AMC Entertainment Group (AMC +7.41%) released some preliminary fiscal 2021 fourth-quarter (ending Dec. 31) earnings results on Tuesday. Those results showed a company that continues to recover from the devastation caused by the pandemic.
AMC was forced to close its theaters to guests for several months at its onset. As billions of doses of vaccines against COVID-19 have been administered and folks have felt increasingly comfortable leaving their homes, AMC's business is rebounding, albeit still not at full strength. In that regard, AMC hit another milestone and turned its cash flow from operations positive.
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Blockbuster hit fills the seats at AMC theaters
Before the fourth quarter, in the nine months ended Sept. 30, AMC had lost $660 million in cash from operations. The company has an elevated base of fixed expenses that it must pay regardless of movie theater attendance and concession sales. Therefore, when sales sank because of the pandemic, the company started taking on heavy losses on the bottom line. Revenue fell by 77% for AMC in 2020 compared to 2019.
Despite improving in 2021, the company is still far from its pre-pandemic revenue totals. That said, the preliminary fourth-quarter results were a dramatic improvement. In the nine months ended Sept. 30, AMC had generated $1.36 billion in revenue. In the fourth quarter alone, AMC's revenue totaled $1.17 billion. It nearly eclipsed its revenue for the rest of the year in one quarter.
The surge in revenue finally stopped the cash operating losses for AMC. In Q4, cash from operations turned positive at a healthy $216.5 million. Undoubtedly, AMC's results were buoyed by the release of blockbuster hit Spider-Man: No Way Home, which has tallied $1.74 billion in global box-office sales as of this writing. The movie soundly outperformed any other in 2021, and the difference was most pronounced domestically. It brought in $737 million, and the second-place finisher, Shang-Chi and the Legend of the Ten Rings, earned $225 million at the box office.
Regardless, turning cash flow positive from operations is a big step in a favorable direction for the battered movie theater chain. The company has $5.4 billion of debt on the balance sheet, costing it hundreds of millions annually in interest payments. If it can sustainably generate cash from operations, it can use those funds to pay down debt and increase cash flow even further.
What this could mean for AMC investors
AMC's stock price is down about 18.5% since announcing the positive results. The stock had a meteoric rise in 2021 from its part in the meme stock frenzy. As a result, its valuation became divorced from its fundamental prospects.
If it can string together a few more quarters like the fourth, it will go a long way toward paying down debt, reducing expenses, and putting the company on a firmer long-term footing financially. Whether that will do anything for the stock price remains to be seen.
