Cineplex Inc

Hello and welcome to the Cineplex Inc. Q4 2024 Earnings Conference Call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. I now hand it over to your host, Ryanne Asmat, Vice President, Investor Relations, Corporate Development, Financial Planning and Analysis. Please go ahead.

Good morning, everyone. I'd like to welcome you to Cineplex's fourth quarter 2024 earnings release conference call today, hosted by Alice Jacob, President and Chief Executive Officer, and Gordon Elton, Chief Financial Officer. Before we begin, let me introduce myself. I'm Rehan Azmat, Vice President, Investor Relations, Corp Development, and Financial Planning and Analysis at Cineplex. I'll remind you that certain statements being made are forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions information currently available. Actual results may differ materially from those expressed in forward-looking statements. Information regarding factors that could cause results vary to be found in the company's most recently filed annual information form and management discussion and analysis. Following today's remarks, we will close the call with our customary question and answer period. I will now turn the call over to Ellis Jacobs.

Thank you, Rehan. Good morning and welcome to our Q4 2024 conference call. Before we get started, I wanted to share that our thoughts are with our friends and colleagues in Los Angeles as they start to rebuild their communities following the tremendous loss due to the recent wildfires. As we look back on 2024 and our fourth quarter, I want to highlight some accomplishments across our businesses. Starting with exhibition, despite the box office having a slow start last year, it definitely closed on a high note. Overall, the 2024 film slate offered moviegoers a wide range of films to keep them coming back with sci-fi, animated family favorites, a Marvel Cinematic Universe R-rated action comedy, and a majestic film adaption of a successful Broadway musical. The first quarter started off with the much-anticipated and now Oscar-nominated Dune Part II. The film was one of Cineplex's top five movies of the year, and it was clear fans of the film wanted to enhance their movie-going experience with 64% of its box office at Cineplex generated from premium experiences. The summer kicked off with family films starting with Inside Out II in June, which captivated audiences around the world, becoming the highest grossing animated film of all time, surpassing a billion dollars in box office revenues in 19 days, the fastest animated film to do so. The movie also had remarkable staying power with eight consecutive weeks in the top five at the domestic box office. Despicable Me 4 followed closely behind in July, and became the second highest grossing film in the franchise, generating $360 million at the domestic box office and holding a spot in the top five titles of the domestic box office for seven consecutive weeks. The buzz-worthy Deadpool vs. Wolverine rolled onto screens in late July, becoming the highest grossing R-rated film of all time both domestically and globally, surpassing a billion dollars in worldwide box office revenue and staying for an astonishing nine consecutive weeks in the top five domestic box office. Wicked reinforced the power of the cinematic experience, bringing audiences together to enjoy the magical musical on the big screen. Stage-loving fans and newcomers to the story made this the top-grossing film worldwide based on a Broadway musical, Moana 2, originally intended for a streaming release on Disney+, showed the unreplaceable power of the theatrical box office as in delivering record-breaking results. It achieved the largest global opening of all time for an animated film. These record-breaking titles not only brought audiences of all ages to the theater, but also achieved strong multiple week over week, showing his power beyond the opening weekend. These are just some examples of the remarkable firms that captured audiences this year, many in premium formats, helping us achieve an annual box-per-person record of $13.09 and a concession-per-person record of $9.47. Looking specifically at the fourth quarter, the winning trio of Gladiator 2, Wicked, and Moana 2 helped deliver a record-breaking box per person of $13.26 and an all-time fourth quarter concession per person record of $9.41. The key initiatives helping us achieve these record-breaking results include our premium offerings, leveraging our robust data and the ongoing success of our international programming. Last year, we saw premium experiences capture almost 42% of total box office revenues for the year. In 2024, we added three new ScreenX auditoriums, one Ultra AVX screen, one new D-Box location, and four iMac screens. Nothing compares to watching a movie on the big screen with the best sound. The consumer demand for premium viewing options emphasizes the unique power of the cinematic experience. Premium experiences are a competitive advantage for Cineplex, and we will continue investing in premium offerings to generate both revenue and bottom line growth. We attracted audiences to their favorite films this past year by leveraging our robust data. The use of data to drive incremental attendance and increased spend will continue to be a key differentiator for Cineplex's future growth. We are using data models, predictive analytics, and marketing automation platforms to drive attendance through personalized campaigns. In addition, we are leveraging the over 15 million ScenePlus members to drive new visits and target lapsed customers. Over one-third of our ScenePlus guests in Q4 were either first-time visitors or lapsed customers who were coming back after a two-year or more absence. Leveraging the ScenePlus database and marketing channels will continue to be a strong acquisition opportunity. As a reminder, the adjusted EBITDA contribution for each incremental guest is approximately $14. Also contributing to box office success this year and in the quarter was the consistent strength of our international cinema. In 2024, international programming represented 10.2% of our total box office revenues compared to only 3.7% of the North American box office. We have developed detailed film-seeker models that analyze global content to identify which international content will most likely resonate with Canadians in the right markets. Using these models helped us to break three Cineplex records this past year. Jack and Juliet 3 became the highest-grossing Punjabi film in Cineplex history. Hello Love Again, the highest-grossing Filipino language film for us, and The Last Dance, the highest-grossing Cantonese language film in our history. We continue to be the destination of choice for international content amongst the diversified population across Canada. This is not only beneficial to our exhibition business, but a significant and unique opportunity for our media business which we are leveraging to attract new clients and drive incremental media revenue. South Asian Films led the international cinema box office in 2024, holding nine of the top ten international films at Cineplex. With the South Asian demographic being one of the fastest growing groups in Canada, we offer a unique advertising opportunity to transform audience engagement and create new opportunities for authentic brand connections. Paired with the strength of our international cinema, our first-party data can help advertisers reach South Asian moviegoers and extend cinema campaigns through digital channels. The ability to leverage both our extensive data and the strength of our international cinema will be a key opportunity for cinema media sales as we move forward. While the wide range of films brought guests into our theaters, we also had an incredibly busy fourth quarter, opening three new LBE locations across the country. The continued rollout of our Rec Room and Palladium locations plays an important role in delivering growth and shareholder value and strengthening our leading position as an entertainment destination for Canadians. The Rec Room Royal Mount opened in November. alongside a new five-screen premium cineplex theater, making it our first LBE location in Quebec and becoming a one-stop destination for entertainment. It's located in the Royal Mount District, Montreal's premium shopping, dining, and entertainment destination, set to become one of the leading retail developments in Canada. In December, the Rec Room Granville, a much anticipated location on Granville Street in downtown Vancouver, opened featuring 45,000 square feet of gaming, attractions, and dining. It has become a top entertainment destination in downtown Vancouver and one of our top performing locations since opening. We are especially excited about our new mini golf attraction area, The Palms, which is proving to be a huge draw for Menelios and corporate groups. Lastly, our fourth Palladium location opened in December, adjacent to a Cineplex theater at Fairview Mall in Toronto, attracting families from across the greater Toronto area. The box office strengthened as the year progressed and we saw our media business follow suit. achieving cinema media revenue per patron of $1.84, which represents a 10% increase over 2023. As our recent Lumen study proved, cinema advertising stands out as the ultimate attention leader with 100% of audiences viewing ads on the big screen and an average of 80% active attention across all demographics and outlets. With proven attention scores two to five times higher than linear and connected TV and up to nine times higher than digital video channels, our cinema media business will continue to grow and capitalize on the unparalleled impact cinema advertising offers. We are one of the few movie companies that own our cinema media business. As a result of new digital out-of-home clients in 2024, including Cadillac, Fabio, and Pominar, Cineplex Digital Media achieved a 44.3% year-over-year revenue growth and a 70.2% Q4 revenue growth over prior years. CDM operates Canada's largest digital out-of-home shopping media network in public spaces such as malls and office towers. We believe the strength of our digital place-based media assets combined with our diversified channel offering make us a leader in the indoor digital signage industry and provides a platform for significant growth across North America. We attribute part of our strength in Q4 to the Canadian Out-of-Home Marketing and Measurement Bureau welcoming Cineplex Media as a new member. Together with Cineplex Digital Media, Cineplex Media became part of its inaugural mall measurement methodology. With this new accreditation and measurement approach, we ensure our digital out-of-home clients receive the most value and transparency for their impressions. This further solidifies our leadership in the digital out-of-home advertising space as we continue to win new business and roll out new campaigns. Before I conclude, I'd like to provide a brief update on our appeal of the Competition Tribunal's decision regarding our online booking fee. On October 23rd, we filed a Notice of Appeal with the Federal Court of Appeal to overturn the Competition Tribunal's decision. With the consent of the Competition Bureau, the Federal Court of Appeal granted a stay of the Competition Tribunal's judgment pending a decision on Cineplex's appeal. While we disagree with the tribunal's decision, we have modified our website. We remain confident that our fee was always presented in a clear and prominent manner and fully complied with the spirit and letter of the law. As a reminder, this ruling has no impact on our ability to charge the online booking fee and we will continue to offer the optional value added convenience of advanced online seat selection to our guests. As we close 2024, I'm incredibly proud of what we've accomplished last year, managing the ebbs and flows of the film slate, opening three new LTE locations, a new theater, growing our media business, and continuing our efforts to stabilize the business for sustainable long-term growth. As we move into 2025, There are a few standout movies, including Captain America, Brave New World, and Paddington in Peru, which open on Friday and Snow White releasing in March. We also have two international titles, Niza 2 in Mandarin, and Chahavo in Hindi, launching this week. Rolling into Q2, we have established IP like Mission Impossible 8, Lilo and Stitch, Karate Kid, and the live action How to Train Your Dragons. In the back half, Jurassic World Rebirth, Superman Legacy, The Fantastic Four First Steps, Tron Ares, Wicked Part II, Zootopia II, and Avatar Fire and Ash are set to draw an audience to experience these films on the big screen. Before I wrap up, I want to reinforce that we are optimistic the momentum of our business will continue into 2025, with SWOT shaping up to be a strong year for the film slate. Our diverse media portfolio will drive unique value to advertisers, to unparalleled consumer attention, capitalizing on the robust film slate, including our international titles. The recent growth of our LBE footprint across Canada further establishes as a one-stop destination for entertainment, offering guests best-in-class gaming, attractions, and dining, driving both revenue and bottom-line growth. As we look forward, we will continue to differentiate ourselves within the market and drive industry-leading results. We are confident we will sustain this momentum and our position as one of North America's leading entertainment and media companies. With that, I will turn things over to our CFO, Gordon Nelson.

Thanks, Ellis. I am pleased to present a condensed summary of the fourth quarter and full year 2024 results for Cineplex, Inc. For further reference, financial statements and information filed on Cineplex Plus are also available on our customer relations website at cineplex.com. Our MD&A and earnings press release include a complete narrative on the operational results, so I will focus on highlighting select items in addition to providing commentary on liquidity, capital allocation priorities, and our outlook. For my comments on operations, all amounts following will be from continuing operations unless otherwise stated. As Alice mentioned, we were pleased to see the continued return of the supply of film content in the fourth quarter. As a result of the 60.1% attendance increase, our total revenue increased 15.1% to $362.7 million, and our adjusted EBITDA increased 66.6% to $40.3 million. Our consolidated EBITDA margin increased to 11.1% from 7.7% in the prior year. Let's take a closer look at our segments. In the film and entertainment content segment, attendance increased 1.5 million or 16.1% to approximately 11.1 million. Total revenue increased 15.4% and segment adjusted EBITDA increased 259% to $26.6 million, primarily as a result of the attendance increase. We achieved record Q4 VPP and CPP results which was quite an achievement given the premium ticket price and significant food and merchandise spending provided by Taylor Swiss fans in Q4 2023. We continue to focus on our portfolio and our costs. Although we added one new theater to our portfolio, our theater cash rent paid payable was down 29% as compared to the prior year due to theater closures and renegotiated rent deals. compared to the pre-pandemic Q4 2019 period, our theater portfolio has decreased by nine locations and our theater cash rent payable has decreased by 6.8% as we continue to focus on strategies to reduce our fixed rent costs. Overall, the segment margin increased 9.6% or increased to 9.6% from 3.1% in the prior Fourth quarter media segment total revenue increased 27.1% to $51.5 million, and segment adjusted EBITDA increased by $2.5 million to $29.4 million. As compared to the prior year, cinema media revenue increased 5.7% to $30 million, primarily due to the attendance increase. Our digital place-based media business had strong results, with total revenues up 70.2% to $21.8 million. Project revenues were up $3.3 million, or 112.6%, and other revenue, which includes mall advertising revenue, was up $5.7 million, or 57.6%, primarily as a result of the addition of Cadillac Fairview beginning in 2024. For the quarter, digital place-based media revenue increased to 42% of our overall media revenues, up from 31% in 2023. As a result of this mix shift, although segment EBITDA increased, the overall segment margin decreased to 57.1% from 66.3% in the prior year. And lastly, in our LBE segment, segment revenues were down slightly to $33.6 million from $34 million in the prior year. We opened three locations during the quarter, which resulted in pre-opening and other additional costs during the quarter. Store level adjusted EBITDA margins were 23.6% versus 28.1% in the prior year, primarily as a result of the impacts of minimum wage increases contractual occupancy cost increases, and select nominal expense recoveries reflected in the fourth quarter of 2023. At the segment level, segment EBITDA was negatively impacted by pre-opening costs of $2.8 million. At year end, we had $84 million in cash and no drawings under the Covenant Light credit facility, which has a capacity of $100 million. With the comprehensive refinancing plan, we have meaningfully pushed out near-term maturities and removed restrictions related to covenant testing, and no testing was required under the credit facility at year end. As Alice mentioned, with respect to the Competition Bureau matter, we filed our notice of appeal on October 23rd and have been granted a stay regarding the payment of the administrative monetary penalty pending the Federal Court of Appeals decision. As we have mentioned previously, our capital allocation priorities include maintenance capital expenditures, continuing to strengthen the balance sheet to achieve our target leverage ratios, investing in growth opportunities, and providing shareholder returns in the form of share buybacks and or dividends. We are pleased to report that under our NCID program, Cineplex has purchased a cumulative 620,275 common shares at an average share price of $10.48 resulting in a cash flow of approximately $6.6 million. This program reinforces our confidence in our business plan and our continued commitment to creating shareholder value. With respect to CapEx, our net cash CapEx for 2024 was $66.4 million which is below our initial guidance of approximately $80 million. With four locations opening in late Q4, a portion of the capex related to these bills will fall into 2025. And as such, we expect our net capex for 2025 to be approximately 65. I would like to take a few moments to discuss the potential of new tariffs. As a reminder, our business is primarily based on providing compelling entertainment experiences to our guests in Canada and not transferring physical goods across borders. With respect to the threat of any trade tariffs, approximately 99% of our revenue is generated in Canada through our operations and facilities in Canada. And with respect to any potential reciprocal Canadian trade tariffs, I remind you of our overall cost structure with approximately 78% of our 2024 total costs coming from four categories. Film rent, employee costs, and occupancy costs, all intangible items and not caught by any current tariff discussions represent 70% of overall costs. The next largest cost category is food costs. which represents approximately 8% of our overall costs. We are continuing to evaluate any potential impacts and additional sourcing opportunities for any items potentially caught by tariffs and do not believe that the currently proposed tariffs will have a material impact on our business. Now I'd like to take a few moments to remind our investors of the work we see going forward. This is where we achieve or exceed pre-pandemic adjusted EBITDA levels on 75 to 80% of pre-pandemic attendance levels. With no near-term cash taxes due to the NOLs, in this scenario, we could generate an excess of $100 million of free cash flow and use this free cash flow to invest, de-lever, and provide additional shareholder returns. When the product flow returned in the back half of 2024, we achieved 71% of pre-pandemic attendance. And if one excluded October, which is impacted by the performance of Joker 2, we achieved 74% of pre-pandemic attendance. So we believe we are well on the way. In summary, we believe there's a lot to be excited about. With our long history of disciplined operations and capital management, we remain highly focused on creating long-term shareholder value. And with that, I would like to turn things over to the conference operator for questions.

Thank you. As a reminder, if you'd like to ask a question, please press star 5 by 1 on your telephone keypad. If you'd like to remove your question, you may press star 5 by 2. Please ensure you're unmuted locally when asking your question. Our first question for today comes from Derek Lessard of TD Cohen. Your line is now open. Please go ahead.

Hey, good morning, Ellis and Gord. This is Cheryl calling for Derek, who is away at the moment. The first question is on the box office outlook. I'm just curious if you could talk about your outlook on the box office for 2025 and perhaps give us a breakdown by quarter. And also anything you've heard in terms of the production activities, perhaps any impact from the recent fires in Los Angeles.

Good question. And bottom line is for 2025, we are looking at a much stronger film slate as we move forward. On this coming weekend, Friday, we're opening Captain America, which I expect to do very well. And Paddington in Peru, which is already opened overseas and is doing quite well. So that'll get the month of February going to a good direction. And then in March, we've got Disney's Snow White. We've got Warner Brothers' Mickey 17. And April, there's Minecraft. And then as we go through, there's a significant number of other movies for the balance of the year, including things like Karate Kid. We've got Superman, which is going to be good. There's F1. you know, lots of titles coming through. So we feel pretty strong about the balance of 2025. And I can't forget Mission Impossible, one of my favorite movies. And then towards the end of the year, you've got, you know, Wicked 2. You've got, you know, Avatar, Five Nights at Freddy's. There's a lot of film for the balance of the year. And what's good is we are not seeing the movement in the film slate like we did in the past. To me, that's going to be very positive. And from a quarterly perspective, I think orders to and forward should get much stronger as we get to the balance of 2025. Hope that helped you.

Yeah, awesome. Thanks so much for the color. And I guess just one more before I recue. So very strong results, obviously, on the digital place-based media. So I'm curious, is the Cadillac Fairview contract still ramping up, or should we expect more moderate growth going forward? And if you see any room or opportunity for more contract wins like this in Canada. Thank you.

Thanks. Good morning, Cheryl. It's Gord here. We're very excited about the addition of Cadillac Fairview to our network. Obviously, in our discussions in previous quarters, we talked about the ramp up of that new business throughout the first half of the year. So, as you take over a new network, typically the business ramps up. So, we're excited to see where we ended the year in that network. And so you would expect growth over 2024 into 2025 just because the year included a ramp up here. We all have common, which we added at the midpoint or sorry in Q2 of 2024. So you'll see the incremental full year impact of that. There are some other opportunities within Canada that we could look to add to our mall network.

um but uh obviously cadillac february was a huge win for us all right thank you very much thank you our next question comes from adam shine of national bank financial the line is now open please go ahead

Hi, good morning. So you've alluded to in the reporting that you've rolled out fully now across the circuit the online concession booking. Can you talk about some of the initial experience in terms of any upselling as well as any efficiencies from a margin perspective in that effort?

Sure, Adam. It's Gord here. So as we look at the back half of the year, You know, again, the adoption is typically low as you roll out new platforms. You know, an average of Canadians only go to the theatre, you know, four to five times a year. So take a time to traction. We are seeing incremental purchasing off of the app, which is expected. But again, it's early days and it's low adoption at this point.

And Adam, it's the convenience for our guests that's very important as an overall attribute of what Cineplex can provide.

Thanks for that. The Cineplex store, a nominal sale, but curious why even do that sale? And then separately, any other non-core divestitures possibly contemplated this year? And Gord, I'm sorry, I did not hear the CAPEX guidance for 2025. Maybe you can just repeat it. Thank you.

Sure. So CAPEX guidance, $60 to $65 million. And again, that includes carryover of the locations that we've completed in the fourth quarter of 2025. And then on the store then. So again, the business world has evolved over the past number of years. We provided the store as a service to our customers. It worked very well during the pandemic when people couldn't come out and see movies. But with the expansion of in-home options for content and the fact that we had you know, a party that was interested in acquiring the business from us, because we thought at this point in time, you know, it made sense to entertain that option and sell the business. So again, you know, the store was built initially out there at the time when people owned content, and now people typically, consumer habits have changed. With respect to your other question about, you know, other assets is, You know, at this time, we're still looking to kind of build all of our existing businesses and we're excited about where they're going. But you never say never if someone came in and, you know, made an offer that we thought was very creative and we would entertain it.

Thanks a lot. Thank you. Our next question comes from Maya Yagi of Scotiabank. The line is now open. Please go ahead.

Great, thank you for taking my question. Maybe I'll start just with the closures of one of your competitors in Montreal. How should we think about attendance impact and maybe help that we see in Q1 since they closed, I think, yesterday? So, any idea of what kind of attendance this can bring to your Montreal tiers in terms of upside. And on the media side, can you maybe just give us a sense of why your CMPP numbers went down in Q4 versus last year, even though general revenues increased? Is that the repricing happening in terms of how much you charge or just a volume issue. Thank you.

I'll take the first question and then Gord will respond to the second. As it relates to the theaters in Montreal, you know that we opened a new cinema in Royal Mount and with five screens we have seen some very strong results and that should continue to improve because of certain of the closures. It's really about where the theaters are located and what the impact is going to be as far as our locations. We are seeing some benefits and that will continue to get better as we move forward because the theaters were just closed a couple of days ago. So we expect to see continued improvement in the overall attendance in certain of the theaters in Quebec.

Do you have a sense of what is the... Sorry, just to follow up on this one. Do you have a sense of what is your market share in the Montreal area in terms of the theater attendance?

We have about...

market share, 60 to 70 percent market share, and the main other player in the marketplace is, you know, some independents and then .

Okay. Thank you.

And sorry, Mayor, on the question on the media then and the cinema media for patient statistic going down in the fourth quarter. You know, you really need to look at the top films in the quarter. Both of the two top films were more oriented to kids' audiences. And so advertisers are more focused on, you know, connecting with adults. And we had Taylor Swift, obviously, last year with what advertisers wanted to be connected with. So it's more the type of product that was playing in the quarter. We also did see just towards, you know, into the fourth quarter, know a little bit of um you know as advertisers look at consumer confidence we can mean a little bit and there's a little bit of a pullback um on spend we also you know a big category of spend for us is uh pharmaceuticals and um you know they typically do not um associate with kids oriented products they can't yes i agree so uh that's a good thing so i just wanted to ask you uh in terms of castle allocation um

You mentioned the dividend in your prepared remarks. Could that be a 2025 event or at this point you're mostly focused on the buyback? And on the buyback, I noticed you were quite active in October and November. You dropped off a little bit in December. I have not seen anything in January. in your filings yet, but can you just help us understand a little bit your buyback strategy, how much you've allocated for the buyback maybe on a typical year basis in terms of amount of dollars you want to purchase, anything quantifiable would be helpful. Thank you.

Yeah, so there's a lot in that question, Mark. So in terms of the first part of your question was related to dividends, I think we've been pretty clear that you want to see us on a sort of retroactive basis being at two and a half to three times in terms of our overall leverage ratio. So, that would be the precursor to see that happening. On share buybacks, we've been kind of clear in our communication to say that we're going to be opportunistic and balancing our investment to generate kind of growth capex. So, you know, you wait at the timelines in the fourth quarter, you know, we open four new locations and we'll have a little bit of that cost going through. So we're just at this point in time balancing that investment in growth as well as, you know, the share buybacks which happened, you know, I would call it like Q3 to date. So again, we'll look to be opportunistic look forward how we allocate capital to share buybacks and growth.

Thank you. As a reminder, if you'd like to ask a question, please press star, close by one, and hit our thank you pad. Our next question comes from Drew McReynolds of RBC. The line's now open. Please go ahead.

Yeah, thanks very much. Good morning. Just to follow up on Adam's question, Gord, on the Cineplex store, just is there any real any material financial impact that we should kind of consider as we model 2025? No.

OK. No. I mean, look at, sorry guys, as you see, We'll see from the EBITDA level, you know, minimal contribution from any way on from another revenue perspective. And we'll probably flag it as we go along, but you'll see, you know, a small decrease in other revenue category. So, luckily, in the magnitude or minus basis.

Yes, sorry, Gord. You're cutting out on my end here. I think you were quantifying a little bit of that.

Yeah, so I said at the EBITDA level, you know, relatively negligible. At the other revenue level, so right now the store revenue would be in other revenue, roughly, you know, around $10 million on an annualized basis. Got it, got it.

Okay, that's helpful. And then a couple of items just for 2025, just to help us kind of think through to an earlier question on Cineplex Digital Media and how the two more recent contracts kind of flow through here year over year in 2025. Like at a high level in 2024, you did 56 million in Cineplex Digital Media. Can you give us a sense of just what kind of year-over-year growth, even if it's a broad range, we could see for 2025? And then secondly, on the cost side, there's obviously minimum wage impacts that flow through in 2024. What kind of minimum wage and residual impacts do you expect will be still hitting Cineplex in 2025?

Yeah, so thank you on both of those questions. And so, first of all, you know, to date, obviously, you've seen tremendous growth in the digital media network on a year-over-year basis with the addition of those two networks. As I mentioned, we were really pleased, and as Ellis mentioned in his remarks, to get certifications of all network under the COAM certification. That will provide advertisers with more comfort on the metrics that they're getting in advertising in a normal network. So you should expect to see continued growth into 2025. I will say you're not going to see the same level of growth that we achieved in 2024, given that we're not adding new networks to date. On your second question, which is on minimum wages, look, we've seen, we would hope and we encourage provinces across the country to increase minimum wages in line with CPI growth. That is where the business community would like to see things go. We do know that there's early announcements in one province in Nova Scotia to go above that amount. But we would expect, you know, and hope that minimum wage increases across the board would be sort of potentially in that 4% aggregate range.

But on that, we are using our technology to help us as it relates to the minimum wage and the employees that are working at our location.

Yeah. Got it. Yeah, thanks, fellas. Okay, last one. Then on my side, just on the LBE and store-level EBITDA, Gord, you talked to payroll and occupancy and some recoveries in 2023. Just in terms of Q4 attacks, just wondering, are we still looking at kind of 25% overall store-level EBITDA margins for the LBE business? And then, presumably, to get back to that level takes a little bit of ramp up, just given some dilution from some of the locations you opened in Q4, or just how should we be thinking about that one?

Yeah, look, our ultimate goal is to be at a 25% EBITDA level margin. You know, when we look at some of the metrics that we have described previously, you know, on an annualized basis, we're looking to do about $10 million average on BOCS, per box at a 25% EBITDA margin for 2024, we're at about $9.8 million, so slightly below that. But we had invested fairly heavily in virtual reality as an attraction in most of our LBE boxes. We're transitioning out into new attractions that will drive, you know, increased spending within the block. So, yeah, we're comfortable to get back to the levels that we had previously described.

Okay. Thanks. Thanks very much.

Thank you.

Thank you. Our next question comes from Aravinda Galapathage from Canaccord Genuity. Your line is now open. Please go ahead.

Good morning. Thanks for taking my questions. Just on the CPP and BPP numbers, you had alluded to sort of some price action to go with inflationary conditions. Maybe just, Gord, you can talk to sort of any kind of sensitivity you've sensed there and your inclination to perhaps continue to use price adjustment to drive forward those metrics or maybe start there.

Sure. So, you know, in 2024, when you look at the year-over-year comparisons, you know, pricing increases, let's just call them about 5%. So, 5% for ticket prices, 5% for concession prices. But if you recall, we were coming out of a higher inflationary period. through 2023 and 2024. We, again, the primary driver for attendance is really the quality of film product. You know, we like to say that we're a low-cost format of home entertainment. We do know that customers want value, and we look for value through other means to our customers, which includes pricing and selective discounting. So, you know, going forward, we will see, you know, the incremental impact of some of those pricing changes that have been put in place. in late 2024, or from a box office perspective, in the midpoint of 2024.

And on the PPP, which is box office, it's really the premium offerings that also make a difference in the overall box per person, because we had 41% of our patrons come through and see movies in these premium offerings, and some of the premiums, you know, have higher pricing compared to others, but that helps with the overall box per person. And concessions, we continue to, you know, increase the basket size and also the benefits of the alcohol that we've had over the last number of years.

Thanks, Ellis. And then just maybe to follow up on the earlier question about, you know, what the slate looks like, and I And I fully agree with Alice's comments around Q2 and Q4 certainly looking good. I mean, particularly Q4 of 25 looks quite strong. You know, recognizing it's very early days, you know, based on the way the dates are lined up, 2026 looks sort of unusually strong. I don't know whether it's premature to even have that discussion. But, you know, we're seeing sort of the return of, you know, sort of big franchises like the Avengers and so forth. Maybe, Ellis, very generally you can share sort of conversations you've had in the industry about that. You know, anything you can share on that front would be helpful.

Yes, and most of our studios are basically looking at 2026 as being a normal year as we look forward because we've gone through, we went through COVID, we went through the strikes, and now, you know, as things move forward, and movies got moved around, I think what you're going to see is a lot more movies sitting in the appropriate months that they've been allotted for. And you also have both Amazon very interested and Apple also continuing. And I just got a note about the movie F1 that they saw in Los Angeles and said it was extremely strong. So those are the kinds of extra movies

product that we will look to do and do extremely well with okay thank you thank you our next question is a follow-up from derek lassard of td cohen the reliance now open please go ahead

Hi, thank you, Alison. Just a couple of follow-ups. So first on the LBE revenue, in the MDMA, you've noted a decline in media and particular events. So could you provide some more color there? Is that driven by reduced corporate spending, or what are you seeing in terms of the non-corporate consumers?

Yes. Hi, Cheryl. It's Court. Actually, the corporate events increased year over year. I think if I looked at our stats, we were about 22% in Q4 coming from groups and events versus about 20% in the prior year. So the corporate events are doing well. If we saw anything in the quarter, You know, it was perhaps occurring. There's two, there's two impacts in the quarter. I would maybe potentially call out one was so in the month of October, you know, overall business was down and it was down on weekends. And if you recall, October was a very warm month for us. So we did not get as much in venue traffic as we typically would in October. November was up. And then in December, in that holiday period, so those two weeks, and as I mentioned, groups and events, so corporate events was up, but the walk-in traffic was down a little bit in those two weeks. And that could be an early sign of where consumer confidence was in, but nothing that we expect to see sort of on a go-forward basis. Those are just some of the nuances that we saw.

Okay, thank you so much for that caller. And then just one more from me. In terms of your theater occupancy, I think the costs are quite low at $16 million compared to Q1 to Q3 at around $18 to $19 million. Is this even or is that somewhat tied to the rent renegotiation that you mentioned earlier in your prepared remarks? What would be a reasonable level to assume going forward?

Yeah, so typically on those, You know, we, from time to time, we'll get recoveries with respect to property tax appeals. So it's, I would say the Q4 amount is low relative to where you should expect things to go on, go forward, basically. And just so everyone knows on the call, you know, with number 16, the lease costs, um are not recorded as part on the income statement um it's just what the common area maintenance um insurance just certainly so so that those are the items that appear on in the sort of 17 million dollar numbers that cheryl has

Sorry, Gord, I think you were cutting out at the end, so did you say around $17 million per quarter or was that a different number?

Yeah, so sorry, the number that you described, so the roughly $17 million per quarter represents the common area maintenance taxes and insurance related to our buildings. um so when you see an amount below that in a quarter it's typically that there's been a recovery which is more of a one-time recovery great thank you very much thank you at this time we currently have no further questions so i'll hand back to alice jacob president and ceo for any further remarks

Thank you all for joining us this morning. We're excited about the outlook for 2025 and beyond. We look forward to sharing our first quarter results in May 2025. Have a wonderful day and enjoy the movies.

Thank you all for joining today's call. You may now disconnect your lines.