AMC Entertainment Holdings, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. AMC operates theatres in the U.S. and Europe; at quarter-end it owned, operated or held interests in 920 theatres and 10,264 screens.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $954.4 million | $785.7 million |
| Operating loss | $(108.2) million | $(166.9) million |
| Net loss | $(235.5) million | $(337.4) million |
| Loss per share, basic and diluted | $(0.17) | $(0.33) |
| Adjusted EBITDA (non-GAAP) | $7.1 million | $(61.7) million |
| Cash used in operating activities | $(189.9) million | $(295.0) million |
| Capital expenditures | $47.4 million | $34.8 million |
Revenue increased 21.5%; attendance rose 21.9% to 47.6 million. Admissions revenue grew 20.3% and food-and-beverage revenue 30.2%. Approximate operating margin improved to negative 11.3% from negative 21.2%; net margin improved to negative 24.7% from negative 42.9%.
At March 31, cash and cash equivalents were $495.6 million (plus $23.1 million restricted cash), down from $631.5 million at year-end. Working capital deficit, excluding restricted cash, was $994.9 million. Corporate borrowings had $4.741 billion principal outstanding; $3.107 billion was scheduled to mature in 2026. The revolving credit facility had $208.1 million of unused capacity, net of letters of credit. The balance sheet reported a $2.590 billion stockholders’ deficit.
Changes versus prior year
- Higher attendance and film popularity drove stronger revenue and improved Adjusted EBITDA, though AMC remained loss-making and used substantial operating cash.
- Operating costs rose 11.5%, slower than revenue growth. Film exhibition costs increased 29.7%; food-and-beverage costs increased 44.1%. Rent expense fell 7.8%, partly reflecting a theatre lease termination and landlord incentive.
- Interest expense rose to $101.1 million from $92.4 million, reflecting debt issuance and higher term-loan rates, partly offset by debt repayments.
- Net loss improved in part because other expense was lower than in Q1 2022, when debt extinguishment losses were substantial. Q1 2023 results included a $126.6 million shareholder-litigation reserve, offset in part by debt-extinguishment gains and a $14.0 million settlement receipt. A $15.5 million gain on the sale of the Saudi Cinema Company investment also contributed to results.
Liquidity, outlook, risks and unusual items
- Management said existing cash and expected operating cash flows should fund operations, obligations and the $100 million minimum-liquidity requirement for at least the next 12 months. The revolving-credit financial covenant suspension was extended through March 31, 2024; the facility matures April 22, 2024.
- Management cautioned that current cash burn is not sustainable long-term and that revenue must rise significantly toward pre-COVID levels to achieve positive operating cash flow and long-term profitability. It said future liquidity needs are difficult to estimate and additional financing beyond 12 months is not assured; if liquidity is insufficient, a restructuring could be required.
- AMC estimated 2023 capital expenditures, net of landlord contributions, of approximately $150 million to $200 million. No earnings or revenue guidance was provided in the filing.
- In Q1, AMC raised $80.3 million gross through sales of approximately 49.3 million AMC Preferred Equity Units and issued 197.6 million units to Antara for $75.1 million cash and $100 million principal amount of notes. It also repurchased $103.5 million principal amount of debt for $56.5 million. Further equity issuance and debt exchanges may dilute holders.
- The proposed conversion of APE units into common stock, reverse split and related charter amendments were subject to Delaware shareholder litigation and a court status quo order. The court denied a motion to lift that order on April 5, 2023; settlement approval remained pending. AMC recorded the litigation reserve in Q1, but the proposed settlement and related share issuance were contingent on court approval and other conditions.
- After quarter-end, National CineMedia filed for Chapter 11 bankruptcy. AMC said it did not expect a material impact, but payments due from NCM could be delayed and NCM had not issued units owed under its annual adjustment.
- Risks include high leverage and debt service, film-release timing and box-office performance, competition from streaming and other entertainment, deferred rent obligations of $123.6 million, market volatility and potential dilution. AMC also cited the Writers Guild of America strike, which began May 2, 2023, as a possible risk to future film supply.
Investor verification priorities
- Track cash burn, cash balance, unused borrowing capacity and compliance with the $100 million minimum-liquidity requirement.
- Review debt maturities—particularly the $3.107 billion scheduled for 2026—and the ability to refinance or reduce debt and interest costs.
- Monitor attendance, film slate and release windows, revenue per patron, and progress toward sustained positive operating cash flow.
- Confirm court rulings and approval status concerning the shareholder settlement, charter amendments, APE conversion and reverse split; assess the potential dilution and share-count effects.
- Assess NCM’s bankruptcy developments, any delayed receipts, and the effect on advertising arrangements and AMC’s contractual rights.