WHEN: Today, Tuesday, August 10, 2021
WHERE: CNBC’s “Squawk on the Street”
Following is the unofficial transcript of a CNBC interview with AMC Entertainment Chairman & CEO Adam Aron on CNBC’s “Squawk on the Street” (M-F, 9AM-11AM ET) today, Tuesday, August 10th. Following is a link to video on CNBC.com:
All references must be sourced to CNBC.
JIM CRAMER: And I am proud to bring in Adam Aron, AMC’s Chairman & CEO, who joins us first and maybe only on CNBC. Adam, it is always great to have you back. How you been?
ADAM ARON: Good morning Jim. Good morning David. I’m great as you know we just reported a fabulous quarter way ahead of market expectations. We would really like to thank after this very long 16 months of COVID that we can see recovery in site ahead.
CRAMER: Well, let’s go over that. Right now, in the conference call you talk about the idea that you’ve laddered the debt which is very good meaning there’s no big payment to do right now. Obviously, you’ve lowered the cash burn, it’s much better, but then in the call you say, look, I’d like to raise capital, others do too, but you’ve obviously taken both informal polls because you’re on Twitter and spoken to a lot of shareholders and you’re saying, you know what, let’s not do that but the previous guest James Chanos comes on and says Cinemark is so much cheaper and also IMAX is so much cheaper. Why don’t you just say you know what let’s do convertible bonds, let’s do something that raises capital given the fact that stock’s still very high?
ARON: Well, let’s start and remind everyone how much capital we’ve raised in the last year and a half since April of 2020. AMC has brought in between $5 and $6 billion of capital, either from raising equity, raising debt or getting concessions from lenders and other entities close to the companies like, like our landlords and we ended the first quarter of 2021 with a billion dollars of liquidity. That compares to a company that was running out of cash during the height of the pandemic last winter. That’s where we were in March of 2021 that billion-dollar quarter ending liquidity figure was the single highest quarter ending liquidity figure that AMC has ever had in its more than 100-year history. Well, that record we set on March 31. On June 30, thanks to having raised another billion and a quarter of equity in May in June, we ended up with another record liquidity position at the end of the second quarter June 30 of $2 billion, that actually was $2.23 billion or $2.24 billion but it was more than $2 billion. We beat the 100-year record for AMC by a full billion dollars, it was double where we were in March. So, yes, sure I’d like always to amass the largest war chest I can get so that we can do things with it but we do have the largest war chest that AMC has ever had. As for your question specifically about convertible bonds, we sold over 400 million shares between April of, actually, between September of 2020 and June of 2021. We actually don’t have any shares left so converted is not an option until such time as the shareholders authorized more shares.
CRAMER: But you did say you need to play offense and then you went over multiple ideas in the conference call that need more capital that you said would be very successful. So, I was confused because obviously playing offense could mean raising more capital or are you going to use your stock, that many feel is inflated, to start buying more than you already have and you’ve made some great acquisitions.
ARON: Well, look, we have $2 billion of liquidity. That gives us plenty of capital to go on offense with. And for example, we said yesterday, that we’re adding somewhere between five and 10 very important theaters in the United States. We already announced specifically two in Los Angeles, which were the second and fifth highest grossing theaters in Los Angeles a few years back. These came to us from ArcLight Pacific theaters and did not resume operations as a result of COVID and we said we think we’ll wind up with between five and 10 theaters just a few weeks ago, that’s an example of playing offense. Another example of playing offense, we’re going to get quite involved in the world of cryptocurrency. We announced yesterday that we’re going to be accepting bitcoin as payment online for online purchases for AMC admissions and concessions. There’s much more that we can do with cryptocurrency because we got a big population, an avid population of customers, of transactions, of consumers. That’s an example of playing offense. There are a whole lot more ideas we said we are going to go look at alternative programming. We just had our first two UFC fights that we showed at AMC Theaters, attendance was very strong. This month in August, we’re showing our first two concert movies in ages with the artists Chance the Rapper and Halsey. So, there are things that we can do. $2 billion is the biggest we’ve ever had to play with. And as I said, we’re the largest theatre operator in the world. We’re playing on offense. It is true—
CRAMER: Alright, so—
ARON: That COVID put us on our heels for a year, but that’s behind us now.
CRAMER: Okay, now you mentioned, obviously the apes, which is this cohort of investors that is very excited about AMC stock, and you also mentioned something they want very much, partnering with GameStop on a number of possible fronts. Now, how are those talks going? Have you sat down, or resumed with Ryan Cohen who is the sear of GameStop, to get something going?
ARON: Well, I think the irony here is I actually didn’t say anything about the apes, you said something about the apes. I look at these millions of individual investors as who really came on the scene just in the last six months, they’re the owners of my company. They don’t work for me, I work for them. They’re my bosses. And just like all professional management teams respond to the shareholders of their companies, we’re certainly interested in the suggestions that are flowing through us from the owners of our company. One of the many suggestions—
CRAMER: So, you’ve talked to Ryan Cohen then? You’ve talked to Ryan Cohen.
ARON: No. No.
CRAMER: Why not?
ARON: What I said is—
CRAMER: Isn’t he a neighbor of yours?
ARON: What I said yesterday on our earnings call, when for the first time ever, we took questions rather, the most of the questions on our earnings call came from our individual shareholder owners rather than professional securities analysts, was that we’ve gotten a lot of good ideas flowing into the company from our company’s owners. One of them was that we should partner with GameStop. I was asked if I was willing to do that I said sounded like an interesting idea to me and that I would reach out to GameStop however I also said yesterday that there have been no communication between GameStop and AMC as of yesterday afternoon.
DAVID FABER: Adam, it’s David. Yeah, I brought that up as a kind of jokingly a couple of months ago right here. Funny how it’s become something that perhaps could actually become a reality. I want to talk though more about reality itself. Adam, you’ve done a lot of things to navigate this company, to navigate to calmer waters and you need to be applauded for that but, you know, today you’re, with this move up, the stock’s going to be worth about $19 billion. You don’t believe it’s in your interest to tell your shareholders that you’re still an exhibitor of product, right? Of movies, typically, perhaps of other sporting events. Is there any path you could justify for having that kind of value given the financials on a fundamental basis as we at least try to weigh them that you’re going to be able to produce even under the best of scenarios?
ARON: So, guess what, I think all of us have been watching the financial markets for a very long time. And we can’t always explain how the financial markets act. A market is a market, they’re willing buyers, they’re willing sellers. We made a very clear disclosure a few months ago that our stock was trading away from historic fundamentals and, and, and we’ve, we made no bones about that. But you know, you and CNBC and I’ve great respect for all of you there, you focus on our share price every day. What I focus on is running the company. And what I focus on is the recovery of the company. Ours was the company that was the strongest player in our industry on the planet in February of 2020. The COVID pandemic shut all of our theatres in, 1,000 of them in 15 countries in the span of a week. Our revenues went from $450 million a month to $450,000 in a month, our earnings went from reliably positive to nonexistent. And as you say, we had to pull a lot of rabbits out of the hat—
FABER: And you did it, Adam. You did it. And you’ve, and you’ve detailed a lot of that in the last 10 minutes in terms of what you’re able to do and it’s, it’s worthy of praise, but I still wonder, I mean I’m looking at a Loop Capital Markets, you know, they have $1 price target, Credit Suisse $1.55. You know, even despite a $2.1 billion equity raise over the last year, we remain concerned about your leverage, the shrinking of the exclusive theatrical window, the number of screens relative to the long term attendance trends, you know, nobody’s worried you’re going out of business of course and you’ve delayed all your debt repayments and things of that nature. But again Adam, to understand the long-term fundamental strength of this franchise, I just, it’s being treated as though it’s the greatest growth company of all time and it’s not.
ARON: Well look, the same people who are putting us down now were writing with equal certainty 10 months ago that we were going out of business then. They’ve been wrong. And who knows what will happen, there’s only one thing I’m certain of. Tomorrow, our share price will go up, it will stay the same or it will go down. And as you just said, wait you just said—
FABER: Yeah.
ARON: Our focus is on building this company, taking it forward, improving its performance, that’s exactly what we’ve done. Some people think heroically over the past year and the same team that has paid attention to driving this company through improving its fortunes going forward, is the same team that’s going to take it forward from, from now on.
FABER: Understood.
ARON: How the share price reacts to all that, we’re all going to, we’re all going to find out together.
FABER: I guess, but you know if I was in your position and I hit the lottery ticket of having the Reddit crowd kind of congregate around me and believe in my future and spit my stock up man, I’d be selling a lot of stock Adam. I mean you’ve become an incredibly wealthy man over the last year. How do you view that and your ability to potentially monetize some of that wealth?
ARON: Are you talking about me personally?
FABER: Yeah.
CRAMER: Or your kids or your children, your two children.
ARON: Because the company did monetize very much so.
FABER: It did but what about you. What about you.
ARON: Hey look, I’ve run this company for five and a half years, I haven’t sold a single share yet. I believed in it, I believed in its past. I believe in its present. I believe in its future. I did say on the earnings call yesterday that I hit my 67th birthday in September. At some point in time this winter, I suspect I need to diversify my assets a little bit. I intend to file a 10b5-1 plan, but my focus isn’t on my personal net worth, my focus is on restoring AMC to health and prosperity. This is 101-year old company—
FABER: Right, no I get it.
ARON: I want its next century to be as successful as its first.
FABER: You know what, really quickly on that, on that basic idea though, just let’s get back to the fundamentals themselves, the theatrical window I know you signed this new deal with Warner, seems to be fairly important but there are those who believe things have changed forever as a result of the pandemic, as a result of the growth of direct to consumer and that movie theaters are going to become a less and less important way for the producers of that product to actually showcase what they have and therefore you’re not going to benefit as much as in the past.
ARON: Well, you’re right, we’ve signed a very agreement with Warner Bros. They experimented starting in December with going to the home simultaneously with the actual release and it was a six-month experiment, and they’ve already abandoned that experiment because when I talked to studio executives across Hollywood, they tell me that the proven way to build billion dollar movie franchises is to take it to theaters first. As for the other—
CRAMER: But Adam, I paid $30 for Black Widow, very willingly and it was dynamite, I watched it at home. I didn’t have to pay the cost of that popcorn that you cost a fortune for. I didn’t have to buy the Diet Coke because it was right there in my kitchen. And you know what, it was like one unbelievable opportunity, I have a big screen Adam I wish you could have been there with me, we would have had a dynamite time.
ARON: Guess what Jim. If we had gone to an AMC theater, we would have had an even more of a dynamite time but I’m going to tell you why. One of the major studios who took a film to the home early did a survey and they found that people who watched that movie in the theater liked that movie twice as much as the people who watched that same movie at home. There are no concerns about piracy when movies are coming to our theaters, as there are concerns when movies are, are taken to the home. And as for this notion of people staying in the house. Gee, I think if COVID has taught us anything at all, it’s people want to get out of the house. Everybody has a kitchen, but people go to restaurants to eat. Not all the time, but they do. AMC and movie theaters, we’ve been competing against television sets for 75 years. People watch a lot of TV at home, but they also go to movie theaters. And I think that’s because it’s an event, they want to go out, they want to get out of the house, they want to be with other people. And at a horror movie, they want to scream at the same time. At a comedy, they want to laugh at the same time. At a rom com, a romantic comedy, they want to cry at the same time. There’s a magic about going to the theater.
CRAMER: But well, I don’t want to get COVID at the same time as these people with this delta I know you guys have done unbelievable but I do not, I would prefer to sit at home, okay, with less risk of delta than go out and have a risk of delta and have unvaccinated people. Why don’t you do what Frank Del Rio does at Norwegian, now allowed by a federal court, and ask us if we’ve been vaccinated so I can feel safer going to the movies.
ARON: Let’s start at a couple of places there because there’s several important things what you said. Number one, no one is a bigger proponent of vaccination than AMC. I said on this network six months ago, the most important man in the movie business was Albert Bourla, the CEO of Pfizer, because well I am quite optimistic about the future of AMC, the future of theatrical exhibition despite all the concerns that you’ve properly raised, we would be nowhere without vaccination but the big difference between our country dealing with a delta variant, and our country dealing with the COVID virus last winter is that 57% of the US population has been vaccinated already. And I’m hopeful that the delta variant will remind the unvaccinated how important it is that they get vaccinated so that’s the first thing. The second thing is we spent a tremendous amount of effort working with Clorox and faculty from Harvard University’s prestigious school of public health on our safe and clean protocols to make sure that we operate our theaters safely and cleanly. We were so far ahead of the rest, not just in the movie theater industry but all industries on air purification and upping the filtration in our HPAC systems because we knew way back in May and June of last year that this virus was much more a respiratory spread. But last but not least, I happen to been on the board of Norwegian Cruise Line, which is an irony of given your question Jim and my hat’s off to Franco Del Rio and the FCL—
CRAMER: That’s why I know because you ran Norwegian—
ARON: Pardon me.
CRAMER: You ran Norwegian, that’s why I thought you would go for that one.
ARON: I was the CEO of Norwegian in 1993.
CRAMER: I know. That’s why I thought it was a good question.
ARON: It is a good question.
CRAMER: I got one more for you. Would you give me, would you give me this, you’re a showman, and I’ve never been, never afraid of being called a showman. Isn’t Bitcoin a bit of a showman? Is that like a great way, I mean, if I came to the movie theater I’m, you know, I have to do it ahead of time and I used to Ethereum, I mean, why? I mean I got it. You want it?
ARON: Well, we keep on hearing suggestions from our shareholders that we should start accepting cryptocurrency and we found out that it was very easy for us to take cryptocurrency and take no balance sheet risk in the process that will be involving third party processors in the effort who will take the currency risk, so if people want to pay us in Bitcoin, they can pay us in Bitcoin. Having said that, as we learned more and more about cryptocurrency, a cryptocurrency is equated on trading options for companies who have millions of consumers and hundreds of millions of transactions and that’s AMC. So, there’s something— if I could just say one thing because I know we have to wrap up.
FABER: Adam, we got to go in 10 seconds so make it quick.
ARON: I understand why you raised concerns. I just want to remind you, movie theaters have been central to the cultural fabric of American life for 100 years and we’re going to remain central to the cultural fabric of American life for the next 100 years.
CRAMER: Well, let me do this. Congratulations, you’ve done a great job, and you know how I feel privately and publicly I will say that, because your company would not have survived without your incredibly smart work and cooperation of the shareholders who understand exactly what you’re trying to do, win for them, and I am congratulating you. Great job.
ARON: Thank you so much.
