Q4 2020 Cinemark Holdings Inc Earnings Call

It's almost unfathomable year ago. We were reporting Cinemarks fifth consecutive year of record results with the North America industry touting the second highest grossing box office of all time our earnings call this this time last year reflected an incredibly strong company with a history of discipline and consistency operating in a stable and mature industry it goes without saying that our environment has drastically changed COVID-19 has caused significant to stress in multiple Industries, including the exhibition industry wage and tested the strength and resiliency of our company over the course of the past 11 months. I'm immensely proud to say that Cinemark is still a strong company operating with Pac discipline and consistency while adapting to our current circumstances this past year has only reinforced at Cinemark has tenacity perseverance and pure grit wage.

To mention an ability and a willingness to think quickly and move nimbly as we evolve and persevere this unpredictable and ever-changing environment while we have provided updates throughout the year. The underscore house Cinemark has continued to adapt we thought it worthwhile to outline the key actions that have enabled us to reactivate our theaters and generate positive variable cash flow our project Phoenix relaunch initiative with its structure rigor and organization has been truly exceptional initially tasked with researching and defining our cleaning and same protocols and then coordinating the relaunch of nearly 350 theaters in the US and more than 200 in Central and South America. Our team implemented a robust. They need to learn process and methodical phased rollout. It is because of this meticulous planning and preparation that Cinemark was one of the first exhibitors to reopen and is largely been able to rep.

Open government restrictions notwithstanding.

To the year approximately 75% of our us circuit was reopened relative to just 45% of North America industry similarly in Latin America off. We had approx 65% of our theaters operating in both regions. We remain open were allowed and efficiently close and reopen as government restrictions change with the fluctuation. Status with our foundation of discipline processes and constant evaluation. The Cinemark team has become quite Adept at quickly reacting to changes in regulations off while there were many factors driving are successful re-opening. Our theater general managers were crucial in every aspect. We kept our GM's on staff throughout the pandemic to maintain our theaters while they were closed which was no easy feat and then prepare them for reopening and because our GM's consistently live one of our core values passion for people they maintained a strong.

En rapport with your hourly theater employees that had been laid off during the shutdown as such a vast majority of team members hired as we began reopening were previous Cinemark employees, it goes without saying how much time and money to save their company and training education background checks Etc.

And our theater teams have been proficient in the execution of the Cinemark standard and protecting the health and safety of our employees guests and communities since we began reopening in June. We have consistently received 96% guest satisfaction scores on Cinemark protecting their health and safety. This simply could not be achieved without the meticulous research Planning by the project Phoenix team and the impeccable execution of our theater staff. And as we prepare for a steady stream of new film content our film and marketing team have been creative and Resolute in securing relevant and varied Library content and developing promotional campaigns to keep our guests engaged and entertained including promotions around Halloween Thanksgiving Christmas New Year's Eve to name just a few Cinemark has also excelled in directly reaching our consumers notifying them that we're open highlights.

In films, they can see showcasing food and beverage promotions. And of course emphasizing are clean and safety protocols. We have been aggressive in every Communication channel including digital email social public relations to inform consumers and entice them to visit. Our theaters are private watch parties have been a key element of those promotional campaigns and continue to grow in popularity to date. We have hosted more than a hundred and fifty thousand private watch parties as the average number of 10 days is 13 people this represents more than two million moviegoers that have experienced the Cinemark standard for themselves just with PW peas during the fourth quarter alone, the private watch parties represented 24% of our attendants and box office and one interesting fact here more than half of the private watch parties during the fourth quarter were driven by Library content. Yep.

at the end

My family favorite comedy.

Else this Library content could be watched for free at home on the sofa but instead consumers chose to pay $99 to see it in the theater. This reinforces home of consistently stated people are yearning for normality escape and a fun out of home opportunity movie theaters provide all that and more in a safe and clean environment and something else that you can get bully in the theater. Is that craveable movie theater popcorn our food and beverage team has been actively engaged in initiatives to sell more than favorite popcorn refreshing soda and a wide variety and assortment of candy, in fact our for q2020 per cap of $5.42 was on par with our for q19 driven by increased incidence rates in these core categories, despite pure more streamlined concession offerings and strategically discounted well birth

Welcome back pricing on selected items.

Another exciting initiative we have started rolling out and that shows considerable early promise is snacks in a tap our mobile and online concession ordering service package oils moviegoers to order their food and beverages in advance and either pick them up at the counter upon arrival or have them delivered directly to their seat for a nominal fee. How about 70% of our domestic service of our domestic circuit already features snacks and a tap functionality and we've been highly encouraged by the initial results. We look forward to see you using our key learnings from the initial rollout process to bring this platform to moviegoers across our domestic circuit during the first half of this year.

And to assure that we're maximizing attendance revenue and cash-flow. We'd refund we've refined our processes to be more efficient and accelerated productivity measures to further streamline a business. We remain laser focused on fine-tuning operations and protocols such as right-sizing our operating hours and Staffing to align with film content and consumer demand wage and all these strategies combined have led to some remarkable results in consideration of the headwinds. We're facing notably We are continuing to more than cover off incremental variable costs associated with being open and we are burning less cash open than we would relative to being closed this requires an immense amount of focus and and not by our service center in conjunction with Incredible execution by our theater teams. Furthermore. We're seeing the impact of these actions in our box office results during birth.

Fourth quarter of 2019 Cinemark Theatres represented 7% of the North America industry screens and generated 13% of the overall box office a dead fast forward to the fourth quarter of 2020 Cinemark constituted 11% of the industry screens with over 20% of the domestic box office while we full that a portion of this market share growth is due to some competitors remaining closed. We will be aggressive in our attempts to retain a meaningful amount of this share shift on go forward basis. And again, we feel well poised to do so given are consistent historic Investments to maintain a high quality experience with upscale amenities. We have the highest recliner penetration among the major players with 64% of our auditoriums feature featuring luxury loungers. 75% of our circuit is dead.

with expanded food

And beverage capabilities rxd brand is the number one exhibitor premium large-format brand with 278 screens across our Global plan for we also have a solid reputation of top-notch guest service and our Movie Club are unique transactional base subscription program has more than nine hundred and fifty thousand members before I turn the call over to Sean. I would like to share that in my thirty plus years in the entertainment industry. I have never been more proud more impressed by my college than I am with the Cinemark team. We are all working relentlessly toward common goals navigating the pandemic and setting ourselves up to once again Thrive and Excel in a post COVID-19 it with every crisis There's an opportunity and this team has done all they can to seize that opportunity Sean will now walk you through our liquidity position wage.

For two results before turning it back over to me to cover our re-opening status Shawn. Thank you Mark. Good morning, everyone as we continue to navigate the challenges associated with a good nineteen cash management and liquidity remain crucial focal points Cinemark has long maintained a disciplined approach towards Capital allocation with a consistent history on a balance sheet strength. We believe that these attributes along with the many proactive measures we've taken to bolster and preserve liquidity and numerous additional options options that remain available to provide us a viable Runway to see our way through the remaining impact of the pandemic and emerged successfully thereafter.

As we've described them prior calls some examples of the actions we've taken include significantly limiting all non-essential operating and capital expenditures restructuring and streamlining operations in headquarters, including the permanent closure of twenty-seven lower performing theaters and significant reductions in Workforce and payroll negotiating substantial least related and other contractual deferrals and modifications suspending our dividend and securing 730 million dollars of new debt.

We also have actively pursued tax benefits provided by the cares act including adjustments to qualified Improvement property deductions and carrying back net operating losses, which provided us with a $524 million dollars of meaningful cash relief during 2020 with another one hundred plus million dollars expected by mid 2021.

In total we ended the year with a global cash balance of 655.3 million dollars which includes approximately $15 of new fourth-quarter international borrowings wage and seven million dollars of state tax refunds received during the quarter.

Excluding these inflows. Our fourth quarter cash burn was approximately $65 per month. This figure is modestly below the estimate. We provided on our prior earnings call of $7,000 per month as a result of higher variable operating profit than we initially anticipated and further reduced Capital expenditures.

Based on the current operating environment. We continue to project an average monthly cash burn of approximately $65 million dollars at this rate and based on are approximate $6 cash balance at the end of January our cash Runway extends into the fourth quarter of 2021. This will this runaway further extends into twenty twenty to age including the incremental tax refunds. We expect to receive that we have already filed for just to be clear these projections do not assume any further improvements in operating results off his new film content ramps up during the course of the year or any additional rent adjustments which we continue to pursue. They also do not include additional financing options that remain faithful to us such as drawing on our $100 revolving credit line tapping incremental Term Loan borrowing capacity within our credit facility executing sale-leaseback Arrangements on unencumbered properties we own

and issuing equity

turning attention now to our fourth-quarter results. We'd like to remind you again that are reported financials follow accrual-based accounting and therefore do not necessarily correlate directly to the timing of cash flows furthermore as in previous quarters reported this year. Our traditional metrics are somewhat distorted in this current environment.

Domestically approx 75% of our theaters were open and operating at your end and total fourth quarter revenues were eighty six point eight million dollars driven by attendance of 5.1 million patients us admissions revenues were forty four point four million dollars of which 24% were generated by private watch parties.

Our average ticket price of $8.64 benefited from the impact of private parties deferred revenue reversals related to loyalty points breakage and mix associated with reduced price and availability that offset the effect of discounted pricing for Library content domestic concession revenues or 27.9 million dollars for the food and beverage per cap of $5.42 as Mark outlined during his comments. We are extremely pleased with this result in light of our sustained pricing discounts on concessions and The Limited range of menu items we offer during a quarter.

Internationally, we continue to scale up operations and ended the year with 65% of our Latin American theaters open and operating our total International revenues for the fourth quarter of eleven point four million dollars with attendance of one and half million patrons.

Globally film rental and advertising expenses were 44% of admissions revenues which declined over 1,000 basis points compared to 419.

This decline was driven by lower performing first-run film content and the impact of Library films that tend to carry more favorable terms.

Concessions costs were 27.6% of concessions revenues and increased from 79.9% in the fourth quarter of 2019 predominantly as a result of additional spoilage associated with are temporarily closed theaters.

Promotional pricing which has been very helpful in attracting consumers back to our theaters and stimulating incremental purchase incidents. Also created a slight near-term drag on our cogs rate.

Global salaries and wages were twenty eight point four million dollars and declined 72.1% year-over-year as are open theaters managed to effectively operate with highly reduced hours and Staffing.

Facility least expenses of 65.3 million dollars were driven by the fixed nature of our rent commitments. However, we're down 18.3 million year-over-year predominantly as a result a permanently closed theaters, very rent abatements and reduced percentage rent associated with our decline in revenues. Again, these expenses are accrual-based and do not reflect nearly $15 of cash payment deferrals executed during the quarter.

Worldwide utilities and other expenses were fifty point eight million dollars and declined 56.8% versus four to nineteen while several costs within this expense category such as credit card fees, commissions paid a third party ticket sellers are 100% variable others, like property taxes and property and liability insurance remained fixed still other expenditures survey utilities and repairs and maintenance have a blend of fixed and variable attributes and have been increasing as our theaters have continued reopening.

Finally G&A for the quarter declined to twenty eight point two million dollars driven by the impact of our recent restructuring actions travel restrictions and reduced incentive compensation expense collectively are worldwide adjusted ebitda for the fourth quarter was -97.5 million dollars and we posted a net loss of 239.3 million dollars wage Capital expenditures during the quarter. We're sixteen point three million dollars of which 7.3 million dollars was associated with new build projects that had been committed prior to the COVID-19 demek and 9.1 million dollars was driven by new cleaning and safety equipment Regulatory and compliance requirements maintenance and additional prior commitments.

For the full year twenty-twenty. We spent eighty three point nine million dollars in capex, which was 16% below our revised guidance of one hundred million dollars and seventy 2% below Factory original guidance of $300.

Throughout the fourth quarter and since the Inception of the pandemic, we aggressively curtailed expenditures to preserve cash and liquidity as is exemplified by our significant capex reduction as we've already indicated liquidity management continues to be one of our near-term priorities and as such our 2021 Capital expenditures will remain limited to essential needs a pandemic commitments along these lines. We currently estimate spending approximately 100 million dollars on full year 2021 capex with fifty million dollars deployed to previously commissioned a new build projects that were mostly delayed from 2020 and the remaining balance predominately driven by maintenance and compliance needs are expected maintenance expenditures remain highly reduced wage historically levels and are associated with needed repairs and safety equipment are consistent investments in proactively maintaining our theaters over the years has positioned us to sustain a.

reduce capex without

hindering our asset quality operations or give satisfaction

before handing the call back over to Mark. We thought it would also be helpful to provide an estimate of cash interest for 2021 that captures the impact of our recent debt issuance has in 2028 based on current interest rates and our existing borrowings. We expect cash interest would be approximately 32 million dollars per quarter. It's worth noting that there is a modest differential between the interest expense that is reported on our income statement and are pure cash interest. This differential is driven by non-cash items that include the amortization of debt issuance and related costs as long as the accretion of Interest related to our convertible notes.

Over the course of twenty Twenty-One. We will continue to carefully manage cash as we navigate the lingering impact of COVID-19 and work to start ra fortifying our balance sheet to its promotion of its standing as our industry and Company begin to recover. We have already made significant strides in adapting and evolving our business to the current environment while simultaneously stream our overall processes to operate leaner and more efficiently going forward. We remain pleased with our progress to date and the success we've had with our cleaning and safety protocols. Our ability to more than cover our incremental variable costs, which is enabled us to keep the majority of our theaters open wherever permitted.

That said I will now turn the call back over to Mark who will provide additional information on our path forward.

Thank you. Shawn. We continue to be highly confident in the movie-going industry that the movie go industry will Rebound in a most significant way. It's only a matter of time and we're beginning to see the signs of that recovery the following factors continue to impact the pace of recovery, which are consistent with our commentary during prior calls to begin the status of the virus the rule out of the vaccine government regulations consumer sentiment clean and safety protocols and most importantly new first-run film content.

Cinemarks strategic priorities for 2021 are geared towards addressing these near-term factors while also looking forward to set our company up for Success post-pandemic June 1st will continue to effectively navigate ongoing pandemic including executing health and safety protocols managing cash and liquidity strategically coordinating theater theater wage opening hours resources and labor secondly will work towards reigniting the theatrical exhibition industry to increase in consumer awareness month and confidence regarding moviegoers collaborating with our studio partners for the release of new film content while helping to lead an industry-wide campaign welcoming back moviegoers to the Thursday. We're also actively negotiating the terms and structures of the evolving theatrical window with the goal of benefiting exhibitors Studios moviegoers. And of course shareholders dead.

and last but certainly

Not least we're focused on evolving and adapting the way we operate and continue to be successful in the post-pandemic landscape doing so includes continuing to enhance our business office to fully address evolving consumer preferences while aggressively pursuing cost-saving initiatives and developing new revenue-generating opportunities in that regard. We took a lot of time and effort over the course of the past year developing and incorporating new technology and systems such as snacks and a tap which I spoke about in my opening comments a new age jerk information system with workday and workforce management system. That would be integral in gaining further staff efficiencies just to name a few these process efficiencies will not allow us to deliver the same exceptional service with fewer resources were singularly focused on becoming stronger leaner and more competitive than ever before to lead the rebirth

In our industry and we believe this rebound is eminent with active role out of multiple vaccines. We're witnessing strong results driven by pent-up demand countries like China, Japan and Australia for the virus is more contained for context the Chinese New Year holiday brought in an all-time high of one point two billion dollars with a staggering hundred and sixty million viewers visiting a movie theater, which also sets a record. Furthermore. This is the first time ever that China's single day box office or more than $155 billion dollars for five straight days. Notably detective Chinatown 3 has scored the largest Monday gross of any movie in a single Market anywhere overtaking the previous record held by Avengers endgame in North America only days later the Chinese movie wage.

Hi mom opened up to even higher single day of Single Day sales.

These two films have now grossed more than $600 million dollars each and box office after only two weekends in the theater truly astonishing results that again underscore the demand for out of home entertainment consumers are eager to return to their local theater to watch great content on the big screen. These unprecedented results also a fuel our confidence in the Resurgence of the theatrical movie going across the globe as vaccines rollout and the virus is controlled and we are especially encouraged were the results of these foreign countries. No one loves movies more than Americans the production of movies the shared activity of enjoying them theatrically is deeply embedded inside American culture.

Now shifting back specifically to the market. The number of theaters opened and operating is a key consideration in our studio Partners decision on release date timing as suck the announcement that New York City theaters can begin reopening reopening next week is a significant step forward in the recovery of our industry the New York City dma alone now represents 7% of the 2019 North America industry box office. We also remain optimistic that Los Angeles and San Francisco will be able to reopen in the 16 weeks with those markets representing 8% and 3% of the industry box office respectfully has theaters in these key markets began to reopen and the virus need more contained we expect the volume of new film content will accelerate and as we stated last quarter, we continue to believe that 2021 will be a transition area year. Yep.

cut transition area

recovery leading into a more normalized year of 2022

For some perspective on our enthusiasm just look at the highly-anticipated film beginning this summer and may we have black widow Fast and Furious 9 and Cruella off from Pixar releases in June and July there's top gun Maverick minions 2 and jungle cruise The Fall season includes James Bond no time to die off Suicide Squad to a quiet place to Hotel Transylvania 4 and boss baby. And then the holiday season kicks off with Marvel's eternals Mission Impossible 7 Disney Animation inkanto sing too and a sequel to Spider-Man from home. And this is just to name a few and then 2022 is lining up to be an outstanding year off with high-profile films was strong consumer demand including the long-anticipated Avatar 2 from James Cameron the Batman black panther to Jurassic World.

Dominate domination Captain America to Mission Impossible eight Aquaman to Lightyear from Pixar Thor love and thunder Doctor Strange. The list goes on and on 2002 is truly lining up as a great year in closing. I am proud of the accomplishments of our team and what they've done over this past year year. Well positioned heading into this crisis and we've adapted and evolved the way we operate to navigate the current environment and to ensure we remain successful and further solidify our leadership position as the theatrical movie-going researches, which will ultimately benefit the long-term shareholder value for our company operator that concludes our prepared remarks. I'd like to Now open up the line for questions.

Ladies and gentlemen at this time. If you would like to ask a question, please press star then the number one on your telephone keypad again. That's star one to ask a question about to withdraw your question. Press the pound key. We will pause for just a moment to compile the queue and a roster.

Your first question is from the line of Securities. Thank you. Good morning, guys, excuse me, a couple of questions. I guess one you talked about the exhaust about keeping me private parties on the menu kind of going forward given the success. You've had I guess a couple of questions. Where am I just one trying to get a sense of how you can efficiently kind of key goes on the offering without cannibalizing greater demand than kind of $100 per Auditorium. How far Advanced would you like those be broken? How would you maybe adjust the terms around that to to avoid that off? Thank you Eric the p w p as we've noted been incredibly successful. We kind of led the charge on those. What we're going to do is is we're already we're already doing exactly what you're asking and that we do an analysis and and say, you know, are we better off selling that Auditorium for a hundred first-run product by the way is $150 or do we think we can make more money?

with consumer demand because we

Can fill up more seats with with the current restrictions that we have some some places 25% some places 50% we do that analysis and we open up more pwps where we or we open a more regular tickets as the new product comes without question, especially on the high demand Friday nights and Saturdays. We're going to allocate more screens to Reagan showtimes because we're going to be able to put more people in those seats, but we're going to continue to be able to offer pwps during matinee time periods, Saturday afternoon Sunday afternoon weekdays, so we don't see pwps going away. We think pwps will naturally slow down as a percentage of box office because we'll have the ability to put more people into that particular theater and generate a higher box office. So we've got a model in place which helps us make those decisions and it's just going to be a clearly just one where we we actually dead.

As we move forward adjust and adapt as necessary based on consumer demand, but the good thing is we're already doing it and we can already see the benefits of of that analysis.

I appreciate it. It's on a question. I need to talk about the market share gains. You've seen so far and obviously some repairs being closed another part of that. You know, how long is the factorization potential as the the industry starts to reopen and liquidity the main focus near term, but as you think about you know the potential for Acquisitions going for I guess one what have you seen so far in terms of you know, how plentiful and attractive those targets are that something you would only want to go into kind of want to asset light or kind of, you know, rent my model or would you be willing to take on more that fixed. See if the location and tracking the thank you again. Good question looks our number one priority as shown as indicated in I've said multiple times is is we're going to we're going to be really cognizant of rebuilding back up our balance sheet. It was one of the strengths that we had going into this pandemic and and that's going to be a priority as it relates to m&a. We are very open to any opportunity that comes our way.

Obviously, what is most attractive to us is to if we were going to do some kind of takeover of leases would be looking for for either based on a on a percent rent based on overall revenue or potentially a management fee. However that does not call out that we wouldn't do a straight acquisition. But the price is I have to be appropriate and as we have done over the last many years we've been very careful in our m&a Acquisitions and it's proved to be as proof of a good strategy. So I think we know what these theaters are worth. We know that kind of cash flow that can come out of them. We do a serious amount of financial analysis and and that's how we should continue. So we're clearly open to m&a but we're also going to be very careful as as it relates to the amount of additional fixed lease that we would take off.

in this environment

Perfect. Thank you guys. Thank you.

Your next question was on the line of Eric Handler with mkm partners.

Good morning, and thank you for the question. So Mark works on you know, I think most people at this point are just looking at business, you know back in 2022 and 2023 in terms of valuing your company and let's assume, you know, we get back to normal in in either one of those years based on let's say Revenue getting back to where it once was and 2019. Is it possible if that happens off for you to get back to your $23 24% adjusted ebitda margin mobile.

Good morning, Eric. Thanks for the question. This is Sean. I'll take that one. It's it's certainly possible and I would say that's absolutely going to be one of our goals is trying to recapture those types of margins as we as we look ahead obviously, you know, one of the biggest factors that influence is that is the the overall degree of attendance given the, you know, the relative Lehigh nature of fixed costs in our business, which we've been working on reducing that as as Mark indicating that we working on finding ways to operate leaner and restructuring aspects of the business to take any of those fixed costs out but still just the the inherent nature of the business has a a certain degree of fixed costs, you know attendance become sensitive in terms of the overall margin, so that'll that'll be probably the biggest driver but we've got a whole range of projects that we're working on to continue to drive incremental productivity and to continue to take costs out and then also find additional sources. Yep.

Revenue with the the goal of trying to return to those types of margins, um, you know, it's it's hard to fully predict right at this moment, but that that's certainly our ambition.

Great, and and this is a follow-up Mark. Wonder if you could talk about the state of Latin America at this moment. And what environment is like how red are they to, you know, fully reopen? And you know, how is that business, you know looking as as you project out the back to Eric Latin America has been has been actually kind of in parallel with us relative to operating efficiencies with with a phoenix to we've been able to the landlord situation there is different than in the so the vast majority of our leases have been able to be converted over to a a percentage of Revenue basis. We currently have 73% of our cinemas open throughout Latin America Brazil is is kind of the Highmark there. We have 90% of our Cinemas opened in Bruges.

100%

Of our theaters are open in Columbia. The viruses has not as much under control in places like Chile where we only have 35% open and Argentina a 10% off in Central America were nearly a hundred percent open. So it depends on the country obviously because a lot of countries there but we we believe that Latin America is going to recover in an equal way to the US there is a you know, there is a strong demand to go to the theater and those countries. It's it's still one of the last affordable out of home entertainment. So we believe that that when we're able to open up fully and content is back fully with those two things that we're going to see a Resurgence back to Latin America and accept we feel pretty good about the 73% open and we're going to continue to grow that I think we're going to see that grow grow kind of correspondingly to the

The exception might be Argentina and Brazil just because they're a little bit behind the curve relative to getting the virus under control.

Thank you very much. Thanks, Eric.

Your next question is from the line my king with the Goldman Sachs. Hey, good morning. Thanks for the question in the time Mark and Sean. I was just wondering if you could talk a little bit more about what you're seeing in places like Japan and Australia that give you confidence about the uh, the the eventual consumer Behavior as the domestic box-office recovers. And you know, I was just wondering if you could talk about, you know, some of the kind of similarities or differences in other factors that may affect the same as you look to those markets as a as a comparison to the United States. Thank you very much. Thank you Mike, you know, I spend a lot of my years when I am on the international side of the business. So I'm very familiar with those markets. I talked quite a bit about China here so you didn't ask about that so it won't do any further there, but those results dead.

They truly are incredible to do one point two billion dollars over over a period of about ten days of Chinese New Year. Now in Japan, you know, they released a movie called Dragonslayer a month six weeks ago and that movie went on to become the biggest movie of all time in Japan bigger than any American movie bigger than any Avenger movie. It was the biggest movie of all time in Japan. And what happened is a giant commercial movie was released when the virus was getting under control and people wanted to leave the home and go okay it the market is probably the most like the US in terms of just culturally of course is Australia Its English-speaking and when they released a Wonder Woman 84 at Christmas time, it was one of the best markets in in international for Wonder Woman because the virus was more under control and dead.

We we saw what happened.

With when again that was a an imported movie Wonder Woman 84 it wasn't a local movie, but it was one of the best markets in the world for that film because those two things happen a big strong commercial movie along with the virus under control. So as we look forward to what's happening in this country with New York starting to open up and California will begin to open up the next two to four weeks. We are really optimistic as we look at the lineup of film and the the single most important thing for Studios to to leave the content where it is is our theaters going to be open and I don't blame them. If New York and hasn't been opened up there going to be a little bit more cautious, but now that they're opening up we are very optimistic that major content to stay where it is and the second half of the summer and then moving into the fall in the second half of the year is going to we're going to be able to start to see that recovery coming forward so it's dead.

You know, I I think that as you look at these foreign markets, there's no reason to not say that same kind of phenomenon is not going to happen in the US with the virus under control and big movies being released, right? Thank you very much Mark. That was very helpful.

Your next question is from the line of Jim gosh with Berrington research. It's thank you. Good morning. We probably all hope everything will return to Thursday, but I'm wondering if if you think that should physical attendance not quite get there because of the streaming options and windows that sort of thing. Do you think there's a path to the level of profitability you have been able to achieve in a fairly reasonable period of time in terms of ticket pricing off the controls technology and other sort of things that might not necessitate it and then that would be a bonus if we were able to do that in terms of physical attendance.

Yes, Jim, you know there's certainly a path obviously that becomes more challenged with with the reduction of attendance. And I think some of that would depend on the agreed to which attendance has affected that's precisely what we have been working on in the form of you know, two-fold one figuring out ideas to generate incremental sources of revenue, uh to supplement anything. We might be affected on in terms of the downside of attendance and then likewise finding efficiencies on the cost front, you know, both of those play toward recapturing any loss margins associate with reduced attendance and you know margin dollars as well as margin rates. So there's definitely a path but I would just say like some of that's going to be in the near-term some of that will just be a factor of what the the attendance profile looks like over the coming years.

And the and the speed of the rebound.

I do you think there will be any permanent shifts in attendance patterns by time and day of week now that may be some who have come back have decided that maybe seeing something later in the evening or the prior day or something like that might be just a satisfactory and they can feel more comfortable in terms of safety issues to even with the vaccine.

Jim up I'll pick that one up. I don't really think so. I don't think there's going to be any permanent shift in consumer Behavior to two different times. What we've done and we're going to continue to do is is highly flexible variable pricing because with our discount Tuesdays that we've had that's always been either the second or third most popular day of the week because we get all the value consumers won't come that time. And then usually we we price also a little lower, you know for the the afternoon shows and then a slightly higher on the on the weekend shows, but I I don't think anything relative to the Panthers is going to cause any kind of permanent shift in a days of the week that people come to the movies. We've also seen from some of the surveys too that you know the commentary when the vaccine age are fairly widespread, you know, the the intent that people Express it's significant in terms of returning to the theaters and it's not a derivative of timing, you know of the week or anything like that to Mark's Point shifting behaviors. It's more just a

Overall level of comfort with vaccines and get getting out and it's kind of scaling out and the general General environment.

Okay, and one last one, I'm curious of your thoughts are given your background in the theatrical side in the studio side of the one remedial HBO Max take on windows with day and a pricing and then taking it out of the theaters are having a theater exclusive after 30 days instead of the opposite way that everybody else approaching it.

You know Warner's made a decision to put a real focus on Max or two thousand and and twenty one and we've we've been able to continue to back date, you know an acceptable deal with them relative to that that strategy HBO Max, um obviously is important to them as as they go forward with Warners has has made public statements about that. They intend to ship that strategy in to 2022 back to a more traditional exclusive wage know with the article. So we're very encouraged by by those statements that they've made and and I'm sure they will probably be coming out with further details about that in the in the coming months, but they've indicated that this was a 2021 during the pandemic strategy and that they were going to return to a more traditional window strategy dead.

Or twenty-two and we've been very highly encouraged with with the this with the announcement the Paramount made just this week about what they're doing with quiet place to and with top gun Maverick and with Mission and possible that you know, they're looking at somewhere between a 45 and and 60-day window and and finally life I'd say that the what Universal the deal that we were able to do with universal where where were getting 5 full weekends on their big movies at a minimum and three weeks off on their smaller moderate-sized movies, uh will probably turn out to be in an acceptable way to go as well there. So I think everybody's trying and clearly Disney, you know announced a significant number of movies that are going to be going theatrically both for 2021 and 2022. So it's actually been you know, a good 30 days as we as we look at Birth

I'm wondering.

product availability and window

Was going forward.

I agree though great support for Windows of some sort anyway, but thank you very much. Thank you, Jim.

Your next question is on the line of Robert Fishman with good morning. I've got a few questions for you guys. And let's just continue that window conversation if we can when you think about all the experimenting going on and with your your partners and you know what you just talked about, um, and the formal agreements that that you already do have in place. You just helped frame for us the expected longer-term impacts on your company both positive likely from you know, potentially lower film rental costs and getting your share of New Jersey news and then the negatives like the cannibalization on movie-going attendance and together. Do you think these net out is a positive or negative for Cinemark Robert? I'm I'll take that long. It's hard to say at this point since we're just starting and and all these various Windows scenarios are just beginning and we're in the middle of a pandemic. It's very difficult to say wage.

Exactly what the positive or negative of that is going to be. So, uh, I maybe that's more appropriate for the next earnings call when we actually have some data to look at instead of just projections, but I would say this as well. It's allowed us to be open to you know, test some some alternative content as well. And we're open Tuesdays testing alternative content with other streaming services, whether that be Hulu or whether it be Amazon or whether it be Netflix or whether it be Apple TV plus so we're looking at this as as a way for us to think about, you know, do we do we want to open our theaters up to some of this other content with different restructure deals happening on the the length of the exclusive window? So yes, it's it potentially has some negatives but also, yes, it potentially has some positive so one I think we've probably need three for Thursday.

To be able to see the data and and then be able to get back to you and I would just add to that. You know, that was always a big unknown as you know, Robert. This has been something that's been talked about and being evaluated for many years even pre pandemic and there's always kind of an unknown of what the longer standing impact is on consumer behavior. And what all that means so you'll for us will clearly be off on trying to get a net result that's in you know neutral to positive for exhibition. It's just that much more complicated as Mark said it was complicated before is that much more complicated now with the pandemic and probably the lingering effects of the pandemic for the next year or so that will continue to Cloud, you know real solid answer to that.

I got no that makes a lot of sense following up on your higher share comments in the prepared remarks. I'm curious if you can provide any more color around how much of the increase could be sustainable giving you a geographic footprint that that you have today and then relatedly any updates on what you're hearing about the ability of some of the smaller private chains to reopen starting this summer with the release both improving their let me start with the second part of that. I really don't have insight into what the smaller private chains are going to do relative to their timing. Obviously. There's one big national chain, which is not yet open. I would expect them, you know to open sometime in the you know in the early to mid spring, but but obviously I think you'll you'll ask them to to to be able to give you specifics but the smaller littler guys, you know, there's dozens and dozens of them. So I I really don't have a perspective on that as it relates to market share wage.

Shift, we you know, we've been incredibly.

Aggressive promotional e and marketing and with film in order to to gain that 20% plus market share and we do not expect to keep the majority of it. But we do expect them to keep all say a meaningful portion of it. You know what that's going to prove to be that's very hard to say. We traditionally been in the 12 and 1/2 to 13% market share and and I would expect that we're going to we're going to be able to hold on to at least a point or two. And and again, let's let's let the data actually speak for itself as opposed to us putting a projection there.

Okay, and if I could squeeze one last one maybe for Shawn, how can we think about normalized longer-term capex spending and whether there should be this down there. What do you expect to be a meaningful cat, you know catch up spend in 22. I'm not sure I go there, you know historically we had been spending in the you know, excess of three hundred million as we were working on our old recliner conversions. Yeah don't anticipate being you know anywhere near that in the you know in the near-term here is we're working as we're working on, you know, rebuilding our balance sheet wage say the the hundred or so million level that we're currently at is a bit depressed. Yeah, probably somewhere in between the two of those is more likely as we get going again over the coming years. There will be you know, there still are some prior commitments on new builds that will be moving forward on there will be opportunities. They're ultimately will be some you know maintenance that's been on hold that wage.

To do which will which will increase that but a big chunk of what drove our levels in the past were opportunistic revenue-generating and Roi generating types of projects and I will do some of those but those are more selective, you know, those are more things that we can choose. So I expect it'll start to go up but I don't believe that we're going to have like a massive catch up, or 23 and a lot of that comes back to comments. I made the kind of opening remarks that we've been very proactive about preventive maintenance and things like that in the past and now we're getting to to reap the benefits package that in that we do our our circuit is in really good shape. So it just comes back to how much cash flow our cash flow is recovering and and how opportunistic we're going to be in the future versus a big, you know catch we have to do on on any kind of Maintenance or anything like that.

Great. Thank you very much. Both of you. Thanks Robert.

Your next question is from the line of Alexia quadrant with JPMorgan.

Hi, thank you. This is David Cross guy in for Alexia Mark any update you can provide on talks to distribute movies for streaming services send to the incremental interest from these platforms to release a trickle and then maybe on a separate note. Is there any update you can provide on Movie Club, maybe how the awareness of the program or active membership has shifted during the pandemic and how you think about leveraging bath royalty to to bring moviegoers back. Thanks. I'm sorry. We missed your first question. Could you mind repeating the first part of your question is you cut out for just a second. We didn't hear you said something about what what company did you happen to know just you could provide an update on talks to distribute for streaming services and whether there's any incremental interest there to release detachable discussions. Well, you know, I think I think we've told you before that we we did it a series of tests during the holiday season and shortly thereafter specifically we did we did a number of tests test movies with with

So we're we're in.

Discussions with with Netflix Apple TV plus and others to continue to look and say we're not talking about quantity. We're not talking about huge quantities. We're talking about there's a half a dozen pictures that that are really important to some of the streaming services. They're they're either big important Academy movies or or or bigger mid-sized commercial films that we would be interested in playing we would be open to a shortened window depending on what the financial terms were on that particular your particular deal. So I would put up as as active discussions and positive and and I think it's been a positive outcome one of the opportunity opportunities that are referred to a relative to being in the middle of this page MC so that we we're we're open to that and I think the major streaming services are open to it to a specifically, excuse me.

With their bigger more commercial films or their Academy oriented films relative to movie club. We have been really active with Movie Club to keep those members engaged at this time. We have not initiated rebilling of people unless they have chosen to reactivate and we've got we've had a number of people that have chosen to do that churn has been very very low during this time. And we're we will have a big effort when when the significant content returns to reactivate all of those accounts and begin rebilling with a marketing effort around it, but it's what's been important is that we stayed in active communication with our movie club members and very very few have declined. That's why we still have more than nine hundred and fifty thousand members. So we we expect Movie Club to be to continue to be very wage.

Thank you, David. Thank you, David.

Your next question is from the line of Alan Gould with capital.

Thanks for taking my question most have been asked but I've got a question the company has historically paid a dividend. I realize I'm looking a little bit early. You know, we're all looking forward to getting back home theater what has to happen for the board to reconsider reinstating the dividend here. I mean the the biggest, you know, the biggest driver is that is obvious need to be the state of our cash flows, you know, we're going to want to get to back to a position of healthy and sustained positive cash flow generation and then, you know the decision to reactivate part or all that off of it and it's just going to be the the degree of that cash flow and you know kind of balancing that with the priority we stated of getting our our balance sheet kind of back to its its pre COVID-19 standing so long that those are really going to be the big drivers. We want to kind of look ahead and make sure we've got a sustained level of of reliable future cash flows coming our way and then you know, or we're going to be working on delivering the

And putting back the balance sheet. So we're going to get there. Uh, those will be there are you know, we've already kind of been talking.

About conceptual timing of that with the board when we look at our forward-looking cash flows, but obviously at this moment in time there still are a lot of unknowns just with regard to the ramp up with the recovery and whatnot wage, but it certainly would be something that will be uh be an active conversation going forward. Okay, if I can follow up it seems like minimum wage talks are getting cheated again, if hypothetically we were to go to a $15 minimum wage any idea what kind of impact that would have had what would have against a normalized earnings? It's something that we are actively watching and you know working on quantifying it's a little difficult at the moment just as a little early to speculate because of clearly we have off of a a dynamic scale of our staffing and Workforce in this current environment the positives I would say our our current Workforce at the at least at the end of life.

Twenty-twenty only about 3% of our Workforce was at the federal minimum wage level already, you know, the majority is in excess of that. So you're clearly that will be a factor that would have a reduced amount of impact. Uh, so we're going to watch you know, as as always we have a long history of dealing with these kinds of minimum wage wage requirements. Um, California has been very active with that. We have obviously a large presence in California. So we're accustomed to dealing with these types of things. We look to offset that where we can with pricing and obviously with other types of productivity initiatives. So those are the kind of tools we have to deal with those types of circumstances and look, you know to a certain degree being a a very affordable form of entertainment wage across the you know, the the nation when those types of things happen, it puts more discretion of all spending into people's pockets that oftentimes leads to more movie-going. So whatever wage

Impact we might have on the cost front oftentimes gets offset with just more General movie-going as a result of the the off shot impact of those types of increases. So I know that's not a specific number in terms of but it is something worth paying close attention to and again, we have a long history of dealing with these things. I think it's something we can navigate. Okay, that's helpful. Thanks a lot.

Your final question is from the line is Benjamin swinburne with Morgan Stanley. Hi. Good morning. This is Mary on 410. Thanks for taking the question mark. Just wanted to get your thoughts on the group two, and one of my 84 box offices wild relative to your expectations. And they released under these new operating models.

Kerensky performance to thank you. Sorry Mary. And I did I didn't hear sorry. Very pleased with groots Croods 2 is a movie that has just continued to play and play and play. I mean, I think they were into their 11th week and they returned to number one in the box office. So it was a combination of of a movie that had a very good pedigree coming in coming off the first movie package and a very entertaining and successful Movie that that people liked and then it it was it was released in a timeframe whether that wasn't that much product. So I think Universal birth the benefit of continuing to have a very very long tail on on this on this movie and I think it's that that that gives us a positive outlook on what we think's going to happen with Tom and Jerry Tom and Jerry again is a is a well-known franchise it it actually opens today across the country and we think Warner Brothers is likely to have a dog

success and that and

You know, I think they could they could only hope for it to to be as successful as crude to which I'm sure Universal is pleased with.

Got it, that's helpful. And then secondly as we kind of look forward to reopening, is there a film or a certain weekend that you're looking at? Maybe this Summer that you think might be the inflection point for normal situation where that that is a really that is a really good question and actually one that I I didn't particularly anticipate but I have thought about it a lot and I am I look at the summer and I I say boy with black widow opening up on May 7th that is just, you know, a very high-profile movie and then even in in April, you've got got sucked in Mortal Kombat. So it's it's hard to say but Black Widow and May 7th. And then if you get down to the end of May, which is traditionally been the beginning part of Summer and and you look at it and you go off the week the week before May 28th is free guy from Fox Disney and then the last weekend in May which has been kind of that traditional beginning of Summer you have both, correct?

From Disney and you have a fast and furious from Universal and you have infinite from Paramount. So you've got three big movies on that last weekend in May. So that's an awful exciting time. And then I think it would be it would be wrong of me not to not to to look forward and say another kind of traditional very big weekend in the summer as a launching pad not particularly on the day is that weekend of July 4th, July 4th specifically is not that great of a day because people want to be outside and barbecues and such but that weekend you've got a great family movie minions coming from Universal and you've got top gun Maverick coming from Paramount which you know, I expect both those movies to be highly successful. So look at the beginning the beginning of Summer the middle of summer and even the end of the summer we're optimistic about about this content and I think the positive information about the virus rates and of course

The vaccines coming likely a third vaccine coming now with Johnson & Johnson. We're up. We're optimistic that that we're going to be on the light up these theaters again come this summer.

Awesome, super helpful. Thank you so much. Thank you.

There are no further questions and we'll turn the call back over to Cinemax or any closing remarks will again, I'd like to thank you all very much for joining us this morning. We look forward to the recovery. Look forward to speaking with you again following our first quarter. Please stay safe be well. Enjoy your families by now.

This includes this concludes the Cinemark fourth-quarter and full-year 2020 earnings call. Thank you for participating you may now disconnect.

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