AMC Entertainment Holdings, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023; filed August 7, 2023. AMC operates theatres in the U.S. and Europe. At quarter-end it operated 906 theatres and 10,120 screens.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $1,347.9m | $1,166.4m | $2,302.3m | $1,952.1m |
| Operating income (loss) | $84.8m | ($16.1m) | ($23.4m) | ($183.0m) |
| Net earnings (loss) | $8.6m | ($121.6m) | ($226.9m) | ($459.0m) |
| Adjusted EBITDA | $182.5m | $106.7m | $189.6m | $45.0m |
| Operating cash flow | Not separately presented | Not separately presented | ($203.3m) | ($371.6m) |
Q2 revenue rose 15.6% year over year. Admissions revenue increased 14.3%, with attendance up 12.2% to 66.4 million and average ticket price up 1.8%. Food and beverage revenue increased 23.1%; spending per patron rose 9.7% to $7.36. Q2 operating margin was approximately 6.3%, versus a loss-making operating margin in the prior-year quarter. Adjusted EBITDA is a non-GAAP measure and excludes items including interest, taxes, depreciation and selected other costs.
- Q2 film exhibition costs were 51.5% of admissions revenue, versus 50.5% a year earlier; food and beverage costs were 18.8% of food and beverage revenue, versus 16.3%.
- Six-month revenue increased 17.9%, while the net loss narrowed by $232.1m. Interest expense for the six months increased to $203.7m from $182.7m.
- Six-month operating cash use improved by $168.3m year over year. Capital expenditures were $96.0m, compared with $75.2m.
Debt, liquidity and capital
- Cash and cash equivalents were $435.3m at June 30, 2023, down from $631.5m at December 31, 2022. Cash plus restricted cash declined $196.2m to $458.2m.
- Working capital deficit was $869.5m, excluding restricted cash. Unused revolving-credit capacity, net of letters of credit, was $208.1m. A $100m minimum-liquidity requirement applied while the secured leverage covenant was suspended; the facility matures April 22, 2024.
- Corporate borrowings had $4,693.7m aggregate principal outstanding; balance-sheet corporate borrowings were $4,815.6m including current maturities and carrying-value adjustments. Operating lease liabilities totaled $4,632.8m.
- During the six months AMC repurchased $145.5m principal of debt for $84.1m, recognizing $86.7m of gains on extinguishment. Net proceeds from AMC Preferred Equity Unit issuance were $175.7m. The company reported no authorized APE units remaining under its at-the-market offering agreement.
- Stockholders’ deficit was $2,582.6m at June 30, 2023. The filing reports 519.2m Class A shares and 995.4m AMC Preferred Equity Units outstanding at August 4, 2023.
Outlook, risks and unusual items
- Management said existing cash and expected operating cash generation should fund operations and obligations currently and through the next twelve months, but described current cash burn as unsustainable long term. AMC said positive operating cash flow and long-term profitability depend on revenues returning toward pre-COVID levels; North American box office grosses for the first half were approximately 21% below the first half of 2019. Management warned that additional liquidity beyond twelve months may not be available on acceptable terms or at all.
- No earnings or revenue guidance is provided. AMC estimated 2023 capital expenditures, net of landlord contributions, at approximately $150m–$200m.
- Film-release timing, attendance, competition from streaming and other entertainment, inflation, high debt and interest costs, and film-production labor stoppages are material risks. The Writers Guild strike began May 2, 2023, and the actors’ strike began July 14, 2023; their duration and effects were uncertain.
- A $125.4m charge was recorded for the proposed stockholder-litigation settlement, including an estimated $115.4m fair value for settlement shares and legal fees. The court declined to approve the settlement as presented on July 21, 2023; the status quo order remained in place, preventing the charter amendments and proposed conversion of APEs into common stock unless the order is lifted and the proposals become effective.
- National CineMedia’s reorganization plan became effective August 7, 2023, after quarter-end. NCM assumed its agreements with AMC, but certain prior payments were delayed and units issued to AMC were immediately cancelled under the plan; AMC said it appealed aspects of the plan.
- Other notable items included a $15.5m gain from selling AMC’s Saudi Cinema Company interest and $20.2m of additional stock-compensation expense following changes to 2022 performance awards.
Important facts for investors to verify
- Whether operating cash burn improves enough to preserve liquidity, meet the $100m minimum-liquidity condition and address obligations beyond the next twelve months.
- Debt maturity, refinancing and interest-rate exposure, including the $3.1bn of principal scheduled for 2026 and the revolving facility’s April 2024 maturity.
- Progress and court decisions in the shareholder litigation, including the status of the charter amendments, proposed settlement and APE conversion.
- Whether film supply and attendance can sustain revenue growth, particularly given the labor stoppages and AMC’s stated gap between current box office levels and 2019.
- Further equity issuance and dilution, and the distinction between reported GAAP earnings and Adjusted EBITDA.