Greetings. Welcome to the AMC Entertainment Fourth Quarter and Year-End 2020 Earnings Webcast. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, John Merriwether. You may begin.

Thank you, Alex. Good afternoon. I'd like to welcome everyone to AMC's fourth quarter and year-end 2020 earnings webcast. With me this afternoon is Adam Aron, our President and Chief Executive Officer; and Sean Goodman, our 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 that 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 most recent public filings including our most recently filed 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, free cash flow, adjusted free cash flow and constant currency, among others, which are non-GAAP financial measures. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website earlier today. After our prepared remarks, there will be a Q&A session. This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website at amctheaters.com later today. With that, I'll turn the call over to Adam.

Thank you, John. Good afternoon, everyone, and thank you for joining us today. Let me begin this afternoon's call the same way I've begun all of our 2020 earnings calls by expressing my wishes that you and your families are all in good health, and I will add to that on this call and that vaccination comes soon for you as well. You all know that 2020 was a year unlike anything that we've ever seen. COVID-19 has dramatically and in some cases, tragically affected all of us to an extent we never could have or would have imagined. Throughout it all, AMC never minimized distresses that this pandemic put on our industry and on our company, which were corporately life-threatening, as you all know. On our quarterly calls, we told you of our resolve and determination, but also of our reality and distress. Our public disclosures were fulsome, robust and fully transparent. We've pulled no punches in describing the magnitude of our challenge, and yet we were clear, that at AMC, we were absolutely committed to fighting the good fight and doing all that was humanly possible to save this proud century-old American company that has been a meaningful part of the American cultural landscape since 1920. And finally, today, we can give you an immensely satisfying report. As we sit here today, thanks to developments on so many fronts during the fourth quarter and especially in January and February, I am now in a position to say that I am optimistic and confident about AMC's ability to weather this COVID-19 storm. Our focus is no longer on survival, but now has turned instead to directing a surge in moviegoing and on the recovery of AMC. Objectives that feel to us, like they are right around the corner. AMC's…

Thanks, Adam, and thank you, everyone, for joining us this afternoon. I do hope that you and your families have been safe and well during these continued extraordinary times. As Adam mentioned, the fourth quarter was, once again, severely impacted by the COVID-19 crisis. The sizable number of our theaters that were closed for much of the quarter plus the limited number of new titles during the quarter significantly impacted our attendance levels and our financial results. Overall, our domestic attendance in the fourth quarter was 92% below the prior year, and our international attendance was 89% below the prior year's fourth quarter. The very low attendance levels ultimately make the quarter's financial results largely irrelevant. And so on this call today, Adam and I will devote very little time to the fourth quarter results, and we'll talk more about the issues that relate to our future. However, I do want to point out just a couple of encouraging data points from Q4. In our international markets, average ticket price was up more than 13% or 7% in constant currency. And food and beverage revenue per patron increased by more than 16% or 10% in constant currency compared to last year. In the domestic market, ticket prices and food and beverage results were similarly encouraging, with average ticket price up slightly, and food and beverage revenue per patron up more than 22%. These statistics, which are actually even more impressive when you consider the discounted pricing on library content and food and beverage promotions that we offered during the quarter were driven by a number of factors, including a higher proportion of evening and weekend shows, strategic ticket and food and beverage pricing adjustments, the success of our new and very popular private theater rental program in the United States.…

Thank you, Sean. For the past 12 months, our overarching focus has been raising capital to ensure our survival during this dreadful pandemic. And as Sean just described, we did just that, meaningfully extending our financial runway. At this point, with any semblance of even a partial recovery of movie theater revenues beginning this summer, we have enough cash to make it all the way through the end of 2021 and beyond. However, we are not done. While understandably, we are pleased with the progress that we've made, that does not in any way diminish our intense focus on diligently managing our expenses, seeking opportunities to enhance our profitability to innovate in driving the recapture of our moviegoing revenues from moviegoers who will come to our theaters once again, ensuring that we have adequate liquidity, and managing our balance sheet to deleverage. As I said earlier, 2021 is already feeling very different from 2020. We have more than $1 billion of cash on hand. President Biden has stated that there will be enough vaccines for every adult in the United States by the end of May. And the rate of new COVID-19 cases, associated hospital stays and morbidity statistics, thankfully, are all declining. Theater openings are happening again. A spate of major movie titles are coming to our theaters again, blockbuster after blockbuster after blockbuster. And all that is combined with a massive amount of stimulus money being voted upon in Congress this very week to jump-start the U.S. economy more broadly. So with this as a closing thought, I'd ask that you reflect for just a moment about the consumer, the moviegoing public. Last week's poll from the National Research Group showed moviegoer confidence growing to its highest level since the late summer of 2020, with consumers feeling far…

[Operator Instructions] Our first question is from Chad Beynon with Macquarie.

Adam, just wanted to start off with a broad one on the theatrical window topic. We've now heard from many of your studio partners, including Universal, Paramount and Warner. Just wondering how you're thinking about this from an agreement standpoint? What this means for the business model? And how this could affect getting back to historical EBITDA margins?

Thank you, Chad. So this is an area -- obviously, I could have put this in the prepared remarks, but I think I saved it for questions. This is an area where I feel very good. Dating back to my first weeks at AMC, we signed on something called screening room. It never took off, but you may -- some of you may remember it. That was going to play movies at home earlier than traditional windows. And I think that over the past several years, AMC has indicated in private conversations with every major studio that we are willing to be the most experimental movie theater circuit around with respect to windows strategies that were different than the traditional norm. But we always laid down 1 marker. And that was if we adjusted windows, it had to be good for AMC shareholders, not bad for AMC shareholders. And when we couldn't strike deals with studios on shorter windows, we resisted them with all of our might. Some of you will recall, the letter exchange from April of 2020 with Universal as an example of that. Having said that, after a very brief -- given that we're at it for years, after a very brief 90 days of serious discussion, we announced what we thought was a groundbreaking landmark new agreement with Universal. That was good for Universal and good for AMC. It was -- it suggested that there were other ways than the high bound traditional way to release movies that could be done in a way that was beneficial for our studio partners and for AMC as a theater chain. Fast forward to Warner's announcement about HBO Max. We put out a very clear statement that we were not willing to let Warner Bros. advantage its streaming service at AMC shareholders' expense. And you may have noticed that we are playing Warner Bros. movies right now. Now we never discuss our film terms publicly, and I won't break that pattern today. But you should properly assume that if we're playing Warner movies, we came to agreement with Warner that any changes in their strategy are being done in ways where AMC shareholders benefit as opposed to or being penalized. We are willing to engage with every major studio on the same topic, and I continue to be optimistic that having been business partners with all these studios for a century, we can adjust the business relationships between us and our studio partners such that they can support their streaming services and their theatrical releases and do so not at our expense. So I know that there have been others who aren't necessarily privy to our private conversations, who are more anxious about windows than MI, but so far, our dealings with studios, where windows policies have changed, we've made changes such that we think we come out ahead and not come up behind.

Appreciate that. And then, Sean, you noted the reduced CapEx for the year, the guidance of $100 million. How are you guys thinking about the percentage of your theaters now that have been updated, if the renovation return CapEx is still in the cards in the future if that is almost complete? And then if new build opportunities come along, how would you think about partnering with landlords to build more particularly if your liquidity is strong and the business is stable?

Yes. Thanks for the question. Our primary focus right now, I think as we've said in our prepared remarks, is: a, liquidity; and b, deleveraging. And so you see that reflected in the CapEx guidance for 2021 of $100 million, primarily focused on maintenance CapEx. We're pretty fortunate that over the last few years, we have spent a considerable amount of CapEx, renovating and updating our theater fleet. And so the timing is quite good to reduce that CapEx. We're always planning to reduce that CapEx in 2020, and we did reduce it, and we reduced it even more than our original plans just because of the situation with the pandemic. But we believe that our theater portfolio is in good shape. The $100 million is predominantly maintenance-related. I would expect in the future as our liquidity position improves, as our leverage position improves, we will then look to invest more from a growth point of view. But at this point, as I said at the beginning, it's primarily leverage and liquidity. And I'll let Adam talk a little bit about the growth opportunities.

So what we're finding, just literally last week, we opened a new build theater in Denver. And what we're finding is that landlords still find the AMC brand to be very powerful. And opportunities come our way -- are coming our way constantly to pick up existing theaters or to have new builds in attractive locations. But -- and I would expect that you'll see new builds continue for us or what we sometimes call spot acquisitions. Having said that, we're in a position where we can be somewhat demanding with respect to the landlords of those theaters. For us to take on a new build theater going forward, the landlord is going to take a lot more risk as opposed to AMC taking a lot more risk. So you probably will see a greater capital contribution from landlords rather than from us. You might see percentage rents based on the ebb and flow of theatrical revenues rather than fixed rents. We're solely on the hook for the success of the theater. So I still think they're in our future, but there'll be a much more attractive financial terms to us than the expansion that we might have put in place over the past decade when times are more flush.

Our next question is from Eric Wold with B. Riley FBR.

A couple more questions is really kind of around kind of cash flow and outlook. I'm kind of thinking about the current liquidity and kind of the runway you laid out to next year. Can you update us on what your underlying box office, your domestic international box office assumptions are to get to that point next year versus kind of maybe what you had in prior filings?

Sure. Rick, it's Sean. So let's talk a little bit about our cash projection in 2021. When we look at those projections, we necessarily look at them very conservatively. I think that's appropriate when we're managing our liquidity to make sure that we have sufficient liquidity. When we think of 2021, it's going to be an interesting year. The first half from a conservative point of view, again, at the first half, we're expecting cash burn to be somewhat similar to the cash burn that we've seen in the months of January and February. Q3 will be a transition quarter. And then Q4, our expectations as things start to return more to normalized levels. And so in Q4, we expect to be cash flow breakeven, just slightly cash flow positive. Q3, that transition period is probably somewhere around $50 million, let's say, a month cash burn during that Q3 period. If you -- when it added up all those quarterly numbers, you would see that based on that expectation, the conservative expectations, we have more than sufficient cash on hand right now to be able to cover that and advance there. What that translates to answer your question specifically, what that translates to from a box office point of view is a box office that is significantly below 2011 levels, somewhere around...

You said 2011.

Sorry, not 2011. I don't know why 2011, sorry, significantly below 2019 levels, somewhere close to 50% below 2019 levels. And again, I'll go back to what I said at the beginning, it's conservative, necessarily because I think that's the appropriate way to manage our liquidity.

Perfect, that's helpful. Maybe just last question. Sorry to -- right, another finance question. Sorry, Adam, I just saw another one here. I guess thinking about the $450 million of deferred rent, you mentioned 27 months on average kind of payback period. Are most of the terms in general that once a theater reopens, you go back to full rent plus a defer rent kicking in immediately? Or are there other requirements that need to be hit in terms of attendance levels or whatnot? And then assuming we get to year-end, and all theaters are open, you're kind of back to kind of normal environment, does that bring in effect kind of prepandemic rent levels plus then that kind of $17 million per month of deferred rent kicking as well?

Yes. The way to think about the deferred rent, $450 million of deferred rent, be careful on just assuming that, that deferred rent is paid back roughly over the 27-month period, except for the rent that's paid back over a longer period of time. And the reason I say be careful of that assumption because during 2021 and specifically in the first half of 2021, we will have additional rent concessions. And that will offset, so you will have some of that deferred rent being paid down, but it will be offset by additional rent concessions. As far as the timing of when these paybacks happen, it's a specific date. It's a specific date agreed with the landlords. And that date is something that is discussed and negotiated, depending on how attendance levels are going. But think about it as a specific date. A lot of that deferred rent from 2020, the repayment period kicks in at the beginning of January 2021. But then I go back to what I've said before, there's additional rent concessions that will offset that.

So Eric, if I can just add a comment. There are so many heroes for AMC over the past year. I told you about my deep appreciation of Albert Bourla of Pfizer. We could talk about all the retail investors who bought shares from us in the ATM effort from October through January. But another constituency that has really stood tall in helping AMC survive was our theater landlord community. And we renegotiated hundreds and hundreds and hundreds of lease agreements. And our land -- our theater landlords wanted us to stay in business, and they wanted to keep us around. And the concessions that they made are very much appreciated. And those talks continue. We continue conversations with all of our theater landlords. As wonderful as it is that we raise cash, and as wonderful it is that new movies are coming this summer, we're still burning through cash right now. And we continue to find that our landlords have been flexible and creative, and we are very much appreciative to them.

Our next question is from Eric Handler with MKM Partners.

Can you give us a good update on your cash? Can you give us an update on where your total debt is now at the beginning of March? And what your cash interest expense will most likely look like either on a per quarter basis or just for all of '21, given that you've got some picked nits to deal with?

Sure. So to answer your first question, if you look at our total debt, and you'll see our capitalization table on the 10-K, which will be published later this week. If you look at the total debt at the end of December, and then I'll tell you that as of the end of March, what our pro forma debt is and it's essentially the same number. So there's a lot of puts and takes. But at the end of the day, essentially that total debt same number at the end of March as it was at the end of December. This reflects, okay, so when you have, the big transactions that you have is you have the conversion of the convertible debt. That'll eliminate $600 million from our debt. However, at the same time, you have the European loan, right? And so that's additional debt, and that's $550-odd million of additional debt. Those are 2 big items. The other big items is repayment of the revolving credit facility in Odeon. And then the difference, because they weren't quite net out, the difference is actually payment in clients PIK interest on the second lien debt on the European term loan. There'll be some PIK interest on that. And there's some PIK interest on some of our first lien debt as well. So when you add up all of that, you end up with the same debt number at the end of the day. I think your second question was related to interest costs. So you're looking at cash interest costs in 2021. 2021, there's a significant amount of payment in kind of PIK interest. When you go through a capitalization schedule, you can calculate what the total interest is. But you'll see that the payment in kind interest is not a single number because it depends what elections we make with PIK interest. But if we elect all of the PIK interest we're able to do through 2021, you have around $250 million of PIK interest that you need to net off the interest paid amount. And the heavy quarters for interest payments are Q4 and Q2, Q1 and Q3, pretty low interest payments. Q1 and Q3 are above $20 million a quarter. The heavier interest payments are in Q2 and Q4.

And so what -- your back of what should -- if you assume your PIK contributions paid and you like the PIK option. What is your average -- what should be your cash interest payments for the year?

For 2021, the cash interest payments, assuming that PIK number that I gave you, the cash interest payments will be around $165-odd million.

Our next question is from Jason Bazinet with Citi.

I just had that 2 quick questions. Without getting into the specifics of your agreements with the studios, can you just talk about the buckets that we should think about when you come out ahead versus behind as the studios sort of rejigger their release or their windows? And then my second question is, if we end up in a world where -- and you may disagree with the premise, but if we end up in a world where there are fewer patrons at the end of the day going to AMC just because maybe some of the smaller movies go in these direct-to-consumer apps. Do you think that there's scope to sort of reposition the theater experience as a premium experience? And take higher ticket pricing to offset what may be potentially lower attendance? And I'm not talking 2021 or something like that, just if you think sort of longer turn to sort of the new run rate?

So the first question, we really don't talk about our theater deals. So I'm going to dock it, respectively. Where you'll see it is in -- I mean, that is the business relationship between movie theater chain and studios. So if we're going to get concessions back, that's where you likely see it. And your second question has so many assumptions built into it that I don't want to accept. It doesn't mean you're wrong, but you're not right yet, which is to say that go back to 2019, the industry sold 1 billion movie theater tickets in the United States, 1 billion. It's the third most popular out-of-home -- sorry, it's the second most popular out-of-home experience in the United States. Other than going out to eat a meal in a restaurant. If you take the attendance of all 5 major professional sports leagues together, all 150-ish teams, all sports, all games, all season long, movie theaters sold 7x the quantity of every sports event tickets sold in the United States in 2019. If the pandemic has taught us anything, it's that we do not want to be cooped up in our homes or in our apartments no matter how nice they are forever and ever. People want to go back to theaters. And we are -- even with changing window strategies, we are quite confident that you're going to see massive amounts of demand heading to movie theaters, you'll recall, people have been predicting the demise of the movie theater business for a century. Radio is going to put us out of business, and TV was going to put us out of business, and VCRs were going to put us out of business, and now streaming is going to put us out of business. It's a guess, well, guess what? Other than the pandemic, movie theaters have thrived this whole time. I am highly confident that we will make whatever adjustments we need to make to accommodate whatever change in the industry structure there is. If streaming is on the rise, then something will change. Maybe film rents will come down. Maybe prices will go up. We'll see. But don't just assume that people aren't going to theaters. Because I think we're going to find out post pandemic that people are going to go to theaters, and they're going to be really happy that they got out of their homes to do so.

Our next question is from Alan Gould with Loop Capital.

I've got a few. First, Adam, how long do you think it will take? Or can you get back to the adjusted EBITDA levels that you had in 2019, given that you have fewer screens? And that there will be a shorter theatrical windows?

So, I'm going to answer you this way, fewer screens does not decrease EBITDA, it increases EBITDA because the screens that we were closing had negative EBITDA, that's kind of point one. On your other question, I know that John reads that forward-looking statements disclosure. But it's such a forward looking disclosure, I don't think it's appropriate for me to make a crystal ball projection. You've heard me on this call, talk proudly of everything that AMC has done to get our way through this extraordinary challenge that was thrown our way. And I'm quite optimistic and bullish about the prospects of moviegoers coming back to our theaters. But I don't think that it's right for us to start predicting what year we're going to see what level of EBITDA. That's your job, and you all will make your estimates, and we'll try to beat them.

Okay. Let me follow that up with a few others. There haven't been any ATMs or shares offered since the end of January. Was that simply because you needed to have more shares authorized to do that? Because Sean did mention the intention is now to raise additional capital.

Well, he didn't say that we would raise additional capital. He said that we will carefully examine the raising of additional capital in whatever form we think is most attractive. Having brought in $1.222 billion between December 14 and January 20 something, 22nd, I think it was, we thought -- and with $1 billion of cash to the bank, we thought it was appropriate to take a bit of a breather. But we are now very carefully looking at what are the smartest ways for us to raise capital. There are a lot of vehicles that we can use to get there. And we're also balancing how we can achieve the goal of deleveraging the company. We are thrilled that in July of 2020, we got rid of $555 million of debt through a very complex negotiation with our second lien holders. We're thrilled that in January, we got rid of $600 million of debt when Silver Lake converted their notes and equity. So it's something that we'll look at very hard. But it's just a simple fact that, yes, we took 5 weeks away from capital raising given what we put in the bank in the last couple of months.

Okay. And what do you see happening industry-wide? Do you see screens closing? Do you see, frankly, opportunities for M&A now that you've got a more attractive currency?

I think you're overstating that -- not you, but I think people are overstating that streaming is somehow going to cause screen closures. But I do think given what our industry has lived through this past year, our eagerness to continue to operate money-losing theaters is at a very low point of desirability. And so I think we'll be much tougher. And when I say we, I don't mean AMC, I mean the whole industry. I think people are going to be much tougher in evaluating the risk that they're taking. And the degree to which they are willing to lease and operate marginal theaters. Is there M&A activity? I guess we'll all find out together.

Okay. And my last question, now that you have over $1 billion of cash on your balance sheet, does that change your landlord negotiations?

Yes. It makes it harder. We're not quite as desperate as we were in June of 2020. But we're a creative bunch here at AMC. And we're continuing to have really interesting conversations with the landlord community. There are things that we can put on the table. There are things that we can do. And on this call, we focused on some of our theaters that are -- were largely profitable or unprofitable. We have a lot of theaters in normal times that are very profitable. And so again, landlord by landlord, lease by lease, theater by theater, the discussions are always interesting, and there's plenty of opportunity for us going forward.

Ladies and gentlemen, we have time for one final question. Our final question comes from Jim Goss with Barrington Research.

One small one, wrapping up the windows idea. Do you think, given the variety of types of windows that have emerged, do you think there will be any standardization or range of standardized actions that will develop between the studios and the exhibitors? Or will it be on a -- just on a one by one basis as time goes on?

That's a very good question, Jim, and hello, by the way. And I don't think there's going to be a cookie-cutter approach. I don't -- everybody understood like there was 1 window. That's what it's been for years and years and years. I think what we're going to see -- what we've learned especially since the universal agreement is every studio seems to have different desires and needs. And so I'm expecting that you're going to see custom agreements that will be developed studio by studio that may differ, and they're probably going to differ circuit by circuit.

Okay. And over the past year...

But if I could just add 1 more point, Jim, if I could have 1 more point to the answer. But as I've been saying literally for 5 years, and as we said with our Universal discussions, as we said with our Warner discussions, we can only sign on to something if it's good for our company and good for our shareholders. So you should assume that like one of the advantage of being the largest exhibitor in the world is that we have a legitimate seat at the table to have discussions with our studios. And we don't go there stuck in 1955 and saying, "Oh, it's got to be the way it used to be." We're willing to be innovative and imaginative and creative and look for solutions. And I am highly confident that we will continue to find those solutions. We have been partners with these studios for decades and decades and decades more. And clearly, we need them to exist, but I believe that they need us, too. Last year -- or not last year, 2019. There was $43 billion of ticket sales generated in movie theaters globally. The Hollywood share of that is a huge number. And I don't think it's in their interest to just throw that good money away. So, I continue to be confident that working as business partners who've been doing this a long time with each other, I'm highly confident we'll find good solutions that work for our studios and for us. There might be a little drawing in public, there might be a little drawing in private, but when you get to the final end solution, I think it will be good for both entities.

Okay. And my -- the last thing, we've talked over the past year, all of the exhibitors about things that might persist post COVID. Now that we're getting to a point where this might actually be coming to some sort of conclusion or at least transition, what do you think will persist in terms of staffing levels, seat blocking, private showings, cleaning protocols and maybe even food and beverage 2.0 as you have a chance to go back from popcorn and softdrinks again to maybe broader menu items?

Thanks, Jim. So there's a whole lot in that question, right? Certainly, private theater rentals is here to stay. That's been immensely popular. As Sean said, we did 115,000 of them already, and I'm expecting that will continue. AMC has long prided itself on our imaginative food and beverage efforts. I'm sure as patronage builds up in our theaters, we will go back to more varied and imaginative menus. The -- another thing that I think you can assume going forward, there will be more automation in the movie theater industry as wages rise, so for example, we used this pandemic period to build mobile food and beverage ordering into our smartphone app, and that's gotten a lot of traction with our guests, which cuts out a lot of time at the concession stand, which is good for our guests and good for us. So those are 3 things. But on -- a fourth thing that's going to continue is we're going to have to figure out ways, and I have expressed over and over, that I'm confident we can. We're going to have to figure out how to work with our studio partners such that we can support their theatrical business and their streaming business. And I believe that we can do so. And lastly, I saved the biggest for last. Now this is something that our operations department shudders about when I say it. But I'm just going to tell everybody here and now, the days of dirty movie theaters are over after what the public has been through over the last year, cleanliness, the sanitization is going to be an extremely important factor for guests, even in a post-pandemic world, and we intend to run our theaters spotlessly going forward. And woe be it to any of our competitors who does not match us stride for stride.

We have reached the end of the question-and-answer session, and I will now turn the call back over to management for closing remarks.

Thank you, operator. Thanks to everybody on the call. Since our last quarterly call, AMC raised $1.222 billion of cash, we got rid of $600 million of debt, our theaters are reopening, big movie titles are coming, ladies and gentlemen, see you at the movies. Thanks for joining us today.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a great evening.