Reading International, Inc. Q1 FY2026 earnings call

- Overall Business Performance - Q1 2026 consolidated revenue increased $5 million to $45.1 million YoY, the second highest first quarter revenue since Q1 2020. The net loss attributable to Reading International increased to $8.1 million from $4.8 million YoY, driven by a $6.6 million property sale gain in Q1 2025; underlying operational performance improved when excluding this one-time gain. - Cinema operating earnings before depreciation and amortization turned positive for the first time since 2019. Global operating loss of $3.6 million was a 47% improvement YoY, the best operating result since Q1 2019, with total segment operating income hitting $480,000, the first positive total segment operating income since Q1 2019. - The company has reduced overall gross debt by $100.4 million since December 31, 2020, with Q1 2026 interest expense 11% lower YoY.

- Notable Strategic & Asset Transactions - In February 2026, the Cinema 1,2,3 property in New York City was classified as held for sale after the company acquired the remaining 25% interest in Q4 2025. Over 60 parties have signed NDAs, with first round bids due in the week of the call. A purchase and sales agreement was signed for the Napier, New Zealand property, with the transaction currently in due diligence and an expected leaseback of the cinema post-sale. Proceeds from both sales will be used to retire outstanding debt. - Since the start of the COVID-19 pandemic, the company has reduced its global cinema count by 8 loss-making theaters, all of which were unprofitable and unlikely to return to profitability without significant capital expenditure, with no fees or penalties paid for most closures.

- Cinema Operational Initiatives - F&B performance hit record levels: U.S. F&B spend per capita reached $8.38 and Australian F&B spend per capita reached AUD 8.09, both the highest Q1 levels on record, driven by movie-themed menus, merchandise sales, and strategic U.S. price increases. - Loyalty programs have grown rapidly: Australia/New Zealand free Reading Rewards has 510,000 members (19% quarter-over-quarter (QoQ) growth), with paid memberships hitting 31,800 (44% QoQ growth). New U.S. programs launched in early 2026 already have 24,000 free members and 1,500 paid members, with a paid premium Angelika membership launching in Q2 2026. - Capital improvement projects delivered strong early results: The Bakersfield, California U.S. cinema renovation (adding heated IMAX recliners, a new premium TITAN LUXE screen, and upgraded auditorium seating) delivered 83% YoY revenue growth in March 2026. A full renovation of the top-performing Wellington, New Zealand cinema is planned for a 2027 relaunch, pending building seismic upgrades by the landlord.

- Real Estate Operational Performance - The remaining international real estate portfolio maintains a 98% occupancy rate across 58 third-party tenants. U.S. real estate growth was driven by strong live theater performance at Minetta Lane Theatre, with multiple high-profile productions scheduled for Q2 2026. - Leasing efforts for 44 Union Square in New York City have been renewed with broker Newmark, targeting multiple tenant categories amid an improving Midtown South Manhattan leasing market.

1. Global Cinema Segment: Q1 2026 revenue was $41.5 million, a 14% increase year-over-year (YoY), contributing 92% of total consolidated revenue. The segment reported a $1.3 million operating loss, a 70% improvement YoY, marking the best operating result for this metric since Q1 2019. U.S. Cinemas generated $19.5 million in revenue (6% YoY increase, 43% of total revenue) with a $1.6 million operating loss (51% improvement YoY). Australian Cinemas generated $19.7 million in revenue (26% YoY increase, 44% of total revenue), turning from a $974,000 operating loss in Q1 2025 to $426,000 operating income in Q1 2026. New Zealand Cinemas generated $2.3 million in revenue (6% YoY decrease, 5% of total revenue) with a 40% improved operating loss YoY.

2. Global Real Estate Segment: Q1 2026 total revenue was $4.6 million, a 5% decrease YoY, contributing 8% of total consolidated revenue. The segment reported $1.4 million in total operating income, a 13% decrease YoY, marking the 14th straight quarter of positive real estate operating income. Australian Real Estate generated $2.6 million in revenue (14% YoY decrease, ~6% of total revenue) with $986,000 operating income (25% YoY decrease). New Zealand Real Estate generated $123,000 in revenue (12% YoY decrease, <1% of total revenue), turning from a $94,000 operating loss in Q1 2025 to $69,000 operating income in Q1 2026. U.S. Real Estate generated $1.8 million in revenue (13% YoY increase, 4% of total revenue) with $155,000 operating income (8% YoY increase, marking the highest Q1 U.S. real estate revenue in company history).

- Management expects the operational momentum from Q1 2026 cinema improvement to continue through the full year 2026, projecting 2026 will be the strongest post-pandemic box office year to date, supported by a robust slate of major studio releases through the end of the year. - The Napier property sale is expected to close in Q2 2026, with no assurances provided regarding final terms. - A decision on the Reading Viaduct appellate court case is not expected until Q4 2026 or later. - Paid premium membership programs for the U.S. Angelika branded cinema chain will launch in Q2 2026, and two additional U.S. cinemas will receive luxury recliner, premium screen, and F&B upgrades in 2026. - The relaunch of the renovated Wellington, New Zealand cinema is targeted for late 2027.

- Cinema attendance remains below pre-pandemic levels, while broad-based operating cost (including occupancy, energy, and labor) inflation has increased costs, limiting headroom for ticket and F&B price increases. - The company faces ongoing liquidity pressures tied to its outstanding debt portfolio, requiring ongoing amendments to debt covenants, maturity extensions, and principal payment modifications with lenders. - Uncertainty remains around the timing and final sale price of the Cinema 1,2,3 and Napier properties, which are key to reducing outstanding debt and improving liquidity. - The New Zealand cinema market faces weaker macroeconomic conditions, rising energy costs, and increased local competition, pressuring profitability. - The pending appellate court case for the Reading Viaduct creates uncertainty around the future of this asset, though no monetary damages are being sought by the city. - 44 Union Square still has 4 unleased floors, and previous discussions with a lead prospective tenant ended without a deal, creating uncertainty around leasing timelines and future revenue. - The company did not qualify for any U.S. government pandemic assistance, which created longer-term financial headwinds relative to peer competitors.

Q: What is the current status of refinancing the Santander loan secured by Minetta Lane and Orpheum, which matures June 1, 2026? What are the contingency plans if refinancing does not close on time? / A: Management confirms they are currently working through multiple refinancing options to reach acceptable terms, and will not disclose terms publicly at this stage. They expect to close the refinancing within the next few months.

Q: Are there any covenants, prepayment or change of control provisions that would be triggered by the sale of Cinema 1,2,3 or other future asset sale transactions under the nationwide facility? / A: There are no such provisions that would be triggered by these transactions.

Q: Why has Australian cinema performance improved so much more than New Zealand cinema performance, and what is the plan to return New Zealand cinema to profitability? / A: Australia has a more resilient economy and stronger labor market, while New Zealand faces slower growth, higher unemployment, rising energy costs, and a weaker currency performance relative to the U.S. dollar. New Zealand also faced difficult comparisons to Q1 2025, which had an extraordinarily strong performance from a breakout local film, plus a top-performing Christchurch cinema has lost material market share to new, state-of-the-art competition. The same strategic growth and cost reduction initiatives rolled out in Australia are being implemented in New Zealand to improve profitability.

Q: U.S. cinemas still have a $1.6 million operating loss even after closing underperforming locations. What is driving this loss, and what changes are needed to reach sustainable profitability? / A: After backing out depreciation, U.S. cinemas already posted positive earnings for Q1 2026. The division was the hardest hit by the pandemic, and received no U.S. government pandemic assistance unlike comparable private competitors that received tens of millions in interest-free government support. Management's ongoing priorities are negotiating lower occupancy costs with landlords, closing unprofitable locations where possible, reducing operating expenses, upgrading high-potential cinemas, growing F&B and loyalty programs to drive attendance, and exploring opportunities to acquire existing cinemas on more favorable current market terms. Ultimately, the strongest driver of improved profitability will be the continued robust major studio film slate for the remainder of 2026.