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AMC Entertainment Holdings, Inc. (AMC) Q2 2023 Earnings Call Transcript

AMC Entertainment Holdings, Inc. (AMC)

Q2 2023 Results Earnings Conference Call

Company Participants

John Merriwether - Vice President, Capital Markets and Investor Relations

Adam Aron - Chairman and Chief executive Officer

Sean Goodman - Executive Vice President and Chief Financial Officer

Conference Call Participants

Presentation

Operator

Good afternoon, ladies and gentlemen. And welcome to the AMC Entertainment Second Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode. And following the presentation, we will conduct a question-and-answer session. [Operator Instructions].

This call is being recorded on Tuesday, August 8, 2023.

I would now like to turn the conference call over to Mr. John Merriweather. Please go ahead.

John Merriwether

Thank you, Kelsey. Good morning. I'd like to welcome everyone to AMC's Second Quarter 2023 Earnings Webcast. With me this morning is Adam Aron, our Chairman and CEO, and Sean Goodman, our Chief Financial Officer.

Before I turn the webcast over to Adam, let me remind everyone that some of the comments made by management during this webcast may contain forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events.

On this webcast, we may reference non-GAAP financial measures, such as adjusted EBITDA, constant currency, free cash flow, operating cash generated, among others. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier this morning.

After our prepared remarks, there will be a question-and-answer session. This morning's webcast is being recorded, and a replay will be available in the Investor Relations section of our website at amctheaters.com later today.

With that, I'll turn the call over to Adam.

Adam Aron

Thank you, John. Good afternoon, everyone. And thank you for joining us today. When I think of our second quarter 2023 results and our start to the third quarter, I want to share this with all of you. In plain English. AMC blew it out of the water in the second quarter of 2023. And I might add that the third quarter of 2023 is starting out to be roaring hot too.

Around here, the metaphors we often use to describe our circumstances involve famous movie quotes. Our recent results in Q2 and so far in Q3 of 2023 brings, to my mind, Bruce Willis as Lieutenant John McClane in the Die Hard movies, when he would say, Yippee-ki-yay. He would then add a colorful expletive that I cannot repeat on this call. I think the closest I can get to it would be Yippee-ki-yay, mother ducker. So, yeah, that's the second quarter of 2023.

Without being too dramatic, the stakes are high and we're surrounded by some uncertainties and risks. But it's certainly encouraging for us all to take a moment this afternoon and celebrate our immensely positive results in the most recently completed quarter.

AMC's results in Q2 2023 were well ahead of last year second quarter and well ahead of the market's expectations. Indeed, AMC exceeded consensus market expectations across the board, generating post pandemic records for revenue, adjusted EBITDA, net income and earnings per share.

We now have posted three consecutive quarters of positive adjusted EBITDA. And this quarter, for the first time since Q2 of 2019, that's four years ago, we generated positive earnings per share, yet another milestone in our path towards ongoing recovery.

While we still have much work ahead of us on this front, AMC's glide path to eventual recovery continued with significant pace in the second quarter of 2023 as our results set new records and represent AMC's strongest second quarter in four full years.

Following an impressive start to the year in the first quarter of 2023, the second quarter yet again showed great progress. AMC saw more than a 12% growth in attendance, more than a 15% growth in total revenue, and a 71% increase in adjusted EBITDA compared to the second quarter of 2022 last year. Indeed, adjusted EBITDA in the second quarter of 2023 was $182.5 million, the highest such quarterly figure for AMC since the fourth quarter of 2019.

Our ongoing progress is obvious and ever so encouraging. Combining AMC's commitment to innovation with a notable increase in both the number and the quality of movie titles from our studio partners, movie theaters are once again captivating audiences and driving an audience and attendance back to theaters in general, and especially at AMC, we're driving audiences that attendance back to AMC theaters.

Our theaters across the globe welcomed more than 66 million guests in the second quarter of 2023, up 12.2% over the prior year's Q2. And it was our highest quarterly attendance number also since the fourth quarter of 2019.

Let's use the second quarter domestic industry box office as a proxy for the size and the improving health of our industry overall. Looking at domestic industry box office for the second quarter, ticket sales grew by nearly 15% compared to the same quarter last year, benefiting from six movies that grossed more than $100 million each, anchored by Super Mario Bros. and franchises such as Guardians of the Galaxy, Spider Man, Fast and Furious, Transformers and The Little Mermaid. These titles provided compelling movie going experiences.

Year-to-date, through today, in 2023, 19 films crossed the $100 million mark in gross ticket revenues compared to only 12 during the same period in 2022. That is a 58% increase. And the total number of wide release films grossing more than $5 million dollars also continues to rise from 24 in Q2 of 2022 to 36 in Q2 2023. That's a 50% increase.

One area that has far exceeded pre-pandemic norms has been AMC's per patron revenue. AMC movie goers are consistently seeking out the most immersive sight and sound experiences, especially important to AMC, as we offer more premium large format screens than any other exhibitor. You know what premium large format screens are, IMAX Dolby cinema and our various house brands including Private AMC and iSense in Europe, among others.

Demonstrating how significant these premium large format screens are to AMC's success, the so-called POS represent only 5.3% of our total screens globally, but an astounding 19% of our second quarter ticket revenues.

AMC's imaginative offerings at our concession stands and in our dining theaters also helped AMC to generate in the second quarter for food and beverage revenues per patron $7.36 ahead. That is within $0.01 of our all-time high watermark for food and beverage spending per patron. Considering the enormous operating margins in our food and beverage business, this is contributing meaningfully to AMC's improving profitability.

But. to me, perhaps the most surprising second quarter statistic of them all is this one. Because of our determined and sustained pandemic era cost reduction efforts, along with ticket pricing initiatives, and soaring food and beverage revenues, comparing Q2 2023 to Q2 of 2019, four years ago, pre-pandemic, AMC's overall profit per patron after the cost of goods sold improved by an impressive 40% in the United States and 22% internationally in constant currency. Put those together, that's a 36% total global increase in our profitability per patron in constant currency.

And if the Q2 domestic industry box office wasn't enough to lift our spirits and bolster our path to recovery, the month of July, the first month in Q3, was the highest grossing month for AMC in 12 years. And it was the second highest grossing box office month ever in our 103 year history.

As you know, this performance in July was driven by the resounding success of titles such as Sound of Freedom, Mission: Impossible – Dead Reckoning Part One, Oppenheimer, and for all of you dressed in pink, Barbie, among other titles.

In the United States, the July box office represented a 5.8% increase compared to the pre-pandemic July of 2019 and a 20% increase compared to last year's July. For AMC globally, these milestones translated into July of 2023 being the highest revenue month for our company in our entire 103-year history.

The first week of August is continuing with an incredibly strong showing, with the domestic industry box office about double that of last year. This all speaks to what we at AMC have said time and time again. Studios are masterful at storytelling. And when they have great stories to tell, they are best showcased – in the words of Nicole Kidman – as damned dazzling images on our huge silver screens. Here at AMC, those stories are perfect and powerful. And audiences are flocking to our AMC theaters in the United States and our Odeon cinemas in Europe, in our AMC cinemas in the Middle East as a result.

Looking forward to the rest of 2023. We have a slew of exciting movies yet to be released this year. They're coming. And barring complications to the timing of film releases due to the uncertainties arising from the writers and actors strikes currently well underway unfortunately, we have good reasons to believe that the second half box office will continue to show real strength this year.

Even so, we will not get to 2019 pre-pandemic levels for this full year 2023, but there is a clear trajectory upwards. Our hope is that COVID-19 is but a bad ancient memory by 2024 or 2025 even though as much as some of you hate it when I say the word COVID, we are still dealing with the aftermath of that pandemic.

Now, at this point, I'll pass the webcast over to our CFO, Sean Goodman, to provide more details on our financial results, after which I'll return to talk about some of our ongoing initiatives and AMCs plans for the future, as well as taking some of your questions. Sean?

Sean Goodman

Thanks, Adam. Thanks, everyone, for joining us this afternoon. So before I begin my comments on our second quarter financial performance, I would like to just take one moment to provide a little bit of context behind our earnings release and 10-Q issuance this morning rather than our customary after to the market issuance. ...

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