Greetings, and welcome to AMC Entertainment First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, John Merriwether, Vice President Investor Relations..

Thank you, Dana. Good morning. I'd like to welcome everyone to AMC's First Quarter 2019 Earnings Conference Call. With me this morning is Adam Aron, our Chief Executive Officer and President; and Craig Ramsey, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which 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 those risks and uncertainties are discussed in our public filings, included in 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 to not place undue reliance 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 call, we may reference measures such as adjusted EBITDA, adjusted free cash flow, and constant currency, which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results please see our earnings release issued earlier this morning.

In conjunction with our earnings release, we encourage you to review the supplemental financial information for the 2019 first quarter that we published this morning on our website in tandem with the earnings release. After our prepared remarks, there will be a question-and-answer session.

This morning's call is being recorded and a webcast 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..

Endgame in April. We expect to continue to see strong positive operating leverage throughout the rest of 2019 as the box office ramps. Accordingly, let me reiterate that we believe 2019 has the potential to be another record-breaking year for AMC.

And as a result we now expect that our full year 2019 adjusted EBITDA will exceed that of 2018 adjusted for ASC 8421. One final update for you before we close, I'm pleased to point you to our announcement yesterday of our addition of a new independent Director joining the AMC Board of Directors, Adam Sussman.

As part of the strategic investment from Silver Lake last September, we agreed to elect a Director with significant technology experience and knowledge and we couldn't have picked a better candidate.

The Harvard MBA, Adam Sussman is currently the GM of Direct Digital and Geographies at Nike with over 20 years of digital consumer experience at major global brands including; Disney, Electronic Arts and Zynga. We look forward to his valuable ideas and contributions to AMC. In conclusion, before we turn to your questions.

Looking at the totality of AMC, increasingly AMC is delivering a moviegoing experience to our customers that is frictionless and leverages data to create meaningful and personalized communication and experiences between AMC and our guests.

We are marrying our global and upgraded physical footprint with a rapidly growing customer database along with modern technology interfaces, data-driven insights and innovative consumer engagement practices. Clearly, we continue to see in Q1 that this is all measurably driving attendance surges at AMC.

With a strong movie slate coming and increasing consumer loyalty to our company, we look forward to the remainder of 2019 and what will hopefully be another record-breaking year for AMC. And as I said before what we might -- what we just think might be the biggest nine months in movie history. With that thank you for listening.

And Craig and I are happy to take your questions..

[Operator Instructions] Our first question comes from the line of David Miller with Imperial Capital. Please proceed with your question..

Hey guys. Adam, question on surge pricing for you. You recall a couple of years ago you guys did an analyst event in San Francisco where you detailed all kinds of surge pricing strategies around multiple days and multiple formats and multiple types of genres and films. You reiterated that, I think briefly at your Analyst Day a couple weeks ago.

With that being said what kind of surge pricing strategies and tactics have you been using with this Avengers juggernaut that continues? And will those continue going forward into the back half of the year? Thanks very much..

Endgame, based on where you sat in the theater. With more than half of the seats in the theater priced at north of £33 per ticket, close to $40 a ticket or higher. So pricing is something we think we understand a lot about at AMC.

We've already taken a lot of actions over the past couple of years and this will continue to be an active area of revenue opportunity for us going forward..

Wonderful. Thank you. .

Our next question comes from the line of Eric Handler with MKM Partners. Please proceed with your question..

Yes. Good morning and thank you very much for the question.

Adam, I wonder if you can dig in and maybe provide us a little color about the bring-alongs that you're seeing with A-List subscribers?.

Eric, we know exactly what it is and I don't think we've released the statistic probably, but -- and if I'm wrong, I'm happy to say what it is in the call, but people are nodding that we haven't released the number publicly. But there are three -- there are four numbers that really drive the profitability of A-List.

And those people who were at our Investor Day presentation, or those who've looked at the Investor Day presentation realize that the level and detailed analysis that we have in A-List is huge. But the big numbers that drive the profitability of the program.

What's the price we're charging, what's the frequency per month at which members are going, what's the take along percentage, and how much food and beverage spend are they buying? And literally, we are now sophisticated enough in our A-List analysis that we're able to track those statistics literally account-by-account, member-by-member.

And we have a very good feel of who's profitable and who's not profitable and what the average profitability of that portfolio is. So, while we haven't released that specific stat yet and therefore, I don't want to set a precedent today.

Rest assured that we know it, we track it literally daily and as a result of all this we're very confident in putting forward the two comments that AMC Stubs A-List was accretive in Q1 and by the end of the year, it will be accretive to the tune of $3 per member per month, that's $36 million a year if we had one million members in the system.

I should also add that while we're not releasing the exact stats, it is a meaningful number. There are a lot of A-Listers who are being joined by non-A-listers.

And one of the many technical enhancements that we're making in the AMC app right now as we speak is making it easier and more seamless, more frictionless for AMC A-Listers to bring along guests at full revenue, so they can do it in a single transaction without paying.

The easier we can make it to user app, the more incentive it will provide those A-Listers to bring people along with them..

Great. And just as a follow-up, not sure what you'll be able to provide.

But among families, how many subscriptions are you seeing per family on average? And secondly, what percentage of ticket purchases are seeing upgrades?.

When you say seeing upgrades, what do you mean by that?.

PLF..

PLF upgrades?.

PLF. Yeah. Yeah..

Again, we track that stat hourly and I don't think we release that stat, we don't. But we know exactly what it is and it's pretty close to where we modeled it. And it's a big exciting feature of our program to the guest. They use our PLFs. They like IMAX. They like Dolby Cinema.

They like getting it without having to pay the normal 70% premium that we charge. And it's one of the things that is I think driving the major appeal of A-List. With respect to families, the average member is between one and two members per household our AMC Stubs members, so we have a lot of couples, both of them are members.

We also have a lot of single members. While we have some children members, we don't have as many as you might think, because we imposed as a rule of the program when we launched back in 2018, a minimum age which we lowered down to 2016. But we still have a minimum age of 2016. And you may wonder why.

The reason is literally every time an A-Lister shows up at our theater, we require that they show us a government-issued photo ID, which generally is a driver's license. And obviously, if you're under the age of 16, it's not going to be so easy to get a driver's license.

We've done this because we wanted from day one to make sure there was not fraud within the A-List program. Others and subscription who failed pretty spectacularly were saying that they say massive fraud because they were not checking identification and people were passing their cards around.

I'm also pleased to say that we are working right now to program family membership capability within our website and app.

And essentially what we're going to do is program a photo upload capability so that you can store your picture with us, so you won't have to show us a government ID for us to know that you are actually the member, because we'll have your picture loaded on file.

And while you'll be able to change your picture from time-to-time, they will be infrequently so maybe once a year or something. So that we don't open ourselves up to fraud.

When we have the photo upload capability that will then allow us to lower the minimum age down to let family members enroll not only for a husband and wife, but also for their children.

So that's -- and that's yet another one of these bells and whistles adds to A-List coming down the pike that will make A-List even more attractive to more people which I think will cause it to continue to grow as a program into the future.

But I wouldn't be surprised if that photo upload capability is a 2020 initiative rather than something we'll have to -- will happen this year in 2019..

Eric it's Craig. I'd add and just kind of to repeat a point to that I mean maybe and balance it a little bit. We actually for the quarter planned as we looked as we planned 2019 without the second quarter, the A-List program would actually be slightly dilutive on an EBITDA basis.

So, we thought it would be better than -- it performed in 2018 but still a little dilutive.

The fact that it was by a meaningful number accretive I think it was really in Q1 was an indication of kind of the strength and contribution of all the factors frequency really in line bring along exceeding expectations and so it's a combination of a lot of things that are driving the improvement well above what we expected at this point in time and why we again think run rate at the end of the year it's going to be $3 of contribution per member..

Thank you very much..

Can I just add one more thing because obviously A-List is such an important topic? I'm an old geezer. I'm 64 years old. I have been in business for 40 years. I worked for probably 10 different companies over the course of my career.

I have never been more proud of an organization in my entire career than I am of AMC's marketing organization and its ability to analyze A-List and understand what's going on. The sophistication of our understanding of A-List is a big reason why it's profitable. We designed the program right.

We are prepared to change the program as needed to make sure that it would become profitable and stay profitable and obviously the early returns are just way ahead of our expectations positively on every dimension. And they rip this program apart every single day. We understand it well. We know what's going on. We have it under control.

It's performing well and we will do whatever we need to do to change the program to keep it that way, but as I said right now, program is very profitable and way ahead of timetable..

Much appreciated..

Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question..

Thanks. I might as well stay in the A-List theme for a moment. You are tempted to right-size frequency with the price increases.

And I wondered if you can talk about how that calculation changed the frequency in New York or Chicago or LA as you raised the prices?.

So, we didn't see any change in frequency in the five states we went up to $24 that I detected. But we -- and the five states where California, New Jersey, New York, Connecticut, which is Metro, New York, and Massachusetts which is Metro Boston. We then went up $4 a month in those markets.

We went up $2 a month in another 10 states plus the District of Columbia. It's not so much that it right-size frequency it just got us more revenue. If we're getting $4 more per head per month, it's $48 more per year and that's $48 more that we either can afford to pay our studio partners and film rent or put in our pocket or a combination of the two.

And we needed to get that additional price increase because we want this program to be profitable and we got a lot of people seeing a lot of movies 2.6 per month in a quarter and we want to price it right. Plus I guess the other comment on pricing it right it's just also a function of demand. The membership applications have been so solid.

When you got demand, you can afford to raise the price and we had demand, so we figured might as well raise the price..

All right.

And Adam does the 2.6 times frequency mainly create profitability by the bring along box office or by adding concession sales? And when you do the accretive calculation what are you accounting into that?.

So, it's both. Because it's a sum of all these metrics, right? Money is fungible, right? If we didn't have the bring along factor, we wouldn't have the $3. If we didn't have the F&B -- increased F&B spend, we wouldn’t have the $3. We do have the bring along factor, we do have the F&B spend, hence the $3.

The $3 means that it's $3 per member per month of incremental EBITDA. What we're doing is we're comparing the program to the money that it's bringing to us now versus what the moneys that would have come to us anyway if we didn't have the program, so that's this calculus.

Because for an enormous subset of this group, I'd say in the neighborhood of half, we knew what their frequency with us was prior to creating A-List because they were already Stubs members. So they were already tracking our purchases with us.

So we're able to compare -- and remember Stubs gives them points not only on their own tickets, but on other tickets they buy for bring alongs and brings them points for F&B spend. So we knew exactly what they were doing before A-List and we know exactly what they're doing after A-List and you can adjust that for the change in the box office.

You can -- so you can size it to make sure that the box office was comparable in dollar volume and you can analyze exactly how much money was coming in the door beforehand and how much was coming in after. And that's what this incremental calculation is..

Jim, I might add. I'd say it's fully loaded. And by that, I mean, in this comparison that Adam's describing the program -- the A-List program versus how the member attended before A-List, we also consider any additional fees -- ticketing fees that may be weighed.

So we're putting that factor in all the film costs, all the food and beverage costs, operating expenses were loading any incremental operating expenses whether they maybe be even credit card fees as an example, not to -- this isn't an exhaustive list, but we're putting in some overhead costs that are incurred in the program from this office.

So I think it's a realistic view of incremental revenues and also incremental costs that are associated. So we're trying to be as transparent I guess as we can. And intellectual honesty is a good thing. We're trying to be able to actually honest with how it is performing in -- by building in all the costs as we compare pre-A-List to post-A-List..

Okay. One smaller non-A-List question. I noticed you had a few more Dolby Cinema openings and I think one IMAX opening.

And I assume that IMAX is pretty much largely in place or is it -- do you have more room for IMAX and do you think most of the PLF increments will come from Dolby and perhaps your Prime area and how aggressively will you be?.

Jim, so look AMC is in love in IMAX and AMC for that matters in love with Dolby Cinema. We are the largest IMAX exhibitor in North America. We have about half of all IMAX installations in North America.

We did a major announcement I think a year ago might have been two years ago, but I think it was a year ago that we are going to look to add 25 IMAX locations throughout Europe.

Similarly, we're the only Dolby Cinema operator in North America or in the United States and we have about 130 Dolby Cinemas by now opened in the United States, the Odeon Leicester Square the Dolby Cinema in London. We would like to add as many IMAX and Dolby Cinema locations as we can.

We have room for -- in the U.S., Europe and the Middle East maybe 100 to 150 more theaters could take an IMAX or a Dolby installation I would think. I'm sure that we will add more IMAX locations I'm sure that we'll add more Dolby Cinema locations. We're also going to have more Prime locations.

We're -- without being too specific, we're also looking at other large-format ideas that we find fascinating that might not require as much capital as an IMAX or Dolby or Prime installation.

And -- so -- but because consumers are willing to pay premiums for the better sight and sound experience in the theater, we're working hard to figure out how we can maximize the number of premium sight and sound, technology auditoriums that we have, because we're getting handsomely compensated by the customer for them..

All right. Thanks for that. Appreciate it..

Our last question comes from the line of Mike Hickey with The Benchmark Company. Please proceed with your question..

Hey guys. Thanks for taking the question. A couple on A-List. You noted the frequency was 2.6 for Q1, obviously not the most compelling slate during that period.

And you mentioned that 2.6 to -- looks like May 8 and obviously that includes Avengers I think intuitively you sort think frequency would go higher and maybe it's just a case that we haven't stressed long enough into the tent-pole season or enough weeks of Avenger.

But why you think frequency I guess had stepped up given more compelling film content? On a similar level, I guess you would anticipate I guess Avengers would be a driver of A-List sales. I'm curious what relationship you've seen there in terms of Avengers being a catalyst for A-List sales or at least does that meet your expectations.

And I have a follow-up..

So it's our supposition also that frequency would rise with Avengers. And the last step that I saw 73% of A-List members went to see Avengers which is a pretty amazing statistic. But it didn't actually change the number of movies that they saw in a month.

And I think it might be because they -- 2.6 movies a month is -- you're going every week and a half it may have to do more with their lives than the titles that are out there. But I wouldn't be surprised if the frequency goes up a little bit between now and December.

It's -- but it sure feels to us like it's -- I called 2.5 to 3.0 times per month the sweet spot for this program, it sure feels to us that it's staying within that bound even with a stronger box office going forward.

And if it were ever to raise higher than that, we would raise the price to make sure that the profitability of the program stays in balance. But so far so good and does it grow up to 2.7 or 2.8 with higher -- with this better slate of movies coming, it's possible. But it doesn't look like it's going to soar beyond that.

And I said -- as I said, we always have a pricing mechanism that we could pull if we need to..

Okay. And then I guess the question was on Avengers what influence it has on ....

I'm sorry you asked that question too, Mike. Yeah. Yeah. .

Yeah..

We did see a -- when Avengers opened we certainly saw a surge in member applications, but not in an enormous surge. I mean, it was up, it was a higher number. But remember, we added 100,000 from January 1 to Feb 28 and we added 80,000 from March 1 to May 8. So -- and January 1 to Feb 28 was a slower moviegoing season.

But still zooming, still zooming that's where -- we thought we would be lucky to get to 500,000 by June of 2019 and we've got to 500,000 in 4.5 months and we've added 180,000 in the first four months of the year basically -- 185,000 in the first four months of this year. And that includes this slow moviegoing season in the first quarter.

So, we're not done, they're still signing up. And I think one of the reasons they're still signing up, we're doing a very good job of promoting A-List in our theaters, on the website. We sold more than 20 million tickets a month at our theaters, that's 20 million eyeballs a month that we're promoting A-List to.

Between the smartphone app and the website, we're getting somewhere between 50 million and 80 million visits a month, depending upon the month. Those people are hearing about A-List. So -- and interestingly this marketing is pretty inexpensive to us, because they're already on our website, they're already in our theaters.

So, it's practically free and yet, it's a lot of exposure and to a very targeted audience too..

Hey, Mike, it's Craig. The thing that strikes me with the great success of the program. We're seeing -- as we've talked about, we're seeing the CapEx cycle kind of coming to maturation certainly in the U.S. and over the next couple of years we'll probably see the same thing in Europe.

We'll spend a little more in Europe, but it will tail off and we see the $250 million to $300 million in three to five years. This is the type of strategy A-List which is a low-capital strategy to drive moviegoing res.

Before it was physical improvement to the theater costing capital earning good returns, now we're really focused on marketing programs and this A-List program has got so much headroom to it where we can drive growth and drive attendance on a low-capital spend and I think that is an additional big benefit from the program..

Cool. Thanks, guys. Last question from me. I guess when you're close to sort of 800,000 in subs now and I think the bogey of maybe 1 million by year-end, I'm not sure if you gave that that's just what we're thinking. But sort of the 200,000 in incremental subs to bridge from where we are today to that 1 million wherever it is, whenever it is.

Any thoughts in terms of what that demo would look like that sort of where we're at and sort of the new buyer movie behavior pattern, what -- any particular geos that you feel like is sort of under-indexed and maybe step up. And I guess, do you feel like you have to pull more from non-AMC patrons and perhaps where you have before..

Well the official bogey is I said 500,000 by June of 2019 and $1 million by June of 2020. I think I'll live with that and beat expectations again, better to under-promise than over-deliver. But yes, if we're already at 785,000 you would think we're going to get to one million before June of 2020.

In terms of demos, the thing that I find interesting is that about a quarter of them are millennials above the ages all over the place. We've got senior citizens who were getting senior citizen discounts before and now they're not getting, now they're paying the same price as everybody else.

We've got millennials, a couple of years ago people in this industry were lamenting that maybe millennials were not going to movie theaters and were more geared to subscription services well lo and behold AMC now has a subscription service and millennials are coming to AMC. So I find that particularly interesting.

It is also interesting to us, I don't want to release the stat, but how many of our A-List members are coming from the five states that -- where we're charging the highest price. Clearly, we have struck a chord with moviegoers in New York and California and that's very good for us.

We have a lot of theaters in those states and if we can lock in brand loyalty to AMC, it's good where we've locked in brand loyalty, but it's especially good in states where we have a lot of theaters. And then from geographies, beyond -- I mean that was geographies.

Then the other stat that's interesting is that about half of the members for A-List were coming into the program having already been Stubs members, but what was so interesting is about half of the members coming to A-List were not Stubs members.

Now some of those people might have been coming to AMC anyway, but coming with very low frequency, once every three or four months and now they're coming once every couple of weeks. Or they might have been coming from other chains where we've been taking share. But there's a lot going on we're tracking it very closely.

We have a pretty solid understanding of what it is. And there's really -- there's not a single red flag within A-List right now. Just wherever we turn, we're pleased with what we're seeing..

Thanks guys. Best of luck..

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Adam Aron for closing remarks..

Great. Thank you everybody. Thanks for joining us today. Let me just close with a couple of points that we made during the call. Our attendance was 700 basis points better than the competition in the United States that's a whole new world.

And as we continue to drive attendance at a time when the movie slate is robust and we believe that the movie slate from mid-April to the end of December will be quite robust. We think while the first quarter was a tough one and we all understand that boy this could be a great year for our company.

And we are -- we've never been more upbeat, more confident and more excited to let the next several months play out and post good numbers for the benefit of our shareholders. With that, thank you very much. We're glad you joined us today..

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..