Cinemark Holdings Exec Insights: Screen Count Outlook, Ticket Pricing Growth
On Monday, Cinemark Holdings Inc (NYSE:CNK) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.
Screen Count Outlook
Eric Handler – MKM Partners: Good morning. Thanks for taking my question. First on your screen count outlook for the year, you gave us what you expect to be opening, but when you include closures in there, can you give us an estimate of what you think your year and screen count is going to look like? And then secondly with regard to concessions, you just put up your fourth out of past last quarters, you’ve seen per cap spending in the U.S. up in excess of 5%, is there something going on with the mix shift that allow the product mix, that has loved you to put up such good numbers there?
Timothy Warner – CEO: I’ll start with your question, this is Tim Warner speaking, I’ll start with your question on the concessions, it has been a combination of product mixture and a slight price increase in some categories, but the other big part that we have been successful in integrating our social media and sort of a direct correspondence in couponing to our customers that have also driven these sales. Regarding the screen count, Robert will…
A Closer Look: Cinemark Earnings Cheat Sheet>>
Robert Copple – EVP; Treasurer; CFO; Assistant Secretary: So, Eric, with respect to the screens, one thing, the numbers we gave are those projects that we have signed leases for and technically probably most everything is signed, although maybe a little variation internationally still at this point. I think before we were talking 100 plus screens internationally to be build this year, and somewhere around between acquisitions and new build and when I say acquisition, this one-off that we just had this quarter, probably somewhere in the 70 range or so for domestic. I foresee, as I said, some of the international to be delayed, in particular, so that – I think that’s probably going to be more in the 80 to 90 range and the U.S. will still be in the 70 range. As far as closures, I think probably net screens 10 to 12 screens probably will close this year, so we should have net U.S. growth, and those would be U.S. screens, so we should have net U.S. growth as well as international growth.
Ticket Pricing Growth
Bo Tang – Barclays: This is actually (Bo Tang) in for Anthony. So, first off, I guess on the ticket pricing growth, it looks like you guys put up 4.7% in the quarter, can you kind of just breakout how much of this growth is coming from base ticket price increases versus 3D?
Robert Copple – EVP; Treasurer; CFO; Assistant Secretary: If we looked at let’s say what we call our 2D ticket price, our base price, it would probably be a real increases of about 1.5%, most of the growth has to do with premium allocation as well as increase in our 3D and premium pricing. So, I think what you’re looking for is probably in that 1.5% range.
Bo Tang – Barclays: Also, Robert, you mentioned you are looking to add a decent amount of new theatres in both the U.S. and the LatAm this year. Would you be able to remind us what your typical ROI is for a new build for both U.S. and LatAm?
Robert Copple – EVP; Treasurer; CFO; Assistant Secretary: Sure. Our hurdle rate for any new build is to look for a 20% cash-on-cash return and generally, that’s within the first year. We also look for 20% margins. As you know, our EBITDA margins are one of the critical issues that we focus on as we build or buy theatres and so, we kind of look for that 20%, 20%, if you will. We’ve been very good at achieving that. Actually, our domestic has greatly exceeded the 20% returns over the last few years, not necessarily reflecting more selectivity, but probably just less theatres being built in the U.S. and looking for those that we really feel like can have higher returns. International, we’ve also definitely met our 20% hurdle.