Imax Cutting Jobs Will Help Eliminate Risk From Box Office Volatility
Imax Corp.'s plans to cut its workforce and increase its share buybacks demonstrate two key inflection points, according to B. Riley analyst Eric Wold: "The potential for more efficient network growth (even with a projected total addressable market twice the current network size) and the network shifting from a net cash flow investment to one that more consistently generates cash flow (up and beyond any normal box office volatility)," Wold wrote. Imax said after hours on Monday that it plans to cut 14% of its workforce, or about 100 employees, including some at Imax China, of which Imax owns about 68%. The premiere film exhibitor expects the cost cutting measure to generate about $20 million in annual operating cost savings. The Hollywood box office, which has been disappointing but is still up 3.2% compared with the same time frame last year, is always going to be volatile. Film results are unpredictable. Imax's recent moves will help eliminate as much as 8% in box office risk during 2018, Wold wrote. Shares of Imax opened on Tuesday up 5%, but have declined nearly 24% in the year to date. During the same time frame the S&P 500 index has gained nearly 9%.
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