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IMAX's Q1 Loss Wider Than Expected, Revenues Increase Y/Y

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IMAX Corporation (IMAX - Free Report) reported first-quarter 2021 adjusted loss of 25 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 24 cents. The figure was however narrower than loss of 82 cents per share in the year-ago quarter.

Total revenues of $38.8 million missed the Zacks Consensus Estimate by 2.7% but increased 11% from the year-ago quarter.

As of Mar 31, 2021, 77% of the theaters in the global IMAX commercial multiplex network were open, spanning 41 countries. This included 66% of the theaters in domestic (United States and Canada) locations, 97% of the theaters in Greater China and 52% of the theaters in Rest of World markets.

In many parts of Asia, audiences continued to rediscover the theatrical experience in impressive numbers, driving record-breaking box office and accelerating the continued shift to blockbusters at multiplexes despite the continued delay of Hollywood theatrical releases, which typically account for 70% of box office ticket sales in those regions.

However, ticket sales have been significantly lower than normal levels in theaters outside Asia as Hollywood movie studios have delayed the theatrical release dates for a number of films. As a result, certain theater chains remained closed or reduced their operating hours in the first quarter of 2021.

Category-wise, technology sales, Image Enhancement & Maintenance Services, Technology Rentals and financial income were up 9.1%, 4.3%, 40% and 202% year over year to $6.2 million, $21.6 million, $8.4 million and $2.6 million, respectively.

IMAX Corporation Price, Consensus and EPS Surprise

IMAX Corporation Price, Consensus and EPS Surprise

IMAX Corporation price-consensus-eps-surprise-chart | IMAX Corporation Quote

Segment Details

IMAX Technology Network Business

IMAX technology network business revenues were $20.3 million, up 22.3% year over year due to an improvement in IMAX DMR revenues.

Within the segment, IMAX DMR revenues increased 12.4% year over year to $11.9 million. The continued reopening of the company's network, particularly in Asia, and strong performance of local-language content during the Chinese New Year holiday period drove the increase in gross box office and revenues.

IMAX delivered global box office of $110 million for the first quarter, marking the company's first year-over-year quarterly box office growth since the pandemic began. Results were driven by the strong rebound of moviegoing in Asia and encouraging performances at the multiplex as other global markets reopen.

For the quarter, IMAX achieved record-breaking Chinese New Year opening weekend results, its number-one and number-two highest grossing Japanese local language releases of all time and its strongest North American opening of the pandemic period with Godzilla vs. Kong, which also performed well in key markets including Mexico, Russia, Spain, and Saudi Arabia.

For the year ended Mar 31, 2021, global box office was generated primarily by the exhibition of 18 IMAX DMR films (12 new and 6 carryovers) and the re-release of classic titles throughout the IMAX theater network compared with 13 films (9 new and 4 carryovers) in the first quarter of 2020.

Joint revenue sharing arrangements-contingent rent increased 40% year over year to $8.4 million.

As of Mar 31, 2021, the company has signed traditional and hybrid joint revenue sharing agreements with 41 exhibitors for a total of 1,228 IMAX Theater Systems, of which 896 theaters were operational and included in the network as of that date.

IMAX Technology Sales & Maintenance

IMAX’s technology sales & maintenance business generated revenues of $17 million, up 12.5% year over year attributed to recovery in pace of theater system installations and higher IMAX Maintenance sales associated with the continued reopening of IMAX global network.

Within this segment, IMAX systems revenues increased 3.7% from the year-ago quarter to $5.9 million. IMAX maintenance revenues increased 20.8% year over year to $8.9 million due to the continued reopening of the IMAX network.

Moreover, joint revenue sharing arrangements-fixed fees were $1.7 million, up 125.7% year over year. Other theater revenues declined 65.4% to $0.4 million in the reported quarter.

New Business & Others

New Business generated revenues of $0.7 million, up 39.7% year over year. Film distribution and post-production generated revenues of $0.8 million, down 67.4% year over year.

Network Growth Statistics

As of Dec 31, 2020, there were 1,650 IMAX Theater Systems operating in 84 countries and territories, including 1,562 commercial multiplexes, 12 commercial destinations and 76 institutional locations. This compares with 1,616 IMAX Theater Systems operating in 81 countries and territories as of Mar 31, 2020 including 1,526 commercial multiplexes, 14 commercial destinations and 76 institutional locations.

Greater China is the company’s largest market, measured by revenues, with 66% of overall revenues generated from its Greater China operations in first-quarter 2021.

As of Mar 31, 2021, the company had 750 theaters operating in Greater China with an additional 248 theaters in backlog that are scheduled to be installed by 2028. The company’s backlog in Greater China represents 47.6% of its total current backlog, including upgrades.

The company’s largest single international partnership is in China with Wanda Film (“Wanda”). Wanda’s total commitment to the company is for 361 IMAX Theater Systems in Greater China,of which 355 IMAX theater Systems are under the parties’ joint revenue-sharing arrangement.

IMAX installed 12 systems and signed agreements for six systems in the quarter, demonstrating continued partner demand for IMAX theater systems despite the temporary delay in major theatrical releases.

As of Mar 31, 2021, 12 IMAX with Laser systems have been installed and the company’s backlog included 149 new IMAX with Laser systems and 92 upgrades to IMAX with Laser systems.

Operating Details

Gross margin expanded from 14.6% in the year-ago quarter to 44.6% in first-quarter 2021.

Adjusted EBITDA per credit facility was $2.8 million versus ($4.4) million in the year-ago period.

Selling, general & administrative (SG&A) expenses decreased 12% year over year to $25.2 million.

Research & development (R&D) expenses contracted 33.1% on a year-over-year basis to $1.5 million.

Operating loss margin contracted from (110.1%) in the year-ago quarter to (28%) in the reported quarter.

Balance Sheet & Cash Flow

As of Mar 31, 2021 the company had $267.8 million in cash and cash equivalents compared with $317 million as of Dec 31, 2020. Total debt, excluding deferred financing fees, was $283 million as of Mar 31, 2021.

Cash flow used operating activities was $10.9 million compared with $23.01 million used in the prior quarter.

Free cash flow was $3.30 million compared with free cash flow of $6.16 million in the prior quarter.

Zacks Rank & Stocks to Consider

IMAX currently has a Zacks Rank #4 (Sell).

JAKKS Pacific, Inc. (JAKK - Free Report) , Nexstar Media Group, Inc (NXST - Free Report) and TEGNA Inc. (TGNA - Free Report) are some better-ranked stocks in the broader consumer discretionary sector, each carrying a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nextstar Media, TEGNA and JAKK Pacific are scheduled to report their quarterly results on May 4, 10 and 12, respectively.

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