What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-30 compared with 2024-07-25 · 229 added, 211 removed, 670 unchanged (40% of the section changed)

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.

Presented below is Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) for IMAX Corporation and its consolidated subsidiaries (“IMAX” or the “Company”) for the three and nine months ended September 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.

As of September 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).

For the three months ended September 30, 2024, net income attributable to IMAX China is $5.0 million, of which $3.6 million is attributable to the shareholders of the Company (2023 — $11.0 million and $7.9 million, respectively).

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

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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 performance of IMAX remastered films and other films released to the IMAX network;

the signing of IMAX System agreements;

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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.

The information posted on the Company’s Corporate and Investor Relations website may be deemed material to investors.

Accordingly, investors, media and others interested in the Company should monitor the Company’s investor relations website in addition to the Company’s press releases, SEC and SEDAR+ filings and public conference calls and webcasts.

IMAX is a premier global technology platform for entertainment and events.

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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.

As of September 30, 2024, there were 1,788 IMAX Systems in 89 countries and territories, including 1,714 commercial multiplexes, 12 commercial destinations, and 62 institutional locations in the Company’s global network.

This compares to 1,731 IMAX Systems in 87 countries and territories as of September 30, 2023, including 1,651 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.)

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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 Company has a Filmed For IMAX ® 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.

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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,

The following table provides detailed information about the films that were released to the Company’s global network during the three and nine months ended September 30, 2024 and 2023, respectively:

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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Local language film releases:

Japan 5 1 8 3

China 10 12 18 21

Japan 4 4 12 7

India 3 1 7 4

South Korea 2 5 5 7

Malaysia 1 1 1 1

Thailand 1 — 1 —

Indonesia — — 1 —

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Total local language film releases

Alternative content experiences

(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.

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:

Other Content Solutions

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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.

Additionally, the Company had limited commercial network releases of the documentaries Skywalkers:

A Love Story The IMAX Experience and Fly:

The IMAX Experience , in partnership with Netflix and National Geographic, respectfully.

Upcoming documentaries in production include 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 2025 followed by The Lost Wolves of Yellowstone .

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:

As of September 30, 2024, the Company had a footprint of 265 connected locations in the IMAX network across North America, Europe, Africa, Australia and Asia configured with connectivity to deliver live and interactive events with low latency and superior sight and sound.

In the nine months ended September 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 .

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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.

Additionally, the Company hosted multiple IMAX Live TM events, including screening the NBA finals across multiple IMAX locations in the Asia Pacific region, the screening of The Beach Boys:

IMAX Live Experience , the special advance screening and live event for Megalopolis:

The Ultimate IMAX Experience , the live pre-show Q&A with the cast of Twisters , and in partnership with NBC television network, extended 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.

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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.

In addition, the Company provides post-production — including its proprietary DMR process — and quality control services for films that are distributed across the IMAX network.

Sales and Sales-Type Lease Arrangements

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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.

As of September 30, 2024, the Company had 894 locations under joint revenue sharing arrangements in its global commercial multiplex network.

The Company also had contracts in backlog for 302 systems under joint revenue sharing arrangements as of September 30, 2024, including 92 upgrades to existing locations and 210 new locations.

IMAX Maintenance

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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:

As of September 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.

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IMAX NETWORK AND BACKLOG

The following table provides detailed information about the IMAX network by type and geographic location as of June 30, 2024 and 2023.

The following table provides detailed information about the IMAX network by type and geographic location as of September 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

September 30, 2024 September 30, 2023

Institutional

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(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%.

(See “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there.” and “– The Company may not convert all of its backlog into revenue and cash flows” 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 in Part I, Item 1A of the Company’s 2023 Form 10-K.)

IMAX currently estimates a worldwide commercial multiplex addressable market of 3,619 locations, of which there are 1,714 IMAX Systems operating as of September 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).

As of September 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.)

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

In the nine months ended September 30, 2024, the Company’s revenue generated from its Greater China operations represents 25% of consolidated revenue.

As of September 30, 2024, the Company had 808 IMAX Systems operating in Greater China with an additional 254 systems in backlog.

In the nine months ended September 30, 2024, the IMAX network generated over $114 million in box office from local language films, representing approximately 16% 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 .

The following tables provide detailed information about the Company’s commercial multiplex network by arrangement type and geographic location as of September 30, 2024 and 2023:

September 30, 2024

Commercial Multiplex Locations in IMAX Network

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(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

(2) Period-to-period changes in the tables above are reported net of permanently closed locations.

September 30, 2023

Commercial Multiplex Locations in IMAX Network

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(2) Period-to-period changes in the tables above are reported net of permanently closed systems.

The following table provides detailed information about the Company’s backlog as of June 30, 2024 and 2023:

June 30, 2024 June 30, 2023

The following table provides detailed information about the Company’s backlog as of September 30, 2024 and 2023:

September 30, 2024 September 30, 2023

Systems Dollar

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Current backlog information reflects all known elections.

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

The following tables provide detailed information about the Company’s backlog by arrangement type and geographic location as of September 30, 2024 and 2023:

September 30, 2024

IMAX System Backlog

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(2) Worldwide Total of 472 includes 262 new IMAX Laser Systems and 109 upgrades of existing locations to IMAX Laser Systems.

June 30, 2023

September 30, 2023

IMAX System Backlog

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(2) Worldwide Total of 486 includes 250 new IMAX Laser Systems and 84 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%).

Approximately 31% of IMAX System arrangements in backlog as of September 30, 2024 are scheduled to be installed in international markets excluding Greater China (2023 — 37%).

The Company’s system backlog in Greater China represents 54% (2023 — 40%) of its total current backlog, including 194 new IMAX Systems and 60 upgrades (2023 — 183 new and 10 upgrades).

(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.)

of this 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:

Three Months Ended Six Months Ended

June 30, June 30,

The following tables provide detailed information about IMAX System signings and installations for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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(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,

(2) Includes IMAX System upgrades of one and 69 for the three and nine months ended September 30, 2024, respectively (2023 ― six and 18 upgrades, respectively).

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

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Total IMAX System installations (3)

(1) Two IMAX Systems were relocated from their original location (2023 ― two).

(1) Two and four IMAX Systems were relocated from their original location for the three and nine months ended September 30, 2024, respectively (2023 ― one and three relocations, respectively).

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.

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(2) Includes Sales, Hybrid Sales and Sales-Type Lease deal types.

(3) Includes 11 IMAX System upgrades (2023 ― eight upgrades).

(3) Includes 32 and 43 IMAX System upgrades for the three and nine months ended September 30, 2024, respectively (2023 ―12 and 20 upgrades, respectively).

RESULTS OF OPERATIONS

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(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;

(ii) the signing, installation, and financial performance of IMAX System arrangements, particularly those involving IMAX Laser Systems;

(iii) the success of the Company’s investments in business evolution and brand extensions into streaming and consumer technology, and the distribution of live events to the IMAX network;

(iv) revenues and gross margins earned by the Company’s segments, as discussed below;

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(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

Results of Operations for the Three Months Ended September 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:

Three Months Ended June 30,

Three Months Ended September 30,

(In thousands of U.S.

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$ 13,896 $ 0.26 $ 11,990 $ 0.22

Adjusted income attributable to common shareholders *

Adjusted net income attributable to common shareholders *

$ 18,855 $ 0.35 $ 19,410 $ 0.35

*Refer to “Non-GAAP Financial Measures” for a description of this non-GAAP financial measure and a reconciliation to the most comparable GAAP amount.

During the three months ended September 30, 2024, the Company’s revenues decreased by $12.4 million, or 12%, while net income increased by $1.9 million or 16%, when compared to the same period in 2023, driven by a lower level of IMAX box office that was more than offset by decreases in costs and expenses resulting from corporate and operational initiatives and timing of expenditures, as discussed below.

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:

During the three months ended September 30, 2024, the Company’s revenues and gross margin decreased by $12.4 million, or 12%, and $11.7 million, or 19%, respectively, when compared to same period in 2023 principally due to a lower level of IMAX box office performance driven by a less favorable mix of film content available to play across the IMAX global network, partially offset by higher IMAX Systems installed under sales arrangements.

The following table presents the Company’s revenue, gross margin, and gross margin percentage by reportable segment for the three months ended September 30, 2024 and 2023:

Revenue Gross Margin Gross Margin %

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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.

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.

For the three months ended September 30, 2024, Content Solutions segment revenues and gross margin decreased by $14.1 million, or 32%, and decreased by $10.0 million, or 38%, respectively, when compared to the same period in 2023.

In the third quarter of 2024, box office generated by IMAX films totaled $239.5 million and represented IMAX’s third highest third quarter box office of all time.

The decrease of $107.6 million, or 31%, decrease versus the prior year comparative period of $347.1 million, driven in part by a less favorable mix of content globally which included fewer blockbusters, as well as a challenging compare to the prior year that included over $180 million in box office from Oppenheimer , the Company’s fifth highest grossing title of all time.

In the third quarter of 2024, IMAX box office was generated by the exhibition of 44 films and other content (37 new and 7 originally released in a prior year), including Deadpool & Wolverine , which generated IMAX box office of over $83 million.

In the third quarter of 2023, IMAX box office was generated by the exhibition of 41 films (34 new films and 7 films originally released in a prior year).

The impact on revenue from the lower box office experienced year over year was partially offset by the revenue earned from higher revenues from alternative content including A24 title release Everything, Everywhere All At Once , NBC’s 2024 Paris Olympics Opening Ceremony, Korean concert film IM Hero:

The Stadium , and limited release documentaries FLY:

The IMAX Experience and Skywalkers:

A Love Story The IMAX Experience .

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 .

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, alternative and other) 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 September 30, 2024, gross margin percent was 55% compared to 60% in the prior year period, with the decrease being driven primarily by a lower level of IMAX box office year over year.

Technology Products and Services

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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,

Three Months Ended September 30,

(In thousands of U.S.

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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.

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.

For the three months ended September 30, 2024, Technology Products and Services segment revenue increased by $1.8 million , or 3%, while gross margin decreased by $1.8 million, or 5%, when compared to the same period in 2023.

These results reflect an increase in system installations under sales arrangements that offset the impact of a lower level of rental revenues, which is box office dependent.

Rental revenues decreased by $6.9 million, driven by GBO from joint revenue sharing arrangements which decreased by $35.2 million in the third quarter of 2024 when compared to the prior year comparative period, from $159.5 million to $124.3 million.

For the three months ended September 30, 2024, gross margin percent was 55% compared to 60% in the prior period with the decrease being driven by the lower level of IMAX box office year over year.

For the three months ended September 30, 2024, All Other revenue and gross margin decreased by $0.2 million and less than $0.1 million, respectively, when compared to the same period in 2023, principally due to the performance of the Company’s one owned and operated theater.

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:

The following table presents information about the Company’s Selling, General and Administrative Expenses for the three months ended September 30, 2024 and 2023:

Three Months Ended

June 30, Variance

September 30, Variance

(In thousands of U.S.

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$ 26,430 $ 31,417 $ (4,987) (16 %)

(1) A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenues, Research and Development, and Executive Transition Costs.

(1) A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenues, 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.)

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.

For the third quarter of 2024, the lower level of Selling, General and Administrative Expenses year over year is driven by inclusion in the prior year of $3.1 million in transaction expenses associated with the proposal to acquire the outstanding shares in IMAX China.

Also contributing to the decline year over year is the timing of expenditures, adjustments in certain estimates relating to payouts in connection with our streaming and consumer technology division as well as management’s continued focus on operational efficiencies, which were partially offset by the impact of higher inflation during the period.

Research and Development

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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.

For the three months ended September 30, 2024, the Company recognized a net cost recovery for its Research and Development activity of $0.3 million, compared to an expense of $2.8 million during the same period in the prior year.

In the third quarter of 2024, the Company concluded that technological feasibility of the new IMAX film cameras was achieved resulting in the capitalization of costs incurred.

The Company intends to continue research and development to further evolve its end-to-end technology.

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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.

Credit Loss (Reversal) Expense, Net

For the three months ended September 30, 2024, the Company recorded a credit loss reversal of $1.1 million, as compared to a credit loss expense of $0.5 million recognized in the prior year primarily due to increases in collections of the Company’s account receivables, primarily in China, as exhibition partners continue to improve their cash position post pandemic.

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.

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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.

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.

For the three months ended September 30, 2024, interest expense was $2.2 million, representing an increase of $0.8 million, or 51% when compared to interest expense of $1.5 million during the same period of the prior year primarily due to a higher level of borrowings under the Credit Facility in the current period.

For the three months ended September 30, 2024 and 2023, interest income was $0.6 million and $0.7 million, respectively.

For the three months ended September 30, 2024, the Company recorded an income tax expense of $2.4 million (2023 — tax expense of $6.6 million).

The Company’s effective tax rate of 13.4% for the three months ended September 30, 2024 differs from the Canadian statutory rate of 26.5% primarily due to tax rate differences in foreign jurisdictions and a decrease in the valuation allowance which was partially offset by an increase in tax reserves, tax return adjustments and withholding taxes.

The Company’s effective tax rate of 30.4% for the three months ended September 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, tax return adjustments and withholding taxes.

(Refer to Note 10 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1).

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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

For the three months ended September 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $1.4 million, a decrease of $1.6 million, when compared to the same period in 2023, primarily due to lower IMAX box office earned in Greater China.

Results of Operations for the Nine Months Ended September 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,

Nine Months Ended September 30,

(In thousands of U.S.

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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.

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:

For the nine months ended September 30, 2024, the Company’s revenues and gross margin decreased by $29.3 million or 10% and $28.8 million or 17%, 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 and a less favorable mix of content across our global network.

These year over year declines were partially offset by the sale of commercial and streaming rights for an IMAX documentary and higher revenues associated with alternative content.

The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the nine months ended September 30, 2024 and 2023:

Revenue Gross Margin Gross Margin %

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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.

For the nine months ended September 30, 2024, Content Solutions segment revenues and gross margin decreased by $8.4 million, or 8%, and $9.7 million, or 15%, respectively, when compared to the same period in 2023.

In the nine months ended September 30, 2024, box office generated by IMAX films totaled $696.5 million, a $192.4 million or 22% decrease versus the prior year comparative period of $888.9 million driven in part by the Hollywood strike impact on the film slate and a less favorable mix of content globally which included fewer blockbusters in 2024.

During the nine months ended September 30, 2024, IMAX box office was generated by the exhibition of 104 films and other content (83 new and 21 that were originally released in prior years), including Dune:

Part Two ($145 million) , Deadpool & Wolverine ($83 million), Godzilla x Kong:

The New Empire ($41 million), Inside Out 2 ($39 million), and Alien:

Romulus ($39 million).

Additionally, in the nine months ended September 30, 2024, local language films exhibited across the Company’s global network generated over $114 million in box office, representing 16% of its total box office.

Leading local language titles distributed across the IMAX network in the nine months ended September 30, 2024 included the Chinese films Pegasus 2 and Yolo , the Japanese film Haikyu!!

, and the Korean concert film, IM Hero:

The Stadium .

In the nine months ended September 30, 2023, IMAX box office was generated by the exhibition of 84 films (67 new films and 17 films that were originally released in prior year) including Oppenheimer , which generated box office of over $180 million, and local language Chinese titles Wandering Earth 2 ($49 million) and Creation of the Gods 1:

Kingdom of Storms ($32 million).

The impact on revenue from the lower box office experienced year over year was partially 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.

alternative and other) 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.

For the nine months ended September 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 .

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Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands of U.S.

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Total 36 $ 36,601 37 $ 33,479

Included in the table above are two IMAX Systems which were relocated from its original location (2023 ― one IMAX System).

Included in the table above are four IMAX Systems which were relocated from its original location (2023 ― two IMAX Systems).

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.

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.

For the nine months ended September 30, 2024, Technology Products and Services segment revenue and gross margin decreased by $19.8 million, or 12%, and $18.7 million, or 19%, 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 $14.1 million, as a result of GBO from joint revenue sharing arrangements which decreased by $85.0 million or 20% in the nine months ended September 30, 2024 when compared to the prior year comparative period, from $435.7 million to $350.7 million.

For the nine months ended September 30, 2024 gross margin percent was 54% compared to 58% in the prior period, primarily the result of lower rental revenues, as described above.

For the nine months ended September 30, 2024, All Other revenue and gross margin decreased by $1.1 million, or 12%, and $0.4 million, or 6%, respectively, when compared to the same period in 2023, which principally reflects the performance of the Company’s one owned and operated theater coupled with the mix in revenue from 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

The following table presents information about the Company’s Selling, General and Administrative Expenses for the nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30, Variance

(In thousands of U.S.

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$ 84,408 $ 92,799 $ (8,391) (9 %)

(1) A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue and Research and Development.

(1) A portion of share-based compensation expense is recognized within Cost and Expenses Applicable to Revenue, 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.)

(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.

For the nine months ended September 30, 2024, the lower level of Selling, General and Administrative Expenses year over year reflects the inclusion in the prior year of $3.1 million in transaction expenses associated with the proposal to acquire the outstanding shares in IMAX China.

Research and Development

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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.

For the nine months ended September 30, 2024, Research and Development expenses were $4.0 million, representing a decrease of $3.4 million, or 46%, when compared to Research and Development expenses of $7.4 million during the same period in the prior year.

The current period expenses reflects the capitalization of costs related to the development of the new IMAX film cameras upon the conclusion of technological feasibility.

This decrease was partially offset by continued investment in other R&D projects including developing new Streaming Technology product offerings.

The Company intends to continue research and development to further evolve its end-to-end technology.

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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.

Credit Loss (Reversal) Expense, Net

For the nine months ended September 30, 2024, the Company recorded a credit loss reversal of $1.0 million, as compared to a credit loss expense of $1.6 million recognized in the prior year due to increases in collections of the Company’s account receivables, primarily in China, as exhibition partners continue to improve their cash position post pandemic.

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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.

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.

For the nine months ended September 30, 2024, interest expense was $6.5 million representing an increase of $1.4 million, or 28% as compared to $5.0 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 nine months ended September 30, 2024 and 2023, interest income was $1.7 million and $1.8 million, respectively.

For the nine months ended September 30, 2024, the Company recorded an income tax expense of $3.5 million (2023 — tax expense of $14.9 million).

The Company’s effective tax rate of 12.0% for the nine months ended September 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, tax reserves, tax return adjustments, withholding taxes and a shortfall in tax benefits related to share-based compensation.

The Company’s effective tax rate of 33.4% for the nine months ended September 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, tax return adjustments and withholding taxes.

In the nine months ended September 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.

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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

For the nine months ended September 30, 2024, the net income attributable to non-controlling interests of the Company’s subsidiaries was $5.1 million, a decrease of $1.9 million, when compared to the same period in 2023, primarily due to lower IMAX box office earned in Greater China.

CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

Operating Activities

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(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.

For the nine months ended September 30, 2024, net cash provided by the Company’s operating activities totaled $59.4 million, as compared to net cash provided by operating activities of $54.6 million in the same period of the prior year, an increase of $4.7 million.

For the nine months ended September 30, 2024, the net cash provided by the Company’s operating activities is principally a result of a decrease in Accounts Receivable of $23.0 million which primarily reflects an improvement in the financial health of exhibitor customers, partially offset by $17.9 million of expenditures incurred in connection with the development of film assets and $6.2 million in inventory purchases.

For the nine months ended September 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, partially offset by $15.0 million of variable consideration receivables, $13.8 million in inventory purchases, and $14.6 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.

For the nine months ended September 30, 2024, net cash used in investing activities totaled $30.3 million, as compared to $18.7 million in the same period of the prior year.

For the nine months ended September 30, 2024, the net cash used in investing activities is primarily driven by $21.7 million invested in equipment to be used as the Company installs systems under joint revenue sharing arrangements with exhibitor customers, $4.8 million of intangible assets principally related to the purchase or continued development of internal use software, and $3.8 million in purchases of property, plant and equipment.

For the nine months ended September 30, 2023, the net cash used in investing activities was primarily driven by $10.7 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitor customers, $2.5 million in purchases of property, plant and equipment, and $5.4 million of intangible assets acquired, principally related to the purchase or continued development of internal use software.

Based on management’s current operating plan for the remainder of 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 $48.2 million for the nine months ended September 30, 2024, as compared to $33.2 million for the nine months ended September 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.

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.

For the nine months ended September 30, 2024, net cash used in financing activities totaled $1.0 million, as compared to $24.3 million in the same period of the prior year.

For the nine months ended September 30, 2024, the net cash used in financing activities is principally due to $18.1 million used to repurchase common shares of the Company and IMAX China and $5.0 million in taxes withheld and paid on vested employee stock awards.

These uses of cash were mostly offset by $23.0 million in net borrowings under the Company’s revolving credit facilities.

For the nine months ended September 30, 2023, net cash used in financing activities was principally due to $12.0 million in net repayments of revolving credit facility borrowings, $4.3 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:

As of September 30, 2024, the Company’s principal sources of liquidity included:

(i) its balances of cash and cash equivalents of $104.5 million;

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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.

In addition, as of September 30, 2024, the Company had $253.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association (the “Credit Agreement”), $27.1 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 $28.5 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).

The Company’s $104.5 million balance of cash and cash equivalents as of September 30, 2024 (December 31, 2023 — $76.2 million) includes $90.8 million in cash held outside of Canada (December 31, 2023 — $68.5 million), of which $49.9 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.

During the nine months ended September 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 September 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.

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CONTRACTUAL OBLIGATIONS

Payments to be made by the Company under contractual obligations as of June 30, 2024 are as follows:

Payments to be made by the Company under contractual obligations as of September 30, 2024 are as follows:

Payments Due by Years

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Finance lease obligations

515 515 — — —

Wells Fargo Facility

42 unchanged sentences

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,

Three Months Ended September 30,

(In thousands of U.S.

Dollars, except per share amounts)

Per Diluted Share

Net income attributable to common shareholders

5 unchanged sentences

(32) — (454) (0.01)

Transaction-related expenses

— — 3,086 0.06

Tax impact on items listed above

7 unchanged sentences

(1) Reflects amounts attributable to common shareholders.

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands of U.S.

10 unchanged sentences

Transaction-related expenses

— — 3,242 0.06

Restructuring and executive transition costs

24 unchanged sentences

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

Three Months Ended September 30, 2024

(In thousands of U.S.

6 unchanged sentences

Add (subtract):

Income tax (recovery) expense

Income tax expense

2,376 701 1,675

13 unchanged sentences

(1) The amortization of deferred financing costs is recorded within Interest Expense in the Condensed Consolidated Statements of Operations.

Twelve Months Ended June 30, 2024

Twelve Months Ended September 30, 2024

(In thousands of U.S.

16 unchanged sentences

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

Write-downs, including asset impairments and credit loss expense 2,359 434 1,925

Adjusted EBITDA per Credit Facility $ 126,976 $ 13,422 $ 113,554

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30, September 30,

(In thousands of U.S.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis