Cinemark Holdings Inc.

Greetings. Welcome to the Cinemark Holdings second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. At this time, I would like to hand the call over to Chanda Brashears, Senior Vice President of Investor Relations. Thank you. You may begin.

Good morning, everyone. I would like to welcome you to Cinemark Holding, Inc.' 's second quarter 2023 earnings release conference call hosted by Sean Gamble, President and Chief Executive Officer, and Melissa Thomas, Chief Financial Officer. Before we begin, I would like to remind everyone that statements or comments made on this conference call may be forward-looking statements. Forward-looking statements may include, but are not necessarily limited to, financial projections or other statements of the company's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties. The company's actual results may materially differ from forward-looking projections due to a variety of factors. Information concerning the factors that could cause results to differ materially is contained in the company's most recently filed 10-K. Also, today's call may include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's most recently filed earnings release 10Q, and on the company's website at ir.cinemark.com. With that, I would now like to turn the call over to Sean Gamble.

Thank you, Chanda, and good morning, everyone. We appreciate you joining us today for our second quarter 2023 earnings call. We believe Box Office's performance during the second quarter, combined with movie-going results witnessed year-to-date and over the past two years, provide conclusive evidence that consumer enthusiasm to view compelling films in a shared, larger-than-life cinematic environment is as strong as ever. Theatrical moviegoing enthusiasm has been largely undeterred by the impact of the pandemic and the evolution of in-home streaming offerings, and it continues to demonstrate resilience against macroeconomic inflationary and recessionary dynamics. Year-to-date through July, North American industry box office results are up 20% over 2022 and have improved to within approximately 85% of 2019, driven by further recovery in wide release volume and sustained consumer demand for an in-theater viewing experience. On par with box office results, wide release volume has also reached almost 85% of 2019, which represents a meaningful uptick from last year when volume had recovered to approximately 65% of pre-pandemic levels over the same timeframe. An improved cadence of new, diverse content this year has helped accelerate movie-going momentum across all categories of audiences, leading to a continued extension of impressive, and in many cases, record-breaking results throughout the year. In the first quarter, a series of strong releases exceeded expectations, including franchise-topping successes for Creed III, Scream 6, and John Wick Chapter 4, the outperforming horror thriller Megan, the long-running adult drama A Man Called Otto, and the highly successful faith-based film Jesus Revolution. Then the second quarter kicked off with a bang as the Super Mario Brothers movie quickly became the industry's second biggest animated film of all time and our top performing animated title ever at Cinemark. During the quarter, Amazon also expanded further into theatrical exhibition with Air under its Amazon film label, which delivered solid results. Evil Dead Rise, a movie initially made for streaming, further reinforced the positive impact of a theatrical release, just as Smile did last year, grossing nearly $70 million in domestic box office. Marvel's Guardians of the Galaxy Vol. 3 generated $845 million worldwide, which was comparable to its second installment, and Spider-Man Into the Spider-Verse doubled the domestic results of its widely acclaimed first release, accumulating over $680 million worldwide. Franchise fans were further delighted by Fast X and Transformers Rise of the Beasts, while families enjoyed Elemental and The Little Mermaid, the latter of which reached nearly $300 million in domestic box office and over $560 million globally. And if there was any question about the strength of theatrical viewing habits coming out of the second quarter, take a look at what just happened in July. The month got started with the faith-based sensation Sound of Freedom, which has already eclipsed $150 million in domestic box office and is still growing. The highly successful launch of that film was followed by the action-packed Mission Impossible Dead Reckoning Part 1, which has now generated more than half a billion dollars worldwide. And then, on July 21st, the Barbenheimer phenomenon swept the world. The list of records for Barbie and Oppenheimer is already staggering and includes the first time ever two films open to over $80 million of domestic box office simultaneously, in addition to driving the fourth biggest box office weekend on record for our industry. For Cinemark, as a result of Barbie's and Oppenheimer's success, coupled with the impact of Mission Impossible and Sound of Freedom, as well as other significant titles during the month, including Indiana Jones and the Dial of Destiny, insidious the red door July delivered our biggest single month of admissions revenue in the history of our company these aggregate box office results to date and the many discrete and varied examples of titles just described which cut across all genres of films all types and ages of audiences and all times of the year demonstrate that consumer interest in theatrical moviegoing is strong and and vibrant and remains a meaningful and preferential way of allocating discretionary time. The strength of the second quarter's film lineup, supplemented with the ongoing benefits we are achieving from our strategic initiatives, translated into exceptional 2Q results for Cinemark across our entire global circuit. We sustained our market share advances in excess of 100 basis points compared to pre-pandemic levels. Our box office results meaningfully outpaced industry performance year over year. And while our worldwide attendance trailed 2019 by 20%, we delivered the second highest quarterly adjusted EBITDA in our company's history, bested only by the second quarter of 2019, which included Avengers Endgame, Aladdin, and Toy Story 4. Furthermore, our second quarter adjusted EBITDA margin of 24.6%, was within 100 basis points of 2Q19 and amongst our highest margin results of all time. In addition to second quarter content mix that resonated especially well across our global circuit, our strong results are a direct byproduct of the focused efforts our sensational team has pursued to enhance the top notch experience and service we provide our guests, to drive increased moviegoing frequency while expanding our audience base through more sophisticated marketing techniques, loyalty programs, and showtime planning, to grow concession consumption through expanded offerings, enhanced sales channels, and category management optimization, and to gain incremental operating efficiency through labor and cost management initiatives. A few examples include our continued expansion of premium offerings with recliners that now span almost 70% of our domestic circuit, premium large format auditoriums, which represented approximately 5% of our worldwide screens and drove over 14% of our box office in the quarter, and D-box motion seats, which delivered a 65% increase in revenue year over year. We also continue to strengthen our ability to increase awareness of upcoming events, drive interest in seeing them, and improve conversion into ticket sales. In the second quarter alone, we generated over 2 billion marketing impressions through our actions to further enhance and leverage our omnichannel digital communication platforms. Likewise, the persevering appeal of our global loyalty programs, including our industry-leading subscription program, Movie Club, continue to drive meaningful box office upside. Movie Club now exceeds 1.2 million members and accounted for 24% of our domestic box office in the quarter. Importantly, customer satisfaction with Movie Club remains in excess of 95%, and we continue to find the program drives increased movie-going frequency and food and beverage consumption. We're also benefiting from a wide range of additional food and beverage initiatives that we've been pursuing to increase purchase incidents and overall concessions revenues. Such initiatives include strategic pricing actions, growing and optimizing the portfolio of products we offer, and simplifying the purchase process through streamlined lobby designs, self-service capabilities, and our online mobile ordering platforms. Through the successful execution of these initiatives, we have grown our worldwide per cap 35% compared to the second quarter of 2019. Finally, we continue to make significant advances in our operating hours and workforce management practices. These advancements have yielded meaningful labor efficiencies as a result of actions that include enhancing feeder-level demand forecasting capabilities, introducing more sophisticated staffing tools and techniques, simplifying and or automating varied administrative routines, and improving our ability to actively scale operating hours and labor needs based on attendance dynamics. I'd like to thank our entire Global Cinemark team for all the tremendous impact they have made strengthening our company over the past few years, which enabled us to fully capitalize on the second quarter's rebound in film product. I'd also like to commend our studio and creative partners for continuing to produce such diverse and compelling content that provides something for everyone to enjoy in our theaters. While the second quarter and this past month of July provide additional positive steps in moviegoing recovery, as we look ahead, we are cognizant that the potential impact on product flow from Hollywood's ongoing SAG-AFTRA and WGA strikes are top of mind for our investment community. The evolution of these strikes is something we are watching closely, and their degree of impact on near-term film volume and box office will ultimately depend on how long negotiations progress. We certainly remain hopeful for a timely resolution, not only with regard to implications for the theatrical exhibition industry and our studio partners, but also for the sake of the many individuals within the extensive creative community who are directly affected by this work stoppage. While the strikes are currently delaying the production of new films, and they have the potential to shift certain movie releases which could extend the recovery trajectory of theatrical film volume a bit, it's important to recognize that there has been nothing to suggest that they will affect key fundamentals associated with consumer interest in moviegoing or studio intentions to rebuild overall theatrical film output over the coming years. I've already commented on the strength and resilience of theatrical moviegoing based on box office results generated over the past two years as compelling content returned to the big screen. Considering this positive recovery to date has been achieved on the heels of a major global health crisis that was accompanied by a significant ramp-up of in-home streaming platforms, we have high confidence that consumer demand for theatrical experiences will remain strong even during periods of fluctuation in film product flow. We've also received no indications from our traditional studio partners that they intend to alter their plans for scaling theatrical film volume back to pre-pandemic levels. Furthermore, as we mentioned on prior calls, Amazon and Apple are now expressing intentions to scale theatrical film production over the next few years to levels that are comparable with the major studios. Amazon already had tremendous success with the release of Creed III and Air this year, and Apple will release two epic films in the fourth quarter with Martin Scorsese's Killers of the Flower Moon and Ridley Scott's Napoleon. Apple also recently announced plans to release its third major theatrical title early next year with the spy thriller Argyle. Emerging genres of content in the form of faith-based, multicultural, and anime and concerts are also scaling up. These types of films contributed 7% of our box office in the first half of 2023, and we remain optimistic about their potential for further growth ahead. The reason why our traditional studio partners, streamers, and alternative content providers are fully leaning into theaters is their data and analysis continue to show that the best way to maximize value for these types of filmed entertainment assets is with an exclusive theatrical release. Furthermore, a theatrical release also drives material upside for subsequent distribution channels, including streaming platforms. Confirmation of these findings have been publicly communicated multiple times by the majority of the major media companies and they continue to be reaffirmed in our direct discussions with our content partners. In addition to providing a premium viewing experience that is important to consumers, filmmakers, and talent, A theatrical release provides tremendous promotional and financial impact by eventizing movies and increasing their perceived quality. Doing so heightens awareness of and interest to see films and all forms of content, strengthening long-term recall value. Furthermore, experiencing content in a shared, larger-than-life cinematic environment produces an elevated degree of energy and engagement that forms stronger emotional connections with stories and characters. These connections help build larger brands, bigger franchises, and more significant cultural moments. Again, just look at the cultural frenzy that is currently underway with Barbie and Oppenheimer. For all of these reasons, as we consider prospects for the recovery of new film releases, as well as varied forms of content over the next two to three years, we continue to believe there is a high potential for overall volume to return to if not exceed, pre-pandemic levels. In the meantime, Cinemark is well-situated to confront any ongoing fluctuations in content flow on account of our solid financial and operating foundation, the disciplined way we approach capital allocation, including the prudent steps we've already taken to refortify our balance sheet, the varied enhancements we've made to our operating practices that have improved our agility and ability to scale and flex in a dynamic landscape, and the many ongoing initiatives and opportunities we continue to pursue to drive further revenue and productivity benefits. The actions we've taken to strengthen our company have enabled us to generate positive adjusted EBITDA every quarter throughout all of the ups and downs over the past two years, and they were a key driver of our robust 2Q23 results. Furthermore, we believe the benefits of these actions, along with our ongoing strategic initiatives, will continue to enable us to effectively navigate periods of variability while positioning Cinemark to capture an outsized portion of our industry's ongoing recovery and deliver long-term growth in shareholder value. Melissa will now provide further information on our second quarter results. Melissa?