Earnings Call Transcript - AMC Q2 2021

Operator, Operator

Greetings, and welcome to the AMC Entertainment Second Quarter 2021 earnings webcast. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question-and-answer session. As a reminder, this conference is being recorded Monday, August 9th, 2021. I would now like to turn the conference over to John Merriwether, Vice President Investor Relations. Please go ahead.

John Merriwether, Vice President Investor Relations

Thank you, Kevin. Good morning or good afternoon, everyone. I would like to welcome you to AMC's second-quarter 2021 earnings webcast. Joining me this afternoon are Adam Aron, our Chairman and CEO, and Sean Goodman, our Chief Financial Officer. Before I hand it over to Adam, I want to remind everyone that some comments made by management during this webcast might include forward-looking statements based on current expectations. Various risks, uncertainties, and other factors may lead to actual results differing significantly from what is expressed today. Many of these risks and uncertainties are outlined in our most recent public filings, including our latest 10-Q. Several factors that will influence the Company's future outcomes are beyond its control or ability to predict. Given the uncertainties surrounding any forward-looking statements, listeners are advised not to place undue reliance on them. The Company has no obligation to revise or update any forward-looking statements due to new information or future occurrences. In this webcast, we may mention measures such as Adjusted EBITDA, free cash flow, constant-currency, among others, which are non-GAAP financial measures. For a complete reconciliation of our non-GAAP measures to GAAP results, please check our earnings release posted in the Investor Relations section of our website earlier today. After our prepared remarks, we will have a Q&A session. This afternoon's webcast is being recorded, and a replay will be available in the Investor Relations section of our website at amctheatres.com later today. With that, I'll turn the call over to Adam.

Adam Aron, Chairman and CEO

Thank you, John. Good afternoon, everyone, and thanks for joining us today. The second quarter of 2021 was another very important quarter for AMC. We have a lot to talk about on this call regarding the considerable progress towards recovery that AMC is making, and we have some real news to share today as well. Before we go there in detail, I first would like to express a very warm welcome to what, from past experience, makes us believe that more than 10,000 individual AMC investors will be listening live to this webcast. And another warm welcome to the at least hundreds of thousands, if not millions of our investors, who will be listening to replays, reading our press releases, and AMC Investor Connect communications, or following on Twitter and other social media platforms, our earnings report, and the accompanying new news that we'll be discussing later in the call. Realizing that it is these investors who now actually own control of AMC Entertainment Holdings, for the first time ever, later in this call, we will answer a variety of questions that have been submitted to us directly by our shareholders. As to our second-quarter performance, I believe you can see from the release issued after the market closed today that we are making tremendous progress as our business emerges from the impact of COVID-19. This progress can be seen not only in our operating statistics and financial performance but also by the significant strengthening of our balance sheet. AMC is stronger today than it has been at any point since the pandemic forced the closure of all our theaters in March of 2020. Our quarter-ending liquidity at the end of Q2 on June 30 is actually at a 100-year high. Now that's precisely what we said on the Q1 call when we reported to you that on March 31, we had $1 billion of quarter-ending liquidity and that was the highest quarter-ending liquidity that AMC had ever had. In Q2, mostly May and June, we raised another $1.25 billion of fresh equity capital, and our cash burn was meaningfully less than we had previously experienced in recent quarters. So, we ended Q2 with around $2 billion of liquidity—cash in the bank and undrawn revolver. And just a short three months after our last call, that $2 billion figure is literally double the Q1 mark, a new record double the old record that was set just 91 days prior. As for our earnings in Q2, thanks to rising attendance, increased ticket prices achieved through mix changes and actual price increases, increasing food and beverage revenues per patron, a relentless focus on cost containment, and the pruning of marginal theaters from our network, our financial results in Q2 were well ahead of our own and consensus third-party expectations. In short, AMC crushed it in Q2. You've already seen some of the highlight headline numbers: revenues in Q2 of $445 million, consolidated food and beverage revenues per patron up 44.1% over that same statistic of the second quarter of 2019, which was the comparable quarter pre-pandemic, a net loss of $334 million, an EBITDA loss of only $151 million, an EPS loss of only $0.71 per share, gross Capex expenditures in Q2 2021 of only $17.9 million. These are very strong metrics for across-the-board performance by AMC, compared to what many people, ourselves included, thought might happen in Q2 of 2021. And here are more operating statistics that also suggest things are improving at AMC as 2021 unfolds. Overall ticket admissions revenue in the United States in 2021 versus 2019 pre-pandemic. This is overall ticket admissions revenue in the U.S. well, it was 13% of what it was two years ago in this year’s Q1. But it was 29% of what it was two years ago in Q2 of '19. And so far in the first weeks of Q3, we're running 45% of our two years ago levels. So Q1 it was 13% of what it was, Q2, 29% of what it was, and Q3 so far, 45% of what it was. It's still down. But the trend lines show significant improvement. And even that's somewhat misleading because we've reduced so many showtimes at our theaters to save on theater operating expenses, which partially mitigates those revenue declines. So, if instead of just looking at ticket admission revenues, if one looks instead at capacity utilization, that is, the percentage of seats that we sold as a total of what was available for sale, you'd see that our capacity utilization was 41% in Q1 of 2021 of what it was two years ago in Q1. It was 61% of two years ago levels in Q2 and 68% of two years ago levels so far in Q3. Again, capacity utilization: 41% in Q1, 61% in Q2, 68% so far in Q3. Again, that trend line is pointing up. We certainly have a way to go, but progress is clear. And we should be getting to play many more movie titles in the balance of Q3 and Q4 2021, as contrasted with what was shown in our theaters in the first six months of this year. Incidentally, we see the same exact positive trends at our European theaters. Let’s start with 2021 admission revenues. In Q1 of 2021, it was a bleak 2% of 2019 levels. In Q2, it was 18% of 2019 levels. But so far in Q3, we're now running at 57% of 2019 levels clearly indicating an upwards trend. The same holds true for that same capacity utilization statistic in Europe for us. In Q1, our capacity utilization in 2021 was 53% of the 2019 level. In Q2, it was 56% of the 2019 level but so far in Q3, it’s 69% of the 2019 level. 53%, 56%, 69%. Again, we're seeing upward trends with ways still to go for sure, but upward nonetheless. Despite the strong financial and operating results indicating success, we're on a path to recovery. I want to assure you there are no victory laps being taken. We are still losing money. We're still burning cash; we're burning lots of it, but we're using cash, not generating cash. So, we’re not out of the woods yet. We do still live in a COVID-infected world. But fortunately, we can see a light at the end of this tunnel. Vaccination rates have climbed quickly in 2021 and the counterintuitive result of this new Delta variant is that vaccinations likely will continue to rise. The increase in vaccinations is very important for AMC and for the movie theater industry, in general. No one has a perfect crystal ball, of course. But based on what we know, and what we see today, we currently estimate that AMC's theater-level cash flows will turn positive in Q4 of this year assuming that we all see at least $5.2 billion in domestic box office cumulatively for the year. Now, there are some naysayers who are quick to point out the size of our debt load. What they do not bother to mention, perhaps because it does not fit their narrative, is that we have smartly laddered that debt. We have no debt maturities at all until 2023 and most of our maturities do not come before 2026. This gives us considerable time to deleverage our company, to further strengthen our balance sheet, and to refinance our liabilities, hopefully in better times. I’m reminded in all of this, that there were those who were absolutely certain they just knew that AMC would file for bankruptcy in the calendar year 2020 or early in 2021. At AMC, we proved them wrong. There are those who were sure our recovery in Q2 would be slower than the current reality. Again, the Q2 numbers for AMC have proved them wrong, as well. But there are those who continue to forecast the demise of the theatrical exhibition business overall or maybe they just want to predict the demise of AMC. They say that streaming is going to beat us, that’s their conventional wisdom. Well, a lot of people mock conventional wisdom because so often it's just plain out wrong. You’ve likely heard before this mantra, maybe even repeated it yourself. Radio is going to kill off movie theaters. TV was going to kill off movie theaters. VCRs were going to kill off movie theaters. DVDs are going to kill off movie theaters. Each time movie theaters proved resilient. Americans went to a movie theater a billion times in 2019. That's a billion with a B. And the global box office in 2019 was a record-high $43 billion. Yes, there was a pandemic, but now streaming is going to kill off theaters, we breathlessly hear. Well, at AMC, we intend with all of our might, brains, and heart to prove those doubters and prognosticators wrong, too. I'm now going to turn the call over to our Chief Financial Officer, Sean Goodman, to give you some more insight into the progress we're making, and then I'll come back to break some news before we head to the Q&A.

Sean Goodman, Chief Financial Officer

Thanks, Adam. And thank you, everyone, for joining us this afternoon. As Adam noted, this quarter marked an important and very successful step along our pathway to recovery. Overall, our global attendance in Q2 was more than three times that of Q1. While this is approximately 77% below 2019’s attendance levels, it is only approximately 45% below our 2019 attendance per show. This is an illustration of how we’re actively managing our showtimes and associated costs to optimize the efficiency of our operations. We have a way to go before the business fully normalizes. But clearly, we are on the right path in making significant progress. In general, comparison of our results to 2020 and 2019 is not particularly meaningful, given that we are still in a ramp-up phase. However, there are certain metrics that are really very encouraging and worth mentioning. Compared to the second quarter of 2019, the domestic average ticket price was up more than 15% and food and beverage revenue per patron was up nearly 42%, to an impressive $7.91. This compares to $5.58 during the same quarter of 2019. Similarly, the international average ticket price was up 6%, and food and beverage revenue per patron was up nearly 33% compared to the second quarter of 2019. The food and beverage increase is primarily driven by a significantly higher percentage of guests choosing to purchase our food and beverage concessions. We are continuing to see strength in both average ticket price and food and beverage per patron as we move through the third quarter. Clearly, our guests are celebrating the experience of going out to see a movie and enjoying the full immersive theatrical experience, the sights, the sounds, and innovative AMC concessions. Let’s talk a bit about our balance sheet. As Adam noted, we ended the quarter with $2.023 billion of total liquidity. This is comprised of $1.811 billion of unrestricted cash and $212 million available under our revolving credit facilities. This record liquidity level was made possible by our equity issuances during the quarter plus the completion of the sale of our remaining equity interest in theaters in Lithuania. On average, during the second quarter, our cash burn was $85 million per month. This is a significant improvement from Q1 when the average cash burn per month was $120 million. This improvement in cash burn is a result of higher gross box office grosses together with our very strong operating performance. And it's particularly noteworthy and an impressive improvement when one considers that our cash interest spend and deferred rent repayments were significantly higher in Q2 than they were in Q1. If we look at cash burn before the payback of deferred rent and debt servicing costs, it was approximately $40 million per month in Q2 versus a burn of $115 million per month in Q1; a very significant improvement. Note that our cash burn numbers are stated after normalizing for the impact of capital raised during the quarter, and therefore, exclude the proceeds from the completion of the sale of our theaters in Lithuania, and the equity capital that we raised during the quarter. Regarding capital allocation, we’re pursuing a balanced approach to capital allocation with our priorities as follows: One, ensuring that we have sufficient liquidity to withstand any bumps along the road and the inevitable volatility as our industry recovers from the impact of the COVID pandemic. Two, strengthening our balance sheet by reducing our debt and associated business costs. Three, investing in our business to enhance the guest experience. Four, opportunistically pursuing value-enhancing partnerships for acquisition opportunities. With our current solid liquidity position and the recovery that we're seeing in the business, we believe that it is appropriate to carefully deploy our cash in ways that are most beneficial for the long-term future of the business. While of course, we will continue to be ultra-focused on our operating efficiency, this will be rather than focusing on short-term monthly cash burn. What I mean in this regard is we expect going forward that we will choose to pay cash interest as opposed to payment-in-kind or PIK interest. This will avoid any increases in our debt position. We also anticipate taking thoughtful actions to reduce our debt, including the deferred rent balance. All of this with a view to strengthening our company for the future. In addition, we will continue to actively manage our theater portfolio, closing underperforming locations. We've quietly closed more than 74 marginal or money-losing locations over the last 18 months, and opportunistically pursuing attractive, high-potential locations which Adam will discuss when he comes back on. Turning to our landlords, at the end of the second quarter, we had deferred rent obligations of $420 million, representing a decline in obligations of approximately $55 million compared to Q1 of 2021. For the second quarter, actual cash rent paid was approximately $55 million more than what is shown on the face of the income statement as we repaid deferred rent. While future cash rent payments will continue to be dependent on ongoing discussions with landlords, we anticipate cash rent paid in the second half of 2021 will be significantly higher than in the first half as we continue to work on reducing the deferred rent balance. We take advantage of opportunities that may arise, for example, prepaying rent in exchange for favorable lease terms. For now, we continue to focus the substantial majority of our capital expenditures on maintenance spend. However, a small amount of growth Capex could arise from potential opportunistic, high-return investments later on in the year. CapEx for the second quarter was $10.5 million; this is net of landlord contributions. Net CapEx for the whole of 2021 is expected to be in the range of $100 million to $120 million. Reflecting on our results and the financial position at the end of Q2, it is quite remarkable just how far we have come in a relatively short period of time. We believe that we are uniquely well-positioned for a strong and profitable recovery. Now that all our theaters are open, we have a backlog of exciting movie titles to be released and we have record levels of liquidity. And with that, I’ll pass the call back over to Adam.

Adam Aron, Chairman and CEO

Thank you, Sean. I’ve been saying publicly, ever since we raised that life-prolonging additional equity in May and June, that it was high time for AMC to start playing on our terms again. And earlier in this call, I promised you some news. So, here it goes quickly on 10 specific items. 1, you already know that with ArcLight and Pacific theaters' decision to permanently shut down, we announced that we've executed two leases with Rick Caruso's world-class real estate organization to add to the AMC fleet of theaters. Two of Los Angeles' highest-grossing cinemas, The Grove and Americana at Brand, were the second and fifth highest-grossing theaters in Greater Los Angeles as recently as the calendar year 2018. They should open later this month as AMC theaters. However, I can confirm today that the number is not 2 new theaters for AMC; it might be 10. We actually now have 6 new theater pickups under lease or signed letter of intent. Note two, 3 of those are in Los Angeles, 2 are in Chicago, and 1 is in Atlanta. We are currently in advanced negotiations to add 4 more, bringing the possible pickups to 10. Eight of the 10 would come from former ArcLight Pacific locations. Item 2, speaking of new theaters, in 2021, we will open about a dozen new build theaters in the U.S., Europe, and the Middle East that were all well underway before COVID struck. I’m happy to report that we do know something about designing beautiful and productive theaters. In the United States, for example, we opened 3 new theaters in 2021. The 2 in Los Angeles: AMC Porter Ranch and AMC Dine-in Montclair, are already each among the top 25 highest-grossing movie theaters in the entire United States. That puts each of these 2 theaters in the top one-half of the 99th percentile of highest-grossing U.S. cinemas, and that was achieved in just their first few months of operations. It's really astounding. Our new AMC Dine-In Theatre in Sunnyvale, California, is also doing amazingly well. It's in the 94th percentile of highest-grossing U.S. theaters. Item 3. Many of our new individual investors have showered us with great ideas about how we can strengthen and brighten the future of AMC. Among their ideas for AMC are that we show concert movies, professional sporting events, e-sports, and gaming events. Wasting no time, we've immediately started to implement these very good ideas. Our first 2 UFC matchups, which were in July, drew significant attendance to our theaters. Our first two concert movies, starring Chance the Rapper and Halsey, will show at AMC theaters across the country later this month in August. We’re quite optimistic that this alternative programming can be built into a real revenue opportunity for AMC in future years, and we're chasing it hard. We also hope to engage in meaningful dialogue with professional sports leagues and collegiate sports conferences to see if we can obtain the rights to show more sporting events at our theaters. As for gaming opportunities, indeed, the president of Epic Games is a member of the AMC Board of Directors. I cannot even count the number of times already that our shareholders have asked us to reach out and partner with GameStop. We’re on the case; more to come. Item 4, many of our new shareholders are also quite enthusiastic about cryptocurrency. You may know that my best friend of almost 25 years, the billionaire former chairman and owner of Silversea Cruises, formed a SPAC earlier this year called Centricus, and he asked me to join its Board of Directors. SPAC, for those of you who don't know, stands for Special Purpose Acquisition Company. That’s a fancy name for a pool of investment capital in search of a company to buy. Ironically, Centricus is contracted by a fascinating company called Arquit, which just happens to be on the very cutting edge of quantum encryption and Blockchain technologies. It was initially funded by the British government. Its clients include British Telecom, the European Space Agency, and Verizon, among others. My role as a board member is merely to ensure that all laws and stock norms are being complied with when the acquisition of Arquit is completed, which should be occurring soon. I will then step down from the board of directors. However, to get to this point, I've had to learn more in the past 6 months about Blockchain and cryptocurrency than I learned about it in the entire decade before that. This increased knowledge has given me the confidence to tell you all today that AMC is hereby formally announcing on this call that by year-end, we will have the information technology systems in place to accept Bitcoin as payment for movie tickets and concessions if purchased online at all of our U.S. theaters. We are also in the preliminary stage of now exploring how else AMC can participate in this new burgeoning cryptocurrency universe and we're quite intrigued by the potentially lucrative business opportunity for AMC if we intelligently pursue further serious involvement with cryptocurrency. More details will be shared publicly with you, but only if, as, and when our plans are firmer. Item 5, since we had to do the IT programming to accept Bitcoin anyway, we are simultaneously writing the code right now to accept Apple Pay and Google Pay for online purchases at our U.S. theaters. These new payment methodologies for us could also be implemented by year-end. Item 6. Again, speaking of our new shareholders, in June, we introduced a new program called AMC Investor Connect that got a lot of press attention. It's part of AMC Stubs and offers our shareholders who participate full Stubs benefits. We are thrilled that almost 300,000 of our shareholders have already joined. Our goals with the program are simple. We’d like to improve the communications that we have with the people who own AMC. We also want to convince many of the millions of people who are now our shareholders into becoming avid customers of our theaters as well. Hence, we already have made multiple free and discounted offers to participants in AMC Investor Connect, and we're setting up a program of special advanced screenings for our AMC Investor Connect members. To that end, a very special thank you to Sony Pictures for enabling our first such advanced screening in July, ahead of the scheduled theatrical release of Escape Room: Tournament of Champions. Item 7, the heightened information exchange with our new shareholders, as well as with the public at large. In April, I started actively tweeting again, which I've not done since my days running the Philadelphia 76ers back in 2013 when Twitter was my social media platform of choice to interact with sports fans. My Twitter followers have more than doubled since April and now exceed 150,000. What blows my mind is that according to Twitter analytics, my tweets, which I write personally, have been read more than 72 million times. Additionally, I’m actively following almost 2,000 people who appear to be interested in AMC to get a better sense of what they're saying and thinking. I also make it a point to check and read my inbound Twitter feeds personally. There are hundreds and hundreds of replies to any tweet that I publish, which gives me a more sophisticated and better understanding of what’s on the minds of AMC’s new owners. Item 8, with labor costs going up in some places around the country, our costs are rising in the United States. We've also noticed that there appears to be little price resistance to the increased prices currently being charged at our U.S. theaters. So just last week, we imposed an approximate 5% admissions ticket price increase at many of our U.S. theaters. On average, that's about $0.50 or so in an increased admissions ticket price. We think consumers will find that palatable but, hopefully, that will meaningfully strengthen the AMC bottom line. Item 9. There's a lot of talk currently about exclusive theatrical windows or the lack thereof. You all know that AMC was way ahead of this issue, reaching a landmark and historic agreement with Universal in July of 2020 on their concept to premium video on demand. We were pleased then, and we're still very pleased now with the outcome of the Universal-AMC agreement and we are mutually working through that initially contentious issue. AMC and Universal are now very close. In fact, I think we have the best working relationship that we've had in many years. In the same vein, I'm also pleased to announce today that AMC just reached a formal agreement with our friends at Warner Brothers to show all of their movies in calendar year '22, importantly respecting an exclusive theatrical window of 45 days prior to home release for all Warner Brothers films. It’s no secret that AMC was not at all happy when Warner decided in December to take movies to home on HBO Max simultaneously with the theatrical release. Therefore, it’s especially gratifying that Warner is yet again embracing an exclusive theatrical window. For us at AMC, it is especially pleasing to be working so harmoniously with Warner Brothers once again. We are actively engaged in dialogue with every major studio on this very important topic. We are hearing considerable support in Hollywood that an exclusive theatrical window is an important way to build big and successful movie franchises. Clearly, though, this whole subject is quite topical and is very much a work in progress. We will keep you posted as things turn out. And finally, 10. I would like to thank the Board of Directors of AMC for electing me in July to serve as Chairman of the Board, as well as CEO of AMC Entertainment, you know all that. You’ve also heard that former U.S. Ambassador to the United Kingdom, Phil Lader, was elected to serve as the Board's Lead Director. It’ll be no surprise to any of you that we have a highly able, experienced, and dedicated Board. I feel fortunate to serve with them all. But the news on this point is that at our first meeting of the Board in my new role, I discussed with the Board that I think it is extremely important that Company insiders maintain a significant financial ownership stake in AMC through owned and/or granted shares so that insiders have financial interests that are directly aligned with those of our shareholders. Our board members already have a policy in place that they must hold any granted shares for at least one full year. But there was no such plan currently in place for the Company's 19 most senior executives. Therefore, I will be recommending to the board a new policy. Without going through all the nuances and it's kind of complex, to simplify it, I will propose that I, as CEO, be required to hold a number of owned or granted shares at least equal to eight years of my salary. In my case, eight years of my salary would mean that I would be required to have at least a $12 million ownership stake in AMC of owned or granted AMC shares. Sean, our Chief Financial Officer, will be required to hold six years of his salary. Our Executive Vice Presidents will be asked to hold four years of their salaries in owned or granted shares, and our Senior Vice Presidents will be asked to hold two years of their salaries in owned or granted shares. The board will consider this proposal as a new policy at its next regularly scheduled meeting. At the same time as I am emphasizing shareholders, I'm reminded that I have not sold any shares of AMC stock in the five full years I've been running this Company, even though it represents more than three-fifths of my annual compensation. Other than gifting a small percentage of my AMC ownership stake to my two adult children earlier this year, I also did not sell any AMC shares in March when I could have or in June when I could have in 2021. Similarly, I will commit that I do not intend to sell any AMC shares in September 2021 when I'm legally permitted to do so. As much as it pains me to admit, in September, I'll be celebrating my 67th birthday. I'm going to be a young, vibrant 67, but hey, it's 67 nonetheless. Two months ago, more than 85% of my net worth was in AMC stock and proper estate planning for a 67-year-old suggests I should diversify my assets a bit. But I don’t want any of you ever to think that I have anything but full confidence in AMC’s future. So, I will do so under the auspices of the parameters of what is called a 10b5-1 plan, where I pass off all this year’s trading control of the shares that I own or have been granted to an independent third-party bank based on the parameters of the plan that I only partially set. The plan will not go into effect until towards year-end at the earliest, and only a small percentage of my owned or granted shares could get sold in any one month. And that would then be repeated over a period of at least several months. This way, I have really passed the decision-making to someone else on this important topic. Additionally, whatever is sold or not sold by the independent third party, I still will have millions of AMC shares either owned by me personally or have been previously granted to me personally. My economic incentives are very much aligned with yours to increase shareholder value for all the owners of AMC. What's more, I do fully believe in transparency, and I'm letting you all know this well in advance, even though current U.S. law does not require me to make this or any public disclosure now at this time or at any time soon prior to any shares actually being sold. Well, there you go. That's the quarter. That's 10 items of news. Our second quarter was a very encouraging one for AMC. We believe we're on the road to recovery. We’re ever so grateful to our friends and allies who share our passion, that AMC's best days are those that are coming. You can take comfort that our deeper financial reserves allow us to stay the course, to innovate again, and to capitalize on the opportunities that we see around us. We fundamentally believe that our future is bright because there is nothing as magical as seeing dazzling images on a huge silver screen. We’re now going to turn this call to the questions that were submitted and uploaded with the greatest shareholder interest on the same technology platform. Then we’ll take some questions from analysts if you all can spare us the time. I should point out that this is an experiment, the State Technologies platform for us. It works really interestingly, but it only works with some brokerage firms, not all. So many of our U.S. shareholders, and especially many of our international shareholders, may not have had a chance to ask their questions on this call. Still, we’ve had quite a bountiful array of questions posed to us to answer. Sean, what’s the first question?

Sean Goodman, Chief Financial Officer

Thanks, Adam. So, the first question we have is from Timothy and the question is; do you have any plans to offer a dividend again?

Adam Aron, Chairman and CEO

Thank you, Timothy. We appreciate the question. If you look at our path since going public in 2013, AMC paid a sizable quarterly dividend every quarter until we got close to the pandemic. Realizing that our liquidities would be stretched, we ceased offering a dividend. There are some commitments that we've made in some of our debt instruments that we cannot pay a dividend until at the earliest, about a year from now. Having said that, we do know that dividends are very much on the mind of our shareholders, so we'll take that interest quite seriously when we have the ability to make dividends once again. We'll balance those shareholder desires against the other competing uses of our cash. What opportunities are available in M&A? How much do we need for liquidity? What can we do to deleverage the Company? All of the priorities that Sean talked about previously.

Sean Goodman, Chief Financial Officer

Great. Thanks, Adam. And the next question is from David. The question is, will AMC consider partnering with GameStop to offer more theater experiences by local and national gaming competitions?

Adam Aron, Chairman and CEO

As I said in my remarks just a few minutes ago, I don’t even think I can count the number of times people have asked me if we could partner with GameStop. We’re certainly willing to do so. It seems to me it's one of these interesting ideas that's flowed in from our individual investors, and we're happy to reach out to GameStop and see if they have any interest.

Sean Goodman, Chief Financial Officer

The next question is from Ryan. The question is: would AMC ever consider reestablishing drive-in theaters? With the current state of the world, it would bring a lot of revenue with little worry for people trying to social distance.

Adam Aron, Chairman and CEO

Ryan, that's a great question, and the reason I say it's a great question is that I asked that same question last July. We went through an exhaustive analysis of drive-in theaters. Honestly, we came to the conclusion that they're a bad economic idea. It sounds appealing to stay in your car, but there are two problems. Go into a parking lot and look at how much asphalt is needed to put a lot of cars in a space. The viewing experience at a drive-in theater is not necessarily great because many people are quite far from the screen. Additionally, drive-in theaters are very seasonal; they're not popular in the winter in colder locations in the United States. In the summer in much of the United States, it doesn’t get dark before 8 or 9 PM, which means that you really can only use the drive-in screen for one showtime a night. The economics aren't there. It's unlikely that we would go for it. It sounds like a great idea, but it isn’t.

Sean Goodman, Chief Financial Officer

Thanks, Adam. And the next question is from Terrill. The question is: how is AMC preparing for the possible large-scale COVID surge that could potentially shut it down again?

Adam Aron, Chairman and CEO

When I think back over the last year, I think the thing that I’m most proud of is that we prevented a catastrophe at AMC, which so many were predicting. Alongside it, I am proud of the safe and clean protocols that we developed in partnership with The Clorox Company and current and former faculty of Harvard University's prestigious School of Public Health. To our knowledge, there has not been a single transmission of COVID to an AMC guest over the last year. The first thing that we’re doing is staying very strongly committed to our safe and clean protocols to continue to operate our theaters safely and cleanly as we go forward. Additionally, I think we can hope that there may not be a large-scale COVID surge that would force the kind of lockdown or shutdown that we saw in the United States and countries abroad last year. Most scientific experts will tell you that the virus will increase in the winter compared to the summer. However, the big change between this winter and last winter is vaccination. Fortunately, the vaccination rates, especially among the most vulnerable populations, have been extensive, and we’re optimistic that we won’t see the kind of lockdown of society this winter that we saw last year. We also hope that vaccination continues. There is nothing more important that any of you can do to protect yourselves, your families, your friends, and the country as a whole. Nothing is more important than getting vaccinated. I know that many of our shareholders are younger who think they’re invincible. It is true that older people are more susceptible to getting COVID than younger people, but no one is entirely invincible against this virus. The solution for AMC is vaccination. I would remind each of you that the solution for each of you is vaccination, too.

Sean Goodman, Chief Financial Officer

Arun asks, are there ways you are considering to reduce the company's debt without issuing new shares?

Adam Aron, Chairman and CEO

Yes. Some of our debt is trading at a discount. We might be able to buy it back at a discount. Some of our landlords, where we have deferred rent obligations that stretch out for years, have indicated to us that they might be willing to take a reduction in what we owe them if we're willing to pay them in cash now. Once we have satisfied ourselves that we have the liquidity to get through COVID, no matter what COVID throws at us, we’ll be turning to debt reduction and see if there's an opportunity there.

Sean Goodman, Chief Financial Officer

The next question is from Mike. Mike asks, how does AMC plan to combat day-and-date releases of movies on streaming platforms and theaters?

Adam Aron, Chairman and CEO

Well, this is such an important topic, and I addressed it earlier in my remarks that we’re especially pleased that Warner Brothers has decided to move away from day-and-date releases and commit to an exclusive theatrical window as well. We’re having private conversations with every major studio in Hollywood on this topic, and we're seeing a lot of consensus emerging that an exclusive theatrical window is a good way to build major motion picture franchises. It's a fluid situation. A lot of studios that have experimented with day-and-date say that they are doing it only in pandemic times. We'll all see how this plays out, but we know that studios are going to do what's in their financial interest. They're not going to just help out AMC charitably. We're also making sure that our marketing programs are as vibrant and as powerful and as potent as they can possibly be. AMC has been a marketing leader in this industry for the past five years. We have a few tricks up our sleeves coming. We intend to continue to be a bold pioneer and lead the industry in marketing, hopefully driving audiences to our theaters and hopefully selling more tickets, which then in turn hopefully convinces our studio partners that the smartest thing for them to do is to give us their movies first and let us help them build their brands.

Sean Goodman, Chief Financial Officer

Next question. Would you consider selling AMC merchandise at theaters and on online platforms? I think it will be profitable.

Adam Aron, Chairman and CEO

We would consider it. This is one of the ideas I’ve received a lot of commentary about in the last few weeks. It's intriguing. It’s complicated to send merchandise to 600 retail locations. We have to ensure that it sells, because we can get stuck with inventory that makes it a less profitable business than you might think. But we're going to take a hard look at it.

Sean Goodman, Chief Financial Officer

Next question from Amy: could live theater and concert events be streamed to theaters? Based on the streaming success of Hamilton, I expect this would be a real seat-pulling success.

Adam Aron, Chairman and CEO

Yes, yes, and yes, Amy. But not on Hamilton because that's already come and gone. However, we are experimenting right now with these two concert movies featuring Chance the Rapper and Halsey, each of whom has a huge following. We’re already in discussions with major musical entities and talent about whether this could become a permanent line of business for AMC to have this intriguing alternative programming at our theaters. It’s not such a new concept; there is something known as Fathom Events that we own a third of, showcasing various types of content at movie theaters for decades. The Metropolitan Opera is the biggest example. I think there’s a real opportunity here, and we’re going to chase it. The same goes for sports and gaming. There's a real possibility here to find a new source of revenue that AMC has not tapped before.

Sean Goodman, Chief Financial Officer

Petra asks, can AMC partner up with GameStop for gaming competitions on the big screen?

Adam Aron, Chairman and CEO

I think that question was asked and answered. It takes two to tango. We're willing. We have not reached out to GameStop yet, but we intend to do so.

Sean Goodman, Chief Financial Officer

Mark asks, do you plan on reinstating dividends? They tend to mean a lot to a certain type of investors that could potentially attract non-ag investors and larger holders?

Adam Aron, Chairman and CEO

We've touched on that too, Mark, and the answer is we know it’s important. Sean's a shareholder too, I'm a shareholder too; we'd like to get those dividend checks if we could. However, we do have to adhere to the commitments in our debt instruments. We have to use our cash wisely. That's a decision for next year, not for today.

Sean Goodman, Chief Financial Officer

Aaron asks: I promise not a sarcastic question, but can you guys make the AMC mascot officially a gorilla?

Adam Aron, Chairman and CEO

Well, AMC has been around for 100 years. We don’t actually have a mascot. That’s an interesting question. I don’t know. I know why you ask it. I think we’re probably going to go without a mascot. However, I will tell you this; there is a tremendous amount of branding work going on at AMC right now. I said a few minutes ago that we intend to be the best, strongest marketer around. Watch what we’re doing with our marketing programs over the coming weeks, months, and years. I think you’ll be pleased when you see AMC leading the way yet again.

Sean Goodman, Chief Financial Officer

Next question from Buddy: has AMC considered partnering with a movie studio in order to produce their own films?

Adam Aron, Chairman and CEO

Yes, we have and recently. The notion of making exclusive content is interesting. Some of you may not know this, but about 5 years ago we were in a joint venture with another theater operator to co-fund something called Open Road Films. Open Road Films made a movie called Spotlight which won the Oscar as the Best Movie of the Year a few years ago. We have some experience with this. Making movies is a risky business. Movies aren't cheap to make and they do take capital. I’ve made no secret of the fact that I personally thought it’d be very wise for AMC to have sold more shares to raise more equity to build up our war chest so that we could entertain some of these more capital-intensive ideas. It was very clear to me, based on following social media, that our shareholder base was split on that issue. Many thought it was a great idea; others didn’t want any part of it. I didn’t want to move forward because our shareholder base wasn’t unified, so we tabled that motion and did not have a shareholder vote on it. Some of these more capital-intensive ideas will require that the Company have more capital. We're keeping an eye on it, but again, as Sean mentioned before, we will first ensure liquidity, get through COVID, deleverage, and prove the quality of what we offer.

Sean Goodman, Chief Financial Officer

And next question from Jonathan: will AMC keep holding viewing parties for mainstream sporting leagues?

Adam Aron, Chairman and CEO

I certainly hope so. We’ve had very good luck with UFC and there’s every indication that they’d like to see us continue. We’ve talked before to some of the major professional sporting leagues and they have not yet been willing to grant rights to movie theater operators to show movies in theaters—or to show sporting events in theaters. I do believe the holy grail on this would be if we could secure one of the four major leagues' rights to show live professional sporting events at our theaters. Additionally, college football would be a powerful draw at AMC, drawing 100,000 people into stadiums all over the country. Two years ago, we experimented with showing NFL games at our theaters for one year and I can tell you categorically; seeing an NFL game broadcast on a 40-foot-high screen is just amazing, unbelievable. I know that if we can affordably secure the rights, it could be a big hit.

Sean Goodman, Chief Financial Officer

Next question: Have you considered expanding AMC to a family entertainment center experience? You could include bowling, an arcade, laser-tag parties, and family dining.

Adam Aron, Chairman and CEO

This is actually an interesting question too. We've already experimented a little bit. Obviously, we have family dining at our dine-in theaters; we have about 70 of them around the United States. A couple of years back, we greatly expanded what we call AMC feature fare, the hot menu items typically served at our concession stands, at our non-dine-in theaters, trying to give families better dining choices. We've also put in Freestyle Coca-Cola machines with their 150-ish flavors at all our theaters in the United States, including all of the Carmike theaters we bought in the U.S. with massive investment and Coke-Freestyle. Similarly, we've experimented with virtual reality through an entity we invested in called Dreamscape. We have a Dreamscape Virtual Reality auditorium experience at our theater in Dallas, at one of our theaters in Columbus, Ohio, and one opening soon in Northern New Jersey. It would be relatively inexpensive to decommission an auditorium if we have surplus capacity and put in a laser tag parlor—kind of fun. However, if you're talking about a full-blown entertainment center as described in this question, don’t underestimate how much capital such an idea would require, especially if you want to do it at 50 theaters, 100 theaters, or 200 theaters. This is why I thought that AMC should raise more capital. Our shareholder base wasn’t ready for that yet. Honestly, to do something as you envision will have to come down the road when we have a larger capital base. Sean, I'm looking at my list. I think we've answered a lot of questions.

Sean Goodman, Chief Financial Officer

Yup.

Adam Aron, Chairman and CEO

I’d like to thank our shareholders for sending these in, for voting on them to see which ones we should answer first. This experiment for us; if you like this idea, we’ll do it again at future calls. But let us know. Having said that, operator, if we could see if any of our analysts have a question—we don’t—we’re already over time. It’s after 6:00 in the east so we may only have time for a single question.

Operator, Operator

Very good. So that question comes from Chad Beynon with Macquarie. Please go ahead.

Chad Beynon, Analyst

Hi. Adam, Sean, thanks for taking my question. Thanks for all the commentary so far. I wanted to ask about some of the metrics you discussed regarding industry admission revenue. Adam, you talked about the first quarter being 13% of two years ago and now we're up to 45% of two years ago. So maybe just a broad question on whether you have an updated view on where this can get to, whether it's 2022 or 2023. What's changed in your crystal ball? Is it 80%, 90%? Can we get back to peak levels as you put all these things in your blender? Thanks.

Adam Aron, Chairman and CEO

Thank you. That’s a $64,000 question and nobody knows the answer for sure, and we're all going to learn it together. We’ve already put out a number for 2021 that we hope the industry box office can get back to $5.2 billion in 2021, which is actually a fairly sizable recovery in the second half because the industry box office was like a billion dollars in the early part of the year—very, very low. If you look at the industry box office, for those who don’t know the term, the domestic industry box office comprises movie theater ticket grosses in the United States and Canada. It’s the basic metric of measuring the size of the industry. I went and looked pre-COVID starting in 2019, not 2020. In the five years leading up to 2019, the box office was greater than $11 billion. The five years prior to that, it was $10 billion. Six of the seven years before that, it was greater than $9 billion. Literally, for the past 17 years, the box office has been steady between $9 and $10 billion, then between $10 and $11 billion, and then between $11 and $12 billion. Nobody knows where it’s going to be in 2023. I’ve seen estimates all over the map. Some think it’s going to be $8 billion. Others estimate $10.5 billion. Nobody’s crystal ball is good enough to know. Obviously, it’s a very important question because we will be more profitable the higher the box office is. We know that with the cash we raised, we could survive with an $8 billion box office for a year or two, maybe. However, we’d surely be much more healthily profitable if the industry box office rises back up to $9 billion, $10 billion, or even $11 billion or more in 2023 and 2024. 2022 is probably still going to be a transitional year between the very low $5 billion numbers that we're thinking will occur in 2021 and where things will eventually settle in 2023 or 2024.

Chad Beynon, Analyst

Okay, great. And then a quick follow-up, and then I'll pass it off. With respect to the Food & Beverage strength that you saw in this quarter and I think even in the first quarter from a per-cap standpoint, can you talk about where that’s coming from? Is that the mobile ordering initiative? Is it a mix of products? And then have you taken prices up, given some of the commentaries that you made with respect to ticket pricing? Have you done the same for Food & beverages yet? Thanks.

Adam Aron, Chairman and CEO

Thank you. Well, we'll first tell you the reason we think this is happening, and then we’ll tell you how we’re getting there. It feels like people who have been away from theaters for a year when they're coming back are so happy and eager to be back that they want the full experience. They want the whole package. So, there are four drivers that are causing our food and beverage revenues to spike. Remember, when I say up significantly, this is within the context of the mature food and beverage spend within the movie theater industry. AMC was producing more food and beverage revenue than any other major operator. We would have considered a good quarter if our food and beverage spending per patron was up 2%, 3%, or 5%; it’s up 44% over the pre-COVID levels. It’s coming from four different aspects, each being equal contributors. One, mobile ordering is certainly a big part. We only had mobile ordering in place at around 50 of our U.S. theaters two years ago. During the shutdown of theaters due to COVID, we developed the technology to roll out mobile ordering across our entire system. It’s now in place at all our AMC and AMC Dine-In branded theaters. We also thought it would be very helpful for the AMC Safe & Clean protocols because if people were ordering their food and beverage in advance, there’d be less contact back and forth on payment. So, mobile ordering is popular; that’s one of the reasons. Next, we did raise prices; that’s another reason. Third, when people are going to theaters, they’re buying more items. We see the statistics every day, and it's true across the country. They're buying more items. If before they bought a soda, now they buy a soda and popcorn. If they previously bought a soda and popcorn, now they buy a soda, popcorn, and candy, or a soda, popcorn, and nachos. Or they're opting for some of the more intriguing menu items we put in place through feature fare, my favorite being the flatbread pieces. And the fourth factor, which is really encouraging for us, is that more people are actually visiting the concession stand and purchasing from us. Many people, a lot of people who go to a movie theatre—not just AMC, but in general—would go to movie theaters and not buy anything at the concession stand. All they would buy is a movie ticket, and that’s the experience they would get. What we’ve seen is, as more and more patrons are returning, these patrons are going to the concession stand and buying food and beverage products because they want the whole experience.

Operator, Operator

And that does conclude our call for today, and we thank everyone for participating. You may now disconnect.