Cinemark Narrows Losses, Will Require Staffers to Be Masked Again

Cinema giant Cinemark Holdings reported a narrowed loss for the second quarter of 2021 compared with the year-ago period, which had been hit hard by shutdowns due to the coronavirus pandemic, as revenue rose.

Its quarterly loss of $142.5 million compared with a loss of $170.4 million for the three months ending June 2020. Revenue rose to $294.7 million from $9 million in the year-ago period.

Admissions revenue of $153.5 million and concession revenues were $109.8 million compared with $37 million and $124 million in the year-ago period. Attendance reached 19.1 million patrons, the average ticket price is $8.04 and concession revenue per patron is $5.75.

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“I’m pleased to report that the second-quarter recovery of our industry and business progressed at a faster rate than we expected with the North American industry box office more than tripling first-quarter results,” CEO Mark Zoradi said in a statement that accompanied his latest financial results.

As part of its recovery, Cinemark pointed to having delivered positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the latest quarter for the first time since the theater circuit reopened.

Sean Gamble, COO and CFO of Cinemark and who will succeed Zoradi as CEO at the end of the year, said the company’s domestic business was essentially at break-even in free cash flow during the second quarter, and that represented a floor on which to grow post-recovery.

“We think it’s a good baseline based on what we’re seeing in the current environment. If that trajectory continues, we expect to hit positive overall cash flow in the second half of the year,” Gamble added.

Cinemark recently said that Zoradi would retire from the CEO role, which he has held since 2015, at the end of the year. Gamble will take over from Jan. 1, 2022.

Despite the recovery in revenues at Cinemark, a resurgence in COVID-19 infection rates across the U.S. due to the Delta variant could pose headwinds for the company. Zoradi revealed on the analyst call that Cinemark will require its employees across the circuit to resume wearing masks starting next week, citing the Delta variant.

But Zoradi added the movie theater chain had not seen any “new significant requirements for social distancing” that could impact capacity limits for movie screenings, while adding Cinemark would respond to new requirements from government authorities. “We’re very nimble in being able to adapt. We’re ready to go if and when we have to make further adaptations,” he told analysts.

At the same time, Zoradi insisted the recovery of the exhibition sector was robust. “While we are closely monitoring the status of the Delta virus and rising COVID infection rates, we remain confident in the resurgence of theatrical exhibition as the virus is contained,” he told analysts.

Zoradi on the morning call also discussed the major Hollywood studios during the pandemic shortening the theatrical window, an industry term for the length of time a film screens exclusively in theaters. The Cinemark boss reiterated his support for the exclusive theatrical window, especially for Hollywood tentpoles.

“I continue to firmly believe that the exclusive theatrical window is critically important to the overall media landscape and remain confident regarding the long-term prospects of our company and the overall industry,” Zoradi argued.

Regarding the Hollywood studios, which remain key suppliers of movie product to Cinemark, Zoradi argued they have affirmed their commitment to the exclusive theatrical window post-pandemic, even as they make a beeline to the streaming space in response to changing consumer viewership patterns. He also singled out Walt Disney CEO Bob Chapek for championing the exclusive theatrical window for tentpoles, even as Disney+ increasingly figures largely in the studio’s movie release plans.

“Bob and the other people there have recognized that theatrical plays a really important part,” Zoradi argued as Disney moves from its current “test and learn” phase during the pandemic to eventually emerging with “a very reasonable strategy in both the theatrical business and obviously in their in-home business as well.”

MKM Partners analyst Eric Handler wrote in his earnings preview report: “Cinemark is emerging from the pandemic in a solid financial position with multiple initiatives at the ready to improve the productivity of its movie theater circuit. While the slope of the box office recovery has not been as steep as we once hoped, we are still optimistic a return to normal revenue and margin levels can once again be achieved, although that event may not occur until 2023.”