IMAX Corporation Reports Third Quarter 2018 Results

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: 
     
              
                Media:


       IMAX Corporation, New York         
     IMAX Corporation, New York


       Michael K. Mougias                 
     Amanda Collins


       212-821-0187                       
     212-821-0155


       
              mmougias@imax.com       
     
              abcollins@imax.com

    ---

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
                for the three and nine months ended September 30, 2018 (2017 - $5.2 million
                and $16.2 million, respectively))



              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
    ended September 30, 2018, respectively (2017 - $0.2 million and $0.4 million, respectively).


                                                                                                                        
         
                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
    64,695,550 outstanding)



              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
           (2017 -$2.5 million and $9.8 million, respectively). Joint revenue sharing arrangements segment margins include advertising,
           marketing and commission costs
           of $1.0 million and $2.2 million for the three and nine months ended September 30, 2018, respectively (2017 -$1.3 million and
           $2.5, respectively). IMAX
           system sales and sales-type lease segment margins include marketing and commission costs of $0.8 million and $2.0 million for the
           three and nine months
           ended September 30, 2018, respectively (2017 -$1.1 million and $2.2 million). Film distribution and post production segment
           margins include marketing
           expense of less than $0.1 million and $2.0 million for the three and nine months ended September 30, 2018 (2017 -an expense of
           less than $0.1 million and
          recovery of $0.7 million, 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
           EBITDA from the Company's non-controlling interests.



     (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)                  -
                                                           respectively)



     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

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SOURCE IMAX Corporation