Despite Recent Gains, IMAX Short on Earnings (IMAX, DWA)

IMAX Corporation (NASDAQ: IMAX) is one of the entertainment operations that has been trying to remedy its woes, and its shares at one point were up 100% and more from the 52-week low.  This morning the company issued earnings under estimates at -$0.25 EPS on a 12.3% drop in revenues to $23.5 Million.  First Call had estimates at -$0.14 EPS on revenues of $25.4 million; and the loss for Q1 2007 was only -$0.12 EPS.

IMAX also noted that the seasonally weak quarter faced difficult comparison because of last year’s strong IMAX release of 300.  Below are some key metrics for last quarter and this quarter:

  • The Spiderwick Chronicles opened on February 15 and grossed $6.8 million in IMAX theaters.
  • Shine A Light, the Rolling Stones concert film opened April 4 and IMAX has grossed about $3.9 million to-date.
  • The company noted that it was disappointed that Spiderwick and Shine a Light did not perform as well as it had hoped.
  • On May 9, it grossed $1.9 million from 84 screens on the release weekend of Speed Racer.

A new announcement may mitigate the earnings discrepancy that has been seen this morning, although this is part of an ongoing award.  IMAX announced a deal with DreamWorks Animation (NYSE: DWA) to release Madagascar: Escape 2 Africa into IMAX theaters globally on November 7, 2008.

If you look through the numbers, the company’s rising cost structure is probably more to blame on the earnings front than anything sinister on the entertainment side:

  • SG&A expenses were $12.4 million in Q1, up from $10.3 million a year ago.
  • R&D costs rose to $2.5 million in Q1. up from $1.5 million a year ago, largely related to investments in its switch from film to digital technology.
  • Legal and professional fees (included SG&A) rose to $3.1 million in Q1 from $2.4 million a year ago.

With a last seen short interest of 2.25 million shares, or about 16-days volume, that may keep the selling from outweighing the buying after this stock opens.

Jon C. Ogg
May 12, 2008