Segment Reporting

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Reporting

15. Segment Reporting

The Company's Chief Executive Officer ("CEO") is its Chief Operating Decision Maker ("CODM"), as such term is defined under U.S. GAAP. The CODM, along with other members of management, assess 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 the following reportable segments: (i) IMAX DMR; (ii) Joint Revenue Sharing Arrangements ("JRSA"); (iii) IMAX Systems; (iv) IMAX Maintenance; (v) Other Theater Business; (vi) Film Distribution; and (vii) Film Post-Production. The Company's activities that do not meet the criteria to be considered a reportable segment are disclosed within All Other. The Company organizes its reportable segments into the following three categories, identified by the nature of the product sold or service provided:

(i)IMAX Technology Network, which earns revenue based on contingent box office receipts and includes the IMAX DMR segment and contingent rent from the JRSA segment;

(ii)IMAX Technology Sales and Maintenance, which includes results from the IMAX Systems, IMAX Maintenance, and Other Theater Business segments, as well as fixed revenues from the JRSA segment; and

(iii)Film Distribution and Post-Production, which includes activities related to the distribution of large-format documentary films, primarily to institutional theaters, and the distribution of exclusive experiences ranging from live performances to interactive events with leading artists and creators (through the Film Distribution segment) and the provision of film post-production and quality control services.

The Company presents its segment information at a disaggregated level to provide more relevant information to the users of its financial statements.

Transactions between the IMAX DMR segment and the Film Post-Production segment are valued at exchange value. Inter-segment profits are eliminated upon consolidation, as well as for the disclosures below.

In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced®, an initiative to bring The IMAX Experience® into the home, out of the New Business Initiatives segment and into All Other for segment reporting purposes. IMAX Enhanced was the only component of the New Business Initiatives segment. Prior period comparatives have been reclassified to conform with the current period presentation.

The following table presents the Company's revenue and gross margin (margin loss) by category and reportable segment for the three months ended September 30, 2022 and 2021:

	Revenue(1)				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	19,919	$	15,701	$	11,408		$	7,293
JRSA, contingent rent		12,540		9,887		6,302			3,626
		32,459		25,588		17,710			10,919
IMAX Technology Sales and Maintenance
IMAX Systems(2)		15,957		13,236		9,029			8,086
JRSA, fixed fees		998		1,036		(154	)		280
IMAX Maintenance		13,939		13,055		6,406			6,462
Other Theater Business(3)		2,107		363		168			64
		33,001		27,690		15,449			14,892
Film Distribution and Post-Production
Film Distribution		1,081		699		(2,369	)		(4	)
Post-Production		968		899		287			420
		2,049		1,598		(2,082	)		416
Sub-total for reportable segments		67,509		54,876		31,077			26,227
All Other(4)		1,246		1,726		624			1,260
Total	$	68,755	$	56,602	$	31,701		$	27,487

The following table presents the Company's revenue and gross margin (margin loss) by category and reportable segment for the nine months ended September 30, 2022 and 2021:

	Revenue(1)				Gross Margin (Margin Loss)
(In thousands of U.S. Dollars)	2022		2021		2022			2021
IMAX Technology Network
IMAX DMR	$	67,064	$	39,438	$	42,965		$	22,405
JRSA, contingent rent		43,708		26,108		25,389			7,299
		110,772		65,546		68,354			29,704
IMAX Technology Sales and Maintenance
IMAX Systems(2)		32,806		35,117		18,432			21,646
JRSA, fixed fees		2,486		3,776		79			783
IMAX Maintenance		43,564		33,196		21,643			15,360
Other Theater Business(3)		3,697		1,283		314			269
		82,553		73,372		40,468			38,058
Film Distribution and Post-Production
Film Distribution		2,503		1,115		(4,631	)		(319	)
Post-Production		2,915		2,886		1,161			1,316
		5,418		4,001		(3,470	)		997
Sub-total for reportable segments		198,743		142,919		105,352			68,759
All Other(4)		4,016		3,392		2,156			1,612
Total	$	202,759	$	146,311	$	107,508		$	70,371

(1)The Company's largest customer represents 11% and 13%, respectively, of total Revenues for the three and nine months ended September 30, 2022 (2021 — 18% and 22%, respectively). No single customer comprises more than 10% of the Company's total Accounts Receivable as of September 30, 2022 and December 31, 2021.

(2)The revenue from this segment includes the initial upfront payments and the present value of fixed minimum payments from sale and sales-type lease arrangements of IMAX Theater Systems, as well as the present value of estimated variable consideration from sales of IMAX Theater Systems. To a lesser extent, the revenue from this segment also includes finance income associated with these revenue streams.

(3)The revenue from this segment principally includes after-market sales of IMAX Theater System parts and 3D glasses.

(4)All Other includes the results from IMAX Enhanced, SSIMWAVE, and other ancillary activities. In the first quarter of 2022, the Company's internal reporting was updated to reclassify the results of IMAX Enhanced out of the New Business Initiatives segment into All Other for segment reporting purposes. Prior period comparatives have been revised to conform with the current period presentation. The results of SSIMWAVE, which was acquired on September 22, 2022, were not material to the period. (See Note 4 for additional information related to the Company's acquisition of SSIMWAVE)

Geographic Information

Revenue by geographic area is based on the location of the customer. Revenue related to IMAX DMR is presented based upon the geographic location of the theaters that exhibit the remastered films. IMAX DMR revenue is generated through contractual relationships with studios and other third parties and these may not be in the same geographical location as the theater.

The following table summarizes the Company's revenues by geographic area for the three and nine months ended September 30, 2022 and 2021:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands of U.S. Dollars)	2022		2021		2022			2021
United States	$	23,168	$	16,469		$	75,881		$	34,275
Greater China		14,889		22,203			47,602			75,634
Asia (excluding China)		13,921		4,925			31,045			12,837
Western Europe		8,938		7,634			26,700			11,160
Latin America		2,397		1,181			6,826			1,579
Canada		1,780		1,083			5,520			620
Russia/the CIS & Ukraine(1)		1,638		1,353			2,794			4,577
Rest of the World		2,024		1,754			6,391			5,629
Total	$	68,755	$	56,602		$	202,759		$	146,311

(1)In addition to Russia, the CIS includes 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 September 30, 2022, the IMAX network includes 54 theaters in Russia, nine theaters in Ukraine, and one theater in Belarus.

No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding Greater China) comprises more than 10% of the Company's total revenue in the nine months ended September 30, 2022 and 2021.