Good afternoon. And welcome to Ballantyne Strong's earnings conference call for the third quarter ended September 30, 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 view and expectations as of today, and the company is 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.

Risks and uncertainties are also described in the company's SEC filings. Today's presentation and discussion also contain 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 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 financial reporting before making any investment decisions.

At this time, I would like to turn the call over to Mark. Okay, go ahead, Mark.

Thanks. Good afternoon and thanks for joining us today.

It was a busy quarter. So let's get started with Slide 2 for an overview of the key highlights.

Overall, while revenues currently remain below historical levels, underlying trends are moving in a positive direction with Strong Entertainment doubling from Q2 and Convergent recurring revenue continuing to grow, despite the challenges in the retail landscape. We continue to grow recurring revenue at Convergent.

And with that revenue growth, we also saw the expansion of segment gross margins, segment profitability and cash flow. In Strong Entertainment, the majority of our cinema customers, began reopening midway through the quarter and we were busy helping them with that process.

We also settled the business interruption insurance claim from a 2019 roof issue at our screen manufacturing facility. This resulted in a P&L gain and receipt of initial $2 million in cash during the quarter.

Again in August we completed the sale of Strong Outdoor. With the combination of underlying improvements in the business, the settlement of the insurance gain, the sale of Strong Outdoor and many other actions taken to manage expenditures and working capital, we reported positive quarterly net income and cash from operations increased to over $8 million on a year-to-date basis.

The strong year-to-date cash performance does include some significant one-time items like the insurance proceeds, as well as COVID-related subsidies and deferrals that may not continue. As our operations continue to ramp up, you should also expect to see working capital increasing during Q4 and into next year to support the growth in the business.

I imagine that many of your interest is in more color on the current trends and the outlook of Strong Entertainment as this clearly been a difficult year for everyone in the cinema and theme park industry. We saw cinemas across the globe closing in April and May, and we took measures, including furloughs, salary reductions, and other actions to weather the worst of the shutdowns.

We’re beginning to see things recover, but at a different pace in different parts of the world. In the U.S.

and Europe, we saw most cinemas reopened over the summer and early fall. They’re currently operating with capacity restrictions and very limited inventory of new releases, both of those negatively impact cinema economics, but most exhibitors have done the math and determined that it’s better to be open than to be dark, while waiting for new releases to resume early next year.

In China and other parts of Asia, where virus containment and confidence is in a little bit better shape, cinemas have reopened and are demonstrating positive results, which perhaps gives us a glimpse ahead to what we might expect in the U.S. and Europe.

According to IMAX’s recent public information, China’s box office is back to that 70% of prior year, despite also still dealing with capacity restrictions and limited Hollywood releases. While that market is probably not totally analogous to the U.S.

and other markets around the world, their rebound is certainly encouraging, and I believe is a good indication of the resilience of the cinema industry. This progress also bodes well for domestic and worldwide markets in 2021 as the new releases originally slated for 2020, start coming out in early 2021 and into 2022 feeding pent-up demand for movie patrons.

In North America, with the majority of our customers reopening, we’ve seen demand for technical services recovering and nearly all of our technicians and employees, and return from furlough and/or salary reductions, so that we can meet increasing customer needs. We also continue to see the pendulum swing towards a higher degree of outsourcing, which allows exhibitors to keep their overhead levels low and increases our ability to leverage our service techs across more screens.

We recently announced an exclusive multi-year agreement with Marcus Theatres and we’re also expanding our contractual as well as non-contractual service relationships with other large exhibitors. With some operators look to remain lean and increase efficiency and effectiveness on their side, we will be well positioned to gain share and leverage our operations.

On the screen side, we signed a new exclusive supply agreement was Cinemark in Q3, which we expect to be a positive catalyst for years to come. Cinemark is the third largest exhibitor in the U.S.

and they’ve previously announced plans to upgrade all of their screens from digital projection to laser, which will also drive screen replacement as projection equipment is replaced over the next 10 years. Following the temporary closure of our screen manufacturing plant in Q2, we’ve seen screen orders and production slowly go back to currently around 60% of normal volume.

With orders from China and the Middle East helping offset slower demand in the U.S. markets currently.

As we’ve mentioned in prior calls, one of our strategic objectives is to increase our market share and presence in Asian and European markets and we’re currently seeing a higher proportion of sales outside of the U.S. We also continue to see solid interest and activity around our Eclipse screen for theme parks since the military simulator application, which helps to balance our revenues and provides a nice growth addition to the screen business.

Convergent continues to post solid performance. During the second and third quarter, while most retailers and digital signage companies were struggling, Convergent continued to expand and improve its financial performance.

We’re fortunate that our largest customers were in areas of retail that continue to operate and thrive and we were able to increase our install base. If there is any negative is probably that we have not had the same opportunity to scale that business when new customer growth, as we would have in the absence of COVID.

Those marketing and growth initiatives have largely pushed out into 2021. As we continue to expand the number of players by expanding penetration in our existing customers, as well as adding new logos, we expect to added sale to drive increased margins and profitability, as we further leverage the platform.

Moving on to our investment portfolio, we completed the sale of Strong Outdoor to Firefly in August. This transaction resulted in a $5 million largely non-cash gain that was recognized in Q3 and increased our investment at Firefly equity for approximately $13 million.

Exiting this business eliminated the expected future operating losses and capital expenditures necessary to grow the outdoor advertising business and allows BTN to participate in Firefly's future growth and potential liquidity event as they expand their model. We also continue to hold investments in Itasca Capital and 1347 Property Insurance Holdings.

1347 is proceeding with its business strategy to operate as a diversified holding company of reinsurance and investment management businesses. Itasca recently announced several transactions and the appointment of Paul Rivett and Rick Doman to its team, as it begins to execute its growth strategy.

I'll now turn the call over to Todd, our CFO to walk through the financials.

Thanks, Mark, and good afternoon, everyone. Before I get too deep into the numbers, I wanted to point out that as a result of the sale of Strong Outdoor business to Firefly, we have reclassified Strong Outdoor financial results to discontinued operations.

The next few slides will include reference to only our continuing operations. Slide 8 includes the summary comparison of Q3 2020 and the nine months ended September 30, 2020 to the same periods in the prior year.

Consolidated revenue and gross profit decreased 36% and 38% respectively, during the third quarter of 2020. The COVID-19 pandemic continues to have a significant impact on the operating results of Strong Entertainment.

Although, revenue was also down at convergence due to some non-recurring installation revenue and equipment sales in the prior year, services revenues continued to grow. Despite the significant decline in revenue, gross margin during the second quarter of 2020 was relatively flat year-over-year at 33%.

While our SG&A expenses, as a percentage of revenue increased a year-over-year cost savings measures and cost management initiatives reduced overall SG&A expenses by 28% compared to Q3 2019, which helped offset some of the reductions in gross profit. Slide 9 summarizes our consolidated operating results for the previous five quarters.

As we've previously discussed, our results began to decline towards the end of Q1 2020. As we started feeling the impacts of the pandemic while we continue to face some headwinds, we are pleased that consolidated revenue, gross profit, operating loss, and adjusted EBITDA, all improved sequentially from Q2 2020.

On Slide 10, Strong Entertainment revenues and profitability rebounded nicely during Q3 2020 as compared to Q2 2020. As Mark mentioned earlier, many of our cinema customers began reopening their theaters during the quarter, which had a positive impact on revenue.

Each of our major categories of revenue is Strong Entertainment, which are screen, systems, digital equipment and field services attributed to the revenue more than doubling from Q2 2020 levels. Moving to Slide 11, Convergent continues to perform well in the current environment with gross profit, gross margin and overall profitability improving during Q3 2020, when compared to both Q2 2020, and the prior year.

Convergent’s gross margin continues to improve as the mix of higher margin recurring revenue continues to increase. We did see a slight decline in Convergent revenue during the third quarter of 2020 compared to the prior year.

Again, that decrease was primarily due to some non-recurring revenue items in the prior year, which was partially offset by an increase in service revenues. Slide 12 summarizes our balance sheet as of September compared to the end of 2019.

The benefits of the proceeds received from the settlement of the business interruption claim as well as strong cash collections on our accounts receivable strengthened our cash position and liquidity at the end of the third quarter. In addition, we were able to pay down the balance on MDI’s revolving credit facility during the quarter.

We continue to have our eyes on our operating expenses in an effort to reduce our overall overhead and other operating costs wherever possible. With that let me turn the call back to Mark.

Thanks, Todd. Overall, while it has been a challenging year, we feel good about the performance and accomplishments to-date, including completing the sale of Strong Outdoor, continuing to grow Convergent, navigating COVID in our entertainment business and managing working capital to drag cash flow.

When we step back 30,000 feet and take a look at the business, we have the Convergent business that we've turned around after years of losses and is now growing, returning revenue and is generating approximately 5 million of annual EBITDA and around 3 million of cash flow after debt service. We have opportunities to continue to grow and cash flow this business, where at some point we now have a more valuable business that we could monetize.

We have an Entertainment business that is currently navigating at this scope macro environment in the cinema and theme park business, but is quietly strengthening its competitive position. We're building our market position, signing new contracts and strengthening the relationships and we'll emerge stronger as COVID restrictions subside and as the backlog of studio blockbusters start to hit next year.

It may take some time to see the recovery in 2021 and even into 2022 to fully get back to the 2018 and 2019 levels when entertainment was generating 40 million in revenue and 8 million of EBITDA. So we believe the outlook from here is positive and we continue to gain share in the service business and expand our international market share in screens, while also gaining the momentum with the clips.

The current environment has delayed investment by exhibitors in laser projection. So we see that continuing to be a catalyst in the years to come for both service and screen replacement cycles.

We also have a portfolio of investments that provide potential for both liquidity and for capital appreciation. Looking at longer term, we're focused on capturing international market share in our screen business and converting the near-term momentum in our services business to sustain market share growth.

We expect to continue to grow convergence of small base organically, and we can also consider M&A to accelerate growth where to monetize that investment. Finally, there's a considerable longer term opportunity in our investment portfolio.

We have relatively liquid positions with a task MPH [ph] and longer term upside prospects with Firefly. That was our last cover and we appreciate your time.

We'll now open up the call to any questions you may have.

Thank you. It looks like you guys had a pretty busy quarter on the entertainment side of the business, with some significant deals, I think, you saw with both Marcus and Cinemark.

I know you touched briefly on using your remarks, but could you give us a little more color on each of these deals? I'm just trying to get a better sense of their significance to the overall business?

Yes. Thanks, Jen.

Appreciate the question. We can't get too specific into the actual economics of each individual deal and deal terms.

But we can tell you that those are both we consider very significant deals for both our screen business, as well as our services business in the entertainment side. First of all, we consider ourselves very fortunate to have the type of relationship and personal – type of reputation I should say and personal relationships in the industry, such that operators like Cinemark and Marcus who unquestionably are two of the best in the business and some of the best drawn and best capitalized companies in our sector, would choose strong technical services and strong MDI to be their exclusive partner.

Specifically, the expansion of those relationships is certainly helping now as we rescale the business, coming out of COVID and it will be even more meaningful moving forward. It allows us to leverage our nationwide service tech coverage over a larger base of business.

If you think about it, it's a pretty big deal to those folks as they're placing a lot of personal trust in our organization and our people, when they select us for those type of contractual relationships on an exclusive basis, that goes for both outsourcing tech services to make sure their cinemas are up and running. And also for MDI’s reputation for screens, with the highest game, best viewing angles, et cetera, to provide an optimal viewing experience in the premium category.

So it's about having a quality product, but even more so those wins are about relationships and really trust it's been built over many years. And I think that same trust in relationships carries over not only with Marcus and Cinemark, but also through the other exhibitors in the industry who recognize that.

And that's really what drives our business and bodes well for the future.

Yes, that's great color. Thank you and it's good to see that business start to come back.

Thank you.

Right. Thanks, Jen.

Okay. Thank you very much.

I appreciate everyone who dialed in to listen to the call. If you have any other follow-up questions, feel free to reach out.

My contact information is contained on our website as well as in the earnings release. And we look forward to speaking to you again soon.

Thank you.