Cineplex Inc.

Hello everyone and welcome to the Cineplex Inc fourth quarter 2022 earnings conference call. We will begin shortly. If you would like to register a question, please press star followed by one on your telephone keypad. Please kindly only ask two questions to allow others the chance. Thank you for your patience. Hello, everyone, and welcome to the Cineplex Inc. Fourth Quarter 2022 Earnings Conference Call. My name is Daisy, and I'll be your moderator for today. If you would like to register a question, please press star followed by one on your telephone keypad. Please kindly only ask two questions to allow others the chance. I would now like to hand over to your host, Masa Rajali, Executive Director of Corporate Development Investor Relations, to begin. So, Masa, please go ahead.

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 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 the information currently available. Actual results could differ materially from those expressed in the forward-looking statements. Factors that could result 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 question and answer period. I will now turn the call over to Ellis Jacobs.

Thank you, Masa. Good morning and welcome to our Q4 and year-end 2022 conference call. We are glad you could join us today. Before we review the fourth quarter results, I'd like to address two important topics that I know are top of mind with our investors, namely the industry box office recovery and Cineplex's strategies for continuing growth in the current economic environment. In assessing the future state of box office recovery, there are two primary drivers we are monitoring closely. First is consumer demand, and the second is content supply. We have been pleased to see demand for moviegoing increase since our theaters reopened. Looking back over the last year, there are many examples that stand out which demonstrate the resilience of moviegoing. In May of last year, Doctor Strange in the Multiverse of Madness delivered 75% more domestic box office revenue than the original release in 2016. Also in May, we saw Top Gun Maverick become the fifth highest domestic grossing film of all time after a remarkable 30-week run. Last July, Minion The Rise of Gru set a record for largest 4th of July weekend in box office history And a few months later, Black Panther Wakanda Forever broke the record for highest grossing November weekend of all time. And while negatively impacted by winter storms in North America during its opening weekend in December, Avatar the Way of Water has since demonstrated its staying power. Avatar is now the fourth highest grossing film of all time, crossing the $2 billion mark in global box office and still going strong and attracting audiences as we speak. These record-breaking results, and others like them over the past year, demonstrate a point you hear me say on each and every one of these calls. When there's compelling content, consumer enthusiasm for theatrical moviegoing is as strong as ever. Even more promising is that we continue to see significant growth in attendance for premium offerings, even in the midst of recessionary concerns. This quarter, we delivered an all-time quarterly BPP of $13.06, an increase of 6.3% over the prior year, and a CPP of $8.93, an increase of 19.2% compared to Q4 2021. These results are further validation than when guests enter our theaters, they treat themselves the full escape our venues offer. Investments and premium experiences in our theaters continue to deliver returns, as an impressive 50% of box office revenue in the fourth quarter was derived from premium formats. Not only is this a record for us, but it's also the highest percentage for any exhibitor in North America. Avatar, The Way of Water is breaking records when it comes to premium experiences, accounting for Cineplex's highest 40X, ScreenX, and VIP cinemas viewings in our history. Having said that, like our exhibition peers around the world, our business continues to be impacted by COVID-19-related production delays. Content supply remains a near-term industry challenge. For example, both Aquaman and the Lost Kingdom and Shazam! Fury of the Gods were originally slated for the fourth quarter of 2022, but were moved into 2023. Such shifts and delays resulted in the overall volume of major releases in fourth quarter 2022 recovering to approximately 70% of the fourth quarter of 2019. These shifts also led to a few number of wide release titles in this quarter as compared to the fourth quarter of 2021, leading to lower year-over-year attendance. As we move forward, however, we have full confidence in the ongoing recovery of content supply as COVID-19 related production delays subside. Studios are clearly recognizing the promotional and financial value of a theatrical release window. We are still the engine that drives the train, and we are encouraged by recent large commitments from non-traditional studios. These commitments further validate the importance of the cinematic experience and the role theatrical exhibition plays in elevating content to its full financial potential. The remarkable performance of the horror film Smile proves exactly this point. Smile was originally slated for direct streaming, but instead was given an exclusive theatrical release. After nine weeks on the big screen, the film generated over $200 million at the global box office. As I referenced on our Q3 earnings call, last October we reached an agreement with Netflix for the theatrical release of Glass Onion, a Knives Out Mystery. The film performed extremely well and generated an estimated $15 million at domestic box office over a seven-day period in fewer than 700 theaters, including ours. And just last week, Amazon announced the exclusive theatrical window for the release of the Ben Affleck and Matt Damon Nike film, Air. These examples and others like them continue to highlight the power of theatrical exhibition in elevating the overall success of movie content. In addition to non-traditional studios, we are also broadening our content opportunities by expanding our distribution business, Cineplex Pictures. Last month, we announced a Canadian theatrical distribution agreement with Lionsgate for its 2023 film slate, which will bring 11 titles to the big screen and create additional distribution fees for Cineplex Pictures. We are excited to bring these titles to Canadian audiences, which include exciting titles Like John Wick Chapter 4, Are You There, God? It's Me, Margaret, and Hunger Games, The Ballad of Songbirds and Snakes. This is in addition to the ongoing successful efforts we are seeing with alternative programming through Cineplex events, as well as the growing importance of international film product to our business. Without a doubt, Cineplex is an industry leader in international cinema programming, consistently over-indexing the North American market share, particularly with Bollywood product. Bataan, the recent Bollywood feature in January of this year, generated the highest ever opening weekend for a Bollywood title in North America, and even outperformed Hollywood's avatar, The Way of Water, then in its sixth week. Cineplex again took the number one position in North America with 27% of the market share for this film, and we continued to gross more than three times the domestic average in our circuit. We also saw great success with the film The Wandering Earth 2, which is now Cineplex's number one opening for a Mandarin language film. And of course, we were pleased to see RRR make Bollywood history as the first Indian feature film to be nominated for an Oscar outside of the international film category. The bottom line is that we are focused on expanding our content offerings to appeal to wider audiences and drive incremental attendance. While this doesn't fully close the content gap resulting from production delays, it gets us closer. This is particularly evident that Cineplex outperformed the fourth quarter North American box office recovery compared to 2019 levels by a notable 533 basis points. These results also benefited from our team's efforts to drive attendance through strategic marketing and loyalty initiatives. We will continue tapping into our rich customer data for personalized content engagement and targeted ScenePlus offers. This allows us to introduce moviegoers to alternative content, upselling campaigns to our premium experiences, and do everything we can to ensure our guests always have a memorable escape when they're in our venues. Speaking of venues, this quarter we celebrated the grand opening of our first Cineplex Junction location. This is a new concept for us that features multiple entertainment options, including movies, gaming, live events, and expanded food and beverage offerings, all under one roof. Our first location, Cineplex Junction Caldonen, opened to much fanfare in December in Winnipeg, Manitoba, sorry, replacing an older theater. Junction provides additional revenue per square foot by driving incremental attendance and spend from the expanded offerings. While it is still early days, Cineplex Junction Kildonan is performing extremely well with metrics exceeding our internal projections, which is welcome news as we work towards opening our second location in mid-2023. Our first junction location is a great example of asset optimization, a key focus for us in the current exhibition landscape. In addition to novel concepts like junction, we are also exploring other ways to optimize the results from our exhibition footprint. We continue to advance our data analytics capabilities to increase operating efficiencies, improve film bookings, and enhance our marketing efforts. Overall, we remain disciplined and focused on maximizing the use of our square footage and resources, driving attendance, and effectively managing costs. Turning your attention to our fourth quarter results, despite the 10.1% year-over-year attendance decline, our revenue grew 16.7% to $350 million and adjusted EBITDA increased 54.5% to $31.2 million. Looking at our segmented results, while exhibition performance was impacted by the content supply challenges that I spoke to earlier, Our diversified businesses delivered very strong fourth quarter results and continue being an important pillar in our growth. We are particularly pleased with our amusement and leisure segment, which continues to outperform pre-pandemic results on both revenue and bottom line metrics. During the fourth quarter, LBE same-store sales reached 2019 levels and P1AG same-store root revenue exceeded 2019 levels. In addition to strong top-line demand, B1AG and LV's record quarterly EBITDA results showcase our team's ability to effectively manage costs. On the media side, we remain encouraged by strong signs of recovery for Cineplex Media and Cineplex Digital Media, both showing significant improvement in overall revenues for the quarter. With further content supply and mall traffic recovery underway, we expect further momentum in these divisions moving forward. Overall, we are pleased with our fourth quarter results, which we believe illustrate the effectiveness of our strategies to manage the current fluid environment. Gord will speak to the numbers in more detail shortly, but before I pass things to him, I want to address the ongoing litigation with Cinnabon. As you know, Cineworld remains under Chapter 11 bankruptcy, and we continue to work closely with our advisors to consider any value optimization opportunities. I have no further comment, but this remains an important priority for us. With that, I will turn things over to Gord.