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IMAX Surpasses Earnings, Revenue Expectations in Q3
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IMAX Corporation (IMAX - Free Report) delivered third-quarter 2018 adjusted earnings of 14 cents per share that beat the Zacks Consensus Estimate by 3 cents and surged 75% year over year.
Revenues of $82.1 million surpassed the Zacks Consensus Estimate of $80 million. However, revenues declined 16.9% from the year-ago quarter. The decline can be attributed to the absence of $8.7 million of revenues contributed by Inhumans television series in third-quarter 2017 coupled with lower sales type systems installations in the reported quarter.
Category-wise, Equipment and product sales were $25.3 million, down 17.6% from the year-ago quarter. Services revenues totaled $39.4 million, down 20.8%. Rentals revenues totaled $14.5 million, down 8.6%. Finance income increased 19.3% year over year to $2.9 million.
During the quarter, the company extended its partnership with Wanying Cinema Line, a subsidiary of China Resources Land — one of the biggest state-owned commercial developers to open 14 more IMAX laser theaters, bringing the total to 15.
Segment Details
IMAX network business revenues were $36.7 million, down 13.9% year over year. Strong performance of The Meg and Mission: Impossible in China collectively contributed over $32 million.
Within the segment, IMAX DMR revenues declined 13.9% to $22.4 million.
Gross box office from IMAX DMR films declined 5.6% year over year to $206.5 million in the reported quarter. The company exhibited 29 films (24 new and five carryovers) compared with 24 films (17 new and seven carryovers) exhibited in the year-ago quarter.
Greater China box office increased 30.5% year over year driven by blockbuster Hollywood and Chinese language titles. Moreover, increasing focus on releasing Chinese content in smaller cities boosted local box office revenues.
Joint revenue sharing arrangements-contingent rent was $14.3 million, down 8% from the year-ago quarter.
IMAX theatre business generated revenues of $40.7 million, down 6.5% year over year.
Within this segment, IMAX systems revenues declined 15.7% from the year-ago quarter to $23.4 million. However, theater system maintenance revenues were $12.4 million, up 7.9%. Other theater revenues surged 30.9% to $2.1 million on the back of 15 sales and 6 hybrid theaters installed in the reported quarter.
New business revenues plunged 85.7% year over year to $1.3 million. Other revenues declined 7.7% to $3.5 million.
Management noted that it is benefiting from subscription services such as AMC's new Stubs A-List, which is driving additional customers to IMAX theatres.
IMAX Corporation Price, Consensus and EPS Surprise
IMAX installed 37 theater systems, of which 36 were for new theater locations. Of these 36, 26 were installed in China and other key markets including India and Western Europe. As of Sep 30, total IMAX theater network consisted of 1,443 systems, of which 1,346 were in commercial multiplexes.
There were 635 theaters in backlog as of Sep 30, 2018, compared with the 545 as of Sep 30, 2017.
IMAX signed contracts for 25 new theaters and 12 upgrades in third-quarter 2018 across markets such as China, Japan and France.
Operating Details
In the reported quarter, gross margin surged 1100 basis points (bps) on a year-over-year basis to 51.4%.
Network gross margin contracted 560 bps on a year-over-year basis. IMAX DMR gross margin contracted 310. Gross margin for joint revenue-sharing arrangements expanded 10 bps from the year-ago quarter.
Theater gross margin contracted 390 bps on a year-over-year basis.
Adjusted EBITDA was $25.9 million in the reported quarter and adjusted EBITDA margin was 35.7%.
Operating expenses increased 2.1% year over year to $30.8 million. Selling, general & administrative (SG&A) increased 4.9% to $26.8 million. However, research & development (R&D) expenses declined 12.9% to $4 million.
Operating income margin expanded approximately 700 bps year over year to 11.5% due to efficient cost structure and focus on core operations.
Balance Sheet
As of Sep 30, 2018, IMAX had cash and cash equivalents of $133.6 million compared with $133 million as of Jun 30.
Cash flow from operations was $68.1 million and free cash flow was $6.9 million.
Guidance
For fourth-quarter 2018, IMAX expects to install approximately 21 sales-type, 11 hybrids, 41 full JV systems and and upgrade 23 theaters. For full-year, management anticipates to install almost 155 new theater systems.
For 2018, management anticipates total operating expenses (SG&A, excluding stock-based compensation, and R&D) to be essentially flat compared with 2017. Moreover, effective tax rate is projected to be 24%.
Further, IMAX expects full year pre-tax impact from new business between $4 million and $5 million, down from the earlier guidance of $4.5 million to $5.5 million. Full-year DMR cost of sales are expected in the range $37 million to $38 million, down from the earlier guidance of $38 million to $40 million.
E.W. Scripps is set to report third-quarter 2018 results on Nov 9. Dish and lululemon athletica are slated to report third-quarter fiscal 2018 results on Nov 8 and Dec 5 respectively.
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IMAX Surpasses Earnings, Revenue Expectations in Q3
IMAX Corporation (IMAX - Free Report) delivered third-quarter 2018 adjusted earnings of 14 cents per share that beat the Zacks Consensus Estimate by 3 cents and surged 75% year over year.
Revenues of $82.1 million surpassed the Zacks Consensus Estimate of $80 million. However, revenues declined 16.9% from the year-ago quarter. The decline can be attributed to the absence of $8.7 million of revenues contributed by Inhumans television series in third-quarter 2017 coupled with lower sales type systems installations in the reported quarter.
Category-wise, Equipment and product sales were $25.3 million, down 17.6% from the year-ago quarter. Services revenues totaled $39.4 million, down 20.8%. Rentals revenues totaled $14.5 million, down 8.6%. Finance income increased 19.3% year over year to $2.9 million.
During the quarter, the company extended its partnership with Wanying Cinema Line, a subsidiary of China Resources Land — one of the biggest state-owned commercial developers to open 14 more IMAX laser theaters, bringing the total to 15.
Segment Details
IMAX network business revenues were $36.7 million, down 13.9% year over year. Strong performance of The Meg and Mission: Impossible in China collectively contributed over $32 million.
Within the segment, IMAX DMR revenues declined 13.9% to $22.4 million.
Gross box office from IMAX DMR films declined 5.6% year over year to $206.5 million in the reported quarter. The company exhibited 29 films (24 new and five carryovers) compared with 24 films (17 new and seven carryovers) exhibited in the year-ago quarter.
Greater China box office increased 30.5% year over year driven by blockbuster Hollywood and Chinese language titles. Moreover, increasing focus on releasing Chinese content in smaller cities boosted local box office revenues.
Joint revenue sharing arrangements-contingent rent was $14.3 million, down 8% from the year-ago quarter.
IMAX theatre business generated revenues of $40.7 million, down 6.5% year over year.
Within this segment, IMAX systems revenues declined 15.7% from the year-ago quarter to $23.4 million. However, theater system maintenance revenues were $12.4 million, up 7.9%. Other theater revenues surged 30.9% to $2.1 million on the back of 15 sales and 6 hybrid theaters installed in the reported quarter.
New business revenues plunged 85.7% year over year to $1.3 million. Other revenues declined 7.7% to $3.5 million.
Management noted that it is benefiting from subscription services such as AMC's new Stubs A-List, which is driving additional customers to IMAX theatres.
IMAX Corporation Price, Consensus and EPS Surprise
IMAX Corporation Price, Consensus and EPS Surprise | IMAX Corporation Quote
Network Growth Statistics
IMAX installed 37 theater systems, of which 36 were for new theater locations. Of these 36, 26 were installed in China and other key markets including India and Western Europe. As of Sep 30, total IMAX theater network consisted of 1,443 systems, of which 1,346 were in commercial multiplexes.
There were 635 theaters in backlog as of Sep 30, 2018, compared with the 545 as of Sep 30, 2017.
IMAX signed contracts for 25 new theaters and 12 upgrades in third-quarter 2018 across markets such as China, Japan and France.
Operating Details
In the reported quarter, gross margin surged 1100 basis points (bps) on a year-over-year basis to 51.4%.
Network gross margin contracted 560 bps on a year-over-year basis. IMAX DMR gross margin contracted 310. Gross margin for joint revenue-sharing arrangements expanded 10 bps from the year-ago quarter.
Theater gross margin contracted 390 bps on a year-over-year basis.
Adjusted EBITDA was $25.9 million in the reported quarter and adjusted EBITDA margin was 35.7%.
Operating expenses increased 2.1% year over year to $30.8 million. Selling, general & administrative (SG&A) increased 4.9% to $26.8 million. However, research & development (R&D) expenses declined 12.9% to $4 million.
Operating income margin expanded approximately 700 bps year over year to 11.5% due to efficient cost structure and focus on core operations.
Balance Sheet
As of Sep 30, 2018, IMAX had cash and cash equivalents of $133.6 million compared with $133 million as of Jun 30.
Cash flow from operations was $68.1 million and free cash flow was $6.9 million.
Guidance
For fourth-quarter 2018, IMAX expects to install approximately 21 sales-type, 11 hybrids, 41 full JV systems and and upgrade 23 theaters. For full-year, management anticipates to install almost 155 new theater systems.
For 2018, management anticipates total operating expenses (SG&A, excluding stock-based compensation, and R&D) to be essentially flat compared with 2017. Moreover, effective tax rate is projected to be 24%.
Further, IMAX expects full year pre-tax impact from new business between $4 million and $5 million, down from the earlier guidance of $4.5 million to $5.5 million. Full-year DMR cost of sales are expected in the range $37 million to $38 million, down from the earlier guidance of $38 million to $40 million.
Zacks Rank & Stocks to Consider
Currently, IMAX carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader consumer discretionary sector are lululemon athletica inc. (LULU - Free Report) , E.W. Scripps Company (SSP - Free Report) and DISH Network Corp. . All three stocks sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
E.W. Scripps is set to report third-quarter 2018 results on Nov 9. Dish and lululemon athletica are slated to report third-quarter fiscal 2018 results on Nov 8 and Dec 5 respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>