Q3 2024 AMC Entertainment Holdings Inc Earnings Call
Greetings and welcome to the AMC Entertainment Holdings 3rd Quarter, 2024 earnings webcast.
Speaker Change: at this time, I'll participate in our listen-only mode. The question and answer session will follow the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
Please note this conference is being recorded. I'll now turn the call over to John Murray Weather, Vice President, Capital Markets and Investor Relations. Thank you. You may be in.
Speaker Change: Thank you and good afternoon everyone. I'd like to welcome you to AMC's third quarter 2024 earnings webcast. Within this afternoon is Adam Merriwether, 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.
Speaker Change: Newmores risks and certainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-U 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. In light of the uncertainties inherent in any forward-looking statement, 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.
Speaker Change: On this webcast we may refer to non-GAAP financial measures such as adjusted EBITDA, constant currency, contribution margin, among others.
Speaker Change: 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 this afternoon.
Speaker Change: 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.
Adam Merriwether: Thank you, John. Good afternoon, and thank you to everyone for joining us today.
Adam: What a difference a quarter makes.
Adam: As most of you know all too well, the industry-wide box office late last year, and for several months at the start of this year, was severely affected by the prolonged Hollywood strikes of 2023.
Adam: Even so, when we looked ahead, knowing the movie titles that were scheduled for release, we saw better times ahead.
Adam: So, earlier this year, we started saying that we all would finally get to enjoy a surge in moviegoing in the second half of 2024, and that is exactly what happened.
Adam: In the third quarter of 2024, the Domestic Industry Box Office set a third quarter post-pandemic high of $2.7 billion, up 37% from the second quarter of 2024.
Speaker Change: It slightly exceeded last year's Barberheimer-dominated third quarter, and it came within four percent of the pre-pandemic domestic box office of Q3 of 2019.
Speaker Change: The box office's return to life.
Speaker Change: became evident on June 14th of this year with the release of Disney Pixar's record-breaking Inside Out 2, now the highest-grossing animated film of all time.
Speaker Change: and thus far the top-grossing movie of 2024 and the fourth-highest-grossing movie since 2019.
Speaker Change: The third quarter followed Inside Out 2's lead-in, fueled by blockbusters like Disney's Deadpool and Wolverine, Universal's Despicable Me 4, and Twister's
Speaker Change: and Warner Brothers' Beetlejuice Beetlejuice among many other movie titles from a multitude of studios and distributors.
Speaker Change: To illustrate the magnitude of the box office improvement since June 14th of this year, let's compare the first five and a half months of 2024 to the next three and a half months.
Speaker Change: on a per day basis.
Speaker Change: The Domestic Injury-Wide Box Office was 82% stronger between mid-June and end-September than it was in 2024 prior to June 14.
Speaker Change: And that strengthened entity-wide box office translated to strong performance by AMC Entertainment in the third quarter of 2024.
Speaker Change: Solidifying our financial metrics.
Speaker Change: Our net loss in the third quarter of 2024 was narrowed by fully 37%.
Speaker Change: AMC's total revenues were 31% stronger than our revenues of Q2 2024. During the third quarter of 2024, we are proud that AMC achieved a new record for our third quarter admissions revenue per patron.
Speaker Change: And we're even happier to report that we set an all-time record for any quarter ever for our food and beverage revenues per patron.
Speaker Change: AMC's Adjusted EBITDA was four times stronger in Q3 of 2014.
Speaker Change: than that of Q2 of 2024, four times stronger.
Speaker Change: Indeed, AMC's adjusted EBITDA posted in the third quarter of 2024 was the second best EBITDA performance of any third quarter in AMC's 104-year history, second only to last year's third quarter of 2023.
Speaker Change: that AMC realized that just at EVITA in this just-completed third quarter
Speaker Change: Q3 of 2019, five years back, even though our attendance in the just-completed quarter
Speaker Change: was a full 25% lower than it was in that third quarter of 2019 pre-pandemic.
Speaker Change: of enormous importance as we look ahead for the next two years.
Speaker Change: Looking forward, not looking backwards. We believe that the box office will continue on its recent marked rise.
Speaker Change: There's an impressive Q4 2024 movie slate about to be released into our theaters in the coming weeks.
Speaker Change: highlighted by two beloved blockbuster Disney storylines, Mufasa the Lion King and Moana 2.
Speaker Change: Adding to the excitement is Universal's highly anticipated film Wicked, the adaptation of the 21-year-running second most successful Broadway musical ever.
Speaker Change: Some people in the know are telling me that they think Moana 2 could eclipse and outshine even the success of Inside Out 2.
Speaker Change: and early critics of use of Wicked are stellar. Wicked has already been described as quote, a masterpiece, unquote.
Speaker Change: Notwithstanding the success of Taylor Swift's record-breaking The Heiress Tour concert movie, which was the top movie in last year's fourth quarter, as well as Beyoncé's renaissance film, both of which are our very own creations here at AMC,
Speaker Change: We anticipate that the Q4 2024 Domestic Box Office will emphatically surpass last year's Q4 results.
Speaker Change: And that's just the beginning.
Speaker Change: It is Anne C's belief.
Speaker Change: at the 2025 Domestic Industry Box Office.
Speaker Change: should easily surpass.
Speaker Change: That of 2024.
Speaker Change: with bankable titles hitting our theaters next year such as Paramount's Mission Impossible 8, Universal's Jurassic World 4, and Disney's Captain America Snow White, The New Thunderbolts, and of course Avatar 3 as just some of the big movies coming next year.
Speaker Change: And as for 2026...
Speaker Change: 2026 could make 2025 look small.
Speaker Change: We currently believe that the domestic box office will be bigger still.
Speaker Change: Two years out.
Speaker Change: Movie theater ticket sales should continue to build, led by some truly blockbuster releases.
Speaker Change: including the next chapters of the Avengers, Star Wars, Batman, Super Mario Brothers, and Toy Story franchises lighting up our huge silver screens at AMC in the United States, Odeon in Europe, and AMC Cinemas in the Middle East.
Speaker Change: The buzz and excitement surrounding theatrically released movies over the next two years is nothing less than palpable.
Speaker Change: We believe that as the industry's largest player,
Speaker Change: And an increasingly efficient one at that, AMC is well poised to benefit from that highly likely increase in moving going.
Speaker Change: The other accomplishment of vital importance by AMC in the third quarter of 2024 was our continuing to successfully strengthen our balance sheet.
Speaker Change: As you know, in the quarter, we announced that we extended up to $2.4 billion of our long-term debt maturities from 2026.
Speaker Change: to 2020-2029 and 2030. That is a big step forward for AMC. So, too, is that in 2024 year to date,
Speaker Change: We paid down some $345 million of debt and raised some $250 million gross proceeds of equity.
Speaker Change: This all translated to ending the third quarter with some $527 million of cash on hand.
Speaker Change: I have said many times that cash is king and that AMC must maintain ample cash reserves.
Speaker Change: Similarly, paying close attention to our balance sheet has been a mandatory priority at AMC Entertainment.
Speaker Change: These are among the major reasons why AMC has survived these past four and a half years at a time, by contrast, when so many of our competitors failed.
Speaker Change: As we move forward, we will continue to take actions as needed to keep our cash reserves
Speaker Change: and to lessen our debt.
Speaker Change: We could not be more pleased with the response both from retailers and by consumers to our ready-to-eat and microwaved lines of popcorn.
Speaker Change: As you'll recall, it was launched exclusively at Walmart in 2023.
Speaker Change: on walmart.com and at more than 2,500 Wal-Mart stores for our ready-to-eat popcorn and at 500 Wal-Mart stores for our microwave corn.
Speaker Change: In 2024, this year, we successfully added Kroger, Publix, Meijer, and Amazon.com online, bringing our store count now to well more than 6,000 locations.
Speaker Change: selling AMC Perfectly Popcorn.
Speaker Change: for 2020, sorry, for 2025.
Speaker Change: Wal-Mart and Kroger have advised us that they are adding our microwave line
Speaker Change: in up to 4,000 or more of their stores on top of where it was carried previously. We also added Hy-Vee and Associated Wholesale Grocers, which supply several dozen regional and smaller grocery chains.
Speaker Change: As a result...
Speaker Change: We would expect to see AMC Perfectly Popcorn on the shelves of as many as 10,000 or more retail locations.
Speaker Change: By early or mid-year 2025,
Speaker Change: That's about four times where it was.
Speaker Change: in mid-2023.
Speaker Change: Our distribution footprint is expanding so rapidly.
Speaker Change: because sales of our home popcorn are brisk.
Speaker Change: and it is AMC Purpley Popcorn that is actually driving the category growth.
Speaker Change: successfully launching a new packaged goods food product for the home is not at all an easy task. Most people who try fail and as I just said
Speaker Change: At AMC, we could not be more pleased about where we are only 18 months after initial product launch.
Speaker Change: With that, I'll now call, turn the call over to Sean Goodman, our Executive VP and Chief Financial Officer, to take you through the third quarter in more detail. And then I'll return afterwards.
Speaker Change: for a very important update on our plans for a growth trajectory ahead. Sean? Thank you, Adam, and thanks to everyone for joining us this afternoon.
Sean Goodman: As Adam noted, the North American Box Office experienced a very strong recovery as we moved into the second half of this year.
Speaker Change: While the box office in North America exceeded the prior year's third quarter, AMC's consolidated attendance was approximately 12 percent below the same period last year.
Speaker Change: There were two factors driving this result.
Speaker Change: First, the phone slate did not resonate as well in Europe as in North America.
Speaker Change: This is particularly for titles such as Deadpool and Wolverine, Twisters, and Beetlejuice Beetlejuice.
Speaker Change: The result is that the overall theater industry
Speaker Change: In the European markets in which we operate, experience and attainments decline approximately 16% in Q3-24 when compared to the same quarter last year, when titles such as Oppenheimer and Barbies outperformed in the European markets.
Speaker Change: Second, in our domestic business, performance rate in Q3 2024 skewed in attendance away from the major urban centers such as New York and Los Angeles where AMC has our largest presence.
Speaker Change: This was particularly evident with titles such as Twisters, Stickable Me, and Beetlejuice, compared to the prior year, when again Oppenheimer and Barbie attendance skewed very much in favour of AMC's urban geographic footprint.
Speaker Change: As a result, our overall North American market share declined by approximately 60 basis points. This is related to the interplay between the form slate and our geographic mix.
Speaker Change: During the third quarter, we welcomed 65 million moviegoers to our theatres worldwide. This represents a sequential revenue increase of approximately 31% compared to the Hollywood strike-impacted second quarter of 2024, and resulted in an indicator of more than four times that of Q2 of 2024.
Speaker Change: A key to our post-pandemic recovery trajectory over the last few years has been the success of our profit optimization initiatives including elevating the guest experience
Speaker Change: optimizing the theater fleet, tightly managing expenses and improving operating efficiency.
Speaker Change: These initiatives allowed us to achieve adjusted EBITDA in Q3 of 2024 that was in line with pre-pandemic Q3 of 2019, despite selling 25% or 22 million fewer tickets.
Speaker Change: We achieved this notable result due to record revenue per patron of $20.72.
Speaker Change: up 37.1% from pre-pandemic 2019.
Speaker Change: And by the way, compared to Q3 of 2023, both revenue per patron and contribution margin per patron increased by approximately 8%.
Speaker Change: Recall that we define contribution margin per patron as the total revenue, less form exhibition costs, and less food and beverage costs, divided by the number of guests.
Speaker Change: This measure is indicative of the incremental profit generated per additional guest at our theaters.
Speaker Change: It is worth noting this quarter that our food and beverage initiatives led to all-time record achievements in food and beverage revenue per patron during the quarter.
Speaker Change: Consolidated food and beverage per patron hit a high of $7.53.
Speaker Change: an increase of 14.8% compared to Q3 of 2023, and an increase of 56.3% compared to Q3 of 2019.
Speaker Change: Both the domestic and the international business achieved all-time records for food and beverage per pager.
Speaker Change: And in our international business, food and beverage revenue from the patron was $5.07, 12% ahead of Q3 of 2023, and 41.5% of Q3 ahead of Q3 of 2019.
Speaker Change: Our results for the quarter reflect continued success.
Speaker Change: of our market-leading food and beverage offerings including collectible movie-themed items, movie-themed cocktails, and menu upgrades.
Speaker Change: world-class marketing, leading position in immersive premium large format auditoriums, and revenue diversification initiatives such as retail popcorn.
Speaker Change: Now let's move on to the balance sheet.
Speaker Change: The third quarter began with a substantive strengthening of our balance sheet.
Speaker Change: As previously announced at the beginning of the third quarter, in a collaborative agreement with both our second lien and first lien firmland lenders, we extended the maturity date of approximately $2.4 billion of debt from 2026
Speaker Change: to 2029 and 2030.
Speaker Change: And in addition, since our last webcast, we've taken significant further actions to reduce debt and extend maturities.
Speaker Change: Two, we reduced our second-year debt due in 2026 by approximately $128 million through buybacks and exchanges of debt for equity.
Speaker Change: 3. We reduced our senior subordinator notes due in 2025 by approximately $28 million through buybacks or exchanges of debt for equity.
Speaker Change: And four, we reduced our senior subordinated notes due in 2026 by approximately $10 million through exchanges of dividend or equity.
Speaker Change: In addition,
Speaker Change: In total, since our Q2 earnings webcast, we were able to reduce our debt through these transactions by approximately $165 million using a combination of cash and approximately 14.2 million shares of common stock.
Speaker Change: bringing the total reduction in principal, debt and finance leases to $349 million thus far in 2024 alone.
Speaker Change: And since the beginning of 2022...
Speaker Change: We've lowered the principal value of our debt and finance leases by approximately $1 billion, and we've repaid $277.3 million of deferred leases.
Speaker Change: All this for a total debt at the third rent reduction of $1.31 billion.
Speaker Change: For now, our capital allocation priorities remain. One, liquidity. Two, reducing financial leverage and strengthening the balance sheet.
Speaker Change: 3. Investing in our existing business 4. Investing in attractive, high-return growth initiatives
Speaker Change: Q3, net cash used in operating activities was $31.5 million, and we ended the quarter with cash of $527.4 million, excluding restricted cash, which was $49.7 million.
Speaker Change: Based on our box office forecast, we would expect net cash provided by operating activities to be positive in the fourth quarter.
Speaker Change: CapEx, net of land hold contributions was $50 million, point two.
Speaker Change: and we continue to expect Net CapEx in 2024 to be in the range of $175 to $225 million.
Speaker Change: The deferred rent balance at the end of Q3 was approximately $38 million. We plan to reduce this balance by another $2 million during the fourth quarter.
Speaker Change: And from a theatre portfolio perspective, during the quarter we closed 11 underperforming locations and we opened one new location.
Speaker Change: And we continue to see that the 61 new locations very significantly outperform the 187 closed locations.
Speaker Change: So, in summary, the box office recovery has resumed.
Speaker Change: and our profit enhancement initiatives that are yielding record results plus the actions that we continue to take to strengthen the balance sheet position us very well.
Speaker Change: to capitalize on what we expect will be an increasingly strong box office through the remainder of 2024 and in 2025 and beyond. And with that, I'll now hand the webcast back over to Adam. Thank you, Sean.
Adam Merriwether: At AMC, our hard work, imaginative thinking, and bold actions over the past few years have allowed us to successfully manage through challenging times when others in our industry have faltered.
Speaker Change: But by definition, to survive COVID and then the 2023 Hollywood Strikes,
Speaker Change: We've necessarily been on our heels much of the time and playing on the defensive.
Speaker Change: Yes, we've repeatedly taken smart and decisive action to protect the business and position our company for success as the industry recovers.
Speaker Change: But now...
Speaker Change: Finally, now.
Speaker Change: We can see that real success is at hand, and not all that far ahead of us.
Speaker Change: with an expected multi-year rising theatrical box office in our near-term future.
Speaker Change: and the significant debt maturities having been extended far out.
Speaker Change: We are finally ready to play on the offense again.
Speaker Change: with what we are calling, and we'll announce by press release tomorrow, AMC's GO Plan.
Speaker Change: Go. G period. O period. Go on offense.
Speaker Change: AMC's GO Plan is a multi-year initiative focused on strategically reinvesting in our core business to further elevate and differentiate the moving going experience that we offer to AMC and ODEON guests.
Speaker Change: In the process, we will be striving to add mightily to our current adjusted EBITDA levels and to generate attractive returns for our shareholders as a result.
Speaker Change: specifically.
Speaker Change: AMC's GO Plan calls for AMC to invest between 1.0 and 1.5 billion dollars over the coming four to seven years back into our theaters and into the AMC Odeon movie-going experience.
Speaker Change: coming at a time of a likely theatrical box-office resurgence.
Speaker Change: We are hopeful that in so doing, investing back in our core business, we can turbocharge our financial results.
Speaker Change: in the quarters and years ahead.
Speaker Change: Of course, it goes without saying.
Speaker Change: that we will implement AMC's Go Plan only as we successfully manage our debt reserves, our debt levels, our liquidity, our cash reserves, and our leverage.
Speaker Change: with AMC's GO Plan.
Speaker Change: We will be providing our guests with an ever greater selection of premium experiences.
Speaker Change: Immersive sight and sound enhancements, more comfortable seating, and upgraded theaters, as well as other initiatives including upgrading our IT systems.
Speaker Change: and considering how the smart use of AI can improve AMC's bottom line.
Speaker Change: Some of the components of AMC's GO Plan are already being implemented now, and others will be implemented over time.
Speaker Change: But only as and when our financial resources prudently allow.
Speaker Change: So, let's talk some more about just some of the key components.
Speaker Change: of AMC's GO Plan, here are three in ascending order of importance. First, laser projection. As you know,
Speaker Change: We previously announced an agreement with Simionic to launch our first major broad-scale projector upgrade since the transition to digital film decades ago by now installing barco-laser projectors broadly throughout AMC auditoriums.
Speaker Change: This project is currently well underway.
Speaker Change: And as we sit here right now today, we currently have some 2,137 screens in the United States now equipped with and marketed as laser at AMC.
Speaker Change: No surprise.
Speaker Change: Guests are reacting extremely positively to the brighter images, more vivid colors, and consistently sharp image quality associated with laser projection. Dimming and lamp degradation are a thing of the past in these auditoriums.
Speaker Change: This is a major greening of AMC as well, which also plays well with consumers because laser projection is considerably more environmentally friendly than its predecessor projection technologies.
Speaker Change: In the time frame of AMC's GO Plan,
Speaker Change: It would be our hope.
Speaker Change: to at least double.
Speaker Change: and maybe even triple our current number of laser and AMC equipped auditoriums.
Speaker Change: Second in the plan is theater renovation and upgrading seating efforts.
Speaker Change: AMC's GO Plan will allow us to continue to invest
Speaker Change: in some of our best and most productive theaters.
Speaker Change: where, in our view, renovation would cause significant increases in their theater-level EBITDA and or prevent erosion in our operating cash flows when competitors try to claim the moviegoers who are currently ours.
Speaker Change: In recent years, as Sean just mentioned, we have not been shy, to the contrary, been quite aggressive.
Speaker Change: in opening shiny new theaters in superb locations geographically and in closing tired older theaters where it would be unwise for us to reinvest.
Speaker Change: That strategy of pruning our fleet by eliminating weak theaters and adding profitable new ones will continue.
Speaker Change: And some of that will be funded by AMC's GO Plan.
Speaker Change: But Ainsley's girlfriend also will allow us
Speaker Change: to make important what we think are the almost sure-bet investments
Speaker Change: in some of our absolute best and most productive theaters, where in our view, renovation would cause significant improvements to our already quite solid financial results.
Speaker Change: The caveat, of course, in saying it's an almost sure bet is that nothing in life is certain, but there is opportunity in life that is often worth grabbing.
Speaker Change: Right now, for example, we've been putting in new, wider, and much more comfortable plus-rocker seats with a feel of leather at three theaters which routinely rank among the five highest-grossing AMC theaters in the entire United States currently.
Speaker Change: We started in our flagship theater, Burbeck 16, in Los Angeles, which received this major seating upgrade last year.
Speaker Change: Our guest scores went up markedly.
Speaker Change: Based on that success,
Speaker Change: Since Labor Day of this year, we are in the process now of doing so at our two most successful New York City theaters in Manhattan, at AMC Lincoln Square 13 and at AMC Empire 25. Over 4,000 aged and tired fabric chairs.
Speaker Change: In Manhattan, Ardena plays with Plus Deluxe Rockers, offering guests between 12% and 23% wider seats.
Speaker Change: These significantly upgraded seats.
Speaker Change: are visually stunning and physically much more comfortable.
Speaker Change: As part of the senior renovation of Lincoln Square, our new seats in most of the programs also will feature
Speaker Change: 10 inches of additional legroom from the current 38 inches instead of 48 inches of legroom between rows in 8 of our 13 Lincoln Square auditoriums.
Speaker Change: That will mean that AMC will offer legroom of four feet for your two legs. How's that for a slogan?
Speaker Change: making for a much more enjoyable viewing experience.
Speaker Change: And we believe that will open the door to even higher profitability at that already very successful theater for AMC.
Speaker Change: The upgrade at Lincoln Square will be completed this month before Thanksgiving. We expect to complete much of the Empire 25 seating upgrades before the rush of the holiday movies around Christmas, with the entire renovation of Empire 25 being finished during Q1 of 2025.
Speaker Change: Beyond just these three theaters.
Speaker Change: Long list of high-performing AMC theaters that could receive significant seating and other upgrades as part of AMC's GO Plan, which in our view will make those theaters even more successful, even more profitable.
Speaker Change: As a third, an extremely important element to ANC's GO Plan.
Speaker Change: Pre-Large Formats, or PLFs.
Speaker Change: and extra-large formats.
Speaker Change: AMC already benefits from having the most premium large format screens of any movie theater chain in the world.
Speaker Change: In the United States, for example,
Speaker Change: AMC single-handedly represents just under half.
Speaker Change: of all of IMAX's U.S. screens and 100% of all of Dolby's Dolby Cinema-branded U.S. screens.
Speaker Change: We also have 31 Primate AMC screens in the U.S. That's our house brand here domestically. Some 423 PLF screens in total.
Speaker Change: including IMAX, Dolby Cinema, and our 82 iSense, those are our house brand PLFs in Europe, we now have some 566.
Speaker Change: PLF screens globally, no one else comes close.
Speaker Change: From our package data, we know with certainty that moviegoers increasingly seek out our premium large format screens. On average, our PLF screens in the U.S., for example, do about quadruple
Speaker Change: Quadruple derivatives.
Speaker Change: of our non-POF houses.
Speaker Change: You all know the saying, fish where the fish are.
Speaker Change: moviegoers clearly want PLFs and through AMC's Go Plan we have every expectation of improving the quality and increasing the number.
Speaker Change: of our PLF auditoriums.
Speaker Change: Under the auspices of AFC's GO plan, we would expect to continue to increase the number of our IMAX auditoriums, but more importantly, we intend to upgrade many to IMAX's latest technology.
Speaker Change: not so long ago.
Speaker Change: Only 42 of our 223 IMAX theaters offered the superb IMAX with laser product.
Speaker Change: including laser projections and its enhanced 12 channel sound system along with significant recliner or plus rocker seating upgrades.
Speaker Change: We are optimistic that AMC's GO Plan will enable us going forward to have IMAX with laser installed in more than two-thirds of our homes.
Speaker Change: of our IMAX deployments.
Speaker Change: We are also proud of our success, our clear success, in establishing the Dolby Cinema PLF brand in the United States.
Speaker Change: As a result of AMC's GO Plan, we would expect to increase the number of our Dolby Cinema locations in the U.S. by 25 percent, bringing our total globally up to about 214.
Speaker Change: As envisioned in AMC's GO Plan, we further expect to more than triple the number of our prime and AMC auditoriums, prime being our U.S. House plan and field labs, from the current 31 to what we hope will get up to about 100.
Speaker Change: We indeed hope to have...
Speaker Change: A hundred of these wonderful offerings in which no royalty has to be paid to a third party, I might add, installed in our theaters over the next several years.
Speaker Change: Beyond our so-called PLUFs,
Speaker Change: Also, in another press release that will be issued tomorrow,
Speaker Change: We will unveil...
Speaker Change: A new auditorium product.
Speaker Change: But I don't think any of you have heard about yet.
Speaker Change: called XL at AMC. XL stands for Extra Large Screens.
Speaker Change: And we'll be getting another AMC Innovation.
Speaker Change: and one of the many premium experiences that AMC will offer to our guests.
Speaker Change: It is modeled after something that we've been testing and piloting in Europe over the last year, where...
Speaker Change: XL, or XL at AMC, lets us brand and leverage other offerings currently in place.
Speaker Change: or envisioned for ODEON and for AMC.
Speaker Change: For example, here in the United States, we already have extra large screens in place at almost all of our theaters presently, but they've never been marketed as such.
Speaker Change: Now, we're just not living in the laws that we have large screens. We're combining some of these larger screens with a new laser projection that has been or will be deployed in our theaters.
Speaker Change: specifically the brand standards for XL and AMC here in the United States
Speaker Change: will include screens that are sized only 40 feet or wider. What's more, in our new XL product, we will especially offer another upgrade in immersive sight and sound, the latest 4K laser projection technology.
Speaker Change: Thanks to AMC's Go Plan, we anticipate rolling out approximately 50 to 100 XL and AMC screens in the United States within calendar year 2025.
Speaker Change: with the potential to grow the total number of XL and AMC screens in the United States to between 200 and 250 screens over time in addition to our XL screen count in Europe.
Speaker Change: with the introduction of AMCXL.
Speaker Change: We will specifically identify the largest screen or screens in the theater, equip them with the best in 4K laser projection.
Speaker Change: And through Excel and AMC branding, arm our guests with the knowledge to select their auditorium of choice when reserving their seats.
Speaker Change: In Europe, we are currently charging an extra euro or an extra pound for our XL screens. We've not yet decided whether it's smarter to charge an extra dollar here in the United States, or instead, to keep our current pricing as is.
Speaker Change: And instead, generate our financial returns from the added patronage that will come our way thanks to offering a clearly superior and guest-pleasing consumer offering.
Speaker Change: Take all this together, adding IMAX screens, upgrading our current IMAX screens to IMAX with laser, increasing the counts of Dolby Cinema and Prime screens, and introducing XL at AMC, and introducing XL in Europe.
Speaker Change: AMC's GO Plan features as its hallmark a significant commitment to building upon AMC's now massive competitive lead in TLF moving going.
Speaker Change: It's our view that these investments in premium auditoriums are an ambitious and an aggressive step.
Speaker Change: Indeed, going on offense.
Speaker Change: for our much-deserving retail shareholder base and those institutional investors who care to join them.
Speaker Change: That's so given their popularity of premium screens, not only with moviegoers, but also with movie studios who tell us constantly that they recognize and seek out the unparalleled audience experiences and creative opportunities that AMC offers.
Speaker Change: through our premium screens at AMC Theatres.
Speaker Change: Two final thoughts about AMC's GO Plan. First,
Speaker Change: It does not pertain exclusively to our domestic theaters.
Speaker Change: Our ODM team in Europe is excited about the opportunity to roll out internationally as well, where industry PLF screen density is lower than that of the United States.
Speaker Change: at a differentiated experience.
Speaker Change: as evidence in our PLFs resonates with consumers extremely well. Similarly,
Speaker Change: In terms of theatre renovation in Europe and the introduction of new theatres into our fleet, we've already identified opportunities to add theatres or to develop a meaningful number of additional Lux cinemas, especially in the United Kingdom.
Speaker Change: Our Lux Theatres, here to four introduced in Europe, have been quite a successful innovation by AMC. These theatres, as you know, boast of upgraded amenities, including reclining seats, premium auditoriums, handsome theatre lobbies, and enhanced bars and concession areas.
Speaker Change: Audiences have been keen on our Lux cinema experience in Europe.
Speaker Change: And happily for us, feeder landlords, eager to drive football to their developments, often have been quite willing to provide a substantial portion of the required capital investment, resulting in healthy financial returns for AMC.
Speaker Change: The second thing that I want to stress about our GO Plan...
Speaker Change: is that we will carefully marry our going on offense plan with respect to added capital investments.
Speaker Change: with our financial ability to do so.
Speaker Change: We can either go fast or go slow. We said four years to seven years.
Speaker Change: But we will not get ahead of our skis.
Speaker Change: As we see it today,
Speaker Change: Substantially heightened CAPEX levels will only occur with rising EBITDA.
Speaker Change: or a sense within our shareholder base that it is wise to increase the pace of equity raising, not just to maintain our cash reserves or manage our debt load, but also for the purpose of increased capital expenditures specifically aimed at accelerating our growth.
Speaker Change: Thank you for listening today.
Speaker Change: Mark's not all rosy. We had a good quarter, but we still have challenges to navigate. Most obviously, adjusted EBITDA on calendar year 2024 is expected to be but a fraction.
Speaker Change: of where it was in 2019 pre-pandemic and we are well aware that it's not yet where we will need to get it to be.
Speaker Change: But even so...
Speaker Change: The quick synopsis of this call is fourfold. One, the third quarter was a success at AMC.
Speaker Change: 2. We have been smartly managing our cast levels.
Speaker Change: Just at the same time, I've been actively addressing the amount and timing of our debt obligations.
Speaker Change: and Thor.
Speaker Change: We have a plan and are committed to going on offense again.
Speaker Change: looked at as a whole, assuming we continue to do all the right things in managing this company.
Speaker Change: making sure that our liquidity and leverage is well managed, that our business is operating efficiently, and that we produce rising EBITDA in the years ahead, we could not be more confident
Speaker Change: about the future for AMC.
Speaker Change: Sean, that concludes my remarks. Let's open up the webcast for questions both from our retail shareholders and from our equity research analysts.
Sean Goodman: Thanks Adam. So we have questions from the retail shareholders and I'll ask just a few of those and then we'll pause and see if there's any questions from the equity research analysts.
Sean Goodman: starting with questions from our retail shareholders. The first one relates to the loyalty programs, our AMC loyalty programs. The question is really, are there plans in place to enhance or change these loyalty programs at AMC in the future?
Speaker Change: I am actually very glad you asked that question because, as you know, I'm a marketing guy by training, and I'm so proud of what AMC has done in the area of loyalty. We have three major programs.
Speaker Change: that have massive enrollments.
Speaker Change: and each of the three is vital to our success.
Speaker Change: A couple of years ago, we launched something called AMC Investor Connect.
Speaker Change: It was a free program for our retail shareholders to join that would get them frequent benefits at AMC, including the occasional free this and free that.
Speaker Change: almost on a monthly basis. We're coming out with significant offers to them four to six times a year. This is a group that has been very loyal to AMC. And in fact, we track their patronage.
Speaker Change: because they also were enrolled in AMC Stubs, our frequent movie door program, so we could see what movie tickets they were buying. And our AMC Investor Connect population, 1.4 million strong.
Speaker Change: is about twice as loyal to AMC as our regular AMC Insider Stubs members and like infinitely more loyal to AMC than the great population as a whole who are not in our loaning program.
Speaker Change: Then, that's Program 1. Program 2 is AMC Stubs.
Speaker Change: which is our Play for Points movie theater equivalent of a frequent flyer program. Over the years, we've enrolled...
Speaker Change: I think it's 34 million households, U.S. households, in AMC Stubs. It was only two and a half million households when I joined the company nine years ago. This has been a massive area increase for AMC. Back when I joined AMC, about 19% of our guests
Speaker Change: We're playing for points through AMC Stubs in the third quarter, and in fact for the latest 12 months ending September 30.
Speaker Change: 48%
Speaker Change: of our guest tickets.
Speaker Change: are purchased by members of the AMC Stubs Program. And it's not just that...
Speaker Change: We've got a lot of consumers intrigued with playing our game. It's so important for us.
Speaker Change: Because remember, we know the movie ticket buying habits.
Speaker Change: of the members of our AMC Stubs program.
Speaker Change: So, if you went to see Mission Impossible 7 last year, guess who's going to get a lot of marketing to see Mission Impossible 8 in 2025? If you show up as a Stubbs member to see Wicked two weeks from now...
Speaker Change: Guess who's gonna get a reminder next Thanksgiving when Wicked Part Two comes out? We actively market through email, push notification, and text.
Speaker Change: Billion of times a year to the members of our stubs program. It's an immensely important and successful program for us. And then the third program, which actually is subset...
Speaker Change: of AMC Stubbs is AMC Stubbs A-List, our subscription program we're under current rules for somewhere between 20 and 25 dollars a month we get to see up to three movies a week.
Speaker Change: You may recall the pandemic just gutted.
Speaker Change: and A-List. We had to pause the program for a couple of years.
Speaker Change: There's no point having a subscription program when movie theaters are closed for months on end, or when there are very few movie titles coming out. Fortunately, since we reopened our theaters and restarted AMC Stubs,
Speaker Change: We've seen a dramatic increase in the number of members and I believe the count that I last saw was
Speaker Change: up about two-thirds.
Speaker Change: in terms of AMC lists active paying current members today as contrasted with the number we started with coming out of the pandemic pause.
Speaker Change: The only other reason I'm just so excited to talk about Stubbs and A-List endlessly is because I don't want to announce it today, I don't want to announce it tomorrow, I don't want to announce any other things.
Speaker Change: But I can tease this audience to tell you, we have some significant enhancements coming, both to the STUBS program and the A-List program in 2025.
Speaker Change: We've been working on this for almost a year. We did a lot of market research in 2024. We test marketed some of these things in a few cities. We're confident they're going to work. We're confident they're going to drive significant improvements to our bottom line. And.
Speaker Change: make both the A-List and the SUBS programs all that more appealing to their members.
Speaker Change: So watch this space for important stubs and A-list announcements for 2025.
Speaker Change: That's exciting stuff. And the next question here is about investment spend. Can you talk more about the financing and timing of investments that we plan to make in the future? Sure.
Speaker Change: You know, for the past several years, we've been investing about $200 million a year in CapEx.
Speaker Change: What we've announced with
Speaker Change: the AMC go plan is that we're going to invest in CapEx in our fleet of theaters somewhere between a billion dollars and 1.5 billion dollars over the next four to seven years. Now at the slowest
Speaker Change: That's a little bit more than $200 million a year. At the fastest, $375 million a year. We'll decide how much we're spending in the future years.
Speaker Change: Only by applying the fiscal discipline
Speaker Change: That a youth practice is our CFO and I've talked about on this call already We've got to marry our spending with either rising invent a rising EBITDA, which could fund increased spending or alternatively
Speaker Change: If our shareholders were to tell us...
Speaker Change: That they think it's smart of us
Speaker Change: to increase capital expenditure spending.
Speaker Change: specifically with the purpose in mind of accelerating growth. So the exact timing and speed is something that we'll decide over the course of the next several years.
Speaker Change: But as we outlined on the call today, we have a lot of very specific ideas of opportunity in the company that could turbocharge our EBITDA returns.
Adam Merriwether: Thanks, Adam. And, Diego, let's pause with the retail investor questions and see if there are any questions from equity research analysts.
Speaker Change: Thank you. And those on the phone to ask a question, press star 1 to queue up for a question and press star 2 to remove yourself from the queue. Once again, to queue up, press star 1 on your telephone keypad.
Speaker Change: Our first question comes from Jim Goss with Barrington Research. Please go ahead.
Jim Goss: Okay, thank you.
Jim Goss: Adam, I know you are all about the creative use of your platform. I was wondering if you might talk a little about AMC's participation in the effort by IMAX, insurance biggest partner, to exhibit the Penn State Washington football game on live on selected IMAX screens.
Jim Goss: and sort of on a related basis, is there any likelihood you might...
Speaker Change: try to initiate a similar program since you would arguably have greater available screen capacity. I assume rights issues are the primary obstacle and the level of...
Speaker Change: Interest in specific games tend to be very localized, but how do you approach this opportunity? How do you size it? And maybe this new emphasis on the Excel screens might tie into this.
Speaker Change: Thanks for the question, Jim, and hope you're well.
Speaker Change: I spoke with Rich Gelfand, the CEO of IMAX, as recently as yesterday about their Penn State Washington initiative. We've long been in IMAX's corner. We represent, as I said, almost half of the total U.S. IMAX screens in the United States.
Speaker Change: Provided they can get a suitable window, an exclusive theatrical window, we're...
Jim Goss: Well, we can do just about anything with IMAX.
Jim Goss: and I'm optimistic that IMAX could do some interesting things.
Jim Goss: not just related to Penn State, Washington, but other things as well. And I've got a lot of confidence.
Jim Goss: and Rich to make good things happen for IMAX, which in turn makes good things happen for AMC. If he brings us the Penn State-Washington game, we will play it, of course.
Jim Goss: That triggers the whole question about sports and sports rights. I've long believed...
Jim Goss: that sports programming is an extremely attractive alternate programming opportunity for AMC. You'll recall that for two seasons we carried NFL games
Jim Goss: but we we did so under some
Jim Goss: Quirky writes from Given to us by Direct TV. We couldn't ever mention the word NFL. We couldn't ever mention
Jim Goss: A team name, because those were proprietary trademarks.
Jim Goss: of the league and the clubs, and we can only carry the wrong games, which are out-of-market games.
Jim Goss: Like here in Kansas City, they only want to watch the Chiefs.
Jim Goss: Where you are in Chicago, they want to watch the Bears.
Jim Goss: Like, I'm sure the Jacksonville-Seattle game is a great game, but the games that we ought to be playing are home games, and we ought to do it...
Jim Goss: in full cooperation with the NFL not going around them. There are some things we are willing to experiment with. Even in football, we've been quite intrigued about carrying nationally broadcast games.
Jim Goss: Whether that's the Thursday night games, or the Saturday night games, or the Sunday night games, or the Monday night games, or the playoff games, we don't have those rights yet.
Jim Goss: But we will continue to work with those entities that can get us those rights.
Speaker Change: every single budget issue we have put forward and monitored. And when we succeed, we'll be very happy and we'll test it and bring it out and see what happens. I think you mentioned college football. We've long thought that while the teams may have regional appeal, when we look atру different kind of optimizations, we've asked people to consider various different male programs. There's a number of black schools, there are black kids, there are African American schools, there are kids who go to college, festivals, Asia.
Speaker Change: There are a lot of teams with a lot of regional appeal in a lot of regions, so I will hope that we'll also continue to introduce conversation with collegiate sports.
Speaker Change: to see what kind of collegiate sports we can carry. Obviously, it will be different.
Speaker Change: collegiate teams that we're following in different cities around the country. We had good success.
Jim Goss: with things like UFC and other things that we tried a couple summers ago.
Jim Goss: So we're going to try to bring some of those opportunities back into the system. So that's the long answer to your question. The short answer to your question is, yeah, I think there's real promise.
Jim Goss: In order to content
Jim Goss: The key is getting the rights to the correct events.
Jim Goss: and we're in active dialogue with a lot of sports leagues to see what we can get our hands on at AMC.
Jim Goss: Okay, thank you. And one other one, if I might. The franchise-heavy film release slate should support some assurances of continued recovery. I was wondering, though, if you can discuss the role of the smaller films relative to norms and the impact of
Jim Goss: gaining those films and concentration and film rent splits and also the interplay with streaming options for these smaller films versus theatrical releases.
Speaker Change: I'm glad you limited your follow-up to one question, because there was two questions, and there were only nine questions in there. I'll just try to give you a general answer. I'll just try to... No, you're doing well. I'll just try to give you a general answer to the whole thing.
Speaker Change: When we do our forecasts around here,
Jim Goss: for the size of the box office.
Jim Goss: We literally do it on a title-by-title basis.
Jim Goss: And in here, that film forecast is updated on a weekly basis.
Jim Goss: I mean it's circulated on a weekly basis. It's upgraded by our programming staff on a daily basis.
Jim Goss: And so we're tracking not only the blockbuster movie titles, but also the smaller and mid-size titles. And yes, we're, you know, thrilled beyond thrilled that there are so many blockbuster franchises coming in 2025 and 2026.
Jim Goss: But there are also a lot of medium and smaller size movies coming and Like we need them all. We can't just survive on the blockbusters though it's
Jim Goss: We need the blockbusters, but we also need the medium and smaller size movies.
Jim Goss: And in our conversations with...
Jim Goss: major Hollywood studios, one thing we're like most encouraged about
Jim Goss: If so many studios are trying to increase the number of movies that they release now,
Jim Goss: as compared with what they were releasing a year or two or three years ago.
Jim Goss: Calendar Year 2025 11129
Jim Goss: wants to issue more products.
Jim Goss: And some of that's the big massive products, like Avatar 3 and the latest Star Wars movie and the latest Avengers movie, like we're happy about that, but we're also happy with the medium and smaller size movies and as you rightly pointed out.
Jim Goss: our film ranch, we don't really disclose the terms of our deals with each studio, but it's well known That the bigger the movie often would pay a higher gross split
Jim Goss: to a major studio, which means that we get to keep more of the smaller and medium-film box office grosses, and that's helpful to us as well. So on balance...
Jim Goss: As we look at 2020, the remainder of 2024.
Jim Goss: All of 25 and all of 26, there are a lot of big blockbusters coming. We know the students want to release more and more titles, including a medium and smaller size ones, and that all bodes very well for the recovery of our industry broadly, but of ANC specifically.
Jim Goss: Thank you.
Speaker Change: All right. Well, thanks very much. I'll stop there.
Speaker Change: Thank you. And we have time for one more question, and that question comes from Alicia Reese with Wedbush Securities. Please state your question.
Speaker Change: Adam Merriwether, Adam Aron, Sean Goodman
Alicia Reese: Hi, thanks for taking my question guys. Jim asked one of my questions thankfully, but I do have a couple others. I'm wondering if you could just give some, if you could put some takes on the concession costs. It looks like that was quite a bit lower domestically than it has been trending recently. Perhaps there were some one-time items, perhaps some easing of commodity costs in the domestic region. I'm wondering if you could give your take on the quarter and what to expect going forward on that line item.
Speaker Change: Let me pass that one to Sean.
Sean Goodman: Sure. Thanks, Aneesha. I've been doing well. With respect to the food and beverage cost,
Alicia Reese: When you compare it to quarters when our attainance and revenue is lower,
Jim Goss: Would you get a benefit on food and beverage costs when attendance is higher? Why is that? Because you have less spoilage and less shrinkage as a percentage of the total volume of food and beverage sold. So that's one factor to take into account.
Jim Goss: Yes, there have been price increases, particularly in commodities like cocoa.
Jim Goss: But at the same time, we have a very focused and successful procurement team that has done a lot of work in terms of looking at mixer products.
Jim Goss: suppliers of different products, etc.
Jim Goss: And we do get rebates, and you see some of the impact of rebates coming through the numbers in Q3.
Jim Goss: And that certainly helps our food and beverage costs as well. So going forward, if I look out for the remainder of the year, which is basically Q4, right, I think that food and beverage costs should be pretty much in line with what we were able to achieve in the third quarter.
Speaker Change: And let me just chime in, it's a small small numbers but when you go to margins and percentages, including our food and beverage numbers are the merchandise that we sell at our concession stands.
Speaker Change: and this has been a massive success for AMC.
Jim Goss: and in calendar year 2024.
Jim Goss: It's going to be about $50 million.
Jim Goss: and somewhere between $50 and $75 million. Maybe we can even beat $75 million next year. But our profit margins on merchandise are more like 50% whereas our profit margins on other food and beverages are in the low 80s.
Jim Goss: So, um...
Jim Goss: Mind you, a 50% profit margin is nothing to sneer at, well it's hot money.
Jim Goss: Take as much of that as we can get, but that's...
Speaker Change: Just one more thing in your list of modeling.
Speaker Change: I think that's an important point, Adam, because despite that, because the merchandise and collectible concession vehicles were up significantly in Q3-24 versus Q3-23, not close to 200%, that does put pressure on the food and beverage costs, exactly as you said. Despite that, our food and beverage costs are still lower, which gives you an indication of the success we're having in managing those costs.
Adam Merriwether: Thank you.
Adam Merriwether: Obviously, there's so many things in there, and with the popcorn expanding early to mid-year next year, just taking that into consideration.
Adam Merriwether: alongside Q4'23 when you had Taylor Swift. That added quite a bit in there, I think, for distributing that. Just wondering if you could give us some sense of where you expect that to track on a per-cap basis, maybe around $182 on a normalized basis, perhaps, once you get the full distribution of popcorn into stores.
Speaker Change: Good luck.
Speaker Change: I agree with you, I'm glad I'm not taking that question. Good luck, Sean. Go ahead. No, look, Aneesh, that's absolutely right. Included other revenue is the retail popsicle and stuff.
Jim Goss: So you would expect, and the retail popcorn sales have grown significantly when you look at a quarter over quarter, year over year, right, comparison, Q3, 24 versus Q3, 23.
Speaker Change: So, you know, that impacts your revenue per patron, and I think when you look at Q4, and you look at the following year,
Speaker Change: Well, what's going to happen is the retail revenue sales, probably in Q3 and Q4, are going to be relatively similar, but because Q4's...
Speaker Change: Likely to be higher attendance, likely to be a higher box office, the impact is going to be less. I'm looking out to 2025, we should continue to see that revenue per se.
Speaker Change: Adam Aron, Sean Goodman
Speaker Change: Thank you, really appreciate that detailed answer.
Speaker Change: Before we end the call, I know it's late and there's like a lot of election news that people want to continue to go back and pay attention to. Let's take one last question from our retail shareholders before we end the call.
Speaker Change: Thanks Adam. And so the last question that I will read out here from our retail shareholders relates to the box office and the question is really when do we expect the industry box office to reach a steady state and return to the traditional pre-pandemic industry growth rates?
Speaker Change: So, um...
Speaker Change: You know, I mean, I think that the answer to that question is almost the whole saga of this earnings call combined with Jim Goss's question.
Speaker Change: It's been a long time in coming. The pandemic knocked the industry box office down 80 percent.
Speaker Change: And we've been on a bill, sort of straight up.
Speaker Change: Since 2021.
Speaker Change: But it's been a slow build, and the pace of that growth was knocked off to the side by the Hollywood Strikes of 2023. But as we look ahead...
Speaker Change: You know, we'll all know on December 31 where this year ends up.
Speaker Change: It'd be nice thought to think that the industry box office
Speaker Change: in 2026 could get near to pre-pandemic levels. I don't know that it's gonna go all the way up to 11 and a half billion in 2026, but an important point for everybody to remember.
Speaker Change: If an AMC does not need...
Speaker Change: the box office to return to pre-pandemic levels.
Speaker Change: to outproduce pre-pandemic levels of Evita.
Speaker Change: because of the operational and financial efficiencies that we've achieved in this company over the past several years. Just look at this year. The attendance
Speaker Change: in Q3 was 25% down.
Speaker Change: from the third quarter of 2019 pre-pandemic.
Speaker Change: and yet our EBITDA was in line.
Speaker Change: with the pre-pandemic level of Ivatah in the third quarter. So our prop, whatever you want to call it, our contribution per patron, our profit per patron, there are a lot of phrases you can use to describe it, but the amount of money we make from each body coming into our theaters,
Speaker Change: There's a lot more today.
Speaker Change: than it was a few years ago. And so we don't need the box office to return historic levels.
Speaker Change: at the top line of revenue.
Speaker Change: to our ticket revenue, let's say.
Speaker Change: to outshine our former performance at the bottom line, which is, of course.
Speaker Change: Everybody should be very excited about 25, 26, and 27, and the box office looks good enough for us to be a quite successful company in 25 and even more so again in 26.
Speaker Change: With that, I think we're going to end the call. What a good quarter.
Speaker Change: We have an exciting plan going forward.
Speaker Change: We're going to put out a press release tomorrow that will give you a little bit more information about...
Speaker Change: AMC's GO Plan.
Speaker Change: We're similarly going to put out a press release tomorrow that will give you a little more description about Excel and AMC, which we are quite excited about. As I said, we think we can get it up to 200 to 250 screens in the United States, in addition to the current 68 that we already have in Europe. Thank you for joining us, everybody. We will talk to you again.
Speaker Change: 90 days from now.