Strong Global Entertainment, Inc. Class A Common Voting Shares

Good afternoon and welcome to the Strong Global Entertainment Earnings Conference call for the second quarter 2023. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time. Please note this conference is being recorded. I'll now turn the conference over to your host, John Nesbitt. John, you may begin.

Thank you. Good afternoon, and welcome to Strong Global Entertainment's first earnings conference call for the quarter ended June 30th, 2023. On the call today are Mark Roberson, 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 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 website. Our non-GAAP measures may not be comparable to those used by other companies, and we encourage you to review and understand all our financial reporting before making any investment decisions. At this time, I'll turn the call over to Mark Robertson. Go ahead, Mark.

Thanks, John. Good afternoon, and thank you for joining the call. We're pleased to host our first quarterly earnings call since the completion of the IPO for Strong Globe Entertainment in mid-May. Overall, this is a really good quarter. As you'll see on slide four, our revenues doubled, operating income increased to a profit, and adjusted EBITDA increased from $130,000 last year to just over $3.5 million in the current quarter. We're seeing increased demand from cinema exhibitors for both screens and services. We're also continuing to add new customer accounts and add new services, increasing our overall market share. As a result, we saw screen sales up 24%, while technical services grew over 40%. And we had our first initial sale of IP in our Strong Studios group, which contributed over $6 million to consolidate the revenues. As we look ahead, there are several key drivers to growth. One is the continued resurgence in the cinema industry and the rebound we're seeing in the box office. Two is the increasing investments we're seeing by exhibitors in premium auditoriums, including the laser upgrades that are just starting to roll out in the industry. Three, our leadership position in the industry, our exclusive customer relationships, and our increasing market share and geographic reach. And finally, the expansion and diversification of our revenue base beyond traditional cinema to now include the addition of studios, theme parks, and immersive. If you flip over to slide six and seven, the industry backdrop continues to strengthen. Customers like Cinemark, IMAX, and AMC all reported strong quarterly profits over the past week or so. AMC reported its first quarterly profit in several years. IMAX reported a 30% increase in revenue and just recently had its fourth best weekend box office ever. Cinemark delivered the second highest quarterly EBITDA level in its history. Year to date, the box office is up over 20% versus last year. And the number in the cadence of studio releases is trending back towards pre-pandemic levels. Barbie and Oppenheimer continue to drive the summer box office And after that, the outlook is really bullish with a solid slate of releases for the back half of this year and into 2024. The common theme we heard in the recent announcements from our customers was a combination of bullishness around the overall resurgence in the box office and what they're seeing in terms of attendance levels, as well as the outsized contributions they're seeing from the premium auditoriums. Flipping over to slide eight, We're seeing operators, they're investing in upgrading the consumer experience, specifically with laser projection. Auditoriums with premium large format screens and premium audio, such as IMAX, for example, are driving an increasing share of the box office. AMC, Cinemark, Cineplex, and Opelous, among others, are among the larger exhibitors who've made public announcements with their plans to upgrade the lasers. We've seen upgrades getting started in the second half of last year and continuing into this year, and we believe those activities will increase through the balance of this year and on into 2024. Several, including Cinemark and IMAX, for example, noted in their earnings calls last week that they expect capital spending and upgrades to be back-end loaded this year, which is consistent with our expectations for the second half demand, and we're staffing up to meet that demand. Looking further out, we expect the pace of upgrades to premium laser through the industry to continue to drive demand for screens and services for at least the next several years. On slide nine, we have a leading position in North American cinema industry, and we've served as the trusted partner to the largest names in the industry for many years. Over the past two years, we've further strengthened and formalized those relationships, and we've increased our sales efforts. Strong supplies all of IMAX's screens worldwide. We're the exclusive supplier of screens to AMC, Cinemark, and Marcus, and we're the preferred supplier to many other exhibitors. As the rollout of Laser and the premium upgrades accelerate, we're well positioned, and also want to welcome a new name on the customer list here this quarter. Canopolis is an important new European customer, and we're very excited to be their preferred global screen provider. Moving on to slides 10 through 13, we've been expanding and diversifying our revenue base, adding our Eclipse product line for theme parks and immersive attractions, expanding our service offerings to be more of a one-stop shop, expanding internationally, and of course, launching Strong Studios' vision last year. In the immersive business, we closed an order in the second quarter that will be the first to utilize our new seismos optical flooring tiles, This is at an immersive attraction based in Asia. This is an exciting seven-figure-sized project, and we expect it to deliver and install during the second half of this year. On the service side, as another example, we've been expanding our team and adding services to meet customer demand. One notable area is the addition of our new installation services offering, which is growing rapidly and contributing to the overall growth in our technical services business. Internationally, We mentioned our new European customer earlier, and this relationship is a direct result of our increased presence and efforts in the market. Another example of our progress in getting closer to our customers in Europe is our expanded ability to expedite screen shipments and import-export through our local warehousing and finishing programs. In the studios business, we have several projects under development. We realized our first meaningful revenue transaction this quarter with 6.4 million for a portion of the IP of Safe Haven. This represents the minimum guarantee for the Safe Haven series, and it's just one, an initial step, but an important one in the ultimate marketing and monetization of the series. We're also continuing to work and develop on other projects, and we're working on a new international project we hope to be able to announce soon. Overall, a solid quarter. Todd will now walk us through the results for the quarter.