Cinemark Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Cinemark operates movie theatres in the U.S. and Latin America. Theatres were open across both segments during the quarter; the prior-year comparison includes some temporary closures and fewer new film releases. Financial amounts below are in millions of dollars unless stated otherwise.
Financial performance
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | $650.4 | $434.8 | $1,855.0 | $843.8 |
| Operating income (loss) | $18.8 | $(42.5) | $(32.8) | $(297.4) |
| Net loss | $(23.9) | $(77.6) | $(169.2) | $(428.7) |
| Adjusted EBITDA | $99.5 | $44.3 | $263.0 | $(59.5) |
| Operating margin | 2.9% | (9.8)% | (1.8)% | (35.2)% |
Q3 revenue rose about 50% year over year; attendance increased to 48.4 million from 30.7 million. For the nine-month period, revenue more than doubled and attendance reached 133.5 million versus 57.5 million. Higher attendance and a fuller film slate drove the recovery, while film rental costs, wages, utilities and other operating expenses also rose. Average ticket price declined year over year in both periods; concession revenue per patron was broadly lower for the nine-month period but higher in Q3 in the U.S.
- Cash flow: Nine-month operating cash flow was $27.7, versus cash used of $42.2 in 2021. Capital expenditures were $65.3, implying operating cash flow less capital expenditures of $(37.6). Cash declined by $75.4 to $631.9.
- Liquidity: Holdings reported $631.9 of cash and $800.9 of current assets against $628.4 of current liabilities at quarter-end. CUSA reported $386.6 of cash. The $100.0 revolving credit facility was undrawn and available.
- Debt and leases: Holdings’ gross carrying value of debt was $2,530.1, including $460.0 of 4.50% convertible notes; balance-sheet debt net of issuance costs was $2,495.5. Operating lease obligations totaled $1,205.5 and finance lease obligations $106.2. CUSA’s term loan balance was $628.2; $450.0 was covered by interest-rate swaps. Management reported covenant compliance and a 2.2x secured leverage ratio against a 4.25x maximum when the revolver is drawn.
Material changes and unusual items
- Year-to-date impairment charges were $107.5, compared with $7.5 in 2021. This included a $98.0 write-down of the NCM investment; Q3 included a further $11.2 NCM impairment and $4.0 of long-lived asset impairments.
- Cash flow improved with the recovery in operations, but nine-month capital spending exceeded operating cash flow. Cash also reflected financing outflows, foreign-exchange effects and other working-capital movements.
- Holdings’ investment in NCM fell from $135.4 at year-end 2021 to $28.4. The filing cites NCM’s low share price and prolonged business recovery.
- The quarterly dividend remained suspended following the pandemic-related suspension. Holdings’ 2021 debt refinancing included a $6.5 loss on extinguishment of debt; no such loss was recorded in 2022.
Outlook, commentary and risks
The filing provides no quantitative earnings or revenue guidance. Management stated that 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. It cautioned that the industry recovery depends on film availability and box-office performance, consumer sentiment and government restrictions. The company also highlighted streaming competition and changes in theatrical release windows, inflation, wage and supply-chain pressures, foreign-exchange movements, and exposure to variable interest rates. A 100-basis-point increase in market rates was estimated to increase annual interest expense by $2.0.
Material legal matters include Cinemark’s insurance-coverage lawsuit against Factory Mutual relating to pandemic theatre closures and a California class action alleging Fair and Accurate Credit Transactions Act violations. The company said it could not predict the outcome of either case and considers potential liability from other pending proceedings not material.
Important facts for investors to verify
- Whether attendance, film supply and box-office performance sustain the operating recovery, and whether ticket and concession pricing offset inflation and higher operating costs.
- Cash generation, capital expenditure needs and liquidity, including the timing of remaining deferred rent payments and theatre-development commitments.
- Debt maturities, variable-rate exposure, covenant headroom and restrictions on dividends or transfers from CUSA to Holdings.
- Further impairment risk for theatres and the NCM investment, and the outcomes of the disclosed litigation.