Imax Q2 Profit Down On Lower Film Revenue

Courtesy of Twentieth Century-Fox

The company’s earnings fall sharply as its second quarter financials stack up against the "Avatar" effect of 2010.

TORONTO – Falling short of Wall Street expectations, Imax Corp. on Thursday posted sharply lower third quarter earnings on disappointing Hollywood box office.

Despite revenues rising 3% to $57.2 million for the three months to June 30, against $55.5 million in 2010, Toronto-based Imax posted earnings of $1.82 million, down 87 per cent from a year-earlier profit of $13.3 million.

Second quarter film revenue was $18.7 million, against a year-earlier $20.7 million, and gross box office from the digital-remastering of Hollywood titles was also down: $107.7 million during the latest quarter, compared to $113.9 million in the second quarter of 2010, when Imax screened Avatar 3D.

This year’s film performance prior to Transformers and Harry Potter was disappointing,” Imax CEO Richard Gelfond told analysts during a morning call.

But Gelfond insisted Imax had passed through a “bad stretch” and was headed into better box office during the second half of 2011 after Transformers 2 performed and Harry Potter and the Deathly Hallows - Part 2 broke opening weekend box office records.

The current third quarter box office stands at $88 million after three and a half weeks, against $98 million in all of the same period of 2010.

Giving the disappointing first-half film performance, Imax expects adjusted earnings and EBITIDA to be lower in 2011, against 2010 levels, even as revenue for 2011 should be consistent with 2010.

The latest results underline the pressure Imax is on to continue to expand its international theater network and pump out super-sized Hollywood titles on its screens to maintain the momentum Avatar and other 3D titles produced in 2010.

Even as Imax continues to successfully woo international exhibitors, it has effectively disappointed investors back home more focused on domestic performance.

Stock in Imax was punished Thursday, falling $2.44, or 10 percent, in morning trading to $21.98 on the New York Stock Exchange.

Gelfond told analysts Imax would press on with its international expansion by moving screen backlog into service, especially in China where it eyes more joint venture theatre deals.

"We believe we are on track to outpace the record level of theatre installations achieved in 2010, and we are positioned to nearly double our global footprint purely from backlog as of June 30,” he said Thursday.

Imax has signed 153 theater deals year-to-date, against 98 systems signed during the first half of 2010, and currently has a record backlog of 294 Imax theater systems, most of which are overseas.

Imax expects to install from 120 to 130 theaters this year, up from earlier estimates of between 115 and 125 new theaters.

But while Imax has argued the risk to the company’s growth is minimized by building out its international theater network, its fortunes continue to depend on how its films play on its screens.

Imax' Gelfond also had to concede Thursday the giant screen exhibitor remains vulnerable to shorter runs for Hollywood titles as studios continue to jam films into peak periods, and continuing to split screens where required to accommodate scheduling clashes of tentpole titles.