IMAX: How It’s Still Cashing In on the Movie Business

Key Points

• IMAX operates a global technology platform that provides enhanced cinematic experiences through licensing, revenue sharing, selling, designing, installing, upgrading and servicing its systems.
• IMAX has swung back to profitability with GAAP EPS of 46 cents in 2023 versus a GAAP loss of 40 cents in 2022.
• IMAX is experiencing growth outside the United States, notably in China, as Oppenheimer rakes in $19 million in revenues.

IMAX Co. NYSE: IMAX owns and operates a technology platform that specializes in enhancing cinematic experiences. Contrary to popular belief, IMAX doesn't operate cinemas or movie theaters. However, they do profit from the movie production and theater business. This is in contrast to the largest theater operator, AMC Entertainment Holdings Inc. NYSE: AMC, which has yet to earn a nickel since the pandemic.

IMAX is known for its super high-resolution screens that can stretch up to 59 feet by 79 feet, combined with cutting-edge audio that creates an immersive experience that viewers can't duplicate at home. While movie theaters are still trying to recover from the pandemic, IMAX is back in the green and continuing to grow its moat in the consumer discretionary sector.

Multiple Revenue Streams

The IMAX model is comprised of multiple revenue streams. The company licenses its technology to filmmakers, movie studios and streaming services. Major blockbuster motion pictures also tend to be filmed in IMAX, as theatres charge a premium for the experience. IMAX also collects recurring licensing fees from the number of IMAX theaters. IMAX earnings revenue from selling, leasing and installing the projection and sound systems and other specialized equipment. Most IMAX theaters have a box office revenue-sharing agreement with IMAX as they take a cut off the top of ticket sales.

Beyond Theaters

Beyond movie theatres, IMAX also offers giant screen installations for entertainment venues, including theme parks, museums and even high-end home theater systems. IMAX announced a new partnership to install 3 state-of-the-art IMAX with laser systems across key locations in India. IMAX has the world's largest movie screen, measuring 8,770 square feet, at the Traumplast Leonberg IMAX in Germany.

China is a Growth Driver

IMAX also announced the addition of three new locations in China through its partnership with Bona Film Group, slated to begin operations in 2026. China continues to be a growing segment for IMAX.

CEO Rich Gelfond commented, "As IMAX continues to expand further into Chinese films, local language releases from countries including Japan, and new experiences, it's clear that our value proposition for Chinese moviegoers and the opportunity for our business in China are strong." IMAX earned more than $19 million from Oppenheimer in China, while Dune 2 has earned over $15 million to date.

Q4 2023 Earnings Recap

IMAX reported Q4 2023 EPS of 17 cents, beating analyst estimates by 12 cents. Revenues fell 12.3% YoY to $86.02 million versus $85.83 million consensus analyst estimates. The company anticipated that the full-year 2024 box office gross would be consistent with 2023.

Recap of 2023 Turnaround Year

For the full year 2023, IMAX earned a GAAP EPS of 46 cents versus a loss of 40 cents in the full year 2022. The adjusted full-year EPS was 94 cents, up from just 6 cents the prior year. Net income was $25 million versus a loss of $23 million in the prior year. Systems sales activity grew 174% YoY with 129 worldwide signings as the company delivered 128 system installations. IMAX's global box office almost hit the previous record at $1.1 billion. Full-year cash from operations rose 3X to $59 million.

International is the Growth Driver

CEO Gelfond noted the international growth driver for IMAX as the company installed a record 61 systems from strategic Rest of World (ROW} markets, including Europe, Japan and South Korea. There's a long runway for growth as the current IMAX network only has a 47% penetration, leaving the door open for an additional 2,000 worldwide locations.

Low Bar Expectations for Q1 2024

IMAX is expected to earn 9 cents per share in its Q1 2024 earnings release on April 25, 2024, down from 16 cents per share in the year-ago period. Revenues are expected around $77.51 million.

Daily Cup Pattern

The IMAX daily candlestick chart illustrates a cup pattern. The cup lip line formed at the $17.64 swing high on its Q4 2023 earnings results on February 28, 2024. Shares fell back down to the $15.57 support, forming a rounding bottom as they staged a rally back up towards the cup lip line ahead of its Q1 2024 earnings release. The daily relative strength index (RSI) has gone flat at the 64-band. Pullback support levels are at $16.82, $15.96, $14.77 and $13.50.