Q3 2024 Cinemark Holdings Inc Earnings Call
Speaker Change: Greetings and welcome to Cinema Colting Inks 3rd quarter 2020 for earnings call.
Speaker Change: At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Chanda Brashears, Senior Vice President and Best of Relations. Thank you, you may begin.
Chanda Brashears: Good morning everyone. I would like to welcome you to Cinema Coding Inc., 3rd quarter, 2024, earnings release conference call hosted by Sean Gamble, President and Chief Executive Officer, and Melissa Thomas Chief Financial Officer.
Chanda 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 Brashears: Forward-looking statements may include that 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 Brashears: The company's actual results may materially differ from forward-looking projections due to a variety of factors.
Chanda Brashears: and information concerning the factors that could cause results to different materialies as contained in the company's most recently filed 10K.
Chanda Brashears: Also, today's call main include non-gap financial measures.
Chanda Brashears: A Reconciliation of these non-gap financial measures to the most directly comparable Gap financial measures can be found in the company's most recently filed earnings release.
Speaker Change: 10Q and on the Capy's website at IR.Cinamark.com With that, I would like to turn the call over to Sean Gamble
Sean Gamble: Thank you, Chanda and Good Morning, everyone. We appreciate you joining us this Halloween morning to discuss our third quarter 2024 results.
Sean Gamble: Strong, sustained consumer enthusiasm, per shared larger-than-life theatrical experiences, was once again on full display in three cue, as box office results far outpaced expectations for the third quarter in a row this year.
Sean Gamble: North American Industry Box Office reached $2.7 billion and was up 1% year over year, which is remarkable considering the high bar that was set by last year's Barbon Himer phenomenon.
Sean Gamble: These results also represented the highest grossing quarter since the pandemic, in climbed to within 4% of 3Q19.
Sean Gamble: For paled by one breakout hit after the next, as a steadier cadence of compelling films were released into theaters. The third quarter's results clearly underscore that movie going, the gets movie going, and further illustrate the heightened level of impact of theatrical release provides all categories of content.
Sean Gamble: Take, for example, the lengthy playthrough of Inside Out 2, which grew to become the highest grossing animated film in history during the quarter, generating more than $650 million of domestic box office and nearly $1.7 billion worldwide over its full theatrical run.
Sean Gamble: And then there was Deadpool and Wolverine, which slashed up screens to become the highest grossing R-rated film in history with over $635 million domestically and an astounding $1.3 billion worldwide up 70% from Deadpool 2.
Sean Gamble: In Thusiastic, Mussy on the Big Screen Momentum, also drove Magnificent Results for Dispicable Meat 4 with domestic box office of more than $360 million that was up 36% above DM3.
Sean Gamble: As well as Adventure, Thrill Ride, Twisters and comedic fantasy Beetlejuice Beetlejuice, both of which captured more than $250 million domestically in the third quarter alone.
Sean Gamble: Strong Word of mouth and high anticipation also lifted romantic drama it ends with us.
Sean Gamble: to nearly $350 million worldwide. An elevated suspense thriller, a quiet place day one, as well as sci-fi adventure Alien Romulus, which was up more than 45% from 2017's Alien Covenant.
Sean Gamble: Additionally, posit response boosted crime thriller long legs to nearly $75 million of domestic box office, which became the highest-grossing domestic release of all time for independent studio Nia.
Sean Gamble: Third-quarters film results continue to demonstrate how a theatrical release stimulates increased conversation, creates bigger cultural events.
Sean Gamble: and Amplifies the Relevance of Content, Strengthening, its Recoalability and Stain Power, all of which deliver significantly enhanced value to studios, filmmakers and audiences.
Sean Gamble: These are the films like their theatrical predecessors that have longevity and that people will be talking about and remember for many years to come.
Sean Gamble: Just consider the fact that the original installment of Alien was released into theaters 45 years ago. Beetlejuice more than 35 years ago. Twister almost 30 years ago and inside out to, inside out nearly a decade ago.
Sean Gamble: Furthermore, theatrical franchises like the Marvel Cinematic Universe and Dispicable Me have grown to massive heights via the big screen.
Sean Gamble: These two franchises alone are recent examples from the third quarter that have been delighting audiences with sequels, spin offs, consumer products, games and theme park rides for approximately 15 years now.
Sean Gamble: and then there's Repertory Content, like Coraline, of film that first hit theaters in 2009, which continues to generate meaningful theatrical proceeds every year and grossed close to $35 million of domestic box office this quarter.
Sean Gamble: These are all examples of the deep and lasting impact that at the Atrical Release generates through the unparalleled level of emotional connection, it creates with stories, characters and memory-making moments.
Speaker Change: At Cinemaq, we certainly understand how impactful experiencing stories in the theatrical setting is to the hundreds of millions of moviegoers we serve every year as we strive to consistently deliver unmatched entertainment and service that the lights are guests and keeps them coming back for more.
Speaker Change: To that end, we were thrilled to see how well the third quarter's film line of captivated audiences. And I'd like to commend our studio partners for their outstanding work, producing and releasing such compelling content that will clearly leave an imprint on movie goers for many years to follow.
Speaker Change: That also like to equally commend our sensational cinema team for helping to drive the quarters tremendous box office results through all of their tactical actions to strategically program our screens, stimulate increased movie going demand and deliver an unforgettable cinematic experience that can't be found anywhere else.
Speaker Change: Driven by our team's diligent execution and coupled with the continued benefits we are deriving from our strategic initiatives, as well as a film mix that resonated particularly well across our US circuit.
Speaker Change: Sittamark once again outperform the industry in the third quarter and deliver exceptional financial results.
Speaker Change: Domestically, we exceeded year over year North American industry box office growth by over 600 basis points and generated our highest-grossing August and September box office proceeds of all time.
Speaker Change: Similarly, internationally we surpassed our comparable Latin American industry admissions benchmark than more than 100 basis points.
Speaker Change: We also set another new domestic concession per cap record of $7.97 which combined with our industry leading box office growth yielded worldwide total revenue of $922 million, our highest third-quarter revenue of all time.
Speaker Change: The strong top line achievements were complemented by comparably robust bottom line results that were further enhanced by disciplined operating agility and expense management.
Speaker Change: During the quarter, despite a marginal decline in attendance for the last year, our worldwide adjusted EBITDA grew 12% to $221 million, which is our highest third quarter adjusted EBITDA in the history of our company.
Speaker Change: Furthermore, we expanded our adjusted EBITDA margin 140 basis points year over year, to nearly 24% and generated $64 million of free cash flow.
Speaker Change: As we've highlighted on previous calls, our solid results, including our consistent track record of industry out performance.
Speaker Change: are the byproduct of years of discipline capital deployment, a highly skilled and resourceful global team that is second to none.
Speaker Change: Careful Navigation of our Industries Recovery from the pandemic and the active pursuit of strategic initiatives to build audiences, grown-in sources of revenue, and advance and optimize our operating capabilities.
Speaker Change: These ongoing areas of focus combined with a solid overall foundational found framework has been established over the past four decades, continue to uniquely position cinema with a wide range of distinctive advantages.
Speaker Change: For example.
Speaker Change: We continue to benefit from our years of strategic investments to maintain and enhance our circuit that has yielded the largest array of high quality assets in our markets.
Speaker Change: Including nearly 70% penetration of recline seats domestically, the largest volume of exhibitor-branded premium large format auditoriums in the world, the highest roll-a-debox motion seats globally, and the leading site sound in presentation quality in the business.
Speaker Change: In this regard, it's worth noting that during the third quarter, we generated our highest quarterly debox revenue ever, which grew nearly 70% versus 3223, and we generated our second highest quarterly, XD premium large format revenue of all time.
Speaker Change: We've been able to make and sustain these investments on account of our solid financial position and compelling free cash flow profile that we have long viewed as a strategic asset for our company.
Speaker Change: On very pleased with the great strides our team has made in refortifying that position over the past two years as we've continued to invest in our future and Melissa will provide a deeper dive into those financials in a moment.
Speaker Change: Beyond the quality of our assets and our financial strength, we also have developed a highly loyal customer base and an extensive marketing reach.
Speaker Change: Over 21 million members now participate in our global loyalty programs and we consistently derive approximately 25% of our domestic box office from our paid movie club subscription members.
Speaker Change: Furthermore, we have an addressable reached to over 30 million customers across our global circuit with whom we can actively communicate to spread awareness of upcoming events, deliver unique and personalized offers and drive increased movie going frequency.
Speaker Change: The scale and extent of our loyal and addressable consumer base is something that has taken years to establish through a concentrated focus on developing, honing and continuously improving our industry-leading operating capabilities.
Speaker Change: From service levels achieved through field training and protocols that consistently earn high-satisfaction ratings from approximately 95% of our guests to technology measures that yield the best and brightest projection imagery with close to 100% up time.
Speaker Change: We developed sophisticated digital social and on the channel marketing platform capabilities that drive billions of impressions a year to scale audiences, as well as data driven pricing analytics at an individual theater level that maximizes volume, revenue, and margin.
Speaker Change: Our advanced capabilities also extend to the methodical curation of food, beverage, and merchandise offerings that provide a broad array of appealing, high quality selections with efficient purchase ease.
Speaker Change: as well as the utilization of enhanced tools and processes that help us optimize our showtimes and labor management.
Speaker Change: We have consistently invested for years in enhancing the way we run our business to drive growth and deliver exceptional levels of service as efficiently as possible.
Speaker Change: Collectively, we expect that the many distinctive advantages we possess today, as well as the ongoing actions we are pursuing to further grow and strengthen our company, will continue to provide us with an outsized ability to capitalize on future market opportunities and drive incremental value creation as we move forward.
Speaker Change: One such area of opportunity is the continued rebound of new release volume in 2025 and beyond. As film production further recovers, following the delays it incurred during the pandemic, that were then compounded by last year's strikes in Hollywood.
Speaker Change: We are highly optimistic about a strong close to 2024. With fourth quarter releases like Wicked, Gladiator 2, Moana 2, Moofasa and Sonic the Hedgehog 3 on that horizon. As well as the continued momentum they will carry into what is shaping up to be a blockbuster 2025 film slate.
Speaker Change: Much like the storyline of an inspirational movie, the resiliency of our industry and its ability to persevere and grow through change and adversity has improved in time and again.
Speaker Change: Despite a global health crisis and varied experiments with new release models, the past three years have clearly demonstrated that consumer enthusiasm for theatrical movie going entertainment is as strong as ever.
Speaker Change: Moreover, theatrical exhibition remains an important and stable component of a studio's financial value creation formula and our content partners are fully leading into our channel as a way to elevate the awareness, relevance, and impact of their films like only a theatrical release can.
Speaker Change: And within that setting, which is poised for further recovery and growth, we remain a cutely focused, undelivering unforgettable experiences for our audiences and long-term value for our shareholders, and we believe that cinema is well situated to thrive in the years to come.
Speaker Change: I will now turn the call over to Melissa who will share more information about this quarter's results.
Melissa Thomas: Well, listen. Thank you, Sean. Good morning, everyone, and thank you for joining the call today. We were extremely pleased with a box office momentum during the third quarter, which significantly surpassed expectations and further reinforced the health and vitality of our industry.
Melissa Thomas: This momentum, together with our team's ability to fully capitalize on the strength of the box office, through your unwavering dedication and strong execution, led to remarkable third quarter results.
Melissa Thomas: We welcome to over 60 million movie goers across our global footprint in the quarter and achieves third quarter record highs for both revenue and adjusted EBITDA.
Melissa Thomas: We grew worldwide revenue 5% year over year to 921.8 million dollars.
Melissa Thomas: Notably, we delivered $220.5 million of a just a debat. A 12% increase over the third quarter of 2023.
Melissa Thomas: and on similar box office levels, we expand our Justice of the Deaf Margin 140 basis points you over year to 23.9%.
Melissa Thomas: In the US, we entertained 37.6 million guests. Flat with a third quarter of 2023. We grew our market share 80 basis points over year and maintain significant share games compared with pre-pandemic levels.
Melissa Thomas: Our Marketshire benefit is from a content mix that skewed more heavily towards family and horror films, which will particularly well receive by our audience face.
Melissa Thomas: It was also supported by limited capacity constraints due to box office success that was well distributed throughout the quarter and the ongoing impact of our strategic initiatives.
Melissa Thomas: During the third quarter, we generated $375.2 million in admissions revenue and grew average ticket price 7% year over year to $9.98.
Melissa Thomas: The increase in our average ticket price was primarily driven by strategic pricing initiatives, a higher mix of premium format tickets, and the absence of national cinema day, which occurred in Q3 of last year and offered patrons $4 tickets to celebrate and encourage the theatrical movie going.
Melissa Thomas: We delivered $299.6 million of concession revenue in the third quarter and achieved a new all-time high concession per cap of $7.97.
Melissa Thomas: Our Confession Turquout was up nearly 12% year over year, driven by higher incident rates and an increase in merchandise sales, both of which benefited from the favorable content mix in the quarter, as well as strategic pricing measures.
Melissa Thomas: Other revenue was $66.6 million. Up 4% year over year primarily due to higher promotional and events revenue.
Melissa Thomas: Altogether, our domestic operations delivered $741.4 million of revenue and $180.7 million of a just-of-dead of that. E-oving a robust 24.4% adjusted to that margin.
Melissa Thomas: Turning to our international segment, we hosted 22.8 million patrons in our theaters during the third quarter. A 7% decline from the third quarter of 2023. As films like Twisters, Beetlejuice Beetlejuice, and Alien Romulus did not resonate as well in Latin America as they did in the US.
Melissa Thomas: However, we grew our market share across the region.
Melissa Thomas: Our International segment delivered $85.2 million of admissions revenue, $67.7 million of other revenue in the third quarter.
Melissa Thomas: In total, we delivered $180.4 million of international revenue and $39.8 million of a just to be bidda. Resulting in a strong 22.1% just to be bidda margin.
Melissa Thomas: International Adjusted Deepadaw was negatively impacted by FXT valuation, particularly in Argentina, with inflation largely offsetting these dynamics.
Melissa Thomas: Our third quarter and year-to-date results demonstrate our local team's ability to continue to a definitely navigate the complex, economic and political landscape across our Latin American footprint.
Melissa Thomas: Chifting to Global Expenses, film rental and advertising expense was 57.7% of admissions revenue. Up 180 basis points compared with the third quarter of 2023, due to an increased concentration of high-grossing titles and the overall mix of films.
Melissa Thomas: Confession costs as a percent of Confession revenue were 17.6%. A decrease of 90 basis points year over year, driven by strategic pricing measures and favorable Confession rebates.
Melissa Thomas: Partially offset by inflationary pressures on certain concession categories, as well as a higher mix of lower margin product offerings such as merchandise and candy.
Melissa Thomas: Global salaries and wages were $109.9 million. Up 2% compared with the same period last year, due to higher wage rates. As the benefits from our labor productivity initiatives, more than offset the expansion of our operating hours in the quarter.
Melissa Thomas: As a percent of total revenue, salaries and wages were down 40 basis points year for year.
Melissa Thomas: Facility Leas expense with $85.9 million and increase of 2% year over year largely due to higher percentage rent.
Melissa Thomas: As a percent of total revenue, facility lease extends decreased 30 basis points.
Melissa Thomas: Utilities and other expense was $127 million, down 2% from the third quarter 2023. Primarily driven by the reduction in attendance and foreign currency impacts, partially offset by inflation.
Melissa Thomas: As a percent of total revenue, utilities and other decreased 100 basis points.
Melissa Thomas: GNA was $56.4 million in the third quarter, and increased year over year due to wage and benefits inflation, higher incentive and share-based compensation, and increase professional fees.
Melissa Thomas: These impacts are partially offset by foreign currency dynamics.
Melissa Thomas: Globally, we delivered net income attributable to cinema-colding zinc of $187.8 million in the third quarter and alluded earnings per share of $1.19.
Melissa Thomas: Net income included a $42.7 million tax benefit. Primarily related to the partial release, evaluation allowances previously recorded in the U.S.
Melissa Thomas: Turning to cashflow, we generated $107 million of operating cashflow and $64 million of free cash loan that they're at quarter. Despite working capital headwinds associated with film rental payments made during the third quarter, related to the strong June box office.
Melissa Thomas: With that, we ended the third quarter with $928 million of cash on the balance sheet, which benefited from the stronger box office environment, as well as the upsizing of our July unsickered notes issuance to $500 million.
Melissa Thomas: We continue to anticipate our cash balance will remain elevated in the near term. As we intend to leverage cash on hand to repay the principal amount of the 460 million of convertible notes upon their August 2025 maturity.
Melissa Thomas: As a reminder, the notes do not have a provisional call feature.
Melissa Thomas: More broadly on Capitol allocation, we have three pillars to our Capitol allocation strategy.
Melissa Thomas: Strengthening our balance sheet, investing to position the company for long-term success, and returning excess capital to shareholders, with a near-term focus on the first two priorities.
Melissa Thomas: As it relates to the first pillar, we successfully refinanced our 405 million unsickered notes do in March 2026 with the issuance of 500 million unsickered notes do 2032.
Melissa Thomas: We also repaid our remaining $6 million of COVID-related debt in Latin America.
Melissa Thomas: We concluded the third quarter with a net leverage ratio of 2.8 times, which remains within our target range and surpassed our expectations, driven by the unanticipated outperformance of the third quarter box office.
Melissa Thomas: Our strengthening balance sheet is a strategic asset and affords us the flexibility to invest in long-term growth and the health of our circuit, which is a key competitive different cheater for our company.
Melissa Thomas: This brings me to our second capital allocation pillar, making strategic and financially creative investments to grow and secure a long-term success.
Melissa Thomas: Including maintaining a high quality circuit and pursuing high confidence ROI generating opportunities such as new builds, theater enhancements and a creative M&A.
Melissa Thomas: In the third quarter, we have 43 million of capital expenditures, and we are on track to spend $150 million for the full year to maintain and further enhance our fleet.
Melissa Thomas: As box office in cash flow rebound, we continue to anticipate normalized capital expenditures in the 200 to $250 million range.
Melissa Thomas: Moving to our third capital allocation pillar, returning excess capital to shareholders, which has historically been key part of our capital allocation strategy and remains an important consideration for us as we look forward.
Melissa Thomas: Even the significant progress we've made on our near-term capital allocation priorities, and our positive outlook regarding our recovery and the industry's rebound, we are currently re-evaluating our capital allocation priorities in connection with our 2025 budgeting process.
Melissa Thomas: As we conveyed on our second quarter earnings call in August, we intend to provide a more full-sum update on capital allocation during our fourth quarter earnings call in February.
Melissa Thomas: Overall, Cinemaq's steadfast commitment to balance and discipline capital allocation with an emphasis on maximizing long-term, sheer holder value creation has positioned as well. I would expect us to maintain that prudent approach as we look forward.
Melissa Thomas: In closing, I'm exceptionally pleased with our team's ability to make the vote of the successful third quarter box office, as well as their progress in advancing our strategic initiatives, which continue to yield strong operating and financial results for the company.
Melissa Thomas: As Evidence by our third quarter and year to date, performance.
Melissa Thomas: We remain keenly focused on continuing to execute our strategic priorities and striving to deliver industry-leading results.
Melissa Thomas: Operator that concludes our prepared remarks and we would now like to open up the line for questions.
Speaker Change: Thank you, the floor has now opened for questions. If you would like to ask the question, please press star one on your telephone keypad at this time.
Speaker Change: A confirmation tunnel indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Again, that star 1 to register a question at this time.
Speaker Change: Today's first question is coming from David Karnowski of JP Morgan. Please go ahead.
Speaker Change: and the past, you don't really get full visibility on next year's supply until current year ends, but if you have any update on 20.5 that'd be great.
Speaker Change: You've discussed an expectation in the past for streamers to ramp their theatrical output. We did see a film get pulled off of slavery two-three-doh and there's been some talk in the trade press about a rethink here at least by one of the streamers. So, you know, I want to see how you're thinking about that contribution as we go forward.
Speaker Change: Sure, thanks for the questions David. You're right. We're still a little bit early to fully assess 20, 25, just based on the timing of when this studio is announced there are full slate. But we do continue to expect that.
Speaker Change: Over all volume next year we'll spring back somewhere between 2023.
Speaker Change: and 2019, you know, following the impact that the Hollywood strikes had on the recovery trajectory this year. Obviously, the studio is tend to plant their larger films with dates a bit early, but the smaller titles.
Speaker Change: will continue to fill out over the coming months and into next year. So we'll be able to provide a more full, so we'll look at that.
Speaker Change: On our next call, but we do remain based on what we know of and what we continue to hear from the studios. We remain very optimistic about that nice rebound next year on the way to pre-pandemic recovery. Specific, your question on content from streamers.
Speaker Change: Yeah, there was, you know, we're obviously a little disappointed by one of those titles shifting, you know, we were referencing to, you know, in the case of Wolf's I believe, is a situation where they're still learning their way into the business is still early stages.
Speaker Change: You're optimistic that...
Speaker Change: that in time they'll find their footing. They got a big movie coming next year with F1 that we're really all excited about. But at the same time, you've got Amazon who has really leaned heavily into investing in distribution team films.
Speaker Change: They just recently indicated that they could get up to 16 releases by 2027 as they've taken on revitalizing United Artists in addition to MGM. So they're leaning more significantly at this stage than we anticipated. And I think they're on track to have something in excess of 10 films next year. So I think between those two things, we continue to be optimistic about further growth.
Speaker Change: from Conten from Streamers. And then also, we need to mention it, but what we're continue to see with non-traditional content, multicultural films, anime, and things of that sort.
Speaker Change: Maybe just one for Melissa on the confession call side as a percentage of revenue that figure was the lowest we've seen in some time comes as a commodity prices are steady. We've been mentioned in inflation, so there are mixed factor to consider here and how to be think about sustainability of this percentage going forward.
Melissa Thomas: Sure, thanks for the question. So I are cogsrate for the quarter. There were a couple factors driving that primarily strategic pricing actions as well as favorable concession rebates.
Melissa Thomas: That was offset partially by some inflationary pressure on certain condition categories, namely candy and non-alcoholic beverages, as well as a shift towards some lower margin products including.
Melissa Thomas: Again, Candy.
Melissa Thomas: and Merchandice as well. Now the one call out that I would make is on the favorable concession rebates that was around one point of benefit in Q3 came from those concession rebates and that's mainly just a timing item. So the year today, Cogsray is going to be
Melissa Thomas: 3. In terms of how we're thinking about the full year, we continue to expect our cogs rate may reflect a modest step up from last year's levels to again to those inflationary pressures as well as product mix.
Melissa Thomas: and then Beyond 2024, as we think longer term, again we do expect inflationary.
Melissa Thomas: Pressure 2, Percent, while we've had easing on some commodities, there are other commodities, same in Cocoa and Palm Oil, which are key candy ingredients that do continue to rise. So we'll continue to look to offset those impacts where possible. There are efforts around strategic sourcing, pricing and proactive category management.
Melissa Thomas: But I would say Q3, you know, with the favorable concession rebate, there is a tiny element there to keep in mind.
Speaker Change: Very helpful thanks thanks David
Speaker Change: Thank you, the next question is coming from Eric Handler of Ross Capital. Please go ahead.
Eric Handler: Good morning, thanks for the question. What if you could sort of give some perspective or metrics on when you look at your concessions revenue, how much of that is coming now from non-food items, meaning like these popcorn buckets or any type of other merchandise?
Speaker Change: Thanks for the question, Eric. You're that continues to grow. We haven't broken that out in terms of the split.
Speaker Change: of Merchandice. And we tend to look at it in two buckets. You know, there's just the pure merch, and then there's the cups and tubs that also include food in it, you know, with popcorn and typically fountain drinks.
Speaker Change: Inside of that. So we haven't split that out at this stage, but it is an area where we continue to see nice growth. We see it in terms of in-feet or consumption. Obviously some of those popcorn tubs have gone viral recently and that has prompted an increase of sales. We've also been expanding our e-commerce channel in having the option to actually sell those types of goods.
Speaker Change: and the Honda Arched leaders, which has been also a nice incremental source of growth. So, it's something that we do see as just part of one of the many areas that are carrying Ford or Perkab growth year over year and we think we'll continue to do so and something that we'll look into, you know, providing more color on your figure.
Speaker Change: Okay, thanks Sean and just some follow-up questions.
Speaker Change: We and Wall Street were a two-fee aware of all of the big movies that are coming out in 2025 and 2026.
Eric Handler: How aware do you think your audiences are of this and how could you maybe take advantage of improved awareness of the titles coming to maybe.
Eric Handler: Bush, movie club sale sort of ahead of the big waves.
Speaker Change: It's a great question and something that we've actually been discussing.
Speaker Change: at a NATO level in our industry trade association of how to continue to create better awareness.
Speaker Change: and you know, counter some of the negativity, negative, mediarticles that are sometimes out there which just aren't always entirely accurate about movie going. So there's certain things that are, we're exploring like the concept of an awareness day that provides more color to upcoming films. Clearly, they're the trailers that we are showcasing with movies and theaters, but there may even be more that we can do. We have a tremendous amount, like we talk about all the volume of communication we send out.
Speaker Change: to our 20 plus million loyalty members and we have access to over 30 million addressable consumers. Just we have connectivity too. So we're sending them that out, but how we can continue to do that more effectively is an ongoing conversation because you're right.
Speaker Change: The content both next year in 2026 is just very compelling and it's good to try to build some of that hyper early.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you, the next question is coming from Omar. The highest of both Fargo, please go ahead.
Speaker Change: Good morning, say you were taking my questions.
Speaker Change: and the first shot, my mother's share performance was very strong and it came in a buffest sort of level despite capacity constraints from having a strong little boss off his quarter.
Speaker Change: If you may be on Packed Driver, sub the App Performance, including Mixed Films and PLF Performance, versus Organic Serving, thank you.
Speaker Change: Sure, thanks for the question, Omar, yes you're right, Wall.
Speaker Change: We definitely saw some of those capacity constraints. You know, hit us a bit more than we've seen in the past as volume grew in July. One of the things that really helped us overcome that was certainly the benefit of the initiatives we've been pursuing to expand our audiences and connect more with our consumers, but also a mix of films, especially in the U.S. that really resonated particularly well across our circuit. Family, horror, nostalgia films, like those all really connected and I would say were that.
Speaker Change: The biggest component of that incremental outperformance and market share relative to the approximate 100 or so basis points that we talk about versus pre-pandemic levels in this quarter in particular.
Speaker Change: Thank you, thank you so much for meeting one more for Melissa. You guys have just got to absolutely capitalizing a market opportunity and potentially adding new assets.
Speaker Change: As you exit the spirit of uncertainty and still looking to potentially reinstated dividend in early 2025
Speaker Change: The UC-E-E attractive M&A opportunities to continue to expand the split-trend, especially in North America, would sometimes become potentially available or even South America, any color there would be helpful. Thank you.
Speaker Change: So I'll just talk first broadly from a capital allocation standpoint. So ultimately we have our three pillars.
Speaker Change: and I mentioned in my prepare remarks of strengthening the balance sheet investing in the creative opportunities as well as returning access capital to shareholders with the near term focus on the first two pillars. Certainly with the investments in long term success.
Speaker Change: M&A is a consideration as we evaluate those capital allocation priorities and as the industry rebound.
Speaker Change: and Chanda Brashears on the market. Yeah, I mean, as far as particular assets, we're consistently evaluating the landscape of what opportunities might.
Speaker Change: Come available or are available thus far the limited types of opportunities have come to market really haven't met our investment thresholds in terms of the quality assets and the expectations.
Speaker Change: of the sellers, but that said we do think that now that our industry continues to turn the corner and rebound, a would be seller who is able to make it through kind of the tougher period. You don't want to sell in a down market. We think there's certainly the potential for higher quality assets to start to surface.
Speaker Change: Probably more so in the US than international, I know you mentioned Latin, I'm you know, Latin, it tends to be a more concentrated market amongst the major operators in each country and those operators are very financially well to do, so there's not necessarily a need.
Speaker Change: For them to sell but I do think in the US we could start to see more attractive opportunity surfaced in the next year or so.
Speaker Change: Thank you.
Speaker Change: Thanks, Omar.
Speaker Change: Thank you, the next question is coming from the Chad Byland of McCquarie Asset Management. Please go ahead.
Speaker Change: Thanks for taking my question. Sean, you kind of give us a preview into the 2025 Blockbuster slate which we're all well aware and excited about. As we think about the Latin American market,
Speaker Change: You know, thinking about what you noted in some of the underperformance this quarter which is some movies that didn't resonate as well.
Speaker Change: Do you think there will be...
Speaker Change: Start differences in terms of attendance levels or interest in the content that we're aware of from a Hollywood standpoint down in Latin America. Thanks.
Speaker Change: Thanks, great question. I think across the totality of the year, it will likely be relatively balanced.
Speaker Change: When you look at films like Avatar 3 in Jurassic World and how to train your dragon, Minecraft Utopia, like all those films obviously padding to improve in that country. You know, all those films.
Speaker Change: We expect will resonate very well in the market, you know, on the flip sign, you know, a film like Wicked part two, the next mission impossible to a certain degree even like a cat in America. Those may under index a bit
Speaker Change: Relative to the US. So you could see a little bit of fluctuation quarter to quarter depending on when those titles release, but on the whole of the year we think it'll be relatively balanced and comparison to the types of performances we'd see in the US.
Speaker Change: Okay, thank you and then just thinking about movie club here with all the content, you know, in the next 12 to 24 months.
Speaker Change: How frequently are you adjusting prices and you talked about the communication with?
Speaker Change: with the members right now. But I guess my question is, are there opportunities to grow this because of the content and then secondly are there opportunities to maybe raise prices just because of how good of a deal members are currently getting?
Speaker Change: Sure, well, well, I mean, I'll speak broadly and I'm most want to add, I think, by all means so for him, we continue to be really pleased with the performance of movie club and the degree of value and satisfaction that our members derive from it and the increased movie going frequency, we see because of that, you know, as you've mentioned.
Speaker Change: It's consistently now accounting for approximately 25% of our box office.
Speaker Change: In the U.S., we get great feedback from our members and we're constantly looking for ways to add enhanced value into the club with surprise and delight types of events and things like that. You know, you terms of your specific...
Speaker Change: Comment, or a question on pricing that we do look at that. Obviously over time and we're focused on what's the parity of the pricing relative to our base level ticket prices.
Speaker Change: So we want to make sure that that stays in line. So we're conscious of that staying in an appropriate place.
Speaker Change: and at the same time not having two frequent of price increases that can potentially you know, agitate our consumer base. So we have a whole team that is looking at pricing on the whole at a feeder level and using a ton of data to drive a lot of that decision making. It applies to movie club as well. So it's something that we do look at. We had a price increase not too long ago, which went very smoothly. And I don't know if there's most of you that anything today. I think I would just reiterate the way that we think about it is looking.
Speaker Change: Overall at the value proposition for the customer within movie club.
Speaker Change: Trying to continue to grow that subscriber base, which we still think we have runway there, so it's really balancing those dynamics again, as Sean said, also with our base pricing and the benefits the consumers receiving, but we've been really happy with results we've seen today.
Eric Handler: Thank you both. The agitation is definitely less than what we see from the streamers personally. Thanks, Ed.
Speaker Change: Thank you, the next question is coming from Daniel Durand of Morgan's Family. Please go ahead.
Daniel Durand: Hi Sean Gamble, thank you for taking my question.
Daniel Durand: How do you assess the attractiveness of by-lacks versus dividend that you get back to returning capital to shareholders in 2025?
Sean Gamble: So in terms of our capital allocation strategy and dividend versus buyback, so that's something as we mentioned that we're looking at re-evaluating our overall capital allocation priorities as part of
Sean Gamble: Art 2025, budgeting process. And as part of that, we will be evaluating our third pillar, as well, which is returning excess capital to shareholders.
Sean Gamble: and Dividends and Sites.bybox.As you imagine, we're taking a comprehensive approach and we will evaluate both of those.There are certainly different considerations in both of those. But what we're ultimately trying to do is maximize.
Speaker Change: God, I thank you.
Speaker Change: and just a...
Speaker Change: Quick second one and you've kind of already talked on Market Chair, getting this quarter.
Speaker Change: But you believe these market share gains are just 2019 or sustainable. Any of the market share will represent performance we've seen, due to continued balance sheets stress of the competition.
Speaker Change: and Onaf, will your base, should we assume market share levels change? The box office further recovers in the year that had, thank you.
Speaker Change: So I couldn't start with that one. So as we think about maybe I'll start with fourth quarter because I think it's important to remember that our market share does fluctuate.
Speaker Change: Quarter to Quarter, dependent upon Phil Mix and other relates to Q4 specifically.
Speaker Change: Our Market Share may trend lower than it's been running year-to-date through the content mix.
Speaker Change: as well as possible capacity constraints that you mentioned.
Speaker Change: We do expect to have strong performance on a family content during the quarter, as that genre tends to resonate well with our suburban footprint.
Speaker Change: However, some of the content on the slate such as wicked, mace, ski, more metro causing our share to moderate a bit. So we'll just have to see how the box office shakes out but we do expect there could be some pullback there. Beyond 2024.
Speaker Change: We do think on a full year basis that we believe that a hundred basis points of share improvement relative to our pre-pandemic results continues to be a reasonable expectation as wide-release volume ramps back up and we start to hit more of those feeding capacity constraints that may limit our overall share.
Speaker Change: Got it, thank you very much. Thank you.
Speaker Change: Thank you. The next question is coming from Robert Fishman of Moffitt Netson. Please go ahead.
Robert Fishman: Hi, good morning everyone. I'll start one for Sean and then one for Melissa.
Robert Fishman: and I'm showing up on the movie club member conversation and your prior answer about the 21.
Robert Fishman: Millian Cinemark Movie, reward members. Can you just talk about how the studio is partner with you?
Robert Fishman: The Target These Loyal Fans and have you considered even partnering or bundling with any of their streaming services to bring a joint subscription offering to musicers.
Speaker Change: Sure, well look, we have a lot of partnership with our studios in both programs. I mean, I think we've been able to demonstrate how, I mean, certainly in the case of movie club, how that leads to increased movie going frequency increased.
Speaker Change: and Elections of Consumers to Upgrade. So they've given us special types of promotions with screenings and things of that sort. For our overall loyalty program, we get different types of movie.
Robert Fishman: Gear and Promo's and things of that sort that were able to put into the rewards, carousel, that consumers can select through. We work with them also just in part of our overall joint marketing efforts. When they have an upcoming film as an example of somebody who has a mask, you know, a certain amount of credits.
Robert Fishman: [inaudible] people who have done and we will consider to do depending on what those types of programs are, and what the structure is. But yeah, I think.
Robert Fishman: The studios have been highly encouraged by what they've seen from the impact that those programs of ours as low as the programs we have do for supporting their content.
Speaker Change: Thanks for your time. Melissa, I'm NATO, put out a big headline last month.
of the 2.2 billion of investment to modernize and upgrade the feeders I think it was over the next three years.
Cross V8 Largest Domestic Petercane
Eric Handler: So anyway, to help think about what cinema's planned investment will be over that time period and just maybe more broadly, how do you think about your competitive positioning?
Speaker Change: In future CapEx spending relative to your peers, like maybe any bigger initiatives that's in the market considering to keep you ahead of everyone else.
Speaker Change: Thanks for the question Robert, so a couple things on the NATO report, so they did announce 2.2 billion of investments over the next few years.
Within that number they did include the 200.
Million, 200 million a year for us, which was part of our normalized range that we had disclosed of 250 million. So that is our share of that. What the other things I would mention there is...
Speaker Change: You know, if you think about our consistent investments that we've made to maintain a high quality circuit and enhance the theatrical experience for our guests.
Speaker Change: We certainly...
You know, do feel that that has created a competitive advantage and as we...
Look forward, we do expect that our investment levels may continue to over index versus peers which...
Speaker Change: Again, we think we'll further differentiate cinema arc. So we do expect that over indexing, potentially, to occur. As you think about our spending over the next couple of years, and we said, normalize basis.
Speaker Change: We'd expect a girl to around 250 million. The one thing that I would keep in mind there is while we're still underway with our budgeting process for 2025.
Speaker Change: Based on, we can't provide specific expectations, yet we'll be so on our February call, but based on the ROI generating initiatives in front of us, we do think that it's certainly possible that we get within that range as soon as 2025. Now, ultimately,
Box Office Expectations, as well as cash flow generation, will factor into the levels of spend that we do under take in 2025, but I think it's just important to call out that we could get within that range of students next year.
Thank you both. Thanks Robert.
Thank you the next question is coming from my Kiki Adventure Mark, please go ahead.
Thanks for taking a question to create quarter congratulations. First topic is on the consumer.
Speaker Change: Definitely seeing some pressure.
Speaker Change: You're in just curious if you think you're sort of in the position now of benefiting from the trade-down effect.
Speaker Change: and you think for the quarter at least you should take a price domestically with 10 bucks.
and Concession for Patrons, Abaging Eight, which means for a 20 spot and I can give my daughter, she can have a great time with her friends. The value proposition of that scenario and this environment just seems pretty remarkable. So I guess that's the first question. Are you benefiting here?
The other day, the consumer.
Speaker Change: In the second one would be giving that or not how you're thinking about.
Pricing moving forward in this environment and how sensitive you think your patrons are to get pricing here. Thank you guys.
Here, thanks for the questions, Mike. It's an interesting one, you're right. That is historically something we've seen is...
The Atrical Exhibition will tend to buck the trends of broader macroeconomic.
Cycle, so in periods where it's in a flashenary market or recessionary market and consumers' pockets are being more pinched.
Movies, I guess, in theory benefit from that because we continue to be one of the more affordable, localized, premium, entertainment choices that consumers have at their disposal when they want to get out of the house for some fun. The extent to which we're benefiting from that is a little bit difficult to tease out and what we've generally seen in the past of clearly strength of content is the biggest driver of people coming to the movies. So, you know, we've seen when compelling contents in the marketplace that even in those tough periods.
People are coming out and I think what I've always found remarkable and we continue to see it now. Maybe this is one example. People will elect to come out to the theaters and they continue to indulge in many of the enhanced options we've had.
I've always anticipated, well maybe we'll start to see a little bit of a dip in people in their food and beverage consumption and then electing some of the premium offerings that we have and we just haven't seen that here in the US or throughout Latin America where some of those ups and downs tend to be a bit more radical. So we're not seeing this. So yeah, I do think we kind of benefit a bit from people, you know, maybe downgrading on that more expensive vacation and more expensive type of activity coming in. It's just it's hard to specifically to keep these out how much that is.
and then Mike I'll take the second part of your question around pricing, moving forward and you asked also around consumer sensitivity to price. So we do know that
The number one deterrent to moving going is price. So that is certainly something that...
We analyze on an ongoing basis and we're very mindful of given our overarching strategy is to maximize attendance and box office. So ultimately we can further monetize with Ancillary Revenue. So we're very mindful of price. We continue to lean in to data and analytics and take a very surgical approach.
Speaker Change: to our pricing decisions.
and you look forward we do see opportunity to continuously grow our domestic ticket prices.
Speaker Change: As you know, they do fluctuate quarter to quarter based on film mix, but we do see.
Room for their growth on the ticket price. Just at one color, I would make this to be mindful of in the near term for fourth quarter is that we are lapping Taylor Swift from last year, so just keep in mind that cute poor pricing might be flat to slightly down, but as we think kind of more broadly.
Beyond 2024, we expect to continue to be able to have modest growths in our ticket prices.
Thanks guys. Thanks Mike.
Thank you, the next question is coming from Jim Goss of Berington Research, please go ahead.
Jim Goss: Thanks. You've talked more about alternative content actions in recent quarters.
and Wild The Need may be lessening somewhat since the film flow is improving. I'm ex was discussing improved platform utilization on its own yesterday.
Speaker Change: and I wonder if you might talk about...
Speaker Change: House and this might fit in going forward.
Both in terms of something unique to cinema and maybe something in conjunction with others in the industry, I'll have to have them or whatever that might be a better way to create some initiatives that might be successful.
Sure thing, well yeah I personally am in thrilled to see
and some growth in non-traditional content. I've long been a believer that there is a lot more potential than we were realizing pre-pandemic in this space. And a bit frustrated that it had never really taken off as much and now we're finally seeing that. On a go-for basis, I think even as more of the larger Hollywood films come back into the fold with further volume recovery, there will continue to be a place for these types of films. So some of these movies are doing...
Speaker Change: Considerable Business at the level of Hollywood films even you look at some of the faith-based concert you look at some of the multicultural content you know optimistic that will start to see some more Concert films as well when you look at the success of Taylor Swift and Beyonce last year So you know there's always gonna be perhaps a bit of timing you know making sure that the The scheduling and programming of those don't coincide with a you know a week or two week period in the summer Where there's already a substantial amount of volume, but keep in mind most of our theaters We got a number of screens in the ability to program these
Speaker Change: in the midst in parallel with the big Hollywood content. So I definitely think it can continue to be a source of box office lift. We've always felt it could represent.
Up to 5% or so of box office. For us last year it was 14% and year to date this year it's still been about 10% so it's over indexing right now and again I think it'll continue to be to have its place on a go-for basis and hopefully continue to grow.
Speaker Change: Okay, and are there live events that you might make some headway with?
You know what this big network around the country or
Will write offerings still get in the way of getting any of that done.
Speaker Change: Well, yes, I mean, we have the ability to do live events and we've done that. We've broadcast BTS live, we do live Q&A sessions that we broadcast across our network. I mean, we have the ability to broadcast not only within our cinema network, but to other theater chains as well. You know, if you're commenting specifically on sports, sports, and traditional sports is a more complicated area because of the rights that you're talking about. Like unraveling that, we've had some success in that in the past with Disney and their relationship with, you know, their ownership of ESPN where we were unable to pierce through that. But it is a complicated and challenging area to navigate. So there's still work to be done there. But we've done gaming types of events and there's a fantastic consumer response to it. So it's an...
Another pocket where I'd say it's been limited in the number of events there have been today, but certainly there's opportunity there and there's been phenomenal fan response when we've done those types of things.
Okay, one last thing, you're notable upcoming films are very franchise-category. So that should give some comfort in terms of future projections.
which you also talked about that breath of content, that's developing and wondering if that...
Speaker Change: of content is creating some demographic shifts. You may be experiencing and whether that might also be helping that you're moving plus efforts and your proactive push marketing to those members.
Oh, actually, I mean, we believe that what is most healthy.
Speaker Change: For the industry is a broad range of compelling content that speaks to wide audience space. We tend to talk about and focus more on these calls on the bigger films that will obviously drive a larger portion of the box office. But that by no means.
suggests that the non-franchise, smaller and meteor films are not important, they absolutely are.
We look at the potential for some of those original types of films. You big business and support it. It's necessary and you're right. Our most frequent moviegoers, our movie club members, they consume a high amount of franchise films and non-francised films. So it's one of the things that...
Use us optimism as we look forward as more of that type of content fills back in. It provides a greater amount of opportunities for...
Specific fans of that, those types of films as well as the kinds of fans who consume everything to just see more content.
So, absolutely, you know, think that, and by the way, I would say to that to a large degree, the more flexible type of release model that exists now, it improves the risk equation for studios on that type of content and we started to see, you know, the opportunity for more that to come in and see, it's lean a bit more into that, which was becoming a struggle pre-pandemic with a, you know, longer window. So, I say it's one of the benefits that has come out of.
and more flexible windows it allows for a greater opportunity for students to take chances on that type of film and be able to do so in a profitable way.
and thanks Sean for your feedback.
Thank you, the next question is coming from Stephen Lastic of Goldman Sachs, please go ahead.
Stephen Lastic: Hey, great, good morning. Thanks for taking the question. Just one for me, Sean. Could you give us really a thought on how you expect the competitive dynamic and industry to play out as the slate ramps here in 4Q and into 2025 and just curious to the extent of which competition might be framing the way you're approaching pricing, either at the box or or a rent movie club. Thank you.
Sean Gamble: Sure, I mean I think it probably touches on a couple of the concepts we've spoken to you know one just as more compelling films come to feeders and we hit some more of our capacity limits in terms of our maximum seating occupancies
That can affect our share in some ways it's a good problem to have and that we're being fully utilized. It's our most profitable type of scenario to have. But from a competitive landscape we could just see our share come down. A tick as Melissa was referencing.
Earlier, I say the way we approach our business, we're continuing just to do a wide range of consumer-facing initiatives to enhance.
The Intertainment Value that we provide. So I think that's just to stay competitive and try to maintain our edge out there. Pricing from a pricing standpoint, we use a tremendous amount of data and analytics on a very discrete, feeder-based level to drive those decisions.
So some of that's obviously influenced by dynamics in the marketplace.
of demographics, what's happening perhaps with some of the competition out there, but we are testing things, using controls and letting that guide us so that whatever we're doing ultimately isn't affecting the volume of attention. It also plays into our food and beverage consumption as well, and we're not wanting to add virtually affect our incidents.
So to really try to optimize the level that and you can work both ways up or down. So I would say it's a data-driven exercise based on a lot of analytics that kind of guide us there. More so and then just kind of and it's consumer oriented, more so then just thinking about what our competition is doing.
Speaker Change: Good, thank you.
Speaker Change: Thank you very much.
Thank you at this point I would like to turn the floor back over to Mr. Gamble for closing comments.
Okay, thank you, Donna. Just in closing, I'd like to reinforce once more that we believe our third quarter results are indicative of the meaningful continued impact our team, initiatives are having in advancing our company. And we remain bullish about the future of our industry and cinema. I'd like to thank you all again for joining us this morning and we look forward to speaking again following our fourth quarter results.
Speaker Change: Alright, get it.
Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines along the webcast at this time and enjoy the rest of your day.
Speaker Change: [inaudible]
Speaker Change: The End.