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IMAX Down 2.8% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for IMAX Corporation (IMAX - Free Report) . Shares have lost about 2.8% in that time frame.

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.

Recent Earnings

IMAX delivered first-quarter 2018 earnings of 21 cents per share that beat the Zacks Consensus Estimate by a dime and soared 250% year over year.

Revenues of $84.9 million comfortably surpassed the Zacks Consensus Estimate of $82 million and surged 23.8% from the year-ago quarter.

Category-wise, Equipment and product sales were $19.5 million, up 69% from the year-ago quarter. Services revenues totaled $44.7 million, up 15.2%. Rentals revenues totaled $18.2 million, up 14.8%. Finance income increased 4.6% year over year to $2.5 million.

During the quarter, the company launched IMAX with Laser, which has already gained significant traction. Notably, Avengers: Infinity War was the first commercial film shot entirely with IMAX cameras.

Segment Details

IMAX network business revenues were $44.9 million, up 14.2% year over year.

Within the segment, IMAX DMR revenues increased 15.6% to $27.1 million.

Gross box office from IMAX DMR films climbed 16.4% year over year to $246.9 million in the reported quarter. Gross box office was generated primarily by the exhibition of 22 films (14 new and eight carryovers), as compared with 18 films (12 new and six carryovers) exhibited in the year-ago quarter.

Joint revenue sharing arrangements-contingent rent was $17.9 million, reflecting an increase of 17.3% from the year-ago quarter.

IMAX theatre business generated revenues of $34.9 million, up 50.6% year over year.

Within this segment, IMAX systems revenues soared 119% from the year-ago quarter to $20.9 million. Theatre system maintenance revenues were $12.7 million, up 15.1%. However, other theatre revenues plunged 36.4% to $1.4 million.

New business revenues fell 52.5% year over year to $0.6 million. Other revenues declined 6.9% to $4.5 million.

Network Growth Statistics

IMAX installed 16 theatre systems, all of which were for new theatre locations. As of Mar 31, total IMAX theatre network consisted of 1,382 systems, of which 1,286 were in commercial multiplexes.

There were 529 theatres in backlog as of Mar 31, 2018, compared with the 524 in backlog as of Mar 31, 2017.

IMAX signed contracts for 45 new theatres across eight countries in first-quarter 2018.  

Operating Details

In the reported quarter, gross margin surged 750 basis points (bps) on a year-over-year basis to 59.6%.

Network gross margin contracted 200 bps on a year-over-year basis. IMAX DMR gross margin contracted 520 bps reflecting higher marketing costs. Gross margin for joint revenue-sharing arrangements expanded 400 bps from the year-ago quarter.

Theater gross margin was 24.1% much higher than 15.3% reported in the year-ago quarter.

Operating expenses declined 10.2% year over year to $31.7 million. Selling, general & administrative (SG&A) and research & development (R&D) expenses declined 9.2% and 17.1%, respectively.

Adjusted EBITDA per Credit Facility surged 70% year over year to $31.4 million in the reported quarter.

Balance Sheet

As of Mar 31, 2018, IMAX had cash and cash equivalents of $145.6 million as compared with $158.7 million as of Dec 31, 2017.

During the quarter, IMAX repurchased shares worth $13.4 million at an average price of $20.46 per share.

Guidance

For second-quarter 2018, IMAX expects to install 34 new theatre systems. For full-year, management anticipates to install almost 155 new theatre systems.

For 2018, management anticipates total operating expenses to be essentially flat as compared with 2017. IMAX expects additional restructuring charges of approximately $1 million. Moreover, effective tax rate is projected to be 24%.

Further, IMAX expects full year pre-tax impact from new business between $7 million and $8 million (as compared with $31.5 million in 2017).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

IMAX Corporation Price and Consensus

VGM Scores

At this time, IMAX has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. 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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