AMC Entertainment Holdings (AMC -2.14%) reports second-quarter earnings on Monday, Aug. 9. The company was devastated by the onset of the pandemic when it had to shut its doors to viewers worldwide. That led AMC to start burning through hundreds of millions of dollars as expenses piled on with no revenue coming in.
There is some light at the end of the tunnel for the movie theater company. Economies are reopening, and folks are returning to movie theaters. That means there's a possibility that AMC will announce it has stopped the bleeding when it reports earnings on Monday.
One step at a time
In its most recent quarter, AMC's cash burn rate was roughly $120 million per month. That was during a quarter in which the company earned $148 million in revenue. Management has spent the past year working diligently on cutting costs and raising capital to survive the pandemic. Maybe there is more it can do to cut costs, but ultimately AMC will have to boost revenue to improve cash flow.
The good news is that studios released a few blockbuster films to the big screen during the quarter. Films like F9: The Fast Saga, A Quiet Place 2, Cruella, Godzilla vs. Kong, and Black Widow have all earned over $200 million at the box office so far in 2021. If enough of their viewers went to an AMC theater, it could boost revenue enough to match cash outflows, especially if those same folks spent a good deal of money on snacks and beverages. It doesn't take many $8 buckets of popcorn and $6 cups of soda for the money to start piling up for AMC.
Still, even if AMC stops the bleeding, it's not the end of its troubles. The company has $5.4 billion of debt on its balance sheet, and its annualized interest expense is over $600 million. This is from a company that made over $300 million in operating income only once over the last 10 years.
The next decade is not going to get much easier, as streaming services are gaining traction. Several studios launch blockbuster films straight to streaming services, meaning fewer people attend theaters.
What this could mean for investors
Analysts on Wall Street expect AMC to report revenue of $375 million and a loss per share of $0.93. If AMC's report matches those estimates, it would be solid progress. It could further boost enthusiasm from Reddit traders who have been following the stock closely.
Investors should be cautious around this stock, as it has displayed wild price fluctuations over the past eight months. The stock is up an incredible 1,480% year to date, but it's down 35% in the last month.