Omar Mejias Santiago

Omar Mejias Santiago from Wells Fargo asked about the state of the consumer, any signs of weakness impacting spending, and the drivers behind higher concession costs in the quarter.

Answer

CEO Sean Gamble reported no signs of macroeconomic pressure on moviegoing, citing strong Q2 momentum and record premium format sales as evidence of robust consumer spending. CFO Melissa Thomas explained that higher concession costs were primarily due to a greater mix of merchandise, which was exacerbated by low Q1 attendance, and she does not expect that rate to be the new norm.

Omar Mejias Santiago asked where the additional film volume is expected to come from to close the gap to pre-pandemic levels and requested an analysis of the drivers behind elevated concession and labor costs.

Answer

CEO Sean Gamble attributed future film volume growth to a mix of traditional studios, new entrants like Amazon and Angel Studios, and the continued expansion of non-traditional content. CFO Melissa Thomas clarified that the concession cost of goods sold *rate* was actually favorable year-over-year. She pointed to the 'Utilities and other' expense line as a key cost driver, impacted by higher variable costs from attendance, gift card commissions, and insurance, and also flagged future headwinds from deferred maintenance spending.

Omar Mejias Santiago asked for the key drivers of the quarter's strong market share outperformance and inquired about the potential for M&A as the company considers reinstating its dividend.

Answer

President and CEO Sean Gamble attributed the market share gains primarily to a favorable film mix of family, horror, and nostalgia titles that resonated well with Cinemark's audience, in addition to the company's strategic initiatives. Regarding M&A, Gamble stated that while past opportunities haven't met their investment criteria, he believes higher-quality assets may become available in the U.S. as the industry continues to rebound.

Omar Mejias Santiago asked about the historical performance of the Chinese box office during recessionary periods and whether there are concerns that an economic slowdown could impact attendance.

Answer

CEO Richard Gelfond pointed to the record-breaking Q1 results, achieved during a slow economic period in China, as a strong indicator of resilience. He asserted that Chinese consumer behavior mirrors other global markets where moviegoing is a durable, affordable luxury. CFO Natasha Fernandes added that government support for the film industry in China also provides a buffer during such times.

Omar Mejias Santiago of Wells Fargo asked how the company's increased leverage with studios translates into better economics and inquired about the potential for margin progression beyond 2025, given the business's operating leverage.

Answer

CEO Richard Gelfond clarified that IMAX uses its leverage not to change film revenue splits, but to secure better marketing placement, more flexibility on release dates, and concessions on ancillary costs. CFO Natasha Fernandes reiterated that margin expansion beyond 2025 will be driven by top-line box office growth falling to the bottom line against a relatively fixed cost base, alongside ongoing cost discipline.

Omar Mejias Santiago from Wells Fargo asked about management's confidence in the full-year 2024 box office guidance and inquired about specific internal initiatives aimed at increasing theater capacity utilization.

Answer

CEO Richard Gelfond expressed confidence in the Q4 slate, citing major titles like 'Gladiator II,' 'Wicked,' and 'Moana 2.' CFO Natasha Fernandes and CEO Richard Gelfond detailed initiatives to boost utilization through alternative content, including concert films, documentaries, and live events like eSports, supported by a new Chief Content Officer and new low-CapEx streaming technology.

Inquired about the expected acceleration of product innovation following new DSP deals, how new features might improve churn and conversion, and the key focus areas for DSPs in the near future.

Answer

Executives expect innovation to accelerate through bundling, varied regional product offerings, and super-premium tiers. They highlighted audiobook bundling as a way to expand the market and improve retention, and pointed to enhanced voice-interactive experiences as another area of focus for DSPs.