Cinemark Stock Dips On Q2 Write-Down, Higher Costs; CEO Sees Next Two Months Challenged By Fewer Releases

Film

Cinemark, which saw box office momentum buoy second quarter financials, said August and September will be tougher as new release volume dips.

CEO Sean Gamble told Wall Street on a post-earnings call that the nation’s third largest exhibitor is optimistic on the business, but that the pace of an ongoing recovery depends on consumer sentiment regarding the pandemic, sustained quality and diversity of new films, and the number releases.

After a string of blockbusters led by Top Gun: Maverick, the industry is girding for a slowdown on seasonality, pandemic-related production delays, and film release date shifts. Late fall and winter picks up, with highlights Black Adam, Black Panther: Wakanda Forever. Puss In Boots: The Last Wish. Shazam: Fury of the Gods, Avatar: The Way Of Water and others.

Cinemark earlier posted narrower and revenue for the three months ended in June. The former was up 152% to $744 from $294 million. Admissions revenue was $382 million and concession revenue $286 million, driven by attendance of 52 million ticket buyers at an average ticket price of $7.34 and concession revenue per patron of $5.50.

Losses of $73.4 million compared with losses of $142 million a year earlier – for a diluted loss per share of 61 cents vs $1.19. The red ink included a $92 million write down and higher costs for film rentals and advertising, concession supplies, salaries, utilities and lease expense – driving total costs up to $762 million from $380 million.

Wall Street knocked the shares down 13%.

On this call and others, investors are growing more focused on the return of mid-range films. The understandable enthusiasm generated by a glow of mobbed superhero showings is morphing into a more realistic look at the longer term prospects for the business.

Blockbusters have higher film rental costs. And a bigger variety of films will brings in a bigger range of moviegoers, which is important for a full recovery. Exhibitors have been saying the same thing. Gamble sees the strong numbers for non-franchises like Elvis, Lost City and Where The Crawdads Sing as a good sign. “My view is that over the next one to two years we are going to see that normalize to pre-pandemic levels.”

Gamble stressed that difficult economic times – high inflation, high interest rates and a potential recession – have always been a boon for movie theaters.

“Continued improvement in consumer sentiment, as well as a more consistent release cadence of compelling new films with broad consumer appeal and an exclusive theatrical window, yielded the highest quarterly box office since the inception of Covid-19,” he said. “As a result of our sustained investments over the years, the operating enhancements we’ve made throughout the pandemic, and the further advancements we are achieving through our strategic initiatives, we believe Cinemark remains exceptionally well-positioned to navigate the ongoing recovery of our industry and fully capitalize on its continued resurgence.”

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