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“The company’s financial results continue to be significantly impacted by the COVID-19 pandemic, as the company’s theaters were closed for an extended period of time beginning in March 2020,” Cinemark said. “The company began reopening domestic theaters in June 2020 and international theaters in August 2020, following enhanced health and safety protocols.”
As of Dec. 31, it had 217 domestic and 129 international venues open “to limited hours, showing library content and some new releases with some limitations on capacities.”
The company, led by CEO Mark Zoradi, posted a quarterly loss of $239.3 million, or $2.03 per share, compared with a profit of $26.3 million in the year-ago period, or 22 cents a share. Adjusted results before interest, taxes, depreciation and amortization, another profitability metric, swung to a loss of $97.5 million.
Revenue dropped from $788.8 million in the year-ago period to just $98.2 million in the fourth quarter. During a morning analyst call, Cinemark executives focused on efforts to strengthen the company’s balance sheet during the pandemic, and on their own and the industry’s recovery strategies into 2022.
And with the release dates for big studio pictures dependent on theater availability, Zoradi pointed to the reopening of New York City theaters next week as “a significant step forward in the recovery of our industry.” He added Los Angeles and San Francisco theaters were expected to reopen in the coming weeks.
“As theaters in these key markets begin to reopen and the virus is more contained, we expect the volume of new film content will accelerate,” Zoradi predicted, leading to a “normalized” domestic theatrical market in 2022. Also looking ahead as movie-goers are expected to keep streaming content post-pandemic, the Cinemark boss added his company continues to negotiate with major studios on shorter theatrical window releases.
Those talks come amid the industry’s overall shift for big budget tentpoles to premium video-on-demand, a platform that has come into its own during the COVID-19 crisis with a shattering of the traditional theatrical window. “We’re actively negotiating the terms and structures of the evolving theatrical window, with the goal of benefiting exhibitors, studios, moviegoers and of course shareholders,” Zoradi told analysts.
The future of the theatrical window has also been a key focus for exhibitors. AMC Theatres and Universal first struck a deal, in which films were given a guaranteed 17-day window, or three weekends, before they could also be made available through premium VOD. Cinemark then unveiled a deal with Universal for a 31-day window, covering five weekends, for films that open to $50 million or more and/or key franchise titles.
But even with tentpoles premiering on PVOD during the pandemic, Zoradi predicted the major studios will return to a more traditional and extended theatrical window in 2022. He said Warner Bros., while focusing on HBO Max releases during the pandemic, had signaled it will shift to a more traditional exclusive window for theatrical next year.
And Paramount and Disney had similarly indicated a greater commitment to the multiplex for high-profile tentpole releases post-pandemic, Zoradi added. While the major studios for now will continue to put movies on streaming platforms, he reported Cinemark was in talks with major streaming platforms on releasing some of their movies on its available theater screens, though not in big numbers.
“We’re in active discussions with Netflix, AppleTV+ and others. We’re not talking about huge quantity. We’re talking about a half dozen pictures that are really important to some of the streaming services, either big Academy movies or mid-sized commercial films, that we would be interested in playing with a shortened window, depending on what the commercial terms are,” Zoradi argued.
Cinemark, the third-largest circuit in the U.S. behind AMC Theatres and Cineworld’s Regal, said that for its latest quarter, attendance fell to 6.6 million patrons, admissions revenue reached $49.1 million and concession revenue dropped to $31.5 million.
Cinemark also provided an update on its liquidity, which MKM Partners analyst Eric Handler in a first reaction highlighted. “Cash remains plentiful at $655 million, and the average cash burn per month, after the exclusion of $15 million of new debt, was a lower than anticipated $62 million (we had projected a $75 million per month),” he wrote, but added: “We believe investors will be more focused on management’s forward-looking statements about its liquidity and how it is moving forward.”
In December, Zoradi had insisted that Cinemark’s priority was rebuilding its balance sheet, like it was for peers. “I don’t want to say M&A isn’t a potential in the future, but it’s not something we’re actively doing, as we speak, right now,” he said back then.
But on Friday, Zoradi expressed more enthusiasm for acquisitons of rival theaters, while indicating caution for the terms of fixed leases Cinemark would take on with new screens. “We’re clearly open to M&A,” he told analysts.
Cinemark shares were down by 13 cents, or less than 1 percent, at $22.66 in morning in trading.
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