IMAX Corporation (
Q3 2010 Earnings Call
October 28, 2010 8:30 am ET
Heather Anthony - VP of IR
Rich Gelfond - CEO
Joe Sparacio - CFO
Rob Lister - Senior EVP and General Counsel
James Marsh - Piper Jaffray
Richard Ingrassia - Roth Capital Partners
Jeff Blaeser - Morgan Joseph
Marla Becker - Hudson Square
Mark Argento - Craig-Hallum Capital
Martin Pyykkonen - Wedge Partners
Jim Boyle - Gilford
Steven Frankel - Dougherty & Co
Jim Goss - Barrington Research
Welcome to IMAX Corporation’s Third Quarterly Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Heather Anthony, Vice President of Investor Relations. Please go ahead, ma’am.
Good morning. Thanks for joining us on today’s on third quarter 2010 conference call. Joining me is our CEO, Rich Gelfond; and our CFO, Joe Sparacio. Also with us is our Senior EVP and General Counsel, Rob Lister.
In addition, this morning we’ve loaded a PowerPoint presentation in PDF format on the IR section of our website to help illustrate some points included in today’s discussion.
Before we begin, let me remind you the following information regarding forward-looking statements. Our comments and answers to your questions on this call may include statements that are forward-looking and that they pertain to future results and outcomes.
Actually future results or occurrences may differ materially from these forward-looking statements. Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and outcomes.
During today’s call references may be made to certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission. A discussion of management’s use of these measures and the definitions of these measures as well as reconciliation to adjusted EPS and adjusted EBITDA are contained in this morning’s press release. The full text of our third quarter release, along with supporting financial tables, is available on o www.imax.com. Today’s conference call is being webcast in its entirety on our website.
With that, let me now turn the call over to Rich Gelfond.
Thanks, Heather. These are exciting times at IMAX. Today we sit at the intersection of the entertainment industry, innovation and the digital world, which is revolutionizing our business in many ways. The powerful global appeal of our brand is increasing and consumers worldwide are seeking premium at home entertainment experiences, differentiated from the choices in home and in traditional theatres. These trends are providing wind at our back.
Our third quarter results reflect these trends, demonstrating the strength of IMAX’s business model and the continued demand for IMAX theatres throughout the world. In many respects the third quarter was the best quarter we ever had, most notably for theatre system signings.
These signings have resulted in a backlog that should increase the size of our commercial network by 70%. The simple fact is that consumers are embracing the IMAX brand and experience. As the result exhibitors around the world are more interested than ever for being in the IMAX business and theatres are eager to provide the IMAX experience for their blockbuster films.
The powerful combination of strong global consumer demand and contracted network growth is giving us increased visibility in to the future of our business. The third quarter, one which featured only one breakout film, Inception, illustrates how network growth and diversified film slate can drive financial performance.
We believe that for the next couple of years, the math is relatively simple. To hold our film performance constant with historical levels, excluding any impact from Avatar and simply layer on the growth of our theatre network, our financials will continue on a positive growth trajectory.
The slides have been prepared and designed to help illustrate this math. Before I spend further on the model, let me give you some highlights of the quarter and then Joe will provide more details.
Our 17% in top-line growth resulted in a 150% increase in net income through the third quarter, excluding variable stock compensation. On a per share basis, that translates into in to $0.15 a 128% increase compared to the EPS of $0.06 on the same basis last year.
Our trailing 12 months EBITDA increased approximately 140% to $96.5 million versus $40.3 million in a comparable period last year. As a result, cash on the balance sheet was $45.5 million at the end of the quarter and our net cash position was positive by approximately $24 million, up sequentially versus that of the second quarter.
The significant improvement in our bottom line this quarter demonstrates that our new business model as delivering as we had envisioned.
As you know we have shifted our strategy to rolling out more revenue share theaters in which we shared our percentage of the ongoing box-office in return for contributing our digital theater systems. The percentage of ongoing box we received from exhibitors is an addition to the DMR revenues, which we receive from the studio. The combination of these factors is driving our significant gross margin expansion.
We’ve been often asked, what is driving our business momentum? Expanding on my earlier comment, from the consumer standpoint we believe IMAX stance, seek out IMAX, because it is the best way to experience the biggest blockbuster movies of the year, whether in 2D of 3D.
For the studios it is the incremental revenues from an IMAX release, the price premium and the marketing boost as IMAX events the size of the film. From the exhibitors standpoint we believe it comes down to the ways to return of the IMAX business model, incremental box office and market share gains.