Analyst: AMC Entertainment’s Focus Should Be Quality Over Quantity

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The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

Q1 revenues upside driven by higher admissions revenues, but EPS lower than expected due to higher other operating expenses and depreciation. Revenue was $623 million, compared with our estimate of $618 million, and the consensus estimate of $617 million. Adjusted EBITDA (excluding NCMI distributions) was $85 million, compared with our estimate of $93 million. EPS was 5 cents versus our estimate of 10 cents and the consensus estimate of 1 cent.

AMC (NYSE:AMC) continues to execute well on its strategic roadmap and outperformed industry averages, emphasizing quality over quantity in order to drive revenue growth beyond M&A. The company is focused on increasing productivity from its current asset base as opposed to focusing on M&A. Management believes that there are still significant opportunities ahead to drive incremental returns from its current assets and estimates that it has completed only 25-30 percent of the retrofit opportunities outlined in the S-1.

AMC continues to innovate and introduce new concepts, and we believe the company can stay ahead of competitors by focusing on quality over quantity. The company disclosed details regarding generation 2.0 of its recliner reseat initiative, which removes only half of the existing seats instead of the existing concept that requires two-thirds of seats to be removed. Earlier this year the company also revealed Red Kitchen, AMC’s fast-casual version of Dine-In Theatres. Management expects the next generation of recliner re-seats and the Red Kitchen concept to allow the company to deploy comfort and dine-in initiatives deeper into its existing portfolio than the initial concepts would have allowed.

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