Cineplex Inc.

Stand by, we're about to begin. Good day and welcome to the Cineplex Inc. Q3 2020 Analyst Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Melissa Persacco, Senior Manager, Communications and Investor Relations. Please go ahead, Ms. Persacco.

Thank you, Celestina. Good morning and welcome to Cineplex's third quarter 2020 conference call. With me today is Ellis Jacob, our President and Chief Executive Officer, and Gord Nelson, our Chief Financial Officer. Before I turn the call over to Ellis, let me 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 regarding the information currently available. Actual results could differ materially from those expressed in the forward-looking statements. factors that could cause results to vary include, among other things, the negative impact of the COVID-19 pandemic, adverse factors generally encountered in the film exhibition industry, risks associated with other national and world events, discovery of undisclosed material liabilities, and general economic conditions. I will now turn the call over to Ellis Jacobs.

Thank you, Melissa. Good morning, and welcome to our Q3 2020 conference call. We are glad you could join us today. I hope you and your families are well and staying healthy. This morning, much like Q1 and Q2 2020 earnings calls, we are not going to spend a lot of time on the actual financial results. Instead, we will provide an update on the most recent actions we are taking to manage through this crisis. The status of our resumed operations as we safely welcome guests back to our venues is and what we are doing to position the company for continued success looking forward. As always, we will conclude the call with our customary questions and answer period. COVID-19 continues to significantly impact the financial performance of many businesses in Canada and around the world. And while we are feeling the effects of the pandemic much longer than we had originally anticipated, we are encouraged by the recent use of a vaccine available in the near future. In the meantime, we are confident in our ability to navigate through the remainder of the storm and ensure the long-term success of the company. Throughout our 100-plus year history, we have faced adversity and have always emerged well-positioned for future growth, and this time will be no different. Despite the tough industry and economic conditions, we remain confident in three key areas. First, we are confident in our response to COVID-19 and the actions we've taken to stabilize the company's financial position. Second, we remain confident in our business reopening plan as we safely welcome guests back to the theaters and entertainment venues where and when permitted. And third, we remain confident in the exhibition industry's ability to recover in the long term, as we look ahead to an exciting film slate in 2021 and beyond. While Gordon will go into more detail in a moment, it goes without saying that much like the first and second quarter, our third quarter results were again severely impacted by COVID-19, resulting in substantial decreases when compared to last year. Although we were able to reopen all of our venues with a phased approach during the quarter, the combination of capacity restrictions and a lack of film product impacted our revenues. However, during this time, the team continued to work harder than ever to adapt our operations, manage our cash burn, and strengthen Cineplex's financial positions. Building on our response to the pandemic in the second quarter, we remain laser-focused on significantly reducing capital expenditures and our two primary operating costs, lease costs and payroll, which Gord will elaborate on shortly. Overall, in the short and medium term, we are focusing on a smaller number of projects and priorities supported by a sustainable financial model. As a result, we have reduced our operating costs and overheads accordingly to reflect this. In addition, we raised over $300 million in additional financing, obtained extended relief under our credit facilities, materially reduced our net cash lease outflows by approximately $58 million, received approximately $22.5 million in wage subsidies, and are generating a substantial tax asset from our operating losses, which we will realize in 2021. We also began the sales process of our head office, which we expect to complete in early 2021. We remain focused on all other revenue-generating areas of our business, including Cineplex Digital Media, our expanded food delivery services through Skip the Dishes and Uber Eats, and our online digital movie platform, the Cineplex Store, which has experienced significant growth this year. So far this year, our Centerplex store customer base has grown by 41% to 1.8 million registered users, and we have completed more than 2 million transactions. To drive additional revenue through our groups and events business since reopening, we have been promoting private events at our venues, and we are now set to ramp up marketing efforts for this program. Today, I'm pleased to officially launch Private Movie Nights at Cineplex, which offers movie lovers an easy and affordable way to reserve an entire auditorium with up to 20 guests, starting with an accessible price point of just $125. With people looking for creative and safe ways to come together, particularly as the holidays approach, private movie nights and venue rentals at Rec Room and Palladium are great options to share a social experience with family and friends safely. Moving on to our resumed operations and reopenings during the quarter, we remain confident in our guests' mounting desire to return to our theaters and entertainment venues as well as the industry-leading health and safety protocols we have put in place to keep them safe. After almost four months of closure during the pandemic, and as restrictions lifted across individual provinces, we moved ahead with our phased approach to reopening our theaters and entertainment venues in late June and July. Then on August 21st, we became one of the first major theater circuits in North America to reopen all of its theaters across the country, coast to coast. During the third quarter, with the first major film released in five months, Tennant, we proudly welcomed 1.6 million guests back to our theaters. This signaled to us, as well as our studio partners, that Canadians have missed the magic of the big screen and are confident in the rigorous health and safety protocols we have put in place in our venues. As you heard me say before, the health and safety of our employees and guests is our top priority, and we are proud that no outbreaks or transmissions of COVID-19 can be attributed to movie theaters. Our guests are happy to be back, not just anecdotally, but our data validates this as well. Surveys conducted by our team during the quarter showed that 95% were satisfied with their overall experience. 96% were satisfied with overall cleanliness, and 95% were satisfied with auditorium health and safety. What's more, these figures are actually up from the same period one year ago, reflective of our strong focus of effort and execution excellence by our operations teams. When we look at moviegoing, we know that it doesn't pose the same risk as other indoor services and gatherings. The spacious footprint and headroom naturally offers a great ability for guests to physically distance both in the lobby and the auditorium. We deliver a manageable and predictable flow of guests that most other businesses cannot replicate by staggering our showtimes and implementing reserved seating with physically distant spacings. We know that the magic of the movies and escaping to a movie theater provides guests and their families with a safe and temporary break from the mounting pressures and anxiety created by the pandemic. This is what so many of us need right now, a safe escape, especially as we approach the long winter months. We continue to take our cues from the government as they respond to the second wave across the country and adjust provincial regulations and safety guidelines as required. We know there is a risk we may be required to shut down our theaters and venues again, such as the recent reinstated temporary closures in Ontario, Quebec, and Manitoba. In response to public health authorities, we have made proactive operational changes and will continue to adjust as required. Future adjustments will depend on how the COVID case numbers evolve over time, but we continue to actively work with government regulators to advocate for our safety protocols within our venues and the zero transmission records they've provided to date. Of course, we are encouraged by the recent news of the successful trial of COVID-19 vaccines. As initial reports suggest, a COVID-19 vaccine could be available within the first half of 2021, and this is an important milestone. As the vaccine becomes widely available, COVID cases will reduce, restrictions will loosen, and attendance numbers will rebound as guests seek out social experiences, especially when the deferred film content hits the big screens. Looking at what's happening in Japan, since the government eased restrictions on movie theaters and allowed them to open at full capacity in mid-October, the country's box office has been booming, and there remains no claims of COVID-19 transmission in a cinema. The recent release of an anime film shattered the record for the biggest opening weekend in Japanese history, surpassing the three-day total of Frozen 2, when it opened in Japan last year. This is a clear sign that Japan's movie industry has rebounded from the damage caused by the coronavirus, just as the exhibition industry will rebound in Canada and other parts of the world. As we look to the remainder of 2020 and into 2021, We remain extremely strategic and agile in our approach and are more than confident in the team's ability to pivot as needed through these challenging times. Which leads me to the final key area, our confidence in Cineplex and the exhibition industry's ability to rebound in 2021 as evidenced by a vast desire to return to the theatres and the upcoming film slate. As I mentioned earlier, guests are craving human connection and sharing social experiences with the ones they love. We know that when new movies are released, they will want to come back and experience it in a theater. And while there's still a risk that the schedule could shift again, right now we have the following films to look forward to for the balance of 2020. The Cruise, The New Age, Funny Boy, All My Life, Nomadland this year's TIFF People's Choice Award winner, the Tom Hanks film News of the World, and of course Wonder Woman 1984, among others hitting the big screen. As you know, many key titles shifted from 2020 into next year, which when combined with what was previously announced for 2021, makes for a very exciting year at the box office. These are first-run titles that are ready to be released and that studios want and need to land in theaters. Even though certain titles have shifted, studios have assured us they are still supporting theatrical releases. Which is why when we look at 2021, we can't help but expect it will be an even bigger year than originally anticipated. Given the sheer volume of titles, it looks like we may have a new major release almost every week. These include James Bond, No Time to Die, Top Gun, Maverick, Fast and Furious 9, A Quiet Place 2, The Eternals, Minions, The Rise of Groove, Black Widow, Candyman, West Side Story, Sing 2, Mission Impossible 7, and Cruella. When I look back at the past eight months, I'm extremely proud of our team's ability and focus in this environment and everything we have accomplished. We have fortified the financial position of our company, raised the necessary funds to extend our financial runway, and developed a gold standard in health and safety protocols to safely welcome guests back. We have worked hard to mitigate the impact of COVID-19 on our business, and we will continue to do so. Although we know a vaccine is on the horizon, we also recognize that there will be challenges ahead. We are confident in the measures we have put in place to manage through this pandemic and soften the negative impact on our business. As we look to the future, we will remain extremely strategic and agile in our approach to operating the company. We will review and refine our plans across the entire business and continue to take the necessary steps to ensure Cineplex remains on solid financial ground and is well positioned for a strong and healthy future. With that, I will pass the call over to Gaur. Thank you.