Strong Global Entertainment Reports Fourth Quarter and Full Year 2023 Operating Results

Charlotte, N.C., March 29, 2024 (GLOBE NEWSWIRE) — Strong Global Entertainment, Inc. (NYSE American: SGE) (the “Company” or “Strong Global Entertainment”) today announced operating results for the fourth quarter and full year ended December 31, 2023.

Operational Highlights – Fourth Quarter and Full Year 2023

  • Revenue increased 9.4% to $42.6 million for the year and decreased 2.1% to $10.3 million for the quarter.
    • Upgrades to laser projection continue to drive customer demand.
    • Services revenue grew 26.6% during the fourth quarter of 2023, and 34.0% for the full year, with increased market share, new service offerings, and contribution from the Innovative Cinema Solutions (“ICS”) acquisition adding to revenues in late 2023.
    • Screen systems revenue increased 5.3% during the fourth quarter of 2023, and grew 7.2% for the full year, largely related to marketplace momentum around laser screen replacements and expansion into Europe. This growth was partially offset by the timing of immersive screen projects.
  • The Company expanded its installation, project management, content delivery and other service offerings to address customer demand and expand market share.
  • Strengthened European presence with quick ship programs and local finishing operations.
  • Expanded immersive product solutions and installed the Company’s first Seismos immersive flooring project.
  • Completed the acquisition of certain assets of Innovative Cinema Solutions LLC (“ICS”), adding additional scale to the Strong Technical Services operations during the fourth quarter.

Mark Roberson, Chief Executive Officer, commented, “We delivered solid results for full year 2023, achieving revenue growth and improved gross margins as demand for laser projection and customer upgrade initiatives increased as the year progressed. The Company also completed the acquisition of ICS assets in the fourth quarter, increasing the scale and scope of our services business. As part of our annual planning process, we evaluated the performance of all our lines of business and initiated a plan to exit the content business, as we strategically focus the Company’s resources on driving cash flow from our core entertainment products and services lines.”

Select Financial Highlights

  Revenue increased 9.4% to $42.6 million in 2023 from $39.0 million in 2022 due to increased sales of projection screens and equipment, as well as increased demand for installation and maintenance services. For the fourth quarter, total revenue decreased despite growth in both services and projection screens due to the timing of a large distribution sale in the prior year. The increase in demand from cinema customers was due to a combination of increased sales efforts, expanded market share and a rebound in the rate of investment by exhibitors for the upgrade of their auditoriums, particularly related to the pace of laser projection upgrades. Strong Global Entertainment expects the upgrade activity to be a multi-year catalyst in the industry.
     
  Gross profit increased to $10.6 million or 24.8% of revenues in 2023 compared to $9.5 million or 24.3% in 2022. The increase resulted primarily from increased demand for large format projection cinema screens and installation and maintenance services.
     
  Income from operations was $0.6 million in 2023 compared to $2.4 million during 2022. As increased gross profit was offset by higher selling, general and administrative expenses, including costs of operating as a stand-alone public company.
     
  Net income from continuing operations was $3.0 million as compared to $2.3 million in 2023.
     
  Adjusted EBITDA decreased to $2.6 million as compared to $3.2 million in the prior year, as increased profitability from products and services from continuing operations was offset by the increased general and administrative costs primarily related to expenses associated with operating as a stand-alone public company.
     

About Strong Global Entertainment, Inc.

Strong Global Entertainment, Inc. a majority owned subsidiary of Fundamental Global Inc (NASDAQ: FGF) is a leader in the entertainment industry, providing mission critical products and services to cinema exhibitors and entertainment venues for over 90 years. The Company manufactures and distributes premium large format projection screens, provides comprehensive managed services, technical support and related products and services primarily to cinema exhibitors, theme parks, educational institutions, and similar venues. In addition to traditional projection screens, the Company manufactures and distributes its Eclipse curvilinear screens, which are specially designed for theme parks, immersive exhibitions, as well as simulation applications. It also provides maintenance, repair, installation, network support services and other services to cinema operators, primarily in the United States.

About Fundamental Global Inc.

Fundamental Global Inc. (Nasdaq: FGF, FGFPP) and its subsidiaries engage in diverse business activities including reinsurance, asset management, merchant banking, manufacturing and managed services.

The FG® logo and Fundamental Global® are registered trademarks of Fundamental Global LLC.

Use of Non-GAAP Measures

Strong Global Entertainment, 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 (“Adjusted EBITDA”), which differs from the commonly used EBITDA (“EBITDA”). Adjusted EBITDA both adjusts net income (loss) to exclude income taxes, interest, and depreciation and amortization, and excludes share-based compensation, impairment charges, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries, and other cash and non-cash charges and gains.

EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP. However, Adjusted results 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.

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or to net cash from operating activities as measures of operating results or liquidity. The Company’s 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.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. Some of these limitations are: (i) they do not reflect the Company’s cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, the Company’s 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 the Company’s 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 the Company’s statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters management considers not to be indicative of the Company’s ongoing operations, and (vii) other companies in the Company’s industry may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.

Management believes 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). The Company also presents EBITDA and Adjusted EBITDA because (i) management believes these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the Company’s industry, (ii) management believes investors will find these measures useful in assessing the Company’s ability to service or incur indebtedness, and (iii) management uses EBITDA and Adjusted EBITDA internally as benchmarks to evaluate the Company’s operating performance or compare the Company’s performance to that of its competitors.

Forward-Looking Statements

In addition to the historical information included herein, this press release contains “forward-looking statements” that are subject to substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release are forward-looking statements. Forward-looking statements contained in this press release may be identified by the use of words such as “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “target,” “aim,” “should,” “will” “would,” or the negative of these words or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements are based on the Company’s current expectations and are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. These and other risks and uncertainties are described more fully in the section titled “Risk Factors” in the final prospectus related to the public offering filed with the SEC. Forward-looking statements contained in this announcement are made as of this date, and the Company undertakes no duty to update such information except as required under applicable law.

Investor Relations Contacts:

Mark Roberson
Strong Global Entertainment, Inc. – Chief Executive Officer
(704) 471-6784
IR@strong-entertainment.com

Strong Global Entertainment, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)

    December 31, 2023     December 31, 2022  
Assets                
Current assets:                
Cash and cash equivalents   $ 5,470     $ 3,615  
Accounts receivable, net     6,476       6,148  
Inventories, net     4,079       3,389  
Assets of discontinued operations     940       3,167  
Other current assets     1,062       2,881  
Total current assets     18,027       19,200  
Property, plant and equipment, net     1,592       4,607  
Operating lease right-of-use assets     4,793       237  
Finance lease right-of-use asset     1,201       606  
Film and television programming rights, net            
Goodwill     903       882  
Other long-term assets     10       6  
Total assets   $ 26,526     $ 25,538  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
Accounts payable   $ 3,544     $ 4,102  
Accrued expenses     3,112       2,685  
Payable to FG Group Holdings Inc.     129       1,861  
Short-term debt     2,456       2,510  
Current portion of long-term debt     270       36  
Current portion of operating lease obligations     397       64  
Current portion of finance lease obligations     253       105  
Deferred revenue and customer deposits     1,318       1,769  
Liabilities of discontinued operations     1,392       1,805  
Total current liabilities     12,871       14,937  
Operating lease obligations, net of current portion     4,460       234  
Finance lease obligations, net of current portion     971       502  
Long-term debt, net of current portion     301       126  
Deferred income taxes     125       529  
Other long-term liabilities     4       6  
Total liabilities     18,732       16,334  
                 
Commitments, contingencies and concentrations                
                 
Equity:                
Preferred shares            
Class A common stock            
Class B common stock            
Additional paid-in-capital     15,740        
Accumulated deficit     (2,712 )      
Accumulated other comprehensive loss     (5,234 )     (5,024 )
Net parent investment           14,228  
Total equity     7,794       9,204  
Total liabilities and equity   $ 26,526     $ 25,538  

Strong Global Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
Net product sales   $ 7,167     $ 8,043     $ 30,776     $ 30,119  
Net service revenues     3,119       2,463       11,840       8,834  
Total net revenues     10,286       10,506       42,616       38,953  
Total cost of products     5,292       5,812       22,871       22,729  
Total cost of services     2,373       1,907       9,168       6,762  
Total cost of revenues     7,665       7,719       32,039       29,491  
Gross profit     2,621       2,787       10,577       9,462  
Selling and administrative expenses:                                
Selling     564       538       2,210       2,252  
Administrative     1,828       1,143       7,757       4,836  
Total selling and administrative expenses     2,392       1,681       9,967       7,088  
Income from operations     229       1,106       610       2,374  
Other income (expense):                                
Interest expense, net     (51 )     (52 )     (256 )     (134 )
Foreign currency transaction (loss) gain     (222 )     (118 )     (406 )     528  
Other income, net     3,463       7       3,479       22  
Total other income (expense)     3,190       (163 )     2,817       416  
Income from continuing operations before income taxes     3,419       943       3,427       2,790  
Income tax expense     (126 )     (118 )     (477 )     (535 )
Net income from continuing operations     3,293       825       2,950       2,255  
Net loss from discontinued operations     (5,198 )     (100 )     (4,860 )     (555 )
Net (loss) income   $ (1,905 )   $ 725     $ (1,910 )   $ 1,700  
                                 
Basic net (loss) income per share:                                
Continuing operations   $ 0.42     $ 0.14     $ 0.42     $ 0.37  
Discontinued operations     (0.66 )     (0.02 )     (0.70 )     (0.09 )
Basic net (loss) income per share   $ (0.24 )   $ 0.12     $ (0.28 )   $ 0.28  
                                 
Diluted net (loss) income per share:                                
Continuing operations   $ 0.42     $ 0.14     $ 0.42     $ 0.37  
Discontinued operations     (0.66 )     (0.02 )     (0.69 )     (0.09 )
Diluted net (loss) income per share   $ (0.24 )   $ 0.12     $ (0.27 )   $ 0.28  
                                 
Weighted-average shares used in computing net (loss) income per share:                                
Basic     7,838       6,000       6,922       6,000  
Diluted     7,838       6,000       6,978       6,000  

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

    Year Ended December 31,  
    2023     2022  
Cash flows from operating activities:                
Net income from continuing operations   $ 2,950     $ 2,255  
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:                
Recovery of doubtful accounts     (62 )     (30 )
(Benefit from) provision for obsolete inventory     (35 )     49  
Provision for warranty     347       299  
Depreciation and amortization     596       697  
Gain on acquisition of ICS assets     (1,012 )      
Amortization and accretion of operating leases     236       68  
Deferred income taxes     (331 )     (84 )
Stock-based compensation expense     955       123  
Changes in operating assets and liabilities:                
Accounts receivable     2,150       (1,595 )
Inventories     39       (309 )
Current income taxes     315       500  
Other assets     538       919  
Accounts payable and accrued expenses     (2,158 )     (373 )
Deferred revenue and customer deposits     (797 )     (758 )
Operating lease obligations     (239 )     (69 )
Net cash provided by operating activities from continuing operations     3,492       1,692  
Net cash used in operating activities from discontinued operations     (1,748 )     (1,535 )
Net cash provided by operating activities     1,744       157  
                 
Cash flows from investing activities:                
Capital expenditures     (429 )     (253 )
Acquisition of ICS assets, net of cash acquired     58        
Net cash used in investing activities from continuing operations     (371 )     (253 )
Net cash used in investing activities from discontinued operations     (503 )     (459 )
Net cash used in investing activities     (874 )     (712 )
                 
Cash flows from financing activities:                
Principal payments on short-term debt     (423 )     (305 )
Principal payments on long-term debt     (55 )     (28 )
Borrowings under credit facility     9,604        
Repayments under credit facility     (7,179 )      
Payments on finance lease obligations     (145 )     (28 )
Proceeds from initial public offering     2,411        
Payments of withholding taxes for net share settlement of equity awards     (116 )      
Net cash transferred (to) from parent     (3,045 )     (33 )
Net cash provided by (used in) financing activities from continuing operations     1,052       (394 )
Net cash provided by financing activities from discontinued operations            
Net cash provided by (used in) financing activities     1,052       (394 )
                 
Effect of exchange rate changes on cash and cash equivalents     (67 )     70  
Net increase in cash and cash equivalents from continuing operations     4,106       1,115  
Net decrease in cash and cash equivalents from discontinued operations     (2,251 )     (1,994 )
Net increase (decrease) in cash and cash equivalents     1,855       (879 )
Cash and cash equivalents at beginning of year     3,615       4,494  
Cash and cash equivalents at end of year   $ 5,470     $ 3,615  

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

    Three Months Ended December 31,     Year Ended December 31,  
    2023     2022     2023     2022  
                         
Net (loss) income   $ (1,905 )   $ 725     $ (1,910 )   $ 1,700  
Net loss from discontinued operations     5,198       100       4,860       555  
Net income from continuing operations     3,293       825       2,950       2,255  
Interest expense, net     51       52       256       134  
Income tax expense     126       118       477       535  
Depreciation and amortization     138       176       596       697  
EBITDA     3,608       1,171       4,279       3,621  
Stock-based compensation expense     65       26       955       123  
IPO related expenses                 475        
Gain on insurance proceeds     (2,485 )           (2,485 )      
Gain on purchase of ICS, net of acquisition expenses     (1,012 )           (1,012 )      
Foreign currency transaction loss (gain)     222       118       406       (528 )
Severance and other                 7        
Adjusted EBITDA   $ 398     $ 1,315     $ 2,625     $ 3,216  

strong global entertainment reports fourth quarter and full year 2023 operating results

Source: globenewswire.com

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