Cineplex Inc.

Hello and welcome to the Cineplex Inc. Q4 2024 Earnings Conference Call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. I now hand it over to your host, Ryanne Asmat, Vice President, Investor Relations, Corporate Development, Financial Planning and Analysis. Please go ahead.

Good morning, everyone. I'd like to welcome you to Cineplex's fourth quarter 2024 earnings release conference call today, hosted by Alice Jacob, President and Chief Executive Officer, and Gordon Elton, Chief Financial Officer. Before we begin, let me introduce myself. I'm Rehan Azmat, Vice President, Investor Relations, Corp Development, and Financial Planning and Analysis at Cineplex. I'll 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 information currently available. Actual results may differ materially from those expressed in forward-looking statements. Information regarding factors that could cause results vary to be found in the company's most recently filed annual information form and management discussion and 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, Rehan. Good morning and welcome to our Q4 2024 conference call. Before we get started, I wanted to share that our thoughts are with our friends and colleagues in Los Angeles as they start to rebuild their communities following the tremendous loss due to the recent wildfires. As we look back on 2024 and our fourth quarter, I want to highlight some accomplishments across our businesses. Starting with exhibition, despite the box office having a slow start last year, it definitely closed on a high note. Overall, the 2024 film slate offered moviegoers a wide range of films to keep them coming back with sci-fi, animated family favorites, a Marvel Cinematic Universe R-rated action comedy, and a majestic film adaption of a successful Broadway musical. The first quarter started off with the much-anticipated and now Oscar-nominated Dune Part II. The film was one of Cineplex's top five movies of the year, and it was clear fans of the film wanted to enhance their movie-going experience with 64% of its box office at Cineplex generated from premium experiences. The summer kicked off with family films starting with Inside Out II in June, which captivated audiences around the world, becoming the highest grossing animated film of all time, surpassing a billion dollars in box office revenues in 19 days, the fastest animated film to do so. The movie also had remarkable staying power with eight consecutive weeks in the top five at the domestic box office. Despicable Me 4 followed closely behind in July, and became the second highest grossing film in the franchise, generating $360 million at the domestic box office and holding a spot in the top five titles of the domestic box office for seven consecutive weeks. The buzz-worthy Deadpool vs. Wolverine rolled onto screens in late July, becoming the highest grossing R-rated film of all time both domestically and globally, surpassing a billion dollars in worldwide box office revenue and staying for an astonishing nine consecutive weeks in the top five domestic box office. Wicked reinforced the power of the cinematic experience, bringing audiences together to enjoy the magical musical on the big screen. Stage-loving fans and newcomers to the story made this the top-grossing film worldwide based on a Broadway musical, Moana 2, originally intended for a streaming release on Disney+, showed the unreplaceable power of the theatrical box office as in delivering record-breaking results. It achieved the largest global opening of all time for an animated film. These record-breaking titles not only brought audiences of all ages to the theater, but also achieved strong multiple week over week, showing his power beyond the opening weekend. These are just some examples of the remarkable firms that captured audiences this year, many in premium formats, helping us achieve an annual box-per-person record of $13.09 and a concession-per-person record of $9.47. Looking specifically at the fourth quarter, the winning trio of Gladiator 2, Wicked, and Moana 2 helped deliver a record-breaking box per person of $13.26 and an all-time fourth quarter concession per person record of $9.41. The key initiatives helping us achieve these record-breaking results include our premium offerings, leveraging our robust data and the ongoing success of our international programming. Last year, we saw premium experiences capture almost 42% of total box office revenues for the year. In 2024, we added three new ScreenX auditoriums, one Ultra AVX screen, one new D-Box location, and four iMac screens. Nothing compares to watching a movie on the big screen with the best sound. The consumer demand for premium viewing options emphasizes the unique power of the cinematic experience. Premium experiences are a competitive advantage for Cineplex, and we will continue investing in premium offerings to generate both revenue and bottom line growth. We attracted audiences to their favorite films this past year by leveraging our robust data. The use of data to drive incremental attendance and increased spend will continue to be a key differentiator for Cineplex's future growth. We are using data models, predictive analytics, and marketing automation platforms to drive attendance through personalized campaigns. In addition, we are leveraging the over 15 million ScenePlus members to drive new visits and target lapsed customers. Over one-third of our ScenePlus guests in Q4 were either first-time visitors or lapsed customers who were coming back after a two-year or more absence. Leveraging the ScenePlus database and marketing channels will continue to be a strong acquisition opportunity. As a reminder, the adjusted EBITDA contribution for each incremental guest is approximately $14. Also contributing to box office success this year and in the quarter was the consistent strength of our international cinema. In 2024, international programming represented 10.2% of our total box office revenues compared to only 3.7% of the North American box office. We have developed detailed film-seeker models that analyze global content to identify which international content will most likely resonate with Canadians in the right markets. Using these models helped us to break three Cineplex records this past year. Jack and Juliet 3 became the highest-grossing Punjabi film in Cineplex history. Hello Love Again, the highest-grossing Filipino language film for us, and The Last Dance, the highest-grossing Cantonese language film in our history. We continue to be the destination of choice for international content amongst the diversified population across Canada. This is not only beneficial to our exhibition business, but a significant and unique opportunity for our media business which we are leveraging to attract new clients and drive incremental media revenue. South Asian Films led the international cinema box office in 2024, holding nine of the top ten international films at Cineplex. With the South Asian demographic being one of the fastest growing groups in Canada, we offer a unique advertising opportunity to transform audience engagement and create new opportunities for authentic brand connections. Paired with the strength of our international cinema, our first-party data can help advertisers reach South Asian moviegoers and extend cinema campaigns through digital channels. The ability to leverage both our extensive data and the strength of our international cinema will be a key opportunity for cinema media sales as we move forward. While the wide range of films brought guests into our theaters, we also had an incredibly busy fourth quarter, opening three new LBE locations across the country. The continued rollout of our Rec Room and Palladium locations plays an important role in delivering growth and shareholder value and strengthening our leading position as an entertainment destination for Canadians. The Rec Room Royal Mount opened in November. alongside a new five-screen premium cineplex theater, making it our first LBE location in Quebec and becoming a one-stop destination for entertainment. It's located in the Royal Mount District, Montreal's premium shopping, dining, and entertainment destination, set to become one of the leading retail developments in Canada. In December, the Rec Room Granville, a much anticipated location on Granville Street in downtown Vancouver, opened featuring 45,000 square feet of gaming, attractions, and dining. It has become a top entertainment destination in downtown Vancouver and one of our top performing locations since opening. We are especially excited about our new mini golf attraction area, The Palms, which is proving to be a huge draw for Menelios and corporate groups. Lastly, our fourth Palladium location opened in December, adjacent to a Cineplex theater at Fairview Mall in Toronto, attracting families from across the greater Toronto area. The box office strengthened as the year progressed and we saw our media business follow suit. achieving cinema media revenue per patron of $1.84, which represents a 10% increase over 2023. As our recent Lumen study proved, cinema advertising stands out as the ultimate attention leader with 100% of audiences viewing ads on the big screen and an average of 80% active attention across all demographics and outlets. With proven attention scores two to five times higher than linear and connected TV and up to nine times higher than digital video channels, our cinema media business will continue to grow and capitalize on the unparalleled impact cinema advertising offers. We are one of the few movie companies that own our cinema media business. As a result of new digital out-of-home clients in 2024, including Cadillac, Fabio, and Pominar, Cineplex Digital Media achieved a 44.3% year-over-year revenue growth and a 70.2% Q4 revenue growth over prior years. CDM operates Canada's largest digital out-of-home shopping media network in public spaces such as malls and office towers. We believe the strength of our digital place-based media assets combined with our diversified channel offering make us a leader in the indoor digital signage industry and provides a platform for significant growth across North America. We attribute part of our strength in Q4 to the Canadian Out-of-Home Marketing and Measurement Bureau welcoming Cineplex Media as a new member. Together with Cineplex Digital Media, Cineplex Media became part of its inaugural mall measurement methodology. With this new accreditation and measurement approach, we ensure our digital out-of-home clients receive the most value and transparency for their impressions. This further solidifies our leadership in the digital out-of-home advertising space as we continue to win new business and roll out new campaigns. Before I conclude, I'd like to provide a brief update on our appeal of the Competition Tribunal's decision regarding our online booking fee. On October 23rd, we filed a Notice of Appeal with the Federal Court of Appeal to overturn the Competition Tribunal's decision. With the consent of the Competition Bureau, the Federal Court of Appeal granted a stay of the Competition Tribunal's judgment pending a decision on Cineplex's appeal. While we disagree with the tribunal's decision, we have modified our website. We remain confident that our fee was always presented in a clear and prominent manner and fully complied with the spirit and letter of the law. As a reminder, this ruling has no impact on our ability to charge the online booking fee and we will continue to offer the optional value added convenience of advanced online seat selection to our guests. As we close 2024, I'm incredibly proud of what we've accomplished last year, managing the ebbs and flows of the film slate, opening three new LTE locations, a new theater, growing our media business, and continuing our efforts to stabilize the business for sustainable long-term growth. As we move into 2025, There are a few standout movies, including Captain America, Brave New World, and Paddington in Peru, which open on Friday and Snow White releasing in March. We also have two international titles, Niza 2 in Mandarin, and Chahavo in Hindi, launching this week. Rolling into Q2, we have established IP like Mission Impossible 8, Lilo and Stitch, Karate Kid, and the live action How to Train Your Dragons. In the back half, Jurassic World Rebirth, Superman Legacy, The Fantastic Four First Steps, Tron Ares, Wicked Part II, Zootopia II, and Avatar Fire and Ash are set to draw an audience to experience these films on the big screen. Before I wrap up, I want to reinforce that we are optimistic the momentum of our business will continue into 2025, with SWOT shaping up to be a strong year for the film slate. Our diverse media portfolio will drive unique value to advertisers, to unparalleled consumer attention, capitalizing on the robust film slate, including our international titles. The recent growth of our LBE footprint across Canada further establishes as a one-stop destination for entertainment, offering guests best-in-class gaming, attractions, and dining, driving both revenue and bottom-line growth. As we look forward, we will continue to differentiate ourselves within the market and drive industry-leading results. We are confident we will sustain this momentum and our position as one of North America's leading entertainment and media companies. With that, I will turn things over to our CFO, Gordon Nelson.