AMC Entertainment Holdings, Inc. (AMC) on Q1 2024 Results - Earnings Call Transcript
Operator: Greetings and welcome to the AMC Entertainment Holdings Inc. First Quarter 2024 Earnings Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Merriwether, Vice President, Capital Markets and IR. Please go ahead, sir. John Merriwether: Thank you, Joe. Good afternoon. I'd like to welcome everyone to AMC's first 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. Numerous risks, uncertainties 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-K and 10-Q. 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. On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, constant currency, free cash flow 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 this afternoon. 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@amctheaters.com later today. With that, I'll turn the call over to Adam. Adam Aron: Thank you, John. Good afternoon, one and all, and thank you for joining us today. Against the backdrop of an industry box office that was hampered by Hollywood strike induced production delays, AMC once again outperformed. We exceeded Wall Street expectations for total revenues, adjusted EBITDA, net income and diluted earnings per share. It was no surprise for most of the student observers that the number of major film releases in the first quarter of 2024 would be greatly reduced because of production delays caused by the five months long actors and writers strikes of 2023 in Hollywood. Indeed we saw that one major studio had its first quarter domestic box office revenues decreased by an astounding 98% compared to the first quarter of 2023. That studio's decline was not because of some strategic shift to streaming or a disinterest by consumers in going to movie theaters. It was solely because they were not able to release new films into the market due to the actors and writers strikes of mid-summer last year. However, at AMC, we were heartened by several important events in the first quarter. First, the movie-going bounced back in March, which was a considerably stronger month than January or February. Second that our company's intensive review of the movies coming out later in 2024, 2025 and 2026 suggest in our view that very good times are ahead for the movie theater industry. And third, that our company AMC Entertainment performed so well in Q1, increasing our market share and continuing to become a more potent and more efficient operator. Notwithstanding a 6% decline in the quarter's North American box office compared to 2023, AMC's total revenue remained broadly in line with the prior year. And our per patron revenue and per patron profit continued along their stellar growth trajectory with all-time first quarter records achieved on these two metrics in our domestic business. At AMC in the quarter, our total revenue per patron was almost 36% above the pre-pandemic level in Q1 of 2019 and even more impressive is that our contribution margin per patron defined as total revenue, less film exhibition costs and less food and beverage costs divided by the number of patrons was almost 44% above pre-pandemic Q1 of 2019. These achievements are thanks to our relentless focus on enhancing the guest experience at our theaters, while at the same time driving efficiency in our operations. Through our resilience, resolve, creativity and flexibility, AMC continues to adeptly navigate through changing and challenging circumstances. Our surging revenues per patron and surging profit per patron numbers are why at AMC we believe that there is now a path for AMC to achieve the same levels of EBITDA that we enjoyed pre-pandemic even at lower levels of revenue. What's more, if and when the industry revenue does fully recover, we would then expect to be able to achieve substantially higher levels of EBITDA than we did in the past. Moviegoer sentiment is clear. Guests want to see movies on a huge silver screen and they are consistently willing to pay more for the best possible experience. That certainly favors AMC as we have more premium large format screens, namely IMAX, Dolby Cinema and Prime than any other cinema operator in the world. Consumers are also paying up for innovative food and beverage offerings and AMC continues to outsell all our major competitors in F&B. All moviegoers also are now buying movie themed merchandise from us, online, and in our concession stands in quantities that we have never before seen. Enough said for me about the first quarter of 2024, because my focus is not on a strike that impacted January and February movie releases. It is instead on two other things. First, it's not the movies that were not released in January and February. It is instead the movie slate that is coming over the next 2 years to 2.5 years. I am more optimistic now about the future of movie theaters than I have ever been and that's because of the movie slate that's coming especially towards the end of 2024, in 2025 and again in the first half of '26, which hold in my opinion great promise. Second, I am paying great attention to our cash reserves. I've said over and over again on these calls and webcasts that cash is king and that the smartest thing AMC has ever done since COVID hit in 2020 was to make sure that our cash reserves at AMC were robust, while other theater operators fell by the wayside. To that end, it is so energizing and so reassuring that we had $624 million of unrestricted cash at the end of Q1 and that AMC has raised yet another $124.1 million of equity capital since March 31. With cash in the bank, we are better prepared to weather any storm, but fortunately storms do end. As a result, we see the box office turning an important corner later this year and again in full year 2025. This is not just AMC's view. Having recently returned from our industry's largest and most important annual gathering, CinemaCon, the positive energy in the air was palpable. One studio after another confirmed that film production was once again in full motion, that they were eager to bring more titles to the silver screen and that the value of theatrical exhibition has never been more evident. I'm not going to regale you on this webcast with all the titles of the cavalcade of big movies that are coming, but they are indeed coming. And it all starts in just a few months with a great slate of movies exclusively for theatrical exhibition. They include new characters and captivating storylines along with familiar faces and popular franchises. When I look at year end 2024, especially at full year 2025, and I see in the industry box office, I don't think I should say yet, Hallelujah, let the good times roll, but I can finally say with confidence, Hallelujah, let the significantly better times roll. Things are looking up as we look ahead. I'll now pass this webcast over to Sean to provide more details on our financial results just released after which I'll return to update you on some key initiatives before taking questions from our sell side analysts and from our retail shareholders. Sean? Sean Goodman: Thanks, Adam, and thank you to everyone for joining us this afternoon. The box office in the Q1 was impacted by last year's Hollywood strikes despite a 6% decline in the North American box office compared to Q1 of 2023. AMC was able to maintain total revenue within 1% of last year's first quarter. This was achieved thanks to the North American market share growing by over 70 basis points more than any other top 50 theater operator, solid attendance growth in our European business of approximately 6% and total revenue per patron growth of 1.8%. Now looking at our domestic segment and comparing the first quarter of 2024 to Q1 of 2023, with the box office down by approximately 6%, our admissions revenue declined by 3.2% outperforming the industry and total revenue declined by only 2.2%. Total revenue per patron increased by 3.8% with admissions revenue per patron up by 2.7% and food and beverage revenue per patron up by 1.2%. These per patron metrics were all time first quarter records for AMC and our total revenue per patron was some 43% ahead of the Q1 of pre-pandemic 2019. In addition, our contribution margin per patron which we define as total revenue less film exhibition costs and less food and beverage costs provided by the number of guests was $15.32. This is 5% above the first quarter of 2023 and 54% above the first quarter of pre-pandemic 2019. These strong per patron metrics are as a result of the continued success of our innovative market leading food and beverage offerings as well as our alternative content and immersive [indiscernible] offerings and revenue diversification initiatives such as retail popcorn. Add to this our ongoing theater portfolio rationalization and thoughtful expense management and we end up with record setting results. Now looking at our international segment and comparing the first quarter of 2024 to Q1 of 2023, this is all in constant currency. Admissions revenue increased by 3.7% and total revenue increased by 2.8%. Total revenue per patron declined by 2.9% with admissions revenue per patron down by 2% and food and beverage revenue per patron down by 1.4%. Note that total revenue per patron was 27.8% ahead of the first quarter of pre-pandemic 2019. Contribution margin for patron was 3.6% below the first quarter of 2023, up 30.3% above the first quarter of pre-pandemic 2019. Our international per patron metrics this quarter were adversely impacted by country mix with relatively strong attendance growth in the traditionally lower revenue per patron market of Italy coupled with attendance declines in the traditionally higher revenue per patron markets of Sweden and Germany. In addition, while our European attendance benefited from strong local content offerings particularly in Finland, Germany, Italy and Sweden. Such content is associated with lower PLF mix and lower revenue per patron. As we continue along our recovery glide path, we will maintain our focus on providing a differentiated high value guest experience at our theaters across the globe and profitable revenue growth through diversification initiatives such as retail popcorn, AMC branded candy and the distribution of alternative content. All of this while paying very close attention to our overall operating efficiency. Now moving to cash flow and the balance sheet. We ended the quarter the first quarter of 2024 with unrestricted cash of $624.2 million which translates into $188.3 million of net cash used in operating activities for the quarter. This is broadly in line with the net cash used in operating activities in Q1 of 2023. CapEx net of landlord contributions was $46 million in the first quarter. We continue to expect net CapEx in 2024 to be in the range of $175 million to $225 million. From a theater portfolio perspective, we continue to actively manage our footprint. During the first quarter, we closed four underperforming locations and we added one new high performing theater. This will bring the total number of locations closed since the pandemic began to 169 and the total number of new locations opened to 60 for a net reduction of 109 locations or 10.9% of our locations at December 31st, 2019. And we continue to see that the 60 new locations clearly outperform the 169 closed locations. To ensure our ongoing recovery and position us to thrive as our industry grows, our top two capital allocation priorities must remain. Number one, we must ensure that we have sufficient liquidity to manage through our recovery phase including the impact of last year's Hollywood strikes. And number two, we must strengthen our balance sheet by extending debt maturities and improving our financial leverage. During the first quarter, we exchanged $17.5 million of debt for roughly 2.5 million shares of common stock recording a profit of $5.8 million. And we also repaid approximately $8.4 million of deferred rent. The deferred rent balance at the end of Q1 was $47.9 million and we would plan to reduce this balance by another approximately $12 million by the end of 2024. Thus far during the second quarter of 2024, we have raised $124.1 million of gross equity proceeds excluding commissions and fees through the sale of approximately 38.5 million shares under our existing ATM or at-the-market offering program. So overall since the beginning of 2022, so over the last 2.3 years, we've raised nearly $1.2 billion of gross equity capital with lower the principal value of our debt and finance leases by $707 million to debt repayments, repurchases or exchanges of debt for equity and we repaid $267 million of deferred leases. This all for a total reduction of debt and deferred leases of $974 million. This debt reduction has also lowered our annual cash interest expense by approximately $60 million. These actions have prepared us to face with confidence a relatively weak box office in the first half of 2024. And while the second quarter is forecast to be well below 2023's record second quarter that quarter benefited from the tremendous success of titles such as Super Mario Brothers, Guardians of the Galaxy and Spider Man: Across the Spider-Verse, we are increasingly enthusiastic about the second half of the year and a return to a strong and vibrant post-pandemic growth trajectory. And now I hand the webcast back over to Adam. Adam Aron: Thank you, Sean. Before taking your questions, I'd like to bring you all up to date on five ongoing initiatives at AMC. First, is our continuing dialogue with several of the world's greatest musical artists. As you know, for the first time in our company's history, in late 2023, we surprised the world with our Taylor Swift and Beyonce concert films. That appears to be the gift that keeps on giving because ever since we've been in conversation with artist after artist after artist after artist. Some of the biggest names who routinely fill arenas and stadiums the world over. That has led to an announcement just yesterday of our collaboration with nine time Grammy Winner and two time Academy Award winner, Billie Eilish in partnership with Apple Music and Interscope Records, next week, on May 16 and 17, our AMC Theaters Dolby Cinemas will be an integral part of the launch of her new album, Hit Me Hard and Soft. In a special listening event, Billie Eilish fans will be able to hear the new album in Dolby Atmos sound exclusively at AMC Theatres, the day before the album is released to the public. The visual content on screen has been carefully selected to delight those in attendance. This is just the beginning of the innovative programming that will be coming to our theaters from our new distribution arm, AMC Theaters Distribution. While the Billie Eilish listening event will take place only at AMC locations. We took great pride that so many of our fellow movie theater operators were included in our efforts with Taylor Swift and Beyonce. We expect going forward that some of our activity in this sphere will be exclusively held at AMC locations only and that other activity cooperatively will be shared across our entire industry. Second, let's talk briefly about the success of AMC's retail popcorn initiative which just now has celebrated his one-year anniversary. Initially offered exclusively at Walmart with ready-to-eat popcorn at just 550 locations, but within weeks thereafter, we introduced our microwave popcorn varieties, and we expanded to some 2,600 Walmart stores as well as to walmart.com. Sales have been brisk and more and more retailers have decided to carry our branded popcorn for the home. Today, AMC's Perfectly Popcorn is now sold at 6,500 points of distribution or nearly 12 times as many locations as when we first launched a year ago. We've added amazon.com as well and grocery juggernauts Publix and Kroger to our distribution channels and we are ambitiously pursuing further growth, adding more grocery chains as we look ahead later this year and next. The third topic to discuss today is our exploding food and beverage sales numbers, which lead the industry among major operators in the United States. Naturally, we are pleased that the New York State legislature, just weeks ago, agreed to allow movie theaters to serve alcohol, a ban that has been in place for almost a century, believe it or not. This means for us that we can have lucrative liquor sales at 30 more AMC Movie theaters across the State of New York. Beyond that, our culinary team continues to work passionately on innovative in-theater food and beverage offerings. For example, on more than 400 AMC theaters across the country in the United States, we've just added new fresh donut hole offerings in multiple flavors to sweeten the moviegoing experience. The Baker's Dozen shareable donut holes come in three heavily flavors, cinnamon sugar, strawberry and our proprietary peanutbutter blend created in partnership with PB2. Every serving comes with a container of warm icing to make each bite even sweeter and add just a few calories to this neat little offering at AMC. These things might look like donut holes to our guests, but to us, they look like incremental dollars. We expect to sell a lot. Similarly, we're innovating at our 50 dine-in theaters as well, where guests are served a more comprehensive food and beverage menu. We've added four entirely new offerings, new artisan pizzas with five different topics, two new chicken sandwich choices, each nestled on a toasted brioche bun. A new Caesars sell with chicken to complement our already popular cobb salad. And last, but certainly not least, again, to satisfy those sweet tooth or teeth, we have introduced milkshakes in five flavors, including chocolate with ghirardelli chocolate syrup, vanilla, strawberry, peanut butter with a REESE'S peanut butter sauce, and an Oreo shake with Oreo cookie pieces mixed in. It's no accident that AMC food and beverage leads the way in our industry. We devote substantial resources to imaginatively understanding the flavor palette and the diverse tastes and appetites of AMC moviegoers. The fourth topic to discuss quickly, at our European theaters, we have just introduced an intriguing innovation, which we've named XL. We have branded more than 60 of our larger screen auditoriums, but screens that would not necessarily qualify as a premium large format. We've given them an XL name, XL for extra-large, of course and gently nudge into the market, a small premium price in these auditoriums. We're watching the success of this new product very closely to see if we should expand the concept further in Europe and/or to our US theaters as well. And finally, fifth, we are taking our AMC Investor Connect program very seriously, both to reward our shareholders and to stimulate added patronage at our theaters from the more than one million members in this program. In the summer of 2021, AMC launched AMC Investor Connect, a first-of-its-kind program in which our shareholders were invited to enroll, so that we could engage directly with them. Investor benefits to our retail shareholders through AMC Investor Connect have included shareholder inclusive promotions, NFTs, free or discounted items, invitation and special screenings and communications directly from me as CEO of the business. Our continued commitment to AMC Investor Connect recognize the important role that our retail shareholders have played in getting AMC through these past difficult COVID and strike impacted years and the program is designed to provide them with truly exclusive rewards and benefits. Especially knowing that there are many retail shareholders listening to this webcast right now, can I remind you all that at 7 P.M. local time tonight, in our IMAX Dolby Cinema and AMC Prime auditoriums, we are offering a special advanced screening of Disney's stunning new movie, that's right, Kingdom of the Planet of the Apes, which opens to the general public this weekend. We hope you enjoy it. Now it's time to take your questions. But before I do, here are our final thoughts on the first quarter and our near and longer-term prospects. In the first quarter, AMC exceeded all expectations, a quarter that admittedly was impacted by last year's Hollywood strikes. The second quarter's box office, while likely -- will be sequentially stronger and bigger than Q1, but it will still to be impacted by the strikes of last year and will fall significantly below last year's second quarter because last year's second quarter just happened to be the single strongest quarter in all of 2023. However, when we speak again in August after the second quarter is in the books, based on what we know today, we believe that the summer box office will be strong, healthy and growing. AMC is poised handsomely to benefit as our moviegoing audience will be thoroughly entertained next summer by titles playing at an AMC theater near you, including Disney's Deadpool and Wolverine, and Universal's Despicable Me 4 and Twisters. And looking beyond just the summer, we similarly are excited about what we anticipate for the fourth quarter with such blockbusters titles as Warner Bros.' Joker, Folie a Deux, Universal's Wicked bringing to the screen with the Broadway musical that is run for decades and more like Disney's Mufasa: The Lion King and Sony's Venom: The Last Dance. I could go on and on and on about the movies that are coming in 2024. But not only are we confident about in the second half of 2024, we are also literally enthralled about an accelerating box office recovery as we head into 2025 and on into 2026. The box office in 2025 should be materially stronger than it has been in several years. AMC continues to be resilient, leveraging innovation as well as hard and smart work to navigate through these turbulent times. We have positioned ourselves not only to survive and troubled waters, but also to thrive as our industry grows. And as we look at 2025, we believe that our industry will again grow. We think the future, therefore, looks very bright. With that, Sean, let's move to questions. Operator: [Operator Instructions] And our first question comes from the line of Jim Goss with Barrington Research. Please proceed. James Goss: All right. Thanks. Adam, regarding your discussion about food and beverage initiatives, clearly, dollars are more important than margin percentages. But I wonder if you could talk about how you think in terms of introducing items and the pricing attached to those items and where you feel the food and beverage margin should settle in. It slipped a little bit in the last quarters for some of the reasons that have taken place. Adam Aron: So Jim, we're picking up increased food and beverage sales, sort of a staggering numbers. Pre-pandemic, routinely, food and beverage sales per patron were about $5 ahead of AMC. I'm using the domestic numbers as a placeholder, not the European numbers. European numbers are a little bit less than the US numbers. And they shot up to around $8 to $9 a head post-pandemic. So we're looking at a huge increase. And our F&B margins are in the low 80s. I know it varies item by item and quarter-by-quarter. But my rule of thumb is about 82% of incremental food and beverage sales flows to the bottom line. So when we pop a $4 increase in food and beverage spending over where we were a few years ago like -- that's a huge driver of income for us. And it's one of the reasons that our revenue per patron is up so much. It's one of the reasons our profit per patron numbers are up so much. And it really comes from three factors maybe I should say four factors. One, we have slightly and only slightly raised the prices on our F&B products. Second, though, more and more people are stopping at our concession stands and buying food and beverage items from us. There is no rule that says you have to buy food or drink when you come into movie theater. You can just buy the ticket, go to your chair, enjoy it, enjoy the movie and leave. But what we have seen over the last couple of years is that we're doing a much better job in capturing more people to stop the concession stand and buy. The third factor is they're buying more items. So where they -- where someone used to buy one item, maybe they're buying two. If they're buying a drink and a popcorn and maybe they're buying a third item as well. If they are buying three items before, now they're stocking up and buying four. If there are mobile people in the party maybe more people in the party are taking items individually in the theater. And then the fourth item, and this is one of the issues that might affect food and beverage margins a little bit. Our merchandise sales at the concession stands, which are not as high a margin as 82%, but they're still very attractive margins. Three or four years ago, we didn't have any merchandise sales at our concession stands like literally zero. In calendar year '23, we had $54 million of merchandise sales just at our US theaters. So that might affect the margins a little bit. But as I said, this whole area has been one of staggering success for us. We've given our food and beverage organization more staffing, more resources to run our F&B business. We've asked them to launch innovative new products in our theaters at our dine-in our theaters, at our concession stands, at our regular theaters. And so far, so good. We're quite optimistic that this growth will continue. And that the margins are going to stay real high. I have often said you can do very well when you're selling air and water, air being popcorn and water being Coca-Cola. So this -- the whole industry has been pretty successful in improving its F&B numbers over the last few years. But AMC has really led the way, we've outpaced everybody else. James Goss: Okay. Thanks. And just one other one. If we use the Billie Eilish concert as a prerecorded concert as an example. Is this something you think you could than share with cinema competitors? Or would that -- is that just a one and done sort of thing? Or could you do a limited run at AMC like every Wednesday or something of that nature to take advantage of it, but not interfere with your first run theater or first run films. Adam Aron: So when you talk about every Wednesday, that means 52 Wednesdays. James Goss: Well or not necessarily just some pattern. Adam Aron: No, I know. But I would say with nine Grammys and two Oscars there aren't 52 Billie Eilishs. So I don't -- and it's a tremendous amount of work to get these artists to agree to showcase their talent in our theaters. But that having been said, I don't think we'll be doing 52 a year of them. But I do think that we'll be doing several per year. Even a onetime listening event is lucrative for us on a per screen basis. And of course the Taylor Swift and Beyonce concert films were enormous for AMC. They represented more than 15% of our total profitability for the year last year, if you look at the EBITDA they generated. I do think that many of the -- I do think that -- as a whole, look, I don't think, I know from having talked to so many people who are either the artists themselves are representing the artists that there's a lot of interest in the movie industry generally based on what we pulled off collectively for Taylor and for Beyonce, I would expect several major projects a year. I'm really excited about this listening event for Billie Eilish because it's not a concert film. It's her new album release, which they put some visuals to. Is it possible that a lot of major artists will look to movie theaters as an intriguing way to launch their albums and to get garner extra publicity and fan interest, especially auditoriums of [indiscernible] was something as industry leading as Dolby Atmos sound. We put together the Billie Eilish thing with pretty tight timing. So it really wasn't practical to try to take this one to our competitors. But the success of Taylor and Beyonce was that we did take it to our competitors. It wasn't just an AMC thing. It was an industry thing. We had a very good market share, but it was -- it was an industry wide effort. And we're going to be working very hard with our fellow movie theater operators through AMC Theaters Distribution, our distribution firm to offer experiences not only at AMC, but also to take them to our competitors' theaters as well. So I really think it's an industry wide opportunity, but AMC is blazing a new trail and we're way out in front. And the summary is some of them wind up doing ourselves alone exclusively. And others we will certainly take to our competitors. I got to say this is one circumstance where our competitors have been fabulous to work with. We fight like cats and dogs all year long, but on pulling off Taylor Swift and pulling off Beyonce, so many of the names that you would recognize as major theater chains in the US, in Canada, in Mexico, Europe and globally, we are our best possible partners in this effort and we would expect to be able to bring more such experiences to them, either later in 2024 or in 2025. James Goss: All right. Well, thanks very much for taking my questions. Adam Aron: Thank you, Jim. Operator: And the next question comes from the line of Alicia Reese with Wedbush Securities. Please proceed. Alicia Reese: Good afternoon, gentlemen. I'm looking at the dynamics around market share and film rent. And so I'm just looking at -- there are a few titles in the quarter that drove most of the box office, particularly domestically. And a lot of that coming from June, which presumably led your market share gains in the quarter as you have the largest footprint of IMAX screens and that played very well on IMAX. But I'm wondering if you could talk at least qualitatively about the dynamics that drove your film rent substantially lower year-over-year. Adam Aron: Sure. I'll throw in something and Sean will take it in addition. If you look at the first quarter there were fewer big blockbuster films and more middle-sized films that were in our theaters that did really well. And if you look at the -- we've never really disclosed our deal studio by studio. But they tend to be on sliding scales where studios command a higher film rent on higher grossing films. And the fact that there were so many middle size and smaller films that led the way in the first quarter, that explains a lot of why the film rent reduction was achieved by AMC. You want to add anything? Sean Goodman: Yes. So I'll just give you a little bit more color. So when we look at the number of titles that we played in Q1 2024, over $5 million, we had 41 in Q1 versus 35 in Q1 2023. And obviously, the box office was lower in '24 than 2023. So, yes, June was the biggest title of the quarter, no significant. But after June, the box office per title went down quite significantly. And so it's exactly as Adam says when the firms have a lower gross per showing that certainly impacts our firm rent favorably. Alicia Reese: Thank you. Operator: Thank you. There are no further questions on the audio line. I would like to turn the call back to management for retail shareholder questions. Adam Aron: Thank you, operator. Okay, Sean. So what questions have come in from our retail shareholders? Sean Goodman: So the first question is related to market share as well. And the question says that AMC has been growing market share in the US market, while at the same time, closing underperforming theaters. So can you comment about what we can attribute the success to? And do we see this market share growth as sustainable as the industry recovers? Adam Aron: Sure. So, yes, it's a pretty impressive trick to increase your market share when you're closing 100 theaters. But that's exactly what we did. And part of it is -- and as you mentioned in your earlier remarks, our 70 basis point improvement in market share with a higher market share growth that was achieved by any of the 50 largest movie theater circuits in the United States. That's very encouraging for us. Part of it is because we think our theaters are in good shape. Part of it is because we think we've got very strong marketing, which I will talk about later. But also what's really interesting is that the theaters that we are closing were our older, more tired theaters, buildings that were sort of at the end of their 20 or 30 year useful lives that weren't grossing all that much. And the theaters that we opened were shiny new ones in great locations, usually open with reclining seats to start. And as it turns out, it's incredible, but true, the 60 theaters that we opened outgrossed the 169 theaters that we closed. So we're replacing older, tired unsuccessful theaters with thriving ones. And some of the ones that we've opened are amongst our -- literally, our highest grossing, most profitable theaters in all of Europe and in all the United States. Sean Goodman: Terrific. And the next question is about AMC Cinema Suites. Question here is looking for an update on Cinema Suites? And is there a chance that we release these products on the retail channel? Adam Aron: So Cinema Suites is doing great. We're very pleased. As you all know, I think, it was in the fourth quarter of 2023. We unveiled a proprietary house brand of premium gourmet candies, chocolate covered peanuts, chocolate covered raisins, chocolate covered almonds, chocolate covered pretzels. Four different SKUs. We say they're premium gourmet candies because they have a lot more chocolate. And we tend to charge the same price for Cinema Suites as we charge what I call regular branded candies that are weighed on those loves. They've been selling well. We've been -- they're nicely ahead of expectations. We've had no problem with the supply chain and getting these delivered to us in quantity. And I would think that we would, in fact, take them to the retail market at some point going forward. Exactly when, I don't know. It's not the highest priority. There are other things that are higher on the list of things to do to make more money for AMC, but Cinema Suites have done great. We're glad we did it. Sean Goodman: Great. And then the next question is about our capital expenditure. Can we provide some color on AMC's CapEx spend, where are we allocating the money? Adam Aron: Well, since your nickname around here is Dr. No and you're the one who is raising the capital -- and we've done everything in our power not to spend capital expenditures at the moment because our preference has been to build up our cash reserves for a rainy day. Why don't you answer the CapEx question? Sean Goodman: Thanks, Adam. Well, it's true we are very disciplined in our capital spend, particularly during this recovery period. But the good news is that AMC has a very large number of high return investment opportunities. Right now, we're prioritizing those investments that maintain our existing buildings, our existing equipment, our IT capabilities so that we can continue to provide the best possible guest experience. But we're always allocating our capital to the best risk-adjusted return opportunities and we continue to do that. When I look to the future and I see the sort of the pipeline of attractive investment opportunities we have. They include our premium large format auditoriums, side and sound upgrades, automation of the guest experience, better seating, et cetera. So again, there are many very attractive opportunities, but now around 75% of our capital spend is really focused on attaining the assets to continue to provide the best possible guest experience. Adam Aron: Thank you, Sean. And I might add that I think the priority of spending has been maintenance CapEx first because we have to keep our theaters in decent shape. But to the extent that we have additional monies in the door, our priority has been to use that to build up our cash reserves. My comments in my earlier prepared remarks that cash is king. It's a serious comment. I do believe that one of the reasons why AMC has defied gravity the last four years and surprised a lot of people who thought we might run into trouble, but we didn't as we build up our cash reserves intelligently. But having said that, there are so many interesting ways that we could reinvest in the business. And I personally think the most lucrative of those ideas is, as you said, the increased premium large-format screens. I hope that we can add more IMAX screens and Dolby Cinema screens. We are the largest IMAX exhibitor in the world outside of China. We're the largest Dolby Cinema exhibitor in the world. We have about half of the IMAX locations in North America. We have all the Dolby Cinema locations in North America, those auditoriums do extremely well. And if we can wrestle up some capital expenditure money to do it, adding more of them is a great idea. Sean Goodman: Agreed. Next question here is related to debt. The investor asks with a significant amount of debt maturing in 2026, two years from now, what is the company doing to address this debt that is maturing and reduce the overall debt level? Adam Aron: So in terms of reducing the debt level, we have done, I think, a phenomenal job over the last few years of paying down debt and other deferred obligations like deferred rent. We, in the last two years roughly, we paid off almost $1 billion of long-term debt and other deferred obligations, which is encouraging. We've done that in part by buying a lot of debt back in the open market at a discount, which means you're doing it at a profit, which is also good. Still realizing we are playing a capital allocation game of reducing debt, buying in debt versus investing in the business through CapEx versus building up our cash reserves. It's a bit of an art form, which actually shown here you manage this process day to day. But -- and we paid off or reduced so much of our debt and obligations. It is kind of staggering to me that we had to borrow about $2 billion to survive COVID. And yet if you look today at our net debt, AMC's net debt today is less than it was just prior COVID. So how is it possible that we had to borrow $2 billion to survive and yet we have less debt today than we had going into COVID. And the answer, of course, is because we raised a lot of equity and we paid down debt, which is important for us to do. Looking forward, we still have about $4.5 billion of debt, not much maturities before 2026, but there are huge maturities in 2026. And I can assure everyone listening to this call today is that the management of this company, which has been pretty smart in how we've navigated ourselves through the pandemic heretofore and a leveraged balance sheet without a lot of EBITDA heretofore, that same management team is wholly focused on the debt maturities that are due in 2026. This is not something that we're going to look at next year or the year after that. We've been working with our Board of Directors and our investment banks for almost a year now in discussing the smartest ways to extend the maturities of our 2026 debt into future time periods. The good news is that we have lender syndicates who generally like AMC, have worked with this before, are working with this now. I'm hopeful that we will come to some conclusion. That will allow us to push out the debt maturities from 2026 into future periods. There's nothing to announce yet because there's nothing that's final or done yet. There's no agreement that's imminent like it's going to be announced in a day or a week, but it has our highest attention. We know about our obligations going forward. We intend to refinance, if at all possible, and we're hopeful that we can do so on attractive terms. Sean Goodman: Absolutely agreed. And then the last question that we have is relating to the upcoming shareholder meeting. There's a question here. I would like to vote at the upcoming shareholder meeting, but how do I vote? I've not received any proxy information. Adam Aron: Well, I do hope you -- I mean I hope you all do vote for those of you who own shares that is. I hope you all do vote. In prior years, the voting numbers at AMC have been pretty low because it has been having of some retail investors not to vote. I would remind everybody, this is a chance to have your voices be heard. We pay attention to what you say in the shareholder votes. We act accordingly. You know that I reduced my own compensation this year in response to what shareholders were saying in the so-called say-on-pay vote. So we really do want you to vote. We want to hear what you're thinking. But the way you vote is you go to your broker where your shares are held and you get the proxy materials from your broker. If you haven't received proxy materials yet, I know that I've received mine as an AMC shareholder from several different brokers. But if you haven't received yours you should call your broker, you should ask for your proxy materials. We do have a proxy adviser, a listener here in the United States called D.F. King. You can call D.F. King if you would like help. There's a toll-free number that's been set up. 1-800-859-8511. Let me repeat that 1-800-859-8511. If you hold your shares through DRS, you get your proxy materials from the registrar, Computershare. And I just might add, since I note that we have many international shareholders who listen to these webcasts. We do know that voting in shareholder meetings for American companies is not as easy, abroad as it is in the United States. And in some cases, it is impossible because some overseas brokerages do not facilitate getting proxy materials to shareholders. And we have discussed this at length, there is literally nothing that we can do as a single listener on the New York Stock Exchange to do anything about that. All we can do is suggest to you that you change brokers and change from a broker who will not get you proxy materials to a broker who will get you proxy materials. But as I said, we encourage you to vote. It's a good thing. And the shareholder meeting is coming not too far from now. Adam Aron: With that, I think you're telling me we're done with questions. So we're going to thank you all for joining us today. I leave you with two simple thoughts. As we look at the box office for the end of this year and for next year, and into 2026, the box office looks spectacular compared to what we've suffered with in 2020, '21, '22 and '23. And the second thing I'll leave you with is, not too late, it's only 5 o'clock Central, 6 o'clock East. At 7 o'clock local time all across the country and our premium large formats is a special advanced screening of Kingdom of the Planet of the Apes. It should be a pretty big movie this weekend. With that thank you all for joining us today. Operator: Thank you. This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day.AMC Ratings Summary
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AMC Entertainment Holdings Price Target Adjustment and Performance Highlights
- Chad Beynon of Macquarie adjusts the price target for AMC Entertainment Holdings to $4, indicating a potential decrease in stock value.
- AMC reports significant achievements during the 4th of July week, driven by merchandise sales from the "Despicable Me" film.
- Despite positive sales momentum, AMC's stock experiences a slight decrease, trading at approximately $5.365.
Chad Beynon of Macquarie recently adjusted the price target for NYSE:AMC, AMC Entertainment Holdings, to $4, a move that suggests a potential decrease in the stock's value by about 25.65% from its current trading price of approximately $5.38. This adjustment was reported by TheFly in an article titled "AMC Entertainment price target raised to $4 from $3.50 at Macquarie." This new valuation comes at a time when AMC has shown a notable uptick in its stock value, rising over 8% following a tweet from CEO Adam Aron about the company's exceptional performance during the 4th of July week.
AMC Entertainment Holdings has been in the spotlight due to its significant achievements during the 4th of July week, marking one of the best periods in the company's history. This success was largely driven by merchandise sales related to the new "Despicable Me" film, which saw AMC welcome more than four million customers, the highest cinema attendance of the year for the company. The merchandise sales for "Despicable Me 4," a collaboration between Universal Studios and Illumination, were the second highest ever for AMC, showcasing the film's popularity among moviegoers.
The company's CEO, Adam Aron, highlighted that food and beverage sales on July 3rd reached the third-highest for a Wednesday in AMC's 104-year history. This surge in sales, along with the high demand for merchandise such as the "Despicable Me 4: Anti-Villain League" bus tin lunchbox, T-shirts, hoodies, and collectible Funko POP! figure toys, underscores the significant impact of animated films on AMC's performance. Notably, other animated features like Pixar's "Inside Out 2" have also contributed to breaking box office records in recent months.
The remarkable merchandise sales for "Despicable Me 4," ranking second only to those for Taylor Swift's concert movie, highlight the significant role of merchandise sales in AMC's revenue. This popularity of "Despicable Me 4" among moviegoers not only boosts the company's financial performance but also demonstrates the potential for future collaborations with film studios to drive revenue through merchandise sales.
Despite the positive momentum from merchandise and ticket sales, AMC's stock has experienced a slight decrease, now trading at $5.365, with a change of approximately -1.92%. The stock has fluctuated within a wide range over the past 12 months, reaching as high as $51.62 and as low as $2.38, reflecting the volatile nature of the entertainment industry. With a market capitalization of approximately $1.59 billion and a trading volume of about 7.14 million shares, AMC continues to navigate the challenges and opportunities within the cinema sector.
Roth MKM Reaffirms Sell Rating on AMC Entertainment, Cites High Debt
Roth MKM analysts reaffirmed their Sell rating on AMC Entertainment (NYSE:AMC) with a price target of $4 on the stock, noting they remain cautious due to AMC's substantial debt levels, low or negative projected cash flow, and high valuation.
Despite some optimism about the 2025/2026 box office outlook, it may take several years for AMC to improve its financial position and address its significantly diluted share count.
AMC ended the first quarter with $624 million in cash. The analysts' projections include a cash burn of $335 million in the second quarter, followed by positive free cash flow of $155 million in the second half of the year, reducing the need for additional equity raises. Total debt stands at $4.453 billion after a recent $164 million debt-for-equity swap, with an annual interest expense of $346 million. The diluted share count has increased to approximately 325 million, following the completion of an ATM offering and debt swap, which is about 14 times larger than at the start of the pandemic, leaving room within the authorized maximum of 550 million shares.
AMC Shares Plunge 14% on a New Equity Distribution Deal
AMC Entertainment Holdings (NYSE:AMC) saw its shares drop over 14% on Thursday following its announcement of a new equity distribution deal valued up to $250 million. The company plans to occasionally sell its Class A common stock under this agreement, aiming to raise as much as $250 million.
AMC aims to utilize the raised funds for various purposes, including enhancing its liquidity, reducing or refinancing existing debts, and covering general corporate needs.
The company's liquidity has been negatively impacted by a disappointing box office performance in the first quarter, a situation partly attributed to last year's strikes by the Writers Guild of America and the Screen Actors Guild-American Federation of Television and Radio Artists.
AMC Shares Plunge 14% on a New Equity Distribution Deal
AMC Entertainment Holdings (NYSE:AMC) saw its shares drop over 14% on Thursday following its announcement of a new equity distribution deal valued up to $250 million. The company plans to occasionally sell its Class A common stock under this agreement, aiming to raise as much as $250 million.
AMC aims to utilize the raised funds for various purposes, including enhancing its liquidity, reducing or refinancing existing debts, and covering general corporate needs.
The company's liquidity has been negatively impacted by a disappointing box office performance in the first quarter, a situation partly attributed to last year's strikes by the Writers Guild of America and the Screen Actors Guild-American Federation of Television and Radio Artists.
AMC Entertainment Holdings Shares Up 5% on Q4 Pre-Announcement
AMC Entertainment Holdings, Inc. (NYSE:AMC) shares closed almost 5% higher on Tuesday following the company’s pre-announced Q4 results, with revenue of $1.172 billion (vs. Street’s $1.089 billion) and EPS of ($0.30) at the mid-point (vs. Street’s ($0.24)).
Analysts at Wedbush provided their views on the company following the announcement, noting that they remain optimistic about the exhibition industry as attendance just began to meaningfully rebound in Q4/21, and they anticipate attendance to meaningfully improve throughout this year.
The analysts believe the company and its competitors will continue to consolidate while pushing deeper into alternative content to drive attendance, and add premium large format screens and more dynamic ticket pricing in order to drive average ticket higher overall as the film slate shifts toward more blockbuster content.
The analysts adjust their full 2021-year revenue estimate to $2.53 billion from $2.57 billion, adjusted EBITDA to ($302) million from ($359) million, and EPS to ($2.86) from ($2.76).
AMC Entertainment Holdings Shares Up 5% on Q4 Pre-Announcement
AMC Entertainment Holdings, Inc. (NYSE:AMC) shares closed almost 5% higher on Tuesday following the company’s pre-announced Q4 results, with revenue of $1.172 billion (vs. Street’s $1.089 billion) and EPS of ($0.30) at the mid-point (vs. Street’s ($0.24)).
Analysts at Wedbush provided their views on the company following the announcement, noting that they remain optimistic about the exhibition industry as attendance just began to meaningfully rebound in Q4/21, and they anticipate attendance to meaningfully improve throughout this year.
The analysts believe the company and its competitors will continue to consolidate while pushing deeper into alternative content to drive attendance, and add premium large format screens and more dynamic ticket pricing in order to drive average ticket higher overall as the film slate shifts toward more blockbuster content.
The analysts adjust their full 2021-year revenue estimate to $2.53 billion from $2.57 billion, adjusted EBITDA to ($302) million from ($359) million, and EPS to ($2.86) from ($2.76).
