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IMAX Corporation Reports First Quarter 2020 Results

·20 mins read

NEW YORK, April 30, 2020 /PRNewswire/ --

IMAX Logo. (PRNewsFoto/IMAX Corporation)
IMAX Logo. (PRNewsFoto/IMAX Corporation)

HIGHLIGHTS

  • A solid balance sheet and ample cash puts the Company in a strong position to operate through this historic period of COVID-19-driven theater closures

  • In response to COVID-19, the Company has implemented cost reductions and drew on its revolver, ending the quarter with $352.3 million in consolidated cash and its $300 million revolver fully drawn

  • The Company estimates a monthly cash burn rate of approximately $10 million and remains confident in its ability to operate through an extended business shut down and a zero revenue environment

  • First quarter 2020 revenue decreased 56.5% versus 2019 to $34.9 million

  • First quarter 2020 net (loss) attributable to common shareholders was ($49.4) million. Non-GAAP adjusted EBITDA (loss) was ($4.4) million versus $28.5 million in the prior-year period

  • The Company is actively preparing to reopen to what is projected to be an IMAX-friendly second-half release slate



Three Months Ended



March 31

(In millions of U.S. dollars, except per share data)

2020


2019


YoY %







Change

Total Revenue

$

34.9

$

80.2


(56.5%)








Gross Margin

$

5.1

$

45.1


(88.7%)

Gross Margin (%)


14.6%


56.3%










Net (Loss) Income(1)

$

(49.4)

$

8.3


N/A

Diluted Net (Loss) Income Per Share(1)

$

(0.82)

$

0.13


N/A

Adj. Net (Loss) Income Per Share(1)(2)

$

(0.48)

$

0.18


N/A








Adjusted EBITDA(2)

$

(4.4)

$

28.5


N/A

Adj. EBITDA Margin (%)(2)


(13.1%)


39.8%


N/A

(1)Attributable to common shareholders

(2)Non-GAAP Financial Measure


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.

IMAX Corporation (NYSE: IMAX) today reported first quarter 2020 revenues of $34.9 million, gross margin of $5.1 million, and a net (loss) attributable to common shareholders of ($49.4) million, or ($0.82) per diluted share. First quarter non-GAAP adjusted net loss attributable to common shareholders was ($28.7) million, or ($0.48) per diluted share. For reconciliations of reported results to non-GAAP financial results, please see the end of this press release.

The closure of substantially all of the Company's theater network due to the global outbreak of the COVID-19 pandemic drove results down in the first quarter. Also contributing to the Company's first quarter loss was a $10.2 million provision for credit losses on its theater receivables as a result of the current pandemic-related challenges facing the exhibition industry. In addition, the Company's results include a deferred income tax charge of $19.7 million ($13.7 million attributable to common shareholders or $0.23 per share) related to its decision in the first quarter of 2020 to no longer indefinitely reinvest historical earnings from its Chinese business. The Company had previously planned to keep these funds overseas and, as a result, was not required to accrue withholding taxes. The change in IMAX China's plans reflect its desire for increased capital allocation flexibility to repatriate cash from the Chinese mainland including for payment of dividends to shareholders including IMAX Corporation.

"IMAX is uniquely positioned to manage through a temporary shutdown of theaters as a result of strategic planning which led to our strong financial position, valuable brand, and vast global footprint. With our strong cash balance and continued cost discipline, we believe that we will be ready to program our network, accelerate our theater business, and once again bring audiences the world's most immersive entertainment experience when ready," said IMAX CEO Richard L. Gelfond.

"When global economies restart, and theaters reopen, we believe audiences will turn to strong, trusted brands like IMAX. In 2019, IMAX delivered a record year across global, international, and local language box office — underscoring the strength of our brand and product offering throughout an increasingly diverse geographic footprint."

"We are working closely with our studio partners to reshape our slate in the second half of 2020 and into 2021 — a period that is now scheduled to see an impressive offering of marquee blockbuster films. Operationally, we are focused on ensuring that we can support this rich content pipeline with our proprietary post-production process and our enhanced marketing capabilities."

"We continue to monitor the situation and carefully plan for the reopening of theaters in China when it is safe. We look forward to circumstances continuing to improve in the market and meeting strong audience demand for immersive filmmaking and entertainment experiences."

"Above all, we are focused on the safety and well-being of our employees and our audiences. Our thoughts remain with those impacted by this pandemic around the world, as we continue to support the efforts of local governments and our industry to prioritize public health."

First Quarter Segment Results(1)



IMAX Technology Network


IMAX Technology Sales and
Maintenance



Revenue


Gross
Margin

Gross
Margin %


Revenue


Gross
Margin

Gross
Margin %












1Q20

$

16.6

$

2.8

17.0%

$

15.1

$

4.7

31.3%

1Q19


46.0


31.7

68.9%


30.1


13.1

43.5%

% change


(63.9%)


(91.1%)



(49.9%)


(63.9%)



(1) Please refer to the Company's Form 10-Q for the period ended March 31, 2020 for additional segment information.

IMAX Technology Network

  • IMAX Technology Network revenues decreased 63.9% to $16.6 million in the first quarter of 2020, compared to $46.0 million in the prior-year period. The decline in revenue was driven by a 62.9% decrease in IMAX global box office connected to COVID-19-related theater closures.

  • Total gross margin for the IMAX Technology Network business was 17.0% in the most recent quarter, compared to 68.9% in the prior-year period. The year-over-year decrease in total gross margin was primarily driven by lower revenue.

IMAX Technology Sales and Maintenance

  • IMAX Technology Sales and Maintenance revenues decreased 49.9% to $15.1 million in the first quarter of 2020, compared with $30.1 million in the prior year period.

  • Total gross margin for IMAX Technology Sales and Maintenance was 31.3% compared to 43.5% in the prior year period. The year-over-year decline in total gross margin was primarily driven by fewer sales and sales-type leases due to COVID-19 related delays in theater installations and lower maintenance revenue as such services were not able to be provided while theaters are closed.

Cash Balances and Outstanding Debt

Total cash and cash equivalents as of March 31, 2020 was $352.3 million. Total debt was $300.0 million as of March 31, 2020 and represented an increase compared to $18.2 million as of December 31, 2019. As of March 31, 2020, the Company's $300.0 million credit facility due June 28, 2023 was drawn in its entirety.

Share Count and Capital Return

  • The weighted average diluted shares outstanding at the end of the first quarter of 2020 declined 1.9% to 60.4 million, compared to 61.6 million in first quarter 2019, due primarily to share repurchase activity. During the quarter, a total of 2.5 million shares were repurchased at an average price of $14.72 for a total value of approximately $36.6 million. A total of $89.4 million remains available under the Company's outstanding share repurchase authorization, which expires in June 2020.

  • During the first quarter of 2020, IMAX China repurchased a total of 480.6 thousand shares at an average price of $1.85 for a total value of approximately $890.8 thousand.

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 investors.imax.com. 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 corporate and Investor Relations 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 8:30AM ET to discuss its first quarter 2020 financial results. This call is being webcast by PGI and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (800) 458-4148 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 484-0477. The conference ID for the call is 2512506. 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 2512506.

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 March 31, 2020, there were 1,616 IMAX theater systems (1,526 commercial multiplexes, 14 commercial destinations, 76 institutional) operating in 81 countries and territories. Shares of IMAX China Holding, Inc., 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®, 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).

For additional information please contact:

Investors:

IMAX Corporation, New York

Brett Harriss

212-821-0187

bharriss@IMAX.com

Media:

IMAX Corporation, New York

Mark Jafar

212-821-0102

mjafar@imax.com

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; the impact of COVID-19 on our financial condition and results of operations and on the businesses of our customers and exhibitor partners; 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 the following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing Arrangements; (iii) IMAX Systems, (iv) IMAX Maintenance; (v) Other Theater Business; (vi) New Business Initiatives; (vii) Film Distribution; and (viii) Film Post-production. The Company organizes its reportable segments into the following four categories, identified by the nature of the product sold or service provided:

(i) IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the Joint Revenue Sharing Arrangement ("JRSA") segment;

(ii) IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance and Other Theater Business segments, as well as fixed revenues from the JRSA segment;

(iii) New Business Initiatives, which is a segment that includes activities related to the exploration of new lines of business and new initiatives outside of the Company's core business; and

(iv) Film Distribution and Post-production, which includes activities related to the distribution of films primarily for the Company's institutional theater partners (through the Film Distribution segment) and the provision of film post-production and quality control services (through the Film Post-production segment).

Non-GAAP Financial Measures

In this release, the Company presents adjusted net (loss) income attributable to common shareholders and adjusted net (loss) 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 the Company's performance, which are not recognized under U.S. GAAP. Adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share exclude, where applicable: (i) share-based compensation; (ii) exit costs, restructuring charges and associated impairments, and (iii) changes in the fair value of equity investments, as well as the related tax impact of these adjustments, and (iv) income tax expense related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company's financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual charges to net (loss) income attributable to common shareholders. Although share-based compensation is an important aspect of the Company's employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

In addition to the non-GAAP financial measures discussed above, management also 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 allowed by the Company's credit agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company's operating performance and to provide additional information with respect to the Company's compliance against its credit agreement requirements in the current period. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry to evaluate, assess and benchmark the Company's results.

EBITDA is defined as net (loss) income excluding (i) interest income (expense), net; (ii) income tax provision (benefit); and (iii) depreciation and amortization. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) gain (loss) from equity accounted investments; (ii) stock and other non-cash compensation; (iii) exit costs, restructuring charges and associated impairments; (iv) change in fair value of equity investment; (v) write-downs, net of recoveries, including asset impairments and receivable provisions; and (vi) adjusted EBITDA attributable to non-controlling interests.

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.

These non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered as a substitute for, or superior to, the comparable GAAP amounts.

Signings and Installations




















Three Months
Ended March 31,







Theater System Signings:

2020


2019







Full new sales and sales-type lease arrangements

2


9







New hybrid joint revenue sharing lease arrangements

-


3







New traditional joint revenue sharing arrangements

2


2







Total new IMAX Theater Systems

4


14







Upgrades of IMAX Theater Systems

11


9







Total IMAX Theater System signings

15


23




























Three Months
Ended March 31,







Theater System Installations:

2020


2019







Full new sales and sales-type lease arrangements

2


6







New hybrid joint revenue sharing lease arrangements

1


4







New traditional joint revenue sharing arrangements

2


4







Total new IMAX Theater Systems

5


14







Upgrades of IMAX theater systems

7


3







Total IMAX Theater System installations

12


17


















Three Months
Ended March 31,














Theater Sales Backlog:

2020


2019







Sales and sales-type lease arrangements

180


182







Joint revenue sharing arrangements










Hybrid lease arrangements

138


117







Traditional arrangements

215

(1)

272

(1)






Total IMAX Theater System backlog

533


571


















Three Months
Ended March 31,














IMAX Theater System Network:

2020


2019







Commercial Multiplex Theaters:










Sales and sales-type lease arrangements

659


611







Hybrid joint revenue sharing lease arrangements

136


128







Traditional joint revenue sharing lease arrangements

731


681







Total Commercial Multiplex Theaters

1,526


1,420

















Commercial Destination Theaters

14


14







Institutional Theaters

76


80







Total IMAX Theater System network

1,616


1,514
















(1) Includes 34 IMAX Theater Systems where the customer has the option to convert from joint revenue sharing arrangements
to a sales arrangement (2019 — 46).

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per share amounts)

(Unaudited)












Three Months Ended




March 31,




2020


2019

Revenues(1)







Technology sales


$

5,662


$

15,200

Image enhancement and maintenance services



20,721



44,147

Technology rentals



5,971



18,170

Finance income



2,548



2,681





34,902



80,198

Costs and expenses applicable to revenues(1)







Technology sales



3,869



9,435

Image enhancement and maintenance services



17,816



19,243

Technology rentals



8,131



6,380





29,816



35,058

Gross margin



5,086



45,140

Selling, general and administrative expenses



28,636



27,649

Research and development



2,200



1,136

Amortization of intangibles



1,321



1,075

Credit loss expense



10,217



431

Asset impairments



1,151



-

Exit costs, restructuring charges and associated impairments



-



850

(Loss) Income from operations



(38,439)



13,999

Change in fair value of equity securities



(4,539)



2,491

Retirement benefits non-service expense



(116)



(160)

Interest income



365



570

Interest expense



(648)



(681)

(Loss) income before taxes



(43,377)



16,219

Income tax expense



(15,505)



(3,648)

Equity in losses of investees, net of tax


(529)



(84)

Net (loss) income



(59,411)



12,487

Less: Net loss (income) attributable to non-controlling interests



10,057



(4,222)

Net (loss) income attributable to common shareholders


$

(49,354)


$

8,265









Net (loss) income per share attributable to common shareholders -
basic and diluted:




Net (loss) income per share — basic and diluted


$

(0.82)


$

0.13









Weighted average number of shares outstanding (000's):








Basic



60,418



61,377


Fully Diluted



60,418



61,559









Additional Disclosure:







Depreciation and amortization(2)


$

15,252


$

14,211


















(1) In the first quarter of 2020, the Company updated certain account names within revenues and costs and
expenses applicable to revenues in its Condensed Consolidated Statements of Operations to better reflect the
nature of its business activities.

(2) Includes $0.1 million of amortization of deferred financing costs charged to interest expense for the three
months ended March 31, 2020, respectively (2019 - $0.1 million, respectively).

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In accordance with United States Generally Accepted Accounting Principles

(In thousands of U.S. dollars, except share amounts)

(Unaudited)








March 31,


December 31,



2020


2019

Assets





Cash and cash equivalents


$ 352,277


$ 109,484

Accounts receivable, net of allowance for credit losses


64,818


99,513

Financing receivables, net of allowance for credit losses


121,112


128,038

Variable consideration receivable from contracts, net of allowance for credit losses


38,694


40,040

Inventories


61,635


42,989

Prepaid expenses


11,558


10,237

Film assets


15,645


17,921

Property, plant and equipment


294,361


306,849

Investment in equity securities


11,131


15,685

Other assets


24,559


25,034

Deferred income tax assets


37,967


23,905

Other intangible assets


29,542


30,347

Goodwill


39,027


39,027

Total assets


$ 1,102,326


$ 889,069

Liabilities





Bank indebtedness


$ 298,355


$ 18,229

Accounts payable


25,296


20,414

Accrued and other liabilities


111,850


112,779

Deferred revenue


103,267


94,552

Deferred income tax liabilities


19,681


Total liabilities


558,449


245,974

Commitments and contingencies





Non-controlling interests


5,500


5,908

Shareholders' equity





Capital stock common shares — no par value. Authorized — unlimited number.





58,878,749 issued and 58,786,752 outstanding (December 31, 2019 — 61,362,872 issued
and 61,175,852 outstanding)


405,583


423,386

Less: Treasury stock, 91,957 shares at cost (December 31, 2019 — 187,020)


(1,419)


(4,038)

Other equity


168,892


171,789

Accumulated deficit


(108,428)


(40,253)

Accumulated other comprehensive loss


(5,759)


(3,190)

Total shareholders' equity attributable to common shareholders


458,869


547,694

Non-controlling interests


79,508


89,493

Total shareholders' equity


538,377


637,187

Total liabilities and shareholders' equity


$ 1,102,326


$ 889,069

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended




March 31,




2020


2019


Cash provided by (used in):







Operating Activities








Net (loss) income


$

(59,411)


$

12,487


Adjustments to reconcile net (loss) income to cash from operating activities:








Depreciation and amortization



15,252



14,211


Credit loss expense



10,217



431


Write-downs



4,403



266


Deferred income tax expense



5,627



688


Share and other non-cash compensation



4,309



4,524


Unrealized foreign currency exchange loss (gain)



223



(24)


Change in fair value of equity securities



4,539



(2,491)


Equity in losses of investees



529



84


Investment in film assets



(3,064)



(3,740)


Changes in other non-cash operating assets and liabilities



23,342



(27,105)


Net cash provided by (used in) operating activities



5,966



(669)










Investing Activities








Purchase of property, plant and equipment



(271)



(2,237)


Investment in joint revenue sharing equipment



(1,580)



(9,716)


Acquisition of other intangible assets



(862)



(540)


Investment in equity securities





(15,153)


Net cash used in investing activities



(2,713)



(27,646)










Financing Activities








Increase in bank indebtedness



280,000



35,000


Repayment of bank indebtedness





(15,000)


Settlement of restricted share units and options



(1,667)



(4,987)


Treasury stock repurchased for future settlement of restricted share units



(1,419)



(4,207)


Repurchase of common shares, IMAX China



(891)



(1,767)


Taxes withheld and paid on employee stock awards vested



(236)



(219)


Common shares issued - stock options exercised





803


Repurchase of common shares



(36,624)




Net cash provided by financing activities



239,163



9,623










Effects of exchange rate changes on cash



377



186










Increase (decrease) in cash and cash equivalents during period



242,793



(18,506)










Cash and cash equivalents, beginning of period



109,484



141,590










Cash and cash equivalents, end of period


$

352,277


$

123,084





Three Months Ended




March 31,




2020


2019


Revenue






IMAX Technology Network






IMAX DMR


$ 10,629


$ 27,950


Joint revenue sharing arrangements, contingent rent


5,971


18,044




16,600


45,994


IMAX Technology Sales and Maintenance






IMAX Systems


5,688


13,026


Joint revenue sharing arrangements, fixed fees


770


2,539


IMAX Maintenance


7,370


12,951


Other Theater Business


1,263


1,626




15,091


30,142


New Business Initiatives


478


834


Film Distribution and Post-Production


2,494


2,662




34,663


79,632


Other


239


566


Total revenues


$ 34,902


$ 80,198








Gross Margin






IMAX Technology Network






IMAX DMR(1)


$ 4,443


$ 19,775


Joint revenue sharing arrangements, contingent rent(1)


(1,618)


11,935




2,825


31,710


IMAX Technology Sales and Maintenance






IMAX Systems (1)


3,176


7,052


Joint revenue sharing arrangements, fixed fees(1)


179


295


IMAX Maintenance


759


5,281


Other Theater Business


610


475




4,724


13,103


New Business Initiatives


361


619


Film Distribution and Post-Production (1)


(1,935)


(25)




5,975


45,407


Other


(889)


(267)


Total Segment Margin


$ 5,086


$ 45,140







(1)

IMAX DMR gross margin includes marketing costs of $2.4 million for the three months ended March 31, 2020 (2019 — $3.9 million). JRSA gross margin
includes advertising, marketing and commission expense of $0.5 million for the three months ended March 31, 2020 (2019 — expense of $0.1 million). IMAX S
ystems gross margin includes marketing and commission costs of $0.2 million for the three months ended March 31, 2020 (2019 — $0.5 million). Film
Distribution segment gross margin includes marketing expense of $0.2 million for the three months ended March 31, 2020 (2019 — expense of $0.6 million).

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

Non-GAAP Financial Measures:

In this release, the Company presents adjusted net (loss) income attributable to common shareholders and adjusted net (loss) 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 the Company's performance, which are not recognized under U.S. GAAP. Adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share exclude, where applicable: (i) share-based compensation; (ii) exit costs, restructuring charges and associated impairments, and (iii) changes in the fair value of equity investments, as well as the related tax impact of these adjustments, and (iv) income tax expense related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries .

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company's financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual charges to net (loss) income attributable to common shareholders. Although share-based compensation is an important aspect of the Company's employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

In addition to the non-GAAP financial measures discussed above, management also 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 allowed by the Company's credit agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company's operating performance and to provide additional information with respect to the Company's compliance against its credit agreement requirements in the current period. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry to evaluate, assess and benchmark the Company's results.

EBITDA is defined as net (loss) income excluding (i) interest income (expense), net; (ii) income tax provision (benefit); and (iii) depreciation and amortization. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) gain (loss) from equity accounted investments; (ii) stock and other non-cash compensation; (iii) exit costs, restructuring charges and associated impairments; (iv) change in fair value of equity investment; (v) write-downs, net of recoveries, including asset impairments and receivable provisions; and (vi) adjusted EBITDA attributable to non-controlling interests.

These non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered as a substitute for, or superior to, the comparable GAAP amounts.



For the



For the




For the




For the




Three Months
Ended



Three Months
Ended




12 Months
Ended




12 Months
Ended




March 31, 2020



March 31, 2019




March 31, 2020(1)




March 31, 2019(1)

















Reported net (loss) income attributable to common shareholders

$

(49,354)


$

8,265



$

(10,753)



$

22,604


Add (subtract):















Provision for income taxes


10,949



2,721




21,369




5,193


Interest expense, net of interest income


253



270




930




655


Depreciation and amortization, including film asset amortization


14,012



12,964




59,502




53,148


EBITDA

$

(24,140)


$

24,220



$

71,048



$

81,600


Stock and other non-cash compensation


4,158



4,414




22,697




22,594


Change in fair value of equity investment


3,165



(1,700)




5,218




(1,700)


Write-downs, including asset impariments and credit loss expense


11,928



655




17,040




2,917


Exit costs, restructuring charges, and associated impairments


-



850




-




9,690


Legal arbitration award


-



-




-




11,737


Executive transition costs


-



-




-




2,994


Loss from equity accounted investments


529



84




442




371


Adjusted EBITDA attributable to common shareholders

$

(4,360)


$

28,523



$

116,445



$

130,203


Adjusted revenues attributable to common shareholders(2)

$

33,306


$

71,724



$

319,236



$

332,489


Adjusted EBITDA margin attributable to common shareholders


(13.1)

%


39.8

%


36.5

%


39.2

%

(1)

Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility.





















(2)



Three months ended
March 31, 2020


Three months ended
March 31, 2019


12 months ended
March 31, 2020


12 months ended
March 31, 2020


Total revenues




$

34,902




$

80,198




$

350,368




$

369,615


Greater China revenues


$

5,269




$

26,681




$

102,882




$

116,055




Non-controlling interest ownership percentage(3)



30.29%





31.76%





30.26%





31.99%




Deduction for non-controlling interest share of revenues





(1,596)





8,474





(31,132)





(37,126)


Adjusted revenues attributable to common shareholders




$

33,306




$

71,724




$

319,236




$

332,489

(3)

Weighted average ownership percentage for change in non-controlling interest share






IMAX CORPORATION

Adjusted Net (Loss) Income Attributable to Common Shareholders and Adjusted Diluted Per Share Calculations

(In thousands of U.S. dollars)

(Unaudited)




March 31, 2020



March 31, 2019



Net Income


Diluted EPS



Net Income



Diluted EPS

Reported net (loss) income attributable to common shareholders


$ (49,354)


$ (0.82)



$ 8,265



$ 0.13

Adjustments:











Share-based compensation


4,075


0.07



4,277



0.07

Exit costs, restructuring charges and associated impairments





850



0.01

Change in fair value of equity securities


3,165


0.05



(1,700)



(0.02)

Tax impact on items listed above


(338)


(0.01)



(881)



(0.01)

Income tax expense related to removal of indefinitely reinvested assertion on the
historical earnings of certain subsidiaries


13,726


0.23





Adjusted net (loss) income


$ (28,726)


$ (0.48)



$ 10,811



$ 0.18












Weighted average basic shares outstanding




60,418






61,377

Weighted average diluted shares outstanding




60,418






61,559

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 (loss) 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. A reconciliation of cash provided by operating activities to free cash flow is presented in the table below:



Three Months Ended


March 31, 2020




Net cash provided by operating activities

$

5,966

Net cash used in investing activities


(2,713)


Free cash flow

$

3,253

Cision
Cision

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SOURCE IMAX Corporation