In April 2019, Marvel Studios released Avengers: Endgame, the 22nd film in the Marvel Cinematic Universe (MCU). The film was a massive success, raking in over $357 million at the box office in its opening weekend alone and claiming a spot as the second-highest grossing movie of all time.

Endgame is just the latest in a string of wins for Marvel: since the debut of the first MCU movie, Iron Man, in 2008, the studio’s films have raked in more than $8 billion in revenues at the box office alone. That’s great news for Disney, which acquired the comic book franchise in 2009 for $4 billion.

There’s no denying that Marvel Studios today is at the height of its powers, creatively and financially. But it hasn’t always been this way. Twenty years ago, fresh out of bankruptcy with $250 million in debt, Marvel was on the brink of collapse.

So how did they get from bankruptcy to a $4 billion acquisition by Disney in just 10 years?

Stories about the meteoric rise of Marvel tend to focus on the impressive creative and strategic guidance of film producer and Marvel president Kevin Feige, who has presided over the MCU since 2007.

Feige’s achievements are impressive, but they don’t paint a complete picture. If it hadn’t been for some savvy financial moves in the early 2000s, there well may not have been a Marvel Studios at all.

Prologue: Marvel and the comic book bubble of the 1990s

In order to recognize just how impressive the Marvel turnaround story is, it’s important to understand the state of the comic book industry in the mid-to-late 1990s.

Business was booming, and Marvel’s revenues boomed right along with it. The company’s 1993 Annual Report (which, fittingly enough, it published in comic book form) shows the company bringing in $415 million in 1993—up from $224 million the year before and $115 million in 1991.

But, alas, it wasn’t to last.

Popular author and comic book writer Neil Gaiman was one of the earliest to spot the problem. In a 1993 speech that has since become known as “The Tulip Speech,” Gaiman likened the comic book industry to the Tulip Mania of the 17th century, which drove prices for the most fashionable tulip bulbs sky high. This is widely considered to be the first recorded instance of a speculative bubble.

One of the main reasons that speculative bubbles form is that the perceived value of a commodity—and therefore demand for that commodity—vastly outstrips what the commodity is actually worth. In the late '80s and early '90s, a significant portion of the growth in the comic book industry came from collectors, who bought up multiple copies of books on speculation that they would one day be collectors' items.

Said Gaiman in the speech:

"You can sell lots of comics to the same person, especially if you tell them that you are investing money for high guaranteed returns. But you're selling bubbles and tulips, and one day the bubble will burst, and the tulips will rot in the warehouse."

Sure enough, when collectors woke up from the dream of becoming comic book millionaires, sales plummeted and the comic book bubble—like the tulip bubble and the dotcom bubble and the housing bubble of the mid-2000s—popped.

It nearly took Marvel Comics down with it. Sales dropped by 70 percent. The company’s stock plummeted from $35.75 in 1993 to $2.38 in 1996. In December 1996, the company filed for Chapter 11 bankruptcy.

By 1999, Marvel executives were desperate to turn the company’s financial fortunes around. So, they turned to an executive who knew a thing or two about saving businesses from the brink of destruction: Peter Cuneo.

Chapter 1: Enter Peter Cuneo, turnaround CEO/CFO extraordinaire

By the time Peter Cuneo came to Marvel, he had six successful corporate turnarounds to his name, including arms manufacturer Remington, power tool purveyor Black & Decker, and beauty brand Clairol.

Cuneo served as both CEO and CFO at Marvel. (He noted in an interview that this was before the passing of the Sarbanes-Oxley Act of 2002, which imposed higher standards for corporate governance and made such setups untenable.)

The double duty had the obvious financial advantage in that it saved the company the half-million dollars or so it would have spent on a CFO salary. But Cuneo cites another benefit as well. “[It] allowed me to stay close to the numbers and follow the details of our progress during that critical early stage,” he said in an interview published on Forbes.

Cuneo had a financial operator’s understanding of what money means to a business: “The language of business, the blood flowing through the veins of a business, is the numbers, the financials,” he said in another interview.

If financials are the vital signs of a business, the Marvel that Cuneo inherited was on life support. Coming out of bankruptcy, the company had $250 million in high-yield debt and 11 million shares of preferred stock. At one point in 2000, the company’s bank account balance dropped to $3 million—barely enough to cover its cash needs, let alone the debt.

“Going through bankruptcy is like going through chemotherapy,” Cuneo said in an interview. “You are supposedly cured but you are very weak. The company has lost all its hair. The best people have left. You have a talent drain.”

Cuneo knew that if he was going to bring new life to Marvel, he needed to do two things: conserve cash and cut back required capital to grow.

So that’s what he set out to do.

Chapter 2: Transforming Marvel into a lean, mean cost-saving machine

Marvel’s cost-conscious culture has become a legend in its own right in the years since Cuneo steered the ship. “People joke about Marvel counting paper clips every month, and really that's only a small exaggeration,” said Cuneo in an interview. “We wanted all of our employees thinking about spending every day.”

As CEO, Cuneo imposed a culture of strict financial discipline, tying employee incentives to cash flow instead of profitability and cutting costs across the company. Warehousing and merchandising costs, for example, dropped 71% from 2000 to 2001. Selling and general and administrative expenses decreased from $124.6 million in 1999 to $107.5 million in 2000, according to the company’s 2001 SEC filing.

However, there was one place Cuneo refused to cut corners: talent. In Cuneo’s eyes, sacrificing talent in order to cut costs had a role to play in Marvel’s demise in the 1990s, and he was not going to repeat that mistake.

“In creative businesses, in entertainment, your real power comes from creative people,” he said. “In comic books, it's the writers, editors and illustrators. If you abuse them because you're cost cutting and they feel that they're not appreciated—this is what happened at Marvel—they will leave.”

Marvel invested in talent where it counted, but they kept a tight ship otherwise. The company scaled back its payroll dramatically during Cuneo’s tenure, from 1,650 in-house workers in 1998 to under 250 employees by 2002. In fact, Marvel has since won several awards for productivity as measured by cash flow per employee, which at times exceeded $1.5 million per year.

“We were committed to paying for performance, focusing on productivity from both financial and creative viewpoints,” Cuneo said.

By 2002, Cuneo’s focus on financial discipline began to bear fruit. The company’s cash ratio shot up close to 30% from 30.7% in 2001 to 59.6% in 2002. Net income in the same period increased by 426%, from $5.3 million to $53.7 million.

With costs under control and the whole team aligned with the company’s new financial direction, the next thing Marvel needed was cash flow. To get there, Cuneo turned to the most valuable asset Marvel had: its intellectual property.

Chapter 3: Harnessing Marvel’s superpowered IP to generate cash flow

Marvel licensed various pieces of its IP deals throughout the ‘80s and ’90s, particularly as the company tried to bail itself out after the bubble. Marvel sold the film rights to the popular X-Men series to 20th Century Fox in 1994. It had optioned Spider-Man for film all the way back in 1985.

Under Cuneo, the company’s licensing activities kicked into high gear. Cuneo estimated that the company issued “thousands” of licenses over the decade from 2000-2010, covering everything from clothing to school supplies to toys to, of course, more deals for television and movies.

Licensing Marvel’s most recognizable, bankable characters—Spider-Man, the Incredible Hulk, Captain America—was a quick way to revitalize public awareness of and interest in the Marvel brand. But it also had a financial advantage, as producing Marvel-branded merchandise was a costly enterprise. Through licensing, Marvel was able to outsource the expenses to the licensees while keeping a low-cost revenue stream for itself.

That revenue stream saved the company. Thanks to the improved cash flow stemming from licensing, Marvel was able to buy its own bonds at 52 cents to par, retire its high-yield debt, and convert the preferred shares to common shares within four years.

Cuneo left the CEO position in 2002, moving to the role of vice chairman of the company’s board. But his impact as CEO/CFO reverberates to this day. With the company’s financial equilibrium restored, the stage was set for the move that would change the company’s destiny forever.

Chapter 4: The strategic financial risk that changed everything

Movies based on Marvel properties were being made by other studios throughout the 1990s and 2000s, thanks to the company’s liberal use of licensing. The first X-Men movie from Fox appeared in 2000 and was a box office and critical success, as was its 2002 sequel, X2. The Tobey Maguire Spider-Man movies out of Sony were similarly successful when they came out in 2002 and 2004.

But the upside for Marvel in these projects was negligible. Another movie based on Marvel IP, Blade, made $70 million at the box office, but Marvel saw only $25,000 of that return. Eventually, Cuneo and the other execs at Marvel started to wonder: what if we took a crack at this movie-making business ourselves?

“We had the talent, and we’d been apprenticing under the big studios long enough to have the know-how,” said Cuneo of the decision. “We felt we could produce quality motion pictures and keep all the profits, rather than receive a small revenue participation from a typical studio license deal.”

The creative talent to develop the movies wasn’t a problem. The money to produce them, on the other hand, was. Comic book films on the scale of an X-Men or a Spider-Man are expensive propositions: X2, the most recent X-Men movie at the time, had a production budget of $125 million. Spider-Man 2 set its studio back $200 million.

To finance the new venture, Marvel made what Cuneo calls their "most transformative move:" they took on a $525 million loan from investment firm Merrill Lynch and brought Marvel's movie-making operation in-house. As collateral for the deal, the company put up rights to 10 of the biggest characters it still had rights to at the time, including Ant-Man, Black Panther, Doctor Strange, Captain America, and the Avengers. If Marvel’s movie-making ventures went south, some of its most beloved and valuable properties would be forfeit.

Marvel’s first solo movie venture, Iron Man, bowed in 2008 with a budget of $140 million. At the time, the movie was seen as a huge gamble. Iron Man was far from a marquee property for Marvel, and Downey’s reputation at the time was checkered, to say the least. But when Iron Man hit the theaters, audiences were delighted with the story of the wisecracking but well-meaning Tony Stark. The movie went on to gross more than $585 million.

The first Iron Man movie has an impressive 93% fresh rating on the review aggregation website Rotten Tomatoes.

The Disney acquisition was announced in August 2009 and completed in December of that year. Iron Man was followed by a sequel, plus solo movies for the Incredible Hulk, Thor, and Captain America. In 2012, Marvel's The Avengers hit screens, and it was official: the Marvel Cinematic Universe was here to stay.

Mission accomplished: Savvy financial management saves the day

The financial side of Marvel is just as impressive and essential as its creativity and storytelling ability. As Peter Cuneo said, financials are the lifeblood that keeps a company alive. Or to borrow a metaphor from the pages of Marvel comics: if Marvel is the Iron Man suit, finances are its Arc Reactor, the powerful energetic core that keeps the whole operation running.