Amc Entertainment Holdings, Inc. Q4 FY2021 Earnings Call

Thank you for standing by. This is the conference operator. Welcome to the AMC Entertainment's Fourth Quarter 2021 Earnings Conference Call. The conference is being recorded. I would now like to turn the conference over to John Merriwether, Vice President, Investor Relations. Please go ahead.

Thank you, and good afternoon, everyone. I'd like to welcome you to AMC's fourth quarter year-end 2021 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, 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. 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 not to 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 the webcast, we may reference non-GAAP financial measures such as adjusted EBITDA, free cash flow, operating cash burn, and 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 earlier today. After our prepared remarks, there will be a Q&A Session. This afternoon's webcast is being recorded, and a replay will be available on the Investor Relations section of our website later today. With that, I'll turn the call over to Adam.

Thank you, John. Good afternoon, everyone. Thank you for joining us today. The fourth quarter of 2021 saw AMC putting up on the board significant milestones of progress sending a crystal-clear message to one and all that AMC is moving well along the path to recovery. For the first time in the two years since COVID-19 descended upon us all in early 2020, in the fourth quarter of 2021, AMC achieved positive EBITDA, and we generated positive operating cash flow. And this is not a situation where we only narrowly achieved these important markers. Our positive EBITDA in the quarter was almost $160 million, up a breathtaking $487 million over the fourth quarter of a year ago. This led to non-GAAP operating cash generated of more than $220 million in the just completed quarter. In addition, we ended the year with a record-setting year-end liquidity of approximately $1.8 billion, enough to provide AMC with more security in case the return to normal box office levels takes longer than some might expect. And importantly, it also gives us the flexibility to go on the offensive as we work to create the AMC of the future. 2021 was another year of sequential and continuous recovery and improvement. As was the case after COVID forced the closure of all of our theaters in March of 2020, the industry and especially AMC box office grosses improved each and every quarter of 2020 and each and every quarter of 2021, as theaters reopened, as the number of release film titles increased, as the overall film slate became more varied and appealing and especially throughout 2021 as COVID vaccination counts soared. With the industry and AMC's box office growing each quarter, so too our financial results at AMC improved each quarter as well. As I look at the recently completed fourth quarter, I'm especially pleased that we hosted roughly 60 million guests at our theaters in the U.S., Europe, and the Middle East. 60 million people enjoyed watching a movie at AMC in Q4, 60 million people. I am similarly pleased that our average total revenues per patron at AMC in the quarter were $19.63, some 25.5% higher than the same statistic in our pre-pandemic Q4 of 2019. It's our understanding that this is considerably higher than that of any other major theater operator. None of this is accidental. We worked hard to get people back in theaters, and our job is not yet done. We are not yet where we want or where we need to be. That will continue to take time and require sustained and imaginative effort on our part. But even so, you can see, and you can taste, and you can feel it, that AMC seems to be on a positive glide path to recovery. There is so much conventional wisdom floating around that movie theaters cannot coexist and thrive in a world of streaming. What a load of nonsense that is. In a world where the consumers' appetite for content is so voracious that it seems to be sufficient to let us all prosper, it's our view at AMC, that movie theaters, especially our company as a leader in the movie theater industry, have a very bright future. The problem with conventional wisdom is that conventional wisdom is so often just utterly wrong. Remember the breathless reporting that AMC would file for bankruptcy in 2020? Wrong. Remember that otherwise highly respected experts were calling for the AMC share price to fall to $2, $1, or even $0.01 by February or March of 2022? Now for all the lawyers listening in, I'm making no prognosis for the future. I'm looking only retrospectively, but those experts gravely underestimated AMC. And with the full benefit of hindsight, we can now happily say: because now it's a simple matter of fact: they were wrong, they were wrong, they were wrong. Reflect on the remarkable success of Sony's Spider-Man: No Way Home, currently the third highest grossing movie of all time. Think about that for a moment, the third highest grossing movie ever even though it was released at a time when people were battling Omicron fear. But it wasn't just Spider-Man, Venom, Bond, Eternals, Ghostbusters; they were all part of the highest North American box office that we've seen in two full years, and more than $2.1 billion in the quarter, and that was more than 50% higher than the industry box office one quarter earlier in Q3 of 2021. Looking to 2022, the film slate is expected to be significantly stronger than 2021's, with Warner's The Batman opening later this week, for which advanced bookings are very strong. The second quarter slate also includes Marvel's Dr. Strange, Universal's Jurassic World Dominion, Paramount and Tom Cruise blessing us with the long-awaited Top Gun: Maverick, and then there's Pixar's Lightyear. Later in the year, we have titles such as Minions: The Rise of Gru, Thor: Love and Thunder. And I fully expect Disney to both dazzle us with Marvel's Black Panther: Wakanda Forever and James Cameron's Avatar 2, the sequel to, in inflation-adjusted dollars, the single highest-grossing movie of all time. Couples of great films with much of the industry coalescing around an exclusive 45-day theatrical window in the United States. That is infinitely better for AMC than when the movie industry flirted with day and date simultaneous release of films to theaters and home experimentation in 2021. As we look forward to the full calendar year of 2022, recognizing that no one has a perfect crystal ball, we think that the overall domestic industry box office, which is a good placeholder for the size of our industry, both here in the United States and abroad, could be nearly double that of 2021, and that makes us at AMC bullish about our continued progress. Two notes of caution, stating the obvious: inflationary cost pressures, labor shortages, and potential supply chain disruptions continue to exist. If you watch the news, you are well aware that there is a war in full bloom on the continent of Europe. These challenges all will need to be carefully managed. Additionally, a year ago, we spoke to you about a sequentially improving year in 2021 with each quarter expected to be better than the previous one, and that is exactly how 2021 turned out. Merely because of the timing of big movie releases in 2022, we expect that 2022 could follow a similar path, with the first quarter being the low point of the year and meaningful, sequential improvement being achieved as the year progresses. In short, our expectations are for a Q1 that is well above 2021 Q1 levels, but nonetheless, it will be a relatively weaker Q1 coupled with strong and reassuring full year performance for all of 2022. As you look at AMC, now that we remain focused on recovery and transformation, we remain focused on innovation and managing through change. We are determined to continue with bold and dazzling marketing initiatives, all the while maintaining our disciplined cost controls as well as cash conservation and potentially cash-raising strategies. I'll be back in a few minutes to provide some updates on specific key advances for AMC and to take your questions. But right now, I'll turn the call over to our Chief Financial Officer, Sean Goodman.

Thanks, Adam. And thank you to everyone for joining us on the webcast this afternoon. The fourth quarter represented a very important landmark along our path of recovery. The 60 million guests that we welcomed to our theaters around the world during the fourth quarter resulted in consolidated revenue of $1.17 billion. That's up 53% from Q3 of 2021, and it's more than seven times the $162.5 million of revenue we had in Q4 of 2020. This resulted in two very important accomplishments during the fourth quarter. First, we generated positive adjusted EBITDA for the first time in two long years of $159.2 million. This represents $164.6 million improvement over Q3 2021’s EBITDA loss of $5.4 million and a $486.7 million improvement over last year's fourth quarter EBITDA loss of $327.5 million. This positive EBITDA was achieved in both Europe at $61.3 million and the U.S. at $97.9 million. And second, we achieved positive operating cash generated, a non-GAAP measure, of $224.4 million. This represents average operating cash generated of approximately $75 million per month during the fourth quarter. This compares to an average operating cash burn of approximately $75 million per month during the first half of 2021. The fourth quarter proved to be a very good illustration of the working capital dynamics of our business with growth in the business also accompanied by working capital benefits. Note that operating cash generated and operating cash burn represent total cash flow before debt servicing costs and before deferred rent payments. The GAAP reconciliation table is included in today's earnings release. The strong results in Q4 were driven by consolidated revenue per patron of $19.63, which is 25.5% higher than Q4 of 2019 and a resulting solid contribution dollars per patron of $13.44 versus 32% higher than Q4 2019. Note that I'm defining contribution dollars per patron as total revenue, less film exhibition costs and food and beverage costs on a per patron basis. This tremendous growth in both revenue and contribution dollars per patron was across both our domestic and international markets and reflects strength in average ticket prices, food and beverage spend, and other revenue per patron. The strength in average ticket price has been helped by a high utilization of our premium large-format offerings, such as IMAX and Dolby Cinema. This reflects our guests increasingly wishing to experience going to the movies as a special, immersive event, and thus, they are more and more selecting to upgrade to the best possible sight and sound experiences available. The percentage attendance at premium formats was 17% in Q4 2021 compared to 12% in Q4 2019. In addition, relative to 2019, we benefited from a favorable showtime mix with a higher percentage of evening and weekend shows, coupled with pricing adjustments that we were able to take during the course of 2021. From a food and beverage perspective, throughout the year, we have enjoyed exceptionally strong food and beverage revenue per patron as our guests chose to enjoy the full outside the home entertainment experience offered at AMC. Overall, our consolidated food and beverage spend per person in the fourth quarter was $6.37 versus 35% higher than the spend in Q4 of 2019. Our significant outperformance in this area compared to 2019 continues to be primarily driven by an increase in the proportion of guests choosing to enjoy our industry-leading food and beverage offerings made easy and convenient to purchase through our app that allows one to order food and beverage when purchasing tickets in advance of arriving at the theater. Our total revenue – our total other revenue in Q4 2021 decreased by only 6% compared to the same period in 2019, this despite a 36% decrease in the number of guests served. Other revenue primarily represents fees associated with online ticket purchases, screen advertising, and theater rental revenue. Online ticket revenue per patron benefited as an increasingly higher percentage of our guests chose to reserve their seats and order food and beverages in advance, utilizing our industry-leading website and app. Screen advertising revenue also continued to increase during the course of 2021 as the box office improved, and we also benefited from revenue diversification initiatives, such as renting our theaters during off-peak times for businesses and government organizations for meetings and other events. In our domestic markets, revenue per patron in the fourth quarter was $20.46, up 24.5% from Q4 of 2019. This was driven by a 35% increase in food and beverage spend per patron, coupled with a 17% increase in average ticket price and a 40% increase in other revenue per patron. In our international markets, revenue per patron for the fourth quarter was $17.90, up 28% from 2019. This was driven by a 32% increase in food and beverage spend per patron, coupled with a 20% increase in average ticket price and a 55% increase in other revenue per patron. In an ongoing effort to enhance efficiency, we have been extremely deliberate in adjusting payroll hours and flexing showtimes to adjust to the market demand. For example, our Q4 attendance of 60 million guests represents 65% of Q4 2019’s attendance, but 87% of Q4 2019’s attendance per showing. This increase in attendance per showing enhances our efficiency and allows us to effectively manage cost pressures. Moving over to the balance sheet. We ended the quarter with a record year-end liquidity of $1.8 billion, comprised of $1.592 billion of cash and cash equivalents and $209 million of undrawn credit facilities. During the fourth quarter of 2021, we repaid approximately $61 million of deferred rent reducing our deferred rent balance down to $315 million. In total, we have been able to reduce our deferred rent balance by approximately $155 million during the last nine months of 2021, and we expect to further reduce the deferred rent balance during 2022 by approximately $150 million to $200 million. Looking closer at the balance sheet and particularly our debt position, it is worth noting that last month, we completed a highly successful capital raising. We issued $950 million of 7.5% first lien notes. As a result of this transaction, we were able to fully repay high interest debt that was raised at the height of the pandemic. The end result is a reduction in our annual interest expense by approximately $30 million and an extension of our debt maturities by between three and four years as the new debt has a maturity date of 2029, enhancing our financial flexibility. Overall, this was a really terrific transaction for AMC, and we continue to actively consider attractive opportunities to further strengthen our balance sheet, lower our interest costs, and increase our operating and strategic flexibility. Regarding capital allocation, we continue to pursue a balanced and disciplined approach. Our priorities remain unchanged: ensuring that we have sufficient liquidity, strengthening our balance sheet by reducing our debt and associated interest costs and extending maturities, investing in our business to enhance the guest experience, and opportunistically pursuing value-enhancing initiatives including those that lead to diversification of our business. During 2020 and 2021, we focused our capital expenditures almost entirely on maintenance of the existing fleet. Net CapEx, including landlord contributions, was $130.2 million in 2020, and it was $70.4 million in 2021. Both of these are significantly less than in 2019 when CapEx included spend associated with the enhancement of our fleet, predominantly through seating upgrades. For 2022, separate and apart from any M&A activity, we expect CapEx to be in the range of $150 million to $200 million as we begin to invest in the growth enhancement and extension of our business. As part of our ongoing efforts to optimize our theater portfolio, during the quarter, we opened or added three new theaters and closed five. So, this brings the total number of locations permanently closed during the last two years to 83 and the total number of new locations opened to 30 for a net reduction of 53 locations. Both actions, closures and openings serve to increase our adjusted EBITDA. Collectively, the older, somewhat tired theaters that we closed or money losers, while the beautiful new theaters that we are bringing into our system are expected to be extremely strong performers positively impacting our overall profitability. Going forward, we will continue to actively manage our portfolio, adding new high-performing locations and eliminating lower performance, all with the goal of improving guest satisfaction through improvements to the inherent quality and appeal of our fleet of theaters as well as optimizing our overall profitability. The operating improvements and efficiency optimization initiatives implemented over the last two years have allowed us to nicely capitalize on the box office growth in the fourth quarter. We have very profitable results for Q4, but we are in no way complacent. As we begin 2022, we are still in a recovery phase, and we will continue to focus on revenue growth, efficiency, and enhancement initiatives to build our business and ensure our success in a post-COVID environment.

Thank you, Sean. Before we open up this webcast to your questions, I’d like to update you on recent actions we’ve taken to enhance our business and highlight some strategic initiatives that will better position our company as we head into what we believe is a much more promising future for AMC. A strong current of innovation runs deep throughout AMC’s DNA. We have led in elevating moviegoing to a truly unique and desirable out-of-home experience, and we set the standard for so many transformative changes in our industry. We will continue to do so. But in 2022, 2023 and beyond, we also expect to transform our company into something much greater than solely a movie theater operator. Let’s quickly look at seven of the initiatives and innovations already or soon to be underway. One, NFTs. During Q4, AMC became the first theatrical exhibition company to collaborate with a studio partner to offer an exclusive non-fungible token, or NFT, to reward moviegoers for their AMC attendance. AMC worked closely with our partners at Sony to launch the Spider-Man NFT, and the success was undeniable. 86,000 NFTs were fully subscribed within hours. And ultimately, these NFTs have been sold on secondary markets, some of them for as much as $17,000. By now, in just a few months from our first effort with Sony in November, we have already launched four separate NFT programs, one of which is supporting what is sure to be the new blockbuster movie, The Batman, which opens this week. In total, more than 800,000 NFTs have already been made eligible by AMC for consumer collection in just three months. NFTs are not just interesting collectibles but are also seen as drivers of attendance for AMC at our theaters and growth in box office revenues for our studio partners. We expect to continue both jointly with studios and separately on our own to create future NFT offers to enhance the overall engagement with our guests. And importantly, in 2022, we will look to further monetize what is now our nascent NFT activity. For example, selling some of these NFTs, in addition to giving them away for free and getting a commission on the transfer of our NFTs when and if they’re later resold. Two, cryptocurrency. We continue to explore opportunities to both provide convenience and create value for our guests through the use of cryptocurrencies. Last year, we introduced the capability to accept payments in Bitcoin, Ethereum, Bitcoin Cash, and Litecoin using our website and mobile app. Later this month in March, we will introduce the ability to transact and make AMC online payments in Dogecoin and Shiba Inu, followed by mobile app functionality. We continue to explore how else AMC can participate in the burgeoning crypto universe, and we remain intrigued by the potential business opportunity. We have looked for some time at potentially issuing our own cryptocurrency, but that will depend on how the regulatory frameworks surrounding cryptocurrency unfold. More to come, if, as and when we have something more concrete to share. As a side note, a benefit of programming cryptocurrency functionality for our website and mobile app, AMC picked up the capability to accept Apple Pay, Google Pay, and PayPal online. Incredibly, in just a few months, these latter three forms of payment, along with cryptocurrency, already constitute more than 15% of our online ticketing activity as was seen in the fourth quarter of 2021. Three, variable pricing. A few years ago, at some of our U.S. theaters, AMC successfully raised weekend pricing above midweek levels. Currently, our prices for The Batman, which opens this week, are slightly higher than the prices we’re charging for other movies playing in the same theaters at the same time. This is quite novel in the United States. But actually, AMC has been doing it for years in our European theaters. Indeed, in Europe, we charge a premium for the best seats in the house as do most other sellers of tickets and other industries. Look at sports events, concerts, and live theater. This has not commonly been a practice heretofore in the United States. If you look at our year-over-year pricing success, as demonstrated in the Q4 numbers, you can see that AMC has been a bold thinker in the area of pricing, one who is willing to take risks and one who sees considerable upside opportunity if we continue to be imaginative. Four, AMC Perfectly Popcorn. Our foray into the multibillion-dollar popcorn industry during 2022 is on track. Remember, AMC knows something about popcorn. On a peak day, we sell 50 tons of the stuff. We plan to make our freshly popped popcorn available through food delivery to home services, allowing consumers to enjoy a slice of the AMC experience while entertaining at home. We also plan to sell to-go packages of popcorn at our theaters for takeout and/or pickup. Beginning later this year, we will begin selling freshly made AMC Theatres Perfectly Popcorn and other movie treats at select mall retail locations around the United States. The biggest opportunity here is that AMC is actively working on an opportunity to offer prepackaged and/or ready-to-pop microwavable AMC Theatres Perfectly Popcorn in supermarkets, convenience stores, and other food service venues around the country. As we recently announced, we recruited Ellen Copaken to fill the newly created position of Vice President of Growth Strategy, where she will lead our initiatives related to the sale of popcorn outside the traditional in-theater channel and assist with other initiatives to broaden and transform our company. Watch out, Orville Redenbacher; a considerable competitor with a popcorn brand that truly resonates with consumers is on its way. Five, additional theater locations. During 2021 and early in 2022, we acquired seven high-profile and strategic theaters, including six former ArcLight/Pacific theaters located in major metropolitan markets like Los Angeles, San Diego, Chicago, and Washington, D.C. Adding the magic of the AMC product and marketing strategies to existing high-profile theater locations has proven to be a winning formula. Our mid-2021 acquisitions of The Grove 14 and Americana at Brand 18, both former ArcLight/Pacific theaters, have ranked among the 30 highest grossing movie theaters in the entire United States since joining the AMC family. Theater landlords, real estate owners around the country recognize that AMC is a theater operator of choice, and we continue to be in active and constant discussions regarding potentially picking up additional highly attractive locations that can enhance our portfolio. Transition costs can be modest and often subsidized by landlords. Not always, but sometimes we find an opportunity to pick up theaters at a mere one to two times projected EBITDA even counting and factoring in their transition costs. Similarly, we have looked at buying some or all of several smaller movie theater circuits. Now some sellers have price expectations that make their approaches to us dead on arrival. On the other hand, we see other opportunities where we think we can grow our theater count attractively with quality theaters in strong potential markets and do so at three to four times our projected cash flows. These are bargain prices. We will continue to be highly disciplined in our approach, though, but put it all together, there is opportunity in our heels. Next, a branded credit card. Some of you may have seen two completely voluntary and well-earned executive retirements announced yesterday afternoon, and we are seamlessly backfilling these two very talented executives with superb individuals to carry our legacy forward. We will have new leadership, highly experienced, already internal within the company, to run our U.S. theater operations. In addition, in choosing our new CMO, Eliot Hamlisch, we have someone bringing considerable experience with co-branded credit cards. With approximately 4 million shareholders and 25 million households in our AMC Stubs program, I think there is significant potential profitability for AMC if we launch our own co-branded credit card. That will become yet another high priority for AMC in 2022. You may recall that back in the early 1990s, I was the Chief Marketing Officer of United Airlines and managed its co-branded credit card with what is now Chase. I’ve seen firsthand the spectacular profitability that can accrue to a company that has a successful co-branded credit card launch. Finally, recovery, agility, and transformation. These three words are the mantra for AMC in 2022 and 2023. As our fourth quarter results indicate, we continue to be in a state of recovery, and our focus remains on bringing to fruition a successful, full and lasting recovery from the impact of the pandemic. At the same time, we realize that we will need to be agile to achieve that goal because admittedly, our industry is at a time of robust change. But agility is something that AMC has demonstrated we are good at. Let’s just say that at AMC, we have steered this ship through the most uncharted of uncharted waters in recent years. So, we’re not worried about the need for us to adapt our business model as we go forward to cope well as change unfolds around us. But some people following us look too narrowly. They think our aim is merely to bring back the company that existed back in 2019 pre-pandemic. They look at the value of that company and project a fall from grace for us at AMC going forward. But I want to make very clear to everybody on this call: Our ambition is much grander than that. Our shareholders have armed us with $1.8 billion of year-end liquidity, and there may be creative ways for us to raise even more money. I keep on getting offers from our shareholders, for example, that they want to chip in and help us pay down our debt. I don’t know exactly what that’s in the cards, but I do admire their passion and dedication to AMC nonetheless. They’ve shown it over and over again. Still, with $1.8 billion of cash and under our revolver at our disposal, that can be used to outlast the pandemic, pay down debt, innovate within our core and related businesses, and for transformative M&A. We encourage those of you who look at AMC to do so boldly because within AMC, we are thinking boldly. Before turning the call over to Q&A, I would like to make a few specific observations about our enthusiastic and avid shareholder base. They really care about AMC, and they’re not shy with their advice. Believe it or not, I tend to read a few thousand of their short comments on Twitter each week, and the feedback that we are getting has greatly helped me to run this company. I’m also pleased that more than 615,000 individuals have self-identified as AMC shareholders in joining AMC Investor Connect, a program that we launched in the last days of June of 2021. It’s our Special Communications & Rewards program designed especially and only for our shareholders. In the fourth quarter of 2021, I personally hosted two sold-out early movie screenings for our shareholders in New York and Los Angeles. More such screenings that I personally host and attend will be planned around the country throughout 2022. At the L.A. screening back in December, one of our investors screamed from the audience, 'We are not leaving.' He said, and indeed, he appears to be right. Right now, there are several data sources to reconcile, but as best we can tell, we have about the same number of individual shareholders now as we had a year ago at this time, in the neighborhood of 4 million individual investors who care about AMC’s future. If you exclude index funds, who have no choice but to own and hold AMC shares, individual retail investors would seem to own more than 90% of our officially issued 516 million shares as of today. Indeed, as it is often said about AMC on Twitter, retail owns the float. Our shareholders ask me every day on Twitter, speaking of Twitter, to speculate about their theories on the trading of AMC stock as well as on natural or unnatural pressures on it. Exactly as we said last July, we have no reliable information on naked shorting or so-called fake shares or so-called synthetic shares. So even as we are well aware of your thoughts, legally, we simply are unable to make any further public commentary on these topics. One thing that I’m particularly proud of is that we kept our word to our shareholders in 2021. It is widely known that we are essentially out of more common shares that could be issued to the public in any quantity, although a decade ago, our Board did authorize the potential issuance of preferred shares if we so chose. Some of you are anxious about this whole topic, and so I gave you my word back in the early summer of 2021 that we would sit on the sidelines for the balance of the full year 2021 on the equity issuance, and that is exactly what we did. We kept our word. Some of you then speculated that we would rush to issue new shares to the public early in January as the new year started. It is already March. Again, we have not done so. Retaining your support, leading your company smartly and well, keeping our word to you, these are extremely important to us. They’re extremely important to me at AMC. That’s the report. The fourth quarter was a spectacular one for AMC, the strongest in two years. Sean, let’s now turn to questions, starting with questions from our shareholders. I do hope we’ll take some securities analyst questions as well.

Thank you, Adam. And the first question is, can you give us an update on the Perfectly Popcorn initiative?

Sure. As I said in my prepared remarks, we sold 50 tons of it on a good day. We know something about popcorn. Our brand has credibility, and we’ll have credibility in the market for people who buy and consume popcorn. So, we’re taking this initiative very seriously. I talked about hiring Ellen Copaken, who’s got substantial brand management and innovation experience at PepsiCo, at Frito-Lay, and at Hostess Brands. She’s already on board since mid-February and in charge of this whole effort, among other projects, and we are going full bore. I expect that hopefully with Uber Eats, we will launch a food delivery program in the beginning as early as the second quarter of this year, depending upon which city you happen to be in. We’ll roll it out around the country over the second and third quarters primarily, possibly the fourth quarter in some of our smaller markets. As for grocery, many of you may not know this, but grocery stores tend to restock their shelves twice a year, in February and in September. Obviously, February is behind us. So, our goal is to catch the September reshelving efforts and to get AMC Theatres Perfectly Popcorn in a supermarket or convenience store near you in the fall of 2022.

Thanks, Adam. And the next question is, are there other food and beverage initiatives in the pipeline, for example, expanded offerings, concessions to go, et cetera?

Absolutely. We consider ourselves innovators in food and beverage. Of the large theater operators, AMC has had the highest food and beverage sales per patron for years now. That continues to be the case. Part of it comes from doing it well in our theaters, and part of it comes from our innovation. Just a couple of weeks ago, we launched Impossible Nuggets, the plant-based alternative chicken nuggets, which are selling briskly. We constantly are adding new menu items in our theaters. We constantly are providing specialty movie-themed drinks at our more than 350 bars around our U.S. theaters themed to major movies that are coming out. But beyond that, some of you may recall that about four years ago, we launched something called Feature Fare. We were ahead of the competition in our view regarding the menu variety that AMC offered in Feature Fare. Because of COVID, we had to strip that way back. It was a challenge just to open our theaters, let alone do it with a full-blown variety of menu items as we had when everything was going like a Swiss watch back in 2018 or so. Having said that, we’re building back up in terms of menu variety at our concession stands and in our dine-in theaters. We’re still challenged with labor shortages and supply chain disruptions. So, we’re picking and choosing very carefully which items we bring back into our theaters. We want to make sure that if we promise a guest a high-quality food and beverage experience, the people working in our theaters can deliver it. Having said that, we certainly seem to be succeeding. Our food and beverage sales per patron are up 35% year-over-year. That’s a stunning increase. I’m very proud of what our food and beverage organization is pulling off. You last asked about to-go questions. When we introduce the popcorn to-go products at our theaters, we’ll also have other to-go items, including other delivery to homes through services like Uber Eats.

Great. Thank you very much. Next question is, can you give us an update on alternative content?

Alternative content is something that we are very intrigued by. We’ve dabbled in it so far to gauge consumer response. Some of the people who track us closely know that we had WWE events, UFC events, and we showed DIRECTV’s Sunday Ticket for two years over the last three, showing professional football games on Sundays. We’ve had several concerts, one as recently as two nights ago with Kanye West, now Ye, in IMAX theaters around the country. We’ve also shown some old movies. Just had a very successful re-showing of the 50th anniversary of The Godfather. I think that was in our Dolby Cinemas. We’ve just agreed with Warner Music to look closely at which of their concert artists we can bring to AMC Theatres. But the big opportunity here is sports rights. We know that AMC is going to make a real splash in alternative content if we can secure the rights for major professional and collegiate sporting events. Getting professional collegiate sports is a great potential, but it’s much easier said than done. We have begun dialogue with leagues. There’s a lot to work out, but it’s something that we’re looking at hard.

Great. Next question, what is the time frame to bring premium formats to the recent theater acquisitions?

I'm proud of the partnership that AMC has with IMAX and with Dolby Cinema. We're IMAX's largest customer in the world outside of China and their largest partner here in the United States. We had 150 or so PLFs five years ago. AMC globally now has over 400, and we continue to want to grow it. We're in active dialogue with both IMAX and Dolby right now about how we can grow our business with each of those great companies. I have every expectation that we are going to increase the number of our PLFs, and in the case of IMAX in particular, increase the number of laser-equipped IMAX auditoriums around the AMC system. One of the things we've done as we've looked at bringing new theaters into our system is to see if we can add PLFs to those theaters. For example, The Grove and Americana brand in L.A. already in the 30 highest grossing movie theaters in the United States, neither has an IMAX or Dolby Cinema auditorium. We're going to put an IMAX and a Dolby Cinema, and our house brand, which we call Private AMC, we're going to put three of them into The Grove, three of them in the Americana brand. We're looking at other theaters to see where we can add IMAX or Dolby locations. In terms of timing, and once you get permitted, it's about six to 12 months to get them constructed. Permitting can go fast or slow, depending on the locality. So, if I had to pick a date, I would say about a year after we add a theater to our network, we should be well underway with IMAX or Dolby or Prime at AMC locations.

Great. The next question is what are the plans to monetize the opportunity from NFTs and cryptocurrency?

Look, this is a big opportunity for us. As I said in my prepared remarks about NFTs, we've already done four programs since November, and already 800,000 NFTs have been made available to consumers. One with Spider-Man, one with Dune, and one with The Batman movie, and we offered an AMC NFT to our shareholders enrolled in AMC Investor Connect. This is all good for us. We have tended to give them away for free so far. We will continue to give some away free, especially if that drives a closer bond with the company or drives attendance to our theaters, where we'll make money selling tickets and concessions. But I also think it's possible for good and important NFTs to sell them to the public. I also know for a fact that we already are and will be on future programs collecting a commission on the resale of those NFTs as they get resold. As for cryptocurrency, we're starting with Dogecoin and Shiba Inu in a couple of weeks. We know there are a lot of consumers who are very keen on those cryptocurrencies. We expect that our market share amongst that audience will grow when we can take cryptocurrencies.

Great. The next question here is regarding our strategy for lowering debt and improving our leverage ratios.

Well, the best thing we can do to lower debt is to grow our EBITDA, so that by definition, the debt that we do have is a lower multiple of our rising EBITDA. And that's certainly the case in the fourth quarter, where we had positive EBITDA for the first time in two years. But that's not enough. We also need to pay down debt. We're doing that right now. We made a great start by paying off a considerable amount of deferred rent that we owe from 2020. Additionally, there still is debt out there that we could buy at a discount, and that's an intriguing use of cash we're considering.

Great. Next question, what are the plans with respect to signature recliners? Do you plan to introduce these at all screens?

We do not plan to introduce recliners at all screens. Let's start with the branding of AMC. We have three major brands at AMC: AMC Theatres, AMC Dine-In Theatres, and AMC Classic Theatres. Our dine-in theaters are equipped with full-blown restaurant menu items, mostly delivered to seat. We have our normal mainline AMC Theatres, and we have the classic brand. The classic brand tends to be smaller, less frequented theaters. The economics at a classic theater probably would not allow us to invest in putting in recliners as it is an expensive proposition. We can spend as much as $5 million or more per theater to do it. The traffic at the classic theaters just doesn't justify a return. But with respect to our AMC Theatres, we've already made great progress. We have recliner seats in one or more auditoriums at somewhere around two-thirds or more of our AMC Theatres. We're well populated with recliners. One other thing the pandemic has taught us is to guard our cash very carefully. Given that we are already well established with recliners, it's important to keep CapEx low and hold on to that $1.8 billion war chest to do with it as we described earlier, we think we will slow down the pace of our renovations. Now, that doesn't mean we will do none. We will do some, but at significantly lower levels than we were doing in 2017 and 2018. We need to be very prudent. The best asset this company has is our $1.8 billion cash and liquidity. We need to be very careful how we deploy it.

Thank you. And the last question here is, can you give us an update on the opportunity to introduce AMC merchandise?

Sure. Merchandise is one of these ideas that came pouring in from our retail shareholder base in 2021. It sounds like they want to buy it, and if they want to buy it, we want to sell it to them. We started to experiment back in November. When Ghostbusters: Afterlife emerged, we created a special merchandise item, a Ghostbuster ambulance, which sold out quickly as we sold 40,000 of them in just days. This reminded us that our shareholder base and our customers are really interested in merchandise. We just this week are going forward with a big Batman popcorn holder, about six inches high, which will hold your popcorn. I'm hoping they'll sell out. Merchandise is going to be a big project for us in 2022. I expect that towards the middle of this year, we'll have a broad array of AMC-branded merchandise that our shareholders and our guests can buy online or possibly in some of our theaters.

Great. And then the last question I have here is what are your goals with respect to more theaters or other acquisitions?

Well, as I said in my prepared remarks, especially in the section I call recovery, agility, and transformation – we have cash. There are theaters that I believe we can acquire very inexpensively. One to two times cash flow is really cheap. Even three to four times projected cash flow is really cheap. If we can grow by bringing in high-quality theaters in strong markets into our fleet inexpensively, that’s a great opportunity for us. Beyond that, though, there is no specific company that we are yet ready to acquire. But I really want to say again and again that people who are watching and analyzing this company should think hard about what a strong management team can do with $1.8 billion of cash. We are going to be looking seriously at M&A candidates. It’s intriguing to diversify our business away from the pure movie theater industry to diversify our risk while capitalizing on our knowledge of food and beverage, entertainment, selling tickets, and managing buildings that are far apart from each other, dealing with landlords with hundreds of leases. This all is expertise that AMC possesses where it is needed in other industries too. For those who are merely valuing the AMC of 2019 and suggesting that’s all we can do going forward, you’re making a mistake. There are numerous lines of business, whether it's NFTs, cryptocurrency, popcorn, or what we grow into through transformational M&A. There is an opportunity to change this company's fortunes greatly as we look ahead. Thank you.

Yes, if you want to repeat the Q&A instructions.

The first question comes from Jim Goss with Barrington Research. Please go ahead.

Alright, thank you. Hi, Adam.

Hey, Jim. Nice to hear your voice again.

Yes, I do have a question – a couple of questions. One, I was wondering if you think there's any opportunity to maybe carve out some subset of your theaters, perhaps the AMC Classic or some of them and create a sale that could create some value that you could use for additional acquisitions or to pay down some debt.

Does the opportunity exist? Yes. Is it our plan to do that? No. I think that we benefit mightily from our size and scale. If we give up some of that size and scale, we hurt the rest of the company in the process. You all know that there are other companies who report their financials publicly. Take a look at our film rent costs in Q4, compare that to some other companies, that's a direct result of the relationships that we have in Hollywood but also a result of the size and scale of AMC. We would be giving up on a competitive advantage if we got smaller.

Okay. And maybe also on the idea of trying to reduce the debt load, do you have any thoughts on any creative financial instruments beyond the common equity that's dominated by the retail investors that could improve your financial position and interest costs and also reengage institutional investors in AMC?

So, we do, and we're not yet ready to share them publicly. Having said that, I would remind you that my CFO, sitting a couple of feet away from me, has been very successful in the capital markets, and we just had this impressive refinancing. We lowered our interest cost by 300 basis points and stretched out maturities to 2029. There are other tranches of our debt that we're looking at very hard to see if we can do something imaginative and creative with them, just as we did with our first liens a few weeks ago. Beyond that, there are other things that we can do. But as I said – and we're looking at them carefully, but as I said, we're not yet ready to share anything publicly. But you're on to something; it would be nice to have institutional investors embrace AMC. But I want to be very clear. I don't want to do that if it costs us our individual shareholder base. This new individual shareholder base has been very loyal to AMC since it showed up on our door about a year ago, and we intend to be very loyal in return.

You've been very clear about that. Thank you very much.

Thank you, Jim.

As there are no further questions from the phone lines, I would now like to turn the conference back over to Adam for any closing remarks.

Thank you, Operator. For all of you on the call today, thank you for joining us. The fourth quarter of 2021 was so encouraging for us. AMC is on a glide path to recovery with bold, exciting plans for 2022 in an improving environment around us. With that, don't hold our feet to the fire too much for Q1. But boy, are you going to like Q2 through Q3 and Q4; we're expecting 2022 to be a very good year for our company. Thank you one and all. We appreciate you joining us today.

This concludes today's conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.