IMAX
$12.23
Imax
$.43
3.64%
Earnings Details
2nd Quarter June 2020
Tuesday, July 28, 2020 4:05:00 PM
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Summary

Imax (IMAX) Recent Earnings

Imax (IMAX) reported a 2nd Quarter June 2020 loss of $0.54 per share on revenue of $8.9 million. The consensus estimate was a loss of $0.57 per share on revenue of $15.1 million. Revenue fell 91.6% compared to the same quarter a year ago.

Imax Corp is an entertainment technology company, specializing in motion picture technologies and large-format motion picture presentations.

Results
Reported Earnings
($0.54)
Earnings Whisper
-
Consensus Estimate
($0.57)
Reported Revenue
$8.9 Mil
Revenue Estimate
$15.1 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

IMAX Corporation Reports Second Quarter 2020 Results

NEW YORK, July 28, 2020 /PRNewswire/ --  

HIGHLIGHTS

  • 409 IMAX® theaters reopened in China over the July 24th weekend. The Company now has 624 theaters or approximately 40% of its global network generating revenue and is ready to benefit from an IMAX-friendly slate
  • A strong balance sheet, with $319 million in consolidated cash as of June 30, 2020, and an amended credit agreement, with covenant flexibilty through Q3 2021, positions the Company well to manage through the ongoing COVID-19 related challenges
  • Cost reduction measures taken at the outset of the pandemic reduced the Company's average monthly cash burn to approximately $10 million, as demonstrated by the second quarter and in line with previous guidance
  • IMAX signed agreements to add 29 theater systems, headlined by the international 17-theater CGV and 10-theater Wanda deals, demonstrating continued global demand for The IMAX Experience® from existing partners in established markets
  • As a result of the global pandemic, second quarter 2020 revenue decreased 92% versus 2019 to $8.9 million. Second quarter 2020 net (loss) attributable to common shareholders was ($26) million. Non-GAAP adjusted EBITDA (loss) was ($18.5) million versus $41.4 million in the prior-year period

 


Three Months Ended



June 30,


In thousands except per share data

2020



2019



YoY %
Change


Total Revenue

$

8.9



$

104.8




(91.6)

%













(Margin Loss) Gross Margin

$

(7.7)



$

59.6




(112.9)

%

(Margin Loss) Gross Margin (%)


(86.8)

%



56.8

%

















Net (Loss) income attributable to common shareholders

$

(26.0)



$

11.4



N/A


Diluted Net (Loss) income per share attributable to common shareholders

$

(0.44)



$

0.19



N/A


Adjusted Net (Loss) Income(1)

$

(26.1)



$

19.7



N/A


Adj. Net (Loss) Income Per Share(1)

$

(0.44)



$

0.32



N/A














Adjusted EBITDA per Credit Facility attributable to common shareholders(1)

$

(18.5)



$

41.4



N/A


Adj. EBITDA Margin attributable to common shareholders (%) (1)


(219.3)

%



43.8

%


N/A


_____________

(1)  Non-GAAP Financial Measure


Note: For the definition and reconciliations of reported results to non-GAAP financial results, please refer to the discussion of non-GAAP financial measures at the end of this earnings release.

IMAX Corporation (NYSE:IMAX) today reported second quarter 2020 revenues of $8.9 million, gross margin (loss) of ($7.7) million, and a net (loss) attributable to common shareholders of ($26.0) million, or ($0.44) per diluted share. For reconciliations of reported results to non-GAAP financial results, please see the end of this press release.

Results in the second quarter reflect the closure of substantially all of the theaters in the Company's global network driven by the Coronavirus pandemic. These closures reduced IMAX Technology Network and IMAX Maintenance revenue to essentially zero and caused a margin loss for the quarter. During the second quarter, the Company accrued $3.2 million in payroll subsidies and tax credits from the Canadian and US governments as part of their COVID-19 relief programs which benefitted SG&A expense, cost of sales, and R&D expense.

"As the only global theatrical platform for blockbuster entertainment, IMAX is uniquely advantaged as theaters begin to reopen on a rolling basis throughout the world. Our model gives us the flexibility to reopen where safe, program locally relevant content to maximize revenues, and play a leadership role as the industry returns," said IMAX CEO Richard L. Gelfond.

"We are seeing early signs of progress, with approximately 40% of our global network currently generating revenue. This includes 409 IMAX® theaters in China, which are scheduled to debut Hollywood and local language films over the coming weeks. Additionally, the South Korean blockbuster "Peninsula" continues to perform well across markets in Asia and Europe, drawing $26.5 million in global box office despite capacity limitations and highlighting solid demand among moviegoers in lower-risk markets worldwide."

"We believe that our solid financial position gives IMAX the strength to be ready as the rest of our network comes back online. At the end of the second quarter, the Company had $319 million in consolidated cash and recently amended its credit agreement for increased financial flexibility through September 2021."

"We continue to look ahead to an exceptionally strong slate through 2021, as studios affirm their commitment to the theatrical release by rescheduling their key blockbuster titles. Additionally, major global exhibitors continue to underscore the value of The IMAX Experience, with new agreements including a 10-theatre deal with Wanda Film in China and a multinational 17-theatre deal with CGV."

"We remain unwavering in our stance that the health and safety of audiences must be the priority as theaters reopen and we support by the work of local governments and our partners to put public health first."

Second Quarter and June Year-to-Date Segment Results(1)


IMAX Technology Network



IMAX Technology Sales and Maintenance



Revenue



(Margin
Loss) Gross

Margin



(Margin
Loss) Gross

Margin %



Revenue



Gross

Margin



Gross

Margin %


2Q20

$

0.4



$

(6.5)



N/A



$

4.6




$

0.2




4.9

%

2Q19

64.8




43.3




66.8

%


34.8





15.4




44.1

%

% change


(99.4)

%



(115.1)

%







(86.8)

%




(98.5)

%






























YTD 2Q20

$

17.0



$

(3.7)




(21.8)

%


$

19.7




$

5.0




25.1

%

YTD 2Q19

110.8




75.0




67.7

%



65.0





28.5




43.8

%

% change


(84.7)

%



(104.9)

%







(69.7)

%




(82.6)

%
































(1)  Please refer to the Company's Form 10-Q for the period ended June 30, 2020 for additional segment information

IMAX Technology Network

  • IMAX Technology Network revenues decreased 99% to $0.4 million in the second quarter of 2020, compared to $64.8 million in the prior-year period. The closure of the Company's network due to the COVID-19 pandemic impacted results.
  • Margin (loss) for the IMAX Technology Network was ($6.5) million in the second quarter of 2020 and was driven by the lack of revenue and ongoing fixed costs associated with our installed IMAX network.

 IMAX Technology Sales and Maintenance

  • IMAX Technology Sales and Maintenance revenues decreased 87% to $4.6 million in the second quarter of 2020, compared with $34.8 million in the prior year period. Seven fewer sales type lease installations principally resulted in lower IMAX system revenue. IMAX maintenance revenue declined to nil as regular maintenance services were suspended due to the COVID-19 theater closures.
  • Total gross margin for IMAX Technology Sales and Maintenance was $0.2 million compared to $15.4 million in the prior year period. Lower revenue was partially offset by the shift in certain overhead costs from cost of sales to SG&A.

Cash Balances and Outstanding Debt

Total cash and cash equivalents as of June 30, 2020 were $319 million. Total debt was $300.2 million as of June 30, 2020.

Share Count and Capital Return

  • The weighted average diluted shares outstanding at the end of the second quarter of 2020 declined 4.4% to 58.8 million, compared to 61.5 million in the second quarter of 2019, due primarily to share repurchase activity during the twelve-month period. During the second quarter of 2020, the Company did not repurchase any stock. A total of $89.4 million remains available under the Company's outstanding share repurchase authorization, which was extended in June and now expires in June 2021.
  • During the second quarter of 2020, IMAX China repurchased a total of 423 thousand shares at an average price of $1.50 for a total value of approximately $640 thousand.

Supplemental Materials

For more information about the Company's results, please refer to the IMAX Investor Relations website located at investors.imax.com.

Investor Relations Website and Social Media

On a weekly basis, the Company posts quarter-to-date box office results on the IMAX Investor Relations website located at investors.imax.com. The Company expects to provide such updates on Friday of each week, although the Company may change this timing without notice. Results will be displayed with a one-week lag.

The information posted on the Company's corporate and Investor Relations website may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company's website in addition to the Company's press releases, SEC filings and public conference calls and webcasts.

Conference Call

The Company will host a conference call today at 4:30PM ET to discuss its second quarter 2020 financial results. This call is being webcast by PGI and can be accessed at investors.imax.com. To access the call via telephone, interested parties in the US and Canada should dial (800) 367-2403 approximately 5 to 10 minutes before the call begins. Other international callers should dial (647) 490-5367. The conference ID for the call is 9071085. A replay of the call will be available via webcast at investors.imax.com or via telephone by dialing (888) 203-1112 (US and Canada), or (647) 436-0148 (international). The Conference ID for the telephone replay is 9071085.

About IMAX Corporation

IMAX, an innovator in entertainment technology, combines proprietary software, architecture and equipment to create experiences that take you beyond the edge of your seat to a world you've never imagined. Top filmmakers and studios are utilizing IMAX theaters to connect with audiences in extraordinary ways, and, as such, IMAX's network is among the most important and successful theatrical distribution platforms for major event films around the globe.

IMAX is headquartered in New York, Toronto, and Los Angeles, with additional offices in London, Dublin, Tokyo, and Shanghai. As of June 30, 2020, there were 1,615 IMAX theater systems (1,527 commercial multiplexes, 13 commercial destinations, 75 institutional) operating in 81 countries and territories. Shares of IMAX China Holding, Inc., a subsidiary of IMAX Corporation, trade on the Hong Kong Stock Exchange under the stock code "HK.1970."

IMAX®, IMAX® Dome, IMAX® 3D, IMAX® 3D Dome, Experience It In IMAX®, The IMAX Experience®, An IMAX Experience®, An IMAX 3D Experience®, IMAX DMR®, DMR®, IMAX nXos® and Films to the Fullest®, are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Instagram (https://www.instagram.com/imax), Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).

For additional information please contact:

Investors:
IMAX Corporation, New York
Brett Harriss
212-821-0187
bharriss@IMAX.com

Media:
IMAX Corporation, New York
Mark Jafar
212-821-0102
mjafar@imax.com

Forward-Looking Statements

This earnings release contains forward looking statements that are based on IMAX management's assumptions and existing information and involve certain risks and uncertainties which could cause actual results to differ materially from future results expressed or implied by such forward looking statements. Important factors that could affect these statements include, but are not limited to, references to future capital expenditures (including the amount and nature thereof), business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, plans and references to the future success of IMAX Corporation together with its consolidated subsidiaries (the "Company") and expectations regarding the Company's future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada; risks related to the Company's growth and operations in China; the performance of IMAX DMR® films; the signing of theater system agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates; competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to recent consolidation among commercial exhibitors and studios; risks related to new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the Company's inability to protect the Company's intellectual property; general economic, market or business conditions; the failure to convert theater system backlog into revenue; changes in laws or regulations; the failure to fully realize the projected cost savings and benefits from any of the Company's restructuring initiatives; the impact of COVID-19 on our financial condition and results of operations and on the businesses of our customers and exhibitor partners;  and other factors, many of which are beyond the control of the Company. These factors, other risks and uncertainties and financial details are discussed in IMAX's most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Primary Reporting Groups

The Company has the following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing Arrangements; (iii) IMAX Systems, (iv) IMAX Maintenance; (v) Other Theater Business; (vi) New Business Initiatives; (vii) Film Distribution; and (viii) Film Post-production. The Company organizes its reportable segments into the following four categories, identified by the nature of the product sold or service provided:

(i)

IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the Joint Revenue Sharing Arrangement ("JRSA") segment;



(ii)

IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance and Other Theater Business segments, as well as fixed revenues from the JRSA segment;



(iii)

New Business Initiatives, which is a segment that includes activities related to the exploration of new lines of business and new initiatives outside of the Company's core business; and



(iv)

Film Distribution and Post-production, which includes activities related to the licensing of film content, the distribution of films primarily for the Company's institutional theater partners (through the Film Distribution segment) and the provision of film post-production and quality control services (through the Film Post-production segment).

 

Signings and Installations



Three Months

Ended June 30,



Theater System Signings:

2020




2019



Full new sales and sales-type lease arrangements


12





7



New hybrid joint revenue sharing lease arrangements


17





45



New traditional joint revenue sharing arrangements


-





2



Total new IMAX theaters


29





54



Upgrades of IMAX theater systems


-





19



  Total theater signings


29





73














Three Months

Ended June 30,



Theater System Installations:

2020




2019



Full new sales and sales-type lease arrangements


2





9



New hybrid joint revenue sharing lease arrangements


1





5



New traditional joint revenue sharing arrangements


-





13



Total new IMAX theaters


3





27



Upgrades of IMAX theater systems






8



Total theater installations


3





35














Three Months

Ended June 30,



Theater Sales Backlog:

2020




2019



Sales and sales-type lease arrangements


190





182



Hybrid JRSA


154





154



Traditional JRSA


215


(1)



276


(1)

Total theater backlog


559


(2)



612


(3)












Three Months

Ended June 30,



Theater Network:

2020




2019



Commercial Multiplex Theaters:










  Sales and sales-type lease arrangements


659





619



  Hybrid joint revenue sharing lease arrangements


138





133



  Traditional joint revenue sharing lease arrangements


730





693



Total Commercial Multiplex Theaters(4)


1,527





1,445



  Commercial Destination Theaters


13





15



  Institutional Theaters


75





81



Total theater network


1,615





1,541




(1)   Includes 46 IMAX Theater Systems where the customer has the option to convert from a joint revenue sharing arrangement to a sales arrangement (2019 — 60).

(2)  Includes 154 new IMAX with Laser projection system configurations and 94 upgrades of existing locations to IMAX with Laser projection system configurations.

(3)  Includes 139 new IMAX with Laser projection system configurations and 118 upgrades of existing locations to IMAX with Laser projection system configurations.

(4)   Period to period changes are net of the effects of permanently closed theaters.          

 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except per share amounts)

(Unaudited)




Three Months Ended



Six Months Ended




June 30,



June 30,




2020



2019



2020



2019


Revenues
















Technology sales

$

2,687



$

19,694



$

8,349



$

34,894


Image enhancement and maintenance services


3,799




56,662




24,520




100,809


Technology rentals


(137)




25,863




5,834




44,033


Finance income


2,506




2,578




5,054




5,259





8,855




104,797




43,757




184,995


Costs and expenses applicable to revenues
















Technology sales


2,546




11,939




6,415




21,374


Image enhancement and maintenance services


7,244




26,781




25,060




46,024


Technology rentals


6,753




6,524




14,884




12,904





16,543




45,244




46,359




80,302


(Margin loss) gross margin


(7,688)




59,553




(2,602)




104,693


Selling, general and administrative expenses


29,796




32,136




58,432




59,785


Research and development


1,232




1,222




3,432




2,358


Amortization of intangibles


1,344




1,218




2,665




2,293


Credit loss expense


1,440




927




11,657




1,358


Asset impairments


-




-




1,151




-


Exit costs, restructuring charges and associated impairments


-




-




-




850


(Loss) income from operations


(41,500)




24,050




(79,939)




38,049


Gain (loss) in fair value of equity investment


2,025




(4,544)




(2,514)




(2,053)


Retirement benefits non-service expense


(130)




(160)




(246)




(320)


Interest income


891




572




1,256




1,142


Interest expense


(1,581)




(636)




(2,229)




(1,317)


(Loss) income before taxes


(40,295)




19,282




(83,672)




35,501


Income tax benefit (expense)


10,248




(5,308)




(5,257)




(8,956)


Equity in losses of investees, net of tax


-




(138)




(529)




(222)


Net (loss) income


(30,047)




13,836




(89,458)




26,323


Less: Net loss (income) attributable to non-controlling interests


4,080




(2,439)




14,137




(6,661)


Net (loss) income attributable to common shareholders

$

(25,967)



$

11,397



$

(75,321)



$

19,662


Net (loss) income per share attributable to common shareholders - basic and diluted:
















Net (loss) income per share — basic and diluted

$

(0.44)



$

0.19



$

(1.26)



$

0.32



















Weighted average number of shares outstanding (000's):

















Basic


58,808




61,331




59,613




61,354



Fully Diluted


58,808




61,507




59,613




61,525


Additional Disclosure:
















Depreciation and amortization(1)

$

11,930



$

15,593



$

27,182



$

29,804



(1)   Includes $0.2 million and $0.3 million of amortization of deferred financing costs charged to interest expense for the three months and six months ended June 30, 2020, respectively ($0.1 million and $0.2 million, respectively).

 

IMAX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

In accordance with United States Generally Accepted Accounting Principles

(In thousands of dollars, except share amounts)

(Unaudited)



June 30,



December 31,



2020



2019


Assets








Cash and cash equivalents

$

318,986



$

109,484


Accounts receivable, net of allowance for credit losses


54,839




99,513


Financing receivables, net of allowance for credit losses


123,865




128,038


Variable consideration receivable, net of allowance for credit losses


39,397




40,040


Inventories


60,179




42,989


Prepaid expenses


12,008




10,237


Film assets


13,147




17,921


Property, plant and equipment


287,220




306,849


Investment in equity securities


13,192




15,685


Other assets


24,575




25,034


Deferred income tax assets


46,826




23,905


Other intangible assets


28,204




30,347


Goodwill


39,027




39,027


Total assets

$

1,061,465



$

889,069


Liabilities








Bank indebtedness

$

297,765



$

18,229


Accounts payable


13,668




20,414


Accrued and other liabilities


108,917




112,779


Deferred revenue


104,311




94,552


Deferred income tax liabilities


18,475





Total liabilities


543,136




245,974


Commitments and contingencies








Non-controlling interests


4,237




5,908


Shareholders' equity








Capital stock common shares — no par value. Authorized — unlimited number.








58,878,749 issued and 58,857,436 outstanding (December 31, 2019 — 61,362,872 issued and 61,175,852 outstanding)


405,583




423,386


Less: Treasury stock, 21,313 shares at cost (December 31, 2019 — 187,020)


(329)




(4,038)


Other equity


172,690




171,789


Accumulated deficit


(134,395)




(40,253)


Accumulated other comprehensive loss


(4,180)




(3,190)


Total shareholders' equity attributable to common shareholders


439,369




547,694


Non-controlling interests


74,723




89,493


Total shareholders' equity


514,092




637,187


Total liabilities and shareholders' equity

$

1,061,465



$

889,069


 

IMAX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

(Unaudited)



Six Months Ended



June 30,



2020



2019


Cash (used in) provided by:








Operating Activities








Net (loss) income

$

(89,458)



$

26,323


Adjustments to reconcile net (loss) income to cash from operating activities:








Depreciation and amortization


27,182




29,804


Credit loss expense


11,657




1,358


Write-downs


6,806




508


Deferred income tax (benefit) expense


(4,878)




1,296


Share-based and other non-cash compensation


10,850




11,710


Unrealized foreign currency exchange loss (gain)


312




(14)


Loss in fair value of equity securities


2,514




2,053


Equity in losses of investees


529




222


Changes in assets and liabilities:








Accounts receivable


36,971




489


Inventories


(16,887)




(3,226)


Film Assets


(4,057)




(8,214)


Deferred revenue


9,799




(1,355)


Changes in other operating assets and liabilities


(12,220)




(12,437)


Net cash (used in) provided by operating activities


(20,880)




48,517


Investing Activities








Purchase of property, plant and equipment


(594)




(4,175)


Purchase of equipment for joint revenue sharing arrangements


(3,908)




(22,235)


Acquisition of other intangible assets


(1,221)




(1,121)


Investment in equity securities





(15,153)


Net cash used in investing activities


(5,723)




(42,684)


Financing Activities








Increase in credit facility borrowings


280,244




35,000


Repayment of credit facility borrowings





(50,000)


Credit facility amendment fees paid


(959)





Settlement of restricted share units and options


(2,757)




(7,619)


Treasury stock repurchased for future settlement of restricted share units


(329)




(1,575)


Repurchase of common shares, IMAX China


(1,532)




(16,813)


Taxes withheld and paid on employee stock awards vested


(251)




(219)


Common shares issued - stock options exercised





2,379


Repurchase of common shares


(36,624)




(1,258)


Issuance of subsidiary shares to non-controlling interests (net of return on capital)





1,106


Dividends paid to non-controlling interests


(2,118)




(2,266)


Net cash provided by (used in) financing activities


235,674




(41,265)


Effects of exchange rate changes on cash


431




293


Increase (decrease) in cash and cash equivalents during period


209,502




(35,139)


Cash and cash equivalents, beginning of period


109,484




141,590


Cash and cash equivalents, end of period

$

318,986



$

106,451


 


Three Months Ended



Six Months Ended



June 30,



June 30,



2020



2019



2020



2019


Revenue
















IMAX Technology Network
















IMAX DMR

$

546



$

39,293



$

11,175



$

67,243


Joint revenue sharing arrangements, contingent rent(2)


(137)




25,540




5,834




43,584




409




64,833




17,009




110,827


IMAX Technology Sales and Maintenance
















IMAX Systems


4,549




16,501




10,237




29,527


Joint revenue sharing arrangements, fixed fees


369




2,548




1,139




5,087


IMAX Maintenance





13,207




7,370




26,158


Other Theater Business(3)


(309)




2,580




954




4,206




4,609




34,836




19,700




64,978


New Business Initiatives


632




478




1,110




1,312


Film Distribution and Post-production


3,182




3,601




5,676




6,263




8,832




103,748




43,495




183,380


Other


23




1,049




262




1,615


Total revenues

$

8,855



$

104,797



$

43,757



$

184,995


















(Margin Loss) Gross Margin
















IMAX Technology Network
















IMAX DMR(1)

$

(30)



$

23,961



$

4,413



$

43,736


Joint revenue sharing arrangements, contingent rent(1)


(6,501)




19,318




(8,119)




31,253




(6,531)




43,279




(3,706)




74,989


IMAX Technology Sales and Maintenance
















IMAX Systems (1)


2,650




8,019




5,826




15,071


Joint revenue sharing arrangements, fixed fees(1)


48




870




227




1,165


IMAX Maintenance


(1,908)




5,640




(1,149)




10,921


Other Theater Business


(564)




841




46




1,316




226




15,370




4,950




28,473


New Business Initiatives


512




281




873




900


Film Distribution and Post-production (1)


(1,396)




458




(3,331)




433




(7,189)




59,388




(1,214)




104,795


Other


(499)




165




(1,388)




(102)


Total Segment Margin

$

(7,688)



$

59,553



$

(2,602)



$

104,693


__________________

(1)   IMAX DMR gross margin includes marketing expense of $nil and $2.4 million for the three and six months ended June 30, 2020, respectively (2019 — $9.5 million and $13.4 million, respectively). JRSA gross margin includes advertising, marketing and commission expense of less than $0.1 million and $0.6 million for the three and six months ended June 30, 2020, respectively (2019 —$0.2 million and $0.3 million, respectively). IMAX Systems gross margin includes marketing and commission costs of $0.2 million and $0.4 million for the three and six months ended June 30, 2020, respectively, (2019 — $0.4 million and $0.9 million, respectively). Film Distribution segment gross margin includes marketing expense of $nil and $0.2 million for the three and six months ended June 30, 2020, respectively (2019 — less than $0.1 million and $0.6 million, respectively).

(2)   The Company is reporting negative revenue due to the continued amortization of lessee incentives that are typically netted against lease revenues, which are abnormally low during the period due to the COVID-19 global pandemic.

(3)   The Company is reporting negative revenue due to an adjustment to prior period revenue.

IMAX CORPORATION
OTHER INFORMATION
(in thousands of U.S. dollars)

Non-GAAP Financial Measures:

In this release, the Company presents adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share, EBITDA, Adjusted EBITDA per Credit Facility, Adjusted EBITDA margin, and free cash flow as supplemental measures of the Company's performance, which are not recognized under U.S. GAAP. Adjusted net (loss) income attributable to common shareholders and adjusted net (loss) income attributable to common shareholders per diluted share exclude, where applicable: (i) share-based compensation; (ii) exit costs, restructuring charges and associated impairments, (iii) changes in the fair value of equity investments, (iv) COVID-19 government relief benefits, as well as the related tax impact of these adjustments, and (v) the income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company's financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net (loss) income attributable to common shareholders. Although share-based compensation is an important aspect of the Company's employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

In addition to the non-GAAP financial measures discussed above, management also uses "EBITDA," as such term is defined in the Credit Agreement, and which is referred to herein as "Adjusted EBITDA per Credit Facility." As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company's operating performance and to provide additional information with respect to the Company's compliance against its Credit Agreement requirements in the current period, if applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company's industry to evaluate, assess and benchmark the Company's results.

EBITDA is defined as net (loss) income excluding (i) interest expense, net of interest income; (ii) income tax (benefit) expense; and (iii) depreciation and amortization, including film asset amortization. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) gain (loss) in fair value of equity investment; (iii) write-downs, net of recoveries, including asset impairments and credit loss expense; (iv) gain (loss) from equity accounted investment; (v) exit costs, restructuring charges and associated impairments; (vi) legal arbitration award; and (vii) executive transition costs.

Free cash flow is defined as cash provided by operating activities minus cash used in investing activities (from the condensed consolidated statements of cash flows). Cash provided by operating activities consist of net (loss) income, plus depreciation and amortization, plus the change in deferred income taxes, plus other non-cash items, plus changes in working capital, less investment in film assets, plus other changes in operating assets and liabilities. Cash used in investing activities includes capital expenditures, acquisitions and other cash used in investing activities. Management views free cash flow, a non-GAAP measure, as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, and fund other financing activities. Free cash flow does not represent residual cash flow available for discretionary expenditures. A reconciliation of cash provided by operating activities to free cash flow is presented below.

These non-GAAP measures may not be comparable to similarly titled amounts reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered as a substitute for, or superior to, the comparable GAAP amounts. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measures is presented below.


For the Three Months Ended June 30, 2020



For the Three Months Ended June 30, 2019



Attributable to

Non-controlling



Less:






Attributable to

Non-controlling



Less:






Interests and



Attributable to



Attributable to



Interests and



Attributable to



Attributable to



Common



Non-controlling



Common



Common



Non-controlling



Common



Shareholders



Interests



Shareholders



Shareholders



Interests



Shareholders


(In thousands of U.S. Dollars)






























Reported net loss

$


(30,047)



$


(4,080)



$


(25,967)



$


13,836



$


2,439



$


11,397


Add (subtract):






























Income tax (benefit) expense



(10,248)





638





(10,886)





5,308





1,187





4,121


Interest expense, net of interest income



524





(96)





620





64





(140)





204


Depreciation and amortization, including film asset amortization



11,930





1,049





10,881





15,593





1,177





14,416


EBITDA

$


(27,841)



$


(2,489)



$


(25,352)



$


34,801



$


4,663



$


30,138


Share-based and other non-cash compensation



6,541





299





6,242





7,186





228





6,958


(Gain) Loss in fair value of equity investment



(2,025)





(612)





(1,413)





4,544





1,443





3,101


Write-downs, including asset impairments and credit loss expense



3,843





1,815





2,028





1,169





84





1,085


Loss from equity accounted investments















138









138


Adjusted EBITDA per Credit Facility

$


(19,482)



$


(987)



$


(18,495)



$


47,838



$


6,418



$


41,420


Revenues attributable to common shareholders(2)



8,855





421





8,434





104,797





10,216





94,581


Adjusted EBITDA margin attributable to common shareholders



(220.0)

%




(234.7)

%




(219.3)

%




45.6

%




62.8

%




43.8

%
































For the Twelve Months Ended June 30, 2020 (1)



For the Twelve Months Ended June 30, 2019 (1)



Attributable to

Non-controlling



Less:






Attributable to

Non-controlling



Less:






Interests and



Attributable to



Attributable to



Interests and



Attributable to



Attributable to



Common



Non-controlling



Common



Common



Non-controlling



Common



Shareholders



Interests



Shareholders



Shareholders



Interests



Shareholders


(In thousands of U.S. Dollars)






























Reported net loss

$


(57,210)



$


(9,093)



$


(48,117)



$


37,596



$


11,220



$


26,376


Add (subtract):






























Income tax expense



13,069





6,707





6,362





10,386





3,737





6,649


Interest expense, net of interest income



922





(424)





1,346





392





63





329


Depreciation and amortization, including film asset amortization



60,865





4,897





55,968





59,207





5,372





53,835


EBITDA

$


17,646



$


2,087



$


15,559



$


107,581



$


20,392



$


87,189


Share-based and other non-cash compensation



22,710





730





21,980





23,513





527





22,986


Loss in fair value of equity investment



978





274





704





2,053





652





1,401


Write-downs, including asset impairments and credit loss expense



23,404





5,420





17,984





5,518





1,827





3,691


Loss from equity accounted investments



304









304





409









409


Exit costs, restructuring charges and associated impairments















9,234









9,234


Legal arbitration award















4,237









4,237


Executive transition costs















2,994









2,994


Adjusted EBITDA per Credit Facility

$


65,042



$


8,511



$


56,531



$


155,539



$


23,398



$


132,141


Revenues attributable to common shareholders(2)



254,426





21,697





232,729





376,067





39,905





336,162


Adjusted EBITDA margin attributable to common shareholders



25.6

%




39.2

%




24.3

%




41.4

%




58.6

%




39.3

%

_____________


(1) Senior Secured Net Leverage Ratio calculated using twelve months ended Adjusted EBITDA per Credit Facility. During the second quarter, the Company entered into the Amendment to the Credit Facility Agreement which provides for, among other things, the suspension of the Senior Secured Net Leverage Ratio financial covenant through the first quarter of 2021.

(2)



Three months ended June 30, 2020



Three months ended June 30, 2019



12 months ended June 30, 2020



12 months ended June 30, 2019


Total revenues






$


8,855








$


104,797








$


254,426







$


376,067


Greater China revenues

$


1,393








$


32,575








$


71,700








$


125,289






Non-controlling interest ownership percentage(3)



30.19

%









31.36

%









30.26

%









31.85

%





Deduction for non-controlling interest share of revenues








(421)










(10,216)










(21,697)









(39,905)


Revenues attributable to common shareholders






$


8,434








$


94,581








$


232,729







$


336,162



(3) Weighted average ownership percentage for change in non-controlling interest share

 

IMAX CORPORATION

Adjusted Net (Loss) Income Attributable to Common Shareholders and Adjusted Diluted Per Share Calculations

(In thousands of U.S. dollars)

(Unaudited)



Three Months Ended



Three Months Ended



June 30, 2020



June 30, 2019


(In thousands of U.S. dollars, except per share amounts)

Net Loss



Diluted EPS



Net Income



Diluted EPS


Reported net (loss) income attributable to common shareholders

$

(25,967)



$

(0.44)



$

11,397



$

0.19


Adjustments(1):
















Share-based compensation


6,168




0.10



$

6,799




0.11


Change in the fair value of equity securities


(1,413)




(0.02)




3,101




0.05


COVID-19 government relief benefits


(3,151)




(0.05)








Tax Impact on items listed above


(857)




(0.01)




(1,604)




(0.03)


Income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries


(841)




(0.02)








Adjusted net (loss) income(1)

$

(26,061)



$

(0.44)



$

19,693



$

0.32


















Weighted average basic shares outstanding






58,808








61,331


Weighted average diluted shares outstanding






58,808








61,507




(1)

Reflects amounts attributable to non-controlling interests.

 


Six Months Ended



Six Months Ended



June 30, 2020



June 30, 2019


(In thousands of U.S. dollars, except per share amounts)

Net Income



Diluted EPS



Net Income



Diluted EPS


Reported net (loss) income attributable to common shareholders

$

(75,321)



$

(1.26)



$

19,662



$

0.32


Adjustments(1):
















Share-based compensation


10,243




0.17



$

11,076




0.18


Exit costs, restructuring charges and associated impairments








850




0.01


Change in the fair value of equity securities


1,752




0.03




1,401




0.03


COVID-19 government relief benefits


(3,151)




(0.05)








Tax impact on items listed above


(1,195)




(0.02)




(2,484)




(0.04)


Income tax effects related to the removal of the indefinitely reinvested assertion on the historical earnings of certain subsidiaries


12,885




0.21








Adjusted net (loss) income(1)

$

(54,787)



$

(0.92)



$

30,505



$

0.50


















 Weighted average basic shares outstanding






59,613








61,354


Weighted average diluted shares outstanding






59,613








61,525




(1)

Reflects amounts attributable to non-controlling interests.

 

Free Cash Flow:



Three Months Ended



Six Months Ended



June 30, 2020



June 30, 2020


Net cash used in operating activities

$


(26,846)



$


(20,880)


Net cash used in investing activities



(3,010)





(5,723)


Free cash flow

$


(29,856)



$


(26,603)


 

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SOURCE IMAX Corporation