Q1 2024 Cinemark Holdings Inc Earnings Call
Greetings and welcome to Cinemark Holdings, Inc. First quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded it.
It is now my pleasure to introduce your host MS. Chanda Brashears Senior Vice President Investor Relations. Thank you. Mr. <unk> you may begin.
Chanda E. Brashears: Good morning, everyone I would like to welcome you to Cinemark Holdings, Inc. First quarter 2024 earnings release Conference call hosted by Sean Gamble, President and Chief Executive Officer, and Melissa Thomas Chief Financial Officer.
Chanda E. Brashears: Before we begin I would like to remind everyone that statements or comments made on this conference call may be forward looking statements.
Chanda E. Brashears: We're looking statements may include but are not necessarily limited to financial projections or other statements of the company's plans objectives expectations or intentions. These matters involve certain risks and uncertainties.
Chanda E. Brashears: The company's actual results may materially differ from forward looking projections due to a variety of factors information concerning the factors that could cause results to differ materially is contained in the company's most recently filed 10-K also today's call may include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP finding.
Chanda E. Brashears: Measures can be found in the company's most recently filed earnings release 10-Q and on the company's website at IR Cinemark Dot com with that I would now like to turn the call over to Sean Gamble.
Sean Gamble: Thank you Chanda and good morning, everyone. We appreciate you joining us today to discuss our first quarter 2024 results.
Sean Gamble: Over the past three years, the theatrical exhibition industry has seen meaningful year over year increases in attendance and box office as film volume has been rebounding following the shutdown of movie making during the pandemic.
Sean Gamble: And as we indicated last quarter, while this year will likely experience a dip in that recovery trajectory due to over six months of Hollywood strikes last year that again disrupted film production 2024 kicked off to a better than expected start.
Sean Gamble: First quarter, North American industry box office declined only modestly versus 2023 on account of a wide range of films that delivered outsized results.
Sean Gamble: Examples include SIFI sensation due in part to the outgrowth. Its first installment by more than two and a half times with over $275 million of domestic box office.
Sean Gamble: It hit Kung Fu Panda, four which became the second biggest installment in its franchise history with over $180 million domestically and more than half a billion dollars worldwide.
Sean Gamble: Biopic, Bob Marley, one loved which captivated audiences and generated nearly $100 million in domestic box office.
Sean Gamble: Musical comedy mean girls, an action thriller the beekeeper, which each delivered close to $70 million domestically and Mega Adventure Godzilla X Kang the new Empire that open to a monstrous $80 million in North America at the end of the quarter and has since delivered over $500 million worldwide.
Sean Gamble: The first quarter also benefited from strong continued play through of December's whimsical family spectacle, Wonka, which has now exceeded $215 million domestically and nearly $415 million globally as well as anyone but you that proved audiences are still craving romantic comedies and theaters, having generated close to nine.
Sean Gamble: <unk> million dollars of domestic box office over its impressive run.
Sean Gamble: Furthermore, we continued to witness strength of non traditional content during the quarter such as the successful releases of Cabrini and the complete fourth season of faith based series the chosen.
Sean Gamble: The solid results of all these diversified titles. Once again provides strong further validation that consumer enthusiasm for experiencing compelling content and an elevated cinematic theatrical setting remains vibrant.
Speaker Change: We certainly experienced that enthusiasm within our cinemark theaters during the first quarter as we entertained nearly 40 million guests across our global circuit with results that once again outpaced the industry.
Speaker Change: Relative to 2019, our admissions recovery continued to size it really exceed that of our industry by 700 basis points domestically and 600 basis points internationally.
Speaker Change: To that end. We also continued to maintain the most significant market share gains compared to pre pandemic results of all major exhibitors.
Speaker Change: While Melissa will cover our financials in greater detail in a moment during the first quarter, we generated nearly $580 million of total revenue more than $70 million of adjusted EBITDA and a healthy 12% adjusted EBITDA margin.
Speaker Change: These results once again demonstrate our team's resilience and outstanding ability to skillfully navigate a dynamic operating environment pressured by strike induced headwinds.
Speaker Change: Yesterday, we also successfully retired another $150 million of our COVID-19 related debt given our sustained confidence in our team financial position and positive long term outlook for our company and industry.
Speaker Change: That positive outlook was further reinforced a few weeks ago during cinema Khan, our industry's annual trade show event as studios and filmmakers provided glimpses into their upcoming film lineups for the next year and a half.
Speaker Change: One key message that was emphasized again and again by studios during cinema Con as has been consistently conveyed to us during our one on one conversations is the significant enhanced value that a theatrical release provides their films and their companies.
Speaker Change: As we've highlighted on previous earnings calls.
Speaker Change: The clear consensus is that theatrical release delivers unparalleled levels of promotional impact and quality perception, which strengthens consumer interest to see films bolsters long term recall value and leads to elevated lifetime financial results throughout all distribution channels.
Speaker Change: It's also very important for consumers, who want to experience. These films on the big screen as well as for attracting top tier talent.
Speaker Change: In light of this context as well as what has been further communicated by the studios with regard to their future film development plans. We continue to remain bullish about the resurgence of film volume over the coming years.
Speaker Change: Production is now fully up and running again following last year's strikes new significant entrants like Amazon and Apple are meaningfully scaling into theatrical exhibition and non traditional content like concerts faith based films multicultural titles and anime is also growing.
Speaker Change: Yeah.
Speaker Change: Along these lines the major studios took the opportunity during cinema con to showcase and increased numbers of titles relative to prior years and what they shared but the quantity of films as well as the quality of materials presented created a buzz of optimism that permeated the convention all week.
Speaker Change: A diverse range of highly anticipated films slated for the rest of this year appear primed to fully deliver including a resurgence of family films like if the Garfield movie inside out to Despicable me for Moana, too and we foster the Lion King.
Speaker Change: <unk> adventure saga as such as Kingdom of the planet of the Apes Fury Osaka Bad Boys rider die twisters than in the last dance and Gladiator to commit.
Speaker Change: Comedic thrill rides like the fall Guy Deadpool, and Wolverine Borderlands, Betelgeuse, BEETLEJUICE Red one and Sonic the Hedgehog three <unk>.
Speaker Change: Suspense dealers such as a quiet place day, one alien Romulus Joker to speak no evil and smile too and the fantastical world of Wicked part one.
Speaker Change: And next year's lineup is already coming together in a big way with a wide array of spectacle films that includes wicked part to another Jurassic World Superman legacy the next installment of mission impossible.
Speaker Change: <unk> of the fantastic four ballerina from the John Wick Universe, a live action version of how to train your Dragon Captain America, a brave new world Snow White Zootopia to Minecraft Megan to try on areas and of course avatar three whose prior installments represent the <unk>.
Speaker Change: Number one and number three biggest global films of all time.
Speaker Change: So again based on strong sustained consumer interest in movie going numerous indicators that point to a continued resurgence of film volume and the highly encouraging slate of upcoming titles on the horizon, we maintain a positive future outlook for the actual exhibition and our company and.
Speaker Change: We believe that cinemark in particular is uniquely positioned to prosper as we move forward on account of several key differentiators.
Speaker Change: To start our consistent investment in maintaining and enhancing our theaters over time, which we've performed at sustained levels that significantly exceed our peers has positioned our company with the largest collection of high quality assets in our markets.
Speaker Change: In addition to a more favorable overall condition of our theaters, we have the highest penetration of luxury seat of the major operators with almost 70% of our domestic circuit reclined, we have the best sight and sound technology and overall film presentation in the business, including 90, 997% screen uptime, we have.
Speaker Change: The number one private label premium large format in the world with our XD auditoriums as well as the largest footprint of D box motion seats, and we now offer enhanced food and beverage menus and more than 80% of our U S theaters.
Speaker Change: We also have a distinctive global footprint across the U S and central and South America with a concentration in both suburban and Latin markets that have strong moviegoing cultures, which tend to over index in theater visitation frequency.
Speaker Change: With one of the highest market shares in North America, as well as the highest share across our Latin American region. Our global footprint also provides valuable scale.
Speaker Change: Furthermore, it provides attractive diversification across 42 states and 14 countries beneficial best practice sharing and access to varied pockets of growth in Underpenetrated markets.
Speaker Change: Beyond the quality of our assets and our favorable geographic profile. We also have a solid financial position with a healthy balance sheet industry, leading adjusted EBITDA margins and cash flow generation and results that consistently outperform our industry.
Speaker Change: Our disciplined and balanced approach towards capital allocation over the years has positioned our company with an outsized advantage to both effectively navigate periods of reduced film volume as well as actively capitalized on market opportunities as they materialize.
Speaker Change: Our solid financial position is further supported by our advanced operating capabilities.
Speaker Change: These capabilities are the byproduct deep experience domain expertise and skill of our sensational global team as well as years of deploying strategic initiatives.
Speaker Change: <unk> include our heightened levels of customer service that consistently earn high satisfaction ratings from nearly 95% of our guests and our domestic surveys.
Speaker Change: Sophisticated social and digital marketing platforms and tools that deliver billions of media impressions annually driving increased film awareness and demand to visit cinemark.
Speaker Change: And planning and execution rigor that has a consistent track record of optimizing showtime's in staffing fine tuning operating hours theater by theater based on fluctuating weekly demand and driving efficiencies to help offset varied inflationary and supply chain oriented headwinds.
Speaker Change: Our debt to operating abilities and consumer minded actions have also helped us to develop a loyal and extensive consumer base.
Speaker Change: We have over 21 million members in our global loyalty programs in the U S and in the U S alone movie club, our paid subscription tier now accounts for 25% of our domestic box office.
Speaker Change: These members are frequent and dedicated cinemark movie goers as well as our most satisfied guests.
Speaker Change: Moreover, our marketing reach extends to a total addressable customer base of nearly 30 million consumers and continues to grow.
Speaker Change: Finally, we are also well positioned to drive incremental value creation on account of the numerous levers we have that go above and beyond our industries continued recovery and our singular competitive advantages.
Speaker Change: From continuing to extend premium amenities more broadly across our circuit to enhancing our food beverage and merchandise offerings as well as distribution methods, even further to taking our pricing sophistication to the next level, while executing a wide range of additional productivity initiatives to further optimizing our circuit, including adding attractive new app.
Speaker Change: While addressing lower performing properties.
Speaker Change: The opportunities before us to drive incremental growth and prosperity that are fully within our control are plentiful.
Speaker Change: Those opportunities combined with the positive direction, our industry is headed as well as our advantage market position underpin our optimism about the future of cinemark and our ability to create meaningful long term value for our shareholders.
Speaker Change: I'll now turn the call over to Melissa for a deeper look at our first quarter financials Melissa.
Melissa Thomas: Thank you Sean good morning, everyone and thank you for joining the call today.
Melissa Thomas: We were pleased that the first quarter box office surpassed our expectation.
Melissa Thomas: Our team once again demonstrated our agility in a fluid environment and achieved healthy operating and financial outcomes by capitalizing on the box office and diligently executing our strategic initiatives.
Melissa Thomas: Globally, we welcomed 40 million guests to our theaters and generated $579 $2 million of worldwide revenue in the first quarter.
Melissa Thomas: We delivered $77 million of adjusted EBITDA.
Melissa Thomas: Yielding a solid adjusted EBITDA margin of 12, 2%. Despite the pressure on operating leverage given the attendance decline due to the impact of the Hollywood strikes.
Melissa Thomas: Domestically, we entertained $23 6 million moviegoers in the first quarter and maintained strong market share.
Melissa Thomas: We generated $231 $8 million in admissions revenue and we grew our average ticket price, 1% year over year to $9 82.
Melissa Thomas: The growth in average ticket price was driven by our strategic pricing initiatives, partially offset by.
Melissa Thomas: Ticket type mix with more family content in the first quarter of this year as well as format mix due to the lapping of strong <unk> penetration on avatar from the prior year period.
Melissa Thomas: We generated $178 $6 million of domestic concession revenue.
Melissa Thomas: And our U S concession per cap achieved a first quarter record of $7 57.
Melissa Thomas: Our concession per cap grew 2% in the quarter fueled primarily by strategic and inflationary pricing measures and a shift in product mix towards higher price concession items.
Melissa Thomas: Really upset by lower incidence rates due to some content.
Melissa Thomas: Other revenue was $46 6 million down 2% year over year, primarily due to the decline in attendance.
Melissa Thomas: Collectively our domestic segment generated $457 million of total revenue and $49 1 million of adjusted EBITDA.
Melissa Thomas: Yielding an adjusted EBITDA margin of 10, 7%, reflecting the relatively fixed nature of our cost base.
Melissa Thomas: Shifting to our international segment, we hosted $16 1 million guests during the quarter a decline of 9% versus the first quarter of 2023 as the film slate did not resonate as well in the Latin American region year over year.
Melissa Thomas: So we did benefit from an increase in local content in Brazil.
Melissa Thomas: Similar to the U S. We maintained strong market share across the region.
Melissa Thomas: As reported our Latin American operations delivered $58 million of admissions revenue $45 $6 million of concessions revenue and $18 6 million of other revenue.
Melissa Thomas: Altogether, we generated $122 2 million of total international revenue and $21 6 million and adjusted EBITDA, yielding a 17, 7% adjusted EBITDA margin.
Melissa Thomas: Foreign currency devaluation, particularly with respect to the Argentinian peso resulted in a year over year headwind to international adjusted EBITDA in the quarter that was largely offset by inflationary dynamics.
Melissa Thomas: Our seasoned knowledgeable local teams continue to skillfully maneuver through the fluid economic and political environment in the region.
Melissa Thomas: Turning to our global expenses film rental and advertising expense was 53, 2% of admissions revenue down 40 basis points year over year due to a lower concentration of box office and the mix of films during the quarter.
Melissa Thomas: Partially offset by higher marketing spend.
Melissa Thomas: As I mentioned at our earnings call last year industry box office in the first quarter of 2023 meaningfully exceeded our expectations, resulting in marketing expense as a percentage of admissions revenue that was somewhat lower than we had planned creating a tougher comparison.
Melissa Thomas: Concession costs as a percent of concession revenue were 19, 6% up 110 basis points compared with the first quarter of 2023.
Melissa Thomas: Driven by ongoing inflationary pressures on certain core concession items as well as a shift in product mix towards lower margin products, such as movie themed merchandise strip.
Melissa Thomas: Strategic pricing measures, partially offset these impacts.
Melissa Thomas: Global salaries and wages were $86 9 million relatively in line with the first quarter of 2023.
Melissa Thomas: As a percentage of total revenue salaries and wages increased 90 basis points, primarily due to reduced operating leverage associated with the decline in attendance.
Melissa Thomas: Wage rate pressure and expanded operating hours.
Melissa Thomas: Benefits from our ongoing focus on labor management travel partial offset.
Melissa Thomas: Facility lease expense was $77 3 million, a modest decline of 3% year over year, primarily due to feed our closures.
Melissa Thomas: As a percent of total revenue facility lease expense increased 30 basis points.
Melissa Thomas: Utilities and other expense was $104 million down 3% from the first quarter of 2023.
Melissa Thomas: Primarily driven by variable costs that decline with attendance and foreign currency impacts, partially offset by inflationary pressures.
Melissa Thomas: As a percent of total revenue utilities and other increased 30 basis points.
Melissa Thomas: G&A was $48 $9 million in the first quarter, an increase of 5% year over year, primarily due to wage and benefit inflation onetime severance costs and higher share based compensation.
Melissa Thomas: Partially offset by lower professional fees and the impact of foreign currency fluctuations.
Melissa Thomas: We continue to exercise prudence in our discretionary spending and staffing decisions maintaining head count below 2019 levels.
Melissa Thomas: As a percent of total revenue G&A increased 80 basis points.
Melissa Thomas: Globally, we generated net income attributable to Cinemark Holdings, Inc of $24 8 million in the first quarter, resulting in earnings per share of <unk> 19.
Melissa Thomas: Net income for the quarter included a $27 $7 million tax benefit primarily due to the release of valuation allowances in certain foreign jurisdictions.
Melissa Thomas: Turning to the balance sheet, we ended the quarter with a strong cash position with $789 million of cash on hand.
Melissa Thomas: As expected our free cash flow was negative $46 million for the quarter, given the softer box office environment, the timing of our semiannual interest payments.
Melissa Thomas: He is in a working capital headwind and.
Melissa Thomas: And our ongoing investment in our circuit.
Melissa Thomas: In the near term, we remain focused on further strengthening our balance sheet, while deploying capital towards strategic investments that position the company well over the long term.
Melissa Thomas: To that end yesterday, we used cash on hand to redeem the remaining $150 million of our 875% senior secured notes at par, reflecting our confidence in our company's any industry's recovery.
Melissa Thomas: Furthermore, we invested $23 million and capital expenditures to further enhance our global circuit.
Melissa Thomas: Looking ahead, we continue to anticipate deploying $150 million this year towards capital expenditures aligning with our commitment to prudent financial management.
Melissa Thomas: At the end of the quarter, our net leverage ratio stood at two eight times for the trailing 12 months.
Melissa Thomas: Which is at the high end of our target range of two to three times.
Melissa Thomas: While our objective is to sustain this leverage ratio within our target range. We may face some pressure this year due to the Hollywood strike impact.
Melissa Thomas: I would like to reiterate that at this juncture our capital allocation decisions are prioritizing a dual focus.
Melissa Thomas: Re fortifying our balance sheet and strategically positioning ourselves for long term success.
Melissa Thomas: In closing as we face complexities associated with the Hollywood strikes our commitment to sound operating and financial practices remains steadfast at the same time as Sean highlighted we are laser focused on maintaining our distinctive market position and further advancing our company, which gives us optimism regarding our future.
Melissa Thomas: And the value we can provide to our shareholders.
Speaker Change: Operator that concludes our prepared remarks, and we would now like to open up the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your questions from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one woman please poll for questions.
Speaker Change: The first question comes from the line of Eric Handler with <unk>.
Eric Owen Handler: <unk>. Please go ahead.
Eric Owen Handler: Good morning, and thanks for the question.
Eric Owen Handler: Sean we've seen a number of companies. This earnings season talk about the consumer being more collect.
Eric Owen Handler: Conservative with there are selective with their spending decisions I'm curious are you seeing anything notable.
Eric Owen Handler: In terms of.
Eric Owen Handler: Housing purchase tickets or food and beverage decisions that maybe suggest there's some.
Eric Owen Handler: Selective that's going on here too.
Sean Gamble: Good morning, Erik Thanks for the question.
Speaker Change: Good question.
Speaker Change: Interestingly to date very consistent with his history, we have not seen a significant impact from the macro economy on our business.
Speaker Change: Consumers when the movies are in our theaters, we've continued to see consumers coming out I mean, I think we mentioned that in the prepared remarks, just in terms of the number of films that have delivered above expectations and that plays through too.
Speaker Change: Choices to upgrade to premium formats. It plays through to concession purchases as we mentioned we had another record first quarter per cap this quarter.
Speaker Change: So we haven't seen that bleed through it's similar to as I mentioned recessionary.
Speaker Change: Environments of the past, where our industry has grown in six of the past eight major recessions in North America.
Speaker Change: Going to the movies remains an affordable form of entertainment, while consumers may scale back and other things that they they may otherwise go to.
Speaker Change: It's a localized affordable means of entertaining themselves and they still tend to select.
Speaker Change: To indulge when they come to theaters and we just we continue to see that in this current environment.
Speaker Change: Great and then just as a follow up.
Speaker Change: Yeah.
Speaker Change: From what I see in your press release, there really isn't much of a backlog at this point with Newbuild theaters are you seeing anything change in the market that maybe.
Speaker Change: Could allow you to expand it.
Speaker Change: Beyond what you are currently planning.
Speaker Change: Sure well I think there's probably two fold.
Speaker Change: One I think much like the whole of the industry. During the course of the pandemic our development process was more or less put on hold we have reactivated that development pipeline process. So we're out there kind of scouting look to get sites. So there is a bit of a delay on account of that and then beyond that.
Speaker Change: As we've talked about we're still in that mode of just refer to funding our balance sheet and being tempered in the amount of Capex. We are deploying as our cash flow continues to recover. So I think those two things are are a bit of regulators over just the speed of newbuild activity, but there are still plenty of markets, where we see opportunities and I think some of that.
Speaker Change: We'll start.
Speaker Change: To ramp to a certain degree over the coming years I was just going to take a little bit of time.
Speaker Change: Thank you thanks.
Speaker Change: Thanks, Eric.
Speaker Change: Yeah.
Speaker Change: Thank you next question comes from the line of David <unk> with Jpmorgan. Please go ahead.
David: Alright. Thank you Sean wanted to see if you could expand a bit more on your conversations and cinema Khan. What are you hearing from legacy studios in terms of output is there anything incremental to share regarding some of the streamers and then with Amazon we've seen them achieve some success recently with exclusive streaming films does that create any concern from your end about their output.
David: Ramping over time and for.
Speaker Change: Melissa your staffing costs were nearly flat year over year wanted to see if you could just speak a bit more to the initiatives youre deploying to control expenses, there and how should we think about the rest of the year kind of just given natural labor inflation and likely improvement in film supply by Q4.
Speaker Change: Alright, well thanks for the questions.
Speaker Change: Starting with <unk>.
Speaker Change: I'd say.
Speaker Change: The overall.
Speaker Change: The overall feeling coming out of Semicon was definitely a very positive one.
Speaker Change: I think.
Speaker Change: So it's interesting to get some exposure to the materials that are up and coming and by and large I think everyone is really positive about what they saw things look extremely promising as I mentioned to just the number of titles that were showcased where also to greater degree how that all plays through.
Speaker Change: Future volume.
Speaker Change: Both what we heard during semicon and also what we continue to here as we speak directly with our studio partners is one of our focus on continuing to replenish.
Speaker Change: There their production they're building their slates back in many respects towards where they were pre.
Speaker Change: Pre pandemic in certain cases are looking to go beyond that but it's just going to take some time, obviously they were in the process of ramping that back.
Speaker Change: Post pandemic and then the strikes just put a little hiccup in that so that's just prolong things a bit further but on the whole we remain very optimistic that in the coming years, we could see volume return back to close to if not exceed pre pandemic levels.
Speaker Change: Specific to your question on Amazon.
Speaker Change: I mean look we had very direct conversations I think they're really bullish about theatrical opportunities.
Speaker Change: They're continuing to build towards that.
Speaker Change: <unk> got a number of films already slated this year I think they are looking at 25 is kind of their first big major film slate in theatrical that doesn't mean that they're going to going to walk away from.
Speaker Change: Direct to platform films I mean, we've seen that forever in this industry, where studios will make.
Speaker Change: HBO would make direct for HBO movies in the past and there'd be direct to video films. So we certainly expect there will continue to be direct to streaming films. It's those movies that have a certain degree of higher scale and potential that are the ones that we will see coming to theaters and we know that that Amazon at least what they're sharing with us.
Speaker Change: He is very committed to continuing to build into the space.
Speaker Change: And then David on the Labor front. So we do continue to scale, our labor hours up and down based on projected attendance levels that we're seeing and we are working on a range of initiatives to drive further labor productivity. So a couple of examples.
Speaker Change: For that would be continuing to right size, our staffing at the wing, so opening and closing them being even more nimble between flow and peak periods with a focus on our most profitable service hours optimizing operating hours and scheduling for expanded food and beverage offerings and those are just some of the ways that we're looking.
Speaker Change: To drive efficiencies with respect to salaries and wages.
Speaker Change: More broadly it is reasonable to assume going forward that we will continue to flex our labor hours based on anticipated attendance levels, albeit at a rate that is less than the change in attendance.
Speaker Change: I will say on the wage rate side, we do continue to face some pressure there now Fortunately what we're seeing now is more in line with pre pandemic increases.
Speaker Change: And then as I mentioned, we do expect to continue to see some productivity benefits as we lean in there.
Speaker Change: The one call it I would make though in 2024 in particular, especially in the first half of the year, we do expect to be more impacted by minimum staffing levels, just given the reduction and content volume is more concentrated and in that period. This year.
Speaker Change: But overarching Lee we're leaning in to data assessing our profitability on a per theater a per hour basis to determine operating hours in our corresponding staffing requirements and we will continue to balance our revenue generating opportunities with cost mitigating initiatives.
Speaker Change: Thank you thanks, David.
Speaker Change: Thank you next question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.
Benjamin Daniel Swinburne: Good morning.
Benjamin Daniel Swinburne: Two questions.
Benjamin Daniel Swinburne: Really around some debates I think on your business and the stock.
Benjamin Daniel Swinburne: Your market share gains.
Benjamin Daniel Swinburne: Gains have persisted now for awhile.
Benjamin Daniel Swinburne: Out of the pandemic, which as you know and I guess one question.
Benjamin Daniel Swinburne: I'd be curious to hear about is just the role that your loyalty programs. You think play in driving share I mean, I thought the slide in the deck that you have is interesting.
Benjamin Daniel Swinburne: Got a million plus people in movie club, a $20 million plus in our rewards program.
Benjamin Daniel Swinburne: I guess the question is do these have a measurable tangible benefit to your share and returns that you could share with us.
Benjamin Daniel Swinburne: And then secondly is around kind of capital allocation I know its leverage ticked up as expected I'm just wondering Sean if you could talk about how you guys look at M&A.
Speaker Change: How do you think about it.
Speaker Change: Valuing assets out there relative to your own stock how do you think about deploying capital and M&A relative to resuming the dividend I think it'd be helpful to hear your your approach to those trade offs as you guys move through this year. Thank you.
Speaker Change: Excellent well. Thanks. Thanks for the question has been to start with market share.
Speaker Change: We certainly believe that our loyalty programs play a part in supporting our market share it's difficult to fully slice that up in terms of how much of that is is attributable just to the loyalty programs versus to some of our Showtime.
Speaker Change: Planning efforts as well as just the marketing actions, we do in general to try to stimulate demand and coming to cinemark, but theres a whole series of things and just the overall service and experience that we try to provide in terms of our elevated levels of of maintenance and.
Speaker Change: Just the overall.
Speaker Change: Experience, we create so it's tough to say that but.
Speaker Change: Given that movie club now consistently represents about 25% of our box office and those movie goers tend to be our most satisfied moviegoers.
Speaker Change: And they wind up.
Speaker Change: Having a strong affinity to coming to our theaters and so it certainly is a component we believe of what we're seeing in the uptick in our share.
Speaker Change: We continue to look at ways that we can continue to pack value and that in and utilize the data in that communication channel we have to create value for for those guests because we see them over indexing in their degree of frequency and their level of coming to cinemark and again their overall satisfaction with regard to the experience they are having.
Speaker Change: Specific to <unk>.
Speaker Change: M&A.
Speaker Change: M&A is certainly one of the prongs of potential growth, we think about as we consider optimizing our footprint and growing overall, we do we.
Speaker Change: We do continue to target high quality assets that we believe can deliver solid short returns over time.
Speaker Change: We evaluate everything through that lens, we're not we're not just looking to grow for growth's sake.
Speaker Change: We believe we've had a lot of success in being disciplined and balanced with regard to deploying capital and targeting those kinds of investments that really do have a high probability of.
Speaker Change: A success. So we again, we've done well in that regard I would say in this marketplace right now.
Speaker Change: What we're seeing is there is still is a little bit of distortion out there and it's a little bit complicated just due to a range of things clearly where the debt markets are right now interest rates and cost of borrowing.
Speaker Change: Expectations of sellers still are often certain cases in terms of expectations of what their margins really are what multiples should be there's also that added layer of any particular type of company. We might look at what is the level of incremental investment that may need to go back into.
Speaker Change: That business to get those assets in the right shape, depending on what levels of deferred maintenance. There may have been over the past several years. So that also just plays into the calculus of all that so it's something that we certainly look at all opportunities in the marketplace.
Speaker Change: We're optimistic that.
Speaker Change: Some of those opportunities could shake out over the next year or so based on the environment. We're in but we're going to continue to be very disciplined and balanced in our approach towards that.
Speaker Change: And in terms of our near term capital allocation priorities I mentioned Duffy we stated.
Speaker Change: On the call that those do remain centered around strengthening balance sheet, and making those right investments to position us well for the long term and ultimately our decisions as Sean mentioned, our return driven by returns.
Speaker Change: In terms of the dividend we do believe our approach is prudent right now maintaining conservatism around our cash given the box office headwinds this year, coupled with the backend weighting of the box office, which we do believe may pressure, our net leverage ratio in the near term.
Speaker Change: All that said, though dividends significant aspect of our capital allocation strategy prior to the pandemic and will remain a key consideration for us going forward.
Speaker Change: Great. Thank you both.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Next question comes from the line of Robert Fishman with <unk>.
Nathan: Nathan Please go ahead.
Robert S. Fishman: Hi, Good morning, one person and then one for Melissa Shawn maybe.
Robert S. Fishman: Maybe taking a different angle on the cinema Khan takeaways I'm wondering how you would characterize the <unk> relationship with your studio partners more as it relates to the recent or maybe even upcoming renewals around windowing strategies and do you see an opportunity to improve film rental split going forward.
Speaker Change: Maybe let's start there and I'll come back with my other one.
Speaker Change: Sure well look I'd say.
Speaker Change: Hey, overarching Lee our relationships are very positive with our studio partners specific to windows, There's clearly been quite a bit of evolution in the window throughout the pandemic and following up on that and I think.
Speaker Change: With a lot of experimentation there was clearly quite a bit of learning that an exclusive window definitely is something that creates more value for these film assets, particularly for the studios, it's the best way to to fully gain that revenue opportunity in the theatrical space It helps to Cree.
Speaker Change: <unk> that bigger cultural moment, it helps to create more lift in downstream impact on all those subsequent channels. So that has clearly been been tested and learned again and it is something we're seeing now and by and large in the practice of Windows.
Speaker Change: I would say that one of the changes, which we actually view as a net positive while the window reduced a bit coming out of the pandemic and has become more dynamic what that has led to in our view is something that improves the risk equation for the studios. So in success in movie can run long and they can.
Speaker Change: Extract more value out of the window, whereas if a movie they go for it in the movie just doesn't work they've got an opportunity to get into the home quicker and manage their downside, which net net is a good thing, especially as we're looking for more volume to come back through so it's one of the things we look to as a positive that plays into that resurgence of.
Speaker Change: Volume and the reality is when movies aren't working generally we're moving onto the other films that are working stronger to begin with so it works collectively both both ways and we think that we can lead to the sea is taking more risks on films like the mid tier films and the romantic comedies and the raunchy kind of some of the stuff that we have.
Speaker Change: Haven't seen as much of as of late because that was a tougher financial decision prior to the pandemic.
Speaker Change: So we're very positive and I would say over the course of discussions.
Speaker Change: There has been economic consideration that has been <unk> been factored into the equation with regard to some of the evolution of windows.
Speaker Change: I think more on the go forward, it's just back to kind of that typical back and forth from any.
Speaker Change: Ben supplier customer relationship in terms of of the splits I wouldn't say, there's any heightened degree of pressure or or ease relative to the norm, it's debt that traditional relationship where sometimes.
Speaker Change: One party has a little bit stronger in other programs, others, and things just kind of ebb and flow and in the aggregate.
Speaker Change: The overall film rental rates tend to stay relatively stable.
Speaker Change: Okay, great. Thank you Shawn.
Speaker Change: Alyssa, if I can do a little bit more detail.
Alyssa: Follow up on Capex spend.
Alyssa: Spending levels have hovered around 100 $150 million range, you mentioned guidance again.
Alyssa: So this year coming out of the pandemic, but back in 19, you were at an elevated $300 million level and I understand that that included the core maintenance spend in that $80 million range.
Alyssa: But there is more significant spending levels around the newbuild that you already touched on and these cash flow generating projects.
Alyssa: Just maybe a long way of asking should.
Alyssa: Should we expect to see more investment and cash flow generating projects or anything else in the pipeline to call out to get back to more of an elevated level in 'twenty five and beyond even if it remains below 19 levels.
Speaker Change: So thanks for the question Robert So we do believe our history of proactively maintaining and investing in our theaters as a key differentiator for the company as you think about Capex beyond 2024, I would expect us to maintain again, our balanced and disciplined approach to our capital.
Speaker Change: Richard but to ramp our capex levels up at the box office rebound well our peak Capex Pac Capex seniors are behind us from where I sit today, what I would say is we.
Speaker Change: Expects to grow to around capex to grow to around $200 million to $250 million annualized.
Speaker Change: On a normalized basis, so that'll be contingent upon obviously, the ROI generating opportunities that are available to us, but that 200 to 250 annually is where we think capex should shake out relative to that kind of 300 plus range that you saw it peak.
Speaker Change: At our peak years in the pandemic and remember that included that heavy push for a recliner penetration that's behind US largely at this stage, we would still expect around $80 million to $100 million.
Speaker Change: Ben to be earmarked towards maintenance capex to maintain a high quality circuit, the remainder dedicated towards Newbuild and other theater enhancements, including laser projector conversion.
Speaker Change: Okay. Thank you both thanks Robert.
Speaker Change: Yes.
Speaker Change: Thank you next question comes from the line of Omar <unk> with Wells Fargo. Please go ahead.
Speaker Change: Okay.
Omar: Good morning, guys. Thank.
Omar: Thank you for taking my question. So maybe on the market share performance. It was very impressive during the quarter, especially as the Slayer was in particularly favorable for your demographics.
Omar: The extent you can can you parse out the impact from June to NGL outperformance versus continued organic share gains.
Omar: And maybe second for me you recently extended your summer movie Club clubhouse program in response to strong consumer demand can you talk about the benefits of programs like this and any other opportunities. You think you have to maximize capacity utilization across your circuit during off peak periods.
Speaker Change: Sure. Thanks for the questions Omar specific to share obviously, we were very pleased with our results in the first quarter and actually there were there are several we benefited in particular from a handful of outperforming titles. So films like Kung Fu Panda, four Godzilla X com.
Speaker Change: A new Empire and Bob Marley, one love those films.
Speaker Change: Those are those skewed very much in our favor during the course of the quarter and I think where some of the drivers of our share they more than offset I would say some of the headwinds due to was by the way was our biggest film of the quarter, but given it's a heavy SIFI film, which often doesn't it doesn't skew as much in our circuit our share was a bit lower on.
Speaker Change: And that specific title, but collectively all of these other films definitely help to drive that I'd say another another benefit in that.
Speaker Change: It was a overall reduced box office environment due to the strikes we also werent coming up against capacity issues, sometimes in those higher box office periods, you can only sell as many seats as you have so that can also sometimes lead to a dampening of share, but we didn't.
Speaker Change: Have any of those issues over the course of the quarter, which allowed us to just to to really fully maximize.
Speaker Change: The upside potential on all of these titles.
Programs: Programs. It's interesting you mentioned that the summer movie clubhouse, and we think it's a great program really the goal of that program is to try to get younger families in younger audiences into a habit of moviegoing by giving them a very accessible.
Programs: Price point on some legacy films. It really is a program that runs for a number of weeks. It one day a week in the mornings thats an early morning.
Programs: A opportunity so it can help with with.
Speaker Change:
Speaker Change: To a certain degree of filling out that kind of maybe slower period on an early Wednesday morning, but I'd say that program. In particular is really more designed towards trying to stimulate moviegoers of the future.
Speaker Change: Versus fill in other periods of lower capacity, we do run a number of other types of programs of bringing back respiratory content fan favorites and things of that sort that we look to kind of sprinkle in to lower periods of volume and certain days of the week as a way to try to get a lift in.
Speaker Change: During the course of the week days in particular in slower periods of business. So there are there are efforts like that that we do.
Speaker Change: <unk> tried to do that.
Speaker Change: Great. Thank you. Thanks, a lot I appreciate it.
Speaker Change: Thank you next question comes from the line of Chad Beynon with Macquarie.
Chad Beynon: Macquarie. Please go ahead.
Speaker Change: Hey, Good morning. This is Aaron on for Chad Thanks for taking our question.
Aaron: One more for you Ren cinema Con was there anything you saw from a tech standpoint that you believe could enhance or change the experience for your movie goers or.
Aaron: Help you from a productivity standpoint.
Aaron: Think about that Theres, all kinds of evolutions that are constantly happening.
Aaron: In.
Aaron: In terms of new.
Aaron: Introductions of technology, both from a productivity standpoint, as well as from presentation standpoint, obviously, barco recently announced their new HDR kind of light steering projection capability is something that we.
Aaron: We've been talking to them about and working with them on for actually a number of years.
Aaron: So that's kind of out there and that's something that has the potential it is a new even heightened level of laser projection I mean laser projection in and of itself takes the quality of light on screen.
Aaron: To a new level it actually has a productivity elements baked into it as well because it doesn't consume as much energy you don't have to change the bulbs as much you don't have to maintain them as frequently so those types of pieces of equipment lend themselves to productivity and then the light steering component of that also is something that could be.
Aaron: Taking that to another level. So there are things like that that work, but yes. There is a range of things I mean, even in food and beverage new types of equipment things like that that could lead to productivity I mean, not necessarily specific to cinema con, but obviously you see it in different places in the market with unattended retail and things of that sort.
Aaron: Which could lead to some overall labor productivity, depending on as well as just revenue growth and pockets of theaters, where you may be able to insert some of those things and drive incremental sales. So yeah, I would say that that's something that our teams are constantly evaluating.
Aaron: And it goes well beyond Cinemark, just looking at what's coming to market in various pockets of our business from presentation from labor management from food and beverage equipment and things of that sort just to drive incremental productivity benefits and overall experiential opportunities.
Speaker Change: That's great and then just regarding concession per cap. So you just had a domestic record in the U S for the first quarter.
Speaker Change: Are you seeing more engagement in terms of incidence of purchase bigger basket size or price increases how would you break that down.
Speaker Change: I'll take that one Aaron so on the domestic per cap side, our per cap was up 2% year over year and that was driven by strategic pricing actions to offset some of the inflationary cost pressures that we've been seeing as well as a shift in product mix.
Aaron: It's higher price items merchandise being one example of that that was partially offset by lower incidence rates due to the content mix in the quarter and.
Speaker Change: So that's really the breakdown of the drivers there as you think though about our per cap on a go forward basis. We do continue to believe that we can moderately grow our concession per cap for full year 2024 domestically, we continue to lean into <unk>.
Aaron: Areas initiatives to maximize.
Aaron: Our incidence rates, so mobile order ordering adoption of self service capabilities modifying that flow as concession traffic as well as leaning into enhanced food offerings merchandise sales and scaling third party delivery. We also continue to look.
Aaron: To find optimal pricing that will maximize our per caps, while maintaining high incidence rates.
Speaker Change: But.
Speaker Change: As you saw in the first quarter our per cap will fluctuate.
Speaker Change: <unk> quarter to quarter with film mix.
Speaker Change: That's great. Thank you very much and congrats on the quarter. Thanks, Darren appreciated.
Speaker Change: Thank you next question comes from the line of Mike Hickey with benchmark. Please go ahead.
Michael Joseph Hickey: Thanks, Sean Melissa Shannon and good morning, guys great job.
Michael Joseph Hickey: On the quarter.
Michael Joseph Hickey: Two questions from us.
Michael Joseph Hickey: Obviously, you don't forecast.
Michael Joseph Hickey: The box office, Sean for obvious reasons, but given what you know I guess about.
Michael Joseph Hickey: Q2, and the rest of the year and maybe just in terms of wide releases do you feel like obviously Q1 outperform do you feel like you can sort of build.
Michael Joseph Hickey: On the strength of Q1 sequentially through the remainder of the year or any sort of I.
Michael Joseph Hickey: I guess inside on phasing on the box office. It seems like Q2 would be higher than Q1, Q2, Q2 Q4 higher than Q3.
Michael Joseph Hickey: But curious what you think there and then any updates I guess on wide release product and 25, how that would compare.
Michael Joseph Hickey: 24.
Michael Joseph Hickey: And pre pandemic.
Speaker Change: And then Melissa.
Speaker Change: I'm not sure if you touched on this or not but your concession.
Speaker Change: Margin domestically was sort of sub 81% I think you've heard about.
Speaker Change: About three quarters.
Speaker Change: Sequential.
Speaker Change: Pressure here, just curious what's driving that.
Speaker Change: This is sort of a low point in the quarter and you can sort of build back margin through the remainder of the year.
Speaker Change: Medium term thanks, guys.
Speaker Change: Sure. Thanks for the questions Mike.
Speaker Change: Specific I guess, starting with this year.
Speaker Change: We saw a little bit of lift in the first quarter.
Speaker Change: Theres been some titles shifts like we know just like credit Kid just moved out a year. So when we look at the totality of of 2024.
Speaker Change: Still at least from our vantage point, we still think it probably looks pretty consistent to what we were seeing at the onset of the year overall volume of wide releases were still counting at around 95, or so films, which is down a touch from last years 110 again relative to about one one.
Speaker Change: Third 30 from pre pandemic timeframe and that's all a byproduct of the six plus months of Hollywood strikes last year. So as you mentioned the year is definitely backend loaded more of that impact is playing through in the first part of the year and then as you get towards the fourth quarter, that's when things really start to ramp up ramp up.
Speaker Change: Particularly the scale of the releases because those larger films that have more complex productions more complex visual effects like those are the things in particular that where we're most impacted so I would say at this stage.
Speaker Change: At least again from our vantage point things we were seeing it we still think the year is kind of looking at comparable to what we were anticipating three months ago.
Speaker Change: As we look out to 'twenty five.
Speaker Change: It's still a bit early per our normal practice to try to get a full handle on that we were optimistic that were going to see overall volume.
Speaker Change: Our viewpoint was you saw a nice progression from 'twenty, one to 'twenty to 'twenty two to 'twenty three prior to the strikes we were anticipating 24 would continue that trajectory and then we had this little hiccup from the strikes. We think 25 will likely spring back to that that trajectory curve that we've been.
Speaker Change: On a recovery so it will be somewhere likely.
Speaker Change: In line or above.
Speaker Change: 2023 between 2023 and pre pandemic levels.
Speaker Change: Prior to the strikes we thought there could be the potential for 25 or 2006 to get back to pre pandemic levels with the strikes we think that pushes out a little bit further.
Speaker Change: But again, we think that we'll see some nice lift in improvement next year. Once we're fully passed the effects of the strikes of last year and I would just say I know theres been a lot of questions on on <unk> at least the materials that were shared during that convention.
Speaker Change: The films that are going to be releasing in 25 look incredibly promising.
Speaker Change: Really.
Speaker Change: Really optimistic about what we saw and really pleased just with the quality of the presentation of those titles that are they are up and coming.
Speaker Change: Mike in terms of your question on domestic concession cost rates.
Michael Joseph Hickey: The change that you saw year over year in Q1 was primarily driven by two key factors one a shift in product mix towards lower margin rate items, such as merchandise as well as can be and then in addition to that we did incur.
Michael Joseph Hickey: Increases in the cost of some of our core concession items, so fountain beverages bottled drinks and candy and then partially offsetting that with benefits that we realized from the strategic pricing actions that we've been implementing.
Michael Joseph Hickey: As you look forward, we do expect concession costs as a percentage of concession revenue to begin to moderate over the next few quarters now that said, we do still anticipate that our Cogs rate will reflect a modest step up for our from full year of 2023 levels due in.
Michael Joseph Hickey: Part to product mix as we continue to look to grow merchandise sales expand enhanced food offerings and as well as scale third party concession delivery, which have lower margins than our over all kind of core concession offerings.
Michael Joseph Hickey: Now.
Michael Joseph Hickey: While we do expect.
Michael Joseph Hickey: Inflationary pressure to continue in 2024, particularly in transportation packaging and certain commodities, namely cocoa. We expect these pressures to be somewhat offset by corn canola oil and buttery tapping prices moderating. So we also continue to execute.
Michael Joseph Hickey: On strategies to offset inflationary impacts wherever possible, including through strategic sourcing efforts, our pricing strategies and proactive category manager management to really drive incidents.
Speaker Change: Thanks, guys.
Michael Joseph Hickey: Mike.
Michael Joseph Hickey: Thank you next question comes from the line of Jim Goss with Barrington Research. Please go ahead.
James Charles Goss: Thank you.
James Charles Goss: You discussed earlier.
James Charles Goss: Caution about Newbuild. There was also very interested in looking at the screen count reduction.
Speaker Change: Over the past.
James Charles Goss: Five years I think since the spin.
James Charles Goss: Pandemic.
Speaker Change: I imagine.
Speaker Change: The screen Count reduction has had less of a revenue impact because of the nature.
Speaker Change: The screens you have been cutting out and also less of a profit impact but.
Speaker Change: Can you talk about the.
James Charles Goss: Headwind or a drag that might have.
James Charles Goss: Those then you over that over those years and what it's doing right now and are you mostly.
James Charles Goss: Through the process of screen count rationalization or should we expect somewhat more.
Speaker Change: Thanks, Jim Good question.
Speaker Change: I'd say on the whole the industry is probably seeing slightly in excess of 10% screen rationalization.
Speaker Change: Since the pandemic on.
James Charles Goss: On a total net basis of those that we've closed relative to those that we've opened where we're slightly below that.
James Charles Goss: Certainly in the U S. I think we're about 7% or so of our screens down versus versus pre pan endemic but the majority of those screens that have closed for us are.
James Charles Goss: Ones that were lower performing screens they were ones that were older theaters more on the cost.
Speaker Change: Of.
Speaker Change: <unk>.
Speaker Change: Just breakeven performance so from an overall impact on financials net net between what we've closed and what we've opened that's actually a net positive in terms of bottom line. So I'd say, we've been very very particular in that so there's been many theaters, we've been able to go back and make modifications to leases and things like that.
Speaker Change: That an improvement in certain cases, it just made sense to to rationalize a bit so.
Speaker Change: On the whole that's just part of our overall optimization of our footprint as we're looking to really shore up our our higher performing theaters looked to make modifications to those theaters, where we have the opportunity to do so with certain leases, where there is a bit of pressure and then exit ones that are a bit more strained.
Speaker Change: That whole calculus.
Speaker Change: We're adding we're adding new theatres to those footprints, where there's opportunity as we look ahead.
Speaker Change: Yes, I mean, I'd say, we're kind of in that that normal phase now where it was always part of our practice of as older theaters are coming to the end of their leases. We're looking at how they're performing and does it make sense to continue with those or does it make sense to look to newer opportunities. So there could certainly be some incremental.
Speaker Change: Closures that we see over the coming years, but I wouldn't say that's necessarily a byproduct of the pandemic. This point, that's just more of a normal practice and as I mentioned earlier, we have reinvigorated our development pipeline with regard to new builds and new looking at new assets to bring into the fold.
Speaker Change: So that could that could also offset that.
Speaker Change: Okay and one other one.
Speaker Change: In recent calls you've talked about alternative content and it seems like it's.
Speaker Change: A lot of the change that we're talking about this a little bit more I'm wondering.
Speaker Change: What type of content are you thinking might resonate best with your audiences would it be concerts or sports. If you can get the rates or other smaller genres like the faith based that you brought up are there other things and also IMAX and its call is talking about us.
Speaker Change: Using other days, which seems to be the conventional wisdom is to when you might both net net ahead with alternative content can you talk about any plans along those lines.
Speaker Change: Sure look.
Speaker Change: Definitely overall, we've been thrilled to see.
Speaker Change: A burst of life with alternative content historically, it just kind of hovered around 1% to 2% of box office and we always felt there was a lot more potential in these types of titles and we're finally seeing that for our circuit I wouldn't say, there's any one particular category that.
Speaker Change: Is necessarily a driver it's really across the board. So you named a few of them whether it be concerts faith based films multicultural titles anime, we're seeing great success across all of these different categories.
Speaker Change: And we're thrilled to see more and more titles of significance coming into theaters in that area again for the first quarter non traditional content represented about 14% of our box office. So it is definitely.
Speaker Change: Inflated again similar to last year, which was a banner year for non non traditional film. So we're certainly leaning into that I'd say the key is there is there is often work to be done in this space. So finding those types of products that lend themselves to scale.
Speaker Change: Sports as you mentioned is an area of opportunity. It's a complicated one just due to the way the licenses work and then also the question becomes how can you get scale because those tend to be singular events on a singular showtime versus something like a concert or something like a faith based film that can run throughout the week.
Speaker Change: Or weeks really.
Speaker Change: There are some questions. There. So it's all about finding those those properties with scale looking for things that could be more unique opportunities to also fill in slower periods. During the week. There is also the potential for that I mean, we're talking about that earlier with some of the other kinds of event types of of.
Speaker Change: Products that we bring into our theaters. So we'll have to see but I do think.
Speaker Change: What's been wonderful to see is yes.
Speaker Change: Potential of these these types of titles has is being realized.
Speaker Change: Also nice is that these types of films can also bring new types of audiences into theaters, who then get exposed to the films get exposed to the recliner seats folks who may not have been industry. Currently and then they start a movie going practice. So it can kind of expand beyond this type of content. So again, we remain really optimistic about continued growth in this.
Speaker Change: Space and it really cuts across a range of categories.
Speaker Change: Alright, Thank you very much thanks, Jim.
Speaker Change: Thank you next question comes from the line of Stephen <unk> with Goldman Sachs. Please go ahead.
Stephen: Hey, great. Thanks for taking the questions. Sean you mentioned earlier the resilience you're seeing on the consumer front, maybe just given that could you update us on your latest thoughts on ticket ticket price.
Stephen: From some of the more in demand stretches of slate coming up here.
Speaker Change: The next few quarters and then one for Melissa.
Speaker Change: Facility lease expense Shawn I think you mentioned it in your prior risk.
Speaker Change: Our response, but there might be some opportunity to negotiate on brand I'm curious how much opportunity you think there is commitment there.
Speaker Change: The next few years. Thank you.
Shawn: Okay. Thanks for the question. So look I mean, you had a question on pricing is an important one I mean, obviously, we were talking about the environment that we're in right now so it's an area that we.
Shawn: We need to be careful about and we are very careful about we use a lot of data to drive our decision, making on what's the right price points. So while consumer resilience has certainly been there demand has been strong we got to be careful that we don't go too far and pushed things that could change that dynamic right, especially in a high inflationary type of environment.
Speaker Change: Where people may be starting to be a bit more discretion in what they select we've seen that over the years and again, we use a lot of data we have a team that focuses heavily on this to to make sure that we're trying to capture as much opportunity as we can which basically cuts both ways. It's not unilaterally up it can go both ways to really maximize.
Speaker Change: <unk> attendance maximize box office maximize incidents with regard to food and beverage sales and overall food and beverage revenues. So so again, it's something that.
Speaker Change: We believe there is lots of ongoing opportunity with further and further analytics it constantly is evolving.
Speaker Change: But it's a dynamic that.
Speaker Change: It will just continue to stay on top of and it isn't unilaterally one way.
Speaker Change: And then with respect to facility lease expense. So it's important to note that lease.
Speaker Change: <unk> is our contractual obligations. So unless there is an event such as the end of a lease term or a landlord needs our consent for their redevelopment there isn't much of a catalyst to renegotiate a lease, particularly given the strength of our financial position.
Speaker Change: Third we are actively working to renegotiate renegotiate leases as their exploration in our renewal dates approach and we have seen some success in that regard, particularly as it relates to more challenged theaters, but keep in mind that only about call.
Speaker Change: Call it 10% to 15% of our leases are up for renewal in any given year. So it's a fairly small percentage.
Speaker Change: Great. Thank you both.
Speaker Change: Thanks Steven.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to Sean Gamble for closing comments.
Sean Gamble: Thank you operator, and thank you all for joining this morning I'd just like to emphasize again that we remain highly encouraged as we look ahead.
Sean Gamble: Based on the current dynamics related to consumer consumer moviegoing behavior. The different forward looking indicators, we see pertaining to film releases as we discussed.
Sean Gamble: Also just the wealth of opportunities that we see before us to drive incremental value creation. We do think that cinemark is particularly well positioned to prosper on account of our advantage position and our exceptional team and we look forward to speaking with you again following our second quarter results. So thanks again for the time this morning.
Sean Gamble: Okay.
Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
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