Q4 2022 Cineplex Inc Earnings Call
Hello, everyone and welcome to the Cineplex, Inc. Fourth quarter 2022 earnings Conference call. We will begin shortly if he would like to register a question. Please press star followed by one on your telephone keypad. Please call me or Neil two questions to allow others the chance and you feel pain.
Yeah.
[music].
Hello, everyone and welcome to the Cineplex, Inc. Fourth quarter 2022 earnings conference call. We will begin shortly if you would like to register a question. Please press star followed by one on your telephone keypad. Please call me O'neill two questions to allow others the chance.
Do you feel patients.
[music].
Hello, everyone and welcome to the Cineplex, Inc. Fourth quarter 2022 earnings conference call. My name is Daisy and I'll be your moderator for today.
If you'd like to register a question. Please press star one on your telephone keypad.
He's called me ONEOK two questions to allow others the charm.
I would now like to hand over to your highest mark drove a Jolly executive director of corporate development Investor Relations to begin the marked up. Please go ahead.
Good morning, and welcome with me today is Ellis, Jacob our President and Chief Executive Officer, and Gordon Johnson, Our Chief Financial Officer before I turn over the call to Alice Let me remind you that certain statements being made are forward looking and are subject to various risks and uncertainties such forward looking statements.
Based on management's beliefs and assumptions regarding the information currently available.
I've chosen results could differ materially from those expressed in the forward looking statements factors that could result cause results to vary include among other things the negative impact of the COVID-19 pandemic.
Various factors generally encountered in the film exhibition industry risks associated with other national and world events discovery of undisclosed material liabilities and general economic conditions.
Following today's remarks, we will close the call with our customary question and answer period.
I'll now turn the call over to Ellis Jacob.
Thank you Marcel and good morning, and welcome to our Q4 and year end 2022 conference call.
We're glad you could join US today before we review the fourth quarter results I'd like to address two important topics that I know on top of mind with our investors name.
Namely the industry box office recovery and cineplex as strategies for continuing growth in the current economic environment.
In assessing the future state of box office recovery. There are two primary drivers we are monitoring closely first as consumer demand in the secondary content supply.
We have been pleased to see demand for movie going increase the Saar theaters reopen looking back over the last year. There are many examples that standout which demonstrates the resilience of moviegoing.
In may of last year, a doctor strange in the Multiverse Madness delivered 75% more domestic box office revenue than the original release in 2016.
Also in May we saw top gun Maverick become the fifth highest domestic grossing film of all time after a remarkable 30 week run.
Last July minions, the rise of brews set a record for largest fourth of July weekend in box office history.
A few months later Black Panther will conduct forever broke the record for highest grossing November weekend of all time.
And was negatively impacted by winter storms in North America. During its opening weekend December avatar. The way of order has since demonstrated that staying power avatar is now the fourth highest grossing film of all time crossing the $2 billion Mark in global box office and still going strong.
Attracting audiences as we speak.
These record breaking results and others like them over the past year demonstrated a point to hear me say on each and every one of these calls when there's compelling content consumer enthusiasm for theatrical moviegoing is as strong as ever.
Even more promising is that we continue to see significant growth in attendance for premium offerings, even in the midst of recessionary concerns.
This quarter, we delivered an all time quarterly BBB of $13.06, an increase of six 3% over the prior year and the CPP of $8.93, an increase of 19, 2% compared to Q4 2021.
These results are further validation than when guests into our theaters they treat themselves before escape all venues offer.
Investments in premium experiences in our theaters continue to deliver returns has an impressive 50% of box office revenue in the fourth quarter was derived from premium formats.
Not only is this a record for us, but it's also the highest percentage for any exhibitor North America haven't thought that way of water is breaking records. When it comes to premium experiences accounting for Cineplex is highest for Dx screen acts in VIP cinemas viewings in our history.
Having said that like our exhibition peers around the world. Our business continues to be impacted by COVID-19 related production delays content supply remains a near term industry Challenge for example, both the Aquaman into law scheme, there men's Shazam Fury of the gods of originally slated for the fourth quarter of <unk>.
1022, but we've moved into 2023, such shifts and delays resulted in the overall volume of major releases in the fourth quarter 2022 recovering to approximately 70% of the fourth quarter of 2019. These shifts also led to a fewer number of why.
Released titles in this quarter as compared to the fourth quarter of 2021, leading to lower year over year attendance.
As we move forward. However, we have full confidence in the ongoing recovery of content supply as COVID-19 related production delays subside stood.
Studios are clearly recognizing the promotional and financial financial value of our pediatric will release window.
We are still the engine that drives the train and we are encouraged by our recent large commitments from non traditional studios. These.
These commitments further validate the importance of the cinematic experience and the royalty optical exhibition plays in elevating content to its full financial potential.
The remarkable performance of the horror film Smile proves exactly this point Smile was originally slated for direct streaming, but instead was given an exclusive theatrical release after nine weeks on the big screen. The film generated over $200 million at the global box office.
As I referenced on our Q3 earnings call last October we reached an agreement with Netflix for the theatrical release of glass onion and knives out Ministry. The film performed extremely well and generated an estimated $15 million at domestic box office over a seven day period.
Fewer than 700 theatres, including ours, and just last week Amazon announced the exclusive theatrical window for the release of the Ben Affleck and Matt Damon Nike film are these examples and others like them continue to highlight the power of theatrical exhibition elevating.
The overall success of movie content.
In addition to non traditional studios, we are also broadening our content opportunities by expanding our distribution business Cineplex picture.
Last month, we announced a Canadian theatrical distribution agreement with Lionsgate for its 2023 film slate, which will bring 11 titles to the big screen and create additional distribution fees for Cineplex pictures.
We are excited to bring these startups to Canadian audiences, which include exciting titles like John Wick Chapter full are you there God, It's me Margaret and hunger games, the ballad of songbirds and snakes. This is in addition to the ongoing successful efforts, we are seeing with alternative programming through cineplex.
Hence as well as the growing importance of international film product to our business.
Without a doubt cineplex as an industry leader in international cinema programming consistently over indexing, the north American market share, particularly with Bollywood product, but on the recent Bollywood feature in January of this year generated the highest ever opening weekend for a Bollywood.
Idle in North America, and even outperformed Hollywood Avatar, the way of water than in the six week.
Cineplex again took the number one position in North America with 27% of the market share for this film and we continue to grow more than three times the domestic average in our circuit.
We also saw great success with the film the wandering Earth too, which is now cineplex is number one opening for a Mandarin language film.
And of course, we were pleased to see our arb make Bollywood history as the first Indian feature film to be nominated for an Oscar outside of the International film category.
The bottom line is that we are focused on expanding our content offerings to appeal to why do you or wider audiences and drive incremental attendance.
While this doesn't fully close the content cap, resulting from production delays it gets us close.
This is particularly evident that cineplex outperformed the fourth quarter, North American box office recovery compared to 2019 levels by a notable 533 basis points.
These results also benefited from our team's efforts to drive attendance through strategic marketing and loyalty initiatives. We will continue tapping into our rich customer data for personalized content engagement and targeted seen plus offers.
This allows us to introduce moviegoers to alternative content upselling campaigns to our premium experiences and do everything we can to ensure our guests always have a memorable escape when they're in our venues.
Speaking of venues this quarter, we celebrated the grand opening of our first Cineplex junction location.
This is a new concept for us that features multiple entertainment options, including movies gaming live events and expanded food and beverage offerings all under one roof.
First location Cineplex junction Caledonian open to much fanfare in December in Winnipeg.
Manitoba, replacing an older Theater junction provides additional revenue per square foot by driving incremental attendance and spend from the expanded offerings.
While it is still early days cineplex junctions alone and is performing extremely well with metrics exceeding our internal projections, which is welcome news as we work towards opening our second location in mid 2023.
Our first junction location is a great example of asset optimization, a key focus for us in the current exhibition landscape.
In addition to novel concepts like junction, we are also exploring other ways to optimize the results from our exhibition footprint.
We continue to advance our data analytics capabilities to increase operating efficiencies improved film bookings and enhance our marketing efforts overall, we remain disciplined and focus on maximizing the use of our square footage and resources driving attendance and effectively managing costs.
So turning your attention to our fourth quarter results. Despite the 10, 1% year over year attendance decline. Our revenue grew 16, 7% to $350 million and adjusted EBITDA increased 54, 5% to $31 2 million.
Looking at our segmented results while exhibition performance was impacted by the content supply challenges that I spoke to earlier, our diversified businesses delivered very strong fourth quarter results and continue being an important pillar in our.
We are particularly pleased with our amusement and leisure segment, which continues to outperform pre pandemic results on both revenue and bottom line metrics.
During the fourth quarter <unk> same store sales reached 2019 levels and be one AG same store route revenue exceeded 2019 levels in.
In addition to strong topline demand do you want Aegean Lv's record quarterly EBITDA results showcase our team's ability to effectively manage costs.
On the media side, we remain encouraged by strong signs of recovery for Cineplex media and Cineplex digital media, both showing significant improvement in overall revenues for the quarter.
Further content supply in mall traffic recovery underway, we expect further momentum in these divisions moving forward overall.
Overall, we are pleased with our fourth quarter results, which we believe illustrate the effectiveness of our strategies to manage the current fluid environment Gordon will speak to the numbers in more detail shortly but before I pass things to him I want to address the ongoing litigation with Cineworld.
As you know Cineworld remains under chapter 11 bankruptcy and we continue to work closely with our advisors to consider any value optimization opportunities.
No further comment, but this remains an important priority for us with that I will turn things over to ward.
Thanks, Allison I'm pleased to present, a condensed summary of the fourth quarter results.
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 and quantifying some of the key operating results and provide commentary on our liquidity.
As Alex mentioned, we were pleased with our Q4 operating results, we reported adjusted EBITDA of $31 $2 million.
And although the film exhibition segment faced some film release schedule challenges, our diversified business model continues to deliver with our amusement and leisure business reporting its strongest quarterly adjusted EBITDA whatever.
For the fourth quarter total revenues increased 16, 7% to $350 $1 million from $300 million in the prior year.
Net income was positive $10 $2 million as compared to a net loss of $21 $8 million in the prior year and adjusted EBITDA increased 54, 5% to $31 $2 million from $20 $2 million in 2021.
Yeah.
Our film exhibition and content segment box office revenues were approximately 66% of the pre pandemic period.
For 2019.
In total segment revenues were approximately 75% of the pre pandemic period.
In the film exhibition and content segment, adjusted EBITDA was $4 $6 million decreased from $9 million in the prior year, primarily related to the attendance decline, which I always mentioned in his remarks and this was due to fewer releases this quarter due to schedule shifts.
Yeah.
On the media side of the business, we reported a fourth quarter media segment revenue of $44 $1 million as compared to $32 $5 million in the prior year.
The increase was primarily due to cinema media revenue per patron, increasing 25% to $3 33 from $2 42 sits in the prior year.
Comparison to the pre pandemic period, our media segment revenue was approximately 64% of our Q4 2019 levels, but this was impacted by strong hardware sales in Q4.
2019, with one client in our digital place based media business.
If we exclude hardware sales our overall media segment revenue would be approximately 71% of Q4 2019 levels.
The results in our cinema media business are encouraging as we generated 72% of Q4 2019 was level with 55% of the attendance level.
Our overall Q4 media segment, adjusted EBITDA increased to $29 million from $19 $3 million in the prior year.
Segment margins, increasing to 65, 7% from 59, 5%.
As we continue to see growing traffic in our cinemas and in malls, we expect to see further recovery in our media businesses.
Yeah.
Our amusement and leisure segment had another incredible record breaking quarter. This business segment continues to outperform the pre pandemic period on a topline and bottom line basis.
Segment revenue increased to $71 $8 million as compared to $51 $2 million in the prior year and segment EBITDA increased 70% to $13 $7 million from $8 $1 million in the prior year with combined margins of 19, 1% as compared to <unk>.
<unk>, 8% in the prior year.
Our amusement and leisure segment total revenues exceeded pre pandemic levels coming in at 115% of Q4 2019 levels.
G&A expenses increased two 5% to $16 2 million from $15 $8 million in the prior year, primarily due to increased payroll costs. As a result of a decrease in wage subsidies and increased costs related to certain digital and technology initiatives, partially offset by reduced.
Litigation and advisory costs.
These items are described in more detail in our MD&A.
For the fourth quarter of 2022, we reported net capex of $25 million as compared to $4 four.
$4 million in the prior year.
Included in the Capex in the fourth quarter is approximately $4.4 million related to the distribution of projection assets on the wind up of CDC Pete.
Full year 2022 cable capex came in at $53 million.
Well below our earlier guidance as we responded to these shifting film slate for.
For 2023, and beyond we will continue to be prudent with our growth initiatives.
Guidance for Capex for 2023 is reduced to approximately $60 million.
Before discussing our liquidity position I wanted to briefly touch on two additional items taxes and impairment reversals.
First I want to remind you of the benefit of the tax asset that was derecognize. During 2020 as a result of uncertainties related to the pandemic.
As described in note eight of our year end financial statements. We currently have non capital losses totaling $436 million to utilize against future periods and as such you should expect a minimal cash taxes over the next two years.
We continue to evaluate the recoverability of these deferred taxes tax assets and will recognize such assets when and if appropriate.
Second in addition to the deferred tax assets as our business continues its recovery and returns to profitability. The reversal of a portion of previously recognized impairments may be appropriate.
During the fourth quarter of 2022, we recognized a net reversal of previous impairments of long lived assets of approximately $20 million.
Other words, a pickup primarily related to the <unk> portfolio.
This segment has been experiencing significant improvement in business volumes and operating results throughout 2022, and we saw results approach or exceed pre pandemic levels.
I'd be happy to answer further questions about these items in the Q&A. However, I would like to move on for the time being and speak to our balance sheet in particular, our liquidity position.
For Q4, 2022, we reported net repayments of $5 million under our credit facilities, which left us with $327 million drawn any approximately $204 million available under our credit facilities as at December 31, 2022.
We resumed financial Covenant testing in Q4, and we're compliant under the two leverage covenants with total leverage at three six times as compared to a covenant of 375 times and senior leverage at 215 times as compared to a covenant of 275 times.
During the fourth quarter, we approached the bank group and received their support to extend the maturity of the credit facility by one year to November 13 2024.
This extension provides us with additional timing and flexibility during the current turbulent economic environment as we look forward for opportunities relating to our capital structure and cost of capital.
I would now like to address the macroeconomic factors in today's environment, including a recessionary concerns inflation and interest rates.
With respect to any recessionary concerns in the economic outlook. It is important to note that the exhibition industry has fared extremely well jewelry past recessionary cycles.
As consumers trade down their out of home experiences moviegoing becomes the affordable option and factor in seven of the last nine recessionary periods box office revenues increased.
As we contend with rates of inflation that havent been seen in decades. It is important to understand the overall cost structure of an organization to weigh potential impacts for cineplex, our top four cost categories make up approximately 75% of our overall costs.
Film costs is approximately 25% of our overall cost and is 100% variable based on the related box office revenues.
Rent and occupancy related costs represent approximately 20% of total costs and are typically contractual and fixed in nature.
Payroll related costs are approximately 20% of total costs and are subject to wage markets and minimum wage impacts.
Finally, food costs represent approximately 10% of our overall costs and this is a cost category that is impacted by inflationary pressures.
As you can see our cost structure is not as significantly impacted by inflationary cost pressures, but to the extent that we do experienced cost pressures.
Cannot offset through other means we are confident cineplex can turn to pricing as others are doing.
The last macroeconomic factor I wanted to discuss is the interest rate environment. We believe we are well positioned in this regard cineplex is currently in an over hedged position with our bank credit facility, we have hedges totaling $450 million at fixed rates between 283% and $2 94.
5% maturing between November 2023, and November 2025.
In addition, our $250 million high yield offering is fixed at seven 5% and our convertible debenture is fixed at 575%.
As we look at our balance sheets, our capital allocation strategy is to remain focused on delevering and strengthening the balance sheet as we navigate towards our target leverage range of two five to three times.
Since fully opening without restrictions in April 2022, we have generated positive additions and adjusted free cash.
We expect this trend to continue as business volumes increase.
And during the next year or so we will continue to define and move towards our optimal capital structure.
So let's recap by segment in the exhibition segment product supply issues resulted in box office revenues at 66% of pre pandemic levels and total revenues at 75% of pre pandemic levels, demonstrating the ability to drive more revenue off of our attendance space.
Pre pandemic. This segment had an EBITDA margin of 14, 8% in 2019.
And given the high cost structure of this segment, our EBITDA margin was three 1% in a COVID-19 and product supply challenged year in 2022.
We continue to focus on revenue opportunities such as our online booking fee and cost management, including our fixed costs and as product supply stabilizes. This segment will benefit in the future.
In the media segment, we achieved revenues excluding hardware hardware sales of approximately 72% of Q4 pre pandemic levels and reported strong growth in cinema media revenue per patron.
We are excited for this area is product supply stabilizes and attendance levels return, including continued mall traffic growth, which approached 90% of pre pandemic pre pandemic levels in Q4, despite the challenging influenza season.
With the media segments will fixed cost base and annualized margins of approximately 55%. This segment is also poised to benefit from further recovery and contribute to overall EBITDA.
And finally in the amusement and leisure segment, we are already exceeding pre pandemic levels in revenue EBITDA and segment margins, which were 19, 1% in Q4, we look forward to continued success and growth in this segment.
We are also being prudent in managing our Capex and as I mentioned earlier, we have reduced our guidance for 2023, capex to $660 million from a $100 million and will.
On projects delivering the highest and most immediate return.
Our.
<unk> and the diversified business model is paying off with the growth in the amusement and leisure segment, helping to offset the challenges in recovery in the exhibition segment.
And as Alex mentioned, there is a lot for our exhibition business to be excited about and with that I would like to turn things over to Alex for closing remarks.
Thank you for looking ahead, we remain optimistic about the future of our business our investment in diversification is paying off as we continue to see growth and record results in our amusement and leisure businesses.
We have high confidence in the ongoing recovery of content volume in box office, and our team's ability to capitalize on the opportunities that lay ahead.
We are excited by the robust slate of blockbuster and international film product for 2023 and off to a great start to the year with January box office coming in that 88% of 2019 levels for the remainder of Q1 2023 just to name a few we have the following factors.
And Matt and the loss Quanta Mania, which is releasing next week and the pre sales results. So far are fantastic.
Disney's Bollywood feature selfie screen six Shazam theory of the gods, John Wick chapter four and for the remainder of the year, we have Super Mario Brothers Guardians of the Galaxy volume three fast X the little Mermaid Spider man across the Spider verse, Indiana Jones 500.
Dialog Destiny mission impossible seven dead reckoning part one due in part to attack will man in the last Kingdom.
Closing, we remain focused on maximizing value across all our businesses and driving shareholder returns with the backdrop of recessionary concerns cineplex is well positioned to provide an affordable and compelling entertainment experience that can't be replicated at home the consistent discipline we have.
Based on capital and cost management, and revenue and margin generation will serve us well for years to come.
That concludes our remarks this morning, and we would now like to turn the call over to the moderator for questions. Thank you.
Yes.
Thank you.
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That stopped led by one to make store question.
Our first question today comes from Derek Lessard from TD Securities. Derek. Please go ahead. Your line is open.
Yes, good morning, everyone glad to see.
Some positive trends back in the business.
My first question is is that.
Was curious Gordon you might have alluded to this in the pricing, but as you look out further.
On the box office and opportunities around pricing and I know, it's a difficult balance just wondering if you think there's any opportunity.
The pricing model through things like dynamic pricing.
Through your loyalty program just curious on your thoughts there.
<unk> and <unk>.
Bottom line as we mentioned in the script, we have basically provided a well guess with so many different experiences which allows us to.
We have different pricing levels and helped us drive our <unk> higher and we will continue to look at opportunities and we feel that it's really important for our guests to have that incremental benefit of coming out of their homes and experiencing something they cannot replicate so we will.
Continue to look at that and from a pricing perspective as you know a cineplex was one of the first companies to introduce Tuesday pricing many many years.
Years ago, and we continue to look at opportunities as it relates to pricing.
Different age groups with different time of day, and all kinds of opportunities that are available.
Okay. Thanks, and maybe just one last one from me required for Q.
Gordon you did talk about the reduced guidance on Capex and it being limited to high return projects.
Maybe can you just add some color to what youre thinking there maybe the split between the spend between theaters rack room other projects on the books.
Sure.
So.
Got it.
Broken it out in a very.
This category has historically so for.
A maintenance Capex perspective.
I'm guiding you in sort of the range of $20 million to $25 million on an annual basis for growth in premium. So that would include new locations as well as adding premium initiatives.
Roughly in the $15 million to $20 million range.
Our media business.
Its primary digital media to the extent that we have new external customers.
You know somewhere in the $5 million to $10 million range <unk> very similar.
There is maintenance capex levels, and there's a new customer.
<unk> costs in a range of five to 10 and Corp. Another roughly $5 million. So you know a range of between 50 and 70 and so you know what let's say the midpoint guidance of six.
Okay.
Thank you.
Thank you. Our next question is from Matt Yaghi from Scotiabank Ma'am. Please go ahead. Your line is open.
Yes, Thank you for taking my questions.
I have two questions for you guys I wanted to just go back on Q4 in order to better understand and appreciate what could be ahead.
By no means this is cineplex.
Cineplex fault, but more of an industry situation, where we saw a good difference in actual results versus initial expectations on the on the box office side.
Due to some shifts in movie releases unless one when we look forward how would you qualify.
Our optimism for 2023 in the context of these continuous push outs of movie releases as we saw in Q4 I'm just trying to make sure we remain grounded in our expectations and and make sure that we're aligned with the way you know, what's what's happening in terms of movie releases.
And my second question.
It is on DPP. So you had a.
Very strong print on on DPP I wanted to understand a little bit.
What drove that number how much of the increase was due to avatar versus other movies, just so that we can maybe modeled it properly.
As we go back maybe to regular releases rather than a three hour movie release like Avatar. Thank you.
Yes, so on the question as it relates to product when you look at the 2023 film slate it looks much stronger than the last three years from an overall.
Release perspective, and also the blockbuster titles that are coming through.
I still feel that it's going to take.
A year or two before we can get back to the 2019 levels, but what we are seeing as I mentioned in the script as these big titles are performing significantly stronger now compared to their original.
Releases and if that continues we should have a strong year with <unk>.
Less blockbusters, but being able to deliver strong revenue as we move forward. The attendance, we will probably be impacted but you know how significant that will be it will depend on the results. We see from some of the big movies that are coming out.
So hopefully that.
Answers your question as we move into.
The second and third and fourth quarters. The other thing is we have done extremely well in international product and we feel that that's a good opportunity and we will.
We'll continue to do that use our data use artificial intelligence to drive more people and more diverse.
Yes, and to our theatres across.
Canada and you saw in the first quarter first month of January we came 88% of the 2019 numbers and but pan and wandering or two are both very big film for us and we did extremely well and we are continuing to do that as we move forward in this.
Some other big Bollywood films expected for the balance of the year and also Mandarin Arabic version and other films Filipino films that we see doing very well for us moving forward.
And Mark just you.
We do disclose in the box office revenue discussion in our MD&A.
The percentage of box office in any given quarter that comes from premium product.
And so this quarter.
As we mentioned it was 50%.
Sorry, avatar and some of the other product in the premium offering.
Now that compared to 47% last year and <unk>.
41% for the full year. So so as we as you go in quarter by quarter is youll see through our disclosures the impacts.
Liam.
Mix is having on our overall BBB.
Right. So I was just trying to figure out.
With the mix as it is how much of it was impacted by avatar versus.
Are we seeing a.
Steady increase in premium.
It's being sold across the board or it was mainly due to advertise that's I'm trying to understand.
Yes, so, but I would say about 20% of it was due to avatar.
Okay, great. Thank you.
Thank you. Thank you.
Our next question is from Adam Shine from National Bank Financial Adam. Your line is open. Please go ahead.
Thanks, a lot good morning, So obviously good run through on the various segments I don't want to.
Rehash a lot of what was said cord, but if we take some of what Alex was talking about in terms of <unk>.
Revitalization of the box office evolving over the course of the next year or two and the.
Do you expect a prudent in regards to stepping down on the Capex scored per what you said, we saw you squeak by on the on the Covenant testing Q4 end.
Certainly no changes in terms of amendments to the credit facility. So can you speak just a little bit more in terms of perhaps how you see.
The early phase of Q1 unfolding.
<unk> talked to you about.
No more products certainly coming post January but in the meantime, avatar is certainly that his job to backfill January so maybe touch on how youre looking at the positioning around the covenant, particularly acknowledging the twenty-five deep stepped out number one.
At that perhaps number two partly related to that there was a much bigger performance out of other and I know, we don't want to fixate on that per se and part of that at least $5 billion related to <unk>.
The booking fee, but how should we think about the other line going forward because you certainly seem to be getting incremental traction. There then that even back in 2019.
Yeah. So thanks, Adam so.
And.
What we expect.
The question about sort of what the EBITDA levels are.
That we would require in Q1 to sort of hit that test and so in advance of getting that question. The amount is roughly about $36 million.
We are very encouraged by the start of 2023, and we released our January box office results.
Today's press release at 88%.
Of the 2019 levels.
And as Alex mentioned, we are encouraged about the product coming out and in particular for the remainder of the year.
So at this juncture.
We're encouraged by where it was what was seen in January .
And are encouraged by the product for the rest of the year.
And then.
On your second question.
Okay.
So it was out of the revenue.
Yeah, Thanks, and just getting the reminder, so thanks so much.
So in other revenue.
For the our focus is on to drive.
Other streams of revenue for the organization.
And so elements you discussed your online booking fee.
Just a bit of a cineplex pictures initiative.
So I would say if you were to look at.
Where we were in Q4 of 2022.
And looked back to the pre pandemic period in Q4 of 2019.
We're up right roughly $14 million.
And those those two periods.
And it was roughly equally split increase between increases in the online booking fee.
Additional margins.
On a drive thru scene.
And additional breakage revenue on our gift cards, and corporate certificates coming out of the pandemic.
Okay.
You did mentioned Cineplex pictures, though is that is there something related to that be it a distribution fee or something else that will be coming through other at some point going forward.
Yes, yes, youll see okay for it and obviously, we just initiated out of that so theres very little commentary.
Otherwise the YMCA Ryan arrangement was announced in January So what you saw in Q4 was a very small correct.
As to other patents.
Okay I'll leave it there I appreciate it thanks.
Thank you.
Thank you. Our next question is from Arvind <unk> from Canaccord Genuity Arvind. Please go ahead. Your line is open.
Okay.
Good morning, Thanks for taking my questions a couple from me on the on the media side.
I think the Q4 margin was.
So that particularly attractive I think if you kind of back into it.
North of 70%.
You know I know that even with some headwinds in the media it seems to be sort of managing the cost. There I was wondering if you can kind of give.
Give us a sense of what we should be looking for as we look to kind of protect that margin forward and then in terms of ad trends.
Alan Sokol I'd, maybe just talk about.
What you're kind of getting in terms of feedback from the sales team and from clients.
You know recognizing the macro but also sort of you know your students specific targeting capabilities.
I'll leave it there.
Okay. Thanks, So Evan.
Take the first question on the margins.
And as we are.
<unk> described historically and particularly the setup.
Media advertising business is a very high margin business.
In that segment, we do not.
There is no charge from the exhibition segment to the media segment for access to the theaters.
So on the increment you can imagine that the revenue is very accretive to the bottom line.
Because it's a relatively low fixed cost business.
And the primarily the additional costs on any revenue generating sales commissions.
On the digital place based media business.
There's a technology component to it as a licensed technology. So it's a lower margin business cinema media business, but we blend into the number that I described earlier, which is roughly about a 55%.
Our segment margin.
Right.
So as that volume grows in the future that has huge bottom line.
Contributions to our overall results.
And our window on the actual future as we look forward. The numbers are still a you know very strong and our.
Advertisers at the cinema level basically look at that as the best opportunity to get the message across.
And on the.
Digital media, we've got you know.
Mall traffic, returning very close to pre pandemic levels and it's a great way for our advertisers to get their messages across so we feel even you know with the recessionary periods, we feel quite strong that our business will continue to move forward.
Thank you and just a quick follow up and I apologize if I missed something that was said with.
With respect to CPP, given sort of inflationary conditions instead of.
The execution that you've been able to deliver.
Do you sort of see.
More kind of CPP level growth.
Going into 'twenty three.
Do you think that something is higher than levels or do you feel that's achievable.
Sorry, as high as sort of the historic numbers is that what you're asking but yes, we've seen over the last couple of years.
Yes, yes, yes.
Yes.
Linda I wanted to just make a couple comments on that one is.
In the pandemic I think we all sort of noted and saw that there was a next celo accelerated level of growth in CPP significantly over levels that we had seen historically so in the mid teens in certain quarters.
At the time, we had always said that level of growth is not necessarily achievable on a long term basis, but what we are seeing is that.
Our customers that are coming in they definitely want to indulge and the overall experience and they want to spend at the concession stand. So now that we've returned another a number of quarters backer.
A more normalized kind of business with any operating restrictions is.
You would expect a more normalized level of growth going forward from CPP perspective.
Okay. That's helpful. Thank you.
Okay.
Thank you our last question today comes from Dream Reynolds from RBC Drew. Please go ahead. Your line is open.
Yeah. Thanks, Thanks, very much and good morning, and congrats on.
All of the moving parts coming back to normal two for me one is Gordon you alluded to.
The media revenue that you're generating relative to the attendance for Cineplex media can you just kind of remind us obviously.
All equate the dollars but.
What would you expect.
In terms of revenue uplift.
You know what as attendance continues to build through 2023.
And then second question.
You highlight the defensibility.
Box office.
Which I think we all fully acknowledge on the.
Location based entertainment and amusement businesses can you just remind us what kind of cyclical.
<unk> sensitivity from your perspective. These two businesses could have thank you.
Sure.
So on your first question is.
I think one thing from our perspective, the cinema advertising has and always will be a compelling medium for advertisers and as we look forward or that was mentioned great traction.
Confidence in place.
Ads across our screen.
The one thing is we're focused over the last number of years on.
Our data capabilities and providing advertisers what theyre looking for in terms of determining returns in the data related to some of what their campaigns, which is a really compelling in our value added offerings that others don't do.
We started to introduce and talk about the media for cinema media per patron.
I'd like to highlight that.
Our statistics tend to significantly outperform our peers.
Particularly in the U S markets.
And that has to do with some of the.
Initiatives that we're undertaking to deliver more Val.
Value and opportunities any opportunities to our customers in the cinema environment.
And on your second question.
Kind of LTE and one thing I want to talk about it, particularly with respect to <unk>.
The seasonality with respect to <unk> and <unk>.
You need to.
One thing to remember is that.
Primarily related to amusement gaming the router business. So this is where our equipment is in third party venues drive a significant amount of the overall margin that's the higher margin component of the business.
Perform stronger during sort of the Q2 Q3 summer months.
When students are offline on school holiday. So when you look at the cyclicality and seasonality.
<unk> trend and as you saw some of the higher margins in Q2 Q3 in the RV space. Once we hit the fourth quarter and the mix shift in the product shift changes a little bit.
You know it goes down, but we're still confident with the 15% to 17% overall blended EBITDA margin for the business on an annualized basis.
Okay Super and.
And sorry, just on that location based entertainment.
Okay, sorry, and then it'll be a business that so again.
We're really pleased with.
The achievements that we did versus pre pandemic period, because if you remember the business performs quite strong in the summer period again, very similar types of thoughts and holiday season.
But also.
During Q4, and particularly with the holiday parties and we do a significant amount of our business on corporate parties and events.
And so if youre looking at seasonality.
And the LTE business it would be more heavily weighted to Q3 and Q4.
Got it thank you very much.
Thank you.
Thank you I would now like to pass back to Alex for any closing remarks, as we have make that the question.
Thank you everyone for joining the call. This morning, we look forward to speaking with you again in May for our first quarter 2023 result.
Thanks, again and see you at the movies.
Thank you everyone for joining today's call you may now disconnect your lines and have a lovely day.
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