Cineplex Inc.

Good day and welcome to the Cineplex Inc. Q2 2021 analyst conference call. Today's conference is being recorded and at this time, I would like to turn the conference over to Melissa Sajali, Executive Director of Corporate Development and Investor Relations. Please go ahead, ma'am.

Good morning and welcome. With me today is Ellis Jacobs, our President and Chief Executive Officer, 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 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. Following today's remarks, we'll close the call with our customer question and answer period. I will now turn a call over to Ellis Jacob.

Thank you, Martha. Good morning and welcome to our Q2 conference call. We are so glad you could join us today. I hope you and your families are well. As we all know, overall results for the quarter were impacted by the pandemic and are difficult to compare, specifically when during the second quarter in 2020, our entire circuit was still closed. Board will cover the numbers in greater detail, but I will focus on three things. Provide you an update on our national reopening and the positive guest reaction we have seen so far. Share more about the exciting launch of our Cine Club subscription program. And finally, reaffirm the measures we have in place to take advantage of being poised for a strong recovery. During the second quarter, we continued to reopen our theaters and entertainment venues in provinces where restrictions were lifted. It wasn't until July 17th for the first time in over nine months that all of our theaters and entertainment venues were open from coast to coast. This was a milestone we have been working toward for a long time, and I would like to thank our team for their unwavering dedication and hard work throughout this challenging time, and for reopening our location safely and as quickly as possible. We truly could not have reached this day and confidently welcomed our guests back without such a committed team. After months of closures and lockdowns, we can finally welcome back our guests to enjoy movies as they were meant to be seen, and we couldn't be more excited. Based on our ongoing customer experience research, our guests are thrilled to be back and feel both safe and excited to be in our venues again. In terms of attendance, that first fully reopened weekend in July was our busiest weekend since March 2020. For the last three weeks in July, we have welcomed back over 2 million guests to our theaters, which is more than the entire first half of 2021. Our locations at the Rec Room and Palladium have also experienced strong results as Canadians start to get out of their home and enjoy entertainment experiences again. Looking at our other businesses, we are also seeing an encouraging ramp up within Cineplex Media as client confidence returns and companies begin to build out their advertising budgets for the fourth quarter and into 2022. Cineplex Digital Media is also experiencing positive momentum as it continues to focus on growing the business and securing new clients and partners. And our P1HE, has been very busy with a great reopening in the U.S. and the continued national reopenings in Canada. In addition to the excitement of reopening, during the second quarter, we completed certain previously committed projects and opened on U.S. VIP cinemas at the Cineplex Cinemas Forum and VIP in Montreal. Then in July, subsequent to quarter end, we opened three more new bills within an impressive two-week time frame including our first location of the rec room in British Columbia and first stand-alone VIP cinemas in Western Canada, both located at the amazing Brentwood Centre in Burnaby, British Columbia. Two weeks later in Ontario, we open our tenth location of the rec room in Barrie, Ontario at Park Place. With our location-based entertainment venues now open coast to coast, we can offer our guests even more options when it comes to spending their leisure time with us. We are very encouraged by initial results coming from our newest locations with a great response from the community. In fact, we continue to see lineups at our Brentwood and Barrie locations as guests are eager to check out the new space and experience all we have to offer. As you've heard me say throughout this pandemic, the health and safety of our employees and our guests remain our top priority. With that in mind, during the quarter, we introduced our Venue Safe program, which encompasses all of our health and safety protocols in adherence with our exceeding provincial and public health guidelines. The specific protocols will evolve over time, province to province, and even community to community as we emerge from the pandemic. But our branded venue-safe feel will remain consistent across all our venues so that guests can feel safe and comfortable while enjoying the escape of the theater and the fun on the game. One thing is for sure, our teams and our guests are happy to be back. With a new appreciation for friends and family and social settings that have been restricted for so long, we are focusing on providing our guests the one thing they can't get at home, an immersive shared entertainment experience. At Cineplex, we focus on providing guests with exceptional experiences at a great value. Coming out of the pandemic, it is going to be even more important for us to drive habitual movie-going and community visitation by making it easier and more accessible. That's why yesterday we launched CineClub, an innovative movie subscription program that provides great value our guests are sure to love. For just $9.99 per month, members receive one regular admission ticket every month with no expiration date, the opportunity to purchase additional tickets at the Cine Club price, 20% off concession items, and a variety of other benefits, including discounts on purchases at the Cine Club store and an amusement gaming at our entertainment venues nationwide. Through extensive research, we spoke to thousands of our guests in order to design the best subscription offering for them. We asked what they wanted and delivered an exciting program that, while focused on moviegoing, also provides great benefits and discounts across our ecosystem of businesses. We recognize that movie fans nationwide are eager to return to the theatrical experience and escape to the big screen. and we are thrilled to offer Canadians this unique risk-free subscription program that provides both value and convenience. We designed CineClub to appeal to a wide array of guests and entice them to join the theatrical experience more frequently with their friends and family. The additional discounts included for concessions, the Cineplex store, the rec room, and Palladium also provide our guests with even greater value to enhance the entertainment experience with us. When looking at our peers in other markets who have successfully launched subscription programs, we are encouraged by their results and feel this program will be very successful. Although we are not providing guidance on our targets, we look forward to sharing results with you as it matures. It was no coincidence that we launched CineClub on the heels of our circuit reopening. Now is the time to capitalize on the pent-up demand and make movie viewing even more accessible for our guests. And with a significant lineup of highly anticipated films hitting screens for the remainder of this year, CineClub will give guests yet another reason to head back to our theaters and enjoy a movie on the big screen with big sound. Box office numbers are encouraging as our circuit reopens in Canada with blockbusters like F9, The Fab Saga, Black Widow, and Space Jam A New Legacy drawing guests back to the theaters. As vaccination numbers rise and restrictions loosen across the country, we expect that by the fall we will be close to full capacity in time for the onslaught of blockbuster films scheduled for the back half of the year. Just to name a few, we've got The Suicide Squad that just opened last weekend in an exclusive exhibition window in Canada to strong results. Free Guy, starring Canada's own Ryan Reynolds, opening tonight. Shang-Chi and the Legend of the Ten Rings, with Canadian actor Simu Liu. The highly anticipated new James Bond film, No Time to Die. Dune, directed by Canada's own Denis Villeneuve. The Eternals, Ghostbusters Afterlife, Top Gun Mavericks, West Side Story, Spider-Man No Way Home, A Matrix Reboot, and ZingTube. Of course, we are keeping a close eye on streaming services and windows. Studios have been experimenting with many different windowing strategies over the last 15 months as the pandemic forced the closure of movie theaters around the world. Some have worked well and others have not been successful. As always, we will continue to work with our studio partners to reach mutually beneficial agreements. But let me be clear, while windows may be changing, they are not disappearing and nor is movie going. We know that an exclusive theatrical release means more revenue for all stakeholders in every cycle of a movie's life. Although some consumer habits may have changed because of the pandemic, and with more streaming content available, it has not dampened the desire to go out and enjoy a shared immersive experience, the escape that moviegoing has always provided. Looking ahead, we remain confident and poised for a strong recovery. During the second quarter, we remain prudent in managing costs and reduce our average monthly net cash turn to $24 million, down from $27 million in the first quarter as our circuit reopened across the country. We were pleased to learn that CEWS and CERS will be extended to October and continue working with our landlord partners for rent relief. I would like to thank them for their commitment and support during this extremely challenging time. Looking ahead, we will continue to actively monitor all aspects of our business and operations to minimize the impact of COVID-19 wherever possible. We will manage our costs and will assess all future capital spending as we make our way through the recovery period. Before I turn things over to Gord, I would like to provide a brief update on the Cineworld litigation. As of today, they're nearing the completion of the discovery process and remain on target to begin a three-to-four trial on September 13th. We are confident in our case but can't speculate in terms of an outcome or timing. Overall, we remain optimistic about the recovery of our industry and specifically Cineplex's. Looking ahead, the recent box office results are very encouraging, as is the upcoming film release schedule. Based on what we have seen, we expect guests will continue to return back to theaters largely due to increases in vaccination rates, months of pent-up demand, and a robust release schedule that continues to unfold in the back office year. Let me take a moment to pause and state what's important to note here. Our team has done an outstanding job of focusing on what we can control to protect our company during the closure period. We have prepared for this moment for many months, and with our unwavering efforts to control costs and solidify our financial position, we have set the stage for a dramatic comeback. With that, I will pass the call over to you.