AMC Entertainment Holdings, Inc. (AMC) Earnings Call Transcript & Summary

Hello, and welcome, everyone joining today's AMC Entertainment Holdings Second Quarter 2026 Results Call. [Operator Instructions] Please note, this call is being recorded [Operator Instructions] It is now my pleasure to turn the meeting over to John Merriwether, Vice President, Capital Markets and Investor Relations. Please go ahead.

Thank you, Manuela. Good morning. I'd like to welcome everyone to AMC's Second Quarter 2026 Earnings Webcast. With me this morning is Adam Aron, our Chairman and CEO; and Sean Goodman, our Chief Financial Officer. . Before I turn the webcast over to Adam, I'd like to remind everyone that some of the comments made by management today during this webcast may contain forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of those risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA and free cash flow, 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 early this morning. 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 -- excuse me, this morning's webcast is being recorded, and a replay will be available in the Investor Relations section of the website later today. With that, I'll turn the call over to Adam.

Thank you, John. Good morning, everyone, and thank you for joining us to discuss AMC's record-breaking results for the second quarter of 2026. What a quarter, what a quarter, what a quarter. In AMC's entire 106-year history, there has never been a quarter like this one. Needless to say, I'm extremely pleased to report that AMC Entertainment achieved all-time record revenue and all-time record adjusted EBITDA for the period April to June 2026. More than 71 million guests visited our theaters worldwide in the second quarter, 13.5% more than last year, drawn by one of the most powerful and diverse films like than we've seen in years. Second quarter total revenues for AMC and ODEON increased 14.2% year-over-year to approximately $1.6 billion, while adjusted EBITDA surged [ 70 ] $321.4 million, exceeding $300 million in a quarter for the very first time ever. Let me say that again so that the prognosticators of doom who have continued to vastly underestimate the will and the skill of AMC despite our having risen to a challenge after challenge after challenge during these difficult past 6 years can hear me clearly. AMC reported record adjusted EBITDA of $321.4 million in Q2 of 2026, that's up $132 million over the results of last year's second quarter. And you may recall that last year's second quarter itself was a strong one. Both second quarter revenue and second quarter adjusted EBITDA exceeded Wall Street's expectations, and has established new all-time high points for our company. Equally important, we converted this outstanding performance into generating cash. Free cash flow for the quarter was $190.1 million. You all have known for some time that the overall industry-wide domestic box office was showing strength in the quarter. At $2.99 billion, it was the highest second quarter in 7 years. And perhaps an even greater note of the 200 quarters in the past 50 years for which I have been able to personally scrutinize the statistics. This was the fifth best quarter ever in the past half century. Indeed, in the second quarter, 6 different film titles coming from Universal, Lionsgate, A24 and three from Disney had impressive domestic opening with good grosses exceeding $75 million or more, in some cases, far more. But Agency did not just benefit from the rising box office tide, which, as you know, saw an overall 10.7% bump domestically. We also increased AMC's market share as our domestic ticket revenues were up by even more, up by some 11.4%. Our European numbers also shined as evidenced by our European attendance in the second quarter, increasing by 18% year-over-year. And I might add with our European second quarter adjusted EBITDA more than quadrupling over the second quarter of a year ago. Globally, in the quarter, we also successfully grew our food, beverage and merchandise sales, which increased by 15.3% as did our so-called other revenues on growth, which increased by 16.1%. By now on this earnings webcast, you're probably hearing a common theme of one word being repeated over and over again. In [indiscernible] increasing and increasing and doing so with the increases of double-digit growth. But happily, we get to use it different but equally impressive qualifier when you all take a look at just how well AMC get the tight on our costs. With so much deal and cost management, our adjusted EBITDA margin jumped from 13.6% in last year's 2Q to 20.1% in the quarter just completed. This all demonstrates the inherent operating leverage in our business model, which is significant at the time of rising revenues. The power of AMC's market-leading position stem some our size and scale, of course, but also from the compelling appeal of our theaters, the increasing numbers of our premium offerings, the prowess of our marketing programs as well as our ability to keep our costs in check. Finally, after some admittedly tough years as our industry recovered only slowly from the ravages of COVID and its aftermath, the relentless focus of AMC on delighting our guests has seen AMC executing with all cylinders blazing so far throughout 2026. Combining both the first and second quarters of this year, AMC's revenues are up 16.9% year-over-year and our adjusted EBITDA for the first 6 months of $359.7 million in the first half of '26 is considerably more than 2.5x the $131.8 million reported in the first half of last year. Thinking about this as you reflect on the operating leverage in AMC &C when revenues are rising. For the first 6 months of 2026, AMC's adjusted EBITDA is some $228 million above that achieved in the same period last year, up $228 million. As you've been learning this morning, the AMC story of 2026 includes our vastly improved operating results, but we also should speak to the enormity of the progress that we've made in strengthening the AMC balance sheet. Sean will walk you through the details in a couple of minutes. Suffice it to say, we have $1.7 billion less debt than we had at the end of 2020. Assuming static overall market benchmark rates, interest expenses decreased as our debt levels decrease and with rising adjusted EBITDA, interest rates also decreased as our leverage ratios improve. Thanks in part to our success in generating free cash flow, and thanks in part to our success in raising equity. Take it all together, AMC had $778 million of cash on hand, excluding restricted cash at the end of Q2 2026. And importantly, we do not expect any significant debt maturities prior to the year 2029, 3 years from now. Looking ahead, we continue to be ever so optimistic. This weekends powerful debut of Universal Pictures and Christopher Nolan's, THE ODYSSEY, with an encouraging media reported $124 million domestic opening weekend gross. It's the latest reminder of the strength of today's theatrical marketplace. Indeed, we also announced this morning, in addition to second quarter earnings that there were some 4.3 million guests in AMC theaters and ODEON Cinemas this weekend from Thursday to Sunday. 4.3 million people in our theaters, big, big numbers. That outstanding debut of THE ODYSSEY will be followed a mere 2 weeks of now by Sony's highly anticipated Spiderman brand new day, for which advanced bookings suggest yet another box office triumph is at hand. There will be more exciting moving weekends this year, especially including when Warner Bros will be releasing Dune Part II and Disney will be availing Adventures Dunes day just before Christmas. Accordingly, we believe than what we theaters will enjoy in the full 12 months of 2026, their strongest yet post-pandemic year at both the domestic box office and at the global box office. The summary of 2026 so far is that our strategy, our execution, and our preparation at AMC all came together as the recovery box office net of strong, lean and well-positioned market leader is the largest movie theater chain orders AMC. In short, $321.4 million of adjusted EBITDA, the best in 106 years, what a quarter, what a quarter, what a quarter. With that, I'll turn the call over to Sean Goodman, our CFO, who will walk you through our second quarter financial results in greater detail. After that, I'll return to highlight some of the consequential strategies and actions that encourage us as we move forward. Sean?

Thank you, Adam, and good morning to everyone. We are indeed proud of the Q2 results. They delivered the highest quarterly revenue and adjusted EBITDA in AMC's entire history. We did not simply benefit from a stronger industry box office, we outperformed. In the United States, admissions revenue increased by 11.4%, approximately 70 basis points ahead of the industry box office growth that was 10.7%. And in Europe, our tenants increased by 17.9%, and that's approximately 170 basis points ahead of the relevant industry tenants growth. The success of our initiatives around the market share for patron profit, cost management and portfolio optimization, coupled with the benefits of operating leverage drove the second quarter adjusted EBITDA up 70% to the record $321 million. That is more than $30 million ahead of the previous record that was achieved almost 9 years ago when our attendance was approximately 23% higher. Comparing Q2 2026 results to the prior year. Approximately $200 million of incremental revenue generated $131.9 million of additional adjusted EBITDA. That's a roughly 66% flow-through that drove our adjusted EBITDA margin up 650 basis points to 20.1%. The second quarter's performance was broad-based across our global circuit, with food and beverage revenue per patron and total revenue per patron hitting new all-time highs in both the domestic and the international businesses. In the United States, adjusted EBITDA increased by 57.5% year-over-year to $285.6 million; while in Europe, adjusted EBITDA increased by 337% to $35.8 million. Note that when comparing our second quarter 2026 results to the prior year, international revenue and EBITDA benefited by approximately 2% from European currency appreciation versus the U.S. dollar. And also note that 2026 general and administrative expenses benefited from an approximately $5.5 million credit associated with insurance recoveries. It's informative to compare our results this quarter to the second quarter of 2019, that was before the onset of the pandemic and before the strategic actions that we have taken over the last 6.5 years. In this year's second quarter, the North American box office was approximately 7.5% less than the second quarter of 2019. Yet in Q2 2026, AMC generated 6% more revenue and 39.5% more adjusted EBITDA than we did in Q2 2019 with attendance at our theaters, approximately 26 million people or 26.5% less than in 2019. So we generated more revenue and significantly more adjusted EBITDA in a lower service environment after 7 years of inflationary cost pressures and with approximately 16% fewer theater locations. This very clearly illustrates that we do not need the box office to return to pre-pandemic levels to achieve the same level of EBITDA. This is because of the actions that we have taken and continue to take to enhance our market share on low profit per patron reduce our cost base optimized in the guest experience. During the second quarter, we closed 7 theaters and introduced 6 new premium large format and 25 new XL or extra large auditoriums. Since 2020, we have now closed 225 locations. We've opened 66 for a net reduction of 159 theaters or approximately 16% of our global circuit. We have, at the same time, also added 77 premium large format and 193 XL or extra large auditoriums. This increases the number of premium or enhanced auditorium options available to our guests by more than 50%. Now let's move to the balance sheet. Our priorities are clear: One, maintain sufficient liquidity; two, reduce borrowing costs and extend maturities; three, lower financial leverage; and four, invest in high-return opportunities that enhance the moviegoing experience at AMC. During the quarter, we successfully refinanced $400 million of debt that was due in 2027, thereby extending the maturity by 4 years. We also eliminated approximately $100 million of exchangeable debt that was due in 2030 through its conversion into equity. And we completed $150 million of at-the-market equity offering raising more than $85 million of gross proceeds during the second quarter. In addition, we recently completed a $200 million registered direct equity offering with several institutional investors. And following the closing of that transaction, we exercised our right to redeem the remaining $125.5 million of 6.125% senior subordinated notes due in 2027. This redemption is subject to a 30-day notice period, and as such, the subordinated notes will be redeemed on July 24, 2026. As a result of the debt refinancing and repayment actions taken in the second quarter, we do not anticipate any material debt principal payments required prior to 2029. And our go-forward annual cash interest expense will be reduced by approximately $16 million. Our outstanding first half of 2026 financial performance, together with a meaningful improvement in the balance sheet has resulted in a substantial reduction in our financial leverage ratios. And thanks to the terms that we negotiated in our various debt documents, the financial leverage reduction achieved during the second quarter is expected to trigger a reduction in interest rate paid on approximately 75% of our debt. This will result in a lowering of the annual interest expenses by approximately $51 million, yet another significant step in the transformation that we've been driving over the last 6 years. At the end of June, thanks to free cash flow generation of $190.1 million and the benefit of the capital raise during the quarter, our cash on hand was $778 million, excluding $42 million of restricted cash. It is important to note that on July 24 of this year, $125.5 million of cash will go out to be used for the redemption of our subordinated debt. As you may recall, our working capital cycle is closely tied to the seasonality of the box office. Generally, this has resulted in a positive cash impact from working capital in the second and fourth quarters and a negative cash impact in the first and third quarters, and we do expect this cadence to continue through 2026. With a strengthening balance sheet, enhanced cash position and a resurge in box office, we're continuing to execute on a highly successful AMC go plan. And we expect net CapEx for 2026 to be between $200 million and $235 million. As we look ahead, we are optimistic about the ongoing recovery of global box office and confident in our ability to convert box office growth into significant growth in profit, cash flow and ultimately, shareholder value. And with that, I will turn the call back over to Adam.

Thank you, Sean. I want to briefly address a few key topics, six to be specific, before turning to your questions. First, one of the reasons AMC continues to outperform is the strength of the relationships that we have built with our guests to our industry-leading loyalty programs, more than 40 million U.S. households, for example, have participated in our AMC Stubs loyalty program, creating a direct and ongoing relationship between AMC and our guests. It is especially helpful that we know exactly which movie jumps and which movie tails they have seen in our theaters. Through our loyalty programs, we're then able to develop a valuable understanding of our guests, reward their patronage and encourage them to visit our theaters for the movies that they most like more often. AMC Stubs members represented just more than 50% of our total U.S. guest count in the second quarter. Second, benefiting from our many best practices learnings from our highly successful limitless subscription programs in Europe. I cannot raise enough about the success of our A-List subscription program in the United States. The one that lets you see up to 4 movies a week, for a flat monthly fee of somewhere between $24 and $30 a month plus tax. At the end of the second quarter, more than 1.1 million moviegoers were members of our A-List program, more than double the membership that AMC's A-List had just 5 years ago. A-List is such a popular program, especially among GenZ moviegoers, and it gives AMC a more consistent and increasingly more predictable cadence to welcome a younger generation to flock to movie theaters as their parents and grandparents did before them for decade after decade gaining back a full century or more. Indeed, A-listers who also get to participate in our AMC Stubs loyalty program, were responsible for right around 20% of all any theater patrons in the U.S. during the second quarter. Thinking about that, 1.1 million people out of the 330 million Americans are so loyal to AMC then they represented about 20% of our moviegoing customers in the second quarter, which itself was so successful. Third, Sean often mentions with great satisfaction, our closing nonperforming theaters and opening shiny new ones. What is so impressive here is that the theaters that we're opening, so how gross and have so much more combined profitability than the theaters that we shut. What's more our willingness to do so also has given us the credibility we need in the theater landlord community to successfully renegotiate and receive much more attractive lease terms on many of the theaters that routinely come up for renewal each and every year. Fourth, AMC is the movie theater chain that led the way with rerefine seating, both in the U.S. and at our Lux brand in theaters across Europe. Ironically, many of our highest grossing theaters simply can't take reclining seats because they require so much seat loss. We just can't afford to give up those seats in theaters that are so thoroughly patronized. Fortunately, we have a solution to this conundrum. Our really new branded AMC club rocker seat is much more attractive and much more comfortable than the seats that proceeded it. The seat loss is but a fraction of the seating given up to install full recliners that are also costs solely a fraction to deploy the club rockers compared to what we previously were investing. The AMC club rocker seats propelled AMC Burbank, AMC Lincoln Spare, AMC Empire to be among the highest grossing theaters across the entire country week after week after week. Just as it has been for the past several years, we will remain highly disciplined with our capital expenditures efforts. But even so, we have figured out a way to relatively inexpensively get more of these club rockers into more of our top performing theaters, which will make them even that much more appealing to moviegoers. Fifth, I've noticed that many have been writing recently about the power of extra large format and premium large-format screens. I want to remind you how much of a commandingly AMC enjoys most importantly, with IMAX and with Dolby Cinema, among others, along with our house brands consumer-preferred premium products all and proudly featured in the world of AMC in the U.S. and ODEON in Europe. Globally, AMC and ODEON now have deployed and operating some 226 IMAX screens, 182 Dolby screens, 83 screens, 47 prime screens, 14 ScreenX and 40 X screens, along with 193 XL screens, just about 750 in total. No other movie theater chain on earth comes even close. And these auditoriums are so popular. They represent only about 8% of our total screen count. But for THE ODYSSEY this weekend, for example, they generated more than 50% of our total ticket gross for the film. IMAX especially performed fabulously well with THE ODYSSEY. Chris Nolan's Epic movie was filled entirely with IMAX Temeris and our IMAX auditoriums are just packed right now. That's a real trip for both IMAX and for AMC. It's no surprise then why AMC and ODEON are so committed to further increasing the number of and XLS screens, mostly using third-party capital will get there. I think that we can affordably increase that total count of our PLFs and XLFs by 250 more auditoriums over the next 2 to 4 years. And finally, sixth, I really want to salute our headquarter staff and our theater teams in the field for the creative ways in which they have controlled costs so far in 2026. It would almost be not mind numbing on this webcast today to try to walk you through all the line items on which we've been vigilant in keeping costs in check. But you should know that are success in the second quarter in driving more EBITDA than more EBITDA than almost any of you expected came from large terms in efforts push to get revenues growing but to get them growing at a far faster pace than that of expense growth. With that, Sean and I would be pleased to take your questions from analysts and our retail shareholders following the quarter in which I forgot to mention it before, generated some $321.4 million, a 106-year record for AMC.

[Operator Instructions] And our first question today comes from Mike Hickey with StoneX.

Congrats guys on an incredible 2Q strong first half performance. Two questions, Adam. The first is probably your 0.6 on your routines cost discipline here, which has been exceptional, holding your OpEx basically flat in 2Q. How sustainable do you think that as discipline is in the second half? And would you expect continued revenue growth to drive similar operating leverage?

That's like -- and by the way, Mike, our comp lawyers on goal is mean Michael. So it's very defusing. It's very defusing. Thank very nice words about the quarter. It was quite a good one. There were a few onetime items in the second quarter last year and this year. So I don't know if exactly the same expense growth going forward -- to expense growth containment going forward as we ended Q2. But that's a small piece of what was going on in Q2. What's really going on in Q2 is just we really contained costs. And I'm so proud of our people because it took 30,000 of them across 850 theaters as well as in our headquarters organizations in Europe and the U.S. to pull it off. We're going to be maniacal and continuing to try to keep our cost down. Will we have the full 700 basis point improvement in adjusted EBITDA margin every quarter going forward that we had in Q2? I guess that remains to be seen based on how strong the revenues are and how much we can keep a living cost, but we're going to do everything in our power to maximize and drive revenue growth and keep costs under control.

The free cash flow also exceptional $190 million free cash flow in 2Q. I guess at this point, and I know that you've brought your leverage down, you reduced your interest expense. That all seems very positive for the second half and an overall annually. Do you have a sense at this point, the level of box office that would be required for you to consistently generate positive free cash flow moving forward?

To -- how many decimal points would you like that answer? We know exactly what breakeven box office needs to be for us to be free cash flow positive on a 12-month basis. Right now, it's right around $10.4 billion, which is so impressive because we -- if you compare what it was back in 2019, pre-pandemic, had 7 years of inflationary costs and wage pressure among other things, and everything is more expensive that we buy because as everything that everyone buys is more expensive over 7 years. You would have thought the breakeven box office would have been much higher, but we've done such a great job in increasing our profit per patron and controlling our costs. Where with insight of being cash flow positive, not for a quarter, but for a year. And the efforts to continue to drive that breakeven box office level downwards continue. If, in fact, we are successful in continuing to get lower interest rates going forward. And Sean deserves me justifiably proud of helping build some automatic triggers into our various then as our leverage ratios improve, our interest rates fall, and that's exactly what's happening right now with the strong operating results from the second quarter and having paid off or converted to equity a bunch of our debt so far this year. If interest rates go interest expense goes down that means that the breakeven box office level goes down as well. As I said to your earlier question, Mike, we're going to continue to do all of our power to drive revenues. Remember that something like 2/3 of our incremental revenue dollar falls to the EBITDA line. And we're going to do everything in our power to keep costs under control. So we're not quite a breakeven neutral for the full year. But for you, we closed and there's so much improvement. However, we've been since 2019.

And our next question will come from Alicia Reese with Wedbush.

Great numbers guys. Congrats on the quarter. I have a couple of questions about international. Just looking at the admissions revenue per screen growth of 20% year-over-year, and that's on the 34% growth last year in the second quarter, and some really nice growth in the first quarter, strong expectations for the back half of the year with a good slate. I wonder if you could talk about -- you had mentioned about 250 more premium large format screens expected for the full, I think global print over the next 2 to 4 years. To what extent have you completed your upgrades in Europe? And are those driving results? And to what extent are you still taking that $250 million and driving that higher?

Alicia, I'm going to let Sean to answer your question because -- our international dates actually report to Sean in addition to his CFO duties. But I just want to clarify one thing. What I said on my prepared remarks, that we'll do somewhere between 150 and 204 to 50 more premium format and extra large format screens, the so-called XL @ AMC screens in the U.S. and XL Screens in Europe. We have 193 of them now. I'm sure that we can add 100 more, maybe more than the across the U.S. and Europe going forward. So there's a lot of opportunity to add more screens, and we do get a healthy price premium for our premium products. Here in the U.S., for example, our IMAX auditoriums, our Dolby Cinema auditoriums usually are carrying something like a $6 or $7 price premium over a traditional auditoriums. Our prime auditoriums and our iSense auditoriums are also commanding healthy premiums and even our XL screens are commanding small price premiums, but price premiums on the left, basically up maybe 10% above normal auditorium pricing. And not only do we get higher prices for these premium products, but there are also auditoriums that book first. And you just need to look at just one weekend ODYSSEY that our premium and extra large format screens were 8% of our screens, but 50% of our growth. I mean these -- the premium format screens and extra large format screens generating power of 6x that of a normal auditorium. So you can be sure that we're going to do all our to increase the number of IMAX auditoriums in our system, Dolby auditoriums in our system, ScreenX and 4DX auditoriums in our system, and our House brand, Prime and iSense auditoriums Experience. With that, do you want to make a further comment on about Europe?

Thanks, Adam, and thanks, Alicia, for the question. We are very fortunate because in line with what Adam was saying, we have a very long list of extremely high return projects, longer list than we could refer to actually that can invest one particular point in time. We're also fortunate that we're able to get co-funding from our technology partners, from our landlords to do investments in our peers. The opportunity in Europe is pretty much the same as it is in the U.S. The recliner penetration in Europe is actually quite significant for in the U.S. So there's an increased opportunity with recliner penetration. The Luxtera conversions that we've done in Europe has generated extremely high returns. And so those opportunities exist, and we're spending at the moment, pretty much a proportionate amount of capital in the U.S. and Europe and on these very, very high return projects.

And I might add for as exciting as we are about the current profitability in the second quarter of AMC. There's so much operating leverage in our company, then when revenues rise, EBITDA rig is much -- at a much more rapid clip. And as Sean said there, a lot of growth opportunities that we look at, but I don't want anyone to have the wrong conversation. As you look at the last 6 years, AMC has been incredibly disciplined in our capital expenditure efforts. We skinned down CapEx as it embrace only the most obvious successful products and projects. We intend to continue to be extraordinarily in our capital expenditure process as we go forward.

And as a quick follow-up. Can you just discuss briefly the ROI on the Europe and recliner upgrades and just compare that to U.S. back when you were doing that and the premium and large-format screens as well as ROI similar to U.S.?