Q4 2021 Cinemark Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Cinemark fourth quarter and full year 2021 earnings call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer recession to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
You require any further assistance. Please press star zero I would now like to hand, the conference over to our speaker today Chanda Brashears Senior Vice President of Investor Relations. Please go ahead.
Good morning, everyone. At this time I would like to welcome you to Cinemark Holdings, Inc. Fourth quarter and full year 2021 earnings release Conference call hosted by Sean Gamble, President and Chief Executive Officer, and Melissa Thomas Chief Financial Officer.
In accordance with the Safe Harbor provision of the private Securities Litigation Reform Act of 1995 certain matters that are discussed by members of management. During this call may constitute forward looking statements.
Such statements are subject to risks uncertainties and other factors that may cause <unk> actual performance to be materially different from the performance indicated or implied by such statements such risk factors are set forth in the company's SEC filings. The company undertakes no obligation to publicly update or revise any forward looking statements today's call and webcast may include non <unk>.
GAAP financial measures a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures can be found in today's press release within the company's quarterly filing on Form 10-K or on the company's website investors Cinemark Dot com I would now like to turn the call over to Sean Gamble.
Thank you Chanda and good morning, everyone. We appreciate you joining us for our fourth quarter and full year 2021 results.
It's been a pleasure getting to know many of you during my time as CFO and C O O and I look forward to our ongoing relationships in my new role.
As we announced last quarter, Melissa Thomas joined Cinemark as our new CFO in November and I would like to formally welcome her to her first cinemark earnings call.
I'd also like to publicly thank and acknowledge mark Zoradi for his thoughtful collaboration and coordinating and supporting such an incredibly smooth leadership transition over the past several months.
The theatrical exhibition industry made huge strides in its recovery throughout 2021, culminating in an exceptional fourth quarter during which north American box office crossed the $2 billion Mark for the first time since the onset of the pandemic New film releases that led the charge include.
Denim, let there be carnage eternal Ghostbusters afterlife, no time to die and of course, the record setting Spiderman No way home then now represents the industry's third highest grossing film in history.
Worth, noting that all five of these films had an exclusive theatrical window.
Cinemark contributed to these box office results in a big way.
On the release Venom, we set a record for the largest October opening weekend ever for a single film pre and post pandemic and while number three for the industry Spiderman has now become our number one highest grossing film of all time driven by our sustained outperformance on this title.
The fourth quarter's box office success underscores enduring consumer appetite and demand to experience great films in an immersive shared cinematic environment.
Over 48 million guests visited our global Cinemark theaters in the fourth quarter and that consumer enthusiasm translated into strong results.
On a worldwide basis, our fourth quarter attendance grew 57% compared to <unk> 21.
Once again cinemark surpassed North American industry box office recovery this past quarter over indexing by more than 700 basis points when comparing for Qs 21 box office results against four Q1 9.
Our Latin American admissions also outperformed their corresponding industry results Biosimilar degree.
These significant global attendance and box office results flowed through to our bottom line.
Adjusted EBITDA in the fourth quarter was positive $140 million and that sizable <unk> result drove positive adjusted EBITDA of $80 million for the full year.
Moreover, exclusive of one time benefits, we generated positive cash flow during the fourth quarter in both the U S and Latin America, another meaningful milestone in our company's recovery from COVID-19.
I'd like to commend our incredible global team for their outstanding planning execution and dedication to deliver these tremendous results.
Our cinemark team has faced monumental challenges during the pandemic and what they have accomplished and what they continue to accomplish through their endless perseverance resourcefulness strategic thinking and optimism is nothing short of astounding.
While strong film content was certainly a key component of our fourth quarter success exceptional operating performance and the ongoing execution of our strategic initiatives were also significant factors as.
As we look ahead, our overarching focus remains unchanged and that is to maximize attendance and box office, while actively pursuing ancillary revenue opportunities.
Over the course of 2021 the world has made tremendous progress combating the ongoing effects of the pandemic, although for the time being the impact of its lingering presence, particularly on our industry and business still remains.
As a result, as we move forward in 2022, our priorities will continue to focus on first effectively navigating the ongoing pandemic second fully reigniting theatrical exhibition and third positioning our company for ongoing success in the evolving media landscape.
With regard to our first priority of effectively navigating the pandemic I'm exceptionally proud of the accomplishments our cinemark team has achieved over the past two years. These.
These accomplishments include Swift inappropriate actions that were taken to preserve cash and minimize expenses and improve our liquidity profile as well as refine our operating practices, such as streamlining processes, driving new efficiencies and strengthening operating hours management we.
We defined implemented and have consistently executed a wide range of new health and safety protocols to protect our guests communities and employees.
Additionally, we effectively reopened our entire global circuit and remained open while dealing with frequent fluctuations and content supply and government restrictions.
Our team also continues to skillfully manage through the challenging labor and supply chain dynamics just to name a few.
We have provided examples of the meaningful impact. These actions have had throughout the pandemic during prior calls and their benefits clearly continued in the fourth quarter as demonstrated by our sustained market share advances compared to 2019 guest satisfaction scores averaging 90%.
And as I mentioned, a moment ago positive adjusted EBITDA and cash flow.
That said our work navigating the pandemic is not done yet.
At the end of 2021 and throughout most of the first quarter to date, our industry alongside many others was affected by another searching COVID-19 headwind brought upon by the Omicron variant.
Fortunately however, we are encouraged by the recent decline in new cases around the world as well as commentary by a growing number of health experts, who believe the virus may be transitioning from a pandemic to an endemic.
Signs that disruption from the virus on our day to day lives May finally be subsiding are evident and easing government restrictions, which are now fairly minimal across the U S with regard to movie going as.
As well as consumer sentiment, which has improved to 75% of moviegoers, indicating they're comfortable returning to theaters today and over 80% within the next month.
The ethical exhibitions ongoing recovery remains highly contingent on the state of the virus government restrictions and consumer sentiment and all of these factors are now moving in a favorable direction.
At the same time, we have been navigating through the challenges of the pandemic. We have also been actively working to reignite theatrical moviegoing, our second key priority.
First and foremost this effort has included actively collaborating with our studio partners to bring new compelling first run film content back into our theaters on a steadier release cadence.
While health concerns and availability of content have clearly been two of the largest challenges during the pandemic. So too has been inconsistent film calendar with large gaps between commercial releases.
While omicron cause another blip in the return to a more normalized release pattern. We are highly optimistic about the film slate for the rest of the year.
New releases this past weekend uncharted and dog, both exceeded projections and we expect industry box office will continue to ramp and accelerate with the release of the Batman next week, followed by a long list of additional highly anticipated titles throughout the year, including Doctor strange into the multi verse of madness.
Top gun Maverick Jurassic World Dominion light year minions. The rise of grew Thor Love and Thunder Black atom Aquaman and the last Kingdom Black Panther will conduct forever.
And the long weighted alleviated next installment of avatar.
And these are just a handful of examples of the franchise films that are lined up for 2022 not to mention the broad range of additional family drama comedy and other genre films that are interspersed throughout the year, providing varied offerings for all audiences.
Furthermore, I'm pleased to report that the majority of films being released theatrically. This year will include an exclusive window with most larger and commercial titles, maintaining a 45 day window.
Demonstrated yet again in the fourth quarter of 2021, and this past weekend a theatrical window continues to produce bigger events larger cultural moments and increased box office results with reduced piracy.
It also continues to provide a platform that establishes a stronger emotional connections with content. Unlike any other distribution channel and those connections lead to more sizable brands franchises and promotional value for all other windows.
Great films are an essential part of reigniting theatrical moviegoing, and so too is compelling marketing that increases consumer awareness sentiment and ticket sales.
To that end, we will continue to lean heavily into a myriad of digital social onscreen and loyalty strategies throughout 2022 to target a wider range of consumers increased movie going frequency and grow our cinemark audiences.
Over the past few years, we have significantly enhanced the scale of our digital marketing capabilities and reach we are now directly connected to more than 20 million addressable guests across our global circuit and by way of these connections and the comprehensive Omni channel network. We have built we have consistently delivered.
During billions of impressions each month via social media engagement personalized E mails and earned media stories showcasing the benefits of the Cinemark movie going experience.
These marketing actions have not only been helping to revive moviegoing, but have also increased loyalty, which we witnessed in the ongoing strength of our market share results and movie Club program.
After proactively pausing movie club memberships at the onset of the pandemic, we fully reactivated the program in the second half of 2021 and we are thrilled to report that we have already returned to new monthly membership gains.
During the fourth quarter, we added 40000, New movie club members, bringing our membership base to within 1% of its pre pandemic level at approximately 940000 members.
We continue to receive tremendous feedback about our unique transaction based subscription program that allows members to rollover unused monthly credits sure credits with friends and family and receive a meaningful 20% discount on concessions.
Member feedback has also been resoundingly positive with regard to movie club platinum a nu earned premium tier that we launched in September .
By the end of the year more than 100000 members achieved this heightened status, which they will enjoy throughout the entirety of 2022.
And that brings us to our third key priority, which is positioning our company for ongoing success in the evolving media landscape.
We are fortunate to already have a head start with regard to positioning ourselves for the future. Thanks in part to the financial discipline, we have consistently exercised for years and the sustained investments we've made in premium amenities, maintaining our circuit marketing capabilities and operating excellence examples.
Include our luxury lounger recliner seats and over 65% of our U S footprint nearly 300 premium large format XD in IMAX auditoriums worldwide immersive D box motion seating across 250 of our theaters, the best sight and sound technology in the industry and enhanced.
Food and beverage offerings throughout 75% of our global circuit.
Furthermore, we continue to simplify and enhance our transactional processes for tickets and concessions, including our recently deployed snacks and attack online ordering platform that allows guests to purchase food and beverage ahead of time and simply pick up their order upon arrival to our theaters or have it delivered.
<unk> to their seats.
These amenities innovations and capabilities provide us considerable tailwind as we sort through evolving opportunities and implications driven by the pandemic and near term shifts in the distribution landscape.
As we concentrate on positioning cinemark for ongoing success within this dynamic environment. We are focused on five primary strategies for.
<unk> is providing our guests an extraordinary experience doing so is fundamental to our business and cinemark has a solid reputation and long history of delivering this objective.
That said, we are investing time energy and resources to take the experience we provide our guests to the next level.
Our goal is to be top of mind, when consumers think about world class guest service quality value ease and a premium entertainment destination.
Second is building audiences with an increased focus on attracting a wider range of consumers by expanding the variety of content, we offer as well as utilizing our industry, leading marketing capabilities to drive consumer demand and conversion as described a moment ago.
Third is growing sources of revenue by creating incremental sales opportunities such as continuing to expand food and beverage offerings. Honing recently implemented ecommerce in theater design initiatives optimizing pricing testing, new experiential entertainment concepts and enhancing cinemark partnerships and brand tie ins.
Fourth is streamlining processes.
Which essentially means executing the aforementioned strategies as efficiently as possible and includes initiatives such as workforce management continuous improvement and utilizing advanced tools practices and platforms to free up time spent on administrative tasks and increased focus on our guests teams and productivity.
And fifth is optimizing our footprint.
This strategy involves actively assessing our circuit as well as domestic and international markets to determine where it is most advantageous to grow recalibrate and strengthen our circuit to deliver sustained long term returns.
We believe these areas of focus are best suited to steer us through expected ongoing fluctuations within the media landscape in the near term and position US for continued success over the long haul.
In summary, while our recovery from the pandemic is still ongoing we are highly encouraged by recent improvements in the state of the virus and associated consumer sentiment.
Fourth quarter attendance demonstrated that consumer enthusiasm for the shared immersive theatrical movie going experience remains strong and films maintained the ability to become a larger than life and generate significant box office results even in the current environment.
As we look ahead, we remain optimistic about the future of theatrical moviegoing and cinemark.
We are working diligently to position ourselves for ongoing success in the evolving media landscape and to deliver long term value for our shareholders guests communities and employees.
With that I will now pass the call to Melissa who will provide further information about our fourth quarter financial results.
Uh huh.
Good morning, everyone and thank you Shaun I'm honored to be part of the Cinemark team and I'm greatly looking forward to meeting the investment community in the near future.
As Sean discussed we made significant progress in terms of the overall recovery of our industry and our company throughout 2021, and especially in the fourth quarter.
As reflected in our financial results.
Our worldwide attendance was $48 1 million patrons for the fourth quarter.
We delivered $666 7 million of total revenue.
$139 4 million of adjusted EBITDA.
$208 million of operating cash flow.
Notably these worldwide results were driven by robust performance in both our domestic and international segments.
With each segment generating positive adjusted EBITDA in the quarter and reporting adjusted EBITDA margins in excess of 20%.
Taking a closer look at our U S operations in the fourth quarter, our attendance rebounded to $31 2 million patrons.
Representing a 45% increase over the third quarter and underscoring the recovery of theatrical moviegoing.
We were able to service these guests with operating hours that were essentially flat to last quarter and.
And approximately 20% below that of pre COVID-19 , which speaks volumes to the operational efficiencies and technological advances we've achieved since the onset of the pandemic.
Our domestic admissions revenue rebounded to $287 3 million in the fourth quarter on an average ticket price of $9 in 'twenty one.
Our average ticket price continues to be elevated due to three key factors.
Reduced operating hours, resulting in fewer matinee and weekday showtime's.
Strategic pricing actions.
And a higher concentration of premium large format box office.
It's worth mentioning that 15% of our U S box office was generated by our premium large format. This is 400 basis points higher compared with the fourth quarter of 2019.
The growth in the average ticket price was partially offset by revenue deferrals related to our loyalty program ramping back up.
Our U S concessions revenue with $207 8 million in the fourth quarter and reached 90% of fourth quarter 2019 levels with an all time high per cap of $6.66.
Our food and beverage per cap remained above $6 throughout 2021 due to a few factors.
Including heightened in diligence and food and beverage consumption, particularly within our core concession categories.
Mix of moviegoers that tend to skew higher in purchase incidence.
And our operating hours, which while reduced remain concentrated in timeframe that are more conducive to concession purchases.
Domestic other revenue also benefited from the uptick in attendance and increased more than 50% quarter over quarter to $56 6 million.
By volume related increases and screen AD and transaction fees.
Altogether fourth quarter total domestic revenue was $551 7 million with positive adjusted EBITDA of $115 9 million and an adjusted EBITDA margin of 21%.
Turning to international our International segment also experienced a substantial recovery in the fourth quarter exceeding.
Exceeding our expectations.
All of our theaters, where operating throughout the fourth quarter, albeit with certain government imposed restrictions on operating hours and capacity.
We were able to grow our attendance, 84% quarter over quarter to.
To $16 9 million patrons, given our lineup of films that resonated extremely well with the Latin demographic <unk>.
Including in Concho, which is a story based in Colombia.
Then ill, let there be carnage a journalist.
Of course, the global phenomenon.
Biedermann no way home.
We delivered $115 million of total international revenue in the fourth quarter, including $57 6 million of admissions revenue.
$40 4 million and concessions revenue.
$17 million of other revenue.
International adjusted EBITDA was $23 5 million for the fourth quarter with an adjusted EBITDA margin of 24%.
This was our first quarter a positive international adjusted EBITDA since the onset of the pandemic.
Turning to global expenses.
Film rental and advertising expense was 57, 5% of admissions revenue.
Primarily by a higher concentration of larger more successful new film releases with an exclusive theatrical window.
We also increased our investment in marketing to help reignite moviegoing.
And loyalty and drive market share, which also flow through this line item.
Concession costs were 17, 6% of concession revenue and were up 40 basis points from last quarter.
Supply chain constraints were amplified in the fourth quarter as attendance rebounded.
We experienced product shortages and price increases on certain concessions inventory and we took appropriate actions during the quarter to mitigate much of these impacts.
Fourth quarter global salaries, and wages were $83 7 million.
And increased 24% quarter over quarter, as we hired incremental employees to service the expected surge in attendance.
Like most industries, we face a series of labor challenges.
Wage rate inflation, and staffing shortages, which where we were able to partially offset by streamlining our workforce management processes.
Facility lease expense was $79 2 million.
And increased 15, 1% quarter over quarter.
While largely fixed lease expense will fluctuate with percentage rent and common area maintenance increases as volume rebounds.
Worldwide utilities, and other expense was $90 8 million and increased 11% quarter over quarter, driven by variable costs, such as credit card fees that grew in line with volume.
And higher utility expenses due to expanded operating hours, particularly for our international segment.
Finally, G&A for the quarter was $49 3 million and increased 27, 7% quarter over quarter.
Our investments in cloud based software and higher consulting costs legal fees and stock based compensation.
Capital expenditures during the quarter were $38 3 million.
Including $13 9 million for Newbuild projects that had been committed to prior to the pandemic.
And $24 4 million for investments to maintain or enhance our existing theaters such as later laser projectors.
And rounding out our fourth quarter results, we generated net income attributable to Cinemark Holdings, Inc. A $5 7 million, resulting in earnings per share of <unk>.
Another metric that was positive for the first time since the pandemic and represents another milestone in our recovery during the quarter.
As we look forward, we expect 2022 to be a recovery year, we remain.
Optimistic regarding the full year, particularly with the strong film slate.
That said, our first quarter results will be impacted by the lighter film release calendar due to the omicron variant, which may lead to negative cash flow during the first quarter.
However, we expect to generate positive cash flow for the full year 2022.
On the cost side like most other companies in the service industry, we are experiencing inflationary increases due to supply chain constraints and the challenging labor market.
We will continue to mitigate these impacts wherever possible in 2022.
Some steps we are taking include implementing incremental labor productivity initiatives.
Negotiating with an expanded set of vendors.
Considering alternative concession products and evaluating strategic price increases.
Turning to our expectations around capital expenditures, while still well below our pre pandemic ranges, we are beginning to ramp up our investments in our theaters in 2022 and expect to spend approximately 125 million on capital expenditures.
We expect to continue to reap the benefits of our consistent investment and proactively maintaining and enhancing our theaters over the years.
Which has enabled us to scale back capital expenditures in the near term without hindering our asset quality or guest satisfaction.
In closing, while our recovery from the pandemic is ongoing we remain highly optimistic regarding the future of theatrical moviegoing.
And the long term prospects for our industry, particularly for Cinemark, we are innovating and evolving in this new operating environment for us.
<unk> what is in the best long term interests of our key stakeholders to further secure cinemark is positioned as an industry leader.
Operator that concludes our prepared remarks, and we would now like to open up the line for questions.
Ladies and gentlemen at this time, if you would like to ask a question. Please press star one on your telephone keypad again that star one to ask a question to withdraw your question press the pound key we.
We will pause for just a moment to compile the Q&A roster.
Yeah.
Your first question is from the line of Steven Kay Hall with Wells Fargo.
Yeah. Thank you maybe first just wondering as you look at the 2022 slate are you having any conversations with the studios around their expectations for exhibition Windows.
Ben.
And on an ongoing moving process as they've looked at their windowing onto streaming. So maybe you could just give the latest on what you're seeing from the studios on the window side.
Sure thing thanks for the question Stephen.
It's it's certainly a an ongoing conversation I think the the positive news is the outlook is most releases will have some form of exclusive window and it seems like the majority of the larger films are gravitating toward a 45 day window are both Warner brothers and payer.
Mt have formally expressed intention to have a 45 day window universal is likely to continue to release the majority of its films that way with probably a bit of a variety, but they've also expressed intent to have their films hit their streaming platform 45 days after theatrical release.
Sony has consistently been a big advocate of of a window Disney has been taking more of a wait and see how things progress with the course of the pandemic and just consumer appetite, but all signs are pointing to the majority of films, having a window on a go forward basis.
Thanks, and maybe kind of a follow up to that it seems like that a lot of the box office revenue. We're seeing is getting more concentrated to the larger films. When you think about that possibly being a trend where maybe smaller films are going to be more of an at home experience larger films are going to be more of an exhibition experience and you think about things like ticket.
And food and beverage how does the mix it skews more to larger films impact your business, both at the topline and with the rents kind of at the at the profit line.
It's a it's an interesting thought Stephen when we look at the mix of titles overall, even prior to the ban demick, we were starting to see a little bit of a higher concentration of blockbuster films. Although interestingly some of that was due to just the the higher levels of risk that we're starting to.
Take place with regard to the smaller and mid tier films Interestingly as you look at the environment today with a more dynamic window, even though some of the smaller and mid tier films have reduced in volume in the near term, partly because of the pandemic and partly because of some of the the near term dynamics with the streaming platforms.
The actual risk factor associated with that has improved to a in a certain way because of the more dynamic window. So I actually think there's the potential that we may start to see over time more of these smaller and mid tier films getting released theatrically than we've had in the past, which could balance out the mix all of that.
Being said, obviously there continues to be a lot of evolution and things to sort out coming out of the pandemic with regard to just changing consumer behavior as expectations and things of that sort. So we're just going to continue to monitor how that plays through in and think about what the best strategies are with regard to pricing and mix in.
Things of that sort of both for ticket prices as well as concessions.
And maybe just the last housekeeping one Melissa if I could sneak it in you talked about the positive cash flow for 2022 was that operating or free cash flow after the capex guidance.
Yeah, so from a free cash flow perspective.
Great. Thank you.
Your next question is from the line of Eric Handler with MK M partners.
Good morning, and thanks for the question.
Two questions I'll start off first with.
Outperforming the market the.
Domestic market actually in international market to buy 700 basis points very impressive well above your normal levels.
Was there anything specific in the quarter that you were doing that allows you to.
Increase your market share like that and outperformed the market and then all of a phone.
Thanks for the question, Eric I think a part of that is just a reflection of the gains that we've made in our market share over the course of the pandemic. So that just continued to play through in the fourth quarter, perhaps there was a little bit of a bump by the fact that Canada had been closed in certain markets.
I think everybody in the U S gained a little bit of just overall share relative to the full north American industry because of that but all the investments we had made prior to the pandemic in our amenities and just the upkeep of our circuits and just all the efforts we've continued to push on with regard to our marketing.
Capabilities too to entice movie goers back to our theaters I think that's really a culmination of all those things that played through it in terms of our performance relative to the market.
Great.
And then.
It was really nice to see your.
Adjusted EBITDA margin get back above, 20%, which is always better.
Sort of a company benchmark.
When you look at sort of like your revenue base of $667 million.
Give or take a little bit of revenue if you can get close to that.
Number is it safe to say you can sustain a 20% plus adjusted EBITDA margin or do we need to think about any inflationary issues that may weigh on.
The margin a little bit.
Thanks for the question, Eric So we have a track record of delivering industry, leading adjusted EBITDA margins and we certainly are focused on.
<unk> adjusted EBITDA margins as the industry recovers.
The single biggest driver of our EBITDA margins, it certainly going to be box office recovery.
That that returns to historical levels, but there are some a few other key drivers that I would highlight as you think about adjusted EBITDA margins going forward I'm. So first from a topline perspective as it pertained to average ticket prices and concession per caps and those have been running at elevated level.
In 2021 and have been a nice tailwind for us as attendance starts to come back and as we see them.
Operating hours expand them in different audience mix come back we do expect that some of that may normalize.
As as that audience that.
Comes back in operating hours expand we are certainly trying to sustain those tailwind and have strategies strategies in place to do so.
But that is certainly a variable.
On the expense side as I mentioned in my prepared remarks, we are seeing them as are many other companies right now labor wage inflation as well as.
Some inflationary increases on the Cogs side, just due to supply chain constraints, it's difficult to fully predict how that's going to evolve in 2022, and what the full extent of that impact will look like we are working to offset those impacts wherever possible.
With various initiatives both on the labor productivity side as well as on the Cogs side, expanding our vendor base looking at different product alternatives as well as strategic price increases, but those are the different factors that I would think about as we think about margin heading into 2022.
Great. Thank you very much.
Thanks, Eric.
Your next question is from the line of Chad Beynon with Macquarie.
Hi, good morning, Thanks for taking my question.
Wanted to start with international Shawn I know, you've talked about that market generally being kind of a three to six months laggard to the U S.
Our fourth quarter results would suggest that that has accelerated I think you kind of noted some of the big hits that drove the outperformance there, but wondering if theres an update on that if you can kind of paint the picture in terms of.
Those markets have come along a little bit faster in the past couple months. Thanks.
Your observation is spot on Chad the Latam markets, while they continued to trail the U S. A bit there definitely picking up ground most of the drag we're still seeing is because of varied government capacity restrictions that are still in place. Although like most places in the world those are starting to lift as well.
While vaccines were slower to rollout throughout the reason actually now vaccination rates largely exceed the U S with regard to double and single doses as well as boosters. So that's a big part of our.
What is helping the markets to pick up some some pace in terms of their recovery and catch up to the U S and like we said some of the box office gains in the fourth quarter were fairly comparable to what we saw in the U S.
Great. Thanks, and then.
In terms of the other line that you report Melissa I think you said that that was due to screen advertisements and transaction fees. The advertising market has really picked up where their deferral roads.
Kind of fell into the quarter or.
Is there maybe a larger foundation or base of screen ads going forward, just a little bit more color on that thanks.
No I would say.
Nothing nothing notable on that screen outside outside of S. R.
Our attendance rebalance screen advertising is going to rebound and then on the transaction side, which is the other point that that I mentioned that is as a greater percentage of our business starts to shift online and we are seeing higher revenue from transaction fees as a result.
Thank you very much congrats on the quarter thing online.
Thank you.
Okay.
Your next question is from the line up of Robert Fishman with Moffett Nathan.
Good morning, I have one for Sean and then one for Melissa again.
Sean can you expand on your opening remarks and share some more details around your own movie club survey work or elsewhere, but how the different age groups are returning to the movie Theater and then thinking about if older demos in the younger families.
Bill, possibly below pre pandemic levels is there something that you think will be able to bring them back or any signs that you have that the more flexible windows.
It is permanently changing moviegoing behavior there.
Sure thing Robert Thanks.
You know I think our movie club data is generally consistent with wider demographic data.
At this point, while we are seeing that certain categories of older audiences and family audiences have trailed younger adult moviegoers.
Part of that is been driven clearly by the pandemic, we see that in survey data around just comfort going back to theaters. When you look at that demographic as well it's been really a phenomenon of just health concerns in the current environment and that that continues to improve as the pandemic improve so we anticipate that.
As the pandemic further recovers that those categories will also recover those groups of audiences and then the other factor that has really affected those audiences is also just been the availability of content. So more of the content is favored younger moviegoers you know I think some of the programming decision, making has a line. So it's a little bit of a chicken and egg factor.
Likewise, we think as that content mix starts to fill in over the course of 'twenty two that speaks more to those audiences that will also help further the recovery of those categories. So it's difficult to say, if there's really any longer term changes in either of those buckets. I think we tend to think that when the right content.
<unk> is available and health environment is in a in an acceptable place we're going to see those those categories of audiences continue to come back.
Okay, Thank you and and Melissa.
Just wondering if you can expand upon the comments made so far.
The opportunities for using maybe more dynamic ticket pricing and other concession initiatives that can help drive monetization from the returning moviegoers and see growth from these elevated levels.
Yeah, So I can speak to but the pricing side of things. So we are looking at.
Pricing.
Strategically, we believe theres opportunity to leverage data and analytics to become more active and sophisticated with our pricing over time and that is both on the admission side as well as the concession side.
Not a one size fits all approach stop segmentation and the averaging and of course, where we're testing and learning but for example, we're in the midst of a series of tests to better understand how elasticities have evolved during the pandemic to further optimize our base pricing levels going forward.
That could mean increases or decreases in pricing, depending upon theater market time of day weekend and various other factors, but the goal is for us to be more surgical with changes in our price versus instituting blanket price increases across the circuit, but we believe.
That is certainly a lever that we have to offset some of the inflationary cost pressures that we're seeing in the in the current environment, but we will approach that cautiously and test or the test and learn our way into it particularly as we're trying to reignite movie going.
As the pandemic starts to subside.
Got it. Thank you both thanks Robert.
Your next question is from the line of Mike, Inc. With Goldman Sachs.
Hi, Good morning, Thank you very much for the question.
I have two first following up on some of the earlier questions. I was just wondering if you could talk a little bit more about.
The outlook for average ticket prices and concession per caps SB.
Move into 2022, you know I can appreciate you talked about normalization over the long term.
But do you expect that normalization to happen during the year or is that more a little farther out. Thank you.
Okay.
Hi, Mike Thanks for the question.
That one as you think about a T piece and we talked about some of the drivers in the prepared remarks that we benefited from reduced operating hours, which has led to a favorable ticket type mix that we've had strategic pricing actions and then a higher concentration of premium large.
Format box office.
That's helped to elevate our average ticket prices as.
As you think about the go forward and and potential normalization there.
Just to provide some context nearly a third of the increase that we saw in domestic average ticket prices.
In the fourth quarter of <unk>.
<unk> 21, compared with the fourth quarter S of 19 can be attributed to favorable ticket type mix from reduced operating hours.
Such as fewer matinees, so just to give some context of how that those reduced operating hours and ticket mix has been been benefiting us that said as we mentioned we are looking at opportunities on the strategic pricing side.
As well as continuing to push and promote our premium large format screens.
There's some puts and takes there, but hopefully that helps provide some context and then on the per cap side.
There you know as you mentioned in prepared remarks, we did also benefit from expanded.
Our operating hours expanded I guess, we've been shrinking our operate we've had reduced operating hours, but they've been more conducive to periods, where our customers consume concessions, which certainly has has benefited us during the pandemic period. We've also.
So to Tad heightened indulgence and consumers in a favorable audience mix there.
As we think about sustaining the per cap piece going forward.
There are initiatives that we're looking at we do expect some could normalize as that audience mix starts to shift and come back and in 2022, but we are promoting snacks in a tap that's a huge convenience factor a frictionless experience for the customer also creates shorter lines for those who who want to purchase in the.
Traditional way I'm on the category management side, we are looking.
Looking to expand or reactivate categories that we haven't fully brought back yet and also introduce new products and flavors to help maintain those per caps and then strategic pricing is another factor so.
Lots of actions underway to really help us sustain.
Sustain those those per caps, but you know it could be some normalization that happens there.
Great. Thanks, most of that's very helpful and I was just wondering if you could provide an update.
Some of the.
Programs pre pandemic and during the pandemic specifically.
How things like discount Tuesdays are going.
And then is.
His group viewing in.
Screen rentals coming down as a percentage of mix as reopening of course. Thank you.
Yeah.
Some of those are those programs. They are fluctuating a discount Tuesdays have come back really well I mean, it's improving as you you know you might anticipate.
I would say if anything it may still be not back to its full stride because of the audience demographic discussion that we had earlier you know that tends to favor some older audiences, which are the ones that had been more reluctant to come back. So again as that recovers, we expect discount Tuesdays will recover even further with regard to the.
Auditorium rentals, particularly our private watch parties those have come down quite a bit.
Simply because there is capacity inflection point, there where the.
The limits of the auditorium size you have there there's limits on the PW P size and now that we've had a much higher level of occupancy and audience is coming back we just need the seats for general admissions.
Our steelmaking PW piece available in our circuit.
Taking the price up a bit to balance out that dynamic of of attendance and still make them.
Competitive, but but yes, they have come down a bit from where they were during the course of the pandemic, but it's a great option to have in periods, particularly where there's a.
More limited content flow.
Because it just can fill in those gaps really well.
Great. Thank you for all the thoughts around much appreciate it.
Hi, guys. Thanks for the questions.
Your next question is from the line of Mike Hickey with benchmark company.
Hey, Sean <unk> congrats.
Congrats guys on them.
Really strong finish to the year.
Two questions from me I guess, just the first one.
If you guys were surprised that some of them.
Growth Youre seeing out of your subscription plan.
Movie Club.
And sort of how do you think that will progress.
This year, given the heavy slate of blockbusters, and I guess, maybe remind us.
The strategic value here in terms of.
Maybe share.
Concession games in a more competitive open market I have a follow up thanks guys.
Sure. Thanks, Mike we've been really pleased with the continued.
Growth of movie club.
We we knew that as we've gotten tremendous feedback about that program obviously prior to the pandemic.
I think our the response from our members over the course of the pandemic with regard to the way we handle the program and the communication we had with them was really positive and that helped us to retain a wide majority of those members throughout the pandemic, even when we were closed and had.
Much reduced content flow so as we've reactivated we've just been really proactive in our.
Our marketing reminding them of all the benefits and value that come from the program and that has helped to sustain that benefit our help to sustain our existing members and at the same time, we've been going back out in promoting movie club to new members, which is part of the reason why we started to see a return to growth in that program and as.
I said in prepared remarks, we've recovered almost back to the point of where we were prior to the pandemic and I would say one other data point most of the the members that we lost when we reactivated the program was really due to expired credit cards versus people proactively coming out and part of the gains coming back have just been get.
Those customers to reactivate with updated information, but we also are adding brand new members as well. So just the sustained benefits of sustained commentary here about the value of the program, it's very far reaching it doesn't while it's a great benefit value and benefit for.
Frequent moviegoers. It also works really well for families. If you have a family of four and you go to the movies only three or four times a year. It's a great program for those types of audiences as well, so it's quite fast and versatile.
Thanks, Sean.
Second question I guess is sort of.
Melissa this topic on inflation obviously.
We hear that and see the cost side. So curious flip side of that equation that on your <unk>.
Packed on that.
Consumer the movie door.
Asleep economy.
I think we'll slow here inflation is.
You know tightening and everyone's budget are you seeing.
Sort of any impact here I know the slides.
Q, so that you see.
Pat.
On your movie Goer.
In terms of a shift in pricing.
Maybe a pullback concession stand and then broadly speaking.
How is your theatrical medium worked.
When the economy has slowed thanks guys.
Mike I'll take that one I think one of the positive things we've seen over time.
And we're continuing to see it now is going to the movies tends to Buck the trends of recessions.
In fact, considering that going to the movies is one of the more affordable forms of entertainment.
In many cases, we see an uptick in those types of situations people may cut back on travel and cut back on more expensive forms of entertainment, but they're still looking to get out and do things and when you compare the cost of going to the movies to other forms of entertainment, we're still a great <unk>.
<unk>.
For that amount of time that people spend with us so.
As I said that that has been the they're the type of result over time and we're continuing to see that now I mean at least Theres certainly havent been any signs as of yet with regard to.
People are.
Hesitate and go to the movies I mean, if anything we just saw this past weekend as we indicated.
Both films this past weekend with unchartered adult exceeded expectations they over they outperformed projections. So that's.
That's a positive and as Melissa indicated earlier, when we think about pricing in this environment. It's just something that we're going to be careful with we think on some sense will be looking to try to cover some of the inflations, we experienced that our costs, but at the same time, we've got to be really careful about not leading to people thinking twice about coming to the movies because they feel.
Like it's getting too expensive. So it's just a it's a fine balance we have to to work is we're trying to get people more people coming back to our theaters more frequently in the midst of this inflationary environment.
Thanks, guys. Good luck alright, thanks, a lot Mike.
Your next question is from the line of Jim Goss with Barrington Research.
Okay. Thank you.
Yes.
I, let him had a particularly successful rebound it seem to me and I'm wondering how it compared with your expectations.
And I'm also wondering if if it's beginning to set the stage for the potential renewed growth thrust as you've historically outlined.
Yeah look thanks for the question Jim Lat Am response.
Was very positive I think it perhaps did exceed our expectations I think part of that like the USD I think part of that was just how strong certain films like spider-man performed in the quarter and that converted really well with Latin audiences.
So that coupled with the ongoing recovery from the pandemic has played out really well as far as just the overall strategy and long term potential of Latam, we're still very positive on the Latin American market.
<unk>, it's still a very strong movie goer in culture, it's a very social and family oriented activity, which plays well to that that community. Many of the markets across the region remain underpenetrated as far as theaters go so.
The fundamentals still the long term fundamentals still remain positive even considering some of the more near term challenges, we've experienced with the economic political and foreign exchange dynamics in those marketplaces. So.
We're positive about the long term potential in the region.
And Fortunately, we have really strong teams there with a fantastic local knowledge excellent market share in each country in each country, where we're cash self sufficient so we're in a great strategic position with regard to capitalizing on that long term potential.
Okay and.
With regard to property mix I'm wondering if there are any further closings you have in mind are you as you evaluate your platform.
Are there any trends we should be looking at in terms of maybe pursuing concentration of theatres in certain areas or anything else that the M&A.
Having a mate.
Benefit for them.
I think that's going to be just its going to be an evolving landscape you know I think.
It's going to it will depend ultimately on a range of things you know what kinds of new opportunities unfold. As we look ahead. Both in terms of just new new market opportunities and potential M&A. The ongoing performance of our existing theaters that'll factor into whether or not we retain or potentially.
Close any of those theaters ability to find solutions with landlords or find new concepts that could also help to recover performance. If there is a downturn.
So and just overall evolving market dynamics, so I think theres a range of considerations I would say, we're going to we've always been very active in keeping a pulse on.
Our existing theaters and evolving market opportunities and it's something we're going to be even more diligent with as we analyze and look for creative solutions of the body. The landscape continues to evolve.
Okay, and then one last little one.
Do you expect any further benefit from reduced or eliminated mask requirements or is that yesterday's news and you are at a stage where it doesn't matter so much anymore.
I would say, it's probably less impactful at this point.
People are more or less going about their business I, certainly think that as overall mask guidance.
And requirements and recommendations continue to wane that that will just be a positive on the whole in terms of people's comfort level with going out, especially those those audiences that have been more hesitant. So do you think there is a positive there, but we haven't seen.
Any of the even current mask policies or practices really being a deterrent in a meaningful way at this point.
Alright, well, thank you very much thanks, Jim.
Your next question is from the line of Meghan Durkin with credit Suisse.
Hi, Good morning, guys. Sean can you talk about where you are outperforming your peers, maybe some markets, where you're taking share and what you think is driving it and then Melissa quick followup I might've missed it earlier, but was there something unusual in the free cash flow in the quarter.
I'll start with your first question, Megan I think from a market share standpoint.
It's been fairly consistent across.
Across both the U S and Latin America, So I wouldn't say, there's any particular areas or particular markets, where it's tremendously different than others.
It really just a combination of the things that we've talked about the value of having been open one of the first circuits to open and stay open through the pandemic and just more consumers coming into contact with the type of experience that we provide in contrast to our peer.
So it's really that and then the sustained marketing efforts, we've had to keep them coming back.
And then Megan with respect to your question on free cash flow I would call. It two key factors in the quarter on free cash flow. So first our strong EBITDA generation in the quarter benefited free cash flow and then secondly, you saw the working capital dynamics of our model play out we had.
<unk> in our business throughout the quarter and particularly towards late in the quarter as spiderman their way home.
<unk> generated so much success.
We received that cash related to that admissions revenue in that period and didn't pay our film rentals until the first quarter. So it's really that that timing in working capital flows are playing out in the numbers.
Any way to sort of normalize for that.
It was about $90 million to $100 million.
Okay. Thanks.
The final question is from the line of Daniel Doran with Morgan Stanley .
Hi, Sean Jaime was asking a question for Ben here.
Could you please give us an update.
Her native cotton rare.
Revenue initiatives.
Amy or sports for example, thank you.
<unk>.
Absolutely. Thanks for the question Daniel.
Turning to content is is is certainly an area as we look to build audiences and find additional forms of entertainment that go beyond film to bringing guests into our theaters. So it's an area that we've been spending quite a bit of time on specific to the areas you mentioned.
Games and sports.
Both of those are I would say are still very much in R&D mode. We're testing a whole range of different types of content from both spectator is formed from the gaming spectator and participatory angles to try to determine which have the most potential going forward really a big factor.
Or is trying to discern what types of content can really grow in terms of scale things like the metropolitan Opera have been an example through fathom that have worked really well where there is a series of ongoing performances that work. So we're trying to hone in on what things can really lead to material impact and sustained impact overtime I would say.
Some of the events that we have.
We've done recently in terms of.
On the gaming realm, and the critical role campaign, three and with regard to ESPN. Some of the <unk> football playoffs and championships that we've recently done.
The response from consumers has been incredibly strong I mean, the feedback they just it's another validation. An example that audiences love to congregate and come together to experience. These types of events together, it's just a different level of emotion.
Excitement in terms of the type of experience that has so the feedback has been tremendous and it's something that we're just going to continue to evaluate and test and see what sticks.
Great. Thank you and congrats on the strong quarter.
Thanks, Dan I appreciate it.
I will turn it back over for closing remarks.
Okay, well. Thank you all again for joining us. This morning, we look forward to speaking with you all again in the second quarter.
Thank you. This concludes cinemark fourth quarter and full year 2021 earnings call. Thank you for your participation you may now disconnect.
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