Good morning, and welcome to the Cineplex Inc. fourth quarter and year-end conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Pat Marshall, Vice President of Communications and Investor Relations. Please go ahead, Ms. Marshall.
Good morning. Before beginning the call, we'd 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'll now turn the call over to President and CEO, Ellis Jacob.
Thank you, Pat. Good morning and welcome to Cineplex Inc.'s fourth quarter and year-end 2015 conference call. We appreciate you joining us today. I will begin by providing a brief overview of our top-line results, as well as a summary of our key accomplishments during the fourth quarter. I will also highlight a few of the most anticipated films for 2016. At the conclusion of my remarks, our Chief Financial Officer, Gord Nelson, will provide an overview of our financials. As always, once Gord has concluded his remarks, we will hold a question-and-answer period. I am very pleased to report that 2015 was the most successful year in Cineplex's history. Record-setting results were achieved in all key business metrics. Total revenue for the year increased 11% to CAD 1.4 billion and Adjusted EBITDA increased 24.3% year-over-year.
New annual records were established for box office revenue, which increased 5.7% to CAD 711.1 million, and attendance which increased 4.6% to 77 million guests. This was due to the success of multiple blockbuster films during the year, including "Star Wars: The Force Awakens", "Jurassic World", "The Avengers: Age of Ultron", "Minions", and "Furious 7". Gord will share the balance of our record-setting fourth quarter and full-year results with you in a few moments. Now, I would like to highlight our key accomplishments during the fourth quarter. Looking at theater exhibition. "Star Wars: The Force Awakens" generated 22% of box office revenue during the quarter, even though the movie had only played for 14 days. Other standout performers included "Spectre" at 10.8%, followed closely by "The Martian" at 9.2%.
Simply put, the quarter was a tremendous success and proves once again that consumers love experiencing a movie in theater on a big screen with great sound. During the fourth quarter, we opened a three-screen VIP Cinemas at our Yonge-Eglinton location. This brings our total VIP Cinema locations to 15, with a total of 56 auditoriums at year-end. We also took the opportunity to upgrade the traditional theater at the same time, including new seats, carpeting, and a concession stand, amongst others. In early March, we will celebrate the opening of our newest theater in the Marine Gateway area in South Vancouver. Cineplex Cinemas Marine Gateway and VIP will feature seven traditional screens, UltraAVX, and three VIP Cinemas. Our media business is comprised of two areas, Cineplex Media and Cineplex Digital Media, which combined generated record results in 2015.
Cineplex Media, our wholly owned and operated advertising business, delivered its best results ever due to record showtime and pre-show advertising sales. The combination of growth in key sectors and the addition of new clients are the major factors behind this success. Cineplex Digital Media represents our digital out-of-home advertising business, which includes digital signage networks both on the path to purchase in shopping malls and office complexes, and at the point of purchase in quick-service restaurants, financial institutions, and retailers across North America. Cineplex Digital Media provides an innovative and full turnkey digital solution for some of North America's top brands, including Tim Hortons, McDonald's Restaurants of Canada, Royal Bank of Canada, Scotiabank, Oxford Properties, Ivanhoé Cambridge, and Rogers, to name a few. In November, we were very pleased to announce that Cineplex Digital Media had been selected by A&W Food Services of Canada Inc.
to be the sole provider of digital menu boards for its over 850 restaurants across Canada and has already begun installation in some locations. Subsequent to year-end, American Dairy Queen named Cineplex Digital Media as their endorsed provider of in-store digital merchandising solution for their stores throughout both the U.S. and Canada. This business is a strategic area of growth for us, and we believe that Cineplex Digital Media is well-positioned for significant growth throughout North America and beyond. In Amusement, Gaming and Leisure, during the quarter, we completed the acquisition of the remaining 50% of the issued and outstanding equity of Cineplex Starburst Inc. that we did not already own for approximately CAD 21 million.
As we look to support the existing businesses and grow with The Rec Room, Amusement Gaming is a strategic area of growth for us. We believe there are more opportunities to expand this business organically and through additional M&A activity. We continue to move forward with the launch of The Rec Room, Canada's premier social entertainment destination, having announced two locations during the year with the first opening in South Edmonton Common this spring, and at Deerfoot City in Calgary in the first quarter of 2017. Other locations are in active development and will be announced as they arrive. Subsequent to quarter end, Cineplex and WorldGaming Network announced the signing of a comprehensive deal with Sony Computer Entertainment Canada, a world leader in interactive entertainment and gaming hardware.
Sony is the exclusive presenting sponsor for all of our 2016 tournaments, which we have named Cineplex WorldGaming Canadian Tournaments presented by PlayStation. We anticipate hosting approximately four national tournaments annually. We also believe we can export this business model globally to other exhibitors and large venue operators, providing a secondary future revenue opportunity. We also announced that our first tournament will feature Call of Duty: Black Ops III. The online qualifying portion began on January 7th and ran through February 7th. The regional finals take place in 24 of our theaters on February 21st, and the tournament culminates with the Canadian finals on March 6th at our Scotiabank Theatre in Toronto.
On February 12th, during the NBA All-Star Game taking place here in Toronto, Cineplex and WorldGaming will host a hands-on come and see our new esports theater initiative from 5:00 P.M. to 8:00 P.M. at our Scotiabank Theatre in Toronto. Sports fans and gamers alike are invited to come and experience the thrill of gaming on the big screen. It is important not to confuse this open house with the tournament play I mentioned earlier. Moving on to Scene. We are pleased to announce a term extension to our agreement with Scotiabank for the Scene program, which will now run for 10 additional years until October 31st, 2025. The extension also includes naming rights for two additional Scotiabank theaters, bringing our total to 10 theaters, and to the Cineplex VIP Cinemas presented by Scotiabank, and to Scotiabank's annual commitment with Cineplex Media.
Our partnership with Scotiabank has been extremely positive, and we are pleased to continue to work together in the future on this popular and much-loved loyalty program. The Scene loyalty program continued to grow its membership, adding approximately 200,000 new members to finish the fourth quarter at more than 7.3 million members. This is the third consecutive year that Scene has added more than a million members on an annual basis to the program. Looking at our corporate initiatives. We were very pleased to once again be recognized as one of Canada's 10 Most Admired Corporate Cultures of 2015 by Waterstone Human Capital. The annual program celebrates 10 organizations across four categories with cultures that drive performance and contribute to the bottom line. This is the second consecutive award for Cineplex, and each award is for a three-year term.
At year-end, we launched a new integrated Cineplex brand platform that asks Canadians to see the big picture and rediscover the importance of entertainment in their lives. The platform is intended to forge a stronger connection between Cineplex and our guests and customers, as well as unify all of our varied businesses and 13,000 employees across Canada. If you visited our theaters anytime from mid-December onward, you would have seen the first initiative of this brand platform, which was an animated short film that played before every movie. Entitled "Lily & the Snowman," it tells the story of a girl named Lily and a friendly snowman and showcases in a very heartfelt way how life gets in the way of Lily enjoying the entertainment she once loved.
Given the overwhelming positive response we have received from guests on both mainstream and social media, we certainly made the connection with people that we wanted to reach. The short has been seen more than 13.5 million times in theater since its launch in mid-December, and also has been viewed online via social media more than 28 million times to date as the campaign went viral. Let's take a look at the film slate for 2016. Overall, I am very encouraged by the film schedule this year. We always like when there is a combination of action, adventure, comedy, drama, science fiction, and animated children's features throughout the year, in addition to strong film sequels. Each quarter this year seems to have a good combination of these genres, combined with a good mix of traditional and 3D product.
The first quarter is off to a good start as the box office in Canada for the month of January was up over 19% year-over-year, as reported by Rentrak. "Star Wars: The Force Awakens" continued to perform well in January, along with "The Revenant" and "Kung Fu Panda 3." Looking ahead, "Deadpool," "Zootopia," The Divergent Series, and "Batman v Superman: Dawn of Justice" fill out the quarter. In the second quarter, we can look forward to Melissa McCarthy's new comedy, "The Boss." Families and baby boomers alike will be delighted to see "The Jungle Book," this time in 3D, back on the big screen, as well as "Finding Dory," also in 3D, which is the highly anticipated sequel to "Finding Nemo." "Captain America: Civil War" in 3D, "X-Men: Apocalypse," "Warcraft," and "Independence Day: Resurgence" complete this period.
The third quarter features Steven Spielberg's "The BFG" or the "Big Friendly Giant." From the studio that gave us the highly successful "Minions" and "Despicable Me" franchises, there is "The Secret Life of Pets." "Ghostbusters" is back with an all-female comedic cast. There is "Star Trek Beyond," the still to be titled Jason Bourne film, and "Suicide Squad" in 3D round out the third quarter. In the fourth quarter, Tom Cruise returns in "Jack Reacher: Never Go Back," Tom Hanks returns with the latest Dan Brown novel to hit the big screen with "Inferno," and Marvel has "Doctor Strange." Harry Potter fans will be thrilled to see the prequel to the incredibly successful series when the first of two new films, "Fantastic Beasts and Where to Find Them," hits the big screen at U.S. Thanksgiving and then again in 2018.
The year will finish with "Rogue One: A Star Wars Story" and "Assassin's Creed," the popular Sony video game starring Michael Fassbender that launches in time for the holidays. Before I turn the call over to Gord, I would like to say that it has been an extraordinary year for Cineplex. I feel very privileged to lead this company filled with an exceptional senior management team and great employees in our offices and theaters across Canada. I want to take this time to thank them for all of their great work this past year. Also, on behalf of Gord Nelson and Pat Marshall, we want to thank the investment community for your ongoing support and votes in recognizing the investor relations team at Cineplex for the work we do by winning the Best in Sector Award for 2016 at last week's IR Magazine Awards Gala.
Now I will turn the call over to Gord.
Thanks, Ellis. I am pleased to present the fourth quarter financial results for Cineplex Inc. For your further reference, our financial statements and MD&A have been filed on SEDAR this morning and are also available on our investor relations website at cineplex.com. As Ellis mentioned, Cineplex reported all-time fourth quarter and full year records for all revenue categories, as well as for attendance, BPP, CPP, and adjusted EBITDA. Total revenue increased 22.6% to CAD 407.4 million. adjusted EBITDA increased 35.9% to CAD 85.2 million. Cineplex's fourth quarter box office revenue was CAD 196.3 million compared to CAD 172.5 million in the prior year, as a result of an attendance increase of 7.1% and a BPP increase of 6.3% to CAD 9.63, a quarterly record from the 2014 fourth quarter BPP of CAD 9.06. Our premium product percentage increased to 46.8% of box office revenue in 2015 from 29.4% in 2014.
The impact of premium priced product on the average ticket price was CAD 1.22 for this quarter as compared to CAD 0.67 in the prior year, primarily due to the success of "Star Wars: The Force Awakens" in this quarter. Excluding premium product, our average ticket price increased 0.2% to CAD 8.41 as compared to the prior year quarter. Food service revenue increased 16.4% to CAD 113.8 million as a result of the higher attendance and a 68.6% increase in concession revenue per patron to CAD 5.58, a quarterly record. The CPP growth was primarily a result of higher average transaction values as a result of expanded offerings, including those from Cineplex's VIP Cinemas. Total media revenue increased CAD 8.4 million, or 17.9%, to CAD 55.3 million for the quarter. Cineplex Media revenue, which is primarily theater-based, increased 38%.
Cineplex Digital Media revenue decreased 19.6% due to lower project revenues, which were down 52% as a result of the timing of project installations. This was partially offset by a 30% growth in existing and new business opportunities, including the TimsTV network deployment and the Oxford Properties Group digital installations. As we have noted in the past, new client agreements typically have a long lead time, and we were pleased to announce the recent agreements with American Dairy Queen and A&W and are optimistic about our opportunities with other potential new clients in 2016 and beyond. As you may recall, the acquisition of EK3 in 2013 included a deferred earn-out payment based on normalized 2015 operating results as defined in the purchase agreement.
During the fourth quarter, based on timing and a weighted probability of reasonably possible outcomes, we adjusted the deferred consideration to CAD 10 million from an undiscounted value of CAD 39.6 million and recorded a gain of CAD 29.1 million as a change in fair value of financial instruments. Final settlement of this item may be materially different from this amount. With the acquisition of the remaining 50% of the equity of Cineplex Starburst Inc. on October 1st, we began consolidating their results during the fourth quarter. Other revenue includes CAD 21.2 million of gaming revenue arising as a result of the consolidation of CSI's results. On the acquisition of the remaining 50% of CSI, Cineplex's historic 50% interest was remeasured at the current fair value, resulting in a gain on equity interest of CAD 7.4 million. Turning briefly to our key expense line items.
Film cost for the quarter came in at 53.6% of box office revenue, as compared to 51.4% reported in the prior year. The increase was primarily a result of the concentration of box office results during Q4 as compared to the prior year. Cost of food service for Q4 2015 was 21.8%, as compared to 22.1% in the prior year. Other costs of CAD 192.4 million increased to CAD 32.1 million, or 20%. Other costs include theater occupancy expenses, other operating expenses, and general and administrative expenses. Theater occupancy expenses were CAD 50.5 million for the quarter versus our prior year actual of CAD 50.1 million. Other operating expenses were CAD 123.3 million for the quarter versus a prior year actual of CAD 94.4 million, an increase of CAD 28.9 million.
Major reasons for the increase include an increase of CAD 19 million due to the consolidation of CSI, an increase of CAD 1.6 million due to the impact of new and acquired theaters, net of disposed theaters, higher same-store payroll of CAD 4 million due to higher business volumes and extended operating hours at select theaters for the opening of Star Wars, as well as minimum wage increases in certain provinces. Higher 3D royalty fees of CAD 1.3 million due to higher 3D attendance during the quarter, higher credit card fees of CAD 0.7 million due to record ticket pre-sales for Star Wars, and higher marketing costs of CAD 1.2 million due to expenses incurred by Scene supporting its partnership with Sport Chek and Cara, and the programs earn and redeem changes implemented during the quarter.
G&A expenses were CAD 18.5 million for the quarter, which was CAD 2.7 million higher than the prior year, primarily due to a CAD 1.1 million increase in long-term and short-term incentive program expenses. Interest expense of CAD 5.3 million was CAD 0.4 million lower than the prior year amount of CAD 5.7 million. Contributing to the decrease was a CAD 0.2 million decrease in cash interest as a result of lower interest rates on the revolving facility. The company recorded tax expense of CAD 15 million during the fourth quarter of 2015, comprised substantially of current tax expense. Our blended federal and provincial statutory tax rate currently is 26.6%, and the losses acquired in the AMC acquisition were fully utilized in 2014. Net CapEx for the fourth quarter was CAD 22.3 million as compared to CAD 21.2 million in the prior year. We continue to estimate that net CapEx will be approximately CAD 100 million for 2016.
Record fourth quarter revenues contribute to our strong Q4 results. We continue to remain comfortable with where Cineplex Inc. is positioned today. Our strong balance sheet and low leverage ratio allows us to continue to invest in future growth opportunities for the company and benefit from future strong film product. That concludes our remarks for this morning, and we'd now like to turn the call over to the conference operator for questions.
Thank you. Our first question comes from Adam Shine of National Bank Financial. Please go ahead.
Thanks a lot. Good morning. Obviously, congratulations. These are spectacular results. A couple of questions related to Alberta. Obviously, not much of an impact, needless to say, in the Q4. Curious as to whether or not early in 2016, any pressures, perhaps more on the advertising side of things than necessarily in terms of theater attendance.
Adam, overall, we haven't seen any significant impact coming out of Alberta. As a matter of fact, in the first month of the year, the attendance is up in those theaters because, again, you have to understand this is an entertainment treat, and instead of people traveling, they are staying closer to home. We see in past situations with recessions that the box office and the business continues to perform extremely well. On the media side, we really haven't seen any impact as a result of what's happening in the oil patch.
I think early last year, maybe around this time last year, Ellis, you were getting a bunch of questions as to whether or not you'd be exploring concessions or food-related items into food courts, notwithstanding what you're going to be doing with The Rec Room, which is separate and distinct. Your answer then was you'll be experimenting within the theater for a variety of different food offerings through 2015. Maybe subject to how that experimentation went, is there any change to the strategy going into 2016?
Adam, as we've discussed before, we have a great opportunity in our theaters to experiment with food offerings. So far, we have done very selective out of the theater locations, and the plan is to continue to focus on the theaters and to maximize the value coming out of there before we start to run into third-party locations.
Okay, thanks. Maybe just one last one for Gord. Just in the context of some of the step-up in regards to the A&W as well as the Dairy Queen mandates. Obviously acknowledging that initially, as you ramp up, you get the project revenues, and then subsequently, you build up in terms of advertising and other related revenues. Is there any way to quantify some of these mandates? One of the big mysteries each quarter is obviously the strength of the other revenue line, but anything you can add to that would be appreciated.
Yeah. Look, I know it's a question that you have typically asked historically, but when we look at 2015's results, Cineplex Digital Media's revenues was just over CAD 40 million. We have approximately 10,000 locations deployed in that business. As you look forward, you may use those two statistics I just gave you as an indicator of the potential on an assumption of a full deployment.
Okay. Thank you very much.
Thank you. The next question comes from Paul Steep of Scotia Capital. Please go ahead.
Great. Thanks. I guess I'll split this one into two. On the M&A side, maybe Gord, could you talk a little bit about the view on the media space in terms of your outlook there, if our weak dollar has changed any sort of views in terms of how you might approach expansion in the U.S. on the niche side? Then I thought, Aravinda, your comments, you were going fast there, whether I heard you say something with regards to around The Rec Room and some form of M&A. I just wanted to clarify that. I may have misheard.
No, to respond to on the M&A, I did not say anything related to The Rec Room. It had to be with the expansion of our gaming business.
Okay.
As we consolidated CSI and we continue to focus on that business.
Paul, on your first question then with respect to the digital signage business and the opportunity for M&A or business in the U.S., as we've mentioned, probably for the last year and a half or so, is we focused on opening an office in the U.S. to attract major North American and U.S.-based customers. I think the signing of Dairy Queen is a great example of the success that we've had down there. We continue to look at opportunities. Most of our cost infrastructure is in Canada, though. As we continue to look for opportunities, we're looking to add on skills, potentially customer relationships that don't exist today. We're mindful of where the dollar is, but our focus is still to explore the landscape to see if there are other opportunities.
As we sign some of these U.S.-based customers, the revenue stream is typically denominated in U.S. dollars. As I mentioned earlier, the cost base is primarily in Canadian dollars.
Great. Then actually, just to carry on with you as well, could you talk a little now that CSI will fully be in the numbers, if there's any revenue seasonality we should just think about as that sort of filters through? I guess then the final one, if there's any sort of further uptick we should think about in Q1 on the film cost, or we're sort of steady state likely around the level we had this quarter. Thanks, guys.
I guess to answer both of those questions. Look at the CSI business. There is some seasonality to it, if you think it's not as pronounced as the exhibition business. Typically during seasonal holiday times, the business will be a little bit higher than non-peak periods. There is a little bit of seasonality to it.
Film rental.
Around the film rental, yeah. I know you're concerned about Star Wars, I think if you go back to the experience that you saw 2009 and 2010 with Avatar, where you had a film that generated a sizable portion of its revenue in the first quarter as opposed to the fourth quarter. If you look at those kind of trendings in terms of film cost, that's a good indicator of what you may see coming forward into 2016.
Paul, you have to understand that Star Wars has now become the biggest movie ever in North America. It crossed $900 million this weekend, it is a significant contributor in the fourth quarter and in the month of January.
Perfect. Thanks, guys.
Thank you. The next question comes from Derek Lessard of TD Securities. Please go ahead.
Yeah, thanks, everybody. Again, congratulations on a great quarter and great year. Maybe if I just start, now that you've announced your first tournament and major sponsor in the esports realm, maybe just wondering if you have any more color on the business model and perhaps when you expect it to start contributing.
We're going to expect it to start contributing in 2016. I think as we look at the statistics and the trends and the growth projections in this business as we've shared with others, in some of our presentations, the global market in esports is expected to grow from just under CAD 1 billion today to about CAD 3 billion in three years or so. About 75% of that revenue stream is expected to be in advertising and sponsorships. North America is supposed to represent about a third of that space. That's when you're looking at what's the opportunity, that's the opportunity. We were very pleased to announce our sponsorship with Sony, with some other partners that we have in this program. The interest is high.
This is our first tournament. I think I'd be a bit remiss to kind of project where we think we're going to be for the rest of the year. Interest is high. Advertising and sponsorship interest is high. Everything's aligning in terms of where those projections are that we see from a global perspective.
Okay. Maybe just to follow up on Adam's question a little bit. In light of the weaker Canadian economy, I'm looking at it, just wondering how you're thinking about your The Rec Room initiative and the upcoming openings in Alberta.
One of the good things on the situation in Alberta is the labor cost of actually building the locations have tempered a little bit. We still feel it is important that people have these escapes in situations where the economy is weak. We are very focused on making sure that we have the best offering when we open our location in South Edmonton Common.
Okay. Maybe just one final one. Ellis, you touched on it. I'm just interested in knowing what your thoughts are about the upcoming 2016 film slate. Specifically, I was wondering if you prefer movie years like the one that's coming up where it seems to be a bit more balanced but lacking that true blockbuster Star Wars?
We always prefer movie years where the box office is continuing to grow and the attendance is higher than the previous year. That being said, it's always nice to have repeat hits rather than one big home run, but we'll take that home run also. This year is slightly different in the fact that there are a number of movies that we see that could break out. Again, there's important concepts that are out there that need to be verified with the public.
Okay. Thanks, guys.
Thank you. The next question comes from Tim Casey, BMO. Please go ahead.
Thanks. Good morning. My question relates to the screen media business. The numbers were quite strong through the end of the year. Gord, you mentioned briefly that there was some new customers in there. Is there anything else that's happening there? Was there some one-time business or were you reporting things differently? I'm just wondering how we should think about that business going forward and maybe asking for a little more color on what drove it through the end of the year. Thanks.
Yeah, I know. I think, for anyone who visited our theaters too, I think you would see the types of advertisements were out there. We are absolutely pleased with the growth of the mobile gaming type category, and had some significant successes in that category. It was a combination, as we said in our notes, is really existing customers continuing to participate and the growth of new customers. Would the success and the expected success of Star Wars attract advertisers to move theaters? That is a potential. It is a known quantity. Really, we had growth in both existing and new customers.
Thank you.
Thank you. Ladies and gentlemen, if there are any additional questions, please press star one at this time. The next question comes from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.
Good morning. Thanks for taking my question. I just want to start with the food service numbers, continues to be strong, driven by VIP. I was just wondering, looking back a year or so, the projections that you had for VIP on the food service side, are these numbers that are coming in ahead of that? It seems to be that it is, given the CPP growth that we are seeing. Does this maybe cause you to sort of revisit the rollout of VIP and look at maybe an expanded rollout for that platform?
Aravinda, the VIP is contributing, but again, the VIP is a very small portion of the total gain on the concessions. It also has to do with our offerings that we have in our traditional auditoriums and theaters. In total, with the increase in the basket size with our guests, we are seeing that growth year-over-year. We are expanding the VIP, but again we are doing it in a controlled and measured fashion across the country with the next one opening in March in Vancouver.
Okay. Thanks for that, Ellis. With respect to digital signage business, I know you talked about some of the dynamics in the quarterly numbers, but when you look at it on an annual basis, obviously you've signed some very good deals with a number of operators. Pro forma, when you bought EK3, you were sort of just south of CAD 40 million revenue. We're still a little bit north of CAD 40 right now. Just help me understand sort of the dynamics there. Were there maybe some customers that you sort of exited when you bought EK3 that are not in the revenue mix right now?
Yeah, I think, Aravinda, the one thing that we've learned through having the business for a couple of years now is the length of the lead time in a sales process with major and significant customers. That's kind of the sweet spot for our business is we're a partner with major brands with a significant number of locations. I think if anything, it's kind of the length of time it's taken to secure some of these new customers that came more as a surprise to us.
Okay, understood. Then last question from me, Gord. With respect to the positive working capital swing, it looks like, not just for the quarter, but also for the full year, it looks like it's mostly accounts payable. Is this around sort of the film payments at all, or I just wanted to get your thoughts on that, and would that sort of smooth out as we look at the 2016 number on a full year basis?
No, absolutely it will. It comes down to timing of things. The business volume during the fourth quarter particularly peaked in those last couple of weeks. Given traditional payment terms on anything, you're going to have 30-45 days worth of payables in there at any point in time. It's really based on the significant business volumes, both at the theater level and from the media perspective. It will reverse itself over time. Q4 is always the highest source of working capital as we're selling gift certificates, and we're also having experienced the huge business volumes on the payment terms that extend into the first quarter.
Great. Thank you. I'll leave it there, and congrats on the quarter.
Thank you.
Thank you.
Thank you. The next question comes from Kenric Tyghe of Raymond James. Please go ahead.
Thank you. Good morning. Ellis, particularly strong January, I'm curious, given how sort of atypical February was last year with the "50 Shades" success, as to your thoughts on this first quarter. Is there enough in the January carry and the back end of the slate to your mind to support the expectations around this quarter? What's your level of confidence around the quarter, given that we're going into an atypical or in the middle of an atypical February?
Well, the big weekend was the last year with "50 Shades of Grey" and "Kingsman." This year we're opening "Deadpool", which seems to be doing very well from a tracking perspective. We are opening "Zoolander" and we're opening "How to Be Single." It'll be interesting to see how this year the three movies perform compared to last year. You've got "Gods of Egypt", you've got "Zootopia", you've got the "Divergent" series, and "Batman versus Superman." It's a quarter that still has some big pictures for the balance of the quarter, plus the carryover from what we had in January. It's hard to tell how the quarter's going to end, but at this point, we are, for January, ahead of last year.
Just on that note, Ellis, could you just confirm, was that 19% on the Rentrak number for January? Did I hear you correctly?
That is correct. Yeah.
Thank you. Then just switching gears on the esports quickly. I understand the longer-term opportunity and roadmap. I'm curious on how this first competition has sort of been relative to your expectations, whether you've been positively surprised on the uptake or the energy around the initiative. I realize not something you can sort of put numbers to as yet, but I'm really just trying to get an idea on the excitement level relative to what you'd expected or the uptake relative to what you'd expected on this first tournament.
Yeah, I think the excitement level is really there. There's been a lot of attention given to the event from kind of expected sources and unexpected sources. We have this interesting event that we're going to host on February 12th that you're all invited to go and see during the All-Star Week. We have our regional tournaments occurring on February 21st and the national on March 6th for our first event. It's going to be a really exciting event, and I invite you guys to come and check it out in person. Yeah.
Great. Thank you and congrats. I'll leave it there.
Thank you.
Thank you. The next question comes from Rob Peters of Credit Suisse. Please go ahead.
Hi. Thanks for taking my question. Most of mine have been answered, but maybe a broader strategic question. When you guys think about long-term growth outside of the box office, you've got a number of different initiatives with esports, digital media, and games that you've touched on today. Maybe if we look out a couple of years from now, what do you think is going to be the biggest driver of the business outside of your traditional box office and concessions?
I think the media growth will be both from a digital perspective and our traditional media business will continue to grow and will be a major contributor to our EBITDA. In addition to that, you mentioned both esports and gaming, plus we've also focused on alternative programming at the theater level, which is also a business that continues to grow. It's all about using our infrastructure and our assets to make our company stronger. With the opening of The Rec Room, we are very excited because it really pulls together a lot of the assets we have today.
Perfect. Thank you, Ellis. Maybe just one follow-up on that. When we look at digital media, I think you touched on there's kind of been a longer lead time on that portion of the business. Previously you had mentioned about doubling the business. Is that still the goal over time to try and get the revenues doubled there? Is there maybe a change in the timeline on that? How comfortable are you guys feeling about achieving that longer term?
Yeah. Absolutely. I think it's taken a little bit longer. We've announced some significant new customers. I gave you our existing location count at roughly 10,000, and with an American Dairy Queen with a potential of just under 5,000, that would be our largest customer. We're in the midst of a number of other processes. We're very optimistic about the outlook. Yeah, we're still comfortable in those magnitudes. I'd say it's delayed like a year, maybe two, as some of these customers now roll out over extended periods of time.
Rob, our focus is on the long-term growth of Cineplex. Yes, we have spent money from an R&D perspective to continue to grow these opportunities. Again, it's more about what is Cineplex going to look like three years from now, not worrying about the next quarter.
Absolutely. Good to see those deals starting to ramp up. Thank you very much.
Thank you.
Thank you. There are no further questions at this time. I would like to turn the call over to Ellis Jacob.
Thank you very much, and thanks for joining us this morning. We look forward to seeing you at our annual general meeting on May the 11th, 2016. Please mark your calendars. Have a great day.
Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line, and have a great day.