Cineplex earnings: Stock surges as much as 12% as moviegoers return

A Cineplex movie theatre sign is seen over a construction gate on Yonge street in Toronto, Ontario, Canada March 16, 2020.  REUTERS/Chris Helgren
Cineplex (CGX.TO) saw its stock jump as much as nearly 12 per cent on Thursday after the company reported a third quarter profit as consumers returned to the movie theatres. (REUTERS/Chris Helgren)

Cineplex (CGX.TO) saw its stock jump as much as nearly 12 per cent on Thursday after the company reported a third-quarter profit as consumers returned to the movie theatres.

The movie theatre company says its net income in the three-month period ending Sept. 30 increased to $30.9 million, or 43 cents per diluted share, compared to a loss of $33.6 million, or 53 cents per diluted share, during the same time last year. Total sales increased 35.7 per cent on an annual basis to $339.8 million, as attendance rose in the quarter.

The results sent Cineplex's stock up as much as nearly 12 per cent in early trading on Thursday. Shares of the company were trading at $10.11 on the Toronto Stock Exchange as at 12:50 p.m. ET, an increase of 4.3 per cent compared to Wednesday's close.

"These results, along with many other examples from the past year, demonstrate that consumer enthusiasm for theatrical movie going is as strong as ever," chief executive Ellis Jacob said on a conference call with analysts on Thursday.

"The bottom line is when there's compelling content, guests are coming back to our theatres."

The profit growth comes despite the fact that business volume shrank in both August and September as the company received limited content from Hollywood due to pandemic-related production delays. Cineplex says it shifted its strategy, focusing on marketing initiatives to drive attendance and international product offerings. The company says it earned 80 per cent of the North American box office tickets for the Punjabi film, Chhalla Mud Ke Nahi Aaya, and 28 per cent of the North American market share for Disney's Bollywood film Brahmastra Part One: Shiva.

"These are strong numbers, especially for Cineplex which generally accounts for seven to eight per cent of the North American box office on Hollywood releases," Jacob said.

Box office sales are still below pre-pandemic levels, with third-quarter revenue amounting to 70 per cent of 2019 levels. October's box office revenue dropped to 62 per cent of 2019 levels, but Jacob points to the release of several new titles coming in the fourth quarter, including Black Panther: Wakanda Forever and Avatar: The Way of Water.

Cineplex also reached a deal with Netflix in October for the theatrical release of its film Glass Onion: A Knives Out mystery before it is added to the streaming service, a model Jacob expects will continue going forward.

"It is becoming increasingly clear that the approach by streamers to collapse theatrical windows and squarely focus on growing a subscriber base does not deliver sustainable or competitive return," Jacob said, adding that he sees lots of opportunity with streamers, including Apple and Amazon.

"What you're going to see is a move towards a (theatrical) window... It's very encouraging and I'm quite confident that we're going to see more content on the big screen."

While the movie theatre business continues to recover from its pandemic lows, there are growing concerns about a global economic slowdown and potential recession in Canada. Cineplex chief financial officer Gord Nelson says that the movie theatre industry tends to fare "extremely well" during recessionary cycles.

"As consumers trade down their out-of-home experiences, moviegoing becomes the affordable option," Nelson said.

"In fact, during seven of the last nine recessionary periods, box office revenues have increased."

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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