IMAX Corporation Q1 2010 Earnings Call Transcript

IMAX Corporation Q1 2010 Earnings Call Transcript
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IMAX Corporation (IMAX)

Q1 2010 Earnings Call

April 29, 2010 8:30 am ET

Executives

Heather Anthony – VP, Investor Relations

Rich Gelfond – Co-Chairman & Co-CEO

Joe Sparacio – EVP & CFO

Analysts

Richard Ingrassia – Roth Capital Partners

James Marsh – Piper Jaffray

Marla Becker – Hudson Square Research

Steve Frankel – Brigantine Advisors

Mark Argento – Craig Hallum Capital

Jeff Blaeser – Morgan Joseph

Aravinda Galappatthige – Cormack Securities

Jim Goss – Barrington Research

Martin Pyykkonen – Janco Partners

Eric Wold – Merriman Curhan Ford

P

resentation

Operator

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Welcome to IMAX Corporation’s first quarter earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference over to Ms. Heather Anthony. Please go ahead, Ms. Anthony.

Heather Anthony

Good morning and thanks everyone for joining us on today's first quarter 2010 conference call. Apologies for the late start. We had some technical difficulties. Joining me is our CEO, Rich Gelfond, and our CFO, Joe Sparacio. Also with us are our Senior EVP and General Counsel Rob Lister.

Before we begin, let me remind you the following information regarding forward-looking statements. Our comments and answers to your answers on this call may include statements that are forward looking in that they pertain to future results or outcomes. Actual 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 sales or future results and outcomes.

During today's call references may be made to certain non-GAAP financial measures as defined by Reg G of the Securities and Exchange Commission. A discussion of management’s use of these measures and the definition of these measures are contained in this morning’s press release. The full text of our first quarter release along with supporting financial tables is available on our web site,

www.imax.com

.

Today's conference call is being web cast in its entirety on our web site. Today, Rich will review highlights of the first quarter, our outlook for future growth, the film slate and our general tone of business. Joe will then review our Q1 financial results in more detail.

With that let me now turn the call over to Rich.

Rich Gelfond

Thanks Heather. We are very pleased with our first quarter 2010 financial results. Our performance highlights the dynamic nature of our business model and what can happen when compelling film content is combined with our growing theater network.

While we recognize that a film like Avatar is not an annual event it is important to remember that we would not have been able to capitalize on this cultural phenomenon were it not for our transition to digital and the implementation of our new financial model which accelerated the growth of our network, ensured greater box office impact of Hollywood films at IMAX and most importantly established recurring revenues. This model is still very much in its early stages but it is clear that this approach is resulting in significantly stronger operating performance.

On our last call we spoke about Avatar and the halo effect that it was having on different areas of our business. The first area was of course its financial benefits which is certainly evident in our first quarter results as are the results of Alice in Wonderland which also is a large contributor to our first quarter.

Adjusted EBITDA increased to a record $42 million for the quarter compared to last year’s first quarter adjusted EBITD of $7 million. Adjusted EBITDA for the trailing 12 months ended March 31 was $93.4 million compared to $15.1 million for the same period last year. Total revenue increased 120% to $72.8 million from $33.1 million last year. Adjusted EPS increased to $0.53 per diluted share compared to a loss of $0.06 per share on the same basis last year. Reported EPS increased to $0.40 per diluted share from a loss of $0.06 last year and we reduced net debt down to $16.5 million compared to $161 million last year and $30 million as of the end of 2009.

Perhaps more important than the near-term financial benefits of Avatar and Alice is the positive impact these titles are having on other areas of our business, namely network expansion, the further expanding of our relationships in Hollywood, increased consumer awareness and demand for the IMAX experience. Our strong film slate has also benefited several of our other business segments making our entire enterprise more profitable than we had experienced in the past.

In addition, recurring rev segments by joint ventures, DMR and maintenance represented 65% of total revenue in the quarter compared to 30% last year and an average of 52% over the last four quarters.

During the quarter we signed deals for 41 systems including a minimum of ten JVs with CJ CGV in South Korea, five JV’s with Tokyu in Japan and four JVs with Gaumont Pathe in France. The quarter also included deals with our partner Odeon in the U.K. for an additional theater bringing Odeon’s theater count to six. Rising Star in Russia, our first theater with Shaw Brothers in Singapore and our first theater in Croatia. Domestically we signed deals with strong regional operators like Warren Theaters and Penn theaters. We believe this deal activity is a reflection of the strong IRRs our exhibitor partners are enjoying overall and the strong box office results their IMAX Theaters are generating which creates competitive advantage for our customers in their given marketplace and increases the productivity of their complexes.

Given these as well as other theater deals signed during the first quarter we now expect to install approximately 40-45 joint venture theaters from backlog in 2010, up from our recent estimate of 35-40 out of backlog provided on our March conference call. In addition we now expect to install 15-20 sales type lease systems excluding digital upgrades from backlog in 2010, up from our recent outlook of 10-15 installed. We continue to expect additional signings and installs not yet accounted for throughout the year. As a reminder, installations can slip from period to period usually for reasons outside of our control.

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