AMC Entertainment Holdings, Inc. (AMC) Earnings

Management highlights

- **Overall Financial and Operational Results * Achieved all-time record quarterly revenue ($1.6 billion) and adjusted EBITDA ($321.4 million) in AMC's 106-year history, exceeding consensus analyst expectations * Outperformed industry box office growth: domestic ticket revenue growth of 11.4% beat the 10.7% domestic industry box office increase, and European attendance growth of 17.9% beat local industry attendance growth by 170 basis points * Reported $190.1 million in free cash flow for the quarter, with a 66% incremental revenue flow-through to adjusted EBITDA pushing the adjusted EBITDA margin up 650 basis points to 20.1% * Generated 6% higher total revenue and 39.5% higher adjusted EBITDA than Q2 2019 (pre-pandemic), despite a 7.5% lower North American box office, 26.5% lower attendance, and 16% fewer theater locations, proving pre-pandemic box office levels are not required for strong profitability - **Balance Sheet Improvements * Reduced total debt by $1.7 billion compared to the end of 2020 * Refinanced $400 million of 2027-maturing debt to extend maturities to 2031, eliminated $155.8 million of 2030 exchangeable debt via equity conversion, and completed multiple equity offerings to raise gross capital * Completed a $200 million registered direct equity offering and exercised the right to redeem $125.5 million of 6.125% senior subordinated notes due 2027, resulting in no material debt maturities prior to 2029 * Reduced annual go-forward cash interest expense by a total of $67 million ($16 million from debt repayment/refinancing, $51 million from automatic interest rate reductions tied to improved leverage ratios), ending the quarter with $778 million in unrestricted cash on hand - **Theater Portfolio Optimization and Guest Experience Investments * Closed 7 underperforming theaters in Q2, resulting in a net reduction of 159 theaters (16% of the global circuit) since 2020 * Added 6 new premium large format (PLF) and 25 new extra large (XL) auditoriums in Q2, bringing total premium/enhanced auditoriums up 50% compared to 2020 levels, with new low-cost AMC Club Rocker seating offering improved comfort with minimal seat loss and capital expenditure * Holds a global industry leading position in premium screens: 750 total PLF/XL screens across IMAX, Dolby Cinema, iSense, Prime, ScreenX, 4DX, and XL formats, representing just 8% of total screens but over 50% of ticket gross for blockbuster titles like *The Odyssey* - **Customer Loyalty and Pricing Strategy * AMC Stubs loyalty program counts over 40 million participating U.S. households, representing over 50% of total U.S. guest count, enabling targeted marketing and higher guest retention * U.S. A-List subscription program has grown to over 1.1 million members (double the count 5 years ago), representing ~20% of U.S. patronage, with particularly strong appeal to Gen Z moviegoers and delivering consistent attendance * Grew incremental movie-themed merchandise revenue from zero 4 years ago to a projected $100 million annual run rate in 2026

Guidance

- Full year 2026 is projected to be the strongest post-pandemic year for both domestic and global box office, supported by a strong blockbuster slate including upcoming *Spider-Man: Brand-New Day*, *Dune: Part Two*, and *Avengers: Doomsday* - Net capital expenditure for full year 2026 is guided to between $200 million and $235 million, with management maintaining strict capital discipline and only investing in high-return projects - Management plans to add 100 to 250 additional PLF and XL auditoriums globally over the next 2 to 4 years, mostly funded via third-party co-investment from partners and landlords - AMC's current 12-month free cash flow breakeven domestic box office level is ~$10.4 billion, down from pre-pandemic levels despite 7 years of inflation, and the breakeven level continues to fall as debt is reduced and interest expense declines - Management's long-term target leverage ratio is approximately 3x; leverage is currently below 6.5x, down from double-digit levels in recent years, and management will continue working to reduce leverage further

Segment performance

**U.S. Segment**: Adjusted EBITDA increased 57.5% year-over-year to $285.6 million. Admissions revenue grew 11.4% (70 basis points ahead of industry domestic box office growth), with food and beverage per patron and total revenue per patron hitting all-time records. Loyalty program members account for over 50% of total U.S. guest count, and A-List subscription members made up ~20% of U.S. patronage in Q2 2026. This segment contributed ~88.9% of total company adjusted EBITDA for the quarter. **Europe (International) Segment**: Attendance increased 17.9% year-over-year (170 basis points ahead of local industry attendance growth), and adjusted EBITDA surged 337% year-over-year to $35.8 million. Currency appreciation against the U.S. dollar boosted segment revenue and EBITDA by approximately 2% year-over-year. Food and beverage per patron and total revenue per patron also hit all-time highs in the segment. This segment contributed ~11.1% of total company adjusted EBITDA for the quarter. Total company Q2 2026 revenue was $1.6 billion, up 14.2% year-over-year; adjusted EBITDA was $321.4 million, up 70% year-over-year; global attendance was 71 million guests, up 13.5% year-over-year; food, beverage and merchandise sales grew 15.3% year-over-year; and other revenues grew 16.1% year-over-year.

Risks & headwinds

- Forward-looking results are inherently uncertain, and actual outcomes may differ materially from projections due to factors outside of AMC's control, including fluctuations in box office performance, film slate availability, macroeconomic conditions, and changes to market interest rates - The company has not yet achieved consistent full-year positive free cash flow, and remains above its target long-term leverage ratio, requiring continued operational improvement and debt reduction - Ongoing cost inflation for wages, supplies, and other operating expenses could pressure margins if cost discipline cannot be maintained - Equity dilution from past and potential future capital raises has been unpopular with some shareholders, though management notes such actions were required for long-term survival

Analyst Q&A

• Q: How sustainable is AMC's recent strong cost discipline, and will continued revenue growth drive similar operating leverage in the second half of 2026? What is the current 12-month free cash flow breakeven box office level for AMC? /

  A: While one-time items benefited Q2 2026 cost results, management says its team will remain maniacally focused on cost containment going forward. The magnitude of future margin improvements will depend on revenue growth, but the company will continue prioritizing faster revenue growth relative to expense growth. AMC's current 12-month free cash flow breakeven box office level is around $10.4 billion, far lower than expected even after 7 years of inflation, due to gains in profit per patron and cost cutting. Continued interest expense reductions from debt paydown will push this breakeven level even lower, and AMC is very close to full-year free cash flow positivity.

• Q: How much opportunity remains for PLF and XL auditorium upgrades in Europe, what is the ROI of these projects and recliner upgrades relative to the U.S., and are you on track to hit your 100-250 net new premium screen target? /

  A: The growth opportunity for premium upgrades in Europe is similar to the U.S., with higher recliner penetration already in place and high returns from Luxe theater conversions. ROI for these projects is consistently 30% or higher, often reaching 40-50%, with XL screens delivering extremely high returns due to their low under $20,000 per-screen capital cost. Many projects are co-funded by landlords and technology partners, and AMC will maintain strict capital discipline by only investing in the highest-return opportunities across both the U.S. and Europe.

• Q: What pricing opportunities does AMC see for admissions and concessions in the second half of 2026 and 2027? /

  A: Management cannot discuss forward-looking pricing strategy, but notes that past pricing actions have been flexible: discount initiatives like midweek cheap ticketing and the A-List subscription program have driven attendance on low-demand days and increased consistent patronage, while premium formats command healthy 10%+ price premiums for high-demand blockbusters. Much of AMC's revenue per patron growth actually comes from mix shift (more guests choosing premium offerings) and new high-margin revenue streams like movie-themed merchandise, not just base price increases, with merchandise on track to hit $100 million in annual revenue in 2026.

• Q: What is AMC's target long-term leverage ratio, and what is the outlook for future capital expenditure levels? /

  A: Management's target long-term leverage ratio is ~3x; leverage has fallen dramatically from double-digit levels to under 6.5x in the last six months, and the company will continue reducing debt and growing EBITDA to hit the target. 2026 CapEx guidance reflects the large pipeline of high-return projects available this year, but future CapEx will remain disciplined, dependent on box office performance and project ROI, with no preset levels for 2027 and beyond.