IMAX Corporation — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are U.S. dollars; financial figures below are in millions unless noted. IMAX operates a global premium cinema technology and content network. COVID-related theater closures and film delays continued to affect results, although reopening and box-office recovery improved performance.
Financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $56.6 | $37.3 | $146.3 | $81.0 |
| Gross margin | $27.5 | $3.8 | $70.4 | $1.2 |
| Operating loss | $(0.9) | $(27.4) | $(14.7) | $(107.3) |
| Net loss attributable to common shareholders | $(8.4) | $(47.2) | $(32.4) | $(122.5) |
| Loss per diluted share | $(0.14) | $(0.80) | $(0.55) | $(2.06) |
- Q3 revenue rose 52%; nine-month revenue rose 81%. Gross margin improved substantially as theaters reopened, film releases resumed and impairment charges recorded in 2020 did not recur.
- Q3 adjusted net loss was $5.0 million, or $0.08 per diluted share; nine-month adjusted net loss was $26.8 million, or $0.45 per share. These are non-GAAP measures.
- Cash used in operations was $19.6 million for the first nine months, versus $30.8 million in 2020. Investing activities provided $6.7 million, including $17.8 million from the Maoyan investment sale; financing activities used $110.5 million.
- Cash and equivalents were $193.0 million at quarter-end, down from $317.4 million at December 31, 2020. Current assets were $523.0 million and current liabilities were approximately $209.8 million.
- Debt included $230.0 million face value of 0.5% convertible notes due 2026 (carrying value $223.3 million) and $11.0 million outstanding under the China working-capital facility. The $300.0 million revolving credit facility was undrawn. The filing separately reports approximately $354.9 million of consolidated indebtedness; the text does not clearly reconcile that figure to the balance-sheet debt amounts.
Material changes and operating trends
- IMAX DMR box-office receipts were $141.9 million in Q3 and $360.7 million year to date, increases of 102% and 115%, respectively, over the comparable 2020 periods. September receipts approximated pre-pandemic levels; management said October receipts had exceeded the prior October record.
- At September 30, 93% of the global commercial multiplex network was open at varying capacities: 100% in the U.S. and Canada, 93% in Greater China and 87% in other markets.
- Maintenance revenue increased to $13.1 million in Q3 from $5.9 million, and to $33.2 million year to date from $13.2 million. System installations were 17 in Q3 and 45 year to date.
- Credit-loss expense reversed by $3.3 million in Q3 and $4.9 million year to date, compared with provisions of $3.9 million and $15.6 million in 2020, reflecting improved expected collections and theater-operator outlook.
- The company sold its Maoyan shares for $17.8 million in February, recording $5.2 million of gain relative to year-end 2020 fair value. It also settled the Giencourt dispute: paid $9.5 million and reversed a remaining $1.8 million liability, recorded as a benefit.
- Backlog was 506 theater systems, with approximately $314.6 million of stated dollar value. The company installed 45 systems and signed 25 during the first nine months.
Liquidity, outlook and risks
- Management said cash balances and expected operating cash flows should be sufficient for anticipated operating needs and capital requirements during the next 12 months. Liquidity sources also included $300.0 million of revolving capacity and $18.3 million available under the China working-capital facility.
- Credit amendments suspend the senior secured net leverage covenant through Q1 2022 and impose a $75.0 million minimum-liquidity covenant. Other restrictions apply to certain payments, investments, liens and debt. IMAX reported compliance at September 30, 2021.
- Management was encouraged by theater reopenings, box-office recovery, exclusive theatrical windows and the scheduled 2021–2022 film slate. Release dates, attendance and recovery remain uncertain; the filing provides no formal financial guidance.
- COVID-19 remains a key risk through possible renewed closures or capacity limits, film delays, weaker consumer demand, exhibitor financial distress, payment delays and delayed or cancelled installations. These conditions could affect receivable collection, asset recoverability, cash flow and liquidity.
- Other material risks include dependence on Greater China, foreign exchange movements, backlog conversion, competition and technology changes, debt covenants and potential dilution from convertible notes. A $14.2 million year-to-date increase in the deferred-tax valuation allowance reflected uncertainty about future taxable income.
- Q3 income tax expense was $4.4 million despite a pretax loss; management cited valuation allowances and jurisdictional tax effects. The company also received $5.5 million in COVID-related government relief benefits during the first nine months.
Important facts for investors to verify
- Whether box-office improvement, theater openings and the announced film schedule translate into sustained revenue and positive operating cash flow.
- The collectibility of theater-operator and studio receivables, including financing receivables and the exposure to customers under credit watch or transactions-suspended status.
- The reconciliation and definition of the filing’s stated $354.9 million of consolidated indebtedness versus reported convertible-note and working-capital-facility balances.
- Compliance with the amended credit agreement, including the monthly minimum-liquidity covenant and covenant requirements after the suspension period.
- Backlog conversion, installation timing and Greater China concentration; Greater China represented 52% of nine-month revenue.
- Potential tax, impairment and dilution effects, including valuation allowances, convertible-note conversion terms and capped-call counterparty exposure.