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Why Is Imax (IMAX) Down 1.8% Since Last Earnings Report?
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A month has gone by since the last earnings report for Imax (IMAX - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Imax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
IMAX Corporation reported adjusted earnings of 5 cents per share for fourth-quarter 2022, beating Zacks Consensus Estimate by 26.67% but declined 38.7% year over year.
Total revenues of $98.04 million beat the Zacks Consensus Estimate by 2.16%. The figure, however, decreased 9.7% from the year-ago quarter’s levels.
Category-wise, Image Enhancement & Maintenance Services, technology rentals and Finance income were down 18.7%, 10.1% and 23.2% year over year to $44.09 million, $18.06 million and $2 million, respectively. Technology sales generated revenues of $33.8 million, up 7.1% from the year-ago quarter’s levels.
Segment Details
IMAX Technology Network Business
IMAX Technology Network revenues decreased 10.6% year over year to $45.8 million in the fourth quarter of 2022.
Within the segment, IMAX DMR revenues decreased 10.9% year over year to $27.8 million. For the year ended Dec 31, 2022, gross box office (GBO) generated by IMAX films totaled $849.7 million, representing a $211.5 million, up 33% versus 2021. Fourth-quarter GBO came in at $251.5 million, down 9.4% year over year.
For the year ended Dec 31, 2022, GBO was generated by the exhibition of 78 films (63 new, 10 carryovers and five re-releases), including Avatar: The Way of Water, which generated GBO of $140.2 million (or 11% market share) and Top Gun: Maverick, which generated GBO of $110.7 million (or 7% market share) in the year. During the year ended Dec 31, 2021, GBO was generated by the exhibition of 73 films (63 new, 6 carryovers and four re-releases).
The company concluded 2022 with the release of Avatar: The Way of Water on Dec 16, 2022, which became the company's highest grossing release of 2022 by earning $140.2 million of GBO (or 11% market share) during the year ended Dec 31, 2022. This momentum has carried over into 2023 throughout the remainder of the film's theatrical run with its cumulative GBO of approximately $250 million, cementing the title as the highest global first run IMAX release of all time and the top performing IMAX release of all time in 48 countries to date.
Domestic and Greater China GBO revenues came in at $102.5 million and $47.3 million. For the year ended Dec 31, 2022, the company's revenues generated from its Greater China operations represents 24% of consolidated revenues.
In China alone, the company generated $24 million in box office on 14 screens. The company partnered with 84 Chinese exhibitors in 207 cities across 31 provinces in Mainland China.
As of Dec 31, 2022, the Company had 794 IMAX Systems operating in Greater China with an additional 204 systems in backlog. The Company’s backlog in Greater China represents 45% of its total current backlog, including upgrades in system type. Of the IMAX Systems currently scheduled to be installed in Greater China, 66% are under joint revenues sharing arrangements, which further increases the Company’s ongoing exposure to box office performance in this market.
The joint revenue-sharing arrangements contingent rent decreased 10% to $18.06 million.
IMAX Technology Sales & Maintenance
IMAX Technology Sales and Maintenance revenues decreased 10% year over year to $48.04 million in the fourth quarter of 2022, which reflects one-time release of $6.3 million in deferred maintenance revenues that benefitted the fourth quarter of 2021.
Within this segment, IMAX systems revenues decreased 1.4% from the year-ago quarter’s levels to $30.1 million. IMAX maintenance revenues decreased 35.2% year over year to $13.04 million.
Joint revenue-sharing arrangements-fixed fees were $2.3 million, up 42.2% year over year. Other theater revenues were $2.55 million in the reported quarter.
Film Distribution & Post-Production
Film distribution and post-production generated revenues of $1.5 million, down 12% year over year.
Network Growth Statistics
As of Dec 31, 2022, there were 1,716 IMAX Systems operating in 87 countries and territories, including 1,633 commercial multiplexes, 12 commercial destinations and 71 institutional locations in the Company's global network. This compares with 1,683 IMAX Systems operating in 87 countries and territories as of Dec 31, 2021, including 1,599 commercial multiplexes, 12 commercial destinations and 72 institutional locations in the Company's global network.
As of Dec 31, 2022, 253 systems in the IMAX network across North America, Europe and Asia were configured with connectivity to deliver live and interactive events.
As of Dec 31, 2022, the company had 931 locations in operation under joint revenue-sharing arrangements in its global commercial multiplex network, a 2% increase as compared with the 909 locations as of Dec 31, 2021. The company also had contracts in backlog for 288 systems under joint revenue-sharing arrangements as of Dec 31, 2022, including 76 upgrades to existing locations and 212 new locations.
Operating Details
Gross margin decreased 23.7% year over year to 48.8% in the fourth quarter 2022.
Adjusted EBITDA per credit facility was $27.8 million compared with $44 million in the year-ago period.
Selling, general & administrative expenses increased 8.4% year over year to $37.8 million.
Research & development expenses increased 30.8% on a year-over-year basis to $1.63 million.
The company reported an operating income of $7.53 million compared with the year-earlier quarter’s operating income of $25.6 million.
Balance Sheet & Cash Flow
As of Dec 31, 2022, the company had $97.4 million in cash and cash equivalents compared with $87.2 million as of Sep 30, 2022. As of Dec 31, 2022, total debt, excluding deferred financing fees, was $270.7 compared with $237.6 million as of Sep 30, 2022.
As of Dec 31, 2022, the Company's available liquidity was $415.5 million including its balance of cash and cash equivalents of $97.4 million, $275 million in available borrowing capacity under the Credit Facility and $43.1 million in available borrowing capacity under IMAX China's revolving facilities.
Net cash provided by operating activities was $17.3 million for full-year 2022, compared with $6.1 million for full-year 2021.
Free cash flow was $7.25 million compared with a negative free cash flow of $3.9 million in the prior quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 60% due to these changes.
VGM Scores
Currently, Imax has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Imax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Imax (IMAX) Down 1.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Imax (IMAX - Free Report) . Shares have lost about 1.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Imax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
IMAX's Q4 Earnings Decline Y/Y, Box Office Slump Hits Revenues
IMAX Corporation reported adjusted earnings of 5 cents per share for fourth-quarter 2022, beating Zacks Consensus Estimate by 26.67% but declined 38.7% year over year.
Total revenues of $98.04 million beat the Zacks Consensus Estimate by 2.16%. The figure, however, decreased 9.7% from the year-ago quarter’s levels.
Category-wise, Image Enhancement & Maintenance Services, technology rentals and Finance income were down 18.7%, 10.1% and 23.2% year over year to $44.09 million, $18.06 million and $2 million, respectively. Technology sales generated revenues of $33.8 million, up 7.1% from the year-ago quarter’s levels.
Segment Details
IMAX Technology Network Business
IMAX Technology Network revenues decreased 10.6% year over year to $45.8 million in the fourth quarter of 2022.
Within the segment, IMAX DMR revenues decreased 10.9% year over year to $27.8 million. For the year ended Dec 31, 2022, gross box office (GBO) generated by IMAX films totaled $849.7 million, representing a $211.5 million, up 33% versus 2021. Fourth-quarter GBO came in at $251.5 million, down 9.4% year over year.
For the year ended Dec 31, 2022, GBO was generated by the exhibition of 78 films (63 new, 10 carryovers and five re-releases), including Avatar: The Way of Water, which generated GBO of $140.2 million (or 11% market share) and Top Gun: Maverick, which generated GBO of $110.7 million (or 7% market share) in the year. During the year ended Dec 31, 2021, GBO was generated by the exhibition of 73 films (63 new, 6 carryovers and four re-releases).
The company concluded 2022 with the release of Avatar: The Way of Water on Dec 16, 2022, which became the company's highest grossing release of 2022 by earning $140.2 million of GBO (or 11% market share) during the year ended Dec 31, 2022. This momentum has carried over into 2023 throughout the remainder of the film's theatrical run with its cumulative GBO of approximately $250 million, cementing the title as the highest global first run IMAX release of all time and the top performing IMAX release of all time in 48 countries to date.
Domestic and Greater China GBO revenues came in at $102.5 million and $47.3 million. For the year ended Dec 31, 2022, the company's revenues generated from its Greater China operations represents 24% of consolidated revenues.
In China alone, the company generated $24 million in box office on 14 screens. The company partnered with 84 Chinese exhibitors in 207 cities across 31 provinces in Mainland China.
As of Dec 31, 2022, the Company had 794 IMAX Systems operating in Greater China with an additional 204 systems in backlog. The Company’s backlog in Greater China represents 45% of its total current backlog, including upgrades in system type. Of the IMAX Systems currently scheduled to be installed in Greater China, 66% are under joint revenues sharing arrangements, which further increases the Company’s ongoing exposure to box office performance in this market.
The joint revenue-sharing arrangements contingent rent decreased 10% to $18.06 million.
IMAX Technology Sales & Maintenance
IMAX Technology Sales and Maintenance revenues decreased 10% year over year to $48.04 million in the fourth quarter of 2022, which reflects one-time release of $6.3 million in deferred maintenance revenues that benefitted the fourth quarter of 2021.
Within this segment, IMAX systems revenues decreased 1.4% from the year-ago quarter’s levels to $30.1 million. IMAX maintenance revenues decreased 35.2% year over year to $13.04 million.
Joint revenue-sharing arrangements-fixed fees were $2.3 million, up 42.2% year over year. Other theater revenues were $2.55 million in the reported quarter.
Film Distribution & Post-Production
Film distribution and post-production generated revenues of $1.5 million, down 12% year over year.
Network Growth Statistics
As of Dec 31, 2022, there were 1,716 IMAX Systems operating in 87 countries and territories, including 1,633 commercial multiplexes, 12 commercial destinations and 71 institutional locations in the Company's global network. This compares with 1,683 IMAX Systems operating in 87 countries and territories as of Dec 31, 2021, including 1,599 commercial multiplexes, 12 commercial destinations and 72 institutional locations in the Company's global network.
As of Dec 31, 2022, 253 systems in the IMAX network across North America, Europe and Asia were configured with connectivity to deliver live and interactive events.
As of Dec 31, 2022, the company had 931 locations in operation under joint revenue-sharing arrangements in its global commercial multiplex network, a 2% increase as compared with the 909 locations as of Dec 31, 2021. The company also had contracts in backlog for 288 systems under joint revenue-sharing arrangements as of Dec 31, 2022, including 76 upgrades to existing locations and 212 new locations.
Operating Details
Gross margin decreased 23.7% year over year to 48.8% in the fourth quarter 2022.
Adjusted EBITDA per credit facility was $27.8 million compared with $44 million in the year-ago period.
Selling, general & administrative expenses increased 8.4% year over year to $37.8 million.
Research & development expenses increased 30.8% on a year-over-year basis to $1.63 million.
The company reported an operating income of $7.53 million compared with the year-earlier quarter’s operating income of $25.6 million.
Balance Sheet & Cash Flow
As of Dec 31, 2022, the company had $97.4 million in cash and cash equivalents compared with $87.2 million as of Sep 30, 2022. As of Dec 31, 2022, total debt, excluding deferred financing fees, was $270.7 compared with $237.6 million as of Sep 30, 2022.
As of Dec 31, 2022, the Company's available liquidity was $415.5 million including its balance of cash and cash equivalents of $97.4 million, $275 million in available borrowing capacity under the Credit Facility and $43.1 million in available borrowing capacity under IMAX China's revolving facilities.
Net cash provided by operating activities was $17.3 million for full-year 2022, compared with $6.1 million for full-year 2021.
Free cash flow was $7.25 million compared with a negative free cash flow of $3.9 million in the prior quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 60% due to these changes.
VGM Scores
Currently, Imax has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Imax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.