Regal Entertainment Group Management Discusses Q1 2014 Results - Earnings Call Transcript

Apr.24.14 | About: Regal Entertainment (RGC)

Regal Entertainment Group (NYSE:RGC)

Q1 2014 Earnings Call

April 24, 2014 4:30 pm ET

Executives

Amy E. Miles - Chief Executive Officer and Director

David H. Ownby - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Analysts

Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division

James M. Marsh - Piper Jaffray Companies, Research Division

Eric O. Handler - MKM Partners LLC, Research Division

Ryan Fiftal - Morgan Stanley, Research Division

Townsend Buckles - JP Morgan Chase & Co, Research Division

Robert Fishman

Michael Gallagher

Michael Hickey - The Benchmark Company, LLC, Research Division

James C. Goss - Barrington Research Associates, Inc., Research Division

Tuna N. Amobi - S&P Capital IQ Equity Research

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

Anthony Wible - Janney Montgomery Scott LLC, Research Division

Operator

Good afternoon. My name is Doug, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regal Entertainment Group Fiscal First Quarter 2014 Earnings Release Conference Call, with our host, Amy Miles, Chief Executive Officer of Regal Entertainment Group; and David Ownby, Chief Financial Officer of Regal Entertainment Group. [Operator Instructions]

I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements, other than statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed in the Risk Factors contained in the company's annual report on Form 10-K dated February 24, 2014. All forward-looking statements are expressly qualified in their entirety by such factors.

Now I will turn the call over to Amy Miles.

Amy E. Miles

Hello, everyone, and thank you for joining us this afternoon. First and foremost, we're happy to start 2014 with significant growth in revenue, adjusted EBITDA and free cash flow. The factors that made 2013 a record year for us were also present in the first quarter. The combination of a healthy first quarter box office, the continued impact of our acquisition of Hollywood theaters and our focus on managing the variable portion of our cost structure enabled us to expand our adjusted EBITDA margin by over 100 basis points and generate almost $137 million of adjusted EBITDA, the second highest first quarter total in our history. We will provide further details regarding these results throughout the call, but I want to emphasize how happy we are that our strategic and operational execution resulted in a strong start to fiscal 2014.

Industry box office receipts for our first quarter increased approximately 7.5% versus the same period last year and totaled over $2.5 billion, just shy of the record Avatar-driven first quarter the industry experienced in 2010. While few key films accounted for a sizable portion of the box office, most notably, The Lego Movie, Frozen and Ride Along, we believe a film slate that included diverse offerings for a wide variety of audiences was a key driver as the overall increase in ticket sales in the first quarter. Included in the top 10 films of the quarter were 3 animated family films, 2 action movies, 2 science-fiction fantasy films, 2 Oscar-nominated adult dramas and 1 comedy. While we recognize that big budget blockbuster films play a key role in our success and that of our studio partners, we are encouraged by the wide variety of content being delivered throughout the release calendar and believe that a diverse a film slate increases the potential for box office success. Equally important to us as a healthy box office environment is our ability to take advantage of increased attendance to leverage our cost structure and maximize our operating results.

Focus on cost control, an important element of our success in recent years, was also a key driver of the growth in our adjusted EBITDA and in our adjusted EBITDA margin for the first quarter. David will provide more financial detail behind our operating results later in the call, but I want to personally commend our management team and, of course, our field personnel for their consistent efforts to deliver a great customer experience in a cost-efficient manner.

As we look ahead into '14 and beyond, we are excited and encouraged by the industry's recent focus on improved customer amenities. For the last several years, technology was priority one for the industry as we allocated time and resources to the installation of digital projection systems and the development of the associated premium revenue opportunities.

Now that the digital conversion here in the U.S. is largely complete, many exhibitors have shifted their efforts to improving the customer experience by experimenting with a wide variety of new amenities. At a high level, we believe that the focus on improved customer amenities will help further differentiate the theater experience from in-home content viewing platforms, and ultimately, have a positive impact on the industry box office environment. Furthermore, at a tactical level, we believe that our sizable, geographically diverse asset base provides numerous opportunities for experimentation with a variety of customer amenities. As always, we will approach and prioritize these opportunities based solely on our assessment of their returns on investment potential.

To that end, we plan to deploy capital in several key areas, some existing and some new for 2014 and beyond. Our premium IMAX and RPX screens continue to generate meaningful low-risk returns and we expect the rollout of both platforms to continue for the next couple of years. By the end of 2015, we expect to operate almost 200 large-format screens, allowing us to offer a premium experience to customers in practically all of our key markets.

At the concession stand, our expanded food menu continues to generate steady returns at over 100 locations and our alcoholic beverage offerings, currently available at only 31 locations, has started gaining traction with customers. These initiatives require very little upfront capital investment and we expect to expand both offerings to additional sites throughout the balance of 2014.

As for the auditorium, our initial experiments with luxury reclining seats have yielded promising results. This concept is not right for every location. Many of our theaters are simply too busy to sustain the seat loss that results from the installation of the larger recliners. But in certain situations, where a theater has been impacted by competition or is simply nearing the end of its useful life, our return-minded investment in reclining seats can rejuvenate and potentially even extend the life of an existing theater. To that end, we expect to install the new seats in approximately 25 locations with 275 screens between now and the end of the year. And to the extent the early results can be replicated, we believe we will have further opportunities to invest in our existing asset base in both 2015 and '16. We are excited about the potential for growth and financial returns associated with these initiatives and look forward to updating you regarding our progress throughout 2014.

And finally, looking ahead to the upcoming film slate. The summer box office season started earlier than ever this year with Disney's release of Captain America in early April. Industry box office receipts for the first 4 weeks of our second -- of our fiscal second quarter increased approximately 15% versus the same period last year and resulted in a year-to-date headstart of over $280 million as compared to the first 4 months of 2013. That headstart will be important as the industry faces difficult comparisons with a record summer box office over the next several months. With that in mind, we are still encouraged by what appears to be a promising lineup of high-profile films that are well-spaced throughout our summer release calendar. Superhero fans will continue to have plenty of choices with the Amazing Spider-Man 2 and the next chapter of the X-Men franchise in May, Marvel's Guardians of the Galaxy in late summer. Science-fiction fans won't be disappointed either with Godzilla, Transformers 4, Dawn of the Planet of Apes and Teenage Mutant Ninja Turtles, all scheduled for release in the upcoming months. A number of key films from other genres, including 22 Jump Street; the sequel to How to Train Your Dragon; A Million Ways to Die in the West, from Ted creator, Seth MacFarlane; teen romance, The Fault in Our Stars; and Disney's Maleficent round out what appears to be a promising summer schedule. Prior year comparisons should be more manageable in late 2014 and it appears that the fourth quarter film slate will be headlined by the Hunger Games and Hobbit franchises and by Interstellar, an original title from acclaimed director, Christopher Nolan.

With these factors in mind, we remain optimistic regarding the potential for box office success in 2014.

In summary, we are extremely pleased that our strategic and operational execution, combined with a healthy box office environment, yielded operating results ahead of last year's total and ahead of Wall Street consensus estimates. And we are excited about the ongoing opportunity to further enhance the customer experience in 2014 and beyond.

I would now like to turn the presentation over to David for a discussion of our financial performance.

David H. Ownby

Thanks, Amy, and good afternoon, everyone. For the next few minutes, I'll provide a brief analysis of our first quarter results and update with respect to our balance sheet and asset base.

For our first fiscal quarter, we generated total revenues of $726.9 million, including $489.6 million of box office revenue, $200.7 million of concession sales and $36.6 million of other operating revenue. As was the case last year, our recent acquisition had a positive impact on our market share in the first quarter, as our box office revenue grew by over 12% in the aggregate as compared to a 7.5% increase for the industry as a whole. The increase was largely driven by attendance growth of approximately 11%, as the decline in the percentage of our revenue generated by premium films, an increase in the percentage of our attendees who purchased child or matinee tickets and slightly lower ticket prices at the acquired Hollywood screens all put downward pressure on our average ticket price, which increased by only 1% to $8.88.

On a same-store basis, and excluding our 83 IMAX screens, the increase in our per screen box office revenue was in line with the industry increase. Our concession revenue increased by almost 17% in the aggregate and by $0.18, or 5.2% on a per attendee basis. Strategic price increases, improvements in popcorn and beverage volume and the continued success of our expanded food menu all contributed to the increase and helped drive per cap growth of over 2.5% for the 11th consecutive quarter.

Other operating revenues increased by $2.2 million as compared to the same period last year, as contractual revenues from National CineMedia, revenues from our vendor marketing programs and our advanced ticket programs all benefited from increased attendance during the quarter.

Our film and advertising expense of $255 million represented 52.1% of admissions revenue, an increase of 260 basis points as compared to the first quarter last year. The overall increase in industry box office, a film slate that relied more heavily on a few high-grossing films than those of recent first quarters, and incremental promotional advertising costs all contributed to the increase.

Our 86.9% concession margin improved by 80 basis points as compared to the same period last year, as minor increases in raw material costs were more than offset by strategic price increases and an increase in the amount of vendor marketing revenue recorded as a reduction of cost of concession.

Total rent expense of $104.6 million increased 5% in the aggregate due primarily to the additional rent associated with the quarter-over-quarter growth in our screen count. On a per screen basis, our rent expense declined by over 2% as compared with the same period last year due to slightly lower rent amounts associated with the acquired theaters. And as Amy mentioned earlier, our operational execution continued to have a positive impact on our operating results. Total other operating expenses of $201.1 million increased 9.5% in the aggregate again, due to the growth in our screen count and by approximately 1.8% on a per screen basis.

Once again, our field personnel's ability to control variable cost while still delivering a great customer experience and a meaningful increase in our concession per cap was a key driver of our success in the first quarter. We are extremely pleased that a healthy box office environment and our operational execution had a positive impact on our first quarter results and enabled us to generate total revenue, adjusted EBITDA and adjusted earnings per share that were ahead of consensus Wall Street estimates.

As for our asset base and our balance sheet, capital expenditures, net of asset sales, for the quarter totaled $27.4 million and we continue to actively manage our asset base, opening 1 theater with 12 screens and closing 3 theaters with 25 screens to end the quarter with 578 theaters and 7,381 screens.

Based on our development schedule and outlook for the remainder of the year, we expect full year capital expenditures to be between $115 million and $125 million. We expect to open 7 to 9 newbuild theaters with 80 to 100 screens, and close 8 to 10 theaters with 60 to 80 screens, which would result in ending counts of approximately 579 theaters and 7,414 screens for 2013 -- excuse me, 2014.

With respect to the balance sheet. In mid-March, we took advantage of a favorable high yield market to refinance all of our remaining 9 1/8% REG senior notes and 8 5/8% RCC senior notes, with a $775 million issuance of new 5 3/4% REG senior notes due in 2022. Needless to say, we were extremely pleased with the outcome of the transaction, which locks in a historically low fixed rate on a significant portion of our capital structure and we'll reduce our annual cash interest expense by approximately $18 million.

With our current capital structure and interest rates swap portfolio, we now expect our interest expense to be approximately $31 million per quarter for the remainder of 2014. Also please note that while the new issuance closed in the first quarter, a portion of the old notes were not redeemed until early in the second quarter. And as a result, our quarter end cash and debt balances do not reflect the full impact of the transaction. Pro forma for the note redemption that occurred after the end of the quarter, our cash and debt balances at the end of the first quarter would have been $331 million and $2,369,000,000 respectively. As was the case in 2013, our recent acquisitions and the corresponding growth in our annual adjusted EBITDA have had a positive impact on our leverage calculation. And as of the end of the quarter, our overall leverage ratio was 3.3x net debt to adjusted EBITDA.

In closing, we are again extremely pleased that a healthy box office environment, combined with our strategic and operational execution, resulted in significant first quarter growth and we remain optimistic regarding the potential for continued success for the remainder of 2014.

Operator, this concludes our prepared remarks. We will now open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Ben Mogil from Stifel.

Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division

David, a couple of things. I just want to make sure I heard you correctly. The sort of -- I'm getting to around a 4.2 box office per screen number, and that's kind of what you guys saw with the industry benchmarks, given your screen adjustments back and forth?

David H. Ownby

Yes, Ben, if you -- again, we've talked about, in previous quarters, about how the acquired theaters, both from Great Escape and Hollywood for this quarter, those are smaller market screens, so when you average those screens in, that causes us to lag that industry number a little bit. That was the case again this quarter. This will be the last quarter for that because we've now lapped that acquisition. And then, also, just from a premium perspective, the IMAX product for the first quarter wasn't quite up to what it was in the first quarter last year. Really, primarily, because of the success of Oz The Great and Powerful in the first quarter of last year. There was just wasn't an IMAX movie this year that could match that one. So as a result, our IMAX screens were down on a per screen basis. So if you strip those 2 elements out, the remaining screens were up in line with that 7.5% that the industry was up for the first quarter.

Benjamin E. Mogil - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay, that's great. And then, Amy, maybe one for you. So I get sort of cost competitiveness, et cetera, when you look at the 25 theaters in the 275 screens that you plan to sort of do reseatings around. Are you largely focused on markets that AMC has touched? Are you focused on some that they've touched, and some that they haven't? I was really curious how you're thinking about which markets to do it and which markets not to?

Amy E. Miles

Yes, I mean, from our perspective, it's much more what theaters does it make sense to add that amenity. And if I look at that portfolio of 25 theaters, they're spread -- they're pretty geographically diverse and as one would expect, based on just our asset base. But the way that we are prioritizing is the first 25 for us will be the first -- will be the 25 where we believe we get the highest return. So we do a lot of analysis and a lot of time behind how do you -- strategically, how do you best tackle priorities, but it always comes down to where do we get the highest return.

Operator

Our next question comes from the line of James Marsh from Piper Jaffray.

James M. Marsh - Piper Jaffray Companies, Research Division

I just wanted to follow-up on the luxury seating commentary. I think, Amy, you mentioned that you thought it was promising. I was just hoping maybe you could kind of quantify that a little bit, maybe just talk a little bit about what's it going to cost to do a reseating per theater, like in CapEx, and what happens to the number of seats, what do you expect to happen to attendance, just broadly?

Amy E. Miles

I mean, I guess, let me broadly answer the first question and then David can answer with respect to how it impacts our overall CapEx. If you just look at it from an industry, and say, what have you seen from an early results perspective on a number of theaters, and this is an industry answer, not just a Regal answer. Revenue at these sites has increased anywhere from 30% to north of 100%, so very site specific. But you can tell from all of those numbers that the early returns are very encouraging. And from that perspective, I guess, the typical seat loss, which I think was also a component of your question, can be anywhere from, call it, 50% to probably 65% is what we're seeing.

David H. Ownby

And James, just in general, from -- it'll be a little bit different for every theater, just based on the characteristics of that individual theater. But if you think about a slope 4 theater an older slope 4 theater, you're probably talking about plus or minus $100,000 of screen or so to convert those to reclining seats, and for a stadium theater, it'll be a little bit more than that just given the dynamic with the risers. So again, relatively low investment when you think about that kind of returns that you can generate when you combine that with the numbers that Amy's talking about.

Operator

Our next question comes from the line of Eric Handler from MKM Partners.

Eric O. Handler - MKM Partners LLC, Research Division

A couple of things. First, on the reseating or some of the additional premium amenities that you're looking at doing. When you look at -- AMC has talked about the reclining seats, I think you are, too. But when you also look at some of the initiatives that are going on in Asia, and I think you guys have looked at a couple of 4D-type of screen-type experiences. You've got, in Korea, like the Sweetbox that has sort of a loveseat type of seat and the Veatbox, which has like the speaker actually embedded within the seat. How do you view like some of these various initiatives? And are you trying some of these types of differentiated features? And then secondly, I mean, you talked a little bit about what drove the per session, per cap increase of 5.2%, that's the highest you've had since the second quarter of 2012. And I'm just curious, was there anything aside from the fact that this was a really good popcorn quarter, given the Tangled and The Lego Movie, but was there anything other indicated that allowed the per cap spending to be so high on a percentage basis?

David H. Ownby

I think you hit some of it on the head there, Eric, I mean, I'll answer that per cap question first. I mean, we were up $0.18 in the per cap and if you really break that down to where it came from, about $0.08 of that was pricing. About $0.08 of that was volume, and then aside from that, about $0.02 came from the expanded food menu. So I think you're exactly right that we did have some good film dynamics. 3 of the top 10 pictures, and the top 2 pictures of the quarter were family animated movies. Those were The Lego Movie, Frozen and then Peabody and Sherman was also in the top 10. So from that perspective, I think we've got a nice bump on the per cap, but it was really a result of several factors, some being volume and some being price.

Amy E. Miles

And then, Eric, with respect to the experimentation that we were talking about. If you think about our premium experience, we're going to focus primarily on the RPX, the finalization of our IMAX rollout, the reseating opportunities, as well as the enhanced concessions that we're talking about. So that's going to be our primary focus. Now we do have one site in L.A. where we are testing the 4D concept. So the great thing about having the number of theaters that we do throughout the United States is we have opportunities to test a lot of these concepts. So if you think about where we're prioritizing and focusing, it'll be on those first 4 areas.

Operator

Our next question comes from the line of Ryan Fiftal from Morgan Stanley.

Ryan Fiftal - Morgan Stanley, Research Division

Two, if I may. David, you mentioned higher matinee sales is one of the headwinds to pricing this quarter. I don't know, do you have any sense if that was just purely a function of the mix of films? Or do you have any sense that there was some price sensitivity that drove that?

David H. Ownby

No. Anytime -- again, same as Eric's question, anytime we have the top 2 films being a family animated type pictures, we would expect an increase in our children's tickets and our matinee tickets.

Ryan Fiftal - Morgan Stanley, Research Division

Okay, makes sense. And then second, can you guys talk about any sense you have on how the major studios are thinking about investing in content over the next like medium-term say 3 to 5 years? It seems like we're through the period where major studios have been scaling back their slates. And I'm curious if you get the sense that maybe the pendulum is starting to swing back. We're seeing more competition for release dates and that sort of thing?

Amy E. Miles

Yes, I think one thing that we can say today is as we look at the film slate for 2015, and we've already talked about at various points how exciting that film slate looks as we're looking at for '15. I think one thing that we are seeing is further clarity with respect to some of the films that are being released in 2016 and beyond. So I do think we have more insight today with respect to those films and I would just characterize the film slate for the next several years from both the production side, as well as what we expect to be in the theaters is very healthy.

Operator

Our next question comes from the line of Townsend Buckles from JPMorgan.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Just another on the 25 reseatings. Can you give a sense to the timing of those? Should they be weighted to any particular quarter or time of year? And can you also just generally give a sense of how many slope 4 theaters you have overall?

Amy E. Miles

The timing, I would say, Townsend, will take place primarily in the second through the fourth quarters. And I would guess that they're spread pretty evenly throughout that time period, maybe a little bit back weighted to the third and the fourth. And we have an excess of 130 slope 4 theaters.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Got it. And then even with these luxury initiatives, it looks like your cash balance should continue to build and M&A activities sounds a bit slow, at least lately. Do you feel there's opportunity to do something with the dividend this year? And can we read into the last 2 specials coming 2 years apart in December?

David H. Ownby

You know, Townsend, we'll go through the same process we always do on a regular basis with our board. When we think about capital allocation, we always want to make sure we use that cash in a way that best benefits our shareholders. You mentioned the M&A market and we'll continue to look for good opportunities there. We believe those are good uses of cash for our shareholders. And without giving you a narrow timeframe, we still think over the next 24 to 36 months, there'll be some opportunities there. Historically, we've been able to combine that with a healthy approach to shareholder return, and I would certainly expect, again, over that longer term timeframe, we would do that as well.

Townsend Buckles - JP Morgan Chase & Co, Research Division

Got it. So still some -- there's still potential for something to be done this year, you don't rule it out?

David H. Ownby

Yes, like I said, we evaluate that continuously, so it's not something that we -- not a decision that we put off to any particular time.

Operator

Our next question comes from the line of Robert Fishman from MoffettNathanson.

Robert Fishman

I have for Amy and then one for David if that's okay. Amy, I know that it's early, but any data you can share us from this past week about your Haunted House digital download, with the tickets for the sequel, and how that might have maybe impacted attendance? And then maybe more broadly, how do you expect these types of offerings and the return of Super Ticket with Spider-Man 2 to grow your revenues and profits going forward there?

Amy E. Miles

Yes, no. I'm sorry, but I think it's probably just too premature at this point to comment with respect to the impacts. But obviously, we are continuing to test in this area. And as you just highlighted, the next test is going to be, and we're excited about this one, the Amazing Spider-Man 2 will be our next Super Ticket platform, which has been announced. And so I think as we get, call it, 3 or 4 of these behind us, we're going to have more data that we can talk about or results that we feel better about from a disclosure perspective. But I think at this point, it's just premature. But I think the key here is that we continue to try and tap these new initiatives.

Robert Fishman

Got it. And then I got, either you or David, can you address your thoughts on offering discount ticket pricing during the weeknights to help improve that underutilized capacity during the week, and how that might impact the strong operating leverage that you are already experiencing?

David H. Ownby

Robert, we have locations around the country where we have experimented, and even today, offer some midweek discount price. But as a widespread strategy, it's not something we're really pursuing. We'll look at it on a case-by-case basis, and in a market where it makes sense, then certainly, we've done some of that with some success in different places. But by and large, we believe that our tickets are a good value for a customer when they can come into a high-tech auditorium and see a piece of content that cost, oftentimes, hundreds of millions of dollars to make. We think that our prices, in terms of value, a good value for the customer. And remember that we already offer a lot of price points without discount. We offer Friday night prices, we offer matinee prices, we offer discounts for seniors and students and military, so we have a lot of different price points today. And so we don't feel like big deep discounting is really necessary to continue to drive customers to the theater.

Operator

Our next question comes from the line of Barton Crockett from FBR Capital Markets.

Michael Gallagher

This is Mickey, in for Barton. Just quickly, on film rental cost. Even given the strength of the top 3, we thought the costs came in a little higher than expected. Wondering if you could just give a little more color around that, if you see anything in the film mix for Q2 and the rest of the year that would bring that up going forward?

David H. Ownby

It's always difficult to evaluate our film cost on one quarter. I think if you look at it historically on an annual basis, it's been on a pretty stable band, so we don't think we -- looking ahead, we wouldn't expect anything different than that. You did have a -- probably have a bit a, just from comparison purposes, you probably had -- the last couple of first quarters has been little bit below the trendline, so this quarter, with its concentration up, not surprising that you kind of had that increase. And again, a few of those basis points in increase are also related to some advertising and promotional things we're doing as well, so not all of that is purely film cost.

Michael Hickey - The Benchmark Company, LLC, Research Division

Okay, great. And then, also quickly on Open Road, and just some possibilities for the next few quarters, what you guys are seeing based on the current slate.

David H. Ownby

Open Road had a busy first part of the year and they've got some good titles coming up for the back half of the year as well. In May of this year, we've got the film, Chef, directed by Jon Favreau and also starring Jon Favreau, that's been generally pretty well received at some of the festivals around the country, so that's a film we're excited about. In the back half of the year, we've got comedian Gabriel Iglesias with a stand-up comedy film. I think the title is funny, but it's called The Fluffy Movie. And if you know him, you know who that character is. And then we've also got a horror movie this year from director Eli Roth, also in the back half of the year. So a busy year, overall, for Open Road. It started off this year with a bang with their highest grossing film to date, The Nut Job. And with that film and the subsequent release of Sabotage and Haunted House 2, they have now crossed the $400 million mark in terms of box office dollars generated to date. So I think we're extremely pleased with our performance so far and look for them to have more success in the back half of this year.

Operator

Our next question comes from the line of Jim Goss with Barrington Research.

James C. Goss - Barrington Research Associates, Inc., Research Division

A couple. First, you referred earlier to the broadened calendar, starting with Captain America being an early start. And you've also discussed in the past the sort of mixed blessing of having a large channel of blockbusters during the summer, where it's good to have a choice, but it might be better to spread them out. I'm just wondering how you view the potential to have an even broadened calendar during the year, or do you think there will still be the inevitable holes because of the lack of high school and college kids going to movies and that sort of thing? Or will there be other types of content to fill in some of those gaps?

Amy E. Miles

I think you're always going to see that natural strength in the summer season when kids are out of school and again, in the holiday season. But I think the good news there is without cannibalizing the great success of the blockbusters in that summer seasons, we're expanding the box office potential by having more content available in what we historically refer to as the shoulder season. So yes, I think you're always going to have box office tentpole time period. With that being said, we are seeing success in those traditional shoulder seasons that are helping the fiscal years.

James C. Goss - Barrington Research Associates, Inc., Research Division

Okay. And another subject. I'm wondering about your time frame as an industry, actually, for taking advantage of the DCDC-driven event programming. Like what type of events could come first? Could you get into sports and concerts, et cetera? And do you have any teams assigned to rights negotiations too and other such issues, or is this way too premature to get into that?

Amy E. Miles

Yes, I think it's a little premature. I think the good news here is, as we talked about before, the satellite delivery initiative is progressing, but then on the alternative content side, Fathom just hired a new CEO, so we're excited about that, and I think there'll be more news to come in the future from a programming perspective, but I think any specifics is probably a little bit premature at this point.

James C. Goss - Barrington Research Associates, Inc., Research Division

Okay. And the last issue I might raise is IMAX versus RPX. As you look at it, we know the advantages and disadvantages of both. Is there any blending of that? Or do you still have a favorite one versus another in certain situations?

David H. Ownby

I think we like where we are in terms of an overall circuit in having both, Jim. In the right size market, I think we've said historically that we believe IMAX is a great choice. Obviously, in a bit smaller market or maybe in a market, where we don't have access to an IMAX, RPX has been a great alternative for us. And long term, I think what we like best is having the flexibility of having both.

Operator

Our next question comes from the line of Tuna Amobi from S&P Capital IQ.

Tuna N. Amobi - S&P Capital IQ Equity Research

Amy, I was wondering if you had any update on some of the mobile initiatives, if you see that starting to become more of a factor as you look out over the next year.

Amy E. Miles

I think the next year, that may be a little bit premature. I mean, we're continuing to see, as customers shift more from online to a mobile purchase, so from that perspective, you're seeing some traction there. But I wouldn't forecast over the next 12 months that you see any kind of meaningful change or shift. Obviously, it's an area we're focused on, but from that perspective, I just wouldn't forecast the next 12 months as being meaningful from a mobile perspective.

Operator

Our next question comes from the line of Matthew Harrigan from Wunderlich Securities.

Matthew J. Harrigan - Wunderlich Securities Inc., Research Division

I'm probably getting a little lean on the questions, but when you look at the 4D experience for things like sports and all that, I know in the NASCAR, NHL have kind of tried to get people the physical experience, the slamming into the boards and all that. Have you seen anything encouraging with that in terms of reinforcing the alternative entertainment concept? I guess, the holy grail here would be to have your theater as a local location-based entertainment alternative. I know it's early, but I think a lot of things have happened. I think there's an earlier question relating to what some people are doing in Asia. I know culturally, things are different there, but it feels like it's something that could certainly help you out even if you got a little bit of increment, given the operating leverage is inherent in your business?

David H. Ownby

Yes, Matt, we did announce that we're going to have that first location in Los Angeles. We don't even have it up and running yet, so I think it's probably too early for us to really opine on what it could mean, either for the business or for the customer experience. Obviously, we'll evaluate it as we get it in there and see how customers like it and what they respond to and what they don't. But at this point, we know about as much about it as you do from a customer's perspective.

Operator

Our next question comes from the line of Tony Wible from Janney Capital Markets.

Anthony Wible - Janney Montgomery Scott LLC, Research Division

I was hoping what you guys think about concession sales this summer versus last with the difference in just the animated slate. There was this overabundance of animation last year. In this year, it seems to be a little bit more paced out. There are certainly some good stuff there, but should we be expecting any kind of difference in the concession sales per cap with that?

David H. Ownby

Well, like I mentioned earlier, Tony, I think we've had an increase of at least 2.5% now for 11 consecutive quarters. And then obviously, some of those quarters were heavy family film quarters, some of them were not so heavy. So I think we've demonstrated our ability to drive concession per caps kind of regardless of the film slate in a short period. Obviously, you can always have a little bit of an impact, but when you think about the summer season, the kids pictures may matter just a little bit less because you also about a big budget blockbuster films, which tend to be good popcorn movies as well.

Operator

There are no further questions in the queue. And I'd like to hand the call back over to management for closing comments.

Amy E. Miles

Thank you for joining us this afternoon, and we look forward to speaking to you again after our second quarter. Thank you. Bye-bye.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

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Regal Entertainment Group (RGC): Q1 EPS of $0.20 beats by $0.01. Revenue of $726.9M (+13.1% Y/Y) beats by $10.51M.