AMC Entertainment Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022. Figures are in U.S. dollars; financial statement amounts are in millions unless noted. AMC operates theatres in the U.S. and internationally. Essentially all theatres were open during the nine-month period, with no operating restrictions reported at quarter-end.
Financial performance and liquidity
- Third-quarter revenue: $968.4 million, up 26.9% from $763.2 million a year earlier. Admissions revenue was $545.3 million, food and beverage revenue $333.3 million, and other theatre revenue $89.8 million.
- Third-quarter results: Operating loss was $114.9 million versus $145.2 million; net loss was $226.9 million versus $224.2 million. Basic and diluted loss per share were each $0.22. Adjusted EBITDA, a non-GAAP measure, was negative $12.9 million versus negative $5.4 million.
- Nine-month results: Revenue was $2.921 billion versus $1.356 billion; operating loss was $297.9 million versus $869.6 million; net loss was $685.9 million versus $1.135 billion. Loss per share was $0.66 versus $1.22. Adjusted EBITDA was positive $32.1 million versus negative $450.9 million.
- Attendance and cost trends: Third-quarter attendance rose 32.9% to 53.2 million patrons; nine-month attendance rose to 151.4 million from 68.9 million, but remained below pre-pandemic levels. Q3 average ticket price declined 3.6% and food and beverage spend per patron declined 5.4%. Film exhibition costs rose to 48.3% of admissions revenue from 41.5% in Q3, reflecting the mix of higher-grossing films and lower prior-year costs on shorter theatrical windows.
- Cash flow: Operating cash outflow was $595.2 million for the first nine months, compared with $660.6 million in 2021. Investing cash outflow was $153.7 million, including $129.7 million of capital expenditures; financing cash outflow was $135.5 million. Cash and cash equivalents declined to $684.6 million from $1.593 billion at December 31, 2021; cash plus restricted cash was $705.8 million.
- Liquidity: Working capital deficit was $738.6 million, versus a $54.6 million surplus at year-end 2021. Unused capacity under the $225 million revolving facility was $211.2 million. Management said cash and operating cash generation should cover operations, obligations, planned capital expenditures and covenant requirements for at least 12 months, while cautioning that liquidity needs and cash burn are difficult to predict.
- Debt and leases: Corporate borrowings had $5.076 billion of principal outstanding at quarter-end; finance lease liabilities were $56.2 million. Discounted operating lease liabilities were approximately $4.8 billion. COVID-related deferred rent was $195.8 million. The company reported a $136.2 million minimum-liquidity requirement at quarter-end; the Odeon loan-related requirement ended after its October repayment.
Material changes versus prior periods
- Revenue recovery largely reflected reopened theatres, increased attendance and more available films compared with pandemic-affected 2021. The nine-month revenue increase was $1.564 billion.
- Despite higher Q3 revenue and a smaller operating loss, net loss was slightly larger year over year, as lower government assistance and other income, investment losses and reduced equity-method earnings offset operating improvement.
- Cash use continued despite improved year-over-year operating cash flow. Cash and equivalents fell by about $908 million from year-end 2021, and Q3 operating cash outflow worsened from $76.6 million in Q2 to $223.6 million, partly due to seasonal working capital and deferred-rent repayments.
- On February 14, 2022, AMC issued $950 million of 7.5% first-lien notes due 2029 and used proceeds plus cash to retire certain 10.5% notes due 2025 and 2026 and 15%/17% toggle notes. The refinancing generated a $135 million debt-extinguishment loss. AMC also repurchased $72.5 million principal of second-lien notes for $50 million, recording a $38.6 million gain.
- In August, AMC distributed one AMC Preferred Equity Unit (“APE”) for each Class A share. The units were structured with the same intended economic and voting rights and treated as a stock split for financial-statement share references. A September agreement authorized an at-the-market offering of up to 425 million APE units.
Outlook, risks and unusual items
- AMC gave no specific revenue or earnings guidance in the provided filing text. Management said box-office revenue must rise substantially, toward pre-COVID levels, for sustained positive operating cash flow and long-term profitability. It estimated 2022 capital expenditures, net of landlord contributions, at $150 million to $200 million.
- Management expects attendance and film availability to support recovery, but noted that attendance remains below pre-pandemic levels. Seasonal attendance, film release schedules, fewer theatrical releases, shortened exclusive windows, direct-to-streaming decisions, COVID-19 developments and consumer behavior could weaken results and increase cash burn.
- The secured leverage covenant suspension was scheduled to end March 31, 2023, with testing beginning for the quarter ending June 30, 2023. AMC expected compliance, but said this depends on attendance increases. The company warned that if attendance and liquidity initiatives prove insufficient, it may need additional liquidity or a restructuring; in a future liquidation or bankruptcy, common and APE holders could lose their entire investment.
- After quarter-end, on October 20, 2022, Odeon issued $400 million principal of 12.75% secured notes due 2027 at 92% of face value. Together with $146.7 million of existing cash, $363 million of net proceeds funded full repayment of the Odeon Term Loan. AMC expected an approximately $34 million extinguishment loss. This reduced the loan maturity exposure but introduced high-coupon debt.
- Q3 included $18.3 million of investment expense, primarily fair-value declines in Hycroft shares and warrants and NCM units. The nine-month period included debt-extinguishment losses, partially offset by the second-lien repurchase gain, and reduced COVID-related government assistance versus 2021.
- Legal matters include a proposed $17.375 million settlement of the Lao stockholder action, subject to court approval; AMC and other defendants deny wrongdoing. A separate securities class action settlement for $18 million received final court approval in February 2022.
Most important facts for investors to verify
- Whether attendance, film releases and box-office receipts improve enough to reduce cash burn and meet the secured leverage covenant when testing resumes in 2023.
- Cash runway and funding needs after deferred rent payments, interest, capital spending and the October Odeon refinancing; monitor the $195.8 million deferred-rent balance and $4.8 billion operating lease liability.
- Actual pricing, volume and net proceeds from the APE at-the-market program, its potential dilution, and the company’s use of proceeds. The filing reported approximately $28 million gross proceeds from about 12.2 million units sold through the filing date after quarter-end.
- Debt service and refinancing risk, including the 12.75% Odeon notes and the concentration of reported corporate borrowing maturities in 2026.
- Underlying operating performance versus Adjusted EBITDA, including the effect of film rental costs, European energy costs, government assistance and fair-value movements in Hycroft and NCM investments.