Cinemark Holdings, Inc. Stock

Greetings, and welcome to Cinemark Holdings Second Quarter 2026 Earnings Conference Call.

[Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chanda Brashears, Senior Vice President, Investor Relations. Thank you. Please go ahead.

Good morning, everyone, and thank you for joining us today to discuss our second quarter 2026 results.

Our earnings release, executive commentary and 10-Q were issued earlier this morning and are available on our website at ir.cinemark.com. Today's call is being webcast with a replay and transcript available on our website after the call.

Before we begin, I would like to remind everyone that during this conference call, we will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied. The factors that could cause results to differ materially are detailed in our most recent annual report on Form 10-K as filed with the SEC and available on our website.

Also, today's call will 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 website's most recently filed earnings release, 10-Q and on the company's website at ir.cinemark.com.

Joining me this morning are Sean Gamble, President and CEO; and Melissa Thomas, CFO. Consistent with last quarter, Sean will provide some brief introductory remarks, and then we'll turn it over to Q&A.

Sean?

Thank you, Chanda, and good morning, everyone.

I'd like to take a brief moment to touch on some of our key highlights from the second quarter. You can also find additional information in our executive commentary and 10-Q that were published on our Investor Relations website this morning.

We're thrilled to report today that Cinemark delivered a historic quarter in Q2, achieving a multitude of all-time quarterly records throughout our global company. For the first time in our history, our quarterly worldwide revenue exceeded $1 billion, supported by record high results across all key revenue categories. Importantly, through diligent execution and benefits derived from improved operating leverage, we effectively converted that strong top line growth into exceptional bottom line performance. We produced our highest ever quarterly adjusted EBITDA of $294 million with an adjusted EBITDA margin of 27.1%, our second highest quarterly margin in history that trailed our all-time record by only 10 basis points. We also generated nearly $300 million of free cash flow, deployed over $60 million of capital expenditures toward enhancing our business and returned excess capital to shareholders through stock buybacks and our dividend.

Our historic results are the byproduct of our ongoing efforts to elevate our consumer offerings, scale revenue opportunities and further optimize our business, combined with a compelling slate of film releases and solid operating rigor. Beyond propelling our aggregate revenue and adjusted EBITDA records, these factors also yielded all-time high quarterly admissions revenue, concession sales and per caps, premium amenity performance and loyalty transactions worldwide. We are incredibly proud of our global team and all they continue to accomplish. We devote significant time and effort to working on strategic initiatives to strengthen our business, and it's especially rewarding to see those actions translate into outstanding results, particularly when amplified by a favorable box office environment.

The performance we delivered this quarter is a testament to the dedication, skill and execution of our sensational team and their ability to capitalize on strong film content and positive industry dynamics. As we move ahead, we believe we are exceptionally well positioned for the future. Bolstered by our differentiated financial strength, we stand to continue benefiting from the many targeted investments we have made over the years, the meaningful customer loyalty we have earned and the industry-leading operating capabilities we have developed. Moreover, we are actively advancing a broad set of new opportunities to further enhance our competitive edge and drive incremental growth, and we remain highly encouraged by positive recent industry developments, including expansion in theatrical window exclusivity, increases in young moviegoer frequency and strength in emerging forms of content.

In the very near term, we look forward to building further on the robust performance we've achieved through the first half of 2026, particularly with what is shaping up to be a tremendous launch of Spider-Man: Brand New Day this weekend, along with continued momentum from The Odyssey.

Operator, that concludes our prepared remarks, and we'd now like to open up the line for questions.

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question is coming from David Karnovsky of JPMorgan.

Sean, Q2, I think, was the best box office quarter since the pandemic. It was probably reasonable to assume there could have been capacity constraints for Cinemark and yet you gained domestic market share. I know film mix is a factor, but these results surprise you at all? And then how do they inform your view of potential market share sustainability or gains going forward? Or should the box office kind of run at over $10 billion, for instance?

Thanks for the question, David. Yes, we were very pleased with the second quarter results, to say the least. Yes, I mean, it was a big quarter. I think what we wound up seeing over the course of the quarter was the way the performance of the films played out wound up helping out with capacity, where there certainly were some periods where there were a bit more bunch up of films in terms of the dating week-to-week. You had films like Backrooms and Obsession, which were a bit earlier in the quarter, and they actually played out with less competition. So it turned out that just the way the films worked alleviated some of those capacity constraints that we were expecting would be a bit more significant over the course of the quarter.

As we look ahead, obviously, we continue to benefit from the many investments we've made to advance our market share. But the way things will play out will depend a bit on how overall content mix resonates with our audiences and how that capacity constraint plays out. We saw a little bit more of that perhaps in terms of just similar films kind of going on top of each other at the beginning of the third quarter, and we'll see how that plays out over the second half of the year. There certainly are some more periods, at least on paper right now, where you've got in peak periods where there's a bit more concentrated larger films than we saw during the first half. So we're really watching out for that. So those are the types of things that could affect things as we go forward.

And then you mentioned the 45-day window. I know it's early, but any data research on your end that indicates the longer time period is helping to reeducate consumers about the need to see the movies in the theater?

It's difficult to say quite yet how significant the long-term impact because those changes obviously just took place. I mean, clearly, as you pointed out, it was just a record second quarter since the pandemic. So if you look at that, one might say, okay, great, things are working better. I'd say probably the most tangible thing we've seen is that the theatrical exclusivity did start to increase in the second quarter as studios started to honor those commitments of 45 days. So we'll have to see. It's going to take a little bit more time. I think we certainly expect that the 45-day window will -- we're optimistic about the positive benefits that will yield, which we think will continue to be meaningful. But it will take a little bit more time for that to roll out and for consumers to fully feel the impact of that.

Our next question is coming from Eric Handler of ROTH Capital.

Sean, you're continuing to get some really good lift from premium. And I'm curious, when you look at your theater footprint, how much more capacity do you have to add an IMAX, XD, 4DX, ScreenX, how much can you add there? And then also, you're getting a really good lift and a nice surcharge for D-BOX. Where are you with D-BOX and how much more can you add there?

Sure. Thanks for the question. I'd say we still have a healthy runway for incremental additions. There clearly is a balance to be struck because while we continue to see growing audience appeal for these types of enhanced amenities, they're still just about 15% or so of overall box office. And they're great for certain audiences, but they're not for everyone. To your question on runway, we've added and we added a series of new additions in 2025. In the first half of '26, we already added seven new XDs, 12 new ScreenXs, two new IMAXs with three new 70-millimeter projectors activated and 112 new D-BOX auditoriums. So we've put in quite a bit, and we've got further runway going this year and into the future beyond.

So I'd say some -- the screens tend to be a little bit tethered by how big the screen is in an auditorium. That's one governing factor. We've got many more opportunities for like second PLFs in theaters where we just have one today. And obviously, in new builds, you have more latitude in what you can do there. D-BOX, there's less limitation because we're doing a few rows within an auditorium. So those can go into a bunch. To your specific question, I think on -- we've got about 350 overall PLFs globally right now, including XD, IMAX and ScreenX, and we've got about 660 auditoriums that have D-BOX installed.

Great. And then I wonder if we could just touch on Latin America for a second. Your Latin America margin was an all-time high. Just curious what type of operating leverage you can now achieve in the region?

Eric, I'll take that one on international. So our international team has done a great job navigating a dynamic landscape in Latin America as demonstrated by, as you mentioned, record-setting adjusted EBITDA and adjusted EBITDA margin. As we look at that business, again, predominant drivers of what we're seeing will be attendance and box office in terms of leverage within that model. But also, there's other factors that have influenced that. You've seen market share gains in international. The team has done a really nice job of capitalizing on the box office has been there. Our average ticket prices and concession per caps continue to be growth catalysts for us. And then also within the international market, our ability to mitigate cost pressures has been an important factor. So really, as we think about margins going forward, those are going to be key dynamics that come into play key variables as we look to maximize our margin potential.

FX movements and inflationary dynamics are clearly one of the key differences between the U.S. and international. I think a couple of things to keep in mind as you think about our international business going forward is, there are a few dynamics at play on the labor side that do differ from our domestic market that I think are worth highlighting as you think about box office variations. So local labor laws, they can restrict our staffing flexibility as the box office ramps. So that can impact that line item. And then additionally, government-mandated wage rates, those can exceed inflation, and we've seen that in markets. Our team has done a nice job offsetting those impacts to the extent possible. But also you have a different dynamic in lease expense in international, that's more variable. So there's some different dynamics when you look at that international business, really all comes down to how we're managing those levers. And I think the team is doing a nice job pushing the top line to offset some of the inflationary dynamics we're seeing on the bottom line.

Our next question is coming from Chad Beynon of Macquarie.

Nice quarter. Just in terms of the use of capital, so you finished the quarter in a very strong position from a cash standpoint. You mentioned the interest expense opportunities that you've been able to take advantage of here, reducing that. But just as you think about use of cash with regards to return to shareholders, investing back in the portfolio or looking at outside opportunities, has anything changed at this point given your position of strength?

Thanks for the question, Chad. So from a capital allocation standpoint, we continue to have three pillars to our strategy: maintaining the strength of our balance sheet, investing in accretive opportunities, including M&A that position the company for long-term success and returning excess capital to shareholders. So we remain balanced and disciplined in our approach to capital allocation and prioritize the strength of our balance sheet and growth opportunities first and foremost, followed by shareholder returns. And as we think about kind of ranking between new builds, theater enhancements and M&A, that really comes down to return profiles and strategic importance of each.

And then with respect to shareholder returns, that's going to be governed by factors like our leverage ratio, cash position, overall liquidity and then alternative uses of cash at any given time, among other factors. But overarchingly, our strategy aims to maintain sufficient flexibility so that we can take advantage of future value-creating opportunities while mitigating any risks that may come along.

Okay. Great, thanks. And then, Sean, just going back to the strength of the quarter and the breadth of different movies that really hit. I know you mentioned 50% is coming from your direct channel. But in terms of just a new audience, do you think there was significant growth in terms of whether it's younger moviegoers or just moviegoers that hadn't come back for a while that came in the second quarter. And then as we know, moviegoing begets moviegoing, do you think that could portend well for the back half of the year in '27?

Sure. Well, yes, I mean, look, it's -- part of the reason we like a lot of the nontraditional content is that often is a way to bring new audiences into our theaters, and we've seen a nice uptick in that over the years. As we look at our data, very similar to some of the broader industry studies that we've done, we continue to see really healthy growth of younger audiences. I mentioned that earlier, but some of these films, particularly like you saw films like Obsession and Backrooms, which were based upon creator content. They've got these embedded younger audiences. It's helping to bring them in.

And then similar to others, as you mentioned, the momentum business, they see other things of interest when they're there and they wind up coming back, and it just winds up being a positive cycle. So we're definitely seeing healthy signs of new attendees, but also nice signs of sustained and growing frequency from our existing audiences. So there's just a lot of great momentum. This year has been obviously really positive for the industry and certainly for our company with regard to moviegoing in general. So we're pleased with the trends we're seeing with both new and existing members.

Our next question is coming from Mike Hickey of StoneX.

Hey, Sean, Melissa, Chanda, great job, incredible quarter, guys. Congratulations. First question, maybe back to you, Melissa, sort of mirroring the international margin question, but thinking domestic, obviously, your domestic EBITDA margin here over 27% was significant. How are you -- so I guess sort of when you think about the elements of margin improvement here, what do you view as sort of sustainable, I guess, or durable as attendance continues to recover? And where do you see the largest remaining opportunities to improve that productivity? And I have a follow-up.

Thanks for the question, Mike. So on the domestic side, attendance in box office, again, obviously, primary driver. But key levers, as you look at our performance in the second quarter, it underscores the strength and operating leverage of our business model when supported by a content mix that resonates well with our audiences. You saw that come up clearly in the strength of our market share, also the steady cadence of releases and strong overall box office environment. Outside of box office and attendance on the market share side, Sean mentioned some of the key drivers of market share in the quarter. More broadly, long term, while we continue to try to drive our market share gains and have been pleased with what we have seen thus far, we need, I think, more runway of a consistent box office to see what is structural within those market share gains. So that will play out over time, but we're very encouraged by what we've seen on the market share side.

With respect to average ticket prices and per cap, again, there, we do believe that we continue to have runway. We've been benefiting from our strategic pricing actions as well as premium format penetration that Sean talked about earlier and within the food and beverage and broader concession realm, we still do believe we've got runway, and you saw that with the growth in our merchandise sales and some of the records that we were able to achieve in the quarter. So top line is an area that we really continue to lean into and have a number of strategic initiatives. Obviously, some of these metrics are going to fluctuate quarter-to-quarter. But over the long term, these are key factors outside of attendance and box office that we will continue to look to drive to support margin strength.

And then on the expense side from -- there is operating leverage in our model. We do have around 40% of our cost structure is fixed. So we do get leverage over line items like facility lease expense in the U.S., some of our G&A, property insurance real estate taxes. And then you have other semi-variable costs like fee or labor that we continue, while those increase with attendance, not to the same extent. So that creates additional opportunities for us from a margin standpoint. So we also obviously do have inflationary factors that we're dealing with, but we're focused on controlling what we can control and overall looking to maximize our profitability and margin potential.

Thanks Melissa. And Sean, as a follow-up here, creator-led films, I mean, the success of Backrooms, Obsession and really, I guess, in 1Q, Iron Lung kind of kicked it off, but all of these seem strategically important for you. So when you sort of think about the success of these films, which was obviously a huge surprise in the quarter and then also the budgets of these films, which were incredibly low. Does that sort of suggest to you that Internet native creators could be a meaningful source of new theatrical film supply for you in the future? It feels like Hollywood is starting to chase a lot of this IP already. So I'm guessing more is coming. But curious your view on that.

And then you talked about sort of bunching up on the calendar. Do you think these sort of lower budget sort of creator-led films could help fill the gaps in the release calendar that's obviously lower budgets still generate strong attendance?

Sure. Thanks. Appreciate the question. Yes. I mean, let me start first with kind of the bunching of the calendar. I mean we are hopeful that even some of the more traditional larger Hollywood films will spread themselves out a bit. It's something that took a long, long while for Hollywood to figure out and eventually got there and you started to see larger films in February and in March and then other off periods from the summer and year-end, and they worked great. So I think that will start to naturally happen. In the meantime, yes, these types of nontraditional films, creator content, anime, faith-based, foreign, like they can definitely help to fill those gaps. And obviously, we're seeing some real significant success stories. Now I mean, even prior to Iron Lung, Obsession and Backrooms, we had Sam and Colby, we had Critical Role, there has been numerous examples of these.

Some of the challenge to date has just been trying to figure out what's going to work and what's not. Some of the kind of concepts that you would think would have worked didn't and some of the other ones that were -- wind up being big surprises. But I think there's clear recognition now, certainly from the studios that are taking more interest in this and producers that there's real potential. There's already a strong fan base between -- and connectivity between creators and their audiences. And when the programming is compelling and well-positioned, strong word of mouth can really generate significant momentum with the potential for these to cross over more mainstream, which is what we're starting to see. So definitely expect this to be an area of go-forward opportunity, and we're just really excited to see how it evolves.

The next question is coming from Robert Fishman of MoffettNathanson.

Two for you, one longer term and one shorter term. First, you talked about the excitement around Spider-Man and clearly, Avengers at the end of the year. When you think about the '27 slate, are there lessons that you've learned, maybe just building off the last question from first half box office that you can apply to think about what the mix of the content looks like, expectations around that for franchise and non-franchise movies, think about '27 and even beyond would be the first one.

Well, thanks, Robert. First, I would say, obviously, we're still getting line of sight to 2027. It's still a little bit early, but initial views are very positive based on what has been announced on paper. The volume of releases that have been announced thus far is even a tick up from the norm, and there's a lot of highly anticipated films with another Avengers: Secret Wars, of Frozen 3, a Sonic, another Spider-Man animated film, A Minecraft, et cetera, there's a whole bunch. I think to your point of trying to anticipate the mix and the impact of that, the hard thing is, you never quite know what is going to fully resonate. So you gave your best estimate to use comps of the past to kind of make a forecast of what each of these movies will do. But then inevitably, there are surprises that go both ways, right? You had the Backrooms and the Obsessions with kind of come out of nowhere and do these massive numbers.

You have films like Odyssey and hopefully Spider-Man based on presales, what's looking like way outperform even big numbers that are expected. And then you have other films that kind of underperform. And it's all a matter of like the concept on paper versus what the film actually turns out to be and how it resonates with audiences in terms of how that can skew things. So we're certainly looking optimistically at '27 based on what we know. But ultimately, it's going to be a matter of, again, the quality of the content, the marketing effectiveness, how it ultimately performs throughout the year and how spread out that performance is in terms of what it ultimately amounts to in total box office.

Makes sense. And then maybe just for the shorter-term trends, and this might be a funny question, just given the record concession revenues that we just saw. But are you noticing anything in terms of even into July about consumer spending changing patterns in terms of reacting to higher gas prices or any other macro pressures on the consumer?

Thanks for the question, Robert. So in terms of health of consumer and what we're seeing, it continues to follow the historical trend. We're more dependent on the strength of the film slate than economic cycles. I mean we've seen that play out over the last couple of years, continue to see that play out today as we think about upgrades to premium formats, concession purchases and even on the merchandise side, some of what we've seen there. So we continue to closely monitor behavior, and we have a number of incidents in place that are designed to help grow food and beverage consumption as well as merchandise sales and premium format penetration while we deliver value for our guests. But we aren't seeing what I would call any indications that there has been an impact on moviegoing as a result of that.

The next question is coming from Andrew Crum of B. Riley Securities.

Sean, I want to go back to your commentary around what seems to be an energized Gen Z audience. Can you remind us your competitive positioning with a younger cohort and understanding that you're beholden to your studio partners for content, is there anything from a planning perspective that you can or are doing to advantage Cinemark for that next Obsession or Backrooms breakout hit?

Sure. Well, thanks very much. I would say our positioning, while we tend to have a little bit more of a suburban versus urban SKU for our overall circuit, I wouldn't say that necessarily is too varied with regard to younger audiences versus older audiences. So I'm not sure there's a huge difference in that regard. But things that we're doing are absolutely working with studios in terms of joint partnerships in the promotion and marketing of these titles. We've got a fantastic marketing team that leverages all kinds of social and digital channels and more and more through influencer networks and things like that, basically being where those younger audiences are to help drive that awareness and then importantly, channel that awareness into ticket sales at Cinemark.

So definitely spend a lot of time and effort and energy in investing in things like that. In fact, our new brand campaign that we launched at the end of the year last year, it's showtime that actually was put together with an intent of a certain energy and certain way of resonating with younger audiences into that. So it definitely plays into some of the angles we think about when we're working on our varied marketing materials and the types of things we're doing to both in tandem with the studios as well as with regard to our just own Cinemark promotion.

Got it. Okay. And then my next question is, can you address the variance between Latin America and U.S. in terms of year-on-year rate of change? Was it comp related? Was it mix? And I guess, specifically, it doesn't -- the headline number would suggest that Latin -- or World Cup rather did not have an impact on Latin America's performance. But curious if you had any observations there and if you noticed anything in July with the success Argentina had in the tournament.

So in terms of Q2, in particular, on the year-over-year attendance growth between -- differential between international and the U.S., that is more so, I would say, comp than anything. If you look at recovery relative to '19, the recovery rates are still tracking very closely between U.S. and international. So we don't make much of that differential that we saw in the quarter.

Yes. And we've tried to tease out the impact of the World Cup. We do think that with how strong the interest was both in the U.S. as well as certainly overseas, there may have been some impact, probably less so in the second quarter. We're seeing a little bit more of that in the third quarter as it advanced to the knockout rounds, especially with some of the Latin American teams that advanced into those rounds. So a little bit of impact there, but I would say something that I don't think was materially affecting the numbers based on what we can tell.

The next question is coming from Omar Mejias of Wells Fargo.

Sean, you've now reached 40 million addressable customers worldwide. Maybe can you talk about that figure? How much has that expanded over the past year? And where are you seeing the clearest payoff from some of the personalization and direct marketing efforts you guys are doing? Thanks.

Well, we definitely think it's one of the many things that are helping to support our growth and our market share advances, kind of tying that to the answer I had for some of the younger audiences. It's just a way for us to access a broader range of consumers. And another one of the questions is, if we have more new consumers who are coming through our circuit, now we're establishing a communication channel to those individuals to help try to drive repeat business. So it's something that our marketing team focuses on very heavily domestically and internationally and just continuing to try to develop that connectivity. And then through these new tools and capabilities, aim to more personalize and customize things using mass market types of promotions like Spider-Man as well as more individual kind of behavior type things to try to promote things that are going to be relevant and meaningful to those guests. So it really speaks to their interest. So it's one of the things that we're certainly seeing has been complementary and helpful to just our ongoing performance, and we're leaning more and more into it.

That's great. And maybe my follow-up would be on the release cadence of films. I mean you talked about how now we've probably made a little progress on some of the 45-day windows and commitments from studios, like another thing sort of maybe limiting the potential box office would be the release cadence and how some studios just crowd the summer holiday periods. Can you maybe talk about the importance of that? And if you guys are having conversations with studios and potentially maybe spreading out the release cadence across the full year just to improve sort of maximization of box office?

Sure. I mean it's definitely a topic of discussion we have. And I think there's kind of broad recognition that there's opportunity there. I would just say when it comes to dating, there are a lot of -- and this kind of dates back to my time at Universal. I mean there's a lot of factors that go into that in terms of trying to find the right slots for your entire slate if you're an individual studio, trying to work collectively with the filmmakers who are part of that and something that's going to work for them, looking at the competitive profile. So they're just -- there's a lot of different influences in the mix on that whole thing, which sometimes kind of factors into it and doesn't always lead to at the aggregate, when you put everything together, something that's maybe as optimal from a spread.

But that said, it is something that is recognized as an opportunity and trying to work through some of those challenges is something that we're all discussing and focused on. So I think in time, we'll start to see that. I mean, usually, what winds up happening is somebody will take a risk on doing that, find a huge success and then that will become like the new date for something. I mean I remember years ago, the summer would have started like in June and now that became May, and now it's kind of crept out into April. So the period has just continued to expand a bit as we've seen that movies can do real solid business any time in the year.

The next question is coming from Stephen Laszczyk of Goldman Sachs.

Sean, I was just curious on a follow-up from an earlier question on capital allocation. I would love to get your thoughts -- your latest thoughts on the opportunity set and your appetite for new builds and M&A as part of that framework, whether any of that has evolved over the course of this year, whether that be in the U.S. or in some of your international markets?

Sure. Absolutely. I mean when we think about the evolution of our business and positioning ourselves for ongoing success, growth through new builds, growth through M&A is certainly part of that equation. It's part of the calculus we look at. Specific to M&A, obviously, we're pretty disciplined in that regard, and we do look at all opportunities. We tend to target, as I've mentioned in the past, quality assets that we have confidence can deliver solid assured returns over time. Same goes for new builds, by the way, we want to make sure we're making smart decisions because these are big long-term considerations. But we're going to continue to be disciplined with our capital. We're looking for those right kinds of opportunities that we have high confidence in.

But as Melissa said earlier, it's a balancing act of the investments we're making in future growth, the ongoing maintenance of a strong balance sheet and then all that coupled with distributing excess capital to shareholders. So we're constantly looking at kind of our future projections of cash and kind of where things are -- cash generation, where things are going and the opportunities to manage that balancing act. And we're going to continue to remain disciplined as we move forward because it's proven to be very successful for us over time, and we think it will continue to be.

Great. That's helpful. And then if I could, just for Melissa on the expense lines, utilities and other, I was hoping you could perhaps unpack some of the trends that we've seen so far through the first half of the year. I know a lot has been made around electricity prices, some deferred maintenance in there as well. What are we seeing? And then thoughts into the back half of the year and then maybe even some of the early quarters of 2027. Any help there would be much appreciated.

Sure. From utilities and other standpoint, the increase that we've seen there is primarily driven by the increase in attendance as many of those costs are variable and semi-variable in nature. So credit card fees, electricity costs, repairs and maintenance, janitorial would be examples of those. We've also seen higher gift card sales, which result in gift card commissions and fees increasing. So you're seeing those dynamics play through in our second quarter results and frankly, first half of the year.

On the electricity front, in general, that is an area where we have been seeing -- so unrelated to volume, we have been seeing rising market rates, which has translated into an increase in our costs that are running through this market or running through this line item. We do have -- two of our key markets did have increases that were meaningful, and we've seen some of that already played through in the first half of this year. We'll see the remainder come through in the second half. So I still do expect some impact on that line item year-over-year as a result of energy markets. And again, that's not unique to us, but we do participate in -- we have a heavy presence in markets like Texas, which do have spike in data center demand. So that ultimately translates into the cost that we incur.

And then on our ongoing efforts to address deferred maintenance needs across the circuit, that hasn't had a meaningful impact on a year-over-year basis, given we started that program last year. And so as you think about year-over-year comp for even full year, we'll still continue to work through deferred maintenance needs in the second half of the year, but I don't expect the year-over-year impact to be as meaningful as it was when you look at last year's comparisons.

The next question is coming from Patrick Sholl of Barrington Research.

Maybe just starting off with following up on some of your commentary on younger demographics. Could you maybe provide a little more detail on like the frequency of the various demographics and I guess, the breadth of the share of like each of those demos going to theaters versus like the historical trends?

Sure. I'll do my best. I don't have all that information on hand. But I think when we've looked at audiences under the age of 25, I think their frequency is up something like 20% year-over-year, maybe even a touch higher as more and more types of films have resonated with that audience. So I think that has been kind of the direction things have been moving in over the course of the past year. So we're seeing things migrate in that direction, and it's something we're continuing to study. But it's just -- and that also dovetails with, as I mentioned earlier, some of the broader industry studies in terms of what that have been done in this regard. So just really pleased with the progress. And when we look at kind of the composition of what's coming going forward, we think that's going to continue.

One of the real interesting things that we've seen with that demographic is, we're now getting into these generations that have grown up with devices. And interestingly, at one point, there was some question as to would going to the movies and being asked to disconnect be an alienating thing to those audiences. And in fact, what's turning out is exactly the opposite. They're valuing the experience more than other generations because it's more differentiated. It's a communal experience together, and it's just a whole different level of energy and connectivity. So it's proving out to be something that is a big positive versus a negative with that generation more so than, as I mentioned to others, which is really encouraging.

Okay. And then just on the concession side, where would you say like you are kind of within merchandise as a driver of -- or a component of growing concession revenue, just in terms of like how far you think that can run in terms of being a continued contributor?

From a merchandise standpoint, we feel good about our ability to grow. As you saw likely in our executive commentary, we did reach a record $25 million merchandise sales in the quarter. That reflected both the strength of the film slate, also robust consumer demand for merchandise as well as the ongoing execution of our merchandise initiatives. We have been focused on curating a compelling assortment of offerings. We've also been focused on targeted product allocations across our circuit as well as enhancing our inventory optimization, and we've seen really nice benefits there in terms of sell-through rates, which drove some meaningful growth in merchandise revenue in the quarter.

So we do believe that we still have runway on the merchandise side. And I would say importantly, with movie-themed merchandise, it not only does it generate strong demand for the merchandise itself, but it also enhances title awareness and audience engagement given its significant social media reach. So that is an area as we think about catalysts for future per cap growth, that is one of the many tools in the toolkit that we're leaning into to drive sustainable long-term growth.

Thank you. At this time, I would like to turn the floor back over to Mr. Gamble for closing comments.

Okay. Thank you, Donna, and thank you, everyone, for joining us this morning. I really appreciate all the questions, and we look forward to reconnecting in a few months to share and discuss our third quarter 2026 results. Hope you all have a great rest of the summer. Take care.

Ladies and gentlemen, this concludes today's teleconference. We thank you for your interest in Cinemark Holdings. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

Greetings, and welcome to Cinemark Holdings First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chanda Brashears, Senior Vice President, Investor Relations. Thank you. You may begin.

Good morning, everyone, and thank you for our First Quarter 2026 Results. Our earnings release, executive commentary and 10-Q were issued earlier this morning and are available on our website at ir.cinemark.com. Today's call is being webcast with a replay and transcript available on our website after the call.

Before we begin, I'd like to remind everyone that during this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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.

Forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied. The factors that could cause results to differ materially are detailed in our most recent annual form report on 10-K as well as with the SEC and available on our website.

Also today's call will include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the website's most recently filed earnings release 10-Q and on the company's website at ir.cinemark.com.

Joining me this morning are Sean Gamble, President and CEO; and Melissa Thomas, CFO. Consistent with last quarter, Sean will provide some brief introductory remarks, and then we'll turn it over to Q&A. Sean?

Thank you, Chanda, and good morning, everyone. The first quarter of 2026 marked our strongest first quarter since the onset of the pandemic across all revenue categories and adjusted EBITDA with meaningful year-over-year top line growth and margin expansion. Worldwide revenue increased 19% versus 2025 to $643 million. Adjusted EBITDA grew 143% to $88 million, and our adjusted EBITDA margin expanded 710 basis points.

Our results are indicative of our team's ability to effectively capitalize on a strengthening box office environment, while continuing to derive benefits from our sustained efforts to deliver unmatched entertainment for our guests, build audiences, grow new sources of revenue, strengthen our operating capabilities and optimize our circuit.

As described in greater detail in our executive commentary that we published this morning, we believe our standout first quarter performance is the byproduct of strong operational execution and our advantaged market position, which continues to be reinforced by our ongoing investments and strategic initiatives.

From an execution standpoint, we achieved significant year-over-year box office growth and sustain the sizable market share gains we've achieved over the past several years through impactful programming actions and far-reaching marketing strategies that boosted attendance. As a more compelling slate of films was released into our theaters, we were able to leverage our extensive consumer marketing network and sophisticated scheduling tools to help amplify film awareness and optimize screen utilization to drive ticket sales.

Furthermore, actions we pursued to increase engagement and stimulate food and beverage consumption drove record high concession sales and diligent layer and overall cost management, combined with improved operating leverage contributed to our significant margin expansion in the quarter.

Complementing our execution the initiatives we are pursuing to drive incremental growth and productivity continue to position Cinemark for long-term success. These initiatives include a wide range of actions focused on sustaining our high-quality theaters expanding premium amenities and leveraging new technologies to further advance our operating capabilities.

Examples include sustained investments we're making in enhanced screen formats, laser projectors and motion seats as well as the overall upkeep of our theaters to ensure our guests enjoy a premium experience at Cinemark regardless of which auditorium issues. Additionally, we continue to actively expand data-rich tools and automation throughout our operating practices to strengthen our decision-making, enhance our customer journey and improve process efficiencies.

As we look ahead, we maintain our confidence in Cinemark's long-term growth prospects on account of our solid financial position, distinct competitive advantages and the multitude of opportunities we have to drive incremental value. Furthermore, we are highly encouraged by continued positive momentum in our industry's core fundamentals namely sustained consumer enthusiasm for larger-than-life cinematic experiences, strength of upcoming film content and robust studio support of theatrical exhibition.

These fundamentals were recently reinforced by moviegoing results in the first quarter and at CinemaCon last month as filmmakers and studio executives reaffirm their steadfast commitment to theatrical experiences, and showcased a diverse and plentiful volume of compelling films that will be released over the coming years. Moreover, there's been constructive progress over the past several weeks in expanding the theatrical window which is an important factor in the long-term health of the film ecosystem.

So we remain bullish on our future, and we are thrilled with the strong kickoff to 2026 as well as the promising lineup of films on the horizon, particularly in light of last week's successful opening of Michael, and this weekend's highly anticipated release of The Devil Wears Prada 2.

Operator, we'd now like to open up the line for questions.

[Operator Instructions] Our first question today is coming from Robert Fishman of MoffettNathanson.

A couple for you guys. Sean, we've been debating windows for many years now. So just would appreciate your updated thoughts after talking to all the studios at CinemaCon about the value that they see in 45-day windows. And do you expect a return of consistent minimum windows to help improve the overall moviegoing habits and how we should think about the impact to film rental costs, would be the first 1 to start with, please.

Sure. Thanks for the question, Robert. We've kind of talked about before in the past, following all the evolution that's taken place with the theatrical window in both the length and variability over a pretty short period of time following the pandemic, there has been a lot of ongoing discussion between studios and exhibitors as we've been evaluating the impact of that on consumer behavior.

So your question on the value they see in 45 days, I think there's recognition that the shortened window has been creating headwinds in full attendance recovery, particularly for smaller titles and more casual moviegoers. So I think this is a big step in terms of course correcting what may have over-indexed in terms of reducing beyond 45 days and now shifting back to that. So -- we see all these announcements is a really positive step forward. Again, there's recognition not only by studios, but by the wider creative community as well that this is a necessary step to help sustain long-term industry health.

I think the impact of that change still remains to be seen. It's like we have to watch what that does over time. It's not a precise science, trying to measure how much of that opening weekend attendance has been affected by the window, but we all believe that this will have a meaningful improvement in moving the needle in a further positive direction. So it's something we will be watching to improve.

As far as film rental rates go. I mean, there's a lot of factors that go into film rental discussions. The short answer is, we don't expect it to impact film rental. Again, I view the recent shifts in windows as an important reset in the right direction based on the sizable reductions that may have gone a bit too far over the past few years. While this progress definitely represents significant improvements even at 45 days, the window is still down approximately 40% from the pre-pandemic norm. So we don't have -- and those most of those film scales were kind of predicated on an environment that preexisted before the pandemic. So we don't expect a material impact as a result.

Okay. Maybe Melissa, your Movie Club now drives about 30% of your box office. So just wondering how do we see the demographic breakdown of Movie Club and the frequency of returning to the movies for your members and how that might differ from just regular moviegoers? I know you referenced that the Global Cinema Federation study, the success of the younger moviegoing habits, but what can Cinemark the industry do to bring back older moviegoers?

I'll take that one, Robert. I mean as far as the profile of our Movie Club members, I would say it largely is consistent with just general demographics of moviegoers on the whole. I think, it is a program that is 1 of the examples that helps not only for younger audiences, but older audiences alike.

And your question on what can we do to bring other audiences back. We continue to see that as we get new members into the program, their moviegoing frequency increases, and that spans all age ranges, which is part of the reason why it's such a valuable program and guests find tremendous value in it. So not only do they come more, they upgrade more, they buy more food and beverage and are some of our most satisfied guests. So that's 1 of the things.

Beyond that, and this goes beyond the Movie Club question, I think it extends into the profile of films that are getting released. I think, this year is probably 1 of the most diverse slates we've seen for a while. So as more of that content come that appeals to other types of age ranges and that's more sustained that should help. And then our marketing efforts, too. I mean, we continue to increase the sophistication of our marketing efforts to really target market different consumer categories and really speak to what is motivating to them. So certain things that may appeal to younger audiences, we all craft messages 1 way and other will craft them differently for older audiences. So there's a range of things like that, but we're thrilled with the movie -- back to Movie Club, we're thrilled with our Movie Club success. And again, it really spans all age brackets.

Our next question is coming from David Karnovsky of JPMorgan.

Maybe following up on the first question. Sean, I wanted to see if kind of post CinemaCon, you see any traction in terms of getting the studios to space out their releases and getting more back to a pre-pandemic pattern, just kind of noting some of the still kind of large gaps in programming like in the winter or late summer.

Sure. Yes. It's another great observation, David. And it's probably the next piece of the puzzle to continue to make progress on. I think we've seen volume continue to recover. So that's made leaps and bounds from where we were a few years ago. We've obviously just had recent news on Windows, which we think is great progress there in terms of supporting a healthy theatrical exhibition ecosystem.

The other piece is just the cadence of movies because this does tend to be a momentum business where people go, they have your time. They see what's coming up. They come back. And when there are those gaps that can disrupt that momentum and then we got to reboot the engine again and again. So this year, I'd say we have a little bit of that kind of clumping going on in the summer months and at year-end.

I think probably coming out of CinemaCon at least, beyond just talking about it, when we looked at what is currently lined up for first quarter of next year, I think what at least for now, assuming that the release dates hold, the first quarter looks far more robust than we've seen in prior years, the first quarter of 2027, I mean. So we've seen some of that kind of clumping and we have wished that some of the stuff that's been programmed in this summer would have spread earlier in the year. We saw more of that this past CinemaCon. So hopefully, that will continue to stretch out over the full of the year and that will be something else that will be beneficial to the industry.

Okay. And then in the prepared commentary, you spoke to marketing and the residents of some of the direct-to-consumer brand programs. I'm curious if the traction here changes your long-term view at all of market share gains, per caps or even other revenue, right, assuming customers might be, kind of, more inclined to buy tickets to Cinemark rather than a third party? And then just for Melissa, like given the marketing runs through film rent, I don't know if it's possible to quantify at all some of the added expense you've incurred here.

Yes. Thanks for the question, David. So on the marketing front, we have leaned in there. We've stepped up our investment post pandemic. And we have seen some nice successes there and our marketing efforts do span across both the admission side as well as the food and beverage side. And we do think that we have been seeing benefits there. And our market share, we do believe is reflective of those benefits.

And you saw us even in Q1, maintain elevated market share in the quarter, and that was flat year-over-year despite a challenging comp. There are a number of factors that we're doing across our business. So beyond just marketing that are really driving growth across market share average ticket prices and are per cap. So it's a combination of all of the efforts across marketing, loyalty, our Showtime optimization as well as our investments in our circuit that we've been doing on an ongoing basis.

So I wouldn't call out 1 area specifically, but we have made the significant progress on the marketing side, and I do think you're seeing that in the results. And from an investment standpoint going forward, not only have we had a step up since 2019. But as you look at full year 2026, I would expect our marketing as a percent of revenue to increase year-over-year just based on the returns that we've been seeing to date. Now we continuously calibrate that spend as we're monitoring our returns and adjusting our mix based on what we're seeing in the data, but feel really good about the progress we've been making there.

Our next question is coming from Eric Handler of ROTH MKM.

Thanks for the question. Sean, Cinemark's always prided itself on having a wide range of offerings across premium and baseline pricing. I'm curious with this week's Wall Street general report, have been a competitor charging $55 for IMAX film screenings for Dune: Part Three in this opening weekend. How do you feel about price sensitivity from consumers? And do you have a $55 ticket presale for Dune: Part Three?

Well, the short answer is we don't have that for Dune: Part Three. As far as pricing more broadly, the way we look at it is kind of on the unique profile of each theater. And expectations of our guests with the kind of overarching objectives of maximizing attendance in box office and food and beverage incidents and total revenue while at the same time, ensuring that our guests receive strong value in their experience to encourage repeat visitation. Through all our pricing team and analytics, we found that, that approach has served us well.

And when you look at our attendance recovery compared to the industry and our growth in concession per caps year-over-year, we think that's really working. To the extent we were to pursue something in that direction, we would do so very cautiously just to gauge the impact it has on guest value perception as well as visitation frequency as well as our overall Cinemark brand proposition.

That's helpful. And secondly, looking at your concessions line, you've seen really good increases in per cap spending. Merchandise, I'm seeing more and more of in my local Cinemark. So I'm curious how much of the lift is driven by merchandise versus sort of the core food and beverage products?

Thanks for the question, Eric. So on the per cap side, for domestic per cap break down our 7.5% growth year-over-year. That's largely driven by strategic pricing. That's the majority of it, followed by higher incidents and then a shift in product mix.

Now the product mix this quarter, the favorability there was actually predominantly driven by a shift into larger sizes within our core offerings, so specifically fountain beverages and popcorn. That was actually offset in part by a lower mix of merchandise. And that was really just driven by the film content in the quarter. If you look at the relative mix year-over-year and what lended itself to movie-themed merchandise, we did have a lower mix of merch in the quarter. So there are other other factors that are driving per cap.

Now as you think about the balance of the year, however, we do expect, based on the film slate that there are meaningful merchandise opportunities ahead of us, and we would expect that to be an increasing part of the mix and a key driver of per cap growth for the balance of the year.

And I would just add, last year, March was up about 40% year-over-year. So we can -- to Melissa's point, we continue to see growth over time. We expect to continue to see further opportunity as it's something that fans continue to embrace and it continues to enhance just the overall experience and event of coming to our Cinemark theaters.

Our next question is coming from Mike Hickey of StoneX.

Great quarter, guys. Congratulations. Just two from us. Sean, I guess, CinemaCon was pretty exciting this year. Hot topic was Paramount, Warner Bros. deal. Obviously, there's an industry view that I think most of the exhibitors are subscribing to. But just curious with David, his presence...

Sorry, that in, could you clarify that last piece of the question, Mike? I missed that.

Yes. I think there's obviously push back from the industry, and I think there's the view that it's intended to drive some level of concessions in terms of commitments, whether it's film volume or window marketing. And so just wondering what's actually achievable there in your view?

Got you. So let me start and then I'll -- you can tell me if I kind of capture that fully. Paramount is a great partner to exhibition. They've been for many years. It was a nice step that David came out to CinemaCon to kind of speak directly to the wider exhibition community. I think the -- the positive thing is they're saying all the right things regarding their future intentions for film volume and windows in a combined company, which is a great start.

I'd say -- that said, us similar, I think, to the wider community, we'd just like to see those statements backed by firm commitments just to ensure there is, in fact, the follow-through, and that leads to the preservation of a healthy and sustainable theatrical and film ecosystem going forward. So I mean, I think that's the big piece. And I may have missed your concessions question. I don't know if I captured it in that, but that's kind of what I think we and the industry at large is really seeking out of this.

Okay. I think that works, Sean. The other is on Netflix. I think also Ted showed up, which looks great. Made a statement, I think, post the deal that obviously didn't go his Netflix' direction. Just curious, your conversations with TAM with the broader Netflix team, whether it's at CinemaCon or before or after. Obviously, they gave themselves sort of an off-ramp from their prior philosophy on how they view theatrical when they were sort of romancing the Paramount, Warner Bros deal. Now that that's gone, there's still, I guess, the formation of that ramp. Do you see that Netflix is is becoming or wants to be a more constructive partner with exhibitors? Obviously, Stranger Things and other one-offs have been successful. But I guess the key here is the theatrical window. Do you feel like there is some momentum to move in the right direction?

Thanks, Mike. I would say it was great to see Netflix and Ted personally take the time and initiative to come to CinemaCon. And I think I would characterize the discussions as being productive in opening the door to the possibility of greater collaboration at some point down the road. They're -- as you mentioned, they're very pleased with the recent successes they've had in theaters with their Stranger Things Finale and K-Pop Demon Hunter Sing Along and they've certainly expressed the desire to explore more of those types of events as well as possibilities for film releases. So I think that's a step in the right direction.

While I don't necessarily anticipate any type of material shift on their part in the near term following that meeting, we do continue to believe there's mutual opportunity and partnering together and remain optimistic that they will pursue a more meaningful venture into theatrical distribution over time.

The next question is coming from Andrew Crum of B. Riley Securities.

Sean, you've highlighted the success of your PLF screens the last few quarters. as you look ahead and continue to invest, is there an optimal mix of PLF screens versus standard screens you see for your circuit? And what is the time frame to achieving that?

Sure, Andrew. Good question. I think 1 of the governors on large screen format and enhanced format screens, it's just the size of the auditorium and size of the screen. So you got more flexibility clearly if you're building a brand-new venue, but with existing theaters, you got to bear that in mind to make sure that it delivers the appropriate level of enhanced experience.

On the whole, we still have about 6% of our screens that are kind of in the PLF category. So there's more runway in that with -- and we've even announced more XDs and more screen Xs, and we're adding a couple more -- a few more IMAXes. So we've got a range of those things going on. So we continue to see opportunity there. But the overall extent to that, I think it is capped again by how many screens we have that can fit the bill of [indiscernible] And then also just the fact that, look, there's definitely a growing appetite for enhanced formats and theaters by certain categories of moviegoers. But what we've seen too is there's also those other moviegoers who don't prefer to pay the charge for that.

So striking that right balance is important. And by and large, so if you look at the amount of box office that is generated by PLFs, it's about 15%. So if you think about it, 85% of the overall box office in the industry is coming from all those other cinematic screens. So it's still relatively small in the whole scheme of things and just got to kind of bear in mind that right balance from what we're offering in terms of a range of options to consumers as well as how things get marketed in the marketplace.

Got it. Okay. And then, Melissa, you highlighted in the deck the, call it, marginal 3.5% increase for salaries and wages expense against a much higher attendance figure. As you look at the middle of the P&L and aspire to achieve discipline around spending, what areas do you see where you can achieve or drive further efficiencies?

Thanks for the question. Yes, the key areas that we're focused on from a cost management, I mean, obviously, across the full expense line items, we're trying to drive efficiencies. But salaries and wages and the concession COGS are really 2 key areas that we're looking to drive efficiencies out, and we've seen some nice success. And you see that both in our salaries and wages rate for the quarter as well as our COGS rate for the quarter. So we were on the labor side, pleased with our disciplined management of labor costs. We align staffing levels and operating hours in response to consumer demand. We effectively manage wage rate inflation and we delivered on our labor productivity initiatives.

As you look forward, labor hours and wage rates, I mean, those are going to be the key factors on our salaries and wages. We'll continue to flex our labor hours up or down based on projected attendance and operating hours. They're not necessarily at the same rate, and we'll try to drive efficiencies within those hours.

The one thing I would call out, though, Drew, for modeling purposes for Q2 specifically, we did have a significant overperformance from Minecraft in Q2 of last year, which resulted in fewer labor hours than would typically be expected for that level of attendance. So there will be a tougher comp for salaries and wages in Q2 on a year-over-year basis. And wage rate inflation, we do expect will remain a factor. But again, we'll continue to look to try to offset some of that with our labor productivity initiatives.

On the international side, I would just highlight there, we, again, continue to look to drive productivity initiatives. But what you saw in the quarter in Q1 was wage rate inflation really coming into play, particularly just in the Latin American market, we have seen which is not unusual, but we have seen government mandated wage increases that have exceeded inflation. So that has put some pressure on that line item, that we continue to manage and we'll look to manage going forward.

Just a little bit of detail on the COGS side. As you look at some of the things that we're pursuing there, we have been really active on the strategic sourcing front. So we had mentioned in our executive commentary that we made changes to our distribution model allowed us to not only expand our product selection but also lower our overall product costs. and you're seeing that play through. We've also been consolidating our vendor base to leverage our scale and continue to competitive source our products. So lots of efforts going on there to try to combat the inflation that we've been seeing.

The next question is coming from Omar Mejias of Wells Fargo.

Sean, maybe first on M&A, there's been recent media reports of potential consolidation activity in the space. Without getting into specifics, how are you thinking about your appetite for accretive opportunities right now? And when you evaluate deals, are you more interested in circuit level pickups or something larger, more transformative?

Sure. Well, look, I'd say one of the areas of focus that we think about as we position ourselves for success going forward is optimizing our footprint, and that includes growing and recalibrating and strengthening our circuit as appropriate. And M&A is certainly part of that equation. So it's very much on the table.

I would say with regard to growth via M&A, we do look at all prospective opportunities, and we do tend to highlight -- tend to target high-quality assets that have we think, have solid assured returns over time.

So we do tend to prefer deepening penetration into the market where we already have some presence because that leverages our established infrastructure and relationships and knowledge of the market. But we also consider other factors such as scale and strategic importance and competitive positioning and margin profile. So there's a range of things that we do look at. Ultimately, our goal is to create value for shareholders. As far as kind of tuck-ins versus more transformative M&A, I think it boils down to the deal. So I wouldn't necessarily limit one -- I would just pigeonhole us into any 1 area. There's probably more, I think, more inclination to potentially move on some kind of tuck-ins that can move a little bit faster, but it really just boils down to the economics and the prospects for a given deal.

That's very helpful. And Sean or Melissa, on Latin America attendance and results were bit below expectations. Just wanted to get some color on, how much of that was just a slate not resonating versus anything you're seeing on the consumer side? And with the Q2 slate ahead and the rest of the year, how does the slate look for that Latin American audience?

Yes. Thanks for the question, Omar. So as it pertains to international in Q1, we did see -- what you're seeing in our results there is essentially the film content just simply didn't resonate as well in the region in the first quarter, that happens from time to time, and it impacted our margin. That said, our team delivered results that were in line with Latin America benchmarks.

As you look forward, we do feel really good about the slate for the remainder of this year for Latin America and do believe that it will resonate well with audiences in the region, titles like Toy Story 5, Spider-Man, Avengers, Minions, and Michael are all anticipated to deliver strong box office results in LatAm. We also have another title from the Insidious, SAGA this year, which typically performs particularly well in the region. There are certain films such as Odyssey or Supergirl, The Cat in the Hat, Dune 3, that might not index as favorably as they are projected to do in the U.S. market, but we also do have local content in the international side.

Not a ton of visibility there yet into major contributors, but there's always opportunity for a breakout film. But on balance, I would attribute Q1 to really just a film slate that didn't resonate as well with the market. Balance of the year, we feel optimistic about the film slate.

Our next question is coming from Chad Beynon of Macquarie.

And great to see you all at CinemaCon. Melissa, you've kind of touched on this a little bit throughout the call so far just in terms of some of the cost items, but approaching it from a different angle, with respect to the Middle East conflict, gas prices, we saw some big fluctuations even this week. How are you thinking about the impact from this if that continues either domestically or internationally? And are you starting to see some of your vendors kind of pass through these costs of maybe delivering some of the goods or anything else that goes into the margin?

Thanks, Chad. So on the cost side, we do benefit from contractual structures that provide some protection for rising gas prices. So there are elements of fuel charges in select agreements. But to the extent higher fuel costs have an impact, it would mostly likely show up in our cost of goods sold line item. At this point, though, we wouldn't expect it to be material, and we're not seeing those costs, come through by and large. So I would say not expecting it to be material or have a big impact.

Okay. Great. And then one of the big takeaways from CinemaCon was around the renewed interest from the Gen Z age group outside of just the content that's coming out in the near term. Can you just talk about some of the things Cinemark is doing to better attract and retain some of these customers that maybe haven't been as frequent in years past?

Sure. I think probably one of the biggest things that we've done recently is at the end of last year, we launched our first ever Cinemark brand campaign called it Showtime. And that was very much structured with an eye toward younger moviegoers. To have more showcasing kind of the the freshness and the fun of moviegoing and in particular, at Cinemark. So it definitely was through that lens, and we're using that strategically in -- as part of our overall marketing efforts going forward to try to speak to that audience.

Along those lines, too, clearly, one of the things that we've done in our different social media efforts is we're using a lot of influencers through our -- in our process which resonates with that audience in particular. So that's a big piece of it. And then just the way we kind of put our different kind of media spots out there. There's different things that we're doing is that [indiscernible] I mentioned briefly in kind of the executive commentary -- we mentioned in our executive commentary how also with our e-mails, we're kind of sending out unique calibrated e-mails that are personalized based on attributes of our guests.

So -- and people who are in our network of direct communication. So -- all those kinds of things are just examples of how we're calibrating different ways of speaking to those audiences and then when they're in our theaters, making sure we're offering them the types of things that appeal to them, whether that's food and beverage or that is a category of audience that these premium amenities are resonating with.

So as we continue to roll those out, our motion seats, our large-screen formats, our screen access like things like that, all speak to that audience and are working really well. So all those things come together to kind of really help with as well as the film content in attracting that audiences more and more.

Our next question is coming from Patrick Sholl of Barrington Research.

Following up on an earlier question, do you have like any sense on like the extent of the audience that like with the shortened windows was staying home? Or is it like kind of just harder to terse out?

It's difficult to fully pierce that out. So one thing we've seen is the week-to-week patterns of a film's release have held relatively consistent to pre-pandemic characteristics. So in that regard, that's been a positive. But that overall opening that then plays through that pattern is where the challenge has been. And it's as I said, we've seen the effect of across all categories of moviegoers, particularly pronounced in more casual moviegoers, who come only once or twice a year as well as on smaller films.

So those are some areas of the audience that have perhaps been a bit more pronounced, but it's kind of cut across the board. And the hard part is like we know there's a big gap that's been unexplained in terms of attendance recovery. And when you kind of start to go through all the different pieces of what it could be, everything points to windows, which is why we're so encouraged by these recent changes, but kind of singling out a specific area of audience is difficult to do.

Okay. And then just on the concession side, could you maybe talk about like the, I guess, the breadth of the wide release slate that you offer merchandise for and like how you would expect that to sort of trends as in volume increases, maybe just the overall contribution from that side of the concession spending area.

Sure. Let me -- I'll start on that, and you can let us know if we kind of capture what you're asking. The -- as Melissa referenced merchandise, which is certainly been growing in appeal and has not only represented a revenue opportunity but help to eventize going to the cinema, even kind of the talent and the films have gotten into the promotional vehicle of that, it is largely tethered to film content.

We do sell a range of other things like we'll sell Cinemark blankets and we sell Cinemark thing, we sell kind of [indiscernible] type T-shirts and things like , but the big drivers of what's causing the growth are the new releases. So it kind of boils down to what -- it's the situation that Melissa was raving for first quarter where last year, the films that release lended themselves a bit more to merchandise compared to the first quarter this year.

As we look over the course of the balance of this year, it's quite robust in terms of the opportunities that we see for merchandise. So it's something we're leaning into more and more. And we do expect that to continue going forward. I mean, when we -- with the materials we saw at CinemaCon and just the general trends of what studios are investing their production into majority of that lends itself well to merchandise.

Clearly, there's the the main -- the big tentpole blockbuster films, but then you'll get different types of categories too that things can resonate, which sometimes can kind of surprisingly be really robust.

Our next question is coming from Stephen Laszczyk of Goldman Sachs.

Sean, I wanted to get your latest sense and see if you could talk a little bit more about what you're seeing out there on the competitive front in the markets you're operating in? And then specifically within those marketplaces, be curious how what you're seeing is maybe influencing some of the decisions you're making around things like marketing, the pricing at a market-to-market level and then some of the strategic investments you're making on the CapEx side?

Sure. I mean, look, I'd say the competitive environment continues to get stronger which isn't necessarily a bad thing. I think this is the type of industry where in certain circumstances, all boats rise and fall together. So -- to the extent our peers in the industry are delivering consumers a really positive moviegoing experience. That tends to bode well for the impression of the industry as a whole. So as others are leaning into premium amenities as well and ideally enriching the overall experiences they're providing for guests -- that's a good thing. So we're certainly seeing more of that. We're seeing others step up their marketing efforts to attract people to their venues as well as to just help build awareness for upcoming films, all that works well.

I would say we're obviously -- we feel we're in an advantaged position because of all the work we've done for the past several years, we got a big head start on that. It's part of what resonates in our market share results in our attendance results and our overall performance results. We obviously haven't stopped. We continue to further advance what we're doing.

There's just a long road of initiatives that we're pursuing to take our programming, our marketing, our pricing, our scheduling everything to the next level. So for us, it's just a matter of okay, how do we keep that lead and ideally continue to gain it even as competition continues to strengthen.

Great. And then maybe just a follow-up for Melissa. Just wanted to see if you could unpack with any more detail at the drivers around utilities and other SG&A expense increases in the first quarter? And then just as we think ahead to the balance of the year, how we should be thinking about modeling those line items across the rest of the quarters?

Sure. From a utilities and other standpoint, that was up primarily driven by the increase in attendance as many of those costs are variable or semi-variable in nature, so credit card fees, janitorial, repairs and maintenance, electricity costs. So you will see that uptick happen and it is primarily attendance related in the quarter. And as you think forward for utilities and other. There's a couple of things that I would call out outside of the variable and semi-variable nature of our expenses, I mean we do expect those to scale with the anticipated growth in attendance that we're expecting for the balance of the year.

But from a rate perspective, I would just call out that we do continue to expect electricity costs to be higher, just reflective of market rates, I mean, that's more a macro level dynamic that we're seeing. And then on the repairs and maintenance side, just as a reminder there that we do expect our repairs and maintenance to remain elevated as we continue to address deferred maintenance needs across the circuit.

So we don't expect that to have a meaningful year-over-year impact because we started those efforts last year. However, there could be some timing of quarterly within the year there. And then other factors, we do have fixed costs like property insurance and real estate taxes that those would be subject to the broader insurance market and changes in property values. But we continue to focus on disciplined management within that line item and in particular, usage as it comes to electricity costs and the pressure we're seeing there.

From a general and a administrative expenses. So on the G&A side, for the quarter, what you're seeing there primarily excluding stock-based compensation, G&A was up about 2%. And globally, and that's driven by wage and benefit inflation and some targeted investments and headcount and capabilities, including our ongoing shift in cloud-based software to support our strategic initiatives. Those impacts were partially offset by lower professional fees.

As you think about the go forward, we do expect to continue to have an impact from merit increases and some investments that we're making in talent and capabilities. We do expect variability in the areas of professional fees and incentive comp may somewhat offset those increases. So we'll, again, continue to be disciplined on the expense side with line item as well. But there's puts and takes. However, we're not expecting meaningful increases there.

Our next question is coming from Eric Wold of Texas Capital.

Maybe just want to take that last question. Following kind of individual expenses maybe to kind of a higher kind of broader level. I guess knowing that recovery in attendance and box office and the associated kind of concession spending are kind of the biggest drivers to pushing your margins higher and back towards kind of pre-pandemic levels ex obviously DCIP the other kind of things that were back there. I just want to get a high level of sense of where do you see margin leverage this year on that kind of revenue growth if you get back towards a $10 billion box out environment, given all the labor, utilities, inflationary headwinds that may be pushing back on that versus maybe what you may see in a more optimal recovery environment?

So where we -- thanks for the question, Eric. So where we expect to gain the most leverage is going to be against our fixed expenses, and that's going to be in the U.S. side, our facilities lease expense primarily being fixed in the U.S. as well as our G&A expenses. So those are kind of primary areas that we expect to get leverage.

Beyond that, we've talked about some of the different expense impacts across the P&L. But I would kind of step back and take a look at overall margin profile and what we have been able to deliver because we've been seeing inflationary pressures across these various expense categories for some time, but we've still been able to deliver really strong margins because of the offsets we've been able to provide, but also the top line growth that we've been able to deliver from a food and beverage per cap, average ticket point -- average ticket price standpoint as well as maintaining our market share gains relative to pre-pandemic.

So we'll continue to focus on growing the top line, and that will give us leverage as well as trying to mitigate expense pressures that we see. But overarchingly, we do expect the box office and attendance levels to improve year-over-year, which does support margin expansion. And then we'll continue to focus from an execution standpoint on getting the most leverage that we can out of that growth.

At this time, I'd like to turn the floor back over to Mr. Gamble for closing comments.

Okay. Thank you, Donna, and thank you all for joining us this morning. We appreciate you taking the time to participate today. And we look forward to reconnecting in a few months to share and discuss our second quarter 2026 results. I hope you all have a wonderful weekend. Thanks.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.

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.

All right. Please note that important disclosures, including my personal holdings disclosures and Morgan Stanley disclosures, appear as a handout available at the registration area and on the Morgan Stanley public website.

With that out of the way, my name is Sean Diffley, from the Morgan Stanley Media and Entertainment Research team. Today, we're joined by Sean Gamble, President and CEO of Cinemark. Sean, thanks for being here.

Thank you for having me -- having us.

So looking back on the 2025 industry box, I would say it was slightly disappointing versus expectations. What do you think the main drivers of that underperformance were? And what did you learn from how you look at the '26 outlook?

Well, 2025 -- '25 was up from 2024, although, as you noted, trailed expectations a bit. As we've kind of broken that down, I think there's a few areas that led to that. One, we didn't have a film last year that crested that $0.5 billion mark, which happens from time to time. I mean that's rarefied air. So don't read too much into that. Second thing is we didn't have a large animated film in the summer, which we customarily have. I mean this year, we've got Toy Story 5. We've got Minions. There's another live action in Milan, just as an example of '26 in contrast. And then I'd say it's a little bit more of a mixed bag of films that really connected with audiences and some of those that didn't.

Altogether, look at that a little bit as kind of the normal ebb and flow of our business. '24 wind up surpassing expectations. '25 was a little bit under. I think if there had been one animated -- big animated film this summer, I think everybody would be looking at the year differently. In total, I think there was still a lot to celebrate. I mean for us at Cinemark, it was our biggest year since the pandemic. There were a lot of all-time record-breaking results that we saw throughout the year. Another great year in growth of younger audiences and a great year of nontraditional content again. So lots of positives. And as we look to 2026, I'm not sure there's a lot to read from '25 into 2026, but we're just really optimistic about the slate for this year based on what we see.

Excellent. That's a perfect intro. So as we think about kind of the higher wide release volume for '26, maybe you could talk about your current visibility into film supply and current expectations around the cadence of releases by quarter?

It's a great question. So overall volume has continued to recover since the pandemic. So actually, last year in '25 recovered to about 98% of the number of wide releases that were put out into theaters compared to pre-pandemic levels. Based on what we can see right now, it looks like 2026 will at least match that and could even exceed that recovering to pre-pandemic levels, maybe even beyond. So I think the volume potential is really strong. When we look at the cadence of releases, that's an area that we're still having a lot of discussion with the studios about. If anything, that may have gone backwards a bit.

When we look at '26, we see a bit more congestion in the summer months and at year-end. It took a long while for everybody to realize, hey, it's a 12-month calendar before the pandemic and movies can work at any time of year, and that had started to happen. And then ever since things have kind of ratcheted back to more of the tried and true area. So there's opportunity there. We saw how well Dune did a couple of years ago in March. We'll see how Project Hail Mary does. I mean that's a good example, but I think there's more opportunity for that to spread in, again, it could just cause a little bit of compression in those big months in the summer.

Got it. Okay. And over the last few months, there's been some debate around the impact of shorter and flexible theatrical windows. In the post-COVID days, I think early on, you were excited about a flexible 45-day window in terms of derisking theatrical overall. I'm curious what your current view is on windows?

Yes. So I think there was a lot of change over a very short span of time post-pandemic with the window, and we've all been evaluating what that would do to consumer behavior. And what we're seeing now is that does appear to be having an adverse effect on just the overall recovery of attendance, particularly with more casual moviegoing audiences and smaller films. So it's become a bigger matter of discussion now with the studios, both privately and publicly that has come out. You're right, we've still consider a 45-day window to be the optimal time frame with the ability to flex up and down a bit based on performance. I think the key in that, though, is 45 days or more being the majority of the circumstances [indiscernible], not 17 days or 24 days or something considerably lower than that.

And there have been a couple of studios that have been a bit more aggressive on that. And that's where some of the headwinds have been coming from, and it's created some confusion with consumers that like everything is that way. So there's a bit more a course correction to do on that, where things may have over-indexed a bit. We're looking to pull that back. I think a great example of that is Disney has experimented with some of that before, and they have gone back to about 60-plus days for the majority of their films and you look and they continue to be the most successful studio year after year with their overall box office. So I think there's good examples to look to of how beneficial that can be.

So it helps when Disney 60?

Absolutely. I mean I think that -- they've proven that, that model works, and it's a good model for the industry.

Makes sense. So I wanted to ask about marketing intensity from the studios. Have you noticed a meaningful change since the pandemic? And how does that impact your own decision around marketing?

Interestingly, marketing is a little bit tougher to get a handle on in terms of the overall spend. I mean unlike box office, which is reported every week and you got really good public data on that, there's not a good source to get your arms around how much is being spent. When we talk to the studios, they generally tell us that they're continuing to spend as much as they have historically to release their movies. If anything, I think what's changed is just the fragmentation of audiences in terms of their viewing habits and what they're spending time on in the home. It used to be a much more efficient model to get at consumers through linear television. And now because time is scattered across the board, it's just -- it's become more complicated.

It's not unique to the theatrical space. I mean really that's for all consumer-facing industries. So we're working with the studios on that and trying to work on strategies to make those campaigns as effective as they can be. We augment your question on what we do. I mean we augment what the studio campaigns are doing with a whole series of things. I mean we have direct access to 33 million addressable consumers globally, 27 million within our loyalty program. So we've got a really direct channel of communication to moviegoers, and we're using e-mails and social and digital channels to really amplify that messaging, spread awareness, help drive more interest and importantly, drive that to Cinemark in that process. So that's kind of a big part of what we're doing to help support the marketing efforts of the studios.

And I'm curious, as you talk about the grab for attention and the fragmentation of viewing across media, where do you think kind of cinema going and movie theater going fits into all of that? Do you think we're -- there's any kind of reversion back to kind of getting away from the AI swap? Or how do you think about how consumers perceive going to the theater?

Well, it's interesting. I mean the perception and the interest remains really strong. I think we've been looking at different segments of audiences. Highly frequent moviegoers, what we've seen is as more movie, the volume has corrected itself, the amount of attendance of those moviegoers has come back. So great signs there. We're continuing to do surveys about interest, which remains very high. I think probably the most -- one of the most positive signs we're seeing is younger moviegoers are growing in their frequency of attendance.

We were concerned at one point, at least I was concerned at one point that because younger audiences are so tethered to their devices that going to the theaters and then being asked to put their way would actually be alienating, and it's proving to be the exact opposite. It's more differentiated. I think with what you hear about mental health issues and things like that, the social experience of that is actually a positive. And we saw 25% growth in GenAlpha attendees last year. And in surveys, the younger audiences value the moviegoing experience more than any other generation. So we think that's just a real positive in terms of the moviegoers of tomorrow.

That's fascinating. Is that -- what kind of movies is that across? Like I remember Minecraft was like very popular on socials, but is it in horror, I would imagine that's all space.

It's across the board. I mean we see it in all categories. I think this kind of drive to more experiences and event type things, which really kind of caters to those types of audiences. I mean, we fit in with that really well. We're looking to get out of house and do something fun, enjoy and we see it. But it cuts across all genres.

Great. And I wanted to ask the big news in the media industry is obviously Paramount, Warner, Netflix bowing out of the process there. I wanted to ask what your thoughts are on the implications for the theatrical space. Obviously, that deal would need to get approved, but I think the market generally perceived this outcome is better for your company and the industry.

Yes. Look, both Paramount and Warner Bros. have been long-standing supporters of theatrical exhibition, great partners of Cinemark for decades, right? So I think based on their actions over many, many years, I think that's a real positive. And there clearly has been a lean of those organizations to ramp more into the space. So we see that as a positive. And I'd say speaking to that particular deal consolidation in the industry in general, anything that leads to sustained or increased levels of investment in the number and scale of releases theatrically that continue to have a robust theatrical window and comprehensive marketing campaigns is viewed as a positive for the industry.

So I think we're hearing all the right things. There's still a lot still -- a lot of details still to work through that still needs to take place to make sure there's really kind of firm commitments in that regard. But I think we're going to be working through that process over the coming months. I think one interesting thing about that, I would say, is on the Netflix front, there are a lot of public comments made about having had the chance to see the Warner Bros. financials and see how lucrative that part of the business was and the intent to continue that business in that same structure would lead me to believe, well, if that was in truly the case, and that was the perception as stated, like why not get more into that space as an opportunity. And we've seen that opportunity sitting there that hasn't been pursued for years, and maybe this will actually unlock that potential more going forward, which would be a real positive for their company and for our industry.

Right. Ted talks about KPop Demon Hunters coming into the theater [indiscernible]

It was huge. I mean that and the Stranger Things event. But I think even some of the mainstream films doing it with more of a traditional theatrical. It's not a difficult business to enter in terms of distribution. So I think it can provide a lot of value for that company. And I think, hopefully, in having seen that, it can kind of unlock a new channel for them.

That makes a lot of sense. So I wanted to ask about the Hollywood Guild contracts coming up again in 2026. Obviously, the last round was a major headache for the industry broadly. But I want to ask what are the key signposts that you're watching for? And how do you plan around a potential disruption? I would say most people think this round should be less disruptive than the last one, but how are you guys thinking about it?

Well, look, we're certainly hopeful after all the hardships that were endured after the last strikes, which seem to lead to some pretty detrimental [indiscernible] across the board that level heads will prevail and we'll avoid another situation like that. Don't have any real inside baseball on what's going on there other than because things appear to progress quietly, I think everybody views that as a good sign. There's not a lot of saber rattling publicly, which is a positive. So not much to necessarily speculate on or prepare for at this stage other than it looks like at least so far, all signs are positive in terms of how things are progressing.

Great. So I want to shift to Cinemark specifically. So you've obviously seen a lot of market share gains since pre-pandemic much of that, I think, has been driven by premium and higher quality experiences versus your peers. What do you think are the 2 or 3 biggest drivers of that, that makes you most defensible versus competitors in the market?

Well, we've been really pleased with what we've been able to achieve in our market share advances. And it really is the result of a whole series of initiatives. If I were going to call out 2 or 3, I'd say, I think it starts, number one, with just the consistent investments we've made in our physical theater assets over the years to maintain a high-quality assets that are in good shape. We see that and also have a high degree of the types of amenities consumers look for, 72% of our U.S. circuit has recliner seats. We've got the largest premium large format -- private label premium large format network in the world, the most D-box motion seats. So like a lot of those types of things that really keep people coming back.

Second is just the efforts we've pursued over the years to create a fantastic experience within those assets, in particular, our efforts around guest service. We've really worked to hone that in cleanliness. We consistently get high satisfaction scores from 95% of our guests regarding the types of experiences they have, and that lends to them coming back more. And then finally, probably the third thing I'd say is just the work that we've done to improve the way we run the company, specifically in terms of building audiences. So our showtime optimization efforts from a programming standpoint, marketing efforts, pricing, all those things collectively have really played into -- and I'd say across the board, all those things are -- they're initiatives that we've been pursuing for years and have been investing in for years. So specific to competitive edge.

I mean they're hard to replicate in any kind of short order. It's been a lot of time and dedicated focus to get them to where they are. And we're continuing to pursue a series of additional initiatives to take all those areas even further.

That's great. And I wanted to ask about Movie Club. I think you're up to 1.5 million members there, which generate close to 30% of your domestic box. How are you thinking about the next phase of this growth as the program matures? And how do you think about long-term targets?

Well, we continue to be thrilled with the performance of Movie Club and especially the value that our consumers continue to find. As you mentioned, we've got now -- we last reported a little over 1.45 million members in Movie Club, and they account for roughly 30% of our box office. We never thought it would be that high, which is tremendous. I think the core benefits of the program continue to resonate exceptionally well with our members, and we are also constantly working on adding new things to increase that value.

And -- because of that, one of the things we find is even our newest subscribers, we see their level of consumption of movies, their frequency grow to levels of our early adopters. So there's a real value of getting people in the program because what they find from it, it leads to more moviegoing. So we're continuing to lean into it, continuing to innovate around ways to make things better and keep consumers engaged, churn low. I don't know, 50% may be a high-water mark to get to. I think if we need to sustain about 1/3 of our box, there's huge benefits that come from that.

That's great. And I wanted to ask about per cap. So food and bev and merch per cap spending continues to set records. You break down what you view as the sustainable drivers on that from a kind of film mix volatility standpoint? We used to joke the profits in the popcorn. What's driving these per caps higher over time?

Well, I think -- let me -- I guess I would start with some of the per cap growth. I think we've focused on initiatives predominantly that drive more consumption. So when we look over the past few years since the pandemic, about 2/3 of our growth has largely come from incidence growth and about 1/3 from price. Last year, a little bit more of that was from price. But we're very focused on making sure consumers continue to see a lot of value in what we're selling. One of the benefits of more expansive menu actually lends to that the price points on enhanced food is comparable to what you'd find elsewhere.

By genre, we do see a bit more of like certain types of audiences, younger male kind of action-oriented type of audiences tend to consume a bit more of food and beverage, especially merchandise as well, whereas kind of older adult type of specialty types of audiences consume less. We haven't really broken that out. We just do see some skewing based on that. I would say, overall, we've had a pretty good track record of delivering mid-single-digit growth for over a decade now, 5% to 6% annual growth rates. And that's certainly our target going forward. We're working on a whole series of additional initiatives with new innovations, new floor designs, menu concepts, localized flavors and things of that sort to just sustain that growth as we go forward.

It sounds like you're not seeing any GLP-1 impacts in the business there?

It's interesting. We -- no, the short answer is no, we're not. We do carry a range of healthier options. We think of like fruit juices and waters and even popcorn without oil and like things of that sort that for -- what we tend to find is as we introduce those types of concepts, there's not a lot of uptake. When people elect to come to the theaters, it's a moment to splurge and the varied kind of fun event type of offerings that we have in the food and beverage and it tend to be the things that over-index, but not seeing any kind of impact from that or any other type of health consciousness efforts.

And you discussed the ongoing advancements in showtime optimization and analytics and automation. What are you seeing as the biggest payoffs around those efforts today?

Well, a range of things. I mean, it ranges from the guest satisfaction results that we've seen. When we talk about enhancing the experiences that gets into how we're delighting and servicing our guests, building audiences. So if we've got programs, more accessibility of shows that are programmed at the right time, it lends itself to more consumers coming into our theaters back to that market share kind of comment you raised, like we do -- some of that does get skewed by product mix and capacity constraints.

But in general, it's one of the things that has lent itself to that. So a wide range, productivity advances internally. So it all has kind of worked towards improved top line growth as well as just overall profitability as we're kind of dealing with various headwinds and tailwinds in the marketplace.

Great. And as of the end of last year, I think over 20% of your auditoriums were converted to laser projectors. What's the time line to reach the majority of penetration there? And what do you think are the key benefits that you're underwriting to?

Well, look, to talk to the kind of benefits, I'll start there and come back. All projectors need to be replaced at some point. So a part of that is just planning forward to when we're going to have to replace our existing fleet of digital projectors. I think the great news is like we have a phenomenal tech team and some of the best technology and presentation in the industry. So we're in a position of being able to drive that at a pace that works for us. Our Barco Xenon projection capability is like the light levels and the presentation, I mean, it's not dramatically different from laser. We do get some added benefits in laser with a slight uptick in presentation and there's some OpEx savings with maintenance, spare parts, energy consumption.

So we're kind of working a balancing act of a time line over several years to just replace theaters as they're coming or replace projectors as they're coming to maturity, trying to capitalize on some of the marketing and consumer benefits that lasers provide, but being able -- and then balancing that with some of the other investments we're making of our capital so we can just diligently manage the overall spend we're deploying. But the good news is us relative to some others out there is we can operate that on a time line that works because we don't have any burning issues just based on how solid our existing fleet of projectors are and the high quality that they already provide.

Right. And as we think about attendance hopefully recovering in '26 and '27, how should we think about operating leverage to show up most clearly?

So I mean, our business is -- in generally, our cost structure, about 40% of our costs, I would say, are fixed, things like our lease expenses, property taxes, a certain degree of our G&A and even kind of base level of labor that we need to run our theaters. So we do see some nice increases in operating leverage over those fixed costs when attendance increases. Our revenues tend to scale at a faster clip than our costs do to service the added pages we need.

So I think we expect to see some lift in terms of profitability on account of that. Obviously, there's other cost headwinds we continue to deal with like everybody else, inflationary things on wage rates, minimum wage increases by various states, utilities and things of that sort. But we're also working on productivity efforts to try to offset a good portion of that. So good news is that the biggest driver of our kind of operating leverage is attendance. So big increases in that, it lends itself to better profitability.

Got it. And I wanted to ask what expense categories do you worry could remain structurally higher than they were pre-pandemic?

Gosh, like so much has changed versus pandemic. I'm not sure it's even directly comparable. I think maybe I'm not sure I would consider it structural per se, but I guess you could like some of those inflationary areas is probably more what I would point to wage rates tend to only go in one direction. So there was a little bit of a spike in that for a period. That's rationalized a bit, but it's not necessarily going backwards. So I'd say that's structurally maintaining and we're, again, working on things to kind of offset same thing in the utility camp. We've seen some increases in utilities that we think will be ongoing. But those are, I guess, 2 of the things that I would point to structurally.

So I want to shift to international, Latin America. I think attendance disappointed a bit last year. What do you think were the biggest drivers of the variance in LatAm demand versus the U.S.? And are you more optimistic as we look into '26 on the Latin American attendance front?

Well, interestingly, Latin America on the whole has recovered even more so than the U.S., even in the midst of some of the extreme economic and political dynamics that take place in the market. I mean I look at Argentina, Argentina with 200-plus percent inflation has had attendance recover beyond 2019, right? So 2025 specifically was really, it just boils down to the product mix. Certain types of films resonate better with Latin audiences than others. In particular, horror family films and like live-action types of films really work well. Sci-Fi and fantasy and more U.S. nostalgia, U.S. comedy type of films under-index, and it was more a fact of that. When we look at 2026, it feels like a more balanced slate in terms of what will really connect with audiences more so than '25.

I mean there are films like Dune and Mandalorian and even the Odyssey that we think will probably underperform relative to the U.S., but other films like Minions and Mario Brothers and Moana that -- and Spider-Man, which is a huge character in that market that we think will really over-index. So I think it's a much more balanced slate.

Great. So turning to the balance sheet. So now that the convertible notes and related warrants are behind you, congratulations on that. I know that was a big area of focus for a while and near-term maturities are pushed out. How do you think about the right balance between reinvestment and capital returns?

So yes, we're thrilled to have refortified our balance sheet over the past few years, extinguishing all of our COVID-related debt. When we think about capital allocation, our first 2 priorities are; one, maintaining the strength of the balance sheet, which we continue to view as a strategic asset; two, investing in high confidence ROI-generating initiatives to set the company up for long-term success. We continue to believe those 2 pursuits are in the best interest of generating long-term shareholder value. And that followed by three, returning excess capital to shareholders, and we continue to look at that in the context of leverage, liquidity, our cash balance projections and the range of strategic initiatives we have to pursue to drive value.

I think we feel really good about the strength of our free cash flow over the past year that has really enabled us to execute across all 3 of those objectives, pursuing the first 2 and then also evidenced by reactivating our dividend, subsequently increasing it and repurchasing $275 million worth of shares last year. So I think certainly, our aim is to continue to execute in all 3 of those areas as we move forward.

Excellent. And you outlined CapEx expectations for $250 million for 2026. Maybe you could walk through the major buckets, maintenance versus ROI projects and new builds. Where do you expect to get the biggest paybacks?

So when we look at that $250 million, we expect a little over half of that will go towards maintaining a high-quality circuit as well as pursuing some of the laser conversions that we were talking about a moment ago. That's a little bit up from what our norm would be of around $100 million just based on some of the deferred maintenance we're pursuing over the next couple of years. The remainder of that would go towards high confidence accretive types of investments. So you mentioned new builds is one of them. I mean that has a little bit of a longer lead time in terms of payback in terms of the new builds because they're longer projects. That would be one area. Continuing to pursue more premium types of amenities like more XD screens, more motion seats and things of that sort, which are definitely resonating with audiences, additional food and beverage innovations.

So those usually have really quick turnaround in terms of introducing as we continue to test with what types of things work well with our audiences and can be additive to our consumptions. Oftentimes, that requires more equipment. So those are just some of the types of examples of things that we're leaning into to drive incremental growth.

Sounds great. And maybe hitting on M&A, what types of assets could you be most interested in, in terms of geography or quality of asset? How should we think about that?

So we look at everything. I mean, so we are open to exploring everything. That said, we do tend to favor higher quality assets that have really assured returns and would be accretive to the company. We do explore other markets, although we tend to prefer going deeper in the markets we're already in, where we've got great knowledge, great relationships in terms of operating in those spaces. So we continue to see opportunities out there. I would say we obviously also consider what type of strategic impact there is, what type of competitive influences there might be, things of that sort. But we're not looking to just grow for growth's sake, like we're very [indiscernible] buyers.

And again, we want to make sure there's a strong path to accretion when it comes to M&A. But again, it's one of the areas that we look to as a prospective area of growth for the company. So we're constantly out there kind of evaluating what types of opportunities there are. And just a question more or less of when they unlock and become actionable.

Okay. I want to see if we have any questions in the crowd.

Sean, you guys have talked about, among other things, I think sort of redesigning the lobby and utilizing that space better. I was curious because you also talked about merch, which is a business that I just see booming like everywhere, which is the most low-tech, old-school business ever. But is there an opportunity to do more on the merch side and particularly utilize the lobby space in ways that you haven't in the past?

Absolutely. That doesn't sound like much of a studio question. But yes, absolutely. We've been leaning into merch. I mean what's great about merchandise in addition to it being a sales opportunity is it just adds to the experience and the event of going to cinemas. So these movie themed concepts have really connected. I mean, talent in the films have gotten into promoting them. So it's just added to the fun of the movie experience. And yes, from a space, we've been adding dedicated space and racks for more merch in theaters. We've actually now really expanded our e-commerce channel, too, to be able to distribute more of that. If we run out in our theaters, we have -- that's one channel we can direct people to.

Obviously, there's a lot more shelf space we can pursue there than what we can actually physically do in our theaters, so we can carry a wider array of options. So it's something we're leaning into based on the demand of doing more, and we definitely see it as a further area of growth opportunity to sustain that 5% to 6% growth rate I was talking about when it comes to our per caps going forward.

And I wanted to ask, obviously, AI is a big theme in this conference. I wanted to ask how you think about AI impacting the movie business and your business in particular?

Well, we look at AI as a big area of opportunity. We've been using AI and machine-based learning in a wide range of our tools and processes for a long time. Some of those areas we talked about are showtime planning, our pricing, things like that. We're now incorporating GenAI as that continues to evolve into those practices and look at that as a way to grow revenue, find additional productivity opportunities and things like that. So we've got a lot of people who are evaluating that, looking for what are the tangible types of things that can really provide value to us within Cinemark.

Beyond that, I'd say, we looked at it as really something that has a lot of potential on the content creation space, too. I mean, clearly, the right types of IP and copyright protections have to be in place to do that responsibly. But with that kind of structure set, I mean, the ability to gain efficiencies in how movies get made, unlock new visual effects capabilities. I mean, it can lead to a greater -- I think it can lead to a greater volume of movies being created with interesting new ways and interesting new visuals that we haven't seen before, which all bodes well to the content pipeline for our theaters. So we just look at it as there's a tremendous amount of potential as this expands.

Great. And I wanted to close out, put on your prediction hat. And if you had to pick 1 or 2 films or franchises in 2026, you could -- you think would drive the biggest upside surprise to the domestic box office. We hit on some of them earlier, but down to 1 or 2, what would they be?

Upside surprise. Well, I mean, yes, you know there's going to be the movies like the Spider-Man and the Avengers and Moana and Minions and Super Mario Brothers, they're all going to do big business. I think actually, for me, probably -- I wouldn't call it a sleeper hit necessarily, but I think one of the ones that could really surprise in the magnitude of upside is Devil Wears Prada 2. I think the amount of heat on that movie is huge. So it's not really considered necessarily a tent-pole, but it has the ability to do that level of business just based on the interest that's out there. So I think that one could really -- hopefully, we'll see something similar from Project Hail Mary in a couple of weeks as well, but I think that would be my Devil Wears Prada 2.

My wife is excited for it too. All right. We'll wrap it there. Thanks, so much, Sean.

All right. Thank you, Sean. Appreciate it. Thank you, everybody.

Greetings, and welcome to Cinemark Holdings Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chanda Brashears, Senior Vice President, Investor Relations. Thank you. You may begin.

Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2025 results. Our earnings release, executive commentary as well as our Form 10-K were issued earlier this morning and are available on our website at ir.cinemark.com. Today's call is being webcast with a replay and transcript available on the website after the call.

Before I begin, I would like to remind everyone that during this conference call, we will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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.

Forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied. The factors that could cause results to differ materially are detailed in our most recent annual report on Form 10-K as filed with the SEC and available on our website.

Also, today's call will include non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the website's most recently filed earnings release, 10-K and on the company's website at ir.cinemark.com.

Joining me this morning are Sean Gamble, President and CEO; and Melissa Thomas, CFO. Beginning with today's call, we are shifting our earnings format to provide adequate time for your questions. Following brief introductory remarks from Sean, we will open up the lines for Q&A.

With that, I'll turn the call over to Sean.

Thank you, Chanda, and good morning, everyone. Before we dive into Q&A, I'd like to briefly reflect on our 2025 results as well as the advancements we've made over the past few years. Driven by further market share expansion and a series of all-time record achievements in 2025, we delivered a post-pandemic high in worldwide revenue of $3.1 billion. This strong top line result, combined with effective cost management and incremental productivity gains resulted in $578 million of adjusted EBITDA with a healthy 18.6% adjusted EBITDA margin. .

Through a relentless focus on initiatives that are aimed at expanding our audiences, activating new sources of revenue growth, optimizing our circuit and continuously improving our processes and capabilities, we have taken the experiences we create for our guests and our operating agility to new levels.

Furthermore, we have developed a distinctive set of competitive advantages, including a differentiated position of strength. Over the past 3 years, we generated nearly $1.8 billion of adjusted EBITDA with over $1.3 billion of operating cash flow. We increased customer loyalty to Cinemark, meaningfully expanded our market share and grew our concession revenues and per caps to all-time highs.

We have fortified our balance sheet, extinguishing over $700 million of COVID-related debt, while at the same time, reinvesting over $0.5 billion in capital expenditures to advance our company for the future and returning $315 million to shareholders through dividends and share buybacks. Achieving these results has required extraordinary dedication, ingenuity and perseverance throughout our entire company, and I'd like to commend our sensational global team for the significant impact they have made setting up Cinemark for ongoing success in the current environment and beyond.

As we look ahead, we remain focused on effectively navigating an evolving media and entertainment landscape, continuing to diligently operate our business and delight our guests week after week and effectuating a multitude of strategic initiatives to further strengthen our company and market position.

2026 appears set to benefit from a robust lineup of compelling films and a volume of wide releases that looks poised to reach pre-pandemic levels. We are excited about the prospects of this year's slate and we remain highly encouraged by sustained consumer enthusiasm we continue to see for the types of larger-than-life cinematic entertainment we provide at Cinemark as well as the multitude of opportunities before us that are fully within our control to create incremental value for our customers, partners and shareholders.

Operator, we'd now like to open up the line for questions.

[Operator Instructions] Our first question is coming from Eric Handler of ROTH MKM.

Yes. Thank you for the question. Sean, given how well premium has been performing for you guys, I'm curious how many of your theaters have two XD screens? Are there plans to add more theaters with multiple XD screens? And what do you think ultimately that could be?

Sure. Thanks for the question, Eric. Definitely, premium amenities we're seeing a growing interest from a section of our audiences who really enjoy the added enhancement that they provide.

And specific to your question, we've got about 10% of our domestic circuit that has two XDs. There are others that have a combination of an IMAX in XD, a ScreenX in XD, but that's the overlap. Part of the governor on that is just have any enough significant screens to add an extra XD too. We are very particular about making sure that if we're selling an enhanced experience that it fully delivers on that, and that's beyond just the sound, the environment, it goes to the scale of the screen. So if it's an existing theater, there needs to be a second auditorium that can do that.

We are in the process of rolling out additional screens over the next few years. So we're going to be continuing to do that. So we've got still a nice runway of opportunity, but I'm just flagging that there are some limits to how -- we also are just focused on how many of those we have in a theater, premium enhanced format still only represent about 15% of overall box office. So while there is a group of moviegoers who do like to pay that additional enhanced experience, the bulk of moviegoing still is on all the other screens and our focus is continuing to make sure all of our screens are premium experience, regardless of whether you choose XD or something else.

That's helpful. And then I wonder if you have any type of updates on new build activity, be it in the U.S. or Latin America.

Sure. We -- our new build pipeline was slowed during the pandemic, obviously. And then we've reactivated our real estate efforts in exploring opportunities out there. We've got a number of things that are in motion, but these projects take -- can take 2 to 3 years to get off the ground. So we opened a new site in El Paso in 2025. We've got plans to open an additional site in Greenville, Texas in 2026. We've got -- we've broken ground in Omaha, Nebraska and another site for 2027. And then we've got a range of other projects, as I mentioned, that are in motion. So we reactivated that. It just takes a little bit of time to fully get up to the speed because you got to make sure you get the right site and when you go through all the exercise of finding locations, negotiating the deals, working through all the regulatory processes, it can just take a little bit.

And Eric, do you see that increase in our pipeline coming through as well and the step-up in capital expenditures that we're expecting from '25 to 2026. So that is reflected there as well as to your point on XDs and how many opportunities there, expansion in XD, ScreenX, and D-BOX as well.

Our next question is coming from David Karnovsky of JPMorgan.

Sean, on your executive commentary, you noted the softer than anticipated slate last year. So I wanted to see just with some hindsight, you can walk through the factors that you think drove this. Is this primarily about quality and film mix? Or are there any kind of structural impacts to consider like Windows?

Sure. Thanks for the question, David. At a high level, I would say we view it more as just the normal ebb and flow of the industry. I think perhaps some of the expectations for 2025 got a little bit overinflated coming in. We had some pretty lofty targets for select films. When we look at the aggregate of the film -- the aggregate slate, excuse me, there was a bit more of a mixed bag of the ones that overperformed and some of those that didn't fully resonate. The year lacked a mega blockbuster that exceeded $0.5 billion. And there really was no major summer animated film. So I think if we had had one $300 million animated film this summer, which we traditionally do, I think everybody would be viewing 2025 much differently.

So I think -- I don't view that as a real structural issue. I think it's just more of the way sometimes the strength and quality of films play out and how well they resonate with audiences.

Windows is something we do continue to evaluate. It's something that's a big topic for the industry. There are indications that awareness of highly shortened Windows is having some effect on smaller movies and more casual moviegoers, which could be providing some headwinds to overall recovery in the industry. So there is a factor. But I don't look at kind of the softness versus expectations on '25 necessarily, because of that. It's just more based on some of the the really high expectations we had.

Okay. And then just with margins, when we look at '25, obviously, attendance was a headwind. But assuming a recovery this year, how should investors think about room for operating leverage and Melissa, any help in thinking about kind of cost of goods, staffing or G&A?

Sure. From a margin standpoint, we would expect, given we do expect a stronger box office and higher attendance year-over-year that would support leverage in our operating model as well as margin expansion. As you know, our EBITDA margins are most heavily influenced by those two factors of box office and attendance. That said, there are a number of variables beyond that, that influence our margin. Is market share or average ticket prices in food and beverage per caps. And then in addition to that incremental value that we expect to capture from our strategic initiatives and our ability to manage cost pressures.

And then for international segments, our performance will depend on -- we're talking about film slate. So how film slate resonates with their audiences as well as inflationary and FX dynamics.

And then to your question on expenses, particularly on a go-forward basis. From a G&A perspective, we do expect our G&A to continue to reflect merit increases and rising benefit costs. We are making targeted strategic investments in talent and capabilities, including cloud-based software to continue to advance our strategic priorities and position the company for long-term success. But we remain disciplined in our approach to expense management ensuring that our spend is closely aligned with long-term objectives.

And then broadly, as you think about our variable costs, those are going to flex with attendance, albeit not at the same rate.

The next question is coming from Eric Wold of Texas Capital Securities.

I guess a question on kind of the moviegoers monetization. Can you talk about with the strength you had in concessions Q4 and then broadly throughout last year? What strategies have been driving the most success that you've kind of put into place with the various ones that you've used? Any way to parse out how much of the increase was film mix influence versus just basket and incidents? And then lastly, kind of what do you think the opportunity is going to push ticket prices, the concessions higher this year given the environment that were economically?

So I'll take that one from a per cap standpoint, our per caps domestically were up about 5% year-over-year. And there are three primary drivers to that. First, our strategic pricing actions; second, higher incidence rates; and then third, a shift in product mix given the growth in merchandise sales as well as enhanced foods.

As you think about kind of the breakout that, I'd call it probably about around three points: strategic pricing, one point incidence and one point driven by shift in product mix. In terms of the key catalyst, as we've said before, food and beverage, this is a game of singles and doubles, we have a variety of initiatives that we've been executing upon and others that we will be executing on to really drive growth on an ongoing basis, and that includes increasing the throughput of our concession stands, leveraging planograms to improve the monetization of our space.

We continue to introduce new concepts, new flavors, expanding our enhanced food offerings. We still think there's runway there as well as growth in movie theme to merchandise, and that's just to name a few. As we think about the go forward looking ahead to 2026, we do remain optimistic about our ability to deliver another year of moderate year-over-year growth in concession per cap, supported by the broad range of initiatives that I just mentioned.

And we do think that growth can come from both incidence as well as further opportunities to optimize our pricing. Bear in mind, from quarter-to-quarter, our per caps will fluctuate with film mix. And then in our international markets, we do expect concession per cap to be impacted by inflationary as well as FX dynamics in the region, while shifts in country mix also can play a factor. Overarchingly, our focus is on delivering sustainable per cap growth and ensuring that our strategies are supporting both profitability and long-term value creation.

The next question is coming from Chad Benyon of Macquarie Asset Management.

Wanted to ask about international attendance. It fell in '25, and I believe a lot of that decline was really just kind of a product of what was out there in terms of the movie slate. But as you look at '26, Sean, I know you talked about your optimism, maybe domestically or globally. But what about internationally? Do you think this could be an inflection point and maybe we could see attendance even exceed what we're expecting in the U.S. in '26?

Sure. Thanks for the question, Chad. Yes, I mean, I think you're right. When we look at overall 2025 for Latin America in particular, the profile of the slate in terms of what worked and kind of what didn't work is skewed a little bit lower for that region relative to the U.S. When we look at -- and so that's just nothing more than the product, and we see how that kind of can fluctuate year-to-year.

2026, specific to that region, we are optimistic about a better balance relative to the U.S. We think that the overall slate is -- looks set to resonate stronger with Latin audiences than 2025 did. So you got titles like Michael, the Super Mario Galaxy, Spiderman, Brand New Day, Minions, Avengers, then these are all movies that really will resonate. There's another insidious title on that particular type of genre of horror and that franchise in particular, has done really well there.

Certain films like The Odyssey, Star Wars, Supergirl, [indiscernible] like some of those, like SciFi oriented Dune do tend to skew down, but on the whole, we definitely are more optimistic about 2026 in LatAm.

And in general, attendance throughout that region has recovered in certain pockets, more so than in the U.S. And with everything -- I mean, a great example what we guys like to point to is Argentina with all the hyperinflation and the economic and political turmoil that has happened within that country over recent years, attendance is neck and neck with pre-pandemic levels. So they've recovered exceptionally well. So when the content is there and it connects that region in particular can really show some upside.

Okay. Great. And then as we think more broadly just in terms of the loyalty product, I think you said 60% domestically 30% internationally. Are there any changes that we should expect in the near term that could either help that loyalty increase moviegoing? Yes, just anything on the product side that could be different in the near term for consumers?

I would say, I don't know if there's anything materially different. I mean, I think that the core value and the core benefits that are inherent to these programs continue to resonate with existing members and continue to attract growth in our overall membership, like we've continued to see growth year-after-year in these programs. Movie Club, in particular, in the U.S. is up over 50% from where we were in 2019. We do expect that, that will start to level off a bit more as the program continues to mature. But thus far, we've continued to see terrific growth.

So what we're doing is, in addition to those kind of core benefits, we do keep adding additional elements to it, just to keep it fresh and enrich, there's all kinds of surprise and delight type of events we do for our loyalty members throughout the year where they get invited into special programming and things of that sort.

I mentioned that we just added a new premium tier to Movie Club, which we're hopeful will attract those audiences who are more inclined to upgrade on a regular basis. We've introduced badges. So there's a whole slew of things like that, that we continue to add to the program to make it attractive from a retention standpoint as well as attracting new guests. So I think that's really it.

We do other kind of promotional events, sometimes tied to films, sometimes tied to just engaging types of incentives also to stimulate growth. But those are the things that we're continue to lean into to sustain growth and sustain our existing membership.

Our next question is coming from Drew Crum of B. Riley Securities.

So solid ATP growth have accelerated over the last few years. How do you foresee the rate of change for ATP trending going forward? Given the ongoing shift towards and success with PLFs across your circuit, amongst other factors, is the the mid-single-digit increase the business delivered in 2025, the new normal? Or was last year more of a one-off and not sustainable?

Thanks for the question, Drew. So -- we have, to your point, we were pleased we've delivered a 4% CAGR in our domestic average ticket price over the past 3 years. As we look ahead to 2026, we expect average ticket prices will increase modestly year-over-year in the full year. And that's really twofold.

One, we do believe that there's further strategic printing opportunities, as well as opportunities related to our continued expansion of premium offerings. So as we mentioned, XD, D-BOX, IMAX, and ScreenX. So we do think it's twofold, but not likely to the same extent that we saw in 2025, given some of the outsized mix benefit.

But keep in mind average ticket prices, they will fluctuate quarter-to-quarter depending upon the film mix. And then on the international side, inflationary and FX dynamics in the region could play a factor as well as country mix. We do continue to approach our pricing decisions thoughtfully and are leveraging data to identify those optimal price points that maximize attendance as well as box office performance.

Got it. Okay. And then maybe one follow-up. Can you address the planned splits between U.S. and international in terms of CapEx spend? And is the $250 million number you're planning for this year a good annual run rate for the business? Or is '26 a peak?

Yes. So in terms of the split between international and the U.S. mean typically, around $50 million to $60 million of our CapEx is dedicated on the international side. Remainder is towards the U.S.

And then in terms of our capital expenditures in 2026. Those are ramping up to $250 million, and that's based on not only our expectations for cash flow generation, but also the ROI-generating opportunities in front of us that we're looking to pursue. And as we look forward beyond 2026, the extent of our spending and whether we kind of stay at that $250 million level will again be predicated on the ROI-generating opportunities we see in front of us. And then the other point I would call out is as the new build pipeline ramps, that can cause variability from year-to-year with temporary uptick and then coming back down, just depending upon where we're at within that new build time line. So there could be some fluctuations, but by and large, I would say we're too early.

The next question is coming from Patrick Sholl of Barrington Research.

I just had a quick follow-up on some of your CapEx question -- CapEx comments. Just on the new builds, are these kind of expanding into like additional markets? Or are they kind of more replacing older theaters within those markets? And I guess, similarly, is that sort of the path that you're taking to increase recliner penetration? Or are you still finding opportunities within existing theaters to kind of renovate those? And increase, I guess, competitiveness and attractiveness of those amenities?

So in terms of the new build pipeline, most of the locations that we are looking at are new locations, so that would be in new markets where we see that there's underpenetration and there's an opportunity for us to go in and have a high confidence returns. So that is really the genesis of what we're doing on the newbuild side.

And I'll add on the recliners, we do still see recliner opportunities. I mean, with 72% of our circuit reclined in the U.S. those are fewer than they once were, but we are still finding opportunities beyond our newbuilds to have attractive returns with some of our theaters that strengthen the overall competitiveness as well as just provide a good lift in performance.

Okay. And then on just the -- sounds like for 2026 and maybe in 2027 as well, I guess how are you seeing like the cadence of releases and are you seeing it kind of create more stability in box office in the coming years? Yes, is how are you doing that?

It's a great question. I mean the good news is volume continues to grow. We saw that 2025 got to within 5% or so of pre-pandemic levels. 2026 looks to at least match that potentially go beyond that. And the benefit of that is, obviously, it's -- our industry tends to be a bit of a momentum type of business where people come to the theater. They see what's coming up. they get excited. They have a good experience and they come back because of that. And when you get these kind of lulls in terms of things being released, you're winding up having to reboot the engine over and over and over again. And that's the type of cycle that we've been in.

So I think the good news is with further recovery in volume coming forward, there should be fewer of those instances of having to reboot. I will say what we've still yet to see and these are conversations we continue to have with our studio partners is -- for a long while, prior to pandemic, we would see more of the films getting bunched in the summer and at year-end. And then in time, everybody learned, it's a 12-month calendar. Movies can do huge business any time of the year. First quarter, late summer, not just kind of in those peak when kids are off from school types of months.

I'd say the industry has gravitated a little bit back to this old norm, and we see a bit of a more crowded summer in 2026 and a crowded year-end. So that's one of the things that we're still looking for that to fully resolve itself. So we can truly have a fluid cadence of movies every month throughout the year and just sustain that momentum. So that's something that still is being sorted out. But the good news is it's moving in the right direction.

The next question is coming from Robert Fishman of MoffettNathanson.

Two for you. When you look at 2026, and beyond, how do you balance leaning into your organic growth led by the sustainability of market share gains compared to positioning the company for other opportunities like M&A that hasn't really been an option for a while. And then just if we could get any update on where things stand with any conversations you've had on the Warner Bros. acquisition, both with either Netflix or Paramount guidance?

Thanks, Robert. I'll take the first part of your question. So in terms of our strategy for investing in growth, we have a balanced and disciplined approach to capital allocation, and we intend to invest in growth opportunities, including new builds, existing theater enhancements and M&A to the extent attractive opportunities present themselves. As you think about M&A, we evaluate all transactions that come to market, and we target high-quality assets with minimal deferred maintenance needs.

And consistent with our disciplined approach, we're looking for accretive M&A opportunities at attractive multiples. We'd prefer to deepen our penetration in markets where we already have a presence to leverage established infrastructure, relationships and market knowledge to drive growth and create value. Naturally, there's other factors we also look at scale, strategic importance, competitive positioning and margin profile.

And then in terms of new builds and theater enhancements, we, again, remain disciplined with our capital expenditures. We're looking for ROI-generating opportunities that are high confidence and that position the company well for the long term and enhance the guest experience. But overarchingly, we're looking to balance balance among the three, but that is something that we're evaluating on an ongoing basis to try to create value for all shareholders.

And the last point for Warner Bros, just add to, they're not mutually exclusive, right? I mean, we've got -- the good news is with the strength that we've recovered on our balance sheet, we have the opportunity to pursue multiple attractive accretive types of deals, whether they be new build or M&A to the extent they're there. But as Melissa said, we're going to continue to be disciplined in that approach. Specific to the Warner Bros. deal, I don't know if there's a tremendous amount to update on that. Clearly, the overall transaction remains pretty active and fluid in terms of what direction this may go going forward.

Our focus, along with our trade organization in United has just been to engage directly with all the respective parties as well as the regulators to pursue -- ultimately pursue an outcome that is in -- we believe is in the best interest of our industry, of the creative community of consumers and of the local economies that benefit from healthy theaters in their towns. And that's a focus on sustained volume of output with whichever direction this transaction plays out. Sustained exclusive theatrical windows in a meaningful way that support the industry as well as sustained levels of comprehensive marketing campaigns to get that message out.

Those are the things that have driven value have been moving in a positive direction with new entrants coming in and growth from different players in terms of volume -- and we just want to make sure that things continue to progress that way versus any type of risk that might ensue from a consolidation of a significant studio like Warner Bros. that has been a strong partner of theatrical exhibition for many, many years and just had a record-breaking performance in 2025.

The next question is coming from Omar Mejias of Wells Fargo.

Sean, market share has been a key driver of Cinemark's outperformance, and we were encouraged by the 4Q results despite the softer box office. I understand that the box office continues to recover. There might be some capacity constraints. But how have you guys been able to gain share? And how do you plan to manage your footprint with the busier slate in '26?

Sure. Thanks for the question, Omar. I mean, it's been a variety of things we pursue. I mean, there's if we kind of unpack 2025. First, we were thrilled with our overall results of 2025. We continue to see the benefits of the varied initiatives that we've been pursuing to build our audiences, everything from our Showtime programming to our marketing actions, to our pricing strategies to our loyalty programs, which we spoke about earlier. All of those things have helped support increasing our structural market share. 2025, in particular, while we had at the beginning of the year, expected our market share might moderate a little bit. It actually continued to benefit from a high concentration of outperforming family and horror films as well as what played out to be more of a balanced cadence of releases throughout the years, which limited the amount of capacity constraints we hit and enabled us to fully optimize our screens.

So we benefited from that throughout the year. I'll flag that, obviously, our share year-to-year will fluctuate based on that content mix and how well individual films resonate with our audiences as well as those capacity constraints. So when we look at 2026, in particular, again, we see a highly compelling diverse profile of films on paper as we look at the composition, there is a little bit more on that we do see during the summer and year-end, as I alluded to a moment ago, you've got some pretty substantial films in that pocket, which could lead to more capacity constraints where we're just fully utilized and don't have the benefit of kind of expanding further like we were able to do in '25, which could create a little bit of a headwind and caused our market share to normalize a bit.

Ultimately, it's just going to depend on how the actual results on film-by-film play out. And the extent to which any of those dating decisions spread a bit more from the way they're organized right now.

Great. And on all turn content, you guys have seen some notable success recently. Just curious how Cinemark is leaning into this category? And what untapped opportunities do you see within this vertical?

Absolutely. Look, I think alternative content is definitely one of the real positive signs we're seeing with nice growth. Similar to younger moviegoers, we're seeing nice growth in younger moviegoers, but specific to alternative content, we've had multiple consecutive years now where alternative programming has been more than 10% of our box office. And that's not just because of the overall box office, the pure proceeds from alternative content as an example, in 2025 are up more than double what they were in 2019.

So audiences continue to be attracted by this content. And it's a range of different areas, everything from faith-based films, to animate, to other foreign films, content creator, concerts, there's a whole slew of things that are at reparatory films. I mean, they just continue to grow in their scale and magnitude. And your specific question on what are we doing. I mean, we have a team that is dedicated to finding these kind of opportunities, pursuing them and then trying to really understand what the potential is so we can optimize how we're programming that throughout our circuit. And it's been really successful and we expect -- or at least we're optimistic about continued growth in this area as we move forward.

Our next question is coming from Mike Hickey of StoneX.

Sean, Melissa and congrats on '25, and I appreciate this new format as well. It's very helpful. First question from us is just, Sean, the impact on AI, we've obviously seen AI sort of intended to rewrite the script here of a lot of companies and being, I guess, destructive here, but it seems like out-of-home entertainment is in a really sweet spot in terms of not being negatively impacted. And I guess the flip side the positive impact, although delicate, I'm sure, on film development, it seems like there's a lot of opportunity to reduce expense and time and ultimately increase volumes. So I'm just sort of curious, overall, your view on AI and how help OPD to your business? Then I have a follow-up.

Sure. Well, you captured some of the points nicely there, Mike. I'd say broadly, we're optimistic and enthused about the potential AI has in a number of areas. I mean, specific in terms of things we're doing within our company, the ability to both drive efficiencies as well as support our revenue growth objectives we see lots of opportunity. We're already incorporating it into pricing optimization, some of the Showtime optimization efforts I mentioned, our app development work in terms of how we're doing our software development. We've even got it going in our hiring activities within HR and our guest services. So there's a whole range of things that we're looking to utilize this for within our own company.

And then on the content creation side of things, as you just mentioned, we see lots of potential for AI to unlock new types of capabilities, whether that's in visual effects, previse and efficiencies just in terms of movie making with time lines and things of that sort, which could lead to an increased volume of movies being made as well as just new quality enhancements along the way. So we see a lot of potential for that.

Just as every filmmaker has his or her own unique way of bringing stories to life, it would appear that AI is another tool that can enable select filmmakers to use it effectively and do new things that we haven't seen before.

Obviously, there's quite a bit of risk regarding IP and copy right infringement, and we very much support filmmakers and creatives and our studio partners and their efforts to protect their IP with AI as it evolves. But it seems like if that balance can be struck appropriately in the right measures and safeguards are in place, there's just a tremendous amount of potential that AI provides for our business specifically and broadly for the industry.

Nice, Sean. The next question on the Warner Bros deal, and I guess, specifically focusing on Netflix here. definitely not asking you to bless anything, but just sort of holistically just sort of your view on a couple of things.

One, Netflix was originally thinking a 17-day window. And I think they shocked and all a few of us here and went to 45-day window and maybe that's in front of streaming. So that's a consideration. But just thinking about a new partner here with the 45-day window, how you think whether that's workable or not?

And then, I guess, just to maybe your own view, Sean, in terms of Netflix, the gains in Serra or maybe a few if you believe, obviously, you've had conversations with them, they've been ongoing just as part of your business if you believe they can be a real theatrical partner for you not just the Warner Bros asset, but maybe the core asset as well.

Sure. Thanks, Mike. Look, I'd say -- we've said this before for a long while, we've been optimistic that in time, Netflix would recognize the opportunity that theatrical exhibition provides their platform and their content, much like all their other peers are doing, whether it's traditional studios, Amazon, even able getting a bit into the space. We've seen through data, and we've heard from the conversations that theatrical exhibition provides a real meaningful lift to engagement and retention and interest in those platforms. So we thought for a long while, there's just value that was being ignored by not taking advantage of that opportunity.

We obviously look at the recent comments providing some element of encouragement. I would say that we, much like our industry at large is a bit apprehensive in just placing too much stock into those comments just given how contradictory they now are to many of the other disparate remarks that have been made over the recent years, even as recently as middle of last year when there was references to the industry being outmoded as an idea. So, I think there's going to need to be more action versus comments to really and firmer assurances to give everybody comfort that what's being said is real.

45-day window, I think, generally speaking, we all view that as a good target point that is, strikes the right balance of giving studios more flexibility with getting content into the home and capitalizing on the market campaigns that have been spent in the theatrical space without creating too much adverse risk to theatrical performance.

As I mentioned earlier, in some cases, things have kind of overshot that a bit, and it's causing some concern about what that might mean on select films. So it's a good starting point, but it also begs the question of 45 days to what, like 45 days to a transactional type of offering in home like a premium video on demand is one thing, where there's a price point there.

45-day window to an SVOD, which consumers generally view as free is a different type of construct. So there's a lot still to clarify with what exactly is being referenced. And again, I think we're all looking for much firmer assurances that are long-standing for not only Window, but levels of continued investment and also sustained marketing, which is a critical component of this, too, versus just verbal comments and promises.

Our next question is coming from Stephen Laszczyk of Goldman Sachs.

Sean, just would love to get your latest thoughts on what you're expecting to see on the competitive front this year. And if you're seeing anything as you make your way out of '25 into '26 that might make you more confident that some of the recent gains in market share are perhaps more structural or could become structural with how you position the brand as you look ahead into this next year?

Sure. Well, look, I think from a broad competitive landscape, I think competition just continues to grow. I think we see industry a large improving marketing capabilities, continuing to lean into amenities and upgrades. And I think that's a good thing on the whole because it creates an overall lift for everybody. we, too, obviously, are continuing to ratchet up our competitiveness, pursuing ongoing initiatives in all the different areas we've talked about before to try to push our share even further. I think the structural gains we've talked about, we're very pleased about it.

It's -- we do our best to kind of tease out how much is content mix and capacity constraints relative to structural things. But we've said, we believe at least 100 basis points growing beyond that 100 basis points of our gains since prepaid levels we believe are sustainable, and we continue to push that further. So I think we feel good about the direction we're heading in. And I think our ability to continue to compete as overall competition grows.

Great. And then Melissa, maybe just a follow-up on margin. Curious if there's any more help, you could perhaps provide investors just on the magnitude of margin expansion you would expect to see in 2026 if Box performed in line with expectations. And given some of the puts and takes you called out on the expense side a bit earlier?

Yes. So from a margin perspective, again, as I mentioned earlier, really box office and attendance are going to be the primary drivers. And given anticipated growth, we do believe that, that supports margin expansion. But there are a number of other variables at play. We've talked about on the average ticket price side, and per cap side that we do expect to continue to grow those top line measures. We talked about market share but we'll have to see how the film slate, how individual films shake out to see more market share trends.

And then from a big picture expense standpoint, as I was alluding to earlier. So we do expect to gain some leverage over our fixed costs, and that's particularly in the U.S., where we have a higher fixed cost structure on the variable expense side, fundamental and advertising, salary and wages, concession supplies and then in the case of international facility lease expense, those will fluctuate based on attendance and box office performance, although not necessarily at the same rate.

Other factors from a modeling standpoint to consider would be ongoing inflation impacts on wage rates and certain concession categories. Also from a film rental standpoint, just keep in mind that that's going to vary depending upon the mix blockbuster content. And then utilities and other expenses, I would just call out there. We expect them to remain elevated as we continue to address deferred maintenance needs across the circuit, albeit from a year-over-year standpoint, I don't expect that to be a meaningful headwind given that we started those efforts in 2025, also on utilities and other, just keep in mind, electricity costs, which continue to [indiscernible] profitability and margin potential.

At this time, I'd like to turn the floor back over to Mr. Gamble for closing comments.

Okay. Thank you, Donna, for your help, and thank you to everyone for joining us this morning. Really appreciate the time and all your questions, and we look forward to reconnecting in a few months to share and discuss our first quarter 2026 results. Have a great day.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the website at this time, and enjoy the rest of your day.

Greetings. Welcome to the Cinemark Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to Chanda Brashears, SVP, Investor Relations. Thank you. You may begin.

Good morning, everyone. I would like to welcome you to Cinemark Holding, Inc.'s third quarter 2025 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 forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to materially differ from those expressed or implied in the forward-looking statements. The factors that could cause these results to differ materially are detailed in the company's 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 in 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. Over the past several years, we have made significant strides in advancing our company since the pandemic, including enhancing the experiences we offer our guests, strengthening our operating capabilities, further bolstering our competitive position, growing new sources of revenue and driving incremental process efficiencies.

These efforts have enabled us to reach multiple important milestones in our recovery as well as attain numerous record-breaking results year-after-year, all of which reflect the discipline, focus and commitment of our entire organization.

This morning, I'm excited to share that we have realized another significant achievement. As of today, we have settled the final outstanding warrants related to our convertible notes, thereby fully extinguishing the remaining portion of our COVID-related debt. This accomplishment marks another major milestone for Cinemark that is the byproduct of our team's highly proficient execution and versatility, prudent fiscal decision-making and the substantial benefits we have derived through our strategic initiatives.

Furthermore, in recognition of our company's robust financial position as well as the sustained conviction in our ongoing business strategies, team and industry, our Board of Directors just authorized a new $300 million stock repurchase program and an increase of our dividend to $0.36 per annum.

These results would not have been possible without the hard work, tenacity and resourcefulness of our collective team, and I want to extend my sincere gratitude to every member across our company for all they do, including our Board and key business partners who so diligently support us.

The talent, passion and determination that runs throughout Cinemark is truly remarkable and provides me with the utmost confidence in our continued ability to maintain our financial strength, actively capitalize on future growth opportunities and deliver meaningful value to our guests, partners and shareholders. With that in mind, let's turn our attention to our third quarter results and the road ahead.

During the third quarter, North American industry box office reached $2.5 billion, which was down approximately 10% year-over-year as a well-rounded slate of compelling films couldn't fully match last year's extensive lineup of breakout hits that included the highest grossing R-rated film of all-time, Deadpool & Wolverine, as well as sizable carryover from the highest grossing domestic animated film of all-time, Inside Out 2.

That said, 3Q '25 featured a multitude of solidly performing titles that connected well with moviegoers across a wide range of genres, including Valiant superhero reimaginings such as Superman and The Fantastic Four: First Steps, heart racing action thrillers like Jurassic World: Rebirth and F1, terrifyingly successful horror films, including The Conjuring: Last Rites and Weapons, family-friendly fair such as Freakier Friday and The Bad Guys 2, and yet another non-traditional sensation, Demon Slayer: Infinity Castle, that became the highest grossing anime film ever, generating over $130 million domestically and nearly $670 million worldwide.

Notably, during the quarter, Demon Slayer: Infinity Castle also became Latin America's biggest anime film of all time and The Conjuring: Last Rites grew to become the region's highest grossing horror film ever. So while the third quarter was down slightly versus 2024 due to a challenging comparative, there were plenty of highlights, which continue to showcase strong consumer appetite for immersive cinematic experiences. Within that industry backdrop, Cinemark once again delivered stand-out results as our ongoing efforts to build audiences and grow box office continue to yield tangible results.

During the quarter, we surpassed year-over-year North American industry box office performance by nearly 250 basis points, and we achieved our highest third quarter domestic market share in our company's history. The data-driven learnings, analytical advancements and automation improvements we keep enhancing within our programming, pricing and operating platforms, coupled with our highly impactful and evolving marketing actions, continue to provide material benefits quarter after quarter.

These initiatives helped propel our 3Q box office and market share performance, and were further amplified by a heightened mix of horror films and alternative content that resonate particularly well across our circuit. Our results also benefited from a film release cadence that was well spaced throughout the quarter, thus minimizing capacity constraints.

It's worth noting that our concentrated efforts to scale anime, multicultural, faith-based, music and specialty titles produced our second highest quarterly box office of all time for non-traditional programming, trailing only the fourth quarter of 2023 that included Taylor Swift's highly successful Eras Tour film. Altogether, alternative content accounted for a significant 16% of our domestic box office in the quarter.

We also achieved a new third quarter domestic food and beverage per cap record of $8.20. This accomplishment can be attributed to superb execution by our field teams as well as our continued focus on enhancing the variety and appeal of products we offer our guests, further optimizing our pricing and improving ease of purchase.

Overall, our collective efforts to deliver sustained top line performance that outpaces our industry and to do so as efficiently as possible once again translated into solid all-around financial results. We generated $858 million of third quarter global revenue, $178 million of adjusted EBITDA and achieved a 21% adjusted EBITDA margin.

We are thrilled to have produced yet another quarter of consistent outperforming results, while at the same time further refortifying our financial strength and competitive position by putting our convertible notes behind us. Once again, I'd like to recognize our sensational team for their outstanding execution and impact.

Looking ahead, we are highly enthusiastic about wrapping up 2025 on a strong note as we approach one of the most robust and promising film slates we've seen over the past 5 years throughout Thanksgiving corridor and year-end. The upcoming movie lineup is jam-packed with a diverse and compelling assortment of films that offers something for everyone during the holidays.

For action and adrenaline seekers, there's Predator: Badlands, Now You See Me: Now You Don't, and The Running Man as well as Anaconda that snakes in some Jumanji-like humor. For family going fun, there's Zootopia 2 and The SpongeBob Movie: The Search For SquarePants! which are sure to entertain audiences of all ages.

Moviegoers in search of some deeper emotional resonance and character-rich storytelling have Eternity, Ella McCay and Song Sung Blue to look forward to. In contrast, for a bit of horror and suspense, there's Five Nights at Freddy's 2 and The Housemaid. Alternatively, upcoming non-traditional content includes the animated faith-based film David as well as anime sequel Jujutsu Kaisen: Execution. And of course, for those craving fantasy and spectacle, there's the highly anticipated follow-ups to their smash hit predecessors, Wicked: For Good and Avatar: Fire and Ash.

And beyond 2025, based on our recent conversations with our studio partners and the future development plans they've shared with us, we remain highly encouraged about further box office growth as film releases continue scaling up in size, variety and volume.

In the near term, 2026 already looks prime to captivate audiences with a slew of high-profile new releases from franchise favorites, including Super Mario Brothers, Spider-Man, The Avengers, Toy Story, Minions, Moana, Star Wars, Dune and The Hunger Games as well as original new concepts from visionary filmmakers like Christopher Nolan and Steven Spielberg.

And Cinemark remains optimally positioned to make the most out of this compelling pipeline of films on account of the many distinctive advantages we have developed over time, the unparalleled value proposition we offer consumers and the ongoing initiatives we continue to advance.

Our overall aim at Cinemark is to deliver unmatched entertainment and service that consistently delights our guests and keeps them coming back for more by creating unforgettable, larger-than-life, immersive experiences that can't be found at home or anywhere else. To do that, we have been deliberate about focusing on actions, details and amenities that make the biggest consumer impact across the entirety of our theaters, while prioritizing investments in enhancing and maintaining our circuit that distinguish us from our peers.

We have also stayed highly diligent about managing and preserving the financial health of our organization to sustain our ability to make these investments even in times of macro level headwinds. These actions have enabled us to create a differentiated entertainment experience at Cinemark that we have started showcasing more widely in our first-ever comprehensive brand campaign called It's Showtime.

We launched It's Showtime last week and believe it powerfully captures the joy, fun and positive emotional impact we create for moviegoers as well as the communal connections we foster. Moreover, the campaign challenges the notion that all movie theaters are created equal by spotlighting various facets of Cinemark's movie magic methods that set us apart from the pack, including our heroic service, immersive technology, craveworthy indulgences and the passion we bring to everything we do.

We're excited about the many possibilities we have to augment and amplify our current marketing strategies with It's Showtime as well as the tangible way it illustrates what is unique about our company.

Leveraging our competitive edge that is reflected in our new campaign, which includes the elevated experiences we create for our guests, our financial strength and our advanced operating capabilities, we believe Cinemark is well situated to continue thriving as we move forward. We are highly enthusiastic about our future growth prospects, including the many opportunities we have to unlock incremental value for our customers and shareholders through our ongoing strategic initiatives and continued execution.

I will now turn the call over to Melissa, who'll provide more information about our third quarter results as well as our capital allocation strategy going forward. Melissa?

Thank you, Sean. Good morning, everyone, and thank you for joining the call today. Cinemark delivered solid financial results in the third quarter, underscoring the effectiveness of our strategy and our ongoing operational rigor. Despite facing a softer box office environment, our team remained focused, nimble and disciplined in their execution, successfully capitalizing on the film slate and surpassing broader North American industry box office performance year-over-year.

In the third quarter, we welcomed 54.2 million guests across our global footprint, a 10% decrease year-over-year, reflecting a challenging comparison against last year's exceptionally strong film slate. We delivered worldwide revenue of $857.5 million and $177.6 million of adjusted EBITDA. This resulted in a healthy adjusted EBITDA margin of 20.7%, despite operating deleverage driven by lower attendance levels.

Shifting to our U.S. operations. We hosted 33.2 million patrons and expanded our market share by 40 basis points year-over-year. Our outsized market share in the quarter was supported by a compelling slate of horror titles and alternative content that aligned exceptionally well with our audiences.

Our team capitalized on that demand through effective showtime scheduling, agile operations and marketing investments to drive awareness and engagement. We also benefited from minimal capacity constraints throughout the quarter. Notably, when compared with pre-pandemic levels, our market share gains remained above the 100 basis points we view as structural.

We reported domestic admissions revenue of $348.5 million with an average ticket price of $10.50. Our average ticket price grew 5% year-over-year, primarily due to strategic pricing actions and a higher mix of alternative content, which typically carries higher ticket prices than traditional films.

We delivered $272.4 million of domestic concessions revenue, setting a new third quarter record with concession per cap reaching $8.20, an increase of 3% compared with the third quarter of last year. Our per cap growth was achieved despite a more challenging year-over-year comparison and was primarily driven by strategic pricing initiatives and a favorable shift in product mix with a notable uplift from merchandise sales.

Other revenue was $62.7 million in the third quarter, representing a 6% decrease year-over-year due to lower attendance levels, which affected the variable components of this line item, including transaction fees. This impact was partially offset by increases in both promotional income and gaming revenue. In total, our domestic operations generated $683.6 million of revenue and $140.2 million of adjusted EBITDA, yielding a solid 20.5% adjusted EBITDA margin.

Moving to our international operations. We entertained 21 million guests in the third quarter. Despite the tough year-over-year comparison I mentioned earlier, our international segment benefited from record-setting performances from The Conjuring and Demon Slayer, as well as highly successful cinema weeks in select markets throughout the region. Importantly, similar to the U.S., we continue to maintain strong market share gains in the quarter when compared with pre-pandemic levels.

International delivered $81.2 million of admissions revenue, $64.3 million of concession revenue and $28.4 million of other revenue during the third quarter. In aggregate, our international operations generated $173.9 million of revenue and $37.4 million of adjusted EBITDA, resulting in a robust adjusted EBITDA margin of 21.5%.

Turning to global expenses. Film rental and advertising expense represented 57.1% of admissions revenue this quarter, a 60-basis point improvement year-over-year, primarily due to a reduced concentration of high grossing titles, partially offset by increased marketing investments, given the strong and consistent returns we have observed.

Concession costs as a percentage of concession revenue were 19.5% for the quarter, up 190 basis points compared with the prior year period, primarily driven by the timing of concession rebates, growth of lower-margin merchandise sales and ongoing inflationary pressures. These impacts were partially offset by our strategic sourcing initiatives and pricing strategies, which continue to play a key role in managing inflation.

Global salaries and wages totaled $106.3 million, a 3% improvement year-over-year, driven by lower attendance levels and reduced operating hours as well as benefits realized from our labor productivity initiative and foreign exchange rate favorability. These factors were partially offset by wage and benefits inflation. As a percentage of total revenue, salaries and wages were 12.4%.

Facility lease expense was $81.9 million for the third quarter, a 5% decrease compared with the prior year period, largely due to lower percentage rent associated with the reduced box office as well as favorable movements in foreign exchange rates. These were partially offset by inflationary increases. As a percentage of total revenue, facility lease expense was 9.6%.

Utilities and other expense totaled $127.4 million, flat versus the third quarter of last year. Higher utilities, repairs and maintenance, and gift card expenses were partially offset by lower attendance, which impacted variable and semi-variable costs. As a percentage of total revenue, utilities and other expense was 14.9%.

G&A expenses were $61.9 million and increased year-over-year, mainly due to wage and benefits inflation, investments in headcount to advance our strategic initiatives, increased cloud-based software costs and higher share-based compensation. Favorable foreign exchange rate fluctuations partially offset these impacts. As a percentage of total revenue, G&A was 7.2%.

Globally, we delivered $49.5 million of net income attributable to Cinemark Holdings, Inc., resulting in diluted earnings per share of $0.40. With respect to the balance sheet, we ended the third quarter with $461 million in cash and generated $38 million of free cash flow.

Turning to capital allocation and starting with the first pillar of our strategy: maintaining a strong balance sheet. During the third quarter, we successfully retired our remaining pandemic-related debt with the repayment of the $460 million convertible notes. This milestone underscores the strength of our balance sheet and the overall financial health of our company, made possible by disciplined execution, financial resilience and strategic focus.

We also amended the warrant agreements related to the convertible notes to accelerate the settlement and satisfy half of the obligation in cash and half in shares. The cost to settle the warrants was determined using our volume weighted average stock price from August 18 through November 3, with the final settlement occurring today. The total cost was $196 million, with $98 million paid in cash and 3.6 million shares issued to our counterparties.

Importantly, our proactive approach to managing dilution proved effective. By repurchasing 7.93 million shares in March of this year, we more than offset the shares issued to settle the warrants, resulting in no net dilution for our long-term shareholders.

With respect to our capital structure, now that the convertible notes and associated call spread have been fully addressed, our nearest maturity is not until 2028. We continue to target a net leverage ratio of 2 to 3x, ending the quarter with a net leverage ratio of 2.4x.

Moving to our second pillar: pursuing strategic and financially accretive investments to grow and secure our long-term success. During the first 9 months of this year, we have invested $106 million to maintain and enhance the quality of our global circuit. We continue to target $225 million of capital expenditures for the full year with a significant weighting towards the fourth quarter, given the timing of several key projects underway.

As always, our ability to achieve this target is subject to project-specific variables and external factors, which may impact the pace and timing of execution. We continue to actively manage these dynamics.

Now to our third capital allocation pillar: returning excess capital to shareholders. As Sean mentioned, given our strong financial position and sustained confidence in our business, we are pleased to announce that our Board of Directors has authorized a $300 million share repurchase program. We intend to execute the program in a measured and disciplined manner, ensuring it aligns with our financial priorities and broader strategic objective.

Our Board also approved a 12.5% increase in our quarterly cash dividend, raising it to $0.09 per share, reinforcing our objective to deliver a sustainable and growing dividend. The increased dividend will be payable on December 12 to shareholders of record as of November 28.

Collectively, the authorization of the share repurchase program and the dividend increase demonstrate our intent to return a greater proportion of free cash flow to shareholders over time. These actions also reflect our balanced approach to capital returns, supporting our long-term objective of driving sustainable growth, maintaining financial strength and maximizing shareholder value.

It's important to note that we will continue to prioritize the health of our balance sheet and growth opportunities. The timing and extent of our capital returns will be governed by maintaining our net leverage ratio within our target range as well as our cash position and overall liquidity. This disciplined approach provides us with the flexibility to pursue accretive opportunities as they arise, while continuing to manage risk and preserve our financial strength.

In closing, we are pleased with our financial performance in the third quarter and the progress we have made in executing our capital allocation strategy. Our approach remains anchored in financial discipline, operational excellence and a long-term strategic view. With a strengthened balance sheet and prudent capital deployment, we are well positioned to deliver shareholder value.

Operator, that concludes our prepared remarks, and we would now like to open up the line for questions.

[Operator Instructions] Our first questions come from the line of Ben Swinburne with Morgan Stanley.

My question is really just continuing the conversation on kind of capital allocation. Obviously, great to see the dividend and the buyback. I guess, Sean, can you talk a little bit about sort of your appetite around M&A and how much of a, let's call it, a cushion you want to keep in terms of financial capacity now that you're -- you've got the convert behind you and generating healthy free cash flow?

And then I didn't know, Melissa, if there's any reason to change any of your prior comments on kind of thinking about CapEx over the next couple of years. Maybe I don't know if there's an update there. Just would be interested in hearing how we should think about that.

And then just one housekeeping on the same topic, hopefully for the last time. Can you give us what the fully diluted share count should be now going forward now that you've cleaned all this stuff up for us?

Sure. Thanks for the questions, Ben. As you know, one of our key areas of focus as we position ourselves for success over time is optimizing our footprint, which includes growing and recalibrating our circuit over time. And M&A is certainly a part of that. So we certainly have an appetite for M&A as we look forward.

Melissa mentioned that with regard to overall capital allocation priorities, investing in the future success of our company is a top priority of ours. And again, that includes M&A. Broadly speaking, with regard to M&A, as you know, we evaluate all prospective opportunities. And our focus is on high-quality assets that we believe can deliver solid assured returns over time. So that continues to be our focus.

We tend to prefer deepening penetration in those areas where we already have some presence to leverage our existing infrastructure and relationships, but we also do consider other factors such as scale, strategic importance, margin profile, competitive position. So we do look at a wide range of options as they come to market and we have targets in mind.

So we look at a range of things, but we've been very disciplined in our approach that served us well over time. We continue to believe that's the right strategy in terms of going after the right types of assets. But broadly speaking, we do believe we have and we intend to maintain the right flexibility to be able to pursue those types of opportunities as they come to the table.

And then Ben, with respect to your question on CapEx 2026, we do intend to remain prudent with our CapEx, and we'll continue to prioritize maintaining a high-quality circuit as well as pursuing high confidence ROI-generating opportunities. But it is premature -- a bit premature at this stage to provide specifics on CapEx expectations for '26, given that we're still underway with our budgeting process.

But given the abundance of ROI-generating opportunities available as well as some modest deferred maintenance CapEx that we're still working through, it is reasonable to anticipate some increase in CapEx for 2026 above what we're targeting in 2025. So we'll provide more clarity once we finalize our budget and have assessed all the moving pieces. I'd expect that to be on the February call.

And then in terms of your question regarding fully diluted share count. So just to kind of speak more broadly to our share count and how to think about that. As of September 30, we had 116.5 million shares outstanding. That reflects 1.4 million of shares that we issued in Q3 to settle a portion of the warrants.

In Q4, we issued 2.2 million shares to settle the remaining portion of the warrants. So you'll want to factor that into the share count. In Q4, in particular, you will still have some noise from a diluted EPS standpoint, just given GAAP accounting. But once we move forward into 2026, you should start to see our diluted share count more closely aligned with basic share count with just modest variations for certain share-based compensation awards.

Our next questions come from the line of David Karnovsky with JPMorgan.

Sean, there's been a lot of handwringing in the trade press about the fall box office so far and whether the performance of films in aggregate is representative of the demand trend or whether you can dismiss this -- the quality or scheduling or genre preferences. So I wanted to give you a chance to kind of expound on the last 2 months and how you see the state of things. And then I have a follow-up.

Sure. Well, look, I think when you look at the overall box office for our industry, it's always important to keep in mind, it's something that needs to really be looked at over time just due to the nature of how movies get released, the scale of those movies, ultimately how well they resonate with audiences. So I think it's tough to any -- to ever look at any short-term period and try to draw too many conclusions from that. You got to look at longer term trends.

Specific to what we've seen as of late -- third quarter, as an example, we had some -- and really October as well. When you look at just the scale of some of the movies that were released last year, you had some big, big overperformers in the third quarter with like a Twisters and a Beetlejuice Beetlejuice, and films like that. You just had a wider release slate than you had in the third quarter of this year as well as the past couple of months.

But as we look ahead to November and December, the inverse is the case. You've got just a loaded slate of movies coming to wrap up the year just the way the dates got planned out, which on paper should far exceed last year. So we'll see how that all continues to play out for the rest of this year. So I think 2025 is still got to see. There's still plenty of room to go in terms of that.

Probably the one big difference year-over-year that I would call out is we didn't have a major animated release in the third quarter like we traditionally do. And I think if that had been the case, people would be looking at this year much differently in many respects. So like one movie can make a big difference in terms of the overall perception. But again, there's a lot of big stuff still to come, and I think the story is still to be written on how 2025 ends up.

Okay. And then I was hoping to follow up on theatrical windows. Around the time of CinemaCon, it seemed like there was a lot of talk between studios and exhibitors over this, but still work to be done or research to be executed on the topic. Maybe can you just update on where things stand? And is there any movement towards a more uniform or longer window?

It's a great question. I would say that there continue to be quite a number of conversations on that matter and evaluation taking place. Obviously, there has been quite a shift in windows that happened fairly rapidly since the pandemic with regard to the timing of things, and it's become quite varied.

So the overall implications of that long term on consumer behavior and how it's affecting attendance and box office patterns is still being sorted out, especially because, as you know, volume has been continuing to recover. So there are things like that, which kind of muck up the evaluation a bit.

The good news is while there doesn't appear to be a material impact on the week-to-week box office trajectory when you look at films that have shorter versus longer windows, I will say there's some concern and some signs emerging that highly shortened windows below the 30 to 45 days may be affecting overall attendance recovery and results for casual moviegoers and smaller titles. So I think that's the point of discussion in particular, as we're all trying to understand what's happening with that.

It has been clearly demonstrated that a theatrical release significantly benefits the overall performance of films and the asset value over time for those films, but a significant enough of a window is necessary in order to deliver those proceeds. So that's still a matter of discussion.

I would say the good news for Cinemark specifically is we have done a lot of work to reorient our business to be both highly successful in the current environment as it stands today, and we remain highly encouraged about where things are going. So the matter of windows specifically is something that I expect will continue to be discussed over the coming quarters as we all try to sort out what's the best optimal structure going forward.

Our next questions come from the line of Eric Handler with ROTH.

Sean, I wanted to follow up on M&A. Earlier this week, Kinepolis announced its buying Imagine Entertainment. It's been reported National Amusements is up for sale. Can you talk about like is the pipeline as deep as it's been since the start of the pandemic? And maybe give some color around that.

Sure. Sure thing, Eric. I don't know if I'd say the pipeline is as deep. I'd say it's been pretty consistent. If anything, the pipeline has -- we had been expecting more opportunities, as we said in the past, coming out of the pandemic than have played out. There are a few things percolating now like the deals that you just mentioned. I think the timing of those 2 may be more coincidental than kind of anything indicative of a growing volume of opportunities or activity that may take place.

So I would still say that while we still believe there will be more opportunities as we look ahead and opportunities for higher quality circuits, the overall volume of those has still been fairly limited. And at least there's no indications at this moment in time that that's going to accelerate or anything like that. But we still believe in time, there's unique circumstances in most of these cases. In time, we will start to see more opportunities become available.

Great. And then secondly, given the success of alternative content that we saw in the third quarter, is there a way to sort of lean into this more? We're finding -- I know Chris Oliver does a lot in the music space. There's clearly a vault of anime movies and opportunities there. And so I'm curious to have your thoughts there.

Absolutely. Look, I mean, we have been leaning into non-traditional programming quite significantly and trying to hone what are those better opportunities that are out there. And as a result of that, we've seen for the last 3 years that non-traditional content has represented in excess of 10% of our box office. And importantly, it's not just a percentage. The overall dollar amount last year was almost 2x what it was in 2019 for us. So that's the byproduct of actively focusing on this and trying to stimulate more growth as well as just more compelling content becoming available that is resonating with audiences.

So we continue to see growth. As mentioned in our prepared remarks, it was 16% of our box office this past quarter. So we remain optimistic about further growth in this category as a way to add to the box office. If anything, it was something as we had talked about before the pandemic, that was always an area of frustration where it seemed like there was tremendous potential and never quite got off the ground.

It's great now to see that we're really seeing some movement in anime, faith-based, multicultural content, repertory content, like there's a range of these categories, and they all appear to be working really well. So we're optimistic about more growth there, and it is something that we're going to continue to lean into. And we're not alone. It's something that's happening across the industry.

Our next questions come from the line of Drew Crum with B. Riley Securities.

A question on '25 and one on '26. Melissa, you've expressed confidence in your ability to grow adjusted EBITDA margin this year. Nine months in, you're down a little bit, but it seems that you're poised to make that up in 4Q. I just want to confirm that's still your expectation to grow margin year-on-year this year.

And then, Sean, just a follow-up on Eric's question concerning non-traditional content. Looking ahead to next year, with '26 being a World Cup year for FIFA, curious if there are opportunities to incorporate that into your programming and/or if this is a competitive headwind for your business, particularly in Latin America.

Thanks, Drew. So I'll start with your first question on margin. So in terms of our margin expectations, ultimately our margin for the year is going to be driven by attendance and box office performance as the primary driver, given the operating leverage inherent in our business model as revenue scales.

Other factors that will influence our margin will be market share of food and beverage per cap and average ticket prices, along with the incremental value we capture from our strategic initiatives. Naturally, we have ongoing inflationary pressures, other expense headwinds and the impacts of FX movements that also will be considerations.

As you think about kind of specific to fourth quarter, our margin should benefit from the anticipated box office recovery as well as growth in concession per cap and average ticket prices. But we do recognize that our market share may temper in the fourth quarter, given the cadence of releases as well as the overall scale and relative mix of films.

Also keep in mind, other revenue in the fourth quarter of last year included a onetime $6 million contractual payment received from a third-party service provider that will not recur in Q4 of this year. And then expense considerations that you would want to take into account namely I'll point out on utilities and other, we continue to incur some elevated expenses as we work through some deferred maintenance needs across the circuit.

So we remain highly focused on maximizing profitability and margin potential, but our ability to grow margins year-over-year is largely going to be dependent upon how the box office unfolds in the fourth quarter as well as the other dynamics I mentioned.

And then to your question on the World Cup, I guess starting on the opportunity front, one of the challenges that we've had with the World Cup, much like sports in general, are just the complicated rights issues. So the ability to program those games in theaters is something that has been limited because of that. So it's not for lack of trying, but like many of the major sports leagues, the rights have just been preventative.

The other thing, too, with the World Cup, in particular, is it is so widely displayed everywhere that there even is some question as to how big of an opportunity might there be in terms of showcasing those games and drawing people to theaters versus just walking down the street and being able to see these things all over the games all over.

Specific to LatAm and what that -- how that could impact there, we've seen historically, it really just depends on how the teams are performing and playing out, like depending on what their games are, there are times where the studios will schedule some of the content around particular games, so they'll try to work that to the extent they can.

But it hasn't historically presented a huge headwind. It can create a little bit of headwind depending again on a particular country, as -- particularly as you get closer to the finals, but that is something that just has to play out. I don't think it would be something that ultimately would be material in the whole scheme of things.

Our next questions come from the line of Robert Fishman with MoffettNathanson.

Two for you guys. Sean, you talked about the sustained structural share gains over the past few years and the success in the quarter. Do you see an opportunity to continue to expand your market share in the U.S.? And also if you could help us think about internationally? And what are the biggest drivers to grow share organically aside from obvious M&A away from your competition?

And then for Sean or Melissa, can you just maybe discuss your strategy on premium large screen formats and how you prioritize your own XD brand over the other formats, especially I think there was news of your recent IMAX agreement in U.S. and Latin America.

Sure. Thanks for the questions, Robert. Well, first, starting with share, yes, we've been thrilled with the results of our share over the last several years. We've been really pleased again this year that it's performed at levels even beyond our expectations, partly due to all the initiatives that we have pursued to gain those structural benefits as well as just some further upside from the way content mix has played in our favor as well as just the overall release cadence of films that has kept us from hitting those max threshold capacity limits. So our focus, obviously, is on how do we continue to extend that further.

Your question on how to do that, it boils down to a range of things. We continue to advance and hone the way we're programming our screens to extract the absolute maximum value out of each screen, getting the right films on the appropriate screens to match demand. So we don't have any underutilized capacity or just hit limitations on given screens based on the demand of individual titles.

Our continued marketing efforts to build audiences and attract people to our circuit, loyalty, all those things, pricing, I mean, all that stuff adds up. And we continue to work on varied initiatives in all those areas to extend that further. And that's on a -- really, I'm speaking mostly to just a same-store basis, how do we keep growing share within our existing theaters beyond the new theaters we may add to our circuit through new builds and/or M&A, as we've talked about before. So it boils down to a whole bunch of different actions that we're pursuing to extend that further, which is clearly the aim.

Our hesitation to take up that kind of focus on, we've been delivering at least 100 basis points of structural gains since the pandemic. We're just waiting to see a bit of a more normalized box office environment to be able to evaluate that more thoroughly with regard to how much is structural versus how much are some of these other factors that are further boosting that.

Premium amenities, I mean, look, premium amenities is something else that can play into share to a certain degree. I would say, our overall strategy hasn't changed. We're continuing to lean into enhanced offerings based on the demand that we continue to see from consumers, and that's everything -- when I talk about enhanced offerings, everything from seating to the food and beverage we offer to our screens as well.

We announced -- and it's a comprehensive strategy. I mean we announced earlier this year plans to increase our number of ScreenX auditoriums by 20 over the next couple of years. We've also announced that we're going to be adding an additional 80 D-BOX seats to an additional 80 auditoriums, which already are close to 500 auditoriums across our circuit. We've been adding more XD screens. We continue to -- we plan to continue to do more of those.

And then yes, we also just last week announced plans to upgrade our 12 existing remaining auditorium -- IMAX auditoriums in the U.S. to their laser technology, add 4 more screens throughout the U.S. We're also exploring opportunities in LatAm, and we're going to be activating 3 70-millimeter projectors. So it boils down to a theater-by-theater analysis, but we're pursuing a wide range of different opportunities throughout that. So no change in strategy, just further leaning into what is an opportunity based on consumer demand.

Our next questions come from the line of Eric Wold with Texas Capital.

Just one question. I guess, as we kind of head into the holiday slate and then into next year, how much pricing power do you feel you have on ticket pricing in general and then on XD and the other premium offerings?

Just trying to get a sense if you think in this environment, you feel it's better to kind of raise pricing on kind of all boats or kind of keep baseline pricing somewhat more stable and kind of mainly push up the higher end kind of premium offerings and kind of make that more of the consumer choice instead of kind of raising pricing across the board?

I can take that one, Eric. So from a pricing standpoint, we do continue to identify opportunities to optimize pricing for both tickets as well as the concession side of our business, and that's guided by robust data and analytics. Our pricing decisions, they continue to be driven by us closely monitoring elasticity of demand, which allows us to make informed decisions so that we can maximize attendance, box office incidents and then overall revenue.

We are mindful of the current macro environment, and that's -- we are applying a disciplined data-driven approach as we evaluate those pricing actions. But ultimately, we want our guests to perceive strong value from their overall experience, which we believe has contributed positively to our attendance recovery and how that's outpaced industry trends, and then also, when you look at the strength of our concession per cap growth since the pandemic period.

So we do continue to rely heavily on the data, but we also do see further opportunity to capture benefits on both the ticket pricing side as well as concession per caps from our pricing strategies.

Our next questions come from the line of Chad Beynon with Macquarie.

Just one for me. Just wanted to ask about the approach towards the dividend. Obviously, great to see the increase announced tier in the print today. Melissa, how are you thinking about -- I know you talked about your leverage currently at 2.4 and some of the initiatives from a growth and buyback standpoint. But how are you thinking about maybe consistently raising this dividend or viewing it against some type of a payout ratio?

Yes. So overarchingly, I mean, as you think about broadly our returns to capital -- capital returns to shareholders, those decisions are guided by a balanced framework. We're prioritizing maintaining financial strength as well as investing in accretive growth opportunities, first and foremost, followed by returning excess capital to shareholders.

We'll evaluate payout decisions holistically based on a number of factors, and that will include cash and overall liquidity, leverage and strategic priorities at any given time, among other factors. But that ensures we can remain nimble and well positioned to pursue value-creating opportunities as they arise.

As we think about kind of sizing of the dividend and then the share repurchase program, we're really looking at those together, right, as means that we can execute on our strategy to return more capital to shareholders over time.

So on the dividend front, objective is to provide a sustainable and growing dividend while preserving flexibility. And then the share buyback program allows us to lean in as there's excess cash to return. So really looking at those holistically, and we'll be guided in a disciplined approach as you've seen us take historically.

Our next questions come from the line of Patrick Sholl with Barrington Research.

Just on the concessions, I was just wondering if you could discuss if there's anything in like the macro that you're seeing and having an impact on merchandise sales? And just any detail you could provide on the merchandise component on concessions and how that sort of maps out across either the film slate or the attendee base.

Sure thing. Thanks for the question, Pat. Much like, I would say, our overall moviegoing as well as our food and beverage sales, from a macro standpoint in terms of any -- if you're referring to any macroeconomic influences on that, fortunately, we've continued to see consumption hold up very strong through some of the higher inflationary periods we've gone through recently, throughout concerns of recession. So we haven't seen any slowdown of that.

The historic trend of consumers coming out to movies, maybe trading off on other things, but still coming to theaters when compelling content in the marketplace and then indulging when they're there, that has continued to play out both domestically and internationally.

Specific to merchandise, as you were asking, merchandise has continued to show great signs of growth. In fact, if anything, consumers have been shown up for it. There have been more and more of these viral moments. The talent has been getting involved in using those as ways to help promote their films as has the studio.

So we've continued to see nice growth year-after-year with merchandise, and we believe there's further opportunity to come. So -- and similar to all of our concessions categories, that has not shown any drag or any issue with regard to any kind of macro level economic trends. So we're just really encouraged about further opportunity ahead.

Our next questions come from the line of Omar Mejias with Wells Fargo.

Sean, one for me. There was a recent article in the press that talked about how David Ellison and the new Paramount leadership wants more theatrical content and how they're looking to build their slate from their current 8 annual releases to 15 by '26 and 18 by '28. This is clearly great news for the industry.

So just wanted to get your thoughts on how your early conversations either with the new leadership of Paramount or other studio partners that are developing and just the potential increases to the volume of films that will come to market in '26 and beyond. Just curious on early thoughts on that.

Sure. Well, I appreciate the question, Omar. I would say, at a high level, the conversations have been very positive and continue to encourage us with regard to volume recovering to pre-pandemic levels, if not beyond. As you mentioned, our discussions with Paramount and what has been stated publicly have been positive in terms of their desire to expand the amount of volume that they're putting out. Obviously, there's been conversation.

Amazon has been public about growing to 15 or so films a year, while Apple is still -- it's still not entirely clear kind of where they go. We know that they were extremely pleased with the results of F1 and Eddy Cue just recently talked about viewing very positively the theatrical space and with intentions to put more films out that way.

A24 has been growing their volume. Universal has been holding their volume, pre-pandemic levels, like we're getting these encouraging signs from Disney from -- really from everywhere. And as we just talked about earlier, all the non-traditional programming continues to grow.

So when you put all that together, we just -- we remain encouraged about just the overall volume of films getting back because even this year for 2025, wide releases, by the way, we define it, are looking to get back to about 120 or so films by the end of the year. That compares to about 130 on a pre-pandemic basis. We expect next year will be another notch further from that closer to the 130, could even get to the 130 based on how the slate ultimately plays out. So all those signs are positive.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Sean Gamble for closing comments.

Thank you, Darryl, and thank you all for joining us this morning. We're thrilled with the results we're able to deliver in the third quarter, and again, the advances we made with capital allocation and our balance sheet. And we're looking forward to a strong close to the year and speaking with you again following our fourth quarter results. So hope you all have a great day and great quarter.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.