Q1 2023 FG Group Holdings Inc Earnings Call
Speaker 1: earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded.
Speaker 2: I will now turn the conference over to your host, Jen Bellado of IMS Investor Relations. Jen, you may begin.
Speaker 3: Thank you. Good morning and welcome to FG Group Holdings earnings conference call for the first quarter at March 31, 2023. On the call today from FG Group Holdings are Mark Roberson, Chief Executive Officer, Todd Major, Chief Financial Officer, and Kyle Cermanera, Chairman of the Board of Directors.rare phase,
Speaker 4: 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 view and expectations as of today, and the companies under no obligation and expressly disclaims any obligation to update forward looking statements except as required by law. These statements are also subject to risks and uncertainties and may cause actual results to differ materially from those described on today's call.
Speaker 5: Risk and uncertainties are also described in the company's SEC file links. Today's presentation and discussion also contain references to non- GAAP financial measures. The definition of non-GAP terms and reconciliation to GAAP measures are available and the earnings release puts on the Invest Relations section of the website. Our non- GAAP measures may not be comparable to those used by other companies and we encourage you to review and understand all of our...
Speaker 6: hopefully aware we are completing the spin out IPO of Strong Globe Entertainment this week. So it's a busy week. This transaction we believe is an important step for the company. It transitions Strong Entertainment from a wholly owned subsidiary of F2 Group Holdings to an independent operating entity.
Speaker 7: And the shares of SGE began trading yesterday on NYC under the ticker symbol SGE.
Speaker 8: accelerate growth with the industry in the midst of a robust rebound. And we're really on the front edge of a large, you capill upgrade cycle with the conversion delays. The new Strong Studios division also adds an important additional growth driver to that business. And we're expecting M&A to be also an important element of Strong's growth strategy looking ahead. We could not be really more excited about the growth prospects as we look at Strong Entertainment.
Speaker 9: And operating now the separate public company that will provide strong entertainment
Speaker 10: as well as the opportunity to execute on its growth potential with the goal of scaling it into a much larger company.
Speaker 11: If you flip over, look at the slides three and four to start with in the presentation.
Speaker 12: Overall, at FGF, FGH, we have capital currently allocated across several holdings. In addition to SGE, where we now hold six million shares, providing a more tangible and more easily measurable indicator of value going forward, we also have equity positions in three other operating companies.
Speaker 13: F.T. financial, Firefly and Green First. And through our digital ignition business, we own a 44,000 square foot building and 11 acres in Atlanta area. We retained that building from the sale of conversion a couple of years ago. And as part of the strongener came a spin.
Speaker 14: FGH is also retaining ownership of 80,000 square foot screen manufacturing facility in Quebec, which is being leased SG under a long-term operating lease.
Speaker 15: In the first quarter, the strong entertainment segments continue to see strong demand, really strengthening, especially on the dynamite and the business. Our cinema screen revenues are up 23% for the quarter, and services revenue is up 36%. This growth in the cinema services and the screen revenue is really related to the income
Speaker 16: ahaha.
Speaker 17: Flip it over to slide six, you know, looking at it from an industry standpoint, the domestic box office receipts grew about 64% in 2022. ????? 4. Small
Speaker 18: And the first quarter of 23, you'll continue to outperform expectations, coming at the highest quarterly levels since 2019.
Speaker 19: The overall number of wide releases coming to theaters already scheduled is up 30 to 40% from 2022.
Speaker 20: And in addition to the studio releases, which are accelerating, it's really encouraging to see Amazon and Apple committing production to theatrical releases now, as opposed to sending all their content directly to Prime and Apple TV.
Speaker 21: With consumers returning to the movies and exciting new content coming to the big screens, we're seeing a solid tailwind behind the industry.
Speaker 22: If you look on slide seven, this is the sampling of our cinema customers and partners.
Speaker 23: If you look on slide seven, this is the sampling of our cinema customers and partners, and we remain focused on capturing market share.
Speaker 24: Internally, we've expanded our sales and operating teams over the last year, which has resulted in the addition of new accounts and stronger relationships with our distant customers.
Speaker 25: And we believe the rollout of laser upgrades will drive increased demand for screen replacements and services for the rest of 23, as well as into 24 and beyond.
Speaker 26: With that in mind, we've been adding to our head count and we're training up new staff on the service side as well as in our screen business to meet this demand. On
Speaker 27: On the content side of the business, you know, we launched strong studios last spring. That team's been very busy with several projects progressing nicely.
Speaker 28: Safe Havens, wrapping up post-production, and we expect episodes to be ready for delivery later this year.
Speaker 29: Additionally, we reacquired the global distribution rights to Flagrant, and we're actively out shopping that project now with the producer, Adam Aaron Kaplan.
Speaker 30: And we see tremendous growth potential for strong studios as we create this library projects with the capability of driving both up front revenue as well as back in multi-ravities. And we see tremendous growth potential for strong studios as well as back in multi-ravities.
Speaker 31: On slide nine, you can see the details of our equity holdings.
Speaker 32: F.G. financial had a really nice first quarter, generating positive net income, with growth in its re-insurance premiums and continued expansion of its merchant banking platform. This included the formation of Cray Worthy led by the former CEO Jimmy Johns. It's a restaurant brand platform that curly owns and operates.
And franchise is seven distinct brands over 24 states. In addition, FG merger announced its business combination with I-Corp Connect and FG acquisition corp announced its business combination with Think Markets.
So a lot of progress at FG financial during the quarter.
And Green First recently announced several transactions to monetize their non-core assets.
with a sale of private force land for 49 million and a metriand action was followed by the sale of two sawmills in Quebec for 90 million.
Those deals further strengthen green for spout sheet, bringing down their average cost per board foot of operations, and allows the team to focus their attention and resources on the more valuable and more efficient Ontario mill operations.
Overall, we're really pleased to see the accelerating progress in both our strong entertainment segments. Now operating as a standalone public company.
as well as our equity holding, does they execute on their strategic plans? Todd, you wanna walk through the financials?
Sure, thanks Mark and good morning everyone. All start on slide 11. Tazaar consolidated results for the quarter compared to the prior year. On a consolidated basis, most of the results for the first quarter, 2023, were consistent on a year over year basis. That being said, and nearly all of the operating results are strong entertainment.
improved over the prior year as the industry momentum we benefited from throughout 2022 continues to the first quarter of 2023.
As Mark mentioned, we saw growth in both our cinema screen products and service revenues in the current period, while the prior year benefited from several large non-cinema immersive product sales.
As we previously stated, the first quarter is historically our slowest from a seasonality standpoint. So we expect the improvements we are seeing in strong entertainment to continue as we progress through 2023.
Service revenues and the entertainment business increase as the demand from our cinema customers continue to strengthen.
We're capitalizing on opportunities in the cinema services market by increasing the scope of our service offerings and our adding toward headcount to better support our customers and capital market share in this area.
Gross margins on our product sales increased as the mix improved with a greater proportion of the revenue derived from our higher margin, cinema spring sales in the first quarter of 2023.
This improvement was offset by lower margins in the services business where we incurred additional travel over time and outside contract to cost to meet customer demand. The third party strain installation costs are expected to be replaced with internal labor as we continue to onboard the recently added installation team.
which is expected to improve margins on the surface design as we move through the year.
Our most recent balance sheet is on slide 12. The first thing I'll point out here is that with our cash on hand, this is the end of March, and the availability under our credit facility, we continue to maintain adequate liquidity.
In addition, net cash flows from operations during the first quarter of 23 with the strongest since the third quarter last year.
We mark the carrying value of our green first and FG financial equity holdings to market each quarter.
and the value of our equity holdings at the end of the first quarter is reflected by the recent pullback that crossed the broader markets. However, all three of our equity holdings continue to execute against their business plans, and as a result, we expect to see appreciation of the value of these assets. And lastly, our book value at the end of March was approximately $2.19 per share.
That wraps up the quick review of the financials, and I'll put the call over to Kyle for a few remarks.
Thanks Todd. FGGerr poting has built a strong portfolio of businesses and equity holdings that enable us to participate in a diverse and growing industries. While the current economic landscape is not without its challenges, with the breadth of our operations, we also believe there's a great opportunity to drive progress and success as we fully transition to a holding company.
We're excited about what the future holds and remain committed to creating shareholder value.
We're going to open it up for Q&A. Please ask any question. We'll do our best to answer it. Operator, can you open up for Q&A? Thank you, Kyle. At this time, we are conducting a question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate your question is in the key.
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Please hold a moment whilst we pull for questions. Thank you. Your first question is coming from Adam Liefdom of Rising Tide Partners. Adam, your line is live.
Hey guys, thanks for taking my question. How should we think about the international opportunity for your business? Are you guys seeing opportunity in any particular overseas markets?
Yeah, Adam, thanks for the question. Good morning. Yeah, we were pretty excited about the international markets. You know, as you probably know, we've said this many times, you know, in North America, you know, in the entertainment business and stronger entertainment, we have truly a dominant market share across the screens and service side of the business in this region.
When we look outside of this region, we see a lot of our fatigue for us to leverage that position and really grow at the market share, particularly in Asia as well as in Europe , when we've established finishing and warehousing operations in both of those regions over the past year. So, particularly in Europe , we're starting to see how to improve our??. We don't see it here, we don't see it. We are
real signs of acceleration in the cinema market there as well as the beginnings of the conversion to laser. Our investments in the facility and the local operations there as well as some local sales and operational resources on the ground are really starting to bear some fruit. It takes a little time but it's starting to really.
come through. We're recently at the trade show and body body. And the guys were there and there's another trade show coming up in Europe and Barcelona and June . And given the activity that we're seeing in the region, I would be very surprised if you don't see some.
decent customer announcements from us in the near future and really an increase in our share of revenue coming from the European and Middle Eastern regions going forward.
Got it, got it. Great. Thanks for taking my question. Thanks, Adam. Thank you very much. Just as a reminder, if anyone has any remaining questions, please press star one on your phone keypad now.
Okay, they don't appear to be any further questions in the queue. I will now hand back over to the management for any closing remarks. Thanks again and thanks for joining us this morning. If you do have additional questions, you'll feel free to reach out directly.
and have a wonderful day. Thank you for your participation.