Welcome to the Cinemark Holdings Inc. Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] 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 Holdings, 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 on the company's most recently filed earnings release, 10-Q 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 to discuss our second quarter 2024 results. During my prepared remarks this morning, I am 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 provide the 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 the 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 trends 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 installments by more than 15%. The second quarter also included solid results from action comedy Bad Boys: Ride or Die, and suspense…

Thank you, Sean. Good morning, everyone, and thank you for joining the call today. We were pleased with the remarkable success of the June box office, which meaningfully exceeded our expectations and bolstered the second quarter’s results. This box office upside benefited our operating leverage and coupled with the operational excellence of the Cinemark team led to a strong financial performance in the quarter. During the second quarter, we entertained 50 million guests across our global footprint and generated $734.2 million of revenue worldwide. We delivered $142.1 million of adjusted EBITDA, yielding a robust adjusted EBITDA margin of 19.4%, despite a softer box office than typical in the second quarter due to the impact of the Hollywood strikes. In the US, we hosted 29.1 million guests and we grew our market share. Our market share expansion was driven by three primary factors, a film slate that resonated exceptionally well across our footprint; a lack of capacity constraints given the softer box office; and successful execution of our strategic initiatives. We generated $287.4 million in admissions revenue and our average ticket price increased 3% year-over-year to $9.88. The growth in average ticket price was primarily driven by our strategic pricing initiatives. We reported $231.4 million of domestic concession revenue for the second quarter. Our concession per cap achieved a new all-time high of $7.95, increasing 4%, compared with the second quarter 2023, primarily driven by strategic and inflationary pricing measures. We were pleased that our incidence rates held flat year-over-year, despite a less favorable content mix for concession purchases. Other revenue was $53.2 million for the second quarter, down 18% year-over-year due primarily to reduced attendance. In total, our domestic operations generated $572 million of revenue and $108.8 million of adjusted EBITDA resulting in a strong 19% adjusted EBITDA margins. Shifting…

[Operator Instructions] Our first question is come from the line of Chad Beynon with Macquarie. Please proceed with your questions.

Hey, good morning. This is Aaron on for Chad. Thanks for taking my question. Really nice quarter. Your average ticket price has increased for several years in a row now. But I think we'll be facing some more difficult comps potentially from a mix standpoint with really high XD to get. So, how are you thinking about the ability to drive prices higher in ‘24 and ‘25 just given the anticipated slate in your pricing initiatives? Thanks.

Hi Aaron thanks for the question. So, in just more broadly, we do continue to see opportunity to continue to modestly grow our average ticket prices and we're leaning into data and analytics to find that optimal pricing that maximizes our overall attendance in box office. So we do still believe we have runway there. As you look at full year 2024, again modest growth expected though that may fluctuate, our ATPs may fluctuate quarter-to-quarter based on film mix. Particularly, with respect to Q4 of this year, it's important to keep in mind that we will face a challenging comp given the Taylor Swift’s Eras Tour concert film in Q4 of last year. And then, beyond that, I would just highlight on the International side, you'll continue to see some fluctuations there given FX dynamics within the recent.

Okay, got it. Understood. And as a quick follow-up, consumers appear to have a greater appetite for premium and large formats and your XD offering is driving more of your box office as you mentioned. Can you talk about what the opportunity looks like to expand that across your circuit?

Sure, Aaron, I'll take that one. Yeah, definitely I’ve been pleased with the performance of premium amenities in general has continued to grow post-pandemic. There's certainly been a bit of an uptick in consumer appeal for that. XDs, as well as D-BOX motion seats, I would say as well as just our overall food and beverage enhanced offerings, it's something that we're continuing to look for opportunities to deploy. Specifically, with regard to XD, which I believe was your question, some of the governors on that are just the scale of auditoriums that are available. So we're looking to in the case of existing theaters where we may have an opportunity for a second XD, but it's important that that be a large enough screen otherwise it kind of undermines the point of having the a larger screen with the enhanced sound and so on. So we're continuing to look for where those opportunities are to deploy those in certain cases we may have the opportunity to where we design a theater to actually add to that theater and definitely wherever we're opening new theaters we’re putting in multiple XDs right out of the gate. D-box seats, we continue to have a long runway of opportunity there in terms of deploying more of those across the circuit. Those have been generating really strong returns and we're, I'd say just very early in terms of the overall penetration across our circuit in terms of the opportunities there. So, we see it - we see that too as a real possibility. So it's part of our ongoing CapEx when we look at further ROI generating opportunities. We still see plenty of opportunity for further in varied kinds of premium amenities.

That's helpful. Appreciate the color and congrats again on the quarter.

Thanks, Aaron. Appreciated.

Thank you. Our next questions comes from the line of David Karnovsky with the JPMorgan. Please proceed with your question.

Hey, thank you. Sean, your market share gain this quarter looks outsized even a relative to some of the increases from prior periods. Maybe you can segment out the performance a little bit between the film mix which you highlighted and then those factors that you listed that are more in your control and would you kind of expect to sustain gains on this level going forward?

Sure, thanks, David. Yeah, we're really pleased with our share results in the quarter. Just to kind of flag again in addition to - I'd say just solid execution in the quarter by our team, obviously as I mentioned, we benefited from content mix that was particularly strong for our circuit with about more than a third of the domestic box office as an example came from family films which is right in our sweet spot. Titles like, Kingdom of the Planet of the Apes, Godzilla x Kong, A Quiet Place, those also skew really well for our circuit. And we saw that benefit - domestically we saw that benefit internationally. So we definitely got a lift there. The other thing that I'd say is, since the pandemic as you know we've continued to see that volume overall film volume has been somewhat depressed. So, we haven't really encountered many situations where we're hitting seating capacity constraints that can kind of limit our ability where we hit our maximum occupancy thresholds that can limit our overall share expansion. So we benefited from that, as well. So as we look forward, we - the comments we've made is we continue to think that about a 100 basis points of improvement is a reasonable expectation. Certainly, as we start to encounter more of those situations, where we are hitting those seating capacity thresholds, just as an example, we've already started to see some examples of that this July. We certainly saw examples of that in the third quarter of last year. So as more and more content comes back, we expect to see more of that. In some ways that's a good problem to have. It just means we're fully optimizing our theater capacity and highly productive. And then of course, we're going to continue to see skews from content mix. We've seen that, even recent examples where that can cause fluctuations of about 100 basis points or more in our market share, as was a circumstance this quarter, which was a kind of on the upper end. So, again, pleased with our performance. We're going to continue to obviously do everything we can to maximize our share into the future and push the limits on how far we can push our attendance gains and box office performance gains, but that's some of the key things that we benefited from this quarter and what our expectations are as we go forward.

Okay. And maybe one more on the expense side. So you've been able to manage salaries and wages during this periods of anticipated slower box, you have talked though to a recovery in film supply for ‘25 and ’26. So as you look over the medium term, does that better box office to set the tape greater hours and staffing? Or can you utilize some of these innovations that you've seen over the past couple of years and get a lot more operating leverage on that line if the box recovers?

I’ll take that question. So regarding our go-forward salaries and wages expense. We do flex our labor hours for down based on projected attendance levels and operating hours. So, I would expect labor hours and in turn our salaries and wages to increase as we start to see the box office scale to accommodate higher attendance. But we do still expect to benefit from the productivity gains that we have been seeing, just not to the same extent as we have been in these softer box office environments we've been experiencing over the past couple of quarters. Maybe the other thing I would call out on the salaries and wages side is just to keep in mind is wage rates. So we do continue to expect to see some pressure there. It's in line with what we saw pre-pandemic, which was in that 5% to 6% range annually. And we continue, of course to continue to look for opportunities to drive further productivity and efficiencies, but those are the puts and takes.

Very helpful. Thank you.

Thanks, David.

Thank you. Our next questions come from the line of Eric Handler with the Roth MKM. Please proceed with your questions.

Good morning, and thanks for the question. Sean, it's clear that when content is compelling people are showing up to the movie theaters. When you look at the fourth quarter, when you look at ‘25 you and you have a great chart in your power [Indiscernible] the content looks really good in ‘25 and then you’ve got some really big franchises coming in 2026. So I was like, Walstreets probably hyper aware of the content slate over the next two plus years. But how well do you think your consumers are aware of just how good that the slate is? And what can you do to improve that? So maybe it helps reinvigorate the movie pass subscriptions even more than what you're seeing right now?

Well, thanks. Thanks, Eric for the question and for the observation. I mean, we agree I think when we look at what is - we have line of sight to it today and which is generally is some of those larger films, we definitely think it looks quite promising. And you're right, I mean, I think that's certainly understood by industry insiders that question on how do we get broader consumer awareness of that. I think there's a range of ways. I mean, obviously, there's the classic ways as we get near to those titles, the marketing campaigns that take place both by the studios, as well as by exhibitors just to gain awareness for what's coming in the nearer term. I think as we get to a place where there is a more steady cadence is what we talk about is the benefits and really desire for more of this volume to come back in. More volumes and we are seeing it right now, right in the marketplace. We got great momentum going in the marketplace as a result of number one, great films in the market, but then also there is more steady cadence of release. People come in, they get exposed through trailers, through one sheets just by being there in terms of what's coming down the pipeline. So I think that's a real other important ingredient as we have more sustained volume of content in theaters people get into that habit of going to the theaters and getting more exposure to other things. Beyond that, I'd say there's a range of other conversations happening about just how to broaden out PR to it's one of NATO’s big focal points in terms of priorities of how do we - how do they work to help the industry to create and spread more of the positive news and awareness about what's coming and try to counteract some of these false narratives that sometimes get portrayed about movie going, which consumers can read about. So, there's a range of things. Big focal point, but I think a large part is just getting back to that scenario where there are more films in the marketplace and people are just getting exposed to them more regularly through marketing and by coming to the movies.

Okay. Great. And then, as a follow-up, I mean, your financial position is definitely one of – if not the best in the industry right now. So I'm curious, we haven't seen much in new theater development of late particularly in the US. There's only so much you can do to push real estate projects along, but what are you seeing right now in terms of new developments?

Well, obviously, as you point out the development pipeline was slow - kind of like the film pipeline was slow due to pandemic so too was the whole new build pipeline. And if anything have been more in a contraction mode in the industry of more theaters that have closed over the past few years, certainly lower performing theaters, which is in some ways isn't a bad thing. It's kind of pruning some of those theaters that that were lesser yielding venues. We have reactivated our pipeline of looking at and incubating new projects. We've had – as I mentioned in my prepared remarks, we had great success with the new builds that we have opened since the pandemic which were projects that were committed to prior to pandemic. On the whole, those have been performing better than what we set out to do in our expectations before the pandemic. So we've reactivated that pipeline. I expect others have as well. It's just going to take a little bit of time, because like making a movie these projects can take years to work through all of the deals with landlords, with government permitting and just the whole construction progress - process it can take some time. So, I expect the more of that will - you'll start to see more of that taking place over the next few years. Albeit, I also expect that'll continue to be tampered a bit just as everybody's still is going through a bit of recovery. Our whole industry still is continuing to recover volume still is coming back. So, as everyone is still working through that cycle, I still think that'll be a little bit of a governing factor on how fast any kind of new build activity ramps up.

Thank you.

Thanks, Eric.

Thank you. Our next questions come from the line of Ben Swinburne with Morgan Stanley. Please proceed with your questions.

Hey, good morning, everyone. Sean, I always – we were benefit from hearing your expectations on film supply next couple of years and you hit it a little in your prepared remarks. But maybe you could just give us the latest and greatest from the studio side in terms of ‘25 wide releases I think the last time you updated I think you felt those would be higher than ’23. And then I had a follow-up for Melissa.

Sure. Well, I mean as we sit here today can speak you know most specifically about 2024, because that's where we have the most line of sight to. So, earlier we're kind of coming into the year, we were estimating overall volume would be somewhere around 95 wide releases. At this point, we are seeing a few more. So we're looking at about a 100 wide releases for this year. There has been a few smaller films that have been dated since that time, which is great to see a little bit of further recovery. Obviously, that's still down about 25% from the 130 or so average prior to the pandemic and down a little bit from last year, which was about 110. As we look to 2025, the typical process this even pre-days COVID, we generally get a better line of sight to that towards the end of the year. That's just we have a good sense for what some of the larger titles are, but on the studios don't more fully announce what they have in all their dating until you get towards the end of this year. So we don't have complete line of sight to that. But from our conversations, the discussions we have and the different data points that we do have access to, we continue to expect that we'll see a rebound in overall volume next year somewhere between where 2023 landed and where we were pre-pandemic in ‘25. There's probably a little bit of lingering impact from the Hollywood strikes of last year, but definitely a nice bounce back to the trajectory we've been progressing upon in terms of overall volume recovery in the marketplace.

That's helpful. Thank you. And Melissa, you gave us a lot to chew on in the prepared remarks. I just want to come back to a couple of things. On the convert, you guys are planning to redeem that with cash. I guess, my question is a little technical. You said principal amounts. I'm wondering as the stock has performed and I think that liability grows, did you plan to redeem all in cash or might there be a stock piece if the stock were to do really well between now and next August? And then, you also mentioned in the budgeting process and sort of talking about your return of capital plans in February, you framed in as returning excess capital to shareholders. So I guess I want to ask if that includes buybacks as a consideration historically, Cinemark has been obviously a dividend payer, but I noticed maybe I'm reading too much into your language. But it seemed like you were being a little more vague. So I wanted to just maybe you guys were considering buybacks, as well or the board was? Thank you.

Thank you, Ben. So, on your first question with regard to the convert, so we purchased the call spread that protects us from the impact of stock price movements up to $22.08. To the extent that the stock price exceeds $22.08, we have the flexibility to settle the incremental amount in either shares or cash. Ultimately, our decision will be contingent upon the extent to which the stock price exceeds $22.08. Our cash on hand and potential dilution considerations among other factors. And then, with the respect to your question on capital allocation, we are taking, as you would expect a comprehensive approach to evaluating our capital allocation strategy. So you can assume that that is looking across all three pillars, inclusive of looking at stock buybacks as well as dividends.

Great, thank you so much.

Thanks, Ben.

Thank you. Our next questions come from the line of Jim Goss with Barrington Research. Please proceed with your question.

All right, thanks. Sean, I'm wondering if you feel with this discussion of the film flow, if it's more of a numbers game right now? Or is it dependant primarily on the quality and demographic appeal mix of the films being released? You do seem optimistic about attendee attitudes and I'm just wondering how you view the slate?

Sure. Well, I'd say, I think we kind of look at it as, it's really a factor of both. We've clearly seen examples where even with reduced film volume, overall box office can perform at levels comparable to pre-pandemic and we saw that I think it was last July where box office exceeded July of 2019 even with quite a bit - quite a fewer number of overall titles being released. So, compelling content that resonates well with audiences is clearly a critical aspect of that. But I would say the volume piece you want to have just more opportunities for one films to have those breakouts like we've seen. I went through a series of those examples. We see many of them over the last several years. You want more of those opportunities for those breakouts which often times can propel the box office. And then just to have that opportunity for that continued momentum of going to the films. This is a this is an industry where movie going off and begets movie going you people get into that kind of habit as I mentioned earlier, you get exposed to what's coming up. We like a nice variety of films that speak to all audiences and then sufficient volume of that to keep people coming because you get kind of into that mode and it helps. So that's it's really both elements of that and we're – again we are encouraged by what we see thus far in terms of the appeal of and strength of what's coming down the line from a quality standpoint and we're certainly encouraged as we listen to and look to the different indicators we have regarding overall volume filling back in.

Okay. And maybe one other - Melissa mentioned the you are leaning into data analytics to determine the most effective pricing strategy. Box office trends and the recovery has really been focused a lot on price increases and premium share of mix. And I know attendance levels is always this Cinemark priority and that's really what is going to allow you to benefit from the higher concessions per cap. And I am wondering when I talk about how you attendance - physical attendance recovery over the next several years and how that might move into the next couple of years where there's a lot of optimizm?

Well, I think that those that goes hand in hand with the volume. I mean, you're right, I think our primary focus is driving attendance and driving frequency of attendance, because that helps to maximize box office. It helps to create those opportunities for food and beverage sales. And again, it just keeps people getting exposed to what's coming down the line. So it becomes a positive circle. So when we've think about attendance trends and by the way it also plays into our pricing strategies too as Melissa mentioned earlier. When we approach pricing, we're looking at it strategically, like clearly we're looking to do what we can to get price gains. But we're very conscious of what that can do ultimately to attendance. So it's really that goal of finding that sweet spot where we're not negatively affecting attendance or we're not negatively affecting incidents of consumption of food and beverage. So we're looking for what can actually stimulate that. And we think there the trends on both attendance and box office was positive, just as more movies come back into the marketplace and people come in. They receive all the enhancements that have been made in the theaters when it's particularly for those people who may not have been their frequently. We just think that winds up continuing a positive continuum movie going.

All right. Thanks very much. Appreciated.

Thanks, Jim.

Thank you. Our next questions come from the line of Omar Mejias with Wells Fargo. Please proceed with your questions.

Good morning, guys. Thank you for taking the questions. Sean, maybe first, in your prepared remarks you mentioned expansion of alternative content as a driver of film supplied volume, could you give us an update on what your plans are for traditional - non-traditional content going forward? And if you continue to expect that to continue to hat the box office performance?

Thanks, thanks, Omar, yes. Look, I think we've been pleased with some of the building success we've seen in non-traditional content. Anime, faith-based film, multicultural titles, concert films, I know for a long while prior to pandemic at least for me personally it was a disappointment. I was felt like there was this huge potential in the space of alternative content that never was kind of living up to fruition. And it’s been great to finally see that momentum build. There's been many, many examples now across all those different categories. So it feels like it's getting to a place where audiences are seeking those out more. There's more compelling content in that space and because of that success, there's more of that content getting made now. You got now studios like, Angel Studios that's putting out, I think they’ve announced five releases of faith-based films this year and they had phenomenal success last year. So there's more of that we obviously saw Taylor Swift and Beyonce last year with the concert-based films. There's been many of those types of examples with BTS and Metallica and Coldplay as a smaller scale and we are optimistic as that will lead to more in that area. Anime has been growing really strong. Obviously, Sony purchased Crunchyroll. They're leaning more heavily into that space. So, there's more and more of that compelling content coming into the market. So we remain optimistic about what it can continue to do on a go forward basis. Last year was a banner year. It was about 14% of our box office. This past quarter, again it was about 10% for us. So it's real please. Now we think that percentage may go down a bit just as we have more of that Hollywood content rebounding over future years. But we've said for a long while we could see non-traditional content represent more like 5% or so of overall box office versus the 1% to 2% it's historically been and we continue to expect that as we look ahead.

Yes, that's very helpful. And maybe for Melissa on per caps you mentioned that incidence rate was flat year-over-year, yet per caps grew over 4%. A clear sign that some of the strategic initiatives are working. Can you provide us some color on the key drivers of the success and how much room for improvement you have ahead? Thanks.

Sure. So, on the per cap side for Q2, our increase was driven largely by our strategic pricing actions to offset some of the inflationary pressures that we've experienced. So we've seen success in being able to push price on food and beverage. Again, as Sean mentioned, we're very cognizant similar to how on average ticket prices. We're cognizant of we want to maximize attendance first and foremost. On the food and beverage side, we're looking to ultimately find the optimal pricing, as well as drive our incidents. The last two quarters, just the film slate hasn't been as conducive to concession purchases. So more action-oriented and horror content, typically brings in that audience that does have a higher concession purchase. But we were pleased given some of the initiatives that we've been leaning into - that we were able to hold incidents flat year-over-year despite that dynamic. As you think about some of the things that we're doing that we’re most excited about, I would say, would be on modifying our flow of concession traffic, putting in self-service capabilities, mobile ordering. We also have enhanced our hot foods offering. So as we offer more products we’ve certainly seen some success from that pushing merchandize sales as well as scaling third-party delivery are some other initiatives that we're pursuing to ultimately drive incidence rates higher. So we feel good about where we're at and the film slate will - we'll have our per caps fluctuate quarter-to-quarter. But we still believe we have plenty of opportunity to grow.

Thank you guys. Appreciate it.

Thanks, Omar.

Thank you. Our next questions come from the line of Mike Hickey with The Benchmark Company. Please proceed with your questions.

Hey, Sean, Melissa, Chanda, good morning guys. So great job on your quarter. I guess on the topic of concession and this dovetails a bit I think on Omar's question and your answer Melissa. But looking at 2Q and this has obviously been a trend here exiting the pandemic, but your concession looking at domestic revenue your concession to admission ratio is about 81%. And I think that's a all-time record and you compare that to pre-pandemic it was 68%. So, I'm just curious I heard what you said, Melissa, on concession what’s driving in on a per cap basis, but just curious sort of the total volume here on relative admission what you think is sort of the key driver there. And I guess, then the question is I am going to be keep waiting for this to come down a bit, but it seems very durable. And in fact, it seems to be – the mix seems to be growing. So curious as you look forward how durable in fact you think it will continue to be when we have a full product play and maybe economic challenges obviously, we've seen some straying on the consumer. That's fed through into and some of the restaurants doesn't seem to be the case at all in theater but wondering your view there. And then, I guess the last piece, if it is in fact durable when we do see a larger portion of the mix when you think about attendance getting back to pre-pandemic and I know that Sean you said you think volume of product in the next couple of years should be equal to pre-pandemic. So maybe attendance is too. What does that sort of mix towards concession ultimately mean to your total margin opportunity versus pre-pandemic? Thanks, guys.

So, I can start on that Mike. One of the things you mentioned that percentage of concessions relative to admissions and even if we look at that on a per cap basis versus 2019, our domestic per cap is up north of 40% and the majority of that growth that we're seeing is driven by higher incidence rates and then to a lesser extent price. And that higher incidence rate is a blend of core concession purchases. So say coke and popcorn as well as expanded product offerings, including alcohol icy and hot food such as pizza, as well as the execution of some of the strategic initiatives that I mentioned earlier. So, we did coming out of the pandemic, we did think that incidence rates would start could potentially normalize. We haven't seen that and we do believe that our efforts that we've been leaning into to drive incidence rates are ultimately causing them to hold. So we feel good about where we're at, but those are kind of the drivers since 2019. And then from a margin standpoint, as we talk about just the EBITDA margin going forward and even look at what we were able to deliver in full year 2023 with concession revenue being higher than it was pre-pandemic, we certainly feel that that's a key element to adjusted EBITDA margin going forward. And ultimately, as we look to get back to - to try to get back to pre-pandemic margins, our ability to sustain and grow our per caps would be an important driver of that.

And I would just add Mike, just while we're certainly going to continue to pursue the kinds of initiatives, Melissa's mentioned things we've been successful with to grow per caps, we don't know at least historically one of the areas that pressures per caps is just when you have full feeders. Long lines are as probably the number one deterrent to buying food and beverage. People see that and then they'll skip it. So we've worked really hard to try to avoid that. Obviously, with a lower volume of films in the marketplace and thus because of that lower attendance, we haven't had as much of those kinds of situations where we find that pressure. That is something that we could see into the future as a more full slate of films comes back which could put a little bit of pressure on that concession to admission ratio. That said again, we've been working on initiatives like the mobile platforms where you can order ahead delivery to seat, things of that sort that allow people to avoid the lines and thus by doing that it makes it makes it easier for people who are buying in theaters to have lower lines. So hopefully, we'll see that all those things will continue to sustain as we go forward and we have fuller theaters with more volume in the marketplace. But we'll have to see. But obviously, we're very we're very pleased by the impacts that our many initiatives have had to boost our per caps with our attendance and we got a lot more of those that we are working on to sustain that type of growth going forward.

Thanks, guys.

Thanks Mike. Appreciated.

Thank you. Our next questions come from the line of Eric Wold with B. Riley Securities. Please proceed with your questions.

Thanks. Good morning. I guess, just a high level question, Sean, I guess, in the past couple of years, the whole issue was wound around windows days and theater has that came about during the pandemic has essentially disappeared from discussions of the exhibition industry. But maybe just I was curious on kind of what you hear in general from the studios recently around windows. Are they becoming into kind of scheduling discussions with you with kind of any pre-determined date that a film may go to a streaming platform with a completely flexible on that day? And when they'll start marketing streaming availability to subscribers depending on how a film performs? And how do you think that could or could not change of the slate becomes more robust in ‘25 and beyond?

Sure. Great question. Obviously, there was a lot of kind of public focus on that with all the experimentation that was going on during the pandemic. I would say, it's probably less in the public guy now. It's an ongoing just conversation holistically amongst exhibitors, amongst studios as we just continue to try to evaluate any impact that evolving windows might have on consumer behavior. I would say what we're where we are right now is it's been a little bit more stable albeit stable with a dynamic component, right? Before things were more rigid, now it's a more flexible window, which I know we've commented. We view as a positive because in many respects it de-risks, it reduces some of the risk for certainly smaller and mid-tier films for the studios giving them the opportunity to run along window and success and get those titles into home – to home faster and curtail losses if things just don't connect. Likewise, for us when things aren't connecting, we're looking to put other things on to our screen. So it kind of works both ways. Generally, what we're finding is things are still kind of coalescing around 45 days for those more compelling films. Films that's kind of - in some respects starting point for those larger more compelling films. Some of the smaller films are ranging, they're kind of screening a little bit it largely is depending on size, scale and ultimate performance in terms of how that's playing through. Thus far, again, we're still all evaluating. Are we seeing any kind of impact on moving on, I mean, thus far, we're not seeing that having a major effect on people's decisions to go to the movies and kind of where we've landed at this point in time which is probably why there hasn't been as much discussion on it. But it’s something that we all continue to watch carefully as we're just trying to figure out what's the sweet spot and optimal point for the studios to maximize their financial gains on their films, as well as for us in the exhibitor side for us to be able to maximize our opportunity, as well.

Perfect. Thank you.

Thanks.

Thank you. Our next questions come from the line of Robert Fishman with MoffettNathanson. Please proceed with your questions.

Hi, good morning, everyone. One for Sean and then one for Melissa, if I can. So Sean, given your strong financial position, can you just update us on your appetite for acquisitions both in the US and internationally? And do you even have a preference in terms of larger portfolios versus smaller tuck-ins if they both meet your return on investment criteria? And just maybe on a related note any thoughts you can share about Sony’s acquisition of Alamo taking it from the other side?

Sure. Well, yeah, I mean, look as we have talked about optimizing our circuit in evolving - are evolving our footprint, which includes growing and recalibrating and strengthening our circuit. M&A is certainly a piece of that equation. So the appetite for M&A is certainly there, And I would say, as we've indicated in the past, our focus is generally on high quality assets that we believe have - can deliver solid assured returns over time? As I've also mentioned like we don't just pursue growth for growth sake. We really are targeting accretive investments that don't strain our balance sheet. We've had great success following that approach in the past and we believe it's the right approach as we move forward. So we keep a close view on what's out there in the marketplace. There hasn't I would say there, when we look across the industry, the M&A activity has been fairly limited. There have been handful of assets that have come to the market. None of those I would say met our strategic or investment thresholds. But we'll continue to keep a close watch on what's out there. In terms of smaller opportunities versus larger opportunities, it really would just depend. I would say it clearly it all comes back to the quality assets. The assurance of being able to deliver the returns that we're looking for. And then how they fit in with our circuit. And I think directionally, we tend to favor going a bit deeper in the markets we’re in versus just going broader. And when I say markets, I'm talking more like US, Latin America. But, again we keep a close eye. We evaluate everything that's out there as we're thinking about the best way to move our circuit forward and we're going to continue to do that.

And Alamo?

Oh, I'm sorry and then, second question on Alamo. Yeah, I mean, that's - it's an interesting acquisition by Sony. We know from the - what Sony has commented on in their earnings last quarter even based on their mid-range plan. We know that they've talked about looking for ways to further monetize their IP. Their film IP, their gaming IP, and looking at experiential types of opportunities to do that. So, this clearly fits that category. We know, Sony has been a big supporter of the theatrical experience for a long, long time. And certainly this transaction is a demonstration of that the fact that they are actually physically purchasing a circuit and entering into this space themselves. I think that's just underscores their feelings of the future of theatrical exhibition. So we look at that as a positive. But beyond that, I mean I think again we see this as a plus in terms of their view on the marketplace. And I think we'll probably learn more as they continue to talk about their future plans.

And if I can just squeeze one quickly for Melissa? Just coming back to the margin conversation it's been a lot of talk about that. But just in terms of the sustainability outside of - from the cost side, outside of the salaries which you talked about, are there any other big lessons learned that you can share with us that given these slower box office periods that that give you the confidence in terms of the sustainability of cost efficiencies going forward as box office ramps up?

Sure. So as we think about the sustainability of cost efficiencies, I mean, our - one of our largest variable cost is salaries and wages. So that has been the area where I would say we’ve gained most of our productivity and we talked about that side. As we scale - as the box office scales, I think the other just couple things that I would keep in mind from an expense and margin standpoint is over the past couple of quarters, given the mix of films and concentration of box office, our film rental rates have been lower than they historically have been. So we would expect as that overall mix and concentration starts to change in second half of the year and beyond that film rental rates would normalize. The other thing I would just call out is on the facility, lease expense side, particularly in International, that is more variable in nature given it’s tied to box office generated. So that we would expect to scale as the box office scales. And there have been other efficiencies that we have learned within utilities and other, as well, but I would say the biggest drivers would be theater labor is the learnings that we've gained there and then just some of the other costs will naturally increase as a result of the box office scaling.

Okay. Thank you all.

Thanks, Robert.

Thank you. Our next questions comes from the line of Stephen Laszczyk with Goldman Sachs. Please proceed with your questions.

Hey, great. Thanks for taking the questions. Maybe first, Sean, you mentioned the strategy to exit underperforming theaters. I think you've done 70 or so to-date. I would just be curious on how much more opportunity you think there is to close less productive theaters. And then maybe how you think about the benefit financially perhaps on the long-term margin side from that recalibration?

Sure, I'm sorry. Could you repeat the last part, I got the question on where we think going forward on closing? I didn’t hear the last piece.

Just the financial benefit of that strategy and potential long term margin benefit.

Got you. Got you. Thanks. Yeah, I think, as far as closing theatres goes, there was a bigger amount of titles that were affected more recently as we've exited the pandemic. Now the majority of those were theaters that were at the end of their lease life. So they were a bit older and I would say more on the cusp financially. So, on the whole, those have yielded positive bottom-line benefits to our organization by exiting those theaters. I think as we look forward, we're getting more into that normal state of operation where historically, we've been in that case we may close a few theaters a year and then we would open a few theaters in a year. And generally it's repurposing older theaters with newer theaters that have just run their course. So I expect we will continue to have a certain number of closures just each year which is just part of the norm of the business. But on the same token as we talked about earlier, we've reactivated both our new build pipeline, we will see what comes from a potential M&A perspective as we go forward, but we expect that we will be adding new theatres in, as well. Net-net, in all cases, as we pursue these type of activities to your question on future margin impact, we're looking at circumstances that enhance our margins and benefit our margins. It's rare. I don't think of - I can't even think of a situation where we're closing a theater that actually has a negative margin impact. Generally, when that’s happening it’s happening for a reason and it's to the positive.

Great. Thanks for that. And then, maybe one for Melissa. On the International side, there's been some continued volatility on the inflationary front in some of your markets. Could you talk a little bit more about the operating environment at the moment? And then maybe looking ahead are there any aspects to that environment that you see easing or becoming more difficult over the next couple of quarters? Thank you.

Thanks for the question, Stephen. So, on the International side, we do continue to see volatility in Argentina. So Argentina continues to contend with FX devaluation and you're seeing that in our numbers year-over-year. Now, Argentina is also a highly inflationary environment. So inflation has been providing some offset to the FX devaluation that we're seeing in the country. Now one of the dynamics that we saw in Q2, when you look at our average ticket price and per cap, we did have promotional activity within the quarter, particularly in the softer box office months of April and May, which led essentially our prices to increase at a rate that was slower than the rate of inflation. So we did see some pressure in the quarter in International related to that. It continues to be a dynamic situation. But again we have teams on the ground who are highly experienced at navigating the economic landscape in Argentina.

I would just add, we've been really pleased with the performance of our Latin American circuit on the whole, I mean, in the midst of the environment that Melissa was just describing, which we know has been somewhat fluid from a economic and political standpoint. The results have been really strong. I mean, again last year, our overall EBITDA in Latin America was higher than 2019. And in the case of Argentina, which is probably the extreme situation right now, attendance last year was higher than 2019. So even in the midst of a really challenging environment and we are facing some pressures on what we may be able to do from a pricing standpoint otherwise just to contend with this market and as most that we have teams that are very well adept at dealing with that. We still see great examples of performance in the marketplace here as a result of just our teams. Our team's impact. These are strong movie going cultures. Again on the whole, Latin America has actually recovered further than the US at this stage. So for a while during the pandemic that lagged due to availability of vaccines, that’s changed. Again, we look at that as a testament to have strong movie going is in these marketplaces and also to a certain degree, how content has resonated. The content that's been-- released thus far has resonated in those markets. We make may face a little bit of pressure on that in the second half, but on the whole we are really pleased with how Latin America has performed.

Great. Thank you, both.

Thank you.

Thank you.

Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over to Sean Gamble for any closing remarks.

Thank you, very much. In closing, I just like to reiterate once again our enthusiasm about the future of our industry and Cinemark. Consumer interest in theatrical experiences as we have discussed remains robust. The key indicators we continue to see related to a continued recovery of wide release volume are positive. And we continue to believe that Cinemark is exceptionally well positioned to prosper as we move forward. We appreciate all of you joining us this morning. And we look forward to speaking with you again following our third quarter results. Have a great day.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.