Executive Summary / Key Takeaways

• IMAX Corporation, a premier global technology platform, is positioned for a new era of growth driven by its differentiated technology, expanding global network, and increasingly diversified content portfolio.
• The company delivered strong Q1 2025 results with 10% revenue growth and 13% gross margin expansion, fueled by record box office performance (especially in China) and accelerating system installations.
• IMAX's proprietary technology, including IMAX with Laser and the "Filmed For IMAX" program, provides a significant competitive moat, attracting top filmmakers and enabling exhibitors to command premium pricing and drive higher attendance.
• Network expansion is accelerating, with 95 system signings and 21 installations in Q1 2025, contributing to a backlog of 516 systems and supporting management's 2025 installation guidance of 145-160 systems.
• Management projects a record global box office exceeding $1.2 billion and adjusted EBITDA margins of at least 40% in 2025, underpinned by a robust film slate, a rebound in the China market, and the inherent operating leverage of the business model.

A Differentiated Experience in a Recovering Market

IMAX Corporation has evolved from its origins in 1967 into a leading global technology platform synonymous with immersive entertainment. Leveraging proprietary software, specialized auditorium architecture, patented intellectual property, and unique equipment, IMAX offers an end-to-end solution that creates awe-inspiring content experiences. This model positions IMAX not merely as a cinema technology provider, but as a premium destination platform for filmmakers, studios, and audiences worldwide. The company operates primarily through two segments: Content Solutions, focused on enhancing and distributing content, and Technology Products and Services, centered on the sale, lease, and maintenance of its advanced theater systems.

The broader entertainment industry has navigated significant disruption from the pandemic and the Hollywood strikes, impacting traditional exhibition. However, moviegoing has shown signs of a rebound, and demand for premium, out-of-home experiences remains robust. Within this landscape, IMAX stands out with its differentiated offering. The company holds the largest global premium format network, more than double the size of its nearest competitor, comprising 1810 systems across 89 countries as of March 31, 2025. This extensive footprint, coupled with a strategic focus on underpenetrated, high-per-screen-average markets internationally, provides a significant runway for future growth.

IMAX's competitive positioning is fundamentally rooted in its technological superiority and the resulting premium experience. Its core technology suite, including proprietary digital remastering (DMR), advanced laser projection systems (IMAX with Laser), specialized auditorium geometry, and immersive sound, sets it apart. The "Filmed For IMAX" program, which involves using proprietary IMAX film or certified digital cameras and a customized workflow, delivers enhanced image quality and exclusive aspect ratios, providing up to 26% more image on standard screens and up to 67% more on select 1.43 aspect ratio screens. These technological advantages translate directly into tangible benefits: exhibitors can charge a premium for IMAX tickets, films often achieve higher attendance levels, and the immersive quality attracts top-tier filmmakers seeking to realize their creative vision on the largest canvas. While direct competitors like AMC (AMC) and Cinemark (CNK) operate larger overall networks, IMAX's focus on the premium segment allows it to capture a higher share of box office for major titles and command better profitability on a per-screen basis. Dolby Laboratories (DLB) competes in immersive sound and imaging, but IMAX's strength lies in its integrated, end-to-end system and brand ecosystem, which is challenging to replicate.

Accelerating Momentum in Network and Content

The strategic emphasis on expanding the global network and diversifying content is yielding tangible results, driving recent financial performance. In the first quarter of 2025, IMAX reported total revenues of $86.7 million, a 10% increase compared to $79.1 million in the prior-year period. Gross margin expanded by 13% to $53.2 million, reflecting the inherent operating leverage in the business model as higher revenues flow through efficiently.

The Technology Products and Services segment was a key driver, with revenue increasing 17% to $50.6 million and gross margin up 23% to $29.1 million. This growth was primarily attributed to a higher number of system installations and renewals, as well as increased rental revenues tied to box office performance. The company completed 21 system installations in Q1 2025, a significant increase from 15 in Q1 2024, contributing to management's confidence in achieving 145-160 installations for the full year 2025. System signings also accelerated, with 95 agreements signed in Q1 2025, including 58 upgrades, compared to just 8 signings (no upgrades) in Q1 2024. This strong signings activity pushed the backlog to 516 systems as of March 31, 2025, up 17% year-over-year, representing a solid pipeline for future revenue, particularly with approximately 74% of the backlog scheduled for international markets.

The Content Solutions segment also contributed positively, with revenue increasing slightly to $34.2 million and gross margin growing 7% to $23.6 million. This segment benefited from a record-breaking global box office of $298.2 million in Q1 2025, driven significantly by the performance in Greater China, where the local language film Ne Zha 2 became the highest-grossing IMAX release of all time in the region. The increasing contribution of local language films, which represented 68% of global box office in Q1 2025, up from 12% in 2019 and 21% in 2023, highlights the success of IMAX's content diversification strategy. This diversification, alongside exclusive events and documentaries, helps mitigate reliance on the Hollywood slate and drives capacity utilization across the network.

Outlook and Financial Health

Management's outlook for 2025 is highly optimistic, projecting a record global box office exceeding $1.2 billion and adjusted EBITDA margins of at least 40%. This guidance is underpinned by a robust film slate featuring a record number of "Filmed For IMAX" titles (over 14 announced for 2025) and major tentpole franchises lined up through the end of the decade. The expected rebound in the China market, following softness in 2024 but a record-setting start to 2025, is a key assumption for achieving the box office target. The inherent operating leverage of the business model means that as box office and network scale increase, a higher percentage of revenue is expected to flow through to profitability.

Financial health remains strong. As of March 31, 2025, IMAX held $97.1 million in cash and cash equivalents and had over $300 million in available borrowing capacity across its credit facilities.

Operating cash flow provided $7.0 million in Q1 2025, an $18 million improvement over the prior year, reflecting better working capital management. While net cash used in investing activities increased due to higher investment in JRSAs and CapEx, this aligns with the strategy to grow the network and capitalize on the strong slate. The company's debt includes $230 million in convertible senior notes due in April 2026, but management believes its strong liquidity position provides flexibility in addressing this maturity.

Share repurchases continue to be a component of capital allocation, with $175 million spent since 2020, reducing shares outstanding by approximately 19%.

Risks and Considerations

Despite the positive momentum, investors should consider potential risks. The ability to collect receivables is dependent on the financial health of theater operators, which can be influenced by economic conditions, inflation, and interest rates. Geopolitical factors, particularly concerning operations and film imports in China, could impact performance, although management remains confident that any potential restrictions on Hollywood films would target lower-tier titles not central to IMAX's business. Converting the system backlog into revenue and cash flows is subject to factors outside IMAX's direct control, such as theater construction timelines and customer financing. Competition from other premium formats and alternative entertainment options, while addressed by IMAX's differentiation and content diversification, remains a factor in the evolving market landscape.

Conclusion

IMAX Corporation is demonstrating strong operational and financial momentum, driven by its unique technological platform, expanding global network, and diversified content strategy. The record-breaking start to 2025, coupled with a robust film slate and accelerating system installations, positions the company for a potentially record year. While risks related to market volatility and geopolitical factors persist, IMAX's differentiated offering, strong balance sheet, and focus on high-growth international markets and alternative content streams provide a compelling investment thesis. The company appears well-poised to capitalize on the increasing demand for premium, immersive experiences and translate its strategic initiatives into sustainable growth and expanding margins in the years ahead.