Greetings, and welcome to the AMC Entertainment Holdings' Third Quarter 2024 Earnings Webcast. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the call over to John Merriwether, Vice President, Capital Markets and Investor Relations. Thank you. You may begin.

Thank you, and good afternoon, everyone. I'd like to welcome you to AMC's third 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-Q and 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 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 refer to non-GAAP financial measures such as adjusted EBITDA, constant currency, contribution margin, 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 at amctheatres.com later today. With that, I'll turn the call over to Adam.

Thank you, John. Good afternoon, and thank you to everyone for joining us today. What a difference a quarter makes. As most of you know all too well, the industry-wide box office late last year, and for several months at the start of this year, was severely affected by the prolonged Hollywood strikes of 2023. Even so, when we looked ahead, knowing the movie titles that were scheduled for release, we saw better times ahead. So earlier this year, we started saying that we all would finally get to enjoy a surge in moviegoing in the second half of 2024. And that is exactly what happened. In the third quarter of 2024, the domestic industry box office set a third quarter post-pandemic high of $2.7 billion, up 37% from the second quarter of 2024. It slightly exceeded last year's Barbenheimer-dominated third quarter, and it came within 4% of the pre-pandemic domestic box office of Q3 of 2019. The box office's return to life became evident on June 14 of this year with the release of Disney/Pixar's record-breaking Inside Out 2, now the highest grossing animated film of all time, and thus far the top grossing movie of 2024, and the fourth highest grossing movie since 2019. The third quarter followed Inside Out 2's lead-in fueled by blockbusters like Disney's Deadpool & Wolverine, Universal's Despicable Me 4 and Twisters, and Warner Bros.' Beetlejuice Beetlejuice, among many other movie titles from a multitude of studios and distributors. To illustrate the magnitude of the box office improvement since June 14 of this year, let's compare the first 5.5 months of 2024 to the next 3.5 months. On a per day basis, the domestic industry-wide box office was 82% stronger between mid-June and end-September than it was in 2024 prior to June 14. And…

Thank you, Adam, and thanks to everyone for joining us this afternoon. As Adam noted, the North American box office experienced a very strong recovery as we moved into the second half of this year. While the box office in North America exceeded the prior year's third quarter, AMC's consolidated attendance was approximately 12% below the same period last year. There were 2 factors driving this result. First, the film slate did not resonate as well in Europe as in North America. This is particularly for titles such as Deadpool & Wolverine, Twisters and Beetlejuice Beetlejuice. The result is that the overall theater industry in the European markets in which we operate experienced an attendance decline of approximately 16% in Q3 '24 when compared to the same quarter last year when titles such as Oppenheimer and Barbie outperformed in the European markets. Second, in our domestic business, the film slate in Q3 2024 skewed in attendance away from the major urban centers such as New York and Los Angeles where AMC has our largest presence. This was particularly evident with titles such as Twisters, Despicable Me and Beetlejuice, compared to the prior year when again Oppenheimer and Barbie attendance skewed very much in favor of AMC's urban geographic footprint. As a result, our overall North American market share declined by approximately 60 basis points. This is related to the interplay between the film slate and our geographic mix. During the third quarter, we welcomed 65 million moviegoers to our theaters worldwide. This represents a sequential revenue increase of approximately 31% compared to the Hollywood strike impacted second quarter of 2024, and resulted in an EBITDA of more than 4x that of Q2 of 2024. A key to our post-pandemic recovery trajectory over the last few years has been the success…

Thank you, Sean. At AMC, our hard work, imaginative thinking, and bold actions over the past few years have allowed us to successfully manage through challenging times when others in our industry have folded. But by definition, to survive COVID and then the 2023 Hollywood strikes, we've necessarily been on our heels much of the time and playing on the defensive. Yes, we've repeatedly taken smart and decisive action to protect the business and position our company for success as the industry recovers. But now, finally, now, we can see that real success is at hand and not all that far ahead of us. With an expected multiyear rise in theatrical box office in our near-term future and the significant debt maturities having been extended far out, we are finally ready to play on the offense again with what we are calling, and we'll announce by press release tomorrow, AMC's G.O. Plan. G.O., Go on Offense. AMC's G.O. Plan is a multiyear initiative focused on strategically reinvesting in our core business to further elevate and differentiate the moviegoing experience that we offer AMC and Odeon guests. In the process, we will be striving to add mightily to our current adjusted EBITDA levels and to generate attractive returns for our shareholders as a result. Specifically, AMC's G.O. Plan calls for AMC to invest between $1.0 billion and $1.5 billion over the coming 4 to 7 years back into our theaters and into the AMC/Odeon moviegoing experience. Coming at a time of a likely theatrical box office resurgence, we are hopeful that in so doing, investing back in our core business, we can turbocharge our financial results in the quarters and years ahead. Of course, it goes without saying that we will implement AMC's Plan G.O. -- sorry, AMC's G.O. Plan, only…

Thanks, Adam. So we have questions from the retail shareholders. And I'll ask just a few of those and then we'll pause and see if there's any questions from the equity research analysts. Starting with questions from our retail shareholders. The first one relates to the loyalty programs, our AMC loyalty programs. The question is really, are there plans in place to enhance or change these loyalty programs at AMC in the future?

I'm actually very glad you asked that question because, as you know, I'm a marketing guy by training, and I'm so proud of what AMC has done in the area of loyalty. We have 3 major programs that have massive enrollments. And each of the 3 is vital to our success. A couple of years ago, we launched something called AMC Investor Connect. It was a free program for our retail shareholders to join that would get them frequent benefits at AMC, including the occasional free-this and free-that. Normally, they're buying a movie ticket when they're there, which is a good thing too, right? We have 1.4 million members of that program. We're communicating to them almost on a monthly basis. We're coming out with significant offers to them 4 to 6 times a year. This is a group that has been very loyal to AMC. And in fact, we track their patronage because they also were enrolled in AMC Stubs, our frequent moviegoer program, so we could see what movie tickets they were buying. And our AMC Investor Connect population, 1.4 million strong, is about twice as loyal to AMC as our regular AMC Insider Stubs members and like infinitely more loyal to AMC than the great population as a whole who are not in our loyalty program. That's program one. Program two is AMC Stubs, which is our play-for-points, movie theater equivalent of a frequent flyer program. Over the years, we've enrolled, I think it's 34 million households, U.S. households, in AMC Stubs. It was only 2.5 million households when I joined the company 9 years ago. This has been a massive area of increase for AMC. Back when I joined AMC, about 19% of our guests were playing for points through AMC Stubs. In the third quarter,…

It's exciting stuff. And the next question here is about investment spend. Can you talk more about the financing and timing of investments that we're trying to make in the future?

Sure. For the past several years, we've been investing about $200 million a year in CapEx. What we've announced with the AMC G.O. Plan is that we're going to invest in CapEx in our fleet of theaters somewhere between $1 billion and $1.5 billion over the next 4 to 7 years. Now at the slowest, that's a little bit more than $200 million a year. At the fastest, it's $375 million a year. We'll decide how much we're spending in the future years. Only by applying the fiscal discipline that you practice as our CFO, and I've talked about on this call already. We've got to marry our spending with either rising EBITDA which could fund increased spending, or alternatively, if our shareholders were to tell us that they think it's smart of us to increase capital expenditure spending, specifically with the purpose in mind of accelerating growth. So the exact timing and speed is something that we'll decide over the course of the next several years. But as we outlined on the call today, we have a lot of very specific ideas of opportunity in the company that could turbocharge our EBITDA returns.

Thanks, Adam. And Diego, let's pause with the retail investor questions and see if there are any questions from equity research analysts.

[Operator Instructions] Our first question comes from Jim Goss with Barrington Research.

Adam, I know you are all about the creative use of your platform. I was wondering if you might talk a little bit about AMC's participation and the effort by IMAX, I'm sure its biggest partner, to exhibit the Penn State-Washington football game live on selected IMAX screens. And sort of on a related basis, is there any likelihood you might try to initiate a similar program since you would arguably have greater available screen capacity? I assume rights issues are the primary obstacle and the level of interest in specific games tend to be very localized. But how do you approach this opportunity? How do you size it? And maybe this new emphasis on the XL screens might tie into this.

Thanks for the question, Jim, and hope you're well. I spoke with Rich Gelfond, the CEO of IMAX, as recently as yesterday about their Penn State-Washington initiative. We've long been in IMAX's corner. We represent, as I said, almost half of the total U.S. IMAX screens in the United States. Provided they can get a suitable window, an exclusive theatrical window, we're -- we'll do just about anything with IMAX. And I'm optimistic that IMAX could do some interesting things, not just related to Penn State-Washington, but other things as well. And I've got a lot of confidence in Rich to make good things happen for IMAX, which in turn makes good things happen for AMC. If he brings us the Penn State-Washington game, we will play it, of course. That triggers the whole question about sports and sports rights. I've long believed that sports programming is extremely an attractive alternate programming opportunity for AMC. You'll recall that for 2 seasons we carried NFL games, but we did so under some quirky rights from -- given to us by DIRECTV. We couldn't ever mention the word NFL. We couldn't ever mention a team name because those were proprietary trademarks of the league and the clubs. And we can only carry the wrong games, which are out-of-market games. Like here in Kansas City, they only want to watch the Chiefs. When you are in Chicago, they want to watch the Bears. Like I'm sure that Jacksonville-Seattle game is a great game, but the games that we ought to be playing are home games. And we ought to do it in full cooperation with the NFL, not going around them. There are some things we are willing to expand that with. Even in football, we've been quite intrigued about carrying nationally broadcast…

Okay. And one other one, if I may. The franchise-heavy film release slate should support some assurances of continued recovery. I was wondering though if you can discuss the role of the smaller films relative to norms, and the impact of gaining those films and concentration on film rent splits and also the interplay with streaming options for these smaller films versus theatrical releases?

I'm glad you limited your follow-up to 1 question, because it was 2 questions but really 9 questions in there.

Okay. I tried.

No, you're doing well. I'll just try to give you a general answer to the whole thing. When we do our forecast around here for the size of the box office, we literally do it on a title-by-title basis. And in year, that film forecast is updated on a weekly basis. I mean it's circulated on a weekly basis, it's upgraded by our programming staff on a daily basis. And so we're tracking not only the blockbuster or the titles, but also the smaller and midsize titles. And yes, we're thrilled, beyond thrilled, that there are so many blockbuster franchises coming in '25 and 2026. But there are also a lot of medium and smaller-sized movies coming. And like we need them all. We can't just survive on the blockbusters. Like we need the blockbusters, but we also need the medium and smaller-sized movies. And in our conversations with major Hollywood studios, one thing we're like most encouraged about is so many studios are trying to increase the number of movies that they release now as compared with what they were releasing a year or 2 or 3 years ago. And I don't want to name studios, but you have some studios that were producing 25 films that were down to like 10 or 12. And like we talked to 1 major studio just 2 weeks ago who said their aspiration for calendar year '25 was to release 38 movies. Now whether they actually can release -- that's a lot of movies, by the way. Whether they can actually release 38, there's no commitment. But what I'm comforted by is the fact that each and every studio that we talk to wants to issue more products. And some of that's the big massive products like Avatar 3 and the latest Star Wars movie and the latest Avengers movie, like we're happy about that. But we're also happy with the medium and smaller-sized movies. And as you rightly pointed out, our film rents, we don't really disclose the terms of our deals with these studios, but it's well-known that the bigger the movie, often we pay a higher gross split to a major studio, which means that we get to keep more of the smaller and medium film box office grosses. And that's helpful to us as well. So on balance, as we look at the remainder of 2024, all of '25 and all of '26, there are a lot of big blockbusters coming. We know the studios want to release more and more titles, including medium and smaller-sized ones. And that all bodes very well for the recovery of our industry broadly, but of AMC specifically.

And we have time for one more question. And that question comes from Alicia Reese with Wedbush Securities.

Jim asked one of my questions, thankfully, but I do have a couple of others. Wondering if you could just give some maybe puts and takes on the concession costs. It looks like some -- that was quite a bit lower domestically than it has been trending recently. Perhaps there were some onetime items, perhaps some easing of commodity costs in the domestic region. Wondering if you could give your take on the quarter and what to expect going forward on that line item.

Let me pass that one to Sean.

Sure. Thanks, Alicia. Hope you're doing well. With respect to the food and beverage costs, when you compare it to quarters when our attendance and revenue is lower, we do get a benefit, right, on food and beverage costs when attendance is higher. Why is that? Because you have less spoilage and less shrinkage as a percentage of the total volume of food and average sold. So that's one factor to take into account. The other factor to take into account is, yes, there have been price increases, particularly in commodities like cocoa. But at the same time, we have a very focused and successful procurement team that has done a lot of work in terms of looking at mix of products, the supplies of different products, et cetera. And that has helped up in beverage costs. And we do get a rebate, and you see some of the impact of rebates coming through the numbers in Q3. That certainly helps up in beverage costs as well. So going forward, if I look out for the remainder of the year, which is basically Q4, right, I think that food and beverage costs should be pretty much in line with what we were able to achieve in the third quarter.

And let me just chime in. So small numbers, but -- when you go to margins and percentages. Including our food and beverage numbers, the merchandise that we sell in our concession stands, this has been a massive success for AMC. Three years ago, our merchandise sales were precisely $0. And in calendar year 2024, it's going to be about $50 million. And I think in calendar year '25, somewhere between $50 million and $75 million. Maybe we can even do $75 million next year. But our profit margins on merchandise are more like 50%, whereas our profit margins on other food and beverages are in the low 80s. So mind you, a 50% profit margin is nothing to sneer at. We'll take as much of that as we can get. But that's just one more thing in your list of modeling.

I think that's an important point, Adam, because despite that, because the merchandise and collectible concession vehicles were up significantly in Q3 '24 versus Q3 '23, like I have said, that does put pressure on your food and beverage cost, exactly as you said. Despite that, our food and beverage costs are still lower, which gives you an indication of the success we're having in managing those costs.

That makes a lot of sense, thanks for explaining that. And then lastly, the other revenue, obviously, there's so many things in there. And with the popcorn expanding early to midyear next year, just taking that into consideration, alongside Q4 '23 when you had Taylor Swift, that added quite a bit in there, I think, for distributing that. Just wondering if you could give us some sense of where you expect that to track on a per cap basis, maybe around $1.82 on a normalized basis perhaps once you get the full distribution of popcorn into stores?

Good luck. Yes, I do want to say on that -- good luck, Sean. Go ahead.

No. Look, that's absolutely right, included in other revenue is the retail popcorn sales. So you would expect -- and the retail popcorn sales have grown significantly when you look at the quarter-over-quarter -- year-over-year, right, comparison, Q3 '24 versus Q3 2023. So that impacts your revenue per patron. And I think when you look at Q4 and you look at the following year, well, what's going to happen is the retail revenue sales probably in Q3 and Q4 are going to be relatively similar. But because Q4 is likely to be higher attendance, likely to be higher box office, the impact is going to be less. Looking out to 2025, you should continue to see that revenue per patron -- that other revenue per patron increase, but probably more towards the second half of 2025 as retail popcorn does increase a little bit.

Thank you. Really appreciate that you could answer.

Before we end with -- you're welcome, of course. Before we end the call, I know it's late and there's like a lot of election news that people want to continue to go back and pay attention to, let's take 1 last question from our retail shareholders before we end the call.

Thanks, Adam. And so the last question that I will read out from our retail shareholders relates to the box office. And the question is really, when do we expect the industry box office to reach a steady state and return to the traditional pre-pandemic industry growth rates?

So I mean, I think the answer to that question is almost the whole saga of this earnings call combined with Jim Goss' question. It's been a long time in coming. The pandemic knocked the industry box office down 80%. We've been on a build sort of straight up since 2021, but it's been a slow build, and the pace of that growth was knocked off to the side by the Hollywood strikes in 2023. But as we look ahead, we'll all know on December 31 where this year ends up, but should be close to around $9 billion. It may be more, it may be less, but closer to $9 billion than to $8 billion. As we look ahead to 2025, it should be a lot bigger than that. As we look to 2026, we think it'd be a lot bigger than that. It would be a nice thought to think that the industry box office in 2026 could get near to pre-pandemic levels. I don't know that it's going to go all the way up to $11.5 billion in 2026. But an important point for everyone to remember is that AMC does not need the box office to return to pre-pandemic levels to outproduce pre-pandemic levels of EBITDA because of the operational and financial efficiencies that we've achieved in this company over the past several years. Just look at this year, the attendance in Q3 was 25% down from the third quarter of 2019 pre-pandemic, and yet our EBITDA was in line with the pre-pandemic level of EBITDA in the third quarter. So our -- whatever you want to call it, our contribution per patron, our profit per patron, there are a lot of phrases you can describe it, but the amount of money we make from each…

Thank you. And this concludes today's call. All parties may disconnect. Have a good day.