AMC Entertainment (AMC -6.79%) trounced Wall Street expectations in the first quarter, posting higher revenue and a narrower loss than forecast as a combination of high-profile films drew moviegoers back to the cinema. Chairman and CEO Adam Aron said it was the theater operator's strongest first quarter in two years.
Revenue surged to $785.7 million for the period, five times greater than last year and ahead of analyst expectations of $743 million, while recording an adjusted loss of $0.52 per share, far better than the $0.63-per-share loss Wall Street was looking for.
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"The significant progress AMC has made is very rewarding, as our guests continue to recognize the unparalleled movie-going experience offered by AMC," Aron said in a statement.
With a stream of big-budget films now ready to flow into theaters, the theater chain is looking forward to strengthening its financials and putting it back on course to profitability for the rest of the year. AMC said it expects to get close to pre-pandemic revenue levels by the fourth quarter and achieve positive operating cash generation by then as well.
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Not your father's movie theater chain
Retail investors in AMC, the self-described "apes" who created a massive following for the theater chain and of Aron himself, and who often rally one another to hold on as the stock price continuously falls, actually have something to celebrate this quarter.
Although they've been operating more on blind faith than the reality of AMC's situation, it appears the theater operator is finally giving them something to chew on this time.
Aron has thrown a lot of irons into the fire. Among the ideas AMC is pursuing or has begun include:
- Branded popcorn and snacks that will be available in retail stores and for home delivery.
- A handful of non-fungible token (NFT) programs that it has been giving away to bring more people to the theater but may begin selling to raise money.
- Acceptance of cryptocurrency, which seems to be a negligible contributor to sales, but fostered the acceptance of Apple Pay, Google Pay, PayPal, BitPay, and Venmo. These payment services now account for 35% of AMC's online payments.
- The potential for a branded credit card.
- Dynamic pricing, which helped boost revenues per patron by 34% above pre-pandemic levels.
There are a number of things to actually cheer for this quarter.
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Burning through cash
Of course, there do remain issues with AMC. Its cash burn rate is "not sustainable" by the theater company's own admission, and it will need to return to pre-pandemic attendance levels to achieve long-term profitability.
That is a problem because attendance levels have been steadily declining for the past decade, and even with some of the biggest movies of the season in theaters, it hasn't been enough to cross that threshold. It remains to be seen whether the remaining slate of big movies due to be released this year will be enough to put it over, but then it also has to maintain that for years to come.
Declining attendance was one of the reasons AMC Entertainment was ailing before the pandemic ever hit.
Digging for fool's gold
Aron also promised that the theater operator is changing. He said you can't look back at the business of last year (or even 2019) to see where it is going tomorrow.
He promised investors they will see more investments like the one it made in Hycroft Mining (HYMC), an all-but-defunct gold and silver miner that was unable to be profitable even when gold and silver were at their highest prices in years. Aron said other investments are coming, and though they won't necessarily be miners, they will be financially strapped companies that need to raise cash.
That's not something that should be cheered, and just because AMC's mark-to-market valuation on Hycroft is three times greater than its buy-in price, Hycroft's value could just as easily collapse once again as the gains have all been predicated on AMC's investment, not on business viability.
That's the ticket
It was a good quarter for AMC, though not a great one, and there is a lot of work remaining to do, and none that would assure the theater operator will be successful. But it's at least something the movie theater stock's investors can finally hang their hat on and anticipate the rest of the year might not be as bad as AMC's critics have warned.
