Good morning, everyone. I would like to welcome you to Cinemark Holdings, Inc.'s Second 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 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. As we shared during our last call in May, the second quarter launched out of the gates with the record-breaking results of a Minecraft movie, which has now generated over $950 million in global box office proceeds. That film, coupled with a steady stream of highly compelling new releases week after week, ignited a surge of summer moviegoing momentum that propelled second quarter North American industry box office to $2.7 billion, which was up more than 35% year-over-year. Moreover, the substantial magnitude of that result flipped year-to-date tracking from a 12% deficit versus 2024 at the end of the first quarter to a 14% gain by the end of June. Consumer enthusiasm for theatrical experiences was on full display in 2Q as audiences turned up in mass for films like the genre-defying breakout hit centers the high-flying live-action remake of How to Train Your Dragon and Marvel's most recent Avenger Adventure, Thunderbolts. That enthusiasm also delivered an all-time high Memorial Day weekend at the box office driven by the lovable Lilo & Stitch, which just exceeded $1 billion globally as well as an adrenaline-pumping, The Final Reckoning in Mission Impossible. Furthermore, audiences scared up a thrilling outsized result for Final Destination Bloodlines, a sizable $60 million domestic run for the faith-based film the King of Kings and a powerful heart-racing victory lap for F1 that yielded Apple's most significant theatrical debut to date. And that robust moviegoing momentum surged right into July with strong continued carryover from prior month releases, monstrous results for Jurassic World Rebirth including the franchise's second highest opening of all time, a soaring Superman reboot that has ushered in a bold new era for DC Comics and this past weekend's big first steps for the Fantastic Four, which opened to rave reviews and nearly $120 million of domestic box office that stretched well past expectations. And while August and September are typically transitional months as box office tapers off with summer vacations winding down and school resuming, several exciting films are still to come in the third quarter, including a Resurgence of Comedies such as the Naked Gun, Freakier Friday, The Roses and Spinal Tap II: The End Continues, more thrills and chills and films like Weapons, The Conjuring: Last Rites and The Long Walk. Fresh original titles like A Big Bold Beautiful Journey and One Battle After Another, and new installments of the Bad Guys, Downton Abbey and Demon Slayer. And then the fourth quarter is primed to accelerate once again with a further array of action, comedy, thrills, family fair and spectacle, including Tron: Ares and Mortal Kombat II. A new take on The Running Man, Zootopia 2, the exciting conclusion to last year's sensation in Wicked: For Good, Five Nights at Freddy's 2, and of course, Avatar, Fire and Ash, just to name a few. Looking beyond 2025, the 2026 film slate is already shaping up to be an incredible year. Audiences can look forward to new chapters and beloved franchises like the Avengers, Spider-Man, Minions, Toy Story, Shrek, the Hunger Games and Mario Brothers alongside innovative original concepts from visionary filmmakers like Christopher Nolan, Jordan Peele and Steven Spielberg. This strong lineup of films on the horizon, coupled with sustained consumer enthusiasm for cinematic experiences underscores our continued confidence in the future of theatrical exhibition. Amid this positive industry trajectory, Cinemark's execution stood out once again in the second quarter with outperforming results that are indicative of our advantaged market position and the continued impact we are deriving from our strategic initiatives. Our team fully capitalized on the strength of moviegoing during the quarter sustaining the core structural market share gains we have achieved over the past several years, while further benefiting from a sizable mix of family titles that accounted for 3 of the quarter's top 4 films and more than 40% of 2Q box office. Furthermore, we also continue to realize upside from our efforts to take full advantage of nontraditional programming opportunities which drove more than 10% of our admissions revenues for the fourth straight quarter in a row as audience appeal for foreign, repertory, faith-based, content creator and concert films continues to grow. These collective actions helped us deliver several impressive box office records during the second quarter, including our highest quarterly domestic admissions revenues since the pandemic and our third highest quarterly result of all time. We also achieved our biggest Memorial Day week endeavor as well as a record high opening for a family film with a Minecraft movie. Importantly, we were able to translate these accomplishments into meaningful overall operating and financial results. Through solid execution and making the most of opportunities to delight our guests, our sensational team grew revenue 28% year-over-year to $941 million during the second quarter as we entertained $58 million patrons across our global circuit. Adjusted EBITDA increased to further 63% to $232 million with over 500 basis points of margin expansion to 24.7%. We're very proud to report that our second quarter adjusted EBITDA marked our second highest quarterly achievement in the history of our company trailing only 2Q of 2019, which included Avengers Endgame, the second highest grossing film of all time.

Thank you, Sean. Good morning, everyone, and thank you for joining the call today. Our robust second quarter results reflect a compelling film slate that clearly resonated with audiences as well as the successful execution of our strategic initiatives to drive revenue and efficiently scale our operations. The team's commitment to operational excellence enabled us to maximize the opportunities presented in the quarter, and deliver strong financial results. In the second quarter, global attendance grew 16% year-over-year to 57.9 million patrons, and worldwide revenue increased 28% to $940.5 million. We delivered $232.2 million of adjusted EBITDA and expanded our adjusted EBITDA margin by 530 basis points to 24.7%, reflecting increased operating leverage driven by the attendance growth in the quarter as well as improved monetization and productivity advancements. Domestically, we entertained 36.9 million guests, and we continue to sustain strong market share gains compared with pre-pandemic levels. In addition to the structural gains we have made over the past few years, our market share in the quarter benefited from a favorable content mix, including family films like Minecraft movie, Lilo & Stitch and How to Train Your Dragon, which connected particularly well with our audiences. We delivered $383.4 million in domestic admissions revenue with an average ticket price of $10.39 for the second quarter. Our average ticket price increased 5% year-over-year, primarily driven by strategic pricing initiatives and to a lesser extent, favorable format and ticket type mix given the composition of the film slate in the quarter. We grew domestic concession revenue by a substantial 33% year-over-year to $307.6 million. This performance marks a significant milestone for us. As it is the first time we have exceeded $300 million in concession revenue in a single quarter, representing our highest quarterly concession revenue ever. Our concession per cap increased 5% year-over-year to an all-time high of $8.34 due to strategic pricing actions, a favorable shift in product mix fueled by growth in merchandise sales and higher incidence rates. Other revenue was $68.3 million and grew 28% compared with the second quarter of 2024, primarily due to the higher attendance levels, which contributed to increased promotional income and transaction fees, as well as gaming revenue. Altogether, our Domestic segment generated our highest quarterly revenue ever, with $759.3 million, representing an increase of 33% year-over-year. Adjusted EBITDA grew 73% to $188.1 million, yielding a robust adjusted EBITDA margin of 24.8% representing a 580 basis point expansion versus the prior year period. Turning to our International segment. We hosted 21 million guests during the second quarter, in line with the same period last year. Our attendance benefited from the solid performance of family titles, which helped to offset the prior year's challenging comparison, driven by the exceptional success of Inside Out 2, which over-indexed in Latin America and was the region's highest grossing film of all time. Like the U.S., we maintained strong market share gains in the second quarter compared with pre-pandemic levels, delivering more than 100 basis points of growth versus Q2 of 2019. Internationally, we generated $83.7 million of admission revenue, $70.1 million of concessions revenue and $27.4 million of other revenue in the second quarter. In total, international revenue grew 12% year-over-year to $181.2 million. Adjusted EBITDA increased 32% to $44.1 million with a strong 24.3% adjusted EBITDA margin that expanded 380 basis points year-over-year. Moving to global expenses. Film rental and advertising expense was 58% of admissions revenue, up 220 basis points year-over-year due to an increased concentration of high-grossing films and higher marketing spend as we leaned into the strength of this quarter's film slate. Concession costs as a percent of concession revenue were 19.4%, a 10 basis point increase compared with the second quarter of last year, driven by a higher mix of merchandise sales, which have a lower margin than our core concession offerings and ongoing inflationary pressures on certain concession categories. These impacts were largely offset by benefits from our strategic pricing actions and higher rebates. Global salaries and wages were $109.4 million, up 12% year-over-year due to an increase in labor hours to accommodate higher attendance levels and expanded operating hours as well as wages and benefits inflation, partially offset by labor productivity initiatives and favorable foreign exchange rate fluctuations. As a percentage of total revenue, salaries and wages decreased 170 basis points to 11.6%. Facility lease expense was $82.9 million, an increase of 2% compared with the second quarter of 2024, reflecting higher percentage rent given the stronger year-over-year box office results and inflationary increases, partially offset by foreign exchange rate favorability. As a percentage of total revenue, facility lease expense declined 230 basis points to 8.8%. Utilities and other expense was $124.7 million, up 19% year-over-year, primarily driven by higher attendance, which impacted our variable and semi-variable costs, elevated repairs and maintenance expense to address deferred maintenance needs across the circuit, and higher fixed costs, namely real estate taxes and property and liability insurance. As a percentage of total revenue, utilities and other decreased 100 basis points to 13.3%. G&A was $54.1 million and was down 3% year-over-year, largely attributed to lower share-based compensation and related payroll taxes and favorable exchange rate movements. These benefits were partially offset by wage and benefits inflation, targeted investments in headcount and higher professional fees. As a percentage of total revenue, G&A declined by 180 basis points to 5.8%. Globally, we delivered $93.5 million of net income attributable to Cinemark Holdings, Inc., resulting in diluted earnings per share of $0.63. Shifting to the balance sheet. We ended the quarter with $932 million of cash as we prepare to address our convertible notes later this month. We generated $246 million of free cash flow in the quarter, reflecting the stronger adjusted EBITDA performance as well as seasonal working capital tailwinds. This result underscores the strong free cash flow generating capabilities of our business model when supported by a more favorable content cycle. Turning to capital allocation. Our strategy remains focused on 3 key pillars: one, strengthening our balance sheet; two, investing to position Cinemark for long-term success; and three, returning excess capital to shareholders. Starting with the first pillar, strengthening our balance sheet. Given the strength of our financial position, we provided notice to the convertible note holders of our election to settle the $460 million principal amount in cash upon their August 15 maturity. Bear in mind that the maturity date for the warrants extends beyond that of the convertible notes and hedges. As a reminder, in the first quarter, we took steps to proactively mitigate potential dilution from the settlement of the warrants with the repurchase of 7.93 million shares. Actively managing dilution remains a key priority as we seek to deliver long-term value for our shareholders. We also took proactive steps in the quarter to reduce our interest expense. We successfully repriced our term loan, resulting in a 50 basis point reduction in our interest rate and more than $3 million in annual savings. When combined with the upcoming repayment of our convertible notes, we expect a $24 million reduction in our annual cash interest expense. To wrap up our first capital allocation pillar. We ended the quarter with a net leverage ratio of 2.2x, which is within our target range of 2 to 3x. Our balance sheet continues to set us apart, providing us the financial flexibility to strategically invest in long-term growth while maintaining the ongoing strength and resilience of our circuit. This brings me to our second pillar, pursuing strategic and accretive investments to grow and secure our long-term success. We deployed $52.2 million of capital during the first half of the year to maintain and enhance our high-quality circuit. For the full year, we continue to expect capital expenditures of approximately $225 million. And now to our third capital allocation pillar, returning excess capital to shareholders. In June, we paid our second quarterly dividend since the pandemic. And over time, our goal continues to be to return a greater share of our free cash flow to shareholders, provided our net leverage ratio remains within our target range. Overall, we remain committed to taking a balanced and disciplined approach to capital allocation, ensuring we retain the flexibility to pursue attractive financially accretive opportunities as they arise, while proactively managing risk. In closing, we are pleased with the strong financial and operational performance we achieved in the quarter. Our solid financial condition, disciplined capital allocation and focused execution positions us to capitalize on opportunities ahead and deliver long-term value to our shareholders.

Thank you for the insights on the convertible note. I’d like to discuss the convertible note and your capital allocation strategy, Sean and Melissa. It appears you intend to manage the premium by issuing shares. I'm curious if you’ve considered using cash instead. If you are indeed sticking with the stock method, is there a possibility to expedite the daily settlement of 180 shares through March 12? I ask this in light of your aim to enhance capital returns as outlined in your presentation. Do you need to wait for the warrant premium to fully resolve before reconsidering the dividend or ramping up the buyback, or might that not be necessary? That’s my first question. Additionally, I’d like to follow up on the impact of the Big Beautiful Bill for Cinemark.

Thank you for the question, Ben. Regarding the warrants, our current intention is to settle them with shares, but we don't need to make that decision until close to the settlement date. Ultimately, our choice will depend on how much the stock price exceeds $22, our cash and liquidity situation, and considerations about potential dilution, among other factors. Concerning acceleration, we are still looking at ways to reduce potential exposure related to the warrants. Whether we choose to unwind the warrants early or let them expire during the contractual settlement period will depend on the cost of an early unwind, the stock price at that time, future stock price expectations, and other variables. As for your question about whether this will impact our ability to return more capital to shareholders, addressing the maturity of the convertible notes this month and the warrants is indeed crucial for our capital allocation strategy. However, the possibility of additional capital returns to shareholders before settling the warrants will depend on several factors, including our overall cash position, liquidity, and net leverage ratio. The Board and our management team are continuously reviewing our capital allocation strategy, which includes the size of the dividend and potential share buybacks, as we aim to provide long-term value to our shareholders.

And then, yes, I guess, can you quantify cash flow benefits at Cinemark from the 100% bonus depreciation and the shifts into the leverage interest coverage limitations. I don't know if you guys have figured that out yet?

So it's still premature to provide quantification there. We're still analyzing the full impact but we do expect our cash taxes to meaningfully benefit from the new legislation, particularly as it relates to the 100% bonus depreciation and the loosening of the interest expense limitation from a capital expenditure standpoint, many of our capital expenditures to qualify for that accelerated depreciation on the bonus side. I think just the one thing I would call out there Ben, as you guys are looking at modeling, it's just we do for 2025, we had 40% bonus depreciation such that the benefit isn't all incremental, but we do expect it to be significant. And then on the loosening of the business interest expense limitation essentially the - the denominator or the measure that before essentially our interest expense limitation was determined based on EBIT. Now that will be determined based on EBITDA. And since EBITDA is that bigger number, we'll be able to take a greater deduction for interest expense. So the combination of those, like I said, still not at a position where we'll quantify it. We think it's a bit premature to do so, but we do expect meaningful benefits to come from the new legislation.

Sean, I want to see if you could just expand a bit on your PLF strategy. For instance, what kind of drives your decision to roll out more D-BOX and ScreenX as opposed to XDs. And then you wanted to just get your view on some reports that surfaced a couple of weeks ago that you and others were looking at co-branding some of your own PLF formats. And if you can't comment on that directly, maybe you could just speak more generally to what you can do with the XD brand in terms of maybe driving more share or pricing or even integrating it with studio marketing?

Sure. First, I want to emphasize that at Cinemark, we value our IMAX and XD theaters and other enhanced screens. However, our primary goal is to ensure that every aspect of the theater experience feels premium, no matter which auditorium our guests choose. This includes our service, reclined seating, cleanliness, maintenance, and food and beverage options. We believe that these broad attributes enhance the perception of value, leading to increased moviegoing frequency and loyalty across all types of films. Specifically regarding premium large format (PLF) theaters, they present a great option for certain moviegoers seeking an enhanced experience. However, PLF currently represents about 15% of the domestic box office. Although this figure has improved since pre-pandemic levels, PLFs typically perform best with major new releases at premium prices, making their recovery seem more significant compared to 2019. The vast majority, 85%, of domestic box office revenue still comes from standard auditorium screenings. While PLFs are an exciting amenity contributing to industry growth, they remain a small portion of overall box office sales, so it’s essential to keep a balanced perspective. There are many exceptional PLF experiences available to audiences in the U.S. and worldwide, including the impressive IMAX experience. Discussions about PLFs have primarily focused on effective marketing strategies for large screen formats to expand the market and create additional growth opportunities, rather than posing a threat to IMAX. Raising consumer awareness of the various PLF options and other enhanced amenities benefits the entire industry, including exhibitors, studios, the creative community, and moviegoers. We’ve noticed increasing interest from consumers in these amenities, and we are exploring opportunities across these categories you mentioned. The decisions we make regarding D-BOX, ScreenX, or XD experiences depend on factors like theater particulars, screen sizes, market dynamics, and demographics, all of which guide our approach to growth opportunities.

And then just for Melissa, just given the down G&A in the quarter, I want to see how to think about the growth on that line item for the balance of the year. We recognize, obviously, there's a variable component around box and your stock price? And then just any view you can give on concession costs from here and just managing inflation around certain items.

Yes. From a general administrative expense perspective, we experienced lower stock-based compensation and associated payroll taxes this quarter, which led to a reduction in G&A. Beyond that, we are continuing to invest in headcount and capabilities to further our strategic initiatives. We are also implementing some merit increases and facing rising benefit costs. Looking ahead from a G&A standpoint, it’s important to remember that excluding stock-based compensation, we still expect wages and benefits to increase due to the factors I mentioned. Additionally, the timing of professional fees and incentive compensation may affect our G&A from quarter to quarter. We are maintaining discipline in our spending, but I would note that year-over-year comparisons were significantly impacted by stock-based compensation this quarter. Yes. So on our concession rate, so we continue to expect our COGS rate for the full year to be higher year-on-year given ongoing inflationary pressures as well as a shift in product mix. And that's mainly driven by higher sales of merchandise, and you saw that happen in the first half of the year. Now we do continue to pursue strategies to mitigate inflationary and tariff impacts that may arise and we'll continue to look to do that. And then with respect to product mix, that is an area that we think could continue to drive, especially as we look at the film slate for the second half of the year, particularly in Q4, does lend itself to merch. So it's really going to depend on that mix of merchandise and what transpires there. But we'll continue to look to offset wherever we can. I think the other thing I would just call out is that's a tough comp in the third quarter. So just keep that in mind, we had a challenging comparison year-over-year given the timing of rebates in Q3 of last year. So you'll want to look at that when you're modeling.

Sean, I wonder if you had a view on whether or not you will be looking at doing discount Wednesdays?

Sure. I think that's an interesting concept and angle. We're eager to see how it ultimately impacts attendance patterns and whether it can encourage more moviegoing without affecting box office results. I'm also interested to see how it performs and how well studios adopt it. We've had a successful discount Tuesday program at Cinemark for many years, along with variable pricing throughout the day, week, and year, which aligns with consumer demand to optimize attendance, box office, and revenue. Our pricing team is sophisticated and dedicated, using extensive data and insights to guide our decisions, aiming to ensure our guests feel they receive meaningful value when visiting our theaters. Our decisions are based on demand elasticity and consumer value perception regarding pricing, which has served us well over the years. We'll keep evaluating the specific concept you mentioned based on its performance, and depending on that, we can decide whether to pursue it further.

Great. That's helpful. And then as a follow-up, I'm curious what percentage of your concession sales is now merchandise? And how are you thinking about maybe expanding that business to grow maybe broaden the product mix or add some online capabilities?

Sure. Well, look, it's still a relatively small overall portion of our food and beverage. But it's growing exceptionally well. I mean, year-over-year, overall merch was up close to 240%. So again, it's on a smaller base, but it's showing great signs of upside. Obviously, that it's become beyond just a nice offering, it's become part of the fun events of going to movies and also a fantastic promotional vehicle. So they become more and more elaborate, fans are seeking them out. Talent from the movies are getting involved in using them to promote the films. So it's just become more and more part of the fun of going to the movies. So we're very encouraged about what we're seeing really over the past couple of years with the growth, and we think there's still more to come.

Great to see the strength in the second quarter and the continuation in July. Sean, I was wondering if we're starting to see more, I guess, filling in around the edges just from an overall content standpoint, kind of how that looks for the back half of the year? Obviously, some a little bit of weakness projected in August and September, but kind of picks up. But yes, just wondering how some of that filling in looks at this point.

Thanks for the question. This year, we've experienced a significant increase in the number of releases in the industry, especially noticeable in the second quarter. The first quarter was still feeling the effects of the strikes, but momentum really gathered in the second quarter with a consistent flow of exciting releases week after week, leading to outstanding results and attendance throughout that period. Typically, August and September see a slight slowdown in movie releases, but this year, the fourth quarter is shaping up to be one of the most exciting since the pandemic, with many films scheduled for release. In recent years, larger films have mostly been concentrated in the summer, and the end of the year was less impactful in terms of major releases. This year, we're looking forward to a strong fourth quarter lineup. We're eager to see how the film releases unfold as we move further into the year, especially after a solid July to start the third quarter.

Great. And then somewhat related, just in terms of international. I know the booking periods are slightly different. So it was a very family-friendly film slate up here in North America for Q2. Was that the same in international? Or were some of these pushed into later periods, just in the context of that market being more flat versus all the growth that we saw up here?

Sure. Well, we were very pleased with the results of Latin America for the second quarter, and it is a little nuanced as you kind of point out, I would say, the profile and release timing of the films was similar, but there were a few differences when you look at just how the totality of the slate performed in the U.S. relative to LatAm. Keep in mind, LatAm had a bit of a tougher comp year-over-year because it was going up against Inside Out 2, which was huge in the U.S. but in Latin America, it was the biggest movie of all time. So that was just a huge comparison. It will be flat year-over-year with that comparison in there. We look at it as a real positive. A couple of other things. Minecraft did exceptionally well in Latin America. However, in the U.S., it was that much higher of a cultural phenomenon. When you look at Lilo & Stitch, which also did well in both markets compared to Minecraft, in the U.S., the difference between the two are about 6% in box office. In LatAm, Lilo & Stitch nearly doubled the attendance of Minecraft. Similarly, films like Centers, which was the third largest movie in the quarter for the U.S. didn't really connect that broadly in LatAm. It wasn't even in the top 10 and other films like The Accountant 2 and Karate Kid and Mission Impossible, these are films that tend to work better in the U.S. and have a little bit more of a nostalgia factor in the U.S., whereas they don't over-index as much in that market. So those factors really are the things that drove some of the differences between the level of performance in the U.S. on a year-over-year basis compared to LatAm. But overall performance, and we are still thrilled with the results of LatAm basically with flat attendance year-over-year margins in excess of 24%. The whole region continues to perform the recovery pace relative to the U.S. continues to outpace things in LatAm on a comparative basis, which is really good.

Okay. Your previous guidance for domestic ATP and per cap had been modest growth. Curious if there's any update there, any changes to your expectations for the year?

Thanks for the question. So with respect to average ticket prices, we continue to expect modest growth year-over-year for full year 2025, and that's again driven by strategic pricing opportunities as well as expected increase in premium format mix, given our anticipations around the strength of the film slate. Now do keep in mind that our average ticket prices may fluctuate quarter-to-quarter based on film mix but we do expect modest growth in the U.S. year-over-year. Specific to international ticket prices will be impacted by inflationary and FX dynamics in the region and country mix will also play a factor. On the per cap side, for food and beverage, we do continue to expect moderate year-over-year growth in our domestic per cap for full year and that's driven by the ongoing initiatives we have in place to both increase incidence rates as well as optimized pricing again, similar to our average ticket prices, they will fluctuate quarter-to-quarter with film mix. And then the same drivers I mentioned for international on the average ticket price side really apply for per caps that inflation and FX dynamics as well as country mix will influence where they shake out there. But ultimately, our aim is to drive sustainable per cap growth. Yes. From a capital expenditure perspective, it is accurate that we have spent just over $50 million year-to-date as of June. We still anticipate our total spending for this year to reach $225 million. As is typical with our capital expenditures, much of this will be concentrated in the latter half of the year. Some projects require time to initiate and complete, so we remain focused on that target. In terms of free cash flow for the second half of the year, it’s important to consider both cash flow timing and the dynamics of our working capital. We usually face working capital challenges in the first and third quarters due to the timing differences between box office revenue generation and our film rental payments. Additionally, interest payments tend to be more concentrated in the first and third quarters. Regarding cash taxes, we had previously indicated that we expected a significant increase in 2025, but now with the benefits from recent tax litigation, we are not anticipating that same level of increase. Therefore, these factors, along with box office performance and attendance, will significantly influence the second half.

One for Sean and one for Melissa, if I can. Sean, after the box office success from F1 that you discussed in your prepared remarks, just curious if you've heard anything directly from Apple about their intention to ramp up the potential number of theatrical releases in the year ahead? And then on a related note, any updated thoughts on Netflix changing its theatrical strategy, especially with their recent Happy Gilmore 2 release, which I think we can all say would likely have been a pretty big box office.

Thank you for the question, Robert. F1 was a significant film for Apple, and we are very pleased with the success they achieved in collaboration with Warner Bros. It has been an excellent movie and a fantastic outcome. Regarding future plans, we know they have ambitions to expand in the theatrical space, and this marks an important step in that direction. While we think positive developments will follow, we do not have specific details to share at this time as things are still being worked out. We see this as an encouraging sign for Apple's future. On the Netflix side, their public statements suggest they do not have immediate plans to alter their overall strategy. It’s unfortunate because there seems to be a major opportunity that they are not currently seizing, given that data shows theatrical releases can generate more promotional impact, increase consumer interest in films, create larger brands and cultural moments, and enhance the lasting value of those assets. This is crucial for both filmmakers and audiences, but it appears they are not opting for that approach right now. We remain hopeful that they may change their strategy in the future. Happy Gilmore has performed well, but it's essential to note that it is based on a successful theatrical film, and many films that have thrived in that area have similar origins rather than being solely original ideas. As of now, we do not have any knowledge of their plans to make a shift.

So we were certainly very pleased to deliver our second highest quarterly adjusted EBITDA ever. And over 24% margins across both the U.S. and international in the quarter. And we do remain optimistic about our long-term margin potential, driven by our expectations around further box office recovery ahead as well as what we anticipate from the ongoing execution of our strategic initiatives. Primary drivers, I mean, attendance and box office, as we talked about earlier, those are going to be biggest drivers given the operating leverage we gain as revenue scales, and that was demonstrated really by the significant margin expansion we even saw just between Q1 and Q2 of this year with the strong slate. Our margins are also influenced by market share, food and beverage per cap and average ticket prices. The extent of benefits captured by strategic initiatives and our ability to mitigate potential cost pressures also play a significant role in our margin performance. Specific to full year 2025. So our margin should benefit from the anticipated box office recovery as well as the higher concession per cap and ticket prices that we mentioned. That said, we are mindful that we're comparing against the elevated market share levels we delivered last year and our market share may temper in the second half given the cadence of releases as well as the overall scale and relative mix of films. And that's particularly the case in the fourth quarter. Of course, ongoing inflationary and other expense dynamics as well as the impact of FX devaluation will also be a factor. To your point on just the expense side and what you should keep in mind for the full year margin? I mean film rental rates, we do continue to expect a higher concentration of blockbuster content, which would impact our film rental rates, and then wage rates remain a factor. However, we've done a nice job offsetting those with some productivity initiatives that we continue to pursue. And then the other thing I would keep in mind is utilities and other. We do expect that to remain elevated as we address some deferred maintenance needs across the circuit. So net-net, though, we continue to prioritize growing revenue, mitigating costs to maximize our adjusted EBITDA and margin potential as the box office continues to rebound.

I would like to follow up on your comments about film rent margin and the majority of box office revenue coming from outside the PLF. I'm curious if you could share some strategies for managing film concentration and how you might market the longer tail of leases to help alleviate some of the issues. Additionally, I would like to understand the composition of attendance for those longer tail releases.

Sure. Thanks for the question, Pat. I believe that studios primarily focus their marketing efforts before a film's release. However, there is some follow-up marketing that occurs afterwards, which varies based on the film's scale, performance, and the studio's marketing strategy. We also provide additional support both before and after films are released, targeting audiences we believe are most likely to see those films, and attempting to amplify our efforts in those areas. While we strive to impact film rentals strategically, our main goal is to capture maximum box office performance and attendance, whether during the initial release or later. Some of this relies on word of mouth and the conversations around the movie, which can influence people's perceptions and overall interest. I'm not convinced there's a significant opportunity to pursue it that way. Instead, we focus on finding methods to improve overall outcomes and maximize results across all films.

Okay. And then I was curious if you could talk a little bit about the opportunity for new builds. And if you view those mostly as replacing existing theaters where they maybe gotten a little older or if those would be more market expansion opportunities and where you think you would target screen growth going forward?

Sure. It could be a combination of both. Generally, as our real estate team evaluates market opportunities, we continue to identify underserved areas where we can establish new builds to increase attendance that is currently not being met. In some cases, it might make more sense to replace an older theater instead of undergoing a major renovation, so we are focusing more on new opportunities rather than simply replacing older theaters. However, it could involve both aspects, depending on the specific market opportunities and potential returns.

A couple of questions. If you look at the Q3 and Q4, the back half of the year, obviously, Q2, Latin America, there's a number of films that didn't resonate down there versus here also with a tough comparison to inside out last year. So as you look at the back half of this year, any films you can see or just how do you think about the back half in terms of the slate and any major divergences you can see down in Latin America that could impact performance with the slate. And then with regards to your pricing initiatives, both here and in Latin America, how do you think about your pricing power around both tickets and concessions heading into the end of summer and into the holiday box office period with where we are with the consumer right now.

Sure, thanks, Eric. In the second half of the year, the lineup of films for Latin America is a bit mixed. We anticipate a variety of films that should resonate well and possibly perform at least as well as, if not better than, in the U.S. Conversely, some films are expected to perform better in the U.S. For instance, Superman, which has already been released, did quite well in the region but underperformed slightly in the U.S., aligning with trends observed in other international markets. In the third quarter, we expect titles like The Conjuring to perform strongly, while films like Freaky Friday, Naked Gun, and Bad Dads 2 might do better in the U.S. compared to Latin America. Moving into the fourth quarter, we see that family and horror films tend to perform better in Latin America than sci-fi and fantasy films. We believe Zootopia 2 and Five Nights at Freddy's 2 will resonate very well in that region, while films like Wicked for Good, The Running Man, Mortal Kombat 2, and Tron Ares are expected to do significantly better in the U.S. with lesser performance in Latin America. It really depends on how these films compare overall regarding the box office outcome. Additionally, regarding timing, a family film like SpongeBob has been shifted to 2026 for Brazil, Argentina, and Chile. While it will be released in North America in the fourth quarter, it will now be part of the first quarter for those countries.

So we do continue to see opportunities on the strategic pricing front for both tickets as well as food and beverage based on our ongoing analysis of data and analytics by our team. And I think Sean mentioned a little bit of this earlier, but we are really driving our pricing decisions based on elasticity of demand, and our ultimate goal is to maximize attendance box office and overall revenue. We continue to leverage data to guide those decisions. And we approach it thoughtfully given the economic background. But we want our guests to feel they've received a great overall value for the experience. And we believe that strategy has benefited us when we look at our attendance recovery relative to the industry and our overall concession per cap growth since the pandemic.