AMC Entertainment Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; filed November 8, 2023. AMC operates theatres in the U.S. and Europe. At quarter-end it operated 904 theatres and 10,078 screens.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $1,405.9 million | $968.4 million | $3,708.2 million | $2,920.5 million |
| Operating income (loss) | $99.4 million | $(114.9) million | $76.0 million | $(297.9) million |
| Net earnings (loss) | $12.3 million | $(226.9) million | $(214.6) million | $(685.9) million |
| Adjusted EBITDA | $193.7 million | $(12.9) million | $383.3 million | $32.1 million |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(137.4) million | $(595.2) million |
Q3 revenue increased 45.2%, with admissions up 46.3% and food and beverage revenue up 44.8%. Attendance rose 38.4% to 73.6 million and average ticket price increased 5.8%. For the nine months, revenue grew 27.0% and attendance increased 23.9% to 187.6 million. Operating margin was approximately 7.1% in Q3 versus negative 11.9% a year earlier; for the nine months it was approximately 2.0% versus negative 10.2%.
Higher attendance and popular film releases drove the improvement, while film exhibition costs rose faster than admissions revenue: those costs were 50.0% of admissions in Q3 versus 48.3% in Q3 2022. Q3 profitability also reflected other income, including litigation-related income and a debt-extinguishment gain. Interest expense was $103.7 million in Q3, up from $95.7 million.
Liquidity, debt and capital
- September 30 cash and cash equivalents were $729.7 million; cash plus restricted cash was $752.1 million. Working capital, excluding restricted cash, was negative $571.1 million, improved from negative $811.1 million at year-end 2022.
- Nine-month operating cash outflow was $137.4 million; investing cash outflow was $116.4 million, including $153.5 million of capital expenditures. Financing provided $355.3 million, primarily from equity issuances. Cash and restricted cash increased $97.7 million over the period.
- Corporate borrowings had $4.664 billion principal outstanding; balance-sheet corporate borrowings were $4.770 billion including net premium and financing costs. Total corporate borrowings and finance lease liabilities had a carrying value of $4.825 billion. The largest scheduled principal maturity is $3.041 billion in 2026.
- Operating lease liabilities totaled $4.492 billion, including $512.3 million current. Deferred rent obligations were approximately $74.2 million at quarter-end.
- AMC raised approximately $492.4 million net through equity issuances during the nine months and repurchased $169.7 million principal amount of debt for $101.5 million cash, recognizing a $97.5 million extinguishment gain. It also exchanged $100 million principal amount of second-lien notes for preferred equity units.
Outlook, risks and unusual items
- Management said available cash and expected operating cash generation should fund operations and obligations through the next 12 months, and that AMC expected to meet a $100 million minimum-liquidity requirement while its secured-leverage covenant was suspended. The suspension was extended through March 31, 2024; the revolving facility matures April 22, 2024.
- Management cautioned that cash burn is not sustainable long term and that sustainable positive operating cash flow and profitability require revenue to return to pre-COVID levels. North American box-office grosses for the first nine months of 2023 were approximately 16% below the comparable 2019 period. AMC said it could not assure additional liquidity beyond 12 months would be available on acceptable terms.
- Estimated 2023 capital expenditures, net of landlord contributions, were $175 million to $225 million. This is an estimate, not earnings guidance.
- Film supply and attendance remain uncertain due to studio release decisions, competition from streaming and other entertainment, seasonality, and labor disruptions. The filing said the Writers Guild strike ended September 27, 2023, while the actors’ strike was ongoing; management said their effects on future releases and liquidity could not be reliably estimated.
- Q3 included a $10.8 million gain on extinguishment of second-lien debt and litigation-related income. For the nine months, AMC recorded a $110.1 million shareholder-litigation-related charge, substantially offset by $97.5 million of debt-extinguishment gains and other items. The settlement included issuing 6.9 million common shares; an appeal was filed after the settlement dismissal, and separate litigation by former preferred-unit holders remained pending. AMC is pursuing further insurance recovery, which insurers contest.
- On August 24, 2023, AMC effected a 1-for-10 reverse stock split; outstanding preferred equity units converted into 99.5 million common shares on August 25. Together with the settlement issuance and 40 million shares sold through an at-the-market offering, these actions materially increased common shares and diluted existing holders. The company also disclosed substantial share-price volatility.
- AMC reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether operating cash flow improves sufficiently to avoid additional financing or a restructuring, and whether liquidity remains adequate after the revolving facility’s April 2024 maturity.
- Debt repayment, refinancing, interest costs, and the ability to address the significant 2026 maturities.
- Film release schedules and attendance impacts, including the downstream effects of labor stoppages.
- Potential further share issuance, dilution, and the common-share count following the conversion, settlement issuance, and equity offering.
- Outcome of the shareholder-litigation appeal, preferred-unit-holder litigation, and contested insurance coverage.
- Progress toward the $175 million to $225 million 2023 capital expenditure estimate and the repayment of deferred rent obligations.