Consolidated Graphics, Inc. Q2 FY2026 earnings call

Overall Quarterly Performance

• Cineplex delivered record Q2 2026 total revenue of $383.7 million, up 9.8% year-over-year, with consolidated adjusted EBITDA of $40.8 million, up 20.4% year-over-year. The company recently achieved the highest-grossing week in its history, exceeding the prior record set by Star Wars: The Force Awakens in 2015 by more than 20%.
• A broad, diverse slate of high-quality content across genres drove strong attendance growth, rather than reliance on a single blockbuster; 12.7 million guests attended, up 9.3% year-over-year, with Gen Z audiences returning meaningfully to theatrical moviegoing.

Theatrical Exhibition and Content

• Major blockbuster and franchise films performed exceptionally well: The Super Mario Galaxy Movie became 2026's first global billion-dollar release, Toy Story 5 also joined the billion-dollar club, and Michael became the highest-grossing biopic of all time and Cineplex Pictures' highest-grossing title to date. Horror titles Obsession and Backrooms became two of the highest-grossing horror films in Cineplex history, demonstrating successful theatrical conversion of digital-native content.
• All-time quarterly records were set for box office revenue per patron ($13.91, +1.7% YoY) and concession revenue per patron ($10.26, +2.2% YoY). Merchandise sales grew 45% year-over-year to a new quarterly record, contributing one-third of concession per patron growth, with themed items for major releases selling out quickly.
• Cineplex Pictures (the company's in-house distribution business) continues to scale successfully, with upcoming high-profile releases including Godzilla Minus Zero and The Hunger Games: Sunrise on the Reaping. Non-traditional studios (Amazon MGM, Netflix) are increasingly committing to theatrical windows, reinforcing the importance of theatrical exhibition for content success across all platforms.

Alternative Programming, Media, and LBE

• Cineplex was the only Canadian exhibitor to screen select 2026 FIFA World Cup matches theatrically, delivering strong audience response and proving the opportunity to drive incremental attendance from non-film cultural events.
• Cinema media delivered year-over-year revenue growth despite a strong prior year comparison; new research confirms cinema advertising delivers strong audience attention, recall, and unique access to the hard-to-reach Gen Z demographic.
• LBE faced ongoing macroeconomic headwinds to discretionary spending, resulting in softer near-term performance. A new Palladium location opened at the high-traffic Vaughan Mills shopping center in June 2026, delivering strong early results, and Cineplex remains confident in the long-term demand for experiential social entertainment.

Guest Loyalty and Balance Sheet

• The ScenePlus loyalty program added Shell as a nationwide partner in Q2, expanding its earn/redeem ecosystem to include fuel, bringing total membership to more than 15 million. The CineClub movie subscription program has over 270,000 members, with members visiting four times more frequently than non-members.
• Leverage has declined 1.5x over the past 18 months, with the company on track to reach its long-term target leverage ratio of 2.5x to 3x in the near term. Capital allocation priorities remain: maintaining assets, deleveraging, selectively investing in growth, and returning capital to shareholders once leverage targets are met.

1. Film Entertainment and Content Segment: Box office revenue increased 11.2% year-over-year to $176.2 million, representing ~46% of total company revenue. Segment adjusted EBITDA grew 32.8% to $48.2 million, the highest second quarter adjusted EBITDA for the segment since 2019. Theater food service revenue increased 11.8% year-over-year to $130 million (~34% of total company revenue), reaching an all-time quarterly record. Other revenue for the segment rose 20.9% year-over-year, driven by higher online booking fees and distribution revenue from Cineplex Pictures.
2. Media Segment: Revenue increased 4.4% year-over-year to $20.2 million (~5.3% of total company revenue). Adjusted EBITDA was $15 million, flat compared to the prior year, despite a tough comparison against elevated pharmaceutical advertising spend in Q2 2025.
3. Location-Based Entertainment (LBE) Segment: Revenue decreased 3.7% year-over-year to $32 million (~8.3% of total company revenue). Segment adjusted EBITDA fell to $1.7 million from $4.4 million in the prior year. Adjusted store level margin dropped to 12.2% from 17.5% year-over-year; excluding new 2024 openings, same-store adjusted EBITDA margin was 15.3%.

• Full-year 2026 capital expenditure guidance is maintained at approximately $50 million; 2027 capital expenditure is projected to be roughly $60 million, including one committed new LBE location with no additional major expansion commitments as of the call.
• Management confirmed domestic industry full-year 2026 box office tracking to reach $10 billion, and expects to hit the 2.5x-3x target leverage range by the time Q4 2026 results are reported if the industry meets this box office expectation.
• Both opportunistic share repurchases under the normal course issuer bid and reintroduction of a dividend will be on the table once the target leverage ratio is achieved, with no final prioritization of the two capital return methods announced as of the call.

• LBE faces ongoing macroeconomic headwinds that pressure discretionary consumer spending, and new competitor entries in select high-performing locations have impacted results on a localized, non-widespread basis. Q2 2026 LBE margins were further pressured by a temporary shift in revenue mix away from the higher-margin amusement category to food and beverage during FIFA event screenings.
• The broader macroeconomic environment has softened overall advertising spending, creating near-term headwinds for the cinema media business.
• One-time incremental costs in Q2 (marketing/implementation costs for the Shell ScenePlus launch, timing of technology initiative spend, and accelerated LTIP expense for retirement-eligible employees) pressured G&A and segment earnings in the quarter.
• There is ongoing quarterly volatility in box office results tied to the timing of school holidays and film slate composition, though the diversified 2026 back-half slate mitigates this risk to some degree.

Q: Adam Schein (National Bank) asked why LBE margins were lower than expected in Q2, whether the one-time costs from the Shell ScenePlus launch and elevated G&A will reverse in the back half of 2026, and for clarification on the resolved AMC-related tax matter. / A: Gordon Ellison explained Q2 is typically the lowest-traffic quarter for LBE, and a revenue mix shift toward lower-margin event-related food and beverage (from FIFA screenings) pulled down margins, which should reverse in subsequent quarters. The Shell launch marketing and implementation costs are one-time, and G&A increases were driven by timing of tech spending and a one-time $6 million 2026 LTIP expense for retirement-eligible employees, half of which was recognized in H1. For the AMC tax matter, the net refund after a deferred payout to AMC is much smaller than the $26 million disputed loss amount, at roughly 26% of the $26 million pre-payout. (398 characters)

Q: Drew McReynolds (RBC) asked if film rental percentages have structurally increased, if LBE competition is a widespread ongoing risk, and what attendance trajectory management assumes for 2027 relative to 2019, plus what 2026 back-half slate comps look like. / A: Ellis Jacob noted film rent adjusts incrementally with higher box office performance but no structural change has occurred. Gordon Ellison added new competition is only impacting select localized locations, not the broader LBE portfolio. Management confirmed the first 10 days of August 2026 are well ahead of last year driven by The Odyssey and Spider-Man: Brand New Day, and the industry is on track to hit the $10 billion full-year 2026 box office target, with a strong diversified slate remaining for the back half. (390 characters)

Q: Cheryl Zhang (TD Cowen) asked what drivers are behind the record concession per patron (CPP) and if advertising clients are shifting budgets amid the soft macro environment. / A: Gordon Ellison explained one-third of Q2 CPP growth came from strong demand for film-themed merchandise, which grew to ~$4 million in quarterly sales, with sellouts for popular items like the Devil Wears Prada 2 red popcorn purse; an online merchandise platform was added to capture demand for sold-out theater inventory. For media, macro softness is impacting overall ad spend, but category shifts (including strong FIFA-related out-of-home spend) supported Q2 growth, and Cineplex held an upfront event and released new effectiveness research to gain traction in the competitive ad market. (417 characters)

Q: Mayor Yagi (Scotiabank) asked when Cineplex will hit its target leverage range, how capital return will be prioritized, and what CapEx plans look like for IMAX expansion and 2027. / A: Gordon Ellison confirmed if the full-year 2026 domestic box office hits $10 billion, Cineplex will reach the 2.5x-3x target leverage range when Q4 2026 results are reported. Both share repurchases and dividend reintroduction will be on the table after hitting the leverage target, with no final prioritization announced yet. Management noted Cineplex already has 8 of the world's 41 IMAX 70mm screens, so no immediate large IMAX expansion is planned, and 2027 CapEx is projected to be ~$60 million. (379 characters)