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Strong Global Entertainment Reports Second Quarter 2024 Operating Results

Mooresville, N.C., Aug. 14, 2024 (GLOBE NEWSWIRE) — Strong Global Entertainment, Inc. (NYSE American: SGE) (the “Company” or “Strong Global Entertainment”) today announced operating results for the second quarter ended June 30, 2024.

Second Quarter Highlights –

Mark Roberson, Chief Executive Officer, commented, “The second quarter operating results demonstrated double digit growth with improvements at Strong Technical Services and positive contributions from the ICS acquisition. We also announced two merger transactions that we believe will continue to streamline and reduce the overall overhead levels going forward. The Strong/MDI transaction with Saltire represents a compelling valuation and the potential to participate in their future growth. The planned merger of Strong Global Entertainment into Fundamental Global will reduce the burden and duplicate costs associated with operating separate public companies.”

Select Financial Comparisons for Continuing Operations –

As a result of the pending transaction between Strong/MDI and FG Acquisition Corp., the current year and historical results of operations of Strong/MDI have been reclassified to discontinued operations and are not discussed below.

About Strong Global Entertainment, Inc.

Strong Global Entertainment, Inc., a majority owned subsidiary of Fundamental Global Inc., is a leader in the entertainment industry, providing mission critical products and services to cinema exhibitors and entertainment venues for over 90 years. The Company manufactures and distributes premium large format projection screens, provides comprehensive managed services, technical support and related products and services primarily to cinema exhibitors, theme parks, educational institutions, and similar venues. In addition to traditional projection screens, the Company manufactures and distributes its Eclipse curvilinear screens, which are specially designed for theme parks, immersive exhibitions, as well as simulation applications. It also provides maintenance, repair, installation, network support services and other services to cinema operators, primarily in the United States.

About Fundamental Global Inc.

Fundamental Global Inc. (Nasdaq: FGF, FGFPP) and its subsidiaries engage in diverse business activities including reinsurance, asset management, merchant banking, manufacturing and managed services.

The FG® logo and Fundamental Global® are registered trademarks of Fundamental Global LLC.

Use of Non-GAAP Measures

Strong Global Entertainment, 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 (“Adjusted EBITDA”), which differs from the commonly used EBITDA (“EBITDA”). Adjusted EBITDA both adjusts net income (loss) to exclude income taxes, interest, and depreciation and amortization, and excludes share-based compensation, impairment charges, severance, foreign currency transaction gains (losses), transactional gains and expenses, gains on insurance recoveries, and other cash and non-cash charges and gains.

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

EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or to net cash from operating activities as measures of operating results or liquidity. The Company’s calculation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies, and the measures exclude financial information that some may consider important in evaluating the Company’s performance.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company’s results as reported under GAAP. Some of these limitations are: (i) they do not reflect the Company’s cash expenditures, or future requirements for capital expenditures or contractual commitments, (ii) they do not reflect changes in, or cash requirements for, the Company’s working capital needs, (iii) EBITDA and Adjusted EBITDA do not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debt, (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements, (v) they do not adjust for all non-cash income or expense items that are reflected in the Company’s statements of cash flows, (vi) they do not reflect the impact of earnings or charges resulting from matters management considers not to be indicative of the Company’s ongoing operations, and (vii) other companies in the Company’s industry may calculate these measures differently than the Company does, limiting their usefulness as comparative measures.

Management believes EBITDA and Adjusted EBITDA facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting relative depreciation expense). The Company also presents EBITDA and Adjusted EBITDA because (i) management believes these measures are frequently used by securities analysts, investors and other interested parties to evaluate companies in the Company’s industry, (ii) management believes investors will find these measures useful in assessing the Company’s ability to service or incur indebtedness, and (iii) management uses EBITDA and Adjusted EBITDA internally as benchmarks to evaluate the Company’s operating performance or compare the Company’s performance to that of its competitors.

Forward-Looking Statements

In addition to the historical information included herein, this press release contains “forward-looking statements” that are subject to substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this press release are forward-looking statements. Forward-looking statements contained in this press release may be identified by the use of words such as “anticipate,” “believe,” “contemplate,” “could,” “estimate,” “expect,” “intend,” “seek,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “target,” “aim,” “should,” “will” “would,” or the negative of these words or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements are based on the Company’s current expectations and are subject to inherent uncertainties, risks and assumptions that are difficult to predict. Further, certain forward-looking statements are based on assumptions as to future events that may not prove to be accurate. These and other risks and uncertainties are described more fully in the section titled “Risk Factors” in the final prospectus related to the public offering filed with the SEC, our Annual Report on Form 10-K for the year ended December 31, 2023, and the Company’s other reports filed with the SEC. Forward-looking statements contained in this announcement are made as of this date, and the Company undertakes no duty to update such information except as required under applicable law.

Investor Relations Contacts:
IR@strong-entertainment.com

Strong Global Entertainment, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
 
      June 30, 2024       December 31, 2023  
      (Unaudited)          
Assets                
Current assets:                
Cash and cash equivalents   $ 3,483     $ 4,822  
Accounts receivable, net     4,308       3,528  
Inventories, net     2,548       1,482  
Assets of discontinued operations     12,730       14,329  
Other current assets     399       317  
Total current assets     23,468       24,478  
Property, plant and equipment, net     429       487  
Operating lease right-of-use assets     267       350  
Finance lease right-of-use asset     1,071       1,201  
Other long-term assets           10  
Total assets   $ 25,235     $ 26,526  
                 
Liabilities and Stockholders’ Equity                
Current liabilities:                
Accounts payable   $ 3,448     $ 2,569  
Accrued expenses     2,302       1,712  
Payable to Fundamental Global Inc.           129  
Short-term debt     43       18  
Current portion of long-term debt     271       270  
Current portion of operating lease obligations     180       183  
Current portion of finance lease obligations     264       253  
Deferred revenue and customer deposits     1,151       849  
Liabilities of discontinued operations     9,503       11,257  
Total current liabilities     17,162       17,240  
Operating lease obligations, net of current portion     129       216  
Finance lease obligations, net of current portion     836       971  
Long-term debt, net of current portion     166       301  
Other long-term liabilities     5       4  
Total liabilities     18,298       18,732  
                 
Commitments, contingencies and concentrations                
                 
Stockholders’ Equity:                
Preferred stock, no par value            
Paid-in-capital related to:                
Class A Common stock, no par value                
Class B Common stock, no par value     15,881       15,740  
Accumulated deficit     (3,377 )     (2,712 )
Accumulated other comprehensive loss     (5,567 )     (5,234 )
Total stockholders’ equity     6,937       7,794  
Total liabilities and stockholders’ equity   $ 25,235     $ 26,526  
Strong Global Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share amounts)
 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2024     2023     2024     2023  
Net product sales   $ 4,782     $ 3,794     $ 9,417     $ 7,564  
Net service revenues     3,339       3,049       6,387       5,796  
Total net revenues     8,121       6,843       15,804       13,360  
Cost of products     3,973       3,542       7,874       6,875  
Cost of services     2,624       2,340       5,099       4,505  
Total cost of revenues     6,597       5,882       12,973       11,380  
Gross profit     1,524       961       2,831       1,980  
Selling and administrative expenses:                                
Selling     369       161       655       397  
Administrative     1,866       2,372       3,588       3,212  
Total selling and administrative expenses     2,235       2,533       4,243       3,609  
Loss from operations     (711 )     (1,572 )     (1,412 )     (1,629 )
Other income (expense):                                
Interest expense, net     (21 )     (17 )     (55 )     (31 )
Foreign currency transaction loss     (6 )           (5 )     (4 )
Other income, net     2       1       28       11  
Total other expense     (25 )     (16 )     (32 )     (24 )
Loss from continuing operations before income taxes     (736 )     (1,588 )     (1,444 )     (1,653 )
Income tax (benefit) expense     (6 )     279       (6 )     (81 )
         Net loss from continuing operations     (742 )     (1,309 )     (1,450 )     (1,734 )
         Net income from discontinued operations     150       893       785       1,694  
         Net loss   $ (592 )   $ (416 )   $ (665 )   $ (40 )
                                 
Basic net (loss) income per share:                                
         Continuing operations   $ (0.09 )   $ (0.20 )   $ (0.18 )   $ (0.28 )
         Discontinued operations     0.02       0.14       0.10       0.27  
Basic net loss per share   $ (0.07 )   $ (0.06 )   $ (0.08 )   $ (0.01 )
                                 
Diluted net (loss) income per share:                                
         Continuing operations   $ (0.09 )   $ (0.20 )   $ (0.18 )   $ (0.28 )
         Discontinued operations     0.02       0.14       0.10       0.27  
Diluted net loss per share   $ (0.07 )   $ (0.06 )   $ (0.08 )   $ (0.01 )
                                 
Weighted-average shares used in computing net (loss) income per share:                                
Basic     7,904       6,553       7,891       6,278  
Diluted     7,904       6,553       7,891       6,278  
Strong Global Entertainment, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
             
    Six Months Ended June 30,  
    2024     2023  
Cash flows from operating activities:                
Net loss from continuing operations   $ (1,450 )   $ (1,734 )
Adjustments to reconcile net income to net cash (used in) provided by operating activities:                
Provision for (recovery of) doubtful accounts     30       (26 )
(Benefit from) provision for obsolete inventory     (38 )     30  
Provision for warranty     3       6  
Depreciation and amortization     207       126  
Gain on acquisition of ICS assets     (17 )      
Amortization and accretion of operating leases     94       32  
Deferred income taxes           (432 )
Stock-based compensation expense     147       766  
Changes in operating assets and liabilities:                
Accounts receivable     (387 )     (45 )
Inventories     (1,027 )     395  
Current income taxes     (51 )     9  
Other assets     1       438  
Accounts payable and accrued expenses     1,262       2,594  
Deferred revenue and customer deposits     304       (569 )
Operating lease obligations     (100 )     (38 )
Net cash (used in) provided by operating activities from continuing operations     (1,022 )     1,552  
Net cash used in operating activities from discontinued operations     (572 )     (2,139 )
Net cash used in operating activities     (1,594 )     (587 )
                 
Cash flows from investing activities:                
Capital expenditures     (20 )     (119 )
Net cash used in investing activities from continuing operations     (20 )     (119 )
Net cash used in investing activities from discontinued operations     (59 )     (283 )
Net cash used in investing activities     (79 )     (402 )
                 
Cash flows from financing activities:                
Principal payments on short-term debt     (32 )      
Principal payments on long-term debt     (135 )     (18 )
Payments of withholding taxes for net share settlement of equity awards     (6 )     (104 )
Proceeds from initial public offering           2,411  
Payments on finance lease obligations     (124 )     (60 )
Net cash transferred to parent           (2,283 )
Net cash used in financing activities from continuing operations     (297 )     (54 )
Net cash provided by financing activities from discontinued operations     477       1,930  
Net cash provided by financing activities     180       1,876  
                 
Effect of exchange rate changes on cash and cash equivalents from discontinued operations     (11 )     (132 )
Net (decrease) increase in cash and cash equivalents from continuing operations     (1,339 )     1,379  
Net decrease in cash and cash equivalents from discontinued operations     (165 )     (624 )
Net (decrease) increase in cash and cash equivalents     (1,504 )     755  
                 
Cash and cash equivalents from continuing operations at beginning of period     4,822       2,889  
Cash and cash equivalents from continuing operations at end of period   $ 3,483     $ 4,268  

Strong Global Entertainment, Inc. and Subsidiaries
Reconciliation of Net Loss to Adjusted EBITDA
(In thousands)
(Unaudited)

    Three Months Ended June 30,     Six Months Ended June 30,  
    2024     2023     2024     2023  
                         
Net loss   $ (592 )   $ (416 )   $ (665 )   $ (40 )
Net income from discontinued operations     (150 )     (893 )     (785 )     (1,694 )
Net loss from continuing operations     (742 )     (1,309 )     (1,450 )     (1,734 )
Interest expense, net     21       17       55       31  
Income tax (benefit) expense     6       (279 )     6       81  
Depreciation and amortization     104       67       207       301  
EBITDA     (611 )     (1,504 )     (1,182 )     (1,321 )
Stock-based compensation expense     73       748       147       766  
Transaction expenses     370             370        
IPO expenses           475             475  
Adjust gain on purchase of ICS     5             (17 )      
Foreign currency transaction loss (gain)     6             5       (528 )
Adjusted EBITDA   $ (157 )   $ (281 )   $ (677 )   $ (608 )


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