Yahoo Finance Cinemark Holdings Inc (CNK) Q1 2024 Earnings Call Transcript Highlights: Navigating Challenges ...
Total Revenue: $579.2 million
Adjusted EBITDA: $70.7 million
Adjusted EBITDA Margin: 12.2%
Net Income: $24.8 million
Earnings Per Share (EPS): $0.19
Free Cash Flow: Negative $46 million
Domestic Admissions Revenue: $231.8 million
Domestic Concession Revenue: $178.6 million
International Revenue: $122.2 million
Global Salaries and Wages: $86.9 million
Net Leverage Ratio: 2.8 times
Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Cinemark Holdings Inc reported strong attendance and box office results, with nearly 40 million guests entertained globally in the first quarter.
The company achieved significant market share gains compared to pre-pandemic levels, outpacing industry recovery by 700 basis points domestically and 600 basis points internationally.
Cinemark Holdings Inc generated nearly $580 million in total revenue and over $70 million in adjusted EBITDA, demonstrating resilience and effective navigation of a dynamic operating environment.
The company successfully retired another $150 million of its COVID-related debt, reflecting confidence in its financial position and long-term industry outlook.
Cinemark Holdings Inc continues to invest in maintaining and enhancing its theaters, boasting the highest penetration of luxury seating among major operators and a strong presence in both suburban and Latin American markets.
Negative Points
First quarter North American industry box office declined modestly versus 2023, impacted by over six months of Hollywood strikes the previous year that disrupted film production.
The company faces ongoing challenges from the Hollywood strikes, which have led to a reduced volume of wide releases and could pressure net leverage ratios in the near term.
Cinemark Holdings Inc's international segment saw a 9% decline in attendance compared to the first quarter of 2023, with film slate not resonating as well in the Latin American region.
Foreign currency devaluation, particularly with respect to the Argentinian peso, posed a headwind to international adjusted EBITDA in the quarter.
Despite strategic pricing initiatives, the company experienced a concession cost rate increase due to inflationary pressures on core concession items and a shift towards lower margin products.
Q & A Highlights
Q: Sean, we've seen a number of companies this earnings season talk about the consumer being more conservative with their spending decisions. Are you seeing anything notable in terms of how they purchase tickets or make food and beverage decisions that suggest some selectiveness? A: Sean Gamble - Cinemark Holdings, Inc. - President & CEO: Good morning and thanks for the question. Interestingly, to date, we have not seen a significant impact from the macro economy on our business from consumers. When movies are in our theaters, we continue to see consumers coming out. We mentioned that in the prepared remarks just in terms of the number of films that has delivered above expectations and that plays through to choices to upgrade to premium formats. It plays through to concession purchases. As we mentioned, we had another record first quarter per cap this quarter, so we haven't seen that bleed through. It's similar to recessionary environments of the past where our industry has grown in six of the past eight major recessions in North America. Going to movies remains an affordable form of entertainment, while consumers may scale back on other things, they still tend to select to indulge when they come to theaters, and we just continued to see that in this current environment.
Q: Sean, could you expand a bit more on your conversations at CinemaCon? What are you hearing from legacy studios in terms of output? Is there anything incremental to share regarding some of the streamers? A: Sean Gamble - Cinemark Holdings, Inc. - President & CEO: Thanks for the questions. Starting with CinemaCon, the overall feeling coming out of CinemaCon was definitely a very positive one. It's interesting to get some exposure to the materials that are up and coming and by and large, I think everyone is really positive about what they saw. Things look extremely promising. As I mentioned, the number of titles that were showcased were also to a greater degree how that all plays through to future volume and both what we heard during CinemaCon and also what we continue to hear as we speak directly with our studio partners is one of a focus on continuing to replenish on their production, they're building their slates back in many respects towards where they were pre-pandemic in certain cases looking to go beyond that, but it's just going to take some time. Obviously, they were in the process of ramping that back post-pandemic. And then the strikes just put a little hiccup in that. So that's just prolonged things a bit further on. But on the whole, we remain very optimistic that in the coming years, we could see volume return back to close to, if not exceed pre-pandemic levels.
Q: Melissa, your staffing costs were nearly flat year over year. Could you speak a bit more to the initiatives you're deploying to control expenses there, and how should we think about the rest of the year given natural labor inflation and likely improvement in film supply by Q4? A: Melissa Thomas - Cinemark Holdings, Inc. - CFO: On the labor front, we do continue to scale our labor hours up and down based on projected attendance levels that we're seeing. And we are working on a range of initiatives to drive further labor productivity. So a couple of examples for that would be continuing to rightsize our staffing at the wing. So opening and closing being even more nimble between slow and peak periods with a focus on our most profitable service hours optimizing operating hours and scheduling for expanded food and beverage offerings. And those are just some of the ways that we're looking to drive efficiencies with respect to salaries and wages, more broadly, and it is reasonable to assume going forward that we'll continue to flex our labor hours based on anticipated attendance levels, albeit at a rate that is less than the change in attendance. I will say on the wage rate side, we do continue to face some pressure there. Now fortunately, what we're seeing now is more in line with pre-pandemic increases and then, as I mentioned, we do expect to continue to see some productivity benefits as we lean in there at the one call it I would make though, in 2024 in particular, especially in the first half of the year, we do expect to be more impacted by minimum staffing levels, just given the reduction in content volume is more concentrated in that period this year. But overarchingly, we're leaning into data assessing our profitability on a per theater per hour basis to determine operating hours and our corresponding staffing requirements. I mean, we'll continue to balance are revenue-generating opportunities with cost mitigating initiatives.
Q: Ben, regarding the role that your loyalty programs play in driving share, do these have a measurable tangible benefit to your share and returns that you could share with us? A: Sean Gamble - Cinemark Holdings, Inc. - President & CEO: Thanks for the question. It's been up to start with market share. We certainly believe that our loyalty programs play a part in supporting our market share. It's difficult to fully slice that up in terms of how much of that is attributable just to the loyalty programs versus to some of our Showtime planning efforts as well as just the marketing actions we do in general, tried to stimulate demand and coming to Cinemark, there's a whole series of things and just the overall service and experience that we tried about providing in terms of our elevated levels of of maintenance and just the overall experience we create. So it's tough to say that, but and given that Movie Club now consistently represents about 25% of our box office. And those moviegoers tend to be our most satisfied moviegoers. I mean, they wind up having a strong affinity to coming to our theaters. And so it certainly is a component we believe of what we're seeing in the uptick in our share. And we continue to look at ways that we can continue to pack value in that and utilize the data in that communication channel. We have to create value for for those guests because we see them over-indexing in their degree of frequency in their level of coming to Cinemark and again, their overall satisfaction.
Q: Sean, maybe taking a different angle on the CinemaCon takeaways. How would you characterize Cinemark's relationship with your studio partners more as it relates to the recent or maybe even upcoming renewals around windowing strategies? And do you see an opportunity to improve film rental splits going forward? A: Sean Gamble - Cinemark Holdings, Inc. - President & CEO: Sure will help. I'd say overarchingly, our relationships are very positive with our studio partners. You know, specific to Windows, there's clearly been quite a bit of evolution in the window throughout the pandemic and following up on that. And I think with a lot of experimentation, there was clearly quite a bit of learning that an exclusive window definitely is something that creates more value for these film assets, particularly for the studios. You know, it's the best way to to fully gain that revenue opportunity in the theatrical space. It helps to create
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
