Strong Global Entertainment Reports Fourth Quarter and Full Year 2023 Operating Results
- Revenue increased by 9.4% to $42.6 million in 2023.
- Services revenue grew by 26.6% in Q4 of 2023.
- The company acquired certain assets of Innovative Cinema Solutions
- Net income from continuing operations increased to $3.0 million.
- Gross profit increased to $10.6 million or 24.8% of revenues in 2023.
- Adjusted EBITDA decreased to $2.6 million in 2023.
- Income from operations decreased to $0.6 million in 2023.
- The company experienced a decrease in total revenue for the fourth quarter despite growth in services and projection screens.
Insights
The growth in revenue by 9.4% for Strong Global Entertainment indicates a positive market response to their strategic initiatives, particularly in the laser projection and services sectors. The expansion into Europe and the acquisition of ICS assets are strategic moves that could potentially open up new revenue streams and consolidate the company's market position. However, the decrease in revenue for the fourth quarter, alongside the decision to exit the content business, suggests a re-alignment of the company's focus towards its core competencies. It's important to observe how this focus shift will affect the company's long-term revenue diversification.
The mixed results in operational income and net income versus the decrease in EBITDA highlight a concerning increase in administrative expenses. Investors should closely monitor how these expenses are managed moving forward, as they have the potential to erode profit margins despite top-line growth. The emphasis on driving cash flow from core entertainment products and services lines is an indication of the company's commitment to improving operational efficiency.
Strong Global Entertainment's improved gross margins reflect effective cost management in the production and delivery of their services and products. The increase in net income from continuing operations, despite a decline in income from operations, could be indicative of non-operational income streams or one-time benefits, which should be scrutinized for sustainability. Investors would benefit from understanding the nature of these income streams to assess the company's financial health accurately.
The decline in Adjusted EBITDA, despite increased profitability from products and services, is a red flag that needs to be addressed. It may signal underlying inefficiencies or growing pains associated with scaling operations, such as the integration of ICS. The company's ability to streamline operations and control costs as it scales will be important for maintaining investor confidence and ensuring long-term value creation.
The entertainment technology sector is highly competitive and Strong Global Entertainment's focus on laser projection upgrades and expanded service offerings suggests an alignment with industry trends towards high-quality visual experiences. The company's strategic exit from the content business could be seen as a move to concentrate on technological advancements in cinema experiences, which may be more in line with their core strengths and market demand.
However, the timing of immersive screen projects and the European expansion will require careful execution to avoid overextension. The company's first Seismos immersive flooring project represents an innovative step in the sector, potentially setting a new standard for immersive experiences. The success of these initiatives will hinge on the company's ability to deliver consistent and high-quality service while managing the costs associated with such cutting-edge technologies.
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 decreased2.1% 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, and34.0% 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 grew7.2% 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 | |
| ● | Gross profit increased to | |
| ● | Income from operations was | |
| ● | Net income from continuing operations was | |
| ● | Adjusted EBITDA decreased to | |
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 | ||||||||
FAQ
What was the revenue growth percentage for Strong Global Entertainment (SGE) in 2023?
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What was the gross profit percentage of Strong Global Entertainment (SGE) in 2023?
