Charlotte, NC, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company”), a holding company with diverse business activities focused on serving the cinema, retail, financial, advertising and government markets, today announced financial results for the period ended June 30, 2019. The Company conducts its operations through three operating segments: Strong Cinema, Convergent and Strong Outdoor.

Second Quarter and First Half 2019 Highlights

 Total revenue increased 0.6% to $14.3 million for the second quarter of 2019 compared to the prior year and decreased 4.8% to $28.6 million for the first half of 2019 compared to the prior year. Revenue grew 53.1% for the quarter and 37.7% for the first half in our Convergent business unit primarily due to the acceleration of our DSaaS recurring revenue business model. Strong Cinema posted lower revenue for the quarter and first half, as weather-related damage at our production facility impacted operations. The newly improved and expanded production area is nearing completion and expected to be operational soon.
   
 Gross profit increased 150.3% to $3.2 million for the second quarter of 2019 and increased 42.0% to $5.9 million for the first half of 2019. Gross profit margins improved to 22.7% for the quarter from 9.1% and improved to 20.6% from 13.8% for the first half. The improvement was a direct result of repositioning Convergent to a high margin recurring revenue model combined with cost reduction initiatives. Gross profit margins remained stable at Strong Cinema, while the gross profit dollar contribution declined as a result of the lower revenue in the current periods.
   
 Operating loss improved 57.9% to $2.3 million for the second quarter of 2019 and improved 43.1% to $4.9 million for the first half of 2019. Improved operating performance at Convergent and Strong Outdoor combined with reductions in administrative expenses were partially offset by the lower contribution from Strong Cinema in the current periods.
   
 Net loss improved 49.4% to $3.4 million ($0.24 per share) for the second quarter of 2019 as compared to $6.8 million ($0.47 per share) in the prior year. Net loss improved 28.2% to $7.6 million ($0.52 per share) for the first half of 2019 as compared to $10.5 million ($0.73 per share) in the prior year. Net loss improved primarily due to improved operating results partially offset by non-cash fair value adjustments and equity method investment losses.
   
 Adjusted EBITDA, a non-GAAP measure, improved to negative $0.9 million for the first quarter of 2019 from negative $3.2 million in the prior year. On a year to date basis, Adjusted EBITDA improved to negative $2.5 million from negative $5.4 million, due primarily to operating improvements at Convergent and reduced administrative expenses.
   
 Announced transaction with Firefly Systems Inc. (“Firefly”), receiving $4.8 million Series A-2 preferred shares in conjunction with entering into agreements with Firefly to collaborate on its digital advertising business. If the transaction had been effective for the full six-month period, reported revenue would have been reduced by approximately $0.9 million, operating expenses would have been reduced by approximately $2.4 million, and operating income would have been increased by approximately $1.5 million.

Kyle Cerminara, Chairman and CEO, commented, “Overall, Ballantyne Strong generated significantly improved operating results with consolidated operating profit metrics all improving from the prior year. Convergent continued to post gains in operating results reflecting the growth in our recurring revenue DSaaS business combined with a significant reduction in operating costs. We believe that Strong Outdoor is much better positioned following the recently announced investment and collaboration agreement with Firefly. At Strong Cinema, construction is coming along nicely on our newly upgraded production facility and we expect to see a positive impact and sequential improvements in the second half.”

Conference Call

A conference call to discuss the second quarter 2019 financial results will be held on Wednesday, August 14, 2019 at 4:30 pm Eastern Time. Investors and analysts are invited to access the conference call by dialing 877-407-3982 (domestic) or 201-493-6780 (international) and providing the operator with conference ID number: 13693626. A replay will be available approximately two hours after the conclusion of the conference call until Saturday, September 14, 2019 by dialing 844-512-2921 in the U.S. and Canada and 412-317-6671 internationally and entering the conference ID number: 13693626.

Use of Non-GAAP Measures

Ballantyne Strong, Inc. prepares its consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In addition to disclosing financial results prepared in accordance with GAAP, the Company discloses information regarding Adjusted EBITDA, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes share-based compensation, impairment charges, equity method income/loss, fair value adjustments, severance and transactional expenses and other non-cash charges.

EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP. However, Adjusted EBITDA is used internally in planning and evaluating the Company’s operating performance. Accordingly, management believes that disclosure of these metrics offers investors, bankers and other stakeholders an additional view of the Company’s operations that, when coupled with the GAAP results, provides a more complete understanding of the Company’s financial results.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in operating activities as measures of operating results or liquidity. Our calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating the Company’s performance. A reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA is included in the accompanying financial schedules.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of our results as reported under GAAP. Some of these limitations are (i) they do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, our working capital needs, (iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in our statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations, and (vii) other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.

We believe EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). We also present EBITDA and Adjusted EBITDA because (i) we believe these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in our industry, (ii) we believe investors will find these measures useful in assessing our ability to service or incur indebtedness, and (iii) we use EBITDA and Adjusted EBITDA internally as benchmarks to evaluate our operating performance or compare our performance to that of our competitors.
For further information, please refer to Ballantyne Strong, Inc.’s Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or about August 14, 2019, available online at www.sec.gov.

About Ballantyne Strong, Inc.

Ballantyne Strong (www.ballantynestrong.com) and its subsidiaries engage in diverse business activities including the design, integration and installation of technology solutions for a broad range of applications; development and delivery of out-of-home messaging, advertising and communications; manufacturing of projection screens; and providing of managed services including monitoring of networked equipment. The Company focuses on serving the cinema, retail, financial, advertising and government markets.

Forward-Looking Statements

Except for the historical information in this press release, it includes forward-looking statements which involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2018 and the following risks and uncertainties: the Company’s ability to expand its revenue streams, potential interruptions of supplier relationships or higher prices charged by suppliers, the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological developments, the Company’s ability to successfully execute its capital allocation strategy, the Company’s ability to maintain its brand and reputation and retain or replace its significant customers, the impact of a challenging global economic environment or a downturn in the markets, economic and political risks of selling products in foreign countries (including tariffs), risks of non-compliance with U.S. and foreign laws and regulations, potential sales tax collections and claims for uncollected amounts, cybersecurity risks and risks of damage and interruptions of information technology systems, the Company’s ability to retain key members of management and successfully integrate new executives, the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms or at all, the Company’s ability to utilize or assert its intellectual property rights, the impact of natural disasters and other catastrophic events, the adequacy of insurance and the impact of having a controlling stockholder. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

CONTACT

Ballantyne Strong, Inc.
Mark Roberson
Chief Financial Officer
IR@btn-inc.com
704-994-8295

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except par values)

  June 30, 2019  December 31, 2018 
  (unaudited)    
Assets        
Current assets:        
Cash and cash equivalents $2,869  $6,698 
Restricted cash  350   350 
Accounts receivable (net of allowance for doubtful accounts of $1,549 and $1,832, respectively)  13,638   13,841 
Inventories, net  3,459   3,490 
Recoverable income taxes  435   281 
Other current assets  1,669   1,663 
Total current assets  22,420   26,323 
Property, plant and equipment (net of accumulated depreciation of $9,290 and $9,046, respectively)  11,755   14,483 
Operating lease right-of-use assets  5,831   - 
Finance lease right-of-use assets  1,236   692 
Investments  14,381   11,167 
Intangible assets, net  1,685   1,795 
Goodwill  899   875 
Notes receivable  2,658   3,965 
Other assets  247   337 
Total assets $61,112  $59,637 
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable $5,089  $4,724 
Accrued expenses  2,986   2,782 
Short-term debt  3,237   3,152 
Current portion of long-term debt  970   1,094 
Current portion of operating lease obligations  982   - 
Current portion of finance lease obligations  1,052   160 
Deferred revenue and customer deposits  3,885   2,310 
Total current liabilities  18,201   14,222 
Long-term debt, net of current portion and debt issuance costs  3,518   10,053 
Operating lease obligations, net of current portion  5,111   - 
Finance lease obligations, net of current portion  3,437   427 
Deferred revenue and customer deposits, net of current portion  1,160   1,167 
Deferred income taxes  2,329   2,516 
Other accrued expenses, net of current portion  84   254 
Total liabilities  33,840   28,639 
Commitments and contingencies        
Stockholders’ equity:        
Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding  -   - 
Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,313 and 17,237 shares at June 30, 2019 and December 31, 2018, respectively; outstanding 14,519 and 14,443 shares at June 30, 2019 and December 31, 2018, respectively  169   169 
Additional paid-in capital  41,938   41,474 
Accumulated other comprehensive loss  (4,785)  (5,378)
Retained earnings  8,536   13,319 
Less 2,794 of common shares in treasury, at cost  (18,586)  (18,586)
Total stockholders’ equity  27,272   30,998 
Total liabilities and stockholders’ equity $61,112  $59,637 

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

  Three Months Ended June 30,  Six Months Ended June 30, 
  2019  2018  2019  2018 
Net product sales $6,082  $7,450  $11,648  $16,184 
Net service revenues  8,187   6,728   16,927   13,821 
Total net revenues  14,269   14,178   28,575   30,005 
Cost of products sold  3,747   5,492   9,781   11,469 
Cost of services  7,288   7,394   12,915   14,395 
Total cost of revenues  11,035   12,886   22,696   25,864 
Gross profit  3,234   1,292   5,879   4,141 
Selling and administrative expenses:                
Selling  1,222   1,274   2,450   2,500 
Administrative  4,297   4,208   8,226   8,917 
Total selling and administrative expenses  5,519   5,482   10,676   11,417 
Loss on disposal of assets  (38)  (1,331)  (102)  (1,331)
Loss from operations  (2,323)  (5,521)  (4,899)  (8,607)
Other income (expense):                
Interest expense  (186)  (42)  (305)  (87)
Fair value adjustment to notes receivable  (797)  192   (1,307)  150 
Foreign currency transaction (loss) gain  (77)  3   (220)  107 
Other income (expense), net  418   (5)  453   (11)
Total other (expense) income  (642)  148   (1,379)  159 
Loss before income taxes and equity method investment loss  (2,965)  (5,373)  (6,278)  (8,448)
Income tax expense  423   642   564   1,339 
Equity method investment loss  (30)  (740)  (727)  (751)
Net loss $(3,418) $(6,755) $(7,569) $(10,538)
Basic loss per share $(0.24) $(0.47) $(0.52) $(0.73)
Diluted loss per share $(0.24) $(0.47) $(0.52) $(0.73)

Ballantyne Strong, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

  Six Months Ended June 30, 
  2019  2018 
Cash flows from operating activities:        
Net loss $(7,569) $(10,538)
Adjustments to reconcile net loss to net cash used in operating activities:        
(Recovery of) provision for doubtful accounts  (404)  143 
Provision for obsolete inventory  96   535 
Provision for warranty  25   58 
Depreciation and amortization  1,644   1,140 
Amortization and accretion of operating leases  1,132   - 
Fair value adjustment to notes receivable  1,307   (150)
Equity method investment loss  727   751 
Recognition of contract acquisition costs  -   29 
Loss on disposal of assets  102   1,331 
Gain on Firefly transaction  (220)  - 
Deferred income taxes  (198)  18 
Impairment of operating lease  -   74 
Stock-based compensation expense  464   482 
Changes in operating assets and liabilities:        
Accounts receivable  2,691   (297)
Inventories  (19)  557 
Current income taxes  (144)  22 
Other assets  120   (591)
Accounts payable and accrued expenses  (316)  1,115 
Deferred revenue and customer deposits  (438)  1,156 
Operating lease obligations  (1,234)  - 
Net cash used in operating activities  (2,234)  (4,165)
         
Cash flows from investing activities:        
Proceeds from sale of property, plant and equipment  86   - 
Dividends received from investee in excess of cumulative earnings  -   46 
Capital expenditures  (1,136)  (887)
Net cash used in investing activities  (1,050)  (841)
         
Cash flows from financing activities:        
Proceeds from issuance of long-term debt  237   3,234 
Proceeds from sale-leaseback financing  -   7,000 
Principal payments on short-term debt  (200)  (1,039)
Principal payments on long-term debt  (491)  (1,974)
Payment of debt issuance costs  -   (17)
Payments on capital lease obligations  (137)  (96)
Other  -   (8)
Net cash (used in) provided by financing activities  (591)  7,100 
Effect of exchange rate changes on cash and cash equivalents  46   (117)
Net (decrease) increase in cash and cash equivalents and restricted cash  (3,829)  1,977 
Cash and cash equivalents and restricted cash at beginning of period  7,048   4,870 
Cash and cash equivalents and restricted cash at end of period $3,219  $6,847 
Components of cash and cash equivalents and restricted cash:        
Cash and cash equivalents $2,869  $6,847 
Restricted cash  350   - 
Total cash and cash equivalents and restricted cash $3,219  $6,847 

Ballantyne Strong, Inc. and Subsidiaries
Summary by Business Segments
(In thousands)
(Unaudited)

  Quarters Ended June 30,  Six Months Ended June 30, 
  2019  2018  2019  2018 
Strong Cinema                
Revenue $7,879  $10,353  $15,479  $21,664 
Gross profit  2,537   3,215   4,953   6,600 
Operating income  1,256   1,973   2,415   4,298 
Adjusted EBITDA  1,589   2,248   2,935   4,940 
                 
Convergent                
Revenue $5,135  $3,355  $10,670  $7,746 
Gross profit  1,584   (34)  3,153   632 
Operating income (loss)  321   (2,731)  1,073   (3,756)
Adjusted EBITDA  804   (1,103)  1,967   (1,954)
                 
Strong Outdoor                
Revenue $1,135  $406  $2,229  $468 
Gross loss  (1,007)  (1,953)  (2,424)  (3,218)
Operating loss  (1,593)  (2,278)  (3,605)  (3,776)
Adjusted EBITDA  (1,234)  (2,211)  (3,147)  (3,664)
                 
Corporate and Other                
Revenue $120  $64  $197  $127 
Gross profit  120   64   197   127 
Operating loss  (2,307)  (2,485)  (4,782)  (5,373)
Adjusted EBITDA  (2,035)  (2,176)  (4,211)  (4,746)
                 
Consolidated                
Revenue $14,269  $14,178  $28,575  $30,005 
Gross profit  3,234   1,292   5,879   4,141 
Operating loss  (2,323)  (5,521)  (4,899)  (8,607)
Adjusted EBITDA  (876)  (3,242)  (2,456)  (5,424)

Ballantyne Strong, Inc. and Subsidiaries
Reconciliation of Net Loss to Adjusted EBITDA
(In thousands)
(Unaudited)

  Quarters Ended June 30, 
  2019  2018 
  Strong Cinema  Convergent  Strong Outdoor  Corporate and Other  Consolidated  Strong Cinema  Convergent  Strong Outdoor  Corporate and Other  Consolidated 
Net income (loss) $202   120  $(1,410)  (2,330) $(3,418) $735   (3,014) $(2,279)  (2,197) $(6,755)
Interest expense, net  35   111   38   2   186   2   18   -   22   42 
Income tax expense  288   101   -   34   423   440   202   -   -   642 
Depreciation and amortization  220   472   100   55   847   219   261   68   60   608 
EBITDA  745   804   (1,272)  (2,239)  (1,962)  1,396   (2,533)  (2,211)  (2,115)  (5,463)
Stock-based compensation expense  -   -   -   221   221   -   -   -   227   227 
Fair value adjustment to notes receivable  797   -   -   -   797   (192)  -   -   -   (192)
Equity method investment loss (income)  47   -   -   (17)  30   1,042   -   -   (302)  740 
Loss on disposal of assets  -   -   38   -   38   2   1,329   -   -   1,331 
Severance and other  -   -   -   -   -   -   101   -   14   115 
Adjusted EBITDA $1,589  $804  $(1,234) $(2,035) $(876) $2,248  $(1,103) $(2,211) $(2,176) $(3,242)


  Six Months Ended June 30, 
  2019  2018 
  Strong Cinema  Convergent  Strong Outdoor  Corporate and Other  Consolidated  Strong Cinema  Convergent  Strong Outdoor  Corporate and Other  Consolidated 
Net income (loss) $(145)  699  $(3,444)  (4,679) $(7,569) $2,598   (4,138) $(3,776)  (5,222) $(10,538)
Interest expense, net  72   202   59   (28)  305   15   27   -   45   87 
Income tax expense  310   169   -   85   564   1,092   247   -   -   1,339 
Depreciation and amortization  440   896   200   108   1,644   443   480   112   105   1,140 
EBITDA  677   1,966   (3,185)  (4,514)  (5,056)  4,148   (3,384)  (3,664)  (5,072)  (7,972)
Stock-based compensation expense  -   -   -   464   464   -   -   -   482   482 
Fair value adjustment to notes receivable  1,307   -   -   -   1,307   (150)  -   -   -   (150)
Equity method investment loss (income)  888   -   -   (161)  727   940   -   -   (189)  751 
Loss on disposal of assets  63   1   38   -   102   2   1,329   -   -   1,331 
Severance and other  -   -   -   -   -   -   101   -   33   134 
Adjusted EBITDA $2,935  $1,967  $(3,147) $(4,211) $(2,456) $4,940  $(1,954) $(3,664) $(4,746) $(5,424)