Imax Takes Pandemic Hit With Steep Second-Quarter Loss

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Richard Gelfond

The giant screen exhibitor says it's looking beyond tentpole release delays and an uncertain China reopening to making the most of the global release window into 2021 and beyond.

Giant screen exhibitor Imax has unveiled its second-quarter financials, the first fully impacted by the coronavirus pandemic.

On Tuesday, Imax reported a loss of $26 million attributable to shareholders, compared to a year-earlier $11.4 million profit.

The adjusted loss per share for the second quarter was 44 cents, compared to per-share earnings of 32 cents in 2019, and the quarterly revenue was $8.9 million, down 92 percent from $104.8 million in 2019. During the latest financial quarter, virtually all the theaters in Imax's global network were closed down by the COVID-19 pandemic.

Analysts forecast a per-share second quarter loss of 52 cents, on revenue of $ 9.81 million.

The year-ago period for Imax saw tentpoles like Avengers: Endgame, Godzilla: King of the Monsters and Disney's Aladdin remake playing on its screens. Also in 2019, Hollywood tentpoles like Christopher Nolan's Tenet, James Bond 25 and Wonder Woman 1984 were being shot in part or entirely using Imax cameras. 

Those same tentpoles are now seeing their studio theatrical releases, including on shuttered Imax screens, delayed by the coronavirus pandemic.

Gelfond and top Imax execs will discuss their latest financial results -- the first to reveal the full impact of the pandemic on its global theater network -- during an analyst call. They're expected to look beyond the current studio release delays for tentpoles and an uncertain reopening for its China network to outline how they will make the best of the global release window into 2021 and beyond.

"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," Gelfond said in a statement that accompanied his latest results.

Wedbush analyst Michael Pachter sees Imax eventually taking advantage of audiences returning to theaters once a vaccine is made available and the multiplex can offer the big screen experience that streamers cannot. "We think Imax is best positioned within theatrical exhibition for a full rebound, but the ability of Imax’s theater partners to return to screen growth is key, and may take time," Pachter said in a July 24 note.

The worry at Imax, however, is the company may have sufficient financial headroom to survive prolonged theater closures into 2021, but the wider movie industry may not and will be devastated if the major studios follow Disney and ping-pong their delayed tentpole releases into late 2021 or 2022.

"The rising infection rate in the U.S. and other markets stands in stark contrast to the opening of large international markets and presents a unique challenge for an industry that is accustomed to global releases," Gelfond told analysts during a late afternoon conference call. Here the key for Imax will be making the best of its global release windows, and that means the industry no longer measuring out the weeks before global day-and-date releases can return to build hype and a worldwide water cooler moment.

Instead, a slower lane for Hollywood tentpole releases is anticipated, and one long taken by indie films as titles go from red carpet debuts to staggered theater release dates in different countries as theaters open in lower-risk markets. And eventually, a tentpole release will open in Los Angeles and other major U.S. cities as theaters reopen.

Warner Bros.’ Tenet, directed by Christopher Nolan, is the first movie to launch on a rolling basis, first overseas in over 70 countries starting on Aug. 26, followed by select U.S. cities on Sept. 3 ahead of the long Labor Day weekend. "... as we saw with Tenet's release strategy announced yesterday, we expect studios could release films regionally, as markets open," Gelfond argued.

Shelving traditional simultaneous global releases as the majors shift their release dates later on the calendar will work for Imax. "Despite recent studio moves, we still have an Imax-friendly 2020 slate scheduled for the remainder of the year, with at least four films with Imax DNA," Gelfond todld analysts.

Besides Tenet, that includes Wonder Woman 1984, Marvel's Black Widow, the James Bond No Time to Die instalment, and Disney's Mulan. The giant screen exhibitor forecasts that around 1400 screens in 70 markets, or 90 percent of its global network, will be open by end of August.

"There have been very many blockbusters that opened overseas. Reversing the model is unusual, but it's not unheard of. It's just reversing the paradigm," said one Imax exec on background ahead of the company's earnings release. The giant screen exhibitor will be looking to how the major studios embrace a rolling release strategy for their tentpoles, and how and when audiences return to the local multiplex to judge how quickly its overall revenues return to pre-pandemic levels.

"We all have to take a breath. We have Tenet coming up now. See how that opens up. Get the theaters open and see how it all shakes out," Gelfond said of his short-term expectations for the exhibition industry while on the analyst call. 

Imax theaters started to reopen in China over the past weekend. Currently, around 390 of the large format exhibitors just over 700 theaters in the Chinese mainland have reopened, with at least 600 expected to reopen by mid-August.

Over the weekend in China, Dolittle and Bloodshot earned $750,000 on Imax screens from play on around 40 percent of the company’s Chinese theaters, and with a 30 percent capacity limitation and reduced ticket prices to boot.

Discussing the Chinese box office prospects, Gelfond pointed to Hollywood releases like Interstellar and Harry Potter and the Sorcerer's Stone being approved to play on the big screen in China. And he pointed to reports in China that big Lunar New Year movies like Wanda's comedy action sequel Detective Chinatown 3, Huanxi Media's comedy tentpole Lost in Russia and the sports epic Leap that were pulled from theaters early on during the pandemic may reach the big screen in the Middle Kingdom during the next holiday season in October.

Ahead of Imax releasing its second quarter financial results, Imax China issued a profit warning to the Hong Kong stock exchange that predicted a net loss of $34 million to $36 million for the six months to Jun 30, 2020, compared to a net profit of $24 million for the first half of 2019.

Globally, around 625 Imax screens are now open globally across 40 countries.

2:30 p.m. Updated with comments by top Imax execs made during an analyst call.