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AMC reports after the bell — here’s what to expect

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  • CNK
  • NCMI
  • IMAX
  • AMC

Macquarie Group senior analyst Chad Beynon discusses his expectations for AMC, which is set to report second-quarter results after the bell on Monday, as well as his outlook for the movie theater industry.

Video Transcript


JULIE HYMAN: AMC Entertainment, set to report second quarter results after the bell today, and joining us now to discuss what to expect is Chad Beynon He's Macquarie Group senior analyst. Chad, in a much as the numbers matter to the diehards for AMC, let's talk about what to expect here. As Brian Sozzi mentioned earlier, Cinemark reported late last week, and perhaps we can extrapolate some encouraging things for AMC. What is your outlook?

CHAD BEYNON: Sure, thanks for having me, Julie. So a couple of the highlights we talked about from Cinemark, and then also a few of the other chains that have released second quarter earnings. What we saw was revenues were generally off roughly 70% versus the two-year comparable period back in Q2 2019. However, the big positive for everybody was actually an opportunity to break even on cash flow. And that's what we saw from Cinemark, from Marcus. IMAX was another company. A little bit of a different business model, but again, they're burning less cash or actually no cash, which is positive going forward.

But on the core fundamentals, clearly, we're seeing lower demand for movies that are coming out. That was evidenced this weekend with "Suicide Squad," which came in a little bit below expectations. For the back half of the year, we were expecting that US admission revenues would be off somewhere between 10% and 25%. We've brought down our estimate. And then that brings down our estimate for 2022.

BRIAN SOZZI: Chad, do these companies, AMC, Cinemark, do they still have that access to capital they need potentially later this year?

CHAD BEYNON: I think AMC was able to address these issues in the last quarter. They'll talk about that tonight on the earnings call. They still have significant amount of deferred rent that they will have to pay. These weren't debt forgiveness rental agreements. But yeah, currently, they have some cash on the balance sheet. They'll burn less. I don't know if they'll be able to access the markets as they were in the first and second quarter just given what happened with the proxy and the lack of options for AMC.

BRIAN SOZZI: Out of all the main theater chains, you see some of the stocks we're showing on the screen, AMC, Cinemark, IMAX, National CineMedia, is there one theater chain that you're concerned that may not survive this?

CHAD BEYNON: From a margin perspective, IMAX is a very asset-light business model. They have a clean balance sheet. They're in the best position. They have global diversification. That stock has been hampered just with what's going on in China from a headline standpoint. Cinemark, on the traditional exhibitor space, they were generating 25% margins pre-pandemic.

When we talked to them on Friday, they actually said they still believe they can get back to those levels. They have very low cost in terms of utilities, labor, wages, et cetera. And they're more outside of urban markets. AMC is always the one, just because their rent is extremely high. They're center city, New York, LA, Chicago, some of these bigger markets, and it's just going to be harder for them to generate positive margin and positive free cash flow.

MYLES UDLAND: And Chad, thinking about just the general setup for the movie business, I mean, we heard a very different tone from Viacom last week when they came out with their results, trying to be very, and we talked to the CFO on the program, I thought they were trying to be extremely explicit in their talent friendliness, let's say, relative to some other brands that we'll hear from later this week. Have we maybe underrated the shift that's happened though with the distribution of movies during the pandemic? And have we opened a Pandora's box here, to use kind of the industry's phrase, and is that maybe not being reflected in some of the theater chains quite as much as it ought to be?

CHAD BEYNON: I think we can't be naive in the conversation around theatrical windows. We won't go back to three to four months. Pre-pandemic, the average was about a 75-day window at the theater versus at the home. Now it's certainly coming in somewhere between the 30 and 45 days. I think all the studios believe that this is the correct model. They still do believe that there is something that is created and generated at the theater.

But the consumer, they want things now. They can't wait three or four months like maybe they would years ago. So they've had to adjust. And I think that's just something that we're going to have to live with. And with the day and day releases, as we've seen with some of these movies, that's going to be a very tricky situation, because like we saw with Scarlett Johansson, a lot of the artistic and financial benefits that come in the industry aren't being rewarded like they were in the prior business model.

JULIE HYMAN: And Chad, I wanted to ask about "Suicide Squad," because it did not meet its projections in the theaters over the weekend. And what are we to take away from that? Are we to take away that people are worried about the Delta variant and there are some bigger implications for the theater business? Is it just because of this movie? What's your takeaway?

CHAD BEYNON: Yeah, I think we had lowered expectations as a result of mask compliance and the Delta variant. But this did come in below, to your point. Part of it may have been as a result of prior reviews on the predecessor movie. Part of it I think was probably the Delta variant. It's really, it's tough to tell. I think we were seeing some good momentum in the movie theater going business. We're seeing that with premium content, premium showings. That's resulting in good ticket prices and really a movement towards IMAX or premium type showings.

So we were slightly optimistic that this could come in above expectations. It's really the romantic comedies and some of those lower budget movies, those are going to take a lot longer to recover. But this is certainly hurting the names. I think that's one of the reasons why the stocks are down today. They all sold off hard in July when their reopening name sold off, and I think this will put pressure on them for the next month or so.

JULIE HYMAN: Hey, Chad, we've been sort of joking this morning about our own market research we've been conducting on different topics. Have you been going to the movies? What have you been seeing? What have you been noticing? Are people buying more drinks, less? I mean, what's happening out there?

CHAD BEYNON: I personally haven't gone back to the movies yet, just given the approach that my family is taking. I think um, it's a tricky one, because the numbers that we're seeing clearly show that there's no price elasticity. There's people that want to go do lots of things, whether it's vacationing or going out to restaurants or going to the movies, and the operators can charge whatever. And those people who want to go are going to continue to go. So we're seeing really strong pricing, but the attendance is still well off of prior levels.

You do have a slew of differentiated content that comes out in the next couple of months that'll probably get me back into that environment. But we've always said the movie theater is a place where kids can escape parents and parents can get kids, and I think parents right now aren't choosing to escape their kids, get a babysitter and go to the movies. They're doing other things that maybe they weren't able to do during the past 18 months. And this has kind of been pushed back in the priority scale.

JULIE HYMAN: And to your point, there's also, of course, safety concerns about bringing it home to your kids. So it's telling that in itself is market research that you are not there yet. And I think a lot of people are in the same boat. Chad Beynon, good to see you. Macquarie Group senior analyst, thanks for being here.