Cinemark Holdings, Inc. (CNK) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Meghan Durkin. I cover U.S. theaters here at Crédit Suisse. I'm very happy to have Cinemark up next. We have Mark Zoradi, CEO. Mark, thanks so much for being here.

Glad to be here, Meghan. Thank you for organizing.

Of course. So you announced your time line and your protocols this morning for reopening. Can you take us through the plan and what exactly determined your protocols?

Okay. Well, hopefully that the people have had a chance to maybe look at some of the materials, so we'll just do kind of a high-level overview. We are -- we've had this planning in place for several months now. And we have 9 different operating working groups to do this, everything from health and safety group to a publicity group, to the operations group, technology group. And it's all culminated now with the announcement that we made today. And so I'm really pleased. We're opening up 5 beta test theaters in the Dallas-Fort Worth area to -- 3 this Friday and 2 next Friday. And we're going to test out all the systems, everything from our theater seating technology, which we adapted so that people can come and if they were a family of 3 or 4, they can sit together, but our technology will automatically block seats left and right and our recliners. And in a traditional auditorium where you don't have the 6-seat separation front to back, we'll also block out seats in front of you as well. So that's all now automated. The ticketing is all automated. Everything is going to be scan your phone. It's going to be kind of like you're going through an airport anymore. So you no longer will be ripping tickets and handing them back and forth. That's just one of the many protocols. Everything else from literally we're spraying every auditorium every morning with a disinfectant. We're going in between every show and wiping down the seats, wiping down bathrooms, hard surfaces every 30 minutes. So we've put all this together, and we knew that the health and safety was critical to make people feel safe. Then we had to have a time where the studios were going to have content available for us. And so active negotiations and discussions, more discussions and negotiations with Disney and Warner Bros. of when they're comfortable in coming back. And then we did a bunch of research with consumers to find out how they're feeling. And so you marry all of these things together, and we came up with this mid-July date. Warner's came up with a little twist last week when they decided to delay Tenet for 2 weeks because they had a real marketing spin they wanted to do for Tenet. And Chris Nolan, the director of Tenet, had a lot to do with this. And Chris wanted to do a 10-year anniversary reissue of Inception, and he would go on camera and talk about it. And then he would show some exclusive footage never seen before for Tenet on Inception. So they took the opportunity for a big marketing push. So they're doing that on the 17th of July now. Mulan will be on the 24th of July, and Tenet will now be on the 31st of July. So it actually worked out just fine. We adapted a little bit. And so it just feels like it's coming together for us. We now have -- most states have allowed theaters to reopen with capacity limits obviously. And we're seeing those capacity limits increase after several weeks of time. So we're highly encouraged that by the time Mulan opens up on the 24th, we're going to have the vast majority of our theaters open and operating, hopefully with no more limitations and 50% capacity.

So can you take us back sort of what has been like to get those first few theaters open? What is -- your staff, how was -- how are they responding to the training? How was it even getting them back?

That's a good question because it allows me to tell you, one of the things we're doing is we put together 12 training modules for all of our returning staff. As you may remember when we closed the theaters in March, we had to lay off all of our hourly employees. And now we're in the process of hiring back thousands of those same employees, and some new people if people have moved on and then retraining them. So it is a gigantic project, and it's why we're starting with the 5 beta test theaters in Dallas close to our headquarters and home office, so we can monitor it and get it right. And then we're going on 1/3 of the theaters will open the week of July 3, and then approximately the next 1/3 on July 10, and the final 1/3 on July 17. So we'll be up and running with the vast majority of our theaters. And it's been a herculean effort. I honestly can't give enough credit to the team members that we've had both in Plano and also out in the field. Our general managers all stayed on. All of these people, the maximum salary any of them got was 50%. And some of our team members went down to a furlough of 20%. So people have been -- have really, really been putting in the time and effort at a time where obviously we are in a cash preservation mode because we had no revenue coming in. So it's made me even more appreciative of the Cinemark team that's rallied together to get us to this point, to be able to make the announcement we made today.

So I think you've alluded to some of the municipalities may not have given you approval to open yet? Which are those? I noticed that San Francisco is on the list for one of the later dates. So what's going on there?

Well, sometimes you have the -- you have a state government give the okay, and that happened in California last week, but our -- but the governor in California also stated that if a county or city wanted to put further restrictions beyond the state, they were able to do so. San Francisco is one of those, Los Angeles is another. It's fair to say that we fully expect that within 30 days, by the time that Mulan opens on the 24th, which is actually 5 weeks from now, it's actually a little more than a month, we think those restrictions will be lifted in Los Angeles because they've been listed -- lifted on restaurants, they've been lifted on other retail environments, they've been listed -- lifted on seniors and on churches. So we fully expect that San Francisco and Los Angeles will follow. I think likely, they'll start with a 25% maximum capacity. We're prepared for that. Our technology is prepared for that. But then also likely, it will follow along what other cities and counties and states have done. After 3 or 4 weeks, that 25% becomes 50%. And then we fully expect, as the months go on, that 50% will become 75% and eventually, we'll get back to having the theaters with no capacity limitations.

Okay. So you sort of touched on my next topic which is the capacity. It's been a big topic. And we get the question all the time about -- you did talk about on your last earnings call that you operate typically at 20% to 30% sellouts typically. But we keep getting the question about weekends versus weekdays, and how are you going to manage through that. What are the offsets? And how are you going to work through that?

Yes. That is a really good question. And the one thing that theaters have is we have enough seats. And that's why it was not an issue for us to convert so many of our big auditoriums to luxury recliners because in doing so, you lose half the seats. We -- a typical theater will operate somewhere in the 20% to 30% capacity. But you're absolutely right, on the weekends, on a Friday night or a Saturday night, that can go north of 50% to 60% to 70%. So what we plan on doing, especially for the early movies, like Tenet and Mulan, is we will just open up an extraordinary number of screens. So whereas in the past, Mulan or Tenet might open on 3 or 4 screens in a big multiplex, now it might open on 7 or 8 screens in a big multiplex because of the limitation. And in some ways, it's actually a consumer benefit for this way. Instead of -- you can now -- you can have a showtime at 6:30, at 7, at 7:30, at 8, at 8:30, so there's a lot of convenient time. We'll separate those so as to not have large crowds in the lobby entering and exiting at the same time. So what we've told Warner Bros. and Disney is, "We will have enough seats for you because we will have more screens available," because they're the first 2 really large studio movies. There are a couple of movies prior to that. Unhinged opens on the 10th and Broken Hearts opens on the 17th, and we'll have enough for them. But especially in our big theaters, there's going to be plenty of seats because our ability to add screens and, therefore, add seats.

And then you're opening with library content, right, which is going to be priced at a discount of $5 for adults and $3 for kids and seniors. So is that going to be sort of out of the way once Mulan comes? Or are you still going to have some movies priced at that level?

What we plan on doing is we'll open the theaters with that library content, and we will play it right up until the first-run product. And we'll probably continue, but it will just be highly decreased. So as Tenet -- excuse me, as Mulan comes in, library product will decrease. As Tenet comes in, it will decrease significantly. So we'll get to a point where the library product really goes away, that pricing will go away because it's our plan when we launch the first-run product to go back to our normal pricing. Cinemark has never been a high-priced theater circuit. We've always kind of prided ourselves on focusing on attendance and thereby getting people in the door and having a really good experience and making our money both a combination of attendance and F&B. And so when we look at Cinemark, you can go to a Cinemark theater anywhere in this country, if you're a Movie Club member for $10, any show, any day of the week. And so I think we're still one of the most attractive out-of-home, family-entertainment venues. And we want to stay there and encourage people to come back.

And is there any different strategy with your XD screens? I mean those are priced higher, and there's fewer of them. So are they -- is there going to be demand-based pricing on those? Or do you expect to see those change in strategy?

Yes. Meghan, what we're going to do, just again to welcome people back with this welcome-back pricing, and we're also going to discount our concessions during the welcome-back pricing as well. For all customers, there will be significantly reduced concession prices and for Movie Club members, an incremental 20% off of that. For XD during the library product, we're not going to charge anything extra. It's going to be $3 and $5. And yes, those will probably fill up the fastest and get to our capacity limits the fastest because there'll be no upcharge. Once the first-run product comes, then we'll go back to traditional pricing. And typically for XD, we charge a $3 upcharge. And so we'll begin that with the first-run product.

Okay. You touched on your loyalty plan members. How have they been in touch with you? Are they excited about the return? What are you hearing from them?

It would be an understatement if I didn't give a resounding yes. One of the things we did right when we closed our theaters, I mean I think it was literally the day of or the day after, we connected every one of our 950,000-plus Movie Club members, and we told them that we were automatically pausing their membership. That they would not be charged, they'd be -- everything would be safe for them. Their movie credits would be safe, but they would not be charged until the theaters open. So over the past 3 months, we have lost so few. We still have more than 950,000 members. And so what we're planning to do as just a thank you to our Movie Club members is during the library product, a Movie Club member can come to see any library movie for them and a friend at no cost. And we're going to allow them to do that for 3 different movies, get the extra discount on concessions and really welcome them back. And then as one final bonus, we're going to reactivate their memberships during the month of -- the end of this month and early July, but we're not going to charge them until August. So we're just doing everything we can to thank them for being so loyal to us and communicate really well. So we've gotten a tremendous amount of positive feedback about that auto pause and the way that we've communicated with our Movie Club members.

Yes, I bet. So let's move to the slate. Tenet, you mentioned Tenet shifted back. Mulan is now the first really big release. We know Unhinged will be first. Do you have -- is there much risk that these movies shift again? What are you watching to know? Or are you confident that they're going to be open by...

I'm very confident. Unhinged has come out and said, "We're set." They moved from the 1st of July to the 10th when Tenet moved. And they're set. They're -- they've come out publicly and said that. Tenet when they made their movie came out publicly and said, "We're set. We're going on the 31st. And we're doing this big promotion with Chris Nolan's picture." So the idea for them is to have a promotion on the 17th with Chris' movie prior to that and have a reissue of -- oh god, my memory just went. I should know this at the top of my head. Chanda, are you there?

Inception?

Inception.

Inception. Thank you. Thank you. My memory just went. So what Chris is going to do is -- and Warner Bros. is they're going to have a 10th anniversary reissue of Inception with exclusive footage, which we're really excited about. And so they put that on the 17th as a big marketing push to set up -- help set up Tenet on the 31st.

Okay. So the rest of the year, it seems like there's a good slate, but it's fairly spaced out. How are you feeling about the rest of the year, and whether or not we should be anticipating a potential shift back again?

It's -- you can't say never on this. But I think it's starting to really firm up. I think Disney is -- I can't speak for Disney, obviously, but they very much want to leave Mulan on the 24th as well. And if by chance Disney moves out, I don't think it's going to be a big significant move. I think they -- maybe they'll do something like Tenet did. But I'm not so worried about that because we're able to shift along the way as well. And you've got -- so as you said, you've got Unhinged on the 10th. And then Inception, a big 10th anniversary rerelease in the 17th. Mulan on the 24th. Then you have SpongeBob on August 7, Bill and Ted's Face the Music on the 14th, A Quiet Place on September 4. So it's a good month of August, early September. And then the fourth quarter kicks off with Wonder Woman 1984 on October 2, which is, I think, going to be one of the biggest movies of the year and highly anticipated. And then Disney's got Marvel's Black Widow on November 6. James Bond, No Time to Die is on the 20th of November. Disney Pixar has got their next original movie, Soul, on that date. And then Top Gun: Maverick with Tom Cruise on December 23. So it's a good, strong fourth quarter, and that leads in to what I think is going to be a real recovery year for 2021. So I'm pretty positive about the light -- however, I would like to say this. I don't think the business is going to be like a light switch, and all of a sudden everything is back. I think there's going to be a good, solid build as people feel comfortable in coming back, they see the health and safety protocols we have and as the studios continue to put good product in throughout the fourth quarter. And it is true, Meghan, that some movies that were scheduled for '20 have gotten moved to '21. So that's a very positive move. But also it's true that production has been down for 3 months and post-production has been down for 3 months. So some of the movies that were originally slated to be done for '21 are going to get some push into '22. So I see '21 as a recovery year but a transitional recovery year. And '22, I think, starts to get us back to the normal cycle of movies. I think that's a fair representation.

Okay. Do you envision these movies playing longer than they would have before COVID? Do you think that they're going to be sort of given more time in theaters because of COVID and the capacity issues?

I think especially that is -- that will be true for the early movies. Because we're going to be building confidence with consumers on everything from Unhinged to Mulan and Tenet, I think -- and there's going to be space because there's going to be less movies, I fully expect the movies will have a longer life in theaters. They may not open as gigantic as a movie that went out pre-COVID, but I do think the tail end of it will play longer for exactly what I said, just because I think there's going to be some capacity limits and some process for people to come back. One of the reasons I'm really excited about the Tenet -- about Tenet coming when it is, is I think that movie is going to draw back a lot of young males. And Mulan is going to bring back a lot of families. And so we are going the extra mile to communicate to our customers just of all the safety and health protocols we're doing. And the research clearly says you have to do that. The research says if you tell people the health and protocols that you're doing, there's going to be a much higher percentage of people willing and desiring to come back soon.

Yes. I mean I would think so. I think that -- that's first and foremost in people's minds. So it feels like you're doing all the right things. So I want to shift gears to a big topic in the last few months which is premium VOD. Trolls World Tour sort of kicked off this big debate in the industry. You kind of alluded to your -- to on your last call that you're willing to work with studios on mid-tier films. What -- how do you see this going? I mean I think that AMC still says that they're not -- they're still talking to Universal, but that they are not scheduling their films at this point. How do you think that plays out?

Well, Meghan, as you know, we did not enter into that media fray. It doesn't mean that we haven't had and continue to have active discussions with Universal. We just are choosing to do it in a private business setting as opposed to a press setting. And I can say I know that Universal is committed to the theatrical business, especially as it relates to their big movies. This is important to them. They've come out and said it publicly. They've said it to us. They've got some big movies coming next year. They got Jurassic World. They have a Minions picture. They have Fast & Furious. So we're excited about playing those Universal pictures. And we think we will be able to come to a business decision with them that we're both happy with. We don't expect any significant changes on the big, high-profile movies. On the lower-end movies that play less in theaters, they're in and out very quickly. We're willing to talk to Universal or Warner Bros. or any content provider relative to those low-end movies that come in and out of theaters quicker and come -- kind of come up with a unique plan that might work for both involved. But relative to the big ones that really drive the box office, we fully expect a full theatrical window for those.

And you can -- care to comment on sort of the things that you're willing to discuss with the studios or anything except for...

Yes. Meghan, I think as I said to you, I think those are better off done in a private business setting than on a call like this.

Understood. If in the case that Universal can't work it out with AMC and Regal, that should benefit Cinemark, right, once these movies come out. I mean Universal doesn't have any big movies, right, in the near term. They seem to have maybe The Croods, which is at the end of the year. But what if they can't work it out, that's going to see a big benefit to you, right?

I'm going to pass on that too just because there's too much speculation there, and it has to do with Universal and AMC a lot more than Cinemark. So I think I'm just going to pass on any comment here.

Fair enough. Okay, so you touched on concessions earlier. You guys talked about optimizing for the level of demand that you expect early on. What do you expect -- expecting from concessions when you open? And how do you think that's going to ramp?

Yes. It's interesting. We're -- we've looked at how theaters have done -- some independents have opened previously. And concessions have actually been okay. The key on concessions, of course, is the health and safety protocol. So we're going to open up our concession more with the core concessions. We're going to offer packaged candy, no free-flow candy. Bottled soda pop and water fountain drinks, but no refills on the fountain drinks. We're going to -- we have a specific protocol in how we serve popcorn so that it's completely safe and hygienic, and there'll be no refills on any popcorn vessels. So if somebody had previously bought an unlimited popcorn, we'll make good on that, but we're going to give them a new vessel every time. We're not going to do any refills. And the same goes for any fountain drink as well. So we're going to begin with the core items like that, and we'll probably offer some -- where we serve alcohol, we'll offer beer and wine and a frozen drink and likely hotdogs. But where we're going to delay a little bit are the items that take a lot of personalized touch to make. So for example, our hand-thrown pizzas and our -- and some of our hamburgers or French fries that take -- that takes more cook time. We're just going to -- we're going to take that 60 days out or 90 days out. We're going to do it, and we're going to bring them all back. But in the beginning, we're going to go more for the core. And it makes -- it will make the line shorter. It will make the delivery to the consumer more clean and simple and packaged. Obviously, we could not have popcorn. Popcorn is -- popcorn and movies go together, so you can't do that. So we've just adjusted our protocols and put training modules in place for all of our returning employees, so that they know exactly how to scoop up and provide popcorn to a consumer with no potential negative effect.

And then what's -- what are you going to be looking for before you actually bring back those items that have higher touch? Pizza Hut and the...

I think we're going to let the restaurants lead the way there. And I think people will start to -- more restaurants will open up, and people will become more comfortable in going to restaurants and having prepared food put in front of them. So since it's not so sentinel to our business -- what's sentinel to our business is Coca-Cola products, water, beverages, popcorn, candy, hotdogs. The other ones are important, but they're more of our enhanced food. So we just think we don't need to be the leaders there. We can let restaurants be the leaders there, and we'll follow in 60 to 90 days.

So what are you thinking on per caps for the near term? I mean I took them down on a lot of my models assuming that that's going to impact. You've obviously been ramping, and these expanded options have helped. So going back to the traditional items, you're going to have much lower per caps. Is that the way we should think about it?

I would maybe adjust what you said there. I would say, "Yes, we probably will have lower." I'd take the word "much lower" out -- I might take that word "much" out. But the other thing that's going to take place is the items that we are offering have very high margins. So I think you're going to see our margins potentially increase a little bit there, but per caps will moderately come down. I think that's maybe a better way to think about it.

Okay. Well, margins is a good segue. You guys alluded to operating the theaters a lot more efficiently in the wake of this crisis. So what are you thinking about margins and profitability as you sort of recover? And how should we think about the next few years as you move forward?

Well, it's interesting. We're doing some things that are going to increase our efficiency. The way we sell tickets, I think there will be a greater emphasis even than before, it's already going this way on reserve seating. And when you show up at the theater now, you will no longer print a ticket. You will just show your phone and scan it. So that's going to save some time, some printing, lots and lots of paper. So we're going to make that a more efficient operation, reduce down the number of people that go to a box office. We're going to reduce down the amount of cash that we take. And as we reopen, everything is going to be basically cashless. You will buy your ticket with a credit card. You even buy your concessions with a credit card. If you don't have it, there'll be one place to go buy a gift card, and then you can use the gift card instead of cash as well. So we're going to minimize that. We think we can also be more efficient as we lay out our labor. Because in the beginning, we're going to staff to a level to ensure the health and safety and cleanliness of the theaters, but we think that the capacity is going to build. And also we're going to start with 3 and 4 shows a day instead of 4 and 5 and 6 shows a day, again, and we'll build that as capacity goes. So I think that we have the opportunity to become more efficient, both in theater and also out of our Plano and Frisco offices.

So the cost that we should think about ramping with demand, obviously you're going to have the film rentals and your labor a bit. Is there anything else we should be thinking about? Because some of these stuff in the midterm should be temporary, but how should we think about that?

Well, Meghan, I wouldn't put too much reduction on the theater-level reduction even notwithstanding what I just said, simply because we're also investing, at least in the short to moderate term, in health and safety protocols. And now we're going to be careful there, and we're going to watch our labor costs very, very carefully. So I wouldn't put too much there. Relative to film rental terms, I don't think there's going to be any dramatic shift on film rental terms. Film rental terms are based on scales, as you know, on how the movies do. And I don't think there's going to be any change pre-COVID or post-COVID on that.

So do you think the business can be more profitable in the future post -- once you recover? You talked about '22 getting back to sort of box office recovery, to be business...

Meghan, I wouldn't say more profitable. I would say our goal is to try and move back towards what already were, as you know, industry-high EBITDA margin. So to the extent that we can work our way back to that, we were north of 20% for year after year after year. I don't think we're looking -- or I don't think we have a line of sight to increase what has already been the highest profit margins, the EBITDA profit margins in the industry. So I mean our goal is going to be to move back to get to those. And it's not going to be on day 1 because we have some start-up costs. We have start-up costs of bringing all these people back in the beginning, less amount of product and some hesitancy to come back to the theaters. I really don't think it's going to be a light switch going off, we'll open their doors and everybody is back. I think it's going to be a moderate build based on people's comfort level coming back, where the virus is and of course, content. But I do believe as I look -- as we look forward, that we're going to build into the fourth quarter, and I'll call '21 a transitory rebuild year. It's going to be -- it's -- I think it's going to be a good year. I think it's probably unrealistic to think of '21 as a record year. And I don't think we're going to get back to that sense of normalcy until we get to '22.

Okay. So I wanted to shift to Latin America. The virus took hold later there than it did in the U.S. You said you were not expecting to open there until August. Can you give us an update on your approach there and what you plan to do?

We're fortunate in that we've been operating in Latin America for, gosh, over 25 years. And we have a tremendously experienced management team, both in Latin America and also in our Dallas headquarters. So you're right, it is somewhere 3 to 5 weeks behind the U.S., especially in a couple of hot-spot countries like Peru and especially Brazil. So we don't expect to open the theaters there until somewhere around late August. The advantage that -- the disadvantage Latin America has is the -- there's not as much governmental support. The health care isn't quite as pervasive as it is in this country. But the advantage is that we're testing and learning and have this whole map of how to reopen the theaters that we're doing in the U.S., that we will then be able to translate and adapt for each one of the countries. We do business there in 15 different countries. And we're already in the planning stage to reopen, and we're doing that based on some of the learnings that we're getting out of the U.S. So I'm encouraged about Latin America, but like I said, it's somewhere in the 4 to 6 weeks behind the U.S.

Okay. And then the slate will just sort of be timed for those areas just on later schedule? And sort of similar to the U.S. slate, they'll be opening there later?

Yes. And it's never exact in -- especially in the south con of Central and South America because school holidays are so much different. Winter is summer, and summer is winter. So many times, the studios want to delay a big family movie for several weeks to tie to school holidays down there. So it's not unusual to not go day and date with major motion pictures.

So before this all happened, you were still expanding your footprint in Latin America. I mean this -- there was some sort of delays to some of the builds. But do you still see Latin America as a growth opportunity for Cinemark?

Well, one of the last times -- I don't think it was this earnings call because we didn't really dive into it, but the earnings call before that, I think we kind of reset a little bit there saying that we thought Latin America was still a growth opportunity, but not to the same level and extent than it had been. So we continue to expect that we're going to have an ability to grow there. But our #1 priority in a coming out of COVID, in a post-COVID world is going to be to rebuild our balance sheet. We think that one of the real strategic advantages that Cinemark had going into this was we had over $500 million in cash and a strong balance sheet and a low leverage ratio. So one of our top priorities is going to be to rebuild that. So therefore, we're going to be very cautious and conservative on new builds, not just in Latin America but in the U.S. Because number one is we want to get back to rebuilding that balance sheet up, and I think it just makes good business sense. Nobody knows what's going to happen. And one of the reasons we have been able to survive and thrive through this and be in the position we're in today is because we have that strong balance sheet. So that's our #1 strategic priority. And then we'll turn our attention back to growth initiatives, both domestically and in Latin America.

Okay. So does that imply that the CapEx is not going to get to the level that you were guiding to last year? It's going to be, in the near term, a lot lower than that, more than that?

Yes. Yes, it is.

Maintenance range? Okay.

It will be a lot lower. We're not presenting a number yet because we want to -- when we present a number, we want to have fully thought through it. But to give some indication of where we're going, your characterization is right. It will be significantly lower.

Do you want to comment on the relationship with Cinépolis? Because I think the family members bought some stock recently.

We have an excellent relationship with Enrique, that's the father, with Alejandro and have for many years. They filed a 13G Form when they bought approximately 7% of Cinemark stock. It was a completely passive investment. They made that clear on their filing, and they've also made it clear to me personally. And they indicated they just thought the cinema business was a good business to invest in, and they wanted to get some of that into the United States. And they thought that our management team and our theater assets were best in class, and so that's why they chose to make the investment. But it's purely a passive investment.

Okay. So your balance sheet, you just -- we're talking about it, it's in great shape. Sean indicated that you have a runway well into '21. Does that imply that you have a much longer runway now that you're opening?

Well, let's see what happens with it with -- because right now, obviously, we're spending money. We're spending money to light back up the stairs, to hire back thousands of people. And so we're confident, especially with the debt offering that we did that were -- as Sean indicated, that we've got a runway well into '21. So I don't think it's going to be a long time before we get to cash break in operating the theaters, but that's not going to happen for the first week or 2 because we're going to be showing library product. And it's not until such time that we get out with that first-run product and we start to see the capacity limits all get lifted that we think -- then we'll get back into a cash-positive line. So I think it's a little premature to revise our -- revise the liquidity plan that Sean laid out before.

Understood. So you paused the dividend for the time being. What is the Board looking for to have the confidence that they can start paying that dividend again? What would you say on that?

Well, I think I'd go back to the first thing I said. The first thing I said relative to capital is let's make sure we have enough cash for a long runway into '21 in case the downside happens. We don't expect it, but we've planned for it. So that's number one. Number two is let's take that free cash flow and build back up the balance sheet just in case something happens again. So we'll do that. And then we'll look at it and say, "Okay, at what point does it make sense for us to start paying a dividend again and allocate some of that money back into the growth area and potentially look at an M&A opportunity that comes down the line?" But I would say that it's almost in that order: number one, our liquidity position; number two, building back up the balance sheet; number three, looking at a renewed dividend; and number four, looking at potential M&A in a conservative mode. So I don't have a time frame to give you. I will use this word, we temporarily suspended the dividend. We did not permanently. We just don't have -- we don't have guidance for you to tell you when that temporary would be lifted.

Is there any reason to think that your theaters can't draw off as much cash post-COVID, post-recovery once they recover?

No, I don't think there's any reason. I think it's going to be a build back, Meghan. I don't think it's going to be on day 1 or necessarily in the fourth quarter. I think we need to get back to a consistent product flow. And that will begin in '21 and culminate, I think, in '22 as I indicated.

Understood. So just last topic, what do you think about theaters, the industry post-COVID? There's been a lot of talk about potential bankruptcies. You were probably around and saw what happened in the multiplex bankruptcy cycle. What do you think happens in the next few years with theaters?

I think there will probably be in the -- I'll speak specifically of the United States, if that's okay. I think there'll probably be a little bit of a slowdown in terms of growth, but I think that there will not be any massive closure of theaters. I think there could be some consolidation. This could accentuate some consolidation amongst smaller -- among smaller theater chains. Most of those are family owned, and what causes those to get sold usually is some form of estate planning indication. So I don't think there's going to be any kind of mass closure of screens, but I wouldn't be surprised to see a small number of screens closing and various circuits closing some of their lower-performing theaters. I mean -- by the way, we do that every year. We've done it for the last 5 years I've been at Cinemark. We come to the end of a lease of 5, 6, 7, 8 theaters. We're at the end of the lease. It's not throwing off a lot of cash flow or maybe it's mildly negative, we'll close the theater. So that's kind of the normal course of business. There may be a little bit more of that, but I don't think on a mass scale. And I do think that maybe they'll be a little bit slower in terms of a lot of new capital going for new growth. It's certainly for the short term.

And do you think Cinemark would do well in a scenario like that?

Well, I think we have a little bit of an advantage because we're not financially challenged. We're in a financial area of strength. However, Cinemark has traditionally, and I fully support it as does our Board, we tend to be a little bit conservative. And I think in this COVID crisis, that's proved to be a good strategy. So I don't think our strategic direction is going to change, but we do have a little bit of an advantage in that we're in a good financial position. And we look forward to whatever those opportunities are, whether it's additional new builds or potential acquisition. It's so hard to think of an acquisition right now because it's hard to know even how to price it right now. So it's not on the top of our list. Top of our list is to improve that balance sheet and get Cinemark back to an element of strength we were in pre-COVID.

Understood. Well, we're at our time. Mark, thank you so much for being here. Good luck with the opening in the next few weeks.

Thanks, Meghan. I appreciate it. Good questions. Okay. Thanks again. Bye-bye.

Thanks. Bye.