AMC 電影院 (AMC) 2017 Q1 法說會逐字稿

Greetings, and welcome to the AMC Entertainment First Quarter 2017 Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, John Merriwether, Vice President, Investor Relations.

Thank you, Mr. Merriwether.

You may begin.

Thank you.

Good afternoon.

I'd like to welcome, everyone on today's call and those of you listening on the webcast to AMC's first quarter 2017 earnings conference call.

With me here this afternoon is Adam Aron, our Chief Executive Officer and President; and Craig Ramsey, Executive Vice President and Chief Financial Officer.

Before I turn the call over to Adam, let me remind everyone that some of the comments made by management during this conference call may contain forward-looking statements, which 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 public filings under 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 to not 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 this afternoon's call, we may reference measures such as adjusted EBITDA, adjusted EBITDA margin and constant currency, which are non-GAAP financial measures.

For a full reconciliation of our non-GAAP measures to GAAP results, please see our first quarter earnings release issued about an hour ago.

In conjunction with our first quarter earnings release, we encourage you to review the CFO commentary for the 2017 first quarter that we published in tandem with the earnings release, which includes select historical pro forma information.

After our prepared remarks, there will be a brief question-and-answer session.

This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website later this evening.

With that, I'll turn the call over to Adam.

Thank you, John and good afternoon, everybody.

Let me start today's call by saying that I hope that every year will start out with a first quarter like 2017.

AMC set one performance record after another and AMC's adjusted EBITDA performance in Q1 2017 of $251.3 million fills us with confidence about AMC's earnings power and potential in our new configuration as the largest movie theater operator in the world, diversified across 15 countries.

The advances for AMC that were set into motion in 2016 all showed up to color our performance so far in 2017.

We continue to make enormous progress on each of the 3 strategic legs that buttress and support AMC, the so-called 3 Es: to expand our company, to enhance our theaters and to engage our guests through world-class marketing activity.

AMC's first quarter was marked most noticeably by our growth to more than 1,000 theaters and more than 11,000 screens, thanks to the closing of our Carmike and Odeon acquisitions late in Q4 '16, and the signing and ahead-of-schedule closing of our Nordic Cinema Group acquisition, wholly within Q1 '17.

Our integration of these added theaters has gone incredibly smoothly and we have moved fast to capture expense synergies that were promised as these acquisitions were announced.

As for theater enhancement, we quickened the deployment pace for our strategic initiatives, with more theaters now equipped with recliner seating than anyone else in our industry, and their attendant investment return metrics still being quite lucrative and well ahead of the 25% cash-on-cash unlevered returns of our investment hurdles.

Similarly, food and beverage enhancements are flowing through our system quickly.

Coca-Cola Freestyle machines are in virtually all of our domestic theaters as we speak.

We should be at about 275 MacGuffins bars by the end of this year.

And the New York Times just highlighted our bold plans to increase the variety and quality of our concession food menus across all of the approximately 400 theaters in the AMC brand, with these new menus rolling out across the network June through October of this year.

Our marketing activity continues to amaze even us.

Literally all of the Carmike Theatres will cut over to the AMC brands, programs, websites and systems by the end of this week, with the Carmike name retired.

And speaking of the efficacy of those marketing programs, AMC Stubs partition -- participation continues to soar.

As of today, we have 7,553,209 AMC Stubs member households.

We previously announced hitting 5 million member households on December 19 of last year; announced 6 million member households on February 13 of this year; and 7 million member households on April 13, less than a month ago.

So in a year, we've tripled the Stubs membership to numbers that we believe are light-years ahead of any other exhibitor program and the numbers continue to grow rapidly.

Now let's turn more specifically to first quarter results, which are the reflection of the strategies that we've been putting into play.

The old adage that records are made to be broken is certainly true for AMC, and the records we just achieved in 2016 are already falling.

We, again, set new all-time-high first quarter records for every single revenue segment, smashing through the quarterly $1 billion ceiling to grow total revenues by 67.5% to a record $1.28 billion in the first quarter.

In the process, more importantly, AMC grew adjusted EBITDA 71.6% to a record $251.3 million while increasing adjusted EBITDA margins by 50 basis points to 19.6%.

Adjusted EBITDA is a key financial metric for AMC as it's the basis upon which the vast majority of financial analysts, both sell side and buy side, value us and our peers.

For the most part, our stock is valued as a multiple of adjusted EBITDA, less net debt, which we believe is an appropriate valuation basis.

These outstanding record results for Q1 2017 exceed all consensus estimates for both revenues and adjusted EBITDA for the first quarter.

We likewise met or exceeded all consensus estimates for diluted EPS of $0.07 per share in the first quarter.

Diluted EPS would have increased 6.1% to $0.35 per share in the first quarter compared to $0.33 last year but for 2 items.

First, a nearly $36 million increase in one-time merger and acquisition costs, $23 million of which related to an MCM exclusivity waiver needed to be able to proceed with the Carmike acquisition; and two, a 23.6% increase in average outstanding diluted shares, primarily related to our recent equity offering.

Breaking down some of the highlights from our U.S. and international segments and a reminder going forward, we will report both U.S. and international numbers separately.

The U.S. results include the benefit of the Carmike acquisition as U.S. admissions revenues increased 28.6%.

This was driven by a 30.8% increase in attendance and a slight decline in price owing to the less expensive Carmike theaters joining into our system.

U.S. food and beverage revenues increased 33.7%, which included the aforementioned attendance gain, and a 2.3% increase in food and beverage revenue per patron.

All of this contributed to a 35% increase in U.S. adjusted EBITDA and an 80-basis-point increase in adjusted EBITDA margin to 20.0%.

Our new international theaters produced $291.2 million of total revenues and generated $53.2 million of adjusted EBITDA at an 18.3% margin, as U.S. films played well at Odeon theaters, particularly in the U.K. and Ireland.

All this took place against a backdrop of a strong North American industry box office, which as most of you know, saw a 4.5% increase in box office growth.

The slate for the remainder of 2017 looks strong to us.

We think it's a great time to be part of the large stable, strong and growing film industry and now as the clear market leader, it's a great time also to be AMC.

Let's return to the 3 strategic drivers of AMC's success in the first quarter: enhance, engage and expand.

We see that our commitment to improving the guest experience continues to serve us and our guests very well.

We continue to invest in innovation at AMC and nearly all the $159 million of CapEx in the first quarter was invested domestically, with most of the dollars used to deploy more reclining seating at more theaters, followed by enhancing food and beverage choices and also installing more premium large-format screens.

As of March 31, 2017, including our Dine-In Theatre locations, spot acquisitions, new builds, Dolby Cinema auditoriums and full recliner reseat renovations, AMC operated 2,078 U.S. recliner screens in 208 theaters.

Of the 75 theaters with recliners that have been open for more than a year, these theaters are seeing attendance lifts between 40% and 60%, average ticket price increases of 7% and total revenue increases averaging 64% in the first 12 months after renovation compared to the last 12 months before renovation.

Our recliner renovation investments are still comfortably exceeding our 25% unlevered cash on cash return hurdles, while handily outperforming the first quarter U.S. industry box office revenue per screen by 830 basis points and also outpacing U.S. industry attendance per screen by 270 basis points.

In having more recliner screens than any other U.S. circuit, recliners as a percentage of AM's U.S. theater count are now 32%, virtually all of them in the legacy AM circuit and very few in the Carmike circuit.

As long as the financial returns stay as solid as they are now, we expect to renovate an additional 118 theaters in the United States, representing 1,480 U.S. screens in 2017 and 2018, which would bring us to 326 recliner-equipped theaters in the U.S. That's about 51% of our entire domestic footprint, including all of the theaters of the newly-acquired Carmike circuit, which were off to a very slow start under prior ownership.

So the opportunity with all these recliner-equipped theaters to deliver outsized performance of returns in the immediate term ahead is clear.

Continued investment in our strategic initiatives across both our legacy and acquired theaters will continue to create value for AMC and for our shareholders.

We are also rolling out more premium large formats or so-called PLF experiences.

During the first quarter of 2017, we added 19 Dolby screens to bring our total as of March 31 to 67, and we'll be moving to more than 100 Dolby Cinema auditoriums by the end of this year, 2017.

Guests continue to rave about the comfortable seats, immersive sound and visual experience of Dolby Cinema at AMC and are willing to pay about a 70% price premium to enjoy this unique experience.

Also getting a 70% price premium, we also deployed 3 new IMAX screens to bring our total IMAX screens worldwide to 198, including 179 in the U.S., increasing our position as the largest IMAX operator in North America.

And as promised in late February, we opened our first proprietary private label PLF named Prime at AMC at an AMC theater location in Marlton, New Jersey.

Prime at AMC has been designed to offer a premium experience without as high an upfront capital investment required nor will we need to share economics with a third-party.

Early indications are showing positive results.

We have high hopes, both for Prime as well as for our existing Dolby and IMAX brands.

We believe that Prime at AMC will expand the number of theaters where we can offer premium experiences to our guests in theaters that can support an IMAX or Dolby level of investment, but we'll be doing so as we continue to grow at a fairly brisk pace the number of IMAX and Dolby PLFs as well.

Speaking of PLFs, we just this month announced an agreement to launch 25 more IMAX screens in Europe in addition to 3 already in construction and are in active discussions with Dolby Labs to expand its Dolby Cinema European footprint as well.

Taken together, AMC expects to be operating more than 300 PLF screens globally by the end of 2017.

Let's do a little more on marketing, which is designed to create ways to keep our customers coming back.

We could not be more excited about our AMC Stubs loyalty program and the redesigned website and mobile apps that span the divide between the physical theater setting and the digital experiences our consumers prefer.

As previously mentioned, our rapidly growing number of AMC Stubs members accounted for approximately 25% of all ticket sales in Q1, and will soon account for more than 30% of all AMC moviegoers in the United States.

These tens of millions of purchase histories now captured in our database offer us a treasure trove of data and consumer information for us to use to market AMC and future moviegoing more effectively.

Thanks to our new website and smartphone app, both launched on November 30, more and more of our guests are utilizing the AMC website and app to buy their tickets.

In the first quarter, we sold 31% of our tickets online; that's a 600-basis-point increase over last year.

And of our total online sales, the AMC channels sold 49% of those online tickets.

That's a 1,300-basis-point increase compared to last year.

Clearly, we're developing the desired connections with our guests by offering a fast, easy and convenient solution that's driving ticket sales.

And finally, let me provide you just a bit more color on our 3 acquisitions.

The integration of Carmike into AMC is running very smoothly.

As you know, we are retiring the Carmike name and are rebranding all our theaters as AMC, about 400 of the 644; or AMC Dine-In, about 45 of the 644; or AMC Classic, about 200 of the remaining theater locations in the U.S. However, as our AMC and AMC Dine-In Theatres are considerably larger and get considerably more visitation, only about 10% of our revenues will fall under the AMC Classic marquee.

We have made great progress with the conversion of the acquired theaters.

We only have 2 Carmike theaters as we speak, and by the end of this week, all Carmike theaters will have gone through their cutover to AMC systems, processes and brands.

There have literally been no operational snafus of any note to report to you, and the new larger AMC is showing movies every day without pain in a much bigger national footprint.

We have moved especially fast to realize cost synergies.

There are only 6 employees still remaining in Carmike's Georgia headquarters, and the buildings themselves are already under contract to be sold.

The Carmike corporate jet has similarly been delivered to its new owner.

Films are being licensed under the new prevailing AMC contracts, with film rent splits more favorable to us than the much smaller Carmike was able to achieve on its own.

Even so, we expect over time to deliver much more box office revenue from the previous Carmike outlets so our studio partners should also benefit from the arrival of AMC on scene.

Now speaking of revenues, we are very pleased that the legacy AM theaters, which are those theaters that were AMC prior to the Carmike acquisition in the United States, outperformed the industry in Q1, with box office revenue growth of 6.2%.

This proving that the AMC initiatives put into play in 2016 are working well.

By contrast, with Carmike, we have inherited a circuit that was showing revenue weakness in 8 of the 12 months in 2016 and in 3 of the 4 months in the last trimester of 2016.

Candidly, that was one of the allures to us of acquiring Carmike.

As we look to the end of 2017 and into 2018, we are highly confident that AMC's marketing activity and product ideas will generate a meaningful revenue boost to the Carmike theaters just newly added to our domestic platform.

Fortunately, we were so aggressive in reducing expense and in achieving expense synergies that the cost savings are offsetting short-term revenue softness -- again, which I'm quick to add, we expect to reverse soon on our watch.

To do so, we have assembled a key operational team to review every aspect of theater operations of the acquired Carmike theaters, from operating our show start staffing, marketing, concepting, every conceivable aspect.

We have been developing comprehensive plans for Carmike theaters theater-by-theater to ensure optimal revenue, pricing and attendance.

Similarly, the Odeon integration is also progressing very well and as planned.

In fact, our international revenues at the Odeon locations are booming.

In constant currency, up 11.8%, with admissions revenue up 11.4% and food and beverage revenue up 13.8%.

Progress is also impressive in our moving ahead rapidly with our strategies for theater renovations and bringing proven AMC initiatives to European moviegoers.

To date, we have already met with the landlords of more than 40 Odeon theaters to review our plans and seek their co-investment.

Their response has been overwhelmingly positive, so much so that we can report to you today that we expect to have approximately 25 theaters fully renovated by the end of 2018, with far more coming in 2019 and 2020.

An interesting fact to come out of our detailed integration work is that Odeon is actually starting putting a toe in the water of recliner seating.

Admittedly, it was small.

It was only a few rows in this auditorium or a few auditoriums in that theater, but results in 4 Odeon theaters confirm our investment thesis that European moviegoers will rally to the new concepts being introduced by AMC and that we can achieve similar attendance and return lifts that we've already seen here in the United States.

As but 2 examples, at our theater in Bournemouth, with 17% of its seats being recliners, the recliners are over-indexing at a 40% attendance premium and a 20% price premium.

And in Bromborough, where 30% of the seats are now recliners, overall theater attendance is up 66% and the recliners, again, are commanding an additional 20% price premium on top.

And finally, as you know, during the first quarter, we capitalized on an opportunity to solidify our position as the largest movie exhibitor in Europe when we both announced and completed the transaction to acquire Nordic, the largest exhibitor in Scandinavia, the Nordic and the Baltic regions.

We completed the acquisition with just 4 days left in the first quarter, and while those 4 days of results are included in our results for the quarter, they really weren't all that material.

Some of you have questioned, if it's already -- it being Nordic, if Nordic is already so very well run of a circuit, as we've been saying -- which it is, by the way -- where's the upside for AMC?

If you're asking that question, we think you're overlooking Nordic's big pipeline of theaters in development and redevelopment that, hopefully, assures growth ahead for Nordic.

Similarly, and this is crucial, Nordic's high-quality management team is already in position to help us get the huge EBITDA gains we expect to be able to generate at Odeon over the next several years.

Indeed, Jan Bernhardsson, Nordic's CEO, has been promoted to become COO of all our more than 350 theaters in 14 countries across Europe.

And he'll be working closely with Mark Way, Odeon's Managing Director, to integrate both Odeon and Nordic into the AMC family with success.

Before I wrap up our prepared remarks and open the call to questions, I would briefly like to address two additional topics that are of interest to us and have been of interest to shareholders.

First are the so-called premium VOD discussions; and second is a comment about a recent increase in the short share position on -- in AMC stock.

With regard to PVOD, we repeatedly have acknowledged our participation in discussions with our studio partners about the opportunity to increase the pie for both studios, but importantly, also for AMC as well through the creation of a so-called premium VOD window, in which we would meaningfully share in the economics.

As we've stated, we would be interested in working with the studios to find a mutually beneficial solution.

Just as Kevin Tsujihara of Warner Bros.

said last week, we at AMC agree that there is a real opportunity to work cooperatively to increase both the bottom line of movie studios but also to increase the bottom line of AMC.

Having said that, I also need to state as strongly and clearly as I can, at AMC, we have a backbone, and a firm one at that.

If we cannot forge agreement on a new window that advances our interests, we will take any and all necessary actions to vigorously protect the long-term interest of AMC and those of our shareholders.

Fortunately, though, we have a seat at this table and the talks that are underway are intriguing.

As a significant AMC shareholder myself, with more than half of my compensation taking the form of AMC shares and having purchased 51,747 AMC shares on the open market on 3 separate occasions over the past 16 months, I must confess to being absolutely perplexed by a dramatic increase in the number of AMC shares that have been sold short since March 1.

Clearly, our first quarter performance reaffirms that AMC is on a bright and exciting road.

We are totally focused on generating return for our investors and have every possible confidence in our ability to do so.

Putting guesswork aside, our performance in Q1 of 2017, with adjusted EBITDA of $251.3 million, says we are off to a great start.

As always, we thank you for listening.

Operator, we'll be happy to open it up to questions.

(Operator Instructions) Our first question comes from the line of Eric Handler with MKM Partners.

A couple little things to go through, Adam.

First, when you guys were in New York doing your -- showing off your 42nd Street theater, curious, one of the things you talked about was in the New York budget proposal that would allow you to sell alcohol in New York theaters, wanted to see if you had an update there.

Secondly, with Carmike, and you said some of the theaters were underperforming.

As you now have taken a closer look at some of these Carmike theaters, any thoughts about maybe shuttering some of those operations or maybe selling them off?

And then last, when you look at Odeon, it looks like there's -- the initial number suggests that there's a great opportunity with these recliners.

Is there any way to maybe even accelerate some of these starts for some of these renovations because -- are you worried at all that when the competitors see what -- some of the numbers you're getting that they're going to follow suit and you're just going to have a free-for-all in those markets?

All right.

So several questions, several answers.

One on alcohol.

Our understanding is that the provision in the litigation -- in the annual budget for 2017 got yanked at the last moment, so we have -- so that opportunity is delayed for us.

Having said that, we just, a few weeks ago, hired a new Vice President of Government Relations.

It's a function that AMC had never staffed before.

He is a very able and experienced executive.

And we're no longer going to be outsourcing our government affairs just to trade associations.

We're going to take a very active role ourself because the opportunity is significant for us.

And specifically in that regard, we're hiring a lobbying firm for Albany, so that we go back in and make our case directly as AMC, without -- again, without just pushing this off to trade associations to do the work.

With respect to the Carmike theaters, when I talk about revenue softness, I'm not talking about revenue declines.

What I'm talking about is that the AMC Theatres have been growing faster than the Carmike theaters have been growing, if you take, though, the totality of it all.

So no, we're -- there's no thought to shuttering any Carmike theaters.

We think we have an A team in place here in Kansas City that has generated great results for AMC over the past year.

That's why AMC revenues are up 6.2% when the industry is up 4%, 5%.

That same team is now wholly focused on the Carmike theaters, not only from a system basis but also theater-by-theater.

And we're highly confident we're going to make a lot of progress across the Carmike system.

On the third question about Odeon, yes, the early returns are backing up everything that we have thought all along, that we could take the AMC initiatives to Europe and benefit handsomely.

You'll recall we've been saying literally since the day of the acquisition that we thought we could drive EBITDA gains of 50% over 4 to 5 years.

We still believe that today.

But your question is the same question we've asked ourselves.

Not that competitors might get ahead of us, because we think we are far ahead of competition on this, but simply because the opportunity is so great.

If we can accelerate the recliner theater deployments at Odeon, we will.

I do believe we will have some recliner theaters in Europe, new ones that is, this year.

But the number that I gave you of at least 25 is a next year number.

I know that our team in Europe is already working on more than 35 theaters to get reclined and get into the marketplace.

Whether all 35 or not make it in 2018 is uncertain, but we're almost positive 25 will make it by the end of '18.

So yes, we are moving -- and as I said in my remarks, we've already talked to more than 40 landlords who are just as intrigued by all this opportunity as we are.

So we are going to Europe in -- at a fast pace with recliner seating.

And similarly, I might add that same view that we have about improving the fortunes of Odeon, we have about improving the fortunes across the Carmike system.

Carmike has made big bets in Dine-In Theatres.

We think the returns are much -- and very little, very few bets in recliner-seat equipped theaters.

We think that the recliner seat is the surest way to produce return for our shareholders.

And so we're not only talking about pulling up the pace of our theater deployments in Europe, but we're also talking about moving up the pace of our deployments of recliner seats in the Carmike circuit as well.

That's very helpful.

But bottom line, with your -- you got a head start against your competitors and no one's going to be able to sort of get ahead of you in terms of deployments.

One of the reasons that we acquired Nordic Cinemas, we like the idea that we have more theaters in Europe than anyone else.

And I can almost sit here and guarantee you that AMC will have more recliner-equipped auditoriums and more recliner-equipped theaters in -- across Europe than anyone else.

That is a lead we intend to establish and maintain.

And by the way, we're not doing that for an ego reason.

We're doing that because we think the returns are going to be breathtaking.

Our next question comes from the line of David Miller with Loop Capital Markets.

Adam, can you just update us on where we stand with the disposition of the 15 to 20 theaters per DOJ decree that we talked about back on December 20?

I believe you guys got a 60-day window and then got a second 60-day window, and any update there would be helpful.

And then what do you plan on doing about the NCMI sell-down, given what happened last week with the stock?

Any color there would be helpful.

And then I have a follow-up for Craig.

Okay, great.

Well -- so the final count from DOJ was 17 theaters, and we disposed of all 17 already as we speak.

A lot of those were in April, outside of first quarter, but they're prior to today's call.

So similarly, the Justice Department required that we port 17 theaters over from NCM to Screenvision.

We got to keep the theaters, but we had to change the pre-show advertising vendor.

That's what drove the so-called exclusivity waiver payment of $23.2 million to NCM in Q1.

That also has been completed.

And we have given up all the governance rights that we promised the Justice Department we would.

So with the sole exception of selling the NCM shares, we are fully in compliance with the consent decree.

And of course, the consent decree gave us 30 months to sell-down the NCM stock.

I'll let Craig take the NCM question, but I'll just make the comment that we may want to slow down the selling of some of these NCM shares and give NCM a little time to recover.

Obviously, their share price took a huge hit last week.

Craig?

Yes, just to kind of amplify a little bit on Adam's remarks.

I think there's a bit of an overreaction.

I think a couple of analysts' reports that came out today would substantiate that or at least back that up, that sometimes a first reaction is an overreaction.

But the stock's struggling a little bit.

We do think it's still got a very important and viable proposition for advertisers.

And the upfronts are around the corner, and they're going to -- the company, I know, is going to be active out talking to shareholders.

So we'll let the stock settle in.

Hopefully, we'll see some positive results from their upfronts.

And we do have a certain number of shares we have to sell by the end of -- well, kind of the middle of December, actually.

We think there's a couple of different windows.

And to Adam's point, we do still have some flexibility, have a pretty substantial amount to sell.

But we have some flexibility that will allow us to slow it down and let the equity kind of settle in and maybe recover some of the hit that it's taken.

So that's kind of how we think about it.

Okay.

And then, Craig, just a quick follow-up, can you just talk about the nature of the $9.2 million tax benefit?

And then that's it for me.

Some of that is actually related to the international circuit.

We're finding, as we get further involved with our -- the diligence work internationally, that they do have some an NOLs, loss carryforwards, similar to what AMC has, a number of which are fully reserved.

So as we become -- as we see more certainty around realization, future profitability and taxability, those reserves unwind.

And that was the biggest part of the adjustment.

Our next question comes from the line of Barton Crockett with FBR Capital Markets.

This is Zack Silver on the line for Barton.

You mentioned that the first Prime launch in New Jersey was showing some positive results already, I think you launched in February.

Is there any way that you can quantify some of the attendance or pricing lift just out of that theater?

And then the second is on the Stubs program.

I think, in the past, you've kind of given an incremental attendance and concession spending for those prime members.

I was wondering if you had an updated -- any updated statistics on that.

So this is going to be a disappointing answer to your question because we don't plan to release stats for Prime until it gets any critical mass.

But we, at least, are encouraged by what we see.

And on Stubs, I don't have at my fingertips the -- our company does for sure.

And I've sat in lots of meetings discussing it, but I don't remember what the Stubs uplift is per se in food and beverage spend and the like.

To put it -- to make it clear, though, Stubs numbers do outspend the average AMC patron.

And the fact that we tripled our database of Stubs members is one of the reasons why Stubs purchase of AMC tickets has risen and why we're performing industry box office.

Our next question comes from the line of Chad Beynon with Macquarie Capital (sic - Macquarie Research).

I wanted to focus on margins, particularly in the quarter, I think that was kind of the big beat against where the consensus was.

Adam, you talked about -- synergies are in place and you also mentioned that the legacy Carmike film rental contracts moved over to AMC's rates.

Anything else that we should be kind of focusing on that that could help margins as we go forward in the year?

And then also related to margins, not sure if you're willing to disclose the Nordic margins from the acquisition.

And that's what I have on margins.

Okay.

So just on the cost side, these aren't -- on the cost side, we moved so fast.

I've seen other companies that have done mergers, and they've gone really slow and they don't actually deliver the synergies they said they would.

We have moved quickly.

As I said, we're down to 6 employees in Georgia.

That's -- that corporate headquarters essentially was shut over 90 -- in the period of 90 days, and that's a lot of labor savings, a lot of facility savings.

Very -- I do hope that the 3 full-time pilots they had on payroll for their corporate jet are flying for some other company, but they're not flying for AMC.

In terms of margins going forward, the -- we did not cut a lot of cost at the theaters, and don't expect to cut a lot of cost at the theaters in terms of labor staffing and the like.

They were already wound pretty tight.

What we do hope to continue to drive are purchasing synergies at the theaters where we're buying products from vendors more efficiently, which makes sense.

I mean, a company that's buying for $5.5 billion of revenue ought to be able to get better prices for commodity products than companies that are buying for $1 billion of revenue.

But I would say the biggest possible driver of margin at Carmike theaters, given that our business is heavily a fixed-cost business, is that as we drive revenue increases at the Carmike theaters, commensurate with the kind of revenue increases that we've been driving at AMC Theatres, a lot of that's going to drop down to the bottom line.

And so -- but it took Carmike a year to get into this position.

We said that their revenue softness was 8 months out of 12, so we're not going to get out of it in a week.

But I think, as we look to the second half of '17, as we look certainly to '18, we'll start to see the Carmike theaters perform in a really good way.

And as I said, something on the order of 2/3 of the incremental dollar drops down to the bottom line.

On Nordic, I'll give that one to Craig.

Yes, so we talked about -- I think the prior disclosure was that Nordic operates at higher margins.

We'll confirm that that's still the case.

We raised our margins 50 basis points, Adam spoke to it earlier, to 19.6 -- 19.6%, and Nordic's are still higher.

And that's really, at this point, all the color -- we'll give a little more as we go forward, obviously, as they -- we have a full quarter next year.

But at this point, we're not done with all the purchase accounting and wouldn't want to give you a number that might change later.

And actually, let me just finish that answer.

It is our intention to release -- in the CFO commentary, we did give you pro forma numbers so that you knew what Carmike and Odeon did last year.

We expect to be similarly transparent with Nordic, including what their margins actually are.

But we do have to complete purchase accounting to see -- because we know what it is in IFRS, but we've got to give it to you in U.S. GAAP, and that work is being done as we speak.

As soon as we have the information in U.S. GAAP, we intend to release it publicly.

Okay.

Great.

And then my follow-up, Craig, just on the net leverage, if you guys are pumping the brakes a little bit on the NCM sales and potentially also contemplating increasing the renovations, how should we think about leverage through '17 and '18, just goals around that?

Sure.

The -- we saw visibility -- even putting aside the National CineMedia sales, we see visibility to deleveraging because as we grow EBITDA, we think leverage comes down.

And we were at 4.8% as we kind of came into the quarter, and we think the growth will substantiate that the leverage is coming out, down in and of its own, without these NCM sales.

They will be added if and when we get them completed, but we see leverage coming down with -- even without the sales.

Our next question is from the line of Michael Ng with Goldman Sachs.

I have one for Craig and two for Adam.

Craig, of the $24 million of cash distributions realized in the quarter, how much was NCMI versus other equity investments?

And Adam, first, could you give us an update on your latest pricing initiatives as it relates to experimentation with dynamic ticket pricing and pricing differentials between the front and the back of the house?

And then second, I was wondering if you could expand a little bit more on the revenue weakness at Carmike, what's really been driving that and what steps are necessary to correct that by -- I think, you said the end of 2017 and early '18?

You first.

So about -- we're looking at the $24 million cash distributions.

About $17 million from National CineMedia and about $7 million from our Digital Cinema Partners company.

On pricing, we have been quite active in testing innovative concepts in a handful of cities across the country to learn how AMC can make a lot more money by having created a pricing department in July -- on July 15 of 2016.

Based on what I've seen from those pilot tests, we're going to make a lot of money from having created a pricing department July 15 of 2016.

However, it is, per se, illegal and a violation of every [interest] law there is for me to make any comment on prospective pricing or what our intentions are with prospective pricing.

So after -- so I should back up.

So if and after we make any pricing changes, we'll be able to comment about it, but we can't comment about it before.

On the issue of Carmike, I -- it's really complicated.

There are a lot of Carmike theaters that are doing just great.

So we've gotten quite granular looking theater by theater by theater, and there are so many reasons.

And I want to be careful what I say because I don't want to say anything uncharitable to the prior management team.

It's a problem that we inherited.

It's a problem that we'll solve.

You could imagine, with any company that announced it was for sale in March and got sold in December, that decisions that might have been taken to drive short-term performance might have been put on hold, thinking those are more appropriate decisions that should be taken by the new owner.

That's one argument.

Another argument is some of the Carmike theaters did have competitive activity around them.

And they -- since Carmike was not a company that really believed in recliner reseats, they didn't counter some of that competitive activity by putting in re-seated theaters of their own.

Clearly, that's something that will change.

When we have a theater that we renovate, we do it in 3 to 6 months.

Two of the largest theaters in their system, they shut down for renovation, and I believe they're going to be closed for 15 months -- which, again, I know it's only 2 theaters out of 270, but when they're significant theaters of size and when you're starting to look at all these things on 0.10% here and 1% over there, it matters.

There's a lot more than that.

We've already taken 5 of their theaters.

For example, that they had as sub-run theaters, meaning they're showing older films, and we've already converted those -- at a very deeply discounted price.

We've already converted those theaters to first-run movie houses, showing the latest Hollywood releases at full price.

So there are a lot of reasons their -- for as many of their theaters, there are sort of reasons that affect big patches of their theaters, and we think we have a solid understanding of what the issues have been, theater by theater, and we're putting in solutions, theater by theater.

The Carmike theaters in question have only been branded as AMC theaters in the last 30, 60, 90 days.

The first cut-over was mid-January, and the last cut-over is going to be mid-May.

So as these theaters become AMC-branded theaters with more potent marketing programs and the like and some targeted investment to improve the product, we think we'll see real benefits.

So we're not at all upset about all this.

It's just more upside to come.

And I said it before, but I'll say it again, thank goodness we moved fast to get cost synergies because that's one of the things that allowed us to have a blowout quarter, even with these Carmike issues to deal with.

And maybe just a follow-up on the synergy comment.

I think you guys are pretty far along in terms of harmonizing the film rental contracts and reducing the headcount.

Are you at a $35 million annualized run rate today?

Or is there still more to go?

I don't think I should actually comment.

But I've said about -- I mean, specifically, but I've said about 15 times on this call that I'm thrilled with how quickly we have achieved synergies.

And I think we're running the Carmike circuit really well, and I'm proud of how fast we've moved to already address the expense side and are moving right now to address the revenue side.

Our next question comes from the line of Jarrett Brotzman with PPM America.

Just kind of two high-level questions.

The first being, you've spoken a lot about how much data you're collecting about consumers, both the purchasing patterns and what they prefer with movies.

I was wondering if there's any intent to potentially monetize this by licensing any of this information to third parties or being in discussions with studios over what products are selling well, what movies are preferred by customers.

I was in a meeting just this week -- I guess, it's last week now.

Today is Monday.

I was in a meeting just last week with very smart people who are convinced that this data is -- can be monetized and it's quite valuable.

They're not the only people who have made that assertion to us.

We do want to be very careful about -- with privacy laws, making sure that we use the data intelligently, use it in our interest first, be very careful about who we share it with and under what circumstances.

But we are investing millions to get this data, and we do intend to use it to our benefit.

So I think the answer is watch this space.

And just finally, considering that you guys have such a significant proportion of IMAX theaters, specifically in the United States, I was wondering if there was any potential for further discussions, integrations or closer partnerships with the IMAX company, given your significant presence as a customer?

Well, I want you to know that I think, the world of Rich Gelfond and Greg Foster, I think the world of IMAX; we're thrilled to be their most important partner in North America.

It's specifically why I went to London to do a joint press appearance with Rich a couple weeks ago to announce that, in addition to the 19 IMAX locations we currently have opened and 3 under construction, that we are committing to an additional 25 IMAX locations in Europe, which is a -- which Rich told me was the single biggest IMAX announcement that they've ever made in Europe with a single circuit before.

So I think that demonstrates that we're quite excited about doing more with IMAX, and we certainly are not done with the 198 that we have open now and the 28 that are announced and coming.

This is a very close partnership of ours.

We are building Primes, we are building Dolbys, we are building IMAXs and we'll continue to do so.

And I might add -- it's not in my prepared comments and nobody asked the question yet, but IMAX had a very tough first quarter, and IMAX is a significant percentage of the AMC system here in the United States.

And the fact that we produced these numbers during a quarter that IMAX itself was having a weak quarter is yet another testimony to how strong a first quarter AMC had in Q1 '17 and what, I think, the really staggering earnings power and potential is of AMC as we look down the road over the next 2, 3, 4 years.

There are no further questions at this time.

I'd like to turn the floor back over to Mr. Aron for closing comments.

Thank you for everybody staying with us late on the East Coast on a Monday afternoon.

I have only one comment to end the call.

$251.3 million of adjusted EBITDA in Q1 in 2017.

AMC's future is very bright.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.