- Share this article on Facebook
- Share this article on Twitter
- Share this article on Flipboard
- Share this article on Email
- Show additional share options
- Share this article on Linkedin
- Share this article on Pinit
- Share this article on Reddit
- Share this article on Tumblr
- Share this article on Whatsapp
- Share this article on Print
- Share this article on Comment
Cinema giant AMC Theatres swung to a second-quarter profit as revenue jumped 15.6 percent to $1.35 billion and touted its highest quarterly attendance in years, but also issued a warning of possible liquidity challenges ahead.
Earnings for the second quarter hit $8.6 million, compared to a loss of $121.6 million in the comparable period of 2022, the company reported on Tuesday. It also saw a 12.2 percent gain in attendance year-over-year.
CEO Adam Aron, in an after-markets analyst call, said the third quarter of 2023 had kicked off well due to Barbie, Oppenheimer, Mission Impossible – Dead Reckoning Part One and Sound of Freedom playing on his company’s screens.
Related Stories
“The stakes are high and we’re surrounded by some uncertainties and risks. But it’s certainly encouraging for us all to take a moment this afternoon and celebrate our immensely positive results in the most recently completed quarter,” Aron insisted. But AMC still has some ways to go before reaching a full corporate recovery.
“While we still have much work ahead of us, AMC’s glide path to eventual recovery continued with significant pace,” during the second quarter, Aron said, while also on the call warning of a potentially negative impact from a delayed settlement of the Hollywood strikes on movie flow from the major studios and the company’s ability to raise fresh capital to pay down debt.
“Barring complications to the timing of film releases due to the uncertainties of the writers and actors strikes currently well underway, unfortunately, we have good reasons to believe that the second half box office will continue to show real strength this year,” Aron said. Sean Goodman, AMC Theatres’ CFO, told analysts that the mega exhibitor released its second quarter results early on Tuesday, before the financial markets opened, to avoid complications as a Delaware court continues to review a proposed settlement of outstanding shareholder litigation.
In July, AMC revised its stock-conversion proposal to potentially remove any objection from the Delaware court to the earlier version of stock conversion plan to raise fresh capital. Aron has been consistent in arguing the APEs-to-stock conversion plan was essential to the company’s survival.
The Delaware Court has so far blocked the wider conversion of APE units into AMC common shares, with a resolution of the shareholder litigation not yet at hand. “If the strikes are prolonged and or our ability to access the capital markets is constrained, then our … ability to continue to take the necessary actions to strengthen our balance sheet and to ensure a full and sustained recovery may be in jeopardy,” Goodman warned.
Aron added AMC needed to keep raising fresh capital to continue strengthening its balance sheet and reducing overall debt. In the last year, AMC raised $418 million in new equity and retired $548 million of debt since creating the APE units for financial markets.
The AMC boss also took aim at retail investors in his company that criticized the proposed APEs-to-stock conversion plan. “In the short term, AMC has some serious liquidity issues to solve. We should not oversimplify that it will be easy to overcome the obstacles and hurdles in our path,” Aron added, knowing that message would not be well received by some meme-stock investors.
“We need to be able to raise capital if we need to. The dumbest thing we could ever do as a company is run out of cash and other companies in the industry have run out of cash. And some of the armchair quarterbacks on Twitter, who give me advice every day, if I follow their suggestions, we would have run out of cash a long time ago. If I follow their suggestions now, we’ll run out of cash,” he argued about listening to retail investors opposing the APEs-to-stock conversion plans.
Aron added AMC needed to maintain “ample cash reserves” until the exhibition industry returns to pre-pandemic levels, likely either next year or in 2025. “If we were running out of cash before we get to 2024 or 2025, that would be a disaster. And that’s a disaster that I simply will do everything in my power to make sure that this company avoids,” he argued.
Aron also took aim at retail investors calling on him to stop talking about the pandemic. “We’ve had to adjust our strategy because the movie theater industry has come back slowly. And so our strategy has become survive, and then thrive,” he said on the call.
Aron also discussed plans to unveil premium chocolate candy and gummies lines after introducing branded popcorn products in retail stores, and about possibly ramping up screening of live sports and featuring live musical artists on stages in his cinemas.
The AMC Theatres boss had no analysts directly posing questions during the after-markets call as the company relied instead on questions submitted online by retail investors and read out by CFO Goodman.
During the second quarter of 2023, AMC raised $34 million of cash and reduced its principal balance of debt by $42 million through debt repurchases. “Even with our $643 million of quarter-ending liquidity, our ability to continue to raise capital and remain agile are absolutely vital to maintaining our strong recovery trajectory. There are real and potentially severe liquidity hurdles on the horizon that we will need to overcome,” Aron said earlier in the day after releasing his second quarter earnings results.
THR Newsletters
Sign up for THR news straight to your inbox every day