Good day, and welcome to the Cineplex Incorporated Third Quarter twenty nineteen Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Melissa Prezaco, Senior Manager, Investor Relations and Communications. Please go ahead.
Thank you. Good morning, everyone. Before beginning the call, we would like to 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, adverse factors generally encountered in the film exhibition industry risks associated with national and world events, discovery of undisclosed material liabilities and general economic conditions. I will now turn the call over to our President and CEO, Ellis Jacob.
Thank you, Melissa. Good morning, and welcome to Cineplex Inc. Twenty nineteen third quarter conference call. We are pleased you could join us this morning. I will begin by providing a top line overview of our third quarter results and a summary of our key accomplishments during the period.
Then we will look at some of the upcoming films for the rest of the year and into 2020. At the conclusion of my remarks, our Chief Financial Officer, Gord Nelson, will provide an overview of our financials and then we will follow with a question and answer period. With growth across all of our businesses, Cineplex delivered an impressive third quarter, including record total revenue of $418,400,000 up 8.3% and a 21.2% increase in adjusted EBITDA, as we leveraged the strong film product and further executed on our diversification strategy. In addition to the increases in attendance and box office revenue, which were largely the result of the quarter's strong film slate, we also achieved third quarter records for food service and amusement revenue and achieved an all time quarterly record for digital place based media revenue. These positive results are a great example of how our diversified businesses continue to build scale and make more meaningful contributions to our bottom line.
New third quarter records were also achieved for BPP of $10.16 and CPP of $6.68 as we grew transaction size through expanded offerings in our theaters. Top performing films for the quarter included The Lion King, Far From Home, Fast and Furious, Hobbs and Shaw, IT Chapter two and Once Upon a Time in Hollywood, all of which helped drive the one point eight percent increase in attendance this quarter. Now let's take a look at some of our key accomplishments during the third quarter. Exemplifying our commitment to providing Canadians with an unparalleled moviegoing experience, we opened Canada's second 40X auditorium at Scotiabank Theatre Chinook in Calgary, Alberta. And just this past Tuesday, subsequent to quarter end, we opened our third 40X auditorium at Cineplex Cinemas, Winston Churchill in Oakville, Ontario.
For those of you who haven't tried it yet, 4DX is a fully immersive experience with motion seats and environmental effects like wind, mist and scent that work in concert with the action on the big screen. We will continue to expand our footprint of both 4DX and ScreenX experiences in the coming months. Also during the quarter, we were pleased to announce plans for a new Cineplex VIP cinemas at Royal Mountain Montreal, Quebec, which is expected to open in 2022. Within theater food service, we continue to expand our alcohol service to an additional 12 theaters today totaling 83 locations within three provinces, that's over half of our circuit. And in addition to our Uber Eats offering at 101 theaters, we also began a pilot program with Skip the Dishes, ensuring guests can enjoy our signature popcorn and other popular concession items anytime they want right to their door.
Key contributors to the record CPP I mentioned earlier included growth in alcohol and merchandise sales and also within Cineplex VIP cinemas as we continue to expand food and beverage offerings at this increasingly popular premium experience. Looking at alternative programming, we continue to bring new non Hollywood content to audiences across Canada, both in our traditional auditoriums and our 24 dedicated event screen auditoriums. During the quarter, we featured live events from Andrea Ryu, Fleabag by Phoebe Waller Bridge and Margaret Atwood's book launch of The Testaments. Anime features along with documentaries from BTS, the pop sensation and the feature Game Changers were all part of the quarter's lineup. Our international film programming also featured several strong performers in Hindi, Punjabi and Filipino with the film Hello, Love, Goodbye becoming the highest grossing Filipino title in Cineplex history.
Switching gears to our online offerings, our guests are becoming comfortable with and more reliant on mobile technology inside and outside of our theaters, which is why the Cineplex mobile app is such an important asset for us. During the quarter, online and mobile ticketing represented 31% of total admissions, up from 24% in the 2018. Total registered users for the Cineplex store increased by 43% in the third quarter. We also saw 181 increase in device activations as compared to the prior year period. Growth in the stores largely driven by increases in consumer use of the Cineplex apps embedded on smart TVs and leveraging the Cineplex ecosystem by providing store offers to guests who visit our theaters and purchase concession combos.
Moving to Media, I am very pleased to report that our Media business reported a 30.6% increase in revenue as a result of growth in both Cinema Media, which was up 13% and Digital Place based Media, which was up 57.2. Growth in Showtime and Preshow advertising sales resulted in the increased Cinema Media revenue for the third quarter with Automotive continuing to lead as a top category. And as I mentioned earlier, Digital Place based Media reported an all time quarterly record as a result of increased project installation revenue from new and existing clients. Speaking of new clients, in the third quarter, we also announced that Cineplex Digital Media was selected to manage enhance AMC Theatres digital network at approximately six thirty locations across The United States. This includes box office signage, theater menu boards and other ancillary signage.
Moving on to amusement, gaming and leisure. It has been a particularly exciting time for our location based entertainment team. And this quarter, we opened our very first reinvented Palladium concept in Brampton, Ontario. Retrofitted from what was once our Orion Gate Theatre, the new Palladium is designed specifically for teens and friends and family. We are pleased with the response from the community so far as the new Palladium becomes Brampton's ultimate place to play, featuring the latest video games, a road course, bowling and virtual reality as well as a range of fresh food and beverage offerings that are fun to eat.
And just this weekend, subsequent to quarter end, we celebrated the grand opening of our second new Palladium location in Whitby, Ontario. Our plan remains to open 10 to 15 Palladium locations in midsized markets over the next three to five years. Earlier in the call, I spoke about the newly announced Cineplex VIP cinemas opening at Royal Mount in Montreal. As a direct result of regulatory amendments made by the Quebec government in partnership with Cineplex, we also announced plans for the province's first location of The Rec Room at Royal Mountain Montreal. This time to become the city's new hotspot, the entertainment complex is expected to open in 2022 and will feature incredible dining options, exciting live entertainment, over 100 amusement games and attractions, including virtual reality.
Shifting our focus to Topgolf. Last quarter, I shared that we had secured a site for our first location within the GTA. While I wish I could share specifics, we are still conducting our due diligence on the site and hope to have an announcement shortly. Turning to esports, World Gaming Network held its second annual Rocket League North American Championship Tournament with its grand finals event taking place at the hugely popular Fan Expo Canada in August. We entered into this industry early in its evolution in North America and today it's fast becoming one of the largest esports businesses with many opportunities.
As such, during the quarter, Cineplex initiated a review process and engaged a financial adviser to identify a strategic equity partner to further develop the World Gaming Network business. While we are still early in the process, at its conclusion, we may retain a minority interest in the operations of the business. Gord will go into more detail as it relates to our reporting shortly. Moving on to the SCENE loyalty program. This quarter, we celebrated our 10,000,000 member milestone, reaching 10,100,000 members as of September 30.
As a tool for growth, the value of SCENE is significant. It drives increased customer frequency and provides more channels for us to communicate directly and regularly with our guests. SCENE also increased its overall awareness and spend, not just at our network of 165 theatres across Canada, but also across the entire Cineplex ecosystem of businesses. But perhaps the most valuable benefit of SCENE is the tremendous insights into customer behavior through the rich data we have collected. Using this information has and continues to help us better understand our guests' needs, enabling us to analyze and influence behaviors across the business.
Now let's take a look at some of the films for the balance of the year and into 2020. The fourth quarter got off to a good start, largely because of the huge success of Joker, which had the highest ever opening weekend in the month of October and has become the highest grossing film to open in the month, reaching $316,000,000 in domestic box office to date. Looking ahead, the remainder of the year has a great lineup of films, including Fold versus Ferrari, A Beautiful Day in the Neighborhood, Frozen two, The Next Level and The Rise of Skywalker, which are already generating some strong buzz. So much so that the first week of Cineplex presales for Frozen two has already set a record for advanced ticket sales for an animated film at the same point in time. There are two other films I would like to mention, both opening on December 25, Merci Porte Tooth, which is expected to be a big holiday release in Quebec and Little Women directed by Greta Gerwig and starring Emma Watson in the reimagined classic.
As you can see, we have what appears to be a promising film slate for the remainder of the year and are encouraged by the 2020 film slate that's been announced to date. Films such as Birds of Raise, The Kingsman, A Quiet Place Part two, Mulan, the James Bond movie, No Time to Die, Trolls, World Tour, Black Widow, Fast and Furious, Wonder Woman 1984, Top Gun, Mavericks, Minions, The Rise of Gru, Tenant, and an untitled Spider Man film. Before I turn turn things over to God, let me take a moment to discuss a few questions and concerns I have received about some of the new streaming platforms that are available. Our industry and specifically Cineplex has experienced many disruptions over the years from various economic cycles and technological advances, including VHS, cable, DVD, the Internet and now streaming. But time and time again, over the past thirty plus years, moviegoing has long excelled amid changes in the industry.
The reason is when there's great content available, our guests want to see the film in the way it was meant to be seen, on a big screen with great sound and amenities and seek out that social movie theater experience. And that's why we remain ever focused on keeping movie going top of mind by putting the guests first. Today, we offer our guests nine different ways to watch a movie, including two d, three d, four d x, Screen x, Ultra AVX, IMAX, D BOX, VIP Cinema, and the Clubhouse, always bringing the very latest in innovation and technology for a totally immersive experience that cannot be replicated at home. In summary, Cineplex experienced a very strong third quarter by capitalizing on the robust film lineup and continuing to execute our diversification strategy. Looking ahead, I'm encouraged by the outlook of film product for the remainder of the year and the ongoing growth of our diversified businesses.
Adding to this, with our strategic focus on spending for growth, we remain confident that we are positioning Cineplex well for the future. Finally, I'd like to congratulate the entire Cineplex Ford team for being recognized as one of the top 40 most valuable Canadian brands for 2019. The study conducted by Brand Z was based on in-depth consumer research, and I'm extremely proud to see that Cineplex was highlighted numerous times for our customer experience, emotional connection, excellent reputation, clear purpose and good citizenship. In addition to this tremendous recognition, our team was also honored with the Best Brand Experience Award with callouts to our Uber Eats partnership, SCENE loyalty program, VIP Cinemas experience, brand meaningfulness and brand innovation. With that, I'll turn the call over to Gord.
Thanks, Ellis. I'm pleased to present the third quarter financial results for Cineplex Inc. For your further reference, our financial statements and MD and A have been filed on SEDAR this morning and are also available on our Investor Relations website at cineplex.com. Before I review the results, I would like to note that Q3 two thousand and nine is Cineplex's third quarter reporting under the new accounting standard for leases IFRS 16. I would like to remind you of the new non GAAP measure we are providing, adjusted EBITDA after leases or adjusted EBITDAaL, to assist with the comparability to prior year periods.
With respect to the transition to IFRS 16 leases, we have noted that there continues to be confusion in the market with respect to the consistent reporting of key financial metrics provided by financial data provider services, including Bloomberg, Capital IQ and FactSet. This confusion in the marketplace is not unique to Cineplex and applies to many organizations with large lease portfolios. The inconsistency relates to the use of an operating earnings metric before or after a lease cost and a debt measure, which either includes or excludes a lease obligation liability. I caution investors to use additional diligence when reviewing metrics provided by data provider services. We continue and will be working with these providers to help rectify the situation and give investors more accurate information.
As Ellis mentioned, during the third quarter, Cineplex initiated a review process of World Gaming Network's online esports business, including Fujitsar League, engaging a third party adviser to identify a strategic equity partner. As a result of this process, the operations of World Gaming Network are reported separately in the financial statements categorized as discontinued operations. All the results I will discuss today exclude any impact of World Gaming Networks in the current and comparative periods as prior year amounts have been restated to reflect this treatment. Growth in results from all lines of business resulted in total revenue increasing 8.3% to a third quarter record of $418,400,000 and adjusted EBITDA increasing by 21.2% to $62,300,000 Turning to specific items, Cineplex's third quarter box office revenue increased 2.6% to $177,900,000 compared to $173,300,000 in the prior year. The increase was due to the third quarter VPP record of $10.16 an increase of $09 or 0.9% from $10.07 reported in 2018 as well as the 1.8% increase in attendance.
The third quarter benefited from a wider appeal of the film slate than in 2018. Foodservice revenue increased 8.6% to $125,600,000 Included in Foodservice revenue is $8,500,000 from The Rec Room. Excluding revenue from LBE, Theatre Foodservice increased by 8.9% from the prior year to a third quarter record of $117,100,000 due to the 6.9% increase in concession revenue per patron to a third quarter record of $6.68 and the 1.8% increase in attendance. CPP growth was attributed in part to expanded food offerings, including those available at Cineplex's VIP cinemas, outtakes, pricing changes and additional licensed locations. Total media revenue increased CAD10.1 million or 30.6% to CAD43.3 million for the quarter.
Cinema revenue, which is primarily theatre based, increased 13%. Digital place based media revenue increased 57.2% compared to the prior year, primarily due to higher project installation revenues. For the quarter, project revenue was up 273.4% due to the increased installations, including AMC, A and W and McDonald's. At the end of the third quarter, our location count of 14,559 locations represents an increase of 8.5% over the prior year and an increase of 7.8% during the first nine months of twenty nineteen. Amusement revenue increased CAD4.3 million or 8% due to continued revenue growth from P1AG as well as the additional locations of Rec Room and our new Palladium.
P1AG revenues increased by CAD2 million due to an increase in revenue in Canada and The U. S. Margins on the P1AG business increased four fifty basis points as compared to the prior year to 14.3% for the third quarter and or 13.3% on a year to date basis. P1AG EBITDAL for the third quarter increased 52.1% to $6,400,000 With respect to location based entertainment, which includes results from The Rec Room and The New Palladium, total revenue grew CAD2.8 million over the prior year, primarily due to the additional locations. We opened our first reimagined Palladium in Brampton on September 1639.
Store level EBITDAaL from location based entertainment increased CAD0.6 million or 17% to CAD4.1 million, and the store level EBITDA margin increased to 20.7% from 20.6% in the prior year. Turning briefly to our key expense line items. Film costs for the quarter came in at 52.7 percent of box office revenue as compared to 52.1% reported in the prior year, reflecting the relative mix of films in the quarter. Cost of food service for Q3 twenty nineteen, excluding CAD2.2 million incurred at LBE was 21.5% as compared to 20.5% in the prior year. Cost of food service at LBE was 26.1%, down against 28.2% reported in the prior year due to improved cost management.
The increase in theatre concession costs was primarily due to the mix of food and beverage items sold, including the impact of increased number of locations with alcohol sales. Other costs of $191,000,000 decreased $26,000,000 or 12%, primarily due to the impact of the adoption of IFRS 16, partially offset by increased costs due to an increase in business volumes in the non exhibition businesses, new theater locations, increased operating hours in the exhibition business and minimum wage increases. Other costs include theater occupancy expenses, other operating expenses and general administrative expenses. Theater occupancy expenses were $18,200,000 for the quarter versus a prior year actual of $53,200,000 a reduction of $34,900,000 This was primarily due to the impact of IFRS 16, which reduced rent expense by CAD38.8 million. Additional details on the movement arising from the transition to IFRS 16 can be found in our MD and A.
Other operating expenses were CAD156.7 million for the quarter versus a prior year actual of $145,800,000 an increase of $10,900,000 Other costs are net of $4,500,000 of cash rent related to the lease obligations arising on the adoption of IFRS 16. Increases included an increase in media expenses of $8,700,000 due to increased media business volumes and revenue mix shifts a $2,200,000 increase in LBE expenses due to increased number of locations and a $1,200,000 increase due to new and acquired theatres, net of a reduction of $400,000 due to disposed theatres. Same theatre payroll increased by $2,300,000 mainly due to increased operating hours, additional attendance, expanded concepts and minimum wage increases. G and A expenses were $16,000,000 for the quarter, which was 2,200,000.0 lower than the prior year due to a $800,000 decrease in restructuring costs and in addition to other cost reductions, dollars 400,000.0 decrease in share based compensation costs. Interest expense increased $11,400,000 during the quarter to CAD18.3 million, primarily due to the inclusion of CAD11.6 million in lease related interest arising on the transition to IFRS 16.
Net CapEx for the third quarter was CAD27.1 million, flat against the prior year. We are continuing to confirm our net CapEx guidance of $165,000,000 for 2019 and $170,000,000 for 2020. Net income for the quarter from continuing operations was up $2,800,000 or 31.1% to $15,100,000 and basic EPS was up $05 or 26.3% per share
to $0.24
per share, on the strength of the results for the quarter, offset by the impacts of the adoption of IFRS 16, which negatively impacted our net income by approximately $3,800,000 in the current period and approximately $6,400,000 or $0.10 per share as compared to the 2018. As Ellis mentioned earlier, we have steadfastly focused on creating entertainment and media company for the future. We are prepared to prudently use both our operating cash flow and our credit facilities to invest in these new businesses. We continue to remain comfortable with where Cineplex Inc. Is positioned today.
We are still in the early execution phase of a number of our diversification initiatives and our balance sheet allows us to continue to invest in these growth initiatives to deliver future value for our shareholders. That concludes our remarks for this morning. And we now like to turn the call over to the conference operator for questions.
Thank you. We will take our first question from Derek Lessard from TD Securities. Please go ahead. Your line is open.
Yes. Good morning, everybody, and congrats on the quarter and the awards, which I think are well deserved. I think my first question is maybe for Gord. What was going on with your EBITDA margin in the media business? It looks like there was a significant compression in the quarter.
And maybe if you could just follow-up to
that is should we expect it to
go back to normalized levels?
Yes. I mean, what I highlighted in my comments was that the costs increase in media was related to a mix shift. So when you look at the components of revenue in the third quarter, I highlighted in my comments and we put in our MD and A, the growth in the installation revenue and the project based revenue. So that's a lower margin business than the services business and then the cinema media business. So it's really related to the amount of the installation revenue that occurred during the third quarter.
Okay. And I guess once you complete these rollouts with your new customers, do you expect sort of a shift back?
Yes, absolutely. Okay.
All right. And just sort of and maybe if you could remind us again when you expect to reach peak spend and assuming I guess there's no assuming no delays with Topgolf?
With Topgolf, as I said, we are still anxious and awaiting final due diligence and we will confirm that in a short period of time with our first location and Gord on the spend. Yes.
So I mean and that's why we have the higher amount that was kind of retained in the 2020 guidance of the $170,000,000 So peak spend would probably be in 2020 as we're getting that site ready for opening in 2021.
Okay. That's it for me. I'll reach you. Thanks.
Thank you.
We will now take our next question from Adam Shine from National Bank Financial. Please go ahead. Your line is open.
Thanks a lot. Maybe one question for Ellis and a couple for Gord. Ellis, just in terms of some of headlines we saw in recent weeks on The Irishman, obviously, it's going to debut on the streamer after about a twenty six day window. I think there was some talk in the market that Netflix was maybe prepared to go to forty five days, but that theater operators didn't want to go less than sixty days. Maybe you can talk around that.
I don't know if those metrics are true or not. Obviously, were part of private negotiations. But can you speak to the concern around maybe setting the precedent for that type of movie? Or could that could there have been some degree of accommodation for obviously a special movie like that? Maybe I'll leave it there and I'll move on after with Gord.
Yes, it's a great question. And as we've said repeatedly, we like to give great movies, great experiences in our theaters, but we have a number of partners that we work with closely. And we feel that it's important that the theatrical window is observed by all of the players coming to our theaters. And no different for Netflix and no different for any of the other suppliers. And yes, we would welcome them into our theaters.
And I think as part of their whole building of their business, which they continue to evolve, is to get that theatrical release creates a lot of positive buzz for their product. And I always say we are still the engine that drives the train. So it's a decision, and we'll continue to keep speaking with them and we'll see over the next couple of quarters where things end up.
Okay. Maybe for Gord. On one of The U. S. Peer calls, they talked about the fact that the recruitment on DCIP would perhaps peak out next year and then sort of run its course ultimately in 2021.
Can you give us just a quick little update perhaps where things stand with respect to CDCP up here? And then with respect to the gap in your box office revenue performance and industry. There were some adjustments to industry numbers, some restatements to last year. But I think your industry data point that you provided, I presume reflects that adjustment.
Yes. So I will take the first question on CDCP. And for everyone who's not familiar with CDP, it's a Canadian digital cinema partnership where we set up a really, there's a third party entity that's set up for the funding and financing of digital production role as in Canada, DCIP, which Adam referred to as the similar type of partnerships set up in The U. S. We do show on our statement of changes of cash flow, a net cash received from CGCP line.
It was roughly CAD12.5 million on a year to date basis in the third quarter of this year. And very similar to the comments that were made in The U. S. Is we expect that to continue until early to the midpoint of 2021. So that will continue along to that point of time.
And with respect to the industry question, I'll just turn that over to.
Al. Yes. Adam, as you mentioned, our under compared to the box office for the industry, number of factors come into play in the quarter. We have taken two of large theaters where we are converting them to loungers. So when we take screen out, that affects our box office.
We've also got the issue of the drive ins. This summer, the drive ins did extremely well. That's 40 drive ins across Canada. We unfortunately or fortunately only have one of them, which is in the province of Quebec. So and they overperform compared to the prior year.
And there's also a number of theaters that are IMAX locations that never used to report in the past, and they are now included in those totals. And there was also an IMAX film called Super Dogs, which played very well in those IMAX locations from an educational perspective and also box office. And finally, there are theaters that are being built in Canada. As we talked about in Fort McMurray, there was a new theater put in. In Lauritville in Quebec, there was a new theater put in.
And the difference is every time you add those, it increases the size of the market. And because our share is as high as it is, the percentage looks like it's impacted more than one would see on a regular basis. And the other thing is we continue to look at the square footage and what we are using the theater for. So in the case of Orion Gate, that was a theater that was delivering us with box office. We've converted it to a Palladium.
So that doesn't come into the totals. And then we look at other opportunities as we move forward through the whole process. And we've still got a number of things on the goal that we continue to focus on. And to me, it's all about how do we use the available square footage and increase the value that we are getting out of that square footage within all of our complexes.
Great. I appreciate the color. Thanks. I'll queue up again.
Thank you.
We will now take our next question from Jeff Fan from Scotiabank. Please go ahead. Your line is open.
Thanks. Good morning, everyone. A few questions. First, maybe touch on The Rec Room. Saw some good growth this quarter, but you also added a few locations that you didn't have before.
So it looks like from a revenue per location perspective or same store sales, Wondering if you can talk a little bit about the performance there. And also the mix between Food and Gaming, looks like the mix for Food was down. Wondering if there's anything specific, whether it's macro related or spending, consumer spending related that's impacting that in the quarter? Thanks.
Sure. Thanks, Jeff. It's Gord. So as we look at sort of the same store results and as we kind of get past the first twelve to eighteen months in a number of locations, we do see the honeymoon period come into play such that the same store revenue numbers decline after that first twelve to eighteen months of operation. What we have seen is that and again, we have a limited number of locations out there today.
So and each one of them has performed differently over the various quarters. I think we highlighted in the first quarter that the same stores, our expectation was the honeymoon impact was around 12% or so. I would say in the second quarter, it was significantly less than that. It was almost neutral. And then the third quarter, it was a bit higher than the average.
So I would say we're still seeing trends that the numbers are plus or minus around the 12% range. And so in the third quarter, we saw something that was just a little bit higher than what we've seen in the first two quarters. So still, again, limited number of locations, limited number of experiences, each one of them is unique and has their own set of criteria. With respect to the second part of your question, which was on food and beverage versus amusement, what we are seeing also is that for a number of these locations, and you may be familiar with some of the announcements related to the VOID and some of their new experiences, is that we've been actually expanding some of the amusement options that are out there. In particular, we've kind of called out the void experience, which wasn't at the West Edmonton Mall on opening.
So we do have some expanded amusement options, which is driving the growth. But with that said, we are seeing what the market is seeing in terms of some of that late night food and beverage spend has been a bit softer in recent quarters than it has been historically.
And then my next question is on to the digital media. Again, you're seeing some good implementation and installation of locations, seeing some good momentum there. Wondering if you can talk about the pipeline of installations for the near to medium term as well as the recurring revenue stream that, I guess, that you should be generating from that business beyond kind of the lumpy installation business?
Sure. So we expect to kind of continue to see in the short term for the rest of 2019 see some of that continued revenue growth that we've seen in the first three quarters of this year. So we're continuing to roll out with some of the clients that we mentioned earlier. We have a lot of prospects that we've announced. I think we've continued to call out A and W as a customer.
And if you do recall, it was about three years ago, we of we announced the contract with A and W, and as we've mentioned time time and time again is that when we're in the QSR space and we have the franchisee relationship, you know, there's often a long deployment period. So we have a number of contracts in place or agreements in place with QSR operators. Those take time, but we are very encouraged by the results that we're seeing in the short term in terms of the significant growth. With respect so that creates the lumpiness. With respect to the recurring is that lumpy installation revenue is typically the precursor for that recurring revenue stream.
I would make a comment that a component of the recurring revenue stream is based on advertising sales in our digital mall networks, and so that can go up and down as well as the level of creative services that individual customers request during a time period.
If I can just be a little bit more specific, what was the recurring revenue stream? Did that grow this quarter compared to the same period a year ago or early this year?
No. Again, it's relatively flat. And again, what we saw The two elements I actually called out, so the level of creative work and the amount of advertising revenue stream created that sort of neutral impact.
Okay. And just a couple of more strategic questions. One on esports, know that you made the announcement about looking at opportunities. Maybe just stepping back, the strategic view of how you see this industry kind of moving forward And why why take a minority position of perhaps a new entity or a a and a sort of redefined entity? And then just on SCENE, I think, Ellis, you and I spoke before about a partnership that you had engaged in with, one of the studios on marketing new films using your SCENE data.
Wondering if you can just give us a bit of an update as to how that one is moving along.
Sure. I'll start with the esports question. And we entered the esports space a number of years ago. We are a very Canadian based company. We have businesses in The US.
Our locations are primarily sort of location based entertainment and theaters are primarily based in Canada, virtually entirely based in Canada. What we've recognized is there's a number of elements of the esports ecosystem. We and I I give the team great credit for building the World Gaming Network and and the Collegiate Star League to where it is today. We have great connections with amateur esports athletes all across North America as well as viewers of esports content. But one thing we'll recognize is esports is a global business.
And the impressions that we're seeing on our live events, know, with a small share of that viewership that is Canadian, and the majority of the viewer is, the viewership is international. And, you know, as we look and how do we grow this business going forward, you know, our view is we've got great connections with esports athletes in Canada and The US. We're primarily in the amateur space. The ecosystem is much larger than the space that we're in today. It includes pro teams, it includes content creators, it includes distribution partners.
But mainly the business is global. And how do we grow and and we believe the better opportunity is to position ourselves with other members of the ecosystem and global players in the space. So that is primarily our focus and why we're going through this review
process today. Great. And Jeff, on your second question regarding with the studio, as you know, the studio is Lions Gate and we are working on their first film, which is Knives Out, which will be released shortly. And part of it is basically having the medium and marketing budget and taking a portion of that and having Cineplex's assets like SCENE and other assets being used to promote those films. And that will be the first film that we will be doing together.
And it's a partnership with Mongol Media and also with a marketing Victor Lowy. So you can see the results and we'll see the percentages when the phone gets released, I guess, days from now or two weeks from now.
Okay. Thanks.
We will now take our next question from Aravinda Galappatthige from Canaccord Genuity. Please go ahead. Your line is open.
Good morning. Thanks for taking my question. Two from me. The first one with respect to Cinema Media, obviously, very nice growth in Q3 as was the case in the first half of the year. Obviously, a much stronger year this year than last year.
I was wondering if in addition to the revenue growth, Gord or Ellis, you can talk a little bit about the structural changes that have occurred. I'm referring to perhaps the change in the sector mix in terms of the advertisers and perhaps even the size, individual sizes of the contracts. Is there anything that's, you know, when you look at the individual components where there's sort of a difference that you can call out that will help us sort of think through the sustainability of the improvement in cinema media? And then the second question, with respect to VIP, obviously, continues to contribute to the nice CPP growth that you have. I realize that over the last year, there's only been a few additions to the VIP count.
Wondering if, Ellis, you're kind of reaching sort of that maturity stage for VIP? Or is there still a bit more running room there? Thank you.
Okay. So on your questions, the first one regarding Cinema Media, we focused and we actually broadened the base of our clients, and that's really been a big focus because in the past, we relied heavily on a number of clients to deliver the numbers at the end of each quarter. And by broadening the base, it also takes away the volatility that we had suffered in the past. So that's been positive, and we're also using technology to help us and inventory management and the ability to market quickly. So those are all been positive for us as we look forward for that Cinema Media business.
On VIP, they continue to do extremely well. As you noticed, we just announced another one for the province of Quebec. We have one opening in Brentwood, and we are also working on a couple of theaters where we will retrofit them to basically put VIPs into those cinemas that have numerous screens that we can better benefit the bottom line with the VIP experience. And what helps with the VIP is also the experience for the guests and also the ability to make it a one stop shop when it comes to having a great evening out.
Great. Thank you. I'll pass the line.
We will now take our Rob Goff from Echelon Wealth Partners. Perhaps
if we could go back to the focus on increased over the top provisions. Could you talk to perspectives you might have where there are opportunities to do showcasing or specific events working alongside and taking advantage of the increased competition or the numerous over the top providers?
Well, we have a great asset in our Cineplex store and ours still has close to 8,600 different movie titles. And one of the things that, you know, I've talked with a number of friends and one of their challenges are with so many different streaming services, they don't know where to find what they're looking for. And we give them the capacity to go in and for a small rental fee, they can watch what they want, when they want it. And to me, that's also very, very positive. And in the past, we've also basically done in the theaters events that are part of those streaming companies like we did Game of Thrones with Pell.
So there are lots of opportunities, I think, going forward, both from an event perspective in the cinema and also in our store as we go forward.
Okay. And if I could turn it to a different subject. Could you talk to the experience you've had with introducing alcohol across more theaters? You've been pleased with the both the revenue generation and you're okay with the incremental costs associated with that?
Well, it definitely has helped our concession per person. And most of them are relatively new rollouts and it continues to be an overall positive experience for our guests. And we've rolled it out close to 83 locations, as I mentioned, and the CPP impact is $0.17 $0.07 Sorry.
Just to clarify that $07 would be in your aggregate, not within those specific locations?
Correct. That's the aggregate. Okay,
perfect. Thank you.
Thanks.
We will now take our next question from Drew McReynolds from RBC Capital Markets. Please go ahead. Your line is open.
Thanks very much. Good morning. Three questions for me. First, maybe Gord, can you comment on the issue in the quarter in terms of that security dynamic? Was there any impact in terms
of the results that we see? Yes. Just quickly that SCENE issue was not a breach, but there were individuals, fraudsters fishing for information and looking to garner points. And we basically canceled the specific cards and reissued them And the situation is totally under control, and there's no material financial impact.
Okay. Thanks, Alex. Second, back to The Rec Room, certainly a little bit below our forecast. Can you remind us the seasonality that you're seeing now across the rec room? And is there anything that you think needs to be, I guess, fundamentally evolved in terms of the concept when you look at how everything is performing to date?
Yes. So in terms of the seasonality, I mean Q2 and Q3 are typically the weakest two quarters with Q4 obviously being the strongest and Q1 being the second strongest. Now they're fairly I mean there's not a wide variance in terms of how the percentage is allocated amongst the fourth quarters, but definitely Q1 and Q4 Q4 by far the strongest. So on the second question, look, we're continually looking to refine that concept. We've really only introduced our first new generation Palladium during the quarter.
As we mentioned, we've begun to reduce the square footage from something that used to be in the 40,000 to 60,000 square foot range to closer to the 40,000 foot range. So we're always fine tuning the menus. We're fine tuning the allocation of floor space. And I think what also in the labor models, but also we've moved into other geographies too. So we're in Eastern Canada.
We're in smaller towns now and fine tuning it to determine what works within that local community too. So and that does take a bit of time to tune up. So it's always going to be a consistent evolution, I think, with Tune in terms of the overall size, the overall allocations, but each market will have its own fine tuning too.
Okay. Thanks, Gord. One last one then. Maybe back to you, Ellis, on SVOD product out there through the theater. I think the interesting dynamic with a lot of the consolidation we've seen in The U.
S. And then subsequently the launch of these new platforms is there's the movie studio and the direct to consumer SVOD platform embedded in the same company. I know it's a complex web that needs to be navigated, but do you ultimately expect some kind of alignment among all the major players when these major players and partners clearly are running now two kind of different models underneath the hood, if you will?
Yes. And I kind of equated back to the days where you had these same partners running specific television channels and having movies of the week. And to me, this is going to be more of that content that's going to be available. But as I've said before, and Ernst and Young study that was done by industry basically came up with the fact that people that stream more actually come to the movie theater more frequently. So it increases the awareness and they want to get into that social experience and leave their homes.
So I don't think there's going to be any kind of disconnect. I think it will actually work to our overall advantage and the benefit is that there will be more content that will be available, which will be positive.
Okay. Thank you.
And we will now take our next question from Derek Lessard from TD Securities.
Yes. And maybe just a follow-up to Drew's question on The Rec Room. Is your target for store level EBITDA margin still 25%?
So in aggregate across the pool of locations, so this is the 30 locations in total, yes, we're still around that margin now. What we have what we're saying is The Rec Room with the fifty-fifty roughly allocation between food and beverage and amusement sales will be less than that target rate. And the Palladium, so the smaller box with more of a square footage allocation to amusement and leisure should be above that target rate, and we expect to blend in around that number.
Okay. Thanks. That's helpful.
This concludes today's question and answer session. I would like to turn the conference back to Alex Jacob for any closing remarks.
Thank you all for joining us this morning. We wish you a very happy and healthy holiday season filled with lots of movie theater visits and entertainment experiences. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.