Q2 2021 Cineplex Inc Earnings Call
Yeah.
Good day and welcome to the Cineplex, Inc. Q2, 'twenty 'twenty one analyst Conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Mr. Kelly Executive director of corporate development and Investor Relations. Please go ahead ma'am.
Good morning, and welcome with me today is Alex Jacobs, our President and Chief Executive Officer, and Gordon Nelson, Our Chief Financial Officer.
Before I turn the call over to Alex 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 could differ materially from those expressed in the forward looking statements.
Factors that could cause results to vary include among other things the negative impact of the Covid 19 pandemic adverse factors generally encountered in the film exhibition industry risks associated with other national and world events discovery of undisclosed material liabilities and general economic.
Ill make condition.
Following today's remarks will close the call with our customary question and answer period.
I will now turn the call over to Ellis Jacob.
Thank you Massa good morning, and welcome to our Q2 conference call. We are so glad you could join US today I Hope you and your families are well.
As we all know overall results for the quarter was impacted by the pandemic and are difficult to compare specifically when during the second quarter in 2020, our entire circuit was still closed.
Ed will cover the numbers in greater detail, but I will focus on three things provide you with an update on our national reopening and the positive guest reaction we have seen for.
Share more about the exciting launch of a cynical up subscription program and finally reaffirm the measures we have in place to take advantage of being poised for a strong recovery.
During the second quarter, we continued to reopen our theaters and entertainment venues in provinces, where restrictions were lifted it wasn't until July 17th for the first time in over nine months that all of our theaters and entertainment venues, who are open from coast to coast.
This was a milestone we have been working toward for a long time and I would like to thank our team for their unwavering dedication and hard work throughout this challenging time and for reopening our location safely and as quickly as possible.
It truly could not have reached to stay and confidently welcome Nuggets back without such a committed team.
After months of closures in Lockdown. So we can finally welcome back our guests to enjoy movies that they will meant to be seen and we couldnt be more excited based on our ongoing customer experience research. Our guests are thrilled to be back in field, both safe and excited to be in our venues again.
In terms of attendance that first fully reopened weekend in July was our busiest weekends since March 2020 for the last three weeks in July we have welcomed back over 2 million guests to our theaters, which is more than the entire first half of 'twenty into 'twenty one.
Our locations of the Rec room at Palladium have also experienced strong results as Canadians start to get out of the hole and enjoy entertainment experiences again.
Looking at our other businesses. We are also seeing an encouraging ramp up within cineplex media as client confidence returns and companies to begin to build out their advertising budgets for the fourth quarter and into 2022.
Cineplex digital media is also experiencing positive momentum as it continues to focus on growing the business and securing new clients and partners and a P. One AG has been very team has been very busy with the great reopening in the U S and the continued national re openings in Canada.
Yes.
In addition to the excitement of reopening during the second quarter, we completed certain previously committed projects and opened a new S. VIP cinemas at the Cineplex cinemas forum in VIP in Montreal.
Then in July subsequent to quarter end, we opened three more new builds within an impressive two week timeframe, including our first location of the Rec room in British Columbia, and first Standalone VIP cinemas in Western Canada, both located at the Amazing Brentwood Center in Burnaby British Columbia.
Two weeks later in Ontario, we opened our 10th location of the Rec room in Barrie, Ontario has cloth park place.
With our location based entertainment venues now open coast to coast, we can offer our guests even more options when it comes to spending their leisure time with US. We are very encouraged by initial results coming from our newest locations with a great response from the community.
So as we continue to see lineups at our Brentwood embury locations as guests are eager to check out the new space and experience all we have to offer.
As you've heard me say it throughout this pandemic the health and safety of our employees and our guests remain our top priority with that in mind during the quarter. We introduced a venue safe program, which encompasses all of our health and safety protocols and adherence with or exceeding provincial and public health guidelines.
Right.
But the specific protocols will evolve over time province to province, and even community to community as we emerge from the pandemic.
But our branded venue safe seal will remain consistent across all of our venues. So that guests can feel safe and comfortable while enjoying the escape of theater and the fun on the gaming.
One thing is for sure our teams and our guests are happy to be back with a new appreciation for friends and family in social settings that have been restricted for so long we are focusing on providing our guests. The one thing they can't get at home.
And immersive shared entertainment experience.
Yes.
That set up Lex we focus on providing guests with exceptional experiences at a great value.
Coming out of the pandemic it is going to be even more important for us to drive the virtual moviegoing.
Visitation by making it easier and more accessible.
That's why yesterday, we launched center club and innovative movie subscription program that provides great value. Our guests are assured of love.
For just $9.99 per month members receive one regular admission ticket everyone's with no expiration date, the opportunity to purchase additional tickets at the cynical up price, 20% off concession items in a variety of other benefits, including discounts on purchases at the Cineplex store and then amused.
And gaming at our entertainment venues nationwide.
Through extensive research we spoke to thousands of our guests in order to design the best subscription offering for them. We ask what they wanted and delivered an exciting program that while focused on moviegoing also provides great benefits and discounts across our ecosystem of businesses.
We recognize that movie fans nationwide are eager to return to the theatrical experience and escape to the big screen and we are thrilled to offer Canadians. This unique risk free subscription program that provides both value and convenience, we design cynical up to appeal to a wide array of guests and entice them.
Who joined the theatrical experience more frequently with their friends and family.
The additional discounts included for concessions the cineplex store, the Rec room and Palladium also provide our guests with even greater value to enhance the entertainment experience with us.
When looking at our peers and other markets, who are successfully launched subscription programs. We are encouraged by the results and feel this program will be very successful.
Although we are not providing guidance on our targets, we look forward to sharing results with U S matures.
It was no coincidence that we launched cynical up on the heels of our circuit reopening now is the time to capitalize on the pent up demand and make movie going even more accessible for our guests and with the significant lineup of highly anticipated film sitting screens for the remainder of this year, So Nicola will give.
Guests yet another reason to head back to our theaters and enjoy a movie on the big screen with pixel.
Box office numbers are encouraging as a sofa reopens in Canada with blockbusters like F&I and the SaaS, Sarah Black widow, and space Jam, a new legacy drawing guests back to the theater as vaccination numbers rise and restrictions loosen across the country. We accept expect that by the fall we will be.
Close to full capacity in time for the onslaught of blockbuster films scheduled for the back half of the year just to name a few we've got the suicide squad that just opened last weekend in an exclusive exhibition window on Canada, two strong results free Guy starring Canadian Canada's own Ryan regimens opening Tonight.
Right.
<unk> Chi and the legend of the 10 rings with Canadian actor Simo Liu.
Hi, Lee anticipated New James Bond film No time to Die June directed by Canada Zone, Dinny villager Dia terminals Ghostbusters afterlife top gun Maverick West side story Spider Man No way home a matrix reboot thing too.
Of course, we are keeping a close eye on streaming services and Windows Studios have been experimenting with many different windowing strategies over the last 15 months has the pandemic forced the closure of movie theaters around the world.
Some have worked well and others have not been successful as always we will continue to work with our studio partners to reach mutually beneficial agreements.
Let me be clear why the windows may be changing their not disappearing and noise Moviegoing. We know then an exclusive theatrical release means more revenue for all stakeholders in every cycle off of movies life.
Although some consumer habits may have changed because of the pandemic and with more streaming content available. It has not dampened the desire to go out and enjoy a shared immersive experience. The escape that movie going has always provided.
Looking ahead, we remain confident and poised for a strong recovery during the second quarter, we remain prudent in managing costs and reduce our average monthly net cash burn to 24 million down from $27 million in the first quarter as a circuit reopened across the country.
We were pleased to learn that Qs answers will be extended to October and continue working with our landlord partners for rent relief I would like to thank them for their commitment and support during this extremely challenging time.
Looking ahead, we will continue to actively monitor all aspects of our business and operations to minimize the impact of Covid 19 wherever possible, we will manage our costs and we'll assess all future capital spending has we make always recovery period.
Before I turn things over to God I would like to provide a brief update on the Cineworld liquidation litigation as of today.
During the completion of the discovery process and remain on target to begin a three to four trial on September 13th we are confident in our case, but can't speculate in terms of an outcome or timing.
Overall, we remain optimistic about the recovery of our industry and specifically Cineplex looking ahead. The recent box office results are very encouraging as is the upcoming film release schedule.
Based on what we have seen we expect gas will continue to return back to theaters largely due to increases in vaccination rates months of pent up demand and a robust release schedule that continues to unfold in the back half of the year.
Let me take a moment to pause and state what's important to note here. Our team has done an outstanding job of focusing on what we can control to protect our company during the period we.
We are prepared for this moment for many months and with our unwavering efforts to control costs and solidify our financial position. We have set the stage for a dramatic comeback with that I will pass the call.
Thanks Al I am pleased to present, a condensed summary.
Quarterly results for Cineplex, Inc, and to provide additional detail on the ongoing financial impacts of Covid 19 on our operations.
Further reference our financial statements and MD&A have been filed on SEDAR and are also available on our Investor Relations website at Cineplex Dot com.
Our MD&A and earnings press release includes a fulsome narrative on the operational results. So I will focus on highlighting quantifying some of the key items, including commentary on cost control liquidity initiatives and Alcoa.
The Covid 19 pandemic continued to have a material negative impact on all aspects of Cineplex's core businesses, resulting in material decreases in revenue operating income and cash flows for Q2.2021.
With ongoing closures and capacity restrictions in place in Canada, We bet, we began the quarter with approximately 38.
<unk> three <unk> locations operated Pri.
Primarily in smaller markets and ended the quarter with 86 theaters and six LTE locations opened.
The majority of the ramp up in reopening as occurred in June however.
However, our <unk> business did benefit from expanded FEC openings in the U S earlier in the quarter.
As a result, we continue to focus on cost control and liquidity and we're extremely pleased to report an improvement in the EBITDA loss and the average monthly net cash burn when comparing Q2.2021 to Q1.2021.
The EBITDA loss improved to a loss of $53.2 million from a loss of $62.1 million and the average monthly net cash burn improved to $24 million from $26.9 million when comparing Q2.2021 to Q1 'twenty 'twenty one.
With respect to cost control I want to provide some additional details on our largest fixed and semi fixed costs <unk> costs and our payroll expenses and then discuss our overall cash burn rate.
Lease costs are our largest fixed cost.
2020 and into 2021, we maintained strong communication channels with our landlord partners and identifying opportunities for leaf during these unprecedented times.
<unk> has been on working with them to identify opportunities for abatements during the closure period and to jointly look for other opportunities under our existing lease agreements.
During the past 15 months of the pandemic, we were able to materially reduce net cash vis in occupancy you related outflows by approximately $132.1 million, which includes approximately $74 million in lease abatement savings.
27, $4 million as a result of sale of certain restrictive rights to landlords and approximately $34.3 million as a result of other subsidies rebates.
We were able to maintain similar levels of total occupancy reductions in both the orders in 2021.
Approximately $26 million was reflected in Q2 as compared to $25.7 million in Q1.
We continue to work with our landlord partners and what the government support to provide additional relief throughout the balance of 2021.
Payroll is our largest semi fixed costs with the initial mandated closures in early 2020, we immediately initiated temporary layoffs and reduced full time employee salaries across the board by agreement with the employees, we reviewed and applied for government subsidy programs, where available, including the Canada emergency wage.
Obsidian.
During the past 15 months of the pandemic, we have benefited from approximately $87.5 million in subsidies, primarily under this program of which $15.7 million was related to Q2.2021 as compared to $14.8 million in Q1.
As we reopened during the quarter and our staffing levels increased our theater payroll costs increased only marginally to $5.5 million in Q2, 2021 from $3.6 million in Q1.2021, as we continued to benefit from wage subsidies.
We are encouraged that the accused program has been extended through to October 2021, albeit at reduced rates as businesses ramp.
With respect to other supplier partners and expense control, we put in place immediate expensing capex curtailment programs during the closure period.
Worked with our supplier partners to provide elements of relief, including eliminating or reducing amounts due for contractual monthly services. In addition to payment deferrals and abatements you can see the further benefits of these initiatives and the substantial cost reductions in a number of our controllable cost categories.
In addition, we continue to monitor other subsidy relief programs, which could benefit cineplex.
For the second quarter of 2021, we've reported net capex of $3 million.
And approximately $31.6 million during the past 15 months of the Covid 19 impacted period.
As we look forward for the remainder of 2021, we will only be completing contractually committed projects and required maintenance capex product projects and as such we expect that net capex for 2021 will be in the range of $30 million to $40 million.
Beyond 2021, we will continue to be prudent with our growth initiatives and we will seek out opportunities within the disrupted retail landscape.
Yes.
With all the actions previously described we were able to achieve a 15 month pandemic average monthly net cash burn rate of approximately $22 million per month.
Q2, 2021, the average monthly net cash burn rate was approximately $24 million down from the $26.9 million reported in Q1.2021.
Due primarily to the partial reopening of the circuit and the success of the <unk> route business in the U S.
I would now like to focus on our liquidity position for.
For Q2.2021, our net borrowings under our credit facilities were only $13 million during the first quarter. Our total borrowings increased by $14 million, resulting in an increase in total debt of only $27 million during 2021.
We managed our debt balance by minimizing our cash burn and looking for liquidity opportunity.
Key liquidity opportunities on a year to date basis.
The receipt of the income tax receivable and the head office sale leaseback proceeds.
During the second quarter of 2021, where we received an additional $49 million in income taxes recoverable as a result of the 2020 tax losses.
Approximately $54 million of the $66 million claimed has been received to date in 2021.
In January 2021, we received gross cash proceeds of $57 million for the sale leaseback of the head office building.
As a reminder, on the latest credit facility Amendment, we extended the suspension of financial Covenant testing until the fourth quarter of 2021, but provided for a monthly liquidity test until the financial covenants are reintroduced.
As at June 32021, we had approximately $246 million in availability under our credit facilities are.
Our average net monthly cash burn for 2021 is approximately $25 million during a prolonged closure scenario and as such we believe we are positioning the company well to handle any further uncertainties through the next 12 months.
As we reopen and generate revenues again, we will continue to focus on cost controls and liquidity.
For the month of July we are pleased to advise that we had positive EBITDA and marginally positive net cash flow as opposed to the net cash burn we have experienced over the past 15 months.
This is an encouraging sign to start off Q3, as we were not fully open across the country for the entire month and we're subject to capacity restrictions.
As we look forward, we see positive news on vaccine Rollouts, we see reopening and restrictions being relaxed, we see pent up consumer demand and we see a backlog of film titles to supply the market on reopening.
We continue to focus on the safe operations of our businesses and continue to explore further opportunities for cost reduction and value creation.
That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.
Thank you very much to our speakers, ladies and gentlemen, if you would like to ask a question over the phone at this time. Please signal by pressing star one on your telephone keypad. These notes using a speaker phone just to make sure. Your mute function is turned off to allow your signal to reach our equipment. So once again that is star one to ask a question.
And we'll pause for just a brief moments to allow everyone an opportunity to signal for questions.
Okay.
Yeah.
Well now move to our first question over to floor, which comes from Derek Lessard from TD Securities. Please go ahead. Your line is open.
Yeah, good morning, everybody and congrats on the reopening I know, it's been a long road for you guys.
Yeah.
Thank you.
Just wondering if you have or.
Our currently and kind of any discussion with provincial authorities on the ways to stay open.
In the event that future waves or outbreaks.
Is the venue state that you introduced part of the discussion.
We keep on a regular basis.
Having conversations with the authorities and we basically.
Most intensive.
In our protocols to make sure that our guests and our employees.
Having a safe and comfortable experience in the environments that we're operating in and as you see across the country by province, the actual requirements vary and we're looking forward to changes as we move forward, but we're also being very careful and making sure that we can provide.
I guess with that comfortable and safe experience.
Okay. Thanks for that.
And maybe just one follow up for for Gordon.
But that burn obviously, it looks like with some.
Pretty good cost control, there and part of that was with reopening.
Do you think that you have any more cost labors.
That you could still pull on going forward.
Okay.
I would say that we've done a fairly exhaustive review obviously during the closure period part of our focus has been to.
To the extent that we could is look at opportunities to take costs, which may have been fixed costs and look for opportunities to turn those as more to variable costs given.
The uncertainties of the environment going forward.
You know obviously.
Technology, and Youre going to see the launch of some technology plays into the next into 2020 to allow for more efficient operations, but I would say we've done a very good job and I'm really pleased with the team.
And the way we've looked at cost over the last 15 months so.
In the near term I would say, we're pretty much exhausted I think there are opportunities longer term, but in the near term I think we've exhausted.
The majority of the high high amounts.
Value items.
Thanks, guys.
Yeah.
Well now move onto our next question over the phone which comes from Jeff Fan from Scotia Bank. Please go ahead. Your line is open.
Thanks, Good morning, I'm glad to say that was one of those 2 million patrons tell us.
So glad you guys are reopening.
Maybe just on that point I think you were quoted.
You had about 900000.
And the first week, so $2 million in the three weeks or so.
Reopened so the math would suggest 500 to 600000.
For the second and third week.
I mean, I know, it's difficult, but what do you think is a good level.
Looking ahead until we have a greater capacity.
No it depends on a law that the guidance, including the film slate, but can you help us out there based on.
The Big news is that your school.
And then a question as we head out to the fourth quarter thinking about the covenants.
Yeah the U S.
You gave some numbers talking about the U S box office in history.
If you can kind of do the math.
Almost suggests that about like about 70% of what they got in second half of 19, so roughly 70% recovery from where they were at the 22019 numbers.
And again, we're a little bit behind the U S, but what what level of problem.
We need to get back to you.
In order to meet those covenants taking into account the subsidy cut.
All in October.
So Jeff in answer to your first question basically when you look at our the weeks. After July we still continue to do quite well, especially when there are large movies that open and we are running over.
Over 50% of 2019 numbers, even with all the restrictions and going even higher than that uncertain weeks and we feel by you know the fourth quarter. If product is there and the situation continues to get better we're looking at.
Adding up to the 80% range as we get into the fourth quarter.
With the lifting of.
Some of the requirements for them.
Overall perspective as it relates to physical.
Yes.
And so Kevin a question Oh, sorry.
Hello, sorry, I got a follow up.
Okay. So.
So with respect to the covenants.
Just to make it clear is.
You're aware of the calculation, which is four times the Q4.
EBITDA amount.
So that becomes an annualized amount, which would test against the debt. So if you were to as an example use.
And I made comments today about July being a.
Relatively cash flow marginally cash flow positive during the quarter.
During the month.
So if you assume that you maintain the same debt levels.
Sure.
He used pro forma June 30 at that levels.
And backed into the numbers I think you would find sort of an EBITDA range between the two tests or the total leverage in the senior debt.
Debt Covenant ranges is that you would need to be in sort of a 26% to $36 million.
EBITDA will range in the fourth quarter.
And historically, if we look back of where we were in.
2019.
Adjusted for certain of the Cineworld adjustments. So there was a number of additional cost that we reflected in the fourth quarter of 19. So I think that's important to remember.
And if you look at 18, and 19, where both of those both of those.
Quarters were about $80 million of EBITDA, so significant reduction in the EBITDA EBITDA amounts.
Two to stay within the Covenant ranges.
And so when youre looking at what would be the attendance decline versus two.
2019, which I think it was your various.
<unk>.
We're talking about a 35 roughly about a 35% attendance decline.
Okay. That's great that's helpful.
And just a clarification gourd.
Positive quite positive cash flow in July.
How much subsidy was included to get to that causes this number.
Yeah, so with respect to subsidies and I'm not going to provide any more granular detail on the monthly amounts because as we work through.
I just want to.
What I would say on that is if you looked at our Q2 amounts we were closed still halfway through.
July and the majority of the subsidies that we received so the abatements would be somewhat in line. If you look at the Q2 amounts, which was roughly about $6.6 million for the entire quarter. So if you.
Divided those by three that would be.
You know a good approximation of July.
<unk>.
The certain subsidies provincial subsidies so the realty taxes utility subsidies were still applicable in July.
Well there was a mandated closure so for those for half of July.
We believe video Joel Joel eligible for those subsidies.
And then as I mentioned in my call script, the curse subsidy is available.
Been extended to the end of October.
Albeit as cues and cures or declining rates.
So.
So for the month of July Jeff.
Is it.
It's slightly less than what you would have seen for the quarter, but as you look forward into August and September as.
As I mentioned and those will start to decline.
Great and maybe one last quick one our food services in the U S theaters since reopening has been strong.
I'm curious.
And Canadians Mr. Popcorn's as much as our U S neighbors.
Yes, yes, they do and our numbers as we see through the reopening have been extremely strong okay.
Okay. Thanks, guys.
Thank you thanks, Jeff.
Thank you Bruno move onto our next question over the phone which comes from Adam Shine from National Bank Financial. Please go ahead.
Thanks, a lot good morning, Alex I know you are not talking targets. Additionally, on city club, which looks quite interesting, but if we look.
To the Cinemark experience would suggest that maybe over.
Two three years, you could get up to a range of maybe eight to 12 protect conversion.
You see that Bruce does that sort of bake some degree of sets of trip that at least.
Additional parameters for expectations.
Okay.
That's Adam a good target, but I think given our you know across the country presence and our ability with the scene program to move forward I feel that we will see some strong numbers coming out of the.
The cynical program and it's a little early there had been a day, but we were quite excited to see how many people actually signed up yesterday.
Tastic.
Going back I know with the AMC sort of call with bet on that call.
My goal to take what you said earlier regarding.
On top of the studio experimentation epic ABC. Nevertheless.
Get to 2022 did sorry to deal with water solidify the theatrical exclusivity if you will.
Can you talk a little bit about what youre seeing in terms of either.
This tree dynamics, among your peers at or some of your expectations certainly.
Can we get to next year in terms of baby.
A changing landscape in Cc subs.
With the experimentation, albeit may be taking a lot of different cortex next year.
Okay.
Yes, good question and there are differences between Canada and the U S. In situations like for example, it's suicide squad, we opened it on theatrical without any streaming services. So it varies by studio, but looking at 2022.
Looking to.
Window for a minimum of 45 days with most of the U S. SEC.
Pliers and you know that Canadian companies that represent them going with that 45 day as a minimum window at this point.
Okay, and just maybe one other question.
Obviously as we continue to see the Delta variant draw headlights.
Not withstanding people.
Safety Kleen fixtures youre pursuing any additional thoughts as to how some of these passports.
<unk> proposed by the breadth of municipalities that door provinces.
How you might be additionally, adjusting to that I mean, it might be as simple as just.
Having your employees.
Check.
For a QR code, but any quick thoughts as to.
How do you address obviously it flow hopefully have greater Patriots over the next couple of quarters.
Yeah.
And we will be following the requirements on government regulation.
To be put for and as I said on the call on the safety side. We are always even further in some cases than what governments, requiring but if you're talking for example about vaccine passports. We will definitely look at what the requirements are between provinces and where things stand.
Okay, Great I'll leave it there thank you.
Okay.
Yes.
Thank you we now move onto our next question over the phone which comes from Tim Casey from BMO. Please go ahead. Your line is open.
Thanks, Good morning, two for me.
Sure.
You want to invest.
Investors should expect in terms of.
Timelines or milestones with respect to the the litigation with Cineworld.
My second question is.
Gordon just so we're clear are you.
In terms of the outlook for the back half of the year.
Your.
Assuming or we should be thinking that you.
Got it.
All of which will be cash flow positive in each of Q3 or Q4 or.
Cash flow neutral or do you still expect a bit of a burn just any color you could give there.
Yes.
Yeah.
So in response to your first question about Cineworld. The trial date is basically in mid September and we are expecting that the decision to come a few months later after that.
Thats, where we are at today and we have spent significant.
Amount of time and feel confident of our position.
How long do you think on your second question.
Yeah.
Three to four weeks.
It would be the timelines for the trial.
Thank you.
And on your second question then.
Tim.
So I want to make it clear I was trying to do an example, based on the June 30th balances of what the covenants, how the covenant mechanics would work for Q4 estimates so.
Your question was will we be.
<unk> positive or negative for the remainder of the quarter and we typically don't provide guidance, but what I do want to say is as during the month of July when we were only open then you know.
Not even all of our locations in Ontario was only open for a couple of weeks.
So we're really pleased to be neutral during a period with severe restrictions and not the full circuit offering.
You could take from that that we expect.
With a full circuit operating.
And hope you know relaxing of restrictions over time is that we would be positive for the back half of the year.
And maybe just one follow up if I may.
In terms of cinema advertising.
Gordon you bought all controllable.
For the big advertisers have come in they want to have confidence in.
The quality of movies will attract big crowds and whatnot could you maybe offer a little more commentary on how the discussions are going with that particular.
Revenue opportunity and how you're thinking about the back half of the year with Rio.
Yeah, Theres, a real eagerness in the media area for our clients and advertisers to get back on the screen and you know with the quality of the product that we have coming forward, we feel and we believe strongly that the media.
<unk> will come back and they're looking at how they get through the holiday period and into 2022. So.
So we are quite positive about that business moving forward.
Thank you.
Thanks.
Thank you, we'll now move onto our next question, which comes from Linda <unk> from Canaccord. Please go ahead. Your line is open.
Good morning, Thanks for taking my question.
Quick clarification to start with Atlas you mentioned, a 50% number with respect to attendance versus pre pandemic levels I just wanted to.
Make sure were you referring to just an individual week or were you referring to the period and the period since the reopening.
That's question number one and then secondly, following up on the comment about concessions.
<unk>.
Still a short period to kind of form an opinion on but the conversion of attendance to concession sales CPP is it is it starting to trend back towards pre pandemic levels or given sort of the restriction of movement and so forth.
Is that skill set of some ramp up there to be achieved I was wondering if there is a little bit more granularity there. Thank you.
Yes, so on the first part of your question regarding the reopening we are running.
Some weeks of higher other weeks, depending on the product, but we are running about 55% on average above 2019 for now.
And when you asked about the concessions.
We are seeing higher numbers than in 2019 and that isn't.
Changing that much as we are seeing a week to week with our guests coming back to the cinemas.
Excellent. Thank you and a quick follow up for Ford.
The lease abatements cord, you mentioned, the $6.6 million last quarter.
Obviously, two divide that by three for July.
Is the longevity of those abatements does it need to be renegotiated straight away for August and September or does it kind of go until quarter end or so forth.
And <unk>.
Each one is unique so each lease has a separate negotiation with the landlord.
Some of them are contingent on.
Peter has been mandated closed.
Others have been included a bit of a ramp up period. So there is no simple formula or Linda.
And Thats why you know.
You kind of suggested for the month of July given half of closure and you know in our major province, or half a month's worth of closure in our major provinces that youre going to potentially for July I see roughly a third of that and then its going to tail off.
To tail down again.
Reopen.
Great. Thank you so much profit line.
Thank you.
Thank you, we'll now move onto our next question, which comes from drew Mcreynolds from RBC. Please go ahead. Your line is open.
Yes. Thank you very much and good morning, Allison Gordon. Thank you very much for all the granularity that you have.
Super helpful. Two last ones for me.
For you Gordon.
A couple of quarters ago, you were helpful in providing what kind of adjusted EBITDA or EBITDA margin. The company could return to once kind of fully normalized whenever that is.
Could you update on whether reaching 2019 levels is.
Certainly what would be the objective and then secondly.
I guess for Ellis or onboard on film costs, just given all of the fluidity in terms of.
Our relationships with the studios.
Or is that film cost percentage I expect it to evolve or budget all outside of that kind of low low to mid 50% range. Thank you.
So drew on your first question.
And as we've kind of always said theres a mix of businesses as we look going forward.
And.
The goal would be to what we.
Want to work to get through is roughly that 2019 level, but as we look can we move forward.
As you know certain elements of the business.
As we incrementally add LTE locations that helps the overall EBITDA margin.
As the digital signage business grows that helps EBITDA margin.
And so it's how the mix of certain of those businesses in <unk> and the growth of <unk> cash flow, but it is slightly lower than average.
Then her overall EBIT margin business. So so as the various businesses kind of grow over time is that EBITDA margin.
Shifts what I think is what we said is we want to get back to that 2019 level.
And then on your question regarding film costs.
They have been lower because.
Through some quarters, we were playing all the products and lower film cost and then also when the movies were available on streaming we were discussing with our studio partners and.
Getting to better positioning and in the long run.
All about how well the movies do and what the results are and that will impact.
The film costs go and also where the Windows are as we move forward. So there are a number of variables.
Before we can pin down the final percentages.
Okay, Thanks, very much and a great great to see the reopening.
Thank you.
Yeah.
Ladies and gentlemen. This concludes today's question and answer session. At this time I would like to turn the call back to Mr. Ellis Jacob.
Any additional or closing remarks.
Thank you. Thanks again for joining the call. This morning as you heard today, we hit the ground running as our entire circuit reopened last month, and we were able to deliver the first class experience that our guests have missed for so long.
We launched an innovative subscription model with center club that will help drive regular movie going and make the experience even more accessible and affordable for our guests.
Above all this as with every turn through the pandemic, we adapted with great agility and resilience manage our costs and added liquidity, we needed to see us through.
I am confident incentive blacks in the industry's ability to recover and look forward to providing our guests with an exceptional experience that they can only get in one of our theaters. Our entertainment venues I look forward to speaking with you all again for our third quarter conference call in the fall until then please enjoy the rest of your summer.
Our movie theaters.
Yes.
And be well.
Okay.
Thank you very much towards speakers today, ladies and gentlemen. This does conclude today's call. Thank you very much for your participation you may now disconnect.
Yeah.
Yeah.
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