Good day, and welcome to the Cineplex Inc. Q2 twenty twenty one Analyst Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mehta Tajali, Executive Director of Corporate Development and Investor Relations. Please go ahead, ma'am.
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-nineteen pandemic, adverse factors generally encountered in the film exhibition industry, risks 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 question and answer period. I will now turn the call over to Ellis Jacob.
Thank you, Massa. Good morning, and welcome to our Q2 conference call. We are so glad you could join us today. I hope you and your families are well. As we all know, overall results for the quarter were impacted by the pandemic and are difficult to compare specifically when during the second quarter in 2020, our entire circuit was still closed.
Board will cover the numbers in greater detail, but I will focus on three things, provide you an update on our national reopening and the positive guest reaction we have seen so far, share more about the exciting launch of our CineClub subscription program and finally reaffirm the measures we have in place take advantage of being poised for a strong recovery. During the second quarter, we continue to reopen our theaters and entertainment venues in provinces where restrictions were lifted. It wasn't until July 17 for the first time in over nine months that all of our theaters and entertainment venues were open from coast to coast. This was a milestone we have been working toward for a long time and I would like to thank our team for their unwavering dedication and hard work throughout this challenging time and for reopening our locations safely and as quickly as possible. We truly could not have reached this day and confidently welcomed our guests back without such committed team.
After months of closures and lockdowns, we can finally welcome back our guests to enjoy movies as they were meant to be seen and we couldn't be more excited. Based on our ongoing customer experience research, our guests are thrilled to be back and feel both safe and excited to be in our venues again. In terms of attendance, that first fully reopened weekend in July was our busiest weekend since March 2020. For the last three weeks in July, we have welcomed back over 2,000,000 guests to our theaters, which is more than the entire 2021. Our locations at The Rec Room At Palladium have also experienced strong results as Canadians start to get out of their home and enjoy entertainment experiences again.
Looking at our other businesses, we are also seeing an encouraging ramp up within Cineplex Media as client confidence returns and companies to begin to build out their advertising budgets for the fourth quarter and into 2022. Cineplex Digital Media is also experiencing positive momentum as it continues to focus on growing the business and securing new clients and partners. And our P1AG team has been very busy with a great reopening in The U. S. And the continued national reopenings in Canada.
In addition to the excitement of reopening during the second quarter, completed certain previously committed projects and opened our new VIP cinemas at the Cineplex Cinemas Forum and VIP in Montreal. Then in July, subsequent to quarter end, we opened three more new builds within an impressive two week timeframe, including our first location of The Rec Room in British Columbia and first standalone VIP cinemas in Western Canada, both located at the amazing Brentwood Centre in Burnaby, British Columbia. Two weeks later in Ontario, we opened our tenth location of The Rec Room in Barrie, Ontario at Park Place. With our location based entertainment venues now open coast to coast, we can offer our guests even more option when it comes to spending their leisure time with us. We are very encouraged by initial results coming from our newest locations with a great response from community.
In fact, we continue to see lineups at our Brentwood and Barrie locations as guests are eager to check out the new space and experience all we have to offer. As you've heard me say throughout this pandemic, the health and safety of our employees and our guests remain our top priority. With that in mind, during the quarter, we introduced our VenueSafe program, which encompasses all of our health and safety protocols in adherence with our exceeding provincial and public health guidelines. The specific protocols will evolve over time province to province and even community to community as we emerge from the pandemic. But our branded VenueSafe feel will remain consistent across all our venues so that guests can feel safe and comfortable while enjoying the escape of theater and the fun on the game.
One thing is for sure, our teams 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 the one thing they can't get at home, an immersive shared entertainment experience. At Cineplex, we focus on providing guests with exceptional experiences at a great value. Coming out of the pandemic, it is going to be even more important for us to drive habitual movie going and visitors by making it easier and more accessible. That's why yesterday, we launched CineClub, an innovative movie subscription program that provides great value our guests are sure to love.
For just $9.99 per month, members receive one regular admission ticket every month with no expiration date, the opportunity to purchase additional tickets at the Cynical uprise, 20% off concession items, and a variety of other benefits including discounts on purchases at the Cineplex store and an amusement gaming at our entertainment venues nationwide. Through extensive research, we spoke to thousands of our guests in order to design the best subscription offering for them. We asked what they wanted and delivered an exciting program that while focused on movie going, also provides great benefits and discounts across our ecosystem of businesses. We recognize that movie fans nationwide are eager to return to the theatrical experience and escape to the big screen, and we are thrilled to offer Canadians this unique risk free subscription program that provides both value and convenience. We designed CynicalUp to appeal to a wide array of guests and entice them to join the theatrical experience more frequently with their friends and family.
The additional discounts included for concessions, the Cineplex store, The Rec Room and Palladium also provide our guests with even greater value to enhance the entertainment experience with us. When looking at our peers and other markets who have successfully launched subscription programs, we are encouraged by their results and feel this program will be very successful. Although we are not providing guidance on our targets, we look forward to sharing results with you as the trial matures. It was no coincidence that we launched CineClub on the heels of our circuit reopening. Now is the time to capitalize on the pent up demand and make movie going even more accessible for our guests.
And with the significant lineup of highly anticipated films hitting screens for the remainder of this year, CineClub will give guests yet another reason to head back to our theaters and enjoy a movie on the big screen with big sound. Box office numbers are encouraging as our circuit reopens in Canada with blockbusters like F9, The Fast Saga, Black Widow, and Space Gem and New Legacy drawing guests back to the theater. As vaccination numbers rise and restrictions loosen across the country, we accept expect that by the fall, we will be close to full capacity in time for the onslaught of blockbuster films scheduled for the back half of the year. Just to name a few, we've got the Suicide Squad that just opened last weekend in an exclusive exhibition window in Canada to strong results. Free Guy starring Canadian Canada's own Ryan Reynolds opening tonight.
Shang Chi and the Legend of the 10 Rings with Canadian actor Simu Liu. The highly anticipated new James Bond film, No Time to Die. Dune directed by Canada's own Denis Villeneuve, The Eternals, Ghostbusters Afterlife, Top Gun Maverick, West Side Story, Spider Man No Way Home, A Matrix reboot, Think two. Of course, we are keeping a close eye on streaming services and windows. Studios have been experimenting with many different windowing strategies over the last fifteen months as the pandemic forced the closure of movie theaters around the world.
Some have worked well and others have not been successful. As always, we will continue to work with our studio partners to reach mutually beneficial agreements. But let me be clear, while Windows may be changing, they are not disappearing and nor is movie going. We know that an exclusive theatrical release means more revenue for all stakeholders in every cycle of a movie's life. Although some consumer habits may have changed because of the pandemic and with more streaming content available, it has not dampened the desire to go out and enjoy a shared immersive experience, the escape that movie going has always provided.
Looking ahead, we remain confident and poised for a strong recovery. During the second quarter, we remain prudent in managing costs and reduce our average monthly net cash burn to 24,000,000 down from $27,000,000 in the first quarter as our circuit reopened across the country. We were pleased to learn that queues and serves will be extended to October and continue working with our landlord partners for rent relief. I would like to thank them for their commitment and support during this extremely challenging time. Looking ahead, we will continue to actively monitor all aspects of our business and operations to minimize the impact of COVID-nineteen wherever possible.
We will manage our costs and we'll assess all future capital spending as we make our way through the recovery period. Before I turn things over to Gord, I would like to provide a brief update on the Cineworld litigation. As of today, we are nearing the completion of the discovery process and remain on target to begin a three to four trial on September 13. We are confident in our case, but can't speculate in terms of an outcome or timing. Overall, we remain optimistic about the recovery of our industry and specifically Cineplex.
Looking ahead, the recent box office results are very encouraging as is the upcoming film release schedule. Based on what we are seeing, expect guests will continue to return back to theaters largely due to increases in vaccination rates, months of pent up demand and a robust release schedule that continues to unfold in the back half of the year. Let me take a moment to pause and state what's important to note here. Our team has done an outstanding job of focusing on what we can control to protect our company during the closure period. We have prepared for this moment for many months and with our unwavering efforts to control costs and solidify our financial position, we have set the stage for a dramatic comeback.
With that, I will pass the call over to Boris.
Thanks, Albert. I am pleased to present a condensed summary of the second quarter results for Cineplex Inc. And to provide additional detail on the ongoing financial impacts of COVID-nineteen on our operations. Further reference, our financial statements and MD and A have been filed on SEDAR and are also available on our Investor Relations website at cineplex.com. Our MD and 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. The COVID-nineteen pandemic continued to have a material negative impact on all aspects of Cineplex's core businesses, resulting in material decreases in revenue, operating income and cash flows for Q2 twenty twenty one. With ongoing closures and capacity restrictions in place in Canada, we began the quarter with approximately 38 theatres and three LBE locations operating, primarily in smaller markets and ended the quarter with 86 theatres and six LBE locations open. The majority of the ramp up and reopenings occurred in June. However, our P1AG business did benefit from expanded FEC openings in The U.
S. Earlier in the quarter. As a result, we continue to focus on cost control and liquidity and we are extremely pleased to report an improvement in the EBITDA loss and the average monthly net cash burn when comparing Q2 twenty twenty one to Q1 twenty twenty one. The EBITDA loss improved to a loss of $53,200,000 from a loss of $62,100,000 and the average monthly net cash burn improved to $24,000,000 from $26,900,000 when comparing Q2 twenty twenty one to Q1 twenty twenty one. With respect to cost control, I want to provide some additional details on our largest fixed and semi fixed costs, our lease costs and our payroll expenses and then discuss our overall cash burn rate.
Lease costs are our largest fixed costs. Throughout 2020 and into 2021, we maintained strong communication channels with our landlord partners in identifying opportunities for relief during these unprecedented times. Focus has been on working with them to identify opportunities for abatements during the closure period and to jointly look for other opportunities under our existing lease agreements. During the past fifteen months of the pandemic, we were able to materially reduce net cash lease and occupancy related outflows by approximately $132,100,000 which includes approximately $70,400,000 in lease abatement savings, 27,400,000.0 as a result of the sale of certain restrictive rights to landlords and approximately $34,300,000 as a result of other subsidies and rebates. We were able to maintain similar levels of total occupancy reductions in both orders in 2021 as approximately $26,000,000 was reflected in Q2 as compared to $25,700,000 in Q1.
We continue to work with our landlord partners and look to government support to provide additional relief throughout the balance of 2021. Payroll is our largest semi fixed cost. With the initial mandated closures in early twenty twenty, we immediately initiated temporary layoffs and reduced full time employee salaries across the board by agreement with the employees. We reviewed and applied for government subsidy programs where available, including the Canada Emergency Wage Subsidy. During the past fifteen months of the pandemic, we have benefited from approximately CAD 87,500,000.0 in subsidies, primarily under this program, of which $15,700,000 was related to Q2 twenty twenty one as compared to $14,800,000 in Q1.
As we reopened during the quarter and our staffing levels increased, our theater payroll costs increased only marginally to $5,500,000 in Q2 twenty twenty one from $3,600,000 in Q1 twenty twenty one as we continue to benefit from wage subsidies. We are encouraged that the CUES program has been extended through to October 2021, albeit at reduced rates as businesses ramp up. With respect to other supplier partners and expense control, we put in place immediate expense and CapEx curtailment programs during the closure period. We worked with our supplier partners to provide elements of relief, including eliminating or reducing amounts due for contractual monthly services in addition to payment deferrals and abatements. You can see the further benefits of these initiatives in the substantial cost reductions in a number of our controllable cost categories.
In addition, we continue to monitor other subsidy and relief programs, which could benefit Cineplex. For the 2021, we reported net CapEx of $3,000,000 and approximately $31,600,000 during the past fifteen months of the COVID-nineteen 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 in the range of 30,000,000 to $40,000,000 Beyond 2021, we will continue to be prudent with our growth initiatives and will seek out opportunities within the disruptive retail landscape. With all the actions previously described, we were able to achieve a fifteen month pandemic average monthly net cash burn rate of approximately $22,000,000 per month.
For Q2 twenty twenty one, the average monthly net cash burn rate was approximately $24,000,000 down from the $26,900,000 reported in Q1 twenty twenty one due primarily to the partial reopening of the circuit and the success of the P1AG's route business in The U. S. I would now like to focus on our liquidity position. For Q2 twenty twenty one, our net borrowings under our credit facilities were only $13,000,000 During the first quarter, our total borrowings increased by $14,000,000 resulting in an increase in total debt of only $27,000,000 during 2021. We managed our debt balance by minimizing our cash burn and looking for liquidity opportunity.
Key liquidity opportunities on a year to date basis include the receipt of the income tax receivable and the head office sale leaseback proceeds. During the 2021, we received an additional $49,000,000 in income taxes recoverable as a result of the 2020 tax losses. Approximately $54,000,000 of the $66,000,000 claimed has been received to date in 2021. In January 2021, we received gross cash proceeds of $57,000,000 for the sale leaseback of the head office building. As a reminder, on the latest credit facility amendments, we extended the suspension of financial covenant testing until the 2021, but provided for a monthly liquidity test until the financial covenants are reintroduced.
As at 06/30/2021, we had approximately $246,000,000 in availability under our credit facilities. Our average net monthly cash burn for 2021 is approximately $25,000,000 during a prolonged closure scenario. And as such, we believe we have positioned the company well to handle any further uncertainties through the next twelve months. As we reopen and generate revenues again, we will continue to focus on cost controls and liquidity. For the month of July, we are pleased to advise that we had positive EBITDAaL and marginally positive net cash flow as opposed to the net cash burn we have experienced over the past fifteen months.
This is an encouraging sign to start off Q3 as we were not fully open across the country for the entire month and we're subject to capacity restrictions. As we look forward, we see positive news on vaccine rollouts. We see reopenings and restrictions being relaxed. We see pent up consumer demand and we see a backlog of film titles to supply the market on reopening. We continue to focus on the safe operations of our businesses and continue to explore further opportunities for cost reduction and value creation.
That concludes our remarks for this morning. We'd now like to turn the call over to the conference operator for questions.
Thank you very much to our speakers. Please signal by pressing 1 on your telephone keypad. Please note you'll be using a speakerphone just to make sure your mute function is turned off to allow your signal to reach our equipment. So once again, that is star one to ask a question, We'll now move to our first question over the phone, which comes from Derek Lessard Congrats
on the reopening. I know it's been a
long road for you guys.
Just wondering if you have or, are currently in in kind of any discussions with provincial authorities on on ways to stay open, in the event of future waves or or outbreaks. And is the venue safe that you introduce part of those discussions?
We keep on a regular basis, you know, having conversations with the authorities, and we basically have done the most intensive, you know, protocols to make sure that our guests and our employees are having a safe and comfortable experience in the environments that we are operating in. And as you see across the country by province, the actual requirements vary and we are looking forward to changes as we move forward. But we are also being very careful and making sure that we can provide our guests with that comfortable and safe experience.
Okay. Thanks for that, Ellis. And maybe just one follow-up for Gord on the net burn. Obviously, it reflected some pretty good cost control there, and part of that was reopening. Do you think that you have any more cost levers that you could still pull on going forward?
Okay. I would say that we've done a fairly exhaustive review, obviously, during the closure period. Part of our focus has been to the extent that we could is look at opportunities to take costs, which may have been fixed costs and look for opportunities to turn those more into variable costs given the uncertainties of the environment going forward. Obviously, technology and you're going to see the launch of some technology plays next into 2022, allow for more efficient operations. But I would say, we've done a very good job, and I'm really pleased with the team and the way we've looked at costs over the last fifteen months.
You know, in the near term, I would say we're pretty much exhausted. I think there are opportunities longer term, but in the near term, I think we've exhausted the majority of the high high amounts, high high value items. Okay. Thanks, guys.
We'll now move on to our next question over the phone, which comes from Stefan from Scotiabank. Please go ahead. Your line is open.
Thanks. Good morning. Glad to say I was one of those 2,000,000 patrons, Ellis. So glad to see you guys are reopening. Maybe just on that point, Ellis, I think you were quoted that you had about 900,000 patrons in the first week.
So 2,000,000 in the three weeks or so that that you've been reopened. So the math would suggest 500 to 600,000 for the second and third week. I mean, I know it's difficult, but what do you think is a good level to assume, you know, looking ahead until we have a a greater capacity? I know it depends on a lot of different things, including the film slate, but can you help us out there based on, the businesses that you're seeing? And then, a question as we head out to the fourth quarter thinking about the covenant.
You know, the The US I guess AMC gave some numbers talking about The US box office industry. And if you kinda do the math, they they almost suggest that about they expect about 70% of what they got in '19, so roughly 70% recovery from where they were up to twenty twenty nineteen numbers. And, again, we're we're a little bit behind The US, but what what level of, of attendance do you think we need to get back to in order to meet those covenants taking into account the the subsidies coming off in October? Thanks.
So Jeff, in answer to your first question, basically, when you look at the weeks after July, we still continue to do quite well, especially when there are large movies that open. And we are running over 50% of 2019 numbers, even with all the restrictions and going even higher than that on certain weeks. And we feel by the fourth quarter, if product is there and the situation continues to get better, we are looking at getting up to the 80% range as we get into the fourth quarter with the lifting of some of the requirements from a overall perspective as it relates to physical distancing.
The covenant question yeah. Sorry.
No. Sorry. Question.
Follow-up. Okay. So, so with respect to the covenants, I mean, you just to to make it clear is, you know, you're aware of the calculation, which is four times the q four EBITDAL amount. So that becomes an annualized amount, which would test against the debt. If you were to, as an example, use and I made comments today about July being relatively cash flow marginally cash flow positive during the quarter sorry, during the month.
So if you assume that you've maintained the same debt levels or if you use pro form a as of June 30 debt levels and backed into the numbers, I think you would find sort of an EBITDAL range between the two tests. So the total leverage and senior debt covenant ranges is that you would need to be in sort of a $26,000,000 to $36,000,000 EBITDAL range in the fourth quarter. And historically, if we look back at where we were in 2019, adjusted for certain of the Cineworld adjustments. So there was a number of additional costs that we reflected in the 2019. So I think that's important to remember.
And if you looked at 2018 and 2019, both of those quarters were about $80,000,000 of EBITDA. Significant reduction in the EBITDA amounts to stay within covenant ranges. And so when you're looking at what would be the attendance decline versus 02/2019, which
I think was your very specific
question, we're talking about a 35 roughly about a 35% attendance decline.
Okay. That's great. That's helpful. And just a clarification, Gord, positive slight positive cash flow in July. How much subsidies was included to to get to that positive number?
Yeah. So and with respect to the subsidies, I and I'm not gonna provide any more granular detail on the monthly amounts because, you know, as we look through, I I just want to what I would say on that is if you looked at our Q2 amounts, we were closed still halfway through July. And the majority so the subsidies that we received so the abatements would be somewhat in line if you looked at the q two amounts, which was roughly about $6,600,000 for the entire quarter. So if you if you, you know, divided those by three, that would be a, you know, a good approximation of July. The the the certain subsidies, provincial subsidies, so the realty tax and the utility subsidies, were still applicable in July while there was a mandated closure.
So for those for half of July, you know, we would be eligible for those subsidies. And then as I mentioned in my call script, the current subsidy is available has been extended to to the October, albeit as queues and cures are are are at declining rates. So so for the month of July, Jeff, is you know, it's it's slightly less than, you know, what you would have seen for the quarter. But as you look forward into August and September, as I mentioned, those will will start to decline.
Great. And maybe one last quick one. Our food services in The US theaters since reopening has been strong. I'm curious. Do Canadians miss their popcorn as much as our US neighbors?
Yes, Jeff, they do. And our numbers, as we see through the reopening, have been extremely strong.
Okay. Thanks, guys.
Thank you.
Thanks, Jeff.
Thank you. We will now move on to our next question over the phone, which comes from Adam Shine from National Bank Financial. Please go ahead.
Thanks a lot. Good morning. Alice, I know you are not talking targets initially on CineClub, which looks quite interesting. But if we look to the Cinemark experience, it would suggest that maybe over two to three years, you could get up to a range of maybe eight to 12% conversion of, your seed members. Does that sort of make some degree of sense in terms of at least, you know, additional parameters for expectations?
That's, Adam, a good target. But I think given our across the country presence and our ability with the SCENE program to move forward, I feel that we will see some strong numbers coming out of the CineClock program. And it's, you know, a little early. We've been a day, but we were quite excited to see how many people actually signed up yesterday.
Fantastic. And, you know, going back, I know the AMC, sort of call was mentioned. On that call, you know, acknowledging what you said earlier regarding, you know, some of the studio experimentation during the pandemic, AMC, nevertheless, going into 2022, did sign a deal with Warner, solidifying the theatrical exclusivity. Do want to maybe talk a little bit about what you're seeing in terms of either industry dynamics among your peers and or some of your expectations certainly going into next year in terms of maybe changing landscape and a ceasing of some of the experimentation, albeit maybe taking on a different context next year?
Yes. Good question. And if there are differences between Canada and The US in situation like, for example, with Suicide Squad, we opened it on theatrical without any streaming services. So it varies by studio, but looking at 2022, they are looking to window of a minimum of forty five days with most of The U. S.
Suppliers and, you know, the Canadian companies that represent them going with that forty five days of minimum window at this point.
Okay. And just maybe one other question. Just, obviously, as we continue to see the delta variant draw headlines and notwithstanding the evolving safety and cleaning fixtures you're pursuing, any initial thoughts as to how some of these passports, being proposed by the municipalities and or provinces, how you might be initially adjusting to that? I mean, it might be as simple as just having your employees check check, you know, a a phone for a QR code. But any quick thoughts as to, you know, how you address, obviously, any inflow, hopefully, of of greater patriots over the next couple of quarters?
Adam, we will be following the requirements on government regulations as they're gonna be put forward. And as I said on the call, on the safety side, we are always even further in some cases than what government's requiring. But if you're talking, for example, about vaccine passports, we will definitely look at what the requirements are between provinces and where things stand.
Okay, great. I'll leave it there. Thank you.
Thank you. We'll now move on to our next question over the phone, which comes from Tim Casey from BMO. Please go ahead. Your line is open.
Thanks. Good morning. Two for me. One, Ellis or Gord, could you walk us through what investors should expect in terms of timelines or milestones with respect to the litigation with Cineworld? And my second question is, Gord, just so we're clear, are you in terms of the outlook for the back half of the year, you're assuming or we should be thinking that Cineplex will be cash flow positive in each of q three or q four or, cash flow neutral, or do you still expect a bit of a burn?
Just any color you could give there would be helpful.
So in response to your first question about Cineworld, the trial date is basically mid September, and we are expecting that the decision to come a few months later after that. That's where we are at today and we have spent a significant amount of time and feel confident of our position.
Long do you think
to four weeks, we think it would be the timelines for the trial.
Thank you.
And on your second question then, Tim. So I want to make it clear. I was trying to do an example based on the June 30 balances of what the covenants how the covenant mechanics would work for a Q4 estimate. So your question was, will we be cash flow positive or negative for the remainder of the quarter? And I and we typically don't provide guidance.
But what I do want to say is during the month of July, when we were only open in not even all of our locations and Ontario was only open for a couple of weeks, We were really pleased to be neutral during a period with severe restrictions and not the full circuit operating. So I think you could take from that that we expect with a full circuit operating, you know, and and hope, you know, relaxing of of restrictions over time is that we would be positive for the the back half of the year.
And maybe just one follow-up, if I may. In terms of in cinema advertising, you know, that's like Gordon, you've often told us that, you know, for the big advertisers to to come in, they wanna have confidence in in, you know, the the quality of movies will attract big crowds and whatnot. Could you maybe offer a little more commentary on how the discussions are going with that particular revenue opportunity and and how you're thinking about the back half of the year with Rio?
Yes. There's a real eagerness in the media area for our clients and advertisers to get back on the screen. And with the quality of the product that we have coming forward, we feel and we believe strongly that the media business will come back and they are looking at how they get through the holiday period and into 2022. So we are quite positive about that business moving forward.
Thank you. Thanks. Thank you. We'll now move on to our next question, which comes from Aravinda Galappatthige from Canaccord. Please go ahead.
Your line is open.
Good morning. Thanks for taking my question. A quick clarification to start with, Alice. You mentioned a 50% number with respect to attendance versus pre pandemic levels. I just wanted to make sure, were you referring to just individual week or were you referring to the period and the period since the reopening?
That's question number one. And then secondly, following up on the comment about concessions. Obviously, you know, it's still a short period to kind of form an opinion on, but the conversion of attendance to concession sales, you know, CPPs, is it starting to trend back towards sort of pre pandemic levels or given sort of the restriction of movements and so forth, is there still sort of some ramp up there to be achieved? Was wondering if there's a little bit more granularity there. Thank you.
Yes. So on the first part of your question regarding the reopening, we are running some weeks are higher, other weeks depending on the product, but we are running about 55% on average above twenty nineteen for now. And when you asked about the concessions, we are seeing higher numbers than in 2019 and that isn't changing that much as we are seeing week to week with our guests coming back to the cinemas.
Excellent. Thank you. And a quick follow-up for Gord on the lease abatements. Gord, you mentioned the $6,600,000 last quarter, know, obviously to divide that by three for July. What is the longevity of those abatements?
Does it need to be renegotiated straight away for August and September? Or does it kind of go till quarter end or so forth?
And each one is unique. So each lease is a separate negotiation with a landlord. Some of them are contingent on theaters being mandated closed. Others have been included a bit of a ramp up period. So like there's no simple formula, Aravinda.
And that's why, you know, you know, it kind of suggested for the month of July, given half a closure in, you know, in our major province or half a month, sorry, of closure in our major province is that you're gonna, you know, potentially for July, see roughly a third of that, and then and then it's gonna tail off start to tail down again to reopen.
Great. Thank you so much. I'll pass the line.
Thank you.
Thank you. We'll now move on to our next question, which comes from Drew McReynolds from RBC. Please go ahead. Your line is open.
Yes. Thank you very much, and good morning. And Ellis and Gord, thank you very much for all the granularity that you've provided. That's super helpful. Two last ones for me.
For you, Gord, a couple of quarters ago, you were helpful in providing what kind of adjusted EBITDA or EBITDA margin the company could return to once kind of fully normalized, whenever that is. You update on whether reaching twenty nineteen levels is you know, certainly what what would be the objective? And then secondly, I guess, for Ellis or or Gord, on film costs, just given all of the fluidity in terms of relationships with the studios. Are is that film cost percentage expected to evolve or budget all outside of that, you know, kind of low low to mid 50% range? Thank you.
So Drew, on your first question, as we and as we've kind of always said, there's a mix of businesses as we look going forward. And the goal would be to what we want to look to get to is roughly that twenty nineteen level. But as we look and we move forward is certain elements of the business, as we incrementally add LBE locations, that helps the overall EBITDA margin. As the digital signage business grows, that helps EBITDA margin. And so it's how the mix of certain of those businesses and P1AG and the growth of P1AG adds cash flow, but it's slightly lower than average than our overall sort of EBITDA margin business.
So as the various businesses kind of grow over time is that EBITDA margin shifts. But I think as what was said is we want to get back to that 2019 level.
And then on your question regarding film costs, they have been lower because through some quarters, we were playing up older products and lower film costs. And then also when the movies were available on streaming, we were discussing with our studio partners and getting to a better positioning. And in the long run, it's all about how well the movies do and what the results are and that will impact where the film costs go and also where the windows are as we move forward. So there are a number of variables, you know, before we can pin down the final percentages.
Okay. Thanks very much, and great great to see the reopening.
Thank you. Thanks, Drew.
Ladies and gentlemen, this concludes today's question and answer session. At this time, I would like to turn the call back to Mr. Ellis Degel for any additional closing remarks.
Thank you. Thanks again for joining the call this morning. As you heard today, we hit the ground running as our entire circuit reopened last month and we were able to deliver the first class experience that our guests have missed for so long. We launched an innovative subscription model with CineClub that will help drive regular movie going and make the experience even more accessible and affordable for our guests. Above all this, as with every turn through the pandemic, we adapted with great agility and resilience, manage our costs and added the liquidity we needed to see us through.
I am confident in Cineplex and the industry's ability to recover and look forward to providing our guests with an exceptional experience that they can only get in one of our theaters or entertainment venues. I look forward to speaking with you all again for our third quarter conference call in the fall. Until then, please enjoy the rest of your summer and our movie theaters. And be well.
Thank you very much to our speakers today. Ladies and gentlemen, this does conclude today's call. Thank you very much for your participation. You may now disconnect.