UPDATED: AMC Entertainment’s recent acquisitions binge took a chunk out of profits even as the company’s quarterly financial results beat Wall Street projections.
Earnings at the world’s largest exhibition chain fell more than 70% to $8.4 million, which the company attributed to costs associated with its purchase of Odeon Cinemas Group and Carmike Cinemas, two deals that expanded its presence in Europe and the United States. Revenue for the three-month period ending in March rose 67.6% to $1.28 billion. Analysts had projected that the company would do $1.25 billion in sales. Earnings per share fell from 29 cents to 7 cents, in line with estimates.
Excluding merger and acquisition costs, AMC said its net earnings increased 7.5% to $34.6 million. Box office hits such as “Beauty and the Beast” and “Logan” helped goose attendance at the chain, with admissions revenues climbing nearly 70% to $817.3 million. AMC has invested heavily in updating its menu and moving beyond popcorn and soda. It has added alcoholic beverages and more inventive snacks at many locations. The strategy appears to be working — food and beverage revenues at the chain rose 63% to $397.9 million.
In a statement, AMC CEO Adam Aron said the company will continue to invest in sprucing up its food offerings and in outfitting theaters with recliner seats. He also predicted that the theater chain’s acquisitions would result in certain cost synergies.
“We are only just beginning to unlock the growth potential of our recent acquisitions,” Aron said. “The initial integration efforts of creating a transformed AMC have been done quickly and have been very smooth.”
In an earnings call after the results were made public, Aron said AMC will renovate 122 theaters in 2017 and 2018 and will retire the Carmike name. He argued AMC’s brand resonated more strongly with customers.
Aron also addressed studios’ plans to offer some new films on-demand with days of their release on theaters. Currently, most major films aren’t available to rent until roughly 90 days after their theatrical debut In order to get exhibitors to agree to screen movies that will hit home entertainment earlier, studios are offering to give theater chains a cut of their profits.
Aron said the plan was attractive to AMC because the company would “be paid handsomely in the process,” but said that any deal would need industry-wide support. It would not work if it was simply between one studio and one exhibitor.
“A consensus is going to need to emerge,” said Aron.
Shares of AMC Entertainment climbed more than 1% in after-hours trading, hitting $29.10.