AMC 電影院 (AMC) 2019 Q2 法說會逐字稿

Greetings, and welcome to the AMC Entertainment Second Quarter 2019 Earnings 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.

Please go ahead.

Thank you, Sachi.

Good morning.

I'd like to welcome everyone to AMC's second quarter 2019 earnings conference call.

With me this morning is Adam Aron, our Chief Executive Officer and President; and Craig Ramsey, our 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 the 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 free cash flow and constant currency, which are non-GAAP financial measures.

For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release issued earlier this morning.

In conjunction with our earnings release, we encourage you to review the supplemental financial information for the 2019 second quarter, that we published this morning on our website in tandem with the earnings release.

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

This morning's call is being recorded, and a 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 morning, everybody.

Thank you for joining us this morning for a review of AMC's results for the second quarter of 2019 and a progress update on several key initiatives in support of achieving the product, customer engagement and financial targets we laid out for you at our Investor and Analyst Day in April of 2019.

The second quarter of 2019 was a superb one for AMC.

We posted strong, above-consensus results for the quarter.

And later during this call today, I'll be announcing new positive actions looking forward that you may not be expecting, and of which we are quite proud.

Let's start with a look at the industry's impressive performance in the second quarter and AMC's outperformance well ahead of the pack over the same period.

The domestic industry box office for the second quarter of 2019 came in, as you know, at $3.2 billion, which was 34.2% higher than Q1 of 2019.

Reading all the articles from journalists who continually seem to be obsessed by how streaming concepts can or cannot coexist with brick-and-mortar movie theaters, it would be easy to miss that not only was 2018 a record year for AMC and a record year for moviegoing generally, but also that Q2 of 2019 represents the second largest quarter for domestic movie theater revenues of all time.

Let me say that again.

Over the 400 calendar quarters over the last 100 years, the domestic industry box office for Q2 of 2019 was the second best quarter ever.

Not the second best Q2, the second best quarter of all of them.

Admittedly, this year's second quarter industry revenue performance was 3.7% shy of last year's Q2, but remember that, that quarter, Q2 of 2018, was itself up 23% over Q2 of the year prior, and was the single highest quarter in cinema history.

Indeed, the domestic industry box office in Q2 of 2019 was fully 19% higher than that of Q2 2017 and fully 15% higher than that of Q2 2016.

Why was Q2 2019 such a smash hit?

All studios contributed and often with a welcome return of a greater number of family-friendly films in the quarter.

But special praise must go to Disney for Avengers: Endgame.

In the U.S., April was the highest-grossing April ever, and May was the second highest-grossing May ever, thanks to the formidable strength of Avengers: Endgame, now standing at $2.8 billion globally, the highest-grossing film ever.

In Europe, too, the industry box office showed real strength in the second quarter of 2019, up 16.6% in the countries served by Odeon and up 11.1% in the countries served by Nordic on a constant currency basis.

It's not just that Q2 looked good.

Already in the third quarter, the industry is off to a great start.

Sony's Spider-Man: Far From Home and Disney's The Lion King helped drive the domestic industry box office for July to be some 6.7% ahead of last year's July.

And as you know, just 3 weeks into its run, The Lion King is already the second largest movie of the year.

All in all, the cadence of the industry box office in 2019 is tracking exactly as we at AMC predicted: a weak first quarter followed by what we believe will be an impressive stretch in quarters 2, 3 and 4. It's a cadence that we previously noted.

2019 is expected to be a back-end-weighted year, culminating in what we believe will be an exciting fourth quarter to end the year large.

As always, while we were especially encouraged by the industry performance in April, May and July of 2019 and optimistic for the balance of the year, it's important to remember that there are natural fluctuations in the box office between weeks, months and quarters within the year due to the timing of film releases.

Our management team tends to focus on our full year results and our performance against our medium- and long-term financial targets rather than on any particular film or intra-year time frame.

We would encourage you to do the same.

Now let's turn to AMC's strong performance with our second quarter results.

I've just reviewed how very pleased we were with the industry box office performance in Q2, but what matters more to us than anything else is our delivering solid results within our own company at AMC.

This is why we're even more pleased to be taking you through AMC's Q2 results.

In U.S. markets, AMC had an excellent quarter, outperforming the industry once again.

AMC set a new record in U.S. attendance, up 3.1% this quarter to nearly 72 million theater visits.

And for the fifth consecutive quarter, AMC handily outperformed the rest of the industry, the rest of the industry being defined as the approximate 75% of the industry that excludes AMC.

On an attendance per screen basis, AMC beat the rest of the U.S. industry by approximately 800 basis points.

Can I repeat that statistic?

We beat the pack by some 800 basis points.

That attendance growth came from conscious decisions on our part, which we widely discussed starting last June, July and August, to create incremental demand by driving attendance through marketing programs like A-List and Discount Tuesdays, among others.

Even with a modest intentional sacrifice on pricing per ticket, with such a substantial attendance gain, we still also outperformed the industry on an admissions revenue per screen basis by approximately 400 basis points.

Market share has been moving our way, and AMC's continued outperformance is clear evidence that our carefully crafted strategic initiatives and customer engagement are working.

The story is similar in our international markets.

Not only were the industry revenues strong because of Avengers: Endgame and the large family-friendly slate, but AMC performed very well internationally, too, with attendance up a whopping 16.6% year-over-year in the second quarter.

On a consolidated basis, AMC generated $1.506 billion of total revenues, an increase of 4.4% compared to last year and up 6.0% on a constant currency basis.

We also set a global attendance record this quarter of 97 million guests, up 6.3% versus the year ago quarter.

Notably, we continue to see strong growth in concession spend in our theaters with second quarter consolidated food and beverage revenues per patron growing 3.9% to $5.08 or up 5.1% on a constant currency basis, and eclipsing the $5 threshold on a consolidated basis for the first time in AMC's company history.

Food and beverage revenues in the United States increased to $5.58 per patron, which was an all-time high for AMC.

For sure, we're spreading our food and beverage expertise to Europe, where food and beverage spend at Odeon and Nordic theaters was impressive with per patron revenue growing by 9.1% quarter-over-quarter to an all-time high on a constant currency basis.

In addition to our ongoing food and beverage initiatives, this strength was supported by strategic pricing actions taken back in 2018 and again in 2019 and a food- and beverage-friendly slate of G- and PG-rated films in the current quarter.

As we've said previously, while we tend to outsell all other mass cinema operators, we believe that we are still in the early to middle innings of capturing increased food and beverage opportunities and expect to continue improving food and beverage spend in both the United States and in Europe over the coming years.

Accordingly, as a result of achieving company-wide attendance records and strong food and beverage spend growth, also record setting, AMC generated second quarter total adjusted EBITDA of $237.6 million, which is up 7.3% from the year ago quarter and up 8.6% on a constant currency basis, adjusted for the impact of ASC 842.

Furthermore, this year-over-year growth is even more impressive when you remember that Q2 of 2018 last year benefited from a $10.8 million rent adjustment related to a lease modification that did not recur this year.

So in Q2 of 2019, AMC generated $100.1 million of adjusted free cash flow, up 68% year-over-year after adjusting for ASC 842 in the year ago quarter.

Our strength, in particular attendance growth, is being driven by a combination of our experiential theater initiatives and enhancements, innovative use of technology and smart promotional pricing globally.

Deserving a particular mention, in the United States, AMC is reaping enormous benefit from the popularity of our website and smartphone apps, currently on a pace to be visited some 1 billion times annually; our voluminous outbound moviegoer communications currently at a pace of around 1.5 billion outbound customer communications annually; and our AMC Stubs loyalty program now reaching more than 21 million U.S. member households, which includes our new A-list subscription tier of AMC Stubs.

As we've noted during our Investor and Analyst Day in April and in previous earnings calls, this combination forms what we call the AMC platform.

By delivering a personalized and targeted, indexed end-experience for our guests, leveraging modern technology interfaces, data-driven insights, innovative consumer engagement practices and a state-of-the-art theater experience, we're creating a positive flywheel effect that encourages incremental attendance and ultimately drives incremental value for our customers, for our studio partners and for AMC.

Looking in the rearview mirror, that is our second quarter report.

Before moving on to some AMC news that we will make today, as we look at the volatility in AM's share price over the past few months, we would like to call out to you yet again the new lease accounting standard, ASC 842.

As all of you know, on May 8, we reported our first quarter results, which for the first time included the impact of ASC 842 on lease accounting.

Those impacts, which were all noncash, include, among other things, the capitalization of our operating leases onto our balance sheets as operating right-of-use assets and operating lease liabilities.

The guidance from FASB was clear.

These operating leases were operating in nature and not to be considered as debt.

Unfortunately, and as many on this call have already noted in your thinking and in your reports, the financial data provider services, including, by name, Bloomberg, Capital IQ and FactSet, in our view erroneously categorize these operating leases as debt.

Given the importance of these data providers, often serving as the primary source of truth for algorithmic trading platforms as well as for traditional human asset managers, this caused significant confusion in the marketplace.

What's more, what we believe is this mistaken reporting by these data services made it appear that the 842 impact doubled our reported debt literally overnight, even though there was no corresponding adjustment to our cash flows, no change in our interest obligations and no change to our adjusted EBITDA.

But the services made it appear that our leverage ratio increased, again, literally overnight from about 5x to over 12x.

Additionally, their misreporting of an increase in our debt had the optical and erroneous impact of inflating our total enterprise value and consequently our valuation models.

In other words, as viewed on the data streams of these providers, AMC became wildly over-levered and AMC shares became stunningly expensive, all this despite no change in cash, no change in interest payments and no change in the operations of AMC's business.

This is not a problem unique to AMC as ASC 842 has broad impact across industries, but we have been unnecessarily and significantly impacted.

As you would expect, we have been in contact with the various data providers, seeking that they rectify their reporting.

Based on our conversations, it seems clear that they are, in fact, intent on resolving these issues.

That said, any fix will take time as it impacts not only AMC but also thousands of other public companies.

In the meantime, before our corrections can be reported correctly, we would encourage investors to take 1 of 2 approaches when looking at AMC's leverage and valuation ratios to ensure like-for-like comparisons: either debt excluding operating leases should be compared to our reported adjusted EBITDA, or debt including operating leases should be compared to our reported adjusted EBITDA, plus adding back on top to EBITDA our rent expense.

I would now like to call your attention to 7 specific AMC strategies and developments that deserve to be highlighted.

First, let's start with A-List.

And as we have done over the past year, giving you each quarter a fairly specific update, we have just now lapped the 1-year anniversary of the program, which launched on June 26, 2018.

As of yesterday, we had more than 900,000 A-List members.

That's about 300,000 members who've joined in 2019 since we instituted a considerable price increase and more than 100,000 new members since we last spoke on the first quarter conference call back in May.

Compared to our initial 12-month goal of 500,000 members, we have far exceeded our own and all expectations.

As for the frequency of moviegoing by A-Listers, you'll recall that in the first quarter of 2019, A-Listers averaged seeing 2.6 movies per month in admittedly a slow box office quarter.

With the second quarter domestic box office being some 34% bigger than that of Q1, some observers feared that A-List frequency might similarly rise by 34% in Q2 to about 3.5 visits per month.

It should be no surprise, therefore, that we are pleased to inform you that average A-List frequency in Q2 of 2019 was only 2.85 visits per month.

Actually, 2.848 visits per month, to be precise.

We really do watch and analyze this program, like a hawk.

This frequency of 2.848 was well within our profitability sweet spot of between 2.5 and 3.0 visits, per member per month.

Importantly, these frequency levels combined with both bring-along attendance at full ticket prices and food and beverage spending on a significant increase in overall moviegoing as A-List has clearly stimulated demand.

Accordingly, per our previous commentaries, we continue and have increasing confidence but firmly believe that the A-List program is driving incremental attendance for AMC and that this is one of the reasons we are considerably outpacing the industry's attendance growth.

We similarly believe and have increasing confidence that A-List is already contributing to AMC's overall profitability in 2019.

I should note that we are aware that after spotting AMC a 13-month first-mover advantage, one of our competitors, Regal, has finally launched a competitive program.

We have -- we fully expected them to do so and are not concerned by their effort.

Second.

At the end of June, starting with the clever University (sic) [Universal] movie entitled Yesterday, we introduced Artisan Films at AMC, a marketing effort by our company to highlight and promote more specialized movies.

With Artisan Films, we are curating and then promoting a collection of intriguing cinema products that might get lost in an era where blockbuster movies are deservedly grabbing considerable attention and headlines.

At AMC, we believe that a wide array of storytellers are making great movies, and we are focused on supporting their voices and on selling tickets to their films when they play at our theaters.

Indeed, we play hundreds of movies across the AMC footprint each year, and more of them will be more successful because of the extra love and attention that Artisan Films will offer.

Third.

Speaking of blockbuster movies, on August 2, that would be last week, AMC started testing a new pricing initiative that will actually charge a small premium for select movies that are of the highest appeal to moviegoers and which would appear to have the highest consumer demand.

Specifically, at 30 AMC theaters across all 3 of our brands in 4 cities, Boston, Columbus, Indianapolis and San Diego, we are test marketing a $0.50, a $1 and $1.50 per ticket surcharge for a handful of high-demand blockbusters.

Think of it being applied, say, to 1 or 2 movie titles each month.

Just as a couple of years ago we instituted higher pricing on weekend days and lower prices on Tuesdays, this again is basic economic theory that goes back to the first microeconomics course we all might have taken in college.

Charge more in peak periods and charge more for high-demand products but charge less in the off-peak.

These pricing strategies have been commonplace across our European theaters for years, and industry observers have talked about this idea coming to the United States also for years.

Moving from mere talk at AMC, we are trying it right now in the United States to determine consumer response.

I should point out, though, that our A-Listers and Stubs members who are Discount Tuesdays guests will be exempt from these not only higher ticket prices, giving even more value to these 2 programs should the concept be rolled out more broadly across the country, if the test market is successful.

Fourth.

We are very close to reaching final agreement on a concept that we have been working on for more than 2 years.

Starting this fall, we hope and expect to be able to broadcast live sporting events, a meaningful number of games, on weekend afternoons at a select number of theaters across the country at AMC, across all 3 of our brands from 1 of the 4 major professional sports leagues.

Again, if consumers respond favorably to seeing live sports broadcasts on, say, a 30-foot or 40-foot screen, as we think they certainly will, this could be the start of considerably more live sports programming at AMC.

Fifth.

As you'll recall from our Investor and Analyst Day in April, we provided medium- to long-term financial targets as a helpful framework for thinking about our opportunity over time.

We set out a goal for you then to improve AMC's operating margins by up to 200 basis points, and we asked you to hold our management team accountable to deliver improving and increasing margins.

Accordingly, we are announcing today the launch of a formal profit improvement plan that will go into effect essentially immediately, ramping up such that while there would be only modest impact in 2019, we believe we can add $50 million or more to AMC's operating income in 2020.

Specifically, we have identified about $25 million of ideas in possible revenue enhancements and some $50 million of ideas in possible cost savings.

Some ideas are big and some ideas are small.

But together, they add up.

While most of the ideas will be realized, some will not.

Some of you may wonder why now.

Is there any specific significance to our aggressively going after revenue enhancements and cost containments?

Actually, any time and all the time is a good time for a company to think creatively about its revenues and its costs, and we signaled to you earlier this year that we are serious about increasing our margin delivery.

Think of us as a leaner, but not a meaner, AMC.

This is a healthy exercise for organizations to undergo every few years and will improve our overall operating efficiency at AMC as well as our baseline margin profile.

Sixth.

AMC has been saying for years now that our capital allocation strategy has been to continually balance amongst 3 competing and conflicting objectives.

Choice one: reinvest capital back into the business to drive growth.

We've done this hyper-aggressively in recent years, renovating more theaters with recliner seats; more theaters with premium, large-format screens; and more theaters with enhanced food and both hard and soft beverage options than anyone else.

Indeed, we have reinvested more than $2 billion back into our theaters since 2014.

Choice two: return cash to shareholders through dividends and share buybacks.

Again, since 2014, the time of AMC's first dividend as a publicly traded company, we have returned well over $1 billion to shareholders, including, among other methods, through meaningful open-market buybacks and our paying a handsome and unchanged regular quarterly dividend for 21 consecutive quarters, including an announcement on Monday just of this week that our dividend policy has continued unchanged once again.

We see no change to that dividend strategy anytime soon.

Choice three: hold on to our cash, thereby lowering net debt, and as a result, deleveraging.

While we have the option to actually pay down certain debt instruments, we would note that we have already proactively managed our balance sheet to ensure financial strength and flexibility such that we currently have no maturities for the next 5 years, which is a significant advantage for AMC.

Again at our Investor Day in April, we addressed that deleveraging has become our single highest current priority in the allocation of capital.

Accordingly, we are updating and issuing new net CapEx guidance for 2019 and for 2020, respectively.

You'll recall that 2018 net CapEx was approximately $460 million and that we initially guided 2019 net CapEx to be around $450 million.

We now believe it'd be more prudent for our 2019 net CapEx to be in the neighborhood of approximately $415 million, 4-1-5, an approximate $35 million reduction for calendar year '19.

More importantly, though, we are currently driving our net capital expenditure budget for 2020 to be approximately $300 million, a $150 million reduction over the recent guidance for 2019.

We have not yet set a target for 2021 or 2022 net CapEx, but this all is consistent with our saying at the April Investor and Analyst Day that we wanted to bring down total net CapEx to $250 million to $300 million over a 3- to 5-year time period.

Even with our lowered CapEx budget, adding in landlord contributions, there still will be ample monies in 2020 for maintenance capital as well as to invest in growth, funding technology initiatives, further premium, large-format screen development, more food and beverage initiatives and, importantly, to go after high-return growth projects and renovating theaters across Europe but especially in the United Kingdom as well as adding new build theaters in the United States, in Europe and in the Middle East.

Fortunately, we are after all nearing the completion of a significant time segment of reinvestment domestically, which organically lessens the capital need at home.

Theater renovation projects in the U.S. will not stop per se, but with so many U.S. theaters already having been done recently, gradually monies are reducing, as to the quantity of U.S. theaters being addressed, starting in 2020 and in the years ahead.

Not only does this decreased CapEx spending help us to deleverage, it also will have the effect of increasing the magnitude of the adjusted free cash flow that AMC is actually generating.

We are aware of a mild debate over the years among some shareholders questioning how much of our current capital expenditure investments had been for maintenance purposes versus how much had been for growth.

Finally, in 2020, that question should be off the table and end any doubt.

And finally, the seventh bit of news.

I'm pleased to welcome Ambassador Philip Lader and Adam Sussman to the AMC Board of Directors.

Ambassador Lader is the former U.S. Ambassador to the Court of St.

James's, which, for you non-diplomatic officials, is the United Kingdom.

He's also the former longtime Chairman of WPP in the U.K., the world's largest network of advertising and marketing agencies.

His career is marked by abundance of business and diplomatic success, and he brings with him a global perspective that we believe will be particularly insightful for our European operations, which are headquartered in London.

Adam Sussman, having served as the Chief Digital Officer of Nike, allows us to leverage his significant expertise building digital experiences to help accelerate AMC's efforts to further engage our guests through technology.

Both Phil and Adam have attended their inaugural Board meetings, both telephonically and in person.

And no surprise, each are already making contributions to the company.

I'm also pleased to note that with their appointments, the majority of AMC's Board is now comprised of independent directors.

In summary, AMC had a terrific second quarter, and we have exciting, innovative plans and actions under way that will improve our company's operating performance as we look ahead, all the while ensuring that the AMC platform continues to deliver the best moviegoing experience for our guests and puts AMC clearly at the top and in the lead as the clear and undisputed leader among movie theater circuits around the world.

With that, operator, we're ready to take questions.

(Operator Instructions) The first question is from Eric Wold of B. Riley & Co.

Eric?

Eric, we missed the first few words.

Can you start again.

Yes.

It's just -- good morning was the first few words.

But then a few questions on Stubs, A-List.

I guess can you dig in a little more about the visitation trends, kind of what you're seeing on older subscribers, maybe ones who came in initially versus the ones that had come this year since the price increase?

Any large variability month to month?

And any comment on churn?

Sure.

We've been tracking this since June of 2018, and we look at everybody's first few weeks in the program, then we look at their first calendar month in the program, and then we look at their frequency in subsequent months.

We do the same not only on frequency but also how many people they bring along with them, how much food they buy.

We have this quite granularly, literally down to an account-by-account analysis.

And really, there hasn't been that much difference.

As you would think, in the first few weeks upon joining the program, their frequency is intense and high.

It is a new toy after all.

And very quickly, it settles down such that the average across the membership is where it was in Q1, 2.6, and where it was in Q2 at technically 2.8 since you would round down 2.848 to 2.8.

We haven't seen much different activity amongst the new members who joined with the price increases since January of 2019, than the membership that joined in 2018.

Beyond that -- so we've given you frequency data.

We've told you this thing is profitable.

We've told you it's driving incremental attendance.

We've told you that our previous commentaries are of -- which we've been talking about widely since June of last year, are -- all are operative.

But we are going to be careful how much more we say publicly than that because we don't want to be forced into doing a GAAP reconciliation table, which is not so easy to do for the A-List population.

But we've got a big hit on our hands.

That is clear.

We know some of you were quite afraid of A-List back in the second half of 2018.

We did say that we're going to have some investment spend in the first few months, which we did, although not nearly as much as we thought we might have to.

And clearly, this thing is a winner for AMC.

We could not be more happy with the program's performance.

That's based on its incrementality.

That's based on its profitability.

That's based on the contributions to our operating income that we expect it to make going forward.

Yes.

And I'm sure Craig would love to put together that GAAP table.

Then a quick follow-on.

Now that Regal's launched their plan that includes 3D IMAX, et cetera, for no surcharge versus your plan that -- I mean, they have a surcharge versus your plan that has no surcharge, do you view that as a competitive advantage to AMC or more of an opportunity to equal the playing field going forward without potential price adjustment?

Well, look, their -- the Regal program has launched -- we always knew they were going to launch something.

Remember that in the U.K., the 2 circuits that have unlimited program are Cineworld, which is Regal's corporate parent, and Odeon, which is our European subsidiary.

So we thought if anybody would match us, it would be Regal, and we're kind of amazed they gave us a 13-month lead.

We track departures from the program very carefully.

We ask anybody who churns out of the program why they're leaving us.

And we're literally in, like, such a low number of people who've told us that they are departing our program for Regal.

It's like in the hundreds.

It's a really small number.

We're just not worried by the Regal program.

We think their program will play more to their own clientele than to our clientele.

We've had a lot of people lock in their brand loyalty to AMC.

What's more, our program has several significant advantages.

One, we have more theaters.

Two, we're not charging a ticketing convenience fee.

They're charging $0.50 per ticket.

Three, once you join the program, that's the price you pay.

You don't have to pay a surcharge if you then attend our better theaters a couple of times.

Three, we're not charging a surcharge for IMAX, Dolby Cinema or 3D or our proprietary house brand, PLF.

And I will tell you that a substantial number of moviegoers are seeing movies in IMAX, Dolby or 3D formats within the A-List program.

The only real advantage is that Regal -- the only -- Regal says it's slightly lower priced than ours.

But when you add in their surcharges, it actually can be much more expensive than ours.

That may actually give us an opportunity to raise price for A-List if we so choose.

But the only real advantage that Regal has is that we're limiting their moviegoing to 3 movies per week, and Regal's program is essentially unlimited movies over the month.

We went back and checked.

Precisely 3/10 of 1% of A-Listers are seeing more than 10 movies in a month, not more than 11, 12 or 13.

10.

0.3%.

0.3% is 2,700 people on 900,000 members.

This unlimited feature that they are talking about is a very limited appeal.

And candidly, they can have all of our members who are going to 10, 11, 12 or 13 members (sic) [movies] a month.

No matter how much food they buy, that's a lot of moviegoing.

We're paying film rents on each and every one of those visits.

Take it all together, we think A-List is already way out in front.

It's going to stay way out in front.

As I said before, we've got a smash hit winner on our hands, and we're going to make sure that continues.

Great.

And just final one, a real quick question about -- maybe on the test of the broadcasting live sporting events, if that goes to a full rollout beyond the test, will it be exclusive to AMC?

For a while.

I think if we prove the concept, a league or leagues may want to reap the benefit of spreading it wider.

But I think we start out in front.

We'll see how long that lasts.

The next question is from Chad Beynon of Macquarie Group.

Great second quarter, guys.

Wanted to ask about the international strength, which is a little bit harder for us to nail down the drivers, I guess, against your peers, even though one of them reported this morning and we'll be able to review that shortly.

But do you have a sense of if you gained market share in the quarter?

And then also could you kind of update us on what percentage of your screens have been renovated?

And then lastly on international, any commentary just in terms of how you're thinking about the back half of the year versus how we're thinking about the U.S.?

Well, clearly, the international story was a big improvement over last year, and you might recall that we had a number of things -- headwinds last year.

Our circuit generally performed in line with the industry -- that's wise -- and so it's holding up well.

And from a competitive perspective, we are seeing, as we've talked about before, some competition on price, but we're beginning to respond on a very targeted and selective basis.

So we think that's the right approach, even though it may be providing some overall headwinds for average ticket prices throughout those industries, or throughout those different countries on the international front, but we're very pleased how our European circuit is performing.

And we're seeing -- I think, very importantly, we are seeing the types of returns and types of lift, both attendance and pricing, from the deployment of our recliner strategy and renovation program on a number of the theater assets in -- primarily in the U.K. and Ireland.

So we're pleased with that, and that's driving our results overall as well.

The -- there's a lot of the strength that's come from the family product, and we had expected that, and it's good to see that we're getting some lift from the more favorable product.

Back half, again, I think there's a good sprinkling of family product that should bolster those markets as well as our smaller rural or non-urban markets in the U.S. So the product mix should bode well for the last half in Europe.

Chad, I would add that -- remember the stats I gave in my prepared remarks.

The overall box office was -- industry box office was up 16.6% in the Odeon countries and up 11.1%, I think, in the Nordic countries.

And attendance in Europe was up 16.6% across the whole of the continent, including the U.K. and Ireland.

So -- while Craig said we're in line, we might have picked up a little share.

What's impressive to me is that happened with anywhere from 15 to 20 theaters out of service for renovation.

Because remember, we closed a significant number of theaters so that we could put in the recliners.

For us to be growing share with a significant number of theaters closed, that's also very good news as those theaters reemerge.

We've told you in prior calls, we're seeing 50% and 75% ROIs in our theater renovation projects in Northern Europe.

That's a very good omen of things to come for us in Europe.

Great.

And then separately, at your Investor Day, you talked about testing mobile ordering on food and beverage at a small amount of theaters.

That could potentially provide a nice uplift to CPPs.

Can you elaborate on how this is tracking?

And then, Adam, has this been included in the revenues for your profit improvement plan?

Or is this initiative separate?

You're right.

We announced -- actually, we announced 2 changes way back then.

April seems so long ago.

Pre Avengers Endgame.

One, we were increasing mobile ordering, extending it like 8 or 9 cities around the United States, including New York, Boston.

L.A., San Diego, San Francisco.

We're putting in anywhere from $1 to $2 service charge on every order that's conducted through mobile ordering.

So right there, you've got revenue enhancement.

And we've seen the order size be slightly larger amongst those who mobile order.

Now the pickup rate on mobile ordering is still in its infancy.

First of all, it hasn't rolled out across all of the system.

And also, it's still relatively new, but that is not in our profit improvement plan because that's something we did starting 6 months ago, and that's sort of embedded in the base case for 2019.

So that's not a new idea.

The second idea that we spread in Q2 of '19, which we completed basically by Memorial Day weekend, was to introduce reserved seating across all of the AMC-branded theaters and all of the AMC Dine-In branded theaters, not at the AMC Classics.

We're now at something like 95%, 97% of those branded theaters.

The only theaters that might not be included are theaters we might intend to dispose of or renovate in the near-term, so we would not have spent the money to put it in reserved seating.

We think reserved seating is a great benefit for our guests.

It's something across -- on a circuit-wide basis that is only being done by AMC, of the major mass operators.

It takes all the anxiety out of going to movies because you know what your seat is.

So you don't have to get there 20 or 40 minutes early to lock in and snag a high-quality seat.

It also tends to drive increased ticketing fees from -- for advanced ticketing online.

And I'm pleased to report that our advanced ticket sales now are in the neighborhood of 50% to 55%.

That contrasts with 20% of our tickets that were being ordered online in advance 3 years ago.

There's a huge change, and we've seen significant increases in online ticketing fees.

The next question is from Jim Goss of Barrington Research.

I was wondering if you have many cases of 2 or more household members joining the A-List?

And if not, would you consider, as part of your pricing strategy, a couples or a family pass pricing structure to encourage attendance?

Or would that come out of the average visits number?

Yes.

We have a significant number of couples and/or friends who both joined A-List because of a quirk in our technology platform, you can only join A-List individually.

You join Stubs as a household, but you can only join A-List individually.

To have corrected that would have delayed our launch last year by 3 to 6 months.

We didn't want to wait.

But why don't I blow the eighth bit of news that I didn't put in today's call, it was going to be one of the points of next quarter's call.

But in October, we will be announcing something called AMC Stubs A-List Entourage, in which couples, or groups of friends, will be able to join the program individually but will be able to make their A-List reservations for a particular movie collectively so that you can block seats 8, 6 and 7 for you and your wife, for example, if you're both members of A-List in one single transaction, rather than having to do it in 2 separate transactions and hope that she quickly grabs H7 immediately after you grabbed H6 and that no one else grabbed that seat out from underneath the 2 of you.

We are not expecting to reduce price, however.

That's a service enhancement to our guests.

It's another thing that we think will allow us to charge a price premium rather than have to institute a price decrease.

And while we don't intend to charge price premium, we also don't intend to cut price for our new multiperson plan.

Again, whether it's a couple or just for your friends, one person in the party can snag seats.

Again, we're basically an all-reserve circuit within the AMC brand and the AMC-Dine-In brand for A-Listers.

So that's a very good enhancement of the program.

It's something our members have been asking for from the day we launched.

And as I said, we have addressed and fixed that quirk in our technologic platform that will -- that prevented it from happening before and will enable it to happen going forward pretty soon.

Okay.

And maybe this is too granular, but you might do this.

Your liability to the studio in terms of your rental fees is probably based on the ticket prices charged.

So it might vary by time or age or date, especially as you get into more variable pricing.

Does that -- did you try to factor that in as you're looking at the visits per month calculation?

We have never publicly before said what our private discussions are with any studio on film rents, other than giving you a collective film exhibition cost number.

We continue that view with respect to our A-List agreements with studios.

I don't think you should assume that the premise of your question is accurate, but I cannot confirm or deny what we're doing because we've long felt that our discussions with studios should stay private.

And I might add that we believe, today, what I believed the day I took the job.

We are so disinterested in haggling over film rent splits between AMC and our studio partners.

Our focus on everything that we've done over the past 3.5 years, whether it's investing in the theaters or innovative marketing programs, has been to drive industry demand so that the pie is bigger for both our studio partners and for AMC, that's a much better strategy.

And that's a strategy that we've been embarked on for years now and will continue to be embarked on going forward.

Our goal is the health of AMC and health of the industry and health of a strong, bonded, loyal 2 way partnership between AMC and Disney, AMC and Warner, AMC and Universal, Sony, Paramount, Lion's Gate, all the smaller distributors.

We want to be their best friends because they are our best friends.

The next question is from Mike Hickey of The Benchmark Company.

Congrats on the strong quarter here.

Curious on your point three, Adam.

I don't think it's variable pricing, but you're looking to sort of -- you're testing out sort of, I guess, premium pricing.

And of course, you planned that with Discount Tuesdays, I guess you sort of have more variables than there were before.

But curious how fast -- assuming the 30-theater test is successful -- how fast you intend to roll that out?

Obviously, Q4, there's some pretty big fighting for films coming out.

Sure, people wouldn't mind paying a premium for.

Just curious on that.

And then when you sort of -- if you are successful on your test here and you think on an annual basis on a full rollout domestically, call it, $1 in premium pricing on average, how big of an impact that would be on your average ticket price?

And I have a follow-up.

Sure.

Well, you're right.

This isn't the first time we're doing this.

We did it with weekend pricing where we went up on Friday, Saturday and Sunday.

Actually, went up initially on Friday, Saturday, then we went up Friday, Saturday, Sunday, then down on Tuesdays.

We know this works because we do it in Europe all the time.

We've looked at a whole slew of ideas, charging more for large screens, charging more for the best seats in the house, maybe charging less for the front row because they're not the best seats in the house, charging more for blockbusters.

There are other ideas that have surfaced over time, maybe charging more at the beginning of a movie's run or charging less at the end of a movie's run.

But the thing about pricing, the whole concept is, the test will be successful if consumers are not offended by a nominal surcharge.

What -- you can't pile on too many nominal surcharges right on top of each other or they don't become so nominal anymore.

That's why there was about a 2-year spread between introducing weekend price increases and are now looking at whether small increases on blockbuster movies, 1 or 2 movies a month, maybe in an occasional month, 3 movies in a month, but I would say more likely 1 or 2 movies in a month, whether that will be acceptable to U.S. consumers.

It is certainly acceptable to European consumers.

We have noticed that there are some very large movies coming in the fourth quarter of 2019, which just might be one of the reasons why that test started on August 2, and we are testing movies from each of the major studios, or the larger studios, I should say, so as to get a good read on does this concept work.

Because if it is accepted by U.S. consumers, we could roll it out very quickly.

As the order of magnitude, it is -- we do believe it's a very low 8-figure number, just for AMC, if it works, but that assumes that the test will prove successful.

And of course, it will be a much different number if it's a $0.50 surcharge or if it's $1 surcharge, for example.

And remember, our studio partners get a big chunk of this money.

We don't bank it all.

But as I said earlier to Jim Goss's question, we're interested in growing our bottom line, we're also interested in growing the bottom line of our studio partners.

We could roll this out very quickly if it works.

Last question from me.

On your point five, your profit improvement plan, the $25 million revenue enhancement, the $50 million cost savings, sort of curious how that balances domestic versus international.

And then international, obviously, you enhanced the network with refiners.

Maybe now you're enhancing with your profit improvement plan.

And I guess you're optimizing the model international.

Is this also [leading] work for an IPO?

So let's be clear.

There is international idea -- there are international ideas in the profit improvement plan.

A lot of them relate to above theater overhead, things that the consumer will never see.

When we bought Odeon and Nordic, they had 7 different, what you might call systems of duplicative country overheads, territory after territory after territory, which we think we can prudently rationalize, especially since we invested heavily to put in new Oracle accounting systems across Europe and other technologic advances that -- in the last 2 years -- that will continue this year to improve the technology platform that we had across Europe.

Nothing related to putting recliner seating in Europe is included in the profit improvement plan because that's not a new idea that we came up with for this profit improvement plan.

That's an idea that was the central investment thesis on buying Odeon in the first place.

Similarly, the investment thesis in Nordic of adding new-build theaters where we opened a theater in Oslo, it become the highest-grossing movie theater in Norway from the day it opened.

We opened a new theater in Helsinki that became one of the highest-grossing theaters in Finland as soon as it opened.

That's not in the profit improvement plan either.

To qualify for the profit improvement idea, this had to be a new idea that we had been working on all of 2019 and especially since Investor Day of 2019 and especially in the last 2 months to hit the list of new ideas to make 2020 more successful than 2019.

The next question is from Eric Handler of MKM Partners.

Two questions for you.

It was very helpful that you gave what ASC 842 pro forma impact would have been on last year's numbers, which essentially showed that your fully consolidated adjusted EBITDA margin increased year-over-year.

You didn't give that on a segment basis, so I was wondering if you could give what would have happened to adjusted EBITDA last year with ASC 842 and what that impact would have meant on a year-over-year margin basis for this year.

And then secondly with regards to CapEx, lowering that number by $100 million, very helpful for free cash flow next year.

Wondering -- I'm assuming most of that impact is going to be seen in Europe.

Can you talk about where -- have the things just been pushed out?

Are things -- any investments being canceled?

And where, it's just a matter of just pushing out the reclining seat initiative?

Eric, we do believe that the ASC 842 information segment data that you requested is in -- is it in the CFO note?

No.

It's actually in the press release under the selected second quarter financial results.

It's in the third bullet under that section.

So it's there.

Secondly -- on your second question.

Most of the reductions in CapEx are domestic reductions.

We said back at the April Investor Day that we're -- oh, and I forgot -- somebody asked the question, I didn't give the number of what the percentage of recliner theaters is.

We'll dredge that out for you.

But when you look at the domestic circuit, from memory, more than 50% of our theaters have been fully reclined, and we put some recliner seating in more than 75% of our domestic theaters.

And that -- those numbers are based on theater counts, but you have to remember that our AMC Classic theaters, of which we have 240, only give us something like 10% to 15% of our visitation.

So if you volume-adjust the theater count with recliner seats, not as a percentage of theaters, but as a percentage of our attendance, we're substantially above the 50% and 75% numbers.

I think you'd see something more like 60% to 65% by domestic volume, and even more by the number of theaters where some auditory has been done, but not all.

But because so many of the domestic theaters have already been done, there just aren't that many domestic theaters remaining to be done.

So where we've reduced maybe someone's ambitious plan to keep going with renovation is in the domestic circuit, not the international circuit.

What we're going to do is -- we still -- we think the low-hanging fruit has been seized domestically.

We started renovating theaters in the United States in 2011 and 2012.

We just started in 2017 in Europe, and that was the very tail end of 2017.

So the number of projects that we expect to do in Europe in 2020 is a similar number to what we did in 2019.

We've renovated in the neighborhood of 15 theaters in 2019 in Europe.

We expect to renovate another 15 theaters in Europe in 2020.

We've not slowed down the pace of renovating theaters in Europe.

It's an enormous area of opportunity for us.

We're continuing the flood of new-build theaters in the Middle East, not necessarily with our own capital because our Middle Eastern partner is putting up 90% of the money for our Middle Eastern expansion, which is in -- which is helpful for us.

So our international growth is still going to be quite robust even with the lowered CapEx number.

Where you'll see it, is -- being at what we think is coming near to the end of the domestic reinvestment cycle from 2011, '12 to 2019, 2020, we're kind of getting there.

We'd also note that nobody else seems to be renovating theaters in Europe, so this continues to be a first-mover advantage for us in Europe.

Other circuits are signaling also in the United States that they're pulling back on domestic U.S. CapEx investments for the same reason that we are, that they've already renovated a bunch of theaters, they've got no low-hanging fruit, and they're slowing down.

So that's where -- that's how we think we could get there.

We're still chasing the highest-growth ROIs, and we still have a substantial amount of growth capital that will be spent.

If you think that maintenance CapEx is -- you pick your number, somewhere between $100 million and $200 million -- probably in the lower half of that range, so within $100 million and $150 million -- even at a $300 million total CapEx number, when you add in landlord contributions, we're still going to have in the neighborhood of like $300-million-ish of growth CapEx to invest in 2020.

Now that's not all coming from us because our landlords in Europe and our landlords in the United States are chipping in profusely.

But we still have a lot of money.

We'll probably spend more money than anybody else in growth and in pursuing growth initiatives and high-return projects in 2020.

But $300 million worth of net CapEx, not $450 million and not $550 million, like it was 2 or 3 years ago, which means that our deleveraging priority will be increasingly met and our absolute generation of free cash flow will not only be increasingly met but be without any kind of doubt or question.

Great.

So that's just -- as a point of clarification, that $150 million reduction, that's pretty much because it's domestic, you're pretty much looking at a permanent CapEx reduction there?

Well, I said in my prepared remarks. . .

Or as close to permanent as you can get.

The answer to your question is, sort of.

We said back in April we want to get to $250 million to $300 million in 3 to 5 years.

We're now saying we can get to get the $300 million in 1 year.

This is net CapEx.

That's a little ahead of schedule from the 3 to 5 years.

And I specifically said in my remarks that we have not yet set a CapEx number for '21 or '22.

We don't need to make that decision today.

We can make that decision based on what we learn over the course of the next 16 months or so, 18 months.

So that's a decision for another day precisely, but if I had to give you -- is it more likely to be a permanent reduction or more likely to be a 1-year aberration, I'd say it's more likely to be a 1 year -- it's more likely to be a permanent reduction than it's likely to be a 1-year aberration, but we specifically haven't set a '21 target yet.

What we said back in April was hold this management team accountable.

We shouldn't be knee jerking based on what last week's box office was.

We shouldn't be knee jerking operating and capital strategies.

We ought to set medium to long-term targets and then you should hold us accountable to deliver on those targets.

Between the profit improvement plan and the capital expenditure curtailment, we think we're making great progress on both of those goals.

But I'm holding out a little bit of wiggle room for '21 and '22 based on what we learn over the next year and half.

But as I said, we want to get -- we want to delever.

It's a high priority.

We're not kidding.

We're proving it with the agility and the discipline to deliver the CapEx plan for 2020 of approximately $300 million.

And that sounds like the general neighborhood where we would expect to be going forward although not necessarily precisely that.

Could be more, could be less, depending about what we learn over the next year and a half.

And I might add, Eric.

We -- you've given us a lot -- we read your notes.

We read all your notes, not just Eric Handler.

A lot of your thinking has been very helpful to this management team as we've crafted these various strategies and thought how best to drive performance going forward.

The next question is from Alan Gould of Loop Capital.

I've got two.

First, Adam, are you surprised with the price elasticity of A-List?

And what do you and the competition charge for your unlimited programs in Europe?

So we're not surprised by it, actually.

I was in the ski resort business, and when I got -- for 10 years of my life -- and when I got to Vail, Colorado, we sold 5,000 season passes a year.

When I left Vail, Colorado, 10 years later, we were reselling 160,000 season passes a year.

I had a couple of years stint as the CEO of my -- of the NBA team in my hometown, and we doubled season ticket sales in 1 year and drove the biggest attendance increase of all 30 teams in the NBA and the biggest revenue -- ticket revenue increase of all 30 teams in the NBA in my first season.

I think if you're smart about these things, they can be massive hits.

And long before there was a MoviePass, we had been working on a subscription product within AMC.

And as we met in conference rooms, we actually pegged the launch price at $19.99 -- or $19.95.

We thought that was the perfect level to launch.

It was one of the reasons we were so incensed by MoviePass coming out at $9.95 because it was such a joke of a price that was guaranteed to be an economic catastrophe, and we said so loudly on the first day of their announcement.

So no, we're not surprised.

But having launched at $19.95 and with the success of our program, we can go up a little bit and did go up a little bit, up 10% in 10 states and the District of Columbia and up 20% in 5 states across the country back in January.

I do think there's still -- we're providing so much value to our guests and especially without a surcharge for IMAX or Dolby or 3D, some of the other features of our program.

Not only am I not surprised by the price elasticity, I think there's room for us at some point in the future to go up further.

That's A-List.

There was a second part of your question which was, pardon me.

In Europe, what do you charge for your...

One of the reasons that we settled on $19.95 as a launch price for A-List was because in Europe we're charging about the equivalent of 2 movies a month, and it's quite a successful program for us in Europe.

And the frequency in Europe is just like it's been in the United States, it's averaged between 2.5 and 3 movies a month.

So like the basic deal, the basic compact with the consumer is in very round numbers.

They were going to 1 movie a month, charging for 2 movies a month and let them go to 2.5 to 3 movies a month.

It's going to cost us a little bit on film mills because we're going to have to pay the studios for 2.5 to 3 movie visits at whatever price we've negotiated.

But they're not coming alone.

They're bringing people with them at full ticket prices with much greater frequency than they were coming before, and they're buying food on every one of these visits, food and drinks, on every one of these visits in much greater frequency than they were coming before.

And when you add it all up, we're ahead of the game.

And like -- you've seen it, right?

You've seen our attendance is growing far faster than the industry.

Our price has come down a little bit on a per transaction basis.

Our film rents as a percentage of revenue have gone up a little bit because we're paying film rent on these extra visits, but our total revenues are like through the roof.

Why?

Because our overall revenue is up because our food and beverage revenue is up, our other revenues are up, and that offsets any change in ticket revenues.

And we've said in prior calls, you've got to look at all these factors, you've got to add them all up, some are positive, some are negative.

You take a portfolio approach to the population, and we're way ahead.

And that's what we've modeled, and that's what we hope going into the program.

And if anything, I take you back to day 1. We said it would take us a year to get to 500,000 members.

It took us 4.5 months.

We said we would invest and spend $10.5 million -- $10 million to $15 million in the second 6 months of 2018 on 250,000 members.

We invested and spent less than that on 600,000 members in 2018.

We said that 2019 would be a breakeven year for A-List.

And in fact, we said on the first quarter call, that we thought A-List would be -- was profitable in Q1.

We've said on this call it's profitable in the first half and that it would be nicely generative, like handsomely generative by the end of this year, way ahead of schedule, because it wasn't supposed to produce anything this year, and we didn't originally expect to really generate profits from A-List until 2021.

And obviously, we're a full year ahead of schedule.

Sorry -- wouldn't be profitable until '20, breakeven in '19.

And we appear to be -- now it's profitable in '19 and will be much more profitable in '20.

We seem to be a full year ahead of schedule.

So that's more on A-List.

I understand why so many investors were spooked by it, because MoviePass and Sinemia went bust, but we have a very different program and radically different economics.

We're not foolishly charging $9.95, and we do get the benefit of all the take-along revenue, and we do get the benefit of all the food and beverage spending, as they did not.

So this -- and we had years of experience looking at what was done in Europe, ins with the data, inside our company.

And, I might add, remember we were the -- for the first time in the company's history back in 2016, we created what is now a 5 person pricing department.

We got a lot of [quants] inside this company who analyze everything that we do exhaustively.

I'm very proud of the capabilities that we built and the internal data we have about the A-List clientele is so extensive.

We can do so much analysis, and we can bob and weave with our communications programs to members, based on the profitability of guests such that to those guests who are most profitable, they're getting a lot more communications from us, they keep doing it and on and on and on.

So I don't know what more I can say about how powerful a concept A-List has been for this company.

Yes, Cinemark has a program.

It's not like our program.

I think you'll find that ticket counts in our program are significantly higher than theirs.

Regal is coming to the party quite late.

And if you add up the market share of Regal, Cinemark and AMC, it's like 60%.

I mean it's 40% of the industry is everybody else, and most of those players do not have any kind of a -- A-List-type program, or for that matter, a Stubs program.

They're not doing $1.5 billion outbound e-mails, text and push notifications to moviegoers, tailored and customized based on their purchase patterns of moviegoers previously.

So we think we're way out in the front.

And that's why, guess what, 800 basis points of attendance per screen advances over the rest of the industry for -- domestically in the U.S. -- 400 basis points of revenue growth per screen ahead of everybody else.

The marketing activity in AMC is -- and the technology efforts at AMC is crushing it right now.

By the way, I'll stay until you drop, but it's 7 to 9:00 AM Central Time.

That means it's 7 to 10:00 AM Eastern, so I think we're going to go one more or some of you are going to kill us because you would like to cover other things going on in the market today.

For our last question, operator?

Our last question is from Meghan Durkin of Crédit Suisse.

I have one for Adam and one for Craig.

So Adam, have you seen any change to the attendance trends on Tuesdays since you raised that price in May?

And then for Craig, was there anything unusual in the free cash flow results in the quarter?

You came in light versus my estimate, despite the EBITDA and CapEx being [up], so I just wanted to know if there was something in there.

I'll take Tuesdays, Meghan.

Thank you for your initial report on AMC.

Yes, something changed on Tuesday.

Shockingly, it went from being the least visited day of the week at AMC Theatres, hence, the reason for it.

It is now the second most heavily trafficked day of the week at AMC, second only to Saturday.

More people are showing up Tuesdays at AMC than Fridays.

Now the revenues aren't the second-highest revenues of the week.

Friday is still the second-highest revenue of the week because the ticket prices are down.

But yes, consumers have figured this out, and they have -- they are coming to the party that we throw every Tuesday.

I might add very quietly, we really do believe in smart pricing.

When we launched Discount Tuesdays, we actually launched a program that's $5 Tuesdays.

And very quietly, earlier this year, we changed the name of the program to Discount Tuesdays because we noticed that $6 is a 20% price increase over $5 and $6.50 is a 30% price increase and $7 is a 40% price increase over $5.

So we will continue to look theater by theater and market by market what the right level of pricing is to charge on Tuesdays.

But in any case, it will still be quite a bargain compared to what we charge for the rest of the week, offering the consumer great value and driving a significant increase in demand.

Craig?

Is there any impact on the attendance since you lifted the price to the $6 and $6.50 in some theaters?

It's pretty recent.

It's in the last 30 to 90 days.

It's a little too early to know how consumers will respond over time, but we have seen nothing that scares us yet.

You're paying $6 in Manhattan to go to a movie, that's quite a deal.

Craig, free cash flow.

Yes, on the free cash flow.

Only a couple of points I'd make, Meghan, was -- would be one, last year free cash flow from ops number was positively impacted by about $11 million rent inducement that -- can't say one time -- that didn't recur -- we had rent adjustments, but that one was abnormally large, I guess, would be the way to describe it, so $11 million positive impact last year.

And then last year, you would want to think about the ASC 842 impact, about $14 million.

There's an impact on rent.

There's also somewhat offsetting impact on interest costs.

The net of those 2 flow through cash flow from operations and we would have pro forma adjusted last year by that $14 million.

Thank you, one and all.

As we end the call, I -- obviously, we had a second quarter that we're quite proud of, but we think we have bold plans underway to make AMC more appealing to our consumers, to deliver increased margins, to deliver free cash flow growth.

And again, if you -- again, if we lift ourselves out of the ASC 842 morass because this will come to a clarification sometime soon, we would expect, and you don't think about were the movies in June great or poor, were the movies in July great or poor, if you lift yourself out of the day to day, week to week, weekend to weekend box office and you look at AMC over the medium- to long-term time frame, we think the value creation that we will drive for our shareholders is dramatic, and we think the future for AMC is quite bright.

We thank you for joining us today and for your attention to our company all year long.

With that, we're signing off.

This concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.