Cineplex Inc. (TSX: CGX) released its second-quarter financial results for 2024, revealing a significant downturn in both revenue and attendance. The toppling highlight is the reported net loss of $21.4 million, or 33 cents per diluted share, for the quarter ended June 30, 2024. This represents a dramatic reversal from the $176.5 million profit, or $1.99 per diluted share, reported in the same quarter the previous year or the $5.2 million profit, or $0.08 per diluted share, posted in the previous quarter.
The steep decline in profitability is primarily attributed to a substantial drop in theatre attendance, which fell 31.8% year-over-year.
Total revenues for the quarter decreased by 24.6%, dropping to $277.3 million from $367.9 million in the same period last year. This significant decline was driven by lower attendance, which dropped to 8.7 million from 12.8 million a year earlier. The drop in attendance is directly linked to the disruption in the release schedule caused by the prolonged Hollywood strikes in 2023, which left a void in the first half of 2024.
The theatre exhibition segment, a core component of Cineplex’s revenue, saw box office revenues fall by $50 million, or 30.4%, from $164.5 million to $114.5 million, further reflecting the impact of the strikes.
Interestingly, despite the decline in overall attendance, Cineplex managed to achieve record highs in revenue per patron. The box office revenue per patron (BPP) for the quarter reached an all-time high of $13.11, a 2.1% increase from $12.84 in the same period last year. Concession revenue per patron (CPP) also hit a quarterly record of $9.56, up 3.8% from $9.21 a year ago.
The improvement in per-patron revenue was supported by several strategic initiatives, including the national rollout of mobile food and beverage pre-ordering across 146 locations, which has shown early signs of increasing transaction sizes.
Despite the difficult first half of the year, CEO Ellis Jacob highlighted that “the end of the second quarter was a turning point for our industry.”
“With the two consecutive box office months of June and July reaching over 90% of pre-pandemic levels, it is clear these challenges are firmly behind us,” Jacob maintained.
The chief executive pointed to the strong box office performance in June, particularly driven by the release of the highly anticipated film Inside Out 2, as a key factor in this recovery. The film’s success was instrumental in stabilizing revenues and reigniting audience interest, setting the stage for a stronger second half of the year.
During the second quarter, the company closed two theatres at the end of their lease terms as part of a broader effort to optimize its portfolio and rationalize its operations. However, it also invested in enhancing its theatre circuit, notably by adding an IMAX screen at Cineplex Odeon South Edmonton Cinemas in Edmonton, Alberta, aiming to draw more patrons to its premium offerings.
Looking forward, Cineplex is planning to accelerate its growth with the opening of two new Rec Room locations in Montreal and Vancouver, as well as a new Playdium in Toronto. Additionally, the company is set to open a new theatre at the Royalmount shopping complex in Montreal, which is expected to attract significant foot traffic.
Cineplex’s media division also showed resilience, with cinema media revenues increasing by 4.0% over the previous year, despite lower theatre attendance. The company reported second-quarter cinema media revenues of $18.5 million, with cinema media per patron (CMPP) rising significantly by 52.5% to $2.12.
Digital place-based media revenue saw a more substantial increase of 28.1%, reaching $10.6 million. This growth was primarily driven by Cineplex’s partnership with Cadillac Fairview, which added to its digital-out-of-home (DOOH) network. This partnership involves selling, installing, and managing directory and media assets at 14 properties across Canada, beginning in the third quarter of 2024.
Alternative programming remains a strong area for Cineplex, with 9.2% of the second quarter’s box office revenues coming from international films, a notable increase compared to North America’s 3.1% share. This growth is evident in the success of Punjabi-language films like Jatt & Juliet 3, Shinda Shinda No Papa, and Shayar, with Cineplex accounting for over 75% of the total North American box office for these titles.
In addition to international films, Cineplex also performed in event cinema programming, offering a range of initiatives, including screenings of the ICC Men’s T20 Cricket World Cup 2024, concerts featuring artists like GHOST and SUGA from BTS, as well as classic film retrospectives like the Stanley Kubrick career retrospective.
The company also announced the launch of a Normal Course Issuer Bid (NCIB) to repurchase up to 6.3 million of its common shares, representing approximately 10% of its public float. This buyback plan, pending approval from the Toronto Stock Exchange, is intended to capitalize on what Cineplex’s board of directors believes is an undervaluation of its stock.
“The board of directors believes that the market price of the Common Shares does not reflect the intrinsic value of the Company, and the repurchase of shares would be in the best interests of the Company and its shareholders,” the company stated.
Cineplex last traded at $8.97 on the TSX.
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