Earnings Transcript for RDI - Q4 Fiscal Year 2022

Andre Matyczynski : Thank you for joining Reading International Earnings Call to discuss our 2022 Year-end and Fourth Quarter Results. My name is Andre Matyczynski, and I'm Reading's Executive Vice President of Global Operations. With me 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 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, and our remarks today are qualified in their entirety by the more detailed disclosures in our recently filed annual report on SEC Form 10-K. 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 2022 fourth 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 we can consider to be nonrecurring in accordance with the 2-year SEC requirement for determining when an item is nonrecurring, 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. ATP, average ticket price is also used as an accepted industry acronym. We 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-K 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 2022 full year and fourth quarter results and discuss our strategy for continuing to navigate Reading International through the lingering effects of the COVID-19 pandemic and into the post-COVID era, followed by Gilbert, who will provide a more detailed financial review. Ellen?

Ellen Cotter: Thanks, Andre, and thank you for listening to our call today. 2022 marked another year in our progressive recovery from the pandemic. $203.1 million, our 2022 full year consolidated total revenue represents a 46% increase from 2021 and 73% of our 2019 consolidated total revenue, which was $276.8 million. Our operating loss of $28.5 million improved by 32% compared to 2021, but was unfavorable to the $9.1 million in operating income we reported in 2019. At $191.3 million, our 2022 Global Cinema revenue increased by 50% compared to '21 and represented 73% of 2019's Global Cinema revenues, which were $262.2 million. We're pleased with these improving results despite headwinds facing the company, which has included inflationary cost pressures, higher interest rates, supply chain and labor shortage issues and the weakening of the Australian dollar and the New Zealand dollar against the U.S. dollar. Through 2022, Cinema audiences showed their desire to return to the big screen when the content was compelling and/or the price was right. Movies like Top Gun

Gilbert Avanes: Thank you, Ellen. Consolidated revenues for the quarter ended December 31, 2022, decreased by $2.7 million to $47.2 million when compared to the same period in the prior year. For the year ended December 31, 2022, revenues increased by $64.1 million to $203.1 million for the year ended December 31, 2021. These increases were primarily driven by no mandated closure in 2022 compared to 2021 and the release of several major films in 2022, which led to an increase in attendance compared to 2021. Net income attributable to Reading International for the quarter ended December 31, 2022, decreased by $13.6 million to a net loss of $13.2 million when compared to the same period in the prior year. Basic earnings per share decreased by $0.62 to a basic loss per share of $0.60 for the quarter ended December 31, 2022, compared to the quarter ended December 31, 2021. These results are due in large part to the increase in cinema expenses in Q4 2022 compared to Q4 2021. While cinema operations for Q4 2022 were weaker than Q4 2021 as a result of Spider-Man

A - Andre Matyczynski: Thanks, Gilbert. Firstly, I'd like to thank those stockholders for forwarding questions to our Investor Relations e-mail. As usual, 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 such question. Now that the proposed grocery tenancy obligation has been completely removed, what is the timing and/or milestones toward finalizing a larger redevelopment plan for Courtenay Central in New Zealand. Ellen?

Ellen Cotter: In the first instance, we continue to work with various stakeholders on the reactivation of Courtenay Central. Reactivating our Reading Cinemas is our priority goal. However, we're also evaluating the future feasibility of developing the wider Courtenay Central precinct, which encompasses all of our Wellington real estate assets and development must be economically feasible for our company. Our goal is to create a dynamic addition to Wellington's vibrant Te Aro district that now offers both [indiscernible] domestic and international travelers, cultural destination that includes the renovated St. James Theatre, the newly completed Takina Convention and Exhibition Center, New Zealand's National Te Papa Museum and the beautiful Wellington Harbor. As of today, we don't have a concrete schedule of redevelopment start or finish dates to report, and I'll note that we make no assurances that such a strategy will be completed.

Andre Matyczynski : Thanks, Ellen. And perhaps you could handle the next question, which revolves around the 10-K mentioning a fee interest in a 23-acre industrial site with rail access in Williamsport, Pennsylvania. Please provide some more information on the property. As an industrial site, how or why is this property not presently at near optimal value that it shouldn't be monetized for higher return generating capital deployments like debt pay down, stock buyback, et cetera. Ellen?

Ellen Cotter: This industrial site in Williamsport is a Reading railroad legacy asset, which has been in our portfolio for decades. Currently, this space is occupied by Transco, a company in repair business and a subsidiary of Marmon Rail & Leasing, which is part of Marmon Holdings, the global industrial organization with diverse business lines. This particular area in Williamsport is industrial as our property abuts the Chance Aluminum production facility. And we're currently reviewing this category of assets for potential monetization opportunities.

Andre Matyczynski: Thanks, Ellen. Gilbert, perhaps you can handle this next one. Has the March $5 million principal payment on the costly 10% BofA U.S. cinema term loan being made? And what is the loan's present outstanding balance specified as of what date versus the $26.7 million year-end '22 balance sheet date. Is the plan to retire this loan via its updated principal paydown schedule or refinance some remaining balance into longer-term U.S. cinema financing? Given the current variable rate on this loan, do you feel refinancing will be at similar, higher or lower interest rate spreads?

Gilbert Avanes: In accordance with the new loan amendment signed on March 30, 2023, that was disclosed in our recently filed 10-K, our principal payment schedule has been modified and the $5 million payment originally due in March was no longer required. As of end of March 2023, our new loan balance has been reduced to $26 million. As we have mentioned, we continue to closely manage our liquidity. And as a result of that, we focus on the paydowns for our amendments. Regarding refinancing, while we cannot predict the future as we get closer to the maturity of our loan, we'll be evaluating our cash balances and interest rates, and we'll make a decision that's in the best interest of our company and our stockholders.

Andre Matyczynski: Thanks, Gilbert. And our last question here regarding the $9.4 million deferred rent obligation mentioned in our 10-K outstanding as of March 30. What is the timing for payoff? Are these extra amounts a drag on EBITDA or were they already expensed when deferred? The whole of the potential $9.4 million deferred rent obligation mentioned in the 10-K, an outstanding actually on December 31, 2022, have been accrued through the income statement, and therefore, will not be a drag on future EBITDA. Most of the $9.4 million is payable within the next 12 months with the remaining amounts payable based on existing documentation over future periods. However, we continue to work with most of our landlords in the U.S. to seek further occupancy relief to alleviate the severe hardships caused by the COVID pandemic and its impact to our U.S. cinema cash flow. That marks the conclusion of our question-and-answer session and the conclusion of the call. We appreciate you listening to the call today. Thank you for your attention, and we wish everyone good health and safety.