Cineplex Inc. Reports First Quarter 2023 Results

Cineplex Reports Record Amusement & Leisure First Quarter Results and Highest Combined April Box Office and Concession Revenues

TORONTO, May 12, 2023 /CNW/ - (TSX: CGX) - Cineplex Inc. ("Cineplex" or the "Company") today released its financial results for the three months ended March 31, 2023. Unless otherwise specified, all amounts are in Canadian dollars.

First Quarter Summary

• Total revenues increased 49% to $341.0 million compared to first quarter of 2022
• Net loss improved to $30.2 million compared to a net loss of $42.2 million in first quarter of 2022
• Adjusted EBITDAaL increased to $20.2 million compared to a loss of $5.7 million in first quarter of 2022
• First quarter record adjusted EBITDAaL of $8.9 million for Player One Amusement Group ("P1AG")
• All time quarterly record adjusted store level EBITDAaL of $12.1 million for Location-Based Entertainment ("LBE")
• First quarter record BPP of $12.63, 5.3% higher than prior year
• First quarter record CPP of $8.85, 0.3% higher than prior year

"We were extremely pleased with the record results in our amusement and leisure businesses, which helped mitigate the short-term film content supply challenges during the first quarter of 2023, resulting in total revenues of $341 million and adjusted EBITDAaL of $20.2 million," said Ellis Jacob, President & CEO, Cineplex. "We are excited to report our highest ever combined April box office and theatre food service revenues in April 2023."

"Coming out of this year's CinemaCon convention, the commitment of traditional and non-traditional studios to theatrical has never been stronger. We are extremely pleased with the quantity and quality of upcoming film product for the remainder of 2023 and into 2024. We look forward to many more highly anticipated films set to hit the big screen over the next few months including Fast X, The Little Mermaid, Spider-man: Across the Spider-Verse, The Flash, Indiana Jones 5 and the Dial of Destiny, Mission: Impossible 7 Dead Reckoning Part One, Oppenheimer, Barbie, and many more."

"With strong film product, commitment from our studio partners, and the record results from our diversified businesses, we have much to be excited about in the future," Jacob concluded.

The following table compares 2023 monthly box office revenues to 2019 monthly box office revenues:

Month	2019 Box office (i)	2023 Box office (i)	2023 as a percentage of 2019
January	$52,034	$45,744	88 %
February	$41,892	$36,950	88 %
March	$62,570	$40,644	65 %
Q1 Total	$156,496	$123,338	79 %
April	$63,759	$61,278	96 %
(i) Amounts are in thousands of dollars.

First Quarter Financial Results

Financial highlights	First Quarter
(in thousands of dollars, except theatre attendance in thousands of patrons and per share and per patron amounts)	2023	2022	Change (i)
Total revenues	$340,957	$228,723	49.1 %
Theatre attendance	9,767	6,661	46.6 %
Net loss (ii)	$(30,173)	$(42,225)	-28.5 %
Net loss as a percentage of sales (ii)	(8.8) %	(18.5) %	9.7 %
Cash provided by (used in) operating activities	$3,135	$(5,437)	NM
Box office revenues per patron ("BPP") (iii)	$12.63	$12.00	5.3 %
Concession revenues per patron ("CPP") (iii)	$8.85	$8.82	0.3 %
Adjusted EBITDA (iii)	$62,765	$36,475	72.1 %
Adjusted EBITDAaL (ii) (iii)	$20,243	$(5,719)	NM
Adjusted EBITDAaL margin (ii) (iii)	5.9 %	(2.5) %	8.4 %
Adjusted free cash flow (iii)	$1,626	$(21,745)	NM
Adjusted free cash flow per share (iii)	$0.026	$(0.343)	NM
Net loss per share - basic and diluted (ii)	$(0.48)	$(0.67)	-28.4 %

i.	Period over period change calculated based on thousands of dollars except percentage and per share values. Changes in percentage amounts are calculated as 2023 value less 2022 value.
ii.	2023 includes expenses related to the Cineworld transaction and associated litigation and claims recovery in the amount of $0.9 million (2022 - $0.3 million).
iii.	Adjusted EBITDA, adjusted EBITDAaL, adjusted EBITDAaL margin, adjusted free cash flow per common share of Cineplex, BPP and CPP are measures that do not have a standardized meaning under generally accepted accounting principles ("GAAP").  These measures as well as other Non-GAAP other financial measures reported by Cineplex are defined in the 'Non-GAAP and Other Financial Measures' section at the end of this news release.

KEY DEVELOPMENTS IN 2023

The following describes certain key business initiatives undertaken and results achieved during 2023 in each of Cineplex's core business areas:

FILM ENTERTAINMENT AND CONTENT

Theatre Exhibition

• Reported first quarter box office revenues of $123.3 million, an increase of $43.4 million (54.3%) from $80.0 million due to a 46.6% increase in theatre attendance as a result of Cineplex's theatre circuit being open during the entire period, compared to the prior year where select provinces were subject to operating restrictions.
• Reported a first quarter record BPP of $12.63, $0.63 or 5.3% higher than the $12.00 reported during the prior year due to a higher percentage of premium ticket sales in the current period as compared to the prior year.

Theatre Food Service

• Reported first quarter theatre food service revenues of $86.4 million, an increase of $27.7 million (47.1%) compared to the prior year primarily due to a 46.6% increase in theatre attendance.
• Reported first quarter record CPP of $8.85, an increase of $0.03 or 0.3% compared to the prior year, due to product mix and modest price increases.

Alternative Programming and Distribution

• Entered into a theatrical distribution partnership with Lionsgate on January 5, 2023, for its 2023 film slate, bringing 11 titles to Canadian audiences.
• As part of the theatrical distribution partnership with Lionsgate, Cineplex's distribution business (Cineplex Pictures) distributed PLANE on January 13, 2023, Jesus Revolution on February 24, 2023 and John Wick: Chapter 4 on March 24, 2023. Additionally, Cineplex Pictures released a number of feature films during the quarter, including Creed III and There's Always Hope.
• Featured numerous strong performing international films, including Pathaan (Hindi), which became Cineplex's number one Indian and international movie of all time. Cineplex also featured other strong performing international films including Kali Jotta (Punjabi), Tu Jhoothi Main Makkaar (Hindi) and The Wandering Earth 2 (Chinese (Mandarin), of which Cineplex represented 83%, 40% and 32%, respectively, of the total North American box office market share.
• During the first quarter of 2023, Event Cinema featured two major concert events, from K-Pop sensations BTS (BTS: Yet to Come) and André Rieu (André Rieu in Dublin) and two live presentations of The Metropolitan Opera, including Fedora (Giordano) and Lohengrin (Wagner).

Digital Commerce

• Total registered users for Cineplex Store increased 4.0% compared to the prior year, reaching approximately 2.3 million registered users.
• Launched the Cineplex Store app on Android TV and Google TV enabled devices.
• Expanded content offering including HBO's TV series, House of the Dragon and The Last of Us and AMC TV series, Better Call Saul and Lucky Hank.
• Celebrated Black History Month with a collection of films available on the Cineplex Store where $1 from every purchase was donated to The Black Academy, an organization that celebrates, empowers and showcases Black Canadian talent.

MEDIA

• Reported first quarter media revenues of $22.3 million, an increase of $6.8 million or 43.4% as compared to the prior year.

Cinema Media

• Reported first quarter cinema media revenues of $14.3 million, an increase of $6.0 million or 73.3% over the prior year resulting in the return of advertisers to cinema in a variety of sectors, including financial services and broadcast media.

Digital Place-Based Media

• Reported first quarter revenues of $8.0 million, an increase of $0.7 million or 9.7%.

AMUSEMENT SOLUTIONS AND LBE

• Reported all-time quarterly record revenues of $75.8 million, an increase of $25.3 million or 50.3% compared to the prior year.

Player One Amusement Group

• Reported all-time quarterly record revenues of $49.6 million, an increase of $14.8 million or 42.4% compared to the prior year. Adjusted EBITDAaL during the first quarter was a first quarter record of $8.9 million, an increase of $3.9 million or 77.9% compared to the prior year. The increase in revenues and adjusted EBITDAaL were primarily due to increases in P1AG amusement revenues from US and Canada route locations at FEC's and theatres, along with an increase in distribution sales.

Location-based Entertainment

• Reported all-time quarterly record revenues of $35.1 million, an increase of $15.0 million or 75.0% compared to the prior year.
• Reported all-time quarterly record adjusted store level EBITDAaL of $12.1 million, an increase of $5.1 million or 71.3% compared to the prior year. The increase in revenues and adjusted EBITDAaL were primarily due to all LBE venues being open during the entire period, compared to the prior year where select provinces were subject to operating restrictions.

LOYALTY

• Membership in the Scene+ loyalty program increased to over 12 million members as at March 31, 2023.
• Empire brands launched Scene+ in Quebec on March 23, 2023, providing members with opportunities to earn and redeem Scene+ points through Empire's family of brands across the country.

CORPORATE

• On March 28, 2023, Cineplex entered into the Seventh Credit Agreement Amendment (the "Seventh Amendment"), which revised certain of the financial covenants throughout the remainder of 2023.
• Celebrated National Popcorn Day on January 19, 2023 by treating Scene+ members across the country with a free bag of popcorn. Additionally, theatre teams across Canada gifted first responders with popcorn as a show of appreciation.

NON-GAAP AND OTHER FINANCIAL MEASURES

National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure ("NI 52-112") imposes obligations regarding disclosure of non-GAAP financial measures, non-GAAP ratios, and other financial measures. Cineplex reports on certain non-GAAP measures, non-GAAP ratios, supplementary financial measures and total segment measures that are used by management to evaluate Cineplex's performance. The following measures included in this news release do not have a standardized meaning under GAAP and may not be comparable to similar measures provided by other issuers. Cineplex includes these measures because management believes that they assist investors in assessing financial performance. These non-GAAP and other financial measures are used throughout this news release and are defined below.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures are defined in 52-112 as a financial measure disclosed that (a) depicts the historical or expected future financial performance, financial position or cash flow of an entity, (b) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most directly comparable financial measure disclosed in the primary financial statements of the entity, (c) is not disclosed in the financial statements of the entity, and (d) is not a ratio, fraction, percentage or similar representation.

NON-GAAP RATIO

A non-GAAP ratio is defined by 52-112 as a financial measure disclosed that (a) is in the form of a ratio, fraction, percentage or similar representation, (b) has a non-GAAP financial measure as one or more of its components, and (c) is not disclosed in the financial statements.

Below are non-GAAP financial measures or non-GAAP ratios that are reported by Cineplex.

EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDAaL

Management defines EBITDA as earnings before interest income and expense, income taxes and depreciation and amortization expense. Adjusted EBITDA excludes the change in fair value of financial instrument, loss on disposal of assets, foreign exchange, the equity income of CDCP, and impairment, depreciation, amortization, interest and taxes of Cineplex's other joint ventures and associates. Adjusted EBITDAaL modifies adjusted EBITDA to deduct current period cash rent paid or payable related to lease obligations.

Subsequent to the adoption of IFRS 16, Leases, by Cineplex effective January 1, 2019, the calculation of EBITDA no longer includes a charge for amounts paid or payable with respect to leased property and equipment. Given the majority of Cineplex's businesses are carried on in leased premises, Cineplex introduced the measure of adjusted EBITDAaL which includes a deduction for cash rent paid/payable related to lease obligations. Cineplex's management believes that adjusted EBITDAaL is an important supplemental measure of Cineplex's profitability at an operational level and provides analysts and investors with comparability in evaluating and valuing Cineplex's performance period over period. EBITDA, adjusted for various unusual items, is also used to define certain financial covenants in Cineplex's Credit Facilities. Management calculates adjusted EBITDAaL margin by dividing adjusted EBITDAaL by total revenues.

EBITDA, adjusted EBITDA and adjusted EBITDAaL are non-GAAP measures generally used as an indicator of financial performance and they should not be seen as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. Cineplex's EBITDA, adjusted EBITDA and adjusted EBITDAaL may differ from similar calculations as reported by other entities and accordingly may not be comparable to EBITDA, adjusted EBITDA or adjusted EBITDAaL as reported by other entities.

Reconciliation of reported net loss to adjusted EBITDAaL   

	Three months ended March 31,
	2023	2022
Net loss	$                          (30,173)	$                          (42,225)
Depreciation and amortization - other	26,006	26,892
Depreciation - right-of-use assets	22,199	24,263
Interest expense - lease obligations	16,333	14,704
Interest expense - other	23,506	10,083
Interest income	(211)	(30)
Current income tax expense (recovery)	1,615	(724)
Deferred income tax expense	2,307	—
EBITDA	$                            61,582	$                            32,963
Loss on disposal of assets	744	157
Loss on financial instruments recorded at fair value	270	3,830
CDCP equity income (i)	—	(854)
Foreign exchange loss	14	234
Depreciation and amortization - joint ventures and associates (ii)	142	131
Taxes and interest of joint ventures and associates (ii)	13	14
Adjusted EBITDA	$                            62,765	$                            36,475
Cash rent paid/payable related to lease obligations	(43,723)	(43,353)
Cash rent paid not pertaining to current period	1,201	1,159
Adjusted EBITDAaL (iii)	$                            20,243	$                            (5,719)

(i)	CDCP equity income is not included in adjusted EBITDA as CDCP is a limited-life financing vehicle that is funded by virtual print fees collected from distributors. On December 16, 2022, Cineplex divested its investment in CDCP.
(ii)	Includes the joint ventures with the exception of CDCP (see (i) above).
(iii)	See Non-GAAP and other financial measures section of this news release.

Adjusted Free Cash Flow

Free cash flow is a non-GAAP measure generally used by Canadian corporations as an indicator of financial performance and it should not be viewed as a measure of liquidity or a substitute for comparable metrics prepared in accordance with GAAP. Standardized free cash flow adjusts the amount of cash from operating activities to deduct capital expenditures net of proceeds on sale of assets in ordinary business operations. Standardized free cash flow is a non-GAAP measure recommended by the CICA in its 2008 interpretive release, Improved Communication with Non-GAAP Financial Measures: General Principles and Guidance for Reporting EBITDA and Free Cash Flow, and is designed to enhance comparability. Adjusted free cash flow is also a non-GAAP measure used by Cineplex to modify standardized free cash flow to exclude certain cash flow activities and to measure the amount available for activities such as repayment of debt, dividends to owners and investments in future growth through acquisitions. Adjusted free cash flow includes repayments of lease obligations that represented the principal portion of rent expenses that were included in net income calculation prior to the adoption of accounting standard IFRS 16, Leases, by Cineplex. Given that the materiality of the principal portion of the rent expenses and comparability of adjusted free cash flow disclosure for comparative periods, adjusted free cash flow also adjusts standard free cash flow to deduct principal amount of repayment of lease obligation.

Cineplex presents standardized free cash flow and adjusted free cash flow per share because they are key measures used by investors to value and assess Cineplex. Cineplex's management defines adjusted free cash flow as standardized free cash flow adjusted for certain items, and considers adjusted free cash flow the amount available for distribution to shareholders. Standardized free cash flow is defined by the CICA as cash from operating activities as reported in the GAAP financial statements, less total capital expenditures minus proceeds from the disposition of capital assets other than those of discontinued operations, as reported in the GAAP financial statements; and dividends, when stipulated, unless deducted in arriving at cash flows from operating activities. The standardized free cash flow calculation excludes common dividends and others that are declared at the Board's discretion.

Reconciliation of reported cash used in operating activities to adjusted free cash flow per share

	Three months ended March 31,
	2023	2022
Cash used in operating activities	$                              3,135	$                            (5,437)
Less: Total capital expenditures net of proceeds on sale of assets	(16,485)	(9,585)
Standardized free cash flow	(13,350)	(15,022)
Add/(Less):
Changes in operating assets and liabilities (i)	28,998	15,077
Changes in operating assets and liabilities of joint ventures and associates (i)	754	(707)
Repayments of lease obligations - principal	(27,532)	(29,267)
Principal portion of cash rent paid not pertaining to current period	1,201	1,143
Growth capital expenditures and other (ii)	12,819	7,054
Share of income of joint ventures and associates, net of non-cash depreciation	(1,264)	(23)
Adjusted free cash flow	$                              1,626	$                          (21,745)
Average number of shares outstanding	63,375,471	63,346,444
Adjusted free cash flow per share	$                              0.026	$                            (0.343)

(i)	Changes in operating assets and liabilities are not considered a source or use of adjusted free cash flow. Refer to Note 25 of Cineplex's 2022 Annual Consolidated Financial Statements for further details.
(ii)	Growth capital expenditures and other represent expenditures on Board approved projects, exclude maintenance capital expenditures and are net of proceeds on asset sales. The Revolving Facility is available to Cineplex to fund Board approved projects.

SUPPLEMENTARY FINANCIAL MEASURES

Supplementary financial measures are financial measures that are not (a) presented in the financial statements and (b) is, or is intended to be, disclosed periodically to depict the historical or expected future financial performance, financial position or cash flow, that is not a non-GAAP financial measure or a non-GAAP ratio as defined in the instrument. Below are supplementary financial measures that Cineplex uses to depict its financial performance, financial position or cash flows.

Loss per Share Metrics
Cineplex has presented basic and diluted loss per share net of this item to provide a more comparable loss per share metric between the current periods and prior year periods. In the non-GAAP and other financial measure, earnings is defined as net income or net loss attributable to Cineplex excluding the change in fair value of financial instruments.

Per Patron Revenue Metrics
Cineplex reviews per patron metrics as they relate to box office revenue and theatre food service revenue such as BPP, CPP, BPP excluding premium priced product, and concession margin per patron, as these are key measures used by investors to value and assess Cineplex's performance, and are widely used in the theatre exhibition industry. Management of Cineplex defines these metrics as follows:

Theatre Attendance: Theatre attendance is calculated as the total number of paying patrons that frequent Cineplex's theatres during the period.

BPP: Calculated as total box office revenues divided by total paid theatre attendance for the period.

BPP excluding premium priced product: Calculated as total box office revenues for the period, less box office revenues from 3D, 4DX, UltraAVX, VIP ScreenX and IMAX product; divided by total paid theatre attendance for the period, less paid theatre attendance for 3D, 4DX, UltraAVX, VIP, ScreenX and IMAX product.

CPP: Calculated as total theatre food service revenues divided by total paid total theatre attendance for the period.

Premium priced product: Defined as 3D, 4DX, UltraAVX, IMAX, ScreenX and VIP film product.

Theatre concession margin per patron: Calculated as total theatre food service revenues less total theatre food service cost, divided by theatre attendance for the period.

Same Theatre Analysis
Cineplex reviews and reports same theatre metrics relating to box office revenues, theatre food service revenues, theatre rent expense and theatre payroll expense, as these measures are widely used in the theatre exhibition industry as well as other retail industries.

Same theatre metrics are calculated by removing the results for all theatres that have been opened, acquired, closed or otherwise disposed of subsequent to the start of the prior year comparative period. For the three months ended March 31, 2023 the impact of one location that has been opened or acquired and four locations that have been closed or otherwise disposed of have been excluded, resulting in 152 theatres being included in the same theatre metrics. 

Cost of sales percentages
Cineplex reviews and reports cost of sales percentages for its two largest revenue sources, box office revenues and food service revenues as these measures are widely used in the theatre exhibition industry. These measures are reported as film cost percentage and concession cost percentage, respectively, and are calculated as follows: 

Film cost percentage: Calculated as total film cost expense divided by total box office revenues for the period.

Theatre concession cost percentage: Calculated as total theatre food service costs divided by total theatre food service revenues for the period.

LBE food cost percentage: Calculated as total LBE food costs divided by total LBE food service revenues for the period.

Certain information included in this news release contains forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include, among others, statements with respect to Cineplex's objectives and goals, and strategies to achieve those objectives and goals, as well as statements with respect to Cineplex's beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective" and "continue" (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, including those described in Cineplex's Annual Information Form ("AIF"), and the management's discussion and analysis for the year ended December 31, 2022 ("Annual MD&A") and in this news release. These risks and uncertainties, both general and specific, give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. Cineplex cautions readers not to place undue reliance on these statements, as a number of important factors, many of which are beyond Cineplex's control, could cause actual results to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements, including: Cineplex's expectations with respect to liquidity and capital expenditures; its ability to meet its ongoing capital, operating and other obligations, and anticipated needs for, and sources of, funds;  Cineplex's ability to execute cost-cutting and revenue enhancement initiatives; risks generally encountered in the relevant industry, competition, customer, legal, taxation and accounting matters.

The foregoing list of factors that may affect future results is not exhaustive. When reviewing Cineplex's forward-looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements may be found in the "Risks and Uncertainties" section of Cineplex's Annual MD&A.

Cineplex does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable Canadian securities law. Additionally, Cineplex undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Cineplex, its financial or operating results or its securities. All forward-looking statements in this news release are made as of the date hereof and are qualified by these cautionary statements. Additional information, including Cineplex's AIF, can be found on SEDAR at www.sedar.com.

You are cordially invited to participate in a conference call with the management of Cineplex (TSX: CGX) to review our first quarter. Ellis Jacob, President and Chief Executive Officer and Gord Nelson, Chief Financial Officer, will host the call scheduled for:

Cineplex Inc. Q1 2023 Earnings Webcast:

Date:                       Friday, May 12, 2023

Time:                      10:00 a.m. Eastern Daylight Time

Audio Webcast:      Audience URL https://events.q4inc.com/attendee/946554895 
                               Pre-registration available.
                               An archive of the webcast will be available at https://corp.cineplex.com/investors after the webcast for a limited time.

Please note, analysts who cover the Company, should use the dial-in option to participate in the live question period:

1-226-828-7575 (Local) or 1-833-950-0062 (Canada Toll-free), access code 918414.

All attendees should join the event 5-10 minutes prior to the scheduled start time. Media are welcome to join the call in listen-only mode.

About Cineplex

Cineplex (TSX:CGX) is a top-tier Canadian brand that operates in the Film Entertainment and Content, Amusement and Leisure, and Media sectors. Cineplex offers a unique escape from the everyday to millions of guests through its circuit of over 170 movie theatres and location-based entertainment venues. In addition to being Canada's largest and most innovative film exhibitor, the company operates Canada's favourite destination for 'Eats & Entertainment' (The Rec Room), complexes specially designed for teens and families (Playdium), and a newly launched entertainment concept that brings movies, amusement gaming, dining, and live performances together under one roof (Cineplex Junxion). It also operates successful businesses in digital commerce (CineplexStore.com), alternative programming (Cineplex Events), motion picture distribution (Cineplex Pictures), cinema media (Cineplex Media), digital place-based media (Cineplex Digital Media) and amusement solutions (Player One Amusement Group). Providing even more value for its guests, Cineplex is a partner in Scene+, Canada's largest entertainment and lifestyle loyalty program.

Proudly recognized as having one of the country's Most Admired Corporate Cultures, Cineplex employs over 10,000 people in its offices and venues across Canada and the United States. To learn more, visit Cineplex.com.

SOURCE Cineplex

Investor Relations contact: Mahsa Rejali, Vice President, Corporate Development & Investor Relations, [email protected]; Media Relations contact: Judy Lung, Director, Communications, [email protected]