IMAX's Big Screens Bring In Big Money

Image: IMAX.

The first few months of the year aren't a big season for moviegoers, and investors in big-screen theater specialist IMAX expected Thursday morning's first-quarter financial report would reflect the entertainment industry's usual New Year's hangover. Surprisingly, though, IMAX gave investors cause to celebrate, posting numbers that showed a more resilient growth trajectory than most had anticipated. Let's look at how IMAX managed to perform above expectations during the first part of 2015.

What's behind IMAX's blockbuster numbers?IMAX's revenue growth in the quarter was nothing short of amazing, with sales jumping 29% to $62.2 million; the company cited both strong box office figures and higher numbers of installations of its theater systems and equipment for the surge. Adjusted net income came in at $5 million, climbing more than 50% and producing adjusted earnings of $0.07 per share, up from last year's $0.05 per share and much better than the flat performance investors had anticipated. Global box office figures were equally impressive, rising 20% during the quarter to $166 million, as IMAX earned almost two-thirds of its box-office take from its international markets.

All three of IMAX's major segments added to the company's overall growth. Revenue gains from sales and lease arrangements saw the biggest change, almost doubling from year-ago levels as IMAX installed five full new theater systems and upgraded two digital systems in existing locations during the quarter. Joint revenue-sharing arrangements also performed well, lifting sales by more than 45%, as the company put in six new theaters under such arrangements in the first three months of the year. Even sales of the sometimes-sluggish production and digital remastering business climbed 16%, helped by box office gains during the quarter.

CEO Richard Gelfond. Image: IMAX.

IMAX CEO Richard Gelfond couldn't have been more optimistic about the company's prospects. "This is a very exciting time for IMAX," Gelfond said in a press release. "Our continued progress in expanding our theatre network globally, along with our strong film performance during the first quarter, resulted in robust financial results." Gelfond pointed to technology advancements, network expansion, and film performance all adding to IMAX's gains for the quarter.

Will IMAX grow even faster?Best of all, there's reason to believe the good times will continue. Gelfond cited even faster growth potential building to support future gains, noting that "with record results from Furious 7 in April and a great start to the Avengers sequel internationally, the momentum has continued into the second quarter." Gelfond also pointed to recent movie deals with Disney and Warner Brothers to give it access to the content it will need to draw more people into IMAX theaters.

IMAX has done a great job of moving new theaters through its pipeline as quickly as possible. Despite signing contracts to bring on 21 new theaters during the quarter, the backlog fell to 403 -- compared to 431 a year ago -- as IMAX has committed to completing projects in order to bring new revenue sources online efficiently. The company's network inched closer to the 1,000 mark, with 943 locations composed predominantly of commercial multiplex locations.

IMAX has no shortage of content lined up over the next couple of years. Beyond 2015 releases of Avengers and Star Wars movies, 2016 will bring the much-awaited Batman v. Superman, a new Captain America movie, and the Star Wars spinoff Rogue One, in addition to many other releases likely to be negotiated in the coming year.

Current conditions in the movie industry look solid, as content producers have a strong distribution network that encompasses not only movie theaters but also television and streaming arrangements that have broadened the way viewers get their entertainment. Even with that competition, IMAX offers a unique viewing experience, and as long as economic conditions make visits to the theater affordable for the general public, the company is in position to reap the fruits of Hollywood's labor.

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Dan Caplinger owns shares of Apple and Walt Disney. The Motley Fool recommends Apple, Imax, and Walt Disney. The Motley Fool owns shares of Apple, Imax, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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