Cinemark Holdings Inc (CNK) Q4 2024 Earnings Call Highlights: Record Revenue and Strategic ...

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Thu, Feb 20, 2025, 12:04 AM 5 min read

Worldwide Revenue: Over $3 billion for the full year 2024.
Adjusted EBITDA: $590 million with a 19.4% margin for the full year 2024.
Free Cash Flow: $315 million generated in 2024.
Q4 Revenue: $814.3 million, a 28% increase year-over-year.
Q4 Adjusted EBITDA: $156.9 million, nearly doubling year-over-year.
Q4 Adjusted EBITDA Margin: 19.3%, up 680 basis points year-over-year.
Domestic Attendance: 32.6 million patrons in Q4, up 24% year-over-year.
Domestic Admissions Revenue: $338.7 million in Q4, a 27% increase year-over-year.
Domestic Concession Revenue: $259.7 million in Q4, a 29% increase year-over-year.
International Revenue: $147.9 million in Q4, a 23% increase year-over-year.
Net Income: $51.3 million in Q4; $309.7 million for the full year 2024.
Diluted EPS: $0.33 in Q4; $2.06 for the full year 2024.
Cash Balance: $1.1 billion at year-end 2024.
Capital Expenditures: $151 million in 2024; projected $225 million for 2025.
Dividend Reinstatement: Annual cash dividend of $0.32 per share, payable quarterly.

Warning! GuruFocus has detected 6 Warning Signs with CNK.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cinemark Holdings Inc (NYSE:CNK) outperformed the industry with year-over-year box office performance exceeding industry benchmarks by 300 basis points domestically and 100 basis points internationally.
The company achieved all-time high concession sales with a domestic food and beverage per cap record of $7.89.
Cinemark Holdings Inc (NYSE:CNK) reinstated its cash dividend, reflecting confidence in future prosperity and resilience.
The Movie Club loyalty program grew by 10% to nearly 1.4 million members, contributing to 25% of domestic box office revenue.
The company maintained a strong balance sheet with a net leverage ratio of 2.2 times and generated $315 million of free cash flow in 2024.

Negative Points

Attendance declined by 4% year-over-year, despite strong financial performance.
Film rental rates are expected to increase in 2025 due to a greater concentration of blockbuster content, potentially impacting margins.
The company anticipates ongoing wage rate pressure and inflationary impacts on expenses.
Market share gains may temper as box office recovers and auditoriums reach capacity limits.
International operations face challenges due to FX devaluation and local labor laws limiting staffing flexibility.

Q & A Highlights

Q: Can you elaborate on what's driving the growth in concessions, particularly in the US? A: Sean Gamble, President and CEO, explained that the growth in concessions is driven by a variety of initiatives, including optimizing product assortment, improving purchase ease, and strategic pricing. The focus is on increasing purchase incidents, which leads to higher margins. Melissa Thomas, CFO, added that they expect moderate growth in domestic concession revenue in 2025.

Q: How do you feel about the content slate for 2025, especially given the lighter first quarter? A: Sean Gamble noted that while the first quarter is lighter, likely due to residual impacts from the Hollywood strikes, the rest of the year looks promising with a diverse slate of films. He mentioned that the increased volume might lead to some capacity constraints but overall sees a positive outlook for the year.

Q: How does Cinemark plan to address the convertible notes maturing in August 2025? A: Melissa Thomas stated that Cinemark intends to repay the principal amount of the convertible notes using cash on hand. They have a call spread in place to protect against stock price movements up to $22.08 and will decide on settling any exposure above the principal amount based on stock price, cash on hand, and dilution considerations.

Q: What are your thoughts on Netflix's agreement with IMAX for the Narnia film, and is there potential for similar arrangements with Cinemark's XD screens? A: Sean Gamble commented that while the structure is interesting, Cinemark would prefer a full wide release for such films. He noted that the current approach seems more promotional and not necessarily sustainable long-term.

Q: Can you discuss the advantages of Cinemark's domestic geographic footprint and plans for new builds? A: Sean Gamble highlighted that Cinemark operates more in suburban markets, which have yielded the best returns. He mentioned that they have reactivated their new build pipeline and see opportunities for growth, with a focus on high-confidence, ROI-generating projects.

Q: How should we think about margin improvement in 2025 and beyond? A: Melissa Thomas indicated that margins are expected to benefit from higher operating leverage due to a stronger box office, strategic initiatives, and growth in ticket prices and concession per caps. However, these may be offset by market share tempering, inflationary pressures, and increased film rental rates.

Q: What are the expectations for cash taxes and capital expenditures in 2025? A: Melissa Thomas stated that cash taxes are expected to increase due to business recovery, reduced tax attributes, and Brazil's tax rate changes. Capital expenditures are projected to be around $225 million, with potential growth to $250 million or more, depending on investment opportunities.

Q: How does Cinemark plan to maximize the value of its Movie Club loyalty program? A: Sean Gamble emphasized that Movie Club is crucial for driving attendance and increasing moviegoing frequency and concession sales. The program enhances guest satisfaction and continues to grow, representing a significant portion of box office revenue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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