Movie season has heated up, with the summer months giving moviegoers their first taste at the year's hottest blockbuster films. For investors in IMAX (NYSE:IMAX), the height of Hollywood success typically brings good news in the form of more patrons in the seats of its big-screen theaters. Coming into Thursday morning's second-quarter financial report, IMAX investors wanted to see a substantial pop from last quarter's winter sluggishness, and the theater company gave them even better results than they had expected. Let's look more closely at how IMAX did and what's to come for the rest of 2015.
IMAX rides the early summer wave higher
IMAX's numbers for the second quarter were quite impressive, as revenue soared 35% to $107.2 million. Adjusted net income grew at an even faster pace, skyrocketing by two-thirds from last year's second quarter, and adjusted earnings of $0.40 per share were up 60% from last year. Earnings met the high expectations of investors, but the revenue growth IMAX posted was quite a bit higher than the 27% growth rate most had expected.
Helping to support IMAX's numbers was a healthy environment in the movie industry generally. Global box office figures jumped to $343 million, hitting a new record and crushing the $216 million IMAX saw in last year's quarter. Average box office per screen also rose sharply, climbing from around $300,000 last year to $414,600 now.
As we've seen in previous quarters, IMAX has all of its segments working hard and showing success. Joint revenue-sharing arrangements saw the biggest revenue gains, with a 63% rise reflecting box-office strength as well as the 20 new theaters IMAX installed during the quarter. Production and digital remastering sales also climbed by more than half, benefiting directly from the increase in viewership. Sales and lease arrangements managed to post revenue gains of 29% despite seeing mixed performance, with an increase in the number of full-theater system installations outweighing the lack of any existing-location upgrades during the quarter.
IMAX CEO Richard Gelfond couldn't say enough good things about the company's results, noting that "the second quarter of 2015 was one of the strongest in IMAX's history." Gelfond compared the quarter favorably to 2010, when the hit Avatar dominated its screens. With the CEO slated to attend the world premiere of the latest installment in the Mission Impossible series, Gelfond believes that the company is still seeing "the continuation of the transformation of IMAX's brand from the smaller successes onto center stage."
Will IMAX gives investors an encore?
Certainly, IMAX's growth has shown few signs of slowing down anytime soon. With the company's latest theater openings, IMAX counts 976 locations in its network, and that should leave the theater giant in a good position to top the 1,000 mark by the end of 2015. The greater IMAX's penetration gets throughout the global movie theater market, the stronger its reputation will be among moviegoers around the world, and that could build a positive feedback loop to accelerate growth even further.
IMAX premiere showings have also boosted the recognition of the theater brand. Gelfond pointed to premieres of Jurassic World and Furious 7 as important to the company's long-term strategy, calling them "a powerful marketer for our brand and also signal the increasingly important role IMAX plays in the entertainment ecosystem."
One area that some investors worry about is the declining theater backlog that IMAX has seen. During the second quarter, backlogs fell to 391 theaters, which was down 28 from the year-ago quarter and 12 fewer than what IMAX had in its pipeline at the end of March. Nevertheless, with contract signings for 30 more theater locations during the quarter, IMAX doesn't have to worry about its business drying up just yet.
With expectations that it will release roughly 40 DMR films throughout its network this year, IMAX is riding high on the success of Hollywood's blockbuster releases. As long as that momentum holds -- and it looks like it will for the foreseeable future -- IMAX will have a continuing opportunity to reap the rewards from offering moviegoers a unique viewing experience.