# Imax Corp: Form 10-Q for the period ended Mar 31, 2023

- Company: [Imax Corp](/companies/imax.md) (CIK 921582)
- Form: 10-Q
- Filed: 2023-04-27
- Accepted by EDGAR: Apr 27, 2023, 21:01 ET
- Period: 2023-03-31
- Accession: 0000950170-23-015371
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/921582/000095017023015371/imax-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/921582/000095017023015371/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $86.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $36.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $50.1m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $1.9m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $34.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $11.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $1.8m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $4.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $2.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.05 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 54,991,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $21.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $364.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $3.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $99.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-03-31 | $821.5m | us-gaap:Assets |
| Total liabilities | at 2023-03-31 | $487.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-03-31 | $264.0m | us-gaap:StockholdersEquity |
| Shares outstanding | at 2023-03-31 | 54,589,933 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 91,833 characters.

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 months ended March 31, 2023 and 2022. In the first quarter of 2023, the Company revised its internal segment reporting, including the information provided to its Chief Operating Decision Maker (“CODM”) to assess segment performance and allocate resources, and, as a result, updated its reportable segments. Prior period comparatives in this MD&A have been revised to conform with the updated segment reporting presentation. MD&A should be read in conjunction with Note 13, “Segment Reporting,” in the accompanying Condensed Consolidated Financial Statements in Item 1.

As of March 31, 2023, the Company indirectly owns 71.63% 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 March 31, 2023, net income attributable to IMAX China is $9.4 million, of which $6.7 million is attributable to the shareholders of the Company (2022 — $5.7 million and $4.0 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 related to the adverse impact of the COVID-19 pandemic; 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, such as the conflict between Russia and Ukraine; risks related to the Company’s growth and operations in China; the performance of IMAX DMR® 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 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, including with respect to the Russia-Ukraine conflict; 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 (the “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 IMAXTM, IMAX LiveTM, IMAX Enhanced®, and SSIMWAVE® are trademarks and trade names of the Company or its subsidiaries that are registered or otherwise protected under laws of various jurisdictions.

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.sedar.com and through the Company’s website at www.imax.com or by calling the Company’s Investor Relations Department at 212-821-0100. 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 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, theater architecture, patented intellectual property, and specialized equipment, IMAX offers a unique end-to-end solution to create superior, 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 and, increasingly, exclusive experiences ranging from live performances to interactive events with leading artists and creators.

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 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 theater 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, except for one, in the IMAX network, and is not an exhibitor, but instead sells or leases the IMAX System to exhibitor customers along with a license to use its trademarks and ongoing maintenance services.

As of March 31, 2023, there were 1,711 IMAX Systems in 87 countries and territories, including 1,631 commercial multiplexes, 12 commercial destinations, and 68 institutional locations in the Company’s global network. This compares to 1,690 IMAX Systems in 87 countries and territories as of March 31, 2022, including 1,606 commercial multiplexes, 12 commercial destinations, and 72 institutional locations in the Company’s global network. (See the table under “IMAX Network and Backlog” for additional information on the composition of the IMAX network.)

The IMAX System provides 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 (formerly known as “IMAX DMR”) process, 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 theater 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 every specific spot in a theater 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.

In addition, select movies shown in the IMAX network are filmed using proprietary IMAX film cameras or IMAX certified digital cameras, which offer filmmakers customized guidance and a workflow process to provide further 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 create a more intense, immersive, and exciting experience than a traditional theater, enabling audiences in IMAX locations to feel as if they are a part of the on-screen action.

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 the IMAX network over 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 films exhibited in the IMAX network has helped establish IMAX as a key premium distribution and marketing platform for Hollywood and foreign local language movie studios.

In addition, the Company continues to experiment in bringing new, innovative IMAX LiveTM 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 of March 31, 2023, 258 systems in the IMAX network across North America, Europe and Asia were configured with connectivity to deliver live and interactive events.

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.

In September 2022, the Company acquired SSIMWAVE Inc. (“SSIMWAVE”), a leader in AI-driven video quality solutions for media and entertainment companies. The acquisition of SSIMWAVE marks a significant expansion of the Company’s strategy to deliver the highest quality images on any screen, while also creating cost efficiencies to streaming companies, broadcasters and other companies that transmit visual data — to drive new, recurring revenue and grow its global leadership in entertainment technology.

Commencing in March 2022, in response to numerous sanctions imposed by the United States, Canada and the European Union on companies transacting in Russia and Belarus resulting from ongoing conflict between Russia and Ukraine, the Company suspended its operations in Russia and Belarus. As of March 31, 2023, the IMAX network includes 54 systems in Russia, eight systems in Ukraine, and one system in Belarus. In the first quarter of 2022, the Company recorded provisions for potential credit losses against substantially all of its receivables in Russia due to uncertainties associated with the ongoing conflict. These receivables relate to existing sale agreements as the Company is not party to any joint revenue sharing arrangements in these countries. In addition, exhibitors in Russia, Ukraine, and Belarus were placed on nonaccrual status for maintenance revenue and finance income beginning in the first quarter of 2022, which resulted in revenue deferred and not recognized of $0.6 million during the three months ended March 31, 2023. As of March 31, 2023, all IMAX Systems in Ukraine have reopened. The Company continues to closely monitor the evolving impacts of this conflict (including the sanctions imposed by the United States, Canada and the European Union) and its effects on the global economy and the Company. (See Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 and “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 2022 Form 10-K.)

On September 7, 2022, Cineworld Group plc (“Cineworld”), the parent company of Regal, and certain of its subsidiaries and Regal CineMedia Holdings, LLC, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. The Company had an unsecured pre-petition claim of $11.4 million related to receivables from the entities included in the reorganization proceedings. On October 21, 2022, the Company was ratified by the bankruptcy court as a critical vendor of Cineworld, allowing the Company to collect pre-petition amounts owed to it by Cineworld, and requiring Cineworld to stay current on the Company’s post-petition receivables. On November 8, 2022, IMAX Corporation entered into a trade agreement with Cineworld (the “Trade Agreement”), pursuant to which Cineworld affirmed its pre-petition obligations to the Company and its post-petition obligations to the Company during the Chapter 11 proceedings, the amount of the receivables owed to the Company and agreed to a payment plan under which all amounts due will be settled over the period from November 9, 2022 to April 12, 2023. As of April 17, 2023, the Company had received all of the payments due from Cineworld in accordance with the terms of the Trade Agreement with respect to the pre-petition obligations. Based on its evaluation of its contracts with Cineworld, its assessment of the reorganization and its discussions with Cineworld to date, the Company has determined that no additional provision for expected credit losses is required. The Company also does not expect to see a material impact on its IMAX network with Cineworld resulting from this reorganization. There can, however, be no guarantees as to the ultimate outcome of a Chapter 11 proceeding.

The COVID-19 pandemic and the measures to prevent its spread have impacted and may continue to impact the Company’s business and the global economy. For additional discussion regarding the risks related to the COVID-19 pandemic on the Company’s business, see “Risk Factors – The Company experienced a significant decrease in its revenues, earnings and cash flows due to the COVID-19 pandemic and its business, financial condition and results of operations may continue to be significantly harmed in future reporting periods” in Part I, Item 1A of the Company’s 2022 Form 10-K.

### SOURCES OF REVENUE

The historical results of operations for the three months ended March 31, 2023 and 2022 reflect the results of operations for two reportable segments: (i) Content Solutions, which principally includes content enhancement and distribution services, previously included within the IMAX DMR, Film Distribution and Film Post-Production segments, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems, previously included within the JRSA, IMAX Systems, IMAX Maintenance, and Other Theater Business segments. The Company’s activities that do not meet the criteria to be considered a reportable segment will be reported 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 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 exclusive experiences ranging from live performance to interactive events with leading artists and creators, as well as the provision of film post-production services.

#### IMAX 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., 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.

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. Unlike the soundtracks played in conventional theaters, IMAX remastered soundtracks are uncompressed and full fidelity. IMAX sound systems use proprietary loudspeaker systems and proprietary surround sound configurations that ensure every theater seat is in 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 IMAXTM 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 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, and South Korea. More recently, the Company has further diversified its strategy by distributing local language films in both native and foreign markets.

In the first quarter of 2023, the IMAX network generated over $80 million in box office from local language films, a record for the Company. Local language box office represented approximately 30% of the Company’s total box office in the quarter. This year’s quarter included the highest grossing Chinese New Year holiday and highest grossing local language title (*Wandering Earth 2*) in the Company’s history. 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 *Suzume* and the Indian film *RRR.*

The following table provides detailed information about the films that were released to the Company’s global network during the three months ended March 31, 2023 and 2022:

|  | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Hollywood film releases(1) | 6 | 6 |
| Local language film releases: |  |  |
| China | 5 | 4 |
| India | 2 | 1 |
| Japan | 2 | — |
| South Korea | 1 | 1 |
| France | — | 1 |
| Total local language film releases | 10 | 7 |
| Total film releases(2) | **16** | **13** |

(1) Includes one re-released film for the three months ended March 31, 2023 (2022 — nil).

(2) For the three months ended March 31, 2023, the films released to the Company’s global network include two with IMAX DNA (2022 — three).

The films distributed through the Company’s global network during the three months ended March 31, 2023 include *Avatar: The Way of Water, The Wandering Earth 2, Ant-Man and the Wasp: Quantumania, Creed III, John Wick: Chapter 4,* and *Suzume.*

In addition to the 16 IMAX films released through the Company’s global network during the three months ended March 31, 2023, the Company has announced the following additional 30 titles to be released in 2023:

| Title | Studio | Scheduled Release Date(1) | IMAX DNA |
| --- | --- | --- | ---: |
| The Super Mario Bros. Movie | Universal Pictures | April 2023 | — |
| The Three Musketeers: D'Artagnan(2) | Pathé | April 2023 | — |
| Beau is Afraid | A24 | April 2023 | — |
| Detective Conan: The Black Iron Submarine(2) | Toho Studios | April 2023 | — |
| Ponniyin Selvan: II(2) | Lyca Productions | April 2023 | — |
| Born to Fly(2) | Alibaba | April 2023 | — |
| Godspeed(2) | Maoyan | April 2023 | — |
| Flashover(2) | Lian Ray | April 2023 | — |
| Guardians of the Galaxy Vol. 3 | Walt Disney Studios | May 2023 | Filmed For IMAX |
| Fast X | Universal Pictures | May 2023 | — |
| The Little Mermaid | Walt Disney Studios | May 2023 | — |
| Spider-Man: Across the Spider-Verse | Sony Pictures | June 2023 | — |
| Transformers: Rise of the Beasts | Paramount Pictures | June 2023 | — |
| The Flash | Warner Bros. Pictures | June 2023 | — |
| Adipurush(2) | T-Series | June 2023 | — |
| Indiana Jones and the Dial of Destiny | Walt Disney Studios | June 2023 | — |
| Mission: Impossible - Dead Reckoning Part One | Paramount Pictures | July 2023 | — |
| Oppenheimer | Universal Pictures | July 2023 | Shot with IMAX Film Cameras |
| Smuggler(2) | Next Entertainment World | July 2023 | — |
| Gran Turismo | Sony Pictures | August 2023 | — |
| Blue Beetle | Warner Bros. Pictures | August 2023 | Filmed For IMAX |
| The Equalizer 3 | Sony Pictures | September 2023 | — |
| The Nun 2 | Warner Bros. Pictures | September 2023 | — |
| A Haunting in Venice | Walt Disney Studios | September 2023 | — |
| The Creator | Walt Disney Studios | September 2023 | — |
| Kraven the Hunter | Sony Pictures | October 2023 | — |
| Untitled Exorcist | Universal Pictures | October 2023 | — |
| Dune: Part Two | Warner Bros. Pictures | November 2023 | Filmed For IMAX |
| Wonka | Warner Bros. Pictures | December 2023 | — |
| Aquaman and the Lost Kingdom | Warner Bros. Pictures | December 2023 | Filmed For IMAX |

(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.

(2) Local language film.

The Company remains in active negotiations with studios, both domestically and internationally, for additional films to fill out its short- and long-term film slate for the IMAX network.

#### Other Content Solutions

The Company distributes large-format documentary films, primarily to institutional theaters. The Company 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 addition, the Company continues to experiment in bringing new, innovative IMAX LiveTM 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 of March 31, 2023, 258 systems in the IMAX network across North America, Europe and Asia were configured with connectivity to deliver live and interactive events.

In the first quarter of 2023, the Company partnered with United Artists Releases for an IMAX premiere event consisting of red carpet interviews and behind the scenes footage, followed by a special advanced screening of *Creed III*, which was later released across the IMAX global network, taking 7% of total box office. Additionally, the Company partnered with A24 for an IMAX Live event in March 2023 for the 25th anniversary of Darren Aronofsky's debut film *Pi*, including a Q&A with members of the cast and crew live from Los Angeles followed by a screening of the restored film.

The Company provides film post-production 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 Technology Product and Services segment earns revenue principally from the sale or lease of IMAX Systems, as well as from the maintenance of IMAX Systems. To a lesser extent, the Technology Product and Services segment also earns revenue from certain ancillary theater business activities, including after-market sales of IMAX System parts and 3D glasses.

#### 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 between the time of signing the arrangement and the time of system installation, which is when the total of these fees, in addition to the present value of future annual minimum payments, are recognized as revenue. Finance income is recognized over the term of a financed sale or sales-type lease arrangement. In addition, in sale arrangements, an estimate of the 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.

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.

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 annual minimum payments. Rental payments from the customer are required throughout the term of the arrangement and are 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 sales. 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 are 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 theater 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 March 31, 2023, the Company had 927 locations under joint revenue sharing arrangements in its global commercial multiplex network. The Company also had contracts in backlog for 298 systems under joint revenue sharing arrangements as of March 31, 2023, including 75 upgrades to existing locations and 223 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.

### All Other

#### IMAX Enhanced

IMAX Enhanced is a solution, made in partnership with audio leader DTS (an Xperi subsidiary), 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 Signature Sound, which is specially recreated and calibrated for the home by DTS to unlock more immersive audio.

For their products 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 of IMAX and DTS engineers, along with some of Hollywood’s leading technical specialists.

At present, certified global device partners include Sony Electronics, Hisense, TCL, LG, Phillips, Hewlett Packard, Xiaomi, Sound United and Honor, among others. As of March 31, 2023, more than 250 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 10 million IMAX Enhanced certified devices are estimated to be in the market today.

In addition, the Company’s collaboration with Disney allows fans to stream 19 Disney titles in IMAX’s Expanded Aspect Ratio at home on Disney+, primarily including content created by Marvel Studios, a division of Walt Disney Studios. The launch of IMAX Enhanced on Disney+ provides strong brand exposure for IMAX by expanding the Company’s in-home entertainment footprint to Disney+ and the majority of its 160 million global subscribers. In 2023, IMAX Enhanced is expected to enable an elevated end-to-end experience on Disney+, with IMAX Signature Sound coming to subscribers with IMAX Enhanced certified devices.

IMAX Enhanced is part of the Company’s next evolutionary step to extend the IMAX brand and technology further into new use cases, including streaming entertainment and the consumer electronics market.

#### SSIMWAVE

In September 2022, the Company acquired SSIMWAVE, a leader in AI-driven video quality solutions for media and entertainment companies. Following the acquisition, SSIMWAVE became a wholly-owned subsidiary of the Company. SSIMWAVE provides perceptual quality measurement and optimization solutions based on artificial intelligence technologies for leading media and entertainment companies. The acquisition of SSIMWAVE marks a significant expansion of the Company’s strategy to deliver the highest quality video images on any screen—to drive new, recurring revenue and grow its global leadership in entertainment technology.

#### Other

All Other also includes revenues from one owned and operated IMAX theater 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; and also offering production advice and technical assistance to both documentary and Hollywood filmmakers.

### IMAX NETWORK AND BACKLOG

#### IMAX Network

The following table provides detailed information about the IMAX network by type and geographic location as of March 31, 2023 and 2022:

|  | March 31, 2023 Commercial Multiplex | Commercial Destination | Institutional | Total | March 31, 2022 Commercial Multiplex | Commercial Destination | Institutional | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| United States | 361 | 4 | 25 | 390 | 362 | 4 | 27 | 393 |
| Canada | 40 | 1 | 7 | 48 | 40 | 1 | 7 | 48 |
| Greater China(1) | 777 | — | 16 | 793 | 776 | — | 15 | 791 |
| Asia (excluding Greater China) | 140 | 2 | 2 | 144 | 122 | 2 | 2 | 126 |
| Western Europe | 118 | 4 | 8 | 130 | 115 | 4 | 8 | 127 |
| Russia/the CIS & Ukraine(2) | 69 | — | — | 69 | 70 | — | — | 70 |
| Latin America(3) | 54 | 1 | 8 | 63 | 53 | 1 | 11 | 65 |
| Rest of the World | 72 | — | 2 | 74 | 68 | — | 2 | 70 |
| Total(4) | 1,631 | 12 | 68 | 1,711 | 1,606 | 12 | 72 | 1,690 |

(1) Greater China includes China, Hong Kong, Taiwan, and Macau.

(2) In addition to Russia, the Company has IMAX Systems in the Commonwealth of Independent States (“CIS”) which are Azerbaijan, Belarus, Kazakhstan, and Kyrgyzstan. Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of March 31, 2023, the IMAX network includes 54 systems in Russia, eight systems in Ukraine, and one system in Belarus.

(3) Latin America includes South America, Central America and Mexico.

(4) Period-to-period changes in the table above are reported net of the effect of permanently closed locations.

The Company currently believes that over time its commercial multiplex network could grow to over 3,300 IMAX Systems worldwide from the 1,631 as of March 31, 2023. The Company believes that the majority of its future growth will come from international markets. As of March 31, 2023, 75% 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, including Russia, 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 2022 Form 10-K.

In the three months ended March 31, 2023 the Company’s revenue generated from its Greater China operations represents 31% of consolidated revenue. As of March 31, 2023, the Company had 793 IMAX Systems operating in Greater China with an additional 200 systems in backlog. The Company’s backlog in Greater China represents 43% of its total current backlog, including upgrades in system type. The Company has a partnership in China with Wanda Film (“Wanda”). As of March 31, 2023, through the Company’s partnership with Wanda, there were 375 IMAX Systems operational in Greater China of which 361 are under the parties’ joint revenue sharing arrangements.

In the first quarter of 2023, the IMAX network generated over $80 million in box office from local language films, a record for the Company. Local language box office represented approximately 30% of the Company’s total box office in the quarter. This year’s quarter included the highest grossing Chinese New Year holiday and highest grossing local language title (*Wandering Earth 2*) in the Company’s history. 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 *Suzume* and the Indian film *RRR.*

(See “Risk Factors – The Company faces risks in connection with its significant presence in China and the continued expansion of its business there,” “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 2022 Form 10-K.)

The following tables provide detailed information about the Company’s global commercial multiplex network by arrangement type and geographic location as of March 31, 2023 and 2022:

|  | March 31, 2023 Commercial Multiplex Locations in IMAX Network Traditional JRSA | Hybrid JRSA | Sale / Sales- type Lease | Total |
| --- | ---: | ---: | ---: | ---: |
| Domestic Total (United States & Canada) | 274 | 6 | 121 | 401 |
| International: |  |  |  |  |
| Greater China | 401 | 110 | 266 | 777 |
| Asia (excluding Greater China) | 37 | 5 | 98 | 140 |
| Western Europe | 47 | 28 | 43 | 118 |
| Russia/the CIS & Ukraine(1) | — | — | 69 | 69 |
| Latin America | 2 | — | 52 | 54 |
| Rest of the World | 17 | — | 55 | 72 |
| International Total | 504 | 143 | 583 | 1,230 |
| Worldwide Total(2) | 778 | 149 | 704 | 1,631 |
|  | **March 31, 2022** |  |  |  |
|  | **Commercial Multiplex Locations in IMAX Network** |  |  |  |
|  | **Traditional JRSA** | **Hybrid JRSA** | **Sale / Sales- type Lease** | **Total** |
| Domestic Total (United States & Canada) | 273 | 6 | 123 | 402 |
| International: |  |  |  |  |
| Greater China | 397 | 112 | 267 | 776 |
| Asia (excluding Greater China) | 33 | 2 | 87 | 122 |
| Western Europe | 46 | 28 | 41 | 115 |
| Russia/the CIS & Ukraine(1) | — | — | 70 | 70 |
| Latin America | 2 | — | 51 | 53 |
| Rest of the World | 16 | — | 52 | 68 |
| International Total | 494 | 142 | 568 | 1,204 |
| Worldwide Total(2) | 767 | 148 | 691 | 1,606 |

(1) In addition to Russia, the Company has IMAX Systems in the Commonwealth of Independent States (“CIS”) which are Azerbaijan, Belarus, Kazakhstan, and Kyrgyzstan. Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of March 31, 2023, the IMAX network includes 54 systems in Russia, eight systems in Ukraine, and one system in Belarus.

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

#### Backlog

The following table provides detailed information about the Company’s backlog as of March 31, 2023 and 2022:

*(In thousands of U.S. Dollars, except number of systems)*

|  | March 31, 2023 Number of Systems New | Upgrade | Dollar Value New | Upgrade | March 31, 2022 Number of Systems New | Upgrade | Dollar Value New | Upgrade |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Sale and sales-type lease arrangements | 157 | 13 | $173,374 | $14,293 | 159 | 12 | $182,246 | $11,252 |
| Hybrid JRSA | 114 | 4 | 84,354 | 3,235 | 125 | 6 | 91,001 | 4,785 |
| Traditional JRSA(1)(2) | 109 | 71 | 200 | 2,900 | 99 | 86 | 200 | 4,500 |
|  | 380 | 88 | $257,928 | $20,428 | 383 | 104 | $273,447 | $20,537 |

(1) Includes 38 IMAX Systems (2022 — 43) 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.

(2) The consideration owed under joint revenue sharing arrangements, which are accounted for as leases, is typically contingent on the box office receipts earned by the exhibitor. Accordingly, such arrangements do not usually have a dollar value in backlog; however, certain joint revenue sharing arrangements provide for contracted upfront payments and therefore carry a backlog value based on those payments.

As of March 31, 2023, the Company’s backlog includes 14 systems in Russia, one system in Ukraine, and five systems in Belarus with a total fixed contracted value of $22.9 million.

The backlog reflects the minimum number of commitments for IMAX Systems under 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 under 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.

The following tables provide detailed information about the Company’s backlog by arrangement type and geographic location as of March 31, 2023 and 2022:

|  | March 31, 2023 IMAX System Backlog Traditional JRSA | Hybrid JRSA | Sale / Sales- type Lease | Total |  |
| --- | ---: | ---: | ---: | ---: | ---: |
| Domestic Total (United States & Canada) | 100 | 2 | 9 | 111 |  |
| International: |  |  |  |  |  |
| Greater China | 42 | 92 | 66 | 200 |  |
| Asia (excluding Greater China) | 13 | 13 | 33 | 59 |  |
| Western Europe | 19 | 10 | 6 | 35 |  |
| Russia/the CIS & Ukraine(1) | — | — | 22 | 22 |  |
| Latin America | 3 | — | 2 | 5 |  |
| Rest of the World | 3 | 1 | 32 | 36 |  |
| International Total | 80 | 116 | 161 | 357 |  |
| Worldwide Total | 180 | 118 | 170 | 468 | (2) |
|  | **March 31, 2022** |  |  |  |  |
|  | **IMAX System Backlog** |  |  |  |  |
|  | **Traditional JRSA** | **Hybrid JRSA** | **Sale / Sales- type Lease** | **Total** |  |
| Domestic Total (United States & Canada) | 124 | 2 | 8 | 134 |  |
| International: |  |  |  |  |  |
| Greater China | 41 | 99 | 68 | 208 |  |
| Asia (excluding Greater China) | 3 | 16 | 35 | 54 |  |
| Western Europe | 11 | 12 | 5 | 28 |  |
| Russia/the CIS & Ukraine(1) | — | — | 23 | 23 |  |
| Latin America | 3 | — | 6 | 9 |  |
| Rest of the World | 3 | 2 | 26 | 31 |  |
| International Total | 61 | 129 | 163 | 353 |  |
| Worldwide Total | 185 | 131 | 171 | 487 | (3) |

51

(1) In addition to Russia, the Company has IMAX Systems in backlog in the Commonwealth of Independent States (“CIS”) which are Belarus, Kazakhstan, and Uzbekistan. Commencing in March 2022, in response to the ongoing conflict between Russia and Ukraine and resulting sanctions, the Company suspended its operations in Russia and Belarus. As of March 31, 2023, the Company's backlog includes 14 systems in Russia, one system in Ukraine, and five systems in Belarus with a total fixed contracted value of $22.9 million.

(2) Includes 309 IMAX Laser Systems (221 new and 88 upgrades of existing locations).

(3) Includes 284 IMAX Laser Systems (180 new and 104 upgrades of existing locations).

Approximately 34% of IMAX System arrangements in backlog as of March 31, 2023 are scheduled to be installed in international markets excluding Greater China (2022 — 30%).

#### Signings and Installations

The following tables provide detailed information about IMAX System signings and installations for the three months ended March 31, 2023 and 2022:

| System Signings: New IMAX Systems | For the Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sale and sales-type lease arrangements | 14 | 4 |
| Hybrid JRSA | — | 1 |
| Traditional JRSA | 13 | 2 |
| Total new IMAX Systems | 27 | 7 |
| Upgrades of IMAX Systems | 1 | — |
| Total IMAX System signings | 28 | 7 |
|  | **For the Three Months Ended** |  |
|  | **March 31,** |  |
|  | **2023** | **2022** |
| **System Installations:** |  |  |
| New IMAX Systems |  |  |
| Sale and sales-type lease arrangements | 7 | 4 |
| Hybrid JRSA | — | 2 |
| Traditional JRSA | — | 6 |
| Total new IMAX Systems | 7 | 12 |
| Upgrades of IMAX Systems | 2 | 2 |
| Total IMAX System installations | 9 | 14 |

52

### 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 other events 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, including the integration and performance of SSIMWAVE, the distribution of live events to the IMAX network and IMAX Enhanced, (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 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 two reportable segments: (i) Content Solutions, which principally includes content enhancement and distribution services, previously included within the IMAX DMR, Film Distribution and Film Post-Production segments, and (ii) Technology Products and Services, which principally includes the sale, lease, and maintenance of IMAX Systems, previously included within the JRSA, IMAX Systems, IMAX Maintenance, and Other Theater Business segments. The Company’s activities that do not meet the criteria to be considered a reportable segment are reported within All Other. Prior period comparatives have been revised to conform with the current period presentation. (See Note 13 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

### Results of Operations for the Three Months Ended March 31, 2023 and 2022

### Net Income (Loss) and Adjusted Net Income (Loss) Attributable to Common Shareholders

The following table presents the Company’s net income (loss) attributable to common shareholders and the associated per diluted share amounts, as well as adjusted net income (loss) attributable to common shareholders(1) and adjusted net income (loss) attributable to common shareholders per diluted share(1) for the three months ended March 31, 2023 and 2022:

*(In thousands of U.S. Dollars, except per diluted share amounts)*

|  | Three Months Ended March 31, 2023 Net Income | Per Share | 2022 Net Loss | Per Share |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) attributable to common shareholders | $2,454 | $0.04 | $(13,609) | $(0.23) |
| Adjusted net income (loss) attributable to common shareholders(1) | $9,025 | $0.16 | $(8,244) | $(0.14) |

(1) See “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 March 31, 2023, the Company’s revenues and gross margin increased by $26.9 million, or 45%, and $18.3 million, or 58%, respectively, when compared to same period in 2022 principally due to the strength of IMAX GBO performance through the distribution of films such as *Avatar: The Way of Water, Wandering Earth 2, Ant-Man and the Wasp: Quantumania,* and *Creed III.*

The following table presents the Company’s revenue, gross margin and gross margin percentage by reportable segment for the three months ended March 31, 2023 and 2022:

*(In thousands of U.S. Dollars)*

|  | Revenue 2023 | 2022 | Gross Margin 2023 | 2022 | Gross Margin % 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Content Solutions | $32,101 | $20,988 | $17,995 | $12,625 | 56% | 60% |
| Technology Products and Services | 51,667 | 37,863 | 29,891 | 18,416 | 58% | 49% |
| Sub-total for reportable segments | 83,768 | 58,851 | 47,886 | 31,041 | 57% | 53% |
| All Other(1) | 3,178 | 1,185 | 2,165 | 730 | 68% | 62% |
| Total | $86,946 | $60,036 | $50,051 | $31,771 | 58% | 53% |

(1) All Other includes the results from IMAX Enhanced, SSIMWAVE, 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 March 31, 2023, Content Solutions segment revenues and gross margin increased by $11.1 million, or 53%, and $5.4 million, or 43%, respectively, when compared to the same period in 2022 principally due to the strong performance of the films distributed through the IMAX network. In the first quarter of 2023, box office generated by IMAX films totaled $273.4 million, leading to the Company's best-ever first quarter box office performance, a $100.2 million, or 58% increase versus the prior year comparative period of $173.2 million. In the first quarter of 2023, box office was generated by the exhibition of 22 films (15 new films, 6 carryovers and 1 re-release) including *Avatar: The Way of Water*, which generated box office of $109.1 million, and other content. In addition, in the first quarter of 2023, local language films exhibited across the Company’s global IMAX network generated over $80 million in box office representing 30% of the Company’s total box office. The growth in local language box office was driven primarily by a record IMAX Chinese New Year of $61.3 million for the full 26-day Chinese New Year holiday, a growth of 72% over the prior year, as well as growth in Rest of World box office. Leading local language titles distributed across the IMAX network in the first quarter of 2023 included the Chinese film *Wandering Earth 2,* which generated $48.8 million in box office, the Japanese anime film *Suzume,* which generated $6.7 million in box office, and the Indian film *Pathaan,* which generated $3.6 million in box office. In the first quarter of 2022, box office was generated by the exhibition of 23 films (13 new films and 10 carryovers) and other content. Despite accounting for approximately 1% of all domestic screens and less than 1% of all screens globally, the IMAX network had a domestic market share of 4.6% and a global market share of 3.5% for the three months ended March 31, 2023. Furthermore, the share of industry box office that IMAX Systems captured in 2022 increased by 50% domestically and 33% internationally from 2019.

In addition to the level of revenues, Content Solutions segment gross margin is also influenced by the costs associated with the films and other content exhibited in the period, and can vary from period-to-period, especially with respect to marketing expenses for films and the costs incurred to produce, market and distribute live events and documentary content during the period. For the three months ended March 31, 2023, marketing expenses for films were $6.4 million, as compared to $2.3 million during the same period in 2022, primarily driven by marketing costs for *Avatar: The Way of Water*. The costs incurred to operate the IMAX connected network, including infrastructure costs, depreciation expense and network connection fees were $1.6 million (2022 — $0.4 million), an increase over the prior year comparative period of $1.2 million resulting from the growth of the IMAX connected network to 258 systems (2022 — 68 systems).

### 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 varies 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 newly built 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.

For the three months ended March 31, 2023, Technology Products and Services segment revenue and gross margin increased by $13.8 million, or 36%, and $11.5 million, or 62%, respectively, when compared to the same period in the prior year. Box office from joint revenue sharing arrangements increased $48.9 million in the first quarter of 2023 when compared to the prior year comparative period, from $92.8 million to $141.7 million. The box office performance increase of 53% over the prior period resulted in an increase of $7.4 million in rental revenues. Also contributing to the higher level of revenue was an increase of $5.5 million in revenue from the renewal of existing IMAX system arrangements and an increase of $1.5 million in revenue from after-market sales of IMAX 3D glasses when compared to the same period in the prior year. The Technology Products and Services segment revenue increase is partially offset by a decrease of $1.5 million in maintenance revenues primarily due to temporary relief to select exhibitor customers by waving or reducing maintenance fees related to periods when theaters were closed or operating with reduced capacities as a result of public health restrictions related to the COVID-19 pandemic.

The Technology Products and Services segment gross margin increase during the three months ended March 31, 2023 is primarily due to the renewal of certain existing IMAX Systems which extended the agreement term, as well as higher rental revenues from the Company's joint revenue sharing arrangements, driven by the stronger box office performance which led to incremental profit flow-through during the quarter.

The following table provides information about IMAX Systems installed and recognized, under sales, sales-type leases and hybrid joint revenue sharing arrangements, during the three months ended March 31, 2023 and 2022:

*(In thousands of U.S. Dollars, except number of systems)*

| New IMAX Systems: | For the Three Months Ended March 31, 2023 Number of Systems | Revenue | 2022 Number of Systems | Revenue |
| --- | ---: | ---: | ---: | ---: |
| Sale and sales-type lease arrangements(1) | 7 | $6,627 | 4 | $4,747 |
| JRSA — hybrid | — | — | 2 | 1,014 |
| Total new IMAX Systems | 7 | 6,627 | 6 | 5,761 |
| IMAX System upgrades: |  |  |  |  |
| Sale and sales-type lease arrangements(1) | 1 | 1,339 | 1 | 1,673 |
| Total upgraded IMAX Systems | 1 | 1,339 | 1 | 1,673 |
| Total | 8 | $7,965 | 7 | $7,434 |

(1) The arrangement for the sale of an IMAX System includes fixed upfront and ongoing consideration, including indexed annual minimum payment increases over the term of the arrangement, as well as an estimate of the contingent fees that may become due if certain annual minimum box office receipt thresholds are exceeded.

### All Other

For the three months ended March 31, 2023, All Other revenue and gross margin increased by $2.0 million, or 168%, and $1.4 million, or 197%, respectively, when compared to the same period in 2022 principally due to the inclusion of revenues earned by SSIMWAVE's operations which were not in the prior year comparative period as the acquisition was completed in late September 2022, as well as growth in IMAX Enhanced initiatives resulting in an increase in revenues of $0.7 million over the same period in 2022.

### Selling, General and Administrative Expenses

The following table presents information about the Company’s Selling, General and Administrative Expenses for the three months ended March 31, 2023 and 2022:

*(In thousands of U.S. Dollars)*

|  | Three Months Ended March 31, 2023 | 2022 | Variance $% |  |
| --- | ---: | ---: | ---: | ---: |
| Total selling, general and administrative expenses | $34,148 | $30,181 | $3,967 | 13% |
| Less: Share-based compensation(1) | 5,196 | 5,726 | (530) | (9%) |
| Total selling, general and administrative expenses, excluding share-based compensation | $28,952 | $24,455 | $4,497 | 18% |

(1) A portion of share-based compensation expense is recognized within Costs and Expenses Applicable to Revenues, Research and Development, and Executive Transition Costs. (See Note 11(a) of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

The increase in Selling, General and Administrative Expenses reflects the Company’s normalized level of business activity in the current period, primarily the result of higher workforce costs of $1.8 million reflecting a full staff complement and the resumption of travel as compared to the prior year period, as well as from the inclusion of SSIMWAVE which was not in the prior year comparative period as the acquisition was completed in late September 2022.

As a percentage of revenue, Selling, General and Administrative Expenses excluding share-based compensation was 33% versus 41% in the three months ended March 31, 2022, an improvement over the prior year period which reflected cost discipline efforts and the strong operating leverage in the business.

### Research and Development

A significant portion of the Company’s recent research and development efforts have been focused on its laser-based projection systems, which the Company believes present greater brightness and clarity, higher contrast, a wider color gamut and deeper blacks, consume less power and last longer than other digital projection technologies, and are capable of illuminating the largest screens in the IMAX network. To a lesser extent, the Company’s recent research and development efforts have also focused on image enhancement technology, developing technologies and systems to help bring additional interactivity to its global IMAX network. With the acquisition of SSIMWAVE, there is ongoing research and development in perceptual metrics including novel measurement and optimization techniques. Teams from IMAX and SSIMWAVE are working to expand existing and/or develop new technologies which are expected to further enhance video quality, delivery, and creation across devices.

For the three months ended March 31, 2023, Research and Development expenses increased by $0.7 million, or 55%, when compared to the same period in the prior year, which primarily reflects the increased efforts specifically related to SSIMWAVE technologies.

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 and experimenting with 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.

### Credit Loss Expense, Net

For the three months ended March 31, 2023, the Company recorded current expected credit losses of $0.2 million, as compared to credit losses of $7.2 million recognized in the prior year. The prior period expense was principally due to reserves established against substantially all of the Company's receivables in Russia due to uncertainties associated with the ongoing Russia-Ukraine conflict and resulting sanctions, partially offset by the reversal of provisions associated with the COVID-19 pandemic as the outlook for the theatrical exhibition industry in Domestic and Rest of World markets improved.

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. (See Note 3 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

### Interest Expense

For the three months ended March 31, 2023, interest expense was $1.8 million, representing an increase of $0.1 million, or 4% when compared to interest expense of $1.7 million during the same period of the prior year.

### Income Taxes

For the three months ended March 31, 2023, the Company recorded income tax expense of $4.9 million (2022 — $2.6 million). The Company’s effective tax rate for the three months ended March 31, 2023 of 48.8% differs from the Canadian statutory tax rate of 26.5% primarily due to the fact that the Company recorded an additional $1.6 million valuation allowance against deferred tax assets in jurisdictions where management cannot determine that the tax benefits will be realizable based on available evidence. Accordingly, the tax benefit associated with the current period losses in these jurisdictions is not ultimately reflected in the Company’s Condensed Consolidated Statements of Operations. (See 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 March 31, 2023, the net income attributable to non-controlling interests of the Company’s subsidiaries was $2.7 million, an increase of $1.0 million, or 61%, when compared to the same period of the prior year. The increase can be primarily attributed to IMAX China's box office success in the first quarter of 2023 following the Chinese government relaxing its dynamic zero-COVID policies and easing capacity restrictions at the end of 2022.

### CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

#### 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 distributed by the Company and/or released to IMAX locations, (iv) the level of inventory purchases, and (v) the level of the Company’s operating expenses, including expenses for research and development and new business initiatives.

For the three months ended March 31, 2023, net cash provided by the Company’s operating activities totaled $21.2 million, as compared to net cash used in operating activities of $3.8 million in the same period of the prior year, an improvement of 675%.

For the three months ended March 31, 2023, the net cash provided by the Company’s operating activities is principally due to cash collected from earnings in the period, as a result of revenue growth attributable to the record box office performance of the films distributed through the IMAX network, partially offset by $5.9 million in inventory purchases, and $3.9 million of expenditures incurred in connection with the development of Film Assets.

For the three months ended March 31, 2022, the net cash used in the Company’s operating activities was principally due to the settlement of Accrued and Other Liabilities and $5.1 million spent in connection with the development of Film Assets, partially offset by the Company’s cash earnings in the period.

#### Investing Activities

For the three months ended March 31, 2023, net cash used in investing activities totaled $4.3 million, as compared to $10.6 million used in investing activities in the same period of the prior year. For the three months ended March 31, 2023, the net cash used in investing activities is primarily driven by $2.2 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitor customers, $0.4 million in purchases of property, plant and equipment, and $1.8 million of intangible assets acquired, principally related to the purchase or continued development of internal use software.

For the three months ended March 31, 2022, the net cash used by investing activities was primarily driven by $4.6 million invested in equipment to be used in the Company’s joint revenue sharing arrangements with exhibitors, and $4.7 million invested by IMAX (Shanghai) Culture and Technology Co., Ltd, a wholly-owned subsidiary of IMAX China, in the movie *Mozart from Space*. (See Note 15 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

Based on management’s current operating plan for 2023, 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 $8.2 million for the three months ended March 31, 2023, as compared to $15.7 million for the three months ended March 31, 2022. The Company expects its investment in joint revenue sharing arrangements to be weighted toward the second half of the year which aligns with the historical seasonality of system installations.

#### Financing Activities

For the three months ended March 31, 2023, net cash used in financing activities totaled $15.0 million, as compared to $13.0 million used in financing activities in the same period of the prior year. For the three months ended March 31, 2023, the net cash used in financing activities is principally due to $5.5 million in net repayments of revolving credit facility borrowings, $3.7 million used to repurchase common shares of the Company, and $6.2 million in taxes withheld and paid on vested employee stock awards.

For the three months ended March 31, 2022, net cash used in financing activities was principally due to the $8.1 million used to repurchase common shares, including $6.3 million in share repurchases for the Company and $1.8 million in share repurchases for IMAX China, $3.1 million in taxes withheld and paid on vested employee stock awards, and $1.8 million in fees paid in relation to the Sixth Amended and Restated Credit Agreement entered into by the Company during the first quarter of 2022. (See Note 6 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1 for additional information on the Sixth Amended and Restated Credit Agreement.)

### LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2023, the Company's available liquidity was $423.4 million, including its balance of cash and cash equivalents of $99.2 million, $280.0 million in available borrowing capacity under the Credit Facility and $44.2 million in available borrowing capacity under IMAX China's revolving facilities.

As of March 31, 2023, the Company’s principal sources of liquidity included: (i) its balances of cash and cash equivalents; (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 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 March 31, 2023, the Company had $280.0 million in available borrowing capacity under its Sixth Amended and Restated Credit Agreement with Wells Fargo Bank, National Association (the “Credit Agreement”), $27.3 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 $16.9 million in available borrowing capacity under IMAX Shanghai’s revolving credit facility with HSBC Bank (China) Company Limited, Shanghai Branch (the “HSBC China Facility”). (See Note 6(a) of Notes to Condensed Consolidated Financial Statements in Part 1, 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 $99.2 million balance of cash and cash equivalents as of March 31, 2023 (December 31, 2022 — $97.4 million) includes $83.6 million in cash held outside of Canada (December 31, 2022 — $79.7 million), of which $47.2 million was held in the People’s Republic of China (the “PRC”) (December 31, 2022 — $43.7 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. As of March 31, 2023, the Company’s Condensed Consolidated Balance Sheets include a deferred tax liability of $14.9 million for the applicable foreign withholding taxes associated with the remaining balance of unrepatriated 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 2022 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.

For the three months ended March 31, 2023, box office generated by films exhibited in the IMAX network totaled $273.4 million, leading to the Company’s best-ever first quarter box office performance, a $100.2 million, or 58% increase versus the prior year comparative period of $173.2 million. In the first quarter of 2023, box office was generated by the exhibition of 22 films (15 new films, 6 carryovers and 1 re-release) including *Avatar: The Way of Water*, which generated box office of $109.1 million, and other content. In addition, in the first quarter of 2023, local language films exhibited across the Company’s global IMAX network generated over $80 million in box office representing 30% of the Company’s total box office. The growth in local language box office was driven primarily by a record IMAX Chinese New Year of $61.3 million for the full 26-day Chinese New Year holiday, a growth of 72% over the prior year, as well as growth in Rest of World box office. Despite accounting for approximately 1% of all domestic screens and less than 1% of all screens globally, the IMAX network had a domestic market share of 4.6% and a global market share of 3.5% for the three months ended March 31, 2023. Management is encouraged by the return of the prevalence of exclusive theatrical windows and the strong pipeline of Hollywood and local language movies scheduled to be released for theatrical exhibition throughout the remainder of 2023 and the visibility into 2024.

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.

### CONTRACTUAL OBLIGATIONS

Payments to be made by the Company under contractual obligations as of March 31, 2023 are as follows:

*(In thousands of U.S. Dollars)*

|  | Payments Due by Period Total Obligation | Less Than One Year | 1 to 3 years | 3 to 5 years | Thereafter |
| --- | ---: | ---: | ---: | ---: | ---: |
| Purchase obligations(1) | $39,534 | $36,231 | $2,668 | $391 | $244 |
| Pension obligations(2) | 20,298 | — | — | 20,298 | — |
| Operating lease obligations(3) | 16,969 | 3,669 | 5,551 | 4,127 | 3,622 |
| Finance lease obligations | 1,016 | 508 | 508 | — | — |
| Wells Fargo Facility | 20,000 | — | — | 20,000 | — |
| HSBC Facility | 12,165 | 12,165 | — | — | — |
| Bank of China Facility | 379 | 379 | — | — | — |
| Federal Economic Development Loan(4) | 3,128 | 156 | 1,251 | 1,251 | 470 |
| Convertible Notes(5) | 234,025 | 1,150 | 2,300 | 230,575 | — |
| Postretirement benefits obligations | 2,480 | 104 | 210 | 220 | 1,946 |
|  | $349,994 | $54,362 | $12,488 | $276,862 | $6,282 |

(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. (See Note 6(b) 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. (See Note 6(b) 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 2022 Form 10-K.

### RECENTLY ISSUED ACCOUNTING STANDARDS

See 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;
- 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) COVID-19 government relief benefits; (iii) realized and unrealized investment gains or losses; (iv) acquisition-related expenses; and (v) 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 income or 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 (loss) attributable to common shareholders and the associated per share amounts to adjusted net income (loss) attributable to common shareholders and adjusted net income (loss) attributable to common shareholders per diluted share are presented in the tables below.

*(In thousands of U.S. Dollars, except per share amounts)*

|  | Three Months Ended March 31, 2023 Net Income | Per Share | 2022 Net Loss | Per Share |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) attributable to common shareholders | $2,454 | $0.04 | $(13,609) | $(0.23) |
| Adjustments(1): |  |  |  |  |
| Share-based compensation | 5,536 | 0.10 | 5,959 | 0.10 |
| COVID-19 government relief benefits, net | — | — | (193) | — |
| Realized and unrealized investment gains | (45) | — | (34) | — |
| Acquisition-related expenses | 156 | — | — | — |
| Executive transition costs(2) | 1,353 | 0.02 | — | — |
| Tax impact on items listed above | (429) | (0.01) | (367) | (0.01) |
| Adjusted net income (loss)(1) | $9,025 | $0.16 | $(8,244) | $(0.14) |
| Weighted average shares outstanding — basic |  | 54,064 |  | 58,574 |
| Weighted average shares outstanding — diluted |  | 54,991 |  | 58,574 |

(1) Reflects amounts attributable to common shareholders.

(2) Reflects costs in connection with the departure of Megan Colligan, President, IMAX Entertainment and Executive Vice President of the Company. (See Note 16 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

In addition to the non-GAAP financial measures discussed above, management also uses “EBITDA,” as well as “Adjusted EBITDA per Credit Facility,” as defined in the Credit Agreement. 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: (v) share-based and other non-cash compensation; (vi) realized and unrealized investment gains or losses; (vii) acquisition-related expenses; (viii) executive transition costs, and (ix) write-downs, net of recoveries, including asset impairments and credit loss expense.

Reconciliations of net income (loss) 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.

*(In thousands of U.S. Dollars)*

|  | For the Three Months Ended March 31, 2023 Attributable to Non-controlling Interests and Common Shareholders | Less: Attributable to Non-controlling Interests | Attributable to Common Shareholders |
| --- | ---: | ---: | ---: |
| Reported net income | $5,123 | $2,669 | $2,454 |
| Add (subtract): |  |  |  |
| Income tax expense | 4,885 | 793 | 4,092 |
| Interest expense, net of interest income | 735 | (11) | 746 |
| Depreciation and amortization, including film asset amortization | 13,320 | 1,301 | 12,019 |
| Amortization of deferred financing costs(1) | 625 | — | 625 |
| EBITDA | 24,688 | 4,752 | 19,936 |
| Share-based and other non-cash compensation | 5,633 | 194 | 5,439 |
| Unrealized investment gains | (44) | — | (44) |
| Acquisition-related expenses | 156 | — | 156 |
| Write-downs, including asset impairments and credit loss expense | 524 | 82 | 442 |
| Executive transition costs(2) | 1,353 | — | 1,353 |
| Adjusted EBITDA per Credit Facility | $32,310 | $5,028 | $27,282 |

*(In thousands of U.S. Dollars)*

|  | For the Twelve Months Ended March 31, 2023 Attributable to Non-controlling Interests and Common Shareholders | Less: Attributable to Non-controlling Interests | Attributable to Common Shareholders |
| --- | ---: | ---: | ---: |
| Reported net (loss) income | $(2,804) | $3,933 | $(6,737) |
| Add (subtract): |  |  |  |
| Income tax expense | 12,382 | 1,562 | 10,820 |
| Interest expense, net of interest income | 1,827 | (156) | 1,983 |
| Depreciation and amortization, including film asset amortization | 57,240 | 4,820 | 52,420 |
| Amortization of deferred financing costs(1) | 2,779 | — | 2,779 |
| EBITDA | 71,424 | 10,159 | 61,265 |
| Share-based and other non-cash compensation | 27,017 | 751 | 26,266 |
| Unrealized investment gains | (81) | — | (81) |
| Acquisition-related expenses | 1,278 | — | 1,278 |
| Write-downs, including asset impairments and credit loss expense | 8,638 | 1,787 | 6,851 |
| Executive transition costs(2) | 1,353 | — | 1,353 |
| Adjusted EBITDA per Credit Facility | $109,629 | $12,697 | $96,932 |

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

(2) Reflects costs in connection with the departure of Megan Colligan, President, IMAX Entertainment and Executive Vice President of the Company. (See Note 16 of Notes to Condensed Consolidated Financial Statements in Part I, Item 1.)

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.

## Market risk

As filed, 8,045 characters.

The Company is exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. Market risk is the potential change in an instrument’s value caused by, for example, fluctuations in interest and currency exchange rates. The Company’s primary market risk exposure is the risk of unfavorable movements in exchange rates between the U.S. Dollar, the Canadian Dollar (“CAD”) and Chinese Renminbi (“RMB”). The Company does not use financial instruments for trading or other speculative purposes.

### Foreign Exchange Rate Risk

A majority of the Company’s revenue is denominated in U.S. Dollars while a significant portion of its costs and expenses is denominated in Canadian Dollars. A portion of the Company’s net U.S. Dollar cash flows is converted to Canadian Dollars to fund Canadian Dollar expenses through the spot market. In addition, IMAX films generate box office in 87 different countries, and therefore unfavorable exchange rates between applicable local currencies and the U.S. Dollar could have an impact on the GBO generated by the Company’s exhibitor customers and its revenues. The Company has incoming cash flows from its revenue generating IMAX network and ongoing operating expenses in China through its majority-owned subsidiary IMAX Shanghai. In Japan, the Company has ongoing Yen-denominated operating expenses related to its Japanese operations. Net RMB and Japanese Yen cash flows are converted to U.S. Dollars through the spot market. The Company also has cash receipts from lease arrangements denominated in RMB, Japanese Yen, Euros and Canadian Dollars.

The Company manages its exposure to foreign exchange rate risks through its regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates.

Certain of the Company’s PRC subsidiaries held approximately RMB 322.6 million ($47.0 million) in cash and cash equivalents as of March 31, 2023 (December 31, 2022 — RMB 303.8 million or $43.6 million) and are required to transact locally in RMB. Foreign currency exchange transactions, including the remittance of any funds into and out of the PRC, are subject to controls and require the approval of the China State Administration of Foreign Exchange to complete. Any developments relating to the Chinese economy and any actions taken by the Chinese government are beyond the control of the Company; however, the Company monitors and manages its capital and liquidity requirements to ensure compliance with local regulatory and policy requirements. (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 I, Item 1A of the Company’s 2022 Form 10-K.)

Management also monitors the macroeconomic environment as part of its continuous assessment of credit risk. This includes consideration of developments in the U.S. and global banking sectors following recent banking collapses, which informs management's assessment of any potential direct and indirect impacts on the Company. There are no concentrations of cash and cash equivalents in any regional banking institutions, such that management considers there to be any material risk in this regard.

For the three months ended March 31, 2023 and 2022, the Company recorded foreign exchange net losses of $(0.1) million, resulting from changes in exchange rates related to foreign currency denominated monetary assets and liabilities.

The Company has entered into a series of foreign currency forward contracts to manage the risks associated with the volatility of foreign currencies. Certain of these foreign currency forward contracts met the criteria required for hedge accounting under the Derivatives and Hedging Topic of the FASB ASC at inception, and continue to meet hedge effectiveness tests as of March 31, 2023, with settlement dates throughout 2023 and 2024. Foreign currency derivatives are recognized and measured in the Condensed Consolidated Balance Sheets at fair value. Changes in the fair value (i.e., gains or losses) are recognized in the Condensed Consolidated Statements of Operations except for derivatives designated and qualifying as foreign currency cash flow hedging instruments. The Company currently has cash flow hedging instruments associated with Selling, General and Administrative Expenses. For foreign currency cash flow hedging instruments related to Selling, General and Administrative Expenses, the effective portion of the gain or loss in a hedge of a forecasted transaction is reported within Accumulated Other Comprehensive Income (Loss) and reclassified to the Condensed Consolidated Statements of Operations when the forecasted transaction occurs. Any ineffective portion is recognized immediately in the Condensed Consolidated Statements of Operations.

The notional value of foreign currency cash flow hedging instruments that qualify for hedge accounting as of March 31, 2023 was $34.4 million (December 31, 2022 — $24.7 million). A gain of $0.1 million was recorded to Other Comprehensive Income (Loss) with respect to the change in fair value of these contracts for the three months ended March 31, 2023, (2022 — gain of $0.3 million). A loss of $(0.3) million was reclassified from Accumulated Other Comprehensive Loss to Selling, General and Administrative Expenses for the three months ended March 31, 2023 (2022 — loss of less than $(0.1) million). The Company currently does not hold any derivatives which are not designated as hedging instruments.

For all derivative instruments, the Company is subject to counterparty credit risk to the extent that the counterparty may not meet its obligations to the Company. To manage this risk, the Company enters into derivative transactions only with major financial institutions.

As of March 31, 2023, the Company’s Financing Receivables and working capital items denominated in Canadian Dollars, RMB, Japanese Yen, Euros and other foreign currencies translated into U.S. Dollars was $163.3 million. Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency exchange rates as of March 31, 2023, the potential change in the fair value of foreign currency-denominated financing receivables and working capital items would have been $16.3 million. A significant portion of the Company’s Selling, General, and Administrative Expenses is denominated in Canadian Dollars. Assuming a 1% change appreciation or depreciation in foreign currency exchange rates as of March 31, 2023, the potential change in the amount of Selling, General, and Administrative Expenses would be $0.1 million.

### Interest Rate Risk Management

The Company’s earnings may also be affected by changes in interest rates due to the impact those changes have on its interest income from cash, and its interest expense from variable-rate borrowings that may be made under the Credit Facility.

As of March 31, 2023, the Company had drawn down $20.0 million on its Credit Facility (December 31, 2022 — $25.0 million), $12.2 million on its HSBC China Facility (December 31, 2022 — $12.5 million) and $0.4 million on its Bank of China Facility (December 31, 2022 — $0.4 million), which are subject to variable effective interest rates.

The Company had variable rate debt instruments representing 6.7% and 7.7% of its total liabilities as of March 31, 2023 and December 31, 2022, respectively. If the interest rates available to the Company increased by 10%, the Company’s interest expense would increase by $0.2 million and interest income from cash would increase by $0.2 million. These amounts are determined by considering the impact of the hypothetical interest rates on the Company’s variable rate debt and cash balances as of March 31, 2023.

## Controls and procedures

As filed, 2,618 characters.

### EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods and that such information is accumulated and communicated to management, including the CEO and the Chief Financial Officer (“CFO”), to allow timely discussions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

The Company’s management, with the participation of its CEO and its CFO, has evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of March 31, 2023 and has concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective. The Company will continue to periodically evaluate its disclosure controls and procedures and will make modifications from time to time as deemed necessary to ensure that information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

On September 22, 2022, the Company acquired SSIMWAVE and commenced consolidating the assets, liabilities, and results of operations of SSIMWAVE in its financial reporting. Management has excluded SSIMWAVE from its assessment of internal control over financial reporting as of March 31, 2023, as it has been less than 12 months since it was acquired by the Company in a purchase business combination. SSIMWAVE is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment of internal control over financial reporting represent approximately 3% and 1%, respectively, of the related consolidated financial statement amounts as of and for the three months ended March 31, 2023.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in the Company’s internal control over financial reporting which occurred during the three months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 528 characters.

This Form 10-Q should be read together with the risk factors in Item 1A. Risk Factors in the Company’s 2022 Form 10-K, which describes various risks and uncertainties to which the Company is or may become subject. The risks described in the Company’s 2022 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial also may materially adversely affect its business, financial condition and/or operating results.

Filed Apr 27, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-015371. Last ingested by Listed: Oct 24, 2026, 15:00 ET. No prices; not investment advice.