Monday, August 9, 2021

[AMC Earnings Call Transcript] Rough Transcript of AMC Q2, 2021 Earnings Call - Everything Discussed, Answer to Ape Questions via Say Technologies, Analyst Questions

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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