Good morning, everyone. I would like to welcome you to Cineplex's second quarter 2026 earnings release conference call.

I'm Mahsa Rejali, Vice President, Corporate Development and Investor Relations 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 the 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's 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.

Thank you, Mahsa, and good morning, everyone. I am extremely excited to be speaking with you today at a defining moment for Cineplex.

We have just come off the highest-grossing week in our company's history. Box office results were more than 20% ahead of our previous record set during the release of Star Wars: The Force Awakens in December 2015, which is the highest-grossing film of all time at the domestic box office.

That achievement speaks to the exceptional strength of the current film slate and the positive momentum we are seeing in our business. Against that backdrop, I'm pleased to share Cineplex's tremendous second quarter 2026 results, which demonstrates how we are effectively translating the current content environment into strong financial results.

We delivered total revenue of $383.7 million, resulting in a new second quarter revenue record and growing nearly 10% year-over-year. We also delivered significant EBITDA growth of more than 20% and improved cash flow generation.

This quarter's success was not dependent on a single blockbuster or a small number of tentpole releases. Instead, consumers embraced a broad range of compelling content across multiple genres and formats.

These trends reinforce what we have long believed: when audiences are provided with quality content on a consistent basis, moviegoing becomes part of the cultural conversation and a recurring entertainment choice. The steady flow of diverse, compelling content we are seeing today creates a healthy and more durable industry environment, giving us continued confidence in the long-term growth outlook for theatrical exhibition.

What gives us further conviction is Cineplex's unique position within the industry. We are Canada's market leader with more than 150 theatres nationwide, leading premium formats, a proprietary cinema media platform, a growing film distribution business through Cineplex Pictures, one of the country's strongest loyalty ecosystems through Scene+, and leading location-based entertainment brands with The Rec Room and Playdium.

These assets create multiple earning streams, deepen our relationship with guests, create robust data opportunities, and provide competitive advantages that are difficult to replicate. Together, these assets position Cineplex to convert improving industry conditions into sustainable long-term growth, stronger profitability, and increasing cash flow generation.

Let's get into what drove our record performance in the quarter. The second quarter showcased one of the strongest and most diverse content slates we have seen in years.

Family films were a significant driver of performance. The Super Mario Galaxy Movie became the first film of 2026 to surpass $1 billion globally.

Toy Story 5 delivered a new franchise opening record and subsequently joined the year's billion-dollar releases. This demonstrates the appeal these beloved characters have across generations and show how compelling stories can bring audiences to theatres at scale.

At the same time, audiences are also eager for original storytelling. Michael became the highest-grossing biopic of all time, whereas Obsession and Backrooms exceeded industry expectations, ultimately becoming two of the highest-grossing horror films in Cineplex history.

Obsession has now generated more than $250 million at the domestic box office, a remarkable achievement for an independent horror film. Backrooms was equally notable, illustrating how content that originates on digital platforms can successfully transition to theatrical exhibition when paired with the right audience.

One of the most encouraging trends we have observed is the return of the Gen Z audience, a demographic many questioned would fully embrace moviegoing. That trend was certainly evident in the performance of Obsession and Backrooms.

This demographic contributed meaningfully to our second quarter results and continues to demonstrate that moviegoing remains a highly relevant and valued social experience. Together, these films reflect the growing influence of a new generation of filmmakers who are connecting with audiences in new and exciting ways.

The Devil Wears Prada 2 outperformed the original film and delivered one of the strongest VIP performances in Cineplex history, while films such as Star Wars: The Mandalorian & Grogu further demonstrated continued demand for premium large-format experiences. As the market leader in premium formats, Cineplex is well-positioned to capture the growing demand behind this trend.

Guests also choose to enhance their moviegoing experience through our expanded food and beverage offerings and merchandise programs. During the quarter, we delivered record theatre food service revenue and an all-time quarterly concession per patron record of $10.26.

Merchandise continued to be an important contributor, with sales increasing 45% year-over-year and reaching a new quarterly record. Popular items tied to major releases included themed collectibles from The Super Mario Galaxy Movie and Star Wars: The Mandalorian & Grogu, as well as the iconic red popcorn purse inspired by The Devil Wears Prada 2.

These offerings helped drive incremental spending, deepen guest engagement, and further capitalize on the excitement surrounding major film releases. Overall, the quarter demonstrated healthy consumer demand across a wide range of content, genres, and audience segments.

As that demand continues to grow, we are increasingly well-positioned not only as an exhibitor, but also as a distributor of content through Cineplex Pictures. Michael became the highest-grossing film ever distributed by Cineplex Pictures and was the second highest-grossing film at the box office during the quarter.

Its performance reinforces the growing scale and relevance of our distribution business and demonstrates our ability to successfully connect quality content with Canadian audiences. Together with our upcoming film slate, including Godzilla Minus Zero and The Hunger Games: Sunrise on the Reaping, we remain confident in the continuing growth opportunity for Cineplex Pictures.

Alternative programming and events: beyond traditional films, we continue to give Canadians more reasons to visit our theatres. Cineplex is a clear market leader in international content and continues to outperform the domestic market.

We continue to view our theatres as premium destinations for shared entertainment experiences of all kinds. During the quarter, we proudly partnered with TSN to present select FIFA World Cup matches in theatres across Canada.

Cineplex was the only exhibitor in Canada offering fans the opportunity to watch these matches on the big screen, and one of only a handful of exhibitors across North America providing this type of premium viewing experience at scale. The response was extremely encouraging and demonstrated the broader opportunity for Cineplex to be part of large cultural moments.

Through major sporting events, concerts, live performances, or specialty content, we see the potential to attract new audiences, create incremental revenue streams, and further maximize the value of our theatre network. Media: turning to cinema media, during the quarter, we delivered year-over-year revenue growth despite a particularly strong prior year comparison.

The prior year benefited from elevated spending from the pharmaceutical category ahead of patent expirations for certain products. Our cinemas continue to provide advertisers with a premium, high-attention environment.

Recent Canadian research conducted for Cineplex Media and launched at our recent media showcase further reinforced the effectiveness and value of cinema advertising. The findings demonstrated strong audience attention, advertising recall, and brand impact.

Our media platform also provides meaningful access to Gen Z consumers, one of the most sought-after yet increasingly difficult demographics to reach through traditional media channels. As young moviegoers continue to return to theatres, we are uniquely positioned to help brands connect with this audience.

Combined with improving attendance, this positions our media business well for continued growth. Location-based entertainment: in location-based entertainment, the industry continues to face macroeconomic headwinds impacting discretionary consumer spending.

Our same-store performance has generally tracked in line with the results being experienced by our peers across the industry. We remain focused on driving visitation, optimizing operational execution, and driving productivity at our LBE locations.

Despite these near-term challenges, we remain confident in the long-term fundamentals of the business. Consumers continue to demonstrate a strong desire for social and experiential forms of entertainment, and our Playdium and The Rec Room brands are well-positioned to meet that demand.

In June, we expanded our LBE presence with the opening of Playdium at Vaughan Mills, one of Canada's most visited shopping destinations. The venue features four exciting attractions, including Gel Blasters, a team experience that combines the best of laser tag and paintball, alongside an extensive games floor and a wide variety of food and beverage offerings.

The new venue is delivering strong results in its early days of operation, reinforcing our confidence in our offering. Guest engagement and loyalty: our loyalty ecosystem remains an important competitive advantage and continues to strengthen our relationship with guests.

During the quarter, Shell launched nationwide with the Scene+ program. With the ability to earn and redeem points across groceries, entertainment, dining, travel, and now fuel, Scene+ continues to increase its relevance and frequency of engagement for members.

For Cineplex, Scene+ and its more than 15 million members remain a powerful tool to strengthen guest relationships, drive repeat and incremental visitation, and deliver more personalized experiences. Complementing Scene+ is CineClub, our movie subscription program, which recently celebrated its fifth anniversary.

With more than 270,000 members and visitation rates that are approximately four times higher than non-members, CineClub continues to strengthen loyalty, encourage more frequent moviegoing, and reinforce Cineplex's position as one of the most affordable and compelling out-of-home entertainment options available to Canadians. As we look ahead into the back half of the year, industry momentum and optimism remain strong.

Earlier this year, the domestic box office surpassed $5 billion faster than in any year since 2019. This milestone highlights the improving fundamentals of the industry and provides a solid foundation for the balance of 2026 and beyond.

More recently, the opening of The Odyssey and Spider-Man: Brand New Day have further demonstrated the strength of premium event filmmaking and Cineplex's ability to bring these cultural moments to life through exceptional theatrical experiences across our circuit. The Odyssey opened to $124 million domestically, with Cineplex over-indexing the market and operating three of the top 20 theatres in North America.

Demand for premium experiences has been exceptional, including sold-out IMAX 70mm presentations throughout the film's run. Cineplex operates eight of the world's 41 IMAX 70mm screens, reinforcing the strategic value of our premium format footprint and our ability to attract moviegoers seeking the highest quality theatrical experience.

Released on July 31st, Spider-Man: Brand New Day delivered a record-breaking $360 million domestic opening and has already surpassed $1 billion at the global box office. Together with the sustained performance of The Odyssey, these films helped drive outstanding results across our circuit.

They also generated record-breaking results across our industry-leading premium formats, including UltraAVX, 4DX, ScreenX, and VIP, further highlighting consumer demand for premium theatrical experiences and Cineplex's unique ability to meet that demand at scale. Looking further into the second half of the year, the slate remains exceptionally strong and highly diversified.

Family audiences will be well-served by anticipated releases including Cat in the Hat, Hex, and Jumanji: Open World. Comedy fans can look forward to Digger and Fork in the Law, while horror remains one of the industry's most resilient genres with Clayface and Werewolf.

Science fiction is particularly compelling with the much-awaited Doomsday in December with the opening of both Avengers: Doomsday and Dune: Part Three. Both films are generating significant consumer anticipation and should represent one of the biggest opening weekends of the year.

Beyond these categories, highly anticipated titles such as The Hunger Games: Sunrise on the Reaping and Godzilla Minus Zero, both distributed by Cineplex Pictures, and The Social Reckoning, further contribute to one of the deepest and most diversified release schedules we have seen in years. We are also encouraged by the growing commitment from non-traditional studios.

Amazon MGM continues to expand its theatrical ambitions, with upcoming releases including Verity, Out of a Bank, and I Play Rocky. At the same time, Netflix continues to increase its engagement, with the 49-day theatrical window for Narnia in 2027.

Non-traditional studios increasingly recognize the value theatres create in building awareness, cultural relevance, and long-term audience demand. These developments reinforce a trend we have discussed for several quarters: theatrical exhibition continues to be the engine that drives the train and remains the most important distribution channel for content, helping maximize its success across all platforms and windows.

With the industry's continued resurgence, we believe Cineplex is entering this next phase with a solid foundation for growth. The momentum we are seeing in the business is translating into stronger profitability, cash flow generation, and balance sheet flexibility.

We believe the strength of our business and the opportunities ahead are not yet fully reflected in how Cineplex is currently valued. I will now turn the call over to Gord Nelson, our Chief Financial Officer, to walk through the financial results in more detail.

Thanks, Ellis. I am pleased to present a condensed summary of Cineplex's record second quarter 2026 results.

As Ellis mentioned, we're coming off the highest box office week in the company's history, making this an especially exciting time for our industry and our business. For further reference on our second quarter results, our financial statements and MD&A have been filed on SEDAR+ and are also available on our investor relations website at cineplex.com.

Our MD&A and earnings press release include a complete narrative on the operational results, I will focus on highlighting select items in addition to providing commentary on liquidity, capital allocation priorities, and our outlook. For my comments on operations, all amounts following will be from continuing operations unless otherwise stated.

The second quarter reflected continued momentum in our exhibition business, supported by a stronger film slate that drove higher attendance and meaningful growth in revenue per patron metrics, adjusted EBITDAaL, and cash flow. Total revenues for the quarter were $383.7 million, an increase of 9.8%, driven primarily by a 9.3% increase in theatre attendance to 12.7 million guests.

Notably, our revenue represented the highest second quarter revenue in the company's history, underscoring both the strength of the content environment and Cineplex's ability to translate attendance growth into profitable revenue generation. Our consolidated adjusted EBITDAaL for the quarter was $40.8 million, up 20.4% from $33.9 million in the prior year.

The disproportionate growth in adjusted EBITDAaL relative to revenue reflects the operating leverage in our business and demonstrates the significant earnings and cash flow potential associated with incremental attendance. Let's take a closer look at the segments.

In the film entertainment and content segment, attendance increased by approximately 1.1 million guests. The increase in attendance contributed to box office revenues increasing 11.2% to $176.2 million, representing our second highest quarter box office revenue since 2019.

Performance was supported by a balanced mix of successful franchise releases and compelling original content. The breadth and consistency of film supply remain key drivers of exhibition performance, as a diversified film slate encourages repeat moviegoing and helps offset the natural variability in performance across individual titles.

Box office revenue per patron reached an all-time quarterly record of $13.91, up 1.7% from the prior year. The increase reflects inflationary and strategic pricing initiatives, partially offset by fewer promotions and a lower premium format mix as the film slate skewed toward 2D releases.

Theatre food service revenue increased 11.8% to an all-time quarterly record of $130 million. These results demonstrate our continued ability to drive guest engagement and monetize attendance through premium food, beverage, and merchandise offerings.

Concession revenue per patron reached an all-time quarterly record of $10.26, an increase of 2.2% year-over-year. The increase reflects strategic pricing initiatives, higher purchase incidence, and strong growth in merchandise sales.

Merchandise contributed roughly one-third of the CPP growth and achieved a new quarterly revenue record, highlighting the significant growth potential of this category. Other revenue increased 20.9% year-over-year, reflecting increased online booking fee revenues associated with stronger attendance, as well as higher distribution revenues from Cineplex Pictures.

During the quarter, Michael was our second highest-grossing film and became the highest-grossing film ever distributed by Cineplex Pictures. Cash rent paid or payable was slightly lower than the prior year due to portfolio optimization initiatives and ongoing lease management efforts.

Other occupancy costs remained generally consistent with the prior year. While theatre payroll and theatre operating expenses increased compared to the prior year, growth in those costs remained below attendance and revenue growth, reflecting effective expense management by our team.

Segment adjusted EBITDAaL for film entertainment and content increased 32.8% to $48.2 million. This result marks our highest second quarter segment adjusted EBITDAaL since 2019, driven by higher attendance, record per patron metrics, and strong operating execution.

In the media segment, revenues increased 4.4% year-over-year to $20.2 million. This performance reflects higher demand for advertising placements, with strength across several key customer categories, despite a difficult comparison against elevated pharmaceutical advertising spend in the prior year.

Cinema media per patron was $1.59 compared to $1.67 in the prior year. Despite the modest decline, improving attendance and greater consistency in film supply continue to support advertiser demand and position the business for future growth.

Adjusted EBITDAaL for the media segment was $15 million, remaining flat relative to the prior year. Location-based entertainment revenues for the quarter were $32 million, a decrease of 3.7% compared to the prior year, reflecting the broader economic headwinds and discretionary spending pressures experienced across the industry.

Adjusted store-level EBITDAaL was $3.9 million compared with $5.8 million in the prior year. Adjusted store-level margin was 12.2%, down from 17.5% in the prior year, and excluding the 2024 new builds, same-store adjusted store-level EBITDAaL margin was 15.3%.

At the segment level, adjusted EBITDAaL was $1.7 million compared to $4.4 million in the prior year. Despite the softer revenue environment, we are focused on operational discipline and improving profitability within our LBE business.

We remain confident in its long-term potential. During the quarter, we opened Playdium Vaughan, marking the 17th location in our LBE portfolio, and the location has delivered strong results since opening.

G&A expenses for the quarter were $24.2 million compared to $21.9 million in the prior year period. The increase was primarily due to the timing of recognition of LTIP and increased LTIP costs associated with changes in Cineplex's common share price.

This was partially offset by reduced restructuring costs relative to the prior year. We ended the quarter with $116.8 million of cash on the balance sheet and no drawings under our $100 million covenant-lite revolving credit facility.

In addition, approximately $92.5 million remained available under the facility after letters of credit. With improved operating results, our strong cash position provides us with additional capacity to execute on our capital allocation priorities.

Our capital allocation priorities remain unchanged and include maintaining our assets, strengthening the balance sheet and achieving our target leverage ratios, providing shareholder returns through share repurchases and/or dividends when appropriate, and selectively investing in attractive growth opportunities. Net capital expenditures for the quarter was $7 million and included investment related to the opening of Playdium Vaughan.

Our full year capital expenditure guidance remains at approximately $50 million. Over the last several years, we have taken deliberate actions to strengthen the balance sheet and improve our financial flexibility.

These actions have included the sale of non-core assets, the refinancing and extension of our debt maturities, and a continued focus on operational execution during a period of attendance volatility. With sustained momentum in attendance and profitability, leverage has declined 1.5 turns over the past year and a half.

As a result, we have improved visibility toward achieving our long-term target leverage ratio of 2.5 to 3.0 times, which we believe is achievable in the near term. As our leverage profile continues to improve and earnings continue to grow, our financial flexibility increases.

Higher earnings generation expands our builder basket capacity, and together with continued deleveraging, enhances our ability to return capital to shareholders. This includes opportunistic share repurchases under our normal course issuer bid and, upon achieving our target leverage ratio, the reintroduction of a dividend.

We remain encouraged by the performance and outlook of both the industry and our business. Recent releases have continued to drive strong attendance, record guest spending, and improving profitability across our circuit, reinforcing the positive momentum we are seeing in the business.

Looking ahead, we remain encouraged by the balance of the 2026 release calendar and the continued commitment to theatrical exhibition from both traditional and non-traditional content creators. As attendance and profitability continue to improve, we see a clear path toward our target leverage range, while also unlocking growth opportunities across each of our business segments.

We remain focused on executing against these opportunities and creating long-term shareholder value. With that, I will turn it back to the operator for questions.

Hello, good morning. Hopefully you can hear me.

One question for you, Ellis, and one for Gord with a few parts to it. Ellis, it's been I think 13.5 months since the press release saying that you were going to be leaving at the end of this year.

Obviously, you've been highlighting on recent calls that the board continues with the effort in regards to the succession planning. Just curious, any updates in regards to what's going on?

No details in anything we've seen today in that regard, and curious if there's a potential extension out to the first half of next year potentially in the cards. For you, Gord, notwithstanding all the positive elements at the top line that were referenced, your EBITDAaL was a bit light.

Maybe it's on us on the street for having pushed a bit too high, but when we go back to some of the calculations you addressed in a question on the Q1 call, you were still comfortable with that $13.50 per patron exhibition, $1.50 per patron media. In theory, that would have been $16 million up on EBITDAaL.

I think your exhibition business came in plus $12, which was actually very strong. My question to you really is the three-parter in regards to we saw the lower margin in LBE.

We saw the JV loss related to marketing spend for the new Shell Canada partnership. Then I think there was some higher G&A, which surprised a little bit, and some of that maybe was referenced to LTIP timing.

Really just curious if some of these things improve going into the back half, the JV loss, whether the marketing spend continues at or below that level, and whether G&A steps down going into the Q3. I'll leave it there.

Thank you. Okay.

Thank you, Adam, for your question about my retirement. I'm preparing to retire by the end of the year, and the board is managing the process and it's well underway.

Our focus continues to remain on strengthening and growing the business, and I'm proud of what we've accomplished. I think the year is going to be quite strong for us at Cineplex.

Thank you for that, Ellis.

Adam, so, of course, let me take you through a couple of the items, and you called out a number of them. Let's sort of focus.

The exhibition business was the strong performer of the quarter. What we saw really in sort of the other businesses and sort of one-time costs, which I will kind of elaborate a little bit on, but with respect to the LBE business, typically the second quarter is the lowest traffic quarter of the year.

If you look at the results in the quarter, obviously we called out FIFA a little bit, there was some success related to kind of FIFA viewership in the theatres. When you look at the sort of the revenue mix in that business, we did see food and beverage increases in the quarter.

As you would expect, is people kind of coming out and enjoying and watching some of those events. Amusement was down.

Again,

focus on the events. Amusement is the highest-margin revenue category in that business.

We got a little bit of a mix shift with respect to the revenue side, which impacted sort of the overall margin of where you saw that. EBITDAaL, same-store was down about $2 million, which, as we look forward, you expect that to reverse a little bit.

Now you called out a couple of one-timers, let me go through those. The Scene JV costs.

Scene would typically operate on a relatively close to breakeven level. In quarters where we're doing something like a national launch of Shell was an example, there would be some additional costs, sort of implementation costs, as well as marketing costs to launch new members.

I'm calling that as a more of a one-time quarterly expense that you would not expect to see sort of on a go-forward basis. In the G&A category, I'm going to call out a couple of things here then.

If you look at, as we disclosed in our MD&A, sort of the base category, you're going to see just a little bit of timing, and it's in some of our technology initiatives, to be honest. If you look at our year-to-date number for what we would call base G&A as in our MD&A, it's only up 1.9% on a year-to-date basis, roughly $700,000.

Yep.

Whereas in the quarter, it's up $2 million, that's up 10%. It's purely timing.

This quarter was impacted more than other quarters. Then I'm going to just call out LTIP, too.

LTIP, the accelerated share price, and as we called out in the MD&A, there's a little bit of a sort of change which is going to impact the 2026 results related to what I'm going to call retirement-eligible employees where there's an acceleration of the expense related to them, but not the vesting. That there's no change to the vesting, but retirement-eligible employees have the ability to have the full grant available to them over the appropriate vesting periods.

That would be about a $6 million hit for 2026, which will be really sort of a one-time event for this year. I think I hit sort of the other parts.

You definitely did. No, you definitely did.

Of the $6 million in 2026, how much have we already seen in the first half?

Roughly $3 million, half of it.

Okay. One last follow-up if you don't mind, and that is there seemed to have been some resolution, a finality to some of the tax AMC-related item, and curious because you called out in the MD&A, some of that was already refunded, curious how much is still left to go of the call it $26 million plus, and whether any intention to use any of that beyond just deleveraging?

Would you do any buyback related to that or not at all? Thank you.

Yeah. That relates to a tax litigation matter related to the losses that were acquired on the acquisition of AMC back in the mid-2000 2013 or so.

We were successful in that litigation. The $26 million is the quantum of the losses that were at the dispute, not the tax impact.

It's 20 So and our effective tax rate is roughly 26%. We did get roughly I'm going to say 26% of $26 million back as a refund because we had put that on account.

There was sort of a deferred payout to AMC of roughly $3 million related to the final resolution of all tax matters related to that acquisition. There was a net inflow, Adam, but it's not of the magnitude that you described there.

Got it. Appreciate it.

Thank you very much.

Yeah. Thanks very much.

Good morning. Thanks, Gord, for that opex breakdown.

Very very helpful. One follow-up to that just on the film cost percentage.

It just feels certainly from our perspective, it continues to creep up, and clearly a diversified slate that didn't appear to be a lot of concentration. Just any thoughts on whether anything is structurally changed there underneath the hood?

Then on the LBE outlook, again, appreciate the detail there. In the MD&A, you talk about competition.

Wondering if that was a transitory comment just with respect to obviously all the sporting events that were ongoing, or is there kind of something new that you're flagging there?

On the film rental, it's Ellis. The bottom line is as the box office improves and the movies do better, there is an adjustment in the film rent.

Overall, there hasn't been a change in the film rent moving forward. Then

on the LBE question, then is, yeah, look at, we did highlight competition. There are certain locations in our portfolio that have been extremely successful.

We're seeing alternative concepts in select locations come up, which does impact our business to a certain degree in those locations. It's not widespread, but we are seeing where we have successful locations, there have been some entrants.

Okay. Thanks, Gord and Ellis, for that.

Just additionally, we can go back and scrub this, but you typically have a good line of sight on this. Clearly, August is going to be very strong at the box office.

Is there anything from last year, whether that's in August or September, that you'd call out as either particularly easy or tough comps from a slate perspective? Then maybe the bigger picture question here is as the industry comes back and as you're seeing kind of Q2 and Q3 play out, I know it's never a perfect visibility here, but can you update us on just what your working assumptions would be in terms of how you hope attendance will track somewhat on an annualized basis going forward here into 2027, just as a percentage of 2019 levels, just trying to tie in whether there's been any kind of change in the broader working assumption of what you can get back to, again, on an annualized, normalized basis, just notwithstanding kind of quarterly volatility?

Thank you.

Hey, Drew. It's a good question.

Just looking at the year-to-date, we've already had five movies that have crossed $1 billion. You got Odyssey, Spider-Man, Super Mario, Michael, and Toy Story 5.

The good news is we are close to covering the month of August in the first 10 days compared to last year. That's a result of both Odyssey and Spider-Man.

We expect that to continue for the next number of weeks. We've got PAW Patrol also opening this week, and that should help us.

The industry is tracking at the $10 billion of box office that we were discussing and getting to that number. There's a lot of good films for the balance of the year, which is exciting and should continue to do well for us.

One of the things that I should say is when I look at the second quarter and you look at some of the differences, in the month of June, we end up with schools closing much later than the US. In the month of August, we start later, and they already have started to go back to school, so that should help us on the numbers comparison.

Got it. Thank you.

Helps for sure. It does.

Thank you.

Hey, good morning, Ellis and Gord. Congrats on a very strong quarter.

Happy to see the box office results and improvement. I'd like to double-click on CPP.

I think you called out it's a record number from strategic pricing and also higher purchase incidence. Wondering if you can elaborate on that and what you're seeing in terms of consumer purchasing decisions considering the film content?

Yeah. Cheryl, we also called out sort of a category of merchandise, and Ellis called out the red purse from Devil Wears Prada, which was a sellout immediately.

We're seeing a really strong demand for movie-related merchandise as part of the concession purchase. We called it out as being a record with growth and representing roughly a significant portion of the overall CPP growth.

We generated just around $4 million of sales from merchandise in the second quarter. For us, as we've always described, is, when you look at pricing in this business is, we typically look to pass on food cost inflation in through price.

CPI kind of growth in pricing. It's about broadening the basket, and so merchandise sales is a great example of kind of broadening that product basket and then increasing the incidence, the frequency of purchasing.

I would say in the second quarter, this broadening of the basket is what generated roughly one-third of the CPP growth during the quarter.

That's great color. Thank you.

Cheryl, just to add on to that, because of the demand for merchandise in the theatres, we've also added an online platform so consumers can buy the merchandise content if it is sold out at the theatre.

That's great. Just to follow up on that, what are you seeing in terms of concession-related sales as related to The Odyssey and Spider-Man performance thus far?

It continues to be strong, and there's a good demand as we're going through with those two films.

Okay. Thank you, Ellis.

Then just one more. On media, I think you called out there's still strong demand from advertising, but I'm wondering based on your conversation with the advertisers, are there any changes in their thinking of the spending budgets in light of the softer macro backdrop?

Cheryl. That's a good point.

Look at, as we looked at the second quarter as an example, our media revenue went up. When you look at the overall media market, we definitely saw sort of a shift in category spending.

The out-of-home market had tremendous success in the second quarter. That includes billboards, stadiums, and sort of street furniture.

You would expect that people were putting their money into FIFA-related campaigns, wanted to be all over the cities, particularly where those events were held. As we look forward, you're bang on is there is a challenging kind of macro environment, which is impacting advertising spend.

That's in part why we did two things during the quarter, and it impacted our opex to a certain degree in our media business, is one is we held an upfront event to really showcase the content that's coming out over the next 12 months. Then in addition to that is, we launched a research study into sort of the attention statistics through Amplified.

Those are two costs that we incurred in the quarter. Again, looking to kind of gain traction in a tougher media environment over the short or the shorter near term.

That's very helpful. Thank you so much.

Thank you.

Great. Thank you for taking my question, and welcome back, Mahsa.

I wanted to ask you, seems Odyssey is generating a lot of demand for premium seatings. How should we think about the contribution specifically to Q3 from that movie?

Will it have an impact on your film cost? Is there a different metric that we should think about when forecasting the movie costs in Q3 that would be different in any way compared to previous quarters?

No, the film cost basically is based on the performance of the film. If the film does, and gets stronger and does better, the film cost is slightly higher.

Overall, there shouldn't be a significant impact from the movie delivering the box office.

Okay. It's sometimes specific films do have a higher marginal cost related to the tickets themselves to the studios.

Is there anything specific to Odyssey on that we should be aware of,

no? No, there's no change, there's nothing that you should be concerned about.

Okay. It seems like we have a good momentum going into Q3.

As you mentioned, August has so far been very strong. What would you flag in terms of the cash generation that we should think about when forecasting Q3 and Q4 that would allow you to reach your maybe target leverage at an earlier possible time to allow you to re-engage in stock buybacks?

Look at we're very encouraged by the results for the back half of the year and where things are going, particularly with the momentum that's coming out of the month of August as Ellis described. There's a technical calculation of how these builder baskets work, which I will at a extremely high level provide the test, but you'd have to go down and do the calculations in detail, but roughly if you go back to January 1 of 2024 and look at the cumulative EBITDAaL from that point in time, the basket opens up to the extent that it covers more than 1.75 times sort of the fixed interest charges, and the fixed interest charges at a rough calc is about $60 million a year, so that's the interest charge on our high-yield debt and our convertible debenture.

Part one of your question is that calc opens up the basket at some point in time. The second part of your question is on leverages, and then in my comments, as I said that we're confident and comfortable and as we look at the near term is that that target of 2.5 to 3.0 times is well within our reach now.

Okay. Can you maybe help us or give us some reference as to when you think you'd be in those target leverage ranges?

Look at, most industry participants are forecasting or projecting a domestic box office of about $10 billion for this year. If that's the case and the industry delivers on that amount, then you'd expect that we would be in our target range with the reporting of the sort of the Q4 results.

Great. Just to continue that discussion, you mentioned earlier the dividend optionality, and you have the buyback optionality.

Given where the stock is and long-term projections that you have, which way you're leaning more on going forward to be your preferred method to returning cash to shareholders?

Look at, I would say we've described the NCIB program as sort of being what I would call opportunistic and looking for opportunities to drive value. As we just approach and as we cross that kind of target leverage ratio range is we will then make a more focused discussion on where our priorities are with respect to those two items.

I would say both of them are on the table, and then as we look forward and create more significant free cash flow generation in 2027, things could open up more in one of those options. At this point in time, I'm just going to say that both of those are on the table and a focus, but we're not going to provide sort of the levels between the two of them at this point.

Okay. That's fair.

Maybe one just question on theatre screens. I'm sure it's a good problem to have when you have such a high demand for a movie on IMAX.

It seems like the capacity in many of your big cities in Canada are slightly supply-constrained for that typical format. Would you consider in the future to add more IMAX screens or at this point, the movie slates are not necessarily requiring a big change in how you have your design set up?

It's a good question, but you have to remember as I mentioned in the commentary, we have eight of the top 41 locations in the world. We will continue to evaluate as things move forward.

When you look at it and we have 20% of the total number in the world, that's pretty significant.

I agree. How should we think about capex for the rest of 2026 and maybe 2027, if you had to give us an idea on where you're going to land on capex, that would be helpful.

Thank you.

Yeah. It's Gord.

I provided comments that our guidance for 2026 is about $50 million. Then as we look into next year, we have the one obviously LBE location that'll open in 2027.

We have no further commitments at this point in time, but our guidance for 2027 would be roughly $60 million.

Great. Thank you.

Thank you for taking my questions.

Thank you.

Just want to thank you again for joining us this morning. We remain quite excited about the future of Cineplex and confident in the long-term opportunities ahead.

Have a wonderful day. Thank you.