AMC Q1 2023 Investment Note
AMC narrowed Q1 losses and expected a Hollywood box-office boost this year
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Key Takeaways:
Attitude: AMC theatres across the globe welcomed nearly 48 million guests in the first quarter. The first quarter of 2023 and fourth quarter of 2022 mark the first two consecutive quarters of positive Adjusted EBITDA since March 2020. According to Adam Aron, the CEO of AMC, "We kicked off 2023 by continuing on a positive glide path to recovery, with more than a 21% growth in total revenues and a $69 million improvement in Adjusted EBITDA compared to the previous year. We will continue our fight to preserve our agility and to remain on a recovery trajectory as we work hard to position AMC for long-term success."
Product & Service: In the last month, AMC scaled up the supply chain, with the distribution of AMC's ready-to-eat popcorn hitting the shelves at approximately 2,600 Walmart stores and for shipping nationally in the United States through walmart.com. AMC's Microwave popcorn was also introduced at that time at Walmarts across the country. As was the case back in March, sales are brisk. AMC believes that its home popcorn will turn into a substantial business. The company is currently exploring opportunities for its eventual expansion. Besides, AMC launched its branded credit card recently. Before that, 80,000 people signed up on the waitlist to be notified when the AMC credit card was being launched. For the movie business, many compelling movies are coming in the next few months for AMC, like GUARDIANS OF THE GALAXY VOL 3; THE LITTLE MERMAID, ELEMENTAL, FAST X, SPIDER-MAN: ACROSS THE SPIDER-VERSE, MISSION IMPOSSIBLE – DEAD RECKONING PART ONE.
Guidance: AMC expects the net CapEx for 2023 to be in the range of $150 to $200 million. For the industry level, the management believes the 2023 domestic box office will be up 20% to 30% over last year. Moreover, the management believes Q1 2023 is just the tip of the iceberg for what's to come in the remainder of the year. To that end, Q2 2023 has already begun with the notable success of THE SUPER MARIO BROTHERS MOVIE, currently the highest-grossing movie of 2023 and over $1 billion in ticket sales worldwide. AMC seems to stand ready to welcome movie-goers in significant numbers. "When our studio partners showcase their magical storytelling, there is robust demand to be realized at AMC theatres. We could not be more optimistic about the prospects for the 2023 box office, except to say that 2024 looks even better." Said CEO Adam Aron.
APE units: In September 2022, AMC launched an at-the-market (ATM) equity program to sell up to 425 million shares of its AMC Preferred Equity Units (APE units). Since the inception of the ATM in September 2022, as of March 31, 2023, AMC had raised gross proceeds of approximately $309.1 million before commissions and fees. During Q1 2023, AMC raised gross proceeds of $80.3 million by selling approximately 49.3 million APE units. During the second quarter of 2023, AMC raised additional gross proceeds of about $34.2 million before commission and fees. Currently, no APE units are available to be issued under the 2022 ATM equity program and board authorization.
Earnings Q&A
Q: Can you comment on the possible impact of the Hollywood writer strike on AMC and particularly the availability of new movies, perhaps in 2024?
Adam Aron: We're very sympathetic to the real problems that exist for members of the writers. Streaming has changed the landscape of television and the economics of what writers earn. We hope that the Hollywood producers and writers guild can work in good faith to craft a good solution for all parties. As far as its impact on AMC and the movie industry, if this is a short strike, like short -- I mean short like I don't mean days, I mean months, its impact will mostly be felt on television programming because the movies for '23 and '24 have pretty much been written. In many cases, they've already been filmed. And I think only a very prolonged writer strike would have a material impact on the movie theater industry or AMC.
Adam Aron: We're very sympathetic to the real problems that exist for members of the writers. Streaming has changed the landscape of television and the economics of what writers earn. We hope that the Hollywood producers and writers guild can work in good faith to craft a good solution for all parties. As far as its impact on AMC and the movie industry, if this is a short strike, like short -- I mean short like I don't mean days, I mean months, its impact will mostly be felt on television programming because the movies for '23 and '24 have pretty much been written. In many cases, they've already been filmed. And I think only a very prolonged writer strike would have a material impact on the movie theater industry or AMC.
Q: Are there any plans to enhance or expand our AMC loyalty programs?
Adam Aron: AMC has three key marketing programs: A-list, AMC Stubs (with two tiers: Insider and Premiere), and outbound communications to loyalty program members via email, push notification, and text. A-list is a subscription program that allows members to see up to three movies a week for a monthly fee, while AMC Stubs rewards customers for their spending at AMC theaters with discounts and freebies. The COVID-19 pandemic impacted these programs, but AMC is working to rebuild them and has seen positive numbers since reopening. Regarding the A-list, there are plans to enhance the program in the future. One area of focus is addressing churn, where some A-list members drop out of the program each month. AMC aims to communicate directly with these former A-listers and try to retain them as customers. As for AMC Stubs, a variety of initiatives are being tested in certain markets to determine which ones will be most appealing to consumers. Once successful initiatives are identified, they will be rolled out nationwide. Finally, AMC's communications program is ramping back up, and the company plans to communicate with loyalty program members based on their specific moviegoing preferences. This personalized approach is intended to enhance customer satisfaction, loyalty and to encourage repeat business.
Adam Aron: AMC has three key marketing programs: A-list, AMC Stubs (with two tiers: Insider and Premiere), and outbound communications to loyalty program members via email, push notification, and text. A-list is a subscription program that allows members to see up to three movies a week for a monthly fee, while AMC Stubs rewards customers for their spending at AMC theaters with discounts and freebies. The COVID-19 pandemic impacted these programs, but AMC is working to rebuild them and has seen positive numbers since reopening. Regarding the A-list, there are plans to enhance the program in the future. One area of focus is addressing churn, where some A-list members drop out of the program each month. AMC aims to communicate directly with these former A-listers and try to retain them as customers. As for AMC Stubs, a variety of initiatives are being tested in certain markets to determine which ones will be most appealing to consumers. Once successful initiatives are identified, they will be rolled out nationwide. Finally, AMC's communications program is ramping back up, and the company plans to communicate with loyalty program members based on their specific moviegoing preferences. This personalized approach is intended to enhance customer satisfaction, loyalty and to encourage repeat business.
Q: What are AMC's plans to expand theaters in new markets within the U.S. and perhaps in other countries?
Adam Aron: Our plans to expand our theaters involve continuously evaluating our fleet of theaters to remove any money losers and add new theaters where we see growth opportunities. We've closed 150 of our theaters since the pandemic hit, but we've also acquired or built 66 new theaters that have been profitable. We plan to continue this strategy going forward. For example, we recently bought just under half of the ArcLight/Pacific circuit in California, and the theaters we acquired have been among our highest-grossing theaters. We've also succeeded with our new theater at the Westfield Mall in Topanga. We're open to acquiring more theaters from other chains, both in the U.S. and internationally in Europe, as long as they fit into our network and are financially attractive.
Adam Aron: Our plans to expand our theaters involve continuously evaluating our fleet of theaters to remove any money losers and add new theaters where we see growth opportunities. We've closed 150 of our theaters since the pandemic hit, but we've also acquired or built 66 new theaters that have been profitable. We plan to continue this strategy going forward. For example, we recently bought just under half of the ArcLight/Pacific circuit in California, and the theaters we acquired have been among our highest-grossing theaters. We've also succeeded with our new theater at the Westfield Mall in Topanga. We're open to acquiring more theaters from other chains, both in the U.S. and internationally in Europe, as long as they fit into our network and are financially attractive.
Q: Can you comment on the sale of AMC-branded retail popcorn? What are the initiatives or plans?
Adam Aron: We only launched popcorn at home a couple of weeks ago. We have said that sales for the popcorn are brick. I'll reveal one for the first time today, which I'm particularly excited about. We noticed recently, as a result of the pandemic and the supply chain shortages, that candy manufacturers had increased their prices to us by a huge amount. Some candy makers increase their cost for wholesale candy by as much as 33% in a one-time bump. That's kind of thinking very hard about our candy. And we realized that we could manufacture a private-label candy brand to very high-quality standards. It is priced less than our current candy and has a higher profit margin because our cost to manufacture the private label brand is so much less than the normal brands you've seen in our theaters for years. This doesn't mean we're going to discontinue our branded candy. Of course, we'll continue it. But I would expect that sometime in late 2023 or early '24 if our purchase department doesn't get off of taster. But I'm going to hold out for late '23 when we can introduce a private label brand of popular candies in our theaters, offer them to consumers at a lower price and achieve a higher profitability in doing so. And for the people who want the branded candies, we will showcase them to all their beloved ones too.
Adam Aron: We only launched popcorn at home a couple of weeks ago. We have said that sales for the popcorn are brick. I'll reveal one for the first time today, which I'm particularly excited about. We noticed recently, as a result of the pandemic and the supply chain shortages, that candy manufacturers had increased their prices to us by a huge amount. Some candy makers increase their cost for wholesale candy by as much as 33% in a one-time bump. That's kind of thinking very hard about our candy. And we realized that we could manufacture a private-label candy brand to very high-quality standards. It is priced less than our current candy and has a higher profit margin because our cost to manufacture the private label brand is so much less than the normal brands you've seen in our theaters for years. This doesn't mean we're going to discontinue our branded candy. Of course, we'll continue it. But I would expect that sometime in late 2023 or early '24 if our purchase department doesn't get off of taster. But I'm going to hold out for late '23 when we can introduce a private label brand of popular candies in our theaters, offer them to consumers at a lower price and achieve a higher profitability in doing so. And for the people who want the branded candies, we will showcase them to all their beloved ones too.
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Disclaimer
This article is a script from the AMC Q1 FY23 earnings conference call. In order to facilitate reading, we have made appropriate cuts and revisions. This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Before investing, please consult a licensed professional. See this link for more information.
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Shuseido : The whole world is in transition from pandemic to endemic encourages people back to normal life.
AMC should be greatly benefited by this. Hope the management team can bring the glory back to AmC!
This is a volatile stock, trade with plan!
费北敬 : This AMC is the first share i learn my wheel strategy, thanks to this share that i learn how to wheel.
TLim77 : Used to sell puts on AMC due to it's low price. Thankfully, I stopped after it turned into a meme stock. Greed could have taken over me and ended up holding the bag, which I am not a particular fan of the stock.
quekky : with the whole opening up, hopefully more people will go to the movie theaters more. Hope that AMC will produce more movies in future too
sociable Dingo_8604 : We see people going to theaters more now as we move away from Covid19 restrictions. It will still be challenging as it needs to compete with streaming apps like Netflix and Disney+. But nothing beats the atmosphere and sound systems of a cinema or theater.
Xixi29 : Seeing high volatility in AMC’s share for the past week, will monitor further before making any decision. As we have moved out from the pandemic, AMC’s book should show favorable numbers soon.
xiaoliurb0916 : This AMC is the very first share i try my trading skills, thanks to this amc and moomoo for the great learning opportunity.
GodSpeed289 : The popular “meme stock” may soon make its next big move. Be mindful of the downside risk, though. It all has to do with AMC management's plan to convert APE units into common shares, which will likely continue to create volatility in its stock price. Also, it is possible that until the class-action lawsuit hearing claiming that AMC management breached its fiduciary duty by diluting the voting power of AMC's Class A stockholders, AMC shares will suffer an extra dose of volatility, not necessarily related to its financial results.
102392341 : Once an ape, always an ape. I miss those AMC days, together, we are strong! I hope one day, I can see you rocketing to the moon again.
mizmo : I can't wait for this court case to be handled and any arbitrage trade to be over. This stock deserves better and has been battered and bullied, a lot. like the superheroes in the movies though. we're going to take down the bad guys and come out and in triumph!
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