Cinema Earnings Digest – Tuesday 12 May 2015

By | May 12, 2015 4:19 am PDT

This is an overview of recent earnings announcements and quarterly results of US cinema related companies from the last few weeks. This is not a review of ALL the cinema companies that released result, but only some of the more notable ones. (And, yes, I know Imax is Canadian.)

Regal 

Regal’s Q1 earnings outperformed market expectations at USD $23.1 million or 15 cents per share, as opposed to the anticipation of 12 cents.

Revenues were down 5% to $691.3 million for an 89-day quarter, but the 91-day year-ago period included six days during the 2013 holiday season. Regal had reported a 2014 first-quarter loss of $1.2 million, which included a $32.6 million after-tax loss on extinguishment of debt; adjusted EBITDA declined 11% to $128.1 million.  LINK

There was an understandable optimism about the rest of the year and interestingly more than half of the cinema’s ticket sales are being done through mobile devices. But one Seeking Alpha analyst’s take on it was “Regal Entertainment Group: An Underwhelming Quarter And Increased Strategic Risk,” pointing out that it under-performed compared to its peers and also saw  worrying non-cyclical drop in traffic.

AMC

AMC was ever so slightly off on both earnings and revenue (6 cents misses by 2 cents, with revenue of USD$653.12 million off by USD $2.99 million) but still up +4.9% year-on-year. F&B was up by over 10%, which was the best ever for the company. CEO Gerardo Lopex commented:

I don’t think many people anticipated the first quarter of 2015 would be as strong as it was especially in light of the tremendous quarter the industry and AMC both had a year ago. And just to refresh everyone’s memory in the first quarter of 2014, AMC grew admissions revenue 6.8% while industry box office grew 5.5%, a big number for the industry to be sure, but an even bigger number for us with that three and third point outperformance hence it might be in a nervous Nellie.  LINK

AMC also partnered Movio in an effort to track and understand frequent cinema goers better, using the AMC Stubbs loyalty card/scheme. Seeking Alpha’s analyst had a favourable opinion, stating that he saw “Continued Progress Of Multi-Year Initiatives And Potential Expansion” and that “I still believe in the AMC story and I still believe in the story of the sector.”

Cinemark

The last of the Big Three exhibitors beat Wall Street’s expectations by one cent on dividend and overall on revenue.

  • Cinemark Holdings (NYSE:CNK) reports admissions revenue was up 5.2% to $400.7M.
  • Concessions sales gained 11.1% to $214.4M.
  • The average ticket price per patro was $6.12 and concession revenue per patron was $3.27.
  • Attendance was up 6.5% during the quarter.
  • Total cost of operations +3.8% to $554.96M.  LINK

There seems to be a running theme that both Regal, AMC and Cinemark achieved significant uplift on concession spend in the first quarter of this year. Worth looking into further.

Imax

The PLF major had a very good quarter on the back of several hits and expansion in China.

Imax Corp. revenues climbed 29 percent to $62 million in the first quarter of this year behind a stronger-than-expected domestic box office and solid returns from China and abroad, the company reported Thursday.

While the revenues were up from $48.2 million last year, first quarter earnings for the giant-screen chain fell. Net income was $391,000, down from $579,000 a year ago and earnings per share were at zero, down from one cent per share a year ago.  LINK

It seems that Imax is blowing its earnings back into expanding further in markets like China, as well as the cost of launching laser projection.

NCM

NCM had solid growth in Q1, helped by the growing success of the upfronts. It missed predictions by 10 cents but beat forecasts on revenue. Regal will next added Cinetopia in Q2 2015 and Santoikos Theatres in Q1 2016 to its network.

After solid growth in Q4 2014, the momentum continued into 2015 with record Q1 non-beverage advertising revenue. Total Q1 revenue growth of 10% versus Q1 2014 was driven by a 19% increase in national advertising revenue and a 2% increase in local advertising revenue, partially offset by a decrease in beverage revenue.  LINK

Q2 is apparently approaching “sell-out levels”. There was not much dwelling even during the Q&A on the aborted “Screenvision NCM merger saga.”

Dolby

While Dolby continues to be driven by consumer licensing, we like to track it because it is driving several new cinema innovations (immersive audio and HDR in particular). Those are not reflected in the numbers, with dolby Atmos only having a small overall impact, but the company had a good quarter.

  • In addition to beating FQ2 estimates, Dolby (NYSE:DLB) is maintaining FY15  (ends Sep. ’15) revenue guidance of $970M-$1B (consensus is at $982.9M) in spite of forex and PC pressures. GAAP operating expense guidance has been cut by $4M to $660M-$670M.  LINK

Seeking Alpha’s analyst take on the company and its latest quarter is that “Dolby Labs Is Misunderstood And Needlessly Cheap,” because even though many of it patents expire in 2017 it still has plenty of new goodies in the pipeline, while “The Licensing Model Is A Highly Profitable Gem.”

Star Wars

Seeking Alpha also gave a boost to AMC and other shares with a bullish prediction about the prospects for the new “Star Wars” film.

  • Box office forecasts from Wall Street for Star Wars: Episode VII range between $1.75B to $2.0B in a development that’s not unwelcome news to the exhibitor sector (CKECAMCCNKRDIMCS).
  • Entertainment publications peg their box office predictions even higher, with some seeing #1 Avatar ($2.788B) and #2 Titanic ($2.187B) in range to be reeled in on the all-time box list.
  • The J.J. Abrams-directed film debuts on December 18, 2015 to give theater chains a good two-week Q4 boost.
  • The YTD U.S. box office tally stands at $3.227B with 197 films released.
  • Another company looking for Episode VII to be a major blockbuster and rev up interest in standalone Star Wars films is Hasbro (HAS -0.3%) which holds the key toy license.
  • Related: Disney gets afternoon rise as ‘Star Wars’ event launches (Apr. 16 2015)

So the year could end with a very strong quarter indeed for all of the above companies.

Patrick von Sychowski
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Patrick von Sychowski

Patrick was a Senior Analyst at Screen Digest, went on to launch the digital cinema operations of Unique and Deluxe Europe, then digitised Bollywood at Adlabs/RMW, and now writes, consults and appears on panels about cinema all over the world.
Patrick von Sychowski
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