Cinemark Earnings Exceed Estimates, CEO Says Talks About Premium VOD Window Continue
The exhibitor reports lower quarterly revenue but record full-year revenue as Mark Zoradi lauds "a banner year for the North American industry box office."
Movie theater operator Cinemark Holdings on Thursday reported better-than-expected fourth-quarter earnings as management touted Hollywood's film slate and said discussions about possibly offering movies in a premium VOD window soon after their cinema run continue.
“The strength and timing of Hollywood content has been tremendous over the past few years, and the movies that have already been announced in 2017 and 2018 appear to be highly commercial across broad-based audience groups, reinforcing our optimism for the future of our industry," CEO Mark Zoradi said on the company's earnings conference call.
The exec added that Cinemark was "enthusiastic" about the 2017 film slate, highlighting a mix of superhero, action and family releases, which also tend to work well in Latin America. He cited such upcoming movies as The Fate of the Furious, Despicable Me 3, Guardians of the Galaxy Vol. 2, the latest Star Wars film, Beauty and the Beast, Wonder Woman, Dunkirk, Logan and Coco.
Zoradi was also asked about recent comments from Warner Bros. and Fox executives about their interest shorter theatrical windows and in offering films in a premium VOD window soon after their release in cinemas. "We are in discussion with various studios, but it’s not something that we’re prepared to discuss or comment on in a public forum," the Cinemark boss said. "We are going to continue these negotiations. Clearly, any solution that comes out of this, we will want to see it, and the studios will want to see it, as incremental.”
Zoradi also lauded studios for ending "dead zones" or "quiet zones" by spreading out release dates, citing Disney's Beauty and the Beast release date in March as one that can help extend the cinema season for big releases further.
The exhibition giant, which has a major presence in Latin America, reported quarterly earnings of $77.0 million, or 66 cents per share, up from $57.8 million, or 50 cents. The latest period included a tax benefit of $2.2 million primarily due to "the implementation of a foreign holding and financing structure that increased the company's ability to use foreign tax credits that had previously carried a full valuation allowance."
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), another profitability metric, for the quarter fell to $168.2 million, though, compared with $174.8 million in the year-ago period.
Revenue declined to $700.9 million from $707.2 million as international growth was more than offset by lower U.S. revenue. Quarterly admissions revenue fell from $429.8 million to $424.4 million, partly due to tough comparisons with the previous year's release of Star Wars: Episode VII – The Force Awakens, while concession revenue rose from $232.8 million to $237.3 million. The company said its average ticket price in the quarter came in at $6.48, slightly down from the previous year, while concession revenue per patron hit $3.62.
“It was a banner year for the North American industry box office, achieving its fourth all-time high in the past five years," said Zoradi. "Cinemark’s domestic operations outperformed the North American industry box office ... and globally we set numerous records, including total revenues of nearly $3 billion, net income of $255 million and adjusted EBITDA of more than $706 million."
On the call, Zoradi said he was optimistic regarding revenue opportunities for VR and AR offerings and said the company would continue to build screens and look for accretive acquisitions in the U.S. and abroad.