After 89% Q4 Revenue Hit, AMC Hopes Vaccines, Openings Bring Recovery

After a “corporately life-threatening” year, AMC Entertainment delivered what CEO Adam Aron called an “immensely satisfying report” on its Q4 call Wednesday, despite dismal pandemic-driven Q4 results. Revenue for the world’s largest theater chain plummeted 89% year on year for the quarter ended Dec. 31, to $162.5 million.

At the beginning of Q4, AMC had resumed operations at 467 domestic theaters, about 78% of locations, after suspending operations March 17 for five months due to COVID-19. Many of those U.S. theaters suspended operations again in Q4 after state and local governments issued mandates in response to a resurgence of coronavirus cases, Aron said. AMC ended the quarter operating 394 theaters -- 67% of theaters -- with limited seating capacities of 20%-40%; same-theater revenue was 61% of 2019 revenue, said the company.

Amid steep losses, the chain raised $2.2 billion in cash from debt and equity capital and secured over $1 billion in concessions from creditors and landlords, said Aron. Wedbush analyst Michael Pachter wrote investors Thursday it will take AMC “years to repay its debt burden, and longer until it is able to revisit its growth strategy.” AMC raised enough liquidity “to last through midsummer without an incremental box office boost,” he said. The company has “sufficient liquidity to allow it to survive with low utilization through at least Q3,” Pachter said, citing theater reopenings in New York, and the Middle East and impending openings in Los Angeles.

The company instituted safety and cleanliness protocols developed with Clorox and the Harvard School of Public Health. No reports of COVID-19 cases have been linked to an AMC theater among the 17 million moviegoers who attended its theaters since they reopened, the CEO said. New sanitation measures include electrostatic sprayers and HEPA vacuums and an HVAC system upgrade to include MERV 13-quality air filtration, he said.

With the March 5 limited-capacity reopening of theaters in New York and San Francisco -- and the opening of a new theater in Denver -- 90% of AMC’s domestic theaters are open, which Aron called an advantage over competitors with lower reopen rates. A third of U.S. AMC movie-viewing dollars comes from California and the tri-state New York, New Jersey and Connecticut region. Los Angeles theaters are expected to open soon with limited capacity.

Some 40 major movie titles delayed from a 2020 release will hit AMC screens beginning in May, said Aron. “We are LaGuardia Airport, closed by a thunderstorm, with tons of planes circling overhead, all waiting to land and all needing to land,” said Aron, paraphrasing a metaphor he said studio executives shared with him.

Commenting on theatrical windows in Q&A, Aron referenced a “landmark agreement” with Universal in April suggesting there were “other ways than the hide-bound traditional way to release movies that could be done in a way that was beneficial for our studio partners and for AMC as a theater chain.” On Warner's release of titles to its company's streaming service HBO Max, Aron said: “We put out a very clear statement that we were not willing to let Warner Bros. advantage its streaming service at AMC shareholders' expense."

AMC has an agreement with Warner to assure “any changes in their strategy are being done in ways where AMC shareholders benefit as opposed to being penalized,” said Aron in Q&A, noting AMC doesn’t discuss film terms publicly. The theater chain is “willing to engage with every major studio on the same topic,” he said, expressing hope that studios can “adjust the business relationships between us and our studio partners such that they can support their streaming services and their theatrical releases -- and do so not at our expense.” Warner didn't comment Thursday.

Aron noted the 100 millionth vaccine injection will take place in the U.S. this week as the country is vaccinating people at a rate of 60 million-90 million monthly. Despite AMC's extensive health protocols, “the real salvation of our company will be because of vaccination,” he said. He was also positive about upcoming stimulus payments.

Wedbush’s Pachter pointed to May as “the first window of opportunity for studios and theaters to test moviegoer demand.” Based on the fast-moving developments in vaccine pace, movie release slates and theater reopenings, the analyst updated estimates to “reflect less conservative box office assumptions.” Pachter believes “demand for theatrical content is high, and plenty of high-quality content is awaiting audiences.” The stock closed 4.4% higher Thursday at $10.28.