• AMC Entertainment said it could post positive cash flow at the theater level as soon as the fourth quarter if the domestic box office sales reach at least $5.2 billion.
• With the domestic box office currently at $1.76 billion, according to data from Comscore, analysts say topping $5 billion is an overly optimistic goal.
• At present only around 85% of North American theaters are open to the public and many have imposed capacity restrictions, limiting how much cinemas can make per showing.
• Many local governments have reinstated mask mandates as the delta variant spreads in the U.S.

AMC Entertainment CEO Adam Aron has set an optimistic target for the 2021 domestic box office.

During an earnings call Monday, Aron said AMC could post positive cash flow at the theater level as soon as the fourth quarter if the domestic box office reaches at least $5.2 billion. This means that AMC's theaters would generate enough money to cover all of its operating costs.

Industry insiders, however, are not convinced the goal is attainable, particularly, as a new Covid-19 variant has forced local governments to reinstate health and safety measures like mask mandates. Experts are also keenly aware that the availability of many major blockbusters on streaming platforms at the same time as theaters has eaten into ticket sales.

As of Sunday, the domestic box office has tallied $1.76 billion in ticket sales, according to data from Comscore. This means that Hollywood would need to generate around $3.4 billion in revenue in the final 20 weeks of the year — a feat that many box-office analysts say is overly optimistic.

For comparison, during the last 20 weeks of 2019, the box office generated around $4 billion from titles like "Joker," "It: Chapter 2," "Frozen II," " Jumanji: The Next Level" and "Star Wars: The Rise of Skywalker."

The last four months of this year are packed with some highly anticipated films. However, movies such as "Matrix 4," "Dune" and "Venom: Let There Be Carnage" will debut in cinemas and on streaming on the same day, which could dampen ticket sales. Others, like "No Time to Die," "Eternals," "Top Gun: Maverick" and "Spider-Man: No Way Home" will have exclusive theatrical releases.

"2021's final months have more potential than any prior period to inch closer toward pre-pandemic levels of business," said Shawn Robbins, chief analyst at Boxoffice.com. "But everything hinges on the state of variants and audience comfort levels, a higher share of vaccinated people, and of course, studios remaining committed to their existing release schedules. Everything is fluid right now and probably will be for the foreseeable future."

Robbins said that $5 billion is a possible, but "optimistic" target.

Wedbush's Alicia Reese said her firm's estimate for the 2021 domestic box office was $4.9 billion at the end of July. However, more headwinds have arrived in recent weeks, which Reese expects will make moviegoers reconsider going to theaters.

"Studios may give more thought to day-and-date releases for Q4, or perhaps push their releases yet again if this continues to get worse into the holiday season," she said. "There are still many variables that make 2021 domestic box office a moving target, but it looks unlikely from the beginning of August that the domestic box office will hit $5.2 billion for the full year."

Crunching the numbers

Comscore's senior media analyst, Paul Dergarabedian, broke down the week-by-week box-office receipts for the last three years and determined that in order for the 2021 slate to reach that figure, it would need a "perfect rest of the year."

"The fall would have to behave like summer in order to get us to a number approaching $5 billion," Dergarabedian said. "It would appear, at this point, an incredibly heavy lift to even approach such a benchmark by the end of the year."

Between May and August 2019, the box office generated $4.3 billion from titles like "Avengers: Endgame," "Aladdin," "Godzilla: King of the Monsters," "Toy Story 4," "Spider-Man: Far From Home" and "The Lion King."

"It's a stretch, but it's possible," said Eric Wold, senior analyst at B. Riley Securities.

Wold noted that his firm is not currently projecting the box office to reach this mark. After all, the domestic box office is currently down 75% from 2019 levels and the third quarter is expected to be down around 50% compared with the pre-pandemic period.

He projects the domestic box office will reach between $4.4 billion to $4.5 billion for the whole of 2021.

"This would imply that [fourth-quarter] box office would have to be equal or down only 5% from 2019 levels to get to $5.2 billion for the year," he said. "We think that is unlikely at this point given continued near-term traffic uncertainties."

At present, only around 85% of North American theaters are open to the public, compared with 2019 levels. Some have imposed capacity restrictions, which limits how much cinemas can make per showing. Theaters that are closed are either shuttered completely due to the pandemic or are waiting for more favorable conditions to reopen.

Higher ticket prices, more theaters

As of the end of June, all of AMC's 593 U.S. theaters were open to the public and 335 of its international theaters, or about 95%, were operational.

Around 22 million guests visited AMC's theaters during the quarter, much larger than the 7 million that attended during the first quarter. However, it's a far cry from the company's all-time quarterly record of 97 million during the second quarter of 2019.

Audiences are returning, which has aided the chain's revenue in recent months, but crowds have not yet rebounded to pre-pandemic levels.

"We are still losing money," Aron said on the call Monday. "We are still burning cash. We're burning less of it. But we're using cash not generating cash."

In the second quarter, AMC posted its sixth consecutive loss. This means losses date back to the third quarter of 2019 — before Covid-19 spread around the globe and studios began focusing on new streaming services.

Revenue has been flat since AMC bought rivals Carmike and Nordic Cinema Group in 2016 and 2017, respectively, despite its investments in premium recliner seats and in-theater dining options. These efforts have weighed heavily on the company's bottom line and its cash flow.

AMC has amassed more than $1.8 billion in cash, mostly from stock sales, that it is using to further upgrade its theaters and lease new locations. But payments for its massive debt, which is in excess of $5 billion, have been pushed out. It does not have any maturities coming due until 2023.

The chain has tried to boost revenue by raising ticket prices by 5%, or about 50 cents per ticket, in some U.S. theaters last week. The hope is that increasing prices and adding locations will benefit AMC as more films arrive in theaters and studios begin to ease away from day-and-date streaming releases.

"As we we look to 2022 when vaccine distribution should be wider and, more importantly, studios return to exclusive theatrical windows, we are projecting only a mid-teens percentage decline in domestic box office from 2019 levels — which would easily return the exhibition group to positive [adjusted earnings before interest, taxes, depreciation and amortization] and cash flow," said Wold of B. Riley Securities. "And given that strong cash balance in hand for AMC at this point, they are well positioned to make it to that point and beyond."