Ballantyne Strong, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to Ballantyne Strong Incorporated fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the call over to Jen Belladeau, of IMS Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to Ballantyne Strong's earnings conference call for the fourth quarter ended December 31st, 2021. On the call today from Ballantyne Strong are Mark Roberson, Chief Executive Officer, and Todd Major, Chief Financial Officer. There is also a slide presentation that management will be referencing that is available on the Investor Relations section of the Ballantyne Strong website. 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 risks and uncertainties and may cause actual results to differ materially from those described on today's call. Risks and uncertainties are also described in the company's SEC filings. Today's presentation and discussion also contain 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 company's website. Our non-GAAP measures may not be comparable to those used by other companies, and we encourage you to review and understand all of our financial reporting before making any investment decisions. At this time, I'd like to turn the call over to Mark Roberson. Go ahead, Mark.

Thanks, Jen. Good afternoon, everyone, and thank you for joining. It's great to be here today. So 2021 actually turned out to be a pretty good year for Ballantyne. Starting on slides three and four, if you happen to be following along with the PowerPoint, some of the key highlights of the performance of the past year include a strong recovery in top line, Q4 revenues increased 68%, and full year revenue increased over 25% as demand continued to improve post-COVID. On a full year basis, Earnings per share improved to positive, 99 cents per share all in, with 19 cents per share coming from continuing operations. And shareholders' equity nearly doubled from 27 million to 52 million. The positive financial results were really driven by three primary factors. Number one was the rebound, obviously, in our entertainment business. Two, the performance in our equity holdings. And three, the realized gain from the completed sale of Convergint. In addition, we also took some other steps along the way to strengthen our position as the world continues to reopen. We strengthened our industry relationships and partnerships, signing new exclusive deals with AMC, Cinemark, and Marcus Theatres, for instance. And we continue to strengthen our longstanding support of IMAX, delivering the world's largest IMAX screen this fall. And we also formalized our preferred partnership relationship with Cineonic. Cineonic is the premier supplier of laser projection equipment worldwide. Outside of the cinema, we continue to expand our Eclipse immersive screen business, as well as finding other unique applications for our paints and coatings and other products in venues such as the Van Gogh exhibit and the Illuminarium in Atlanta. Recently, we also expanded into the military sector, delivering immersive flight simulators using the Eclipse curvilinear products for the Navy. In early 2021, we also monetized our investment in the convergent digital signage business at a meaningful gain. You may recall several years back, this was a business that was losing a lot of money. We restructured it and we pivoted the business to be a leaner, more profitable recurring revenue model, making the asset marketable and ultimately resulting in a successful transaction. We increased our equity holdings this year. We allocated additional capital to both FG Financial as well as Green First. And in the first quarter of 2022, we acquired the real estate that houses our digital ignition operation in Georgia. And a couple of weeks ago, we just announced the launch of Strong Studios. We're especially excited about the addition of Strong Studios and believe it will prove to be a valuable growth engine for the Strong Entertainment Group. Specifically, moving to the entertainment business, on slides 6 through 15, if you're following along, you can see some of our partnerships with the worldwide leaders we just mentioned. We took the opportunity during COVID to add to our sales teams and to strengthen our customer relationships to better position the company for success post-COVID. With partners like Cineonic, Cinemark, Marcus, AMC, IMAX, and others, we're in good company. We're seeing a strong recovery unfolding in cinema, with COVID restrictions continuing to fade and the flow of high-quality content into theatrical exhibition accelerating. Reported industry box office revenues have been impressive, and in some cases record-breaking. For instance, IMAX reported that its fourth quarter 2021 was 15% higher than its pre-pandemic fourth quarter 2019, and that Spider- No Way Home was its sixth largest global opening ever. And the release schedule for 2022 is one of the strongest in years. Doctor Strange, Thor, and Black Panther coming from Marvel, the Batman, Flash, and Aquaman from DC, We have new sequels of Jurassic Park, Mission Impossible, Transformers, and obviously Top Gun on the way. And then we have Avatar on tap to close out the year. We've seen recurring maintenance contracts largely return to pre-COVID levels, which is an encouraging sign. Distribution of projection and audio equipment bounced back really strong in the second half as well. This summer, we formally released our HGA React screen, which has been optimized for laser projection. The upgrade cycle from xenon projection to laser projection is a meaningful catalyst as exhibitors look to upgrade their projection equipment. We expect most domestic exhibitors to upgrade the majority of their projection equipment over the next five to 10 years. which also drives screen sales and, in many cases, additional demand for installation and de-installation services. Outside of the traditional seminar on slide nine, the Eclipse immersive screens have been a great addition to the screen business and opens the door to new markets that we're just starting to leverage. Flying theaters, aviation training, flight simulators are just a few areas where we're seeing demand and serve to increase our addressable market as well as to diversify and grow our revenue opportunities. This is an area where I feel we're just starting to scratch the surface and evaluate the growth potential of that line of business. Moving on to slides 11 through 13, with the announcement of the launch of Strong Studios earlier this month, I'm excited to welcome David Ozer and his team to the company and also to start what we expect to be a long and mutually beneficial relationship with the team over at Chicken Soup of the Soul and Screen Media. The addition of content into our entertainment business opens up an entirely new avenue of growth. With the launch of studios, we acquired a portfolio of 12 projects from Chicken Soup. We plan to start production on two of those right away as they're already greenlit and ready to go, which allows us to hit the ground with a head start. Safe Haven is a supernatural thriller, Inflagrant is a comedy series starring Michael Rapaport. For those two projects, we've licensed the distribution rights to screen media in return for a $9 million minimum revenue guarantee. With demand for content and the explosion of streaming, we believe there is a tremendous growth potential, both organically and potentially through M&A. We plan to take things one step at a time in this area. employing a financially disciplined and conservative approach to new projects. We'll be utilizing coproduction and presales to fund production while building out our content library, creating both near-term as well as longer-term revenue participation. As we evaluate new projects, we plan to presale projects before we start production, thereby allowing us to operate in a capitalized fashion. We'll have more to share with you on these and other projects soon. And as I'm sure you're aware and probably waiting for an update, we've been working on the IPO of the Strong Entertainment Group for the past few months. We're now completing the separate audits of the Entertainment Group on a standalone basis that will be used to update and finalize the registration statement. For today, that's really all I'll be able to say about the Strong Entertainment IPO process and appreciate your patience on that front for just a little bit longer. Moving on to our equity holdings on slides 17 through 22. We remain bullish on the outlook for Green First, FGF, and Firefly as they all continue to execute. Green First completed its acquisition of the lumber assets of Rainier Advanced Materials in August, making it a world-class forest products company and one of the top 10 lumber producers in Canada. We allocated capital to Green First to the rights offering, increasing our position from 7 million shares to 15.3 million shares. which now represents approximately 9% of their common shares outstanding. Green First is now a leading producer of lumber in Canada, with the capacity to produce over 900 million board feet annually, and we're bullish for a number of reasons. The management team there is top notch, bringing decades of industry experience to the management and optimization of the acquired assets. The price of lumber continues to hold at historically high levels and are expected to remain elevated. While Green First has publicly said that they don't require lumber prices to remain at historically high levels for their acquisition to be successful, higher lumber prices certainly don't hurt, especially if they're also able to execute on their objectives to reduce expenses to support free cash flow generation. More recently, Green First also announced they've been uplisted and now recognized as a TSX Fast 50 company. FG Financial is expanding its reinsurance and SPAC platforms. We allocated additional capital to that investment in late 2021, increasing our holdings from 1 million shares to 1.6 million common shares. FGF recently launched its SPAC platform and closed its first SPAC transactions with OpFi and with Hagerty. The team at FGF has proven they can get high-quality deals done, and we expect them to continue to grow their business and create additional value. Firefly is a private company and we acquired our holdings in Firefly as part of merging our strong outdoor taxi top advertising business into their digital rideshare advertising platform. Their revenues have been accelerating and they've been successful in raising additional capital over the past year. Firefly acquired Curb Taxi Media, making it the dominant mobility media company in the New York market. As Firefly continues to scale and eventually looks towards a liquidity event, we believe this holding could deliver significant upside potential. On slide 23, we provide a brief sum of the parts, view of Valentine, help frame out the business in a simple one-page fashion. I'm not going to go through the details, but what we want to highlight here is simply that There are multiple assets, valuable assets, that Valentine has in attractive growth markets. At our current enterprise value, we're confident that we have the opportunity to build durable, long-term, sustained shareholder value. With that, I'll now turn the call back over to Todd.