AMC Entertainment Holdings Inc (AMC) Q2 2024 Earnings Call Highlights: Navigating Challenges …

• Adjusted EBITDA: 84% drop compared to the same quarter last year.

• Cash Reserves: Ended the second quarter with $770 million.

• North American Market Share: Increased by approximately 50 basis points compared to last year.

• Domestic Admissions Revenue: Declined by 25.6%, outpacing the industry box office decline of 27.2%.

• Consolidated Revenue per Patron: $20.61, 33% higher than 2019 and 1.5% higher than the prior year.

• Contribution Margin per Patron: $13.77, 41% higher than 2019 and 4.6% above the prior year.

• North American Revenue per Patron: $22.36, 38% ahead of Q2 2019 and 2.8% ahead of Q2 2023.

• Food and Beverage Revenue per Patron: Reached an all-time high of $8.34.

• International Revenue per Patron (Constant Currency): $15.96, 20.8% ahead of Q2 2019.

• Debt Refinancing: Extended maturity date of up to $2.45 billion of debt from 2026 to 2029 and 2030.

• Net Cash Used in Operating Activities: $34.6 million for the quarter, $21 million better than Q2 2023.

• Theater Portfolio: Closed nine underperforming locations, total net reduction of 118 locations since December 31, 2019.

Release Date: August 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• AMC Entertainment Holdings Inc (NYSE:AMC) ended the second quarter with $770 million in cash, providing a strong liquidity position.

• The box office has shown signs of recovery, with significant successes from films like Disney and Pixar’s Inside Out 2 and Universal’s Despicable Me 4.

• AMC set an all-time monthly adjusted EBITDA record for June, the best June in the company’s 104-year history.

• The company has successfully extended the maturity of $2.45 billion of its debt from 2026 to 2029 and 2030, providing financial breathing room.

• AMC has increased its market share in North America, despite reducing its theater count, and has seen growth in revenue and profit per patron.

Negative Points

• AMC reported an 84% drop in adjusted EBITDA for the quarter compared to the same quarter last year.

• The North American box office was challenging in the first half of the year, with a 19% decline compared to the same period in 2023.

• The company faces competitive pricing pressures in the UK market, impacting its ability to increase prices.

• Despite improvements, AMC’s domestic margins remain below pre-pandemic levels, with challenges in returning to mid-to-high teen margins.

• The company continues to close underperforming locations, with a net reduction of 118 locations since the pandemic began.

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Q & A Highlights

Q: Can you provide an update on the current state of the UK and international markets, and how does it compare to the US in terms of movie-going demand and pricing power? A: Sean Goodman, CFO, explained that the European market, particularly the UK, is performing well but faces challenges due to higher operating leverage and competitive pricing pressures. Despite these challenges, AMC’s European business has maintained high contribution margin profitability, slightly higher than in the US. The company sees potential for market share growth as the competitive environment stabilizes.

Q: How do you view the potential for AMC to return to pre-pandemic margin levels, particularly in the US? A: Adam Aron, CEO, and Sean Goodman, CFO, expressed confidence in returning to pre-pandemic margins. They highlighted that June 2024’s adjusted EBITDA was higher than June 2019, driven by increased food and beverage revenue per patron and cost-cutting measures. They believe that as the industry recovers, AMC’s margins could expand due to high incremental margins on increased revenues.

Q: What are the current trends in the theatrical window, and how do they impact AMC? A: Adam Aron noted that the industry has largely settled on a 45-day exclusive theatrical window before films move to streaming services. While it’s unclear if this has hurt theaters, the box office has not yet returned to pre-COVID levels. However, the company believes the 45-day window has not significantly impacted attendance and expects box office growth as more titles are released.

Q: Can you discuss AMC’s strategy for screen-based rationalization and the potential for further closures? A: Adam Aron explained that AMC has closed 160 theaters over the past four years, focusing on underperforming locations with unsustainable rent structures. The company negotiates with landlords to improve terms or renovate theaters. As the box office grows, fewer closures are expected, but AMC will continue to evaluate theaters based on profitability and market conditions.

Q: What are AMC’s plans for enhancing the auditorium experience, and are there opportunities outside the exhibition industry? A: Adam Aron highlighted ongoing efforts to upgrade profitable theaters with better seating and more premium large-format screens. AMC is also exploring opportunities in alternative content and merchandise sales. While external M&A is not a priority due to cash constraints, the company focuses on internal growth initiatives to enhance the consumer experience.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.