Q2 2024 AMC Entertainment Holdings Inc Earnings Call
Greetings and welcome to the AMC Entertain Holdings second quarter 2024 earnings webcast.
Operator: At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Merriwether, Vice President, Capital Market. Thank you, John. You may begin.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Merriwether, Vice President Capital Markets.
John Merriwether: Thank you, Alicia. Good afternoon.
Speaker Change: Thank you, John . You may begin.
John Merriwether: Thank you, Alicia. Good afternoon. I'd like to welcome everyone to AMC's second quarter 2024 earnings webcast. With me this afternoon is Adam Aron, our Chairman and CEO , and Sean Goodman, our Chief Financial Officer.
John Merriwether: I'd like to welcome everyone to AMC's second quarter 2024 earnings webcast. With me this afternoon is Adam Aron, our Chairman and CEO, and Sean Goodman, our Chief Financial Officer. 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. However, numerous risks, uncertainties, and other factors may cause actual results to differ materially from those that might be expressed today.
John Merriwether: Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-Q and 10-K. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events.
Speaker Change: 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.
Speaker Change: that are based on management's current expectations.
Speaker Change: Numerous risks and certainties and other factors may cause actual results to differ materially from those that might be expressed today.
Speaker Change: Many of these risks and uncertainties are discussed in our most recent public filings including our most recently filed 10-Q and 10-K.
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: The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events.
John Merriwether: On this webcast, we may reference non-GAAP financial measures, such as adjusted EBITDA, constant currency, and non-GAAP cash burn, among others. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the investor relations section of our website earlier today. After our prepared remarks, there will be a question and answer session. This afternoon's webcast is being recorded, and a replay will be available in the Investor Relations section of our website at amctheaters.com later today. With that, I'll turn the call over to Adam. Bye.
Speaker Change: On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, constant currency, and non-GAAP cash burn, among others.
Speaker Change: For a full reconciliation of our non-cap measures to GAAP results, please see our earnings release posted in the investor relations section of our website earlier today. After our prepared remarks, there will be a question and answer session.
Speaker Change: This afternoon's webcast is being recorded and a replay will be available in the Investor Relations section of our website at amctheaters.com later today.
Adam Aron: Thank you, John. Good afternoon, everybody, and thank you for joining us today.
Speaker Change: With that, I'll turn the call over to Adam. Thank you, John . Good afternoon, everybody, and thank you for joining us today.
Adam Aron: You might think that someone reporting an 84% drop and adjusted even this quarter compared to the same quarter last year might be in a foul mood. But, to the contrary, as I sit here today and look at what has transpired so far this year and especially over the past seven weeks. I am ecstatic. Pick any adjective you want, ecstatic, euphoric, almost giddy, at ANC's prospects for near-term and medium-term improvement and recovery.
Adam: You might think that someone reporting an 84% drop in adjusted EBITDA this quarter compared to the same quarter last year might be in a foul mood.
Adam: But to the contrary, as I sit here today and look at what has transpired so far this year and especially over the past seven weeks, I am ecstatic.
Adam: Pick any adjective you want, ecstatic, euphoric, almost giddy, and AMC's prospects for near-term and medium-term improvement and recovery.
Adam Aron: In fact, I'm now more confident than I've been in more than four years about how well AMC will perform over the next six to 30 months. That would seem to be inconsistent with the earnings release that we just put out for the second quarter. But here are the four key reasons for my optimism. First, monies raised during the second quarter. AMC ended the second quarter with $770 million in cash. I've said it repeatedly over the past few turbulent years.
Adam: In fact,
Adam: I'm now more confident...
Adam: that I've been in more than four years.
Adam: about how well AMC will perform over the next 6 to 30 months.
Adam: That would seem to be inconsistent.
Adam: with the earnings release that we just put out for the second quarter.
Adam: But here are the four key reasons.
Adam: for my optimism.
Adam: Burst.
Adam: including monies raised during the second quarter. AMC ended the second quarter with seven hundred seventy million dollars of cash.
Adam Aron: Cash is king, and having ample cash reserves is the single best strategy for survival. Sometimes, a few of our retail shareholders want to hang me by my toenails, but on my watch, we have brought so much cash into AMC's coffers. But I cannot say it enough times. It is so important.
Adam: I've said it repeatedly over the past few turbulent years.
Adam: Cash is king, and having ample cash reserves
Adam: is the single best strategy for survival.
Adam: Sometimes, a few of our retail shareholders want to hang me by my toenails, but on my watch we have brought so much cash into AMC's coffers.
Adam Aron: The single smartest thing that AMC has done since 2020 was to make sure that our bank account balances were always plentiful and abundant, despite all the rocky roads of the past several years. AMC has stayed strong. We've defied conventional wisdom. We've continued to innovate, and we've maintained our leading industry position. And we did that at the exact same time that many of our competitors, large and small, in the US or in Europe, found themselves in ruin.
Adam: But I cannot say it enough times.
Adam: It is so important, the single smartest thing that AMC has done since 2020 was to make sure that our bank account balances were always plentiful and abundant.
Adam: Despite all the rocky roads of the past several years, AMC has stayed strong.
Adam: We've defied the conventional wisdom, we've continued to innovate, and we've maintained our leading industry position, and we did that at the exact same time that many of our competitors, large and small, in the U.S. or in Europe .
Adam: found themselves in ruin.
Adam Aron: How did we pull that off? Well, in honor of the Paralympics, which, I might add, in partnership with NBC, we happen to be showing right now in our AMC theaters in the United States. I'll use the French word.
Adam: How did we pull that off?
Speaker Change: Well, in honor of the Paris Olympics, which I might add, in partnership with NBC, we have to be showing right now in our AMC theaters in the United States, I'll use a French word.
Adam Aron: We pulled it off by having Bo Ku of Cash. I've said it before and I'll say it again. Cash is king, cash is king, cash is king, and we ended the quarter with $770 million. The second reason...
Speaker Change: We pulled it off by having Bo Ku of Cash.
Speaker Change: I've said it before and I'll say it again, cash is king, cash is king, cash is king and we ended the quarter with $770 million.
Adam Aron: Starting in mid-June, this is just a month and a half ago. The box office. Finally, after four long, tough years, it has shown evidence of making a real and enduring comeback. Disney and Pixar's Inside Out 2, which debuted in mid-June, became the highest grossing animated film of all time. It was followed by an enormous success from Universal's Illumination Studios with its Despicable Me 4. Twister, yes, Twister is old and strong, and Disney then came right back with Marvel, Smash Hit, Deadpool, and Wolverine, which has set all sorts of attendance and revenue records for AMC.
Speaker Change: The second reason.
Speaker Change: Starting in mid-June, this is just a month and a half ago.
Speaker Change: The box office.
Speaker Change: Finally!
Speaker Change: After four long, tough years has shown evidence of its making a real and enduring comeback.
Speaker Change: Disney's and Pixar's Inside Out 2, which debuted in mid-June, became the highest grossing animated film of all time.
Speaker Change: It was followed by an enormous success from Universal's Illumination Studios with its despicable me 4.
Speaker Change: Twister's Old and Strong, and Disney then came right back with Marvel's smash hit Deadpool and Wolverine, which has set all sorts of attendance and revenue records for AMC.
Adam Aron: We knew 2024 was coming. We correctly predicted and previously publicly disclosed that moviegoing in general would be weak in the early months of 2024 because production delays caused by the prolonged writers' and actors' strikes of 2023 would decrease the number of movies that would be ready for theatrical release early this year. But by the end of May... the impact of those 2023 Hollywood strikes was finally, for the most part, firmly behind us, and it is as clear as a bell right now that the box office has started its big upward climb. I'll just give you one example.
Speaker Change: We knew 2024 was coming. We correctly predicted and previously publicly disclosed that moviegoing in general would be weak in the early months of 2024.
Speaker Change: because production delays caused by the prolonged writers and actor strikes of 2023 would decrease the number of movies that would be ready for theatrical release early this year.
Speaker Change: But by the end of May...
Speaker Change: The impact of those 2023 Hollywood strikes was finally, for the most part, firmly behind us.
Speaker Change: And it is as clear as a bell right now.
Speaker Change: that the box office has started its big upwards climb.
Adam Aron: The June Domestic Industry Box Office was so much larger than the prior month that June was only two percentage points less than the box office of April and May combined, and comparing June to the earliest part of 2024, that same June, the Mets and Industry Box Office was 10% more than the January and February 2024 box offices combined. The strikes of 22 and 3 had their impact.
Speaker Change: I'll just put one example.
Speaker Change: The June Domestic Industry Box Office was so much larger.
Speaker Change: than the prior months.
Speaker Change: that June was only two percentage points less.
Speaker Change: Then the box office of April and May combined.
Speaker Change: and comparing June to the earliest part of 2024.
Speaker Change: That same June , the Mets and Industry Box Office was 10% more...
Speaker Change: Then the January and February 2024 box office combined.
Adam Aron: But that, in fact, appears to be, for the most part, behind it. It's not surprising then that with a surging June box office, AMC saw a remarkable contrast in its own results, between the early quarter with a dearth of movie releases and the end of the quarter with a record-setting movie, Inside Out 2, delighting audiences in theaters. There was a soaring difference, for the industry's performance, and more importantly to us, in AMC's performance, when looking later in the second quarter versus looking earlier in the second quarter. The contrast is so vivid.
Speaker Change: The strikes of 2023 had their impact.
Speaker Change: But that, in fact, appears to be, for the most part, behind us.
Speaker Change: It's not surprising then that with a surging June box office, AMC saw a remarkable contrast in our own results.
Speaker Change: between the early quarter with a dearth of movie releases and the end of the quarter with a record-setting movie, Inside Out 2, delighting audiences in theaters.
Speaker Change: There was a soaring difference.
Speaker Change: for the industry's performance and more importantly to us in AMC's performance when looking later in the second quarter.
Speaker Change: versus looking earlier in the second quarter. The contrast was so vivid, the difference between the end of the quarter and the beginning of the quarter, that it was as if we were two totally different companies.
Adam Aron: The difference between the end of the quarter and the beginning of the quarter was as if we were two totally different companies, surrounded by two totally and completely different... Industry Dynamics, and the proof is in the pudding. AMC capitalized on the strong juvenile officer's recovery. And in so doing, AMC set an all-time monthly adjusted EBITDA record for the month of June, meaning... This was the best June results for AMC of any June, in its 104-Year History. There were 103 Junes before this one, and this was the best.
Speaker Change: surrounded by two totally and completely different industry dynamics.
Speaker Change: And the proof is in the pudding.
Speaker Change: AMC capitalized on the strong juvenile box office recovery.
Speaker Change: And in so doing, AMC set an all-time monthly adjusted EBITDA record for the month of June . Meaning, this was the best June result for AMC.
Speaker Change: of any June .
Speaker Change: in AMC's 104-year history.
Speaker Change: There were 103 Junes before this one, and this was the best.
Adam Aron: And we did so across the board. We did so domestically, and we did so internationally.
Speaker Change: And we did so across the board. We did so domestically, we did so internationally, and we did so on a consolidated basis.
Adam Aron: And we did so on a consolidated basis. But the good box office does not stop with Jim. We have carefully and intensely studied the movie slate coming for the remainder of 2024, as well as the slates that are coming out for 2025 and 2026. Our current expectations are that the box office turned an important corner in June of 2024 and would be ahead. We at AMC believe we will see sizable growth in industry-wide revenues and, therefore, most likely, in AMC revenues, in the second half of 2024.
Speaker Change: But the good box office does not stop with June .
Speaker Change: We have carefully and intensely studied the movie slate coming for the remainder of 2024 as well as the slates that are coming out for 2025 and 2026.
Speaker Change: Our current expectations are that the boss office turned an important corner in June of 2024 and would be ahead.
Speaker Change: We at AMC believe we will see sizable growth in industry-wide revenues and therefore most likely in AMC revenues in the second half of 2024.
Adam Aron: It's possible that the third quarter box office... may not overtake last year's record-breaking Barbenheimer phenomenon. But the fourth quarter slate really looks to easily outpace that of Q4 last year with spectacular titles this year like Warner Bros. Joker, Folie Aux Deux, Universal's Wicked, Disney's Mufasa, The Lion King, and Disney's Moana 2, Sony's Venom, and Based on the movies that we know are coming, including in 2025 and 2026. Another Star Wars movie? Another Avengers movie? and another Avatar movie, and so many more.
Speaker Change: It's possible that the third quarter box office may not overtake last year's record-breaking Barbenheimer phenomenon?
Speaker Change: But the fourth quarter slate...
Speaker Change: really looks to easily outpace that of Q4 last year with spectacular titles this year like Warner Brothers Joker Folie Aux Deux, Universal's Wicked,
Speaker Change: Disney's Mufasa the Lion King, and Disney's Moana 2, Sony's Venom, and Paramount's Gladiator 2 among so many other big films that are coming out in the remainder of 2024. Based on the movies that we know are coming,
Speaker Change: including
Speaker Change: In 2025 and 2026...
Speaker Change: Another Star Wars movie?
Speaker Change: Another Avengers movie?
Adam Aron: A growing box office is also what we believe will be the case again in 2025 and again in 2026. Clearly, a rising box office is good news for those who are rooting for AMC to succeed and bad news for those who root against it. As a significant portion of our expense structure consists of fixed costs, more than half of incremental revenues wind up flowing through as contributions. Clearly, then, a box office that looks to be rising over the next 30 months.
Speaker Change: and another Avatar movie, and so many more.
Speaker Change: A growing box office is also what we believe will be the case again in 2025.
Speaker Change: and again in 2026.
Speaker Change: Clearly, a rising box office is good news to those who are rooting for AMC to succeed, and bad news for those who root against us.
Speaker Change: As a significant portion of our expense structure consists of fixed costs,
Speaker Change: More than half of incremental revenues wind up flowing through as contribution. Clearly then, a box office that looks to be rising over the next 30 months.
Adam Aron: It goes extremely well for the cash generation and the financial results that AMC could be reporting over the two and a half years ahead. The third reason for our optimism, and why it's so, there's such a palatable sense of confidence here, and almost a relaxation, compared to the stresses and pressures that we've been facing since the spring of 2020. It's our company's laser focus on driving up revenue and driving down expense that's been in evidence over the last several years. We've gotten this way both through product innovation to capture more revenues and through our cost-cutting efforts to reduce expenses. I've given one example of many in driving revenues.
Speaker Change: It goes extremely well.
Speaker Change: for the cash generation and the financial results that AMC could be reporting.
Speaker Change: over the two and a half years ahead.
Speaker Change: The third reason for our optimism.
Speaker Change: And why it's, there's such a palpable sense.
Speaker Change: of confidence here.
Speaker Change: and almost a relaxation.
Speaker Change: compared to the stresses and pressures that we've been facing since the spring of 2020.
Speaker Change: It's our company's laser focus on driving up revenue and driving down expense that's been in evidence over the last several years.
Speaker Change: We've gotten this way both through product innovation to capture more revenues and by our cost-cutting efforts to reduce expense.
Adam Aron: Our retail shareholders floated an idea a few years ago that we sell merchandise in our theaters. Three years ago, we sold next to nothing in the way of merchandise in our theaters until this recommendation came from our retail investor base. This year, by comparison, we should sell around $50 million of merchandise, especially movie-themed collectibles, and we will do so with handsome profit margins. Here's another statistic that drives home the point of our laser focus on becoming more efficient.
Speaker Change: I've put one example of many in driving revenues. Our retail shareholders floated an idea a few years back that we sell merchandise in our theaters.
Speaker Change: Three years ago, we sold next to nothing.
Speaker Change: in the way of merchandise in our theaters.
Speaker Change: Until this recommendation came from our retail investor base. This year, by comparison, we should sell around $50 million of merchandise, especially movie-themed collectibles.
Speaker Change: And we will do so with Hanson Profit Margins.
Speaker Change: Here's another statistic that drives home the point of our laser focus on becoming more efficient.
Adam Aron: AMC's June 2020-24 adjusted EBITDA was higher than AMC's June 2023 adjusted EBITDA. But that occurred despite the fact that the box office in June of 24 was actually 3.6% lower than the box office in June of 2023, on an even more dramatic note. Our June 2024 Justin Ibbitsoff was higher than the June 2019 Adjusted E-Liftoff, pre-pandemic.
Speaker Change: AMC's June 2020-24 adjusted EBITDA was higher than AMC's June 2023 adjusted EBITDA, but that occurred despite the fact
Speaker Change: The box office in June of 24 was actually 3.6% lower than the box office in June of 2023.
Speaker Change: And even more dramatic...
Speaker Change: Our June 2024 Justin Ibbitsoff was higher.
Speaker Change: Then the June 2019 Adjusted E-RATAR, pre-pandemic.
Adam Aron: Despite the fact that the 2024 box office was approximately 12% lower in June of 24 than it was in June of 2019. And the summary of it all, that continues to support our proposition that we are more innovative than ever while being more lean than ever before, is it often our contribution to overhead per patron? It is our contribution per head can be as much as 50% more now than it was five years ago, a 50% improvement in our profit per head.
Speaker Change: Despite the fact that the 2024 box office was approximately 12% lower,
Speaker Change: in June of 24 than it was in June of 2019.
Speaker Change: And the summary of it all, that continues to support our proposition that we are more innovative than ever before while being more lean than ever before.
Speaker Change: Is it often our contribution to overhead per patron? Is it our contribution per head?
Speaker Change: can be as much as 50% more now.
Speaker Change: than it was five years ago.
Adam Aron: So what that means, because we're bringing in more per head... We don't actually need movie theater attendance to rise all the way back up to pre-COVID levels for us to generate pre-COVID levels, or maybe even more than pre-COVID levels, of adjusted events. And finally, the fourth reason our confidence levels are so high, just last week. We announced that AMC completed several transformative capital market transactions that took up to $2.45 billion of our debt, previously due in 2026, and extended immaturities to 2029 and 2030. This was an enormously complex effort, but one that will have profound positive impact on AMC. The years 2029 and 2030 are still a long way off.
Speaker Change: A 50% improvement in our profit per head.
Speaker Change: So what that means, because we're bringing in more per head,
Speaker Change: We don't actually need for movie theater attendance to rise all the way back up to pre-COVID levels for us to generate pre-COVID levels, or maybe even more than pre-COVID levels, of adjusted theater time.
Speaker Change: And finally, the fourth reason our confidence levels are so high.
Speaker Change: Just last week...
Speaker Change: We announced that AMC completed several transformative capital market transactions that took up to $2.45 billion of our debt.
Speaker Change: previously due in 2026 and extended their maturities to 2029 and 2030.
Speaker Change: This was an enormously complex effort, but one that will have profound positive impact on AMC.
Adam Aron: We have years and years of additional breathing room before them to further build, grow, and strengthen our company. For full disclosure and complete transparency, we do not move all of our debt that was due in 2025 or 2026 to 2029 and 2030. But that which remains that is still due in 2025 or 2026. In my view, it's de minimis compared to the previous... (inaudible) I cannot even begin to count the number of nervous Nellies, bloggers, and journalists who are agonizing in the press about our losing debt repayment obligations just 20 months from now prior to this debt refinancing.
Speaker Change: The years 2029 and 2030 are a long way away. We have years and years of additional breathing room before them to further build, grow, and strengthen our company.
Speaker Change: For full disclosure and complete transparency, we do not move all of our debt
Speaker Change: that was due in 2025 or 2026 to 2029 and 2030. But that which remains that is still due in 25 or 2026.
Speaker Change: In my view, it's de minimis compared to the previous amounts due, and we believe it's thoroughly and entirely manageable.
Speaker Change: I cannot even begin to count the number of nervous nose.
Speaker Change: bloggers and journalists.
Speaker Change: who are agonizing in the press.
Speaker Change: about our losing debt repayment obligations just 20 months from now prior to this debt refinancing.
Adam Aron: And they were just over and over again, wherever you look, predicting our demise in 25 or 26 as a result of the debt payment that, until last week, was owed 21 months from now. Perhaps that's what they believe; perhaps they were spurred on by the short-selling community, who had every financial incentive in the world to sow seeds of doubt about AMC's viability. There's no way of knowing for sure.
Speaker Change: And they were just over and over again, wherever you look, predicting our demise in 25 or 26 as a result of the debt payment that, until last week, was owed 21 months from now.
Speaker Change: Perhaps that's what they believe, perhaps they were spurred on by the short-selling community who had every financial incentive in the world to sow seeds of doubt about AMC's viability. There's no way of knowing for sure.
Adam Aron: But in any case, it does not matter now because so much of our debt has been pushed so far into the future. It's no longer an issue. With this debt refinancing and our other capital markets actions, this management team has demonstrated our confidence in buttressing our balance sheet at AMC. Needless to say, there are still fertile lines here at AMC, and we have numerous other thoughts and ideas about how we can further reduce some of our debt or further improve the terms surrounding our debt along the pathway between now and 2029 and 2030. This debt refinancing is an accomplishment of the highest order.
Speaker Change: But in any case, it does not matter now, because so much of our debt has been pushed so far out into the future, it's no longer an issue.
Speaker Change: with this debt refinancing and our other capital markets actions
Speaker Change: This managing team has demonstrated our competence in buttressing our balance sheet at AMC.
Speaker Change: Needless to say,
Speaker Change: There are still fertile lines here at AMC, and we have numerous other thoughts and ideas about how we can further reduce some of our debt.
Speaker Change: will further improve the terms surrounding our debt along the pathway between now and 2029 and 2030.
Speaker Change: This debt refinancing is an accomplishment of the highest order.
Adam Aron: One of the most important things that AMC will get done all year long in 2024. So it would be an error, an absolute error, on behalf of myself personally and on behalf of our company, if I failed to express my gratitude and the gratitude of AMC to our lenders, who work so constructively with us. [inaudible] Make no mistake. AMC's lenders just gave our company a strong vote of confidence as to their view of the likelihood of AMC's long-term success, and we're grateful to them for that. In summary, my comments this afternoon are simple and straightforward. The 2023 strikes impacted the number of movie titles early in 2024 and somewhat crushed our profitability in January and May. But look out, world.
Speaker Change: One of the most important things that AMC will get done all year long in 2024.
Speaker Change: So it would be an error, an absolute error, if on behalf of myself personally and on behalf of our company, if I failed to express my gratitude and the gratitude of AMC.
Speaker Change: to our lenders who work so constructively with us.
Speaker Change: on this endeavor.
Speaker Change: Make no mistake.
Speaker Change: AMC's lenders just gave our company a strong note of confidence as to their view of the likelihood of AMC's long-term success.
Speaker Change: and we're grateful to them for that.
Speaker Change: In summary, my comments...
Speaker Change: This afternoon are simple and straightforward.
Speaker Change: The 2023 strikes impacted the number of movie titles early in 2024 and somewhat crushed our profitability January and May.
Adam Aron: June and July were decidedly different, and we believe the rest of 2024 and on into 2025 and on into 2026 also should be decidedly different. The power of extending our financial runway for many years into the future, combined with what we believe is a multi-year slate of blockbuster movie releases immediately ahead of us, sets the stage for Continued Recovery at AMC. Now it does go without saying that we cannot just declare a win today and take a victory lap today.
Speaker Change: But look out world, June and July were decidedly different.
Speaker Change: And we believe the rest of 2024, and on into 2025, and on into 2026, also should be decidedly different.
Speaker Change: The power of our extending our financial runway for many years in the future combined with what we believe is a multi-year slate of blockbuster movie releases immediately ahead of us sets the stage for continued recovery at AMC.
Speaker Change: No, it does go without saying that we cannot just declare a win today and take a victory lap today.
Adam Aron: We still have to implement an... But even with that statement... that we have to do our jobs well, and we continue to have to excel and be on the ball every step of the way. [inaudible] As we sit here right now, we are more confident than ever in our ability to ensure that AMC will thrive, as both our company and our industry continue to rebound. With that, as introductory remarks, I'm going to turn the call over to our CFO, Sean Goodman, to give you more detail on our results.
Speaker Change: But even with that statement, that we have to do our jobs well and we continue to have to excel and be on the ball every step of the way.
Speaker Change: Today...
Speaker Change: As we sit here right now,
Speaker Change: We are more confident than ever.
Speaker Change: in our ability to ensure that AMC will thrive.
Speaker Change: as both our company and our industry continue to rebound.
Sean Goodman: With that, as introductory remarks, I'm going to turn the call over to our CFO , Sean Goodman, to give you more detail on our results.
Sean Goodman: Thank you Adam. Thanks to everyone for joining us this afternoon.
Sean Goodman: As expected, and as we previously discussed, the North American box office was indeed challenging during the first half of this year. The first-week box office was some 19% below the same period in 2023 and 36% below the same period in 2019. And while the second-quarter box office grew around 19% from the first quarter of this year, the box office nonetheless fell way short of the prior year by approximately 27% in the second quarter.
Sean Goodman: Thank you Adam. Thanks to everyone for joining us this afternoon.
Speaker Change: As expected, and as we previously discussed, the North American box office was indeed challenging during the first half of this year.
Speaker Change: The first-off box office was some 19% below the same period in 2023 and 36% below the same period in 2019.
Speaker Change: And while the second quarter box office grew around 19% from the first quarter of this year, the box office nonetheless fell way short of the prior year by approximately 27% in the second quarter.
Sean Goodman: The second quarter of 2023, as a reminder, was the highest quarter of that year. With this order's background, simple year-over-year comparisons may not necessarily be helpful in understanding our true financial position and potential future financial performance as the industry grows as we expect it will. I therefore want to focus my comments on some of the key metrics that we look at when we're assessing our performance and forecasting our future financial performance.
Speaker Change: The second quarter of 2023, as a reminder, was the highest quarter of that year.
Speaker Change: With this sort of background, simple year-over-year comparisons may not necessarily be helpful in understanding our true financial position and potential future financial performance as the industry grows as we expect it will.
Speaker Change: I therefore want to focus my comments on some of the key metrics that we look at when we're assessing our performance and forecasting our future financial performance.
Sean Goodman: First, let's take a look at market share. North American market share continued to increase in the second quarter of 2024, with approximately 50 basis points of growth compared to last year. This is despite the fact that we reduced our North American theater count by approximately 15 locations during this period.
Speaker Change: [inaudible]
Speaker Change: Let's take a look at Market Share.
Speaker Change: A North American market share continued to increase in the second quarter of 2024, with approximately 50 basis points of growth compared to last year. This is despite the fact that we reduced our North American theater count by approximately 15 locations during this period.
Sean Goodman: In a quarter where the North American box office declined by 27.2 percent compared to last year, our domestic admissions revenue declined by only 25.6 percent, outpacing the industry by approximately 160 basis points. Second, looking at our per patron revenue and profitability. We have successfully been able to grow and then sustain revenue and profit per patron at levels that are meaningfully higher than pre-pandemic 2019. For Q2, consolidated revenue per patron was $20.61.
Speaker Change: In a quarter where the North American box office declined by 27.2% compared to last year, our domestic admissions revenue declined by only 25.6%, outpacing the industry box office by approximately 160 basis points.
Speaker Change: Second, looking at our per patron revenue and profitability.
Speaker Change: We have successfully been able to grow and then sustain revenue and profit to a patron at levels that are meaningfully higher than pre-pandemic 2019.
Speaker Change: For Q2, consolidated revenue per patron was $20.61. This is some 33% higher than 2019, and also 1.5% higher than the prior year.
Sean Goodman: This is some 33% higher than 2019, and also 1.5% higher than the prior year. But even more important than revenue per patron is contribution margin per patron, which we define as total revenue, less film exhibition costs, and less food and beverage costs divided by the number of guests. This measure is indicative of the incremental profit generated for our guests at our theaters. Consolidated contribution margin per patron in Q2 2024 was $13.77.
Speaker Change: But even more important than revenue per patron is contribution margin per patron.
Speaker Change: which we define as total revenue less film exhibition costs and less food and beverage costs divided by the number of guests. This measure is indicative of the incremental profit generated per guest at our theaters.
Speaker Change: Consolidated contribution margin per patron in Q2 2024 was $13.77. This is some 41% higher than 2019 and 4.6% above the prior year.
Sean Goodman: This is some 41% higher than in 2019 and 4.6% above the prior year. Now, if we look at the North American business, total revenue per patron, at $22.36 was 38% ahead of the second quarter of 2019. 2.8% ahead of Q2 2023 and, by the way, a record achievement in their second quarter. It's worth noting that our food and beverage revenue per patron reached an all-time high of $8.34 in the second quarter, an all-time high.
Speaker Change: Now, if we look at the North American business, total revenue per patron at $22.36 was 38% ahead of the second quarter of 2019.
Speaker Change: 2.8% ahead of Q2 2023 and, by the way, a record achievement in their second quarter.
Speaker Change: It's worth noting that our food and beverage revenue per patron reached an all-time high of $8.34 in the second quarter, an all-time high.
Sean Goodman: And most importantly, contribution margin per patron, at $14.73, was 48% above the second quarter of pre-pandemic 2019, and also 6% above the second quarter of 2023. And we achieved yet another all-time record with food and beverage gross profit per patron of $6.86, another all-time record.
Speaker Change: And most importantly, contribution margin per patron at $14.73 was 48% above the second quarter of pre-pandemic 2019, and also 6% above the second quarter of 2023.
Speaker Change: And, we achieved yet another all-time record with food and beverage gross profit per patron of $6.86, another all-time record.
Sean Goodman: Now we look at our international segment in constant currency. Total revenue per patron of $15.96 was 20.8% ahead of the second quarter of 2019, and it was in line with the second quarter of 2023. And the important contribution margin per patron was approximately 26% above the second quarter of pre-pandemic 2019 and 3.9% ahead of the second quarter of 2023. These achievements in market share growth and revenue and profit per patron are the result of the ongoing success of our market-leading food and beverage offerings, including collectible movie-themed items, movie-themed cocktails, and menu upgrades, as well as our leading position in immersive premium large format auditoriums and our innovative alternative content options, plus revenue diversification initiatives such as retail popcorn.
Speaker Change: Now looking at our international segment in constant currency.
Speaker Change: Total revenue per patron of $15.96 was 20.8% ahead of the second quarter of pre-pandemic 2019 and it was in line with the second quarter of 2023.
Speaker Change: And the important contribution margin per patron was approximately 26% above the second quarter of pre-pandemic 2019 and 3.9% ahead of the second quarter of 2023.
Speaker Change: These achievements in market share growth
Speaker Change: and revenue and profit per patron.
Speaker Change: They're as a result of the ongoing success of our market-leading food and beverage offerings.
Speaker Change: including collectible movie-themed items, movie-themed cocktails, and menu upgrades, as well as our leading position in immersive premium large-format auditoriums and our innovative alternative content options.
Speaker Change: plus also revenue diversification initiatives such as Retail Popcorn.
Sean Goodman: This, coupled with active portfolio rationalization and focused expense management initiatives, means that we should be able to achieve pre-pandemic levels of EBITDA even while the box office is lower than in 2019. Now, let's talk a bit about the balance. Since our last earnings webcast, we have been incredibly active, taking meaningful steps to materially strengthen the balance sheet. We're not done, but the progress is undeniable.
Speaker Change: This all coupled with active theater portfolio rationalization and focused expense management initiatives means that we should be able to achieve pre-pandemic levels of EBITDA even while the box office is lower than in 2019.
Speaker Change: Now let's talk a bit about the balance sheet.
Speaker Change: Since our last Earnings Webcast, we have been incredibly active taking meaningful steps to materially strengthen the balance sheet. We're not done, but the progress is undeniable.
Sean Goodman: We started this quarter by completing a $250 million equity capital raise through an at-the-market offering, and then we followed up with the elimination of $173.9 million of our second lien 10% debt obligations. That was the elimination of $173.9 million of our second lien 10% debt obligations through debt for equity exchanges. And in the process of doing that, we recorded a profit on debt extinguishment of $85.3 million. But most noteworthy is last week's refinancing announcement that considerably improved our financial position by extending the maturity date of up to $2.45 billion of our debt from 2026 to 2029 and 2030, as Adam mentioned in his remarks. The transactions that we announced last week represent an unequivocal sign that our lenders believe in AMC and our recovery trajectory.
Speaker Change: We started this quarter by completing a $250 million equity capital raise through an at-the-market offering.
Speaker Change: And then we followed up with the elimination of $173.9 million of our second lien 10% debt obligations.
Speaker Change: That's the elimination of $173.9 million of unseconded 10% debt obligations through debt for equity exchanges. And in the process of doing that, we recorded a profit on debt extinguishment of $85.3 million.
Speaker Change: But most noteworthy is last week's refinancing announcement that considerably improved our financial position by extending the maturity date
Speaker Change: of up to $2.45 billion of our debt.
Speaker Change: of 26 to 2029 and 2030, as Adam mentioned in his remarks. The transactions that we announced last week represent an unequivocal sign that our lenders believe in AMC and our recovery trajectory.
Sean Goodman: These transactions are unique in that they represent the results of true collaboration between AMC, our second lien, and our first lien terminal members, which we believe will extend AMC's liquidity runway for the benefit of all of our SECs. These are complex transactions, and I urge you to read our public disclosures for more details. However, in summary, the results of the transactions are as follows. One, as of today, $1.864 billion of term loans that were previously due in 2026 are now new term loans due in 2029.
Speaker Change: These transactions are unique in that they represent the results of true collaboration between AMC, our second lien, and our first lien terminal members, which we believe will extend AMC's liquidity runway for the benefit of all of our stakeholders.
Speaker Change: These are complex transactions and I urge you to read our public disclosures for more details. However, in summary, the results of the transactions are as follows.
Speaker Change: 1. As of today,
Speaker Change: $1.864 billion of term loans that were previously due in 2026 are now new term loans due in 2029. That represents more than a 98% participation rate.
Sean Goodman: That represents more than a 98% participation rate. Two, 580 million of second loan debt that was due in 2026 has been refinanced with $104 million of new term loans due in 2029 and $440 million of exchangeable loans due in 2030, three new term lines that their interest at the software price between 600 and 700 basis points depending on our leverage levels. For the exchangeable notes, their cash interest is at 6% per annum or 8% per annum if the interest is paid in kind. 5.
Speaker Change: 2. $580 million of second loan debt that was due in 2026 has been refinanced with $104 million of new term loans due in 2029 and $440 million of exchangeable loans due in 2030.
Speaker Change: Three, new term lines that their interest at SOFR plus between 600 and 700 basis points depending on our leverage levels.
Speaker Change: For the exchangeable notes, their cash interest at 6% per annum or 8% per annum if the interest is paid in kind.
Sean Goodman: We have the ability to further reduce the amount of debt maturing in 2026 by increasing the size of the new term loan due in 2029 by an additional $31 million. We also have the ability to further reduce year-term debt maturities by increasing the size of the exchangeable notes due in 2030 by an additional $50 million. And finally, very importantly, as the exchangeable notes can be exchanged into equity under various conditions, we have the potential to permanently reduce debt by up to $464 million.
Speaker Change: 5.
Speaker Change: We have the ability to further reduce the amount of debt maturing in 2026.
Speaker Change: by increasing the size of the new term loan due in 2029 and by an additional $31 million. And we also have the ability to further reduce year-term debt maturities by increasing the size of the exchangeable notes due in 2030 by an additional $50 million.
Speaker Change: And finally, very importantly, as the exchangeable notes can be exchanged into equity under various conditions, we have the potential to permanently reduce debt for up to $464 million.
Sean Goodman: For this transaction, our remaining debt in June 2026 is now approximately $340 million. As I said, there's still more to do, but the progress is undeniable. Since the beginning of 2022, we have raised more than $1.3 billion of gross equity capital. We've lowered the principal value of our debt and finance leases by $888.3 million, and we've repaid $268.8 million of deferred leases. All of this for a total debt and deferred rent reduction of $1.16 billion since the beginning of 2022. However, for now, our capital allocation priorities remain.
Speaker Change: Performer, for this transaction, our remaining debt in June in 2026 is now approximately $340 million.
Speaker Change: As I said, there's still more to do, but the progress is undeniable.
Speaker Change: Since the beginning of 2022, we've raised more than $1.3 billion of gross equity capital, we've lowered the principal value of our debt and finance leases by $888.3 million, and we've repaid $268.8 million of deferred leases.
Speaker Change: All of this for total debt and deferred rent reduction of $1.16 billion since the beginning of 2022.
Sean Goodman: One, ensure that we have sufficient liquidity to manage through our recovery phase. And two, continue the work that we're doing to strengthen the balance sheet by extending maturities, reducing debt obligations, and improving our financial leverage. Before handing the webcast back over to Adam, there are a couple of additional points worth noting.
Speaker Change: For now, our capital allocation priorities remain.
Speaker Change: One, ensure that we have sufficient liquidity to manage through our recovery phase.
Speaker Change: and two, continuing the work that we're doing to strengthen the balance sheet.
Speaker Change: by extending maturities, reducing debt obligations, and improving our financial leverage.
Speaker Change: Before handing the webcast back over to Adam, a couple of additional points worth noting.
Sean Goodman: First, the deferred rent balance at the end of Q2 was approximately $40 million. We plan to reduce this balance by another approximately $5 million by the end of 2024. We ended the second quarter, as Adam mentioned, with a cash position of $770 million. This translates into $34.6 million of net cash used in operating activities for the quarter, which is roughly 21 million better than in Q2 of 2023, and this despite the box office in Q2 2024 obviously being significantly below that of Q2 2023. TAPEX, net of Landlord Contributions, was $34 million in the second quarter.
Speaker Change: First, the deferred rent balance at the end of Q2 was approximately $40 million. We plan to reduce this balance by another approximately $5 million by the end of 2024.
Speaker Change: We ended the second quarter, as Adam mentioned, with a cash position of $770 million. This translates into $34.6 million of net cash used in operating activities for the quarter.
Adam: This is roughly 21 million better than in Q2 of 2023, and this despite the box office in Q2 2024 obviously being significantly below that of Q2 2023.
Sean Goodman: We continue to expect Net TAPEX in 2024 to be in the range of $175 to $225 million. From a theatre portfolio perspective, we continue to actively manage our footprint. During the second quarter, we closed nine underperforming locations. This will bring the total number of locations closed since the pandemic began to 178. The total number of new locations opened to 60, for a net reduction of 118 locations, or 11.8% of our locations at December 31, 2019.
Adam: CapEx, Net of Landlord Contributions, was $34 million in the second quarter. We continue to expect Net CapEx in 2024 to be in the range of $175 to $225 million.
Adam: From a theatre portfolio perspective, we continue to actively manage our footprint. During the second quarter, we closed nine underperforming locations.
Adam: This will bring the total number of locations closed since the pandemic began to 178, total number of new locations open to 60, for a net reduction of 118 locations, or 11.8% of our locations at December 31, 2019.
Sean Goodman: And, of course, we continue to see that the 60 new locations significantly outperform the 178 closed. So, in summary, Q2 has been a quarter of indisputable progress; we've materially strengthened our financial position. As Adam noted, the box office recovery from the impact of the Hollywood strikes has very clearly begun, with a particularly strong performance in June, and we see that same strong performance in July. And as the box office grows, we believe AMC is incredibly well-positioned to leverage our operating capabilities to meaningfully grow both adjusted EBITDA and cash flow and finally recover from the challenges of the last four years. And with that, I'll now hand the call back over to you. Thank you, Sean.
Adam: And, of course, we continue to see that the 60 new locations significantly outperform the 178 closed locations.
Adam: So, in summary, Q2 has been a quarter of indisputable progress.
Adam: We've materially strengthened our financial position. As Adam noted, the box office recovery from the impact of the Hollywood strikes has very clearly begun, with a particularly strong performance in June . We see that same strong performance in July .
Speaker Change: And as the Box Office grows, we believe AMC is incredibly well positioned to leverage our operating capabilities to meaningfully grow both adjusted EBITDA and cash flow and finally recover from the challenges of the last four years.
Adam: And with that, I'll now hand the call back over to Adam.
Adam Aron: As I said at the start, and Sean just reiterated, we really do believe that... the good times are about to roll, and that AMC is very well positioned for industry and company recovery in 2025 and 2026. It's been a lot of work to get the company to this position, but we can feel it in our bones now, based on what we've seen starting with Inside Out 2 and what's happened ever since, and with what we know is coming down the pike. Before we move to your questions, I'd just like to touch very briefly on just a few topics.
Adam: Thank you, Sean.
Adam: As I said at the start, and as Sean just reiterated,
Adam: We really do believe that...
Adam: The good times are about to roll.
Speaker Change: and that AMC is very well positioned for industry and company recovery in 2025 and 2026.
Speaker Change: It's been a lot of work.
Sean Goodman: to get the company to this position.
Sean Goodman: But we can feel it in our bones now, based on what we've seen, starting with Inside Out 2, and what's happened ever since, and with what we know is coming down the pike.
Sean Goodman: Before we move to your questions, I'd just like to touch very briefly on just a few topics.
Adam Aron: Let me start by saying that clearly, a significant innovation for AMC last year in 2023 was our distributing, for the first time in AMC's history, a movie and exhibiting that movie, of course, that movie being the concert film of Keller Swift and Ears Tour, followed almost immediately by the concert film of Renaissance, a film by Beyonce and Earls Carter. Those two efforts were quite lucrative for AMC, and they were perceived to be big successes in the marketplace.
Sean Goodman: Let me start by saying
Speaker Change: Clearly a significant innovation for AMC last year in 2023 was our distributing
Speaker Change: for the first time in AMC's history, a movie, and exhibiting that movie, of course that movie being the concert film of Keller Swift and Ears to War, followed almost immediately by the concert film of Renaissance, a film by Beyoncé and Earls Carter.
Speaker Change: Those two efforts were quite lucrative for AMC. They were perceived to be big successes in the marketplace. They should be perceived that way since Taylor's film was the highest grossing concert film in history. And Beyonce's film was strong.
Adam Aron: They should be perceived that way since Taylor's film was the highest-grossing concert film in history, and Beyonce's film was strong, and it's no surprise since that we realized we had an opportunity here. Many world-class artists have come to us. We've gone to many world-class artists. We've had many more such interactions.
Speaker Change: And it's no surprise since...
Speaker Change: that we realize we have an opportunity here. Many world-class artists have come to us. We've gone to many world-class artists. We've had many more such interactions.
Adam Aron: I can say with certainty that there will be more such theatrical events ahead of us over the next 30 months. The first of those was in May, with AMC, in partnership with Apple Music and Interscope Records, hosting listening parties at more than a hundred of our U.S. theaters for Billie Eilish and the launch of her latest smash hit album, Hit Me Hard and Soft. And just this week... We announce that we will be showing Usher's sponsored film, called Usher: Rendezvous in Paris, in our AMC theaters beginning on September 12th of this year, 2024.
Speaker Change: And I can say with certainty that there will be more such theatrical events ahead of us over the next 30 months.
Speaker Change: The first of those was in May.
Speaker Change: with AMC in partnership with Apple Music and Interscope Records.
Speaker Change: hosted exclusively listening parties at more than a hundred of our U.S. theaters for Billie Eilish in the launch of her latest smash hit album, Hit Me Hard & Soft.
Speaker Change: And just this week...
Speaker Change: We announced that we will be showing Usher's sponsored film, called Usher, Rendezvous in Paris.
Speaker Change: in our AMC theaters beginning on September 12th of this year, 2024.
Adam Aron: We're doing so in partnership with Usher, of course, but also with Sony Music Vision and Trafalgar Releasing. We are in ongoing conversations right now with several others of the best musicians and the best performers on the planet. And you can expect more announcements from us in this regard as time goes by. That segues nicely into other alternative content. And to that end, we're also very proud to be in an exclusive partnership with NBC to be showing NBC's telecast of the Paris Olympics right now in many of our AMC theaters across the United States. If you think watching the Olympics is great at home...
Speaker Change: We're doing so in partnership with Usher, of course, but also with Sony Music Vision and Trafalgar Releasing.
Speaker Change: We have ongoing conversations right now with several others of the best musicians and the best performers on the planet.
Speaker Change: And you can expect more announcements from us in this regard.
Speaker Change: As time goes by.
Speaker Change: That segues nicely into other alternative content. And to that end, we are also very proud...
Speaker Change: to be in an exclusive partnership with NBC.
Speaker Change: to be showing NBC's telecasts of the Paris Olympics right now in many of our AMC theaters across the United States.
Adam Aron: Wait until you see it on a 40 foot screen in our theater. Of course, that content is shown in our theaters. And I should also mention that it is our intent to continue to invest in our theaters to improve their overall consumer appeal as our finances are prudently allowed through capital expenditure dollars. Speaking of our theaters, What sells first at our theaters are the seats in our auditoriums with large screens. AMC Theaters and Odeon Cinemas in the U.S., across Europe, and the Middle East have more premium large format screens now than any other movie theater operator in the world. Consumers are clearly showing that they have a preference.
Speaker Change: If you think watching the Olympics is great at home, wait until you see it on a 40-foot screen in our theaters.
Speaker Change: Of course, that content is shown in our theaters.
Speaker Change: And I should also mention that it is our intent to continue to invest in our theaters to improve their overall consumer appeal as our finances
Speaker Change: prudently allow through capital expenditure dollars.
Speaker Change: Speaking of our theaters...
Speaker Change: What sells first at our theaters is the seats in our auditoriums with large screens.
Speaker Change: AMC Theatres and Odeon Cinemas in the U.S., across Europe and the Middle East, have more premium large format screens now than any other movie theatre operator in the world.
Adam Aron: They're showing it through their buying habits for Large Format Auditoriums. And so, over the course of the next year... I expect that AMC will be making a variety of announcements to further strengthen our lead in having more large format screens than anyone else in our industry. Our market teams have not only reacted to marketing upgrades to theaters, which include our large, great auditoriums. But significant work is also underway right now within our marketing groups to enhance two of the most powerful marketing programs that AMC has ever launched: AMC Stubbs, our loyalty program, and AMC Stubbs A-List, our movie subscription program.
Speaker Change: Consumers clearly are showing that they have a preference. They're showing it through their buying habits.
Speaker Change: for Large Format Auditoriums.
Speaker Change: And so, over the course of the next year, I expect that AMC will be making a variety of announcements to further strengthen our lead.
Speaker Change: in having more large format screens than anyone else in our industry.
Speaker Change: Are market teams not only reactive in marketing upgrades to theaters?
Speaker Change: that include our large creative auditoriums.
Speaker Change: But significant work is also underway right now within our marketing groups to enhance two of the most powerful marketing programs that AMC has ever launched.
Speaker Change: AMC Stubs, our loyalty program, and AMC Stubs A-List, our movie subscription program. Look for announcements coming about those two programs towards the end of this year and early next.
Adam Aron: Look for announcements coming about those two programs towards the end of this year and early next. I'm relaying this information to you not to tease you now by hinting that things are coming but then forcing you to wait for the full announcements later. But instead, my intent is to point out that there are so many, many facets of a company like AMC, and our goal here is to make progress in as much of our business activities as we can.
Speaker Change: I'm relaying this information to you, not to tease you now by hinting that things are coming but then forcing you to wait for the full announcements later, but instead, my intent is to point out.
Speaker Change: that there are so many, many facets.
Speaker Change: to a company like AMC and our goal here is to make progress in as much of our business activities as we can.
Adam Aron: We are always thinking, and we're always willing to dare to innovate where it makes sense for us to do so. We're about to turn over the call to field your questions, but before we do... I'd just like to remind you one last time. Wyatt AMC, right now.
Speaker Change: We are always thinking and we are always willing to dare to innovate where it makes sense for us to do so.
Speaker Change: We're about to turn over the call to fielding your questions, but before we do...
Speaker Change: I'd just like to remind you one last time.
Adam Aron: We're so optimistic. We're so bullish as we look ahead to 2025 and 2026. It's very simple.
Speaker Change: Why at AMC, right now, we're so optimistic, we're so bullish, as we look ahead to 2025 and 2026. It's very simple. It's four things.
Adam Aron: It's four things. We had $770 million in cash at quarter end. The box office is roaring back. We're running our company more efficiently than ever, and our debt extension transactions are literal game changers for this company. We're proud of the fact that we know we're the biggest movie theater operator in the world, and we'd like to think that among the mass operators, we're also the best. Well, we think it's pretty clear to one and all that, because of our size and because of the innovations that we have made, AMC has been the clear leader in our industry for many years now. And let me tell you what leaders do, what they do best.
Speaker Change: We had $770 million of cash at quarter end.
Speaker Change: The box office is roaring back.
Speaker Change: We're running our company more efficiently than ever.
Speaker Change: and our debt extension transactions.
Speaker Change: are literal game changers for this company.
Speaker Change: We're proud of the facts.
Speaker Change: That we know we're the biggest movie theater operator in the world, and we'd like to think that among the mass operators, we're also the best.
Speaker Change: Well, we think it's pretty clear to one and all.
Speaker Change: is that because of our size and because of the innovations that we have made,
Speaker Change: AMC for many years now has been the clear leader in our industry.
Speaker Change: And let me tell you what leaders do, what they do best.
Adam Aron: What leaders do best is they lead. And so, now..., with what we believe is finally the wind in our backs, and Anne Fink, we intend to continue to lead and to be up front. With that, thank you for listening today, Sean. Let's turn to questions, both from our equity research analysts and from our retail shareholders. Thank you.
Speaker Change: What leaders do best is they lead.
Speaker Change: And so now, with what we believe is finally the wind in our back at AMC, we intend to continue.
Speaker Change: to lead and to be up front.
Speaker Change: With that, thank you for listening today, Sean. Let's turn to taking questions, both from our equity research analysts and from our retail shareholders.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Eric Wold with Be Riley Secured. Please proceed with your question.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please, while we pull for questions.
Eric Wold: First of all, hello, Eric. Nice to hear your voice. And since Europe reports to Sean directly, I'm going to let him answer the question first and then I might chime in afterward. Go ahead, Sean. Sure. Hey, Eric.
Speaker Change: Thank you. Our first question comes from the line of Eric Wold with B. Riley Securities.
Speaker Change: Please proceed with your question.
Eric Wold: Thank you, and good afternoon, Adam and Sean.
Eric Wold: Obviously doing great here domestically with the share gains and the improved monetization. I guess maybe give us an update on the current state of the UK.
Speaker Change: and your international market. What are you seeing there with underlying movie-going demand relative?
Speaker Change: to the U.S., how its pricing power improved or not.
Speaker Change: in recent months, given the competitive environment there? And lastly, how do you view the opportunity to take share internationally, either organically or inorganically, with some competitors struggling in closing locations?
Sean Goodman: First of all, hello Eric. Nice to hear your voice. And since Europe reports to Sean directly, I'm going to let him answer the question first, and then I might chime in after. Go ahead, Sean. Sure. Hey, Eric.
Sean Goodman: So the European business, overall, the industry in Europe has been responding quite well. The industry performance in Q2-24 was actually better than in the domestic market. But the thing about the European business is a couple of things. One, from an operating leverage point of view, inherent in the structure of that business is that it has higher operating leverage than what we have here. That's just part of the inherent structure there.
Sean Goodman: So the European business, overall, the industry in Europe has been responding quite well. The industry performance in Q2, 24, was actually
Sean Goodman: A couple of things. One, from an operating leverage point of view, inherent in the structure of that business is it has higher operating leverage.
Sean Goodman: So when you have a situation where attendance is down on the previous year's quarter and attendance is still significantly down versus 2019, you do have more of an operating leverage impact there. So one has to bear that in mind when looking at the European results. The other thing one has to bear in mind when looking at our European results is that if you look at the percentage of theatres closed in Europe versus the percentage of theatres closed in the U.S., closed a higher percentage of theaters in Europe than closed in the U.S.
Eric: Then what we have here is...
Eric: That's just part of the inherent structure there.
Eric: So, when you have a situation where attendance is down on the previous...
Eric: [inaudible]
Eric: The other thing one has to bear in mind when looking at our European results is if you look at the Percentage of theatres closed in Europe versus percentage of theatres closed in the U.S. Closed a higher percentage of theatres in Europe than closed in the U.S.
Sean Goodman: The third thing to bear in mind with European business is the market there is different from the U.S. market in that during the pandemic and for a while after that, many of the competitors in the market received government assistance. So you haven't seen that level of theater closures yet as we saw in the U.S. market. So those are all factors impacting the performance of the business there. As you heard in my prepared remarks, our business there is doing well. The contribution margin profitability is high, significantly higher than it was pre-pandemic.
Eric: The third thing to bear in mind with the European business is the market there is different from the European market in that
Eric: During the pandemic and for a while after that, many of the competitors in the market received government assistance. So you haven't seen that level of theater closures yet as we saw in the U.S. market.
Eric: So those are all factors impacting the performance of the business there as you
Eric: Heard in my prepared remarks
Eric: Our business there is doing well, the contribution margin profitability is high, significantly higher than it was pre-pandemic, it's actually slightly higher than it is in the U.S.
Sean Goodman: It's actually slightly higher than it is in the U.S. With that operating leverage and with the theaters being closed, you do see more of the bottom line impact. From a market point of view, the market there is quite challenging, particularly in the U.K. market. We have a competitive situation there where there is somewhat irrational pricing from one of our competitors in the UK market. That irrational pricing is not sustainable for them, but that is creating some pressure on our ability to take price increases there.
Eric: And with that operating leverage, and with the theaters being closed,
Eric: You do see more of the bottom line impact.
Eric: just on the market point of view.
Eric: The market there is quite challenging, particularly in the UK market.
Eric: We have a competitive situation there where...
Speaker Change: It's somewhat irrational pricing from one of our competitors in the UK market.
Speaker Change: That irrational price is not sustainable for them.
Sean Goodman: But as I say, that's not sustainable for them over a long period of time. So we do see our ability to take market share as being sort of normalized there, to sit and get better. But that's sort of my perspective on the European market.
Speaker Change: but that is creating some pressure on our ability to take price increases there but as I say that's not sustainable for them over the long period of time so we do see our ability to take market share as being sort of normalized there.
Adam Aron: I don't know if Adam- No, that's all right.
Speaker Change: to certainly get better. But that's sort of my perspective on the European market. That's all right. I would just know that they've come in the UK in particular.
Adam Aron: That's all right, I would just know that they'd come to the UK, in particular. There is only one circuit. Dutch, Pricey, Movie Theater, Ticket, privately in bulk, they're doing an institutional business, a business program, as low as three pounds, which is lunacy, it's idiocy, but it'll be very hard to take, but if that's what they're doing, market share will move in their direction, and it'll be very difficult to take back share when a competitor is practically giving it away free.
Adam: There is one circuit.
Speaker Change: That's Pricey Movie Theater tickets.
Speaker Change: privately in bulk. They're doing a sort of an institutional business, a business program, as low as three pounds, which is lunacy. It's idiocy.
Speaker Change: but it'll be very hard to take but if that's what they're doing market share will move in their direction and it'll be very difficult to take share back.
Speaker Change: when a competitor is practically giving it away free.
Adam Aron: But with, We're very proud of what we're doing in Europe and our European team. First of all, we run our European theaters from Europe; we don't run them from Kansas City, which is the best decision we made as a company eight years ago. There aren't a lot of people in Kansas City who speak Portuguese.
Speaker Change: But, they're not.
Speaker Change: We're very proud of what we're doing in Europe and our European team.
Speaker Change: First of all, we run our European theaters from Europe , we don't run them from Kansas City, which is the best decision we made as a company eight years ago.
Adam Aron: But they've really done a great job running the circuit there. We've come up with a lot of imaginative ideas. And one that I just want to, it wasn't in my prepared remarks, but I talked about large screens, and they've done something I think is quite interesting that I might share. In almost all of our buildings, we have movie theater screens that are quite large. And we've never marketed them as anything special, although that's where...
Speaker Change: There aren't a lot of people in Kansas City who speak Portuguese, but they've really done a great job running the circuit there.
Speaker Change: We come up with a lot of imaginative ideas and one that I just want to it wasn't in my prepared remarks But I talked about large screens, and they've done something. I think it's quite interesting that I might share
Speaker Change: In almost all of our buildings, we have movie theater screens that are quite large.
Speaker Change: And we've never marketed them as anything special, although that's where...
Adam Aron: The newest, most important movies go, because it makes sense that you would put... If Inside Out 2 is coming out, you're not going to put it on a small screen. And so, what ODEON did earlier this year is they branded these large auditoriums with large screens, like really large screens, and they branded them XL as their shorthand for extra large, and started to market them as being exactly what they are, a better movie experience than even other screens in the same theater because they can be as much as double the size of other screens in the same theater.
Speaker Change: the newest, most important movies go, because it makes sense. You would put, you know, if Inside Out 2 is coming out, you're not going to put it on a small screen way in the back. You're going to put it on the biggest screen that you have in the entire theater complex.
Adam Aron: And that's a really smart idea that we might try to bring over here in the United States because there's almost no capital required to implement the idea because the large screen is sitting right there. It just hasn't been packaged and tied up with a nice little bow and marketed to consumers as being exactly what it is.
Speaker Change: And so what ODEON did earlier this year is they branded these large auditoriums with large screens, like really large screens.
Speaker Change: And they branded them XL as a shorthand for extra large.
Speaker Change: and started to market them.
Speaker Change: as being exactly what they are, a better movie experience than even other screens in the same theater because they can be as much as double the size.
Speaker Change: of other screens in the same theater.
Speaker Change: And that's a really smart idea that we might try to bring over here in the United States because there's almost no capital required to implement the idea because the large screen is sitting right there.
Speaker Change: It just hasn't been packaged and tied up with a nice little bow and marketed to consumers as being exactly what it is. And right now we have 67 of these things in Europe already.
Adam Aron: And right now, we have 67 of these things in Europe already. So our team in Europe is really quite good. And, you know, we're proud of them, we're proud of the business, and as the box office grows, Europe will be the beneficiary of the growing box office, just the same way that we here in the United States will be the beneficiary of the growing box office. As you all know, the whole of our industry is not doing as well with a $9 billion box office as we did with an $11.5 billion box office, which is basically what we had five years in a row pre-COVID, or a $10 to $12 billion box office, which we had 11 years in a row pre-COVID.
Speaker Change: So our team in Europe is really quite good.
Speaker Change: And, you know, we're proud of them, we're proud of the business, and as the box office grows...
Speaker Change: You know, Europe will be the beneficiary of the growing box office just the same way that we here in the United States will be the beneficiary of the growing box office. As you all know, the whole of our industry
Speaker Change: It's not doing as well with the $9 billion box office as we did with the $11.5 billion box office, which is basically what we had five years in a row pre-COVID.
Speaker Change: or a $10-12 billion box office, which we had 11 years in a row, pre-COVID. We're still not back to those levels yet, but obviously we're quite bullish that the box office is going to grow.
Adam Aron: We're still not back to those levels yet, but obviously, we're quite bullish that the box office is going to grow in the second half of 24, we think it's going to grow in 25, and we think it's going to grow in 26. And that should boost profitability levels across the whole of the industry, but certainly across all of AMC, and not only in the U.S. but also around the world.
Speaker Change: In the second half of 24, we think it's going to grow in 25, we think it's going to grow in 26, and that should boost profitability levels across the whole of the industry, but certainly across all of AMC, and not only in the U.S., but also in Europe .
Eric Wold: Perfect. Thank you both. I appreciate it.
Speaker Change: Perfect. Thank you both. Appreciate it.
Chad Benen: Thank you. Our next question comes from the line of Chad Benen with Macquarie. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Chad Benen with Macquarie. Please proceed with your question.
Chad Benen: Afternoon. Thanks for taking my question.
Chad Benen: I wanted to continue the conversation on operating leverage, but maybe focus it back here in the U.S. A few times in your prepared remarks, you talked about June results, I guess, really without giving us the exact numbers, but I wanted to think about margins here. So for the quarter, your domestic margins were 6% pre-pandemic. You guys were in the mid to high teens. So I guess maybe the best way to ask it is, is there anything that you're seeing in the business in terms of where it is now versus before, or anything that you saw in June that makes you think that you can't get back to those margins that you experienced in 19?
Chad Benen: Afternoon. Thanks for taking my question.
Chad Benen: I wanted to continue the conversation on operating leverage but maybe focus it back here on the U.S. A few times in your prepared remarks you talked about
Speaker Change: June results, I guess really without giving us the exact numbers, but
Speaker Change: wanted to think about margins here. So for the quarter, your domestic margins were 6%. Pre-pandemic, you guys were in the mid to high teens.
Speaker Change: So I guess maybe the best way to ask it is, is there anything that you're seeing in the business in terms of where it is now versus before, or anything that you saw in June that makes you think that you can't get back to those margins that you experienced in 19? Thanks.
Adam Aron: Thank you, Chad. First of all, hello Chad. I'll start, and then I'll pass it off to Sean.
Speaker Change: Thank you, Chad. First of all, hello, Chad. I'll start and then I'll pass it off to Sean.
Adam Aron: You know, we just don't want to get started on, you know, we release quarterly results. We don't, we don't want to make the mistake of, releasing monthly results at Forever After, but, you should, without giving you a quantifiable number, so we set the precedent of having to tell you what every single month is going forward in perpetuity. I think the right way to describe our profitability in June compared to that of April and May, and by profitability, I'm referring to adjusted EBITDA, is I think there's a technical term called through the roof. And there might be a curse word there before the roof.
Speaker Change: You know, we just don't want to get started, you know, we release quarterly results. We don't want to make the mistake of...
Speaker Change: releasing monthly results and then after...
Speaker Change: released monthly results at Forever After.
Speaker Change: but
Sean Goodman: You should, without giving you a quantifiable number so we set the precedent of having to tell you what every single month is going forward in perpetuity.
Speaker Change: I think the right way to describe our profitability in June compared to that of April and May, and by profitability I'm referring to adjusted EBITDA, is I think there's a technical injury term called through the roof.
Adam Aron: Like, the difference between April, May, and June is just going to take your breath away, how much of a change it is. And that's why... In my earlier remarks, I kept on saying this is such a strange quarter where you can't really even look at the quarterly results because the April-May results are so radically different from the June results. Now, as to your specific question about margins, can we get back to the starting margins? Sean, do you want to take that one?
Speaker Change: And there might be a curse word there before the roof. Like the difference between April-May and June is just, it would take your breath away of how much of a change. And that's why in my earlier remarks...
Speaker Change: I kept on saying this is such a strange quarter where you can't really even look at the quarterly results.
Speaker Change: because the April-May results are so radically different than the June results. Now, as to your specific question about margins, can we get back to the start margins? Sean, do you want to take that one?
Sean Goodman: Following up from what Adam said By definition, what Adam said in his prepared remarks is that June EBITDA was higher than June 2019, right, so by definition, our EBITDA margin in June 2024 would be higher than it was in June 2019, and I think to your question, Mark, is there any reason why we shouldn't be able to do that going forward? I don't think so, because remember we spoke about the contribution margin per patron and the contribution margin profitability?
Speaker Change: Yes.
Sean Goodman: Following up from what Adam said.
Sean Goodman: By definition,
Sean Goodman: What Adam said in his prepared remarks is that
Sean Goodman: The June EBITDA was higher than June 2019, right? So by definition
Speaker Change: Our EBITDA margin in June 2024 was higher than it was in June 2019.
Mark: And I think to your question, Mark, is there any reason why we shouldn't be able to do that going forward? I don't think so, because remember we spoke about the contribution margin per patron and the contribution margin profitability?
Sean Goodman: So much higher than it was pre-pandemic. We've been able to sustain that now for year after year. We were concerned initially, is that sustainable? Back in 2021, beginning 2022, is that sustainable?
Mark: so much higher than it was pre-pandemic. We've been able to sustain that now for year after year. We were concerned initially, is that sustainable back in 2020?
Sean Goodman: It only got better. It didn't get worse. It only got better. And I think the actions that we've taken, particularly on the food and beverage side and enhancing the guest experience, and with potential new investments in PLS, et cetera, I don't see any reason why we shouldn't be able to return to those sort of margins as the industry recovers.
Mark: Why in beginning 2022 should that sustainable... It only got better. I think the words really got better. Only got better. And I think the actions that we've taken, particularly on the...
Mark: Food and Beverage side and enhancing the guest experience and with potential new investments in PLS, etc., I don't see any reason why we shouldn't be able to return to those sort of margins as the industry recovers.
Sean Goodman: And I would just add, just when you look at F&B, right? These numbers are pretty public.
Speaker Change: And I would just add, just when you look at F&B, right?
Sean Goodman: [inaudible] If you assume that, it's not a perfect assumption, but if you assume that labor stays constant in a theater regardless of volume, which isn't really totally true, but we do have to step up a little bit as volume increases at the theater. But if you were to make that assumption, you already know what our film rent is. You know, so you know what percentage of the ticket price flows through the contribution line prior to all those other expenses that you have to cover, like labor, but I'm pretending that that's fixed at the moment.
Speaker Change: These numbers are pretty public.
Speaker Change: If you assume...
Speaker Change: It's not a perfect assumption, but if you assume that labor stays constant in a theater regardless of volume, which isn't really totally true, but we do have to step up a little bit as volume increases at the theater, but if you were to make that assumption, you already know what our film rent is.
Speaker Change: So you know what percentage of ticket price flows through the contribution line, prior to all those other expenses that you have to cover, like labor. But I'm pretending that that's fixed at the moment.
Sean Goodman: We've been very public over the years saying that our margins in F&B are in the low 80% rate, and you have. [inaudible] Food and Beverage Revenues, release for the quarter. And if you go back and compare the food and beverage revenues... of 2024 against the food and beverage revenues of 2019 pre-pandemic, you'll see that. We used to be doing about five bucks a head in food. And now we're doing nine bucks, and I'm talking about you, I'm using U.S. numbers, I'm not using consolidated numbers, and now we're doing nine bucks a head, sometimes ten bucks a head. It depends on the day, week, month, and quarter. Well, by definition.
Speaker Change: We've been very public over the years saying that our margins at F&B...
Speaker Change: are in the low 80% range.
Speaker Change: And you have...
Speaker Change: our
Speaker Change: Food and Beverage revenues released for the quarter.
Speaker Change: And if you go back and compare the food and beverage revenues...
Speaker Change: of 2024,
Speaker Change: against the food and beverage revenues of 2019 pre-pandemic.
Speaker Change: You're going to see that we used to be doing about five bucks a head in food.
Speaker Change: And now we're doing nine bucks. And I'm talking about you. You're using U.S. numbers. I'm not using consolidated numbers. And now we're doing nine bucks a head, sometimes ten bucks a head. Depends on the day, week, month, quarter.
Sean Goodman: That extra food leverage definitely has a much higher mark than our other revenues. And that's where we've seen the biggest growth. The biggest growth has come in extra food and beverage revenue. And so that's not the only reason, but that's one of the key reasons why the profit per patron is up so much. The other reason that the profit per patron number is up so much is because we've really just done such a great job of cutting costs.
Speaker Change: Well, by definition, that extra food and beverage revenue
Speaker Change: has much higher margins.
Speaker Change: then our other revenues. And that's where we've seen the biggest growth. The biggest growth has come in extra food and beverage revenue.
Speaker Change: And so that's not the only reason, but that's one of the key reasons why the profit per patron is up so much. The other reason that the profit per patron number is up so much is because we've really just done such a great job in cutting costs.
Sean Goodman: Remember, in my prepared remarks, I said even though the box office was down 3.5% June over June, the adjusted EBITDA in June was up. So what that means is it all came out of expense cuts. All right. Now, but that's comparing June of 24 to June of 23. If you compare June of 24 to April and May of 24, and then the big im profit drivers in June of 24 versus April and May of 24 are a combination of the expense cuts and the fact that revenues were so much higher in June because the box office was so much higher in June than it was in April.
Speaker Change: Remember, in my prepared remarks, I said even though the box office was down 3.5% June over June .
Chad Benen: That makes a lot of sense. Thanks for everything, Adam. I appreciate it. But the point of that, along with your answers, is to say...
Speaker Change: The adjusted EBITDA in June is up.
Speaker Change: So what that means is it all came out of expense cuts.
Speaker Change: Now, that's comparing June of 24 to June of 23. If you compare June of 24 to April , May of 24,
Speaker Change: Then, the big improfit drivers in June of 24 versus April and May of 24 is a combination of the expense cuts and the fact that the revenues were so much higher in June because the box office was so much higher in June than it was in April and May.
Speaker Change: That makes a lot of sense. Thanks for everything, Adam. The point of that long-winded answer is to say, I believe our margins are going to look really good. And if you...
Adam Aron: I believe our margins are going to look really good.
Adam Aron: I said in my prepared remarks that More than 50% of our incremental dollar. Close to the contribution line, right?
Speaker Change: I mean, yeah.
Speaker Change: I said in my prepared remarks that more than 50% of our incremental dollar flows to the contribution line, right?
Adam Aron: And in some cases, it's a lot closer to 65% than over 50%. Well, in an industry where revenues are increasing, and 65% of the marginal dollars flow to the bottom line. Not the debt profit line, but the EBITDA line or the cognition overhead line.
Speaker Change: And in some cases, it's a lot closer to 65% than over 50%.
Speaker Change: Well, in an industry where the revenues are increasing.
Speaker Change: and 65% of the marginal dollars flow to the bottom line.
Adam Aron: That's huge operating language, and conversely, because revenues are shrinking, which is what we've been dealing with for the last five years of our lives, four and a half years of our lives, that incremental operating leverage works against you. And so every dollar of revenue that we lost, we were losing 65 cents from you at that one.
Speaker Change: Not the debt profit line, but the EBITDA line or the cognition overhead line.
Speaker Change: That's huge operating luggage. And conversely.
Speaker Change: If the revenues are shrinking...
Speaker Change: which is what we've been dealing with for the last five years of our lives, four and a half years of our lives.
Speaker Change: That incremental operating leverage works against you, and so every dollar of revenue that we lost...
Adam Aron: But it's, in our opinion, and by the way, for full disclosure, we could be wrong, right? I don't think we're wrong. I mean, we have a lot of data that proves it right.
Speaker Change: We were losing 65 cents from you at that one. But it's, in our opinion, and by the way, for full disclosure, we could be wrong, right? I don't think we're wrong. We have a lot of data that proves it right.
Adam Aron: Noah's crystal ball is absolutely perfect, but if we're right... that industry revenues are about to grow, and AMC revenues are about to grow. And recently, we've been gaining market share, not losing market share, which means if that were to continue, and there's no guarantee that it will, but if it were to continue, it would mean we would grow even faster. It means our margins are going to expand because... Our overall margins are in the teens, and our incremental margins are in the 50s and 60s. There's a big difference.
Noah: Noah's crystal ball is absolutely perfect, but if we're right...
Noah: that industry revenues are about to grow.
Noah: And AMC revenues are about to grow.
Noah: And recently, we've been gaining market share, not losing market share, which means if that were to continue, and there's no guarantee that it will, but if it were to continue, it means we would even grow faster.
Noah: It means our margins are going to expand because our overall margins are in the teens and our incremental margins are in the teens.
Chad Benen: So I think there's a possibility, as opposed to can, like is there a chance we can't get our margins back? I think it might go the other way. I think it's a possibility. The probability is that our margins will actually start to expand.
Noah: are in the 50s and 60s.
Noah: There's a big difference.
Noah: So, I think there's a possibility, as opposed to, is there a chance we can't get our margins back? I think it might go the other way. I think it's a possibility, the probability is our margins will actually start to expand.
Chad Benen: Great. Thank you both very much. I appreciate it. Thank you. Our next question comes from the line of these.
Speaker Change: Great. Thank you both very much. Appreciate it.
Jason Bazinet: Thank you. Our next question comes from the line of Jason Bazinet with Citi. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Jason Bazinet with Citi. Please proceed with your question.
Jason Bazinet: I just had a quick question on the theatrical window. Do you mind just giving us an update on sort of how the contours of the window have changed?
Adam Aron: and whether that's good or bad. Yeah. And this is Friday Night. Two hours later on the East Coast, well, I'll try to talk shorter.
Speaker Change: and whether that's good or bad.
Speaker Change: Thanks. Yeah.
Speaker Change: [inaudible]
Speaker Change: It is Friday night.
Adam Aron: In the good old days, I'm going to use the US only because the windows were different in every country in the world in the good old days, pre-pandemic. The windows were 74 days before the movie went to a pay window in the home. And it often was, and then it might have gone to DVD. And it might have been six months before I went to the library for free.
Speaker Change: It's an hour later on the East Coast, so I'll try to talk shorter.
Speaker Change: In the good old days, I'm going to use U.S. only because the windows are different in every country in the world, but U.S., in the good old days, pre-pandemic,
Speaker Change: The windows were 74 days.
Speaker Change: before the movie went to a pay window in the home.
Speaker Change: Or to a
Speaker Change: And it often was, and then it might have gone to DVD.
Speaker Change: And it might have been six months.
Adam Aron: I want to say for free, you know, like going to home HBO, you know, where you're not paying a monthly fee, you're subscribing to the service, but you're not paying individually for each title. There was a lot of experimentation during COVID. People tried a lot of different things. And you know, you've heard of all the things they did.
Speaker Change: before I went to the home for free.
Speaker Change: I want to say for free, you know, like going on the home, HBO, you know, where you're not paying a, you know, you're subscribing to the service, but you're not paying individually for the title.
Speaker Change: Understood. There was a lot of experimentation during COVID.
Adam Aron: Some studios took movies to their screening services and took them out of theaters. Some, and by the way, a lot of studios tried lots of different things. So when I say some studios, I don't mean a studio only did one thing. They might have done multiples of these. Some of them tried to take
Speaker Change: People tried a lot of different things.
Speaker Change: And you know, you've heard of all the things we did?
Speaker Change: Some studios took movies.
Speaker Change: to their screen services and took them out of theaters.
Speaker Change: And by the way, a lot of studios tried lots of different things.
Speaker Change: So, when I say some suitors, I don't mean it...
Speaker Change: A studio only did one thing, they might have done multiples of these. Some of them tried to take...
Adam Aron: The movie To the Home, day and date, the same day that it went to theaters, went to home on a streaming service. Sometimes they took it to a streaming service for free, sometimes they took it to a streaming service for pay. Adam.
Speaker Change: The movie To the Home, day and date, the same day that it went to theaters, it went to the home on a streaming service?
Speaker Change: Sometimes they took it to a streaming service for free, sometimes they took it to a streaming service for pay.
Speaker Change: Some, one student in particular, with our full agreement, we entered a deal with Universal that they would take a few movies that were small.
Adam Aron: [inaudible] that were small, to a pay window at 17 days, and we would share in the revenue of that. That was later amended to, they would take small movies at 17 days, and they would take big movies at 30 to 35 days. With all that experimentation that went on... What the industry coalesced around? was a 45-day window, exclusively in theaters. And after that, it could go to the home on streaming services
Speaker Change: To a pay window at 17 days and we would share in the the revenue of that That was later amended to they would take small movies at 17 days And they would take big movies at 30 to 35 days, but
Speaker Change: With all that experimentation that went on...
Speaker Change: What the industry coalesced around...
Speaker Change: It was a 45-day window.
Speaker Change: exclusively in theaters.
Adam Aron: So you'd have to pay for the streaming service, but you didn't have to pay for the title. And the only exception to that was the universal PVOD deal and the occasional PVOD deal that somebody might throw at us on an ad hoc basis. And there aren't that very many movies that are going to be on the PVOD. [inaudible] It's unclear. [inaudible] Was that just fine? or whether theaters have been hurt by it? Well, the reason I say it's unclear...
Speaker Change: And after that, it could go to the home on streaming services. So you'd have to pay to have the streaming service, but you didn't have to pay to have the title.
Speaker Change: And there aren't that very many movies that were going in the PVOD.
Speaker Change: So if I had to guess, I would say 90% of the movies coming out were observing a 45-day cruise in the theater of a window.
Speaker Change: Okay, it's unclear.
Speaker Change: Whether
Speaker Change: That was just fine? Or whether theaters have been hurt by it? Well, the reason I say it's unclear...
Adam Aron: It's just because you know the box office is not yet back to pre-COVID levels. So how much of that is because there have been fewer titles, and how much of that is because there have been fewer attendance? It looks to us like it's more fewer titles is causing the drop in the box office, not less attendance per movie release. So right now, we think the 45 day window has not hurt us, but we don't know that for sure, and we'll learn a lot more over the next few weeks. 18 months of the, clearly, the number of titles increases, and the revenue is going to increase.
Speaker Change: He says, because you know the box office is not yet back.
Speaker Change: to pre-COVID levels. So how much of that is because there have been fewer titles and how much of that is fewer attendance?
Speaker Change: It looks to us like it's fewer titles that are causing the drop in the box office, not lesser attendance per movie released.
Speaker Change: So right now we think the 45 day window has not hurt us.
Speaker Change: But we don't know that for sure.
Speaker Change: and we'll learn a lot more over the next...
Speaker Change: 18 months as clearly the number of titles increases, the revenue is going to increase.
Adam Aron: The only reason I mention all that is there was one other lesson. Warner Brothers, for one year, took all their movies to Mac on the same day for free as they put them in theaters for pay. And they compensated us for that somewhat, not entirely, by dramatically reducing the filament that we were charged. But I will tell you that was a disaster for theaters. And our quantification is when movies went to homes for free, the same day that they were released to theaters for full price.
Speaker Change: and we'll see. The only reason I mention all that is there was one other learning.
Speaker Change: Warner Brothers for one year.
Speaker Change: took all their movies to Macs.
Speaker Change: on the same day for free as they put them in theaters for pay.
Speaker Change: And they compensated us for that somewhat, not entirely, by dramatically reducing the film run that we were charged.
Speaker Change: But I will tell you that was a disaster for theaters.
Speaker Change: And our quantification is, when movies went to the home for free, the same day,
Adam Aron: We lost about half the audience in theaters. Now, you'll notice that that went away from the industry because it would have destroyed the whole industry, but it's unclear whether the 45-day window is okay, but it might be, may not be what it might be, but it was very clear that going home day and date was a disaster. I'm not saying it was a disaster for Warner; I'm saying it was a disaster for the theater industry.
Speaker Change: that they were released to theaters for full price.
Speaker Change: We lost about half the audience in theaters.
Speaker Change: Now, you'll notice that that went away from the industry because it would have destroyed the whole industry. But it's unclear whether the 45-day window is okay, but it might be.
Speaker Change: It may not be what it might be, but it was very clear that going to the home day and date was a disaster. I'm not saying it was a disaster for Warner, I'm saying it was a disaster for the theater industry.
Speaker Change: Crystal clear. Thank you. It's very helpful.
Adam Aron: Thank you. Thank you. Our next question comes from the line of Jim Goss with Bering. Please proceed. All right, thank you. I wanted to ask you, Adam, about the...
Jim Goss: Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.
Speaker Change: Thank you. Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.
Jim Goss: Alright, thank you. I wanted to ask you, Adam, about the screen-based rationalization effort.
Jim Goss: you've been carrying back on the both the domestic and international screens especially domestic. Typically that happens when leases come up for expiration and you decide to extend or end the lease. I'm wondering
Jim Goss: What share of the decision tends to go to extension versus ending the lease? Do they tend to be focused in the AMC classic markets?
Speaker Change: And is there more room to run on that?
Adam Aron: So look, we've closed 160 theaters out of a thousand in the last four years. So, a theater is a money loser. We sit, and it's at the end of the brief term. We sit down with the landlord, and we discuss it, and there are a variety of outcomes. Often, the landlord will renegotiate the rent terms and make them more favorable such that we can keep the theater open. Sometimes.
Speaker Change: Look, we've closed 160 theaters.
Speaker Change: Out of a thousand.
Speaker Change: in the last four years.
Speaker Change: So.
Speaker Change: Is the theater is a money loser?
Adam Aron: Jointly with the landlord, we decide that the best course of action is to renovate the theater and invest in the theater and improve the product with the hope of driving more revenue for the theater, which would then support a different rent structure. In other cases... The rent structures are moved from a fixed price to a variable price, which is to say that instead, we take all the risk, like the rent is X dollars, no matter what the volume of the theater is. In some cases, we are successful in convincing the landlord to take a percentage of the revenue.
Speaker Change: We sit, and it's at the end of the three-term, we sit down with the landlord and we discuss it.
Speaker Change: and there are any variety of outcomes.
Speaker Change: Often, the landlord will renegotiate the rent terms and make them more favorable such that we can keep the theater open.
Speaker Change: Sometimes.
Speaker Change: Jointly with the landlord, we decide that the best course of action is to renovate the theater and invest in the theater and improve the product with the hope of driving more revenue in the theater, which would then support a different rent structure.
Speaker Change: In other cases, the rent structures are moved from fixed price to variable price, which is to say that...
Speaker Change: You know, instead of, we take all the risk, like the rent is X dollars, no matter what the volume of the theater is. In some cases, we are successful in convincing the landlord to take a percentage of revenue.
Adam Aron: So the landlord can make more if the theater succeeds, but the landlord takes less if the theater can't sustain a higher rent. And sometimes we have to close the theater. Guess on the percentage. I mean, my real estate guy knows it, like, intimately, and he's told me 20 times, and I think I have it directly right, but I might be marginally off.
Speaker Change: So the landlord can make more if the theater succeeds, but the landlord takes less if the theater can't sustain a higher rent?
Speaker Change: And sometimes we have to close the theater. If I had to guess on the percentage, I mean, my real estate guy knows it, like, intimately, and he's told me 20 times, and I think I have it directly right, but I might be marginally off.
Adam Aron: I think we wind up closing about 40% of the theaters where we have those conversations with the landlords at the end of the lease. Um, and about this again, these are round numbers, but about 10% of our theaters come up for lease renewal every year. So, you know, uh, we, uh, say, you know, 55 theaters come up in the United States every year. Eighty-five theaters come up globally every year, and you know, more than half of them will stay open on better terms or different terms.
Speaker Change: I think we wind up closing about 40%.
Speaker Change: of the theaters.
Speaker Change: where we have those conversations with the landlords at the end of the lease.
Speaker Change: And about, this again, these are round numbers, but about 10% of our theaters come up for lease renewal every year.
Speaker Change: So, you know, we.
Speaker Change: So, say, you know, 55 theaters come up in the United States every year.
Speaker Change: 85 theaters come up globally every year and, you know, more than half of them will stay open on better terms or different terms, but some will close.
Adam Aron: But some will close. I don't know that the percentages are going to change. Well, actually, I do know the percentage is going to change. As we look ahead... As opposed to looking back, we will continue to close tired, worn out, end-of-life stage theaters, especially where the market rents are too high to support the revenues of the theater. My prediction is that this is what's going to happen.
Speaker Change: I don't know that the percentages are going to change.
Speaker Change: Well, actually, I do know the percentage are going to change. As we look ahead...
Speaker Change: As opposed to looking back.
Speaker Change: We will continue to close. Tired. Worn out.
Speaker Change: end-of-their-life stage theaters, especially where the market rents are too high to support the revenues of the theater, but
Adam Aron: We've just said on this call over and over again that the box office is about to grow radically. If the box office grows radically, the profitability of the theater will rise, and it will rise precipitously. And if the profitability of the theater rises precipitously, then there won't be as much desire by a theater operator to close it because, by definition, more theaters will be profitable, or certainly there'll be more theaters that are more profitable than they were previously. But some won't rise to the level to get above the threshold from losing a lot to making a lot. Some may go from losing a lot to losing a little.
Speaker Change: My prediction is here's what's going to happen.
Speaker Change: We've just said on this call over and over again, the box office is about to grow radically.
Speaker Change: If the box office grows radically, the profitability of the theater will rise, and it will rise precipitously.
Speaker Change: And if the profitability of the theater rises precipitously...
Speaker Change: then there won't be as much desire by a theater operator to close it because by definition, more theaters will be profitable.
Speaker Change: There will be more theaters that will be more profitable than they were previously.
Speaker Change: Some won't rise to the level to get above the threshold from losing a lot to making a lot. Some may go from losing a lot to losing a little. Those fields will get closed.
Adam Aron: Those stills will get close, but in an era of rising revenues. That means an era of rising profitability. That means fewer theaters are closed. But we're not quite at that point yet. I mean, I think that might be a year away.
Speaker Change: But in an era of rising revenues, that means an era of rising profitability, that means fewer theaters should close. But we're not quite at that point yet. I mean, I think that might be a year away.
Jim Goss: But, and in terms of whether they're classic theaters, some of them are classificators, and a healthy chunk of them are classificators. But there are plenty of instances where you've got big theaters, where the rents are just out of control because somebody signed a contract 10, 15, 20, 25 years ago took on a theater and agreed to a rent and an escalator clause where it's... It might have worked 20 years ago, but it's just how to kill her today, or similarly.
Speaker Change: But, and in terms of whether they're, they're not all classic theaters.
Speaker Change: Some of them are classificators, and a healthy chunk of them are classificators.
Speaker Change: But there are plenty of instances where you've got big theaters where the rents are just out of kilter because somebody signed a contract
Speaker Change: 10, 15, 20, 25 years ago.
Speaker Change: took on a theater and agreed to a rent and an escalator clause.
Speaker Change: We're
Speaker Change: It's...
Jim Goss: There might be theaters that weren't classic theaters that were in good retail malls but not great retail malls, and in the course of 15 years from when the original lease was established, and the mall itself has become a failing mall, in which case the theater is going to be a failing theater. So they're not all classic theaters, but..., you know, a healthy percentage are.
Speaker Change: It might have worked 20 years ago, but it's just out of kilter today. Or similarly, there might be theaters that weren't classic theaters that were in good retail malls
Speaker Change: But not great retail malls.
Speaker Change: and in the course of 15 years from when the original lease was established.
Speaker Change: The mall itself has become a failing mall.
Speaker Change: In which case, the theaters will be a failing theater.
Speaker Change: So they're not all classic theaters, but...
Jim Goss: Okay, well, thanks for taking my question. Thank you, Jim. Nice to talk to you again, as always.
Speaker Change #100: You know, a healthy percentage are.
Speaker Change #101: Okay, well, thanks for taking my question.
Speaker Change #101: Thank you, Jim. Nice to talk to you again, as always. Same here.
Alicia Reese: Thank you. Our next question comes from the line of Alicia Reese with Webb Bush. Please proceed with your question.
Speaker Change #102: Thank you. Our next question comes from the line of Alicia Reese with Web Bush. Please proceed with your question.
Alicia Reese: Hi guys, thanks for taking the question. I had a quick question really on concessions, per capita, and margin, just looking at the specialty popcorn buckets and assuming that there's obviously going to be a bigger benefit in quarters where you have titles like Dune II, Deadpool, Wolverine, and such. But I'm wondering if what you're seeing there on films like that, I do understand that you only offer that in the very early days of a film's release, but are you seeing a larger basket of concessions purchased around that? Obviously, you're going to get higher margins on that. I was just wondering if you could give a little bit more detail on that.
Alicia Reese: Hi guys, thanks for taking the question. I had a quick question really on the concessions.
Alicia Reese: per capita and margin, just looking at the specialty popcorn buckets.
Speaker Change #104: And assuming that there's obviously going to be a bigger benefit in quarters where you have titles like Dune II, Deadpool Wolverine, and such.
Speaker Change #105: But I'm wondering if what you're seeing there on films like that are, you know, I do understand that you only offer that in the very early days of the film's release.
Speaker Change #106: But are you seeing a larger basket of concessions purchased around that? Obviously, you're going to get higher margins on that. I was just wondering if you could give a little bit more detail around that.
Adam Aron: Well, we're learning as we go, and the We built this up from basically zero to $50 million a year and $30 months, which is pretty good, and we didn't want to get stuck with a lot of excess inventory. So we tended, as a company, our strategy was... go for the biggest movies only and buy enough quantity that you can kind of last the whole of opening weekend, but you weren't stuck with a lot of excess supply beyond opening weekend. And the first lesson is... We could do a lot more movie programs. There are just a few.
Speaker Change #107: Well, we're learning as we're going, and...
Speaker Change #107: The
Speaker Change #108: We built this up from basically $0 to $50 million a year.
Speaker Change #109: 30 months, which is pretty good.
Speaker Change #108: Art.
Speaker Change #108: We didn't want to get stuck with a lot of excess inventory.
Speaker Change #108: So we tended, as a company, our strategy was
Speaker Change #110: Buy for the biggest movies only, and buy enough quantity that you can kind of last the whole of opening weekend, but you weren't stuck with a lot of excess supply beyond opening weekend.
Speaker Change #110: And the first learning...
Speaker Change #110: is
Adam Aron: So when we started this thing, we were doing maybe six movies a year? Maybe eight, maybe four, I forget exactly, but it was single digits.
Speaker Change #110: We can do a lot more movie programs.
Speaker Change #110: So when we started this thing, we were doing maybe
Speaker Change #111: Six movies a year?
Adam Aron: And now we're practically doing them every week, almost every week, but certainly twice a month. So I'm guessing we have. 30-ish, maybe 40.
Speaker Change #110: Maybe eight, maybe four, I forget exactly, but it was single digit.
Speaker Change #110: And now we're practically doing them every week, almost every week, but certainly twice a month.
Speaker Change #110: So I'm guessing we have
Adam Aron: Merchandise programs for a year now. And the other thing, the next thing that we've learned is, whether it's because we've trained the consumer to like these things, or the consumer just likes these things, they're flying off the shelf. And so the other thing that's happened is that we haven't satisfied the full opening weekend demand. We've had to, this is a high quality problem, not a bad problem, we've had to increase how much of this stuff we order.
Speaker Change #110: 30-ish maybe 40
Speaker Change #110: Merchandise programs a year now?
Speaker Change #110: And the other thing, the next thing that we've learned...
Speaker Change #110: is
Speaker Change #112: Whether it's because we've trained the consumer to like these things or the consumer doesn't like these things, they're flying off the shelves.
Speaker Change #112: satisfied the full opening weekend demand.
Speaker Change #112: This is a high-quality problem, not a bad problem. We've had to increase how much of the stuff we order.
Adam Aron: I remember we ordered like eight months in advance because it's often made overseas and shipped to the United States. And so we've got to increase our orders, and it's getting so popular, that we might have had none. We'll be seeing merchandise items for a film, and now we'll have three different merchandise things for a film. And in the case of Deadpool and Wolverine, where are we ordering about 50% more than we've ever ordered before?
Speaker Change #112: And remember, we order like eight months in advance because it's often made overseas and shipped to the United States. And so we've had to increase our orders.
Speaker Change #112: And it's getting so popular.
Speaker Change #112: that we might have had one
Speaker Change #112: We'll be seeing merchandise items for a film, and now we'll have three.
Speaker Change #112: different merchandise things for a film.
Speaker Change #112: And in the case of Deadpool and Wolverine, where we ordered about...
Speaker Change #113: 50% more than we've ever ordered before?
Adam Aron: We were sold out by Thursday night, around 5 o'clock, which was mind-blowing to us. One of the learnings, and these are very popular, is that we're going to wind up doing more movies, not fewer, we're going to wind up doing more merchandise per movie, not fewer, and we're going to order larger quantities. We might not be so insistent that we are, you know, sold out at the end of the first weekend; we might be willing to take the risk of ordering up to last two or three weekends.
Speaker Change #114: We were sold out by Thursday night around 5 o'clock, which is mind-blowing to us.
Speaker Change #114: So, one of the learnings is, these are very popular,
Speaker Change #114: We're going to wind up doing more movies, not fewer, we're going to wind up doing more merchandise items per movie, not fewer, we're going to order larger quantities.
Speaker Change #114: We might not be so insistent that we be, you know, sold out at the end of the first weekend. We might be willing to take the risk.
Adam Aron: Right now, you can only get this stuff really easily at our theaters. We haven't yet worked this into the web yet, where people could buy this stuff. [inaudible] We went from $0 million to $50 million in two years. And I think we could double it again. So I think there's real upside for us.
Speaker Change #114: of ordering it up to the last two or three weekends.
Speaker Change #115: Right now you can only get by this stuff really easily at our theaters.
Speaker Change #115: We haven't yet worked this onto the web yet where people could buy this stuff.
Speaker Change #115: online,
Speaker Change #115: Thank you.
Speaker Change #116: We went from $0 million to $50 million in two years.
Speaker Change #116: And I think we can double it again.
Adam Aron: And then some of the merchandise items are sort of geared toward commemorative cups for soda purchases, commemorative popcorn tins or tubs for popcorn purchases. So it may not only drive an incremental sale of the merchandise item, but it might also drive an incremental sale of a $7 Coke or a $10 tub of popcorn, which is also high margin for us. So it's just like all, it's an all-good news story, and our margins on these concession items are similar to normal retail margins. So you know what normal retail margins are; they're 40, 50%, something like that. We haven't disclosed the exact number, but... You know, you can guess and estimate. You'll probably be pretty close.
Speaker Change #116: So, I think there's real upside for us. And then, some of the merchandise items...
Speaker Change #116: is sort of geared for...
Speaker Change #117: It's commemorative cups for soda purchase, commemorative popcorn tins or tubs for a popcorn purchase.
Speaker Change #116: So it may not only drive an incremental sale of the merchandise item, but it might also drive an incremental sale of
Speaker Change #116: of a $7 Coke or a $10 tub of popcorn, which is also high margin for us. So it's just like, it's an all good news story.
Speaker Change #116: And our margins on these concession items...
Speaker Change #116: are similar to normal retail margins.
Speaker Change #116: So you know what normal retail margins are, they're 40-50%, something like that. We haven't disclosed the exact number, but...
Alicia Reese: Yeah, it seems like a good program. Were you able to get any merchandise around the Olympics? And also, I was wondering what the ticket price was around that, if you're able to share that, or just qualitatively, if it's higher or lower than typical field tickets.
Speaker Change #116: You know, you can guess and estimate, you'd probably be pretty close.
Speaker Change #118: It seems like a good program. Were you able to get any merchandise around the Olympics? And also, I was wondering what the ticket price was around that, if you're able to share that, or just qualitatively, if it's higher or lower than typical field tickets.
Alicia Reese: We did not get any Olympic merchandise. And honestly, I don't know what price we're charging for the limp. I never asked. I was so excited that we landed it. I never asked our head of programming what she was going to charge. I could tell you how much every concert movie goes.
Speaker Change #119: We did not get Olympics merchandise.
Speaker Change #120: And honestly, I don't know what price we're charging for the Olympics.
Speaker Change #121: I never asked. I was so excited that we landed it I never asked our head of programming what she's going to charge. I could tell you what every concert movie goes for though.
Adam Aron: to the penny. Yeah, if you would.
Alicia Reese: Geller was 1989 for adults and 1313 for kids. [inaudible] Thank you. I appreciate that detail. And I just had one last housekeeping item for Sean.
Speaker Change #122: to the penny. Yeah, if you would. Geller was 1989 for adults and 1313 for kids.
Speaker Change #122: [inaudible]
Speaker Change #123: I just had one last housekeeping item for Sean. I think I heard you say the CapEx for the year was $175 to $225, as you had said before, but did you say $175 to $200? Did that come down or was that still $225?
Alicia Reese: I think I heard you say the CapEx for the year was $175 to $225, as you had said before. But did you say $175 to $200? Did that come down, or was $225 still on the high end?
Sean Goodman: No, it's the same as it was before, 175 to 220. Excellent. All right. Thanks. Thanks for your time, guys.
Sean Goodman: No, it's the same as it was before, 175 to 225.
Speaker Change #124: Excellent. All right. Thanks. Thanks for your time, guys.
Speaker Change #124: Thanks for listening.
Alicia Reese: If you're still there, the price for the Olympics is $8.99 for adults, $6.69 for kids. I don't know if that's a reasonable price.
Speaker Change #124: How is Alicia?
Speaker Change #125: If you're still there, the price for, we just pulled up the price for the Olympics, it's $8.99 for adults, $6.69 for kids.
Adam Aron: I don't know if that's a reasonable price, so I'll get some people in.
Alicia Reese: Oh, that's a reasonable price, so I'll get the people in.
Alicia Reese: Thank you.
Adam Aron: So, Adam, we're going to take just two quick questions from our retail shareholders. The other call is...
Alicia Reese: So Adam, let's take just two quick questions from our retail shareholders. Yeah, the call is run long, and it is a Friday night, like for us.
Adam Aron: All right. I'll just... Yeah, the call is running late, and it is a Friday night. It may be a Friday night in summer, but this is a 24--7 kind of a place. We didn't actually get the debt extension deal done by working Monday to Thursday, 930 to 430.
Adam: It may be a Friday night of summer, but this is a 24-7 kind of a place.
Adam Aron: But it is a Friday night, so we do want to get off the phone and let you guys go home. So let's take a couple of questions on the shoulder, and then we'll sign off. Okay, we'll just take two quick ones, yeah.
Speaker Change #126: We didn't actually get the debt extension bill done by working Monday to Thursday, 930 to 430.
Speaker Change #126: But it is a Friday night, so we do want to...
Adam: Let's get off the phone. Let you guys go home. So
Adam: Let's take a couple of shoulder questions and then we'll...
Operator: The first one is about our auditoriums. The question is, General, what are the plans to influence the auditorium experience in the future? What about things like private booths or 4D experiences for our guests? So that's a good question, because, um...
Adam: Signing off.
Speaker Change #127: Okay, we'll just take two quick ones, yeah. The first one is about our auditoriums. The question is, General, what are the plans to advance the auditorium experience for the future? What about things like private booths or 4D experiences for our guests?
Adam Aron: There's actually some serious activity going on in this area within the company right now. We have about 43 theaters, out of 550, that represent about a third of our EBITDA. (Inaudible) So these are very successful theaters. This is the opposite of Jim Goss.
Speaker Change #128: So that's a good question because, um...
Speaker Change #129: There's some serious activity going on in this area within the company right now.
Speaker Change #129: first.
Speaker Change #130: We have about 43 theaters.
Speaker Change #130: Out of 550.
Speaker Change #130: that represent about a third of our EBITDA.
Speaker Change #131: So these are very successful theaters. This is the opposite of the Jim Goss...
Adam Aron: Here to close them; this is where we make a lot of our money. And so we keep on looking at ways to improve those theaters. And at the highest-grossing AMC theater in the United States, which is our theater in Burbank, California. It's not every single week that it's the highest-grossing theater in the country, but most weeks it's the highest-grossing theater in the country. The seats were quite run down. And we didn't have the option of putting in reclining seats because the theater was packed, and the seed loss would have been too high if we'd put in reclining seats, but we did rip out all the fabric seats.
Speaker Change #131: This is where we make a lot of our money, and so we keep on looking at ways to improve those theaters.
Speaker Change #131: And at the highest-grossing AMC theater in the United States, which is our theater in Burbank, California It's not every single week it's the highest-grossing, but most weeks it's the highest-grossing theater in the country
Speaker Change #132: The seats were quite run down.
Speaker Change #132: And we didn't have the option of putting in reclining seats because the theater was packed.
Speaker Change #132: And the seat loss would have been too high if we'd put in reclining seats. But we did rip out all the fabric seats and we put in a brand which were like sit-em-up straight, uncomfortable seats.
Adam Aron: And we put in a brand with which we're, like, setting them up straight, uncomfortable seats. So traditional movie theater seats have gone by the wayside over the years. But, in the words of Yogi Berra, the place was so crowded that nobody goes there anymore. So what we did is we replaced all those seats, and we put in leather sheets. And they were 15% wider, and they had more padding, and they rocked, so you could control them, so the comfort was much better, and we had minimal seat loss.
Speaker Change #132: [inaudible]
Speaker Change #132: and they were 15% wider and they had more padding and they rocked so you can control, so the comfort was much better and we had minimal seat loss.
Adam Aron: [inaudible] It's changed the entire look of the theater and made it look like a car with beautiful leather seats instead of junky stained fabric seats that have had Coca-Cola spilled on them for the last 14 years. We are going to make some press announcements next week about doing that same kind of program in other places. We're not going to get to all 43 theaters right away, but we are going to continue to see what we can do to upgrade our profitable theaters. So that's point one.
Speaker Change #132: And it's changed the entire look of the theater and made it look, you know, like a car with beautiful leather seats instead of junky stained fabric seats that have been... had Coca-Cola spilled on them for the last 14 years.
Speaker Change #132: We are going to make some press announcements next week about doing that same kind of a program in other places.
Speaker Change #132: and we're not going to get to all 43 theaters right away, but we are going to continue to see what we can do to upgrade our profitable theaters. So that's point one. Point two?
Adam Aron: I think there's an enormous opportunity to capitalize on the consumer's desire to watch movies on a giant screen. That means... more Dolby Cinema. It either means more IMAXs or upgrading. Remember, we were one of the first people to put IMAX in with a lot of them. So that means maybe converting some regular IMAX auditoriums, and IMAX lasers with an upgraded sound system, which is a much better IMAX experience. It also means more of our house label. [inaudible] I sense some UK and European prime here in the United States.
Speaker Change #133: I think there's enormous opportunity to capitalize on the consumer's desire.
Speaker Change #133: to watch movies on a giant screen.
Speaker Change #133: That means...
Speaker Change #134: More Dolby Cinemas?
Speaker Change #134: It either means more IMAXs or upgrading, remember we were one of the first people to put IMAX in, we have a lot of them, so that means maybe converting some regular IMAX auditoriums to IMAX lasers with an upgraded sound system, which is a much better IMAX experience.
Speaker Change #134: It also means more of our house label, PLS.
Adam Aron: We have this Excel concept in Europe, which is interesting. I'd really like to see us play up the fact that we have large auditoriums and make sure the consumer knows we have them, because that's what the consumer wants. There are other things, in 40-X's popular. Some chains have them, and they're a little gimmicky, bounce around like a roller coaster, depending upon whether it's D-Box or 4DX and so on and sprays water in your face when that's the right way for eating on the movie screen.
Speaker Change #135: I sense in the UK and Europe , prime here in the United States.
Speaker Change #135: We have this Excel concept in Europe which is interesting. I'd really like to see us play up.
Speaker Change #135: The fact that we have large auditoriums
Speaker Change #135: and make sure the consumer knows we have them.
Speaker Change #135: because that's what the consumer wants.
Speaker Change #135: There are other things.
Speaker Change #136: You know, 4DX is popular.
Speaker Change #137: Some chains have them, and they're a little gimmicky.
Speaker Change #138: Bounce around like a rollercoaster seat.
Adam Aron: We at AMC believe that there's a possibility. One could put something like that in. There's another concept called, what's the Screen Act?, which is a wraparound screen where the screen not only covers the front of the normal screen, but it comes up about a third of the way on either side around you to give you sort of an envelope feel with obviously more of the image on the screen. There are a lot of things we could do, but what we think is the most important thing, and I think if we increase the number of our large screens, that's the smartest thing that we could do.
Speaker Change #138: John Merriwether, Sean Goodman, John Merriwether
Speaker Change #139: We at AMC believe that there's a possibility.
Speaker Change #139: One could put something like that in. There's another concept called, what's the Screen X, which is a wraparound screen where the screen.
Speaker Change #139: not only covers the front, the normal screen, but it comes up about a third of the way on either wall around you to give you sort of an envelope feel with obviously more of the image on the screen. There are a lot of things we could do, but what we think is the most
Speaker Change #139: And I think if we increase the number of our large screens.
Adam Aron: And just to tell you why we're doing this. The premium large format screens, and this is not just IMAX and Dolby, because we have some house brands too. But if you add up all of our... We have 421 of them in the United States. We have 550 of them globally. Those are exact numbers.
Speaker Change #139: That's the smartest thing that we could do. And just to tell you why we're doing this.
Speaker Change #139: The premium large format screens, and this is not just IMAX and Dolby, because we have some house brands, too.
Speaker Change #139: But if you add up all of our
Speaker Change #139: PLS. We have 421 of them in the United States. We have 550 of them globally. Those are exact numbers.
Adam Aron: And they represent about 5% or 6% of our screens, and they represent about 20% of our revenue. So... And there are some in the case of Inside Out 2. The typical.
Speaker Change #139: and they represent about 5 or 6% of our screens and they represent about 20% of our revenue.
Speaker Change #139: So, and there are some, in the case of Inside Out 2,
Speaker Change #139: the typical
Speaker Change #140: PLS sheet
Adam Aron: [inaudible] sold seven times more tickets than the typical seat in a non-PLF auditorium. So, and, and. In very few cases does a PLF auditorium sell fewer than three times as many tickets as a regular seat in a regular auditorium.
Speaker Change #141: sold seven times more tickets.
Speaker Change #141: than the typical seat in a non-PLF auditorium.
Speaker Change #141: So, and, and...
Speaker Change #141: In very few cases does a PLF auditorium sell fewer than three times as many tickets.
Adam Aron: The large format screens are very successful, and that's where I think we have the greatest opportunity, and that's where I would like to see us really make a big dent in improving the product at EMC. The second area where we go is also in the food and beverage area, and we continue to change menus on a monthly or quarterly basis. We continue to try to find consumer-pleasing items because if they're happier at the concession stands, they're going to be happier in the theater experience. If they're happy with the experience, they'll come back more and more.
Speaker Change #141: as a regular seat in a regular auditorium. So, all right.
Speaker Change #141: The large format screens are very successful, and that's where I think we have the greatest opportunity, and that's where I'd like to see us really make a big dent in improving the product at EMC. The second area where we go is also in the food and beverage area.
Speaker Change #142: And we continue to change menus on a monthly or quarterly basis. We continue to try to find consumer-pleasing items. Because if they're happier at the concession stands, they're going to be happier in the theater experience. If they're happy with the experience, they'll come back more and more.
Operator: Other questions, Ron? Yeah, the last question, staying on the theme of investment opportunities, the question is sort of where are we focusing our investment dollars, and I think you've spoken about that right now. But then it goes on to say, are there investment opportunities outside of the exhibition industry that we would consider?
Sean Goodman: Other questions, Sean? Yeah, the last question, staying on the theme of investment opportunities. The question is sort of where are we focusing our investment dollars, and I think you've spoken about that right now. But then it goes on to say, are there investment opportunities outside of the exhibition industry that we would consider?
Adam Aron: This is an area where AMC has had its head jerked around a bit in the last year, because exactly a year ago at this time... We've got, based on the number of authorized shares that we had in our share price, that if we were to use all those shares, not that we would, don't get nervous, retail investors, we, You know, these sheriffs are quite present. It would be quite precious. Give me one second.
Speaker Change #143: So.
Speaker Change #144: This is an area where AMC has a...
Speaker Change #145: Our head jerked around a bit in the last year.
Speaker Change #145: because exactly a year ago at this time
Speaker Change #145: We've got...
Speaker Change #145: based on the number of authorized shares that we had in our share price.
Speaker Change #145: that if we were to use all those shares, not that we would, don't get nervous, retail investors, we...
Speaker Change #145: You know, these shirts are quite...
Speaker Change #145: Precious.
Speaker Change #145: It's quite precious.
Speaker Change #146: Give me one sec.
Adam Aron: [inaudible] We might have been able to raise $6 billion and try to sell those shares at market price, not that we would have done so. We would only have done so if we had something really good to do with money. We didn't have anything that brilliant to do with money.
Speaker Change #146: The
Speaker Change #147: We might have been able to raise $6 billion.
Speaker Change #147: How do we...
Speaker Change #147: Thank you.
Adam Aron: But our share price has come way down in the last year, and today... Based on the current share price, we could probably only raise about $500 million. And if we could only raise $500 million, and if you add that to the $770 million of cash we have now, that money needs to be managed very carefully to make sure that our liquidity position is strong, that we can bring in debt as we need to bring in debt.
Speaker Change #147: But our share price has come way down in the last year.
Speaker Change #147: And today...
Speaker Change #148: Based on the current share price, we could probably only raise about $500 million.
Speaker Change #148: And if we only could raise $500 million, and you add that to the $770 million of cash we have now.
Speaker Change #148: That money needs to be husbanded very carefully.
Speaker Change #148: to make sure that our liquidity position is strong.
Adam Aron: We still have about $450 million of debt that is currently due in 2025 or 2026. Some of that we might be able to push out and extend, but some of it we might buy back. Some of it we might buy back at a discount. We also need money to invest in growth initiatives inside the business, like more PLF auditoriums as I just described a few minutes ago. So, I think right now...
Speaker Change #148: that we can bring in debt as we need to bring in debt. We still have about $450 million of debt that is currently due in 2025 or 2026. Some of that we might be able to push out and extend it, but some of it we might buy back. Some of it we might buy back at a discount.
Speaker Change #148: We also need money to invest in growth initiatives inside the business.
Speaker Change #148: like more PLF auditoriums like I just described a few minutes ago. So I think right now...
Adam Aron: External M&A. If we were to do it, it would only be if we were investing a very small amount of money. [inaudible] $25 million, not $1 billion. And so right now, external M&A is not our highest priority, because we think that we should treat the cash that we have as precious. We should treat the shares that are in the Treasury that we have not yet used as precious.
Speaker Change #148: External M&A, if we were doing, it would only be if we were investing a very small amount of money.
Speaker Change #149: You know.
Speaker Change #150: $25 million, not $1 billion.
Speaker Change #150: And so right now, external M&A is not our highest priority.
Speaker Change #150: because we think that we should treat the cash that we have as precious. We should treat the shares that are in the Treasury that we have not yet used as precious.
Adam Aron: And so I think we've got to grow the business internally and organically for now. With that, everybody. We're going to end the question and session. I'd just like to close the call by reminding everybody that the challenging first half of 24, which was impacted by the 2023 strikes, is behind us. It's in the rear view mirror. So now, at AMC, we believe we're off to a good start. We're highly confident that the box office will be growing in the second half of 24.
Speaker Change #150: And so I think we've got to grow the business internally and organically for now.
Speaker Change #150: With that, everybody,
Speaker Change #151: We're going to end the question and session. I'd just like to close the call.
Speaker Change #151: By reminding everybody that the challenging first half of 24.
Speaker Change #151: which was impacted by the 23, 2023 strikes is behind us. It's in the rear-view mirror.
Speaker Change #151: So now, at AMC, we believe we're off to the races.
Speaker Change #151: We're highly confident that the box office will be growing in the second half of 2024.
Adam Aron: We're highly confident the box office will be growing in 2025, and we're highly confident the box office will be growing in 2026. And that's good news for us. And that's good news for people who want us to succeed. With that, thank you very much for your time today. And we'll adjourn the call. We appreciate you joining us.
Speaker Change #151: We're highly confident the box office will be growing in 25, we're highly confident the box office will be growing in 26.
Speaker Change #151: And that's good news for us, and that's good news for people who want us to succeed. With that, thank you very much for your time today, and we'll adjourn the call. We appreciate you joining us.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #152: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change #152: [inaudible]
Speaker Change #152: [inaudible]