Earnings Call Transcript - AMC Q4 2025

Operator, Operator

Hello, and welcome, everyone, joining today's AMC Entertainment Holdings, Inc. Fourth Quarter and Full Year 2025 Earnings webcast. Please note this call is being recorded. It is now my pleasure to turn the meeting over to John Merriwether, Vice President, Capital Markets. Please go ahead.

John Merriwether, Vice President, Capital Markets

Thank you, Stephanie. Good afternoon. I'd like to welcome everyone to AMC's Fourth Quarter and Full Year 2025 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, I'd like to 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 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 constant currency, among others. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website. After our prepared remarks, there will be a question-and-answer session. This afternoon's webcast is recorded, and a replay will be available in the Investor Relations section of our website later today. With that, I'll turn the call over to Adam.

Adam Aron, Chairman and CEO

Before I begin today's call, I want to share a personal update. In early December, after returning to AMC's headquarters in Kansas City, I issued a press release informing everyone that I had suffered a minor stroke during a business trip to London just before Thanksgiving. Thankfully, I received prompt treatment at a great hospital in London, and a full recovery was expected. At the time of the stroke, there were no cognitive issues; I only lost my ability to speak for a short period. That happened 14 weeks ago, and I'm happy to say my voice is back. I feel strong and ready to move forward. Let's discuss AMC. As we reflect on 2025, it's clear that we made significant strides both operationally and financially. While the industry's recovery has been slower than anticipated, AMC continued to perform well and exceeded expectations. Even in a challenging fourth quarter, when the North American box office dropped by 4.4%, AMC achieved around $1.29 billion in total revenue, $134 million in adjusted EBITDA, and $127 million in cash from operating activities. Our U.S. theaters showed impressive performance, outperforming the industry average by 140 basis points, reflecting our strong marketing and loyalty programs, and our commitment to providing premium theatrical experiences. AMC holds a substantial market share, generating over 25% of the box office in the U.S., and we are significantly larger than the second and third largest competitors. Sean will cover our financial results in detail, but it's worth noting that despite a 2.1% decline in global attendance, our adjusted EBITDA rose by 12.7%. This demonstrates our operational leverage—about two-thirds of any additional revenue contributes directly to our adjusted EBITDA. We anticipate this trend to continue into 2026. Although predictions can vary, many expect a much richer slate of films in 2026 compared to the last several years. This is crucial because the economic levels experienced in 2025 are not sustainable. However, we are optimistic. Major studios like Disney and Universal have strong movie lineups, and even smaller players like A24 are poised to embrace theatrical releases. Given the growing number of films set for release in 2026, we expect a significant increase in box office revenues, potentially by $500 million to over $1 billion compared to 2025. This increase in revenue would likely lead to substantial growth in our adjusted EBITDA. While I won't list every movie title for 2026, we are confident that the box office will see the highest figures since 2019. The operating leverage we have means that as revenues rise, so too will our adjusted EBITDA. I want to ensure we have a solid film slate not only for 2026 but also for 2027, which we expect to support positive cash flow in the following years. The progress we anticipate this year should boost our confidence in the future. Now, regarding our financial leverage, enhancing AMC's balance sheet is a strategic priority. Since the end of 2020, we have reduced our total debt by roughly $1.8 billion, including a $1.4 billion decrease in outstanding principal and $420 million in lease deferrals related to COVID. In 2025, we took actions to strengthen our balance sheet in anticipation of a box office recovery. In July 2025, we completed significant transactions, raising over $240 million through new debt and converting $183 million of existing debt, with potential for more. These efforts address all of our 2026 debt maturities, extending them to 2029. Recently, we initiated another refinancing effort for about $2.4 billion in debt, aiming to extend the maturity to 2031. In short, we are continuing to take decisive actions to strengthen AMC's financial foundation and enhance our flexibility. Now, I'll turn the call over to Sean Goodman, our CFO.

Sean Goodman, Chief Financial Officer

Thanks, Adam, and good afternoon to everyone. As Adam noted, 2025 did represent a year of meaningful operational and financial progress. Although the industry box office did fall short of expectations, AMC performed exceedingly well in the areas that are within our direct control. For the full industry box office increased by a modest 1.5% and industry attendance in the European markets in which we operate declined by approximately 3% versus 2024. Nonetheless, at AMC, we grew consolidated revenue by 4.6% versus 2024 to more than $4.8 billion as we welcomed more than 219 million guests to our theaters across the globe and we grew adjusted EBITDA to approximately $388 million, a nearly 13% year-over-year improvement, all of this in an essentially flat industry box office environment. We achieved these consolidated financial results with record-setting per patron revenue and per patron profit metrics. Admissions revenue per patron grew 5.9% to a record of $12.09. Food and beverage revenue per patron grew 5.1% to a record of $7.62, and total revenue per patron grew 6.8% to another record of $22.10. Importantly, our contribution margin per patron, this is defined as total revenue less film exhibition and food and beverage costs divided by attendance, this metric grew 7.2% to yet another record-setting $14.80. This measure of per patron profitability is now 51% higher than in pre-pandemic 2019, underscoring the meaningful improvements that we have made to the business over the last few years. Breaking down our results by segment, starting with U.S. operations, we outperformed the North American box office, growing our admissions revenue by 3.9%, 240 basis points in excess of the overall industry growth. This outperformance helped drive total revenue growth of 4.6%, along with a nearly 15% increase in adjusted EBITDA. And consistent with the overall consolidated trends I referenced earlier, our U.S. theaters delivered record-breaking per patron metrics for admissions, food and beverage, and total revenue with total revenue per patron growing 5.3% to $23.79. In addition, the business generated a record per patron contribution margin of $15.69, a 5.7% improvement over the prior year. Domestic total revenue per patron is now up 48% versus pre-pandemic 2019 and domestic contribution margin per patron is now up 56% compared to pre-pandemic 2019. Now turning to our international operations. Note that the results are impacted by an increase in foreign currency exchange rates of approximately 4.5% year-over-year. With attendance at our international theaters down 5.5% versus the prior year, revenue grew by 4.6% or was flat in constant currency, and adjusted EBITDA declined by 2.1% or 10% in constant currency. Our international theaters also delivered record-breaking per patron metrics for admissions, food and beverage, and total revenue, with total revenue per patron growing 10.6% or 5.8% in constant currency to a record-setting $17.97 and contribution margin per patron growing 11.3% or 6.4% in constant currency to a record-setting $12.61. Total international revenue per patron is now up 32% versus 2019, and international contribution margin per patron is up 37% compared to pre-pandemic 2019. Our results for 2025 reflect the effectiveness of our industry-leading loyalty programs, innovative pricing strategies, leadership in premium formats, and innovative food and beverage offerings, complemented by a relentless focus on the efficiency of our operations and optimization of our theater footprint. In that regard, we continue to execute a transformation of our theater portfolio, negotiating more favorable lease economics, exiting underperforming locations, and selectively acquiring high-quality theaters that enhance our network. During 2025, we closed 21 locations and we opened 3. Since 2020, we've now closed 213 locations and opened 65 locations for a net reduction of 148 theaters or roughly 15% of our portfolio. This ongoing reshaping of our footprint reflects our commitment to improve asset productivity, expand margins, and position AMC for sustainable long-term growth. Now let's move to the balance sheet. We ended the year with $428 million of cash. This excludes restricted cash. Our free cash flow for the year was a use of cash equal to $366 million. It's very important to note that this negative free cash flow was entirely related to the first quarter of 2025, and that for the 9 months ending December 31, 2025, we generated positive free cash flow of $51 million. As you may recall, our traditional 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 with a negative cash impact in the first and third quarters, the first quarter typically representing the largest negative cash impact. This pattern held true in 2025. And assuming similar box office seasonality, we would expect this cadence to exist in 2026. As Adam said, strengthening our balance sheet has been and will continue to be a top priority. This includes maintaining robust liquidity and continuing to pursue opportunities to extend debt maturities, reduce debt servicing costs, and decrease the principal balance of our debt. As Adam noted as well, we recently launched a refinancing transaction targeting our $2 billion term loan due in 2029 and our $400 million Odeon notes due in 2027. This new debt offering, if successful, will address the vast majority of our 2027 debt maturities, extend a significant portion of our debt maturities to 2031, simplify our capital structure, and reduce our debt servicing costs. In addition, we're also in the market with an at-the-market equity offering. Proceeds from the offering will be used to strengthen our balance sheet and also allow us to continue to invest in our core business to elevate and differentiate the moviegoing experience for our guests. As of last Friday, we received $26.2 million of gross proceeds from this equity offering. Our capital allocation priorities are clear and consistent. First, maintain robust liquidity and strengthen the balance sheet; and second, invest in our core business to elevate the guest experience. This disciplined approach to capital allocation reflects our commitment to building an increasingly strong and resilient company to deliver long-term shareholder value. From a capital expenditure standpoint, our 2025 CapEx net of lease incentives totaled $200 million, exactly at the midpoint of our previously communicated $175 million to $225 million range. And we expect 2026 CapEx net of lease incentives to be between the same range of $175 million to $225 million. Looking ahead, we see an exceptionally strong film slate in 2026 and beyond. And the operating leverage inherent in our business, coupled with continued success in growing that per patron revenue and per patron profit metrics means that we are very well positioned to meaningfully increase adjusted EBITDA, improve free cash flow and strengthen our balance sheet with the box office growth that is anticipated in 2026 and beyond. And with that, I'll turn this call back over to Adam.

Adam Aron, Chairman and CEO

Thank you, Sean. Our 2025 results and our optimism for 2026 emphasize that AMC is actively pursuing bold strategic initiatives to enhance the moviegoing experience and solidify AMC's leadership in theatrical exhibition. One year into our AMC Go Plan, we see tangible and encouraging results as we continue to delight our guests and prepare for sustained growth in 2026 and beyond. For instance, half of our U.S. theater circuit now features laser projection, providing brighter and sharper images. AMC's leadership in premium large-format and extra-large format screens is noteworthy, as these screens command higher price premiums and are about three times more productive than standard screens. It's no coincidence that AMC has more premium large-format and extra-large format screens than any other exhibitor globally. We're also pleased to see our number of IMAX screens and upgraded IMAX with laser screens increasing, along with the popular Dolby Cinema screens. Our offerings have expanded with CJ's ScreenX and 4DX, as well as increases in our PRIME and iSense house brand PLF options. I'm particularly proud of the story behind AMC's extra-large format screens, which began as a pilot by our Odeon team in Europe less than two years ago. Due to their success, we are now broadly expanding XL screens across our U.S. theaters. We currently have around 170 XL screens worldwide, and I anticipate that number will double by the end of 2026. Moving beyond the auditorium, our AMC marketing and loyalty programs continue to evolve successfully in 2025. In January 2025, we introduced a new loyalty tier called AMC Premiere GO, allowing consumers to upgrade to Premier status without an additional fee through increased visits to our theater chain. This initiative has raised our member enrollments to about 39 million households in the U.S., which represents an impressive 51% of our total U.S. attendance during the year as guests participate in our loyalty program. This level of engagement enhances guest loyalty and provides valuable insights, allowing us to create targeted marketing efforts for our best customers continuously. Additionally, we implemented significant price increases within our A-List subscription program in May 2025. These price adjustments were made during peak demand periods for our most frequent guests while also remaining appealing to value-conscious consumers. In July 2025, we revamped our longstanding discount Tuesdays program with a new 50% off initiative for Tuesdays and Wednesdays. Our analysis shows that the increased attendance on these weekdays has not negatively impacted our weekend business; rather, it has enhanced midweek theater revenue, benefiting both AMC and our studio partners, as well as moviegoers. Moreover, at the end of 2025, we introduced the AMC Popcorn Pass to our loyalty members. This innovative annual offering allows AMC Stubs members to enjoy 50% off large popcorn for a one-time fee of $29.99 plus tax yearly. In just the first two months post-launch, over 120,000 guests have taken advantage of this. The Popcorn Pass not only delivers exceptional value to guests but also encourages more frequent theater visits and deeper engagement. Looking ahead, I’m excited to share our plans for 2026, including the introduction of preferred so-branded premier seating. We will reserve the best seats in our theaters for A-List and Stubs Premier members, ensuring that our top customers can access these seats without a fee. We believe this initiative will significantly benefit our frequent guests and enhance their loyalty to AMC. I would also like to highlight our recent partnership with Netflix. This collaboration represents a significant shift from years of maintaining distance between our two companies. We recently brought Netflix's K-Pop Demon Hunters to AMC theaters, which was highly successful, with AMC contributing to about 35% of the film's total attendance during the Halloween weekend. Following this, we hosted the series finale of Stranger Things in 231 AMC theaters, which greatly exceeded our expectations, attracting more than 753,000 attendees and generating approximately $15 million in revenue from Netflix fans. The success of this collaboration highlights the potential for future cooperative events between AMC and Netflix, especially given the substantial audience overlap, as about two-thirds of our Stubs loyalty members also subscribe to Netflix. We're enthusiastic about expanding our relationship and creating innovative theatrical events that provide value for both companies. Lastly, I want to mention the rise in share price for Hycroft Mining Company, which has exceeded our financial expectations. In November 2025, we monetized over $24 million from a partial sale of our Hycroft stake. We retained a significant number of shares and warrants, valued at approximately $39 million at today’s market closing price. Overall, our total returns compare favorably to the initial $29 million investment in Hycroft four years ago, demonstrating the merit of our decision and strategic insight. As we conclude, AMC's resilience continues to set us apart in the slowly recovering industry. Despite the challenges, AMC remains agile and focused on long-term value creation. We are well-positioned to capture opportunities ahead and expect box office growth in 2026. Remember that operating leverage will be crucial; an increase in our revenues can lead to improved adjusted EBITDA as the year progresses. Although we still have challenges ahead, the indicators for 2026 suggest a significantly strengthened year. Now, let's turn the call over to our operator for questions from equity research analysts. Sean, I’ll pass it to you for our review of questions submitted by retail investors.

Operator, Operator

Our first question comes from Chad Beynon with Macquarie.

Chad Beynon, Analyst

Adam, great to hear that you're feeling and sounding much better here. I wanted to ask, I know, Sean, in the prepared remarks, you talked about the screen or the theater count reduction in '25 and in the past couple of years. How are we thinking about your fleet or portfolio at this point given the strong outlook for content in '26? And then related to that, are there expected to be any new builds that are in that CapEx number?

Sean Goodman, Chief Financial Officer

Chad, as I've said in my prepared remarks, we've done significant activity, closing over 200 theaters over the last six years and opening around 65-odd. We will continue to take actions to close theaters, to reduce leases as we go forward. About 10% of our leases come up for renewal each year. So that's about 85 leases coming up for renewal. Each time these leases come up for renewal, we have that opportunity to improve our overall theater economics. The portfolio has improved significantly over the last six years. It's one of the reasons that our per patron metrics and our per patron profitability is so much higher than it was before. But we believe there continues to be a very significant opportunity. Like most organizations or companies with a retail footprint, our theaters are kind of normal distribution, and there is a tail of underperforming or loss-making theaters. And we see an opportunity to close those theaters or renegotiate leases and then take on new theaters that are significantly more profitable. So I think you're going to see the similar sort of pace going forward. We'll be closing more theaters than we open, but the new ones we opened are generating significantly more profit than the ones we closed. And to your question about sort of the CapEx level, there'll be a small number of new theater locations in 2026 and going forward, and that is included in our CapEx projections in the $175 million to $225 million range.

Adam Aron, Chairman and CEO

I would like to emphasize that our approach over the past few years has been focused on being capital-light. You mentioned new build theaters, which are significantly more costly compared to spot acquisitions. With spot acquisitions, we can take over a theater where most of the investment has already been made, and we typically spend around $500,000 to $1 million to upgrade it, integrating it into the AMC network and utilizing our marketing strategies and expertise in product experience. In the past, this strategy has led to substantial increases in both the revenues and efficiencies of the theaters we've acquired. As Sean mentioned, we will likely close some underperforming theaters, which is beneficial to our finances rather than a cost, and we might also add a few spot acquisitions.

Sean Goodman, Chief Financial Officer

And maybe it's worth pointing out the example of the growth, right, which in Los Angeles that we took over as a spot acquisition. That theater used to be number 28 in the country in terms of annual box office receipts. Now we're adding the AMC secret sauce that theater is now number 5 in the country in terms of receipts. And that's just one small example of the benefits that we bring and the attractiveness of AMC as a tenant for landlords in their developments.

Chad Beynon, Analyst

Okay. Great. And then my unrelated follow-up. I think you mentioned most are expecting the U.S. box office to be up somewhere between $500 million and $1 billion. I think that's where most analysts are in this high single-digit, low double-digit growth rate. International is a little harder for, I think, us in the industry to pinpoint. Do you have a gut feel if international admission revenues could be higher or lower than kind of what we're seeing in North America this year?

Adam Aron, Chairman and CEO

We have completed almost 8 weeks of 2026, and we already see that Europe is recovering faster than the U.S. from the 2025 box office. If I had to make a prediction, I would say Europe will outperform the U.S. Some report in constant currency while others report based on incoming dollars. Since the dollar has been relatively weak, our overseas revenues and EBITDA are reflecting stronger levels in U.S. dollars. This year could potentially be Europe's best in the last six years.

Operator, Operator

I'd like to turn it back to Sean Goodman for retail shareholder questions.

Sean Goodman, Chief Financial Officer

Thank you, operator. Adam, we have a couple of questions here. Firstly, relating to the food and beverage business. As you and I both know, our food and beverage per patron numbers have just been spectacular post pandemic. And I think there's really exciting opportunities for us ahead there. But the question is sort of what future changes of innovations can people expect on the food and beverage side?

Adam Aron, Chairman and CEO

This is really important because it explains how our company has managed to handle challenging times over the past five years. Our strong food and beverage sales have played a significant role in this. Our contribution per patron has nearly reached a 50% increase, which indicates that we do not necessarily need the box office to fully recover to pre-COVID levels from 2019. This improvement is partly due to our success in food and beverage. Currently, we are refining our food and beverage operations, experimenting with the menu to satisfy our guests and enhance our profits. For instance, in the fourth quarter of 2025, we introduced freshly baked chocolate chip cookies that not only taste wonderful but also have a delicious aroma in the theater lobbies, and they have replaced doughnut holes, which were less popular at our concession stands. Additionally, we launched a significantly improved pizza at our dine-in theaters that truly resembles and tastes like authentic pizza. I have personally tried it in the kitchens, and as a pizza enthusiast, I can say it's really good. These are just a couple of examples. Moreover, an important development in our concession stands has been not just what is being consumed, but what is being purchased. Three years ago, AMC did not sell any movie-themed merchandise. Now, this merchandise has grown into a substantial business for us. In 2025, it generated $65 million in the U.S. and an additional $10 million to $15 million in Europe. This was a segment that literally produced no revenue or EBITDA three years ago, and now it is generating around $80 million in sales, with significant profit margins of about 50%. I believe that our movie-themed merchandise is set to grow significantly again in 2026, and I wouldn’t be surprised if it grows by 20% or more as we continue our successful efforts in our theaters.

Sean Goodman, Chief Financial Officer

There is a lot happening in the industry right now. Can you provide some insights on our relationships with studios, the current status of windows, updates on union negotiations, and the possibility of a strike later this year?

Adam Aron, Chairman and CEO

Sure. When you talk about what's our relationship with studios, it sure helps when you sell more movie theater tickets for every single studio than anybody else on earth, especially if you combine the ticket selling in quantity with the amount of effort that AMC devotes to our studio interactions. I can say with confidence that AMC enjoys a very strong special relationship with each and every studio, every single one. We think highly of them because our lifeblood depends on it. And I believe that they think highly of us because they know at the end of the day, we're going to outperform for them above everybody else. So in terms of studio relations, it's all great. An interesting development when I think of studios is not just the traditional studios, the majors, but we've had surprisingly good interactions of late with some of the streamers who historically were not major theatrical exhibitors. Last year, we had real success with Apple in their film F1. We leaned into it in a big way. We were very successful with the film. They were very successful with the film. We appreciate our relationship with them. I know they appreciated the support that we put forward. I'm looking forward to big things coming from Apple original films going forward. Amazon is now telling us that their goal is to release 15 theatrical movies in 2027 and that they'll probably get up to 10 to 13 theatrical movies on their slate in 2026. That's news. Amazon MGM was only good for a movie or two five years ago. They've become a real player in Hollywood. And then there's Netflix. We had this September meeting where we sorted through how we could work together and that it would be advisable to work together. The first two efforts out of the shoot were extraordinarily positive. I know that we're excited about doing more with them, and I know that they were pleased with AMC's effort on their behalf towards the end of 2025. You mentioned in your question, union negotiations. For good or for bad, we're not a party to those union negotiations. We have a vested interest in their outcome, but we're not at the table. I do know that the studios have taken these negotiations seriously. They've started the negotiation process earlier than they did last time around. I think the general consensus is that the two strikes a couple of years back were devastating to everyone connected to the movie business, devastating to the members of the union, devastating to movie makers. I would sure hope that we don't have to repeat anything like that and that the union studio negotiations transpire in such a way that deals are met and that the production of movies goes along without interruption.

Sean Goodman, Chief Financial Officer

And then our final question here is on CapEx spend. We've guided to $175 million to $225 million a year, which is the same in 2026 as it was in 2025. Just questions on how we're allocating our CapEx spend, sort of what are the focus areas for our CapEx spend?

Adam Aron, Chairman and CEO

We are looking at quite substantial numbers. Out of the total, $150 million will be allocated for maintenance capital to ensure our theaters remain in good condition. This includes fixing roofs, maintaining HVAC systems, and upgrading IT systems to keep AMC competitive. We are also focused on improving the theater experience in a cost-effective manner by adding more IMAX, Dolby Cinemas, PRIMEs, iSenses, and doubling the number of XL screens. A decade ago, AMC was adept at costly renovations, such as removing seats to install popular recliner seating. However, now we face challenges with certain high-volume theaters where we cannot take out many seats without losing revenue. In the past, it was straightforward to renovate theaters completely, but now we are exploring options to maintain high standards in our busiest locations while adhering to more traditional seating models. Recently, we identified a solution that is also cost-effective. In Burbank, we had a top-performing theater that was in poor condition two and a half years ago. Although we needed to replace all the seats, we also recognized the need to maintain a similar number of seats due to the theater's high volume. After extensive research, we developed the AMC Club Rocker, an upgraded seat that offers comfort and quality beyond our typical seating. It has been very well-received and performed exceptionally well in Burbank, with similar success in our Empire and Lincoln Square theaters in Manhattan. The Club Rocker will also be introduced to the Orpheum 6 theater on the Upper East Side, along with a significant increase in legroom. This will transform the outdated Loews theater into a premier venue. We plan to continue incorporating the Club Rocker into more theaters, which is a smart, cost-efficient way to enhance our offerings. To address earlier inquiries about theater upgrades, we will both renovate existing theaters and add new locations. When we take over a theater, we might invest around $500,000 to $1 million to ensure it meets our standards. If additional renovations are needed, we could partner with landlords for shared investment. We expect to manage our capital expenditures more conservatively, aiming for around $200 million going forward, give or take $25 million. This is the current outlook on our spending strategy.

Sean Goodman, Chief Financial Officer

And that concludes the retail investor questions.

Adam Aron, Chairman and CEO

So let me just end the call by thanking you all for listening to us today and participating with us. It is going to be the strongest slate of moviegoing that this industry has seen since 2019. The year is starting off in double digits, which is a nice way to start. I leave you with this one thought that's dominating our thinking and my comments on this call, that notion of operating leverage, as revenues rise, EBITDA rises, and it does so at a geometric pace. We won't be all the way to where we need to be at the end of '26, but we expect to make a dramatic amount of progress. This should be a year that makes us all smile. Thank you for joining us today. See you at the movies.

Operator, Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.