Investors didn't know what to think going into IMAX's (NYSE:IMAX) second-quarter financial report. After the big-screen specialist delivered better-than-expected results in the first quarter, worries were rising over recent headlines saying that the overall domestic box office tally through June 30 was down nearly 10% year over year and total ticket sales for the summer season were down more than 7%.
Fortunately, IMAX didn't follow the overall sales trend. The specialty theater operator on Tuesday reported solid growth across all its key metrics and says it's still on track to deliver the best box office year in the company's history.
IMAX generated revenue of $104.8 million, up 6.6% year over year, easily surpassing analysts' consensus estimates of $98.84 million. IMAX said growth in global box office and record ticket sales in China -- which grew 29% year over year -- helped boost the results.
This produced net income that soared 49% to $11.4 million, resulting in earnings per share of $0.19, up from $0.12 in the prior-year quarter.
It wasn't just the box office in China that shone, as IMAX reported a number of record-setting metrics for its business in the Middle Kingdom. Year-to-date revenue in China grew 15% year over year to record levels while box office receipts hit new highs, climbing 24% in Greater China and 35% in Mainland China.
Strong segment performance
The theater business, which provides the lion's share of IMAX's revenue, grew to $35 million, up 13% year over year. The bulk of the improvement was the result of a higher number of theater installations and higher maintenance revenue from its expansive theater network. IMAX continued to add to its tally of theaters, which grew 10% during the quarter to 1,445 commercial multiplex theaters and 1,541 overall.
Emphasizing the strength of the segment, IMAX signed contracts for 54 new theaters and 19 upgrades to its new laser system after installing 27 new theaters and 8 upgrades during the quarter. This resulted in a total theater backlog of 612 locations waiting to be installed and points to increased demand among theater owners for IMAX systems.
The network business -- which includes revenue from digital remastering and joint revenue-sharing arrangements -- hit $65 million, an increase of 6%. The stronger performance in the segment was the result of the higher global box office take.
The take rate -- which calculates network business as a percentage of global box office -- was $365 million, or 17.7%, statistically similar to the 17.8% from the year-ago quarter.
What the future could hold
On the conference call, IMAX CEO Rich Gelfond pointed to the success of Spider-Man: Far From Home, The Lion King, and the company's record-breaking first local language animated release in China this past weekend, Ne Zha, as leading entries in a strong slate of films released in the second half of the year. "IMAX is on track to deliver its best year ever at the box office," Gelfond said in prepared remarks.
Earlier this year -- following its strong first quarter -- IMAX raised its full-year guidance. The company said it is expecting global box office to increase by a "low-double-digit percent" over the $1.03 billion it generated in 2018. As the company continues cost-control measures it enacted last year, IMAX is expecting operating expenses to be in line with the $111 million it spent in 2018.
IMAX management doesn't provide quarterly guidance, but analysts' consensus estimates for the next quarter are calling for revenue of $93.85 million, which would represent growth of about 14% year over year. Analysts are also expecting earnings per share of $0.27, more than triple the $0.08 IMAX reported in the prior-year quarter.
There was a lot to like in IMAX's earnings report after the first quarter, and that has carried through to this quarter as well. It could be an indication that the company has turned the corner on a tough couple of years of performance and is on the way to an upbeat 2019 for its investors.