Operator: Good day, and thank you for standing by. Welcome to the Cineplex Second Quarter 26 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Rayhan Azmat. Please go ahead.

Rayhan Azmat: Good morning, everyone, I would like to welcome you to Cineplex's Second Quarter 26 Earnings Release Conference Call. I am Rayhan Azmat, 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 will 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 analysis. Following today's remarks, we will close the call with our customer question and answer period. I will now turn the call over to Ellis Jacob.

Ellis Jacob FCPA: Thank you, Rayhan, 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 am pleased to share Cineplex's tremendous second quarter 26 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 unique position within the industry. We are Canada's market leader with more than 150 theaters nationwide, leading premium formats, a proprietary cinema media platform, a growing film distribution business through Cineplex Pictures, 1 of the country's strongest loyalty ecosystems through SCENE+ leading location based entertainment brands with The Rec Room and Palladium. These assets create multiple earnings 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 1 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 in 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 theaters 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 2 of the highest grossing horror films in Cineplex's history. Session 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. 1 of the most encouraging trends we observe observed is the return of the Gen Z audience. A demographic many question would fully embrace movie going. 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 1 of the strongest VIP performances in Cineplex history, while films such as Star Wars, The Mandalorian, and 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 movie going experience through our expanded food and beverage offerings and merchandise programs. During the quarter, we delivered record theater 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 team from the Super Mario Galaxy movie and Star Wars the Mandalorian and Grogu, as well as the iconic red popcorn purse inspired by the Devil Wears Prada 2. These offerings help drive incremental spending, deepen guests engagement and further capitalize on the excitement surrounding major film release. Overall, the quarter demonstrated a 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 1 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 theaters. Cineplex is a clear market leader in international content and continues to outperform the domestic market. We continue to view our theaters 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 theaters across Canada. Cineplex was the only exhibitor in Canada offering the opportunity to watch these matches on the big screen and 1 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 theater 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 reinforce 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, 1 of the most sought after yet increasingly difficult demographics to reach through traditional media channels. As young movie goers continue to return to theaters, we are uniquely positioned to help brands connect with this audience. Combined with improving attendance, this positions our media business wealth 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 LVE 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 Palladium and The Rec Room brands are well positioned to meet that demand. In June, we expanded our LBE presence with the opening of palladium at Vaughan Mills 1 of Canada's most visited shopping destinations. The venue features 4 exciting attractions including gel blasters a team experience that combines the best of laser tag and paintball alongside an extensive games on 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 incremental visitation, and deliver more personalized experiences. Complementing SCENE+ is CineClub, our movie subscription program which recently celebrated its 5th anniversary. With more than 270 thousand members, and visitation rates that are approximately 4x higher than nonmembers CineClub continues to strengthen loyalty encourage more frequent moviegoing, and reinforce Cineplex's position as 1 of the most affordable and compelling out of home entertainment 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 network. The Odyssey opened to $124 million domestically with Cineplex over indexing the market and operating 3 of the top 20 theaters in North America. Demand for premium experiences has been exceptional, including sold out IMAX 70 millimeter presentations throughout the film's run. Cineplex operates 8 of the world's 41 IMAX 70 millimeter screens reinforcing the strategic value of our premium format footprints and our ability to attract moviegoers seeking the highest quality theatrical experience. Released on July 31, Spider-Man: Brand New Day 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 artist these films helped drive outstanding results across our circuit. They also generated record breaking results across our industry leading premium formats, including Ultra AVX, 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 Falklands Law while horror remains 1 of the industry's most resilient genres with Playtest and Werewolf. Science fiction is particularly compelling with the much-awaited Doomsday in December with the opening of both Avengers Doomsday and Dune: Part 3. Both films are generating significant consumer anticipation and should represent 1 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 1 of the deepest and most diverse release schedules we have seen in years. We are also encouraged by the growing commitment from nontraditional studios Amazon MGM continues to expand its theatrical ambitions. With upcoming releases including Verity, How to Rob 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 theaters 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 platform 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.

Gord Nelson: Thanks, Ellis. I am pleased to present a condensed summary of Cineplex's record second quarter 26 results. As Ellis mentioned, we are 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 view on the operational results, so I will focus on high-level 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 a meaningful growth in revenue per patron metrics, adjusted EBITDA 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 theater 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 EBITDA for the quarter was $40.8 million, up 20.4% from $33.9 million in the prior year. The disproportionate growth in adjusted EBITDA 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 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 movie going and helps offset the natural variability of 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 towards 2D releases. Theater 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 1-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 remain generally consistent with the prior year. While theater payroll and theater 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 EBITDA for Film and Entertainment and Content increased 32.8% to $48.2 million This result marks our second quarter segment adjusted or sorry, our highest second quarter segment adjusted EBITDA since 2019. Driven by higher attendance record per patron metrics and strong operating execution. 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 patient 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 EBITDA 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 EBITDA 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 24 new builds, same-store adjusted store-level EBITDA margin was 15.3%. At the segment level, adjusted EBITDA 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 in Vaughan, marking our 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 the 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 light revolving credit facility. In addition, approximately $92.5 million remained available under the facility after the 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 were $7 million and included investment related to the opening of Playdium in 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 improve our financial flexibility. These actions have included the sale of noncore 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 and attendance and profitability, leverage has declined 1.5 turns over the past year and a half. As a result, we have and we have improved visibility toward achieving our long term target leverage ratio of 2.5 to 3x which we believe is achievable in the near term. As our leverage profile continues to improve, and the earnings continue to grow, our financial flexibility increases. Higher earnings generation expands our builder-basket capacity 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 of the 2026 release calendar and the continued commitment to theatrical exhibition from both traditional and nontraditional 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.

Operator: Star 1 on your touch tone phone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from Adam Shine with National Bank of Canada.

Adam Shine: Hello, good morning. Hopefully, you could hear me. 1 question for you, Ellis, and 1 for Gord with a few parts to it. So Ellis, it is been, I think, 13.5 months since the press release say that you were going to be leaving at the end of this year. And obviously, you would be highlighting on recent calls that the Board continues with the effort in regards to the succession planning. But just curious, any updates in regards to what is going on? No details in anything we have seen today in that regard. And curious if there is 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 EBITDA was a bit light. Maybe it is on us on the street for having pushed a bit too high. But you know, when we go back to, you know, some of the calculations you addressed in a question on the Q1 call, you know, you were still comfortable with that $13.50 per patron x exhibition, $1.50 per patron media. In theory, that would have been $60 million up on EBITDA. I think your exhibition business came in plus $12 million, which was actually very strong. But my question to you really is the 3-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 And then I think there was some higher G&A which surprised a little bit, and some of that maybe was referenced to LTIP timing. So 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. And I will leave it there. Thank you.

Operator: Thank you, Adam, for your question about my retirement.

Ellis Jacob FCPA: I am preparing to retire by the end of the year. And the Board is managing the process and it is well underway. But, our focus continues to remain on strengthening and growing the business, and I am proud of what we have accomplished. And I think the year is going to be quite strong for us at Cineplex. Thank you for that.

Gord Nelson: Yeah. And, Adam, so let's go. So let me take you through, you know, a couple of the items, and you called out a number of them. So let's sort of focus. You know, the exhibition business, you know, was, you know, the strong performer of the quarter. What we saw really in sort of the other businesses and sort of onetime costs, which I will which I will kind of elaborate a little bit on. But with respect to the LBE business, so, typically, the second quarter is the lowest traffic quarter of the year. And if you look at the results in the quarter, you know, obviously, we called out FIFA a little bit. So there was some success related to kind of FIFA viewership in the theaters. When you look at the sort of the revenue mix in that business, you know, we did see food and beverage increases in the quarter. And as you would expect, as people kind of coming out and enjoying and watching, some of those events, but amusement was down. And, again, so focus on the events. Amusement is the highest margin revenue category in that business. You know, 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 where you saw it. Saw that. So EBITDA store was down about $2 million, which, you know, as we look forward, we expect that to reverse a little bit. Now you called out a couple of 1 timers, so let me go through those The scene JV costs. So SCENE would typically operate on a relatively close to breakeven level in quarters where we are doing something like a national launch of Shell as an example, there would be some additional costs sort of implement implementation costs as well as marketing costs to launch. New members. So that would be I am calling that as a more of a onetime quarterly expense that you would not expect to see sort of on a go forward basis. In the G&A category, I am going to call out a couple of things here then. So if you look at as we disclose it in our MDNA, sort of the base category You are gonna see just a little bit of timing, and that is in some of our technology initiatives, to be honest. If you look at our year to date number, or what we would call base G&A as in our MD&A, only up 1.9% on a year to date basis. So, you know, roughly $700 thousand. Whereas in the quarter, it is up $2 million. it is up 10%. So it is it is purely timing. This quarter was impacted more you know, than other quarters. And then I am gonna just call it LTIP too. So LTIP, the accelerated share price, as we call it out on the in the MD&A, there is a little bit of a sort of change, which is going to impact the 2026 results related to what I am gonna call retirement eligible employees. Where there is an acceleration of the expense related to them, but not the vesting. So that there is no change to the vesting, but retirement eligible employees have the ability to have the full grant available to them over the appropriate vesting period. That is about a 6 that will be about a $6 million hit for 2026. Which will be really sort of a onetime event for this year. And I think I hit sort of You definitely did.

Adam Shine: No. You definitely did. Of the $6 million for 2026, how much have we already seen in the first half? So it is roughly that will be sort of roughly $3 million, half of it. Okay. Okay. 1 last follow-up if I may and that is there seems to have been some resolution, a finality to some of the tax matter with AMC related item. And curious because you called out in the MD&A, some of that was already refunded. Curious how much, how much is still left to go of the, call it, $26 million plus And whether any intention to use any of that for beyond just deleveraging? Would you do any buyback related to that? Or not at all? Thank you.

Gord Nelson: Yeah. So first of all, so that relates to a tax litigation matter related to the losses that were acquired on the acquisition of AMC, back in the mid 2013 or so. So we were successful in that litigation. And so the $26 million is the quantum of the losses that were at dispute. So not the tax impact. So it is 20 so and our effective tax rate is roughly 26%. So we did get roughly, I am gonna say, 26% of $26 million. Back as a refund because we had put that on accounts. And, 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. Acquisition. So there was a net inflow, Adam, but it is not of the magnitude that you described there.

Adam Shine: Got it. Appreciate it. Thank you very much.

Operator: Our next question comes from Drew McReynolds with RBC Capital Markets. Your line is now open.

Drew McReynolds: Thanks very much. Good morning. Thanks. Gord, for that OpEx breakdown. Very, very helpful. 1 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 did not appear to be a lot of concentration. So just any thoughts on whether anything is structurally changed there underneath the hood? And then on the LBE outlook, again, appreciate the detail there. In the MD&A, you talk about competition. Wondering if that was transitory comment just with respect to obviously, all the sporting events that were ongoing or is there kind of something new that you are flagging there?

Ellis Jacob FCPA: So on the film rental at Ellis, the bottom line is as the box office improves and the movies do better, there is an adjustment in the film rent. But overall, there has not been a change in the film rent moving forward.

Gord Nelson: And then on the LBE question, then is yeah. Look. We did highlight competition. There are certain locations in our portfolio that have been extremely successful. And we are seeing alternative concepts in select locations come up, which does impact our business to a certain degree in those locations. it is not widespread, but we are seeing where we have successful locations. There have been some entrance.

Drew McReynolds: Okay. Thanks, Gord Ellis, for that. Just additionally, I mean, we can go back and scrub this, but you typically have a good line of sight on this Clearly, August is gonna be very strong at the box office. Is there anything from last year, whether that is in August or September, that you would call out as either particularly easier or tough comps, from a slate perspective. And then maybe the bigger picture question here is as the industry comes back, as you are seeing kinda Q2 and Q3 play out, I know it is it is 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 you know, somewhat on an annualized basis going forward here into 2027, as a percentage of 2019 levels. Just trying to tie in whether there is been any kind of change in the broader working assumption of know, what you can get back to, again, on an annualized normalized basis just notwithstanding kind of quarterly volatility. Thank you.

Ellis Jacob FCPA: Hey, Drew. it is a good And just, looking at the, you know, year to date, we have already had 5 movies that have crossed $1 billion. You have got Spider Man, Super Mario, Michael, and Toy Story 5. And the good news is, we are close to covering the month of August in the first 10 days compared to last year. And that is a result of both Odyssey and Spider Man, and we expect that to continue for the next number of weeks. And, you know, we have got PAW Patrol also opening, this week, and that should help us And the industry is tracking toward the $10 billion of box office that we were discussing and getting to that number. And there is a lot of good films, you know, for the balance of the year, which is exciting and should continue to do well for us. And 1 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, you know, schools closing much later than The US, but 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.

Drew McReynolds: Thank you. I always appreciate it. It does. Thank you.

Operator: Our next question comes from Cheryl Zhang with TD Cowen. Your line is now open.

Cheryl Zhang: Hey, good morning, Ellis and Gord. Congrats on a very strong quarter. Happy to see the box office results and improvement. So I would like to double click on CPP. I thank you called out it is a record number from strategic pricing and also higher purchase incidents. Wondering if you can elaborate on that and what you are seeing in terms of consumer purchasing decisions considering the film content?

Gord Nelson: Yeah. So Cheryl, we also called out sort of a category merchandise which, and they also called out the red purse from Devil Wears Prada 2, which was, like, a sellout immediately. So we are seeing a really strong demand for sort of movie related merchandise as part of the concession purchase. So, you know, we call it that as being a record with growth and representing roughly you know, a significant portion of the overall CPP growth. We generated just around $4 million of sales from merchandise in the second quarter. So for us, as we have always described is, you know, we look at pricing in this business, is, you know, we typically look to pass on food cost inflation in through price. So CPI kind of growth in pricing, but it is about broadening the basket And so merchandise sales is a great example of kind of broadening that product basket and then increasing the incidence so the frequency of purchasing. So I would say, in the second quarter, this broadening of the basket is what generated, you know, roughly 1-third of the CPP growth. During the quarter.

Cheryl Zhang: that is great color. Thank you.

Gord Nelson: And, sorry, just to add on to that, Because of the demand, for merchandise in the theaters, we have also added an online platform so consumers can buy those the merchandise content if it is sold out at the theater.

Cheryl Zhang: that is great. And just to follow-up on that, what are you seeing in terms of like, more CPP sorry. Concession-related sales as related to the Odyssey and Spider Man performance thus far? It continues to be strong and there is a good demand as we are going through with those 2 films. Okay. Thank you, Ellis. And maybe just 1 more on media I think you called out there is still strong demand from advertising. But I am wondering, like, 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?

Gord Nelson: Yeah. Cheryl, I mean, that is a good point. And look at as we looked at the second quarter as an example, you know, our media revenue, went up. When you look at the overall media market, you know, we definitely saw sort of a shift in category spending. So the auto home market had tremendous success in the second quarter. You know, that includes billboards, stadiums, and sort of street furniture. And you would expect that people were putting their money into, you know, FIFA related campaigns, so want it to be all over the cities, particularly. Where those events were held. But as we look forward, your I mean, you are on you are bang on. it is there it is a challenging kind of macro environment, which is impacting, you know, advertising spend. And that is in part why, you know, we did 2 things during the quarter, and it impacted our OpEx to a certain degree in our media businesses. 1 is we held an up upfront event to really showcase content that is coming out over the next 12 months. And then in addition to that, is, you know, we launched our research study into sort of the intention statistics through Environics Analytics. And so those are 2 costs that we incurred in the quarter. But again, looking to kind of gain traction in a tougher media environment over the short or in the shorter near term. that is very helpful.

Cheryl Zhang: Thank you so much. Thank you.

Operator: As a reminder, if you would like to ask a question at this time, please press 11 on your touch tone phone. Our next question comes from Maher Yaghi with Scotiabank. Your line is now open.

Maher Yaghi: Great. Thank you for taking my question and welcome back, Massa. I wanted to ask you So it 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 will it have an impact on the cost the your film cost Is there a different metric that we should think about when know, you know, forecasting the movie costs in Q3 that would be different in any way to previous quarters?

Ellis Jacob FCPA: No. The film cost basically is based on the performance of the film. So if the film does you know, and it gets stronger and does better, the film cost is slightly higher. But overall, there should not be a significant impact from the movie delivering the box office. K.

Maher Yaghi: So it is sometimes, you know, 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?

Ellis Jacob FCPA: No. there is no change. So there is nothing that you should be concerned about.

Maher Yaghi: Okay. So if you know, it seems like we have a good momentum Going into Q3. As you mentioned, August has so far been very strong. Are there any you know, 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 target leverage at the near term? Possible time to allow you to reengage in stock buybacks.

Gord Nelson: Yeah. So look at we are very encouraged by the results of the back half of the year and where things are going, particularly with the momentum that is coming out of the month of August, as Ellis described. You know, there is a technical calculation of how these builder baskets work, which I will at a extremely high level, you know, provide the test, but I encourage you to you know, you would have to go down and do the calculations. In detail. But roughly, if you go back to January 1, 2024, and look at the cumulative EBITDA from that point in time it needs to cover. The little basket opens up. To the extent that it covers more than 1.75x sort of the fixed interest charges. And the fixed interest charges a rough calc is about $60 million a year, so interest charge on our high yield debt and our convertible debenture. So 1 is part 1 of your question is that calc opens up the basket at some point in time. The second part of your question is on leverage is and then in my comments, as I as I as I said that we are we are confident and comfortable that and as we look at the near term, that target of, you know, 2.5 to 3x as well within our reach now. Okay.

Maher Yaghi: So can you maybe help us or give us some reference as to when you think you would be in those target leverage? Ranges.

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

Maher Yaghi: Okay. Great. And so just to continue that, you know, that discussion. So you mentioned earlier the dividend optionality. You have the buyback option. Optionality given where the stock is and long term projections that you have, which way you see you are you are leaning more on going forward to be your preferred method to returning cash to shareholders?

Gord Nelson: Yeah. Look. We always I would say we describe the NCIB program as sort of being what I would call opportunistic. And looking for opportunities to drive value. And so as we just approach and as we cross that kinda target leverage ratio range, is we will then make a more focused discussion on where our priorities are with respect to those 2 items. I would say both of them are on the table, And then as we look forward and create, you know, more significant path free cash flow generation in 2027, you know, things could open up more on in 1 of those options. But at this point in time, you know, I am just going to say that both of those are on the table and a focus. But we are not gonna provide sort of the levels between the 2 of them at this point.

Maher Yaghi: Okay. that is fair. Maybe a last, you know, question on IMAX 70 mm screens. And, you know, it is it is I am sure it is a good problem to have when you have such a high demand for a movie on IMAX But it seems like the capacity in many of your big cities in Canada are slightly supply constrained for that typical format. format. Would you consider in the future to add more IMAX screens? Or, you know, at this point, the movie slates are not necessarily requiring a big change in how you have your design set up.

Ellis Jacob FCPA: it is a good question, but you have to remember, as I mentioned in the commentary, we have 8 of the top 41 locations in the world. And we will continue to evaluate, as things move forward. So, you know, when you look at it, and we have you know, 20% of the total number in the world, that is pretty significant. I agree.

Maher Yaghi: But for now, we should not think about CapEx You know, like, how should we think about CapEx in for the rest of 2026 and maybe 2027 if you had to give us an idea on where you are gonna land on CapEx, that would be helpful. Thank you.

Gord Nelson: Yeah. So for, miss Gord, so, you know, we I provided comments that, you know, our guidance for 2026 is about $50 million And then as we look into next year, we have the 1, obviously, LBE location. That will open in 2027. We have no further commitments at this point in time, but our guidance for 2027 would be roughly $60 million.

Maher Yaghi: Great. Thank you. Thank you for taking my questions. Thank you.

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

Ellis Jacob FCPA: 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.

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