AMC Entertainment Holdings, Inc. (AMC) Q1 2016 Earnings Report, Transcript and Summary

Greetings. Welcome to the AMC Entertainment First Quarter 2016 Conference Call. At this time, all participants are in a listen-only mode [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 of Investor Relations. Thank you, Mr. Meriwether. You may now begin.

Thank you, Rob and good morning everyone. I would like to welcome you to AMC’s first quarter 2016 earnings conference call. Before we get started with our prepared remarks, I would like to remind everyone that as referenced in our press release issued earlier this morning, we have posted a CFO commentary on the Investor Relations page of our website at amctheaters.com. I would also like to remind you that some of the comments made by management during this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are discussed in our public filings, including our most recent 10-K. Statements made throughout this presentation are based on current estimates of future events and the company has no obligation to update or correct these estimates. Listeners are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainty and that actual results may differ materially as a result of these various factors. In addition, comments made on this call may refer to certain measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, free cash flow and adjusted diluted earnings per share, which are not in accordance with GAAP. However, management believes these results more clearly reflect the operating performance. For a full reconciliation of our non-GAAP measures to GAAP results in accordance with Regulation G, please see our press release issued earlier this morning an furnished as an exhibit to our Form 8-K dated April 29, 2016, which is located in the Investor Relations area of our website at amctheaters.com. After our prepared remarks, there will be a brief question-and-answer session. Joining me on the call today are Adam Aron, CEO and President and Craig Ramsey, Chief Financial Officer. I will now turn the call over to Adam.

Thank you John. Good morning everyone. Thank you for joining us. Today marks my 117th day on the job leading the AMC team. And I can't remember a more exciting 117 days in my professional career. I have had the opportunity to immerse myself in all things AMC and the exhibition industry, having spent countless hours with AMC's talented headquarters executives and staff, as well as, our theater managers; having visited with our Hollywood studio partners on six different trips; having met with our largest shareholder Wanda in China twice; and having numerous interactions with the CEOs of IMAX, Dolby labs in RealD 3-D; all designed to advance the prospects of AMC's future. We have thought through several marketing and theater initiatives, which are sure to increase revenues, and importantly have announced an agreement to acquire Car-Mic cinemas to becoming largest movie exhibitor in the world. On the personal side, I have attended the Golden globes, the NAACP image awards and the Oscars. At which we enjoyed seeing Open Road films of which AMC owns 50%, and I serve as co-chairman, win the best picture Oscar for Spotlight. I met with the CEOs of dozens of movie theaters circuits from around the world, not to mention experiencing my first CinemaCon convention. It has been a whirlwind four months. By the way, as the most brilliant generals know when to make the smartest of strategic retreats, while it is still important for theaters to innovate. So as to make movie going more popular among millennials, AMC carefully listened to our customers and within 36 hours of launching a trial balloon, quickly determined that there will still be no texting in any of our AMC theater auditoriums. John, Craig, and I are pleased to be with you today to provide a brief overview of our record-setting start to FY16 and share with you some highlights and updates, since we last spoke with you. Of course Craig Ramsey, my executive partner and CFO is joining me on the call today morning and after my formal remarks, he and I will be happy to take any questions that you may have. The pace that AMC set in 2015 continues in 2016 and we are off to an incredible strong start to the year. Once again, AMC continued to set records in the first quarter of 2016. We established new first quarter or all-time benchmarks for record revenue, record adjusted EBITDA, record adjusted EBITDA margin. In addition, to numerous record average ticket price, food and beverage per patron metrics and all-important key gross profit indicators. As you can see from our press release, total revenues in the first quarter increased 17.3% to $766 million, and adjusted EBITDA grew 26.6% to $146.5 million. However even more impressive than that, you may remember that in last year's first quarter AMC recognized a one-time $18.1 million gain related to the termination of the post retirement health benefit plan. After excluding this game from the prior year's first quarter, the growth in 2016 first quarter adjusted EBITDA compared to last year is a stunning 50.1% year- over- year. We thought hard about what adjective to use here: stunning 50.1%, eye-popping 50.1%? How about we just say simply, a 50.1% increase year-over-year. These improvements came both from growing our revenues and crucially managing our cost tightly. Two objectives on which this management team has a laser light focus going forward. Converting that adjusted EBITDA to cash is crucial to allow us to continue to return cash shareholders, to pay down debt and to reinvest in our theaters. With initiatives like, large screens, reclining seats and more imaginative food and beverage offerings, including full alcoholic bars that both please our guest and which historically have been producing unlevered [Cavel] (Ph) returns exceeding 25% and generate cash we did. Unique to AMC given our tax structure, we generated $72.1 million of free cash flow in the first quarter of 2016, a 276% increase from the same quarter last year. These operating results translate it into $28.3 million of net earnings and $0.29 of diluted earnings per share. Both representing tremendous first quarter growth of 361% and 383% respectively, compared to the same quarter a year ago. By anyone's definition, these have to be thought of as outstanding first quarter results for AMC, driven in part by a film slate that exceeded everyone's expectations, even eclipsing our own optimistic outlook, which we alluded to in February was significantly more bullish than any pessimistic industry observers. In the first quarter for the first time ever, three first quarter film openings have gone on to gross more than $300 million: Deadpool, Batman vs. Superman, and Zootopia. As well as these films played, they were even better in 3-D, IMAX and Dolby cinema. Premium formats, big at AMC and all of which saw substantial increases in attendance compared to the first quarter of last year. This further supports our conviction of the importance of these premium formats and our customers preference and willingness to pay additionally for an exceptional theatrical experience. While the upcoming second and fourth quarters of 2016, present some challenging comparisons to the blockbusters in the prior year, we believe our studio partners have a multitude of entertaining films coming in the remainder of 2016. Across a wide spectrum of the movie genres. That when combined with our innovative guest experience initiatives will in fact keep guest coming back to AMC for more movies. Accordingly, we are bullish about our prospects for full-year 2016. Also contributing to our excellent results was the contribution from the increase in-screens, related to our Starplex acquisition, completed in December 2015. Starplex now represents 8% of our theaters and 6% of our screens. The Starplex screens performed well, as we hoped and expected. Exactly two-months ago when we last talked on the quarterly call, we shared with you several key priorities that we believe will drive positive results for AMC in the years to come. Here is a brief update. We spoke in February that we intend to grow this company's through acquisition. Three days after that call, we announced the signing of a definitive agreement to acquire Car-Mic cinemas, which upon consummation will make AMC the largest theater circuit worldwide. We were true to our word. We believe this transaction combines two great companies with complimentary geographic footprints and a rich tradition of innovation and service, to form the leading movie exhibitor in the world, while passing on the benefits of AMC guess centric amenities to millions of new consumers, ultimately providing them with more choices for how to enjoy the movies and giving us a platform in which to produce substantial returns for our shareholders. Of course the transaction is subject to usual and customer regulatory reviews, approvals, and imposing conditions, including a shareholder vote by Car-Mic shareholders. Obviously we are paying attention to any and all developments here. We are optimistic that the transaction will be completed by the end of this year. Our next priority grows AMC as well by increasing attendance at our existing theaters. We will continue to strengthen our bond with our current guests and establish connections with future guests, through world-class marketing and theater initiatives. Marketing first, we have a number of notable guest loyalty and engagement innovations, including through a wholly redesigned AMC stub loyalty program, a new mobile smartphone app and a new website, and comfort and convenience improvements with an online ticketing focus and a new online mobile F&B ordering capably. Starting with Stubs, the wholly new and wholly redesigned AMC stubs loyalty program will be updated, keeping our current paid tier, but also incorporating a free tier of membership. The reward profiles of both existing paid and new free programs are currently being tested in 40 theaters in six markets. We are highly encouraged by the early results and we would expect a full national rollout of both new AMC Stubs tiers during the third quarter of 2016. As we mentioned, we have a goal of more than doubling our AMC's guest participation rates from the current 21% of our guest totaling within 24-months of launch. We will then be able to leverage a much larger database and we will be set to more effectively market to our guest and monetize the data with our studio partners as well. Since the AMC Stub firm is integrated with our website in mobile apps. It also made great sense to take this opportunity to initiate a comprehensive redesign of both our web and smartphone presence. We are creating a much more attractive content rich photographically, graphically, and functionally improved user friendly interface. We will be creating a more personal experience online with enriched content and a simpler path to finding the AMC amenities that guests want. Added functionality is also important as we make it easier to buy tickets and concessions in advance. We will plan to roll out the website and the new app in the fall of 2016 in Q3, well ahead of the holiday season. We will believe it will be transformational for our guests and therefore for our shareholders. More on this to come in the months ahead. The importance of our website mobile app is clear, as a convenience of being able to buy a ticket online and reserve a seat to popular movies is increasingly more important to our guests. We now offer reserved seating at approximately 1/3 of our theaters. We intend to grow this markedly, including in the important New York City market where AMC already is the leader. Our first quarter 2016 Internet ticketing volume totaled approximately 12.5 million tickets purchased online - a 54% increase over the first quarter last year. Representing along with our other online ticketing channels, the fact that 25% of our guests now buy tickets in advance online, that compares to approximately 18% of our tickets sold online in the first quarter a year ago. We also expect these online ticketing numbers to soar even to higher levels in the years ahead. That is why creating a proprietary ticketing engine is very important with our guests. AMC just on our own channel, sold 46% more online tickets in the first quarter 2016 compared to the same quarter last year. To further expand our guests' online experience and to drive increase attendance at our theaters, we are working incredibly closely with fandango and we have recently partnered with Adam tickets to utilize Adam's intriguing social invitation and pre-ordering features in conjunction with our existing internal role technologies. The Adam tickets apps in particular provides relevant movie related content, but importantly guests using Adam tickets can seamlessly invite their millennial friends to join them at our theaters. Fandango 2 has created initiatives between fandango, adam tickets and AMC's internal proprietary channels online is an enormous opportunity for us going forward. Our next priority is our commitment to deliver spectacular movie going experiences at AMC theaters. As I mentioned earlier, our innovative recliner reseat renovations, which include comprehensive theater upgrades for appearance and functionality throughout the entire theater, not just in auditoriums, includes investments and enhanced food and beverage offerings like mcguinness bars, Coca-Cola freestyle machines, new hot food items, and they continue to generate cash on cash unlevered returns to exceed 25%. These are great investments. As of March 31, 2016, AMC operated 1208 screens across 99 theaters with plush recliners. Add to that our 19 dine-in theaters, which also had power plush power recliners, as well. Looking ahead, we expect to renovate a further approximately 105 theaters at approximately 1100 screens in the remainder of 2016 and 2017. Looking back our operating results on a per screen basis for these renovated theaters continues to impress. Attendance per screen grew 9.7%. Admissions revenue per screen grew 16.0% handily outperforming the industry. These amenities all resonate with our guest. We will continue to enthusiastically deploy more recliner and more food and beverage enhancements throughout our theaters. But there is more than we can do in our theaters. And one area of great opportunity, is to significantly increase the number of premium offerings, especially premium large-format screens, in our theaters. Big screens provide the biggest wow factor. So we are committed to bringing more IMAX, more Dolby cinema and to create our own proprietary PLF, premium large format screen to the markets that we serve. AMC is the largest IMAX provider in the United States and among the largest in the world operating more than 150 IMAX screens. The established IMAX brand is recognized globally, and it is synonymous with high-quality, immersive motion picture experience and that experience drives attendance and positive guest feedback. AMC will continue to invest heavily in the IMAX brand, we will add IMAX screens, add IMAX theaters.

As of March 31, 2016, we now operate 16 Dolby cinema auditoriums. That number will grow exponentially in 2016 and beyond. We consider Dolby cinema attractive to AMC, but also highly complementary to our partnership with IMAX. Additionally also as I mentioned in late February, AMC is deep in the planning for the introduction of our own proprietary PLF brand. This premium large format brand will offer a premium sight and sound experience, but we can do so at a slightly lower price point than the IMAX and Dolby offerings. We envision deploying disk PLF concept in smaller markets that might not be able to support the premium price point of an IMAX or Dolby experience, but nonetheless consumer demand for what might be called a mid-tier premium experience. Likewise, in markets that already have an IMAX or Dolby cinema offering, we might be able, and expect to be able, to offer the AMC PLF format, as well. Right now, our large screen index about 300% in attendance of their representation of the percentage total of AMC screens. Consumers are spending and voting with their wallets that they like to watch movies in a big screen format. As a result today with AMC offering about 165 large branded large screen experiences, we would not be at all surprised if you see 400 to 600 large-screen formats throughout the AMC network, including Car-Mic cinemas, to come in the years ahead. Speaking of what is coming ahead, the movie slate for the remainder of 2016 also offers us great promise. Consensus in the industry is our studio partners have an interesting Slate of pictures coming for the balance of this year, but more importantly have an amazing Slate of the potential blockbuster techpol film in 2017 and 2018 that could result in both 2017 and 2018 being record box office years. We believe that combining great movies with great theaters is a forward-looking approach to creating and deploying a guest experience strategy. Making AMC the best exhibition assets, and which will continue us to be positioned as the industry leader. And while I have only touched on a few of our priorities this morning, acquisitions, marketing, theatrical experiences, rest assured that we are working diligently and hard at making progress across all of our action fronts that we discussed a few months back to enhance the guest experience, to drive attendance, to grow earning and ultimately increase shareholder value at AMC. Thank you for being with us this morning. Thank you for your continued support. We believe the future is ever so bright for AMC. Look for the balance of 2016 and in the years to come. Now let's turn the call back to the operator so that we can take your questions.

Thank you. [Operator Instructions] Our first question comes from the line of Eric Handler with MKM Partners. Please go ahead with your question.

Thank you very much for taking my question. Craig, wonder if you could sort of dissect a little bit on the average ticket prices. I know, obviously, last year you had the benefit of tax on top and while you still have that, it is anniversaried, but I wondered if you could talk about what level of ticket price growth did you see from premium, what did you see from just average ticket price growth? And then, secondly, what was premium as a percentage of overall sales versus last year? And then, also, wondered if you could talk a little about Starplex, the integration there and I also believe that they have a number of discount theaters, long term. Do you want to keep those discount theaters? What do you do with them?

This is Adam. Could you repeat the question?

There are two questions in 15 parts.

On pricing. You are zeroing in on, certainly, the performance in the box office where, in total, we were 15.3% up and the industry box office up 12.7%. So, in total, we outperformed, certainly, the acquisition of Starplex was a piece of that. If you pro forma for Starplex - take it out, if you take out Starplex in the current year, our box office was in line. You focused on average ticket price, and certainly Starplex was a piece of our performance there were - you look at the industry, average ticket price was probably up over 5%, we are up just under 1%. And Starplex is certainly a piece of that. Because of the markets they serve and this discount theater operation that you referenced, average ticket price for that circuit is about $4.80-some cents - $4.80 to $4.90. And, certainly, our average ticket price of our traditional for our core AMC Theatres is well over $9.00. So, once we blend that in for the full quarter, that has a dilutive effect on our average ticket price performance. The second piece you alluded to as well, we've anniversaried the tax-on-top treatment and many of our peers are actually still probably in the middle of deploying that, so the industry results are impacted favorably by our peers taking tax on top. And our results are not as favored, if you think about it, because we don't get that benefit. We had a good IMAX in premium format performance. IMAX was up about 63%, 3D up even a little more than that almost 70% - and our own premium large format was up 20%. The ticket prices in the premium format were kind of flat. I think IMAX was up 2% to 3%. 3D was flat. Total premium format contributions 21% this year versus 50% last year. That certainly would lift our average ticket price, but then once you lay on top the impact of Starplex, it is mitigating it. Your question about what are we going to do with the discount operations in Starplex - they do have discount theaters, the screens film weeks later, so they are not on first run break. They charge lower ticket prices. The thing that is most intriguing to us about that operation is that all of them are profitable, from a cash flow generation perspective. And many times, when you are running a traditional theater and as it ages and matures and, probably, gets into the later years of its life, you need an exit strategy. Sometimes the exit strategy is to reseat them, make them new again, that we are doing effectively. In some cases, though, the market is just not there and you're probably better served to go to another pricing strategy, like a discount operation. And to be able to do that, and do it profitably, is really kind of the magic of that strategy. They do it very well. It is a learning opportunity for us. We would continue to operate those theaters to the end of their lease term. Certainly, maybe even think about extending that as long as they are generating positive cash flows, but it is a learning opportunity for us, and we will run them as long as that remains the case. I think I addressed 80% of your questions I hope, if not all of them.

That is good enough for government work. I appreciate it.

Thank you. Our next question is from the line of Jim Goss, Barrington Research. Please go ahead with your question.

Thank you. I will try to ask slightly fewer. But, Adam, you were talking quite a bit about the PLF options and, if you look at IMAX versus Dolby cinema at AMC Prime in particular, aside from the content flexibility aspect, what is your read on the key differences, one versus the other quality or branding, or whatever else you think there is that's meaningful?

Well, you are talking to someone who has more than one child, and I love all my children equally. I think, actually, that is not a bad metaphor for thinking about IMAX, Dolby, and don't forget our own proprietary house brand that's being created. It is not really all that important for us to nuance where IMAX is better developed than Dolby, or where Dolby is better developed than IMAX. The important point is, what we are seeing in our theaters right now is that our guests love IMAX. And our guests love Dolby Cinema. Craig gave you the number: we are up more than 60% year-over-year in IMAX attendance. Up 60%. That's box office dollars, not necessarily attendance. That is just huge. And as I said in my prepared remarks, our large screens, IMAX and Dolby, don't have that many Dolbys yet, we will have many Dolbys, 3% of our screens and 9% of our revenues, they're indexing at triple the rate. So, while it is sort of interesting speculation as to what specific aspects of each are compelling, the important thing is, both have compelling guest-appealing aspects. Both are going to be immensely successful at AMC. Both are going to grow dramatically at AMC in the future. If you just want a few, IMAX is incredibly seamlessly intertwined with Hollywood. There is lots of footage in various blockbuster movies where there is specific unique IMAX content, filmed with IMAX cameras, showable only in IMAX auditoriums. Dolby Cinema has an extremely impressive million-to-one light contrast ratio, creating a very bright picture. We love the fact that our plush recliners are in the Dolby Cinema auditoriums, especially with the transducer seat. Transducer seat is just a fancy name for putting a base speaker in the cushion of the seat. So, to take Star Wars, for example, every time a starfighter's shot out of the sky, you are shot out of your seat at the same time. But there are more benefits that IMAX has, there are more benefits that Dolby has. The important thing for us, we've got more IMAX screens than anybody else in the United States, we have more Dolby Cinema screens than anybody else in the United States. We know that they can coexist within the AMC family successfully, and with growth for both companies and both brands. And we are so confident about the growth of IMAX and the growth of Dolby within AMC that we are creating yet a third brand, as I discussed already, to further add to the mix of large-screen experiences for our guests.

Alright. Thank you. The other couple of things, one quick one. RealD, I notice you took a $0.02 gain. Did the terms at all change with them going private and you're not having an ownership stake anymore? And the other one is, I know you're a marketing guy, if you could discuss any further thoughts you have on the segmented reseating experiences that you talked about the last couple of calls. That would be of interest, too.

Alright so, quickly on RealD. No, there is no change to our economics in RealD. But I just gave an enthusiastic endorsement to both IMAX and Dolby Cinema. Let me also say that AMC has been a leader in 3D, and we are also very impressed with our partnership with RealD-3D. We intend to continue to have a strong commitment to 3D formats and 3D capability within our theaters. We do know that so many of the tent poles that are coming in 2017 and 2018 will offer 3D options, and AMC will be perfectly positioned as a result of our 3D capability. In terms of segmented renovations and theater receipts, it has been AMC's policy historically, it's either touching an entire theater or not touch it at all. That has been a very successful strategy. But as we look ahead, especially as we look at the Carmike circuit, it is not clear to us that making investments in every single auditorium will generate the kind of returns that we have historically produced, if we invest in every single auditorium. Now, when you think that we still at 250 theaters to look at reseating capability within the AMC family, and maybe more than 500 theaters that we can look at across AMC and the Carmike circuit, there is still an enormous opportunity for us to take this renovation strategy forward. And I already mentioned on the call that, not even looking at the Carmike circuit, we ought to be able to fully reseat and fully renovate 105 more of our theaters in the next 1.5-years. You can probably add another 50 Carmike theaters that could be wholly reseated, wholly renovated in the coming years. But, we think there is a really interesting additional opportunity. If it does not make sense to reseat and renovate every seat in the theater, we can reseat some. And that will allow us to introduce either IMAX or Dolby Cinema, or our own house brand PLF in those theaters, making sure that those auditoriums especially are reseated. We are also looking at what might be considered partial auditorium reseat possibilities. One of the places seating auditoriums does not make sense is in the highest-visited theaters of today. And the reason for that is, when we reseat and we take out traditional sit'em-up-straight seats and replace them with reclining seats. By definition there is seat loss in the auditorium. In theaters that are lightly visited, that seat loss is painless, because you are taking out seats that are never filled and replacing with seats that are of greater appeal to consumers and drawing pre-submissives. In the highly visited theaters, you cannot necessarily afford that seat loss. And so, one of the things that is interesting to us is maybe we would only put the reclining seats in a third of an auditorium, or a half of an auditorium. And putting in new, more comfortable seats in the remainder of the auditorium, but not necessarily seats that had the kind of seat loss that a reclining seat requires. So that is also on our radar screen. We are already testing this new strategy in some of our theaters. In the third quarter, we are going to deploy this test of other kinds of seat options, other kinds of partial-theater renovations, partial-auditorium renovations. And the beautiful thing about a company like AMC is, today, we have about 387 laboratories in which we can experiment with innovation, where we only have to deploy the capital to address our theater and our auditorium, and see how customers respond. And if customers respond poorly, we back off, as we did in the texting, 36-hour flap. If consumers respond positively, then we aggressively roll out nationally, as we are going to do with AMC Stubs where, in the theatrical testing that is going on right now, the returns are very encouraging.

Thanks very much.

Thank you. [Operator Instructions] Our next question is coming from the line of Barton Crockett, FBR. Please go ahead with your question.

Great. Thanks for taking the question. One thing I wanted to zero in on is in the prepared CFO comment. You mentioned something about the lower contribution from strategic initiatives tied to the effects of competitive new builds and recliner remodels. Could you give us a little bit more detail there, what is now the growth on your recliner theaters on a comparable basis? And what's happening there that you are calling out?

We will give it a try. Adam alluded to it in his remarks, and if you think it's about what we have talked about in the past, we probably quoted statistics well in excess of industry performance - admissions revenue of our recliner reseat, I think were in Adam's comments up 16% year-over-year. So that's still on admissions revenue per screen basis, still very strong, but it is not likely the first five that we launched. And fully expected that, as the concept gets deployed throughout the market as other exhibitors copy the strategy and the market matures from a recliner perspective, you are going to see that kind of erosion. So I don't know - I don't want to get into any more detail from initially, when we were reporting 50% growth, 60% growth in attendance to today, where we are seeing still well in excess of market performance, 16% up on admissions per screen basis, that's the order of magnitude of decline and it's largely competitive.

Its Adam chiming in. As nice as it would be to get 50% growth all the time, we will still happily take 15% growth. That's still a great stimulation and produces great financial returns.

Okay. All right. So, the delta relative to the industry, up 12% or so, is about three percentage points, three or four percentage points, I guess. So that is enough of a delta to think that you get a positive ROIC and continue with the big reseat push?

Well, yes, absolutely. The leverage in the business, you get that kind of over-industry performance or over-industry indexing, the leverage in the model still generates substantial gross in EBITDA for the circuit - or for that group of theaters above 50%. You are definitely going to drive above-threshold returns above our 25% threshold returns.

Remember what all this led to EBITDA 50% for the circuit, year-over-year, adjusted for the one-time gains out. The initiatives that we have been embarked upon are still producing fabulous financial returns. I understand we can dissect exactly how much and differing rates, but if you take one step up and go to the forest from the trees, financially, these projects are still immensely profitable for AMC..

Okay. Now I wanted to ask a question on a separate topic. Adam, you put out your goal to double, basically, the membership in your free and paid programs there at AMC. You have been through this before at other industries. What does a doubling of membership do to the P&L of the business? What have you seen in the past? And how could the reaction at AMC be similar or different to what you have seen in the past when you have grown membership?

So we've got some data that the incrementality of our current AMC Stubs program is around 25%. Meaning that, of the 21% of total tickets bought at AMC last year by AMC Stubs members, which we sold 200 million tickets, so that is 42 million tickets, that there was about a 25% incremental surge in loyalty to AMC from those human beings because of AMC Stubs. So 25% off is 20% of the total, so that says about 8 million of those 42 million tickets would not have been purchased at AMC theaters, if we did not have the Stubs program. In looking at redesigning Stubs and taking this from 20% participation to 40% participation, that is another 40 million tickets or more on which loyalty is tracking. And if we can see the same kind of incrementality in those people as we see in the current AMC Stubs members - I am just giving you the quantification here that is another 8 million incremental tickets that will generate at AMC, which is a 4% lift in attendance for AMC. Now, we're only rolling out this program in the third quarter of 2016, and we are not getting double participation in the first week. We did say it is going to take 24 months. But if we can find initiatives that can sell an extra 8 million tickets a year at AMC, we will gladly take them, as long as the cost of those initiatives is far less than the incremental revenues. And if I sort of more broadly that's a very specific and quantitative approach for AMC. if I take the broader part of the question that you asked, loyalty programs were really launched in the United States, in a big way, in the early 1980s. And, as you know, I had something to do that, creating one of the very first airline frequent-flyer programs and one of the very first hotel frequent-guest programs. It is 30-years later, and every company in America, just about, has a loyalty programs. That would probably tell you that the experience in industry, after industry, after industry, over the past three decades, is that loyalty marketing and database marketing works. And that companies are very wise to focus on their best customers, and they will be rewarded with increased patronage as a result. Now, these things don't operate in a vacuum either. Some of our competitors also have loyalty programs. Some of our competitors do not. So, on the offensive, to the extent that we have a stronger loyalty program, we will increase loyalty and increase business. Similarly, if we don't have a strong loyalty program, that would leave the door open for competitors to take share away from us. So, we are extraordinarily confident that the experience of AMC Stubs will work, and it has one last corollary benefit which is ever-so important: the more people participating in your loyalty program, the more people in your database; the more people in your database, the more people who can get weekly emails saying, go out to the movies. A, and go out to the movies at AMC. B. And, just as I am confident that we are going to double the participation rate at AMC Stubs, we are also going to be growing our database accordingly. And that gives us an extraordinarily efficient platform in which we can market movie-going. Remember, an e-mail costs less than a penny. So this notion of having a big database, and mining that database, and marketing movies to identify movie-goers is incredibly important to experience than smart marketeers.

That is very helpful. Thank you for that color.

Thank you. Our next question is from the line of David Miller, Topeka Capital. Please proceed with your question.

Hey, guys. Congratulations on the stellar results. Craig, just be clear, on an apples-to-apples basis, excluding Starplex, average revenue per screen you said was in line with the general market? Or did you slightly beat the general market year-over-year? Thanks. All right. And then I have a follow-up. Thanks.

David, the in-line performance was on attendance per screen, after carving out Starplex. And we think that is probably what we're focused on attendance driving attendance and so that feeds the food business and, as you see, that was up 21%, almost 22% year-over-year and contributed to the overall 50% EBITDA Adam was talking about.

We also want to be careful here because Starplex is 8% percent of our theaters, 6% of our screens. Craig already mentioned on the call, the average ticket price in the Starplex circuit is half of the ticket price in the pre-Starplex circuit. So, it is obviously a much lower percentage of our revenues than even the 6% of screens. And we don't want to get into the precedent of reporting on Starplex numbers and AMC numbers because, at the end of the day, the Starplex numbers are a de minimus part of the AMC overall. And we don't want to get you distracted in that, How did Starplex do? Because in the grand scheme of things, it is not really all that important.

Well, actually, I was not asking that, I was actually asking how you did ex-Starplex. Because, just according to my models here, you came in below where we thought you'd come in. And I am trying to figure out, was it a shortfall in premium format? Was it a shortfall in attendance? The market was up 12.3%. It looks like you guys missed that, ex-Starplex. That is the explanation I'm looking for.

Yes I know that it's the gap between - we talked about attendance, which was, in our view, dead on. Take out Starplex because it operates at a lower attendance per screen. If you look at the historic AMC circuit, attendance per screen, period over period, in line with the industry. The difference between then as you switch to admissions revenue, that is where the tax on top differential really takes hold We are not benefiting from tax on top. We did that last year. The industry as a whole saw a lot higher average ticket price development, in good part due to that strategy.

It's just on that last point. I just want to make sure we are not sounding defensive about either our pricing or tax on top. The tax on top was a smart initiative that AMC launched. The rest of the industry took a year to watch and see. They copied what AMC did. We have already anniversaried of our comp, so they are catching up. We don't think you will see this pricing differential once they anniversary their tax-on-top initiative.

Okay. Great. Just one follow-up if I may, Adam. If you overlay a map of the Carmike assets with a map of your assets, it looks like you guys are fairly heavy and just hugely dominant in Florida, Georgia, Illinois, and Texas. A big states, obviously. What is your inclination to fighting the DOJ here if the DOJ comes back at you and says, hey, guys you have got to sell off a big chunk of these assets? Thanks.

Thanks for asking. Number one, as the CEO of a company who has acquired assets before, I don't believe the word dominating has ever been used by me, or the word dominating has ever come out of my mouth. So, for anyone who is listing to the call, let's make sure that was not the Company using the word. I'm joking. Next, I would even consider this fighting - this exercise, this regulatory review, as fighting the Justice Department. We just went through a very successful antitrust review with the Starplex circuit just a few months ago. Our dialogue with the Justice Department was highly professional on both sides, I might add and we did divest a couple of theaters out of the Starplex acquisition. In going into the Carmike transaction, we wholly expected that we will come out of the Carmike transaction divesting some number of theaters where the local competition across the street, down the block, is too close for comfort. And we are working with the Justice Department, and expect to work with the Justice Department throughout 2016, to get to a position where they and we are comfortable with the surviving AMC circuit.

Okay. Thank you.

Our next question is from the line of Anthony Nemoto, Credit Suisse. Please go ahead with your question.

Great. Good morning. Just a question on, I saw, in the CFO commentary, the CapEx guidance was slightly increased. I just wanted some color there. Assume it is around an accelerated timeframe on some of the recliner or other pre-initiatives, but yes, just a confirmation would be great there. And then, also - I don't know how much you can disclose, but anything around discussions with Screening Room and the Company's thoughts towards theatrical windows and ventures, like Screening Room, would be great. Thank you.

I will take the industry one as Craig looks for the other. On windows, obviously windows are important, and AMC believes in windows, and AMC is willing to talk with our studio partners about being creative around the edges of windows, but as was the case last year with the Paramount experiment, but, fundamentally, we believe in windows. Having said that, it has been widely reported in the press that the one circuit that has been intrigued by Screening Room is AMC. We've made no public comment about Screening Room and don't think it is probably wise to make public comment about Screening Room today. It is still just an idea. Until such time as they've got studios signed on and product to offer, it is just an idea. So, we will save our Screening Room commentary for private conversations between us and Screening Room, between us and our studio partners, rather than fighting it out with the press whether Screening Room is a good idea, going forward.

On the CapEx guidance, I think where we indicated last time around into the calendar year was about a gross number of $390 million to $410 million, and we are up about $10 million on that. The net I think was around $270 million at that point in time; now we are in the $280 million to $290 million, so we are up about $10 million. We are finding a few more projects. We don't think that a change of that magnitude really materially affects our free cash flow development. So it is probably finding a few more receipt projects that we can launch into and get them done, and start contributing to financial results, that is driving the difference.

And the new website and new mobile approximately, because those new initiatives are $11 million just between that pair. But, again, when you see the new website and put it side by side with the old website, it is going to sell so much harder. And we have almost 150 million visits to our website annually today. When you think we have 150 million unique hits coming to our website, and if our website is far more potent and far more effective in selling movie tickets, that should translate to, again, increases in visitation and attendance at our theaters, which is the lifeblood of our revenue growth.

Great, thanks.

Thank you. We have time for one more question. The question is coming from the line of Leo Kulp, RBC Capital Markets. Please go ahead with your question.

Good morning. Thanks taking the question. Just a few ones around the recent Fox announcement that it was no longer going to honor clearance requests. First, do you see other studios following suit on that? Second, how do you expect this will impact near- and long-term industry screen trends? And then, finally, do you see this having any impact on your screen policies and competitive [notes] (Ph)?

I am going to duck the question as to what's the industry impact of a change in clearances because I am not smart enough to know. But let me talk about AMC. We only clear in less than 30 of our 385 theaters today. And we've got lots of people who clear against us. So, our view is really pretty simple. AMC has done very well in an industry that clears. AMC will do very well in an industry that does not clear, realizing that we only have 26 theatres that clear a day and that we have more theaters that clear against us than we clear against them. This might actually be a positive for AMC because we may have more access to films rather than less access to films. So we were fine with Fox's announcement and if others - I assume some other studios will match. They are probably watching and waiting to figure out what the industry impact is, as you describe it. We are indifferent to whether they keep clearances or not. I would further add that AMC, who thinks of itself as a highly able competitor, likes being in a competitive industry. And anything that makes this industry restrictive or anti-competitive is something that AMC would like to avoid. AMC would like to be a highly competitive player in a highly competitive industry for all the reasons we talked about on this call, all of our initiatives, all of our desire to be an innovator and forward thinker. We are happy to face competition. I generally believe that competition keeps companies on its toes, and you get far more complacent in a noncompetitive environment and you get far more innovative in a competitive environment. And when you are innovative is when you will find those things that actually do drive great financial return for shareholders.

Got you. Thank you very much.

So I think we say thank you all. John, do you want to wrap up the call?

I just want to say thank you to everybody. We look forward to talking to you between now and when we announce Q2.

It is Adam. If I forgot to mention earlier in the call, our adjusted EBITDA, excluding one-time gains, was up 50.1% year-over-year. Goodbye, everybody.

Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect your lines at this time.