Ballantyne Strong, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ballantyne Strong Incorporated First Quarter 2021 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the call over to John Nesbitt of IMS Investor Relations. Thank you. You may begin.

Good afternoon and welcome to Valentine Strong's earnings conference call for the first quarter ended March 31st, 2021. On the call today from Valentine Strong are Mark Robertson, Chief Executive Officer, and Todd Major, Chief Financial Officer. Before we begin, I'd like to remind everyone that some statements made on this call will be forward-looking in nature. These statements are based on management's current view and expectations as of today, and the company is under no obligation and expressly disclaims any obligation to update forward-looking statements except as required by law. These statements are also subject to risk and uncertainty and may cause actual results that differ materially from those described on today's call. Risk and uncertainties are also described in the company's SEC filings. Today's presentation discussion also contained references to non-GAAP financial measures, The definition of non-GAAP terms and reconciliations to GAAP measures are available in the earnings release posted on the Investor Relations section of the website. Our non-GAAP measures may not be comparable to those used by other companies, and we also encourage you to review and understand all of our financial reporting before making any investment decisions. At this time, I will now turn the call over to Mark. Okay, go ahead, Mark.

Good afternoon. Thanks for joining us. We've had a busy first few months. And we'll start on slide two with a brief overview. Valentine Strong is comprised of our wholly owned entertainment operating business, which is an industry leader in cinema screens and managed services in three non-control investments, Green First Forest Products, FG Financial Group, and Firefly Systems. If you turn to slide three, last year at this time, we were at the very beginning of the COVID pandemic, with three operating businesses, but very little visibility into the next 12 months. Over the past year, we've successfully navigated the worst of the global cinema and theme park closures. We sold to our two signage businesses, Strong Outdoor for equity in Firefly and Convergent for cash in a note and assumption of debt. We also completed an equity capital raise, further strengthening the balance sheet. With cash now over 20 million, and stockholders' equity increasing 67% during Q1 to $45 million as of the end of March. Moving on to slide four. As we now look forward into the second half of 2021 and into next year, we're increasingly optimistic about the outlook for entertainment operating business and our investment positions. With vaccination rates in the U.S. improving dramatically over the past several months, in major markets reopening more aggressively and easing restrictions. We're seeing increased bullishness and excitement in our cinema customer base. We're also seeing positive momentum in our investment portfolio, with Green First announcing its definitive agreement to acquire the Forest Products business of Ryanair, FG Financial expanding its SPAC sponsor and reinsurance businesses, and Firefly continuing to position itself for growth post-COVID. Now turning to the cinema business, starting on slide five and six, Strong Entertainment is a market leader in premium large format screens as well as in managed services. In the second half of 2020, we strengthened that position, signing new multi-year exclusive agreements with Cinemark for screens and with Marcus Theatres for services. We continue to have a great relationship with IMAX, and supply all of their screens worldwide on an exclusive basis. Eclipse, which is designed for immersive theme park and simulator applications, also continue to perform despite COVID. Revenues overall in our entertainment business have recovered from the low point in Q2 of last year, but they remain over 30% to 40% below normalized pre-COVID levels. Fortunately, we've been able to manage the business to relatively break even during this period of reduced revenues, and we're better positioned competitively post-COVID. After over a year with very little content for our exhibitors to drive people to the cinema, we expect the pace of blockbuster movie releases to be a positive catalyst for the industry starting in July with the release of Top Gun kicking off things in earnest. We also expect major exhibitors to rely more heavily on outsourcing post-COVID, And we believe our managed services group is well positioned to provide that support as exhibitors prepare for return to the movies. On slide 7 through 10, we'd like to review our equity investments, which are comprised, again, of three positions, Firefly, FG Financial, and Green First. We became an investor in Firefly through our sale of our strong digital media outdoor advertising business. and we currently hold approximately 13 million in preferred equity shares. Firefly is a really interesting venture-backed company with Google Ventures and NFX being the largest shareholders along with us. We met the guys at Firefly a couple of years ago, and we were very impressed with what they were doing in the outdoor advertising market, particularly their ability to adopt and deploy technology in the taxi and rideshare advertising space. As a result, we decided it was better to join forces and go to market together rather than as competitors. As you can see, Firefly is doing some very innovative things to be a true leader, whether it's through their partnership with companies like Drive Sally or cutting edge technology development like their launch of Street IQ this quarter. Turning to slide nine, we own approximately 21% of the outstanding shares of FG Financial. FGF has gone through a repositioning of its business and has an attractive business model focused on reinsurance and allocating capital to SPAC and SPAC sponsor-related businesses. The reinsurance sector is strengthening and seeing increased rates. FGF wrote its first reinsurance contract in 2020, and as a nimble reinsurer led by an experienced management team, they're carefully looking at deploying additional capital in that sector. On the SPAC side, FGF had two recent SPAC investments, FG New America and All Dell Financial. FG New America was backed by Joel Moglia, the former CEO and chairman of TD Ameritrade, and has announced a definitive agreement to acquire Opportunity Financial. OpFi is a leading FinTech platform. The acquisition is expected to close this summer. FG Financial holds approximately 1.4 million FG&A founder shares and approximately 430,000 warrants and an exercise price of $1,150. Alldell is led by Rob Kaufman, the former founder of Fortress. FGF holds approximately 533,000 Alldell founder shares and approximately 321,000 warrants and an exercise price of $15 per share. Turning over to slide 10. Green First, which is formerly Atasca Capital Limited, recently announced the signing of a definitive agreement to acquire all of the forest and paper products and operating assets of Ryanair, which will make Green First one of the top 10 lumber producers in Canada. As I think everyone listening to the call probably is already likely aware, this announcement has been well received, and the market cap of Green First has increased from under 10 million Canadian dollars to well over $200 million Canadian on the planned transaction, with the share price increasing from roughly 40 cents to well over $9 today Canadian. Green First also announced that as part of the financing of the transaction, it will be conducting a rights offering with current shareholders receiving three rights to purchase additional shares at $150 Canadian for every share held. Ballantyne Strong currently has just over 7 million shares representing 30% ownership of Green First and would anticipate receiving approximately 21 million rights based on information leased by Green First. The rights are anticipated to be issued in June, and at that time, we believe there will be a separate and distinct intrinsic value for those rights. We're currently evaluating our options with regards to the rights, and we could be a participant in the rights offering, increasing our investment in green first, or we could also potentially sell some or all of our rights to generate additional investable cash to diversify our holdings. We'll evaluate that course of action in the coming weeks as the rights offering and the transaction proceed to an anticipated closing in Q3. On slide 11, The positive performance of Green First has driven a meaningful increase in the market value of our investments. We currently hold the three investments in our balance sheet at $19 million, and the current market value is approximately $74 million, representing an unrealized gain of over $50 million. Of course, I would caution that the unrealized gain is just that. It's unrealized, and it will continue to fluctuate up and down as Green First proceeds with its transactions and as FGF and FFLA continue to execute on their strategies. With that, I'll turn the call over to Todd for a financial review.