Q1 2020 Earnings Call

Our conference will be can momentarily.

Once again, thank you for standing by our conference will begin momentarily.

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Thank you for standing by our conference will be good momentarily.

Once again, thank you for standing by our conference will be getting on the chart.

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Ladies and gentlemen, thank your for standing by our conference will be can momentarily.

Once again, thank you for standing by our conference will begin momentarily.

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Ladies and gentlemen, thank you for standing by welcome to the balance on strong first quarter 2020, <unk> earnings Conference call.

On the call today for Valentine's trial, or Kyle Cerminara Nonexecutive chairman of the board.

Mark Robertson, Chief Executive Officer, and Todd Major Chief Financial Officer.

I would now like to handle the conference over to talk major for some opening remarks. Please go ahead.

Good afternoon, and welcome to Ballantine strong earnings earnings Conference call for the first quarter ended March 31st 20 boring 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 views and expectations as of today and the company is under no obligation and expressly disclaims any obligation.

The update forward looking statements, except as required by law.

These statements are also subject to risks and uncertainties that may cause actual results to differ materially from those described on today's call risks and uncertainties are also described in the company's FCC filings.

Today's presentation and discussion also contain references to non-GAAP financial measures.

The definition of non-GAAP termed reconciliations to GAAP measures are available in the earnings release posted in the Investor Relations section of our website.

Our non-GAAP measures may not be comparable to those used by other companies and we encourage you to review and I understand all of our financial reporting before making any investment decisions.

This time I would like to turn the call overtime.

Good afternoon. Thank you for joining our call today.

One other priorities over the past couple of years has been to assemble the right management team for downtime strong or subsidiary operations.

As you are aware, we recently announced executive management changes as part of our succession planning initiatives.

Mark Webber since taking over as CEO and Todd major stepped up the CFO.

I will continue to be actively involved on key strategic in M&A initiatives my role as Nonexecutive Chairman.

Well he markets hot into the organization over the past two years was a key element of our plan to strengthen our management team as well is allowing us to improve our governance structure by separating roles of CEO and chairman.

Over the past 18 months, we've made significant improvements in our operations and those improvements are clearly visible in our recent financial trends.

Well, we did not for C that we'll be in the midst of has done that gets their first contemplating these moves you're certainly better positioned as a result of these investments to react emerged from our current situation in a position of strength.

Turning to our overall strategic plans going forward.

M&A remains a key strategic focus of the company and we continue to evaluate acquisitions and opportunities to monetize each of our businesses, So where we analyze several potential transactions with our internal team.

In addition, we've engaged with investment banks, a strategic consultants to help us further evaluate transactions.

Better define our strategy.

As the business operations have continued to improve we're seeing increased inbound interest and potential for strategic M&A transaction, even during the current endemic.

Strategic tuck in acquisitions in our digital signage and managed services businesses.

Swap attendees to sell steaks and operations are combined with other providers, we intend to.

Selectively pursue these opportunities where we believe we can increase shareholder value.

When you look at the combined adjusted EBITDA on a strong entertainment convergent for example, when only needs to assume a modest multiple of adjusted EBITDA to understand the potential upside from an M&A transaction.

Of course, M&A transactions come up let's get uncertainty are difficult to execute we believe we've assembled a team that is up to the challenge well what to do what we believe isn't the best interest to shareowners.

Obviously, the current environment with Cobot 19 has presented an unexpected challenge for our strong entertainment strong outdoor advertising businesses as Mark will discuss in a moment, we're taking actions to adjust to the current barb.

Plunging times, often also bring new opportunities and serve to accelerate industry consolidation, which we are closely evaluating as well.

Well being proactive in creating products and solutions for the cinema Entertainment retail industries to address the cobot 19 pandemic and help these businesses reopened and operate safely on an ongoing basis in the future.

We expect to having lots of these products in the near future.

I'll now hand, the call over to Mark.

Good afternoon, it's hard to believe it's only been two months since our last call and how much has changed for everyone. It's such a short period of time.

Let me start by giving a high level view of the operational progress through Q1 will also cover more detail around the impact of Cobot night gene and the actions, we're taking to stabilize our financials and the outlook as we prepare to support our customers post cobot.

If you've been following our progress I'm sure you've seen that our financial and operational performance, that's been improving consistently quarter to quarter for over the past year.

The first quarter of 2020 reflected a continuation of that strictly tritan before the impact to covert became more evident.

Gross margins operating results adjusted EBITDA and operating cash flow demonstrated a trend of steady improvement over the past year in half.

In the first quarter 2020.

Gross profit increased by 60% with gross margins increasing to 31% from 19%.

Adjusted EBITDA improved by over 50% and net loss per share was three cents as compared to 29 cents in the prior year.

Those improvements were the result of action plans, we implemented starting in late 2018, it continuing throughout 29 <unk>.

The repositioning of convergent for example.

They hardware focused digital signage business to a higher value add recurring revenue service model.

It is significant positive impact.

Today over 60% of our revenues now from recurring revenue service contracts and we expect that trend will continue in 2020, as we see our existing customers requesting additional services and we're winning new customer business without de SaaS model.

Additionally, our convergent business has been the least impacted by cold. It is the majority of our Dcs customers are providers of a central services are able to much into operating three depend on it.

That's strong outdoor we restructured the operating cost model for our static taxi top advertising business mid 2019.

At the same time that we sold our digital advertising business the Firefly.

As a result at the repositioning of that business, we were able to dramatically improve the overall financial performance with Q4 being our first quarter positive adjusted EBITDA.

In Q1, we began to see the impact of covert on the New York advertising markets and results trended down from Q4 on a sequential basis.

However, even with the impact of Cobot operating results were quite favorable that's compared to prior year due to the lower operating cost model no place.

As you might imagine.

The answer taxi top advertising in New York is not very high at the moment.

We have taken additional steps to further reduce the operating expenses.

Fortunately a reduced operating cost structure as well as these additional temporary cost reduction actions have dramatically reduce the cash needs of that business.

Strong and her team that we had a fantastic second half the 20 like gene.

We enter 2020 with higher than normal demand in our screen business in the month of January.

However, as a corner virus began to impact China.

And then made its way to the U.S. in Canada by March we saw that positive momentum swing back.

As a result of government mandates in Quebec, as well as concern for the health of our employees, we closed our facility there in mid March.

We will begin to stage reopening with a limited number of employees. This week and we expect demand and utilization to start to solar cover over the next couple of months before gradually returning to normalized levels.

We also saw demand for distribution.

Local service started off strong and then drop and then we're dropping to dance or the cinema closures.

We significantly reduced hours and wages starting in early April and those continue through the second quarter, while our system customers remain closed.

Lots of trying time for all of our strong entertainment customers and for our employees, we're committed to flexing our operations to ensure that we're ready to support our customers as they now start planning how to reopen there have been use.

We're already proactively working with those customers to begin the planning work that will be needed to calibrate projection systems ensure safety and otherwise get sent them is ready to show movies again after being idle for this unprecedented period of time.

Overall 2020 started off strong continuing the trends from 2019 before customers and operations rent packet about stay at home worse.

We applied for repair paycheck protection loans from the S.P.A. along with many other small in larger customers companies.

Ultimately the ground rules is to book intensive along program and the certification criteria changed its treasury moved goalpost with regards to qualification and enforcement.

And our view those changes made the PPP long as potentially inappropriate for public companies with access to any other source of operating liquidity.

We elected to return to funds that they might be used by other companies without access to alternatives.

Fortunately, we do have existing bank facilities and lines of credit hold assets that can be monetized and there are many other actions. We can take the manage liquidity to the storm and as we prepare to ramp back up operations on the other side.

We significantly reduced our mckee operating expenses in a closely managing working capital and liquidity.

Some of those expense reductions are temporary as we ramp down variable costs and implement a temporary austerity measures others will be more permanent will be better positioned the company to operate more profitably on the other side of the crisis.

We're in unprecedented times.

I'm proud of the manner in which our teams have rapidly adjusted the circumstances.

I'm confident that we've taken appropriate measures to weather the storm for the next few months and are beginning to see opportunities on the other side that we're uniquely positioned for.

We're starting discussions with customers already help them plans to the new normal postcode, how to opened their doors against safely and profitably.

I believed that our service organizations are uniquely equipped for that work that will be required to get the cinemas and other venues ready to reopen.

We're also working on covert related safety measures.

And we are developing new product offerings targeted at improving safety in retail and.

Retail and entertainment venues as they reopen.

Those new products and services or any development and we look forward to sharing more on that topics.

I'll now turn the call up at the Todd to review the financials.

Thanks, Mark total revenue decreased 5.1% to 13.6 million for the first quarter of 2020.

Gross margins improved to 31.3% for the first quarter of 2020 from 18.5% and the first quarter 2019.

Operating loss improved 25.4%, a 1.9 billion for the first quarter 2020.

From 2.6 million in the prior year, while adjusted EBITDA improved 54.1% the negative point 7 billion for the first quarter of 2020 compared to negative 1.4 million in the prior year.

These improvements were primarily driven by strong outdoor and conversion.

Were partially offset by reductions in Prague profitability at strong entertainment.

Slide eight summarizes our consolidated operating results for the previous five quarters.

Gross profit gross margin percentage income from operations and adjusted EBITDA All increased sequentially throughout 2019 before dipping in Q1 2020.

The results from the first quarter <unk> decline from Q4, 2019, primarily due to the headwinds and strong entertainment.

In the latter part of the quarter.

Notably despite our Q1 2020 results decreasing on a sequential basis due to the current environment.

They were still significantly improved as compared to Q1, Oh 2019, due to improvements in convergence and strong outdoor.

On slide nine strong entertainment revenue and profitability, we're tracking significantly in Q1 2020 as compared to both Q4 2019 and Q1 of the prior year.

As Mark previously noted we temporarily closed our screen manufacturing facility in Quebec.

In March and saw a significant and speedy declined and field services and parts distribution. That's been a cinemas began closing in China and North America during the quarter.

We commenced our expense rationalization initiatives in early April shortly after the end of our first quarter. So we expect to see the benefit of those activity and our second quarter results.

Moving to slide 10.

And burdens operating results continued to trend upward direction.

Gross margins income from operations and adjusted EBITDA, All continued to improve.

We did not see any meaningful impact of cobot 19, often burdens financials during the first quarter of 2020.

Some of our retail customers temporally temporarily paused operations during the second quarter, but the overwhelming majority of our recurring revenue customer base, that's providing essential services and continue to operate.

On slide 11 strong outdoors financial results improved in the second half of 29 team continues to hover around breakeven in the first quarter 2020 on an adjusted EBITDA basis.

There was also strong outdoor positively impacted by an increase in our experiential marketing campaign business in January.

But began to see the impact of Cobot 19 on that New York City market mid quarter and demand for taxi top advertising declined significantly as New York City entered its locked down.

We implemented additional steps in early April to temper layer temporarily reduced operating expenses, while we wait for the market to reopen.

In closing the first quarter started off with strong positive momentum before the stay at home waters and other disruptions related to Kogan 19.

We have taken decisive actions to reduce operating costs and it's working capital and maintain liquidity through the current phase.

We believe our customers will need our services and support more than ever as they start preparing to reopen their doors in the coming months.

While we cannot predict the project.

The trajectory of the economic recovery with much certainty, we will continue to closely monitor expenses and pace our activities to ensure that we are positioned to withstand this disruption.

With that let me turn the call back to Mark.

Thanks Todd.

Thank you for listening in today, please stay safe and have a good evening.

This does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation and have agreed evening.