GREATER CHINA HIGHLIGHTS
-IMAX China’s commercial network consisted of 443 screens in more than 160 cities at June 30, 2017. The Company is partnered with nearly 50 different exhibitors, including 9 out of 10 largest exhibitors in China;
-Robust signings of 83 new theatres in the first half of 2017, up from 79 theatre signings in the comparable period last year. The Greater China backlog now stands at a record 381 systems;
-IMAX China reiterated guidance of 120 new installations for 2017, a slight increase from the record 117 new installations completed in 2016;
Consolidated revenues for the period were US$51.6 million with net margin of 32%, resulting in an adjusted profit of $17.7 million. Net cash provided by operations was US$17.2 million;
-Cost-reduction initiatives were implemented during June 2017 aimed at streamlining costs and increasing scalability. The Company expects these initiatives to yield ongoing annual savings of US$2.4 million, resulting in a low single digit growth rate of SG&A year over year, excluding stock-based compensation, versus original expectations for an 8% increase in 2017.
SHANGHAI – July 27, 2017 – IMAX China Holding, Inc. (“IMAX China,” HKG: 1970) today reported first-half 2017 Greater China revenue of US$51.6 million and gross profit of US$32.6 million, or 63.1% of revenues. Adjusted profit for the period came in at US$17.7 million, which excludes US$0.6 million of charges and impairments associated with the Company’s cost-reduction initiative. For adjustments to profit for the period and a full detail of financial results, please refer to the corporate filing posted with the Hong Kong Stock Exchange or to the earnings results posted on the Investor Relations section of the IMAX China web site (http://www.imax.cn/investor).
“Building on the 238 new theatre system signings last year, we continued to see notable demand from our exhibitor partners in China, as evidenced by the 83 signings we achieved in the first half of 2017. This robust level of activity is encouraging as it demonstrates our partners’ sustained demand for The IMAX Experience,” said Richard L. Gelfond, Chairman of IMAX China. “Our network in China currently consists of 443 commercial screens in more than 160 cities, not to mention the record 381 systems we have in backlog. This footprint, which we believe is the biggest value-creator over the long term, serves the Company on multiple fronts. It enables us to achieve greater free-cash-flow generation, as evidenced by the US$17.2 million in operating cash flow generated in the first half of 2017, while also affording IMAX China with derivative opportunities that leverage the scale of the network and offer unique prospects for future growth in new business areas such as virtual reality.”
There were 460 systems in the IMAX theatre network in Greater China as of June 30, 2017, of which 443 were in commercial multiplexes. Currently, 285 of these theatres operate under revenue-sharing arrangements and 175 operate under sales and sales-type lease arrangements. There are also 381 theatres in backlog as of June 30, 2017, of which 291 are for revenue-sharing arrangements. The Company also installed 36 new theatres systems in the first half of 2017, which is up from the 30 installations recognized in the first half of 2016.
“While growing the network is the foundation of our business, we have instituted several strategic initiatives aimed at increasing the revenue productivity of our existing theatres while also reducing our cost structure,” Gelfond continued. “On the cost side, our efforts have been aimed at streamlining operations and rationalizing costs after periods of rapid network growth. On the revenue side, we are implementing strategies geared towards increasing the productivity of our current network. For example, we are looking to better curate our film slate on a location-by-location basis, playing more local content in smaller markets. We also intend to shorten film windows in an effort to keep content fresh and continue to add more IMAX DNA into our titles, further differentiating the IMAX experience. On that front, the parent company just released Dunkirk, which saw a per-screen average of over US$30 thousand in Taiwan, a market that often serves as a proxy for potential performance in Mainland China. Ultimately, we expect these cost and revenue initiatives to increase the profitability, operating leverage and free-cash-flow generation of the IMAX network in China over the long-term.”
Box Office Update
Gross box office from IMAX DMR® titles in Greater China was US$167.4 million in the first half of 2017, compared with US$ 180.5 million in the prior-year period. The average Greater China box office per-screen average in the first half of 2017 was US$411,000, compared with US$615,000 in same period last year. Per-screen averages were down year-over-year, primarily a result of weaker content and the ramp-up of new-build theatres.
Confirmed Film Slate for Second Half 2017
To date, the Company has announced the following eight titles for the second half of 2017. The Company intends to announce and exhibit additional titles upon confirmation of film release dates in China.
-Despicable Me 3 (Universal Pictures, July 2017)
-Wu Kong (New Classic Media, July 2017)
-The Founding of an Army (Bona Film Group, July 2017)
-Once Upon a Time (Enlight Media, August 2017)
-The Adventurers (Gravity Pictures, August 2017)
-The Legend of Naga Pearls (Shanghai Film Group, August 2017)
-Cars 3 (Disney, August 2017)
-Dunkirk (Warner Bros. Pictures, September 2017)
The Company will host a conference call today at 7:30 AM Hong Kong Time to discuss its half-year 2017 financial results. To access the call via telephone, interested parties in the US and Canada should dial (800) 263-0877 approximately 5 to 10 minutes before the call begins. Hong Kong callers should dial 800-961-105 and other international callers should dial +1-(416) 640-5944. The conference ID for the call is 9574111. A replay of the call will be available via webcast at www.imax.cn/investor/l-en or via telephone by dialing (888) 203-1112 (US and Canada), or +1-(647) 436-0148 (international). The Conference ID for the telephone replay is 9574111.
About IMAX China
IMAX China is a subsidiary of IMAX Corporation, and is incorporated under the laws of Cayman Islands. IMAX China was established by IMAX Corporation specifically to oversee the expansion of IMAX's business throughout Greater China. IMAX China trades on the Hong Kong Stock Exchange under the stock code “HK.1970.”
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 theatres 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 offices in London, Dublin, Tokyo, Shanghai and Beijing. As of Jun 30, 2017, there were 1,257 IMAX theaters (1,154 commercial multiplexes, 13 commercial destinations and 90 institutions) in 75 countries. On Oct. 8, 2015, shares of IMAX China, a subsidiary of IMAX Corp., began trading on the Hong Kong Stock Exchange under the stock code “HK.1970.”
IMAX®, IMAX® 3D, IMAX DMR®, Experience It In IMAX®, An IMAX 3D Experience®, The IMAX Experience®, IMAX Is Believing® and IMAX nXos® are trademarks of IMAX Corporation. More information about the Company can be found at www.imax.com. You may also connect with IMAX on Facebook (www.facebook.com/imax), Twitter (www.twitter.com/imax) and YouTube (www.youtube.com/imaxmovies).
This press 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, general economic, market or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by the Company; the performance of IMAX DMR films; competitive actions by other companies; conditions in the in-home and out-of-home entertainment industries; the signing of theater system agreements; changes in laws or regulations; conditions, changes and developments in the commercial exhibition industry; the failure to convert theater system backlog into revenue; 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 failure to respond to change and advancements in digital technology; risks related to the acquisition of AMC Entertainment Holdings, Inc. by Dalian Wanda Group Co., Ltd.; risks related to new business initiatives; the potential impact of increased competition in the markets within which the Company operates; risks related to the Company’s inability to protect the Company’s intellectual property; risks related to Eastman Kodak bankruptcy and the possibility of constrained film supply; risks related to the Company’s implementation of a new enterprise resource planning system; risks related to the Company's prior restatements and the related litigation; 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.
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