Good afternoon, ladies and gentlemen. And welcome to the AMC Entertainment Second Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. And following the presentation, we will conduct a question-and-answer session. [Operator Instructions]. This call is being recorded on Tuesday, August 8, 2023. I would now like to turn the conference call over to Mr. John Merriweather. Please go ahead.

Thank you, Kelsey. Good morning. I'd like to welcome everyone to AMC's Second 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 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 afternoon, everyone. And thank you for joining us today. When I think of our second quarter 2023 results and our start to the third quarter, I want to share this with all of you. In plain English. AMC blew it out of the water in the second quarter of 2023. And I might add that the third quarter of 2023 is starting out to be roaring hot too. Around here, the metaphors we often use to describe our circumstances involve famous movie quotes. Our recent results in Q2 and so far in Q3 of 2023 brings, to my mind, Bruce Willis as Lieutenant John McClane in the Die Hard movies, when he would say, Yippee-ki-yay. He would then add a colorful expletive that I cannot repeat on this call. I think the closest I can get to it would be Yippee-ki-yay, mother ducker. So, yeah, that's the second quarter of 2023. Without being too dramatic, the stakes are high and we're surrounded by some uncertainties and risks. But it's certainly encouraging for us all to take a moment this afternoon and celebrate our immensely positive results in the most recently completed quarter. AMC's results in Q2 2023 were well ahead of last year second quarter and well ahead of the market's expectations. Indeed, AMC exceeded consensus market expectations across the board, generating post pandemic records for revenue, adjusted EBITDA, net income and earnings per share. We now have posted three consecutive quarters of positive adjusted EBITDA. And this quarter, for the first time since Q2 of 2019, that's four years ago, we generated positive earnings per share, yet another milestone in our path towards ongoing recovery. While we still have much work ahead of us on this front, AMC's glide path to eventual recovery continued with…

Thanks, Adam. Thanks, everyone, for joining us this afternoon. So before I begin my comments on our second quarter financial performance, I would like to just take one moment to provide a little bit of context behind our earnings release and 10-Q issuance this morning rather than our customary after to the market issuance. As you know, the Delaware court is currently in the process of reviewing our proposed shareholder litigation settlement. A ruling by the court prior to the issuance of our 10-Q could constitute a post balance sheet event that might require an adjustment to our financial statements, and thereby a possible delay in our regulatory filings and earnings release. So to avoid any such risk of a delay and the possibility of thereby missing filing deadlines, we decided to release our results for the second quarter before the market opened this morning. Okay, so now on to our results for Q2, our strongest quarter post pandemic and a clear sign of our ongoing recovery. 2023 has continued to see box office recovery, $1.7 billion in Q1 and now $2.7 billion in Q2. For the first half of 2023, the box office is now up approximately 20% from the same period last year. Remember, the first half of 2022 was up almost 4 times from same period in 2021. With attendance growth of 12.2% and revenue growth of 15.6% compared to the second quarter of 2022, we grew our adjusted EBITDA by 71% to a post pandemic record of $182.5 million. This illustrates the operating leverage that is inherent in our business model. For the quarter, we achieved positive earnings per share for the first time since Q2 of 2019. Now granted, it's a small positive number. But for those of us who have been working tirelessly for…

Thank you, Sean. I'd like to give you all a brief update on seven specific items related to some of our thinking, as well as our exciting ongoing initiatives and our current plans. First, on liquidity. We've made many public statements throughout this year and again in recent weeks that AMC has skillfully charted our way through turbulent waters at a time when several of our most important competitors failed, and that we watch our liquidity position very closely. We've made it clear that our strategy first is to survive and then to thrive. Of course, we are heartened by the fact that we had $643 million of liquidity at the end of the second quarter of 2023. But some who follow us closely, nonetheless, underestimate the potential for cash burn in the seasonally weaker winter months. This is especially true given the uncertainties of the writers and actors strike since no one knows when they will end. We intend to make sure that AMC does not run out of cash by continuing to seek the flexibility to raise fresh capital on the best possible terms. Our highest obligation to stakeholders is to avoid the pitfalls that sank others in our industry into financial ruin. Second, on balance sheet management. In the second quarter, we methodically raised $34 million of equity and retired $42 million of debt. Sean, in his remarks, gave us a lot of other statistics, various timeframes of how much equity we raised and how much debt we retired. I am particularly intrigued by this statistic, which I haven't heard yet on the call. Since the creation of the APE preferred equity units in August of 2022, about a year ago, AMC raised $418 million of equity and retired $548 million of debt, including deferred rent. Needless…

So quite a few questions from shareholders. First question relates to our strategic direction. And the question is, what are the top priorities for AMC both today and in the future? Are we considering M&A opportunities?

Some of you have asked me on Twitter. Like, why are we still talking about COVID. And that's because – we are because, in the movie theater industry, the industrywide box office, which is the basic size of our industry, is still below 2019 levels. And that's a lingering problem because if you look at the box office 2017, 2018, 2019, this industry was sized for about $11.5 billion box office. And in 2020, it was $2 billion. 2021, it was $4.5 billion. 2022 is $7.5 billion. This year, I hope it hits $9.5 billion, might hit more, might hit less. We won't really know till the end of the year. Going to be a lot more than 2022. But we're still down below pre-pandemic norms. I remember when we shut our theaters in March of 2020 and people were predicting we'd be back in normal in four to six weeks. Our theaters were shut for five and a half months. Some of our theaters were shut for almost a year. And the box office fell by more than 80% that year. And it still was way below pre-pandemic levels. Even now, three full years later. So we've had to adjust our strategy because the movie theater industry has come back slowly, and so our strategy has become survive, then thrive. We have had to take the steps to make sure this company survives. And not all companies in our industry can say that. Other companies with big brand names, both big chains, chains that you would recognize, and small chains that had a cult following in some markets in Texas and California, they went bankrupt and a lot of their theaters didn't reopen. So, first, we have to survive. And as I said, we like the results. And April,…

I think that addresses that question very nicely. There's some questions here about our theater footprint. What are the expansion opportunities of that footprint, both US and internationally? And what are the opportunities to continue to close theaters, underperforming theaters and improve our overall profitability? And also, how does premium large format fit into those plans?

On the theater footprint, we've managed this like maniacally over the last three-and-a-half years. You gave the stats earlier that we opened 50 something theaters, we closed 150 something theaters. We didn't open any of the 50 lightly, we didn't close any of the 150 lightly. When you look at a company that has almost 1,000 theaters globally, we've got some theaters that are brand new, we've got some theaters that are 25 years old. We've got some buildings in great shape. We've got some buildings sort of at the end of their useful lives. We've got theaters where we've got great rent deals with landlords. And we've got theaters where we have terrible rent deals with landlords. We've got some theaters in unbelievably successful malls and other theaters in unbelievably unsuccessful malls. And so, we have a whole department here, our real estate department, our development department that's paying attention to every single one of these theaters, every single one of our landlord relationships. And where the theaters are successful, we cheerfully pay the rents. Where the theaters are not successful, we enter into cooperative dialogue with the theater landlord to see if they're willing to lower our rent to keep us around and continue to drive traffic to their other properties nearby. And in many cases, we're quite successful in getting landlords to adjust rents. In addition to that, I would say we have spectacular relationships with all of the large mall operators in the United States, the Simons, the Brookfields, the Westfields, and a whole slew of other theater owners, and I could name another probably 10 REITs, who have anywhere from 5 to 50 of our theaters. I think we maintain excellent relationships with each. And one of the things, because our relationships are so good,…

Let's talk a little bit about food and beverage. There are for quite a few questions about that because it's been enormously successful for us post pandemic. Question here about plans to potentially expand the menu offering at theaters or plans to open restaurants at a theater or take food orders directly from the seats.

This is a subject near and dear to my heart. I'm an eater. Any of you have seen me sideways, I'm not the slimmest guy around, although I weigh a lot less than I did 20 years ago. And yeah, no more chocolate or pretzels. All the chocolate covered almonds are pretty good. Anyway. I think AMC was leading the way before the pandemic in having the biggest variety in our concession stands. Remember, we introduced something called feature fair all across the system here in the United States, where we made a lot of progress in variety. We put in as a brand standard for all AMC theaters in United States, Coke Freestyle machines. I counted more than 140 flavors come out of those Coke Freestyle machines. I think that's an enormous advantage for us over theater chains, which still are offering 8, 12 or 14 flavor choices. Those Coke Freestyle machines don't come cheap. But I think that was a very smart investment for us. But then COVID hit. And when we came out of COVID, we came back with a very limited menu, which we tried to grow back to sort of the feature fair levels. But then came supply chain shortages. And then came labor shortages. And all of a sudden some of our more complicated items were difficult for our staff at the concession stands to execute, which then would slow down delivery, which would lengthen lines at the concession stand and you're always trying to balance variety of items against speed of purchase in a concession stand because no one wants to wait in a long line. I don't blame him for that. And I'd say where we are today is we're back up to about 80% of the feature fair variety at the…

Adam, our shareholders are uniformly very excited about the retail popcorn sales and our initiatives there. And so, their questions about, do we plan to expand this further? And are there other potential revenue streams similar to retail popcorn that can help grow the business?

I couldn't be more excited about the popcorn success. We spent over a year in our food and beverage department working on the right recipe for home corn. Whether it was in the bag ready to eat or microwave pouches that you microwave at home, we wanted it to taste just like it tastes in the movie theater. And by the way, there's a secret to our popcorn. Not all popcorn is created equal. There are different grades of corn. And we buy the best there is. So one of the reasons why our popcorn is so good at AMC Theaters, is we buy the best corn. It's like graded. And so, our corn at home tastes great. And the sales – like, Walmart can barely keep it on the shelves. And they keep on reordering and they keep on selling out. So, yes, we gave Walmart a six month exclusive because they gave us so many store locations. We rolled out the AMC popcorn in like 2,600 Walmart stores. Very few brands get to roll out on day one in 2,600 Walmarts. Normally, you'd get a fraction of that. And you prove your way. But they believed in our brand. And it's been a big success. And we're happy to give them the full exclusive. But, yeah, as soon as the exclusive is up, we will have conversations with all the major grocery chains with all the major retail outlets in the country. It's taken a while, but I'd like to see AMC popcorn on every shelf where you can buy stack products. There are other things too. I've already talked about the candy products. That's next. And there are a whole host of other ideas that we have to grow revenues for the company. But in the interest of time, I'll either save those for another nice earnings call or for Twitter.

Final question here about the trading of our shares. And there's a few questions here related to – can you comment, Adam, on the very high level of failures to deliver AMC securities?

Yeah, I can sort of. There's a limit to what I'm supposed to say on this subject. But I can say some things. I know it's maddening for so many of our shareholders. I read my Twitter feed, guys. I know what you think. I know what you say because I get thousands of messages a day. For those of you who didn't send Elon Musk his $8 a month for a blue checkmark, since you're limited to a couple hundred characters, you can read a tweet pretty fast, I know you're really frustrated by the high number of FTDs. And as many of you – not all, as many of you know, an FTD is a failure to deliver a share within the normal trading, closing cycle, which is within two business days of the trade. And so, if someone never delivers a share, they're breaking the law. But if they deliver the shirt three days late, instead of – one day late, which is on the third day, they show up as an FTD in your eyes, but the trade did consummate. A little slow, but it consummated. If more than 0.5% percent of our trading volume is in an FTD status, then we would go on something called the threshold list. And we've been on and off the threshold list many times in 2023, and for that matter, in 2022 as well. And this drives some of you like out of your minds because I read what you say. And I say out of your minds in a nice way. I don't mean in a nasty way. But you're angry about it because you think there's something wrong going on. And again, I've got to be very careful what I say legally, but I can tell you this. On multiple occasions, even multiple occasions this year, we have gone to the New York Stock Exchange at very high levels to make them aware of our status on the threshold list. And similarly, we have gone to FINRA, which is the regulatory body of the public markets. And we are voicing your concerns. Unfortunately, I know many of you would like to see the results of what they send us back. It's not so easy for us to share that information with you. But we're aware of the concerns. We're aware of them ourselves. And we are taking them to the appropriate regulatory bodies.

Kelsey, that's going to do it for the prepared questions from the internet. Can you give the instructions for Q&A, please?

[Operator Instructions]. At this time, there are no questions. You may proceed, Mr. Merriwether.

We are after 5 o'clock, which is supposedly our cut off. So I'm going to thank everybody for joining us today and leave you with a couple of thoughts. One, we had a fabulous quarter in the second quarter of 2023. And July was gangbusters. And August is gangbusters so far. And for those of you around the country who are listening in the United States, it's really hot in United States right now. Most of our theaters are quite cool and they have some really good movies on the screen. So, if you haven't gone to see Sound of Freedom or Mission: Impossible – Dead Reckoning Part One or Oppenheimer or Barbie or Haunted Mansion, or all the other wonderful movies that are out, go to an AMC Theater near you. We'd love to see you in our theaters. Thank you for joining us today.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day.