- 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
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
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.
Second-Quarter Segment Results
- 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 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.
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.
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.
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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