Categories Earnings Call Transcripts, Leisure & Entertainment

Cineplex Inc. (CGX) Q4 2021 Earnings Call Transcript

CGX Earnings Call - Final Transcript

Cineplex Inc.  (TSX: CGX) Q4 2021 earnings call dated Feb. 11, 2022

Corporate Participants:

Mahsa Rejali — Executive Director of Corporate Development and Investor Relations

Ellis Jacob — President and Chief Executive Officer

Gord Nelson — Chief Financial Officer

Analysts:

Derek Lessard — TD Securities — Analyst

Jeff Fan — Scotia Capital — Analyst

Aravinda Galappatthige — Canaccord Genuity — Analyst

Drew McReynolds — RBC Capital Markets — Analyst

Adam Shine — National Bank Financial — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to Cineplex’s Fourth Quarter and Year-end 2021 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mahsa Rejali, Executive Director, Corporate Development and Investor Relations. Thank you. Please go ahead.

Mahsa Rejali — Executive Director of Corporate Development and Investor Relations

Good morning, and welcome. With me today is Ellis Jacob, our President and Chief Executive Officer; and Gord Nelson, our Chief Financial Officer.

Before I turn over the call to Ellis, let me 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, the negative impact of the COVID-19 pandemic, adverse factors generally encountered in the film exhibition industry, risks associated with other national and world events, discovery of undisclosed material liabilities and general economic conditions.

Following today’s remarks, we will close the call with our customary question-and-answer period.

I will now turn the call over to Ellis Jacob.

Ellis Jacob — President and Chief Executive Officer

Thank you, Mahsa. Good morning, and welcome to our Q4 and year-end 2021 conference call. We are glad you could join us today. As I address the quarterly results, I am pleased to say that Cineplex and the exhibition industry continues to make significant progress in recovering from the effects of the pandemic. Since reopening in the summer of 2021, releases like Shang-Chi and the Legend of the Ten Rings, No Time to Die and Dune exceeded industry expectations, but the highly anticipated release of Spider-Man: No Way Home was a huge success. The film generated over CAD1 billion of global box office within two weeks of its release and has grossed CAD750 million domestically to date. While government-mandated restrictions and closures in December prevented us from fully capitalizing on this demand, there is no question that Cineplex is poised for a strong recovery and our box office performance will mirror other jurisdictions once our theatres resume operations at full capacity.

While 2022 started off with some challenges, the fact remains that the year ahead is bright. The recent mandated closures were temporary, and we are delighted to see that all of our theatres and entertainment venues are now open nationwide, although capacity and other restrictions remain in certain provinces. Despite mandated restrictions, in Q4 2021, we delivered our strongest quarter in two years and made significant strides towards profitability and cash flow generation. What’s really impressive is that these results were achieved even though operating restrictions were imposed on us during our busiest box office period. This momentum is highly encouraging and with the recent closures now behind us and restrictions continuing to ease, we are thrilled about the year ahead and our path towards recovery.

With Gord speaking to our financial results shortly, I want to focus my remarks on three main areas. First, the positive momentum seen when our venues are open. Secondly, our proactive efforts to reinstate financial stability and advance growth initiatives, and lastly to reaffirm our solid position for a promising recovery across all of our businesses.

To speak to my first point, although most of our venues were closed for the first half of 2021, once we were able to reopen from mid-July to early December of last year, we saw momentum in all of our lines of business. Shang-Chi and the Legend of the Ten Rings established an all-time record for a Labor Day release in September. No Time to Die brought out an audience that mirrored the demographic makeup of our 2019 base by bringing back in our adults. Since reopening in July, our box office numbers were progressively approaching pre-pandemic levels, with October reaching 80% of the same month in 2019. These results had us excited about December, which included the highly anticipated releases of Spider-Man: No Way Home, The Matrix Resurrections and Sing 2.

However, as we all know, during December, provincially mandated capacity restrictions and closures were reinstated in certain provinces. And for the first time ever, the operating restrictions also included a ban on concession sales in some provinces, including our largest market, Ontario. These constraints were intensified, as Omicron numbers increased and ultimately culminated in closures of our theatres and LBE locations in certain markets from mid-December to early February 2022.

The timing of the operating restrictions was extremely unfortunate. To provide some background, the last two weeks of December account for a material portion of our business, typically delivering around 30% of our Q4 box office. These restrictions prevented us from realizing the full benefits of Spider-Man: No Way Home, which had the second-biggest domestic opening weekend of all time and the biggest December opening ever. We know from our own box office results prior to the recent closures as well as box office results from our peers in the United States that guests want to be back in our theatres.

In spite of these restrictions, we still delivered strong revenue growth, welcoming 10.2 million guests to our theatres during the fourth quarter. We also achieved an all-time quarterly record BPP of CAD12.29 and while the CPP for Q4 2021 was significantly impacted by restrictions on concession sales, we still set an all-time annual record CPP of CAD7.93.

In addition to the exhibition business, our other businesses also contributed positively to our overall results. We significantly improved our net loss during the quarter to CAD21.8 million from CAD230 million in Q4 2020 and improved our adjusted EBITDAaL to CAD20.2 million from an adjusted EBITDAaL loss of CAD65.9 million in Q4 2020. Through a combination of attendance growth and working capital management, we generated positive net cash from operating activities of CAD27.5 million in the fourth quarter, compared to negative CAD61 million in Q4 2020. We were also pleased to see a positive average monthly net cash contribution from the first quarter since the pandemic began.

I would now like to talk about our proactive efforts to reinstate financial stability and advanced growth initiatives in the past year. While we hope to avoid further operating restrictions, we will prepare for an anticipated possible challenges arising from a new variant. We have contingency plans in place well before the first case of the new variant was recorded in Canada. With the onset of Omicron, we took proactive steps to reinstate financial stability. Gord will provide a more fulsome financial update in a moment, but some of the actions taken included continued focus on minimizing cash burn, cost management across all business lines and adding liquidity, which included government subsidies where possible.

Moreover, we worked with our supportive lenders and obtained the continued suspension of financial covenant testing until the second quarter of 2022. This continued support speaks volumes about our lenders’ confidence in our business plan and our expected recovery. We have taken significant measures to manage the financial uncertainties created by COVID-19 and believe in the strength of our industry as the pandemic gets under control and we see a return to normalcy.

Looking back on the quarter, we achieved encouraging results, which would not have been possible without the dedication of our amazing employees across the Cineplex ecosystem. With all our theatres and entertainment venues now open nationwide and restrictions easing in many provinces, we are turning yet another corner on the road to recovery and anticipate further upward trajectory in the months to come.

Over the course of the pandemic, we continued to advance our growth initiatives, and during the fourth quarter, we announced the launch of Scene+. This enhanced rewards program brings together two of Canada’s favorite loyalty program, SCENE and Scotia Rewards. Scene+ members will still enjoy the much-loved features and rewards from movies, entertainment and dining, while also adding the option of earning and redeeming points for travel, shopping and banking. This strategic alignment creates huge opportunities for the future of the Scene+ program and enables our team to reach and entertain even more guests and movie lovers than ever before.

In addition, during the summer of 2021, we launched our entertainment subscription program, CineClub, which provides members with benefits in our theatres, location-based entertainment venues and the Cineplex Store. So far, CineClub has received positive response from our guests, despite restrictions and closures. We have always strived to provide our guests an exceptional entertainment experience at great value, while driving attendance and increasing movie-going frequency and CineClub does just that.

We have also worked hard to engage with our guests and provide offerings through our digital movie platform, the Cineplex Store and food delivery through Skip the Dishes and Uber Eats. The Cineplex Store, which differentiates us from our peers, benefited from a number of PVOD releases during the year, offering guests the chance to view content directly in their homes. This was especially important during the closure periods, as it enabled us to engage with our guests at a time when their out-of-home entertainment options were limited.

We are also exploring alternative content offerings, including the expansion of our distribution business, for select feature films in Canada. Branded Cineplex pictures, we see significant growth opportunities where we can leverage Cineplex assets and database to promote and find new audiences. This is an addition to our ongoing efforts to increase and diversify content through international titles where we are experiencing tremendous success. In fact, three of the Top 10 highest-grossing Punjabi films in Cineplex history were released in 2021, which indicates significant post-pandemic growth and opportunity for Cineplex going forward.

Last year, we opened three new VIP locations, including our 25th VIP Cinema in Calgary, which opened its doors in November. We also opened one Playdium location in Nova Scotia and two new locations of The Rec Room in British Columbia and Ontario in 2021. With these additions, we now have location-based entertainment venues open coast to coast and can offer our guests even more options when it comes to spending their leisure time with us.

Lastly, I want to discuss and reaffirm our solid position for a promising recovery across all of our businesses, including the encouraging results from our non-exhibition business units. During the fourth quarter, P1AG’s adjusted EBITDAaL increased by 27% to CAD4 million compared to pre-pandemic Q4 2019, mainly driven by customer shifts and cost management. Our location-based entertainment business continues to perform well with an adjusted store-level EBITDAaL of CAD4.6 million in Q4 2021 compared to a loss of CAD2.8 million in the prior year. Going forward, we expect to reap benefits from the new locations that were built over the last two years.

Cineplex Media is also showing encouraging signs of ramping up, as client confidence returns and companies build out their advertising budgets for 2022. Our team at Cineplex Digital Media continues to be busy with the rollout of new products and services, which optimize digital signage to expand offerings for our clients and unlock value from theatre and experience design services. As we look forward, we believe we can generate high-margin opportunities from these initiatives.

Looking ahead, it is clear the global film industry is poised for a big return as restrictions are lifted and content supply remains strong. Our studio partners are gravitating towards an exclusive theatrical window for blockbuster titles, and there is a general acknowledgment in the industry about the importance of the big screen in a film’s success. Theatrical exhibition has and always will play a significant role in elevating content to realize its maximum potential from box office revenues to associated downstream revenues, including merchandising sales and the promotion of studio streaming platforms.

With that said, we are particularly encouraged by this year’s film slate, which is very promising and includes the following anticipated titles, just to name a few. For the remainder of Q1 2022, we have Death on the Nile and Marry Me releasing today ahead of Valentine’s Day, Uncharted later this month and the highly-anticipated release of The Batman in early March. And for the remainder of the year, we have Mobius, Sonic the Hedgehog 2, Fantastic Beasts, Doctor Strange in the Multiverse of Madness, Top Gun: Maverick, Jurassic World Dominion, Minions: The Rise of Gru, Spider-Man: Into the Spider-Verse 2, Black Panther: Wakanda Forever, Avatar 2 and Aquaman and The Last Kingdom. We believe that after experimentation with various release strategies over the past year and a half, this extensive list of titles reaffirms the commitment of studios to an exclusive theatrical release window.

Finally, before I pass things to Gord, I want to provide a brief update on the ongoing litigation with Cineworld. As many of you heard, the Ontario Supreme Court of Justice issued a judgment for CAD1.24 billion in favor of Cineplex. While Cineworld has filed a notice of intent to appeal, we remain confident in the Court’s decision. We will continue pursuing compensation for what we believe to have been a wrongful repudiation of the agreement between Cineplex and Cineworld.

The bottom line is that Cineplex has an exciting year and future ahead. We have applied financial discipline, liquidity initiatives and cost control measures throughout the pandemic, and are confident in our financial position to withstand any further pressures in the near term. We have implemented operating efficiencies and laid the groundwork for recovery. And we have done all of this while staying committed to the health and safety of our employees and guests. Our team has proven that we can safely operate during the pandemic, and we are thrilled to welcome guests back to our venues once again. Movie-going is here to stay and Cineplex’s future is strong.

With that, I will turn things over to Gord.

Gord Nelson — Chief Financial Officer

Thanks, Ellis. I am pleased to present a condensed summary of the fourth quarter results for Cineplex Inc. For further reference, our financial statements and MD&A have been filed on SEDAR and are also available on our Investor Relations website at cineplex.com. Our MD&A and earnings press release include a fulsome narrative on the operational results. So, I will focus on highlighting and quantifying some of the key operating results and provide commentary on cost control, liquidity and outlook.

As Ellis mentioned, our Q4 operating results were materially impacted by provincially mandated closures, capacity restrictions, and for the first time, restrictions on concession sales in certain provinces. These restrictions became effective during the last half of December when we typically generate about 30% of Q4’s box office volume. Despite these operating restrictions, we did report our strongest results since the beginning of the pandemic.

Total revenues increased to CAD300 million from CAD52.5 million in the prior year, net loss improved to CAD21.8 million from CAD230.4 million in the prior year and adjusted EBITDAaL increased to CAD20.2 million from negative CAD65.9 million in 2020. In addition, we reported our first quarter since the beginning of the pandemic without a net cash burn.

In our film exhibition and content segment, attendance increased to 10.2 million in the current quarter as compared to 0.8 million in the prior year. We reported a record quarterly BPP of CAD12.29 and our CPP of CAD7.49, although strong, was negatively impacted by the restrictions on theatre food sales in certain provinces. While we had to pivot from ramping business volumes to operating restrictions yet again, we did what we always do, we focused on the guest experience, safety and cost controls as we navigated through the uncertainty.

For film entertainment and content, we reported our highest segment EBITDAaL of the pandemic during Q4 2021. Our media business was also materially impacted by operating restrictions and closures, not only by the specific restrictions implemented in Q4, but also by the uncertainty that restrictions throughout the year created in our client strategies as they look to commit to cinema and our digital place-based networks.

We did see clients coming back and reported fourth quarter media revenue of CAD32.8 million as compared to CAD12.5 million in the prior year. The increase was primarily due to cinema media revenue, which increased CAD20.6 million as a result of the circuit reopening throughout the majority of Q4 2021 and the resulting stronger box office performance. Given the high margin contribution of cinema media, our overall media segment EBITDAaL increased to CAD19.3 million, also a segment record during the pandemic.

Our P1AG business typically generates approximately two-thirds of its revenue from the U.S. and as such is less impacted than our other businesses by operating restrictions in Canada. It had another strong quarter, with revenues increasing to CAD31.8 million from CAD11.8 million in the prior year and EBITDAaL increasing to CAD4 million from a loss of CAD3.7 million in the prior year.

Our LBE business continues to be impacted by the pandemic and operating restrictions. We would typically generate significant revenues during the fourth quarter from corporate events and holiday parties, but as you all know, these types of events were significantly impacted in 2021. We were still pleased to report Q4 adjusted store level EBITDAaL of CAD4.7 million, up from a loss of CAD2.8 million in the prior year. Despite the lower business volumes, we were able to manage costs and reported an adjusted store level EBITDAaL margin of 24.4%.

G&A expenses were up 34.2% to CAD15.8 million from CAD11.8 million in the prior year, primarily due to additional litigation costs, a decrease in wage subsidies, a decrease in restructuring expenses and timing related to certain expenditures. These items are described in more detail in our MD&A.

With the continuing uncertainty of COVID and the potential further operating restrictions, we continue to be focused on cost control. And I wanted to provide some comments on our largest fixed and semi-fixed costs and the impacts of subsidies and abatements during the quarter. For the fourth quarter, we reported government subsidies of approximately CAD11.3 million as compared to CAD18.4 million [Phonetic] in the third quarter of 2021 and CAD22.2 million in the fourth quarter of 2020. The CAD11.3 million reported in Q4 2021 includes approximately CAD9.4 million in wage subsidies and approximately CAD1.9 million under the federal rent subsidy program and provincial property tax and utility subsidies.

Our subsidy program receipts did reduce in the fourth quarter, as it was expected that we would be in a reopening phase. Provincial and federal governments have announced subsidy programs, which will continue to apply throughout the beginning of 2022, and we will continue to benefit from these programs. In addition to the government subsidies, we continue to receive abatements from our landlords, albeit at declining amounts as time has passed and our locations reopen. For the fourth quarter, we received the benefit of abatements, totaling CAD7.1 million as compared to abatements of CAD14.9 million in the fourth quarter of 2020.

For the fourth quarter of 2021, we reported net capex of CAD4 million and approximately CAD15.6 million for the full year. Our net capex was materially below prior years and our guidance, as we focused on only contractually committed expenditures and necessary expenditures. For 2022 and beyond, we will continue to be prudent with our growth initiatives and will seek out opportunities within the disrupted retail landscape.

Given the ongoing impacts of the pandemic and related restrictions during the first quarter, our guidance for net capex for 2022 is reduced to CAD70 million to CAD75 million. As a result of the foregoing, we were pleased to report our first quarter since the beginning of the pandemic without a cash burn. We had an average monthly net cash contribution of CAD439,000 as compared to an average monthly net cash burn of CAD24.9 million in the prior year.

Please note that we are providing two alternative calculations of average monthly net cash burn. One which is similar to our previous disclosures and a second which is based on a more directly identifiable GAAP measure, including net cash provided by or used in operating activities as a starting point. As a result, there have been some immaterial changes to the previously presented amounts.

Before discussing our liquidity position, I wanted to discuss two additional items. As I know you’re aware with respect to the Cineworld litigation, we were awarded damages of CAD1.24 billion and CAD5.5 million for transaction costs, exclusive of pre-judgment interest. Cineworld has filed a notice of appeal, and due to uncertainties in timing, outcome of appeal and the ability to recover the full amount, no amount has been accrued as a receivable on our financial statements.

Secondly, I want to remind you of the benefit of the tax asset that was derecognized during 2020 as a result of the uncertainties related to the pandemic. As described in Note 8 of our financial statements, we currently have non-capital losses totaling CAD314.6 million to utilize against future periods. We can continue to evaluate the recoverability of these deferred tax assets and we’ll recognize such asset when and if appropriate.

I would now like to focus on our liquidity position. For Q4 2021, we were pleased to have net borrowings of CAD1 million under our credit facilities after net repayments of approximately CAD26 million in Q3 2021. Throughout 2021, we have managed our debt balance by minimizing our cash burn and looking for liquidity opportunities. As a result of Omicron and the provincially mandated operating restrictions and closures, we immediately and proactively approached our bank group to amend our credit facilities to extend the suspension of covenant testing until the second quarter of 2022.

We were pleased to receive their support and announced this amendment on December 30, 2021. As a reminder, while the covenant testing is suspended, we are required to maintain a minimum liquidity of CAD100 million. And as at December 31, 2021, we had approximately CAD271 million in availability or liquidity under our credit facilities.

As we continue to reopen and ramp-up, we will continue to focus on cost controls and the liquidity while driving revenues. We see restrictions being relaxed, we see pent-up consumer demand, and we see a backlog of film titles to supply the market on reopening. We continue to focus on the safe operations of our businesses and cost management while exploring opportunities for value creation.

That concludes our remarks for this morning. And we’d like to now turn the call over to the conference operator for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question today comes from Derek Lessard of TD Securities. Derek, please go ahead. Your line is open.

Derek Lessard — TD Securities — Analyst

Yeah, good morning, everybody. Glad to talk to you again. Just a few questions for me. Curious about the price increase that you put through and maybe if you could add some context around, I guess, their average magnitude and are they simply you guys raising ticket prices, and maybe just how sticky do you expect them to be?

Ellis Jacob — President and Chief Executive Officer

Yeah, Derek. We have made some very small price adjustments as we are moving forward. Most of the increase you see in the BPP is based on the guests coming to our premium offerings and that’s helped us get to the higher numbers that you see, but we will continue to evaluate our pricing and how we move forward with that into 2022.

Derek Lessard — TD Securities — Analyst

Okay. No, that’s helpful. And maybe, Gord, the CAD3.8 million and CAD3.1 million increase in SCENE costs and marketing expenses, just wondering how we should be thinking about the level of these expenses and whether or not these are more one-time?

Gord Nelson — Chief Financial Officer

Yes. With respect to the marketing expenses, I mean there are two strong initiatives that we implemented in the third and into the fourth quarter. So one is with respect to a kind of a rebranding campaign to reintroduce our guests and get them back into thinking of the theatre experience. And then, the second one is CineClub introductions. So you’re going to see a little bit of an elevated spend in Q4 related to those initiatives. And that’s why you’re seeing the increase relative to the prior year.

With respect to SCENE and you’ve seen the SCENE increase from 2020 to 2021 is we’ve discussed the launch of Scene+ and the opportunities that we see with respect to that. So the elevated costs that you’re going to see in both 2021 and that will continue on through 2022 as we go and implement the benefits of Scene+. So for 2021 and 2022, you’ll see those costs at a little bit of an elevated level than you would have historically seen.

Derek Lessard — TD Securities — Analyst

Okay, that’s helpful. And then maybe one last one for me before I re-queue, Ellis. I know you guys want to be open, but I was just curious on which movie for you would you regard as the next tent-pole that you say that you need to absolutely be fully open in order to leverage for this?

Ellis Jacob — President and Chief Executive Officer

Well, the good news is we started tickets on sale at mid-day yesterday for the movie, The Batman, and we got some special events that are taking place, the day before the movie opens at a special deal we made with Warner Brothers and it’s happening across North America. And on that Wednesday, we’ve already pretty well sold out all of the bigger markets like Toronto and Montreal and things are going very well.

And as at this point, I think we already pre-sold close to CAD0.5 million worth of tickets. So I think that’s going to be the next biggie, even though we’ve got opening tonight, Death on the Nile, Marry Me and Blacklight. So we’ve got product that’s coming through that will continue to get our guests back to our theatres and let’s not also forget the Oscar-nominated films that are back on the screen, so there’s going to be a lot of product that our guests can enjoy.

Derek Lessard — TD Securities — Analyst

Okay, that’s it for me. Thanks, everybody.

Ellis Jacob — President and Chief Executive Officer

Thank you.

Gord Nelson — Chief Financial Officer

Thanks, Derek.

Operator

Thank you. And our next question comes from Jeff Fan of Scotia Capital. Jeff, please go ahead. Your line is open.

Jeff Fan — Scotia Capital — Analyst

Thank you. Good morning, and thanks for all the color. I just want to dig into the performance in the box office a little bit. Ellis, I think you said in October, you did about 80% of 2019. Wondering if you can give us the number for November just before the closures. And then the second part related to box office is because the closures were not applied across the country uniformly, some theatres were open in some provinces. Do you have any data on how those theatres performed through the quarter, the ones that were opened and the ones that were able to show Spider-Man in the last two weeks of December? I know it might be small, but it just gives us a sense as to what the pent-up demand and patrons’ willingness to come back is, if you have that, that would be great.

Ellis Jacob — President and Chief Executive Officer

So October, as you said, we did 80%. In November, we were close to 70% and December, yeah, taking all of the items into account, we ended up at 62%, but that was also because as you said, we were hurt by the back half of December where we were closed or restricted in a number of locations. The first half of December is not a good indicator because the first two weeks in December are usually the slow weeks and the back two weeks are usually the strongest weeks of the quarter and in the last two weeks, it’s also the strongest weeks of the year, which is really something that hurt us because of the closures. So on an overall basis from like October to December, we were close to 70% for the quarter. And if you looked at October to December 15, we were around the same number.

Jeff Fan — Scotia Capital — Analyst

Okay, that’s helpful.

Ellis Jacob — President and Chief Executive Officer

Is that [Speech Overlap] for you or?

Jeff Fan — Scotia Capital — Analyst

What about the theatres that were open, if we can dig it down to the ones that actually went through the quarter and stayed opened?

Ellis Jacob — President and Chief Executive Officer

Yeah. If you look at the ones that stayed open, that helped us get to the 70%. And basically, we were close to 80% for the ones that were open.

Jeff Fan — Scotia Capital — Analyst

Okay, great. That’s helpful.

Ellis Jacob — President and Chief Executive Officer

So they were strong, but again remember, we were hurt because Quebec was closed and we also had restrictions in all of — mostly all of the other provinces.

Jeff Fan — Scotia Capital — Analyst

Right, understood. The other question is for Gord. Just related to some of the measures — relief measures that you alluded to since the new closures, how much should we be expecting for 2022, I guess, particularly in Q1? And can you talk a little bit about what you’re thinking on cash burn for Q1 ’22 before the covenants kick back in?

Gord Nelson — Chief Financial Officer

Sure. So on your first question and on the subsidies, so, on government subsidies [Indecipherable] the wage program, the rent program and realty tax and utilities program, we generated about CAD11.3 million of support during the fourth quarter. And as we mentioned, it was primarily related to the restrictions put in place in the back half of December.

The programs that have now been announced for that mid-December through any other periods of restrictions in the 2022 are actually a little bit richer than some of the predecessor programs. So there is a hardest hit business recovery program, a tourism and hospitality recovery program that are really designed to help those organizations that have been particularly hard hit during the pandemic. So the subsidy levels are a little bit richer. So I would expect that our support mechanisms, so I gave you the amount for Q4 about CAD11.3 million [Phonetic] is that our support mechanisms for the first quarter could be almost three times that magnitude. So they will be — we would expect them to be over CAD30 million.

Jeff Fan — Scotia Capital — Analyst

Okay.

Gord Nelson — Chief Financial Officer

Yeah. So, on your second question, which relates to cash burn is, what I would suggest is that I gave you the number for last quarter, which — sorry, Q4 2020 which was in essence a full quarter — full quarter closure, we were kind of ramping up to about a CAD25 million cash burn in a full closure scenario. If you wanted to suggest that perhaps for Q1 we’re in a scenario or maybe a third of that number, given the impacts that have kind of really fallen in January that’s probably around the neighborhood of where it’s going to be.

Jeff Fan — Scotia Capital — Analyst

Great. Thanks, Gord. That’s helpful.

Operator

Thank you. Our next question comes from Aravinda Galappatthige from Canaccord Genuity. Aravinda, please go ahead. Your line is open.

Aravinda Galappatthige — Canaccord Genuity — Analyst

Two for me. The first one for Gord or even Ellis, with respect to occupancy costs, I mean as we look beyond Q1, how shall we sort of think about that element, the cash component? Are there more rationalization that you can achieve on a go-forward basis or as sort of box office returns back to pre-pandemic levels, should we be thinking of sort of historic — sort of the historic benchmark as we sort of look to forecast that?

And then secondly, on the media side, under the circumstances, I thought the cinema media numbers were actually quite good getting to — surpassing 50% of the pre-pandemic levels. Can you give us a flavor of the sort of the dialog that you’re having with advertisers, their appetite to sort of come back alongside sort of the reopening? So would that be a sort of a lag as in terms of the return of those ad dollars? Thank you.

Gord Nelson — Chief Financial Officer

Hi Aravinda, it’s Gord. I’ll take the first question on occupancy and then turn it back to Ellis for media. With respect to the occupancy costs, we’ve done — our real estate team has done an amazing job, incredible job in terms of getting abatements. And I want to stress again that these are abatements, these are not deferrals of rent. So this is permanent forgiveness. We are not in a situation where we have to pay catch-up rent in [Technical Issues]. So obviously, we are continuing to explore other opportunities during the most recent closure period. And so, we expect to be successful, but again on diminished levels and where we’ve been historically. So your question is, do I go back up to sort of the 2019 level and I think that’s appropriate. You would not go above that level, because as I said, we have not been in situation where we’ve been deferring rent and having to pay catch-up for it in 2022.

And then I’ll let Ellis talk about kind of the media relationships.

Ellis Jacob — President and Chief Executive Officer

Yes, on the media side, we did have a strong Q4 and we are seeing a real desire for how clients to get back on screen and we will see a continuing ramp up as we move forward. Sadly, we got hit with the closures in our bigger markets, but we are looking forward to a nice ramp-up as we move forward.

Aravinda Galappatthige — Canaccord Genuity — Analyst

Okay, thank you. I’ll pass the line.

Ellis Jacob — President and Chief Executive Officer

Thank you, Aravinda.

Operator

Thank you. And our next question comes from Drew McReynolds of RBC Capital Markets. Drew, please go ahead. Your line is open.

Drew McReynolds — RBC Capital Markets — Analyst

Yeah, thanks very much, and good morning to you all. A couple of just follow-ups or clarifications. Maybe starting with you, Gord, on capex. I don’t know if I got the number right. I think I heard CAD70 million to CAD75 million for 2022. If that is correct, just can you give a little color on what that envelope is going to include? And then second on the Scene+ accounting, you’ve walked through just a couple of puts and takes so as to what we should expect kind of going forward, but in terms of accounting for that program, is there really any big difference to what you were doing before? And I’ll stop there and add just a couple of others after that. Thanks.

Gord Nelson — Chief Financial Officer

Okay. Thanks, Drew. So I’ll take those two questions with respect to capex and I’m happy to provide a little bit more color on that. In 2021, as I mentioned, we look to only complete contractually committed projects as well as really only required expenditures during the period. So we have reported a full-year capex of roughly CAD16 million, which is described in our MD&A with roughly CAD7 million in maintenance, CAD5 million in builds, CAD5 million in growth and about CAD1 million in sort of timing of disbursements. The amounts that I described for 2022, you heard me correctly, was a range of CAD70 million to CAD75 million and so that would be comprised of the following.

Roughly CAD25 million of maintenance capital. So again, we’ve got a little bit of catch-up. Our maintenance is typically CAD30 million, as we’ve described before. And with some of the closures in the first quarter, we’re a little bit behind [Indecipherable]. So, I’m suggesting it will be at around CAD25 million of maintenance capex, some of the builds that we’ve restarted, and so the net build amount would be about CAD30 million premium initiatives. So this is typically adding premium initiatives in the theatres will be around CAD10 million. And then other new growth as it comes along will be sort of a range of CAD5 million to CAD10 million and that makes up CAD70 million to CAD75 million.

With respect to your second question on SCENE, the nuances and the changes, and it’s a good question, and on the accounting, one that really had relatively insignificant impact in the fourth quarter, which we will provide more detail on in 2022, as we go forward is we — when we were issuing SCENE points historically for transactions at the box office or the concession stand as we would deduct those SCENE points — the value of those SCENE points almost as a discount against the original transaction. So if you’re buying a ticket purchase at CAD10, and we issued X number of SCENE points, we would actually record the box office revenue as CAD14 less X. Now that we’re not necessarily the primary beneficiary of the Scene+ rewards is we will end up really moving that discount to a marketing expense.

So now that in the example I just gave you, CAD14 will come in as box office revenue and that X the value of SCENE points issued will become a marketing expense. So as again it was insignificant, it was just slightly over CAD1 million in the fourth quarter and we will provide detail in our MD&A about going forward on how those amounts are comprised when compared to the prior years, but the important thing is it’s a net zero impact. So it just means the box office and the concession revenue will be grossed up and there will be a corresponding marketing expense.

Drew McReynolds — RBC Capital Markets — Analyst

Yeah, there was two answers there, Gord. Fantastic, thank you for that. A couple other, one just quick on the digital media side just in the MD&A, you talk about a few of the contracts expiring and a focus on the higher margin projects. Just — I’m assuming that’s maybe in the normal course of scaling this business as you look forward, but just any change in your strategy there? And then lastly for me, I probably have asked this often on prior quarters, but just as we come out of the mess of the last couple of years, you guys have done a great job on the cost structure, but at the same time, obviously, the world is seeing some inflation. So just how do you view at the high-level kind of the put and take of that one? Thank you.

Gord Nelson — Chief Financial Officer

Sure. So I’ll start with both — I’ll take both the questions and Ellis can jump in. So on CDM, we’re really pleased with sort of the pivot that the business is doing. In our materials, we talk about the development during the pandemic and initiative to develop our flex smart engine technology. And so, this is where we really see the next generation of the digital signage business. And the SmartEngine is really a data-driven platform, which provides more value for the impressions that appear in front of the side, it’s an essence it’s using machine learning and AI to kind of provide more targeted messaging. So that’s where we see sort of a high-margin pivot in terms of our strategy. And what we’ll see is we’ll transition our customer base away from sort of the low margin, maybe mass location type customers where they’re not looking for a solution like that. And so, they’re low margin contributors to us and look into kind of more of these high-touch points, high-value contributors and high-margin contributors in the digital media business. So that’s really started and that’s the focus of the business going forward.

Ellis Jacob — President and Chief Executive Officer

And Gord, I think it’s really important to say that as we switch and pivot, we may sure decline. But over the next 12 to 18 months, we will recapture a lot of good business as we continue to use technology to move forward and get new clients into this space. So we are optimistic that it will continue to grow as we move forward.

Gord Nelson — Chief Financial Officer

Yeah. And then we’ll pivot a little bit away from the big hardware sale component to — hardware sales was about 50% of our revenue in 2019. So you’ll see a little bit of a pivot away from hardware sales to which is extremely low margin.

On your second question, which is related to costs and our cost structure, we obviously have been very focused on that during the pandemic. Look, we’re aware of all the supply chain disruptions, potential for inflationary cost increases, wage challenges and a number of items which we denoted in our risk section of our MD&A. We do believe that there is opportunity to potentially pass on any, and if those occur through pricing, we have held back on pricing, but that would be an opportunity, but also we’re looking at automation and technology to help mitigate some of those and any of those cost increases.

Drew McReynolds — RBC Capital Markets — Analyst

Got it, thanks. Thanks very much to you both.

Ellis Jacob — President and Chief Executive Officer

Thank you.

Gord Nelson — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] And our next question comes from Adam Shine of National Bank Financial. Adam, please go ahead. Your line is open.

Adam Shine — National Bank Financial — Analyst

Thanks a lot. I can imagine, most of them — most of my questions have been asked and answered already, but a couple maybe for you, Ellis. One, when I look at the release schedule this year, it does look pretty strong. I can count at least a dozen-plus particularly large blockbuster movies and then a whole slew of perhaps smaller budget ones, which leads to the question, Bob Iger has exited Disney and made a few remarks during a number of interviews talked about the increasing blockbusterization of the box office and we’ve seen obviously have some of the Marvel movies, Disney movies have sort of outperformed. Can you maybe talk about your thoughts as to how you see things in terms of driving more consumers for more movies out to the box office as we exit the COVID?

Ellis Jacob — President and Chief Executive Officer

Yes, it’s a great question and I did read what Bob said, but the bottom line is when you go back and look, Adam, as to all the different experiments that the studios did over the last year and a half, they all still realize that the theatrical release is one of the best ways of building the brand. And I look at the back half of this, not even the back half from moving forward, there are a significant number of tentpole movies that are being released in 2022, which are the movies that really drive the total box office for the year because they’re usually the higher grossing movies.

And as we go through the year, I think there is going to be a number of the smaller studios that are going to come out with the specialty product and also the Academy Awards this year. There is a lot of movies like West Side Story, Licorice Pizza, Dune, Canadian Story, King Richard, Nightmare Alley. These are all movies that will start to continue to do business as we move forward. And I think even though Bob said, hey, the theatres are only going to be good for the tentpoles, I think it’s going to come back to all of the movies performing and being part of the overall box office. But again, the tentpoles drive the bottom line, both from a box office and concession perspective. Hope that helps you.

Adam Shine — National Bank Financial — Analyst

Absolutely. And maybe one just to tie Gord in, just notwithstanding the fact that obviously there are inflationary pressures out there and as Aravinda asked on occupancy costs, these will naturally move higher this year. Gord, just in the context of where margins go on the back of savings that have indeed been achieved over the last couple of years, can we still assume that there will indeed be margin expansion this year or exiting COVID compared to the 2019 level?

Gord Nelson — Chief Financial Officer

Yeah, Adam, that’s where we want to get back. 2019 included some unusual transaction-related expenses. I think if you say excluded those, that’s where we’re trying to get to as the margin up above 2019, excluding those.

Adam Shine — National Bank Financial — Analyst

Fantastic. Thanks a lot.

Ellis Jacob — President and Chief Executive Officer

Thank you, Adam.

Operator

Thank you. We currently have no further questions, so I hand the call back over to Ellis Jacob, CEO and President, for closing remarks.

Ellis Jacob — President and Chief Executive Officer

Thank you again for joining the call this morning. As you heard today, our Company is positioned well and we have a lot to look forward to, as we move ahead. Our theatres and entertainment venues are now open across the country, and we expect the remaining restrictions to be lifted in the coming months, as we have seen in Saskatchewan and Alberta.

The film slate for the remainder of the year is strong and momentum is building in our other businesses. Our financial position is on solid ground, and we are prepared for what’s to come as we continue to ramp up across the country and businesses. And above all of this, we are beyond thrilled to be back doing what we do best, something we’ve been proudly doing for 100 years, entertaining Canadians.

I look forward to speaking with you all again in May for our first quarter results. Until then, please take care, be well, and enjoy a movie at your local Cineplex. Thank you very much and have a great weekend.

Operator

[Operator Closing Remarks]

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