Cineplex Inc.

Hello, everyone, and welcome to the Cineplex Inc. Third Quarter 2023 Earnings Conference Call. My name is Daisy, and I'll be coordinating your call today. If you would like to ask a question, please press star four by one on your telephone keypad. I would now like to hand over to your host, Master Vijayali, Vice President of Corporate Development and Investor Relations, to begin, so please go ahead.

Good morning, everyone. I would like to welcome you to Cineplex's third quarter 2023 earnings release conference call hosted by Ellis Jacob, President and Chief Executive Officer, and Gord Nelson, Chief Financial Officer. Before we begin, let me remind you that certain statements being made are forward-looking and subject to various risks and uncertainties. Fresh forward-looking statements are based on management's beliefs and assumptions regarding the information currently available. Actual results may differ materially from those expressed in the forward-looking statement. Information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and management's discussion analysis. 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, Matza. Good morning and welcome to Q3 2023 conference call. It is a pleasure to be with you today to provide details on our best quarter in Cineplex history. Before I get started, I wanted to take the opportunity to share the exciting news that the actors have now joined the writers in reaching an agreement to end the strike. On behalf of exhibitors and the millions of moviegoers, thank you. Let's continue doing what we do best. bearing beautiful performances with exceptional experiences best enjoyed in our theaters. Now back to our best quarter in Cineplex history. We achieved the highest EBITDAO ever, even surpassing pre-pandemic levels, and we are extremely proud to see our thoughtful strategies deliver such strong results. Our adjusted EBITDAO margin of 18% was significantly higher than the third quarter of 2019, demonstrating the power of the operational improvements we implemented over the past couple of years. Over the past two quarters, free cash flow generation has enabled us to repay $55 million in bank debt as part of our focus on deleveraging the balance sheet and strengthening our capital base. Our outstanding third quarter results can be attributed to our record-breaking box office but just as importantly, the success of our diversification strategy. We achieved third quarter record box office revenue of $188 million, which represents 106% of 2019 levels. Impressively, our third quarter results outperformed North American market share by 310 basis points. By driving guests to premium experiences, our PPP reached a third quarter record of $12, and through expanded concession offerings, CPP achieved $8.44. These results clearly indicate the multiplying effect of the sustained enthusiasm for our premium theatrical experience and our enhanced food and beverage offerings, paired with our unique ability to offer guests diverse content personalized experiences, and a variety of entertainment options across our venues. Looking at our theatrical business, we have seen consumer demand for premium experiences and compelling content continue to hold strong. July was our highest box office month ever, with Barbie generating the highest July attendance at Cineplex theaters nationwide, Oppenheimer and Mission Impossible, Dead Wrestling Part One followed in second and third places respectively with strong performances. The Oppenheimer phenomena generated 2.5 billion in global box office revenue since their respective releases. We capitalized on this demand by using rich consumer data to personalize outreach and bring guests into more premium experiences And this resulted in 35% of third quarter box office revenue coming from our premium margin accretive experiences like VIP, Ultra AVX, and IMAX. Launching new concepts like Cineplex Junction enhances the guest experience drawn strong per patron spent across box office, food, beverage, and gaming with the aim of maximizing guest revenue per square foot. There's been excellent progress made on film release volume over the last two quarters, and we continue to work closely with our studio partners. Now with both the writers and actress strike behind us, any slight movement of content will not have a material impact. We're excited about the diverse film slate for Q4, and there's something for everyone in the coming months. Action and adventure abound with the marvels, Aquaman and the Lost Kingdom, and acclaimed director Ridley Scott's Napoleon. Ferrari, described as a gripping and masterful drama with a star-studded cast, tells the story of legendary sports car magnate Enzo Ferrari during three critical months in 1957. Much anticipated family features are also coming to our theaters, including Migration, Trolls Band Together, Disney's Wish, and Warner Brothers' Wonka, the original story of Charlie and the Chocolate Factory starring Timothée Chalamet. Non-traditional studios like Amazon and Apple are also building on their commitment to theatrical releases. As mentioned previously, streamers are expressing intentions to scale theatrical film production over the next few years, bringing a wave of new content to our theaters. Apple had another big theatrical film release in October with Martin Scorsese's Killer of the Flower Moon. Over the past several years, we've been ahead of our peers, driving demand for alternative content not tied to Hollywood studios. Remaining focused on our content broadening strategy helped us to navigate supply shifts. Our international content is making a meaningful contribution to our overall box office performance. In fact, four of the top 20 films in the third quarter were international titles. Films like Jawan and Carry On Jata 3 outperformed North American market share by 28% and 77% respectively. Through our relationships with international content suppliers and our ability to understand consumer preferences, we have attracted new audiences and have a proven ability to outperform the North American industry on these titles. We've got an incredible lineup of international films coming in in our fourth quarter, including four indie films, Tiger 3, Animal, Dunkey, and Salar Part 1, Ceasefire. Furthermore, non-traditional content like concerts, opera, stage performances, and sporting events continue to grow in popularity and are performing well at the box office. October brought the record-breaking concert film Taylor Swift, The Heiress Tour, which generated over $165 million in box office revenue at the domestic level and fast on its heels. Next month is Renaissance, a film by Beyonce. Fans are reimagining their local theater, transforming it into a venue where they can be front and center with their favorite artists. soaking in the concert experience with ultra-premium sound and singing and dancing along with their friends. Finally, through our distribution business, Cineplex Pictures, we are sourcing feature film content from all over the world, including homegrown Canadian content like the light-hearted drama The Queen of My Dreams, Japanese animated film The Boy and the Heron, And as part of our distribution partnership with Lionsgate, the much-anticipated Hunger Games, the Ballad of Songbirds and Snakes. Moving on to our diversified businesses, our location-based entertainment business had a strong performance in Q3, generating record third-quarter revenues of $34.2 million. LBE continues to be a growth opportunity for us as we have two new LBE locations opening in the second half of next year and more to come. Our amusement solutions business, P1AG, generated record third quarter revenues of $49 million and an increase of 7.7% compared to prior years. On the media side, both Cineplex Media and Cineplex Digital Media perform well despite the challenging macroeconomic environment. While there are some economic headwinds in the advertising sector, cinema media continues to outperform other traditional advertising mediums. They both had a strong third quarter and are displaying significant momentum as we head into a traditionally strong fourth quarter. The Cineplex digital media team is focused on new client growth to significantly expand its digital out-of-home network. As we keep consumer needs at the forefront, we are excited to announce the launch of our new Cineplex app, creating a more seamless guest experience, greater personalization, and improved visibility of other Cineplex businesses like the Rec Room and the Cineplex Store. We are also excited to announce the launch of mobile food ordering. While mobile ordering has been available in our VIP theaters for several years, we are expanding it across the entire circuit with a rollout by region over the next few months. This new functionality improves and enhances the guest experience and provides upsell and cross-sell opportunities throughout the guest journey. The ScenePlus program is another example of what sets us apart from our peers. With over 17 years of data, we are able to drive profitable guest engagement across the Cineplex ecosystem. The program has grown significantly over the past year and ScenePlus now boasts over 14 million members. The addition of Empire with their grocery banners and home hardware to the program is enabling us to identify and convert non-movie goers into Cineplex customers and bring them into our ecosystem. For our guests, this means broader and more attractive content and personalization, and as we think about our complete ecosystem, there's tremendous opportunity to further leverage this data across all our lines of business in the future. Before I wrap and turn the call over to Gord, I want to provide a brief update on the Competition Bureau's allegations regarding our online booking fee. We are currently conducting various preliminary steps necessary to have this heard by the Competition Tribunal during the first quarter of 2024. As I've said before, we strongly believe that we have complied with both the letter and spirit of the law. We believe the Competition Bureau's allegations are unfounded and we continue to seek an early determination of this matter. As we look forward, we are extremely proud of the momentum coming out of our record-breaking quarter, reinforcing that our strategic initiatives are driving results. The strength of the third quarter film lineup, paired with the strong results of the company's diversified businesses, saw Cineplex achieving the highest quarterly EBITDA in our history. This remarkable quarter proves we have the ability to capture more value even though attendance levels were at 90% of 2019. We are also focused on deleveraging and using cash from operations to reduce debt levels. We remain confident in the strength of both our theatrical and diversified businesses. Our diversification strategy is one of the several compelling factors that will continue to differentiate Cineplex from our North American peers. Cineplex is an innovative exhibitor when it comes to guest experiences, from premium formats and enhanced gaming in our venues to new entertainment destinations like Junctions. Our content broadening strategy reinforces our leading market position in international cinema and alternative content. We are using our theaters for non-theatrical events to maximize our return on the real estate footprint we have across the country. The consumer data we collect is utilized across the CinePlus ecosystem to drive additional revenue and create efficiencies within our business operations. Overall, Cineplex is well-positioned to achieve great success and will build on these industry-leading results. I'd like to thank and congratulate our team for their tremendous work this past quarter. With that, I will turn things over to Boris.