Q3 2019 Earnings Call
Good day and welcome to the Cineplex incorporated third quarter 2019.
Today's conference is being recorded.
I would like to soon.
Two movies Supercycle senior manager Investor Relations and Communications. Please go ahead.
Thank you good morning, everyone.
During the call we would like to remind you that certain statements being made are forward looking and subject to various risks and uncertainties.
Such forward looking statements are based on managements beliefs and assumptions regarding the information currently available actual results could differ materially from those expressed in the forward looking statements factors that could cause results to very include among other things adverse factors generally encountered in the film exhibition industry.
[laughter] associated with National and World events discovery of undisclosed material liabilities and general economic conditions.
I'll now turn the call over to our President and CEO Alex Jacobs.
Thank you Melissa good morning, welcome to Cineplex things 2019 third quarter conference call.
And you could join US this morning.
Again by providing a topline almost feel fourth quarter results and the summary, I'll talk to you accomplishments. During the period then we will look at some of the upcoming films for the rest of the year and into 2020 at the conclusion of my remarks, our Chief Financial Officer Board Nelson will provide an overview of financial.
And then we will follow with the question and answers period.
With growth across all four businesses Cineplex delivered an impressive quarter, including record total revenue of 418.4 million up 8.3% and up 21.2% increase in adjusted EBITDA.
As we leverage the strong brought often further executed on on diversification strategy.
In addition to the increases in attendance and box office revenue, which were largely the result at the Port a strong film slate. We also achieved good quarter records for food service and amusement revenue and achieved all time quarterly record for digital place based media revenue.
These positive results are a great example of how about diversified businesses continued to build scale and make more meaningful contributions to our bottom line.
New third quarter Records were also achieved four BPP of $10.16 and CPP of $6.68. As we grew transaction side through expanded offerings in almost two years.
[noise] Das performing films for the quarter into just a lion King Spiderman fall for hall fast and furious.
Presents Hobson show like T. In chapter two and once upon a time in Hollywood all of which helped drive the 1.8% increase in attendance this quarter.
Now, let's take a look at some of our key accomplishments during the third quarter.
Exemplifying our commitment to providing Canadians with an unparalleled movie going experience. We open Canada second 40, S. auditorium at Scotiabank, either Sunoco in Calgary, Alberta, and just this past Tuesday subsequent to quarter end, we opened up toward 40 ex auditorium at Cineplex cinemas Winston Churchill that whole full Ontario.
For those of you haven't tried to get 40 acts as a fully immersive experience with motion seats and environmental effects like when missed and said that work in concert with the action on the big screen. We will continue to expand our footprint of both 40 accident screen next experiences in the coming on.
Also during the quarter, we were pleased to announce plans for a new cineplex VIP cinemas at World Mountain, Montreal, Quebec, which is expected to open in 2022.
Well, then theater foodservice, we continue to expand the alcohol. So this to an additional 12 theatres to date totaling 83 locations within three provinces, that's over half of cost circuit.
And in addition to our over eats offering at 101 theaters will be also began a pilot program, which kept the dishes ensuring guests can enjoy our signature popcorn and other popular concession items anytime they want right to the adult.
Key contributors the record CPP I mentioned earlier included growth in alcohol and merchandise sales and also within Cineplex VIP cinema as we continue to expand food and beverage offerings that this increasingly popular premium experience.
Looking at alternative programming, we continue to bring new North Hollywood content to audiences across Canada, both in our traditional auditoriums and up 24 dedicated events screen auditoriums.
During the quarter, we featured live events from Andrea U sleep backed by Phebe wall operation and Margaret Afterwards book launch of the Testaments animated features along with documentaries from BG has to reinvent Bob sensation and the feature game changes will all parts of the quarters lineup.
Our International film programming also featured several strong performers in Hindi Punjabi and Filipino what's the film Hello loves it by becoming the highest grossing Filipino titled incentive plus history.
Switching gears to online offerings.
Yes, up becoming more comfortable with and more reliant on mobile technology inside and outside of water heaters, which is why the cineplex mobile app is such an important asset for us during the quarter online and mobile ticketing represented 31% of total theater admissions up from 24% as a third quarter 2000.
18.
Total registered users for the Cineplex store increased by 43% in the third quarter. We also saw 181% increase in device activations as compared to the prior year period.
Growth in the stores largely driven by increases in consumer use of the cineplex apps embedded on smart Tvs and leveraging the cineplex equal system by providing stalkers to guess who visit off theaters and purchase concession calls.
Moving to media I'm very pleased to report that our media business reported that 30.6% increase in revenue as a result of growth in both cinema media, which was up 13% and digital place this media, which was up 57.2% growth.
Growth in Showtime and pretty show advertising sales resulted in the increase in my media revenue for the third quarter with automotive continues to lead as a top category.
And as I mentioned earlier digital place based media Rich reported an all time quarterly record as a result, our increased project installation revenue from new and existing client.
Speaking of new clients in the third quarter, We also announced at Cineplex Digital media was selected to manage and enhance AMC theaters digital network at approximately 630 locations across the United States. This includes box office signage theater menu boards and other and so the reason.
Signage.
Moving onto amusement gaming and leisure it has been a particularly exciting time for our location based entertainment team and this quarter. We opened our very first reinvented palladium concept and Brampton, Ontario retrofit. It from what was lost so Ryan either the new Palladium is designed.
Specifically for teens fat friends and family.
We are pleased with the response from the community so far as a new palladium becomes Brampton ultimately to play featuring the latest video games Earl course, falling at virtual reality as well as arrange a fresh food and beverage offerings that are fun to eat.
And just this weekend subsequent to quarter end, we celebrated the grand opening across second new palladium location in would be Ontario.
Oh plan remains to open 10 to 15 palladium locations and midsize markets for the next three to five years.
Only on the call I spoke about the newly announced Cineplex VIP cinema opening at Royal Mountain Montreal as a direct result of regulatory amendments made by the Quebec government in partnership with Cineplex. We also announced plans for the province is first location up the Rec room at Royal Mountain must feel.
This time to become the city's new hot spots. The entertainment complex is expected to open end 2020 too and we will feature in ratable dining options exciting live entertainment over 100 amusement games and attractions, including virtual reality.
Shifting our focus to talk golf last quarter I shared that we had secured a sites where our first location within the GT.
Well I wish I could share specifics, we are still conducting due diligence on the site and hope to have an announcement shortly.
Turning to E Sports World Gaming network held that second annual rocket deep North American Championship tournament with his Grand files events, taking place at the hugely popular fan Expo Canada in August .
We entered into this industry early in its evolution in North America, and they it's fast becoming one of the largest these sports businesses with many opportunities.
During the quarter Cineplex initiated a review process and engage the financial advisor to identify a strategic equity partner to further develop the will gaming network business.
While we are still early in the process at his conclusion, we may retain a minority interest in the operations of the business.
I'll go into more detail as it relates to our reporting shortly.
Moving onto the scene loyalty program. This quarter, we celebrated up 10 million member milestone, reaching 10.1 million members as of September Thirtyth.
As a tool for growth the value of seen a significant and drives increased customer frequency and provides more channels for us to communicate directly in regularly with our gas.
So you can also increases overall awareness spend not just at a network of 165 theaters across Canada, but also across the entire cineplex ecosystem of businesses.
But perhaps the most valuable benefit of scene is a tremendous insights into customer behavior through the rich data we have collected.
Using this information has and continues to help us better understand our guest needs, enabling us to analyze and influence behaviors across the business.
Now, let's take a look at some of the phones for the balance of the year and into 2020 .
The fourth quarter got off to a good start largely because of the huge success of Joko, which had the highest ever opening weekend in the month of October and has become the highest grossing film to open in the month, reaching 316 million and the best tick box office Disney.
Looking ahead, the remainder of the has a great lineup of films, including full horses Ferrari Beautiful day in the neighborhood frozen to jumanji. The next level and Star Wars, the rise of skywalk, which already generating some strong but.
So much so that the first week of Cineplex Presales was frozen to has already set a record for advanced ticket sales for animated film at the same point in time.
There are two other films I would like to mentioned board opening on December 25th Seaport, too, which is expected to be a big holiday release in Quebec.
It'll women directed by greater Gerwig, and starring Emma Watson in the Reimagine Classic.
As you can see we have what appears to be a promising film slate for the remainder of here and I encourage by the 2020, some slate that's been announced to date.
Some such as birds afraid that kingsman acquired place far to move along the James Bond movie No type to die thresholds will do well last widow fast and furious Wonder woman 1980 full top gun Mavericks minions, the rise of group tenant Ns Untitled Spider Man Phil.
Before I turn things over to claw, let me take a moment to discuss a few questions and concerns I have received about some of the new streaming platforms that are available.
Our industry and specifically cineplex has experienced many disruptions over the years from various economic cycles, and technological advances, including VHS gable DVD, the internet and now streaming.
But time and time again over the past 30, plus years movie going as long. So the mid changes in the industry. The reason is when there's great content available our guests want to see the thumb into weight was meant to be seen on big screen with great seventh and amenities and seek out that social movie.
Greetings and that's why we remain ever focused on keeping moviegoing top of mind by putting the guest first today, we offer our guest nine different ways to watch a movie, including two D. Threed 40 Act screen X all three VX IMAX de box VIP.
Cinema, and the clubhouse always bringing the very lead us in innovation and technology for a totally immersive experience that cannot be replicated at home.
In summary, cineplex experienced a very strong third quarter by capitalizing on the robust robust film lineup and continuing to execute our diversification strategy.
Looking ahead I'm encouraged by the outlook of film product for the remainder of the year and the ongoing growth of our diversified businesses.
Adding to this with our strategic focus on spending for growth, we remain confident thats the of positioning cineplex well for the future.
Finally, I'd like to congratulate the entire cineplex foot team for being recognized as one of the top 40, most valuable Canadian brands for 2019.
The study conducted by brassy was based on Indepth consumer research and I'm extremely proud to see that Cineplex was highlighted numerous times for our customer experience emotional connection excellent reputation clear purpose and good citizenship.
In addition to this tremendous recognition. Our team was also are what the best brand experience award with call out store over each partnerships seen loyalty program VIP cinemas experience brand meaningfulness and brand innovation with that I'll turn it over to Gore.
So I am pleased to present, the third quarter financial results for Cineplex Inc. for your further reference our financial statements and Mdna have been Cedar. This morning, and are also available on our Investor Relations website Cineplex Dot com.
Before I review the results I'd like to note. The Q3 2009, the Cineplex's third quarter reporting under the new accounting standard for leases for 16.
I would like to remind you of the new non-GAAP measure we are providing adjusted EBITDA after leases or adjusted EBITDA to assist with the comparability to prior year periods.
With respect to the transition to infer 16 leases. We have noted that there continues to be confusion in the market with respect to the consistent recording key financial metrics provided by financial data providers services.
Including Bloomberg capital Accuen Factsets, that's kind of confusion in the marketplace is not unique to cineplex and applies to many organizations with large and these portfolios.
The inconsistency relates to the use of the operating earnings metric before or after a lease cost and a debt measure, which either includes or excludes a lease obligation liability.
I caution investors to use additional diligence when reviewing metrics provided by data provider services, we continue and we'll be working with these providers to help rectify the situation and give investors more accurate information.
As Alex mentioned during the third quarter Cineplex initiated a review process of World Gaming networks online E sports business, including we just starling engaging a third party advisor to identify a strategic equity partner.
As a result of this process the operations of World Network.
Separately in the financial statements categorized as discontinued operations all the results I will discuss today exclude any impact of world get gaming networks in the current and comparative periods as prior year amounts have been restated to reflect this treatment.
Growth in results from all lines of business resulted in total revenue increased 8.3% to Inc. third quarter record of $418.4 million and adjusted EBITDA, increasing by 21.2% to $62.3 million.
Turning to specific items Cineplex's third quarter box office revenue increased 2.6% to $177.9 million compared to $173.3 million in the prior year.
The increase was due to the third quarter BPP record of $10 in 16 cents, an increase of nine cents, 4.9% from $10 in seven cents reported in 2018.
As well as the 1.8% increase in attendance.
The third quarter benefit from a wider appeal of the film slate.
And.
Food service revenue increased 8.6% to $125.6 million included in food service revenue is $8.5 million.
The record.
Excluding revenue from Lv Theater food service increased by 8.9% from the prior year to a third quarter record of $117.1 million due to the 6.9% increase concession revenue per patron to a third quarter record of $6.68 and.
1.8% increase attendance.
CPG growth was attributed in part to expanded food offerings, including those available at Cineplex's VIP cinemas outtakes pricing changes and additional licenses locations.
Total media revenue increased $10.1 million or 30.6% to $43.3 million for the quarter.
Cinema revenue, which is primarily theater based increased 13%.
Digital plates based media revenue increased 57.2% compared to the prior year, primarily due to higher project installation revenues.
For the quarter project revenue was up 273.4% due to the increased installations, including AMC and W and Mcdonald's at the end of the third quarter, our location count to 14559 locations represents an increase of 8.5% over the prior.
Our year and an increase of 7.8% during the first nine months of 2019.
Amusement revenue increased $4.3 million or 8% due to continued revenue growth from Phptwenty G.
Well, let me additional locations of recruitment our new palladium.
PD, one AG revenues increased by $2 million due to an increase in rent revenue in Canada in the us.
Margins on the P. when AG business increased 450 basis points as compared to the prior year to 14.3% for the third quarter and or 13.3% on a year to date basis.
You want AG EBITDA for the third fourth quarter increased 52.1% to $6.4 million.
With respect to location based entertainment, which includes results from the recruitment and new Palladium total revenue grew $2.8 million over the prior year, primarily due to the additional locations.
We opened our first Reimagine palladium and Brampton on September 16, 2019.
Store level EBITDA from location based entertainment, increasing point $6 million or 17% of $4.1 million and historic level EBITDA margin increased to 20.7% from 20.6% in prior year.
Turning briefly to our key expense line items.
Film costs for the quarter came in at 52.7% the box office revenue as compared to 52.1% reported prior year, reflecting the relative mix films in the quarter.
Cost of food service for Q3, 2019, excluding $2.2 million incur that LP, he was 21.5% as compared to 20.5% prior year.
Cost of food service that there will be he was 26.1% down against 28.2% reported in the prior year due to improved cost management.
The increase in theater concession costs was primarily due to the mix of food and beverage items sold including the impact of increased number of locations with alcohol sales.
Other cost of $191 million decreased $26 million or 12%, primarily due to the impact of the adoption of efforts 16, partially offset by increased cost doing.
Increase in business volumes in the non exhibition businesses New theater locations.
Increased operating hours in the exhibition business and minimum wage increases.
Other costs include occupancy expenses other operating expenses and general administrative expenses.
Peter occupancy expenses were $18.2 million for the quarter versus the prior year actual $53.2 million a reduction of $34.9 million.
This was primarily due to the impact for 16, which reduced rent expense by $38.8 million additional details on the movement arising from the transition for 16 can be found in our mdna.
Other operating expenses were $156.7 million for the quarter versus a prior year actual of $145.8 million, an increase of $10.9 million.
Other costs are net of $4.5 million of cash rent related to the lease obligations are rising on the adoption of the for 16.
Increases included an increase in media expensive expenses of $8.7 million due due to increased media business volumes and revenue mix shifts a $2.2 million increase in LP you expenses due to increased number of locations and a 1.2 million dollar increase.
Due to new and acquired theaters that have a reduction of point $4 million due to dispose theaters.
Same theater payroll increased by $2.3 million, mainly due to increased operating hours additional attendance expanded concepts and minimum wage increases.
<unk> expenses were $16 million for the quarter, which was $2.2 million lower sorry, $2 million lower than the prior year.
Point 8 million dollar decrease in restructuring costs and in addition to other cost reductions 8.4 million dollar decrease in share based compensation costs interest expense increased $11.4 million during the quarter to $18.3 million, primarily due to the inclusion of 11.6.
Million dollars in were lease related interest are rising on the transitions for 16.
Net capex for the third quarter was $27.1 billion flat against the prior year.
We are continuing to confirm our net capex guidance of $155 million for 2019 and $170 million.22.
Net income for the quarter from continuing operations was up $2.8 million or 31.1% to $15.1 million and basic EPS was up five cents or 26.3% per share to 24 cents per share primarily on the strength of the results for the quarter offset by the end.
Yes.
Option November 16, which negatively impacted our net income by approximately $3.8 million in the current period.
$6.4 million or 10 cents per shares compared to the third quarter of 2000.
As else mentioned earlier, we have steadfastly focused on creating a diversified entertainment and media companies in the future.
We are prepared to prudently as both are operating cash flow and our credit facility to invest in businesses.
We continue to remain comfortable with where cineplex inc. as position today.
Still in the early execution phase a number of our diversification initiatives and our balance sheet allows us to continue to invest in these growth initiatives to deliver future value for our shareholders.
That concludes our remote for this morning, and we'd now like to turn the call over to the conference operator for questions.
Thank you, ladies and gentlemen, if you would like to us.
Okay.
So listen Pete.
If you.
Q assumptions.
Hello.
Sure.
Once again.
Good question.
We will take us.
Question.
Aside from TD Securities. Please go ahead your line is so.
Yes, good morning, everybody and congrats on the quarter and the awards, which I think our well deserved.
I think my first question is maybe for guard what was going on with your EBITDA margin in the media business.
There was a significant compression in the quarter and and maybe if you could just follow up to that is should we expect it to go back to normalized levels.
Yes, I mean, what I highlighted in my comments was that.
The cost.
Increase in media was related to a mix shift so when you look that at the components of revenue in the third quarter.
Hi, lighted my comments and we put in our Mdna the growth in the.
Installation revenue in the project based revenue, so thats, a lower margin business.
Then the services business and then the cinema media business, So it's really related to the.
The amount of the installation revenue that occurred during the third quarter.
Okay, and I guess.
Once you once you complete these these rollouts with the new with your new customers do you expect sort of.
A shift back.
Yes, absolutely okay alright.
And.
Just sort of and maybe I should remind us again, when you expect to reach peak spending.
And assuming I guess theres, not assuming no delays with top golf.
The top off as I said, we are still.
You know anxious and awaiting.
Final due diligence and we will confirm that.
Period of time without first location and going on the spend yet so I mean and Thats why we have the higher amount that was kind of retained in the 2020 guidance over the $170 million.
So peak spend would probably be in 2020 as we're getting that site ready for opening in 2021.
Okay Thats it for me ill re queue. Thanks.
Thank you.
We will now.
Some of them slide national Thanks.
Please go ahead your line.
Thanks, a lot maybe one question for Ellis with a couple of record Ellis just in terms of.
The headlines we saw in recent weeks on the Irish but obviously it.
Debut on the streamer after about a 26 day window I think there was some talk to the market that Netflix is baby prepared to go to 45 days, but that.
Theater operators did want to go less than 60 days.
Yeah, maybe you can talk around that I love those metrics are true or not obviously they were part of.
Private negotiations, but can you speak to the concerned around maybe setting the precedent for that type of movie or.
But that could there be some degree of accommodation for obviously.
Especial movie like that maybe I'll leave it there Doug I'll move on after with cord.
Yes, so great question and you know as we've said repeatedly we like to get great movies, great experiences in theaters, but.
Do we have a number of partners that we work with closely and.
We feel that it's important that the.
Theatrical window is observed by all of the players and coming to our theaters and no different for Netflix and no different for any of the other suppliers and yes, we would welcome them into our theaters and I think as part of their whole building off their business.
As which they continue to evolve is to get that theatrical release creates a lot of positive.
For the product and I always say, we still the engine that drives the train so.
It's a decision and we'll continue to keep.
Speaking with them and we'll see over the next couple of quarters, where things end up.
Okay, maybe for for Gord.
You one on one of the.
Yes peer calls they talked about the fact that the recruitment on.
DC IP would perhaps peak out next year that sort of run its course ultimately in 2021 can you give us just a quick we'll update perhaps where things stand with respect to.
See DCP up here.
With respect to.
Gap in your box office revenue performance and.
Industry.
There were some adjustments to industry numbers.
So we statements to last year, but I think.
Your industry data points that you provided.
I presume reflects that adjustment.
Yes, so I will take.
I'll take the first question on on CDC peak and.
For for everyone has not familiar with.
With CDC be the Canadian digital cinema partnership where.
We set up a.
Really there is a third party additive set up for the funding in financing a digital projector rollouts in Canada.
Which added referred to is the similar type of partnerships set up in the us.
We do show on our statement of changes cash flow.
Net net cash received from CGP line, it was roughly $12.5 million on a year to date basis.
In the third quarter of this year.
And very similar to the comments that were made in the U.S. as we expect that to continue until.
The early to the midpoint of 2021, so that will continue to.
To that point of time.
The.
And with respect to the industry question I'll, just turn that over time.
Yes, so Adam as you mentioned, our under compared to the box office with the industry number of factors come into play in the quarter. You know we have taken do have a large theaters, where we're converting them to allow under so when we take screen out that affects our box office.
Yes.
We've also got the issue of the drive ins. This summer the drive ins did extremely well this 40 drive ins across Canada, we unfortunately, or Fortunately only have one of them, which is in the province of Quebec, So and the overperform compared to prior year and there's also a number of theaters that IMAX slow.
Patients that never used to reported the past India now included in those totals and there was also an IMAX film called Super Dogs, which played very well in those IMAX locations from an educational perspective, and also a box office and finally, there are theaters that are being built in Canada. So as we.
Talked about in Fort Mcmurray, there was a new theater put in.
In lorette villain get back there was a new theater put then hand the differences every time you add those it increases the size of the market and because our share is as high as it is the percentage looks like it's impacted more than one would see on a regular basis and the other thing as we continue to look at the.
Square footage and what we are using the theater for so in the case of fluoride gate that was a theater that was.
You know delivering us with box office, we've converted it to a palladium so that doesn't come into the totals and then we look at other opportunities as we move forward through through the whole process and.
We've still got a number of things on the goal that we continue to.
Due to focus on and to me, it's all about how do we use the available square footage and increase the value that we are getting out of that square footage within all of our complexes.
Great do I appreciate the color thanks, all queue up again.
Thank you.
We will now take our next question, Jeff Ben from Scotiabank.
Your line is.
Thanks, Good morning, everyone.
A few questions first maybe touch on the Rec room.
Well some good growth this quarter, but you also added a few locations that you didn't have before.
So it looks like.
From a revenue per location perspective, or same store sales wondering if he can talk a little bit about the performance there and also the the mix between food and gaming looks like the mix for food was down wondering if there's anything specific whether its macro related or spending consumer spending related that's impacting that.
In the quarter. Thanks.
Sure Thanks, Jeff at scored.
So as we look at sort of those the same store results and as we kind of get passed the first 12 18 months in a number of locations.
We do see those the honeymoon period come into play such that.
The same store revenue numbers decline after that first 12 to 18 months of operation.
What we have seen as it and again, we have a limited number of location there today so.
In each one of them has performed differently over the various quarters.
I think we highlighted in the first quarter that the same stores, our expectation was the honeymoon impact goes around 12% or so.
I'd say in the second quarter was significantly less than that it was almost neutral.
And then the third quarter it was a bit higher than the average so I would say, we're still seeing trends that.
Numbers are plus or minus around the 12% range.
And so in the third quarter, we saw something that was just.
A little bit higher than what we've seen in the first two quarters. So still get unlimited number of locations live another experiences. Each one of them is unique and has their own set of criteria I.
With respect to the second part of your question, which was on food and beverage versus amusement what we what we are seeing also is that for a number these locations and you may be familiar with.
Some of the announcements related to the void in some of their new experiences is that would actually expanding some of the amusement options that are there.
In particular, we've kind of call to avoid experience, which wasn't that this the west Edmonton mall on opening.
So we do have some expanded amusement options, which is driving the growth.
But with that said we are seeing what the market is seen in terms of some of that white Knight food and beverage spend.
It's been a bit softer in recent quarters and it has been historically.
And then my next question is on to the digital media.
Again, you seeing some good.
Implementation installation of locations.
Seeing some good momentum there.
I Wonder if you can talk about the.
Blind of installations.
For the near to medium term as well as the.
The recurring revenue stream that so I guess.
You should be generating from that business beyond kind of the lumpy installation business.
Sure. So we expect to kind of continue to see in the short term.
For the rest of 19 is the some of that continued revenue growth that was seen in the first.
Three quarters of this year, so we're continuing to rollout with some of the clients that we mentioned earlier, we have a lot of prospects that we've announced.
I think we've continued to call it a in w. as a customer and if you do recall.
Three years ago.
The contract with a and W and as we've mentioned time time and time again as it.
We're in the QSR space that we have the franchisee relationship.
There's often a long deployment period, so we have a number of contracts in place.
Our agreements in place with QSR operators so.
Those take time, but we're very encouraged by the results that were seen in the short term in terms of significant growth.
With respect so that creates the lumpiness.
With respect to the recurring is that lumpy installation revenues typically the precursor for that recurring revenue stream I wouldn't make a comment that a component of the recurring revenue stream is based on advertising sales in our digital mobile networks and selecting could go up and down as well as the level of creative services that.
The visual customers request during a time period.
If I guess just be a little bit more specific what was the recurring revenue stream that it did that grow this quarter compared to the same period a year ago early this year.
No again, those relatively flat and again, we size to two elements. The two elements actually called it so the level of creative work and the amount of advertising revenue stream.
Created that sort of neutral impact.
Okay.
And just a couple of more strategic questions one on E sports.
No that you made the announcement about looking at opportunities.
Maybe just stepping back to strategic view of how you see this industry kind of moving forward and why why take a minority position of perhaps a new entity or a an.
Sort of redefined entity and then just on scene.
I think outlets you I spoke before about a partnership that you had.
Engaged in with one of the studios on marketing new fans using your seen data wonder if you could just give us a bit of an update as to how about one is moving along.
Sure I'll start with the E sports question and.
We entered the youth sports space, a number of years ago.
We are a very Canadian based company, we have businesses in the U.S.
Our locations are primarily location based entertainment and theaters are primarily based in Canada virtually entirely based in Canada.
What would recognize that theres a number of elements of the sports ecosystem, we and I give the team great credit for building in the World Gaming network and and the collegiate star leak to where it is today.
We have great.
Connections with amateur.
The sports athletes all across North America, as well as viewers of sports content, but one thing we've recognized as E sports as a global business.
And the impressions that we're seeing on ROI of events.
You know, it's a small share of that viewership that its Canadian.
And the majority of the viewer is viewership is international and as we look at how do we grow this business going forward.
Our view is we've got great connections with the sports athletes in Canada in the U.S.
We are primarily in the amateur space ecosystem as much larger than the space that we're in today includes proteins that includes content creation creators that concludes distribution partners.
But mainly the businesses global and how do we grow and we believe.
To better opportunity is to position ourselves with other members of the ecosystem and global players in the space, though so that is.
Our focus and why we're going through this review process today.
Great. Thank Jeff on your second question regarding the partnership with the studio as you know the studio is Lionsgate and we're working on that first film, which is knives out which will be released shortly and part of it is basically a having the medium and.
Marketing budget, and taking a portion of that and having cineplex's assets like CNN other assets being used to promote those those films and that will be the for us than that we'll be doing together and it's a partnership with Longbow media and also.
With a marketing Victor Luis.
So.
You can see the results and we'll see the percentages when the phone gets released.
I guess eight days from now or two weeks from now.
Okay.
Okay. Thanks.
Yes.
We'll now take on next question.
But you get from Canaccord Genuity. Please go ahead your line is open.
Good morning, Thanks for taking my question.
Two from me have the first one with respect to sit on the media, obviously very nice growth in Q3 as was the case in the fed stuff for the year.
Obviously, a much stronger year this year than last year I was wondering if in addition to the revenue growth.
Quarter, Alex you can talk a little bit about the structural.
Changes that have occurred.
Referring to perhaps the change in the sector mix in terms of the appetizers and perhaps even the sized individual sizes of the the contracts as anything that SAP.
I mean, you look at the individual components, where that set of but a difference that you can call out that will help us think.
I think through the sustainability of the improvement in cinema media and then the second question with respect to VIP. Obviously, you can continues to contribute to the nice CPP growth that you have.
I realize that with last year that want to get a few additions to the VIP count.
Wondering if alethia kind of reaching set of that maturities stage for VIP always there's still a little bit more running room. There. Thank you.
Okay. So on your questions. The first one regarding cinema media, we focused and we actually broadening the base so far clients and Thats really been a big focus because in the past we relied heavily on a number of clients to deliver.
So the numbers.
End of each quarter and by broadening the base. It also takes away the volatility that we had suffered in the past so thats been positive and we also using technology to help us.
And inventory management and the ability to market quickly. So those are all been positive for us as we look forward for Pat cinema media business.
On VIP they continue to do extremely well as you noticed we just.
You know announced another one for the province of Quebec, We have one opening in Brentwood.
We're also working on a couple of theaters, where we will retrofit them.
To basically put VIP into those cinemas that have numerous screens that we can better benefit the bottom line with the VIP experience and what helps with the VIP is also the.
Experience for the guest and also the ability to make it a one stop shop when it comes to having a great evening out.
Great. Thank you up offline.
[noise], even though they come next question, Rob Goff from Echelon wealth management. Please go ahead. Your line is open.
Thank you very much for taking my question.
Perhaps if you could go back to the.
The focus on increased over the top provisions could you talk to perspective as you might have.
Where there are opportunities to do showcasing or specific events working alongside and taking advantage of the increased competition or the numerous over the top providers.
Well, we have a great asset in our cineplex store and our still has.
Close to 8600.
Different movie titles and one of the things that you know.
Talked with a number of France, and one of their challenges our with so many different streaming services. They don't know where to find what they're looking for and we get big give them the capacity to go in and for a small rental fee. They can watch what they want when they want it and to me. That's also very very positive and.
In the past we've also basically done in the theaters events that are part of those streaming companies like we did game of Thrones with would fail. So there are lots of opportunities I think going forward. Both from an event perspective in the cinema and also in our store as we go forward.
If you could turn it to different subject on could you talk to the.
Experience, you've had with introducing alcohol across more theaters, you've been pleased with the.
Both the revenue generation and you're okay with the incremental costs associated with huh.
Well it definitely has helped our concession per person and.
Most of them, a relatively new rollouts and.
It continues to be an overall positive experience for our gas and.
We rolled it out.
Close to.
83 locations as I mentioned in the CPP impact is.
17 cents.
Oh seven cents sorry.
And just to clarify that seven cents would be in your aggregate not within those specific locations.
That's the aggregate.
Perfect. Thank you.
Thanks.
Oh no take on that question from drew Mcreynolds.
<unk> capital markets. Please go ahead your line is open.
Thanks, very much good morning, three questions for me first maybe core can you comment on the scene issue in the quarter in terms of that security dynamic was there any impact in terms the results that we see.
Yes, just quickly that that's seen issue was not a breach but there were individuals.
Fraudsters fishing for information and looking to garner points and we basically you cancel the specific cards and re issue them and the situation is totally under control and there's no material financial impact okay. Thanks all of.
A second back to the Rec room, certainly a little bit below our forecast.
Can you remind us the seasonality that you're seeing now across the rec room.
And is there anything that you think needs to be I guess fundamentally evolved in terms of the concept when you look at.
How how everything's performing today.
Yeah. So in terms of the seasonality in Q2 Q3 year typically the weakest two quarters.
With Q4, obviously being the strongest in Q1 being the second strongest now they're fairly.
I mean, there's not a wide variance.
In terms of how the percentages allocated amongst the fourth quarters.
But definitely Q1 in Q4 Q4 by far the strongest.
So one on the second question look at we're continually looking to refine that the concept.
Really only introduced our first.
Generation palladium during the quarter.
As we mentioned with we've begun to reduce the square footage.
From something that used to be in the 40 to 60000 square foot range to closer to the 40000 foot range.
So we're always fine tuning the menus were fine tuning.
The.
Yes allocation of floor space.
And I think what also in the labor models.
But also we moved into other geographies too so.
We're in Eastern Canada.
We're in smaller towns now.
And fine tuning it too to determine what works within that local community to so and that does take a bit of tied to fine tune up. So it's always going to be a consistent evolution I think with tune in terms of the overall size you over locations, but each market will have its own fine tuning too.
Okay. Okay. Thanks, Cort one last one then.
Maybe back to you Ellis on Espod product there through the theater.
The interesting dynamic with a lot of the consolidation we've seen in the U.S. and then subsequently the launch of these new platforms is there's the movie studio and the direct to consumer Escalade platform embedded in the same company.
I know, it's a complex web that needs to be navigated, but do you ultimately expect some kind of alignment.
Among all the major players when.
These major players and partners clearly are running now too.
The different model with underneath the Hood, if you will.
Yeah, and I kind of equate it back to the days, where you had these same partners running you know specific television channels on having movies of the weak and to me.
This is going to be more off that content, that's going to be available but.
As I've said before and Ernst and young study that was done by the industry basically came up with the fact that people that stream more actually come to the movie theater more frequently so it increases the awareness and they want to get into that social experience and leave their homes. So I don't think there is going.
And to be any kind of disconnect I think it'll actually work to.
Our overall overall advantage and the benefit is that there will be more content that will be available which will be positive.
Okay. Thank you.
And that will take on next question from that include thoughts from TD Securities.
Yeah, maybe just a follow up to juice question on on the rack room.
Your target.
For store level EBITDA margin still 25%.
So.
And the aggregate across the pool of location. So the 30 locations in total yes, we're still around that margin now what we have what were say is the rack room.
With a 50 50, roughly allocation moods, leading food and beverage and.
And management sales will be less than that target rate and the play the.
Smaller box with more of a square footage allocations and you're going to lose your should be above that target rate and we expect to full Andy and around that number.
Thanks, that's helpful.
[noise] [noise], it's completes today's question and answer station I would like to turn the conference at his Jacobs for any closing remarks.
Thank you all for joining us. This morning, we wish you a very happy and healthy holiday season filled with lots of movie theater visits and entertainment experiences. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.