I mentioned in my previous AMC article thatSpider-Man: No Way Homedefinitely saved the company's final quarter of 2021. The domestic box office was on pace for only around $1.5 billion in total grosses for Q4 prior to the blockbuster arriving in December, but strong viewership pushed theater grosses above $2 billion for the three month period. That number was critical, because it was roughly what AMC needed to get its adjusted cash flow metric to be positive, and as I pointed out, maybe be truly cash flow positive.
Based on where the domestic box office had been in recent quarters and what AMC had reported for its quarterly revenues so far in 2021, I was projecting that Q4 2021 revenue would come in a range of $1.086 billion to $1.221 billion. The company did just that, coming in at $1.172 billion, its strongest quarter of the pandemic so far. This was a beat of street estimates for $1.12 billion, but AMC had beaten expectations in all but one quarter in the past four years, so a beat wasn't a major surprise.
For Q4, AMC says it generated operating cash of $216.5 million. However, this is an adjusted metric that excludes items like deferred lease repayments and cash interest payments. The company's true free cash flow was just $8 million for Q4. That included maintenance capital expenditures in Q4 that were basically equal to the first nine months of 2021, so AMC is having to start spending some capital again. Also, total cash for the quarter appears to be down about $20 million from Q3 ending levels, remaining around $1.6 billion. Investors will have to wait until the earnings report for a full balance sheet update.
While Q4 may look like an okay quarter in the end, the company is not out of the woods just yet. According toBox Office Mojo, the domestic box office in January saw grosses of just $386 million, compared to $622 million in October 2021, the first month of Q4. Obviously, Q1 has some seasonal impacts and worse weather, andit's a shorter quarter as well. The Omicron variant of Covid-19 may also be pushing consumers to stay home, and there aren't any major releases set for the current three month period. Unless something dramatic happens, Q1 is going to be much weaker than Q4, which will likely result in more cash burn and weakening financials for AMC.
As for AMC shares, they are bouncing right now on the headlines, with some of this being help now that the market has come back a bit from recent lows. This was a stock that was around $43 back at Thanksgiving, and last week it hit a low of $13.40. It's not a surprise to see the stock bounce a couple of dollars on these headlines, but just remember thestreet sees the nameas only worth $10.45 currently.
In the end, AMC's preliminary Q4 results might have some decent headlines, but the numbers aren't exactly a major surprise. We knew the box office finished the year strong, but it's off to a very weak start so far in Q1. Even with more than $1.17 billion in revenue for Q4, AMC only generated free cash flow of $8 million, and the company continues to have a net debt position in the billions. We might be seeing a bit of a dead cat bounce in the stock currently, and if markets retest their recent lows, AMC will likely lose a good chunk of these gains from the past few days.
SOURCE: seeking alpha
Comments