IMAX CORP - Quarter Report: 2024 June (Form 10-Q)

Despicable Me 4Universal PicturesJuly 2024—A Place Called SilenceMaoyanJuly 2024—A LegendBonaJuly 2024—Indian 2

Lyca Productions

July 2024—Skywalkers: A Love StoryXYZJuly 2024—Kingdom 4Toho StudiosJuly 2024—TwistersUniversal Pictures/Warner Bros. PicturesJuly 2024—

Olympics Opening Ceremony

Universal/NBC Sports

July 2024—SuccessorMaoyanJuly 2024—Deadpool & WolverineMarvel Studios/Walt Disney StudiosJuly 2024—The TravellerNew ClassicsJuly 2024Filmed For IMAXMy Hero Academia The Movie: You're NextToho StudiosAugust 2024—DecodedMaoyanAugust 2024Filmed For IMAXUpstreamAlibabaAugust 2024—White Snake: AfloatWandaAugust 2024—BorderlandsLionsgateAugust 2024—Alien: RomulusWalt Disney StudiosAugust 2024

Expanded Aspect Ratio

The CrowLionsgateAugust 2024—

Everything Everywhere All At Once

A24

August 2024

Takluk

GSC Movies

August 2024—

Beetlejuice Beetlejuice

Warner Bros. PicturesSeptember 2024—Transformers OneParamount PicturesSeptember 2024—WolfsSony Pictures/AppleSeptember 2024—The Wild RobotUniversal PicturesSeptember 2024—MegalopolisLionsgateSeptember 2024—Joker: Folie à DeuxWarner Bros. Pictures/DC StudiosOctober 2024Filmed For IMAXVenom 3Sony PicturesOctober 2024Filmed For IMAXSwan Lake Pathe Live November 2024Filmed For IMAXRed OneAmazon/MGMNovember 2024—Gladiator IIParamount PicturesNovember 2024—Wicked – Part 1Universal PicturesNovember 2024—Kraven the HunterSony Pictures/Marvel StudiosDecember 2024—

(1)The scheduled release dates in the table above are subject to change, may vary by territory, and may not reflect the date(s) of limited premiere events.

The Company remains in active negotiations with studios for additional films to fill out its short- and long-term film slate for the IMAX network. The Company expects to continue announcing additional local language films and exclusive IMAX events and experiences to be released throughout the remainder of 2024 to its global network. The Company has also announced the majority of the titles to be released in IMAX in 2025 including Avatar 3 and a record 14 or more Filmed for IMAX titles including four Marvel titles, the latest Mission Impossible installment, Superman Legacy and F1 from Apple. Additionally, IMAX expects to distribute a number of major titles in 2026 including an Avengers, Star Wars, Batman and Dune title.

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Other Content Solutions

The Company distributes large-format documentary feature films through its global commercial network and institutional theaters. The Company traditionally receives as its distribution fee either a fixed amount or a fixed percentage of the theater box office receipts and, following the recoupment of its costs, is typically entitled to receive an additional percentage of gross revenues as participation revenues. In May 2024, Amazon Content LLC (“Amazon Content”) acquired the worldwide rights to the Company’s original documentary, The Blue Angels, which was filmed with IMAX digital certified cameras and produced in collaboration with Dolphin Entertainment, Bad Robot Productions, and Zipper Bros Films. The full-length documentary was released to select commercial locations across the IMAX network on May 17, 2024, and a 40-minute version will be released to institutional locations beginning in early 2025. The Company continues to work on The Elephant Odyssey a documentary in collaboration with Beach House Pictures Pte Ltd and China International Communications Group, which was announced in 2023 and is expected to be released in 2025, and Stormbound, an additional feature documentary produced by Academy Award-winning producer, Adam McKay, which will be released in late 2025.

In addition, the Company continues to evolve its platform to bring new, innovative IMAX events and experiences to audiences worldwide. As of June 30, 2024, the Company had a footprint of 263 connected locations in the IMAX network across the United States, Canada, Europe, and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound.

In the six months ended June 30, 2024, the Company partnered with Pathé Live for the exclusive release of Queen Rock Montreal which became one of the Company’s highest grossing concert films ever, along with 2023’s Taylor Swift: The Eras Tour. In addition, the Company hosted an IMAX event, Andre 3000: New Blue Sun, and entered into a partnership with A24 for a monthly one-night-only IMAX release of classic A24 titles, including Alex Garland’s highly acclaimed Ex Machina, Uncut Gems, and Hereditary. Additionally, the Company hosted multiple IMAX LiveTM events, including screening the National Basketball Association finals across multiple IMAX locations in the Asia Pacific region and the screening of The Beach Boys: IMAX Live Experience. On July 26, 2024, the Company, in partnership with NBC television network, will be extending its live coverage of the 2024 Paris Olympics Opening Ceremony to select IMAX locations throughout the United States.

The Company provides film post-production and quality control services for large-format films, whether produced by IMAX or third-parties, and digital post-production services. In addition, the Company also provides IMAX film and digital cameras to content creators under the IMAX certified camera program.

Technology Products and Services

The Company works with filmmakers, studios, and artists end-to-end from content creation through content delivery. The Company provides IMAX film cameras to select IMAX and third-party productions and certifies a suite of high-end digital cameras to shoot in the IMAX format under its Filmed for IMAX program. In addition, the Company provides post-production — including its proprietary DMR process — and quality control services for films that play in the IMAX network.

Sales and Sales-Type Lease Arrangements

The Company provides IMAX Systems to exhibitors through sale arrangements or long-term lease arrangements that for accounting purposes are classified as sales-type leases. Under these arrangements, in exchange for providing the IMAX System, the Company earns initial fees and ongoing consideration, which can include fixed annual minimum payments and contingent fees in excess of the minimum payments, as well as maintenance and extended warranty fees (see “IMAX Maintenance” below). The initial fees vary depending on the system configuration and location of the IMAX System. Initial fees are paid to the Company in installments typically between the time of signing the arrangement and the time of system installation. Once an IMAX System is installed, the initial fees and the present value of future annual minimum payments, which are financing fees, are recognized as revenue. In addition, in sale arrangements, the present value of the estimated contingent fees that may become due if certain annual minimum box office receipt thresholds are exceeded is recorded as revenue in the period when the sale is recognized and is adjusted in future periods based on actual results and changes in estimates. Such variable consideration is only recognized on sales transactions to the extent the Company believes there is not a risk of significant revenue reversal. Finance income is recognized over the term of a financed sale or sales-type lease arrangement.

In sale arrangements, title to the IMAX System equipment generally transfers to the customer. However, in certain instances, the Company retains title or a security interest in the equipment until the customer has made all payments required by the agreement or until certain shipment events for the equipment have occurred. In a sales-type lease arrangement, title to the IMAX System equipment remains with the Company. The Company has the right to remove the equipment for non-payment or other defaults by the customer.

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The revenue earned from customers under the Company’s IMAX System sale or sales-type lease agreements varies from quarter-to- quarter and year-to-year based on a number of factors, including the number and mix of IMAX System configurations sold or leased, the timing of installation of the IMAX Systems, the nature of the arrangement and other factors specific to individual contracts.

Joint Revenue Sharing Arrangements

The Company provides IMAX Systems to exhibitors through joint revenue sharing arrangements (“JRSA”). Under the traditional form of these arrangements, the Company provides the IMAX System under a long-term lease in which the Company assumes the majority of the equipment and installation costs. In exchange for its upfront investment, the Company, primarily, earns rent based on a percentage of contingent box office receipts rather than requiring the customer to pay a fixed upfront fee or fixed annual minimum payments. Rental payments from the customer are required throughout the term of the arrangement and are typically due either monthly or quarterly. The Company retains title to the IMAX System equipment components throughout the lease term, and the equipment is returned to the Company at the conclusion of the arrangement.

Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX System in an amount that is typically half of what the Company would receive from a typical sale transaction. As with a traditional joint revenue sharing arrangement, the customer also pays the Company a percentage of contingent box office receipts over the term of the arrangement, although this percentage is typically half that of a traditional joint revenue sharing arrangement. Hybrid joint revenue sharing arrangements take the form of a sale. The fixed upfront payment is recognized when the lease term commences and is recorded within Revenues – Technology Sales. The contingent rent is recognized as revenue over the lease term and is recorded within Revenues – Technology Rentals.

Under most joint revenue sharing arrangements (both traditional and hybrid), the initial non-cancellable term is 10 years or longer and is renewable by the customer for one to two additional terms of between three to five years. The Company has the right to remove the equipment for non-payment or other defaults by the customer. The contracts are non-cancellable by the customer unless the Company fails to perform its obligations.

The revenue earned from customers under the Company’s joint revenue sharing arrangements can vary from quarter-to-quarter and year-to-year based on a number of factors that drive box office levels including film performance, the mix of IMAX System configurations, the timing of installation of IMAX Systems, the nature of the arrangement, the location, size and management of the theater and other factors specific to individual arrangements.

Joint revenue sharing arrangements also require IMAX to provide maintenance and extended warranty services to the customer over the term of the lease in exchange for a separate fixed annual fee. These fees are reported within IMAX Maintenance, as discussed below.

Joint revenue sharing arrangements have been an important factor in the expansion of the Company’s commercial system network. Joint revenue sharing arrangements allow commercial theater exhibitors to install IMAX Systems without the significant initial capital investment required in a sale or sales-type lease arrangement. Joint revenue sharing arrangements drive recurring cash flows and earnings for the Company as customers under these arrangements pay the Company a portion of their ongoing box office receipts. The Company funds its investment in equipment for joint revenue sharing arrangements through cash flows from operations. As of June 30, 2024, the Company had 898 locations under joint revenue sharing arrangements in its global commercial multiplex network. The Company also had contracts in backlog for 327 systems under joint revenue sharing arrangements as of June 30, 2024, including 108 upgrades to existing locations and 216 new locations.

IMAX Maintenance

IMAX System arrangements also include a requirement for the Company to provide maintenance services over the life of the arrangement in exchange for an extended warranty and annual maintenance fee paid by the exhibitor. Under these arrangements, the Company provides preventative and emergency maintenance services to ensure that each presentation is up to the highest IMAX quality standard. Annual maintenance fees are paid throughout the duration of the term of the system agreements.

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All Other

Streaming and Consumer Technology

Streaming and Consumer Technology includes the Company’s Streaming Technology software offerings and IMAX Enhanced product services. Streaming Technology consists of several software products including:

•IMAX StreamSmart – works within existing video compression workflows to reduce bitrates and retain picture quality across all devices and formats and deliver significant cost savings.

•IMAX StreamAware On-Demand – all-in-one quality assurance and quality control to automate and standardize checks for comprehensive content integrity and regulatory compliance for third-party content libraries, across an entire video compression workflow.

•IMAX StreamAware On-Air – real-time monitoring software for live streams, which enables users to monitor video quality across their networks and to identify and address streaming issues.

These AI-powered products allow streaming platforms and broadcasters to automate workflows. The Company believes that these products allow users to deliver the highest quality viewing experiences to their subscribers while reducing costs.

IMAX Enhanced is a solution to bring The IMAX Experience into the home. IMAX Enhanced provides end-to-end premium technology across streaming content and best-in-class entertainment devices, offering consumers high-fidelity playback of image and sound in the home and beyond, including the following features:

•IMAX’s expanded aspect ratio, which is available on select titles and streaming platforms, including Disney+;

•IMAX’s proprietary remastering technology, which produces more vivid, higher-fidelity 4K HDR images on premium televisions; and

•IMAX’s signature sound, which was specially recreated and calibrated for the home to unlock more immersive audio.

To be certified as IMAX Enhanced, leading consumer electronics manufacturers spanning 4K/8K televisions, projectors, A/V receivers, loudspeakers, soundbars, smartphones, personal computers, tablets, and more must meet a carefully prescribed set of audiovisual performance standards, set by a certification committee, along with some of Hollywood’s leading technical specialist.

At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Hewlett Packard, Xiaomi, Sound United and Honor, among others. As of June 30, 2024, more than 300 IMAX Enhanced titles have been released across five of the biggest streaming platforms worldwide: Disney+, Sony Bravia CORE, Tencent Video, iQiyi and Rakuten TV. Over 15 million IMAX Enhanced certified devices are estimated to be in the market today.

Other

All Other also includes revenues from sources including one owned and operated IMAX System in Sacramento, California; a commercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to three other theaters; renting the Company’s proprietary 2D and 3D large-format film cameras; and offering production advice and technical assistance to both documentary and Hollywood filmmakers.

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IMAX NETWORK AND BACKLOG

IMAX Network

The following table provides detailed information about the IMAX network by type and geographic location as of June 30, 2024 and 2023. For additional information regarding the composition of the IMAX network, see “Marketing and Customers” in Part I, Item 1 of the Company’s 2023 Form 10-K.


	June 30, 2024				June 30, 2023
	Commercial Multiplex	Commercial Destination	Institutional	Total	Commercial Multiplex	Commercial Destination	Institutional	Total
United States	364	4	24	392	360	4	25	389
Canada	43	1	7	51	40	1	7	48
Greater China(1)	790	—	13	803	779	—	16	795
Asia (excluding Greater China)	176	2	2	180	145	2	2	149
Western Europe	129	4	8	141	119	4	8	131
Latin America(2)	61	1	7	69	55	1	8	64
Rest of the World	142	—	2	144	140	—	2	142
Total(3)	1,705	12	63	1,780	1,638	12	68	1,718
(1)Greater China includes China, Hong Kong, Taiwan, and Macau. (2)Latin America includes South America, Central America, and Mexico. (3)Period-to-period changes in the table above are reported net of the effect of permanently closed locations.

IMAX currently estimates a worldwide commercial multiplex addressable market of 3,619 locations, of which there are 1,705 IMAX Systems operating as of June 30, 2024, representing a market penetration of only 47%. The Company believes that the majority of its future growth will come from international markets. As of June 30, 2024, 76% of IMAX Systems in the global commercial multiplex network were located within international markets (defined as all countries other than the United States and Canada). Revenues and GBO derived from international markets continue to exceed revenues and GBO from the United States and Canada. Risks associated with the Company’s international business are outlined in “Risk Factors – The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales and future growth prospects” in Part I, Item 1A of the Company’s 2023 Form 10-K.

In the six months ended June 30, 2024 the Company’s revenue generated from its Greater China operations represents 26% of consolidated revenue. As of June 30, 2024, the Company had 803 IMAX Systems operating in Greater China with an additional 263 systems in backlog.

In the six months ended June 30, 2024, the IMAX network generated over $80.0 million in box office from local language films, representing approximately 18% of the Company’s total box office in the period. The Company is also seeing its local language films increasingly generate significant IMAX box office in markets outside of those in which they are released, such as the Japanese film Conan 27 as well as the Chinese film Formed Police Unit and the Korean film Suga - Agust D Tour D-Day The Movie.

(See “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there.” in Part II, Item 1A. of this Form 10-Q and “Risk Factors – General political, social and economic conditions can affect the Company’s business by reducing both revenues generated from existing IMAX Systems and the demand for new IMAX Systems,” and “Risk Factors – The Company may not convert all of its backlog into revenue and cash flows” in Part I, Item 1A of the Company’s 2023 Form 10-K.)

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The following tables provide detailed information about the Company’s commercial multiplex network by arrangement type and geographic location as of June 30, 2024 and 2023:


	June 30, 2024
	Commercial Multiplex Locations in IMAX Network
	Traditional JRSA	Hybrid JRSA	Sales Arrangements(1)	Total
Domestic Total (United States & Canada)	271	7	129	407
International:
Greater China	379	108	303	790
Asia (excluding Greater China)	53	8	115	176
Western Europe	40	15	74	129
Latin America	3	0	58	61
Rest of the World	14	0	128	142
International Total	489	131	678	1,298
Worldwide Total(2)	760	138	807	1,705
(1)Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2)Period-to-period changes in the tables above are reported net of permanently closed systems.


	June 30, 2023
	Commercial Multiplex Locations in IMAX Network
	Traditional JRSA	Hybrid JRSA	Sales Arrangements(1)	Total
Domestic Total (United States & Canada)	271	6	123	400
International:
Greater China	402	110	267	779
Asia (excluding Greater China)	37	5	103	145
Western Europe	40	17	62	119
Latin America	2	0	53	55
Rest of the World	17	0	123	140
International Total	498	132	608	1,238
Worldwide Total(2)	769	138	731	1,638
(1)Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2)Period-to-period changes in the tables above are reported net of permanently closed systems.

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Backlog

The following table provides detailed information about the Company’s backlog as of June 30, 2024 and 2023:


	June 30, 2024						June 30, 2023
	Number of Systems		Dollar Values				Number of Systems		Dollar Values
(In thousands of U.S. Dollars, except number of systems)	New	Upgrade	New		Upgrade		New	Upgrade	New		Upgrade
Sales Arrangements(1)	157	20	$	161,443	$	17,838	177	16	$	190,636	$	17,552
Hybrid JRSA(2)	100	1	74,873		910		108	1	80,058		910
Traditional JRSA(2)(3)	116	110	425		1,475		119	75	500		2,825
Total	373	131	$	236,741	$	20,223	404	92	$	271,194	$	21,287
(1)Includes Sales, Hybrid Sales, and Sales-Type Lease deal types. (2)The consideration owed under traditional joint revenue sharing arrangements is typically a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments. Accordingly, such arrangements do not usually have a dollar value in backlog; however, hybrid joint revenue sharing arrangements typically provide for contracted upfront payments and therefore carry a backlog value based on those payments. (3)Includes 32 IMAX Systems (2023 ― 38) where certain of the Company’s contracts contain options for the customer to elect to upgrade system type or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections.

The backlog reflects the minimum number of commitments for IMAX Systems according to the signed contracts. The dollar value fluctuates depending on the number of new arrangements signed from year-to-year, which adds to backlog and the installation and acceptance of IMAX Systems and the settlement of contracts, both of which reduce backlog. The dollar value of backlog typically represents the fixed contracted revenue according to the signed IMAX System sale and lease agreements that the Company expects to recognize as revenue upon installation and acceptance of the associated system, as well as an estimate of variable consideration in sales arrangements. The value of backlog does not include amounts allocated to maintenance and extended warranty revenues or revenue from systems in which the Company has an equity interest, operating leases, and long-term conditional theater commitments. The Company believes that the contractual obligations for IMAX System installations that are listed in backlog are valid and binding commitments.

From time to time, in the normal course of its business, the Company will have customers who are unable to proceed with an IMAX System installation for a variety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from all their future obligations under the agreement, all or a portion of the initial rents or fees that the customer previously made to the Company are recognized as revenue.

Certain of the Company’s contracts contain options for the customer to elect to upgrade system type during the term or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections.

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The following tables provide detailed information about the Company’s backlog by arrangement type and geographic location as of June 30, 2024 and 2023:


	June 30, 2024
	IMAX System Backlog
	Traditional JRSA	Hybrid JRSA	Sales Arrangements(1)	Total
Domestic Total (United States & Canada)	76	2	12	90
International:
Greater China	112	90	61	263
Asia (excluding Greater China)	18	7	33	58
Western Europe	15	1	19	35
Latin America	2	—	4	6
Rest of the World	3	1	48	52
International Total	150	99	165	414
Worldwide Total(2)	226	101	177	504
(1)Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2)Worldwide Total of 504 includes 261 new IMAX Laser Systems and 69 upgrades of existing locations to IMAX Laser Systems.


	June 30, 2023
	IMAX System Backlog
	Traditional JRSA	Hybrid JRSA	Sales Arrangements(1)	Total
Domestic Total (United States & Canada)	103	2	15	120
International:
Greater China	41	90	66	197
Asia (excluding Greater China)	27	13	31	71
Western Europe	17	3	18	38
Latin America	3	—	7	10
Rest of the World	3	1	56	60
International Total	91	107	178	376
Worldwide Total(2)	194	109	193	496
(1)Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2)Worldwide Total of 496 includes 247 new IMAX Laser Systems and 92 upgrades of existing locations to IMAX Laser Systems.

Approximately 30% of IMAX System arrangements in backlog as of June 30, 2024 are scheduled to be installed in international markets excluding Greater China (2023 — 36%). The Company’s backlog in Greater China represents 52% of its total current backlog including upgrades in system type (2023 — 40%).

(See “Risk Factors – The Company may not convert all of its backlog into revenue and cash flows.” in Part II, Item 1A. of this form Form 10-Q.)

Signings and Installations

The following tables provide detailed information about IMAX System signings and installations for the three and six months ended June 30, 2024 and 2023:

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	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
System Signings:
Sales Arrangements(1)	25	26	30	41
Traditional JRSA	62	20	65	33
Total IMAX System signings(2)	87	46	95	74
(1)Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2)Includes IMAX System upgrades of 68 for the three and six months ended June 30, 2024 (2023 ― 11 and 12 upgrades, respectively).


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2024	2023	2024	2023
System Installations(1):
Sales Arrangements(2)	10	11	15	19
Hybrid JRSA	—	2	1	2
Traditional JRSA	14	7	23	8
Total IMAX System installations(3)	24	20	39	29
(1)Two IMAX Systems were relocated from their original location (2023 ― two). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System. (2)Includes Sales, Hybrid Sales and Sales-Type Lease deal types (3)Includes 11 IMAX System upgrades (2023 ― eight upgrades).

RESULTS OF OPERATIONS

The Company’s business and future prospects are evaluated by Richard L. Gelfond, its Chief Executive Officer (“CEO”), using a variety of factors and financial and operational metrics including: (i) IMAX box office performance and the securing of new IMAX films and alternative content to be exhibited across the IMAX network; (ii) the signing, installation, and financial performance of IMAX System arrangements, particularly those involving laser-based projection systems; (iii) the success of the Company’s investments in business evolution and brand extensions into streaming and consumer technology, including the integration of SSIMWAVE and the distribution of live events to the IMAX network; (iv) revenues and gross margins earned by the Company’s segments, as discussed below; (v) consolidated earnings (loss) from operations, as adjusted for unusual items; (vi) the continuing ability to invest in and improve the Company’s technology to enhance the differentiation of The IMAX Experience versus other out-of-home experiences; (vii) the overall execution, reliability, and consumer acceptance of The IMAX Experience; and (viii) short- and long-term cash flow projections.

The CEO is the Company’s Chief Operating Decision Maker (“CODM”), as such term is defined under United States Generally Accepted Accounting Principles (“U.S. GAAP”). The CODM assesses segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, the amortization of intangible assets, provision for (reversal of) current expected credit losses, certain write-downs, interest income, interest expense, and income tax (expense) benefit are not allocated to the Company’s segments.

The Company has organized its operating segments into the following two reportable segments: (i) Content Solutions, which principally includes content enhancement and distribution services, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems. The Company’s activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. (See Note 13 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1).

Results of Operations for the Three Months Ended June 30, 2024 and 2023

Net Income and Adjusted Net Income Attributable to Common Shareholders

The following table presents the Company’s net income attributable to common shareholders and the associated per diluted share amounts, as well as adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share for the three months ended June 30, 2024 and 2023:

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	Three Months Ended June 30,
	2024				2023
(In thousands of U.S. Dollars, except per diluted share amounts)	Net Income		Per Diluted Share		Net Income		Per Diluted Share
Net income attributable to common shareholders	$	3,583	$	0.07	$	8,351	$	0.15
Adjusted income attributable to common shareholders*	$	9,746	$	0.18	$	14,355	$	0.26
*Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

Revenues and Gross Margin

During the three months ended June 30, 2024, the Company’s revenues and gross margin decreased by $9.0 million, or 9%, and $14.0 million, or 24%, respectively, when compared to same period in 2023 principally due to IMAX box office performance driven in part by the Hollywood strike impact on the film slate, fewer IMAX systems installed under sales arrangements and a lower contribution from IMAX system amendments and renewals. These year over year declines were partially offset by the sale of commercial and streaming rights for an IMAX documentary.

The following table presents the Company’s revenue, gross margin, and gross margin percentage by reportable segment for the three months ended June 30, 2024 and 2023:


	Revenue				Gross Margin				Gross Margin %
(In thousands of U.S. Dollars)	2024		2023		2024		2023		2024		2023

Content Solutions	$	35,076	$	31,290	$	16,138	$	19,996	46	%	64	%
Technology Products and Services	50,898		63,976		25,783		36,411		51	%	57	%
Sub-total for reportable segments	85,974		95,266		41,921		56,407		49	%	59	%
All Other(1)	2,987		2,713		2,006		1,480		67	%	55	%
Total	$	88,961	$	97,979	$	43,927	$	57,887	49	%	59	%
(1)All Other includes the results from Streaming and Consumer Technology and other ancillary activities.

Content Solutions

Content Solutions segment results are influenced by the level of commercial success and box office performance of the films and other content released to the IMAX network, as well as other factors including the timing of the releases, the length of play across the IMAX network, the box office share take rates under the Company’s film remastering and distribution arrangements, the level of marketing spend associated with the releases in the year, and the fluctuations in the value of foreign currencies versus the U.S. Dollar.

For the three months ended June 30, 2024, Content Solutions segment revenues and gross margin increased by $3.8 million, or 12%, and decreased by $3.9 million, or 19%, respectively, when compared to the same period in 2023, which was driven by the sale of The Blue Angels commercial and streaming rights, as described below.

In the second quarter of 2024, box office generated by IMAX films totaled $196.4 million, a $71.9 million, or 27%, decrease versus the prior year comparative period of $268.3 million driven in part by the Hollywood strike impact on the film slate. In the second quarter of 2024, IMAX box office was generated by the exhibition of 34 films (27 new films and 7 films originally released in a prior year), including Inside Out 2, which generated IMAX box office of over $37 million. In the second quarter of 2023, IMAX box office was generated by the exhibition of 23 films (17 new films and 6 films originally released in a prior year), including The Super Mario Bro. Movie, which generated box office of $50 million.

The impact on revenue from the lower box office experienced year over year was more than offset by the revenue earned from the completion of the sale of worldwide commercial and streaming rights of the Company’s original documentary, The Blue Angels, to Amazon Content as well as from higher revenues from alternative content. The Company continues to build out its alternative content strategy, including evolving its documentary strategy, as a way to increase utilization and revenues across the IMAX system footprint.

In addition to the level of revenues, Content Solutions segment gross margin is influenced by the costs associated with films and other content (documentaries, live and alternative) exhibited in the period. The costs associated with films and other content can include production, post-production, distribution and marketing, which are expensed as incurred, For the three months ended June 30, 2024, gross margin percent was 46% compared to 64% in the prior year period, with the decrease being driven by the lower level of IMAX box office coupled with a higher mix of self-produced content expensed, including The Blue Angels.

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Technology Products and Services

The primary drivers of Technology Products and Services segment results are the number of IMAX Systems installed in a period, the costs associated with each installation, lease payments tied to the box office performance of the films released to the IMAX network, as well as the associated maintenance contracts that accompany each installation. The average revenue and gross margin per IMAX System under sale and sales-type lease arrangements vary depending upon the number of IMAX System commitments with a single respective exhibitor, an exhibitor’s location, the type of system sold, and various other factors. The installation of IMAX Systems in theaters or multiplexes, which make up a large portion of the Company’s system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company’s control.

The following table provides information about IMAX Systems installed and the associated revenue recognized at that time, except for traditional joint revenue sharing arrangements as revenue is recognized over the lease term, during the three months ended June 30, 2024 and 2023:


	Three Months Ended June 30,
	2024			2023
(In thousands of U.S. Dollars, except number of systems)	Number of Systems	Revenue		Number of Systems	Revenue
New IMAX System	8	$	7,649	11	$	11,622
Upgraded IMAX System	2	2,926		2	1,793
Total IMAX Systems	10	10,575		13	13,415

Included in the table above is one IMAX System which was relocated from its original location (2023 ― one IMAX System). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System.

For the three months ended June 30, 2024, Technology Products and Services segment revenue and gross margin decreased by $13.1 million, or 20%, and $10.6 million, or 29%, respectively, when compared to the same period in 2023, primarily driven by a lower level of rental revenues, which is box office dependent. Rental revenues decreased by $5.5 million, as a result of GBO from joint revenue sharing arrangements which decreased by $36.8 million or 27% in the second quarter of 2024 when compared to the prior year comparative period, from $137.8 million to $101.0 million.

Also contributing to the lower level of revenues was the number of systems recognized under sales arrangements, per the table above, and a $4.5 million decrease in revenue contribution from the impact of amendments and renewals to existing IMAX Systems arrangements.

The Technology Products and Services segment gross margin decrease during the three months ended June 30, 2024 as compared to 2023 was primarily due to the lower level of revenues, as described above, coupled with higher maintenance costs incurred.

All Other

For the three months ended June 30, 2024, All Other revenue and gross margin increased by $0.3 million and $0.5 million, respectively, when compared to the same period in 2023, principally due to growth in revenues earned by the Company's Streaming and Consumer Technology business.

Selling, General and Administrative Expenses

The following table presents information about the Company’s Selling, General and Administrative Expenses for the three months ended June 30, 2024 and 2023:

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	Three Months Ended
	June 30,				Variance
(In thousands of U.S. Dollars)	2024		2023		$		%
Total Selling, general and administrative expenses	$	37,564	$	38,906	$	(1,342)	(3	%)
Less: Share-based compensation(1)	(6,506)		(6,469)		(37)		(1	%)
Total Selling, general and administrative expenses, excluding share-based compensation	$	31,058	$	32,437	$	(1,379)	(4	%)
(1)A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenues, Research and Development, and Executive Transition Costs. (Refer to “Capital Stock and Reserves — Share-Based Compensation” in Note 11 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

For the second quarter of 2024, the lower level of Selling, General and Administrative Expenses experienced over the prior year period reflects savings from management’s continued focus on operational efficiencies, which were partially offset by the impact of higher inflation on wages and other business expenses.

Research and Development

The Company believes that it is a premier global technology platform for awe-inspiring entertainment and events with significant proprietary expertise in digital and film-based projection and sound system component design, engineering, and imaging technology, particularly in laser-based technology. A significant portion of the Company’s research and development efforts have been focused on the IMAX Laser Systems, which the Company believes is capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers. The Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers.

For the three months ended June 30, 2024, Research and Development expenses were $2.0 million, representing an decrease of $0.8 million, or 29%, when compared to $2.8 million during the same period in the prior year. The current period expenses reflect continued investment in developing new IMAX film cameras and Streaming Technology product offerings.

The Company intends to continue research and development to further evolve its end-to-end technology. This includes bringing connectivity to the Company’s global network to support live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary film remastering and distribution process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, as well as enhancing the Company’s image and sound quality. Within the Company’s Streaming and Consumer Technology business, there is ongoing research and development in perceptual metrics involving novel measurement and optimization techniques. Investments are also being made to expand existing and/or develop new technologies which are expected to further enhance video quality, delivery, and creation across devices. Furthermore, the Company intends to invest in activities that will capture opportunities to create/build AI and automation into its operations and processes.

Credit Loss Expense, Net

For the three months ended June 30, 2024, the Company recorded a credit loss expense of $0.1 million, as compared to a credit loss expense of $0.8 million recognized in the prior year.

Management’s judgments regarding expected credit losses are based on the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared and involve estimates about the future. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect. (Refer to Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

Interest Expense, net

For the three months ended June 30, 2024, interest expense was $2.3 million, representing an increase of $0.5 million, or 27% when compared to interest expense of $1.8 million during the same period of the prior year primarily due to increased borrowings under the Credit Facility in the current period. For the three months ended June 30, 2024, interest income was $0.6 million, when compared to interest expense of $0.7 million during the same period of the prior year due to lower average cash balances maintained at major financial institutions.

Income Taxes

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For the three months ended June 30, 2024, the Company recorded an income tax benefit of $4.0 million (2023 — tax expense of $3.5 million). The Company’s effective tax rate of (371.5)% for the three months ended June 30, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions and a tax benefit related to an internal asset sale during the quarter which was partially offset by an increase in the valuation allowance and withholding taxes. The Company’s effective tax rate of 26.5% for the three months ended June 30, 2023 is similar to the Canadian statutory rate of 26.5% which includes tax rate differences in foreign jurisdictions that were offset by withholding taxes.

During three months ended June 30, 2024, the Company completed an internal asset sale to more closely align its intellectual property ownership with its operations. In order to effect this internal asset sale, transactions between entities within the group resulted in capital gains for tax purposes. The tax expense related to the capital gain was partially offset by the reversal of the valuation allowance. Net deferred tax assets were also recorded on the transaction, resulting in a net tax benefit of $7.7 million. (Refer to Note 10 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

Non-Controlling Interests

The Company’s Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the three months ended June 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $1.5 million, an increase of $0.2 million, when compared to the same period in 2023.

Results of Operations for the Six Months Ended June 30, 2024 and 2023

Net Income and Adjusted Net Income Attributable to Common Shareholders

The following table presents the Company’s net income attributable to common shareholders and the associated per share amounts, as well as adjusted net income attributable to common shareholders* and adjusted net income attributable to common shareholders per share(1) for the six months ended June 30, 2024 and 2023:


	Six Months Ended June 30,
	2024				2023
(In thousands of U.S. Dollars, except per diluted share amounts)	Net Income		Per Diluted Share		Net Income		Per Diluted Share
Net income attributable to common shareholders	$	6,857	$	0.13	$	10,805	$	0.20
Adjusted net income attributable to common shareholders*	$	17,688	$	0.33	$	23,380	$	0.42
*Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

Revenues and Gross Margin

For the six months ended June 30, 2024, the Company’s revenues and gross margin decreased by $16.8 million or 9% and $17.1 million or 16%, respectively, when compared to same period in 2023, principally due to weaker IMAX box office performance driven in part by the Hollywood strike impact on the film slate, fewer IMAX systems installed under sales arrangements and lower aftermarket sales as the first half of 2023 included Avatar: The Way of Water, a 3D film. These year over year declines were partially offset by the sale of commercial and streaming rights for an IMAX documentary.

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The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the six months ended June 30, 2024 and 2023:


	Revenue				Gross Margin				Gross Margin %
(In thousands of U.S. Dollars)	2024		2023		2024		2023		2024		2023

Content Solutions	$	69,089	$	63,391	$	38,237	$	37,991	55	%	60	%
Technology Products and Services	94,048		115,643		49,367		66,302		52	%	57	%
Sub-total for reportable segments	163,137		179,034		87,604		104,293		54	%	58	%
All Other(1)	4,947		5,891		3,212		3,645		65	%	62	%
Total	$	168,084	$	184,925	$	90,816	$	107,938	54	%	58	%
(1)All Other includes the results from Streaming and Consumer Technology and other ancillary activities.

Content Solutions

For the six months ended June 30, 2024, Content Solutions segment revenues and gross margin increased by $5.7 million, or 9%, and $0.2 million, or 1%, respectively, when compared to the same period in 2023. In the six months ended June 30, 2024, box office generated by IMAX films totaled $457.1 million, a $84.6 million or 16% decrease versus the prior year comparative period of $541.7 million driven in part by the Hollywood strike impact on the film slate. During the six months ended June 30, 2024, IMAX box office was generated by the exhibition of 60 films (46 new films and 14 films that were originally released in prior years), including Dune: Part Two ($145 million), Godzilla x Kong: The New Empire ($41 million), Inside Out 2 ($37 million), Kingdom of The Planet of The Apes ($25 million) and Furiosa ($23 million). Additionally, in the six months ended June 30, 2024, local language films exhibited across the Company’s global network generated over $80 million in box office, representing 18% of its total box office. Leading local language titles distributed across the IMAX network in the six months ended June 30, 2024 included the Chinese film Pegasus 2, the Japanese film, Conan 27, and the Korean film, Suga - Agust D Tour D-Day The Movie. In the six months ended June 30, 2023, IMAX box office was generated by the exhibition of 39 films (33 new films and 10 films that were originally released in prior years).

The impact on revenue from the lower box office experienced year over year was more than offset by the revenue earned from the completion of the sale of worldwide rights to the Company’s original documentary, The Blue Angels, to Amazon Content during the period as well as from higher revenues from alternative content.

In addition to the level of revenues, Content Solutions segment gross margin is influenced by the costs associated with films and other content (documentaries, live and alternative) exhibited in the period. The costs associated with films and other content can include production, post-production, distribution and marketing, which are expensed as incurred. For the six months ended June 30, 2024, gross margin percent was 55% compared to 60% in the prior year period. The decrease was due to the lower level of IMAX box office receipts and the higher mix of self-produced content being released during the period, including The Blue Angels.

Technology Products and Services

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	Six Months Ended June 30,
	2024			2023
(In thousands of U.S. Dollars, except number of systems	Number of Systems	Revenue		Number of Systems	Revenue
New IMAX Systems	13	$	11,511	18	$	18,249
Upgraded IMAX Systems	3	4,303		3	3,131
Total	16	$	15,814	21	$	21,380

Included in the table above are two IMAX Systems which were relocated from its original location (2023 ― one IMAX System). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System.

For the six months ended June 30, 2024, Technology Products and Services segment revenue and gross margin decreased by $21.6 million, or 19%, and $16.9 million, or 26%, respectively, when compared to the same period in the prior year. The lower level of revenue is primarily driven by a lower level of rental revenues which is box office dependent. Rental revenues decreased by $7.0 million, as a result of GBO from joint revenue sharing arrangements which decreased by $53.1 million or 19% in the six months ended June 30, 2024 when compared to the prior year comparative period, from $279.5 million to $226.4 million.

Also contributing to the lower level of revenue was a decrease resulting from the lower number of systems recognized under sales arrangements, per the table above, and a $9.7 million decrease in revenue contribution from the impact of amendments and renewals to existing IMAX Systems arrangements.

The Technology Products and Services segment gross margin decrease during the six months ended June 30, 2024 is primarily due to the lower level of revenues, as described above.

All Other

For the six months ended June 30, 2024, All Other revenue and gross margin decreased by $0.9 million, or 16%, and $0.4 million, or 12%, respectively, when compared to the same period in 2023, which principally reflects the performance of the Company’s Streaming and Consumer Technology operations.

Selling, General and Administrative Expenses

The following table presents information about the Company’s Selling, General and Administrative Expenses for the six months ended June 30, 2024 and 2023:


	Six Months Ended
	June 30,				Variance
(In thousands of U.S. Dollars)	2024		2023		$		%
Total Selling, general and administrative expenses	$	68,821	$	73,054	$	(4,233)	(6	%)
Less: Share-based compensation(1)	(10,843)		(11,665)		822		7	%
Total Selling, general and administrative expenses, excluding share-based compensation(2)	$	57,978	$	61,389	$	(3,411)	(6	%)
(1)A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue and Research and Development. (Refer to “Capital Stock and Reserves — Share-Based Compensation” in Note 11 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (2)See “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

For the six months ended June 30, 2024, the lower level of Selling, General and Administrative Expenses experienced over the prior year period reflects management’s continued focus on identifying cost-saving opportunities and realizing operational efficiencies. Management’s cost-saving initiatives were partially offset by increased inflation during the period.

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Research and Development

For the six months ended June 30, 2024, Research and Development expenses were $4.2 million, representing a decrease of $0.4 million, or 9%, when compared to Research and Development expenses of $4.6 million during the same period in the prior year. The current period expenses reflect continued investment in the development of new IMAX film cameras and Streaming Technology product offerings that does not qualify for capitalization.

Credit Loss Expense, Net

For the six months ended June 30, 2024, the Company recorded a credit loss expense of $0.2 million, as compared to a credit loss expense of $1.1 million recognized in the prior year.

Interest Expense, net

For the six months ended June 30, 2024, interest expense was $4.2 million representing an increase of $0.7 million, or 19% as compared to $3.6 million during the same period of the prior year which primarily reflects a higher average level of outstanding borrowings under the Credit Facility in the current period. For the six months ended June 30, 2024 and 2023, interest income was $1.1 million, respectively.

Income Taxes

For the six months ended June 30, 2024, the Company recorded an income tax expense of $1.2 million (2023 — tax expense of $8.3 million). The Company’s effective tax rate of 10.0% for the six months ended June 30, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions and a tax benefit related to an internal asset sale during the quarter which is offset by an increase in the valuation allowance, withholding taxes and a shortfall in tax benefits related to share-based compensation. The Company’s effective tax rate of 36.2% for the six months ended June 30, 2023 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions which was offset by an increase in the valuation allowance and withholding taxes.

During the six months ended June 30, 2024, the Company completed an internal asset sale to more closely align its intellectual property ownership with its operations. In order to effect this internal asset sale, transactions between entities within the group resulted in capital gains for tax purposes. The tax expense related to the capital gain was partially offset by the reversal of the valuation allowance. Net deferred tax assets were also recorded on the transaction, resulting in a net tax benefit of $7.7 million. (Refer to Note 10 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1).

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Non-Controlling Interests

The Company’s Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the six months ended June 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $3.6 million, a decrease of $0.3 million, when compared to the same period in 2023.

CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Operating Activities

The net cash used in or provided by the Company’s operating activities is affected by a number of factors, including: (i) the level of cash collections from customers in respect of existing IMAX System sale and lease agreements, (ii) the amount of upfront payments collected in respect of IMAX System sale and lease agreements in backlog, (iii) the box office performance of films and other content distributed by the Company and/or released to IMAX locations, (iv) the level of inventory purchases and investment in joint revenue sharing arrangements, and (v) the level of the Company’s operating expenses, including expenses for research and development and new business initiatives.

For the six months ended June 30, 2024, net cash provided by the Company’s operating activities totaled $24.1 million, as compared to net cash provided by operating activities of $25.9 million in the same period of the prior year, a decrease of $1.8 million.

For the six months ended June 30, 2024, the net cash provided by the Company’s operating activities is principally a result of a decrease in Accounts Receivable of $14.5 million which reflects an improvement in the financial health of exhibitor customers, partially offset by $12.7 million of expenditures incurred in connection with the development of film assets and $6.3 million in inventory purchases.

For the six months ended June 30, 2023, the net cash provided by the Company’s operating activities was principally a result of revenue growth attributable to the record box office performance of films distributed through the IMAX network, revenue from the installation of IMAX Systems and revenue associated with the amendments and renewals of IMAX Systems arrangements, and a decrease in Accounts Receivable of $9.5 million as a result of cash collection efforts, partially offset by $13.4 million of variable consideration receivables, $6.1 million in inventory purchases, and $9.2 million of expenditures incurred in connection with the development of film assets.

Investing Activities

For the six months ended June 30, 2024, net cash used in investing activities totaled $15.6 million, as compared to $8.5 million in the same period of the prior year. For the six months ended June 30, 2024, the net cash used in investing activities is primarily driven by $9.8 million invested in equipment to be used as the Company installs systems under joint revenue sharing arrangements with exhibitor customers, $3.2 million of intangible assets principally related to the purchase or continued development of internal use software, and $2.7 million in purchases of property, plant and equipment.

For the six months ended June 30, 2023, the net cash used in investing activities was primarily driven by $4.0 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitor customers, $1.0 million in purchases of property, plant and equipment, and $3.5 million of intangible assets principally related to the purchase or continued development of internal use software.

Based on management’s current operating plan for 2024, the Company expects to continue to use cash to deploy additional IMAX Systems under joint revenue sharing arrangements.

Capital expenditures, including the Company’s investment in joint revenue sharing arrangements, the purchase of property, plant and equipment, the acquisition of other intangible assets, and investments in films, were $28.4 million for the six months ended June 30, 2024, as compared to $17.8 million for the six months ended June 30, 2023. The Company expects its investment in joint revenue sharing arrangements to be more heavily weighted toward the remainder of the year which aligns with the historical seasonality of system installations.

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Financing Activities

For the six months ended June 30, 2024, net cash provided by financing activities totaled $6.6 million, as compared to $19.8 million used in financing activities in the same period of the prior year. For the six months ended June 30, 2024, the net cash provided by financing activities is principally due to $30.0 million in net borrowings under the Company’s revolving credit facilities, $18.1 million used to repurchase common shares of the Company and $5.0 million in taxes withheld and paid on vested employee stock awards.

For the six months ended June 30, 2023, net cash used in financing activities was principally due to $8.2 million in net repayments of revolving credit facility borrowings, $4.0 million used to repurchase common shares of the Company, $6.5 million in taxes withheld and paid on vested employee stock awards, and $1.4 million in dividends paid to non-controlling interests.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2024, the Company’s principal sources of liquidity included: (i) its balances of cash and cash equivalents of $91.6 million; (ii) the anticipated collection of trade accounts receivable, which includes amounts owed under joint revenue sharing arrangements and film remastering and distribution agreements with movie studios; (iii) the anticipated collection of financing and variable consideration receivables due in the next 12 months under sale and sales-type lease arrangements for systems currently in operation; and (iv) installment payments expected in the next 12 months under sale and sales-type lease arrangements in backlog. Under the terms of the Company’s typical sale and sales-type lease agreements, the Company receives substantial cash payments before it completes the performance of its contractual obligations.

In addition, as of June 30, 2024, the Company had $246.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association (the “Credit Agreement”), $26.7 million in available borrowing capacity under the IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”) revolving credit facility with the Bank of China (the “Bank of China Facility”), and $28.1 million in available borrowing capacity under IMAX Shanghai’s revolving credit facility with HSBC Bank (China) Company Limited, Shanghai Branch (the “HSBC China Facility”). (Refer to “Borrowings — Revolving Credit Facility Borrowings, Net” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a description of the material terms of the Credit Agreement, the Bank of China Facility, and the HSBC Facility.)

The Company’s $91.6 million balance of cash and cash equivalents as of June 30, 2024 (December 31, 2023 — $76.2 million) includes $83.0 million in cash held outside of Canada (December 31, 2023 — $68.5 million), of which $44.0 million was held in the People’s Republic of China (the “PRC”) (December 31, 2023 — $30.0 million). Management reassessed its strategy with respect to the most efficient means of deploying the Company’s capital resources globally and determined that historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested. During the six months ended June 30, 2024, no historical earnings from a subsidiary in PRC were distributed (2023 — $24.0 million) and, as a result, no foreign withholding taxes were paid to the relevant tax authorities (2023 — $2.4 million). As of June 30, 2024, the Company’s Condensed Consolidated Balance Sheets include a deferred tax liability of $12.5 million for the applicable foreign withholding taxes associated with the remaining balance of non-repatriated historical earnings that will not be indefinitely reinvested outside of Canada. These taxes will become payable upon the repatriation of any such earnings.

The Company forecasts its future cash flow and short-term liquidity requirements on an ongoing basis. These forecasts are based on estimates and may be materially impacted by factors that are outside of the Company’s control (including the factors described in “Risk Factors” in Part I, Item 1A of the Company’s 2023 Form 10-K. As a result, there is no guarantee that these forecasts will come to fruition and that the Company will be able to fund its operations through cash flows from operations. In particular, the Company’s operating cash flows and cash balances will be adversely impacted if management’s projections of future signings and installations of IMAX Systems and box office performance of IMAX content are not realized.

Based on the Company’s current cash balances and operating cash flows, management expects to have sufficient capital and liquidity to fund its anticipated operating needs and capital requirements during the next twelve-month period following the date of this report.

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CONTRACTUAL OBLIGATIONS

Payments to be made by the Company under contractual obligations as of June 30, 2024 are as follows:


	Payments Due by Years
(In thousands of U.S. Dollars)	Total Obligation		Less Than One Year		1 to 3 years		3 to 5 years		Thereafter
Purchase obligations(1)	$	26,503	$	23,252	$	3,017	$	22	$	212
Pension obligations(2)	20,298		—		20,298		—		—
Operating lease obligations(3)	13,546		1,250		4,981		4,927		2,388
Finance lease obligations	515		515		—		—		—
Wells Fargo Facility	54,000		54,000		—		—		—
Federal Economic Development Loan(4)	2,783		952		1,831		—		—
Convertible Notes(5)	231,151		1,150		230,001		—		—
Postretirement benefits obligations	2,384		104		203		219		1,858
Total	$	351,180	$	81,223	$	260,331	$	5,168	$	4,458
(1)Represents total payments to be made under binding commitments with suppliers and outstanding payments to be made for supplies ordered, but yet to be invoiced. (2)The Company has an unfunded defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), covering its CEO, Mr. Richard L. Gelfond. The SERP has a fixed benefit payable of $20.3 million. The table above assumes that Mr. Gelfond will receive a lump sum payment of $20.3 million six months after retirement at the end of the term of his current employment agreement, which expires on December 31, 2025, in accordance with the terms of the SERP, although Mr. Gelfond has not informed the Company that he intends to retire at that time. (See Note 14 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (3)Represents total minimum annual rental payments due under the Company’s operating leases. (4)The Federal Economic Development Loan will be repayable over 60 months, with repayments estimated to begin in January 2024. (Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (5)The Convertible Notes bear interest at a rate of 0.500% per annum on the principal of $230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year. The Convertible Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted. (Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

OFF-BALANCE SHEET ARRANGEMENTS

There are currently no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements and related disclosures in accordance with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying notes. Management’s judgments, assumptions, and estimates are based on historical experience, future expectations, and other factors that are believed to be reasonable as of the date of the Company’s Condensed Consolidated Financial Statements. Actual results may ultimately differ from the Company’s original estimates, as future events and circumstances sometimes do not develop as expected, and the differences may be material. For more information on the Company’s critical accounting estimates refer to the section entitled “Critical Accounting Estimates” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Form 10-K.

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Note 2 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of recently issued accounting standards and their impact on the Company’s Condensed Consolidated Financial Statements.

NON-GAAP FINANCIAL MEASURES

GAAP refers to generally accepted accounting principles in the United States of America. In this report, the Company presents financial measures in accordance with GAAP and also on a non-GAAP basis under the SEC regulations. Specifically, the Company presents the following non-GAAP financial measures as supplemental measures of its performance:

•Adjusted net income or loss attributable to common shareholders;

•Adjusted net income or loss attributable to common shareholders per basic and diluted share;

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•EBITDA; and

•Adjusted EBITDA per Credit Facility.

Adjusted net income or loss attributable to common shareholders and adjusted net income or loss attributable to common shareholders per basic and diluted share exclude, where applicable: (i) share-based compensation; (ii) realized and unrealized investment gains or losses; (iii) transaction-related expenses; and (iv) restructuring and executive transition costs, as well as the related tax impact of these adjustments.

The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company’s financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net loss attributable to common shareholders. Although share-based compensation is an important aspect of the Company’s employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures.

Reconciliations of net income attributable to common shareholders and the associated per share amounts to adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share are presented in the tables below.


	Three Months Ended June 30,
	2024				2023
(In thousands of U.S. Dollars, except per share amounts)	Net Income		Per Share		Net Income		Per Share
Net income attributable to common shareholders	$	3,583	$	0.07	$	8,351	$	0.15
Adjustments(1):
Share-based compensation	6,647		0.12		6,511		0.12
Unrealized investment gains	(32)		—		(27)		—
Tax impact on items listed above	(452)		(0.01)		(480)		(0.01)
Adjusted net income(1)	$	9,746	$	0.18	$	14,355	$	0.26

Weighted average shares outstanding — basic			52,633				54,591
Weighted average shares outstanding — diluted			53,428				55,320
(1)Reflects amounts attributable to common shareholders.


	Six Months Ended June 30,
	2024				2023
(In thousands of U.S. Dollars, except per diluted share amounts)	Net Income		Per Diluted Share		Net Income		Per Diluted Share
Net income attributable to common shareholders	$	6,857	$	0.13	$	10,805	$	0.20
Adjustments(1):
Share-based compensation	11,354		0.21		12,047		0.22
Unrealized investment gains	(62)		—		(72)		—
Transaction-related expenses	—		—		156		—
Restructuring and executive transition costs	—		—		1,353		0.02
Tax impact on items listed above	(462)		(0.01)		(909)		(0.02)
Adjusted net income(1)	$	17,688	$	0.33	$	23,380	$	0.42

Weighted average shares outstanding — basic			52,568				54,328
Weighted average shares outstanding — diluted			53,386				55,145
(1)Reflects amounts attributable to common shareholders.

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In addition to the non-GAAP financial measures discussed above, management also uses “EBITDA,” as such term is defined in the Credit Agreement, and which is referred to herein as “Adjusted EBITDA per Credit Facility.” As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company’s operating performance and to provide additional information with respect to the Company’s compliance with its Credit Agreement requirements, when applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company’s industry to evaluate, assess and benchmark the Company’s results.

EBITDA is defined as net income or loss excluding: (i) income tax expense or benefit; (ii) interest expense, net of interest income; (iii) depreciation and amortization, including film asset amortization; and (iv) amortization of deferred financing costs. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) realized and unrealized investment gains or losses; (iii) transaction-related expenses; (iv) restructuring and executive transition costs; and (v) write- downs, net of recoveries, including asset impairments and credit loss expense.

Reconciliations of net income attributable to common shareholders, which is the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA per Credit Facility are presented in the tables below:


	Three Months Ended June 30, 2024
(In thousands of U.S. Dollars)	Attributable to Non-controlling Interests and Common Shareholders’		Less: Attributable to Non-controlling Interests		Attributable to Common Shareholders’
Reported net income	$	5,073	$	1,490	$	3,583
Add (subtract):
Income tax (recovery) expense	(3,997)		543		(4,540)
Interest expense, net of interest income	1,229		(119)		1,348
Depreciation and amortization, including film asset amortization	18,838		1,382		17,456
Amortization of deferred financing costs(1)	492		—		492
EBITDA	21,635		3,296		18,339
Share-based and other non-cash compensation	6,970		218		6,752
Unrealized investment gains	(32)		—		(32)
Write-downs, including asset impairments and credit loss expense	2,428		637		1,791
Adjusted EBITDA per Credit Facility	$	31,001	$	4,151	$	26,850
(1)The amortization of deferred financing costs is recorded within Interest Expense in the Condensed Consolidated Statements of Operations.

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	Twelve Months Ended June 30, 2024
(In thousands of U.S. Dollars)	Attributable to Non-controlling Interests and Common Shareholders		Less: Attributable to Non-controlling Interests		Attributable to Common Shareholders
Reported net income	$	28,823	$	7,436	$	21,387
Add (subtract):
Income tax expense	5,867		1,975		3,892
Interest expense, net of interest income	3,037		(526)		3,563
Depreciation and amortization, including film asset amortization	66,826		5,133		61,693
Amortization of deferred financing costs(1)	1,969		—		1,969
EBITDA	106,522		14,018		92,504
Share-based and other non-cash compensation	23,450		540		22,910
Unrealized investment gains	(455)		(93)		(362)
Transaction-related expenses	3,413		208		3,205
Write-downs, including asset impairments and credit loss expense	4,305		830		3,475
Restructuring and executive transition costs	1,593		258		1,335
Adjusted EBITDA per Credit Facility	$	138,828	$	15,761	$	123,067
(1)The amortization of deferred financing costs is recorded within Interest Expense in the Condensed Consolidated Statements of Operations.

The Company also adjusts Selling, General and Administrative Expenses to exclude a portion of share-based compensation and related payroll taxes. Management uses non-U.S. GAAP and other financial measures such as this, internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. IMAX believes that this non-U.S. GAAP measure provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management and its financial and operational decision making.

A reconciliation of Selling, General and Administrative Expenses, the most directly comparable U.S. GAAP measure presented in the Condensed Consolidated Statement of Operations in Part I, Item 1, to Adjusted SG&A, is presented in the table below.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In thousands of U.S. Dollars)	2024		2023		2024		2023
Total Selling, general and administrative expenses	$	37,564	$	38,906	$	68,821	$	73,054
Less: Share-based compensation	(6,506)		(6,469)		(10,843)		(11,665)
Total Selling, general and administrative expenses, excluding share-based compensation	$	31,058	$	32,437	$	57,978	$	61,389

The Company cautions users of its financial statements that these non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered in isolation, or as a substitute for, or superior to, the comparable GAAP amounts.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. Market risk is the potential change in an instrument’s value caused by, for example, fluctuations in interest and currency exchange rates. The Company’s primary market risk exposure is the risk of unfavorable movements in exchange rates between the U.S. Dollar, the Canadian Dollar (“CAD”), and Chinese Renminbi (“RMB”). The Company does not use financial instruments for trading or other speculative purposes.

Foreign Exchange Rate Risk

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A majority of the Company’s revenue is denominated in U.S. Dollars while a significant portion of its costs and expenses is denominated in Canadian Dollars. A portion of the Company’s net U.S. Dollar cash flows is converted to Canadian Dollars to fund Canadian Dollar expenses through the spot market. In addition, IMAX films generate box office in 89 different countries, and therefore unfavorable exchange rates between applicable local currencies and the U.S. Dollar could have an impact on the GBO generated by the Company’s exhibitor customers and its revenues. The Company has incoming cash flows from its revenue generating IMAX network and ongoing operating expenses in China through its majority-owned subsidiary IMAX Shanghai. In Japan, the Company has ongoing Yen-denominated operating expenses related to its Japanese operations. Net RMB and Japanese Yen cash flows are converted to U.S. Dollars through the spot market. The Company also has cash receipts under leases denominated in RMB, Japanese Yen, British Pound Sterling, Euros and Canadian Dollars.

The Company manages its exposure to foreign exchange rate risks through its regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates.

Certain of the Company’s PRC subsidiaries held approximately RMB 313.7 million ($44.0 million) in cash and cash equivalents as of June 30, 2024 (December 31, 2023 — RMB 213.0 million or $30.0 million) and are required to transact locally in RMB. Foreign currency exchange transactions, including the remittance of any funds into and out of the PRC, are subject to controls and require the approval of the China State Administration of Foreign Exchange to complete. Any developments relating to the Chinese economy and any actions taken by the Chinese government are beyond the control of the Company; however, the Company monitors and manages its capital and liquidity requirements to ensure compliance with local regulatory and policy requirements. (Refer to “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there” in Part II, Item 1A. of this Form 10-Q.)

Management also monitors the macroeconomic environment as part of its continuous assessment of credit risk. This includes consideration of developments in the U.S. and global banking sectors following recent banking collapses, which informs management’s assessment of any potential direct and indirect impacts on the Company. There are no concentrations of cash and cash equivalents in any regional banking institutions, such that management considers there to be any material risk in this regard.

For the three and six months ended June 30, 2024, the Company recorded foreign exchange net losses of $0.2 million and $0.5 million, respectively, resulting from changes in exchange rates related to foreign currency denominated monetary assets and liabilities (2023 — net losses of $0.5 million and $0.6 million, respectively).

The Company has entered into a series of foreign currency forward contracts to manage the risks associated with the volatility of foreign currencies. Certain of these foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the FASB ASC at inception, and continue to meet hedge effectiveness tests as of June 30, 2024, with settlement dates throughout 2024 and 2025. Foreign currency derivatives are recognized and measured in the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value (i.e., gains or losses) are recognized in the Condensed Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments. The Company currently has cash flow hedging instruments associated with Selling, General and Administrative Expenses. For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported within Accumulated Other Comprehensive Income (Loss) and reclassified to the Condensed Consolidated Statements of Operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the Condensed Consolidated Statements of Operations.

The notional value of foreign currency cash flow hedging instruments that qualify for hedge accounting as of June 30, 2024 was $39.4 million (December 31, 2023 — $40.6 million). Losses of $0.4 million and $1.3 million were recorded to Other Comprehensive Loss with respect to the change in fair value of these contracts for the three and six months ended June 30, 2024, respectively (2023 — gains of $0.7 million and $0.8 million, respectively). Losses of $0.1 million and $0.1 million were reclassified from Accumulated Other Comprehensive Loss to Selling, General and Administrative Expenses for the three and six months ended June 30, 2024, respectively, (2023 — loss of $0.1 million and $0.5 million, respectively). The Company currently does not hold any derivatives which are not designated as hedging instruments.

For all derivative instruments, the Company is subject to counterparty credit risk to the extent that the counterparty may not meet its obligations to the Company. To manage this risk, the Company enters into derivative transactions only with major financial institutions.

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As of June 30, 2024, the Company’s Financing Receivables and working capital items denominated in Canadian Dollars, RMB, Japanese Yen, Euros and other foreign currencies translated into U.S. Dollars was $160.1 million. Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates as of June 30, 2024, the potential change in the fair value of foreign currency-denominated financing receivables and working capital items would have been $16.0 million. A significant portion of the Company’s Selling, General, and Administrative Expenses is denominated in Canadian Dollars. Assuming a 1% change appreciation or depreciation in foreign currency exchange rates as of June 30, 2024, the potential change in the amount of Selling, General, and Administrative Expenses would be $0.2 million.

Interest Rate Risk Management

The Company’s earnings may also be affected by changes in interest rates due to the impact those changes have on its interest income from cash, and its interest expense from variable-rate borrowings that may be made under the Credit Facility.

As of June 30, 2024, the Company had drawn down $54.0 million on its Credit Facility (December 31, 2023 — $24.0 million), and $nil on its HSBC China Facility (December 31, 2023 — $nil) and $nil on its Bank of China Facility (December 31, 2023 — nil), which are subject to variable effective interest rates.

The Company had variable rate debt instruments representing 11.0% and 5.0% of its total liabilities as of June 30, 2024 and December 31, 2023, respectively. If the interest rates available to the Company increased by 10%, the Company’s interest expense would increase by $0.4 million and interest income from cash would increase by $0.3 million. These amounts are determined by considering the impact of the hypothetical interest rates on the Company’s variable rate debt and cash balances as of June 30, 2024.

Item 4. Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and that such information is accumulated and communicated to management, including the CEO and Chief Financial Officer (“CFO”), to allow timely discussions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

The Company’s management, with the participation of its CEO and its CFO, has evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of June 30, 2024 and has concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. The Company will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting which occurred during the three months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Note 7 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for information regarding legal proceedings involving the Company.

Item 1A. Risk Factors

This Form 10-Q should be read together with, and supplement, the risk factors in Item 1A “Risk Factors” in the Company’s 2023 Form 10-K, which describes various risks and uncertainties to which the Company is or may become subject. The risk factors described below update certain risk factors included in the Company’s 2023 Form 10-K in light of recent events. The below risk factors and the risk factors included in the Company’s 2023 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.

The Company faces risks in connection with its significant presence in China and the continued expansion of its business there.

Greater China is the Company’s largest market by revenue, with approximately 26% of overall revenues generated from its Greater China operations for the six months ended June 30, 2024. As of June 30, 2024, the Company had 803 IMAX Systems operating in Greater China with an additional 263 systems in backlog, which represent 52% of the Company’s current backlog. Of the IMAX Systems currently scheduled to be installed in Greater China, 77% are under joint revenue sharing arrangements, which further increases the Company’s ongoing exposure to box office performance in this market.

The China market faces a number of risks, including a continued slow recovery from the COVID-19 pandemic, changes in laws and regulations, currency fluctuations, increased competition, and changes in economic conditions, including the risk of an economic downturn or recession, trade embargoes, restrictions or other barriers, as well as other conditions that may impact the Company’s exhibitor and studio partners, and consumer spending. The market’s slow recovery from the pandemic has caused some theatrical exhibitors in Mainland China, including several of the Company’s exhibitor partners, to experience financial difficulties which, in certain cases, has resulted in delays in meeting payment and theater system installation obligations to the Company. There are no guarantees that such financial difficulties will not continue, or that partner delays or failures to meet contractual obligations will not occur in the future, adversely impacting the Company’s future revenues and cash flows.

The Company does not believe that it is currently required to obtain any permission or approval from the China Securities Regulatory Commission, the Cyberspace Administration of China or any other regulatory authority in the PRC for its operations, but there can be no assurance that such permissions or approvals would not be required in the future and, if required, that they would be granted in a timely manner, on acceptable terms, or at all. Furthermore, PRC regulators, including the Cyberspace Administration of China, the Ministry of Industry and Information Technology, and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection. Regulatory requirements concerning data protection and cybersecurity, as well as other requirements concerning operations of foreign businesses, in the PRC are evolving, and their enactment timetable, interpretation and implementation involve significant uncertainties. To the extent any additional PRC laws and regulations become applicable to the Company, it may be subject to increased risks and uncertainties associated with the legal system in the PRC, including with respect to the enforcement of laws and the possibility of changes of rules and regulations with little or no advance notice.

Certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates both the scope of the Company’s continued expansion in China and the Company’s business within China. For instance, the Chinese government regulates the number, timing, and terms of Hollywood films released to the China market. A number of prominent Hollywood films were denied release dates in China in 2021 and 2022, including several films released in IMAX format in other markets. While significantly more Hollywood films were given release dates in China in 2023 and 2024, several of the prominent Hollywood sequels or franchise films released into China have underperformed their predecessors in that market. The Company cannot provide assurance that the Chinese government will continue to permit the release of Hollywood IMAX films in China or that the timing, number or performance of IMAX releases will be favorable to the Company. There are also uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights in China. If the Company were unable to navigate China’s regulatory environment, or if the Company were unable to enforce its intellectual property or contract rights in China, the Company’s business could be adversely impacted.

The worsening of United States–China political tensions could exacerbate any or all of these risks, and adverse developments in any of these areas could impact the Company’s future revenues and cash flows and could cause the Company to fail to achieve anticipated growth in Mainland China.

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The Company may not convert all of its backlog into revenue and cash flows.

As of June 30, 2024, the Company’s backlog included 504 IMAX Systems, consisting of 177 IMAX Systems under sales or lease arrangements and 327 IMAX Systems under joint revenue sharing arrangements. The Company lists signed contracts for IMAX Systems for which revenue has not been recognized as backlog prior to the time of revenue recognition. The total value of the backlog represents all binding IMAX System sale or lease agreements scheduled to be installed in the future. Backlog value includes initial fees along with the estimated present value of contractual ongoing fees due over the term, and a variable consideration estimate for the IMAX Systems under sales arrangements, but excludes amounts allocated to maintenance and extended warranty revenues. Notwithstanding their legal obligations, some of the Company’s exhibition customers with which it has signed contracts may be delinquent in their contractual payments and/or not accept delivery of IMAX Systems that are included in the Company’s backlog. An economic or industry downturn may exacerbate exhibition customer liquidity constraints and the risk of customers not accepting delivery of IMAX Systems. Customers sometimes request that the Company agree to modify their obligations concerning systems in backlog, which the Company has agreed to do in the past under certain circumstances, and may agree to do in the future. Customer-requested delays in the installation of IMAX Systems in backlog remain a recurring and unpredictable part of the Company’s business. China’s slow recovery from the COVID-19 pandemic has caused several of the Company’s exhibition partners there to delay payment or theater system installation obligations to the Company. Any reduction or change in backlog could adversely affect the Company’s future revenues and cash flows.

There is collection risk associated with payments to be received over the terms of the Company’s IMAX System agreements.

The Company is dependent in part on the viability of its exhibitors for collections under long-term leases, sales financing agreements, and joint revenue sharing arrangements. Exhibitors or other operators may experience financial difficulties that could cause them to be unable to fulfill their contractual payment obligations to the Company. As a result, the Company’s future revenues and cash flows could be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On June 12, 2017, the Company announced that its Board of Directors approved a $200.0 million share repurchase program for its common shares that would have expired on June 30, 2020, which was subsequently extended for a 12-month period in 2020, 2021, and 2022 and increased in the total share repurchase authority to $400.0 million. In 2023, the Board of Directors approved a 36-month extension to the share repurchase program through June 30, 2026. As of June 30, 2024, the Company had $150.7 million available under the program. The repurchases may be made either in the open market or through private transactions, including repurchases made pursuant to a plan intended to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements, and other relevant factors. The Company has no obligation to repurchase shares and the share repurchase program may be suspended or discontinued by the Company at any time.

During the three months ended June 30, 2024, the Company repurchased 7,646 common shares at an average price of $14.98 per share for a total of $0.1 million, excluding commission. All share repurchases were made under the Company’s publicly announced program, and there are no other programs under which the Company repurchases shares.

The Company’s common share repurchase program activity for the three months ended June 30, 2024 was as follows:


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced program	Maximum approximate dollar value of shares that may yet be purchased under the program
April 1 through April 30, 2024	—	$	—	—	$	150,834,924
May 1 through May 31, 2024	—	—		—	150,834,924
June 1 through June 30, 2024	7,646	14.98		7,646	150,724,352
Total	7,646	$	14.98	7,646

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In 2023, IMAX China's shareholders granted its Board of Directors a general mandate authorizing the Board, subject to applicable laws, to repurchase shares of IMAX China not to exceed 10% of the total number of issued shares as of June 7, 2023 (33,959,314 shares). This program expired on the date of the 2024 Annual General Meeting of IMAX China on June 7, 2024. During the 2024 Annual General Meeting, shareholders approved the repurchase of shares of IMAX China not to exceed 10% of the total number of shares as of June 7, 2024 (34,000,845 shares). This program will be valid until the 2025 Annual General Meeting of IMAX China. The repurchases may be made in the open market or through other means permitted by applicable laws. IMAX China has no obligation to repurchase its shares and the share repurchase program may be suspended or discontinued by IMAX China at any time. During the three months ended June 30, 2024, IMAX China repurchased 119,900 ordinary shares at an average price of HKD 7.43 per share ($0.95 per share) for a total of HKD 0.9 million ($0.1 million).

(Refer to Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a summary of the material terms and conditions of the Company’s revolving credit facility, which include a limitation of the amount of permitted share repurchases.)

Item 5. Other Information

(a)None.

(b)None.

(c)Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

None of the Company’s directors or officers , modified, or a Rule 10b5-1 trading arrangement or a non-Rule 10b5- 1 trading arrangement during the Company’s fiscal quarter ended June 30, 2024.

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Item 6. Exhibits


Exhibit No.						Description
10.1*+						E mployment Ag reement, dated as of January 9, 2023 , bet ween I MAX C hina (Hong Kong) Limited and Daniel Manwaring
10.2*+						Amendment Agreement to Employment Agreement, dated as of March 7, 2024, between IMAX China (Hong Kong ) Limited and Daniel Manwaring
31.1*						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2024, by Richard L. Gelfond

31.2*						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated July 24, 2024, by Natasha Fernandes

32.1*						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2024, by Richard L. Gelfond

32.2*						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated July 24, 2024, by Natasha Fernandes

101.INS						Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.

101.CAL						Inline XBRL Taxonomy Extension Schema Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101. PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed herewith.

+Management contract or compensatory plan, contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	IMAX CORPORATION

Date: July 24, 2024	By:	/s/ NATASHA FERNANDES
		Natasha Fernandes
		Chief Financial Officer
		(Principal Financial Officer)

Date: July 24, 2024	By:	/s/ ELIZABETH GITAJN
		Elizabeth Gitajn
		Senior Vice-President, Finance & Controller
		(Chief Accounting Officer)

IMAX CORP - Quarter Report: 2024 June (Form 10-Q)

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