Cinemark(US:CNK)2022-08-05 18:48Financial Data and Key Metrics Changes - The North American industry box office exceeded $2.3 billion during Q2 2022, nearly tripling from Q2 2021, indicating a strong recovery from the pandemic [9][10] - Cinemark achieved a global revenue of $744 million, up more than 150% year-over-year, with adjusted EBITDA growing to $138 million, reflecting a $150 million improvement from Q2 2021 [21][22] - The adjusted EBITDA margin for the quarter was 18.6%, showcasing effective cost management amidst inflationary pressures [37] Business Line Data and Key Metrics Changes - Domestic operations generated $600.8 million in total revenue with an adjusted EBITDA of $111.1 million, resulting in an adjusted EBITDA margin of 18.5% [41] - International operations served 18 million patrons, generating $143.3 million in total revenue with an adjusted EBITDA of $27.2 million and a 19% adjusted EBITDA margin [42] - The average ticket price in the domestic market was $9.11, remaining elevated compared to pre-pandemic levels, while concession revenue per cap reached an all-time high of $6.90, up 26% from Q2 2019 [39][40] Market Data and Key Metrics Changes - Cinemark's domestic box office performance surpassed North American industry results by over 300 basis points compared to Q2 2019, indicating significant market share gains [19] - Latin American attendance outpaced its industry benchmark by approximately 400 basis points compared to Q2 2019, reflecting strong regional performance [20] - The company reported that 85% to 90% of moviegoers are comfortable returning to theaters, demonstrating a positive shift in consumer sentiment [10] Company Strategy and Development Direction - Cinemark is focused on five strategic priorities: enhancing guest experience, building audiences, growing new revenue sources, streamlining processes, and optimizing footprint [23] - The company continues to invest in technology, premium amenities, and marketing initiatives to drive growth and improve customer satisfaction [22][30] - The introduction of the new brand concepts aims to modernize the company's aesthetic and enhance customer engagement [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the continued recovery of theatrical moviegoing, citing strong consumer interest and a diverse film slate [35][36] - The company anticipates challenges in the upcoming months due to a temporary dip in new release volume but remains confident in a strong close to 2022 [31][32] - Management highlighted the importance of consumer sentiment and the quality of film releases in driving future attendance and revenue [31] Other Important Information - The company ended the quarter with $695 million in cash and generated $143 million in free cash flow, indicating strong liquidity [49] - Capital expenditures for the quarter were $21.9 million, with a target of $125 million for the full year, although supply chain constraints may impact spending [48] - The Movie Club membership surpassed pre-pandemic levels by more than 10%, driving over 20% of domestic box office revenue [27] Q&A Session Summary Question: What are the factors affecting expenses and margin potential? - Management noted that wage rate pressure due to inflation is a significant factor, alongside expanded operating hours to accommodate increased attendance [56][57][60] Question: Can profitability remain similar with flat attendance? - Management indicated that attendance and box office performance are key drivers of profitability, with elevated ticket prices and concession per caps providing some margin support [62][64] Question: How to sustain concession per caps growth? - Management plans to promote mobile ordering, optimize product mix, and leverage strategic pricing actions to maintain elevated per caps [70][72][74] Question: What is the outlook for midsize films? - Management expressed optimism about the return of midsize films, noting that diverse content has been performing well and studios are likely to release more such films [102][106] Question: How will film rental costs evolve? - Management expects film rental rates to align with pre-pandemic levels as smaller films return, but higher costs from blockbuster films may persist [96][98]