Reading International, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Cinema Business:
  • Q2 2025 global cinema revenues and operating income exceeded expectations. Films like Minecraft Movie, Sinners, Lilo & Stitch, etc., performed well. April 2025 releases of Minecraft Movie and Sinners outperformed expectations. May 2025 had Lilo & Stitch, Mission: Impossible - The Final Reckoning, etc. June 2025 had How to Train Your Dragon. July had Superman, Jurassic World: Rebirth, etc. Third quarter expected to slow down, but fourth quarter and 2026 have promising film slates.
  • F&B program: Q2 2025 Australian F&B SPP was $8.26 (highest ever), New Zealand F&B SPP was NZD 7.14 (highest ever), and U.S. F&B SPP was $9.13 (highest ever). Online and app F&B sales improved, movie theme menus and merchandise expanded.
  • Loyalty programs: In Australia and New Zealand, Reading Rewards program was revamped and relaunched; paid loyalty program for Reading and Angelika brands in Australia had over 15,000 sign-ups. In U.S., free-to-join Angelika membership program has ~165,000 members, and premium monthly membership to launch soon.
  • U.S. cinemas: Closed a money-losing theater in San Diego. New York's Angelika had success with Wes Anderson's cinema takeover and specialty films. Expect to upgrade a major cinema with recliner seats and TITAN LUXE premium screen by end of 2025.
• Real Estate Business:
  • U.S. real estate business with live theaters in NYC had a 15% revenue increase and 144% operating income increase. Minetta Lane Theatre saw attendance increase 201% and theater level cash flow 215% due to successful shows. Orpheum Theatre's Ginger Twinsies had strong praise. Leasing updates at 44 Union Square with increased interest from office users. Property in Williamsport, PA held for sale with aggressive outreach marketing.

Segment Performance

• Global Cinema Business:
  • Q2 2025 global cinema revenues were $56.8 million, which was 32% higher than Q2 2024, representing just over 79% of pre-pandemic 2019 levels. Global cinema operating income was $5.5 million, a 218% increase from Q2 2024 and the best since Q2 2019.
  • Australian cinema revenue increased 24% to $22.9 million, with operating income moving from a loss to $2.9 million. New Zealand cinema revenue increased 24% to $3.6 million, and operating income went from a loss to $241,000.
• Global Real Estate Business:
  • Global real estate total revenue was $4.7 million, a 7% decrease from Q2 2024. Total operating income was $1.5 million, a 56% increase, representing the best second quarter since Q2 2018.

Guidance

• Third quarter expected to slow down significantly. High hopes for fourth quarter with exciting film slate including Zootopia 2, Five Nights at Freddy's 2, etc. 2026 film slate is strong with major franchises like Spider-Man: Brand New Day, Toy Story 5, etc. Expect to upgrade a major U.S. cinema with recliner seats and TITAN LUXE premium screen by end of 2025. Interest rates and Hollywood release lineup expected to contribute to growth in 2026 and beyond.

Risks

• Exchange rate fluctuations: Australian and New Zealand dollar weakening against the U.S. dollar in Q2 2025 affected revenue.
• Commercial real estate market uncertainties: Impact on property sales and leasing.
• Uncertainty in movie releases: Affects cinema revenue and performance.

Question and Answer

Q: Why was Rotorua land and improvements removed from held for sale in late 2024? In what way did you change your views about the property's long-term prospects?

A: We initially classified Rotorua as an asset held for sale as we thought it could assist in debt reduction. But it failed to attract attention during a challenging period for New Zealand commercial real estate. Now, the asset continues to generate reasonable cash flow and is believed to be part of the overall cinema circuit in New Zealand.

Q: What is NAB's appetite for longer-dated facility given the lower leverage and increased Australian cash flow from cinema segment rebound?

A: We are working with NAB on a longer-term extension. We've had a good working relationship with NAB since 2011. They are familiar with our industry and assets. We're working towards having a long-term extension in place within the next few months though no assurance can be given.

Q: The property sale, what are the landlord's seismic upgrade timeline commitments and current status versus those commitments? This refers to Courtenay asset in New Zealand. Has the new owner started seismic work? And when is it expected to be deliverable to Reading for its leasehold improvements? What are Reading's estimated leasehold improvement costs for the upgrades you plan for reopening this cinema? And what are these upgrades and expected duration requirements for Reading's completion once a seismically sound cinema is presented to you?

A: The new owner Primeproperty Group in Wellington is advancing seismic upgrade plans. They're working with engineers to finalize design, with an anticipated completion in 2026. Reading will start fit-out immediately after seismic work is done. Specific budget figures aren't disclosed, but investment will be several million dollars in line with best-in-class standards. Target for reopening is late 2026 or early 2027, but no assurances due to not controlling the development process.