Cinemark Holdings Inc.

Welcome to the Cinemark Holdings Inc. second quarter 2024 earnings call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Chanda Brashears, SVP of Investor Relations. Thank you. You may begin.

Good morning, everyone. I would like to welcome you to Cinemark Holding, Inc.' 's second quarter 2024 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 like to turn the call over to Sean Gamble.

Thank you, Chanda. Good morning, everyone. We appreciate you joining us today to discuss our second quarter 2024 results. During my prepared remarks this morning, I'm going to focus on three main topics. First, sustained consumer enthusiasm for immersive cinematic experiences. which continues to be validated by robust film performance and provides a positive long-term outlook for our industry, along with favorable forward-looking indicators related to wide release volume. Second, Cinemark's solid results this quarter that continued to outperform and were driven by the consistent and skilled operational execution of our sensational team, as well as the impact of our ongoing strategic actions to advance our business. And third, the overall strength of our company, operationally, financially, and competitively, which we believe positions us exceptionally well to deliver sustainable future growth, profitability, and shareholder value. To start, for the past three years now, we have witnessed example after example of outsized film performance across a diverse range of genres and non-traditional content that include a multitude of record-setting highs. These results provide a clear indication that consumer enthusiasm for elevated, larger-than-life theatrical experiences remains strong and vibrant when compelling titles are brought to the big screen and marketed effectively. This performance trend was widely apparent in the first quarter and continued to be evident during 2Q in July. For example, in April, the dystopian saga Civil War delivered A24's biggest opening weekend ever. Shortly thereafter, adult drama Challengers exceeded expectations, generating $50 million of domestic box office. And then at the beginning of May, action-adventure Kingdom of the Planet of the Apes delivered exceptional results, surpassing the full run of its preceding installment by more than 15%. The second quarter also included solid results from action comedy Bad Boys Ride or Die and suspense thriller A Quiet Place Day One, as well as a resurgence in family film volume, beginning with the heartwarming If in May that was followed by the Garfield movie the next weekend. And then in June, Inside Out 2 took family moviegoing to new heights with an astounding opening that blew away expectations and a strong continued run that recently made it the highest grossing animated film of all time, with over $615 million domestically, and more than $1.5 billion worldwide so far. With a steadier cadence of theatrical releases over the past month, movie-going momentum escalated during the second quarter and has continued to build in 3Q. Along with the ongoing playthrough of Inside Out 2, July kicked off with the fantastic opening of yet another family film, Despicable Me 4, which has already eclipsed $675 million globally and is still growing. Additionally, over the course of July, horror film Long Legs became a breakout hit, grossing more than $60 million domestically to date and yielding indie label Neon's biggest title ever. Action thriller Twisters created a storm at the box office, stirring up more than $80 million in its domestic debut, which exceeded most industry opening weekend estimates by over 50%. And this past weekend, Disney and Marvel's highly anticipated release, of superhero adventure Deadpool and Wolverine just tore up the box office, becoming the biggest R-rated opening ever with over $210 million domestically and more than $440 million globally. It produced the highest domestic July opening of all time for our industry, and for Cinemark, it delivered the biggest summer opening in the history of our company. So individual title performance across all categories of films continues to demonstrate that consumer enthusiasm to view compelling content in theaters has been undeterred, even confronted by the temporary drag and fluctuations in theatrical release volume caused first by the pandemic and then last year's strikes in Hollywood. We were thrilled to see how robust consumer enthusiasm drove second quarter North American industry box office to nearly $2 billion that was well ahead of our internal projections, and how it has continued to generate strong third quarter results to date as the scale of this year's films has started turning the corner in the second half. Furthermore, we remain highly optimistic about the ongoing rebound of theatrical release volume back toward pre-pandemic levels over the next couple of years based on our continued discussions with our traditional studio partners, the further expansion into theatrical exhibition of growing studios like Amazon and Apple, and the increasing success of non-traditional content. Next, I'd like to comment on Cinemark's second quarter results. As strong consumer moviegoing demand produced a plethora of outperforming films during the quarter and propelled overall industry box office meaningfully beyond our expectations, at Cinemark, we once again extended our lengthy track record of outsized results. Notably, Our second quarter box office performance far outpaced our industry and peers, exceeding year-over-year industry results by more than 300 basis points, both domestically and in Latin America. Moreover, compared to 2Q19, our box office recovery in the second quarter was even further pronounced and surpassed the industry by nearly 1,000 basis points domestically and 500 basis points internationally. Our strong box office outperformance coupled with disciplined expense control and agile management of the quarter's dynamic volume fluctuations, yielded strong bottom-line results, even facing strike-induced headwinds that caused a 22% decline in year-over-year attendance. During the quarter, we delivered $142 million of adjusted EBITDA with a 19.4% adjusted EBITDA margin and $161 million of free cash flow. Our impressive second quarter results were amplified by the impact of our many ongoing initiatives to build audiences, grow new sources of revenue, and hone our industry-leading operating capabilities. Additionally, our results also benefited from film content mix that skewed particularly well across our global circuit, as well as minimal seating capacity constraints due to the reduced volume of film releases and associated attendance levels. Some examples of impactful drivers that helped elevate our results during the quarter and were derived from our many ongoing strategic initiatives include the following. We continued to earn high satisfaction ratings from approximately 95% of our guests surveyed in the U.S. due to our heightened levels of guest service. We further expanded the reach of our extensive and loyal customer base, growing our movie club membership 10% since our last update to over 1.3 million subscribers. We generated almost 10% of our domestic box office through non-traditional content by continuing to actively pursue emerging categories of films such as anime, multicultural titles, and faith-based releases. Through rigorous planning and execution, we also improved labor efficiencies while increasing the number of show times we offer per theater per day despite operating with fewer overall hours. And we achieved our highest domestic food and beverage per capita ever $7.95 through the continued enhancement of our concession offerings, pricing strategies, purchasing platforms, and space management. So again, we are thrilled with the results we were able to deliver in the quarter and believe they are a direct reflection of the significant impact we have made and continue to make advancing our company. And that brings me to my third topic, which is the overall strength of Cinemark. As we highlighted last quarter, following many years of strategic capital deployment, as well as actions to enhance our operating capabilities and the experience we provide our guests, we believe that Cinemark maintains an advantaged market position and is uniquely situated to grow and prosper as we move forward. First and foremost, the strength and stability of our global team is unparalleled and a key differentiator for our company with domain expertise, resourcefulness, creativity, and determination that is second to none. Furthermore, in addition to our extensive and loyal customer base, as well as our industry leading feeder management practices that I already mentioned, we continue to benefit from the sustained investments we have made over time to develop and maintain the largest collection of high quality assets in our markets. For instance, over the past decade, We have invested more than $675 million in high return recliner conversions, resulting in the most extensive domestic recliner penetration of all major exhibitors at nearly 70% circuit wide. We have built Cinemark XD into the largest exhibitor branded premium large format in the world, with nearly 300 XD auditoriums across the US and Latin America. And in the second quarter alone, while XD represented only 5% of our global screens, It generated 13% of our total company box office, which was up 300 basis points compared to 2Q19. We have also developed the largest footprint of D-Box motion seats in the world that now extends across 365 auditoriums globally with associated revenue growth of 75% since the pandemic. Our circuit has long been regarded as having the leading sight, sound, and overall presentation quality in the business, including our best-in-class Xenon projection technology, And we continue to raise that standard to the next level with our ongoing rollout of Barco projectors, Barco laser projectors. And with the exception of 2020 through 2022, we have historically spent approximately 80 to a hundred million dollars of CapEx per year to maintain the overall condition of our theaters, which is far beyond our major peers on a per theater basis. We also have a distinctive global footprint that we continue to optimize. Since the pandemic, we have exited approximately 70 lower performing theaters and over the past year alone we renegotiated a series of ongoing lease arrangements that yielded approximately $10 million of annual rent savings. At the same time, we've opened 16 new theaters that are collectively performing well beyond the pro forma targets we established prior to the pandemic. In North America, we continue to consistently generate the number one or number two box office results in 21 of our top 25 markets with the highest attendance per screen of the leading exhibitors. And across Latin America, we are the industry leader with over 25% market share. As a result of our many strategic initiatives and our long history of disciplined capital management, Cinemark also maintains a solid financial position. We consistently deliver industry-leading adjusted EBITDA and free cash flow, as was apparent once again in our second quarter results. And Melissa will comment in a moment about the further steps we made during 2Q to further re-fortify our balance sheet. So we believe Cinemark is in great shape, possesses a wide range of distinctive advantages, and is well-positioned to thrive in the years to come. I will now pass the call over to Melissa, who will share more information about this quarter's results. Melissa?