Release Date: November 18, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Reading International Inc (NASDAQ:RDI) reported a significant improvement in total revenues, operating income, and adjusted EBITDA for Q3 2024 compared to the previous three quarters.
• The company's global cinema revenue for Q3 2024 was materially higher than the previous quarters, driven by successful film releases such as Deadpool and Wolverine.
• The Australian cinema division achieved its best third-quarter performance ever, with record revenues and operating income.
• The global real estate operating income increased by 52% compared to the third quarter of 2023, driven by strong performance in the Australian portfolio.
• RDI is optimistic about the upcoming 2024 holiday movie slate, which includes high-profile releases expected to boost cinema revenues.

Negative Points

• Consolidated revenue for Q3 2024 decreased by $6.5 million compared to Q3 2023, primarily due to lower attendance and cinema closures in the US.
• Net loss attributable to Reading International Inc for Q3 2024 increased to $6.9 million from $4.4 million in Q3 2023.
• The US cinema division experienced a 19% decrease in revenue and an operating loss of $900,000, attributed to a 10% reduction in screen count and weaker film performance.
• Interest expenses increased, contributing to the overall financial loss for the quarter.
• The company's total assets decreased by $37.4 million from December 31, 2023, to September 30, 2024, driven by a decrease in cash and cash equivalents and the sale of properties.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with RDI.

Q: How many more auditoriums are planned for additions of recliners, and when will the reseating program be completed? A: In the US, we plan to convert 23 screens to luxury recliners in three theaters over the next 24 months. This would result in almost 70% of our existing US circuit featuring recliners. We also intend to create a premium screen concept in each of those theaters. In Australia and New Zealand, we are targeting similar conversions over the next two years, subject to successful negotiations with landlords, an improved movie slate, and a stronger liquidity position.

Q: What needs to happen for the company to achieve results in the US similar to Q2 and Q3 of 2023, considering the screen fleet is 10% smaller? A: Despite the reduction in revenues, we believe that streamlining our US circuit will boost our overall theater level cash flow in the long run. We expect stronger results in the future based on CapEx improvements, the rollout of rewards and premium membership programs, and a better movie slate expected for 2025 and beyond. The US Specialty circuit's box office was off 32% quarter versus quarter, but we believe it can produce strong results again, driven by film product.

Q: Has any thought been given to selling the US cinema circuit, considering the oversaturation in the US? A: We anticipate a much stronger movie slate from 2025 and beyond, and even the holiday season in 2024. We expect our US circuit to return to producing acceptable levels of income, contributing to the overall advancement of our global enterprise. While the US market is generally over-screened, we believe our remaining US theaters will return to income-producing in 2025 and beyond, considering the improved movie schedule and strategic initiatives like CapEx upgrades and the rollout of rewards and membership programs.

Q: Do you expect to refinance the Santander loan secured by the Minetta Lane and Orpheum Theaters, and what are the expected interest rate changes? A: We are exploring options with different lenders to ensure it is in the best interest of the company and shareholders. We are optimistic about interest rates trending downwards, following recent rate cuts by the Fed. We aim to work with lenders that provide flexibility in terms of interest rate floors, fees, and covenants to reduce our interest expenses.

Q: What are your plans and sources of capital for the $5.9 million purchase price due for the Village East Ground lease? A: We are working on a transaction to complete the acquisition of the remaining New York City property, the tenant's interest in the Village East ground lease. Our CFO and General Counsel are developing a mutually agreeable transaction with the non-co-partner of Sutton Hill. While no assurances can be given, we anticipate reporting on a deal during our Q4 reporting period.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.