Q1 2025 Cinemark Holdings Inc Earnings Call

Operator: Greetings, and welcome to the Cinemark Holdings first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Cinemark Holdings first quarter 2025 earnings Conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note this conference is being recorded.

Chanda Brashears: I will now turn the call over to your host, Chanda Brashears, Senior Vice President of Investor Relief. Thank you. You may begin. Good morning, everyone.

I will now turn the call over to your host Chanda per shares senior Vice President of Investor Relations. Thank you you may begin.

Speaker Change: Good morning, everyone I would like to welcome you to Cinemark Holdings, Inc. First quarter 2025 earnings release Conference call hosted by Sean Gamble, President and CEO and Melissa Thomas CFO before we begin I would like to remind everyone that statements or comments made on this conference call. Maybe forward looking statements forward looking statements may include.

Chanda Brashears: I would like to welcome you to Cinemark Holdings Inc.

Chanda Brashears: first quarter 2025 earnings release conference call, hosted by Sean Gamble, President and CEO and Melissa Thomas, CFO. 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. 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: 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.

Chanda Brashears: The factors that could cause results to differ materially are detailed in the company's 10-Q and 10-K.

Speaker Change: After that could cause results to differ materially are detailed in the company's 10-Q and 10-K also today's call may include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's most recently filed earnings release 10-Q and on the company's website at IR docs.

Chanda Brashears: 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-Q, and on the company's website at ir.cinemark.com.

Sean Gamble: With that, I would now like to turn the call over to Sean Gamble. Thank you, Chanda, and good morning, everyone. As we indicated last quarter, we remain highly optimistic about what the future holds for Cinemark and theatrical exhibition, including a positive rebound in our industry's recovery trajectory this year. That said, and as expected, lingering headwinds from 2023's strikes in Hollywood, which caused a prolonged work stoppage on film production and an associated drag on last year's results, continue to affect the first quarter of 2025. North American industry box office during the quarter totaled approximately $1.5 billion, which declined 12% compared to the same period in 2024.

Speaker Change: Cinemark dot com with that I would now like to turn the call over to Sean Gamble.

Sean Gamble: Thank you Chanda and good morning, everyone.

Sean Gamble: As we indicated last quarter, we remain highly optimistic about what the future holds for cinemark and theatrical exhibition, including a positive rebound in our industry's recovery trajectory this year.

Sean Gamble: That said and as expected lingering headwinds from 'twenty to 'twenty three strikes in Hollywood, which caused a prolonged work stoppage on film production and associated drag on last year's results continued to affect the first quarter of 2025.

Sean Gamble: North American industry box office during the quarter totaled approximately $1 $5 billion, which declined 12% compared to the same period in 2024.

Sean Gamble: In addition to strike-induced influences that resulted in fewer year-over-year tempo releases, this decline can also be attributed to multiple films that didn't fully resonate with audiences and trailed expectations, as well as a handful of titles that were originally planned to release in one cue, that shifted out of the quarter for a variety of reasons. Within this pressured environment, Cinemark once again delivered outsized results. During the quarter, we exceeded year-over-year North American box office performance by 160 basis points and surpassed our comparable Latin American benchmark by nearly 60 basis We also continue to maintain our industry leading market share gains, including approximately 100 basis points of structural improvement relative to our pre-pandemic level.

Sean Gamble: In addition to strike induced influences that resulted in fewer year over year Temple releases. This decline can also be attributed to multiple films that didn't fully resonate with audiences and trailed expectations as well as a handful of titles that were originally planned to release in one queue that shifted out of the quarter for a variety of reasons.

Sean Gamble: Within this pressured environment Cinemark once again delivered outsized results.

Sean Gamble: During the quarter, we exceeded year over year, North American box office performance by 160 basis points and surpassed our comparable Latin American benchmark by nearly 60 basis points.

Sean Gamble: We also continued to maintain our industry, leading market share gains, including approximately 100 basis points of structural improvement relative to our pre pandemic levels.

Sean Gamble: These gains were further amplified by a strong mix of family films that were represented in four of the quarter's top five titles, as well as minimal capacity constraints due to the lighter release schedule, which afforded us maximum showtime scheduling flexibility to avoid hitting occupancy. Nevertheless, while our outperforming box office proceeds and market share helped lift our overall results, one must go all the way back to the first quarter of 2022 to find a comparable level of domestic attendance, which was a period when our industry and company were still in the early stages of emerging from the pandemic.

Sean Gamble: These gains were further amplified by a strong mix of family films that were represented in four of the quarters top five titles as well as minimal capacity constraints due to the lighter release schedule, which afforded us maximum showtime's scheduling flexibility to avoid hitting occupancy thresholds.

Sean Gamble: Nevertheless, while are outperforming box office proceeds in market share help lift our overall results. One must go all the way back to the first quarter of 2022 to find a comparable level of domestic attendance, which was a period when our industry and company. We're still in the early stages of emerging from the pandemic.

Sean Gamble: Consequently, our worldwide first quarter revenue was $541 million with adjusted EBITDA of $36 million and an adjusted EBITDA margin of 6.7%. It's worth noting, however, that relative to the first quarter of 2022, our 2025 adjusted EBITDA grew almost 45 percent, despite scaling up our business since the pandemic and contending with significant inflationary cost pressure. This improvement underscores the transformative impact that our strategic initiatives have provided our company over the past several years. The remaining headwinds associated with the Hollywood Strikes were largely expected to be short-lived this year, and fortunately, that appears to be the case as the second quarter exploded out of the gates with record-breaking results of a Minecraft match.

Sean Gamble: Consequently, our worldwide first quarter revenue was $541 million with adjusted EBITDA of $36 million and an adjusted EBITDA margin of six 7%.

Sean Gamble: It's worth, noting however that relative to the first quarter of 2022 or 2025, adjusted EBITDA grew almost 45% despite scaling up our business since the pandemic and contending with significant inflationary cost pressures.

This improvement underscores the transformative impact that our strategic initiatives have provided our company over the past several years.

Sean Gamble: The remaining headwinds associated with the Hollywood strikes were largely expected to be short lived this year. Unfortunately that appears to be the case as the second quarter exploded out of the gates with record breaking results of our Minecraft movie.

Sean Gamble: The film became an instant cultural phenomenon as millions of crafters let their imaginations run wild, sparking a major social movement that produced the industry's largest opening weekend ever for a film based on a video game, surpassing the giant launch of the Super Mario Brothers movie in 2023. It also delivered Cinemark's highest three-day opening of all time for a family. Since then, moviegoing momentum has continued to accelerate, with a Minecraft movie already building to more than $815 million in global box office proceeds, and numerous successive films delivering solid results, including the breakout faith-based hit A King of Kings, the thrilling horror sensation Sinners, and the action-packed return of everyone's favorite number cruncher, In The Accountant 2.

Sean Gamble: The film became an instant cultural phenomenon as millions of crafters, let their imaginations run wild sparking a major social movement that produced the industry's largest opening weekend ever for a film based on a video game, surpassing the giant launch of the Super Mario Brothers movie in 2023.

It also delivered cinemark highest three day opening of all time for our family film.

Sean Gamble: Since then movie going momentum has continued to accelerate with the Minecraft movie already building to more than $815 million in global box office proceeds and numerous successive films delivering solid results, including the breakout faith based hit a king of kings the thrilling horror sensation.

Sean Gamble: <unk> centers and the action packed return of everyone's favorite number cruncher any accountant too.

Sean Gamble: The force was also strong with the 20th anniversary re-release of repertory film Star Wars Episode III, Revenge of the Sith, that brought in more than $25 million domestically this past fall. and the successful release of The Chosen Season 5 represents yet another example of the growing appeal for non-traditional content in theater. The robust results of these recent releases are illustrative of the strong, sustained enthusiasm consumers have for experiencing compelling, well-marketed films in theaters across varied genres of titles. They're also reflective of the excitement that was generated at our industry's annual trade show, CinemaCon, a month ago.

Sean Gamble: The force was also strong with the 20th anniversary Rerelease of Repertory film Star Wars episode, three revenge of the Sith that brought in more than $25 million domestically. This past weekend and the successful release of the chosen season five represents yet. Another example of the growing appeal for non traditional content.

Sean Gamble: In theaters.

Sean Gamble: The robust results of these recent releases are illustrative of the strong sustained enthusiasm consumers have for experiencing compelling well marketed films in theaters across very genre of titles.

Sean Gamble: There are also reflective of the excitement that was generated at our industry's annual Tradeshow cinema Con a month ago.

Sean Gamble: During that event, studios and filmmakers provided glimpses into the upcoming line-up of movies that are on the horizon over the next two years, and they reaffirmed comments they've expressed over and over regarding the significant enhanced impact that theatrical exhibition provides their films, companies, and audiences. The quality of material showcased and the supportive messages that were emphasized during CinemaCon reinforced a positive overall outlook for the future of moviegoers. In the very near term, our exuberance about the well-rounded mix of films that are still slated to release this year has only grown based on what was shared.

Sean Gamble: During that event studios and filmmakers provided glimpses into the upcoming lineup of movies that are on the horizon over the next two years and they reaffirmed comments they've expressed over and over regarding the significant enhanced impact that theatrical exhibition provides their films companies and audiences.

Sean Gamble: The quality of materials showcased and the supportive messages that were emphasized during cinema con reinforced our positive overall outlook for the future of movie going.

Sean Gamble: In the very near term our exuberance about the well rounded mix of films that are still slated to release. This year has only grown based on what was shared.

Sean Gamble: Family films that were featured are sure to delight audiences of all ages, including a live action version of Lilo and Stitch, Karate Kid Legends, Elio, the Smurfs movie, The Bad Guys 2, the SpongeBob movie Search for SquarePants, Zootopia 2, and a live action remake of How to Train Your Dragon, which was screened in its entirety and is absolutely sensational. Then there was an abundance of exhilarating, heart-racing action on display, such as Mission Impossible The Final Reckoning, Ballerina, Jurassic World Rebirth, Predator Badlands, a new take on The Running Man, and F1 from the producer and director of Top Gun Maverick.

Sean Gamble: Family films that were featured are sure to delight audiences of all ages, including a live action version of Levo and Stitch Karate Kid Legends Hulio. The Smurfs movie the bad guys to the Spongebob movie search for square pants, Zootopia, too and a live action remake of how to train your drag.

Sean Gamble: <unk>, which was screened in its entirety and he is absolutely sensational.

Sean Gamble: Then there was an abundance of exhilarating heart racing action on display such as mission impossible to final reckoning ballerina Jurassic World Rebirth creditor Badlands, a new take on the running man and F. One from the producer and director of top gun Maverick.

Sean Gamble: Screams, scares, and thrills were also plentiful, with clips of hair-raising horror and suspense in films like Final Destination Bloodlines, 28 Years Later, Megan 2.0, The Conjuring Last Rites, The Long Walk, The Black Phone 2, Five Nights at Freddy's 2, and a new chapter of I Know What You Did Last Summer. Laughter also appears primed to crank the volume up to 11, based on comedies showcased like Spinal Tap 2 The End Continues, The Phoenician Scheme, Freakier Friday, Good Fortune, and a hilarious-looking reboot of The Naked Gun. At the same time, we saw highly compelling looks at new superhero stories that continue to be a mainstay, including Thunderbolts, which opens this weekend, the Fantastic Four First Steps, and the highly anticipated relaunch of Super And sci-fi fantasy lovers will most certainly be captivated by further spectacles in the iconic worlds of Tron Ares, Wicked for Good, and Avatar Fire and Ash, as well as a fresh new romantic adventure in A Big Bold Beautiful Journey.

Sean Gamble: Screams scares and thrills, we're also plentiful with clips of hair, raising horror and suspense in films like final destination Bloodlines 28 years later, Megan 2.0, the conjuring last rights the long walk the Blackstone to five nights at Freddy's too and a new chapter of.

Sean Gamble: I know what you did last summer.

Sean Gamble: Laughter also appears primed to crank the volume up to 11 based on comedy showcase like spinal tap to the yen continues the Phoenician scheme Freaky Friday, good fortune and a hilarious looking reboot of the naked gun.

Sean Gamble: At the same time, we saw highly compelling looks at new superhero stories that continue to be a mainstay, including Thunderbolts, which opens this weekend the fantastic four first steps and the highly anticipated relaunch of Superman.

Sean Gamble: And sat Fi fantasy levers will most certainly be captivated by further spectacles and the iconic worlds of Tron areas, we could for good and avatar fire and ash as well as a fresh new romantic adventure and a big bold beautiful journey.

Sean Gamble: In addition to all the eye-popping, star-studded materials and presentations that were provided by our traditional studio partners during CinemaCon, including Sony, Lionsgate, Warner Brothers, Universal, Paramount, and Disney, another highlight of the convention was Amazon MGM, who took the stage for the very first time to reconfirm their intention to release 14 to 16 films into theaters per year by 2027 and share footage from a wide range of their upcoming titles. Their message was highly encouraging with regard to the further recovery of overall wide-release volume in 2026 and beyond, and so too was the quality and scale of their films, as well as how far along they are with the titles they have in motion.

Sean Gamble: In addition to all the eye-popping star-studded materials and presentations that were provided by our traditional studio partners during cinema Con, including Sony Lionsgate Warner Brothers, Universal Paramount and Disney Another highlight at the convention was Amazon MGM.

Sean Gamble: Look the stage for the very first time to reconfirm their intention to release 14 to 16 films into theaters per year by 2027 and share footage from a wide range of their upcoming titles.

Sean Gamble: Their message was highly encouraging with regard to the further recovery of overall wide release volume in 2026 and beyond and so too was the quality and scale of their films as well as how far along they are with the titles they have in motion.

Sean Gamble: Our enthusiasm about the film pipeline ahead, ongoing theatrical support of our studio partners, and sustained consumer appeal for moviegoing is also coupled with optimism regarding our ability to navigate an uncertain and evolving macroeconomic landscape. Over the years, our industry has been more closely tied to the strength of film content than swings in economic cycles, both domestically and internationally. In fact, in six of the past eight U.S. recessions, North American box office has grown. Likewise, even with the frequent economic and political turbulence that often exists throughout Latin America, our industry and business have held strong when favorable movies are in the market.

Sean Gamble: Our enthusiasm about the film pipeline ahead ongoing theatrical support of our studio partners and sustained consumer appeal for movie going is also coupled with optimism regarding our ability to navigate an uncertain and evolving macroeconomic landscape.

Sean Gamble: Over the years, our industry has been more closely tied to the strength of film content than swings in economic cycles, both domestically and internationally in.

Sean Gamble: In fact in six of the past eight U S recessions North American box office has grown <unk>.

Sean Gamble: Likewise, even with the frequent economic and political turbulence that often exist throughout Latin America, our industry and business have held strong when favorable movies are in the marketplace.

Sean Gamble: Based on our observations, during strained economic periods, people continue to pursue out-of-home experiences, and they tend to prioritize value and affordability. Going to the movies remains one of the least expensive, high quality, localized entertainment options for spending two to three hours of time. Moreover, it provides an often much-needed opportunity to unwind, disconnect, and escape. Interestingly, during these periods, in addition to sustained levels of moviegoing, we also haven't historically seen a dip in the degree to which our guests upgrade to premium amenities or consume food and beverage offers. That behavior continued to hold true in the first quarter, as we achieved a new record high concession per cap, which was driven partly by increased incidents.

Sean Gamble: Based on our observations during strained economic periods people continue to pursue out of home experiences and they tend to prioritize value and affordability.

Sean Gamble: Going to the movies remains one of the least expensive high quality localized entertainment options for spending two to three hours of time.

Sean Gamble: Moreover, it provides and often much needed opportunity to unwind disconnect and escape.

Speaker Change: Interestingly during these periods. In addition to sustained levels of movie going we also have historically seen a dip in the degree to which our guests upgrade to premium amenities or consume food and beverage offerings.

Speaker Change: That behavior continues to hold true in the first quarter as we achieved a new record high concession per cap, which was driven partly by increased incidence rates.

Sean Gamble: Furthermore, the opening weekend of a Minecraft movie in April just yielded our highest three-day sales of Dbox motion seats ever. So collectively, we remain highly encouraged about the overall direction of our industry, and especially Cinemark. In particular, we believe that we are very well-positioned and will continue to benefit from our many efforts and investments in enhancing the entertainment experience we provide our strengthening and maintaining high-quality theaters, building loyalty to Cinemark, developing industry-leading operating capabilities, and activating levers to drive incremental value creation. Furthermore, we continue to derive significant advantages from our solid financial position, which remains a strategic asset for us.

Speaker Change: Furthermore, the opening weekend of our Minecraft movie in April just yielded our highest three day sales of D box motion seats ever.

Speaker Change: So collectively we remain highly encouraged about the overall direction of our industry and especially cinemark.

Speaker Change: In particular, we believe that we are very well positioned and will continue to benefit from our many efforts and investments in enhancing the entertainment experience, we provide our guests strengthening and maintaining high quality theaters building loyalty to cinemark developing industry, leading operating capabilities and activating level.

Speaker Change: <unk> to drive incremental value creation.

Speaker Change: Furthermore, we continue to derive significant advantages from our solid financial position, which remains a strategic asset for us.

Sean Gamble: Considering the health of our company, as well as our positive outlook going forward, we paid our first quarterly dividend since the pandemic this past quarter, and we opportunistically executed $200 million of share repurchases in March. These repurchases represent the first stock buyback program we've ever transacted in the history of our company. And they've put us out in front of managing potential dilution related to the warrants associated with our upcoming convertible notes. These meaningful actions reflect our steadfast confidence in Cinemark and theatrical exhibition as a whole. To that end, we aim to fully capitalize on our industry's ongoing resurgence of content over the coming years while maintaining the operating discipline that continues to serve us so well, and actively advancing a wide range of new revenue-generating, productivity, and synergistic diversification initiatives to secure our long-term growth and prosperity.

Speaker Change: Considering the health of our company as well as our positive outlook going forward, we paid our first quarterly dividend since the pandemic this past quarter, and we opportunistically executed $200 million of share repurchases in March.

Speaker Change: These repurchases represent the first stock buyback program, we've ever transacted in the history of our company and they've put us out in front of managing potential dilution related to the warrants associated with our upcoming convertible notes settlement.

Speaker Change: These meaningful actions reflect our steadfast confidence and cinemark and theatrical exhibition as a whole.

Speaker Change: To that end, we aim to fully capitalize on our industry's ongoing resurgence of content over the coming years, while maintaining the operating discipline that continues to serve us so well in actively advancing a wide range of new revenue generating productivity and synergistic diversification initiatives to secure our long term growth in <unk>.

Speaker Change: Barry.

Melissa Thomas: I'll now pass the call over to Melissa, who will share more about our first quarter results. Melissa? Thank you, Sean.

Speaker Change: I'll now pass the call over to Melissa who will share more about our first quarter results Melissa.

Melissa Thomas: Thank you Sean.

Melissa Thomas: Good morning, everyone, and thank you for joining the call today. Amid the first quarter industry headwinds Sean covered, Cinemark successfully capitalized on available box office opportunities and effectively navigated the dynamic environment, demonstrating the strength and resilience of our outstanding. In the first quarter, we welcomed 36.6 million patrons globally and delivered $540.7 million of worldwide revenue. we generated $36.4 million of adjusted EBITDA, with a 6.7% adjusted EBITDA margin, despite operating de-leverage associated with lower attendance. Within our US operations, we hosted 20.6 million guests and grew our market share 30 basis points year over year. Compared with the pre-pandemic period, we continue to maintain market share gains in excess of 100 base due to the combination of structural gains, a favorable content mix that over-indexed towards family titles, and minimal capacity constraints driven by a more spread out slate and the flexibility in our program.

Speaker Change: Everyone and thank you for joining the call today.

Speaker Change: Maybe the first quarter industry headwinds, Sean covered cinemark successfully capitalize on available box office opportunities and effectively navigated the dynamic environment, demonstrating the strength and resilience of our outstanding team.

Speaker Change: In the first quarter, we welcomed $36 6 million patrons globally and delivered $547 million of worldwide revenue.

Speaker Change: We generated $36 $4 million of adjusted EBITDA with a six 7% adjusted EBITDA margin, despite operating deleverage associated with lower attendance levels.

Speaker Change: Within our U S operations, we hosted $20 6 million guests and grew our market share of 30 basis points year over year.

Speaker Change: Paired with the pre pandemic period, we continue to maintain market share gains in excess of 100 basis points due to the combination of structural gains a favorable content next set over indexed towards family titles and minimal capacity constraints driven by a more spread out fleet and the flexibility in our programming.

Melissa Thomas: We generated $207.6 million in domestic admissions revenue. Our average ticket price increased 3% year over year to $10.08, primarily driven by strategic pricing initiatives, partially offset by a lower mix of premium formats due to the film content in the quarter. Our domestic concession revenue was $164.4 million in the first quarter, and we grew our concession per cap 5% year-over-year, achieving a new all-time high per cap of $7.98. This robust growth was driven by an increase in incidence rates, a higher mix of merchandise, and strategic pricing accuracy.

Speaker Change: We generated $207 $6 million and domestic admissions revenue, our average ticket price increased 3% year over year to $10 eight primarily driven by strategic pricing initiatives.

Partially offset by a lower mix of premium format due to the film content in the quarter.

Speaker Change: Our domestic concession revenue was $164 $4 million in the first quarter and we grew our concession per cap of 5% year over year, achieving a new all time high per cap of $7 98.

Speaker Change: This robust growth was driven by an increase in incidence rates, a higher mix of merchandise and strategic pricing actions.

Melissa Thomas: I would like to commend our Cinemark team for their diligent efforts and innovative strategies, which combined with excellent field execution, have been instrumental in achieving this quarter's impressive concession per cap result. We delivered $45.1 million of other revenue, down 3% versus the first quarter of 2024, primarily due to lower attendance, which led to a reduction in the variable component of other revenue. partially offset by an increase in promotional income and gaming Overall, our domestic segment generated $417.1 million of revenue and $20 million of adjusted EBITDA, yielding a 4.8% adjusted EBITDA mark. Moving to our international operations, we welcomed 16 million guests during the first quarter, relatively flat with Q1 of last year, despite the softer film slate, due to a content mix that skewed more heavily towards family titles, which tend to resonate well in Latin America.

Speaker Change: I would like to commend our cinemark team for their diligent efforts and innovative strategies, which combined with excellent field execution have been instrumental in achieving this quarter's impressive concession per cap resolved.

Speaker Change: We delivered $45 $1 million of other revenue down 3% versus the first quarter of 2024, primarily due to lower attendance, which led to a reduction in the variable component of other revenue.

Speaker Change: We offset by an increase in promotional income and gaming revenue.

Speaker Change: Overall, our domestic segment generated $417 $1 million of revenue and $20 million of adjusted EBITDA, yielding a four 8% adjusted EBITDA margin.

Speaker Change: Moving to our international operations, we welcomed 16 million guests during the first quarter.

Speaker Change: Relatively flat with Q1 of last year, despite the softer film slate due to our content and accept skewed more heavily towards family titles, which tend to resonate well in Latin America.

Melissa Thomas: strong performances from two local Brazilian titles, and promotional activities, including cinema weeks across the region to stimulate demand. Like the U.S., we maintain strong market share gains in the first quarter, compared with pre-pandemic levels, delivering over 200 basis points of growth versus Q1 of 2020. We grew revenue from our international segment 1% year over year to $123.6 million in the first quarter. which was comprised of $56.5 million of admissions revenue. $46 million of concession revenue and $21.1 million of other revenue. International adjusted EBITDA was $16.4 million with an adjusted EBITDA margin of 13.3%.

Speaker Change: Strong performances from two local Brazilian titles and promotional activities, including cinema weeks across the region to stimulate demand.

Speaker Change: Like the U S. We maintain strong market share gains in the first quarter compared with pre pandemic levels.

Speaker Change: Laboring over 200 basis points of growth versus Q1 of 2019.

Speaker Change: We grew revenue from our international segment, 1% year over year to $123 $6 million in the first quarter.

Speaker Change: Which was comprised of $56 $5 million of admissions revenue $46 million of concession revenue and $21 $1 billion of other revenue.

Speaker Change: International adjusted EBITDA was $16 $4 million with an adjusted EBITDA margin of 13, 3%.

Melissa Thomas: Shifting to global expenses. Film rental and advertising expense was 53.5% of admissions revenue, representing a 30 basis point increase year-over-year due to higher marketing spend and the overall mix of partially upset by a lower concentration of high-grossing titles due to the residual Hollywood strike. Concession costs as a percent of concession revenue were 21.1%, up 150 basis points compared with the first quarter of 2024, driven by a higher mix of merchandise, lower vendor rebates, and the impact of ongoing inflationary pressure on certain concession categories. These increases were offset in part by our strategic... Global salaries and wages were $90.3 million, an increase of 4% compared with the first quarter of 2024, due to wage and benefit inflation and higher workers' compensation costs, partially offset by lower attendance and foreign currency fluctuation.

Speaker Change: Shifting to global expenses.

Speaker Change: Silver until an advertising expense was 53, 5% of admissions revenue.

Speaker Change: Representing a 30 basis point increase year over year due to higher marketing spend in the overall mix of films, partially upset by a lower concentration of high grossing titles due to the residual how Hollywood strike impact.

Speaker Change: Concession costs as a percent of concession revenue were 21, 1% up 150 basis points compared with the first quarter of 2024, driven by a higher mix of merchandise lower vendor rebates and the impact of ongoing inflationary pressure on certain concessions categories.

Speaker Change: These increases were offset in part by our strategic pricing actions.

Speaker Change: Total salaries and wages were $93 million, an increase of 4% compared with the first quarter of 2024, due to wage and benefit inflation and higher workers compensation cost.

Speaker Change: Partially offset by lower attendance and foreign currency fluctuations.

Melissa Thomas: As we flex our labor hours based on anticipated attendance levels, salaries and wages were also impacted by the lower than expected box office performance. Facility lease expense was $78.3 million, up 1% year-over-year, reflecting the relatively fixed nature of domestic leases and the dissipation of temporary rent abatements in our international segment that benefited the first quarter of 2020. Lower percentage rent partially offset the Utilities and other expense was $105.7 million, an increase of 5% from the first quarter 2024, primarily driven by higher property taxes, credit card fees, and repairs and maintenance costs. An increase in third party commissions associated with screen advertising revenue growth and international and inflationary impact.

Speaker Change: As we flex our labor hours based on anticipated attendance levels salaries and wages were also impacted by the lower than expected back half performance.

Speaker Change: Facility lease expense was $78 $3 million up 1% year over year.

Speaker Change: Collecting the relatively fixed nature of domestic leases and the dissipation of temporary rent abatements in our international segment that benefited the first quarter of 2024.

Speaker Change: Lower percentage rent, partially offset the increase.

Speaker Change: Utilities and other expense was $105 $7 million, an increase of 5% from the first quarter 2024, primarily driven by higher property taxes as credit card fees and repairs and maintenance costs.

Speaker Change: An increase in third party commissions associated with screen advertising revenue growth in international and inflationary impacts. These increases were somewhat offset by lower attendance as many of these costs are variable or semi variable in nature as well as foreign currency fluctuations.

Melissa Thomas: These increases were somewhat offset by lower attendance, as many of these costs are variable or semi-variable in nature, as well as foreign currency fluctuations. G&A was $54.5 million in the first quarter and grew year-over-year due to wage and benefit inflation, share-based compensation and related payroll taxes, and professional Partially upset by the favorable impact of foreign exchange rate fluctuations. Globally, we generated a net loss attributable to Cinemark Holdings Inc. of $38.9 million, resulting in a loss per share of $32.9 million.

Speaker Change: G&A was $54 $5 million in the first quarter and grew year over year due to wage and benefit inflation share based compensation and related payroll taxes and professional fees, partially offset by the favorable impact of foreign exchange rate fluctuations.

Speaker Change: Globally, we generated a net loss attributable to Cinemark Holdings, Inc of $38 $9 million.

Speaker Change: <unk> and a loss per share of 32 cents.

Melissa Thomas: Turning to the balance sheet, we ended the quarter with $699 million of cash. Our free cash flow was negative $141 million in the quarter, which reflects the soft box office environment, semi-annual interest seasonal working capital headwinds, and ongoing investments in our circle.

Speaker Change: Turning to the balance sheet, we ended the quarter with $699 million of cash.

Speaker Change: Our free cash flow was negative $141 million in the quarter, which reflects the soft box office environment.

Speaker Change: My annual interest payments.

Speaker Change: Working capital headwinds and ongoing investments in our circuit.

Melissa Thomas: With respect to our capital allocation strategy, we continue to have three Strengthening our balance. Investing to position Cinemark for long term success. and Returning Excess Capital to Shareholders.

Speaker Change: With respect to our capital allocation strategy, we continue to have three pillars.

Speaker Change: Strengthening our balance sheet.

Speaker Change: Investing to position Cinemark for long term success.

Speaker Change: And returning excess capital to shareholders.

Melissa Thomas: Regarding the first pillar, strengthening our balance. As we previously communicated, given our strong financial condition and our optimism around box office recovery, we intend to repay the $460 million principal amount of our convertible notes using cash on hand upon their maturity in August of this year. We expect our cash balance will remain elevated in the near term as we prepare to address this maturity. Specific to the potential exposure above the principal amount, our board and management team are mindful of potential shareholder dilution from the settlement of the warrant. To that end, given the recent equity market volatility, we announced the authorization of a $200 million share buyback program in March to proactively mitigate potential dilutions.

Speaker Change: Regarding the first pillar strengthening our balance sheet as we previously communicated given our strong financial condition and our optimism around box office recovery, we intend to repay the $460 million principal amount of our convertible notes using cash on hand upon their maturity in August of this year.

Speaker Change: We expect our cash balance will remain elevated in the near term as we prepare to address this maturity.

Speaker Change: Specific to the potential exposure above the principal amount our board and management team are mindful of potential shareholder dilution from the settlement of the warrants.

Speaker Change: To that end given the recent equity market volatility, we announced the authorization of a $200 million share buyback program in March to proactively mitigate potential dilution.

Melissa Thomas: We were thrilled to fully execute the $200 million authorization in the first quarter, using cash on hand to successfully repurchase 7.93 million shares of our common stock, or 6.5% of our then-outstanding share count, at an average price of $25.25. With that, our current intent is to issue shares to settle any incremental exposure we may have above the principal amount of the convertible net. Closing out the first capital allocation pillar, we ended the quarter at three times net leverage, at the high end of our target range of two to three. The health of our balance sheet remains a key differentiator for our company and affords us the flexibility to invest in long-term growth and maintain the health of our circuit.

Speaker Change: We were thrilled to fully execute to $200 million authorization in the first quarter using cash on hand to successfully repurchased 793 million shares of our common stock or six 5% of our debt outstanding share count at an average price of $25.22.

Speaker Change: With that our current intent is to issue shares to settle any incremental exposure. We may have above the principal amount of the convertible notes.

Speaker Change: Closing out the first capital allocation pillar, we ended the quarter at three times net leverage at the high end of our target range of two to three times.

Speaker Change: The health of our balance sheet remains a key differentiator for our company and affords us the flexibility to invest in long term growth and maintain the health of our circuit.

Melissa Thomas: Which leads me to our second pillar, investing to position the company for long-term success. We spent $22.1 million on capital expenditures in the first quarter. For the full year 2025, we continue to anticipate spending $225 million on capital expenditures. to maintain, enhance, and grow our global circle. We have currently earmarked roughly half of our full-year capital expenditures for maintaining a high-quality circuit and laser projector installation. with the remainder for ROI generating opportunities, including new builds and other creative opportunities such as recliners, premium formats, and food and beverage opportunities.

Speaker Change: Which leads me to our second pillar investing to position the company for long term success.

Speaker Change: We spent $22 $1 million on capital expenditures in the first quarter.

Speaker Change: For the full year 2025, we continue to anticipate spending $225 million on capital expenditures.

Speaker Change: To maintain and enhance and grow our global circuit.

Speaker Change: We have currently earmarked roughly half of our full year capital expenditures for maintaining a high quality circuit and laser projector installations with the remainder for ROI generating opportunities, including new builds and other accretive opportunities such as recliners premium formats, and food and beverage upgrades.

Melissa Thomas: Moving to our third pillar. In March, we paid our first quarterly dividend post the pandemic, marking an important first step in returning excess capital to share. This is a testament to the strength of our free cash flow profile, which allows us to prudently invest in the future of our business while returning more capital to shareholders over time through dividends and or stock buybacks, provided our net leverage remains within our target range. Our goal is to maintain a balanced and disciplined approach to capital allocation, ensuring we have the flexibility to seize future value creation opportunities.

Speaker Change: Moving to our third pillar in March we paid our first quarterly dividend post the pandemic, marking an important first step in returning excess capital to shareholders.

Speaker Change: This is a testament to the strength of our free cash flow profile, which allows us to prudently invest in the future of our business, while returning more capital to shareholders over time through dividends <unk> stock buybacks provided our net leverage remains within our target range.

Speaker Change: Our goal is to maintain a balanced and disciplined approach to capital allocation, ensuring we have the flexibility to seize future value creation opportunities, while also effectively managing risks.

Melissa Thomas: while also effectively manag- In conclusion, we are confident in our strategic direction and the growth opportunities that lie ahead for our company. Our strong financial position, deliberate strategic initiative, and unwavering commitment to operational excellence provide a solid foundation for long-term success. As we look forward, we will maintain our focus on disciplined execution, prudent investments, and leveraging our strengths to maximize value for our shareholders.

Speaker Change: In conclusion, we are confident in our strategic direction and the growth opportunities that lie ahead for our company, our strong financial position deliberate strategic initiatives and unwavering commitment to operational excellence provide a solid foundation for long term success.

Speaker Change: We look forward, we will maintain our focus on disciplined execution prudent investments and leveraging our strengths to maximize value for our shareholders.

Operator: Operator, that concludes our prepared remarks, and we would now like to open up the line for questions. Thank you.

Speaker Change: Operator that concludes our prepared remarks, and we would now like to open up the line for questions.

Speaker Change: Thank you we will now be conducting our question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Operator: We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that 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 your handset before pressing the star key.

Speaker Change: Confirmation tone will indicate that your line is another question queue you.

Speaker Change: You May press star two if he would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Eric Handler: Our first question is coming from the line of Eric Handler with Roth Capital. Please proceed with your question. Good morning, and thanks for the question.

Speaker Change: Our first question is coming from the line of Eric Handler with Roth Capital. Please proceed with your question.

Eric Handler: Good morning, and thanks for the question.

Sean Gamble: Sean, you know, it was a very nice surprise to see you take down the whole $200 million of the share buyback in the quarter. Given that the box office is expected to be a lot stronger in the remaining three quarters of this year, and next year as well, any reason why you wouldn't want to just announce another program to have it there in case you see an opportunistic, you know, you could be opportunistic if you think the share price is undervalued?

Speaker Change: Sean.

Speaker Change: It was a very nice surprise to see you take down the whole $200 million of the share buyback in the quarter.

Given that the box office is expected to be a lot stronger than the remaining three quarters of this year and next year as well any reason why you wouldn't want to just announced another program to have it there in case you see an opportunistic.

Speaker Change: You know you can be opportunistic if you think the share price is undervalued.

Sean Gamble: Thanks for the question, Eric. Yeah, we were definitely very pleased with the opportunistic situation that presented itself over the quarter to fully execute that. And we're very encouraged about where the full year is heading with regard to the overall potential of Box Office.

Sean Gamble: Thanks for the question Eric Yeah, we're definitely very pleased with.

Sean Gamble: The opportunistic situation that presented itself over the quarter to fully execute that and we're very encouraged about where the.

Sean Gamble: Full year is heading with regard to the overall potential of box office I'll, let Melissa talk more specifically to kind of our forward looking plans in that regard so Eric.

Melissa Thomas: I'll let Melissa talk more specifically to kind of our forward-looking plans in that regard. So, Eric, with respect to that, so our goal does remain to return a greater share of our free cash flow to shareholders over time through dividends and or stock buybacks, provided our net leverage ratio remains within our target range of two to three times. And that mix between dividends and or stock buybacks will be determined over time. But a variety of factors go into our decision on repurchasing shares, including but not limited to cash and liquidity, valuation, considerations around dilution management, as well as ongoing returns paid to shareholders.

Sean Gamble: With respect to that so our goal does remain to return a greater share of our free cash flow to shareholders over time through dividends and our stock buybacks provided our net leverage ratio remains within our target range of two to three times and that mix between dividend and or stock buybacks will be delivered.

Sean Gamble: Determined overtime a variety of factors go into our decision on repurchasing shares, including but not limited to cash and liquidity valuation considerations around dilution management as well as ongoing returns paid to shareholders, but all that said I think it's important to also keep in.

Eric Handler: But all that said, I think it's important to also keep in mind that in the near term, we do have the upcoming convertible note settlement. As we mentioned on the call, we continue to anticipate repaying the principal amount of $460 million upon maturity in August. So that is a key priority for us from a capital outlook. Okay, so but you're not ruling it out for the future.

Sean Gamble: In the near term, we do have the upcoming convertible notes settlement as we mentioned on the call. We continue to anticipate repaying the principal amount of 460 million bond maturity in August so that is a key priority for us from a capital allocation standpoint.

Sean Gamble: Okay. So, but you are not ruling it out for the future and then could you just remind us for I know you've got the.

Eric Handler: And then could you just remind us, you know, for I mean, you've got the The collar in place or the derivative instrument in place, like for every dollar above what I think it's like $22.08, how much does that equate to and incremental payment. Yes, so in terms of exposure above the $460 million principal amount, every dollar of stock price movement above $22 represents $32 million of exposure or the corresponding number of shares.

Sean Gamble: The collar in place on the derivative instrument in place like for every dollar above but I think it's like $22 in a sense, how much does that equate to in <unk>.

Sean Gamble: Incremental payments.

Sean Gamble: Yes, so in terms of exposure above the 460 million principal amount every dollar of stock price movement above $22 represents $32 million of exposure or the corresponding number of shares.

Eric Handler: What I would recommend, Eric, we did include in our investor deck a slide on the convertible note mechanics, which helps to show what that looks like, particularly in light of the repurchase that we just executed on, which does mitigate dilution now associated with 7.93 million shares. Associated with the settlement of the warrant. So I would encourage folks to look at that Thank you. Thanks, Eric. Thank you.

Eric Handler: What I would recommend Eric we did include in our Investor deck, a slide on the convertible note mechanics, which helps to show.

Eric Handler: What that looks like particularly in light of the repurchase that we just executed on which does mitigate dilution now associated with 7.93 million shares.

Eric Handler: Associated with the settlement of the warrants so I would encourage folks to look at that as well.

Eric Handler: Thank you.

Eric Handler: Thanks, Eric.

Speaker Change: Thank you. Our next question is going to come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question.

Ben Swinburne: Our next question is going to come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your question. Thank you. Good morning. Sean, I guess, and with a couple of questions from some of your prepared remarks, I guess, coming out of Cinemacon, helpful to hear your feedback on Amazon. I think that's been a bit of a debate given the shifting management and leadership at their studio. So I don't know if you had any more color on sort of the expectations you have from their studio and the kind of films they're working on, maybe beyond the Bond story.

Ben Swinburne: Thank you good morning.

Speaker Change: Sean I guess and with a couple of questions from some of your prepared remarks I guess.

Ben Swinburne: Coming out of cinema Con helpful to hear your feedback on Amazon because it's been a bit of a debate given the shifting management and leadership at their studio.

Ben Swinburne: I'm sorry, if you had any more color on sort of the expectations you have from their studio in the kind of films that are working on really beyond the bond story and I'd love to hear similar thoughts on Apple I think theres some debate in Hollywood about their appetite today to keep pushing into into theatrical and invest behind that.

Ben Swinburne: I'd love to hear similar thoughts on Apple. I think there's some debate in Hollywood about their appetite today to keep pushing into theatrical and invest behind. And then I don't know, I don't know how much you'd be willing to share. But last year's Q2 had really strong market share for Cinemark. I think it was I think it was your highest maybe ever. But this year's second quarter also looks really good from a mix point of view. So just curious if you had any thoughts on kind of comparing what we're seeing now and in the current quarter versus a year ago that might impact year-over-year market share performance.

Ben Swinburne: And then I don't know I don't know, if how much you'd be willing to share but last.

Ben Swinburne: Last year's Q2 had really strong market share for cinemark. It because it was I think it was your highest maybe ever.

Ben Swinburne: But this year's second quarter also looks really good from a mix point of view. So just curious if you had any thoughts on kind of comparing what we're what we're seeing now in the current quarter versus a year ago that might impact year over year market share performance for Cinemark circuit. Thank you sure. Thanks for the question has been star.

Sean Gamble: Sure, thanks for the questions Ben. Starting with your questions on Amazon and Apple. Yeah, I mean look, Amazon, we continue to be very encouraged. I think Mike Hopkins was very clear at CinemaCon about their enthusiasm regarding putting out up to 14 to 16 theatrical releases by 2027. I think they're looking at potential, the potential to have up to 14 even next year. And they shared a lot of that content during the course of the event. They had some great looking materials from their upcoming film, Project Hail Mary, which is based on a book with Ryan Gosling.

Ben Swinburne: Starting with your question is on Amazon and Apple, Yes, I mean look Amazon we continue to be very encouraged I think.

Ben Swinburne: Mike Hopkins was very clear at cinema con about their enthusiasm regarding putting out up to 14 to 16 theatrical releases by 2027, I think theyre looking at potential has the potential to have up to 2014, even next year and they shared a lot of that content.

Ben Swinburne: During the course of the event.

Ben Swinburne: They had some great looking materials from their upcoming film project Hail Mary which is based on a book with Ryan Gosling. They just recently announced a new us the new take on Thomas Crown affair Mercy. They have a whole you know masters of the universe for them. So they got some.

Sean Gamble: They just recently announced the new take on Thomas Crown Affair, Mercy. They have a whole Masters of the Universe film. So they got some varied content coming out across a range of genres of varied scales that I'd say everybody was pretty overwhelmed with just the quality and how far along they are with the movies that they showcased. They've continued to lean into putting resources in place. So they've got real skin in the game with people in production and marketing and distribution. They're putting in a whole international distribution team now. So they're really leaning into this in a big way.

Ben Swinburne: Very good content coming out across a range of genres of varied scales that are I'd say, everybody was pretty overwhelmed with just the quality and how far along they are with the movies that they showcased they've continued to lean into putting resources in place. So they've got real skin in the game with people and.

Ben Swinburne: <unk> and marketing and distribution, they're putting in a whole international distribution team now so they are really leaning into this in a big way. So I think we just look at their actions it really shows that they're they're in this for the long haul.

Sean Gamble: So I think when we just look at their actions, it really shows that they're in this for the long haul.

Sean Gamble: Your question on Apple, I think Apple has a big focal point in the short run on F1 that they're going to be releasing through Warner Brothers this summer. The materials that they shared on that during CineCon looked fantastic. Everything we've heard about the film is it's just a sensational movie. So I think they're kind of waiting to get through that. And I believe they even commented, made a comment about that on their earnings call yesterday. But I think that, you know, in their case, they're still in a little bit of an earlier phase of sorting out their longer term plans.

Ben Swinburne: Your question on Apple I think Apple has a big focal point in the short run on F. One that they're going to be releasing through Warner brothers. This summer.

Ben Swinburne: The materials that they shared on that during set of Con look fantastic everything we've heard about the film is it's just a sensational movie. So I think they are kind of waiting to get through that and I believe they even commented had made a comment about that on their earnings call yesterday.

Ben Swinburne: But I think that are in.

Ben Swinburne: In their case, they are still in a little bit of an earlier phase of sorting out their longer term plans, we continue to be optimistic about where they ultimately land just because we think it is a it would be a great complement for their business and their platform given the type of benefits that theatrical provides films from a quality perceptions.

Sean Gamble: We continue to be optimistic about where they ultimately land, just because we think it would be a great compliment for their business and their platform, given the type of benefits that theatrical provides films from a quality perception standpoint, which really fits well with their whole, you know, Apple branding. But we'll have to we'll have to see where that goes.

Ben Swinburne: Dan point, which really fits well with their whole apple branding, but.

Ben Swinburne: But we'll have to we'll have to see where that goes.

Sean Gamble: Your other question on market share for the second quarter. I mean, we'll we're going to, you know, see how things unfold this quarter. Yes, there's certainly a fair amount of family films, which, as you know, works very well and tends to over index for our circuit, you know, as does horror. So that will be definitely working in our favor from a content mix standpoint, albeit there's a lot more significant films coming into the marketplace now with a larger cadence, which we've said, you know, those are the periods that we have seen our share. We start to hit more of those capacity constraints, hitting our kind of occupancy thresholds where some of that attendance spills over to other circuits.

Ben Swinburne: Your other question on market share for the second quarter.

Ben Swinburne: Well, we're going to see how things unfold. This quarter, yes, there's certainly a fair amount of family films, which as you know works very well and tends to over index for our circuit has those horror.

Ben Swinburne: So that will be definitely working in our favor from a content mixed standpoint.

Ben Swinburne: There is a lot more significant films coming into the marketplace now with a larger cadence, which we've said you know those are the periods that we have seen our share we start to hit more of those capacity constraints hitting our kind of occupancy thresholds, where some of that attendance spills over to other circuits are.

Sean Gamble: So our share has the potential to compress a bit in those circumstances. It still means that we're operating at, you know, our most efficient way and we're capitalizing on that. But we, you know, we do expect that our share may compress a bit in an environment where we have a lot of content in the marketplace. And that's a good thing. Again, fortunately, we're heading into appear to be heading into that type of situation with a steady cadence of meaningful releases week after week after week. Got it.

Ben Swinburne: Sure. It has the potential to compress a bit in those circumstances. It still means that we're operating at at <unk>.

Ben Swinburne: Our most efficient way and we're capitalizing on that but we do expect that our share may compress a bit in an environment, where we have a lot of content in the marketplace and that's a good thing again, Fortunately, we're heading into appear to be heading into that type of situation with a steady cadence of meaningful releases week after.

Ben Swinburne: A week after week.

Speaker Change: Got it and I just want to clarify Melissa. Thank you for the convert slide appreciate that the 32 million of incremental value above 22 away you plan to settle that in shares now I think you said earlier and as that shares issued at 20 208 is that the rough math, we showed about a million 141 45.

Ben Swinburne: And I just want to clarify, Melissa, thank you for the converse slide. Appreciate that. The 32 million of incremental value above 2208, you plan to settle that in shares now, I think you said earlier, and is that shares issued at 2208? Is that the rough math, which is about a million 1.45 million shares per? The way you would want to do the math, Ben, is you would basically take... If the stock price, for example, based on where we closed yesterday, if it was $30, you would compare, basically take $30 plus $22, that gives you roughly $8 spread, times that by $32 million, that gives you your dollar value, divide that by $30 share price, and that will get you the equivalent shares.

Speaker Change: Million shares per let's think about that rate the way the way you would want to do that Ben is you would basically take.

Speaker Change: <unk> 32, and if the stock price for example, you know based on where we closed yesterday, but it was $30 you would compare.

Speaker Change: Basically take $30 less 20 joy.

Speaker Change: R $22 that gets you roughly eight.

Speaker Change: Dollar spread times that by $32 million that gives you your dollars dollar value divide that by $30 share price and that will get you the equivalent shares nicely. So.

Ben Swinburne: I see. So you'll issue shares at basically the market, wherever the stock is in August is the value. Gotcha. So you're effectively bought back stock at 25 and you'll be issuing shares presumably much higher. That would be the goal. Thank you. Thanks, Ben.

So you will issue shares basically the market whatever wherever the stock is in August yes valuable goods.

Speaker Change: Gotcha, So youre effectively bought back stock at 25, and you'll be issuing shares presumably much higher which is obviously a nice trade for you guys.

Speaker Change: Anyway, that's not that would be the goal.

Speaker Change: Thank you [laughter] Thanks, Ben.

Speaker Change: Thank you. The next question is coming from the line of Chad Beynon with Macquarie. Please proceed with your question.

Chad Beynon: The next question is coming from the line of Chad Beynon with Macquarie. Please proceed with your question. Hi, good morning. Thanks for taking my question. Sean, film windowing was another big theme at CinemaCon this year. Could you kind of give us the down low in terms of where that sits from your conversations? And then I guess the sidebar of that is, since you're gaining share and it seems like you're contributing on the marketing side, is that less of an issue for you just given your movie club and kind of your market share? Sure, and just to clarify the last question, are you referring to, are windows less of an issue for us, or is something related to marketing less of an issue for us?

Chad Beynon: Hi, good morning, Thanks for taking my question.

Chad Beynon: Sean film Windowing.

Speaker Change: It was another big thing Semicon. This year could you kind of give us the down-low in terms of where where that sits from from your conversations and then I guess the sidebar if that is since youre gaining share and it seems like you're contributing on the marketing side is that less of an issue for you.

Chad Beynon: Just given you.

Chad Beynon: Your movie club and kind of your your market share. Thanks.

Chad Beynon: Sure and just to clarify the last question are you are you referring to is our windows less of an issue for us or is something related to marketing less of an issue for us.

Sean Gamble: Windowing, if that compresses. Gotcha. Sure, happy to provide some added color to that. So the topic of windows is becoming a more active discussion again, following all the considerable evolution that's taken place with the theatrical window, both in length as well as just variability over a relatively short period since the pandemic. More and more conversation is taking place now between studios and exhibitors as we collectively are evaluating the longer term impacts on consumer behavior over time, especially for the circumstances where there's a more highly shortened window. The goal is to maximize the shared value revenue and margin creation, achieving increased flexibility and marketing leverage and overall film results without adversely impacting theatrical attendance and overall theatrical proceeds.

Chad Beynon: Window or if that if that compresses gotcha.

Chad Beynon: Sure happy to provide some added color to that so the topic of windows is becoming a more active discussion again following all the considerable evolution, that's taking place with the theatrical window, both in length as well as just variability.

Chad Beynon: Over a relatively short period since the pandemic more and more conversation is taking place now between studios and exhibitors as we collectively are evaluating the longer term impacts on consumer behavior over time, especially for the circumstances, where there is a more highly shorten window. The goal is to maximize the shared value revenue.

Chad Beynon: And margin creation.

Chad Beynon: <unk> increased flexibility in marketing leverage and overall film results without adversely impacting theatrical attendance.

Chad Beynon: And overall theatrical proceeds.

Sean Gamble: So in our view, we continue to believe that a flexible window structure provides benefits both to studios and theaters, both of our economics. However, the debate really is on the timeframe. We think that the timeframe between when a movie releases in theaters and when it becomes available in homes needs to be sufficient enough across a majority of films to fully stimulate and realize the theatrical movie going excitement, build those cultural moments like we're seeing recently with a Minecraft movie and centers, you know, just maximize value creation without the risk of causing consumer confusion and suboptimizing revenue generation.

Chad Beynon: So in our view, we continue to believe that a flexible windows structure provides benefits both to studios.

Chad Beynon: And theaters both to our both of our economics. However, the debate really is on the timeframe, we think that the timeframe between when a movie releases and theaters and when it becomes available in homes needs to be sufficient enough.

Chad Beynon: Across the majority of films to fully stimulate and realize the theatrical movie going excitement build those cultural moments like we're seeing recently with Minecraft movie in centers, just maximize value creation without the risk of causing consumer confusion and sub optimizing Rev.

Revenue generation, so I'd say, it's just an active topic because theres some debate going on what is that optimal window lengths.

Sean Gamble: So I'd say it's just an active topic because there's some debate going on. What is that optimal window length?

Sean Gamble: And while we don't necessarily believe it's a one size fits all scenario, you know, we do share some of that sentiment that more of a 45 day average kind of across the bulk of films is a good target that we think minimizes the risk of suboptimizing results over time, particularly for casual moviegoers and in smaller films. So that's really the topic that has kind of resurfaced more actively now that we're a few years from all these changes and taking a good look at, all right, what are we seeing now with regard to the impact of that in our viewpoint?

Chad Beynon: While we don't necessarily believe it's a one size fits all scenario, we do share some of that sentiment that more of a 45 day average kind of across the bulk of films is a good target that we think minimizes the risk of sub optimizing results over time, particularly for casual moviegoers and in smaller films. So that's really the topic that.

Chad Beynon: It has kind of re surfaced more actively now that we're a few years from all these changes and taken a good look at alright, what are we seeing now with regard to the impact of that.

Chad Beynon: In our viewpoint I wouldn't say that our marketing efforts and our share gains, but those have been real positives, but I'm not sure that necessarily changes the matter with regard to windows I think the windows concept is more of a macro industry discussion just because we're looking at alright are any consumer.

Sean Gamble: I wouldn't say that our marketing efforts and our share gains, those have been real positives, but I'm not sure that necessarily changes the matter with regard to Windows. I think the Windows concept is more of a macro industry discussion just because we're looking at, all right, are any consumer behavior patterns changing over time because of some of these shifts and trying to hone in on, again, what's that optimal point to maximize overall value for all key stakeholders?

Chad Beynon: Behavior patterns changing over time because of some of these shifts and trying to hone in on again, what's that optimal point to maximize overall value for all key stakeholders.

Chad Beynon: Okay, great. Very comprehensive. Thanks.

Speaker Change: Okay, great very comprehensive thanks.

Melissa Thomas: And then, Melissa, the domestic concession per cap bumping up against $8, I guess, for the fourth quarter in a row, pretty, pretty nice growth. You mentioned, you know, good, good incidence of spending and strategic pricing increases and the benefit from the, from the slate. Should we continue to see growth in CPPs? Or are we getting to a level that it's more based on the content that's out there and the people that are in your auditoriums? Thank you. Thanks for the question. So, we do continue to expect moderate year-over-year growth in our domestic concession per cap for full year 2025, and that's driven by ongoing execution of our initiatives aimed at both increasing incidence rates as well as optimizing our concession prices.

Melissa Thomas: And then Melissa the.

Speaker Change: Domestic concession per cap bumping up against.

Speaker Change: $8 I guess for the fourth quarter in a row.

Speaker Change: Pretty pretty nice growth you meant that you mentioned.

Speaker Change: Good good incidence of spending and strategic pricing increases and the benefit from the from the slate should we continue to see.

Speaker Change: Growth in CPP is are we getting to a level that it's more based on.

Speaker Change: The content that's out there and the people better and your auditoriums. Thank you.

Speaker Change: Thanks for the question. So we do continue to expect moderate year over year growth in our domestic concession per cap for full year 2025, and that's driven by ongoing execution of our initiatives aimed at both an increasing incidence rates as well as optimizing our concession prices now keep in mind.

Melissa Thomas: Now, keep in mind, our per caps do fluctuate quarter-to-quarter with film mix, but we do expect to continue to be able to grow our concession per caps. That's on the domestic front. I would just highlight, as it relates to international, we do expect to face some pressure from FX dynamics, with some offset expected from inflationary price increases. But that's it for now. The dynamic that's been playing out in international is not really a new phenomenon.

Speaker Change: Our per caps do fluctuate quarter to quarter with film mix, but we do expect to continue to be able to grow our concession per caps.

Speaker Change: That's on the domestic front I would just highlight as it relates to international we do expect to face some pressure from FX dynamics with some offset expected from inflationary price increases, but that's just the dynamic that's been playing out in international it's not really a new phenomenon there.

Chad Beynon: Great. Thank you very much. Thanks, Chad. Thank you.

Speaker Change: Great. Thank you very much.

Ed: Thanks, Ed.

Speaker Change: Thank you. The next question is coming from Patrick Sholl with Barrington Research. Please proceed with your question.

Patrick Scholl: The next question is coming from Patrick Scholl with Barrington Research. Please proceed with your question. Hi, thank you. I just had a question about the market share impacts of the growing box off that you guys have talked about. And just curious on the opportunities that you see around Operating hours to you know, maybe make that a little bit easier to absorb or if you're you feel you're kind of at The Sustainable Capacity of Operating Levels, where it would be kind of more margin dilutive if you were to... It's a great question, Pat.

Patrick Sholl: Alright, thank you.

Speaker Change: A question about.

Speaker Change: The market share impacts of a growing box off you guys have talked about.

Speaker Change: Just curious on the.

Speaker Change: The opportunities that you see around <unk>.

Speaker Change: Operating hours.

Speaker Change: Two.

Speaker Change: Maybe make that a little bit easier to absorb or if you feel youre kind of at.

Speaker Change: Like just the sustainable capacity of operating levels, where it would be kind of more margin dilutive. If you were to expand it.

Speaker Change: It's a great question, Pat I'll take that one.

Sean Gamble: I'll take that one. Operating hours are definitely something that we look at as a way to try to capture more attendance when the demand is there. Our team actually looks at profitability by feeder, by hour, by day of the week with the anticipated demand we have, and that's generally how we're kind of gearing up the degree of operating hours we have. So, you know, you tend to have a little bit lower margins in the wings kind of in the early hours and then later hours, but we're looking at driving positive just dollar generation in those moments.

Speaker Change: That operating hours are definitely something that we look at.

Speaker Change: As a way to try to capture more attendance when the demand is there our team actually looks at profitability by theater by hour by day of the week with anticipated demand, we have and that's generally how we're we're kind of gearing up the degree of operating hours. We have so you tend to have a little bit.

Speaker Change: Lower margins in the wings kind of in the early hours and then later hours, but we're looking at driving positive just dollar generation in those moments. So we're flexing that based on the level of demand and you are right. Your observation is one where with greater demand. There is an opportunity to expand that within reason so that you are still profitable.

Sean Gamble: So we're flexing that based on the level of demand. And you're right, your observation is one where with greater demand, there's an opportunity to expand that within reason so that you're still profitable. But that's the way you do it. As it pertains to share, that can help a bit. However, you know, the periods where we're starting to hit some of those threshold, those capacity thresholds are really in like the weekend evening moments like Friday, Saturday evening where you only have so many seats to sell across your circuit. And in those periods, even if you're expanding hours in the wings, you know, it may not fully capture that because if somebody is looking to go during that period of time, particularly in some of the prime sets and you don't have any seats, you know, they look elsewhere.

Speaker Change: But that's the way you do it.

Speaker Change: As it pertains to share that can help a bit however, the periods, where we're starting to hit some of those threshold those capacity thresholds are really like the the weekend evening moments like Friday Saturday evening, where you only have so many seats to sell across your circuit and in those periods.

Speaker Change: Even if you're expanding hours in the wings. It may not fully capture that because if somebody is looking to go during that period of time, particularly in some of the prime sets and you don't have any seats. They may look elsewhere. So some of that demand may spillover to other time frames, but not all of it. So that's where we just get some of that compression at times.

Sean Gamble: So some of that demand may spill over to other time frames, but not all of it. So that's where we just get some of that compression at times when you get into these really big movie going periods with a lot of films in the marketplace.

Speaker Change: When you get into these really big movie going periods with a lot of films in the marketplace.

Sean Gamble: I'll just add one point. The way we compensate for that in a lighter period is you can basically expand the volume of showtimes you have on a given title across more auditoriums, but when you have many large, important films in the marketplace, you don't have as much flexibility to do that. Right.

Speaker Change: The way I will just add one point the way we compensate for that in a in a lighter period as you can basically expand the volume of Showtime's you have on a given.

Speaker Change: Given title across more auditoriums, but when you have many large important films in the marketplace. You. Just you don't have as much flexibility to do that.

Speaker Change: Right.

Sean Gamble: Maybe just on capital expenditures, you mentioned recliners as one of the investment areas. Should we think of, are you looking at... More quickly going to full recliner seating, or is that still more just a gradual process, more around like new builds and things like that? Well, we're, at this point, we have approximately 70% of our domestic circuit is reclined, and I wouldn't say we're aiming for 100%. Part of that is a factor of just the performance of the theater, part of that, and the age of the theater. Part of that is, you know, if a theater is just doing so much demand, if your occupancy levels are really high, we can't afford to lose that volume of seats, because you can't generate the lift you need without the number of seats in the marketplace.

Speaker Change: And then maybe just on the capital.

Speaker Change: Capital expenditures, you mentioned Recliners as one of the investment areas should we think of are you looking at.

Speaker Change: <unk>.

Speaker Change: More quickly going to covert finer sitting or is that still more just a gradual process.

Speaker Change: More around like new builds and things like that.

Speaker Change: Well, we're at this point, we have approximately 70% of our domestic circuit is reclined.

Speaker Change: And I wouldn't say, we're aiming for 100% part of that is a factor of just the performance of the theaters part of that in the age of the theater part of that is is it's a theater is.

Speaker Change: <unk> is doing so much demand if your occupancy levels are really high.

Speaker Change: We can't afford to lose that volume of seats, because you can't generate the lift you need without the number of seats in the marketplace that tends to be the situation in Latin America, where auditoriums generally are a bit smaller occupancies are higher so you can't really afford to take seats out. So you wind up with a few.

Sean Gamble: That tends to be the situation in Latin America, where auditoriums generally are a bit smaller, occupancies are higher, so you can't really afford to take seats out, so you wind up with a few auditoriums that are VIP and reclined, and the remainder auditoriums that are kind of standard rocker seating. So we look at it, really, where there's opportunities to generate positive returns based on a lift that we feel confident we can get, if we have enough capacity, theater by theater, for the remaining 30% of the circuit that's not reclined. Okay, thank you. Thanks, Pat.

Speaker Change: Auditoriums that our VIP and recline in the remainder auditoriums that are kind of your standard rocker seating.

Speaker Change: So we look at it really where there's opportunities to generate positive returns based on the lift that we feel confident we can get if we have enough capacity theater by theater for those remain the remaining 30% of the circuit that's not reclined.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks Pat.

Speaker Change: Thank you. The next question is coming from the line of Omar <unk> with Wells Fargo. Please proceed with your question.

Omar Mahias: The next question is coming from the line of Omar Mahias with Wells Fargo. Please proceed with your question. Sean, I know you mentioned how resilient the box office is during recessionary periods, but I wanted to dig in on this a bit further. Can you touch on the state of the consumer, and if you have seen any early signs of weakness in 2Q? And I'm curious if you have any concerns on average ticket prices or per caps being pressured by the weaker macro. Sure.

Speaker Change: Yes.

Speaker Change: Good morning, and thanks for the question.

Speaker Change: Sean I know you mentioned, how resilient the box office is doing recessionary periods, but wanted to dig in on this a bit further can you touch on the state of the consumer and if you have seen any any early signs of weakness in <unk> and curious if you have any concerns on average ticket prices are being pressured by the by the weaker.

Speaker Change: Zero.

Sure look it's a it's a great question kind of the current state of macro economy.

Sean Gamble: Look, it's a great question, kind of the current state of macroeconomy. The short answer is we haven't seen any indications of any of those factors adversely affecting moviegoing. I mean, as kind of mentioned, second quarter specifically, we're in a moment right now where there's a lot of positive momentum in the marketplace for moviegoing. We've seen generally the majority of films have been outperforming this quarter at significant levels, particularly when you look at kind of what a Minecraft movie has done. The holds on Sinners have been sensational. I mentioned kind of the first quarter of food and beverage, but also, you know, the second quarter on Minecraft, we had our highest D-box sales ever for a three-day opening period.

Speaker Change: The short answer is we haven't seen any indications of.

Speaker Change: Any of those factors adversely affecting moviegoing I mean.

Speaker Change: As kind of mentioned second quarter, specifically, we're in a moment right now where there's a lot of positive momentum in the marketplace for movie going we've seen generally a majority of films have been outperforming this quarter at significant levels, particularly when you look at kind of a minecraft movie is done the holds on centers have been sensational I.

Speaker Change: And kind of the first quarter food and beverage, but also the second quarter on Minecraft, we had our highest D box sales ever for a three day opening period. So if.

Sean Gamble: So people are continuing not only to come to the movies, but they are continuing to consume food and beverage, merchandise, as well as upgrade to premium amenity offerings, seats and auditoriums and things of that sort. So we haven't seen a stall in that, which is consistent with historic patterns. When compelling films are in the marketplace, people may trade off on other types of activities, but they're still looking for affordable local forms of out-of-home entertainment, and going to the movies is one of the best choices, most economical choices they have.

Speaker Change: People are continuing not only to come to the movies, but they are continuing to consume.

Speaker Change: Food and beverage merchandise as well as upgrade to premium momentum make many of the offerings seats auditoriums and things of that sort. So we haven't seen a.

Speaker Change: Stall in that which is consistent with historic patterns when compelling films are in the marketplace people may trade off on other types of activities, but there is still looking for affordable local forms of out of home entertainment and going to the movies is one of the best choices most economical choices they have so short.

Sean Gamble: So short answer again is we haven't seen any impact, and hopefully that will continue as we progress through the year. Pricing, I think we're going to be careful about. Obviously, it's the same way when we were coming out of the pandemic. We were really careful about pricing when we were trying to encourage people to come back. So we'll continue to use our data analytics to guide that decision-making in terms of what the market will bear and how much elasticity there is. But our overall goal with all those decisions, we want to make sure when consumers come to our theaters, they get a premium movie-going experience that they feel is a great value, and that's what continues to drive more frequency and keeps them coming back again and again.

Speaker Change: The short answer again is we haven't seen any impact.

Hopefully that will continue as we progress through the year pricing I think we're going to be careful about obviously it is the same way when we were coming out of the pandemic. We were really careful about pricing. When we were trying to encourage people to come back. So we will continue to use our data analytics to guide that decision, making in terms of what the market will bear and how much elasticity.

Speaker Change: There is but our overall goal with all of those decisions, we want to make sure when consumers come to our theaters they get a premium movie going experience that they feel is a great value and that's what continues to drive more frequency and keeps them coming back again and again.

Melissa Thomas: And one thing I would add, Omar, just on the average ticket price side for our expectations there, we do continue to expect modest growth. As Sean mentioned, we'll approach our pricing cautiously, but we do still see pockets of opportunity there. In addition, given the strength of the film slate from here on out that we're expecting, that also bodes well for a premium format mix. So we do still see the ability to modestly grow our ticket prices. That's super helpful.

Speaker Change: One thing I would add Omar just on that average ticket price side for our expectations. There. We do continue to expect modest growth as Sean mentioned will approach our pricing cautiously, but we do still see pockets of opportunity. There. In addition, given the strength of the film slate from here on out that were.

Speaker Change: Expecting that also bodes well for our premium format mix. So we do that.

Speaker Change: We'll see the ability to modestly grow our ticket prices.

Speaker Change: That's super helpful and Melissa maybe on the on the cost side compression costs were a little bit higher when compared to historical levels P. P O.

Melissa Thomas: And Melissa, maybe on the cost side, concession costs were a little bit higher when compared to historical levels. Can you unpack some of the key drivers that drove costs higher? And do you see this as a new run rate or just a one-off? Thanks. Sure. So on the COGS rate side, there were a couple of drivers of rate in the quarter. I would say the largest impact was the higher mix of merchandise, and then followed by lower rebates and just some ongoing inflationary pressure that we've been seeing on certain concession categories, offset by our pricing initiatives.

Speaker Change: The key drivers that drove costs higher and do you see this as a new run rate or just a one off.

Speaker Change: Thanks.

Sure. So on the Cogs rate side, there were a couple of drivers.

Speaker Change: A rate in the quarter I would say the largest impact was the higher mix of merchandise and then followed by lower rebates and just some ongoing inflationary pressure that we've been seeing on certain concessions categories offset by our pricing initiatives, what I like to highlight the merch smack.

Melissa Thomas: What I would highlight on the merch mix is, in a quarter like Q1, where, as Sean pointed out in his prepared remarks, where we had the lowest attendance level since Q1 of 2022, we do have some noise in the expense side. The level of merchandise mix, how much this is impacting our COGS rate in the quarter is probably exacerbated by that, so we're not expecting this run rate on a go-forward basis for COGS.

Speaker Change: <unk> is in a quarter like Q1, where as Sean pointed out in his prepared remarks, where we had the lowest attendance levels. Since Q1 of 2022, we do have some noise in our in the expense side I would say that.

Speaker Change: That level of merchandise mix and how much this is impacting our cogs rate in the quarter is probably exacerbated by by that so we're not expecting this run rate on a go forward basis, our Cogs, we do still expect it to increase year over year, but not at the clip that youre seeing in the quarter.

Omar Mahias: We do still expect it to increase year-over-year, but not at the clip that you're seeing in the quarter. Great. Thank you very much. Thanks, Omar.

Speaker Change: Great. Thank you very much thanks Omar.

Robert Fishman: Thank you. The next question is coming from Robert Fishman with Moffitt Nathanson. Please proceed with your question. All right, good morning. One for Sean and one for Melissa, if I can. So, Sean, can we go back to Windows for a second?

Speaker Change: Thank you. The next question is coming from Robert Fishman with Moffett Nathanson. Please proceed with your question.

Speaker Change: Hi, Good morning, one for Sun and one for Mark So if I can so Sean can we go back to windows for a second.

Sean Gamble: Any best estimate you can give us on the box office cannibalization that you've seen from the current studio flexible windows relative to the pre-pandemic longer windows, maybe if you just think of a full year 24 as an example, and would you be willing to give any offsetting economics to the studios to help convince them, given their own success in PVOD, like Universal generating 100 million from WIC? Sure, well, I mean, trying to evaluate the impact is the exercise going on right now because it's not perfectly straightforward, unfortunately. On the plus side, what we're not seeing is an accelerated drop in theatrical performance when movies enter the home on PVOD.

Speaker Change: That a best estimate you can give us on the box office cannibalization that you've seen from the current studio flexible windows relative to the pre pandemic longer windows, maybe maybe if you just think of full year 'twenty four as an example, and would you be willing to give any offsetting economics to the studios to help to convince them.

Speaker Change: Given their own success in PV like Universal generating 100 million from wicket.

Speaker Change: Sure well I mean trying to.

Speaker Change: Evaluate the impact is the exercise going on right now because it's not perfectly straightforward. Unfortunately.

Speaker Change: <unk> side, what we're not seeing is an accelerated drop in theatrical performance when movies enter the home.

Speaker Change: On <unk>. So that's a good sign what's unclear and harder to fully Pierce through is.

Sean Gamble: So that's a good sign. What's unclear and harder to fully pierce through is, you know, is the overall opening, is the overall impact not as large as it otherwise could be because people are starting to decide, you know, to either stay home or, you know, wait because of that. And that's the analysis we're going on. Or is there confusion being created right now that could be leading to that over time over any particular types of film? The other thing that convolutes it a little bit is the fact that overall volume in the marketplace still hasn't fully recovered to pre-pandemic level.

Speaker Change: Is the overall opening is the overall impact not as large as it otherwise could be because people are starting to decide to either stay home or wait because of that and thats. The analysis, we're going on or is there confusion being created right now that could be leading to that over time over any particular types of film.

Speaker Change: The other thing that convolute sit a little bit is the fact that overall volume in the marketplace still hasnt fully recovered to pre pandemic levels. So when we kind of compare what we're seeing now relative to pre pandemic circumstances.

Sean Gamble: So when we kind of compare what we're seeing now relative to pre-pandemic circumstances, it's just another factor that distorts things. Because like we've talked about, this tends to be a momentum type business that when there's a regular cadence of films in the marketplace, it keeps people coming, it keeps people getting exposed to the film, the future films that are coming down the pike. And then they continue to come more. We've had more of those starts and stops. Like, for instance, the first quarter, it was a weaker film. Now we're in a much stronger film period and momentum is starting to crank back up again.

Speaker Change: As just another factor that distorts things because like like we've talked about this tends to be a momentum type business that when there is a regular cadence of films in the marketplace. It keeps people coming it keeps people getting exposed to the film the future films that are coming down the Pike and then they continue to come more we've we've had up more of those starts and stops.

Speaker Change: <unk> like for instance, the first quarter was a weaker film stack now we're in a much stronger film period and momentum is starting to crank back up again, so how much of what we're seeing at a macro level is because of that versus other factors. This is what we're all kind of studying and evaluating so can't really give a.

Sean Gamble: So how much of what we're seeing at a macro level is because of that versus other factors? This is what we're all kind of studying and evaluating. So can't really give a direct sense for that because it's not fully clear right now, which is why we're all trying to understand that collectively to figure out what is the best ultimate landing point to go forward with. I think, you know, from an economic standpoint, that's just a, that's an ongoing discussion that I think will play out as we're sorting these types of things out to figure out what is that right balance.

Speaker Change: Direct sense for that because it's not fully clear right now which is why we're all trying to understand that collectively to figure out what is the the best Ultimate landing point to go forward with.

Speaker Change: From an economic standpoint, that's just a that's an ongoing discussion that I think will play out as we're sorting. These types of things out to figure out what is that right balance. So it is an appropriate and fair kind of just economic structure in and whatever kind of final.

Sean Gamble: So, you know, it's an appropriate and fair kind of just economic structure in whatever kind of final place things land. Okay, makes sense.

Speaker Change: Place things.

Speaker Change: <unk>.

Speaker Change: Okay makes sense.

Melissa Thomas: Melissa, after the slower start to the box office that you guys have talked to and the impact on margins, just, can you help us and investors think about what kind of full year margin target you might be expecting given the stronger rebound in the box office for the rest of the year? Is 20% the right goal? Anything more meaningful or any help around some of the other cost pieces would be very helpful. Thank you. Yeah, so from a margin standpoint, as you know, the largest driver of our margins are going to be attendance and box office performance, given the operating leverage that we gain as revenue scales, additional factors, market share growth in food and beverage per cap and our average ticket prices that we've talked about, as well as the value capture from our strategic initiatives and our ability to mitigate potential cost pressures.

Chad Beynon: Melissa after the slower start to the box office that you guys talked to in the.

Speaker Change: The impact on margins just can you help us and investors think about what kind of full year margin target.

Speaker Change: Be expecting given the stronger rebound in the box office for the rest of the year is.

Speaker Change: Is 20% the right goal anything more meaningful or any help around some of the other cost pieces.

Speaker Change: Would be very helpful. Thank you.

Speaker Change: Yeah. So from a margin standpoint, as you know the largest driver of our margins are going to be attendance and box office performance given the operating leverage that we gain as revenue scales and additional factors market share growth in food and beverage per cap and our average ticket prices that we've talked about as well as.

Speaker Change: The value capture from our strategic initiatives and our ability to mitigate potential cost pressures I mean, given what we're expecting regarding box office recovery. This year, we expect our margins to expand as we benefit from that higher operating leverage of our fixed costs and the.

Melissa Thomas: I mean, given what we're expecting regarding box office recovery this year, we expect our margins to expand as we benefit from that higher operating leverage over our fixed costs, the execution of our strategic initiatives, and then the growth in per cap and ATP. But we do expect some offset from market share tempering from the record levels that we've experienced the past couple years. And that's really just driven by some of the commentary Sean made earlier in the call around the capacity constraints that we may face just given the more robust film slate. Beyond that, the other considerations would be ongoing inflationary and other headwinds, as well as potential impacts from FX devaluation on the international side.

Speaker Change: Execution of our strategic initiatives and then the growth in per cap and ATP, but we do expect some offset from market share tempering from the record levels that we've experienced the past couple of years and that's really just driven by some of the commentary Sean made earlier in the call around the capacity constraints that we may face.

Speaker Change: Just given the more robust film slate and beyond that the other considerations would be ongoing inflationary and other headwinds as well as potential impacts from FX devaluation on the international side, but we you know all.

Melissa Thomas: But we, you know, all that said, remain highly focused on maximizing our overall profitability and expanding margins as the box office recovers. Thank you.

Speaker Change: All that said remain highly focused on maximizing our overall profitability and expanding margins at the box office recovers.

Speaker Change: Thank you we'll move on to our next question.

Operator: We'll move on to our next question.

David Karnovsky: Our next question is coming from the line of David Karnovsky with J.P. Morgan. Please proceed with your question. Thank you.

Speaker Change: Our next question is coming from the line of David Karnofsky with J P. Morgan. Please proceed with your question.

David Karnofsky: Alright, thank you.

Sean Gamble: Sean, I'm curious, when you think about the Minecraft movie and the popcorn trend, I know this is an organic thing, but is there kind of an opportunity to, you know, either work with studios in advance and figuring out how to kind of potentially create these moments or just kind of execute more on maybe viral trends that you're seeing across social channels? Yeah, I mean, look, it's a great question. I mean, that is a great example of fans really getting into the film, creating this cultural moment and this event building where they just, you know, kind of created their own unique ways of engaging with the films with elevated emotion.

Speaker Change: Sean I'm curious when you think about the Minecraft movie and the popcorn trend I know this is an organic thing, but is there kind of an opportunity.

Speaker Change: Either work with studios in advance and figuring out how to kind of potentially create these moments or just kind of execute more on maybe viral trends that youre seeing across social channels.

Speaker Change: Yes, I mean look it's a great question.

Speaker Change: <unk>.

Speaker Change: <unk> is a great example of fans really getting into the film, creating this cultural moment and this event building, where they just kind of created their own unique ways of engaging with the films with elevated emotion.

Sean Gamble: Trying to work with the studios on that, I mean, one of the things that we do, it's not to the level of what we're just talking about with Minecraft, but obviously like merchandise is an example where we're starting to see that continue to grow and it adds to the whole experience, right? Some of these fun types of offerings that engage fans, it makes the experience more special in terms of going and so it's a version of that. I don't think anybody quite expected, you know, this to take off. So it's almost like we've seen with some of the sing-alongs with the Wicked or Frozen in the past.

Speaker Change: Trying to work with the studios on I mean, one of the things that we do it's not to the level of of what we were just talking about with Minecraft, but obviously like merchandise is an example, where we're starting to see that continue to grow and it is.

Speaker Change: It adds to the whole experience right. Some of these fund types of offerings that engage fans. It makes the experience more special in terms of going and so it's a version of that.

Speaker Change: Don't think anybody quite expected this to take also it's almost like like we've seen with some of the sing along with a wicked or a frozen in the past. It's maybe more of a question of when we start to see some sign of that how do you quickly worked together to engage in that and try to try to make it grow and make it.

Sean Gamble: It's maybe more of a question of when we start to see some sign of that, how do you quickly work together to engage in that and try to, you know, try to make it grow and make it something more than it otherwise could be. But sometimes they're just hard to fully anticipate what's going to catch on.

Speaker Change: More than than it otherwise could be.

Speaker Change: Sometimes are just hard to fully anticipate what's going to catch on we do other kinds of fan events I would just say in terms of the launch.

Sean Gamble: We do other kinds of fan events, I would just say in terms of the launch. So there are things like that that we do, but it's a great question is how do we just feed into these kind of moments when they start to emerge because they're fun for fans and we see that also too with the way people dress up for movies. We saw that with Mario Brothers where people coming as Mario and Luigi and Princess Peach. I mean like there's all those kinds of different activities that make for a fun outing.

Speaker Change: There are things like that that we do but it's a great question is how do we just feed into these kind of moments when they start to emerge because they're just they're fun for fans and we see that also to wake people dress up for movies, we saw that with Mario brothers, where people coming as Mario and Luigi Infringes, Pete I mean, like there's all those kinds of different activities that make for a fun outing.

David Karnovsky: Okay, and then with other revenue, so growth in the quarter, well in excess of attendance losses, maybe you could just speak to the drivers there. Melissa, you mentioned gaming revenue, for instance, and, you know, just would you expect over the balance of the year for, you know, those, those other revenue lines to collectively outpace attendance? So as we look at other revenue in the quarter, on the domestic side, that declined about 3% relative to a 13% decline in attendance. So what we saw there was essentially offsetting some of the attendance decline with higher promotional income.

Speaker Change: Okay and then.

Speaker Change: With other revenue.

Speaker Change: Growth in the quarter.

Speaker Change: Well in excess of attendance.

Speaker Change: Losses, maybe you can just speak to the drivers there Melissa you mentioned gaming revenue for instance, and just would you expect over the balance of the year for those those other revenue lines to collectively outpaced attendance.

Speaker Change: So as we look at other revenue in the quarter.

Speaker Change: The domestic side that declined about 3% relative to the 13% decline in attendance that so what we saw there was essentially offsetting some of the attendance decline was higher promotional income.

Melissa Thomas: Some of that is really timing and depends on content mix. Those are vendor contributions to promote content. So we do see timing flux quarter to quarter there. And then gaming revenue, we did see increase. I would expect the gaming revenue to continue as we've launched our first FEC in El Paso. But as we think about kind of going forward, I think the couple drivers to just call out is that on the variable component side, you have transaction fees, screen advertising revenue, promotional income and gaming. Those will fluctuate with attendance and film content, not necessarily at the same rate.

Speaker Change: Some of that is really timing and it depends on content mix that was our vendor contributions to promote content. So we do see timing flux quarter to quarter. There and then gaming revenue. We did see increase I would expect at the gaming revenue to continue.

Speaker Change: As we've launched our first FEC and El Paso, but as we think about kind of going forward I think a couple of drivers to just call out is that on the variable component side, you have transaction fees screen advertising revenue promotional income in gaming those will fluctuate with attendance and film Con.

Speaker Change: <unk> not necessarily at the same rate beyond that you also need to keep in mind that other revenue includes a fixed portion associated with the amortization of N C. On screen advertising advances that's about 8 million per quarter. So when you have a quarter that has low box office levels that we do like.

Melissa Thomas: Beyond that, you also need to keep in mind that other revenue includes a fixed portion associated with the amortization of NCM screen advertising advances. That's about $8 million per quarter. So when you have a quarter that has low box office levels like we did in Q1, that will represent a higher percentage of the mix.

Speaker Change: We did in Q1 that will represent a higher percentage of the mix.

David Karnovsky: Very well, Paul. Thanks. Thanks, David.

Speaker Change: Very helpful. Thanks.

David Karnofsky: Thanks, David.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question is coming from the line of Mike Hickey with the Benchmark Company. Please proceed with your question.

Mike Hickey: Thank you. Our next question is coming from the line of Mike Hickey with The Benchmark Company. Please proceed with your question. Hey Sean, Melissa, Chanda, thanks for taking our questions. Just two topics here, Sean. First on premium format, looks like XD If our math is right, you're about 12% of your global box office on 5% of your screen.

Mike Hickey: Hey, Sean Melissa Shanda, Thanks for taking our questions just two topics here, Sean first on premium format looks like XD.

Mike Hickey: Our math is right here, it's about 12% of your global box office on 5% of your screens. Just curious if you think the trend here.

Sean Gamble: I was just curious if you think the trend here from moviegoers, which has been substantial toward the premium screen, is going to continue even in the face of maybe an economic downturn, and what opportunity, I guess, you have within your network to expand your premium formats? And I have a follow-up. Sure. Thanks, Mike, and good observation. Yeah, I mean, we've certainly seen a nice uptick from consumers in terms of leaning further into premium amenities since the pandemic, which are up probably a couple percentage points from where they were prior to the pandemic. So there's certainly there's definitely a segment of audience that likes to pursue these elevated experiences, whether it be auditorium, food and beverage, seating choice, et cetera.

Speaker Change: For a movie goers, which has been substantial towards the premium screen is going to continue.

Speaker Change: Even the phase of maybe an economic downturn and what opportunity I guess you have within your network to expand your premium formats and I have a follow up.

Speaker Change: Sure. Thanks, Mike and good observation, yes, I mean, we've certainly seen a nice uptick.

Speaker Change: From consumers in terms of leaning further into premium amenities since the pandemic, which are up probably a couple percentage points from where they were prior to the pandemic. So there's definitely a segment of audience that likes to pursue these elevated experiences whether it be auditorium food and beverage.

Speaker Change: Seating choice et cetera, it's not just limited to auditoriums and we've continued to lean into that we're not as I mentioned earlier, we're not seeing any signs of trade downs, both domestically or internationally with what's going on kind of in the macroeconomic landscape.

Sean Gamble: It's not just limited to auditoriums. And we've continued to lean into that. We're not as I mentioned earlier, we're not seeing any signs of trade downs, both domestically or internationally with what's going on kind of in the macroeconomic landscape. I will say that, you know, our focus, however, is just on making the entirety of coming to our theaters a premium movie going experience, regardless of which auditorium our guests choose. You know, we focus on service levels, our recliner seats, our cleanliness and maintenance, our food and beverage offerings. Like those are the attributes that affect everybody and they drive a perception of value.

Speaker Change: I will say that.

Speaker Change: Our focus however is just on making the entirety of coming to our theaters, our premium movie going experience, regardless of which auditorium, our guests choose we focus on service levels, our recliner seats, our cleanliness and maintenance, our food and beverage offerings like those are the attributes that affect everybody and they drive a perception.

A value and from what we've seen ultimately lead to increased movie going frequency and loyalty across all categories of films not just the big Big blockbusters.

Sean Gamble: And from what we've seen ultimately lead to increased movie going frequency and loyalty across all categories of films, not just the big, big blockbusters. And so when we look at it, it's important not to lose sight of the fact that these upgradable offerings, they still only represent a small fraction of the overall sales in the industry. You know, as an example, just you mentioned our XDs like PLS in general across the industry are less than 20% of the box office that's generated. So we need to strike a right balance between those further enhanced offerings and just making sure that the entirety of going to theaters is viewed as a premium experience.

Speaker Change: And so when we look at it's important not to lose sight of the fact that these upgradable offerings. They still only represent a small fraction of the overall sales in the industry. As an example, just you mentioned our XD is like Pls in general across the industry are less than 20% of the box office desk generated so we need to strike a right balance between.

<unk> those further enhanced offerings and just making sure that the entirety of going to theaters is viewed as a premier experience. So we're continuing to lean into those again, we see further growth there we continue to expect that.

Mike Hickey: So we're continuing to lean into those. Again, we see further growth there. We continue to expect that there'll be further opportunity in that regard, but it's a balancing act.

Speaker Change: There'll be further opportunity in that regard, but there is it's a balancing act.

Sean Gamble: Just a clarification, Sean, when you look at your 25 and 26 slate, is premium a tailwind for you over the next couple years, when you look at it, what would it be as a percentage of your mix? Guadalgire, Ballpark Public Libraries, Filmed on Treaty Lake National Park, Heatherton, October 22, 2016 Oh, a tailwind on pricing? I think so. Yeah, I think that as you have, I mean, particularly this year, the next three quarters, next year's slate looks incredibly strong from a tentpole standpoint. All those things, obviously, those are the films in particular that tend to over index in these premium formats.

Speaker Change: Just a clarification Sean when you look at your 25 and 26 slate is premium a tailwind for you over the next couple of years. When you look at it would it be as a percentage of your mix.

Speaker Change: And on pricing.

Speaker Change: Oh, a tailwind on pricing I think so yes, I think that.

Speaker Change: As you have I.

Speaker Change: I mean, particularly this year. The next three quarters next year's slate looks incredibly strong from a tentpole standpoint.

Speaker Change: All those things obviously those are the films in particular that tend to over index. In these premium formats. They also lend themselves to more merchandise, which is kind of premium food and beverage offerings as well. So I would say it was just the likelihood for a skewed mix both in the form of price and just overall percentage of our box.

Sean Gamble: They also lend themselves to more merchandise, which is kind of, you know, premium food and beverage offerings as well. So I would say it was the likelihood for a skewed mix, both in the form of price and just overall percentage of box office for the remainder of this year and next. Last question, Sean.

Speaker Change: <unk> for the remainder of this year and next.

Speaker Change: Thanks last question Sean.

Sean Gamble: On the tariff war, there is some concern that some Hollywood films may not be allowed into the China market. Curious your view on that, and if you think that situation could influence any studios on their release dates this year. I think that'll have to remain to be seen. Right now, we're not getting any indications from the studios of that being an issue. It's not one of the topics that really comes up much. I think, on the whole, while there was a period several years ago where China was becoming a much larger percentage of the Hollywood box office, worldwide box office of a film, that's come down a bit as that market has become more localized.

Speaker Change: On the tariff war there is some concern that some Hollywood films may.

Speaker Change: It may not be allowed into the China market curious your view on that and if you think that the situation could influence any studios under our release states. This year.

Speaker Change: I think that.

Speaker Change: Ill have to remain to be seen right now we're not getting any indications from the studios have that being an issue. It's not one of the topics that really comes up much I think on the whole.

Speaker Change: While there was a period of several years ago, where China was becoming a much larger percentage of the Hollywood box office in worldwide box office of the film that's come down a bit as that market has become more localized local films have have started to grow considerably. So the amount of box office that's being during.

Sean Gamble: Local films have started to grow considerably. The amount of box office that's being derived from China for the studios is still important, but to a lesser degree than where it was. We haven't heard any indication of that impacting both green lighting decisions of new films being made or shifts in release dates because of just quotas and things of that sort with regard to what gets into China. Nice. Thanks, guys. Good luck. Thanks, Mike.

Speaker Change: <unk> from China for the studios is still important but to a lesser degree than where it was so we haven't heard any indication of that impacting both green lighting decisions of new films being made or shifts in release states because of just quotas and things of that sort with regard to what gets into China.

Mike: Alright, Thanks, guys. Good luck thanks, Mike.

Speaker Change: Thank you. The next question is coming from the line of Stephen <unk> with Goldman Sachs. Please proceed with your question.

Stephen Laszczyk: The next question is coming from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your question. Hey, good morning. Thanks for taking the questions.

Speaker Change: Hey, good morning, and thanks for taking the questions first Sean if I could I'd love to get maybe your latest thoughts on industry consolidation and M&A.

Sean Gamble: First, Sean, if I could, I'd love to get maybe your latest thoughts on industry consolidation and M&A. If you thought consolidation was something that could happen, maybe more at scale over the near to medium term, what you thought or think could catalyze that? And then if the opportunities did present themselves, how interested would you be in pursuing them? Sure. Obviously, we haven't seen a tremendous amount of consolidation. We had been of the mindset that we might see more in the earlier days emerging from the pandemic, but I think some of the government stimulus money kind of staved off what otherwise would have been more bankruptcies and circuits going out of business, particularly for the smaller circuits.

Speaker Change: If you saw consolidation was something that could happen maybe more scale over the near to medium term, but you thought.

Speaker Change: Capitalize that and then if the opportunities present themselves how interested would you be pursuing them.

Speaker Change: Sure we have.

Speaker Change: Obviously, we haven't seen a tremendous amount of consolidation we had been of the mindset that we might see more in the earlier days emerging from the pandemic, but I think some of the government stimulus money kind of staved off.

Speaker Change: What other wise would've been more bankruptcies and circuits going out of business, particularly for the smaller circuits.

Sean Gamble: So we haven't seen a tremendous amount of that. Now, if you were a would-be seller, presumably, if you're able to get through kind of the last few years were a bit of a tougher box office cycle and make it to now. Now, as we look forward, it would be a better market to bring your assets to the marketplace. For us, I mean, it's certainly when we think about optimizing our circuit and pockets of growth, M&A is one of the areas that we look at. We do tend to be prudent buyers looking for assets that are of quality, can deliver solid, assured returns over time.

Speaker Change: So we haven't seen a tremendous amount now if you were would be seller.

Presumably if youre able to get through kind of last few years, which were a bit of a tougher box office cycle and make it to now now as we look forward it would be a better market to bring your assets to the marketplace.

Speaker Change: For us I mean, it's certainly when we think about optimizing our circuit and pockets of growth M&A is one of the areas that we look at we do tend to be prudent buyers looking for assets that have are of quality can deliver solid assured returns over time and we generally 10. We've mentioned this in the past we tend to prefer.

Sean Gamble: We generally tend, we've mentioned this in the past, we tend to prefer deeper penetration in our existing markets that can leverage our infrastructure and relationships and knowledge. And obviously, we also consider things like scale and strategic importance and just competitive position and margins. But we're looking for assets that can have an assured, positive return over time. And we're not looking to grow just simply for growth sake, like we already have a meaningful scale as it is. So it really has to have a good financial profile to it. So I think it remains to be seen kind of what comes.

Speaker Change: Deeper penetration in our existing markets that can leverage our infrastructure and relationships and knowledge and obviously, we also consider things like scale and strategic importance and just competitive position and margins but.

Speaker Change: We're looking for assets that can really have an assured positive return over time and we're not looking to grow just simply for growth's sake like we already have a meaningful scale as it is so it really has to have a good financial profile to it. So I think remains to be seen kind of what comes.

Sean Gamble: I still believe we'll start to see a little bit more in that kind of area. Just again, as we get to a better marketplace, I'm not expecting it to be rampant, but there could be some more opportunities that come to the table over the next couple of weeks. That's great.

Speaker Change: I still believe we will start to see a little bit more in that kind of area. Just again as we get to a better marketplace I'm not expecting it to be ramping but there could be some more opportunities that come to the table over the next couple of years.

Speaker Change: That's great. Thanks for that and then maybe just a second one housekeeping question for Melissa utilities and other expense just curious if you could dig a little bit deeper into the drivers of the step up in the first quarter. I think there is a mix of fixed and variable expenses in that line item would just be curious how you would encourage us to think about.

Stephen Laszczyk: Thanks for that.

Melissa Thomas: And then maybe just a second one, a housekeeping question for Melissa. Utilities and other expense. Just curious if you could dig a little bit deeper into the drivers of the step up in the first quarter. I think there's a mix of fixed and variable expenses in that line item.

Melissa Thomas: I would just be curious how you would encourage us to think about how that trends over the course of the year as box scales. Sure, so on utilities and other, there are a couple of key drivers we have in the quarter. So property taxes and other fixed costs were higher. That there is kind of a tougher comparison year over year on the property tax side just given successful tax appeals in the prior year, so we do expect that to subside. And repairs and maintenance, this is an area that impacted our expense in Q1, and as you may recall from our year-end earnings call, we mentioned that this year we do anticipate to spend an additional $8 to $10 million on repairs and maintenance to address some deferred maintenance needs across the circuit, so I would expect that to continue to be an area that you need to model in as you think about utilities and other for full year 2025.

Speaker Change: How that trends over the course of the year as box skills.

Speaker Change: Sure so on utilities and other there are a couple of key drivers we have in the quarter, so property taxes and other fixed costs were higher.

Speaker Change: That there is kind of a tougher comparison year over year on the property tax side, just given successful tax appeals in the prior year. So we do expect that.

Speaker Change: Got to subside repairs and maintenance. This is an area that impacted our expense in Q1 and as you may recall from our yearend earnings call. We mentioned that this year, we do anticipate to spend an additional $8 million to $10 million.

Speaker Change: On repairs and maintenance to address some deferred maintenance needs across the circuit. So I would expect that to continue to be an area that you need to model and as you think about utilities and other for full year 2025 and outside of that we did have higher credit card fees.

Melissa Thomas: And outside of that, we did have higher credit card fees and, you know, a couple of drivers there, but one of them includes higher online penetration and a shift from cash to credit cards, so as we start to see consumers increase their online purchases, we do start to see higher credit card transactions as a result. So I would expect that to continue as well. So by and large, kind of big picture. What I would expect is utilities and other as a percentage of revenue to remain elevated with the most material driver of that being repairs and maintenance expenses.

Speaker Change: <unk> and drive a couple of drivers there, but one of them includes higher online penetration and a shift from cash to credit card. So as we start to see consumers increase there.

Speaker Change: Mine purchases, we do start to see.

Speaker Change: Higher credit card transactions as a result, so I would expect that to continue as well so by and large kind of big picture.

Speaker Change: What I would expect as utilities and other as a percentage of revenue to remain elevated with the most material driver of that being repairs and maintenance expense.

Melissa Thomas: Got it.

Speaker Change: Got it thank you both.

Melissa Thomas: Thank you, both. Thanks, Stephen.

David Karnofsky: Thanks, David.

Alicia Reese: Thank you. Our last question is coming from the line of Alicia Reese with Wedbush Securities. Please proceed with your question. Hey guys, thanks for taking my question. You already talked about concession costs and merchandising costs a bit, but I wanted to dig in a little bit more. So just curious, to what degree was the Q1 concession costs a bit higher due to cost pressures versus just a higher mix of merchandising? And then also I wanted to ask about, you know, the potential for merchandising more over the course of the year and certainly into 2026 as the volume and quality of the content increases, and whether or not that would be bigger in quarters or periods where there are more family friendly titles versus, you know, adult fair like, say, sinners or, you know, around Halloween with, you know, horror fair.

Speaker Change: Thank you. Our last question is coming from the line of Alicia Reese with Wedbush Securities. Please proceed with your question.

Speaker Change: Hey, guys. Thanks for taking my question, you already talked about concession cost and merchandise it costs a bit but I wanted to dig in a little bit more so just curious to what degree.

Speaker Change: Does the Q1 concession costs.

Speaker Change: Higher due to cost pressures versus just a higher mix of merchandising and then also I wanted to ask.

Speaker Change: Ask about.

Speaker Change: The potential for merchandising more over the course of the year and certainly into 2026 is the volume and quality of the content increases and whether or not that would be a bigger in quarters or periods, where there are more family friendly titles versus adult fair like say centers.

Speaker Change: Around Halloween with.

Speaker Change: Uh Huh Sir.

Melissa Thomas: So Alicia, I'll take the first part on mix. So higher merchandise mix was the key driver of the 140 basis point increase in domestic COGS rate, I would call it, you know, just north of 100 bps of that. The other items that we mentioned, the lower rebates and inflationary pressures, those were largely offset by pricing initiatives. So I'd say it's the lion's share of that increase in the course. And as we look forward, I would just say we're certainly optimistic about further growth of merchandise, both when we look at just the profile of films coming out over the rest of this year and next that lend themselves to merch, as well as just the growing interest of consumers in that.

Speaker Change: So Alicia I'll take that first part on mix, so higher merchandize mix was the key driver of the 140 basis point increase in domestic Cogs rate I would call. It just north of 100 100 bps of that the other items that we mentioned the lower rebates in place.

Speaker Change: Play scenario pressures those were largely offset by pricing initiatives. So I would say, it's the lion's share of that increase in the quarter.

Speaker Change: And as we look look forward I would just say, we're certainly optimistic about further growth of merchandise both when we look at just the.

Speaker Change: The profile of films coming out Oh.

Speaker Change: The rest of this year and next that lend themselves to merch as well as just the growing interest of consumers and that as I mentioned earlier, it kind of adds to the fun and overall entertainment experience. It's also a great promotional vehicle to for these films as they're coming up.

Sean Gamble: As I mentioned earlier, it kind of adds to the fun and overall entertainment experience. It's also a great promotional vehicle, too, for these films as they're coming up. While that could create a little bit of a further mixed drag on COGS over time, I think Melissa kind of addressed some of the expectations on that. The good news is we've largely seen it to be incremental in terms of consumption. So while it can have a little bit of a mixed drag on COGS, it's adding incremental dollars to the pie, which we view as a positive thing.

Speaker Change: While that could create a little bit of a mix further mixed drag on Cogs over time, I think Melissa kind of address some of the expectations on the good news is like we've largely seen it to be incremental in terms of consumption.

Speaker Change: So while it can have a little bit of a mixed drag on Cogs is adding incremental dollars to the pie, which we view as a positive thing. So it's an area within our many food and beverage concession initiatives that we continue to lean into for all those reasons.

Sean Gamble: So it's an area within our many food and beverage and concession initiatives that we continue to lean into for all those reasons. Yeah, definitely seems higher gross profit. And so expanding that further seems like a wise thing to do.

Yes, definitely seems higher gross profit and so expanding that.

Speaker Change: Further it seems like a wise thing to do and following on to that.

Sean Gamble: And following on to that, have you started a merchandising effort in Latin America? If not now, is that in in the works? Is that planned for the coming year? Absolutely, we do it the same that we're pursuing in the US. We've we're also doing in LATAM, you know, on a comparable level. So we're also expanding more now, while we have been pursuing food and beverage and merchandise, specifically in our theaters for years, you know, we continue to grow our e commerce channel as well, where there's a greater degree of inventory space, and a way to, if for whatever reason, we sell out, we have another channel to also feed into the demand beyond our theater.

Speaker Change: Have you started a merchandising effort in Latin America, if not now is that in the works is that plans for the coming year.

Speaker Change: Absolutely we do it the same that we're pursuing in the U S. We're also doing in Latam.

Speaker Change: Comparable level. So we're also expanding more now while we have been pursuing a food and beverage and merchandise specifically in our theaters for years, we continue to grow our E Commerce channel as well, where there is a greater degree of inventory space and a way to if for whatever reason we sell out.

Speaker Change: Have another channel to also feed into demand.

Sean Gamble: So we're doing that domestically, and also working on that internationally. Great, thanks. Thanks, Alicia. Thank you.

Speaker Change: And our theaters, so we're doing that domestically and also working on that internationally.

Speaker Change: Great. Thanks.

Speaker Change: Thanks Alicia.

Speaker Change: Yeah.

Speaker Change: Thank you. This now concludes our question and answer session I would like to turn the floor back over to Mr. Campbell for closing comments.

Operator: This now concludes our question and answer session.

Sean Gamble: I would like to turn the floor back over to Mr. Gamble for closing comments. Thank you, Jesse, and thank you, everyone, for joining. We always appreciate your time and all the great questions. We look forward to speaking with you again soon, following our second quarter results. Have a great day. Thank you.

Speaker Change: Thank you Jesse and thank you everyone for joining I always appreciate your time and all the great questions. We look forward to speaking with you again soon following our second quarter results have a great day.

Speaker Change: Thank you ladies and gentlemen, we thank you for your participation. This does conclude today's teleconference and webcast. You may disconnect your lines and have a wonderful day.

Operator: Ladies and gentlemen, we thank you for your participation. This does conclude today's teleconference and webcast. You may disconnect your lines and have a wonderful day.

Speaker Change: [music].

Speaker Change: Okay.