IMAX Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Amounts are U.S. dollars unless stated otherwise. IMAX earns revenue from film remastering and box-office participation, theater-system sales and leases, maintenance, and content distribution. It generally does not own the theaters in its network.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $254.9 million | $137.0 million |
| Gross margin | $134.4 million; 52.7% of revenue | $21.5 million; 15.7% of revenue |
| Operating income (loss) | $11.0 million | $(121.8) million |
| Net loss attributable to common shareholders | $(22.3) million; $(0.38) per diluted share | $(143.8) million; $(2.43) per diluted share |
| Adjusted net loss attributable to common shareholders (non-GAAP) | $(8.4) million; $(0.14) per diluted share | $(112.1) million; $(1.89) per diluted share |
| Cash from (used in) operating activities | $6.1 million | $(23.0) million |
| Cash and cash equivalents at year-end | $189.7 million | $317.4 million |
Revenue increased 86% year over year as theaters reopened and film releases recovered. IMAX-film gross box office was $638.2 million, up 146% from 2020; fourth-quarter box office was $277.5 million, above the fourth quarter of 2019. Operating cash flow improved, but growth in accounts receivable used $52.5 million of cash. Capital expenditures, including equipment for joint revenue-sharing theaters, totaled $32.6 million.
At December 31, 2021, the balance sheet showed $189.7 million of cash, $2.5 million of net revolving-credit borrowings and $223.6 million of convertible notes, net of discounts and issuance costs. The notes have $230.0 million principal, a 0.500% coupon and mature in 2026. The company reported $300.0 million of available capacity under its Wells Fargo revolver and $26.2 million under its China working-capital facility. Management expected existing cash and operating cash flows to fund anticipated needs for the next 12 months.
Material changes and notable items
- Total revenue rose from $137.0 million to $254.9 million, while the attributable net loss narrowed substantially. IMAX Technology Network revenue increased to $116.8 million from $46.1 million; Technology Sales and Maintenance revenue rose to $126.8 million from $79.8 million.
- The network grew to 1,683 operating theater systems in 87 countries, from 1,650 in 84 countries. Installations were 75 versus 71; signings declined to 36 from 65. Backlog fell to 489 systems from 527.
- The company recorded a $4.0 million net reversal of credit-loss expense, versus an $18.6 million provision in 2020, reflecting improved outlook and collections. It recognized $6.3 million of maintenance revenue previously deferred amid pandemic-related fee relief.
- Income tax expense was $20.6 million despite pretax income of $11.0 million; the effective tax rate was 187.2%, primarily reflecting a $17.2 million increase in the deferred-tax valuation allowance. The allowance totaled $46.0 million at year-end.
- IMAX sold its Maoyan investment for $17.8 million, recording a $5.3 million investment gain in the financial statements. It paid $9.5 million to settle the Giencourt matter and reversed a remaining $1.8 million liability, recorded as a benefit.
- The company issued $230.0 million of convertible notes and used proceeds in part to repay revolving-credit borrowings. It repurchased $13.9 million of IMAX shares and $10.1 million of IMAX China shares during the year.
Outlook, risks and contingencies
Management described the return of moviegoers, strong fourth-quarter box office and a 2022 theatrical film pipeline as encouraging, but provided no quantified revenue or earnings guidance. The announced film slate and expected installation activity are subject to change. Management also highlighted laser-system upgrades, live and interactive theater events, and IMAX Enhanced home-entertainment offerings as areas of continued development.
- COVID-19 variants, renewed theater closures or capacity limits, film delays, and shifts toward streaming could again weaken box office, installations, collections and maintenance revenue. At year-end, 95% of commercial multiplex theaters were open, at varying capacities.
- Greater China generated approximately 44% of 2021 revenue and represented 44% of total theater backlog. China-related film-release regulation, currency controls, geopolitical tensions and local operating conditions pose material risks.
- Wanda represented 10% of revenue, 22% of the theater network and 4% of backlog. Long-term exhibitor payment obligations, customer concentration and the conversion of backlog into installations and cash remain risks.
- Credit-agreement amendments suspended the senior secured net leverage covenant through the first quarter of 2022 and added a $75 million minimum-liquidity covenant. The company said it was compliant at year-end; covenant limits and debt maturities remain relevant.
- The company reported a pending effort to enforce an arbitration award against E-City, calculated at $24.4 million including interest as of year-end; recovery is uncertain. The filing also identifies tax audits and other ordinary-course legal matters.
PwC issued an unqualified audit opinion and concluded internal control over financial reporting was effective. Critical audit matters included theater-system revenue recognition, uncertain tax positions and the allowance for credit losses.
Important facts for investors to verify
- Whether box-office recovery and theater attendance persist, particularly in Greater China, and whether the film slate reaches theaters on schedule.
- Collection trends in accounts and financing receivables, credit-loss allowances, and the conversion pace and quality of the 489-system backlog.
- Liquidity and covenant compliance after the temporary covenant provisions, including the $75 million minimum-liquidity requirement and revolver availability.
- The assumptions supporting deferred-tax asset recoverability, the $46.0 million valuation allowance, and the resolution of tax examinations and the E-City enforcement proceeding.