Cinemark Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to CenterMark's third quarter earnings conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you ask a question during the session, you will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Chanda Prashiris, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Natalia, and good morning, everyone. At this time, I would like to welcome you to Cinemark Holding, Inc.' 's third quarter 2020 earnings release conference call, hosted by Mark Zarate, Chief Executive Officer, and Sean Gamble, Chief Financial Officer and Chief Operating Officer. In accordance with the safe harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that are addressed by members of management during this call may constitute forward-looking statements. Such statements are subject to risks, uncertainties, and other factors that may cause Cinemark's actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are set forth in the company's SEC filings. The company undertakes no obligation to publicly update or revise any forward-looking statements. Today's call and webcast may include non-GAAP financial measures. A reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures can be found in today's press release within the company's quarterly filing on Form 10-Q or on the company's website, investors.cinemark.com. I would now like to turn the call over to Mark Zarate.

Thank you, Chanda, and good morning, everyone. We hope you and your families are healthy and well during this very challenging time. We appreciate you joining us to discuss our 2020 third quarter results. The format for our call this morning will be similar to what our first and second quarter calls were like. I'll kick things off with a high-level overview of the current state of our company and industry, and then Sean will provide commentary on our liquidity position, third quarter financial results, before turning the call back over to me for further update on our strategic focus and reopening plans. We'll then open up the line for a customary Q&A. It perhaps goes without saying the COVID-19 pandemic continues to have an unprecedented impact on the world and the movie exhibition industry. Delays of new film content, operating constraints imposed by varied government authorities, and ongoing health concerns associated with the pandemic continue to challenge a material resurgence in moviegoing. As such, resolving these pressure points, along with stringent cash and liquidity management and driving incremental productivity gains remain our top near-term priorities. While the current operating environment remains difficult, we're very pleased to report that on account of tireless and focused efforts of our broad CentiMark team, we have been able to adapt our business to more than satisfy the current health and safety needs and re-engineer a wide range of procedures within our field operations to derive meaningful new efficiencies. As a result of the majority of our theaters are presently open and operating and generating a modestly positive variable cash flow, which means our theaters are slightly improving our overall cash burn remaining open versus being closed. As discussed on our second quarter earning call, we developed and implemented a comprehensive series of new and enhanced cleaning and safety protocols to address current health requirements in light of COVID-19. We branded our program the Cinemark Standard, and it included various varied social distancing measures, required face masks, disinfecting auditoriums, and frequently sanitizing hard surfaces, optimizing air quality, and assigning a chief clean and safety monitor during each theater shift to ensure we're performing all these functions and more to the highest level of effectiveness. To further ensure the execution of the Cinemark Standard, before going full scale. We designed a strategic phased reopening plan for our theaters that provided an opportunity to test the training, communication, implementation, and feasibility of the program. In mid-June, we reopened five theaters in a test and learn phase, which was followed by the launch of another ten theaters in the month of July. This phase approach provided invaluable learnings with regard to the refinement of our safety protocols as well as theater reopening efficiencies. In August, we opened another 205 theaters with 32 more in September for a total of 252 theaters operated by the end of the third quarter or more than 75% of our domestic circuit. One strong indicator that this phase approach served its purpose is the feedback we've been receiving from guests who for the past four months have consistently reported a 96% satisfaction with Cinemark's health and safety measures. Furthermore, an overwhelming majority of those moviegoers indicate they intend to return again and will recommend visiting Cinemark to a friend. While our abundance of new cleaning and safety protocols are more than satisfying the needs of many moviegoers in this current environment, we recognize that there is a segment of the audience who may still require an additional layer of comfort. As such, starting back in July, we introduced the innovative concept of Private Watch Party, which has been met with resounding positive results. Our Private Watch Parties offer consumers a simple and affordable way to reserve an entire auditorium for their trusted group, up to 20 guests, and select the contact of their choice from a list of new releases and favorite film classics. with a few simple clicks on our website or mobile app. Since we launched Private Watch Parties four months ago, we've already sold nearly 50,000 of these private events. Notably, more than 600,000 people have attended a Private Watch Party to date, with a significant portion reporting it was their first time back in the theater since the shutdown, underscoring the opportunity for guests to sample the cleanliness and safety of our theaters. While several of our competitors have since followed with their own version of private watch parties, we've not seen them impact our sales to date, which continue to grow. Two additional benefits of our phased reopening approach are it enabled us to materially improve the speed and ability of the reopening process. It also provided us with the ability to test and hone our newly designed, more optimized operating procedures. As I previously indicated, as a result of these procedures and their focus on maximizing revenues while minimizing expenditures, we are burning less cash with our theaters open than when they were shut down. Said another way, we are more than covering the incremental costs of operating our theaters, such as film rental, concession costs of goods sold, hourly payroll, utilities, security, janitorial, cleaning, and safety supplies. These results have been achieved by closely evaluating our business theater by theater and adjusting our operations as necessary. We developed sophisticated data analytics related to this current operating environment during our initial test and learn phase, which is now enabling us to optimally align operating hours based on current market demand and ability to produce positive cash flow. As a result, we've been expanding operating hours and show times in certain instances and reducing in others. Furthermore, during this period of reduced demand, we have limited our food and beverage offerings to the highest value core offerings that require less labor to fulfill and have less risk of spoilage. Consumers can still enjoy movie-going favorites like freshly popped popcorn, candy, and drinks, and this tactical approach has supported our ability to maximize our operating cash flow. In addition to cash management in our variable field operations, we continue to remain hyper-focused on fixed costs as well. As an example, we restructured our business during 2Q, which resulted in the permanent closure of 21 theaters as well as the reduction in our corporate workforce. We're continuing to seek various means to reduce or defer fixed costs, such as ongoing landlord negotiations as we pursue incremental rent abatements, and or modifications to the underlying structure of our lease agreements. One of the key things I'd like you to take away from my introductory comments is that we have already dramatically evolved our business, and we continue to conform to the current operating environment. Doing so has involved reengineering varied operating procedures, developing and implementing new safety protocols like the Cinemark standards, and tightening cash management routines, all while devising new innovations and promotional campaigns to reignite moviegoing and drive revenue. I'm truly proud of the Cinemark team's dedication, focus, and collaboration, as well as their flexibility and agility in this dynamic environment. I remain confident that we will emerge from this crisis a stronger company and look forward to the recovery of both our company and our industry and focusing on what we do best, entertaining millions upon millions of moviegoers in the best possible environment that is safe, comfortable, and exciting. Sean will now walk you through our liquidity position and three key results before turning it back over to me to cover our reopening plans. Sean? Thank you, Mark.