Thank you for standing by. This is the conference operator. Welcome to the AMC Entertainment's Fourth Quarter 2021 Earnings Conference Call. The conference is being recorded. I would now like to turn the conference over to John Merriwether, Vice President, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. I'd like to welcome you to AMC's fourth quarter year-end 2021 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, and 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. 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 to not place undue reliance 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 the webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, free cash flow, operating cash burn and operating cash generated among others. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier today. After our prepared remarks, there will be a Q&A Session. This afternoon's webcast is being recorded, and a replay will be available on the Investor Relations section of our website at amctheatres.com later today. With that, I'll turn the call over to Adam.

Thank you, John. Good afternoon, everyone. Thank you for joining us today. The fourth quarter of 2021 saw AMC putting up on the board significant milestones of progress sending a crystal-clear message to one and all that AMC is moving well along the path to recovery. For the first time in the two years since COVID-19 descended upon us all in early 2020, in the fourth quarter of 2021, AMC achieved positive EBITDA, and we generated positive operating cash flow. And this is not a situation where we only narrowly achieved these important markers. Our positive EBITDA in the quarter was almost $160 million, up a breathtaking $487 million over the fourth quarter of a year ago. This led to non-GAAP operating cash generated of more than $220 million in the just completed quarter. In addition, we ended the year with a record-setting year-end liquidity of approximately $1.8 billion, enough to provide AMC with more security in case the return to normal box office levels takes longer than some might expect. And importantly, it also gives us the flexibility to go on the offensive as we work to create the AMC of the future. 2021 was another year of sequential and continuous recovery and improvement. As was the case after COVID forced the closure of all of our theaters in March of 2020, the industry and especially AMC box office grosses improved each and every quarter of 2020 and each and every quarter of 2021, as theaters reopened, as the number of release film titles increased, as the overall film slate became more varied and appealing and especially throughout 2021 as COVID vaccination counts soared. With the industry and AMC's box office growing each quarter, so too our financial results at AMC improved each quarter as well. As I look…

Thanks, Adam. And thank you to everyone for joining us on the webcast this afternoon. The fourth quarter represented a very important landmark along our path of recovery. The 60 million guests that we welcomed to our theaters around the world during the fourth quarter resulted in consolidated revenue of $1.17 billion. That's up 53% from Q3 of 2021, and it's more than seven times the $162.5 million of revenue we had in Q4 of 2020. This resulted in two very important accomplishments during the fourth quarter. First, we generated positive adjusted EBITDA for the first time in two long years of $159.2 million. This represents $164.6 million improvement over Q3 2021’s EBITDA loss of $5.4 million and a $486.7 million improvement over last year's fourth quarter EBITDA loss of $327.5 million. This positive EBITDA was achieved in both Europe at $61.3 million and the U.S. at $97.9 million. And second, we achieved positive operating cash generated, a non-GAAP measure, of $224.4 million. This represents average operating cash generated of approximately $75 million per month during the fourth quarter. And this compares to an average operating cash burn of approximately $75 million per month during the first half of 2021. The fourth quarter proved to be a very good illustration of the working capital dynamics of our business with growth in the business is also accompanied by working capital benefits. Note that operating cash generated and operating cash burn, these are measures meant to represent total cash flow before debt servicing costs and before deferred rent payments. The GAAP reconciliation table is included in today's earnings release. The strong results in Q4 were driven by consolidated revenue per patron of $19.63, which is 25.5% higher than Q4 of 2019 and a resulting solid contribution dollars per patron of $13.44 versus…

Thank you, Sean. Before we open up this webcast to your questions, I’d like to update you on recent actions we’ve taken to enhance our business and highlight some strategic initiatives that will better position our company as we hurdle into what we believe is a much more promising future for AMC. A strong current of innovation runs deep throughout AMC’s DNA. We have led in the elevating of moviegoing to a truly unique and desirable out-of-home experience, and we set the standard for so many transformative changes in our industry. We’ll continue to do so. But in 2022, 2023 and beyond, we also expect to transform our company into becoming something much greater than solely a movie theater operator. Let’s quickly look at seven of the initiatives and innovations already or soon to be underway. One, NFTs. During Q4, AMC became the first theatrical exhibition company to collaborate with a studio partner to offer an exclusive non-fungible token, or NFT, to reward moviegoers for their AMC attendance. AMC worked closely with our partners at Sony to launch the Spider-Man NFT, and the success was undeniable. 86,000 NFTs were fully subscribed within hours. And ultimately, these NFTs have been sold on secondary markets – some of them that is. But some of them have been sold in secondary markets for as much as $17,000, no, you did not hear me wrong, $17,000 for a single Spider-Man NFT. By now, in just a few months from our first effort with Sony in November, we have already launched four separate NFC programs, one of which is supporting what is sure to be the new blockbuster movie, The Batman, which opens this week. In total, more than 800,000 NFTs have already been made eligible by AMC for consumer collection in just three months…

Thank you, Adam. And the first question is, can you give us an update on the Perfectly Popcorn initiative?

Sure. As I said in my prepared remarks, we sold 50 tons of it on a good day. We know something about popcorn. Our brand has credibility, and we’ll have credibility in the market for people who buy and consume popcorn. So, we’re taking this initiative very seriously. I talked about hiring Ellen Copaken, who’s got substantial brand management and innovation experience at PepsiCo, at Frito-Lay and at Hostess Brands. She’s got a lot of grocery experience. As – she’s already on board. She joined us in mid-February. She’s in charge of this whole effort, among other projects, and we are going full bore. I expect that hopefully with Uber Eats, we will launch a food delivery program in the beginning as early as the second quarter of this year, depending upon which city you happen to be in. We’ll roll it out around the country over the second and third quarters primarily, possibly the fourth quarter in some of our smaller markets. As for grocery, many of you may not know this, but grocery stores tend to restock their shelves twice a year, in February and in September. Obviously, February is behind us. So, our goal is to catch the September reshelling efforts and to get AMC Theatres Perfectly Popcorn in a supermarket or convenience store near you in the fall of 2022.

Thanks, Adam. And the next question is, are there other food and beverage initiatives in the pipeline, for example, expanded offerings, concessions to go, et cetera?

Absolutely. We fancied ourselves as an innovator in F&B. And of the large theater operators, AMC has had the highest food and beverage sales per patron for years now. That continues to be the case. And part of it comes from doing it well in our theaters, part of it comes from our innovation. Just a couple of weeks ago, we launched Impossible Nuggets, the plant-based alternative chicken nuggets, which are selling briskly. We constantly are putting new menu items in our theaters. We constantly are putting specialty movie theme drinks at our more than 350 bars around our U.S. theaters, theme of major movies that are coming out. But beyond that, some of you may recall that about four years ago, we launched something called Feature Fare, and we were way ahead of the competition in our view as to the menu variety that AMC offered in Feature Fare. Because of COVID, we had to strip that way back. It was a challenge just to open our theaters, let alone to do it with a full-blown variety of menu items as we had when everything was going like a Swiss watch back in 2018 or so. Having said that, we’re building back up in terms of menu variety and our concession stands and in our dine-in theaters. We’re still challenged with labor shortages and supply chain disruptions. So, we’re picking and choosing very carefully what items we bring back into our theaters. We want to make sure that if we promise a guest a high-quality F&B experience that the people are working in our theaters can deliver it. Having said that, we certainly seem to be succeeding, Sean, as you said in your prepared remarks, our food and beverage sales per patron are up 35% year-over-year. That’s a stunning increase. I’m very proud of what our F&B organization is pulling off. You last asked about to-go questions. When we introduce the popcorn to-go products at our theaters, we’ll also have other to-go items, including other delivery to home through REITs and the like as well. So, it’s all coming. More big projects and more big goals for 2022.

Great. Thank you very much. Next question is, can you give us an update on alternative content?

Alternative content is something that we are very intrigued by. We’ve dabbled in it so far to gauge consumer response. Some of the people who track us closely know that we had WWE events. We had UFC events. We showed DIRECTV’s Sunday Ticket for two years over the last three, showing professional football games, out-of-market football games on Sundays. We’ve had several concerts, one is recently as two nights ago, Kanye West, now Ye, in IMAX theaters around the country. We’re showing some old movies. We just had a very successful reshowing of the 50th anniversary of The Godfather. I think that was in our Dolby Cinemas. We’ve just agreed with Warner Music to look really hard together at which of their concert artist we can bring to AMC Theatres. But the big one here is sports rights. And we all know that AMC is going to make a real splash in alternative content, if we can secure the rights for major professional and collegiate sporting events, not to mention these others like WWE and UFC, that getting professional collegiate sports is something that is great potential. It’s much easier said than done. We have begun dialogue with leagues. There’s a lot to work out, but it’s something that we’re looking at hard.

Next question, what is the time frame to bring premium formats to the recent theater acquisitions?

I'm so proud of the partnership that AMC has with IMAX and that it has with Dolby Cinema. We're IMAX' I think, largest customer in the world outside of China. We're certainly their largest partner here in the United States. We have an exclusive relationship with Dolby Cinema here in the United States. We had 150 or so PLFs five years ago. AMC globally, now has over 400, and we continue to want to grow it. We're in active dialogue with both IMAX and Dolby right now, how we can grow our business with each of those great companies. I have every expectation that we are going to increase the number of our PLFs, and in the case of IMAX in particular, increase the number of laser-equipped IMAX auditoriums around the AMC system. One of the things that we've done as we've looked at bringing new theaters into our system and see if we can add PLFs to those theaters. And for example, The Grove and Americana brand in L.A., which already are in the 30 highest grossing movie theaters in the United States, neither one has either an IMAX or a Dolby Cinema auditorium. We're going to put an IMAX and a Dolby Cinema and our house brand, which is called Private AMC, we're going to put three of them into The Grove, three of them in the Americana brand. We're looking at other theaters as well to see where we can add IMAX or Dolby locations. In terms of timing, and once you get permitted, it's kind of six to 12 months to get them constructed, Permitting can go fast or slow, depending upon the locality. So, if I had to pick a date, I would say, about a year after we add a theater to our network, we got to be well underway with IMAX or Dolby or Prime at AMC locations.

Great. The next question is what are the plans to monetize the opportunity from NFTs and cryptocurrency?

Look, this is a big opportunity for us. As I said in my prepared remarks about NFTs, we've already done four programs since November, already 800,000 NFTs have been made available to consumers. One with Spider-Man movie, one with Dune, one with The Batman movie. We offered an own AMC NFT to our shareholders enrolled in AMC Investor Connect. This is all good for us. We have tended to give them away free so far. We will continue to give some away free, especially if that drives a closer bond with the company or if it drives attendance to our theaters where we'll make money selling tickets and concessions, but I also think it's possible for good and important and special NFTs to sell them to the public. And I also know for a fact that on some of these NFT programs, we already are and will be on future programs, collecting a commission on the resale of those NFTs as they get resold. As for cryptocurrency, we're taking it now. We start with Dogecoin and Shiba Inu in a couple of weeks. We know there are a lot of consumers who are very keen on those cryptocurrencies. We expect that our market share amongst that audience will grow when we can take cryptocurrencies. In addition to that, the one that you know well, Sean, because we've talked to you about at great length, the one that has our biggest intrigue is whether AMC would be capable of issuing our own coin, our own cryptocurrency. We have to be careful how we do that. The regulatory framework surrounding cryptocurrency is going to change dramatically, I think, during this calendar year. We always believe in staying on the right side of the law. And so, we want to make sure that whatever we do in this area, we fully comply with whatever regulations governments send our way. But it is something we're looking hard at, and there may be an opportunity to create significant value for us.

Great. The next question here is regarding our strategy for lowering debt and improving our leverage ratios.

Well, the best thing we can do to lower debt is to grow our EBITDA, so that by definition, the debt that we do have is a lower multiple of our rising EBITDA. And that certainly was the case in the fourth quarter, where we actually had positive EBITDA for the first time in two years. But that's not enough. We also need to pay down debt. And we're doing that right now. We made a great start by paying off a considerable amount of deferred rent that we owe from 2020. And additionally, there still is debt out there that we could buy at a discount and that is an intriguing use of cash that we are considering.

Great. Next question, what are the plans with respect to signature recliners? Do you plan to introduce these at all screens?

We do not. Let's start with the branding of AMC. We have three major brands at AMC. AMC Theatres, AMC Dine-In Theatres and AMC Classic Theatres. Our dine-in theaters are what they are with full-blown restaurant menu items, mostly delivered to seat. We have our normal mainline AMC Theatres, and we have the classic brand. The classic brand tends to be smaller, less visited theaters. The economics at a classic theater probably would not allow us to invest in putting in recliners. It's an expensive proposition. We can spend as much as $5 million or more a theater in doing it. And the traffic at the classic theaters just doesn't justify a return. But with respect to our AMC Theatres, we've already made great progress. We've got recliner seats in one or more auditoriums at somewhere around two-thirds or more of our AMC Theatres. We're very well populated with the recliners. And one other thing that the pandemic through at us is to guard our cash very carefully. And given that we already are well established with recliners and given that it's really important to keep CapEx low and to hold on to that $1.8 billion war chest to do with it as we described on the call earlier, I think we're going to slow down the pace of our renovations. Now that doesn't mean that we'll do none. We will do some but at significantly lower levels than we were doing it back in 2017 and 2018. We've got to be very prudent. The best asset this company has is this $1.8 billion cash and liquidity word. We need to be referent that our shareholders have entrusted us with $1.8 billion. We need to be very careful how we deploy it.

Thank you. And the next question here is, can you give us an update on the opportunity to introduce AMC merchandise?

Sure. Merchandise is one of these other ideas that came pouring in from our retail shareholder base in 2021. It sounds like they want to buy it. And if they want to buy it, we want to sell it to them. So, we started to experiment back in November. When Ghostbusters: Afterlife emerged, we created a special merchandise item, a Ghostbuster ambulance. It was like $40 or something. I think we sold 40,000 of them in like days, we sold out, which reminded us that our shareholder base and our customers are really interested in emerge. We just – this week are going forward with a big Batman popcorn holder. It's about six-inch-high Batman’s head, which your popcorn will be served. I'm hoping they'll sell out. And merchandise is going to be a big project for us in 2022. I would expect that towards the middle of this year, we'll have a broad array of merchandise, AMC-branded merchandise that our shareholders and our guests can buy whether they do it online or possibly many of our theaters.

Great. And then the last question that I have here is what are your goals with respect to more theater or other acquisitions?

Well, look, as I said in my prepared remarks, especially the section I called recovery, agility and transformation – we have cash. There are theaters that I believe we can acquire very inexpensively. One time to two times cash flow is really cheap. Even three times to four times projected cash flow is really cheap. And if we can grow by bringing in high-quality theaters in strong markets into our fleet inexpensively, that's a great opportunity for us. Beyond that, though, there is no specific company that we are yet ready to acquire. But I really want to say again and again and again, that people who are watching and analyzing this company should think hard about what a strong management team can do with $1.8 billion of cash. And we are going to be looking seriously at M&A candidates. It's intriguing to diversify our business away from the pure movie theater industry to diversify our risk and yet capitalize on our knowledge of things like food and beverage, entertainment, selling tickets to things, running buildings that are far apart from each other, dealing with landlords with hundreds and hundreds of leases. This is all expertise that does not – that AMC has where that expertise is needed in other industries, too. And again, I think for the people who are merely valuing the AMC of 2019 and suggesting that that's all we can do going forward, you're making a mistake. There are other lines of business, whether it's NFTs, cryptocurrency, popcorn or that which we grow into through transformational M&A. There is opportunity to change this company's fortunes greatly as we look ahead. Thank you.

Yes, Sheri, if you want to see if there's – if you could repeat the Q&A instructions.

The first question comes from Jim Goss with Barrington Research. Please go ahead.

Alright, thank you. Hi, Adam.

Hey, Jim nice to hear your voice again.

Yes. I do have a question – a couple of questions. One, I was wondering if you think there's any opportunity to maybe carve out some subset of your theaters, perhaps the AMC Classic or some of them and create a sale that could create some value that you could use for additional acquisitions or to pay down some debt.

Does the opportunity exist? Yes. Is it our plan to do that? No. I think that we benefit mightily from our size and scale. And if we give up some of that size and scale, we hurt the rest of the company in the process. You all know that there are other companies who report their financials publicly. Take a look at our film rent costs in Q4, compare that to some other companies, that's a direct result of the relationships that we have in Hollywood but also a result of the size and scale of AMC. And we would be giving up on a competitive advantage that we now have, if we got smaller.

Okay. And maybe also on the idea of trying to reduce the debt load, do you have any thoughts on any creative financial instruments beyond the common equity that's dominated by the retail investors that could improve your financial position and interest costs and also reengage institutional investors in AMC?

So, we do and we're not yet ready to share them publicly. Having said that, I would remind you that my new CFO sitting – you're not so new anymore, you've been here two years, but who's sitting a couple of feet away from me, six feet away probably, but like we've been very successful in the capital markets, and we just had this impressive, I think, refinancing of $950 million of our debt. We lowered our interest cost by 300 basis points. We stretched out maturities to 2029, and there are other tranches of our debt that we're looking at very hard to see if we can do something imaginative and creative with them, just as we did with our first liens a few weeks ago. Beyond that, there are other things that we can do. But as I said – and we're looking at them carefully, but as I said, we're not yet ready to share anything publicly. But you're on to something that it would be nice to have institutional investors embrace AMC. But I want to be very clear. I don't want to do that if it costs us our individual shareholder base. This new individual shareholder base has been very loyal to AMC since it showed up on our door about a year ago, and we intend to be very loyal in return.

You've been very clear about that. Thank you very much.

Thank you, Jim.

As there are no further questions from the phone lines, I would now like to turn the conference back over to Adam for any closing remarks.

Thank you, Operator. For all of you on the call today, thank you for joining us. The fourth quarter of 2021 was so encouraging for us. AMC is on a glide path to recovery with bold, exciting plans for 2022 in an improving environment around us. With that, don't hold our feet to the fire too much for Q1. But boy, are you going to like Q2 through Q3 and Q4, we're expecting 2022 is going to be a very good year for our company. Thank you one and all. We appreciate you joining us today.

This concludes today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.