IMAX Corporation Reports Third Quarter 2019 Financial Results

NEW YORK, Oct. 31, 2019 /PRNewswire/ -- IMAX Corporation (NYSE: IMAX), a global leader in entertainment technology, today reported financial results for the three months ended September 30, 2019.

Highlights for Third Quarter 2019
(Note: Percentage and other changes refer to third quarter 2018 unless otherwise noted.)

    --  Strong execution and cost discipline driving solid financial performance
        and increased operating leverage.
    --  5.2% increase in revenue.
    --  19.1% growth in global box office.
    --  11.7% increase in gross profit and approximately 310 basis point
        increase in gross profit margin to 54.5%.
    --  79.9% increase in GAAP net income attributable to common shareholders to
        $9.0 million, or $0.15 per share; 50.0% increase in adj. net income per
        share to $0.21.
    --  45.2% increase in GAAP net income to $10.9 million; 25.6% increase in
        adj. EBITDA and approximately 570 basis point increase in adj. EBITDA
        margin.


                                                                           
          
       Three Months Ended


                                                                              
         
        September 30,




     
              In millions, except per share data                          2019                              2018    YoY %



                                                                                                                    Change




     Total Revenue                                                    $
        86.4                       $
         82.1     5.2%





     Gross Margin                                                     $
        47.1                       $
         42.2    11.7%



        Gross Margin (%)                                                  54.5%                            51.4%





     Net Income                                                       $
        10.9                        $
         7.5    45.2%



     Net Income Attributable to Common Shareholders                    $
        9.0                        $
         5.0    79.9%



     Diluted Net Income Per Share Attributable to Common Shareholders $
        0.15                       $
         0.08    87.5%



     Adj. Net Income Per Share Attributable to Common Shareholders    $
        0.21                       $
         0.14    50.0%





     Adj. EBITDA Attributable to Common Shareholders                  $
        32.4                       $
         25.8    25.6%



        Adj. EBITDA Margin (%)                                            41.4%                            35.7%

Note: For the definition and reconciliations of reported results to non-GAAP financial results, please refer to Tables 8-10 and the discussion of non-GAAP financial measures at the end of this earnings release.

The Company delivered impressive third quarter results as it continues to grow its core business while developing new strategic initiatives. Results for the quarter were driven by a 19.1% increase in global box office, including 23.3% growth in domestic box office, and a 9.4% increase in its global commercial network to 1,473 theatres in 81 countries and territories. The Company's continued momentum is complemented by potential levers around new strategic initiatives including IMAX Enhanced and non-traditional content.

"IMAX again delivered strong results for the quarter with 5% revenue growth and costs maintained at prior year levels, driving a 26% increase in adjusted EBITDA and 50% increase in adjusted EPS," said IMAX CEO Richard L. Gelfond. "We are on track for our best year ever at the global box office. In China our box office is up 27% in RMB through early October and we recently grew our box office by more than 160% during the pivotal National Day holiday. And we look forward to the highly anticipated Star Wars: The Rise of Skywalker, final installment of the Star Wars saga, in December."

"Looking ahead to 2020, we continue to build out a strong slate headlined by a record number of releases filmed in IMAX® and proven franchise properties -- demonstrating our longstanding relationships with world-class creators, our ability to create new opportunities to drive IMAX market share on key titles, and growing demand for our end-to-end technology," Gelfond added.

"Building on the strength of our core business, we are developing new opportunities for future growth while maintaining cost discipline. In partnership with leading manufacturers and streaming platforms, we are leveraging our strong brand and technology to extend our offerings into the home through IMAX Enhanced. Additionally, we continue to partner with innovative artists across genres to create truly unique events that drive increased utilization throughout our global network."

"We believe that the powerful combination of momentum in our attractive core business and new potential levers of growth under development, position us well for the future."

Third Quarter 2019 Consolidated Results
Revenues:
Total revenues of $86.4 million increased $4.3 million, or 5.2%, compared to $82.1 million for the three months ended September 30, 2018. The $4.3 million increase in revenue was driven principally by a $6.5 million, or 17.8%, increase in Network business revenue on a $39.7 million, or 19.1%, increase in gross box office to $246.1 million (see Table 2). The $39.6 million increase in gross box office was driven by a $26.5 million, or 39.8%, increase in international gross box office, excluding China, and a $14.4 million, or 23.3%, increase in domestic gross box office. Partially offsetting the strong increase in Network revenue was a $3.0 million decline in revenues related to theater installations discussed below in the segment review. Year-to-date, total revenues increased $5.9 million, or 2.2%, to $271.4 million, primarily due to an $11.3 million, or 7.9%, increase in Network revenue on a $71.9 million, or 9.0%, increase in gross box office to $867.3 million.

Network: The IMAX theater network consisted of 1,568 systems as of September 30, 2019, of which 1,473 were in commercial multiplexes, representing a year-over-year increase of 127 theaters, or 9.4%, and 1,065, or 72.3%, were located in international markets.

Signings and Backlog: IMAX signed contracts for 22 new theaters and 8 upgrades in third quarter 2019, reflecting the continuing strong demand for the Company's technology and systems. There were 607 theaters in backlog, including 125 upgrades, as of September 30, 2019, compared to 635 in backlog, including 112 upgrades, as of September 30, 2018. For a breakdown of theater system signings, installations, backlog and the theater network, please refer to Table 3 at the end of this earnings release.

Operating Expenses: Operating expenses, defined as selling, general and administrative plus R&D, excluding stock-based compensation, were $25.9 million, essentially flat compared to the prior year period. Year-to-date, operating expenses decreased 6.6% to $77.6 million from $83.1 million in the prior year.

Net Income: Net income increased 45.2% to $10.9 million, compared to $7.5 million in the prior year period. Year-to-date, net income increased 24.8% to $37.2 million, compared to $29.8 million in the prior year period.

Adjusted EBITDA: Adjusted EBITDA increased 25.6% to $32.4 million, compared to $25.8 million in the prior year period and the adjusted EBITDA margin, defined as adjusted EBITDA per Credit Facility divided by adjusted revenues attributable to common shareholders (see Table 8), was 41.4% compared to 35.7% in the prior year. Year-to-date, adjusted EBITDA increased 5.9% to $102.4 million, compared to $96.7 million in the prior year period and the adjusted EBITDA margin was 41.8%, compared to 40.4% in the prior year.



     
                Table 1: Third Quarter Segment Results

       (In millions)


                                                                      Network Business                          Theater Business



                                                              Revenue                         Gross     Gross                        Revenue             Gross        Gross
                                                                                       Margin        Margin %                                  Margin             Margin %





             
              
                3Q19                  $
        43.2                    $
         27.4      63.4%                   $
          37.7      $
           18.4         48.8%


             
              
                3Q18                  $
        36.7                    $
         22.5      61.4%                   $
          40.7      $
           20.2         49.6%


                                 % change                       17.8%                         21.6%                                   (7.4%)            (8.8%)




                                 YTD 3Q19                 $
        153.8                   $
         102.2      66.5%                  $
          102.9      $
           47.0         45.7%


                                 YTD 3Q18                 $
        142.5                    $
         97.0      68.0%                  $
          106.5      $
           56.7         53.2%


                                 % change                        7.9%                          5.4%                                   (3.4%)           (17.0%)

Network Business

    --  Network business segment revenues increased 17.8% to $43.2 million,
        compared to $36.7 million in the prior-year period. The $6.5 million
        increase in revenues was driven principally by a $4.3 million, or 19.2%,
        increase in IMAX DMR revenues and a $2.2 million, or 15.5%, increase in
        revenues from joint revenue sharing arrangements. The strong increase in
        revenues was driven by a $39.7 million, or 19.1%, increase in IMAX
        global box office. Year-to-date, Network business segment revenues
        increased 7.9% to $153.8 million, compared to $142.5 million in the
        prior year period on a 9.0% increase in box office.
    --  The blended take-rate for IMAX DMR and joint revenue sharing
        arrangements was 17.6% in the quarter, compared to 17.8% in the prior
        year period. Year-to-date, the blended take-rate was 17.7%, compared to
        17.9% in the prior year.
    --  Gross margin for the Network business was 63.4%, compared to 61.4% in
        the prior-year period. The increase in gross margin for the business was
        driven principally by higher box office, partially offset by a $1.7
        million, or 11.8%, increase in cost of goods sold. Year-to-date, gross
        margin for the Network business was 66.5%, compared to 68.0% in the
        prior year.

Theater Business

    --  Theater business segment revenues decreased $3.0 million, or 7.5%, to
        $37.7 million, compared to $40.7 million in the prior year period. The
        $3.0 million decrease in revenues was driven principally by:
        --  One fewer new sales and sales-type lease arrangement in the quarter,
            as well as one used system.
        --  Two fewer hybrid joint revenue sharing lease arrangements.
        --  The average revenue per new sales and sales-type theater system
            installed was $1.2 million, compared to $1.3 million in the prior
            year period.
    --  Year-to-date, Theater business segment revenues decreased $3.6 million,
        or 3.4%, to $102.9 million, compared to $106.5 million in the prior year
        period. Please refer to Table 3 for detail on our signings,
        installations and theater network at the end of this earnings release.
    --  Gross margin for the Theater business was 48.8% in the third quarter,
        compared to 49.6% in the prior year period and the margin on sales and
        sale-type theaters was 48.5% in third quarter 2019, compared to 49.6% in
        the prior year period.
    --  Year-to-date, gross margin for the Theater business segment was 45.7%,
        compared to 53.2% in the prior year. The decline in gross margin
        year-to-date was principally driven by lower margin on sales and
        sales-type leases due to the Company's decision to allocate additional
        resources to ensure the successful roll-out and launch of its new IMAX
        with Laser technology.

Cash Balances and Outstanding Debt (Table 5)
Total cash and cash equivalents as of September 30, 2019 was $102.5 million, which includes $83.4 million held in IMAX China. Total bank indebtedness was $18.1 million as of September 30, 2019 (net of $1.9 million of deferred financing fees) and represented a decrease of $19.7 million from $37.8 million (net of $2.2 million of deferred financing fees) as of December 31, 2018. As of September 30, 2019, $280.0 million was available under the $300.0 million credit facility in place due June 28, 2023.

Share Count and Capital Return
The weighted average diluted shares outstanding in third quarter 2019 declined 2.1% to 61.5 million, compared to 62.8 million in third quarter 2018, due primarily to share repurchase activity. In third quarter 2019, a total of 47 thousand shares were repurchased at an average price of $20.35 for a total value of approximately $950 thousand. A total of $125.9 million is available under the outstanding share repurchase authorization, which expires in June 2020.

Full-Year 2019 Guidance
IMAX's updated guidance for full-year 2019 is as follows:

    --  IMAX global box office is expected to experience low double-digit growth
        compared to the $1,032.1 million recorded in full-year 2018.
    --  Operating expenses, defined as selling, general and administrative
        expenses less stock-based compensation plus research and development
        costs are expected to be in-line with the $110.7 million recorded for
        full-year 2018.
    --  The effective tax rate is expected to be approximately 23%.
    --  Adjusted EBITDA margin is expected to be approximately 41% to 42%.
    --  Total theater installations are now expected at the high-end of the
        range of 185 to 190 systems, with new theater installs now expected to
        be slightly below the low-end of the range of 140 to 145 systems, and
        upgrades to IMAX with Laser now expected to be slightly above the
        previous guidance of approximately 45 systems. The resulting shift in
        mix of installations, therefore, is expected to be revenue neutral in
        fourth quarter 2019 due to the sales-type structure and margin profile
        of the additional upgrades.
    --  Total theaters equipped with IMAX with Laser are now expected to be
        slightly below the previous guidance of approximately 140 systems.

Conference Call
The Company will host a conference call today at 8:30 AM ET to discuss its third quarter 2019 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 (800) 367-2403 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 490-5367. The conference ID for the call is 3701970. 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 3701970.

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 earnings releases, SEC filings and public conference calls and webcasts.

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, 2019, there were 1,568 IMAX theater systems (1,473 commercial multiplexes, 14 commercial destinations, 81 institutional) operating in 81 countries and territories. On October 8, 2015, shares of IMAX China Holding, Inc., a subsidiary of IMAX Corporation, 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).

For additional information please contact:

Investors:
IMAX Corporation, New York
Stephen Davidson
212-821-0125
sdavidson@imax.com

Media:
IMAX Corporation, New York
Mark Jafar
212-821-0102
mjafar@imax.com

Forward-Looking Statements

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

Primary Reporting Groups

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

Non-GAAP Financial Measures

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

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

Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the condensed consolidated statements of cash flows). Cash provided by operating activities consist of net income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented in Table 10.



     
     Table 2



     
     IMAX Global Box Office




        (in millions
         of USD)                                                    
     
              Three Months Ended,


                               Sept. 30, 2019         Jun. 30, 2019     Mar. 31, 2019                    Dec. 31, 2018  Sept. 30, 2018

                                                                                                                                   ---

        Domestic                                   $
              76.5                                   $
              123.3                     $
          71.8      $
           82.1      $
            62.0


        Greater China                                        76.4                                               130.1                            105.8               69.2                77.8


        Rest of World                                        93.2                                               111.5                             78.7               85.4                66.7



             Total Global
               Box Office                     $
     
                246.1                             $
       
                364.9                $
     
            256.3 $
     
             236.7 $
     
              206.5

                                                                                                                                                                                        ---







        Blended take rate                                   17.6%                                              17.7%                           17.9%             17.6%              17.8%




        New films                                              20                                                  15                               12                 22                  24




        Carry-over films                                        6                                                   4                               12                  7                   5



              
                Table 3:
    Signings, Installations and Backlog





              
                Signings and Installations

    ---



                                                                                                                                                                                                         Three Months
                                                                                                                                                                                          Ended September 30,



                                                          
              
                Theater System Signings:                                                                                                       2019       2018



                                                          
              Full new sales and sales-type lease arrangements                                                                                              22         22


                                                          
              New traditional joint revenue sharing arrangements                                                                                                       1


                                                          
              New hybrid joint revenue sharing lease arrangements                                                                                                      2



                                                          
              
                Total new theaters                                                                                                               22         25


                                                          
              Upgrades of IMAX theater systems                                                                                                               8         12



                                                          
              
                    Total theater signings                                                                                                       30         37







                                                                                                                                                                                                         Three Months
                                                                                                                                                                                          Ended September 30,



                                                          
              
                Theater System Installations:                                                                                                  2019       2018



                                                          
              Full new sales and sales-type lease arrangements                                                                                           14(1)         15


                                                          
              New traditional joint revenue sharing arrangements                                                                                            12         15


                                                          
              New hybrid joint revenue sharing lease arrangements                                                                                            4          6



                                                          
              
                Total new theaters                                                                                                               30         36


                                                          
              Upgrades of IMAX theater systems                                                                                                               9          1



                                                          
              
                   Total theater installations                                                                                                   39         37





                                                                                                                                                                                                         Three Months
                                                                                                                                                                                          Ended September 30,





                                                          
              
                Theater Sales Backlog:                                                                                                         2019       2018



                                                          
              Sales and sales-type lease arrangements                                                                                                      205        189


                                                          
              Joint revenue sharing arrangements


                                                          
              Hybrid lease arrangements                                                                                                                 149(2)        119


                                                          
              Traditional arrangements                                                                                                                  253(3)        327


                                                          
              
                Total theater backlog                                                                                           607
                (4) 635
      (5)





                                                                                                                                                                                                         Three Months
                                                                                                                                                                                          Ended September 30,





                                                          
              
                Theater Network:                                                                                                               2019       2018



                                                          
              Commercial Multiplex Theaters:


                                                          
              Sales and sales-type lease arrangements                                                                                                      632        589


                                                          
              Traditional joint revenue sharing arrangements                                                                                               706        641


                                                          
              Hybrid joint revenue sharing lease arrangements                                                                                              135        116


                                                          
              
                Total Commercial Multiplex Theaters                                                                                           1,473      1,346




                                                          
              Commercial Destination Theaters                                                                                                               14         13


                                                          
              Institutional Theaters                                                                                                                        81         84



                                                          
              
                   Total theater network                                                                                                      1,568      1,443





               (1)     Includes 1 IMAX digital theater system that was relocated from a previous location.  This installation is incremental to the IMAX theater network but full revenue
                for the digital theater system was not received.


               (2)     Includes 75 theaters where the theater system could change between IMAX with Laser and digital projection systems based on the site selection for the theaters.



              (3)     Includes 50 theater systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement.


               (4)     Includes 155 new laser projection system configurations and 125 upgrades of existing locations to laser projection system configurations (119 of the 125 upgrades
                are for the IMAX with Laser projection system configurations).


               (5)     Includes 93 new laser projection system configurations and 112 upgrades of existing locations to laser projection system configurations (110 of the 112 upgrades
                are for the IMAX with Laser projection system configurations).



          
                Table 4:


                                                                                                                                                              
              
                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,



                                                                                                                                                                                                             2019                                        2018                      2019           2018




          
                Revenues



          Equipment and product sales                                                                                                                                                                                         $
              21,735                         $
       25,301                        $
         56,629                 $
         60,182



          Services                                                                                                                                                                                                                        44,168                              39,440                              144,977                       138,971



          Rentals                                                                                                                                                                                                                         17,642                              14,479                               61,675                        57,805



          Finance income                                                                                                                                                                                                                   2,845                               2,888                                8,104                         8,479



                                                                                                                                                                                                                                            86,390                              82,108                              271,385                       265,437




          
                Costs and expenses applicable to revenues



          Equipment and product sales                                                                                                                                                                                                     11,740                              14,099                               33,114                        29,620



          Services                                                                                                                                                                                                                        20,181                              18,824                               66,205                        62,808



          Rentals                                                                                                                                                                                                                          7,349                               6,994                               20,253                        19,722



                                                                                                                                                                                                                                            39,270                              39,917                              119,572                       112,150




          
                Gross margin                                                                                                                                                                                                       47,120                              42,191                              151,813                       153,287



          Selling, general and administrative expenses                                                                                                                                                                                    29,482                              26,654                               89,267                        87,097



          Research and development                                                                                                                                                                                                         1,359                               4,028                                3,717                        11,542



          Amortization of intangibles                                                                                                                                                                                                      1,271                               1,039                                3,564                         2,896



          Receivable provisions, net of recoveries                                                                                                                                                                                           599                                 861                                1,957                         1,667



          Legal arbitration award                                                                                                                                                                                                                                                                                            7,500



          Exit costs, restructuring charges and associated impairments                                                                                                                                                                                                                       850                              1,158



          
                Income from operations                                                                                                                                                                                             14,409                               9,609                               52,458                        41,427



          Change in fair value of equity investment                                                                                                                                             (490)                                                                                    (2,543)



          Retirement benefits non-service expense                                                                                                                                                                                          (160)                              (126)                               (480)                        (374)



          Interest income                                                                                                                                                                                                                    490                                 631                                1,632                         1,121



          Interest expense                                                                                                                                                                                                                 (489)                              (958)                             (1,806)                      (2,303)




          
                Income before income taxes                                                                                                                                                                                         13,760                               9,156                               49,261                        39,871



          Provision for income taxes                                                                                                                                                                                                     (3,030)                            (1,452)                            (11,986)                      (9,540)



          Gain (loss) from equity-accounted investments, net of tax                                                                                                                                                                         166                               (202)                                (56)                        (507)




          
                Net income                                                                                                                                                                                                         10,896                               7,502                               37,219                        29,824



          Less: net income attributable to non-controlling interests                                                                                                                                                                     (1,863)                            (2,482)                             (8,524)                      (8,674)




          
                Net income attributable to common shareholders                                                                                                                                             $
              
                9,033                     $
      
         5,020                  $
       
           28,695           $
       
           21,150






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



          Net income per share - basic and diluted                                                                                                                                                                 $
              
                0.15                      $
      
         0.08                    $
       
           0.47             $
       
           0.33






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


                                                                                      
              Basic                                                                                                                                        61,304                              62,551                               61,337                        63,466


                                                                                      
              Fully Diluted                                                                                                                                61,479                              62,793                               61,509                        63,580





          Additional Disclosure:



          Depreciation and amortization(1)                                                                                                                                                                                    $
              15,696                         $
       13,950                        $
         45,500                 $
         41,984





          
                (1)Includes $0.1 million and $0.4 million of amortization of deferred financing costs charged to interest expense for the three and nine months ended September 30, 2019, respectively (2018 - $0.4 million and  $1.0 million, respectively).



     
                Table 5:


                                                                                                                            
         
                IMAX CORPORATION


                                                                                                                      
         
           CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                                        
         
             (In thousands of U.S. dollars)


                                                                                                                          
         
             
                  (Unaudited)








                                                                                                                                                                          
     
     September 30, December 31,


                                                                                                                                                                                       2019          2018




     
                Assets



     Cash and cash equivalents                                                                                                                                                    $102,548                $141,590



     Accounts receivable, net of allowance for doubtful accounts of $4,996 (December 31, 2018 - $3,174)                                                                             81,681                  93,309



     Financing receivables, net of allowance for uncollectible amounts                                                                                                             121,340                 127,432



     Variable consideration receivable from contracts                                                                                                                               37,080                  35,985



     Inventories                                                                                                                                                                    58,175                  44,560



     Prepaid expenses                                                                                                                                                               11,477                  10,294



     Film assets                                                                                                                                                                    18,675                  16,367



     Property, plant and equipment                                                                                                                                                 305,097                 280,658



     Investment in equity securities                                                                                                                                                13,659                   1,022



     Other assets                                                                                                                                                                   20,242                  17,997



     Deferred income taxes                                                                                                                                                          29,742                  31,264



     Other intangible assets                                                                                                                                                        31,246                  34,095



     Goodwill                                                                                                                                                                       39,027                  39,027



     
                Total assets                                                                                                                                                    $869,989                $873,600






     
                Liabilities



     Bank indebtedness                                                                                                                                                             $18,103                 $37,753



     Accounts payable                                                                                                                                                               23,882                  32,057



     Accrued and other liabilities                                                                                                                                                 104,443                  97,724



     Deferred revenue                                                                                                                                                              104,169                 106,709



     
                Total liabilities                                                                                                                                                250,597                 274,243






     
                Commitments and contingencies





     
                Non-controlling interests                                                                                                                                          6,761                   6,439






     
                Shareholders' equity



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



     61,362,281 issued and 61,290,617 outstanding (December 31, 2018 - 61,478,168 issued and 61,433,589 outstanding)                                                               423,370                 422,455



     Less: Treasury stock, 71,664 shares at cost (December 31, 2018 - 44,579)                                                                                                      (1,572)                  (916)



     Other equity                                                                                                                                                                  168,204                 179,595



     Accumulated deficit                                                                                                                                                          (58,424)               (85,385)



     Accumulated other comprehensive loss                                                                                                                                          (4,122)                (3,588)



     
                Total shareholders' equity attributable to common shareholders                                                                                                   527,456                 512,161



     Non-controlling interests                                                                                                                                                      85,175                  80,757




     
                Total shareholders' equity                                                                                                                                       612,631                 592,918




     
                Total liabilities and shareholders' equity                                                                                                                      $869,989                $873,600



     
                Table 6:


                                                                                                   
           
                IMAX CORPORATION


                                                                                            
        
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                              
          
               (In thousands of U.S. dollars)


                                                                                                
          
               
                  (Unaudited)


                                                                                                                                                         Nine Months Ended


                                                                                                                                                           September 30,



                                                                                                                                                                      2019                  2018






     
                Cash provided by (used in):



     
                Operating Activities



     Net income                                                                                                                                                                $
       37,219           $
        29,824



     Adjustments to reconcile net income to cash from operations:



     Depreciation and amortization                                                                                                                                                  45,500                 41,984



     Write-downs, net of recoveries                                                                                                                                                  2,984                  2,541



     Change in deferred income taxes                                                                                                                                                 1,035                (2,849)



     Stock and other non-cash compensation                                                                                                                                          17,397                 18,240



     Unrealized foreign currency exchange loss                                                                                                                                         214                    406



     Change in fair value of equity investment                                                                                                                                       2,543



     Loss from equity-accounted investments                                                                                                                                            789                    209



     (Gain) loss on non-cash contribution to equity-accounted investees                                                                                                              (733)                   298



     Investment in film assets                                                                                                                                                    (15,405)              (22,240)



     Changes in other non-cash operating assets and liabilities                                                                                                                   (24,286)                 (343)



     
                Net cash provided by operating activities                                                                                                                         67,257                 68,070






     
                Investing Activities



     Purchase of property, plant and equipment                                                                                                                                     (5,528)               (7,367)



     Investment in joint revenue sharing equipment                                                                                                                                (31,099)              (22,710)



     Acquisition of other intangible assets                                                                                                                                        (1,874)               (3,198)



     Investment in equity securities                                                                                                                                              (15,153)



     
                Net cash used in investing activities                                                                                                                           (53,654)              (33,275)






     
                Financing Activities



     Increase in bank indebtedness                                                                                                                                                  35,000                 35,000



     Repayment of bank indebtedness                                                                                                                                               (55,000)              (40,667)



     Settlement of restricted share units and options                                                                                                                              (8,589)               (2,567)



     Treasury stock repurchased for future settlement of restricted share units                                                                                                    (1,572)               (3,597)



     Repurchase of common shares, IMAX China                                                                                                                                      (19,157)



     Taxes withheld and paid on employee stock awards vested                                                                                                                         (508)               (1,437)



     Common shares issued - stock options exercised                                                                                                                                  2,391                  1,017



     Repurchase of common shares                                                                                                                                                   (2,659)              (46,452)



     Issuance of subsidiary shares to non-controlling interests (net of return on capital)                                                                                           1,106                  7,546



     Dividends paid to non-controlling interests                                                                                                                                   (4,384)               (6,934)



     Credit facility amendment fees paid                                                                                                                                                                 (1,909)



     
                Net cash used in financing activities                                                                                                                           (53,372)              (60,000)






     Effects of exchange rate changes on cash                                                                                                                                          727                     95






     
                Decrease in cash and cash equivalents during period                                                                                                             (39,042)              (25,110)



     
                Cash and cash equivalents, beginning of period                                                                                                                   141,590                158,725



     
                Cash and cash equivalents, end of period                                                                                                                $
     
         102,548      $
     
          133,615



     
                Table 7:


                                                                                             
              
                IMAX CORPORATION
                                                                                                      SELECTED FINANCIAL DATA
                                                                                                  (In thousands of U.S. dollars)
                                                                                                            (Unaudited)




                                                                                                                                                         Three Months Ended                                          Nine Months Ended


                                                                                                                                                         September 30,                                                      September 30,



                                                                                                                                         2019                                  2018                                    2019                                  2018




     
                Revenue



     
                Network business



     IMAX DMR                                                                                                                        $26,665                               $22,372                                 $93,908                               $85,586



     Joint revenue sharing arrangements - contingent rent                                                                             16,546                                14,327                                  59,704                                56,919



     IMAX systems - contingent rent                                                                                                       32                                                                          189


                                                                                                                                       43,243                                36,699                                 153,801                               142,505




     
                Theater business



     
                IMAX systems



          Sales and sales-type leases                                                                                                 18,100                                20,427                                  42,212                                50,545



          Ongoing fees and finance income                                                                                              2,903                                 2,971                                   8,588                                 8,982



     Joint revenue sharing arrangements - fixed fees                                                                                   1,438                                 2,798                                   6,525                                 3,821



     Theater system maintenance                                                                                                       13,657                                12,415                                  39,815                                37,462



     Other theater                                                                                                                     1,560                                 2,076                                   5,766                                 5,707


                                                                                                                                       37,658                                40,687                                 102,906                               106,517




     
                New business                                                                                                           596                                 1,275                                   1,908                                 4,999




     
                Other



     Film distibution and film post-production                                                                                         3,528                                 3,062                                   9,791                                 9,156



     Other                                                                                                                             1,365                                   385                                   2,979                                 2,260


                                                                                                                                        4,893                                 3,447                                  12,770                                11,416




     
                Total revenues                                                                                                     $86,390                               $82,108                                $271,385                              $265,437








     
                Gross Margin



     
                Network business



     IMAX DMR(1)                                                                                                                     $17,866                               $14,461                                 $61,602                               $57,523



     Joint revenue sharing arrangements - contingent rent(1)                                                                           9,514                                 8,081                                  40,437                                39,441



     IMAX systems - contingent rent                                                                                                       32                                                                          189


                                                                                                                                       27,412                                22,542                                 102,228                                96,964




     
                Theater business



     IMAX systems(1)



          Sales and sales-type leases                                                                                                  8,775                                10,141                                  18,429                                28,648



          Ongoing fees and finance income                                                                                              2,855                                 2,923                                   8,445                                 8,839



     Joint revenue sharing arrangements - fixed fees(1)                                                                                  136                                   529                                   1,301                                   776



     Theater system maintenance                                                                                                        6,125                                 5,996                                  17,046                                17,289



     Other theater                                                                                                                       505                                   581                                   1,821                                 1,099


                                                                                                                                       18,396                                20,170                                  47,042                                56,651




     
                New business                                                                                                           541                                 (298)                                  1,441                                   139




     
                Other



     Film distribution and film post-production(1)                                                                                        50                                   260                                     483                                   320



     Other                                                                                                                               721                                 (483)                                    619                                 (787)


                                                                                                                                          771                                 (223)                                  1,102                                 (467)




     
                Total segment margin                                                                                               $47,120                               $42,191                                $151,813                              $153,287





                   (1) IMAX DMR segment margins include marketing costs of $4.3 million and $17.7 million for the three and nine months ended September 30, 2019, respectively (2018 -$3.1 million and $13.7 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing
                    and commission costs of $0.8 million and $1.1 million for the three and nine months ended September 30, 2019, respectively (2018 -$1.0 million and $2.2 million, respectively). IMAX systems segment margins include marketing and commission costs of $0.6 million and $1.5 million for the three
                    and nine months ended September 30, 2019, respectively (2018 -$0.8 million and $2.0 million, respectively). Film distribution segment margins include marketing expense of $0.1 million and $0.7 million for the three and nine months ended September 30, 2019, respectively (2018 -expense of
                    less than $0.1 million and $2.0 million, respectively).



      
                Table 8:


                                                                                                                                                                                                                                 
              
                IMAX CORPORATION
                                                                                                                                                                                                                                    Adjusted EBITDA per Credit Facility
                                                                                                                                                                                                                                      (In thousands of U.S. dollars)
                                                                                                                                                                                                                                                (Unaudited)




                                                                                                                                                                                                           
              
                Three Months Ended                                       
              
                Three Months Ended                                          
              
                12 Months Ended                                              
              
                12 Months Ended


                                                                                                                                                                                                           
              
                September 30, 2019                                       
              
                September 30, 2018                                       
              
                September 30, 2019(1)                                        
              
                September 30, 2018(1)





                        
              Net income                                                                                                                                                                                                             $
              10,896                                                                 $
              7,502                                                                    $
              40,990                                                                $
              38,522


                        
              Add (subtract):


                        
              Provision for income taxes                                                                                                                                                                                                          3,030                                                                             1,452                                                                                11,964                                                                            25,445


                        
              Net interest (income) expense                                                                                                                                                                                                       (133)                                                                              327                                                                                  (68)                                                                            1,440


                        
              Depreciation and amortization, including film asset amortization                                                                                                                                                                   15,696                                                                            13,950                                                                                60,953                                                                            69,025



                        
              EBITDA                                                                                                                                                                                                                 $
              29,489                                                                $
              23,231                                                                   $
              113,839                                                               $
              134,432


                        
              Stock and other non-cash compensation                                                                                                                                                                                               5,687                                                                             6,320                                                                                22,880                                                                            23,042


                        
              Movements in fair value of financial instruments                                                                                                                                                                                      490                                                                                                                                                                  2,543


                        
              Write-downs, net of recoveries including asset impairments and                                                                                                                                                                      1,118                                                                               855                                                                                 5,781                                                                             6,489
                           receivable provisions


                        
              Exit costs, restructing charges and associated impairments                                                                                                                                                                                                                                                                                                                                                9,234                                                                             3,637


                        
              Legal arbitration award                                                                                                                                                                                                                                                                                                                                                                                   4,237                                                                             7,500


                        
              Executive transition costs                                                                                                                                                                                                                                                                                                                                                                                2,994


                        
              Loss from equity accounted investments                                                                                                                                                                                              (166)                                                                              202                                                                                    41                                                                               373



                        
              Adjusted EBITDA before non-controlling interests                                                                                                                                                                       $
              36,618                                                                $
              30,608                                                                   $
              161,549                                                               $
              175,473


                        
              Adjusted EBITDA attributable to non-controlling interests(2)                                                                                                                                                                      (4,188)                                                                          (4,789)                                                                             (22,797)                                                                         (22,682)


                        
              Adjusted EBITDA per Credit Facility                                                                                                                                                                                    $
              32,430                                               
              $     
              25,819*                                                                  $
              138,752                                                  
              $ 
              152,791*



                        
              Adjusted EBITDA per Credit Facility, excluding impact from "Marvel's Inhumans"                                                                                                                                         $
              32,430                                               
              $     
              25,819*                                                                  $
              138,752                                                  
              $ 
              128,922*



                        
              Adjusted revenues attributable to common shareholders(3)                                                                                                                                                               $
              78,354                                                                $
              72,333                                                                   $
              342,232                                                               $
              352,434



                        
              Adjusted EBITDA margin                                                                                                                                                                                                     41.4
            %                                                                   35.7
            %                                                                       40.5
            %                                                                   36.6
            %





       * Adjusted EBITDA per Credit Facility of $25.8 million and $152.8 million for the three and twleve 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 twleve 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 twleve 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)                                                                                                  Three months ended                           Three months ended                    12 months ended                                     12 months ended
                                                                                                September 30, 2019                      September 30, 2018                 September 30, 2019                            September 30, 2018



           
      Total revenues                                                                                                                    $
              86,390                                                                  $
            82,108                          $
        380,349              $
         390,989


           
      Greater China revenues                                                                                          $
     26,557                                                                       $
      30,480                                          $
      121,366               $
       120,306


           
      Non-controlling interest ownership percentage(4)                                                                   30.26%                                                                          32.07%                                              31.41%                    32.05%



           
      Deduction for non-controlling interest share of revenues                                                                                     (8,036)                                                                          (9,775)                              (38,117)                   (38,555)


           
      Adjusted revenues attributable to common shareholders                                                                             $
              78,354                                                                  $
            72,333                          $
        342,232              $
         352,434






     (4) 
      Weighted average ownership percentage for change in non-controlling interest share



             
                Table 9:


                                                                          
              
                
                  IMAX CORPORATION
                                                                
                 Adjusted Net Income and Adjusted Diluted Per Share Calculations
                                                                               
                   (In thousands of U.S. dollars)
                                                                                         
                  (Unaudited)




                                                                  Three Months Ended                                       Three Months Ended


                                                                  September 30, 2019                                       September 30, 2018



                                                                      Net Income                                               Diluted EPS     Net Income   Diluted EPS




             Reported net income                                            $10,896                                                     $0.18       $7,502          $0.12



             Adjustments:



             Stock-based compensation                                         5,527                                                      0.09        5,562           0.08


              Change in fair value of equity investment                          490


              Tax impact on items listed above                               (1,984)                                                   (0.03)     (1,500)        (0.02)




             Adjusted net income                                             14,929                                                      0.24       11,564           0.18


              Net income attributable to non-
               controlling interests(1)                                      (1,863)                                                   (0.03)     (2,482)        (0.04)


              Stock-based compensation (net of tax of
               less than                                                       (106)                                                                 (75)
      $0.1 million and less than $0.1 million, respectively)(1)


              Change in fair value of equity
               investment(1)                                                   (149)


              Adjusted net income attributable to
               common shareholders                                           $12,811                                                     $0.21       $9,007          $0.14





              Weighted average diluted shares
               outstanding                                                                                                             61,479                     62,793







              (1) Reflects amounts attributable to non-
               controlling interests.




                                      Nine Months Ended                    Nine Months Ended


                                                        September 30, 2019                   September 30, 2018



                                                            Net Income                           Diluted EPS     Net Income   Diluted EPS



      Reported net income                                          $37,219                                 $0.61      $29,824          $0.47



     Adjustments:


      Stock-based compensation                                      16,916                                  0.27       17,165           0.26


      Exit costs, restructuring
       charges and associated
       impairments                                                     850                                  0.01        1,158           0.02


      Legal arbitration award                                                                                         7,500           0.12


      Change in fair value of
       equity investment                                             2,543                                  0.03


      Tax impact on items listed
       above                                                       (4,519)                               (0.06)     (5,287)        (0.08)



      Adjusted net income                                           53,009                                  0.86       50,360           0.79


      Net income attributable to
       non-controlling
       interests(1)                                                (8,524)                               (0.14)     (8,674)        (0.14)


      Stock-based compensation
       (net of tax of $0.1
       million and                                                   (368)                               (0.01)       (279)
       $0.1 million, respectively)(1)


      Change in fair value of
       equity investment                                             (801)                               (0.01)


      Adjusted net income
       attributable to common
       shareholders                                                $43,316                                 $0.70      $41,407          $0.65





      Weighted average diluted
       shares outstanding                                                                                61,509                     63,580









      (1) Reflects amounts
       attributable to non-
       controlling interests.



     
                Table 10:


                                 
           
                IMAX CORPORATION
                                     Free Cash Flow Calculation
                                   (In thousands of U.S. dollars)
                                             (Unaudited)




                                               Three Months                          Nine Months
                                                      Ended                                Ended


                                              September 30,                        September 30,
                                                      2019                                  2019





      Net cash provided
       by operating
       activities                                             $
             18,740                  $
           67,257


      Net cash used in
       investing
       activities                                                      (10,970)                        (53,654)


                  Free cash flow                                  $
             7,770                  $
           13,603

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SOURCE IMAX Corporation