Shares of Cinemark Holdings rose 4% in on Friday as the Texas-based multinational chain beat Wall Street expectations for its second quarter of 2024 with better than-expected-earnings per share and revenue.
Without the usual early summer box office boost, Cinemark saw net income plummet 62% year over year to $45.8 million and revenue fall 22% to $734.2 million. But the chain managed to stay out of the red, boosted by the success of “Inside Out 2,” as it looks to a rebound in the second half of the year.
Here are the top-line results:
Net income: $45.8 million, a 62% year over year decrease, compared to $119.1 million in the year ago period.
Earnings Per Share: 32 cents per diluted share, compared to 7 cents per share expected by analysts surveyed by Zacks Investment Research.
Revenue: $734.2 million, a 22% year over year decrease, compared to $693.2 million expected by analysts surveyed by Zacks.
Attendance: 50 million patrons during the quarter, a 22% drop.
Admissions revenue: 365.8 million, down 24%. The worldwide average ticket price was $7.32 during the quarter.
Concessions Revenue: $292.9 million, down 22% year over year. Concession revenue per patron was $5.86 during the quarter.
“Numerous films across varied genres delivered solid results, including June’s record-breaking release of ‘Inside Out 2’ – now the biggest animated title of all time – which drove cumulative Q2 box office performance beyond our expectations despite headwinds caused by last year’s strikes in Hollywood,” Cinemark President and CEO Sean Gamble said in a statement.
Strong consumer demand yielded “outsized results,” Gamble added, which he attributed to “ongoing benefits we are deriving from our strategic actions to build audiences, grow new sources of revenue and further hone our industry-leading operating capabilities.”
Like the rest of the theatrical industry, Cinemark faced a rough first half of 2024, as delays caused by last year’s WGA and SAG-AFTRA strikes depleted the release slate. In Q2, combined domestic grosses for April and May reached just $980 million, down 42% from the $1.67 million grossed in the prior-year period. The success of “Inside Out 2” in June helped trim that deficit by the end of the quarter, but only to 27% as the quarter’s box office finished at $1.94 billion.
The second half of the year should be better. The $1.17 billion domestic total in July was fueled by “Inside Out 2,” “Despicable Me 4,” “Twisters” and “Deadpool & Wolverine,” the latter of which has earned $600 million in its opening week and delivered Cinemark’s largest summer opening in the company’s history. “Alien: Romulus” and “Beetlejuice Beetlejuice” should provide more modest support through the end of the quarter, leading into a Q4 that will have sequels to films like “Joker,” “Moana,” “Gladiator” and “Sonic the Hedgehog.”
“We remain highly optimistic about the ongoing rebound of theatrical release volume back toward pre-pandemic levels over the next couple of years, based on our continued discussions with our traditional studio partners, the further expansion into theatrical exhibition of growing studios like Amazon and Apple, and the increasing success of non traditional content,” Gamble said Friday.
Cinemark ended the quarter with a cash balance of $789 million and generated $161 million in free cash flow. It expects to deploy $150 million toward global growth and maintenance in 2024.
In order to help strengthen its balance sheet, the company redeemed its remaining $150 million in 8.75% senior secured notes due in 2025. It also repriced a term loan to reduce its interest rate and save $3.2 million of cash interest annually, issued $500 million in 7% unsecured notes due in 2032 and executed a cash tender for the vast majority of its unsecured notes due in 2026, with the remainder to be addressed in the coming months.
Cinemark chief financial officer Melissa Thomas told analysts that the company intends to leverage cash on hand to repay the principal on $460 million of convertible notes when they mature next August. “We expect our cash balance will remain elevated in the interim as we prepare to address the convertible notes,” she added. “Once the convertible notes have been fully addressed, our nearest maturity will be 2028.”
Thomas said Cinemark would reevaluate its capital allocation strategy, including returning excess capital to shareholders, during its 2025 budgeting process later this year. The company will provide a capital allocation update during its fourth quarter earnings call in February.
When asked about Cinemark’s appetite for mergers and acquisitions, Gamble said it is “certainly there” and that the company is focused on high quality assets that can deliver “solid, assured returns over time.”
“We don’t just pursue growth for growth’s sake,” Gamble added. “There have been a handful of assets that have come to the market. None of those, I would say, met our strategic or investment thresholds, but we continue to keep a close watch on what’s out there in terms of smaller opportunities versus larger opportunities.”
Gamble also weighed in on Sony’s recent acquisition of Alamo Drafthouse, calling the move a “positive” for the theatrical industry.
“We know Sony has been a big supporter of the theatrical experience for a long, long time and certainly this action is a demonstration of the fact that they are actually physically purchasing a circuit and entering into this space themselves,” he said. “That just underscores their feelings of the future of theatrical exhibition.”
As of June 30, Cinemark’s aggregate screen count was 5,708, and the company had commitments to open three new theaters and 33 screens over the next three years.
