Q4 2020 Ballantyne Strong Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to Ballantyne Strong Inc. Fourth quarter 2020 earnings Conference call. At this time, all participants are in a listen only mode.

On an answer session will follow the formal presentation.

Anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn this call over to Mr. John Nesbitt of IMS Investor Relations. Thank you Sir you may begin.

Good afternoon, and welcome to Ballantyne strong earnings conference call for the fourth quarter ended December 31 2020.

On the call today from Ballantyne strong are Mark Roberson, Chief Executive Officer, and Todd Major Chief Financial Officer 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 on the company is under no obligation and expressly disclaim.

Any obligation to 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 SEC filings.

Today's presentation discussion also contains references to non-GAAP financial measures. The definition of non-GAAP terms and reconciliations to GAAP measures are available in the earnings release posted on the Investor Relations section on the website are non-GAAP measures may not be comparable to those used by other companies and we encourage you to review and understand all.

All our financial reporting before making any investment decisions.

This time I'd now like to turn the call over to Mark. Okay go ahead Mark.

Yeah.

Thanks, John.

Good afternoon, everyone and thanks for joining us today.

I will start on slides two and three.

Absolutely 'twenty 'twenty was a busy year and also a challenging year.

It was also a very pivotal year in positioning ballantyne strong for the future.

I thought it might be helpful to provide a bit of context and background on where we are and where we plan to go.

Some of you May remember our conference calls in 2019.

We discussed that we were beginning to actively evaluate the potential to monetize our operating businesses.

We've now completed two transactions.

With the sale of strong outdoor and convergent corporation over the past six months.

Following those recent transactions strong entertainment is now our primary operating business.

This is comprised of our screen manufacturing business strong.

<unk> M B I.

And our managed services business strong technical services.

In addition, we have capital allocated the three core investment holdings.

I mean first.

<unk>, Chief financial and Firefly, which we will cover in more detail on a few moments.

We also completed a capital raise.

With net proceeds of $6 7 million in February to further enhance our balance sheet and provide liquidity for growth.

As a result, our balance sheet is much stronger and we have greater flexibility to scale Ballantyne.

Our plan is to deploy that capital and acquiring operating businesses and investments.

We see high ROI potential and we're currently evaluating a number of interesting opportunities.

Turning to slide four.

We navigated the worst of the Covid pandemic related shutdowns in mid 2020.

And we're seeing solid momentum returning through the second half of 2020 and continuing into early 2021.

During this period, we signed new multiyear exclusive agreements with Cinemark and we continue to be the exclusive source for all IMAX screens worldwide.

On the managed services side, we signed a new exclusive agreement with Marcus theatres.

The point is not simply that we sign new contracts, it's more an indicator of the reputation for quality and reliability as well as the personal relationships that had been built over the decades on the industry.

Operators trusts that strong technical services and.

MTI and our people will always be there to stand with them when things are difficult.

Also launched the bright night program to support our customers with driving initiatives and we continue to see our theme park business grow even through Covid.

On slide six we profiled the two components of our entertainment business.

Both of which are positioned positioned well to capitalize on the projected recovery in the industry.

Strong technical services as a leader by market share in the cinema management services with 100% coverage across the U S.

What's been interesting coming through Covid is that rather than retire it professionals.

We're seeing the pendulum swing more towards a higher degree of outsourcing, which then allows exhibitors to keep the overhead levels low and increases our ability to leverage our service techs across more screens.

With demand returning as reopening accelerates and restrictions begin to ease.

Nearly all of our technicians and employees have returned from furlough. So that we're prepared to meet the increasing customer needs.

Strong MDI is the largest premium screen provider in North America with over 65% market share and a growing presence in China and Europe.

As we said, we're the exclusive supplier to IMAX and Cinemark and we supply all the major exhibitors in the U S.

We've seen screen orders and production slowly building back is reopening that began in Q3 and continuing into Q4 and early Q1.

One of our strategic objectives is to increase our market share and presence in the Asian and European markets.

We also continue to see solid demand for our eclipse curvilinear screen from a theme parks and for military stimulator applications, which provides growth and diversification to the core cinema screen business.

If you look at the pace of vaccinations and reopening momentum in the U S. Currently.

As well as the slate of new releases on deck and the public comments from the large exhibitors.

There's a lot of excitement building for cinema as well as for entertainment and hospitality in general.

We're quite bullish on the prospects for growth as those restrictions ease and people get back to the normal activities are going out for a drink or a meal or a movie.

What are the theme parks post pandemic.

If you refer to slide seven.

Tainment business has been bouncing back from the worst of Covid with revenues more than doubling from the low point in Q2.

That positive trend is good to see and it's a sign of things to come as markets continue to normalize in the future.

It is also still well below our normal pre COVID-19 revenue levels.

In prior years on revenues historically ran and a 35 to 40 million range and our EBITDA generally ran on the 20% of topline range.

We're certainly looking forward to getting people back on the cinemas and getting our business back to normal run rates as the industry recovers.

Moving over to slide eight.

We have equity investments in two publicly traded companies Green first in S Chief financial and one venture backed private company Firefly.

We became an investor in Firefly direct transactions with strong digital media, where we combined our digital and static taxi top advertising assets with theirs and exchanged for preferred shares.

After your financial where we own approximately 21% of the common shares outstanding isn't making opportunistic and value oriented investments in reinsurance real estate and related businesses.

As one example, after your financial as an investor in the sponsor of <unk> America.

And we will participate in the economics of the spec sponsor, which means that the 10, well indirectly participate in it and the economics of the stack sponsor as well when their transactions are successfully completed.

Green first where we own approximately 30% of the common shares outstanding has transformed its business and completed its initial strategic investment in the Canadian timber business.

Paul revert and Rick domain, where well known timber investors in the Canadian marketplace are positioning green first to benefit from the strong demand for lumber and have plans to continue to grow that business.

The share price Theres reacted positively increasing the value of our position over the past six months.

With that I'll now turn the call over to Todd for financial review.

Thanks, Mark and good afternoon, everyone before.

Before we get started just a quick note about the presentation of these financial slides.

As a result of the sale on the strong outdoor business to Firefly in August 2020, and the sale of convergent in early 2021, we have reclassified the financial results of these segments to discontinued operations.

Next few slides will include reference to only our continuing operations.

Slide 10 includes a summary comparison with Q4 2020 full year 2020 to the same periods in the prior year.

Consolidated revenue and gross profit decreased 44% and 39% respectively.

During the fourth quarter of 2020 compared to the prior year.

Covid pandemic continues to have a significant impact on the operating results of strong entertainment.

Despite the significant declines in revenue gross.

Gross margin for the fourth quarter of 2020 increased to 37% compared to 34% in the prior year.

Our cost savings measures and cost management initiatives are continuing to have a positive impact on overall, SG&A expenses, which decreased 19% year over year.

Lower SG&A expenses helped to offset some of the reductions in gross profit.

On slide 11, strong entertainment revenues and profitability continued to rebound from the lows in Q2 2020 gross margin during Q4 was flat compared to the prior year, even with significant declines in revenue.

This can be attributed to changes in product mix as well as substantial cost reductions.

Slide 12 summarizes our balance sheet as of December 2020, compared to the end of 2019 despite.

Despite the challenges of Covid. During 2020, we were able to maintain adequate liquidity throughout the year, our cash generated from operations and availability under our credit facility we.

We continue to be pleased with the performance performance of our investment portfolio.

While the combined carrying value of our investments in S. Chief Financial Group and Green First force products was just over 7 million at the end of 2020 the market value of these investments is estimated using their stock price was almost $13 million.

Further our investment in Firefly increased to approximately $13 million at the end of 2020 as a result on the August 2020 transaction and additional cash investment during 2020.

In addition, the sale of convergent and the proceeds from the stock offering in early February 2020, combined to significantly strengthen our balance sheet subsequent to the end of 2020.

In terms of both the increase on our cash position as well as a reduction to our debt and lease obligations.

Although we have we recently improved our liquidity, we will continue to closely monitor our overall operating expense levels as we return to more normalized business levels.

Let me turn the call back to Mark.

Thanks Todd.

Our goal going forward is to build ballantyne strong into a larger public operating company with greater scale.

We also plan to manage our investment holdings to create value strong entertainment brand is trusted in the industry and getting stronger.

We're the leader on the screen business and we expect our managed services offerings to see increased demand post pandemic.

With a pipeline of blockbuster movies anticipated hit theaters over the next year, we're expecting a significant resurgence in cinema attendance in the U S that bodes well for our customers as well as for our entertainment business.

We have three investments all of which have made considerable progress with their growth strategies over the past six months.

We feel there is considerable unrealized value on these assets with potential for both future capital appreciation.

On potential additional liquidity down the road.

Finally, we have we have a considerably enhanced our financial position, increasing cash on hand and reducing debt.

Our goal is to build a much larger business, both organically and through potentially through acquisition.

With that we'll wrap up and open the call for any questions you may have.

At this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is another question queue.

You May press Star two true Love your question from the queue.

For participants using speaker equipment, and maybe necessary free to pick up your handset before pressing the star keen on.

On moment, while we poll for questions.

Our first question comes from the line.

It reads with Janney Montgomery Scott You May proceed with your question.

Hi, gentlemen are new to the situation. Thank you for the opportunity of being able to ask some questions.

I just wanted to pin down the day the cash.

On the other current assets is that a is that cash equivalents like treasury bills and things like that so you have about $14 million in cash.

Yeah, Hey, Brett Thanks for calling in now after the transaction.

Post.

We should probably talk about it post December 31st we've got a lot of activity after the on into the U S. We had $4 million.

On the balance sheet as of the end of the year maybe.

If you look at the you know the current cash position of the company. After the close of the year. We're currently writing writer in the low twenties right around 23 million net cash on the books.

Okay, and that's from the $6 7 million of the secondary.

Plus.

The convergent was what about <unk>.

15 million Hum.

Yeah, Yeah, Brett convergent was 15 million of that 15 million. There were yes. There were a couple of million debt were escrowed hold backs. So there's a cash piece of the convergent transaction that will turn into cash over the next 12 months as those identifications expire.

Okay now.

In the 2020, you know calendar year, where investments went from 13 million three to 20 point.

$1 million that that 7 million, what what you know on.

The 7 million was invested are aware.

Yeah. So the current the current investment portfolio is comprised of Firefly Green first which is formerly Itasca and F Chief financial which was formally 13 47 investment partners.

You know the.

The 20 million 13 of the $20 million is comprised of our investing that Firefly.

And the remaining seven this comprised of the investment than Green first.

And and net of Chief financial.

Okay.

Now the invest ment in in Firefly.

Do you know what percentage of the total company that 13 million represents.

I know approximately where that.

Sits in terms of the capital stack in terms of the common equity on a fully diluted basis, it's give or take between five and 7% as a percentage of the preferred shares its probably low double that in terms of the percent of the of the preferred.

Okay and do you know how do you know what what Google ventures interest is and and the other major shareholder.

Google Ventures, and N effects and in Ballantyne are the three largest shareholders I can tell you that I can't tell you their exact okay, Joe countered percentages, but between the three of US we are the three largest on this.

Shareholders of Firefly.

Okay now when you go to sleep at night you know.

With a wishlist of what happens with Firefly, what what would you like to see happen.

You know in the next year to 18 months.

Yeah, that's a really good question.

Yeah.

The Oh.

Firefly, probably has an even greater wishlist than I do knowing him but.

I I I my wish list would be to see them continue to expand their digital.

Digital advertising network and in major Metropolitan cities, you know, particularly as we come out of Covid I think they've got a lot of growth ahead of them.

And I think you know I think at some point in the near future you know in my Dream.

Dreams at night, they would certainly be a liquidity event involving Firefly, where you know they do a public offering or some form of liquidation event, where we get to participate in that with our preferred shares in <unk> and <unk>.

And have a nice gain on this investment.

Right right now Mark you're sitting you know for a company your size the 23 million in cash hoard that that's a fair amount of money, yes, what is the investment philosophy or process of where you guys are going to deploy.

You touched on it a little bit in your introductory.

Comments, I mean, the things you already own or an eclectic mix of very interesting things.

Is it going to be more of that anything that's cheap youll buy or are you going to focus your attention in one particular area or is it more niche acquisitions to grow your your operating business. What what are you guys leaning towards.

Yeah.

Our strategy with the acquisitions is primarily you know so we're not necessarily ruling anything out.

But our strategy is to leverage our expertise across the board and our management team in businesses that debt.

We see that have a high ROI opportunity, we have quite a bit of domain experience in hospitality in media, obviously with where their entertainment group in Ballantyne.

In through the experience its residents within our team.

And within our board of directors, but we're not necessarily wed to a specific vertical.

We're looking for good investments and good businesses that can scale and drive cash flow and capital appreciation over time, and we think we.

We think coming out of Covid, you know there might be some interesting opportunities along those lines that could be very interesting going forward.

Right.

I I've been on these calls I'm going to drop back because there may be other questioners, but I do have a couple of other questions, but I'll drop back in the queue.

But thank you for answering my questions so far.

Thank you Brad appreciate it.

Our next question comes from the line of.

John <unk> with long Meadow investors you May proceed with your question.

Hey, Mark Thanks for thanks for doing the call.

How are you.

And in Charlotte Someday, when we got to get through all this stuff.

Hmm.

Quick question just a couple for me quick question on on on strong business do you think the.

Is your sense that given the past year, where there's been really nothing going on that there's.

A sort of a ground swell of pent up.

The day <unk>.

Demand and has sort of capital we're spending possibilities on the part of the cinema business such that you might see.

Sort of a bigger surge and returned to us even though a place higher than where you were.

Four that's sort of on the domestic side and then the other my other question was with the cinema businesses.

Is the European Flash.

And market I assume the addressable market is probably.

As big or bigger than do you think that we can make our business there as big as it is in the U S over a period of years.

Yeah, Yeah. Thanks, Chuck I'll start with the last question first you know I think as far as the international opportunities I think you know Europe is you know.

Europe is a little more.

Fragmented in terms of the exhibitor base there, but it's approximately the same size United States market in terms of number of screens out there.

And we have a very small.

Market share in that space, certainly as compared to our market share in the North American markets.

And we believe we have.

Considerable room to improve that market share metric over time.

We intend to put effort into doing that and a number of ways in China, and Asia, and the middle East as well, which is a fast growing cinema market.

We we sell quite a bit into China, primarily through IMAX, and we think there's additional opportunity there to grow that market, we had right before COVID-19 hit.

We had planned.

Planned opening.

On a a warehouse in country in China.

In order to improve the logistics and customer service levels to increase our penetration in that market, obviously with COVID-19 coming.

Last spring, we had the pause that activity.

But we intend as soon as we're able to travel between countries a little more freely we intend to proceed with that and believe that we will be able to increase our market share in China as well as provide better customer service to our existing customers in that market.

In the U S.

With regards to the pent up demand and what we see going forward you know if you.

If we have a crystal ball and you know.

Also listened to what we're hearing.

On the public comments from the large exhibitors like IMAX and AMC and some others.

There's a lot of bullishness, you know looking ahead into particularly into the second half.

In the fourth quarter of this year and on into 2021.

In terms of the pent up demand from the consumer base to return.

The cinemas as well as you know restaurants and other other attractions, but in particular cinemas.

Because there's a tremendous backlog of blockbuster movies that were intended to be.

Released during 2020 in the first half of 2021 debt.

For now being slated for the second half of 'twenty, one and on out into 'twenty. Two so it's going to be a lot of good content.

Which is the primary thing I think the cinema operators on waiting for in terms of being able to get more back to normal.

In the areas, where they're open they're still open with limited capacity, but the real issue is they don't have as much content to show to drive consumers into Peterson.

And we think that's going to be you know, it's going to be the opposite by the time, we get to the second half of this year, there's going to be a lot of good features for the consumers to see and I think it's going to be I'm going to be very good for the exhibitors and obviously very good for us.

Right Okay. Thanks.

And then a quick question on on Firefly, if I could so if we own let's just say 6% to the middle of your range.

So that would imply a value.

Little over $200 million.

What what are their metrics what are they and I would assume they're probably picking up with you know the.

Uhuh errors in the tax season, and all of those things doing better things opening.

What.

I don't know, whether our or I'm not sure. If our preferred is valued at sort of the face value or whether it's reflects the current market value, but they've done on the fundraising transactions I mean, just any any more color on.

You know, what what Firefly it might it might be worth would be it would be helpful.

Yeah, Yeah, I mean, obviously, there they're a private company. So a lot of their metrics are not publicly available, but you know I can't tell you. They have continued to raise some capital and they're continuing to raise capital at the same.

Valuation pricing levels that we're invested in and that we're carrying it on a per day.

Mhm.

Okay, So theres not its not a.

There isn't currently there's not a there's not a sense of a huge sort of unrealized.

The hidden value there it's it's.

Okay.

Yeah, I think the value is in line with their current capital raising activity.

I got it yeah, the increase in value and the unrealized value.

There will be realized when they have a broader liquidity no debt.

Okay.

And then my last one for me I, just just thinking long term.

Whatever really long term.

You got one operating business and three investments.

I mean, what what is what is ballantyne going to look like in five years isn't going to keep making.

Separate minority investments isn't going to be more of an operating more much more of an operating business with cash.

Cash flows on throwing off and buying more businesses or is it.

Or both or just.

Just a feel for what you know strategically long term, it's going to look like.

Yeah, I mean, we think there's tremendous capital appreciation and eventually cash flow opportunities in the investment portfolio, but you know our ultimate goal is really to build ballantyne into a into a larger operating company.

From an operating standpoint, with greater scale and greater cash flow.

Great appreciate it thank you very much.

Thanks, Sean.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Next question comes from the line of Sam about ski with E. Our asset management you May proceed with your question.

Yes.

Have a good.

Reduced wonder or a 5% holder.

And it seems to be a new 5% holder.

Uh huh.

Did we discuss the 5% holder that is showing their stock.

Why they are selling or anything about that.

Hey, Sam Thanks for calling on I'm, sorry, which which 5% hold are you referring to.

I'm referring to the.

No.

Uh huh.

The.

Oh Oh.

Autumn that day.

More than 10% that's been selling on a regular basis.

Yeah, I'm I'm not aware of.

Any sales and there haven't been any sales from the management or board of directors or or insider related parties.

Which hold.

Roughly 30% of the equity of the company.

Did that did they participate in the public offering.

I know they there was not a insider participation in the public offering that was a pure public third party public offering.

Okay.

And Oh.

Okay and.

I'm trying to think of the name escapes me.

A large holder they just filed for the.

Uh huh.

I I believe.

Aerial who filed 13G, yes, yes, yes, yes, yes, so aerial has been a longtime holder.

Good day.

Manage yeah, they've been in the name of long time, they manage our.

Money for other people in their funds in their accounts so.

I'm on a weird the specifics of the specifics of their sale, although I imagine they probably had redemptions in there and there are accounts, which required them to lighten up the share base.

Okay. Thank you.

Thanks next question.

Our next question comes from the line.

Mike <unk> you May proceed with your question.

Yeah Nice to meet you Mark and Todd Hey, I'm retired Air Force on new Investor in our company here and I heard you mentioned military simulators I'm familiar with them could you talk a little bit about our position in them.

Yeah, that's yeah, thanks for calling in and asking the question.

That's a relatively actually a very new area for us.

That emanated from our screen business at M D I.

Just to just to back up a few moments.

As part of our screen manufacturing operations, we we manufacture Oliver on paints and coatings in the facilities that are used on all of our cinema screens, which is one of the competitive advantages that we feel very strongly about it MDI from the screen business that.

Allows us to have the best quality industry from the.

The properties of light reflective of D and gain and in all other all kinds of other things that folks like IMAX and others care about.

So long story short as a result.

Of of our investment in.

Those coding capabilities.

We also have.

Screen a product called eclipse.

Eclipses our curve linear it's it's it's not you know if you imagine a cinema screen that's flat.

Screen on the wall vehicles on the screen more of a solid structure, you know and immersive experience if you've been to one of the theme parks and one of the flying overrides or something like that you know you can imagine you know.

This is a large enclosed kind of structure, where the entire structure is a screen in our coatings are used in those type of facilities and those type of of pre.

Products.

So we've been deploying those really just started that probably three to four years ago. It's been growing slowly as we've been working on that product its starting to take off and grow to be a more meaningful part of our MDI business and it's primarily geared again towards theme park applications. However, excellent.

However, we've recently done a couple.

Installations, you know with the military are.

Where it's being used in flight simulator applications. So it's a very new free new aspects for us that we're very excited about that.

Exciting or would you consider as more of a hardware company or a software and how do you think we'll be able to participate on the entertainment resurgence next year.

Yeah.

Absolutely I would not characterize it as a software company, we're more of a hard goods company in terms of the screens both on the cinema and the theme park in the military stimulator side on and we sell protection equipment, and where services company through our managed services offerings.

And we do a little bit with software, but we're certainly don't hold ourselves out to be a software company.

But you know I believe as you see them.

On the cinema business rebound.

Probably you know coming as early as June or July when top gun comes out on everyone's preparing on the.

A slate of new releases, there's a lot of effort that goes into gearing cinemas up.

To be ready when people come back in and to be ready for the masters. They want everything to be perfect. They want to cut. This projector is working properly they want audio on my working properly and in a lot of what we do particularly in our in our S. T. S managed services business as we provide those services to the cinema. So yeah as we see the cinema.

Start to research and that we will see increased demand for our services and.

Another element of that is as a result of COVID-19.

But on the large cinema exhibitors.

They they maintain.

Some service techs on staff and in varying degrees and then they either use us purely for outsourcing in some cases or they use us as a supplement to their internal staff.

One thing that we've seen with Covid, there's a lot of those service techs were internal to the large exhibitors are no longer with those companies and.

They don't appear to have intentions of re staffing up now that they've got lean who through COVID-19. So we expect to see a lot more outsourcing and we're obviously.

And a good place to be for providing those outsourced services through our service network.

And finally I heard you talk about the mix.

Where would you place the participation of these other investments versus your core competencies over time.

I'm sorry can you can you state that again.

Yeah.

The mix of our income sources, you can talk about two or three different investments how does those what would be the percentage of participation of the investments on one side versus your core competencies on the other.

Yeah, I mean, I expect that we'll see our operating businesses grow much.

Much more significantly, but I also think.

In terms of driving cash flow on revenue, but.

But I do think theres significant capital appreciation.

On future liquidity opportunities within the investment portfolio as well.

Excellent Hey, I'm looking forward to some serious gains here Sir.

Well. Thank you Mike I appreciate it thanks for calling in.

Our next question comes from the line of Steve sniper, but salvage investments you May proceed with your question.

Hey, guys on the.

Two questions.

What was the thinking behind the secondary offering and you just sold convergent you had plenty of cash balance sheet was looking better no immediate need you know stock was trading you did the deal below book value why not just do an ATM. The stock was trading very well above three and just dribble it out why why hammer the stock at that point.

Put stuff into the marketplace second question I don't know if you have any color on it on.

Fundamental globals can be five plan it seemed like they stop buying in December I don't think they had maxed out the amount of shares under there tend to be five do you know if that plan was canceled or any any color on what happened in that situation.

Yeah, Yeah, yeah on the first one I believe that that can be five was maxed out it was not canceled early I believe it expires to being hit a limit on maxed out.

On the capital raise you know I mean, obviously the board and management are meaningful shareholders on the company's though we take the issuance of shares very seriously and you know.

There are multiple ways that we can accomplish that but our long term goal you know as we've stated is really to be a much larger and more profitable public company over time.

And you know in order to get there, having a strong balance sheet and dry powder to execute as a competitive advantage. So we felt like do we.

We saw conversion and significantly improve the balance sheet, but in order to execute on those plans. We believed it was appropriate to have more more capital on the balance sheet in order to proceed forward.

Got you.

As far as Sds is that something I mean, you definitely had it went from being a very sleepy kind of stocks that rarely created having some real runs and huge volume as people took it up you know it.

It's trading well above any sort of intrinsic value for the company, especially as <unk> main holding has collapsed any reason the company didn't try to monetize into that and take advantage of that liquidity at those elevated prices.

Yeah, well you know, we think Oh, we think there.

Sure.

Things going on within all of our investments that you know.

We can certainly monetize them at the appropriate time, we actually feel like they are.

Things going on within F. G F and value being created within F. G F that is.

It was not realized yet that we would like to continue to participate in <unk>.

Hammering their shares with us with it.

Sale would probably not be in the best interest of our investments or in there were in their plans as well.

I think we can afford to be patient and I think there are good things on the horizon for F. G. F in terms of their investment and participation on there obviously getting you know youre, obviously getting the flow through from from fed net right now hopefully that's behind them and hopefully that will continue to move forward on a positive direction.

Putting that has announced that they're exploring strategic alternatives on the wrong. So you know, we'll see where that goes.

With regards to both Green first and FTF you know the question has come up a few times well why don't you just sell them and.

I think in order to maximize.

Our valuation on those we think those both of those positions.

Interesting opportunities ahead of them and we're still bullish on them and we believe that the.

It's appropriate to give those a little more time before monetizing those investments.

Alright, I hope so yeah on fed Nat on Unfortunately, you know they they announced a massive secondary which they just haven't priced and unfortunately I think the next direction is down for them before they have a chance to really bottom out with the amount of stock and they're trying to sell so that's just going to dilute the value even more but hopefully things turned around in the short term and we can monetize it a little bit.

I appreciate it thanks.

Thanks, Steve.

Yes.

Our next question comes from the line of Brett Reece.

Scott You May proceed with your question.

Thanks, a lot for allowing me a couple of follow up is your breath.

Mark is there a breakeven revenue number you know where where we can operate at cash flow breakeven that you can share with us.

Well you know I guess that would put it this way if you look at our our entertainment business, It's obviously not performing where we'd like it to be at this moment in time.

Obviously due to the obvious reasons of Covid and.

What's going on in the cinema space, you know for the second half of 2020, and it's still continuing into early 2021.

Although we're bullish on where it's going to be.

And.

And several quarters or a year from now, but if you look at that business.

Even in the worst of Covid is currently operating more or less at EBITDA breakeven.

Which I think is quite a testament to that business given what occurred in the cinema business in all our restaurants entertainment as a whole during the middle of this year.

They were able to manage our way through it and we're able to cut costs and rationalize things and.

And avoid a avoid.

Bleeding from Covid during during the worst of the pandemic.

So it's got a break even now as we look forward I see it coming back to pre Covid levels. You know hopefully better you know time will tell them pre COVID-19 it was doing.

$35 million to $40 million in revenue and you know eight or so million dollars of adjusted EBITDA.

The other aspect of that as you know in addition to that we have corporate and public company cost and corporate overhead.

Our corporate overhead we've cut pretty significantly over the past two to three years we've taken.

A couple of million out of corporate overhead you know from 2018 to 2020, and we anticipate taken another another chunk out of that in 2021, so you'll see corporate overhead continue to.

To go down.

As we see the cinema business research so I think.

That answers your question.

Right right well what is the corporate run rate on corporate overhead and an aspiration wise, what what do you think you're you're looking to get it down to.

Yeah, you know corporate overhead you know coming out of 2020.

We reduced it significantly we did a lot of restructuring we did a lot of cost cutting some of it through COVID-19.

Reaction to Covid and accelerating things that were already on the works.

To further reduce the overhead levels.

Total corporate G&A was eight to 9 million.

Two to three years ago.

Finished.

20 running Yale.

Right around 6 million a million of that is non cash. So you know roughly five to six of cash G&A right and.

As I said I believe.

Based on the plans that we have in place you know will easily take another $1 million to $2 million out of that number in 2021 right right.

And one final one.

And I appreciate you taking all my questions.

Is there any issue that you really have to be diligent and vigilant on of counterparty risk and selling to some of your cinema customers could you know because some of them do have challenged balance sheets.

How do you work through that.

Yeah, well you know we were we've been very concerned about that particularly you know in the early part of 2020, when we're sitting here in.

April and May of 2020, we were extremely concerned about where are we going to get paid and you know who is going to pay on who is not going to pay.

And we took reserves on more receivables in the first quarter of the year, then than we probably ever had before.

We've actually been pleasantly surprised that we've had.

Really almost no actual collection write offs in the company. During this time we've had.

Had to work with them. Some exhibitors we've had you know.

Provide some terms.

Well, we've really had.

Very little if any you know write offs in gist.

Inability to collect even coming through COVID-19.

So now I'll look at it in.

A lot of the exhibitors have.

Recapitalize their balance sheets, they are preparing themselves for what's coming you know as <unk>.

People return to the cinemas.

It's an industry, where people generally pay their bills and I've been pleased to see that that has continued even during these times.

We're always going to be village village vigilant, we have to continue to be vigilant.

But so far you know the experience has been pretty positive.

Thank you for answering my questions and Oh. Please you guys should go and have some dinner.

Thank you so much I appreciate you calling Brett.

Ladies and gentlemen, we have reached the end of today's question and answer session I would like to try on this call back over to Mr. Mark Robertson for closing remarks.

Okay. Laura Thank you everyone for joining today, if you have other questions or we're just like a follow up you know feel free to reach out and we'll certainly I'd be happy to speak with you you know our contact information is on the earnings release as well as website.

Thank you everyone and have a good evening.

Thank you for joining US today. This concludes today's conference you may disconnect. Your lines at this time and go the rest of your evening.

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