AMC Entertainment Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Figures are in U.S. dollars; amounts are in millions unless stated otherwise. AMC operates movie theatres in the U.S. and internationally. By June 30, essentially all theatres were operating without COVID-related restrictions.
Financial performance
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $1,166.4 | $444.7 | $1,952.1 | $593.0 |
| Operating loss | $(16.1) | $(296.6) | $(183.0) | $(724.4) |
| Net loss | $(121.6) | $(344.0) | $(459.0) | $(911.2) |
| Adjusted EBITDA (non-GAAP) | $106.7 | $(150.8) | $45.0 | $(445.5) |
| Attendance (millions) | 59.1 | 22.1 | 98.2 | 28.9 |
- Q2 revenue increased about 162% year over year as attendance rebounded and average ticket prices rose. First-half revenue increased $1,359.1 million year over year. Recovery reflects reopening, fewer operating restrictions, and more broadly appealing film releases.
- Q2 net loss narrowed, but remained substantial. Q2 operating margin was approximately negative 1.4%; net margin was approximately negative 10.4%. Adjusted EBITDA was positive, but is a non-GAAP measure and does not include debt service, capital spending, or working-capital needs.
- Q2 admissions revenue was $651.0 million and food and beverage revenue was $396.7 million. Film exhibition costs were 50.5% of admissions revenue, up from 42.4% a year earlier. Food and beverage revenue per patron fell 8.3% to $6.71.
Cash flow, debt, and liquidity
- First-half operating cash use was $371.6 million, versus $546.7 million in 2021; investing cash use was $102.9 million, versus $2.5 million; financing cash use was $136.0 million, versus $2,066.9 million provided in 2021. Cash and restricted cash declined $632.4 million during the first half.
- June 30 cash and cash equivalents were $965.2 million, plus $22.7 million restricted cash. Cash and cash equivalents were $1,592.5 million at year-end 2021. Working capital, excluding restricted cash, was a $428.0 million deficit, compared with a $54.6 million surplus at year-end.
- Corporate borrowings were $5,378.2 million on the balance sheet, including current maturities; disclosed principal was $5,115.5 million. Operating lease liabilities were $5,015.9 million and finance lease liabilities were $61.9 million. Total liabilities exceeded assets, leaving a $2,326.8 million stockholders’ deficit.
- AMC issued $950 million of 7.5% first-lien notes due 2029 and used the proceeds, with cash on hand, to redeem higher-coupon first-lien notes. It also repurchased $72.5 million principal of second-lien notes for $50.0 million, recording a $38.6 million gain. The refinancing resulted in a reported debt-extinguishment loss in the first half.
- COVID-related deferred rent was $218.9 million at June 30. AMC had $211.1 million of unused revolving-credit capacity, net of letters of credit, and reported minimum liquidity requirements of approximately $139.5 million.
Outlook, risks, and notable items
- Management said cash and expected operating cash generation should be sufficient to fund operations, deferred rent, planned capital spending, and covenant requirements for at least the next 12 months. It also said reaching positive operating cash flow and long-term profitability requires box-office revenue to rise significantly toward pre-pandemic levels. No specific revenue or earnings guidance was provided.
- AMC was negotiating to refinance the Odeon term loan, with £147.6 million and €312.2 million principal due August 19, 2023. The company cautioned that refinancing was not assured. The secured leverage covenant suspension was extended through March 31, 2023; covenant testing may resume beginning with the quarter ending June 30, 2023, subject to specified borrowing conditions.
- Key risks include renewed pandemic effects, attendance below pre-pandemic levels, film release timing and fewer theatrical releases, shortened theatrical windows or simultaneous streaming releases, competition, inflation, foreign exchange exposure, high debt and lease obligations, and the need for refinancing or additional liquidity. AMC warned that if it cannot generate sufficient liquidity, restructuring could be required and common-stock investors could lose their investment.
- Q2 investment expense included a $47.8 million unrealized loss on Hycroft shares and warrants and a $9.6 million decline in the NCM investment’s fair value. Hycroft valuation, especially the warrants, involves significant estimation uncertainty.
- After quarter-end, on August 4, AMC announced a special dividend of one AMC Preferred Equity Unit for each common share held on August 15, expected to be paid August 19. The units are designed to carry economic and voting rights similar to common shares; the filing cautions that preferred equity issuance could dilute common-stock voting power and affect market values.
- AMC disclosed ongoing stockholder derivative litigation and a proposed $17.375 million settlement of the Lao Action, subject to court approval. Management stated that ordinary-course litigation outcomes could still adversely affect results in the period incurred.
Important facts for investors to verify
- Whether attendance, film supply, and box-office receipts continue to recover enough to reduce operating cash burn.
- Cash consumption, minimum-liquidity covenant headroom, deferred-rent repayment schedule, and the refinancing outcome for the Odeon loan due in 2023.
- Debt principal, interest costs, maturities, and the effect of covenant testing after March 2023.
- The terms, distribution, trading, and potential dilution effects of the AMC Preferred Equity Units.
- Fair-value changes in Hycroft and NCM investments, and the resolution and costs of pending litigation.