Cinemark Holdings, Inc. Q2 2026 Earnings Call

Greetings and welcome to Cinemark Holdings second Quarter 2020 Earnings Conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star Zero on your telephone keypad As a reminder, this conference is being recorded. It is now. My pleasure to introduce your host, Chanda Brashears Senior Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss our second quarter 2020 results. Our earnings release, executive commentary, and 10-q were issued earlier this morning and are available on our website at ir.cinemark.com. Today's call is being webcast with a replay and transcript available on our website. After the call Before we begin, I would like to remind everyone that during this conference call, we will be making forward looking statements within the meaning of the private securities Litigation Reform Act of 1995. 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. Forward. Statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied. The factors that could cause results to differ materially are detailed in our most recent Annual Report on Form 10-K. As filed with the SEC and available on our website Also, today's call will include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found on the websites. Most recently filed earnings release. 10-q and on the company's website at ir dot cinemark.com.

Joining me this morning are Sean Gamble, president and CEO. And Melissa Thomas, CFO. Consistent with last quarter, Sean will provide some brief introductory remarks, and then we'll turn it over to Q&A. Sean.

Thank you. Chanda. Good morning everyone. I'd like to take a brief moment to touch on some of our key highlights from the second quarter. You can also find additional information in our executive Commentary and 10-q that were published on our Investor Relations website this morning. We're thrilled to report today that Cinemark delivered a historic quarter in Q2, achieving a multitude of all time quarterly records throughout our global company for. The first time in our history, our quarterly worldwide revenue exceeded $1 billion, supported by record high results across all key revenue. Categories. Importantly. Through diligent execution and benefits derived from improved operating leverage, we effectively converted that strong top line growth into exceptional bottom line performance. We. Iced our highest ever quarterly adjusted EBITDA of $294 million with an adjusted EBITDA margin of 27.1%. Our second highest quarterly margin in history. That trailed our all time record by only ten basis points. We also generated nearly $300 million of free cash flow, deployed over $60 million of capital expenditures toward enhancing our business, and returned excess capital to shareholders through stock buybacks and our dividend. Our. Historic results are the byproduct of our ongoing efforts to elevate our consumer offerings, scale revenue opportunities, and further optimize our business.

Combined with a compelling slate of film releases and solid operating rigor. Beyond propelling our aggregate revenue and adjusted EBITDA records, these factors also yielded all time high quarterly admissions, revenue, concession sales, and per caps, premium amenity performance and loyalty transactions worldwide. We are incredibly proud of our global team and all they continue to accomplish. We devote significant time and effort to working on strategic initiatives to strengthen our business, and it's especially rewarding to see those actions translate into outstanding results, particularly when amplified by a favorable box office environment. The performance we delivered this quarter is a testament to the dedication, skill and execution of our sensational team and their ability to capitalize on strong film content and positive industry dynamics. As we move ahead, we believe we are exceptionally well positioned for the future. Bolstered by our differentiated financial strength. We stand to continue benefiting from the many targeted investments we have made over the years. The meaningful customer loyalty we have earned and the industry leading operating capabilities we have developed. Moreover, we are actively advancing a broad set of new opportunities to further enhance our competitive edge and drive incremental growth. And we remain highly encouraged by positive recent industry developments, including expansion in theatrical window exclusivity, increases in young moviegoer frequency and strength in emerging forms of content.

In the very near term. We look forward to building further on the robust performance we've achieved through the first half of 2026. Particularly with what is shaping up to be a tremendous launch of Spider-Man Brand New Day this weekend, along with continued momentum from The Odyssey. Operator. That concludes our prepared remarks, and we now like to open up the line for questions.

Thank you. Ladies. And gentlemen, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad. At this time. A confirmation tone will indicate that your line is in the question queue. You may press star two. If you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up the handset before pressing the star keys Again, that's star one. To register a question at this time. Our first question is coming from David Karnovsky of JP Morgan. Please go ahead.

Hi. Thank you for the question., Sean, you know, Q2, I think was the best box office quarter since the pandemic. You know, it was probably reasonable to assume there could have been capacity constraints for Cinemark. And yet you gained domestic market share., I know film is a factor, but did these results surprise you at all? And then how do they inform your view of potential market share? Sustainability or gains going forward? Or should the box office kind of run it over 10 billion, for instance?

Thanks for the question. David. Yeah, we were very pleased with., the second quarter results, to say the least., yeah. I mean, it was a big quarter. I think what we wound up seeing over the course of the quarter was,, the way the performance of the films played out wound up helping out with capacity, where there certainly were some periods where there were a bit more,, bunch up of films in terms of the dating week to week., you had films like Back Rooms and Obsession, which were a bit earlier in the quarter, and they actually, you know, played out with less competition. So it turned out that just the way the films worked alleviated some of those capacity constraints that we were expecting would be a bit more significant over the course of the quarter., as we look ahead, you know, we,, we, obviously, we continue to benefit from, the many investments we've made to advance our market share., but, you know, the, the way things will play out will depend a bit on how ,, overall content mix resonates with our audiences and how that capacity constraint plays out., you know, we saw a little bit more of that, you know, perhaps in terms of just, you know, similar films kind of going on top of each other at the beginning of the third quarter.

And we'll see how that plays out over the second half of the year. There certainly are some more periods, at least on paper right now., where you've got in peak periods where there's a bit more concentrated, larger films than we saw during the first half. So we're going to be watching out for that. So those are the types of things that could affect things as we go forward.

And the you,, you mentioned the 45 day window. I know it's early, but any data research on your end,, that indicates the longer time period is helping to re-educate consumers about,, the need to see the movies in the theater., it's difficult to say quite yet how,, significant the long term impact because those changes obviously just took place. I mean, clearly, as you pointed out, we it was just a record. Second quarter since the pandemic. So,, if you look at that, we might say, okay, great. Things are working better. I'd say probably the most tangible thing we've seen is, that the theatrical exclusivity did start to increase in the second quarter as studios started to honor those commitments of 45 days. So ,, you know, the, the we'll have to see,, it's going to take a little bit more time. You know, I think we certainly expect that the 45 day window will,, we're optimistic about the positive benefits that will yield,, which we think will continue to, to be meaningful, but it will take a little bit more time for that to, to roll out and for consumers to fully feel the impact of that.

Yes.

Thanks for the question.

Thank you. Our next question is coming from Eric Handler of Roth Capital. Please go ahead.

Good morning. Thanks for the question. Sean you to get some really good lift from,, premium. And I'm curious, when you look at your,, theater footprint, how much more capacity do you have to add? You know, an Imax XD? 40 x screen X how much can you add there? And then also,, you know, you're getting a really good lift and a nice,, search. Charge for., D-box., where are you with D-box and how much more can you add there?

Sure. Thanks for the questions. I'd say ,, we still have a healthy runway for incremental additions., there clearly is a balance to be struck because,, while we continue to see audience growing audience appeal for these types of enhanced amenities, there's still just about 15% or so of overall box office. And they're great for certain audiences, but not for they're not for everyone., you know, to your question on, on runway, we've, we've added and we added a series of new additions in 2025. In the first half of 26, we already added seven new Xd's, 12 new screen axes, two new Imax's with three new 70 millimeter projectors activated and and 112 new D-box auditoriums. So we've put in quite a bit, and we've got,, further runway going this year and, and into the future beyond., so I'd say, you know, some of it, the screens tend to be a little bit tethered by how big the screen is in an auditorium. That's one governing factor. We've got many more opportunities for like second plfs in theaters, where we just have one today. And obviously in new builds, you have more more latitude in what you can do there., D-box, there's, there's less limitation because we're doing a few, few rows within an auditorium.

So those can go into a bunch ,, to your specific question, I think on, on we've got about 350 overall plfs globally right now,, including XD, Imax and screen X, and we've got about 660 auditoriums that have D-box installed.

Great. And then why don't we just touch on Latin America for a second? Your Latin America margin ,, was a. An all time high., just curious what type of operating leverage you can now achieve., in the region.

Eric. I'll. Take that one on international. So our, our international team has done a great job., navigating dynamic landscape in Latin America as demonstrated by, as you mentioned, record setting, adjusted EBITDA and adjusted EBITDA margin. As we look at that business, again, predominant drivers of what we're seeing will be attendance and box office in terms of leverage within that model. But also there's other factors that have influenced that. You've seen market share gains in international. The team has done a really nice job of capitalizing on the box office that's been there., our average ticket prices and concession per caps continue to be growth catalysts for us. And then also within the international markets, our ability to mitigate cost pressures has been an important factor. So really, as we think about margins going forward, those are going to be key dynamics that come into play. Key variables as we look to maximize our margin potential ., FX. And. Inflationary dynamics are clearly the key. One of the key differences between the US and international. I think I keep a couple of things to keep in mind. As. As you think about our international business going forward, is.

There are a few dynamics at play on the labor side that do differ from our domestic market that I think are worth highlighting. As you think about box office. Variations. So local labor laws, those. Can they can restrict our staffing flexibility as the box office ramps. So that can impact that line item. And then additionally, government mandated wage rates. Those can exceed inflation. And we've seen that in markets. Our team has done a nice job offsetting those impacts to the extent possible. But also,, you know, you have a different dynamic in lease expense in international. That's more variable. So there's, there's some different dynamics when you look at that international business, really all comes down to how we're managing those levers. And I think the team is doing a nice job pushing the top line to offset some of the inflationary dynamics we're seeing on the bottom line.

Thank you very much.

Thanks, Eric.

Our next question is coming from Chad Beynon of Macquarie. Please go ahead.

Hi. Good morning. Thanks for taking my question. And. Nice quarter. Just in terms of the use of capital. So you finished the quarter in a very strong position from a cash standpoint. You mentioned the interest expense., opportunities that you've been able to take advantage of here reducing that. But just as you think about use of cash with regards to return to shareholders, investing back in the portfolio or looking at outside opportunities, has anything changed at this point, given your position of strength? Thanks.

Thanks for the question. Chad. So from a capital allocation standpoint, we continue to have three pillars to our strategy maintaining the strength of our balance sheet, investing in the creative opportunities, including M&A that position the company for long term success and returning excess capital to shareholders. So we remain balanced and disciplined in our approach to capital allocation and prioritize the strength of our balance sheet and growth opportunities. First and foremost, followed by shareholder returns. And as we think about kind of ranking between new builds, theater enhancements, and M&A, that really comes down to return profiles and strategic importance of each. And then with respect to shareholder returns, that's going to be governed by factors like our leverage ratio, cash position, overall liquidity, and then alternative uses of cash at any given time, among other factors. But Overarchingly, our strategy aims to maintain sufficient flexibility so that we can take advantage of future value creating opportunities while mitigating any risks that may come along.

Okay, great. Thanks. And then Sean just going back to the strength of the quarter and the breadth of of different movies that really hit. I know you mentioned 50% is coming from your direct channel, but in terms of just a new audience, do you think there was significant growth in terms of, whether. It's younger moviegoers or just moviegoers that hadn't come back for a while? That came in the second quarter, and then, you know, as we know, moviegoing begets moviegoing. Do you think that,, you know, could,, could portend well, for the back half of the year in 27. Thanks.

Sure., well, yeah, I mean, look, it's part of the reason we like,, a lot of the nontraditional content is that often is a way to bring new audiences into our theaters. And we've seen a nice uptick in that over the years., was we look at our data very similar to some of the, the broader industry studies that have done, we continue to see really healthy growth of younger audiences. I mentioned that earlier, but,, you know, some of these films, particularly like you saw films like Obsession and Back Rooms, which were based upon, you know, creator content. They've got these embedded younger audiences. It's helping to bring them in. And then similar to others, as you mentioned, a momentum business, they see other things of interest when they're there and they wind up coming back and it just winds up being a positive cycle. So,, we're definitely seeing healthy signs of ,, new attendees, but also nice signs of sustained and growing frequency from our existing audiences. So,, there's just a lot of great momentum this year has been obviously really positive for the industry and certainly for our company with regard to moviegoing,, in general.

So we're pleased with the trends we're seeing with both new and existing members.

Appreciate it. Thanks.

Thanks.

Thank you. Our next question is coming from Mike Hickey of StoneX. Please go ahead.

Hey. Thank you. Hey. Sean. Melissa. Chanda. Great job. Incredible quarter guys. Congratulations., first question, maybe back to you. Melissa sort of mirroring the international margin question, but thinking ,, domestic, obviously you're domestic EBITDA margin here over 27%,, was significant., how are you? I guess sort of when you think about the elements of margin improvement here. What do you view as sort of sustainable, I guess, or durable as attendance continues to recover? And where do you see the largest remaining,, opportunities to improve that productivity? And then the follow up.

Thanks for the question, Mike. So on the domestic side, attendance and box office again, obviously primary driver, but key levers as you look at our performance in the second quarter, it underscores the strength in operating leverage of our business model. When supported by a content mix that resonates well with our audiences. You saw that come up clearly in the strength of our market share. Also, the steady cadence of releases and strong overall box office environment outside of box office and attendance on the market share side. Sean mentioned some of the key drivers of market share in the quarter ., more broadly, long term, while we continue to, we continue to try to drive our market share gains and have been pleased with what we have seen thus far, we need, I think, more runway of a consistent box office to see what is structural within those market share gains. So that will that will play out over time. But we're very encouraged by what we've seen on the market share side with respect to average ticket prices and per cap. Again, there we do believe that we continue to have runway. We've been benefiting from our strategic pricing actions as well as premium format penetration that Sean talked about earlier.

And within the food and beverage and broader concession realm. We still do believe we've got runway. And you saw that with the growth in our merchandise sales and some of the records that we were able to achieve in the quarter. So top line is an area that we really continue to lean into and have a number of strategic initiatives. Obviously, some of these metrics are going to fluctuate quarter to quarter ., but. Over, over the long term, these are key factors outside of attendance and box office that we will continue to look to drive to support margin strength. And then on the expense side, from there is operating leverage in our model, we do have around 40% of our cost structure is fixed. So we do get leverage over line items like facility lease expense in the US. Some of our G and a property insurance, real estate taxes. And then you have other semi variable costs like theater, labor that we continue while those increase with attendance not to the same extent so that creates additional opportunities for us from a margin standpoint. So we'll we also obviously do have inflationary factors that that we're dealing with, but we're focused on controlling what we can control.

And overall looking to maximize our profitability and margin potential.

Melissa. Sean. As a follow up here,, creator led films, I mean, the success of Back Rooms obsession and really, I guess in one cue, iron lung kind of kicked it off. But all of these,, seem strategically important for you. So when you sort of think about the success of these films, which was obviously a huge surprise ,, in the quarter. And then also the budgets of these films, which were incredibly low ., does that. Sort of suggest to you that internet native creators could be a meaningful source of,, new. Theatrical film supply for you in the future? It feels like Hollywood is starting to chase a lot of this IP already, so I'm guessing more is coming ., but curious your view on that. And then you talked about sort of bunching up on the calendar. Do you think that these sort of lower budget sort of creator led films could help fill the gaps in the release calendar?, that's obviously lower budget, still generate strong attendance. Thanks, guys.

Sure..

Thanks. I appreciate the question. Yeah. I mean, let me start first with kind of the bunching up of the calendar. I mean, we're we are hopeful that,, even some of the more traditional, larger Hollywood films will spread themselves out a bit. It's something that took a long, long while., for Hollywood to figure out and eventually got there and you started to see larger films in February and in March and in, you know, other, you know, off periods from the summer and year end. And they worked great. So I think that will start to naturally happen., in the meantime. Yes., these types of non-traditional films, creator content, anime, faith based, foreign, like they can definitely help to fill those gaps. And obviously we're seeing some real significant success stories now. I mean, even prior to iron lung obsession and backrooms, we had Sam and Colby. We had critical role. There's been numerous examples of these,, some of the challenge to date has just been trying to figure out what's going to work and what's not. You know, some of the, some of the ,, kind of concepts that you. Would think would have worked, didn't. And some of the other ones that were wound up being big surprises, but,, I think there's clear recognition now,, certainly from the studios that are taking more interest in this and producers that there's real potential.

There's already a, you know, a strong fan base between and connectivity between creators and their audiences ., and when the programming is compelling and well positioned, you know, strong word of mouth can really generate significant momentum with the potential for these to cross over more mainstream, which is what we're starting to see. So,, definitely expect this to be an area of go forward opportunity. And we're just really excited to see how it evolves.

Nice. Thanks, Sean. Thanks, guys. Good luck.

Thanks, Mike.

Appreciate it.

Thank you. The next question is coming from Robert Fishman of MoffettNathanson. Please go ahead.

Good morning., two for you. One longer term and one shorter term ., first you talked about the excitement around Spider-Man and clearly Avengers at the end of the year. When you think about the 27 slate, are there lessons that you've learned maybe just building off the last question from first half box office that you apply to think about what the mix of the content looks like, expectations around that for franchise and non-franchise movies?, think about 27 and even beyond,, would be the first one. Thanks., well, First thanks. Thanks, Robert. First, I would say obviously we're still getting line of sight to 2027., there's still a little bit early, but initial views are, are very positive based on what's been announced on paper., the volume of releases that have been announced thus far is, is even a tick up from the norm. And there's a lot of highly anticipated films with another Avengers Secret Wars, a frozen three, a Sonic, another, Spider-Man, Spider-Man animated film, Minecraft, etc. there's a there's a whole bunch., I think the, to the point I'm trying to anticipate the mix and the impact of that.. You know, the hard thing is it, you never quite know what is going to fully resonate.

So you give your best estimate to use comps of the past to kind of make a forecast of what each of these movies will do., but then inevitably there's surprises that go both ways, right? You have the, the back rooms and the obsessions with kind of come out of nowhere and do these massive, you know, numbers., you have films like Odyssey and hopefully Spider-Man based on presales. What's looking like way outperform even big numbers that are expected. And then you have other films that kind of underperform, and it's all a matter of like the concept on paper versus what the film actually turns out to be and how it resonates with audiences in terms of how that can skew things. So,, we're certainly, looking optimistically at 27 based on what we know, but ultimately it's going to be a matter of, again, the quality of the content, the marketing effectiveness, how it ultimately performs throughout the year, and how spread out that performance is in terms of what it ultimately amounts to in total box office.

Makes sense., and then maybe just for the shorter term trends, and this might be a funny question, given that record concession revenues that we just saw, but are you noticing anything in terms of even into July about consumer spending ,, changing, you know, patterns in terms of,, reacting to higher gas prices or any other macro pressures on the consumer?

Thanks.

Thanks for the question, Robert. So in terms of health of consumer and what we're seeing. Continues to follow the historical trend where more dependent on the strength of the film slate than economic cycles. I mean, we're we've seen that play out over the last couple of years. Continue to see that play out today as we think about upgrades to premium formats, concession purchases, and even on the merchandise side, some of what we've seen there. So we continue to closely monitor behavior. And we have a number of incidents in place that are designed to help grow food and beverage consumption, as well as merchandise sales and premium format penetration. While we deliver value for our guests. But we aren't seeing what I would call any indications that there's been an impact on on moviegoing as a result of that.

Great. Thank you both Thanks, Robert.

Thank you. The next question is coming from Drew Crum of B. Riley Securities. Please go ahead.

Thanks. Good morning everyone. Sean. I want to go back to your commentary around what seems to be an energized Gen Z audience. Can you remind us your competitive positioning with a younger cohort and understanding that you're beholden to your studio partners for content? Is there anything from a planning perspective that you can or are doing to advantage Cinemark for that next obsession or backrooms breakout hit?

Sure.

Well, thanks for the question. I would say, you know, our positioning. While we tend to have a little bit more of a suburban versus urban skew for our overall circuit, I wouldn't say that necessarily., is to varied,, with regard to younger audiences versus older audiences., so I'm not sure there's a, a huge difference in that regard, but things that we're doing absolutely. Working with studios in terms of, you know, joint partnerships in the promotion and marketing of these titles,, we've got a fantastic marketing team that leverages all kinds