Cinemark Holdings, Inc. ($CNK)

Great. Good morning, everyone. I'm Spencer Amer with Deutsche Bank. And I'm joined today by Melissa Thomas, CFO of Cinemark. Melissa, thanks for joining us.

Thanks for having me.

Let's start with the big picture. It feels as though the industry is back in full swing this year with wide releases set to meet or exceed pre-COVID levels. How do you characterize the overall health of the industry? And what gives you confidence in sustained box office growth looking ahead?

So consumer demand for theatrical moviegoing remains strong. We've seen that time and time again as quality content comes into the theaters. And studios continue to affirm their support for and recognize the value of theatrical releases. As we look ahead to 2026, we're highly optimistic about the slate. It's one of the robust -- most robust, if not the most robust, slates that we've seen in several years with the volume of wide releases expected to approach, if not exceed, pre-pandemic levels. So we're excited about the year ahead from a slate perspective. As always, box office performance will depend on how that content resonates with audiences. But beyond just the slate, we're even more excited about the opportunities that remain squarely within Cinemark's control outside of just box office to drive incremental value and growth.

Great. Another key industry topic is the shortening of the theatrical window. While most major films have been able to maintain a 45-day window, smaller titles are seeing shorter windows. What's your latest view on the optimal window? And how are you working with studio partners to find the window that maximizes value for both exhibitors and creators?

So the theatrical window has evolved significantly, both in length and variability, post-pandemic. It varies by studio, by film, by timing of release. As a result, there are ongoing conversations currently between exhibitors and studios to ascertain the impact of changes in windows on consumer behavior. And while we have a shared objective of maximizing revenue and value creation as well as enhancing flexibility and marketing leverage without impacting theatrical attendance and proceeds, trends are indicating that shortened windows, especially highly shortened windows, could be impeding attendance recovery, particularly for the casual moviegoer or for smaller films. While we do believe in a flexible windowing structure, is advantageous for both studios and exhibitors, we do believe that there needs to be a sufficient length of time between when a film is released in the theaters and when it's subsequently put into the home. And we believe that window needs to be robust enough across the majority of films that are released to maximize value and avoid customer or consumer confusion. So broadly, as we think about target, we think, on average, a 45-day window is a prudent strategy for the majority of films released to make sure that value is maximized.

And that's to PVOD, right?

Yes.

The industry has historically seen film releases concentrated in the summer and holidays, but you've mentioned seeing some momentum toward a more evenly distributed 12-month film release calendar. Is it feasible that we see further momentum in that direction? And are you seeing any progress in conversations with studios to spread releases more evenly throughout the year?

So historically, box office has been highly concentrated in the summer months as well as holiday periods. However, over time, it's been demonstrated that content can deliver robust performance across all 12 months of the year. That being said, as we look at, more recently, we look at 2026 slate, we do see some reconcentration, we see some crowding in the summer months as well as the holiday period. We are in ongoing conversations with our studio partners who look to optimize the release calendar so that we can maximize overall box office potential. We do believe that there's opportunity to position tent-pole films into periods that traditionally aren't those peak windows because it allows the demand to spread out, increases utilization and can increase box office potential. So ongoing conversations there and we do think there's opportunity.

Sure. I think it was Dune, did pretty well off cycle, and unfortunately, scheduled with Avengers. Let's turn to kind of market share. Cinemark has achieved significant sustained market share gains post-pandemic, which you've attributed to structural advantages and strategic initiatives. You've also noted that some of the market share gains may revert as the slate normalizes toward more blockbusters, and thus, capacity constraints. Where do you think the industry is today in terms of that normalization curve? And can you help investors contextualize how frequently these capacity constraints are occurring today and how much more of your theaters could be constrained?

So overall, from a market share standpoint, we've been really pleased, in full year 2025, we had gained over 150 basis points of share relative to pre-pandemic, which is a testament to the strength of our circuit as well as the effectiveness of our strategy. As we look at what drove those market share gains, we do believe we continue to benefit from our sustained investment in the guest experience as well as strategic initiatives around showtime optimization, marketing and our loyalty programs. In addition, our market share in 2025 did have some outsized benefits from favorable content mix. So we did see an over-indexing of family and horror titles during the year, which resonate particularly well in our circuit. We also saw less capacity constraints. And as we look at market share, it can vary period to period depending upon the content mix as well as the extent to which we do reach capacity. As we think about go-forward look on paper, the 2026 film slate does look to be a more diverse set of films. So we'll have to see how the content resonates, the individual films resonate with our audiences. In addition to that, as we talked about, with the dating, we do see crowding during the summer months when we have some particularly strong family content that's expected to come out, and we do have the crowding of that holiday period. So we are expecting that our market share may normalize a bit. But again, we've got to see how the moving pieces play out. But rest assured, we continue to focus on capitalizing on the box office potential out there.

Sure. I think another contributor to market share was alternative content. Cinemark's shares benefited from periods with more of that alternative content. I think it's made up over 10% of box office revenues for 3 straight years now. How is Cinemark positioned to curate and capitalize on this vertical? And do you view it as a sustainable, predictable part of the annual slate?

So we've seen nice success on the alternative content side and we continue to see opportunity there. We view a key driver of our success is our knowledge of local moviegoing behavior at each of our theaters. Our teams are looking at demographic and behavioral insights to optimize our showtimes and program content to maximize box office potential. While in parallel, our targeted marketing is having that content -- pairing that content with the right audience based on the audience's demonstrated preferences. That's particularly important with alternative content because the demand can vary widely across markets. So it is very localized. In addition, we've seen an increase in content within the alternative space. And some key areas that have performed particularly well: anime, foreign titles, faith-based films as well as concert films. And those -- that type of content tends to have really engaged, passionate audiences. When you pair that with that localized knowledge and targeted marketing strong execution, there's incremental attendance and revenue generation to be had. So as we look forward, we continue to see opportunity. We do have less lead times with alternative content. So you don't have as much line of sight upfront as you would with traditional films. But we continue to see potential for the industry as well as Cinemark.

Right. Great. Apple and Formula One recently announced a partnership with IMAX to show live screenings of certain races in select theaters in the U.S. Regal similarly partnered with Riot Games a few years ago to host an Esports championship. We're seeing other sorts of content coming into theaters. Are there opportunities for Cinemark to participate in similar events? And how does Cinemark assess these opportunities?

Absolutely. As I said, we feel that there is great opportunity on the alternative content side more broadly. We've done testing over many years on similar types of events, so including Esports, traditional sports, and content -- select content creator releases, with varying results depending upon the market and the type of content. As we think about the testing that we've done to date, there is a couple of key observations there. First, you have licensing and rights, which can cause some complexities and some limitations. Second, I'd call out scalability. Particularly with respect to live events, there's a lot of effort in terms of planning and coordination for what tends to be limited showtimes, which can constrain the box office potential relative to wide releases. So there are some of those factors. The third thing I'd highlight, as I alluded to earlier, is really the localized demand. So when you think, for example, in sports, what's going to resonate in one market isn't necessarily going to resonate in another market. So we'll continue to test with these types of events. And as I mentioned, we see opportunity on an ongoing basis with alternative content more broadly, but we're also focused on making sure that we're maximizing attendance within our screens, and we'll make our programming decisions accordingly.

And moving to Movie Club, talk about optimizing the use of the screens. Movie Club has grown a considerable amount and drives 30% of your domestic box. As the program matures and growth may start to plateau a bit, where will the next phase of growth come from?

From a Movie Club standpoint, we're really pleased with the traction that we've seen in that program. We now have over 1.45 million subscribers in Movie Club. We saw 5% growth year-over-year in 2025 in our subscriber base, and it's up 50% since 2019. So demonstrative of the significant value that Movie Club members are seeing in that program. We continue to lean in there. As we gain more and more insights from our Movie Club members, we're able to tailor our messaging, so the personalization side, as well as drive deeper loyalty and engagement. This allows us to tailor -- make tailored enhancements to the program. We introduced Platinum tier for the most frequent Movie Club members. More recently, we've introduced a premium upgrade add-on with those who are wanting the most immersive experience. We also have badges that really create that social connection once members achieve certain milestones, as well as exclusive perks like early access screenings. So we continue to look to enhance the value prop and keep that program fresh for our members. And we still see runway for growth. And while it's hard to tell to what extent how big Movie Club can be, we do continue to see that when there is new compelling content in the theaters, we are gaining more subscribers. So we feel good about the trajectory of that program.

Has Movie Club helped with sort of the movement towards younger viewers in theaters?

Movie Club has helped in a couple of regards. I'd say, in general, we're seeing strong consumer behavior from the Gen Z and Generation Alpha. However, as I look at Movie Club more broadly, what we're seeing there is it's actually reaching a broad consumer base. And the benefit there is, what we can see in the data, is when a consumer goes from being a non-Movie Club member to a Movie Club member, that their frequency is increasing when they're doing so. So we like those purchasing patterns that we're seeing.

Helpful. ATP has exhibited strong growth driven by strategic pricing and an uplift from premiums. Looking ahead, where do you see the most opportunity for further growth in pricing? Is it more about disciplined base price increases? Or is the primary lever driving consumers to upgrade to premium format?

So we've seen a 4% CAGR in our average ticket prices over the past 3 years. We've been pleased with the growth profile there. As we look forward, we expect to grow our average ticket prices modestly year-over-year in 2026, and with the 2 key catalysts being our strategic pricing as well as premium format. So we do continue to see opportunities on the premium side, including XD, D-BOX, ScreenX, IMAX, given consumer trends preferencing those formats. So that's an area we continue to expand our footprint in as well. So that is one catalyst. And then beyond that, continue to pursue strategic pricing opportunities. Those though, again, are predicated upon a number of factors. We're looking at consumer elasticities, we're looking at screen -- or the features within a theater. So we're taking into account a number of different factors as we inform our pricing decisions. We'll continue to approach it thoughtfully as we look to maximize attendance and box office, but we see growth opportunity on both fronts there.

Is modest 4% again?

Modest is low single digits.

And on the concession side, you noted, of course, it's a game of singles and doubles. And you were kind enough to break out last year's CPC growth contributors into sort of 3 buckets. Which of the growth levers within CPC has the most runway this year? And what's the lowest-hanging fruit for optimization in concessions?

On the concession side, we've grown our per-cap 6% -- a 6% CAGR over the last 3 years. We've captured a lot of the low-hanging fruit. But we still do believe that we have the opportunity to grow our concession per cap mid-single digits year-over-year in 2026. If we look at the growth that we saw in 2025, there were 3 key factors: our strategic pricing, also our incidence rates increased as well as shift in product mix. We expect those factors to continue to be contributors to the growth this year. However, we have a number of initiatives in place to drive incidents that I would call out, and singles and doubles is how we always refer to it because it's many initiatives that add up to a healthy growth rate. But we continue to look at improving the throughput of our concession stands, leveraging planograms to optimize the monetization of our space. We continue to lean into enhanced food and beverage, so think hot foods, pizzas, really more kind of meal items, in addition to that, merchandise, at-home concession delivery. So there's a number of areas that we continue to see opportunity that we're looking to capture on. And then pricing, similar to the ticket side, leveraging data to inform those decisions, and ultimately looking to maximize incidents and overall revenue.

And are you using AI across both ATP and CPC as an initiative to optimize everything?

We do leverage AI within our pricing. So that is an area that -- and particularly on the machine learning side with respect to the pricing. But we do see opportunities on the GenAI front as well in that regard.

And understanding that moviegoing has been resilient in prior economic downturns, what are the key levers Cinemark can pull beyond the inherent value prop of a movie ticket? Might you offer something like a family ticket? Have you seen any changes in consumer behavior in any pockets of your footprint?

So to your point, our businesses tend to be more reliant upon film content than economic cycles. It's important to note though that we are as focused on ensuring that our consumers see -- have strong perceived value from their experience at Cinemark. And we think that that bodes well for us as we look at our attendance recovery relative to the industry. We're looking to make our experience premium for consumers regardless of what auditorium they choose. And for those more price-conscious consumers, we do have programs such as Discount Tuesday as well as Movie Club that they can take advantage of. All that said, we continue to see consumers take advantage of that full theatrical experience when they come to Cinemark. We see them trading up to our enhanced formats like XD and D-BOX. We see them indulging more on the food and beverage side. And merchandise, the growth we've seen in merchandise sales is just another indication that, when they come to the theater, they're looking for that full experience. So we continue to focus on giving them that. And then rounding it out, as we talked, pricing is an important factor, and we continue to approach that thoughtfully.

It sounds like a lot of Yoshi buckets will be purchased for Super Mario?

We certainly like the film slate as it pertains to merchandise.

And maybe you could speak to Discount Tuesday. Are you seeing good trends there?

Yes. We've seen positive trends on the Discount Tuesday side as we've emerged from the pandemic. So it is a nice offering for that value-conscious customer.

Okay. Great. And assuming the box office continues its recovery in '26, it's hard to imagine margins won't see meaningful expansion compared to a more challenged '25. Can you walk us through the key factors beyond attendance? Specifically, how should investors think about the puts and takes from each of your expense buckets?

So overarchingly, our margin profile is most heavily impacted by box office, and as you mentioned, by attendance, given the leverage that we stand to gain as the top line scales. Beyond those factors, other key items to consider would be our market share, our average ticket prices, food and beverage per cap, the value that we capture from our strategic initiatives, as well as cost pressures that may materialize and our ability to offset those. As we think about kind of other factors to model as you're thinking margins for 2026, I would highlight some -- I guess, if you go big picture on the expenses, we'll start there, and then I'll give a few specifics. But broadly, given that we do expect box office and attendance to expand, we do expect to get leverage over that fixed cost structure, which is particularly prominent in our U.S. business where we have, namely, fixed facility lease expense, also G&A and, to some extent, utilities and other. As you look at the variable expenses, there, we expect expenses to fluctuate based on attendance changes, although not at the same rate, our key variable expenses, our film rental, our concession COGS as well as salaries and wages. And then in case of international, facility lease expense. Other factors to take into account in 2026 from an expense side, we have been seeing inflationary pressure on wage rates and concession costs. We do expect those to continue in 2026. On the film rental side, our film rental rates will be dependent upon the concentration of blockbuster films. So we'll need to see how that shakes out. Film rental rates can be balanced out if small and mid-tier films overperform. So we're looking at film rental rates. And then outside of that, I would call out utilities and other. We do continue to expect that to remain elevated as we continue to work through some deferred maintenance across the circuit, as well as absorb some higher energy costs just given the market dynamics there. And then lastly, I'll highlight G&A. We do expect to make some targeted investments in head count and capabilities, and we've got merit increases and some benefit cost impacts. But we do expect those increases to be somewhat offset by variability in incentive compensation as well as professional fees. So there will be some offsets within that line item. But broadly, we continue to pursue productivity-driving initiatives and cost-mitigating actions to maximize EBITDA and margin potential.

So the deferred maintenance go throughout the year?

Yes. We expect -- when we started deferred maintenance last year within the R&M line item, we stepped up our repairs and maintenance to address deferred maintenance needs across the circuit. We expect it to be a 2 to 3-year time frame. So I would expect it to continue this year and perhaps next year as well. That being said, I will call out, we're not expecting, because we did start it last year, we're not expecting from a year-over-year perspective that to be a meaningful impact on the comp.

And you launched a brand campaign relatively recently. Was that a meaningful contributor to film rental and advertising?

So our marketing campaign more broadly are targeted in 3 key areas. So first, expanding our customer base; second, increasing moviegoing frequency; and third is deepening customer loyalty. So we did launch our first-ever brand campaign, it's Showtime, last year, which we were really excited about. But that's just one of many marketing campaigns that we're executing upon. Some other examples of where we're leveraging our marketing spend would be to promote -- drive awareness of and acquire subscribers for our Movie Club program, also promoting our mobile ordering platform, merchandise, at-home concession delivery, as well as premium formats and then new-builds and remodels. So it's, I would say, one -- our brand campaign is one of many areas that we're spending on the marketing side. But we continue to calibrate our spend based on box office performance and the returns that we're seeing. And when you step back and look at the film rental and advertising line item, the biggest driver of that continues to be the concentration of films and -- the concentration of box office and mix of films.

Of course. Perhaps we can talk about international. Your Latin America business recovered to pre-pandemic levels quite rapidly despite economic turmoil in markets like Argentina. However, '25 was a bit more challenging. What drove the underperformance in LatAm? And what are the key drivers for a bounce-back this year?

We've been really pleased with the trends that we've seen recovery-wise in Latin America, albeit '25 was softer as a result of a film slate that didn't resonate well with audiences, which can happen from time to time in the region. As we look forward to 2026, we believe the film slate caters much better to our Latin America market, and we're highly optimistic there. As we look at the titles, Super Mario as well as Spiderman, Avengers, Minions, Michael, there's a number -- Toy Story 5, a number of titles that we expect to perform strongly in Latin America. So that slate is much more in their favor this year.

And how are you investing in the international footprint to capture more market share?

So our market share in international, I would highlight, to start, is quite strong. We do have -- if you look at the countries that we operate in, our overall market share in those countries is around 25% of admissions. And our market share does vary by country, with countries such as Brazil and Colombia with market share around 20%, goes as high as 40% in countries like Argentina and Chile. So we've been pleased with the performance there, and we attribute that to similar factors that we've seen in the U.S., which is that sustained investment in our theaters as well as successful execution of initiatives around marketing, loyalty programs and digital transformation within the international business. As we look forward, we continue to deploy capital in our international circuit, both maintaining the circuit as well as investing in premium enhancements, similar to the U.S. So think XD, D-BOX, are areas that we're looking to expand, as well as select new-builds. So we do like the Latin America market. And as you look at the market itself, it is a strong moviegoing culture, very family-friendly, social activity for the region.

And maybe changing pace a little bit. The Warner Brothers sale undoubtedly has repercussions in the theatrical space. From your seat, is the greatest risk theatrical, kind of film consolidation, lower volume output? And is there also a potential upside scenario?

So our point of view on consolidation more broadly is that any transaction that results in increased investment in the quality and output of films with a robust marketing campaign and an exclusive theatrical window is constructive for the industry. Conversely, a transaction that reduces film output, lessens marketing support and shortens the theatrical window would be a risk to not only consumers, exhibitors as well as local communities that rely on that healthy theatrical ecosystem. So from our lens, what we're focused on is pursuing firm commitments around these key areas to keep those dynamics healthy.

And from a capital allocation perspective, now that COVID-related debt is extinguished, you've increased the dividend and authorized a buyback. Looking forward, how do you balance returning more capital to shareholders versus accelerating investments in ROI-generating projects like new-builds and premium features that you talked about?

From a capital allocation standpoint, we've been really pleased with the position -- the strong position that our company is in, given our focus on strengthening the balance sheet as well as investing in accretive growth opportunities. As we look forward from a capital allocation standpoint, our priorities, first and foremost, continue to be maintaining the health of our balance sheet as well as investing in our business. Now our strong cash flow profile affords us the ability to invest in the business as well as return capital to shareholders. And you saw that last year when we reinstated and subsequently increased our dividend as well as executed upon share repurchase -- our share repurchases. So we continue to take a balanced and disciplined approach to our capital allocation, looking to continue to have flexibility to capitalize on opportunities that may arise and mitigate risks, all with the goal of driving long-term value for all shareholders.

And CapEx is ramping to $250 million this year. How do you decide between building a new theater in an underserved market as opposed to upgrading an existing location? And what kind of returns are you targeting for these investments?

Yes. So as it pertains to our CapEx, we are, again, disciplined with our spend on the CapEx side. We are investing in premium amenities. We're investing in maintaining the circuit and we prioritize select M&A to the extent it meets our hurdles. As we think about investing in the business and new-build versus premium format, that decision is really guided by what's the strategic importance and what is the return profile of those varying investments. So that's going to be the biggest contributing factor in that decision for us. But we do like to have a balance across our investments.

And is it reasonable to expect a continued similar level of investment in '27 and beyond?

No. I'd say it's too early to give a specific number on 2027, but we do continue to see an abundance of ROI-generating opportunities. We expect to continue to be prudent, but we do have opportunities that we see in front of us. We'll need more time though before we commit to a number there.

Sure. And on the M&A front, you've stated you have an appetite for M&A but prefer to deepen penetration in existing markets. With your balance sheet strengthened and leverage within your target range, how are you viewing the current landscape for potential acquisitions? And what criteria must an asset meet to be an attractive fit?

So as we look at M&A, we evaluate all transactions that come to market. We're targeting high-quality assets with minimal deferred maintenance needs. As we think about the return profile, we want to bring on an accretive opportunity that's at an attractive multiple. Other factors that we consider is we look at scale when we look at an acquisition target. We also look at the strategic importance, the competitive positioning. The margin profile is also important for us. We continue though to approach that with discipline. We make sure that M&A would need to meet our investment criteria. And that's worked well for us historically. So we want to continue that disciplined approach. And I'd say at this stage M&A has been fairly limited.

Has the frequency of M&A opportunities improved at all since the pandemic?

No. We've actually been surprised. We expected that more M&A opportunities would arise post-pandemic than have come to fruition. So we'll need to see how that evolves as box office normalizes.

Why do you think that is?

It could be a couple of things. It could be a kind of a disconnect in terms of what multiples acquirers are willing to give. It could be also box office not being at a point where valuation potentially is optimal. So I would assume those are factors at play.

Okay. And maybe just to wrap up, a fun one, what films are you looking forward to this year?

Oh. I'm looking forward to -- I mean, there's a number on my list. Devil Wears Prada is probably high on my list. Super Mario is really up there. I loved the first one. But yes, there's a number of films that I'm looking forward to this year.

It's a very exciting slate. All right. Well, thank you, Melissa.

Great. Thank you.

Appreciate the time.