Cinemark Holdings, Inc. — Q3 2023 Form 10-Q
Business context and reporting period
For the quarter and nine months ended September 30, 2023. Cinemark operates movie theatres in the U.S. and Latin America, reporting U.S. and international segments. It operated 507 theatres with 5,765 screens at quarter-end. Cinemark USA, Inc. comprises nearly all of Holdings’ operating business.
Financial performance and liquidity
Amounts are in millions, except per-share data and percentages. Figures below are for Cinemark Holdings unless noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $874.8 | $650.4 | $2,427.8 | $1,855.0 |
| Operating income (loss) | $145.8 | $18.8 | $342.7 | $(32.8) |
| Operating margin | 16.7% | 2.9% | 14.1% | (1.8)% |
| Net income (loss) | $91.2 | $(23.9) | $209.1 | $(169.2) |
| Net income (loss) attributable to Holdings | $90.2 | $(24.5) | $206.2 | $(171.9) |
| Diluted earnings (loss) per share | $0.61 | $(0.20) | $1.43 | $(1.43) |
| Adjusted EBITDA | $196.8 | $99.5 | $514.5 | $263.0 |
Q3 revenue grew 34.5% year over year as attendance rose 28.0% to 61.9 million. Average ticket price increased to $7.17 from $6.71, and concession revenue per patron rose to $5.49 from $5.24. Nine-month attendance increased to 169.2 million from 133.5 million. Operating margin and earnings improved substantially; the prior-year period included much higher impairment charges.
- Cash flow: Nine-month operating cash flow was $335.8, versus $27.7 a year earlier. Capital expenditures were $89.7, up from $65.3. Cash increased to $805.9 at September 30 from $674.5 at year-end.
- Liquidity: Current assets were $1,011.0 and current liabilities $651.9. Management stated existing cash and expected operating cash flows should cover working capital, capital expenditures and known contractual obligations for the next 12 months and beyond.
- Debt: Long-term debt carrying value was $2,434.0, including $460.0 of Holdings’ convertible notes; cash less this debt was approximately $1,628.1, excluding lease obligations. Operating and finance lease obligations totaled approximately $1,192.3. No borrowings were outstanding on the $125 revolving facility. The term loan’s average rate, after swaps, was about 6.9%.
- Margins and costs: Film rentals and advertising were 55.9% of Q3 revenue (expressed as a share of admissions revenue in the filing); concession supplies were 18.5% of concession revenue. Management cited wage, supply, utility and other inflationary pressures.
Material changes, outlook and risks
- In May 2023, CUSA amended and restated its senior secured credit facility, establishing a $650 term loan due 2030 and a $125 revolver due 2028, subject to specified springing maturities tied to other debt. It also redeemed $100 principal of 8.75% secured notes, leaving $150 outstanding. Refinancing and redemption activity contributed to a $10.7 nine-month debt extinguishment and refinancing loss.
- Management attributed stronger results to more film releases with broad appeal and successful box-office titles. It identified the volume and performance of future films, theatrical release windows, consumer behavior, streaming and other entertainment competition as ongoing uncertainties. No numerical earnings or revenue guidance is provided.
- Foreign currency and related losses were $19.4 for the first nine months, including $10.1 from Argentina Blue Chip Swap transactions. The company also reported currency translation exposure and said a 100-basis-point rate increase would raise annual interest expense by approximately $2.0.
- National CineMedia (NCM) filed for Chapter 11 in April and emerged in August 2023. Cinemark changed its NCMI investment accounting to fair value, recording a $13.9 nine-month unrealized gain. Cinemark’s appeal concerning its most-favored-nations rights under its NCM agreement remained pending; outcome is uncertain.
- Cinemark completed the sale of its Ecuador subsidiary in September, recognizing a $6.9 gain. A separate COVID-19 insurance coverage suit remains on appeal after summary judgment for the insurer. The company also reported an Illinois FACTA class action and stated it could not predict the outcome.
- The company said it was in compliance with debt agreements and covenants at September 30. Its quarterly dividend remained suspended. Management’s forward-looking statements are subject to risks and actual results may differ.
Key facts for investors to verify
- Whether attendance, box-office strength and customer spending remain sufficient to sustain the improved profitability as film availability changes.
- Debt maturities and springing-maturity terms, refinancing access, interest-rate exposure and the restrictions governing dividends and other payments.
- The sustainability of operating cash flow and the planned level of theatre maintenance, development and other capital expenditures.
- The effects of Argentina’s currency controls and exchange rates, and the valuation volatility of the NCMI investment.
- Developments in the NCM appeal, the COVID-19 insurance litigation and the FACTA lawsuit.