Strange as it sounds, recliner seats and upscale concessions were the stars of the show for financial types at AMC Entertainment in Q2. The No. 2 theater chain reported record ticket and concession sales.
It showed that “guests are driven by more than a movie slate,” outgoing CEO Gerry Lopez said in his last call with the exhibition company’s analysts. AMC’s venues with plush recliner seats “exceed our 25% [profit] return hurdle by a wide margin.” As AMC expands the build out, even if the box office sales are flat in 2016, it “will be another record year for AMC.”
He hit the innovation theme hard — unusual in an industry that often seems allergic to change. Lopez says that differential ticket pricing is getting “closer.” He promoted AMC’s recently announced planned two-release test with Paramount potentially enabling the studio to offer the films on home video before the typical end of the theatrical window.
AMC generated $43.9 million in net earnings in Q2, up 39,9% vs the period last year, on revenues of $821.1 million, up 13%. The top line was well ahead of the $810.2 million that analysts expected, although earnings at 45 cents a share were a penny shy.
Attendance improved 7.3% to 53.8 million. Average ticket outlays increased 3.8% to a record $9.91 in a quarter dominated by Jurassic World and Avengers: Age Of Ultron, which were popular in premium-priced 3D and large-screen venues. Concession sales of $4.65 per patron were up 10.2% and also set a record.
Exhibition stocks swooned early this week after Carmike’s earnings showed that the concentrated spending around a few hit films enabled studios to take a bigger than average slice of the box office pie. But Lopez says that film rents are “not out of control, they’re not out of line.” Indeed, AMC’s gross profit per screen hit an all-time high. “I’m not sure what happened to other folks in the marketplace, but for us it’s completely under control.”
CFO Craig Ramsey, who will become interim CEO when Lopez leaves, added that blockbuster films “feed our food and beverage business” which mean that “our gross profit per patron was up about 10% as well.”
On the Paramount deal, Lopez says it’s a needed test to help studios figure out how to finance some releases. The studio plans to offer Paranormal Activity: The Ghost Dimension (to be released October 23) and Scouts Guide To The Zombie Apocalypse (October 30) to digital home video outlets 17 days after each film dips below 300 domestic theaters. Exhibitors that show the movies will get some of the digital revenues up to the end of the traditional 90-day theatrical window.
“We need more films,” Lopez says. “We have used a broad brush to paint films with the same color. We know that’s not true. …We didn’t think that was smart.”
The CEO opened the call offering sympathy for the victims of last week’s shooting in a Louisiana theater where a gunman shot and killed two moviegoers and wounded nine others before taking his own life. “Safety and security have been, are, and will continue to be our top priorites,” he says.