Cineplex Inc. (CGX), with a market capitalization of $94.5 million, reported its Q1 2025 earnings on May 9, revealing a wider-than-expected loss per share and lower-than-anticipated revenues. The company’s earnings per share (EPS) came in at -$0.58, significantly missing the forecast of -$0.2675. Revenue was reported at $264.3 million, falling short of the $306.07 million forecast. According to InvestingPro data, the stock has shown significant volatility in recent trading, reflecting market uncertainty. Despite the disappointing earnings, Cineplex’s stock showed resilience, with a slight increase of 0.59% in pre-market trading, closing at $10.13.
Key Takeaways
- Cineplex’s Q1 2025 EPS of -$0.58 missed expectations by a wide margin.
- Revenue fell short of forecasts, declining 10.3% year-over-year.
- The company reported a strong April box office performance, boosting future optimism.
- Media revenues surged by 32.9%, driven by growth in digital advertising.
- Cineplex’s strategic partnership with Lionsgate has been extended until 2026.
Company Performance
Cineplex’s overall performance in Q1 2025 was marked by a challenging start to the year, with revenues declining by 10.3% year-over-year. The company’s box office revenues dropped by 18.5%, reflecting a decrease in theater attendance by 14.5%. Despite these setbacks, Cineplex reported substantial growth in media revenues, which increased by 32.9%, and location-based entertainment revenues, which grew by 10.5%.
Financial Highlights
- Revenue: $264.3 million, down 10.3% year-over-year
- EPS: -$0.58, compared to a forecast of -$0.2675
- Box office revenues: $101.9 million, down 18.5% year-over-year
- Theater attendance: 8.4 million, down 14.5% year-over-year
- Media revenues: $29.7 million, up 32.9% year-over-year
Earnings vs. Forecast
Cineplex’s actual EPS of -$0.58 was significantly below the forecast of -$0.2675, representing a negative surprise of over 116%. This miss is notable compared to previous quarters, indicating a challenging environment for the company. Revenue also fell short of expectations by approximately 13.7%, further underscoring the difficult quarter.
Market Reaction
Despite the earnings miss, Cineplex’s stock showed resilience, with a slight increase of 0.59% in pre-market trading, closing at $10.13. This movement is within the context of its 52-week range, where the stock has fluctuated between $7.10 and $13.09. The modest stock reaction suggests that investors may be focusing on the company’s positive outlook and strategic initiatives.
Outlook & Guidance
Looking forward, Cineplex anticipates a strong recovery in the box office for the remainder of 2025, supported by a robust film slate that includes major titles such as "Mission Impossible" and "Lilo and Stitch." The company expects location-based entertainment revenues to average $9.5-9.7 million per location. Capital expenditure guidance has been reduced to $40-50 million for 2025, emphasizing maintenance and balance sheet strengthening.
Executive Commentary
CEO Ellis Jacob highlighted the resilience of the cinema industry, stating, "When economic uncertainty sets in, people still turn to the movies." CFO Gord Nelson expressed optimism about the company’s future, saying, "We are excited for the future of the business and remain highly focused on creating long-term value for shareholders." Jacob also noted the exceptional performance of the media business, with revenues growing 32.9%.
Risks and Challenges
- Continued decline in theater attendance could pressure future revenues.
- Economic uncertainties may impact consumer spending on entertainment.
- Potential film production tariffs could affect cost structures.
- Increased competition from streaming services may impact box office revenues.
- The need for ongoing capital expenditure to maintain and upgrade facilities.
Q&A
During the earnings call, analysts raised questions about potential film production tariffs and their impact on costs. The growth potential of media advertising and the performance of location-based entertainment were also discussed. Additionally, Cineplex addressed potential stock buyback opportunities, reflecting a strategic focus on shareholder value.
Full transcript - Cineplex Inc. (CGX) Q1 2025:
Adam, Conference Operator: Good morning or good afternoon, and welcome to the Cineplex Q1 twenty twenty five Earnings Conference. My name is Adam, and I’ll be your operator today.
And with that, I’ll now hand the floor to Ray Asmat to begin. So Ray, please go ahead when you’re ready.
Rehan Asmat, VP Investor Relations, Corporate Development, Financial Planning & Analysis, Cineplex: Good morning, everyone, and thank you for joining us to discuss Cineplex’s first quarter twenty twenty five results. I’m Rehan Asmat, vice president, investor relations, corporate development, and financial planning and analysis at Cineplex. Joining me today are Ellis Jacob, our president and chief executive officer and Gord Nelson, our Chief Financial Officer. I’ll remind you that certain statements being made are forward looking and subject to various risks and uncertainties. Such forward looking statements are based on management’s beliefs and assumptions regarding the information currently available.
Actual results 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 management discussion and analysis. Following today’s remarks, we will close the call with our customary question and answer period. I will now turn the call over to Ellis Jacob.
Ellis Jacob, President and CEO, Cineplex: Thank you, Rehan, and good morning, everyone. I appreciate you joining us today as we discuss Cineplex’s first quarter results for 2025. While we experienced a softer box office this past quarter, we continue to execute our strategic initiatives and see encouraging signs across our multiple business segments. Our media business performed very well this quarter helping to offset softer box office results. Entering the second quarter, April has already over performed with phenomenal results and we are excited about the strong slate of upcoming films that will drive our business forward for the remainder of the year.
Taking a closer look at the exhibition business in the first quarter, the box office performance delivered revenue of 100,190,000.00. The first two months of the quarter performed well. January delivered 100% of the prior year on the success of the extended runs of Mufasa the Lion King and Sonic the Hedgehog three, whereas February outperformed the prior year by 24% driven by major releases such as Captain America, Brave New World, and Dog Man. The March box office underperformed in comparison to the prior year due to the tremendous success of Dune part two and Kung Fu Panda four as both over indexed to the North American box office at Cineplex in 2024. Our international content strategy continues to yield impressive results, delivering 14.7% of the first quarter box office, surpassing the North American box office at 5.9%.
I’m pleased to share we’ve seen a significant upside in box office momentum at the start of the second quarter, which positions us well for the upcoming months and the balance of the year. April delivered 176% of the prior year’s box office due to the tremendous success of the Minecraft movie, which had the biggest opening weekend ever for a video game adaptation, beating the previous record held by the Super Mario Brothers movie. Sinners also delivered a strong performance within the month, especially in premium formats like IMAX. On the strong opening performance of Thunderbolts, the May is continuing a similar momentum where we have now fully recovered the q one box office shortfall on a year to date basis. And as of today, we have achieved 105% of prior year box office and expect strong comparatives going forward.
At CinemaCon this year, we were encouraged by the quality and quantity of films presented and engaged in productive discussions with our studio partners, reinforcing the vital role theater plays in the entertainment ecosystem. All major studios presented a solid slate of upcoming releases featuring key franchises, new originals, and marquee blockbusters. In addition to the excitement delivered by traditional studio partners, a significant highlight was Amazon MGM’s commitment to theatrical releases with plans to invest over $1,000,000,000 annually in theatrical film production and distribution. This commitment includes a slate of 12 to 15 films annually receiving exclusive theatrical windows, demonstrating their well placed confidence in the theatrical experience. We’re also encouraged by our ongoing conversations with Apple and look forward to the release of their film f one at the June, which is already generating positive buzz.
These industry developments combined with relationships position us well to capitalize on the ongoing recovery of the theatrical exhibition business. The commitment we are seeing from both traditional and emerging studios reinforces our optimistic outlook. Taking a look at our media business, I’m pleased to report exceptional performance in the first quarter with total media revenues increasing by 32.9% to reach 29,700,000.0. This growth was driven by strong results across both our cinema advertising and digital place based media segments. Cinema media revenue showed remarkable resilience growing 38% to 17,100,000.0.
This growth reflects the continued recovery in advertising spending and our success in attracting new advertisers across diverse categories. The value of our on screen advertising product continues to resonate with advertisers, offering them unparalleled access to engage audiences in a premium environment. As one of the few exhibitors that own our cinema media business, this allows us to benefit from an extremely high margin segment with the majority of revenue flowing straight to the bottom line. In our digital place based media business, revenue increased by 26.5% to 12,600,000.0. This growth was driven by new client acquisitions expanded deployments with existing partners this quarter.
Within our digital out of home business, all our new and existing mall networks saw growth over q one twenty twenty four. Our location based entertainment business continues to expand with the revenue increasing 10.5% to 38,100,000.0 in the first quarter due to three new locations being added at the end of twenty twenty four. As we continue to strive towards becoming Canadians’ choice in entertainment, our ability to provide multiple entertainment options under one roof continues to resonate with guests. LBE generates strong EBITDA margins and offers a more predictable operating environment given it’s not dependent on content. The Rec Room and Palladium locations are contributing steadily, and we were encouraged by the potential from recent new bills.
Before I close, I wanted to share a brief update on our appeal of the Competition Tribunal’s decision regarding our online booking fee. On 10/23/2024, Cineplex filed its notice of appeal with the Federal Court of Appeals and with the competition bureau’s consent was granted a stay regarding payment of the Trump Petition Tribunal’s administrative monetary penalty pending the Federal Court of Appeals decision. We are diligently conducting all necessary court filings and other preliminary matters in order for the appeal to be heard expeditiously and hope the appeal will be heard in late twenty twenty five. Looking ahead, we are optimistic about the release schedule for the remainder of q two and beyond. The May lineup is filled with action and adventures for the whole family.
Coming on the heels of Thunderbolts is Mission Impossible, the final reckoning, a fan favorite that traditionally does very well with Canadian audiences. Bringing the nostalgia back in May is the live action adaptation of Lilo and Stitch and Karate Kid Legends. Jumping into June, we’ll see a broad range of titles catering to different audiences with the John Wick spin off film Ballerina distributed by Cineplex Pictures, which has extended its its partnership deal with Lionsgate until the end of twenty twenty six. There’s also a live action adaptation of How to Train Your Dragon, the latest from Pixar Animation Studios, Helio, two horror films with Twenty Eight Years Later and Megan two point zero, and Apple’s f one starting starring Brad Pitt, which tells the story of a form former fall Formula One driver who returns to the sport to mentor a young rookie driver. As the summer movie going season continues, we are off to a roaring prehistoric start with Jurassic World Rebirth, then heroes both big and small hit the screens in Superman, Smurfs, the Fantastic Four, First Step, and Bad Guys two.
A reboot of the classic slasher film, I know what you did last summer, and the fourth installment of The Conjuring Lost Rite will terrify moviegoers in the summer. For a dose of comedy, a remake of The Naked Gun starring Liam Neeson and the anticipated sequel, Freakier Friday, will hit theaters in August. Looking ahead to the fourth quarter, a wide array of content will hit the screens in time for the holiday movie going season with Tron heiress, The Black Phone two, The Running Man, Predator Badlands, Wicked for Good, Zootopia two, Five Night at Freddy’s two, The SpongeBob movie Search for SquarePants, and the film longtime fans are eagerly awaiting Avatar, Fire and Ash. As we see the exhibition business gaining momentum ahead, we believe growth opportunities exist across all our business segments. Our media business will continue to capitalize on the robust film slate ahead.
The LV segment presents an opportunity to capture our target guests with new menu items and value offerings launching in the quarter. Our market position remains strong, supported by a diversified business model and premium entertainment offerings. The early success we’ve seen in April and the May, combined with our strong upcoming slate and strategic initiatives, gives us confidence in our ability to deliver strong results as we move through 2025. Over the decades I’ve spent in this industry, one thing has remained constant. When economic uncertainty sets in, people still turn to the movies.
Time and time again, we’ve seen that in tough times, the movie theater isn’t just resilient. It becomes essential. It’s where people go to escape, to connect, and to find a bit of joy where they need it most. With that, I will turn things over to Gord Nelson.
Gord Nelson, Chief Financial Officer, Cineplex: Thank you, Ellis. I’m pleased to present a condensed summary of the results for the first quarter of twenty twenty five for Cineplex Inc. For further reference, our financial statements and our MD and A have been filed on SEDAR plus and are available on our Investor Relations website at cineplex.com. Our MD and A and earnings press release include a complete narrative on the operational results, so I I will focus on highlighting select items in addition to providing commentary on liquidity, capital allocation priorities, and outlook. For my comments on operations, all amounts falling will be from continuing operations unless otherwise stated.
As Ellis mentioned, we experienced a softer box office in the first quarter, which impacted our results. Total revenues for the quarter were $264,300,000 representing a 10.3% decrease compared to the same period last year. A 14.5% decline in attendance led to adjusted EBITDAL being negative $10,800,000 as compared to positive $4,600,000 in the prior year. Although the soft box office impacted our exhibition segment, this was partially offset by strong performances in our media businesses and three new locations in our LBE segment. So let’s take a closer look at our segments.
In the film entertainment and content segment, box office revenues decreased 18.5% to $101,900,000, reflecting both lower attendance and a decrease in box office per patron. Theater attendance was 8,400,000, down 14.5% from prior year. This decline relative to the prior year was primarily due to a lack of compelling content in the current year as Ellis mentioned earlier. Our box office per pay turn metric was $12.14, representing a 4.7 decrease over the prior year due to a decline in sales mix of premium priced products, the $5 Tuesday program, and a higher child mix due to the films playing during the quarter. Concession per patron increased 2% based on an increase in average transaction spend.
Our theater cash rent paid and payable was down 1.8% compared to q one twenty twenty four due to the closure of two locations and rent reductions as we continue to optimize our theater portfolio and focus on reducing our fixed rent costs. As a result of the product challenges during the quarter, segment EBITDA was negative $12,400,000 but as we look forward, when product is there, the operating leverage is strong in this segment. Ellis mentioned the strong box office performance for April and May to date. For the month of April 2025 alone, our consolidated EBITDA has increased approximately $25,000,000 to positive $13,000,000 for the month from negative $12,000,000 in the prior year. Our media business delivered exceptional results with total media revenues growing 32.9% to 29,700,000.
Cinema media revenues increased 38% to $17,100,000 as a result of strong demand from pharmaceutical, financial services, and ecommerce platforms. Capitalizing on the value cinema advertising offers, digital place based media revenue grew 26.5% to 12,600,000. The increase in digital place based media is due to a combination of an increase in advertising revenue across our mall networks and new project revenue. All of our mall networks saw growth, including newer additions like Cadillac, Bearview, and Commonar, but also increases from our longer term clients such as Oxford and Ivanhoe Cambridge. In addition, project revenue increased 32.7% over the prior year.
In 2024, we entered into an agreement with Suncor to install a digital network in their Petro Canada stations. Deployments began in 2024 and ramped up in q one, generating the strong lift in sales. Location based entertainment continued to expand with revenues increasing 10.5% to $38,100,000 primarily due to an increase of three locations, which opened in q four of the prior year. Store level EBITDAL increased by 1% to $9,800,000 whereas store level EBITDAL margin moderated to 25.7%. This reflects elevated costs in the initial few months as we optimize operations in our new locations.
Although same store revenue declined 8.1% due to a number of factors, the same store EBITDA margin was 28.2%, which is marginally higher than the prior year due to strong operating discipline. The LBE segment EBITDA decreased $400,000 primarily due to the same store volume decline and additional onetime costs related to the opening of the new locations. I wanna speak briefly about our capital priorities and then cash flow and capital allocation in the quarter. Our capital allocation priorities remain unchanged and include continuing to focus on maintenance capital expenditures, strengthening our balance sheet to achieve our target leverage ratios, making strategic growth investments, and providing shareholder returns. For the first quarter, the film content challenges impacted our operating results, and this combined with the normal working capital seasonality resulted in a decrease in our cash balance of approximately $66,000,000.
In simple terms, this decrease is attributable primarily to the following items, negative EBITDA of $10,800,000, a seasonal use of working capital of approximately $23,300,000, cash interest of $15,100,000, and net CapEx of $14,100,000 primarily related to the four builds completed in late twenty twenty four. Although we continue to believe that our stock is currently undervalued, as a result of balancing these capital priorities, there was no activity under the NCIB during the quarter. As we look forward, we expect the strong operating leverage of the business to return as was evidenced by my comment on the April EBITDA results. Large working capital deficiencies are typically unique to Q1 as coupons and certificates sold in q four are redeemed in q one, and we draw down the payables balances at December 31, which reflect the strong December period. With respect to CapEx, our guidance for 2025 is now more muted muted at approximately 40,000,000 to $50,000,000, which includes the $14,100,000 in q one.
Given the current uncertainty regarding tariffs and other matters, we will defer spend until there is more certainty. With respect to the current macroeconomic environment and uncertainty, I would like to take a few moments to discuss these matters. As a reminder, our business is primarily based on providing compelling entertainment experiences to our guests in Canada and not transferring physical goods across borders. With respect to the threat of any US trade tariffs on goods, approximately 99% of our revenue is generated in Canada through our operations and facilities in Canada. With respect to any potential reciprocal Canadian tariffs on goods, I remind you of our overall cost structure with approximately 78% of our annual costs coming from four categories, film rent, employee costs, and occupancy costs.
All intangible items that are not caught by any current tariff discussions represent 70% of our overall costs. The next largest cost category is food cost, which represents approximately 8% of our overall costs. We are continuing to evaluate any potential impacts and additional sourcing opportunities for any items potentially caught by tariffs and do not believe that any proposed tariffs will have a material impact on our business. With respect to currency exposure, less than 5% of our costs are incurred in US dollars. And as Ellis mentioned previously, during times of economic uncertainty, the exhibition business has historically been resilient.
With the renewed confidence emerging from CinemaCon, as Ellis has articulated, the long term outlook for exhibition remains strong. We believe this future is not only real but imminent, beginning to take shape in the very near term with the strong recent results. In summary, we are excited for the future of the business and remain highly focused on creating long term value for shareholders. And with that, I would like to turn things over to the conference operator for questions.
Adam, Conference Operator: Thank you. And our first question comes from Adam Schine from National Bank Financial. Adam, please go ahead. Your line is open.
Adam Schine, Analyst, National Bank Financial: A lot. Good morning. Ellis, can you talk a little bit I mean Gord, obviously good morning. Gord referenced the tariff dynamic. I don’t know if you get anyone believes that a movie tariff will indeed occur.
But can you talk maybe about potential progress across some of The U. S. States? Certainly, Gavin Newsom in California is trying to raise film incentives to stimulate more production activity. Do you ultimately see the prospect of statewide incentives or incentives from a number of additional U.
S. States perhaps stimulating additional film production activity as compared to necessarily drawing productions from abroad, you know, back into The US? We’ll start there.
Ellis Jacob, President and CEO, Cineplex: Yeah. I think, you know, a lot of, you know, movies are not only filmed in California, they are filmed in other parts of The US. And I think that will be part of the incentives. We’ll continue to increase production in other areas of The US. And from an overall perspective, it will lead to, I feel, additional movies being produced right across the board.
And, you know, in international situations, that will also continue to be used depending on the overall cost of the film. But I’m not overly concerned about, you know, the comments that have been made over the last number of days.
Adam Schine, Analyst, National Bank Financial: Given what we saw out of Guzzo, you know, a few months back, are you seeing any, incremental benefits just in terms of, drive more people into your own theaters?
Ellis Jacob, President and CEO, Cineplex: On locations that are close to our existing theaters, they’ve improved, but a lot of these locations aren’t close to us. So we don’t find the total benefits as a result.
Adam Schine, Analyst, National Bank Financial: Okay. And comments were made obviously on the nature of the BPP dip, which were pretty clear in the Q1. Can you maybe talk a little bit about some of the resuscitation in BPP so far in q two?
Ellis Jacob, President and CEO, Cineplex: Yeah. The reason it was low on q q one was the the decline in the sales mix of premium priced product. Then we had the $5 Tuesday program, and there was a higher child ticket mix due to the films playing in the quarter. And I feel in in the in this quarter that we are in, that will change because of the premium offerings, because of the pricing, and that will definitely be on the positive side going forward.
Adam Schine, Analyst, National Bank Financial: Okay. We’ll leave it there. Thank you very much.
Ellis Jacob, President and CEO, Cineplex: Thanks, Adam.
Adam, Conference Operator: The next question comes from Derek Lessard from TD Cowen. Derek, please go ahead. Your line is open.
Derek Lessard, Analyst, TD Cowen: Yes. Good morning, everybody. And Ellis, I think I can hear a faint sound of some excitement back in your voice. I guess, I I just want to maybe hit on the, the same store sales, decline, Gordon, on the LBE side. Was there anything anything I think you’ve mentioned there’s a couple of of drivers of that.
So I’m just wondering if there’s anything to read from that.
Adam, Conference Operator: Yeah. So, Derek, look at there’s a
Gord Nelson, Chief Financial Officer, Cineplex: few things there. Like, you know, obviously, last year was a leap year, so there’s an extra day in in last year’s operations. Yep. The timing of school holidays around, like, you know, Christmas into the New Year impacted, so there’s less holidays in 2025 versus 2024. You know, Family Day occurred during some sort of adverse weather situations across the country.
So, you know, a number of small things leading to that you know, the eight per 8% same store decline.
Derek Lessard, Analyst, TD Cowen: You know, as
Gord Nelson, Chief Financial Officer, Cineplex: we look out for the entire year, though, you know, we’ve always said that, you know, on average, we expect these boxes to do about $10,000,000 of revenue. And so with the start in q one is, you know, we have obviously some concerns with the where the general economic conditions are. But, you know, we would we would think that, you know, you’re probably that average is gonna be impacted by 3% to 5%. So somewhere between 9.5 to $9,700,000 in average for for the 16 locations throughout the year for the full year.
Mehra Yaki, Analyst, Scotiabank: Okay.
Derek Lessard, Analyst, TD Cowen: Sorry. Go ahead. So you’re, you’re taking into account some economic, slowdown?
Gord Nelson, Chief Financial Officer, Cineplex: Yeah. Obviously, that will impact. Right. Today, we’re we’re down 88% on the same store. And Right.
But over the course of the full year, the impact, we believe, will be three to 5%.
Derek Lessard, Analyst, TD Cowen: Okay. Okay. That’s fine. And I guess another question for me is is have you seen or maybe are you anticipating maybe any bump from staycations this year in Canada?
Ellis Jacob, President and CEO, Cineplex: Well, we’ve seen, you know, it’s all content driven. And, when the product is there, our guests come out in a big way, and I think that will continue as we move forward into the balance of the summer and into the balance of the year. So we feel pretty strongly about the content and our guests coming out to see these films.
Gord Nelson, Chief Financial Officer, Cineplex: And then just on the sort of the relative value proposition of, you know, theatrical experience versus, say, a concert or professional sporting event. When you look at sort of pre pandemic to today, you know, the gap is, you know, excessively widened, so we become a more attractive value opportunity for out of home visits.
Derek Lessard, Analyst, TD Cowen: Okay. And just maybe one more for me. Given that you’re you have pulled back a little bit on the CapEx this year, could you maybe talk about any plans for or any future LBE expansion plans?
Gord Nelson, Chief Financial Officer, Cineplex: So yeah. Right. To today, you know, as noted in our MD and A, we have one commitment. And as we’ve always said, we, you know, we’re being we’re we believe in the opportunity for up to 30 locations across Canada. We’re in what we always refer to as a prudent pause.
And when you see retailers like h you know, unfortunately, at Hudson’s Bay and others either downsizing or actually in the country is we we see opportunities for potential better sites and better economics going forward. So we’re just in a little bit of a prudent pause as we look for future opportunities. And then as we’ve sort of also mentioned historically, from the time we commit to a location to the time we actually, you know, shovel on ground and building, depending on the site, sometimes it can be a year to two years.
Derek Lessard, Analyst, TD Cowen: Right. Okay. Thanks for the color, Gord.
Ellis Jacob, President and CEO, Cineplex: Thank you.
Adam, Conference Operator: The next question comes from Mehra Yaki from Scotiabank. Mehra, your line is open. Please go ahead.
Mehra Yaki, Analyst, Scotiabank: Great. Thank you for taking my question. I wanted to go on a question that Adam alluded to in terms of potential tariffs on movie production outside of The U. S. I spoke with a few of the studios in The US, and I did not get the sense talking with them that there’s a going to be a negative reaction, like, know, basically reducing of a reduction of production of movies as a consequence could be a shift in where the production is made.
But can you talk about, let’s say, if the cost to produce a movie goes up, how would that affect your economics as a as a movie operator?
Ellis Jacob, President and CEO, Cineplex: Well, at the moment, nothing has been confirmed. And as you had spoken with them, I had spoken to all the major studios in The US, and they basically feel that things will stay in the same vein with incentives coming from US states for, you know, both, the producers and also some of the exhibitors if, they feel that’s necessary. So I’m not, you know on the Monday, I was quite concerned when it was first brought up, but as the week has gone along, I feel there’s less of, you know, a huge risk because to be able to make the charge, it’s gonna be very, very difficult because movies are made in different parts of the world and different US states, and a lot of them, you know, are finished in, California. But, it would be very difficult to keep the, you know, pieces of the movies, in different areas. And one area that, you know, would impact The US Exhibitors more than, Canadian is for international content, if there are tariffs on those because that’s not something that, we would have to be impacted by in Canada.
Mehra Yaki, Analyst, Scotiabank: Right. And in terms of passing through any increase in cost of production, if it were to happen, how would that be passed through to the consumer?
Ellis Jacob, President and CEO, Cineplex: We would work together and, you know, it’s in a position now where it’s too early to speculate. And that’s why I think it’s better that we see where this, ends up. And I understand that there’s some announcements happening today. So until we know where things are going, I don’t want to, put us or, you know, our guests in an awkward position in any way.
Mehra Yaki, Analyst, Scotiabank: Okay. Fair enough. I wanted to ask you on the media side. It continues to grow nicely, and you seem to, you know, be, you know, seeing a a different angle of the media advertising spend than other advertisers in in Canada, which is, you know, good to see. How much more growth do you expect to see from from that business?
Or have we reached a a level that is consuming most of the time that you have available to put advertising minutes in front of consumers watching movies, or there’s still more inventory you you can sell at this point in time?
Gord Nelson, Chief Financial Officer, Cineplex: Yeah. So let’s talk about so you’re asking a bit about capacity utilization. And so, you know, the business is twelve months of the year, And and so we maybe typically have high capacity utilization in, you know, November and into December. So there’s opportunities, and we’ve always said there’s opportunities to kind of, you know, improve that capacity utilization across the full twelve months of the year. Now advertisers need to be wanting to have campaigns during those periods, but that’s where there’s opportunity.
It’s overall the capacity utilization is is relatively low. In the first quarter, and we called out a couple of things as we saw some great success in in new categories coming into cinema. So pharma was one that we called out. And so pharma had a significant, improvement year over year. And when we think about pharma as a category going forward, you know, it’s a category that’s probably less impacted by general economic conditions than perhaps some of the other categories maybe.
The other thing that we we wanted to kinda or just for me to call out too is that as we look at our our revenue mix, this is the first quarter where where our programmatic category ended up in our top five. And so programmatic is a big opportunity for us as we look forward to. So and and, you know, so we and and, again, we we want to provide a portfolio of media solutions for our customers. So, you know, we have in cinema when the lights go dark. We have the preshow.
We have the lobby network. We have our mall networks. We have an entire portfolio of solutions that we can kinda create and cater to the advertisers’ needs. So we see opportunity, although we do recognize that, you know, there’s there’s general challenges in advertising, but we were one of the few, if not perhaps the only category of advertising that showed improvement in q one.
Mehra Yaki, Analyst, Scotiabank: Okay. Great. And and my last question, Gord. You you you were talk when you were talking about the stock buyback that you, you know, in in in in a year, you put that in the same sentence or close to the same sentence you were talking about the fact that you’re going to see improvement in free cash flow generation in the back half and also potentially in Q2. Is it fair to assume that the outlook on free cash flow provides a good window of opportunity here to see you come back with more active buyback you know, in the in the months to come?
Adam, Conference Operator: Yeah. Look at our commentary.
Gord Nelson, Chief Financial Officer, Cineplex: It was kind of unique. I was speaking specifically about q one and just you know, and I highlighted the number of things that resulted in the drain of cash. But you’re absolutely right. You know, as we look forward and we balance the capital priorities of which, you know, kind of leverage and capital, know, capital investments and share buybacks are all part of that equation. So things are looking encouraging going forward, and, you know, I’ll leave it at that for now.
Mehra Yaki, Analyst, Scotiabank: Okay. Thank you.
Adam, Conference Operator: Thank you. We have no further questions, so I hand the call back to the management team for any closing comments.
Ellis Jacob, President and CEO, Cineplex: Thank you, sir, and thank you all for joining our call this morning. We are totally energized by the start of the second quarter and look forward to sharing our second quarter results with you in August. And we hope to see you at the movies very soon. Thank you.
Adam, Conference Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.
Ellis Jacob, President and CEO, Cineplex: Thank you.
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