Executives at Cinemark, the No. 3 U.S. exhibitor, believe they have sufficient cash to last “well into 2021” even if theaters remain closed due to COVID-19.
The forecast came during an earnings call with Wall Street analysts Tuesday to discuss second-quarter numbers. Earlier in the morning, company reported second-quarter results revealing the severe toll taken by the pandemic. Ticket buyers numbered only in the thousands and nearly all of the reported $9 million in revenue came via pre-paid advertising deals with National CineMedia.
COO and CFO Sean Gamble said the company’s cash balance as of July 31 was about $525 million and it is burning about $50 million a month. That puts it in a more secure position than many rivals like top circuit AMC, which had already been carrying immense debt before the pandemic.
Gamble said he sees enough “cash runway” to last “well into 2021” if theaters were to remain closed. “That said, we do not see that scenario as likely, based on how our industry is progressing toward a large-scale reopening.”
Cinemark has been operating 15 “test-and-learn” locations on weekends ahead of a planned multi-stage reopening of its circuit on August 21. The company will re-open its U.S. operations, one-third at a time, leading up to the September 3 debut of Warner Bros’ Tenet.
As with prior reopening plans, which had to be adjusted as states saw a rise in infection rates, the blueprint for how the next few weeks work out is a tentative one. Left largely unspoken during the call was the fact that many states and cities have had to acknowledge reopening too soon, which resulted in surging infection rates and regression back to heavier limits on activity.
Still, Gamble and CEO Mark Zoradi emphasized throughout the hour-long earnings call that they saw many positive indications even from the extremely limited operations in recent weeks.
With showtimes only on weekends, the 15 sites have seen a 20% rise in attendance over the last three weeks, Zoradi said, with revenue from a reduced slate of food and beverages averaging about $5 per customer.
A set of safety and cleaning procedures the company calls the Cinemark Standard has helped reassure moviegoers, with the company asserting that 97% of patrons felt safe and comfortable, according to initial surveys.
“We have seen a tremendous number of families come back,” Zoradi said. “If we can do our job of convincing people that we have a safe and healthy environment, moms and dads are coming back with kids to enjoy an afternoon out. We’re seeing that in multiple states.”
The slate in 2021 will benefit from the postponement of several major Hollywood tentpoles, Zoradi said. Overall, he sees 2021 as a “good year,” while 2022 will bring additional benefits from the presumed resumption of production after delays pushed some 2021 titles into the following year. “We think 2021 is more of a transition year, with really strong product coming from both ’20 and ’21, and ’22 is going to be the year where it more normalizes,” Zoradi said.
Ramping theaters up again later this month and into September will bring about $10 million to $12 million in one-time costs, Gamble said. Monthly operating costs will run about $5 million due to enhanced cleaning and safety measures.
Zoradi didn’t get into the political debates that have defined so much of the pandemic experience in the U.S. and didn’t give any attention to (nor was he asked about) Cinemark’s reversal on mask-wearing. (The circuit reversed itself in late-June and said it would require patrons to wear masks.)
The CEO struck an optimistic note on the reopening efforts of various state and local authorities, even though that patchwork, combined with a lack of clarity from federal officials, has led to to setbacks for exhibitors.
“Every local government and state government wants to reduce the restrictions that have been put on the public, whether it be on other forms of out-of-home entertainment or restaurants,” Zoradi said. “Of course, they’re going to be cognizant and careful in terms of not doing it too soon.”