Imax Posts Slightly Weaker-Than-Expected End to 2022

Imax IMAX reported a slightly weak end to 2022 with fourth-quarter revenue meeting and EBITDA missing the FactSet consensus. Quarterly box office grosses fell year over year as the Chinese market remained affected by COVID-19-related restrictions. As a result, the Chinese Imax box office fell versus 2021 for the fourth quarter in a row. One positive sign is that the Chinese government started approving Hollywood films for release during the worldwide windows, with the Avatar sequel benefiting at the end of the quarter. Management now projects that the 2023 Imax box office will hit 2019 levels at $1.1 billion, up sharply from the $580 million grossed in 2022. We are maintaining our $19 fair value estimate.

Total revenue fell 10% to $98 million as the fourth quarter last year benefited from a one-time release of deferred maintenance revenue. Imax box office grosses of $252 million dropped 9% versus 2021 but did come in 4% above the same quarter in 2019. The U.S. box office declined 12% to $103 million and was 12% ahead of 2019. The slate for the quarter was relatively strong but only received two weeks of grosses from Avatar: The Way of Water. The slate for 2023 appears to be potentially very deep as the firm expects four Marvel films, two DC movies, a Mission Impossible sequel, and the penultimate Fast and Furious film. The box office in 2023 will also benefit from the Avatar sequel, which has already added $110 million.

Imax generated $47 million at the box office in China, down 27% versus 2021 and 12% below 2019. Management noted that the market started to normalize toward the end of the quarter. Avatar: The Way of Water has posted over $52 million in Imax box office so far, a record for a first-run Hollywood movie in China. Another recent positive sign was that the Chinese New Year grosses came in at a record $61 million, well ahead of management’s expectation of $40 million.