AMC Entertainment Holdings, Inc. (AMC) Q1 2026 Earnings Report, Transcript and Summary

Hello, and welcome, everyone, joining today's AMC Entertainment Holdings First Quarter 2026 Results Call. [Operator Instructions] Please note this call is being recorded. It is now my pleasure to turn the meeting over to John Merriwether, Vice President, Capital Markets. Please go ahead.

Thank you, Leo. Good afternoon. I'd like to welcome everyone to AMC's First Quarter 2026 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, I'd like to 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 those 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 and constant currency, 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 later today. With that, I'll turn the call over to Adam.

Thank you, John. Good afternoon, everybody, and thank you for joining us today. I am so very pleased to report that AMC achieved our best adjusted EBITDA first quarter result since 2019 pre-pandemic, an adjusted EBITDA improvement of some $96 million year-over-year during the quarter. It was driven not only by strong domestic performance, but also by vastly improved international results across our European footprint. These results are a clear testament to our disciplined operating execution in maximizing AMC's revenue growth while simultaneously containing our costs, combined with having an unwavering commitment to elevating the moviegoing experience. Let me reiterate our Q1 results for all to hear clearly. the best first quarter adjusted EBITDA in 7 years for AMC, up a whopping $96 million year-over-year and far, far, far superior to consensus estimates. Our much improved results clearly demonstrate the operating leverage that is inherent in our business, AMC's ability to generate markedly improving results at a time when revenues are rising. Significantly rising revenues indeed are our continued expectation for full year 2026. Finally, after repeated flat years, primarily due to the crippling industry strikes of 2023, the box office is back and in a big and powerful way. In the first quarter of 2026, the North American box office surged an impressive 22% compared to the prior year. The first quarter box office, the strongest since the pandemic closed theatres back in the first quarter of 2020, ended on a high note in late March with Amazon Studios Project Hil Mary rocketing to become the top grossing movie of the year to that point and Amazon Studios highest grossing film ever. But that was just the beginning. The Project Hil Mary box office result was a 2026 only 12 days because the industry momentum grew even further as the second quarter has started off with 3 more blockbuster hits in a row with Illuminations, the Super Mario Galaxy movie, Lionsgate and Universal's Michael and Disney's -- the Devil Wear Prada 2. There are so many more superb movie titles being released throughout 2026. Rather than regale you with a long list of impressive movies that will be coming out in the remainder of this year, let me just say this. At AMC, we've actually seen footage from the remarkable movies that are set to release. We believe that Disney has hits coming. Universal has hits coming. Warner Bros has hits coming. Sony has hits coming. Paramount has hits coming. Lionsgate has hits coming. Amazon has hits coming, so do A24 and Neon and Baker Street and Angel Studios. This is a year where in our theaters, movie after movie after movie after movie after movie after movie will delight both our guests and our shareholders. They are both franchise movies and new IP. They are big movie titles in our immediate future, but also medium and smaller titles that also look to have real consumer appeal. We could not be more optimistic about the entire 2026 film slate, especially in the second half of 2026, which we believe will see more continued robust growth, adding up to a record post-pandemic box office for full year 2026. The domestic industry box office so far in '26 is already up about $300 million year-over-year. And as we look ahead, we think it's easy to forecast that the full year number for 2026 could be somewhere between $500 million and $1.2 billion bigger than that of 2025. If that's not enough, foreign language films in Europe are also doing particularly well and AMC's improving international performance in Europe so far in 2026 is particularly encouraging. What's crucial about all this industry growth is the operating leverage inherent in AMC. Combining the commercial appeal and outsized performance of so many AMC theaters across the U.S. and Odeon cinemas in Europe, our commanding industry lead in offering premium screens with almost a maniacal focus on reining in our costs. We have repeatedly demonstrated in prior quarters that where there has been significant industry growth with industry revenues rising, then AMC's adjusted EBITDA correspondingly can soar. Turning from our income statement to our balance sheet. Ever so importantly, AMC has been actively working to strengthen our balance sheet by enhancing liquidity and improving financial flexibility. As you know, we recently refinanced $400 million of debt that was due in 2027, now extending that maturity by 4 full years to 2031, while simultaneously reducing our annual cash interest expense in the process. We are also currently converting some $155 million of our debt into equity as we speak. To bolster cash reserves, we raised approximately $72 million of gross proceeds in the first quarter through our at-the-market equity program. And also during the first quarter, we also opportunistically sold a portion of our holdings in Hycroft Mining at an average price of $42.40 per share, realizing approximately $30 million in cash proceeds. When combined with our prior sale of Hycroft shares and warrants in the fourth quarter of 2025, AMC has now generated approximately $54 million of cash from the sale of Hycroft shares and warrants, well north of our initial total of $27.9 million invested in Hycroft. In addition, AMC continues to retain approximately 129,500 Hycroft shares to participate in potential future upside at Hycroft. Taking all these actions together from balance sheet item after balance sheet item after balance sheet item, AMC obviously has been vigorous in addressing the need to further right our balance sheet. With that, I'll turn the call over to Sean Goodman, our CFO, who will walk you through our financial results in Q1 in more detail. I'll then return afterwards to provide some additional, and I might add, very important updates. Sean?

Thank you, Adam, and good afternoon, everyone. The first quarter box office was indeed the strongest start to year in 7 years as we welcomed 47.6 million guests to our theaters across the globe. This represented a 13.6% increase over last year. The operating leverage in our business when coupled with growth in our per patron performance metrics and operating efficiency resulted in first quarter adjusted EBITDA growth of $96 million and the achievement of a post-pandemic first quarter adjusted EBITDA record of $38.3 million. In Q1, we set per patron records in admissions revenue, food and beverage revenue and total revenue in both our domestic and international businesses. and we exceeded $1 billion in consolidated Q1 revenue for the first time since 2019. Our consolidated contribution margin per patron, which is representative of the profit generated per incremental guest grew 6% over last year to a record of $15.19. This measure is now 57% higher than the first quarter of pre-pandemic 2019, underscoring the meaningful improvements in the business over the last few years. This is why the box office does not need to fully recover to pre-pandemic levels for us to be able to achieve pre-pandemic levels of adjusted EBITDA. Domestic total revenue per patron is now up 53% versus Q1 of pre-pandemic 2019 and domestic contribution margin per patron is up 67% compared to Q1 of pre-pandemic 2019. When reviewing our international operations, you should note that Q1 2026 results were impacted by a year-over-year increase in foreign currency exchange rates of approximately 10.8%. International revenue per patron is now up 34.5% or 31.4% in constant currency versus Q1 of pre-pandemic 2019. And international contribution margin per patron is up 38.6% or 35.4% in constant currency compared to Q1 of pre-pandemic 2019. Our results for the quarter reflect the box office growth combined with the impact of strong performance from our innovative loyalty programs, success with our pricing strategies, leadership in premium large formats, continued enhancements to our food and beverage offerings, disciplined operating efficiency and ongoing optimization of our theater portfolio. We continue to actively reshape our theater footprint by investing in facility upgrades, proactively securing improved lease terms closing underperforming locations and selectively adding theaters to meaningfully strengthen the overall quality and profitability of our circuit. During the first quarter, we closed 5 locations and opened 1. And since 2020, we have now closed 218 locations and opened 66 for a net reduction of 152 theaters for approximately 15% of our portfolio. Looking at the balance sheet. We ended the first quarter with $339 million of cash, excluding $42 million of restricted cash. And as previously noted, our working capital cycle follows box office seasonality. So typically, we generate cash in the second and fourth quarters, and we use cash in the first and third quarters, with the largest outflow occurring in the first quarter. This pattern held true for the first quarter of 2026, contributing to our cash burn. Balance sheet strength continues to be a priority with a focus on maintaining liquidity, extending maturities, lowering borrowing costs and reducing debt and leverage, while still continuing to invest in our core business to enhance the moviegoing experience. To that end, as Adam noted, this quarter, we successfully raised approximately $101 million through our at-the-market equity offering plus the sale of Hycroft shares. The capital raised is being used to both strengthen the balance sheet and invest in initiatives that elevate and differentiate the guest experience. Following the successful refinancing of $400 million of 12.75% debt maturing in 2027 with a new $425 million first lien term loan at 10.5% that is due in 2031, our sole remaining debt maturity prior to 2029 is $125.5 million of 6.25% unsecured notes, which mature in 2027. And of course, our balance sheet is further strengthened by the announcement earlier today that approximately $155.8 million of senior secured exchangeable notes due in 2030 are converting into equity, yet another step along our path to reduce debt and improve financial -- from a capital expenditure standpoint, CapEx net of lease incentives was $28.4 million in the quarter, and our 2026 CapEx guidance remains the same, between $175 million and $225 million net of lease incentives. So in summary, the first quarter reflects a very strong start to the year with growth in attendance, coupled with record per patron revenue and per patron profit driving significant improvement in adjusted EBITDA. All of this positions us very well as we move into what we expect to be an increasingly robust box office environment as we progress through 2026. And with that, I'll turn the call back over to Adam.

Thank you, Sean. Before we go to your questions, I want to briefly address 5 key topics that are important indicators of the progress being made at AMC. First, the 2026 film slate is bigger, bolder, deeper and more visually spectacular than what we've seen in many years. These are exactly the kinds of films that demand to be seen on the big screen in premium large-format auditoriums, such as AMC's 225 IMAX at AMC auditoriums, our 181 Dolby Cinema at AMC screens, our screen ex at AMC and 240x at AMC screens, along with our house brand, 47 primate AMC screens in the U.S. and 83 iSense auditoriums at Odeon across Europe. They all join our 3,543 laser at AMC equipped screens and our 168 XL screens across the world. I'm giving you these numbers to remind you of the salient fact that no one has more premium screens than AMC. And with the AMC Go plan, we are not standing still on these quantities. We are yet again still significantly expanding the number of our premium offerings and adding even more laser projection technology. We also will be looking to increase the number of theaters, especially in the United States that offer our far more comfortable branded AMC Club Rocker seats, which have been the secret of our success at 3 notable theaters, Empire Lincoln Square in Manhattan and Burbank in the Los Angeles market, which continually rank week after week as being among the absolute highest grossing theaters in the entire country. We think they own much of their success to the Club Rocker seats and we will be taking these club Rockers to many more of our high-potential theaters. Second, speaking of our commitment to innovation. Since 2023, with AMC's sensational partnership with Taylor Swift, AMC has gotten more and more involved in bringing musical artists in some shape or form to theaters. Taylor & Beyonce, Usher and Billy Eilish and Nicole Scherzinger are just some of the musical grace who have graced AMC screens either with concert films or album release celebrations. Today, I am especially excited to unveil something that is brand new to you all that AMC will be taking music to a whole new level. We are announcing today a wholly new product line, Arena 1 at AMC. Starting this June, right around the corner, AMC Theaters will offer a truly groundbreaking shared live concert experience from day 1 across more than 300 AMC theater locations in 89 markets nationwide. Arena 1 at AMC will deliver exclusive real-time interactive live concerts where our artists will perform live from a purpose-built stage and grade and engage directly with audiences inside our theaters across the country. This is a highly immersive commuter experience, combining the energy of a live concert with the scale, comfort, accessibility and affordability unique to AMC. We believe that this innovation can open an entirely new chapter in live entertainment while driving incremental attendance and revenue across our circuit. Fascinatingly with our Arena 1 at AMC experience, it is a 2-way experience between the artist in a live stage remotely and the concert goers all across the country in our various Arena One and AMC Equipped auditoriums. We are also excited to say that for the immediate future, this is an exclusive AMC offering. Arena One will only be available at AMC. Only available that is until we launch in the United States in June because shortly thereafter, we will be taking Arena One and AMC also to some 260 Odeon theaters in 9 countries in Europe as well. This new live concert experience is an initiative that represents a major announcement by AMC Entertainment. The third topic for today, I also want to address the rapid developments of late as to exclusive theatrical windows. The momentum in the industry is palpable with renewed commitments by our studio partners to both increase the number of theatrical movie releases and to extend theatrical windows to at least 45 days. Joining Disney, which has been constant and respecting an exclusive theatrical window heretofore, -- we are particularly pleased by the recent announcements by Universal and Paramount to do the same. We are appreciative of the public commentary by Sony and Lionsgate that a new industry standard is both needed and is emerging. Recognizing Paramount's commitment in this area, for example, this is one of the key reasons why we at AMC embraced Paramount's bid to move forward transaction. This is such good news for the movie theater industry, and we are pleased that AMC has played a central role in pushing this entire initiative of respecting longer theatrical windows forward. But the real heroes here supporting our industry, especially on this windows topic are the people who have really stepped up. Alan Bergman at Disney, Donna Langley at Universal, Tom Rothman at Sony, David Ellison at Paramount now and eventually on behalf of Warner and Adam Folson at Lionsgate, all deserve credit for having a long-term view of restoring the health of our entire theatrical ecosystem. The fourth topic for today, the significance cannot be lost by anyone of Netflix's announcement that in February of 2027, just 9 months from now, we will be giving Greta Gerwig Narnia a global theatrical release with a 49-day window. This is the biggest opportunity our industry has ever had to embrace Netflix as a theatrical content provider. Since our announcement at AMC in October 2025 that AMC and Netflix would be working cooperatively and collaboratively, we've had several joint projects, which have been immensely successful for both companies. Netflix is well aware that AMC is solidly in their corner. We are all in with respect to Narnia, and we enthusiast more opportunity for our 2 great companies to work together in the future. And finally, fifth, it is so encouraging to to remind you all that in just the past few weeks, film producers have reached multiyear labor agreements with both SAG AFTRA and the Writer's Guild, assuring us all of labor peace for several years ahead. This means that the self-inflicted wounds of 2023 are not being repeated. To be sure, as we have said so often before, at AMC, we're not entirely out of the woods yet. Challenges remain, but the indicators that we are seeing today point to a stronger and improving 2026. Indeed, it seems to us that so much has been breaking our way of late. And remember, above all else, two words: operating leverage. As revenues grow, which we believe they will, there is a very significant impact on AMC's bottom line financial performance. With that, let's turn the call over to our operator to poll for questions, both from equity research analysts, and Sean will also give me some of the questions that have been submitted by our retail shareholders.

[Operator Instructions] Our first question is with Eric Wold with Texas Capital.

A couple of questions. I guess, first off, on Arena 1, I'm not sure how much more you can share about kind of briefly about the economics behind this and technology spend required. Is this -- the purpose-built stage something that you will own and be responsible for? Is this something that eventually will go more widespread? And is this geared towards artists currently on tour, looking to reach markets where they're not going physically? Or is this something that's kind of more for artists kind of doing this as one-off performances?

Thank you, Eric. I'm happy to comment. There is a separate press release going out about Arena 1 sort of concurrent with this call, so you'll get more detail. We really are blown away by the technology where the artists performing in this purpose-built stage can actually interact with our audiences all around the country and eventually in Europe. The business proposition is so appealing. As you know, we've done a lot of things with -- even as we shave down our capital expenditure program, and we were able to get Arena One implemented with essentially no upfront spending by AMC. The economics are this is a rev share model where AMC will retain a significant percentage of the admissions revenue and the food and beverage revenue that occurs in our theaters. And Arena 1 will also get a significant percentage of the ticket revenue that we generate. For concerts, these things will be cheap. -- but they're not going to be priced at movie theater levels. The prices will vary by artists and by market, but I wouldn't surprise -- be surprised if we see ticket prices in the $40 to $75 range. As I said, that's very inexpensive when you look at what it costs to actually attend a live concert in an arena or a sports stadium. Another benefit of the Arena 1 experience, unlike when you see a live concert in a large 20,000-seat arena or a 70,000-foot stadium, it feels to you like you're sitting in the front row because like the artist is right in front of you. So the product is great for consumers. The economics are favorable, both for Arena 1 and for us. And in terms of the artists who do it, we think we'll see whole sets of artists who will come to our studio. There's a massive complex in Eastern Pennsylvania who will perform the Arena 1 audience. We're creating in the neighborhood of 0.25 million seats available to Arena 1 concert ticket buyers if you add in our U.S. and European theaters. This is a very exciting initiative and that we got this done as an exclusive for the foreseeable future, that makes it just that much better for us.

Perfect. And then just my follow-up question, kind of going back to the contribution margin per patron and kind of the growth you've experienced since pre-pandemic. To get the numbers right, 57% in the U.S. and 39% international, that was ex FX or not. But maybe talk about your thoughts on closing that gap overseas, the opportunity to do that, maybe what's been holding back the growth there? Or maybe said a different way, what's been driving the stronger growth here versus overseas? And where are you with various ticketing and concession strategies overseas that could kind of help to close that gap in the coming years?

Well, both Sean and I will take this question. Historically, our guests in our European theaters spend less on non-ticket type purchases in the buildings. So it's not surprising to me that our U.S. performance would be higher than our European performance. But we think that both numbers are great. The fact that we were able to drive up per patron contribution by so much in the U.S. and so much in Europe, we think they're both items of success. Do you want to add anything?

Yes. I think the U.S. has benefited from two areas that are a little bit different to the international business. The first is the U.S. business has benefited from the renegotiation of our screen advertising contract with National CineMedia. So that has helped our other revenue per patient. You don't see that sort of impact in the international business. The second is when you look at food and beverage, which is obviously a huge driver of this area, the U.S. is a little more ahead in terms of merchandising food and beverage revenue with the popcorn and collectible concessions. Europe is catching up in that area. And I think you saw this last quarter, Q1, look at the European growth rate. It's quite phenomenal actually, like in excess of 6%, and that's in constant currency, I think over 18% outside of constant currency. So you're seeing some catch-up in Europe, which is pretty exciting. And then I think there's an opportunity from an average ticket price point of view, we have had more competition on ticket pricing in Europe, but that is starting to normalize. So we're seeing some benefits there. And you're going to see more variable type of pricing in Europe where it is more accepted than in the U.S. market. And I think that gives us opportunities in Europe as well.

And while we're talking about Europe, Eric, I just want to say that the first 4 months of the year, the first quarter that's reported and what we've seen with the successful movies in April, Europe has been gangbusters successful for AMC this year. Like we've been blowing through our budgets in Europe. week after week, month after month, we're so encouraged by our strong performance across our European network.

We'll take our next question from Mike Hickey with StoneX.

John, great quarter, guys. Congratulations. First quarter -- first question from us, Adam, a lot of wins for you, a lot of progress from you and your team here. Looking at the window situation, I guess that's a win for the whole industry, strong box office. Your debt situation has improved dramatically. A lot of work on your guys' part. You've optimized your network. You've been innovative with Arena One and you stay disciplined on CapEx. So Adam, I guess the question is, if you can sort of give us an update on your path to free cash flow, milestones, maybe timing? And then the follow-up would be thinking about Arena 1 here. Depending on how you think you can scale it, if that will sort of lower maybe that box office target that you would need to get to be free cash flow positive? And I have a follow-up.

So I'll let Sean talk about free cash flow positive and milestones along the like. But I want to just point out one thing to everybody, nice of you to list the sort of the getting things done on the to-do list. We put a lot of personal capital into play to convince studios to lengthen windows. Our cooperating with Netflix has been a major change. As I said on the call, things really seem to have been breaking our way of late. But I just want to talk about the balance sheet for just a second. I would remind everybody that in the quarter, we just completed, especially with this $155 million debt-to-equity conversion that was announced this morning, that lowers our long-term debt to about $3.9 billion. Our debt going into COVID was over $5 billion. And when you add it in all the deferred rent obligations that we picked up in the closed year of 2020, by the time we ended 2020, we had over $6 billion of either actual long-term debt or deferred theater lease obligations that we've gotten rid of 1/3 of it is especially in a suboptimal box office environment the past several years, we think it's just a superb accomplishment. And we obviously have been paying attention to driving our income as best we can and to improving our balance sheet as best we can. And as we look back on the last crazy 6 years, but the good really threw our way with COVID and its aftermath, we're very proud of what we've accomplished at this company. As for free cash flow milestones, Sean?

Yes. Thanks. We are very focused on taking steps each day really to reduce the level of box office required for us to be free cash flow breakeven or free cash flow positive. And if one looks back to pre-pandemic, the box office required to be free cash flow positive was significantly, very significantly higher than it is today. And that's despite the fact that 6, 7 years have passed, costs have increased significantly. Our debt service costs are also significantly higher than they were pre-pandemic as well. So that just gives you an indication of what has happened in the business to reduce the required box office to be free cash flow breakeven. And I said in my prepared remarks, and I've said it a number of times that we don't need the box office to get to pre-pandemic levels. to reach the same level of EBITDA as we had pre-pandemic. And that is certainly the case as our profit and contribution margin per patron improves over time. A reference point that one can look at to get an indication of where we are from a box office/free cash flow perspective is look at the last 9 months of 2025. Last 9 months of 2025, we were not only free cash flow breakeven, we were free cash flow positive. Now there are some working capital benefits in that period of time that you can adjust for. But that just gives you an indication of where the business is at the moment. And I'll add one other thing is that as the box office improves, automatically, our interest rate on about $2.9 billion of debt reduces because inherent in the covenants or debt agreements that we have there is that the coupon or interest on that debt declines as our leverage improves. So that will help us as well.

And Mike, to your question about Arena One, we know the technology works, and we know the economics work because our investment was upfront was like nonexistent and it's a revenue share basis, which is sort of the whole model of our industry with studio partners. I think that what will determine -- well, we know that Americans and Europeans like to go to concerts, and we know that they pay up for it. So I think ultimately, the real success of Arena One will be based on what artists we attract to have these live concert events that are broadcast to 600-ish theaters in the U.S. and Europe. But we're quite optimistic. And as we said, we believe this is going to be a very profitable activity for us and one that we have on an exclusive basis and one that we think has a great potential opportunity to deliver real dollars to the bottom line.

The second question from Ross is on film volume. CinemaCon, obviously, a lot of action this year, Adam. the Paramount Warner Bros. deal. David, I think, made a really compassionate pitch to you and your peer set exhibitors at the conference really sort of committing to that 30 films and 45-day window. But there also seems to be a healthy amount of skepticism just from history, I guess, on their ability to execute on the 30 films. So just curious if you could sort of frame that for us. I'm guessing if they got close, it would be a win, but curious your view on their ability when you talk to David for them to deliver on that promise. And then on Netflix, just sort of trying to -- it's obviously very exciting and -- but also, I think there's some pushback maybe this is just a one-off led by Gretta. So just wondering when you talk to Netflix and Ted, the appetite you see from them in terms of putting additional films into exhibition? And if you think that the sort of 51-day window to streaming is a workable model for other films in the future as well?

So let me talk about Paramount first. We've had private conversations with Paramount for months and months at the highest levels. And the -- what you described as the sort of passionate commitment that David made at CinemaCon in front of 5,000 people in the auditorium. He and the people who work for him made those same commitments to AMC privately in the days, weeks and months previously. and we believe them. And we have great respect for the leadership at Paramount -- I that, looks like we have a great respect for the leadership team at Warner. They had a sensational year in 2025. And we strongly hope that the filmmakers at Warner stay because they're great. And we have enormous confidence and trust in the leadership under David at Paramount. And we believe that he is fully committed to the promises that he made and fully capable of pulling them off. As for Netflix, again, there's been a tremendous amount of top-to-top diplomacy between the 2 companies that dating back to the fall of 2025. At AMC, we were very pleased to have participated in 3 projects with Netflix, the K-pop bring back at Halloween, the Stranger Things season finale of New Year's Eve and the introduction of new episodes of one piece just a couple of months back. The success of those 3, I think, is one of the reasons, not the only reason, but one of the reasons that Netflix is trying to see what happens with Narnia. I believe that the three things that we've done already with Netflix have been successful, that Narnia will be successful, that we will find other successful opportunities to work with Netflix. And what this leads to, I'll leave you all to speculate amongst yourselves. It's not my place to talk to sort out what or announce what is or is not Netflix's strategy. But I can tell you that the interpersonal dynamics that have existed between Netflix and AMC since September of 2025 have been very positive. And both companies have said repeatedly, both publicly and privately that we are looking to do more together.

We'll move on to Brad Beynon with Macquarie.

This is Chad from Macquarie. I wanted to ask about the merchandising opportunity. [Technical difficulty] Think about the merchandising opportunities, Adam, I know you talked about this business, which kind of went from nothing was on its way to approach $100 million in '25. It seems like based on just looking at the titles and the content throughout the year, there should be another big merchandising year. But wondering if you could help us think about kind of what you have in store and how this business can continue to grow as more people come out to the theaters.

Well, if you judge by the number of people who wanted Prada perse popcorn bags, there is no end to the consumers' desire to have more movie themed merchandise at our theaters. I think that we are fully capable of driving 20% growth per annum in this merchandise business, and that's before Arena. And we also know that merchandise is very popular amongst live concert goers. So as you said, Chad, in 2022, our revenues were like nothing. And it's a $100 million a year business for AMC currently, and it's going to continue to grow.

Okay. And then just in terms of the convert, what the thinking was to strike that now given where the balance sheet is and the outlook. I know there's always working capital shifts. Sean, you talked about that. But what was the reasoning for executing the convert deal this week?

Yes, Chad, in terms of the agreement for that exchange note, there is a mandatory conversion provision based on our share price. So our share price achieved the targets for the mandatory convert, and therefore, we were able to convert that debt into equity. The benefit of this, of course, is it takes $155.8 million of debt off the balance sheet. There were also various covenants associated with that debt that with that no longer on the balance sheet, that frees us up to be even more opportunistic going forward in terms of refinancing opportunities that we may have. And given -- just a little aside on that, given the refinancing of the $400 million of debt due in 2027, we now can be completely opportunistic in terms of taking advantage of lower interest rates and extending maturities when those opportunities arise. We're not forced into a situation of having to refinance based on coming up maturity.

And Chad, when you remember how much of our debt was due in 2026 and 2027 we've moved to around $3 billion to a maturity in 2031. And we '29 or '31, I should say. And we have a sizable amount of debt that's currently due in '29, which is a long time from now, but we do believe that as AMC's -- well, let me just go back to operating leverage. If the box office is going to grow, then AMC's EBITDA is going to grow. If our EBITDA grows by definition, our leverage levels fall. If our leverage levels fall, we ought to be able to refinance some even our '29 debt at significantly lower interest rates and push their maturity out further. So I do think our management of our balance sheet has been one of our most important success stories of the past few years.

We'll move on to Patrick Sholl with Barrington Research.

You provided a lot of detail on the screen base. I was wondering if you could provide just a little bit more on just where you think you are in that process of kind of rightsizing the footprint for profitability.

Yes. I think the press has misunderstood some of the comments we've been making. I saw articles after the last quarterly earnings call that AMC was "closing theaters. That's not the way to look at this. The way to look at this is AMC will constantly be pruning the fleet, which is to say that about 10% of our leases come up for renewal every single year. So when we look at those theaters, -- some number of them are huge home run winners. Some number of them could be more profitable if we can renegotiate rents with theater landlords. And some number of them are just like older buildings that are now 20, 30 years old. They may not be in ideal locations. They might have been in ideal locations when they were built 25 years ago, but not today. And so it makes sense to let them go. At the same time, we are also adding new theaters. And I mean, I would point out that the 60 theaters that we -- these are round numbers. The 60 theaters that we opened in the last several years outgrows to 200 theaters that we closed. So I don't see this as like what's the right size of our footprint. I think that this is a perpetual business strategy that as our theaters come up for renewal consideration every single year, we're going to be thrilled to renew some. We're going to talk hard with landlords with others, and we'll close others. At the same time, all that's going on, we'll continue to look for either more new build theaters or more spot acquisitions where we can add theaters to our footprint that we think are economically attractive to do so. Think of it as you open shiny new theaters and you close older, more tire rooms. That's that's -- I think that's something that will be year in and year out for years, if not decades to come.

Okay. And then just on the shift in windows, do you think there's any sort of like consumer relearning that needs to happen with just like the longer windows? Or how do you guys expect that to sort of ultimately impact like the tail of box office searches overall...

Without attributing it to the studio executives who said it, I was at an industry-wide conference a few weeks ago, and the head of one of major studios said that we are going to retrain the consumer that movies will be in theaters longer and the movies will be going to the home at a slower pace. And there are actually 2 windows to pay attention to, not one. We all talk about the 45-day window as a short end, but there are 2 windows. The first is the so-called PVOD window, the premium video on-demand window, which is when movies go to the home where consumers can pay to watch that movie, often those movies are priced at $20 for a home viewing. But also the same studios who have been committing to a 45-day window many of them have also committed to a 90-day SVOD window or subscription video-on-demand window. And that's when -- not when the movies go to the home where people pay for it to watch it, but it goes into subscription services where once you pay your monthly membership fee upfront, the cost of an incremental movie is 0. And in the minds of many consumers, they're paying nothing to watch a movie at home. It's just as important to us that the 90-day window go into play because it's giving the opportunity for theater operators, AMC included, to convey a sense to consumers that if you want to be part of this global phenomenon of seeing a movie when it's hot, you got to do it in the theater and you can't wait until it comes to the home. And that's something that's quite different than movies going to the home at 17 or 21 or 25 days after initial release.

At this time, I'd be happy to return the call to Sean Goodman.

Thanks, operator. Adam, given the time, we'll just address 1 or 2 of the retail questions. But the first question here, very high-level broad question about we have a lot of growth opportunities, and there's a lot of things we talk about. Question to sort of prioritize what are the key growth areas that you're focused on?

There are so many. There's so much opportunity within this company because of the operating leverage that I talked to in the call. As our revenues rise, our EBITDA rises at a faster pace. And what we've been fighting for the last 3 years is that revenues have been -- for the industry have been flat. That seems to be changing fairly dramatically in 2026. So we're looking, of course, at just the fact that there are more films coming out with bigger consumer appeal where we can attract more guests to our theaters, which means we can sell them more for food and drink, and we can introduce merchandise that we have over the past couple of years. As one of the things that we have obviously noticed is that our premium large-format screens command higher prices and sell first. Just the other day, when Michael came out, 10% -- sorry, the approximately 48% of our revenues for Michael opening weekend took place on premium large-format screens, even though premium large-format screens are only less than 10% of the total screen count. Like these are stunning numbers. So we've obviously already figured out ways to significantly increase the number of premium large-format screens. We created XL extra large screens out of thin air of whole cloth 2 years ago, and we now have 168 of them. I would not be surprised if we don't double that count of XL screens by the end of next year. There's also the opportunity, I believe, as I mentioned on our call, to put in better seating at some of our most productive theaters. These new club rocker seats that we put in at Empire and Lincoln Square and Burbank, they are not recliner seats. So we don't have the 40% seat loss that we have when we put in recliners, but they're wider, they're much more comfortable. guests love them. And we've already identified 30 of our highest grossing theaters where we can put these seats in at pretty inexpensive capital costs because you don't have to renovate the whole theater or build new platforms, you're just putting in new seats themselves. So on and on, it's sort of opportunity after opportunity after opportunity. I also think there's opportunity to make our marketing programs even more potent than they are today. As many of you know, A-List is a smash hit, especially among Gen Z moviegoers. We just in the last week, crossed 1 million people who are members of our A-List program. Our Stubs program, which is our loyalty program, which has 39 million member households, -- it only had 2 million member households when I joined this company 10 years ago, Stub is a static program for us. There are some evolutions in the Stub program that we think we can introduce later in 2026 that will appeal to people going to see, let's call it, 6 to 15 movies a year, which is a slightly different audience than our A-List crowd who tends on average to see more like 30 movies a year. So just -- there's so much opportunity for this company. And not the least is there's pricing power in this business. And there's pricing power both ways. The fact that people are willing to pay more to -- and that has been the case traditionally, to see movies in our premium large format and extra large format screens. That's encouraging. I'll also tell you that in July of last year, we significantly upped our game by introducing discount Wednesdays in addition to discount Tuesdays, rebranding both as 50% off Tuesdays and Wednesdays. That's been a major, major positive for AMC. So it's an example where price -- taking prices down has actually worked for our company as well. In the interest of time, we're over an hour, and that answer to that last question sort of touched on a lot of things that you might have asked me, Sean. So I think at this point, we're going to let everyone run from this call. We thank you much. This was a great quarter for AMC, the first quarter of 2026. It was our best quarterly results for the first quarter in 7 years. Our EBITDA was up $96 million year-over-year, quarter-to-quarter. And it reminds us all how much operating leverage there is in this business. If revenues rise, which we believe firmly that they will, knowing the movie slate that's coming for the rest of this year, it's a very good news story for AMC going forward. Thank you for joining us today, one and all.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.