Imax (IMAX) Down 5.6% Since Last Earnings Report: Can It Rebound?
Imax (IMAX) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
A month has gone by since the last earnings report for Imax (IMAX). Shares have lost about 5.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Imax due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
IMAX's Q2 Loss Narrower Than Expected, Revenues Increase Y/Y
IMAX Corporation reported second-quarter 2021 adjusted loss of 12 cents per share, which was much narrower than the Zacks Consensus Estimate of a loss of 27 cents and loss of 44 cents per share in the year-ago quarter.
Total revenues of $51 million beat the Zacks Consensus Estimate by 13.3% and surged 475.4% from the year-ago quarter.
As of Jun 30, 2021, 89% of the theaters in the global IMAX commercial multiplex network were open, spanning 62 countries. This included 93% of the theaters in domestic (United States and Canada) locations, 90% of the theaters in Greater China and 75% of the theaters in Rest of World markets.
Category-wise, technology sales, Image Enhancement & Maintenance Services and financial income were up 464.7%, 550.5% and 17.4% year over year to $15.2 million, $24.7 million and $2.9 million, respectively. Technology rentals generated revenues of $8.1 million.
IMAX Technology Network Business
IMAX technology network business revenues were $19.7 million, up from $0.4 million reported in the year-ago quarter, due to an improvement in IMAX DMR revenues.
Within the segment, IMAX DMR revenues increased from $0.5 million in the year-ago quarter to $11.8 million. The continued reopening of the company's network, particularly in the United States, and strong performance of Hollywood releases drove the increase in gross box office and revenues.
IMAX delivered global box office of $108.6 million for the second quarter driven by the initial return of Hollywood blockbuster releases and a significant rebound in the domestic box office.
For the second quarter of 2021, global box office (GBO) was generated primarily by the exhibition of 17 IMAX DMR films (14 new and 3 carryovers) including six local language films in China and Japan, and the re-release of classic titles. In the second quarter of 2020, GBO had been generated by the exhibition of 1 new film and the re-release of classic titles.
Joint revenue sharing arrangements-contingent rent increased from ($0.1 million) in the year-ago quarter to $7.9 million.
As of Jun 30, 2021, the company signed traditional and hybrid joint revenue sharing agreements with 42 exhibitors for a total of 1,226 IMAX Theater Systems, of which 897 theaters were operational and included in the network as of that date.
IMAX Technology Sales & Maintenance
IMAX’s technology sales & maintenance business generated revenues of $28.7 million, up 522.7% year over year attributed to a recovery in pace of theater system installations and higher IMAX mmaintenance sales associated with the continued reopening of IMAX global network.
Within this segment, IMAX systems revenues increased 251.3% from the year-ago quarter to $16 million. IMAX maintenance revenues increased to $11.2 million due to the continued reopening of the IMAX network.
Moreover, joint revenue sharing arrangements-fixed fees were $1 million, up 171.5% year over year. Other theater revenues were $0.5 million in the reported quarter.
New Business & Others
New Business generated revenues of $0.6 million, up 2.5% year over year. Film distribution and post-production generated revenues of $1.6 million, down 50% year over year.
Network Growth Statistics
As of Jun 30, 2021, there were 1,654 IMAX Theater Systems operating in 85 countries and territories, including 1,569 commercial multiplexes, 12 commercial destinations and 73 institutional locations. This compares with 1,615 IMAX Theater Systems operating in 81 countries and territories as of Jun 30, 2020 including 1,527 commercial multiplexes, 13 commercial destinations and 75 institutional locations.
Greater China is the company’s largest market, measured by revenues, with 60% of overall revenues generated from Greater China operations in the first half of 2021.
As of Jun 30, 2021, the company had 759 theaters operating in Greater China with an additional 237 theaters in backlog that are scheduled to be installed by 2028. The company’s backlog in Greater China represents 46.1% of its total current backlog, including upgrades.
The company’s largest single international partnership is in China with Wanda Film (“Wanda”). Wanda’s total commitment to the company is for 363 IMAX Theater Systems in Greater China, of which 357 IMAX theater Systems are under the parties’ joint revenue-sharing arrangement.
IMAX installed 16 systems and signed agreements for eight systems in the quarter, demonstrating continued partner demand for IMAX theater systems despite the temporary delay in major theatrical releases.
As of Jun 30, 2021, the company’s backlog included 146 new IMAX with Laser systems and 91 upgrades to IMAX with Laser systems.
Gross margin expanded from (86.8%) in the year-ago quarter to 50.2% in second-quarter 2021.
Adjusted EBITDA per credit facility was $8.7 million versus ($18.5 million) in the year-ago period.
Selling, general & administrative (SG&A) expenses decreased 3.3% year over year to $28.8 million.
Research & development (R&D) expenses increased 78.6% on a year-over-year basis to $2.2 million.
Operating loss margin contracted from (468.7%) in the year-ago quarter to (5.8%) in the reported quarter.
Balance Sheet & Cash Flow
As of Jun 30, 2021 the company had $214.1 million in cash and cash equivalents compared with $267.8 million as of Mar 31, 2021. Total debt, excluding deferred financing fees, was $241 million as of Jun 30, 2021 compared with $283 million as of Mar 31, 2021.
Cash flow used in operating activities was $6.06 million compared with $10.9 million used in the prior quarter.
Negative free cash flow was $8.9 million compared to free cash flow of $3.3 million in the prior quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -54.17% due to these changes.
At this time, Imax has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Imax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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