AMC Cuts Q1 Loss to $163.5M, Plans $250M Share Sale Amid Strikes

Key Takeaway

• AMC narrowed its Q1 net loss to $163.5 million, beating analyst expectations despite Hollywood strikes impacting revenue.
• The company is negotiating debt restructuring for its $4.5 billion long-term debt and plans to sell up to $250 million in shares.
• Industry challenges persist as US and Canada movie ticket sales remain below pre-Covid levels, affecting theater chains' recovery.

Narrowing Quarterly Loss Amid Strikes

AMC Entertainment Holdings Inc. reported a narrowed net loss in its preliminary first-quarter earnings, showcasing resilience despite the challenges posed by last year's writers' and actors' strikes in Hollywood. The company anticipates a net loss of $163.5 million, or 62 cents a share, an improvement from the previous year's net loss of $235.5 million, or $1.71 a share. This performance exceeded analyst expectations, which had forecasted a loss of 79 cents a share. Revenue for the quarter is expected to be around $951.4 million, slightly below the $954.4 million reported in the same period last year but well above analyst expectations of $861 million. AMC's CEO, Adam Aron, expressed optimism about the future, despite anticipating the second-quarter box office to continue being affected by the Hollywood strikes.

Debt Restructuring and Financial Strategy

Facing a significant financial challenge with $4.5 billion in long-term debt, AMC is in discussions to extend its debt maturities, particularly focusing on the $2.8 billion due in 2026. This includes a $1.9 billion term loan and approximately $969 million in second-lien notes. In addition to these negotiations, AMC has taken proactive steps to improve its liquidity, such as securing a new letter of credit and announcing plans to sell up to $250 million worth of shares through an at-the-market issuance. These measures aim to address the financial strain highlighted by a CCC+ junk designation from S&P Global Ratings and an anticipated 8% to 9% drop in revenue.

Industry Headwinds and Competitive Landscape

The cinema industry, including AMC, faces significant challenges as movie ticket sales in the US and Canada have not returned to pre-Covid levels. This stagnation has hindered the recovery of theater chains, contrasting with the surge in retail investor interest that helped AMC avoid Chapter 11 bankruptcy during the pandemic. Meanwhile, competitors like Cineworld Group and Metropolitan Theatres have navigated their financial difficulties, with Cineworld emerging from bankruptcy and Metropolitan filing for it in March. These industry-wide challenges underscore the competitive and financial pressures facing AMC and its peers.

Financial Performance and Outlook

AMC's financial performance remains a focal point for investors and analysts, especially after a fourth-quarter profit that fell short of expectations. The company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $42.5 million, below the forecasted $46.7 million. With $884 million in cash as of December 31, AMC acknowledges the unsustainability of its current cash burn trajectory and the critical need for operating revenues to return to pre-COVID-19 levels. Despite these challenges, AMC's leadership remains optimistic about the company's ability to navigate through industry headwinds and financial constraints.

Management Quotes

• Adam Aron, CEO of AMC:

  "AMC outperformed despite the strikes... While we anticipate that the second-quarter box office will continue to be affected by the 2023 Hollywood strikes, we are ebullient about the upcoming film slate, and we expect to see an increasingly strong box office as the year progresses." "It would be 'inconceivable' that the movie-theater chain would file for bankruptcy despite the turmoil of recent years."