Revenue Growth - Net revenues increased by 52.6% to $41.2 million in 2022 from $27.0 million in 2021, primarily due to the recovery of the Strong Entertainment business and the commencement of Strong Studios operations [140] - Revenue from Strong Entertainment rose 54.0% to $39.9 million in 2022, driven by a $10.5 million increase in product revenue and a $3.5 million increase in service revenue [141] - Strong Studios generated $0.9 million in revenue related to production services in the fourth quarter of 2022 [143] Profitability - Consolidated gross profit increased by 33.0% to $10.9 million in 2022, but gross profit percentage decreased to 26.5% from 30.4% in 2021 [145] - Strong Entertainment segment gross profit increased to $9.5 million, representing 23.9% of revenues in 2022, compared to $7.3 million or 28.1% in 2021 [147] - Total gross profit rose to $10.9 million in 2022, a 33.0% increase from $8.2 million in 2021 [147] - Operating income for the Strong Entertainment segment increased by 24.9% to $2.8 million in 2022, compared to $2.2 million in 2021 [152] Operational Performance - Consolidated loss from operations improved to $2.4 million in 2022, down from $3.1 million in 2021, reflecting a 24.8% reduction [151] - Net cash used in operating activities from continuing operations was $3.6 million in 2022, primarily due to increases in working capital [164] - Total cash and cash equivalents decreased to $3.8 million as of December 31, 2022, down from $8.9 million in 2021 [160] Investment and Capital Allocation - The company continues to evaluate capital allocation opportunities for investments or acquisitions in public or private companies [130] - The company recorded a gain of approximately $14.8 million from the divestiture of the Convergent business segment in February 2021, with a total enterprise value of approximately $23.2 million [131] - Net cash used in investing activities was $0.6 million in 2022, compared to $13.9 million in 2021 [165] Tax and Losses - Income tax expense decreased to approximately $0.5 million in 2022 from $3.2 million in 2021 [157] - The company recorded a net loss from continuing operations of $7.2 million, or $0.37 per share, in 2022, compared to a net income of $3.4 million, or $0.19 per share, in 2021 [158] - Total other loss was $4.7 million in 2022, primarily due to a $4.5 million loss on equity holdings [155] Customer Concentration - The top ten customers accounted for 49% of consolidated net revenues in 2022, with trade accounts receivable from these customers representing 68% of net consolidated receivables [174] Strategic Initiatives - The company plans to separate the Strong Entertainment operating business and pursue an initial public offering to support growth plans [128] - The company started producing original productions and acquiring rights to films and television programming in March 2022, indicating a strategic expansion into content creation [187] Risk Management - The company performs ongoing credit evaluations to minimize credit concentration risk, indicating a proactive approach to managing financial risk [176] - The primary exposure to foreign currency fluctuations is related to operations in Canada, with the company entering into foreign exchange contracts to manage this risk [177] Economic Factors - The impact of COVID-19 has led to significant disruptions, but there is now pent-up demand for out-of-home entertainment, which is expected to drive favorable trends in the cinema exhibition and theme park industries [135] - Inflation has begun to increase since the second half of 2021, but the company has historically managed to offset inflationary effects through price increases or cost efficiencies [179] Amortization and Impairment - The amortization of film and television programming costs is based on the ratio of current period revenues to estimated ultimate revenues, reflecting management's ongoing revenue estimates [188] - The company has not incurred any impairment write-downs on film costs, suggesting that current revenue estimates remain stable [191] EBITDA - Adjusted EBITDA for 2022 was $(2,979,000), while in 2021 it was $(3,957,000), showing an improvement year-over-year [173]
FG (FGH) - 2022 Q4 - Annual Report