Cinemark Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial statements are unaudited; amounts are in millions of dollars except per-share and operating data.
Business context and results
Cinemark operates movie theatres in the U.S. and Latin America, reporting U.S. and international segments. All theatres had reopened by the end of Q4 2021. Q2 2022 results benefited from higher attendance, more theatres operating than in the prior-year quarter, and a stronger slate of new films.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $744.1 | $294.6 | $1,204.6 | $409.0 |
| Operating loss | $(18.6) | $(85.4) | $(51.6) | $(254.9) |
| Net loss | $(72.8) | $(142.2) | $(145.3) | $(351.1) |
| Net loss attributable to Cinemark | $(73.4) | $(142.4) | $(147.4) | $(350.7) |
| Loss per share, diluted | $(0.61) | $(1.19) | $(1.23) | $(2.94) |
| Adjusted EBITDA (non-GAAP) | $138.3 | $(11.8) | $163.5 | $(103.8) |
Q2 operating loss was 2.5% of revenue, compared with 29.0% in Q2 2021; net loss was 9.8% of revenue. Adjusted EBITDA was 18.6% of revenue in Q2 2022. These margins are calculated from reported figures; Adjusted EBITDA is a non-GAAP measure.
- Q2 attendance rose to 52.0 million from 19.1 million. Consolidated average ticket price was $7.34 versus $8.04, while concession revenue per patron was $5.50 versus $5.75.
- For the first half, attendance was 85.1 million versus 26.8 million. Revenue rose substantially year over year, while film rental and advertising costs also increased with the stronger film slate.
Cash flow, debt and liquidity
- First-half operating cash flow was $46.1, compared with cash used of $21.4 in 2021. Investing activities used $28.8, including $40.6 of capital expenditures; financing activities used $19.2. Cash declined $12.2 to $695.1.
- At June 30, current assets were $873.0 and current liabilities were $725.8. The company reported $100.0 available on its revolving credit line and no revolver borrowings.
- Long-term debt carrying value was $2,538.0, including $25.7 current debt. Operating and finance lease obligations totaled approximately $1,352.6. The term loan balance was $629.8; its average rate after swaps was approximately 3.7%.
- Cash of $25.8 was held in a restricted collateral account for certain international letters of credit. Interest-rate swaps covered $450.0 of the term loan; the company estimated a 100-basis-point rate increase would add $2.0 to annual interest expense on $208.0 of variable-rate debt.
- The company stated that existing cash and expected operating cash flows should cover working capital, capital expenditures and known contractual requirements for the next 12 months and beyond. It reported a 1.67 secured leverage ratio for covenant testing against a 4.25 maximum, using the permitted substitute EBITDA calculation, and stated it was in compliance with debt agreements.
Material changes, outlook and risks
- Impairment: Q2 included $92.3 of impairment charges: $86.8 for the NCM investment and approximately $5.5 for theatre assets. The NCM write-down reflected its low share price and prolonged business recovery. No goodwill or tradename impairment indicators were identified in the June qualitative assessment.
- Costs and operating conditions: Management cited inflation and supply constraints affecting concession costs, higher wage rates, and increased utilities and other operating costs. U.S. average hourly wage rates were up approximately 12% in Q2 year over year; first-half rates were up approximately 13%.
- Industry outlook: The recovery remains dependent on the volume and performance of new films, consumers returning to theatres, government restrictions, and the length of exclusive theatrical windows. Management also cited streaming competition, inflation and supply-chain constraints. Films scheduled for the remainder of 2022 were listed, but the filing provides no numerical revenue or earnings guidance.
- Other notable items: The quarterly dividend remained suspended. Approximately $13.3 of deferred lease payments remained at quarter-end, most expected to be repaid during the rest of 2022. Signed theatre-development commitments totaled $45.7, with $13.6 expected to be paid in the remainder of 2022.
- Contingencies: Cinemark is pursuing insurance litigation against Factory Mutual over pandemic-related theatre closure losses; the outcome is uncertain. The company is also defending a California class action alleging Fair and Accurate Credit Transactions Act violations. Management said pending proceedings were not expected to be material, but outcomes cannot be predicted.
Important facts for investors to verify
- Whether attendance and box-office performance remain strong as the film-release slate and theatrical windows evolve.
- Cash generation relative to debt service, lease obligations, capital spending and deferred rent repayments; also confirm availability and terms of the $100.0 revolver.
- Further impairment exposure, particularly the value and recovery prospects of the NCM investment and theatre assets.
- Exposure to interest rates, inflation, wage increases, foreign exchange and concession supply constraints.
- Progress and potential outcomes of the Factory Mutual and consumer-protection litigation, and any change to the dividend suspension.