Cineplex Inc.

day and thank you for standing by welcome to cineplex's fourth quarter and year-end 2021 earnings call if you would like to ask a question at the end of the presentation please press star followed by one on your telephone keypad i would now like to hand the conference over to your speaker today massa rajali executive director corporate development and investor relations thank you please go ahead 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 over the call 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 information currently available. Actual results could differ materially from those expressed in the forward-looking statement. 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 customer question and answer period. I will now turn the call over to Ellis Jacobs.

Thank you, Massa. Good morning and welcome to our Q4 and year-end 2021 conference call. We are glad you could join us today. As I address the quarterly results, I am pleased to say that Cineplex and the exhibition industry continues to make significant progress in recovering from the effects of the pandemic. Since reopening in the summer of 2021, releases like Chang-Chi and The Legend of the Ten Rings No Time to Die and Dune exceeded industry expectations. The highly anticipated release of Spider- No Way Home was a huge success. The film generated over $1 billion of global box office within two weeks of its release and has grossed $750 million domestically to date. While government mandated restrictions and closures in December prevented us from fully capitalizing on this demand, There is no question that Cineplex is poised for a strong recovery and our box office performance will mirror other jurisdictions once our theaters resume operations at full capacity. While 2022 started off with some challenges, the fact remains that the year ahead is bright. The recent mandated closures were temporary and we are delighted to see that all of our theaters and entertainment venues are now open nationwide although capacity and other restrictions remain in certain provinces. Despite mandated restrictions, in Q4 2021, we delivered our strongest quarter in two years and made significant strides towards profitability and cash flow generation. What's really impressive is that these results were achieved even though operating restrictions were imposed on us during our busiest box office periods. This momentum is highly encouraging, and with the recent closures now behind us and restrictions continuing to ease, we are thrilled about the year ahead and our path towards recovery. With Gord speaking to our financial results shortly, I want to focus my remarks on three main areas. First, the positive momentum seen when our venues are open. Secondly, our proactive efforts to reinstate financial stability and advance growth initiatives. And lastly, to reaffirm our solid position for a promising recovery across all of our businesses. To speak to my first point, although most of our venues were closed for the first half of 2021, once we were able to reopen from mid-July to early December of last year, we saw momentum in all of our lines of business. Changchi and the Legend of the Ten Rings established an all-time record for a Labor Day release in September. No Time to Die brought out an audience that mirrored the demographic makeup of our 2019 base by bringing back in our adults. Since reopening in July, our box office numbers were progressively approaching pre-pandemic levels, with October reaching 80% of the same month in 2019. These results had us excited about December, which included the highly anticipated releases of Spider- No Way Home, The Matrix, Resurrections, and Singto. However, as we all know, during December, provincially mandated capacity restrictions and closures were reinstated in certain provinces. And for the first time ever, the operating restrictions also included a ban on concession sales in some provinces, including our largest market, Ontario. These constraints were intensified as Omicron numbers increased and ultimately culminated in closures of our theaters and LBE locations in certain markets from mid-December to early February 2022. The timing of the operating restrictions was extremely unfortunate. To provide some background, the last two weeks of December account for a material portion of our business, typically delivering around 30% of our Q4 box office. These restrictions prevented us from realizing the full benefits of Spider-Man No Way Home, which had the second biggest domestic opening weekend of all time and the biggest December opening ever. We know from our own box office results prior to the recent closures, as well as box office results from our peers in the United States, that guests want to be back in our theaters. In spite of these restrictions, we still delivered strong revenue growth, welcoming 10.2 million guests to our theaters during the fourth quarter. We also achieved an all-time quarterly record PPP of $12.29. And while the CPP work for Q4 2021 was significantly impacted by restrictions on concession sales, we still set an all-time annual record CPP of $7.93. In addition to the exhibition business, our other businesses also contributed positively to our overall results. We significantly improved our net loss during the quarter to 21.8 million from 230 million in Q4 2020. and improved our adjusted EBITDA to 20.2 million from an adjusted EBITDA loss of 65.9 million in Q4 2020. Through a combination of attendance growth and working capital management, we generated positive net cash from operating activities of 27.5 million in the fourth quarter compared to negative 61 million in Q4 2020. We were also pleased to see a positive average monthly net cash contribution from the first quarter since the pandemic began. I would now like to talk about our proactive efforts to reinstate financial stability and advance growth initiatives in the past year. While we hope to avoid further operating restrictions, we were prepared for and anticipated possible challenges arising from a new variant. We had contingency plans in place well before the first case of the new variant was recorded in Canada. With the onset of Omicron, we took proactive steps to reinstate financial stability. Board will provide a more fulsome financial update in a moment, but some of the actions taken include a continued focus on minimizing cash burn, cost management across all business lines, and adding liquidity, which included government subsidies where possible. Moreover, we worked with our supportive lenders and obtained the continued suspension of financial covenant testing until the second quarter of 2022. This continued support speaks volumes about our lenders' confidence in our business plan and our expected recovery. We have taken significant measures to manage the financial uncertainties created by COVID-19 and believe in the strength of our industry as the pandemic gets under control and we see a return to normalcy. Looking back on the quarter, we achieved encouraging results which would not have been possible without the dedication of our amazing employees across the Cineplex ecosystem. With all our theaters and entertainment venues now open nationwide and restrictions easing in many provinces, we are turning yet another corner on the road to recovery and anticipate further upward trajectory in the months to come. Over the course of the pandemic, we continue to advance our growth initiatives and during the fourth quarter, we announced the launch of ScenePlus, This enhanced rewards program brings together two of Canada's favorite loyalty programs, Scene and Scotia Rewards. ScenePlus members will still enjoy the much-loved features and rewards from movies, entertainment, and dining, while also adding the option of earning and redeeming points for travel, shopping, and banking. This strategic alignment creates huge opportunities for the future of the ScenePlus program and enables our team to reach and entertain even more guests and movie lovers than ever before. In addition, during the summer of 2021, we launched our entertainment subscription program, CineClub, which provides members with benefits in our theaters, location-based entertainment venues, and the Cineplex store. So far, CineClub has received a positive response from our guests despite restrictions and closures. We have always strived to provide our guests an exceptional entertainment experience at great value while driving attendance and increasing movie-going frequency, and CineClub does just that. We have also worked hard to engage with our guests and provide offerings through our digital movie platform, the Cineplex Store, and food delivery through Skip the Dishes and UberEat. The Cineplex store, which differentiates us from our peers, benefited from a number of PVOD releases during the year, offering guests the chance to view content directly in their homes. This was especially important during the closure periods as it enabled us to engage with our guests at a time when their out-of-home entertainment options were limited. We are also exploring alternative content offerings including the expansion of our distribution business for select feature films in Canada. Branded Cineplex Pictures, we see significant growth opportunities where we can leverage Cineplex assets and database to promote and find new audiences. This is in addition to our ongoing efforts to increase and diversify content through international titles where we are experiencing tremendous success In fact, three of the top 10 highest-grossing Punjabi films in Cineplex history were released in 2021, which indicates significant post-pandemic growth and opportunity for Cineplex going forward. Last year, we opened three new VIP locations, including our 25th VIP cinema in Calgary, which opened its doors in November. We also opened one Palladium location in Nova Scotia and two new locations of the Rec Room in British Columbia and Ontario in 2021. With these additions, we now have location-based entertainment venues open coast to coast and can offer our guests even more options when it comes to spending their leisure time with us. Lastly, I want to discuss and reaffirm our solid position for a promising recovery across all of our businesses, including the encouraging results from our non-exhibition business units. During the fourth quarter, P1 AG's adjusted EBITDA increased by 27% to $4 million compared to pre-pandemic Q4 2019, mainly driven by customer shifts and cost management. Our location-based entertainment business continues to perform well with an adjusted store-level EBITDA of $4.6 million in Q4 2021 compared to a loss of $2.8 million in the prior year. Going forward, we expect to reap benefits from the new locations that were built over the last two years. Cineplex Media is also showing encouraging signs of ramping up as client confidence returns and companies build out their advertising budgets for 2022. Our team at Cineplus Digital Media continues to be busy with the rollout of new products and services which optimize digital signage to expand offerings for our clients and unlock value from data and experience design services. As we look forward, we believe we can generate high margin opportunities from these initiatives. Looking ahead, it is clear the global film industry is poised for a big return as restrictions are lifted and content supply remains strong. Our studio partners are gravitating towards an exclusive theatrical window for blockbuster titles, and there's a general acknowledgement in the industry about the importance of the big screen in a film's success. Theatrical exhibition has and always will play a significant role in elevating content to realize its maximum potential from box office revenues to associated downstream revenues including merchandising sales and the promotion of studio streaming platforms. With that said, we are particularly encouraged by this year's film slate which is very promising and includes the following anticipated titles just to name a few. For the remainder of Q1 2022, we have Dead of the Nile and Marry Me releasing today ahead of Valentine's Day, Unchartered later this month, and the highly anticipated release of The Batman in early March. And for the remainder of the year, we have Mobius, Sonic the Hedgehog 2, Fantastic Beasts, Doctor Strange in the Multiverse of Madness, Top Gun Maverick, Jurassic World Dominion, Minions, The Rise of Gru, Spider-Man Into the Spider-Verse 2, Black Panther, Wakanda Forever, Avatar 2, and Aquaman and the Lost Kingdom. We believe that after experimentation with various release strategies over the past year and a half, this extensive list of titles reaffirms the commitment of studios to an exclusive theatrical release window. Finally, before I pass things to court, I want to provide a brief update on the ongoing litigation with Cineworld. As many of you heard, the Ontario Supreme Court of Justice issued a judgment for $1.24 billion in favor of Cineplex. While Cineworld has filed their notice of intent to appeal, we remain confident in the court's decision. We will continue pursuing compensation for what we believe to have been a wrongful repudiation of the agreement between Cineplex and Cineworld. The bottom line is that Cineplex has an exciting year and future ahead. We have applied financial discipline, liquidity initiatives, and cost control measures throughout the pandemic and are confident in our financial position to withstand any further pressures in the near term. We have implemented operating efficiencies and laid the groundwork for recovery. And we have done all of this while staying committed to the health and safety of our employees and guests. Our team has proven that we can safely operate during the pandemic, and we are thrilled to welcome guests back to our venues once again. Moving going is here to stay, and Cineplex's future is strong. With that, I will turn things over to Gord.