F9 is biggest victory yet for return of movies ($NCMI)

Say it with me again – movies are back. Back as in as big as 2019. Bigger depending on what you want to comp Fast and the Furious 9 against.

The numbers are truly staggering (article via my favorite box office news site, Deadline). F9 did $70mm in US + Canada box office revenue this weekend, the highest since March 2020. The single day Friday haul of $30mm represents a total larger than the majority of previous Pandemic era weekends and entire movies during the pandemic. F9 beat several other films in the franchise and the spinoff Hobbs & Shaw from August 2019. All of this happened with 40% of theaters in Canada still closed on account of C19.  Overall, F9 is the clearest evidence yet movie theaters can generate as much revenue as prior to the pandemic, if not more with the secular trends of rising ticket prices and bigger blockbusters still in place.

On this last point, let’s remember what Cinemark told us on what’s actually happening with box office receipts over the last decade:

Cinemark Investor Presentation

That’s right – box office receipts are on the rise as theaters leverage pricing power and enhanced experiences (food, beer, nicer seats, bigger and clearer screens) to offset decreases in attendance. The return to theaters for Quiet Place II and F9 demonstrates these trends remain in place.

The Deadline article I linked also brings up a great point on a trend that started during the pandemic and may be short lived – movies dual-released in theaters and on streaming services (ex. HBO Max, Disney+). Movies that are performing well (QP2, F9) use the traditional exclusive theatrical window. Movies that aren’t (Cruella, In the Heights) are not doing as well. From the article:

It’s an amount [F9 numbers] achieved on a pure theatrical window, which is expected to be around 45 days, and that’s important to note: So far the movies that have opened to big numbers this summer ($50M+) are those respecting the theatrical window, F9 and A Quiet Place Part II (which speaking of windows, had a great hold in weekend of 5, -32% with $6.2M). In fact, the top four movies this weekend were those strictly available in theaters. Warner Bros.’ In the Heights, which is also available on HBO Max right now, lost 1,106 theaters in its third weekend due to its misfiring at the B.O., and F9 entering the weekend as the widest release to date during the pandemic in 4,179 theaters.


Will we see Disney and Warner start to rethink dual releases? With the pandemic winding down, the amount of people who will not return to theaters due to safety concerns is shrinking, so the intended audience for the streamed side of dual releases is getting smaller.

The F9 and QPII numbers are strong arguments that the appetite for blockbusters is as strong or stronger than 2019 and than the theatrical window works. My thinking is that studios shortened the window and did dual releases out of an abundance of caution and lack of clarity around the duration of the pandemic last year. With theatrical release demand now pretty certain, I think studios are likely to reconsider same day streaming and theatrical releases.

All of this in my opinion spells re-rating for Stock Talking favorite National CineMedia (NCMI). On the fundamentals side, advertisers are going to commit more dollars knowing that new movies are once again generating 2019 levels of success. Studios for the same reason are likelier to commit movies on time and begin building great slates for 2022, 2023 and beyond (and by the way, there is no shortage of blockbuster movies for the next 1.5 years). On the stock price side, this week should see another round of high profile articles and interviews with movie execs on the success of F9. Asset managers read WSJ / CNBC / other national outlets and are going to see this success. I would be surprised if we didn’t see NCMI, IMAX, CNK and AMC climb up on the media coverage, and will look for any dips as an opportunity to add to my NCMI and IMAX positions.

On NCMI specifically, long-time subscribers will remember this trade’s success only depended on theatrical releases regaining about 75%+ of their previous attendance levels, which I expected could bring them back to half of historical annual free cash flow. Never did I imagine the return to 2019 levels would come less than a year after I first wrote about the company. At that time, I looked at the company’s FCF from previous years and conservatively haircut to $100mm. From the company’s March 2020 presentation (and yes, those 2020 numbers are now laughable):

NCMI March 2020 investor presentation

Let’s go back even further from the Dec. 2019 presi:

NCMI December 2019 investor presentation

This company used to produce $200mm of FCF like clockwork. At its $405mm market cap today, the stock feels absurdly cheap with the ability to produce its market cap in cash in 2-3 years in a post-COVID world. Even if NCMI could only do $100mm, I’d argue the stock should trade at least 5x-10x FCF yield, which is ~20% upside on the low end and 100%+ upside on the high-end. If this company gets back to historical free cash flow (which I now feel confident it could), watch out.