IMAX Corporation (IMAX) Earnings

Management highlights

- Rich provided update on his recovery and expressed excitement about the IMAX business. - Discussed strong global box office performance with projects like Project Hail Mary, Avatar Fire and Ash, Super Mario Galaxy movie, and Michael. - Highlighted promising slate at CinemaCon including Christopher Nolan's The Odyssey, Dune Part 3, and other major tentpole films. - Talked about growing lineup of Chinese films and local language slate internationally. - Mentioned adding high-profile releases in future years and programming experiences beyond feature films like Formula One. - Emphasized IMAX's unique technology, image capture, and quality control leading to passionate fan base.

Guidance

- Confident in 2026 guidance including record $1.4 billion in global box office. - Expect 160 to 175 system installations worldwide. - Adjusted EBITDA margin in the mid-40s percent with at least 45%.

Segment performance

For the content solution segment, revenues declined 8% to $31 million due to tough comp in China against last year's massive hit, Nezha II. Box office grew significantly outside of China, including 90% growth in EMEA, while China box office declined 62%. Content Solutions delivered gross profit of $18 million, a decline of $5 million, and gross margin declined to 58% versus 69% in the prior year. For the technology products and services segment, IMAX delivered revenues of $48 million, a decline of 4% driven by lower box office related system rental revenue in China. Gross profit margin of 56% was in line with prior year. Installed 19 systems in the first quarter, with 11 joint revenue sharing systems and 8 sales arrangements, 11 upgrades, and 8 new locations.

Analyst Q&A

• Q: Natasha, just on the adjusted EBITDA margin guidance with a floor of 45%, does that assume a global box office of $1.4 billion? And if so, just trying to understand how the margin would be flattish year-on-year with an incremental $100 million-plus in box office.

  A: Hi, Drew. So yes, margins really, it does fluctuate normally quarter to quarter, but as you look at the whole year, billion for a box office, I understand the incrementality will come through, but we've chatted about this even on the last call as well, is that there's always a mix between the regions of box office, whether you have local language or Hollywood, and the amount that we're investing into marketing in this year. There are a lot of Hollywood titles that are significantly larger titles than last year. And as we look towards that, our goal would be to lean in heavily into IMAX and marketing the titles as well. And so that's where the margins can ebb and flow. And of course, you can capture more than the 45%, but this is just from a guidance perspective, providing that guidance with respect to the floor of the 45%. But of course, there's opportunity in that too.

• Q: Any disruptions created by the U.S.-Iran conflict during late 1Q or early 2Q? Anything you've seen, anything contemplated in your annual outlook?

  A: No, not at all. If not for us, we know we have about 35 locations within the region in the Middle East and majority are continuing to operate. We haven't experienced anything significant that has, you know, will impact our plans for the year as well. And as you heard, we continue to expect to installs 160 to 175 systems as well. So, you know, if you look at the way that we're building out our entire worldwide network, there's many countries that we're leaning into, and one of those is Australia that we just signed the deal with this week and announced as well.

• Q: Just on the Australia deal, nice to see some growth from that region. Just curious if you could sort of frame it for us, Natasha, the growth opportunity network-wise in Australia and and Japan, and then the follow-up I'll give you now, just what you see from those regions as well in terms of relative PSAs and local language development in terms of films.

  A: Yeah, I think it was a really important deal for us. I mean, for the longest time, we had only about two locations. This past year in 2025, we ramped up and installed some more locations in time for Avatar and Started the year with about 10 locations and now adding this new deal, you know, we're sitting with the potential to double, more than double our footprint in Australia. Australia is one of the strongest performing regions and countries for us. Some of the locations have PSAs up to $4 million, which is absolutely amazing. And I think But that's the opportunity is the ticket price varies over there as well. And so knowing that you have the opportunity to have outsized performance from a mix of not only growing your network, but you're also getting the leaning into IMAX and the higher ticket prices. I mean, it's been one of our priority markets as well. We're only about 13% penetrated. So there's a lot of growth and opportunity there. And as you look at Japan, we signed another seven systems in Japan this quarter. Last year, we signed 13. And off of the success of Demon Slayer in local language in Japan, we're continuing to do that. I did announce in the prepared remarks, and it was heavily shown at CinemaCon as well, Godzilla minus zero, so our first local language system. Film for IMAX title in Japan, which they're leaning in very heavy into IMAX with that as well. And, you know, Japan's only 47% penetrated. So a lot of opportunity there. And those per screen averages remain just as strong as they've ever been, which is very good because I think, you know, as we start to expand in Japan and continue to grow that network, you know, you contemplate whether or not the per screen averages will move, but they've actually shown considerable strength there.

• Q: Starting at your investor day last year, you did mention how IMAX was selectively looking at opportunities to maybe put some more capital into Their deals above and beyond just sort of like the cost of the screen installation. This $8 million of higher lease incentives, is that part of that strategy? How do you measure ROI with those investments?

  A: It is, Eric. Actually, you know, it was a significant expenditure for us in the quarter, and I'm sure you saw that it impacted our cash from ops, but I see that as a good thing. you know, investing the $8 million to help grow the network faster ahead of the fantastic slate that we still have ahead of us coming and as well into 27 and 28, I think that's the opportunity for us. And we do value and really look at what the opportunity for return on it is. So first of all, always using that capital for new locations and not simply for upgrades. So that would be new box office potential for us. but also in high-performing markets and with partners that we know that we can expand and have greater penetration as well. And we know that they'll lean in and all of those things working together, we've been able to value out what that arrangement will look like. And each arrangement does look different as well. But of course, all within the respect of making sure that we hit our return hurdles and And also just for the opportunity to continue to quickly expand the network, therefore grow the box office. And as you know, that will continue to not only grow the box office, but then grow the network. And it works in a nice cycle from that perspective.

• Q: As you look at the backlog, I know you've worked on in prior years cleaning up the backlog with the agreements that may be stale in there. Any remaining opportunities there? in the backlog to kind of work with exhibitors to accelerate installations, move locations around to other zones that may be earlier in kind of the queue or shrink zones to kind of drive new deals?

  A: Yeah, I think obviously we have good visibility into our backlog. We're at about 430 systems. We do comb through that backlog. We actually did an exercise a couple years ago, which I know we've talked about, that we've kind of walked through our backlog and made sure everything is that we're able to roll it out and we've updated our plans and we continue to do that. And so we feel good about our backlog. There is always opportunity. There are some of our exhibitors are global exhibitors. So they operate in different countries. And so there are opportunities when they sign deals that sometimes will shift it from one country to another. And we've done that very recently as well. And so I think that where our team is very active and skilled in that. They are in constant communication with the exhibitors and are tracking a list. It's all list managed as well, and they have a lot of experience in that area.

• Q: India has been a market that's had a lot of potential and you had some good progress with some local language content. But historically, there have been, let's call them backlog conversion problems. It's taken longer than you thought to get some of these theaters open. Where are we in that process today?

  A: Yeah, I think we still have a lot of opportunity. I think we're only about 28% to 30% penetrated in India. So a lot of growth to be had. And you're not wrong. It does take long to install and get permits and complete an installation. But what you haven't maybe seen is that we have grown that network over the past few years. And we have been signing with different partners in India as well. And so that's been a good opportunity for us. one thing that, as you mentioned, is the local language. For us to be doing the Ramayana part one, there will be, that's this year, there will be a part two, and then Varanasi, all filmed for IMAX titles in India, that's a really big deal because over 90% of their box office is local language. And so the big opportunity before us is to continue to show how well local language can perform in IMAX in India, and therefore it'll stir up that conversation for future growth there as well.

• Q: A little bit more on the local language side. How do you expect the next couple of quarters to comp you over a year with China Box Office? and total local language box office versus the prior year. And overall for this year, do you expect local language to be able to grow versus 2025, or are the couple of really big titles last year a little bit too much of that hurdle?

  A: Hi, David. I think our local language underpinnings are strong. I mean, the rest of the world, our local language has continued to increase over the last few years. Of course, last year was very strong with the NAJA2 effect. But if you actually take out China, you can see that our local language is growing. And even this year, we expect it to continue to grow. And there's a lot of diverse content. Within the past year, we've done nine new countries, like local language coming from nine new countries. Actually, this quarter, we had our first Taiwanese title as well. And so I think that there's a lot of opportunity. But I think what's even more important is that with the Hollywood slate, it is making sure you have the right mix to make sure that we, you know, penetrate into the right markets with the right type of film. And so if Hollywood is going to do better for a particular period, we will lean in in that. And if it's not, then we'll lean in on the local language. And that's what's great about all of the different pieces of content that we have and all of our content partners worldwide. With having over 60 content partners worldwide, you have the ability to lean into alternative content. We've been doing music films as well. We did Epic this past quarter for Elvis and we've done some other pieces of content. We have the F1 races coming this weekend and other opportunities of other local language that we've been doing. We've been doing a Japanese anime rollout as well and in South Korea been doing some content. I think our whole goal is to make sure we're doing a whole portfolio between our Hollywood local language and alternative content to make sure we're maximizing box office and leaning in. And even on that, like this past week, we did a fan first event and brought back Speed Racer for our fans and on a night or a couple nights that we wouldn't have really had much box office brought in over a million dollars. I think our whole goal is to look at utilization and maximizing box office, and we're highly focused on that.