With its biggest third-quarter ticket sales since the epidemic, the domestic box office is recovering. But the biggest network of movie theaters in the world isn’t exactly doing well.
AMC has a greater global presence than its main competitors, Cinemark and Regal, with about 900 theaters and 10,000 screens. However, even prior to the pandemic, it had a heavy debt load that could be keeping the corporation from taking full advantage of the theater industry’s comeback.
After taking over the firm in 2015, CEO Adam Aron devoted a large portion of his early career on purchasing other chains and adding upscale seating to already-existing theaters. AMC had already lost $5 billion by the time the Covid epidemic closed cinemas and shut down Hollywood.
The business still owes over $4 billion in long-term debt four years later. Interest payments still have a negative impact on its bottom line even though it has been able to refinance and extend its maturities until 2029 and beyond.
Eric Wold, an analyst at B. Riley, stated, “They have taken steps to reduce their debt, but they still have a lot of debt and they are still paying pretty high interest rates on it.”
AMC made more money in the third quarter than it spent, but interest payments totaling almost $100 million caused the firm to lose around $21 million at that time.
For some years, it won’t be consistently lucrative, according to Wold.
Analysts told CNBC that AMC is making efforts to boost its earnings and entice viewers who have stopped going to its cinemas to return. If the movie theater chain can monitor its cash flow, it can take advantage of the better and more robust movie slates planned for 2025 and 2026.
A lift from a schedule full with blockbusters
According to Comscore statistics, ticket sales at the domestic box office hit $2.71 billion in the third quarter, which is slightly less than a percent higher than the same period last year. Considering that the smash cultural sensation “Barbenheimer” was released during the same period in 2023, the improvement, however little, is remarkable.
The box office was blown away by the simultaneous debut of Warner Bros.′ Barbie and Universal’s Oppenheimer, which brought in about $250 million domestically on their first weekend. As part of an almost $2.4 billion worldwide total, the two films went on to earn about $1 billion in North America.
In addition to approximately $360 million from Universal’s “Despicable Me 4,” $267 million from Universal’s “Twisters,” $250 million from Warner Bros.’ “Beetlejuice Beetlejuice,” and $183 million from Disney and Pixar’s “Inside Out 2,” which came out in June, this year’s third quarter was helped by Disney and Marvel’s “Deadpool & Wolverine,” which brought in $631 million domestically between its July 26 release and September 30.
AMC had a 12% drop in attendance during that time, despite the better-than-expected box office result. In contrast, Cinemark’s global attendance dropped by just 2.4% for the quarter.
AMC noted that attendance was down 16% in the area and blamed the drop on a Hollywood picture slate that, according to the company, didn’t fare as well in Europe as it did in North America. About 62% of AMC’s theaters are located in the United States, with the remaining 37% being in Europe. Reports filed in February indicate that an additional 1.4% are in Saudi Arabia.
Additionally, it pointed out that comparisons became more challenging due to the popularity of “Barbie” and “Oppenheimer” around the same time frame a year earlier.
Additionally, AMC criticized a third-quarter drop in moviegoing in major cities where the firm is most prevalent, such as New York and Los Angeles. Wold pointed out that this was probably due to the summer movie schedule being dominated by family-friendly productions, which tend to attract viewers from more suburban locations.
As Universal’s “Wicked,” Paramount’s “Gladiator II,” and Disney’s “Moana 2” compete for viewers’ attention on premium big format screens over the Thanksgiving holiday, AMC should be in a stronger position in the fourth quarter. Additionally, Sony’s R-rated “Kraven the Hunter” and Paramount’s “Sonic the Hedgehog 3” will be released in December, along with Disney’s “Mufasa: The Lion King.”
As Hollywood production resumes its regular flow of releases after being delayed by two labor strikes in 2023, the 2025 and 2026 slates are anticipated to be even better.
The number of wide releases for the whole year still falls short of pre-pandemic levels, even though the third quarter of 2024 had 31 wide releases, or movies that debuted in or eventually played in more than 1,500 places. This is greater than the totals for both 2023 and 2019.
Over half of the upcoming movies are linked to well-known intellectual concepts or established film franchises, which may draw in devoted audiences but also probably implies they will compete for screen time at upscale big format cinemas.
The premium push
Nearly half of all IMAX screens and all Dolby Cinema-branded screens in the United States are now located at AMC theaters. Globally, it boasts over 550 high-end large-format displays.
Additionally, the business intends to make even more investments.
During AMC’s third-quarter results call earlier this month, Aron stated, “We can be certain that moviegoers are increasingly seeking out our premium large-format screens based on our patronage data.” For instance, our PLF screens in the US typically generate almost four times as much money than our non-PLF households. Everyone is familiar with the adage, “Fish where the fish are.”
Over the next four to seven years, AMC plans to invest between $1 billion and $1.5 billion to upgrade its theaters in the United States and Europe as part of what it is referring to as its “Go Plan.” This include expanding the number of Dolby Cinemas at AMC sites, upgrading auditoriums with screens at least 40 feet wide to be part of its XL branding, and adding more IMAX screens and equipping existing ones with new laser projectors.
Wedbush analyst Alicia Reese stated, “As [AMC] is] approaching 2025 and its really improved release slate, they’re also looking at where to spend money, where to invest in the business, and enhance the business wherever they can.” “They discussed additional investments, theater upgrades, premium screen expansion, and the addition of XL displays extensively. That’s a significant amount of capital expenditure. And I simply believe that they must take a very balanced approach to this. You know, saving money.
Reese is not the only Wall Street analyst who advises AMC to go cautiously with these improvements.
The studio, which has had to be “very frugal with their cash” in recent years, will be able to make much-needed repairs thanks to the incoming slate of films, but “they can’t go crazy,” according to Eric Handler of Roth Capital Markets.
“They still need to manage their cash flow wisely,” he stated.
More issues, more shares?
Historically, AMC has issued more shares in order to raise money.
In order to pay off its obligations and avoid bankruptcy during the Covid epidemic, when movie theaters were either shuttered or had little to offer the public, the corporation earned billions of dollars by issuing additional shares.
Investors, including some of AMC’s most ardent supporters, have previously rejected the company’s attempts to sell more shares because they are afraid about dilution. According to FactSet, AMC now has about 372 million outstanding shares.
Handler stated, “They stated that they would think about using their equity to fund capital expenditure projects.” And here we are once more. To finance these capital expenditure initiatives, equity investors can be further diluted down. They could issue additional shares, and the total number of shares is around 20 times more than it was before the epidemic. Therefore, the advantages of the business’s advancements have not yet been fully realized by equity shareholders.
Despite significant increases over the last month, AMC’s stock has down more than 26% this year and more than 43% during the same period last year. For months, the price of the stock has ranged between $4 to $5 a share.
To free up funds for other projects, AMC has started shutting underperforming theaters while their leases are up for renewal.
“They’re attempting to change the footprint in order to preserve their gains in market share,” Reese stated. “With merchandise, popcorn buckets, and other such items, they keep increasing income per screen and revenue per attendee. Thus, every measure is moving in the correct direction.
