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General Category => Investment Ideas => Topic started by: txvalue on November 09, 2018, 09:02:54 AM

Title: AMC - AMC Entertainment Holdings
Post by: txvalue on November 09, 2018, 09:02:54 AM
AMC has been written up several times in other places and it is a name that will be well known to most.

Mittleman has a large position.

https://valueinvestorsclub.com/idea/AMC_ENTERTAINMENT_HOLDINGS/9309645712

https://valueinvestorsclub.com/idea/AMC_ENTERTAINMENT_HOLDINGS/6058183687


Baupost has a sizeable stake.

The stock is down big today after disappointing earnings, but I don't think the long term story is impaired. There are quite a few moving parts here with their Euro acquisitions, theatre renovations, new PE involvement, special dividend, Wanda Group pressures etc.

Interested if any board members have been following the story here or care to discuss.
Title: Re: AMC - AMC Entertainment Holdings
Post by: peridotcapital on November 09, 2018, 09:21:06 AM
Equity seems fairly valued at around 8x EV/EBITDA and low double-digit free cash flow multiple, given the long-term trends in attendance per screen. The debt looks attractive for those who have allocations to high yield corporate bonds.

FD: long the bonds.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on November 09, 2018, 12:53:52 PM
Market is right to be concerned. Attendance was up Y/Y, but ticket prices were down 6.6%.

Attendance is overwhelmingly driven by the film slate, something AMC has relatively little control over.

AMC has more control over ticket prices. The market is concerned that it's relatively unconcerned about how A-List memberships may be cannibalizing full price ticket sales. This is a mature business with plenty of operating leverage so pricing needs to stay strong.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on November 09, 2018, 02:34:37 PM
I understand what you are getting at - here are some of my thoughts Foreign Tuffett:

- A List picked up subscribers much faster than expected. They basically reached their full year goal in 5 months.
- They are reworking pricing in some of the areas where tickets are more expensive for FY 19.
- The initial data indicate people seeing lots of movies the first month they sign up for A-List and then attendance trickling down as the months go on - by month 3 the avg vistits per month was down to 2.7. I suspect they will keep adjusting until they near that 2.5/mo visit number they always reference as the magic number.

I think these things all had an impact on pricing. They are clearly tweaking the model as time goes on rather than just having static prices everyday ($5 tuesdays, more expensive tickets on the weekend etc).

The other thing to point out is that this is becoming more of a food & beverage story. They have a great margin here (85.4%)so driving attendance is important.

AMC was catching heat from everyone for not having a subscription model and now in under 5 months they have arguably the hottest offering out there. HMNY has imploded and CNK's offering is just ho-hum.

I think the biggest issue is that management is not really digging into paying down debt.  The three acquisitions are really the reason there is an opportunity here, especially with European theatres showing weakness.

It is really difficult to maintain a large dividend, big cap ex spend, a new program like A-List, a special dividend, share buy backs all at the same time when you have a mountain of debt.  I think a strategy to tackle the debt and lighten up on renovations sends this stock into the low 20's straight away. With the 2019 and 2020 movie slate this could be a $30+ stock.

My second wish is that their CEO would just directly answer questions on conference calls.  I know he is a marketing guy but simple questions are often followed by 10 paragraph response from Adam and it can be a bit exhausting.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on November 09, 2018, 04:03:34 PM
Adam is a god awful CEO.  If he was replaced I would consider buying but with him in charge forget it.  Virtually all the decisions he's made since becoming CEO have been wrong.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on November 09, 2018, 11:05:18 PM
Domestic (USA + C) box office annually is coming in at about $11B.

Just about half of that is coming from frequent (>1/month) filmgoers. They make up about 12 percent of the population, or about 43 million people.
If we call that the addressable market, we can take those 43 million people, put them on $20/month subs, and suddenly turn their $5.5B in box office into $10.3B. Add back the other $5.5B that is coming from people that are too casual to be legitimate subscriber prospects, and it isn't at all difficult to imagine a world where last years $11B in BO has been pushed into $16B on nothing more than the normal diet of biannual Marvel releases and an Avatar or two.

Now, of course converting those 1+/month viewers into subs probably means they're going to be coming a bit more often. Is this a problem?

In 1987, the average number of tickets sold per screen-week was over 900. Last year it was well under 600. And all the new screens built in the past quarter century have been way larger, with waaaay more seats than the average auditorium from the 80s. So the capacity is there, they just have to figure out how to manage the traffic.

So can they? Well, Moviepass was able to keep its subscribers through a lot of insane nudging/tech glitches/service blackouts, etc. So I'm cautiously optimistic that AMC can figure out a way to motivate it's 5+/month A-Listers to prefer Tuesdays to Friday (give them twenty cents of popcorn or something, we already know they're way less likely to buy F&B). Lots of knobs to turn there, so I don't consider it a thesis breaker.

At this point, I don't think anybody should be investing in AMC (or anything adjacent) unless they have a strong opinion on what the subscription world is going to look like when the dust settles. Despite the fact that it's all they talked about on the call, I still think they're vastly underselling how potentially industry-shifting this thing is.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on November 10, 2018, 11:29:58 AM
Domestic (USA + C) box office annually is coming in at about $11B.

Just about half of that is coming from frequent (>1/month) filmgoers. They make up about 12 percent of the population, or about 43 million people.
If we call that the addressable market, we can take those 43 million people, put them on $20/month subs, and suddenly turn their $5.5B in box office into $10.3B. Add back the other $5.5B that is coming from people that are too casual to be legitimate subscriber prospects, and it isn't at all difficult to imagine a world where last years $11B in BO has been pushed into $16B on nothing more than the normal diet of biannual Marvel releases and an Avatar or two.

Now, of course converting those 1+/month viewers into subs probably means they're going to be coming a bit more often. Is this a problem?

In 1987, the average number of tickets sold per screen-week was over 900. Last year it was well under 600. And all the new screens built in the past quarter century have been way larger, with waaaay more seats than the average auditorium from the 80s. So the capacity is there, they just have to figure out how to manage the traffic.

So can they? Well, Moviepass was able to keep its subscribers through a lot of insane nudging/tech glitches/service blackouts, etc. So I'm cautiously optimistic that AMC can figure out a way to motivate it's 5+/month A-Listers to prefer Tuesdays to Friday (give them twenty cents of popcorn or something, we already know they're way less likely to buy F&B). Lots of knobs to turn there, so I don't consider it a thesis breaker.

At this point, I don't think anybody should be investing in AMC (or anything adjacent) unless they have a strong opinion on what the subscription world is going to look like when the dust settles. Despite the fact that it's all they talked about on the call, I still think they're vastly underselling how potentially industry-shifting this thing is.

Smart thoughts, but I think you are missing a few pieces of the puzzle:

- Recliner upgrades involve losing up to 2/3s of a given auditorium's seating capacity.

- It's not just about optimizing seat capacity. AMC is constrained by its relationship with the studios, who get ~50% of the revenue from each ticket sale and, importantly, sit outside the A List system. I think studios are getting 50% of the average ticket price every time A List is used, not 50% of the revenue AMC is bringing in from the subscription. I think this dynamic is the main reason AMC's ticket price metric nosedived this Q.

This guy (no affiliation) explains the dynamic well:

https://www.youtube.com/watch?v=7-eGQf7Hx7c (https://www.youtube.com/watch?v=7-eGQf7Hx7c)

I agree with given2invest. Aron is a poor capital allocator. Carmike was a horrible acquisition.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on November 10, 2018, 12:18:49 PM
He's also a promoter.  And a liar.  I'm really surprised Silver Lake invested with him.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on November 10, 2018, 06:30:16 PM
- Recliner upgrades involve losing up to 2/3s of a given auditorium's seating capacity.

Yeah, until looking at the transcript AMC last night I was unaware of the extent of this new trend. But the fact that they were doing these conversions in the first place, I think, tells you what the capacity situation was (and still is). Wish I could get better data on average area per screen trends.

AMC is constrained by its relationship with the studios, who get ~50% of the revenue from each ticket sale and, importantly, sit outside the A List system. I think studios are getting 50% of the average ticket price every time A List is used, not 50% of the revenue AMC is bringing in from the subscription. I think this dynamic is the main reason AMC's ticket price metric nosedived this Q.

The exhibitor incentive has always been to try and shift gross dollars from tickets to concessions, and while I'm sure this has been wrestled with before in distribution agreements, the new business model is going to make it even more contentious. It's why I don't think a 50% increase in total box office is necessary a bull argument for the stock.


I agree with given2invest. Aron is a poor capital allocator. Carmike was a horrible acquisition.

I laughed out loud when this guy spent three paragraphs expressing his bewilderment that the convertible debt actually becomes MORE EXPENSIVE as the stock price increases. And then caps off the embarrassing display by confidently predicting the converts should have no impact on the valuation because, of course, the liability adjusts outside of EBITDA. I'm not sure how any company is investible with somebody like that making decisions.
Title: Re: AMC - AMC Entertainment Holdings
Post by: kab60 on November 10, 2018, 11:21:33 PM
This is the best part I think:

$665.1 million of adjusted EBITDA this year so far versus $534.3 million of adjusted EBITDA last year so far, that's an increase of $130.8 million. Can I repeat that figure for emphasis? AMC's adjusted EBITDA is running more than $130 million ahead of last year for the same nine month time period.

While the dude is giddy about getting Silver Lake onboard, I'd be nervous if I was Aaron. Those guys aren't dumb and I doubt he impresses them much.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on November 11, 2018, 08:19:50 AM
This is the best part I think:

$665.1 million of adjusted EBITDA this year so far versus $534.3 million of adjusted EBITDA last year so far, that's an increase of $130.8 million. Can I repeat that figure for emphasis? AMC's adjusted EBITDA is running more than $130 million ahead of last year for the same nine month time period.

While the dude is giddy about getting Silver Lake onboard, I'd be nervous if I was Aaron. Those guys aren't dumb and I doubt he impresses them much.

Not to mention the EBITDA y/y isn't apples to apples as one of the acquisitions wasn't completed till march 2017.  Not to mention the box office is up huge y/y.  But the best part?

Pro forma, all these chains were doing WELL over $1B in EBITDA in 2016.  The 2018 box office will be > 2016 yet AMC is nowhere near 1B in EBITDA.  That's after spending 100s of millions in "growth" cap ex on refurbishments too. 

The math does not add up.  I've spent a ton of time on this name and once owned it.  Something just isn't right.  This subscription service just makes it even more confusing.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on December 27, 2018, 12:37:20 PM
I wonder when management will become buyers of the stock in size, or act with more urgency. The special dividend they issued could buy back a huge slug of the stock at these prices. Management recently was given stock awards for hitting "goals" - but when the stock tanks there is radio silence and no buying.  Most of us would be hustling to figure out a way to buy back debt on the cheap or execute a buyback if a company we managed plunged 50%.

Barron's had an article about subscription stocks with an AMC mention and a quote from Damodaran.  The article contended that if the stock can rerate to a reasonable multiple it has the potential to run to $40 and here we sit in the $11 range. I am buying here, but I would like for a group of investors to figure out a way to get a better management team implemented. The assets are great, but it needs leadership to improve. As their CEO always says "we don't bank bodies (ticket sales), we bank dollars" - I think investors are ready for this to become a reality.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on December 27, 2018, 02:40:05 PM
I wonder when management will become buyers of the stock in size, or act with more urgency.

Dude, the guy thinks share dilution, being "outside EBITDA", is a non-factor for stock price. He's not going to do this until Silver Lake sends him polaroids of his children asleep in their rooms.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on December 27, 2018, 03:02:30 PM
I wonder when management will become buyers of the stock in size, or act with more urgency.

Dude, the guy thinks share dilution, being "outside EBITDA", is a non-factor for stock price. He's not going to do this until Silver Lake sends him polaroids of his children asleep in their rooms.

I totally agree that capital allocation is a foreign language to him - in that instance I meant buying it directly.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on December 27, 2018, 05:08:37 PM
Adam Aron is one of the worst CEOs in the history of the world.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on December 27, 2018, 07:10:37 PM
I totally agree that capital allocation is a foreign language to him - in that instance I meant buying it directly.

Haha yes, that's much clearer now. Sorry, I'm just totally fixated on that call. Every time I see a movie I think about it.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on January 02, 2019, 06:34:05 AM
This is the best part I think:

$665.1 million of adjusted EBITDA this year so far versus $534.3 million of adjusted EBITDA last year so far, that's an increase of $130.8 million. Can I repeat that figure for emphasis? AMC's adjusted EBITDA is running more than $130 million ahead of last year for the same nine month time period.

While the dude is giddy about getting Silver Lake onboard, I'd be nervous if I was Aaron. Those guys aren't dumb and I doubt he impresses them much.


Pro forma, all these chains were doing WELL over $1B in EBITDA in 2016.  The 2018 box office will be > 2016 yet AMC is nowhere near 1B in EBITDA.


Mind sharing your math?
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on March 01, 2019, 08:48:15 AM
This is the best part I think:

$665.1 million of adjusted EBITDA this year so far versus $534.3 million of adjusted EBITDA last year so far, that's an increase of $130.8 million. Can I repeat that figure for emphasis? AMC's adjusted EBITDA is running more than $130 million ahead of last year for the same nine month time period.

While the dude is giddy about getting Silver Lake onboard, I'd be nervous if I was Aaron. Those guys aren't dumb and I doubt he impresses them much.

KAB60, I have read this comment many times over the past few months and I don't quite understand it or the follow up on EBITDA by given2invest.  I read a negative tone in your post (it may just have been my misunderstanding) while the EBITDA improvement seems positive for 2018? I understand some of the comments about management but was just confused on the EBITDA piece.

I am curious to know if given2invests comment was just a mistake and I would also be curious to see the math of well over $1B EBITDA in 2016. Thanks!

In 2016 EBITDA I have this from my notes:

AMC slightly above 600m.
Euro Acquisitions 120m.
Carmike 135m
Nordic was not included since they were purchased in 2017. I end up in the 850-875 range not well over 1 billion.  I may be missing something so I'd love clarification if my notes are incorrect.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on May 23, 2019, 10:55:27 AM
The A-List subscription program now has 800k+ subs and is the largest movie subscription program in the country. The pace of additions has slowed to 1.2k per day but the company is estimating $3+ of EBITDA from each new user that signs up.  Average visits are now in the 2.6 range / month very close to their target number although some noise is to be expected in that figure depending on the months movie slate.

The program has been taking share from other theatres and no large chain has a competitve subscription offering to date. Food & Beverage has also been making progress.

Q1 was very weak but the rest of 2019 is setting up well. They have guided for CapEx to come down over the next few years as they start to delever.
 
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on May 23, 2019, 11:08:03 AM
2020 box office gonna be a disaster compared to 2019.  Also there is no proof the subscription business is value add vs. pre subscription model.

And the CEO is one of the worst in the world.   

Hard pass.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on May 23, 2019, 12:10:25 PM
given2invest thanks for the reply - I'd be interested to know your answer to my question a few posts above so you could clarify your EBITDA numbers.

2020 certainly looks like a down year vs this year.  2015 was a record box office year and everyone was worried for 2016 because of a lack of blockbusters. When the dust settled 2016 set another record because of the strength of the lower budget movies while the top movies were down 3% year over year.  History may not repeat itself, but the industry is a more resilient than its given credit for, even in recessions and 2021 is shaping up nicely for big movies.

As for the subscription model if industry chatter and other executives are talking about A-List pulling away attendance from their theaters I think there is something interesting to that. To your point this new attendance may in fact be less profitable at the moment but remember only half of the current A-List members were in AMC's loyalty program before so it is drawing in a new customers as well.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on May 24, 2019, 12:00:27 PM
2020 box office gonna be a disaster compared to 2019.  Also there is no proof the subscription business is value add vs. pre subscription model.

And the CEO is one of the worst in the world.   

Hard pass.

Love beating up on this guy.

I think the subscription thing is a big winner (AMC's offering is structurally going to be the best, and the winner-take-all dynamics are strong). But they ultimately still have to figure out how to retain a decent share of the surplus and not end up just being a pass-through for studio profits. In other words, you can't afford to just have a steady-goes-it CEO sitting there and let the business handle itself. You need a guy who you are confident can figure out a win-win deal with studios that doesn't leave AMC high-and-dry and searching for ways to desperately push utilization down.

They're basically price-takers for the DisneyPixelMarvelLucasFox slate, and Disney can periodically check on on AMC's 10-Qs to figure out how to aggressively to reprice.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 06, 2019, 08:55:10 AM
Johnny,

I agree with your points, all valid. As for Given2Invest I think your earlier numbers are incorrect, it looks like you (or someone else) may have posted the incorrect number narrative on another site and been corrected there.

I look at AMC this way - how often do you get a chance to buy a company that could have 2019 EBITDA that matches its current market cap?

The theatre business is resilient during recessions and as you noted their subscription offering is very likely to become the most popular for the foreseeable future.

If I am Silver Lake I am trying to figure out how to buy out Wanda and take this thing over. Aron has made some interesting comments Re: Silver Lake and when they will convert shares and the timing of that and I wonder if there is a little smoke/fire there. Of course it could also just be Aron being Aron.

Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 07, 2019, 07:41:10 AM
One other interesting note, the stock had dropped 12 straight days before today. A user on twitter spoke with IR and AMC said that the new (non cash) accounting change that shows leases as debt on the balance sheet was interpreted incorrectly by financial sites like Bloomberg. I haven't been able to verify this but yesterday Bloomberg listed AMC's debt chart on their website and today this chart for AMC has been removed while other companies still display normally.

If this is true then computer models have been causing heavy selling for the past two weeks and it would explain the divergence from other consumer/theatres stocks that has taken place with no corresponding negative news. Another example of Mr. Market presenting opportunities for those investors paying close attention.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on June 07, 2019, 07:43:04 AM
I don't buy that excuse. How dumb does IR think the market / computers are? FWIW, I've spoken with AMC's IR team lots of times before and they are not that bright.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 07, 2019, 09:01:06 AM
lol at that explanation
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 07, 2019, 09:05:23 AM
I get that the stock is not popular and you all may be right that the excuse/explanation is weak.

I still like to hear other thoughts and opinions on the company considering it is down so much with the outlook looking reasonable over the next 3 quarters.

Given2Invest you are back - I'd love a response to my question about your EBITDA numbers earlier in the thread.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 07, 2019, 09:21:27 AM
I didn't respond to your EBITDA question because you already knew the answer; I was off by a little bit but the pro forma #s from 2016 or whatever didn't include EBITDA from a $1B EU acquisition either. 

I have no idea why the stock is down.  I am not involved and wouldn't be at any price.  The risks are numerous, namely the CEO is a complete buffoon and can't be trusted.

Silver Lake got a sweetheart deal with the convert.  It has a reset function and, if it resets, AMC can only take it out w/ cash if they pay them a 15% IRR.

The box office over the next 18 months will not outperform.  2020 very likely might be a disaster given the slate.  There is huge operating leverage in this business.   Disney controls essentially the entire box office.  They are about to launch a streaming service that will take some of their content direct to TV.   They will also have tremendous leverage over the exhibitors w/ price. 

Currently AMC has no deal w/ Disney or anyone else on how subscription should work.  I think this is very risky.  They are just paying them full ticket prices.  Hey, at least if the box office is terrible, they should make a lot on the subscription business as people don't go to the movies!
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on June 10, 2019, 12:32:14 AM
I just want to note, as somebody who has been using the product quite a bit, a few bullish observations (not enough to make me long just yet)

1. The quality of the overall experience (From the app design to the reliability of the back-end to the relatively seamless check-in process in-theater) has really impressed me. You really don't expect to see something so well executed from a non-software company. It's not a trivial set of things going on here either, and I've yet to experience any sort of failure or hiccup. Maybe this is one of those things where the top-level guys are so incompetent it actually creates a sort of distraction-free paradise for mid-levels to get things done. Maybe they just lucked out when they threw a dart at the contractor board.

2. All of us being autistic penny-pinchers, we may fail to give full credit to the food/beverage angle of this business. I suspect there may be something going on here where somebody getting "free" admission to the theater imagines they are now starting off at a -$12 cost and have some house money to play with in the concessions area. Somebody in my family at least.

3. Assuming they're never able to work out some sort of special pricing deal for subscription admissions with the distributors (which I do), I suspect they'll have quite a bit of room to change up the shape of the offering, not just on the price side but on the admissions as well. Once you have exploited the word of mouth and reached as many subs as possible, I think you can choke back from 3 to 2 showings per week and really not lose many customers, etc. I was quite shocked to see just how many customers stuck with Moviepass despite its monumental failures and panicky revamps of the actual product offering.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on June 10, 2019, 06:10:31 AM
I continue to think that A-List's popularity is, in part, due to it being significantly under priced:

A-List members get both Stubs Premiere benefits + earn Stubs Points on their monthly membership charges. I calculated last year that the latter benefit alone is worth $48 in Stubs points annually.   


Earlier this year I bought two tickets to see "Avengers Endgame" in a premium-type theater for $18 each. Another couple with A-List paid $0 for tickets to the same showing.

Let's assume they saw 1 more film that month (@ $10 ticket price). Let's also assume a 50/50 theater/studio split. Finally, let's assume 1 moviegoer instead of 2:

Not A-List:
($18 ticket + $10 ticket) * 50% take = $14 to AMC (and $14 to studios)

A-List
$20 monthly subscription fee - $14 to studios = $6 to AMC


Don't even get me started on AMC's economics for A-List members that are seeing 1 or more movies a week.
Title: Re: AMC - AMC Entertainment Holdings
Post by: stahleyp on June 10, 2019, 08:11:54 AM
According to this AMC gives $8.99 to the studios:

https://www.fool.com/investing/2018/07/10/theres-1-potential-danger-in-amcs-new-subscription.aspx

How much will AMC pay the studios?
The hangup for studios is that A-List pays studios a cut of admissions using a ticket price of $8.99. The problem? A-List members are probably going to see films in deluxe formats (since it doesn't cost extra), which carry a higher price. In fact, AMC's average ticket price was $9.32 in 2017 ($9.68 in domestic markets), with deluxe offerings in big-city markets being much higher. So studios will make less from a person seeing a film via A-List than if they'd seen it without the program.

AMC justified choosing the $8.99 by saying that is the figure used by the new monthly plan of rival Cinemark, which offers only one film per month and 20% off concessions (with unused tickets rolling over to the next month). The catch: Cinemark's average ticket price in 2017 was only $6.48 ($7.71 domestic), as it operates in smaller markets than AMC. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 10, 2019, 08:19:01 AM
Foreign you are correct in that basic calculation but I think there are a few notes worth adding.

- People buy food & beverage at the theater, on average $5/person. Management has said that that the average A-List sub spends less than this. We know food has 85% margins so lets call it $3/ person into AMC's pocket per A-List visit. As for Stub points if I give you a gift card for $100 of popcorn it is only costing me $15 dollars.

- Your calculation ignores take alongs, if you have A-List and a friend or family member doesn't you will get them to see the movie at an AMC rather than a Cinemark.

- The price is no longer $20 across the board, new users are often paying 21.95 or 23.95/mo.  AMC has said repeatedly that customers don't notice small price increases, for example a dollar up charge for a ticket on a weekend, or changing discount Tuesday to be slightly more expensive.


- I think that they intentionally underpriced it to get traction and prevent others from being able to match/beat the offering. Again Johnny hit on this with the winner take all dynamic. AMC has so much of the countries big cities blanketed that it doesn't make sense to get two memberships to see the same movies. It's not a situation like subscribing to Netflix and Disney+.

- The amount of A-List visits is growing, but still only around 10% of total theater attendance.

- They have said that moving forward on average an A-List sub will provide $3 Ebitda per sub per month.

- I believe that AMC is paying less to the studios for an A-List visit than they are for a "normal" visit, on average as there have been some comments that the studios are not thrilled with this. (sorry to mention this twice this I was typing my reply while Stahleyp posted).
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on June 10, 2019, 08:48:45 AM
Foreign you are correct in that basic calculation but I think there are a few notes worth adding.

- People buy food & beverage at the theater. On average this is over $5/person but I don't think it is split out separately for A-List, although on calls and investor events they do say that the average A-Lister spends less than this. We know food has 85% margins so lets call it $3/ person into AMC's pocket per A-List visit. As for Stub points if I give you a gift card for $100 of popcorn it is only costing me $15 dollars. $48 annually becomes less of a big deal when you look at it this way.

- Your calculation ignores take alongs, if you have A-List and a friend or family member doesn't you will get them to see the movie at an AMC rather than a Cinemark. You can see this happening as their attendance is out indexing other chains.

- The price is no longer $20 across the board, new users are often paying 21.95 or 23.95/mo.

- I think that they intentionally underpriced it to get traction and prevent others from being able to match/beat the offering. Again Johnny hit on this with the winner take all dynamic. AMC has so much of the countries big cities blanketed that it doesn't make sense to get two memberships to see the same movies. It's not a situation like subscribing to Netflix and Disney+. AMC has said repeatedly that customers don't notice small price increases, for example a dollar up charge for a ticket on a weekend, or changing discount Tuesday to be slightly more expensive.

- The amount of A-List visits is growing, but still only around 10% of total theater attendance.

- They have said that moving forward on average an A-List member will provide $3 Ebitda per sub per month.

- I believe that AMC is paying less to the studios for an A-List visit than they are for a "normal" visit, on average as there have been some comments that the studios are not thrilled with this. (sorry to mention this twice this I was typing my reply while Stahleyp posted).

1) Food and beverage gross margin % will come down as the traditional overpriced candy and popcorn mix continues to shift more towards "restaurant food" like hamburgers and chicken fingers. Take a look at iPic Entertainment for what this looks like.

There's a reason why movie theaters have, traditionally, been run the way they've been run: operate lean and cheap, make your money on overpriced concession stands that are simple enough for 16 year olds run, take small price increases every year, and let the movie slate drive attendance. I feel like AMC is trying to reinvent the wheel. 

2) I stand corrected on this point. That said, I don't think this is a situation that will last: one way or the other, Disney is going to get its 50 - 60% of the take. Now that the Fox-Disney transaction has closed, Disney has unprecedented market share.

I don't know if this has been discussed yet, but when you apply a more realistic maintenance capex estimate, alot of the pro forma FCF disappears. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 12, 2019, 01:17:42 PM
Speaking of trying to reinvent the wheel I chuckled at the iPic reference. They have 15ish theaters (vs 1000) that are trying to be odd luxury venues with extensive menus. I don't think iPic is long for this world but they are entertaining to watch. 

Margins may come down a bit on F&B but as long as the overall spend is growing I don't think that it will be a back breaker.  I don't disagree with your overall assessment of the business though, you are spot on that there is a reason the business was run this way for decades.

I think 300m-350m on CapEx/Growth is about where things could realistically end up vs what mgmt has guided depending on how aggressive the Euro circuit is revamped, but they could also save additional money by trimming the dividend. At this point I seriously doubt it is being held for the yield by most besides maybe Wanda. The yield is now 7.25%+

For as much as Aron likes to talk and promote I am puzzled as to why the company is being so silent knocking against 52 week and multi year lows.  There is room on the buyback to retire a meaningful amount of shares but the market is so focused on debt that it might not matter. With all this in view the only recent action has been to acquire another small chain a few weeks ago that needs a refurb.

Similar to a Barnes & Noble, I continue to feel that a buyer could make a killing here.  The asset is fine, but the mgmt is just struggling after flying too close to the sun. If its not an unlikely strategic like NFLX, AMZN etc. then someone could come take a big stake and buy this thing out.  Sell off the Euro assets, clean up the debt and bounce mgmt to the curb. You do that and this thing spits out cash for years to come.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 12, 2019, 02:02:50 PM
You can be sure Wanda looked for a buyer for the whole company before they sold their partial stake at a discount...and there was none.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 25, 2019, 11:34:10 AM
Regal is said to be releasing an unlimited subscription plan in July. It looks like it will have a small upcharge for PLF showings.  All the details don't appear to be firm quite yet, but it will be interesting to watch.  If folks think A-List is not sustainable it seems unlikely that an all you can eat plan will pencil. Interesting to see if this offering draws the heavy users to Regal.

My AMC position is now full, never thought I'd be able to buy in the 9's.

Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 25, 2019, 11:55:20 AM
All a Regal all you can eat sub will do is bring a price war to the industry...won't be good for all players.  Maybe you're right they will take the heaviest users but I'd guess less than 1% actually see >3 movies a week so AMC is effectively all you can eat.

I posted this on VIC...will repost here...not sure how people can own this at any price given the 2020 box office upcoming debacle.

copy/pasted below:

Is nobody long this concerned with 2020 box office?  What is happening with 2019?  This is the 3rd or 4th weekend that has disappointed.  See this article:

https://www.boxofficepro.com/weekend-estimates-toy-story-4-childs-play-anna/

Something definitely seems wrong.  But beyond that, 2020 is setting up to be a disaster.  There is no Avengers, no Star Wars, no Frozen, and Pixar is debuting two original films.  No Lion King.   And 2019 might not even be > 2018 even with all those movies.

Go look at the expectations for 2020 movies on HSX.  It's not pretty, especially 2020 Q4. 

https://www.hsx.com/security/feature.php?type=upcoming

What if the super hero movies disappoint? 

New York Times did a long piece on the future of movies and it sure doesn't read great.  I'm struck by this comment:

"I was at a bar with a friend who directs big movies, and while we were in line for the bathroom, he was saying that movie theaters were going to go away. He was like, “Kids don’t watch movies, they watch YouTube.” Which I thought was crazy. So he goes, “Watch this.” There was a girl in front of us in line, and he said, “Hey, excuse me, what’s your favorite movie?” And she said, “I don’t watch movies.” Just randomly, he picked someone — and she was like 25, she wasn’t a child or anything. We were like, “Well, do any of your friends watch movies?” And she said, “Not really.”

https://www.nytimes.com/interactive/2019/06/20/movies/movie-industry-future.html

There is so much operating leverage in this business.  It just seems like the stock can't be owned at any price with the risk of a double digit decline in the box office in 2020. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 25, 2019, 01:04:21 PM
Spring 2019 was up over 10% vs 2018 and the "disappointment" over the summer slate is way overblown IMO. Toy Story 4 had the best opening weekend in the franchise and as a family film it will perform well this summer just like Aladdin is doing.  No one expected MIB, Dark Phoenix, Godzilla etc. to do well.

The best part is that summer year to date is only down 2.3% vs 2018 and CNN, CNBC and the NYT are all writing as if its the end of the world. Once Spiderman and the Lion King come out over the next few weeks I fully expect Summer 2019 to be outpacing 2018. I guess "YouTube" must not work in summer : )

In 2015 the top 4 movies outgrossed 2016's top 4 by 600 million dollars.  2016 still managed to beat 2015 when the dust settled. The top end of the slate matters but mid range movies can make still make up ground.

2020's slate is not top heavy, but it likely would have kept pace with 2019 had Avatar not been pushed back into 2021.  That being said films are still getting placed on the schedule so its early and a stock should be valued off the future not one year. There are now Avatar and Star Wars films coming out in each of the next 7 years beginning in 2021.

A wildcard is that AMC has opened up negotiations with NFLX again Re: playing their content.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 25, 2019, 01:11:47 PM
Netflix original content is awful and nobody is paying to see their movies in the theater with a 30 day window let alone a 90 day one. 

The articles I linked, both on the recent disappointment and long term worries, go much deeper than "one bad weekend". 

2020 could very well be -10% or worse.  Not sure how you think the stock would look past that given the leverage.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on June 26, 2019, 08:03:28 AM
There was an analyst note this week acknowledging that the recent film underperformance has pressured shares and that the balance sheet presentation due to ASC 842 is potentially preventing buyers from stepping up to offset the decline.  Multiple people have been given this same info from AMC IR who has said they are still working with Capital IQ and Bloomberg etc. to present the data in another way to make things clear. PT is $20.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on June 26, 2019, 09:06:57 AM
Every bull on VIC, here, and twitter, thinks AMC went from 15 to 9 on an accounting change causing quants to short/sell it.

This is the most ridiculous explanation of a stock decline I've heard in my entire career.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on July 07, 2019, 06:43:21 PM
Looks like Regal Cinemas will be introducing its own subscription service soon:

https://deadline.com/2019/07/regal-cinemas-unlimited-movie-ticket-subscription-program-cineworld-1202640441/ (https://deadline.com/2019/07/regal-cinemas-unlimited-movie-ticket-subscription-program-cineworld-1202640441/)

Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on July 08, 2019, 08:31:48 AM
Vue International is putting itself up for sale with bids due in September. They are a reasonable size INTL player and the third largest UK chain.  They were also in on the Odeon bidding that AMC ended up winning in 2016.

Sky is reporting that Vue could fetch $2 billion. Vue is owned by pension funds and mgmt and they seem to have scrapped their IPO plans. They also report financials regularly so this process may help bring some clarity to market value for AMC's Odeon/UCI circuit in the UK and abroad.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on July 28, 2019, 11:24:05 AM
Looks like Regal Cinemas will be introducing its own subscription service soon:

https://deadline.com/2019/07/regal-cinemas-unlimited-movie-ticket-subscription-program-cineworld-1202640441/ (https://deadline.com/2019/07/regal-cinemas-unlimited-movie-ticket-subscription-program-cineworld-1202640441/)

Regal Unlimited plan pricing and terms suggests that, as I've argued here before, AMC A List is materially under priced.

https://www.regmovies.com/static/en/us/unlimited (https://www.regmovies.com/static/en/us/unlimited)
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on October 09, 2019, 08:50:41 AM
Interested to see if someone like a Gabelli sticks their nose into the situation at these levels. They have a very small position at the moment. With such a high short interest and such a small float I think it would be a money making recipe. The top 50 holders plus Wanda account for basically the entire outstanding share count so it may just be that there aren't enough shares available for someone to build a worthwhile position.

Management clearly is not up to the task of supporting the stock.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on October 09, 2019, 09:57:41 AM
FT Interested to get a little color on your comment about A-List pricing. Aside from the PLF inclusion in AMC's plans they seem very similar. (Keep in mind that PLF screens are still relatively rare at AMC on a % basis).  Another major difference is that Regal charges a small fee per booking due to a contract arrangement with a third party vendor, whereas AMC built out their tech and does not have to pay that fee.

Regal's plan is of course "unlimited" allowing a visit per day, where as AMC's has the weekly limit of 3 visits.

I don't disagree with your overall assessment that the AMC plan is a bit underpriced as it almost certainly took a small amount of frequent visitors and put them on a discounted flat rate plan, but I didn't understand what about Regals offering cemented your thoughts on the pricing.

From a competive landscape perspective Regal was trounced last quarter vs AMC and Cinemark.  Regal's Q2 attendance was down 18% y/y where CNK and AMC showed much more resilient performance. For those looking for a laggard in the industry I am puzzled why Regal isn't the obvous choice here.

Regal's operations were run very lean while under the old guard and their theaters were not renovated at the same clip as AMC's and I think you are seeing the Cineworld management team realize they were snookered a bit by Anschutz.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on October 09, 2019, 10:36:43 AM
FT Interested to get a little color on your comment about A-List pricing. Aside from the PLF inclusion in AMC's plans they seem very similar. (Keep in mind that PLF screens are still relatively rare at AMC on a % basis).  Another major difference is that Regal charges a small fee per booking due to a contract arrangement with a third party vendor, whereas AMC built out their tech and does not have to pay that fee.

Regal's plan is of course "unlimited" allowing a visit per day, where as AMC's has the weekly limit of 3 visits.

I don't disagree with your overall assessment that the AMC plan is a bit underpriced as it almost certainly took a small amount of frequent visitors and put them on a discounted flat rate plan, but I didn't understand what about Regals offering cemented your thoughts on the pricing.

From a competive landscape perspective Regal was trounced last quarter vs AMC and Cinemark.  Regal's Q2 attendance was down 18% y/y where CNK and AMC showed much more resilient performance. For those looking for a laggard in the industry I am puzzled why Regal isn't the obvous choice here.

Regal's operations were run very lean while under the old guard and their theaters were not renovated at the same clip as AMC's and I think you are seeing the Cineworld management team realize they were snookered a bit by Anschutz.

AMC A List is superior value proposition largely because you can see premium format movies (including IMAX) without paying a surcharge. Also, you can go to any AMC theatre, not just select theatres like in Regal Unlimited's base plan.

A List's 3 movies a week limitation is almost irrelevant since the % of moviegoers who want to watch over 3 movies @ theatre a week on any sort of regular basis is almost certainly very small.

Overall, I think AMC A List is materially superior. The fact that Regal can't/won't match AMC's offer suggests that A List may be underpriced.

Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on October 10, 2019, 09:41:15 AM
Appreciate your thoughts.

As you know, Regal has tiered pricing just like AMC's so while packaged differently I don't know that the end result is that different.

Regal Unlimited - $18 (200 Theaters)
Regal Unlimited Plus - $21 (400 Theaters)
Regaul Ulimited All Access - $23 (All US Theaters)
+ Surcharges for tickets due to third party vendor
+ Surcharges for PLF that range in price

AMC A-list - $19.95
AMC A-list - $21.95 (all states but CA, CT, MA, NJ, NY)
AMC A-list - $23.95 (all states)

I agree that AMC has the superior offering, but with out knowing PLF attendance on both plans and if any different back room deals were cut with Dolby and IMAX to help drive attendance I think it may be premature to suggest it is "materially underpriced" vs Regal. As an example Dolby is AMC exclusive so its not quite apples to apples.  If you say it "may be underpriced" I can see that.  The decision making process for most folks, if you monitor things seems to boil down to which theater near them has better amenities.   

I continue to maintain that if you are looking for an exhibitor stock with downside risk at today's prices it's Cineworld.

On another note the Joker has now set all time records for an October opening weekend, and October Monday, Tuesday and Wednesday.  Of note the 13.9 million Tuesday record handily beat the previous 8.2 million record. It is not an industry with out challenges, but I think exhibitors defensive properties are being overlooked here and the stock is paying you 8% per year at these prices.

https://deadline.com/2019/10/joker-october-tuesday-box-office-record-weekend-forecast-addams-family-will-smith-gemini-man-1202756065/
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on October 14, 2019, 08:25:42 AM
This month Kinepolis closed an acquisition of MJR (10 locations in Michigan providing $81m rev.) for $152.5m - 7 of the 10 sites were owned by MJR rather than leased.

Marcus bought Movie Tavern from VSS for 126m when announced (30m cash plus stock) for 22 locations and 208 screens in early 2019 and others like Cinepolis have made purchases to get toeholds in the US domestic market.

With Craig Ramsey suddenly retiring and a new CFO coming onboard I would really like them to be more assertive about wringing out value from their assets. I'd be interested to see a small asset sale of domestic theatres in an area they are not focused on - they could then use that cash to tender for shares.

This deal would:

- show the value of the assets
- remove lease obligations, which would result in a debt decrease on the balance sheet
- put pressure on the shorts
- save millions in annual dividend payments
- retire around 8-10% of outstanding shares

It would also likely have a minimal impact on earnings if they sold 15-20 of their 1000 sites.

I get that they need cash to hunker down for 2020 headwinds but the shorts have no fear of managment thinking outside the box to show value especially with the Euro IPO seemingly always in limbo.  With a market cap under a billion a deal like this seems like a winner to me.

Curious what others would do in this situation as a thought exercise, how would a capable management team take advantage of this market action?
Title: Re: AMC - AMC Entertainment Holdings
Post by: stahleyp on October 15, 2019, 11:04:01 AM
https://www.amctheatres.com/about/on-demand

I would imagine this will be a waste of capital. The only benefit I see is that you get points.  Unless you really like points, why not just use amazon or google?
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on October 15, 2019, 12:47:26 PM
This is such a joke and at the same time, something you would totally expect from the AMC CEO.  He is just flailing, looking for anything to survive....
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on October 15, 2019, 02:10:08 PM
Cineplex out of Canada has a similar program where they offer discounts and promotions - things like buying a food combo giving you a rental voucher or "super ticket" where 19.99 gets you a theatre ticket and a digital download once the movie comes out on digital.

https://store.cineplex.com/

So this is meant as more of a loyalty play than tackling someone like Apple head on. Things like this & the NFL game streaming are initiatives to try to get that incremental 25m they targeted in their last round of investor meetings.

Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on December 16, 2019, 06:48:50 AM
Speaking of Cineplex. Cineworld is buying them out for $2.1B (USD including debt).  Cineplex has 165 locations and about 1700 screens. Movies are 80% of their business. Cineplex has 75% share on the Canadian market with just over 10% recliners installed across their circuit.

This deal looks to be about 15xFCF assuming it doesn't materially change. Looks like a potential acquisition to distract from subpar performance by Cineworld in my opinion.

AMC is trading at 3x FCF if you can look out to 2022.
Title: Re: AMC - AMC Entertainment Holdings
Post by: matt@thesovagroup on December 16, 2019, 11:32:48 AM
I just don't see where there is any FCF at AMC, everything is re-invested into capex, and the idea that it is growth capex just doesn't make any sense.  It's capex just to maintain their competitive position.  They haven't materially increased their operating earnings for years if you exclude acquisition-related increases. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on December 17, 2019, 12:20:59 PM
I just don't see where there is any FCF at AMC, everything is re-invested into capex, and the idea that it is growth capex just doesn't make any sense.  It's capex just to maintain their competitive position.  They haven't materially increased their operating earnings for years if you exclude acquisition-related increases.

I agree with you that the recliner chairs and other supposed growth capex initiatives were really maintenance capex since they didn't materially improve operating results. Industry-wide, all or nearly all the benefits went to movie goers, not the cinema operators.


Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on December 19, 2019, 10:37:36 AM
The renovation criticisms leveled are valid, but the domestic reseats are wrapping up.
 
I have spoken with a few private circuit operators to get a better read on this situation and their consensus is generally that AMC has good technology (compared to the avg. theatre), good assets/locations, subpar management with a note that their real estate deals leave a bit on the table.  Most view Marcus or Cinemark as the best public operators.

It is worth pointing out that they are all in this line of work so they feel that exhibition is here to stay for the foreseeable future. Some would be interested in domestic assets if AMC chose to cleave off anything, which is why I mentioned that idea a few posts back. I continue to think that AMC could carve out a set of screens for cash to start digging into the debt while giving the market some indication of what their assets are truly worth.  Management is clearly not receptive to this at the moment, but that doesn't mean that it doesn't make sense and maybe they will change their tune in 2020 if they don't ever IPO the Euro assets.

I read quite a bit about smaller circuits getting crushed, but most of the operators I have talked to are doing well. The 10-12 theatre level seems to help kick things into the next gear. One in particular I chatted with is just posting tremendous numbers. He has distributed 16x the initial investment over 10 years by picking up existing locations in various states and rehabbing them cost effectively. Speaking with them left me with a more favorable impression on exhibition moving forward and a regret that I had not found him early on when he needed capital...

In short I think AMC's assets and operations are fine, there is some room to tighten the belt with expenses and the debt obviously needs to be addressed but I think buying shares presents some opportunity. I have increased my position 3.5x over the past two months.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on December 19, 2019, 12:58:49 PM
Thanks for the color txvalue
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on December 31, 2019, 06:21:40 AM
Curious to hear from those who are long - how are you thinking about valuation and catalysts to get to the upside vs. the downside given the debt load?

Also curious, who are reasonable acquirers for the European assets as well as the domestic U.S. assets?
Title: Re: AMC - AMC Entertainment Holdings
Post by: matt@thesovagroup on December 31, 2019, 08:33:40 AM
One thing to note, there is a big difference between small operators and larger, public companies.  I have owned a few theaters in the past and one of the best strategies is owning a theater in a one-theater city, where you do not need to do a lot of capex and people still come.  The lack of cash flow at AMC is because they are constantly upgrading the facilities.  The ROI on the capex has been vastly over-stated by AMC's CEO.  The ROI is basically zero when the capex is really just maintenance capex because Cinemark and Regal are doing the same upgrades.  They are spending money but really just running in place with their spending.  Aron is suggesting only $300m in capex in 2020.  It will be interesting to come back and look at the end of 2020 whether that number was achieved or he vastly underestimated the spending required to stay competitive. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 03, 2020, 07:00:09 AM
One thing to note, there is a big difference between small operators and larger, public companies.  I have owned a few theaters in the past and one of the best strategies is owning a theater in a one-theater city, where you do not need to do a lot of capex and people still come.  The lack of cash flow at AMC is because they are constantly upgrading the facilities.  The ROI on the capex has been vastly over-stated by AMC's CEO.  The ROI is basically zero when the capex is really just maintenance capex because Cinemark and Regal are doing the same upgrades.  They are spending money but really just running in place with their spending.  Aron is suggesting only $300m in capex in 2020.  It will be interesting to come back and look at the end of 2020 whether that number was achieved or he vastly underestimated the spending required to stay competitive.

Cinemark and Regal are doing the "same upgrades" but at a much lower level. I have done work on this cobbling things together from public sources, conversations, presentations etc.  Over the past 5-6 years AMC has spent  50+% more per screen than CNK and the difference is even greater when compared to Regal.  Regal has run their chain for cash for years and their recent results are indicative of this chronic underinvestment. 

Another thing to keep in mind is that upgrading your circuit takes things offline for an extended period while renovations occur so as the CAPEX cycle winds down you should get additional lift from all of your screens being in service at once.

So to put this simply. AMC has an upgraded circuit and now it can dig in to start working their debt down to a more manageable number, they have also already taken the initial A-List hit as the program is over a year old now. Cineworld is actively adding to their debt load, they are way behind the pace on renovations, their domestic numbers are cratering and they have just introduced a subscription plan that will add to the pain already present. These renovations take time, so this is not something that can be instantly solved by Cineworld management and they are going to be under pressure for the next few years.

I think AMC will be fine in 2020 with the 300m level capex spend.
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on January 03, 2020, 07:46:51 AM
One thing to note, there is a big difference between small operators and larger, public companies.  I have owned a few theaters in the past and one of the best strategies is owning a theater in a one-theater city, where you do not need to do a lot of capex and people still come.  The lack of cash flow at AMC is because they are constantly upgrading the facilities.  The ROI on the capex has been vastly over-stated by AMC's CEO.  The ROI is basically zero when the capex is really just maintenance capex because Cinemark and Regal are doing the same upgrades.  They are spending money but really just running in place with their spending.  Aron is suggesting only $300m in capex in 2020.  It will be interesting to come back and look at the end of 2020 whether that number was achieved or he vastly underestimated the spending required to stay competitive.

Cinemark and Regal are doing the "same upgrades" but at a much lower level. I have done work on this cobbling things together from public sources, conversations, presentations etc.  Over the past 5-6 years AMC has spent  50+% more per screen than CNK and the difference is even greater when compared to Regal.  Regal has run their chain for cash for years and their recent results are indicative of this chronic underinvestment. 

Another thing to keep in mind is that upgrading your circuit takes things offline for an extended period while renovations occur so as the CAPEX cycle winds down you should get additional lift from all of your screens being in service at once.

So to put this simply. AMC has an upgraded circuit and now it can dig in to start working their debt down to a more manageable number, they have also already taken the initial A-List hit as the program is over a year old now. Cineworld is actively adding to their debt load, they are way behind the pace on renovations, their domestic numbers are cratering and they have just introduced a subscription plan that will add to the pain already present. These renovations take time, so this is not something that can be instantly solved by Cineworld management and they are going to be under pressure for the next few years.

I think AMC will be fine in 2020 with the 300m level capex spend.

Of the 300m level quoted by management, do you think their split is credible where they quote ~150m as maintenance CapEx?
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 03, 2020, 08:28:13 AM
That is a bit of a complex question but I will try to answer simply:

Insiders, operators and investors give a slightly different answers but history shows about 3-4% of sales is needed based on various operators comments and the way Regal was run under previous ownership. If you listen to calls or attend investor events I think the truth is that AMC's recent "upgrades" were also taking care of some deferred maintenance, so all together I think the 150m is roughly right for 2020 given all of the factors in play and then the remainder of that Capex can be used for other things like Euro upgrades etc.
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on January 03, 2020, 12:42:58 PM
That is a bit of a complex question but I will try to answer simply:

Insiders, operators and investors give a slightly different answers but history shows about 3-4% of sales is needed based on various operators comments and the way Regal was run under previous ownership. If you listen to calls or attend investor events I think the truth is that AMC's recent "upgrades" were also taking care of some deferred maintenance, so all together I think the 150m is roughly right for 2020 given all of the factors in play and then the remainder of that Capex can be used for other things like Euro upgrades etc.

That's helpful - 150m would be roughly in-line with the low end at ~3% of sales then and the higher end would be ~220m at 4% with some variance depending on the state of the footprint. So 150m might be on the lower end of maintenance, but also not unprecedented.
Title: Re: AMC - AMC Entertainment Holdings
Post by: ArminvanBuyout on January 06, 2020, 11:28:37 AM
Interesting analysis on AMC; http://yetanothervalueblog.com/2019/12/yet-another-guide-to-media-stocks-the-intro-and-cord-cutting.html
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 06, 2020, 11:49:22 AM
Interesting analysis on AMC; http://yetanothervalueblog.com/2019/12/yet-another-guide-to-media-stocks-the-intro-and-cord-cutting.html

different AMC
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 07, 2020, 02:25:49 PM
That is a bit of a complex question but I will try to answer simply:

Insiders, operators and investors give a slightly different answers but history shows about 3-4% of sales is needed based on various operators comments and the way Regal was run under previous ownership. If you listen to calls or attend investor events I think the truth is that AMC's recent "upgrades" were also taking care of some deferred maintenance, so all together I think the 150m is roughly right for 2020 given all of the factors in play and then the remainder of that Capex can be used for other things like Euro upgrades etc.

That's helpful - 150m would be roughly in-line with the low end at ~3% of sales then and the higher end would be ~220m at 4% with some variance depending on the state of the footprint. So 150m might be on the lower end of maintenance, but also not unprecedented.

@ The Citi conference this afternoon this exact question was asked and the CFO reiterated maintenance cap ex as 150m for 2020, and also mentioned capex next year could be 250-300m rather than just 300m. Clarified that off that 300m they would expect an additional 100m of landlord contributions. So 150m maintenance and 250m discretionary.

Also mentioned that they want to pay down debt organically but they have noted there are buyers willing to pay high multiples for assets and that it would not be out of the question to put up "non strategic" assets for sale as a way to pay down additional debt. I took the comment to mean theatre assets but they do own real estate as well.
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on January 08, 2020, 06:27:44 AM
That is a bit of a complex question but I will try to answer simply:

Insiders, operators and investors give a slightly different answers but history shows about 3-4% of sales is needed based on various operators comments and the way Regal was run under previous ownership. If you listen to calls or attend investor events I think the truth is that AMC's recent "upgrades" were also taking care of some deferred maintenance, so all together I think the 150m is roughly right for 2020 given all of the factors in play and then the remainder of that Capex can be used for other things like Euro upgrades etc.

That's helpful - 150m would be roughly in-line with the low end at ~3% of sales then and the higher end would be ~220m at 4% with some variance depending on the state of the footprint. So 150m might be on the lower end of maintenance, but also not unprecedented.

@ The Citi conference this afternoon this exact question was asked and the CFO reiterated maintenance cap ex as 150m for 2020, and also mentioned capex next year could be 250-300m rather than just 300m. Clarified that off that 300m they would expect an additional 100m of landlord contributions. So 150m maintenance and 250m discretionary.

Also mentioned that they want to pay down debt organically but they have noted there are buyers willing to pay high multiples for assets and that it would not be out of the question to put up "non strategic" assets for sale as a way to pay down additional debt. I took the comment to mean theatre assets but they do own real estate as well.

Appreciate your thoughts. Didn't even think of the potential for landlord contributions, which at 100m would be very significant.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 09, 2020, 07:23:00 AM
This thing is now trading at 2x cash flow...

The deal they made with Silverlake was just an awful job by the outgoing CFO.  To top it off he crushes the theatrical exhibition space every time he talks by flubbing easy questions, he should get claw backs on his compensation for creating a deal that provides an incentive to crash the share price. Really looking forward to him getting put out to pasture in February.

That being said it has created a wonderful setup and operationally the company is just fine. Capex cycle complete, 2021 looking like a bumper crop of films, huge short interest and impossible to borrow for a reasonable rate.

On top of that if the share price gets turned around there is an additional tailwind, in addition to short covering they can prevent additional dilution on the SL deal.  The only rational I can see for the deal they made (besides insanity) was some sort of misdirection on Wanda to wrestle away control from them eventually.

I'd like to see some action to take the share price head on some mix of the following: cut the dividend, dig into debt, look into asset sales and reasonable prices, get the euro partial IPO back on the table, start a small buyback program etc.  There is no reason this is not a $20 stock, you can hate the box office and still find value here. EV is now less than CNK despite being much larger from a circuit perspective and revenue.  If I were CNK and I thought I could get it passed by regulators I would take a run at AMC here.  I don't know if there is enough float for a more known activist to step in, but really surprised that some of the sharp smaller funds haven't taken a look at this setup and tried to burn the shorts with all these factors in play.
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on January 09, 2020, 09:59:00 AM
If I were CNK and I thought I could get it passed by regulators I would take a run at AMC here.  I don't know if there is enough float for a more known activist to step in, but really surprised that some of the sharp smaller funds haven't taken a look at this setup and tried to burn the shorts with all these factors in play.

Do you have a view on the DOJ's motion to nullify the Paramount decree?
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 09, 2020, 10:30:22 AM
Re: the ruling my main takeaway is that studio bundling, block booking etc. could further disadvantage smaller theater chains that don't have the scale to push back a bit so an exhibitor bulking up helps.

I think there is less risk for CNK, Regal, AMC who control about 50% of the US screens together. Most of their theaters are also larger so playing a certain less popular movie to get access to the new blockbuster is not as much of an issue as it may be for a 6 screen small town theater for example. When I chatted with smaller operators there was concern that it had the potential to ding their business.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on January 10, 2020, 08:56:07 AM
This thing is now trading at 2x cash flow...

The deal they made with Silverlake was just an awful job by the outgoing CFO.  To top it off he crushes the theatrical exhibition space every time he talks by flubbing easy questions, he should get claw backs on his compensation for creating a deal that provides an incentive to crash the share price. Really looking forward to him getting put out to pasture in February.

That being said it has created a wonderful setup and operationally the company is just fine. Capex cycle complete, 2021 looking like a bumper crop of films, huge short interest and impossible to borrow for a reasonable rate.

On top of that if the share price gets turned around there is an additional tailwind, in addition to short covering they can prevent additional dilution on the SL deal.  The only rational I can see for the deal they made (besides insanity) was some sort of misdirection on Wanda to wrestle away control from them eventually.

I'd like to see some action to take the share price head on some mix of the following: cut the dividend, dig into debt, look into asset sales and reasonable prices, get the euro partial IPO back on the table, start a small buyback program etc.  There is no reason this is not a $20 stock, you can hate the box office and still find value here. EV is now less than CNK despite being much larger from a circuit perspective and revenue.  If I were CNK and I thought I could get it passed by regulators I would take a run at AMC here.  I don't know if there is enough float for a more known activist to step in, but really surprised that some of the sharp smaller funds haven't taken a look at this setup and tried to burn the shorts with all these factors in play.

I don't agree with blaming the outgoing CFO for the Silver Lake deal. A quote from him from a January 2018 conference: "Our leverage is high, and we want to bring it down."

I think Wanda, which ultimately controls the company, was the driving force behind the Silver Lake debacle.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 10, 2020, 09:32:56 AM
It is obvious that Wanda exerts heavy influence behind the scenes.

I find it hard to believe that 600 million (or the desired dollar amount which I believe was less) could not have been raised through a less complicated transaction even if there was a time sensitive element.

So I agree with you about the mechanics and pressures of why a deal like that happened, but I do blame him for not doing something else. There are plenty of options here - if I put you in charge of the company I am confident in short order you would have made a better decision - whether it was selling off some assets or issuing normal debt when they refinanced loans recently etc.

Heck, give me a loan of a few hundred million at 7-8% interest over punting 30% of the entire company's equity.  It is a CFO's job to get it right on these sorts of transactions and if we knew that Wanda was under pressure and a cash crunch then a CFO of one of their companies should have been more prepared.
Title: Re: AMC - AMC Entertainment Holdings
Post by: JRM on January 17, 2020, 11:01:52 AM
Am I reading correctly that 55% of the float is short?  That seems excessive.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 17, 2020, 08:38:48 PM
You are correct, the numbers are slightly higher than 55%. The borrow is extremely high as well, I am not lending out my shares but I’ve been contacted by a brokerage who wants to lend them out. Some have reported retail accounts in the mid six figures are being offered 15%+ and then of course the shorts pay the 11% dividend on top of that.

Lots of speculation on why the short interest is so high at around 30m shares at such high rates. I have my thoughts but I’ll let others draw their own conclusions.
Title: Re: AMC - AMC Entertainment Holdings
Post by: JRM on January 18, 2020, 04:45:43 AM
What brokerage do you use?  I have a retail margin account with TD Ameritrade.  I didn't think they would offer a premium for a shorted stock that I was long. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 18, 2020, 06:08:38 AM
DM sent
Title: Re: AMC - AMC Entertainment Holdings
Post by: TBW on January 20, 2020, 06:29:09 AM
This is interesting, but the financials are a bit confusing to parse through.  Can anyone explain to me why rent went up, I know its due to accounting change, but still find it a bit hard to understand. 

Other questions:

- what are landlord contributions in the cashflow statement, and are they recurring?  They are a large part of current CFO
- why are net operating margins so low?  They are ~2%, rest of industry appears to be at 15%, why?
- EBITDA expectations have steadily decline, were $900mil, then 2018 was ~$800mil, now its run-rate of $600mil, what exactly has happened here?
- why hasn't there been any talk of management change?

If net operating margins could stabilize at even 5%, this looks cheap.  But I don't really understand why cash generation has been so much less than expected when revs have been roughly flat.  I also don't understand why there hasn't been any visible scale benefits.

Just digging in, so appreciate any help getting up to speed.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 20, 2020, 07:58:49 AM
You pretty much summed it up...it's a terrible business possibly in secular decline run by one of the worst CEO's in the public markets.   Other than that it's a great investment.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on January 20, 2020, 08:19:27 AM
Does anyone have an idea at this point how much attendance growth is being driven by AMC Stubs?
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 20, 2020, 08:25:27 AM
You pretty much summed it up...it's a terrible business possibly in secular decline run by one of the worst CEO's in the public markets.   Other than that it's a great investment.

Your posts are always so helpful lol - winners in investing don't always have to be perfect situations. You yourself said you like to invest in hairy situations.

I would disagree that it is a terrible business, the company is 100 years old and theaters have made many families and individuals wealthy and they have made some wealthy folks even more so.  An industry doesn't need software margins to be investable.

Are there challenges to the industry, sure - but you bash on AMC early and often and even your post said that it is "possibly" in secular decline - it is a bit early to know how the story here plays out and even if it is in decline I'd argue it could still be investable.There are lots of examples of things like this coal, tobacco etc.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 20, 2020, 08:46:18 AM
Does anyone have an idea at this point how much attendance growth is being driven by AMC Stubs?

Not sure if you are referring to Stubs or Stubs A-List. They provide Stubs membership numbers frequently and some metrics are given out in their reporting and on calls. The number of Stubs users has skyrocketed over the past few years and there are different tiers to the loyalty plan. The lowest being essentially a member of a mailing list for promotions and showtimes.

If you are referring the highest Tier, A-List - they have stopped providing membership number updates in detail, using 900,000+ as the number in recent discussion. I asked IR about this and they dodged the question a bit. Cineworld doesn't provide much color or updates on their membership so I don't know if AMC has changed their policy in response to the new Regal unlimited plan or because A-List growth has lapped its first year comps and growth has slowed down. I think its likely a combination of both of these factors.  They provide some detail in conference calls about the attendance share of A-List users but there is a bit of guesswork involved to answer your question as not all of the variables are public.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 20, 2020, 09:25:04 AM
You pretty much summed it up...it's a terrible business possibly in secular decline run by one of the worst CEO's in the public markets.   Other than that it's a great investment.

Your posts are always so helpful lol - winners in investing don't always have to be perfect situations. You yourself said you like to invest in hairy situations.

I would disagree that it is a terrible business, the company is 100 years old and theaters have made many families and individuals wealthy and they have made some wealthy folks even more so.  An industry doesn't need software margins to be investable.

Are there challenges to the industry, sure - but you bash on AMC early and often and even your post said that it is "possibly" in secular decline - it is a bit early to know how the story here plays out and even if it is in decline I'd argue it could still be investable.There are lots of examples of things like this coal, tobacco etc.

Wow stuck a nerve heh?  I have owned AMC in the past.  I am not short AMC.  My portfolio is filled with crappy companies.  I just don't think this particular crappy company is investable.  I know you do...that's great!  What makes a market.  If it goes to $20 I will be thrilled for you and all the other AMC holders.

I'll also add since I posted in this thread in Nov 2018 offering cautious comments the stock has been more than halved w/ the broader market up what 30%?   So as of now...my negativity has been warranted. 

I urge anyone interested in this to read the entire thread from start to finish, it's not very long.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 20, 2020, 09:35:32 AM
Re-reading this thread...

From June:  "My position is now full".



My AMC position is now full, never thought I'd be able to buy in the 9's.



From December: 

I have increased my position 3.5x over the past two months.

That's...confusing.  It's now 3.5x a full position?   
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 20, 2020, 09:57:22 AM
I tend to be concentrated in my positions, and clearly I would have been better off not continuing to add. I thought my position was full but I was not expecting the sharp price decline we saw either so I changed my mind as I had funds free up.

I am always glad to hear your comments in this thread, didn't mean to come off as antagonistic to your flip post my only true issue with your posts has been your misleading EBITDA comments here & VIC which you clarified.  You have been on the right side of the trade thus far, so I tip my hat to that.

Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 20, 2020, 10:05:10 AM
My EBITDA #s were incredibly close to what they actually were and the difference is a rounding error to the points I was making both on VIC and here which don't need to be restated. 

Anyway, it's been many months since I've posted in this thread (I do read all your posts and remain silent) and I'm sure it will be many months before I return, unless someone has changed that warrants a post. 

I don't see how this stock can work in 2020.   It's not just the box office, which almost certainly will be down, it's the poor operating results/margins even after tremendous cap ex spend. 

I posted this on VIC 11 days ago:

Big Picture:

Go look at the AMC writeups from the past and see what EBITDA was in 2017, 2018 (or predicted to be).   If you just want to pull up one - try JSTC's here:

https://www.valueinvestorsclub.com/idea/AMC_ENTERTAINMENT/6453528578

He has 2017 at 967 and 2018 at 1026b.   All the #s were around this 900-1b level pro forma for the acquisitions.   These are 2016 #s.

Four full years later (2020) EBITDA should be well south of these numbers despite, what, $1b in cap ex?  Can't make the argument that theaters have been out of commission for refurb cause they were out of commission in 2017 and 2018 too!  The year over year comparisons are not impacted if there is always 3% of theaters out for refurb.  So what's happening?  Either the legacy theaters are seriously comping negative OR the growth cap ex is not getting the returns they say it's supposed to get OR the box office shift to Disney has taken a larger take of the gross OR a combo of all three.

The box office hasn't materially changed over the last 3-4-5 years yet consolidated EBITDA has been pressured, despite all the capex spend. 

Even if they do the $900M or whatever your # is of 2020 EBITDA, the road to de-levering is long and complicated.  They should cut the dividend to 0, sell assets, and get the balance sheet right.  Adam Aron has presided over disaster after disaster destorying the balance sheet.   The European assets were a terrible purchase and the Silver Lake deal was done for benefit of Wanda to pull some cash out.   The canada takeout comp is ridiculous because there will be big synergies for the buyer and there is no buyer for the AMC U.S. unit that can extract similar synergies.  There can also not be an LBO here given the poor de-levering math and the lumpy box office not to mention the secular risks that have been mentioned over and over in all these threads.

I want to like this.  I love terrible stocks.   I just can't see what the exit is here in the next 6, 9 months.  If they could have sold the European assets or IPO'd them they'd have done it already.   If there was a buyer for the whole business in the 20's, Wanda would have taken it. 

International box office is vastly different than domestic so it's unfair to cite it as a reason to be bullish.  Vast majority of AMC's business is U.S. and their Europe business has not been great the last 1-2 years.

So can the stock work?   Sure.   But you will need a box office that grows in 2020 vs 2019 + you will need EBITDA to somehow grow despite years of EBITDA declining in the face of $1b in capex spend.   The real wild card would be if they could sell assets at high multiple and delever but I'm not sure it will be so easy.  What's non core here?  Europe?  Then why did you buy it in the first place!
Title: Re: AMC - AMC Entertainment Holdings
Post by: TBW on January 20, 2020, 10:52:00 AM
That is helpful.  I think you can look at the data and make both the case for and against secular decline.  I lean toward not in decline, but I have only a low conviction.

You highlight, but don't provide an answer, why are margins so low?  If I look at CNK, or other competitors, Q3 was weak, but not crazy out of line with historical margins and in general margins seem ok at others.  Why are things so bad at AMC?

If you can make the case that margin are temporarily low, than stock is probably a buy.  Given leverage, if margins stay low this is one to avoid.  I have no idea yet, but interested to hear people's thoughts.
Title: Re: AMC - AMC Entertainment Holdings
Post by: daddy on January 27, 2020, 06:41:29 PM
@Given2Invest, I have found txvalue's comments over the last year incredibly insightful on how others are looking at this business, and businesses in general. I do not appreciate your comments, especially because they are likely to become a deterrent for others posting in the future.

I understand that you must be extremely frustrated with AMC. Looking through your other comments on VIC, I note that you originally disclosed your AMC position on July 24th, 2017 (when the stock was >$21/share), commented on December 21st, 2017 (when the stock was about $15/share) that you thought "the setup here is fantastic", and commented on February 13th, 2018 (stock ~$15) that you were purchasing call spreads (which are now worthless). For such a high conviction call by yourself, it is interesting that your positions if held through today would have resulted in 70-100% losses. How are you dealing with that?

Additionally, regarding your comments about this being a terrible and unownable business; Will Thorndike chronicled AMC as one of the best businesses in history. Do you think he is wrong?

You pretty much summed it up...it's a terrible business possibly in secular decline run by one of the worst CEO's in the public markets.   Other than that it's a great investment.

Your posts are always so helpful lol - winners in investing don't always have to be perfect situations. You yourself said you like to invest in hairy situations.

I would disagree that it is a terrible business, the company is 100 years old and theaters have made many families and individuals wealthy and they have made some wealthy folks even more so.  An industry doesn't need software margins to be investable.

Are there challenges to the industry, sure - but you bash on AMC early and often and even your post said that it is "possibly" in secular decline - it is a bit early to know how the story here plays out and even if it is in decline I'd argue it could still be investable.There are lots of examples of things like this coal, tobacco etc.

Wow stuck a nerve heh?  I have owned AMC in the past.  I am not short AMC.  My portfolio is filled with crappy companies.  I just don't think this particular crappy company is investable.  I know you do...that's great!  What makes a market.  If it goes to $20 I will be thrilled for you and all the other AMC holders.

I'll also add since I posted in this thread in Nov 2018 offering cautious comments the stock has been more than halved w/ the broader market up what 30%?   So as of now...my negativity has been warranted. 

I urge anyone interested in this to read the entire thread from start to finish, it's not very long.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 29, 2020, 04:15:56 PM
lol.  A+ troll.  i'm not going to engage you, Mr. 1 post.  And I did not hold my AMC and I made money on it.  You can see, in this thread, when I turned bearish and the stock was >$20.  But you have no real interest in that, troll.   So troll on, Daddy.   Great name btw.

Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on January 29, 2020, 06:18:11 PM
Dropping in this thread to say a few things:

1. Being long at $20 and short at $10 doesn't make your opinion invalid; if anything it makes it more interesting.
2. g2i has not been maximally diplomatic in this thread, but i can't imagine anybody would want to not post because of his contributions. If this describes you, please eat some red meat and come back to play
3. I haven't used my AMC subscription in maybe 6 months, which is $300 of pure profit to AMC. So maybe there's something to this business model yet. Then again, my circumstances are unusual.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 30, 2020, 07:49:54 AM
Thanks johnny...

And to be clear, I'm not short!
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on January 30, 2020, 10:38:56 AM
This has been one of the better COB&F forum threads for the past year or two, with both bulls and bears making smart, well-informed, posts. Hopefully that will continue.

Two quick points:

Saw a movie @ a Regal Cinema several weeks ago on a Friday night. Non-IMAX screen. Ticket was just over $14 before sales tax. Makes me, yet again, question the wisdom of AMC A-List being priced @ $20 a month.*

Google "How the motion picture industry miscalculates box office receipts." Very interesting reading, despite the paper being from 2004.


* The real price is somewhat less, as subscribers earn something like $40 or $50 worth of AMC Stubs points from their annual sub fees
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on January 30, 2020, 02:20:33 PM
Interesting paper - thanks for sharing. I believe that much of the data from the past is not very reliable.  Matthew Ball, the former head of Amazon studios, is basically twitter's version of Given2Invest in terms of this thoughts of AMC & theaters. He recently said that he is unable to find accurate data prior to 1960.

In the paper they talk quite a bit about data from early time periods so while their conclusion stands, I think their source material is potentially faulty.

The number of theaters has declined sharply over the past 20 years.
1999 - 7031
201907 - 5548

But during this time as art house and small theaters have shuttered the number of indoor screens is actually up (all of these numbers exclude drive-ins)

1999 - 36448 (5.18 screens per site)
2019 - 40613 (7.32 screens per site)

Admissions in North America
1999 - 1.44 Billion
2019 - 1.244 Billion

We know that moving from stadium seating to recliners knocks out 50-65% of the original seat count. I haven't found reliable data reported for seat counts across North America over time but as things get renovated it stands to reason that there are going to be less seats, which I believe is an underreported element in how to think about these numbers & any potential trend.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on January 30, 2020, 02:32:04 PM
Just to be clear, it's not just that I'm bearish on the domestic theater industry, it's that I find AMC management to be the worst of the worst in *any* sector. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on January 30, 2020, 04:21:14 PM
Interesting paper - thanks for sharing. I believe that much of the data from the past is not very reliable.  Matthew Ball, the former head of Amazon studios, is basically twitter's version of Given2Invest in terms of this thoughts of AMC & theaters. He recently said that he is unable to find accurate data prior to 1960.

In the paper they talk quite a bit about data from early time periods so while their conclusion stands, I think their source material is potentially faulty.

The number of theaters has declined sharply over the past 20 years.
1999 - 7031
201907 - 5548

But during this time as art house and small theaters have shuttered the number of indoor screens is actually up (all of these numbers exclude drive-ins)

1999 - 36448 (5.18 screens per site)
2019 - 40613 (7.32 screens per site)

Admissions in North America
1999 - 1.44 Billion
2019 - 1.244 Billion

We know that moving from stadium seating to recliners knocks out 50-65% of the original seat count. I haven't found reliable data reported for seat counts across North America over time but as things get renovated it stands to reason that there are going to be less seats, which I believe is an underreported element in how to think about these numbers & any potential trend.

Per capita cinema attendance has slowly declined over time.

The industry has taken price, largely through upgrades to the cinema experience like stadium seating, recliners, digital projection, etc, etc.

Recently AMC and Regal, following Movie Pass, have decreased the price of attendance via subscriptions services. As I have mentioned before, I don't think the current subscription models work all that well given the ~50/50 revenue split between the studios and cinemas.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on February 27, 2020, 02:01:08 PM
Earnings call is live. Stock touched low 5's today but is now 6.8

- Announces quarterly dividend of $0.03 per share
- Announces $200 million share-repurchase authorization
- AMCʼs most senior officers voluntarily choose to take immediate salary and other compensation reductions in exchange for out-of-the-money share equivalent grant

"The dividend decrease of $0.17 per share compared to the fourth quarter of 2018, reduces the total dividend payout for the quarter by approximately $18.0 million, providing capital that can be deployed towards share purchases and the decrease of net debt."
Title: Re: AMC - AMC Entertainment Holdings
Post by: JRM on February 27, 2020, 02:19:44 PM
The market cap at today's close was $707M.  You would think this would send the shorts running.
Title: Re: AMC - AMC Entertainment Holdings
Post by: johnny on February 27, 2020, 03:29:29 PM
Thanks to this thread for reminding me to cancel my A list sub. We fell into the gym trap and have probably gone about 4 months with no utilization. So to any remaining bulls, you're welcome for softening the loss this Q.

I think we are going to be a problem case for them; as long as there is a Blockbuster Season, I'm not sure what is to stop many people from just paying $30 a month from June to September and going into de-activation/hibernation for the rest of the year.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on February 27, 2020, 08:56:39 PM
AMC is one of those levered companies that could just get wiped out after one bad season.  I think this whole thing will blow over by the summer, but all the exhibitors went bankrupt back in 2000 or around there when the summer movie slate was just awful. 

This stock comp plan just seems so Adam, just dumb on lots of fronts. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on March 05, 2020, 11:45:01 AM
Awful price action here, over the past few week I have trimmed my position a good amount. I think it could still work long term but with everything going on and Bond getting pushed back my thesis has been broken.  Hope things find a bottom as the weather warms up - and I have started adding to MCS and CNK a bit here.
Title: Re: AMC - AMC Entertainment Holdings
Post by: HalfMeasure on March 05, 2020, 11:50:41 AM
Awful price action here, over the past few week I have trimmed my position a good amount. I think it could still work long term but with everything going on and Bond getting pushed back my thesis has been broken.  Hope things find a bottom as the weather warms up - and I have started adding to MCS and CNK a bit here.

Market seems to be fussing leverage this week, especially today (across many names, not just this one).
Title: Re: AMC - AMC Entertainment Holdings
Post by: hasilp89 on March 05, 2020, 12:04:05 PM
Awful price action here, over the past few week I have trimmed my position a good amount. I think it could still work long term but with everything going on and Bond getting pushed back my thesis has been broken.  Hope things find a bottom as the weather warms up - and I have started adding to MCS and CNK a bit here.

Not holding out for the $200m stock buyback? - 1/3 of the company at these prices.
Title: Re: AMC - AMC Entertainment Holdings
Post by: stahleyp on March 12, 2020, 09:56:49 AM
It'll be interesting if AMC survives this. A ton of debt but I would imagine A list is highly profitable right now. :P
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on March 24, 2020, 10:29:09 AM
At what point do we all pull a Walter Sobchak and "mark it zero?" All US locations are closed. I would assume all European locations are closed. A List memberships are paused, so run rate revenue is probably zero.

Aron is out there saying things like "the [cinema] industry has to get liquidity from somewhere.....we all have expenses and none of us have revenue.” At 12/31 they had $1.93 billion in current liabilities vs $673.1 million in current assets.

Unless the pandemic ends imminently (doubtful) or the government bails them out in a major way, I don't see how this isn't a donut.

Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on March 24, 2020, 12:36:25 PM
Check the short interest and borrow rate, a lot of people agree. 

Additionally, even when they open back up the theaters, the studios are going to wait quite some time to start releasing their big movies.  I can't imagine Mulan comes back until the fall.  Basically, the entire summer is cancelled at this point because the studios won't want to release the movies until the ghost is clear.  Check out China cinema numbers, people don't just come back on day one. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on March 24, 2020, 12:54:41 PM
They were toast before this happened and this is going to be way too much to overcome.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Spekulatius on March 24, 2020, 01:26:27 PM
They were toast before this happened and this is going to be way too much to overcome.

If this takes long enough the movie industry will just release movie to view at home. If one studio breaks the mold and it‘s a success, others will follow and from then on, the industry would be forever changed. I would guess that movie theatre‘s will still exist, but there will be far fewer of the, and they will be like entertainment hubs with various activities of choice.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on March 24, 2020, 01:34:31 PM
They were toast before this happened and this is going to be way too much to overcome.

If this takes long enough the movie industry will just release movie to view at home. If one studio breaks the mold and it‘s a success, others will follow and from then on, the industry would be forever changed. I would guess that movie theatre‘s will still exist, but there will be far fewer of the, and they will be like entertainment hubs with various activities of choice.

I like going to movies.  And they make Disney a ton of money.   I've never believed they would try and push the at home business at the expense of the theaters.   I just think the last few years, it's all changed.  There are just a handful of movies worth seeing in theaters.  And the rest should be on a streaming plan for free.

Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on March 24, 2020, 04:24:53 PM
The movie theaters will still exist, but the equity for AMC seems like it is a donut from here.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Broeb22 on March 25, 2020, 03:56:16 AM
They were toast before this happened and this is going to be way too much to overcome.

If this takes long enough the movie industry will just release movie to view at home. If one studio breaks the mold and it‘s a success, others will follow and from then on, the industry would be forever changed. I would guess that movie theatre‘s will still exist, but there will be far fewer of the, and they will be like entertainment hubs with various activities of choice.

I don’t know that studios would ever choose to give up the massive revenues from releasing movies via the theater. It’s a form of price discrimination. If person A really Likes a movie, they may pay $10+ to see it one time in a “cool” format. If person B likes a movie but less than person A, they may wait for it to come out on the Apple Store, buy it for a different than the theater price there, and watch it an infinite number of times, etc. until you’re watching it as part of your streaming/cable subscription.

Title: Re: AMC - AMC Entertainment Holdings
Post by: chrispy on March 25, 2020, 04:48:13 AM
The margins for film companies are around 70 percent for direct to consumer while closer to 25 for theatre. Add onto that people may not want to go to theatres for awhile and you'll see clever DTC methods and the successful ones will stick.

The theatres hold no cards right now.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on March 25, 2020, 07:26:29 AM
The studios margins for theaters is usually 55/45 favoring the studios, Sony and Disney command up to 60%. 


Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on March 25, 2020, 12:47:28 PM
They have 4 months of liquidity from cash and lines of liquidity. It is almost certain that the gov't will provide life lines in the form of loans to the theaters, restaurants, airlines, cruise ships, retailers etc. Those loans may come with strings attached like equity warrants, agreements for no stock repo or dividends but I think it will be enough to get them through this. Hard to ask for substantial strings when the government essentially mandated that all of these industries shut down. Either the govt provides liquidity or they have many millions of unemployed and thousands of companies in bankruptcy.

They generate $300-$400mm of free cash flow after maintenance capex. So assuming they spend the next 5 years paying down debt, you would have about $4B debt vs $1B EBITDA and assume the same free cash flow. You would have a business earning at least $2.50/share call it $25 fair value.

That's a 7 bagger or 48% annual return from here. But maybe i'm wrong and it's a zero. Still good upside/downside in my mind. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on March 25, 2020, 02:06:18 PM


https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/ (https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/)
Title: Re: AMC - AMC Entertainment Holdings
Post by: Spekulatius on March 25, 2020, 05:36:30 PM


https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/ (https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/)

Furlough without pay whatsoever? isn’t it better to get laid off and get some unemployment benefits, as long as you have a spouse covering health insurance?
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on March 25, 2020, 06:30:17 PM
They have 4 months of liquidity from cash and lines of liquidity. It is almost certain that the gov't will provide life lines in the form of loans to the theaters, restaurants, airlines, cruise ships, retailers etc. Those loans may come with strings attached like equity warrants, agreements for no stock repo or dividends but I think it will be enough to get them through this. Hard to ask for substantial strings when the government essentially mandated that all of these industries shut down. Either the govt provides liquidity or they have many millions of unemployed and thousands of companies in bankruptcy.

They generate $300-$400mm of free cash flow after maintenance capex. So assuming they spend the next 5 years paying down debt, you would have about $4B debt vs $1B EBITDA and assume the same free cash flow. You would have a business earning at least $2.50/share call it $25 fair value.

That's a 7 bagger or 48% annual return from here. But maybe i'm wrong and it's a zero. Still good upside/downside in my mind.


I think the free cash flow here is just mythical. 

Also, you have to think about what happens over the next 6 months, how quickly do studios start to bring back their big movies and risk low attendance. Black Widow, Mulan, when do these return, 2021? 
Title: Re: AMC - AMC Entertainment Holdings
Post by: hasilp89 on March 26, 2020, 05:27:01 AM
They have 4 months of liquidity from cash and lines of liquidity. It is almost certain that the gov't will provide life lines in the form of loans to the theaters, restaurants, airlines, cruise ships, retailers etc. Those loans may come with strings attached like equity warrants, agreements for no stock repo or dividends but I think it will be enough to get them through this. Hard to ask for substantial strings when the government essentially mandated that all of these industries shut down. Either the govt provides liquidity or they have many millions of unemployed and thousands of companies in bankruptcy.

They generate $300-$400mm of free cash flow after maintenance capex. So assuming they spend the next 5 years paying down debt, you would have about $4B debt vs $1B EBITDA and assume the same free cash flow. You would have a business earning at least $2.50/share call it $25 fair value.

That's a 7 bagger or 48% annual return from here. But maybe i'm wrong and it's a zero. Still good upside/downside in my mind.


I think the free cash flow here is just mythical. 

Also, you have to think about what happens over the next 6 months, how quickly do studios start to bring back their big movies and risk low attendance. Black Widow, Mulan, when do these return, 2021?

Important to look at that downside scenario but there are two sides to the story.

Maybe: When this thing is lifted people are going to be screaming to get back out to do things. $12 cinema ticket is about the cheapest thing you can do besides for the $ menu at MCDS. People will go back to the movies. Don’t tell me you don’t want to watch live action Mulan as soon as possible. Going back to comments about studios going direct, we don’t know the full economics of it - theater is 50-60% GM with no overhead and huge global reach, Disney+ seems like there’s no distribution cost and high margin but they’re carrying overhead on app, marketing etc, and it doesn’t have the same global reach yet (not arguing it won’t one day) - even if it has 50m subscribers, there’s probably 4bn people out there that can get to a movie theater in 30 mins, you’re just gonna throw that target market out?
Then you’ll argue that people have been laid off don’t have the money. If the stimulus gets out people are going to be richer than ever. $1200 cash check, state unemployment ranges anywhere from $300-$700 per week federal is providing $600 per week - people aren’t gonna wanna go back to work, heck I might lay myself off for that.

I know this is tongue in cheek but the reality is no one knows. We can all argue one side or the other. Make it a 5% position and forget about it. keep buying BRK and then go for a walk with your family.
Title: Re: AMC - AMC Entertainment Holdings
Post by: DanielGMask on April 10, 2020, 08:46:11 PM
They have 4 months of liquidity from cash and lines of liquidity. It is almost certain that the gov't will provide life lines in the form of loans to the theaters, restaurants, airlines, cruise ships, retailers etc. Those loans may come with strings attached like equity warrants, agreements for no stock repo or dividends but I think it will be enough to get them through this. Hard to ask for substantial strings when the government essentially mandated that all of these industries shut down. Either the govt provides liquidity or they have many millions of unemployed and thousands of companies in bankruptcy.

They generate $300-$400mm of free cash flow after maintenance capex. So assuming they spend the next 5 years paying down debt, you would have about $4B debt vs $1B EBITDA and assume the same free cash flow. You would have a business earning at least $2.50/share call it $25 fair value.

That's a 7 bagger or 48% annual return from here. But maybe i'm wrong and it's a zero. Still good upside/downside in my mind.


I think the free cash flow here is just mythical. 

Also, you have to think about what happens over the next 6 months, how quickly do studios start to bring back their big movies and risk low attendance. Black Widow, Mulan, when do these return, 2021?

Important to look at that downside scenario but there are two sides to the story.

Maybe: When this thing is lifted people are going to be screaming to get back out to do things. $12 cinema ticket is about the cheapest thing you can do besides for the $ menu at MCDS. People will go back to the movies. Don’t tell me you don’t want to watch live action Mulan as soon as possible. Going back to comments about studios going direct, we don’t know the full economics of it - theater is 50-60% GM with no overhead and huge global reach, Disney+ seems like there’s no distribution cost and high margin but they’re carrying overhead on app, marketing etc, and it doesn’t have the same global reach yet (not arguing it won’t one day) - even if it has 50m subscribers, there’s probably 4bn people out there that can get to a movie theater in 30 mins, you’re just gonna throw that target market out?
Then you’ll argue that people have been laid off don’t have the money. If the stimulus gets out people are going to be richer than ever. $1200 cash check, state unemployment ranges anywhere from $300-$700 per week federal is providing $600 per week - people aren’t gonna wanna go back to work, heck I might lay myself off for that.

I know this is tongue in cheek but the reality is no one knows. We can all argue one side or the other. Make it a 5% position and forget about it. keep buying BRK and then go for a walk with your family.

I'm not familiar with this company but consider this industry to be at severe risk. This pandemia is going to change our psyche in a lot of ways, I don't see myself visiting a movie theater any time soon and I do enjoy going to the movies and used to go at least twice a month.

Getting back to life as usual is going to take some time, maybe more than a year if a vaccine is not widely available anytime soon. An enclosed space where you have to sit for a couple of hours with dozens or hundreds of people is not an ideal space for a world where there's a more than usual lethal virus for which we don't have a vaccine.
Title: Re: AMC - AMC Entertainment Holdings
Post by: BG2008 on April 10, 2020, 09:07:09 PM
The bonds are at 30 cents on the dollar. That's what you guys should be looking at.  If it trades up to par somehow (don't know how) but you get 3x.  If it files, you could potentially end up with the equity. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: JayGatsby on April 10, 2020, 09:32:29 PM


https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/ (https://variety.com/2020/film/box-office/amc-theatres-furloughs-employees-coronavirus-pandemic-1203545081/)

Furlough without pay whatsoever? isn’t it better to get laid off and get some unemployment benefits, as long as you have a spouse covering health insurance?
Furloughs are covered by unemployment in Colorado. I think all states. Colorado changed the law, allowing people to stay "job attached", which historically was only for the construction industry. Incentives arguably aren't the best for everyone, but allows companies to put people on unemployment temporarily during the shutdown.
Title: Re: AMC - AMC Entertainment Holdings
Post by: orthopa on April 11, 2020, 10:49:36 AM
Not to change the subject but IMAX looks like its prepared to weather the storm based on the balance sheet. The future of the industry remains to be seen but selling some long dated puts in this name maybe a way to get paid to wait.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Spekulatius on April 11, 2020, 11:01:41 AM
The bonds are at 30 cents on the dollar. That's what you guys should be looking at.  If it trades up to par somehow (don't know how) but you get 3x.  If it files, you could potentially end up with the equity.

My rule of thumb is that I stop looking at equity when I can get hold of bonds of the same name at <50c on the dollar.  At 30c on the dollar, the bonds have become basically equity and the stock has become a far out of the money call option.
Title: Re: AMC - AMC Entertainment Holdings
Post by: heth247 on April 11, 2020, 11:41:22 AM
The bonds are at 30 cents on the dollar. That's what you guys should be looking at.  If it trades up to par somehow (don't know how) but you get 3x.  If it files, you could potentially end up with the equity.

My rule of thumb is that I stop looking at equity when I can get hold of bonds of the same name at <50c on the dollar.  At 30c on the dollar, the bonds have become basically equity and the stock has become a far out of the money call option.

I heard that during BK, even if you are a (minority) bond holder, you can still be robbed by the big holders by not allowing you participate. Have that happened to you before?
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 11, 2020, 02:19:28 PM
AMC hired Weil, which basically means a bankruptcy filing is a sure thing. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Gregmal on April 11, 2020, 02:48:17 PM
Wasn't it just weeks ago when everyone got super excited because management bought some stock? My general rule of thumb is to tread very, very carefully with anything(excluding real estate companies obviously) that has >50% of its EV in the debt column. And never touch anything where its greater than 75%.

If you start with that sort of capital structure handicap, you're behind the ball. If you dont start there, and end up like that, then you're obviously doing a pretty shitty job or the business just sucks. At $6 or whatever when management was buying, this was what? 90% debt on the EV side? Why even bother? You rarely hear of companies who's capital structure consists of 100% equity ending up like this...
Title: Re: AMC - AMC Entertainment Holdings
Post by: Spekulatius on April 11, 2020, 04:30:31 PM
The bonds are at 30 cents on the dollar. That's what you guys should be looking at.  If it trades up to par somehow (don't know how) but you get 3x.  If it files, you could potentially end up with the equity.

My rule of thumb is that I stop looking at equity when I can get hold of bonds of the same name at <50c on the dollar.  At 30c on the dollar, the bonds have become basically equity and the stock has become a far out of the money call option.

I heard that during BK, even if you are a (minority) bond holder, you can still be robbed by the big holders by not allowing you participate. Have that happened to you before?

No, I never went down with the ship buying bonds. I did buy junky bonds before,   but I typically play just below investment grade (BB/BB+). This one ( AMC bonds ) would be too iffy for me.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 11, 2020, 04:36:29 PM
Wasn't it just weeks ago when everyone got super excited because management bought some stock? My general rule of thumb is to tread very, very carefully with anything(excluding real estate companies obviously) that has >50% of its EV in the debt column. And never touch anything where its greater than 75%.

If you start with that sort of capital structure handicap, you're behind the ball. If you dont start there, and end up like that, then you're obviously doing a pretty shitty job or the business just sucks. At $6 or whatever when management was buying, this was what? 90% debt on the EV side? Why even bother? You rarely hear of companies who's capital structure consists of 100% equity ending up like this...

Mgmt didn't technically buy stock, but they did take half their cash comp in stock options with strike prices in the teens, but that was right before the virus came, so....
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 12, 2020, 07:01:24 AM
Adam Aron bought stock at like 18 a few years ago too and bragged about it on a conference call.

He's the clowniest of clowns.  I'm guessing he's the first one the bondholders throw out in Chap 11.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 12, 2020, 08:42:28 AM
The bonds are at 30 cents on the dollar. That's what you guys should be looking at.  If it trades up to par somehow (don't know how) but you get 3x.  If it files, you could potentially end up with the equity.

My rule of thumb is that I stop looking at equity when I can get hold of bonds of the same name at <50c on the dollar.  At 30c on the dollar, the bonds have become basically equity and the stock has become a far out of the money call option.

I heard that during BK, even if you are a (minority) bond holder, you can still be robbed by the big holders by not allowing you participate. Have that happened to you before?

Lots of ways to get screwed by being a minority creditor. If I had to guess, minority bond holders likely get screwed in this particular case by not being allowed to participate in a rights offering or something. Even large bond holders can get screwed if the process is heavily driven by senior bank debt creditors, which this likely will be.

On another note, for as much work as I've previously put in to AMC I think I'm going to stick this one out. I'm not super bullish on the sector's outlook after this virus mess, and at best I think you'd be converting bonds into the equity of an, admittedly de-levered, melting ice cube. The aftermath of the virus is going to have several implications here. I don't think this is going to be an industry that bounces back with a V shaped recovery. Theaters are cramped, already have an "eh" feel to them, and I suspect people will think twice about going due to germ issues. This lowers your attendance, and you'll have to lower ticket pricing to make up for the loss of demand. There is also a ton of theater capacity out there which will likely be over-supplied now, so having to cut that will be another problem. In order to keep attracting people and keep an aura of feeling nice, theaters will have to maintain their renovation programs - reclining seats, better food, bars, etc. - all without the benefit of being able to raise ticket prices to pass these added costs to customers. This also means that what was previously "growth" capex will now solidly be "maintenance" capex. I just think its really hard to win here. You're going to lose top-line, lose margin, and grow capital requirements here. Bad deal in my opinion.
Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on April 12, 2020, 09:25:58 AM
Bond holders mostly get screwed by being primed with higher secured debt or diluted with pari passu debt, cash or assets allowed to leave the restricted subs, etc.  A hedge fund could own the fulcrum security and the senior debt and push for equity at the unsecured etc. you want to own the fulcrum security that will be a loan to own and get the equity. Not always and easy thing to figure out. 
 
AMC has tapped their existing secured capacity and the unsecured market is basically shut off for them.  So the unsecured at 30 cents is saying they don’t expect much recovery or any gov help.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 13, 2020, 10:19:03 AM
CNK raised 250m today.  I don't think it is unrealistic that AMC could tap the debt markets here.  It would be expensive, but under their debt documents, they have substantial amounts of flexibility.  I just don't know what price they would need, probably 15% and warrant coverage.  Significant dilution, but it might get done. 

They have significantly reduced their cash outflows, but the real question is how bad the rest of 2020 turns out to be, since they may actually lose more money once they open up, since they will have to start paying rent again. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 13, 2020, 10:36:52 AM
Their debt is trading at 30 cents on the dollar.  How do you suppose they could issue debt at a 15% coupon?
Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on April 13, 2020, 11:10:07 AM
They have a 6x secured leverage covenant which will be tested in Sept and they won't be below that. I don't think they could issue secured debt at this point and unsecured is yielding 33% ytw so the market is not open for them. CNK unsecured's are 11% so the bond market is pricing in bk for AMC.
Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on April 13, 2020, 11:15:49 AM
At 8x EV/EBITDA, AMC equity ought to be worth $10 but unlikely they get valued that high. At 7x equity is $4 and at 5-6x equity gets nothing and unsecured would be worth 90 cents.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 13, 2020, 12:23:47 PM
Silver Lake obviously knows this business cold.  If they thought there was money to be made anywhere in the capital structure I would think they will step up and infuse capital.  I'm doubtful.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 13, 2020, 12:40:52 PM
SilverLake won't put new money in, at least not to prevent a bankruptcy. Their convertible bond is senior to the subordinated bonds that trade in the 30s which makes SilverLake the fulcrum security behind the bank debt and probably money good. Subordinated bondholders are likely getting minority equity, equity only in the form of warrants (nuisance equity), or nothing.
Title: Re: AMC - AMC Entertainment Holdings
Post by: jeffsreng on April 13, 2020, 12:42:51 PM
I wouldn't use EBITDA. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 13, 2020, 01:09:37 PM
Silver Lake pref is senior to subordinated debt?  I believe you but just surprised. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on April 13, 2020, 01:58:21 PM
The SilverLake convertible is $600mm + $2500mm secured debt + $3000mm unsecured. If i assume 5x EV/EBITDA and EBITDA is lowballed at $750 then the whole business is worth $3750mm. Silverlake and secured get paid in full and unsecured gets equity.

I could just invert and ask is the whole business worth less than $3.1B (convert +secured). If I assume zero debt that adds back $300mm in interest and FCF would be at least $500-$600mm.

It would seem the unsecured are the fulcrum security to me. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 13, 2020, 02:06:45 PM
AMC is going to "prime" the unsecureds with an increase in the senior secured lending facility, either from the 1P lender or a different group.  That is, if they need the cash.  Given the decrease in cash burn, I am not sure they need the cash immediately. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 13, 2020, 02:59:47 PM
Silver Lake pref is senior to subordinated debt?  I believe you but just surprised.

Yeah, its a convertible bond not preferred equity or anything. Indenture says senior to subordinated debt and see some analysts agree
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 13, 2020, 03:24:41 PM
The SilverLake convertible is $600mm + $2500mm secured debt + $3000mm unsecured. If i assume 5x EV/EBITDA and EBITDA is lowballed at $750 then the whole business is worth $3750mm. Silverlake and secured get paid in full and unsecured gets equity.

I could just invert and ask is the whole business worth less than $3.1B (convert +secured). If I assume zero debt that adds back $300mm in interest and FCF would be at least $500-$600mm.

It would seem the unsecured are the fulcrum security to me.

Using your numbers - $750 million EBITDA at 5x EV / EBITDA yields $3.75 billion. Ignoring likely additional secured debt such as DIP super priority claims and admin fees we'll use $2.5 billion secured debt plus $600 million SilverLake bond plus $3.0 billion subordinated debt for a total $6.1 billion claims.

Secured debt gets a full recovery with ~150% coverage of face value, this leaves $1.25 billion residual value for the SilverLake bonds. SilverLake bonds are covered at par at ~208% of face value, this leaves $650 million residual value to the subordinated bonds. Subordinated bonds are covered at ~22% face value which leaves the equity out of the money.

So far you have these recoveries:

Secured Debt - 150% (Unimpaired)
SilverLake Bond - 208% (Unimpaired)
Subordinated Bonds - 22% (Impaired)

So the next step of the analysis is putting a new capital structure together. AMC's prior debt level was too high, so lets say the new capital structure is levered at 3.0x. This isn't too crazy given 1) EBITDA and cash flows are going to be impacted, and 2) Cinemark just issued new debt today with a pro-forma leverage ratio of 1.3x, so it could be a little aggressive for the circumstances even. This means that out of $3.75 billion enterprise value, total debt is $2.25 billion.

Senior creditors prefer getting debt recoveries (because primarily held by CLOs, etc.) so they'll receive the majority of their claim with $2.25 billion worth of debt securities and the $250 million balance with new equity. There isn't any more debt to be allocated, so the SilverLake bond gets their $600 million recovery entirely in the form of new equity. The bonds also receive their $650 million recovery in the form of new equity.

Form of consideration distribution looks like this:

Secured Debt - 100 cents total recovery. 90 cents new debt, 10 cents new equity
SilverLake Bond - 100 cents total recovery. 100 cents new equity
Subordinated Bonds - 22 cents total recovery. 22 cents new equity.

Pro-forma equity ownership:

Secured Debt - 16.7%
SilverLake Bond - 40.0%
Subordinated Bonds - 43.4%

So in this illustration it is entirely possible for the subordinated bonds to become the fulcrum equity and come out with majority equity ownership. However, SilverLake has negative control in scenario which is likely a negative for the subordinated bond owners.

This isn't a perfect illustration and lots of things can go lots of different ways. For example, we excluded a DIP and administration fees which 1) reduces gross recoveries for all non-super priority classes and 2) increases the amount of new equity the secured debt will have to take (since admin claims / DIP are paid with cash). These two things will reduce the recovery of the subordinated bonds below 22 cents and also reduce their pro-rata ownership of the new equity as well. Although I suspect the subordinated bonds may try to increase their ownership of equity by putting together a rights offering plan, who knows how that will go. I think it will be a highly contested bankruptcy given the varying classes of creditors as well as the biggest "dont know" in my opinion which is if some vultures have been buying up to secured debt and will attempt a take under (very, very bad for subordinated bonds).

This doesn't even begin to get into the problems with figuring out what an appropriate set of financial projections will be for the bankruptcy, valuation multiples, and also doesn't discuss how you settle unsecured creditors / landlords (hint: hurts subordinated bonds).

Note: I should add that I use a slightly different definition of "fulcrum security" than what I think is common. I've seen this term used most commonly to refer to the security that gets equity ownership in a restructuring. I tweak just a little bit to define it as the security that gets the most equity in a restructuring because the control premium is so valuable here. Being a minority shareholder isn't fun.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on April 13, 2020, 04:13:57 PM
Thanks for taking the time to write that up 5xEBITDA. You are an asset to this board.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 13, 2020, 05:05:56 PM
I think the filing eventually happens as 2020 plays out and the cash flow just isn't there because of lack of rebound in attendance, but that is probably a long way from here.  They don't have a real liquidity problem immediately given they have stopped paying rent.  I am just saying, this could take a lot longer, and AMC has a longer runway than I thought a few weeks back. 

Also, Weil is always counsel for AMC in all their past debt deals, so hiring Weil is probably not as meaningful as I thought at first.
Title: Re: AMC - AMC Entertainment Holdings
Post by: dbuch on April 13, 2020, 05:07:12 PM
Agree that this is not a simple analysis or that it is a sure thing the unsecured get all the equity but typically the first impaired asset is the fulcrum security. Secured and Silverlake have little say in the matter if they are made whole. The company has survived for a long time with 4-5x debt to ebitda levels so just because secured and Silverlake want equity and want lower leverage doesn't make it so. Also the EBITDA is conservative as is the multiple in this scenario.

But even so 750 x 5 = 3750 so very little probability senior secured gets equity, they get par. Even if the rest was equity that would be only 3.3x gross debt which is substantially lower leverage.

Assume $300mm DIP and admin costs and 4.5x leverage, secured gets par debt, Silverlake gets $500mm par and the $100mm equity and unsecured gets equity.

If the business is valued at 5x which is very low to historical valuations then Silverlake gets 30% and unsecured gets 70% of the equity.

If instead we assume EBITDA is $850 and a fair multiple is 7.5x, everyone is made whole and equity is worth $6. So obviously there is a lot of unknowns.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 14, 2020, 06:10:28 AM
Haha yep exactly my point, this is gonna be a classic valuation fight :)
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 14, 2020, 06:19:50 AM
Just want to remind everyone this was a sub $10 stock and a troubled company *before* Covid.   The debate is not over whether US theaters are in secular decline *before* Covid.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Gregmal on April 16, 2020, 03:33:52 PM
These big pops on favorable short term news seem like obvious entry points for a short. Frankly, I dont see how its possible to lose money if you put on some sort of long bond, short stock trade, with consideration to weightings of course. There's really no chance a company like this, with the debt load they carry, doesnt eventually file.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 16, 2020, 04:28:39 PM
AMC Entertainment Holdings, Inc. Announces Proposed Private Offering of First Lien Notes
Company Release - 4/16/2020 7:14 PM ET
LEAWOOD, Kan.--(BUSINESS WIRE)-- AMC Entertainment Holdings, Inc. (NYSE: AMC) (“AMC”) announced today that it intends to offer, subject to market and other conditions, $500 million aggregate principal amount of first lien notes due 2025 (the “Notes”) in a private offering that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”).

AMC intends to use the net proceeds from this offering for general corporate purposes, including further increasing AMC’s liquidity.

http://www.investor.amctheatres.com/file/4171292/Index?KeyFile=403639618
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 16, 2020, 09:38:50 PM
Will be really interesting to see where these notes price.  PIK features....probably
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 16, 2020, 09:40:11 PM
The following is from Mittleman.  I think he is off his rocker, but thought I would post nonetheless:

April 13, 2020           

AMC Entertainment Holdings, Inc. – AMC ($2.60)

Estimated fair value reduced from $25 to $20 on COVID-19 impact

Bankruptcy plausible yet avoidable; we believe equity unimpaired regardless

 

Estimated fair value = EV/EBITDA multiple of 10x est. 2021 EBITDA of $810M (15% EBITDA margin on $5.4B sales) which is EV of $8.1B, - $4.6B net debt ($4.73B long term debt + $100M capital lease + $225M revolver + GBP100/USD125M credit line = $5.18B total debt - $590M cash = $4.6B net debt, excl. $600M convertible), - $55M pension liability, -$520M est. cash burn (3 months (3/15/20 to 6/15/20) at $155M per month +$55M int. payment 4/22/20) = $2.94B equity, divided by 147.44M shares outstanding (includes 43.2M from convert at $13.89) = $19.91 per share = market cap. / FCF multiple of 12x estimated $250M in free cash flow for 2021. 

As part of the global effort to contain the COVID-19 virus, a worldwide shut-down of movie theaters began on March 16, 2020.  AMC then drew down the remaining availability on their credit lines here and abroad, taking cash on hand up from $265M on 12/31/19 to $590M.  A credible estimate suggests that AMC will burn $155M per month in cash ($38.75M per week) while it has zero revenues, and pay $55M in interest on 4/22/20, implying 3.5 months until the cash runs out, which from the 3/15/20 starting point implies a 6/30/20 limit until existing liquidity runs out.  AMC’s CEO, Adam Aron, gave a rough estimate of $30M per week in costs in a 3/20/20 TV interview (CNN, Quest Means Business), so the situation might be better than we estimate here.   

To maximize their resources, it’s been reported that AMC stopped paying rent beginning in April, which cuts the cash burn substantially, by $80M per month from $155M per month to $75M per month, more than doubling their runway from 3.5 months to 7.1 months (10/18/20).  We still deduct the full $155M per month cost (with rent included) from our equity fair value reduction because the deferred rent will likely be paid at some point.

If we assume theaters reopen on 6/15/20 after 3 months of closure, AMC will have incurred a cumulative $520M in cash burn ($280M without rent paid), leaving $70M cash left in the bank ($310M without rent paid), and the company would return to free cash flow generation shortly thereafter.  We assume that by 2021 the business will have returned to normal. 

Rumors appeared in the press late last week that AMC was close to filing for bankruptcy.  We view such talk somewhat skeptically because the company has breached no debt covenants, missed no interest payments, and has no major debt maturities until 2024.  That said, a covenant breach is likely if trailing 12 months EBITDA is less than $543M, which should happen later this year.  But for such a breach, the cure would normally be a negotiated covenant relief whereby the lender gets a higher interest rate and/or a one-time payment, especially with a recovery to a more normal cash flow profile highly likely in the very next year.  So why is chp. 11 a rumor?

The company is solvent, with 12/31/19 assets of $13.68B, liabilities of $12.46B, and equity of $1.21B, and beyond those debatable book values it was acknowledged as such by AMC’s CEO, Adam Aron, on the aforementioned CNN International TV interview on 3/20/20 when he stated, “…we’re a very solvent company, so that’s not the issue, it’s just a liquidity issue…”  We think it would be very difficult for a CEO to justify a plan of reorganization that impairs equity holders after such a statement.

And yet, solvent companies sometimes do file for bankruptcy to stave off creditor remedies during a liquidity crisis, with the key difference versus most bankruptcies being that a highly solvent company will usually see its shareholders’ equity emerge from a bankruptcy reorganization unscathed, or at least mostly intact. 

A high-profile example was General Growth Properties (GGP), the large owner/operator of shopping malls which lacked cash and couldn’t refinance a $900M debt maturity in 2008 during the credit crisis and filed for chp. 11 shortly thereafter.  The stock price fell from over $12B in market cap. at around $36 in early 2008, to as low as $0.21 ($100M market cap.) later in 2008, as it approached and entered bankruptcy.  Bears claimed that malls were a dying business and that the Great Recession would only accelerate their demise, while bulls claimed the company was highly solvent (assets worth more than liabilities) and the stock would recover.  The bulls won the argument as the stock was over $20 again (more than 100x its $0.21 low of 2008) by 2013.

A more recent example is the utility company in California, Pacific Gas & Electric, now known as PG&E Corp. (PCG $12), which filed for bankruptcy in October 2019 on its expected inability to pay claims against it for the wildfires their faulty power lines allegedly sparked. The stock crashed from $70 in 2017 to as low as $3.55 in late 2019 after the news, but since the company’s assets appear to exceed their liabilities the stock is now $12 while the bankruptcy case is ongoing.  PG&E had already filed for bankruptcy 18 years prior in 2001 for a different set of circumstances, and the stock dropped from $35 to $6.50 but survived intact.  The law firm representing PG&E in both the 2001 and 2019 bankruptcy filings was Weil, Gotshal & Manges LLP, which is the law firm that AMC is rumored to be considering hiring.

That same law firm also represented Carmike Cinemas (CKEC) in their bankruptcy beginning August 2000, which saw the stock price collapse from $8 to $0.20 that year, only to fully recover and then some (40x the low price) by 2004.  The company was solvent, but needed (wanted) to reject a large number of uneconomic leases, which bankruptcy allowed, and the pre-petition equity value was recovered because the firm was solvent.  The court approved a reorganization plan that valued Carmike at $585M, roughly 8x EBITDA of $75M in 2001.  While it seems like a big win for shareholders it was actually an unfair deal (in our opinion) for CKEC’s pre-petition common holders because the preferred shareholders got much more value than they deserved, and management awarded itself more stock then they deserved for “successfully” navigating a bankruptcy process that better management could have avoided.    https://www.abi.org/abi-journal/a-hollywood-ending-for-pre-petition-equity-interests

That Carmike Cinemas case from 2000-2002 highlights a very powerful reason why AMC might choose to file chp. 11 even if they could avoid it (as I believe they can), and that reason is the ability to reject uneconomic leases for far less than breaking the leases would cost outside of a bankruptcy process.  If pre-petition equity holders of AMC benefit from that maneuver and are not otherwise abused in the process, it could be value-enhancing bankruptcy for current shareholders.  But given the likely $100M in costs (paid to lawyers, bankers, etc.) that a bankruptcy the size of AMC would incur, any strategic goals along those lines would have to be very high ROI to justify that cost if it is avoidable.  Unless such a cost/benefit is made apparent, we prefer any restructuring of the balance sheet be done via an out-of-court consensual arrangement, if at all possible.

And again, if an out-of-court solution is not achievable, then a bankruptcy filing should not result in an impairment to AMC shareholders’ equity.

Another great example of why that is the case would be the bankruptcy of U-Haul parent company AMERCO (UHAL $278) which saw its stock price drop from $17.10 on 12/31/01 to $1.24 on 10/24/02 after missing a bond payment (due to an accounting scandal, exacerbated by family-infighting over control), the company ultimately sought bankruptcy in 2003 and actually saw its share price jump 76% from $3.71 to $6.37 on the news of the 6/20/03 chp. 11 filing because the Chairman & CEO, Joe Shoen, who was also the largest shareholder (17%), confirmed that shareholder equity would not be impaired in the press release announcing the filing:  “Additionally, since the Company is solvent, with asset value in excess of its debt, AMERCO intends to repay its creditors in full, pursuant to a full-value plan of reorganization, without diluting the interest of its shareholders.”

Often times in these liquidity crisis bankruptcies where the corporation is clearly solvent, the difference between a fair and unfair deal for shareholders is the presence of a large interested shareholder to stand up for shareholders’ equity against overreaching creditors and/or management.  We had such a circumstance with GSI Group (GSIG), which is an industrial laser manufacturer now known as Novanta (NOVT $81.50). We started buying it at $10 in 2007, and bought even more at around $1.00 in 2009 as the company careened into bankruptcy.  We were convinced it was solvent with substantial equity value, as was a larger shareholder who appeared on the scene after us, Stephen Bershad, who I had read about many years earlier and admired immensely.  He led the charge for maximizing the recovery for shareholders, which would have been miniscule under the original plan had he not intervened to lead a rights offering in which we participated that secured a vastly better outcome.  So, what started out as a 90% loss from 2007 to 2009 ultimately became a big winner at a 275% gain, 25% CAGR over 6 years (from avg. cost $2.00 to avg. exit $7.50 from Sept. 2007 to Sept. 2013), despite an unplanned trip into bankruptcy in 2009-2010.

We think AMC’s shareholders can look to Wanda Group with their 50% equity stake (diluted to 30% if Silver Lake’s $600M convertible bond converts at $13.89 per share) to advocate for the protection of shareholders in any potential bankruptcy, or avoidance thereof.  Wanda has two seats on the AMC board including the Chairmanship, a position their appointee reassumed in December 2019 after a nearly two-year hiatus (he had been COB from 2012-2018). 

AMC turns 100 years old this year, and we’re highly confident it will make it to 101 with the current capital structure largely intact.  The company is seeking gov’t loan guarantees, but even if such loan guarantees are not forthcoming, we think rescue / bridge financing will be made available on tolerable terms, perhaps even from a studio like Disney.  What should happen does not always happen, but there are ample examples of how similarly situated corporations saw their equity holders kept either completely intact or largely unscathed by the bankruptcy process, except for a temporary and often harrowing stock price decline in the days leading up to the filing and/or immediately after the filing.  Toronto, Ontario saw a strong rebound in movie theater attendance after SARS in 2003 shut down theaters for two or three months.  We think a similar if not stronger rebound is likely, globally, after COVID-19 is subdued.
Title: Re: AMC - AMC Entertainment Holdings
Post by: given2invest on April 17, 2020, 06:21:03 AM
out of his mind
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 17, 2020, 06:36:46 AM
Stock is rocketing on the news. Bonds are better bid around ~30/33 (vs. ~25 yesterday). No doubt the general market being up helping a lot too. Skeptical that this deal gets done...requires two covenant waivers (one from US lenders and one from foreign lenders) to avoid breaching leverage limits on secured debt (6x!). That is a tall ask, coupled with the fact that I'm really not sure what security you can pledge to these new bonds, but I guess they found some (or taking it away from someone else...!). AMC put out a supplemental disclosure to this noting that they have only enough liquidity through the end of July and that this new bond will give them to Thanksgiving, but that they also don't know if those liquidity estimates are correct and could be a shorter time frame.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 17, 2020, 10:05:07 AM
Not involved, but some live commentary from citi:

$1.3B in the book as of noon (same-day as launch) at 11% (not the 14% quoted below)
Good chance of upsizing it due to demand & the company always being open to more liquidity runway
If they dont upsize, it will be lower than 11%
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 17, 2020, 04:44:38 PM
At this point, it's really a valuation question.  I mean, if you knock off 6 months, you still have to ask, what is the overall value of this company worth.  Assuming things go back to normal in the value, is there any equity left, if 600m in value goes out the door from being closed for 3 months and at half speed for the other 3 months. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 17, 2020, 05:25:54 PM
At this point, it's really a valuation question.  I mean, if you knock off 6 months, you still have to ask, what is the overall value of this company worth.  Assuming things go back to normal in the value, is there any equity left, if 600m in value goes out the door from being closed for 3 months and at half speed for the other 3 months.

Any interesting data point is that the fact the Company wants a waiver for the leverage covenants implies at least a 40% decline in LTM EBITDA.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on April 17, 2020, 06:56:29 PM
I mean, I think the waiver for this year is meaningless, of course the ebitda is going to fall off a cliff, they have no revenue.  The big question is what happens in the fall/winter.  I don't think they have any idea, so why not ask for the waiver now. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: DanielGMask on April 28, 2020, 09:46:01 PM
‘Trolls World Tour’ Breaks Digital Records and Charts a New Path for Hollywood
In three weeks of digital release, ‘Trolls’ sequel has made more money for Universal Pictures than original did during five months in theaters

“Universal’s plans to continue experimenting with digital releases drew the ire of the world’s largest exhibitor, AMC Entertainment Holdings Inc. In an open letter Tuesday evening in response to Mr. Shell’s comments in The Wall Street Journal, AMC Chief Executive Adam Aron said his chain would refuse to book any of the studio’s movies as long as it pursues such releases.”

https://www.wsj.com/articles/trolls-world-tour-breaks-digital-records-and-charts-a-new-path-for-hollywood-11588066202
Title: Re: AMC - AMC Entertainment Holdings
Post by: Jurgis on April 28, 2020, 09:52:29 PM
‘Trolls World Tour’ Breaks Digital Records and Charts a New Path for Hollywood
In three weeks of digital release, ‘Trolls’ sequel has made more money for Universal Pictures than original did during five months in theaters

“Universal’s plans to continue experimenting with digital releases drew the ire of the world’s largest exhibitor, AMC Entertainment Holdings Inc. In an open letter Tuesday evening in response to Mr. Shell’s comments in The Wall Street Journal, AMC Chief Executive Adam Aron said his chain would refuse to book any of the studio’s movies as long as it pursues such releases.”

https://www.wsj.com/articles/trolls-world-tour-breaks-digital-records-and-charts-a-new-path-for-hollywood-11588066202

Universal is so f'ed!

...

...

Wait...

...

Actually AMC is so f'ed...
Title: Re: AMC - AMC Entertainment Holdings
Post by: stahleyp on April 29, 2020, 02:50:27 AM
Wouldn't universal pay 30% to the streaming distributor vs 50% to theater? Obviously streaming is better in that case.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on April 29, 2020, 09:34:47 AM
Re: the revenue splits I haven't seen anything that shows a company like Universal will consistently make more via PVOD for tentpole movies than the traditional exhibition path. The first Trolls grossed 153m domestically and still had a PVOD period as well as the other deals to offer it on Netflix etc.

In this case I think Universal got a bit out over its ski's - Trolls 2 undoubtedly had its numbers juiced by families looking for something for kids to do while on lockdown. It is unlikely a Jurassic Park or Fast and Furious movie makes sense only on PVOD.

My bet is that this ends up with AMC shortening the window to something like 50-60 days while paying out a smaller %. A deal like that would also keep the door open for things with other streamers like Netflix.

In any event it will all be interesting to watch, Universal seems to be walking their comments back a bit to say only certain titles will be release PVOD.

I trimmed my position awhile back, then added again in the high 2's, low 3's and trimmed again today. When I trimmed I rolled the funds into a basket of things but still holding some AMC and have positions built in:

Jan 15 2021 $10
Jan 15 2021 $11.45
Jan 15 2021 $15.45
January 21 2022 $12

Still a good chance these expire, but seems like the AMC story is becoming more of a 3x or BK situation so thought this was a way to hold a position with out tying up cash while so many things in the market were on sale.

Rolled the rest into CNK & MCS which are up nicely. Still quite a loss & learning experience looking back over my notes on this one. Really appreciate all the commentary from 5x, FT and Given, which helped me sharpen my pencil on things.
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on April 29, 2020, 09:44:40 AM
Lots of interesting developments for sure...it is interesting to see the price action of the stock vs. the debt. Term loan is still mid-70s, the new 1L bond has dropped to 89 since issue, and the subordinate bonds are all still 20-25. From my high level, not super focused observations of the new issue market, I think the AMC bond is one of, if not the, worst performing new issue to-date. Although with a market cap of ~$550 million underneath all of this debt, the option value of the equity is going to swing wildly with good or bad news.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on May 01, 2020, 02:53:00 PM
https://www.sec.gov/Archives/edgar/data/1411579/000119312520131021/d902788dsc13d.htm

Not totally sure what to make of the timing of this filing.  Silverlake is really underwater on the convert price...odd timing.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on May 01, 2020, 05:44:37 PM
The more I look at this, I think Silverlake forgot to file this when AMC told them they were going to pay their convert in shares back in 2019, and now Silverlake was going over their docs and realized it, hence the filing.  Any other ideas? 
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on May 11, 2020, 06:24:12 AM
Amazon rumored to be kicking the tires on a buyout here.

Edit: This was predictably bs and appears to have been about Amazon looking at AMC networks and the paper didn’t catch it.

In other exhibition news Cinepolis and members of the controlling family have taken a 8.1% stake in Cinemark per filings. Cinemark sold their Mexican market operations to Cinemex in 2013. Cinemex recently filed Ch. 11 for their US subsidiary. Anyone have any insight into Cinepolis? I haven’t spent much time on the international circuits.
Title: Re: AMC - AMC Entertainment Holdings
Post by: MVP444300 on June 03, 2020, 11:19:18 AM
https://www.cnn.com/2020/06/03/media/amc-theatres-business-coronavirus/index.html

AMC Theatres, the world's biggest movie theater chain, said on Wednesday that it has "substantial doubt" it can remain in business after closing locations across the globe during the coronavirus pandemic.
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on June 10, 2020, 01:40:08 PM
Just skimmed the call transcript.

Management says they are burning slightly less than $100 million a month while theaters are shut down. They anticipate having "essentially" all locations open by the time "Tenet" releases, which is currently scheduled for July 17th.

$300 million of cash at end of Q1. Let's call that zero since they will burn it all by the end of Q2. Putting aside whatever financing moves they are making, they are looking at $5.1 or $5.2 billion of net debt and finance lease obligations at the end of Q2. That is just a tremendous amount of debt. As previously discussed in this thread, they were already struggling with the debt load prior to COVID.

Stock closed today at $6.29. Maybe I am just an old grump, but looking strictly at the fundamentals I have no idea why anyone would want to be long this at the current price. Massive industry uncertainty. Questionable management. Going concern warning. No-growth industry. Studios may be moving away from theatrical distribution somewhat. So on and so forth

Title: Re: AMC - AMC Entertainment Holdings
Post by: JRM on June 10, 2020, 03:53:01 PM
AMC is popular in the Sherwood Forrest. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Gregmal on June 10, 2020, 04:08:10 PM
9% a month to short. Rule of thumb, whenever you have a triple digit borrow cost, lower prices are almost a guarantee. Expressing a short here is tough though. Selling ITM calls maybe.
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on June 12, 2020, 10:07:41 AM
If you sell ITM calls, with this high of borrow costs, they will most likely get assigned to you as a short position. 

Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on June 12, 2020, 05:12:24 PM
Just skimmed the call transcript.

Management says they are burning slightly less than $100 million a month while theaters are shut down. They anticipate having "essentially" all locations open by the time "Tenet" releases, which is currently scheduled for July 17th.

$300 million of cash at end of Q1. Let's call that zero since they will burn it all by the end of Q2. Putting aside whatever financing moves they are making, they are looking at $5.1 or $5.2 billion of net debt and finance lease obligations at the end of Q2. That is just a tremendous amount of debt. As previously discussed in this thread, they were already struggling with the debt load prior to COVID.

Stock closed today at $6.29. Maybe I am just an old grump, but looking strictly at the fundamentals I have no idea why anyone would want to be long this at the current price. Massive industry uncertainty. Questionable management. Going concern warning. No-growth industry. Studios may be moving away from theatrical distribution somewhat. So on and so forth

"Tenet" release pushed back to July 31st
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on June 12, 2020, 05:15:54 PM
Wonder Woman pushed back to October.  Mulan will probably be pushed back a month.  Some other movies being shifted from fall to next year, Matrix being moved from 2021 to 2022. 

It's just going to be a long slog ahead for AMC.  They really need the unsecured to accept the exchange so they can reduce their interest payments with the PIK Notes. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on June 15, 2020, 07:33:22 AM
Wonder Woman pushed back to October.  Mulan will probably be pushed back a month.  Some other movies being shifted from fall to next year, Matrix being moved from 2021 to 2022. 

It's just going to be a long slog ahead for AMC.  They really need the unsecured to accept the exchange so they can reduce their interest payments with the PIK Notes.

Yeah, upcoming big budget releases keep getting pushed back. AMC is has no control over release dates and opening its US cinemas too far in advance of the first big budget movie release would only serve to burn cash more quickly.

This situation is partially an artifact of the bifurcation that we've seen develop in the movie industry in the last few years: Most big budget movies still go to cinemas, but lower budget movies (like Adam Sandler's recent stuff) go to streaming first.

Way back in 2005 I was dragged to see "Must Love Dogs" -- truly a traumatic experience. These days a lower budget romantic comedy like that would go straight to streaming. This situation means that cinema chains are very reliant on a relatively small number of big budget films.

Anyway, this headline says it all: "Box Office: The Summer Movie Season Is Essentially Canceled"

https://www.forbes.com/sites/scottmendelson/2020/06/13/box-office-summer-movie-season-essentially-canceled-mulan-tenet-spongebob/#54e0bc85258c
 (https://www.forbes.com/sites/scottmendelson/2020/06/13/box-office-summer-movie-season-essentially-canceled-mulan-tenet-spongebob/#54e0bc85258c)
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on June 17, 2020, 08:54:56 PM


https://www.cnbc.com/2020/06/17/amc-facing-creditor-resistance-on-proposed-debt-swap-report-says.html?__source=LinkedIn%7Cmain


Looks like Einhorn bought some debt



Title: Re: AMC - AMC Entertainment Holdings
Post by: Spekulatius on June 18, 2020, 07:58:20 AM
Quote from: Foreign Tuffett

Way back in 2005 I was dragged to see "Must Love Dogs" -- truly a traumatic experience.

LOL, mine was “Stuck Everlasting“

It predates yours, but I still recall the feeble plot line as if I have watched it yesterday,
Title: Re: AMC - AMC Entertainment Holdings
Post by: Jurgis on June 18, 2020, 08:43:04 AM
Quote from: Foreign Tuffett

Way back in 2005 I was dragged to see "Must Love Dogs" -- truly a traumatic experience.

LOL, mine was “Stuck Everlasting“

It predates yours, but I still recall the feeble plot line as if I have watched it yesterday,

You guys just don't understand movies. ::)

#SleeplessInSeattle-BestMovieEver
Title: Re: AMC - AMC Entertainment Holdings
Post by: merkhet on June 18, 2020, 10:40:36 AM
Worst movie ever is still Sucker Punch. IIRC Richard Roeper’s review was something like “somehow this movie has loud explosions, martial arts, and scantily-clad school girls and still even teenage boys would be bored to tears.”
Title: Re: AMC - AMC Entertainment Holdings
Post by: Jurgis on June 18, 2020, 10:50:09 AM
Worst movie ever is still Sucker Punch. IIRC Richard Roeper’s review was something like “somehow this movie has loud explosions, martial arts, and scantily-clad school girls and still even teenage boys would be bored to tears.”

Sucker Punch ( https://www.imdb.com/title/tt0978764/?ref_=fn_al_tt_1 ). My rating: 9 out of 10.

#YouGuysStillDon'tUnderstandMovies  ::)
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on June 19, 2020, 11:33:26 AM
https://twitter.com/AMCTheatres/status/1274038584241160192/photo/1

Aron is such a clown.  He was on Cramer last night saying no masks, now reversing his policy.  What did he expect last night? 

The stock was 30 when it went public in 2015 and 6 today. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on July 24, 2020, 07:08:58 AM
Release dates just keep getting pushed back. Now "Tenet" and "Mulan", the two blockbusters that were supposed to lead the way for cinemas reopening, don't even have release dates at all! 

Link to current release dates:

https://twitter.com/ErikDavis/status/1286657414834655244 (https://twitter.com/ErikDavis/status/1286657414834655244)

I haven't been following the news and rumors surrounding AMC's attempts to finance itself, but I would imagine that going long the stock at this point is a bet on:

(a) COVID treatment/vaccine breakthrough and/or
(b) government bailout and/or
(c) YOLO
Title: Re: AMC - AMC Entertainment Holdings
Post by: Gregmal on July 24, 2020, 02:50:50 PM
I still think this is a pretty sure 0, but from a recent call...on AMC opening

Craig Kucera

Hi. Good morning, guys. I'm curious to hear about your discussions with your movie theater tenants. I know AMC pushed back opening up another couple of weeks this morning. I think, Cinemark is expecting a phase reopening, but just, sort of, curious what you're hearing from them?

John Albright

Yeah. I would say that they weren't expecting to open up this month or next month, back when we negotiated our deals. I think, where the rubber meets the road is if they're not starting to open up in October, that would be, you know, if things aren't looking great for October then you could be having another discussion with them. But they didn't have any grand plans for late summer. They felt -- lease there, the way they are operating, that things are going to be shutdown until fall.
Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on July 29, 2020, 06:53:19 AM
Anyone have thoughts on the deal w/ Comcast Universal to shrink the window to 17 days before PVOD in certain cases?

Details are scant so it is hard to tell how it will play out and what the deal will mean for other studios and exhibitors. The general industry feedback seems to be that it was an unforced error on AMC's side. Anyone have color on what the PVOD splits might look like? I could see this being not a big deal if it just applies to smaller titles or films that underperform but I wasn't expecting the window to get this compressed this quickly.

https://deadline.com/2020/07/universal-amc-theatres-theatrical-window-crush-pvod-agreement-1202997573/
Title: Re: AMC - AMC Entertainment Holdings
Post by: 5xEBITDA on July 29, 2020, 06:56:31 AM
I like to daydream that Universal was like "we own $50 million of your bonds, agree to the window reduction or you don't get your stupid exchange done"
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on August 03, 2020, 01:06:15 PM
Baupost/Klarman with some thoughts that are similar to what was being posted in this thread back in June:

"Movie theater chain AMC provides a fascinating illustration of the equity market’s
optimism in the face of extremely adverse business conditions. With all its U.S. theatres closed,
the company reported on June 3rd that “substantial doubt exists about our ability to continue as a
going concern for a reasonable period of time.” Nevertheless, soon after this filing, shares of AMC
actually traded above their early-February level. By contrast, over this same time period, AMC’s
subordinated bonds reflected a much harsher reality, trading down from 90 to 30 cents on the
dollar.
"

https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/baupost-q4-2017-letter/30/ (https://www.cornerofberkshireandfairfax.ca/forum/general-discussion/baupost-q4-2017-letter/30/)
Title: Re: AMC - AMC Entertainment Holdings
Post by: roark33 on August 03, 2020, 04:15:13 PM
To be fair, the unsecured have really gotten screwed in this process because the covenants were so "lite" that AMC has been able to add new debt ahead of them in the capital structure.  The debt markets have been fairly friendly to AMC throughout this process--and that is the reason the equity has retained some value, and even increased as the equity has realized that the runway is longer than initially expected. 
Title: Re: AMC - AMC Entertainment Holdings
Post by: JRM on August 13, 2020, 08:04:07 AM
So AMC announces they're going to open 100 theaters with capacity restrictions in place and the stock is up 15%?  They were struggling before COVID-19, no good movies will be released this year, they are giving up their release window, and it likely will cost MORE to operate these theaters at reduced capacity then to keep them shut down.  What is going on here?
Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on August 13, 2020, 11:24:15 AM
So AMC announces they're going to open 100 theaters with capacity restrictions in place and the stock is up 15%?  They were struggling before COVID-19, no good movies will be released this year, they are giving up their release window, and it likely will cost MORE to operate these theaters at reduced capacity then to keep them shut down.  What is going on here?

I actually thought the worst part of the release was this: "AMC currently expects to open approximately two thirds of its more than 600 U.S. theatre locations in time for the September 3 release of Warner Bros.’ TENET"

This is a biz with middling economics when ALL of the locations are open. Having only 2/3rds of the US locations open just isn't going to cut it. But hey, I guess they have to start somewhere.

Title: Re: AMC - AMC Entertainment Holdings
Post by: Foreign Tuffett on September 15, 2020, 12:08:57 PM
To make a long story short, Tenet has done poorly at the domestic box office so studios are postponing basically every major upcoming movie. We probably won't see another big release until the second half of November.

https://www.theatlantic.com/culture/archive/2020/09/hollywoods-tenet-experiment-didnt-work/616345/
 (https://www.theatlantic.com/culture/archive/2020/09/hollywoods-tenet-experiment-didnt-work/616345/)

https://variety.com/2020/film/news/black-widow-release-date-delay-soul-disney-plus-1234769426/ (https://variety.com/2020/film/news/black-widow-release-date-delay-soul-disney-plus-1234769426/)

Title: Re: AMC - AMC Entertainment Holdings
Post by: txvalue on September 15, 2020, 12:56:10 PM
To add to FT's comment it is going to make things tough for the American circuits. Many were getting favorable treatment from landlords but now with these big releases pushing back circuits are going to have to make another decision - to stay open with no product or to shutter things again until the end of the year. Many other smaller operators are likely to close up shop.

I like Cineplex and Cinemark here, but Cineworld and AMC continue to be in hot water. AMC did get a fairly nice break from EPR so their liquidity is probably ok.

AMC finally started selling some assets dumping their Baltic region cinemas for 77 million in August, but they are also looking to modify a court order so they can reacquire some theaters they had to let go in the Carmike deal (the owners defaulted in July). Where there is an unnecessary acquisition to be had you can bet Aron will be nearby.