Segmented Information

9 Months Ended

Sep. 30, 2019

13. Segmented Information

Management, including the Company’s Chief Executive Officer (“CEO”) who is the Company’s Chief Operating Decision Maker (as defined in the Segment Reporting Topic of the FASB ASC), assesses segment performance based on segment revenues and gross margins. Selling, general and administrative expenses, research and development costs, amortization of intangibles, receivables provisions (recoveries), write-downs net of recoveries, interest income, interest expense and tax (provision) recovery are not allocated to the segments.

The Company’s reportable segments are organized under four primary groups identified by nature of product sold or service provided: (1) Network Business, representing variable revenue generated by box office results and which includes the reportable segment of IMAX DMR and contingent rent from the joint revenue sharing arrangements and IMAX systems segments (hybrid joint revenue sharing arrangements, which take the form of a sale are reflected under the IMAX systems segment of Theater Business); (2) Theater Business, representing revenue generated by the sale and installation of theater systems and maintenance services, primarily related to the IMAX Systems and Theater System Maintenance reportable segments, and also includes hybrid (fixed and contingent) revenues and upfront installation costs from sales arrangements previously reported in the joint revenue sharing arrangements segment and after-market sales of projection system parts and 3D glasses from the other segment; (3) New Business, which includes home entertainment, and other new business initiatives that are in the development, start-up and/or wind-up phases, and (4) Other; which includes the film post-production and distribution segments, certain IMAX theaters that the Company owns and operates, camera rentals and other miscellaneous items. The Company is presenting information at a disaggregated level to provide more relevant information to readers, as permitted by the standard. Refer to Item 2 of the Company’s Form 10-Q for additional information regarding the four primary groups mentioned above.

Transactions between the film production 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.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenue⁽¹⁾
Network business
IMAX DMR	$	26,665		$	22,372		$	93,908		$	85,586
Joint revenue sharing arrangements – contingent rent		16,546			14,327			59,704			56,919
IMAX systems – contingent rent		32			—			189			—
		43,243			36,699			153,801			142,505
Theater business
IMAX systems		21,003			23,398			50,800			59,527
Joint revenue sharing arrangements – fixed fees		1,438			2,798			6,525			3,821
Theater system maintenance		13,657			12,415			39,815			37,462
Other theater		1,560			2,076			5,766			5,707
		37,658			40,687			102,906			106,517
New business		596			1,275			1,908			4,999
Other
Film post-production		2,185			2,262			6,458			6,512
Film distribution		1,343			800			3,333			2,644
Other		1,365			385			2,979			2,260
		4,893			3,447			12,770			11,416
Total revenues	$	86,390		$	82,108		$	271,385		$	265,437

Gross Margin
Network business
IMAX DMR⁽²⁾	$	17,866		$	14,461		$	61,602		$	57,523
Joint revenue sharing arrangements – contingent rent⁽²⁾		9,514			8,081			40,437			39,441
IMAX systems – contingent rent		32			—			189			—
		27,412			22,542			102,228			96,964
Theater business
IMAX systems⁽²⁾		11,630			13,064			26,874			37,487
Joint revenue sharing arrangements – fixed fees⁽²⁾		136			529			1,301			776
Theater system maintenance		6,125			5,996			17,046			17,289
Other theater		505			581			1,821			1,099
		18,396			20,170			47,042			56,651
New business		541			(298	)		1,441			139
Other
Film post-production		810			737			1,576			2,272
Film distribution⁽²⁾		(760	)		(477	)		(1,093	)		(1,952	)
Other		721			(483	)		619			(787	)
		771			(223	)		1,102			(467	)

Total segment margin	$	47,120		$	42,191		$	151,813		$	153,287

(1)	The Company’s largest customer represented 16.6% and 18.9%, respectively, of total revenues for the three and nine months ended September 30, 2019, respectively (2018 —15.5% and 18.4%, respectively).

(2)

IMAX DMR segment margins include marketing costs of $4.3 million and $17.7 million for the three and nine months ended September 30, 2019, respectively (2018 — $3.1 million and $13.7 million, respectively). Joint revenue sharing arrangements segment margins include advertising, marketing and commission costs of $0.8 million and $1.1 million for the three and nine months ended September 30, 2019, respectively (2018 — $1.0 million and $2.2 million, respectively). IMAX systems segment margins include marketing and commission costs of $0.6 million and $1.5 million for the three and nine months ended September 30, 2019, respectively (2018 — $0.8 million and $2.0 million, respectively). Film distribution segment margins include marketing expense of $0.1 million and $0.7 million for the three and nine months ended September 30, 2019, respectively (2018 — expense of less than $0.1 million and $2.0 million, respectively).

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 re-mastered 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.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue
Greater China	$	26,557	$	30,480	$	85,813	$	81,967
United States		24,316		20,763		84,553		86,476
Asia (Excluding Greater China)		13,534		13,909		32,287		34,510
Western Europe		8,433		6,879		28,809		26,191
Latin America		2,912		2,469		7,725		8,804
Russia & the CIS		2,909		3,142		10,216		7,478
Canada		1,993		2,106		6,485		8,116
Rest of the World		5,736		2,360		15,497		11,895
Total	$	86,390	$	82,108	$	271,385	$	265,437

No single country in the Rest of the World, Western Europe, Latin America and Asia (excluding Greater China) classifications comprises more than 10% of the total revenue.