Cineplex Inc. ($CGX)

Good day, and thank you for standing by. Welcome to the Cineplex First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Rayhan Azmat, Vice President, Investor Relations. Please go ahead.

Good morning, everyone. I would like to welcome you to Cineplex's First Quarter 2026 Earnings Release Conference Call. I'm Rayhan Azmat, Vice President, Investor Relations, Corporate Development and Financial Planning and Analysis 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 information currently available. Actual results may differ materially from those expressed in 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 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, Rayhan, and good morning, everyone. I'm pleased to join you today to discuss Cineplex's first quarter 2026 results. The first quarter of 2026 built on the momentum we've been seeing across the industry and our business with attendance and box office increasing meaningfully year-over-year. We delivered our highest first quarter revenue since 2019, and our Q1 box office reached 125% of the prior year with record Q1 results across several key operating metrics. More importantly, the performance we saw in Q1 reinforces what we have long known to be true. When there is quality, consistency and breadth in the film slate, theatrical doesn't just perform well, it creates unforgettable moments that bring Canadians together. Before I speak to our strong first quarter results, I'd like to talk about the tremendous energy coming out of CinemaCon. This year's event reinforced the strength of what's ahead with strong early reactions for several high-profile upcoming releases, including Toy Story 5, Christopher Nolan's, the Odyssey, Spider-Man: Brand New Day, Dune: Part 3 and Avengers: Doomsday. I haven't experienced this level of buzz coming out of CinemaCon in years. The presentations this year amplified the excitement surrounding these highly anticipated releases and the breadth and quality of the content for 2026 and beyond. Just as importantly, CinemaCon reinforced the industry's long-term commitment to the theatrical business. Amazon MGM reaffirmed its plans to theatrically release at least 15 films per year, making it clear that theatrical is not just an experiment, but a core part of its strategy. We also saw continued support for meaningful exclusive theatrical windows with studios such as Universal and Paramount reaffirming windows of at least 45 days, joining Sony and Disney whose films already extend beyond that threshold. Amazon MGM further demonstrated its commitment to longer windows by delaying the streaming release of Project Hail Mary. In addition, David Ellison outlined plans for up to 30 theatrical releases per year should the proposed Warner Bros. and Paramount transaction receive regulatory approval. While that process remains ongoing, the emphasis on theatrical output reflects the broader recognition of its importance in the life cycle of the film. Taken together, these developments reinforce the confidence studios have in the theatrical release being foundational to a film's success designed to create scale, impact and cultural relevance. That positioning aligns well with Cineplex's strength from our focus on hospitality and community building that brings audiences together to our extensive premium format offerings that elevate the theatrical experience. And recently, Netflix announced that the upcoming Narnia film will now receive a wide release with a 49-day exclusive theatrical window in 2027 instead of only a limited release in IMAX screens. Non-traditional studios continue to expand their theatrical involvement as they increasingly recognize the benefits the theatrical release can have in elevating awareness and long-term performance. Finally, new agreements with both the Writers Guild and the Screen Actors Guild have resolved any uncertainty around labor negotiations. While the industry was not anticipating further disruptions, these agreements provide greater clarity and stability into the production pipeline as we look forward. The first quarter of 2026 featured a diverse slate with strength across original, franchise and international programming. 5 films generated more than $100 million in domestic box office during the quarter compared to 2 films in the first quarter of the prior year. This performance reflects the breadth of the slate with films resonating across genres and demographics and the importance a steady theatrical pipeline plays in solidifying moviegoing as a recurring entertainment choice. Original films played a particularly important role in Q1. Project Hail Mary delivered an outstanding performance and has become the highest grossing Amazon MGM release of all time and the studio's first film to surpass $300 million in domestic box office, a notable achievement for a non-traditional studio. The film resonated strongly with our guests with approximately 2/3 of its Q1 box office generated from premium experiences and Cineplex over-indexing significantly versus the U.S., capturing almost 10% of total domestic revenue. Pixar's Hoppers achieved the studio's biggest opening for original titles since 2017 and along with Goat, highlighted strong audience appetite for fresh storytelling in animated family films on the big screen. The strength in original storytelling was complemented by continuing demand for franchise films. Scream 7 set new records for the franchise, becoming both the largest opening and highest grossing film in the series, underscoring the appeal of established intellectual property. 30% of our first quarter box office was generated from films released in 2025, including franchise titles such as Avatar: Fire and Ash and Zootopia 2, highlighting the value of extended theatrical runs. International programming continues to be a distinct strength for Cineplex, representing approximately 13% of our first quarter box office, more than double the domestic average. Dhurandhar: The Revenge became the highest grossing Hindi language film in North American history and the first to surpass $25 million domestically with Cineplex capturing more than 30% of the film's total box office. While Dhurandhar: The Revenge was a standout film, it represents less than half of our international box office in the first quarter. That outcome reflects both the breadth of international content we curate and our ability to use data and analytics to understand where films will perform best and how to connect them with the right audiences. These capabilities allow us to consistently over-index on international releases. Guest demand for premium experiences remains a critical differentiator for Cineplex, and we saw that demand strengthened year-over-year in the first quarter. By offering a broad range of premium formats that align with how guests want to experience films, we translated those preferences into record financial performance. Box office per patron reached a first quarter record of $12.94, while concession per patron also delivered a Q1 record of $9.54. Turning to our media. Our first quarter results reflected the expected impact of the Olympics, which temporarily diverted advertising spend towards live sporting events. The tough year-over-year comparison also reflects particularly strong pharmaceutical spending in the prior year. Despite that dynamic, our cinemas remain a high attention premium environment for advertisers. As we look ahead to the remainder of 2026, a strong film slate provides a backdrop for advertiser demand, and we are encouraged by the opportunities we see in the balance of the year. Our location-based entertainment delivered store-level margins at our targeted 25% despite the broader macroeconomic pressures facing the industry that have contributed to a year-over-year decline in revenues. This performance emphasizes our focus on optimizing operations. Looking ahead, we see a number of opportunities to drive increased traffic and engagement. The FIFA World Cup is expected to bring meaningful demand into our locations in the summer. In June of 2026, we'll be opening a new Palladium location at Vaughan Mills, one of Canada's most highly visited retail destinations. We are also continuing to enhance the guest experience through increased convenience and digital engagement. Alongside our mobile ordering capabilities, we recently expanded our offerings with the launch of our online merchandise shop, giving guests more ways to buy exclusive merchandise for the films they love. Our CineClub membership surpassed 230,000 members at the end of March with members showing higher visit frequency, stronger premium adoption and increased spending per visit. We also continue to evolve the guest experience through initiatives such as Monday Surprise Premieres, which continue to be well received and helps create moments of exclusivity and discovery. Alongside programs such as $5 Tuesdays, these initiatives play an important role in driving attendance and frequency and are particularly effective at reengaging lapsed moviegoers. By bringing guests back into the theatrical environment, we help restart the moviegoing cycle from experiencing trailers and upcoming films on the big screen to ongoing communication that builds awareness and supports increased visitation. Within our broader loyalty ecosystem, Tangerine and Shell joined the Scene+ program in Q1, expanding the program's everyday relevance to now more than 15 million members. Following a successful launch in Alberta during the first quarter, the Shell partnership will roll out nationwide in May. Tangerine has also recently launched a new credit card that allows customers to earn and redeem Scene+ points, further extending the program into everyday financial services. With the ability to earn and redeem points across groceries, entertainment, dining, travel and now fuel, Scene+ continues to create more touch points in the day-to-day lives of Canadians. I'd also like to provide a brief update on the online booking fee. The Federal Court of Appeal upheld the Competition Tribunal's decision regarding the presentation of our online booking fee. We respectfully disagree with that decision and continue to believe the fee has always been presented clearly. We have filed an application for leave to appeal to the Supreme Court of Canada and have been granted an interim stay regarding a payment of the administrative penalty and costs, pending the Supreme Court of Canada's decision on Cineplex's application seeking leave to appeal. Looking forward, as we look ahead, momentum from the first quarter has clearly carried into the second quarter. The Super Mario Galaxy movie delivered the largest opening of the year so far and the highest grossing Easter weekend in Cineplex history, reinforcing the power of theatrical plays in creating cultural moments. From March 1 through the end of the Easter weekend, Cineplex operated 9 of the top 20 grossing theaters domestically, reflecting the appeal of our premium formats, the quality of our circuit and our strong operational execution. The second quarter has also benefited from the release of Michael, which has achieved the biggest opening for a biopic and Lionsgate's biggest opening since 2015. marking another important chapter for Cineplex Pictures, which is distributing the film in Canada. More broadly, 2026 is shaping out to be a strong year for our distribution business with momentum building from the continued performance of The Housemaid, a late 2025 release that generated meaningful box office in the first quarter, the release of Michael in Q2 and looking ahead to the Hunger Games Sunrise on the reaping later this year. Together, these films reflect the growing scale of Cineplex Pictures and our ability to consistently connect titles with Canadian audiences. Capitalizing on the success of the Super Mario Galaxy movie and Michael, our April box office increased 17% over the prior year, driven by the strength of the slate alongside our ability to create compelling premium environments in which audiences choose to experience these films. More recently, the Devil Wears Prada 2 delivered a record-breaking opening weekend, well ahead of the original film, reinforcing the strength of adult screen event-driven content. This momentum carried through to this past weekend, one of the strongest domestic box office periods in recent years. Notably, it marked just the third weekend since 2019, where 3 films each generated over $30 million of box office with Mortal Kombat 2 opening strongly with Michael and the Devil Wears Prada 2 continuing to perform. Driven by the strength of the slate alongside our ability to create compelling premium environments in which audiences choose to experience these films, our second quarter box office to date is up 23% over the prior year. The remainder of 2026 continues to shape up as one of the most compelling film slate we've seen in years, defined by depth and diversity across multiple categories. Family audiences will be well served with a strong lineup that includes Toy Story 5, Minions & Monsters, a live-action Moana and Jumanji: Open World. The Super Hero Universe is also featured prominently with highly anticipated releases, including Supergirl, Spider-Man: Brand New Day, already the most watched trailer of all time, Clayface and Avengers: Doomsday. Original storytelling remains an important driver with titles such as Steven Spielberg's Disclosure Day; Christopher Nolan's epic, The Odyssey; Digger starring Tom Cruise and Pixar's [indiscernible] offering fresh content. Beyond that, a wide range of established IP round out the slate from Sci-Fi film, Star Wars, the Mandalorian and Grogu and Dune: Part 3 to the comedy Focker-in-Law. With this breadth across genres and our continued focus on the guest experience, we believe Cineplex is well positioned to capture the full value of a strengthening theatrical landscape. I will now turn the call over to Gord Nelson, our Chief Financial Officer, to walk through the financials in more detail.

Thanks, Ellis. I am pleased to present a condensed summary of the first quarter 2026 results for Cineplex Inc. For further reference, 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, so 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 first quarter reflected a meaningful improvement in performance compared to the prior year, driven by a stronger film slate and higher attendance, partially offset by continued macroeconomic pressure in certain nontheatrical businesses. Total revenues for the quarter were $291 million, an increase of 15.6% from $251.7 million in Q1 2025, primarily driven by a 17.3% increase in theater attendance to 9.8 million guests. Our consolidated adjusted EBITDA for the quarter was $4.1 million compared to a loss of $10.7 million in the prior year. This improvement reflects higher attendance and strength in per patron metrics. So let's take a closer look at the segments. In the Film Entertainment and Content segment, box office revenue increased 25% year-over-year to $127.4 million, supported by the 17.3% increase in attendance and a higher mix of premium products. Attendance increased by 1.5 million guests, reflecting improved content breadth versus prior year with strong contributions from titles such as Project Hail Mary, Hoppers, Dhurandhar: The Revenge and Goat as well as extended theatrical runs from 2025 films, Avatar: Fire & Ash and Zootopia 2. March, in particular, represented a material step-up in performance, culminating in our strongest first quarter box office since 2019. Box office revenue per patron increased to a first quarter record of $12.94, up 6.6% from the prior year, driven by strategic pricing initiatives, film mix and an increase in revenue from premium formats, which accounted for 38.2% of box office revenue, up from 35.6% last year. Theater foodservice increased 22.5% to $93.9 million, reflecting the increase in attendance and purchase incidence. Concession revenue per patron reached a first quarter record of $9.54, an increase of 4.5% year-over-year. Other revenue increased 22.2% year-over-year, reflecting increased attendance as well as a stronger quarter from our distribution business. Results from Cineplex Pictures benefited from the continued performance of the Housemaid, which was released late in 2025 and contributed meaningfully during the first quarter. The increase in attendance over the prior year highlights our operating leverage. While theater payroll and theater operating expenses increased year-over-year, growth in these costs remained well below the rate of growth in attendance and revenue, reflecting the largely fixed nature of our costs and the benefit each incremental attendee brings to our exhibition business. Cash rent paid and payable is lower relative to the prior year due to closed locations and the renegotiation of leases upon renewal. Other occupancy costs increased by approximately $0.8 million over the prior year, primarily due to increased common area maintenance and real estate tax expenses. Segment adjusted EBITDA for Film Entertainment and Content was $8.9 million, representing a significant improvement compared to a loss of $12.4 million in the prior year, driven by attendance recovery and per patron growth. In the Media segment, revenues declined 18.9% year-over-year to $13.9 million. This performance reflects lower demand for in-theater advertising driven by the diversion of spend toward the 2026 Winter Olympics and a tougher year-over-year comparison following significantly higher pharmaceutical advertising spend in the prior year. Cinema media per patron declined to $1.41 compared to $2.04 in the prior year, reflecting the decreased demand despite higher attendance during the period. Adjusted EBITDA for the Media segment was $9.6 million compared to $12.9 million in the prior year, reflecting lower revenues during the quarter. Location-based entertainment revenues for the quarter were $35 million, a decrease of 8.1% year-over-year. Same-store revenues, excluding the 2024 new builds were down 5.6%, which aligns closer to the declines we are seeing in the industry as a result of the broader economic headwinds. Despite this, adjusted store level EBITDA margin declined modestly and remained at our targeted 25%, supported by labor optimization and operating efficiencies. Notably, our same-store, excluding 2024 new builds, the adjusted store level EBITDA margin was 27.8%. Adjusted store level EBITDA decreased to $8.8 million compared to $9.8 million in the prior year, primarily due to lower revenues, partially offset by cost controls. At the segment level, despite the revenue decline, adjusted EBITDA was only down slightly at $7.2 million versus $7.7 million in the prior year, and the segment adjusted EBITDA margin increased modestly to 20.7% from 20.2% in the prior year, highlighting the operational efficiencies we implemented at the segment overhead level. G&A expenses for the quarter were $21.6 million, an increase from $18.9 million in the prior year. The increase is primarily due to timing of recognition of LTIP expenses for retirement eligible employees and increased LTIP costs from an increase in Cineplex's common share price, partially offset by lower costs and other G&A expense categories. We ended the first quarter with $77.9 million of cash on the balance sheet and no drawings under our $100 million covenant-light revolving credit facility. During the quarter, we completed an amendment to extend the maturity of our bank credit agreement to September 2028 or March 2029, depending on the status of our secured notes. The extension preserves the covenant-light structure but does not contain financial maintenance covenants. The amendment provides flexibility with respect to permitted distributions and debt repayments, strengthening our liquidity profile and financial flexibility. Net capital expenditures for the quarter were $6.7 million, reflecting a spend of approximately $3 million related to our Palladium location opening at Vaughan Mills in December. The decline in capital expenditures relative to the prior year is primarily due to the timing of cash payments with Q1 of the prior year being elevated due to the 3 LBE locations that opened in the fourth quarter of 2024. Our guidance for the year continues at approximately $50 million. Our capital allocation priorities remain unchanged and include maintenance capital expenditures, strengthening the balance sheet to achieve our target leverage ratios, providing shareholder returns in the form of share buybacks and/or dividends and selective investment in growth opportunities. During the first quarter, we repurchased approximately $5 million in common shares for cancellation under our normal course issuer bid. We continue to view share repurchases as a flexible tool within our capital allocation framework, subject to liquidity and restrictions under our debt agreements and market conditions. In light of ongoing global and economic uncertainty, we continue to monitor potential impacts to our business. We do not expect these conditions to have a material effect on Cineplex's operations. Our business is not meaningfully exposed to fuel-related costs and the majority of goods sold across our circuit are sourced from North America, limiting exposure to supply chain disruption. As a result, we do not anticipate any material impact to operating performance or liquidity. Before concluding, I would like to take a moment to recognize Ellis Jacob. At CinemaCon last month, Ellis was named the recipient of the Legend of Cinema Award, one of the highest honors in the global exhibition industry. This recognition speaks not only to his decades of leadership at Cineplex, but also to his lasting impact on theatrical exhibition worldwide. On behalf of the entire Cineplex team, congratulations, Ellis, on this very well-deserved honor. Building on the momentum from the first quarter, industry excitement following CinemaCon is the highest we have seen in years. This sentiment reflects recent successes and the breadth and consistency of the 2026 film slate and positions us well for the remainder of the year. We expect this increased depth of content to support continued attendance momentum throughout 2026. At the same time, we remain focused on disciplined capital management, strengthening our financial flexibility and executing against our long-term strategic priorities. With that, I will turn it back to the operator for questions.

[Operator Instructions] Our first question comes from Adam Shine with National Bank.

So a couple of questions. One for you, Ellis. Just coming out of CinemaCon, a lot of positives. You had highlighted, I think, going into it that you had hoped to see the studios maybe step up some of their marketing going forward. Maybe you could just talk to whether there were any commitments related to that. And then for Gord, and you Ellis as well, just in the context of media, very clear as to what transpired in the Q1. Maybe talk about how things are going so far in the Q2 and any particular concerns heading into the World Cup month and whether we might see a repeat of the Olympics dynamic or perhaps not?

Yes. In response regarding CinemaCon and the area of promotion and media, we are really working very hard and well with the studios in using the data and basically being able to attract our guests in a big way back to the movies that they are releasing across the next 4 quarters and into 2027. So I think that's been a real positive. And given the window making it longer also is beneficial overall because you're getting a longer period of time for these films to play through. And you look at a movie like Devil Wears Prada and how well it's done, and it was pretty tough to get a movie ticket on the weekend to see that movie. So those are all positives for us going forward. And we are excited about both the slate and the ability to push the movies in a big way.

And on the second question then on media then, Adam. So a couple of call-outs on media. So last year was an incredibly strong year for the media business. If you actually look back to 2024, we had -- we actually had the same attendance levels in the first quarter of 2024, and our media revenue was up 12% versus that quarter. We were down $3.2 million versus last year, as we noted. Roughly $2.2 million of that was related to kind of reduced spend from pharma. And so the extra color on pharma for your interest is that a number of the weight loss drugs had their patents expiring at the end of 2025. And so there was significant spending throughout 2025 and particularly in the first quarter to get the brand awareness out there. So yes, the Olympics had a little bit of an impact. We do not foresee that the FIFA will have the same level of impact in our business as the Olympics had as we will look to take advantage of FIFA in our LBE locations and then kind of just general excitement around it occurring in Canada.

Gord, can you just elaborate a little bit further as to how the early trend is so far for media in the Q2?

Yes. So look, we continue to see strength. I would say if you look at sort of the remainder of the year, Ellis has highlighted strength of the product. And Adam, I think you're aware of some of the domestic box office predictions out there. General economic conditions are obviously tougher. Overall, advertising spend was down in Q1 in Canada, so not just for Cineplex. So as we see attendance growth in the remainder of the year, we would expect that our media business should grow in relation to that attendance growth.

[Operator Instructions] Our next question comes from Cheryl Zhang with TD Cowen.

Congratulations, Ellis, on the well-deserved recognition. So first question is on CPP. So you called out higher purchase incidence as the main driver of growth. Can you provide some color around what's driving that and what you're seeing in terms of consumer purchasing behavior?

Yes. So Cheryl, the one thing that we've always found is theatrical exhibition is very resilient to general economic conditions. And when customers come out, they want an indulgence and they want to spend both in buying a ticket and also at the concession stand. So when I look at the CPP being up roughly 4.5% in the first quarter, approximately 3.25% of that is pricing and the remainder is sort of the basket size and the incidence of purchase at the concession stand. So guests feel they want to come out and they want to spend and they want to buy and have their total experience when they come out.

And as economic conditions get tougher, they stay closer to home and the movie theater becomes a great entertainment option. And it's very, very important that we provide them with the choices.

Absolutely. And that's great color. So on LBE, were there any changes in consumer behavior in Q1 versus Q4? I guess how has it trended so far in Q2? And then maybe just to follow up on that. You mentioned that there were initiatives that helped improve operating efficiency there. I wonder if you could provide some color around that.

Sure. So I mean the trends that we were seeing in Q1 are just really a continuation of some of the consumer trends that we've seen throughout 2025, particularly the one that's most noticeable across not only our business, but the restaurant sector and just general, the spirits beverage in general is reduced consumption of alcoholic beverages across Canada and the U.S. So we're continuing to see spend in alcohol decrease. And that's one trend that we can continue to see. Obviously, with economic conditions, too, and the cost of fuels, we're seeing a little bit of a spend. It's a bit more of a discretionary spend in the LBE business. In terms of efficiencies then and operating costs, so obviously, we've looked at kind of where spending is going, and we've managed and looked at the tools that we have in place and the systems in place to better optimize the way we're scheduling in our boxes. So we've been able to kind of optimize our scheduling in relation to the business levels that we're seeing through and what that means is the business levels at the bar versus the business levels at the amusement side of things.

That concludes today's question-and-answer session. I'd like to turn the call back to Ellis Jacob for closing remarks.

Thank you all again for joining us this morning. We are excited for the remainder of 2026 and beyond and look forward to seeing you at our venues. Have a great day and a wonderful week. Have we got any other questions? So you're going to double check and confirm that there are no further questions.

We do have a follow-up from Cheryl Zhang with TD Cowen.

Okay. Great. I wasn't sure I was still connected. Yes. And just quickly, maybe recently, there was a media report on you exploring a potential sale. Curious if you have any thoughts on that and any thoughts on the potential strategic review?

There's a lot of discussions out there, but we don't really comment on rumors. Our focus now is to strengthen the company, the balance sheet and enjoy the product as we move forward through the 2026 and 2027 year.

[Operator Instructions] I'm showing no further questions in queue. [Operator Instructions] We have a question from the line of Maher Yaghi with Scotiabank.

Trying to get on the call. Perfect. I wanted to ask you, I've been hearing industry discussions suggesting theatrical windows may be stabilizing or lengthening. Are you seeing any tangible benefit in -- are you seeing -- can you confirm that? And maybe some discussion about the premium mix that you're seeing in your theaters?

Yes. Great question. And definitely, we are seeing the benefits of the lengthening window. You look at a movie like Project Hail Mary with Amazon extending the time frame before it goes to streaming, and it's doing extremely well in the theater. And it also helps us reduce consumer confusion because now you know you're not going to be able to just turn your TV on and see the movie. And that really helps, and it's getting stronger as we move forward. And as we've always said, we are really the engine that drives the train for the theatrical and the future of the title and its benefits through the other different portfolios.

Ellis, are you seeing it across the board, these kind of moves? Because in the past, that was a worry for investors, I guess. But are you seeing that lengthening happening across different studios? Or it's still specific to certain...

At CinemaCon, we got some definitive lengthening of the windows. Universal talked about it publicly and so did Paramount, which was extremely beneficial and Sony and Disney already beyond those dates. So overall, you don't have too many companies not following that policy. And with Netflix and Narnia, they are even coming forward, which is very positive overall when you have the biggest streamer moving forward with the lengthening distribution. So to me, it's all very positive, and it continues to justify the fact for studios that the theatrical release is very important for the future of the product.

That's great to hear. Okay. My second question, it's on the premium mix again, like just going back. So with yields rising, can you talk a little bit about the premium mix? What are you seeing in terms of price elasticity? Any evidence of trade downs in Canada yet or demand is still resilient?

No, demand is very strong with the premium experiences. And what is -- what we see in a lot of cases is guests are seeing the movie more than once and they are going to different premium experiences to watch the films. And to me, that continues to be beneficial. And they don't push back on the pricing because they feel that it's a special experience that they cannot replicate. And to me, we in North America have one of the highest percentages of premium experiences. And it's a much bigger differentiator from sitting home and watching it on your TV with your kids crying or your cell phone ringing. So those are all very positive.

Perfect. Okay. I wanted to ask you, we've been talking about the recovery phase post the pandemic, and it feels like we're getting there, especially with the second half slate coming up. Maybe this is more like a big picture question for you. What markers should we be looking for to quite confidently say that the recovery is in full force and kind of declaring going back pre-pandemic. What are the markers in terms of attendance, in terms of revenue run rate that gives us confidence that we're back to normal?

Look, looking ahead, we are encouraged by the strength and depth of the balance of 2026's slate, which includes many marquee titles we just talked about in the call about Star Wars, Toy Story, Minions & Monsters and others as we go through. And all the demos are coming back, which is very positive, and we will see that continue to improve. The frequency was down. But as content is there, we feel that our guests will come back in a big way. And when we look at our loyalty program, we are seeing that having a positive impact of people starting to return to the movie theaters.

Is there like a number of releases that you'd like to see in a typical year running above $100 million per title that you think the industry needs to achieve to give us confidence that it's back to where it was before the pandemic. Are you still looking at it from that kind of a lens? Or it's more specific to Cineplex?

No, I feel that we need a good mix of titles. You need the big titles and you also need the titles that will bring in the right demographics and the audiences to our theaters. And I think we're in a good position now with a lot of movies with some great directors and producers. So we feel pretty comfortable in the second half of 2026 looks really, really strong. And in the fourth quarter, there are so many strong movies that we're really excited about them.

Okay. And maybe one last question on the CEO search. Any update you can provide us on that? We hate to see you leave, Ellis, but you did put a date in the calendar. And can you maybe just give us anything new to report on that?

Yes. The process is underway, and the Board is considering candidates, both internally and externally. And I am sure they will get through the process and make the best choice for the company. And as we've said before, our focus is continuing to strengthen and grow the business and have the right person to take over the position.

Okay. So nothing yet, but something in -- when would you say that should be announced sometime in the fall, not too close to your departure date?

We have to wait for the Board and the committees to go through the process before we can say a specific date.

We have a question from the line of Drew McReynolds with RBC Capital Markets.

Just had some tough time getting on, but we're here. So 3 for me. First, maybe just a follow-up to Maher's question in and around box office. Historically, I seem to recall 80%, 85% of kind of box office revenues on major films being realized in the first 3 weeks. Just wondering if you've seen any evolution of that kind of behavior. And then second question, just back to Cineplex Media, Gord. With respect to the tough comp, again, just kind of well spelled out what happened here in Q1. As we go through the remainder of the year, do you see any particularly tough category comp for Cineplex Media? And then lastly, a little bit more kind of restructuring, I think, in the numbers this quarter. Just wondering kind of what we should expect for the rest of the year. And I assume -- in terms of the operating leverage dynamic that you have been talking about for 2 or 3 years, I assume is that largely intact just given all the moving parts?

Thank you, Drew. On the first question regarding the product and moving forward, we feel very strong and comfortable about the films out there and their delivery. When you talk about the first 3 weeks and the bigger numbers, certain movies are in that category where guests want to see it as soon as possible. But now with the longer windows and things changing, I feel that there will be more guests coming back either to see the movie more than once or to see the movie for the first time because the movie length has increased as far as its theatrical release. So I hope that answers your question on that.

Yes, that does.

And then on the other 3 questions, so on the media side of things, I tried to call out where we thought things were going to come in for the remainder of the year, which is relatively in line with where we see attendance growth. Just as sort of a reminder to a number of you, domestic box office projections range anywhere -- the industry projections anywhere from $9.5 billion to $10 billion for North American box office, which is roughly a 10% to 15% box office growth, which part of that would be pricing. So that gives you some indication of sort of where the year might fall out. You asked about specific kind of verticals and categories. And I called out pharma as a category, which we're going to be impacted in year-over-year, but our team is comfortable that we've done work to build out the other categories that will either return or increase versus prior year to kind of soften the impact of the pharma category. In terms of restructuring, we're always kind of looking to optimize our operations and particularly kind of post pandemic and into '25, 2026, that is at a little bit more elevated levels than it has been historically. And then I think your last question was on operating leverage. And so we continue to use roughly the same metrics that the incremental EBITDA contribution for each guest is about $13.50 from an exhibition perspective and $1.50 or so for -- from a media perspective. So the numbers that we've previously communicated still hold.

Okay. That's great. And Ellis, congrats on the recognition. Obviously, no surprise to all of us that have followed you over the years, but congratulations on that.

Thank you very much.

[Operator Instructions] I'm showing no further questions in queue at this point.

Thank you very much, and I appreciate you joining us this morning. Sorry for difficulties in getting your questions through. As I said before, we're excited for the remainder of 2026 and beyond and look forward to seeing you at one of our venues, having a great time. Have a great day and a wonderful week. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.