FG Group Holdings Inc.
Q2 2015 Earnings Call Transcript

Published: 7 Aug 2015

[Operator:]

Welcome to the Ballantyne Strong's Second Quarter 2015 Conference Call. [Operator Instructions]. I would now like to turn the conference over to Elise Stejskal. Please go ahead, Elise.

[Elise Stejskal:]

Good morning, everyone, and welcome to today's second quarter 2015 conference call. Today's call and webcast may contain forward-looking statements related to the company's future operating results. Except for historical information, it may include forward-looking statements that involve risks and uncertainties, including but not limited to, quarterly fluctuations and results, customer demand for the company's products, the development of new technology for alternate means of motion picture presentation, domestic and international economic conditions, the management of growth and other risks detailed from time-to-time in the company's Securities and Exchange Commission filings. Actual results may differ materially from management's expectations. Joining us on today call this morning is Kyle Cerminara, Chairman of the Board of Directors, Chris Stark, President and Nate Legband, Chief Financial Officer. At this time, I would like to turn the call over to Chris. Chris?

[Kyle Cerminara:]

Good morning and thank you for joining us. The Ballantyne Board and Executive Team is pleased with the progress during the second quarter. The new Board of Directors has invested a great deal of time and energy working closely with the management team to begin our progress of prudently evaluating each of our businesses and implementing strategies that will drive improvements and our financial performance. Since the election of the new Board of Directors in May several strategies have been implemented to reduce our expense structure and increase profitability. These initial changes will enable us to begin leveraging our capital and to further invest and strengthen our focus on our Ballantyne Strong MDI and convergent businesses. We’re committed to the success and growth of each of these businesses and see each of them as strategically important to our future. The Board and I look forward to the continued progress we believe we can achieve in the coming quarters. With that I would like to turn it over to Chris to shed more light on the second quarter.

[Chris Stark:]

Thank you, Kyle. As Kyle mentioned the management team has recently begun implementing several strategies to improve our profitability. During the second quarter the Omaha offices were consolidated to reduce our facility cost with an estimated savings of 1.6 million over the remainder of the least. We also began revaluating our organizational structure and as a result a number of staffing adjustments have been made producing personnel related expenses. While these changes provide a good start for improving the financial performance of the company additional strategies and actions will be implemented in the coming months to drive further volume. The management team will continue to work closely with the Board in developing an appropriately capital allocation policy while determining where investments should be made in our existing businesses to drive organic growth as well as identifying non-strategic area where expenses can be more effectively managed. Aside from some of the charges we recognized that we’re associated with the cost reduction initiatives and inventory valuation adjustments, the second quarter performance was down only slightly in comparison to the prior quarter due in large part due to objective [ph] sale. All other product line show top line improvement over the prior quarter. I would now like to turn the call over to Nate Legband for additional color on the company's Q2 financial results.

[Nate Legband:]

Thanks Chris. Good morning everyone. Our total net revenues in the second quarter of 2015 were 19.7 million compared to 22 million in the same period of last year. The managed services segment generated revenues of 7.8 million in the second quarter compared with 7.6 million in the same period of the prior year. The increase is primarily attributable to increased project revenues in the digital media business. The systems integration segment generated revenues 12.2 million in the second quarter compared with 14.8 million in the same period of the prior year. The primary driver of the decline was lower shipments in digital projectors. We shifted a total of 83 digital projectors in the second quarter compared with a 144 in the same period of last year, this decline was partially offset by strong sales of our stream. Gross profit was 3.7 million compared with 4.2 million in the prior year. Our gross margin of 18.6% in the second quarter compared with 19.3% in the same quarter in the prior year. Decrease in gross margin as a percentage of revenue was driven by charge of $1 million related to the valuation of inventory this decrease is partially offset by a more [indiscernible] mix in our sales to higher margin products. Selling and administrative expenses were 5.5 million compared with 4.4 million in the prior year, increase in SG&A when compared for the same quarter the prior year was primarily attributable to an increase in severance and proxy contest related expenses. We recorded 693,000 of severance cost during the quarter as part of the cost reduction initiatives. We also recorded a charge in the loss on disposable of assets for 426,000 related to the Omaha facility consolidation that took place in the second quarter. The facility consolidation was also part of broader cost reduction initiative. We generated a net loss of 2.9 million or $0.21 per share in the second quarter of 2015 compared with net income of 381,000 and $0.03 per share in the same period a year ago. Excluding charges related to severance, facility consolidation, inventory valuation and the proxy contest we generated a net loss of 473,000 or $0.04 per share in the second quarter of 2015. Ballantyne's ash and cash equivalents balance was $24.7 million as of June 30, 2015 up from 23.9 million at the end of the prior quarter and 22.5 million at the end of the prior quarter. The increase compared to the prior quarter was primarily attributable due to strong cash flows from our systems integration business. We continue to have good liquidity and strong cash flows providing additional capital resources for the future. At this point we would like to open the lines to answer your questions. Operator please open the lines.

[Chris Stark:]

Thank you for joining us this morning. We look forward to speaking with you next quarter to provide additional color on the strategies and performance initiatives in play to enhance the services and products provided to our customers or generating value add to our shareholders.

[Operator:]

Thank you, Mr. Stark. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Have a great day.