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After a strong summer box office run, theater chains have been girding themselves for a slowdown this fall amid a lack of studio tentpoles. And the disclosure that debt-laden Regal owner Cineworld is beginning Chapter 11 bankruptcy proceedings has ricocheted across the global theatrical industry.
“Imax has a longstanding, great partnership with them,” said Imax CFO Natasha Fernandes at the Bank of America Media, Communications and Entertainment Conference on Wednesday, when asked about Cineworld’s bankruptcy proceedings. The exec added: “We have a strong liquidity position and a flexible business model, so we can kind of maneuver and navigate changes in the exhibition landscape from that point of view.”
In August, Imax said that it inked an expanded deal with Cineworld to open or upgrade 52 of its systems in Cineworld locations by 2026. (In total, Imax operates 1,600-plus screens globally, with 773 in China and 363 in the United States.) The Mooky Greidinger-led Cineworld, which operates 9,000-plus screens globally, stated that it was starting Chapter 11 proceedings in Bankruptcy Court for the Southern District of Texas but “expects to operate its global business and cinemas as usual without interruption.”
Fernandes indicated that Cineworld’s restructuring wouldn’t have as much of an impact on Imax locations. “As you look at the restructuring and the bankruptcy that’s been announced, it’s basically to help them clean up the balance sheet…and to continue to operate going forward,” the Imax CFO elaborated during the webcast panel. “So if they’re going to operate, they’re going to operate the top complexes — so clean up the underperforming complexes and either sell them off or do something with them. But that’s not where Imax screens are; Imax screens are all in the top performing complexes.”
Powered by blockbusters like Paramount’s Top Gun: Maverick, Marvel’s Doctor Strange in the Multiverse of Madness and Universal’s Jurassic World Dominion, Imax’s revenue for the quarter ending June 30 jumped to $74 million, up from $60 million in the prior quarter. The company also said that it had increased its box office share to 5 percent of the domestic market this year, up from about 3 percent during pre-pandemic 2019 when revenue in North America hit $11.4 billion.
Yet the theater chain still posted a loss of $2.9 million despite a string of box office hits as the sector keeps recovering from COVID-era lows.
Since Jan. 3, the first day of trading this year, Imax stock has fallen 15 percent, to $15.48 as of Sept. 7. (That’s a smaller decline than memestock AMC Theatres, the world’s largest theater chain, whose stock price has dropped about 68 percent this year, or exhibitor Cinemark, whose shares have fallen about 19 percent since the beginning of 2022.)
Imax has aimed to position itself as a technology platform and premium theater experience to set itself apart among chains. “We are not an exhibitor and this obvious fact is further demonstrated by our results,” CEO Richard Gelfond said on an earnings call July 28. “Despite a first quarter nearly devoid of blockbuster releases, our year-to-date domestic box office through June trailed 2019, our best year ever, by only 5 percent. And in contrast the domestic exhibition industry was down 35 percent over the same period.”
Earlier this month, on Sept. 2, MKM Partners’ Eric Handler gave a “buy” rating to Imax, saying its “blockbuster film focus, global footprint, and asset light financial model have insulated the company well from the broader issues being seen with traditional movie theater operators,” but the analyst reduced his price target for the stock by a dollar to $22 a share.
Fellow Wall Street analyst Eric Wold, of B. Riley Securities, has Imax as a “buy” at $25 a share, as of his latest research report in late August, and says the company has stayed “in a position of strength” relative to its rivals.
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