Adam Aron: Thank you, operator. Okay, Sean. So what questions have come in from our retail shareholders?
Sean Goodman: So the first question is related to market share as well. And the question says that AMC has been growing market share in the US market, while at the same time, closing underperforming theaters. So can you comment about what we can attribute the success to? And do we see this market share growth as sustainable as the industry recovers?
Adam Aron: Sure. So, yes, it’s a pretty impressive trick to increase your market share when you’re closing 100 theaters. But that’s exactly what we did. And part of it is — and as you mentioned in your earlier remarks, our 70 basis point improvement in market share with a higher market share growth that was achieved by any of the 50 largest movie theater circuits in the United States. That’s very encouraging for us. Part of it is because we think our theaters are in good shape. Part of it is because we think we’ve got very strong marketing, which I will talk about later. But also what’s really interesting is that the theaters that we are closing were our older, more tired theaters, buildings that were sort of at the end of their 20 or 30 year useful lives that weren’t grossing all that much.
And the theaters that we opened were shiny new ones in great locations, usually open with reclining seats to start. And as it turns out, it’s incredible, but true, the 60 theaters that we opened outgrossed the 169 theaters that we closed. So we’re replacing older, tired unsuccessful theaters with thriving ones. And some of the ones that we’ve opened are amongst our — literally, our highest grossing, most profitable theaters in all of Europe and in all the United States.
Sean Goodman: Terrific. And the next question is about AMC Cinema Suites. Question here is looking for an update on Cinema Suites? And is there a chance that we release these products on the retail channel?
Adam Aron: So Cinema Suites is doing great. We’re very pleased. As you all know, I think, it was in the fourth quarter of 2023. We unveiled a proprietary house brand of premium gourmet candies, chocolate covered peanuts, chocolate covered raisins, chocolate covered almonds, chocolate covered pretzels. Four different SKUs. We say they’re premium gourmet candies because they have a lot more chocolate. And we tend to charge the same price for Cinema Suites as we charge what I call regular branded candies that are weighed on those loves. They’ve been selling well. We’ve been — they’re nicely ahead of expectations. We’ve had no problem with the supply chain and getting these delivered to us in quantity. And I would think that we would, in fact, take them to the retail market at some point going forward.
Exactly when, I don’t know. It’s not the highest priority. There are other things that are higher on the list of things to do to make more money for AMC, but Cinema Suites have done great. We’re glad we did it.
Sean Goodman: Great. And then the next question is about our capital expenditure. Can we provide some color on AMC’s CapEx spend, where are we allocating the money?
Adam Aron: Well, since your nickname around here is Dr. No and you’re the one who is raising the capital — and we’ve done everything in our power not to spend capital expenditures at the moment because our preference has been to build up our cash reserves for a rainy day. Why don’t you answer the CapEx question?
Sean Goodman: Thanks, Adam. Well, it’s true we are very disciplined in our capital spend, particularly during this recovery period. But the good news is that AMC has a very large number of high return investment opportunities. Right now, we’re prioritizing those investments that maintain our existing buildings, our existing equipment, our IT capabilities so that we can continue to provide the best possible guest experience. But we’re always allocating our capital to the best risk-adjusted return opportunities and we continue to do that. When I look to the future and I see the sort of the pipeline of attractive investment opportunities we have. They include our premium large format auditoriums, side and sound upgrades, automation of the guest experience, better seating, et cetera.
So again, there are many very attractive opportunities, but now around 75% of our capital spend is really focused on attaining the assets to continue to provide the best possible guest experience.
Adam Aron: Thank you, Sean. And I might add that I think the priority of spending has been maintenance CapEx first because we have to keep our theaters in decent shape. But to the extent that we have additional monies in the door, our priority has been to use that to build up our cash reserves. My comments in my earlier prepared remarks that cash is king. It’s a serious comment. I do believe that one of the reasons why AMC has defied gravity the last four years and surprised a lot of people who thought we might run into trouble, but we didn’t as we build up our cash reserves intelligently. But having said that, there are so many interesting ways that we could reinvest in the business. And I personally think the most lucrative of those ideas is, as you said, the increased premium large-format screens.
I hope that we can add more IMAX screens and Dolby Cinema screens. We are the largest IMAX exhibitor in the world outside of China. We’re the largest Dolby Cinema exhibitor in the world. We have about half of the IMAX locations in North America. We have all the Dolby Cinema locations in North America, those auditoriums do extremely well. And if we can wrestle up some capital expenditure money to do it, adding more of them is a great idea.
Sean Goodman: Agreed. Next question here is related to debt. The investor asks with a significant amount of debt maturing in 2026, two years from now, what is the company doing to address this debt that is maturing and reduce the overall debt level?
Adam Aron: So in terms of reducing the debt level, we have done, I think, a phenomenal job over the last few years of paying down debt and other deferred obligations like deferred rent. We, in the last two years roughly, we paid off almost $1 billion of long-term debt and other deferred obligations, which is encouraging. We’ve done that in part by buying a lot of debt back in the open market at a discount, which means you’re doing it at a profit, which is also good. Still realizing we are playing a capital allocation game of reducing debt, buying in debt versus investing in the business through CapEx versus building up our cash reserves. It’s a bit of an art form, which actually shown here you manage this process day to day.
But — and we paid off or reduced so much of our debt and obligations. It is kind of staggering to me that we had to borrow about $2 billion to survive COVID. And yet if you look today at our net debt, AMC’s net debt today is less than it was just prior COVID. So how is it possible that we had to borrow $2 billion to survive and yet we have less debt today than we had going into COVID. And the answer, of course, is because we raised a lot of equity and we paid down debt, which is important for us to do. Looking forward, we still have about $4.5 billion of debt, not much maturities before 2026, but there are huge maturities in 2026. And I can assure everyone listening to this call today is that the management of this company, which has been pretty smart in how we’ve navigated ourselves through the pandemic heretofore and a leveraged balance sheet without a lot of EBITDA heretofore, that same management team is wholly focused on the debt maturities that are due in 2026.
This is not something that we’re going to look at next year or the year after that. We’ve been working with our Board of Directors and our investment banks for almost a year now in discussing the smartest ways to extend the maturities of our 2026 debt into future time periods. The good news is that we have lender syndicates who generally like AMC, have worked with this before, are working with this now. I’m hopeful that we will come to some conclusion. That will allow us to push out the debt maturities from 2026 into future periods. There’s nothing to announce yet because there’s nothing that’s final or done yet. There’s no agreement that’s imminent like it’s going to be announced in a day or a week, but it has our highest attention. We know about our obligations going forward.
We intend to refinance, if at all possible, and we’re hopeful that we can do so on attractive terms.
Sean Goodman: Absolutely agreed. And then the last question that we have is relating to the upcoming shareholder meeting. There’s a question here. I would like to vote at the upcoming shareholder meeting, but how do I vote? I’ve not received any proxy information.
Adam Aron: Well, I do hope you — I mean I hope you all do vote for those of you who own shares that is. I hope you all do vote. In prior years, the voting numbers at AMC have been pretty low because it has been having of some retail investors not to vote. I would remind everybody, this is a chance to have your voices be heard. We pay attention to what you say in the shareholder votes. We act accordingly. You know that I reduced my own compensation this year in response to what shareholders were saying in the so-called say-on-pay vote. So we really do want you to vote. We want to hear what you’re thinking. But the way you vote is you go to your broker where your shares are held and you get the proxy materials from your broker.
If you haven’t received proxy materials yet, I know that I’ve received mine as an AMC shareholder from several different brokers. But if you haven’t received yours you should call your broker, you should ask for your proxy materials. We do have a proxy adviser, a listener here in the United States called D.F. King. You can call D.F. King if you would like help. There’s a toll-free number that’s been set up. 1-800-859-8511. Let me repeat that 1-800-859-8511. If you hold your shares through DRS, you get your proxy materials from the registrar, Computershare. And I just might add, since I note that we have many international shareholders who listen to these webcasts. We do know that voting in shareholder meetings for American companies is not as easy, abroad as it is in the United States.
