Overview of the Company’s Financial Performance

Reading International, Inc. is a diversified entertainment and real estate company that operates cinemas and owns various real estate assets. In 2024, the company navigated the lingering effects of the 2023 Hollywood strikes, which led to postponed movie releases and impacted its cinema business.

The company reported a net loss of $35.9 million for the year ended December 31, 2024, compared to a net loss of $31.2 million in 2023. This increase in loss was primarily due to lower cinema revenues, higher interest expenses, and a loss on the sale of assets, partially offset by decreased operating expenses and depreciation.

Revenue and Profit Trends

The company’s total revenues decreased by 6% to $195.1 million in 2024, compared to $207.6 million in 2023. This decline was driven by weaker box office performance in the United States, which saw a 12% drop in admission and food and beverage revenues. Revenues in Australia and New Zealand also declined, but to a lesser extent.

The cinema exhibition segment reported an operating loss of $2.8 million in 2024, compared to an operating income of $0.1 million in 2023. This was primarily due to the lower revenues, partially offset by reduced operating expenses and depreciation.

In contrast, the real estate segment saw its operating income increase by 23% to $4.7 million in 2024, compared to $3.8 million in 2023. This was driven by higher rental income and lower depreciation and amortization expenses.

Strengths and Weaknesses

One of the company’s key strengths is its diversified business model, with both cinema and real estate operations. The real estate segment has provided a stable revenue stream, with high occupancy rates and long-term leases, helping to offset the volatility in the cinema business.

However, the company’s cinema operations have faced significant challenges in recent years, including the impact of the COVID-19 pandemic and the 2023 Hollywood strikes. The company has had to close underperforming cinemas, renegotiate leases, and implement cost-saving measures to mitigate these pressures.

Another weakness is the company’s high debt load, with total borrowings of $202.7 million as of December 31, 2024. The rising interest rates have increased the company’s interest expenses, further straining its liquidity. The company has had to rely on asset sales, bridge loans, and lease renegotiations to manage its cash flow.

Outlook for the Future

Looking ahead, the company is cautiously optimistic about the future of its cinema business. The success of recent film releases, such as “Inside Out 2” and “Deadpool & Wolverine,” has reaffirmed the enduring appeal of the theatrical experience. Anticipated blockbusters like “Mission Impossible 8” and “Avatar: Fire and Ash” are expected to drive increased attendance in the coming years.

To navigate the evolving entertainment landscape, the company is focused on strategic investments, cost-saving measures, and enhancing audience engagement. This includes upgrading food and beverage offerings, implementing mobile ticketing and app technologies, and selectively closing underperforming cinemas.

In the real estate segment, the company has continued to maintain high occupancy rates and secure long-term leases, providing a stable revenue stream. The sale of its Wellington, New Zealand properties and the potential sale of its Townsville, Australia property are expected to generate additional liquidity to support the company’s operations.

Overall, while challenges remain, the company believes it is well-positioned to adapt and evolve, leveraging its diversified business model and strategic initiatives to achieve sustainable growth in the future.

Key Financial Highlights

Food and Beverage Spend Per Patron (F&B SPP):

• U.S. F&B SPP increased by 6.7% in Q4 2024 and 4.1% for the full year 2024 compared to the prior year periods.
• Australia F&B SPP increased by 5.6% in Q4 2024 and 4.9% for the full year 2024.
• New Zealand F&B SPP increased by 3.7% in Q4 2024 and 1.2% for the full year 2024.

Average Ticket Price (ATP):

• U.S. ATP decreased by 0.6% in Q4 2024 but increased by 3.6% for the full year 2024.
• Australia ATP increased by 7.8% in Q4 2024 but decreased by 1.7% for the full year 2024.
• New Zealand ATP increased by 4.7% in Q4 2024 but decreased by 4.5% for the full year 2024.

Real Estate Key Performance Indicators:

• U.S. net operating income increased by 77.1% in Q4 2024 and 25.3% for the full year 2024.
• Australia net operating income increased by 14.7% in Q4 2024 and 63.1% for the full year 2024.
• New Zealand net operating income decreased by 12.9% in Q4 2024 and 11.5% for the full year 2024.

Cinema Additions and Upgrades:

• The company opened new cinemas in Busselton, Western Australia, and South City Square, Queensland, Australia in 2023.
• As of December 31, 2024, the company had 60 locations with digital screens, 26 locations with TITAN XC and LUXE screens, and 33 locations with premium seating features.

Liquidity and Capital Resources:

• The company’s total available resources (cash and borrowings) were $20.2 million as of December 31, 2024.
• The company’s debt-to-equity ratio increased from 6.37 in 2023 to -42.32 in 2024, reflecting the significant decline in equity due to the net losses.
• The company’s working capital deficit increased from $88.4 million in 2023 to $104.6 million in 2024, indicating ongoing liquidity challenges.
• The company generated $4.0 million in cash from investing activities in 2024, primarily from the sale of the Culver City office building.

In summary, Reading International, Inc. faced significant challenges in 2024 due to the lingering effects of the 2023 Hollywood strikes and the rising interest rate environment. While the company’s real estate segment provided some stability, its cinema operations struggled with lower revenues and profitability. The company has taken various measures to improve its liquidity and position itself for future growth, but it continues to navigate a challenging operating environment.