AMC Is Putting Its Popcorn On The Shelves And Zoom Meetings In Theatres As Q3 Widens Losses

CEO Adam Aron outlines future revenue streams following mixed Q3 2022 financials

AMC Entertainment Holdings, Inc. (NYSE: AMC) reported on Tueday its financial results for Q3 2022, earning US$968.4 million in revenue–beating the consensus estimate of US$961.1 million. The figure, however, is a decrease from Q2 2022’s US$1.17 billion but an increase from Q3 2021’s US$763.2 million.

“Exactly as anticipated and foreshadowed on our last quarterly earnings call, our third quarter results were impacted by a particularly soft industry-wide box office in the latter two-thirds of the 2022 third quarter,” said CEO Adam Aron.

But with operating expenses still larger than the revenue, the firm still ended the quarter with an operating loss of US$114.9 million, compared to last quarter’s loss of US$16.1 million and last year’s loss of US$145.2 million.

This further led the company to end with a US$226.9 million net loss, wider than the net losses of last quarter, which came in at US$121.6 million, and last year at US$224.2 million. This translates to US$0.22 loss per diluted share, beating the street estimate of US$0.24 loss per share.

Calibrating for financial items, adjusted EBITDA came in at a loss of US$12.9 million–which includes an adjustment of US$18.3 million in investment expense related to the “deterioration in estimated fair value of the company’s investment… and appreciation in estimated fair value in warrants to purchase common shares” of Hycroft Mining Holding.

The adjusted income figure is a drop from last quarter’s gain of US$106.7 million and last year’s loss of US$5.4 million.

In Q2 2022, the firm used operating cash flow of US$223.6 million, up from last quarter’s US$76.6 million; free cash flow also ended with an outflow of US$278.1 million vis-a-vis a US$117.0 million outflow in the previous quarter.

The theater chain also ended the quarter with US$684.6 million in cash, putting the current assets balance at US$905.2 million. Meanwhile, current liabilities came in at US$1.62 billion.

“As anticipated and discussed during last quarter’s earnings webcast, cash burn this quarter was adversely impacted by the relatively quiet box office in August and September, together with seasonal working capital requirements,” CFO Sean Goodman explained in the earnings call. For Q4, he said that the firm expects cash burn to improve “with a return to positive operating cash generation.”

Operations-wise, the firm saw a jump in theatre attendance to 53,177 patrons from last year’s 39,999.

Aron also discussed AMC’s initiatives in adapting to the environment and sourcing more revenue streams outside the movie watching business. One of these is the “coming entry into the multibillion-dollar popcorn market.”

“I fully expect that in partnership with a major national retailer, AMC Perfectly Popcorn will be on the shelves at grocery stores around the United States in the first half of 2023,” Aron said.

The chief executive also reiterated the recently launched Zoom Rooms at AMC–the theatre chain’s partnership with video conferencing platform Zoom. Aron said that this move is expected to grow the “US$20 million a year meetings business”.

“The meetings market is a multibillion-dollar market. And for any of you who’ve gone to a hotel for a meeting and sat in their ballrooms or in their breakout rooms, their chairs are not comfortable. When you compare the comfort of an AMC signature recliner seat, to what you might get at a hotel? We beat them,” Aron touted.

The key selling point of Zoom Rooms at AMC is meeting and event planners will be able to bring together decentralized workforces or client bases, as well as huge numbers of individuals from other markets, all at the same time, for a seamless virtual and in-person meeting experience–possibly linking multiple city-based employees through their respective theatres.

Aron also mentioned that the firm is “in the final throes of development of an AMC-branded credit card,” expected to be launched in the first quarter of 2023.

On valuation, the theatre chain has lost around 79% of its share price value year-to-date, which was aggravated by the AMC Preferred Equity (APE) class shares debut. When asked about the share price decline, Aron said “there are a lot of factors.”

“It also does depend on what your time frame is, of course. Because while the share price is lower than it was in, let’s say, June of 2021, it’s still a lot more than it was in January of 2021. But what I just said is about all you’ll ever hear me say about our share price because you asked sort of like why is management silent on this subject,” Aron explained, citing securities laws in the United States. “And if you’re the CEO of a public company, it is much better for you to be talking about the state of the business than the state of the share price.”

Recently, data from Dataroma showed that company insiders such as hedge funds, private equity firms, board members, top executives, and other major investors in AMC sold US$888 million in stock over the last two years at significantly higher prices than they are now.

AMC Entertainment last traded at US$5.06 on the NYSE.

Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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