Greetings and welcome to the AMC Entertainment Holdings Fourth Quarter and Full Year 2023 Earnings Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Merriwether, Vice President, Capital Markets and Investor Relations. Thank you. You may begin.

Thank you, Diego. Good afternoon. I'd like to welcome everyone to AMC's fourth quarter and full year 2023 earnings webcast. With me this afternoon is Adam Aron, our Chairman and CEO, and Sean Goodman, our Chief Financial Officer. Before I turn the webcast over to Adam, let me remind everyone that some of the comments made by management during this webcast may contain forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, constant currency, free cash flow, non-GAAP 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 afternoon. After our prepared remarks, there will be a question and answer session. This afternoon's webcast is being recorded and a replay will be available in the Investor Relations section of our website@amctheaters.com later today. With that, I'll turn the call over to Adam.

Thank you John. Good afternoon and thank you everyone for joining us today. 2023 marked another year of strong operational and financial gains for AMC Entertainment, affirming the success of our strategic recovery efforts as the industry continues to rebound from the lingering effects of the pandemic. Our determination, innovation and agility allowed us to adapt to a rapidly changing and unpredictable box office in calendar year 2023. And once again, it allowed AMC to defy Wall Street's expectations, beating FactSet and Refinitiv consensus estimates in Q4 and for full-year 2023 for revenue, adjusted EBITDA, adjusted net income and adjusted earnings per share. As a result of our actions, global attendance at AMC Theaters in 2023 tallied nearly 240 million guests, up 19% over the prior year and marking the highest annual attendance in the post-pandemic era for AMC. When you couple our 2023 attendance growth with our all-time record setting admissions revenue and our all-time record setting food and beverage revenues per patron, AMC's annual revenues grew by 23%, exceeding $4.8 billion in 2023 and our adjusted EBITDA improved by $379 million to $426 million in 2023. It was the highest level for adjusted EBITDA in four years, the highest revenues for AMC in four years, and in fact, our adjusted EBITDA was up more than nine times what it was just a year earlier in calendar year 2022. Unquestionably, our positive recovery trajectory continued in 2023, not enough for where we hope to eventually wind up in the year ahead or the years ahead, but encouraging progress again was made. We're also proud that when you look at the magnitude of our revenue and adjusted EBITDA increases, AMC is outshining several of our largest and most important key competitors in the U.S. and in Europe. One of AMC's…

Thanks, Adam. And thank you to everyone for joining us this afternoon. I'd like to start my prepared remarks by briefly looking back over the last four years. No doubt our business has experienced challenges like never before. First we had the COVID pandemic, then the Hollywood strikes, and all this while we managed through supply chain challenges and interest rate increases that have just put enormous pressure on our cash flows. Yet today, our business is remarkably well positioned to thrive as the box office recovers towards pre-pandemic levels. Over the last four years, we've improved our per patron revenue and per patron profit quite considerably. In 2023, our consolidated per patron revenue was around 32% higher than in pre-pandemic 2019. This was driven primarily by growth in food and beverage spend per patron of 45.7% and we've also increased our contribution dollars per patron, contribution dollars here defined as total revenue less both film exhibition costs and food and beverage costs, and we lessened this by approximately 37%. So we've increased these contribution dollars per patron by approximately 37%. At the same time, we worked hard to enhance our theater portfolio. We've been closing under-performing theaters and opportunistically opening higher-performing theater locations. As an illustration of the impact of the changes that we have made in our business, consider for a moment the following, in 2023 our domestic attendance was 32.3% less than in 2019. At the same time, we were able to keep revenue per screen flat in 2019 and increase our contribution dollars per screen by approximately 4.3%. So with 32% lower attendance, our contribution dollars per screen actually increased by 4.3%. The consolidated statistics I've quoted are in constant currency and help explain why we believe that, a, the box office does not need to…

Thank you, Sean. As I said earlier, and as our financial results prove, 2023 was clearly another year of recovery and improved performance for AMC. But it was not -but it was not a good year for our shareholders. Adjusted for stock splits, the AMC share price has fallen to a fraction of where it was as recently as last summer, and I promised our shareholders that I would use this earnings webcast as a forum to provide them with some straight talk, to give them my take. So here's my take. There is so much garbage information floating around Twitter, YouTube and other corners of the Internet about AMC. Conspiracy theories abound. Facts are distorted. Bad motives are assumed when the exact opposite is true. So I want to address some of these issues so you get the straight scoop. I can't address all of those issues in the limited amount of time that we have, but I do want to address some of the most important. First, as to all the hub-bub and litigation that surrounded AMC and the Delaware courts in 2023, I want to remind you that our shareholders got the right to vote on our proposed actions. And not only did the preferred shareholders vote in favor of what we did last year, but also of the common shareholders who voted, their count also was in the affirmative by a wide 72 to 28 margin. Then the Delaware courts ruled that the company could settle the litigation surrounding that - those shareholder votes and proceed to implement exactly as our shareholders voted. Second, as to dilution, back in the summer of 2021, a long time ago, after it was clear that shareholder segment was not wholly supportive of more equity sales, we said there would…

[Operator Instructions] And our first question comes from Eric Wold with B. Riley Securities. Please state your question.

Hi, good afternoon. Thanks for taking my call. Adam, I want to go back to one of the parts of the business I think is probably not as talked about, the distribution business. I think one of the knocks on the overall exhibition business in general for years has been that the availability of content was largely out of your control. So when you get things like the pandemic or a strike, there's little that you can do to kind of drive content into your theaters. Obviously, this changes somewhat with what you did with Taylor Swift and Beyoncé. I guess as you continue to build out that business, I know you talked about you're in discussion with other artists for releases later this year to next year. I guess any sense of what you think the annual opportunity could be for revenue and EBITDA from that distribution business? And then what do you think is the ability of AMC to kind of move outside of the concert or kind of musical film genre into other genres that may be more direct competition with some of the other larger distributors out there?

Well, Eric, look, you're entirely right that if you look at the single biggest challenge that our industry has faced since the reopening of theaters at the end of 2020, it's in the lack of content. And we took matters into our own hands in 2023 with Taylor and Beyoncé and had two grand successes. That causes us to want to do more. We certainly got the attention of the best musical artists in the world, and so there will be more of those. I don't want to quantify it. I mean, I've got a good sense of it, but I don't want to quantify it quite yet. Let's land some contracts for future concert films, and then we'll have a better sense of what you can count on reliably. But who knows where this will lead? There's other alternate content that we could focus on other than just concert movies. We could look to comedy, we could look to sports. When you think about the movie theater industry, it's a dirty little secret that we only - that the industry only sells about 15% of our tickets. I used to work in the airline industry. We sold like 75% of our tickets, not 15%. And there has to be ways to create alternate content that will not replace what Hollywood's doing, but will augment what Hollywood is doing by filling some of those empty seats that are just sitting there waiting to be filled. It also does sort of cause us to think what other ways can we generate movie content in our theaters inexpensively? I don't think you'll ever find a situation where AMC is writing a check for $50 million or $100 million or $200 million to make movies. But there are some interesting ways to collaborate with movie makers to take movies that might not otherwise get made and get them into our theaters and into some other theaters of our friends in the industry, both in the U.S., abroad. So, this whole notion of how do we increase content is something that's completely in our wheelhouse, and it's a direct result of our success in what we tried to do in the fourth quarter and succeeded with Taylor and with Beyoncé.

Thanks, Adam. Appreciate that.

Thank you. I'll now hand the floor back over to Adam Aron to take some retail shareholder questions. Thank you.

We'll take it, Diego. We have had retail shareholders send questions in. Sean, what do they want to hear about?

Yes, sure, Adam. So the first question is generally about the industry recovery, which we've certainly been talking about a lot today. But the question relates to, with players like Amazon and Apple entering this business, is it likely that we can see the release schedule really increasing past pre-pandemic levels in the future?

Well, that's a good question. And - but before we talk about whether we get beyond pre-pandemic levels, let's talk first about getting to pre-pandemic levels, because as we sit here today, the movies released by the major studios are down about 25%. From the quantity of pre-pandemic releases. The good news here is, as you know well, we talk to every major studio every week of our lives here at this company, and we know that studio after studio after studio sees the opportunity for them that can come from achieving high theatrical grosses. And one studio after another is doing all in its power to increase their release schedules, to get the release schedules first back up to pre-strike levels, and then hopefully even higher levels than that, moving back closer to pre-pandemic levels. Yes, it's true, Apple and Amazon are making movies. They're releasing those movies theatrically. We're working very closely with each company, happily so. We welcome them to the party, and we have enough screens in our company and in our industry to accommodate whatever supply of content all these studios can produce and then some. I would point out that one of the comments in my prepared remarks that's so important is we've done so much in the past four years to make this company more efficient. Our profit per patron is up 37% from where it was when we entered the pandemic, which means we don't actually need the box office to come all the way back to pre-pandemic levels. We don't need attendance to come all the way back to pre-pandemic levels because we're making so much more profit from each guest who is in our theater. As for whether in fact and when the box office does cross that pre-pandemic hurdle and crosses $11 billion, we'll all find out together.

Great. Related to that, there's some questions about diversification and what revenue diversification opportunities exist to grow and enhance our business.

So I don't think anyone's worked harder at diversifying their revenue streams in our industry than AMC has in the past few years. And some of them have been quite high profile, things like giving Orville Redenbacher some competition on the shelves at Walmart with our popcorn lines that we took to the home, which are selling extremely well at Walmart. And we just literally, in these very months, are in the process of having extended our retail presence to Kroger and to Publix. We also went up on the Amazon Marketplace, so that's an example of diversifying our revenues. Merchant - we launched our candy line, I guess it was in December, I think, at our theaters. I've tweeted publicly about maybe coming up with a house wine or house beer. Beyond that though, I think the single biggest, most successful diversification play we've had so far is what we've done with movie-themed merchandise. As I said in the prepared remarks, we sold $54 million of it in 2023. Like three years earlier, we sold nothing, $54 million from nothing. So we continue to be intrigued by diversification, and there are other diversification opportunities. But I think it's really important to say this. We work very hard to bring all that cash into our bank accounts, as you know, and 2024 could be a challenging year, especially early in the year. We need to husband all of that cash and treat that cash as being very precious because it's the thing which assures our survival going forward. Therefore, if we're going to look for diversification plays, we have to do so in a capital-light way. We have to be able to diversify, spending very little money to do so, because the smartest thing we can do with our cash right now is keep it for a rainy day.

Questions here on loyalty programs. There's quite a few questions on the loyalty programs and people are asking if there's an update to the loyalty programs coming? Any ideas such as bringing a friend along for A-list members in exchange for a fee perhaps, or a family plan for A-list or other new creations for our loyalty programs?

There are a lot of ideas about our loyalty programs. Our marketing department right now is in the process of testing some things we've given a lot of thought to. A list is of great appeal to us, of course, it's been a very successful program for our company. The most important marketing program this company has ever had is our Stubs frequent moviegoer program, and there are a lot of interesting things that we might be able to do to make Stubs appeal to more people and to cause people who are Stubs members to attend more movies. There are interesting things afoot about how might one qualify for Premier. As an example. There are other possibilities of - I think we have three tiers in the Stubs program right now, the free Insider tier, the paid Premier tier, and the A-list tier. There's talk of creating a fourth tier of Stubs, somewhat in between the Premier level and the Insider level with new benefits. We're going to test right - research and test right now for a possible roll out later this year. And then there's a program near and dear to my heart, which is a loyalty program of another sort. It's called AMC Investor Connect. We have over a million members of AMC investor Connect. These are our shareholders who've registered with us and told us that they're interested in our company. They're either current or former shareholders. We've been in frequent communication with them. We've done lots of advance screenings for them. We've given them some free this and that, some free popcorns and some free drinks and other things. One of the things that we will definitely be doing in 2024 is reinvigorating AMC investor Connect, adding more benefits to it. Because we know…

Something new and exciting for people to see when they come to our movie theaters. I think we've got time just for one more question, which is related to capital expenditure. And the question is, what is sort of the ongoing CapEx level that we would expect over the next three-to-five years? The question here notes that pre-pandemic, we were spending around $500 million per year on capital expenditure. What should investors expect going forward?

So for the past couple of years, we've been in a hundred - a landscape of $150 million to $200 million of annual capital expenditures. About $150 million of that is to - what we call maintenance CapEx, to just keep our theaters in good shape. You can't run a movie theater with a leaky roof or an air conditioning unit that doesn't work or a projector that doesn't show movies. And then some of that CapEx has been used for enhancing our IT systems and growth-oriented projects, bringing some spot acquisitions. Like you said we added 59 theaters into our system over the past several years. Some of our CapEx goes to bring those new theaters into our system. As we look ahead, those years of $500 million CapEx, those were in the days when we were renovating, putting in reclining seats in 50, 60, 70 theaters a year. That spurt is way behind us. So I'd say that with one caveat, people should be expecting CapEx in the $200 million range going forward. And that caveat is this, because of the tough years that we've had with respect to earnings over the last few years, we've put a tight lid on capital expenditures. It was crucial for us to keep cash in the bank and not necessarily spend it all. There are some obvious growth projects that if we were to raise an additional $50 million to $100 million, for example, and we wanted to reinvest that back into our fleet of theaters. If that was something that would produce the highest and best return on that investment, it would have to produce a return on investment higher, for example, than buying back our debt at a substantial discount, which we've done a lot of in the past…

Great.

So I'm looking at the clock. We're past our hour, so we're going to bring this webcast to an end. I'd like to leave you with the final simple thought. 2023 was a superb year for this company on the march to getting back to pre-COVID levels of profitability. 2024 is going to be a bit harder, but 2024 is going to get a lot better starting tomorrow because Dune opens in all of its glory and we're expecting it to be a big and successful movie. We hope you all buy tickets, go to the theater, be amused, be entertained. And as we look further beyond just this weekend, and we look ahead to the next year, which is, as I said, right around the corner, we really think '25 is going to be an incredible year for our company and should be the - just as 2023 was the best year since COVID, we're thinking 2025 is going to leave 2023 in the dust in terms of how potentially good a year 2025 is going to be. So we're optimistic, we're confident, and we'll see you all at the movies. Thank you for joining us today.

Thank you. This concludes today's conference. All parties may disconnect. Have a good day.