Earnings Call Transcript - AMC Q2 2025

Operator, Operator

Good day, everyone, and welcome to the AMC Entertainment Holdings, Inc. Second Quarter Earnings Webcast. It is now my pleasure to turn the program over to John Merriwether, Vice President, Capital Markets.

John C. Merriwether, Vice President, Capital Markets

Thank you, Leo. Good afternoon. I'd like to welcome everyone to AMC's Second Quarter 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 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, free cash flow 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 earlier 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 website at amctheaters.com later today. With that, I'll turn the call over to Adam.

Adam M. Aron, Chairman and CEO

Thank you, John. Good afternoon, everyone, and thank you for joining us today. It's earnings at AMC and what a day it is, in this second quarter of 2025, AMC showcased the impressive operating leverage that is inherent in our business. Importantly, in Q2, movies from just about every single major and minor studio alike crushed it at the box office in spectacular fashion. With the second quarter domestic industry box office surpassing that of the first quarter of 2025 by a stunning 85%. At AMC, we are particularly pleased that on many of these second quarter movies, our market share way overperformed. That came in part because of our network of especially productive theaters, AMC and Odeon having more premium large-format screens than any other exhibitor on the planet and the effectiveness of our compelling marketing programs. In this year's second quarter, AMC and Odeon rolled out the red carpet for nearly 63 million guests worldwide, a 25.6% increase over the same period last year. Beyond merely attaining that attendance growth, AMC's revenue growth was actually 35.6% above last year's second quarter, adding in our very tight control of our costs, AMC drove an adjusted EBITDA increase of 391.4% to a highly gratifying $189.2 million. That's a good formula. Revenues way up, combined with quite tight management of costs, and it generated $150.7 million more adjusted EBITDA in this year's second quarter than was posted in last year's second quarter. It is a simple reality and hopefully a harbinger of things to come that as AMC's revenues grow, our EBITDA can soar. With such a sizable increase in adjusted EBITDA from $38 million and change last year to $189 million and change this year, our net cash provided by AMC's operating activities in the quarter surged to a positive $138.4 million, such a dramatic turnaround from last year's net cash used in second quarter operating activities of $34.6 million. That's a total favorable swing of $173 million improvement quarter-over-quarter. I would like to repeat those numbers so that all of you on this call and all of you on this webcast hear them very clearly. In the second quarter of 2025, AMC Entertainment delivered a 25.6% increase in global attendance above that of Q2 '24. Consolidated revenue growth of 35.6% versus Q2 of '24. Consolidated adjusted EBITDA growth of 391.4% versus Q2 of 2024. AMC's $189.2 million of adjusted EBITDA in Q2 2025 was just a hair under 5x the adjusted EBITDA of Q2 2024. Cash generated from our operating activities of a positive $138.4 million stood a favorable swing of $173 million in this year's Q2 versus Q2 of '24. Needless to say, it's all smiles at AMC today. Our second quarter results are a combination of a recovering industry-wide box office and the undeniable fact that both AMC and Odeon are executing so well in so many different ways. Indeed, we shattered all-time revenue records across nearly every per patron metric. As for the strengthening industry-wide box office, we firmly believe that this was not a short-lived spike, but rather the beginning of a sustained and powerful resurgence for our entire industry. So that expectations are set correctly, the box office in the current third quarter will only be so given some seasonality, but not alarming softness. But hold on to your hats for the size of the box office in the fourth quarter of 2025. Hello, Disney's Avatar: Fire and Ash, Tron: Ares, and Zootopia 2. Hello, Universal Wicked: For Good, and Five Nights at Freddy's 2. Hello, Glen Powell in Paramount for Running Man and, hello to so many other wonderful films that will be getting the big screens in theaters from so many of our studio partners in the fourth quarter of this year. In total, it sure looks like 2025 is shaping up to be the biggest post-pandemic box office year yet and one which we believe will be some $500 million to $900 million more than that of full year 2024. Even more compelling is the currently envisioned 12-month run rate for theatrical moviegoing after taking out the weak Q1 of 2025 and replacing it with the much stronger Q1 that we anticipate for 2026. Perhaps with an occasional blip here or there, we expect the 2026 box office will radiate with great strength and resonate with theatrical moviegoers pretty much all year long. Of particular note, this year, in 2025, the first quarter was terribly weak. In 2026's first quarter by contrast, we'll see the spillover benefits from Avatar: Fire and Ash's December 2025 opening, which, in our view, should greatly help to boost the Q1 2026 box office back up to a much healthier level. That should start the year 2026 off right, and we are highly encouraged by the extraordinary slate of films being released throughout the full year. It's our view, and we are far from alone with this optimism for 2026 that the 2026 box office will be considerably larger than that of 2025. Turning back to the performance of AMC and Odeon specifically in the just completed quarter. We set record after record in this year's second quarter. For the first time ever, AMC's consolidated admissions revenue per patron topped $12, coming in at $12.14. Our consolidated food and beverage revenue per guest jumped to a record of $7.95. And our total consolidated revenue per patron at AMC and Odeon hit an unprecedented $22.26 for us. We believe that these new records powerfully validate the rationale behind our various strategic initiatives and the fact that consumers view moviegoing at AMC and Odeon to be highly attractive out-of-home entertainment experiences. In addition to setting new operational records during the quarter and delivering a powerful earnings reported result, just as important, we've continued to fortify our balance sheet. As you know, in July, we just closed a series of transformative transactions, including receiving more than $240 million in cash from new debt issuance and the equitization of at least $143 million in debt with the potential to equitize even more up to a total of $337 million. We have now addressed all of our 2026 debt maturities, pushing them out to 2029. That's 4 years from now. In so doing, we've put in place a solid foundation to capitalize on what we believe will be our industry's continued growth momentum and our company's continued growth momentum, which should be especially evident in the fourth quarter of 2025 and continuing deeply into 2026. If I had to pick up just one set of words to characterize AMC's strong performance in the second quarter of 2025 and our optimism and our confidence about AMC's expected performance for 2026, it would be these. And I quote myself, impressive operating leverage. As AMC's revenues grow, our EBITDA at AMC can soar. I'll now pass this call and webcast over to Sean Goodman, our CFO, to provide more detail on the financial results, after which I'll return to provide an update on the AMC Go plan and others of our strategic initiatives, Sean?

Sean D. Goodman, Chief Financial Officer

Thanks, Adam, and thank you, everyone, for joining us this afternoon. We are pleased to report a quarter in which, as Adam just noted, the team set a number of very impressive records across both our domestic and international operations. Substantial year-over-year industry growth drove our attendance growth, which when coupled with record-breaking per patron revenue and per patron profit resulted in an outstanding set of results for the second quarter. Allow me to elaborate. I'm comparing consolidated results for Q2 2025 to Q2 of 2024. Global attendance rose 25.6% as we welcomed 63 million moviegoers to our theaters. Total revenue grew by 35.6% or 34.1% in constant currency, reaching $1.4 billion. Adjusted EBITDA grew fourfold to $189.2 million, and we generated free cash flow of $89 million, a $168 million improvement compared to the prior year's second quarter. These results were achieved through admissions revenue per patron growth of 7.5% or 6.2% in constant currency to an all-time record of $12.14. At the same time, food and beverage revenue per patron climbed 8.3% or 7.4% in constant currency to an all-time record of $7.95. And total revenue per patron grew 8% or 6.7% in constant currency to yet another all-time record of $22.26. Total revenue per patron is now up approximately 43% compared to pre-pandemic 2019. This is driven in a large part by an approximately 56% increase in food and beverage revenue per patron. Not only did we achieve the per patron revenue records that I just noted, we also grew our contribution margin per patron by 5.2% or 3.9% in constant currency to $14.48. Note this is approximately 48% higher than pre-pandemic 2019. And you'll recall that we calculate contribution margin as total revenue minus both film exhibition costs and food and beverage costs, and this is then divided by total attendance to get to a contribution margin per patron. This is a measure that is intended to provide an indication of the incremental profit that we generate with each additional guest. Based on all the above, it should come as no surprise that total admissions revenue hit a Q2 post-pandemic high of $762.6 million, and this is an important one. Total food and beverage revenue hit an all-time AMC high of $500 million. Our results highlight the significant operating leverage, as Adam just mentioned, that is inherent in our business. With attendance up 25.6%, our adjusted EBITDA margin in Q2 2025 was almost 1,000 basis points above last year's second quarter. It's worth noting that thanks to operating efficiencies, despite consolidated Q2 2025 attendance being some 35% below pre-pandemic Q2 of 2019, which is the quarter that holds the record for the highest quarterly attendance in AMC's history, thanks to the spectacularly successful Avengers Endgame, despite being 35% lower attendance, our consolidated contribution margin in Q2 2025 was just 4% below Q2 of 2019, and our consolidated contribution margin per screen was, in fact, 9% above Q2 of 2019. This all illustrates our conviction that the industry does not need to fully recover to pre-pandemic box office levels for us to achieve pre-pandemic levels of adjusted EBITDA. Up until now, I focused on the consolidated results and record achievements, but note that both our domestic and international theaters operated at record levels during the quarter. And that food and beverage revenue per patron and food and beverage profit per patron have never been higher at both our domestic and our international theaters. The second quarter results reflect the impact of our continued focus on creating an unrivaled guest experience through industry-leading innovations, coupled with our enviable theater footprint and the most comprehensive and growing selection of premium large-format offerings. Another driver of our success is the actions that we've taken to optimize our footprint and enhance profitability by renegotiating leases, closing underperforming locations and investing in high-performing new theaters. Since the beginning of 2020, we have now closed 204 theaters and opened 65, resulting in a net reduction of 139 locations or nearly 14% reduction. Notably, in just the last 18 months, we've closed 42 theaters and opened 6. Let's now turn briefly to our balance sheet. We ended the quarter with $423.7 million of cash and cash equivalents, excluding an additional $51 million in restricted cash. From a CapEx perspective, for the full year 2025, we expect CapEx less landlord contributions to be in the range of $175 million to $225 million. Our capital allocation priorities remain unchanged: one, ensuring adequate liquidity; two, reducing our financial leverage; three, enhancing our existing circuit; and four, pursuing high-return growth-oriented initiatives. With the first 2 capital allocation priorities squarely in mind, as Adam noted, we have recently taken important steps to strengthen our financial position. The collaborative and transformative transactions announced in July strengthen our financial position by: one, enhancing liquidity and addressing near-term debt maturities by raising more than $240 million of new capital before fees and expenses that are primarily being used to repay all debt maturing in 2026; and two, lowering our financial leverage by equitizing at least $143 million of exchangeable debt with the potential to equitize up to $337 million of such debt in total in the future. These actions, which were supported by approximately 90% of our term loan lenders represent a substantial vote of confidence in AMC's future and give us a runway to execute on our strategy and capitalize on the industry recovery. Since the beginning of 2022, we have now lowered the principal value of our debt and finance leases by more than $1.1 billion, and we've repaid $284 million of deferred leases. All of this for total debt and deferred rent reduction of $1.42 billion in about 3.5 years. Looking forward, we expect some seasonal box office weakness in the third quarter when we will also be up against some tough prior year comparators. However, we have high expectations for the fourth quarter, which may see the strongest quarterly box office in 6 years. From a free cash flow perspective, we're pleased with the strong Q2 results. And while Q3 may be somewhat challenging, we continue to anticipate being free cash flow positive for the 9-month period ending December 31, '25, assuming that the box office performs in line with our expectations. In conclusion, this quarter results reaffirm our conviction that our strategies are working and that AMC is extraordinarily well positioned to thrive as the industry continues along the recovery glide path.

Adam M. Aron, Chairman and CEO

And now I'll hand the webcast back over to Adam. Thank you, Sean. I'd like to begin by discussing what’s ahead for AMC, starting with some significant pricing actions we've recently implemented. Demonstrating our pro-consumer approach, on July 8 and July 9, we launched our new 50% off Tuesdays and Wednesdays ticket pricing strategy in the United States. Moviegoers can now enjoy reduced ticket prices during these two days at most of our domestic theaters. Discount Tuesdays has been a tradition in our industry and has made Tuesdays AMC's busiest non-weekend day. Recently, we've rebranded this initiative from discount Tuesdays to 50% off Tuesdays, which we believe better communicates the extent of the savings we are offering. This change allows potential guests to quickly grasp the value of the discount. Importantly, we have also expanded this pricing model to include Wednesdays, hoping to boost attendance on what has historically been our lowest attendance day. Although it’s too soon to declare success since we’re only four weeks into this initiative, we've observed notable increases in attendance and are encouraged by the initial numbers stemming from our new Tuesday messaging and extended discounts to Wednesdays at our theaters. There are two crucial points regarding our 50% off Tuesdays and Wednesdays initiative. Firstly, the discount is exclusively for members of our AMC Stubs loyalty program, which includes individuals who sign up instantly. This tactic incentivizes consumers to join our loyalty program, enabling us to engage with them directly and effectively. Secondly, knowing we would be prominently offering discounts allowed us the confidence to raise prices significantly at our U.S. theaters on the busy days of Thursdays through Mondays. This strategy has proven successful, as reflected in our second quarter performance, where AMC's average ticket price has outpaced that of many key competitors. In terms of yield management, although we employ different strategies at our European theaters, our Q2 results indicate that we've significantly improved ticket revenue per guest compared to previous quarters. Next, I want to highlight the effectiveness of our key marketing programs. Our U.S. loyalty program, AMC Stubs, has purchase data on approximately 36 million U.S. households, translating to around 90 million individuals. Nearly half of our ticket-buying customers are AMC Stubs members, attracted by points and additional recognition benefits. I am particularly excited about the launch of a new VIP tier in the Stubs program on January 1, which has already seen rapid growth with nearly half a million active members within just seven months—a remarkable achievement for AMC. Our A-List subscription program, which began in mid-2018, remains extremely popular, with members averaging about 30 movies per year. Recently, A-List received positive coverage in the Wall Street Journal and the Los Angeles Times, with the latter highlighting its strong appeal among younger Gen Z audiences. This is great for us, as it not only reflects current patronage but also suggests future loyalty as A-Listers continue to choose AMC for years to come. Membership in A-List is growing robustly, up by 15% year-over-year. Similarly, our European subscription program, Limitless, is also gaining traction, particularly in the UK. Another significant initiative has been our AMC Investor Connect program, which has successfully garnered 1.7 million enrolled members, turning retail investor interest into loyal moviegoing customers. Additionally, our advertising campaign featuring Nicole Kidman has resonated well in the U.S., the UK, and Europe, making her a pivotal part of our marketing strategy. Furthermore, our collaboration with notable artists and events continues to thrive. After successful projects with Taylor Swift and Beyonce, we also hosted a Billie Eilish album release event last year and recently showcased Eminem's documentary, "Stans." These efforts contribute to our expectation of receiving more compelling film products in the future. Now, let’s turn to our AMC Go initiative, focused on maximizing the opportunities presented by the recovering box office. We are actively working to enhance our premium offerings. We plan to double the number of IMAX auditoriums featuring upgraded laser projection technology and enhanced sound systems. Additionally, we will be adding more IMAX screens to our total of 220. We're also expanding our Dolby Cinema footprint by adding 23 new screens in the U.S. in 2025 and 2026, and we will continue to introduce more in subsequent years. Over the next few years, we aim to significantly increase our house-branded Prime and AMC PLF auditoriums and have already begun establishing more XL branded screens across the U.S. and overseas. This initiative showcases our largest auditoriums, ensuring superior viewing experiences with high-quality projections. Currently, over 40% of our U.S. screens are equipped with laser projection technology, which provides brighter and more vivid images. By year-end, we expect this number to exceed 55%. Our premium offerings are yielding positive results. We’re witnessing strong guest satisfaction, improved capacity utilization, increased visit frequency, heightened loyalty engagement, and rising ticket prices. AMC remains the leader in providing premium movie experiences, and we intend to build on that advantage, which we believe is vital for long-term profitable growth. As I conclude today’s prepared remarks, we acknowledge that there is still much to accomplish on our recovery journey. The overall industry box office remains lower than pre-pandemic levels. However, as Sean mentioned, our increased revenue per patron allows us to achieve higher EBITDA levels despite lower attendance and box office figures. Our efficiency gains, resulting from the improvements made over the last five years, give us confidence in the industry's resurgence, which now serves as a tailwind for AMC. With our strong second quarter results as a foundation and our proactive strategies to leverage the recovering box office, we are optimistic about AMC's future. My previous assertions have been validated by our recent performance. Our fourth quarter of 2024 showed an 18% increase in revenues, leading to a tripling of year-over-year adjusted EBITDA. In Q2 of 2025, we saw revenues rise by more than 35%, nearly quintupling our adjusted EBITDA, showcasing impressive operational leverage. As AMC's revenues increase, so too does our adjusted EBITDA. Sean, with that, let’s move on to questions from our equity analysts and retail shareholders.

Operator, Operator

We'll take our first question from Eric Wold of Texas Capital Securities.

Eric Christian Wold, Analyst

So you talked a lot about pricing Adam. You obviously mentioned the 50% off Wednesday pricing you implemented about a month ago to bring in the bargain hunters. And you also mentioned you took up or felt comfortable enough to raise prices every day of the week on Tuesday. And I think you still have surcharges on some of the blockbuster films kind of opening weekend. So I guess you're comfortable raising prices on tickets kind of in this macro environment. Maybe talk a little bit about food and beverages. What are your thoughts there once you get the consumers into the theaters? Are you taking up prices on food and beverage? Are you more focused on driving incidents and getting people to the counters instead of taking up price? Where is the focus there? And what is the best way that you found to drive incidents recently? What's worked the best there?

Adam M. Aron, Chairman and CEO

First of all, hello, Eric, welcome back. It seems like your return has brought great fortune, leading to an outstanding quarter. Regarding ticket pricing, I think our improved messaging on Tuesdays, calling it "50% off Tuesdays" instead of merely "discount Tuesdays," will better communicate the level of discount and help increase our Tuesday revenues. Additionally, since we have successfully applied this Tuesday pricing strategy for over a decade in the cinema industry, I believe we can apply a similar approach to Wednesdays. Previously, we did not sell any tickets on Wednesdays, so the price we charge on that day has little effect. I am optimistic that we can elevate Wednesday admission revenues to compete with Tuesday's, transforming it from the lowest attendance day of the week to the strongest non-weekend day. The early signs are promising, although it has only been four weeks, and consumers seem to be responding well. As I mentioned, addressing Tuesdays and Wednesdays has allowed us to raise prices on Thursdays and Mondays without any resistance. Just two weekends ago, our average ticket price in the United States exceeded $14, which is notable compared to where pricing has been in recent years and even today with some competitors. Our confidence about the pricing decisions we have made, which I want to clarify are retrospective, stems partly from the success of our Premium Large Format auditoriums. These auditoriums typically charge a higher fee for formats like IMAX or Dolby Cinema compared to regular screens. Our prime formats can command $3 to $6 more, while our RealD 3D screens generally charge $3 to $4 more than standard screens. These formats have been very successful; whenever we release a movie, the first tickets to sell often come from our premium large-format screens at prices 30% to 50% higher than those of our regular auditoriums. This clearly indicates that consumers are willing to pay a premium for the best experience. Therefore, our goal at AMC is to provide that best experience, which is why we're introducing laser projection in our regular auditoriums. Currently, 43% of our U.S. screens feature laser projection, and we expect that to rise to 55% by the end of the year. This technology enhances brightness and sharpness, significantly improving the quality of experience for our guests, which reinforces our confidence in the recent price increases. Now, moving to your question about food and beverages, we are addressing this from multiple angles. Firstly, we are enhancing menu variety not just at our dine-in theaters but also at our regular concession stands to make them more appealing and interesting for our guests. Secondly, due to the increased variety, we have successfully encouraged guests to purchase more items per transaction. Guests who previously bought one item are now buying two, three, or even four. We have also seen a substantial increase in the number of patrons who stop at the concession stand to make purchases. An astonishing number of people can enter a movie theater, paying an average ticket price of $12 to $14, which is even higher for premium formats, and still buy nothing and head straight to their seat. In fact, at AMC, the total number of people who come in and buy nothing exceeds the attendance of any major League Baseball team in the American or National Leagues, which is remarkable. However, since we reopened from COVID, we’ve noticed that more people are now stopping at the concession stand and exploring our offerings. This has been supported by a variety of innovative items such as movie-themed drinks, which we now feature almost every weekend, and they have proven to be quite profitable. Additionally, we offer multiple popcorn flavors and a wide array of beverage options from our freestyle machines, setting us apart from theaters that only have limited selections. Overall, these improvements are resulting in more guests making purchases at the concession stand and increasing the average number of items they buy, and yes, we have also adjusted some prices upwards.

Eric Christian Wold, Analyst

If I can ask one more question, you signed the amended agreement with National Cine Media a few months ago to increase the number of advertisers before showtime starting in July. There have been recent reports suggesting that you might be reducing that number already. Can you provide any comments on whether that reduction is true, and what is prompting such a quick change after the extension?

Adam M. Aron, Chairman and CEO

The reports you've heard are both accurate and inaccurate. You have part of the story, but not all of it. There were two main reasons for our deal with National CineMedia. First, our two biggest competitors, Regal and Cinemark, have been doing similar deals for about six or seven years without harming their market share. This meant we were giving up tens of millions of dollars a year, especially noted during a challenging first quarter for revenues and profitability. It felt irresponsible to miss out on revenue that our competitors were benefiting from. The second reason relates to our acquisition of Carmike in 2016, which came with a contract with Screenvision, a major competitor of NCM. Screenvision's preshow ran for five minutes after showtime, while NCM's ended at showtime. This created inconsistency across our theaters. With the NCM contract, we've now allowed them to provide the same five-minute preshow that Screenvision has had since 2016, and we didn't encounter any negative feedback at our Screenvision theaters regarding the preshow length. The only other addition is a one-minute platinum spot that plays before the second-to-last trailer. The NCM deal represents considerable financial growth for us. Reports suggesting we're cutting back are misleading; we have a solid, long-term agreement with NCM. However, we are looking to streamline our preshow content, which currently includes around four minutes of AMC marketing materials and other promotional content. We believe we can reduce this by two to three minutes. We're also reviewing the number of trailers shown compared to our competitors, as it seems we're currently showing more than they do, resulting in additional time. When we finalized the NCM deal, we anticipated the need to make some trade-offs in trailers and marketing content to balance the additional NCM time. For example, we usually feature a one-minute promotional teaser for IMAX or Dolby before films, but we believe cutting it to 45 seconds will maintain effectiveness while saving time. Our goal is to adjust the preshow without changing our commitment to NCM, ensuring a balance that satisfies both consumers who enjoy trailers and those who think they take too long. We're also improving communication about movie start times so that those who wish to avoid previews can arrive later without missing the show. This summarizes our approach to the NCM and preshow situation.

Chad C. Beynon, Analyst

Nice quarter. I wanted to ask about just the overall portfolio, Adam. And Sean, you went through the net closures over the past couple of years. I think this was one of the first quarters where there was almost 0 net closures sequentially. So with that in mind, can you just talk about given the profit outlook and the more positive view on the industry, are we at a point where we might start seeing net adds going forward? Obviously, understanding that leases come up on an annual basis, but just kind of thinking about the portfolio and the cash flow per screen, could this start to be a floor in terms of the number of units in your portfolio?

Adam M. Aron, Chairman and CEO

Thank you for the question, Chad. There was a crucial statistic that Sean didn’t mention regarding the 205 closures and 65 openings. I’m not sure if it was exactly 205 and 65, but it was around that number. What’s important to note is that the 65 openings are generating more revenue than the approximately 204 closures. Simply looking at the number of closed theaters doesn’t reflect the bigger picture. The profitability of the new theaters we’re opening is more significant compared to the theaters we’re closing, most of which were unprofitable. The new theaters have been performing exceptionally well, with several among our highest-grossing locations in the U.S. Notable examples include The Grove and Americana in Los Angeles, along with Porter Ranch and Topanga 12. Both The Grove and Americana rank among our top 10 highest-grossing theaters consistently. Similarly, Porter Ranch and Topanga are part of the top 25 or top 50 highest-grossing theaters out of 540. Collectively, our new theaters are considerably more successful and are in prime locations, outshining older theaters that have become less viable over time. About 10% of our leases come up for renewal each year, which means roughly 100 theaters, and I wouldn’t be surprised if we closed around 10 of them. While I don’t believe we’ve hit an absolute bottom, it’s safe to say that virtually all theaters we close are not profitable, negatively impacting our overall EBITDA. As these theaters close, our company’s EBITDA improves. We may continue to close 5 to 15 theaters a year in the upcoming years, but we are actively seeking new locations in prime areas. For instance, we’re opening a theater in Chicago that we anticipate will be among the top earners there. The theaters we’re opening are outgrowing those we’re closing and generating more EBITDA. Eventually, we expect to reach a stage where we add more theaters than we close. Currently, we’re not quite there, but we are being presented with attractive theater portfolios for M&A at favorable prices—around 3 to 4 times EBITDA. Looking ahead over the next 36 months, we might see significant additions through interesting acquisition opportunities that could enhance our fleet significantly.

Chad C. Beynon, Analyst

Lastly, quickly, Sean, just on the big beautiful build benefits to CapEx generating companies. Can you just talk about, as you see it now, maybe what some of the cash benefits could be either from a cash tax standpoint or a cash shield standpoint in future years?

Sean D. Goodman, Chief Financial Officer

As a result of that build, we gain two key advantages. One is the depreciation deduction, and the other is the interest deduction based on EBITDA instead of EBIT. This is beneficial for us, but we have net operating losses that will likely extend through 2026. Therefore, the cash benefits will only materialize in future years, specifically in 2027, 2028, and beyond. While this increases the net operating losses for future cash deductions, it does not provide a short-term cash benefit; it is more of a long-term financial advantage for us.

Operator, Operator

Thank you. We have no further questions at this time. I'd be happy to return the call to Adam Aron.

Adam M. Aron, Chairman and CEO

Thank you, Leo. We're going to now take a couple of questions from shareholders. Sean?

Sean D. Goodman, Chief Financial Officer

Sure.

Adam M. Aron, Chairman and CEO

What came in from our retail investors.

Sean D. Goodman, Chief Financial Officer

Yes. So just briefly, the first question is just asking if we have any reaction to Skydance's acquisition of Paramount, that's not just closed.

Adam M. Aron, Chairman and CEO

We definitely have a comment regarding Skydance's acquisition of Paramount. Firstly, our relationship with Paramount has been strong over many years and I want to especially thank Brian Robbins and his team for being excellent partners for AMC. However, we are optimistic about Skydance's acquisition, as Paramount has struggled financially lately, resulting in fewer movies being produced. In contrast, Skydance seems to have ample resources, and we expect them to release more films from Paramount than it has in recent years. David Ellison is experienced in the film industry and has been involved in significant projects like Top Gun: Maverick, which helped revive the theater business post-COVID with its impressive $1.5 billion global gross. This success has highlighted to studios that both streaming and theatrical releases are important, as evidenced by Top Gun: Maverick being the most-watched film on Paramount Plus thanks to its outstanding box office performance. With David and Skydance aiming to increase movie production, combined with the new President of Skydance, Jeff Shell, who has a great reputation and history with us, we believe there will be positive changes for theatrical exhibition at Paramount.

Sean D. Goodman, Chief Financial Officer

Terrific. Do you want to comment about AMC distribution? We just made the Eminem announcement last weekend. Anything you'd like to point out on AMC distribution and future opportunities there?

Adam M. Aron, Chairman and CEO

Sure. Two years ago, we had significant achievements with Taylor Swift and Beyonce. Since then, we've engaged in numerous discussions with many top artists; some deals nearly came together but ultimately fell through, while others were successful. Last year, we released a Billie Eilish album, and over the weekend, we debuted an Eminem documentary that has been well-received by his fans, with impressive ratings on Rotten Tomatoes. Currently, we are in discussions with more high-profile talent regarding upcoming projects set for release in 2026. This has also encouraged us to explore broader distribution strategies for films. We have successfully distributed concert movies in the past and are considering potential opportunities to release non-concert films in theaters as well. The majority of our content will continue to come from our studio partners, but I see a chance for opportunistic profit. The movie theater industry has significant excess capacity. To put it in perspective, in the airline industry, if less than 75% of seats were filled, it would be a grave concern. Yet in the movie theater industry, we operate at less than 20% occupancy throughout the year. There is a lot of capacity available, and we certainly have the screens ready to showcase more content if it becomes available.

Sean D. Goodman, Chief Financial Officer

Terrific. And Adam, finally a question here on AI and the impact on our business and the extensive benefits. I wonder if you'd like to comment on that.

Adam M. Aron, Chairman and CEO

Every company in America is discussing AI, and our Board of Directors is no exception. We are engaged in conversations about AI as well. The AI revolution is advancing rapidly. Personally, I have moved away from Google in favor of ChatGPT, and we see opportunities to leverage AI in various aspects of our operations. We are already using it for software development, optimization, and testing, as well as for marketing image creation. In our corporate office, we employ AI for task automation and simplification, including processing accounts payable. Our teams in theaters are exploring AI's potential to solve operational challenges, and we are implementing it in demand planning for inventory management. However, this is just the beginning. Looking ahead, we see significant opportunities to utilize advanced AI technologies to enhance our pricing strategies, film scheduling, customer service, and consumer feedback programs. Perhaps most exciting, we are currently in discussions to make small investments in AI technology-enabled companies that have promising prospects in the entertainment and movie industry. We aim to fully capitalize on the AI revolution that is already underway.

Sean D. Goodman, Chief Financial Officer

Terrific. I think that's all the questions that we have at this point.

Adam M. Aron, Chairman and CEO

Great. All right. Well, look, thank you, everybody, for joining us today, for staying with us. The second quarter of 2025 was one that made us very excited here at Leewood, Kansas. We delivered big numbers, almost a quintupling of our EBITDA. We were ahead of the street on just about every expectation you all had for us. And we think this is just the beginning of something that's going to happen quarter after quarter starting in the fourth quarter of 2025. Remember what I said, in the fourth quarter '24, revenues were up 18%, EBITDA tripled. In the second quarter 2025, revenue was up 35% and change. Our EBITDA was quintupled. There's enormous operating leverage in this business. If we can finally have the wind in our backs with rising industry revenues, the sky is a limit for the EBITDA that AMC can generate as a result. Thank you for joining us today. We'll talk to you in 90 days.

Operator, Operator

This does conclude the AMC Entertainment Holdings, Inc. Second Quarter Earnings Webcast. You may now disconnect. And everyone, have a great day.