Fundamental Global Inc.

ladies and gentlemen thank you for standing by and welcome to the fg group holdings inc fourth quarter 2022 and full year 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 FG Group Holdings Earnings Conference Call for the fourth quarter and full year ended December 31, 2022. On the call today from FG Group Holdings are Mark Robertson, Chief Executive Officer, Todd Major, Chief Financial Officer, and Kyle Cermonera, Chairman of the Board of Directors. 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. 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 of our financial reporting before making any investment decisions. At this time, I will turn the call over to Mark. Go ahead, Mark.

Thanks, Jen, and thanks, everyone, for joining us today. As we wrap up 2022 and we're now well into 2023, I thought it'd make sense to start by just recapping some of the takeaways from the past year and more importantly, how we're starting to see things shake up entering the new year. We finished 2022 with strong momentum in the fourth quarter. And as we'll discuss, we see that momentum continuing into 2023. Now we'll start in the deck on slides three and four, if you're following along. First, we completed the name change in December, transitioning from Ballantyne Strong to FG Group Holdings. It's a small thing, but it's an important distinction as the new name better reflects our current and our future plans to operate as a holding company. We currently have capital allocated to five primary holdings. First, our Strong Entertainment operating business, which is the largest supplier of premium large format screens and cinema services in North America and where we launched our new studios business this year. We currently own 100% of Strong Entertainment. Our intent, as we've previously communicated, is to separate the entertainment business and will retain a majority but less than 100% stake going forward at the holding company. This is consistent with our holding company's strategy providing a more tangible measure of value in the future for that business, and also allowing Strong Entertainment increased opportunity to capitalize on its growth potential and scale into a much larger company. We also hold less than 100% equity positions in three operating companies, FG Financial, Firefly, and Green First Forest Products, and also in our digital ignition business, We own real estate with a 44,000 square foot building and 11 acres in the Atlanta area. Moving on to slide six and our strong entertainment operating business to start with, we've seen customer demand and revenues bounce back strongly this year. Annual revenues are up over 50% and notably Q4 revenue grew sequentially to come at the highest level of any quarter since COVID. On slide seven, We've signed new exclusive arrangements with many of the top exhibitors over the past several quarters, formalizing those already strong relationships. We supply AMC, Cinemark, Marcus, and IMAX with all of their screens. And we've invested in building our sales and operations teams and increasing our market penetration and market share coming out of the pandemic. This puts Strong Entertainment in a much stronger position going forward. particularly as the industry continues to recover and exhibitors accelerate their investments to improve their properties and the theatrical experience. And especially as the upgrades to laser projection are accelerating and driving capital spending in the industry for the next several years. We're also expanding our global influence, serving this growing industry. In Europe, for example, we established our finishing facility in Belgium recently. which enables expedited screen delivery and more streamlined import export for customers in Europe and the Middle East. We also see the international markets, Asia and Europe in particular, really starting to improve in 2023 and going forward. If you happen to listen to IMAX's recent earnings call, for instance, a large portion of their commentary in their call was centered around the recovery they're now starting to see in the China market is that market is now more fully reopening. And in other parts of China, of Asia, including new multi-unit deals in Japan and Indonesia, which is obviously great to see. Moving on to slide nine, during 2022, we all saw cinema attendance levels in the overall box office revenue rebound. Box office revenues were up well over 60% from 2021. and are now starting to trend much closer to pre-COVID levels, looking into 2023 and 2024. For 2023 specifically, with film production now catching back up following the COVID-related delays, the studio release calendar is even stronger in 2023 than what we just saw in 2022. Our largest customers are becoming more vocal in voicing their bullishness for strong 2023. A few examples, Cinemark, for example, sees new film releases increasing by over 30% from 2022, driving their internal growth expectations. AMC commented that they expect the number of movie titles in the theaters grossing over 100 million will increase by over 75% in 2023. And of course, IMAX is another example that's performed exceptionally well, and they're expecting their global box office in 2023 to more than exceed the 2019 levels. And they're also starting to ramp up expansion of new screens in their international markets once again. Overall, the industry backdrop was certainly much better in 2022 than in 2021. And we strengthened our position in that industry, which certainly helped propel our business to greater than 50% growth this year and put strong entertainment on solid footing going forward. Turning to slide 10, the upgrades that we've discussed from Xenon to laser projection really started in earnest in the second half of this year. We're seeing AMC and Cinemark in particular leading the charge, upgrading their largest markets first. This is a really big deal for the industry, and it's expected to drive spending by cinema exhibitors for at least the next several years. and particularly as the regional and international exhibitors begin to commence their upgrade plans as well. We spent several years in R&D optimizing our screens and optimal coatings just for laser projection. And we're now the preferred screen and service partner for Cineonic, who's the leading manufacturer of laser projectors. And as the market leader and exclusive provider to many of the large exhibitors, We believe we're well positioned as the upgrade cycle continues to accelerate. Turning now to slide 11. This upgrade cycle that we've discussed is also one of the drivers to the growth we're seeing in our technical services group, which grew 41% for the quarter. We continue to see more demand from cinemas looking to outsource this part of their business as their volumes ramp up. For example, we signed an exclusive multi-year nationwide managed service agreement with Marcus Theaters, and we're continuing to add new customers for both managed services contracts as well as for on-demand work. We've also continued to expand our service offerings to better serve our customers' needs. With the laser upgrade demands increasing, we've been expanding our service team as well as our service offerings, providing more project management services and staffing up to increase our bandwidth for installations of laser screens, projection, and audio equipment in the cinemas. Moving over to slides 12 and 13. In addition to the screen and services business, we launched our new strong studios business this year, adding an entirely new growth vertical to the entertainment business. The studios team has been very busy over the past several months. Inside the Black Box completed production and began gearing on the crackle network in Q4. This project also represents the first revenue producing project for our studio's business. We also wrapped production on Safe Haven, which was a much larger project, and we're now deep into post-production. We expect episodes to be ready for delivery later this year. We see tremendous upside and growth potential in the new studios business, both organically and potentially through M&A. Initially, we're taking a pretty conservative approach to the projects and we'll lean towards utilizing co-production and providing production services where we can generate revenue, minimize capital at risk, while also creating the upside through the ownership of IP and participating in backend revenue streams. Transitioning now, moving to our equity holdings on slides 15 through 17. We're very excited about the value creation potential as the teams in those businesses continue to execute and position themselves for meaningful capital appreciation. At FG Financial, the merchant banking platform was launched this year. The reinsurance team completed seven loss cap reinsurance contracts. Top buy and Hagerty transactions were completed. NFT Merger Corp recently announced the business combination agreement with I-Corps Connect. In the new merchant banking platform, the team has been busy announcing the creation of FG Communities, which is focused in the manufactured housing industry, as well as the launch of Craveworthy with the former CEO, Jimmy Johns, as a multi-brand restaurant franchise platform. If you recall, we acquired our stake in Firefly, a private venture-backed mobile media company, when we contributed our taxi top advertising business to invest alongside Google Ventures and NFX two years ago. Post-pandemic, Firefly has seen exceptional growth in their business, and they're now in over 10 major markets. This year, they entered the European market with the acquisition of the UK's leading taxi advertising company. One key element of Firefly's strategy that we were especially excited about is as they convert non-digital tops to digital, that really multiplies the revenue potential as they continue to grow. We're excited about the team and the potential value they're creating. And then Green First has evolved from a small Canadian shell to one of the leading lumber producers in Canada following our investment. Recently, they announced two transactions to monetize assets that we believe are very favorable to Green First and to the ultimate value of our holding. In November, they announced the sale of their private forest land for 49 million. And then in December, they announced the sale of their two sawmills in Quebec for 90 million. Those transactions further strengthen their balance sheet and allows management to focus on the more valuable Ontario operations. This industry continues to see quite a bit of M&A, so we're watching closely. Overall, a really strong 2022. Solid momentum coming to the end of the new year on all fronts. Todd, with that, would you like to walk us through the financials?