IMAX(IMAX) - 2024 Q3 - Quarterly Report

Financial Performance - IMAX China's net income attributable to the Company for Q3 2024 is $3.6 million, compared to$7.9 million in Q3 2023[194] - Net income attributable to common shareholders for the three months ended September 30, 2024, was $13.9 million, a 16$12.0 million in 2023[259] - Revenues for the three months ended September 30, 2024, decreased by $12.4 million, or 12$14.1 million, or 32%, for the three months ended September 30, 2024, compared to 2023[263] - IMAX box office for the three months ended September 30, 2024, totaled $239.5 million, a 31$347.1 million in 2023[264] - Technology Products and Services segment revenue increased by $1.8 million, or 3$0.2 million for the three months ended September 30, 2024, compared to 2023[271] - Total Selling, General and Administrative Expenses decreased by $4.8 million (13$0.3 million in Q3 2024, compared to an expense of $2.8 million in the same period last year[275] - Credit loss reversal of$1.1 million in Q3 2024, compared to a credit loss expense of $0.5 million in the prior year, primarily due to improved collections in China[277] - Interest expense increased by$0.8 million (51%) in Q3 2024, driven by higher borrowings under the Credit Facility[279] - Net income attributable to common shareholders decreased to $20.8 million in the nine months ended September 30, 2024, from$22.8 million in the same period last year[283] - Revenues decreased by $29.3 million (10$28.8 million (17%) in the nine months ended September 30, 2024, primarily due to weaker IMAX box office performance[284] - IMAX box office totaled $696.5 million in the nine months ended September 30, 2024, a decrease of$192.4 million (22%) compared to the prior year[289] - Technology Products and Services segment revenue decreased by $19.8 million (12$18.7 million (19%) in the nine months ended September 30, 2024[294] - Rental revenues decreased by $14.1 million in the nine months ended September 30, 2024, due to a$85.0 million (20%) decrease in GBO from joint revenue sharing arrangements[294] - Gross margin for the nine months ended September 30, 2024 was 54%, down from 58% in the prior period, primarily due to lower rental revenues[295] - All Other revenue decreased by $1.1 million (12$0.4 million (6%) for the nine months ended September 30, 2024, driven by the performance of the company's theater and revenue mix from Streaming and Consumer Technology operations[296] - Selling, General and Administrative Expenses decreased by $9.0 million (8$100.3 million for the nine months ended September 30, 2024, reflecting lower transaction expenses and operational efficiencies[297][298] - Research and Development expenses decreased by $3.4 million (46$4.0 million for the nine months ended September 30, 2024, due to the capitalization of costs related to new IMAX film cameras[300] - The company recorded a credit loss reversal of $1.0 million for the nine months ended September 30, 2024, compared to a credit loss expense of$1.6 million in the prior year, driven by improved collections in China[302] - Interest expense increased by $1.4 million (28$6.5 million for the nine months ended September 30, 2024, due to higher average borrowings under the Credit Facility[304] - Income tax expense decreased to $3.5 million for the nine months ended September 30, 2024, with an effective tax rate of 12.0$14.9 million and 33.4% in the prior year, due to tax benefits from an internal asset sale[305][306] - Net cash provided by operating activities increased by $4.7 million to$59.4 million for the nine months ended September 30, 2024, driven by a $23.0 million decrease in Accounts Receivable[309][310] - Net cash used in investing activities totaled$30.3 million for the nine months ended September 30, 2024, primarily for equipment investments under joint revenue sharing arrangements[312] - The company had $104.5 million in cash and cash equivalents as of September 30, 2024, with$253.0 million in available borrowing capacity under its Credit Agreement[318][319] - For the three months ended September 30, 2024, adjusted net income attributable to common shareholders was $18.855 million, or$0.35 per diluted share[332] - For the twelve months ended September 30, 2024, adjusted net income attributable to common shareholders was $36.542 million, or$0.68 per diluted share[333] - EBITDA for the three months ended September 30, 2024, was $30.955 million, and adjusted EBITDA per Credit Facility was$35.570 million[337] - EBITDA for the twelve months ended September 30, 2024, was $87.090 million, and adjusted EBITDA per Credit Facility was$113.554 million[339] IMAX Network and Technology - IMAX's global network consists of 1,788 systems across 89 countries as of September 30, 2024, up from 1,731 systems in 87 countries in 2023[201] - The Company's IMAX Film Remastering typically earns approximately 12.5% of global box office receipts, except in Greater China where it receives a lower percentage due to import taxes[210] - IMAX's proprietary technology delivers up to 26% more image on standard IMAX screens and up to 67% more image in select locations with IMAX-exclusive 1.43 film aspect ratio[202][213] - The Company is leveraging AI for image enhancement, streaming technology, and data analysis to improve business operations and efficiency[207] - IMAX's Content Solutions segment generates revenue primarily from digital remastering of films and distribution across the IMAX network[209] - The Company's IMAX Laser Systems are driving the next major renewal and upgrade cycle for the global IMAX network[206] - IMAX's proprietary sound systems reduce background noise by four-fold, enhancing the immersive experience[201] - The company has a footprint of 265 connected locations in the IMAX network as of September 30, 2024, enabling live and interactive events with low latency[217] - The company's IMAX Enhanced technology offers expanded aspect ratio, proprietary remastering, and signature sound for home viewing[233] - The company's AI-powered streaming products, such as IMAX StreamSmart and IMAX StreamAware, aim to reduce costs and improve video quality for streaming platforms[230][231] - Over 15 million IMAX Enhanced certified devices are estimated to be in the market as of September 30, 2024[235] Film Releases and Box Office Performance - The company released 83 IMAX films and alternative content experiences globally in the nine months ended September 30, 2024, compared to 67 in the same period in 2023[214][215] - Top-performing films in the nine months ended September 30, 2024, included Dune: Part Two, Deadpool & Wolverine, and Godzilla x Kong: The New Empire, among others[214] - The company announced an additional 21 films and alternative content experiences to be released in the remainder of 2024, including Joker: Folie à Deux and Venom: The Last Dance[215] - Queen Rock Montreal became one of the company's highest-grossing concert films, alongside Taylor Swift: The Eras Tour in 2023[218] - The IMAX network generated over $114 million in box office from local language films in the nine months ended September 30, 2024, representing approximately 16$114 million in box office, representing 16% of total box office in the nine months ended September 30, 2024[289] International Strategy and Market Penetration - IMAX's international strategy includes expanding its network and supplementing Hollywood films with local language films in markets like China, Japan, and India[213] - As of September 30, 2024, the company had 808 IMAX Systems operating in Greater China with an additional 254 systems in backlog[241] - The company estimates a worldwide commercial multiplex addressable market of 3,619 locations, with 1,714 IMAX Systems operating as of September 30, 2024, representing a market penetration of 47%[240] - 76% of IMAX Systems in the global commercial multiplex network were located within international markets as of September 30, 2024[240] - Revenue from Greater China operations represents 25% of consolidated revenue in the nine months ended September 30, 2024[241] - 54% of the company's total current backlog is represented by system backlog in Greater China as of September 30, 2024[251] - 31% of IMAX System arrangements in backlog as of September 30, 2024 are scheduled to be installed in international markets excluding Greater China[251] Backlog and Installations - The company has 894 locations under joint revenue sharing arrangements globally as of September 30, 2024, with 302 systems in backlog[228] - The company's backlog as of September 30, 2024 includes 363 new systems and 109 upgrades, with a total dollar value of $221.764 million[245] - The company's worldwide backlog includes 262 new IMAX Laser Systems and 109 upgrades of existing locations to IMAX Laser Systems as of September 30, 2024[250] - IMAX System signings for the three months ended September 30, 2024, totaled 16, compared to 20 in the same period in 2023[253] - IMAX System installations for the three months ended September 30, 2024, increased to 49, up from 30 in the same period in 2023[254] Revenue Sharing and Cash Flow - The company's joint revenue sharing arrangements drive recurring cash flows, with customers paying a portion of ongoing box office receipts[228] - The company expects to release Avatar 3 and a record 14 or more Filmed For IMAX titles in 2025, including Marvel and Mission Impossible films[215] - The company forecasts future cash flow and short-term liquidity requirements based on estimates, but these forecasts may be materially impacted by factors outside of its control, such as IMAX system signings, installations, and box office performance[320] - Management expects sufficient capital and liquidity to fund operating needs and capital requirements for the next twelve months based on current cash balances and operating cash flows[321] Non-GAAP Financial Measures - The company presents non-GAAP financial measures, including adjusted net income, EBITDA, and adjusted EBITDA per Credit Facility, to provide supplemental performance metrics and enhance comparability between periods[327][329][335] - The company adjusts Selling, General, and Administrative Expenses to exclude a portion of share-based compensation and related payroll taxes for internal decision-making and period-to-period comparisons[339] - Total Selling, General and Administrative Expenses for the three months ended September 30, 2024 were$31.466 million, a decrease from $36.282 million in the same period in 2023[341] - Total Selling, General and Administrative Expenses, excluding share-based compensation, for the nine months ended September 30, 2024 were$84.408 million, down from $92.799 million in 2023[341] Market Risks and Foreign Exchange - The company is exposed to market risks from foreign currency exchange rates and interest rates, particularly between the U.S. Dollar, Canadian Dollar, and Chinese Renminbi[339] - The Company recorded foreign exchange net losses of$0.3 million and $0.8 million for the three and nine months ended September 30, 2024, respectively[346] - The notional value of foreign currency cash flow hedging instruments qualifying for hedge accounting as of September 30, 2024 was$31.8 million, down from $40.6 million at the end of 2023[348] - The Company had drawn down$47.0 million on its Credit Facility as of September 30, 2024, up from $24.0 million at the end of 2023[352] - Variable rate debt instruments represented 10.0$49.9 million) in cash and cash equivalents as of September 30, 2024, up from RMB 213.0 million ($30.0 million) at the end of 2023[345] - A 10$16.1 million change in the fair value of foreign currency-denominated financing receivables and working capital items[350] - A 1% change in foreign currency exchange rates would result in a $0.3 million change in Selling, General and Administrative Expenses[350] - The Company's interest expense would increase by$0.3 million and interest income from cash would increase by $0.1 million if interest rates increased by 10%[353] Off-Balance Sheet Arrangements - There are currently no off-balance sheet arrangements that have or are likely to have a material effect on the company's financial condition[324]