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.

Thanks, Al. I am pleased to present a condensed summary of the results for Cineflex Inc., and to provide additional detail on the ongoing financial impacts of COVID-19 on our operations. Further reference, our financial statements and MD&A have been filed on CDAR and are also available on our investor relations website at cineplex.com. Our MD&A and earnings press release includes a fulsome narrative on the operational results, so I will focus on highlighting and quantifying some of the key items, including commentary on cost control, liquidity initiatives, and outlooks. The COVID-19 pandemic continued to have a material negative impact on all aspects of Cineplex's core businesses, resulting in material decreases in revenue, operating income, and cash flows for Q2 2021. With ongoing closures and capacity restrictions in place in Canada, we began the quarter with approximately 38 theaters and three LBE locations operating. primarily in smaller markets, and ended the quarter with 86 theaters and six LBE locations open. The majority of the ramp-up and reopenings occurred in June. However, our P1AG business did benefit from expanded FEC openings in the U.S. earlier in the quarter. As a result, we continued to focus on cost control and liquidity, and we're extremely pleased to report an improvement in the EBITDA loss and the average monthly net cash burn when comparing Q2 2021 to Q1 2021. The EBITDA loss improved to a loss of $53.2 million from a loss of $62.1 million, and the average monthly net cash burn improved to $24 million from $26.9 million when comparing Q2 2021 to Q1 2021. With respect to cost control, I want to provide some additional details on our largest fixed and semi-fixed costs, our lease costs, and our payroll expenses, and then discuss our overall cash burn rate. Lease costs are our largest fixed costs. Throughout 2020 and into 2021, we maintain strong communication channels with our landlord partners in identifying opportunities for relief during these unprecedented times. Our focus has been on working with them to identify opportunities for abatements during the closure period and to jointly look for other opportunities under our existing lease agreement. During the past 15 months of the pandemic, we were able to materially reduce net cash lease and occupancy-related outflows by approximately $132.1 million. which includes approximately $70.4 million in lease abatement savings, $27.4 million as a result of the sale of certain restrictive rights to landlords, and approximately $34.3 million as a result of other subsidies and rebates. We were able to maintain similar levels of total occupancy reductions in both the borders in 2021 as approximately $26 million was reflected in Q2 as compared to $25.7 million in 2021. We continue to work with our landlord partners and with the government's support to provide additional relief throughout the balance of 2021. Payroll is our largest semi-fix cost. With the initial mandated closures in early 2020, we immediately initiated temporary layoffs, and reduced full-time employee salaries across the board by agreement with the employees. We reviewed and applied for government subsidy programs where available, including the Canada Emergency Wage Subsidy. During the past 15 months of the pandemic, we have benefited from approximately $87.5 million in subsidies, primarily under this program, of which $15.7 million was related to Q2 2021, as compared to $14.8 million in Q1. As we reopened during the quarter and our staffing levels increased, our theater payroll costs increased only marginally to $5.5 million in Q2 2021 from $3.6 million in Q1 2021 as we continue to benefit from wage subsidies. We are encouraged that the Q's program has been extended through to October 2021 albeit at reduced rates as businesses ramp up. With respect to other supplier partners and expense control, we put in place immediate expense and capex curtailment programs during the closure period. We worked with our supplier partners to provide elements of relief, including eliminating or reducing amounts due for contractual monthly services, in addition to payment deferrals and abatements. You can see the further benefits of these initiatives in the substantial cost reductions in a number of our controllable cost categories. In addition, we continue to monitor other subsidy relief programs which could benefit Cineplex. For the second quarter of 2021, we reported net CapEx of $3 million and approximately $31.6 million during the past 15 months of the COVID-19 impacted period. As we look forward for the remainder of 2021, we will only be completing contractually committed projects and required maintenance CapEx projects. And as such, we expect that net CapEx for 2021 will be in the range of $30 to $40 million. Beyond 2021, we will continue to be prudent with our growth initiatives and we'll seek out opportunities within the disruptive retail landscape. With all the actions previously described, we were able to achieve a 15-month pandemic average monthly net cash burn rate of approximately $22 million per month. For Q2 2021, the average monthly net cash burn rate was approximately $24 million, down from the $26.9 million reported in Q1 2021, due primarily to the partial reopening of the circuit and the success of the P1 AG's root business in the U.S. I would now like to focus on our liquidity position. For Q2 2021, our net borrowings under our credit facilities were only $13 million. During the first quarter, our total borrowings increased by $14 million, resulting in an increase in total debt of only $27 million during 2021. We managed our debt balance by minimizing our cash burn and looking for liquidity opportunities. Key liquidity opportunities on a year-to-date basis include the receipt of the income tax receivable and the head office sale leaseback proceeds. During the second quarter of 2021, we received an additional $49 million in income taxes recoverable as a result of the 2020 tax losses. Approximately $54 million of the $66 million claimed has been received to date in 2021. In January 2021, we received gross cash proceeds of $57 million for the sale week back of the head office building. As a reminder, on the latest credit facility amendments, we extended the suspension of financial covenant testing until the fourth quarter of 2021, but provided for a monthly liquidity test until the financial covenants are reintroduced. As of June 30, 2021, we had approximately $246 million in availability under our credit facilities. Our average net monthly cash burn for 2021 is approximately $25 million during a prolonged closure scenario. And as such, we believe we have positioned the company well to handle any further uncertainties through the next 12 months. As we reopen and generate revenues again, we will continue to focus on cost controls and liquidity. For the month of July, we are pleased to advise that we had positive EBITDA and marginally positive net cash flow as opposed to the net cash burn we have experienced over the past 15 months. This is an encouraging sign to start off Q3 as we were not fully open across the country for the entire month and were subject to capacity restrictions. As we look forward, we see positive news on vaccine rollouts. We see reopenings and restrictions being relaxed. We see pent up consumer demand and we see a backlog of film titles to supply the market on reopening. We continue to focus on the safe operations of our businesses and continue to explore further opportunities for cost reduction and value creation. That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.

Thank you very much to our speakers. Ladies and gentlemen, if you would like to ask a question over the phone at this time, please signal by pressing star 1 on your telephone keypad. Please note you're using a speakerphone, just to make sure your mute function is turned off to allow your signal to reach our equipment. So, once again, that is star 1 to ask a question. And we'll pause for just a brief moment to allow everyone an opportunity to signal for questions. We'll now move to our first question over the phone, which comes from Derek Nassar from TD Securities. Please go ahead. Your line is open.

Good morning, everybody, and congrats on the reopening. I know it's been a long road for you guys. Thank you. Thank you. Just wondering if you have or are currently in kind of any discussions with provincial authorities on ways to stay open in the event of future waves or outbreaks. And is the venue safe that you introduced part of those discussions?

We keep on a regular basis, you know, having conversations with the authorities. and we basically have most intensive protocols to make sure that our guests and our employees are having a safe and comfortable experience in the environments that we are operating in. And as you see across the country by province, the actual requirements vary, and we are looking forward to changes as we move forward. But we are also being very careful and making sure that we can provide our guests with that comfortable and safe experience.

Okay. Thanks for that, Ellis. And maybe just one follow-up for Gord on the net burn. Obviously, it reflected some pretty good cost control there, and part of that was reopening. Do you think that you have any more cost levers that you could still pull on going forward?

I would say that we've done a fairly exhaustive review, obviously, during the closure period. Part of our focus has been to, you know, to the extent that we could, is look at opportunities to take costs, which may have been fixed costs, and look for opportunities to turn those more into variable costs, given, you know, the uncertainties of the environment going forward. You know, obviously, technology and you're going to see the launches and technology plays into the next, into 2022, you know, allow for more efficient operations. But I would say, you know, we've done a very good job and I'm really pleased with the team and the way we've looked at costs over the last 15 months. So, you know, in the near term, I would say we're pretty much exhausted. I think there are opportunities longer term, but in the near term, I think we've exhausted The majority of the high, high amounts, high value items. Okay.

Thanks, Jeff. We'll now move on to our next question over the phone, which comes from Jeff Ann from Scottier Bank. Please go ahead. Your line is open.

Thanks. Good morning. I'm glad to say I was one of those 2 million patrons. So glad to see you guys are reopening. Maybe just on that point, Alice, I think you were quoted that you had about 900,000 patrons in the first week, so 2 million in the three weeks or so that you've reopened. So the math would suggest 500,000 to 600,000 for the second and third week. I mean, I know it's difficult, but what do you think is a good level to assume, you know, looking ahead? until we have a greater capacity. I know it depends on a lot of different things, including the film slate. But can you help us out there based on the businesses that you're seeing? And then a question as we head out to the fourth quarter thinking about the covenant. You know, the US, I guess AMC gave some numbers talking about the US box office industry and If you kind of do the math, they almost suggested they expect about 70% of what they got in the second half of 2019, so roughly 70% recovery from where they were up to 2019 numbers. And again, we're a little bit behind the U.S., but what level of attendance do you think we need to get back to in order to meet those covenants, taking into account the subsidies coming off in October? Yeah. Thanks.

So, Jeff, in answer to your first question, basically when you look at the weeks after July, we still continue to do quite well, especially when there are large movies that open. And we are running, you know, over 50% of 2019 numbers, even with all the restrictions, and going even higher than that on certain weeks. And we feel by, you know, the fourth quarter, if product is there and the situation continues to get better, we are looking at, you know, getting up to the 80% range as we get into the fourth quarter with the lifting of, you know, some of the requirements from an overall perspective as it relates to physical distancing.

And on the covenant question, sorry. No, sorry, Corey. Okay, so with respect to the covenants, I mean, just to make it clear, you're aware of the calculation, which is four times the Q4 EBITDA amount. So that becomes an annualized amount, which would test against the debt. So if you were to, as an example, use you know, and I made comments today about July being, you know, relatively cash flow, marginally cash flow positive during the quarter, sorry, during the month. So if you assume that, you know, you'd maintain the same debt levels, or if you use pro forma, the June 30th debt levels, and backed into the numbers, I think you would find sort of an EBITDA range between the two tests, so the total leverage and the senior debt. coming at ranges that you would need to be in sort of a $26 to $36 million EBITDA range in the fourth quarter. And historically, if we look back at where we were in 2019, adjusted for certain of the center world adjustments, so there's a number of additional costs that we reflected in the fourth quarter of 19, so I think that's important to remember. And if you looked at 18 and 19, both of those quarters were about $80 million of EBITDA. So, you know, significant reduction in the EBITDA amounts to stay within the covenant ranges. And so when you're looking at what would be the attendance decline versus 2019, which I think was your very specific question, We're talking about a 35, roughly about a 35% attendance decline.

Okay. That's great. That's helpful. And just a clarification, Gord, positive, slight positive cash flow in July, how much subsidies was included to get to that positive number?

Yeah, so, and with respect to subsidies, and I'm not going to provide any more granular detail on the monthly amounts because, you know, as we walk through, I just want to, what I would say on that is if you looked at our Q2 amounts, we were closed still halfway through July, and the majority, so the subsidies that we received, so the abatements would be somewhat in line if you looked at the Q2 amounts, which was roughly about $6.6 million for the entire quarter. So if you divided those by three, that would be a good approximation of July. The certain subsidies, provincial subsidies, so the realty tax and the utility subsidies, were still applicable in July while there was a mandated closure. So for half of July... you know, we would be eligible for those subsidies. And then, as I mentioned in my call script, the cure subsidy is available and has been extended to the end of October, albeit as cues and cures are at declining rates. So for the month of July, Jeff, is, you know, it's slightly less than, you know, what you would have seen for the quarter. But if you look forward into August and September, as I mentioned, those will start to decline. Great.

And maybe one last quick one. Food services in the U.S. theaters since reopening have been strong. I'm curious, do Canadians miss their popcorn as much as our U.S. neighbors?

Yes, Jeff, they do. And our numbers, as we see through the reopening, have been extremely strong. Okay. Thanks, guys.

Thank you.

Thank you. We're going to move on to our next question over the phone, which comes from Adam Cheyne from National Bank Financial. Please go ahead.

Thanks a lot. Good morning. Ellis, I know you're not talking targets initially on CineClub, which looks quite interesting. But if we look, you know, to the CineMark experience, it would suggest that maybe over, you know, In three years, you could get up to a range of maybe 8% to 12% conversion of your SEED members. Does that sort of make some degree of sense in terms of at least, you know, additional parameters for expectations?

That's, Adam, a good target. But I think given our, you know, across the country presence and our ability with the SEED programs, to move forward, I feel that we will see some strong numbers coming out of the Cinecom program. And it's, you know, a little early. We've been a day, but we were quite excited to see how many people actually signed up yesterday.

Fantastic. And, you know, going back to the AMC sort of call that was mentioned on that call, you know, acknowledging what you said earlier regarding, you know, some of the studio experimentation during the pandemic, AMC, nevertheless. going into 2022, did sign a deal with Warner solidifying, you know, the theatrical exclusivity. Do you want to maybe talk a little bit about what you're seeing in terms of either, you know, industry dynamics among your peers and or some of your expectations certainly, you know, going into next year in terms of maybe, you know, a changing landscape and a ceasing of some of the experimentation, albeit, you know, maybe taking on a different context next year?

Yes, good question. And there are differences between Canada and the U.S. in the situation. Like, for example, with Suicide Squad, we opened it on theatrical without any streaming services. So it varies by studio. But looking at 2022, they're looking to, you know, a window of a minimum of 45 days with most of the U.S., suppliers and the Canadian companies that represent them going with that 45 day as a minimum window at this point.

Okay. And just maybe one other question. Just obviously, as we continue to see the Delta variant draw headlights and notwithstanding the evolving safety and cleaning fixtures you're pursuing, any initial thoughts as to how some of these passports being proposed by a number of municipalities and or, you know, provinces, you know, how you might be initially adjusting to that. I mean, it might be as simple as just, you know, having your employees, you know, check, you know, a phone for a QR code. But any quick thoughts as to, you know, how you address, obviously, the inflow, hopefully, of greater patriots over the next couple of quarters?

We will be following the requirements and government regulations as they're going to be put forward. And as I said on the call, on the safety side, we are always even further in some cases than what government is requiring. But if you're talking, for example, about vaccine passports, we will definitely look at what the requirements are between provinces and where things stand. Great. I'll leave it there. Thank you.

Thank you. Then I'll move on to our next question over the phone, which comes from Tim Casey from DML. Please go ahead. Your line is open.

Thank you. Thanks. Good morning, too, for me. One, Alison, could you walk us through what investors should expect in terms of timelines or milestones with respect to the litigation with Cineworld? And my second question is, Gord, just so we're clear, are you – In terms of the outlook for the back half of the year, you're assuming or we should be thinking that Cineplex will be cash flow positive in each of Q3 or Q4 or cash flow neutral, or do you still expect a bit of a burn? Just any color you could give there would be helpful. Thanks.

So in response to your first question about Cineworld, the trial date is basically in mid-September, and we are expecting that the decision to come a few months later after that. That's where we are at today, and we have spent a significant amount of time and feel confident of our position.

How long did you spend on your second question?

Three to four weeks, we think it would be the timelines for the trial.

Thank you. And on your second question then, Tim, so I want to make it clear, I was trying to do an example based on the June 30th balances of what the covenants, how the covenant mechanics would work for a Q4 estimate. So, you know, your question was, will we be cash flow positive or negative for the remainder of the quarter. And, you know, we typically don't provide guidance. But what I do want to say is during the month of July when we were only open in, you know, not even all of our locations and Ontario was only open for a couple weeks, you know, we were really pleased to be neutral during a period with severe restrictions and, you know, not the full circuit operating. So I think you can take from that that we expect you know, with the full circuit operating, you know, and hope, you know, relaxing of restrictions over time is that we would be positive for the back half of the year.

And maybe just one follow-up, if I may. In terms of in-cinema advertising, you know, that's, like Gord, you've often told us that, you know, for the big advertisers to come in, they want to have confidence in, you know, the quality of movies will attract big crowds and whatnot. Could you maybe offer a little more commentary on how the discussions are going with that particular revenue opportunity and how you're thinking about the back half of the year with Rio?

Yeah, there's a real eagerness in the media area for our clients and advertisers to get back on the screen. And with the quality of the product that we have coming forward, we feel and we believe strongly that the media business will come back and they are looking at how they get through the holiday period and into 2022. So we are quite positive about that business moving forward. Thank you.

Thanks.

Thank you. We'll now move on to our next question, which comes from Aravinda Galapatige from Kent Ward. Please go ahead. Your line is open.

Good morning. Thanks for taking my question. A quick clarification to start with. Alice, you mentioned a 50% number with respect to attendance versus pre-pandemic levels. I just wanted to make sure were you referring to just an individual week or were you referring to the period since the reopening? That's question number one. And then secondly, following up on the comment about concessions, obviously, you know, it's still a short period to kind of form an opinion on, but the conversion of attendance to concession sales, you know, CPPs, is it starting to trend back towards sort of pre-pandemic levels or given sort of the restriction of movements and so forth, is there still sort of some ramp up there to be achieved? I was wondering if there's a little bit more granularity there. Thank you.

Yeah, so on the first part of your question regarding the reopening, we are running, you know, some weeks are higher, other weeks depending on the product, but we are running about 55% on average above 2019 for now. And when you asked about the concessions, you know, we are seeing higher numbers than in 2019, and that isn't, you know, changing that much as we are seeing week to week with our guests coming back to the cinemas.

Excellent. Thank you. And a quick follow-up for Gord on the lease abatements. Gord, you mentioned the $6.6 million last quarter, you know, obviously to divide that by three for July. What is the longevity of those abatements? Does it need to be renegotiated straightaway for August and September, or does it kind of go until quarter end or so forth?

And, you know, each one is unique, so each lease is a separate negotiation with the landlord. You know, some of them are contingent on feeders being mandated closed. You know, others have been included in a bit of a ramp-up period. So, like, there's no simple formula, Aravinda. And that's why, you know, it kind of suggested for the month of July, given half a closure, you know, in our major province, or half a month, sorry, of closure in our major province is that you're going to, you know, potentially for July, see, you know, roughly a third of that, and then it's going to tail off, starts to tail down again, reopen.

Great. Thank you so much. I'll pass the line.

Thank you. Thank you. We'll now move on to our next question, which comes from Drew McReynolds from RBC. Please go ahead. The line is open.

Yeah, thank you very much, and good morning. And, Ellison, Gord, thank you very much for all the granularity that you provided. Super helpful. Two last ones for me. For you, Gord, a couple of quarters ago, you were helpful in providing, you know, what kind of adjusted EBITDA or EBITDA margin, you know, the company could return to. once kind of fully normalized, whenever that is. You know, could you update on, you know, whether reaching 2019 levels is, you know, certainly what would be the objective? And then secondly, I guess for Ellis or Gord, on film costs, just given all of the fluidity in terms of relationships with the studios, is that film cost percentage expected to evolve or budget all outside of that, you know, kind of low to mid 50% range.

Thank you. So, Drew, on your first question, you know, as we, and as we've kind of always said, you know, there's a mix of businesses as we look going forward. And, you know, the goal would be to, you know, what we want to look to get to is roughly that 2019 level. But, You know, as we look and we move forward is, you know, certain elements of the business, you know, as we incrementally add LBE locations, you know, that helps the overall EBITDA margin. You know, as the digital signage business grows, that helps EBITDA margin. And so it's how the mix of certain of those businesses and P1AG and the growth of P1AG, it adds cash flow, but it's slightly lower than average P1AG. you know, than our overall, or even of our margin business. So as the various businesses kind of grow over time, is that EBITDA margin, you know, shifts, but I think as what was said is we want to get back to that 2019 level.

And then on your question regarding film costs, They have been lower because, you know, through some quarters we were playing up older products and lower film costs. And then also when the movies were available on streaming, we were discussing with our studio partners and, you know, getting to better positioning. And in the long run, you know, it's all about how well the movies do and what the results are. And that will impact, you know, where the film costs go. and also where the windows are as we move forward. So there are a number of variables, you know, before we can pin down the final percentages.

Okay. Thanks very much, and great to see the reopening.

Thank you. Thanks, Drew.

Ladies and gentlemen, this concludes today's question and answer session. At this time, I would like to turn the call back to Mr. Ellis Tickle. for any additional closing remarks.

Thank you. Thanks again for joining the call this morning. As you heard today, we hit the ground running as our entire circuit reopened last month, and we were able to deliver the first-class experience that our guests have missed for so long. We launched an innovative subscription model with CineClub that will help drive regular moviegoing and make the experience even more accessible and affordable for our guests. Above all this, as with every turn through the pandemic, we adapted with great agility and resilience, managed our costs, and added the liquidity we needed to see us through. I am confident in Cineplex and the industry's ability to recover and look forward to providing our guests with an exceptional experience that they can only get in one of our theaters or entertainment venues. I look forward to speaking with you all again for our third quarter conference call in the fall. Until then, please enjoy the rest of your summer and our movie theaters. And be well.

Thank you very much to our speakers today. Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation. You may now disconnect.