Cineplex Inc

TSX:CGX

Earnings Call Transcript 2021-Q3

[Operator]

Good day, and welcome to the Cineplex Inc. Third Quarter 2021 Analyst Conference Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Mahsa Rejali, Executive Director of Corporate Development and Investor Relations. Please go ahead, ma'am.

[Unknown]

Good morning, and welcome. With me today is Ellis Jacob, our President and Chief Executive Officer; and Gord Nelson, our Chief Financial Officer. Before I turn the call over to Ellis, let me 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 could differ materially from those expressed in the forward-looking statements. Factors that could cause results to vary include, among other things, the negative impact of the COVID-19 pandemic, adverse factors generally encountered in the film exhibition industry, risk associated with other national and world events, discovery of undisclosed material liabilities and general economic conditions.Following today's remarks, we will close the call with our customary questions-and-answer period.I will now turn the call over to Ellis Jacob.

[Ellis Jacob, President, CEO & Director]

Thank you, Mahsa, and good morning, everyone. We hope you and your families remain healthy and well. We appreciate you joining us today an important day of Remembrance Day. So I would like to take a moment to honor the Great Canadians who have served and continue to serve our country in times of conflict and peace. We acknowledge those individuals and their families who have given up so much in the name of our country. Thank you, and let us not forget.As I address the quarterly results, I am pleased to say that our business has turned the corner. The global box office is back and domestic openings like Shang-Chi and The Legend of the Ten Rings, Venom: Let There Be Carnage, No Time To Die, Dune and the Eternals are exceeding expectations, and in some cases, even over-indexing in Canada as was the case with Shang-Chi, No Time To Die and Dune. Our business and the industry are recovering, thanks to the millions of Canadians who have clearly missed the sense of escape that only the theatrical experience can provide.For the first time since the pandemic began, we are reporting positive adjusted EBITDA of $10.8 million for the quarter as well as positive quarterly adjusted EBITDA across all our business segments. This is a huge milestone for our team and our business, one that comes from 18 months of hard work and unwavering determination to get us through one of the toughest times in our history since the pandemic began in March 2020. With Gord speaking to our financial results shortly, I want to focus my remarks on 3 things: our full reopenings and continued momentum towards profitability; our efforts to encourage the visual movie going and get guests back to our theaters; and finally, I want to reaffirm our solid position for a strong recovery.Our entire circuit of theaters and entertainment venues nationwide were finally reopened early in the quarter, and we are seeing encouraging results in attendance as well as growth from all our other businesses, including P1AG, Cineplex Digital Media and Cineplex Media. As we have done throughout the pandemic, we maintained our prudent approach to cost management and reduced our average monthly net cash burn to $2.9 million during the quarter, down from $24 million in Q2 2021. This is a significant achievement, and I would like to thank our incredible employees across the U.S. and Canada for their perseverance, sacrifice, hard work and best-in-class execution in carrying the company through this recovery. We truly could not have reached this date and be confidently welcoming our guests back without such a committed team.When we look at the results coming out of the quarter, it's clear movies are back and so was Cineplex. Since reopening our entire circuit on July 17, we have welcomed over 12 million guests to our theaters. We are starting to see box office numbers progressively increase and approach pre-pandemic levels. For example, when compared to pre-pandemic months in 2019 to 2021, July box office reached 38% with only a partial month of openings. August was 62%, September was 67%, and the growth continued into October with box office revenue reaching 80% of the same month in 2019. Then this past weekend was our highest box office since the pandemic started, even exceeding the same weekend in 2019.During third quarter, we also saw BPP and CPP reach all-time highs at $11.38 and $8.58, respectively. The combination of pent-up consumer demand and guests indulgent in our concession offerings and premium formats were the key drivers of these exceptional results.Looking at our other businesses, P1AG delivered record quarterly adjusted EBITDA, driven by continued strength in the reopening of U.S. route locations, strong growth in Canada from reopening and a focus on cost management. We are also seeing an encouraging ramp up within Cineplex Media as client confidence returns and companies build out their advertising budget for the fourth quarter and into 2022.The pipeline is strong, and we are seeing an increasing momentum as clients return to cinema media as a key component of their campaigns. Our team at Cineplex Digital Media has also been busy rolling out Flex SmartEngine, a data-driven machine learning software platform that optimizes digital signage to deliver the right content to the right audience at the right time. As we look forward, we believe we can generate high-margin opportunities with this new platform.This was an important quarter for us. Our entire circuit of theaters and entertainment venues are open, and we are seeing promising growth from our other businesses too, as we continue momentum towards profitability. Combined with insights from our consumer surveys and recent trends, we know that Canadians have missed those shared social experiences and are excited to be back, which is why, now more than ever, we are providing every single guest that comes into our venues with a great entertainment experience. We are taking proactive steps to increase visitation and attendance in our theaters and entertainment venues through innovative offerings, marketing campaigns and new programs.In support of this strategy, during the quarter, we introduced our entertainment subscription program CineClub for just $9.99 per month, members receive 1 regular admission ticket every month with no expiration date, the opportunity to purchase additional tickets at a discounted CineClub price, 20% of concession items and a variety of other benefits, including discounts on purchases at the Cineplex Store and on amusement gaming at our entertainment venues nationwide. We designed CineClub to appeal to a wide array of guests and entice them to enjoy the theatrical experience more frequently with their friends and families. The additional discounts included for concessions, the Cineplex Store, The Rec Room and Playdium, also provide our guests with even greater value to enhance the entertainment experience across the Cineplex people system.So far, the program has received an overwhelming positive response from our guests and has exceeded our expectations and internal benchmarks as membership continues to grow. In September, we launched our new brand platform and tagline Where Escape Begins, [ had at school ] the campaign strategy is centered around reminding Canadians about the magic of cinema, the escape a movie theater provides and to celebrate the unrivaled experience of the Cineplex big screen. It welcomes Canadians back to the theater experience and reminds them about what they've been missing for so long, the immersive cinematic escape and of course our famous popcorn too.Also, during the quarter, we opened our first location of the Rec Room in British Columbia and first standalone VIP cinemas in Western Canada, both located at the amazing Brentwood Center in Burnaby, British Columbia. Later in the quarter, we also opened a location of the Rec Room in Barrie, Ontario at Park Place, which was our 10th Rec Room location to open across Canada. All locations opened extremely well, especially the Rec Room Brentwood, which had one of our strongest location-based entertainment openings ever and remains the top-performing LBE site to date.Overall, our LBE venues continue to perform well this quarter even with capacity restrictions in some provinces. This was especially evident in Alberta, where capacity restrictions were lifted for the quarter, and our LBE locations performed at almost 90% of their 2019 levels. With our location-based entertainment venues now open coast-to-coast, we offer our guests even more options when it comes to spending their leisure times with us. Later this month and subsequent to quarter end, we will celebrate another important milestone for our company.We are opening our 25th VIP cinema location in Canada with Cineplex VIP Cinemas University District in Calgary. Not only is this the province's first standalone VIP cinemas, it's also the next evolution of our VIP concept, offering new amenities. These include newly designed heated recliners with adjustable power headrests and VIP share lounges that turn the front row on our auditorium into the best seats in the house. These are just some of the ways we are inviting guests back to our theaters and ensuring they enjoy an exceptional experience one they cannot replicate at home.Of course, we will continue to closely monitor the fourth wave of the pandemic around the world and in Canada. However, the recent removal of capacity restrictions across the majority of provinces has been welcome news to the Cineplex team and movie lovers across the country. We are now open at full capacity at close to 90% of our circuit. While capacity restrictions have changed, our commitment to the health and safety of our employees and guests remain the same, it's our top priority. We have and will continue to follow all guidelines set forth by all levels of government, including proof of vaccination requirements. Our field teams are doing a super job with limited issues or concerns. I'd like to thank them for their flexibility and hard work as we implement these new protocols, sometimes with only a few hours’ notice.One thing is for sure, our team and our guests are happy to be back with a new appreciation for friends and family and social settings that have been restricted for so long, we are focusing on providing our guests to one thing they can't get at home, an immersive shared entertainment experience.Looking ahead, we are encouraged by the continued easing of restrictions and the availability of new film products, including blockbuster titles. We are also seeing tremendous success with our international titles. 3 of the top 10 highest grossing Punjabi films in Cineplex' history were released in 2021, which indicates significant post pandemic growth. For the third quarter, our top 5 grossing films Shang-Chi and The Legend of the Ten Rings, Black Widow, Jungle Cruise, Free Guy and F9. Shang-Chi over-indexed in Canada and set an all-time record for the biggest Labor Day weekend box office in North America.October box office numbers were even more encouraging with films like Venom: Let There Be Carnage, No Time To Die, Halloween Kills, Dune and The Eternals, all drawing guests back to the theater. In fact, the opening weekend of Dune generated box office revenue that surpassed 2019 numbers for the same weekend. It is clear the global film industry is poised for a big return as restrictions continue to ease and content supply is strong. For the remainder of the fourth quarter, there are a variety of films for all audiences coming from multiple studios. Just to name a few, we have Ghostbusters: Afterlife, House of Gucci, West Side Story, Spider-Man: No Way Home, The Matrix Resurrection and Sing 2.Then we have what is expected to be one of the strongest film slates of waiting movie lover in 2022 with firms like Morbius, The Batman, Sonic the Hedgehog 2, Doctor Strange in the Multiverse Of Madness, Top Gun: Maverick, Jurassic World: Dominion, Minions: The Rise of Gru, Mission Impossible 7, Spider-Man: Into the Spider-Verse 2, Black Panther, Avatar 2 and Aquaman and The Lost Kingdom. All of this is extremely encouraging. And with the healthy moviegoing behavior we have witnessed since reopening, we know we are moving in the right direction as an industry on the road to recovery.Before I turn things over to Gord, I would like to provide a brief update on the Cineworld litigation. As you may have heard, the trial has now concluded with the closing arguments having finished last week. We feel confident in the integrity of the process that unfolded before the Ontario Superior Court and anticipate a judgment in several months. Looking ahead, as always, we are preparing for the unknown, especially as we enter the winter months. We are closely monitoring COVID infection rates and are ready to adapt as we continue navigating the pandemic while positioning our company for ongoing success.The bottom line is that Canadians want to reconnect and recharge with family and friends. And that's exactly what our theaters and entertainment venues offer. Our business is in recovery mode. And as we look forward towards our future, we are confident in our efforts to control costs and solidify our financial position. We are confident in our plans to increase visitation and welcome guests back, and we are confident in the industry's ability to come back.With that, I will turn things over to Gord. Thank you.

[Gord Nelson, Chief Financial Officer]

Thanks, Ellis. I am pleased to present a condensed summary of the third quarter results of 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 includes a fulsome narrative on the operational results. So I will focus on highlighting and quantifying some of the key items, including commentary on cost control, liquidity initiatives and outlook.As Ellis mentioned, our business turned a quarter as we were finally fully reopened, albeit with selected capacity restrictions by the end of the third quarter. Despite all locations not being opened for the entire quarter, we reported box office revenues of $94.1 million, which was approximately 53% of the box office revenue for Q3 2019. In addition, we were extremely pleased to report our first positive EBITDAaL quarter since the beginning of the pandemic with EBITDAaL of $10.8 million. In addition, we reported positive EBITDAaL in all reportable business segments. With the positive EBITDAaL, we were able to materially reduce the average monthly net cash burn to $2.9 million from $24 million when comparing Q3 2021 to Q2 2021.We continue to be focused on cost control as we reopen the circuit, and I wanted to provide some comments on our largest fixed and semi-fixed costs and the impacts of subsidies and abatements during the quarter. For the third quarter, we reported government subsidies of approximately $18.5 million as compared to $28.5 million in the second quarter of 2021. The $18.5 million reported in Q3 2021 includes approximately $16.2 million in wage subsidies under the CEWS program and approximately $2.3 million under the CERS program and provincial property tax utility subsidies. Our wage subsidies under the CEWS program increased $541,000 to $16.2 million in Q3 as compared to Q2 as our gross wages increased with the reopenings, and this more than offset the declining participation rate given the tail off of the CEWS program and our revenue increases.Our occupancy-related subsidies decreased to approximately $2.3 million as compared to $12.9 million in the second quarter, primarily as provincial support ceased after the mandated closures were lifted. In addition to the government subsidies, we continue to receive abatements from our landlords, albeit at declining amounts as time has passed and our locations reopened. For the third quarter, we received the benefit of abatements totaling $4.9 million as compared to abatements and the sale of lease rights totaling $13.1 million in the second quarter of 2021.I also wanted to highlight some additional costs incurred during the quarter. Enhanced cleaning protocols and additional staffing costs related to the verification of vaccine passports amounted to approximately $1.4 million during the quarter. Also, as the Cineworld litigation moved to the trial stage on September 13, our legal costs related to this litigation increased to $4.1 million during Q3. For the third quarter of 2021, we reported net CapEx of $3.5 million and approximately $35.1 million during the past 18 months of the COVID-19 impacted period.As we look forward for the remainder of 2021, we will only be completing contractually committed projects and required maintenance CapEx projects. And as such, we expect that net CapEx for 2021 will be approximately $30 million. Beyond 2021, we will continue to be prudent with our growth initiatives and will seek out opportunities within the disrupted retail landscape. I would now like to focus on our liquidity position. For Q3 2021, we were pleased to have net repayments under our credit facilities of approximately $26 million. Throughout 2021, we have managed our debt balance by minimizing our cash burn and looking for liquidity opportunities. Key liquidity opportunities on a year-to-date basis include the receipt of the income tax receivable and the head office sale-leaseback proceeds.As a reminder, on the latest credit facility amendment, we extended the suspension of financial covenant testing for the fourth quarter of 2021, but provided for a monthly liquidity test until the financial covenants are reintroduced. At September 30, 2021, we had approximately $272 million in availability under our credit facilities. We significantly decreased our average net monthly cash burn to $2.9 million during the latest quarter, and we believe we have positioned the company well to handle any further uncertainties through the next 12 months.As we continue to ramp up, we will continue to focus on cost controls and liquidity while driving revenues. For the month of October, we are pleased to advise that our box office revenues were approximately 80% of our box office revenues in October 2019, and we had positive EBITDA. The signs continue to be encouraging as we look forward. We see restrictions being relaxed. We see pent-up consumer demand, and we see a backlog of film titles to supply the market. We continue to focus on the safe operations of our businesses and cost management, while exploring opportunities for value creation.That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.

[Operator]

[Operator Instructions] And we will take our first question from Derek Lessard with TD Securities.

[Derek J. Lessard, Research Analyst]

I hope everybody is safe and congrats on navigating this tough operating environment. Just taking a look at your film costs, which are trending maybe a few percentage points below 50%. Just curious as to the dynamic going on there and whether this might be the studio way of maybe helping theaters and the industry get back into the black?

[Ellis Jacob, President, CEO & Director]

It's -- Derek, it's mainly because of the mix of film products and the studios that are coming out with the movies and also the international firms that we have as part of the overall movies that were released during the quarter.

[Derek J. Lessard, Research Analyst]

Okay. That's helpful. And maybe just one last one for me. Maybe it's a little premature here, but just wondering if you've started to think about life post pandemic and what that means for paying down debt further and maybe resuming a dividend payment?

[Gord Nelson, Chief Financial Officer]

Yes. So Derek, look, one thing, as we've always said, is in the short-term we significantly reduced our cash outflows from what we had done historically. So the dividend is not there right now. And also the CapEx has been materially reduced from where it was kind of pre-pandemic. Our focus right now is let's get reopened, let's get our balance sheet back more into that target zone that we feel comfortable with. And as we've always said, our comfort zone is leverage of somewhere between 2.5 and 3x. So let's get there first, and then we'll take a look at that question.

[Operator]

We will take our next question from Jeff Fan with Scotiabank.

[Jeffrey Fan]

Nice to see positive EBITDAaL. Couple of questions. On your theatrical metrics, the BPP and CPP were extremely strong compared to Q3 levels that you stated. How sustainable do you think this is? It seems like some of those price increases, some of it is mix. How do you see this kind of playing out?And then a couple of numbers questions as well. One is just the cash burn, Gord. Can you guys give us some very good month-to-month capacity or attendance numbers versus 2019? Wondering if you could just talk about the cash burn from month-to-month, how much of an improvement that you saw from September -- sorry, from July to September and then maybe in October as well. And then the final question is just on inflation and the potential impact on costs. Are you seeing any of these pressures in your numbers yet? And also, as you look out to '22, I guess, with the Ontario minimum wage increase, can you help us requantify what that is? If you have that same yet?

[Ellis Jacob, President, CEO & Director]

So Jeff, I'll take the first part of your question, and then I'll turn it over to Gord. On the BPP, as we saw, it was up over 20% compared to last year. And the large amount of that is coming because [ of new ] formats and the guests wanting to partake in the UltraAVXs, the IMAXs, the VIPs, all of those different formats, which comes with a higher BPP. And then on the CPP, which was up close to 16%, we basically are seeing a real desire for our guests to indulge in all of the food items we have to offer.And because when we had the restricted capacities, we have the benefit of processing our guests in quicker way through the concessions and some of those areas. And in addition to that, for example, in VIP, you can preorder your food before you get to the cinemas, which has also been very positive. So as far as will these trends continue as the guest increase, it gets to be a little more challenging, but we will see and work hard to try and maintain as much as possible in the concessions as we move forward. So I hope that gives you a good color on where it's from.

[Gord Nelson, Chief Financial Officer]

And then -- sorry, Jeff. And I'll take your next 2 questions. And so first of all, with respect to cash burn then is -- and we provided some monthly data to you. So we were pleased -- we're pretty much on line with where we expected. I think last time we spoke is we expected Q3 box office to be around 55%, I think, is what we said, 55% of 2019's levels. And so we came in at 53% with the reopening as we ramped up quarter -- or sorry, month-by-month in terms of our achievement of 2019 box office. We had a strong July relative to other months. September is typically a weak month for us.So when you look at cash burn, you got to -- you remember that sort of the interest costs are relatively fixed. The CapEx is a bit lumpy as -- and we've opened in a few locations. So -- but at the end of the day, we were encouraged by having positive EBITDAaL and the marginally negative cash burn during the quarter. And so as we go forward, we need to think about those attributes too as we go forward. So -- but things are encouraging. We're really pleased that we paid down $26 million of debt during the third quarter, although we had negative cash burn as we had some working capital improvements that helped us get there.With respect to your second question then on inflation then is we are seeing, I guess, a couple, 2 macro effects that people are hearing about. One is some instances of supply chain disruption, which means some level of product substitution that we're seeing at the theaters, particularly from the food and the cups and bags item. Nothing that's been disruptive to us. We have a great procurement team that's been able to source products at no additional costs. But in the long-term, obviously, we do see impacts in terms of -- and you mentioned labor and as well as an inflationary environment coming ahead.So we do believe that we have headroom and ability to pass on inflationary costs as others are doing. And so what we see that impacting us as we do believe that we have the ability to pass on that in terms of costs. And I think with respect to your question on minimum wages is -- that was something that we were expecting to see. And so there will be, obviously, an impact. We are looking to use certain tools to sort of optimize our labor scheduling to hopefully offset some of the impact of that. But that is definitely an impact that we're going to see going forward.

[Operator]

[Operator Instructions] We will take our next question from Adam Shine with National Bank Financial.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

I guess, Jeff asked the question on sort of the BPP, CPP. I'll move on to a few other revenue lines, if you don't mind. On the media front, you talked about how you're seeing some degree of recovery. And otherwise, obviously, media has been a bit of a lag in regards to keeping pace with what's clearly been a recovering box office. Maybe Gord or Ellis, can you talk to sort of how things are truly playing out so far in the Q4? Are we expected to see a meaningful recovery in media, both segments of media in the Q4?

[Ellis Jacob, President, CEO & Director]

Adam, as you said, there's always a bit of a lag, and it's a couple of months before you see the return on the media side. And with attendance continuing to grow, we anticipate a stronger Q4 from a media overall perspective and much more into 2022 as things normalize. And we feel confident that, that will continue into the future.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Okay. And on P1AG, I mean, P1AG in Q3 was about 82% of a level of Q3. I mean that's obviously seen the greatest pace of recovery. You touched on that a little bit. Maybe you can elaborate, are there any particular drivers to note? Are there any potential new contracts that may have been announced or pending?

[Gord Nelson, Chief Financial Officer]

Yes. So Adam, it's Gord here. So look, the one thing to remember about P1AG is roughly between 60% and 2/3 of its business is driven out of the U.S. And so obviously, the U.S. has been open, much more widely open than Canada. So -- and we're seeing a resurgence of people wanting to get out and particularly in the U.S. and go to LBE type concepts and play the types of games that we supply. The other thing that I want to kind of just mention out there, too, is, so from a top line perspective, we were really pleased with the results out of P1AG. And from a bottom line perspective, we were probably exceedingly pleased. They had record -- it was a record quarterly EBITDA for the business, an all-time record quarterly EBITDA. Now it was impacted by some wage subsidies that were included in those results. Over the pandemic, it's kind of cold its customer base. So some of our low-margin are negligible contributing customers. We have exited out of those relationships.But I think what you're seeing, though, as you're seeing in the numbers is that's not really impacting the overall top line, and it's definitely helping the margin. So -- and I guess the last thing to comment on the P1AG business is with what you're hearing about supply chain disruptions and in terms of -- in the tech space is the equipment sales side of the business hasn't been as significant and it has been in prior years. And that's probably not unexpected, and that would be the lower margin element of the business. So summary, very pleased with the business. It's a great quarter for that business. I think we've really optimized it and very encouraging results.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

And I guess that's a lead into the final question just on the revenue segments. When we look to the LBE, which did impress in the period, the skew of revenue was dramatically towards the gaming side, sort of 70% of revs this period compared to, let's say, 55% or lower in a similar period back in Q3 '19. Can -- so is that just the gaming side of the equation is simply resonating. We're now back in Canada. We're now talking about the U.S. opening dynamic here. So there's traction there. Are you guys doing anything to maybe drive promotions, offers or otherwise on the gaming side of the equation across the LBE circuit?

[Gord Nelson, Chief Financial Officer]

Yes. Adam, I think it's actually a little bit of the inverse look at the gaming is doing really well, but I think I would suggest that's more the inverse of the food and beverage side. We've had some operating hours, restrictions in certain provinces. The other thing is not surprising is if you think about a location like our roundhouse corporate lunches, obviously, not happening these days. So I think really, what you're seeing is a reduction in operating hours from the food and beverage side, fewer corporate occasions.And part of the issue in terms of restricting some of the operating hours of the kitchen is the labor shortages that everyone's kind of familiar with and sort of getting kitchen staff. And that's one area. If you look across our entire business, that's probably the one area where labor challenges are more prominent than others. So it's really that the -- so food and beverage has suffered a little bit during the quarter. And so gaming is doing well. And hence, you also see the margin, the EBITDA margin from that business, the percentage being higher than it's been historically because it's more -- the revenue is more weighted on the amusement side. And also, we were benefiting from some labor subsidies during the quarter.

[Adam Shine, MD, Head of Montreal Research & Research Analyst]

Maybe I'll just throw one other in. I mean you've got the covenant retest going. It shouldn't be much of an issue. I think you've talked previously that you need at least 65% box office versus 2019, let's call it, $36 million of EBITDAaL. Given the pacing that Ellis referred to back in terms of October at 80% level, obviously, a record recent weekend and some good products still coming. Are you prepared to venture an assumption in regards to Q4 level or 65% at least is obviously what you're striving for, but could easily come in obviously materially better than that, correct?

[Gord Nelson, Chief Financial Officer]

Yes. Look at that, Adam, I think the Q4 is always typically base. October is the slowest month of the quarter. Q4 is always made from U.S. Thanksgiving to the last day of the year. So we need to see how the product performs during that period, but we're encouraged by it.

[Operator]

We'll take our next question from Tim Casey with BMO.

[Tim Casey, Equity Research Analyst]

Just a couple for me. Have you begun down any of your platform yet? I noticed there was one location in Toronto that's closed. I'm just wondering if that's just a one-off sort of specific lease arrangement? Or are you doing kind of a network-wide review of and looking at and maybe closing some underperforming or older locations? And second, Gord, we've talked in the past about how you're trying to bring in automated processes into the theater, people being able to order concessions by their phone and some sort of delivery into the theater to the seats depending on the type of theater. I'm just wondering if you can update us on if you're accelerating that type of program and just hoping to kind of almost automate the process for going into next year and that way you can really preserve margins? And any comments there would be helpful.

[Ellis Jacob, President, CEO & Director]

So, Tim, on the first part of your question, it's Ellis. On the locations themselves, we continue to evaluate locations across the country. And where we've got older locations and a newer theater within a close proximity, we look at rationalizing our positions within those marketplaces. So that's something that we look at on an ongoing basis. And given the situations we were faced with, it was smart to kind of consolidate our positions in certain areas across each of the provinces. So that's really the overall as it relates to the rationalization of the screen count across the country.

[Gord Nelson, Chief Financial Officer]

And then on your second question and specifically -- sorry, go ahead.

[Tim Casey, Equity Research Analyst]

Is there any metrics you're willing to provide about how much you think you'll rationalize or what type of location or screen count you'll get to?

[Ellis Jacob, President, CEO & Director]

No. It's really looking at each individual areas that we are operating in and seeing what the future is from an overall perspective and where we are moving forward and the proximity of an existing theater. There's no real big analysis that we've done at this point, but we'll continue to review it on an ongoing basis.

[Tim Casey, Equity Research Analyst]

Got it.

[Gord Nelson, Chief Financial Officer]

And then, Tim, on your second question on rolling out sort of automation initiatives, just prior to the pandemic as we had rolled out the mobile ordering app, which is the foodservice -- or foodservice ordering in advance to -- for our VIP locations. And with the pandemic with now reserved seating or assigned seating everywhere, it makes the rollout of mobile ordering easier than having a non-assigned seating environment. So that's on our radar to -- for the first half of next year, is to roll that out across the surrogate.

[Operator]

[Operator Instructions] We have no further questions at this time. I would like to turn the conference back to Mr. Ellis Jacob for any additional or closing remarks.

[Ellis Jacob, President, CEO & Director]

Thank you. I just want to thank you all for joining our call this morning. As you heard today, we are in a strong position and have a lot to look forward to as we move ahead. Our circuit is open nationwide and close to 100% capacity in almost every province. There's a strong slate of films ahead and a reaffirmed commitment from our studio partners. We've been proactive with our efforts to encourage the visual moviegoing and to increase attendance and visitation through strategic offerings like the launch of CineClub. Momentum is building in our other businesses with a strong pipeline ahead.Our financial position is on solid ground, and we are prepared for what's to come as we continue to ramp up across the businesses. Above all this, we are beyond thrilled to be back doing what we do best, entertaining Canadians. I look forward to speaking with you all again for our fourth quarter and year-end conference call early next year. As we say goodbye on this Remembrance Day, I hope you can all take a moment to acknowledge those individuals who have served and continue to serve our country today and every day. Take care, be well and head to the movies.

[Gord Nelson, Chief Financial Officer]

Thank you.

[Operator]

That concludes today's presentation. Thank you for your participation. You may now disconnect.