AMC Leisure (AMC) Q2 2021 earnings beat

Shares of AMC Entertainment rose 4% in extended trading Monday after the company posted a narrower-than-expected second-quarter loss.

Although the movie theater operator’s CEO warned the company still has challenges ahead, it said it could post a profit as soon as the fourth quarter, if the domestic box office reaches at least $5.2 billion.

“AMC’s journey through this pandemic is not finished, and we are not yet out of the woods,” CEO Adam Aron said in a statement Monday. “However, while there are no guarantees as to what the future will bring in a still infection-impacted world, one can look ahead and envision a happy Hollywood ending to this story.”

Aron made a number of announcements during Monday’s earnings call, many of which directly addressed the desires of its new investors, including new payment options like bitcoin and an increased variety of content offerings like sports and pretaped concerts.

For months last year, AMC’s theaters were shuttered due to the coronavirus pandemic. Theaters began to reopen at the end of last summer, only to see Covid cases rise again and movie studios once again postpone new releases.

As of the end of June, all of AMC’s 593 U.S. theaters were open to the public and 335 of its international theaters, or about 95%, were operational. Audiences are returning but crowds have not yet rebounded to pre-pandemic levels.

AMC said 22 million guests visited its theaters during the second quarter. That was an increase from the 7 million guests that returned to theaters in the first quarter, but it was a far cry from normal. In the second quarter of 2019, AMC sold 97 million tickets, which was an all-time quarterly record.

“We are not taking a victory lap … We are still losing money, we are still burning cash,” Aron said during an earnings call Monday. “But we can see a light at the end of the tunnel.”

Second-quarter loss narrows

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Losses per share: 71 cents vs. 91 cents expected
  • Revenue: $444.7 million vs. $382.1 million expected

For the second quarter, AMC posted a net loss narrowed to $344 million, or 71 cents per share, from a loss of $561.2 million, or $5.38 per share, a year ago. Analysts had expected the company to lose 91 cents per share, according to data from Refinitiv.

The movie theater chain reported revenue of $444.7 million, higher than the $382.1 million analysts had expected.

Aron revealed the company had reached an agreement with Warner Bros. to showcase all of the studio’s 2022 slate in theaters for 45 days. In late 2020, Warner Bros. decided to release all of its 2021 films in cinemas and through its HBO Max streaming service on the same day.

Having exclusive content in theaters can help AMC return to profitability.

These deals are also particularly welcome at a time when the United States is averaging more than 100,000 new Covid-19 cases a day for the first time since February. The highly contagious delta variant is sparking a resurgence of the virus, especially among unvaccinated populations.

Fears about shutdowns are resurfacing as many local governments have opted to reestablish mask mandates. Some businesses are even asking customers for proof of vaccination before serving them.

The AMC Burbank 16 and the Batman bronze statue in Downtown Burbank.

AaronP/Bauer-Griffin | GC Images | Getty Images

Putting cash to work

As of June 30, AMC had around $1.8 billion in cash and around $2 billion in liquidity available, the company said.

AMC was able to avoid bankruptcy when its theaters were shut because it was able to raise cash, in part due to a “meme stock” frenzy. For months, fans of the stock, who call themselves “apes,” have helped drive the stock to record highs. These new investors have remained bullish on traditionally heavily shorted stocks like AMC and used their growing numbers to make waves on Wall Street.

Shares of the company have surged nearly 1,500% since January thanks to millions of these retail investors. However, the stock, which closed Monday at $33.80, has been halved since its high of $72.62 in early June.

AMC is starting to put the cash it raised to work by buying or renting new theaters and upgrading its already existing locations with better seating and amenities.

During the second quarter, it took over leases at two Los Angeles locations: the 14-screen cinema at The Grove shopping complex in the Fairfax neighborhood and the 18-screen location at Americana at Brand in Glendale. Both were formerly operated by Pacific Theatres and are owned by real estate company Caruso. AMC didn’t disclose the terms of the lease.

In 2018, The Grove theater was the second-highest grossing cinema and the Americana was the fifth-highest grossing cinema in the Los Angeles area. AMC is expected to reopen these theaters in August.

On Monday, Aron said the company was in the process of signing leases for as many as 10 more locations. Leases or letters of intent have been signed for six cinemas so far, he said. The theaters are located in Los Angeles, Chicago and Atlanta. Four more locations are being discussed, he said. Eight of the 10 possible locations are former Arclight and Pacific Theaters.

Aron also announced that by year-end, AMC plans to have technology in place to accept bitcoin for movie tickets and concessions if paid for online.

Unveils executive stock ownership proposal

To further show his commitment to the company and its new investors, Aron said he had proposed a new stock requirement for AMC’s top leadership positions. The recommendation, which will be considered during the next board meeting, will stipulate that the CEO must hold a value of stock equal to eight years of salary.

In Aron’s case, that would be around $12 million worth of stock that is either owned or has been granted to him by the company.

Under the proposal, he said, the chief financial officer would be required to hold six year’s worth of salary, the executive vice president position would hold four year’s worth of salary and a senior vice president would need to hold two year’s worth of salary in stock.

“At the same time as I’m emphasizing share ownership, I’d like to remind you that I have not sold one share of AMC stock in the five full years I’ve been running this company even though it represents more than three-fifths of my annual compensation,” Aron said.

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