Q4 2023 AMC Entertainment Holdings Inc Earnings Call
Greetings and welcome to the AMC Entertainment Holdings fourth quarter and full year 2023 earnings webcast.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host John Merriwether, Vice President capital markets and Investor Relations. Thank you you may begin.
Yeah.
John C. Merriwether: Thank you Diego good afternoon, I'd like to welcome everyone to Amc's fourth quarter and full year 2020 earnings webcast.
John C. Merriwether: With me. This afternoon is Adam Aron, our chairman and CEO and Sean Goodman, our Chief Financial Officer.
John C. Merriwether: Before I turn the webcast over to Adam Let me remind everyone that some of the comments made by management. During this webcast may contain forward looking statements that are based on management's current expectations.
John C. Merriwether: Numerous risks uncertainties and other factors may cause actual results to differ materially from those.
Adam M. Aron: Might be expressed today.
Adam M. Aron: Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K 10-Q.
Speaker Change: Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict.
Speaker Change: In light of the uncertainties inherent in any forward looking statements listeners are cautioned against relying on these statements.
Speaker Change: Okay.
The airline industry.
Sounds like 75% of our tickets that 15.
And.
There has to be ways.
Two to create all the content.
That will not replacement Hollywood is doing well.
But we will augment with Hollywood is doing by filling some of those empty seats that are just sitting there waiting to be filled.
Uh huh.
It also does sort of.
Uh huh.
Cause us to think.
What other ways can we generate movie content in our theaters inexpensively.
But I don't think you'll ever find a situation.
Where AMC is writing a check for $50 million or $100 million of $200 million to make movies.
But there are some interesting ways to collaborate with movie makers.
To take movies that might not otherwise get made.
And get them into our theaters.
And into some other theaters.
Our friends in the industry both in the U S abroad. So this whole notion.
How do we increase content.
Something that's <unk>.
<unk> in our wheelhouse.
And it's a direct result of our success.
And what we've tried to do in the fourth quarter and succeeded with.
With Taylor and would be answer.
Thanks, I appreciate that.
Thank you.
I'll now hand, the floor back over to.
Okay.
Back over to Adam Aron to take some retail shareholder questions. Thank you.
We'll take it Diego, we have had retail shareholders sent questions in.
<unk>.
What do they want to hear about.
Yes sure Adam.
So the first question is generally about the industry recovery, which we have certainly been talking about a lot today, but the question relates to with players like Amazon and Apple entering this business is it likely that we can see the release schedule.
Increasing pass pre pandemic levels in the future.
That's.
That's that's that's a good question and but.
But before we talk about whether we'd get beyond pre pandemic levels, let's talk first about getting the pre pandemic levels because as we sit here today.
The movies were leaked by the major studios are down about 25%.
The quantity of pre pandemic releases.
The good news here.
Yes.
As you know well we talk to every major studio every week of our lives here at this company.
And we know that studio after studio after studio.
Okay.
Seize the opportunity.
For them that can come from achieving high theatrical grosses.
And warn CVR. After another is doing all of its power.
To increase their release schedules.
Two.
To get the release schedules first back up to.
Pre strike levels, and then hopefully even higher levels of net moving back closer to prevent delek levels.
Yes, it's true.
<unk> and Amazon are making movies they are releasing those movies theatrically.
We're working very closely with each company.
Hopefully so we welcome them to the party.
And.
We have enough screens in our company and in our industry to accommodate whatever supply of content.
All of these studios can produce and then some.
I would point out.
Great.
One of the comments.
In my prepared remarks, it's so important.
As we've done so much in the past four years to make this company more efficient.
Our profit per patron.
Is up 37%.
John C. Merriwether: From where it was when we entered the pandemic.
John C. Merriwether: Which means we don't actually need the box office to come all the way back to pre pandemic levels, we don't need attendants to come all the way back to prepaid debit levels, because we're making so much more profit from each guessing is in our theater.
John C. Merriwether: As for whether in fact, and when the box office does cross that that pre pandemic hurdle in process of $11 billion.
John C. Merriwether: We'll all find out together.
John C. Merriwether: Great.
Adam M. Aron: Related to that there's some questions about diversification and watch our revenue diversification opportunities exist to grow and enhance our business.
Adam M. Aron: So I don't think anyone's worked harder at diversifying.
Adam M. Aron: Their revenue streams in our industry than AMC has been in the past few years.
Speaker Change: And some of them have been quite high profile things like.
Speaker Change: Giving level Renbarger some.
Speaker Change: Competition on the shelves at Walmart with our popcorn lines that we talked to the home, which is selling extremely well at Walmart and we just literally in these very months are in the process of.
Speaker Change: Having extended our retail presence to Kroger.
Speaker Change: And two publix.
Speaker Change: We also went up on the Amazon marketplace.
Speaker Change: So that's an example of diversifying our revenues.
Speaker Change: Merchant.
Speaker Change: We launched our candy line.
Speaker Change: I guess it was in December I think.
Speaker Change: At our theaters.
Speaker Change: Treated publicly about maybe.
Speaker Change: Coming up with a housewife or house beer.
Speaker Change: Beyond that though I think the single biggest most successful.
Speaker Change: Diversification play we've had so far.
Speaker Change: It's what we've done with movie themed merchandise.
Speaker Change: As I said in the prepared remarks, we sold $54 million of it.
Speaker Change: In 2023.
Speaker Change: Three years earlier, we sold nothing $54 million from nothing.
Speaker Change: So so.
Speaker Change: We continue to be intrigued by diversification.
Speaker Change: And there are other diversification opportunities.
Speaker Change: It's really important to say this.
Speaker Change: We worked very hard to bring all of that cash into our banking channels as you know.
Speaker Change: And.
Speaker Change: 2024 could be a challenging year, especially early in the year.
Speaker Change: We need the husband all of that cash and treat that cash is being very precious.
Speaker Change: Because it's a thing which assures our survival.
Speaker Change: Going forward.
Speaker Change: Therefore, if we're going to look for diversification plays.
Speaker Change: We have to do so in a capital light way.
Speaker Change: We have to we have to be able to diversify spending very little money to do so because the smartest thing we can do with our cash right now.
Speaker Change: Let's keep it very any day.
Speaker Change: Questions here on loyalty programs is quite a few questions on the loyalty programs.
Speaker Change: And people are asking if there is an update.
Speaker Change: The loyalty programs coming any.
Speaker Change: Ideas, such as bringing a framed along with a list members exchange for <unk>, perhaps or a family plan for analyst or other.
Speaker Change: New creations for our royalty programs.
Speaker Change: There are a lot of ideas about our loyalty programs, our marketing Department right now is.
Speaker Change: In the process of testing something we've given a lot of thought to.
Speaker Change: Uh huh.
Speaker Change:
Speaker Change: AOS.
Speaker Change: He has a great appeal to us of course, it's been a very successful program.
Speaker Change: For our company.
Speaker Change: The most important market program. This company has ever had as our stubs frequent moviegoers program and there are a lot of interesting things that we might be able to do.
Speaker Change: To make stubs appeal to more people.
Speaker Change: And to pause people, who aren't stubs members too.
Speaker Change: 10 more movies.
Speaker Change: They are interesting things afoot about how might one qualify for premier as an example, there are other possibilities that we have three tiers in the stubs program right now the three insider tier the paid premier tier in the a list here Theres talk of creating a fourth year.
Speaker Change: Of.
Speaker Change: Of subs somewhat in between the premier level on the insider level.
Speaker Change: With new benefits.
Speaker Change: We're going to test research and test right now for possible rollout later this year.
Speaker Change: And then disappointing near and Dear to my heart.
Speaker Change: Which is a loyalty program with other sorts called AMC investor connect.
Speaker Change: We have over 1 million members at AMC Investor connect these are our shareholders.
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: Registered with us and told us that they are interested in our company.
Speaker Change: They are either current or former shareholders.
Speaker Change: We've been in frequent communication with them, we've got lots of.
Speaker Change: Vance screenings for them.
Speaker Change: Given them some pre this is and that's a free popcorn and some free drinks and other things.
Speaker Change: One of the things that we will definitely be doing in 2024.
Speaker Change: Is reinvigorating AMC investor connect adding more benefits to it.
Speaker Change: Because we know how.
Speaker Change: Loyal and those AMC investor characters.
Speaker Change: <unk> are the AMC.
Speaker Change: And thank them for their loyalty and encourage them to visit our theaters over and over again.
Speaker Change: Some of the things, we're working on but watch this space.
Speaker Change: I might add that.
Speaker Change: I think one of Amc's greatest strengths.
Speaker Change: Over the past decade.
Speaker Change: Has been I think we've been the preeminent mark consumer marketer in our industry.
Speaker Change:
Speaker Change: Just think about the Nicole Kidman campaign for example that took out like a cult like nature.
Speaker Change: It really hit into the American Zeitgeist.
Speaker Change: One of the things that I think it's.
Speaker Change: Thought about that.
Speaker Change: Is if you're done with AMC movie, there's something called Depreciable. It's the thing that comes up just before the trailers Ron before the movie's run.
Speaker Change: And for the first time in four years, starting in a couple of days, we're putting up a new pre sell on the screen.
Speaker Change: It's kind of beautiful and spectacular people liked it.
Speaker Change: But one of the intriguing little twists.
Speaker Change: We're moving into phase III, the Nicole Kidman campaign for the last three years.
Speaker Change: We've got a 62nd Nicole commercial the.
Speaker Change: At the same one that's appeared over and over.
Speaker Change: Before every movie start.
Speaker Change: I am starting March one.
Speaker Change: We're going to show three different.
Speaker Change: 32nd Nicole Kidman commercials before the movie starts.
Speaker Change: On a rotating basis, you won't get three in a row. When you go to watch one movie.
Speaker Change: But as you watch movies going forward.
Speaker Change: You'll see three different nicole spots that kind of randomly will appear.
Speaker Change: No our theaters.
Speaker Change: Prior to the show were very good marketers, we use that for the benefit of driving revenues.
Speaker Change: As you saw our revenue growth.
Speaker Change: In calendar 'twenty, three and in the fourth quarter of 2003.
Speaker Change: We outpace just about everybody in our industry.
Speaker Change: Something new and exciting for people to see when they come to our movie theaters I think we've got time just for one more question.
Speaker Change: Which is related to capital expenditure.
Speaker Change: And the question is what is sort of the ongoing capex level.
Speaker Change: We would expect over the next three to five years.
Speaker Change: The question I can note that pre pandemic, we were spending around $500 million.
Speaker Change: Per year on capital expenditure what ships.
Speaker Change: <unk> expect going forward. So for the past couple of years, we've been at 100, a landscape of $150 million to $200 million of annual capital expenditures.
Speaker Change: About 150 of that is too.
Speaker Change: What we call maintenance Capex just to keep our theaters in good shape.
Speaker Change: Uh huh.
Speaker Change: You can't run a movie theater with a leaky roof for an air conditioning unit doesn't work or projector that that doesn't show movies.
Speaker Change: And then some of that Capex has been used for.
Speaker Change: Enhancing our it systems and growth oriented projects, bringing some spot acquisitions. Instead, we added 59 theatres into our system over the past several years some of our Capex goes to bring those new theatres into our system.
Speaker Change: As you look ahead.
Speaker Change: Those years of $500 million Capex those were in the days when we were.
Speaker Change: Brexit renovating putting in <unk>.
Speaker Change: Reclining seats in.
Speaker Change: 50, 60, 70 theatres a year, that's that spurt is way behind us.
Speaker Change: So I would say that with one caveat.
Speaker Change: People should be expecting capex in the $200 million range going forward and that caveat is this.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Because of the tough years that we've had with respect to earnings over the last few years.
Speaker Change: We've put a tight lid on capital expenditures.
Speaker Change: It was crucial for us.
Speaker Change: To keep cash in the bank.
Speaker Change: And not necessarily spend at all.
Speaker Change:
Speaker Change: There are some obvious growth projects.
Speaker Change: If we were to raise an additional $50 million to $100 million for example, and we wanted to reinvest that back into our fleet of theaters. If that was something that would produce the highest and best return on that investment.
Speaker Change: It would have to.
Speaker Change: Our producer, we're kind of investment or higher for example than buying back our debt has a sustainable discounts, which we've done a lot of in the past year or two.
Speaker Change: And you'll see some obvious things that are low hanging fruit.
Speaker Change: Where we know the payback would be quick and the most obvious of them is this.
Speaker Change: AMC has the largest number of.
Speaker Change: Premium large format screens.
Speaker Change: Any movie theater chain in the World and it's not close.
Speaker Change: <unk>.
Speaker Change: We are 50% of all IMAX screens in the United States. For example, we are 100% of all the Dolby cinema screens in the United States for example.
Speaker Change: And what we've seen is that our premium large format screens.
Speaker Change: Command a price in the market, that's about 30% higher than the normal.
Speaker Change: Called <unk> auditorium price.
Speaker Change: They sell out first.
Speaker Change:
Speaker Change: The typical seat in a premium large format screen and sold three to four times more than.
Speaker Change: And the typical seat and in an auditorium with not the premium large format screen.
Speaker Change: And I could easily see us we have about 600 or so premium large format screens around the world.
Speaker Change: I could easily see us, adding another 150.
Speaker Change: And we would get a great return from that but it's not a cheap endeavor.
Speaker Change: And we'd have to be very careful about how much money, we invest in doing it at the right time.
Speaker Change: So I don't want to say that Theres, a lid on capex spending of $200 million because there are some low hanging fruit no brainer ideas on how we can further drive profitability. If we do have additional capex dollar assistant.
Speaker Change: Alright.
Speaker Change: So.
Speaker Change: Looking at the clock, we're passed our hour. So we're going to bring this webcast to an end.
Speaker Change: I'd like to leave you with.
Speaker Change: Final simple thought.
Speaker Change: Okay.
Speaker Change: <unk> three was a superb year for this company.
Speaker Change: On the March to getting back.
Speaker Change: So pre COVID-19 levels of profitability.
Speaker Change: 'twenty 'twenty four is gonna be a bit harder.
Speaker Change: But 'twenty 'twenty four is going to get a lot better starting tomorrow.
Speaker Change: Doom.
Speaker Change: Opens in all of its glory.
Speaker Change: And we're expecting it to be a big and successful movie.
Speaker Change: We hope you all buy tickets go to the theater.
Speaker Change: <unk> be entertained.
Speaker Change: And as we look further beyond <unk>.
Speaker Change: Just this weekend.
Speaker Change: And we look ahead to <unk>.
Speaker Change: The next year, which as I said right around the corner.
Speaker Change: We really think 25 is going to be an incredible year for our company.
Speaker Change: And should be the.
Speaker Change: Just as 2023 was the best year since Kevin.
Speaker Change: We're thinking 2025 is.
Speaker Change: I'm going to leave 2023 and the dust.
Speaker Change: In terms of how potentially good year 2025 is going to be so we're optimistic we're confident.
Speaker Change: And we will see ultimately is thank you for joining us today.
Speaker Change: Thank you. This concludes today's conference all parties may disconnect have a good day.