Cinemark Third-Quarter Earnings Beat Estimates

Mark Zoradi -Getty- H 2016
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CEO Mark Zoradi told analysts Netflix movies won't play on his screens as long as the streaming giant insists on short theatrical runs that threaten the exclusive theatrical window.

Cinema giant Cinemark Holdings on Friday reported higher third-quarter earnings that exceeded Wall Street estimates.

The company posted earnings of $50.2 million, or 43 cents per share, compared with $38.1 million in the year-ago period, or 33 cents. Wall Street had on average forecast earnings of 34 cents per share.

Cinemark's quarterly revenue of $754.2 million was up 6.1 percent from the year-ago period. Admissions revenue increased 0.6 percent to $427.6 million, with concession revenue growing 6.9 percent to $264.1 million.

On an analyst call, the chain asserted it won't be rolling out the red carpet for Netflix just yet, after the streaming giant changed course and decided it will open three of its fall award contenders first in select cinemas — including Alfonso Cuaron's Roma.

The problem is Netflix's insistence on short theatrical runs before making its original movies available to streaming customers, said Cinemark CEO Mark Zoradi.

"The issue comes down to the exclusive window, and at such time that they are willing to abide by the windows that all of our major studios currently do, we would welcome them. As it currently stands, a one- or two-week window, I don't anticipate that we would be playing the Netflix films," he argued.

During the call, the exec also talked up Movie Club, Cinemark's recently launched cinema subscription and ticketing program. Members of the loyalty program can see one regular movie a month for $8.99 and receive a 20 percent discount on concessions, among other benefits.

Zoradi said new sign-ups for Movie Club have "held strong and steady" as his chain added 27 percent more subscribers during the latest quarter to get to 445,000 members in all across the U.S., or 1,003 members for every theater location.

Cinemark to date has sold over 8 million movie tickets via the Movie Club program. During the third quarter, the cinema subscription service accounted for 8 percent of the circuit's box office receipts.

"It's a flexible design, with the ability to carry forward and share unused movie credits differentiating from other programs and making it widely accessible to the masses and the best value for the largest segment of the movie-going population," Zoradi argued. He added that Movie Club offers a "financially sustainable" business model that drives incremental moviegoing and loyalty to Cinemark.

Movie Club subscribers can roll over their unused tickets, but the CEO said they typically don't stockpile tickets for use in other periods of the year, as 75 percent of the movie credits having already been redeemed. "People are not storing them up, and we don't have members with lots of credits because they're coming to the theaters more often," he reported.

Zoradi also told analysts that the 20% discount at the concession stand was driving up sales of popcorn and candy as the basket size for Movie Club members is comparable to what general moviegoers purchase.

During the latest quarter, Cinemark saw attendance rise 3.7 percent to 69.8 million patrons, with the average ticket price coming in at $6.13. Concession revenue per patron climbed 3 percent to $3.78.

Nov. 2, 10:00 a.m. Updated with comments by CEO Mark Zoradi made during an analyst call.