AMC Entertainment Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 5 speakers on the call.

Operator

Ladies and gentlemen, and welcome to the AMC Entertainment Third Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. Please press star 0 for operator assistance at any time.

Operator

I would now like to turn the conference over to John Merryweather. Please go ahead, sir.

Speaker 1

Thank you, Jenny. Good afternoon. I'd like to welcome everyone to AMC's Q3 2023 earnings webcast. With me this afternoon is Adam Aron, our Chairman and CEO and Sean Goodman, our Chief Financial Officer. Before I turn the webcast over to Adam, let me remind everyone that some of Comments made by management during this webcast may contain forward looking statements that are based on management's current expectations.

Speaker 1

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 ks 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 or update any forward looking statements whether as a result of new information or future events. On this webcast, we may reference non GAAP financial measures such as adjusted EBITDA, constant currency, free cash flow, operating cash burn, operating cash generated, among others.

Speaker 1

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.

Speaker 2

Thank you, John. Good afternoon, everyone, and thank you for joining us today. It's almost impossible to contain our pride as the record setting strength of AMC's Q3 2023 financial results. Fresh on the heels of our recent record Q2 results, We set the bar even higher in Q3. For both revenue and adjusted EBITDA, These were the single best third quarter results in AMC's entire 103 year history.

Speaker 2

By definition, revenue and adjusted EBITDA beat last year's Q3. They beat the Q3 of 2019, which was the last Q3 unaffected by the COVID-nineteen pandemic. And for that matter, they beat every 3rd quarter results That AMC has ever reported. Once again, AMC exceeded consensus estimates and market expectations across the board, And we did so handily. AMC was literally in a different ballpark of accomplishment that many third party observers anticipated.

Speaker 2

Sean will discuss these exceptional 3rd quarter results in more detail during his prepared remarks. But suffice it to say, AMC is posting revenues exceeding $1,400,000,000 Adjusted EBITDA of $194,000,000 and positive net income of $12,000,000 is a feat that has us all smiling in Leewood Campus. The entire quarter was rejuvenating for AMC And July especially was meaningful as it was the 2nd highest grossing month in AMC's entire century long history. Global attendance at AMC Theatres tallied more than 73,500,000 guests In the Q3 of 2023, up 38.4% over the Q3 of the prior year, It set a high watermark for quarterly attendance in the post pandemic era. AMC's attendance in Q3 2023 was the highest since the Q4 of 2019.

Speaker 2

Moviegoers returned to AMC Theatres in ever increasing numbers In the Q3 of 2023, in response to both our studio partners' efforts to increase the quantity and quality of new releases combined with AMC's continuing commitment to enhancing the guest experience enjoyed at our theaters. This continuance of AMC's being on a glide path to recovery is notable for 3 key aspects. 1st, the industry wide box office is finally showing some strength. 2nd, we ended the quarter with $730,000,000 of cash and we remain committed to ensuring that our cash reserves remain robust. And 3rd, AMC's contribution per patron was up 30% from pre pandemic norms.

Speaker 2

I want to repeat that number for emphasis, So that you all hear it and understand its significance, AMC's contributions per patron was up 30% from that of 4 years ago. As a result, AMC has demonstrated, at least for this quarter, That we can report a healthy amount of adjusted EBITDA or be free cash flow positive without a complete return to the box office to pre pandemic levels, although pre pandemic levels of box office would certainly be preferable. As for that box office, This was an inspiring quarter that saw the North American, the so called domestic box office surge to $2,700,000,000 exceeding Q3 2022 by 38% and achieving 95% of the pre pandemic Q3 twenty nineteen's box office. This is the closest our industry has come to quarterly box office levels that were considered normal in pre pandemic times. As for our cash, the reason that AMC Odeon has been surviving this ravaging pandemic, How are we staying away from the bankruptcy courts and why big chains like Cineworld Regal or small chains like Elo and the Drafthouse Or Arklay did not, is because at AMC, we have been maniacal In building up our cash reserves, for those trying to understand how AMC successfully has been defying gravity These past 3.5 years, having ample cash on hand is the secret sauce.

Speaker 2

It is having sufficient cash reserves that has enabled AMC's resilience heretofore and therefore We will continue to seek equity capital when it appears smart to do so. As for our vastly improved contribution per patron, This is the real enduring lesson of AMC's 3rd quarter results. Yes, we benefited from Barberheimer And for Mission Impossible Dead Record in Part 1, Sound of Freedom and Indiana Jones, The Dow of Destiny among other films. But if you look at attendance rather than box office dollars, the domestic industry attendance In Q3, it was actually 16% down from the Q3 of 2019, And yet, AMC was more profitable. Attendance down, profits up.

Speaker 2

This came from the cumulative impact of all of the many actions we have taken, especially over the past 3.5 years to change our faith. Those actions include: 1, a focus on expense management in a challenging inflationary environment 2, the pruning of our theater fleet By closing Marginal Theaters and opening successful new ones. 3, cooperatively renegotiating many theater rents with our theater landlords 4, leading the industry with our having more customer pleasing premium large format screens than any of our competitors 5, AMC's innovative moves to sell other things, Everything from Barbie themed pink Corvette models sold in our theaters to microwavable home popcorn sold on the shelves of Walmart. 6th, all of the many innovative marketing and pricing AMC initiatives, which have caused us to achieve dramatic increases In revenues per patron, especially in our high margin food and beverage activities, as well as number 7, Capitalizing on the many scale advantages and opportunities that accrue to AMC by being the largest movie theater company in the U. S, in Europe and globally.

Speaker 2

Now, I'll pass this webcast over to Sean to provide more details on the financial results of Q3, after which I'll return to talk about some of our ongoing initiatives at AMC Spots about the future. Sean?

Speaker 3

Thank you, Adam, and thank you to everyone for joining us this afternoon. As Adam just said, in the Q3, we achieved 2 notable financial milestones. 1, our best revenue and adjusted EBITDA since pre pandemic 2019 and 2, The highest revenue and the highest adjusted EBITDA for any Q3 in AMC's entire 103 year history. Of course, this also means that we beat pre pandemic Q3 2019 adjusted EBITDA and we did this by a resounding 24%. This is a remarkable achievement because our attendance was nearly 16% lower than in Q3 of 2019, yet despite having 13,500,000 fewer guests, We grew revenue by 6.8 percent or $89,000,000 and we grew adjusted EBITDA by 24% or $37,000,000 This result clearly demonstrates the success of the actions that we have taken over the last 4 years to really elevate the guest experience, optimize our theater fleet, manage our expenses and improve our efficiency and overall profitability metrics.

Speaker 3

These results clearly illustrate our ability to deliver solid financial outcomes even when the industry box office and attendance fall below pre pandemic levels. With the 3rd quarter North American box office Of $2,700,000,000 which is 38% above the prior year, we grew revenue by 45.2% to $1,400,000,000 We grew adjusted EBITDA by $206,600,000 to $193,700,000 and we grew net cash provided by operating activities by $289,500,000 to a positive $65,900,000 With this quarter's results, we've now extended our unbroken string of Positive adjusted EBITDA quarters to 4. And for the first time since 2018, we've generated a second consecutive quarter of positive net earnings and positive earnings per share. Now, I'll turn to the North American business. Total revenue for the quarter increased by 41.2% compared to Q3 of 2022.

Speaker 3

This was driven by an attendance increase of 34.4%, which was helped by an increase in our market share. Admissions revenue per patron increased by 4.8% And food and beverage revenue per patron increased by 4.1%. Note that the revenue generated per patron for this quarter was 30.1% above pre pandemic Q3 of 2019 and the contribution dollars per patron, which is defined as the revenue per patron less film exhibition and food and beverage costs was 35.9% above Q3 of 2019. In the international business, on a constant currency basis, total revenue increased by Approximately 50%, five-zero, compared to Q3 of 2022. This was driven by an attendance increase of 48 10.5%.

Speaker 3

Note that international revenue per patron and contribution dollars per patron for the quarter were 18.4% above pre pandemic Q3 of 2019 as measured in constant currency. Moving to cash flow and the balance sheet. We ended the quarter with cash and cash equivalents of $729,700,000 Operating cash generated, a non GAAP measure representing cash from operating activities after deducting capital expenditures And before both debt servicing costs and deferred rent payback was a positive $109,000,000 an improvement of $288,000,000 compared to Q3 of 2022. Capital expenditure net of landlord contributions was $49,800,000 for the quarter. This brings our year to date net CapEx to 137,500,000 Based on our expected CapEx spend in Q4, we now anticipate net CapEx for 2023 to be in the range of $175,000,000 to $225,000,000 During the Q3, We continue to actively manage our theater portfolio.

Speaker 3

We added 1 new theater and we closed 3. This brings the total number of locations that we have closed since the pandemic began to 156 and the total new locations opened to 57 for a net reduction of 99 locations. This portfolio rationalization together with ongoing landlord negotiation has unequivocally resulted in a more profitable theater Just as an illustration of our effective rent expense management, it's worth noting That Q3 2023 rent was 5.6% below the same period in 2019 in constant currency. This despite the significant CPI increases over the last 4 years. Going forward, while we continue to invest in our business and the guest experience, our top two capital allocation priorities must remain 1, to ensure that we have sufficient liquidity to manage through our recovery period and 2, strengthen our balance sheet.

Speaker 3

Now we've made considerable progress in these two areas. During the Q3, we successfully raised $325,500,000 of gross equity capital, we repurchased $24,000,000 of debt at an average discount of 0.28 And we also repaid $22,300,000 of deferred rent. The deferred rent balance End of Q3 was $74,200,000 and we plan to reduce this balance by another $20,000,000 by the end of this year. So year to date 2023 year to date, we have now raised $550,000,000 of gross equity capital. We've lowered the principal value of our debt by $289,000,000 through debt repurchases or exchanges of debt for equity And we've repaid $83,000,000 of deferred rent.

Speaker 3

All told, we have reduced our debt and deferred rent liabilities by $372,000,000 thus far in 2023 and a total of $764,000,000 since the beginning of 2022. In summary, our results for this quarter clearly show the positive impact Of the significant enhancements that we have made and will continue to make to grow and to strengthen the business. As we navigate through this recovery phase, which may be extended by the Hollywood strikes, our primary financial priority will be to ensure ample liquidity, while concurrently continuing to make progress reducing debt and fortifying our balance sheet. Of course, we will also continue to pursue growth initiatives opportunistically as they make sense. We believe that this approach Overall, we best position us to thrive in the future.

Speaker 3

And now, I'll hand the webcast back over to Adam.

Speaker 2

Thank you, Sean. The successes of 2023 and the Q3 in particular have clearly illustrated The allure and power of theatrical exhibition, Movies in Theaters Before we move to questions from our investors and from equity analysts, I'd like to quickly update you on 6 specific topics. 1st, Merchandise. You may recall that we started getting serious about merchandise sales in our theaters and on our website as a result of specific show or suggestions that came in from our retail investors. We embrace the idea thoroughly and quietly.

Speaker 2

It has become a pleasant success story. It was literally a non existent business for AMC In 2022, we grossed about $10,000,000 in merchandise sales. But by year end 2023, it will be more than a $50,000,000 revenue source for us this year. Way to go shareholders, Keep those good ideas coming in. 2nd, popcorn in the home.

Speaker 2

Our lines of ready to eat and microwavable AMC Perfectly Popcorn have been a huge hit. Our 6 month exclusive deal with Walmart Stores at walmart.com proved to us, proved to Walmart and proved to other retailers that consumers find AMC's product offering in this area to be compelling. So in addition to continuing with Walmart, I am pleased to announce today that over the next 2 months, we will be rolling out AMC Perfectly Popcorn to Kroger Stores, including their approximately 1 dozen brands of supermarkets around the country. And before Christmas, We expect to be placing it on the shelves of all of Publix Supermarkets as well. And if all goes according to plan, by Black Friday of this month, the day after Thanksgiving, AMC Perfectly Popcorn will be available nationwide on amazon.com as well.

Speaker 2

3rd, given our success in branding our popcorn, in November December, this month and next, We also will be introducing a new line of AMC conceived and branded gourmet chocolate candies called AMC Cinema Suites. Our first SKUs will be chocolate covered pretzels, chocolate covered almonds, Chocolate covered peanuts and chocolate covered raisins. Essentially, our learning at this company in this area Just about anything tastes a whole lot better if it's strengthened chocolate. AMC's strategy here We offer a top of the line quality treat with some of the finest chocolate made and lots of it. Even though ours will be a gourmet line, we will sell at the same price as mass market brands.

Speaker 2

That's something that AMC can do given the huge demand for candy products that exists within a movie theater environment without requirement for us to run up massive distribution or marketing costs. At least initially, AMC Cinema Suites will only be sold at AMC Theatres. And of course, in addition to carrying our own line of AMC Cinema Suites. We'll continue to stock on the shelves at our theaters, the many name brand candy products that are there today. 4th, I'd like to address the situation that our industry has encountered for almost 6 months now due to the writers and actors strikes that's gone on for almost half a year.

Speaker 2

The short term impacts of the writers and actors strikes will cause additional and needless challenges for AMC in 2024. Projects will get delayed from 2024 into future periods. Without taking sides as to who is to blame for this labor stoppage or how the labor challenges should be resolved in negotiation. We strongly encourage all the parties involved To come to the negotiating table with the intent of reaching an agreement immediately. There has been and will be much collateral damage from these lengthy work stoppages.

Speaker 2

For the benefit of all involved in the movie ecosystem, AMC believes that this month long disharmony needs to come to an end now. Whether one thinks of a studio executive or of a union member in the creative community, It is ever so important that everyone in Hollywood returns to the task of creating world class entertainment that is admired And greatly enjoyed the world over. 5th, I'd like to Quickly comment on our laser projection upgrade. It is categorically accurate to say that the future for AMC continues to get brighter, thanks to our ongoing transition to laser projectors at our theaters. They increased on screen light levels by 50% to 100%.

Speaker 2

As a result, the images on the silver screen are getting sharper and brighter as every week passes. By the end of 2023, AMC will have converted more than 37% of our auditoriums across the United States to laser projection. Not only does this deliver improved picture contrast, more vivid color and greater picture brightness for our guests, This is the biggest single green initiative ever undertaken by AMC. Laser projection is environmentally friendly because it eliminates the problem of having used xenon bulbs And it brings a significant reduction to our energy consumption efforts as we show movies To moviegoers. And finally, topic 6, which is about the only thing we've been Talking about around here in the last 5 months.

Speaker 2

Taylor Swift, Taylor Swift, Taylor Swift. What can we say of our gratitude to Taylor for entrusting AMC to distribute her ERIS tour concert movie to some 100 countries across the planet. As you likely know, with ticket sales expected to hover Around $250,000,000 The Era's tour is already the highest grossing concert film in history. And at the domestic box office, Taylor Swift: The Era's Tour was the 2nd highest grossing movie of all time for any and all genres to be launched during the month of October. That's our role as distributor.

Speaker 2

As for our role as exhibitor, AMC's market share of ticket sales sold for Taylor Swift of the Year store was unusually high. So both as distributor and exhibitor, AMC benefited handsomely, both reputationally and financially, from our having taken on this project, and that benefit will not be a one time thing. As we announced just a few weeks ago, AMC Theatres distribution is following its success with Taylor Swift's The Era's Tour with a concert film release of Beyonce's Renaissance World Tour. Renaissance, A film by Beyonce will be released globally on December 1. We are so privileged to be working with artists like Taylor Swift and Beyonce as they bring their creative vision to their fans and we do so too in the United States and around the world.

Speaker 2

For what it is worth, in working with 2 of the most admired pop stars on the planet, we already have touched lightning. All of us at AMC are now passionate Swifties and are proudly in the beehive. We are optimistic though that this will lead to much more ahead. This is not just a one time thing in 2023. We believe that we will have several more concert film products In 2024 2025, we intend to be working with some of the most known and most loved musical artists the world has ever known.

Speaker 2

For those of you who don't think that this will prove to be transformational for AMC, watch this space. If, as and when more artists come on board, there is significant incremental profitability ahead for AMC If one would think back to March of 2020, if I had to summarize our view as we sit here today. Go back to a time when all theaters were shut and think about what has transpired since. You'll note that the recovery of the movie industry and of the movie theater industry has not been a straight line. Indeed, to the contrary, it's been a wild ride with pauses and turns that no one would have predicted.

Speaker 2

Through it all though, AMC has clearly emerged as the leader of the pack, and we've done so backed by an army of enthusiastic shareholders. Looking ahead, There likely will be challenges for us to conquer still. A prolonged active strife and rising interest rates are not helpful. We still have significant debt to pay down or to refinance, although that's mitigated somewhat because most, but not all of our current maturities Did not start before 2026. But looking again at sort of The glass half empty, many of our shareholders are incensed, truly incensed by stock market practices That they do not trust.

Speaker 2

If that's said enough, there's war in Europe and there's war in the Middle East. The list of problems we dealt with goes on And on and on. But if there ever was a time to look past the immediately foreseeable challenges of the day. For AMC, it might be right now. Right after reporting AMC's Q3 2023 earnings, it was after all The single best third quarter for AMC in some 103 years.

Speaker 2

These were stellar results. To our shareholders listening in to this webcast, We hope you share our pride in the progress that's being made by AMC. This after all is your company and we benefit in so many ways from your enthusiasm and from your passion for AMC. With that, Sean, let's now move to questions from our shareholders And industry analysts and as a change of pace, let's start with questions from industry analysts In a lead up position and then we'll take questions from our shareholders that and clean up so to speak as we close out today's call.

Speaker 1

Jenny, can you provide instructions?

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a 3 tone prompt acknowledging your request. Questions will be taken in the order received. Your first question is from Alicia Rice from Wedbush.

Operator

Please ask your question.

Speaker 4

Hi, Adam and Sean. How are you guys doing? Nice quarter. Congrats on that.

Speaker 2

Thank you. To answer your question, we're doing well because it was a nice quarter, as you know, so thanks.

Speaker 4

Yes, it was indeed. So I have a couple of questions. First of all, I'm wondering if you could talk a little bit more quantitatively in terms of Taylor Swift, in terms of the distribution versus just And same for Beyonce. If you could talk about that quantitatively, what's the benefit of distributing that in terms of Market share or in terms of film rent? And if not that, then talk a little bit more qualitatively about that if you can.

Speaker 2

Sure. Let's talk quantitatively first. We know it to the penny, I mean literally to the penny and it's sizable, But those are stats that we're going to unveil on the Q4 call, not on the Q3 call. For what it's worth, we did very well. We're going to make a handsome profit from having facilitated what was in July only in stadium concert tour, Getting it converted to film and getting it in theaters quickly.

Speaker 2

As I said, we know the numbers. We know I'm cold. We review them almost daily with the entourage that surrounds Taylor. We're all smiling. They're smiling.

Speaker 2

We're smiling. Our market share is abnormally high of the tickets sold. And I think that in part is because we've been so committed to the project, it's pretty hard to pick up a newspaper anywhere in the world We're to go on the Internet and look at news and not see the AMC name connected to Taylor Swift. Beyonce is right behind it. As you know, Taylor's film has grossed in 4 weeks, Grossed $165,000,000 domestically and about $240 something million Sorry, dollars 220,000,000 globally.

Speaker 2

It's still going in theaters. It's not stopping at 4 weeks. There will be a weekend 5 and weekend 6 and weekend 7 and weekend 8, and so the numbers will continue to grow. We don't expect that Beyonce's concert tour will be as large In theater as was Taylor's, but we do expect it to be significant and meaningful and both The Iris tour and the Renaissance tour taken together will provide a healthy bite of profitability for AMC in calendar year 2023. What's also exciting to us is not just the profitability that comes our way this year, but our prospects for 2024 2025.

Speaker 2

Our phone has been dancing off the hooks, really since the day we announced the gears to our projects on August 31. There are a significant number of the world's best artists Who would like to explore doing things with AMC that Taylor and Balancing knows Carter just did. So again, I think our prospects are this is a money making venture in 2023 And it will be a money making venture for us in 2024 and beyond. I also would like to say that as much credit As AMC has received from taking the lead on this project and I might add that with the writers and actors strikes, there were some movies that were going to move out of the 4th quarter. So there were some holes in the calendar in the Q4.

Speaker 2

It was a pleasant thing for movie theater operators the world over To have an unanticipated gift of a Taylor Swift concert film and a Beyonce Knowles Carter concert film Added to the calendar for the Q4, just added just literally a month or 2 in advance of the quarter commencing, We could not have done this alone. And I would specifically like to give credit to so many of our competitors, who also chose to play the Taylor Swift movie and the Beyonce movie. We could not have done this without the cooperation of Cinemark and Regal or of Cinepolis and Cinex in Mexico or Cineplex in Canada. And it's also true that literally all across the globe, movie theater chains in some 100 countries Have embraced the showing of the Era's tour and the Renaissance tour. So this is something that It's particularly good for AMC because we did it, but it's particularly good for our entire industry because Literally just about everyone in our industry is benefiting from the incremental revenue that no one would have expected to see just a few months ago.

Speaker 2

As for the specifics of the question, Alicia, I promise to give you every number there is, but we're going to do it on the next call.

Speaker 4

Yes, that makes sense. Appreciate that. If I can ask one more, just wondering if you can give some commentary around The premium large format screens and the impact on your market share as the biggest footprint for IMAX Dolby And then how your proprietary PLFs are performing across your circuit right now?

Speaker 2

Sure. So I actually think this is one of the biggest success stories of AMC. When we look at our PLFs, And that's IMAX, Dolby Cinema, Prime here in the United States, iSense in Europe. They are our most successful screens. First of all, they sell 1st and they fill Higher than regular screens.

Speaker 2

If you take a look at the box office dollars for us of a premium large format screen. It essentially becomes the equivalent of 4 regular screens. Think about that. Every one of our PLFs on average is grossing about 4 times that of a regular screen. And in the case of AMC, we have 550 of these things around the world.

Speaker 2

No one Anywhere comes close to the number of PLFs that we have. About half Of all the IMAX screens in North America are at AMC. 100% of all the Dolby Cinema Screens in the United States Alright, AMC. So this is just a massive success for us And it's something that we're committed to doing. We would like to we not only have expanded the number of PLFs in our company, Well, we've improved the quality of our PLFs.

Speaker 2

So we've gone back, I mean, almost all of our Dolby Cinemas have been installed over the last 8 years, But some of our IMAX screens are much older. So we've gone back into our IMAX screens and reinvested in those screens with IMAX laser And upgraded sound systems. And in both cases, both for IMAX and for Dolby, We'd like to increase the number of our locations. So the only and similarly, we intend to grow The number of our so called house brand PLFs, the iSenses in Europe and the Primes here. We think we have 550 and round numbers, 550 of these things today.

Speaker 2

We think we could add 150 more. And the only and where the consumer would support that level of supply of premium large format screens. The only limiting factor and a balancing factor is cash, Because as Sean said, we're always balancing Chasing growth initiatives on the one hand and ensuring that we have ample liquidity on the other And strengthen our balance sheet by using some of our cash to pay down debt. So what tempers our ability So to capitalize on the growth initiatives that are right there in front of our eyes is this art form Of how much money do we invest in growth initiatives and how much do we invest in pay down debt and how much do we just put in the bank And save for a rainy day to bolster our cash position. And but there is no doubt There is enormous opportunity ahead and we really do believe that more than any other chain in the world, AMC is home of the PLFs or the so called premium large format screens.

Speaker 2

And that's an advantage that we intend to sustain and improve upon in the years going forward.

Speaker 3

Adam, with that, should we go to some questions from our shareholders?

Speaker 2

Please, let's do it.

Speaker 3

Unless there are any Questions from equity analysts, but I think at this point, these questions from our shareholders. So the first question in, Adam, it's about alternative content and we've spoken a lot about Taylor Swift. But the question is can you talk more about future opportunities? And what other sort of content are we considering to bring into our theaters? Well, given that

Speaker 2

In one of our most important forays in the alternate content, we just added $250,000,000 to the world's box office And 165 of that is in the United States alone. I don't think anybody has been chasing all of the content more aggressively than AMC. Clearly, this whole genre of concert films is something that we've learned. There's a lot of demand for out there, And so we will chase it hard, but it's not limited to concert artists. I continue to think that professional sports is an enormous opportunity for the movie theater industry.

Speaker 2

If you think Watching a football game on your 45 inches or 55 inches or 65 inches TV at home looks good. Imagine how it looks on a 45 foot or a 55 foot or a 65 foot screen at an AMC theater. And so I think the second thing that you'll see us chasing beyond these concert films is sports. It's been a multiyear effort to try to get the rights To do so, but it's something that we are in active pursuit of as we speak. And then beyond that, there's all sorts of other content, Whether it's ethnic film products like Bollywood products or some Asian language film Or Hispanic language films we could bring here to the United States.

Speaker 2

Those are opportunities that we're already pursuing and Our year over year growth is small, but our year over growth in those segments has been quite high. We've had a partnership with 1,000 events for a long time where they bring lots of other interesting content to our screens as well. So Clearly, there's an opportunity here and it's Taylor Swift demonstrated that it can be sizable dollars if it's done right. So it's clearly on AMC's radar screen.

Speaker 3

A lot of interest in our food and beverage offerings. And there's a question about other than popcorn, what are other food and beverage initiatives? And what plans do we have to bring other AMC products, Food and beverage products through retail distribution channels.

Speaker 2

If there is one area where we can take enormous pride At AMC, it's what's happened to our F and B business in the last 3, 4 years. Prior to the pandemic, F and B spending was about $5 ahead in round numbers at AMC. And These are domestic numbers that I'm using right now. And post pandemic, it's been about $8 ahead. That increase of $3 ahead is meaningful when you think that we have a very high margin Food and Beverage business.

Speaker 2

I often joke that we sell air and water. We sell popcorn and soft drinks. And so it's a very profitable business for us. And the fact that we've seen such an increase in the spending per patron is very beneficial to us. Other chains also have seen increases in their food and beverage capture, But I continue to believe that of the not the so called dine in the small dine in theater chains, but the mass market brands, our food and beverage capture Continues to be the highest in the industry.

Speaker 2

And it's no accident. We work at it. We work at getting an interesting variety of products At our dine in theaters and on the concession shelves in our non dine in theaters, We've and there continues to be opportunities. So The thing we're doing right now, of course, on this call, I announced that we're launching AMC Cinema Suites this month and next. About quarter of an inch of pretzel and about 4 inches of chocolate on top of the pretzel.

Speaker 2

It's a lot of chocolate. It's really good chocolate too. And we're optimistic. So we're going to start with that in our theaters first. But just like we proved that we could take AMC Perfectly Popcorn in the Home.

Speaker 2

If we see that there are big sales of AMC Cinema Suites, in our theaters, we might take that Out of the outside world, the same way we took Perfectly Popcorn to Walmart, Kroger's, publixamazon.com. So there it's been a great success story for us, And we continue to look for ways to grow it further. As one last thought on the growing a further part, I think what's so fascinating to me is how successful we've been with merchandise, movie themed That's being sold at our concession stands just about every week of the year now. We're selling anywhere from 100,000 of these things a weekend to 1,000,000 of these things a weekend, and we're selling them at a handsome profit. And whether it's a Tin popcorn cup a tub for Taylor Swift's movie or Pink Corvette for a Barbie movie or any other array of creative things that we've introduced over the course of the year, Title by title by title by title, we're driving a lot of business now with these things and we're going to keep that going in 2024 as well.

Speaker 3

So let's talk a little bit more about the operating improvements that we have done since the beginning of 2020, which are clearly evident And our results for this quarter and the questions about those operating improvements that we've made that will really allow AMC to thrive in the future.

Speaker 2

So we had no choice. We had to get more efficient because during the Ravages of the pandemic, we had no revenues. And so we've gotten this company to be Much leaner than it ever was before. The headcount in our corporate headquarters is way down. The managerial headcount in our theaters is way down.

Speaker 2

In the case of our European theaters, we've automated so many of them with automated box offices and automated food and beverage Operations, we're starting to bring the automated food and beverage kiosks back into the United States as well. We had to get more efficient And we did get more efficient. You in your prepared remarks talked about the progress we made with landlords, where we renegotiated our rents Downwards to the tune of tens of 1,000,000 of dollars of benefits a year. Also, we've just gotten more efficient in terms of What's in our fleet? As you said, we've closed about 150 marginal theaters that were Either marginally profitable or not or money losers and replace them with 50 theaters that are enormous successes.

Speaker 2

The 50 theaters that we opened are grossing far more than the 150 theaters that we closed, And yet our operating expenses by definition are a third of what they were to operate triple the theater count. So just in area after area after area, this company has gotten leaner and more efficient and that's something That drove these 3rd quarter results, which are so good. If you look at The number is hard. You'll still see attendance was off 16% compared to 2019. And if attendance is up 16%, that's 16% fewer bodies that you can sell food and beverage to.

Speaker 2

And yet with attendance down 16%, We still are far more profitable in 2023 than we were in 2019. That's the direct result Of becoming more efficient and that efficiency that we realized is a permanent efficiency. So that's going to be something that's going to continue in our numbers going forward.

Speaker 3

Yes. And there's a final question, which I think relates Very much to what we just discussed about the operations, but just about use of technology to really enhance the customer experience. And you mentioned some of that about the kiosks. I guess there is other things that we are doing on using technology as well, right? So we

Speaker 2

joke We can't go to the bathroom of this company without programming in the computer first. You would think this is a pretty simple business. You have a building, you turn on the lights, you have a projector, you shine a picture on a wall, maybe add people a cup of Coca Cola or popcorn on the way in the door. And yet it's surprisingly intricate and complicated. And one of the reasons for that is Literally everything that goes on in our theaters is automated in some shape or fashion.

Speaker 2

And we've used technology to our advantage. We have a loyalty program, Stubbs and A List, where we track the purchase History of our best customers and reward them for it. The reason we can pull that off is because our tech is so good. Very quietly during the pandemic, we put mobile order on our website and smartphone app, So that literally every guest who buys a ticket online has the opportunity to pre buy There, AMC Food and Beverage. And our experience is we're selling more Food and beverage products to the people who are using mobile order.

Speaker 2

Again, that couldn't happen, but for our tech. The way we distribute movies to theaters, Christopher Nolan still likes 70 millimeter film, but everybody else And even Chris Nolan, everybody else sends their movies to our theaters digitally via satellite and they're received on a computer server. That's a direct result of our tech. So I do believe that From a technological standpoint, we're pretty sophisticated as an operator today, and we're committed to continuing to invest In technology, both to benefit the guests, to make the experience better, to make ourselves more efficient, Which means we can squeeze out more profitability on the same revenues. I was also to stay ahead of the curve in an era where all things seem to be affected by tech.

Speaker 3

Terrific. So that concludes the questions from investors.

Speaker 2

So let me end the call simply by saying this. It doesn't get any better than the Q3 of 2023. We beat market expectations by about 50%. It was a profitable quarter when people were expecting a loss. Revenues were booming, But it wasn't just the revenue growth that caused our success.

Speaker 2

It was also our management of expenses, The combination of which led to a very successful quarter. We do have it would be helpful if Hollywood could end the Actors' Strike. It will be helpful if we don't see movies move from 24 to 25. But as I sit here today, I think we are enormously optimistic and confident in the future of the movie business. AMC is the leader of it.

Speaker 2

We do what we do well, and the Q3 of 2023 reminds us that when all things are aligned, this can be a very profitable industry. With that, thank you one and all for listening. If you haven't seen Taylor Swift's movie yet, go see it. If you haven't bought a ticket yet for Beyonce's movie, go buy 1 and we'll happily see you as Christmas movies Come out at our theaters in just a few weeks' time. There are a lot of big movies coming.

Speaker 2

Movie theaters are going to be bustling in December of 2023 and beyond. Happy holidays to 1 and all, and we'll talk to you next quarter.

Operator

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect.

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Earnings Conference Call
AMC Entertainment Q3 2023
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