Greetings, and welcome to the AMC Entertainment's First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, John Merriwether. Please go ahead, sir.

Thank you, operator. Good morning. I'd like to welcome everyone to AMC's First Quarter 2023 Earnings Webcast. With me this morning 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, 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 this morning. After our prepared remarks, there will be a question-and-answer session. This morning's webcast is being recorded, and a replay will be available in the Investor Relations section of our website at amctheaters.com later today. With that, I'll turn the call over to Adam.

Thank you, John. Good morning, everybody. Thank you for joining us today. As we sit here this morning, I could not be more optimistic about AMC's future because of two vital developments from the first quarter of 2023. First, is the clearly growing industry-wide box office up in North America by some 29% quarter-to-quarter versus last year, growing to more than $1.7 billion in the quarter. And industry-wide attendance in movie theaters in our markets across Europe has risen even closer to pre-pandemic levels, prior to pre-pandemic norms than even the surge in North American box office gains. Incidentally, that clearly growing industry box office has continued in April and so far in May. The April domestic box office was up about 58%, for example, and there is a flood of potential hit movies still to be released in the remainder of 2023. We previously indicated that we expected the 2023 industry-wide domestic box office to be up 15% to 25% or more over that of 2022. Well, now with a big start this year, we now believe the '23 domestic box office will be up 20% to 30% over last year. The second development in Q1 is that our shareholders, at our March 14 special meeting voted by an enormous margin by a totally 80% -- 88% in favor, but only 12% opposed or abstaining, to our proposal to combine our APE preferred units and AMC common shares. Of the AMC common shares that were voted, 72% voted yes. Of the APE holders that were voted, 91% voted, yes. As a result, AMC should be able to raise significant equity capital to outlast the pandemic's lingering aftermath affecting our cash reserves, help us pay down debt or for attractive M&A opportunities as well as for other growth initiatives. AMC's…

Thank you, Adam. And thanks, everyone, for joining us this morning. 2023 is off to a really good start with our consolidated revenue up 21.5%, or 24% in constant currency compared to the first quarter of 2022. The highlight of this being food and beverage revenue. Food and beverage revenue is up 30% or 32% in constant currency versus the same period last year. Overall, our tenants increased by almost 22% over Q1 2022. Revenue per patron was in line with the prior year or up 1.7% in constant currency at $20.45. And it's worth noting that this revenue per patron is some 36% higher in constant currency than pre-pandemic in 2019. In the North American business, the total revenue increased by 25.1% compared to Q1 of 2022, with admissions revenue per patron decreasing by 1.5% to $11.87, and food and beverage revenue per patron increasing by 6.2% to $7.99. This is an all-time record. Note that admissions revenue per patron in the quarter was impacted by an increased proportion of discount tickets during our Tuesday Discount Program and A-list subscription member attendance. In the international business, on a constant currency basis, total revenue increased by 21% compared to Q1 of 2022, with admissions revenue per patron increasing nearly 6% to $10.61 and food and beverage revenue per patron increasing by 12.5% to $4.96. This is another all-time record. And this growth is further supported by increased premium format or PLF penetration, with PLF revenue representing 29.2% of domestic admissions revenue in Q1 2023. This compares to 21.7% in the first quarter of 2022 and 19.9% in Q1 of 2019. And then our international markets, premium format revenue represented 24.1% of admissions revenue compared to 13.1% in Q1 of 2022, and 10.6% in Q1 of 2019. Clearly, guests are increasingly…

Thank you, Sean. Our goal as leaders of AMC is to increase the value of the company over the long term for our shareholders. We do this by efficiently managing our operations and taking decisive actions to provide the best products, services and experiences for our guests, which in turn drives revenues and profit growth. At the same time, we seek to invest in the development of our business, enhancement of our theater footprint, and the growth through value creating diversification initiatives. Over the last three years, we have operated in an extremely challenging environment, as you all know. Survival was our primary focus. That is changing now. It is finally starting to be timed again when AMC can focus not only on surviving but instead on thriving. Thus far this morning, you've heard about the progress we're making in our ongoing recovery. I'd now like to provide an update on some of the key strategic initiatives we're implementing that will transform AMC in a post-pandemic operating environment. In that light, I'd like to highlight four other recent developments. First, our retail popcorn launch. On March 11, the day before Oscars Sunday, we launched AMC's ready-to-eat Perfectly Popcorn for exclusive six months engagement at about 550 locations of the nation's largest retailer, Walmart. As you know, AMC's Perfectly Popcorn hit special aisle endcaps with three varieties of ready-to-eat popcorn, Classic Butter, Extra Butter, and Lightly Salted. Sales were brisk. In fact, so much so that most of the Walmarts sold out of their initial supply. Not only are we very pleased by the initial positive consumer reaction, but so too, Walmart is pleased. Importantly, the second phase of our exclusive Walmart launch began on April 29 when we scaled up the supply chain, with the distribution of AMC's ready to…

Thanks, Adam. Let's start with a couple of questions from our shareholders. The first one here is, are there any plans to enhance or expand our AMC loyalty programs?

Yes. What a surprise. Yes, so two of the most important marketing programs that we have -- let's say, three of the most important marketing programs we have. One is A-list, of course, our subscription program that titles people to see up to three movies a week for $20 or $25 a month plus tax. The other is AMC Stubs in which we have two tiers Insider and Premiere that allow moviegoers at our theaters to earn discounts and freebies when they return to AMC Theaters in future as the reward for their current spending in AMC. And third is just an enormous amount of outbound communications via e-mail, push notification, text that we send to members of our loyalty programs that talk about the movies that will be appearing in our theaters and other benefits that could accrue to them as a result of their support of AMC. As you might expect, COVID brought all those programs at a grinding halt. Our theaters were shut for almost six months. And the volumes in all those three programs started back at a much lower number than where they were just before the pandemic hit us. So we've been in a build back mode ever since we reopened. And I'm pleased to say that the numbers are starting to look good again. We have a significant number of A-list members. And there are a lot of possible enhancements to A-list that we're thinking about and talking about for 2023 and beyond. One of the most interesting of them is, there is something about churn where A-list member -- it’s a small number, but each month some of them drop out. And we don't want to lose those people as AMC customers. So one of the things we'll be aiming to do is to communicate directly with former A-listers who for whatever reason have not tied to continue with the program and try to keep in love with us. Turning to the Stubs program. There are a whole host of initiatives that are now being tested in some markets. We'll see which of these tests meets with positive consumer appeal. And we're going to do interesting new things both for Insider members and for Premiere members. And as I said, we're testing a variety of options right now in small quantities in certain markets around the U.S. as we learn which of our initiatives are testing well and producing good results, we'll start to roll that out nationwide. And as for the communications program, it's ramping right back up. And again, moviegoers at AMC can continue to expect that we'll communicate to them based on their specific moviegoing preferences. We do after all know what movies you went to see. And so it makes sense to talk to you about the kind of movies that you historically have liked as new similar movies coming out in the future.

Thanks, Adam. That's great. The next question here asks about will AMC expand the distribution of retail popcorn to grocery stores and perhaps in international markets? And also is it possible to arrange for the shipping of AMC merchandise internationally?

So the answer to your question is almost definitely yes, mostly. So definitely yes, we would like to expand where AMC Perfectly Popcorn can be bought in the United States. The reasons we were so eager to give Walmart a six-month exclusive: Walmart is one of the great retailers of the world, and it's very rare that there are product launches that start at 2,600 Walmart stores across the United States. They showed great enthusiasm for our product, and therefore, we were willing to give them a head start. But you can be sure that we'll be talking to just about every major grocery store in the country. We'll be talking to convenience stores in the country. We're looking at other possible places to buy AMC Perfectly Popcorn through e-commerce. It has been suggested to us if we want to sell it on Amazon.com, for example. It's been suggested to us that we had to sell it on amctheatres.com, in addition to it's being available at walmart.com. We're also going to look at other unconventional places potentially to showcase AMC Perfectly Popcorn. Like, for example, sports stadiums, company cafeterias that are privately catered, want to say privately catered, I don't mean like fancy privately catered, I just mean meal. There are companies -- big companies have big cafeterias. And hopefully, we can get in there, too. It might just be the best mood that it’s found in the cafeteria. So there are a lot of places that we can take it after the six-month Walmart exclusive. I've heard a lot of you on Twitter, asking me if we are taking it to Canada, and we’re taking it to the UK and Continental Europe. It's a little harder because right now we've only found manufacturers in the United States and the…

That's very exciting. And the next question here is talking about AMC's plans to expand theaters, both in new markets within the U.S. and perhaps in other countries as well.

So we do have plans going forward, and it's impressive the plans that we've already implemented. We've done a tremendous amount of work addressing what we call our fleet of theaters since the pandemic hit in March of -- hit us in March of 2020 and we've actually closed like 150 of our roughly 1,000 theaters because there were money losers or because they were in terrible shape on their end of their lease or some other good reason to close. At the same time, we either acquired or built from a scratch, 66 new theaters. And interestingly, the 66 new theaters greatly out-produced in profitability the 100-plus that we closed. We're going to continue to look at our theaters every single year. And if there is dead wood in our fleet of over 900 theaters throughout the world, we'll take them out of our fleet. At the same time, though, we're going to continue to add theaters. And where we've added theaters, we've been very successful. We bought just under half of the ArcLight/Pacific circuit, mostly in California. The Grove theater and the Americana brand theaters, two of the ArcLights -- the Pacific, I guess they are Pacifics, that we picked up. The Grove is routinely in our five of the seven most highest grossing theaters in the entire United States. The Americana brand is routinely in the dozen most highest grossing theaters in entire United States. We opened a new theater just a couple of months ago at the new Westfield Mall in Topanga, sort of above Nola. And we shut a nearby theater that’s 1 mile or 2 away. It was also in the Westfield Mall. So the old Westfield theater was making no money, the new Westfield theater, the one at Topanga, it's a beautiful theater,…

Questions here, we've all seen the news. Can you comment on the possible impact of the Hollywood writer strike on AMC and particularly the availability of new movies perhaps in 2024?

Sure. Look, we're very sympathetic to the real problems that exist for members of the writer skill. Streaming has changed the landscape of television, changed the economics of what writers earn. We are hopeful that the Hollywood producers and writers guild can work in good faith to craft a solution that's good for all parties. As far as its impact on AMC and the movie industry, if this is a short strike, like short -- I mean short like I don’t mean days, I mean months, its impact will mostly be felt on television programming, because the movies for '23 and '24 have pretty much been written. In many cases, they've already been filmed. And I think only a very prolonged writer strike would have impact, a material impact on the movie theater industry or an AMC.

Question here, can you comment on the take-up of the AMC credit card and the sale of AMC branded retail popcorn? What are the initiatives or plan?

So we only launched the credit card a couple of weeks ago. We only launched popcorn at home a couple of weeks ago. We have said that sales for the popcorn are brick. I think we've announced publicly, and we're not -- if I didn't, will announce it here, but 80,000 people signed up on the waitlist to be notified when the AMC credit card is being launched. The AMC cards that have been provisioned at this point are ahead of our expectations. It's not 80,000, obviously, but the number of cards that have already been out provisioned are ahead of our expectations. We're very pleased with those initiatives. As for other new initiatives in the works, there are many. I'll reveal one for the first time today, which I'm particularly excited about. We noticed recently as a result of the pandemic and the supply chain shortages that candy manufacturers had increased their price to us by a huge amount. Some candy makers increasing their cost for wholesale candy as much as 33% in a onetime bump. That's kind of thinking very hard about our candy. And we realized that we could manufacture a private label brand of candy to very high-quality standards. Price it less expensively than our current candy is priced and have a higher profit margin because our cost to manufacture the private label brand is so much less than the normal brands that you've seen in our theaters for years. This doesn't mean we're going to discontinue our branded candy. Of course, we'll continue it. But I would expect that sometime in late 2023, early '24 if our purchase department doesn't get off of taster. But I'm going to hold out for late '23 that we can introduce a private label brand of popular candies in our theaters, offer them to consumers at a lower price and achieve a higher profitability in doing so. And for the people who want the branded candies, of course, we will showcase them in all their beloved [Odeon] too. But I like that one. We're really out of time. So I would try -- I've been answering all these questions for over a year now. So I'd like to ask you one for a change. And then let's turn to investor questions. In your presentation on this call, there were a lot of numbers. And I would just like you to highlight two. How much cash were we able to generate from the sale of equity since the APEs were created in August of 2022? And if you go back to January 1 of '22, all the way to today, how much debt that we've been able to pay off including the deferred rents which we have worked down? Because those two numbers, how much cash we've generated and how much debt we've reduced are extremely important in considering the current state of the AMC balance sheet and the progress that we've made in showing it up.

Thanks, Adam. That’s a really, as you say, important question. And the two numbers that I want people to take away from this is, one, since the creation of the APEs and an indication of how important that creation was and impact that it has to AMC is, one, we've been able to raise $480 million of cash as a result of the creation of the APEs. So it's a significant impact on our liquidity and cash position. But maybe even more importantly, is the debt reduction. And if one goes back to the beginning of 2022 and just look over the last 18 months, we have reduced our debt balance by $620 million. That includes a reduction in deferred rent. It’s a significant reduction in our debt. And I think I'll add one more number. You asked for two, but I'll add one more number that I think people don't recognize as well is that if you look at our net debt, net financial debt position today as of March 31, and you compare that to our net debt position just prior to the pandemic, December 31, 2019, what one sees is actually our net debt is surprisingly less than it was pre-pandemic by more than $440 million. So it's not more, it's less than what's pre-pandemic. So I think that is a real indication of the importance of the equity raises that we have done since the pandemic and particularly as a result of the creation of the APEs.

Operator, are there any questions from analysts that we should be taking?

Yes, sir. We have one question from Eric Wold from Riley Securities.

Good morning, Adam and Sean. Congratulations on the strong results and turning to positive adjusted EBITDA. I want to focus on the structural improvements in the business that you've made over the past few years, given I think that those benefits may not completely be understood. I'm currently projecting that domestic industry box office revenue to get back to pre-pandemic levels by 2025, but that attendance will continue to lag that recovery as you talked about, that recovery is also being fueled by consumers choosing the premium large format screens and driving up average ticket prices. Can you talk about the structural benefits of the expense reductions you've made at both the corporate and theater levels along with the benefit of the higher per patron spending? And if it's possible that AMC could actually return to pre-pandemic profitability even if attendance remains below pre-pandemic levels?

Sure. I'll respond to that. We had no choice. We had to cut costs like crazy. Because if we didn’t, we're going to run out of cash. And nobody likes to even think about job loss, but the pandemic forces to be lean. Now if you look at our corporate headquarters, it only has about 2/3 of the people working here today than it had pre-pandemic, if you look at our theaters, the management staff at our theaters is down about 1/3 from the amount of management staff we had prior to the pandemic. We've learned to be more efficient. And interestingly, at the same time, we're paying higher wages. So our field crews are earning a lot more, but there may not be as many of them in the theater at any one time. And I know that so many of those people who work for us, work very hard. And they like the fact that whereas we used to be a minimum -- often be a minimum wage employer, now we're routinely paying between $10 and $15 an hour depending upon the market for the line workers. So, number one, fewer management at headquarters, fewer management at theaters, higher paid, but fewer employees in our theaters, and our guest satisfaction scores are all very high. And the leader management team is still running the company just fine. On the revenue side, I guess I'm not supposed to tell you second quarter numbers here yet, but I'll just tease that the food and beverage per patron spending in April is higher than what it was in the first quarter. We are killing it in F&B, slightly higher by the way, don't get too excited. But we are killing in F&B. And our F&B spending per patron pre-pandemic was around $5.60. In the first quarter, it was $7.99, that's up $2.40 per patron, and 85% of that drops to the bottom line. That definitely changes the contribution per patron. And the same is true with ticket price. Our ticket prices have not risen by 20% since pre-pandemic in actual fact. But when you include the mix changes, because there's been such a surge of attendance in IMAX auditoriums and Dolby Cinema auditoriums, our average realized price for ticket is up around 20%. And that again, that's not raw price increase, that's mix change, where there's -- our PLF screens, as I talked about in our prepared remarks, our PLF screens are over indexing like five and six-fold in terms of productivity, and we get a much higher price, which means, again, higher contribution per patron, which for your question, means that we don't need as many attendees going forward as we needed in the past to generate EBITDA.

With that being question and we're over an hour, and you're all busy, other things to do, we will let you go. I want to end the call by thanking all of you who care about AMC and reminding you that there is just an incredible array of really great movies that are coming out between now and Christmas of 2023. You will just spend a lot of time in movie theaters. If you do, you will be amused and you will be entertained and as Nicole Kidman says, you'll see dazzling images on a huge silver screen, and you'll see stories that are perfect and powerful, because here at AMC, they are. Thank you for joining us today.

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.