IMAX Corporation Reports Third Quarter 2018 Results
Strategic Focus on Core Business Drives Strong Net Income Jump
NEW YORK, Oct. 25, 2018 /PRNewswire/ --
HIGHLIGHTS
- Delivered Q3 2018 earnings per share of $0.08, compared to a loss per share of $0.01 last year. Adjusted net income per share was $0.14, compared to $0.08 in Q3 2017.
- Strong box office, continued cost discipline and focus on the core business helped drive a 670-basis point increase in operating margins, the Company's third consecutive quarter of margin expansion.
- Greater China box office increased 30.5% in the third quarter, compared to last year, driven by compelling slate of Hollywood and Chinese local language blockbusters.
- Since launching its best-in-class IMAX with Laser product in April, the Company has signed agreements for more than 200 systems from exhibitors around the world.
IMAX Corporation (NYSE: IMAX) today reported third quarter 2018 revenues of $82.1 million, gross profit of $42.2 million and net income attributable to common shareholders of $5.0 million, or $0.08 per diluted share. Adjusted net income attributable to common shareholders for the third quarter was $9.0 million, or $0.14 per diluted share. Adjusted EBITDA was $25.8 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.
"Our momentum from the first half of 2018 continued into the third quarter. Compelling blockbuster content from Hollywood and China, coupled with our ongoing focus on controlling costs helped drive our third consecutive quarter of operating margin expansion," said IMAX CEO Richard L. Gelfond. "Looking ahead, we expect many of the factors contributing to our strong performance this year to benefit the Company into 2019 and beyond including the rapidly evolving media landscape. The convergence of streaming and traditional media platforms creates interesting opportunities for IMAX.
We are increasingly seeing content creators seeking to attract top filmmakers, eventize the launch of new content and broaden the consumer reach of that content. Our 1,400-plus theatre network across nearly 80 countries affords filmmakers the opportunity to launch their content in a highly-differentiated, premium format. We are in active discussions across these converging platforms and believe IMAX has a unique opportunity to influence the emerging trends in our industry and be a direct beneficiary of the evolving landscape."
Third Quarter 2018 Results
Network Update
During the quarter, the Company installed 37 theater systems, 36 of which were for new theater locations. The total IMAX® theater network consisted of 1,443 systems as of September 30, 2018, of which 1,346 were in commercial multiplexes. There were 635 theaters in backlog as of September 30, 2018, compared to the 545 in backlog as of September 30, 2017.
IMAX also signed contracts for 25 new theaters and 12 upgrades in the third quarter of 2018. For a breakdown of theater system signings, installations, network and backlog by type for the third quarter of 2018, please see the end of this press release.
Box Office Update
Gross box office from IMAX DMR® films was $206.5 million in the third quarter of 2018 compared to $218.8 million in the third quarter of 2017. Gross box office was generated primarily by the exhibition of 29 films (24 new and 5 carryovers), as compared to 24 films (17 new and 7 carryovers) exhibited in the third quarter of 2017.
Third Quarter Consolidated Results
The gross margin across all segments in the third quarter of 2018 was $42.2 million, or 51.4% of total revenues, compared to $39.9 million, or 40.4% of total revenues, in the third quarter of 2017. Operating expenses (which includes SG&A, excluding stock-based compensation, plus R&D) were $26.0 million in the quarter.
Third Quarter Segment Results
Network Business
- Network business revenues were $36.7 million in the quarter, compared with $42.6 million in the prior-year period. Gross margin for the network business were 61.4% in the most recent quarter, compared to 67.0% in the prior-year period.
- IMAX DMR revenues were $22.4 million in the third quarter of 2018, compared to $26.0 million in the third quarter of 2017. Gross margin for the IMAX DMR segment was 64.6%, compared to 69.7% in the prior-year comparative period.
- Revenue from joint revenue-sharing arrangements were $14.3 million in the quarter, compared with $15.6 million in the prior-year period. Gross margin for joint revenue-sharing arrangements was 56.4%, compared to 60.1% in the prior-year comparative period.
Theater Business
- Theater business segment revenues were $40.7 million in the quarter, compared with $43.5 million in the prior-year period, primarily reflecting the installation of four fewer sales-type theaters.
- Gross margin on sales and sales-type leases was 49.6% compared with 60.7% in the year-ago period. The decrease in the recent period is primarily the result of four fewer system installations compared to the prior year period.
In addition to the Company's core revenue segments, new business revenue was $1.3 million in the quarter, compared to $8.9 million in the same period last year. New business revenues in 2017 were driven primarily by the launch of Marvel's Inhumans. The company recognized a gross loss of $0.3 million in the quarter, compared to a gross loss of $11.9 million in the third quarter of 2017.
First Nine Months Results
Through the first nine months of 2018, the Company generated $265.4 million of total revenue, a 4.0% increase compared to the same period last year. Gross profit of $153.3 million resulted in a 57.7% gross margin, which compares to 49.0% in 2017. Net income of $29.8 million compares to the $3.8 million generated in 2017, while adjusted net income to common shareholders increased 121.4% to $41.4 million. The Company's financial performance through the first nine months is driven by its strong box office performance, focus on the core business and continued cost discipline.
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. In addition, the Company maintains a Twitter account: @IMAX_Investors. The Company intends to use Twitter to disclose the box office information, as well as other information that may be of interest to the Company's investor community.
The information posted on the Company's website and/or via its Twitter account may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website and its Twitter account 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 8:30AM ET to discuss its third quarter 2018 financial results. This call is being webcast by Nasdaq and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (877) 260-1479 approximately 5 to 10 minutes before the call begins. Other international callers should dial (334) 323-0522. The conference ID for the call is 9002042. A replay of the call will be available via webcast at investors.imax.com or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 9002042.
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 theaters 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 September 30, 2018, there were 1,443 IMAX theater systems (1,346 commercial multiplexes, 13 commercial destinations, 84 institutional) operating in 79 countries as of September 30, 2018. On Oct. 8, 2015, shares of IMAX China, a subsidiary of IMAX Corp., began trading 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 Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).
This press 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; 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; 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 the Company's restructuring initiative; 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.
For additional information please contact:
Investors: IMAX Corporation, New York Michael K. Mougias 212-821-0187 | Media: IMAX Corporation, New York Amanda Collins 212-821-0155 |
Additional Information
Signings and Installations | ||||||
September 30, 2018 | ||||||
Three Months Ended September 30, | ||||||
Theater Signings: | 2018 | 2017 | ||||
Full new sales and sales-type lease arrangements | 22 | 17 | ||||
New traditional joint revenue sharing arrangements | 1 | - | ||||
New hybrid joint revenue sharing lease arrangements | 2 | - | ||||
Total new theaters | 25 | 17 | ||||
Upgrades of IMAX theater systems | 12 | - | ||||
Total Theater Signings | 37 | 17 | ||||
Three Months Ended September 30, | ||||||
Theater Installations: | 2018 | 2017 | ||||
Full new sales and sales-type lease arrangements | 15 | 19 | ||||
New traditional joint revenue sharing arrangements | 15 | 25 | ||||
New hybrid joint revenue sharing lease arrangements | 6 | 5 | ||||
Total new theaters | 36 | 49 | ||||
Upgrades of IMAX theater systems | 1 | 2 | ||||
Total Theater Installations | 37 | 51 | ||||
Three Months Ended September 30, | ||||||
Theater Backlogs: | 2018 | 2017 | ||||
New sales and sales-type lease arrangements | 189 | (1) | 170 | |||
New joint revenue sharing arrangements | ||||||
Hybrid lease arrangements | 119 | 130 | ||||
Traditional arrangements | 327 | 245 | ||||
Total Theater Backlog | 635 | (2) | 545 | (3) | ||
Three Months Ended September 30, | ||||||
Theater Network: | 2018 | 2017 | ||||
Commercial Multiplex Theaters: | ||||||
Sales and sales-type lease arrangements | 589 | 501 | ||||
Traditional joint revenue sharing arrangements | 641 | 575 | ||||
Hybrid joint revenue sharing lease arrangements | 116 | 127 | ||||
Total Commercial Multiplex Theaters | 1,346 | 1,203 | ||||
Commercial Destination Theaters | 13 | 13 | ||||
Institutional Theaters | 84 | 86 | ||||
Total Theater Network | 1,443 | 1,302 | ||||
(1) | Includes 22 hybrid sales theater systems which were previously classified under joint revenue sharing arrangements – hybrid sales arrangements. |
(2) | Includes 93 new laser projection system configurations, including 112 upgrades of existing locations to laser projection system configurations (110 of these 112 are for the new next generation laser projection system configurations). |
(3) | Includes 25 new laser projection system configurations and three upgrades of existing locations to laser projection system configurations. |
IMAX CORPORATION | |||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
(In thousands of U.S. dollars, except per share amounts) | |||||||||||||
(Unaudited) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||
Revenues | |||||||||||||
Equipment and product sales | $ | 25,301 | $ | 30,714 | $ | 60,182 | $ | 63,593 | |||||
Services | 39,440 | 49,817 | 138,971 | 133,264 | |||||||||
Rentals | 14,479 | 15,849 | 57,805 | 51,143 | |||||||||
Finance income | 2,888 | 2,420 | 8,479 | 7,214 | |||||||||
82,108 | 98,800 | 265,437 | 255,214 | ||||||||||
Costs and expenses applicable to revenues | |||||||||||||
Equipment and product sales | 14,099 | 14,270 | 29,620 | 32,352 | |||||||||
Services | 18,824 | 37,763 | 62,808 | 79,678 | |||||||||
Rentals | 6,994 | 6,899 | 19,722 | 18,086 | |||||||||
39,917 | 58,932 | 112,150 | 130,116 | ||||||||||
Gross margin | 42,191 | 39,868 | 153,287 | 125,098 | |||||||||
Selling, general and administrative expenses | 26,780 | 25,540 | 87,471 | 85,071 | |||||||||
(including share-based compensation expense of $4.8 million and $15.5 million | |||||||||||||
Research and development | 4,028 | 4,626 | 11,542 | 14,638 | |||||||||
Asset impairments | - | - | - | 1,225 | |||||||||
Amortization of intangibles | 1,039 | 802 | 2,896 | 2,182 | |||||||||
Receivable provisions, net of recoveries | 861 | 963 | 1,667 | 2,088 | |||||||||
Legal arbitration award | - | - | 7,500 | - | |||||||||
Exit costs, restructuring charges and associated impairments | - | 3,437 | 1,158 | 13,695 | |||||||||
Income from operations | 9,483 | 4,500 | 41,053 | 6,199 | |||||||||
Interest income | 631 | 253 | 1,121 | 761 | |||||||||
Interest expense | (958) | (528) | (2,303) | (1,418) | |||||||||
Income from operations before income taxes | 9,156 | 4,225 | 39,871 | 5,542 | |||||||||
Provision for income taxes | (1,452) | (1,009) | (9,540) | (885) | |||||||||
Loss from equity-accounted investments, net of tax | (202) | (318) | (507) | (837) | |||||||||
Net income | 7,502 | 2,898 | 29,824 | 3,820 | |||||||||
Less: net income attributable to non-controlling interests | (2,482) | (3,748) | (8,674) | (6,307) | |||||||||
Net income (loss) attributable to common shareholders | $ | 5,020 | $ | (850) | $ | 21,150 | $ | (2,487) | |||||
Net income (loss) per share attributable to common shareholders - basic and diluted: | |||||||||||||
Net income (loss) per share — basic and diluted | $ | 0.08 | (0.01) | $ | 0.33 | $ | (0.04) | ||||||
Weighted average number of shares outstanding (000's): | |||||||||||||
Basic | 62,551 | 64,736 | 63,466 | 65,624 | |||||||||
Fully Diluted | 62,793 | 64,803 | 63,580 | 65,834 | |||||||||
Additional Disclosure: | |||||||||||||
Depreciation and amortization(1) | $ | 13,950 | $ | 14,413 | $ | 41,984 | $ | 39,767 | |||||
(1) Includes $0.4 million and $1.0 million of amortization of deferred financing costs charged to interest expense for the three and nine months | |||||||||||||
IMAX CORPORATION | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(In thousands of U.S. dollars) | |||||
(Unaudited) | |||||
September 30, | December 31, | ||||
2018 | 2017 | ||||
Assets | |||||
Cash and cash equivalents | $ | 133,615 | $ | 158,725 | |
Accounts receivable, net of allowance for doubtful accounts of $3,192 (December 31, 2017 — $1,613) | 106,117 | 130,546 | |||
Financing receivables | 126,318 | 129,494 | |||
Inventories | 52,614 | 30,788 | |||
Prepaid expenses | 10,442 | 7,549 | |||
Film assets | 16,220 | 5,026 | |||
Property, plant and equipment | 276,090 | 276,781 | |||
Other assets | 55,173 | 26,757 | |||
Deferred income taxes | 27,326 | 30,708 | |||
Other intangible assets | 30,688 | 31,211 | |||
Goodwill | 39,027 | 39,027 | |||
Total assets | $ | 873,630 | $ | 866,612 | |
Liabilities | |||||
Bank indebtedness | $ | 17,625 | $ | 25,357 | |
Accounts payable | 15,445 | 24,235 | |||
Accrued and other liabilities | 104,983 | 100,140 | |||
Deferred revenue | 114,075 | 113,270 | |||
Total liabilities | 252,128 | 263,002 | |||
Commitments and contingencies | |||||
Non-controlling interests | 8,029 | 1,353 | |||
Shareholders' equity | |||||
Capital stock common shares — no par value. Authorized — unlimited number. | |||||
62,760,262 issued and 62,585,192 outstanding (December 31, 2017 — 64,902,201 issued and | 431,290 | 445,797 | |||
Less: Treasury stock, 175,070 shares at cost (December 31, 2017 — 206,651) | (3,597) | (5,133) | |||
Other equity | 184,133 | 175,300 | |||
Accumulated deficit | (70,888) | (87,592) | |||
Accumulated other comprehensive loss | (4,185) | (626) | |||
Total shareholders' equity attributable to common shareholders | 536,753 | 527,746 | |||
Non-controlling interests | 76,720 | 74,511 | |||
Total shareholders' equity | 613,473 | 602,257 | |||
Total liabilities and shareholders' equity | $ | 873,630 | $ | 866,612 | |
IMAX CORPORATION | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(In thousands of U.S. dollars) | ||||||||
(Unaudited) | ||||||||
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash provided by (used in): | ||||||||
Operating Activities | ||||||||
Net income | $ | 29,824 | $ | 3,820 | ||||
Adjustments to reconcile net income to cash from operations: | ||||||||
Depreciation and amortization | 41,984 | 39,767 | ||||||
Write-downs, net of recoveries | 2,541 | 25,620 | ||||||
Change in deferred income taxes | (2,849) | (5,145) | ||||||
Stock and other non-cash compensation | 18,240 | 18,916 | ||||||
Unrealized foreign currency exchange loss (gain) | 406 | (863) | ||||||
Loss from equity-accounted investments | 209 | 539 | ||||||
Loss on non-cash contribution to equity-accounted investees | 298 | 298 | ||||||
Investment in film assets | (22,240) | (30,686) | ||||||
Changes in other non-cash operating assets and liabilities | (343) | 11,153 | ||||||
Net cash provided by operating activities | 68,070 | 63,419 | ||||||
Investing Activities | ||||||||
Purchase of property, plant and equipment | (7,367) | (16,356) | ||||||
Investment in joint revenue sharing equipment | (22,710) | (35,538) | ||||||
Acquisition of other intangible assets | (3,198) | (3,939) | ||||||
Investment in new business ventures | - | (1,500) | ||||||
Net cash used in investing activities | (33,275) | (57,333) | ||||||
Financing Activities | ||||||||
Increase in bank indebtedness | 35,000 | - | ||||||
Repayment of bank indebtedness | (40,667) | (1,500) | ||||||
Repurchase of common shares | (46,452) | (46,138) | ||||||
Treasury stock purchased for future settlement of restricted share units | (3,597) | (4,386) | ||||||
Taxes withheld and paid on employee stock awards vested | (1,437) | (218) | ||||||
Settlement of restricted share units and options | (2,567) | (15,366) | ||||||
Issuance of subsidiary shares to a non-controlling interest | 7,546 | - | ||||||
Common shares issued - stock options exercised | 1,017 | 14,419 | ||||||
Dividend paid to non-controlling shareholders | (6,934) | - | ||||||
Credit facility amendment fees paid | (1,909) | - | ||||||
Net cash used in financing activities | (60,000) | (53,189) | ||||||
Effects of exchange rate changes on cash | 95 | 52 | ||||||
Decrease in cash and cash equivalents during period | (25,110) | (47,051) | ||||||
Cash and cash equivalents, beginning of period | 158,725 | 204,759 | ||||||
Cash and cash equivalents, end of period | $ | 133,615 | $ | 157,708 | ||||
IMAX CORPORATION | |||||||||||||||
SELECTED FINANCIAL DATA | |||||||||||||||
In accordance with United States Generally Accepted Accounting Principles | |||||||||||||||
(in thousands of U.S. dollars) | |||||||||||||||
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 content licensing and distribution fees associated with our original content investments, virtual reality initiatives, IMAX Home Entertainment, and other business initiatives that are in the development and/or start-up phase, 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. | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue | |||||||||||||||
Network Business | |||||||||||||||
IMAX DMR | $ | 22,372 | $ | 25,971 | $ | 85,586 | $ | 77,136 | |||||||
Joint revenue sharing arrangements – contingent rent | 14,327 | 15,572 | 56,919 | 49,702 | |||||||||||
IMAX systems – contingent rent | - | 1,094 | - | 2,573 | |||||||||||
36,699 | 42,637 | 142,505 | 129,411 | ||||||||||||
Theater Business | |||||||||||||||
IMAX systems | |||||||||||||||
Sales and sales-type leases | 20,427 | 25,111 | 50,545 | 48,178 | |||||||||||
Ongoing fees and finance income | 2,971 | 2,646 | 8,982 | 7,844 | |||||||||||
Joint revenue sharing arrangements – fixed fees | 2,798 | 2,658 | 3,821 | 4,536 | |||||||||||
Theater system maintenance | 12,415 | 11,511 | 37,462 | 33,459 | |||||||||||
Other theater | 2,076 | 1,586 | 5,707 | 5,449 | |||||||||||
40,687 | 43,512 | 106,517 | 99,466 | ||||||||||||
New Business | 1,275 | 8,917 | 4,999 | 11,508 | |||||||||||
Other | |||||||||||||||
Film distribution and post-production | 3,062 | 2,698 | 9,156 | 11,369 | |||||||||||
Other | 385 | 1,036 | 2,260 | 3,460 | |||||||||||
3,447 | 3,734 | 11,416 | 14,829 | ||||||||||||
Total | $ | 82,108 | $ | 98,800 | $ | 265,437 | $ | 255,214 | |||||||
Gross margin | |||||||||||||||
Network Business | |||||||||||||||
IMAX DMR(1) | $ | 14,461 | $ | 18,114 | $ | 57,523 | $ | 52,578 | |||||||
Joint revenue sharing arrangements – contingent rent(1) | 8,081 | 9,351 | 39,441 | 33,271 | |||||||||||
IMAX systems – contingent rent | - | 1,094 | - | 2,573 | |||||||||||
22,542 | 28,559 | 96,964 | 88,422 | ||||||||||||
Theater Business | |||||||||||||||
IMAX systems | |||||||||||||||
Sales and sales-type leases | 10,141 | 15,246 | 28,648 | 28,190 | |||||||||||
Ongoing fees and finance income | 2,923 | 2,522 | 8,839 | 7,582 | |||||||||||
Joint revenue sharing arrangements – fixed fees(1) | 529 | 624 | 776 | 887 | |||||||||||
Theater system maintenance | 5,996 | 4,624 | 17,289 | 13,306 | |||||||||||
Other theater | 581 | 247 | 1,099 | 1,082 | |||||||||||
20,170 | 23,263 | 56,651 | 51,047 | ||||||||||||
New Business | (298) | (11,912) | 139 | (13,432) | |||||||||||
Other | |||||||||||||||
Film distribution and post-production(1) | 260 | 402 | 320 | (262) | |||||||||||
Other | (483) | (444) | (787) | (677) | |||||||||||
(223) | (42) | (467) | (939) | ||||||||||||
Total | $ | 42,191 | $ | 39,868 | $ | 153,287 | $ | 125,098 | |||||||
(1) | IMAX DMR segment margins include marketing costs of $3.1 million and $13.7 million for the three and nine months ended September 30, 2018, respectively | |||||||||||||
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 and adjusted EBITDA 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) 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) 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. | |||||||
Management uses "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). 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 Adjusted EBITDA per Credit Facility is relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry. | |||||||
For the | For the | ||||||
3 Months Ended | 12 Months Ended | ||||||
September 30, 2018 | September 30, 2018 | (1) | |||||
(In thousands of U.S. Dollars) | |||||||
Net income | $ | 7,502 | $ | 38,522 | |||
Add (subtract): | |||||||
Provision for income taxes | 1,452 | 25,445 | |||||
Interest expense, net of interest income | 327 | 1,440 | |||||
Depreciation and amortization, including film asset amortization | 13,950 | 69,025 | |||||
EBITDA | $ | 23,231 | $ | 134,432 | |||
Stock and other non-cash compensation | 6,320 | 23,042 | |||||
Write-downs, net of recoveries including asset impairments and | |||||||
receivable provisions | 855 | 6,489 | |||||
Exit costs, restructuring charges and associated impairments | - | 3,637 | |||||
Legal arbitration award | - | 7,500 | |||||
Loss from equity accounted investments | 202 | 373 | |||||
Adjusted EBITDA before non-controlling interests(2) | $ | 30,608 | $ | 175,473 | |||
Adjusted EBITDA attributable to non-controlling interests | (4,789) | (22,682) | |||||
Adjusted EBITDA per Credit Facility | $ | 25,819 | * | $ | 152,791 | * | |
Adjusted EBITDA per Credit Facility, excluding impact from "Marvel's Inhumans" | $ | 25,819 | * | $ | 128,922 | * | |
Adjusted revenues attributable to common shareholders (3) | $ | 72,333 | $ | 352,434 | |||
Adjusted EBITDA margin, excluding impact from "Marvel's Inhumans" | 35.7 | % | 36.6 | % | |||
Adjusted EBITDA per Credit Facility of $25.8 million and $152.8 million for the three and twelve months ended September 30, 2018 respectively, includes the impact of the Company's investment in "Marvel's Inhumans", which resulted in a $nil and $1.1 million loss, respectively. However, as permitted by the Credit Facility, this loss was offset by addbacks of $nil and $13.3 million for amortization and by addbacks of $nil and $11.7 million for impairment charges relating to the investment, in each case for the three and twelve months ended September 30, 2018, respectively. The net effect of these addbacks was to increase Adjusted EBITDA per Credit Facility by $nil and $23.9 million for the three and twelve months ended September 30, 2018, respectively. This investment represents the Company's first foray into a commercial television property, and therefore the Adjusted EBITDA per Credit Facility metric presented above may not be reflective of the Company's typical operational activity. Further, the Company does not expect to make meaningful direct investments in original content going forward. As a result, the Company is also presenting Adjusted EBITDA per Credit Facility excluding the impact of "Marvel's Inhumans" to better facilitate comparisons to prior and future periods. | |||||||
(1) | Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility. | ||||||||||||||
(2) | The Adjusted EBITDA per Credit Facility calculation specified for purpose of the minimum Adjusted EBITDA covenant excludes the reduction in Adjusted | ||||||||||||||
(3) | 3 months ended September 30, 2018 | 12 months ended September 30, 2018 | |||||||||||||
Total revenues | $ | 82,108 | $ | 390,989 | |||||||||||
Greater China revenues | $ | 30,480 | $ | 120,306 | |||||||||||
Non-controlling interest ownership percentage(4) | 32.07% | 32.05% | |||||||||||||
Deduction for non-controlling interest share of revenues | (9,775) | (38,555) | |||||||||||||
Adjusted revenues attributable to common shareholders | $ | 72,333 | $ | 352,434 | |||||||||||
(4) | Weighted average ownership percentage for change in non-controlling interest share | ||||||||||||||
IMAX CORPORATION | ||||||||||||||||
OTHER INFORMATION | ||||||||||||||||
(in thousands of U.S. dollars) | ||||||||||||||||
Adjusted Net Income and Adjusted Diluted Per Share Calculations – Quarter Ended September 30, 2018 vs. 2017: | ||||||||||||||||
The Company reported net income of $7.5 million, which calculates to $0.12 per basic and diluted share, for the third quarter of 2018 as compared to a net income of $2.9 million, $0.04 per basic and diluted share for the third quarter of 2017. | ||||||||||||||||
Net income for the third quarter of 2018 includes a $5.6 million charge, or $0.08 per diluted share (2017 — $5.7 million or $0.09 per diluted share), for stock-based compensation. In the third quarter of 2018, the Company did not have any additional expenses for exit costs, restructuring charges and associated impairments (2017 - $3.4 million or $0.05 per diluted share). | ||||||||||||||||
Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, and the related tax impact of these adjustments, was $11.6 million, or $0.18 per diluted share, for the third quarter of 2018 as compared to adjusted net income of $9.2 million, or $0.14 per diluted share, for the third quarter of 2017. | ||||||||||||||||
The Company reported net income attributable to common shareholders of $5.0 million, or $0.08 per basic and diluted share for the third quarter of 2018 (2017 — net loss of $0.9 million, or a loss of $0.01 per basic and diluted share). | ||||||||||||||||
Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, and the related tax impact of these adjustments, was $9.0 million, or $0.14 per diluted share, for the third quarter of 2018 as compared to adjusted net income attributable to common shareholders of $5.2 million, or $0.08 per diluted share, for the third quarter of 2017. | ||||||||||||||||
A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to 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 is presented in the table below: | ||||||||||||||||
(In thousands of U.S. dollars, except per share amounts) | Quarter Ended September 30, | |||||||||||||||
2018 | 2017 | |||||||||||||||
Net Income | Diluted EPS | Net Income | Diluted EPS | |||||||||||||
Reported net income | $ | 7,502 | $ | 0.12 | $ | 2,898 | $ | 0.04 | ||||||||
Adjustments: | ||||||||||||||||
Stock-based compensation | 5,562 | 0.08 | 5,739 | 0.09 | ||||||||||||
Exit costs, restructuring charges and associated impairments | - | - | 3,437 | 0.05 | ||||||||||||
Tax impact on items listed above | (1,500) | (0.02) | (2,855) | (0.04) | ||||||||||||
Adjusted net income | 11,564 | 0.18 | 9,219 | 0.14 | ||||||||||||
Net income attributable to non-controlling interests | (2,482) | (0.04) | (3,748) | (0.06) | ||||||||||||
Stock-based compensation (net of tax of less than | ||||||||||||||||
$0.1 million and $0.1 million, respectively) | (75) | - | (263) | - | ||||||||||||
Exit costs, restructuring charges and associated | ||||||||||||||||
impairments (net of tax of $nil and less than $0.1 million, | - | - | (11) | - | ||||||||||||
Adjusted net income attributable to common shareholders | $ | 9,007 | $ | 0.14 | $ | 5,197 | $ | 0.08 | ||||||||
Weighted average diluted shares outstanding | 62,793 | 64,803 | ||||||||||||||
Adjusted Net Income and Adjusted Diluted Per Share Calculations – Nine Months Ended September 30, 2018 vs. 2017: | ||||||||||||
The Company reported net income of $29.8 million, or $0.47 per basic and diluted share, for the nine months ended September 30, 2018 as compared to net income of $3.8 million, or $0.06 per basic and diluted share for the nine months ended September 30, 2017. | ||||||||||||
Net income for the nine months ended September 30, 2018 includes a $17.2 million charge, or $0.26 per diluted share (2017 — $17.8 million or $0.27 per diluted share) for stock-based compensation, and a $1.2 million charge, or $0.02 per diluted share for exit costs, restructuring charges and associated impairments (2017 — $13.7 million, or $0.20 per diluted share), and a $7.5 million charge, or $0.12 per diluted share for a legal arbitration award related to one of the Company's litigation matters from 2006 (2017 - $nil, or $nil per diluted share). | ||||||||||||
Adjusted net income, which consists of net income excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the legal arbitration award and the related tax impact, was $50.4 million, or $0.79 per diluted share, for the nine months ended September 30, 2018 as compared to adjusted net income of $25.7 million, or $0.38 per diluted share, for the nine months ended September 30, 2017. | ||||||||||||
The Company reported a net income attributable to common shareholders of $21.2 million, or $0.33 per basic and diluted share for the nine months ended September 30, 2018 (2017 — net loss of $2.5 million, or a loss of $0.04 per basic and diluted share). | ||||||||||||
Adjusted net income attributable to common shareholders, which consists of net income attributable to common shareholders excluding the impact of stock-based compensation, exit costs, restructuring charges and associated impairments, the legal arbitration award and the related tax impact, was $41.4 million, or $0.65 per diluted share, for the nine months ended September 30, 2018 as compared to adjusted net income attributable to common shareholders of $18.7 million, or $0.28 per diluted share, for the nine months ended September 30, 2017. | ||||||||||||
A reconciliation of net income and net income attributable to common shareholders, the most directly comparable U.S. GAAP measure, to 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 is presented in the table below: | ||||||||||||
(In thousands of U.S. dollars, except per share amounts) | Nine Months Ended September 30, | |||||||||||
2018 | 2017 | |||||||||||
Net Income | Diluted EPS | Net Income | Diluted EPS | |||||||||
Reported net income | $ | 29,824 | $ | 0.47 | $ | 3,820 | $ | 0.06 | ||||
Adjustments: | ||||||||||||
Stock-based compensation | 17,165 | 0.26 | 17,796 | 0.27 | ||||||||
Exit costs, restructuring charges and associated impairments | 1,158 | 0.02 | 13,695 | 0.20 | ||||||||
Legal arbitration award | 7,500 | 0.12 | - | - | ||||||||
Tax impact on items listed above | (5,287) | (0.08) | (9,578) | (0.15) | ||||||||
Adjusted net income | 50,360 | 0.79 | 25,733 | 0.38 | ||||||||
Net income attributable to non-controlling interests | (8,674) | (0.14) | (6,307) | (0.10) | ||||||||
Stock-based compensation (net of tax of $0.1 million and | ||||||||||||
$0.2 million, respectively) | (279) | - | (544) | - | ||||||||
Exit costs, restructuring charges and associated impairments | ||||||||||||
(net of tax of $nil and $0.1 million, respectively) | - | - | (179) | - | ||||||||
Adjusted net income attributable to common shareholders | $ | 41,407 | $ | 0.65 | $ | 18,703 | $ | 0.28 | ||||
Weighted average diluted shares outstanding | 63,580 | 65,834 | ||||||||||
Free Cash Flow: | |||||||
Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the 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 in the table below: | |||||||
For the | For the | ||||||
Three months ended | Nine months ended | ||||||
September 30, 2018 | September 30, 2018 | ||||||
(In thousands of U.S. Dollars) | |||||||
Net cash provided by operating activities | $ | 21,416 | $ | 68,070 | |||
Net cash used in investing activities | (14,483) | (33,275) | |||||
Net cash flow | $ | 6,933 | $ | 34,795 | |||
SOURCE IMAX Corporation
Share this article