AMC 電影院 (AMC) 2018 Q3 法說會逐字稿

Ladies and gentlemen, greetings, and welcome to the AMC Entertainment Third Quarter 2018 Earnings Conference Call.

(Operator Instructions) Please note that this call is being recorded.

At this time, I'd like to turn the conference over to John Merriwether.

Please go ahead, sir.

Thank you, Ari.

Good afternoon, everyone.

I'd like to welcome you to AMC's Third Quarter 2018 Earnings Conference Call.

With me 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 these risks and uncertainties are discussed in our 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 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 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 third quarter earnings release issued earlier today.

In conjunction with our third quarter earnings release, we encourage you to review the CFO commentary for the 2018 third quarter that we published this afternoon on our website in tandem with the earnings release.

After our prepared remarks, there will be a Q&A session.

This afternoon's call is being recorded and webcast replay will be available in the Investor Relations section of our website at amctheatres.com later today.

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

Thank you, John.

Good afternoon, everybody.

We're very pleased that you've joined us for a review of our third quarter results and an update on several key initiatives.

Let me begin by simply and clearly saying that we are so thoroughly encouraged by AMC's performance in the third quarter of 2018.

Company-wide, we achieved the highest third quarter attendance ever for global AMC, driven primarily by an 8.6% surge in attendance at our U.S. theaters.

Despite U.S. and European admissions revenue that was essentially flat year-over-year for the quarter, food and beverage revenue globally was up 6.5%.

Other revenues globally were up 33.5%.

This all led to our reporting ahead of consensus adjusted EBITDA for the quarter of $142.4 million.

That figure was significantly ahead of our internal expectations going into the quarter.

And when combined with our stellar first half results, 9-month year-to-date adjusted EBITDA for all of AMC now stands at $665.1 million, which is up a dramatic 24.5% over the first 9 months of 2017.

$665.1 million of adjusted EBITDA this year so far versus $534.3 million of adjusted EBITDA last year so far.

That's an increase of $130.8 million.

Can I repeat that figure for emphasis?

AMC's adjusted EBITDA is running more than $130 million ahead of last year for the same 9-month time period.

Accordingly, we can now say with high confidence that from an adjusted EBITDA standpoint, full year 2018 will be a record year for AMC, the best ever in AMC's 98-year history exhibiting movies.

Breaking down our third quarter results by segments.

We were pleased with our third quarter results in the United States.

Total domestic revenues grew 5.9% to $895.6 million.

On our last quarterly call, we highlighted a shift in our strategy to boost attendance to increase long-term ticket revenues overall both for AMC, and importantly, for our studio partners as well.

We did exactly as predicted.

In attendance, AMC outperformed the industry domestically, growing domestic attendance per screen by 9.1%, which was more than 400 basis points better than the industry.

We did so even while under pressure from a soft quarter for IMAX and 3D.

As an aside, fortunately, both of these formats have already turned around, and both are booming with us at AMC so far in the fourth quarter.

But turning back to Q3.

An ancillary benefit of our strategy to drive attendance, domestic food and beverage revenue increased 8.3%, and domestic other revenue was up by more than 50% above prior year levels.

We continue to do a good job managing our expenses.

Despite an increase in film rent related to the success of the quarter, total operating expenses as a percent of revenue improved 60 basis points compared to last year.

While adjusted EBITDA declined domestically 2.4% to $105 million, taking into account onetime items in the predicted A-List launch impact in the third quarter, domestic adjusted EBITDA would have grown by more than 11%, and margins would have expanded by 90 basis points compared to the third quarter of last year.

Even with all this, let us not forget that for the first 9 months of 2018, U.S. adjusted EBITDA is now up by a stunning $115.0 million.

We're on an extremely good path in the United States.

Europe improved sequentially compared to the second quarter of 2018, but still delivered mixed results, mostly because the industry box office was down 3.5% in the Odeon-served countries.

While the industry box office was up 17.3% in the Nordic-served countries, we're so much larger across Europe than in Scandinavia and the Baltics.

And on a constant currency basis, our revenue internationally was flat and our adjusted EBITDA internationally declined 2.5%.

Also impacting these results was a nearly 2% decline in the average number of screens in operation during the quarter as we purposely took screens offline for theater recliner renovations.

Even so, we are very excited about our prospects for Europe.

Over the long term, as you know, the movie industry has grown at a faster pace in Europe than in the United States.

More importantly, our initial new build theaters in the Nordic states and our theater renovations in the U.K., Spain and Italy are performing way ahead of our already robust expectation.

And then there's our new theater in Riyadh, which opened in April.

It boasts of very happy patrons and of one of the most financially successful screens in our entire global network.

Looking at Europe overall, 9-month adjusted EBITDA is up $15.8 million internationally.

What makes our financial results for the third quarter so especially satisfying is that they come after conscious decisions to investment spend in the quarter to bolster AMC's future performance.

And we told you about these investments in advance of the quarter.

As but 3 examples among many in the quarter, we cleared away yet another piece of old litigation dating back to 2015.

It was settled on mutually agreeable terms but all of that cost was charged against Q3 EBITDA.

That is now 3 consequential losses from 2015 or earlier that we have put in the rearview mirror, 2 that we settled and 1 that we won outright in court.

Two, we will soon talk later in this call about the runaway success of A-List.

But just as we predicted, we did modestly subsidize A-List in its initial few months to launch the program and acquire a robust membership.

And three, in the quarter we also invested in our people, which boosts morale and increases retention by accruing for higher compensation expense to nearly 1,000 of our managers across the company, whose bonuses will be higher this year than last, thanks to their hard work in delivering our much improved operating performance.

In the third quarter, we also made meaningful strategic progress in just about every area of our company: more recliner-equipped theaters renovated in U.S. and in Europe, some with just stunning financial returns; more IMAX and Dolby screens deployed with the whopping price premiums they come in; greater consumer reliance on our website and smartphone app; new more intriguing menus in the works for our concession stands and Dine-In Theaters; an Oracle accounting system installed in Europe to strengthen the IT backbone of the circuits we acquired abroad; carefully managing operating expense per patron all across our system.

But the biggest advancement we made in the quarter were in marketing, especially, but not limited to, our AMC Stubs and A-List programs.

More detail can be found in our press release and accompanying CFO commentary that were issued after the market closed today.

Before taking your questions though, I'd especially like to give you more color on 4 topics: first, the box office.

We really should take a moment to celebrate the roaring hot consumer appeal of the films now being released.

Over the years, we've articulated the case that AMC would continue to succeed because looking with a much longer lens and quarter-to-quarter, over the past 2 decades, the industry-wide box office has been solid, steady and growing.

That notwithstanding, last summer's brief slump spooked some investors, and over our repeated data-laden protests for the contrary, a bear case incorrectly emerged that theaters were a quaint anachronism in an era of streaming.

Well, you know what's happened so far in 2018.

The year-to-date domestic industry box office through quarter end was the best in history.

October domestic box office was the best October ever, and the year-to-date domestic box office through yesterday, November 7, is up 10.0% year-over-year.

When the dust settles at year-end, 2018 should be yet another record year, the third time that has happened in the past 4 years.

And based on the film slates on the queue for 2019 and 2020, we anticipate a healthy industry ahead.

So here we are, just exactly as AMC predicted.

The partnership between studios and exhibitors continuing to be a tight bond, creating an industry that is strong, relevant, large, growing and smashing record after record after record.

Hooray for Hollywood and the makers of our local language content overseas.

Second, we continue to see high-ROI projects right before our eyes that generate internal organic growth.

We continue to invest in our strategic initiatives, which include recliner seating, enhanced food and beverage offerings and premium large-format experiences.

On the domestic front, during the third quarter, we installed recliner seating at a dozen more U.S. theaters, 5 of them former Carmike theaters.

This brings the total number of theaters in the U.S. who offer recliners, including Dine-In Theatres and Dolby Cinema auditoriums, to 288 locations with just less than 2,800 screens or about 45% of our theaters and 30% of our screens in the total domestic circuit.

And to exclude from consideration, however as we do, the AMC classic branded theaters, which by definition of the brand are not candidates for expensive recliner seating renovation, then in the AMC-branded theaters and in the AMC Dine-In branded readers, about 70% of the theaters and about 50% of the screens are already reclined.

That means that within the legacy AMC circuit, we continue to lead the industry.

And even with that, we still have clearly identified high-ROI opportunity in our sites, especially with some low-hanging fruit in theaters that came to us in the Carmike acquisition.

Internationally, during the third quarter, we nearly doubled the number of recliner theaters in Europe.

This brings us now to the total of 17 theaters in the United Kingdom, Spain and Italy featuring recliners.

Four more renovated theaters get completed in the fourth quarter, which will bring the total number of theaters in Europe with our signature recliner seating to 21.

So that consumers can spot our theater enhancements, our renovated theaters in the U.K., for example, are being rebranded as Odeon Luxe theaters, L-U-X-E.

One of the most anticipated Odeon Luxe reopenings happens next month at our London flagship and throughout years home to the royal family, the majestic Odeon Luxe Leicester Square.

This iconic theater will have a drop-dead gorgeous new interior, about 1,000 luxury leather seats across 5 screens, including almost 400 power reclining seats.

It will also feature the U.K.'s first Dolby Cinema with Dolby Vision laser projection and Dolby Atmos sound.

Over the last 82 years, this marquee theater, the Odeon Leicester Square, has hosted over 700 European film premieres.

And with its breathtaking gut-to-the-studs facelift, this Grand Oldham will make a major brand statement for Odeon and is on the verge of setting a new unparalleled standard for theaters all across Europe.

We also continue to grow our footprint in Europe as well, having opened one new-build theater in the third quarter and 5 more new-build theaters to open before the end of this year.

We continue to expect -- and when it's all counted up, our worldwide net CapEx for 2018 will be between $450 million and $500 million.

You should expect a similar CapEx range for 2019 because as we've been telling you for years now, the financial results of our theater renovations are real, especially in Europe where they've been almost unimaginably strong.

It's no accident that our EBITDA is up $130 million year-over-year in the first 9 months of 2018.

Subject 3. We are so immensely satisfied that we welcomed a new strategic Investor Day AMC in the third quarter when private equity giant, Silver Lake, a global leader in technology investing, made a $600 million investment in AMC in the form of 2.95% senior unsecured convertible notes due in 2024.

The proceeds of those notes, as you know, were used to repurchase approximately 24.1 million shares of Class B Common shares from Wanda and to pay $1.55 per share special dividend to all shareholders of record as of September 25.

Actually, sales record as of -- yes, as of September 25, right.

As part of this transaction, we were able to repurchase Wanda shares at a discount to the then trading price and do so in an orderly fashion benefiting all shareholders and minimizing downward volatility.

For the next 2 years, Silver Lake also has the right of first refusal to purchase any additional shares if Wanda chooses to sell more of its AMC holdings, a pressure reliever for us that has been created.

Although we've also been informed that no such further Wanda share sale is on the horizon.

Speaking personally, I've had a 20-year close-up exposure to some of the best in the world of private equity and I've always enjoyed working with smart people.

What I'm about to say may seem odd coming from a CEO perhaps, but I'm almost giddy that Silver Lake is now in AMC's boardroom.

Silver Lake is in full agreement with our company's strategy.

They've added value wherever they've been.

Their investments have returned mightily and their confidence in AMC's future speaks volumes as to the shareholder value we are striving to create.

Accounting sometimes being a quirky thing, I also need to mention that their convertible notes investment has created a new derivative liability reported on in the press release today that gets charged to our net income, although not to our EBITDA, and will get marked-to-market each quarter going forward for the next 2 years.

It is entirely a noncash charge that will get settled through a balance sheet adjustment about 2 years from now.

Ironically, the charge goes up as the AMC share price rises.

And the mark-to-market liability conversely would decrease if the AMC share price were to fall.

You should know that it's there, but as we tend to be valued on EBITDA, and this is strictly a noncash issue, we're expecting the markets to look past this derivative.

And as a further reason to pay scant attention to the quarterly movement in the derivative, if the fourth quarter of 2018 had ended last night, the entire charge to earnings in Q3 from this derivative already would have been completely reversed.

And finally the fourth topic.

It's time to talk Stubs and A-List.

In the release we issued earlier this week, we told you that AMC Stubs just hit 17 million member households, up from 2.5 million member households only 2.5 years ago.

Stubs members represent more than 40% of AMC's entire U.S. clientele, now pacing at a run rate of more than 100 million AMC Movie tickets sold annually.

It gives us a customer database rich with account-by-account moviegoing histories and habits.

And as a smart marketer should, we are e-mailing or texting Stubs members with individually tailored customized communications well more than 1 billion times annually to promote their continued loyalty and patronage of AMC.

One of the biggest successes we have ever seen is our new VIP tier of Stubs, our new A-List program.

Sometime this weekend, possibly Sunday, probably Saturday, A-List will cross 500,000 enrolled paid members.

You all recall that we hoped we could hit 500,000 members at the end of a full year in operation.

We'll do that number instead in 4.5 months.

At $20 a month per member, that's a run rate of $120 million per year of annual recurring revenues in admission tickets coming from a program that did not exist 4.5 months ago.

And that's before you add in continued impressive new member growth, the approximate price increase averaging 10% nationally that we just announced for 2019, the tens of millions of dollars of food and beverage buying that A-Listers are buying or the full retail ticket price coming from family and friends as they're coming along with A-List members.

Having said that, as others have sadly demonstrated to their peril, getting volume at unacceptable prices is a blunder.

AMC does not intend to repeat their mistakes.

Sustainability is important to us and crucial to our members because they want A-List to prosper and to offer consumers real value for years to come.

That's one reason among many that our monthly price is more than double that of our competitors even prior to the price being raised next year in 15 states and the District of Columbia.

Many of you seen the failure of others in the space have been guessing pretty wildly, in some cases, about A-List's financial impact on AMC.

While we won't routinely be sharing all these numbers with you on every quarterly call, since A-List is so new, we want to be very transparent with you now so you can see why we are so enthusiastic about what all this can mean to AMC.

There are 8 key early learnings from A-List.

One, with 500,000 members now and more coming, there already is and over time there's going to be even more meaningful annual recurring revenues coming from this audience.

A-Listers are currently generating almost 1 of every 10 AMC theater visits in the United States.

But of course, the vast majority of AMC guests will come through our doors the old-fashioned way even with A-List, one ticket bought at a time.

Two, 49% of A-List members were not previously members of AMC Stubs, which confirms market research that we're doing weekly, which also is indicating that there's a ton of incrementality in moviegoing and a ton of incrementality in moviegoing at AMC coming from this A-List population.

Three, A-List appeals to all age groups, but especially intriguing to us, it's intriguing to millennials.

27% of A-Listers are 30 years of age or under.

This is a group that many have thought long and hard about how to pull this younger generation into theaters, an age group which has been somewhat elusive to theater operators in the recent past.

Four, we previously said publicly to you that we were going to have to subsidize early A-List heavy users, estimating about $15 million for launching and subsidizing the program in 2018, showing up mostly in lower prices per ticket consumed and excess film rental cost from incremental visitation.

Happily for us, our member acquisition launch and subsidy costs are running more than 50% less per member than we had originally modeled, therefore, increasing the lifetime profitability of each member and allowing us to add more members than we originally expected without great pain.

And even with these new members being far greater than we expected, thanks to their early subsidy being reduced, they're bringing along of full revenue tickets from family and friends, the food and beverage purchases that they make, we generated $142.4 million of adjusted EBITDA globally in the third quarter of 2018.

We similarly are not concerned that early A-List subsidies will unduly affect Q4 EBITDA generation for all the same reasons.

Five, we also previously said to you publicly that once we were through the launch subsidy period in 2018 and a breakeven year in 2019, we expected that commencing in 2020, we would see incremental EBITDA from A-List of $15 million to $25 million per year per 1 million members if average visits in 2020 and, for that matter, beyond, were 2.5 visits per month per member.

We now believe that with soaring membership, A-List will not breakeven in 2019.

Instead, it actually will be accretive in 2019, a year ahead of schedule.

Six, implied in our prior public comments, we modeled heavy usage early, and that it would take about a year for A-List member visitation to settle down to 2.5 visits per month such that the program could be generative.

And on this point, here may be the best news of all.

We are tracking A-List visitation in excruciating detail.

Speaking in round numbers, just as we thought, new members are averaging about 3.4 visits in their first full calendar month of membership.

But far favorable to our expectations, by month 2 in the program, they are already down to 2.8 visits; and by month 3, down to 2.7 visits.

If this trend continues, as other proprietary data in our possession also suggests that it will, we now believe that they could get down to the modeled 2.5 average visits per month before that full year transpires.

Seven, not because we needed to but instead because of the incredible demand we're seeing for A-List, which has been so strong, we just announced a price increase for 2019 new members and for renewing 2018 members 12 months after they join, of 10% in 10 states and the District of Columbia and 20% in 5 states, including some of our most important, New York, New Jersey, Connecticut, Massachusetts and California.

No increase was instituted in the 35 states where the cost of living is the lowest and where we sensed consumers could be more price sensitive.

At full run rate, which won't start until next autumn at the earliest, this price increase alone is worth more than an additional $20 million to AMC of added contribution per year per 1 million members.

Or it provides us a healthy and protective cushion, offsetting, if for some odd reason, movie visitation troughs out at 2.7 visits per month instead of 2.5, although we still do believe 2.5 is the correct predictor.

And point eight.

If you pore through the message boards and social media postings as we have done, you'd see that AMC Stubs A-Listers just love A-List, how easy it is to use, the many program benefits it offers and the consumer transparency and stability of our offering even at more than double the price of what others are charging.

This is a cake and eat it too program.

Our guests are happy, AMC is happy.

And as a result, A-List is sparking considerable new royalty to AMC and will, starting in 2019, produce significant additional EBITDA for us.

In summary, in A-List, we have an incredible winner.

At current volumes and current pricing, we're seeing $120 million in annual recurring ticket revenues from a program that isn't even 5 months old, but of course both membership volumes and pricing are continuing to rise.

And perhaps more important than anything else, we are absolutely intent on running this program profitably.

Sustainability is the relevant buzzword that's applicable here.

Many in our executive and management team have considerable experience with programs like this.

AMC has been running one successfully in the United Kingdom for several years.

And we are constantly, and I mean constantly, monitoring all the variables that are needed for success with A-List.

Our people are just all over this program, as am I, we're literally living it 24/7.

And as a final thought to the quarter and to the year 2018.

In Q3, we posted solid numbers and made enormous strategic advances that will help AMC progress for years to come.

And from an adjusted EBITDA perspective, we are on the cusp of reporting the best full year results for 2018 in our company's almost century-long history.

We know what's coming in 2019.

We're excited for the year ahead as well.

There you go.

That's the fulsome report.

It's time for your questions.

(Operator Instructions) Our first question is from Kannan Venkateshwar from Barclays.

We're not hearing anything from that line.

Our following question comes from Eric Handler of MKM Partners.

Couple of things quick.

First, with regards to A-List, I'm just curious what's the impact on food and beverage sales?

Are you seeing anything that's different from non-A-List members?

Yes, thanks, Eric.

And we'll give you as many follow-ups as you want.

The number one is buying food, that's a good thing.

And since they're coming with such a surge in volume, it is the A-List population that's helping to drive this 8.6% domestic increase in attendance, not the only program that's driving attendance, but certainly one of them.

They are buying food.

One of the things that we have figured out quickly is while they're buying food, they're not buying quite as much food as the typical more casual AMC guest.

Some had speculated that, oh, well, they're not paying anything to get into the theater, so they can spend more on food because it's less painful in the wallet.

As it turns out, in reality, what we learned in the first 3 or 4 months, if you're coming 2 or 3 times a month in the movie theater, there's just almost so many vats or troughs of popcorn that you can eat.

You can only consume so many giant boxes of Raisinets before you just don't want to look at more food.

So they're buying food, they're buying food at about $4 a pop instead of $5 a pop.

And what that's caused us to do immediately is turn our F&B organization and get it to focus on what is it that we can sell to this population who may not want the vast quantities that we judicially have sold to justify our higher prices.

So we're looking at interesting new menu items that we think will appeal.

And we're pretty sure we can get the spending per head to rise over time.

But we're not in the business of just looking at revenues per patron, we're looking at the business of revenues total.

And with the increase in attendance, we do have an increase in total F&B sales, and that's what we've learned in the first 4 months.

Great.

And then as you think about the disparity of prices that you have had and maybe you can talk about the AMC Classic versus the standard AMC Theatres, are you seeing anything geographically or by market where the membership is working better than other places?

Sure.

The -- geographically, the biggest surprise to us is that this program is popular all over the United States.

We always expected it would be strong in our large urban markets, especially where we have high market share, cities in like of New York, where we have in excess of a 40% theater market share and Manhattan is an example.

But it's working all over the country.

So that's the first learning.

The second learning is that if you take that spread of 50 states and the District of Columbia, we were able to put out a press release that said we were holding the line on pricing because we were not increasing the price in 35 of the 50 U.S. states.

Well, as it turns out, fully 1/3 of our A-list customers are in the New York area, Boston area and California.

New York, New Jersey, Connecticut, Massachusetts, California.

Another 1/3 are in those 10 states that got the second tier of price increase and 1/3 of our clientele is in the remaining 35 states.

And we know that the people who are joining in the 35 states are essentially paying a price per month that is 2x, double the price of a single movie ticket in their theaters.

In New York, however, where the prices of tickets are so much higher in movie theaters, they're not currently paying 2x the price of a single-movie admission.

They're getting a much better deal.

And so when we looked at how we would price the program, back in June, we decided that for simplicity and given the competition we are facing, we should just blow out with one national price, and we obviously picked the price point with under $20 for its initial launch.

But we always had at the back of our mind that we would tier these prices across the country.

As I said earlier in my prepared remarks, based on the cost of living in these markets, New Yorkers are used to paying more for things than people are used to paying in Oklahoma City.

And so we took prices up by 20% in California and New York, New Jersey, Connecticut, in Massachusetts, up 10% in other big mass markets.

Another thing that we've learned is that we took no flak on Monday when we put out this announcement about price increase.

You should read the Reddit message boards about A-List that our competitors.

They're fans of A-List because it offers them so much value.

And one of the things that we did to make sure that we get the higher price that is going in place is we also promised these people more amenities at the AMC Theatres, more amenities at the AMC DINE-IN theaters.

So we announced on Monday, as well, for example, that we're rolling out reserved seating to 100% of our AMC-branded and AMC DINE-IN branded theaters, not in our AMC Classic theaters but the AMC and AMC DINE-IN theaters.

We also announced that in the so-called tier 1 cities in LA, San Francisco, San Diego, New York metro, Boston metro, we're just going to roll out in the first half of '19 mobile ordering of food and beverage, so that you can order -- preorder your food and drink on your smartphone app or on the website, and it will either be ready for you for pickup at the concession stand at the theater ready and waiting for you when you get there or alternatively in our recliner-equipped theaters actually delivered to your seat.

We're doing this already at 52 of our theaters.

It's been a big success.

And it's actually driven $1.25 spending increase per patron from those patrons who've used the mobile ordering service.

Now the percentage of people using mobile ordering service is small, so it's not going to translate to $1.25 a pop across the entirety of the population.

But it sets another thing that we can do to provide good service for our guests, fill these AMC Theatres rich with amenities and capture patronage profitably as a result.

The last thing I'd add on price -- the last thing I want to add on pricing is in the United States for a long time now, no good deed goes unpublished -- unpunished, actually unpublished and unpunished.

I heard some people react to our price increase on Monday that maybe we needed to do that because somehow the financial impact of A-List was negative to AMC.

As I've tried to relay on the call today, the financial impact at AMC is really just every bit as much as we expected, except more favorable.

The membership is growing faster.

The visitations are coming down to reasonable levels more quickly.

We think the problem -- the program will be accretive a year ahead of schedule.

And we're kind of amazed how big the program has become so quickly.

So the reason we took the price increase is not because we have to but because we're able to.

It's simply a matter of demand and supply, and demand is very strong right there, right now out there, and we want to capitalize on that.

Okay.

And then just one quick thing.

The mobile food and beverage ordering, is that only through Atom Tickets?

Or are you doing something on your own?

No, no, no.

We're doing that on our website and our smartphone app.

Just to size all this because I -- there was enough in my script, I didn't want to bore you with everything.

But what's happened to online ticketing in the last 2 years is phenomenal.

If you go back 4 or 5 years ago, Fandango was doing 10% to 15% of our total ticketing, AMC was doing 5% and everybody else combined was doing 1%.

Fast-forward to today.

Fandango is doing 10% to 15% of our ticketing.

Everybody else, including Atom Tickets, is doing 1% to 2% of our tickets.

By the way, we like Atom Tickets, we're an investor in Atom Tickets.

But AMC is doing more than 30% of all the ticketing for AMC Theatres in the United States online either on our website or our smartphone apps.

There's been an explosion of usage of our proprietary website and smartphone app, which we think is a very good thing for us, and we make money from it, too.

(Operator Instructions) Our next question is from [John Smith of CLS].

Congrats on a great quarter and huge success on the AMC Stub.

One question on the free cash flow.

Why did you guys not generate any cash this quarter?

It seemed almost like $130 million burn.

And it seems like even though EBITDA is up massively year-over-year but our cash flow is significantly down and you barely can pay any dividend and have to sell assets.

So what should we be thinking about the cash flow?

Yes, it's Craig Ramsey.

I would characterize it, as you stated, you have to sell assets.

But frankly, what -- if you went back and were to kind of follow our calls over the last year or so, you'd find that we were required to sell -- or the biggest asset we have sold over this period of time was related to one of our acquisitions and our requirement to sell our investment in National CineMedia.

And so we have, for several years and including 2018, have been selling to satisfy that DOJ mandate.

And the idea is we wanted to reinvest the proceeds from the sale of those securities quickly into high-return theater-level strategic initiatives, most notably the reclining theaters that Adam talked about.

So what you're seeing in the cash flow, I'm not sure exactly what formula you're looking at, but you're seeing an elevated amount of CapEx because we're reinvesting sales of assets that were not required because of the CapEx investments, but were mandated.

And as a result of our desire to reinvest, those proceeds were the result of that.

Is that helpful?

I'd pop in and say it a slightly different way.

In the way that you worded the question, I mean there's nothing wrong in the way you worded the question, but the way you worded the question, the implication is sort of that the situation forced us to do -- to sell assets or that we couldn't afford to pay dividends.

We look at it pretty differently.

We began a 12-month period last August saying that we had found assets that were owned by our company that we thought were nonstrategic, that we could sell without pain.

And in fact, we said we found $400 million of them.

We actually found $500 million, $550 million, I think, $550 million of them.

And we were able to sell those assets profitably.

You guys have done a great job on the asset sales, full credit to that.

But without asset sales, would there be a dividend payment?

Well, of course there would be.

But let me just remind you of all the things that we did.

So there were 3 inflows of cash as you look over the past year.

You had $550 million from asset dispositions.

Using last year's numbers, $823 million of EBITDA.

And then you had $600 million inflow from Silver Lake.

The question is what then were we got to do with all of that cash because we only had debt service of about $260 million and cash taxes are pretty small.

And this is where we've been allocating capital and trying to allocate capital as wisely as we can.

We have done essentially 4 things: number one, we've grown our footprint by adding theater locations.

That's the smallest use of capital but we have added theaters.

And our plans are to continue to add theaters in the years ahead.

Two, we decided to have -- to pay a robust dividend.

We're not only paying a dividend that's yielding in excess of 4%, which is way more than the 1% to 2% average dividend paid by most other companies on the NYSE, but we also just paid a $155 million special dividend just 6 weeks ago to all shareholders.

We also bought back about 500 -- no, about -- right around $500 million of stock not only from Wanda but also through open market purchases in the open market between September of '17 and June of '18.

So we returned cash to shareholders.

And third, we have so many high ROI projects that we believe we can profitably reinvest the cash flow, the free cash flow that we're generating and reinvest it back in our business and get a much higher return for our investors by reinvesting in initiatives.

That's why we're renovating theaters like crazy in Europe.

That's why we're redoing the ODEON Leicester Square.

That's why we're doubling the number of Dolby Cinema locations in the United States and on and on and on.

So that's where -- that's the money that's coming in.

That's the money that's going out.

And in so doing, we're growing the company, we're returning cash to shareholders, and we're reinvesting in the business to drive future growth.

Our next question is from Jim Goss of Barrington Research.

Adam, I was wondering if the comments you made earlier were meant to imply that the concessions uplift is totally offsetting the obligation to the studios even in the initial pricing and A-List even before you had the price increase?

Oh, yes, yes.

Look, A-List is already a profitable program because if you take the $20 that's coming in, plus the concession purchases and less the food costs, of course, and you deduct out the film rent splits that are going to the theaters, that's a positive number.

The issue is not -- is it a profitable program?

It is a profitable program.

The issue is trying to compare that program to what a subset of those consumers might have done if we didn't have A-List.

Because if we didn't have A-List, some of those ticket buyers wouldn't be buying tickets at all.

Some of those ticket buyers would still be buying tickets at AMC.

They'd be coming less frequently, they'd be buying fewer tickets but we'd get a higher price per visit.

We might get a higher F&B spend per visit.

And so our goal isn't just to have a profitable program.

It's to make sure that the profitability of that program gives us incremental EBITDA above and beyond what that population would have given us in the absence of that program.

And that's where we said -- this subsidizing users and stuff, again, they're not unprofitable.

It's just that compared to what it would have been if there were no A-List program at all, we might have made slightly more money.

Now we're right in line, and we estimated this thing that we're going to take about $15 million in A-List in 2018.

Well, the membership is double what we expected, which is a high-class problem.

But you could have assumed from that, that our acquisition costs would have doubled.

But fortunately for us, because the members are pouring in so easily readily, our acquisition cost per member, our subsidy per member is much less than we appeared it might be.

And the fact that the early use of subsidies are much lower on a per head basis is -- just happens to neatly offset the doubling of the membership.

So I think we're right in line with this program still costing us about $15 million of EBITDA in round numbers in 2018.

But that's '18.

Come to '19, we -- as I said on the call, we thought this thing was just going to be a breakeven program in '19.

Again, I don't mean breakeven whether it's profitable or unprofitable.

I mean breakeven about against what we all turn it would have been, hypothetically, if there was no program and all people were just buying tickets one at a time.

We now think because the membership is still coming in so fast that we're going to make money on this thing in '19.

And again, not -- making money, I'm not describing as whether it's a profitable or unprofitable program, it's already a profitable program.

I'm talking about what would those consumers have done anyway, what kind of moneys will we have gotten from them anyway?

Our goal is to get more, not less.

And correct me if I'm wrong, but I think initially, you had indicated something -- that something like 10% uptake of your attendees going into a subscription program would be sort of a normalized eventual percentage in your past history.

I'm wondering if it's -- is this doing more than what you would have expected it to do?

And what share of your attendance do you expect will come from A-List members when you get to the part where it levels off, assuming it levels off?

Right.

Just to show you how -- if you want to know why we're optimistic and enthusiastic about this thing, on the call we launched it, we said give us a year, we can get to 500,000 members.

Give us 2 years, maybe we can get to 1 million members.

We don't know we can actually get there.

And that based on our experience in Europe, this thing would cap out at about 10% of our clientele, and that 90% would come in the old-fashioned way one ticket at a time.

It's 4.5 months into the program, we've already hit 500,000 members.

There's no evidence it's going to anywhere close to stop anytime soon.

So hard to imagine we won't hit 1 million.

When I don't know, but we're sure we'll get there.

We're already at almost 10% of our members -- I'm sorry, 10% of our guests at theaters are coming under the guise of A-List, domestically that is.

And it's only 4.5 months into the program and they're still signing up in droves.

So I wouldn't be shocked if we had members at a rate of 50,000 to 100,000 a month going forward, probably more months, I don't know.

It could be 3 months, it could be 10 months, it could be 18 months.

There's a lot of potential here.

So now where do we think it caps out?

I thought it was going to cap out between 0.5 million and 1 million members and 10% of our clientele.

Now I'm thinking it may cap out between 1 million and 2 million members and maybe it caps out at 15% to 20% of our clientele.

I still think this thing -- this program -- eventually, we'll get this program to a point where people are paying about 2x a normal movie ticket to go -- to be a member of A-List.

We're pretty close to that now depending upon the market that you're in, which means that if you're going to less than 1 movie a month, this program is not for you.

But the whole ethos of this program is if you're going to this -- the theaters once a month now, once in a quarter now, once in a quarter times now, well, pay for 1.5 to 2x and then have the flexibility to go no times, 1x, 2x, 5x, 12x, if you want.

And you've already heard me say, we think it'll average out at about 2.5 visits per.

I think we're going to -- I -- just based on everything that we've seen so far, we have a lot of potential here for this thing to really amount to a couple of million tickets a month.

And that's a very encouraging thing for us because of the central driving difference in AMC Stubs A-List versus all the other stuff that's out there from third-party operators.

I'm not talking about Cinemark's Movie Club, I'm talking about the other stuff.

We're going to run our program profitably.

We're already charging double the price, and we're getting that price.

And so as A-List grows, this is a very good thing for AMC.

As I said in the call, just take 500,000 members at $20 a month times 12 months, you're already at $120 million a year program and that doesn't include food.

That doesn't include take-along tickets.

And it doesn't include the price increases coming in '19 and any subsequent price increases in the future.

It doesn't include all the take-along tickets that they're buying at full revenue.

This thing has the potential to be a very lucrative program for AMC.

And also if that's not enough, there were people a year ago who were writing us off, as I said in my prepared remarks, as an anachronism.

That the youth of today stream and they don't go to theaters.

All these challenges for cinemas, well, not anymore because 27% of our A-Listers are under the age of 30 and they like this program and they're coming to our theaters.

And our theaters are booming with attendance and the box office is booming overall.

There's a linkage between the 2. So I mean, we could -- we just couldn't be any more positive about what AMC Stubs A-List means for us in 2019 and 2020.

And it didn't -- it's not costing us anymore in 2018 than we predicted to you when we launched the program back in June.

And one for Craig, some non-A-List question.

The change in lease accounting that's coming up, any thoughts on that and any different approach to our property financing that you might have as a result or maybe there's no impact?

But what are you thinking?

Really, Jim, it's really not a third quarter topic.

It's one that we're really looking forward to addressing with you all as we meet for the February and March, early March quarterly call or end of year 2018 call, get into next year, then we'll be prepared to address all these questions.

And we're well aware that this is going to be a subject where we needed to do a lot of educating of The Street.

Well, it's a 2019 challenge, not a third quarter 2018 challenge.

But actually we're all over the subject, and we're thinking hard about it.

Our next question is from Ryan Sundby of William Blair.

I guess, Adam, starting with the -- I think you said, 50% less in acquisition and subsidy cost.

If we break it apart, is it -- are you seeing that more on the acquisition side, the consumer is just more primed than you thought they would be to subscription?

Or is it more on the subsidy side?

I'd say it's about half and half.

First, it's so many members have poured in that we didn't expect would pour in.

That's probably because they were primed to -- they made -- the concept was not new on June 26, right.

I mean, people have heard of this before.

Others ran into difficulty.

And we didn't expect to have 1 million members in 4 months and especially at double the price point of the competition.

So that's part of the reason.

But an equal part of the reason and maybe even more so is we thought it was going to take a full year to get from 3.5 visits per month to 2.5 visits per month, and we were prepared to subsidize these people as they went down that curve.

And just so we're clear as to why the visitation will come down over time.

When you join this program on day 1, you are hip, baby.

I mean, you are -- you're not joining 6 months before you're going to show up at a theater.

You're signing up for the program and you're going tonight or you're going tomorrow night.

So practically within the first 72 hours, you've seen your first movie.

And most people smile when they come out of an AMC theater.

It is a very pleasant experience.

And they come back, so a lot of people having gone to their first A-List movie, come back frequently.

And in the first month, they're practically coming, not quite, but they're practically coming once a week.

That's not really reasonable that you're going to keep up that pace over the course of a year.

Now some people will but not all.

And what's more common is you'll go every other week.

Some will go more, some will go less.

It'll average out at 2.5 a month.

We thought it was going to take a full year to get to that point.

It's taken like 2 months to get from 3.5 to 2 -- 3.4 is the number, not 3.5, but it's taken like a month or 2 to get from 3.4 visits to 2.7 visits.

That's a much steeper ramp down the curve than we had feared.

And therefore, our subsidy goes down.

And they're much closer to that 2.5 number earlier in the modeling period.

And those 2 factors, more members coming in against the same marketing cost, and they're going -- they're starting strong just as we thought, but they're settling down to what we might call reasonable visitation.

When I say reasonable, it's good for them, it's good for us.

They're not paying for 2.5 movies.

We're getting in for 2.5 movies, everybody's happy.

But the fact that they're getting to a reasonable level of visitation more quickly, add those 2 factors together, that's why our acquisition and subsidy cost per member is half of what we thought.

Got it.

Yes, that makes sense.

I guess now that kind of moved off the 1 pass and 1 price concept, does that open the door to a broader range of passes, either formats or frequency?

Or is this kind of model you want or you just have it kind of the same path but scaled for cost of living?

Well, I said on the last call that we were going to launch 1 product with 1 price nationwide but that we'd already scoped out internally 6 different programs.

And it's only been 4.5 months, and we've already announced that we're going to 3 tiers of pricing around the United States.

There are so many more creative ideas we have to try to generate more profit for AMC from this population.

Here's the but.

If you do too much too fast -- I'm not talking about price now, I'm talking about complexity of product.

If you do too much too fast, all you do is wind up confusing the consumer, and therefore, limiting your own sales because someone who, confronted with a simple offer says yes, and they buy.

And someone confronted with a complex offer says, "Huh, I got to think which one I want," and they go off and they don't buy at all.

And some of them come back and buy but some of them never come back.

So part of the art of being good marketeer is balancing all of the complexity in your brain and my brain with -- and everybody else's brain, for that matter, with keeping the program simple enough that the consumer can just easily say, "Yes, I want -- that's -- I get it.

That sounds good to me.

I want it.

I'm buying." And so I think we have got to pace ourselves in not rolling out too much, too quick that will confuse the customer.

But there's a whole array of stuff that we've been thinking about that's in the works.

I mean very quietly in this announcement on Monday, we announced we were lowering the average age from 18 to 16.

That opens up the door to younger teens being able to be A-List members.

It is vital in a program like this.

I mean, I say over and over again, we're not going to make the foolish mistakes that others have foolishly made.

So we're very insistent on getting ID from everybody as they come into a theater.

And so here's an obvious one, it's kind of a no-brainer.

As soon as -- if you're under the age of 16, you can't get a government-issued ID in the United -- photo ID in the United States.

So if we want to make sure we're protected against fraud, we're going to have to have photo ID for people under 16 if we want to extend the average age of A-List members under 16.

There's a way to do that.

It's photo upload, right?

So and it's currently being programmed.

So that if a parent can upload a photo of their child to a safe, secure database, so that when the child shows up in a theater, they can flash a telephone and show us that the picture is them, then we can lower the age from 16 to something lower.

That's an idea that's in the works.

It's an obvious idea that every parent ought to give every one of their kids, I mean like their teenage kids or their 23-year-old kids Stubs membership for either 3 months, 6 months, 9 months -- not Stubs, I mean A-List, an A-List membership for 3 months, 6 months, 9 months and 12 months and put it in a stocking stuffer as a gift from mom and dad.

You would be amazed how much IT program is required to turn the current A-List program into being capable of being gifted.

Because right now, the architecture of the A-List infrastructure is that if you gift A-List to somebody, you're giving them your credit card and they're going to renew for the rest of eternity on your credit card until your credit card expires.

But that program is already underway, so that sometime in 2019, we'll be able to introduce a gifting component.

And there are so many more -- you articulated a few just in your question.

This thing will -- we said on Monday, this is a permanent part of our marketing.

We believe we're going to make a lot of money from it.

We know the consumers like the program.

We know this will bring millennials in the world of cinema and especially in the world of AMC.

And so we'll be rolling out enhancements over time, but not too fast that we confuse people and undermine our own strong consumer response that we're getting right now.

Yes, that makes a lot of sense.

Just a couple of quick ones on international.

If we adjust Q1 for pro forma Nordic, that is 3 straight quarters here of decent attendance declines.

But yet the EBITDA is up quite a bit.

So any color there around either the declines in Europe but also, what's improving profitability.

And then any color, if you want to kind of provide it around the potential IPO and Odeon and why not move forward with that.

I'll take the first one and then let Craig add on.

Sometimes things are just the way they are.

A year ago, the box office was struggling in the United States and the box office in Europe was booming.

This year the box office in the United States is booming and the box office in Europe has been struggling.

Most of the attendance issues in Europe have been local language films made overseas that have not resonated the same way they did in Germany and Italy in prior years.

That's a big factor.

Having 2% of our screens out of service while we renovate theaters is a big factor.

Some people think the World Cup is a factor.

It probably was.

I mean a lot of people are watching soccer, or I should more properly say football.

But you can't look at our company or our industry quarter-to-quarter.

You got to have a more medium-, long-term mindset.

If you look back last year, Europe was booming.

If you look back over 20 years, over 10 years, Europe has been growing faster than the box office has been growing in the United States.

We're pretty sure that we made a good bet in Europe because of the long-term growth of the market.

But more so than that, the other thing that's happening that's starting to drive profitability for us in Europe is the fact that we're bringing recliner theaters online, and the revenues at these theaters are going up geometrically.

I didn't say arithmetically, I said geometric, like up.

The -- we had 7 renovated theaters at the end of '17.

We're going to have 21 renovated theaters at the end of '18.

We're renovating a whole bunch of theaters in '19.

That also is starting to become a compelling reason for EBITDA growth, which after all was the very thesis of why we bought Odeon in the first place.

The thesis behind buying Nordic other than it's very well-run circuit, was all the new-build theaters in their queue and those new-build theaters have been coming onstream.

The theater we opened in central Oslo in the beginning of this year is already the highest grossing movie theater in the entire country of Norway.

So the investment thesis in Nordic is also panning out to be true.

I'll come back to the IPO in a second, but, Craig, do you have anything you wanted to add in Europe?

Yes, the only thing I'd add to that in Europe, and it was kind of an idea we had and talked about with the management team at the time of the acquisition.

But at some point, we felt the need and the opportunity would be there to kind of rationalize their territorial overhead structure above the theater, 6 territories and could you rationalize that and do some combining of functions and consolidation.

You can't eliminate them all because of language and other differences.

But we thought there would be opportunity.

This management team has taken it very aggressively kind of ahead of schedule is beginning to make actually some -- you're seeing some costs being put into the business as part of that structure.

We're doing it over time and there are some costs coming in to generate longer-term savings.

And I think at the -- that's helping margins a little bit now.

And I think it will prove to be very beneficial as we get through that restructuring in Europe where those initial investments that we're making out will begin to pay off.

Yes.

Let me give you a specific example.

We had a whole overhead structure running our theaters in Spain, where we're the largest cinema operator in Spain.

We had a whole overhead structure running our theaters in Italy, where we're the largest cinema operator in Italy.

In the last few months, Spain and Italy got merged as to one region, essentially a 50% reduction in overhead.

So that's -- there's more that's coming, as Craig described, over the next couple of years.

On the question of the IPO.

There are a lot of good reasons to do the IPO, there are a lot of good reasons not to do the IPO.

We've been saying now for a year that we're studying it and the timing was most likely first half '19.

If we made the decision to go, which we hadn't made the decision to go.

Well, if you look at our first half numbers in Europe, they're not great.

It's just not logical to do an IPO off of mediocre numbers.

You're not going to get a very good price for the shares that you sell.

Combined that with the returns on the recliner-equipped theaters, 7 of them as of December, 17 of them as of now, 21 of them as of December, potentially double that by the end of next year.

We're seeing great early signs out of these renovated theaters but investors in Europe, especially in the London Stock Exchange, tend to be a "prove it to me" investing community as opposed to "we're ready to buy on the dream." So we're hearing over and over again that they'd love to see a full year of numbers coming out of these renovated theaters.

And then we want to get paid on the revenue and profitability of these theaters prior to renovation we can go now.

And if we want to get paid on the strength of the dramatically improved numbers post renovation, we should wait a while.

The combination of the European numbers being soft and wanting to get paid for the renovations rather than just giving that value all away in the IPO to the shareholders to be, I -- we now think that prudence suggests that without making a decision go or no go, we certainly have made the decision we should not go now.

So highly unlikely we'll go in the first half of '19.

Having said that, we did all the necessary work to prepare for it.

We went back and prepared 3 years of IFRS financial statements.

You're going to see an $8 million charge, if I'm not mistaken, in the third quarter of 2018 that we booked for M&A costs.

That's to go back and build all these historic years of financial statements so that we'll be ready to go on a moment's notice if we decide to move forward with the IPO.

So we've done the work and there's a lot of benefit aside from the IPO from having an IFRS standard in accounting.

And so we're really glad that we now have all our books in IFRS in Europe.

And as we go forward in Europe, we'll make sure that we continue to use IFRS accounting.

But I think the -- let's shift off the timing of an IPO to second half '19, first half '20, if in fact, we decide to go at that time.

Our final question is from Eric Wold of B. Riley & Company.

And I apologize for bringing it back to A-List.

But obviously, you gave a lot of learning about stuff that you learned over the past couple of months of having A-List.

And admittedly, in a quarter where 3D and IMAX were down significantly year-over-year.

I guess maybe one, talk about what you've seen so far even in this environment in terms of the upgrade choice by your members and kind of what you assume in your current profitability outlook for next year in the model into next year in a slate that looks a lot more compelling for those 2 formats.

And then I guess, secondly, you kind of talked about not wanting to have too many options, too many choices, too many changes that confuse patrons?

So that's the case kind of announcing the price increases recently kind of with a 12-month guarantee for members prior to January 9, does that lessen your ability to make any further adjustments over the next year should things go adverse to your current planning?

That's a lot of questions, Eric.

Let me do the last one.

I can't remember them all.

Craig, let's answer the last one first.

We gave a 12-month price guarantee on pricing and benefits to the people who joined this year because there were a lot of people who had flirted with subscription programs in the United States, and they were really getting whipsawed by their subscription companies with constant change in the program.

I mean changes week after week after week.

And if you just read the message boards, boy, it was really infuriating to consumers.

So we thought that we should act and look like a responsible $5 billion company would act.

So we said, if you join A-List, like relax, you're not going to have your price or your benefits changed to your detriment in less than a year.

Just like "Come to the theaters, enjoy the movies and don't sweat it." But that guarantee that we put in place was only for people who joined by January 9, 2019.

We also announced on Monday, that we're -- well, we believe, I mean before I say what we announced, we believe that we in fact have achieved in the marketplace exactly what we set out to achieve, that we were reliable, we were predictable.

We treated consumers the right way.

And they played this back to us over and over again in all these chat rooms and message boards on these subjects.

So mission accomplished.

Now we don't think that you need to give a 12-month guarantee to everybody forever because we've already established the principle that AMC is going to treat the customer fairly the way the customer deserves to be treated.

So we announced on Monday that if you joined by January 9, 2019, I guess technically, if you join by January 8, 2019, you still get a 12-month price and benefits guaranteed going forward.

If you join after January 9, on or after January 9, 2019, we promised you 3-months' notice on any pricing change or benefits change because that's reasonable notice to a consumer.

And we're not going to do it all that often anyway.

So there's no reason to tie our own hands to have to wait 12 months to make a change.

And yet we do think it's fair to consumers to give them warning, notice, lead time before we do anything at all to change the program.

So again, and this goes back into the guise of they're happy and we're happy.

We're still treating them the right way.

We're not going to pull rugs out from underneath anybody.

But we only have 3 months to wait before a program change starting in '19 rather than 12 months.

That was one of your questions.

Next of your questions on premium format usage, which includes PRIME at AMC, Big D, RealD 3D, IMAX and Dolby.

We said we're not going to release all these numbers all the time, but we're going to be very transparent in this call because we want you to understand exactly what -- where we are.

So the last time I looked, we were running about 26% of our attendance was in all 5 of those premium formats.

We had modeled it.

You asked how do we model it, what were expectations.

We had modeled it 22%.

So while it's a little higher, not much higher.

And going into '19, as we've done our internal budgets for '19, we've remodeled the premium formats to rise slightly because there are so many big movies coming in 2019 that are great to watch in a premium format.

Fortunately for us, we have so much excess capacity in our premium format auditoriums that the fact that A-List people are showing up for IMAX Dolby Prime, 3D, Big D, we got plenty of room to handle them.

I know there's another question in there but what was it that I missed?

No, I think we're good, Adam.

We do think that it's interesting that still 3/4 of the people coming to the 4.5 million movies that they've seen since June, 75% of it is still coming in regular old 2D auditoriums.

So we believe that the current visitation is manageable.

Craig, do you want to jump in?

No.

And by the way, I think you're the last question.

Maybe there's one more.

But while you guys have asked a lot of A-List questions, the fact that we can answer them, I hope you're noticing we really do know this program cold, we know these numbers cold, we're watching them like a hawk.

What you don't know is that we were prepared to make lots of other program changes if we were in trouble going into 2019.

If we were in trouble would be if acquisition costs were too high, if subsidy costs were too high, if frequency was too high, if it wasn't ramping down from the mid-3s like we expected to start into the mid-2s, we had lots of roads we could have gone down to make A-List attractive to the consumer and still profitable for us.

And we just didn't need to because this program is just a smash hit.

And I sure hope we're convincing you with that because we know that to be true.

And we know there's a lot of fear out there that since others have stumbled in this area, we too could stumble.

That's not going to be the case.

Mr. Aron, there are no further questions.

Would you like to make some closing comments?

I sure would.

Thank you, operator.

Thanks, everybody, on the call.

For those of you in the Disney call right now and you're listening to this on a replay, we missed your questions but we know you still listen to call or read the transcript.

Obviously, we're around to talk to anybody individually after the call.

And we thank you for your time today but more importantly, we hope you share with us our enthusiasm.

2018 is going to be a record year for our company.

2019 is looking really strong, especially because we have marketing programs like Stubs and A-List, which position AMC very well for the future.

With that, we thank you for your time.

It was nice speaking with you.

Thank you.

That concludes today's conference.

Thank you for joining us.

You may now disconnect your lines.