It may seem like a distant memory, but about two years ago, AMC Entertainment Group (AMC -2.48% ) was forced to close all of its theaters to the public, devastating the business.
AMC burned hundreds of millions of dollars each quarter and was in serious danger of running out of cash, but it raised much-needed capital through multiple debt and equity offerings. Thankfully, with the rollout of effective COVID-19 vaccines around the world, people are going back to the movies. As a result, the company is making significant progress to get back on solid ground.
A slew of blockbuster releases to come raise CEO Adam Aron’s hopes
When the company released its fourth quarter operating results, it revealed an inflection point: operating cash flow turned positive from negative $357.8 million last year to $46 million. .5 million dollars. Note that a business cannot sustain itself for the long term if the aforementioned metric is in the red. Eventually, it will eventually exhaust its cash reserves and run out of borrowing capacity. For this reason, positive cash flow was an important milestone in AMC’s post-pandemic recovery.
The turnaround was fueled by a massive increase in revenue, which rose more than 600% year-over-year to $1.17 billion for the quarter. Much of AMC’s expenses are fixed, so it enjoyed positive operating leverage as revenue grew. AMC has to pay certain costs like rent and interest on debt whether or not there are people in its theaters. When box office receipts increase, these expenses remain stable.
CEO Adam Aron shared his excitement for AMC’s takeover in the earnings press release:
The fourth quarter of 2021 proved once again that moviegoers want to see movies in theaters. We’re quite optimistic that for the full calendar year of 2022, the industry’s box office could be nearly double that of 2021, with the impacts of COVID easing, with more and more major films on the release docket, and with most major studios merged around an exclusive theatrical window of 45 days or more. Reservations are very strong for THE BATMANwhich opens this weekend, and we have movies like TOP GUN: MAVERICK, JURASSIC WORLD DOMINION, BLACK PANTHER: WAKANDA FOREVER, AVATAR 2, and many more that will excite us all this year.
The worst is over for AMC
Given these developments, it’s clear that the worst is over for the movie channel. Many governments are no longer mandating business closures in response to rising coronavirus infections. Additionally, judging by the release schedule for the rest of 2022, studios are no longer choosing to skip the traditional exclusive theatrical release format – a major risk during the early stages of the pandemic.
With those headwinds behind it, AMC can focus on stabilizing the business. In 2019, AMC generated $5.47 billion in revenue; last year, that figure was down more than 50% to $2.53 billion. The company still has its issues, including a $5.43 billion debt balance and a long-term industry trend of declining ticket sales, but it’s moving in the right direction.
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