Cinemark Theater Subscription Service Hits 560,000 Members

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Cinemark CEO Mark Zoradi

The theater giant reported lower fourth-quarter earnings as record revenue, led by concessions growth, was more than offset by higher operating costs and a special tax expense.

Cinema giant Cinemark Holdings on Friday reported lower quarterly earnings as record fourth-quarter revenue was more than offset by higher operating costs and a special tax expense, among other factors.

The company posted earnings of $19.4 million, or 17 cents per share, compared with $95.1 million in the year-ago period, or 82 cents. Adjusted earnings before interest, taxes, depreciation and amortization, another profitability metric, increased 5.6 percent to $198.1 million.

Cinemark's revenue rose 6.5 percent from the year-ago period to $798.6 million, which the company said was its highest fourth-quarter figure ever. Admissions revenue increased 0.4 percent to $445.1 million, with concession revenue growing 6.3 percent to $277.6 million.

Key box-office performers of the fourth quarter included Aquaman, Dr. Seuss' The Grinch and Venom.

But the company also said that its cost of operations rose 9 percent to $721.8 million, driven by costs for "utilities and other" and a higher figure for impairment of long-lived assets. Plus, it reported higher foreign currency exchange losses and a swing to income taxes of $35.8 million after a year-ago gain of $19.1 million, among other factors. 

Cinemark said its latest earnings included a $17 million non-cash tax expense "associated with recently issued tax guidance that modified the treatment of foreign tax credit utilization," while the year-ago period included a $45 million tax benefit "driven by a reduction of net deferred income tax liabilities as a result of the 2017 tax reform legislation."

Cinemark, led by CEO Mark Zoradi, said quarterly attendance increased 2.1 percent to 67.4 million patrons, its average ticket price was $6.60 and concession revenue per patron rose 4 percent to $4.12.

"These results demonstrate the resilience of the exhibition industry," Zoradi told analysts during a morning call, as he pointed to 2018 racking up a record high of $11.9 billion in box office, as theater attendance grew in response to a strong Hollywood film slate. 

The Cinemark boss added that the company's Latin American screens underperformed in 2018 as tentpoles like Black Panther, A Star is Born and Crazy Rich Asians did not resonate south of the border as they did in North America. At the same time, Zoradi pointed to 2019 Hollywood releases like Fast & Furious Presents: Hobbs & Shaw and the Jumanji sequel as grounds to forecast Latin America would be "significantly better" for the theater circuit this year.

The earnings call also touched on Amazon recently signaling it may allow fewer of its movie titles to have a three-month theatrical window, as the streaming giant introduces different release variations. Zoradi said Amazon has "been a great partner" for Cinemark and other exhibitors, and that he expected most Amazon Prime movie titles to continue to have a three-month theatrical window. "Whether they would choose to have a movie or two that they would have a different distribution pattern (for), clearly they could choose to do that and that would be in their rights to do so," he told analysts.

"But the indications are the vast majority of their titles have fully appreciated that theatrical exhibition sets up the value of that particular movie to be more valuable in downstream markets and have more value to their Prime members," Zoradi added.

He also argued consumers that view movies on streaming platforms tend to go out to theaters more often than other filmgoers, and vice versa.

Zoradi during the analyst call also addressed Cinemark's cinema subscription program Movie Club, where growth continues "to hold steady" as 560,000 members have been signed up to date. "We're expanding our reach of loyal Cinemark customers as a result of Movie Club," he told investors.

The Movie Club benefits include the ability to reserve seats and buy tickets in advance with no online fees. Unused tickets roll over for active members. Zoradi told analysts that Cinemark was looking at a possible per-month price increase for the Movie Club service.

And he touted Cinemark on Friday, raising its annual dividend by 8 cents per share to $1.36 due to confidence in the company's ongoing business model.

Feb. 22, 9:30 a.m. Updated with comments by Cinemark executives made during an analyst call.