Cineplex Inc.

Good day and welcome to the Cineplex Inc. Third Quarter 2021 Analyst Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Masa Rajali, Executive Director of Corporate Development and Investor Relations. Please go ahead, ma'am.

Good morning and welcome. 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. Following today's remarks, we will close the call with our customary questions and answer period. I will now turn the call over to Ellis Jacob.

Thank you, Martha, and good morning, everyone. We hope you and your families remain healthy and well. We appreciate you joining us today, an important day of Remembrance Day. So I would like to take a moment to honor the brave Canadians who have served and continue to serve our country in times of conflict and peace. We acknowledge those individuals and their families who have given up so much in the name of our country. Thank you and let us not forget. As I address the quarterly results, I am pleased to say that our business has turned a corner. The global box office is back and domestic openings like Changchi and The Legend of the Ten Rings, Venom, Let There Be Carnage, No Time to Die, Dune and The Eternals are exceeding expectations and in some cases even over-indexing in Canada as was the case with Changchi, No Time to Die and Dune. Our business and the industry are recovering thanks to the millions of Canadians who have clearly missed the sense of escape that only this theatrical experience can provide. For the first time since the pandemic began, we are reporting positive adjusted EBITDA of $10.8 million for the quarter, as well as positive quarterly adjusted EBITDA across all our business segments. This is a huge milestone for our team and our business. one that comes from 18 months of hard work and unwavering determination to get us through one of the toughest times in our history since the pandemic began in March 2020. With Gord speaking to our financial results shortly, I want to focus my remarks on three things. Our full reopenings and continued momentum towards profitability. Our efforts to encourage habitual moviegoing and get guests back to our theatres. And finally, I want to reaffirm our solid position for a strong recovery. Our entire circuit of theaters and entertainment venues nationwide will finally reopen early in the quarter, and we are seeing encouraging results in attendance as well as growth from all our other businesses, including P1AG, Cineplex Digital Media, and Cineplex Media. As we have done throughout the pandemic, we maintained our prudent approach to cost management and reduced our average monthly net cash burn to $2.9 million during the quarter, down from $24 million in Q2 2021. This is a significant achievement, and I would like to thank our incredible employees across the US and Canada for their perseverance, sacrifice, hard work, and best-in-class execution in carrying the company through this recovery. We truly could not have reached this day and be confidently welcoming our guests back without such a committed team. When we look at the results coming out of the quarter, it's clear movies are back and so was Cineplex. Since reopening our entire circuit on July 17th, we have welcomed over 12 million guests to our theaters. We are starting to see box office numbers progressively increase and approach pre-pandemic levels. For example, when compared to pre-pandemic months in 2019 to 2021, July box office reached 38% with only a partial month of openings. August was 62%, September was 67%, and the growth continued into October with box office revenue reaching 80% of the same month in 2019. Then this past weekend was our highest box office since the pandemic started, even exceeding the same weekend in 2019. During the third quarter, we also saw BPP and CPP reach all-time highs at $11.38 and $8.58, respectively. The combination of pent-up consumer demand and guests indulgent in our concession offerings and premium formats were the key drivers of these exceptional results. Looking at our other businesses, P1 AG delivered record quarterly adjusted EBITDA driven by continued strength in the reopening of US root locations, strong growth in Canada from reopening and a focus on cost management. We are also seeing an encouraging ramp up within Cineplex Media as client confidence returns and companies build out their advertising budgets for the fourth quarter and into 2022. The pipeline is strong and we are seeing an increasing momentum as clients return to cinema media as a key component of their campaigns. Our team at Cineplex Digital Media has also been busy rolling out FlexSmart Engine, a data-driven machine learning software platform that optimizes digital signage to deliver the right content to the right audience at the right time. As we look forward, we believe we can generate high margin opportunities with this new platform. This was an important quarter for us. Our entire circuit of theatres and entertainment venues are open and we are seeing promising growth from our other businesses too as we continue momentum towards profitability. Combined with insights from our consumer surveys and recent trends, we know that Canadians have missed those shared social experiences and are excited to be back. Which is why, now more than ever, we are providing every single guest that comes into our venues with a great entertainment experience. We are taking proactive steps to increase visitation and attendance in our theatres and entertainment venues through innovative offerings, marketing campaigns, and new programs. In support of this strategy, during the quarter we introduced our entertainment subscription program, CineClub. 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 a discounted CineClub price. 20% off concession items and a variety of other benefits including discounts on purchases at the Cineplex store and on amusement gaming at our entertainment venues nationwide. We designed CineClub to appeal to a wide array of guests and entice them to enjoy 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 across the Cineplex people system. So far, the program has received an overwhelming positive response from our guests and has exceeded our expectations and internal benchmarks as membership continues to grow. In September, we launched our new brand platform and tagline, Where Escape Begins. At its core, the campaign strategy is centered around reminding Canadians about the magic of cinema, the escape a movie theater provides, and to celebrate the unrivaled experience of the cineplex big screen. It welcomes Canadians back to the theater experience and reminds them about what they've been missing for so long, the immersive cinematic escape and, of course, our famous popcorn tube. Also, during the quarter, we opened our first location of the Rec Room in British Columbia and first standalone VIP cinemas in Western Canada, both located at the amazing Brentwood Centre in Burnaby, British Columbia. Later in the quarter, we also opened a location of the Rec Room in Barrie, Ontario at Park Place, which was our 10th Rec Room location to open across Canada. All locations opened extremely well, especially the Rec Room Brentwood, which had one of our strongest location-based entertainment openings ever and remains the top-performing LBE site today. Overall, our LBE venues continue to perform well this quarter, even with capacity restrictions in some provinces. This was especially evident in Alberta, where capacity restrictions were lifted for the quarter and our LBE locations performed at almost 90% of their 2019 levels. With our location-based entertainment venues now open coast-to-coast, we offer our guests even more options when it comes to spending their leisure time with us. Later this month and subsequent to quarter-end, we will celebrate another important milestone for our company. We are opening our 25th VIP cinema location in Canada with Cineplex VIP Cinemas University District in Calgary. Not only is this the province's first standalone VIP cinemas, it's also the next evolution of our VIP concept, offering new amenities. These include newly designed heated recliners with adjustable power headrests and VIP chaise lounges that turn the front row in our auditorium into the best seats in the house. These are just some of the ways we are enticing guests back to our theaters and ensuring they enjoy an exceptional experience, one they cannot replicate at home. Of course, we will continue to closely monitor the fourth wave of the pandemic around the world and in Canada. However, the recent removal of capacity restrictions across the majority of provinces has been welcome news to the Cineplex team and movie lovers across the country. We are now open at full capacity at close to 90% of our circuit. While capacity restrictions have changed, our commitment to the health and safety of our employees and guests remain the same. It's our top priority. We have and will continue to follow all guidelines set forth by all levels of government, including proof of vaccination requirements. Our field teams are doing a superb job with limited issues or concerns. I'd like to thank them for their flexibility and hard work as we implement these new protocols, sometimes with only a few hours' notice. One thing is for sure, our team 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 with one thing they can't get at home, an immersive shared entertainment experience. Looking ahead, we are encouraged by the continued easing of restrictions and the availability of new film products, including blockbuster titles. We are also seeing tremendous success with our international titles. Three of the top ten highest-grossing Punjabi films in Cineplex history were released in 2021, which indicates significant post-pandemic growth. the third quarter are top five grossing films with Chang-Chi and The Legend of the Ten Rings, Black Widow, Jungle Cruise, Free Guy, and F9. Chang-Chi over-indexed in Canada and set an all-time record for the biggest Labor Day weekend box office in North America. October box office numbers were even more encouraging with films like Venom, Let There Be Carnage, No Time to Die, Halloween Kills, Dune, and The Eternals. all drawing guests back to the theater. In fact, the opening weekend of Dune generated box office revenue that surpassed 2019 numbers for the same weekend. It is clear the global film industry is poised for a big return as restrictions continue to ease and content supply is strong. For the remainder of the fourth quarter, there are a variety of films for all audiences coming from multiple studios. Just to name a few, we have Ghostbusters Afterlife, House of Gucci, West Side Story, Spider-Man No Way Home, The Matrix, Resurrections, and Sing 2. Then, we have what is expected to be one of the strongest film slates awaiting movie lovers in 2022, with films like Mobius, The Batman, Sonic the Hedgehog 2, Doctor Strange in the Multiverse of Madness, Top Gun Maverick, Jurassic World Dominion, Minions, The Rise of Gru, Mission Impossible 7, Spider-Man Into the Spider-Verse 2, Black Panther, Avatar 2, Aquaman, and The Lost Kingdom. All of this is extremely encouraging, and with the healthy movie-going behavior we have witnessed since reopening, we know we are moving in the right direction as an industry on the road to recovery. Before I turn things over to court, I would like to provide a brief update on the Cineworld litigation. As you may have heard, the trial has now concluded with the closing arguments having finished last week. We feel confident in the integrity of the process that unfolded before the Ontario Superior Court and anticipate a judgment in several months. Looking ahead, as always, we are preparing for the unknown, especially as we enter the winter months. We are closely monitoring COVID infection rates and are ready to adapt as we continue navigating the pandemic while positioning our company for ongoing success. The bottom line is that Canadians want to reconnect and recharge with family and friends. And that's exactly what our theaters and entertainment venues offer. Our business is in recovery mode and as we look towards our future, We are confident in our efforts to control costs and solidify our financial position. We are confident in our plans to increase visitation and welcome guests back. And we are confident in the industry's ability to come back. With that, I will turn things over to Gord. Thank you.