Earnings Call Transcript - CNK Q3 2025

Operator, Operator

Greetings. Welcome to the Cinemark Holdings Third Quarter 2025 Earnings Conference Call. Please note this conference is being recorded. I will now turn the conference over to Chanda Brashears, Senior Vice President of Investor Relations. Thank you. You may begin.

Chanda Brashears, SVP, Investor Relations

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.

Sean Gamble, President and CEO

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 fare 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 standout 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 consistently 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, crave-worthy 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 Thomas, CFO

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 expenses 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 expenses were 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, Operator

Our first questions come from Ben Swinburne with Morgan Stanley.

Benjamin Swinburne, Analyst

My question is really just continuing the conversation on capital allocation. Obviously, great to see the dividend and the buyback. I guess, Sean, can you talk a little bit about 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'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 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?

Sean Gamble, President and CEO

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 has 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.

Melissa Thomas, CFO

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 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.

Operator, Operator

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

David Karnovsky, Analyst

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 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.

Sean Gamble, President and CEO

Sure. When considering the overall box office for our industry, it's important to analyze it over a longer period rather than focusing on short-term results due to the nature of movie releases and how well they resonate with audiences. Looking at the third quarter, for instance, we had some major overperformers last year such as Twisters and Beetlejuice. This year, the release slate in the third quarter and the months leading up to it has been less robust. However, as we approach November and December, we have an impressive lineup of films set to release, which should greatly surpass last year's performance. The situation for 2025 remains uncertain, with still a lot of time to go. One significant difference this year is the absence of a major animated release in the third quarter, which usually impacts perceptions. If we had that release, the outlook for this year might look more favorable. Nonetheless, there are still many exciting films to come, and the outcome for 2025 is still unfolding.

David Karnovsky, Analyst

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?

Sean Gamble, President and CEO

It's a great question. I would say that there continue to be quite a number of conversations on that matter and evaluations 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.

Operator, Operator

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

Eric Handler, Analyst

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.

Sean Gamble, President and CEO

Sure, Eric. I wouldn’t say the pipeline is as deep, but it has been pretty consistent. We were expecting more opportunities coming out of the pandemic than have actually materialized. There are a few developments happening now, like the deals you mentioned. However, the timing of those might be more coincidental rather than indicative of an increase in opportunities or activity. While we believe there will be more opportunities with higher quality circuits in the future, the overall volume has been quite limited, and there are currently no signs that this will change soon. We still think that over time, unique circumstances in most cases will lead to more opportunities becoming available.

Eric Handler, Analyst

Great. And then secondly, considering the success of alternative content in the third quarter, is there a way to further pursue this? We're finding that Chris Oliver does a lot in the music space, and there seems to be a significant amount of anime movies and opportunities available. I'm interested in hearing your thoughts on this.

Sean Gamble, President and CEO

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.

Operator, Operator

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

Andrew Crum, Analyst

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.

Melissa Thomas, CFO

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 one-time $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.

Sean Gamble, President and CEO

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 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, 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.

Operator, Operator

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

Robert Fishman, Analyst

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.

Sean Gamble, President and CEO

Thank you for the questions, Robert. First, regarding our market share, we are very pleased with our results over the past several years. This year, our performance has exceeded our expectations, partly due to the initiatives we've implemented to achieve structural benefits and the favorable content mix along with our film release schedule, which has prevented us from reaching maximum capacity limits. Our goal is to continue extending this success. To achieve this, we are refining how we program our screens to maximize their value, ensuring the right films are shown on the appropriate screens based on demand. We aim to avoid underutilized capacity and limitations for individual titles. Our marketing efforts are focused on building audiences and attracting people to our theaters, supported by loyalty programs and pricing strategies. We have various initiatives in these areas to further enhance our performance. I am primarily referring to our existing theaters and how we can grow our market share without considering new theaters we may add through construction or acquisitions. This involves pursuing a variety of actions aimed at extending our success. We have consistently achieved over 100 basis points of structural gains since the pandemic, and we are waiting for a more normalized box office environment to better analyze the impact of structural factors versus other influences boosting performance. Regarding premium amenities, we see them as a factor influencing market share. Our strategy remains unchanged as we continue to enhance offerings based on consumer demand, which includes improvements in seating, food and beverage options, and our screens. Earlier this year, we announced plans to increase the number of ScreenX auditoriums by 20 in the coming years and to add 80 D-BOX seats to an additional 80 auditoriums on top of the nearly 500 already in operation. We are also increasing the number of XD screens. Recently, we announced plans to upgrade the 12 remaining IMAX auditoriums in the U.S. to laser technology and to add four more screens across the country. We are exploring opportunities in Latin America and will activate three 70-millimeter projectors. Our approach involves detailed analysis for each theater, but we are pursuing diverse opportunities based on consumer demand while maintaining our strategy.

Operator, Operator

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

Eric Wold, Analyst

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 premium offerings and kind of make that more of the consumer choice instead of kind of raising pricing across the board?

Melissa Thomas, CFO

I can take that one, Eric. From a pricing perspective, we are continuously looking for ways to optimize both ticket prices and concessions based on strong data and analytics. Our pricing decisions are informed by our close monitoring of demand elasticity, which helps us maximize attendance, box office performance, and overall revenue. We are aware of the current macroeconomic climate and are using a disciplined, data-driven approach to evaluate our pricing strategies. Ultimately, we want our guests to see strong value in their overall experience, which we believe has positively impacted our attendance recovery and has surpassed industry trends, in addition to the growth in our concession per capita since the pandemic. While we rely heavily on data, we still see opportunities to enhance benefits from our pricing strategies for both tickets and concessions.

Operator, Operator

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

Chad Beynon, Analyst

I have just one question. I wanted to ask about the approach towards the dividend. It's great to see the increase announced today. Melissa, how are you thinking about your current leverage at 2.4 and the initiatives related to growth and buybacks? How do you plan to consistently raise this dividend or evaluate it against a payout ratio?

Melissa Thomas, CFO

Yes. Overall, when considering our returns to capital and how we return value to shareholders, we follow a comprehensive framework. Our primary focus is on maintaining financial strength while also investing in growth opportunities, followed by returning any excess capital to shareholders. We will assess payout decisions by taking into account a variety of factors including cash, liquidity, leverage, and strategic priorities at the time, among others. This approach allows us to stay agile and ready to take advantage of opportunities that create value as they come up. When considering the dividend and share repurchase program, we are looking at both as interconnected elements of our strategy for returning more capital to shareholders over time. Our goal for the dividend is to ensure it is sustainable and can grow while maintaining flexibility, and the share buyback program enables us to act when we have excess cash to return. We will continue to approach this in a disciplined manner, as we have historically.

Operator, Operator

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

Patrick Sholl, Analyst

Just on the concessions, I was just wondering if you could discuss if there's anything in 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.

Sean Gamble, President and CEO

Sure, thanks for your question, Pat. In terms of movie attendance and our food and beverage sales, we've seen strong consumer behavior despite recent inflationary pressures and recession concerns. We haven't noticed any slowdown; people continue to go to theaters for compelling content, enjoying the full experience while they're there. Regarding merchandise, it has shown significant growth, with consumers actively engaging and taking part in viral moments. Talent and studios are increasingly using these moments to promote their films. We've experienced year-over-year growth in merchandise and see further opportunities ahead. Similarly, all our concession categories have not faced any negative impacts from broader economic trends. We're optimistic about the opportunities that lie ahead.

Operator, Operator

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

Omar Mejias Santiago, Analyst

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.

Sean Gamble, President and CEO

I appreciate the question, Omar. Overall, the conversations have been very positive and give us hope that volume will recover to pre-pandemic levels, if not exceed them. As you mentioned, our discussions with Paramount have been encouraging regarding their plans to increase the amount of content they release. There has also been communication from Amazon about their goal to produce around 15 films a year, and while it's less clear where Apple stands, they have expressed satisfaction with the results of F1 and have shown a positive outlook towards theatrical releases, indicating intentions to release more films. A24 is increasing their output, and Universal has maintained their pre-pandemic release levels. We're receiving positive signals from Disney and from many others as well. Additionally, all types of non-traditional programming are continuing to expand. All of this leads us to remain optimistic about the overall volume of films returning. For 2025, wide releases are projected to reach about 120 films by year-end, which is close to the pre-pandemic average of around 130. We anticipate further growth next year, with the potential to reach that 130 mark depending on how the slate develops. All these indicators are promising.

Operator, Operator

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.

Sean Gamble, President and CEO

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.

Operator, Operator

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.