Earnings Labs

Reading International, Inc. (RDIB)

Q3 2021 Earnings Call· Fri, Nov 12, 2021

$9.51

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Transcript

Andrzej Matyczynski

Management

Thank you for joining Reading International’s Earnings Call to Discuss our 2021 Third Quarter Results. My name is Andrzej Matyczynski, and I’m Reading’s Executive Vice President of Global Operations. With me, as usual, are Ellen Cotter, our President and Chief Executive Officer; and Gilbert Avanes, our Executive Vice President, Chief Financial Officer and Treasurer. Before we begin the substance of the call, I will just run through the usual caveats. In accordance with the safe harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that will be addressed in this earnings call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause our actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are clearly set out in our SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, we will discuss non-GAAP financial measures on this call. Reconciliations and definitions of non-GAAP financial measures, which are segment operating income, EBITDA and adjusted EBITDA, are included in our recently issued 2021 third quarter earnings release on the company's website. We have adjusted, where applicable, the EBITDA items we believe to be external to our business and not reflective of our cost of doing business or results of operations. Such costs include legal expenses relating to extraordinary litigation and any other items that can be considered non-recurring in accordance with the two-year SEC requirement for determining an item is non-recurring, infrequent or unusual in nature. We believe adjusted EBITDA is an important supplemental measure of our performance. In today's call, we also use an industry-accepted financial measure called theater level cash flow, TLCF, which is theater level revenue, less direct theater level expenses. We will also use a measure referred to as F&B spend per patron, SPP, which is a key performance indicator for our cinemas. The F&B SPP is calculated by dividing a cinema’s revenues generated by food and beverage sales by the number of admissions at that cinema. Please note that our comments are necessarily summary in nature, and anything we say is qualified by the more detailed disclosure set forth in our Form 10-Q and other filings with the U.S. Securities and Exchange Commission. So with that behind us, I’ll turn it over to Ellen, who will review our 2021 third quarter results and discuss our strategies for navigating Reading through the COVID-19 pandemic to the post-COVID era; followed by Gilbert, who will provide a more detailed financial review. Ellen?

Ellen Cotter

Management

Thanks, Andre. And thank you for joining our call today. We're happy to be reporting encouraging news about the company and the global cinema industry. As we've previously stated, the fundamentals of our two business three country diversified business strategy provided Reading and its subsidiaries, the foundation necessary to whether what we believed were the darkest periods of the COVID pandemic. As of today, November 11, 2021, 55 of our 59 global cinemas are open. In New Zealand, one cinema is closed due to the COVID restrictions and another is closed for seismic reasons. In Hawaii, one cinema is closed as we try to find an economically feasible reopening plan with another cinema in Hawaii closed for renovation. As of today, our global debt balance of $238 million has been reduced by 16.5% from December 31, 2020. We were able to reduce our global debt as a result of the monetization of five real estate assets from which we generated $141.9 million in cash. In a sign that the protection of our stockholder base is having a positive effect as of September 30, 2021, our stockholder equity had increased by 28% from September 30, 2020. Let's start with an overview of the company's Q3 2021 operations and recent highlights from October and November. At $31.8 million, our Q3 2021 consolidated total revenues increased 212% from the same period last year, but represented 45% of the same quarter two years ago in 2019. Unlike other global exhibitors, we delivered this increase despite 38 of our 59 global cinemas being closed at some point during Q3 2021. This 212% consolidated total revenue increase was primarily driven by our U.S. cinemas, where our cinema revenues increased by 292% from Q3 2020. Thanks to almost 88% of our circuit being reopened and the stellar…

Gilbert Avanes

Management

Thank you, Ellen. Consolidated revenues for the quarter ended September 30, 2021 increased by $21.6 million to $31.8 million when compared to the same period in the prior year. This increase was due to majority of our theaters operating during the third quarter of 2021 compared to the third quarter of 2020. These positive results were further impacted by the release of several major films in the third quarter of 2021, which collectively led to an increase in attendance compared to the third quarter of 2020. These results were further enhanced by the strengthening of our Australian and New Zealand dollars. During the third quarter of 2021, the average Australian and New Zealand dollars strengthened against the U.S. dollar by 2.6% and 5.8% respectively, compared to the same period last year. Revenue for the nine months ended September 30, 2021 increased by $26.3 million to $89.1 million when compared to the same period in the prior year. This increase was due to majority of our theaters operating during the first nine months of 2021 compared to the same period in 2020. Average Australian dollar and New Zealand dollar strengthened against the U.S. dollar by 12.1% and 11.5% respectively for the nine months of 2021 compared to the same period in prior year. Net loss attributable to RDI stockholders for the quarter ended September 30, 2021 decreased by $9.1 million to a loss of $10.1 million when compared to the same period in the prior year. Basic loss per share decreased by $0.42 to a loss of $0.46 for the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. These improved results are due to continued rollout of COVID-19 vaccine in the U.S., which draw the reopening of most of our cinema portfolio and the easing of…

Andrzej Matyczynski

Management

Thanks, Gilbert. First, I’d like to thank our stockholders for forwarding questions to our investor relations email. In addition to addressing many of your questions in the prepared remarks from Ellen and Gilbert, we’ve selected a few additional questions to offer additional insights from management. The first question relates to the sale of assets and repurchase of stock. Would it make sense to sell assets that can get fair value or borrow against, then use the proceeds to buy back undervalued stock. I can handle this one. During the pandemic, we focused on preserving stockholder value. We strengthened our balance sheet by selectively monetizing assets, not adversely impacted by the COVID economy and which would have required significant capital expenditures to take them to their next level of value. We generated $141.9 million in cash unlocking book profits of $90.2 million. We did not take on any high interest rate debt or diluted stockholders by issuing equity at distress prices. We’ve worked with our landlords and haven’t lost any of our cinema assets. We have in short preserved the core of our business and are optimistic about the future of cinema exhibition in the markets where we operate. As for the future, we continue to believe in our two business, three country strategic business plan. We do not see any shift in that strategy, which has survived us well through the pandemic. We also review our position with regards to our authorized stock repurchase program, which has been on hold because of the liquidity needs of the company made more acute by the pandemic and its effect on our businesses. We continue to balance our CapEx and OpEx requirements together with our commitment to our stock repurchase program and we recommenced that program as circumstances allow. The second question comes from, when it makes sense to restart the refurbishment program. How many more theaters are left in your CapEx plans for U.S. theaters? How many have been completed and how many are not participating in the past or near present of the program? What amount of capital is necessary to complete the plan? Ellen?

Ellen Cotter

Management

In addition to building Olino in Hawaii, since 2015, we’ve substantially renovated eight cinemas in our U.S. portfolio. Those renovations included among other things, converting to recliner seating, adding TITAN LUXE screens, and significantly upgrading the F&B offer. As of today, we’re targeting the renovation of three additional theaters starting sometime in 2022. The overall renovation cost, we estimate to be about $8 million to $10 million based on future decisions about the scope of the renovations. We’re working now with our landlords at these three locations to establish reasonable new lease arrangements to take into account major renovations. In 2023, we’d expect to commence renovations on three or four more. Decisions with respect to the remainder of the U.S. circuit are subject to market conditions at the time and discussions with our landlords about lease term, tenant allowances and rent structures.

Andrzej Matyczynski

Management

Thanks, Ellen. And finally, are there any plans to further monetize real estate assets, Gilbert?

Gilbert Avanes

Management

At this time, we have no plan to further monetize any of our real estate assets. Historically, our approach to our real estate assets have been predominantly a buy and hold strategy. However, due to COVID-19 pandemic, we monetize the asset that had minimal impact to our historical cash flow, but have greatly appreciated in value. By capitalizing on these assets, our long-term real estate strategy has given us the ability to not increase debt or issue capital and further enhanced our financial position given us the ability to pay down debt. The monetization of these assets have strengthened our balance sheet in a type of global uncertainty. Our actions in this regards were well received by our lenders and we believe we get top prices for those assets. At this time, we believe our balance sheet is well positioned to provide our company with the continued flexibility to allow the cinema industry and our cinema cash flows time to rebound.

Andrzej Matyczynski

Management

Thanks, Gilbert. Well, that marks the conclusion of the call. As usual, we appreciate you listening to the call today and thank you for your attention. And wish everyone good health and safety. Thank you.

Operator

Operator

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Management

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