Cinemark Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Cinemark operates movie theatres in the U.S. and Latin America and reports U.S. and international segments. Unless noted, financial amounts below are for Holdings and its consolidated subsidiaries, in millions of dollars.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $579.2 | $610.7 | Down 5.2% |
| Operating income | $17.6 | $28.5 | Down 38.2% |
| Operating margin | 3.0% | 4.7% | Down 1.7 percentage points |
| Adjusted EBITDA | $70.7 | $86.2 | Down 18.0% |
| Net income (loss) | $25.3 | $(2.5) | Improved |
| Net income (loss) attributable to Holdings | $24.8 | $(3.1) | Improved |
| Basic / diluted EPS | $0.20 / $0.19 | $(0.03) / $(0.03) | Improved |
| Operating cash flow | $(22.7) | $7.9 | Decreased |
| Capital expenditures | $23.5 | $26.3 | Down |
Cash and cash equivalents were $788.6 at March 31, 2024, down from $849.1 at year-end 2023. Total current assets were $984.4 and current liabilities were $664.0. Cash used in investing activities was $23.3; cash used in financing activities was $10.4. Total long-term debt carrying value was $2,430.0 before debt issuance costs and discounts, including $460.0 of Holdings convertible notes. Holdings also reported $1,048.2 of operating and finance lease obligations. No borrowings were outstanding under CUSA’s $125.0 revolving credit facility.
Average attendance fell to 39.7 million from 42.9 million. Average ticket price rose to $7.30 from $7.25, and concession revenue per patron increased to $5.65 from $5.50. Adjusted EBITDA declined in both segments: U.S. to $49.1 from $63.4 and international to $21.6 from $22.8.
Material changes and notable items
- Revenue declined in both segments, principally reflecting lower attendance amid a smaller film-release slate and less carryover benefit from prior-year releases. U.S. attendance fell 6.3%; international attendance fell 9.0%.
- Despite lower revenue, total operating costs declined less than revenue, lifting costs to 97.0% of revenue from 95.3%. General and administrative expense increased, while depreciation and amortization decreased.
- Reported net income was driven substantially by a $27.7 income tax benefit, including a discrete $33.7 deferred tax benefit from releasing valuation allowances in certain foreign jurisdictions. Holdings reported a $2.4 pre-tax loss; the tax benefit made the effective tax rate unusually high.
- Other income included a $4.4 unrealized gain on the NCMI investment and $3.8 of equity income from affiliates. These items are not equivalent to theatre operating performance.
- On May 1, 2024, after quarter-end, CUSA redeemed the remaining $150.0 principal of its 8.75% secured notes for $156.6, including accrued interest. The indenture was discharged. This was a subsequent event and is not reflected in March 31 balances.
Outlook, risks and contingencies
The filing provides no quantitative revenue, earnings or cash-flow guidance. Management says existing cash and expected operating cash flows should be sufficient for working capital, capital expenditures and known contractual obligations for the next 12 months and beyond. Planned theatre development is expected to be funded from operating cash flow and, if needed, credit-facility borrowings or other financing sources. The quarterly dividend remains suspended.
Management identifies film availability and box-office performance, theatrical release windows, consumer behavior, streaming and other entertainment competition, inflation in labor and concession costs, foreign currency movements, and interest rates as risks. The 2023 writers’ and actors’ strikes affected film-release scale; the timing and strength of future content remain important uncertainties. A 100-basis-point increase in market rates was estimated to increase annual interest expense by $2.0 on variable-rate debt after swaps. The company reported compliance with its debt agreements at March 31; its consolidated net total leverage ratio was 2.26 to 1.00.
Pending matters include an appeal in the COVID-19 insurance dispute, a class action alleging credit-card receipt violations, an appeal involving Cinemark’s rights under its NCM agreement, and a suit filed in April 2024 concerning draft-beer cup labeling. The company says it cannot predict the outcomes; it considers other currently pending ordinary-course proceedings not material individually or in aggregate. It reported no material change in risk factors from its 2023 Form 10-K.
Important facts for investors to verify
- How much of reported profitability reflects the one-time valuation-allowance release and other non-operating gains, versus recurring theatre operations.
- Whether attendance and film availability recover, and how ticket and concession pricing affect patron demand and margins.
- Cash-flow timing and liquidity after the $156.6 note redemption; also review remaining debt maturities, particularly the $460.0 convertible notes due 2025 and $405.0 senior notes due 2026.
- The sustainability of Adjusted EBITDA and the performance gap between U.S. and international segments, including currency effects.
- Developments in the disclosed litigation and in the NCM relationship, including potential financial or operating consequences.