Press

IMAX Corporation Reports Third-Quarter 2017 Results
Oct 26, 2017

HIGHLIGHTS

Company achieves record third quarter box office, up 17% over the prior-year
IMAX domestic box office increased 18% year-over-year, compared to the overall industry box office decline of 14%
Reduced SG&A, excluding stock-based compensation by 11% compared to the prior year period, largely the result of the Company's recently announced cost-reduction exercise
Network Business margin of 67% up 500 basis points compared to prior third quarter
Company's network expansion continues with 49 new theatre system installations in the third quarter, commercial network count reaches 1,203 screens
151 signings over first nine months, 88% of which come from existing partners; backlog at 545 systems

NEW YORK – Oct. 26, 2017IMAX Corporation (NYSE:IMAX) today reported third-quarter 2017 revenue of $98.8 million and a net loss attributable to common shareholders of $0.9 million, or $0.01 per diluted share. Adjusted net income attributable to common shareholders for the third quarter was $0.08 per diluted share, which excludes charges and impairments associated with the Company's cost-reduction initiative and stock based compensation. 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.

"Our third-quarter global box office marked IMAX's highest-grossing third quarter ever, growing 17% to $219 million. In addition to our box office growing 18% in the domestic market, despite the overall North America box office decline of roughly 14%, we also saw exceptional performance from our international, ex-China box office. This segment, which represents 27% of our theater network, accounted for over 34% of our total box office last quarter – underpinning the significance of our growing presence in key markets such as Japan, India and Europe," said Richard L. Gelfond, IMAX Corporation CEO. "Last quarter we laid out several initiatives aimed at increasing the revenue generation of our network and reducing our cost structure. While we are still in the early stages of fully implementing these initiatives, we were pleased with the tangible progress we made in the third quarter—facilitating heightened box office and notable margin expansion across our core business."

Third-Quarter 2017 Results

Network Update
During the quarter, the Company installed 51 theaters, of which 49 were for new theater locations and two were upgrades. The total IMAX theater network consisted of 1,302 systems as of Sept. 30, 2017, of which 1,203 were in commercial multiplexes. There were 545 theaters in backlog as of Sept. 30, 2017, up 9% from the 547 in backlog as of Sept. 30, 2016.

Continuing to build upon the Company's record signings momentum from 2016, IMAX signed contracts for 17 new theaters in the third quarter of 2017. Through the first nine months of 2017, the Company signed contracts for 147 new theater systems and four upgrades across 28 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 third quarter of 2017, please see the end of this press release.

"The IMAX consumer value proposition was on full display last quarter. Despite overall cinema industry challenges, it was our strongest third quarter ever, underpinned by our outperformance on blockbuster-titles such as Dunkirk. Internationally, box office from our international, ex-China network, now exceeds that of our domestic business. In fact, we grew box office in this segment by 25% year-over-year. And given 25% of our backlog is slated for markets outside of North America and China, we anticipate this piece of our business to become even more meaningful over time." Gelfond concluded, "As a Company, our priority remains profitably growing our network. We achieved healthy operating leverage in our core business last quarter, benefiting from the incremental nature of our theatre installations and the attractive returns IMAX screens continue to generate, especially under a more modest cost structure."

Box Office Update
Gross box office from IMAX DMR® increased by 17.4% to $218.8 million in the third quarter of 2017 from $186.3 million in the third quarter of 2016, resulting in higher DMR revenues. Gross box office per-screen for the third quarter of 2017 averaged $181,122, in comparison to $184,700 in the third quarter of 2016 as the increase in gross box office did not increase at the same growth rate as the IMAX theater network. In the third quarter of 2017, gross box office was generated primarily by the exhibition of 24 films (17 new and 7 carryovers), as compared to 29 films (21 new and 8 carryovers) exhibited in the third quarter of 2016. Our third quarter 2017 results include box office attributable to the theatrical release of "Marvel's Inhumans", which underperformed our expectations.

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)
 Q3 2017 Q3 2016  Q3 2017 Q3 2016
    
Global$218.8$186.3 $181.1$184.7
Domestic80.168.1 197.9174.2
Greater China59.655.2 134.1170.9
Other Intl.79.163.0 220.4213.8

 


Third-Quarter Segment Results

Network Business

 

Network business revenue was $42.6 million in the quarter, compared with $36.5 million in the prior-year period. Margins for the network business were 67.0% in the most recent quarter, compared to 61.8% in the prior-year period.

IMAX DMR revenues were $26.0 million in the third quarter of 2017, compared to $21.5 million in the third quarter of 2016. Gross margin for the IMAX DMR segment was 69.7%, up over 1,100 basis points compared to 57.8% in the prior-year comparative period. The margin increase was primarily a result of stronger box office and a reduction in DMR expenses year-over-year.

Revenue from joint revenue-sharing arrangements was $15.6 million in the quarter, compared with $14.2 million in the prior-year comparative period. Gross margin for joint revenue-sharing arrangements was 60.1%, compared to 65.8% in the prior-year comparative period.

 

Theater Business

Theater business segment revenue was $43.5 million in the quarter, compared with $43.2 million in the prior-year comparative period.

The Company's gross margin on full, new sales and sales-type leases were 68.2% compared with 68.8% in the year-ago period, primarily a result of the regional mix of installations.

The Company now expects to install approximately [160 to 165] new IMAX theater systems in 2017, versus its previous outlook of 160 installations.
 

 

Consolidated Results
The gross margin across all segments in the third quarter of 2017 was $39.9 million, or 40.4% of total revenue, compared to $44.9 million, or 51.9% of total revenue in the third quarter of 2016. Our total gross margin reflects investment in new business initiatives in the amount of $11.1 million in the quarter. This figure was largely a result of the Company's investment in the new television series "Marvel's Inhumans". Operating expenses (which include SG&A and R&D, and exclude stock-based compensation) were $25.0 million in the quarter, down 9% compared to $27.4 million in the third quarter of 2016.

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 8:30AM ET to discuss its third-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) 274-0251 approximately 5 to 10 minutes before the call begins. Other international callers should dial (416) 640-5944. The conference ID for the call is 5695574. 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 (647) 436-0148 (international). The Conference ID for the telephone replay is 5695574.

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 September 30, 2017, there were 1,302 IMAX theater systems (1,203 commercial multiplexes, 13 commercial destinations, 86 institutional) operating 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; the failure to fully realize the projected cost savings and benefits from the Company's restructuring initiative; 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:

 

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

    

September 30, 2017

    
  

Three Months

Ended September 30,

 
 

Theater Signings:

2017

 

2016

 
 

Full new sales and sales-type lease arrangements

17

 

5

 
 

New joint revenue sharing arrangements

-

 

-

 
 

New hybrid joint revenue sharing arrangements

-

 

1

 
 

Total new theaters

17

 

161

 
 

Upgrades of IMAX theater systems

-

 

1

 
 

Total Theater Signings

17

 

162

 
      
      
  

Three Months

Ended September 30,

 
 

Theater Installations:

2017

 

2016

 
 

Full new sales and sales-type lease arrangements

19

 

15

 
 

New joint revenue sharing arrangements

25

 

24

 
 

New hybrid joint revenue sharing arrangements

5

 

9

 
 

Total new theaters

49

 

48

 
 

Upgrades of IMAX theater systems

2

(1)

2

(1)

 

Total Theater Installations

51

 

50

 
      
      
  

 

 
 

Theater Backlogs:

September 30,
2017

 

September 30,
2016

 
 

New sales and sales-type lease arrangements

170

 

158

 
 

New joint revenue sharing arrangements

    
 

Hybrid arrangements

130

 

103

 
 

Traditional arrangements

245

 

286

 
 

Total new theaters

545

(2)

547

(3)

      
      
  

As of September 30,

 
 

Theater Network:

September 30,
2017

 

September 30,
2016

 
 

Commercial Multiplex Theaters:

    
 

Sales and sales-type lease arrangements

501

 

445

 
 

Joint revenue sharing arrangements

575

 

487

 
 

Hybrid joint revenue sharing arrangements

127

 

105

 
 

Total Commercial Multiplex Theaters

1,203

 

1,037

 
      
 

Commercial Destination Theaters

13

 

16

 
 

Institutional Theaters

86

 

92

 
 

Total Theater Installations

1,302

 

1,145

 
  
     

(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).