Press

IMAX Corporation Reports Second-Quarter 2017 Results
Jul 26, 2017

HIGHLIGHTS

  • Dunkirk kicked off Q3 with a robust $19 million in Global Box Office across 634 theaters in its opening weekend.. Domestically, IMAX represented a record 23% of the opening weekend box office and laid claim to 18 of the top 20 locations
  • Signed agreements for 92 new theaters in the second quarter, bringing year-to-date signings to 130 systems across 24 countries including the U.S., China, India, Germany and the Netherlands
  • Backlog of 580 systems represents an all-time high, facilitating a sustained level of installations
  • Announced first-ever virtual reality Hollywood content deal with Warner Bros . Home Entertainment to develop three cutting-edge VR experiences based on highly anticipated films, including Justice League and Aquaman
  • Announced a cost-reduction exercise aimed at achieving approximately $20 million in annualized cost savings, with the goal of improving operating leverage
  • Repurchased $46M of shares in the second quarter, completing the previously announced $200-million buyback program; board authorized new program for up to an additional $200 million through June 2020

NEW YORK - July 26, 2017 - IMAX Corporation (NYSE:IMAX) today reported second-quarter 2017 revenue of $87.8 million and a net loss attributable to common shareholders of $1.7 million, or $0.03 per diluted share. Adjusted net income attributable to common shareholders for the second quarter was $0.15 per diluted share, which excludes charges and impairments associated with the Company's cost-reduction initiative. For reconciliations of reported results to non-GAAP financial results, and for the definition and reconciliation of Adjusted EBITDA as calculated in accordance with the Company's credit facility, please see the end of this press release.

"We continue to take a portfolio approach to our film business, understanding certain films resonate strongly with consumers and others less so," said IMAX CEO Richard L. Gelfond. "While several films in the second quarter underperformed our expectations, the recent release of Christopher Nolan's Dunkirk emphasizes the value in viewing our business as a portfolio of films. Dunkirk, which was shot almost entirely with IMAX film cameras, achieved $12 million domestically and indexed a record 23% in IMAX, opening weekend. Breakout titles like this are encouraging as they tend to provide strategic benefits lasting well beyond the window of the film. Historically, with other IMAX hits, we have seen increased consumer awareness of IMAX, heightened demand from other filmmakers looking to leverage our format and greater demand from exhibitors, among other benefits."

"As consumers increasingly demand and value premium content and experiences, we continue to see strong demand from both new and existing exhibitor partners around the world who are seeking to add IMAX to their multiplexes," continued Gelfond. “In fact, during the past 18 months we have signed agreements for an incredible 450 theaters. As a result of our record backlog and strong installation pace, we expect our commercial footprint to span nearly 2,000 screens worldwide over the next several years. We believe expanding our footprint is the single-biggest contributor to long-term value creation and expanding our network will continue to be a key priority."



Second-Quarter 2017 Results

 

Network Update
During the quarter, the Company installed 34 theaters, of which 33 were for new theater locations and one was an upgrade. The total IMAX theater network consisted of 1,257 systems as of June 30, 2017, of which 1,154 were in commercial multiplexes. There were 580 theaters in backlog as of June 30, 2017, up 31% from the 442 in backlog as of June 30, 2016.

Continuing the Company's record signings momentum from 2016, IMAX signed contracts for 92 new theaters and three upgrades to existing theaters in the second quarter of 2017. Through the first six months of 2017, the Company signed contracts for 130 new theater systems and four upgrades across 24 countries, including the US, China, India, Japan, Germany and The Netherlands. For a breakdown of theater system signings, installations, network and backlog by type for the second quarter of 2017, please see the end of this press release.

"We continue to focus our efforts on driving operating leverage and increasing the profitability of our Company," said Gelfond. "While growing the network is the most powerful factor in earnings growth long-term, we are also implementing strategies aimed at increasing the revenue productivity of our current network, while also reducing our cost structure. On the expense side, we streamlined our cost structure, shaving $20 million in annualized costs, which increases profitability and enables us to scale more efficiently. We are also identifying means to increase the revenue productivity of our theaters. For example, we are working with our exhibitor partners to reseat a number of our theaters with new, premium seats. On the film side, we are aiming to play more 2D-version of films domestically, given the clear preference from consumers for 2D, particularly in North America. We also intend to shorten the length of play that we allot many films, which helps keep the content on screen fresh." Gelfond concluded, "We believe our focus on network growth, coupled with strategies to increase our revenue productivity while also reducing our cost structure, should facilitate meaningful value creation long-term."

Box Office Update
Gross box office from IMAX DMR® titles was $268.9 million in the second quarter of 2017, compared with $260.8 million in the prior-year period. The average global DMR box office per-screen average in the second quarter of 2017 was $237,800, compared with $268,200 in same period last year. Per-screen averages were down year-over-year, primarily from weaker box office in China. This underperformance is largely attributable to weaker content and the ramp-up of new-build theaters. Please reference the chart below for a breakout of box office and per-screen averages on a regional basis:


 Box Office (M's) Per Screen Average (000's) 
 
 Q2 2017Q2 2016 Q2 2017Q2 2016 
Global$ 268.9$ 260.8 $ 237.8$ 268.2 
Domestic     85.9         88.8    216.3   225.9 
Greater China     97.2     97.1    235.1   325.3 
Other Intl.     85.8     75.0    267.9   266.7 


Second-Quarter Segment Results

Network Business

  • Network business revenue was $47.4 million in the quarter, compared with $48.1 million in the prior-year period. Margins for the network business were 66.3% in the most recent quarter, compared to 68.8% in the prior-year period.
  • IMAX DMR revenues were $27.8 million in the second quarter of 2017, in line with the second quarter of 2016. Gross margin for the IMAX DMR segment was 61.2%, compared to 62.5% in the prior-year comparative period.
  • Revenue from joint revenue-sharing arrangements was $18.9 million in the quarter, compared with $19.5 million in the prior-year comparative period. Gross margin for joint revenue-sharing arrangements was 72.3%, compared to 75.9% in the prior-year comparative period.

Theater Business

  • Theater business segment revenue was $32.7 million in the quarter, compared with $38.9 million in the prior-year comparative period.
  • The lower revenue versus the second quarter of 2017 was a result of fewer theater installations of new IMAX system sales and sales-type leases (12 in 2017 compared with 13 in 2016), lower upfront revenue from fewer hybrid joint-sharing arrangement installations (3 in 2017 compared with 8 in 2016) and one less system upgrade (1 in 2017 compared with 2 in 2016).
  • The Company's margins on full, new sales and sales-type leases were 69.9% compared with 58.0% in the year-ago period, primarily a result of regional mix of installations.
  • The Company remains on track to install approximately 160 new IMAX theater systems in 2017.

The gross margin across all segments in the second quarter of 2017 was $49.5 million, or 56.4% of total revenue, compared to $50.3 million, or 54.8% of total revenue in the second quarter of 2016.Operating expenses (which include SG&A and R&D, and exclude stock-based compensation) were $28.1 million in the quarter, compared to $27.6 million in the second quarter of 2016.

Share Buybacks
During the six months ended June 30, 2017, the Company repurchased 1,736,150 common shares at an average price of $26.57 per share. The second-quarter repurchases exhausted the remaining allowance under the previously announced $200 million share-repurchase program. The retired shares for the three and six months ended June 30, 2017, were repurchased for $46.1 million.  The average carrying value of the stock retired was deducted from common stock and the remaining excess over the average carrying value of stock was charged to accumulated deficit.

On June 12, 2017, the Company announced that its board of directors approved a new $200 million share-repurchase program for shares of the Company's common stock. The share-repurchase program expires on June 30, 2020. The repurchases may be made either in the open market or through private transactions, subject to market conditions, applicable legal requirements and other relevant factors. The Company has no obligation to repurchase shares and the share-repurchase program may be suspended or discontinued by the Company at any time.

Supplemental Materials
For more information about the Company's results, please refer to the IMAX Investor Relations website located at investors.imax.com.

Investor Relations Website and Social Media
On a weekly basis, the Company posts quarter-to-date box office results on the IMAX Investor Relations website located at www.imax.com/content/investor-relations. The Company expects to provide such updates on Friday of each week, although the Company may change this timing without notice. Results will be displayed with a one-week lag. In addition, the Company maintains a Twitter account: @IMAX_Investors. The Company intends to use Twitter to disclose the box office information, as well as other information that may be of interest to the Company's investor community.

The information posted on the Company's website and/or via its Twitter account may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website and its Twitter account in addition to the Company's press releases, SEC filings and public conference calls and webcasts.

Conference Call
The Company will host a conference call today at 4:30PM ET to discuss its second-quarter 2017 financial results. This call is being webcast by Nasdaq and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (800) 347-6311 approximately 5 to 10 minutes before the call begins. Other international callers should dial +1-(416) 640-5944. The conference ID for the call is 9851418. A replay of the call will be available via webcast at investors.imax.com or via telephone by dialing (888) 203-1112 (US and Canada), or +1-(647) 436-0148 (international). The Conference ID for the telephone replay is 9851418.

About IMAX Corporation
IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theaters to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe.

IMAX is headquartered in New York, Toronto and Los Angeles, with additional offices in London, Dublin, Tokyo, and Shanghai. As of June 30, 2017, there were 1,257 IMAX theaters (1,154 commercial multiplexes, 13 commercial destinations and 90 institutions) in 75 countries. On Oct. 8, 2015, shares of IMAX China, a subsidiary of IMAX Corp., began trading on the Hong Kong Stock Exchange under the stock code "HK.1970."

IMAX®, IMAX®3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and IMAX nXos® are trademarks of IMAX Corporation. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).

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This press release contains forward looking statements that are based on IMAX management's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company's growth and operations in China; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the performance of IMAX DMR films; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; the Company's largest customer accounting for a significant portion of the Company's revenue and backlog; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security; risks related to the Company’s inability to protect its intellectual property; risks related to the Company's implementation of a new enterprise resource planning system; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; and other factors, many of which are beyond the control of the Company. These factors, other risks and uncertainties and financial details are discussed in IMAX's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

For additional information please contact:

Investors:

 

IMAX Corporation, New York

Jessica Kourakos

212-821-0100

jkourakos@imax.com

 

Michael Mougias

212-821-0187

mmougias@imax.com

 

Business Media:

Sloane & Company, New York

Whit Clay

212-446-1864

wclay@sloanepr.com  

Media:

 

IMAX Corporation, New York

Ann Sommerlath

212-821-0155

asommerlath@imax.com

 

Entertainment Media:

Principal Communications Group, Los Angeles

Melissa Zuckerman/Paul Pflug

323-658-1555

melissa@pcommgroup.com

paul@pcommgroup.com

 


 

 

Additional Information

 

Signings and Installations

    

March 31, 2017

    
  

Three Months

Ended June 30,

 
 

Theater Signings:

2017

 

2016

 
 

Full new sales and sales-type lease arrangements

14

 

19

 
 

New joint revenue sharing arrangements

78

 

75

 
 

Total new theaters

92

 

94

 
 

Upgrades of IMAX theater systems

1

 

3

 
 

Total Theater Signings

95

 

95

 
      
      
  

Three Months

Ended June 30,

 
 

Theater Installations:

2017

 

2016

 
 

Full new sales and sales-type lease arrangements

12

 

13

 
 

New joint revenue sharing arrangements

21

 

25

 
 

Total new theaters

33

 

38

 
 

Upgrades of IMAX theater systems

1

(1)

2

(1)

 

Total Theater Installations

34

 

30

 
      
      
  

As of June 30,

 
 

Theater Backlogs:

June 30,
2017

 

December 31,
2016

 
 

New sales and sales-type lease arrangements

174

 

143

 
 

New joint revenue sharing arrangements

    
 

Hybrid arrangements

137

 

192

 
 

Traditional arrangements

269

 

263

 
 

Total new theaters

580

(2)

498

(3)

      
      
  

As of June 30,

 
 

Theater Network:

2017

 

2016

 
 

Commercial Multiplex Theaters:

    
 

Sales and sales-type lease arrangements

483

 

467

 
 

Joint revenue sharing arrangements

671

 

640

 
 

Total Commercial Multiplex Theaters

1,121

 

952

 
      
 

Commercial Destination Theaters

13

 

16

 
 

Institutional Theaters

91

 

92

 
 

Total Theater Installations

1,257

 

1,215

 
  
     

(1)

Includes one installation of an upgrade to a laser-based digital system under a sales arrangement (2016 - one laser-based digital system and one xenon-based digital system under sales and sales-type lease arrangements).

(2)

Includes 28 laser-based digital theater system configurations, including four upgrades. The Company continues to develop and roll out its laser-based digital projection system

(3)

Includes 20 laser-based digital theater system configurations, including three upgrades.

(4)

Includes 21 laser-based digital theater system configurations, including six upgrades (one xenon configuration and five laser configurations).