Category Archives: Earnings Announcements

AMC Q2’14 Results: Revenue Down But Focus On Re-Seat, Imax, AMC Prime, F&B and Internet Ticketing Steady

AMC Wanda logo

AMC has released its quarterly figures and it was a dark cloud but with a silver lining. Revenue was down nearly five per cent (4.7%), dragged down by a 7.1% drop in admissions and despite average ticket price being up to an average of USD $9.55, with Imax and F&B (food & beverage, i.e. concessions) as the main good news. The press release highlighted this other significant milestones.

“In spite of some tough comparisons, we enter the second half of the year building momentum behind our continuing transformation of the AMC guest experience. Our five strategic action fronts continue to deliver innovation, additional revenue opportunities, improved profit flow-through and better-than-industry results,” said Gerry Lopez, AMC president and chief executive officer. “Our vision for the circuit is working and is long-term, and we’re keeping our focus on it.”

“Our comfort and convenience, and enhanced food and beverage initiatives drive significant benefits for our guests and the Company, and are helping us outperform our peers. One of the newest, best examples is open source internet ticketing. After rolling out our own ticketing engine in April, tickets to an AMC theatre are now both easier to get and available in more places on the web than any of our competitors’. So far, we’ve seen a 45 percent increase in online ticket revenues this year, and have sold approximately 13 million online tickets this year. ”  LINK

The conference call provided some ‘drill-down’ details, particularly for topics such as AMC’s re-seating (swapping regular seats for larger and more luxurious premium seats).

Let me briefly give you an update on the significant progress we have made on a few of our strategic action fronts. First, comfort and convenience remains a key focus as we continue with our recliner reseats. There are 505 screens at 44 locations; I said 505 screens at 44 locations that we have deployed to-date, delivered admissions revenue per screen growth of 33% more than doubling of the EBITDA in the second quarter of 2014.

To be sure, the solid top-line per screen growth and more than doubling of EBITDA in a period where industry admissions revenue was down 6.5 points, says we are dramatically significantly outperforming and our strategy is working. That 33% per screen admissions growth was nicely balanced as well, with 21 points coming from attendance and 10 points coming from average ticket price increase.

We believe that this type of balanced growth clearly illustrates the tremendous power of our re-seat program and their customers are not solely driven by this slate of movies, but also the experience of seeing those movies in the comfort and style of an AMC theater.  LINK

Lopez also highlights the 69% top-box get satisfaction scores, calling it “not only the highest in the circuit, but in a class by themselves when it comes to retail enterprises.” Coupled with the improved on-line ticketing and an average concession spend per customer of USD $4.22, the message is clear: even if Hollywood delivers a poor slate of film, we are getting good at extracting more money from the people who do still go to the cinema.

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Quarterly Earnings: Regal, Imax and Dolby

 

Quarterly figures have been arriving thick and fast this week. We look at three key cinema companies: Regal Entertainment, Imax Corporation and Dolby Laboratories.

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The world’s largest cinema operator announced its quarterly figures and they were not what the analysts had hoped for, with revenue of USD $770.3 million, down 8.5% year-on-year and misses expectations by USD $41.41 million. There was a dividend of USD $0.22 per share. The CEO put a brave face on the drop and found a silver lining to highlight, though I’m not sure about her positive take on this year’s BO potential.

In a challenging summer box office environment, the growth in our average concession sales per patron and our focus on controlling variable costs helped drive Adjusted EBITDA margin of over 19%, stated Amy Miles, CEO of Regal Entertainment Group. With year-to-date industry box office results on par with last years record setting pace and an exciting film slate in the back half of the year, we are optimistic regarding the potential for further box office success in 2014.  LINK

In the earnings call that followed there was an acknowledgment of the harsher realities faced this summer but also some historical perspective by Ms Miles.

When viewed from a broader perspective, this year’s second quarter industry box office revenue was in line with the historical average for the last 5 years. On — one other item of note as it relates to the second quarter box office performance, we were again encouraged by the studios’ willingness to expand the summer box office season by delivering high-profile films throughout the quarter. Difficult comparisons aside, we continue to believe that a diverse film slate and a well-spaced release calendar increase the long-term potential for box office success for us and our studio partners.  LINK

Concessions, better consumer amenities, premium seats as well as Imax/RPX (premium large format) screens are the key to riding out the financial troughs.

And finally, the early returns on our initial investments in luxury, reclining seats are very promising, and in most cases, ahead of our expectations. We have fully converted 5 locations with 46 screens and are on track to complete 25 locations with 275 screens by the end of the year. As a reminder, this concept is not right for every location. Many of our theaters are simply too busy to sustain the seat loss that results from the installation of the larger recliners.

But in some situations, where the theater has been impacted by competition or simply nearing the end of its useful life, a return-minded investment in reclining seats can rejuvenate and potentially even extend the life of an existing theater. Based on the early success of these auditoriums, we believe we will have further opportunities to invest in our asset base in both 2015 and ’16. We remain excited about the potential for growth and financial returns associated with these initiatives and look forward to updating you as they progress.  LINK

Other insights: average ticket price was up by USD $0.05, premium screens attract 17% of box office, operating expenses were down by 1% (“due primarily to decreases in attendance-driven theater-level cost and lower payments associated with premium format revenue”), New York City and Washington D.C. were down by more than the market average, while alcoholic beverage serving was up from 31 to 39 locations. Interestingly the company doesn’t think it is possible to cut staffing levels any more than they already have.

Obviously, we’ll always look to reduce costs where we can in a low-attendance environment, and I think our managers and our field personnel will continue to do a great job doing that. But to ask them to do a lot more than that I think is going to be tough for us.  LINK

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Ballantyne Reports Strong Q3 Earnings, New CEO

Ballantyne-Strong Logo.jpgBallantyne Strong, Inc., a leading cinema equipment vendor and service provider, has been keeping their public relations staff busy this week with two important announcements.

On Thursday the Omaha, Nebraska based company released their record breaking earnings for the third quarter of 2010. If you were looking for a sign that the digital cinema rollout was truly underway, then Strong’s financial statement could serve as exhibit A.

The company’s net revenue for the quarter ending September 30th of this year was USD $32.9 million, a 99 percent increase in sales over the same quarter in 2009. Strong’s net earnings jumped from USD $500,000 (USD $0.04 per share) a year ago to USD $2.3 million (USD $0.16), making it the second consecutive record quarter for the vendor.

One of the biggest contributors to Strong’s increased earnings was the sale of digital cinema equipment, which leapt 291 percent to USD $20.2 million. Meanwhile, exhibitors scooped up USD $5 million worth of cinema screens, improving sales by 77 percent. Silver screens needed for certain 3D systems were the biggest sellers. And, with all that d-cinema equipment rolling out the door, someone had to actually install it in theatres. Strong made USD $2.2 million providing cinema services, an increase of 148 percent.

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Kodak’s Losses Decline In Q3

Kodak Logo.jpgEarlier today shares in the Eastman Kodak Company skyrocketed 12% after the company announced their third-quarter financial results had beaten Wall Street expectations. It wasn’t that Kodak had turned a huge profit, but rather it hadn’t lost as much money as had previously been forecast.

Per U.S. generally accepted accounting principles (GAAP), Kodak had third-quarter losses from continuing operations of USD $43 million or $0.16 a share on sales of USD $1.785 billion. That may not sound like good news, though compared to last year’s third quarter loss of USD $111 million or $0.41 it’s a huge improvement.

Kodak has inkjet printers to thank in large part to its improved performance. Turns out those little inkjet cartridges that always seem to be empty in your printer produce a hefty profit margin. Revenue from the company’s inkjet products grew by 23 percent, helping its digital commercial printing division expand by 13 percent. In fact, all of Kodak’s digital businesses were up a combined 10% during the quarter, the fourth consecutive quarter to show year-over-year increases.

It wasn’t all good news for Kodak however, and it is in an area of more specific interest to our readers that the company suffered steep decline. Sales for Film, Photofinishing and Entertainment Group amounted to USD $431 which is down 25 percent from last-year’s third-quarter. Per Kodak’s announcement:

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Cineworld Revenue Boosted By 3D Blockbusters

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Despite much of the world suffering from economic recession Cineworld seems to be having a banner year. Yesterday the United Kingdom’s second largest theatre chain reported that total revenues were up 8.5 percent since the beginning of the year. Cineworld’s success is spurred on by 8.3 percent year-over-year growth in box office since June.

Cineworld’s share of the U.K. box office has crept up to 24.5 percent to date, which is an increase over last year’s 23.8 percent. The company credits Hollywood blockbusters, specifically those in 3D, as being the cause for higher admissions and 1.5 percent in retail revenue. Specifically, Cineworld cited summer hits such as “Shrek Forever After” and “Toy Story 3″, both in 3D, as well as “Twilight: Eclipse” as being particularly profitable for them.

The third installment of the “Toy Story” franchise has earned GBP £70 million (EUR €80.1 million or USD $110.5 million) in the U.K. making it the territories top film of the year. For Cineworld, this not only means increased box office from higher ticket prices, but also revenue from selling 3D glasses. In fact, the company’s “other income” from the sale of glasses, booking fees and renting theatre space rose 43.8 percent when compared with last year’s figures.

With 3D helping drive box office it’s no wonder Cineworld is on schedule in a three year rollout of digital cinema in their 77 venues. In fact, they plan on converting even more screens in the next four months:

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Cinedigm Year-End Figures Shows Company Treading Water

Cinedigm has published its Q4 and year-end financial figures for fiscal 2009, which make for interesting reading, given that the company is the only* publicly listed third-party digital cinema operator. The good news is that the company is treading water, not drowning. The bad news is that it does so in a sea of red ink. Let’s take a closer look at the number and highlight some of the key statements in the company’s press release.

You know that the company has little to write home about when it starts off its list of achievements with the re-branding of the company from AccessIT to Cinedigm, instead of talknig about the number of screens converted, as CEO Bud Mayo does:

“The past year has been tremendously exciting for Cinedigm. Not only did we rebrand the company, but we also brought ground-breaking events to consumers and fans of college football and the NBA in the fourth quarter.”

He then goes on to acknowledge that it is a cold financial wind blowing out there, but trusts the resilience of the exhibition industry and 3D to carry the business through. So how bad are the economic conditions and what has the impact been for the company’s bottom line? First of all, let’s do way with Cinedigm’s EBITDA and the likes. Any CFO with half a brain these days will tell you, revenue is vanity, profit is sanity and cash is king, so the fact that Cinedigm’s revenue is up three per cent is of little consequence in the larger scheme of things.

Encouragingly operating losses decreased from $5.9m to $4.9m for FY09 compared to FY08, according to Cinedigm, due to “increased revenues and reduced direct operating expenses and SG&A, offset by an impairment charge and increased depreciation.” Similarly losses decreased for Q4 from $2.4m to $2.0m. But look more closely at the P&L figures lower down, particularly for the last three months. you will see that net loss was improved by $1,889,000. However, this is more than explained by the difference in interest payments of $2,378,000, which is half a million more than the difference in profit and loss for the the last three month. So the depressed interest rates is what is helping Cinedigm, rather than any management miracles.

There are also some worrying admissions that point to financial challenges in the months ahead:

Fiscal 2009 fourth quarter revenue decreased by 18%, to $17.9 million from $21.9 million in the comparable year-ago period primarily due to a contracted 16% step-down in VPF rates and seasonally fewer titles and prints in the quarter. This contracted step-down in VPF rates charged to the major studios will stabilize with just one more contracted reduction of 7% in the third quarter of fiscal 2012.

So the good news is that there will only be one more cut in the VPF rate, the bad news is that there should be any cut in the VPF rate in the first place. Remember that AccessIT (as it was then still called) got the best VPF rates that any company will ever get from the Hollywood studios in Phase 1 of its deployment – which mainly helped kit out troubled exhibitor Carmike – with VPFs currently being much lower.

It is well known that there are penalty clauses in VPF payments for entities that don’t meet their target number of screens (hello, Arts Alliance and XDC!), but that there should be automatic VPF fee cuts for entitites that came very close to meeting their full target, s AccessIT did in Phase 1, is troubling. And where does Cinedigm stand with regards to deployment for Phase 2? Mayo again:

“We are optimistic about our intensifying efforts to secure financing for Phase 2 installations through third party lenders as well as our exhibitor and vendor partners which will generate ongoing fees and other key revenue streams for Cinedigm. To date we have installed 139 Phase 2 screens and approximately 3,900 screens in total.”

139 screens is a drop in the ocean, or just over one per cent, of the planned 10,000 screens for Phase 2. Don’t expect Cinedigm to be collecting much in the way of the anyways reduced  VPF for these screens. Cinedigm aknowledges as much when it goes on to state that “All comments regarding fiscal year 2010 do not assume a large Phase 2 deployment or a large rollout by other entities, including DCIP, although the Company expects both to occur.” Though to be brutally honest, the likelihood of the latter is greater than the former.

Instead Cinedigm is pinning its hopes to a growth in DMS (digital media services) division revenue, cushioned by steady income (minus another VPF rate cut) from Phase 1. The strategy is thus to keep treading water, hope for the financial climate to improve. At leasthe amended credit facility with GM should ensure that no sharks will be circling just yet.

The situation is unlikely to be much better for the likes of AAM and XDC, though because they are not publicly listed companies, there is no way of knowing whether they are swimming, sinking or treading water nearby, waiting for rescue in the form of radically improved financial climate and/or a buy-out.

*(Companies like Dolby and Kodak are also engaged in third party deployment, but it is not their primary business, unlike Cinedigm, which we group with Arts Alliance Media and XDC)

Digital Cinema Integrators Continue to Bleed Money

There is a standing joke in the industry that to make a small fortune in digital cinema you need to start with a large fortune. Sadly, this sentiment seems to be vindicated by the latest quarterly figures from Cinedigm (formerly AccessIT). The company’s scorecard is impressive enough:

Cinedigm Digital Report Card

And the revenue has been going up year-on-year and quarter-on-quarter, as the press release proudly trumpets:

Access Integrated Technologies, now doing business as Cinedigm Digital Cinema Corp. (“Cinedigm” or the “Company”) (NASDAQ: CIDM), reported a 10% increase in year-to-date revenue to $65.1 million, and a 6% increase in revenues, to $22.7 million for the fiscal 2009 third quarter ended December 31, 2008, versus the year-ago periods. The Company posted an Adjusted EBITDA (defined below) of $11.0 million or $0.40 per share, an improvement from the fiscal 2008 third quarter of $8.4 million.

But is there any profit? No, the company is still burning through money. $17.4m in losses in the most recent quarter to be precise. What are the implications of this? The 10-Q transcript makes for grim reading; Read More »

Dolby Sheds Jobs From UK Cinema Manufacturing Division

Dolby Logo

As if the recent quarterly earnings reports from Warner Bros, Walt Disney and News Corp were not proof enough that the entertainment industry is far from recession proof, news is out that Dolby Laboratories will be closing down its UK manufacturing operation. Some 60 people will lose their jobs from the shuttering of their UK manufacturing base. From BBC news website:

The company, which provides products for the cinema industry, is closing the manufacturing arm of its UK operation in Wootton Bassett in April.

It blamed “changing market conditions” for its decision to close the site which employs 170 people.

Dolby says other business activities at the site will be not be affected.

This is a bitter blow for a company that started in the UK and whose British operation still sees itself as the carrier of founder Ray Dolby’s torch, even when the man himself moved back to the UK and most of the company’s activities is out of San Francisco these days. But it would not be true Brit grit if they did not put a brave face on the decision and declared in their recent earning’s statement: “Having concluded a comprehensive consultation process with our UK employees, the proposal to close our UK manufacturing operation at Wootton Bassett and consolidate manufacturing operations at a single facility has been accepted.”

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Cineplex: 2007 ‘Good’, Q4 ‘Bad’, WGA ‘Thanks’

A mixed bag of financial news for Canadian exhibitor major Cineplex, which saw a rise in 2007 numbers on most fronts, but was dragged down by a weak fourth quarter. From the coverage in Variety:

Toronto-based Cineplex, which operates 131 multiplexes nationwide with 1,327 screens, said it lost CAN$2.77 million ($2.74 million) during the three months ending Dec. 31, compared with a profit of $4.6 million in 2006.

Fourth-quarter revenue at Canada’s largest cinema chain was down 6.3% to CAN$182.6 million ($180 million), against a year-earlier $195 million as overall Canadian box fell 15.7% during the last three months of 2007.

But at least there is a good start to 2008, in part thanks to the now-ended WGA strike:

Going forward, Cineplex Entertainment CEO Ellis Jacob told financial analysts during a morning conference call that the first five weeks of fiscal 2008 has seen boxoffice jump 15.8%.

In addition, the exhibitor has received “a bit of a bounce” in theatrical attendance owing to increased TV reruns during the WGA strike.

Unlike most other end-of-year financial summaries for non-US territories and exhibitors there is no word how domestic fare fared or what it contributed to the up or down on the numbers, which confirms the suspicion that Canada is Hollywood’s 51st state.

Regal Numbers Are Down For 2007

While the latest financial results from Regal showed a healthy profit, the underlying numbers paint a far less comforting picture. From The Hollywood Reporter:

The company earned $23.2 million in the fourth quarter, down 21% from a year ago. But on a per-share basis, the company earned 15 cents, which was 4 cents better than Wall Street expected.

Revenue dropped about 9% to $599.9 million, less than analysts predicted, but investors focused on the positive and the shares rose fractionally Thursday to $18.57.

Admissions revenue was down 6% to $404.1 million and concessions revenue was off 8% to $158.4 million.

It seems that the exhibitor is relying heavily on National CineMedia for its revenue and profit growth. From the press release:

“In 2007, Regal Entertainment Group benefited from the successful IPO of National CineMedia, returned value to shareholders in the form of dividends totaling $485 million and continued to generate significant free cash flow,” stated Mike Campbell, CEO of Regal Entertainment Group. “We were pleased to start the 2008 fiscal year with our announcement of the pending purchase of Consolidated Theatres and look forward to the successful closing of this accretive acquisition,” Campbell continued.

It will be interesting to hear the transcript of the conference call (usually released a couple of weeks after the Q4 figures) to see what if any update on digital cinema Regal gave.