The rise of the home theater system has made it tough on movie theater operators, but big-screen specialist IMAX (IMAX -2.34%) has always had the advantage of offering an experience that's almost impossible for people to duplicate either at home or on competitors' screens. Falling movie attendance has been a problem across the industry, but IMAX has done a good job of stoking demand internationally for its large-theater locations.

Coming into Tuesday's fourth-quarter financial report, IMAX investors were looking to see solid results from the company. IMAX outpaced most of those expectations, cashing in on box-office hits and seeing even better prospects ahead. Let's look more closely at how IMAX closed 2017 and what it sees coming in the next year.

Blue sky with gray building labeled IMAX.

Image source: IMAX.

IMAX puts on a great show

IMAX's fourth-quarter results continued its streak of good financial reports. Sales were up 17% to $125.6 million, accelerating from previous quarters and outpacing the 13% growth that most investors were expecting to see. Adjusted net income soared by more than half to $21.8 million, and that produced adjusted earnings of $0.34 per share, above the consensus forecast among those following the stock for $0.32 per share.

Tax reform had a negative impact on IMAX. The company reported a $9.3 million hit from the new laws, most of which stemmed from the provision remeasurement and writedown of the company's deferred tax assets and liabilities.

Yet the best thing going for IMAX was a strong box office. Global figures were up 13% to $278.1 million, and domestic growth figures were up an even sharper 16% from year-ago levels. Per-screen averages jumped by more than $30,000 to $286,100 in the domestic market. Only weak performance in the Greater China market held IMAX back, with just a 5% rise in gross box office receipts translating to a more than 20% drop in per-screen average box office figures. Elsewhere internationally, IMAX still sported double-digit percentage gains in total box office receipts and solid gains in average box office per screen.

On the network front, IMAX installed 70 theaters during the quarter, bringing the total network to 1,370 systems. The company also signed contracts for 23 new theaters, and the difference brought IMAX's total backlog below the 500 mark. IMAX said it intends to install about 145 new systems in 2018.

IMAX saw balanced performance from its key segments. The network business experienced double-digit segment revenue growth, with gains coming largely from DMR revenues and to some extent from joint revenue-sharing arrangements. Gains from the theater business were less extensive but still solid.

Can IMAX keep the lights on?

CEO Richard Gelfond was happy about how IMAX did. "We saw tangible improvements to box office performance and operating leverage in the second half last year," Gelfond said, "largely the result of our implementing several initiatives aimed at refining our programming strategy and containing costs." The CEO highlighted growth in Japan as especially important in its overall performance.

Moreover, 2018 has gotten off to a great start for IMAX. Gelfond noted that record box office receipts came in February thanks to the Marvel hit Black Panther. At the same time, IMAX has done a good job of focusing on reducing unnecessary spending on non-core projects so that it can focus more squarely on growing its network and building up its international presence.

IMAX shareholders seemed pleased with the report, and the stock climbed 2% in after-market trading following the announcement. The challenges that movie theater operators face are far from over, but IMAX has already done a good job of distinguishing itself from its peers. As long as the company keeps getting good content to show, IMAX will be in a position to make the most of theater-goers seeking the most exciting experience possible.