IMAX CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Presented below is Management’s Discussion and Analysis of Financial Condition and Results of Operations (or “MD&A”) for IMAX Corporation and its consolidated subsidiaries (“IMAX” or the “Company”) for the three and six months ended June 30, 2024 and 2023. MD&A should be read in conjunction with Note 13, “Segment Reporting,” in the accompanying Condensed Consolidated Financial Statements in Item 1. As of June 30, 2024, the Company indirectly owns 71.55% of IMAX China Holding, Inc. (“IMAX China”), whose shares trade on the Hong Kong Stock Exchange. IMAX China is a consolidated subsidiary of the Company. For the three months ended June 30, 2024, net income attributable to IMAX China is $5.2 million, of which $3.7 million is attributable to the shareholders of the Company (2023 — $4.5 million and $3.2 million, respectively). SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION Certain statements included in this quarterly report may constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995 or “forward-looking information” within the meaning of Canadian securities laws. These forward-looking statements include, but are not limited to, references to business and technology strategies and measures to implement strategies, competitive strengths, goals, expansion and growth of business, operations and technology, future capital expenditures (including the amount and nature thereof), industry prospects and consumer behavior, plans and references to the future success of the Company and expectations regarding its future operating, financial and technological results. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. However, whether actual results and developments will conform with the expectations and predictions of the Company is subject to a number of risks and uncertainties, including, but not limited to, risks associated with investments and operations in foreign jurisdictions and any future international expansion, including those related to economic, political and regulatory policies of local governments and laws and policies of the United States and Canada, as well as geopolitical conflicts; risks related to the Company’s growth and operations in China; the performance of IMAX remastering films and other films released to the IMAX network; the signing of IMAX System agreements; conditions, changes and developments in the commercial exhibition industry; risks related to currency fluctuations; the potential impact of increased competition in the markets within which the Company operates, including competitive actions by other companies; the failure to respond to change and advancements in digital technology; risks relating to consolidation among commercial exhibitors and studios; risks related to brand extensions and new business initiatives; conditions in the in-home and out-of-home entertainment industries; the opportunities (or lack thereof) that may be presented to and pursued by the Company; risks related to cyber-security and data privacy; risks related to the Company’s inability to protect its intellectual property; risks associated with the Company’s use of artificial intelligence (“AI”) and exploration of additional use cases of AI; risks related to climate change; risks related to weather conditions and natural disasters that may disrupt or harm the Company’s business; risks related to the Company’s indebtedness and compliance with its debt agreements; general economic, market or business conditions; risks related to political, economic and social instability; the failure to convert system backlog into revenue; changes in laws or regulations; any statements of belief and any statements of assumptions underlying any of the foregoing; other factors and risks outlined in the Company’s periodic filings with the United States Securities and Exchange Commission (the “SEC”) or in Canada, the System for Electronic Document Analysis and Retrieval (“SEDAR+”); and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this quarterly report are qualified by these cautionary statements, and actual results or anticipated developments by the Company may not be realized, and even if substantially realized, may not have the expected consequences to, or effects on, the Company. The forward-looking statements herein are made only as of the date hereof and the Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. IMAX ® , IMAX ® 3D, Experience It In IMAX ® , The IMAX Experience ® , DMR ® , Filmed For IMAX ® , IMAX Live TM , IMAX Enhanced ® , IMAX StreamSmart TM , and SSIMWAVE ® are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions. 41 Table of Contents The Company makes available, free of charge, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to such reports, as soon as reasonably practicable after such filings have been made with the SEC and Canadian securities regulators. Reports may be obtained free of charge through the SEC’s website at www.sec.gov or the SEDAR+’s website at www.sedarplus.ca and through the Company’s website at www.imax.com or by calling the Company’s Investor Relations Department at 212-821-0154. No information included on the Company’s website shall be deemed included or otherwise incorporated into this filing, except where expressly indicated. The information posted on the Company’s Corporate and Investor Relations websites may be deemed material to investors. Accordingly, investors, media and others interested in the Company should monitor the Company’s investor relations websites in addition to the Company’s press releases, SEC and SEDAR+ filings and public conference calls and webcasts. OVERVIEW IMAX is a premier global technology platform for entertainment and events. Through its proprietary software, auditorium, architecture, patented intellectual property, and specialized equipment, IMAX offers a unique end-to-end solution to create superior, awe-inspiring immersive content experiences for which the IMAX ® brand is globally renowned. Top filmmakers, movie studios, artists, and creators utilize the cutting-edge visual and sound technology of IMAX to connect with audiences in innovative ways. As a result, IMAX is among the most important and successful global distribution platforms for domestic and international tentpole films. The Company’s global content portfolio includes blockbuster films, both from Hollywood and local language film industries worldwide; IMAX documentaries, both original and acquired; and IMAX events and experiences in emerging verticals, including music, gaming, and sports. The Company leverages its proprietary technology and engineering in all aspects of its business, which principally consists of the digital remastering of films and other content into the IMAX format for distribution across the IMAX network (“IMAX Film Remastering”) and the sale or lease of premium IMAX theater systems (“IMAX System(s)”). IMAX Systems are based on proprietary and patented image, audio and other technology developed over the course of the Company’s history since its founding in 1967. The customers for IMAX Systems are principally exhibitors that operate commercial multiplex theaters, and, to a much lesser extent, museums, science centers and destination entertainment sites. The Company does not own the locations in the IMAX network, except for one, and is not an exhibitor, but instead sells or leases the IMAX System to exhibitor customers along with licenses to use its trademarks and ongoing maintenance services for which there are annual payments by the exhibitors to IMAX. IMAX has the largest global premium format network, more than double the size of its nearest competitor. As of June 30, 2024, there were 1,780 IMAX Systems in 89 countries and territories, including 1,705 commercial multiplexes, 12 commercial destinations, and 63 institutional locations in the Company’s global network. This compares to 1,718 IMAX Systems in 87 countries and territories as of June 30, 2023, including 1,638 commercial multiplexes, 12 commercial destinations, and 68 institutional locations in the Company’s global network. (Refer to the table under “IMAX Network and Backlog” for additional information on the composition of the IMAX network.) IMAX Systems provide the Company’s exhibitor customers with a combination of the following benefits: • the ability to exhibit content that has been enhanced through the IMAX Film Remastering, which results in higher image and sound fidelity than conventional cinema experiences; • advanced, high-resolution projectors with specialized equipment and automated theater control systems, which generate significantly more contrast and brightness than conventional theater systems; • large screens and proprietary auditorium geometry, which result in a substantially larger field of view so that the screen extends to the edge of a viewer’s peripheral vision and creates more realistic images; • advanced sound system components, which deliver more expansive sound imagery and pinpointed origination of sound to any specific spot in an auditorium equipped with an IMAX System; • specialized theater acoustics, which result in a four-fold reduction in background noise; • ongoing maintenance and extended warranty services; and • a license to the globally recognized IMAX brand, as well as benefits from IMAX marketing of films being shown in its network and IMAX’s growing social media followership. 42 Table of Contents In addition, select movies shown in the IMAX network are filmed using proprietary IMAX film cameras or IMAX certified digital cameras, which along with IMAX’s customized guidance and a workflow process provide filmmakers enhanced and differentiated image quality and an IMAX-exclusive film aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen. In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, delivering up to 67% more image. Together, these components cause audiences in IMAX locations to feel as if they are a part of the on-screen action, creating a more intense, immersive, and awe-inspiring exciting experience than a conventional cinematic format. As a result of the engineering and scientific achievements that are a hallmark of The IMAX Experience ® , the Company’s exhibitor customers typically charge a premium for films released in IMAX’s format versus films exhibited in their other auditoriums. The premium pricing, combined with the higher attendance levels associated with IMAX films, generates incremental box office for the Company’s exhibitor customers and for the movie studios releasing their films to the IMAX network. The incremental box office generated by IMAX films combined with IMAX’s unmatched global network footprint and scale has helped establish IMAX as a key premium distribution and marketing platform for Hollywood and foreign local language movie studios. The Company continues to evolve its platform to bring new, innovative events and experiences to audiences worldwide. The Company has a footprint of connected IMAX Systems capable of delivering live, interactive content with low latency and superior sight and sound. As a premier global technology platform for entertainment and events, the Company strives to remain at the forefront of advancements in technology. The Company offers a suite of laser-based digital projection systems (“IMAX Laser Systems”), which deliver increased resolution, sharper and brighter images, deeper contrast, and the widest range of colors available to filmmakers today. The Company further believes that its suite of IMAX Laser Systems are helping facilitate the next major renewal and upgrade cycle for the global IMAX network. The Company utilizes AI for image enhancement, streaming technology, and data analysis to improve various aspects of its business. Furthermore, the Company is actively exploring other global use cases for AI to save costs, and to improve its products, operations, and efficiency. SOURCES OF REVENUE The Company has organized its operating segments into the following two reportable segments: (i) Content Solutions, which principally includes content enhancement and distribution services, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems. The Company’s activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. (See Note 13 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1). Content Solutions The Content Solutions segment earns revenue principally from the digital remastering of films and other content into IMAX formats for distribution across the IMAX network. To a lesser extent, the Content Solutions segment also earns revenue from the distribution of large-format documentary films and IMAX events and experiences including music, gaming, and sports, as well as the provision of film post-production services. Film Remastering and Distribution IMAX Film Remastering is a proprietary technology that digitally remasters films and other content into IMAX formats for distribution across the IMAX network. In a typical IMAX Film Remastering and distribution arrangement, the Company receives a percentage of the box office receipts from a movie studio in exchange for converting a commercial film into the IMAX format and distributing it through the IMAX network. The fee earned by the Company in a typical IMAX Film Remastering and distribution arrangement averages approximately 12.5% of box office receipts (i.e., global box office (“GBO”) less applicable sales taxes), except for within Greater China, where the Company receives a lower percentage of net box office receipts for certain Hollywood films due to an import tax. 43 Table of Contents IMAX Film Remastering digitally enhances the image resolution of films for projection on IMAX screens while maintaining or enhancing the visual clarity and sound quality to levels for which The IMAX Experience is known. In addition, the original soundtrack of a film to be exhibited across the IMAX network is remastered for IMAX digital sound systems. IMAX remastered soundtracks are uncompressed for full fidelity. IMAX sound systems use proprietary loudspeaker systems and proprietary surround sound configurations that ensure every seat in an auditorium is an optimal listening position. IMAX films also benefit from enhancements made by individual filmmakers exclusively for the IMAX release of the film. Collectively, the Company refers to these enhancements as “IMAX DNA.” Filmmakers and movie studios have sought IMAX-specific enhancements in recent years to generate interest in and excitement for their films. Such enhancements include shooting films with IMAX cameras to increase the audience’s immersion in the film and to take advantage of the unique dimensions of the IMAX screen by projecting the film in a larger aspect ratio that delivers up to 26% more image onto a standard IMAX movie screen. In select IMAX locations worldwide, movies filmed with IMAX cameras have an IMAX-exclusive 1.43 film aspect ratio, delivering up to 67% more image. The Company has a Filmed For IMAX TM program for select films under which filmmakers craft films from their inception in numerous ways to optimize The IMAX Experience . The program includes incremental and bespoke marketing support, which box office metrics demonstrate audiences respond extremely favorably to, and drives a higher market share for IMAX. Management believes that growth in international box office remains an important driver of growth for the Company. To support continued growth in international markets, the Company is focused on the expansion of the IMAX network and has sought to elevate its international film strategy, supplementing its slate of Hollywood films with appealing local language films released in select markets, including China, Japan, India, France and South Korea. More recently, the Company has further expanded its strategy by distributing local language films in both native and foreign markets. The following table provides detailed information about the films that were released to the Company’s global network during the three and six months ended June 30, 2024 and 2023: Three Months Ended Six Months Ended June 30, June 30, 2024 2023 2024 2023 Hollywood film releases (1) 9 9 16 15 Local language film releases: Japan 5 1 8 3 China 4 4 8 9 India 2 1 4 3 South Korea 2 1 3 2 Indonesia 1 — 1 — France — 1 — 1 Total local language film releases 14 8 24 18 Alternative content experiences 4 — 6 — 27 17 46 33 (1) For the six months ended June 30, 2024, the films released to the Company’s global network include two with IMAX DNA (2023 — three). The films distributed through the Company’s global network during the six months ended June 30, 2024 that generated the highest IMAX box office totals were Dune: Part Two, Godzilla x Kong: The New Empire, Inside Out 2, Kingdom of The Planet of The Apes, Furiosa, Bad Boys: Ride or Die, Pegasus 2, and YOLO. In addition, during the six months ended June 30, 2024, a number of alternative content films and events were distributed including Queen Rock Montreal, monthly A24 mid-week film series, Suga - Agust D Tour D-Day The Movie, Fallout series launch event and live streaming of the NBA Finals in select IMAX China locations. 44 Table of Contents In addition to the 46 IMAX films and alternative content experiences released on the Company’s global network during the six months ended June 30, 2024, the Company has announced the following additional 32 films and additional alternative content experiences to be released throughout the remainder of 2024: Title Studio Scheduled Release Date (1) IMAX DNA Despicable Me 4 Universal Pictures July 2024 — A Place Called Silence Maoyan July 2024 — A Legend Bona July 2024 — Indian 2 Lyca Productions July 2024 — Skywalkers: A Love Story XYZ July 2024 — Kingdom 4 Toho Studios July 2024 — Twisters Universal Pictures/Warner Bros. Pictures July 2024 — Olympics Opening Ceremony Universal/NBC Sports July 2024 — Successor Maoyan July 2024 — Deadpool & Wolverine Marvel Studios/Walt Disney Studios July 2024 — The Traveller New Classics July 2024 Filmed For IMAX My Hero Academia The Movie: You're Next Toho Studios August 2024 — Decoded Maoyan August 2024 Filmed For IMAX Upstream Alibaba August 2024 — White Snake: Afloat Wanda August 2024 — Borderlands Lionsgate August 2024 — Alien: Romulus Walt Disney Studios August 2024 Expanded Aspect Ratio The Crow Lionsgate August 2024 — Everything Everywhere All At Once A24 August 2024 Takluk GSC Movies August 2024 — Beetlejuice Beetlejuice Warner Bros. Pictures September 2024 — Transformers One Paramount Pictures September 2024 — Wolfs Sony Pictures/Apple September 2024 — The Wild Robot Universal Pictures September 2024 — Megalopolis Lionsgate September 2024 — Joker: Folie à Deux Warner Bros. Pictures/DC Studios October 2024 Filmed For IMAX Venom 3 Sony Pictures October 2024 Filmed For IMAX Swan Lake Pathe Live November 2024 Filmed For IMAX Red One Amazon/MGM November 2024 — Gladiator II Paramount Pictures November 2024 — Wicked – Part 1 Universal Pictures November 2024 — Kraven the Hunter Sony Pictures/Marvel Studios December 2024 — (1) The scheduled release dates in the table above are subject to change, may vary by territory, and may not reflect the date(s) of limited premiere events. The Company remains in active negotiations with studios for additional films to fill out its short- and long-term film slate for the IMAX network. The Company expects to continue announcing additional local language films and exclusive IMAX events and experiences to be released throughout the remainder of 2024 to its global network. The Company has also announced the majority of the titles to be released in IMAX in 2025 including Avatar 3 and a record 14 or more Filmed for IMAX titles including four Marvel titles, the latest Mission Impossible installment, Superman Legacy and F1 from Apple. Additionally, IMAX expects to distribute a number of major titles in 2026 including an Avengers, Star Wars, Batman and Dune title. 45 Table of Contents Other Content Solutions The Company distributes large-format documentary feature films through its global commercial network and institutional theaters. The Company traditionally receives as its distribution fee either a fixed amount or a fixed percentage of the theater box office receipts and, following the recoupment of its costs, is typically entitled to receive an additional percentage of gross revenues as participation revenues. In May 2024, Amazon Content LLC (“Amazon Content”) acquired the worldwide rights to the Company’s original documentary, The Blue Angels , which was filmed with IMAX digital certified cameras and produced in collaboration with Dolphin Entertainment, Bad Robot Productions, and Zipper Bros Films. The full-length documentary was released to select commercial locations across the IMAX network on May 17, 2024, and a 40-minute version will be released to institutional locations beginning in early 2025. The Company continues to work on The Elephant Odyssey a documentary in collaboration with Beach House Pictures Pte Ltd and China International Communications Group, which was announced in 2023 and is expected to be released in 2025, and Stormbound , an additional feature documentary produced by Academy Award-winning producer, Adam McKay, which will be released in late 2025. In addition, the Company continues to evolve its platform to bring new, innovative IMAX events and experiences to audiences worldwide. As of June 30, 2024, the Company had a footprint of 263 connected locations in the IMAX network across the United States, Canada, Europe, and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound. In the six months ended June 30, 2024, the Company partnered with Pathé Live for the exclusive release of Queen Rock Montreal which became one of the Company’s highest grossing concert films ever, along with 2023’s Taylor Swift: The Eras Tour. In addition, the Company hosted an IMAX event, Andre 3000: New Blue Sun, and entered into a partnership with A24 for a monthly one-night-only IMAX release of classic A24 titles, including Alex Garland’s highly acclaimed Ex Machina , Uncut Gems , and Hereditary . Additionally, the Company hosted multiple IMAX Live TM events, including screening the National Basketball Association finals across multiple IMAX locations in the Asia Pacific region and the screening of The Beach Boys: IMAX Live Experience . On July 26, 2024, the Company, in partnership with NBC television network, will be extending its live coverage of the 2024 Paris Olympics Opening Ceremony to select IMAX locations throughout the United States. The Company provides film post-production and quality control services for large-format films, whether produced by IMAX or third-parties, and digital post-production services. In addition, the Company also provides IMAX film and digital cameras to content creators under the IMAX certified camera program. Technology Products and Services The Company works with filmmakers, studios, and artists end-to-end from content creation through content delivery. The Company provides IMAX film cameras to select IMAX and third-party productions and certifies a suite of high-end digital cameras to shoot in the IMAX format under its Filmed for IMAX program. In addition, the Company provides post-production — including its proprietary DMR process — and quality control services for films that play in the IMAX network. Sales and Sales-Type Lease Arrangements The Company provides IMAX Systems to exhibitors through sale arrangements or long-term lease arrangements that for accounting purposes are classified as sales-type leases. Under these arrangements, in exchange for providing the IMAX System, the Company earns initial fees and ongoing consideration, which can include fixed annual minimum payments and contingent fees in excess of the minimum payments, as well as maintenance and extended warranty fees (see “IMAX Maintenance” below). The initial fees vary depending on the system configuration and location of the IMAX System. Initial fees are paid to the Company in installments typically between the time of signing the arrangement and the time of system installation. Once an IMAX System is installed, the initial fees and the present value of future annual minimum payments, which are financing fees, are recognized as revenue. In addition, in sale arrangements, the present value of the estimated contingent fees that may become due if certain annual minimum box office receipt thresholds are exceeded is recorded as revenue in the period when the sale is recognized and is adjusted in future periods based on actual results and changes in estimates. Such variable consideration is only recognized on sales transactions to the extent the Company believes there is not a risk of significant revenue reversal. Finance income is recognized over the term of a financed sale or sales-type lease arrangement. In sale arrangements, title to the IMAX System equipment generally transfers to the customer. However, in certain instances, the Company retains title or a security interest in the equipment until the customer has made all payments required by the agreement or until certain shipment events for the equipment have occurred. In a sales-type lease arrangement, title to the IMAX System equipment remains with the Company. The Company has the right to remove the equipment for non-payment or other defaults by the customer. 46 Table of Contents The revenue earned from customers under the Company’s IMAX System sale or sales-type lease agreements varies from quarter-to- quarter and year-to-year based on a number of factors, including the number and mix of IMAX System configurations sold or leased, the timing of installation of the IMAX Systems, the nature of the arrangement and other factors specific to individual contracts. Joint Revenue Sharing Arrangements The Company provides IMAX Systems to exhibitors through joint revenue sharing arrangements (“JRSA”). Under the traditional form of these arrangements, the Company provides the IMAX System under a long-term lease in which the Company assumes the majority of the equipment and installation costs. In exchange for its upfront investment, the Company, primarily, earns rent based on a percentage of contingent box office receipts rather than requiring the customer to pay a fixed upfront fee or fixed annual minimum payments. Rental payments from the customer are required throughout the term of the arrangement and are typically due either monthly or quarterly. The Company retains title to the IMAX System equipment components throughout the lease term, and the equipment is returned to the Company at the conclusion of the arrangement. Under certain other joint revenue sharing arrangements, known as hybrid arrangements, the customer is responsible for making fixed upfront payments prior to the delivery and installation of the IMAX System in an amount that is typically half of what the Company would receive from a typical sale transaction. As with a traditional joint revenue sharing arrangement, the customer also pays the Company a percentage of contingent box office receipts over the term of the arrangement, although this percentage is typically half that of a traditional joint revenue sharing arrangement. Hybrid joint revenue sharing arrangements take the form of a sale. The fixed upfront payment is recognized when the lease term commences and is recorded within Revenues – Technology Sales. The contingent rent is recognized as revenue over the lease term and is recorded within Revenues – Technology Rentals. Under most joint revenue sharing arrangements (both traditional and hybrid), the initial non-cancellable term is 10 years or longer and is renewable by the customer for one to two additional terms of between three to five years. The Company has the right to remove the equipment for non-payment or other defaults by the customer. The contracts are non-cancellable by the customer unless the Company fails to perform its obligations. The revenue earned from customers under the Company’s joint revenue sharing arrangements can vary from quarter-to-quarter and year-to-year based on a number of factors that drive box office levels including film performance, the mix of IMAX System configurations, the timing of installation of IMAX Systems, the nature of the arrangement, the location, size and management of the theater and other factors specific to individual arrangements. Joint revenue sharing arrangements also require IMAX to provide maintenance and extended warranty services to the customer over the term of the lease in exchange for a separate fixed annual fee. These fees are reported within IMAX Maintenance, as discussed below. Joint revenue sharing arrangements have been an important factor in the expansion of the Company’s commercial system network. Joint revenue sharing arrangements allow commercial theater exhibitors to install IMAX Systems without the significant initial capital investment required in a sale or sales-type lease arrangement. Joint revenue sharing arrangements drive recurring cash flows and earnings for the Company as customers under these arrangements pay the Company a portion of their ongoing box office receipts. The Company funds its investment in equipment for joint revenue sharing arrangements through cash flows from operations. As of June 30, 2024, the Company had 898 locations under joint revenue sharing arrangements in its global commercial multiplex network. The Company also had contracts in backlog for 327 systems under joint revenue sharing arrangements as of June 30, 2024, including 108 upgrades to existing locations and 216 new locations. IMAX Maintenance IMAX System arrangements also include a requirement for the Company to provide maintenance services over the life of the arrangement in exchange for an extended warranty and annual maintenance fee paid by the exhibitor. Under these arrangements, the Company provides preventative and emergency maintenance services to ensure that each presentation is up to the highest IMAX quality standard. Annual maintenance fees are paid throughout the duration of the term of the system agreements. 47 Table of Contents All Other Streaming and Consumer Technology Streaming and Consumer Technology includes the Company’s Streaming Technology software offerings and IMAX Enhanced product services. Streaming Technology consists of several software products including: • IMAX StreamSmart – works within existing video compression workflows to reduce bitrates and retain picture quality across all devices and formats and deliver significant cost savings. • IMAX StreamAware On-Demand – all-in-one quality assurance and quality control to automate and standardize checks for comprehensive content integrity and regulatory compliance for third-party content libraries, across an entire video compression workflow. • IMAX StreamAware On-Air – real-time monitoring software for live streams, which enables users to monitor video quality across their networks and to identify and address streaming issues. These AI-powered products allow streaming platforms and broadcasters to automate workflows. The Company believes that these products allow users to deliver the highest quality viewing experiences to their subscribers while reducing costs. IMAX Enhanced is a solution to bring The IMAX Experience into the home. IMAX Enhanced provides end-to-end premium technology across streaming content and best-in-class entertainment devices, offering consumers high-fidelity playback of image and sound in the home and beyond, including the following features: • IMAX’s expanded aspect ratio, which is available on select titles and streaming platforms, including Disney+; • IMAX’s proprietary remastering technology, which produces more vivid, higher-fidelity 4K HDR images on premium televisions; and • IMAX’s signature sound, which was specially recreated and calibrated for the home to unlock more immersive audio. To be certified as IMAX Enhanced, leading consumer electronics manufacturers spanning 4K/8K televisions, projectors, A/V receivers, loudspeakers, soundbars, smartphones, personal computers, tablets, and more must meet a carefully prescribed set of audiovisual performance standards, set by a certification committee, along with some of Hollywood’s leading technical specialist. At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Hewlett Packard, Xiaomi, Sound United and Honor, among others. As of June 30, 2024, more than 300 IMAX Enhanced titles have been released across five of the biggest streaming platforms worldwide: Disney+, Sony Bravia CORE, Tencent Video, iQiyi and Rakuten TV. Over 15 million IMAX Enhanced certified devices are estimated to be in the market today. Other All Other also includes revenues from sources including one owned and operated IMAX System in Sacramento, California; a commercial arrangement with one theater resulting in the sharing of profits and losses; the provision of management services to three other theaters; renting the Company’s proprietary 2D and 3D large-format film cameras; and offering production advice and technical assistance to both documentary and Hollywood filmmakers. 48 Table of Contents IMAX NETWORK AND BACKLOG IMAX Network The following table provides detailed information about the IMAX network by type and geographic location as of June 30, 2024 and 2023. For additional information regarding the composition of the IMAX network, see “Marketing and Customers” in Part I, Item 1 of the Company’s 2023 Form 10-K. June 30, 2024 June 30, 2023 Commercial Multiplex Commercial Destination Institutional Total Commercial Multiplex Commercial Destination Institutional Total United States 364 4 24 392 360 4 25 389 Canada 43 1 7 51 40 1 7 48 Greater China (1) 790 — 13 803 779 — 16 795 Asia (excluding Greater China) 176 2 2 180 145 2 2 149 Western Europe 129 4 8 141 119 4 8 131 Latin America (2) 61 1 7 69 55 1 8 64 Rest of the World 142 — 2 144 140 — 2 142 Total (3) 1,705 12 63 1,780 1,638 12 68 1,718 (1) Greater China includes China, Hong Kong, Taiwan, and Macau. (2) Latin America includes South America, Central America, and Mexico. (3) Period-to-period changes in the table above are reported net of the effect of permanently closed locations. IMAX currently estimates a worldwide commercial multiplex addressable market of 3,619 locations, of which there are 1,705 IMAX Systems operating as of June 30, 2024, representing a market penetration of only 47%. The Company believes that the majority of its future growth will come from international markets. As of June 30, 2024, 76% of IMAX Systems in the global commercial multiplex network were located within international markets (defined as all countries other than the United States and Canada). Revenues and GBO derived from international markets continue to exceed revenues and GBO from the United States and Canada. Risks associated with the Company’s international business are outlined in “Risk Factors – The Company conducts business internationally, which exposes it to uncertainties and risks that could negatively affect its operations, sales and future growth prospects” in Part I, Item 1A of the Company’s 2023 Form 10-K. In the six months ended June 30, 2024 the Company’s revenue generated from its Greater China operations represents 26% of consolidated revenue. As of June 30, 2024, the Company had 803 IMAX Systems operating in Greater China with an additional 263 systems in backlog. In the six months ended June 30, 2024, the IMAX network generated over $80.0 million in box office from local language films, representing approximately 18% of the Company’s total box office in the period. The Company is also seeing its local language films increasingly generate significant IMAX box office in markets outside of those in which they are released, such as the Japanese film Conan 27 as well as the Chinese film Formed Police Unit and the Korean film Suga - Agust D Tour D-Day The Movie. (See “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there.” in Part II, Item 1A. of this Form 10-Q and “Risk Factors – General political, social and economic conditions can affect the Company’s business by reducing both revenues generated from existing IMAX Systems and the demand for new IMAX Systems,” and “Risk Factors – The Company may not convert all of its backlog into revenue and cash flows” in Part I, Item 1A of the Company’s 2023 Form 10-K.) 49 Table of Contents The following tables provide detailed information about the Company’s commercial multiplex network by arrangement type and geographic location as of June 30, 2024 and 2023: June 30, 2024 Commercial Multiplex Locations in IMAX Network Traditional JRSA Hybrid JRSA Sales Arrangements (1) Total Domestic Total (United States & Canada) 271 7 129 407 International: Greater China 379 108 303 790 Asia (excluding Greater China) 53 8 115 176 Western Europe 40 15 74 129 Latin America 3 0 58 61 Rest of the World 14 0 128 142 International Total 489 131 678 1,298 Worldwide Total (2) 760 138 807 1,705 (1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2) Period-to-period changes in the tables above are reported net of permanently closed systems. June 30, 2023 Commercial Multiplex Locations in IMAX Network Traditional JRSA Hybrid JRSA Sales Arrangements (1) Total Domestic Total (United States & Canada) 271 6 123 400 International: Greater China 402 110 267 779 Asia (excluding Greater China) 37 5 103 145 Western Europe 40 17 62 119 Latin America 2 0 53 55 Rest of the World 17 0 123 140 International Total 498 132 608 1,238 Worldwide Total (2) 769 138 731 1,638 (1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2) Period-to-period changes in the tables above are reported net of permanently closed systems. 50 Table of Contents Backlog The following table provides detailed information about the Company’s backlog as of June 30, 2024 and 2023: June 30, 2024 June 30, 2023 Number of Systems Dollar Values Number of Systems Dollar Values (In thousands of U.S. Dollars, except number of systems) New Upgrade New Upgrade New Upgrade New Upgrade Sales Arrangements (1) 157 20 $ 161,443 $ 17,838 177 16 $ 190,636 $ 17,552 Hybrid JRSA (2) 100 1 74,873 910 108 1 80,058 910 Traditional JRSA (2)(3) 116 110 425 1,475 119 75 500 2,825 Total 373 131 $ 236,741 $ 20,223 404 92 $ 271,194 $ 21,287 (1) Includes Sales, Hybrid Sales, and Sales-Type Lease deal types. (2) The consideration owed under traditional joint revenue sharing arrangements is typically a percentage of contingent box office receipts rather than a fixed upfront fee or fixed annual minimum payments. Accordingly, such arrangements do not usually have a dollar value in backlog; however, hybrid joint revenue sharing arrangements typically provide for contracted upfront payments and therefore carry a backlog value based on those payments. (3) Includes 32 IMAX Systems (2023 ― 38) where certain of the Company’s contracts contain options for the customer to elect to upgrade system type or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections. The backlog reflects the minimum number of commitments for IMAX Systems according to the signed contracts. The dollar value fluctuates depending on the number of new arrangements signed from year-to-year, which adds to backlog and the installation and acceptance of IMAX Systems and the settlement of contracts, both of which reduce backlog. The dollar value of backlog typically represents the fixed contracted revenue according to the signed IMAX System sale and lease agreements that the Company expects to recognize as revenue upon installation and acceptance of the associated system, as well as an estimate of variable consideration in sales arrangements. The value of backlog does not include amounts allocated to maintenance and extended warranty revenues or revenue from systems in which the Company has an equity interest, operating leases, and long-term conditional theater commitments. The Company believes that the contractual obligations for IMAX System installations that are listed in backlog are valid and binding commitments. From time to time, in the normal course of its business, the Company will have customers who are unable to proceed with an IMAX System installation for a variety of reasons, including the inability to obtain certain consents, approvals or financing. Once the determination is made that the customer will not proceed with installation, the agreement with the customer is terminated or amended. If the agreement is terminated, once the Company and the customer are released from all their future obligations under the agreement, all or a portion of the initial rents or fees that the customer previously made to the Company are recognized as revenue. Certain of the Company’s contracts contain options for the customer to elect to upgrade system type during the term or to alter the contract structure (for example, from a joint revenue sharing arrangement to a sale) after signing, but before installation. Current backlog information reflects all known elections. 51 Table of Contents The following tables provide detailed information about the Company’s backlog by arrangement type and geographic location as of June 30, 2024 and 2023: June 30, 2024 IMAX System Backlog Traditional JRSA Hybrid JRSA Sales Arrangements (1) Total Domestic Total (United States & Canada) 76 2 12 90 International: Greater China 112 90 61 263 Asia (excluding Greater China) 18 7 33 58 Western Europe 15 1 19 35 Latin America 2 — 4 6 Rest of the World 3 1 48 52 International Total 150 99 165 414 Worldwide Total (2) 226 101 177 504 (1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2) Worldwide Total of 504 includes 261 new IMAX Laser Systems and 69 upgrades of existing locations to IMAX Laser Systems. June 30, 2023 IMAX System Backlog Traditional JRSA Hybrid JRSA Sales Arrangements (1) Total Domestic Total (United States & Canada) 103 2 15 120 International: Greater China 41 90 66 197 Asia (excluding Greater China) 27 13 31 71 Western Europe 17 3 18 38 Latin America 3 — 7 10 Rest of the World 3 1 56 60 International Total 91 107 178 376 Worldwide Total (2) 194 109 193 496 (1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2) Worldwide Total of 496 includes 247 new IMAX Laser Systems and 92 upgrades of existing locations to IMAX Laser Systems. Approximately 30% of IMAX System arrangements in backlog as of June 30, 2024 are scheduled to be installed in international markets excluding Greater China (2023 — 36%). The Company’s backlog in Greater China represents 52% of its total current backlog including upgrades in system type (2023 — 40%). (See “Risk Factors – The Company may not convert all of its backlog into revenue and cash flows.” in Part II, Item 1A. of this form Form 10-Q.) Signings and Installations The following tables provide detailed information about IMAX System signings and installations for the three and six months ended June 30, 2024 and 2023: 52 Table of Contents Three Months Ended Six Months Ended June 30, June 30, 2024 2023 2024 2023 System Signings: Sales Arrangements (1) 25 26 30 41 Traditional JRSA 62 20 65 33 Total IMAX System signings (2) 87 46 95 74 (1) Includes Sales, Hybrid Sales and Sales-Type Lease deal types. (2) Includes IMAX System upgrades of 68 for the three and six months ended June 30, 2024 (2023 ― 11 and 12 upgrades, respectively). Three Months Ended Six Months Ended June 30, June 30, 2024 2023 2024 2023 System Installations (1) : Sales Arrangements (2) 10 11 15 19 Hybrid JRSA — 2 1 2 Traditional JRSA 14 7 23 8 Total IMAX System installations (3) 24 20 39 29 (1) Two IMAX Systems were relocated from their original location (2023 ― two). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System. (2) Includes Sales, Hybrid Sales and Sales-Type Lease deal types (3) Includes 11 IMAX System upgrades (2023 ― eight upgrades). RESULTS OF OPERATIONS The Company’s business and future prospects are evaluated by Richard L. Gelfond, its Chief Executive Officer (“CEO”), using a variety of factors and financial and operational metrics including: (i) IMAX box office performance and the securing of new IMAX films and alternative content to be exhibited across the IMAX network; (ii) the signing, installation, and financial performance of IMAX System arrangements, particularly those involving laser-based projection systems; (iii) the success of the Company’s investments in business evolution and brand extensions into streaming and consumer technology, including the integration of SSIMWAVE and the distribution of live events to the IMAX network; (iv) revenues and gross margins earned by the Company’s segments, as discussed below; (v) consolidated earnings (loss) from operations, as adjusted for unusual items; (vi) the continuing ability to invest in and improve the Company’s technology to enhance the differentiation of The IMAX Experience versus other out-of-home experiences; (vii) the overall execution, reliability, and consumer acceptance of The IMAX Experience ; and (viii) short- and long-term cash flow projections. The CEO is the Company’s Chief Operating Decision Maker (“CODM”), as such term is defined under United States Generally Accepted Accounting Principles (“U.S. GAAP”). The CODM assesses segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, the amortization of intangible assets, provision for (reversal of) current expected credit losses, certain write-downs, interest income, interest expense, and income tax (expense) benefit are not allocated to the Company’s segments. The Company has organized its operating segments into the following two reportable segments: (i) Content Solutions, which principally includes content enhancement and distribution services, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems. The Company’s activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. (See Note 13 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1). Results of Operations for the Three Months Ended June 30, 2024 and 2023 Net Income and Adjusted Net Income Attributable to Common Shareholders The following table presents the Company’s net income attributable to common shareholders and the associated per diluted share amounts, as well as adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share for the three months ended June 30, 2024 and 2023: 53 Table of Contents Three Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except per diluted share amounts) Net Income Per Diluted Share Net Income Per Diluted Share Net income attributable to common shareholders $ 3,583 $ 0.07 $ 8,351 $ 0.15 Adjusted income attributable to common shareholders * $ 9,746 $ 0.18 $ 14,355 $ 0.26 *Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount. Revenues and Gross Margin During the three months ended June 30, 2024, the Company’s revenues and gross margin decreased by $9.0 million, or 9%, and $14.0 million, or 24%, respectively, when compared to same period in 2023 principally due to IMAX box office performance driven in part by the Hollywood strike impact on the film slate, fewer IMAX systems installed under sales arrangements and a lower contribution from IMAX system amendments and renewals. These year over year declines were partially offset by the sale of commercial and streaming rights for an IMAX documentary. The following table presents the Company’s revenue, gross margin, and gross margin percentage by reportable segment for the three months ended June 30, 2024 and 2023: Revenue Gross Margin Gross Margin % (In thousands of U.S. Dollars) 2024 2023 2024 2023 2024 2023 Content Solutions $ 35,076 $ 31,290 $ 16,138 $ 19,996 46 % 64 % Technology Products and Services 50,898 63,976 25,783 36,411 51 % 57 % Sub-total for reportable segments 85,974 95,266 41,921 56,407 49 % 59 % All Other (1) 2,987 2,713 2,006 1,480 67 % 55 % Total $ 88,961 $ 97,979 $ 43,927 $ 57,887 49 % 59 % (1) All Other includes the results from Streaming and Consumer Technology and other ancillary activities. Content Solutions Content Solutions segment results are influenced by the level of commercial success and box office performance of the films and other content released to the IMAX network, as well as other factors including the timing of the releases, the length of play across the IMAX network, the box office share take rates under the Company’s film remastering and distribution arrangements, the level of marketing spend associated with the releases in the year, and the fluctuations in the value of foreign currencies versus the U.S. Dollar. For the three months ended June 30, 2024, Content Solutions segment revenues and gross margin increased by $3.8 million, or 12%, and decreased by $3.9 million, or 19%, respectively, when compared to the same period in 2023, which was driven by the sale of The Blue Angels commercial and streaming rights, as described below. In the second quarter of 2024, box office generated by IMAX films totaled $196.4 million, a $71.9 million, or 27%, decrease versus the prior year comparative period of $268.3 million driven in part by the Hollywood strike impact on the film slate. In the second quarter of 2024, IMAX box office was generated by the exhibition of 34 films (27 new films and 7 films originally released in a prior year), including Inside Out 2 , which generated IMAX box office of over $37 million. In the second quarter of 2023, IMAX box office was generated by the exhibition of 23 films (17 new films and 6 films originally released in a prior year), including The Super Mario Bro. Movie , which generated box office of $50 million. The impact on revenue from the lower box office experienced year over year was more than offset by the revenue earned from the completion of the sale of worldwide commercial and streaming rights of the Company’s original documentary, The Blue Angels , to Amazon Content as well as from higher revenues from alternative content. The Company continues to build out its alternative content strategy, including evolving its documentary strategy, as a way to increase utilization and revenues across the IMAX system footprint. In addition to the level of revenues, Content Solutions segment gross margin is influenced by the costs associated with films and other content (documentaries, live and alternative) exhibited in the period. The costs associated with films and other content can include production, post-production, distribution and marketing, which are expensed as incurred, For the three months ended June 30, 2024, gross margin percent was 46% compared to 64% in the prior year period, with the decrease being driven by the lower level of IMAX box office coupled with a higher mix of self-produced content expensed, including The Blue Angels . 54 Table of Contents Technology Products and Services The primary drivers of Technology Products and Services segment results are the number of IMAX Systems installed in a period, the costs associated with each installation, lease payments tied to the box office performance of the films released to the IMAX network, as well as the associated maintenance contracts that accompany each installation. The average revenue and gross margin per IMAX System under sale and sales-type lease arrangements vary depending upon the number of IMAX System commitments with a single respective exhibitor, an exhibitor’s location, the type of system sold, and various other factors. The installation of IMAX Systems in theaters or multiplexes, which make up a large portion of the Company’s system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company’s control. The following table provides information about IMAX Systems installed and the associated revenue recognized at that time, except for traditional joint revenue sharing arrangements as revenue is recognized over the lease term, during the three months ended June 30, 2024 and 2023: Three Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except number of systems) Number of Systems Revenue Number of Systems Revenue New IMAX System 8 $ 7,649 11 $ 11,622 Upgraded IMAX System 2 2,926 2 1,793 Total IMAX Systems 10 10,575 13 13,415 Included in the table above is one IMAX System which was relocated from its original location (2023 ― one IMAX System). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System. For the three months ended June 30, 2024, Technology Products and Services segment revenue and gross margin decreased by $13.1 million, or 20%, and $10.6 million, or 29%, respectively, when compared to the same period in 2023, primarily driven by a lower level of rental revenues, which is box office dependent. Rental revenues decreased by $5.5 million, as a result of GBO from joint revenue sharing arrangements which decreased by $36.8 million or 27% in the second quarter of 2024 when compared to the prior year comparative period, from $137.8 million to $101.0 million. Also contributing to the lower level of revenues was the number of systems recognized under sales arrangements, per the table above, and a $4.5 million decrease in revenue contribution from the impact of amendments and renewals to existing IMAX Systems arrangements. The Technology Products and Services segment gross margin decrease during the three months ended June 30, 2024 as compared to 2023 was primarily due to the lower level of revenues, as described above, coupled with higher maintenance costs incurred. All Other For the three months ended June 30, 2024, All Other revenue and gross margin increased by $0.3 million and $0.5 million, respectively, when compared to the same period in 2023, principally due to growth in revenues earned by the Company's Streaming and Consumer Technology business. Selling, General and Administrative Expenses The following table presents information about the Company’s Selling, General and Administrative Expenses for the three months ended June 30, 2024 and 2023: 55 Table of Contents Three Months Ended June 30, Variance (In thousands of U.S. Dollars) 2024 2023 $ % Total Selling, general and administrative expenses $ 37,564 $ 38,906 $ (1,342) (3 %) Less: Share-based compensation (1) (6,506) (6,469) (37) (1 %) Total Selling, general and administrative expenses, excluding share-based compensation $ 31,058 $ 32,437 $ (1,379) (4 %) (1) A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenues, Research and Development, and Executive Transition Costs. (Refer to “Capital Stock and Reserves — Share-Based Compensation” in Note 11 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) For the second quarter of 2024, the lower level of Selling, General and Administrative Expenses experienced over the prior year period reflects savings from management’s continued focus on operational efficiencies, which were partially offset by the impact of higher inflation on wages and other business expenses. Research and Development The Company believes that it is a premier global technology platform for awe-inspiring entertainment and events with significant proprietary expertise in digital and film-based projection and sound system component design, engineering, and imaging technology, particularly in laser-based technology. A significant portion of the Company’s research and development efforts have been focused on the IMAX Laser Systems, which the Company believes is capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers. The Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers. For the three months ended June 30, 2024, Research and Development expenses were $2.0 million, representing an decrease of $0.8 million, or 29%, when compared to $2.8 million during the same period in the prior year. The current period expenses reflect continued investment in developing new IMAX film cameras and Streaming Technology product offerings. The Company intends to continue research and development to further evolve its end-to-end technology. This includes bringing connectivity to the Company’s global network to support live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary film remastering and distribution process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, as well as enhancing the Company’s image and sound quality. Within the Company’s Streaming and Consumer Technology business, there is ongoing research and development in perceptual metrics involving novel measurement and optimization techniques. Investments are also being made to expand existing and/or develop new technologies which are expected to further enhance video quality, delivery, and creation across devices. Furthermore, the Company intends to invest in activities that will capture opportunities to create/build AI and automation into its operations and processes. Credit Loss Expense, Net For the three months ended June 30, 2024, the Company recorded a credit loss expense of $0.1 million, as compared to a credit loss expense of $0.8 million recognized in the prior year. Management’s judgments regarding expected credit losses are based on the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared and involve estimates about the future. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect. (Refer to Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) Interest Expense, net For the three months ended June 30, 2024, interest expense was $2.3 million, representing an increase of $0.5 million, or 27% when compared to interest expense of $1.8 million during the same period of the prior year primarily due to increased borrowings under the Credit Facility in the current period. For the three months ended June 30, 2024, interest income was $0.6 million, when compared to interest expense of $0.7 million during the same period of the prior year due to lower average cash balances maintained at major financial institutions. Income Taxes 56 Table of Contents For the three months ended June 30, 2024, the Company recorded an income tax benefit of $4.0 million (2023 — tax expense of $3.5 million). The Company’s effective tax rate of (371.5)% for the three months ended June 30, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions and a tax benefit related to an internal asset sale during the quarter which was partially offset by an increase in the valuation allowance and withholding taxes. The Company’s effective tax rate of 26.5% for the three months ended June 30, 2023 is similar to the Canadian statutory rate of 26.5% which includes tax rate differences in foreign jurisdictions that were offset by withholding taxes. During three months ended June 30, 2024, the Company completed an internal asset sale to more closely align its intellectual property ownership with its operations. In order to effect this internal asset sale, transactions between entities within the group resulted in capital gains for tax purposes. The tax expense related to the capital gain was partially offset by the reversal of the valuation allowance. Net deferred tax assets were also recorded on the transaction, resulting in a net tax benefit of $7.7 million. (Refer to Note 10 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) Non-Controlling Interests The Company’s Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the three months ended June 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $1.5 million, an increase of $0.2 million, when compared to the same period in 2023. Results of Operations for the Six Months Ended June 30, 2024 and 2023 Net Income and Adjusted Net Income Attributable to Common Shareholders The following table presents the Company’s net income attributable to common shareholders and the associated per share amounts, as well as adjusted net income attributable to common shareholders* and adjusted net income attributable to common shareholders per share (1) for the six months ended June 30, 2024 and 2023: Six Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except per diluted share amounts) Net Income Per Diluted Share Net Income Per Diluted Share Net income attributable to common shareholders $ 6,857 $ 0.13 $ 10,805 $ 0.20 Adjusted net income attributable to common shareholders* $ 17,688 $ 0.33 $ 23,380 $ 0.42 *Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount. Revenues and Gross Margin For the six months ended June 30, 2024, the Company’s revenues and gross margin decreased by $16.8 million or 9% and $17.1 million or 16%, respectively, when compared to same period in 2023, principally due to weaker IMAX box office performance driven in part by the Hollywood strike impact on the film slate, fewer IMAX systems installed under sales arrangements and lower aftermarket sales as the first half of 2023 included Avatar: The Way of Water , a 3D film. These year over year declines were partially offset by the sale of commercial and streaming rights for an IMAX documentary. 57 Table of Contents The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the six months ended June 30, 2024 and 2023: Revenue Gross Margin Gross Margin % (In thousands of U.S. Dollars) 2024 2023 2024 2023 2024 2023 Content Solutions $ 69,089 $ 63,391 $ 38,237 $ 37,991 55 % 60 % Technology Products and Services 94,048 115,643 49,367 66,302 52 % 57 % Sub-total for reportable segments 163,137 179,034 87,604 104,293 54 % 58 % All Other (1) 4,947 5,891 3,212 3,645 65 % 62 % Total $ 168,084 $ 184,925 $ 90,816 $ 107,938 54 % 58 % (1) All Other includes the results from Streaming and Consumer Technology and other ancillary activities. Content Solutions Content Solutions segment results are influenced by the level of commercial success and box office performance of the films and other content released to the IMAX network, as well as other factors including the timing of the releases, the length of play across the IMAX network, the box office share take rates under the Company’s film remastering and distribution arrangements, the level of marketing spend associated with the releases in the year, and the fluctuations in the value of foreign currencies versus the U.S. Dollar. For the six months ended June 30, 2024, Content Solutions segment revenues and gross margin increased by $5.7 million, or 9%, and $0.2 million, or 1%, respectively, when compared to the same period in 2023. In the six months ended June 30, 2024, box office generated by IMAX films totaled $457.1 million, a $84.6 million or 16% decrease versus the prior year comparative period of $541.7 million driven in part by the Hollywood strike impact on the film slate. During the six months ended June 30, 2024, IMAX box office was generated by the exhibition of 60 films (46 new films and 14 films that were originally released in prior years), including Dune: Part Two ($145 million) , Godzilla x Kong: The New Empire ($41 million), Inside Out 2 ($37 million), Kingdom of The Planet of The Apes ($25 million) and Furiosa ($23 million). Additionally, in the six months ended June 30, 2024, local language films exhibited across the Company’s global network generated over $80 million in box office, representing 18% of its total box office. Leading local language titles distributed across the IMAX network in the six months ended June 30, 2024 included the Chinese film Pegasus 2 , the Japanese film, Conan 27 , and the Korean film, Suga - Agust D Tour D-Day The Movie . In the six months ended June 30, 2023, IMAX box office was generated by the exhibition of 39 films (33 new films and 10 films that were originally released in prior years). The impact on revenue from the lower box office experienced year over year was more than offset by the revenue earned from the completion of the sale of worldwide rights to the Company’s original documentary, The Blue Angels , to Amazon Content during the period as well as from higher revenues from alternative content. In addition to the level of revenues, Content Solutions segment gross margin is influenced by the costs associated with films and other content (documentaries, live and alternative) exhibited in the period. The costs associated with films and other content can include production, post-production, distribution and marketing, which are expensed as incurred. For the six months ended June 30, 2024, gross margin percent was 55% compared to 60% in the prior year period. The decrease was due to the lower level of IMAX box office receipts and the higher mix of self-produced content being released during the period, including The Blue Angels . Technology Products and Services The primary drivers of Technology Products and Services segment results are the number of IMAX Systems installed in a period, the costs associated with each installation, lease payments tied to the box office performance of the films released to the IMAX network, as well as the associated maintenance contracts that accompany each installation. The average revenue and gross margin per IMAX System under sale and sales-type lease arrangements vary depending upon the number of IMAX System commitments with a single respective exhibitor, an exhibitor’s location, the type of system sold, and various other factors. The installation of IMAX Systems in theaters or multiplexes, which make up a large portion of the Company’s system backlog, depends primarily on the timing of the construction of those projects, which is not under the Company’s control. 58 Table of Contents The following table provides information about IMAX Systems installed and the associated revenue recognized at that time, except for traditional joint revenue sharing arrangements as revenue is recognized over the lease term, during the six months ended June 30, 2024 and 2023: Six Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except number of systems Number of Systems Revenue Number of Systems Revenue New IMAX Systems 13 $ 11,511 18 $ 18,249 Upgraded IMAX Systems 3 4,303 3 3,131 Total 16 $ 15,814 21 $ 21,380 Included in the table above are two IMAX Systems which were relocated from its original location (2023 ― one IMAX System). When a system under a sale or sales-type lease arrangement is relocated, the amount of revenue earned by the Company may vary from transaction-to-transaction and is usually less than the amount earned for a new sale. In certain situations when a system is relocated, the original location is upgraded to an IMAX Laser System. For the six months ended June 30, 2024, Technology Products and Services segment revenue and gross margin decreased by $21.6 million, or 19%, and $16.9 million, or 26%, respectively, when compared to the same period in the prior year. The lower level of revenue is primarily driven by a lower level of rental revenues which is box office dependent. Rental revenues decreased by $7.0 million, as a result of GBO from joint revenue sharing arrangements which decreased by $53.1 million or 19% in the six months ended June 30, 2024 when compared to the prior year comparative period, from $279.5 million to $226.4 million. Also contributing to the lower level of revenue was a decrease resulting from the lower number of systems recognized under sales arrangements, per the table above, and a $9.7 million decrease in revenue contribution from the impact of amendments and renewals to existing IMAX Systems arrangements. The Technology Products and Services segment gross margin decrease during the six months ended June 30, 2024 is primarily due to the lower level of revenues, as described above. All Other For the six months ended June 30, 2024, All Other revenue and gross margin decreased by $0.9 million, or 16%, and $0.4 million, or 12%, respectively, when compared to the same period in 2023, which principally reflects the performance of the Company’s Streaming and Consumer Technology operations. Selling, General and Administrative Expenses The following table presents information about the Company’s Selling, General and Administrative Expenses for the six months ended June 30, 2024 and 2023: Six Months Ended June 30, Variance (In thousands of U.S. Dollars) 2024 2023 $ % Total Selling, general and administrative expenses $ 68,821 $ 73,054 $ (4,233) (6 %) Less: Share-based compensation (1) (10,843) (11,665) 822 7 % Total Selling, general and administrative expenses, excluding share-based compensation (2) $ 57,978 $ 61,389 $ (3,411) (6 %) (1) A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue and Research and Development. (Refer to “Capital Stock and Reserves — Share-Based Compensation” in Note 11 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (2) See “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount. For the six months ended June 30, 2024, the lower level of Selling, General and Administrative Expenses experienced over the prior year period reflects management’s continued focus on identifying cost-saving opportunities and realizing operational efficiencies. Management’s cost-saving initiatives were partially offset by increased inflation during the period. 59 Table of Contents Research and Development The Company believes that it is a premier global technology platform for awe-inspiring entertainment and events with significant proprietary expertise in digital and film-based projection and sound system component design, engineering, and imaging technology, particularly in laser-based technology. A significant portion of the Company’s research and development efforts have been focused on the IMAX Laser Systems, which the Company believes is capable of illuminating the largest screens in the IMAX network and provides greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, while consuming less power and lasting longer than existing digital technology, to ensure that the Company continues to provide the highest quality, premier cinematic experience available to consumers. The Company has continued research and development aimed at creating more affordable laser-based solutions with various screen sizes for its commercial multiplex customers. For the six months ended June 30, 2024, Research and Development expenses were $4.2 million, representing a decrease of $0.4 million, or 9%, when compared to Research and Development expenses of $4.6 million during the same period in the prior year. The current period expenses reflect continued investment in the development of new IMAX film cameras and Streaming Technology product offerings that does not qualify for capitalization. The Company intends to continue research and development to further evolve its end-to-end technology. This includes bringing connectivity to the Company’s global network to support live and interactive events worldwide; developing new IMAX film cameras and certifying additional digital cameras; further improving its proprietary film remastering and distribution process for the delivery of content for both theatrical (including local language content) and home entertainment; and further improving the reliability of its projectors, as well as enhancing the Company’s image and sound quality. Within the Company’s Streaming and Consumer Technology business, there is ongoing research and development in perceptual metrics involving novel measurement and optimization techniques. Investments are also being made to expand existing and/or develop new technologies which are expected to further enhance video quality, delivery, and creation across devices. Furthermore, the Company intends to invest in activities that will capture opportunities to create/build AI and automation into its operations and processes. Credit Loss Expense, Net For the six months ended June 30, 2024, the Company recorded a credit loss expense of $0.2 million, as compared to a credit loss expense of $1.1 million recognized in the prior year. Management’s judgments regarding expected credit losses are based on the facts available to management at the time that the Condensed Consolidated Financial Statements are prepared and involve estimates about the future. As a result, the Company’s judgments and associated estimates of credit losses may ultimately prove, with the benefit of hindsight, to be incorrect. (Refer to Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1). Interest Expense, net For the six months ended June 30, 2024, interest expense was $4.2 million representing an increase of $0.7 million, or 19% as compared to $3.6 million during the same period of the prior year which primarily reflects a higher average level of outstanding borrowings under the Credit Facility in the current period. For the six months ended June 30, 2024 and 2023, interest income was $1.1 million, respectively. Income Taxes For the six months ended June 30, 2024, the Company recorded an income tax expense of $1.2 million (2023 — tax expense of $8.3 million). The Company’s effective tax rate of 10.0% for the six months ended June 30, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions and a tax benefit related to an internal asset sale during the quarter which is offset by an increase in the valuation allowance, withholding taxes and a shortfall in tax benefits related to share-based compensation. The Company’s effective tax rate of 36.2% for the six months ended June 30, 2023 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions which was offset by an increase in the valuation allowance and withholding taxes. During the six months ended June 30, 2024, the Company completed an internal asset sale to more closely align its intellectual property ownership with its operations. In order to effect this internal asset sale, transactions between entities within the group resulted in capital gains for tax purposes. The tax expense related to the capital gain was partially offset by the reversal of the valuation allowance. Net deferred tax assets were also recorded on the transaction, resulting in a net tax benefit of $7.7 million. (Refer to Note 10 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1). 60 Table of Contents Non-Controlling Interests The Company’s Condensed Consolidated Financial Statements primarily include the non-controlling interest in the net income or loss of IMAX China, as well as the impact of non-controlling interests in the activity of its Original Film Fund subsidiary. For the six months ended June 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $3.6 million, a decrease of $0.3 million, when compared to the same period in 2023. CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023 Operating Activities The net cash used in or provided by the Company’s operating activities is affected by a number of factors, including: (i) the level of cash collections from customers in respect of existing IMAX System sale and lease agreements, (ii) the amount of upfront payments collected in respect of IMAX System sale and lease agreements in backlog, (iii) the box office performance of films and other content distributed by the Company and/or released to IMAX locations, (iv) the level of inventory purchases and investment in joint revenue sharing arrangements, and (v) the level of the Company’s operating expenses, including expenses for research and development and new business initiatives. For the six months ended June 30, 2024, net cash provided by the Company’s operating activities totaled $24.1 million, as compared to net cash provided by operating activities of $25.9 million in the same period of the prior year, a decrease of $1.8 million. For the six months ended June 30, 2024, the net cash provided by the Company’s operating activities is principally a result of a decrease in Accounts Receivable of $14.5 million which reflects an improvement in the financial health of exhibitor customers, partially offset by $12.7 million of expenditures incurred in connection with the development of film assets and $6.3 million in inventory purchases. For the six months ended June 30, 2023, the net cash provided by the Company’s operating activities was principally a result of revenue growth attributable to the record box office performance of films distributed through the IMAX network, revenue from the installation of IMAX Systems and revenue associated with the amendments and renewals of IMAX Systems arrangements, and a decrease in Accounts Receivable of $9.5 million as a result of cash collection efforts, partially offset by $13.4 million of variable consideration receivables, $6.1 million in inventory purchases, and $9.2 million of expenditures incurred in connection with the development of film assets. Investing Activities For the six months ended June 30, 2024, net cash used in investing activities totaled $15.6 million, as compared to $8.5 million in the same period of the prior year. For the six months ended June 30, 2024, the net cash used in investing activities is primarily driven by $9.8 million invested in equipment to be used as the Company installs systems under joint revenue sharing arrangements with exhibitor customers, $3.2 million of intangible assets principally related to the purchase or continued development of internal use software, and $2.7 million in purchases of property, plant and equipment. For the six months ended June 30, 2023, the net cash used in investing activities was primarily driven by $4.0 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitor customers, $1.0 million in purchases of property, plant and equipment, and $3.5 million of intangible assets principally related to the purchase or continued development of internal use software. Based on management’s current operating plan for 2024, the Company expects to continue to use cash to deploy additional IMAX Systems under joint revenue sharing arrangements. Capital expenditures, including the Company’s investment in joint revenue sharing arrangements, the purchase of property, plant and equipment, the acquisition of other intangible assets, and investments in films , were $28.4 million for the six months ended June 30, 2024, as compared to $17.8 million for the six months ended June 30, 2023. The Company expects its investment in joint revenue sharing arrangements to be more heavily weighted toward the remainder of the year which aligns with the historical seasonality of system installations. 61 Table of Contents Financing Activities For the six months ended June 30, 2024, net cash provided by financing activities totaled $6.6 million, as compared to $19.8 million used in financing activities in the same period of the prior year. For the six months ended June 30, 2024, the net cash provided by financing activities is principally due to $30.0 million in net borrowings under the Company’s revolving credit facilities, $18.1 million used to repurchase common shares of the Company and $5.0 million in taxes withheld and paid on vested employee stock awards. For the six months ended June 30, 2023, net cash used in financing activities was principally due to $8.2 million in net repayments of revolving credit facility borrowings, $4.0 million used to repurchase common shares of the Company, $6.5 million in taxes withheld and paid on vested employee stock awards, and $1.4 million in dividends paid to non-controlling interests. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2024, the Company’s principal sources of liquidity included: (i) its balances of cash and cash equivalents of $91.6 million; (ii) the anticipated collection of trade accounts receivable, which includes amounts owed under joint revenue sharing arrangements and film remastering and distribution agreements with movie studios; (iii) the anticipated collection of financing and variable consideration receivables due in the next 12 months under sale and sales-type lease arrangements for systems currently in operation; and (iv) installment payments expected in the next 12 months under sale and sales-type lease arrangements in backlog. Under the terms of the Company’s typical sale and sales-type lease agreements, the Company receives substantial cash payments before it completes the performance of its contractual obligations. In addition, as of June 30, 2024, the Company had $246.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association (the “Credit Agreement”), $26.7 million in available borrowing capacity under the IMAX (Shanghai) Multimedia Technology Co., Ltd. (“IMAX Shanghai”) revolving credit facility with the Bank of China (the “Bank of China Facility”), and $28.1 million in available borrowing capacity under IMAX Shanghai’s revolving credit facility with HSBC Bank (China) Company Limited, Shanghai Branch (the “HSBC China Facility”). (Refer to “Borrowings — Revolving Credit Facility Borrowings, Net ” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a description of the material terms of the Credit Agreement, the Bank of China Facility, and the HSBC Facility.) The Company’s $91.6 million balance of cash and cash equivalents as of June 30, 2024 (December 31, 2023 — $76.2 million) includes $83.0 million in cash held outside of Canada (December 31, 2023 — $68.5 million), of which $44.0 million was held in the People’s Republic of China (the “PRC”) (December 31, 2023 — $30.0 million). Management reassessed its strategy with respect to the most efficient means of deploying the Company’s capital resources globally and determined that historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested. During the six months ended June 30, 2024, no historical earnings from a subsidiary in PRC were distributed (2023 — $24.0 million) and, as a result, no foreign withholding taxes were paid to the relevant tax authorities (2023 — $2.4 million). As of June 30, 2024, the Company’s Condensed Consolidated Balance Sheets include a deferred tax liability of $12.5 million for the applicable foreign withholding taxes associated with the remaining balance of non-repatriated historical earnings that will not be indefinitely reinvested outside of Canada. These taxes will become payable upon the repatriation of any such earnings. The Company forecasts its future cash flow and short-term liquidity requirements on an ongoing basis. These forecasts are based on estimates and may be materially impacted by factors that are outside of the Company’s control (including the factors described in “Risk Factors” in Part I, Item 1A of the Company’s 2023 Form 10-K. As a result, there is no guarantee that these forecasts will come to fruition and that the Company will be able to fund its operations through cash flows from operations. In particular, the Company’s operating cash flows and cash balances will be adversely impacted if management’s projections of future signings and installations of IMAX Systems and box office performance of IMAX content are not realized. Based on the Company’s current cash balances and operating cash flows, management expects to have sufficient capital and liquidity to fund its anticipated operating needs and capital requirements during the next twelve-month period following the date of this report. 62 Table of Contents CONTRACTUAL OBLIGATIONS Payments to be made by the Company under contractual obligations as of June 30, 2024 are as follows: Payments Due by Years (In thousands of U.S. Dollars) Total Obligation Less Than One Year 1 to 3 years 3 to 5 years Thereafter Purchase obligations (1) $ 26,503 $ 23,252 $ 3,017 $ 22 $ 212 Pension obligations (2) 20,298 — 20,298 — — Operating lease obligations (3) 13,546 1,250 4,981 4,927 2,388 Finance lease obligations 515 515 — — — Wells Fargo Facility 54,000 54,000 — — — Federal Economic Development Loan (4) 2,783 952 1,831 — — Convertible Notes (5) 231,151 1,150 230,001 — — Postretirement benefits obligations 2,384 104 203 219 1,858 Total $ 351,180 $ 81,223 $ 260,331 $ 5,168 $ 4,458 (1) Represents total payments to be made under binding commitments with suppliers and outstanding payments to be made for supplies ordered, but yet to be invoiced. (2) The Company has an unfunded defined benefit pension plan, the Supplemental Executive Retirement Plan (the “SERP”), covering its CEO, Mr. Richard L. Gelfond. The SERP has a fixed benefit payable of $20.3 million. The table above assumes that Mr. Gelfond will receive a lump sum payment of $20.3 million six months after retirement at the end of the term of his current employment agreement, which expires on December 31, 2025, in accordance with the terms of the SERP, although Mr. Gelfond has not informed the Company that he intends to retire at that time. (See Note 14 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (3) Represents total minimum annual rental payments due under the Company’s operating leases. (4) The Federal Economic Development Loan will be repayable over 60 months, with repayments estimated to begin in January 2024. (Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) (5) The Convertible Notes bear interest at a rate of 0.500% per annum on the principal of $230.0 million, payable semi-annually in arrears on April 1 and October 1 of each year. The Convertible Notes will mature on April 1, 2026, unless earlier repurchased, redeemed or converted. (Refer to “Borrowings — Convertible Notes and Other Borrowings, Net” in Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.) OFF-BALANCE SHEET ARRANGEMENTS There are currently no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition. CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements and related disclosures in accordance with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported in the Company’s Condensed Consolidated Financial Statements and accompanying notes. Management’s judgments, assumptions, and estimates are based on historical experience, future expectations, and other factors that are believed to be reasonable as of the date of the Company’s Condensed Consolidated Financial Statements. Actual results may ultimately differ from the Company’s original estimates, as future events and circumstances sometimes do not develop as expected, and the differences may be material. For more information on the Company’s critical accounting estimates refer to the section entitled “Critical Accounting Estimates” in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2023 Form 10-K. RECENTLY ISSUED ACCOUNTING STANDARDS Refer to Note 2 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for a discussion of recently issued accounting standards and their impact on the Company’s Condensed Consolidated Financial Statements. NON-GAAP FINANCIAL MEASURES GAAP refers to generally accepted accounting principles in the United States of America. In this report, the Company presents financial measures in accordance with GAAP and also on a non-GAAP basis under the SEC regulations. Specifically, the Company presents the following non-GAAP financial measures as supplemental measures of its performance: • Adjusted net income or loss attributable to common shareholders; • Adjusted net income or loss attributable to common shareholders per basic and diluted share; 63 Table of Contents • EBITDA; and • Adjusted EBITDA per Credit Facility. Adjusted net income or loss attributable to common shareholders and adjusted net income or loss attributable to common shareholders per basic and diluted share exclude, where applicable: (i) share-based compensation; (ii) realized and unrealized investment gains or losses; (iii) transaction-related expenses; and (iv) restructuring and executive transition costs, as well as the related tax impact of these adjustments. The Company believes that these non-GAAP financial measures are important supplemental measures that allow management and users of the Company’s financial statements to view operating trends and analyze controllable operating performance on a comparable basis between periods without the after-tax impact of share-based compensation and certain unusual items included in net loss attributable to common shareholders. Although share-based compensation is an important aspect of the Company’s employee and executive compensation packages, it is a non-cash expense and is excluded from certain internal business performance measures. Reconciliations of net income attributable to common shareholders and the associated per share amounts to adjusted net income attributable to common shareholders and adjusted net income attributable to common shareholders per diluted share are presented in the tables below. Three Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except per share amounts) Net Income Per Share Net Income Per Share Net income attributable to common shareholders $ 3,583 $ 0.07 $ 8,351 $ 0.15 Adjustments (1) : Share-based compensation 6,647 0.12 6,511 0.12 Unrealized investment gains (32) — (27) — Tax impact on items listed above (452) (0.01) (480) (0.01) Adjusted net income (1) $ 9,746 $ 0.18 $ 14,355 $ 0.26 Weighted average shares outstanding — basic 52,633 54,591 Weighted average shares outstanding — diluted 53,428 55,320 (1) Reflects amounts attributable to common shareholders. Six Months Ended June 30, 2024 2023 (In thousands of U.S. Dollars, except per diluted share amounts) Net Income Per Diluted Share Net Income Per Diluted Share Net income attributable to common shareholders $ 6,857 $ 0.13 $ 10,805 $ 0.20 Adjustments (1) : Share-based compensation 11,354 0.21 12,047 0.22 Unrealized investment gains (62) — (72) — Transaction-related expenses — — 156 — Restructuring and executive transition costs — — 1,353 0.02 Tax impact on items listed above (462) (0.01) (909) (0.02) Adjusted net income (1) $ 17,688 $ 0.33 $ 23,380 $ 0.42 Weighted average shares outstanding — basic 52,568 54,328 Weighted average shares outstanding — diluted 53,386 55,145 (1) Reflects amounts attributable to common shareholders. 64 Table of Contents In addition to the non-GAAP financial measures discussed above, management also uses “EBITDA,” as such term is defined in the Credit Agreement, and which is referred to herein as “Adjusted EBITDA per Credit Facility.” As allowed by the Credit Agreement, Adjusted EBITDA per Credit Facility includes adjustments in addition to the exclusion of interest, taxes, depreciation and amortization. Accordingly, this non-GAAP financial measure is presented to allow a more comprehensive analysis of the Company’s operating performance and to provide additional information with respect to the Company’s compliance with its Credit Agreement requirements, when applicable. In addition, the Company believes that Adjusted EBITDA per Credit Facility presents relevant and useful information widely used by analysts, investors and other interested parties in the Company’s industry to evaluate, assess and benchmark the Company’s results. EBITDA is defined as net income or loss excluding: (i) income tax expense or benefit; (ii) interest expense, net of interest income; (iii) depreciation and amortization, including film asset amortization; and (iv) amortization of deferred financing costs. Adjusted EBITDA per Credit Facility is defined as EBITDA excluding: (i) share-based and other non-cash compensation; (ii) realized and unrealized investment gains or losses; (iii) transaction-related expenses; (iv) restructuring and executive transition costs; and (v) write- downs, net of recoveries, including asset impairments and credit loss expense. Reconciliations of net income attributable to common shareholders, which is the most directly comparable GAAP measure, to EBITDA and Adjusted EBITDA per Credit Facility are presented in the tables below: Three Months Ended June 30, 2024 (In thousands of U.S. Dollars) Attributable to Non-controlling Interests and Common Shareholders’ Less: Attributable to Non-controlling Interests Attributable to Common Shareholders’ Reported net income $ 5,073 $ 1,490 $ 3,583 Add (subtract): Income tax (recovery) expense (3,997) 543 (4,540) Interest expense, net of interest income 1,229 (119) 1,348 Depreciation and amortization, including film asset amortization 18,838 1,382 17,456 Amortization of deferred financing costs (1) 492 — 492 EBITDA 21,635 3,296 18,339 Share-based and other non-cash compensation 6,970 218 6,752 Unrealized investment gains (32) — (32) Write-downs, including asset impairments and credit loss expense 2,428 637 1,791 Adjusted EBITDA per Credit Facility $ 31,001 $ 4,151 $ 26,850 (1) The amortization of deferred financing costs is recorded within Interest Expense in the Condensed Consolidated Statements of Operations. 65 Table of Contents Twelve Months Ended June 30, 2024 (In thousands of U.S. Dollars) Attributable to Non-controlling Interests and Common Shareholders Less: Attributable to Non-controlling Interests Attributable to Common Shareholders Reported net income $ 28,823 $ 7,436 $ 21,387 Add (subtract): Income tax expense 5,867 1,975 3,892 Interest expense, net of interest income 3,037 (526) 3,563 Depreciation and amortization, including film asset amortization 66,826 5,133 61,693 Amortization of deferred financing costs (1) 1,969 — 1,969 EBITDA 106,522 14,018 92,504 Share-based and other non-cash compensation 23,450 540 22,910 Unrealized investment gains (455) (93) (362) Transaction-related expenses 3,413 208 3,205 Write-downs, including asset impairments and credit loss expense 4,305 830 3,475 Restructuring and executive transition costs 1,593 258 1,335 Adjusted EBITDA per Credit Facility $ 138,828 $ 15,761 $ 123,067 (1) The amortization of deferred financing costs is recorded within Interest Expense in the Condensed Consolidated Statements of Operations. The Company also adjusts Selling, General and Administrative Expenses to exclude a portion of share-based compensation and related payroll taxes. Management uses non-U.S. GAAP and other financial measures such as this, internally for financial and operational decision-making and as a means to evaluate period-to-period comparisons. IMAX believes that this non-U.S. GAAP measure provides useful information about operating results, enhances the overall understanding of past financial performance and future prospects, and allows for greater transparency with respect to key metrics used by management and its financial and operational decision making. A reconciliation of Selling, General and Administrative Expenses, the most directly comparable U.S. GAAP measure presented in the Condensed Consolidated Statement of Operations in Part I, Item 1, to Adjusted SG&A, is presented in the table below. Three Months Ended Six Months Ended June 30, June 30, (In thousands of U.S. Dollars) 2024 2023 2024 2023 Total Selling, general and administrative expenses $ 37,564 $ 38,906 $ 68,821 $ 73,054 Less: Share-based compensation (6,506) (6,469) (10,843) (11,665) Total Selling, general and administrative expenses, excluding share-based compensation $ 31,058 $ 32,437 $ 57,978 $ 61,389 The Company cautions users of its financial statements that these non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies. Additionally, the non-GAAP financial measures used by the Company should not be considered in isolation, or as a substitute for, or superior to, the comparable GAAP amounts.