IMAX Corporation Reports Third Quarter 2020 Results

Rhea-AI Summary

IMAX reported third quarter 2020 revenue of $37.3 million, down 56.9% from $86.4 million in Q3 2019, with a net loss of $47.2 million versus a profit of $9 million a year prior. The company ended the quarter with $305 million in cash, expecting break-even cash flow for Q4 2020 and Q1 2021. Despite challenges from COVID-19, IMAX installed 23 systems and signed agreements for 10 more, highlighting robust demand for its technology. Local language films, particularly in Asia, are driving box office returns, indicating a potential recovery in the global theatrical market.

Positive

• IMAX ended Q3 2020 with $305 million in cash, providing significant financial runway.
• Installed 23 new systems and signed contracts for 10 more, indicating strong partner demand.
• Local language films are driving box office revenue, especially in Asia, aiding recovery.

Negative

• Q3 2020 revenue decreased by 56.9% year-over-year.
• Net loss attributable to common shareholders was $47.2 million, a stark contrast to a profit in 2019.
• Non-GAAP adjusted EBITDA loss of $0.3 million compared to a gain of $32.4 million in the previous year.

NEW YORK, Oct. 29, 2020 /PRNewswire/ -- 

HIGHLIGHTS

• Global theatrical industry continues opening with IMAX network in Asia almost fully operational and robust local language titles driving IMAX box office grosses near pre-pandemic levels
• IMAX ended the quarter with $305 million of cash and cash equivalents
• Company expects average monthly cash flow for fourth quarter of 2020 and first quarter of 2021 to be approximately break-even, representing continued free cash flow improvement
• IMAX installed 23 systems and signed agreements for ten systems in the quarter, demonstrating continued partner demand for IMAX® theater systems despite the temporary delay of major theatrical releases
• As a result of the global pandemic, third quarter 2020 revenue was $37.3 million versus $86.4 million in the third quarter of 2019. Third quarter 2020 net (loss) attributable to common shareholders was ($47.2) million versus $9.0 million in the prior-year period. Third quarter financial results include the following non-cash items: $23.7 million or $0.40 per share deferred tax asset valuation allowance, $5.7 million film asset impairment, and a $3.9 million provision for credit losses
• Non-GAAP adjusted EBITDA (loss) was ($0.3) million in third quarter 2020 versus $32.4 million in the prior-year period

 

		Three Months Ended
		September 30,
In thousands except per share data		2020				2019				YoY % Change
Total Revenue		$	37.3			$	86.4				(56.9)	%
Gross Margin		$	3.8			$	47.1				(91.9)	%
Gross Margin (%)			10.3	%			54.5	%
Net (Loss) Income attributable to common shareholders		$	(47.2)			$	9.0			N/A
Diluted Net (Loss) Income per share attributable to common shareholders		$	(0.80)			$	0.15			N/A
Adjusted Net (Loss) Income attributable to common shareholders(1)		$	(44.6)			$	12.8			N/A
Adjusted Net (Loss) Income per share attributable to common shareholders(1)		$	(0.75)			$	0.21			N/A
Adjusted EBITDA per Credit Facility attributable to common shareholders(1)		$	(0.3)			$	32.4			N/A
Adjusted EBITDA Margin attributable to common shareholders (%) (1)			(0.8)	%			41.4	%		N/A
(1)  Non-GAAP Financial Measure
Note: For the definition and reconciliations of reported results to non-GAAP financial results, please refer to the discussion of non-GAAP financial measures at the end of this earnings release.

IMAX Corporation (NYSE: IMAX) today reported third quarter results as the global theatrical industry continues recovery, highlighted by a notably resurgent box office in Asia. IMAX reported improved cash flow and further reduced costs while benefiting from the Company's diversified global footprint, continued growth in its theater network as well as the robust Asian film market - particularly in China and Japan - where audiences are returning to theaters attracted by a strong local language slate.

"As the only global theatrical platform for blockbuster entertainment, our experience around the world has proven that audiences will enthusiastically return to the movies where theaters are open and they feel safe. As they do return, they are coming back to IMAX — underscoring the enduring strength of our brand and the power of The IMAX Experience®," said IMAX CEO, Richard L. Gelfond.

"With continued box office revenues from our strong local language slate and revenues from theater installations, the Company estimates our average monthly cash flow will be approximately break-even through the first quarter of 2021."

"Our multi-year strategic effort to geographically diversify our business is paying off, as our strong local language slate continues to partially offset the lack of Hollywood releases in the market. From the year's number-one global box office release in China, "The Eight Hundred" — the first commercial Asian film shot entirely with IMAX cameras — to Japan's record-breaking "Demon Slayer", we believe that IMAX is poised to benefit from the impressive resurgence of the Asian film market. IMAX has no fewer than 10 local language releases in the fourth quarter of 2020, with the promising Chinese New Year box office period on its heels in February."

"IMAX remains well-positioned to manage through the continued recovery of the global film industry as cinemas await the return of Hollywood tentpoles. We have a significant financial runway with $305 million of cash on our balance sheet at the end of the third quarter."

The Company reported 2020 revenues of $37.3 million, gross margin of $3.8 million, and a net (loss) attributable to common shareholders of ($47.2) million, or ($0.80) per diluted share.

IMAX results reflect the COVID-19 related closure of the majority of the Company's network through a portion of the third quarter. Third quarter financial results also reflect the inclusion of a number of notable non-cash items related to COVID-19 driven uncertainty, the delay of Hollywood releases, and the reclosure of theaters in some markets. These non-cash items include: a $23.7 million valuation allowance to reduce the value of deferred tax assets; a $5.7 million impairment loss related to documentary and alternative content films assets; and a $3.9 million provision for current expected credit losses reflecting a reduction in the credit quality of the theater receivable balances. 

 

Third Quarter and September Year-to-Date Segment Results(1)
		IMAX Technology Network												IMAX Technology Sales and Maintenance
		Revenue				Gross Margin (Margin Loss)				Gross Margin (Margin Loss) %				Revenue				Gross Margin					Gross Margin %
3Q20		$	11.4			$	0.6				5.2	%		$	23.7				$	9.4				39.6	%
3Q19		43.3					27.4				63.3	%		37.6						18.4				48.9	%
% change			(73.7)	%			(97.9)	%							(37.1)	%				(49.1)	%
YTD 3Q20		$	28.4			$	(3.1)				(11.0)	%		$	43.4				$	14.3				33.0	%
YTD 3Q19		154.1					102.4				66.4	%			102.6					46.9				45.7	%
% change			(81.6)	%			(103.0)	%							(57.7)	%				(69.4)	%
(1)  Please refer to the Company's Form 10-Q for the period ended September 30, 2020 for additional segment information

 

IMAX Technology Network

• IMAX Technology Network revenues decreased 73.7% to $11.4 million in the third quarter of 2020, compared to $43.3 million in the prior-year period. The closure of the Company's network through the first half of the quarter, the partial opening of theaters in late August and September, and the release of fewer films as Hollywood continues to delay major titles impacted year over year results.
• Gross margin for the IMAX Technology Network was $0.6 million in the third quarter of 2020 and was driven by lower revenue and ongoing fixed costs associated with our installed IMAX network.

 IMAX Technology Sales and Maintenance

• IMAX Technology Sales and Maintenance revenues decreased 37.1% to $23.7 million in the third quarter of 2020, compared with $37.6 million in the prior year period. Five fewer sales and sales type lease installations resulted in lower IMAX system revenue. IMAX maintenance revenue declined to $5.9 million as COVID-19-related closures of IMAX theater systems through a portion of the quarter prevented the recognition of revenue.
• Total gross margin for IMAX Technology Sales and Maintenance was $9.4 million compared to $18.4 million in the prior year period.

Cash Balances and Outstanding Debt

Total cash and cash equivalents as of September 30, 2020 were $305 million. Total debt, excluding deferred financing fees, was $300.3 million as of September 30, 2020.

Share Count and Capital Return

The weighted average diluted shares outstanding at the end of the third quarter of 2020 declined 4.3% to 58.9 million, compared to 61.5 million in the third quarter of 2019, due primarily to share repurchase activity during the twelve-month period. During the third quarter of 2020, the Company did not repurchase any stock. A total of $89.4 million remains available under the Company's outstanding share repurchase authorization, which was extended in June 2020 and now expires in June 2021.

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 investors.imax.com. 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.

The information posted on the Company's corporate and Investor Relations website may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website 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 2020 financial results. This call is being webcast by PGI and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (800) 367-2403 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 490-5367. The conference ID for the call is 4692103. 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 4692103.

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, 2020, there were 1,632 IMAX theater systems (1,542 commercial multiplexes, 13 commercial destinations, 77 institutional) operating in 82 countries and territories. Shares of IMAX China Holding, Inc., a subsidiary of IMAX Corporation, trade on the Hong Kong Stock Exchange under the stock code "HK.1970."

IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3D Dome, Experience It In IMAX®, The IMAX Experience®, An IMAX Experience®, An IMAX 3D Experience®, IMAX DMR®, DMR®, IMAX nXos® and Films to the Fullest^®, are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Instagram (https://www.instagram.com/imax), Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).

For additional information please contact:

 

Investors: IMAX Corporation, New York Brett Harriss 212-821-0187 bharriss@IMAX.com

Media: IMAX Corporation, New York Mark Jafar 212-821-0102 mjafar@imax.com

 

Forward-Looking Statements

This earnings 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 business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, future capital expenditures (including the amount and nature thereof), 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 performance of IMAX DMR^® films; the signing of IMAX Theater System agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; 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; risks relating to recent consolidation among commercial exhibitors and movie studios; 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 and data privacy; risks related to the Company's inability to protect the Company's intellectual property; general economic, market or business conditions; the failure to convert IMAX Theater System backlog into revenue; changes in laws or regulations; the failure to fully realize the projected cost savings and benefits from any of the Company's restructuring initiatives; the impact of COVID-19 on our financial condition and results of operations and on the businesses of our customers and exhibitor partners;  and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this earnings release are qualified by these cautionary statements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expected consequences to, or effects on, 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. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Primary Reporting Groups

The Company has the following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing Arrangements; (iii) IMAX Systems, (iv) IMAX Maintenance; (v) Other Theater Business; (vi) New Business Initiatives; (vii) Film Distribution; and (viii) Film Post-production. The Company organizes its reportable segments into the following four categories, identified by the nature of the product sold or service provided:

(i)	IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the Joint Revenue Sharing Arrangement ("JRSA") segment;
(ii)	IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance and Other Theater Business segments, as well as fixed revenues from the JRSA segment;
(iii)	New Business Initiatives, which is a segment that includes activities related to the exploration of new lines of business and new initiatives outside of the Company's core business; and
(iv)	Film Distribution and Post-production, which includes activities related to the licensing of film content, the distribution of films primarily for the Company's institutional theater partners (through the Film Distribution segment) and the provision of film post-production and quality control services (through the Film Post-production segment).

 

 

Signings and Installations
		Three Months Ended September 30,
Theater System Signings:		2020					2019
Full new sales and sales-type lease arrangements			8					22
New hybrid joint revenue sharing lease arrangements			-					-
New traditional joint revenue sharing arrangements			-					-
Total new IMAX theaters			8					22
Upgrades of IMAX theater systems			2					8
Total theater signings			10					30
		Three Months Ended September 30,
Theater System Installations:		2020					2019
Full new sales and sales-type lease arrangements			9					14
New hybrid joint revenue sharing lease arrangements			1					4
New traditional joint revenue sharing arrangements			8					12
Total new IMAX theaters			18					30
Upgrades of IMAX theater systems			5					9
Total theater installations			23					39
		Three Months Ended September 30,
Theater Sales Backlog:		2020					2019
Sales and sales-type lease arrangements			193					205
Hybrid JRSA			146					149
Traditional JRSA			206		(1)			253		(1)
Total theater backlog			545		(2)			607		(3)
		Three Months Ended September 30,
Theater Network:		2020					2019
Commercial Multiplex Theaters:
Sales and sales-type lease arrangements			661					632
Hybrid joint revenue sharing lease arrangements			139					135
Traditional joint revenue sharing lease arrangements			742					706
Total Commercial Multiplex Theaters(4)			1,542					1,473
Commercial Destination Theaters			13					14
Institutional Theaters			77					81
Total theater network			1,632					1,568
(1)   Includes 46 IMAX Theater Systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement (2019 — 50).
(2)  Includes 155 new IMAX with Laser projection system configurations and 92 upgrades of existing locations to IMAX with Laser projection system configurations.
(3)  Includes 145 new IMAX with Laser projection system configurations and 119 upgrades of existing locations to IMAX with Laser projection system configurations.
(4)   Period to period changes are net of the effects of permanently closed theaters.

 

 

IMAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars, except per share amounts)
(Unaudited)
			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2020				2019				2020				2019
Revenues
Technology sales			$	15,753			$	21,735			$	24,102			$	56,629
Image enhancement and maintenance services				14,589				44,168				39,109				144,977
Technology rentals				4,473				17,642				10,307				61,675
Finance income				2,441				2,845				7,495				8,104
				37,256				86,390				81,013				271,385
Costs and expenses applicable to revenues
Technology sales				9,222				11,740				15,637				33,114
Image enhancement and maintenance services				16,989				20,181				42,049				66,205
Technology rentals				7,216				7,349				22,100				20,253
				33,427				39,270				79,786				119,572
Gross margin				3,829				47,120				1,227				151,813
Selling, general and administrative expenses				24,815				29,482				83,247				89,267
Research and development				1,130				1,359				4,562				3,717
Amortization of intangibles				1,349				1,271				4,014				3,564
Credit loss expense				3,925				599				15,582				1,957
Asset impairments				-				-				1,151				-
Exit costs, restructuring charges and associated impairments				-				-				-				850
(Loss) income from operations				(27,390)				14,409				(107,329)				52,458
Gain (loss) in fair value of investments				1,575				(490)				(939)				(2,543)
Retirement benefits non-service expense				(186)				(160)				(432)				(480)
Interest income				586				490				1,842				1,632
Interest expense				(2,391)				(489)				(4,620)				(1,806)
(Loss) income before taxes				(27,806)				13,760				(111,478)				49,261
Income tax expense				(19,349)				(3,030)				(24,606)				(11,986)
Equity in (losses) gains of investees, net of tax				(1,329)				166				(1,858)				(56)
Net (loss) income				(48,484)				10,896				(137,942)				37,219
Less: Net loss (income) attributable to non-controlling interests				1,275				(1,863)				15,412				(8,524)
Net (loss) income attributable to common shareholders			$	(47,209)			$	9,033			$	(122,530)			$	28,695
Net (loss) income per share attributable to common shareholders -       basic and diluted:
Net (loss) income per share — basic and diluted			$	(0.80)			$	0.15			$	(2.06)			$	0.47
Weighted average number of shares outstanding (000's):
	Basic			58,859				61,304				59,360				61,337
	Fully Diluted			58,859				61,479				59,360				61,509
Additional Disclosure:
Depreciation and amortization(1)			$	14,112			$	15,696			$	41,294			$	45,500
(1) Includes $0.3 million and $0.6 million of amortization of deferred financing costs charged to interest expense for the three months and nine months ended September 30, 2020, respectively ($0.1 million and $0.4 million, respectively).

 

 

IMAX CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS In accordance with United States Generally Accepted Accounting Principles (In thousands of dollars, except share amounts) (Unaudited)
		September 30,				December 31,
		2020				2019
Assets
Cash and cash equivalents		$	305,197			$	109,484
Accounts receivable, net of allowance for credit losses			59,674				99,513
Financing receivables, net of allowance for credit losses			126,740				128,038
Variable consideration receivable, net of allowance for credit losses			39,394				40,040
Inventories			53,021				42,989
Prepaid expenses			10,812				10,237
Film assets			7,468				17,921
Property, plant and equipment			282,854				306,849
Investment in equity securities			14,803				15,685
Other assets			23,796				25,034
Deferred income tax assets			17,737				23,905
Other intangible assets			27,019				30,347
Goodwill			39,027				39,027
Total assets		$	1,007,542			$	889,069
Liabilities
Bank indebtedness		$	297,985			$	18,229
Accounts payable			12,011				20,414
Accrued and other liabilities			103,970				112,779
Deferred revenue			99,770				94,552
Deferred income tax liabilities			18,661				—
Total liabilities			532,397				245,974
Commitments and contingencies
Non-controlling interests			776				5,908
Shareholders' equity
Capital stock common shares — no par value. Authorized — unlimited number.
58,878,749 issued and 58,861,171 outstanding (December 31, 2019 — 61,362,872 issued and 61,175,852 outstanding)			405,583				423,386
Less: Treasury stock, 17,578 shares at cost (December 31, 2019 — 187,020)			(271)				(4,038)
Other equity			177,110				171,789
Accumulated deficit			(181,604)				(40,253)
Accumulated other comprehensive loss			(1,984)				(3,190)
Total shareholders' equity attributable to common shareholders			398,834				547,694
Non-controlling interests			75,535				89,493
Total shareholders' equity			474,369				637,187
Total liabilities and shareholders' equity		$	1,007,542			$	889,069

 

 

IMAX CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited)
		Nine Months Ended
		September 30,
		2020				2019
Cash (used in) provided by:
Operating Activities
Net (loss) income		$	(137,942)			$	37,219
Adjustments to reconcile net (loss) income to cash from operating activities:
Depreciation and amortization			41,294				45,500
Credit loss expense			15,582				1,957
Write-downs			13,339				1,027
Deferred income tax expense			23,142				1,035
Share-based and other non-cash compensation			16,345				17,397
Unrealized foreign currency exchange (gain) loss			(394)				214
Loss in fair value of equity securities			939				2,543
Equity in losses of investees			1,858				56
Changes in assets and liabilities:
Accounts receivable			30,350				9,613
Inventories			(10,278)				(13,422)
Film Assets			(6,177)				(15,405)
Deferred revenue			5,233				(2,599)
Changes in other operating assets and liabilities			(24,109)				(17,878)
Net cash (used in) provided by operating activities			(30,818)				67,257
Investing Activities
Purchase of property, plant and equipment			(658)				(5,528)
Investment in equipment for joint revenue sharing arrangements			(5,289)				(31,099)
Acquisition of other intangible assets			(1,661)				(1,874)
Investment in equity securities			—				(15,153)
Net cash used in investing activities			(7,608)				(53,654)
Financing Activities
Increase in revolving credit facility borrowings			280,244				35,000
Repayment of revolving credit facility borrowings			—				(55,000)
Credit facility amendment fees paid			(1,026)				—
Settlement of restricted share units and options			(2,815)				(8,589)
Treasury stock repurchased for future settlement of restricted share units			(271)				(1,572)
Repurchase of common shares, IMAX China			(1,534)				(19,157)
Taxes withheld and paid on employee stock awards vested			(251)				(508)
Common shares issued - stock options exercised			—				2,391
Repurchase of common shares			(36,624)				(2,659)
Issuance of subsidiary shares to non-controlling interests (net of return on capital)			—				1,106
Dividends paid to non-controlling interests			(4,214)				(4,384)
Net cash provided by (used in) financing activities			233,509				(53,372)
Effects of exchange rate changes on cash			630				727
Increase (decrease) in cash and cash equivalents during period			195,713				(39,042)
Cash and cash equivalents, beginning of period			109,484				141,590
Cash and cash equivalents, end of period		$	305,197			$	102,548

 

			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2020				2019				2020				2019
Revenue
IMAX Technology Network
IMAX DMR			$	6,886			$	26,665			$	18,061			$	93,908
Joint revenue sharing arrangements, contingent rent				4,473				16,605				10,307				60,189
				11,359				43,270				28,368				154,097
IMAX Technology Sales and Maintenance
IMAX Systems				17,437				20,977				27,674				50,504
Joint revenue sharing arrangements, fixed fees				57				1,438				1,196				6,525
IMAX Maintenance				5,855				13,657				13,225				39,815
Other Theater Business				307				1,560				1,261				5,766
				23,656				37,632				43,356				102,610
New Business Initiatives				378				596				1,488				1,908
Film Distribution and Post-production				1,865				3,528				7,541				9,791
				37,258				85,026				80,753				268,406
Other				(2)				1,364				260				2,979
Total revenues			$	37,256			$	86,390			$	81,013			$	271,385
Gross Margin (Margin Loss)
IMAX Technology Network
IMAX DMR(1)			$	3,079			$	17,866			$	7,492			$	61,602
Joint revenue sharing arrangements, contingent rent(1)				(2,491)				9,524				(10,610)				40,777
				588				27,390				(3,118)				102,379
IMAX Technology Sales and Maintenance
IMAX Systems (1)				8,671				11,652				14,497				26,723
Joint revenue sharing arrangements, fixed fees(1)				(117)				136				110				1,301
IMAX Maintenance				794				6,125				(355)				17,046
Other Theater Business				31				505				77				1,821
				9,379				18,418				14,329				46,891
New Business Initiatives				372				541				1,245				1,441
Film Distribution and Post-production (1)(2)				(6,061)				50				(9,392)				483
				4,278				46,399				3,064				151,194
Other				(449)				721				(1,837)				619
Total Segment Margin			$	3,829			$	47,120			$	1,227			$	151,813
(1)   IMAX DMR gross margin includes marketing expense of $0.4 million and $2.8 million for the three and nine months ended September 30, 2020, respectively (2019 — $4.3 million and $17.7 million, respectively). JRSA gross margin includes advertising, marketing and commission expense of $0.7 million and $1.3 million for the three and nine months ended September 30, 2020, respectively (2019 —$0.8 million and $1.1 million, respectively). IMAX Systems gross margin includes marketing and commission costs of $0.6 million and $1.0 million for the three and nine months ended September 30, 2020, respectively, (2019 — $0.6 million and $1.5 million, respectively). Film Distribution segment gross margin includes marketing expense of $0.2 million and $0.4 million for the three and nine months ended September 30, 2020, respectively (2019 — $0.1 million and $0.7 million, respectively).
(2)  Film Distribution margins were significantly influenced by impairment loss recorded of $5.4 million and $9.9 million for the three and nine months ended September 30, 2020 to write-down the carrying value of certain documentary and alternative content film assets (2019 – $0.2 million and $0.2 million).

 

 

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share, EBITDA, Adjusted EBITDA per Credit Facility, Adjusted EBITDA margin, and free cash flow as supplemental measures of the Company's performance, which are not recognized under U.S. GAAP. Adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share exclude, where applicable: (i) share-based compensation; (ii) exit costs, restructuring charges and associated impairments, (iii) gain (loss) in the fair value of investments, (iv) COVID-19 government relief benefits, as well as the related tax impact of these adjustments, and (v) the income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company's financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net (loss) income attributable to common shareholders. Although share-based compensation is an important aspect of the Company's employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

A reconciliation of net (loss) income attributable to common shareholders and the comparable per share amounts, the most directly comparable GAAP measure to adjusted net (loss) income attributable to common shareholders, adjusted net (loss) income attributable to common shareholders per diluted share, EBITDA, Adjusted EBITDA per Credit Facility and Adjusted EBITDA margin is presented in the table below. The Company believes that net (loss) income attributable to common shareholders is the most directly comparable GAAP measure because it reflects the earnings relevant to the Company's shareholders, rather than including the non-controlling interest. As such, beginning in the first quarter of 2020, the Company has updated the reconciliations for such non-GAAP financial measures included herein.

In addition to the non-GAAP financial measures discussed above, management also uses "EBITDA," as such term is defined in the Credit Agreement, and which is referred to herein as "Adjusted EBITDA per Credit Facility." As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company's operating performance and to provide additional information with respect to the Company's compliance against its Credit Agreement requirements in the current period, if applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry to evaluate, assess and benchmark the Company's results.

EBITDA is defined as net (loss) income excluding (i) interest expense, net of interest income; (ii) income tax (benefit) expense; and (iii) depreciation and amortization, including film asset amortization. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) gain (loss) in fair value of investments; (iii) write-downs, net of recoveries, including asset impairments and credit loss expense; (iv) gain (loss) from equity accounted investments; (v) exit costs, restructuring charges and associated impairments; (vi) legal arbitration award; and (vii) executive transition costs.

Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the condensed consolidated statements of cash flows). Cash provided by operating activities consist of net (loss) income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented below.

These non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered as a substitute for, or superior to, the comparable GAAP amounts. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measures is presented below.

 

			For the Three Months Ended September 30, 2020															For the Three Months Ended September 30, 2019
			Attributable to Non-controlling					Less:										Attributable to Non-controlling					Less:
			Interests and					Attributable to					Attributable to					Interests and					Attributable to					Attributable to
			Common					Non-controlling					Common					Common					Non-controlling					Common
			Shareholders					Interests					Shareholders					Shareholders					Interests					Shareholders
(In thousands of U.S. Dollars)
Reported net loss			$		(48,484)			$		(1,275)			$		(47,209)			$		10,896			$		1,863			$		9,033
Add (subtract):
Income tax expense (benefit)					19,349					(503)					19,852					3,030					654					2,376
Interest expense, net of interest income					1,509					(81)					1,590					(133)					(117)					(16)
Depreciation and amortization, including film asset    amortization					14,112					1,182					12,930					15,696					1,342					14,354
EBITDA			$		(13,514)			$		(677)			$		(12,837)			$		29,489			$		3,742			$		25,747
Share-based and other non-cash compensation					5,495					292					5,203					5,687					137					5,550
(Gain) loss in fair value of investments					(1,575)					(484)					(1,091)					490					156					334
Write-downs, including asset impairments and credit loss expense					10,458					3,324					7,134					1,118					154					964
Loss (gain) from equity accounted investments					1,329					—					1,329					(166)					—					(166)
Adjusted EBITDA per Credit Facility			$		2,193			$		2,455			$		(262)			$		36,618			$		4,188			$		32,430
Revenues attributable to common    shareholders(2)					37,256					5,825					31,431					86,390					8,036					78,354
Adjusted EBITDA margin attributable to common    shareholders					5.9	%				42.1	%				(0.8)	%				42.4	%				52.1	%				41.4	%
			For the Twelve Months Ended September 30, 2020 (1)															For the Twelve Months Ended September 30, 2019 (1)
			Attributable to Non-controlling					Less:										Attributable to Non-controlling					Less:
			Interests and					Attributable to					Attributable to					Interests and					Attributable to					Attributable to
			Common					Non-controlling					Common					Common					Non-controlling					Common
			Shareholders					Interests					Shareholders					Shareholders					Interests					Shareholders
(In thousands of U.S. Dollars)
Reported net loss			$		(116,590)			$		(12,231)			$		(104,359)			$		40,990			$		10,601			$		30,389
Add (subtract):
Income tax expense					29,388					5,549					23,839					11,964					3,581					8,383
Interest expense, net of interest income					2,564					(388)					2,952					(68)					(224)					156
Depreciation and amortization, including film asset    amortization					59,281					4,737					54,544					60,953					5,276					55,677
EBITDA			$		(25,357)			$		(2,333)			$		(23,024)			$		113,839			$		19,234			$		94,605
Share-based and other non-cash compensation					22,518					885					21,633					22,880					573					22,307
(Gain) loss in fair value of investments					(1,087)					(364)					(723)					2,543					807					1,736
Write-downs, including asset impairments and    credit loss expense					32,743					8,590					24,153					5,781					2,183					3,598
Loss from equity accounted investments					1,799					—					1,799					41					—					41
Exit costs, restructuring charges and associated impairments					—					—					—					9,234					—					4,237
Legal arbitration award					—					—					—					4,237					—					9,234
Executive transition costs					—					—					—					2,994					—					2,994
Adjusted EBITDA per Credit Facility			$		30,616			$		6,778			$		23,838			$		161,549			$		22,797			$		138,752
Revenues attributable to common    shareholders(2)					205,292					19,486					185,806					380,349					38,117					342,232
Adjusted EBITDA margin attributable to common    shareholders					14.9	%				34.8	%				12.8	%				42.5	%				59.8	%				40.5	%
(1) Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility. During the second quarter of 2020, the Company entered into the Amendment to the Credit Facility Agreement which provides for, among other things, the suspension of the Senior Secured Net Leverage Ratio financial covenant through the first quarter of 2021.
(2)

 

		Three months ended September 30, 2020										Three months ended September 30, 2019										12 months ended September 30, 2020										12 months ended September 30, 2019
Total revenues							$		37,256								$		86,390								$		205,292							$		380,349
Greater China revenues		$		19,346								$		26,557								$		64,489								$		121,366
Non-controlling interest ownership percentage(3)				30.11	%									30.26	%									30.22	%									31.41	%
Deduction for non-controlling interest share of revenues									(5,825)										(8,036)										(19,486)									(38,117)
Revenues attributable to common shareholders							$		31,431								$		78,354								$		185,806							$		342,232

(3) Weighted average ownership percentage for change in non-controlling interest share

 

 

IMAX CORPORATION Adjusted Net (Loss) Income Attributable to Common Shareholders and Adjusted Diluted Per Share Calculations (In thousands of U.S. dollars) (Unaudited)
			Three Months Ended								Three Months Ended
			September 30, 2020								September 30, 2019
(In thousands of U.S. dollars, except per share amounts)			Net Loss				Diluted EPS				Net Income				Diluted EPS
Reported net (loss) income attributable to common shareholders			$	(47,209)			$	(0.80)			$	9,033			$	0.15
Adjustments(1):
Stock-based compensation				5,019				0.09			$	5,390				0.09
(Gain) loss in fair value of investments				(1,091)				(0.02)				341				—
COVID-19 government relief benefits				(2,084)				(0.03)				—				—
Tax Impact on items listed above(2)				611				0.01				(1,953)				(0.03)
Income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries				129				—				—				—
Adjusted net (loss) income(1)			$	(44,625)			$	(0.75)			$	12,811			$	0.21
Weighted average basic shares outstanding								58,859								61,304
Weighted average diluted shares outstanding								58,859								61,479

(1)	Reflects amounts attributable to non-controlling interests.
(2)	The tax impact on the listed items includes a year-to-date additive adjustment in the current year related to the valuation allowance recorded in respect of certain deferred tax assets booked in the three months ended September 30, 2020.

 

		Nine Months Ended								Nine Months Ended
		September 30, 2020								September 30, 2019
(In thousands of U.S. dollars, except per share amounts)		Net Income				Diluted EPS				Net Income				Diluted EPS
Reported net (loss) income attributable to common shareholders		$	(122,530)			$	(2.06)			$	28,695			$	0.47
Adjustments(1):
Stock-based compensation			15,262				0.26			$	16,466				0.26
Exit costs, restructuring charges and associated impairments			—				—				850				0.01
Loss in the fair value of investments			661				0.01				1,742				0.03
COVID-19 government relief benefits			(5,235)				(0.08)				—				—
Tax impact on items listed above(2)			(584)				(0.01)				(4,437)				(0.07)
Income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries			13,014				0.21				—				—
Adjusted net (loss) income(1)		$	(99,412)			$	(1.67)			$	43,316			$	0.70
Weighted average basic shares outstanding							59,360								61,337
Weighted average diluted shares outstanding							59,360								61,509

(1)	Reflects amounts attributable to non-controlling interests.
(2)	The tax impact on the listed items includes a year-to-date additive adjustment in the current year related to the valuation allowance recorded in respect of certain deferred tax assets booked in the three months ended September 30, 2020.

 

 

Free Cash Flow:
		Three Months Ended					Nine Months Ended
		September 30, 2020					September 30, 2020
Net cash used in operating activities		$		(9,938)			$		(30,818)
Net cash used in investing activities				(1,885)					(7,608)
Free cash flow		$		(11,823)			$		(38,426)

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SOURCE IMAX Corporation

FAQ

What were IMAX's financial results for Q3 2020?

IMAX reported Q3 2020 revenue of $37.3 million and a net loss of $47.2 million.

How much cash does IMAX have as of September 30, 2020?

IMAX has $305 million in cash and cash equivalents.

What impact did COVID-19 have on IMAX's revenue?

IMAX's revenue dropped by 56.9% compared to Q3 2019 due to COVID-19 disruptions.

What is IMAX's outlook for cash flow in late 2020?

IMAX expects average monthly cash flow to be approximately break-even for Q4 2020 and Q1 2021.

How did IMAX perform in terms of system installations in Q3 2020?

IMAX installed 23 new systems and signed agreements for an additional 10 systems.