The movie business has been hit-or-miss the last couple of years, and fears about changing consumer habits have hit theater and exhibitor stocks particularly hard. Premium-format theater company IMAX (IMAX 0.12%) addressed the challenges by working to increase its box-office take, cutting costs, and buying back a boatload of stock, all in an attempt to increase shareholder value. Those plans are ongoing, so we don't yet know the full results, but IMAX management is pulling all the right levers to position the company for the future.

Investors were hoping they might begin to see some of the fruits of the company's labors when IMAX reported its third-quarter results. While progress was made on some fronts, investors couldn't seem to get past a top-line slump, as shares lost more than 6% in the trading session following the company's Oct. 25 earnings release.

A clapperboard and film reels in front of smoke effects, a spotlight, and a theater curtain

Image source: Getty Images.

A lot to like


Q3 2018

Q3 2017

Year-Over-Year Change


$82.1 million

$98.8 million


Operating income

$9.5 million

$4.5 million


Net income

$7.5 million

$2.9 million


Earnings (loss) per share




Data source: IMAX Third-Quarter 2018 Financial Release.

For the third quarter, IMAX reported revenue of $82.1 million, which declined 17% year over year, but surpassed analysts' consensus estimates of $80.5 million. Cost-cutting measures that the company has been pursuing over the past several quarters took hold, dropping significantly more profit to the bottom line, as operating margin improved by 670 basis points and the organization marked its third consecutive quarter of margin expansion.

This resulted in operating income that more than doubled, and net income of $7.5 million, which rose 159% year over year. Earnings per share of $0.08 compared favorably to a $0.01 loss in the prior-year quarter. On an adjusted basis, the company generated $0.14 per share, topping analysts' consensus estimates of $0.10 per share.

IMAX achieved $207 million in box office receipts, exceeding the company's expectations. The performance was led by titles like The Meg and Mission: Impossible -- Fallout. While North American box office declined, moviegoers in China flocked to theaters, driving IMAX ticket sales up 30%.

Box Office

Q3 2018

Q3 2017

Year-Over-Year Change


$62 million

$80 million


Greater China

$78 million

$60 million


Other international

$67 million

$79 million



$207 million

$219 million


Data source: IMAX Third-Quarter 2018 Supplemental Slides.

Network business, which includes digital remastering and joint revenue-sharing arrangements, fell to $36.7 million, a decline of 14% year over year, resulting from fewer blockbusters in the quarter. The theater business -- which includes system sales -- fell by 6% compared to the prior-year quarter, the result of four fewer theater installations. Installations tend to be lumpy and unpredictable, so this change isn't necessarily a bad sign.

A growing network

During the quarter, IMAX installed 37 theater systems, down from 51 in the prior-year quarter, due to ebbs and flows in the marketplace. This brought the total theater network to 1,443 systems in 80 countries. The company signed 37 additional agreements during the quarter, consisting of 25 new theaters and 12 theaters which elected to upgrade to the new IMAX laser system. Each of the upgrades extends contract terms by an additional 10 to 13 years, providing favorable economics for IMAX. This leaves 635 theaters in backlog waiting to be installed, up from just 545 this time last year.

While IMAX is beholden to Hollywood to deliver blockbuster titles to its doors, the company is making substantial progress on the strategic goals it outlined in mid-2017. This has resulted in significant margin expansion and profit improvement. This quarter's lower box-office numbers notwithstanding, IMAX has set itself up for future success.