Reading International Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 16, 2023

There are 3 speakers on the call.

Operator

You for joining Reading International Earnings Call to discuss our 2023 Third Quarter Results. My name is Andrzej Matyczynski, and I am Reading's Executive Vice President of Global Operations. With me as usual are Alan Cotter, our President and Chief Executive Officer and Gilbert Avanes, our Executive Vice President, Chief Financial Officer and Treasurer. Before we begin the substance of the call, I will run through the usual caveats. In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that will be addressed in this earnings call may constitute forward looking statements.

Operator

Such statements are subject to risks, uncertainties and other factors that may cause all our actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are clearly set out in our SEC filings. We undertake no obligation to publicly update or revise any forward looking statements. Financial results. In addition, we will discuss non GAAP financial measures on this call.

Operator

Reconciliations and definitions of non GAAP financial measures, which are segment operating income, EBITDA and adjusted EBITDA are included in our recently issued 2023 Q3 earnings release on the company's website. We have adjusted where applicable the EBITDA items we believe to be external to our business and not reflective of our costs of doing business or results of operations. Such costs include legal expenses relating to extraordinary litigation and any other items that we considered to be non recurring in accordance with the 2 year SEC requirement for determining whether an item is non recurring, infrequent or unusual in nature. We believe that the adjusted EBITDA is an important supplemental measure of our performance. Investor Relations.

Operator

In today's call, we also use an industry accepted financial measure called theater level cash flow, TLCF, which is theater level revenue, less direct theater level expenses. ATP, average ticket price, is also used as an accepted industry acronym. We'll also use a measure referred to as F and B Spend Per Per Patron, SPP, which is a key performance indicator for our cinemas. The F and B SPP is calculated by dividing our cinemas revenues generated by food and beverage sales by the number of admissions at that cinema. Cash flow preoccupancy, CFPO, is an internal measure that we use to show the profitability of a particular location on the level playing field.

Operator

This measure ignores the ownership versus leasing issues associated with the location by excluding depreciationamortization and or RENT, common area costs and real property taxes. Please note that our comments are necessarily summary in nature, and anything we say is qualified by the more detailed disclosure set forth in our Form 10Q and other filings with the US Securities and Exchange Commission. So with that behind us, I'll turn it over to Ellen, who will review our 2023 Q3 results and discuss our business strategy going forward, followed by Gilbert who will provide a more detailed Financial Review.

Speaker 1

Thanks, Andrey. Welcome everyone to our call today and thank you for listening in. During 2023, we've demonstrated that we're clearly on the path to recovery. During each quarter of this year, we've delivered operational results that were an improvement over 2022 and in some cases we established new record highs. Our Q3 of 2023 was a continuation of that story.

Speaker 1

At $66,600,000 our 3rd quarter global total revenue represented the highest since Q4 of 2019 and 95% of our Q3 2019 global total revenue. At $1,000,000 Our Q3 global operating income represented 115% improvement compared to Q3 2022 And was the 2nd highest since Q4 of 2019. Each of our global operational divisions, Cinema, Live Theater and Real Estate contributed to the quarter's success with each division delivering higher cash flow results compared to the Q3 of 2022. Thanks to a stronger movie slate led by the phenomenal success in July at Babenheimer, coupled with the strong operational performance From our cinema management teams, our global cinema revenue topped $62,700,000 which was 30% better than Q3 2022, represented 94% of Q3 2019 and was the highest Q3 achieved since Q4 of 2019. At $5,100,000 our Q3 2023 real estate revenue represented a 24% increase over the same quarter last year and a record Q3 for our U.

Speaker 1

S. Real Estate division. Our Q3 2023 real estate operating income of $900,000 represented an increase of over 700% compared to the same period in 2022. These 3rd quarter real estate results were driven by the rental stream from Petco, Our new tenant at 44 Union Square that opened its flagship retail store in New York in June of 2023. The strong performance of our live theaters in New City, which delivered the highest third quarter theater level cash flow since the pandemic and the continued solid and steady performance of our 3rd party tenant real estate portfolio in Australia and New Zealand, which now has 77 third party tenants And a 97% occupancy rate in available space.

Speaker 1

Delivery of this continued improving operational performance, Resulting in $6,100,000 of adjusted EBITDA, a 59% increase from the Q3 last year, Came despite headwinds facing our company from release schedule changes due to the Hollywood strikes, lack of SAG talent promoting any movies through most of the quarter, which we believe impacted the potential gross box office of certain cash driven movies like Haunted Mansion, Haunting in Venice, Strays and Dumb Money. The weakening again of the Australian dollar and New Zealand dollar against the U. S. Dollar, which has a major impact on us from more as more than half of our revenues are generated from Australia and New Zealand. Though our operational results are encouraging and demonstrate our business moving in the right upward trajectory, We remain focused on our debt and liquidity conditions and further recognize that the duration of the recently settled Hollywood strikes Will negatively impact our box office in 2024.

Speaker 1

Given our upcoming 2023 and 2024 debt maturities, Coupled with the current interest rate environment, which has resulted in the payment of over $5,000,000 in interest in just the 3rd quarter, We recognize the urgency to improve our liquidity and strengthen our balance sheet. As we previously reported, we intend to monetize the built in gain And some of our real estate assets to ensure the company's long term viability. In October of 'twenty three, we sold our property in Maitland, New South Wales for AUD2.8 million. It had a book value of AUD1.4 million. 2 other assets are currently being held for sale and we're evaluating the rest of our portfolio for strategic options to pursue while taking into account suboptimal market conditions for commercial real estate.

Speaker 1

With that, let's look more closely at our Global Cinema business, which has provided the foundational cash flow to support our asset growth over the last few decades. As I just mentioned, the strong diversified movie lineup drove our impressive third quarter box office results for our Global Cinema business. The premieres of Barbie and Oppenheimer, both released on July 21st, led to the 4th biggest box office opening weekend in history. As of today, Barbie has grossed over $1,400,000,000 globally and is the highest grossing film of 2023. Its opening weekend generated over $337,000,000 in worldwide grosses, making it the highest grossing opening weekend For a non franchise film ever.

Speaker 1

Similarly, Oppenheimer has grossed over $949,000,000 at the global box office, becoming the 3rd highest grossing film of the year. This impressive box office performance has allowed it to become the highest grossing World War II movie of all time as well as the highest grossing biographical movie of all time. Not only was Babenheimer a cultural phenomenon, other films contributed to our Q3 results, including Sound of Freedom, the unlikely summer box office hit that's now one of the most successful independent films of all time. And fan favorite franchises return to the big screens such as Mission Impossible, Indiana Jones and Teenage Mutant Ninja Turtles. While the strong box office was the key to our Q3 success, our Global Cinema management teams worked almost every line on the P and L to improve our overall profitability.

Speaker 1

In fact, our cash flow pre occupancy per capita For the Q3, 2023 was the highest that that metric has ever been for any Q3 ever in each of our cinema divisions in the U. S, Australia and New Zealand. This winning combination of box office and management prowess drove our Q3 2023 Global Cinema operating income to improve by 306 percent to $4,400,000 compared to an operating loss of $2,100,000 during the Q3 of 2022. The box office momentum experienced during the Q3 of 2023 Supports our optimism for the cinema industry and our company as a whole as we head into the final weeks of 2023. The Q4 has even started out somewhat better than we anticipated given the uncertainty created by the Actors' strike.

Speaker 1

On October 13, the Swifties came out in full force for the opening weekend of Taylor Swift, the Ares tour, making it the highest grossing film of its kind in North America. As of today, it's grossed over $241,000,000 globally. On October 20th, adult audiences retreated to the release of Martin Mercedes' Killers of the Flower Moon, which was produced by Apple. As of today, it has grossed over $138,000,000 globally and interestingly marks the best wide release debut for a film produced by a streaming service. For Halloween, Horror fans were treated to 5 Nights at Freddy's on October 27th.

Speaker 1

This cinematic adaptation of a popular video game generated over $132,000,000 In its opening weekend and it delivered the highest opening in North America for a PG-thirteen horror movie in over 2 decades. And in late November with the release of director Ridley Scott Napoleon, we'll see another release of a production from a streaming service By a major studio that will hopefully benefit the entire exhibition community. We'll also see a diverse mix titles that we anticipate will attract audiences of all ages such as The Hunger Games, The Ballad of Songbirds and Snakes, migration, Wonka, The Color Purple and Aquaman and the Last Kingdom. And the last weeks of 2023 should benefit greatly from the recently settled ZAG after strike. To have many movies like Aquaman and Wonka to excuse me to have movies like Aquaman and Wonka be able to be promoted fully with support from lead actors Jason Momoa and Timothee Chalamet Should go a long way to boosting the grossing potential of these tentpole movies.

Speaker 1

While we're thrilled that the writers and SAG strikes have come to an end. We anticipate that the halting of movie production from May 2023 until this month will have some negative impact on the release schedule for 2024 and even early 2025. Now let's turn to our U. S. Cinema division, Which again delivered encouraging Q3 'twenty three results.

Speaker 1

Our attendance in this division increased 27% from Q3 2022. Our U. S. Cinema revenue increased by 39 percent to $34,200,000 compared to Q3 2022, represented the best quarterly revenue performance since Q4 2019 and outperformed Q2 2023's revenue performance. At $300,000 our U.

Speaker 1

S. Cinema operating income increased by $4,300,000 compared to the Q3 of 'twenty 2, And our positive theatre level cash flow was almost 200% ahead of the same quarter last year. Other notable third quarter milestones. At $12.81 our average ticket price was the highest third quarter ever. Our continued F and B focus led to an F and B SPP of $7.58 which is the 3rd highest Q3 ever.

Speaker 1

It's impressive when you take into account that this result comes despite, as of this year, all of our U. S. Cinemas offered a value price Tuesday with concession discounts In addition to the rollout of a variety of other F and B discount programs. Our ancillary revenue generated primarily from theater rentals online service fees was the highest third quarter on record. Our U.

Speaker 1

S. Specialty cinemas continue to shine led by the Angelica Film Center in New York City. Our Q3 2023 box office at the Angelica increased by over 100% Compared to the Q3 of 2022 and was higher than the box office generated in the Q3 of 2019. The gross box office engagements of past lives at the Angelica New York ranks as the highest in the U. S.

Speaker 1

Since the film's premiere on June 2, 23, it's grossed over $605,000 Theater Camp, Which opened in July has also achieved its highest box office engagement at the Angelica New York. And our Angelica membership, which launched in April of 'twenty two, has broken through the 100,000 member threshold. Not only have our programming, operating and marketing teams been hard at work over the last quarter, Our executive team has focused on reducing our fixed expenses by attempting to renegotiate leases across the portfolio, closing unprofitable cinemas, which would have required material capital investment for a return to profitability and otherwise took steps to stem theatre cash losses. As we reported in our 10 Q, we closed 2 cinemas in Hawaii in July and just closed another Reading Cinema in Rohnert Park, California. In each case, these cinema leases were either at the end of their term or being held on a month to month basis.

Speaker 1

Encouraging Q3 2023 performance. Thanks to movies in Australia like Barbie, Oppenheimer, Mission Impossible, Indiana Jones and Elemental. The Australian Cinema revenue was $24,200,000 which increased by 21% compared to the Q3 of 2022 And was the best 3rd quarter revenue since Q3 2019. At $3,500,000 our Q3 2023, Australian Cinema operating income increased by 123 compared to the Q3 of 2022. Given the continued decline in the value of the Australian dollar, these operational increases were even more impressive when measured in local currency.

Speaker 1

Our Australian circuit achieved several notable milestones during the Q3. At AUD13.74, our Q3 2023 average ticket price in Australia was the 2nd highest 3rd quarter ever. At AUD7.24 in Australian dollars, Our F and B SPP was the 2nd highest 3rd quarter of all time. And our online F and B sales continued to grow, achieving just about 9% of total Australian F and B sales, up from 7.3% in the Q3 of 2022. Throughout the quarter, we continued to execute on our growth initiatives and develop our pipeline in Australia.

Speaker 1

On August 24, 2023, we opened our beautiful 8 screen Angelica Film Centre at South City Square in Brisbane. And we opened a 5 screen Reading cinema with Titan Luxe at Busselton in Western Australia on September 22, 2023. And now turning to New Zealand. At $4,300,000 our Q3 2023 New Zealand cinema revenues increased by 16% compared to the Q3 last year. At $551,000 Our Q3 2023 New Zealand Cinema operating income increased by $277,000 compared to the Q3 last year.

Speaker 1

Our New Zealand circuit also achieved several notable milestones during the quarter. Our Q3 2023 average ticket price was $12.05 representing the highest 3rd quarter ever. At $6.25 that's New Zealand Dollars, our F and B SPP was the 2nd highest third quarter of all time. And our online F and B sales continue to grow in New Zealand as well, achieving 7.2% of total F and B sales, up from 5% in the Q3 of 2022. Now let's turn to our Global Real Estate business.

Speaker 1

Our Q3 2023 global real estate revenue increased 24% to $5,100,000 compared to Q3 of 2022. And our Q3 2023 real estate operating income of $920,000 improved 700% from the Q3 last year. The improved 3rd quarter real estate operating results are primarily due to Petco at 44 Union Square, whose rent commenced in the Q4 of 2022 along with increased attendance at our Mineta Lane Theatre as it continues to be the home of Audible Theatre. As a result, our real estate business achieved the highest third quarter real estate revenue and operating income increased by $1,100,000 or 206 percent to $1,600,000 primarily due to Petco's rent For the Q3 decreased slightly by $91,000 to $3,100,000 compared to the Q3 of 2022. And in New Zealand, our 3rd quarter real estate revenue decreased slightly by $10,000 to $380,000 Compared to the same quarter last year.

Speaker 1

And focusing on the Australia and New Zealand real estate portfolio, As of September 30, 'twenty 3, we had 77 third party tenants in our combined Australian and New Zealand real estate portfolio for available spaces. We had a total third party occupancy rate of 97%. We executed 4 leases During the quarter, 3 new leases and one lease renewal. And our Australian third party tenants achieved sales for the quarter of over AUD30 1,000,000 Now let's turn to the status of our asset monetizations to Support our liquidity needs. I mentioned earlier that our cinema property in Maitland, New South Wales sold for AUD 2,800,000 Australian Dollars.

Speaker 1

That sale closed on October 25, 2023 and we leased back the cinema on a short term rental basis. This was a transaction with which, while supporting our liquidity needs, might have been done anyway due to competitive market conditions. This transaction is reflective of the fact that we're not in the process of fire sales fire selling our tangible assets. Rather, we continue to be in the process of strategic culling. All of the real estate assets that we've monetized since the beginning of the COVID-nineteen pandemic have been assets that have reached full value that were not distressed and would have required substantial capital investment to generate any meaningful increase in value.

Speaker 1

With respect to our office building in Culver City, California, unfortunately Newmark has not been able to sell the building at its advertised price. While we believe that the property has a fair market value in excess of its book value, the office market in Los Angeles continued to deteriorate over the summer Due to interest rate hikes, continuing work from home trends and result in increasing office space vacancies And the prevalence of bottom feeders looking for distressed real estate. The 27,000 square foot space is located in Culver City And it's a very compelling and strategic location. Our neighbors are some of the most important leaders in entertainment and media and we're right on the I-four zero five and across the street from a Westfield Mall. To ensure that we're reaching the widest pool of potential buyers across the globe, We're putting the asset up for marketing and auction on a leading international online auction platform.

Speaker 1

We expect that the building to be sold through this auction process in the Q1 of 'twenty four. Newmark will continue to be the exclusive listing agent through the process. We expect an owner user will purchase the building and are offering it on a vacant occupancy basis. However, we would be open to dealing with an investor looking to purchase the building with the leaseback of the 2nd floor, which we currently occupy. Our first floor tenant has surrendered its premises in breach of its lease, and we've drawn down on a letter of credit securing its obligations under that lease.

Speaker 1

The first floor is fully built out and ready for occupancy. Our almost 27 acre industrial site in Williamsport, Pennsylvania is a property that doesn't have any strategic value to our company. We've received proposals from potential buyers, but don't believe they reflect fair value Based on an independent September 2023 appraisal. Our broker CBRE continues its marketing efforts. We're offering the property on a vacant possession basis as our long term industrial tenant has given notice that it's terminating its month to month tenancy at the end of November.

Speaker 1

A principal component of value is its connection to the principal rail line servicing that part of Pennsylvania and its extensive rail yard. Our Reading Viaduct property together with various adjacent properties in Philadelphia continues to be an area of focus for us. These properties have been part of our company for over 100 years and consequently are not shown as material assets on our balance sheet. But while having negligible book value, they aggregate over 350,000 square feet of land and bridge works. In light of the benefits brought to New York City by the High Line and the support being shown for development of the Camden High Line in London, England, the first phase of which is obtain planning approval in January this year.

Speaker 1

We believe that this uninterrupted corridor connecting Spring Garden to Center City in Philadelphia has significant potential value both to us and to the city and residents of Philly. While shorter than the New York High Line, at approximately 3,200 feet, it is substantially wider. Its southern terminus connects to Center City, a jump shot from the proposed new home of the 76ers. And its northern end connects to the Spring Garden neighborhood where a significant number of new housing units have just been finished or under construction. While the viaduct is a unique property for which there are not ready sale comparables, land sale transactions along the viaduct in recent years suggest that the property is of significant value.

Speaker 1

In recent periods, we began demolishing obsolete structures on the viaduct and on our properties adjacent to the viaduct. The Philadelphia City Council currently has before a proposed ordinance to enable the City to acquire, in whole or in part, our interest in the viaduct and to transfer it to a non for profit entity for development as a park. We're in discussions with the City and community leaders about such a transaction or some variation thereof And provisions which would enhance the value to our remaining nearby holdings. We've also taken steps to Explore the sale in whole or in part of the Cinema 1, 2 and 3 property in New York City or otherwise reducing our interest in that property. However, the commercial real estate values in New York have been significantly impacted by the same issues of elevated interest rates, office vacancies and work from home preference of employees.

Speaker 1

We're balancing our need to raise sufficient liquidity against the possibility of selling at a low point in the real estate cycle. With that, I'll wrap up my business overview for the Q3, and I'll turn it over to Gilbert.

Speaker 2

Thank you, Alan. Consolidated revenues for the quarter ended September 30, 2023 increased by CAD15.4 million to CAD66.6 million when compared to the Q3 2022. This increase was primarily driven by increased revenue as a result of strong film slate and rent recognized in Q3 2023 from our Petco tenancy at our 44 Union Square property that did not occur in the same period of the prior year. Consolidated revenue For the 9 months ended September 30, 2023, increased by CAD21.5 million to CAD177.4 million when compared to the same period of the prior year as a result of the improved performance across our worldwide cinema circuit Due to a stronger movie slate and the new rental stream from Petcoff at 44 Union Square, offset somewhat by the decrease The value of Australia and New Zealand currencies. Net loss attributable to Reading International for the quarter ended September 30, 2023 decreased by CAD0.8 million to a net loss of CAD4.4 million when compared to the same period in the prior year.

Speaker 2

Basic loss per share decreased by $0.03 to a basic loss per share of $0.20 for the quarter ended September 30, 2023, compared to the quarter ended September 30, 2022. These results are due to improved segment revenue, decreased depreciation and amortization expense, partially offset by increased interest expense and decreased other income. Net loss attributable to Reading International for the 9 months ended September 30, 2023, decreased by CAD 4,700,000 to a loss of CAD18.3 million when compared to the same period in 2022. Basic loss per share It was €0.82 for the 9 months ended September 30, 2023 compared to a basic loss per share of €1.04 For the 9 months ended September 30, 2022. That was due to better cinema segment results Due to increased attendance in our U.

Speaker 2

S. Cinema circuit as more patrons return to the theater and stronger film slate, The rent recognized from our 44 Union Square tenant Petco during the 1st 9 months of the year that did not occur in 2022, decreased G and A expenses and depreciation and amortization expenses improved impairment expenses that were employees in other income. Our total company depreciation, amortization impairment and general and administrative expenses for the quarter ended September 30, 2023 decreased slightly, CNY5.3 million to CNY10 million compared to the same quarter in the prior year. Depreciation, amortization, impairment and G and A expenses for the 9 months ended September 30, 2023 decreased by CAD5.1 million to CAD29.6 million compared to the same period in the prior year. These decreases are due to impairment expenses that were incurred in 2022 that did not reoccur in 2023 and decreased depreciation and amortization due to delay in CapEx spending.

Speaker 2

For the Q3 2023, income tax expense increased by CHF 600,000 to income tax expense of CHF900,000 compared to the equivalent prior year period. The changes between Q3 of 2023 and Q3 of 2022 is primarily related to increase in reserve for valuation allowance in 2023. For the 9 months ended September 30, 2023, income tax expense decreased by CAD 1,200,000 income tax expense of CHF300,000 compared to the equivalent prior year period. The changes between 9 months of 2023 9 months of 2022 is primarily related to the decreases in reserve for unrecognized tax benefits in 2023. For the Q3 of 2023, our adjusted EBITDA Increased by 200,000 yen compared to the same prior year period to 6,100,000 This increase was primarily the result of strengthened cinema operating performance and rent from our Petco tenant.

Speaker 2

For the 9 months ended September 30, 2023, our adjusted EBITDA increased by CAD5.4 million to CAD10 1,000,000 compared to the same prior year period. This increase is due to an improved net income loss as the result of improved cinema operations And an increase in real estate rental income due to the rent from our Petco tenant, which was not incurred in the same time period in the prior year. Activities decreased by CAD19.7 million to net cash used of CAD6.4 million when compared to the same prior year period. This was driven by an improved cinema operating performance compared to the prior year period. Receipt of rental income from our tenants at our 44 Union Square property, which did not occur in the same period of prior year an increase in operating liabilities primarily in taxes payable, accounts payable and accrued expenses.

Speaker 2

Cash used in investing activities for the 9 months ended September 30, 2023 was CNY6.2 million, cash used in financing activities for the 9 months ended September 30, 2023 decreased by CAD 4,100,000 September 30, 2023 were CAD 532,600,000 compared to CAD 587,100,000 on December 31, 2022. This decrease was driven by an $18,000,000 decrease in cash and cash equivalent For which we funded our ongoing business operations and a $19,700,000 decrease in operating lease right of use asset. As of September 30, 2023, total outstanding borrowings were CHF208.6 million Compared to C215.6 million on December 31, 2022. Cash and cash equivalent as of September 30, 2023 were CAD 11,900,000 which included approximately CAD 5,500,000 in the U. S, dollars 5,600,000 in Australia, dollars 10,700,000 in New Zealand.

Speaker 2

Further to address the liquidity pressure on our business. We have closed some of our underperforming cinemas and we have selected certain real estate assets for potential monetization and I have listed them for sale. In Q1 2023, we modified our Bank of America loan extending the maturity date The facility to September 4, 2024 and in May 2023, our required monthly repayment of CAD725,000 commenced. And on September 29, 2023, we paid down DKK1.2 million of our Cinema's 123 term loan and extended the maturity date from October 3, 2023 to October 1, 2024. In August 2023, we modified our revolving corporate market loan facility with NAB with certain covenants and extended this facility maturity date to July 31, 2025 to continue to maintain the debt as non current.

Speaker 2

As we continue to focus on preserving our liquidity, no shares were purchased during the quarter ended September 30, 2023, And our stock repurchase program has and will likely continue to take a lower capital allocation priority for the foreseeable future. With that, I will now turn it over to Andrei.

Operator

Thanks, Gilbert. First, I'd like to thank our stockholders for forwarding questions to our Investor Relations e mail. In addition to addressing many of your questions in the prepared remarks from Ellen and Gilbert, we've selected a few additional questions to offer additional insights from management. The first question for Ellen, we received a number of inquiries about our assets in Wellington, New Zealand, seeking an update as to where we are in the development process.

Speaker 1

With respect to our properties in Wellington, we remain committed to finding a path to redeveloping those properties, Which includes Courtenay Central that's been temporarily closed since January of 2019. As a reminder, Courtenay Central, which Just one of those three parcels we have in the Wellington CBD was the foundation of our New Zealand business. It was the cash flowing asset the power of both our cinema and real estate businesses in that country. In 2019, we closed a majority of the building in Wellington due to a seismic issue that we discovered that could potentially put the families of Wellington at risk. We're committed to the people first approach that we've taken to date.

Speaker 1

We also recognize the economic challenges that have occurred over the last several years that have impacted our business. And we continue to take actions that we believe are in the best interest of our company and our stockholders. We continue to be impressed by the recent elevation of Wellington City by its council with the spectacular opening of Takeda and the upgrades and creativity behind the St. James Theatre. Though no assurances can be given that we'll be successful in completing those redevelopment plans, our management team is very focused on and dedicated to working with various stakeholders to find a workable path to commencing our redevelopment.

Speaker 1

As we continue to work towards finding that path, we believe that the outcomes will be exciting not only for Wellingtonians and tourists to this capital city, But also our stockholders.

Operator

Thank you, Ellen. Interest expense thus far in 2023 has exceeded EBITDA. Do you think that you are in a position where you can effectuate asset sales large enough to address your debt and once again have EBITDA exceed interest expense? On what timeline should investors expect that you are able to regain this position? Can you provide any color on the status of your attempts to sell Culver City headquarters or the Williamsport property.

Operator

Gilbert, can you answer this multipart question, please?

Speaker 2

We are actively pursuing monetization of certain assets as detailed in our Q2 to provide sufficient funds to provide appropriate liquidity to meet our obligations. We have good relationship with our lenders and we have been able to extend our loans. During the last quarter, we extended our largest loan with NAB to July 31, 2025, as well as extended our cinemas 123 loan October 1, 2024. The recent end of Hollywood strike gives us more confidence that 2023 We'll end on a positive note delivering a market improvement over 2022. Regarding Williamsport, As Ellen mentioned, the offers we have received are not reflective of their fair value.

Speaker 2

And with respect to our Culver City office, We expect the building to be sold in the Q1 of 2024.

Operator

Thanks, Gilbert. Ellen, are there additional underperforming theatres you have identified for near term closure. And what is the estimated timing and future savings?

Speaker 1

As we mentioned earlier, in the U. S, we've closed 4 underperforming theaters since late 2022, each of which It was either at the end of its term or on a month to month tenancy. And we estimate that the cash savings from those theatres to be well over $1,000,000 annually. As of today, we haven't closed any underperforming theatres in Australia or New Zealand. As leases become due, where option terms come up, we're reviewing the historic cash flow from the theater and the projected CapEx necessary to keep the theater competitive.

Speaker 1

If we're not confident that we'll make double digit return on our invested dollars, it's our current intention not to exercise the option or seek to put in place a new lease. Our management teams are laser focused on ensuring that each theatre has the potential to generate sufficient cash flow in the future. During 2024, we'll be reviewing a few more theaters in the US for potential closure. However, in each instance, we'll seek to work out with the landlord a deal that's well balanced and that could potentially give us

Operator

Thanks, Ellen. And finally, a last question for you as well. What are the Reading's intermediate term plans to maximize and optimize value of each of the Minetta Lane and Orpheum Theater sites?

Speaker 1

Our current plan is to continue to operate the Orpheme and Minetta Lane, each of them as Off Broadway venues. Given the cost of Broadway productions today, there's considerable interest in the city in off Broadway venues, And our Minute and Lane Theatre has been the home of Audible Theatre for more than the past 5 years, and they've indicated an interest in renewing their license on a multiyear basis. It may be that at some point in the future, a sale or redevelopment of 1 or both of these properties Might make more sense than continuing to enjoy the cash flow from their operations live theater venues. But we don't believe that time is now, Particularly taking into account the current market conditions, interest rates and the cost of development.

Operator

And that brings us to the end of the conference call. I'd like to thank everybody that participated and sent questions for some information from the management team. We appreciate you listening to the call today. Thank you for your attention.

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Key Takeaways

  • Reading reported Q3 2023 global revenue of $66.6 million—highest since Q4 2019—and operating income up 115% year-over-year, driving a 59% increase in adjusted EBITDA to $6.1 million.
  • The Cinema division led performance with $62.7 million in revenue (+30% YoY) thanks to blockbusters like Barbie and Oppenheimer, achieving its highest ever Q3 cash flow pre-occupancy across all regions.
  • Real Estate revenue rose 24% YoY to $5.1 million, propelled by new rental income from Petco at 44 Union Square, while management has begun strategic asset sales (e.g., Maitland property) to bolster liquidity.
  • The company faces headwinds from Hollywood strikes, currency fluctuations and $5 million in Q3 interest expenses, prompting a focus on debt maturities, refinancing and further asset monetizations to improve its balance sheet.
  • Reading is rationalizing its theater portfolio by closing four underperforming U.S. sites—saving over $1 million annually—and will continue evaluating leases for future cost savings.
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Earnings Conference Call
Reading International Q3 2023
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