Warning: This is a ROUGH transcript of the Q2, 2021 EArnings call with CEO Mr. Adam Aaron and CFO John Merriweather
This is Earnings Release PDF: https://s25.q4cdn.com/472643608/files/doc_financials/2021/q2/FINAL-2Q-Earnings-Press-Release-20210809-1440-v.F.pdf
This is Press Release -> https://www.businesswire.com/news/home/20210809005776/en/
Earnings Call ROUGH Transcript
Introduction to CEO & Chairman Adam Aaron
AMC Earnings Call
$1.8 Billion of Liquidity via Cash Reserves ( $2 Billion of liquidity when including $200 Million revolving line of credit)
Soaring Food & Beverage revenues per patron
Relentless Focus on Cost Cutting
Well ahead of expectations
(continuing, CEO Adam Aaron)
AMC crushed it
Revenues - $444.7 Million
44.1% higher revenues of food and beverages per patron
Q2, 2021 vs 2 years ago (2019)
Net Loss of $334 Million
EBITDA loss of $154 Million
71 cents per share loss
Earnings slowly growing back
2019 vs 2021 -> Quarter 1 was 13% of what it was 2 years ago in Q1
2019 vs 2021 -> Quarter 2 was 29% of 2 years ago in Q2
2019 vs 2021 -> Quarter 3 was
So far, first weeks of Q3 45% of our 2 years ago level
Growth from Q1 to Q2 to Q3
13% to 29% to 45%
Capacity Utilization Growth
41% in Q1, 2021 of 2 years ago
61% in Q2
68% in Q3, of 2 years ago
Europe Growth
Q1, 2021 -> 2% of 2019 Levels
Q2, 2021 -> 18% of 2019 Levels
Q3, 2021 -> 57% of 2019 Levels
Capacity Utilization in Europe
53%
56%
69%
Delta Variant
Vaccinations will continue to rise
Vaccinations is very important for AMC
FORWARD LOOKING STATEMENT
Expectation is that Q4, 2021 - Cash Flows will turn positive
Cash Flows will turn positive
$5.2 Billion box office for the year in 2021
Estimate Q4, 2021
People claiming that AMC is under threat because of Debt and focusing on Size of Debt Load
Truth is different but they don't mention it because Does not fit their narrative
AMC has Laddered that Debt
No Debt Maturities AT ALL until 2023
Most of our Maturities do not come before 2026
(Editorial Note: NONE of AMC Debt is due before 2023 and MOST of it only become due 2025 and 2026 and later)
This gives us considerable time to strengthen our company, refinance our liabilities
And hopefully in better times
Those who were absolutely convinced AMC would file for bankruptcy
We have proved them wrong
Those who continue to forecast the demise of the theater business, or perhaps just the demise of AMC
Streaming will kill theaters - that is the conventional wisdom
Conventional Wisdom is wrong
Radio was going to kill
TV
VCRs
DVDs were going to kill Movie Theaters
2019 - one Billion times Americans went to the Box Office
2019 - $43 Billion Dollars (for what?) (Editorial Note: Missed what this figure was for)
At AMC, we intend with all of our might and brains and hearts and sinews to prove those procastinators and prognosticators wrong
********* Switches to CFO
CFO John Merriweather (British)
Q2 Global Attendance More than 3 times of Q1
77% below 2019 (which quarter?)
However, utilization is not as low
Actively managing show times to optimize efficiency of our operations
Comparisons to 2019 and 2020 are not particularly meaningful
Certain metrics are very positive and very encouraging
Average ticket prices up 15%
Food & Beverages up 42% in 2021 vs 2019
$7.13 per person
International
Ticket - X%
Food 33%
Significantly higher percentage of guests choosing to purchase our concessions
Balance Sheet
$2.023 Billion dollars of total liquidity
$1.811 Billion dollars of unrestricted cash
$212 Million dollars under revolving credit facility
Record Liquidity Level
Made possible by Equity issuance + selling Theaters in Lithuania
Q2 - reduced cash burn rate
$85 Million per Month cash burn rate
Q1 - $120 Million per Month cash burn rate
Improvement due to
Higher box office collections
Better cost cutting
Lowering Debt servicing costs (not clear on this point)
$40 Million per month in Q2 if you consider debit servicing costs etc (so they are saying cash burn rate would be lower if they were not servicing their debt load) (paying more now I'm guessing to make things better for the future)
$1.8 Billion Cash Liquidity
Capital Allocation
Balanced approach to Capital Allocation
Ensuring we have sufficient liquidity to withstand any bumps around the road as industry recovers from Covid Pandemic
Strengthening our balance sheet by Reducing Debt Load
Strengthening XXX (what?)
Opportunistically pursuing Opportunities
Ways that are most beneficial for the long term strength of the business
We expect going forward that we will choose to pay cash interest This will lead to reduced debt load
Thoughtful actions to reduce our debt balance
We will manage our theater portfolio
Close money losing opportunities
Opportunistically pursuing attractive money making locations
Still CFO John Merriweather
Deferred Rent Obligations
$422 million
$55 million Paid Deferred rent of another $55 Million (Not sure??? what this was)
We anticipate of 2nd half of 2021 will be significantly higher As we continue to pay off deferred rent debt load
We continue to focus substantial part of our cash reserves of maintaining our Debt Load
Net Capex for 2021 is expected to be
$100 to $120 million
Results and Financial Position at the end of Q2
Quite remarkable
All our theaters are open
Back log of exciting movies
Record levels of Liquidity
Back to Silverback CEO Adam Aaron
*** Mr. Adam Aaron
AMC is ready and Starting playing on Offence again -> 10 Items
Item 1: Arc Light and Pacific Theaters -> executed 2 leases with Rick Caruso to add to AMC fleet of theaters 2 of La's 5 highest grossing theaters
2nd and 5th
Americana
Pacifica at The Grove
New Number is TEN - not just 2, adding TEN new theaters (all in good markets)
6 picked up
3 LA 2 Chicago 1 Atlanta
4 more - advanced negotiations
8 of 10 are from Arc Light and Pacific Locations
Item 2: 2021 AMC will open about a dozen new theaters that were underway before Covid hit
US - 3 new theaters
AMc Porter Ranch
AMc Dine In Mont clair
Among top 25 grossing US Movie Theaters already
AMC Dine In - Sunnyvale California
94th percentile
Item 3: New investors great ideas on how to strengthen AMC
Concert Movies, Professional Sports, eSports, Gaming Events
First 2 UFC Matchups -> July -> significant attendance
First 2 Concert Movie -> Chance the Rapper and Halsey
happen in Aug + we will find out how they do
Professional Sports Leagues and Collegiate Sports Confrerences
To see if we can attain rights to show
eSports
Epic Games President -> Board of AMC
Partner with Gamestop -> we are on the case. More to come
Item 4: Cryptocurrency
25 years duration SPAC Centricus
Mr. Aaron is Board Member of Centricus -> will drop off after Arquit
Special Purpose Acquisition Company
Investment Capital in search of a company (that is what SPAC is)
They are looking to acquire Arquit -> NFT + Quantum Encryption and Blockchain Technology
This has forced Mr. Adam Aaron over the last 6 months to learn a lot about crypto and block chain
Arquit already has customers such as
European Space Agency
Verizon
Mr. Adam Aaron Had to learn about Cryptocurrency and Block Chain
Item 4B: By year end we will have the information technology in place to accept Bitcoin online for all our US movie theaters
Also exploring How else AMC can participate in this Cryptocurrency and Blockchain movement
Item 5: AMC are simultaneously writing code to accept Apple Pay and Google Play online for all US movie theaters
Implemented by Year End
Item 6: AMC Investor Connect
Part of AMC Stubs - share holders get full subscriber benefits
300,000 people have already joined
Improve the communication with the people who own AMC
Convince many of the millions of people who are now AMC shareholders to also become avid customers of AMC as well
Special Advance Screenings for our AMC Connect investors
Thanks to Sony for enabling first such screening of Escape Room - Tournament of Champions
Item 7: In April I started actively tweeting again
Twitter - 150,000 followers
Tweets which Mr. Adam Aaron writes personally - have been read 72 Million times
Following 2,000 people who are interested in AMC
Item 8: Labor costs are rising in the US
so increasing ticket prices
There appears to be little price resistance to increasing ticket prices
5% admissions ticket price increase at many of our theaters
translates to 50 cents per ticket
Item 9: Exclusive Theatrical Release Window, or lack thereof
July 2020 - Universal
Universal AMC agreement -> AMC and Universal are now very close
AMC reached formal agreement with Warner Bros for 2022
Exclusive Theatrical Window of 45 days prior to home release for all Warner Bros
Especially gratifying that Warner is yet again embracing an exclusive theatrical window
Item 10: Thank Board of Directors as Chairman and CEO -> Mr. Adam Aaron
John Laird - Lead Director
Fortunate to serve with them all
At our first meeting -> significant financial ownership stake Insiders have financial interests that are directly aligned with the company, AMC
At least 1 full year
Recommending to the Board a new policy -> 8 years of my salary
Owned to hold at least a $12 Million ownership stake of owned or granted AMC shares
CFO -> 6 years
Executive Vice Presidents -> 4 years
Senior Vice Presidents -> 2 years
Board will consider this proposal
Mr. Adam Aaron on his own holdings
Mr. Adam Aaron has not sold one stock of AMC shares in the 5 years he has been CEO
More than 3/5ths of my total annual compensation (did he means it was shares?)
Gifted to my 2 adult children (500,00 shares)
Not sold any AMC shares
I do not intend to sell any AMC shares in Sept 2021 when legally permitted to do so
(see below for plan to sell some shares)
In September 2021 -> 67th Birthday
Young, vibrant 67
85% of my net worth is in AMC So a 10V51 Plan to sell some of AMC shares
All share trading control of all AMC
Independent 3rd party bank will do it
Year End 2021
Small percentage get sold in any one month
Pass on decision making to someone else
Millions of AMC shares - either owned by me personal, or granted to me (still will own millions of AMC Shares)
My economic incentives are aligned with yours to increase share holder for all share holders
Letting you all know this well in advance
Mr. Adam Aaron finished ten points and now back to general stuff and to questions
Very good quarter
AMC's best days are the ones that are coming
Our Deeper Financial Reserves allow us to capitalize on the opportunities that lie around us
Questions that were submitted and upvoted Say Technology Platform
Experiment for us -> only works with some brokerages and not with all
Questions from AMC Apes via Say Technologies
Questions
Question from Timothy -> Do you have any plans to start offering a Dividend
Since AMC went Public in 2013 -> sizable quarterly dividend every quarter until we got close to the pandemic
Stopped dividend to ensure liquidity
Dividend -> a year from now at the earliest
Dividends are on the minds of our shareholders
We will take that interest quite seriously
When we are able to pay a dividend again
M&A
Liquidity
Deleveraging the company
Q
David - Will AMC consider partnering with Gamestop to offer gaming experiences at AMC theaters
We're certainly willing to do so
We're happy to reach out to Gamestop and see if they have any interest
Q
Ryan - will AMC consider opening up Drive in Theaters
Mr. Adam Aaron - I asked that same question last July
Honestly, we came to the conclusion that they are a bad economic idea
First Problem: how much asphalt needed to put a lot of cars. Space issue
Second Problem: viewing experience is not necessarily great Drive IN Theaters are not popular in cold locations + summers in warm places only 1 show time per night
Q
X - how is AMC preparing for a large Covid wave that might shut down AMC again The thing that I'm most proud of is - we prevented AMC going bankrupt
Right up there with that- how safely and cleanly we operated our theaters
So proud of the safe and clean protocol we developed Harvard school of public health
There may not be a large scale Covid surge again that forced theaters to shut down
Number of Vaccinations - so extensive that we are optimistic that we won't need the kind of lock down of society this winter as we had last winter (2020 Winter)
No more important thing any of you can do to protect yourself, your family, your friends, and the country as a whole
THAN to get vaccinated
Younger people feel they are invincible
No one is totally invincible against this virus
Solution for AMC is Vaccination
Solution for each of you is Vaccination also
Q
Aaron (person asking is Aaron, this is not CEO AA) - Are there ways you are considering of reducing debt without issuing shares
Debt - at a discount. We might be able to buy back that debt at a lower price
Landlords - willing to take a discount if AMC pays them back in cash now
Q
Mike - how does AMC plan on combating release day launch of movies at both Theaters and Streaming Services
Warner Brothers - committed to an exclusive Theatrical Window Private Conservations with every major studio
We're seeing consensus emerge - a Theatrical Window is a great way to build strong movie franchises
We are also making sure our marketing programs are as vibrant and powerful as they can be
We got a few tricks up our sleeves coming
Lead the industry in marketing
Hopefully, driving audiences to our theaters
Our Partners give us their movies first, and let them help build their franchises and movie brands
Q
X - would you consider selling AMC merchandise at AMC theaters A lot of people have talked about this idea Complicated to sell merchandise at 600 retail operations
Q
X - Can Musicals be run in AMC Theaters
Experimenting with two Concert Movies
Already in discussions with a Major Musical Company about whether this can be a permanent line of business for AMC
Own a third of a company that has been showcasing Alternative Concepts like Metropolitan Opera at theaters for decades
Real possibility to find a new source of revenue for AMC
Q (another @#@#$ Gamestop question - ;) )
X - Gamestop
Takes two to Tango
We are willing
We have not reached out to Game stop yet. We plan to
Q another Dividends question :)
X - Dividends
We know it is important
We do have to adhere to our commitments to our debt
WE have to use our cash carefully
Dividend is a decision for next year
Q (WTF, they actually answered this question)
X - Can we make AMC Mascot a Gorilla
AMC been around for 100 years
We don't have a mascot
We are probably going to go without a mascot
A lot of branding work going at AMC
We intend to be the best, strongest marketer around
Coming weeks, months, years - AMC leading the way in marketing yet again
Q
X - AMC partnering with a movie studio to produce our own movies
Yes we have, and recently
Notion of making exclusive content - is an interesting one
6 years ago - Joint Venture with another theater operator
Co Founded - Overroad Films
Spotlight - Oscar for Best Movie of the Year
Making a movie is a risky business
(Ape Typist Ape Idea -> Much better to be the Platform, let others take the risk)
I personally thought it would be very wise for AMC to raise more equity to build up our war chest
So we could entertain some of these ideas
Our share holder base is very split
Share holder base should be unified - so we tabled that motion (no share raising in 2021 - moved to be discussed in 2022)
More capital intensive ideas will require that the company have more capital
Q on UFC
X - UFC @ AMC
Very good luck with UFC
Every indication that they are willing to continue
Holy Grail - secure rights from one or more of MLB, NFL, NBA, NHL
Also Collegiate Football draws 100,000 into college stadiums
College Football
2 years ago - showing NFL games (some pilot program)
Seeing an NFL game broadcast on a 40 foot screen is just amazing. Unbelievable
If we can secure the rights affordably, I think it will be a big hit
Q
Expand AMC to a family entertainment experience (laser tag, etc)
Interesting question too
Family dining at our diamond theaters - 70 that have family dining
AMC Feature Fare - hot items
Dinner and a Movie
Pretty - Laser Tag
Full Blown Entertainment Center - don't underestimate how much capital that would need
Especially if we want to do it at 50 to 100 theaters
Ideas like this why Mr. Aaron thought we should raise more capital
Shareholder base wasn't ready for that
(Note: LOVE that there were 10 questions taken from Apes and just 2 from ANALists)
Questions from Analysts
Only time for a Single Analyst
Chad from McQuarry -> Raise from 13% to 45% in people coming (2019 vs 2021 -> By Q3 AMC is seeing 45% of people coming as compared to 2021)
If you have an updated version of where this can get to?
2021 -> Can get back to $5.2 Billion in 2021
Previous 5 years before 2019 -> $11 Billion a year
5 years before that -> $10 Billion a year
6 of 7 years before that -> $9 Billion a year
For the past 17 years the box office has been steadily growing
Nobody knows where it will be in 2023
$8 Billion
$10.5 Billion
The higher the box office is, the more profitable we will be
We can survive with a $8 Billion box office year
We would be much healthier if it went up to $9 Billion to $10 Billion to $11 Billion by 2023 or 2024
2021 -> $5.2 Billion expected
2022 -> transition year, perhaps $5.2 Billion to X billion
Q2 from Analyst
Food & Beverage - growth in 42%
Where is that coming from?
When people are coming back to theaters, they are so happy, THEY WANT THE WHOLE EXPERIENCE
They are splurging
Up 44% over pre Covid Levels
4 drivers (equal contributors)
1) Mobile Ordering (went from 50 theaters 2 years ago to all theaters in 2021)
2) Raised Prices
3) People Buying more Items - true all around the country
Soda -> Soda + Popcorn
Soda + Popcorn -> Soda + Popcorn + Nachos
4) More people are actually going to the Concession Stand and buying from us
Mr Adam Aaron closing statement:
I have something very simple to say
Ladies & Gentleman - See you at the movies! See you at an AMC Theater sometime soon!
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