Cinemark Holdings, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Amounts are in millions of dollars except per-share data, attendance, and where noted. Comparisons are with Q1 2021.
Business context
Cinemark operates movie theatres in the U.S. and 15 international markets, reporting U.S. and International segments. All theatres had reopened by the end of Q4 2021. Q1 2022 results benefited from significantly more theatres operating and a stronger film slate than in the pandemic-affected prior-year quarter.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $460.5 | $114.4 |
| Operating loss | $(33.0) | $(169.5) |
| Net loss | $(72.5) | $(208.9) |
| Net loss attributable to Cinemark | $(74.0) | $(208.3) |
| Diluted loss per share | $(0.62) | $(1.75) |
| Adjusted EBITDA | $25.2 | $(92.0) |
| Cash used for operating activities | $(118.8) | $(124.1) |
| Capital expenditures | $18.7 | $17.7 |
- Revenue increased about 302%. Attendance rose to 33.1 million from 7.7 million. Average ticket price was $7.12 versus $7.25; concession revenue per patron was $5.23 versus $5.10.
- Operating loss equaled 7.2% of revenue in Q1 2022. Total operating costs were $493.5, or 107.2% of revenue. The filing cautions that many prior-year cost comparisons are not meaningful because of theatre closures and limited film content.
- Cash and cash equivalents were $568.6 at March 31, down from $707.3 at year-end. Current assets were $719.8 and current liabilities $645.6.
- Long-term debt carrying value was $2,543.9, including $27.2 current; no borrowings were outstanding on the $100.0 revolving facility, which was fully available. Operating and finance lease obligations are additional significant liabilities.
- Cash used in investing activities was $8.1 and cash used in financing activities was $8.6. Cash declined by $138.7 during the quarter.
Material changes and notable items
- U.S. revenue was $372.0 versus $97.1; International revenue was $88.5 versus $17.3. Adjusted EBITDA improved to $14.4 in the U.S. and $10.8 internationally, from losses in both segments in Q1 2021.
- The stronger box office and higher attendance drove revenue recovery, while film rental and advertising expense rose to $127.6 from $23.2. Salaries and wages increased to $79.8 from $31.2, reflecting expanded operating hours, attendance and wage pressures.
- A $6.9 gain on disposal of assets and other, primarily from excess land sales, contrasted with a $4.5 loss in Q1 2021. Interest expense rose to $38.1 from $36.6, partly reflecting refinancing at higher coupon rates.
- Remaining deferred lease payments were $22.1, most expected to be repaid during 2022. The quarterly dividend remained suspended.
- The NCM investment had a carrying value of $131.9 versus estimated fair value of $109.6. Management reported no impairment indicators in its March 31 qualitative assessment.
Outlook, risks and contingencies
Management said existing cash and expected operating cash flows should be sufficient for working capital, capital expenditures and known contractual cash requirements for the next 12 months and beyond. It provided no quantified revenue, earnings or cash-flow guidance. Theatre development commitments totaled $61.6, with approximately $24.6 expected during the remainder of 2022. Management identified film availability and performance, changing theatrical windows, streaming competition, consumer sentiment, COVID-19 and government restrictions, inflation, labor costs, supply constraints, foreign exchange and interest rates as risks to recovery and results.
- The company reported compliance with its debt agreements. Its debt indentures specify a minimum 2.0x coverage ratio for certain additional indebtedness; the reported actual ratio was 1.5x. The filing also describes prior covenant waivers and conditions, making borrowing capacity and covenant terms important to monitor.
- A 100-basis-point increase in market rates was estimated to increase annual interest expense by $2.1. Swaps covered $450.0 of the $631.5 term loan; reported term-loan average interest rate after swaps was approximately 3.4%.
- Cinemark’s COVID-19 business-interruption insurance litigation against Factory Mutual remained unresolved; the company could not predict the outcome. It also described a California class action it intends to defend. The Intertrust patent matter was settled and dismissed.
- Management stated that pending legal proceedings were not expected to be material, but outcomes remain uncertain. The filing notes Argentina is treated as a highly inflationary economy.
Important facts for investors to verify
- Whether box-office recovery and the upcoming film slate sustain attendance and revenue, and whether theatre economics improve beyond the reported positive Adjusted EBITDA.
- Cash burn, liquidity needs, repayment of deferred rent, and the company’s ability to fund capital spending and theatre commitments without additional borrowing.
- Debt maturities, interest costs, covenant compliance and the terms or duration of covenant waivers; also consider lease obligations alongside reported debt.
- Whether inflation, wage increases, supply constraints, streaming competition and theatrical-window changes pressure margins or demand.
- Developments in the insurance litigation, the California class action, and the valuation and recoverability of the NCM investment.