AMC’s revenue plummets by more than 90 percent as theaters remain empty

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AMC Entertainment didn’t try to hide the immense financial duress the company has faced the last several months and the increasingly uncertain future that lies ahead if AMC can’t find new ways to make cash.

The company posted a revenue of $119.5 million in its third quarter, down 91 percent year over year. The same quarter last year brought in more than $1 billion. AMC noted in its earnings that it’s “operating approximately 539 of its 600 domestic locations,” as of October 2020, but cities like New York City and Los Angeles remain big obstacles. The issue is getting people into those theaters on a consistent basis without any big movies to encourage attendance. On Monday, the company also filed new documents stating it was trying to sell 20 million class A shares in an attempt to secure just under $50 million.

“The duration and impact of this pandemic are still affecting us to this day and are certain to continue to affect our results going forward,” CEO Adam Aron said in the report.

AMC has been warning for months that it faced a dire financial situation. In mid-October, AMC said it would likely run out of cash if the company didn’t find a way to bring in some form of substantial revenue while studios delay their films and theaters remain closed in major metropolitan areas like New York City and Los Angeles. Aron previously told CNBC the company is focused on fundraising, not bankruptcy rumors that spurred after public documents filed suggested that could be a possibility.

There are a few revenue methods for raising cash to help tide things over that AMC laid out in those documents, including negotiations with landlords over theater lease payments and starting joint ventures with other business partners (including studios like Universal Pictures). The company also suggested it could potentially sell off some of its assets. As it stood in October when AMC filed public documents, however, “at the existing cash burn rate, [AMC] anticipates that existing cash resources would be largely depleted by the end of 2020 or early 2021.”

Without any major blockbusters to drive people to theaters, and with coronavirus cases rising again in states across the country, things are likely to get worse in the immediate future. In those same public documents, AMC’s chief financial officer, Sean Goodman, warned that even if AMC can raise some cash, it might not be enough to stave off possible bankruptcy.

“Our ability to be predictive is uncertain due to the unknown magnitude and duration of the COVID-19 pandemic,” the documents read.

Despite all of the financial turmoil the company is facing, Aron spent the majority of the company’s earnings call telling analysts and investors that it remains focused on raising capital. This included reciting one of Winston Churchill’s famous World War II speeches about holding strong and marching forward; the insinuation seemed to be that AMC was also not giving up without a fight. The CEO reiterated that the company has “sufficient liquidity to get through the beginning of 2021.” The big question is whether studios will actually release films they’ve delayed from 2020 into 2021 on time.

Take AT&T-owned Warner Bros., for example. The company released Tenet globally, and while the film performed well in international markets, it underperformed in the United States. On the call, Aron said he’s talked to Warner Bros. executives and Warner Bros. is “desperately trying to hold on to their Christmas release of Wonder Woman 1984.” And AT&T CEO John Stankey acknowledged on his own recent earnings call that executives aren’t expecting a heavy return to theaters in early 2021.

“We’re not optimistic,” Stankey said on the call. “We’re not expecting a huge recovery in theatrical moving into the early part of next year. We’re expecting it to continue to be choppy.”

With studios like Warner Bros., Disney, and Universal, the companies can pivot some of their titles to streaming exclusives. This could help grow HBO Max, Disney Plus, and Peacock respectively. The companies, alongside studios like Sony and Paramount, can also release their movies as digital exclusives, selling them on digital retailers like Amazon and iTunes. Or, as we’ve seen happen multiple times over the last few months, studios could sell their titles to streamers like Netflix, which are seeing massive growth over the last few months as people stay home and need new titles to satiate consumer demand.

Aron said on the call that he’s aware streaming is taking a priority for many of the studios that also release titles theatrically. But he also says that though a number of movies have shifted to streaming or digital releases, “some 44 major titles have moved from 2020 to 2021 to play theatrically” as well.

His hope is that, like with Universal, many studios will work more closely with AMC. Universal currently has a much shorter release window (the time that a film must play in theaters) before it can appear on digital marketplaces. As part of the deal, AMC also receives some portion of the sale revenue for copies of films sold by Universal through VOD.

“AMC is not stuck back in 1955. We are willing to consider alternate models,” Aron said. “We understand the world of streaming is upon us. We believe it optimizes our profitability and the studio’s profitability if they can have a combo of theatrical releases and streaming.”

The point is that studios have other options; AMC would like to find a way to work with those studios. While theater companies are trying to find ways to survive, they’re also caught in a cataclysmic shift when studios are pivoting faster to direct-to-consumer entertainment (streaming). Warner Bros. and Disney would like to be in theaters. The companies make billions of dollars every year through global box office revenue. But while Disney and Warner Bros. have digital routes to hold things over until things do start to return to some form of normalcy, AMC wants to find ways to partner in order to make it out of the pandemic.

Update November 2nd, 7:08PM ET: The story has been updated to include additional information from AMC’s earnings call.

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