AMC Entertainment Holdings, Inc. (AMC) CEO Adam Aron on Q4 2018 Results - Earnings Call Transcript

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About: AMC Entertainment Holdings, Inc. (AMC)
by: SA Transcripts
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Earning Call Audio

AMC Entertainment Holdings, Inc. (NYSE:AMC) Q4 2018 Earnings Conference Call February 28, 2019 5:00 PM ET

Company Participants

John Merriwether - VP, IR

Adam Aron - President, CEO & Director

Craig Ramsey - EVP & CFO

Conference Call Participants

David Miller - Imperial Capital

Eric Handler - MKM Partners

Chad Beynon - Macquarie Research

James Goss - Barrington Research Associates

Operator

Greetings, and welcome to the AMC Entertainment Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, John Merriwether, Vice President, Investor Relations. Mr. Merriwether, you may begin.

John Merriwether

Good afternoon. Thank you, everyone. I'd like to welcome you to AMC's fourth quarter and year-end 2018 earnings conference call. With me this afternoon is Adam Aron, our Chief Executive Officer and President; and Craig Ramsey, Executive Vice President, 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 income margin, 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 and supplemental financial information issued earlier today. In conjunction with our earnings release, we encourage you to review the supplemental financial information for the 2018 fourth quarter and full year that we published this afternoon on the website.

I would like to point out, there is an error in the table on the front page of the press release and the back page of the press release that was issued today. The adjusted free cash flow number for the fourth quarter of 2017 should be $211.5 million. The adjusted free cash flow number for the year ended December 31, 2017, should be $329.1 million. We are in the process of issuing a corrected press release and updated 8-K with the corrected numbers.

After our prepared remarks, there will be a question-and-answer session. This afternoon's call is being recorded, and a webcast replay will be available in the Investor Relations section of our website at amctheatres.com later today.

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

Adam Aron

Thank you, John. Good afternoon, everybody. I'm very glad you could join us for a review of AMC's fourth quarter and full year results and an update on several key items. Before I dive into AMC's record full year results for 2018, let me spend a minute talking about the impressive health of the movie exhibition industry generally. Simply put, 2018, as many of you already know, was a fantastic year for films. Movie after movie shattered attendance and revenue records this year. Movies like Black Panther, Avengers: Infinity War, Incredibles 2 and Venom helped set industry box office records for the months of February, April, June and October. And the industry achieved the single highest domestic entry box office quarter ever in the second quarter of 2018. As you all know by now, the domestic entry box office reached a new all-time record of almost $11.9 billion, which marks the fifth record year for the industry in the last seven years. This was 6.9% higher than 2017 and 4.3% greater than the previous record of $11.4 billion set in 2016. The 2018 yearly result is a great demonstration of the continued health and strength of the movie business, the theatrical exhibition business and of AMC.

We think it should set to rest once and for all the fallacious argument that movie theatres cannot thrive in an era where ubiquitous content is available in multiple ways, including streaming. We think this is especially true and especially reinforced by the incredibly bright prospects for the domestic industry box office for 2019. As we enter this new year, we cannot be more bullish about our collective prospects for 2019.

Turning to AMC. We are very pleased with AMC's full year performance in 2018. Company-wide, we achieved the highest single year attendance ever for global AMC, driven primarily by a 6.1% increase in attendance at our U.S. theatres. All told, a record 359 million people across the globe chose to see a movie in an AMC or Odeon Cinemas group theatre in 2018.

For the full year, we generated a record $5.5 billion in total revenue, which is up 7.5% from 2017, setting high watermarks across all our revenue categories. Admissions revenue grew 4.8% for the full year. Food and beverage revenue grew 8.0% for the full year. Other revenue grew 34.2% for the full year. Through operating leverage, this led to the highest adjusted EBITDA in AMC's 98-year history at $929.2 million, which is up $106.7 million or 13.0% from 2017. Adjusted EBITDA margins also expanded approximately 80 basis points to 17.0%.

Our growth initiatives continue to see strong returns. Recliner renovations continue to exceed our 25% return thresholds with our recent renovations in Europe achieving 50-plus percent cash returns. Food and beverage investments drove higher spend across the board as food and beverage revenue per patron grew 4.3%.

Likewise, our technology investments are generating higher online engagement and higher online ticketing fees. We are currently routinely seeing some 45% of our tickets now being sold online in advance and nearly 70, 7-0, nearly 70% of those are being sold through AMC's proprietary mobile app and website. Stubs A-List, which we will spend more time discussing later in this call, continue to be very successful. We expect it will continue to drive incremental attendance and will be additive to adjusted EBITDA a full year ahead of the original schedule now beginning this year in 2019.

Breaking down our results by geography. We have to be pleased with our 2018 performance in the United States. Total domestic revenue grew by 7.8% to $4.0 billion. In attendance, AMC outperformed the industry domestically, growing domestic attendance per screen by 6.9%, which was more than 340 basis points better than the industry, benefiting from our organic investments in our theatres as well as the successful launch of the AMC Stubs A-List program. Adjusted EBITDA grew domestically by some 14.8% to $700 million and saw margins expand by over 100 basis points.

Internationally, total revenue was up 6.8% to $1.4 billion, which admittedly benefited from the full year contribution of Nordic Cinema Group versus nine months in 2017. On a pro forma basis, international revenue was approximately flat year-over-year. This compares favorably though to the industry box office in countries served by Odeon and Nordic theatres, which witnessed a 5.2% decline and a 1.6% increase, respectively, on a constant currency basis.

The softer industry box office across Europe was affected by relatively weaker performance of Hollywood titles, inconsistent performance of local films as well as competing viewing attention in the summer from the every four year FIFA World Cup.

Adjusted EBITDA internationally was up 7.6% to $229 million on a reported basis and slightly down 3.2% pro forma for the Nordic acquisition. This drop on a pro forma basis was due primarily to inflationary increases in operating expenses against flat revenues.

Taking a look below the operating line. 2018 net earnings grew to $110 million and benefited from approximately $111.4 million related to the noncash mark-to-market adjustments of the derivative assets and liabilities associated with our convertible notes. In general, the impact of these adjustments moves inversely with our stock price. As I mentioned last quarter on this comparable call, the change in value of the derivative assets and liabilities from quarter-to-quarter are noncash and are purely an accounting figure that will mark-to-market at the end of each quarter. Accordingly, we believe that you should look past these quarterly fluctuations whether they be negative, or as in the fourth quarter of 2018, quite positive.

And speaking of fluctuations, whether it's the year we just completed the last 10 years or really since the beginning of movie exhibition, we have seen and will always see short-term quarter-to-quarter volatility in our results due primarily to the timing of releases of individual movie titles in the movie slate as well as how each such movie resonates with our guests. That's why we tend to focus much more on full year performance as we manage the business. We would encourage you to do so as well.

Overall, 2018 full year was an excellent year for AMC. We reached new heights, both financially and operationally. Looking forward, we are very excited about the films being released in 2019. It's too early to note for certain, but we think 2019 has the potential to be the first year in history ever to break the $12 billion mark in domestic box office. Similar to 2018, based on the timing of the movie slate, we expect to see a ramp-up in box office results that get stronger and better as each quarter goes by. There will be many, and I mean many great franchises throughout the year, maybe starting with Captain Marvel in March, that offer significant consumer appeal.

While tentpoles generate lots of headlines, the depth and breadth of the movies outside the top 20 will also play a very important role in 2019 as it did in 2018. Looking ahead, we accounted more than 30 different films which could resonate with consumers in a big way in 2019. Importantly, the 2019 movie slate also includes a larger number of family-friendly films than we've seen in the past couple of years. This film genre is expected to be very well received in our smaller theatres and in our nonurban domestic markets as well as in Europe.

No matter your taste in movies, there will be something for everyone in 2019. And AMC stands ready to be the theatre of choice with the highest number of comfortable seats, the biggest concentration of premium large-format experiences, continued improvements to our food menus and the widest variety of beverage options, both hard and soft, along with the convenience of food and beverage Delivery to Seat in more markets than ever before.

Another major proconsumer step is also being taken by AMC this year. We are spreading reserved seating, much welcomed by consumers to every single one of our AMC branded and our AMC DINE-IN branded theatres by June of this year.

That's a quick synopsis of the results. Let me shift gears and update you in four topics that are important to us and, therefore, by extension, important to our shareholders. They are: A-List, theatre renovation returns, our capital expenditure program, and a new metric, adjusted free cash flow.

First, for what many of you may be the elephant in the room, A-List. I am extraordinarily pleased to inform you today that A-List is quite a handsome elephant, quite a well-dressed elephant and quite a well-mannered elephant. We realize that many of you want to learn more as to the visibility we have into A-List. While you get more insight into A-List only on these quarterly updates, fortunately, we get and carefully analyze in exhaustive detail A-List results literally on a daily basis. And what we've been seeing is particularly encouraging. Just eight months and two days ago, we launched AMC Stubs A-List, the monthly prepaid subscription tier of our already successful AMC Stubs loyalty program. The guest reaction to both Stubs and A-List has been nothing short of terrific. Stubs is now up to 18.6 million member households, representing about 40 million Americans. About 45% of our entire U.S. clientele is now participating in Stubs, tracking their purchases with us and playing for our points. Accordingly, we now have a rich, large and valuable consumer database at AMC on a transformational basis that has become quite the digital marketer. In 2019, I expect that we will send out more than 1.5 billion e-mails and texts, counting the appeal of the impressive 2019 movie slate to our Stubs members.

As for A-List, we announced yesterday that A-List continues to grow in size now with more than 700,000 moviegoers. The exact number as of the start of this call, 704,560 to be exact, have signed up to enjoy more movies at their favorite AMC Theatres. And that 704,000-member count is net of the de minimis churn of members falling out of the program. As you already know, we achieved our 12-month goal of 500,000 members in just 4.5 months post launch.

On last earnings call, I spent a fair amount of time talking about how the program works and why we're so excited by its prospects for success. This quarter, I want to provide you with a more exact update on the program's unit economics based on actual results. As a preview, they are very attractive, and we are considerably outperforming our original model. There is much more than we are constantly analyzing with A-List. But at its most basic level, there are four simple A-List metrics to understand: one, the monthly price that we charge; two, the frequency of attendance by A-List members and the incrementality of that attendance versus its cannibalization; three, the take-along factor of A-List members bringing along family and friends at full ticket prices; and four, the food and beverage spend at our theatres per subscriber.

On the first variable. We launched the program at more than double the price charged by our competitors. And given robust demand wildly ahead of our original expectations, we took the opportunity to raise price by a weighted average of about 13% on January 16. That price increase is effective now for new members and will roll out across the entire A-List membership as each member hits the one year anniversary of his or her enrollment. As to frequency of movie watching, so far, here is what we've learned. It starts out high in the first week or two of membership, settles down almost immediately to an average of about 3.3 visits per month in the first full calendar month of enrollment and quickly falls below three visits by the third month of enrollment. This is how we always expected it would be, as people settle in to ongoing membership. In January and February of 2019, average frequency for the entire membership was already down to 2.8 visits per month. Of crucial importance in all this frequency data, our reviews suggest that the incrementality of this moviegoing is huge. Prior to joining A-List, A-List members on average were seeing only about a half a dozen or so movies per year. They are now coming to our theatres with much greater frequency. And they're bringing friends with them at full price and buying high-margin food and drink. We finally appear to have cracked the code in generating increases in U.S. theatre attendance, reversing a two decade long trend.

On the third variable, A-List members are not coming alone. We are also outperforming on the bring-along metric. And I reiterate that this is at full price, with members approximately doubling their bring-along revenue as compared to before they signed up for A-List. This greatly adds to the profitability of the program.

And on the fourth variable, food and beverage spend per subscriber has grown nicely. So far, the average A-List member appears to increase their monthly food and beverage spend at AMC by approximately 2.5x versus before they signed up for A-List. This is particularly important as food and beverage revenue benefits us from its high gross margin of approximately 86%. Put all of this together, we can say categorically that we are now capturing increased share of wallet from people who sign up for A-List. We're already seeing that Stubs A-List members are adjusted EBITDA neutral to slightly positive for January and February of 2019 as contrasted with us not having launched the program at all. Just eight months after launch, EBITDA neutral to slightly positive.

Based on current activity, we could significantly outperform our original estimates that an illustrative 1 million subscribers at steady state would generate approximately $15 million to $25 million in incremental adjusted annual EBITDA for AMC. I would not be surprised if by the end of 2019, we are seeing incremental annual adjusted EBITDA of more than $3 per A-List member per month.

At the time A-List launched in mid-2018, we told you that we expected A-List to result in a $10 million to $15 million adjusted EBITDA headwind in the back half of 2018 as we launch the program and subsidized early subscriber acquisition. Despite growing subscribers by about double the originally expected 300,000 to 350,000 by the end of 2018, the adjusted EBITDA impact in 2018 came in at the lower end of that range, coming in at $11.6 million. So much lower all because on a per person basis, all because of our stronger-than-expected subscriber unit economics. Likewise, we originally told you to expect 2019 to be a breakeven year for A-List and that A-List would not be accretive until 2020. We are now quite comfortable to expect the program to contribute adjusted EBITDA dollars in 2019, a full year ahead of schedule.

Importantly, the A-List subscription program is valuable beyond pure EBITDA accretion. A-List shifts a meaningful portion of AMC's business to a recurring revenue subscription model, thereby increasing revenue visibility for us and reducing box office volatility. Additionally, the subscription service allows us to leverage technology to meaningfully enhance the end-to-end customer experience, reducing friction beginning with the booking process to advance F&B selection through mobile preordering, all the way through post movie follow-up. And with the unique customer insights that we gain through the Stubs purchase history database, we are increasingly making this whole process of a consumer feeling attached to AMC more tailored to the individual customer on a custom basis. Done right and we are already far advanced in this area. We would expect this will significantly improve long-term customer loyalty for AMC.

Topic two, continuing attractive returns on our theatre renovations. On the domestic front, during 2018, including new-build theatres, we installed recliner seating at 58 U.S. at theatres, 14 of them former Carmike theatres. This brings the total number of theatres in the U.S. that offer recliners, including our Dine-In Theatres and Dolby Cinema auditoriums, to 305 locations with about 2,900 screens or about 48% of our theatres and 36% of our screens.

But let's look at the AMC circuit, excluding the AMC Classic branded theatres, which by definition are low-visitation theatres, fewer than 1,000 guests per day and theatres that are not now and will not in the future be equipped with recliner seating. Excluding AMC Classic, recliners now account for approximately 75% of AMC and AMC DINE-IN theatres and 50% of AMC and AMC DINE-IN screens. Returns for these newly renovated theatres remain strong, and their run rate performance are resulting in ROIs in excess of our 25% hurdle targets.

Internationally, during 2018, we renovated 16 theatres and built three new theatres, all with power recliners across Europe, bringing the total number of renovated or newbuild theatres with recliner seating in the U.K., Spain, Italy and Germany to 24, totaling approximately 230 screens. Included in the class of 2018 is a stunning, gut to the studs renovation of our most iconic and most important theatre in all of Europe, the legendary Odeon Leicester Square in London, which opened originally in 1938. Initial results of this newly reborn Odeon Luxe theatre, as we're calling the recliner theatres in Europe, in the heart of London and for that matter, for all of the 2018 class of European renovated theatres are very promising. As we said before, recliner penetration is a great opportunity for us in Europe. There's tremendous potential to increase our European EBITDA especially in the United Kingdom, which is a large part of our thesis for the Odeon acquisition. The early renovation returns have proven us out to be true. For example, the first five theatres that we renovated in Europe with recliners and that have already been open for a full year have achieved an average ROI of more than 50%, driven by an average attendance increase of 34%. The early results from our more recent renovations continue to support this same conclusion. Accordingly, we expect to renovate another 20 to 25 theatres in Europe in 2019.

Speaking of which, our third important subject to review with you is our capital expenditures program as a whole. Net CapEx -- net cash CapEx for 2018 came in at $461 million, at the low end of our guidance of $450 million to $500 million. Only $129 million or less than 30% of that amount was related to maintaining our operations, so-called maintenance CapEx. The balance or approximately $332 million net of landlord contributions was invested into organic growth initiatives, both domestically and in Europe, which we believe generate strong ROI well in excess of our cost of capital and, therefore, are additive to shareholder value.

Having said that, 2018 was an important transitionary year for AMC. With 75% of our U.S. AMC and AMC DINE-IN theatres already having been reclined, we are now close to reaching saturation for recliner seating in our domestic circuit with the bulk of the remaining U.S. opportunities coming from the low-hanging fruit from amongst the acquired Carmike theatres. At the same time, our European circuit remains largely unrenovated, and as I just discussed, is yielding fantastic ROIs. Due to these facts, beginning this past year 2018, we began to step down our investments in the domestic circuit and ramped up our investments in the European circuit. You should expect to see this trend continue in 2019 and going forward as we begin to conclude our capital investment cycle domestically and shift focus towards Europe. Therefore, in terms of 2019 CapEx guidance, we now expect to invest approximately $450 million in net CapEx falling at the lowest end of the $450 million to $500 million range we previously provided. Included in that CapEx is an expected 33-theatre renovations and newbuilds to complete -- to be completed in the U.S. and more than 30 theatre renovation and newbuild theatres to be completed in Europe and the Middle East.

For the first time, we want to provide you with CapEx guidance over a longer time period looking ahead because some of you may be overestimating our CapEx investment plans going forward. Over the next 3 to 5 years, we would expect to see CapEx step down to a more normalized level of approximately $250 million to $300 million. Combined with hopefully increasing EBITDA levels, this reduction in CapEx versus today's levels should allow us to use our excess cash for deleveraging, which is a very high priority for us now.

The fourth topic to discuss with you is free cash flow, adjusted free cash flow. In order to provide investors with increased clarity with respect to the company's discretionary cash generation and liquidity position, AMC is disclosing a new non-GAAP metric, adjusted free cash flow, beginning this quarter. It will similarly be announced in the quarters to come. The metric is calculated as cash flow from operations plus certain items such as M&A expenses, less maintenance CapEx, less landlord contributions, which is generally linked to growth CapEx. This metric is how management thinks about the true cash generation potential of AMC before considering the effects of our investments in organic growth initiatives. We're certainly not planning to stop investing in growth given the substantial high ROI opportunities remain. Even so, with a crystal ball, we do expect that growth CapEx should moderate to a more normalized level, previously the $250 million to $300 million range, approximately over the next 3 to 5 year time period.

In 2018, AMC generated adjusted free cash flow of $298.2 million. It was lower than 2017 primarily due to a combination of M&A expense and an increase of interest expense. In considering interest expense, though, it is worth noting that as a result of our repurchase of $24.1 million Class B shares from Wanda in September, our dividend also had been reduced by $4.8 million per quarter, reduced by $19.2 million on an annualized basis. While our adjusted free cash flow measure is lowered by the incremental interest expense, it does not show the benefit from the reduction in cash lays out -- the reduction in cash outlays associated with a reduced dividend pay list. Fully burdening the adjusted free cash flow by growth CapEx of $459.8 million prior to associated landlord contributions of $127.6 million results in negative cash generation of $34.0 million in 2018 full year. It's important to note that this negative cash generation was intentional on our part as we chose to accelerate our CapEx investments to utilize the proceeds from the planned monetization of nonstrategic assets throughout 2018.

You'll recall that in '18, we actioned the mandated sale of NCM shares for $162 million, certain sale leaseback transactions for $50 million and the Screenvision merger, which resulted in $40 million of cash proceeds to AMC. The net-net result of all this activity was that our cash balance remained largely unchanged from the beginning of the year.

Looking forward, we are committed to keep growing our free cash flow in 2019 and beyond, both our adjusted free cash flow and fully loaded cash flows for growth CapEx. As I mentioned a minute ago, as CapEx steps down towards more normalized levels over the next 3 to 5 years, we expect to increasingly utilize our excess cash flow to deleverage as well as continuing to return capital to our shareholders.

Before I turn the call over for Q&A, I finally want to touch on two housekeeping issues. The first housekeeping matter pertains to an upcoming Analyst and Investor Day. AMC plans to host an Analyst and Investor Day sometime in March or April 2019 in New York City. The topics we will cover will include an update on our strategy and growth investment philosophy, a deep dive into our many growth opportunities, the likelihood of a more moderated, normalized CapEx spend in the years ahead and a discussion of our long-term financial target framework, including our long-term target leverage objectives. Details on logistics for the event will be provided at a later date. The event will be webcast. We encourage everyone to attend if you can and/or review the materials that we publish on our Investor Relations website prior to the event.

The second housekeeping matter is in regard to lease accounting and the adoption of ASC 842. Beginning with the first quarter of 2019, our financials will be reported on an ASC 842 basis. As most of you are aware, this will result in certain presentation changes to our financial statements. But as it is purely a noncash accounting change, there should be no impact on our business nor on our cash flows. Still, we want you to be well briefed, so we will provide full and additional details as to the lease accounting changes via dedicated conference call to walk you through the details on a date to be announced. The call will occur after the Analyst Investor Day but prior to the announcement of our first quarter 2019 results.

To summarize, 2018 was AMC's best year in our nearly 100 years of existence. We set financial and statistical records, leveraged our global scale and built deeper loyalty with our guests through AMC Stubs and the new A-List subscription tier, which only helped to drive attendance to new highs. The movie slate is so enticing for this year, especially in 2019's second, third and fourth quarters. As such, we are very optimistic about our ability to deliver superb financial results for 2019.

Ladies and gentlemen, it's now time for your questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from David Miller, Imperial Capital.

David Miller

Nice to see your stock marked up 6.5% here after market hours. A couple of questions, Adam. The -- with regard to the slight softness in Europe, is there any difference now in the scheduling? Or are there any changes to the scheduling that you guys plan on potentially IPO-ing the European portion on either London or euro next? Craig, I think you had mentioned that the time line last quarter was going to be late '19 or early '20. I'm just wondering if there's any change in that timeline. And then I have a follow-up.

Adam Aron

First, thank you, David. First of all, congratulations on your new role. There was slight softness in Europe. A lot of it has to do with the FIFA World Cup. Some movies didn't translate as well in Europe as they did in the United States like Black Panther. Some of the domestic product, local language products in Germany nearly wasn't all that great this year. But we already made a comment on the last call about a European IPO. It's off the table for now. We do need to -- we think it's wiser to post strong operating results in Europe before we contemplate selling off 1/4, 1/3 of our European assets to investors and we'll get a much higher price. So there is no change in the schedule as compared to what we announced on last quarter's call.

Craig Ramsey

Yes, David. I'd say we had -- what's moved -- what's changed though is really the emphasis on the cash flow generation, the changes that Adam talked about in his remarks to the capital deployment, the reduction of CapEx. And that really steps up our opportunity and ability to deliver going forward.

Adam Aron

Yes. That, especially with the more moderate view of CapEx in outer years. But also, I should have mentioned in the first part of my answer, we're also seeing such staggering results in the financial returns on our recliner theatres. We also think that our current shareholders should reap the benefit of that EBITDA increase and the valuation that accrues to us from better EBITDA in Europe, from the recliner renovations in Europe. As I said in my prepared remarks, we're routinely seeing ROIs in excess of 50%. Before we give all that value to a third party, we'd like to give it our own shareholders first.

David Miller

Okay. And then just a follow-up. I believe it was last year at this time that you guys were having problems with the renovated AMC Theatres versus the renovated Carmike theatres then, of course, within that, the non-renovated AMC Theatres versus the non-renovated Carmike theatres. Has that all been absolved now? Do you feel a lot more comfortable with those renovated Carmike theatres given the fourth quarter performance? Appreciate the questions.

Adam Aron

Thank you, and yes. And let me set it in context. The -- you got to go way back. You did say last year, so I got to go way back in 2017. The circuit that was delivered to us in December of '16 was in an eroding position, and eroded throughout much of 2017. And we put the A-Team on it, and by September, October, we'd hit those -- we've hit the bottom and crested. And by October, November, we were starting to decline -- this is of '17, climb up and start to see good performance out of the entire Carmike fleet of theatres. What we said way back then because we're talking 15 months ago, is that some of the investment decisions that Carmike had made in renovating their theatres were -- before our ownership, were different decisions that we might have made ourselves. They put far more money in the Dine-In Theatres and far less money into recliner seating. And that the so-called renovated Carmike theatres in 2017 were similarly problematic for us in the acquired circuit. But we're talking 12 to 24 months ago. As we sit here today, I already said that we have turned around the whole of the Carmike fleet by the end of 2017. And the Carmike theatres that we renovated in 2018, we renovated with the kind of initiatives that AMC is quite experienced in.

We were building -- we were installing recliner seating as we have done quite successfully. And actually, the returns coming out of the renovated Carmike theatres were quite appealing in 2018. They nicely met our 25% hurdle returns. And I mentioned that we did 58 theatres in 2018. 44 of them legacy AMC Theatres and 14 of them legacy Carmike theatres. What we're seeing from the results of the '18 renovations in the Carmike circuit, doing it the way that we know how to do it, making the decisions that are based on our own analysis, they were quite strong. And looking ahead, I think you're going to see more Carmike theatres getting renovated than AMC getting -- than legacy AMC Theatres getting renovated because the returns are so high. We're well down the road. We got 75% of the AMC Theatres now renovated. All but 14 of those are legacy AMC Theatres. But the low-hanging fruit is not deep in the cycle of the AMC Theatres. It's early in the cycle, the Carmike theatres. And that's where our CapEx moneys will primarily be going in the years ahead domestically.

Operator

Our next question comes from Eric Handler, MKM Partners.

Eric Handler

Two things I want to focus on. First, in Europe, particularly the U.K., it sounds like the renovated theatres are off to an excellent start. But I wonder if you can talk about the competitive dynamic. Last year was a near 50-year high in attendance in the U.K. There was definitely some U.K. films that overindexed quite nicely, which helped, but where your competitors, Vue, dropped price substantially and gained some market share that way. So you've gained a little market share, Vue gained some market share. Was it the middle ground that lost market share? Or do you not compete with you in certain markets? And how do you think about the -- some comparisons on a year-over-year basis in the U.K?

Adam Aron

Sure. Look, Vue's pricing in the U.K. is insane. And they gain share from it theoretically, but it's not how we believe we should be competing in the United Kingdom. Fortunately, we have a different strategy. Rather than dropping price to questionable levels, we've chosen instead to compete on quality and value. And that's not just words, it's easy to say you're competing in quality and value. But we now have 20-ish theatres in the U.K. with recliner seating. I'm pretty sure we'll have another 20 in 2019. And we're getting enormous progress and seeing enormous progress in our U.K. network as a result of having improved the physical condition of our theatres, and that's how we're going to play the game in the United Kingdom. I think it's a much wiser strategy.

Eric Handler

And then the follow-up to that was also going to be, when you look at the year-over-year film slate in the U.K. since it is your largest market there, you had a lot of theatres -- or the film content in 2018 was very U.K.-centric. How do you see that as you look at a year-over-year basis in 2019?

Adam Aron

Well, look. Let's talk a little bit more broadly than just the U.K. If you look at all of Europe, Europe was soft in 2017 -- sorry, 2018. And we posted these results for global AMC that are making us smile even in the face of some weakness in Europe. Having said that, as we look at 2019, the slate that's coming on 2019 appears to be so strong that we're hoping for an up year in Europe, in the U.K. and across the continent. And that will just be gravy for us given that we posted strong results in 2018 on the strength solely of the domestic network.

Eric Handler

Okay. And then one last quick thing. So your per cap concession spending in the fourth quarter in the U.S. was quite good, up 2.2%, which is a big reversal from the modest decline that you had in the third quarter. And you talked about, in the third quarter, how A-List had a little bit of impact because of that. What changed so dramatically in the fourth quarter that all of a sudden you get per cap spending back on a positive trend?

Adam Aron

Well, first, I don't know the right way to say it. A-List is very new to us in the third quarter. We only launched it in June 26. We learned early that while the A-List spending per month is way up because of increased visits, the A-List spending per visit was not robust. We learned from that experience, and we marketed our F&B harder and better and smarter in the fourth quarter of 2018. And that's something that's going to continue to be a very high priority for us in 2019, with new menu items, more delivery to see, a lot more marketing activity, a few tricks up our sleeve I can't talk about on this call, because competition will learn about them too soon. And Craig wants to mention one more thing.

Craig Ramsey

Yes, the other thing, Eric, we took our pricing action, the 2018 pricing action was really taken in kind of the late summer, and so we didn't affect really the third quarter that much. The price, food and beverage up 13%. The lion's share of that came from some late summer, early fall pricing that solely benefited the fourth quarter.

Adam Aron

And I might add that we've also put in some price initiatives on F&B already this year in 2019, which had flowed through the P&L throughout the year as well.

Operator

Our next question comes from Chad Beynon, Macquarie group.

Chad Beynon

Firstly, I want to -- domestic margins, as you think about 2019, so outside of the rent adjustment that you all faced, that headwind in the first half of the year, are there any other reasons why the flow-through shouldn't be strong? I think we're all expecting revenue at the box office to be up, and that historically has led to somewhere between 40% and 60% flow-through. So outside of that rent, is there any reason why you shouldn't be able to get some margin expansion?

Adam Aron

I think it's going to be a pretty good year. So let me put all the implication of lease accounting aside for the call when we walk you through it. Should about a pro forma basis, old accounting -- I'm sorry, old accounting or a pro forma basis, new accounting, so you have comparable stats year-over-year. Should feel like a very good year, with the caveat being the box office is going to be much stronger in the second, third and fourth quarters than the first. And whenever revenues are stronger, margins expand greater. So I think you should expect to see better performance in the latter part of the year as opposed to, say, Q1. Craig?

Craig Ramsey

Yes, I'd add, Chad. Some of the headwinds we had in 2018 for the full year on EBITDA contribution margins, we had lower dividends. That will comp very comparably year-over-year 2019 versus 2018. A-List, we've talked about, that we see improvement that actually being a net contributor. So that should be improvement. A [indiscernible] was a piece that we'll have to contend with, but we have some things in store that ought to offset the benefit that we had in 2018 on that onetime lease incentive payment. So there's gives and takes, but I think net-net, we ought to see some margin improvement next year.

Chad Beynon

Craig, on the share count, how are you guys going to be treating the convert, the 32 million shares there from a P&L standpoint? And is this 135 million shares? Is that the right number, kind of fully diluted with everything included, thinking about it going forward?

Craig Ramsey

Yes. That has -- the 135 million has the -- for the quarter, and the 130 million for the full year, has the dilutive effects of the convert, which is what you've observed. Now certainly not as dramatic an impact on the full year because it wasn't outstanding for a full year. So the 135 million, yes, would probably be more indicative of the full year.

Adam Aron

And we're about 103 million shares outstanding if, you set aside the convert.

Chad Beynon

Okay. And then last one. Just for CapEx, the $250 million to $300 million, so I think you said before the maintenance number is really somewhere between $150 million and $180 million. So what would be the delta between the $250 million to $300 million in kind of a pure maintenance number? Is that just further reseats and just things from a technological standpoint that you're doing in the theatre? Why wouldn't that just reset down to the maintenance?

Adam Aron

So you're right. Maintenance capital this year was $129 million. Of that $250 million to $300 million range, call it $150 million and $150 million. $150 million in maintenance capital and $150 million at the higher end of the range for growth initiatives. Look, we're still sitting on what we see as impressive opportunity to invest in our circuit and achieve high returns far in excess of our cost of capital. And sometimes, there are recliner seats. There are a whole host of other things we can do, including new-build theatres. We did sign a contract in 2018 that calls for 50 new theatres to be built in the next 4 years in the Middle East. 90% of the capital for those theatres coming from our partner. If those theatres go well, we could see that number of theatres double and technology is also a great opportunity for us. We've become a digital marketer now. 45% of our clientele are booking their tickets in advance online. That's all the strength of our website and smartphone app or apps, plural. So we got food and beverage opportunities galore.

So we're never going to -- should never say never, but I don't ever envision growth initiative CapEx falling to zero. That would imply that there's no opportunity organically within the business to chase and actually achieve high returns. And as we look ahead, there's going to be a lot of opportunities still to get those returns, which should increase EBITDA, which should be beneficial to our shareholders. Having said that, we've been at this now for six years in the United States. It was 75% of our theatres already having been touched domestically. We don't have to invest at the same levels in outer years going forward as we've been in the last few years simply because once you do the big renovation, you're done. But there is considerable opportunity within our gunsights.

Operator

Jim Goss, Barrington Research, please proceed with your question.

James Goss

Ideally, with A-List, you would like the members to attend -- take out seats that would not be sold otherwise, I suppose. And I'm wondering if [indiscernible] as the uptake increases, are you getting any crowd out in peak periods where you might have sold some tickets at higher prices?

Adam Aron

Your first premise is accurate. Of course, you'd like them to fill empty seats rather than block -- either fill full seats or block full-paying patrons. You know I'm an ex-airline guy. Spent 11 years in the airline industry. I know something about load factors. It is shocking how many empty seats we have in the movie theatre industry. We are not airlines that run 78% load factors. We are churches built for Easter Sunday that have empty pews on those Sundays. We're not seeing any evidence of significant disruption to our ability to sell tickets to full-paying customers.

James Goss

Okay. And as the number of visits per month edges down a little bit, do you think ultimately, you got an improved film ramp margin rather than a challenge to it, as attendance moves to that lower level? But you have the higher revenues and maybe braced the costs?

Adam Aron

I want to stay away from that conversation publicly, because we work so hard with studios to convince them that we are their partner, that we're interested in increasing the pie for everybody, rather than arguing about film rent splits between us. A-List is a program that clearly is driving incremental attendance as I said earlier, up 5, 6x. We're all making more money from this thing. And as for how it splits between the studios and AMC, I prefer that they handle that with our studios privately.

James Goss

And since we're at the end of the line, I'll stop there.

Adam Aron

No, no, no. We love you, you can finish, go ahead. What's your next question?

James Goss

Okay, just one other one. You talked about the family-focused films working against ticket prices this year. And now this coming year, you talked about a lot of those tickets again that might not sell a lot of IMAX and 3D. Do you think that's another issue in terms of the average ticket prices is going on to the [indiscernible]?

Adam Aron

Actually, I think it's going to be the opposite. I think some of these family-friendly films that are going to come out are going to be massive hits for IMAX and for that matter, for Dolby Cinema. Some of the animated films have been made for IMAX. I think are going to do very, very well. And I think we're going to be very glad that we are the largest IMAX exhibitor in North America. I think we're going to be very glad that we're the largest Dolby Cinema operator in North America. And the key to the family-friendly film comment was the former Carmike circuit played really well to G and PG product, less well to our product. And we've seen kind of a dearth of family-friendly product in -- certainly in '17. It improved in '18, but there's a lot more opportunity ahead. We got movies like Toy Story 4 and Frozen 2. And there are a lot of titles coming, Lion King, Dumbo. There a lot of movies coming out that are going to appeal to families in a big way. And that should help us across the entirety of our North American circuit.

Operator

We have reached the end of the question-and-answer session. And I would like to turn the call back over to Adam Aron for closing remarks.

Adam Aron

Thank you, Operator. Thank you, one and all. Look, we're obviously pleased about 2018. $929.2 million of EBITDA, is up $107 million year-over-year. That's a good healthy growth. The box office, it looks to be huge for 2019. A-List is a strong and successful program. This is all adding up to a good '18 and hopefully, a good '19. With that, thank you for joining us today. We'll be happy to take any of your further questions in detail on follow-up calls. Thank you, one and all.

Operator

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.