Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reading International Inc (RDI, Financial) saw a significant increase in food and beverage spend per patron (F&B SPP) in both the US and Australia, with a 43% increase in the US and a 56% increase in Australia compared to Q2 2019.
- The company experienced strong box office performance for certain films, such as 'Inside Out 2,' 'Despicable Me 4,' and 'Deadpool & Wolverine,' which contributed to a positive momentum in June, July, and early August.
- Reading International Inc (RDI) has been proactive in managing its debt, extending maturity dates, and securing new financial arrangements, such as the extension of the Bank of America loan and the negotiation of a bridge facility with National Australia Bank.
- The company is actively working on monetizing non-core real estate assets to bolster liquidity and reduce debt, including properties in Australia, New Zealand, and the US.
- Reading International Inc (RDI) has seen success in increasing transaction sizes through F&B ordering via websites and apps, and is developing a paid rewards program in the US to further enhance customer engagement and revenue.
Negative Points
- Reading International Inc (RDI) experienced a 28% decrease in total revenue for Q2 2024 compared to Q2 2023, primarily due to the impact of the 2023 Hollywood Strikes and a weaker film slate.
- The company reported a net loss of $9.3 million for Q2 2024, a significant increase from the $2.8 million loss in the same period of the prior year, driven by weakened cinema and real estate performance and increased interest expenses.
- Global cinema revenue decreased by 30% compared to Q2 2023, and the company continued to experience operating losses, with a segment operating loss of $324,000 for Q2 2024.
- Reading International Inc (RDI) faced challenges in its US cinema operations, with a 37% decrease in revenue and an operating loss of $1.1 million for Q2 2024, partly due to the closure of underperforming theaters.
- The company's real estate revenue also saw a decline, with a 4% decrease in global real estate total revenue for Q2 2024 compared to Q2 2023, impacted by the sale of properties and the dark period of the Orpheum Theater.
Q & A Highlights
Q: The CapEx was down quite a bit this quarter. What can we expect going forward in 2024 and beyond?
A: Anticipating the drop in revenue due to the 2023 Hollywood Strikes and increased interest rates, we significantly curtailed our growth CapEx spending in 2024. We don't anticipate significant CapEx in 2025, but with landlord support, we plan to upgrade two to three theaters over the next 14 to 16 months. Additionally, we expect to increase CapEx for a potential new tenant at 44 Union Square.
Q: What is the status of the Santander, Minetta, and Orpheum Theater secured term loan?
A: Our Santander loan matured on June 1, 2024. We are in the process of finalizing a one-year extension with Santander.
Q: US admission revenue declined more than the market in the second quarter. What caused this, and should we expect the US market share to recover in 2024 and beyond?
A: The decline was due to a 15% reduction in screen count from closing four theaters and underperformance in Hawaii and the Angelika, New York. Despite this, our US circuit generated higher box office dollars per screen than competitors. Future initiatives like a paid rewards program and CapEx upgrades should improve performance.
Q: Why would you not reauthorize the buyback program, even if it's not going to happen today?
A: Given the headwinds faced, including the COVID pandemic, Hollywood Strikes, and interest rate hikes, our priority has been sustaining the business and reducing debt. Capital allocation and returning capital to stockholders is a regular Board discussion, and we expect to be in a stronger position in 2025 and beyond.
Q: Can you provide more details on the impact of the 2023 Hollywood Strikes on your financial performance?
A: The strikes led to release date shifts and a weaker film slate, significantly impacting our cinema divisions in Australia, New Zealand, and the US. This resulted in a 28% decrease in total revenue and a 30% decrease in global cinema revenue compared to Q2 2023.
Q: What are the key priorities for Reading International in the short term?
A: Our key priority is to lower interest expenses by reducing debt. We are evaluating our asset portfolio to identify assets for monetization to generate liquidity. This strategy will help manage financial obligations while awaiting a full recovery of the global cinema industry.
Q: How did the food and beverage spend per patron (F&B SPP) perform in Q2 2024?
A: F&B SPP showed strong performance. In the US, it increased 43% from Q2 2019 to $8.12 in Q2 2024. In Australia, it increased 56% from Q2 2019 to $7.67 in Q2 2024. This indicates strong food and beverage purchases when audiences visit our cinemas.
Q: What are the expectations for the movie slate in the remainder of 2024 and beyond?
A: The movie slate for the rest of 2024 looks promising with releases like Joker: Folie à Deux, Moana 2, Gladiator 2, and Wicked. Despite some films having tremendous box office potential, the overall industry box office in 2024 is expected to fall short of 2023 due to strike-induced delays. However, 2025 looks very promising with a strong pipeline of major titles.
Q: How did the real estate segment perform in Q2 2024?
A: Global real estate revenue decreased slightly by 3% compared to Q2 2023 but increased by 4% over Q2 2019. The decline was due to the sale of properties and the Orpheum Theater being dark in May and June. However, we are marketing several assets for sale to generate liquidity.
Q: What steps are being taken to improve liquidity and capital resources?
A: We are working with lenders to amend certain debt facilities and have selected real estate assets for potential monetization. Recent sales include the Culver City office building, and we are marketing assets in Australia and New Zealand. These steps aim to manage financial obligations and strengthen our balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
