Cinemark Holdings Inc.

Hello, and welcome to the Cinemark Holdings fourth quarter 2023 earnings call and webcast. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Chanda Brashears, Senior Vice President, Investor Relations. Please go ahead.

Good morning, everyone. I would like to welcome you to Cinemark Holding, Inc.' 's fourth quarter and full year 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 annual report on Form 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, 10-K, 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 fourth quarter and full year 2023 earnings call. 2023 represented another year of meaningful post-pandemic progression for our industry and our company. And I thought I'd start today's call by providing a summary of the significant achievements we made advancing our key priorities throughout the year. First and foremost, we continue to effectively navigate the fluid dynamics of our industry's ongoing recovery, putting an emphasis on near-term revenue and margin generation, strengthening our balance sheet, and actively maneuvering through varied fluctuations in film release volume, as well as inflationary cost pressures. Once again, I'm pleased to share that our phenomenal Cinemark team produced sensational results across all of these focal points. For the full year 2023, we entertained 210 million guests worldwide and generated $3.1 billion of revenue that was up 25% year-over-year and included our highest concession sales of all time, which were 3% higher than 2019. Our adjusted EBITDA grew 77% from 2022 to $594 million with a 19.4% margin rate that represented 570 basis points of margin expansion. Moreover, During the year, we delivered our second-highest quarterly adjusted EBITDA in the history of our company in 2Q and our highest third-quarter adjusted EBITDA in 3Q. In total, our 2023 adjusted EBITDA recovered to within 20% of 2019 on 25% less attendance, a clear sign that our many ongoing strategic growth and productivity initiatives are delivering significant impact. Furthermore, our strong operating results yielded free cash flow of $295 million with positive full-year net cash generation of $175 million after paying down more than $100 million of COVID-related debt. In addition to outstanding operational execution and sound financial discipline throughout the year, These tremendous results also benefited from our continued drive to expand content and build audiences through marketing actions, loyalty programs, pursuit of new content sources, and heightened guest service standards. Throughout 2023, we strengthened and took full advantage of our extensive marketing and communication reach, amassing more than 8 billion media impressions, increasing web and app traffic over 30%, doubling audience engagement on social media and growing our global addressable customer base to nearly 30 million consumers while enhancing personalization. We also continue to advance our global loyalty programs, increasing membership by nearly 20% in the U.S. and by more than 45% in Latin America. Furthermore, Movie Club, our paid U.S. subscription tier, grew 13% during the year to over 1.2 million members as moviegoers continue to highly value and embrace the meaningful benefits included in this program. During the year, Movie Club drove 24% of our domestic box office, and our data continues to demonstrate that the program stimulates increased moviegoing frequency and food and beverage consumption. In tandem with our marketing and loyalty actions, we continued to actively collaborate with our traditional studio partners to drive the successful releases of their films, while also working closely with Amazon, Apple, and an increasing number of non-traditional content creators to help establish and grow their foothold within theaters. To that end, we were thrilled to see North American industry box office grow to $9.1 billion in 2023, driven by a diverse array of studio hits, including Barbie, Super Mario Brothers, Spider-Man Across the Spider-Verse, Guardians of the Galaxy 3, and Oppenheimer, to name just a few. Furthermore, Amazon and Apple collectively generated almost half a billion dollars of domestic box office last year, which was also a highly encouraging sign, considering they are still in the early stages of their theatrical distribution expansions. Also encouraging was 2023's wide range of record-breaking international, concert, and faith-based films that approached three quarters of a billion dollars of North American box office and included the remarkable successes of Taylor Swift's The Heiress Tour and Sound of Freedom. For Cinemark, Non-traditional content accounted for 14% of our U.S. admissions revenues during the year as we worked aggressively to pursue these supplemental box office opportunities and maximize their overall revenue potential. Of course, as we focus on growing the number of guests we bring into our theaters, it's essential that we provide them an exceptional entertainment experience when they join us. As such, we spent a considerable amount of effort in 2023 further enhancing and executing our guest service protocols, as well as sustaining our industry-leading 99.97% screen-up time to avoid viewing disruptions. We also continue to advance our company-wide rebranding initiative, modernizing our messaging strategy and overall aesthetics to strengthen the differentiated experience we provide our audiences. Altogether, our collective efforts to delight our guests and grow our audiences, earned us guest satisfaction scores over 95%, helped sustain our market share gains that continue to exceed our pre-pandemic results by more than 100 basis points, and delivered box office results that surpassed industry recovery relative to 2019 by 700 basis points domestically and 600 basis points internationally. Combined with the effective navigation of our industry's ongoing recovery and the benefits we gained from our focus on expanding content and building audiences, another key contributor to our 2023 results is all the work we've pursued over the past few years to evolve Cinemark for future success. This work includes further enhancing the immersive cinematic experiences we provide our guests, growing new and diversified revenue streams, driving productivity gains, and optimizing our circuit. Impact derived from actions in all of these areas provided substantial upside in 2023. And during the year, we continue to advance new and existing initiatives to drive even further growth and market leadership going forward. While staying disciplined with overall capital management, We leaned further into premium amenities during 2023, which continue to resonate exceptionally well with a growing range of moviegoers. To start, recliners continue to be a significant driver of box office outperformance, and with nearly 70% of our U.S. circuit reclined, we remain the most penetrated major exhibitor featuring this highly sought-after amenity. Over the course of the year, we also grew our D-Box motion seat footprint by 16%, generating all-time high DBOX admission revenues that were up 87% compared to 2019. Similarly, we delivered record-high XD revenues that increased 13% versus 2019, as XD remains the number one exhibitor-branded premium large format in the world. And we continued to enhance our unmatched presentation quality, extending Barco laser projectors to nearly 15% of our theaters worldwide, as we progress toward converting our entire global circuit to laser technology over time. We also continue to drive significant growth and enhancement of our concessions offerings during 2023 as evidenced by our all-time high food and beverage sales and per caps. In addition to expanding the variety of selections we provide consumers, including new menu options and movie-themed merchandise, we further improve distribution as well. For example, we introduced new space management layouts across a range of our theaters that increased product assortments and speed of service, driving incremental purchase incidents. We also continued to advance our mobile ordering platform and realized a 32% year-over-year increase in online concession sales. Furthermore, we became the first major U.S. exhibitor to partner with all three of the largest third-party delivery platforms, DoorDash, Uber Eats, and Grubhub, as we aim to further extend the reach of our concession sales beyond our theaters. Pricing sophistication is another area we continue to actively develop as we aim to maximize attendance, box office, and concession sales while leaving our guests feeling satisfied with the overall value they received. To strengthen our assessment and calibration of consumer elasticity at a theater-by-theater level in the midst of evolving macroeconomic and competitive developments, we've been increasing the number of resources, tools, and data-driven insights we use. The process improvements we have made to date are already helping us fine-tune our pricing strategies with enhanced results, which we expect will continue ramping up as we further develop these capabilities. Likewise, the continuous improvement productivity-related initiatives we've been pursuing are also yielding sizable bottom-line benefits. Examples include our ongoing actions to enhance operating hour windows, showtime scheduling, training efficiency, procurement strategies, and overall labor practices. For instance, as a direct result of our varied workforce management projects, we managed to hold salaries and wages growth to only 8% in 2023, despite a 22% year-over-year increase in attendance, ongoing wage rate pressures, and staggered fluctuations in volume throughout the year. Finally, we took a variety of steps during 2023 to further optimize our circuit. In addition to expanding premium amenities, as I previously mentioned, we also added four new feeders through a management deal with EPR Properties, our largest landlord. We closed 10 low-performing feeders that will provide bottom-line improvement going forward, and we opportunistically exited our non-strategic business in Ecuador, where we were a distant third player after receiving an attractive, unsolicited offer. At the same time, seeing a growing number of opportunities on the horizon, we reactivated our new build development pipeline and added a new family entertainment center concept to our array of feeder designs, with plans to open two of these new concepts by the end of this year. So in summary, 2023 was a highly successful year for Cinemark, with the significant results we delivered amidst another period of fluid market dynamics, the growth we derived from expanding new sources of content and building audiences, and the further advances we made to position our company for future success. It was also a meaningful year for theatrical exhibition as a whole as positive indicators pertaining to the key fundamentals that drive our industry, specifically consumer trends and product flow, were further reinforced. Sustained consumer enthusiasm for shared, larger-than-life cinematic experiences was validated again and again throughout 2023. As more films were released, more records were achieved, and North American box office grew 21% year-over-year. Action, family, horror, spectacle, adult drama, rom-com, concerts, faith-based foreign films— 2023 was propelled by a diverse range of content across all demographics of moviegoers during all times of the year. In fact, as we've examined our Cinemark data, we've observed that audience mix over the past two years, film by film, as well as overall, mirrors pre-pandemic patterns. During 2023, film volume grew to 110 wide releases and reached 85% of pre-pandemic levels. up from 65% in 2022. This favorable growth in film product is the result of studio efforts to rebuild their slates back to historic levels of output after having measured and publicly referenced the enhanced benefits that a theatrical release provides their film assets and their companies. These benefits include elevating promotional impact that increases awareness, interest, and recall, strengthening performance on downstream distribution channels, including streaming platforms, boosting overall financial results and library value, and satiating consumer and talent demand to see these films on the big screen. And while six months of work stoppage associated with the Hollywood strikes will likely cause a dip in wide releases to approximately 95 titles in 2024, an estimated 75% of pre-pandemic levels, We expect film volume in 2025 will quickly spring back to the recovery glide path it's been on over the past two years, notching another step closer to pre-pandemic levels based on current production activity and expressed plans at the major studios. This expectation is further supported by Amazon's and Apple's stated ambitions to continue scaling their theatrical film slates, as well as the encouraging trends we've recently witnessed in non-traditional content growth. As film volume rebounds once again, Cinemark remains in the most advantaged position to capitalize on that upside on account of our solid foundation and the myriad of actions we continue to pursue to further strengthen our company. So as we consider the fundamental drivers of our industry, our current market position, and the many opportunities before us, We remain highly optimistic about the future of our industry, and particularly, our company. I'll now turn the call over to Melissa, who will provide additional information on our fourth quarter results. Melissa?