Q3 2024 Cineplex Inc Earnings Call
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On the fluid Tommaso to Charlie's VP of corporate development Investor Relations. Please go ahead.
Tommaso: Good morning, everyone I would like to welcome you to Cineplex's third quarter 'twenty 'twenty four earnings release Conference call hosted by Ellis, Jacob President and Chief Executive Officer, and Gordon, Our Chief Financial Officer.
Tommaso: Before we begin let me remind you that certain statements being made are forward looking and subject to various risks and uncertainties.
Tommaso: Such forward looking statements are based on management's beliefs and assumptions regarding the information currently available actual results may differ materially from those expressed in forward looking statements information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and managements.
Discussion and analysis.
Speaker Change: Following today's remarks, well close the call with our customary question and answer period I will now turn the call over to Ellis Jacob.
Ellis Jacob: Thank you, Matt Good morning, and welcome to our Q3 2024 conference call.
Ellis Jacob: Like to focus on a few important factors that are top of mind for investors.
Is this the same content supply and consumer enthusiasm for movie going.
Second is the strength of our diversified businesses and finally, how we are positioned to deliver strong growth and shareholder value into the future.
This past quarter the exhibition industry collectively experience a continued shift in the box office since June we've enjoyed a steady stream of titles drawing moviegoers into their local theaters.
Ellis Jacob: Mark I believe five of the top six films of 'twenty 'twenty four will release since the middle of June the surge began with inside out to which became the highest grossing animated film of all time.
Ellis Jacob: The film generated $653 million at the domestic box office and ignited the beginning of a strong run of titles to the rest of the year. Following closely was despicable me for which kicked off the third quarter on a high note, becoming the second highest grossing film in the franchise.
And generating $360 million of the domestic box office.
Ellis Jacob: It held the spots in the top five titles of the domestic box office for seven consecutive weeks.
After these two incredible family films, Deadpool and Wolverine, then stole the show, becoming the highest grossing R rated film ever achieving $637 million in domestic box office revenues and staying in the top five of domestic box office for nine consecutive weeks in <unk>.
<unk> to these three incredible titles twisters in BEETLEJUICE needle juice rounded out cineplex is top five titles for the third quarter.
Operator: Good morning, everyone. I would like to welcome you to Centerplex this third quarter, 2024, earnings release conference call hosted by L.S.
Ellis Jacob: The box office results clearly demonstrate that consumers remain highly enthusiastic about compelling content in theaters.
Operator: Jacob, President and Chief Executive Officer, and Gord Nelson, Chief Financial Officer. Before we begin, let me remind you that certain statements being made are forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions regarding information currently available.
Ellis Jacob: The return of content supply combined with strong moviegoing demand resulted in center Parcs, achieving box office revenues of $175 million in the quarter.
This represented 98% of 2019 levels and total revenue of $395 million exceeding 2019 levels.
Operator: Actual results may differ materially from those expressed and forward-looking statements. Information regarding factors that could cause results to vary can be found in the company's most recently filed annual information form and management's discussion in the analysis.
Cineplex has total revenues were just shy of 2023 levels by four 6% as Q3 2023 was the best quarter in our company's history due to the Barbara and high month phenomenon.
Operator: Following today's remarks, we'll close the call with our customer question-and-answer periods.
Operator: I will now turn the call over to L.S.
Ellis Jacob: Jacob. Thank you, Master.
Ellis Jacob: Although cineplex underperformed the North American box office relative to 2023 at once again outperformed the North American box office relative to 2019 by nearly 3%.
Ellis Jacob: Good morning, and welcome to our Q3 2024 conference call. Today, I'd like to focus on a few important factors that are top of mind for investors. The first is the same content supply and consumer enthusiasm for movie going. The second is the strength of our diversified businesses, and finally, how we have positioned to deliver strong growth and shareholder value into the future. This boss quarter, the exhibition industry, collectively experienced a continued shift in the box office. Since June, we've enjoyed a steady stream of titles drawing moviegoers into their local theaters. Remarkably, five of the top six films of 2024 were released since the middle of June.
Ellis Jacob: When comparing Canada to the U S on a year over year basis, it's important to note that certain firms did not play in Canada and certain John drugs performed stronger in the U S than in Canada. This will drive fluctuations from quarter to quarter, depending on the film mix.
Ellis Jacob: We achieved a BP of $13 19 in the CPP of $9.85. Both all time quarterly records premium experiences also represented 42, 2% of the box office performing better than last year's 35%.
Ellis Jacob: The surge began with Inside Out 2, which became the highest-grossing animated film of all time. The film generated 653 million at the domestic box office and ignited the beginning of a strong run of titles to the rest of the year. Following closely with Despicable Me 4, which kicked off the third quarter on a high note, becoming the second highest-grossing film in the franchise, and generating 360 million at the domestic box office. It held a spot in the top five titles of the domestic box office for seven consecutive weeks. After these two incredible family films, Deadpool and Wolverine then stole the show, becoming the highest-grossing R-rated film ever, achieving 637 million in domestic box office revenues and staying in the top five of the domestic box office for nine consecutive weeks.
Ellis Jacob: Our box office performance at perpetual growth along along with the results from our diversified businesses allowed cineplex to deliver a 47 5 million of adjusted EBITDA and $16 4 million of cash provided by operating activities.
Speaker Change: This performance enabled us to invest in the business and return capital to shareholders through share repurchases.
Speaker Change: Turning to our third quarter media results Cineplex digital media achieved an impressive 43% year over year revenue growth as a result of expanded digital out of home shopping networks and new clients.
Speaker Change: We're also pleased with our cinema media results, which delivered a $1 37 in cinema media revenue per patron and increase of 10, 5% compared to Q3 2023.
Ellis Jacob: In addition to these three incredible titles, Twisters and Beetlejuice, Beetlejuice rounded out Synoplex's top five titles for the third quarter. The boss office results clearly demonstrate that consumers remain highly enthusiastic about compelling content and theaters. The return of content supply, combined with strong movie-going demand, resulted in Synoplex achieving box office revenues of 175 million in the quarter. This represented 98% of 2019 levels, and total revenue of 395 million exceeding 2019 levels. Cineplex's total revenues were just shy of 2023 levels by 4.6% as Q3 2023 was the best quarter in our company's history due to the Barbenheimer phenomenon.
Speaker Change: Cinema media remains a compelling space for our advertisers to invest their dollars as it was one of the few media platforms that can capture consumer's undivided attention.
Being the only exhibitor in North America that owns its media business creates a significant point of differentiation, ensuring an important revenue stream with high margins, especially now that content supply is returning at a steady pace.
Speaker Change: During the quarter, we celebrated another win for our media segment, the Canadian out of home marketing and measurement Bureau, welcome Cineplex media as a new member and together with Cineplex digital media. They became part of its inaugural mall measurement methodology with this new accreditation and measurement.
Speaker Change: Approach, we ensure digital out of home clients received the most value and transparency for the impressions.
Ellis Jacob: Although Cineplex underperformed the North American box office relative to 2023, it once again outperformed the North American box office relative to 2019 by nearly 3%. When comparing Canada to the US on a year-over-year basis, it's important to note that certain films did not play in Canada and certain genres performed stronger in the US than in Canada. This will drive fluctuations from quarter to quarter depending on the film mix. We achieved a BPP of $13.19 and a CPP of $9.85, both all-time quarterly records. Premium experiences also represented 42.2% of the box office, performing better than last year's 35%.
Speaker Change: Further solidifies our leadership in the digital out of home advertising space as we continue to win new business and rollout new campaigns.
Speaker Change: The rec room, and palladium location, so far <unk> business play an important role in strengthening our position in delivering growth and shareholder value.
Speaker Change: During the third quarter, our <unk> business delivered revenue of $31 1 million and adjusted store level EBITDA of seven 6 million, we have three new <unk> locations opening in the fourth quarter, including our first location of the Rec room in Quebec opening later this month.
It will be located at the recently opened Royal Mount District, Montreal, its newest premium shopping dining and entertainment destination.
As anticipated to become one of the leading retail developments in Canada. We are also excited to be opening a new cineplex cinema adjacent to direct room Royal months, creating a one stop destination for entertainment guests.
Ellis Jacob: Our Box Office performance and per-patient growth, along with the results from my diversified businesses, allowed Cineplex to deliver $47.5 million of adjusted EBITDAO and $16.4 million of cash provided by operating activities. This performance enabled us to invest in the business and return capital to shareholders who share repurchases.
Speaker Change: Guests can enjoy amusement games duckpin bowling augmented reality darts delicious food and handcrafted signature cocktails live entertainment and enjoy a movie all under one roof.
Our Royal mounts Cineplex will consist of five auditoriums, Paul with full recliners, giving our guests the ultimate movie going experience.
Ellis Jacob: Turning to our third quarter of media results, Cineplex Digital Media achieved an impressive 40.3% year-over-year revenue growth as a result of expanded digital out-of-home shopping networks and new clients. We're also pleased with our Cinema Media results, which delivered a $37 Cinema Media revenue for Patron and increased of 10.5% compared to Q3 2023. Cinema Media remains a compelling space for our advertisers to invest at dollars as it was one of the few media platforms that can capture consumers' undivided attention. Being the only exhibitor in North America that owns its media business creates a significant point of differentiation, ensuring an important revenue stream with high margins, especially now that content supplies are returning at a steadier pace.
Speaker Change: Later this month, we are also opening a flagship location of the Rec room on Granville Street in Vancouver. This 45000 square foot historical location spans three flows each offering a different experience, including a wide range of the latest amusement games augmented reality darts.
Speaker Change: Ask drawing dining and bar offerings live entertainment and events.
New to dislocation on the lower level as the palms, which is inspired by the historic Granville Street Hotel of the same name founded 1913. It features a mini golf course, a gorgeous hotel inspired bar.
Speaker Change: Tropical cocktails and a unique variety of bold flavor full tropic inspired snacks.
Ellis Jacob: During the quarter, we celebrated another win for our media segment. The Canadian out-of-home marketing and measurement bureau welcomed Cineplex Media as a new member, and together with Cineplex Digital Media, they became part of its inaugural mall measurement methodology. With this newer accreditation and measurement approach, we ensure our digital out-of-home clients receive the most value and transparency for their impressions. This further solidifies our leadership in the digital out-of-home advertising space as we continue to win new business and roll out new campaigns.
Speaker Change: Lastly in December our fourth Palladium location is opening adjacent to our Cineplex theater at February mall in Toronto.
Speaker Change: Once again, we are creating an entertainment destination for families within the high traffic location easily accessible by car or transit.
Speaker Change: In tandem with our new openings, you've developed make room for play as our new brand positioning for the Rec room to appeal and attract our target demographic.
This new positioning came from the belief that the rec room is the perfect place to inject more fundamentally into day to day life.
Ellis Jacob: The RECRUM and the LADEM locations of ILB business play an important role in strengthening our position in delivering growth and shareholder value. During the third quarter, ILB business delivered revenue of 31.1 million and adjusted stolevel EBITDAO of 7.6 million. We have three new ILB locations opening in the fourth quarter, including our first location of the RECRUM and Quebec, opening later this month. It will be located at the recently open Royal Mount District, Montreal's newest premium shopping, dining, and entertainment destination. It is anticipated to become one of the leading retail developments in Canada. We are also excited to be opening a new Cineplex cinema adjacent to the RECRUM Royal Mount, creating a one-stop destination for entertainment.
Speaker Change: To launch our new brand positioning we released a comprehensive campaign aimed at driving awareness and visitation from Gen Z and millennials. The cornerstone of the campaign is a 62nd spot being shown in cinemas across the country.
Speaker Change: We also redesigned the rec room website to deliver a more engaging and elevated platform for our newly defined and guest experience.
With an attractive return on our <unk> business as a meaningful contributor to current and future EBITDA growth, we see an opportunity to continue investing in the business with the potential to expand to 30 locations across the country solidifying our leadership position in the entertainment space.
Speaker Change: As I mentioned earlier in the call. We are seeing excellent revenue from our premium offerings, we offer nine different ways to enjoy a movie at Cineplex Ultra AVX VIP Recliners IMAX D box screen X 40, <unk> clubhouse this past quarter, we <unk>.
Ellis Jacob: Guests can enjoy amusement games, duck-bin-bowling, augmented reality darts, delicious food, and handcrafted signature cocktails, live entertainment, and enjoy a movie all under one roof. Our Royal Mount Cineplex will consist of five auditoriums hauled with full recliners, giving our guest the ultimate movie-going experience. Later this month, we are also opening a flagship location of the RECRUM on Granville Street in Vancouver. This 45,000 square foot historical location spans three floors, each offering a different experience, including a wide range of the latest amusement games, augmented reality darts, axe-throwing, dining and bar offerings, live entertainment and events. New to this location on the lower level is the Palm, which is inspired by the historic Granville Street Hotel of the same name, founded in 1913.
Speaker Change: Stall recliners at Cineplex cinemas, Fredericton and open the screen <unk> auditorium at Cineplex cinemas for quantum and VIP in British Columbia.
In the fourth quarter, we are opening two new IMAX screens to screen ex screens and one ultra AVX screen across the country.
In addition to our guests the ability to choose their preferred movie watching experience a concession offerings are just as important in creating a fulsome experience while also driving revenue.
Speaker Change: For the ultimate movie fan merchandise like outlandish popcorn buckets themed cups or become a customary upgrade and collectible for Deadpool and Wolverine alone a collection of merchandise offering generated one $3 million in revenue.
Ellis Jacob: It features a mini golf course of gorgeous hotel inspired by tropical cocktails and a unique variety of bold, flavorful, tropical inspired snacks. Lastly, in December, our fourth Palladium location is opening adjacent to a Cineplex theater at Fairview Mall in Toronto. Once again, we are creating an entertainment destination for families within a high-traffic location, easily accessible by car or transit. In tandem with our new openings, we've developed "make-room for play" as our new brand positioning for the RECRUM to appeal and attract our target demographic. This new positioning came from the belief that the RECRUM is the perfect place to inject more fun and play into day-to-day life.
Our new mobile App, which has achieved a rating of four eight with both iPhone and Android users allows guests to free purchase their concessions simply pickup this snacks at the theater.
Speaker Change: We are seeing a notably higher average per patron spend compared to in person transactions. We believe as adoption grows this will be an opportunity for further growth in overall concession revenues.
Speaker Change: Our strategy that I'm, particularly proud of is the strength of international cinema. This quarter International programming represented nine 3% of total box office revenues compared to the North American box office at two seven.
Speaker Change: During the third quarter, the two largest international films for Cineplex was streets to where cineplex generated 44% of North Americans market share and Jeff and Juliet, three which became cineplex as highest grossing Punjabi film of all time.
Ellis Jacob: To launch our new brand positioning, we released a comprehensive campaign aimed at driving awareness and visitation from Gen Z's and millennials. The cornerstone of the campaign is a 60-second spot being shown in cinemas across the country. We also redesigned the RECRUM website to deliver a more engaging and elevated platform for a newly defined guest experience. With an attractive return, our LB business is a meaningful contributor to current and future EBITDAO growth. We see an opportunity to continue investing in the LB business with the potential to expand to 30 locations across the country, thus solidifying our leadership position in this entertainment space.
Speaker Change: We were able to attract diverse audiences to their favorite international firms by leveraging our robust data.
Speaker Change: Use of data to drive incremental attendance and increase spend will continue to be a key differentiator for cineplex as future growth.
Speaker Change: We've invested in building a robust data models and marketing automation platforms to drive personalized campaigns.
Speaker Change: We have also developed detailed attendance prediction models that annualized global content to identify what resonates with Canadians. In addition, we have created propensity models using our customer base by integrating these models and crafting unique personalized campaigns through marketing automation.
Ellis Jacob: As I mentioned earlier in the call, we have seen excellent revenue from our premium offerings. We offer nine different ways to enjoy a movie at Cineplex: Ultra AVX, VIP, recliners, iMacs, D-Box, ScreenX, 4DX, 3D, and Clubhouse. Disparse quarter, we install recliners at Cineplex Cinemas, Fedrickton, and open a ScreenX auditorium at Cineplex Cinemas, Coquitlam, and VIP in British Columbia. In the fourth quarter, we are opening two new iMac screens, two ScreenX screens, and one Ultra AVX screen across the country. In addition to our guest ability to choose their preferred movie watching experience, our concession offerings are just as important in creating a full sum experience while also driving revenue.
Speaker Change: Engines, we can enhance relevance and drive incremental visitation and spend.
Speaker Change: As a reminder, the adjusted EBITDA contribution for each incremental grid guests is approximately $13 46.
Speaker Change: And Craig bridging our customer base and the <unk> plus member population to visit more frequently could equate to significant incremental upside to our business.
Speaker Change: Before I conclude I want to provide a brief update on the competition Tribunal decision regarding our online booking fee on October 23rd we filed a notice of appeal with the federal quarter for fuel to overturn the competition Tribunal decision.
Ellis Jacob: For the ultimate movie fan, merchandise like Outlandish popcorn buckets and team cups have become a customary upgrade and collectible. For Deadpool and Wolverine alone, a collection of merchandise offering generated $1.3 million in revenue. Our new mobile app, which has achieved the rating of 4.8 with both iPhone and Android users, allows guests to pre-purchase their concessions and simply pick up their snacks at the theatre. We are seeing a notably higher average per patron spend compared to in-person transactions. We believe as adoption grows, this will be an opportunity for further growth in overall concession revenues.
Speaker Change: With the consent of the competition Bureau, we have been granted an interim stay of the monetary penalty and a broader motion to stay the monetary penalty pending completion of the appeal.
Speaker Change: We continue to emphasize that.
Speaker Change: Optional value added service.
Speaker Change: Provides moviegoers with the convenience of advanced online seat selection, knowing that they have a ticket for a specific showtime and exact seat location before they arrive at a theater.
While we disagree with the tribunals decision, we've been ordered to make changes to our website or in the brand. We are in the process of doing so.
Ellis Jacob: A strategy that I'm particularly proud of is the strength of international cinema. This quarter, international programming represented 9.3% of total box office revenues compared to the North American box office at 2.7. During the third quarter, the two largest international films for Cineplex were Streets 2, where Cineplex generated 44% of North America's market share, and Jat and Julia 3, which became Cineplex's highest grossing Punjabi film of all times. We were able to attract diverse audiences to their favorite international films by leveraging our robust data. The use of data to drive incremental attendance and increase spend will continue to be a key differentiator for our cineplex's future growth.
Speaker Change: We remain confident that our fee was always presented in a clear and prominent manner and fully complied with the spirit and letter of the law.
As a reminder, this ruling has no impact on our ability to charge the online booking fee and we will continue to offer the optional value added convenience of advanced online seat selection to our guests.
As we approached the end of 2024, we are generating positive momentum within our business I am proud to say, we have successfully navigated the challenge of some states supply and it is now behind US looking ahead, the fourth quarters, bringing some remarkable titles, including Wicked part one.
Speaker Change: Gladiator two moana to Lord of the rings, the wall of the <unk> Sonic the Hedgehog, III and foster the Lion King.
Ellis Jacob: We've invested in building robust data models and marketing automation platforms to drive personalized campaigns. We've also developed detailed attendance prediction models that analyze global content to identify what resonates with Canadians. In addition, we have created propensity models using our customer base. By integrating these models and crafting unique personalized campaigns through marketing automation engines, we can enhance relevance and drive incremental visitation and spend. As a reminder, the adjusted EBITDAO contribution for each incremental growth guess is approximately $13.46. Encryorging our customer base and the cineplex member population to visit more frequently could equate to significant incremental upside to up.
We are optimistic the momentum will continue into 2025, what's what's shaping up to be a strong year for the film slate, including Captain America Brave New World Snow wide mission impossible eight karate Kid how to train your Dragon Jurassic World Rebirth Superman legacy.
Speaker Change: Fantastic full force steps, we could part two so top tier two an avatar fire of Nash.
Speaker Change: The upside to a strong film slate means our media business can consistently offer a compelling place for advertisers to invest their dollars and capture guests undivided attention.
Speaker Change: With three new <unk> locations opening in key markets. Our business is set to solidify its position as Canada's destination for play.
Ellis Jacob: Before I conclude, I want to provide a brief update on the Competition Tribunal's decision regarding our online booking fee. On October 23rd, we file the notice of a peer with the Federal Court of Appeal to overturn the Competition Tribunal's decision. With the consent of the Competition Bureau, we have been granted an interim stay of the monetary penalty and have brought a motion to stay the monetary penalty pending completely. We continue to emphasize the optional value-added service. It provides movie goals with the convenience of advanced online seek selection, knowing that they have a ticket for a specific showtime and exact seek location before they arrive at a theater.
Speaker Change: And the use of a robust data presents a significant untapped potential.
To close we have made tremendous strides to overcome product supply challenges in the third quarter prove we are well on our way to a steadier stream of content now and into the future.
Our diversified media and <unk> businesses are following suit and gaining momentum and scale.
Speaker Change: As we look forward, we will continue to differentiate ourselves within the market and drive industry industry, leading results. We are confident we will sustain this momentum and our position as one of North America's leading entertainment and media destination.
Speaker Change: With that I will turn things over to God.
God: Thanks, Alex I am pleased to present, a condensed summary of the third quarter 2024 results for Cineplex, Inc.
Ellis Jacob: While we disagree with the tribunal's decision, we have been ordered to make changes to our website, and we are in the process of doing so. We remain confident that our fee was always presented in a clear and prominent manner and fully complied with the spirit and letter of the law. As a reminder, this ruling has no impact on our ability to charge the online booking fee, and we will continue to offer the optional value-added convenience of advanced online seat selection to our guests.
God: For further reference our financial statements and MD&A have been filed on SEDAR plus and are also available on our Investor Relations website at Cineplex Dot com.
Speaker Change: Our MD&A and earnings press release include a complete narrative on the operational results. So I will focus on highlighting select items. In addition to providing commentary on the accounting provision for the competition Bureau matter liquidity capital allocation priorities and our outlook.
Speaker Change: For my comments on operations all amount following will be from continuing operations unless otherwise stated.
Ellis Jacob: As we approach the end of 2024, we are generating positive momentum within our business. I am proud to say we have successfully navigated the challenge of some state supply, and it is now behind us. Looking ahead, the fourth quarter is bringing some remarkable titles including Wicked Part 1, Gladiator 2, Moana 2, Lord of the Rings, The War of the Rohirrim, Sonic the Hedgehog 3, and The Foss of the Lion King. The upside to a strong film slate means our media business can consistently offer a compelling place for advertisers to invest at dollars and capture our guests' undivided attention.
Speaker Change: We were pleased to see the return of the supply of film content in the third quarter.
Speaker Change: Our third quarter box office was 98% of pre pandemic third quarter of 2019.
Speaker Change: 93% of the record breaking third quarter of 2023.
Speaker Change: As a result of the decline in attendance of compared to the Barbara and hybrid quarter. Our total revenue decreased four 6% to $395 $6 million and our adjusted EBITDA decreased to $47 $5 million in 2024 as compared to the record $74 $6 million in 2020.
Three.
Speaker Change: Let's take a closer look at our segments in.
Speaker Change: In the film exhibition and content segment attendance declined $2 4 million or 15, 5% to approximately $13 3 million.
Speaker Change: Total revenue decreased five 3% and segment adjusted EBITDA decreased to $48 8 million.
Primarily a result of the attendance decline and higher film cost due to the concentration and mix of films.
Ellis Jacob: With three new LVU locations opening in key markets, our LVB business is set to solidify its position at Canada's destination for play. And the use of our robust data presents the significant untapped potential.
Speaker Change: As part of our portfolio optimization and rationalization strategy, we closed one location during the quarter, bringing the total to three location closures on a year to date basis.
Speaker Change: Comparing Q3 2024 to the pre pandemic Q3, 2019 period, our theories theatre portfolio has decreased by 10 locations in our theater cash rent paid and payable has decreased six 8% to $36 $5 million from $39 1 million.
Ellis Jacob: To close, we have made tremendous strides to overcome product supply challenges, and the third quarter proved we are well on our way to a steadiest stream of content now and into the future. Our diversified media and LVB businesses are following suit and gaining momentum and scale. As we look forward, we will continue to differentiate ourselves within the market and drive industry-leading results. We are confident we will sustain this momentum and our position as one of North America's leading entertainment and media destinies.
The media segment revenue increased nine 3% to $31 $3 million.
Speaker Change: Segment, adjusted EBITDA decreased by $2 $4 million to $13 $6 million as a result of a sales mix shift to the lower margin CDM business from the cinema media business and by ongoing conversion costs related to new digital media networks.
Gord Nelson: With that, I will turn things over to Gord. Thanks, Ellis. I am pleased to present a condensed summary of the 3rd quarter of 2024 results for Cineplexic. For further reference, our financial statements in the MBA have been filed on Cedar Plus, and are also available on our Investor Relations website at Cineplex.com. Our MBA and earnings press release include a complete narrative on the operational results.
Speaker Change: As compared to the prior year cinema media revenue decreased 7% to $18 1 million <unk>.
Speaker Change: Primarily due to the 15, 5% attendance decline.
Speaker Change: Our digital place based media business had strong results with total revenues up 43% to $13 3 million.
Gord Nelson: So, I will focus on highlighting select items in addition to providing commentary on the accounting provision for the Competition Bureau matter, liquidity, capital allocation priorities, and our outlook. For my comments on operations, all amounts following will be from continuing operations unless otherwise stated. We were pleased to see the return of the supply of film content in the 3rd quarter. Our 3rd quarter box office was 98% of pre-pandemic 3rd quarter of 2019, and 93% of the record-breaking 3rd quarter of 2023. As a result of the decline in attendance as compared to the Barbon Heimer quarter, our total revenue decreased 4.6% to 395.6 million dollars, and there is just the EBITDA decreased to 47.5 million dollars in 2024, as compared to the record 74.6 million dollars in 2023.
Speaker Change: Primarily as a result of the addition of Cadillac Fairview to our shopping mall network beginning in 2024.
Speaker Change: And lastly in our <unk> segment segment revenues decreased by nine 1% to $31 $1 million.
Speaker Change: Third quarter of the prior year 2023 was positively impacted by weather and stay indoor advisories due to wildfires and some of our major markets.
Speaker Change: As compared to 2022 lb segment revenues were up marginally from $31 million in that period.
Speaker Change: Store level adjusted EBITDA margins were 24, 4% versus 29% in the prior year, primarily as a result of increased volume driving operating efficiencies in the prior year period, and the impact of minimum wage increases.
Speaker Change: We continue to expect that store level margins for the year, we will meet or exceed our 25% target.
Gord Nelson: Let's take a closer look at our segments. In the Film Exhibition and Content Segment, attendance declined 2.4 million, or 15.5%, to approximately 13.3 million. Total revenue decreased 5.3%, and segment adjusted EBITDA decreased to 48.8 million dollars, primarily a result of the attendance decline and higher film cost due to the concentration and mix of films. As part of our portfolio optimization and rationalization strategy, we closed one location during the quarter, bringing the total to three location closures on a year-to-date basis. Compare in Q3 2024 to the pre-pandemic Q3 2019 period, our theater portfolio has decreased by 10 locations, and our theater cash rent to paid and payable has decreased 6.8% to 36.5 million dollars from 39.1 million dollars.
Speaker Change: And at the segment level segment EBITDA was negatively impacted by pre opening and campaign production costs for our new brand campaign for the Rec room designed to drive increased awareness and visitation from our target audience.
Speaker Change: These together totaled approximately $1 $1 million during the quarter.
Speaker Change: I want to now briefly discuss our accounting for the competition Tribunal decision in favor of the competition Bureau.
Speaker Change: And the related administrative monetary penalty of approximately $39 million.
Speaker Change: We continue to believe that our online booking fee fully complied with the letter and the spirit of the law and have filed our notice of appeal with the federal court of appeal.
Speaker Change: With the commissioners consent, we were granted an interim stay regarding this payments and we are requesting a stay pending completion of the appeal.
Speaker Change: Also with the commissioners consent.
Gord Nelson: The media segment revenue increased 9.3% to 31.3 million dollars. Segment adjusted EBITDA decreased by 2.4 million dollars from 13.6 million dollars as a result of a sales mix shift to the lower margin CDM business from the cinema media business, and by ongoing conversion costs related to the new digital media networks. As compared to the prior year, cinema media revenue decreased 7% to 18.1 million dollars, primarily due to the 15.5% attendance decline. Our digital play-based media business had strong results, with total revenues up 40.3% to 13.3 million dollars, primarily as a result of the addition of Cadillac Fairview to our shopping mall network beginning in 2024.
Speaker Change: The agreed upon stay would result in payment being deferred until a decision by the federal court of appeal.
Speaker Change: Although we strongly believe in our position we are accruing the full $39 million in our Q3 results.
Speaker Change: That appears in a separate line item on the income statement and balance sheet entitled provision for competition to tribunals administrative monetary penalty.
Speaker Change: And given its one time nature is excluded from our definition of adjusted EBITDA and adjusted EBITDA.
Speaker Change: Sure the amount be adjusted or eliminated on final appeal. This amount will be adjusted accordingly at the future.
Speaker Change: <unk> date.
Speaker Change: I would now like to move on and speak to our balance sheet and in particularly our liquidity position.
Speaker Change: At quarter end, we had $32 million in cash and no drawings under the Covenant light credit facility, which has a capacity of $100 million.
Gord Nelson: And lastly, in our LBE segment, segment revenues decreased by 9.1% to 31.1 million. The third quarter of the prior year of 2023 was positively impacted by weather and stay-in-door advisories through wildfires in some of our major markets. As compared to 2022, LBE segment revenues were up marginally from $31.1 million in that period. Storal level adjusted EBITL margins were 24.4% versus 29% in the prior year, primarily as a result of increased volume driving operating efficiencies in the prior year period and the impacts of minimum wage increases. We continue to expect that store level margins for the year will meet to exceed our 25% targets.
Speaker Change: With the comprehensive refinancing plan, we have meaningfully pushed out near term maturities and removed restrictions weighted related to covenant testing and no testing was required under the credit facility at quarter end.
Speaker Change: As we have mentioned previously our capital allocation priorities include maintenance capital expenditures continuing to strengthen the balance sheet to achieve our target leverage ratios investing in growth opportunities and providing shareholder returns in the form of share back buybacks <unk> dividends.
Speaker Change: As we discussed at last quarter, and we saw a strong product pipeline going forward driving the potential for significant free cash flow generation.
Speaker Change: We have limited commitments on growth Capex and we saw at current share price, which we believe did not reflect the intrinsic value of the company.
Gord Nelson: And at the segment level, segment EBITL was negatively impacted by pre-opening and campaign production costs for a new brand campaign for the Rec Room designed to drive increased awareness and visitation from our target audience. These together totaled approximately $1.1 million during the quarter.
Speaker Change: We announced and received approval for a normal course issuer bid during the quarter and commenced at the end of the quarter with purchases of approximately $2 million in shares under this program at quarter end.
Speaker Change: We have repurchased an additional $3 9 million in shares subsequent to quarter end.
Gord Nelson: I want to now briefly discuss our accounting for the Competition Tribunal's decision in favor of the Competition Bureau and the related administrative monetary penalty of approximately $39 million. We continue to believe that our online booking fee fully complied with the letter and the spirit of the law and a filed our notice of appeal with the Federal Court of Appeal. With the commissioner's consent, we were granted an interim stay regarding this payment, and we are requesting a stay pending completion of the appeal, also with the commissioner's consent. They agreed upon stay, with result in payment being deferred until a decision by the Federal Court of Appeal.
Speaker Change: Now I'd like to take a few minutes to remind our investors of the world. We see going forward. This is where we achieve or exceed pre pandemic adjusted EBITDA level on 75% to 80% of pre pandemic attendance levels with no near term cash taxes due to the Nols in this scenario, we could generate in <unk>.
Speaker Change: So for $100 million of free cash flow and use this free cash flow to invest delever and provide additional share shareholder returns.
Speaker Change: Annualized in our $47 5 million in Q3, EBITDA gives us comfort that we're on the path to achieving our pre pandemic annualized EBITDA of $209 million.
Speaker Change: Summary, we believe there continues to be a lot to be excited about with our long history of disciplined operations and capital management, we remain highly focused on creating long term shareholder value.
Gord Nelson: Although we strongly believe in our positions, we are accruing the $4.39 million in our Q3 results. This amount appears in a separate line item on the income statement and balance sheets entitled provision for competition through tribunals administrative monetary penalty, and given its one-time nature, is excluded from our definition of adjusted EBITDA and adjusted EBITDA. Should the amount be adjusted or eliminated on final appeal, this amount will be adjusted accordingly at a future date.
Speaker Change: With that I'd like to turn things over to the conference operator for questions.
Speaker Change: As a reminder, if you would like to ask a question today. Please press star one on your telephone keypad announcements to queue.
Speaker Change: To ask a question please ensure you're on mute locally.
Speaker Change: And our first question comes from Douglas Tsao from TV Cowen. Your line is open. Please go ahead.
Douglas Tsao: Yes, good morning, everybody glad to hear you're glad to hear your voices.
Gord Nelson: I would now like to move on and speak to our balance sheet, in particular our liquidity position. At quarter end, we have $32 million in cash and no drawings under the covenant-like credit facility, which has a capacity of $100 million. With the comprehensive refinancing plan, we have immediately pushed out near-term maturities and removed restrictions related to covenant testing, and no testing was required under the credit facility at quarter end. As we have mentioned previously, our capital allocation priorities include maintenance capital expenditures, continuing to strengthen the balance sheet to achieve our target leverage ratios, investing in growth opportunities, and providing shareholder returns in the form of sharebacks and/or dividends.
Douglas Tsao: Thanks.
Speaker Change: So again, congratulations on the PPP and CPP metrics.
Douglas Tsao: I think some of it was driven by price. So could you maybe just talk about the consumer reaction given.
Speaker Change: Tougher macro backdrop, and if youre seeing any changes in consumer behavior.
Speaker Change: Yes on the PPP the increases largely as we talked about in the script that driven by the premium offerings that we have and we were over 42% for the quarter, which helped us drive to BBB and in addition to that is.
Speaker Change: Some small price increases which resulted in the highest number that we had.
Gord Nelson: As we discussed at last quarter end, we saw a strong product pipeline going forward, driving the potential for significant free cash flow generation. We have limited commitments on growth cap-backs, and we saw the current share price, which we believe did not reflect the intrinsic value of the company. We announced and received approval for a normal course issue or bid during the quarter and commenced at the end of the quarter with purchases of approximately $2 million and shares under this program at quarter end. We have repurchased an additional $3.9 million and shares subsequent to quarter end.
Speaker Change: And on the CPP side, we basically.
Speaker Change: But a couple of issues that are beneficial to us one is the increase in the basket size, there's higher visitation and then we've also got more product offerings and slightly the price, which all add up to the improvement in the CPP and then the mobile App is also helping.
Speaker Change: <unk> contribute to that as we see more guests ordering online and resulting in a higher overall CPP. So anything else, yes. So Derek just the one thing I also wanted to add and remind people is that during the.
Gord Nelson: Now I'd like to take a few minutes to remind our investors of the world we see going forward. This is where we achieve or exceed pre-pandemic-adjusted EBITDA level on 75-80% of pre-pandemic attendance levels. With no near-term cash taxes due to the NOLs, in this scenario we could generate in excess of $100 million of free cash flow and use this free cash flow to invest, deliver, and provide additional shareholder returns. Annualized in our $47.5 million in Q3 EBITDA, gives us comfort that we are in the past to achieving our pre-pandemic annualized EBITDA level of $209 million.
Speaker Change: The third quarter of last year in the month of September.
Speaker Change: We.
Speaker Change: We introduced a cinema day.
Speaker Change: As a discounted admission.
Speaker Change: During that period.
Speaker Change: We noted last year that had adverse sort of adversely impacted the <unk> by about 36 cents, so without having a cinema this year with the return of product.
Speaker Change: And so it was 36 cents for the PPP and roughly 14 cents for the CPP. So a lot of the growth you're seeing year over year is also in part due to that and there is no negative consumer sentiment on the changes in the prices.
Gord Nelson: We believe there continues to be a lot to be excited about. With our long history of disciplined operations and capital management, we remain highly focused on creating long-term shareholder value.
Speaker Change: Okay.
Speaker Change: That's great color guys.
Speaker Change: Maybe just following up to that going forward could you maybe just maybe Gordon talk about the cost structure I think more specifically are you able to give us some direction on your film costs.
Operator: And with that, I'd like to turn things over to the conference operator for questions. Thank you. As a reminder, if you would like to ask a question today, please press Starfall as I want on your telephone keypad now to enter into the queue.
Speaker Change: Going forward and then maybe on the SG&A line you did have some software and professional fees in there. So could you just maybe talk about those cost items going forward.
Operator: From parent-just to a question, please ensure you are muted locally.
Derek Lessard: And our first question comes in directly from TV Cowan.
Ellis Jacob: Derek, your line is open; please go ahead. Good morning, everybody. Glad to hear your voices. Next. Thanks. So again, congratulations on the BPP and CPP metrics. I think some of it was given by price. So could you maybe just talk about the consumer reaction given, you know, the tougher medical backdrop. And if you're seeing any changes in consumer behavior. Yeah, on the BPP, the increase is largely as we talked about in the script, driven by the premium offerings that we have. And we were, you know, over 42% for the quarter, which helped us drive the BPP.
Speaker Change: Yeah, So I'll do film costs, and Gordon will do the SG&A. So on film costs for the quarter. The reason it was high as it was was because as we see the top movies in the quarter did a significant amount of the business, which results in a higher cost.
Speaker Change: Now you May say, well you had Barbie and Oppenheimer last year, but when you look at the 10 top movies for the quarter. We did a lot more business than the 10 top movies from 2023. So that was one of the reasons for the increased film rental and the other reason is basically with certain Stu.
Speaker Change: <unk>, we do annual reconciliations and in 2023, there was a pickup in 2024 during the quarter. There was a charge. So there's a delta of the differential between the <unk>.
Ellis Jacob: And in addition to that, there's, you know, some small price increases, which resulted in the highest number that we had. And on the CPP side, we basically, you know, got a couple of issues that are beneficial to us. One is the increase in the basket size. There's higher visitation. Then we've also got more product offerings and slightly the price, which all add up to the improvement in the CPP. And then the mobile app is also helping us contribute to that as we see more guests ordering online and resulting in a higher overall CPP. So for anything else.
Speaker Change: Quarters from the prior to this year.
Speaker Change: And then on the G&A and the technology related comment.
Speaker Change: As we also I think we mentioned in the MD&A.
Speaker Change: There's a couple of things going on here Derek So very similar to everyone else as you transition to a cloud based environment.
Speaker Change: Cost tend to increase and as your software providers move from an ownership model to more of a rental model a SaaS type model is your pain.
Speaker Change: Regular.
Ellis Jacob: Yeah, so there is just one thing I also want to add and remind people: during the third quarter of last year, in the month of September, we introduced a cinema day, which is a discounted admission. During that period, we noted last year that it adverse, sorry, adversely impacted the BPP by about 36 cents. So without having an incentive as a this year with the return or product is, and so 36 cents for the BPP and roughly 14 cents. Thanks for the CPP. So a lot of the growth you're seeing here over a year is also in part two to that.
Speaker Change: Our subscription model rather than being a lower maintenance kind of model in your historic software also also spoke about.
Speaker Change: Our use of data and some of the marketing automation platforms that we're putting in place.
Speaker Change: So there is a cost that we're incurring in terms of.
Speaker Change: Implementation fees professional fees and some additional upfront software fees.
Speaker Change: Weighted to kind of building.
Speaker Change: Yeah.
Speaker Change: That's what we're seeing sort of in the current period.
Speaker Change: Some of that will continue on as we go into a subscription model, but some of the upfront consulting fee will dissipate.
Speaker Change: The future.
Ellis Jacob: And there's no negative consumer sentiment on the changes in the prices.
Douglas Tsao: Okay, and then maybe just to clarify on that.
Speaker Change: Film costs.
Speaker Change: That means we should expect that it should it should return to historical like over a four year should return to.
Ellis Jacob: Okay, that's great color, guys, and maybe just following up to that going forward. Could you maybe just maybe go and talk about your the cost structure. I think more specifically, are you going to give us some direction on your film cost. Going forward, and then maybe on the SGA line, you did have some software and professional fees in there. So could you just maybe talk about those cost items going forward. Yeah, so I'll do some cost, and Gord will do the SGA. So on some cost for the quarter, the reason it was high as it was, was because, as we see, the top movies in the quarter did a significant amount of money.
Speaker Change: To our historical levels.
Speaker Change: Yes, it should basically moderate again, one of the arguments I always say, if we are exceeding our box office and we brought in lots of strong films.
Speaker Change: High class problem the challenges during the quarter, if you have only big films.
Speaker Change: None of the smaller films that impacts the overall cost.
Speaker Change: But I think we can look forward to being.
Speaker Change: Back to a more moderate level on the film rental side.
Speaker Change: Yes, hi, good morning, gentlemen.
Speaker Change: Alright highlight Barclay.
Speaker Change: Yeah.
Speaker Change: Yes, sorry.
Ellis Jacob: But the business which results in a higher cost. Now you may say, well, you had Barbie and Oppenheim last year, but when you look at the 10 top movies for the quarter, we did a lot more business than the 10 top movies from 2023. So that was one of the reasons for the increased film rental, and the other reason is basically with certain studios we do annual reconciliation. And in 2023, there was a pick up, and in 2024 during the quarter, there was a charge. So there's a delta differential between the quarters from the prior to this year.
Speaker Change: There has been historic periods, where films like the first Avatar is an example, where.
Speaker Change: We dominated a quarter in the film rent.
Speaker Change: It was up and then it kind of normalized over the course of the full year.
Speaker Change: Yes high class problems are good thanks, guys.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: The next question is from Maher Yaghi from Scotiabank. Your line is open. Please go ahead.
Maher Yaghi: Great. Thank you for taking my question guys I wanted to ask you just on the box office cost here.
Maher Yaghi: I understand the separation in terms of costs.
Gord Nelson: And then on the GNA and the technology-related comment, you know, as we also I think mentioned in the MVNA, there are a couple of things going on here, Derek. So very similar to everyone else, as you transition to a cloud-based environment, you know, costs tend to increase. And as your software providers move from an ownership model to more of a rental model, a SaaS type model, is your pain, you know, regular subscription model rather than being like a lower maintenance and a model in your stroke software. That was also spoke about, you know, our use of data and some of the marketing automation platforms that we're putting in place.
Speaker Change: Is it is it true to say that more and more we're seeing high cost.
Speaker Change: Films being produced bigger blockbuster movies and less.
Speaker Change: Smaller movies and.
Speaker Change: Why is that not a.
Speaker Change: Cause core potentially think that your box office revenue cost will trend towards the higher end of the 15, rather than the low end of the 50% range like you had in the past.
Speaker Change: I'm just trying to play the Devil's advocate here.
Speaker Change: Yes, and what one has to look at us.
Speaker Change: A lot of the studios have been focusing on the big titles, but now you've got other groups that are coming out with movies.
Ellis Jacob: So there is a cost that we're incurring in terms of, you know, implementation fees, professional fees, and some additional software fees related to kind of building. So that's what we're seeing sort of in the current period. Some of that will continue on as we go into a subscription model, but some of the upfront consulting fee will participate in the future. Okay, and then maybe just to clarify on the film cost, that means we should expect it. It should return to historical like over four years should return to a historical level. Yeah, it should basically moderate.
Speaker Change: And this year at our Toronto International Film Festival, we had a lot of movies that will fall into that category that will fill the gaps and also result in lower costs for US and then you've got the international content with helps us on an overall basis.
Speaker Change: So the mix as we move forward, we will continue to get better for us because we have both types of films that will be released during the quarters.
Speaker Change: Okay. Thank you for that.
Douglas Tsao: I appreciate it. So my question that I wanted to ask you is first of all on media.
Ellis Jacob: Again, one of the arguments I always say is if we are exceeding box office and we've got lots of strong films, that's the eye-class problem. The challenge is doing the work if you have only big films and, you know, none of the smaller films that have impacts the overall. I think we can look forward to being, you know, back to a more moderate level on the film rental site. Yeah, I like Parkly, where we've been. Yes, sorry, we've, this has been historic periods where, you know, films like, you know, the first Avatar as an example, where we've absolutely dominated a quarter in the film rent.
Speaker Change: If we compare your media margin this quarter with a similar level of run rate on the revenue side like Q2 last year.
Speaker Change: You were running a little bit lower on margins.
Speaker Change: Versus Q2 of last year, where you had similar.
Speaker Change: Revenue run rate.
Speaker Change: Can you discuss some of the reasons why we're seeing that that pressure on margins in media.
Speaker Change: Yes Mara scored here so with respect to the cinema media business the margins tend to kind of as I've mentioned historically hover around the 80% level, so and that's where they can really they continue to be at during the quarter.
Speaker Change: It's really on the CDM business, where as we are rolling out these new more clients and if you look at the disclosure in the MD&A and I'll just highlight.
Ellis Jacob: And, you know, with up and then it kind of normalized over the course of the full year. Yeah, high-class problems are good to have.
Operator: Thanks, guys.
Speaker Change: Revenue mix issues so.
Maher Yaghi: Thank you. The next question is from, yeah, Maher Yaghi from Special Bank.
Speaker Change: Our project revenue was up 73%.
Speaker Change: And so the mix is shifting to project revenue that include a lot of the.
Maher Yaghi: Maher Yolanda's open, please go ahead. Great, thank you for taking my question, guys. I wanted to ask you just on the box office cost here. I understand the separation in terms of cost, but is it true to say that more and more, we're seeing high-cost films being produced, you know, bigger blockbuster movies and less. Smaller movies and why is that not a cause for potentially to think that your box office revenue cost will trend towards the higher end of the 50s rather than the low end of the 50% range like you had in the past.
Speaker Change: The refresh that is going on.
Speaker Change: Within our new mall networks, and particularly Cadillac Fairview and so that refresh is point on it. So that's that's Cadillac Fairview capital.
Speaker Change: That's an extremely tiny margin on that revenue and then it's also there is some additional cost in our perspective as we kind of go and implement that refresh across their network. So so we have a little bit of a negative impact.
Speaker Change: And you can kind of see it. It is just the shift of the mix more to the project side of things that should dissipate and again the advertising strength of having a refreshing our network will come back in Q4 and beyond.
Speaker Change: Yeah, Okay that makes sense. Thank you.
Speaker Change: And my last question is Oh God you Ya.
Ellis Jacob: I'm just trying to like play the devil's advocate here.
Speaker Change: Uh huh.
Speaker Change: Bringing up that the company is set up to produce them as.
Ellis Jacob: Yes, and what one has to look at is, you know, a lot of the studios have been focusing on the big titles, but now you've got other groups that are coming out with movies. And this year at Toronto International Film Festival, we had a lot of movies that will fall into that category that will fill the gaps and also result in lower cost for us. And then you've got the international content, which helps us on an overall basis. So the mix as we move forward will continue to get better for us because we have both types of films that will be released during the quarters.
Speaker Change: As much.
Speaker Change: Cash flow on a lower attendance base and and you know you mentioned that again in your prepared remarks, the 206 million I think.
Speaker Change: So but.
Speaker Change: Yes.
Speaker Change: Just the compare if I look at your EBITDA generation this quarter and I compare it to Q3 of 19.
Speaker Change: You're running at close to 80%.
Speaker Change: Attendance this quarter compared to Q3 and 19 so the.
Speaker Change: The comparison.
Speaker Change: So, but you generated 47 million of EBITDA.
Speaker Change: EBITDAR.
Maher Yaghi: Okay, thank you for that. Appreciate it.
Speaker Change: Then, okay, you generated $56 million.
Gord Nelson: So my question that I wanted to ask you is first on media. So, you know, if we compare your media margins in this quarter with a similar level of run rate on the revenue side like Q2 of last year, you were running a little bit lower on margins versus Q2 of last year where you have similar revenue run rate. So can you discuss some of the reasons why we're seeing that pressure on margins and media. Yes, so Mara scored here. So, with respect to the cinema media business, you know, the margins tend to kind of, as I've mentioned, historically hover around the 80% level.
Speaker Change: After the sale of the online so let me take you through that.
Speaker Change: Yeah, Let me take you through a mere okay. So because I know thats a great question and thank you.
Speaker Change: So let me look at our segments then so by segment. So in Q3 2024.
Speaker Change: Our exhibition segment generated $49 million of EBITDA at the segment level in Q3, 2000 22019, the pre pandemic level period, we generated $50 million, so 1 million $1 million or less of EBITDA also basically equal.
Speaker Change: On 75% of the attendance.
Speaker Change: The media business.
Gord Nelson: So, and that's where they can really they continue to be during the quarter. It's really on the CDM business where, as we are rolling out these new mall clients. And if you look at the disclosure in the MDNA, I'll just highlight this as a revenue mix issue. So our project revenue was up 73%. And so the mix is shifting to project revenue. That includes a lot of the refresh that is going on within our new mall networks and particularly Cadillac Fairview. And so that refresh is going on. And so that's Cadillac Fairview's capital at an extremely tiny margin on that revenue.
Speaker Change: Generated $14 million of EBITDA versus 'twenty. So the media business is really where we're seeing a bit of a compression not the exhibition business and we know it.
Speaker Change: In today's environment, there is a challenging media business. So we did.
Speaker Change: Roughly 20% less media sale on an attendance decline of roughly 25%. So our media sales did not decline as significantly the attendance and that's a tough media markets. So we are encouraged.
Speaker Change: About where the media business can go from the <unk> side, we were up marginally from two to five and the corporate costs. The corporate costs were up about $4 million in 'twenty 'twenty four versus 2019 $2 million of that $4 million increase is the change in El chip in.
Gord Nelson: And then it's also there's some additional cost in our perspective as we kind of go and implement that refresh. So we have a little bit of a negative impact, and you can kind of see it in the shift of the mix more to the project side of things. That should dissipate. And again, the advertising strength of having a refresh our network will come back and keep forward beyond. Yeah, okay, that makes sense.
Speaker Change: That was due to the share price increased during the quarter. So I.
Speaker Change: I get really comfortable when I look at this to say that world is that media model is going to come back.
Gord Nelson: Thank you. And my last question is, you know, Gord, you keep, you know, bringing up that the company is set up to produce. You know, as much free cash flow on a lower attendance base, and, you know, you mentioned it again in your prepared remarks, the 206 million, I think. So, but just, just to compare, if I look at your EBITL generation, this quarter, and I compare it to Q3 of 19, you're running up close to 80% of attendance this quarter compared to Q3 19. So, you know, the comparison works out, but you generated 47 million of EBITL.
Speaker Change: Corporate costs are being offset by.
Speaker Change: Where the share price rules.
Speaker Change: And so yes.
Speaker Change: Yes, I'm very comfortable that.
Speaker Change: Once media the media space comes back and starts to generate we're going to be in that world that I described.
Speaker Change: Great. Thank you both for your detailed answer and I appreciate it. Thank you.
Speaker Change: Yes, my pleasure.
Speaker Change: The next question comes from drew Mcreynolds from RBC through your line is open. Please go ahead.
Drew Mcreynolds: Thanks, very much good morning.
Drew Mcreynolds: Gordon I know, we've chatted about this before.
Speaker Change: With respect to the Cineplex digital media business, obviously in your MD&A you break it down by project revenues and other revenues.
Speaker Change: And then there is kind of subcategories of those two buckets.
Gord Nelson: And that's then you generate the 66 million after the sale of. Yeah, let me take you through that. Yeah, let me take you through it. Okay, so because I know that's a great question. And thank you.
Speaker Change: Just wanted to kind of better understand or we could get an update.
Speaker Change: Whats.
Speaker Change: Generally recurring whats transitional in terms of contract deployment et cetera.
Gord Nelson: So, let me look at our segments then. So buy segment. So in Q3 2024, our exhibition segment generated $49 million of EBITL at the segment level in Q3 2020. In 2019, the pre-pandemic level period, we generated $50 million. So, so $1 million, $1 million less of EBITL, so basically equal on 75% of the attendance. The media business generated $14 million of EBITL versus $20. So, the media business is really where we're seeing a bit of the compression, not the exhibition business. And we know in today's environment, there's a challenging media business. So, we did roughly 20% less media sale on an attendance decline of roughly 25%.
Speaker Change: Can you just kind of break that down for us just to help us kind of model this going forward.
Speaker Change: Okay.
Speaker Change: Yeah, So always and again, if we look at the third quarter than we had $13 3 million in total revenue of which about $7 seven.
Speaker Change: What we categorize as other which really includes the advertising the.
Speaker Change: The network management fees to creative content fees.
Speaker Change: And.
Speaker Change:
Speaker Change: And basically those I would consider as more recurring type project revenues are always there. So we're always deploying new hardware brands are refreshing their stuff those are always there, but they're a lower margin source. So as you go forward.
Speaker Change: We're seeing.
Speaker Change: And you can kind of see the lumpiness of the project revenue.
Speaker Change: Quarter ending quarter out.
Speaker Change: But it's the other revenues that you would focus in on the recurring and that's where we're looking to drive value and drive margin.
Gord Nelson: So, our media sales did not decline as significantly the attendance. And it's a tough media market. So, we are encouraged about where the media business can go.
Douglas Tsao: Okay Super.
Speaker Change: And then just back to the last question.
Speaker Change: On the media business, maybe if you can flush out just.
Gord Nelson: From the LBE side, we were up marginally from 2 to 5, and then the corporate costs, the corporate costs were up about $4 million in 2024 versus 2019. $2 million of that $4 million increase is the change in L tip. And that was due to the share price increase during the quarter. So, you know, I get really comfortable when I look at this to say that the world is real. That media model is going to come back. You know, the corporate costs are being offset by, you know, it's where the share price rules. And so, yeah, I'm very comfortable that, you know, once media, the media space comes back and just starts to generate, we're going to be in that world that I described.
Douglas Tsao: Where are the pockets of industry weakness would be and obviously the year over year performance with Cineplex media revenue exceeded the year over year performance of attendance.
Speaker Change: Is that kind of outperformance there.
Speaker Change: Sustainable and if so what are kind of the drivers that youre doing to bed.
Speaker Change: Basically over index on the sure attendance side of things. Thank you yeah, Yeah. So look at.
Speaker Change: Drew Theres a number of factors in play here and I would just also comment MCM.
Speaker Change: Where did yesterday.
Speaker Change: Again, we had significant sort of outperformance relative to what they did.
Speaker Change: During the third quarter.
Speaker Change: We've chatted a bit of our media and our strategy as we go forward part one was we sort of are.
Gord Nelson: Great.
Operator: I thank you, Gord, for your detailed answer and appreciate it. Thank you.
Speaker Change: We morph to CPM based model.
Operator: Yeah, my question.
Drew Mcreynolds: The next question comes from Drew McReynolds from RBC. Drew Yolana, please go ahead. Thanks very much. Good morning. Gord, I know we've chatted about this support. With respect to the Cineplex Digital Media business, obviously in your MD&A, you break it down by project revenues and then there's subcategories of those two buckets. And just want to kind of better understand, or we should get an update. What's generally recurring, what's transitional in terms of contract appointment, etc. Can you just kind of break that down for us just to help us kind of model this one forward? Yeah, so always, and again, so if we look at the third quarter, then we had $13.3 million in total revenue, which about 7.7 was what we categorized as other, which really includes the advertising, the network management fees, the creative content fees, and basically those I would consider as more recurring type.
Speaker Change: A few years ago as we went into the pandemic.
Speaker Change: This year and again this impacted margins a little bit, but we've what we've launched and published.
Speaker Change: <unk> study, which talks about attention.
Speaker Change: And.
Speaker Change: You can all relate to sort of a world where impressions are less relevant.
Speaker Change: People.
Speaker Change: <unk> may be able to count them, but theres actually someone actually paying attention and seeing what that AD is so attention has become the new statistic, we published that women study earlier this year.
Speaker Change: And in that study, we demonstrated that the attention statistics, so who who notes that actually notes and add is eight to nine times higher than it is for a digital AD. So that's kind of step two is we are focusing on this new metric that's critical to advertisers attention and we're selling that we can drive more.
Speaker Change: <unk>.
Speaker Change: Attention to alright drives more attention.
Speaker Change: I will also make a comment that during tough advertising climate.
Speaker Change: <unk> look and reevaluate their spend if they need to cut back as they want to cut back on what they would call inefficient spending so having this alumina study out there at this time, it's going to help US go forward and then lastly, what we will look to do next year as we look at.
Gord Nelson: Project revenues are always there. So we're always, you know, the point, new hardware brands are refreshing their stuff. Those are always there, but they're a lower margin source. So as you go forward, you know, we're seeing the, you know, and you can kind of see the lumpiness of the project revenue quarter and then quarter out. But it's the other revenue that you're focusing on, the recurring, and that's where we're looking to drive value and drive margin.
Speaker Change: The mix of spending as we are tend to be leather lumped into a digital out of home bucket, which is a relatively small bucket and we want to get media planners tried to create a new category for cinema spend or take away share from the digital spend which is significantly growing.
Drew Mcreynolds: Okay, super. And then just back to the last question, on the media business, maybe if you can flush out just where the pockets of industry weakness would be. And, you know, obviously, the year-to-year performance of Cineplex Media revenue exceeded the year-to-year performance of attendance. Is that kind of outperformance there sustainable? And if so, what are kind of the drivers that you're doing to, you know, basically over index on the pure attendance side of things?
Speaker Change: So that's.
Speaker Change: The third prong of our strategy, which we which provides us a lot of comfort going forward that we.
Speaker Change: We're going to drive great strength in our media business, so hopefully that helps.
Speaker Change: Yes.
Gordon: That does Gordon and then with respect to just the broader ad market.
Speaker Change: Obviously, the digital lens.
Speaker Change: It's predominantly dominated by U S media companies now, but on the traditional side.
Gord Nelson: Thank you.
Speaker Change: Where are you seeing kind of category park, this pockets of strength and weakness.
Gord Nelson: Yeah. Yeah, so look at, Drew, there's a number of factors in play here. Now just also comment that NCM reported yesterday. And again, we had significance for about performance relative to what they did during the third quarter. We've chatted a bit about, you know, our media and our sort of strategy as we go forward. You know, part one was we sort of, or was we morphed to a CPF-based model. You know, a few years ago, as we went into the pandemic, this year, and again, this impacted margins a little bit as we've watched and published a little in study, which talks about attention.
Speaker Change: Are you.
Speaker Change: Kind of still broadening.
Speaker Change: The category breadth of who would advertise.
Speaker Change: In cinema.
Speaker Change: Just kind of more broadly.
Speaker Change: The market dynamic would be helpful. Thank you.
Speaker Change: Yes, so we absolutely do that and.
Speaker Change: Two big areas, where we see some great growth opportunities as auto and if you remember.
Speaker Change: We're seeing them come back and you'll see them come back in the fourth quarter.
Speaker Change: During the pandemic they had supply chain challenges are typically a big category for us and the other one that's out there is pharma.
Speaker Change: You'll see a lot about farmers see a lot of.
Gord Nelson: And, you know, you can all relate to, you know, sort of a world where impressions are less relevant. People, you know, impressions; you may be able to count them, but there's actually someone actually paying attention and seeing what that ad is. So attention has become the new statistic. We published that Woman study earlier this year. And in that study, you know, we demonstrated that the attention statistic, so who notes and actually notes an ad, is eight to nine times higher than it is for a digital lab. So that's kind of step two: we're focusing on this new metric that's critical to advertisers' attention.
Speaker Change: Firm advertising on traditional.
Speaker Change: Linear stations and.
Speaker Change: They are very.
Speaker Change: That's another category, where were seeing lots of growth and opportunity for us.
Speaker Change: Okay. Thanks very much.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Does it provide a reminder that staff will look like one on your telephone keypad.
Speaker Change: We are only part of the question so I'll hand, the call back to illustrate.
Speaker Change: Thank you again for joining the call. This morning, we are excited about the strong film slate for the balance of 2024 and into 2025 and beyond we look forward to sharing our fourth quarter results in February 2025 have a great day. Thank you.
Gord Nelson: And we're selling that we can drive more, you know, attention to, or it's going to drive more attention. I will also make a comment that during tough advertising climates. Brands look and re-evaluate their spend. If they need to cut back, they want to cut back on what they would call inefficient spending. So having this illumine study out there at this time is going to help us go forward. And then lastly, what we will look to do next year is we look at, you know, the mix of spending is we are tend to be either want to into a digital out of home bucket, which is a relatively small bucket.
Speaker Change: This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.
Gord Nelson: And we want to get media planners to either create a new category for cinema spend or take away share from the digital spend, which is significantly growing. So that's the third problem of our strategy, which provides us, you know, a lot of comfort going forward that, you know, we're going to drive great straights in our media business.
Drew Mcreynolds: So hopefully that helps. Yeah, no, that does, Gordon.
Drew Mcreynolds: And then with respect to just the broader ad market, you know, obviously the digital lens, you know, is predominantly dominated by US media companies now, but on the traditional side, you know, where are you seeing kind of category pockets of strength and weakness, and you know, are you kind of still broadening the category breadth of who would advertise, you know, in cinema, just kind of more broadly, the market dynamic would be helpful. Thank you. Yeah, so we absolutely do that. And, you know, two big areas where we see some great growth opportunities is our role.
Gord Nelson: And if you remember, we're seeing them come back, and you'll see them come back in the fourth order. You know, during the pandemic, they have supply chain challenges. They're typically a big category for us. The other one that's out there is Pharma. You see a lot about Pharma. You see a lot of, you know, pharma advertising on traditional linear stations, and they are very, that's another category where we're seeing lots of growth and opportunity for us.
Gord Nelson: Okay, thanks very much. Thank you.
Operator: I've got a reminder that staff followed by one on your telephone keypad. We have a very far the question.
Ellis Jacob: So I'll hand the call back to Alice Jacob. Thank you again for joining the call this morning. We are excited about the strong film slate for the balance of 2024 and into 2025 and beyond. We look forward to sharing our fourth quarter results in February 2025.
Operator: Have a great day. Thank you.
Operator: This concludes today's cool. Thank you very much for your attendance. We may now disconnect your lines. Thank you very much.