Third Quarter IMAX Loss Narrows Y/Y, Revenue Aids Box Office Growth – November 1, 2022

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IMAX Corporation (IMAX Free Report) reported an adjusted loss of 5 cents per share for the third quarter of 2022. Zacks consensus estimate was pegged at earnings of 3 cents per share. The figure improved from a loss of 8 cents per share in the year-ago quarter.

Total revenue of $68.7 million missed Zacks’ consensus estimate by 2.54%. The figure, however, was up 21.5% from levels in the year-ago quarter.

Revenue for the quarter was negatively impacted by $700,000 as theaters in Russia, Ukraine and Belarus continued to be in non-recognition status. As of September 30, 2022, the IMAX network includes 54 theaters in Russia, nine theaters in Ukraine, and one theater in Belarus. The company’s backlog includes 14 theaters in Russia, one theater in Ukraine and five theaters in Belarus, with a total fixed contract value of $22.9 million.

In late September, IMAX completed the acquisition of SSIMWAVE for $21 million in cash and IMAX stock and a potential $4 million in future earnouts.

By category, image enhancement and maintenance services, technology rental and technology sales increased 18.5%, 22.7% and 37.3% year over year for reach $36.2 million, $12.5 million, and $18 million, respectively. Financial income generated revenue of $1.9 million, down 27.2% from year-ago quarter levels.

Segment details

IMAX Technology Network Company

IMAX technology network revenue grew 27% year-over-year to $32.5 million in the third quarter of 2022.

Within this segment, IMAX DMR revenue increased 26.9% year over year to $19.9 million. Total IMAX gross box office (GBO) rose 25% year-over-year to $177.1 million, with 30% of the box office coming from local-language blockbusters.

In the third quarter of 2022, GBO was generated by the exploitation of 36 films (27 unreleased films, four postponements and five re-releases), of which Thor: Love and Thunderwhich generated a GBO of $39.8 million over the period, and Top Gun: Maverickwhich generated a GBO of $20.4 million over the period.

Local language films shown on the company’s global network of theaters generated $53 million in GBOs, representing 30% of the company’s total GBOs in Q3 2022.

In China alone, the company made $24 million at the box office across 14 screens. The company has partnered with 84 Chinese exhibitors in 207 cities in 31 provinces in mainland China.

IMAX has nearly 800 theaters open in China and another 200 behind schedule. During the third quarter of 2022, about 82% of IMAX theaters in Greater China were open at various capacities, on average.

Contingent rent from joint revenue sharing agreements increased 26.8% to $12.5 million.

Sales and maintenance of IMAX technology

Revenue from the sale and maintenance of IMAX technology increased 19% year-over-year to $33 million in the third quarter of 2022. The increase in revenue was due to the installation of additional system, the impact of changes to existing theater arrangements and increased secondary market sales revenue.

Within this segment, IMAX systems revenue increased 20.6% from year-ago quarter levels to $15.9 million. IMAX maintenance revenue increased 6.8% year over year to $13.9 million.

Joint revenue sharing agreements – fixed costs were 998,000, down 3.7% year-on-year. Other movie theater revenue was $2.1 million in the current quarter.

Film distribution and post-production

Film distribution and post-production generated revenues of $2.04 million, up 28.2% year-over-year.

Network growth statistics

As of September 30, 2022, there were 1,703 IMAX theater systems in 87 countries and territories, including 1,622 commercial multiplexes, 12 retail destinations, and 69 institutional locations in the company’s global theater network. This compares to 1,664 IMAX theater systems in 85 countries and territories as of September 30, 2021, including 1,580 commercial multiplexes, 12 retail destinations and 72 institutional locations in the company’s global cinema network.

As of September 30, 2022, the company’s backlog includes 157 new IMAX with laser systems and 95 upgrades to IMAX with laser systems.

Operation details

Gross margin contracted by 250 basis points (bps) to 46.1% in the third quarter of 2022.

Credit facility adjusted EBITDA was $16.5 million, compared to $13.1 million for the same period last year.

Selling, general and administrative (SG&A) expenses increased 16% year over year to $32.9 million.

Research and development (R&D) spending fell 44.9% year-over-year to $1.11 million.

The company reported operating profit of $4.2 million compared to an operating loss of $853,000 in the prior quarter.

Balance sheet and cash flow

As of September 30, 2022, the company had $87.2 million in cash and cash equivalents, compared to $110.1 million as of June 30, 2022. As of September 30, 2022, total debt, excluding deferred financing costs, was of $237.6 million compared to $224.37 million as of June 30, 2022.

As of September 30, 2022, the Company’s available cash was $437.4 million, including its cash and cash equivalents balance of $87.2 million, $300 million of borrowing available under its credit facility and $50.2 million of borrowing capacity available under IMAX China’s revolving facilities.

Cash flow used in operating activities was $481,000 compared to $5.29 million used in the prior quarter.

Negative free cash flow was $3.9 million, compared to negative free cash flow of $8.9 million in the prior quarter.

Zacks Ranking and Stocks to Consider

IMAX currently has a Zacks rank of No. 3 (Hold).

IMAX shares are down 28.6% year-to-date, outperforming Zacks’ Consumer Discretionary sector’s 36.7% decline.

Some higher ranked stocks in the Consumer Discretionary sector include AMC Entertainment (CMA free report), tank media (RSVR free report) and American public education (APEI Free Report), each carrying a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMC Entertainment, Reservoir Media and American Public Education are each scheduled to release their quarterly results on Nov. 8.

Zacks’ consensus estimate for AMC Entertainment’s third-quarter 2022 loss is pegged at 27 cents per share, down from a loss of 25 cents in the past 30 days.

Zacks’ consensus estimate for Reservoir Media’s third-quarter 2022 earnings is pegged at 5 cents per share, unchanged for the past 30 days.

The consensus rating for American Public Education’s third-quarter 2022 earnings is set at 25 cents per share, unchanged for the past 30 days.

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