Q3 2020 AMC Entertainment Holdings Inc Earnings Call
Greetings and welcome to the AMC Entertainment third quarter 2020 earnings Conference call.
At this time all participants are in a listen only mode.
A brief question answer session will follow the formal presentation.
If anyone should require operator or technical assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host John Merriwether, Vice President of Investor Relations. Thank you Sir you may begin.
Thank you Victor and good afternoon, I'd like to welcome everyone to AMC <unk> third quarter 2020 earnings conference call.
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 are based on managements 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 life 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 free cash flow adjusted free cash flow in constant currency.
Among other [laughter], 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 question and answer session. This.
This afternoon's call is being recorded and a webcast replay will be available in the Investor Relations section of our website at AMC theaters Dot com later today.
That I will turn the call over to Adam.
Thank you John.
Good afternoon, everyone and thank you for joining us today.
Let me begin today, the same way I began our Q1 and Q2 earnings calls.
By expressing my wishes that you and your families are all in good health.
In these difficult times.
In starting todays call May also note the death.
The legendary Oscar winning actor Sean Connery this past weekend at the wonderful age of 90.
In his honor.
We will be showing goldfinger and the hub for Red October at AMC theaters, all across the country. This coming weekend come join us and see for yourself, how spotlessly clean our theaters are all across the nation.
Similar to the second quarter cover.
Probably 19 continues to significantly impact the financial performance of companies across multiple sectors with.
With a movie theater industry being among the very hardest hit.
AMC certainly included.
Thanks to our efforts in partnership with Clorox.
And in consultation with current and former faculty of Harvard University's prestigious school of public health.
We have made great strides at AMC to safely opened or theaters, where permitted by governments to do so.
10 minutes has been minimal though of course stemming from virus concerns, but perhaps more importantly, due to the fact that only two major new films have been raised released theatrically since mid March but.
But even so as we sit here today.
Since our theaters every opened after the March closures.
People have intended movies at AMC is U.S. and international theaters, almost 10 million at times and.
And we have not heard of even one to answer.
Where the Corona virus was.
Spread in our cinemas.
As of September 30 quarter end.
We had approximately 78% of our domestic theaters at approximately 90% of our international theaters open.
At the end of September our domestic theaters, we're open for business and 39 of the 45 states in which we operate.
And our international theatres were open in every one of the 14 countries that we serve.
Slide the United States.
As of today.
Approximately 90% of our U.S. theaters are now open in 44 of the 45 U.S. States that AMC serves however, the critical movie going market for Los Angeles in New York City remain closed awaiting governmental permission.
To serve moviegoers.
Internationally the numbers of open theaters is going the other way.
In the past few weeks and especially just in the last few days.
We have been ordered to close our theaters for most of the month of November in the United Kingdom, Ireland, Germany, Italy.
And a small portion of Spain, namely, Catalonia, where we have 10 theaters.
This afternoon, not unlike what our Q1 and Q2 2020 earnings calls, we're not going to spend much time on the actual third quarter financial results.
But instead, we'll focus our comments I'd.
And take your questions are what we believe is believe is of primary interest to most of you.
And that is to update you on the most recent actions we've taken to manage through this crisis and our general thoughts about the prognosis for our company looking forward.
In our industry.
The gravity of our situation puts us all in almost a war like position of.
Oh of resolve and determination.
With that as context.
I often find myself thinking of the extraordinary famous and defining speech that then British Prime Minister Winston Churchill delivered in the house of Commons on June eight of 1940.
When he laid out the challenge facing Britain's early during the second World War II.
He said in part.
We shall not flag or fail.
We still fight on the seas and oceans, we still fight in the air we should defend our Iowa, we still fight on the beaches, we still fight on the landing round.
We still fight in the fields in the streets.
We still fight in the hills.
That is exactly.
Where we are now at AMC we.
We are fighting this virus with all of our smart.
And all of our might.
We are resilient resourceful and create a bunch at AMC and all of that energy.
It's being deployed so.
To fight the good fight.
To that end.
The four priorities outlined during our previous earnings calls remain precisely our primary focus at AMC today one.
Continuing to take actions to bolster our liquidity under de leverage our balance sheet.
To.
Reducing our cost structure and spending posture, realizing that revenues will take quite some time to ramp up.
Three.
Reopening and subsequently operating our theaters as professionally as we can.
Ensure that we offer a safe and clean theatrical environment for our guests and associates, leveraging our industry, leading guest engagement platform.
And implementing a wide variety of strategies to optimize theater profitability, Adam and minimize their losses.
For managing our business through or whatever structural changes world events or industry dynamics that are thrown in our direction.
We have made significant progress in each of these focus areas during the year, so far and especially during the third quarter included first.
The safe reopening of our theaters in the United States and around the world.
Indeed, we are seeing guest feedback ratings on our theater theater cleanliness.
That are demonstrably higher than anything we have ever seen in the decades and decades that we've been keeping such records.
Thank you Clorox sorry.
Thank you Howard school of public health.
Second.
The successful 2.6 billion. So 2.6 billion dollar debt restructuring in July that we discussed on our last call, which included bring in $300 million of fresh that capital now on top of the 500 million we raise back in April deferred.
Deferring cash interest to the tune of at least a $120 million over the coming year and eliminating some $555 million of debt.
Third.
The signing of a definitive agreement to sell nine theater locations in Lafayette, Lithuania, and Estonia for approximately $77 million, representing a 9.3 multiple of budgeted 2020 EBITDA.
A budget I might add that was set before the onset of the COVID-19 virus. So in looking to current actually EBITDA.
The sale model price is actually infinite.
And fourth.
The successful launch and completion of our aftermarket or ATM equity offering which has raised approximately $98 million on the issuance of 30 million shares and little more than one month.
Having exhausted that offer and given its success. We are currently seeking again to raise additional equity capital.
And Seth.
Reaching a groundbreaking agreement this summer with universal relating to participating in a new PV of the window.
Specifically because of that agreement.
Universal currently intends to release six movies theatrically in the fourth quarter something that no. Other studio that does not yet have a PV or de window established.
Has been willing to try.
Incidentally.
On the only one of those PV Oddi movies that has been released as of yet our analysis is that AMC came out ahead financially as we had modeled but much better than some of you at Pos related or feared.
If you look at all of the actions that AMC has taken since March.
It's almost breathtaking.
In addition to all the work in first closing and then reopening our theaters.
AMC is raised just under a billion dollars of cash in gross proceeds from the issuance of new debt and equity along with including the Baltics Theater sale.
We have also secured over $1 billion in additional financial concessions that we have negotiated individually with theater landlords and with our lenders.
As I said before.
That AMC were resilient and resourceful.
And we are certainly braced with determination and resolve.
These significant accomplishments are why we are still here today.
But to make it through this corona virus impacted winner.
We will still need to secure additional liquidity.
Our disclosures in this regard have been thorough.
And fully transparent.
There is more to discuss but before we do I'll now turn the call over to Sean Goodman.
Our CFO to update you on the third quarter on some of the more recent actions taken by AMC Sean.
Thank you 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 difficult and unprecedented times.
As Ed mentioned, our results for the quarter were once again severely impacted by the COVID-19 crisis, which necessitated the suspension of all field operations in the U.S. for nearly two thirds of the third quarter and significantly impacted our operations in international markets.
This quarter was characterized by a dearth of new phone content at historically low attendance levels across all markets.
Overall, our domestic attendance was 97% below the prior year quarter.
International attendance was 82% below the prior year's that quota.
Of course this includes time periods when our theatres were closed.
But even as theaters reopened with a scarcity of big new titles attendance levels in the U.S. hovered between 10 and 20% over last year's levels, while attendance numbers in Europe, well only somewhat better.
A bright spot for us so far in 2020, we have tripled our theater caught in the middle East and we expect to at least double that again in the coming half yes.
Similar to our second quarter results International average ticket price and food and beverage spend to test and we're again encouraging holding up nicely with an average ticket price up more than 16% or 10% in constant currency and food and beverage revenue per patron increasing by more than 15%.
9% in constant currency compared to last year.
U.S. ticket prices and food and beverage results in the third quarter showed some of the encouraging trends with both food and beverage revenue per patron and average ticket price broadly in line with last year.
These statistics are impressive when you consider the discounted pricing on library content and food and beverage promotions offered during the quarter.
Very clear based on our operating metrics, including customer satisfaction scores that guests returning to the movies are extremely confident in our AMC safe and clean protocols and are comfortable with the theater experience and are enjoying our food and beverage offerings.
However, with such extremely low overall attendance levels, our bottom line financial performance for the quarter is once again almost irrelevant.
More important is how we performed against our priorities and what we are doing to successfully navigate through these troubled times.
From a liquidity point of view as of September Thirtyth 2020, we had $418 million of cash plus $11 million of restricted cash.
Our total cash burn for the third quarter was $324 million.
This number normalizes for the data exchange and capital raising in July.
Normalizes for the $37.5 million of partial proceeds received from the sale of our Baltic Sea. It is.
And $2.8 million of net cash raised from our ATM program during the second quarter.
The average monthly cash burn in Q3 was $108 million slightly above the approximately $100 million monthly cash burn during the second quarter.
This increased cash burn is due to costs associated with theater, we openings, including AMC safe and clean protocols and increased rent payments SDN has began to reopen for business.
Many have questioned whether we just financially wise to keep theaters opened with such very low attendance levels that we are currently experiencing.
So this is something that we of course analyze very carefully and I can tell you that we have very sophisticated operational initiatives in place to a line theater opening hours to attendance levels. For example, about half of our U.S. theaters opened four weekend Showtime's only and all of our debt is when they're open.
And.
Averaging between one and two show times daily instead of the normal for.
This is a tremendous amount of operating costs, while still giving guests a sense that we are open and preventing the stress on our buildings that stems from prolonged periods of closure.
Accordingly, we are confident that with our flexible operating model. It is economically sensible phosphate is to remain open even in the current low attendance environment.
The obvious next question is how long liquidity runway will be in the current distressed environment.
When we last talk I shared with you that we believed that we had sufficient cash to last through to the beginning of 2021.
Despite the number of movie titles subsequently shifting out of 2020 and continued low attendance levels associated with an absence of new titles. We continue to have sufficient liquidity to last through to the beginning of 2021, even in a worst case scenario, where the current low attendance situation continue.
News.
Of course, if the current phones late holds including movies scheduled for the Christmas holidays, and our current and attendance levels increase accordingly, our liquidity runway could be meaningfully extended.
It is worth noting that given the low attendance levels. Our current cash burn is not significantly impacted by the recently announced data closures in Europe.
Now, while our liquidity runway in the worst case scenario is limited. This is only if we are not able to raise additional capital.
And our goal is to raise additional capital.
Throughout the Corona virus crisis, we have taken deliberate and decisive actions to navigate through the storm.
In a period of only seven months, we have raised approximately $900 million of gross proceeds from new debt to equity, we raised more than $18 million from asset sales and we've negotiated more than $1 billion of concessions from creditors and landlords and we are not finished.
ATM equity process, which was launched at the end of September has already raised $98 million and we are continuing to seek opportunities to generate additional liquidity and reduce our leverage.
One of our most significant expense category is rent.
Our long term relationships with landlords have enabled us to successfully negotiate meaningful concessions during this current crisis.
By the end of the third quarter.
We had deferred rent of approximately $325 million.
Repayment terms are on average 24 months, although a number of agreements have repayment.
That extend through the remaining lease term, which in some cases is well in excess of 10, yes.
It's worth a reminder, that the rent expense shown on the face of the income statement represents our rent obligation for the quarter.
For the third quarter actual rent payments were approximately $120 million less than what is shown on the face of the income statement.
While future cash rent payments will depend on our re opening schedule and level of attendance based on our current agreements we anticipated cash rent paid in Q4, 2020 will be meaningfully higher than in Q3, while still being well below the income statement grant liability.
We continue to have constructive discussions with our landlords as we work together to effectively manage through this crisis and as always as we've said before the terms that we have agreed with our landlords.
Potential and specific to particular facts and circumstances for each landlord and each data.
Shifting to capital expenditures, we have continued to reduce capital expenditures to minimum maintenance levels, eliminating all but essential capex and previously committed growth capex during the third quarter. Our capex spend was approximately $22 million net of landlord contributions.
Most of this was committed to prior to the outbreak of the pandemic. This.
This is approximately $72 million lower than the same quarter a year ago and.
And we now expect 2020 net capex to be between 130 and $150 million.
And finally before handing handing the call back over to Adam It's worth noting that we are using these unprecedented times as an opportunity to intensely examine every single category of our spending and all closable opportunities to enhance our efficiency and improve our profitability for the long term.
While the closure of updated this temporary.
Earnings and the actions that we are taking will have an enduring long term benefit for AMC had.
Adam.
Thank you Sean.
So everybody is all really comes down to one thing.
We believe that we will need to raise more capital.
To assure ourselves that we can lengthen our financial runway at least in the next summer.
A simple question becomes.
Well, we raised that needed capital or not.
We've had considerable success in creatively raising money so far this year and our shoulders are the grindstone yet again.
Medical experts are telling us that in the western world, our populations will be well vaccinated before next summer.
Studios are telling us that they have boatloads of blockbuster titles for us before next summer as well.
Our count while some movies have been shifted or sold off the streamers.
Some 44 major film titles have been deferred from 2020 and will be rescheduled to play theatrically in 2021 instead.
In the words to me privately.
From one major studio CEO.
He said.
Youre Laguardia airport, Adam in a big thunderstorm and there are zillions of planes in the air circling and they all have the land.
We've got to get the movies that we've already made.
And which already are in the can out into the market for movie goers to buy tickets and go see he pause for effect and then said in your theaters.
When I relate his comment to another major studio CEO. This very weekend, he said and I quote wait a second he stole my line I've been saying for months now that you're an airport in the storm.
And there's tons of planes circling overhead and quote so at AMC. It is our considered opinion.
There is good news down the road once the movies start flowing next year.
There will be a new big title almost every single week.
To that end AMC is capital raising efforts and cash conservation efforts.
Because every dollar we save as offsets one dollar that we would not need to raise.
Those capital raising efforts on those cash conservation efforts are in full swing.
We are currently seeking to raise additional equity capital right now.
We have commenced discussions with count them more than a dozen that strategic investors.
About they're taking an equity interest in AMC.
We're also talking with our existing lenders to gauge their interest in further bolstering bolstering our liquidity as they did this past summer.
And we've started dialogue with many of our landlords again about helping us abate or defer rent as they also did.
In the spring.
When movie titles are still few in number and when theater traffic is light.
It is too early to know whether these efforts will bear fruit.
And if so where.
Where should I say and when so.
By how much.
But our days and nights are busy ones at AMC.
And we absolutely are not sitting on our hands, but.
From owning the lousy and the cards that the krona virus has dealt us instead, we're out trying to raise money.
Something at which we're quite skilled.
As we have demonstrated on multiple occasions, so far this year.
Onto a completely separate subject.
Let's do you think we're distractive distracted from innovating in how we market to consumers. We know that some portion of the populace is concerned about sitting intermixed with strangers. So a few weeks back we soft launched the private theater rental program, where consumers can bucket auditorium auto themselves and use up to two.
Many tickets in that audit auditorium for a fixed price of between $99 and $349 plus tax depending upon the movie the format and the market.
We've already had more than 80000 inquiries.
From potential guests about private theater rentals and that number will grow markedly once we formally announced the program with the press release and marketing support which should launch later this month.
Before we open the call for your questions I'd like to take a moment to recognize the truly exceptional achievements of the AMC management team.
Just seven months ago, many were predicting that AMC would not survive past spring.
They underestimated this year, we'll have our management to power through this crisis.
If that is it all humanly possible.
And even I am incredibly impressed by the skill of our theater teams, who have first shot and then reopened the worlds largest collection of movie theaters with extraordinarily with extraordinary professionalism and commitment.
To ensure that this leadership team continues to have incentives that are meaningful.
And which completely align the interests of all our senior officers and junior officers with those of our shareholders.
We have detailed in the 10-Q about to be filed.
That our board has decided to use its discretion to vest in this current fourth quarter. Some previously granted AMC equity.
However that new vesting.
Includes a one year lock up.
That prevents the sale of such equity until a full year from now.
Our entire Officer Corps.
As substantial incentives, therefore to keep and to increase the equity value inherent in AMC shares.
In addition, our.
Our board also wanted to recognize and reward some 2000 AMC managers across our system.
In the U.S. and abroad, almost all of them took between 20% and a 100% salary reductions for almost half a year.
As you all are leading our theaters and our company.
In a time of considerable considerable duress.
They are also doing more with much less in the way of resources.
To get leaner.
Almost incredibly.
We have reduced by about one third.
The number of management staff on our payroll.
Both in our headquarters operations and at our theaters.
Then we had at the beginning of last year.
With a goal of retaining our key managers.
So they do not abandoned AMC, that's the most crucial time when we need them. The most arbor, our board further authorized the creation of a modest bonus pool in lieu of the formal 2020 annual incentive plan.
It's equal to approximately 30% of their annual bonus targets individual awards will range from 20% to 50% of target depending upon the individual the most common award will be 20%.
We believe this will bias considerable loyalty amongst our strongest and most needed performers.
And at most critical time.
With that.
Let us leave you with a laser like focus on that which matters most to AMC at the moment then.
The need for us to increase our liquidity.
To raise new cash or to conserve cash spending that will allow us to bridge from this moment.
A much deeper into 2021.
We do after all have our Chilean charge.
We still fight on the beaches, we still fight on Atlanta ground.
We still fight in the fields and in the streets, we still fight in the hills.
And May I remind you all not to forget that great Britain was on the winning side of that war.
Thank you and we now look forward to taking your questions operator.
Ladies and gentlemen, we will now have our question and answer session.
If you would like to ask a question. Please press star one on your telephone keypad.
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One moment, please while we now poll for questions.
Our first question comes from Eric Wold B. Riley FBR. Please proceed with your question.
Thank you good afternoon.
Alan.
It seems though we've seen.
More of a willingness of exhibitors to going to bite the bullet and open deals were less than optimal conditions I guess, the most recent being San Francisco with a lack of concessions.
One of the conversation you had with the studio heads.
Mcguire you answered it speed.
A point, where they started taking some that were taking upon themselves well before.
Vaccine or something meaningful that regard.
Yes, it's already happening Eric so a universal.
Specifically because of our PV or do you deal with them.
Is going to release crudes, a new age.
Just before Thanksgiving.
That's accompanied by five other universal films.
Only one of which has.
Already been released so Universal has got five more coming out in November and December.
We've had significant conversations with Warner.
We know that they are definitely trying to hold onto their Christmas release of Wonder woman.
And.
With all these studios, we're expressing our desire and eagerness to lean in.
And do whatever we can to support their movies and to be flexible and how we consider various strategies for not only us to prosper, but for our studio partners to prosper.
As they were loose release movies.
As well so yes, it's already happening and with respect to San Francisco I would point out, we actually opened Philadelphia and Boston without food.
Within three to four weeks.
Those municipalities agreed to let US go forward or the concessions as well so it's a very fast evolving landscape as to what individual.
Jurisdictions are allowing us to.
To do and.
We're going to continue to fight the fight.
Okay.
Just one follow up if I may.
I know you've been operating under laundering.
Restrictions around capacity in non fuel new film slate is there any way to.
Getting given incenting the percentage of the circuit that has reopened that's going to do so.
On a positive figure level cash flow.
What then attendance kind of.
Our breakeven point is going to look like.
Yeah, we said on the last call that for.
The interest to have individual profitability at a theater level.
We need about 25% attendance to to be generating cash rather than losing cash I can tell you that.
Number one the capacity restrictions.
Which in most cases are 40%.
Of available seats, which is.
AMC imposed constraint, we have a lot of jurisdictions that are letting us go to 50%.
But we've chosen to stay at 40% I don't think we've lost a single customer.
Because we are limited to 40% of our seat capacity, we should be so thrilled to.
To be anxious about losing the 41st or 51% of our seat capacity.
As Sean said, we're hovering down between 10 and 20% at those theaters that are open in the United States were higher than that in Europe.
And the middle East.
But where we need to get to is around 25% and then those theatres are generating cash rather than 30, guys. Now that assumes that we are paying rent.
And we already did say on this call that not only did we defer and abate rent.
In Q2 and move a lot of rents in Q3, the percentage of revenue as well.
We are going to be going back to our landlord community again, I'm talking about further abating and deferring red.
Given low attendance, but.
But.
Why don't we assume that we get up to 25% or more so that.
That.
We are generating cash.
Remember that I've said this on multiple occasions.
Movie theaters are not.
Sports stadiums that typically sell out.
Our Broadway theaters that typically have every seat full movie theaters are more like churches built for Easter Sunday last.
Last year AMC. This is 2019 offer you pivot.
AMC sold more tickets for movie theaters anybody else in the planet and we only sold 17, one 717% of our available seats.
So this notion that seat limitation is going to cripple us is just wrong.
[music].
We modeled.
That.
Even a 50% seat limitation, which we will move to.
Once demand rises to levels, where we need more than 40% of our seats.
Would cost us only single digit attendance and thats before people re spread themselves around typically available showtime's on different days with better seeding availability. So.
The seat constraints are not the issue the issue is.
Demand on the one hand.
Related to virus fears.
But I think even more than that is the availability of movie titles. That's the thing that we need we.
I've said on TV that.
Interviews that.
We're a new car dealership.
And we're in the business selling new cars and Detroit stop shipment as new cars seven months ago.
The show it was a little bear it's pretty hard to sell new cars. When there are no sure no cars on the showroom floor.
Got it thanks Adam.
Thank you.
Our next question comes from Jim Goss with Barrington Research. Please proceed with your question.
Thanks.
Hi, I'm wondering hi, how are you doing okay.
Okay.
Challenging time no doubt.
Oh, Yes, Oh, we got to do is raise a little money will be just fine.
[laughter].
Huh.
Do you have any thoughts or analysis on those films that so far have shifted from a theatrical run.
Such as a couple of the Disney films in terms of their ability to recapture what they might have had its day. It didnt have a theatrical release.
In terms of how that might strengthen your argument against.
Turning up any further.
Situations like that.
So I do a lot of thoughts, but I think it's more appropriate.
For the studios to talk about the success or lack of success.
They're shifting titles to.
Streaming or beauty, but let me say this.
The conversations that we're having.
With every major studio.
Is that AMC as we prove with the universal deal.
If not stuck back in 1955.
We are willing to consider.
Alternate models, we understand that the world of streaming is upon us we believe that it optimizes our profitability.
And studio profitability, if they can have a combination.
Of theatrical releases and streaming.
That that combo is far more lucrative.
For them and certainly for us.
Then if they pick streaming only.
And ignore the $43 billion.
$43 billion revenue is.
That movie theaters generated globally last year.
For the makers of Phil.
And.
We also understand though.
That the combination of theatrical and streaming will be more lucrative them, but could also be more lucrative for us.
If we can somehow get participation in that streaming world as we did with universe. So.
So look I think there's a very compelling case to be made.
That is in the studio's best financial interest.
Not to choose the streaming world over the theatrical world but.
But to figure out intelligently to create a path that lets them navigate towards being able to benefit from both at the same time and AMC is clearly expressed a willingness and an eagerness to play in that arena.
Yes, well along the lines of what you're suggesting.
The larger the movie and the bigger the budget and the DNA the less likely it is to be vulnerable to a.
Streaming.
Great.
But but as you go down that continuum you hit.
Smaller films that might be more susceptible to that do you have any sense as to where those lines might be drawn.
No, but talking about a small movie.
Universal released a movie called Gillian Air.
Last month.
I think its theatrical run was single digit millions I'd counts in your world as a small movie.
They took that movie first theatrically and NPV odious 17 days.
And we AMC made more money.
With that theatrical streaming combo or theatrical PV of the combo than we would have if it adjusts exclusively been theaters with 74 day window.
Okay.
Maybe just one other one.
Thank you again as many of you one Jim you got all that no. No. This is are there just wanted to ask questions. So is that is there any thought or capability to sell any of your theatre properties.
And be able to exit leases in a favorable way as you do try to look at ways to raise funds.
Yes.
Number one we did in the quarter sell nine theaters in the Baltics for $77 million.
At a 9.3 multiple was a lot more than we're getting being given credit for and Wall Street.
Of our budgeted EBITDA, let alone the infant in multiple of our actual EBITDA.
We have a number of leases of nonproductive theaters.
That.
[music].
Expire and every year.
And very quietly although I did tell you a couple of conference calls back this was our plan.
We probably talked out of 40 theaters.
Within the United States and Europe.
Where we were losing money.
And so as opposed to being behind.
Because we didnt renew those leases were ahead.
And we will continue to have conversations with landlords.
About.
Getting out of unproductive agreements.
Okay and but.
You generally would have a certain number of theaters leases expiring every year. So you have that choice are there any other issue beyond that you would look at.
As potential sources of funds.
Yes, and we already have.
But.
Probably not appropriate for me to quantify it on this phone call, but yes conversations have been held with multiple of our landlords.
About getting out of theater leases.
Where we think it's in our interest is interest to do so and where the landlord might have a higher and better use for the real estate.
Alright. Thank you very much appreciate it and good luck thanks, Jim.
Thank you.
Our next question comes from Eric Handler with MKM Partners. Please proceed with your question.
Yes, thank you very much and good evening.
Few questions for you on liquidity any chance you could update us about where.
You ended October.
In terms of cash.
Eric It's Sean I can update you as to where we ended October.
Obviously just ended last week, but I can give you some guidance on liquidity for the remainder of Q4, which hopefully will be somewhat helpful.
And I think the way to look at it.
Probably the best way to look at is looking at worst case scenario in a worst case scenario.
Where the current level of attendance continues right. So we have no new movies released and we just continue with the current level of attendance in that scenario.
Monthly cash burn during Q4 will be a little bit higher than during Q3, and the reason it will be a little bit higher.
It's really one thing it's the additional lease cost that we have in Q4 versus Q3 based on the current arrangements that we have with our landlords, but if you just look at so would that be higher and just to quantify that to be out even more helpful. There is if you think about our cash burn in.
July and August run 115 million a month.
It will be closer to that number than the average that we were for the quarter, maybe around 5% to 10% higher than that it just depends and this is the key point.
That's based on worst case scenario current agreements with landlords, but if you pull costing our cash position based on that I can tell you right now you're going to get it wrong because as we said in our prepared remarks, we have already raised through the ATM equity program $95 million that came during the month of October.
We've already got additional possible proceeds.
From the Baltics out that's about $8 million, we've been selling real estate, we sold about $7 million of real estate. During October we plan as Adam said to be back in the market with the ATM process. We're in discussions with landlords et cetera et cetera. So you have really given you the west coast and RF, but all these actions that we taking.
We'll offset that worst case scenario.
Plus Sean did not match that also that assumed.
That we have.
That we stay at today's level with tenants.
After Christmas movies hold.
Then our level of attendance should increase in our revenue should increase as well so and you. It was in the press release, we had $418 million of cash at the end of September so.
Obviously, we want much more than that we need much more than that we.
We extent we we.
I have a goal of extending our financial runway deep into 2021 not early into 2021.
Yes, thanks, Adam and that actually clarified our internal full cost would be much better cash burn than that because we're basing it on the film slate as it currently stands and we believe.
Well.
Okay. That's helpful and then I.
I assume that hundreds that whatever that burn rate is in excess of 100 million.
What is.
Youre right. It's on average Youre monthly cash interest expense.
That's all that's included that's included in the numbers, Sean just gave you.
Right and how much is that.
Well look.
And it varies on a Monday cash interest expense right now.
If we just take that.
Running around $20 million a month.
But that is included in the numbers.
Great. Thank you and the last question.
The.
Act the equity shelf that you filed today.
Do you already have a.
Sponsor in places like you did with Goldman and city for for the ATM deal or are you are.
Are you negotiating with others.
And then secondly, along with that.
Why just 20 million I mean, right now 20 million shares will get you a little over $40 million would probably need much more than that.
Why not do a larger shelf offering.
Eric to avert gun jumping.
Concerns.
We can't make any comment at all.
On the filing made this morning with yes, you see.
Okay. Thank you.
Thank you not me not not wanting to duck your question, but being ordered by.
The government United States Duck your question.
Understood.
Thank you thanks art.
Our next question comes from Alan Gould with Loop capital. Please proceed with your question.
Thanks for taking my questions, Oh, Hello, Adam Hello, Sean.
Two questions.
First there were some trade speculation on your sale of your European theaters, not the Baltic spot. The the bulk of the remainder of the European theaters Yoni on chain et cetera is there any comment you can make about about that.
Nope.
We do not comment on rumors and speculation.
Okay. My next one for Sean I believe your debt covenant waiver with the banks expires in March.
Have you already started discussions there and you know can you remind us what the what the covenant relief.
Returns to after March.
Sure absolutely. So as you rightly say, we have a debt covenant holiday through March actually the first time.
That will have to calculate our debt covenant numbers is at the end of June.
That will be off to the second quarter at.
After the second quarter, the debt covenant will be calculated by taking Q2's number multiplying multiplying it by full such annualized nation of Q2, so everything's in terms of where we sit relative to that debt covenant will depend on the full in Q2.
The Covenant is six times secured leverage six times EBITDA secured leverage ratio.
Non of secured debt that we have at the moment is 3.7 billion.
I will.
Point out.
That the EBITDA that we use for the.
Debt Covenant calculation Thats in the credit agreement is different to the EBITDA that is disclosed for financial reporting point of view tends to be higher.
And so that's going to be our situation with the debt covenant, it's all going to be dependent on Q2 2021 performance.
Okay.
And then Adam when will we know when we have a better idea of whether or not warner's going to release, a wonder woman 1984 on Christmas when would they have to start marketing. It I guess that would be our first sign of whether it's we know the exact date, then it's going to come out.
Are there any just start the look I can tell you categorically they they want to release on schedule.
Their marketing will begin.
Sometime this month I would guess.
When will we know.
Exactly that wonder woman is.
Opening on December 19th or December Twentyth, I think on December 19th or December 20 us.
Okay and then my last question for Sean.
How much higher are the fixed cost today than they were say pretty covis.
So if we come out of this to the other and how much higher is it are the fixed cost for the company I know your rent is less your interest expenses more I'm just trying to put it all together maybe your rent is more when you start having to pay back the deferred.
Look I think in general.
So a couple of things I'll say, one is to start with our fixed cost is going to be pretty similar but firstly the range is probably going to be lower based on the negotiations that we've had with landlords right. The second thing is what I mentioned in my prepared remarks is the actions that we're taking looking at every single.
Cost area that we've had that we have we have in the organization and.
And we do see significant benefits there, we targeting between three and $400 million of cash benefits, there and thats cash benefits that includes reducing our capex.
So this is significant benefits on that side.
Cash rent does go up but only in 2022 right because of the Pik interest than we have in 2021.
Okay. Thanks for taking the questions.
Thank you.
Our next question comes from Meghan Durkin with Credit Suisse. Please proceed with your question.
Hi, Good afternoon, guys one for Sean I wanted to know if you could give us a breakdown of where the cash burn is overseas versus the us.
And is there a minimum level of cash that you need our hands to keep running the business and then I just one more on market shares Howard things holding up where you are open. It has regal closing helped you take share in those areas how's that going.
I think its a.
Sean just talking about the split of the cash burn between domestic and international.
It's pretty normal for the spread is the size of the business has nothing drum.
Dramatically different there than what we seeing on both sides of the Atlantic.
I think the second part of your question was is there a minimum level of cash.
There clearly is a minimal level of cash but its low.
And that minimum level of cash is more in Europe, just because of the structure of the European organization, but we can run at pretty low levels of cash of overall.
Okay, Megan yes, our market share obviously has increased.
Given the closure of lots of other theaters, but as Sean said in his prepared remarks we've.
We've modeled this thing extensively.
And those theaters where were open at half of them in the United States. There are only open weekends.
Most of our theaters only doing one or two show times a day not the normal for so we're really pulling operating hours down.
Which is saving a ton of expense.
It's not really much different financially for us to be open managing tightly the way. We are then close.
But the benefits are.
That we're still giving a sense to consumers that our theaters are open that they can see movies when they primarily want to see them, which is weekends currently.
And also it's much less stressful one the buildings.
To have them open every single week, then to have them closed four.
A couple of months on end when you try to reopen a building.
After it's been completely.
A button down for months on end, there's a lot of extra expense.
It comes from starting back up from a dead stop so we think we're doing it the right way and we are benefiting in the marketplace because our share is rising.
Okay I'll leave it at that thanks. Thank you.
Thank you.
Our next question comes from Jason Bazinet with Citi. Please proceed with your question.
Oh. Thanks, so much I just had two questions has there been any studios that have been willing to give you, let's say a 100% of.
The ticket value.
Leased until you get through this crunch period, and sort of maybe cume up the difference in arrears and pay it back to the studios at some later date.
And then my second question is there any sort of wildcard here in terms of government. So.
Assistance to could sort of help you see this crunch period.
Thanks.
Thanks. So on your first question, we have been able.
I have yet to find a studio that we'd like to graciously give us 100% of the ticket sales, but I will tell you that studio has been very flexible on payment schedules.
So we've been able to hold on to money a lot longer.
In some cases, an incredibly lot longer that would be the norm, which helps our liquidity.
As for the a wildcard.
Given that there's an election tomorrow.
I don't think anybody can predict anything right now, but I do know that.
There has been discussion.
Among.
Certain political leaders of certain parties.
That if they're in power post election.
They might step up.
Their activity to support industry, but.
I think it's it's premature.
Get a sense of whether that will bear any fruit.
For our industry or our company.
Since nobody really knows whats going to happen Tomorrow until tomorrow comes that we may not even know tomorrow [laughter].
Fair enough. Thank you.
Thank you.
Our next question comes from Chad Beynon with Macquarie. Please proceed with your question.
Good afternoon, it's Jordan Bender on for Chad.
So hopefully we get a vaccine here and returned to normal somewhat soon.
One thing do you start to normalize what's the capex environment going to look like.
Are you going to have to kind of front load some of this maintenance capex into the theaters that.
You push back over the last two quarters.
Thanks, So what do you mean to you since its sort of a let me hit your premise.
So we are in touch with medical experts.
Quite directly.
Both through the Harvard University School of public health.
Separately have had contact as recently as this past week with the former head of the FDA.
And members of the boards of directors of certain pharmaceutical companies are working on vaccines.
I think there is a lot of confidence.
But there will be a vaccine approved by the U.S. government in November or December but.
But inoculations will begin in December or January.
And that a sizable percentage of the U.S. population could be vaccinated as early as March or April.
Whether those predictions pan out to be true.
Only time will tell but people who are very knowledgeable in the fields are telling us those are all likely scenarios.
In terms of Capex.
You know back when we were spending $500 million a year.
We said, if we ever needed to turn Capex off we could do it on a dime.
And boy did we proved that to be the case.
And.
If you ignore projects.
That were committed.
In prior years.
We havent, even spent $50 million of Capex on maintenance this year.
I think you should assume.
That we will continue to button down capex.
To the lowest conceivable number.
Oh potentially under $100 million.
As we go forward.
If that is what is required to maintain the liquidity of the company.
So is there.
Any deferred maintenance that were nervous about that's going to suddenly unleash a flood of capex spending absolutely not it's the other way around.
We're just not going to spend any money until were out of the woods.
Okay perfect. Thanks for the color Adam.
Remember as I said before a dollar of cash served.
Is of equal value to AMC have an extra dollar risk.
So operator I think that's the last question is that correct.
Yes, Sir that is the last question I'd like to turn the floor back over to you for any closing remarks, you may have.
Three brief thank you everybody as we close this call I remind you that.
Gold finger on the Hunt for Red October was Sean Connery.
We'll be at AMC all weekend.
I remember this.
We still fight on the beaches, we still fighting Atlantic grounds, well still fight on the fields in the streets, we still fighting the hills. Thank.
Thank you for joining us today.
Ladies and gentlemen. This concludes today's web conference you May now disconnect. Your lines at this time. Thank you for your participation and have a great day.
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