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IMAX's Q2 Loss Narrower Than Expected, Revenues Decline Y/Y

Zacks Equity Research
·5 mins read

IMAX Corporation IMAX reported second-quarter 2020 adjusted loss of 44 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 49 cents. The figure marked a sharp drop from adjusted earnings of 32 cents per share reported in the year-ago quarter.

Total revenues of $8.8 million missed the Zacks Consensus Estimate by 12% and declined 91.6% from the year-ago quarter.

The year-over-year decrease in revenues was attributed to the closure of substantially the entire theater network of the company and decrease in theater system installations due to the COVID-19 pandemic in the reported quarter.

Category-wise, technology sales, Image Enhancement & Maintenance Services, Technology Rentals and financial income were down 86.4%, 93.3%, 100.5% and 2.8% year over year to $2.6 million, $3.7 million, ($137 K) and $2.5 million, respectively.

Segment Details

IMAX Technology Network Business

IMAX technology network business revenues were $409K, down 99.4% year over year due to decrease in IMAX DMR revenues.

IMAX Corporation Price, Consensus and EPS Surprise

IMAX Corporation Price, Consensus and EPS Surprise
IMAX Corporation Price, Consensus and EPS Surprise

IMAX Corporation price-consensus-eps-surprise-chart | IMAX Corporation Quote

Within the segment, IMAX DMR revenues were down 98.6% year over year to $546K due to 99% decrease in IMAX global box office revenues connected to COVID-19-related theater closures.

In the second quarter of 2020, global box office was generated by the exhibition of one new film compared with 19 films (15 new and 4 carryovers) in the year-ago quarter.

Joint revenue sharing arrangements-contingent rent decreased 100.5% year over year due to 100% reduction in global box office generated by theaters under joint revenue sharing arrangements.

IMAX Technology Sales & Maintenance

IMAX technology sales & maintenance business generated revenues of $4.6 million, down 86.8% year over year as the pace of theater system installations slowed significantly and regular maintenance services were suspended due to the coronavirus outbreak.

Within this segment, IMAX systems revenues declined 72.4% from the year-ago quarter to $4.5 million. IMAX maintenance revenues were nil.

Moreover, Joint revenue sharing arrangements-fixed fees were $369K, down 85.5% year over year. Other theater revenues declined 112% to ($309K) in the reported quarter.

New Business & Others

New Business generated revenues of $632K. Film distribution and post-production generated revenues of $3.1 million and other revenues were $23K in second-quarter 2020.

Network Growth Statistics

There were 1,615 theater systems (1,527 commercial multiplex, 13 commercial destination, 75 institutional) operating in 81 countries and territories as of Jun 30, 2020.

As of Jun 30, 2020, 141 IMAX with Laser systems were installed, and the company’s backlog included 154 new IMAX with Laser systems and 94 upgrades to IMAX with Laser systems.

Operating Details

Gross margin contracted from 56.8% in the year-ago quarter to (86.8%) in second-quarter 2020.

Adjusted EBITDA per credit facility was a loss of $18.5 million, down from $41.4 million in the year-ago period.

Selling, general & administrative (SG&A) expenses decreased 7.3% year over year to $29.7 million.

Research & development (R&D) expenses increased 0.8% on a year-over-year basis to $1.2 million.

Operating income margin contracted from 18.4% in the year-ago quarter to (468.7%) in the reported quarter.

Balance Sheet & Cash Flow

As of Jun 30, 2020, IMAX had cash and cash equivalents of $319 million compared with $352.3 million in the prior quarter.

Cash flow used operating activities was $20.8 million compared with $5.96 million generated in the prior quarter.

Negative free cash flow was $29.8 million compared with positive free cash flow of $3.25 million in the prior quarter.

2020 Guidance

As of Jul 24, 409 IMAX theaters reopened in China, 172 in the rest of the world and 43 in North America. The company has 624 theaters or approximately 40% of its global network generating revenues in 40 of the 81 countries and territories.

The company is actively preparing to reopen to what is projected to be an IMAX-friendly second-half release slate. By the end of August, the company expects approximately 1,400 screens in 70 markets or 90% of its global network to open.

Zacks Rank & Stocks to Consider

IMAX currently has a Zacks Rank #4 (Sell).

Crocs, Inc. CROX, SiriusXM Holdings SIRI and Take-Two Interactive Software, Inc. TTWO are some better-ranked stocks in the broader consumer discretionary sector, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Crocs and SiriusXM will report results on Jul 30 while Take-Two is set to report on Aug 3.

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