Cinemark Holdings, Inc. Q4 FY2024 earnings call

• Industry box office in North America reached ~$8.8 billion in 2024, within 3% of 2023 despite 2023 Hollywood strikes. Cinemark's box office performance outpaced the industry domestically by 300 basis points and internationally by 100 basis points over the year.
• Maintained market share gains of over 100 basis points, entertained over 200 million guests globally, and achieved all-time high concession sales with a domestic food and beverage per cap of $7.89.
• Advanced multiyear conversion to Barco laser projectors, with PLFs accounting for 13.4% of total box office proceeds in 2024, up from 6.8% in 2023. D-Box motion seats set a new box office record, growing almost 40% year over year.
• Enriched concession offerings, expanded enhanced hot food options, and optimized self-serve areas. Increased sophistication and efficiencies in business operations, including staffing and workforce management, sourcing and procurement, and pricing strategies.

In the fourth quarter, domestically, Cinemark welcomed 32.6 million patrons, up 24% year over year. Domestic admissions revenue increased 27% to $338.7 million, average ticket price grew 2% to $10.39, concession revenue grew 29% to $259.7 million with a record-setting per cap of $7.97, and other revenue increased 35% to $68 million. Domestic operations delivered $666.4 million of revenue and $128 million of adjusted EBITDA with a 19.2% adjusted EBITDA margin. Internationally, 18.4 million guests were entertained in the fourth quarter, up 28% year over year. International revenue grew 23% year over year to $147.9 million, adjusted EBITDA increased 160% to $28.9 million with a 19.5% adjusted EBITDA margin. For the full year, Cinemark had worldwide revenue of more than $3 billion, $590 million of adjusted EBITDA, and a 19.4% adjusted EBITDA margin, generated $315 million of free cash flow.

• 2025 release schedule: Expected to have around 115 wide releases by year-end, roughly 90% of pre-pandemic levels. 2025 has a diversified slate of films across genres.
• Capital allocation: Reinstated cash dividend of $0.32 per share quarterly. Plan to allocate ~$225 million in capital expenditures in 2025, with half for maintaining a high-quality circuit and laser projector conversions, and the remainder for high-confidence ROI generating opportunities. Intend to repay convertible notes maturing in August 2025 using cash on hand. Once convertible notes are addressed, aim to return a greater share of free cash flow to shareholders through dividends and/or stock buybacks within target net leverage ratio.
• 2026 outlook: Already looking promising with new installments from popular franchises and new original movies from filmmakers.

• Content release spacing could lead to capacity constraints in some periods.
• Inflationary pressures on theater amenities, services, cost of goods sold, and utilities.
• International markets affected by foreign exchange rates and local economic and political environments.
• Uncertainty regarding the settlement of convertible notes above the principal amount, which could be affected by stock price movements and other factors.

Q: Chad Beynon from Macquarie asked about concessions growth drivers and content spacing in 2025.

A: Sean Gamble said concessions growth comes from a range of initiatives including assortment, layout optimization, and pricing, and Melissa Thomas added that domestic concession per cap is expected to grow moderately in 2025. Sean Gamble discussed that while there may be some content bunching in 2025 leading to capacity constraints, the diverse content slate is optimistic.

Q: David Karnovsky from JPMorgan inquired about convertible note settlement and dividend vs buyback mix.

A: Melissa Thomas explained that convertible notes will be repaid with cash on hand, and the settlement of any above principal amount will depend on stock price and other factors. Regarding dividend vs buyback mix, it will be evaluated based on cash and liquidity, valuation, dilution management, and total returns to shareholders.

Q: Robert Fishman from MoffettNathanson asked about domestic geographic footprint advantages and screen count plans.

A: Sean Gamble said Cinemark operates more in suburban markets and is open to expanding into other markets with accretive opportunities. He also mentioned reactivating the new build pipeline with some opportunities emerging and it depends on return prospects and capital allocation priorities. Melissa Thomas talked about margin improvement factors including box office recovery, operating leverage, but also potential offset by cost pressures like film rental and wage inflation.

Q: Eric Handler from Roth Capital asked about returning to pre-pandemic adjusted EBITDA margins.

A: Melissa Thomas said attendance and market share are key drivers, along with average ticket prices and concession per cap, and there are initiatives to offset cost pressures.

Q: Ben Swinburne from Morgan Stanley asked about cash tax rate, capital spending, and free cash flow payout ratio.

A: Melissa Thomas said cash taxes will increase in 2025 due to business recovery and reduced tax attributes. Capital spending is expected to be in the $200 - $250 million range long-term. Free cash flow payout will balance flexibility, value creation opportunities, and risk mitigation. Sean Gamble discussed volume recovery expectations for films.

Q: Omar Mejias from Wells Fargo asked about film volume sources and cost drivers.

A: Sean Gamble talked about volume coming from major studios, new entrants, and non-traditional content. Melissa Thomas discussed cost drivers like strategic pricing, inflation, and deferred maintenance impacting utilities and other expenses.

Q: Patrick Scholl from Barrington Research asked about ticket pricing and alternative content marketing.

A: Melissa Thomas said average ticket prices are expected to grow modestly in 2025 due to strategic pricing and premium format mix. Sean Gamble discussed that alternative content marketing is easier to target with niche-focused audiences and established channels.

Q: Mike Hickey from Benchmark asked about Latin America performance and Movie Club.

A: Sean Gamble said Latin America has positive fundamentals with strong moviegoing behavior. He discussed that Movie Club is important for retention, stimulating moviegoing frequency, and enhancing guest experience.

Q: Stephen Laszczyk from Goldman Sachs asked about market share outlook and film rental expense.

A: Sean Gamble said market share may face some pressure in 2025 due to content mix and capacity constraints. Melissa Thomas explained that film rental rates will increase in 2025 due to greater concentration of blockbuster content, with quarterly variation dependent on content concentration.