Good morning ladies and gentlemen, thank you for standing by and welcome to the Cinemark's First Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chanda Brashears, 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 first quarter 2020 earnings release conference call hosted by Mark Zoradi, Chief Executive Officer; and Sean Gamble, Chief Financial Officer and Chief Operating Officer. Given the extraordinary circumstances with a reduced workforce and work-from-home policy to protect our employees and their families, we opted to rely upon the relief provided by the SEC and delay the filing of our first quarter results as disclosed in the 8-K filed May 8. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, certain matters that are discussed 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 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, at investors.cinemark.com. I would now like to turn the call over to Mark Zoradi.

Thank you, Chanda. And good morning, everyone. We appreciate you joining us to discuss our 2020 first quarter earnings result on this virtual call. Chanda, Sean, and myself are all at unique locations this morning. Before beginning with my formal comments, I felt compelled to note all that we, as a society are enduring with numerous crisis simultaneously, a global pandemic, dramatic economic downturn, unemployment rates mounting to historic levels, and social upheaval sparked by racial justice is a most challenging time, and I sincerely hope we are able to find a path forward as a united country and people. Given the extraordinary circumstances associated with the impact of the global COVID-19 pandemic, we are modifying the standard format of our earnings call. Rather than providing a detailed summary of our first quarter results as well as an update on our key strategic initiatives, our prepared commentary on these topics will be abbreviated. Instead, we will concentrate on our liquidity position as well as our plans to reopen our theaters before we turn to Q&A. The social and economic effects of COVID-19 have been widespread and hard hitting in our industry like many others that have been especially impacted. For context through February, the North American industry box office was up more than 7% quarter-to-date compared to the same period last year driven by strong performances from Bad Boys for Life, 1917, Sonic The Hedgehog, and Jumanji: The Next Level. However, the severity of COVID-19 increased throughout the month of March, which resulted in a complete shutdown of the industry by mid-month. Box office rapidly declined, and the quarter ended down 25%. One positive detail we felt worth highlighting is that Cinemark modestly surpassed the industry box office performance by 20 basis points, which is an impressive feat given our comparison of 450 basis points outperformance in the prior period. We've now extended our trend to over-indexing 40 of the past 45 quarters. Cinemark’s consistency has been the cornerstone of our performance over the years. Consistency in terms of our financial results, balance sheet strength, operational and strategic execution, capital allocation strategy, and highly experienced management team. Our ability to deliver in these areas year after year in varied economic climates gives me confidence in our ability to continue to excel even as we adapt to an evolving landscape. Sean will now walk you through our first quarter results and liquidity position with a bit more specificity before turning it back over to me to cover our reopening plans. Sean?

Thank you, Mark. Good morning, everyone. As Mark indicated, the COVID-19 pandemic has had a dramatic impact on our industry and has materially affected Cinemark. As a result of the crisis, we temporarily closed all of our domestic theaters on March 17, followed by our Latin American theaters the next day. These closures created a significant drag on our first quarter results with a sizeable distortion to all associated financial metrics and they continue to impact our business today. Ahead of the crisis, our financial performance was tracking exceptionally well driven by our continuous improvement program and our various strategic initiatives on relatively flat attendance. February year-to-date total worldwide revenue was up 5%, adjusted EBITDA had increased approximately 16%, and our adjusted EBITDA margin had expanded by nearly 200 basis points compared to the same timeframe in 2019. Unfortunately, however, the effects of the crisis in March were severe. We estimate that COVID-19 adversely impacted our first quarter adjusted EBITDA by almost $90 million. The crisis also drove a heightened level of long-lived asset impairments on account of near term cash flow implications and depressed earnings per share by approximately $0.70. Furthermore, it negatively impacted our first quarter’s cash flow by more than $140 million. As we discussed during our investor call on April 15, we took swift action to rein in expenses and manage liquidity as the implications of COVID-19 became clearer and the likelihood of closing our theaters became more probable. While several actions, such as delaying various payments and drawing down $98.8 million of our revolving credit facility, benefited first quarter liquidity and helped to offset the drag on cash caused by COVID-19, the impact of the majority of our actions began to take effect in the second quarter. All told, we ended the first quarter with…

Thank you, Sean. It clearly goes without saying that we are thrilled to have turned the corner from having our theaters closed to actively preparing for them to reopen. As we do so, there are several important considerations that we're diligently assessing and factoring into our timeline and plans. These include the current status of the virus, the evolving restrictions imposed by governmental authorities, availability of new film content, new health and safety protocols and consumer confidence and willingness to return to the theaters. We are working within these parameters and utilizing consumer research to guide our decisions. You may have seen media coverage of a recent survey conducted by EDO, a leading data and analytics company used by the major studios and other entertainment clients, in which consumers were asked about their likelihood to return to theaters in July. It's noteworthy that respondent's likelihood increased from 40% to 75% when proper safety measures were implemented. With that in mind, we have been intensely focused on developing enhanced health and safety protocols, understanding that these factors will weigh heavily on the confidence and peace of mind of our employees, guests and community as we reopen our theaters. Examples of actions we are taking include: increasing our already stringent cleaning and sanitation measures to levels that meet or exceed the CDC and World Health Organization guidelines; minimizing physical distance at the box office and concession stand along with the installation of plexiglass screens to create additional separation; frequently and thoroughly disinfecting all high touch areas; disinfecting seats every morning and again before each showtime with products identified by the EPA to effective – to be effective in eliminating COVID-19; providing ample amounts of hand and seat sanitizer supplies for our guests; screening the health and wellbeing of our employees before each…

[Operator Instructions] Your first question is from the line of Eric Handler with MKM Partners.

Thanks. Thanks and good morning. Mark, a couple of questions for you. First, I wonder if you could maybe outline what's in your four phases for reopening between June 19 and July 10. And also what gives you confidence that Tenet is the first big movie to launch out of Hollywood? What gives you confidence that New York and LA are going to be ready and Warner Bros. will be willing to roll out that movie at that time? And I've got a follow-up question.

Thank you, Eric. Let me deal with the first part. As I mentioned, a four phase. The first phase is a five-theater test phase in and around the DFW Area close to our headquarters and service center, just to make sure we've got all of our systems in place. Everything was working technically, all of our operational and health and safety protocols are operating as planned. So that's a five – that's a one-week, five theater test. Then, the following week, we will open up approximately one third of our theaters. Those will be generally in the larger theaters in larger markets. And then we'll open up one third of the theaters in the following week, and then the final third we'll all be open by July 10. And by doing so, we will have all of our theaters open with lots of tests and opportunities to test out all of our systems. We will have significant amount of promotion with welcome back pricing. Welcome back pricing not only on tickets but also on concessions, big pushes relative to Movie Club, and we'll have everything up and running in those four weeks leading up to Tenet. Regarding your question on Tenet, we have been in close contact with Warner Bros. They remain extremely optimistic and positive as well – as well does Chris Nolan about the July 17 opening. I mean, it does go without saying, and Warner Bros. is clear about this too. Of course, it depends upon a continued positive movement relative to the decline of COVID-19 and the government restrictions being reduced across the country. We do expect that most Counties and States will have relaxed their requirements and allow theaters to open up somewhere close to, if not a full 50%. We're confident that we can…

Great. And just as a follow-up, you said you've been in contact with your movie club members and other people that attend your theaters. I'm just curious, have you been conducting proprietary surveys and maybe some of the results you could – share some of the results you're getting from those surveys about consumers' willingness to return?

We are talking to our consumers and doing it on a regular basis. There is no proprietary research at this point that we're prepared to share with you. But I can say that the key thing that we see in every piece of research, whether it's the research that we're doing ourselves or the industry research, which has been done. There has been multiple pieces of research from various companies. The key thing that comes out every single time is the consumer wants to come back to the movies and to the extent that they feel confident in the health and safety protocols that we put in place, it tremendously increases their likelihood and willingness to come back. So it's really – it's really two things. One, do people feel safe to come back, and by putting all these protocols in place, and it's why we spent so much time and effort and being very diligent and, now we're going to communicate it very clearly because we know that's key for the consumer, that along with great movies. And we know we have great movies coming, so our part right now is to; number one, plan the health and safety protocols; number two, to execute them; number three, to communicate them properly to the consumer.

Great. Thank you very much.

Thank you, Eric.

Your next question is from the line of Alexia Quadrani with JP Morgan.

Thank you. I had a couple of questions I wanted to follow-up on the previous question about Warner Bros. and Tenet’s release. I know you can't speak for Warner Bros. but just in your – in your experience in this industry, which I know is very extensive, is it fair to say it gets harder and harder to push out the date? You know, when you get further into the marketing process, meaning spending a lot in P&A, and can we take some assurance that the more sort of advertising we're seeing and the closer we get them, the less likely it is for them to move it? So that's my first follow-up. And then I’m just wondering if you – if there's any way you're sort of incentivizing guests into pricing, and I'd love to hear thoughts generally on pricing and new ways of changing to kind of get demand spread out throughout the week and not just on the weekends when you reopen?

Alexia relative to Warner Bros., I am glad you recognize that obviously I can't speak to Warner Bros., but they have been consistent in very much wanting to do this as has Chris Nolan from a director and writer standpoint. Yes, the marketing budgets and marketing spends are critical and absolutely Warner Bros. is thinking about that. So, there's going to come a time where they've got to push their button and say, we're going to go spend hard media to start promoting this. One of the things that – the most recent thing they've done already mentioned, which was the trailer drop, which was very key. And so, they will make that decision absolutely somewhere in the not distant future. Again, I can't speak for them, but it's clearly going to be during the month of June. It's probably going to be during somewhere before late June. But not speaking for them, that's likely in their thinking because they've got work to do in terms of actually putting paid media behind the social and publicity media that they're currently doing. And again what's critical to us is that we are planning on the 17th because you've got to pick a date in the sand that makes sense. You put your Tent-pole down there, we've done that, Warner Bros. has done that, but we've done it in such a way that if in fact they believe they have to change, which they given us no indication to as of today, we will be prepared to make that change and adjustment along the way, and it will not be a devastating change or adjustment for us. It would be something that we actually anticipated could happen in our planning. And the second part of the question was about pricing. We're going to have very attractive pricing coming back to the cinema. We're going to do $5 for adults and $3 for children for all of the library product. So we're very excited about that. We're also going to have highly discounted concession offers as well. So we're doing a big welcome back campaign, both ourselves – ourselves at Cinemark, as well as the industry and when consumers return to first-run product, we will return to standard pricing. I think you likely know Alexia that Cinemark has always been a relatively conservative on pricing. Our average ticket price across the circuit in the U.S. is under $9. A Movie Club member can come to the cinema anytime Friday Night, Saturday Night highest costs for $10. So we've been very careful to continue to make movie going an affordable out of home entertainment. So we don't anticipate either price increase or decrease with first-run product when we come back with that first-run product.

Thank you very much.

Your next question is from the line of Chad Beynon with Macquarie.

Good morning. Thanks for taking my question, and congrats on the market share in the strong margins before – before the shutdown. Wanted to focus on that, Sean, I guess related to the continuous improvement plan, given – given the margins that you put up in January and February, is it safe to assume that that the plan was kind of trending on track with what you originally talked about? I believe on – on the last quarter call? And then related to that, is – is $40 million still an achievable number in kind of a normal environment? Thanks.

Sure. Thanks for the question, Chad. Yes. I mean, a big portion of that performance through February was on account of the progress we are making with the continuous improvement program. Through February year-to-date, we were actually pacing well ahead of our target for both for February year-to-date, as well as just for the overall $40 million margin improvement that we were going after for the year. We're current as mentioned – we're currently accelerating many of those efforts that were already underway as we re-assess the business. I think going forward there's – there's, it's going to get a little bit challenging to kind of discern what's continuous improvement versus what's perhaps process restructuring. But I would say based on some of the actions we already see and some of the potential opportunities we've already identified over the last few months, likely the overall impact will probably be a bit higher in total than even what we were originally targeting.

Okay. And then on the $140 million free cash flow impact to the quarter that you called out in your prepared remarks, will – was there an imbalance between payments and receivables? That was just a little bit more than, that what we're thinking? And as your cash burned still similar to what you – what you outlined on that continuous or on the business call last month? Thanks.

Sure. Yes. Chad, just answering that second question first; the cast runway is pretty much in line with what we had communicated back in April. So there's really not a material change in that projection. As far as the $140 million impact on cash flow that I mentioned really, the biggest driver was the flow through of EBITDA and then on top of that from a working capital standpoint really the additional large driver was just the lack of collection of admissions revenues that we had through most of the month of March. So, particularly the last two weeks when we’re closed and that created a significant drag just on working capital. And we pursued a range of other payment actions to offset that to both – to help boost our cash position by the end of the quarter. But the driver of that $140 million was largely the EBITDA flow through and the impact of the lack of admissions revenue collections.

Okay. Thank you very much.

Thanks.

The next question is from the line of David Miller with Imperial Capital.

Hey guys. Can you, Sean, can you talk about, I'm curious on a couple of things, where – where were your admissions revenues domestically as of March 1? I'm just curious where things stood before. Obviously activity fell off a cliff? And I’ve a follow-up. Thanks.

Give me a second on that one. I think as of the end of February, I believe I'm going from, memory here. We see – we along with the industry we're about 7%, up – hold on a second – but I believe that's where, we're year-to-date we're collectively up about 7% heading into the crisis.

Okay. That sounds about right. And then where do you guys stand right now with rents? I mean, actual physical rents, not film rents, but where do you guys stand right now with rents with your landlords? Do you plan on paying any rent when you reopen and how should we model rent say in 2021 where, let's assume the crisis is over by then and you're going to have to remit what you did [indiscernible] landlords sometime in 2021. How should we model that?

David, let me – David limit – Sean, let me start and then I’m going to let you finish it up, if I could. David, our landlords we've contacted literally every single landlord and we have had successful negotiations with many of them for rent delays. And they've been very cooperative. We – some were for three months delay, some were six months, some were nine months, everyone was a different deal and negotiation. And most were willing to do some form of a deal with us, not everybody, but most were, but our real estate department has done a very, very good job and the paybacks on some of those – some of them will be towards the balance of this year, some of them will fall into 2021. There's not a specific schedule that we're going to be able to share with you on that. But let me just say that we've been able to effectively negotiate and work with our individual landlords across the Board. And we have not taken a position across in any kind of significant way. We said we're just not going to pay. Rather, we went into active discussions and negotiations with all of our landlords.

Okay. Sean, were you going to add something or?

Well, I think the Mark kind of – Mark kind of explained it. I mean, the specific modeling of cash associated that gets complicated because the shape of those negotiations takes all different kinds of forms a lot. I say a majority of the payments from discussions to-date have been shifted within year for 2020. There are some that have pushed into next year and dependent on kind of how things continue to progress with the status of openings and movement, those – there could be subsequent actions that are taken. So I guess it's hard to just give a kind of a simple answer on how to anticipate kind of the cash timing of that flowing through over the rest of this year and next year because it's a range of different results.

So let me just make sure I'm clear. So there are some scenarios around the country and you're not going to detail that, but there are a few scenarios where you will be open, but you will not have to pay any rent for 2020, but may have to pay a portion of that back in 2021. Is that the right way to think about it?

That's correct. A lot of the – there are all different kinds of deals. Some of the deals are just based on delayed timing. So there's kind of extended dates when they're due that aren't always connected to a reopening date.

Okay. Perfect. Thank you.

But for some – just to be clear, David because I know this from an accounting standpoint, what will reflect in our EBITDA on the P&L will be the full expenses for our rent expenses, even though the cash timing for paying those will vary from that. So what gets reflected in EBITDA on a go-forward basis, month-to-month, quarter-to-quarter will be the full rent amount that we're obligated to because we have to recognize that expense as it takes place.

Okay. Thank you.

Thanks, David.

Your next question is from the line of Meghan Durkin with Credit Suisse.

Hi, good morning guys. So I wanted to get a little bit more color on the way you'll be pricing. You talked about $5 for adults, $3 for children, but are you going to be adjusting the prices for the weekend so that you have drive more attendance into the weekdays since there's likely more demand on the weekends? I don't know if that's the expectation going forward. And then how do you expect the premium large format screens to be priced? Are you going to be trying to optimize for that?

Thank you, Megha. We decided that during our ramp up stage, when we're showing repertory library product leading up to unhinged and tenant that we're going to make it very simple for the consumer. Very simple marketing message, very attractive pricing, $5 for adults, $3 for children and seniors, no change on the weekend, just very simple. We don't think based on – on the research we've done that a $5 and $3 is going to keep anybody away. What is going to attract people to come is number one, the movie, and like I said, number two confidence that we've taken all the health and safety protocols. So no, so we made it very simple, very clear, easy consumer message, welcome back, and then did the same thing relative to concessions. And your second question was...

The premium large format screens will be priced...

And again – again, what we decided to do is make it very simple. So during library product, there's no incremental charge for XD as well. We believe that we will not have a capacity issue for the library product because; obviously these are movies that have been out there. They're available to people in multiple formats and have been for many years. So we're doing this just to get people comfortable in coming back to the cinemas and that's why the attractive pricing, and that's why the no up-charge for XD. Now, once Tenet and unhinged a released we will go back to normal pricing with normal up-charge for XD.

Got it. And do you believe that your theater staff is ready to come back? Are you in contact with them? Are they prepared?

Yes. You know, one of the things that we did, we did have to lay-off thousands of people. We did not lay-off our general managers and we also kept a second in our larger theaters as well. So each one of our general managers is still in place, they still remain in contact with their theater staff. We will have an expedited, easy hire back process for anybody that left Cinemark in good standing, which was the vast majority of our employees. So we'll be able to bring them back relatively quickly. And when – and when we start up at the beginning with library product, it's not going to be like, we're going to turn the switch and the theaters are going to be full. There's going to – this has been planned out so that there's a roll ramp up ability for both our staff and our employees. And that's why we decided to do this in a four week cycle to be able to bring everything back up instead of just trying to flip a switch and bring them all back at one day. And we were very confident in our General Managers with us. We have an outstanding group of General Managers. We've not lost our General Managers and they're prepared to bring back their Assistant Managers and hourly people and if necessary, hire – hire new people.

Got it. Thank you.

Your next question is from the line of Alan Gould with Loop Capital.

Thanks for taking my questions. I've got a few, first Mark, you mentioned in the opening remarks about having [indiscernible] assuming the governments will allow 50% capacity. I thought with six feet social distancing that theaters only were close to the 30% capacity. Are you expecting to be able to sell 50% of your seats?

Alan, that would be – that’s the maximum number of seats that we would be allowed to sell if in fact, that's in case, the case, but we can operate our theaters as we've indicated before very, very profitable even below that level. So and in the beginning, especially when you have, Tenet will be the single big movie on the 17th, we're going to have plenty of seats and we're going to have plenty of showtimes to be able to satisfy demand. What's – what's critical and which we're monitoring all the time is – all the time we're getting an additional State and additional county starting to relax their requirements. A perfect example is our home state, which is you know our second biggest state in the Union and that's Texas. Traditionally that's been for the last several weeks. The requirement there has been 25%. We fully expect that 25% to go to 50% sometime this week or next. And that's the indication that we're starting to get added to the government there. So – and we also expect that the vast majority of States and Counties will be at that 50% level by the time we open up Tenet on July 17th.

Okay. Second question is what’s your expectations be in terms of concessions per patron? Are you going to be able to have that pre-ordering is just the whole process? I know you're staggering movie opening times a little bit more, but with social distancing, should we expect the same amount of concessions for patrons?

I think we're going to focus on the core, as I said in the prepared remarks. So one good thing about focusing on the court is the margins are going to be higher, because those tend to be the highest margin concession items we have. They take the least amount of labor; they have the least amount of spoilage on them. We don't expect on day-one that our concession per caps will be at the same level, they were would close. First of all, we're going to do some significant price reductions – welcome back price reductions, during the month of June leading up to Tenet opening, again to encourage people to come back. So there'll be some level less than what we ended with in terms of per caps. But I think over time as we move into the third quarter and we start offering additional concession items that we will build back up to that per cap level, I think, initially it won't be there, but I think there's no reason as we continue to get more and more consumers in. And we bring back all the various items. Initially, we won't be selling Pizza Hut, but it won't be long, we are not talking about a half a year, we are talking about months and we're going to be backed up with Pizza Hut, and burgers and, the more complicated things to buy beyond Coke, candy, and pop corn. We will be offering limited alcoholic beverages as well in the beginning and then we'll expand that to the full level as time goes.

Okay. And then for Sean, you ended March 31 with $730 million of cash pro forma for the debt that you took on, I guess May 31 with $640 million. Is $45 million per month a good cash burn rate for us to assume?

That's a fairly safe assumption. I mean, we will fluctuate up and down a little bit just based on the timing of certain items such as our bond payments as an example that come in June, November, and December. But in general, we will probably be hovering around that level give or take a bit. That does not obviously include – that does not include any incremental ramp up costs to restart the business, as well.

Okay. And last question, Sean, I know your costs internationally are all in local currency. But the Brazilian real and the Argentine peso, Brazilian real and the Argentine peso continue to get weaker and weaker versus the dollar. Is there anything we have to worry about with covenants, or balance sheet items, or anything as the currency hit new lows?

We’re not concerned about the effect of those currencies on any covenants or anything, debt related. As we've said in the past, the majority of our activity in those countries, everything is transacted in local currency and they're fairly self sufficient. So, I mean the short answer is no, that's not a concern. The biggest concern for us is just simply the effect it has on the translation of their results back into U.S. dollars.

Okay. Thank you for taking my questions.

Thanks Alan.

Your next question is on the line of Jim Goss with Barrington Research.

Thanks. Mark, you've clearly thought out this plan very well. And I was wondering if everything went is close to perfectly executed and envisioned what would be the earliest month you feel you might be able to achieve sort of a normal type operating environment or at least the new normal. And how might that be different for domestic versus LatAm ops, is it the same several week lag?

Thanks for the question, Jim. There's clearly going to be a transition period in this because we've had so much product movement both within the year of 2020, also with a number of movies in 2020, getting pushed to 2021. And there has been production delays, where studios thought they were going to have movies done in 2021 that are going to get pushed to 2022. So, as we look at what's a new normal, we'll start to feel it towards the end of the fourth quarter and into the new year of 2021. But the reality is I don't think we're going to get into really a full on rhythm again, of product cycle and all that we had prior to COVID until 2022. And that's more production related than our operation related because as studios have had to adapt to not being able to actually do filming and do post-production, they've had to move their schedules. Therefore we're going to adapt as well. We think that 2021 is going to be a nice recovery year, obviously off of 2020, because we've been closed for so long and because some of the movies in 2021 came from 2020. But there's a longer tail to this as it relates to when do you get back to a new normal? I think we're going too operationally to get back to a new normal for us somewhere in the late fourth quarter into the first quarter of 2021. But from a pure industry product flow standpoint, I think, that's going to fall, I think, that tail is going to go into 2022.

Okay. And a couple of other things, one is you had provided a lot of encouraging statistics about your ability to operate fairly close to normal with the 50% limitation on seating capacity. Your theaters tend to be in suburban or smaller markets relative to a couple of the other bigger players. And I wonder if you do have some exposure in urban areas, LA, for example, where perhaps you might have more tendency to have sellouts all the time. What share of your mix might be more impacted by the 50% seating limitation than others? I assume that would be a bigger problem if you tend to sell-out more and what would be the impact on you?

Yes, Jim I don't have a stat for that off the top of my head, obviously. I mean, that would be something where we would have to go look at that specifically. But let me say just to give you some perspective. Our three strongest markets are the San Francisco Bay Area, Dallas and Houston. I mean, that's where, if you said, where is Cinemark the strongest in more urban areas? And we have a lot of theaters in each one of those places and a lot of screens. So the part that gives me confidence that we're going to be able to operate profitably. It is rare that a cinema would get even close to that on a weekly basis. So we're going to have the ability to spread out the consumer demand among a lot of screens and a lot of theaters in our urban environments. And to the extent that we see a problem on a Friday night or a Saturday night, I think, it won't be hard for us to make some midcourse corrections and try and do some things which would spread some of that demand into midweek. For example, we've already done that and we'll come back and do that as well with our Discount Tuesdays. Discount Tuesday is now the second most popular day – pre-closing it was our second most popular day of the week because we did strong variable pricing to bring people in there. If we see that we have a problem on a Friday or Saturday night, we could choose to do more of such tactics like that. So we're very aware of being careful relative to content. And I'm really confident, especially as we re-launch, we will not have a seat capacity issue simply because in the beginning we're going to have the third week of Unhinged with the first week of Tenet and the first week of Mulan. So there's plenty of room in our multiplexes to be able to satisfy the consumer demand, even on a weekend nights on that. And actually one really good thing too, is Mulan is going to play obviously to a somewhat different demographic than Tenet. There is going to be some crossover. But Mulan is going to have a very strong family component to it. And Tenet is going to have a very strong young male component to it. Not that they won't also have other demographics, but I'm just saying the primary. So we're confident at 50% that we're going to be able to operate. Plus there's every likelihood as time goes into the fall that the 50% can become 60%, it can become 75%. We're not going to operate at 50%, forever in a day; it's going to be for a period of time when we open. And then we're all going to see that relaxed as the months go forward.

Okay. Maybe one last thing, every crisis seems to create changes that linger and go on. I'm wondering if there are new protocols you are seeing that you're creating right now, do you think will change the way things are done in the future?

Well, I think, the answer to that is yes. I'll give you just a simple one. The way that we do our tickets in the theaters, we're going to adapt and change. We're effectively going to go to what airports do. So already a significant portion of our tickets are sold online and people are walking in with their smartphone and they have their ticket. Well, in the past, somebody would have to stop and get a printed ticket at a podium, or at a kiosk, and then utilize that printed ticket to get into the theater. As we reopened, that's no longer going to be the case. There'll be like an airline. If you bought your ticket online, it's on your phone, you just scan your phone and you walk in. So we're going to eliminate millions and millions of paper tickets, which will be obviously healthy in this environment because nobody is going to be touching and ripping those tickets. And it’s also going to be cost savings, because we're not going to be printing them anymore as well. So that's just one of the simple things that we've done. The second thing is we were already in process of putting protocols and testing in place for online concession orders. We think that that will be only more important into the future. So we're not going to open with a fully baked tested online concession ordering, but we're continuing to work towards that. So in the not too distant future, we'll be able to do so. And this crisis and everything around it has just confirmed to us that we need to continue to do so.

Okay, thank you very much.

Thank you, Jim.

Your next question is from the line of Ben Swinburne with Morgan Stanley.

Good morning. Mark when you look at your expectations for these films coming up over the next several months, I'm curious, do you expect them to underperform what they would have done pre COVID? I mean, maybe the answer is obvious, but I just trying to put ourselves in the position of the studios as they watch these films come out. And obviously they are very sensitive to box office results. They impact the downstream earnings of these movies. Based on what you know about consumer demand and sort of how you run your theaters in terms of capacity utilization, do you think there's going to be a material reduction in box office relative to how these come out in a “normal environment”?

I don't think so in a macro sense. It's hard to say exactly what consumer demand is. The studios haven't put these pictures on their traditional tracking yet that we have access to. But we have seen on our own social media, a big interest in seeing the first couple, in seeing Tenet, in seeing Mulan and Wonder Woman. So we expect there to be some significant consumer demand for it. And I don't think that the seating capacity is going to limit these people. I think that what the research has shown to us that one of the most important things we can do as an exhibitor is to provide a very consistent health and safety environment, and then to communicate that to the consumer. So I think that is very incumbent upon us to do that. And the research has clearly shown that consumers are much more willing and anxious to come back if they know that we have done all of these things. So that's why we've put so much effort and time in doing so. And we're about ready to begin the consumer campaign to communicate that to the consumer. But your overall question, do I think these movies are going to do less in this environment? I don't think there's an absolute reason for that to happen. I think it all comes back down to us creating a safe environment and the studios creating a very strong demand campaign. And thus far, it looks like what Warner's has been doing with Tenet has been very successful. And that particular audience is probably the first audience that's going to be willing to come back to the cinema. It's a four-quadrant movie, but there is no question that the young adult demo is going to drive that four-quadrant movie.

Right.

And I think that young adult, that young male demo is going to be the first one willing to come back.

Hey Ben the other thing just to cut quickly, one of the unknowns, too, is the extent to which some of these films start to play longer than pre-crisis. What had happened in near term is a lot of films while years ago, they would run a lot longer in the theaters. They come to a point where they have these massive opening weekends and then start to trail off. Well, with kind of the new dynamic in the marketplace, there's a good chance that films could open a little bit lower, but then run much longer particularly the way the theaters are going to be set up. And certainly with these earlier films with less first run content in the marketplace. For some of the theaters that have already started reopening in the marketplace, we're already seeing how some of the content that was in the market prior to the shutdown has been holding pretty consistent. And we think that's a positive sign as well, that we could start to see a little bit of this dynamic as things reopen.

Well, that's a great point. I also wanted to ask, I think, Mark, you listed a whole number of things you guys are doing. You talked about plexiglass, and disinfecting seats, and sanitizers, et cetera. How long do you – is your plan expected of baking and continuing these processes? I think you said a new normal for Cinemark would be through late Q4 into Q1. So is it your expectation that when you get past that you won't need to have these additional initiatives, which seem like they would bring additional costs with them, but maybe I'm thinking about them the wrong way.

Ben, of course, there's additional costs. It's not outlandish but there's additional cost. It really all comes down to what happens with COVID and what happens with the vaccine and how comfortable consumers are. So yes, some of those extra special disinfecting procedures at some point will start to drop off. But it's too early to know exactly when that is. We're going to be very cognizant to make sure that we don't stop too early. And we're going to be cognizant to make sure that we don't continue and spend money we don't have to.

Makes sense. And then lastly, just for Sean, back on the accounting stuff, so thank you for the help on the cash burn. I just wanted to confirm, we will see a gap between rent expense on the P&L and the cash paid for rent as we move through at least Q2 and probably into Q3. Is that accurate?

That is accurate, yes. We'll continue to have delays of cash payments in the second quarter, but we will recognize the full expense of those rent payments and to a certain degree other expenses in full in the quarter.

Got it. Thank you guys.

Thank you.

Thanks Ben.

Your next question is from the line of Mike Hickey with the Benchmark.

Hey Mark, Sean thanks for my questions. I guess the first, I mean, you guys are obviously a solid operator here with meaningful sources of capital and you can certainly maximize your liquidity for a couple of years here. But when you look at, I guess, the broader U.S. market sort of total screen count, do you get a sense of the sort of magnitude private operators could be shuttering or your view, I guess, of the potential reduced U.S. capacity and total screens from the shutdown?

Mike thanks for the question. That's really hard for us to gauge. And honestly it's not something that we are that focused on at this moment. And maybe – maybe what you're asking is the sub-question there is, is there going to be opportunity for us? There potentially could be. Right now, our primary concern is getting the theaters open and the consumer is confident to come back. Secondarily, our own cash security position, so that we're secure even in the downside contingencies that may happen. And it's just really hard for me to answer about other local exhibitors and their particular worry relative to cash flow and liquidity.

Fair enough. Thanks. The second question would be Latin America. You noted the virus, there's a lag, it sounds like your reopening in August. But I imagine your reopening plan in Latin America, your profitability assumptions giving less flex and labor, maybe lower screen count would be different than what you are experiencing in the U.S. Curious on that. And then more broadly speaking, I guess when you sort of look at the risk return profile in Latin America, do you still think that's consistent with your desire to operate in that region? Thank you.

Let me deal with the second one first, because it's the sentinel issue. Yes, we're very much interested in continuing to operate in Latin America. We think it's a very good profitable ongoing business for us. Nothing has changed in a material aspect relative to that. Relative to the virus, yes, there's several weeks behind, probably the current hotspot there more than anywhere else is Brazil. We're very much attuned to that. We have outstanding teams in each one of those areas, plus they have – they were going to have all the learning that take place in the U.S. because the U.S. is several weeks in front of it. So we anticipate being able to open there during the month of August. We think it will probably be on similar guidelines. The question Mike, there is we operate in 15 different countries. So now you've got – now you've complicated because it's not just dealing with one country, but its 15 countries and states and counties within those countries. So it's complicated. We think that we're going to be able to use a lot of learning’s out of the United States to be able to open it up. And we do think we have an ongoing profitable business in Latin America.

Excellent.

Thanks Mike.

The final question is on the line of Robert Fishman with MoffettNathanson.

I have one for Mark and one for Sean. Mark, you touched on it already with Warner Bros., but can you provide more color on Cinemark's relationship with your other major studio partners right now? And given yours and Sean's prior studio experience and all the relationships you have there, are you planning to take a different approach to dealing with window experiments after reopening? And just on a last front there, is there any creative way potentially to be more flexible to certain movies or genres to help these movies stay in the theater first instead of potentially just skipping over the theatrical window and going right to streaming?

Thank you, Robert. I did mention Warner Bros., but I'm glad you asked the question because we have equally good relationships really across the board. And let's start with Disney, and Universal, and Paramount, and Sony and Lionsgate, we've been in – we're in regular contact with each one of them about our plans and their plans. I would say that either Sean, or myself, or our head of film is on with the studios on at least a weekly basis. I feel very comfortable in that world. I know the players; I know what it feels like to be in their shoes as does Sean because Sean was CFO at Universal for years. So I think we're kind of unique there. The way that we've negotiated with the studios on windows and release dates, we've tended to do that in business settings, as opposed to press settings. And we're going to continue to do that because we think these are private negotiations between us and our content providers. And yes, we are open to alternative ways to distribute films. We're going to be very – we think the exclusive window is very important to the theatrical experience. And so we're going to be extremely careful about any undue change to that. But as it relates to lower grossing titles and small titles we we're open to talk with our studio partners about what's the – what are some alternatives that we might consider? I don't want to give the wrong impression here, Robert we think the exclusive theatrical widow, which is currently 74 days is a very important one. And for especially all your big, important blockbusters, we fully support that.

Okay. Thank you. And Sean, understanding this is a difficult question to try and put more color around, but assuming a more normalized level of attendance in the months ahead anyway, to help us think about what type of range of CapEx spending we should think about for 2021? I understand there are a lot of unknowns still, but…

Yes it's – I agree that that is a tough one. I think we are still kind of working through the details. I mean, I mentioned in the prepared remarks, we do expect that that will continue to hover at a very low level. We're going to be very limited in what we will spend CapEx on. It will be really the essentials and things that we're committed to. And even those committed items we've been working on delaying some of the timing that's required for those. So I think we'll aim to give more clarity to that in future calls as we kind of firm up some of those plans. But for the time being and it's going to continue to be a fraction of kind of what our original guidance was.

Okay. Thank you both.

Thank you, Robert.

I will now turn the call back over to Cinemark for any closing remarks.

Thank you very much. We really appreciate all of you being on this call this morning. We know that it's not the easiest of times. You are all working from home. We look forward to speaking with you again, following our second quarter. And that concludes our call. Thank you all very much.

That concludes today's Cinemark’s first quarter earnings conference call. Thank you for your participation. You may now disconnect.