FBYD

Business Context and Reporting Period

Falcon's Beyond Global, Inc. (FBYD) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The Company operates as a holding company with three primary divisions: Falcon's Creative Group (FCG), Falcon's Beyond Brands (FBB), and Falcon's Beyond Destinations (FBD). FCG is accounted for as an equity method investment following a strategic investment by Qiddiya Investment Company (QIC). The Company is classified as an emerging growth company and a smaller reporting company.

Key Financial Metrics

Note: 2024 Net Income was significantly inflated by a $172.3 million non-cash gain from the change in fair value of earnout liabilities, which was reclassified to equity in 2025.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 121% to $14.9 million, driven primarily by new attraction service contracts and product sales from the Falcon's Attractions segment (formed via the OES acquisition).
• Equity Method Gains: The Company recognized a $30.0 million share of gain from the sale of the Tenerife hotel assets by its joint venture PDP. This was partially offset by $8.3 million in impairment charges related to PDP and Karnival joint ventures.
• Debt Reduction: Total indebtedness decreased significantly from $41.2 million to $15.6 million. This was achieved through the issuance of $32.5 million of Series B Preferred Stock, of which $20.5 million was used to exchange outstanding debt.
• Acquisition: Completed the acquisition of Oceaneering Entertainment Systems (OES) assets for $1.6 million, integrating them into the Falcon's Attractions segment.

Guidance, Outlook, Risks, and Contingencies

Going Concern: Management and auditors have concluded there is substantial doubt about the Company's ability to continue as a going concern. The Company has a working capital deficiency of $18.1 million and negative operating cash flows. It relies on additional financing, asset sales, or distributions from equity method investments to meet obligations.

Outlook and Strategy:

• FCG Growth: Continued expansion in Saudi Arabia with QIC and New Murabba Development Company (NMDC), including the Dragon Ball theme park and The Mukaab project.
• Asset Efficiency: Transitioning FBD toward an asset-efficient model, evidenced by the sale of the Tenerife hotel and the wind-down of the Karnival joint venture.
• Capital Needs: The Company will require additional capital to fund operations and growth, which may result in dilution or restrictive covenants.

Key Risks and Contingencies:

• Customer Concentration: FCG revenue is heavily concentrated; QIC and NMDC accounted for approximately 60% and 39% of FCG's revenue, respectively, in 2025.
• Legal Proceedings:
  • Guggenheim: Ongoing litigation regarding $11.1 million in alleged fees; the Company has denied liability and filed counterclaims.
  • FAST Sponsor: Settled a dispute for $9.5 million total ($2.5 million paid upfront, $7.0 million deferred by Jan 2027).
• Internal Controls: The Company identified material weaknesses in internal controls over financial reporting, including risk assessment, control activities, and monitoring.
• Geopolitical Risk: Significant exposure to operations in the Kingdom of Saudi Arabia and international instability.

Investor Verification Checklist

• Liquidity Runway: Verify the timeline and certainty of securing additional financing or asset sales to cover the $18.1 million working capital deficiency and upcoming debt maturities.
• QIC Contract Stability: Assess the risk of revenue concentration given that nearly 100% of FCG's revenue comes from two Saudi-based clients (QIC and NMDC) under agreements terminable with notice.
• Debt Settlement Terms: Confirm the funding source for the $7.0 million deferred settlement payment to FAST Sponsor due in January 2027.
• Internal Control Remediation: Review the progress of remediation plans for material weaknesses in internal controls to ensure future financial reporting reliability.
• Series B Preferred Stock: Understand the dilution impact and dividend obligations (11% cumulative) of the newly issued Series B Preferred Stock.