BTN Ballantyne Strong Inc

Ballantyne Strong, Inc. (NYSE American: BTN) (the “Company”), a holding company with diverse business activities focused on serving the cinema, retail, financial, advertising and government markets, today announced financial results for the period ended December 31, 2018. The Company conducts its operations through three operating segments: Strong Cinema, Convergent and Strong Outdoor.

Fourth Quarter and Full Year 2018 Highlights

• Total revenue increased 15.7% to $18.2 million for the fourth quarter of 2018 due to quarterly revenue growth from Convergent and incremental revenue from the start-up of Strong Outdoor. For the year, revenue decreased 11.0% to $64.7 million as reductions at Convergent and Strong Cinema, where we eliminated several product lines earlier in the year, were partially offset by the start-up of Strong Outdoor.
• Gross profit increased 15.6% to $4.5 million for the fourth quarter of 2018 due to increased quarterly revenues at Convergent and Strong Outdoor combined with cost reduction initiatives at Convergent. For the year, gross profit decreased 35.7% to $12.2 million largely due to the startup costs of Strong Outdoor, and lower annual revenue at Convergent.
• Operating income amounted to $0.1 million for the fourth quarter of 2018 compared to a loss of $1.9 million in the fourth quarter of 2017 due to the combination of higher quarterly revenue and cost reduction initiatives implemented at Convergent. For the year, operating loss was $10.3 million compared to a loss of $2.8 million in the prior year, largely due to the startup costs of Strong Outdoor and the operating losses incurred in the first three quarters in connection with the repositioning of Convergent.
• Net loss was $0.6 million ($0.04 per share) for the fourth quarter of 2018 as compared to a loss of $1.0 million ($0.07 per share) in the fourth quarter of the prior year. For the year, net loss was $12.3 million ($0.86 per share) as compared to a loss of $3.6 million ($0.25 per share) in the prior year, largely due to the startup costs of Strong Outdoor and impairment charges incurred in connection with the repositioning of Convergent.
• Adjusted EBITDA, a non-GAAP measure, improved to positive $1.4 million for the fourth quarter of 2018 from negative $0.4 million in the fourth quarter of 2017 due to quarterly revenue growth combined with improved operating expenses. For the year, adjusted EBITDA was a loss of $3.7 million in 2018 compared to positive $0.5 million in 2017, largely due to the start-up costs of Strong Outdoor and operating losses in the first nine months for Convergent.

Kyle Cerminara, Chairman and CEO commented, “We demonstrated significant progress in all three lines of business during the fourth quarter, resulting in significantly improved quarterly operating results. Strong Cinema continued to produce stable high margin performance, while Convergent turned the corner on increased recurring revenue and lower operating costs in the fourth quarter. Strong Outdoor, which started operations in early 2018, began generating meaningful revenue for the first time.”

“Earlier in 2018, we took a number of steps to right-size and restructure our Convergent business, significantly reducing our operating costs while also accelerating higher margin recurring revenue. We also invested in the startup of Strong Outdoor, which is now beginning to generate meaningful revenue and is expected to continue to grow in 2019. Our Strong Cinema business continues to generate strong margins and reliable cash flow. The investments in the startup of Strong Outdoor and the restructuring of Convergent adversely impacted our reported operating results for the year. We started seeing the benefit of those initiatives in the fourth quarter and look forward to building on that foundation in 2019.”

Conference Call

The Company will host a conference call on Monday March 11, 2019 at 8:30 am Eastern Time, which can be accessed by calling:

U.S.: 1-877-407-3982International: 1-201-493-6780

A replay will be available until Thursday April 11, 2019, 11:59 PM by dialing 1-844-512-2921 in the U.S. and Canada and 1-412-317-6671 internationally and entering the pin number: 13688563.

Use of Non-GAAP Measures

Ballantyne Strong, 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, which differs from the term EBITDA as it is commonly used. In addition to adjusting net income (loss) to exclude taxes, interest, and depreciation and amortization, Adjusted EBITDA also excludes share-based compensation, impairment charges, equity method income, fair value adjustments, severance and transactional expenses and other non-cash charges.

EBITDA and Adjusted EBITDA are not measures of performance defined in accordance with GAAP. However, Adjusted 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 results.

Adjusted EBITDA should not be considered as an alternative to net loss or to net cash used in operating activities as a measure of operating results or liquidity. It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating the Company’s performance. A reconciliation of GAAP net loss to Adjusted EBITDA is included in the accompanying financial schedules.

For further information, please refer to Ballantyne Strong, Inc.’s Annual Report on Form 10-K to be filed with the SEC on or about March 12, 2019, available online at www.sec.gov.

About Ballantyne Strong, Inc. (www.ballantynestrong.com) Ballantyne Strong and its subsidiaries engage in diverse business activities including the design, integration and installation of technology solutions for a broad range of applications; development and delivery of out-of-home messaging, advertising and communications; manufacturing of projection screens; and providing of managed services including monitoring of networked equipment. The Company focuses on serving the cinema, retail, financial, advertising and government markets.

Forward-Looking Statements

Except for the historical information in this press release, it includes forward-looking statements which involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2018 and the following risks and uncertainties: the Company’s ability to expand its revenue streams, potential interruptions of supplier relationships or higher prices charged by suppliers, the Company’s ability to successfully compete and introduce enhancements and new features that achieve market acceptance and that keep pace with technological developments, the Company’s ability to successfully execute its capital allocation strategy, the Company’s ability to retain or replace its significant customers, the impact of a challenging global economic environment or a downturn in the markets, economic and political risks of selling products in foreign countries, risks of non-compliance with U.S. and foreign laws and regulations, cybersecurity risks and risks of damage and interruptions of information technology systems, the Company’s ability to retain key members of management and successfully integrate new executives, the Company’s ability to complete acquisitions, strategic investments, entry into new lines of business, divestitures, mergers or other transactions on acceptable terms or at all, the Company’s ability to assert its intellectual property rights, the impact of natural disasters and other catastrophic events, the adequacy of insurance and the impact of having a controlling stockholder. Given the risks and uncertainties, readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein, as well as others not now anticipated. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except where required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

  Ballantyne Strong, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except par values) (Unaudited)     December 31, 2018   December 31, 2017 Assets Current assets: Cash and cash equivalents $ 6,698 $ 4,870 Restricted cash 350 - Accounts receivable (net of allowance for doubtful accounts of $1,832 and $1,877 respectively) 13,841 10,766 Inventories, net 3,490 4,821 Recoverable income taxes 281 495 Other current assets   1,663     1,290   Total current assets 26,323 22,242 Property, plant and equipment (net of accumulated depreciation of $9,561 and $8,780 respectively) 15,175 10,826 Equity method investments 11,167 18,053 Intangible assets, net 1,795 3,972 Goodwill 875 952 Notes receivable 3,965 2,815 Other assets   337     154   Total assets $ 59,637   $ 59,014   Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 4,724 $ 3,425 Accrued expenses 2,782 2,882 Short-term debt 3,152 500 Current portion of long-term debt 1,094 65 Current portion of capital lease obligations 160 189 Deferred revenue and customer deposits   2,310     1,619   Total current liabilities 14,222 8,680 Long-term debt, net of current portion and debt issuance costs 10,053 1,870 Capital lease obligations, net of current portion 427 113 Deferred revenue and customer deposits, net of current portion 1,167 1,207 Deferred income taxes 2,516 2,816 Other accrued expenses, net of current portion   254     206   Total liabilities 28,639 14,892 Stockholders' equity: Preferred stock, par value $.01 per share; authorized 1,000 shares, none outstanding - - Common stock, par value $.01 per share; authorized 25,000 shares; issued 17,237 and 17,216 shares at December 31, 2018 and 2017, respectively; outstanding 14,443 and 14,422 shares at December 31, 2018 and 2017, respectively 169 169 Additional paid-in capital 41,474 40,565 Accumulated other comprehensive income (loss): Foreign currency translation (5,308 ) (4,048 ) Postretirement benefit obligations 125 99 Unrealized (loss) gain on available-for-sale securities of equity method investment (195 ) 353 Retained earnings   13,319     25,570   49,584 62,708 Less 2,794 of common shares in treasury, at cost   (18,586 )   (18,586 ) Total stockholders' equity   30,998     44,122   Total liabilities and stockholders' equity $ 59,637   $ 59,014       Ballantyne Strong, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)     Quarters Ended December 31,   Years Ended December 31, 2018   2017   2018   2017 Net product sales $ 9,794 $ 9,243 $ 34,378 $ 47,544 Net service revenues   8,438     6,519     30,311     25,102   Total net revenues 18,232 15,762 64,689 72,646 Cost of products sold 6,480 4,523 29,116 35,446 Cost of services   7,242     7,337     23,394     18,266   Total cost of revenues   13,722     11,860     52,510     53,712   Gross profit 4,510 3,902 12,179 18,934 Selling and administrative expenses: Selling 1,168 1,210 4,806 5,417 Administrative   3,285     4,415     15,587     16,121   Total selling and administrative expenses 4,453 5,625 20,393 21,538 Loss on disposal of assets   (6 )   (210 )   (2,135 )   (210 ) Operating income (loss) 51 (1,933 ) (10,349 ) (2,814 ) Other income (expense): Interest income - 1 - 9 Interest expense (180 ) (79 ) (447 ) (153 ) Fair value adjustment to notes receivable 197 1,146 1,150 1,146 Foreign currency transaction gain (loss) 292 106 333 (304 ) Other expense, net   (28 )   (7 )   (35 )   (16 ) Total other income   281     1,167     1,001     682   Income (loss) before income taxes and equity method investment income 332 (766 ) (9,348 ) (2,132 ) Income tax expense 591 709 2,427 3,418 Equity method investment (loss) income   (309 )   442     (552 )   1,958   Net loss from continuing operations (568 ) (1,033 ) (12,327 ) (3,592 ) Net Income (loss) from discontinued operations, net of tax   -     41     -     (25 ) Net loss $ (568 ) $ (992 ) $ (12,327 ) $ (3,617 ) Net loss earnings per share - basic Net loss from continuing operations $ (0.04 ) $ (0.07 ) $ (0.86 ) $ (0.25 ) Net loss from discontinued operations - 0.00 - (0.00 ) Net loss (0.04 ) (0.07 ) (0.86 ) (0.25 ) Net loss per share - diluted Net loss from continuing operations $ (0.04 ) $ (0.07 ) $ (0.86 ) $ (0.25 ) Net loss from discontinued operations - 0.00 - (0.00 ) Net loss (0.04 ) (0.07 ) (0.86 ) (0.25 )   Ballantyne Strong, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)   Years Ended December 31, 2018   2017 Cash flows from operating activities: Net loss $ (12,327 ) $ (3,617 ) Net loss from discontinued operations, net of tax   -     (25 ) Net loss from continuing operations (12,327 ) (3,592 ) Non-cash expenses, net 7,662 3,695 Fair value adjustment to notes receivable (1,150 ) (1,146 ) Changes in operating assets and liabilities   (1,410 )   1,053   Net cash flows (used in) provided by operating activities - continuing operations (7,225 ) 10 Net cash flows used in operating activities - discontinued operations   -     (123 )

Net cash used in operating activities

(7,225 ) (113 )   Cash flows from investing activities: Proceeds from sale of equity securities 4,531 - Dividends received from investee in excess of cumulative earnings 69 253 Capital expenditures (1,984 ) (3,275 ) Purchase of equity securities   -     (2,525 ) Net cash flows provided by (used in) investing activities - continuing operations 2,616 (5,547 ) Net cash flows provided by investing activities - discontinued operations   -     134   Net cash provided by (used in) investing activities 2,616 (5,413 )   Cash flows from financing activities: Proceeds from sale-leaseback financing $ 7,000 $ - Proceeds from issuance of long-term debt - 2,000 Proceeds from issuance of short-term debt 3,963 500 Principal payments on short-term debt (1,154 ) - Principal payments on long-term debt (2,476 ) (33 ) Payment of debt issuance costs (22 ) (49 ) Payment of costs attributable to issuance of equity contract (8 ) - Purchase of treasury stock - (102 ) Proceeds from exercise of stock options - 71 Payments on capital lease obligations   (230 )   (240 ) Net cash provided by financing activities   7,073     2,147   Effect of exchange rate changes on cash and cash equivalents - continuing operations   (286 )   478   Net increase (decrease) in cash and cash equivalents and restricted cash 2,178 (2,901 ) Discontinued operations activity included above: Add: Cash balance included in assets held for sale at beginning of period - 175 Less: Cash balance included in assets held for sale at end of period - - Cash and cash equivalents and restricted cash at beginning of period   4,870     7,596   Cash and cash equivalents and restricted cash at end of period $ 7,048   $ 4,870   Components of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 6,698 $ 4,870 Restricted cash   350     -   Total cash and cash equivalents and restricted cash $ 7,048   $ 4,870             Ballantyne Strong, Inc. and Subsidiaries Summary by Business Segments (In thousands) (Unaudited)   Quarters Ended December 31, Year ended December 31, 2018 2017 2018 2017 Strong Cinema Revenue $ 10,923 $ 10,785 $ 44,361 $ 48,938 Gross profit 3,695 3,354 14,710 14,919 Operating income 2,726 2,086 10,407 10,678 Adjusted EBITDA $ 3,242 $ 2,391 $ 11,812 $ 11,220   Convergent Revenue $ 5,706 $ 5,163 $ 17,210 $ 24,348 Gross profit 1,481 488 2,061 3,840 Operating income (loss) 687 (1,830 ) (4,483 ) (3,944 ) Adjusted EBITDA $ 1,093 $ (823 ) $ (1,459 ) $ (2,223 )   Strong Outdoor Revenue $ 1,684 $ - $ 3,632 $ - Gross loss (726 ) - (4,843 ) - Operating loss (1,118 ) - (6,070 ) - Adjusted EBITDA $ (1,041 ) $ - $ (5,803 ) $ -   Corporate and Other Revenue $ (81 ) $ (186 ) $ (514 ) $ (640 ) Gross profit 60 60 251 175 Operating loss (2,244 ) (2,189 ) (10,203 ) (9,548 ) Adjusted EBITDA $ (1,944 ) $ (1,951 ) $ (8,227 ) $ (8,509 )   Consolidated Revenue $ 18,232 $ 15,762 $ 64,689 $ 72,646 Gross profit 4,510 3,902 12,179 18,934 Operating income (loss) 51 (1,933 ) (10,349 ) (2,814 ) Adjusted EBITDA $ 1,350 $ (383 ) $ (3,677 ) $ 488   Ballantyne Strong, Inc. and Subsidiaries Reconciliation of Net Loss to Adjusted EBITDA (In thousands) (Unaudited)     Quarters Ended December 31, 2018   2017                

StrongCinema

Convergent

StrongOutdoor

Corporateand Other

Consolidated

StrongCinema

Convergent

StrongOutdoor

Corporateand Other

Consolidated Net income (loss) $ 2,499 416 $ (1,118 ) (2,365 ) $ (568 ) $ 3,743 (2,187 ) $ - (2,548 ) $ (992 ) Interest expense, net 28 60 - 92 180 2 54 - 22 78 Income tax expense 410 181 - - 591 328 381 - - 709 Depreciation and amortization   231     413     77     98     819     239     310     -   33     582  

EBITDA

3,168 1,070 (1,041 ) (2,175 ) 1,022 4,312 (1,442 ) - (2,493 ) 377 Stock-based compensation expense - - - 189 189 - - - 200 200 Fair value adjustment to notes receivable (197 ) - - - (197 ) (1,146 ) - - - (1,146 ) Equity method investment loss (income) 267 - - 42 309 (785 ) - - 343 (442 ) Impairment charges 4 2 - - 6 10 201 - - 211 Severance and other   -     21     -     -     21     -     418     -   (1 )   417   Adjusted EBITDA $ 3,242   $ 1,093   $ (1,041 ) $ (1,944 ) $ 1,350   $ 2,391   $ (823 ) $ - $ (1,951 ) $ (383 )     Years Ended December 31, 2018 2017  

StrongCinema

Convergent

StrongOutdoor

Corporateand Other

Consolidated

StrongCinema

Convergent

StrongOutdoor

Corporateand Other

Consolidated Net income (loss) $ 8,834 (5,448 ) $ (6,070 ) (9,643 ) $ (12,327 ) $ 10,622 (4,445 ) $ - (9,794 ) $ (3,617 ) Interest expense, net 72 239 - 136 447 (1 ) 89 - 56 144 Income tax expense 1,925 502 - - 2,427 2,899 519 - - 3,418 Depreciation and amortization   892     1,312     267     273     2,744     912     994     -   232     2,138   EBITDA 11,723 (3,395 ) (5,803 ) (9,234 ) (6,709 ) 14,432 (2,843 ) - (9,506 ) 2,083 Stock-based compensation expense - - - 837 837 - - - 736 736 Fair value adjustment to notes receivable (1,150 ) - - - (1,150 ) (1,146 ) - - - (1,146 ) Equity method investment loss (income) 1,233 - - (681 ) 552 (2,074 ) - - 116 (1,958 ) Impairment charges 6 1,707 - 818 2,531 8 202 - - 210 Severance and other   -     229     -     33     262     -     418     -   145     563   Adjusted EBITDA $ 11,812   $ (1,459 ) $ (5,803 ) $ (8,227 ) $ (3,677 ) $ 11,220   $ (2,223 ) $ - $ (8,509 ) $ 488    

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Ballantyne Strong, Inc.Mark RobersonChief Financial OfficerMark.Roberson@btn-inc.com704-994-8295