Q4 2024 Cinemark Holdings Inc Earnings Call
Speaker Change: Greetings and welcome to Cinemark Holdings fourth quarter and full year 2024 earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero 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 of Investor Relations. Thank you. Please go ahead.
Speaker Change: Good morning, everyone. I would like to welcome you to Cinemark Holdings, Inc.'s fourth quarter and full year 2024 earnings release conference call, hosted by Shawn Gamble, President and Chief Executive Officer, and Melissa Thomas, Chief Financial Officer.
Speaker Change: Before we begin, I would like to remind everyone that statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions.
Speaker Change: These forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied in the forward-looking statements.
Speaker Change: The factors that could cause results to differ materially are detailed in the company's 10-K, which was filed this morning.
Speaker Change: Also, today's call may include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's most recently filed earnings release, 10-K, and on the company's website at ir.sinemark.com.
Speaker Change: With that, I would like to turn the call over to Sean Gamble.
Thank you, Chanda. Good morning, everyone.
Speaker Change: Before we get started, I'd like to first express our deep sympathies for our many friends, colleagues, partners, and the collective Los Angeles community that has been impacted by the devastating wildfires in California. Our hearts go out to all of you as you manage through this difficult time.
Speaker Change: Thank you all for joining us this morning for our fourth quarter and full year 2024 earnings call. During our prepared remarks today, I will focus predominantly on full year highlights and then Melissa will provide details pertaining to our fourth quarter financials and go forward capital allocation strategy.
Speaker Change: As we look back on 2024, Box Office results once again reinforce the enduring and timeless appeal of shared cinematic experiences that are unique and exclusive to a movie theater environment.
Speaker Change: Throughout the year, audiences showcase their ongoing enthusiasm for being immersed in captivating stories and events on a grand, larger-than-life scale with cutting-edge sight and sound technology that can't be matched at home or anywhere else.
Speaker Change: The collective enjoyment, elevated emotional impact, and deep, lasting memories that are fostered by experiencing films in a communal, theatrical setting continue to accentuate the irreplaceable impact of this long-established, yet ever-evolving form of entertainment.
Speaker Change: North American industry box office reached approximately $8.8 billion in 2024, which climbed to within 3% of 2023, despite the significant headwinds that were imposed by the prior year's strikes in Hollywood.
Speaker Change: As more and more compelling content was released to the big screen, moviegoing momentum surged, delivering overall results that far exceeded expectations with numerous all-time records.
Speaker Change: Examples include the highest grossing animated film in history, the most successful R-rated film of all time, and North America's biggest Thanksgiving box office weekend ever.
Speaker Change: Furthermore, multiple franchise installments outperformed their predecessors, while legacy sequels tapped into nostalgia to unite generations, attracting both longtime fans as well as new audiences with a blend of beloved characters and fresh faces and storylines.
Speaker Change: And as the industry swelled to better than expected results, Cinemark once again went above and beyond with year-over-year box office performance that outpaced our industry by 300 basis points domestically and 100 basis points internationally.
Speaker Change: We have now extended our outperformance trend to 14 of the past 16 years and relative to 2019 our recovery since the pandemic now exceeds respective industry benchmarks by 900 basis points in North America and 700 basis points in LATAM.
Speaker Change: During 2024, we maintained our meaningful market share gains of more than 100 basis points relative to our pre-pandemic baseline, and we entertained more than 200 million guests across our global circuit.
Speaker Change: Furthermore, we also achieved all-time high concession sales with another new domestic food and beverage per cap record of $7.89 that was propelled by our second highest purchase incident rate ever.
Speaker Change: Altogether, we delivered worldwide revenue of more than $3 billion with $590 million of adjusted EBITDA and a solid 19.4% adjusted EBITDA margin that was flat year-over-year despite a 4% decline in attendance.
Speaker Change: We also generated strong free cash flow of $315 million and further re-fortified our balance sheet.
Speaker Change: Our results are the byproduct of an intense focus on effectively navigating the dynamic ebbs and flows of film release volume throughout the year, while simultaneously advancing a wide range of strategic initiatives geared toward positioning our company for future success.
Speaker Change: Over the past several quarters, I've provided updates on these initiatives, including actions we've pursued to elevate the experience we provide our guests, build audiences, grow new sources of revenue, streamline processes, and optimize our footprint. And this morning, I thought I would share a brief full year recap.
Speaker Change: The content we show on our screens is always one of the primary drivers that attracts guests to our theaters. Our studio partners and filmmakers do a phenomenal job of producing all kinds of captivating films that are intriguing to audiences and then advertising those films with compelling campaigns to generate interest to see them.
Speaker Change: At Cinemark, we then work hard to amplify the impact and conversion of those campaigns, driving audiences to our theaters through the extensive marketing reach, loyalty programs, and sophisticated scheduling tools that we have developed over many years.
Speaker Change: We now have more than 30 million addressable contacts across our global circuit, to whom we send weekly calls to action to stimulate ticket sales.
Speaker Change: Utilizing purchase history and expressed interest, our emails, push notifications, website, and app automatically tailor communications with millions of unique variations to increase their effectiveness by making them highly personalized, relevant, and appealing.
Speaker Change: We also have established a wide social and digital outreach that generates billions of impressions each year with increasing engagement that has driven a heightened connection and affinity to our Cinemark brand.
Speaker Change: Our loyalty programs also deliver significant impact in boosting awareness of upcoming films and increasing movie-going frequency.
Speaker Change: Our guests continue to find tremendous value in our fan-favorite monthly membership program, Movie Club. And over the course of the year, subscribers grew another 10% to nearly 1.4 million members.
Speaker Change: We have an active channel of communication with our Movie Club members. They are consistently our most satisfied customers. And in 2024, tickets purchased through Movie Club grew to represent 25% of our domestic box office.
Speaker Change: Moreover, combined with our free movie rewards program, loyalty members now consistently represent over half of our domestic box office proceeds every quarter.
Speaker Change: In addition to utilizing marketing and loyalty efforts to stimulate movie-going demand, we also have improved our programming capabilities.
Speaker Change: Through an ongoing refinement of the database tools and controls we use to schedule our showtimes, we've further increased the volume and availability of films that consumers want to see most.
Speaker Change: Additionally, we once again actively pursued non-traditional content to attract guests to our theaters during slower periods of release volume, as well as to expand our audience base.
Speaker Change: Foreign, faith-based, concert, and repertory films continue to grow in appeal and generated more than 10% of our domestic admissions revenue for the third year in a row.
Speaker Change: Of course, beyond what we show on our screens, what's equally important in keeping guests coming back for more is the experience we provide them when they visit our theaters.
Speaker Change: To that end, we remain committed to continuously enhancing the quality and execution of our in-theater presentation, amenities, atmosphere, and service.
Speaker Change: to deliver a comprehensive entertainment value that is unmatched across our industry and that continues to earn us positive satisfaction ratings from nearly 95 percent of our guests.
Speaker Change: In 2024, we continued advancing the multi-year conversion of our entire circuit to barco laser projectors, reaching 20% of our global footprint.
Speaker Change: We also diligently maintained our superb fleet of digital projectors, delivering an incredible 99.98% uptime while sustaining our industry-leading light levels across more than 10 million shows throughout the year.
Speaker Change: We also maintained our commitment to investing in new, premium amenities while extracting increased impact from previous installations.
Speaker Change: In doing so, we achieved record-breaking box office results for our large format screens driven by our XD auditoriums, the world's number one exhibitor-branded premium format.
Speaker Change: For the full year, PLFs represented 5.5% of our total screens, but accounted for 13.4% of our total box office proceeds, which was up 60 basis points from 2023 and almost 400 basis points from 2019.
Speaker Change: Similarly, our D-Box Motion seats also set a new box office record that grew almost 40% year-over-year on a 30% expansion in seat count.
Speaker Change: Of course, we also continue to derive substantial benefits from our widespread fleet of premium recliner seats that span approximately 70% of our domestic circuit.
Speaker Change: Another amenity that also meaningfully contributes to the atmosphere and experience guests enjoy at our theaters is our food and beverage selection.
Speaker Change: During 2024, we further enrich the variety, assortment, and ease of purchase of our concession offerings.
Speaker Change: We continue to expand enhanced hot food options, hone our menus to better cater to local tastes, and fine-tune the layout of our self-service facings to improve sell-through.
Speaker Change: We also work to capitalize on emerging consumer trends for convenience with the introduction of more expedited queue lines that are now present in a third of our domestic theaters, while further ramping up our mobile ordering platform.
Speaker Change: At the same time, we actively leaned into growing excitement for movie-themed merchandise, which further elevates the fun, excitement, and anticipation of going to the movies.
Speaker Change: Collectively, these many actions drove our all-time high food and beverage results that I mentioned earlier.
Speaker Change: To round out the progress we have made advancing our strategic initiatives in 2024, we also continue to increase the sophistication and efficiencies in the way we operate our business.
Speaker Change: Over the course of the year, we maintained our focus on continuous improvement in our pursuit to drive productivity without compromising quality by using refined data, analytics, and tools to simplify tasks, increase automation, and strengthen decision-making.
Speaker Change: Through our ongoing efforts, we further enhanced our staffing and workforce management capabilities, as well as re-engineered varied operating procedures to successfully generate a third straight year of labor productivity upside, reducing payroll hours deployed per customer while preserving our guest service standards.
Speaker Change: We also strengthened our overall sourcing and procurement practices to more aggressively pursue product alternatives and cost deflation as we work to combat ongoing inflationary pressures on feeder amenities and services, cost of goods sold, and utilities.
Speaker Change: And in the realm of pricing, we further invested in our team, analytics, and market intelligence to more closely monitor and respond to market elasticities at a discrete feeder level so our pricing stays actively calibrated and aligned with evolving demand dynamics.
Speaker Change: All of these actions provided significant impact in helping us to maintain our strong margins in 2024 that were consistent with 2023 despite the attendance headwinds caused by the strikes.
Speaker Change: Moreover, we believe they will continue to afford us ongoing benefits as we move forward.
Speaker Change: I'd like to commend our exceptional Cinemark team for their outstanding determination, skill, and agility to deliver yet another year of stellar results while continuing to make significant advancements in positioning our company for long-term prosperity.
Speaker Change: As we turn our attention to 2025 and beyond, we remain highly optimistic about what the future holds for Cinemark and theatrical exhibition.
Speaker Change: After a relatively light first quarter, the 2025 release schedule for the balance of the year
Speaker Change: continues to reflect a nice springback to the recovery trajectory our industry was following prior to the 2023 strikes in Hollywood.
Speaker Change: and 2026 is already looking like it will notch another step forward from there.
Speaker Change: As of today, a little over 100 wide releases have been dated this year.
Speaker Change: We expect that figure will likely grow to around 115 by year end, which is roughly 90% of pre-pandemic levels and represents a further improvement from the past two years that settled around 85%.
Speaker Change: 2025 hosts the most diversified slate we have seen since COVID, with a wide range of genres and varieties of films, both big and small, that truly offers something for everyone.
Speaker Change: There's action-adventure like a Minecraft movie, The Accountant 2, Mission Impossible, The Final Reckoning, Ballerina, F1, and Jurassic World Rebirth, superhero films like this past weekend's heroic launch of Captain America Brave New World, Thunderbolts, Superman, and the Fantastic Four First Steps.
Speaker Change: Family Fair, including Snow White, Lilo and Stitch, How to Train Your Dragon, Smurfs, and Zootopia 2.
Speaker Change: Suspense, Thriller, and Horror titles such as Megan 2, I Know What You Did Last Summer, Conjuring Last Rites, and Saw 11.
Speaker Change: comedies like Mickey 17, The Phoenician Scheme, and A Naked Gun Reboot.
Speaker Change: Faith-based films, including The King of Kings and the next season of The Chosen.
Speaker Change: nostalgia plays like Karate Kid Legends, Freakier Friday, and Michael, Indian drama titles such as Warfare and Downton Abbey 3, and fantasy sci-fi spectacles that include Tron Ares, Wicked for Good, and of course Avatar Fire and Ash.
The list in 20-25 goes on and on.
Speaker Change: And then, 2026's film slate is already jam-packed with new installments from widely popular franchises like The Avengers, Minions, Dune.
Speaker Change: Toy Story, Spider-Man, Shrek, Hunger Games, and Mario Brothers, as well as new original movies from filmmakers that include Christopher Nolan, Jordan Peele, and Steven Spielberg, just to name a few.
Speaker Change: We are thrilled to see the lineup of compelling content continue to build with so many promising films on the horizon that have already been announced.
Speaker Change: As we consider the positive progression of film content over the next two years, one of our top priorities going forward is to fully capitalize on that resurgence, maximizing attendance, box office, and margin potential.
Speaker Change: To do so, we plan to continue driving actions to further refine our programming and showtime scheduling while strategically leveraging our marketing, pricing, and loyalty capabilities and aggressively pursuing concession sale opportunities.
Speaker Change: At the same time, we remain maintain our focus on further advancing strategic initiatives to position Cinemark for long-term growth and success.
Speaker Change: This includes continuing to elevate the quality and value of the experiences we provide our guests.
Speaker Change: scaling up our investments to maintain and upgrade our circuit, pursuing revenue growth and diversification opportunities, and driving incremental productivity gains.
Speaker Change: And finally, all the while, we intend to maintain the operating discipline and prudence that have served us so well over the years and helped us build our advantaged market position.
Speaker Change: We will continue to actively focus on staying ahead of market trends, effectively navigating fluctuations in attendance, remaining disciplined with expense, cash, and investment management, and resolving our remaining COVID-related debt.
Speaker Change: We've made huge strides over the past years since COVID on account of the many actions we have pursued to establish new growth channels, develop enhanced operating capabilities, optimize our circuit, expand our market advantages, and strengthen our financial position.
Speaker Change: We believe Cinemark is in excellent shape in today's environment because of these efforts.
Speaker Change: Furthermore, we maintain a positive outlook for the future based on the current state of our company, the many opportunities that are directly within our control to drive incremental value creation, and the further industry recovery we anticipate overall.
Speaker Change: As such, we are thrilled to announce this morning that we have reinstated our cash dividend.
Speaker Change: This event marks another major milestone in our company's recovery from the pandemic and reflects the remarkable achievements of our sensational team to date, the confidence we have in the future prosperity and resilience of Cinemark, and our commitment to creating long-term shareholder value.
Speaker Change: I will now turn the call over to Melissa, who will provide added context on our fourth quarter results and capital allocation strategy.
Melissa?
Melissa Thomas: Thank you, Sean. Good morning, everyone, and thank you for joining the call today.
Melissa Thomas: We were very pleased with our fourth quarter and full year 2024 operating and financial performance.
Melissa Thomas: Our success was fueled by industry results that far surpassed expectations.
and our Cinemark team's exceptional operational execution.
Melissa Thomas: In the fourth quarter, we entertained 51 million moviegoers across our global footprint, a significant increase of 26% compared with the fourth quarter of 2023, given the higher volume and increased scale of films.
Melissa Thomas: We grew worldwide revenue nearly 28% to a Q4 record of $814.3 million.
Melissa Thomas: Moreover, we gained leverage over our fixed costs with the increased attendance and benefited from the execution of our strategic initiatives, nearly doubling our adjusted EBITDA year-over-year to $156.9 million.
Melissa Thomas: We also expanded our adjusted EBITDA margin by 680 basis points to 19.3%.
Melissa Thomas: Domestically, we welcomed 32.6 million patrons, up 24% compared with the fourth quarter of 2023.
Melissa Thomas: We held our market share flat with the elevated levels we saw in Q4 of last year and maintained significant share gains of more than 100 basis points compared with the pre-pandemic period.
Melissa Thomas: Our market share was bolstered by a content mix that skewed more heavily towards family films, which tend to perform particularly well in our circuit, as well as our strategic initiatives.
Melissa Thomas: We also benefited from our ability to capitalize on alternative content opportunities during the slower October content period, which offset the impact of some of the capacity constraints we experienced during the crowded holiday season.
Melissa Thomas: Propelled by the higher attendance, our domestic admissions revenue increased 27% to $338.7 million dollars.
Melissa Thomas: We were able to overcome last year's challenging comparison associated with the Taylor Swift The Heiress Tour concert film and grow our average ticket price 2% year-over-year to $10.39.
Melissa Thomas: This growth was primarily driven by strategic pricing initiatives and higher premium format mix, particularly 3D penetration.
Melissa Thomas: We grew our domestic concession revenue a sizable 29% year-over-year to $259.7 million.
and delivered a record-setting fourth quarter per cap of $7.97.
Melissa Thomas: Our concession per cap was up nearly 4% driven by strategic pricing with incidence rates holding strong despite the outsized increase in attendance.
Melissa Thomas: Other revenue was $68 million, an increase of 35% year over year, primarily due to higher attendance, an increase in online penetration, and a one-time $6 million contractual payment received from a third-party service provider.
Melissa Thomas: Shifting to our international segment, we entertained 18.4 million guests during the fourth quarter, representing a 28% increase compared with the same period last year.
Melissa Thomas: Notably, our fourth quarter international attendance reached 90% of 2019 levels and our market share continued to meaningfully outperform the pre-pandemic period.
Melissa Thomas: Internationally, we delivered $67.8 million of admissions revenue, $53.7 million of concession revenue, and $26.4 million of other revenue in the fourth quarter.
Melissa Thomas: In total, we grew international revenue 23% year-over-year to $147.9 million, and increased adjusted EBITDA 160% to $28.9 million.
yielding a 19.5% adjusted EBITDA margin.
Melissa Thomas: International Adjusted EBITDA benefited from enhanced operating leverage associated with the 28% increase in attendance.
Melissa Thomas: Film performances that were stronger than expected, and inflationary impacts, partially offset by FX devaluation.
Melissa Thomas: We continue to meaningfully benefit from our local team's significant expertise and long track record in effectively managing the intricate economic and political environment throughout our Latin American region.
Melissa Thomas: Turning to global expenses, film rental and advertising expense was 58 percent of admissions revenue, up 440 basis points compared with the fourth quarter of 2023 due to an increased concentration of high grossing titles and the overall mix of films.
Melissa Thomas: which is a dynamic we expect will persist going forward as the box office continues its recovery.
Melissa Thomas: Concession costs as a percent of concession revenue were 19.2%, down 30 basis points year-over-year, driven by strategic pricing measures, lower shrink in waste, and favorable concession rebates.
Melissa Thomas: partially offset by inflationary pressures on certain concession categories and a shift in product mix.
Melissa Thomas: Global salaries and wages were $107.7 million, up 11% compared with the fourth quarter of 2023, due to higher payroll hours to accommodate the increase in attendance and expanded operating hours, as well as higher wage rates and employee benefits.
Melissa Thomas: These increases were partially offset by the impact of our labor productivity initiatives.
Melissa Thomas: As a percent of total revenue, salaries and wages declined 200 basis points year over year.
Melissa Thomas: Facility lease expense was $80.6 million, a modest increase of 2% year-over-year, reflecting the relatively fixed nature of domestic leases.
Melissa Thomas: as well as higher variable rent internationally due to the increase in attendance.
Melissa Thomas: As a percent of total revenue, facility lease expense decreased 240 basis points.
Melissa Thomas: Utilities and other expense was $127.3 million, up 12% from the fourth quarter 2023, primarily driven by the increase in attendance, which impacted our variable costs such as credit card fees.
Melissa Thomas: This expense line item was also impacted by higher gift card commissions and higher property and liability insurance.
Melissa Thomas: As a percent of total revenue, utilities and others declined 210 basis points.
Melissa Thomas: G&A was $57.1 million in the fourth quarter, an increase year-over-year due to wage and benefits inflation, increased severance costs, and higher share-based compensation. These impacts were partially offset by lower incentive compensation expense and foreign exchange rate fluctuations.
Melissa Thomas: Globally, we delivered $51.3 million of net income attributable to Cinemark Holdings Inc. in the fourth quarter and eluded earnings per share of $0.33.
Melissa Thomas: For the full year, we generated $309.7 million of net income attributable to Cinemark Holdings, Inc., and diluted earnings per share of $2.06.
Melissa Thomas: Shifting to the balance sheet, we ended the year with a healthy $1.1 billion of cash, which remains elevated as we prepare to address our convertible notes maturing in August of 2025.
Melissa Thomas: Our year-end cash balance benefited from $315 million of free cash flow generation during 2024.
Melissa Thomas: Specific to the fourth quarter, we generated $136 million of free cash flow, which was bolstered by working capital tailwinds associated with the stronger December box office.
Melissa Thomas: Keep in mind, our free cash flow has benefited from lower CapEx levels, as well as lower cash taxes due to our utilization of tax attributes accumulated during the pandemic period.
Melissa Thomas: As we look forward, we expect our CapEx levels will ramp up as box office recovery resumes and our cash taxes will increase.
Melissa Thomas: Turning to capital allocation, as we have consistently stated, we have three pillars to our capital allocation strategy.
Strengthening our Balance Sheet.
Investing to position the company for long-term success.
and returning excess capital to shareholders.
Melissa Thomas: with a focus over the past few years on the first two priorities.
Melissa Thomas: Regarding the first pillar, we are proud of the progress we made during 2024 to strengthen our balance sheet.
Melissa Thomas: We paid down $156 million of pandemic related debt, extended our maturities, and reduced the interest rate on our term loan through successful reprices, most recently in November where we achieved a 50 basis point reduction.
Melissa Thomas: Furthermore, we maintained our net leverage ratio within our target range of 2 to 3 times, ending the year at 2.2 times net leverage.
Melissa Thomas: We continue to view our balance sheet as a strategic asset and a key differentiator for our company, providing us with the flexibility to invest in long-term growth and maintain the health of our circuit.
Melissa Thomas: Moving to our second pillar, pursuing strategic and financially accretive investments to grow and secure Cinemark's long-term success.
In 2024, we spent $151 million on capital expenditures.
Melissa Thomas: Given the anticipated box office recovery and our intent to capitalize on that recovery, we are increasing our capital expenditures for 2025 to approximately $225 million.
Melissa Thomas: We expect to allocate roughly half of that spend towards maintaining a high-quality circuit and laser-projector conversions.
Melissa Thomas: With the remainder to be spent on high-confidence, ROI-generating opportunities, including new builds and other theater enhancements, such as recliners, premium formats, and food and beverage upgrades.
Melissa Thomas: While we intend to continue to prioritize the strength of our balance sheet and growth opportunities first and foremost, given the progress we've made on these two pillars, coupled with our expectations around Cinemark and the broader industry's recovery, we have reevaluated our near-term capital allocation priorities.
Melissa Thomas: For our third pillar, returning excess capital to shareholders, we are thrilled to share that our Board of Directors has authorized the reinstatement of an annual cash dividend of $0.32 per share, payable quarterly, representing an approximate 1% yield.
Melissa Thomas: Based on our outstanding shares, this equates to approximately $40 million annually. The first quarterly dividend will be payable on March 19th to shareholders of record as of March 5th.
Melissa Thomas: The reinstatement of our dividend underscores the health of our balance sheet, strength of our operational and financial performance, as well as the positive trends we are seeing in the industry's recovery.
Melissa Thomas: Beyond this, the repayment of our convertible notes remains our primary capital consideration in the near term.
Melissa Thomas: Once the convertible notes are fully addressed, our intent is to return a greater share of our free cash flow to shareholders through dividends and or stock buybacks, provided our net leverage ratio remains within our target range of two to three times.
Melissa Thomas: The relative mix of dividends and or stock buybacks will be determined over time.
Melissa Thomas: Our overarching goal is to maintain a balanced and disciplined approach to capital allocation that provides us with sufficient flexibility to capitalize on any future value creation opportunities that may arise, including M&A, while also mitigating risks.
Melissa Thomas: In closing, we are proud of our 2024 results and the strong positioning of our company.
Melissa Thomas: Our success enables us to confidently invest in the future of our business and prioritize shareholder returns.
Melissa Thomas: demonstrating our dedication to being good stewards of capital. As we look forward, we remain highly focused on continuing to generate strong financial and operating results while creating long-term value for all 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. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will 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's star 1 to register a question at this time.
Chad Bynum: Today's first question is coming from Chad Bynum of Macquarie. Please go ahead.
Chad Bynum: Hi, good morning. Thanks for taking my question and congrats on reinstating the dividend.
Speaker Change: Sean, I wanted to start with concessions, maybe focusing on the U.S. You mentioned that this is a big driver of growth in the next couple of years.
Speaker Change: continue to grow at record-setting paces. So can you maybe just elaborate a little bit more in terms of
Speaker Change: What's going to drive the further growth? Is it incidents of purchase? Just the overall consumer environment, which we've seen a nice
improvement, particularly after the presidential election.
Speaker Change: So, is it controllables or uncontrollables and kind of how you see the CapEx helping grow that line? Thank you.
Chad Bynum: Sure. Thanks for the question, Chad. Look, we've been thrilled with our...
Chad Bynum: continued food and beverage performance really over the years. I think the whole industry saw a big jump in food and beverage coming out of the pandemic. There was some question as to whether or not there would be a reset and it really just established a new baseline from there. We've continued to grow. I always look at food and beverage as a game of singles and doubles. It's a whole series of varied initiatives.
that ultimately drive...
Chad Bynum: The overall results that we've had, everything from the assortment of what we're putting into our theaters to just kind of optimizing the way we lay that out.
Chad Bynum: to new ways to ease purchase through the way we navigate lines in our theaters and the different types of forward-facing...
fixtures that we have.
in our theaters. Clearly, Merchandise has, you know, had some...
Chad Bynum: Big uptick over the last couple of years as well. So it's a whole range of things. Specific to your question on kind of incidents and pricing, that plays into it too. Like we have our strategic pricing team that's not only working on how to best optimize ticket pricing based on elasticity, but the same goes for our food and beverage. So there's a component of that. But we do heavily focus on how do we drive incidents.
Chad Bynum: and that tends to overall lead to the richest margins and we still have seen the bulk of our growth.
over the last several years come from
Chad Bynum: stimulating more volume through promotions, through just better fine-tuning what we're offering to guests, and some of those other things I mentioned just in terms of like the ease of purchase. So a wide range of things and we've got a whole series of initiatives that are in motion to just to continue to try to sustain those types of increases over time.
Speaker Change: And Ted, just to provide a little bit of context on expectations for full year 2025, we are expecting to continue to grow our domestic concession per cap moderately year over year in 2025 with catalysts as Sean described.
Great. Thank you both.
Speaker Change: And then as we think about the remainder of the content for 2025, obviously more...
I guess, loaded it in the last three quarters.
Can you talk about how you're feeling about this?
Speaker Change: While there are some pockets of content that are spaced out nicely with a great cadence, we do see a little bit more bunching up in periods of places throughout the year, so that could create some more capacity constraints than we've seen in the past again I would flag those are usually positive signs in the sense that we're fully maximized in terms of our.
Speaker Change: Occupancy in those periods.
Speaker Change: As I mentioned in our prepared remarks.
The types of content, we think it's one of the most diverse slates, we've seen so we think that.
Speaker Change: That has a lot to offer all types of audiences. So.
Speaker Change: Based on at least on paper the films that we've seen and what materials have been released thus far we're really optimistic about how how these films will perform over the course of the year.
Speaker Change: Thank you I appreciate it thanks, Jeff.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question is coming from David Karnofsky of J P. Morgan. Please go ahead.
David Karnofsky: Hi, Thank you maybe just Melissa following up on your capital allocation commentary can you just clarify on the convert and how you intend to settle that with cash and or stock and then you mentioned the buyback.
David Karnofsky: You might want to comment on this later, but maybe what would be the factors that would deter.
David Karnofsky: Determine the mix of repurchases versus dividends over time.
David Karnofsky: Great. So in terms of your question on convertible note maturity. So as we conveyed in our prepared remarks, given our strong financial condition and optimism around a recovery in that of the industry. We do intend to repay the principal amount of the convertible notes using cash on hand upon their AGA.
David Karnofsky: 2025 maturity the notes don't have a provisional call feature so we do expect cash our cash balance to remain elevated in the near term as we prepare to address the converts beyond the principal amount, we do have a call spread in place that protects us from stock price movements up to $22.08 and we have the flexibility to settle.
David Karnofsky: The impact in either cash or shares how we choose to settle any exposure above the principal amount will be contingent upon the extent to which the stock price exceeds 20, 208, our cash on hand and potential dilution considerations among other factors.
David Karnofsky: And.
David Karnofsky: So that.
David Karnofsky: That's really the strategy there well, we'll determine based on where the stock price is at that time, and we will take the course of action that we believe is in the best interest of the company and our shareholders.
David Karnofsky: With respect to determining the relative mix of dividends versus stock back buybacks over time.
David Karnofsky: That will really be based on the facts and circumstances that we see there in terms of factor isn't the natures of buybacks in general the things that we're gonna I'd consider would include but not be limited to our cash and liquidity valuation dilution manner.
David Karnofsky: Men and total ongoing returns paid to cap that are paid to shareholders, but again, we will evaluate that based on facts and circumstances available at the time.
Speaker Change: Okay, and then just on a separate topic, Sean I'd be interested to get your thoughts on Netflix as agreement with IMAX for the Narnia film.
<unk> participated in a somewhat bigger IMAX footprint, but.
Speaker Change: Wanted to get your overview overall view on the structure and then whether you see an opportunity at some point down the line for <unk>.
Speaker Change: A similar participating arrangement with your XD screens.
Speaker Change: Sure I think.
Speaker Change: It's an interesting structure they put together I think.
Speaker Change: We would have preferred to see a more fair.
Full wide release of the films such as that I think that also it sounds like is similar to what the filmmaker would prefer but I know, it's pretty clear from their commentary that's not the strategy. They are choosing to employ right now.
Speaker Change: So I think this has been described more as a promotional effort.
Speaker Change: Way to support talent versus any real shift I think.
Speaker Change: Ultimately it remains to be seen.
Speaker Change: How that film gets programs because you know it is being released in a very crowded period of the year in 2026, where it'll be going up against several other major films that will have full releases from a major studio suppliers. So I think it's a it's kind of a TBD in terms of how that plays out so it's an interesting concept.
Speaker Change: I know it's a it's.
Speaker Change: And approach that that's being used but I don't think its necessarily one that is sustainable over time.
Speaker Change: Okay Alright.
David Karnofsky: Thanks, David.
Speaker Change: Thank you. The next question is coming from Robert Fishman of Moffett Nathanson. Please go ahead.
Good morning, I'll start with Sun and then one for Melissa.
Speaker Change: Sean actually a two parter for you. So can you you continue to perform strongly in the markets in the U S. I think you called out a number one or two and the box office in 'twenty.
Speaker Change: 2020 one of your top 25 markets can you just talk about the advantages of your domestic geographic footprint.
Speaker Change: Still leans a little bit more suburban or other regions in the U S that you can benefit from getting even bigger.
Speaker Change: And maybe on the flip side of that since 2019, you've reduced your screen count by about 400 screens.
Speaker Change: Do you see building more screens going forward is good ROI or should we expect further reductions of the underperforming screens in the years ahead. Thank you.
Speaker Change: Thanks, Robert Great question.
Speaker Change: Yes, I mean, I think starting with our profile.
Speaker Change: We do tend to operate more in our suburban markets across the country at large not to say that we aren't in some urban markets. We obviously have a large presence in places like San Francisco and Los Angeles and Thats, just how the circuit has evolved over time.
Speaker Change: It certainly has nothing to do with any aversion to other markets that we're not in the U S. We tend to evaluate those ultimate.
Speaker Change: As areas of further opportunity for growth like kind of you has ultimately it boils down to.
Speaker Change: What's the opportunity on a discrete level. So as we looked at we looked over time as we.
Speaker Change: We've looked over times.
Speaker Change: The places that we've chosen to put theaters and have just yielded the best prospects for returns so.
Speaker Change: We would be open to broadening out into some other markets too to the extent that there were opportunities that had a high confidence of accretive.
New theaters.
Speaker Change: You mentioned kind of closing down theaters, we have reactivated our newbuild pipeline. We do believe that will continue to be part of.
Speaker Change: Our overall optimizing footprint strategy over time in that pocket of growth for us we do see more opportunities emerging that have the right kind of return profile and the right kind of demographics for new builds are clearly that whole pipeline was was put on a bit of pause during the pandemic, but.
Speaker Change: We're encouraged by what we see in terms of future opportunities. It all boils down to the types of.
Speaker Change: The types of returns that prospects, we have and the balancing of our capital allocation priorities that Melissa spoke about earlier.
Speaker Change: Okay cool and so Melissa if we go back to some of your prepared remarks.
David Karnofsky: Keeping margins flat and full year 24 versus 23, just can you talk a little bit more about how we should think about margin improvement in 'twenty five and beyond.
David Karnofsky: Clearly a lot of moving pieces on the cost side with box off is expected to recover further.
David Karnofsky: Just talk about some of those cost line items like the film rental costs and other potential efficiencies. Thank you.
David Karnofsky: You're welcome Alright. So if we had go forward margins a couple of things that I would highlight first based on the performance that we've been experiencing over the past couple of years, we're certainly optimistic on our ability to expand margins as the box office rebounds further in 2025 and beyond.
David Karnofsky: In terms of 2025, we do expect our margin to benefit from higher operating leverage over our fixed costs due to the stronger year over year box office as well as the ongoing execution of our strategic initiatives and growth in our average ticket prices as well as our concession per cap. However.
David Karnofsky: However, these anticipated benefits may be somewhat offset by market share tempering as the box office recovers and auditoriums increasingly reached capacity limits and as well as ongoing inflationary and other expense pressures as you mentioned.
David Karnofsky: More specifically on the expense side as you project out margins for 2025, there's a couple of things that I would keep in mind. So first we do expect our film rental rates will increase in 2025 versus last year, given a greater share or a greater concentration of blockbuster content and.
David Karnofsky: <unk>.
David Karnofsky: And second on the salaries and wages side, we are facing ongoing wage rate pressure that you'll want to take into account and then specific to international due to labor local labor laws, we do have less flexibility to adjust staffing levels with changes in attendance, which may impact international margins as the box office further re.
David Karnofsky: I'd also call out utilities and other we do expect that to reflect higher repairs and maintenance. This year as we address some deferred maintenance needs across the circuit and then on the G&A side modest increases are expected there as we look to invest in head count and.
David Karnofsky: <unk> to further advance our strategic initiatives and positioned the company for long term success, but those investments will be targeted in nature and then lastly on the Latin America side, you always want to factor in inflation as well as the FX dynamics in the region and all of that said, we do remain highly focused on maximizing overall.
David Karnofsky: <unk> ability and margin potential.
Speaker Change: Very helpful. Thank you both.
Thanks Robert.
Speaker Change: Thank you. The next question is coming from Eric Handler of Roth Capital. Please go ahead.
Speaker Change: Good morning, Thank you for the question.
Speaker Change: Melissa Shawn maybe a variation on the last question.
Speaker Change: Cinemark.
Speaker Change: <unk> had a long track record of operating.
Speaker Change: Adjusted up our adjusted EBITDA margin.
Speaker Change: Above 20% matter of fact 10 year average was like 23%.
Speaker Change: Revenue this year at least from a consensus basis is for.
Speaker Change: A record level.
Speaker Change: But.
Speaker Change: How.
Speaker Change: To get back to those normalized levels do you have to see attendance sort of get close to record levels or are there. Other levers that you can use to sort of get back there.
Speaker Change: I'll take that one Eric so it's worth noting that pre pandemic margin rates benefited by about 200 basis points from dividends received from N Cen and D CIP, which will not recur on a go forward basis.
Speaker Change: As we think about levers to drive margin expansion going forward.
Speaker Change: <unk> is certainly the biggest attendance in box office is there going to be the biggest drivers of that margin expansion, but outside of that market share our ability to sustain market share or grow market share as well as the average ticket prices and concession per caps, the extent to which we.
Speaker Change: ROE that those are going to be key factors and you've seen us have success, particularly on the food and beverage side kind of shifting the mix of business towards food and beverage which is higher margin.
Speaker Change: And then outside of that it's really going to be offsetting cost pressures that we're facing and we have many initiatives in place whether it be revenue generating productivity driving our cost mitigating to look to continue to expand margins, but there certainly are some puts and takes on.
Speaker Change: The expense side of it that are headwinds for us.
Speaker Change: That's helpful and then.
Speaker Change: Sean you did mentioned about sort of reactivating the newbuild plans.
Speaker Change: And I believe part of that is in your 2025 budget.
Speaker Change: At this point do you have many projects signed up for construction and when do we when can we start seeing maybe some of those come online and then can you maybe talk about the variation between domestic versus a lot of that.
Speaker Change: Sure thing.
Speaker Change: Yes, we actually have a new locations opening this week in fact in El Paso, which is our first.
Speaker Change: Family Entertainment Center concept.
Speaker Change: That is that is happening right now we have a couple of other projects that are in motion that we expect will be happening this year.
Speaker Change: There are some other opportunities also that.
Speaker Change: Are not committed as of this point, but that we're also working on I mean, so we do have a variety of things and Thats continuing to build of course, you know that as I mentioned earlier the pace of that will be dependent on just ongoing industry recovery, our cash flow projections, our balance sheet reported vacation objectives in just the overall strength of opportunities is.
Speaker Change: A range of things that go into that.
Speaker Change: More of those opportunities at this point are domestic based versus international base. There are a couple of things that are actually in motion international as well.
Speaker Change: As far as some some screen additions and things of that nature.
Speaker Change: So that we have reactivated kind of our exploration across the Latam markets too.
Speaker Change: But I would say that's moving a little bit slower at this stage than what's happening in the U S.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Thank you. The next question is coming from Ben Swinburne of Morgan Stanley. Please go ahead.
Speaker Change: Thanks, Good morning, Sean and Melissa I wanted to ask a couple of cash flow related questions.
Ben Swinburne: Well I don't know if you can help us with cash tax rate in 25, I think it was about 18% of book income in 'twenty. Four I know you said cash taxes would grow but I presume, that's partly because or entirely because income is going to grow and then I think you had mentioned at a conference last year, what kind of longer term capital spending in the 200.
Speaker Change: $250 million range, obviously, that's within your.
Speaker Change: Youre 24 numbers in that range just wanted to see if that was still.
Speaker Change: The right kind of a longer term framework.
Speaker Change: And then I think maybe the more important question is how do you guys. How do you and the board think about the right free cash flow payout ratio when you just combine.
Speaker Change: Whatever it is you're going to do with buybacks and dividends, presumably its a to some degree tied to free cash flow generation. I think you were $40 million dividends gonna be about 13% of at least last year's free cash flow pre pandemic, you were paying out like 60% to 100% in any given year. Obviously the dividend was much higher but just like long term whats the philosophy around.
Speaker Change: And you know sort of return of capital once you get beyond the August convert thank you.
Speaker Change: Sure.
Speaker Change: Start with the cash taxes, so on the cash taxes side, we do expect that to start to step up meaningfully in 2025, and there's a couple of drivers of that first is business recovery continues that will naturally cause our cash taxes to increase we also have less available tax attributes to minimize our tax exposure.
Speaker Change: And then thirdly, Brazil has been under a corporate income tax holiday since 2022, and they will start to return to their statutory income tax rate of 34%. So those three factors are really driving our cash taxes to increase in 2025 as you step back and look at where.
Our effective tax rate will land, we think on a normalized basis that that will begin to return closer to 30%.
Speaker Change: So that's the context on the cash tax side in terms of capital expenditures and really what that normalized range would be over time. We have stated in the past as you mentioned, Ben 200 to 250 million as being within that normalized range.
Speaker Change: And we're at 225 is the expectation for this year as we think about beyond 2025, we do think that the number could could grow to 250 and potentially a little beyond that but that's going to be contingent upon the accretive investment opportunities at that.
Speaker Change: At times, so I'd say for now.
Speaker Change: Pretty good range for where we think things could shake out, but we'll have to see where the iron ROI opportunities are.
And then on the third point in terms of how we're thinking about free cash flow the percentage of free cash flow that we ultimately will allocate over time just from a philosophy standpoint, the way that we're thinking about this is we want to make sure that our capital allocation.
Speaker Change: Strategy is maintaining sufficient flexibility for us to be able to capture opportunities that are in front of us while at the same time mitigating risks that we want to make sure at the end of the day that we're considering those two factors, but we're really just trying to deliver long term value for all shareholders.
Speaker Change: So we'll be balancing balancing those factors.
Speaker Change: Okay, but you'll operate presumably within your leverage range or would you do to dip below the leverage range. Because obviously, if you keep the payout ratio lower at some point Youll dip below two yes. The intent is for us to operate within that two to three times net leverage ratio going forward got.
Speaker Change: Gotcha, and then if I could just ask Sean about the slate I know you don't have a crystal ball, but since you have the 26 slate slide in your deck. There always is fair game.
Speaker Change: Are you still expecting.
Speaker Change: Supply to get back to pre pandemic levels next year and suddenly box office as well along the way.
Speaker Change: Well I mean, it's interesting we're certainly optimistic of that volume pipeline continuing to round out we had thought that potentially 2025 would be a year, we'd see volume creep back to pre pandemic levels and then clearly the six months of work stoppage in Hollywood impacted that.
Speaker Change: We're looking this year continuing to bounce back somewhere between 2023 and 2019 was.
Speaker Change: <unk> potentially up to 115 releases, which would be about 90% of pre pandemic levels, and then 2026, which phenomenon about 26 I mean the.
Speaker Change: Obviously, the studios tend to plant their stakes for their large films, we have nice visibility into that and it looks very promising how those mid tier and smaller films round out we won't get line of sight to that until much later, but based on the conversations we continue to have.
Speaker Change: The new entrants that continue to ramp like an Amazon and an Angel studios and <unk> 24, as well as non traditional content, we're definitely optimistic that it will close the gap further if not reach the level of volume that we saw prior to the endemic so we're definitely encouraged by the continued trends, we see with regard to the rebuild.
Speaker Change: The volume.
Speaker Change: Thanks, a lot.
Speaker Change: Thanks.
Speaker Change: Thank you. The next question is coming from Omar My highest of Wells Fargo. Please go ahead.
Speaker Change: Okay.
Speaker Change: Good morning, and thanks for the question Sean.
Speaker Change: You highlighted in your prepared remarks, and maybe a follow up to the prior question for sure.
Speaker Change: For your expectations of 115 films by year end and 90% of pre pandemic.
Speaker Change: You talked about just closing that gap.
Speaker Change: Over the next few years, so how should we think about where these films will come from it's been mostly from Odisha.
Speaker Change: Additional volume from some of the major studios new entrants or.
Speaker Change: Some of the smaller studios just ramping up the volume of mid sized films, just any color on sort of how that bridge looks like to throw a closing that gap or potentially.
Melissa Thomas: Exceeding it and Melissa.
Melissa Thomas: On the cost side U S cost came in a bit higher than expected and you talked about some of the potential drivers there.
Melissa Thomas: Maybe I think you talked about salaries and wages and some inflationary pressures there, but maybe not on the concession side that there were also elevated I think you've talked about some inflationary pressures in some internal initiatives can you talk what what were some of the drivers there from those two key factors.
Speaker Change: Thanks, Omar Yeah, just on your I'll start with your first question I'm going to vomit I think.
Speaker Change: Our sense is from all the factors you mentioned when we speak with our traditional studio partners and try to get a sense for what their plans are and add all that up.
Speaker Change: And then as we we know that Amazon has publicly indicated that.
Speaker Change: The potential to get to up to 16 films by 2027. So they are clearly building to the level of a major studio in terms of the scale of releases that that they plan to have.
Speaker Change: Angel Studios has been delivering about five to six films a year. A 24 has ramped up Lionsgate has expressed similar intentions. So we kind of put all that together and then as we look continue to look at how non traditional content has grown I mentioned, it's been over 10% of our box office for the past three years, we continue to see consumer.
Speaker Change: Appeal for faith based foreign repertory concert.
Speaker Change: Create a content types of films gain bigger and bigger results. So there's that element too and then when we just look at the risk equation on smaller and mid tier films that has improved as a result of a more dynamic window, we think theres more opportunities even for the studios to continue to try and more of that because it's.
Speaker Change: There's lower downside potential and more upside potential. So that's how we're kind of coming to that overall assessment of things building back towards that volume level, because we're not that far off I mean, when we were talking about 115 films. This year versus 130 on average pre pandemic that gap has been closing.
Speaker Change: And it does it wouldn't take too much more to get to get that fully back obviously the scale and the mix of the types of films within that will vary year to year, but back to the earlier question 26 is looking really really compelling right now.
Speaker Change: And then Omar to your question on the cost side. There are a couple of things that I would mention there on cost of goods sold right. There were favorable 60 basis points year over year in the U S. So we were pleased with the outcome there and that was really driven by strategic pricing actions, though or shrink in ways.
Speaker Change: And higher concession rebates due to the increase in attendance that we saw partially offset by ongoing inflationary pressures that we continue to see an uncertain concession categories. We think going forward in 'twenty five we'll still see some modest pressure or we will start to see some modest pressure continue.
Speaker Change: On the Cogs front with on the inflationary side. However.
Speaker Change: Maybe the point that I would call out on the quarter Q4 in particular that may have come in a little bit higher and oppression pressured margins of that would've been under the facilities and other side. We did see an increase there driven in part by the 24% increase and a <unk>.
Speaker Change: Pendants, which impacts our variable and semi variable expenses, namely credit card fees janitorial utilities to varying degrees, but in addition to that we did have higher gift card commissions due to stronger gift card sales as well as increased penetration and third party channels. We also saw in the fixed cost side some impact.
Speaker Change: Due to higher property and liability insurance, so that contributed to.
Speaker Change: Two the increase there so that is something that on utilities and other we do think will remain elevated as we move into 2025, particularly as I mentioned earlier in that we are going to be leaning in to and addressing some deferred maintenance.
Speaker Change: On the R&M side across the circuit, so that and we expect that to be around eight to 10 million of a headwind in 2025.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thanks Omar.
Speaker Change: Thank you. The next question is coming from Patrick Sholl with Barrington Research. Please go ahead.
Patrick Sholl: Hi, good morning.
Speaker Change: It's just a question on ticket pricing and how you're kind of approaching that the strong 2025, and 26 weight and I guess also sort of like in the context that you mentioned of maybe giving back some of that market share gain as you.
Patrick Sholl: Kind of are at your kind of like.
Speaker Change: You're kind of closer to your capacity limits.
Speaker Change: And then maybe like with a stronger slate how.
Speaker Change: Like filling in the gaps in the fleet and whether alternative content needs like a little bit more marketing to stand out and how are you.
Speaker Change: How you approach kind of supporting that side of the film slate.
Speaker Change: Okay I'll take the average ticket price question to start so.
Speaker Change: In terms of 2025, we expect modest growth in our average ticket prices domestically for full year 2025 that will fluctuate quarter to quarter based on sale mix in terms of the primary drivers strategic pricing opportunities continue to be a tailwind for us as well as growth in premium.
Speaker Change: <unk> format mix, including XD D box in <unk>, given the expected strength of the film slate keep in mind on the international side that we do expect ticket prices to face continued pressure from FX dynamics in the region with some offset from inflationary price increases and country mix.
Speaker Change: Typically a factor as well, but we continue to leverage data and analytics to really lean in and find the optimal pricing that's got to maximize overall attendance as well as box office.
Speaker Change: With respect to your question on alternative content marketing I'll take that one.
Speaker Change: With regard to alternative content marketing, it's interesting in some ways the non traditional content.
Speaker Change: Is somebody is easier to target market, because they tend to be a little bit more niche focused audiences with established channels to reach them. So you think of like a concert film usually the artist has a broad base of followers that you can tap into foreign films similar you know, they're usually looking for those kinds of things.
Speaker Change: Proactively state based films same fold they have theyre kind of different channels that they get to those audiences as well. So all of those films always have the potential to crossover as you could look like and sound of freedom or something like that when it gets a bit more mainstream and on occasion. They will follow these the.
Speaker Change: Metres of those that content will follow a more traditional marketing campaign, but generally speaking through their channels, where they have direct connectivity to their consumers as well as supplemented with our own marketing channels Thats basically the way, we're kind of getting to these audiences and how they're they're finding this this content.
Speaker Change: Does that hit on what you were you were asking Pat.
Speaker Change: Yes. Thank you.
Mike Hickey: Thank you. The next question is coming from Mike Hickey of benchmark. Please go ahead.
Speaker Change: Hey, Sean Melissa Shanda, thanks for taking our questions and congrats on the quarter and year your dividend just two from us.
Speaker Change: Clearly the domestic growth opportunity Sean for 'twenty five 'twenty six.
Speaker Change: Pretty obvious good tail ones here in terms of some volume variety et cetera, everything you pointed out.
Speaker Change: Maybe less obvious is how you think Latin America.
Speaker Change: We will perform over the next couple of years and whether you think that region for you is sort of a plus and minus to the growth.
Speaker Change: And revenue and margin that you see from your domestic business.
Speaker Change: Sure. Thanks. Thanks for the question is like Latin America, we've been really pleased with the performance in Latin America, I mean, obviously the financial results in just the recovery of the region as a whole I would say is actually pacing ahead of the U S. At this stage for a while during the pandemic. It was lagging but you look at certain places even art.
Speaker Change: <unk> with everything that has gone on there recently economically the recovery of movie going has been one of the strongest that we've seen.
Speaker Change: Around the world. So we look at just the moviegoing behavior of consumers is really strong.
Speaker Change: Way, we have been able to enhance the performance of our business. There is similar to the U S has been really strong and as we look ahead. We continue to see positive signs about where that region is going I mean, there has been no loss of interest in going to movies.
Speaker Change: <unk> in that region tend to over index in the volume of the level of consumption that they they have so we still think the overall fundamentals of Latin America look positive and are are positive for our business.
Speaker Change: Good to hear Sean second question on movie Club you know it seems like every quarter you've got.
Speaker Change: Great data to share I think you said, maybe 25% of your <unk>.
Speaker Change: Michigan revenue is now from movie club I think thats trending higher I guess thinking forward here, how do you sort of maximize.
Speaker Change: The value of this loyalty.
Speaker Change: Program and how important it has it been in terms of sort of the <unk>.
Speaker Change: Cheating some of your strategic goals in terms of retention when you think about market share and recurrence of attendance was obviously is key to your growth in your concession sales, which had been a huge success. Thanks, guys sure sure well, yes, I mean, it's it's a very important program for us that has had tremendous.
Speaker Change: Amount of success I mean, as you kind of hit on.
Speaker Change: Some of the goals that we seek through that is number one it keeps audiences coming to cinemark. These are very loyal consumers to our business. They derive a lot of value from the program overall and as you mentioned, we continued to see the ratio of box office that they represent grow year after year.
Speaker Change: We've also seen that the program has helped stimulate increased movie going frequency and food and beverage consumption in both cases, so when we look at consumers behavior prior to joining the program and after joining the program. We see both of those tend to grow. So it comes back to the value they derive from that program it stimulates greater consumption Theres greater upgrade.
Speaker Change: Behavior, which is all a positive and directly aligned with kind of the studios interests as well, which they.
Speaker Change: They think very highly of this program and it over at the third piece of it just enhances the overall experience, which leads to increased guest satisfaction. So it's simplistic we have a direct line of communication to these guests. So we can.
Speaker Change: We tailor our communications to their likes based on the data we get in terms of learnings of what they tend to prefer.
Speaker Change: And the ease of purchases just simplified so all round, there's just a whole range of benefits that consumers drive and its been very important we've Fortunately we've continued to see the program grow.
Speaker Change: At a pace that's consistent with what we were seeing even pre pandemic that ebbs and flows based on the amount of volume or a mass amount of content. That's in the marketplace, but it's continue to grow and as I mentioned, we were up 10% year over year.
Speaker Change: And we're up considerably since our since 2019.
Mike Hickey: Hi, Thanks, guys. Good luck thanks, Mike appreciate it.
Speaker Change: Thank you our final question from today is coming from Stephen <unk> of Goldman Sachs. Please go ahead.
Stephen <unk>: Hey, Thanks. Good morning, just two follow ups for me first for Sean on market share could you elaborate a little bit more on your outlook for market share in 2025.
Stephen <unk>: It sounds like you're expecting some pressure just curious how much of that might be slight related in her capacity related versus how much might be added competition or any other factors.
And then second for Melissa on film rental expense in your prepared remarks, I think you called out.
Stephen <unk>: Some of the increases were expected to dynamically persist going forward. Just curious if you could talk a little bit more about what this means and if there's any quarters. In particular, we can expect film rental expense to be heavier or lighter. Thank you.
Speaker Change: Sure. Thanks Steven.
Speaker Change: I'll talk about 2025 by at least starting with 2024 market share I mean, we were thrilled with the results of <unk> 24, we continue to see benefits of all the efforts we pursue to drive attendance in just kind of structural market share improvements, which we continue to believe will be sustained at about.
Speaker Change: 100 basis points ahead of where we were pre pandemic in 'twenty for those benefits were further amplified by a mix of content that really worked well for our circuit.
Speaker Change: As well as our slate that was pretty well spread out over the year that minimize the amount of capacity constraints, we had with hitting occupancy thresholds.
Speaker Change: As we look to 2025.
Speaker Change: We continue to expect those structural benefits will be maintained.
Speaker Change: But we do expect some of the content mix benefits, we received in 2004 as well as the the capacity constraints to temper or the limited capacity restraints to temper a bit so that just a byproduct of more volume in the marketplace overall more diversified content in the marketplace.
Speaker Change: So as I mentioned earlier at least with regard to the capacity constraints I mean, what generally is happening. There is when there is a lot of great content in the market, we're being fully utilized so we're highly productive in those moments, but some of that volume will spillover to other parts of the market and our share may compress a little bit so it's not necessarily a bad thing.
Speaker Change: Thing, but it does affect the overall rate of share that we have overall.
Speaker Change: And then on the film rental side, our film rental rates for 2024 benefited from a lower concentration of Tentpole films due to the Hollywood strikes, particularly in the first half of the year. So as blockbuster content researched in the second half what we saw as box off box office concentration.
Increase as at our film rental rate. So as we look forward to 2025, we do expect that dynamic to continue with a greater concentration of blockbuster content, which will increase our film rental rates year over year, but as you think about how that could present from a quarterly standpoint, it's really going to be dependent upon.
Speaker Change: On the concentration in any given quarter, but the first half of the year given the impact of the Hollywood strikes in 2024 was certainly lighter on the film rental rate side.
Speaker Change: I think the other point that would be worth calling out would be on the marketing side that is also included within our film rental line item and that does also vary quarter to quarter based on our attendance expected attendance and the returns that we're seeing but we do expect for the full year of 2025 that marketing span.
Speaker Change: As a percent of admissions and concession revenue will be relatively consistent to what we saw in 2024.
Speaker Change: That's great. Thank you both.
Speaker Change: Excellent thanks Steven.
Speaker Change: At this time I'd like to turn the floor back over to Mr. Campbell for closing comments.
Speaker Change: Thank you Donna in closing I'd, just like to reinforce once again the strength our confidence in the strength of cinemark and the advantaged position that we maintained in today's environment. As a result of the significant advancements we've been able to make over the past years to position our company for success.
Speaker Change: Remain highly encouraged about the road ahead.
Speaker Change: Further upside we anticipate with further box office recovery and the continued impact of our strategic initiatives.
Speaker Change: Thank you all once again for joining us this morning, and we look forward to speaking with you again following our first quarter results.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen. This concludes today's event you may disconnect. Your lines have backup the webcast at this time and enjoy the rest of your day.
Speaker Change: [music].