Falcon's Beyond Global, Inc. (FBYD) is a visionary leader in the world of innovative and immersive storytelling, operating at the intersection of content, technology, and experiences. The company's three business divisions - Falcon's Creative Group (FCG), Falcon's Beyond Destinations (FBD), and Falcon's Beyond Brands (FBB) - work in harmony to create captivating and unforgettable entertainment experiences for audiences around the globe.
Company Background
Falcon's Beyond Global, Inc. was founded in 2021 through the consolidation of several existing businesses, including Katmandu Group, LLC and Falcon's Treehouse, LLC. The company's formation was driven by the goal of developing and operating themed entertainment experiences using both owned and third-party licensed intellectual property. In April 2021, the founders of Treehouse and Katmandu contributed their ownership interests to form Falcon's Opco, the operating subsidiary of Falcon's Beyond. This strategic move allowed the company to combine its expertise in master planning, attraction design, and media production, creating a powerful synergy across its various business segments.
The company's roots can be traced back to 2000, when it was founded as Falcon's Treehouse by CEO Cecil D. Magpuri and his wife Marty. Drawing from Cecil's extensive creative experience in themed entertainment and attractions development with Universal Creative and Iwerks Entertainment, the business evolved into Falcon's Creative Group, establishing itself as an incubator for innovation in the theme park capital of the world - Orlando, Florida.
Growth and Expansion
In the years that followed, Falcon's Beyond Global has continued to expand its reach and impact, forming strategic partnerships and joint ventures that have allowed the company to deliver its unique brand of immersive storytelling to audiences worldwide. The acquisition of Producciones de Parques, S.L. (PDP) and the formation of the Sierra Parima joint venture with Meliá Hotels International, S.A. have strengthened the company's Falcon's Beyond Destinations division, while the Falcon's Beyond Brands division has brought iconic intellectual properties to life through animation, movies, licensing, and more.
Financials
Falcon's Beyond Global's financial performance has been marked by both challenges and successes. In fiscal year 2023, the company reported total revenue of $18.24 million and a net loss of $47.60 million, primarily driven by significant transaction expenses related to the company's business combination with FAST Acquisition Corp. II in October 2023. The company's annual operating cash flow for 2023 was -$23.42 million, with an annual free cash flow of -$23.73 million.
In the third quarter of 2024, the company reported revenue of $2.07 million and net income of $39.30 million. The significant increase in net income was primarily due to a $40.60 million gain from the change in fair value of earnout liabilities and a $1.60 million increase in share of equity in earnings, partially offset by a decrease in operating losses due to lower transaction expenses, credit reserves, and impairment charges compared to the prior year period.
The company's unconsolidated subsidiaries and joint ventures have continued to demonstrate strong growth. Falcon's Creative Group reported a 146% increase in revenue to $43.80 million for the nine-month period ended September 30, 2024. This increase was driven by a $29.20 million contract with QIC to provide a Dragon Ball theme park. FCG recorded operating income of $3.90 million and net income of $4.20 million during this period, compared to an operating loss of $7.50 million and net loss of $7.50 million in the prior year period.
Producciones de Parques, S.L. (PDP), part of the Falcon's Beyond Destinations segment, increased revenue by 12% to $36.59 million for the nine-month period ended September 30, 2024. PDP's net income increased to $5.50 million, up from $3.80 million in the prior year period, driven by a $4.00 million increase in revenue partially offset by higher expenses.
The Falcon's Beyond Brands segment recorded revenue of less than $0.10 million but incurred $2.10 million in selling, general and administrative expenses and $0.10 million in other expenses, resulting in a segment loss of $2.20 million for the nine months ended September 30, 2024.
Overall, FBYD's total revenue decreased by $10.70 million to $5.40 million for the nine months ended September 30, 2024, compared to $16.10 million in the prior year period. This was primarily due to a $14.40 million decrease resulting from the deconsolidation of FCG, partially offset by a $5.00 million increase in revenue from shared services provided by FBYD to the now deconsolidated FCG segment.
Adjusted EBITDA, a non-GAAP financial measure, increased by $14.50 million from a $22.60 million loss to an $8.10 million loss for the nine months ended September 30, 2024, driven by decreases in operating expenses.
Liquidity
The company's liquidity position has been an area of focus, with Falcon's Beyond Global reporting a working capital deficiency of $27 million and $10.3 million in debt maturing within the next 12 months as of September 30, 2024. The company has been actively seeking additional financing through debt and equity raises to fund its operations, contractual commitments, and expansion plans, but the uncertainty surrounding its ability to obtain such financing has raised substantial doubt about its ability to continue as a going concern.
As of September 30, 2024, the company had $0.83 million in cash and cash equivalents and $6.94 million available under its $15.00 million revolving credit arrangement with Infinite Acquisitions, which bears interest at 2.75% and matures in September 2034. The company's debt-to-equity ratio stood at -25.40, while its current ratio and quick ratio were both 0.052.
Strategic Initiatives and Future Outlook
Despite these challenges, Falcon's Beyond Global remains committed to its ambitious growth strategy, as evidenced by its recent announcement of a strategic investment in Falcon's Creative Group by Qiddiya Investment Company (QIC), an affiliate of the Public Investment Fund of Saudi Arabia. This $30 million investment will provide the resources necessary for Falcon's Creative Group to continue its expansion, including the development of the first-ever Dragon Ball theme park experience in Qiddiya City, Saudi Arabia.
Additionally, Falcon's Beyond Global has taken steps to simplify its capital structure, including the forfeiture and cancellation of its performance-based earnout shares and the declaration of a stock dividend payable to holders of its Class A common stock. These actions are intended to reduce the company's liability overhang and provide a more streamlined foundation for future growth.
Business Overview
Falcon's Beyond Global operates at the intersection of content, technology, and experiences, creating immersive entertainment experiences through its three business divisions: Falcon's Creative Group, Falcon's Beyond Destinations, and Falcon's Beyond Brands. The company's business is focused on brand creation and optimization, facilitated by its multi-disciplinary creative teams. Falcon's Beyond Global aims to engage, inspire, and entertain people through its creativity and innovation, and to connect people with brands, with each other, and with themselves through the combination of digital and physical experiences.
Geographic Markets
In fiscal year 2023, the company had customers located in the United States, Spain, the Caribbean, Hong Kong, and Saudi Arabia. In the third quarter of 2024, the company's customer base was concentrated in the United States and Spain.
Conclusion
Falcon's Beyond Global's story is one of transformative innovation, strategic partnerships, and a relentless pursuit of immersive entertainment experiences that captivate audiences worldwide. As the company navigates the challenges of its current liquidity situation, it remains poised to leverage its unique capabilities and continue its journey as a leader in the themed entertainment industry. The company's diverse portfolio of businesses, spanning creative services, destination development, and brand experiences, positions it well to capitalize on the growing demand for immersive entertainment across various markets globally.