Imax Posts Lower Fourth-Quarter Earnings, Despite Higher Box-Office Return

Richard Gelfond
Allison Michael Orenstein

“It’s difficult to get people off the couch, yet Imax is one of the most successful companies at providing experiences that people run to,” says Gelfond, photographed April 28 in his New York office.

The Canadian-based exhibitor, led by CEO Richard Gelfond, posted a $9.3 million tax charge after the recent U.S. corporate tax overhaul.

Imax on Tuesday posted a decline in fourth-quarter earnings, even as overall revenue rose on Star Wars: The Last Jedi and higher overall box office.

Imax reported net income of $4.83 million for the three months leading to Dec. 31, 2017, compared with a year-ago profit of $8.9 million. The bottom line was hit by the Toronto-based company posting a one-time tax charge of $9.3 million, associated with the recent U.S. corporate tax reform, and a $2.5 million charge stemming from cost reductions.

The adjusted earnings per share for the fourth quarter was 34 cents, which beat an analyst forecast of 32 cents in per-share earnings.

Fourth-quarter revenue was $125.6 million, up from a year-earlier $107 million. The analyst consensus for revenue was $121.2 million.

During an analyst call, Imax CEO Richard Gelfond said the early results from playing more digital 2D versions of Hollywood movies domestically, given a preference by consumers for 2D in North America, "have been encouraging."

The recent releases of Bladerunner 2049 and Justice League were shown entirely in 2D, and Black Panther showed in 2D on 80 percent of Imax screens. Gelfond also signaled to investors that his company will do more to generate box office from its core global theater network and invest less in new, non-core businesses.

That means pulling back on investments in virtual reality, new TV content and other ancillary ventures.

For example, Imax will stand pat with its plans to roll out location-based virtual reality through “pods” that are installed in movie theaters and other public spaces. "At this time, we do not anticipate opening additional VR centers, or making a meaningful future investments in the initiative," Gelfond told analysts.

Imax is also reducing investments in TV series or other alternative content after it financially backed Marvel's Inhumans series that brought the show's first two episodes to its giant screens. "We recognize the hit-and-miss nature of the content business, and therefore will aim to be more of a distributor, rather than a principal, when looking at alternative content," Gelfond said.

Elsewhere in its results, the company reported gross box office from digitally remastered Imax films rose 13 percent to $278.1 million, due in part to a higher number of releases, during the latest quarter.

The gross box office per-screen for the fourth quarter averaged $227,000 globally, down from a year-earlier $233,000. The domestic per-screen average rose to $286,1000, compared to $255,400 in the same period of 2016.

The per-screen average in China tumbled during the latest quarter to $131,100, from $168,400 in the same period last year. The year-ago period included box office for Rogue One: A Star Wars Story in the Christmas 2016 period.