IMAX Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unless otherwise noted, amounts are in U.S. dollars. Results remain heavily affected by COVID-19 theater closures, capacity limits and delayed film releases.
Business context and operating conditions
IMAX earns revenue from film remastering and distribution, theater-system sales and leases, maintenance, and box-office-linked joint revenue-sharing arrangements. At quarter-end, 77% of its global commercial multiplex network was open: 97% in Greater China, 66% in the United States and Canada, and 52% in other markets. Greater China generated 66% of quarterly revenue.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $38.8 million | $34.9 million; up 11% |
| Gross margin | $17.3 million (44.6%) | $5.1 million (14.6%) |
| Loss from operations | $10.8 million | $38.4 million |
| Net loss attributable to common shareholders | $14.8 million; $0.25 per share | $49.4 million; $0.82 per share |
| Operating cash flow | $(11.0) million | $6.0 million provided |
| Cash and cash equivalents | $267.8 million at March 31 | $317.4 million at December 31, 2020 |
| Debt balances | $45.0 million credit-facility borrowings; $7.6 million working-capital borrowings; $230.0 million convertible notes principal | Credit-facility borrowings were $300.0 million at December 31, 2020; no convertible notes then outstanding |
Quarterly revenue and segment margins improved as theaters reopened and box-office receipts increased, especially in Greater China. The $5.2 million investment gain associated with the February sale of Maoyan shares supported pretax results; the company received $17.8 million in proceeds. Interest expense rose to $2.3 million from $0.6 million. Operating cash use primarily reflected a $13.7 million increase in accounts receivable.
Material changes and financing
- IMAX issued $230.0 million of 0.500% convertible senior notes due April 2026, receiving approximately $223.7 million net of initial discounts and commissions. It repaid $255.0 million of revolving-credit borrowings and spent $19.1 million on capped calls intended to reduce potential dilution, subject to a cap.
- The credit agreement amendment suspended the senior secured net leverage covenant through Q1 2022 and added a $75.0 million minimum-liquidity covenant. The company reported compliance with the amended agreement at quarter-end.
- Revenue from IMAX DMR films was $11.9 million, versus $10.6 million; joint-revenue-sharing contingent rent was $8.4 million, versus $6.0 million. DMR box office increased 16% year over year to $110.2 million.
- The company reported $11.3 million accrued for a Giencourt arbitration judgment and appealed the judgment in January 2021.
Outlook, commentary and risks
Management stated it expected available cash and operating cash flows to fund anticipated operating needs and capital requirements for the 12 months following the filing. The filing provides no quantified revenue or earnings guidance. Management cited improving attendance in parts of Asia, accelerating U.S. vaccine distribution and a strong expected Hollywood film pipeline for the second half of 2021, while stressing continued uncertainty.
Key risks include renewed theater closures or capacity restrictions, delayed or streaming-first film releases, weak consumer spending, installation delays, exhibitor financial distress and slower collection of receivables. Management warned that uncertainty could lead to further credit losses, asset impairments, deferred-tax valuation allowances or reversals of estimated box-office-related receivables. The company also disclosed a $7.0 million Q1 valuation allowance charge against deferred tax assets. A single customer represented 31.2% of quarterly revenue.
After quarter-end, CFO Patrick McClymont announced his resignation effective May 14, 2021; Joseph Sparacio agreed to serve as interim CFO beginning June 1, with compensation terms not yet finalized. The board also extended the share-repurchase program through June 30, 2022; no shares were repurchased in Q1.
Investor facts to verify
- Whether theater reopenings, attendance and film releases translate into sustained box-office-based revenue and operating cash flow.
- Receivable collection trends, exhibitor credit quality and compliance with the $75.0 million minimum-liquidity covenant.
- Conversion of the 521-system backlog into installations and revenue, including customer concentration and China exposure.
- Convertible-note conversion, dilution and capped-call counterparty risks, alongside debt maturities and financing needs.
- Developments in the Giencourt appeal, deferred-tax asset recoverability and the CFO transition.