IMAX Corporation Reports Fourth Quarter and Full-Year 2019 Results

NEW YORK, Feb. 19, 2020 /PRNewswire/ -- IMAX Corporation (NYSE:IMAX) today reported full-year 2019 revenues of $395.7 million, gross profit of $214.2 million, net income of $58.6 million, or $0.95 per diluted share, and net income attributable to common shareholders of $46.9 million, or $0.76 per diluted share. Adjusted net income attributable to common shareholders for the year ended December 31, 2019 was $64.8 million, or $1.05 per diluted share. Adjusted EBITDA attributable to common shareholders was $149.3 million.

HIGHLIGHTS

• Company achieved record full-year 2019 box office of $1.1 billion, up 7% over the prior year
• Full-year 2019 revenue increased 6% versus 2018 to $396 million, a new record
• Full-year 2019 net income attributable to common shareholders increased 105% versus 2018 to $47 million and full-year 2019 net income increased 74% to $59 million; Adjusted net income attributable to common shareholders increased 12% year-over-year to $65 million
• Full-year 2019 earnings per share attributable to common shareholders increased 111% to $0.76; Adjusted net earnings per share attributable to common shareholders increased 15% to $1.05
• Company's total commercial multiplex network grew to 1,529 theatres, 73% of which are in international markets

Note: For the definition and reconciliations of reported results to non-GAAP financial results, please refer to the discussion of non-GAAP financial measures at the end of this earnings release.

The Company also reported fourth quarter 2019 revenues of $124.3 million, gross profit of $62.4 million, net income of $21.4 million, or $0.35 per diluted share, and net income attributable to common shareholders of $18.2 million, or $0.29 per diluted share. Adjusted net income attributable to common shareholders for the fourth quarter was $21.5 million, or $0.35 per diluted share. Adjusted EBITDA attributable to common shareholders was $47.0 million. For reconciliations of reported results to non-GAAP financial results, and for the definition and reconciliation of Adjusted EBITDA, please see the end of this press release.

"IMAX is among the world's premiere entertainment experiences, and our record 2019 financial results reflect sharp focus, strong execution, and disciplined cost management as we continue to grow our global footprint, diversify our content portfolio, and enhance our pioneering end-to-end technology," said IMAX CEO Richard L. Gelfond.

"Across 2019, our business demonstrated significant strength by setting a number of new records for the Company including annual revenue as well as global, international, and local language box office — underscoring the increasing geographic diversification of our business."

"In a world of nearly infinite entertainment choices, audiences continue to choose IMAX. Immersive entertainment experiences continue to connect fans and drive culture around the globe. We are committed to building on strong demand for The IMAX Experience^® to strengthen our unique position in the entertainment ecosystem and deliver value for our shareholders."

"In terms of the health crisis in China, where movie theatres nationwide remain closed, we are continuing to monitor the situation closely and needless to say the safety of our team and audiences is our top priority," said Mr. Gelfond. "We look forward to circumstances improving and IMAX continuing to satisfy China's strong demand for premium quality content and entertainment experiences."

Fourth Quarter and Full-Year Segment Results

Network Business

• Network business revenues increased 6.9% to $196.8 million in 2019, compared to $184.2 million in the prior-year period. The strong overall increase in network business revenues was primarily driven by a $76.4 million, or 7.4%, increase in IMAX global box office to $1.1 billion.
• Total gross margin for the network business was 64.4% in the most recent quarter, compared to 66.0% in the prior-year period. The year-over-year decrease in total gross margin was primarily driven by increased contractual marketing expense.

Theatre Business

• Theatre business segment revenues increased 7.2% to $180.5 million in 2019, compared with $168.4 million in the prior-year period.
• Total gross margin for the theatre business was 48.1% compared to 50.9% in the prior-year period. The year-over-year decline in total gross margin was primarily driven by the geographic and system mix of installations in the first quarter of 2018. The theatre business gross margin increased steadily throughout 2019, landing at 51.2% for the entire segment in the fourth quarter of 2019, and 53.0% specifically for sales and sales type lease theatres.

Cash Balances and Outstanding Debt

Total cash and cash equivalents as of December 31, 2019 was $109.5 million. Total bank indebtedness was $18.2 million as of December 31, 2019 and represented a decrease compared to $37.8 million as of December 31, 2018. As of December 31, 2019, $280.0 million was available under the Company's $300.0 million credit facility due June 28, 2023.

Share Count and Capital Return

• The weighted average diluted shares outstanding at the end of the fourth quarter of 2019 declined 2.7% to 61.5 million, compared to 63.2 million in fourth quarter 2018, due primarily to share repurchase activity. During 2019 a total of 134 thousand shares were repurchased at an average price of $19.76 for a total value of approximately $2.7 million. A total of $125.9 million remains available under the Company's outstanding share repurchase authorization, which expires in June 2020.
• During 2019, IMAX China repurchased a total of 8.05 million shares at an average price of $2.38 for a total value of approximately $19.2 million.

Supplemental Materials

For more information about the Company's results, please refer to the IMAX Investor Relations website located at investors.imax.com.

Investor Relations Website and Social Media

On a weekly basis, the Company posts quarter-to-date box office results on the IMAX Investor Relations website located at www.imax.com/content/investor-relations. The Company expects to provide such updates on Friday of each week, although the Company may change this timing without notice. Results will be displayed with a one-week lag.

The information posted on the Company's website may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website in addition to the Company's press releases, SEC filings and public conference calls and webcasts.

Conference Call

The Company will host a conference call today at 4:30PM ET to discuss its fourth quarter and full year 2019 financial results. This call is being webcast by Nasdaq and can be accessed at www.imax.com/content/investor-relations. To access the call via telephone, interested parties in the US and Canada should dial (888) 204-4368 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 794-4605. The conference ID for the call is 9833755. A replay of the call will be available via webcast at www.imax.com/content/investor-relations or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 9833755.

About IMAX Corporation

IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theatres to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe.

IMAX is headquartered in New York, Toronto, and Los Angeles, with additional offices in London, Dublin, Tokyo, and Shanghai. As of December 31, 2019, there were 1,624 IMAX theatre systems (1,529 commercial multiplexes, 14 commercial destinations, 81 institutional) operating in 81 countries and territories. Shares of IMAX China, a subsidiary of IMAX Corp., trade on the Hong Kong Stock Exchange under the stock code "HK.1970."

IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and IMAX nXos® are trademarks of IMAX Corporation. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Instagram (https://www.instagram.com/imax), Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).

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Forward-Looking Statements

This earnings release contains forward looking statements that are based on IMAX management's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company's growth and operations in China, including the adverse impact of the coronavirus outbreak in China; the performance of IMAX DMR^® films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to recent consolidation among commercial exhibitors and studios; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the Company's inability to protect the Company's intellectual property; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; the failure to fully realize the projected cost savings and benefits from any of the Company's restructuring initiatives; and other factors, many of which are beyond the control of the Company. These factors, other risks and uncertainties and financial details are discussed in IMAX's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Primary Reporting Groups

The Company has four primary reporting groups identified by nature of product sold or service provided: (1) Network Business, representing variable revenue generated by box-office results and which includes the reportable segments of IMAX DMR and contingent rent from the JRSAs and IMAX systems segments; (2) Theater Business, representing revenue generated by the sale and installation of theater systems and maintenance services, primarily related to the IMAX Systems and Theater System Maintenance reportable segments, and also includes fixed hybrid revenues and upfront installation costs from the JRSA segment; (3) New Business, which includes home entertainment, and other new business initiatives that are in the development, start-up and/or wind-up phases, and (4) Other; which includes the film post-production and distribution segments and certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items.

Non-GAAP Financial Measures

In this release, the Company presents adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share, EBITDA, Adjusted EBITDA per Credit Facility, Adjusted EBITDA margin, free cash flow and return on invested capital as supplemental measures of performance of the Company, which are not recognized under U.S. GAAP. The Company presents adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related tax impact) and non-recurring charges on net income. In addition, the Company presents adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share because it believes that they are important supplemental measures of its comparable financial results and could potentially distort the analysis of trends in business performance and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests and its stock-based compensation (net of any related tax impact) and non-recurring charges in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP.

The Company is required to maintain a minimum level of "EBITDA", as such term is defined in the Company's credit agreement (and which is referred to herein as "Adjusted EBITDA per Credit Facility", as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization). EBITDA and Adjusted EBITDA per Credit Facility (each as defined below) should not be construed as substitutes for net income or as better measures of liquidity as determined in accordance with U.S. GAAP. The Company believes that EBITDA, Adjusted EBITDA per Credit Facility and Adjusted EBITDA margin are relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry. Accordingly, the Company is disclosing this information to permit a more comprehensive analysis of its operating performance and to provide additional information with respect to the Company's ability to comply with its credit agreement requirements.

Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the condensed consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented below. 

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share, EBITDA, adjusted EBITDA per Credit Facility, free cash flow and return on invested capital as supplemental measures of performance of the Company, which are not recognized under U.S. GAAP. The Company presents adjusted net income and adjusted net income per diluted share because it believes that they are important supplemental measures of its comparable controllable operating performance and it wants to ensure that its investors fully understand the impact of its stock-based compensation (net of any related tax impact) and non-recurring charges on net income. In addition, the Company presents adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share because it believes that they are important supplemental measures of its comparable financial results and could potentially distort the analysis of trends in business performance and it wants to ensure that its investors fully understand the impact of net income attributable to non-controlling interests, its stock-based compensation (net of any related tax impact) and non-recurring charges in determining net income attributable to common shareholders. Management uses these measures to review operating performance on a comparable basis from period to period. However, these non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Adjusted net income, adjusted net income per diluted share, adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share should be considered in addition to, and not as a substitute for, net income and net income attributable to common shareholders and other measures of financial performance reported in accordance with U.S. GAAP.

The Company is required to maintain a minimum level of "EBITDA", as such term is defined in the Company's credit agreement (and which is referred to herein as "Adjusted EBITDA per Credit Facility" or "Adjusted EBITDA per Credit Facility excluding Marvel's Inhumans", as the credit agreement includes additional adjustments beyond interest, taxes, depreciation and amortization). EBITDA and Adjusted EBITDA per Credit Facility (each as defined below) should not be construed as substitutes for net income or as better measures of liquidity as determined in accordance with U.S. GAAP. The Company believes that EBITDA and Adjusted EBITDA per Credit Facility excluding Marvel's Inhumans are relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry.