IMAX Q3 Earnings Call LIVE - Thursday, October 23, 2025 830AM EST / 0730AM CST

All right, guys. Good morning. Happy Wednesday, October 23rd. In about 15 minutes, we have the IMAX Q3 earnings call. Results are already posted. I put them in Discord, on the YouTube community tab, and out on X if you haven't seen them yet. Q3 was a bit of a challenging quarter for the domestic industry in general. However, not for IMAX, and I'm sure they'll be talking about that in the earnings call today. Demon Slayer. Absolutely. It was their number one film globally for Q3, and it blew the numbers off the hinges. So, IMAX is going to have a very good quarter. I think they said best Q3 ever amidst an 11% downturn in the overall domestic industry for Q3. So good job for them. And remember just in generalities as we're listening to this call today, IMAX, and we'll put the map up on the screen, IMAX has a huge global footprint with a lot of screens in Asia, and that really helps them and differentiates them from, you know, your Cinemark or your AMC, which don't have a presence in Asia. Let me bring the chat down here so I can see it.

And really what I want to hear from Rich Gelfond today out of IMAX is more insight into Q4 and 2026. Once we get past all of these Q3 earnings calls, maybe the first week in November, I'm going to really sit down and spend a day doing quarter by quarter forecast for next year. We got to get that done in early November. We got to know, especially if you're investing in AMC and thinking about the vote, we got to know what the next four quarters look like. Not just the year, but by quarter. What's the cash flows look like? Andrew, good morning. Kimber, good morning. Msad Salem, good morning. James, howdy, howdy. I was checking some of our, while we were waiting here for the IMAX call, I was checking some of our momentum plays yesterday just to see how everybody's doing. Let's get rid of open. Beyond, kind of like we were talking about last night, it's going to struggle today. I did finally watch that YouTube video from the Cappy Borrower guy, and I, you know, I have not really been paying attention to him at all, but he did a quick 20 or 30 minute YouTube video, I guess, a day or two ago, telling people his price target was around $6. It went up to $8.80. That's pretty good. And he did a reasonable job, I think, of telling people to take profits, which I think is good. Now, I'm seeing he's already pumping another ticker, which is fine with me. But, some people are getting really mad at him, like, 'Bro, you started this movement with Beyond, and you're already moving on to another ticker.' The pump already happened on Beyond, and it's on its way back down. So now, if you're choosing to stay in Beyond, you better start assimilating all the coming news and the upcoming vote and beyond for November. And maybe we'll talk about that this weekend. I'm not super interested in being a long-term shareholder of Beyond, but maybe, you know, I'll go through the proxy this weekend and see if there's any hope of saving this company with the recapitalization. There's some new 13Ds out. It looks to me like those are just big investors that got shares out of the conversion last week that are doing their filings. I don't know that those are new conversions. James says he had a fantastic day yesterday in Beyond and Donut. I love it. All I want to hear from you guys is, 'Tony, I listened. I peeled off some profits and I'm sitting in the green,' or 'I'm completely out and in the green.' Someone was asking me in the comments last night what to do about options they have expiring Friday. I mean, look, if you get up on options, if you get up on call options, sell them and take the money. You can't diamond hand call options in a squeeze play or a FOMO play. If you made over 100%. Some of y'all were making 1,000%. You got to peel that money off. Don't be greedy. Forget about social media price targets. All these people saying Beyond's going to 40 or 100 or whatever. If you're up on your call option, take the damn money because they can bleed out quick, especially when they're high volatility options, high IV. We were looking at it last night. It did have that spike on the Trump news, but it came back down to earth this morning. So, I did not do anything with that this morning. And the other one that we were just kind of watching was Y AI. I know some of y'all were thinking perhaps this will be in play today because it's so cheap and Beyond money. People exiting that trade are going to be looking somewhere to go. I don't know. It's already down 18%. We'll keep an eye on it after the market opens, but honestly, well, let's see. For the next hour, I'm not going to be looking at any other tickers. We're going to be just looking at IMAX. And for those of you that like me, much like me, invest in the entertainment sector, let's just look at all of our movie exhibitor stocks this morning. AMC is at 2.76 in premarket. IMAX is up about 3% at $33. Cinemark, 26.51. And Dolby down three and a half percent. Come on Dolby, what's up with you? DLB. I think I had a 12-month price target on my chart here for Dolby, didn't I? Maybe not. It is. It is in the demand zone. It's actually even lower than when I bought it back in April. And if you are looking for a profitable company with tentacles in multiple areas, Dolby is not just a movie theater company. Obviously, it's one component of their overall package. I need to look and see when the next earnings is for Dolby. Looks like it's late November. This is a good company to consider as an ancillary entertainment ticker. IMAX, back when I bought it, I bought it originally at 15 bucks. We had set a price target of $32 for IMAX, and that was a 12-month price target that I set in June of 2024. Well, sorry, I said by end of year 2026 it would hit 32. We already hit 32 a year ahead of what I had penciled in here. So pretty good trade. Cinemark, I have August of 2026 for it to hit about $36. And if 2026 is as good as we think, I think there's a good upside potential here for Cinemark. They're going to be running at capacity. So, we'll see. Dark Ace says, 'Burn my fingers in Beyond. Learn my lesson.' Yeah, I mean if you haven't traded one like that, it is a lesson. Dark Ace, don't feel bad. Everybody's got to cut their teeth at some point. But always play the momentum, play the chart, and use social media as entertainment because most of those people have no idea what they're talking about and they're sharing false information. It was a great hype. A lot of reason to be excited, but you got to be unemotional about these and also learn who is not giving you accurate info and who's trying to help. It is called tuition, Dink. Yes, sir. Good morning. Coffee time. What do we have? Oh, my Texas Longhorns. My kid gave this to me for a Christmas present. Hook 'em Horns. Msad Salem says, 'Why do you think 2026 will be a good year for the box office?' We'll go through this slide deck and you'll hear Rich Gelfond, the CEO of IMAX, talking about expectations for next year and so will the Cinemark CEO and then so will Marcus Corp and then eventually when we get to the AMC earnings call, they'll talk about it too. Everybody is expecting based on the slate of movies for 2026. Here we go. It's on page 15 of the slide deck. We got carryover from Avatar. We got the movie Mercy, Project Hail Mary. We got Super Mario, Michael, Mortal Kombat 2, Mandalorian, Toy Story 5, Supergirl, Minions 3, Moana, Christopher Nolan's The Odyssey, Flower Veil Street, Resident Evil, Street Fighter, Hunger Games, Narnia, Avengers Doomsday, and Dune Part Three. I mean, there's some major huge tent poles in there. What we really need to do if we're investing in this industry though is understand quarter by quarter might not matter so much if you're investing in a Cinemark or IMAX, but for AMC you must understand the quarterly and so I will be talking about that in the coming weeks once I finish my full projections, predictions by quarter. It's going to take me a day to do that. The longer I delay it, the more accurate I'll be, so I'm not in a rush to try and get that done. Let's see if we got music still here or not. Yeah, still got music. Jeff says, 'What if Beyond actually hits 10 or 20?' I mean, it's under three bucks right now, Jeff. I don't know how you get it back up. We were talking about it last night. Sometimes these trades have a second spurt of activity, but typically they need to fall down a considerable amount to the next level of support, which for what I'm seeing on Beyond is probably around the $1 or $2 level. Then you get another little bump, but they rarely, I'm not going to say never, but they rarely go past this first wave of investor excitement. Once this kind of dies down, now you're dealing with long-term holders. There's going to be people that are long-term holding. And if you're stuck in that boat, I'll do some analysis of Beyond this weekend and what I think's going to happen over the next year. You need to understand the November proxy and the amount of dilution that is headed your way in a month. It doesn't matter. Don't worry about that right now. Andrew says, 'We are excited about the overall evolution of the movie industry. Great movies with cult-like followings. I'm super excited about some of the titles at the end of this year and a lot of these for next year also.' What do we have to finish up this year that I'm planning on seeing? I'm going to go back and see Sinners again. I'll probably go to the Dolby instead of IMAX if it's offered in Dolby. Our IMAX here is not that comfortable. They don't have the nice seats like the Dolby and it's much further away for me. Predator Badlands in November. I'm actually looking forward to that one. Running Man. Yes. Wicked. Yes. I'll go watch that. If they reshow the first Wicked, I'll go rewatch that in Dolby first. Zootopia, I don't really care about, but I know a lot of the kids will like it. Rolling Stones. I will go see that. And of course, Avatar. I don't know what this is. Is this a reshowing of the original Shining? I need to go look at that. I'm not sure what that is on the schedule there. All right, here we go. I'm going to shut up.

Thanks, Rich. And good morning, everyone. IMAX's third quarter was one of the best in our history, showcasing our global scale, our agility in programming a diverse content portfolio, and in turn the profit and cash incrementality in our business. Third quarter IMAX box office of $368 million was 50% higher year-over-year and exceeded street estimates by more than 25%. Signings for IMAX systems at the end of September was 142, already eclipsing full year 2024, and system installations are now tracking to the high end of our guidance range of 150 to 160 systems. From a profitability perspective, our operating leverage shined through in Q3 with an adjusted EBITDA margin of 48.6%, up a substantial 630 basis points year-over-year, and adjusted EPS of 47 cents, up 12 cents year-over-year. Our profit incrementality flowed through, contributing to cash from operations of $67.5 million, which set a new quarterly record and was up more than 90% year-over-year. As I said on last quarter's call, these are not just numbers. They are a direct result of growing demand by filmmakers, studios, exhibitors, and consumers for the IMAX experience. Our Q3 global market share reflected that, increasing 49% year-over-year to 4.2%, marking a new IMAX high. Our goal though is not to just outperform the market, but to expand it, drawing more consumers to theatrical, eventizing content while opening the aperture to bring audiences more of the entertainment they seek, whether Hollywood, local language, or alternative content. This works for us, but it helps our studio partners. It supports our theater customers, and it is responsive to consumer demand for the best possible experience. All of this has resulted in year-to-date performance that positions us to meet or beat every one of our full year guidance measures. Taking a closer look at our Q3 results, overall we delivered revenues of $107 million, 17% growth over the prior year third quarter of $91.5 million, and achieved gross margin in Q3 of $67 million which grew 32% year-over-year. This resulted in a 63% margin, which is a 740 basis point improvement over the prior year period, reflecting high incremental profit flow-through from the stronger box office performance. Looking at our results at the segment level, content solutions revenues of $45 million increased 49% year-over-year driven by the significant growth in IMAX box office, which as Rich described was propelled by a diverse mix of content globally. I am especially pleased with the programming agility we demonstrated. We released four fewer Hollywood titles in the quarter than the prior year. And yet, we were able to grow box office 50% by consistently capturing higher opening weekend market share and leaning more into local language while adeptly filling in with alternative content. Overall, this led to the third quarter global market share of 4.2% on less than 1% of screens driven by a remarkable 6.1% share of domestic box office. And the setup for Q4 looks very positive with major titles in front of us including Avatar anchoring the year. Content solutions gross profit of $32 million showed tremendous growth up 94% or $15.5 million year-over-year. While gross margin reached a record 71%, up a substantial 1,600 basis points from the 55% gross margin in the prior year, spotlighting the significant incrementality that results from higher levels of box office. Technology products and services revenues of $60 million was up $2.4 million year-over-year with gross profits of $35 million resulting in a 58% margin up approximately 250 basis points year-over-year driven by both growth in our global box office and maintenance revenues that more than offset a lower level of systems installed under sales arrangements. System installations in the quarter of 38 systems compared to 49 in the prior year reflected in part the more balanced timing we're seeing this year with a higher level of first half installations. As of today, we are at approximately 100 system installations. And as highlighted earlier, we now expect to be at the high end of our system installation guidance for this year. And the momentum for signings continues with 19 signings in Q3 and 142 September year-to-date already exceeding the 130 for full year 2024. The diversity of signings is especially encouraging. We have achieved near-record signings in Japan of 11 systems. Many of them are in new and exciting locations in under-penetrated areas in the country and they're performing exceptionally well since opening. We've built momentum in Germany with the successful release of our first-ever German language film in Q3 that resulted in a very strong opening weekend and we expect we'll have four new German locations open by the end of the year. We are very excited about the growth in Australia as well where we have had signings with multiple customers and expect to exit the year with 10 open locations compared to two locations a year ago. And in the US, we expect to expand with new regional partners, including five signings with Apple Cinemas in the quarter with one in a highly desirable central area of Philadelphia. Operating expenditures defined as research and development and selling, general and administrative expenses excluding stock-based compensation was $30 million in the third quarter, which was consistent with the second quarter. However, increased year-over-year as the third quarter of 2024 benefited from adjustments to performance payouts related to our SDT business and from the timing of capitalization of film camera costs. We continue to focus on looking for ways to better use technology and scrutinizing work processes to find productivity opportunities across our business. Overall, our strong operational performance led to a third quarter total consolidated adjusted EBITDA of $52 million, which increased $13 million or 34% year-over-year driven by higher revenues, which mostly flowed through to gross margin. This resulted in an impressive adjusted EBITDA margin of 48.6%, up approximately 630 basis points year-over-year and giving us a year-to-date adjusted EBITDA margin of approximately 45% relative to our full year guidance of low 40s percent. Third quarter adjusted EPS was 47 cents up 12 cents year-over-year driven fully by strong profit growth as our Q3 tax rate of 19% was a headwind of 3 cents year-over-year. Our September year-to-date tax rate is 24% which is consistent with a normalized effective tax rate and what we would expect for the full year. Turning to cash flow and the balance sheet, cash flow from operations of $67.5 million set a new quarterly record. This excellent result reflects the very positive incrementality in our model as well as the timing of collections of the larger first half box office title. September year-to-date cash flow from operations was $98 million and has already exceeded by 40% 2024 full year operating cash flows of $71 million. Year-to-date free cash flow before growth capex is $87 million and equates to an adjusted EBITDA conversion of 68%, a very strong result through 9 months. As previously communicated, we expected operating cash flows to show strength and growth this year. Similar to total adjusted EBITDA, the dynamics of cash flows are quite positive as box office expands leading to incrementality, particularly considering the cash flow characteristics of our joint revenue sharing contracts where the capital expenditure is at the beginning of an average 10-year contract term. Turning to investing cash flows, we continue to prioritize use of our available capital to invest in the business, including $24 million spent on growth capex year-to-date related to partnering with exhibitor customers to grow and upgrade the IMAX network through joint revenue sharing arrangements. This represents an attractive return on investment opportunity as numerous large partners including AMC, Wanda, and Regal are ramping up investment in IMAX as they upgrade their complexes, including bringing IMAX in to replace other premium formats as they look to capture more of the market share gains IMAX is delivering through our film for IMAX program and the exceptional slate ahead of us in 2026, 2027, and beyond. Our capital position remains very strong with a Q3 ending cash balance of $143 million, an increase of $34 million from the second quarter. In our capital structure is $230 million of debt from our convertible senior notes due in April 2026 that bear an interest rate of 0.5% per annum with a cap call leading to a $37 per share conversion price. With our strong liquidity position and available facilities, we have the ability to be opportunistic as we assess the timing of when to address these notes and the nature of the instrument, whether that be with our revolving credit facility or through new notes. Debt excluding deferred financing costs was $261 million and our current available liquidity is approximately $544 million. In conclusion, the team continues to execute well. We are successfully capitalizing on our strengthening position in the theatrical ecosystem and the growing contribution we can make to the industry. We are deepening partnerships with studios and filmmakers. Programming with agility, our global commercial network of over 1,750 locations, connecting with our fan base to bring more of the Hollywood, local language, and alternative content they're seeking out, and partnering with existing and new exhibitors to bring the IMAX experience to more moviegoers. The model is working. The operating leverage we have discussed is coming to fruition. We are gaining market share and meeting or exceeding expectations across our guidance measures of IMAX box office, installations, and adjusted EBITDA margin. But to be clear, we are not resting on our laurels and we are focused on delivering results through the end of the year and beyond. As we look past 2025 into 2026, there is good visibility into IMAX's future system installations as well as the film slate. We have a backlog of nearly 500 systems and an addressable market less than 50% penetrated with potential for additional zones. We also have an increasingly clear view into the film lineup for 2026 and beyond, including significant mega-title catalysts on the horizon. We believe IMAX has never been in as strong a position and we have scheduled on December 4th our first investor day since 2017 to share the compelling opportunity we see in front of us, how we will execute to capture it, and in turn deliver strong shareholder returns. We'll dive deeper into what we see as the next era of IMAX, expanding our global content pipeline, accelerating network growth, and advancing the IMAX technology that continues to redefine the cinematic experience. With that, I will turn the call over to the operator for Q&A.

Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Eric Handler of Roth Capital. Your line is now open.

Good morning. Thanks for the questions. I wonder if you could talk a little bit about your margins potential. I mean 71% for content solutions off of a record box office. I'm curious and you had 100% incremental margin off of that. So at what point does your box office, you know, where does the box office get to where all of a sudden you see just margins start spiking? And then as far as the costs are concerned, you know, how stable are the costs in the content solution business? And is that number going to have to grow as you continue expanding or is that something maybe with AI you can keep flat or maybe even down?

Morning Eric. Thanks for the question. We're so pleased with the operating margin in the quarter. The 71% is a high for us and we've talked about this many times about the incrementality in our model and I think Q3 was the perfect opportunity to display exactly what we reference when we talk about over levels of $250 million in a quarter of box office and how the incrementality flows through at essentially an 85% rate and it could be higher. It just depends on what our costs are for that we choose to do for marketing and some of the discretionary costs that we have. But, there is a lot of opportunity to continue to grow our margins and especially as you hit the even higher levels of box office, which is obviously a record year that we're trending to this year with the $1.2 billion. And from a cost basis when you look at it we actually don't have a significant increase in costs expected just because the basis of our costs are pretty stable. We remaster and we find efficiencies and leverage operating leverage in that because as you distribute to more countries it doesn't cost us any more money. We're already doing versioning and marketing in all of those countries. And on the SG&A side, we've been able to keep everything relatively flat with small amounts for inflation each year. And I think we've done a really good job on that front as well. And so overall, our goal is to continue to show increases in our margins and allow the flow-through to happen all the way down to cash.

Great. And then Rich as a quick follow-up, you know, exhibitors can see that your market share is growing quite nicely. I'm just curious, you know, as theaters see more film for IMAX movies coming, you have the Halo effect raising the market share for non-FFI movies. How are, you know, is the volume of requests for proposals just skyrocketing at this point or you know maybe you could talk about that dynamic a little bit.

Thank you. One moment for our next question. And our next question comes from line of Eric Wool of Texas Capital Securities. Your line is now open.

Thanks. Good morning Richard and Sasha. I guess kind of following up a little bit on the last question on kind of on the exhibitor kind of demand side. Think about from the other way. I guess as you think about the limited amount of real estate for content that you have each year and understanding that you know for example '26 is mostly spoken for with content you know already under contract. I guess what is the best opportunity to really drive you know from your end or work with the exhibitors to drive greater box office revenues on that content for example you know where can you further leverage marketing to drive attendance and drive people into the theaters on that content and I know you can't necessarily push price from your end but why aren't we seeing more ticket price leverage you know for IMAX films from the exhibitors given you know the clear demand from moviegoers, especially given you know the limited runs that most of your films have in their theaters. Why aren't they taking price even more so on IMAX films?

Thank you. One moment for our next question. And our next question comes from Alan Drew of B. Riley Securities. Your line is now open.

Okay. Thanks. Hey guys, good morning. So, I had a couple questions on 2026. You know, I guess you're likely to address this at your investor day, but any preliminary thoughts on 1Q and your ability to grow box office as you lap a tough comp from NHA 2 and then separately, you know, I noticed in your press release and your prepared comments, you highlighted four massive tentpoles. Absent from that was the Avengers, which I think historically has enjoyed success on IMAX screens. Just you know curious if there's anything to read into that omission. Thanks.

Got it. Thanks Rich.

Thank you. One moment for our next question. And our next question comes from the line of Omar Majzoub of Wells Fargo. Your line is now open.

Good morning and thanks for the question. Maybe just more broadly you recently announced the first IMAX investor day since 2017 and I'm just curious why is now a good time to get together and share what's ahead for IMAX? Just if you could share what you're most excited about for IMAX in the years to come, that'd be great.

Great. And maybe just a quick followup on the global opportunity set. You obviously have momentum in the business and a great 4Q slate ahead that ends with Avatar Fire and Ice. What countries or regions do you think IMAX has the biggest opportunity to drive incremental installations and grow the network and any color on that would be helpful. Thanks.

Thank you. One moment for our next question. And due to time, please limit yourself to one question. And our next question comes from the line of David Joyce of Seaport Research Partners. Your line is now open.

Thank you. In thinking about your programming strategy, how do you weigh the pros and cons along with the various economic impacts of running concert films or rerunning a recent release like Formula 1 or an old one like Jaws as a 50th anniversary versus showing a new theatrical release like Jurassic World that you were not able to show earlier in the summer.

And is there a margin differential like is there marketing on some sorts of content that tilts the scale for you one way or the other?