AMC Dips 4% Despite Strongest Earnings in 2 Years
On March 1st, AMC Entertainment released its Q4 2021 earnings along with the year’s results. With the governments’ responses to Covid-19 waning, the theater chain is finally seeing the light at the end of the lockdown tunnel. However, the market seems yet to be impressed.
AMC’s Revenue Increased by 621% from 2021 to 2022
Here is the brief roundup of AMC’s gains and losses compared to previous periods:
- AMC’s revenue drastically increased from the 2020’s bankruptcy-level range, by 621%, from $162.5 million to $1.172 billion. Compared to pre-C19 in Q4 2019, this is a 6% revenue decrease, despite the increase of guests by 36%.
- Compared to Q4 2020, the losses were also significantly diminished, by 603%, from $946.1 million to Q4 21’s $134.4 million.
- Adjusted for one-time items (non-recurring expenses), AMC’s share lost 11 cents over a year.
- AMC’s cash availability sits at $1.8 billion while its cash equivalents are at $1.59 billion.
Overall, the quarterly losses were on the lower end of the spectrum, from last month’s estimated between $114.8m – $194.8m. Notably, for the first time in two years, AMC reached positive EBITDA (earnings before interest, taxes, depreciation, and amortization).
This translated into positive cash, measured by non-GAAP (Generally Accepted Accounting Principles) to over $220 million for Q4 2021. AMC’s CEO Adam Aron framed the earnings report as leaving the worst behind.
“Our positive recovery glide path from the global pandemic continued in earnest in the fourth quarter”
Aron further noted that AMC retail investors were critical in supplying the company with a “monetary war chest”, stemming from memetics against Wall Street hedge funds. Recently, even Citadel withdrew more of its $2 billion from Melvin Capital after its abysmal performance. Aron noted that right now, its $1.8 billion cash reserve is its greatest asset, taking care on how to invest it across AMC’s three core business models:
- AMC Theaters – the mainline theaters with IMAX and Dolby Cinema, two-thirds with recliner seats.
- AMC Dine-In Theaters – full restaurant menus, with revenue from food and beverages increased by 35% compared to Q4 2019.
- AMC Classic Theaters – smaller and less visited, without recliners.
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How did the Market React to AMC Entertainment Earnings?
According to Adam Aron, AMC is firmly in the hands of retailers, to whom it owes its existence.
“If you exclude index funds who have no choice but to own and hold AMC shares, individual retail investors would seem to own more than 90% of our officially issued 516 million shares as of today.”
In other words, as Aron often points out on social media, retailers own 90% of the float, which is the total number of shares available for public trade. Given the history of the short squeeze saga and the concern about naked shorting and dark pools, Aron assuaged these fears in the report by saying that:
“…no reliable information on naked shorting or so-called fake shares or so-called synthetic shares.”
However, according to Fidelity’s report on AMC’s float structure consisting of 516 million shares, 34.4% of the float is in institutional hands.
At the head are the world’s largest asset managers, Vanguard Group and Blackrock, with 9.17% and 8.36% ownerships respectively. All others fall under 3%. Nonetheless, Aron appears to be proceeding with the plan to introduce a number of upgrades to how retailers interact with AMC.
Namely, introducing Dogecoin (DOGE) and Shiba Inu (SHIB) as the biggest meme coins with a $30 billion total market cap between the two.
“We expect that our market share among that audience will grow when we can take cryptocurrencies.”
Interestingly, despite the high volatility of both dog coins, AMC underperformed both of them after the earnings report, dropping by 4%.
This may be due to the fact that AMC’s price moves were already priced in because Aron pre-released unaudited Q4 2021 figures all the way back in January. There is also the matter of AMC’s ongoing debt problem. To stay afloat over the last two years, and even prior, AMC had to accrue a lot of debt.
September 2016 was the last period in which AMC’s long-term debt was under $2 billion. Ever since, AMC’s debt is hovering mostly at over double that, at the current $5.5 billion. In the most recent debt refinancing deal in February, AMC committed to a $950 million bond issuance to pay off maturing debt and its fees.
Unexpectedly, this was almost double from the initial target of $500 million with a 10.5% interest rate. The new $950 will have an interest rate of 7.5% up until 2029. Interestingly, that exact percentage is the current 40-year-high inflation rate the Fed is trying to squash with announced March interest rate hikes.
This will mean that borrowing money will be a lot more expensive for companies, often resulting in taper tantrums and stock market downturns.
Update (8th March 2022, 10:00 am GMT): Changed “Citadel Securities” to “Citadel”. Citadel LLC and Citadel Securities are two separate businesses.
Do you think AMC is looking forward to a rally in 2022? Let us know in the comments below.