Who doesn’t wish that they had bought IMAX stocks in 2001? Back then the once-great large format film company had been reduced to a penny stock on the back of US cinemas filing for Chapter 11 bankruptcy protection to get out of expenses leases and also costly contracts with IMAX. Digital was just over the horizon and even the vaunted Digital Media Remastering (DMR) up-converting technology had yet to make a dent and give it access to first-run films ( re-release of “Apollo 13″ was the first DMR title).
Yesterday the shares jumped to over $27 on the NYS ( C$30 on TSE) on the back of one of the companies best quarters ever. It might not quite have reached the heady heights of the late 1990s, but it is still a good time cash in for anyone who bought cheap. The question now is, can the good times last?
IMAX’s revenue increased from $77.4m to $105m, while profit more than doubled to $27.8m for the last quarter of 2013, compared with a profit of $12.8m a year earlier. Analyst firm Piper Jaffray rightly described it as a “blockbuster” fourth-quarter results. The revenue was primarily driven by three titles: “Gravity”, “The Hobbit: the Desolation of Smaug” and “Stalingrad”, the latter of which did well in Russia and Europe ahead of its US release in February. IMAX also got good at being brutal in 2013, by yanking under-performing titles like “After Earth”, “The Lone Ranger” and “Ender’s Game” off their screens after just one week.
It is revenue from films that forms the largest component of IMAX’s earnings these days. As noted by Variety:
Imax said it earned $244 million worldwide during the period, its highest global box office quarter. It earned $727 million during the year.
It averaged $366,300 per screen during the fourth quarter.
“Gravity,” alone, generated around $100 million for the company. Film has earned over $700 million worldwide for Warner Bros.
Given the large-screen spectacle nature of “Gravity”, “Stalingrad” and “Hobbit” it should come as no surprise, but it is still a seizable figure. Other earnings also grew compared to (Q4 2012), but were smaller overall:
- Sales and sales-type leases – $32.6m ($20.2m);
- Joint revenue-sharing arrangements – $24.5m ($17m);
- Production and DMR – $28.6m ($19.2m);
The more interesting and important figure is the number of new screens. From THR:
During the latest quarter, Imax signed contracts for 119 theater systems and installed 58, of which four were upgrades of existing venues. That brought the full-year total of installations to 112 new theater systems across 23 countries.
The most important growth has come in territories such as China, South Korea and India. As told in a separate piece for THR:
Imax is experiencing continued growth for its fast-expanding theater network in China. The giant-screen exhibitor recently expanded its contract with China’s largest theatrical chain, Wanda Cinema Line Corp., so don’t expect more blockbuster deals anytime soon.
“I don’t think you’re going to see another 120-theater deal like we had with Wanda. That’s not going to happen,” Imax CEO Richard Gelfond told analysts Thursday after the release of his company’s fourth-quarter results.
IMAX is thus keen to play down expectations that the good news will roll for ever. The question is whether there are major challenges ahead. Gelfond was upfront about the problems faced in China. Although the previous quota increase benefitted IMAX, the expected additional increase has not happened.
It is also likely that not all IMAX titles will pass the Chinese censors in 2014 and the problems of getting the right type of Chinese blockbusters onto the largest of screens still remains. While IMAX has had an easier time getting Russian epics like “Stalingrad” or Bollywood blockbusters such as “Dhoom 3″ released around the world, getting Chinese films onto Chinese IMAX screens represents the greatest potential and pitfall for IMAX. But that’s not all.