Good day, and welcome to the AMC Entertainment's First Quarter 2022 Earnings Webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Merriwether, Vice President of Capital Markets and Investor Relations. Please go ahead..

Thank you, Cerra. Good afternoon. I'd like to welcome everyone to AMC's first quarter 2022 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 the comments made by management during this webcast may contain forward-looking statements that are based on management's current expectations.

Numerous risks, and 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 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 webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, operating free cash flow, operating cash burn, 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. After our prepared remarks, there will be a Q&A 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..

Wakanda Forever, and James Cameron's Avatar 2, the sequel to Avatar at the time of its original release, the highest worldwide grossing movie of all time. I've had the privilege of spending some time with the brilliant James Cameron and his producing partner John Landau, and I've seen actual footage from Avatar 2 which is just glorious.

I can tell you with certainty that movie audiences are going to be mesmerized by their return to Pandora. As a result, the entire movie industry is going to end 2022 in grand style. It's just so very clear in our eyes.

Just as Nicole Kidman proclaimed in our ever so successful television advertising, which has attained a cult like status movie goers are so eager to return to the magic offered at AMC theaters. They want dazzling images on a huge silver screen. They want to immerse themselves in stories that are perfect and powerful.

They want to enjoy comfortable recliner seating, a bucket of buttered popcorn and a coke. They want more IMAX and Dolby cinema screens at AMC than are offered by any other movie exhibitor.

And for just a few hours, they want to escape, they want to escape the news, the internet, war, politics, inflation, interest rate hikes, their phone, and the interruptions that inevitably come when at home. So there is no confusion.

At AMC, we are very optimistic about the outlook for the 2022 box office that we believe to be close to double that of 2021 and 4x that of 2020. No one has a perfect crystal ball. But our hope and current expectations is that the fourth quarter of 2022 will finally reach or will get close to pre-pandemic levels of revenue.

Some on Wall Street and some in the press have been filling our heads for 2 years now about the rise of streaming and the corresponding end of theaters. This won't be the first time or the last time that conventional wisdom will be proven to be filled with so much folly and so very wrong.

Movie theaters have been central to the cultural of fabric of America and the world for more than a century. And their promise and potential remains resilient and real. Many of us on this call can remember the revealing and clarifying language that came out of the 1992 presidential campaign when James Carville said it's the economy, stupid.

Well, for the movie theater business, it's the movies, stupid. And oh, do we have hit movies now coming to an AMC theater near you. I'll be back in a few minutes to provide some strategic updates and take your questions. But now I'll turn the call over to our CFO, Sean Goodman. Sean..

One, ensuring that we have sufficient liquidity to manage through the recovery phase of our business; two, strengthen our balance sheet by reducing our debt and associated interest costs; three, invest in our business to enhance the guest experience; and four, opportunistically pursue value-enhancing initiatives, including those that lead to diversification of our business.

So far this year, we have been very active in allocating capital to enhance shareholder value. As we previously reported, earlier this year, we completed a highly successful capital raising, issuing $950 million of 7.5% first lien notes.

As a result of this transaction, we were able to repay high interest debt that was raised at the height of the pandemic, and thereby, reduce our annual interest expense. At the same time, we extended our debt maturities by between 3 and 4 years.

During the first quarter of 2022, we also repaid approximately $45 million of deferred rent, reducing our deferred rent balance to approximately $272 million. We expect to further reduce this deferred rent balance during 2022 by another approximately $125 million.

And we continue to work on other attractive opportunities to strengthen our balance sheet and enhance our financial flexibility. Actively managing our theater portfolio is ongoing at AMC as we add new high-performing locations and eliminate low performance, all with the goal of improving guest satisfaction and optimizing our overall profitability.

During the quarter, we added 3 new theaters and we closed 12. This brings the total number of locations closed since the pandemic began to 95 and the total number of new locations opened to 33 for a net reduction of 62 locations through Q1 2022.

In addition, in early April, we announced the acquisition of 7 formerly bow tie cinema locations in Connecticut, Upstate New York and Annapolis, Maryland.

And last month, we announced a significant investment to dramatically upgrade the sight and sound experience at AMC through the installation of laser projection equipment at 3,500 auditoriums in the U.S. through 2026.

This equipment has a value of approximately $0.25 billion, although our upfront capital investment is minimal based on our agreement with our partner, [indiscernible]. And this new projection equipment is also environmentally friendly and comes along with meaningful operating cost benefits.

Net CapEx, including landlord contributions, in Q1 was $34.2 million. And for 2022, separate and apart from any M&A activity, we're expecting net CapEx to be in the range of $150 million to $200 million. Finally, in mid-March, we announced our investment in Hycroft Mining.

As a result of this investment of $27.9 million, we recorded a mark-to-market gain of $63.9 million in the first quarter of 2022. This is based on the share price of Hycroft kraft on March 31.

The third operating enhancements and efficiency optimization initiatives implemented over the last 2 years have positioned us very well, and we continue to focus on initiatives to grow our revenue, increase our efficiency, enhance the guest experience and diversify our business, all with the goal of growing shareholder value and ensuring our success in a post-COVID environment.

And with that, I'll pass the call back over to Adam..

Maverick, Memorial Day Weekend, then Jurassic World Dominion, and then more and more and more and more. 2022 have me filled with excitement. Sean, now let's turn to questions starting with questions from our shareholders..

Thanks, Adam. So we have a few questions to start relating to the upcoming shareholder meeting. Specifically, there's questions about people's voting materials, when they will be received, what is on the docket for voting at the shareholder meeting. And there's a question about will international shareholders be allowed to vote at this meeting..

Thank you for the question. Our shareholder meeting is scheduled for June 16 at 2:00 p.m. Central Time. It will be held here in our offices in Leawood, Kansas, the suburb of Kansas City. You are all invited, those of you who are shareholders anyway. Those of you who are shareholders are invited to attend in person, if you wish.

We filed all the proxy papers with the SEC on April 29. You can access those proxy papers if you haven't already seen them by going to the Investor Relations section of the amctheaters.com website. Look at the Financial Performance tab, it's all there.

As for voting materials, you should usually allow about 2 weeks or so for brokerage firms to get the proxy materials to you as a shareholder at AMC. If you do not receive proxy materials by mid-May, you definitely should contact your broker or our proxy solicitor, DFK, who has a special toll-free number for AMC shareholders at 1-888-625-2588.

That number again is 1-888-625-2588. There are three issues up for a vote at the annual meeting. One is the election of directors of some members of our Board who are up for reelection. Another is a nonbinding advisory vote on say-on-pay and the third is the ratification of our external auditors, Ernst & Young.

As for our international shareholders, many of whom will be listening to this call today, we have a particular appreciation for those of you around the world who still follow AMC. This is a matter of some consternation for us. Whether you can vote at our shareholder meeting is entirely based on your brokerage firm.

So I would encourage you to check with your broker internationally. Hopefully, you're with one of the brokerage firms who will allow you to vote your shares at our annual meeting. If not, change brokers..

Thanks, Adam. So the next question is about our entry into the retail popcorn business.

The specific question is when is popcorn likely to be available in stores?.

As I said in my prepared remarks, our hope is that we can be there in the fourth quarter of this year, 2022. There's a lot of action behind the scenes, including discussions with various major retailers. And the one thing I know is that our microwave and ready popcorn is going to be a strong competitor. Our brand resonates with consumers.

We are known for popcorn. I've had lots of ideas submitted by shareholders that we should include something called a golden ticket with our packaging. That's a great idea.

And I'm sure that we will, sort of like Cracker Jack has a gift in every box, I wouldn't be surprised if we have some benefit relating to AMC Theatre moviegoing in every box of our perfectly popcorn. Let's hope we can get there in the last trimester of 2022..

One of the many questions that -- sorry, one of the many suggestions that we've had is relating to AMC merchandise. And there's a question of when can people expect to be able to purchase AMC merchandise..

So the suggestion of AMC merchandise is also a good idea. And we've tested some either at our theaters or online. We've had -- you may recall, we had a Ghostbusters Ambulance that we sold out of. We had Batman popcorn holders that we sold out of. And what's very clear to us is the merchandise is going to work for us.

We are in the process of figuring out now how to make AMC-branded merchandise and movie themes merchandise available to our guests, whether at theaters or online. Look for that to unveil to consumers sometime in the second half of 2022..

So people are asking what sort of marketing and initiatives are being done when we acquire new theater locations..

Well, I will answer the question of what we are doing in a second, but let me start by saying, it sure is working. Look at what's going on at The Grove and The Americana brand out in L.A. These were good and strong theaters for Arclight. It's why we took them into our -- and Pacific. That's why we took them into our network.

But their performances soared in our watch. There are like 5,000 movie theaters in the country, and these two have consistently been performing in the top 30 ever since we took them over. In terms of what we do, the first thing that we look at is how can we upgrade the product, bring AMC service levels and amenities into the theaters that we acquire.

We will be doing the same thing at the Bow Tie theaters in Connecticut, Upstate New York and Annapolis that we did out West. In the case of some of our theaters, we're going to be installing IMAX locations or Dolby Cinema locations or both. Beyond improving the product, we are also bringing our loyalty programs to these theaters.

AMC Stubs, our frequent moviegoing program; AMC Stubs A-List, our monthly subscription program. We are also then, as we convert customers from these theaters into our loyalty program, we’re then communicating with them frequently, certainly on a weekly basis to let them know what's coming at AMC.

We are adding to all this local marketing through social media, including paid media, and as I said, it's all working really well so far. And I might add, we are not done. We are going to add more high-quality theaters to our network throughout 2022..

Some questions about dividends.

When will AMC pay a dividend?.

Well, I have seen suggestion after suggestion that you'd like to see us pay a dividend. I think we've announced publicly previously that our current debt documents prevent us from paying a cash dividend prior to June of 2023. So this is not really a decision for today. This is a decision for a year down the road..

Another one of the many suggestions, will AMC make its own movies?.

This one is a particularly interesting topic. Several years ago, AMC owned 50% of Open Road Films, where we did make our own movies, and in fact, got the Oscar in 2016 for the Best Picture of the Year with Spotlight.

And I have to say that there are a lot of conversations that are underway now with various movie makers about whether we should repeat our activity in prior years of making our own content. It is something that's on the list. We're thinking very hard about it.

We've had very serious conversations with some very well-known movie studio executives, major movie directors and it is something that has our attention..

With our recent ….

Can I just add while we are on the subject? But even if we were to make our own movies, now is a good time to put in a good word to our long-standing studio partners. Hollywood is turning out great product again, and it's finally being released exclusively in theaters for exclusive theatrical window.

And we are just -- I just want to say how grateful we are to the likes of, you name it, Disney, Universal, Warner Bros., Sony, Paramount, Lions Gate, all the makers of movies.

And it does raise the question, can we convince some of the streamers to introduce their movies to some of their movies theatrically as well? We have had conversations over the years with Netflix, Amazon and Apple. We continue to make it very clear that we would be very pleased to show some of their bigger, better movies.

But in doing so, we have to respect our long-standing industry partners, the major studios. We can't have one set of rules for the major studios and a separate set of rules for streamers.

But if we can convince the streamers, that it's in their interest to show movies theatrically, that might be another -- yet another way of getting more movie product into our theaters..

So with our recent acceptance of cryptocurrencies and other forms of payment, people want to know, to what extent are these new forms of payment being accepted, including Dogecoin, Bitcoin, et cetera?.

So this was only put on our radar screen by our shareholders. And there was just enormous interest in it. And so we went down the path of doing the programming required to accept cryptocurrency.

And what we found is that the same programming that was needed to accept cryptocurrency is the exact same programming that we needed to accept Apple Pay and Google Pay, PayPal and a whole bunch of other payment types. And it's been a massive home run for us.

While crypto itself is modest in usage, when you take all of those new payment types that we introduced for AMC as a result of our exploring crypto, again, it's in the neighborhood of one-third of our total online ticketing is now being paid for in all these various alternate payment methods.

So I would say this whole endeavor has been a massive success for us. And of course, the Holy Grail is do we actually ever consider launching a cryptocurrency of our own? We've said publicly that we're intrigued by that notion. We are studying that notion.

The biggest issue that we want to make sure that we get exactly right is that we believe the regulatory environment around cryptocurrency will radically change during 2022 and in 2023.

And we want to make sure that if we do embrace issuing cryptocurrency rather than just accepting cryptocurrency, that we anticipate the new regulatory climb as well, and we stay on the right side of the law..

People are interested in our plans with respect to NFTs. Up until now, we've been largely using them for promotional purposes.

There's questions as to whether AMC would look to sell NFTs in the future?.

So that also is an interesting question. That also was put on the radar screen by our shareholder base. I said in my earlier remarks that we have 8 NFT programs either already been launched or in the works. And we, historically -- sorry, we only have 4 of these programs so far, but historically, we've been giving away these NFTs.

We did an interesting poll on Twitter saying, "Should we continue to give them away free or should we sell them?" And the results of that poll, in very round numbers, are two-thirds or two-thirds said, "Keep giving it away free." But a healthy percentage said that we should sell some NFTs to generate some funds.

So who knows exactly what we will do going forward? Maybe we will do a mixture of both. Some NFT programs we will give away free, and others we will sell. But we are exploring very carefully and thinking very hard about how to maximize the profitability possibilities that could accrue to AMC from our interest in NFTs.

And I would say that with respect to our competition, we are way out in front of any other movie theater exhibitor anywhere on the planet. We've issued literally hundreds of thousands more NFTs than anyone else..

There's broad-ranging question here about how we keep AMC relevant with the strength of streaming..

The movie theater industry has an entry at AMC as a company. we will be relevant and we will take whatever actions we need to stay relevant as we look ahead..

And finally, a question about our partnership with Dreamscape and our plans with respect to that partnership. Will AMC consider more Dreamscape locations, for example..

Well, for those of you who don't know what Dreamscape is, it's a really innovative virtual reality product. We opened up three Dreamscape locations, One in New Jersey, one in Ohio, one in Texas to test them. The product is spectacular. The economic returns are okay. They're not spectacular, but they're okay.

We are told that there are changes in the technology coming with VR that will make it more affordable to introduce more Dreamscape locations. So with respect to Dreamscape specifically, we will see. But the fact that we are willing to embrace Dreamscape 3 or 4 years ago, I think is yet another signal of AMC's willingness to embrace alternate content.

And this summer, we experimented with a variety of interesting concepts showing concert movies, some live, some on tape. We showed WWE and UFC events in our theaters. For 2 of the past 3 years, we showed NFL games on Sunday afternoons in our theaters.

And I just have a strong view that if we can obtain the rights to show professional sporting events or collegiate sporting events in our theaters going forward, that would be very popular with our guests. So all of this is in the works. And the minute we strike a rights deal with a major league, we will put out a press release.

With that, are there any other questions? Do we have time? It's already 59 minutes in. We kind of promised people an hour. So maybe, operator, we will take a question and then call it a day..

Thank you. It appears we have reached our time limit for the conference. This concludes our question-and-answer session. I would like to turn back to you for closing remarks..

Maverick. It is one spectacular movie. Thank you, operator. Thank you, one and all, for listening..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..