Good day, welcome to the Cineplex Inc. 2015 first quarter conference call. Today's conference is being recorded. At this time, I'd 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'd now like to turn the call over to Ellis Jacob.
Thank you, Pat. Welcome to Cineplex Inc.'s first quarter 2015 conference call. Thank you for joining us today. I will begin by providing a brief overview of our first quarter results, as well as a summary of our key accomplishments during the first three months of the year. I will also discuss the film slate for 2015, a year many experts predict will be the biggest year at the box office. At the conclusion of my remarks, our Chief Financial Officer, Gord Nelson, will provide an in-depth overview of our financials. Always, once Gord has concluded his remarks, we will hold a question and answer period. Cineplex delivered strong results for the first quarter of 2015. Total revenue increased 3.5%, and adjusted EBITDA increased 30.3% on the strength of higher media and food service revenues coupled with lower operating costs. At the box office, attendance was up 1.5%.
Unfortunately, we were impacted by weather conditions and the underperformance of certain titles in Canada versus the U.S., particularly "American Sniper". Box office revenue was flat versus the prior year period, largely as a result of lower box office per patron caused by the release of fewer 3D films in the quarter versus last year. Let's take a look at our key accomplishments for the first quarter. We opened two new theaters since the beginning of the year: Cineplex Cinemas Lansdowne and VIP in Ottawa and Cineplex Cinemas Markham and VIP just northeast of Toronto. These locations are ideally situated in their communities and offer a wide range of premium experiences, including our VIP Cinemas, D-BOX motion seats, and premium large-format auditoriums. In addition to these new builds, we added our popular Cineplex VIP Cinemas to Galaxy Cinemas Saskatoon.
The theater has been renamed to carry the Scotiabank Theatre brand as part of an expanded naming rights agreement announced in 2014. The expansion of our premium experiences remains a strategic priority for Cineplex. We plan to open two theaters in the Q4 of this year. The first is a new 11-screen theater with three VIP auditoriums at Marine Gateway in Vancouver, and the second as part of the expansion of our Yonge-Eglinton location in Toronto to include VIP. Staying with premium experiences, we also continue the expansion of our UltraAVX auditoriums, adding eight locations so far this year to bring our total to 74 today. 10 of these are second screens at a location that already offers UltraAVX. This strategy allows us to generate incremental box office revenue from major releases.
As an example of the success of this offering, this past weekend, UltraAVX accounted for the top 10 highest-grossing proprietary premium large-format screens in North America. Switching to food service, we set new records for food service revenue and CPP in the Q1 of 2015, with CPP increasing 2.6% to CAD 5.18 versus CAD 5.05 in the prior year. Food service revenues from VIP Cinemas also contributed to our growth this quarter. We also continue to focus on the expansion of our proprietary food service offerings, opening new locations for Outtakes, Yoyo's Yogurt Cafe, and Poptopia. Throughout 2015, we will continue to grow both our core concessions and proprietary offerings by refining our menu, offering targeted marketing and promotional programs, and leveraging the flexibility of our digital menu boards. In January, we announced plans to launch a new social entertainment destination called The Rec Room.
The Rec Room features three main offerings, a large attraction area featuring state-of-the-art simulation games, redemption games, and recreational games. A performance venue offering live entertainment such as musical acts, bands, and comedians, and a theater-sized screen, and an upscale casual dining restaurant. With the strategic and concept development work largely behind us, we are entering the next phase of this project, focusing on execution and building our first location at South Edmonton Common. We expect this location to open in the Q1 of 2016. Also on the amusement gaming front, we continue to expand our presence as a leading distributor of amusement games, creating Brady Starburst LLC with Brady Distributing Company. With this venture, we have become one of North America's largest distributors of amusement and vending equipment. Later this year, Cineplex will acquire the remaining 50% equity that it doesn't already own in Cineplex Starburst Inc.
Our media business experienced strong growth in the Q1 compared to the prior year period. Cineplex Media revenues increased as a result of robust showtime advertising sales, particularly among media and automotive clients. We have created offerings that leverage new technology to offer interactive customer experiences. These include Cineplex TimePlay, digital poster cases, and particularly our Interactive Media Zone. The Interactive Media Zone provides clients with interactive brand experiences featuring large touch screens that offer gesture, motion, image, and video capture technologies, as well as social media connectivity and participant data capture. We have installed an additional 21 Interactive Media Zones in theater lobbies this year, bringing our total to 45 across Canada. We believe these interactive and experiential media properties will provide significant future media revenue growth.
Cineplex Digital Media revenues also grew in the first quarter, thanks to project installation and advertising revenue from the TimsTV and Oxford Properties networks. We see an opportunity to further grow our digital media business throughout North America by leveraging our proprietary technology as well as network installation, management, creative services, and advertising sales capabilities. Our digital commerce offerings continued to gain traction in the first quarter of this year, with cineplex.com registering an 11% increase in unique visitors and a 15% increase in visits versus the prior year period. The Cineplex mobile app has been downloaded more than 11.6 million times as of March 31st, 2015, recording nearly 600 million app sessions and making it Canada's ninth most popular mobile brand. The Cineplex mobile app has an incredible 18% penetration of the Canadian market.
The Cineplex Store saw a significant increase in the number of new users and device activations during the first quarter of this year as a result of initiatives implemented in 2014. The SCENE loyalty program continued to exceed our expectations, adding more than 300,000 members to finish the first quarter at 6.6 million members. In addition, SCENE announced that later this year, members will be able to earn and redeem points at more than 800 Cara Operations Limited locations across Canada. Much like last year's addition of Sport Chek, these strategic marketing partnerships help us grow our member base and make the program even more valuable to existing members. Now let's take a look at some of the films we have coming this summer and for the balance of this year.
The second quarter got off to a strong start with "Furious 7." This latest installment of the popular "Furious" franchise has already become the industry's fourth highest-grossing film of all time. Summer officially kicked off last weekend with "Avengers: Age of Ultron." This highly anticipated film set a new Cineplex record for advance ticket sales, which exceeded CAD 4 million. The film had the second-highest opening of all time with an opening weekend gross of CAD 191 million. Later this month, we have "Mad Max: Fury Road" with Tom Hardy and Charlize Theron, "Pitch Perfect 2" starring Anna Kendrick, and "Tomorrowland" with George Clooney. The return of the Jurassic series headlines our June lineup with "Jurassic World." The first Jurassic film, "Jurassic Park," is one of the best-performing films in Cineplex's history. There's plenty more to get excited about as June continues.
We'll have "Entourage", based on the popular television show, "Spy", featuring Melissa McCarthy and Jason Statham, "Inside Out", a highly anticipated animated film by Pixar, and the return of Ted in "Ted 2". We are also looking at a strong lineup in July with "Terminator Genisys", the latest in the popular "Despicable Me" franchise with "Minions", "Ant-Man", "Pixels", and "Mission: Impossible - Rogue Nation" starring Tom Cruise. Finally, we round out the summer in August with "Fantastic Four" and "The Man from U.N.C.L.E." Looking ahead to the fall, we have the latest installment of the James Bond series, "Spectre", and the final film in The Hunger Games series, "Mockingjay Part 2". Finally, in December, we are looking forward to one of the most anticipated films in years, "Star Wars: The Force Awakens". It's easy to see why 2015 is one of the most exciting film years in recent memory.
We believe we are well-positioned to amplify the strength of this year's film slate with our premium experiences and also through our food service and media offerings. Outside our theaters, we will continue to diversify Cineplex, reducing our reliance on the cyclical nature of Hollywood film product, particularly through our digital media and amusement gaming business, as well as the upcoming launch of The Rec Room. Before I turn the call over to Gord, who will provide an in-depth overview of our financials, we would like to announce a 4% increase to our dividend. The dividend will increase to CAD 1.56 per share on an annual basis, effective with the May 2015 dividend, payable in June 2015. I'm proud to say that Cineplex has increased its dividend every year since the company converted to a corporation. Now, I will turn it over to Gord.
Thanks, Ellis. I'm pleased to present the first 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. For the first quarter, total revenues increased 3.5% to CAD 289.8 million and adjusted EBITDA increased 30.3% to CAD 40.2 million. The results for the quarter were positively impacted by the record CPP of CAD 5.18, media growth of 19.4%, and lower operating costs. Cineplex's first quarter box office revenue was CAD 156 million, compared to CAD 156.2 million in the prior year. An attendance increase of 1.5% was offset by an average ticket price decrease of 1.5%. Our average ticket price for the quarter decreased to CAD 8.90 from the CAD 9.04 reported in the first quarter of 2014 as a result of the reduction in the contribution of 3D films.
None of our top films in 2015 were presented in 3D, as compared to four of the top five in 2014. As a result, our premium product percentage decreased to 25.3% of box office revenue in 2015 from 38.3% in 2014. The impact of premium-priced product on the average ticket price was CAD 0.57 for this quarter, as compared to CAD 0.84 in the prior year. Excluding premium product, our average ticket price increased by 1.6% as compared to the prior year quarter to CAD 8.33. Food service revenue increased 4.2% to CAD 90.8 million as a result of the 2.6% increase in concession revenue per patron to CAD 5.18, an all-time quarterly record. The CPP growth was primarily a result of higher average transaction values as a result of expanded offerings, including offerings at Cineplex's VIP Cinemas. Total media revenue increased to CAD 4.7 million, or 19.4%, to CAD 29.1 million for the quarter.
Cineplex Media revenue, which is primarily theater-based, increased 21.9%, and Cineplex Digital Media revenue increased 14.2% due to continued growth of new business opportunities, including the TimsTV network deployment and the Oxford Properties digital installations. These new business deployments will provide opportunities for continued advertising revenue growth in the future. Turning briefly to our key expense line items. Film cost for the quarter came in at 51.4% of box office revenue as compared to 51.5% reported in the prior year. Cost of food service for Q1 2015 was 21.4% as compared to 21.7% in the prior year. Other costs of CAD 150.9 million increased to CAD 0.5 million, or 0.3%. Other costs include theater occupancy expenses, other operating expenses, and general and administrative expenses. Theater occupancy expenses were CAD 51.1 million for the quarter versus a prior year actual of CAD 51 million.
Other operating expenses were CAD 80.9 million for the quarter versus a prior year actual of CAD 84.2 million, a decrease of CAD 3.3 million. Major reasons for the decrease include a decrease of CAD 1.4 million due to lower spending in new business initiatives due to one-time digital commerce platform development costs incurred during the prior year. Lower marketing costs of CAD 1.3 million due to the timing of campaigns, a decrease in 3D royalty costs of CAD 0.9 million due to less 3D product, and lower ongoing theater maintenance costs of CAD 1 million due to timing of expenditures. These decreases were offset by an increase of CAD 0.5 million due to the impact of new and acquired theaters, net of disposed theaters and higher media costs of CAD 0.6 million due to higher media business volumes during the quarter as compared to the prior year.
G&A expenses were CAD 18.9 million for the quarter, which was CAD 3.7 million higher than the prior year, primarily due to a CAD 3.3 million increase in long-term and short-term incentive program expenses resulting from the CAD 5.05 increase in the share price during the first quarter of 2015, as compared to a decrease in share price of CAD 1.99 during the first quarter of 2014. Interest expense of CAD 5.7 million was CAD 0.5 million higher than the prior year amount of CAD 5.2 million. Contributing to the increase was a CAD 0.3 million increase in cash interest as a result of increased borrowing. The company recorded tax expense of CAD 2.4 million during the first quarter of 2015, comprised substantially of current tax expense. Our blended federal and provincial statutory tax rate currently is 26.3%. As a reminder, the losses acquired on the AMC acquisition were fully utilized in 2014.
Net CapEx for the first quarter was CAD 26.2 million as compared to CAD 28.6 million in the prior year. We continue to estimate that net CapEx will be approximately CAD 100 million for 2015. CapEx for 2015 will include the rollout of The Rec Room, a continued rollout of premium offerings, new theater construction, and digital signage and media initiatives. While the weaker 3D film performance negatively impacted our first quarter box office revenues, successes in food service, media, and cost control contributed to our strong Q1 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 for the company and benefit from future stronger film product. That concludes our remarks for this morning. We'd now like to turn the call over to the conference operator for questions.
Thank you. Ladies and gentlemen, we will now conduct a question-and-answer session. If you have a question, please press the star followed by the 1 on your touch-tone phone. If you're using a speakerphone today, please lift the handset before pressing the keys. Once again, ladies and gentlemen, if you have any questions, please press star 1 at this time. Your first question today will come from Adam Shine with National Bank Financial. Please go ahead.
Thanks a lot. Good morning. Ellis, can you talk a little bit about some of the items in the news in the last few weeks heading in obviously to the Avengers Two release as related to Disney sort of pushing for some incremental cost items going forward? Thanks.
As has been mentioned, I feel that we don't like to discuss our relationships with our partners in public. All that being said, we've always had a great relationship with Disney, and you're always going to have back and forth when you've got your supplier relationship, and it's a partnership for us. We basically negotiate with them and work hard to get the best results for both sides of the partnership.
I guess I would just push you a little bit further because in contrast to some of the prior disclosures where indeed, there is a bit of back and forth between some of the movie studios and ultimately the theater chains and usually the theater chains win out. This go around, obviously Disney's flexing its muscles a little bit in the context of a very robust pipeline of product. We also know in the past that Lucas used to push very aggressively on his film costs, when each of the Star Wars movies came out. Maybe just in the context of helping us think about costs, maybe in the aggregate, is there anything that maybe Gord can add in regards to an assumption of some incremental cost, be it film cost percentages Q2, Q3, Q4? What else could we add to that?
Well, if you looked at the first quarter is basically our film cost percentage was flat. Again, it all is dependent on the performance of the films because the performance of the films drive the higher film rentals.
I think to predict what it's going to be will largely depend on the success of the box office for the balance of the year. Yes, if a film does CAD 1 billion, you would expect that it would cost us more. But if you look over the last 5 years, our film rental has remained pretty constant other than a little bump here or there when box office increased quite significantly from quarter-to-quarter. I don't think one needs to assume there's going to be a dramatic change in the film rental or the relationships we have with our studios at this point.
Okay. No, perfect. I appreciate that extra color. Just one quick little context in terms of The Rec Room or the first The Rec Room, I guess initially was supposed to debut late 2015. I guess there's been maybe a modest push-off, let's call it. I'm sure you want to get that first one right. Any additional color beyond just try to get it right and maybe a few extra weeks of delay accordingly?
Adam, obviously we would've tried to get that open for the holiday season but.
Yeah
I think in terms of just site development and permitting, I think we've recognized now that it may be a challenge to get it open for the holiday season. We're just more accurately, I think, indicating that it'll probably be Q1 2016.
Super. Okay. That's what I figured. Thanks a lot.
Thanks, Adam.
Thank you. Your next question will come from Paul Steep with Scotiabank. Please go ahead.
Thanks. I guess for Gord, maybe in media on CDM, Gord, how should we think now that Tim's and Oxford are ramped up and the installs are done, how should we think about that rollout sort of pacing in on a year-on-year basis in terms of contribution? Is there still some install revenue to come into Q2?
Paul, with respect to the Tim's, that network was fully deployed in the back half of last year. What you're going to see is, and what we would typically see in these networks is you're going to see it ramp up in the advertising revenue as advertisers see the benefits of being on that network. You will see that ramping up over time. With respect to the other ones, as we continue to add and announce kind of new properties in the mall-type environment. You'll see additional installation revenues going forward. I'd also like to remind you that we do have some other clients that are not fully deployed at this time, so you'll continue to see installation revenue. As you may recall, we kind of refer to the business as we're whale hunters. We look for large clients with a significant number of locations.
Some of those clients like to deploy and install as quickly as they can. Within, say, a one-year timeframe, and others of those clients, these are multi-year installations.
Okay, great. The second one is on SCENE. You now had Sport Chek as a new partner. I don't know what feedback you can provide. Obviously, you don't want to talk too much for them, but just in terms of a new major partner into the network, what they've found or some of the benefits or comments they may be fed back with regards to partnering in the program.
It's been a great relationship, and they are very happy with the SCENE program and the actual uptake for their customers and guests, which to me is huge for us. As we mentioned, Cara is also signing up with us, and that'll be implemented post-second quarter. We think that the program will continue to be robust and move forward. Also, the SCENE members seem to be extremely happy with the whole addition of these extra opportunities to earn points and also redeem them.
Great. Before I pass on, maybe one last one, just on Brady and the relationship there. I don't think a lot of us have spent a lot of time on gaming, given the strong position in Canada. Maybe just a little more context around why partner up, why go into the U.S. I think the rationale being bigger made sense, but maybe there's something else that isn't jumping out to us in terms of that opportunity. Thanks.
Yeah. Let me first describe kind of the environment that we operate in Canada, and then I'll describe a little bit about the U.S. environment, what we didn't have, and now what we do have with the Brady partnership. In Canada, when you think about what we do in terms of gaming, I would kind of break it down into kind of three elements. The first is managing our own sites. We have Escape, we have our game rooms, CSI owns Playdium, and we're going to have The Rec Room going forward. We're managing our own facilities. We're driving revenue streams off of people within our own venues. Secondly, there's what we would call kind of route operations.
This is the supply of gaming equipment to third parties, in which we're operating and providing kind of technical expertise, placing games in those facilities and driving a rev share off of those gaming deployments. As I've said before, some of the customers include Canada's Wonderland in that space, amongst others. Then the third element I would call kind of distribution and game sales. In this side, we have relationships with the manufacturers of gaming equipment, which allows us to get our gaming equipment in Canada at a low cost so we can drive better revenue streams through our route operations and in the management of our facilities. That's what we have in Canada. Now let's talk about the U.S.
In the U.S., historically, we had about 15% of our gaming revenue coming from the U.S., and it was primarily from the route operations side of things. We were placing gaming equipment in facilities and driving a rev share on that through our company called Premier Amusements in the U.S. Our partnership with Brady now gives us distribution rights in the U.S. That's going to give us rights to acquire the gaming equipment at lower cost to make our whole gaming infrastructure in the U.S. just operate more efficiently and on a better cost basis. That's really kind of in a nutshell what we're doing in the U.S. and why Brady absolutely makes sense in partnering with them to establish those lower cost base. We are now the number 2 distributor of gaming equipment in the U.S. and the number 1 in Canada.
Great. Thanks, Gord.
Thank you. Your next question will come from Aravinda Galappatthige with Canaccord Genuity. Please go ahead.
Good morning. Thanks for taking my questions. I just want to start with the digital signage business. I think originally you guys had talked about sort of an objective of doubling that revenue line over two to three-year period. I think it was about CAD 40 million at the time, now it's closer to CAD 50. Just wanted to get your updated thoughts on that trajectory. Also, with respect to sort of the traction you could potentially get in the U.S., maybe just talk about some initial steps you've taken there. I mean, do you have some infrastructure in the U.S. now, any salespeople? Just wanted to get some color on that as well.
Sure, Aravinda. We continue to be very excited about this space and encouraged by where we are today. We have opened an office in the U.S. We have built up the infrastructure, in part, that's one of our discussion points on why the digital media margins are a little bit muted throughout 2014, 2015 as we've built up infrastructure. I would like to, again, kind of remind everyone that our client base is typically large customers with a significant number of locations, the sales process can take in excess of a year when you think of needs identification, pilot testing, final negotiation. I would say that we're involved in a number of processes at this time. We're very encouraged with where we sit in these processes, if we're successful, we'll announce something.
Okay, great. Thanks a lot. Just moving on to the OpEx side. I mean, you had the other operating expense line pull back a little bit. It seems like it's mostly timing related. Just wanted to get your sense going in terms of the annual run rates. Should we still be looking at sort of some inflation in that line item when we look at it on an annual basis?
Yeah, I would say that over time, when you look at the majority of that cost, about 40% of that cost is payroll. Payroll tends to be volume-based and obviously rate-based, too. To the extent that the attendance volumes based on what we're expecting for in 2015 will be higher, as well as you've got some incremental wage increases impacting us, yes, you will see kind of cost, the CPI type increases in that category. We try and identify in our disclosures, if there's one-time things or timing things that are up and down, as we mentioned this quarter, the 3D product wasn't as strong. The licensing fees were about CAD 900,000 less than last year. We had some development costs in last year's statements related to our digital commerce platform, which we obviously don't have this year.
You'll likely see some development costs related to The Rec Room continuing on to this year. The last one was really marketing spend, we were associated with the Winter Olympics last year. We may have some associations with some other events this year. I would say you're right, Aravinda, to use a small rate of increase in that category for the year.
Great. Thanks, Gord. My last question is more on a longer term issue. With respect to pricing at the box office, sooner or later, we're going to get to a point where the premium formats are going to get closer to maturity. I just wanted to get your thoughts on going back to base prices and driving price increments there. Any thoughts around how you would implement that and how you think about dynamic pricing, et cetera?
That's a great question. We continue to look at the pricing at our theaters, and we have been very careful and modest when it has come to price increases on the base 2D movies. As I've publicly said, it was cheaper to see a movie today than it was 10 years ago. That to me, is something that we have been able to manage as a result of the premium offerings and our execution. There is flexibility, and we're also looking at other opportunities as to how we can get the best value from a pricing perspective. That's a study that we've undertaken, and we will continue to focus on it.
Thank you. I'll step off the line.
Thank you. Your next question will come from Derek Lessard with TD Securities. Please go ahead.
Yeah, thanks. Good morning, everyone. Most of my questions have been asked. Maybe if you can just talk about your expectation for the 3D lineup this year. It's been two quarters in a row, sort of, where we're talking 20% premium content. I'd just maybe like to get your outlook on that.
I think 3D in the first quarter, as you saw from the results, was not really part of the offerings that we had from a movie perspective. With the commencement of "Avengers," "Mad Max," "San Andreas," "Jurassic World," "Inside Out," "Minions," "Pixels," there's a lot of 3D pictures coming through in the next three months. I think you're going to see a turnaround in the 3D numbers as we move forward.
Okay, thanks for that. That's all for me.
Thank you. Your next question will come from Rob Goff with Euro Pacific. Please go ahead.
Good morning, thank you for taking my question. My question would be on the sustainability of the category strength within the media revenues. It had 21.9% on the quarter. You noted the social media and broadcast and automotive.
We are always thinking of ways to continue to increase our media penetration with the diversification that has taken place within the media segment, all the way from the magazine to our website to our digital boards, we have seen continued increases in our media penetration, and I think we have a lot to offer our clients when it comes to different ways to get the message across. TimePlay is another example of what we've done. We are the pioneers as it relates to that around the world and have been very successful as we've rolled it out across Canada.
Okay, thank you. Just looking to see if you could give an update with respect to the VIP auditoriums, what you're finding as you get further and further into that rollout. I know you have 28 more within your obligations. Do you think you can push that perhaps further or more quickly than you had originally anticipated?
We always do things on a systematic rollout and make sure that we keep refining the offerings. As you go from one VIP to the other, you continue to see enhancements and also benefits both for the guests and the overall experience. Yes, we will roll out a number. As we've said, we've got two more before the end of the year, and we'll continue to roll them out over the next number of years. I wouldn't expect that there will be a rush to deliver these VIPs in the short term.
Okay. Thank you very much.
Thank you. Your next question will come from Haran Posner with RBC Capital Markets. Please go ahead.
Yeah, thanks very much. Good morning. First, maybe a couple for Gord. Going back to the Brady Starburst thing. You mentioned lower cost under this joint venture. From a revenue perspective, though, I think CSI had about CAD 61 million of revenues in 2014. Should we think about a pickup from that perspective?
Yes, you should, because, yeah, we've made an 80% acquisition of a company. Yes.
Is there any guidance you can help us with?
Yeah. You know what? I would say the mid-teens in terms of mid-teen million CAD.
Okay, thank you for that. With respect to your occupancy cost, Gord, I was just wondering, given all the challenges for retail REITs out there with some box stores closing, do you see an opportunity to reduce occupancy expenses over the next couple of years?
Look, we'd love to do that, but we were contractually committed and have legal obligations. With the exception of the existing facilities, I would say that's likely a challenge. Where there is the opportunity, though, is in The Rec Room because it's an interesting real estate environment out there today. I think The Rec Room has really hit a point of interest with the development community and the landlords in Canada, and they're all very excited to have us in their facilities. That bodes well for us. The excitement and the concept, as well as the availability of real estate in Canada, I think that's where our opportunity is going to be in terms of occupancy.
Okay, that's great, Gord. Then one for Ellis. Just when you look at industry statistics for moviegoing, it certainly looks like even though the younger demo continues to account for a fairly significant size of moviegoing, the proportion has come down in the last couple of years. I'm just curious if you would comment on what you can do from an exhibitor standpoint, or is that mostly a studio issue?
I always have said publicly, we set the table, we don't serve the steak. We do influence the studios, but I think they realize there is a great desire for the over 50 crowd to get the right product and to be able to come and engage at the theaters. When I look at the first quarter, for example, it was really the ladies' quarter from the perspective of you had "Fifty Shades of Grey", "Cinderella" and "Divergent" were three of the bigger titles. Then you had "American Sniper" and "Kingsman." SCENE helps us with the youth, and that's part of the reason we developed the SCENE program, and we can basically communicate with them and drive incidents as a result of the program.
Thanks very much.
Ladies and gentlemen, if you have any additional questions at this time, you may press the star followed by the one on your touchtone phone. Once again, ladies and gentlemen, if you have any additional questions, you may press the star followed by the one on your touchtone phone. Your next question on the line will come from Kenric Teich with Raymond James. Please go ahead.
Thank you. Good morning. Nice to see the dividend increase this morning. I'm curious, though, on your thoughts with respect to your target payout ratio going forward. Certainly, you've been on the lower end of that range for a number of years now. As you cycle what would appear to be sort of peak CapEx in 2015, how are you thinking or how should we perhaps be thinking about return of capital through the out-years or an acceleration of return of capital through the out-years?
Yeah, listen, Kenric, I think in the near term, as we've said, we've stepped up the CapEx guidance to CAD 100 million for this year and next year, which incorporates the building of The Rec Room. We see opportunities to grow and expand the business. As we've always said, we look to grow the business and pass on the growth in earnings results to our shareholders in the form of dividend increases. If we get to the point where we don't see additional opportunities requiring excessive amounts of capital, obviously we would revisit the dividend and the payout ratio, and you could potentially move to the higher end of that range. At this point in time, we see opportunities, and we've got CapEx committed.
Great. Thanks, Gord. Ellis, I'd like to switch to you for a second. Obviously, the strength of slate in 2015, well-documented, and we've previously touched on 2016. Could you just give me an update as your current thinking or conviction levels around 2016, given that 2015 is sort of setting up as expected into the summer here, and particularly in the context of Avatar now, sort of a 2017 story. Just to have some incremental color around conviction levels on 2016 as things are evolving here in 2015.
It's a great question because we always see and predict a particular year. Movies get moved around. If you looked at 2014, and if we-
Ladies and gentlemen, please stand by. Your conference call will resume momentarily. Once again, ladies and gentlemen, please stand by. Your conference call will resume momentarily. Thank you.
Thank you very much. Our apologies for the technical difficulties that we incurred. I think I was in the middle about talking regarding the 2016 slate. When you look at 2016, I was mentioning that you've got the carryover of "Star Wars," which is opening late in 2015. You've got the "Divergent" movie again, "Batman v Superman," which we expect to be a big film, "Captain America" opening on the May 6th weekend, the same weekend as "Avengers." You've got "X-Men," you've got a sequel to "Finding Nemo" in "Finding Dory." We've got "Star Trek 3" opening, "Ghostbusters," all-female version. We've got a Marvel movie, "Doctor Strange." We've got "Rogue One," which is the first standalone Star Wars film. There's a lot of product moving forward into 2016. Then you've got the "Avatar" in 2017. Hopefully that covered your concerns about the slate.
Thank you. Your next question on the line will come from Rob Peters with Credit Suisse. Please go ahead.
Hi. Thanks for squeezing me in. Just had a quick question. With regards to Rec Room looking to fall into early 2016 for the first opening, how should we think about the placing of the subsequent locations?
What was said is we look to launch and build our 10-15 locations over a three- to four-year period. Although we haven't announced anything at this point, other than that first location, I would still expect that you're going to see two to three in 2016.
Would that include the shift from 2015, or?
Yes.
Thank you very much.
Thank you. We seem to have no further questions at this time. I'll turn the call back over to Ellis Jacob for any closing comments.
Thank you very much for joining us this morning, again, our apologies for the technical issues. We hope to see you all at our annual general meeting, which is on Wednesday, May 13th at 10:30 A.M. at our new location at Cineplex Cinemas, Yonge and Dundas and VIP. We hope you can join us. Thank you. Have a great weekend.
Ladies and gentlemen, that does conclude our conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.