Greetings and welcome to the AMC Entertainment Holdings Inc. First Quarter 2024 Earnings Webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [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, Capital Markets and IR. Please go ahead, sir.

Thank you, Joe. Good afternoon. I'd like to welcome everyone to AMC's first quarter 2024 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 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, one and all, and thank you for joining us today. Against the backdrop of an industry box office that was hampered by Hollywood strike induced production delays, AMC once again outperformed. We exceeded Wall Street expectations for total revenues, adjusted EBITDA, net income and diluted earnings per share. It was no surprise for most of the student observers that the number of major film releases in the first quarter of 2024 would be greatly reduced because of production delays caused by the five months long actors and writers strikes of 2023 in Hollywood. Indeed we saw that one major studio had its first quarter domestic box office revenues decreased by an astounding 98% compared to the first quarter of 2023. That studio's decline was not because of some strategic shift to streaming or a disinterest by consumers in going to movie theaters. It was solely because they were not able to release new films into the market due to the actors and writers strikes of mid-summer last year. However, at AMC, we were heartened by several important events in the first quarter. First, the movie-going bounced back in March, which was a considerably stronger month than January or February. Second that our company's intensive review of the movies coming out later in 2024, 2025 and 2026 suggest in our view that very good times are ahead for the movie theater industry. And third, that our company AMC Entertainment performed so well in Q1, increasing our market share and continuing to become a more potent and more efficient operator. Notwithstanding a 6% decline in the quarter's North American box office compared to 2023, AMC's total revenue remained broadly in line with the prior year. And our per patron revenue and per patron profit continued along their…

Thanks, Adam, and thank you to everyone for joining us this afternoon. The box office in the Q1 was impacted by last year's Hollywood strikes despite a 6% decline in the North American box office compared to Q1 of 2023. AMC was able to maintain total revenue within 1% of last year's first quarter. This was achieved thanks to the North American market share growing by over 70 basis points more than any other top 50 theater operator, solid attendance growth in our European business of approximately 6% and total revenue per patron growth of 1.8%. Now looking at our domestic segment and comparing the first quarter of 2024 to Q1 of 2023, with the box office down by approximately 6%, our admissions revenue declined by 3.2% outperforming the industry and total revenue declined by only 2.2%. Total revenue per patron increased by 3.8% with admissions revenue per patron up by 2.7% and food and beverage revenue per patron up by 1.2%. These per patron metrics were all time first quarter records for AMC and our total revenue per patron was some 43% ahead of the Q1 of pre-pandemic 2019. In addition, our contribution margin per patron which we define as total revenue less film exhibition costs and less food and beverage costs provided by the number of guests was $15.32. This is 5% above the first quarter of 2023 and 54% above the first quarter of pre-pandemic 2019. These strong per patron metrics are as a result of the continued success of our innovative market leading food and beverage offerings as well as our alternative content and immersive [indiscernible] offerings and revenue diversification initiatives such as retail popcorn. Add to this our ongoing theater portfolio rationalization and thoughtful expense management and we end up with record setting results. Now…

Thank you, Sean. Before taking your questions, I'd like to bring you all up to date on five ongoing initiatives at AMC. First, is our continuing dialogue with several of the world's greatest musical artists. As you know, for the first time in our company's history, in late 2023, we surprised the world with our Taylor Swift and Beyonce concert films. That appears to be the gift that keeps on giving because ever since we've been in conversation with artist after artist after artist after artist. Some of the biggest names who routinely fill arenas and stadiums the world over. That has led to an announcement just yesterday of our collaboration with nine time Grammy Winner and two time Academy Award winner, Billie Eilish in partnership with Apple Music and Interscope Records, next week, on May 16 and 17, our AMC Theaters Dolby Cinemas will be an integral part of the launch of her new album, Hit Me Hard and Soft. In a special listening event, Billie Eilish fans will be able to hear the new album in Dolby Atmos sound exclusively at AMC Theatres, the day before the album is released to the public. The visual content on screen has been carefully selected to delight those in attendance. This is just the beginning of the innovative programming that will be coming to our theaters from our new distribution arm, AMC Theaters Distribution. While the Billie Eilish listening event will take place only at AMC locations. We took great pride that so many of our fellow movie theater operators were included in our efforts with Taylor Swift and Beyonce. We expect going forward that some of our activity in this sphere will be exclusively held at AMC locations only and that other activity cooperatively will be shared across our entire…

[Operator Instructions] And our first question comes from the line of Jim Goss with Barrington Research. Please proceed.

All right. Thanks. Adam, regarding your discussion about food and beverage initiatives, clearly, dollars are more important than margin percentages. But I wonder if you could talk about how you think in terms of introducing items and the pricing attached to those items and where you feel the food and beverage margin should settle in. It slipped a little bit in the last quarters for some of the reasons that have taken place.

So Jim, we're picking up increased food and beverage sales, sort of a staggering numbers. Pre-pandemic, routinely, food and beverage sales per patron were about $5 ahead of AMC. I'm using the domestic numbers as a placeholder, not the European numbers. European numbers are a little bit less than the US numbers. And they shot up to around $8 to $9 a head post-pandemic. So we're looking at a huge increase. And our F&B margins are in the low 80s. I know it varies item by item and quarter-by-quarter. But my rule of thumb is about 82% of incremental food and beverage sales flows to the bottom line. So when we pop a $4 increase in food and beverage spending over where we were a few years ago like -- that's a huge driver of income for us. And it's one of the reasons that our revenue per patron is up so much. It's one of the reasons our profit per patron numbers are up so much. And it really comes from three factors maybe I should say four factors. One, we have slightly and only slightly raised the prices on our F&B products. Second, though, more and more people are stopping at our concession stands and buying food and beverage items from us. There is no rule that says you have to buy food or drink when you come into movie theater. You can just buy the ticket, go to your chair, enjoy it, enjoy the movie and leave. But what we have seen over the last couple of years is that we're doing a much better job in capturing more people to stop the concession stand and buy. The third factor is they're buying more items. So where they -- where someone used to buy one item, maybe…

Okay. Thanks. And just one other one. If we use the Billie Eilish concert as a prerecorded concert as an example. Is this something you think you could than share with cinema competitors? Or would that -- is that just a one and done sort of thing? Or could you do a limited run at AMC like every Wednesday or something of that nature to take advantage of it, but not interfere with your first run theater or first run films.

So when you talk about every Wednesday, that means 52 Wednesdays.

Well or not necessarily just some pattern.

No, I know. But I would say with nine Grammys and two Oscars there aren't 52 Billie Eilishs. So I don't -- and it's a tremendous amount of work to get these artists to agree to showcase their talent in our theaters. But that having been said, I don't think we'll be doing 52 a year of them. But I do think that we'll be doing several per year. Even a onetime listening event is lucrative for us on a per screen basis. And of course the Taylor Swift and Beyonce concert films were enormous for AMC. They represented more than 15% of our total profitability for the year last year, if you look at the EBITDA they generated. I do think that many of the -- I do think that -- as a whole, look, I don't think, I know from having talked to so many people who are either the artists themselves are representing the artists that there's a lot of interest in the movie industry generally based on what we pulled off collectively for Taylor and for Beyonce, I would expect several major projects a year. I'm really excited about this listening event for Billie Eilish because it's not a concert film. It's her new album release, which they put some visuals to. Is it possible that a lot of major artists will look to movie theaters as an intriguing way to launch their albums and to get garner extra publicity and fan interest, especially auditoriums of [indiscernible] was something as industry leading as Dolby Atmos sound. We put together the Billie Eilish thing with pretty tight timing. So it really wasn't practical to try to take this one to our competitors. But the success of Taylor and Beyonce was that we did take it to our…

All right. Well, thanks very much for taking my questions.

Thank you, Jim.

And the next question comes from the line of Alicia Reese with Wedbush Securities. Please proceed.

Good afternoon, gentlemen. I'm looking at the dynamics around market share and film rent. And so I'm just looking at -- there are a few titles in the quarter that drove most of the box office, particularly domestically. And a lot of that coming from June, which presumably led your market share gains in the quarter as you have the largest footprint of IMAX screens and that played very well on IMAX. But I'm wondering if you could talk at least qualitatively about the dynamics that drove your film rent substantially lower year-over-year.

Sure. I'll throw in something and Sean will take it in addition. If you look at the first quarter there were fewer big blockbuster films and more middle-sized films that were in our theaters that did really well. And if you look at the -- we've never really disclosed our deal studio by studio. But they tend to be on sliding scales where studios command a higher film rent on higher grossing films. And the fact that there were so many middle size and smaller films that led the way in the first quarter, that explains a lot of why the film rent reduction was achieved by AMC. You want to add anything?

Yes. So I'll just give you a little bit more color. So when we look at the number of titles that we played in Q1 2024, over $5 million, we had 41 in Q1 versus 35 in Q1 2023. And obviously, the box office was lower in '24 than 2023. So, yes, June was the biggest title of the quarter, no significant. But after June, the box office per title went down quite significantly. And so it's exactly as Adam says when the firms have a lower gross per showing that certainly impacts our firm rent favorably.

Thank you.

Thank you. There are no further questions on the audio line. I would like to turn the call back to management for retail shareholder questions.

Thank you, operator. Okay, Sean. So what questions have come in from our retail shareholders?

So the first question is related to market share as well. And the question says that AMC has been growing market share in the US market, while at the same time, closing underperforming theaters. So can you comment about what we can attribute the success to? And do we see this market share growth as sustainable as the industry recovers?

Sure. So, yes, it's a pretty impressive trick to increase your market share when you're closing 100 theaters. But that's exactly what we did. And part of it is -- and as you mentioned in your earlier remarks, our 70 basis point improvement in market share with a higher market share growth that was achieved by any of the 50 largest movie theater circuits in the United States. That's very encouraging for us. Part of it is because we think our theaters are in good shape. Part of it is because we think we've got very strong marketing, which I will talk about later. But also what's really interesting is that the theaters that we are closing were our older, more tired theaters, buildings that were sort of at the end of their 20 or 30 year useful lives that weren't grossing all that much. And the theaters that we opened were shiny new ones in great locations, usually open with reclining seats to start. And as it turns out, it's incredible, but true, the 60 theaters that we opened outgrossed the 169 theaters that we closed. So we're replacing older, tired unsuccessful theaters with thriving ones. And some of the ones that we've opened are amongst our -- literally, our highest grossing, most profitable theaters in all of Europe and in all the United States.

Terrific. And the next question is about AMC Cinema Suites. Question here is looking for an update on Cinema Suites? And is there a chance that we release these products on the retail channel?

So Cinema Suites is doing great. We're very pleased. As you all know, I think, it was in the fourth quarter of 2023. We unveiled a proprietary house brand of premium gourmet candies, chocolate covered peanuts, chocolate covered raisins, chocolate covered almonds, chocolate covered pretzels. Four different SKUs. We say they're premium gourmet candies because they have a lot more chocolate. And we tend to charge the same price for Cinema Suites as we charge what I call regular branded candies that are weighed on those loves. They've been selling well. We've been -- they're nicely ahead of expectations. We've had no problem with the supply chain and getting these delivered to us in quantity. And I would think that we would, in fact, take them to the retail market at some point going forward. Exactly when, I don't know. It's not the highest priority. There are other things that are higher on the list of things to do to make more money for AMC, but Cinema Suites have done great. We're glad we did it.

Great. And then the next question is about our capital expenditure. Can we provide some color on AMC's CapEx spend, where are we allocating the money?

Well, since your nickname around here is Dr. No and you're the one who is raising the capital -- and we've done everything in our power not to spend capital expenditures at the moment because our preference has been to build up our cash reserves for a rainy day. Why don't you answer the CapEx question?

Thanks, Adam. Well, it's true we are very disciplined in our capital spend, particularly during this recovery period. But the good news is that AMC has a very large number of high return investment opportunities. Right now, we're prioritizing those investments that maintain our existing buildings, our existing equipment, our IT capabilities so that we can continue to provide the best possible guest experience. But we're always allocating our capital to the best risk-adjusted return opportunities and we continue to do that. When I look to the future and I see the sort of the pipeline of attractive investment opportunities we have. They include our premium large format auditoriums, side and sound upgrades, automation of the guest experience, better seating, et cetera. So again, there are many very attractive opportunities, but now around 75% of our capital spend is really focused on attaining the assets to continue to provide the best possible guest experience.

Thank you, Sean. And I might add that I think the priority of spending has been maintenance CapEx first because we have to keep our theaters in decent shape. But to the extent that we have additional monies in the door, our priority has been to use that to build up our cash reserves. My comments in my earlier prepared remarks that cash is king. It's a serious comment. I do believe that one of the reasons why AMC has defied gravity the last four years and surprised a lot of people who thought we might run into trouble, but we didn't as we build up our cash reserves intelligently. But having said that, there are so many interesting ways that we could reinvest in the business. And I personally think the most lucrative of those ideas is, as you said, the increased premium large-format screens. I hope that we can add more IMAX screens and Dolby Cinema screens. We are the largest IMAX exhibitor in the world outside of China. We're the largest Dolby Cinema exhibitor in the world. We have about half of the IMAX locations in North America. We have all the Dolby Cinema locations in North America, those auditoriums do extremely well. And if we can wrestle up some capital expenditure money to do it, adding more of them is a great idea.

Agreed. Next question here is related to debt. The investor asks with a significant amount of debt maturing in 2026, two years from now, what is the company doing to address this debt that is maturing and reduce the overall debt level?

So in terms of reducing the debt level, we have done, I think, a phenomenal job over the last few years of paying down debt and other deferred obligations like deferred rent. We, in the last two years roughly, we paid off almost $1 billion of long-term debt and other deferred obligations, which is encouraging. We've done that in part by buying a lot of debt back in the open market at a discount, which means you're doing it at a profit, which is also good. Still realizing we are playing a capital allocation game of reducing debt, buying in debt versus investing in the business through CapEx versus building up our cash reserves. It's a bit of an art form, which actually shown here you manage this process day to day. But -- and we paid off or reduced so much of our debt and obligations. It is kind of staggering to me that we had to borrow about $2 billion to survive COVID. And yet if you look today at our net debt, AMC's net debt today is less than it was just prior COVID. So how is it possible that we had to borrow $2 billion to survive and yet we have less debt today than we had going into COVID. And the answer, of course, is because we raised a lot of equity and we paid down debt, which is important for us to do. Looking forward, we still have about $4.5 billion of debt, not much maturities before 2026, but there are huge maturities in 2026. And I can assure everyone listening to this call today is that the management of this company, which has been pretty smart in how we've navigated ourselves through the pandemic heretofore and a leveraged balance sheet without a lot of EBITDA heretofore, that same management team is wholly focused on the debt maturities that are due in 2026. This is not something that we're going to look at next year or the year after that. We've been working with our Board of Directors and our investment banks for almost a year now in discussing the smartest ways to extend the maturities of our 2026 debt into future time periods. The good news is that we have lender syndicates who generally like AMC, have worked with this before, are working with this now. I'm hopeful that we will come to some conclusion. That will allow us to push out the debt maturities from 2026 into future periods. There's nothing to announce yet because there's nothing that's final or done yet. There's no agreement that's imminent like it's going to be announced in a day or a week, but it has our highest attention. We know about our obligations going forward. We intend to refinance, if at all possible, and we're hopeful that we can do so on attractive terms.

Absolutely agreed. And then the last question that we have is relating to the upcoming shareholder meeting. There's a question here. I would like to vote at the upcoming shareholder meeting, but how do I vote? I've not received any proxy information.

Well, I do hope you -- I mean I hope you all do vote for those of you who own shares that is. I hope you all do vote. In prior years, the voting numbers at AMC have been pretty low because it has been having of some retail investors not to vote. I would remind everybody, this is a chance to have your voices be heard. We pay attention to what you say in the shareholder votes. We act accordingly. You know that I reduced my own compensation this year in response to what shareholders were saying in the so-called say-on-pay vote. So we really do want you to vote. We want to hear what you're thinking. But the way you vote is you go to your broker where your shares are held and you get the proxy materials from your broker. If you haven't received proxy materials yet, I know that I've received mine as an AMC shareholder from several different brokers. But if you haven't received yours you should call your broker, you should ask for your proxy materials. We do have a proxy adviser, a listener here in the United States called D.F. King. You can call D.F. King if you would like help. There's a toll-free number that's been set up. 1-800-859-8511. Let me repeat that 1-800-859-8511. If you hold your shares through DRS, you get your proxy materials from the registrar, Computershare. And I just might add, since I note that we have many international shareholders who listen to these webcasts. We do know that voting in shareholder meetings for American companies is not as easy, abroad as it is in the United States. And in some cases, it is impossible because some overseas brokerages do not facilitate getting proxy materials to shareholders. And we have discussed this at length, there is literally nothing that we can do as a single listener on the New York Stock Exchange to do anything about that. All we can do is suggest to you that you change brokers and change from a broker who will not get you proxy materials to a broker who will get you proxy materials. But as I said, we encourage you to vote. It's a good thing. And the shareholder meeting is coming not too far from now.

With that, I think you're telling me we're done with questions. So we're going to thank you all for joining us today. I leave you with two simple thoughts. As we look at the box office for the end of this year and for next year, and into 2026, the box office looks spectacular compared to what we've suffered with in 2020, '21, '22 and '23. And the second thing I'll leave you with is, not too late, it's only 5 o'clock Central, 6 o'clock East. At 7 o'clock local time all across the country and our premium large formats is a special advanced screening of Kingdom of the Planet of the Apes. It should be a pretty big movie this weekend. With that thank you all for joining us today.

Thank you. This concludes today's conference. You may now disconnect your lines at this time. Enjoy the rest of your day.