Box Office Performance - Total box office revenue for IMAX China increased by 16% to $336.6 million in 2018, setting a new record[7]. - The company screened 45 films in mainland China, including 19 Chinese films, with Chinese films accounting for 30% of total box office revenue, up from 24% in 2017[4]. - IMAX China achieved a 40% increase in box office during the 2019 Chinese New Year compared to the same period in 2018, while the industry remained flat[3]. - The film "The Wandering Earth" generated $45 million in IMAX box office, becoming the highest-grossing IMAX film in China[3]. - IMAX's box office share during the Chinese New Year for "The Wandering Earth" was 11% on the first day, and 8% of the total box office for the film as of February 26, 2019[3]. - Total box office revenue reached $336.63 million, up from $290.82 million in 2017, with box office per screen at $616[38]. - In fiscal year 2018, IMAX format Chinese films accounted for 30.0% of the company's box office in China, up from 24.1% in fiscal year 2017[56]. - The share of Chinese films in China's total box office was 62.0% in fiscal year 2018, compared to 54.0% in fiscal year 2017[56]. - The average box office per screen for IMAX theaters in Greater China was $0.62 million, significantly higher than the average of $0.15 million for all screens in China[55]. Revenue and Financial Performance - Total revenue for 2018 was $117.52 million, down from $126.47 million in 2017, with a gross profit of $75.25 million and a gross margin of 64%[38]. - Adjusted profit for 2018 was $44.28 million, with an adjusted profit margin of 37.7%, reflecting a 140 basis point increase[38]. - Network business revenue increased to $47.7 million, benefiting from a 16% growth in box office revenue, with a gross margin improvement of 920 basis points[12]. - The average revenue per cinema system rose to $1.4 million, although overall cinema business revenue decreased due to 14 new installations in 2017[15]. - The company returned $27 million to shareholders through dividends and share buybacks in 2018[5]. - The company reported a pre-tax profit of $54.0 million for the fiscal year 2018, compared to $55.8 million in 2017[121]. - Total comprehensive income attributable to the company’s owners decreased from $52.0 million in FY2017 to $32.5 million in FY2018[77]. - Adjusted profit decreased from $45.9 million in FY2017 to $44.3 million in FY2018, a reduction of 3.6%[116]. - The company’s cash and cash equivalents balance as of December 31, 2018, was $120.2 million, compared to $116.7 million at the end of 2017, reflecting an increase of $3.5 million[120]. Expansion and Network Development - IMAX installed 101 systems in 2018, including 70 revenue-sharing theaters and 11 IMAX laser systems, expanding its network to 639 theaters across 185 cities[11]. - The company plans to install approximately 90 to 95 new cinemas in 2019, maintaining a similar installation pace as the previous year[39]. - IMAX has 639 theaters in Greater China as of December 31, 2018, with 624 located in commercial areas and an additional 272 theaters under contract[43]. - The number of IMAX theaters increased from 544 in FY2017 to 639 in FY2018, representing a growth of 17.5%[83]. - The company aims to increase the number of Chinese films screened and the annual revenue generated from these films[49]. - IMAX plans to continue expanding its network in first, second, third, and fourth tier cities, with a focus on identifying new IMAX theater locations[54]. - The company has established approximately 1,260 identified IMAX regions in Greater China, allowing for potential new theater openings without negatively impacting existing theaters[53]. Strategic Partnerships and Investments - IMAX's marketing efforts included a $15 million investment in Maoyan, China's largest ticketing platform, which accounts for approximately 60% of all movie ticket sales in China[5]. - The company is investing in a film fund focused on Chinese-language blockbusters to strengthen ties with local filmmakers[45]. - IMAX has a long-term partnership with local production houses to enhance its film offerings and adapt to market changes[45]. - The company continues to leverage its unique relationships with Hollywood studios to secure a diverse range of film content[48]. - IMAX's revenue-sharing arrangements include comprehensive and hybrid models, allowing partners to expand their IMAX networks with reduced upfront costs[44]. Cost Management and Profitability - The company maintained a strong cost control strategy, as evidenced by a 280 basis point increase in gross profit margin[17]. - Selling, general, and administrative expenses totaled $16.11 million, representing 13.7% of total revenue, up from 11.5% in 2017[72]. - The company incurred restructuring expenses of $0.1 million in 2018, a decrease from $0.6 million in 2017, as part of its cost reduction plan[73]. - The cost of sales for the fiscal year 2018 was $42.27 million, which is 36.0% of total revenue, compared to $49.12 million or 38.8% in 2017[70]. - The company emphasizes the importance of a balanced mix of Hollywood and Chinese films to ensure box office success[55]. Management and Governance - The senior management team includes CEO Chen Jiande, CFO and COO Jim Athanasopoulos, and CMO Zhou Meihui, among others[153]. - Megan Colligan has been appointed as a non-executive director since February 2019, bringing extensive experience from Paramount Pictures and IMAX Corporation[148]. - The company is focused on providing strategic advice and guidance through its board members with diverse backgrounds in media and finance[153]. - The management team is committed to expanding the company's market presence and enhancing operational efficiency[153]. - The board includes members with significant experience in the entertainment and investment sectors, which supports the company's strategic initiatives[153]. Risks and Challenges - The company faces risks from fluctuations in the real estate market, which could negatively impact the demand for new IMAX theaters[61]. - The ability to maintain pricing and profit margins is crucial, as a significant portion of operating costs are fixed, particularly related to network business[62]. - The company does not currently hedge against currency fluctuations, which could adversely affect profitability if the USD/CNY exchange rate rises significantly[63]. - The company's operations are seasonal, with higher profitability typically seen in the second half of the year due to installations before the Chinese New Year[63]. Agreements and Licensing - IMAX Corporation agreed to a personnel secondment agreement with IMAX Shanghai Multimedia for a term of 25 years, effective from August 11, 2011, to October 28, 2036[173]. - The trademark licensing agreement grants IMAX Shanghai Multimedia exclusive rights to use the "IMAX" brand in China for a term of 25 years, effective from October 28, 2011, with an option to renew[178]. - The technical licensing agreement requires IMAX Shanghai Multimedia and IMAX Hong Kong to pay a quarterly fee of 3% of total revenue from cinema and film operations during the initial 25-year term[190]. - The DMR service agreement has a term of 25 years, effective from October 28, 2011, with an option for renewal for an additional 25 years[196]. - The agreements are critical to the business, and shorter terms are deemed not in the shareholders' best interests[183].
IMAX CHINA(01970) - 2018 - 年度财报