Business context and reporting period
IMAX Corporation’s Form 10-K covers the fiscal year ended December 31, 2022; it is an annual report, not a standalone fourth-quarter filing. IMAX sells, leases and maintains premium theater systems and earns revenue from film remastering and box-office participation. It generally does not own the theaters in its network. At year-end, the network comprised 1,716 systems in 87 countries, including 1,633 commercial multiplex systems. IMAX indirectly owned 71.73% of publicly traded IMAX China.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $300.8 million | $254.9 million |
| Gross margin | $156.4 million; 52.0% of revenue | $134.4 million; 52.7% of revenue |
| Operating income (loss) | $(4.8) million | $11.0 million |
| Net loss attributable to common shareholders | $(22.8) million; $(0.40) per share | $(22.3) million; $(0.38) per share |
| Adjusted net income (loss), non-GAAP | $3.2 million; $0.06 per share | $(8.4) million; $(0.14) per share |
| Cash from operating activities | $17.3 million | $6.1 million |
| Cash and cash equivalents at year-end | $97.4 million | $189.7 million |
| Total assets / total liabilities | $821.2 million / $491.4 million | $883.2 million / $452.9 million |
Revenue rose 18% and gross margin rose 16%, driven mainly by stronger film box office and theater activity. The operating loss reflected, among other items, higher SG&A, credit-loss expense and a film investment impairment. Income tax expense was $10.1 million despite a pretax loss; a $16.9 million deferred-tax valuation allowance was a major factor.
IMAX-generated gross box office was $849.7 million, up 33% from $638.2 million. Operating cash flow improved, but cash declined by $92.3 million after investing and financing outflows. Investing cash use was $53.3 million, including SSIMWAVE acquisition costs and equipment for joint revenue-sharing theaters; financing cash use was $58.5 million, including substantial share repurchases.
At year-end, reported borrowings included $230.0 million principal of 0.500% convertible notes due 2026, $25.0 million drawn on the Wells Fargo facility, and borrowings under China facilities. The balance sheet carried $36.1 million of net revolving-facility borrowings and $226.9 million of convertible notes and other borrowings. The filing also cites $413.2 million of consolidated indebtedness and liabilities, a broader measure. Available borrowing capacity was $275.0 million under the Wells Fargo facility, $26.9 million under the Bank of China facility, and $16.2 million under the HSBC China facility. The company reported compliance with the Wells Fargo leverage covenant.
Material changes versus the prior comparable period
- IMAX DMR revenue increased 34% to $94.9 million, and joint-revenue-sharing contingent rent increased 34% to $61.8 million, reflecting higher box office.
- Technology sales and maintenance revenue increased 3% to $130.6 million, while its gross margin declined slightly. System revenue fell 4%, partly because fewer systems were installed under sale and sales-type lease arrangements.
- Film Distribution and Post-Production revenue increased 21% to $6.9 million, but the category recorded a $6.1 million gross margin loss, largely reflecting costs of documentary and live-event content and the connected network.
- SG&A rose 18% to $138.0 million. Management cited increased activity and staffing, marketing, foreign-exchange effects, lower COVID relief benefits, and SSIMWAVE-related expenses.
- System installations increased to 92 from 75, but signings rose to 47 from 36 and backlog declined to 450 systems from 489. Backlog included 162 sale or lease systems and 288 joint-revenue-sharing systems.
- Cash fell from $189.7 million to $97.4 million. IMAX repurchased approximately $82.0 million of its own shares during 2022; IMAX China repurchased a further $3.0 million.
Outlook, management commentary, risks and unusual items
Management gave no specific numeric revenue or earnings guidance in the supplied filing text. It said current cash balances and operating cash flows were expected to cover anticipated operating needs and capital requirements for the twelve months following the report date. Management pointed to the improving box office trend, relaxed China restrictions, a 2023 theatrical film pipeline and the return of exclusive theatrical windows. These are expectations, not guarantees.
- China and COVID-19: Greater China generated 24% of 2022 revenue, down from 44% in 2021, amid temporary theater closures and capacity restrictions. About 97% of the Greater China network was open at year-end, at varying capacities; a further 204 systems were in backlog.
- Russia-Ukraine conflict: IMAX suspended operations in Russia and Belarus in March 2022, recorded credit-loss provisions against substantially all Russian receivables, and stopped accruing certain maintenance revenue and finance income for affected exhibitors. The year-end backlog included 20 systems in Russia, Ukraine and Belarus with $22.9 million of fixed contracted value.
- Credit and exhibitor risk: Cineworld, parent of Regal, entered Chapter 11. IMAX reported an $11.4 million pre-petition unsecured claim and had received $7.2 million under a payment plan by February 20, 2023. Management said no additional expected-credit-loss provision was required, while noting the bankruptcy outcome was not assured.
- Unusual items: The company recorded $8.5 million of net credit-loss expense, including Russia-related reserves; a $4.5 million impairment of its investment in the film Mozart from Space; and a $16.9 million deferred-tax valuation allowance. The Russia credit-loss provision was described as $6.9 million on a non-cash, per-share basis in management’s adjusted-results discussion.
- SSIMWAVE: Acquired in September 2022 for stated consideration of $23.2 million, including cash, shares and contingent consideration. The company is pursuing recurring revenue from AI-driven video-quality technology; post-acquisition revenue and earnings were not material in 2022.
- Other risks: Results depend on film availability and box-office performance, theater installations and customer payments, international operations and currency movements, competition from other premium formats and streaming, and the conversion of backlog into revenue. The company also cited cybersecurity, intellectual-property, supply-chain, inflation, tax and debt-covenant risks.
The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. SSIMWAVE was excluded from the internal-control assessment because of its 2022 acquisition; its assets represented approximately 3% and its revenue less than 1% of consolidated amounts.
Most important facts for investors to verify
- Whether box-office recovery, film releases and China theater activity support continued growth in DMR and joint-revenue-sharing income.
- Whether the 450-system backlog converts to installations and cash collections, and how the decline from 489 systems affects future growth.
- Collections from Cineworld and other exhibitors, the adequacy of credit-loss reserves, and exposure to Russia, Ukraine and Belarus.
- Liquidity after buybacks and investment spending, actual borrowing levels, and continued compliance with debt covenants.
- Whether SSIMWAVE achieves its commercial milestones and recurring-revenue objectives, and whether its acquisition-related integration and valuation assumptions hold.
- The sustainability of non-GAAP adjusted profitability given GAAP net losses, substantial share-based compensation, tax valuation allowances and other unusual charges.