Melissa Pressacco - Manager, Communications Ellis Jacob - President and Chief Executive Officer Gord Nelson - Chief Financial Officer

Tim Casey - BMO Derek Lessard - TD Securities Kenric Tyghe - Raymond James Jeff Fan - Scotiabank Adam Shine - National Bank Financial Rob Goff - Echelon Drew McReynolds - RBC

Good morning. Before beginning the call, we would like to 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 could differ materially from those expressed in the forward-looking statements.

Factors that could cause results to vary include among other things, adverse factors generally encountered in the film exhibition industry, risks associated with national and world events, discovery of undisclosed material liabilities and general economic conditions. I'll now turn the call over to our President and CEO, Ellis Jacob.

Thank you, Melissa, good morning and welcome to Cineplex Inc., 2018 second quarter conference call. We are pleased you could join us this morning.

I will begin by providing a top-line overview of our second quarter results and a summary of our key accomplishments during the period. Then, we will look at some of the most anticipated movies to complete the year's film slate followed by a brief outlook of our businesses for the balance of the year.

At the conclusion of my remarks, our Chief Financial Officer, Gord Nelson will provide an overview of our financials and then we will follow with a question-and-answer period. Cineplex reported a record second quarter with increases in revenue across all reportable segments benefiting from the period strong film product, media results and additional locations of The Rec Room.

Total revenue of $409.1 million increased 12.4% and adjusted EBITDA $67.8 million increased 78.3% versus the same period last year. On a last 12-month basis adjusted EBITDA is $259.7 million reflecting the revenue growth as well as our continued focus on diversification.

Top performing films for the full quarter included Avengers Infinity War, which had the highest grossing opening weekend ever in North America. Dead Pool 2, Incredibles 2 which set the North American box office record for biggest opening weekend for an animated film; Jurassic World: Fallen Kingdom and Solo: A Star War Story.

The second quarter was strong for Cineplex with box office revenue up 9.7% and attendance of 5% versus the prior period. In addition to this, our ongoing focus on per patron metrics resulted in all time quarterly records for BPP of $10.82 and CPP of $6.59.

As I have said before, when there is quality content available, guest will come out to see. The movie business is healthy and thriving and the second quarter was a great example of this with the blockbuster records I just mentioned.

Now, I would like to highlight some of our key accomplishments during the second quarter. Beginning with film entertainment and content, during the quarter we were pleased to open Cineplex Cinemas Easthills in Calgary which features seven auditoriums including an UltraAVX auditorium with D-BOX and the Clubhouse a unique auditorium specifically designed for families with young children.

And in July subsequent to quarter end, we opened two new theaters Cineplex Cinemas Pickering and VIP and the first phase of Cineplex Cinemas Seton and VIP in Calgary. The second phase of Seton which includes our VIP cinemas experience will open to the public next week.

We also announced plan to add four VIP auditorium and our license allowance to our existing Cineplex Odeon North Edmonton Cinemas this fall and plan to open a new theater at the Center Mall in Saskatoon in 2019. Alternative programming included record results from international film programming due to strong performing Punjabi and Hindi films in select markets across the country.

Additional performances included two live shows and multiple encores from the Metropolitan Opera as well as the classic Ballet Giselle, broadcast live from the Bolshoi Ballet. Within theatre food service, in addition to the record CCP mentioned earlier we launched an expanded partnership with Uber Eats.

Now you can order our famous popcorn and other popular concession items bundled with digital movie rentals right to your door. The service is available through 66 Cineplex Theaters in British Columbia, Alberta, Ontario and Quebec with plans to expand the offering to 25 additional locations in the coming months.

The Cineplex store remains a strategic area of focus for us. During the second quarter registered users of the store increased by 40% and we recorded an 88% increase in device activations compared to the prior year period.

We continue to see this area of the business evolve and grow and it has become one of many initiatives that differentiates Cineplex from other film exhibitors worldwide. Adoption of our online offerings including ticket purchases continues to grow.

During the quarter 32.3% of total admissions were purchased online via mobile devices. Moving to media; our media business reported a record second quarter.

Cinema media revenues increased 12.3% primarily due to an increase in show time advertising and digital plays base media revenue increased 9.9% due to an expanded client base which contributed to increased project installation revenue and advertising revenue. The increased project installation revenue was in part due to our partnership with AT&T and 7-Eleven to design develop and implement various digital menu board solutions supporting 7-Eleven U.S.

convenience store hot food program. To-date CDM has deployed their solutions in 240 stores across the West.

We continue to pursue opportunities around the globe to expand our digital media footprint with some of the world's top brands. Moving onto amusement gaming and leisure.

During the quarter, we opened our fifth location of The Rec Room in London, Ontario and have been pleased with its performance to-date. The five locations reported second quarter revenue of $15.7 million and a store level margin of 13%.

There is an element of seasonality in this business and weather can have an impact on results. During the second quarter, Alberta had an unseasonably warm May, which negatively impacted the results in this market, in particular, Edmonton where we have two locations.

If we exclude the Edmonton locations, the store level margin of the remaining locations could have been 22%. We also announced plans to open a new palladium location in Brampton, Ontario by converting our existing Cineplex Odeon Orion Gate Cinemas.

The redesigned space will include approximately 2/3rd games and attractions and 1/3rd fresh food and beverage options targeting teens, young adults and families. Both this location and our previously announced palladium would be location are schedule to open in 2019.

We anticipate having a total of nine locations of The Rec Room and two Palladiums in operation by the end of 2019. Subsequent to the quarter-end, we announced an expansion agreement with the VOID that will provide Cineplex with the exclusive rights to operate VR experience in Canada.

With our first location already successfully operating at The Rec Room in Toronto, the plan is to open an additional VOID experience centers over the coming years both inside and outside of Cineplex operated properties. The next location is set to open at The Rec Room, West Edmonton Mall next week.

We believe we are well positioned to grow on this area and have identified a number of ways to leverage VR within our ecosystem including our theatres, location based entertainment concept and as a product set will play a one amusement group. Speaking of P1AG, in June, we announced an exclusive agreement with Cinemark to install, operate and service amusement gaming equipment in over 270 Cinemark locations across the U.S.

As part of the agreement P1AG will also pilot 3 premium gaming locations featuring the latest interactive amusement and redemption games with a variety of great prizes. The expanded partnership leverages P1AG's national infrastructure and industry experience as one of North America's leading providers of amusement solutions.

In eSports WorldGaming announced its Rocket League Canadian Championship tournament. The top eight teams from the regional finals will compete in Toronto at our Scotiabank Theatre later this month.

Additionally, WorldGaming was named the official tournament operator for the U.S. and Canadian qualifiers of the 2018 World Electronic Sports Games in partnership with Alisports.

These Olympic star games will last over seven months and involve more than 65,000 players from over 190 countries competing for a $5.5 million price. WorldGaming will host the national event via online qualifiers and live finals for both the U.S.

and Canada. Following this, winners from each country will meet in China to attend the grand finals.

Our SCENE program continues to grow as we reach 9.2 million members by the end of the quarter. We have gained tremendous insights into our customers and their behaviors with over 10 years of data.

We continue to focus on leveraging this data through marketing automation to drive customer behavior as well as accelerating our adoption on artificial intelligence and machine learning for more robust consumer insights. Aside from our revenue initiatives, we continue to be diligent and focused on our costs.

We are well on our way to achieving the $25 million in annualized cost reductions that we have previously communicated by the end of this year. Now let's take a look at some of the films in store for the balance of the year.

The third quarter got off to a strong start with movies like Antman and Wasp, Hotel Transylvania 3 and Mission Impossible - Fallout. Then opening next weekend we have the highly anticipated film Crazy Rich Asians a movie based on the best selling book.

The Nun, an offshoot of The Conjuring series opens on September 7 and on September 28, the animated comedy Smallfoot starring the voice of Zendaya and Channing Tatum hits theaters. We have a number of films opening on October 5 including Venom starring Tom Hardy as the Marvel super villain and A Star is Born with Bradley Cooper and Lady Gaga which has already generated strong Oscar buff.

Next up is Jamie Lee Curtis' return to the big screen in the eleventh installment of the Halloween franchise which opens on October 19. Moving into November, we have Bohemian Rhapsody, the Freddie Mercury Queen story opening November 2 and the animated Dr.

Seuss, The Grinch starring Benedict Cumberbatch opens on November 9. Also on November 9, we have the Girl in the Spider's Web, the sequel to the popular crime thriller The Girl with the Dragon Tattoo.

On November 16, The Wizarding World franchise returns to theaters with Fantastic Beast, the Crimes of Grindelwald. Disney's Ralph Breaks The Internet opens on November 23 and on December 14, we have both Spider-Man: Into the Spider-Verse an animated Spiderman movie and Mortal Engines, The post Apocalyptic adventure film based on the novel.

Right in time for the holidays, the highly anticipated Mary Poppins returns opens on December 19 with a star-studded cast including Emily Blunt, Meryl Streep and Dick Van Dyke. Then we close out the year with four great films all opening on December 21 including the next film in the DC Comic Universe Aquaman; the new Transformers film, Bumblebee; the James Cameron film Alita: Battle Angel; and Holmes and Watson, which stars Will Ferrell and John C.

Reilly. As you can see the film slate looks strong for the remainder of the year with the lineup of films that includes something for everyone.

We're also very encouraged by what's to come in 2019. Overall, Cineplex experienced a strong second quarter and an accomplished a great deal.

We continue to pursue our diversification strategy leveraging synergies within the Cineplex ecosystem and identifying new opportunities for revenue growth. As we move into 2018 and look ahead to 2019, we remain confident in our approach.

With a strong film slate, our new theater openings, added VIP Cinema locations and continued growth of The Rec Room, Cineplex digital media and Player One Amusement Group, we believe we are well-positioned for long-term success by investing in the future. With that, I'll turn the call over to the Gord.

Thanks Ellis. I am pleased to present the second quarter financial results for Cineplex Inc.

For your further reference, our financial statements and MD&A have been filed on SEDAR this morning and are also available on our Investor Relations Web site at cineplex.com. We continue to execute our diversification strategy and for the second quarter, total revenue increased 12.4% to $409.1 million, a second quarter record with increases across all reportable segments contributing to the growth.

Adjusted EBITDA increased by 78.3% to a second quarter record $67.8 million primarily a result of this growth. Cineplex's second quarter box office revenue increased 9.7% to $187.2 million compared to $170.7 million in the prior year.

This was a result of the impact of the 5% increase in attendance coupled with a BPP increase of 4.4%, which established an all time quarterly record of $10.82 up from $10.36 in 2017. Food service revenue increased 20.6% to $122.3 million included in food service revenue is $8.3 million from The Rec Room; excluding revenue from The Rec Room, theater food service revenue increased by 14.6% from the prior year due to the previously mentioned increase in attendance combined with the 9.3% increase to concession revenue per patron to an all time quarterly record of $6.59.

The CPP growth was attributed in part to increased market size and expanded food offerings including those available at Cineplex's VIP Cinemas Outtakes and additional licensed locations. Total Media revenue increased $4.2 million or 11.5% to $40.8 million for the quarter.

Cinema media which is primarily theater-based increased 12.3% due to higher cinema advertising with strong results from the automotive sector and a shift in spending this quarter due to the stronger film slate. Digital place-based media revenue increased 9.9% compared to the prior year primarily due to higher project installation revenue related to 7-Eleven.

During the quarter, we increased our location cap by 2.3% or 308 new locations to a total of 13,461 locations. Amusement revenue increased $2.9 million or 6.3% due to strong revenue growth from The Rec Room, which contributed $5.4 million of amusement gaming and other revenue.

This was offset by a decrease in amusement gaming revenue from P1AG due in part to a decline in children's attendance mix in the exhibition sector; the impact of foreign exchange rates on U.S. sourced revenue and a non-recurring item in the prior year.

There were significantly fewer family friendly films in Q2 2018 versus Q1 2017 and using Cineplex as a proxy although our overall attendance was up 5%, our children's attendance category was down 17.9%. With respect to The Rec Room, we opened the fifth location at CF Masonville Place in London, Ontario during the quarter.

While revenue grew $12 million over the prior year with four locations open for the full quarter and the part of the quarter as compared to one in the prior year. Margins were down as compared to the first quarter due to unseasonably warm weather during May in Alberta, Ellis provided some more color early on this impact.

Turning briefly to our key expense line items, film cost for the quarter came in at 54.7% of box office revenue as compared to 53.6% reported in the prior year reflecting the impact of these strong titles in the second quarter of this year. Cost of food service for Q2 2018 excluding $2.3 million incurred at The Rec Room was 20% as compared to 22.7% in the prior year period.

And cost of food service at The Rec Room was 27.1% in line with expectations. Other costs of $213.8 million increased $2.3 million or 1.1%.

Other costs include theater occupancy expenses, other operating expenses and general and administrative expenses. Theater occupancy expenses were $52.8 million for the quarter versus the prior year actual $52.6 million.

Other operating expenses were $143.2 million for the quarter versus a prior year actual $138.9 million an increase of $4.3 million. Increases included $8.6 million related to additional Rec Room locations and $2.3 million in same-store theater payroll due to increased business volumes and minimum wage changes in excess of labor efficiencies.

These increases were offset by the initial impact of our business unit level cost reduction program and business interruption proceeds of $3.7 million as a result of the fire at Cineplex Seton and VIP reported as a credit to other costs. With respect to the $2.3 million theater payroll increase, I would note that our focus on labor hour efficiencies resulted in a $2.1 million efficiency reduction impact.

But this was offset by a $3.2 million, wage rate increase impact which includes the 21% increase in minimum wage in Ontario and $1.2 million volume impact based on the higher attendance levels. G&A expenses were $17.8 million for the quarter which was $2.1 million lower than the prior year due to a $3.6 million reduction in share-based compensation expenses mainly due to Cineplex's lower share price and a $1.3 million reduction in G&A expenses primarily a result of our cost reduction program.

These savings were partially offset by restructuring costs and the amount of $2.8 million related to this program. As we had said earlier, we expect that the annualized impact of the business unit in G&A cost reduction program to be approximately $25 million and this will ramp up over the remainder of the year.

Business Unit level cost reductions will be reflected in the other operating expenses as detailed in our MD&A. Net CapEx for the second quarter was $23.1 million as compared to $52.2 million in the prior year.

We continue to estimate that our net CapEx for 2018 will be approximately $125 million and $150 million for 2019 reflecting in part, the CapEx for our anticipated [talk-off] [ph] location in 2019. As I also mentioned earlier, we focused on creating a diversified entertainment and media company for the future.

We are prepared to prudently use both our operating cash flow and our credit facilities to invest in these new businesses. We continue to remain comfortable with where Cineplex Inc., is positioned today.

We are in the early execution phase of a number of our diversification initiatives and our balance sheet allows us to continue to invest in these growth initiatives to deliver future value for our shareholders. That concludes our remarks for this morning.

And we now like to turn the call over to the conference operator.

Thanks. Good morning.

Three for me. Gord, could you talk about the concession margins.

What drove that up so nicely in quarter-to-quarter there from almost 300 basis points there, and is that sustainable back half of the year? Two, just a clarification on the fire insurance, the 3.7, I'm assuming that's a one-off there's no more carry through in subsequent quarters.

And then, thirdly, on Cineplex media a nice gain there, could you talk a little bit about how dynamic advertiser demand is? And I guess where I'm going is if, if the movie slate is unexpectedly better or worse.

Do you see a quick demand change by advertisers or is inventory pre-bought and so you kind of have a feel for it going into the quarter, if you could just flush out that a bit that would be helpful. Thanks.

Sure. Thanks Tim.

So on your first two questions, on the concession margin and you noticed in the last three quarters, we will have less -- anywhere between 6% and 9% of CPP. A component of that relates to some pricing changes that were -- have been reflected in both 2017 and into 2018 as well as some of the adjustments to the SCENE program where cash discounts were replaced with point rewards.

In addition, we see continued back in size increases lifting the CPP. But those two elements that I mentioned with them you don't get necessarily the corresponding increase in the cost of food items.

So that is in essence what is healthy in our margin side of things. Costs are relatively contained and we've got these increases from the CPP side.

On the business interruption question, the Seton location has now opened in July, so the business interruption claim that we made would have been from the anticipated date of opening and from the fire date until the actual opening date. And as I mentioned, it is in July, so there could be a small additional amount in the third quarter, but I would say substantially all of the estimated interruption claim amounts have been reflected in the second quarter results.

And Tim just to follow-up on that we also have with our restructuring costs, the onetime charge in our numbers. So yes, there are costs form extraordinarily items, which kind of offset each other.

So for the media question, Tim, just in terms of anticipation, as we digitize, obviously, it can be speed of execution based on estimated performance of films, but usually people -- there's a production period where the campaigns are being developed in advance to associate themselves with certain films. So I would say you probably don't see as much as you would expect in terms of people being a lot of reaction because of the preplanning process of the campaigns.

Now we do have the ability to move particularly the digital pre-show send some campaigns in and if there's a highly anticipated product. But, I would say there is a lot of preplanning on these campaigns and so not as much kind of movement at last minute.

And I'm not sure whether your next question is on how films don't perform? How that impacts us?

And as we've mentioned before we typically don't sell our cinema advertising on a CPM model basis. So issues that you may see in the NCM results such as make good type items are as prevalent in our business model.

Thanks for that. Just to follow-up Gord is, do you think 80% margin on concessions is sustainable or is there going to be somewhere between 70 and 80 on a go forward?

No. I would say looking in the near-term, I would say that 80% margin is a sustainable level.

Thank you.

Thanks Tim.

Yes. Thanks and good morning everybody.

You've talked about your initiatives over the next five years accounting for about two-thirds of your profits. I was just wondering if there's any change to that timeline and whether or not you think you can accelerate it and maybe in that timeline specifically, are you talking about the initiatives you've announced or should we assume that there's other opportunities not discussed?

Yes. It's a great question.

And for us it's all about focusing on making smart decisions as we move forward and picking the right locations as we grow both the Rec Room talk off and some of the other initiatives that we have focused on. So as we see strong results and opportunities, we are going to basically look at those opportunities within the CapEx that we've talked about.

And then, making sure that we are always diligent as to our leverage ratio and where Cineplex stands from a balance sheet perspective. So really in response to your question, if we see opportunities for growth, we basically going to look at moving forward with them.

And it's basically things like VR, which we announced with the VOID and we'll look at opportunities in that area also has it is something that we think is important for the future growth of the business.

Okay. And maybe on the -- just switching gears to the digital media, is the 7-Eleven a new contract that you just announced?

And just wondering how big of a rollout this would be?

Yes. We kind of commentary over the past number of calls is, we actively kind of highlight that customers which can ultimately lead to contracts amongst the full deployment scenario.

I would characterize kind of 7-Eleven, one is as a customer that we're piloting with over the past 1 to 2 years and that we're happy to kind of name them today as one that where we're continuing to grow with them and I think as we mentioned in our results today that we showed some significant growth in the first quarter due to that relationship. But, I wouldn't characterize it necessarily as a contracted relationships at this point.

Okay. And maybe just one final one for me before I requeue.

So wondering Gord maybe if you could quantify the higher operating cost for the London Rec Room? And maybe just lay out the overhead cost for the amusement and leisure segment?

And how we should be looking at those costs?

The London -- what was the second part of that question?

The overhead -- the overhead cost for amusement and leisure segment.

Yes. So, in the MD&A, which I think is maybe what you're referring to as we break out the store level margins for The Rec Room locations and we bring as the P1AG operating results.

There's a component of overhead obviously for the amusement and leisure sector, which includes [RLVE] [ph] initiatives includes our music solution initiatives and includes our WorldGaming initiatives. So there is a component of overhead in that amount.

In the second quarter itself with the opening of the London location, the pre-opening costs of approximately $1 million which -- and also in kind of in the overhead in pre-opening numbers.

Okay. Thanks for that.

Thank you and good morning. I wonder if we could just sort of speak to or revisit the Canadian industry performance versus the U.S.

and what appears to be a fairly persistent tracking era. I know partially spoken to sort of relative appeal of the mix perhaps fewer titles released north of the border versus south or similar.

I mean as strong as the performance was in quarter that gap was pretty noticeable. Could you just sort of walk us through some of that dynamic and how we should think about its evolution?

Yes. Certainly Kenric.

And this quarter it looked like in Canada we were up close to 10% and in the U.S. they were up over 24%.

And looking at the different components, last year in Canada we had in Quebec a movie called Bon Cop Bad Cop, which did a significant amount of business. And this year the Quebec feature, we have Little [indiscernible] did less than half of the business that particular film did.

We also had movies that opened in the U.S. that did not penetrate Canada movie like Overboard which did close to $50 million in the U.S.

and didn't have much of an impact in Canada. The other thing is, with the U.S., we've seen the movie buffs and we feel from looking at numbers in the U.S.

that had an impact and the range of SCENE publicly from anywhere from 4% to 8% as far as the impact on the difference between us and them. And that will change over time as the different proposals are out there.

We also saw the U.S. premium large formats.

We did a lot more before they have started. And now they are catching up.

And that's resulted in them doing higher box office than us because they followed our focus in that particular area. So those are all the different components, I would say add up to where we are today.

And there are certain movies, when I look at it for the quarter-to-date, the third quarter we are basically slightly ahead of the U.S. but things change depending on one or two movies that either under or over perform in Canada versus the U.S.

That's great color. Thanks very much.

And can we just switch quickly to The Rec Room, I know you called out some of the weather related challenges in Edmonton where previously you also highlighted the dynamic of a mall-based location? But, you should speak to us outside of whether -- how the Edmonton business is evolving with the Rec Room?

Yes. We continue to do well and it's a little tougher market than the other ones because we've got two locations in the market compared to our other markets within the rest of the country.

And as we open these locations there's great learning and we've been able to get synergies from what we've done on an overall basis. And we still have some softness in the West Edmonton Mall location and we are opening our VOID there next week, and we will continue to work on improving those locations moving forward.

But we're very pleased with the performances of the other locations and also Masonville without the university kids are still doing quite well from a startup perspective.

Great. Thanks.

Just a final one from me. Gord with respect to 2019 CapEx commentary, if top golf were to be a bigger unexpected surprise or win.

Is it some flex in that CapEx number? Or is it simply a constrained from a real estate point of view that regardless of how well it does or doesn't do, 2019, would just be a single top golf planned location or launch.

Yes. I would say, this time, we're going to try and just get the first one out of the box and then and then we'll kind of move on from there.

But, I would say that is not -- it would be extremely unlikely to have a second location in the 2019 CapEx number.

But we will continue to pursue other locations. But again, I think in 2019 like Gord says we will probably have one opened.

Great. Thanks very much.

I leave it there. Congrats.

Thanks.

Thanks. Good morning.

Got a few here. Maybe to start-off on digital media.

It looks like the installation ramped up a bit in the second quarter. Do you expect that to continue into the second half, and therefore, the revenue trajectory to continue that that acceleration.

And then, on P1AG, it looks like the revenue there was a little bit softer, I think in the second quarter in general down mid-single digit. Wondering if you can talk about that business in general and what caused the softness?

And the Cinemark deal perhaps talk about when that can kick in and how that would impact the trend? And then, just on The Rec Room, understanding that there is this seasonality or weather impact as you were I guess projecting the return of this business.

I'm wondering how that factored into your 25% margin and cash return on that business. How much did the seasonality factor in?

Can we still expect that on a full year basis even with the seasonality that you get those types of returns? Thanks.

On the first question on CDM and their revenue trajectory, so I mean we're obviously pleased with 10% growth in the second quarter. And we kind of highlighted that we're rolling out with 7-Eleven as see continued opportunity there.

So we're comfortable that yes you're going to continue to see both growth levels over the foreseeable future. On P1AG, let me provide a little bit of color -- additional color on the results.

I tried to kind of highlight in my prepared comments the kind of disconnect between the attendance growth yet the decline in children's attendance. Obviously, we have the data for our own circuit in Canada.

But when you look at top 15 films is an example in 2018 there is really only one film which I would call kind of family friendly versus about seven in the prior year. So our children's attendance in our circuit was down almost 18%.

And obviously, there is some of the kind of the key gamers from an amusement solutions perspective. So that definitely had an impact on our results.

And you see the results, music, gaming were down both 5% too. In the U.S.

about a quarter of our revenue comes from exhibition sector. So I would say that you would assume similar level of declines in children's attendance impacting that sector.

We had a foreign exchange impact which was about 2% -- just slightly over 2% percent of the variance versus the prior year. And we had a one-time adjustment related to some of the acquisitions, the revenue related item in the prior year results that also impacted kind of the year-over-year change by about 2%.

So declining children's attendance in the exhibition side of the business, foreign exchange and a non-recurring item from the prior results. With respect to Cinemark, we were pleased to announce that relationship during the second quarter, I want to kind of make one kind of comment when we built that strategy of creating the national footprint in the U.S.

part of the reason for that was we believe that there's an ability to kind of take share away from competitors in a more kind of regionalized business model that existed in the U.S. So I think this is a good example, but and customers looking to our expertise obviously are delivering results in the exhibition space.

So just early days on the Cinemark rollouts that we'll continue to see some of that. And we're excited about that and potentially other opportunities in the future.

And Jeff on your question on The Rec Room as far as the Edmonton weather impact I think what we should have focused on sooner was the better cost control as we saw the changing dynamic there. I don't think it's something that we'll continue to win back thus on an annual basis.

Okay. Thanks guys.

Thanks a lot. Good morning.

Ellis, you highlighted [10 years] [ph] into the SCENE program. The only data we really tend to get is the number of members and 100k added basically every quarter.

Is there any additional color you can share today or maybe in future just regards to how indeed incidents are being driven degree of frequency of a SCENE member versus maybe non-SCENE members? And anything else that might shed a bit more color in terms of the productivity you are getting out of the program?

Adam, we have a significant amount of information and stratifications of the data. We are now looking at artificial intelligence to better use the data to control costs and generate higher revenue.

We've got the benefit of now having it in introduced into The Rec Room and it will eventually be part of -- our other opportunities in amusement and leisure. So our focus is really about owning your entertainment time and entertainment hour as we move forward.

It's not just about movies, it's about all your experiences including your experiences online. So I mean, we could spend another hour talking about the data just to let you know we feel that this is one act that provides us with a huge advantage and being able to communicate with our guests and give them the best experience possible under all those circumstances.

So we know…

I'm sorry. Go ahead.

So, we know a significant amount of information now we have to be careful because we don't want to also overuse the information to turn the guests away. But it can provide us with great opportunities to continue to grow in different areas of the business.

I was just curious, just in terms of -- do you think there's ever a time where you're prepared to give let's say miles issuance and redemption or that's really something that remains proprietary and you don't want to give it out competitively?

I think it's something like the program was designed to increase the incidence of movie uptake and also now broadened it to all of the entertainment venues that we offer. And I think the redemption versus earn, it could be used in so many different areas including our concession stands, including our box office and also with the Food Network that you've earned and redeem points.

Okay. Maybe one for Gord.

Just a follow-up to Jeff's question regarding Cinemark. So I think your comment to him was basically stay tuned for a bit of a ramp there.

So not necessarily something significant in terms of a material bump to necessarily revenues, little on profitability, heading into the back half of the year or maybe it does indeed ramp up into Q4 plus?

Yes. I mean it's been fully deployed now -- you see the impact.

But again, as I mentioned the exhibition sector as a percentage of our total U.S. business is about 25%.

So it will have an impact. Obviously, we have an impact in the exhibition sector, but it's still only a quarter of the overall business.

Understood. Thanks a lot.

Thanks.

Thank you very much. And good morning.

Two questions, if I might. The first one would be just to perhaps give us some insights into the experience you've had the incremental contributions related to recliners?

And your thoughts on pushing them further out across your platform? And then, the second perhaps broader question would be that of eSports.

Your thoughts there are on monetization and your partnership with Alisports?

On the recliner side of things, we've got approximately 10% of our circuit now with recliners. We've seen some good returns both at the box office and also increase CPP in these locations.

All of our new locations that we are -- and will have recliners. We've got as we mentioned Seton, Pickering and Seton that have opened and -- Easthills sorry, Pickering and Seton that have opened in the last couple of months and they are all theaters with recliners.

We are looking at other opportunities where we see the benefits in introducing them, but we have to be careful because it's also a capacity utilization issue that we need to focus on in terms of the locations before we convert them.

And then, on the eSports question, Rob, I know you're very well versed in this space, the primary revenue source in the eSports base is always advertising and sponsorship. The relationship now with Alisports, [indiscernible] sport games gives us to kind of premier events and global events, our focus have primarily been Canadian based events.

So those online events culminating in live events, which will take place in California and Toronto are exciting opportunities for us. With [indiscernible] kind of non-endemic brands kind of on the tipping point where they're looking to associate with the eSport audience and should it be kind of coming online service soon and the broader eSports spectrum.

So having this event -- this premier event is just another kind of element in enhancing the overall experience for the gamers on our WorldGaming platform. So we're excited about that opportunity.

Very good. Thank you and congrats.

Thank you.

Yes. Thanks very much.

Good morning. A couple from me, just first, maybe on top golf, I think last quarter Ellis, you just talked about a potential announcement with respect to the first location.

Just wondering how confident you are that you're still on track for a 2019 launch?

Yes, Drew. We are very close to an announcement in the Greater GT area.

And we should be hearing about that shortly. And we are focusing to open our first location by the end of 2019.

Okay, great. Gord, I may have missed this earlier.

With respect to that $25 million in targeted cost savings, what have you achieved, I guess in the quarter kind of exiting the quarter?

Yes. I think we are pleased with the results to-date.

I typically said, he would ramp up to the $25 million on an annualized basis at the end of the year. If you looked specifically at our results and then particularly in the MD&A where we identify the G&A and the other operating expense line items, I think -- and you would see that G&A was down about $1.2 million year-over-year and some of the other operating expenses that we've identified were down about $2.8 million.

So between those two, you're out about $4 million in the quarter, which would be annualized -- $60 million in annualized basis. So initially we said when we announced the program, we kind of ramp up a third to third to third to achieve the $25 million.

So I think we're a little bit ahead of the game right now and we're still confident on reaching that number at the end of the year.

Okay. That's very helpful.

Two others, first, just on the BPP growth a little stronger certainly than what I was looking for and I'm looking at your premium mix, so clearly driven by core price increases. Wondering if you could just shed some light on kind of that strategy -- kind of going forward just what kind of pricing power you think still exists in your ability to raise core prices?

And then, secondly, on the virtual reality initiatives, obviously, early days, but wondering I guess over the medium term what kind of CapEx intensity that was venues or those offerings what kind of CapEx requirements would they require? Thank you.

Drew, I'll take your first question on BPP. And the first part of the question.

The one thing [Technical Difficulty] that I provided a lot of commentary about kids' attendance, how -- what kind of impacted the amusement solutions business that 18% decline in children's attendance. Congress was a little helpful on the BPP perspective because fewer kids which come in at a lower ticket price, so they have premium initiatives, shift in mix of Welcome Child to the higher priced tickets that also help contributed to the BPP increase, which is a little higher than you were expecting.

And then pricing, I will let Ellis make a comment on kind of future opportunity?

Yes. On pricing we have been really very focused on using efficiency and effectiveness to drive attendance.

But, when I look at pricing around the world even specifically in the U.S. compared to what we are charging, I think there is opportunity.

But again, we view that as the last lever to drive our bottom-line because it's important to get more people into the box and have to look at the opportunities. But we continue to look at pricing from an overall perspective.

And on VR, typically when we bucketed the categories of CapEx going forward, we talk about a premium CapEx of $10 million premium offered CapEx is about $10 million a year, which could include VR concepts in that amount. When we talk about the Rec Room and on the cost of a Rec Room typically whatever the VR installation is that would be included in kind of that new build cost of a Rec Room.

So it would be bucketed within that kind of $10 million of premium and other initiatives.

Okay. That's all.

Very helpful. Thank you very much.

Thanks Drew.

Thank you everyone for joining us this morning. We hope you enjoy the rest of your summer and look forward to speaking with you again during our third quarter conference call in November.

Have a great weekend.