Cineplex Inc.

Good day and welcome to the Cineplex Inc. Q4 and year-end 2020 analyst call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Melissa Prasako, Senior Manager, Investor Relations and Communication. Please go ahead, Ms. Prasako.

Thank you, Kevin. Good morning and welcome to Cineplex's fourth quarter and year-end 2020 conference call. With me today is Alice Jacob, our President and Chief Executive Officer and and Gordon Elson, 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 impacts of the COVID-19 pandemic, adverse factors generally encountered in the film exhibition industry, risks associated with other national and world events, and discovery of undisclosed material liabilities and general economic conditions. Following today's remarks, we will close the call with our customary question and answer period. I will now turn the call over to Alex Jacobs.

Thank you, Melissa. Good morning and welcome to our Q4 and year-end 2020 conference call. We are glad you could join us today. Let me start by saying I hope you and your families are well and staying healthy. This has truly been a time like no other in the history of our company. The impact of COVID-19 has been widespread and dramatically affected so many industries, but specifically entertainment and movie exhibitions. which is why it won't come as a surprise that Cineplex experience declines in our year-over-year results. Given our mandated temporary closures, capacity restrictions, and the shifts in the firm release late, our results were significantly impacted. What I would like to focus the discussion on today is how we responded to the impacts of COVID-19 and laid the groundwork for an upward trajectory over the long term. I want you to leave today's call knowing that we are on a path to a stronger, more successful organization. Over the past year, we adapted with agility and created a leaner, more resilient Cineplex. We scrutinized our business divisions, analyzed our structures, and challenged every assumption, all in an effort to streamline our operations and, more importantly, improve our profitability in the long term. In short, we used this time as an opportunity. We took a strategic look at the structure of our business divisions, our partnerships and programs, and made some tough but necessary decisions to reduce overheads, operating expenses, and capital commitments. We realigned and streamlined our corporate and divisional operating structures to improve efficiencies. We also terminated our partnership with Topgolf and canceled a number of capital projects, recognizing that this isn't the time to invest in large development projects. The end of 2020 also saw the conclusion of our partnership with Timeplay, as well as the final issue of Cineplex Magazine, which we released in December. By moving away from the printed magazine, we're able to focus on what we know our clients are looking for, digital, scalable ways of reaching their customers. As Canadians will focus to stay home, we turned our focus to our digital movie platform, the Cineplex Store, which experienced significant growth last year with a massive 39% increase in registered users from the prior to 1.9 million total users. The Cineplex store, which is a key differentiator for us from our peers, benefited from a number of premium video-on-demand releases during the year, offering guests a chance to view exclusive content directly in their homes. The Cineplex store also provided us with the opportunity to meaningfully engage with our guests through our digital platform while our theaters were closed. Like us, our studio partners also used this time to test different film release models. To be clear, there isn't a one-size-fits-all window for all films and all studios. In my discussions with the major studios, the mutual goal is to protect the theatrical window, especially for blockbusters and titles forecasted to perform well at the box office. Studios recognize that the theatrical release is critical to the financial success of a tenfold film as it generates the highest percentage of worldwide revenues for the film. It also generates media and consumer interest for sequels and other downstream revenue opportunities. As the industry evolves, there will be more ways to maximize revenue for ourselves and the studios moving forward. In fact, this is already the case. In November, we announced a dynamic window agreement with Universal that will preserve the theatrical experience while adapting to changing consumer behavior. As the industry navigates the effects of the COVID-19 pandemic, discussions like this are of the utmost importance, and we will continue to have them with our other studios and content producers. These types of partnerships make more content available, which benefits our guests when it comes to film offerings and rich entertainment experiences. While boards will provide a more wholesome financial update in a moment, in 2020, we remained laser-focused on minimizing cash burn, extracting value from all of our assets, and adding the necessary liquidity. We did this to provide ample runway for our recovery period and beyond. We significantly reduced capital expenditures and our two primary operating costs, payroll and lease costs. During mandated closure periods, we temporarily laid off our part-time field workforce, our full-time employees took voluntary temporary salary reductions, and we realigned and consolidated our corporate teams, eliminating 130 roles across the Cineplex ecosystem. We also benefited from approximately $57 million in wage subsidies, primarily through the Q's program, and worked with our landlord partners to obtain relief that reduced cash rent being paid in 2020 subsequent to the lockdown. With the second wave of COVID-19 resulting in another round of widespread temporary closures in late 2020 and into 2021, we were pleased to hear that the Q's program has been extended to June of 2021. As I mentioned, we work closely with our landlords for rent relief, reducing net cash lease outflows in 2020, and have continued discussions with our landlords on further relief into 2021. Cineplex has a unique suite of assets like no other exhibitor in North America, allowing us to extract additional value and strengthen our financial position beyond the current pandemic environment. A key example of this was in the fourth quarter when we entered into an agreement to enhance and expand the scene loyalty program, receiving $60 million from Scotiabank. We also recently completed a sale lease pack of our head office in Toronto for $57 million. Subsequent to year end, we obtained further relief under our credit facilities and have engaged BMO Capital Markets and Scotiabank on a proposed private placement offering of second lien secured notes, which Gord will go into more detail shortly. We will also explore other measures to maintain adequate liquidity, but these are just some of the examples of the value extraction I mentioned earlier. It will be strategic actions like these that will see us through the pandemic recovery period as vaccines are rolled out, restrictions are lifted, and a return to normalcy begins. Although the pandemic has lasted longer than any of us initially expected, we know that the exhibition, amusement, and leisure industries will recover. The box office numbers coming out of countries where theaters are permitted to operate like Japan, China, and Australia have exceeded expectations. In Japan, the anime film Demon Slayer, which opened late last year, went on to become the highest-grossing film ever. We are also reassured by recent survey data from Abacus Data that puts moviegoing as the most missed in-person activity among Canadians. We know our guests will be looking for safe and affordable out-of-home entertainment experiences coming out of the pandemic, and our focus is how best to leverage and capitalize on this desire. Health and safety are, of course, top of mind in everything we do, which is why we have implemented industry-leading operating procedures focused on the health, safety, and well-being of our employees and guests. I want to reiterate, there remains no claim of COVID-19 transmission in a cinema to date globally. As a worldwide industry, we have all focused on the safety of our guests and will continue to do so. With the vaccine rollout underway, our team is looking forward to safely reopening the rest of our circuit of theatres and entertainment venues across Canada, and we anticipate a return to more normal operating conditions later this spring. We have all been cooped up for a long time and are longing to come back together as a community and take part in social experiences. That desire, combined with the build-up of strong film content for both this year and next, means there's a lot to look forward to. Just to name a few film schedules for this year, we have Godzilla vs. Kong, Black Widow, Fast and Furious 9, Cruella, Peter Rabbit 2, The Runway, Venom, Let There Be Carnage, Minions, The Rise of Gru, Top Gun, Maverick, A Quiet Place, Part 2, Dune, No Time to Die, Mission Impossible 7, Spider-Man Far From Home sequel, West Side Story, and The Matrix 4. When I think about the pent-up demand for the theatrical experience, the backlog of film releases, and all the social experiences which have been restricted for almost a year, I am confident that as our locations reopen, our guests will be there. And we are ready for them. We are positioned well for the growth that is to come. Before I turn things over to Gord, I want to take a moment to recognize the unwavering commitment and hard work of our employees. When I look back on the last year, I'm extremely proud of our team's focus, agility, and willingness to make sacrifices as we work together toward everything we accomplish. I also want to thank our board of directors for their ongoing support and sound advice during these unprecedented times. We have fortified the financial position of our company, secured the money we need to see us through, and developed the gold standard in health and safety protocols to safely welcome our guests back. The bottom line is that Cineplex will make it through this tough time. The pandemic expedited parts of our future plans to become a leaner, more agile company and prompted pivots that were already on the roadmap. We remain confident in our strategy and will continue to take all necessary actions to ensure Cineplex not only survives the pandemic, but thrives for years to come. With that, I will pass the call over to Gore.