AMC Entertainment Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 28, 2024

Key Takeaways

  • AMC beat FactSet and Refinitiv consensus estimates for Q4 and full‐year 2023, with global attendance up 19% to almost 240 million guests, revenue up 23% to $4.8 billion, and adjusted EBITDA rising to $426 million.
  • Through pioneering distribution of Taylor Swift’s Eras Tour and Beyoncé’s Renaissance concert films, AMC drove Q4 revenue growth of 11.5%, nearly tripled adjusted EBITDA, and significantly boosted its U.S. box‐office market share.
  • The 2023 actors' and writers' Hollywood strikes delayed major studio releases, causing a 35% drop in the Q4 domestic box office versus pre-pandemic 2019 and weighing on near-term theater attendance.
  • AMC strengthened its balance sheet by raising $865 million of equity in 2023, reducing debt and deferred rent by about $958 million since 2022, and ending the year with $884 million in cash.
  • CEO Adam Aron announced a 25% reduction in his target compensation for the next 12 months, aligning his interests more closely with shareholders amid continued share‐price pressures.
AI Generated. May Contain Errors.
Earnings Conference Call
AMC Entertainment Q4 2023
00:00 / 00:00

There are 4 speakers on the call.

Operator

Greetings, and welcome to the AMC Entertainment Holdings 4th Quarter and Full Year 2023 Earnings Webcast. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Merriwether, Vice President, Capital Markets and Investor Relations.

Operator

Thank you. You may begin.

Speaker 1

Thank you, Diego. Good afternoon. I'd like to welcome everyone to AMC's Q4 and full year 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 the 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 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.

Speaker 1

On this webcast, we may reference non GAAP financial measures such as adjusted EBITDA, constant currency, free cash flow, non GAAP operating cash burn and operating cash generated, among others.

Speaker 2

For a

Speaker 1

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 and thank you everyone for joining us today. 2023 marked another year of strong operational and financial gains for AMC Entertainment, affirming the success of our strategic recovery efforts as the industry continues to rebound from the lingering effects of the pandemic. Our determination, innovation and agility allowed us to adapt to a rapidly changing and unpredictable box office in calendar year 2023. And once again, it allowed AMC to defy Wall Street's expectations, beating FactSet and Refinitiv consensus estimates in Q4 and for full year 2023 for revenue, adjusted EBITDA, adjusted net income and adjusted earnings per share.

Speaker 2

As a result of our actions, global attendance at AMC Theatres in 2023 tallied nearly 240,000,000 guests, up 19% over the prior year and marking the highest annual attendance in the post pandemic era for AMC. When you couple our 2023 attendance growth with our all time record setting admissions revenue and our all time record setting food and beverage revenues per patron, AMC's annual revenues grew by 23%, exceeding $4,800,000,000 in 20 23, and our adjusted EBITDA improved by $379,000,000 to $426,000,000 in 2023. It was the highest level for adjusted EBITDA in 4 years, the highest revenues for AMC in 4 years. And in fact, our adjusted EBITDA was up more than 9 times what it was just a year earlier in calendar year 2022. Unquestionably, our positive recovery trajectory continued in 2023, not enough for where we hope to eventually wind up in the year ahead or the years ahead, but encouraging progress again was made.

Speaker 2

We're also proud that when you look at the magnitude of our revenue and adjusted EBITDA increases, AMC is outshining several of our largest and most important key competitors in the U. S. And in Europe. 1 of AMC's most essential accomplishments, which may not be widely understood, is just how efficient we have become after having to adapt to pandemic stresses these past 4 years. Thanks to AMC's increased high margin foods, beverage and merchandise sales, rising ticket prices, our industry leading premium large format capacity, a commitment to laser projection, pruning our network of some marginal theaters and replacing them with some clear winners, and of course holding a line on costs, AMC's internal analysis reveals to us that our contribution per patron is up by some 37% versus what it was before the pandemic.

Speaker 2

This means that AMC does not need for the industry box office to return completely to pre pandemic levels for AMC's adjusted EBITDA to dramatically outstrip what we generated historically. Speaking of the box office, let's turn to the domestic industry box office as a placeholder for the size of our industry and to demonstrate our industry's long climb back from COVID. We all know that the box office fell from $11,400,000,000 in 2019 to $2,200,000,000 in the height of the pandemic calendar year 2020. But then the domestic industry box office started on its rebound, up to $4,500,000,000 in 2021 to $7,500,000,000 in 2022, and it grew again in 2023 by 21% to more than $9,000,000,000 in the year just completed. That is an upward slope for sure.

Speaker 2

Again, it's not enough, but again, progress has been made. And in looking at the Q4 of 2023 in particular, what is particularly noteworthy about the box office is how our company, AMC Entertainment, reshaped the box office and how much AMC benefited from our trailblazing industry leading efforts with our highly successful distribution of 2 concert movies, Taylor Swift: The Iris Tour and Renaissance, a film by Beyonce. In the Q4 compared to the same quarter a year ago, AMC's revenue grew by 11.5% and AMC's adjusted EBITDA almost tripled. Literally, all of that increase in AMC's revenue and all of that increase in AMC's adjusted EBITDA is attributable to our having shown these 2 concert movies in our theaters in the U. S.

Speaker 2

And internationally. They also caused AMC's U. S. Market share to noticeably rise. That's because our share on these 2 concert films, the 2 that we not only exhibited, but also were the distributor for, were well more than 50% higher than our market share normally.

Speaker 2

If that's not enough, both of these 2 movies played a rave critical acclaim. Each received a rare A plus sumo score. And the Rotten Tomatoes response was astronomical, with Taylor's film scoring a 99, 98 and Beyonce's film scoring a 97, 99. With some $213,000,000 in domestic ticket sales within Q4, These two movies added greatly, not only to AMC's bottom line, but the movie theater success across our entire industry. As just these two films represented fully 1 ninth of the complete 4th quarter domestic industry wide box office, one ninth from our 2 movies.

Speaker 2

Taylor's movie in particular was the single highest grossing movie of them all within the Q4 at the domestic box office. And worldwide, at $275,000,000 of gross, Taylor's film also was the highest grossing concert film of all time and the highest grossing documentary of all time. It's hard to believe, but it's true. Only Universal and Warner significantly outgrossed AMC Theatres distribution domestically in the Q4 of 2023. With just these two movies, AMC Theatres distribution had a domestic box office gross during the months of October, November December of 'twenty three that was only 1.6% less than that of industry behemoth Disney.

Speaker 2

And our 2 films domestically outgrossed all of what was offered theatrically in the quarter by Paramount, by Sony, by Lionsgate or by any of the other smaller movie makers. This is a stunning result, given that neither of these films were on anyone's drawing board until mid year and that they were the first movies ever distributed by AMC in our entire 103 year history. What a triumph for our company. To that end, it is no surprise then that our praise for Taylor Swift and for Beyonce Knowles Carter has no limit. And you will surely understand why we offer our boundless thanks to these 2 world class artists for entrusting AMC to collaborate with them as in the theatrical exhibition of their 2 masterpiece creations.

Speaker 2

I should add that I have said before that our phones have been ringing off the hook and I can confirm to you today that we are now in constant touch with others who are seeking to have AMC also distribute the movies of more world class musical artists for later in 2024 and or 2025. This blending of great musicians and movie theaters is an innovation for AMC that should and will continue into the future. But make no mistake about it. As pleased as we are with the movies that we distributed or as pleased as we are with our entire results for the entire year of 2023, 2023 did not live up to its full potential. That's because the many months of actors and writers strikes crippled Hollywood and they seriously hurt movie theater operators who have been forced to wait for delayed movie titles that shifted out of 2023 in the future time periods.

Speaker 2

After 3 years of hard work by 1 and all after theaters were closed back in 2020, the domestic industry wide box office finally was in sight of pre pandemic levels back in the summer of 2023. At the peak of the summer of 'twenty three, the July 'twenty three domestic box office was actually up 6% above July of 2019, the last July pre pandemic. And in that summer quarter of 2023, AMC generated the highest 3rd quarter adjusted EBITDA ever. Clearly, moviegoers flock to theaters when Hollywood releases films in quantity and equality. Just think Barbie in an Alzheimer's or for that matter, think of what came out of Leeward, Kansas, Taylor Swift, the Eris tour, among others.

Speaker 2

But the strike of 23 clearly interrupted that momentum that was pushing us to above pandemic norms in the middle of last year. The strikes in Hollywood led to the 4th quarter domestic industry wide box office being down 35% versus pre pandemic 2019. The January February 2024 domestic Android box office was down about 45% versus the same months of pre pandemic 2020. We point this out not to alarm you or to whine about it, but instead because we want everyone to realize that by the middle of 'twenty three, we had finally emerged from the cloud of the pandemic. But then the strike hit and sent us back into the soup.

Speaker 2

However, at AMC, we believe that the strike impacts will only be short term in nature. AMC believes that the box office will start to strengthen again as soon as this coming month in March, in some of the summer months of 2024 and especially in the latter third of this year. And over the medium term, we are both bullish and optimistic. With all the caveats that no one's crystal ball is perfect, At AMC, we currently believe that the industry box office in 2025 will be robust. We believe it will grow by $1,000,000,000 to $2,000,000,000 or more in size over what will be the box office in 2024.

Speaker 2

With that, as an introduction to our results for the quarter the year, I'll now pass the webcast over to Sean, our Chief Financial Officer, to provide more details on our quarterly and full year financial results and especially to share with you the progress that AMC has made in reducing our debt and in bolstering our cash reserves. After that, I'll return to provide you with my further take on where we are at the moment as a company and share some other news that may be of interest. John? Thanks, Adam, and thank you to everyone for joining us this afternoon. I'd like to start my prepared remarks by briefly looking back over the last 4 years.

Speaker 2

No doubt our business has experienced challenges like never before. 1st, we had the COVID pandemic, then the Hollywood strikes and all this while we managed through supply chain challenges and interest rate increases that have just put enormous pressure on our cash flows. Yet today, our business is remarkably well positioned to thrive as the box office recovers towards pre pandemic levels. Over the last 4 years, we've improved our per patron revenue and per patron profit quite considerably. In 2023, our consolidated per patron revenue was around 32% higher than in pre pandemic 2019.

Speaker 2

This was driven primarily by growth in food and beverage spend per patron of 45 0.7%. And we've also increased our contribution dollars per patron. Contribution dollars he had defined as total revenue less both film exhibition costs and food and beverage costs. And we lessened this by approximately 57%. So, we've increased these contribution dollars per patron by approximately 37%.

Speaker 2

At the same time, we worked hard to enhance our theater portfolio. We've been closing underperforming theaters and opportunistically opening higher performing theater locations. As an illustration of the impact of the changes that we have made in our business, consider for a moment the following. In 2023, our domestic attendance was 32.3% less than in 2019. At the same time, we were able to keep revenue per screen flat in 2019 and increase our contribution dollars per screen by approximately 4.3%.

Speaker 2

So with 32% lower attendance, our contribution dollars per screen actually increased by 4.3%. The consolidated statistics I've quoted are in constant currency and help explain why we believe that A, the box office does not need to get all the way back to pre pandemic levels for us to achieve pre pandemic adjusted EBITDA and B, at pre pandemic Fox Office levels, we should be able to achieve higher adjusted EBITDA than we were able to before the pandemic. Finally, looking back over the last 4 years, we have very actively worked to strengthen our balance sheet by reducing debt and increasing liquidity. It's worth noting that the total principal amount of our corporate borrowings finance leases at December 31, 2023 was $4,560,000,000 This is approximately $451,000,000 lower than 4 years ago at December 31, 2019. And our net debt at December 31, 2023, net debt to find total corporate borrowings and finance leases less available cash.

Speaker 2

This number was nearly $1,100,000,000 lower than 4 years ago at December 31, 2019 prior to the devastating impact of COVID on our industry. At the same time, it's also worth noting that given pressure from a rising interest rate environment and our heightened leverage ratios due to the box office being still well below pre pandemic levels, our interest expense during 2023 was approximately $70,000,000 higher than in 2019. Now to the results for 2023. AMC generated more than 4.8 $1,000,000,000 in consolidated revenue for the year marking a solid 0.23 dollars increase compared to 2022. Likewise, adjusted EBITDA increased more than 9 fold compared to 2022 to $426,000,000 And for the first time since 2019, we achieved positive adjusted EBITDA in all four quarters of the year.

Speaker 2

Now looking specifically at the Q4 of 2023 compared to last year, the North American box office grew by nearly 5% with Taylor Swift's The Eros Tour distributed by AMC leading the way with market share gains in part from the success of the ARRIS tour and very strong food and beverage per patron growth, our 4th quarter consolidated revenue increased by 11.5 percent to $1,100,000,000 Domestic revenue in Q4 increased by 12.9% as a result of record setting admissions revenue per patron of $12.83 This is 5% higher than a year ago and record food and beverage revenue for patron of $8.31 This is an increase of 7.1% compared to 2022. It should also be noted that other revenue grew in total by approximately 32%, And that's driven by distribution fees associated with the concept movies together with increases in retail popcorn sales and sales of movie themed and AMC branded merchandise. In our international business, competitive dynamics limited our ability to take price increases without adversely impacting market share. Attendance in the quarter increased by 3.9% and on a constant currency basis, revenue increased by 2.5% with admissions revenue per patron decreasing by 1.4 percent to $9.27 and food and beverage revenue per patron growing slightly to $4.38 Other revenue was in line with last year's Q4.

Speaker 2

Now moving to cash flow and the balance sheet. We ended the quarter with cash and cash equivalents of $884,300,000 For the full year, non GAAP operating cash generated, which is a measure representing cash flow from operations after deducting capital expenditures and before debt both debt servicing costs and deferred rent payback. This was a positive $68,300,000 a $362,000,000 improvement compared to last year. For the Q4, non GAAP operating cash burn was less than $1,000,000 CapEx net of landlord contributions was $64,200,000 in the 4th quarter, bringing the year to date net CapEx spend to $201,700,000 right at the midpoint of our 2023 net CapEx guidance. We expect that CapEx in 2024 to be in the range of $175,000,000 to $225,000,000 From a theater perspective, we continue to actively manage our footprint and during the Q4 we added 2 new high performing theaters and closed 9 underperforming locations.

Speaker 2

This brings the total number of locations closed since the pandemic began to 165 and the total new locations opened to 59 for a net reduction of 106 locations or 10.6% of the locations at December 31, 2019. Going forward, as we continue to rationalize the theater portfolio, we will also continue to invest in our circus to enhance the guest experience. To ensure our ongoing recovery and ability to thrive as our industry grows, our top two capital allocation priorities must remain the same. 1, we must ensure that we have sufficient liquidity to manage through this recovery phase, including the impact of last year's Hollywood strikes. And 2, we must strengthen our balance sheet by extending debt maturities and improving our financial leverage thereby reducing our debt servicing costs.

Speaker 2

During the Q4, we successfully raised $350,000,000 of gross equity capital. We then repurchased $50,000,000 of debt at an average discount of 20%. We exchanged $105,000,000 of debt for roughly $14,200,000 shares of common stock and we repaid $17,900,000 of deferred rent. The deferred rent balance at the end of 2023 was $56,300,000 and we plan to reduce this balance by another approximately $20,000,000 by the end of 2024. Overall, since the beginning of 2023, we have raised $865,000,000 of gross equity capital.

Speaker 2

We've lowered the principal value of our debt and finance leases by $466,000,000 We did this through debt repurchases or exchanges of debt for equity and we have repaid $101,000,000 of deferred rent. This all for a total reduction of debt and deferred rent of $567,000,000 The debt reduction since the beginning of 2023 has lowered our future annual cash interest expense by approximately $44,000,000 All told, as of today, we have reduced our debt and deferred rent liabilities by approximately $958,000,000 since the beginning of 2022, so over the last 2 years. Having the flexibility to raise equity capital has been critical to our survival and it has allowed us to seize opportunities to strengthen our balance sheet and build a foundation from which to thrive as the film exhibition industry recovers. Capital markets actions that we took during 2023 have positioned us to face with confidence the probability of a relatively weak near term box office, especially during the first half of twenty twenty four. While the box office for the first half of the year will likely underperform last year, we are increasingly optimistic about the outlook for the latter half of twenty twenty four and the firm slate for 2025 that's incredibly exciting.

Speaker 2

And now I'll hand the webcast back over to Adam. Thank you, Sean. As I said earlier and as our financial results prove, 2023 was clearly another year of recovery and improved performance for AMC. But it was not a good year for our shareholders. Adjusted for stock splits, the AMC share price has fallen to a fraction of where it was as recently as last summer.

Speaker 2

And I promised our shareholders that I would use this earnings webcast as a forum to provide them with some straight talk, to give them my take. So here's my take. There is so much garbage information floating around Twitter, YouTube and other corners of the Internet about AMC. Conspiracy theories abound, facts are distorted, bad motives are assumed when the exact opposite is true. So I want to address some of these issues, so you'd get the straight scoop.

Speaker 2

I can't address all of those issues in the limited amount of time that we have, but I do want to address some of the most important. First, as to all the hubbub and litigation that surrounded AMC and the Delaware courts in 2023, I want to remind you that our shareholders got the right to vote on our proposed actions. And not only did the preferred shareholders vote in favor of what we did last year, but also of the common shareholders who voted, their count also was in the affirmative by a wide 72 to 28 margin. Then the Delaware courts ruled that the company could settle the litigation surrounding that shareholder votes and proceed to implement exactly as our shareholder vote. 2nd, as to dilution, back in the summer of 2021, it's a long time ago, after it was clear that shareholder sentiment was not wholly supportive of more equity sales, we said there would be no more in 2021, and we kept our word.

Speaker 2

Some critics, assigning us bad motives, were convinced that we would start more equity sales in the very 1st week of 2022, since the commitment we made only incorporated 2021, but they were wrong. We sat on the sidelines for almost 8 months in 2022. But by August of 2022, we did in fact introduce into the market AMC preferred equity units, because among other reasons, we wish to make it possible for AMC to raise more cash through the sale of shares if we thought it was advisable or if we needed to do so. We were very clear about this in our public disclosures at the time. Between August of 2022 June 30, 2023, AMC raised $418,000,000 by selling what were called Apes.

Speaker 2

AMC's cash position at the end of June 2023 was $435,000,000 $418,000,000 raised, dollars 435,000,000 of cash. Do the math. Had we not sold those shares, deduct $418,000,000 from 4.35,000,000 Big companies, the size and scope of AMC Entertainment cannot survive with only $17,000,000 of cash on hand. Similarly, in the full year of calendar year 2023, AMC raised $865,000,000 of cash through the sale of Apes and the sale of common stock. We ended the year with $884,000,000 of cash, dollars 865,000,000 raised, $864,000,000 of a year ending cash, again, do the math.

Speaker 2

Had we not sold that equity, deduct $865,000,000 from $884,000,000 Big companies, the size and scope of AMC cannot survive with only $19,000,000 of cash on hand. We did in dilution what was absolutely vital for your company to do to get through the many challenges that have been thrown our way. The absolute smartest way for AMC first to survive and then eventually to be in a position to thrive is to have robust cash reserves. Period. Plain and simple.

Speaker 2

There can be no argument. Cash is king. 3rd, from time to time, there have been matters related to the trading of AMC stock that have been of concern to some of our shareholders. As but three examples, the absolute number of failed to deliver shares, synthetic shares or the length of time AMC Entertainment was on the threshold list among others. We dutifully have kept the New York Stock Exchange and appropriate regulatory bodies well informed and we make frequent public filings.

Speaker 2

But here is a key reminder and clarification. AMC is a company that is listed on the New York Stock Exchange, but we are not the stock exchange itself. Frankly, we have no ability to regulate or enforce trading practices on the Stock Exchange. And as much as some of you may wish it to be otherwise, our business is the exhibiting of movies in theaters. We are not in the business of reforming the financial markets overall.

Speaker 2

Then as to our motives, it's disappointing how many people out there type into their Twitter feeds that the management team at AMC is somehow actively working against the interest of our retail shareholders and instead is nefarious on the side of evil, the so called hedges. A company that does not post the kind of improving financial results as AMC just did today if one is out to sabotage one's owners. 1 does not sell $54,000,000 of movie themed merchandise in our theaters and online as AMC did in 2023 versus virtually no sales of such items only a few years ago if their motives are impure. I should point out, by the way, that selling merchandise was an idea that came in from our retail shareholders, by the way. Similarly, 1 doesn't launch popcorn to the home or blaze new trails with innovative concert movies that have been incredibly profitable and reputationally enhancing for AMC, if one is trying to undermine our company's success.

Speaker 2

So given all that, then why has our share price been falling? Are those conspiracy theories right? There are many, many complicated factors that affect any share price, some well understood, some not so well understood. But my own view is pretty basic and overarching. It is this, it has taken way too long for the entire movie theater industry, including AMC, to recover in attendance or to recover financially from the impact of COVID.

Speaker 2

Also bad, just as adjusted EBITDA in the summer of 2023 was returning to more acceptable pre COVID levels, no one needed for the movie industry to be paralyzed by debilitating strikes, which will temporarily challenge AMC earnings in 2024. We believe there are numerous other reasons too, like rising interest rates and inflationary wage and cost pressures, among many others. But in my mind, the key issues are, 1st, the long drawn out recovery and then the strikes of 2023 combined with the steps we've been forced to take to wade through 4 plus years of a depressed box office. These are the issues that have pressured AMC share price. So let's cut to the chase.

Speaker 2

Looking ahead, is there hope? As I stated earlier, the box office should start to strengthen beginning as soon as March, a month that starts a mere 2 days from now. It should further pick up later in 2024 and the box office for 2025 could be very favorable as movies that might have been released sooner finally get released in 2025. So yes, in my view, there's good reason to be optimistic. That optimism notwithstanding, AMC must continue to address our debt load, extend our debt maturities currently mostly in 2026 and push them out into later years and also to ensure that our cash reserves remain robust.

Speaker 2

That is the recipe for success. Remember what I said earlier on this call, cash is king. At AMC, our strategy is sound. Run the best company we can, please our guests at theaters and serve them well, prudently innovate, drive the most earnings we can, reduce debt, extend debt maturities and have the cash reserves on hand to outlast the tough times. Doing all that, which is what AMC has been doing so well over these past several years, is what makes me optimistic and confident about the future.

Speaker 2

Because as the clear leader of the movie theater industry and the clear leader by a wide margin, AMC is doing all the right things. There's one more topic that I want to raise before we turn to your questions. And that is our interests, meaning the interest of our shareholders and my interests as a CEO of the company and as a shareholder myself are perfectly aligned. I personally am AMC's largest retail shareholders. So as your shares rise in value, so do mine rise.

Speaker 2

As your shares fall in value, so do mine fall. In the last 6 months, as the AMC share price has dropped, I personally have lost tens of 1,000,000 of dollars in the value of my AMC shareholders and in my granted, but unvested stock. I assure you that focus is the mine. In my stock losses, I share in your frustration, I feel your pain and I'm heavily incentivized to get the value of your AMC shares back on the right track. In the past 2 plus years, I have been a holder of AMC stock, not a seller.

Speaker 2

Indeed, I have not sold a single AMC share since January of 2022. While I have forfeited GraniteShares on the same day as they vest to pay the federal and state income tax withholdings that are immediately due upon that vesting, I have not sold even one share in the marketplace, not one share in the last 25 months. I wrote often on Twitter that I ride with you. I am a shareholder. I am holding.

Speaker 2

I'm not selling. I ride with you. So when you deal well financially with AMC, I will too. But if you're hurting from that investment, I believe that I too should be hurting with you as well. Therefore, to prove that these words are not hollow and to show executive leadership from someone who is in your foxhole, I want you to know that I recommended last week to the AMC Board of Directors that for the next 12 months, starting right now, my target compensation should be substantially reduced.

Speaker 2

While my actual compensation can be at the target, below the target or above the target based on the company's financial results, the Board and I agreed that my target compensation will go down right now as we move forward by 25% versus the previous year's target. And maybe even more relevant, if you compare my new lowered target compensation against my actual compensation for the past year as most recently publicly reported, that's actually a 50% reduction in my potential compensation in the year ahead. There is no anguish in my voice about that. That is what a CEO of a company like yours should do, because I mean it when I say that I ride with you. You now know what I think.

Speaker 2

2023 was a year of superb achievement and innovation at AMC. And fortunately, AMC starts out 'twenty four with $884,000,000 of cash. Cash is king. I've said it multiple times and that is the guiding philosophy that has caused this company to stay in a leadership posture no matter what the world threw at us starting at 2020 and since. While the box office took a 5 month downturn starting in October of 2023, because of the long strikes in Hollywood, things will pick up considerably soon.

Speaker 2

And then again, later in 2024 2025, which in the grand scheme of things is right around the corner, could be a gangbusters year, both for our industry and for AMC as a company. We are in this together, you and I, and here's hoping that we all are smiling as we head into next year. With that, Sean, let's move to questions from analysts and from our shareholders.

Operator

Thank you. Ladies and gentlemen, at this time, we'll conduct our question and answer session. Our first question comes from Eric Wold with B. Riley Securities. Please state your question.

Speaker 3

Hey, good afternoon. Thanks for taking my call. Adam,

Speaker 2

I want to

Speaker 3

go back to kind of one of the parts of the business that's I think probably not had talked about the distribution business. I think one of the knocks on the overall exhibition business in general for years has been that the availability of content was largely out of control. So when you get things like the pandemic or strike, there's literally you can do to kind of drive content into your theaters. Obviously, this changes somewhat with what you did with Taylor Swift and Beyonce. I guess, as you continue to build out that business, I know you talked about you're in discussion with other artists for releases later this year or next year.

Speaker 3

I guess any sense of what you think the annual opportunity could be for revenue and EBITDA from that distribution business? And then what do you think is the ability to see a kind of move side of the concert or kind of musical film genre into other genres that may be more direct competition with some of the other larger distributors out there?

Speaker 2

Well, Eric, I mean, look, you're entirely right that if you look at the single biggest challenge that our industry has faced since the reopening of theaters at the end of 2020, it's in the lack of content. And we took matters into our own hands in 2023 with Taylor and Beyonce and had 2 grand successes. That causes us to want to do more. We certainly got the attention of the best musical artists in the world. And so there will be more of those.

Speaker 2

I don't want to quantify it. I mean, I've got a good sense of it, but I don't want to quantify it quite yet. Let's land some contracts for future concert films and then we'll have a better sense of what you can count on reliably. But who knows where this will lead? There's other alternate content that we could focus on other than just concert movies.

Speaker 2

We can look to comedy, we can look to sports. When you think about the movie theater industry, it's a dirty little secret that we only that the industry only sells about 15% of our tickets. I used to work in the airline industry. We sold like 75% of our tickets, not 15%. And there has to be ways to create alternate content that will not replace what Hollywood is doing, but will augment what Hollywood is doing by filling some of those empty seats that are just sitting there waiting to be filled.

Speaker 2

It also does sort of cause us to think what other ways can we generate movie content in our theaters inexpensively. I don't think you'll ever find a situation where AMC is writing a check for $50,000,000 or $100,000,000 or $200,000,000 to make movies. But there are some interesting ways to collaborate with movie makers to take movies that might not otherwise get made and get them into our theaters and into some other theaters of our friends in the industry, both in the U. S. Abroad.

Speaker 2

So this whole notion of how do we increase content is something that's completely in our wheelhouse and it's a direct result of our success in what we've tried to do in the Q4 and succeeded with Taylor and with Beyonce. Thanks, Adam. Appreciate that.

Operator

Thank you. I'll now hand the floor back over to

Speaker 2

I'm sorry, I'll now hand the

Operator

floor back over to Adam Aron to take some retail shareholder questions. Thank you.

Speaker 2

We'll take it, Diego. We have had retail shareholders send questions in. Sean, what do they want to hear about? Yes, sure, Adam. So the first question is generally about the industry recovery, which we've certainly been talking about a lot today.

Speaker 2

But the question relates to with plans like Amazon and Apple entering this business. Is it likely that we can see the release schedule really increasing past pre pandemic levels in the future? Well, that's a good question. And but before we talk about whether we get beyond pre pandemic levels, let's talk first about getting the pre pandemic levels, because as we sit here today, the movies released by the major studios are down about 25% from the quantity of pre pandemic releases. The good news here is, as you know well, we talk to every major studio every week of our lives here at this company.

Speaker 2

And we know that studio after studio after studio sees the opportunity for them that can come from achieving high theatrical grosses. And one studio after another is doing all of its power to increase their release schedules, to get the release schedules first back up to pre strike levels and then hopefully even higher levels than that, moving back closer to pre pandemic levels. Yes, it's true. Apple and Amazon are making movies. They're releasing those movies theatrically.

Speaker 2

We're working very closely with each company, happily so. We welcome them to the party. And we have enough screens in our company and in our industry to accommodate whatever supply of content all these studios can produce and then some. I would point out that one of the comments on in my prepared remarks, it's so important, is we've done so much in the past 4 years to make this company more efficient. Our profit per patron is up 37% from where it was when we entered the pandemic, which means we don't actually need the box office to come all the way back to pre pandemic levels.

Speaker 2

We don't need attendance to come all the way back to pre pandemic levels, because we're making so much more profit from each guest who is in our theater. As for whether in fact and when the box office does cross that pre pandemic hurdle and crosses $11,000,000,000 we'll all find out together. Great. There's related to that, there's some questions about diversification and what revenue diversification opportunities exist to grow and enhance our business. So I don't think anyone's worked harder at diversifying their revenue streams in our industry than AMC has in the past few years.

Speaker 2

And some of them have been quite high profile, things like giving Lorbel Redenbacher some competition on the shelves at Walmart with our popcorn lines that we took to the home, which is selling of having extended our retail presence to Kroger and to Publix. We also went up on the Amazon Marketplace. So that's an example of diversifying our revenues. Merchant, we launched our candy line, I guess it was in December, I think, at our theaters. I've tweeted publicly about maybe coming up with house wine or house beer.

Speaker 2

Beyond that though, I think the single biggest most successful diversification play we've had so far is what we've done with movie themed merchandise. As I said in the prepared remarks, we sold $54,000,000 of it in 2023. Like 3 years earlier, we sold nothing, $54,000,000 of nothing. So, we continue to be intrigued by diversification. And there are other diversification opportunities.

Speaker 2

But I think it's really important to say this. We work very hard to bring all that cash into our bank accounts, as you know. And 2024 could be a challenging year, especially early in the year. We need to husband all of that cash and treat that cash as being very precious because it's a thing which assures our survival going forward. Therefore, if we're going to look for diversification plays, we have to do so in a capital light way.

Speaker 2

We have to be able to diversify spending very little money to do so because the smartest thing we can do with our cash right now is keep it for a rainy day. Questions here on loyalty programs. There's quite a few questions on the loyalty programs. And people are asking if there's an update to the loyalty programs coming, any ideas such as bringing a friend along for A List members exchange for a fee perhaps or a family plan for A List or other new creations for our loyalty programs? There are a lot of ideas about our loyalty programs.

Speaker 2

Our marketing department right now is in the process of testing some things we've given a lot of thought to. A List is of great appeal to us, of course. It's been a very successful program for our company. The most important market program this company has ever had is our Stubs frequent living guard program. And there are a lot of interesting things that we might be able to do to make Stubs appeal to more people and to cause people who are Stubs members to attend more movies.

Speaker 2

There are interesting things afoot about how might one qualify for Premier as an example. There are other possibilities of we have 3 tiers in the subs program right now, the free insider tier, the paid premier tier and the A List tier. There's talk of creating a 4th tier of subs somewhat in between the premier level and the insider level with new benefits. We're going to test right now we're starting to test right now for a possible rollout later this year. And then there's a pudding near and dear to my heart, which is a loyalty program of another sort called AMC Investor Connect.

Speaker 2

We have over a 1,000,000 members of AMC Investor Connect. These are our shareholders who've registered with us and told us that they're interested in our company, they're either current or former shareholders. We've been in frequent communication with them. We've got lots of advanced screenings for them. We've given them some free this and that, some free popcorns and some free drinks and other things.

Speaker 2

One of the things that we will definitely be doing in 2024 is reinvigorating AMC Investor Connect, adding more benefits to it, because we know how loyal those AMC Investor Connect members are to AMC. We want to thank them for their loyalty and encourage them to visit our theaters over and over again. Those are some of the things we're working on, but watch this space. I might add that, I think one of AMC's greatest strengths over the past decade has been, I think, we've been the preeminent consumer marketer in our industry. Just think about the Nicole Kidman campaign, for example, that took on like a cult like nature.

Speaker 2

It really hit into the American zeitgeist. And one of the things that I think is fun about that is if you go with AMC Movie, there's something called the pre show. It's the thing that comes up just before the trailers run and before the movies run. And for the first time in 4 years, starting in a couple of days, we're putting up a new pre show on the screen. We think it's kind of beautiful and spectacular.

Speaker 2

I think people will like it. But one of the intriguing little twists is we're moving into Phase 2 of the Nicole Kidman campaign. For the last 3 years, we've got a 62nd Nicole commercial, the same one that's appeared over and over before every movie start. And starting March 1, we're going to show 3 different 32nd Nicole Kidman commercials before the movie starts on a rotating basis. You won't get like 3 in a row when you go watch 1 movie.

Speaker 2

But as you watch movies going forward, you'll see 3 different Nicole spots that kind of randomly will appear in our theaters prior to the show. We're very good marketers. We use that for the benefit of driving revenues. And as you saw our revenue growth in calendar 'twenty three and in the Q4 of 'twenty three, we outpaced just about everybody in our industry. Something new and exciting for people to see when they come to our movie theaters.

Speaker 2

I think we've got time just for one more question, which is related to capital expenditures. And the question is, what is sort of the ongoing CapEx level that we would expect over the next 3 to 5 years? The question I hear notes that pre pandemic we were spending around $500,000,000 per year on capital expenditure. What should investors expect going forward? So for the past couple of years, we've been in a landscape of $150,000,000 to $200,000,000 of annual capital expenditures.

Speaker 2

About $150,000,000 of that is to what we call maintenance CapEx, which is to keep our theaters in good shape. You can't run a movie theater with a leaky roof or an air conditioning unit doesn't work or projector that doesn't show movies. And then some of that CapEx has been used for enhancing our IT systems and growth oriented projects, bring some spot acquisitions. We said we added 59 theaters into our system over the past several years. Some of our CapEx goes to bring those new theaters into our system.

Speaker 2

As you look ahead, those years of $500,000,000 CapEx, those were in the days when we were renovating, putting in reclining seats in 50, 60, 70 theaters a year, that spurt is way behind us. So I'd say that with one caveat, people should be expecting CapEx in the $200,000,000 range going forward. And that caveat is this, because of the tough years that we've had with respect to earnings over the last few years, we put a tight lid on capital expenses. It was crucial for us to keep cash in the bank and not necessarily spend at all. There are some obvious growth projects that if we were to raise an additional $50,000,000 to $100,000,000 for example, and we wanted to reinvest that back into our fleet of theaters, If that was something that would produce the highest and best return on that investment, it would have to produce a return on investment higher, for example, than buying back our debt at a substantial discount, which we've done a lot of in the past year or 2.

Speaker 2

There's just some obvious things that are low hanging fruit where we know the payback would be quick. And the most obvious of them is this AMC has the largest number of premium large format screens of any movie theater chain in the world and it's not close. We are 50% of all IMAX screens in the United States, for example. We are 100% of all the Dolby Cinema Screens in the United States, for example. And what we've seen is that our premium large format screens demand a price in the market that's about 30% higher than the normal so called 2 d auditorium price.

Speaker 2

They sell out first The typical seat in a premium large format screen is sold 3 to 4 times more than the typical seat in an auditorium, if not a premium large format screen. And I could easily see us we have about 600 or so premium large format screens around the world. I could easily see us adding another 150. And we would get a great return from that, but it's not a cheap endeavor. And we'd have to be very careful about how much money we invest and doing it at the right time.

Speaker 2

So I don't want to say that there's a lid on CapEx spending of $200,000,000 because there are some low hanging fruit, no brainer ideas on how we could further drive profitability if we do have additional CapEx dollars to spend. Thanks. So, I'm looking at the clock. We're past our hour. So, we're going to bring this webcast to an end.

Speaker 2

I'd like to leave you with the final simple thought. 2023 was a superb year for this company on the march to getting back to pre COVID levels of profitability. 2024 is going to be a bit harder. But 2024 is going to get a lot better starting tomorrow, because Dune opens in all of its glory, and we're expecting it to be a big and successful movie. We hope you all buy tickets, go to the theater, be amused, be entertained.

Speaker 2

And as we look further beyond just this weekend and we look ahead to the next year, which is, as I said, right around the corner, we really think 2025 is going to be an incredible year for our company, and should be the just as 2023 was the best year since COVID, we're thinking 2025 is going to leave 2023 in the dust in terms of how potentially good a year 2025 is going to be. So we're optimistic, we're confident, and we'll see you all at the movies. Thank you for joining us today.

Operator

Thank you. This concludes today's conference. All parties may disconnect. Have a good day.

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