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AMC – Terrible Quarter

I just finished reviewing the AMC quarter. I am surprised that they still couldn't turn a profit from either a EBITDA or CF perspective, given the return to theatres and pandemic normalization.

Revenue growth surprised me, but cost containment was disappointing, especially film gross margin (admissions – film costs) of only 50% (58%, 58%, 53% and 57% in prior 4 quarters), which is the lowest it has been in a while. I guess this is what peak volume margins look like since Hollywood extracts tougher deals in post-pandemic times than during the pandemic.

The biggest problem is the balance sheet. FCF was -117m. This means the business itself lost $117m in this supposed recovery quarter. I see the revenue recovery, but not the earnings. For the first half of 2022, the company has lost $450m running this business. They need to turn it around, quickly. I'm not sure how they do that given the pandemic recovery should have helped them. The net cash position is the worst it has been in 4 quarters: -4.390B (prior 4: -3.661B, -3.813B, -3.808B, -4.333B).

I have always hoped the "Apes" make a lot of money as I have no axe to grind. As an impartial referee, this isn't going to cut it. Profits are necessary. All the shenanigans with stock dividends, mining investments, etc. are all a distraction. The core theatre business has to make money. This was supposed to be the quarter. Didn't happen. When will it?

Disclosure: Short a small amount of AMC in my trading competition with Matt Kohrs.

EDIT: I should note they did have positive EBITDA, but it was quite low. At $80m (1H22 only $13m), a run rate of $320m and a multiple of 20x EBITDA (very generous), the business would be worth 6.4B, which when paying off the debt would result in only 2.0B of equity value, or $4 per share. The business has to improve.

Submitted August 05, 2022 at 02:24PM by martinshkreli
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