TSE:CGX Cineplex Q3 2023 Earnings Report C$10.35 +0.46 (+4.65%) As of 05/2/2025 04:00 PM Eastern Earnings HistoryForecast Cineplex EPS ResultsActual EPSC$0.40Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ACineplex Revenue ResultsActual Revenue$463.59 millionExpected Revenue$471.10 millionBeat/MissMissed by -$7.51 millionYoY Revenue GrowthN/ACineplex Announcement DetailsQuarterQ3 2023Date11/9/2023TimeN/AConference Call DateThursday, November 9, 2023Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptInterim ReportEarnings HistoryCompany ProfilePowered by Cineplex Q3 2023 Earnings Call TranscriptProvided by QuartrNovember 9, 2023 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Hello, everyone, and welcome to the Synaplex Inc. 3rd Quarter 2023 Earnings Conference Call. My name is Daisy, and I'll be coordinating your call today. I would now like to hand over to your host, Master Vizjali, Vice President of Corporate Development and Investor Relations to begin. So please go ahead. Speaker 100:00:24Good morning, everyone. I would like to welcome you to Cineplex's 3rd quarter 2023 earnings release conference call hosted by Alice 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. Such 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 statements. Speaker 100:00:57Information 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 Jacob. Speaker 200:01:14Thank you, Massa. Good morning, and welcome to our Q3 2023 conference call. It is A pleasure to be with you today to provide details on our best order in Cineplex history. Before I get 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. Speaker 200:01:43Let's continue doing what we do best, Pairing beautiful performances with exceptional experiences best enjoyed in our theaters. Now back to our best quarter in Cineplex history. We achieved our highest EBITDA ever, even surpassing pre pandemic levels, And we are extremely proud to see our thoughtful strategies deliver such strong results. Our adjusted EBITDA margin of 18% was significantly higher than the Q3 of 2019, demonstrating the power of the operational improvements we implemented over the Last couple of years. Over the past two quarters, free cash flow generation has enabled us to repay $55,000,000 in bank debt as part of our focus on deleveraging the balance sheet and strengthening our capital base. Speaker 200:02:38Our outstanding 3rd quarter results can be attributed to our record breaking box office, but just as importantly, Our diversification strategy. We achieved 3rd quarter record box office revenue Of $188,000,000 which represents 106 percent of 2019 levels. Impressively, our 3rd quarter results outperformed North American market share by 310 basis points. By driving guests to premium experiences, our BPP reached a 3rd quarter record of $12 and through expanded concession offerings, CPP achieved $8.44 These results clearly indicate the multiplying effect of the sustained enthusiasm 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 are seeing consumer demand for premium experiences and compelling content continue to hold strong. Speaker 200:03:53July was our highest box office month ever with Barbie generating the highest July attendance at Cineplex Theatres nationwide. Oppenheimer and Mission Impossible Dead Raffling Part 1 followed in 2nd and third places, respectively, with strong performances. The Baub and Aimer phenomena generated $2,500,000,000 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 3rd quarter box office revenue coming from our premium margin accretive experiences like VIP, UltraAVX and IMAX. Launching new concepts like Cineplex Junction enhances the guest experience, Strong per patron spend across box office, food, beverage and gaming with the aim of maximizing guest revenue per square foot. Speaker 200:04:57There's been excellent progress made on film release volume over the last two quarters, and we continue to work closely with our 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 the star studded class, tells the story of legendary sports car magnate Enzo Ferrari during 3 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 Timothee Chalamet. Speaker 200:06:00Non 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. Speaker 200:06:39Our international content is making a meaningful contribution to our overall box office performance. In fact, 4 of the top 20 films in the 3rd 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 Q4, including 4 indie films, Tiger 3, Animal, Dunkey and Salar Part 1: Cease Fire. Speaker 200:07:28Furthermore, nontraditional content like concerts, opera, stage performances and sporting events continue to grow in popularity and are Forming well at the box office. October brought the record breaking concert film, Taylor Swift, The ARREST tool, which generated over $165,000,000 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 Theatre, 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 lighthearted drama, The Queen of my dreams, Japanese animated film, The Boy and the Heron, and as part of our distribution partnership with Lions Gate, The much anticipated Hunger Games, The Ballad of Songbirds and Snakes. Moving on to our diversified businesses. Speaker 200:08:41Our location based Entertainment business had a strong performance in Q3, generating record 3rd quarter revenues of 34,200,000 LBE continues to be a growth opportunity for us as we have 2 new LBE locations opening in the second half of next year and more to come. Our Amusement Solutions business, P1AG, generated record 3rd quarter revenues of $49,000,000 an Increase of 7.7% compared to prior year. On the media side, both Cineplex Media and Cineplex Digital Media performed well Despite the challenging macroeconomic environment. Well, 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 Playing significant momentum as we head into a traditionally strong Q4. Speaker 200:09:40The 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 Forefront, we're 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 Good ordering. While mobile ordering has been available in our VIP theatres for several years, we are expanding it across The entire circuit with the rollout by region over the next few months. This new functionality improves and enhances the guest experience and provides up and cross sell opportunities throughout the guest journey. Speaker 200:10:32The SCENE plus 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 SEAM Plus now boasts over 14,000,000 members. The addition of Empire with their grocery banners and home hardware to the program is enabling us to identify and convert non moviegoers 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 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. Speaker 200:11:35We are currently conducting various Preliminary steps necessary to have this heard by the competition Triburinil during the Q1 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 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 Q3 film lineup, paired with the strong results of the company's diversified businesses, Saw Cineplex achieving the highest quarterly EBITDA in our history. Speaker 200:12:25This 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 Junction. Our content broadening strategy reinforces our leading market position Cinema and alternative content. Speaker 200:13:18We 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 Cineplex ecosystem to drive additional revenue And create efficiencies within our business operations. Overall, Cineplex is well positioned to achieve great Success and we'll 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 Gord. Speaker 300:13:55Thanks, Ellis. I am pleased to present a condensed summary of the Q3 results for Cineplex Inc. For further reference, our financial statements and MD and A have been filed on SEDAR Plus and are also available on our Investor Relations website at cineplex.com. Our MD and A and earnings press release includes a complete narrative on the operational results. So I will focus on highlighting select items And providing commentary on our liquidity, balance sheet and outlook. Speaker 300:14:26As Ellis mentioned, our Q3 results were spectacular. Total revenue increased 36.4 percent to $463,600,000 and our adjusted EBITDA was 83 $100,000 which represents our highest quarterly EBITDA ever. We had record Q3 results in substantially all our key metrics. And rather than repeating these again, I would refer you to our earnings press release And MD and A. We continue to focus on revenue opportunities and cost management and Extremely pleased with our Q3 EBITDA margin of 17.9% and a combined Q2 and Q3 EBITDA margin of 16 point 2%. Speaker 300:15:13This combined total is higher than any quarter in 2019 and the full year 2019 total 13.8%. Let's take a closer look at our segments and see this optimization Focus in action as we compare Q3 2023 to the pre pandemic Q3 2019. In the Film, Exhibition and Content segment for Q3 2023, attendance was 90% of 20 nineteen's levels, But total revenue and adjusted EBITDA were both higher than 20 nineteen's level at 113% of 20 19 And 135 percent of 2019 respectively. In addition, despite the attendance volume decline, Our segment adjusted EBITDA margin increased to 19.2% in 2023 as compared to 16.1 percent in 2019. In the Media segment, as we have mentioned previously, The Cinema Media business model post pandemic has shifted to a CPM based model. Speaker 300:16:28And as such, Cinema advertising revenues are more dependent on absolute attendance levels. Decrease in attendance levels, Coupled with the current advertising climate as compared to 2019 has resulted in segment adjusted EBITDA coming in at approximately 79 Effective cost management has resulted in the segment adjusted EBITDA margin Improving to 55.8 percent from 46.9 percent in 2019. Turning to our Amusement Solutions segment, P1AG has continued to perform strongly with segment revenues coming in at 110% 20 nineteen's level and adjusted EBITDAO coming in at 133 percent of 20 nineteen's levels. As a result of strong cost control and additional integration synergies, segment adjusted EBITDA margin has increased to 17.2% from 14.2% in 2019. And lastly, our LBE segment has benefited from additional locations and strong cost management. Speaker 300:17:44Segment revenues came in at 175 percent of 20 nineteen's levels and segment adjusted EBITDA came in at 427 percent of 20 nineteen's levels with segment adjusted EBITDA margin increasing 25.4 percent in 2023 from 10.4% in 2019. The above are concrete examples of this focus on revenue opportunities and cost management. In looking at the last 12 months, our LTM EBITDA was closing in on $200,000,000 At $195,000,000 with the last two quarters alone contributing $143,000,000 The $195,000,000 total. As Ellis mentioned previously, it was only in April 2023 That we return to regular product supply with multiple releases on a weekly basis. Finally, net income is relatively flat to the prior year as the $63,000,000 improvement in an adjusted EBITDA Was offset by the inclusion of a gain of $50,000,000 on the reorganization of CNLP in the prior year And the inclusion of non cash deferred taxes of $11,000,000 in the current year. Speaker 300:19:11I would like to now move on and speak to our balance sheet and in particular our liquidity position. As a result of the past 2 strong quarters, We were able to pay down approximately $55,000,000 under our credit facilities. This left us with $301,000,000 drawn And approximately $232,000,000 available under our credit facilities as at September 30, 2023. As at September 30, 2023, we reported a senior leverage ratio of 1.48 times as compared to a covenant of 2.5 times. Although not tested, our total debt ratio was 2.63 times, well within our 2.5 to 3 times target range And demonstrates our commitment to deleveraging. Speaker 300:20:04In addition to deleveraging through operating results, We will continue to evaluate value creating liquidity events, which could include asset sales. Now I'd like to take a few moments to look forward. I want to revisit the world we've described during our past analyst calls. This was a world where we could potentially achieve pre pandemic adjusted EBITDA levels on 75% to 80% of pre pandemic attendance levels due to our diversified business models and used free cash flow to delever. With the return of product on a regular cadence for the 2nd and third quarter combined when comparing to 2019, We achieved 108 percent of 20 nineteen's EBITDA on 83% of the attendance And delevered by $55,000,000 This continues to give us confidence that this world is real And here today. Speaker 300:21:09We may have a few bumps ahead of us because of release date changes due to the various strikes, But the long term view is solid. Our business is typically traded at a premium given our market share 5 businesses. However, with the positive results of our business and momentum in the industry, we have not seen the same valuation return that our peers in the U. S. As of yesterday, we were trading at an approximate 30% discount to our target price. Speaker 300:21:41We understand that our Canadian listing means we are subject to more of a show me view, but we would expect that our Q2 and Q3 results Should give you some confidence that we are continuing to show you. Let's talk about our balance At the end of Q3 2023, we had approximately $867,000,000 face value of debt, Including $316,300,000 in convertible debentures, which have a conversion price of $10.94 All our equity research analysts have a 1 year target price in excess of the conversion price. In the 75% to 80% attendance world, We believe that the convertible debentures would convert to equity. And as mentioned earlier, we would be within our target leverage ratio range of 2.5 times to 3 times and on the path to consider the reintroduction of a dividend. Now let's talk about initiatives to capitalize our capital structure. Speaker 300:22:45As I said last quarter, I want to make it clear that we're primarily talking about the composition and maturity of our debt stack, including items such as rating strategies, mix of bank versus Private versus public debt, U. S. Versus Canada and not dire measures such as issuing common equity to reduce debt. The strong return of our business in Q2 and Q3, you will see us moving forward with these initiatives, including extending maturities, Removing restrictions and financial covenants and ultimately reintroducing a dividend. With our recent record breaking operating results and our commitment to strengthening the balance sheet, there's a lot to be excited about. Speaker 300:23:28And with that, I would like to turn things over to the conference operator for questions. Operator00:23:37Thank you. Our first question today comes from Adam Shine from National Bank Financial. Adam, please go ahead. Your line is open. Speaker 400:24:08Thanks a lot. Good morning. Obviously, good results and great news out of Hollywood. Ellis, can you talk a little bit about I mean, you touched on Q4. Can you talk a little bit about The 2024 film slate, and obviously, there's more to come as we get a sense as to how Production reboots, but how do you characterize the slate? Speaker 400:24:28And any additional information that you might be aware of in terms of further strengthening it? Speaker 200:24:36Yes, Adam. And there were real concerns as to how the slate would roll forward, and we saw a number of movies Like Dune and Ghostbusters move, but we still feel quite strongly. I think the only 2 films I Look at it as far as moving out of 2024 was Snow White And Mission Impossible. Those were the 2 big ones. But now with Dune in the Q1 and Ghostbusters In the Q1, that should help. Speaker 200:25:10And I don't know if you saw, but the Hollywood Group are ready to get back and Deadpool, Gladiator, Venom, Beetlejuice are all starting production Very, very shortly. So that should help as we move forward. That's not to say, Adam, that there aren't going to be Minor disruptions, but still feel good moving forward. Speaker 400:25:39Okay. Thanks for that. Obviously, you referenced The Taylor Swift movie and you've got Beyonce movie, concert movie coming up as well. A number of questions we've had is relate to The film cost profile, and I don't know if you're able to talk to it, whether there's something unique about it or whether sort of it just comes in As a similar average to the usual film cost splits with the studios? Speaker 200:26:08Well, in the case of the concerts, we are basically the Canadian distributor for them. So it's a little bit different than what we would do on a regular film. So It's part of the whole process, but there are give and takes between us and the AMC distribution company. Speaker 400:26:32Okay. And just maybe one for Gord. Gord, obviously, we've seen tremendous strength out of P1AG in recent quarters and still very strong results. But just curious, anything in particular in the Q3 in regards To a bit of a step down we saw from the trend in Q2, which was exceptionally strong and just the context Of margins as well. Yes, up year over year, but maybe moving a little bit lower within the usual range that you talk about. Speaker 300:27:08Yes. So look at, Adam, and it was a record Q3 result for the P1AG businesses, which has continued to kind of Deliver record results and significant increases over prior year. There's a little bit of a seasonality to the business. So in Q2, we absolutely saw some of the benefits of that seasonality. The business, we're extremely pleased with. Speaker 300:27:36We're hitting those target margin ranges of 15% to 17%, which we've always Which was kind of highlighted since some point in time last year. So it continues to perform exceptionally well. And we're really excited on the outlook as you look forward in this business given sort of the explosion of new FEC concepts across North America. Speaker 400:27:58Okay. Super. Thanks. I'll leave it there and queue up again. Appreciate it. Speaker 200:28:03Thank you. Operator00:28:06Thank you. Our next question is from Maher Yaghi from Scotiabank. Maher, please go ahead. Your line is open. Speaker 500:28:16Great. Thank you for taking my questions and great quarter guys. I wanted to maybe start with the most pressing and Questions we got on Cineplex, and that is dealing with the leverage situation. I'm happy, Gord, you said you're not contemplating any equity issuances at this point in time, which is good to hear. However, I just wanted to maybe touch base on the upcoming refinancings that you have coming up and How you are going to handle these refinancings? Speaker 500:28:54You mentioned you're looking to Refinance some of these maturities. Can you maybe just elaborate a little bit on that? I think a lot of our investor base Is hoping to get more clarity on that. Thank you. Speaker 300:29:12Sherry, good morning, Mary, and thank you for your comments. As I mentioned in the call script is, our focus is looking at extending the maturities. We'll look at the composition and the mix between bank debt, public debt, private debt. And our focus will be on extending the maturity. So, we do have and as I said, I wouldn't be surprised if you see us go out and get a Credit rating, to provide optionality, on what we may do. Speaker 300:29:45I also have said historically, I wouldn't be surprised if you saw us Our approach, our bank group to ask to extend the maturity of the existing credit facility To give us additional flexibility as we move sort of through these turbulent economic times and ensure that we have flexibility on when we want to choose and execute on a strategy related to the debt. So our focus will be starting very soon to some point in time in early 2024 To look at extending maturities, changing the composition of mix, And as part of my comments were that the converts, We believe we'll in essence solve themselves, given the strong results and the outlook on the business. Additionally, as I mentioned on my prepared comments too, we have delevered from the strong operating results by $55,000,000 Over the last two quarters and we are now with my comments, we will continue to delevering We would also consider potentially any asset sales to the extent that we thought they were accretive. Speaker 500:31:09Okay, great. Maybe just a follow-up on the results. When you look at 2024, Assuming a steady slate of movies coming out from production and hitting the theaters, Anything you want to highlight that you had in Q3 that would be abnormal or non recurring that is Affecting either up or down your free cash flow. Just trying to make sure we have the right pace of Free cash flow production going into 2024? Thank you. Speaker 300:31:49Yes. So, Maher, I think, Wukin, I think one thing that you're Seeing in the business is we have focused over the last 3 years on optimizing the cost structure. I highlighted some of the results of the work when I provided The EBITDA margins of each of the segments and how we significantly improve those EBITDA margins as compared to the pre pandemic period And the Q3 results is really the material operating leverage of the business. Once the attendance is there, The incremental flow through to free cash flow is massive. So this is the world that we believe we operate Operator00:32:42Thank you. Our next question is from Derek sorry, go ahead. Speaker 300:32:50Sorry, just wrapping up here. So sorry. As Maher, as we mentioned, dollars 150,000,000 of EBITDA in the last two quarters, $55,000,000 of debt pay down. So to that regular cadence, we're very confident about ability to delever off The strong free cash flow that we this business will generate going forward. I think we can go to the next question now. Operator00:33:25Thank you. Our next question is from Derek Lessard from TD Cowen. Derek, please go ahead. Your line is open. Speaker 600:33:34Yes. Good morning, Ellis, Gordon and Masa. First of all, congrats on an awesome quarter and happy to see labor peace for the next 3 years. Maybe on that topic, Ellis, I think some of the concessions that the studios made could I think they were saying could be worth up to $1,000,000,000 Just wondering or do you think that studios try to maybe recoup or cloth some of that back through movie costs to exhibitors? Speaker 200:34:02A lot of the concessions that they gave had to do with streaming and post theatrical. So we feel at this point in time, I haven't had anything as far as significant discussions As it relates to this, but we've been great partners with the studios, and we'll do our best to get the maximum box office that We can derive, and that's something that we work together with them to deliver. And that to me is really important. Speaker 600:34:35Okay. That's helpful. And I think in terms of the current slate, I was curious on whether exhibitors get Any sort of heads up from the studios on potential movements or shifts? Speaker 200:34:51Well, there was a big, as I mentioned earlier, there was a big article on deadline that talked about them restarting ASAP, And they've named about 6 different movies that they are starting right away. And that, to me, is a good sign that They are moving back to full production of these films. Speaker 600:35:13Okay. And as we've Speaker 200:35:15helped many times Sorry, go ahead. Speaker 600:35:21No, no, continue, Alex. Sorry. Speaker 200:35:25But as I've said many times is with the situation we are in, it's not that Films are basically disappearing. They are just moving. So it's a positive positioning for us going forward. Speaker 600:35:42Okay. And Gordon, maybe just a few for you. Obviously, I think you've touched on some of it, but super strong year to date results and Maybe Q4, maybe a little bit less, so just given the slate, but you look well placed for covenant testing to resume in Q4 by my math. Just curious how you're Thinking about the upcoming test and looking ahead to next year? Speaker 300:36:07Yes. Look, we gave you I disclosed the total leverage number, which would be well within the compliance range. And as you recall, And that's an LTM ratio. So the Q4 Q4 last year was not a particularly strong quarter, so that will fall off and get replaced with this one. So yes, we feel very strong about Where we are with respect to the covenants going forward. Speaker 600:36:40Okay. And then just maybe on a bit of housekeeping. On the working capital Sorry, there was a usage on what looks like the accounts payable. Just maybe some color around there would be helpful. Speaker 300:36:54Yes. So, look, with the ebbs and flows, in a strong we typically try and match the our working Capital position to the strength of the business. So with the strong business results, we looked at Sort of accelerating some of the payments to our suppliers from where they had been historically. Speaker 600:37:19Awesome. Thanks for answering my questions, and congrats again. Great quarter. Speaker 200:37:25Thank you very much. Operator00:37:30Thank you. Our next question is from Drew McReynolds from RBC. Drew, please go ahead. Your line is open. Speaker 600:37:48Yes. Thanks very much. Speaker 700:37:49Just to echo a fantastic quarter for you guys, Gordon Ellis. I missed the first part of the call, so my apologies for any duplication here. Maybe for you, Gord, just on the asset Sales that you could explore, is there anything you can give us in terms of whether those would be non core or Perhaps something a little bit more core, so to speak, but how you kind of size up An accretion potential on what your lens is there. And then secondly, Maybe for you, Ellis, on the film supply and specifically from the streaming platforms, I think we're all aware that The theatrical window is increasingly a window that movies from streaming platforms are using. Has anything changed in terms of that pipeline over the last few quarters, Obviously, notwithstanding the delay due to strikes, it still feels there's strong commitment there to Release in the theaters. Speaker 700:39:05Thank you. Speaker 300:39:08Thank you, Russo, and thanks for your comments. I'll take the Question then with respect to asset sales. So throughout the pandemic, as we'd obviously looked at certain non core assets, our head office building, We sold an equity interest or decreased our interest in our holdings and seen. So as we look forward and contemplate what are the other options is, it will probably be a non core asset to the extent that there is an interest in And our businesses, we have a very complementary Set of strong assets that there's always been ongoing interest in. So to the extent that there's something that was accretive and made sense for us As we would obviously execute on something. Speaker 200:40:03Okay. And to your question about the streamers, as Well, I was looking at Apple and Amazon. As you know, Apple released a big movie in October, Killer of the Fire Moon. The movie did quite well, and they've got another movie, Napoleon, coming out shortly. So they are very committed, And we are also working closely with them in Canada as it relates to their movies that aren't going through larger studios to distribute for them. Speaker 200:40:37And in addition to that, Amazon, as you know, with the acquisition of MGM, They've got a good slate of films that are coming out over the next number of months. Now there has been a bit of a delay looking into 2024 because of The strike situation, but I think they are both committed, and they are looking to continue to release strong Theatrical product through the next number of years. Speaker 600:41:07Okay. Super. Thanks very much. Speaker 200:41:10Thank you. Operator00:41:13Thank you. We have no further questions. So I'd like to hand back to Ellis Jacob To close. Speaker 200:41:38Thank you all again for joining us this morning. We look forward to speaking with you in February for our Q4 fiscal year 2023 results. Have a great day, and enjoy a movie. Thank you. Operator00:41:55Thank you, everyone, for joining today's call. You may now disconnect your lines, and have a lovely day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCineplex Q3 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsInterim report Cineplex Earnings HeadlinesIs Now a Good Time to Buy Cineplex?April 29, 2025 | msn.comHow I’d Position $7,500 in Canadian Value Stocks Despite Market UncertaintyApril 11, 2025 | msn.comWarning: “DOGE Collapse” imminentElon Strikes Back You may already sense that the tide is turning against Elon Musk and DOGE. Just this week, President Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group, with connections to the Pentagon and the U.S. government, Elon's preparing to strike back in a much bigger way in the days ahead.May 5, 2025 | Altimetry (Ad)Cineplex Inc. Announces Details of First Quarter 2025 Earnings Release and WebcastApril 10, 2025 | finance.yahoo.comCineplex to Announce Q1 2025 Earnings and Host WebcastApril 10, 2025 | msn.comOpenGate Capital Enters into Binding Agreement to Sell Player One Amusement Group to GENDAApril 9, 2025 | finance.yahoo.comSee More Cineplex Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cineplex? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cineplex and other key companies, straight to your email. Email Address About CineplexCineplex (TSE:CGX) is a diversified media company that operates chains of movie theaters. The company has four reporting segments: film entertainment and content; media; amusement and leisure; and location-based entertainment. The film entertainment and content segment includes revenue from theater attendance. The media segment includes cinema media and digital place-based media operations. The amusement and leisure reporting segment manages the operation and distribution of gaming and vending equipment. Formerly housed in the amusement and leisure segment, the location-based entertainment business derives revenue from entertainment restaurant chains like The Rec Room and Playdium. The film entertainment and content segment generates most of its revenue from audiences located entirely in Canada.View Cineplex ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Brookfield Asset Management (5/6/2025)Arista Networks (5/6/2025)Duke Energy (5/6/2025)Zoetis (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 8 speakers on the call. Operator00:00:00Hello, everyone, and welcome to the Synaplex Inc. 3rd Quarter 2023 Earnings Conference Call. My name is Daisy, and I'll be coordinating your call today. I would now like to hand over to your host, Master Vizjali, Vice President of Corporate Development and Investor Relations to begin. So please go ahead. Speaker 100:00:24Good morning, everyone. I would like to welcome you to Cineplex's 3rd quarter 2023 earnings release conference call hosted by Alice 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. Such 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 statements. Speaker 100:00:57Information 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 Jacob. Speaker 200:01:14Thank you, Massa. Good morning, and welcome to our Q3 2023 conference call. It is A pleasure to be with you today to provide details on our best order in Cineplex history. Before I get 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. Speaker 200:01:43Let's continue doing what we do best, Pairing beautiful performances with exceptional experiences best enjoyed in our theaters. Now back to our best quarter in Cineplex history. We achieved our highest EBITDA ever, even surpassing pre pandemic levels, And we are extremely proud to see our thoughtful strategies deliver such strong results. Our adjusted EBITDA margin of 18% was significantly higher than the Q3 of 2019, demonstrating the power of the operational improvements we implemented over the Last couple of years. Over the past two quarters, free cash flow generation has enabled us to repay $55,000,000 in bank debt as part of our focus on deleveraging the balance sheet and strengthening our capital base. Speaker 200:02:38Our outstanding 3rd quarter results can be attributed to our record breaking box office, but just as importantly, Our diversification strategy. We achieved 3rd quarter record box office revenue Of $188,000,000 which represents 106 percent of 2019 levels. Impressively, our 3rd quarter results outperformed North American market share by 310 basis points. By driving guests to premium experiences, our BPP reached a 3rd quarter record of $12 and through expanded concession offerings, CPP achieved $8.44 These results clearly indicate the multiplying effect of the sustained enthusiasm 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 are seeing consumer demand for premium experiences and compelling content continue to hold strong. Speaker 200:03:53July was our highest box office month ever with Barbie generating the highest July attendance at Cineplex Theatres nationwide. Oppenheimer and Mission Impossible Dead Raffling Part 1 followed in 2nd and third places, respectively, with strong performances. The Baub and Aimer phenomena generated $2,500,000,000 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 3rd quarter box office revenue coming from our premium margin accretive experiences like VIP, UltraAVX and IMAX. Launching new concepts like Cineplex Junction enhances the guest experience, Strong per patron spend across box office, food, beverage and gaming with the aim of maximizing guest revenue per square foot. Speaker 200:04:57There's been excellent progress made on film release volume over the last two quarters, and we continue to work closely with our 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 the star studded class, tells the story of legendary sports car magnate Enzo Ferrari during 3 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 Timothee Chalamet. Speaker 200:06:00Non 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. Speaker 200:06:39Our international content is making a meaningful contribution to our overall box office performance. In fact, 4 of the top 20 films in the 3rd 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 Q4, including 4 indie films, Tiger 3, Animal, Dunkey and Salar Part 1: Cease Fire. Speaker 200:07:28Furthermore, nontraditional content like concerts, opera, stage performances and sporting events continue to grow in popularity and are Forming well at the box office. October brought the record breaking concert film, Taylor Swift, The ARREST tool, which generated over $165,000,000 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 Theatre, 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 lighthearted drama, The Queen of my dreams, Japanese animated film, The Boy and the Heron, and as part of our distribution partnership with Lions Gate, The much anticipated Hunger Games, The Ballad of Songbirds and Snakes. Moving on to our diversified businesses. Speaker 200:08:41Our location based Entertainment business had a strong performance in Q3, generating record 3rd quarter revenues of 34,200,000 LBE continues to be a growth opportunity for us as we have 2 new LBE locations opening in the second half of next year and more to come. Our Amusement Solutions business, P1AG, generated record 3rd quarter revenues of $49,000,000 an Increase of 7.7% compared to prior year. On the media side, both Cineplex Media and Cineplex Digital Media performed well Despite the challenging macroeconomic environment. Well, 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 Playing significant momentum as we head into a traditionally strong Q4. Speaker 200:09:40The 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 Forefront, we're 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 Good ordering. While mobile ordering has been available in our VIP theatres for several years, we are expanding it across The entire circuit with the rollout by region over the next few months. This new functionality improves and enhances the guest experience and provides up and cross sell opportunities throughout the guest journey. Speaker 200:10:32The SCENE plus 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 SEAM Plus now boasts over 14,000,000 members. The addition of Empire with their grocery banners and home hardware to the program is enabling us to identify and convert non moviegoers 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 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. Speaker 200:11:35We are currently conducting various Preliminary steps necessary to have this heard by the competition Triburinil during the Q1 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 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 Q3 film lineup, paired with the strong results of the company's diversified businesses, Saw Cineplex achieving the highest quarterly EBITDA in our history. Speaker 200:12:25This 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 Junction. Our content broadening strategy reinforces our leading market position Cinema and alternative content. Speaker 200:13:18We 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 Cineplex ecosystem to drive additional revenue And create efficiencies within our business operations. Overall, Cineplex is well positioned to achieve great Success and we'll 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 Gord. Speaker 300:13:55Thanks, Ellis. I am pleased to present a condensed summary of the Q3 results for Cineplex Inc. For further reference, our financial statements and MD and A have been filed on SEDAR Plus and are also available on our Investor Relations website at cineplex.com. Our MD and A and earnings press release includes a complete narrative on the operational results. So I will focus on highlighting select items And providing commentary on our liquidity, balance sheet and outlook. Speaker 300:14:26As Ellis mentioned, our Q3 results were spectacular. Total revenue increased 36.4 percent to $463,600,000 and our adjusted EBITDA was 83 $100,000 which represents our highest quarterly EBITDA ever. We had record Q3 results in substantially all our key metrics. And rather than repeating these again, I would refer you to our earnings press release And MD and A. We continue to focus on revenue opportunities and cost management and Extremely pleased with our Q3 EBITDA margin of 17.9% and a combined Q2 and Q3 EBITDA margin of 16 point 2%. Speaker 300:15:13This combined total is higher than any quarter in 2019 and the full year 2019 total 13.8%. Let's take a closer look at our segments and see this optimization Focus in action as we compare Q3 2023 to the pre pandemic Q3 2019. In the Film, Exhibition and Content segment for Q3 2023, attendance was 90% of 20 nineteen's levels, But total revenue and adjusted EBITDA were both higher than 20 nineteen's level at 113% of 20 19 And 135 percent of 2019 respectively. In addition, despite the attendance volume decline, Our segment adjusted EBITDA margin increased to 19.2% in 2023 as compared to 16.1 percent in 2019. In the Media segment, as we have mentioned previously, The Cinema Media business model post pandemic has shifted to a CPM based model. Speaker 300:16:28And as such, Cinema advertising revenues are more dependent on absolute attendance levels. Decrease in attendance levels, Coupled with the current advertising climate as compared to 2019 has resulted in segment adjusted EBITDA coming in at approximately 79 Effective cost management has resulted in the segment adjusted EBITDA margin Improving to 55.8 percent from 46.9 percent in 2019. Turning to our Amusement Solutions segment, P1AG has continued to perform strongly with segment revenues coming in at 110% 20 nineteen's level and adjusted EBITDAO coming in at 133 percent of 20 nineteen's levels. As a result of strong cost control and additional integration synergies, segment adjusted EBITDA margin has increased to 17.2% from 14.2% in 2019. And lastly, our LBE segment has benefited from additional locations and strong cost management. Speaker 300:17:44Segment revenues came in at 175 percent of 20 nineteen's levels and segment adjusted EBITDA came in at 427 percent of 20 nineteen's levels with segment adjusted EBITDA margin increasing 25.4 percent in 2023 from 10.4% in 2019. The above are concrete examples of this focus on revenue opportunities and cost management. In looking at the last 12 months, our LTM EBITDA was closing in on $200,000,000 At $195,000,000 with the last two quarters alone contributing $143,000,000 The $195,000,000 total. As Ellis mentioned previously, it was only in April 2023 That we return to regular product supply with multiple releases on a weekly basis. Finally, net income is relatively flat to the prior year as the $63,000,000 improvement in an adjusted EBITDA Was offset by the inclusion of a gain of $50,000,000 on the reorganization of CNLP in the prior year And the inclusion of non cash deferred taxes of $11,000,000 in the current year. Speaker 300:19:11I would like to now move on and speak to our balance sheet and in particular our liquidity position. As a result of the past 2 strong quarters, We were able to pay down approximately $55,000,000 under our credit facilities. This left us with $301,000,000 drawn And approximately $232,000,000 available under our credit facilities as at September 30, 2023. As at September 30, 2023, we reported a senior leverage ratio of 1.48 times as compared to a covenant of 2.5 times. Although not tested, our total debt ratio was 2.63 times, well within our 2.5 to 3 times target range And demonstrates our commitment to deleveraging. Speaker 300:20:04In addition to deleveraging through operating results, We will continue to evaluate value creating liquidity events, which could include asset sales. Now I'd like to take a few moments to look forward. I want to revisit the world we've described during our past analyst calls. This was a world where we could potentially achieve pre pandemic adjusted EBITDA levels on 75% to 80% of pre pandemic attendance levels due to our diversified business models and used free cash flow to delever. With the return of product on a regular cadence for the 2nd and third quarter combined when comparing to 2019, We achieved 108 percent of 20 nineteen's EBITDA on 83% of the attendance And delevered by $55,000,000 This continues to give us confidence that this world is real And here today. Speaker 300:21:09We may have a few bumps ahead of us because of release date changes due to the various strikes, But the long term view is solid. Our business is typically traded at a premium given our market share 5 businesses. However, with the positive results of our business and momentum in the industry, we have not seen the same valuation return that our peers in the U. S. As of yesterday, we were trading at an approximate 30% discount to our target price. Speaker 300:21:41We understand that our Canadian listing means we are subject to more of a show me view, but we would expect that our Q2 and Q3 results Should give you some confidence that we are continuing to show you. Let's talk about our balance At the end of Q3 2023, we had approximately $867,000,000 face value of debt, Including $316,300,000 in convertible debentures, which have a conversion price of $10.94 All our equity research analysts have a 1 year target price in excess of the conversion price. In the 75% to 80% attendance world, We believe that the convertible debentures would convert to equity. And as mentioned earlier, we would be within our target leverage ratio range of 2.5 times to 3 times and on the path to consider the reintroduction of a dividend. Now let's talk about initiatives to capitalize our capital structure. Speaker 300:22:45As I said last quarter, I want to make it clear that we're primarily talking about the composition and maturity of our debt stack, including items such as rating strategies, mix of bank versus Private versus public debt, U. S. Versus Canada and not dire measures such as issuing common equity to reduce debt. The strong return of our business in Q2 and Q3, you will see us moving forward with these initiatives, including extending maturities, Removing restrictions and financial covenants and ultimately reintroducing a dividend. With our recent record breaking operating results and our commitment to strengthening the balance sheet, there's a lot to be excited about. Speaker 300:23:28And with that, I would like to turn things over to the conference operator for questions. Operator00:23:37Thank you. Our first question today comes from Adam Shine from National Bank Financial. Adam, please go ahead. Your line is open. Speaker 400:24:08Thanks a lot. Good morning. Obviously, good results and great news out of Hollywood. Ellis, can you talk a little bit about I mean, you touched on Q4. Can you talk a little bit about The 2024 film slate, and obviously, there's more to come as we get a sense as to how Production reboots, but how do you characterize the slate? Speaker 400:24:28And any additional information that you might be aware of in terms of further strengthening it? Speaker 200:24:36Yes, Adam. And there were real concerns as to how the slate would roll forward, and we saw a number of movies Like Dune and Ghostbusters move, but we still feel quite strongly. I think the only 2 films I Look at it as far as moving out of 2024 was Snow White And Mission Impossible. Those were the 2 big ones. But now with Dune in the Q1 and Ghostbusters In the Q1, that should help. Speaker 200:25:10And I don't know if you saw, but the Hollywood Group are ready to get back and Deadpool, Gladiator, Venom, Beetlejuice are all starting production Very, very shortly. So that should help as we move forward. That's not to say, Adam, that there aren't going to be Minor disruptions, but still feel good moving forward. Speaker 400:25:39Okay. Thanks for that. Obviously, you referenced The Taylor Swift movie and you've got Beyonce movie, concert movie coming up as well. A number of questions we've had is relate to The film cost profile, and I don't know if you're able to talk to it, whether there's something unique about it or whether sort of it just comes in As a similar average to the usual film cost splits with the studios? Speaker 200:26:08Well, in the case of the concerts, we are basically the Canadian distributor for them. So it's a little bit different than what we would do on a regular film. So It's part of the whole process, but there are give and takes between us and the AMC distribution company. Speaker 400:26:32Okay. And just maybe one for Gord. Gord, obviously, we've seen tremendous strength out of P1AG in recent quarters and still very strong results. But just curious, anything in particular in the Q3 in regards To a bit of a step down we saw from the trend in Q2, which was exceptionally strong and just the context Of margins as well. Yes, up year over year, but maybe moving a little bit lower within the usual range that you talk about. Speaker 300:27:08Yes. So look at, Adam, and it was a record Q3 result for the P1AG businesses, which has continued to kind of Deliver record results and significant increases over prior year. There's a little bit of a seasonality to the business. So in Q2, we absolutely saw some of the benefits of that seasonality. The business, we're extremely pleased with. Speaker 300:27:36We're hitting those target margin ranges of 15% to 17%, which we've always Which was kind of highlighted since some point in time last year. So it continues to perform exceptionally well. And we're really excited on the outlook as you look forward in this business given sort of the explosion of new FEC concepts across North America. Speaker 400:27:58Okay. Super. Thanks. I'll leave it there and queue up again. Appreciate it. Speaker 200:28:03Thank you. Operator00:28:06Thank you. Our next question is from Maher Yaghi from Scotiabank. Maher, please go ahead. Your line is open. Speaker 500:28:16Great. Thank you for taking my questions and great quarter guys. I wanted to maybe start with the most pressing and Questions we got on Cineplex, and that is dealing with the leverage situation. I'm happy, Gord, you said you're not contemplating any equity issuances at this point in time, which is good to hear. However, I just wanted to maybe touch base on the upcoming refinancings that you have coming up and How you are going to handle these refinancings? Speaker 500:28:54You mentioned you're looking to Refinance some of these maturities. Can you maybe just elaborate a little bit on that? I think a lot of our investor base Is hoping to get more clarity on that. Thank you. Speaker 300:29:12Sherry, good morning, Mary, and thank you for your comments. As I mentioned in the call script is, our focus is looking at extending the maturities. We'll look at the composition and the mix between bank debt, public debt, private debt. And our focus will be on extending the maturity. So, we do have and as I said, I wouldn't be surprised if you see us go out and get a Credit rating, to provide optionality, on what we may do. Speaker 300:29:45I also have said historically, I wouldn't be surprised if you saw us Our approach, our bank group to ask to extend the maturity of the existing credit facility To give us additional flexibility as we move sort of through these turbulent economic times and ensure that we have flexibility on when we want to choose and execute on a strategy related to the debt. So our focus will be starting very soon to some point in time in early 2024 To look at extending maturities, changing the composition of mix, And as part of my comments were that the converts, We believe we'll in essence solve themselves, given the strong results and the outlook on the business. Additionally, as I mentioned on my prepared comments too, we have delevered from the strong operating results by $55,000,000 Over the last two quarters and we are now with my comments, we will continue to delevering We would also consider potentially any asset sales to the extent that we thought they were accretive. Speaker 500:31:09Okay, great. Maybe just a follow-up on the results. When you look at 2024, Assuming a steady slate of movies coming out from production and hitting the theaters, Anything you want to highlight that you had in Q3 that would be abnormal or non recurring that is Affecting either up or down your free cash flow. Just trying to make sure we have the right pace of Free cash flow production going into 2024? Thank you. Speaker 300:31:49Yes. So, Maher, I think, Wukin, I think one thing that you're Seeing in the business is we have focused over the last 3 years on optimizing the cost structure. I highlighted some of the results of the work when I provided The EBITDA margins of each of the segments and how we significantly improve those EBITDA margins as compared to the pre pandemic period And the Q3 results is really the material operating leverage of the business. Once the attendance is there, The incremental flow through to free cash flow is massive. So this is the world that we believe we operate Operator00:32:42Thank you. Our next question is from Derek sorry, go ahead. Speaker 300:32:50Sorry, just wrapping up here. So sorry. As Maher, as we mentioned, dollars 150,000,000 of EBITDA in the last two quarters, $55,000,000 of debt pay down. So to that regular cadence, we're very confident about ability to delever off The strong free cash flow that we this business will generate going forward. I think we can go to the next question now. Operator00:33:25Thank you. Our next question is from Derek Lessard from TD Cowen. Derek, please go ahead. Your line is open. Speaker 600:33:34Yes. Good morning, Ellis, Gordon and Masa. First of all, congrats on an awesome quarter and happy to see labor peace for the next 3 years. Maybe on that topic, Ellis, I think some of the concessions that the studios made could I think they were saying could be worth up to $1,000,000,000 Just wondering or do you think that studios try to maybe recoup or cloth some of that back through movie costs to exhibitors? Speaker 200:34:02A lot of the concessions that they gave had to do with streaming and post theatrical. So we feel at this point in time, I haven't had anything as far as significant discussions As it relates to this, but we've been great partners with the studios, and we'll do our best to get the maximum box office that We can derive, and that's something that we work together with them to deliver. And that to me is really important. Speaker 600:34:35Okay. That's helpful. And I think in terms of the current slate, I was curious on whether exhibitors get Any sort of heads up from the studios on potential movements or shifts? Speaker 200:34:51Well, there was a big, as I mentioned earlier, there was a big article on deadline that talked about them restarting ASAP, And they've named about 6 different movies that they are starting right away. And that, to me, is a good sign that They are moving back to full production of these films. Speaker 600:35:13Okay. And as we've Speaker 200:35:15helped many times Sorry, go ahead. Speaker 600:35:21No, no, continue, Alex. Sorry. Speaker 200:35:25But as I've said many times is with the situation we are in, it's not that Films are basically disappearing. They are just moving. So it's a positive positioning for us going forward. Speaker 600:35:42Okay. And Gordon, maybe just a few for you. Obviously, I think you've touched on some of it, but super strong year to date results and Maybe Q4, maybe a little bit less, so just given the slate, but you look well placed for covenant testing to resume in Q4 by my math. Just curious how you're Thinking about the upcoming test and looking ahead to next year? Speaker 300:36:07Yes. Look, we gave you I disclosed the total leverage number, which would be well within the compliance range. And as you recall, And that's an LTM ratio. So the Q4 Q4 last year was not a particularly strong quarter, so that will fall off and get replaced with this one. So yes, we feel very strong about Where we are with respect to the covenants going forward. Speaker 600:36:40Okay. And then just maybe on a bit of housekeeping. On the working capital Sorry, there was a usage on what looks like the accounts payable. Just maybe some color around there would be helpful. Speaker 300:36:54Yes. So, look, with the ebbs and flows, in a strong we typically try and match the our working Capital position to the strength of the business. So with the strong business results, we looked at Sort of accelerating some of the payments to our suppliers from where they had been historically. Speaker 600:37:19Awesome. Thanks for answering my questions, and congrats again. Great quarter. Speaker 200:37:25Thank you very much. Operator00:37:30Thank you. Our next question is from Drew McReynolds from RBC. Drew, please go ahead. Your line is open. Speaker 600:37:48Yes. Thanks very much. Speaker 700:37:49Just to echo a fantastic quarter for you guys, Gordon Ellis. I missed the first part of the call, so my apologies for any duplication here. Maybe for you, Gord, just on the asset Sales that you could explore, is there anything you can give us in terms of whether those would be non core or Perhaps something a little bit more core, so to speak, but how you kind of size up An accretion potential on what your lens is there. And then secondly, Maybe for you, Ellis, on the film supply and specifically from the streaming platforms, I think we're all aware that The theatrical window is increasingly a window that movies from streaming platforms are using. Has anything changed in terms of that pipeline over the last few quarters, Obviously, notwithstanding the delay due to strikes, it still feels there's strong commitment there to Release in the theaters. Speaker 700:39:05Thank you. Speaker 300:39:08Thank you, Russo, and thanks for your comments. I'll take the Question then with respect to asset sales. So throughout the pandemic, as we'd obviously looked at certain non core assets, our head office building, We sold an equity interest or decreased our interest in our holdings and seen. So as we look forward and contemplate what are the other options is, it will probably be a non core asset to the extent that there is an interest in And our businesses, we have a very complementary Set of strong assets that there's always been ongoing interest in. So to the extent that there's something that was accretive and made sense for us As we would obviously execute on something. Speaker 200:40:03Okay. And to your question about the streamers, as Well, I was looking at Apple and Amazon. As you know, Apple released a big movie in October, Killer of the Fire Moon. The movie did quite well, and they've got another movie, Napoleon, coming out shortly. So they are very committed, And we are also working closely with them in Canada as it relates to their movies that aren't going through larger studios to distribute for them. Speaker 200:40:37And in addition to that, Amazon, as you know, with the acquisition of MGM, They've got a good slate of films that are coming out over the next number of months. Now there has been a bit of a delay looking into 2024 because of The strike situation, but I think they are both committed, and they are looking to continue to release strong Theatrical product through the next number of years. Speaker 600:41:07Okay. Super. Thanks very much. Speaker 200:41:10Thank you. Operator00:41:13Thank you. We have no further questions. So I'd like to hand back to Ellis Jacob To close. Speaker 200:41:38Thank you all again for joining us this morning. We look forward to speaking with you in February for our Q4 fiscal year 2023 results. Have a great day, and enjoy a movie. Thank you. Operator00:41:55Thank you, everyone, for joining today's call. You may now disconnect your lines, and have a lovely day.Read morePowered by