Q1 2020 Earnings Call
[noise] go ladies and gentlemen, you're currently on whole should be IMAX first for sure Twentytwenty earnings calls regarding something today's audience and plan to be underway. Shortly thank you for your patience I'm teams remain on the line.
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Good day and welcome to the IMAX first quarter Twentytwenty earnings Conference calls.
All participants are no listen only mode, calling the presentation, we will conduct a question answer session.
As a reminder, today's conference is being recorded.
At this time I'd like to turn the conference over to Mr. Brett Harris. Please go ahead.
Thank you.
Good morning, everybody. Thank you for joining us on today's first quarter earnings conference call on.
On the call today.
Hi, Rich Gelfond, Chief Executive Officer, Patrick Mcclymont, Chief Financial Officer.
Second collagen President My next entertainment, Robert Mr., Chief Legal Officer also joining us today.
Today's conference calls being webcast in its entirety on our website a replay of the webcast will be made available shortly after the call.
During the full text about first quarter earnings press releases in the slide presentation posted on the Investor Relations section of our website.
This call historical Excel model will be posted on the website as well.
I'd like to remind you of the following information regarding forward looking statements.
Condoms and answers to your questions on this call as well see accompanying slide deck may include statements that are forward looking.
The future results or outcomes actual future results recurrences may differ materially from these forward looking statements. Please refer to our FCC filings for more detailed discussion. So some of the factors that could affect or future results and outcomes. During today's call references made to meet certain non-GAAP financial measures as defined by regulation G. of the Securities and Exchange Commission.
Gushing advancements use of these measures and the definition of these measures as well as a reconciliation to non-GAAP financial measures, including adjusted net income.
Yes, and adjusted EBITDA supplying burnt credit facility are contained in this mornings press release with that let me now turn the call Mr. Rich Gelfond rich.
Thanks, Brad.
Extraordinary times since our World Entertainment industry, IMAX Corp. since block and unprecedented challenges over 19.
As much as we look forward that theaters reopening the fully support local officials at or exhibition partners around the world clothing theaters. That's necessary will also be extremely cautious in markets like China that are beginning to reopen in schools restaurants or other public spaces I hope all be joining us.
Staying healthy industry.
Today I'd like to discuss the continued financial strength why that's the health of our brands and our ongoing efforts to enhance the IMAX experience for our audiences the condition of our China business.
I'm absence contributors.
Crafting a formidable upcoming film slate.
Finally, our relationship and efforts to support.
In addition partners.
Okay. That's the first quarter 2020, clearly our results were impacted by <unk> 19, we reported revenues of $35 million adjusted EBITDA loss of $4.4 billion. Adjusted net income was to common shareholders of $29 billion.
For 48 cents per share. This includes a 10 certain credit provision the Patrick will discuss in greater detail.
Install 12, why about systems in the first quarter and our commercial Theatre network now stands at 1526 theaters up 7.5% versus Q1 of last year I.
I want to underscore that IMAX is in a strong financial position whether this crisis.
We ended the year with more than $90 million net cash on our balance sheet.
No March through the balance of old over 300 million dollar involving credit facility maintain maximum flexibility throughout the duration of theater closures.
As result of the strong cash position and a commitment to controlling costs.
Pop in our ability to operate for an extended shutdown is zero revenue environment.
We've already taken significant costs out of our 2020 operating structure I will continue to be flexible and accordingly.
And I'd respond accordingly, and some situation evolves with technology and licensing business you don't have a lot of fixed assets, we run the business with fewer than 700 full time employees.
When you think about how we have grown and managed to global brands that operates across 81 countries and territories and our box office was in excess of a billion dollars last year.
The matters the visits conserve rolling over the preceding years as a result, we believed that we have the balance sheet, we ready for exhibitors studios filmmakers and audiences when they entertainment industry is back up and running.
Furthermore, as global economies restart, we believe consumers will turn to strong cost at Brian's lifetime.
Prior to the challenges of 2020, I'm actually coming off two consecutive years record breaking global box office.
Last year, we set records for global local language and International box office, putting box office records in 27 countries worldwide.
Yes your 2020.
Record number of releases build using IMAX cameras, we have establishing a new can powerful position in the entertainment ecosystem.
Consumers seek out the IMAX experience for immersive blockbuster Entertainment studios value. That's that's remarkable must see film I don't powerful partner in marketing fewer rating and driving box office for their biggest releases the world's best filmmakers and creators are Inc.
Similar using hermine and acknowledging the winning their artistic visions to life.
Exhibitors rely on our theaters to provide premium experience like drives ticket pricing volume of differentiation and finally streaming services all for new opportunities for us to bring new event content to our theaters and to bring Himax technologies, while home entertainment.
Just privileged position enables IMAX the ticket active role in shaping how the entertainment industry emerges from this crisis.
Well also he's vendors times to reshape how we deliver for our audiences.
Last time the theatrical.
There's been so a crisis of this magnitude was in the early two thousands what many of the major exhibitors restructure.
Well wall IMAX is in a far stronger position today during the last private since we Boston many of the innovations that enable doubt global growth over the last two decades.
We invented the proprietary digital imaging mastering process, which has made IMAX or coveted partner almost studios and filmmakers throughout the world.
You transition got theater operations and technology from analog to digital we developed a business model that has driven a theater sales business.
Taking a simple approach in this challenging time.
Celebrating the development of a comprehensive direct to consumer strategy to build on the strength of our brands they knew touch points with our audiences and drive more revenue opportunities.
We're developing new technologies to bring additional indoor activity or theatres were leveraging technology like artificial intelligence and the cloud to better manage our internal workflows.
And our enhancing systems better organized hotter five our box office theater and financial data.
Moving to China have unique position in this market also offers Justin insight into the cobot 19 situation given our gas that work in China, where we have more than seven Elgin theaters IMAX, it's been managing through the impact of this virus since January.
This provides us with an up close on the ground look at the budget for general trajectory the theater closer to Reopenings consumer behavior patterns, especially as China works to restart its economy.
Schools are opening across China in store retail consumption is picking up and TV and Phil.
Production and I've also resumed hundreds strip health Guy guidelines, all positive signs as a matter that just yesterday.
I broke the Chinese government announced that he expect that theaters to begin opening in early June.
Like theaters do reopen in China, We believe IMAX will benefit from an exceptional slate we're prepared to immediately distributed many of the classic titles that are under consideration for release when the theaters resume operations fall by many of the Hollywood titles from earlier in the year and have yet to be seen in China.
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And of course, the Chinese title that were originally slated for release over the Chinese new year.
Additionally, there were positive signs that Chinese audiences are excited to return to the theaters survey released this month by Chinese ticketing platform how young.
72% or Chinese movie goers eager to get back to the moves up from 54% just a month ago.
Turning to the broader film slate.
Back half of 2020 into 2021, we will participate in a formidable content pipeline with which to relaunch the theatrical business in earnest.
Given the uncertainty around theater the openings. The slate is subject to change we've engaged and frequent conversations with our studio partners for being extremely thoughtful and aggressive supply compelling middle east windows and serve global audiences and the best way possible while when.
While we will need to be creative and scheduling. It is clear that studios are deeply committed to theatrical releases for the biggest event movies a year.
Simply no way to recoup substantial financial commitment of a blockbuster film without a theatrical releases.
2020, we are poised to set a new record for all leases that are filmed in either with many of the years biggest films, including detective Chinatown three in China, Christopher Nolan its latest Cy five films and Wonder woman 1984, the latest James bond installed.
No time to die and Paramounts Topcon Maverick.
Schedule for 2021, or two an exceptionally strong slate and as of now includes remarkable titles, including the latest installment of Spider Man.
The highly anticipated new battenfeld, new entries from global blockbuster franchises voting fast and furious mission impossible and drastic world and of course, James Cameron's Avatar to the sequel, the highest grossing IMAX film of all time currently remains on schedule.
And that's the end of next year.
In terms of slight changes were mostly seeing really shifts studios with big blockbuster product all major build slots and with a two to three month delay any studios is simply shifting their entire schedules as a group.
Disney is a great example, when they move Black widow originally scheduled for this made it to the November wobble slot previously held Buddy turtles. As a result 2022. It's also currently filled with films such as the or Black Panther fast and furious.
And then mission impossible eight that will hold strong audience appeal for IMAX.
Oh consumers the long term product pipeline is about its was robust as it's been we look forward to working with our studio and exhibition partners to bring audiences experiences they crave.
In the near term, we've incorporated a number of remote tools into our workflows and arranged for select south safe access to our post production facilities. So we can continue work on forthcoming titles like tenant.
And just as in China, there early encouraging indications at U.S. audiences are eager to get back to the movies. A survey released by research firm Ito earlier this month revealed that the overwhelming majority.
Forward to returning to the cinema when theaters reopened, albeit cautious.
More than 70% of respond that said there will likely to return the theaters when they reopen including 75% of responded between the ages of 13, and 39, which is the IMAX core audience.
While shelter in place guidelines have clearly driven at home Entertainment Consumptions. It's also clear the theatrical remains an essential part of the creative vision consumer proposition, an economic model for blockbuster filmmaking.
As I've said wrote for blockbuster filmmaking runs through line.
We believe that we're well positioned reap the benefits of this rich content pipeline as it begins to flow later this year and beyond.
Despite recent challenges we're hopeful that our exhibition partners also reap the benefits of a strong sleep well be able to manage through this temporary closure of theaters in the near term.
Earlier this month several exhibitors big important moves to extend their liquidity lowered their risk of bankruptcy and managed through the crisis.
Visitors a longstanding valued partners IMAX and these moves drive increased stability that will benefit the whole exhibition industry entertainment industry at times, we've supported exhibitors as they were forced to close theaters and we'll continue to support them throughout this situation.
Be off agility, as a hallmark of Ivan and our ability to service our partnership with exhibition.
As a result, we're confident we can resume installs when conditions improve we've grown very fast they have the ability to wrap up screen installations quickly you may recall that in the fourth quarter of 2019 installed a record 95 systems, which represented more than.
50% of our full year installs, we completed 57 installations in December while.
Additionally, we completed 12 installs in the first quarter, but this year. Despite the challenges provided by cover 19 key strategic markets, including China, Japan, South Korea, India like North America.
Now I'd like to talk about reopening the process of reopening theaters will be message or acquire ties to the industry to build the type of theatergoing momentum capable of supporting a blockbuster Rowley.
First we expect theaters to reopen with promotional pricing a library content in cooperation with Hollywood Studios.
For the limited Reopenings, we saw in China theaters and plans to play library content at discounted prices, which studios and taking a smaller share of the ticket revenue.
We also expect social distancing expectations and regulations to create limited seeding arrangement.
Given theaters typically operate with substantial excess capacity, we expect the industry in general and IMAX at that particular be able to generate incremental gross margin even with constrained. The seating. We also believe their core audience younger Fad boys and fans are all that most value.
An opening weekend blockbuster and high that's the first to resume experiential activities such as movie though.
Let me caution that timing remains highly uncertain.
As I said based on what we've heard from the government in China, We estimate that that opens in June with the rest of the world opening sometime in July and August. This of course is just an estimate.
We are fortunate in that unlike most of out of home Entertainment business is it will cost us virtually nothing to reopen IMAX. If you think of other out of home entertainment businesses like sports or theater itself lives theater, there's a lot of talent.
You have to bring it you have to open a lot of infrastructure and you have to fire a lot of staff for imax's of technology provider, we don't require additional employees for capital to reopen we figure and up like flipped the switch it's a distinct advantage of our technology and services licensing model.
Given the limited operating costs associated with our business. The first time, that's tickets sold generates incremental cash flow.
That concludes overnight team that was this an extraordinary challenge to the entertainment industry and the experience economy in general while this is an unprecedented situation and the futures yet on certain we believe IMAX is well positioned to meet the challenge that extra crisis continue.
To thrive when it is behind US we have the financial strain to endure support our partners in these times ready for audiences when they're ready to return to our theaters I Brad than the IMAX experience I've been in strong growing demand around the world, We're carefully monitoring Chinese films.
<unk>, which in time will drive revenue, along with insights and how to deal with safety.
Possibility and effectively relaunched theaters and went leads theaters reopened a remarkably strong pipeline a blockbuster content.
We are actively working the program through next year or the are you.
Do you need privileged position you build in the ecosystem gives IMAX firm footing in difficult times, and we look forward to continuing their success driving new opportunities for growth and creating value and oppose cobot 19 world. Thanks again for joining us today and please continue.
Do everything you can stay safe and healthy with that I'd like to turn it over there Patrick.
Thanks, Rich and good morning, everyone.
And your families are saying they through this challenging time.
So I wouldn't go for the global pandemic are unprecedented unprecedented in both magnitude of impact and speed of onset.
'cause of our large in China, we started zone would be the issues earlier than most companies.
The prudent disciplined and conservative financial management during the last several years, we remain strong position to meet the current set of challenges.
Our balance sheet itself, providing stability to our business and organization.
We are planning for resumption of our while we're planning for bids consumption. This summer we remain confident in our ability to operate for an extended business shut down to zero revenue environment.
We ended the first quarter with 352 million of cash on our balance sheet, which includes cash from our revolving credit facility, we drew down in its entirety in March.
You're in close contact with our banking group, which remain supportive of our bill that's natural strength and transparency.
Well the duration of Peter closures remains uncertain, we expect our network to reopen well before exhaust our current liquidity.
Based on our current cost structure, you have to make must be fans of approximately 10 million per operating expenditures.
<unk> costs, primarily represents our full time employees facility costs and fully reflect cost actions executed.
The first 12 months a year that we'll continue to say then foods second quarter.
One of the many chip challenges of the clothes and Devon certainty.
While we cannot control when the theater Gulf will reopen.
You can control, our operational costs and capital allocation.
Late January almost two months ahead of the U.S. upgrades theaters and trying to close in response, we took immediate cost action.
So in some growth initiatives.
Central capital expenditures keep me consulting projects and noncore marketing.
When you epidemic developed into a global pandemic, we took a deeper dive.
In March we completed a bottoms up analysis of all our costs looking at everything short of a reduction in full time headcount.
Due to temporary concept employees overtime consultants and our marketing budget.
April we moved the majority of our company to a four day work week.
But like product demand or not able to effect can be function remotely most notably the bottom equipment manufacturing the DMR process.
Luke either a two or three days per week schedule.
Except these measures to reduce costs, while maintaining our ability to quickly Gallup operations and social distancing measures are lifted and our business reasons.
Of course shutdown of theaters that longer than you expect.
Options take additional cost measures.
Our cash burn and extending our cash runway.
Much more capex driven by the growth in our joint ventures, Capex associated with our New Jersey upgrade JB installations, when they dependent on our outlook and that of our partners.
Which in turn is contingent on the pace of construction activity and souter reopening.
As such we do expect to make and use investments to develop our global network through the balance of the year, albeit at a reduced level compared to recent years.
Excluding investments, especially with our joint ventures, we anticipate spending less than 10 million in maintenance Capex in twentytwenty.
In Q1, 2020, we repurchased 2.5 million buying back shares for $36.6 million on average at $14.72 per share.
Right, that's China repurchased 480000 shares per totaled 890000, U.S. dollars or an average of $1.85 cents per share.
Our ownership of IMAX, China now stands at 69.7%.
Turning to our financial results for.
Before I jump the details I'd like to points out that our results were driven by the closure of our China business in late January and the subsequent closure of the majority of our network throughout March.
No, we renamed or operating segments.
That are described the underlying operating activities.
Our network business is now called IMAX technology network.
Peter business was renamed IMAX technology sales and maintenance new business was renamed to new business initiatives.
The other segment is now being distribution and post production.
Total revenue in the first quarter was 35 million down 56% versus last year.
The first quarter they'll be IMAX technology networks business delivery, 91% decrease in gross profit.
64% decrease in revenue.
<unk> revenue and gross margins were driven by the 63% declining gross box office year over year, given the closure of the networks.
Our next technology sales and segment.
Gross profit was down 64% on revenue down 50%.
Declining gross revenue and gross margin is driven by lower sales and sales type leases, which number two in the first quarter 2020 listen six in Q1 2000 my team.
Maintenance revenue $7.4 million decline from 13 billion the previous quarter as we did not recognize maintenance revenue on close theaters since we did not provide and service.
Yes, United Excluding stock based comp was 24.9 billion down sequentially from the 29 million expenses recorded in the fourth quarter of 2019.
And up 1.2 million year over year.
The 1.2 million increase was primarily driven by increased staff costs, maybe foreign exchange loss, partially offset by decreases in marketing <unk> events and I keep spending.
R&D was up by 1 million. However, this was offset by a corresponding 1 million production projects related to sustaining engineering, which it system cost of sales.
In Q2, we expect operating expenses decreased sequentially through the quarter as we realize the previously discussed cost actions a.
Adjusted EBITDA for the quarter was a loss of 4 million down from 28.5.
Net income for the quarter will they lost with 49.4 million more lots of 82 cents per share.
Adjusted net income was a loss of 20.7 billion.
48 cents per share versus the probably 18 cents per share last year.
There are two specific items I would like to call out.
First we took a 10 cents per share charge for potential credit losses.
Associated with our theater receivables.
This drug represents a conservative reserve given the challenges facing our theater partners.
George is excluded from adjusted EBITDA included in our adjusted net income.
Second we took a onetime noncash deferred income tax charge of 23 cents per share related to withholding taxes on historic learnings from or I'm, just trying to business.
We had previously planned but indefinitely reinvested funds offshore and as a result did not accruing withholding taxes that will become too soon and we repatriated the earnings out of China.
The change in the company's plans flux its desire increased capital allocation flexibility to repatriate cash from China.
Fourth dividend payments by IMAX, China, including time export.
Because of this we made on approximately 10% that's approval on 200 million of retained greg's, which relates to the export tax payable upon moving the cash from China Hong Kong.
Sect, IMAX, China continues its future earnings and cash flow to invest in growing this business.
This onetime noncash charges is excluded from built for adjusted EBITDA.
Adjusted EPS.
Now an update on installations.
So the total 12 IMAX systems in the first quarter persons guidance.
The breakdown for new systems was.
Two sales type leases one hybrid into two things.
We also upgraded seven JB locations IMAX laser in markets, such as Japan, and the United States.
Close.
Situation remains uncertain your confidence IMAX has the financial stability to endure the challenges ahead and be ready to quickly delight our patrons once again when they return to the sentiment.
With that I'll turn the call over to the operator for today.
Thank you, ladies and gentlemen, if you wish to ask a question at this time. Please take note was probably pressing star one under telephone.
Piece ensures that the mute function on your telephone switched off to allow your signal to reach our equipment.
Again to ask a question Pete signaled by pressing star one on their telephone.
<unk> for just a moment to unless they want an opportunity to just take note for questions.
Well go to our first question today.
From Eric Wold from B. Riley. Please go ahead.
Good morning, guys.
A couple questions at this one on on the backlog in insulation plant, you know kind of a little bit cloudy sold through the web.
Even started installing Nymex circuit about opening once again.
Good.
Our own habitat.
Now I could you talk a little cloud sort of close to the phone at Wilder Party here sorry.
So I don't think about speaker voted truck.
It's still uncertain because it wouldn't be the pure installs will resume this year, especially in China, but maybe give a little more color on the backlog in terms of how readers.
I've been scheduled to install this year part of the shutdown maybe security of that backlog in terms of any ability of.
Peter Kiener cancel or push out and then you know if there is kind of maybe we'd start to become an accelerator restart.
Sure in China, what does your ability to that are really accelerate into yearend holdings and turning to speak or couldn't make up for last time so to speak.
So in terms of the backlog Eric on everything in the backlog is legally binding. So there's no unilateral ability of anyone to get out of the backlog up in terms of we haven't yet given installed giants for this year when the Pandemics.
Started because when they supposed to give it it or it are already happened in China on our year end call. So we didn't give 'em, we didn't we decided not to give guidance.
Even though its legally binding I think there is the possibility that we unilaterally agree with our partners to allow for time for them to install because obviously a partner. It suggests you know in busy reopening theater rehiring [laughter].
<unk> things like that.
The nature of our relationships isn't one well who are going to say, there's an install date of November 15th gas to do that or or or what we're going to sue you I think the way that thing I think they'll be a number of installs. This year as you know there was a fair number in the in the first quarter as you saw that were even side.
He was in the first quarter, but but you know we're not in a position to give guidance now and I think you should expect that.
You know it'll be less than usual because of the closure palm I also well I think it's just a fact that it's going to take some time three open and I don't think people if they don't want to manage reopening it to networks at the same time, if they want to manage a rapid Phil So I hope that's somewhat helpful or.
Yes. It does help bridge so you're just last question is.
Talked would obviously be Chinese market, no probably opens up with library titles, So I'm kind of delayed Hollywood and the Chinese new year titles as you get passed that and get into the back half of the year, which looks to be division. The U.S. youre fairly healthy in crowded and kind of blockbuster film slate the Chinese.
Government will handle that over there you know given.
We still do kind of approve a lot of titles from that counts and year, how you feel slot them to not let them home Alaska what are your thoughts on how that will be handled over China.
So you know China, it's always a country where things are weight.
Against each other and you're alluding to the fact that they have.
Stated objective plane as much Chinese content as they can.
But in this sense since I think the balance is going to swing towards getting the economy going again and I think as we saw late last year, they tended to be more aggressive and letting Hollywood films, and and more generous giving different dates and given.
That in China of the 70000 screens a lot of the friend high profile balls my back would be that they're going to allow and a lot of those films in order to encourage the consumer to go back into those malls and spend and.
Also I think because production has been close in China as it has been and the rest of the wall, but longer in China. After they run through the new year's movies and some other movies I don't think there's going to be a lot of original content I think both factors will lean for its more Hollywood content.
Okay. Thank you letters.
Yes.
[noise]. He will go try next question I'm from Eric Handler of MKM partners. Please go ahead.
Yes, good morning, and thanks for the question.
Rich I'm, just curious when theaters start reopening and IMAX screens are part of that obviously are you gonna be giving any best practices to your exhibitor partners on how they should be managing the screens in terms of sales or.
Sure.
How to disinfect. This you know the equipment and everything.
Is there something that you're saying, a you'll be telling the partners when that when those reopening shopping or as everybody is going to be operating on their own in every but there's no one size fits all parties reopenings.
Yeah, so were in where no water contact with our exhibition partners as well just studio partners.
Well like basis, I would say pretty much daily someone is talking to someone all of these places. So it's ultimately the exhibitors decision.
And to reopen subject to government regulation and how to reopen.
There is very much Eric and ongoing dialogue going on so we have an internal team that we've put together.
To assess what to say it this way that we can open hertz theaters and I'm sure. We wouldn't open them. If we don't consider it to be safe, but exhibitors it taking slightly different approach and certainly in discussion phases. So one exhibitor is talking about every year.
Theres seat at the beginning or every other ROE and other exhibitors talking about a new software program, which allows families to stay together and then it every other C are there some international Hong Kong I think is allowing the theaters to open next week I think they're talking about.
A different kind of protocol, so we haven't input into those protocols and we're highly focused on it internally.
So I don't think it they or us deciding I think they'll be a lot of consultation and then the won't be one size fits all.
So would you be providing maybe some best practices to the western theaters based on what's going on in Asia as as they reopen.
As I said on Eric it's not like beer mandating being sort of where giving people live but I think we're in the middle of abroad communication going on what kind of if you take a wheel what kind of into set or because of a lot of the relationships. We have so we're communicating that.
I'm going to very regular basis, and I would expect us we say hey, this is working in Thailand and.
And this is working in Korea, you guys should look at this I mean, we're partners I think we're going to figure it out together all though ultimately it it's their responsibility.
Thank you very much.
Thank you next question comes from Chad Beynon from Macquarie. Please go ahead.
Hi, Good morning, Rich Patrick took your well.
Wanted to well just continue the discussion on my last question, maybe asking it a different way can you I guess help us think about maybe she talks you can see his or her screen occupancy is on the weekends or during big releases. You know, we're just trying to figure out how to think about indexing in.
In the social distant I guess near term, hoping world and kind of how this could look obviously youve acute.
You know put up some pretty incredible indexing and that.
Tenant is the first movie you know I don't think we should assume it should be a strong as the dunkirk or some of your.
Historically successful film so could you just kind of help us think about you know where occupancy was our and if you can adjust screen times and some of those things. Thanks.
Well first of all on.
So what it imax's seen it yet, but I've heard the movie is incredible and further for the Crystal and glad you end up doing.
Really a cutting edge phenomenal storytelling, so I really look forward to that and I know, Chris really wouldn't like to me.
I'm out with the film and opened for theaters, but you know that's up to a lot of things, including government regulations and the virus and all sorts of things. So we started to study at the capacity issues and that's you.
Probably no a successful cinema chain over a long period of time on the occupancy rates are in the 15% to 20% range its.
So one way to think about it because if they have a big multi plaques and they have a lot of screens in it depending how much product they have they can do pretty well.
With.
With with capacity constraints.
Hi back since it's a single screen theater has a different issue because.
You know lets say arbitrarily at the beginning of capacity is gonna be set at 50%.
By the way should stop there and saying up you know there no real rules on that where that comes from is what was talked about in China, but no. One as you know said, that's what's going to happen, but I think if that happens that will be for a period of time and then after that period of time lapse.
So they'll be adjustments made to that but if you look at the IMAX numbers. So we've done some work on it if Phil opens in the U.S.
To around 150 million a year like 50 look back at Captain Marvel last year, the IMAX capacity utilization and the opening weekend is around 50%.
So that would mean that we wouldn't lose money, we wouldn't lose anything if the movie was $550 million for less.
If there are a bigger openings like end game up either that movie like the second weekend that was down to about 50% capacity utilization and high that so the place where it really would affect us we'll be opening we can't predict moving on select days Thursday.
Friday Saturday nights at part of the goal of our marketing would be to figure out how we can move people from Saturday night by way of example, the Tuesday night or Tuesday afternoon, and I think given the brand association between sell the like Chris Nolan and <unk>.
That's I actually think that that's likely to happen, how well design marketing tools around that.
That's great. Thanks, Rich and then lastly, just regarding the financial situations with your exhibition partners are there other things that you're considering to help them you know get through this period, whether its you know sale leasebacks on their equipment I'm guessing most of them or in JV or.
Hi brands were delaying receivables and then also on that.
It's a different time, but when many of the exhibitors went through the bankruptcy.
Process I guess that was 20 years ago, you know do they close or change any of the arrangements would you guys are wouldn't batches to two long ago to really have a data point on that thanks.
Oh, I remember that time, very well and no. They didn't really on the amount of theaters that were changed or cancel.
Diminimus It you know if.
It was matched and often I think there was helpful.
So no, but we are arranger swifty exhibitors I mean, there are pockets, but really good news for them and for US is that I think the capital markets and the last several weeks have been flight amendable to financing exhibitors through this crisis and I'm sure.
Are you saw cinemark raised $250 million AMC recently raised $500 million. So I think there are pretty good financial footing now up where I don't really seeing a bankruptcy is a significant risk to a number of change.
Right now like you know I think there's been some smaller regional operators, but as far as we couldn't tell right now we don't thing that's going to be a significant problems with that said.
Yeah, we've been a business with a lot of these people for a long time and stuff where some of these financings were completed the said to some of our partners were going to work, which it. So if you need to slow down installation the understand that if you need to slow down your payables, we understand that and you don't.
Now that they've return to financial health I think we want a more normalized business relationship, but those that aren't I think we're going to work with them, we're not in the business.
No for one quarter over one quarter, we've been a business for over 50 years and one reason as we know how to work with our partners and I think we'll continue to have that philosophy.
Thank you that's look.
[laughter].
She will now go to our next question nine from Mike Hickey from Benchmark Company. Please go ahead.
[noise], Hey, rich Patrick just good thanks for taking my questions I'm just to first.
He's about maybe.
Well, the economic strain that worlds, Minnesota deal with here.
Recessionary environment that we're clearly yet just remind us sort of hub movie goers behave.
Generic environment, how they sort of choose between.
Premium it get immediate cheaper ticket and follow up.
On the movie this as a general tends to perform quite well.
Recessions intact, I think people see it as an affordable luxury you know they might cut out a trip for.
Or restaurant, if they're open or vacation or things like that but movies are still relatively low price of way to escape and get away and historically.
Sentiments have done well and and Downtimes in fact, we looked at our own data from the post 911 period, and that 2000, and and nine financial crisis, and I box office was either flat or off during that period of time. So.
I don't really see that is significant headwinds.
Thanks, I should tell the second question I guess.
Not your first pandemic, obviously this ones.
To scale I don't think we have all my team was ever experienced before that you sort of curious what you've learned from.
Prior Pandemics movie goers willingness to bounce back.
So the only real reference point, we have on what's the SAR situation in Hong Kong and to some extent in Canada. So.
What I remember from Hong Kong was that they opened a little bit slow and out was down year over year for the first few months, but the back ended the year when they reopen they were up significantly up from the prior year again I'm not sure. It's a great analogy.
I'll be quick ones, you say it was a lot of small or in a lot more isolated but that's really the only data point we have.
Hi, Thanks, guys best of luck because it.
Thank you very well now go to our next question Alexia Quadrani from JP Morgan.
Hi, Thank you think you may not be R. 22 questions first can you even stephens crops for black didn't keep of each them. Initially post the opening given lower likely capacity adjustments like cookie pushed out further and then my second question to keep keep against changing I guess.
On the current <unk> Universal and more more you know company potentially considering Oh, hi, good it's kind of Peazazz. That's just the after calls.
Yes, along those lines tends to tighten up the caps and tender with doesn't impact you anyway.
I'll start there and say no the window doesn't impact us that much because the typical IMAX movie plays for two weeks or less at the to cross sell and movie, it's an outlier, but wherever the windows and up the I know it won't have a great impact on.
On IMAX I'll get back to the studio one but on our ability windows question, but on the studios being real lock them up it's a complicated answer Alexia. That's because there are a lot of factors. Some on the one hand, yes, the city a wants to make sure.
The theaters are back to capacity and they want to make sure I'm as many people see their movies as as they can on the other has a lot of these movies have a lot of capital tied up the big carrying costs and their ancillary windows that flow off of the theatrical window and they have their own reporting.
She is in their own accounting issues and they want to get that stream rolling So that's an incentive to go quicker as I mentioned before I'm certain filmmakers are very anxious to have their movies fully so I don't know anyone in America is pushing harder and Chris Nolan to get the theaters open.
And to get his movie release in July when its scheduled for us. So it it's really a balance said I think it's this I've I frankly never seen closer cooperation.
The studios and exhibitors and now it's just almost a daily dialogue going on where everybody is trying to assess the win at a likely opening dates and what is the optimal time, then I think people are really working together to.
To make it happen and I'll say before a transition into your next question about windows that I think one of the things that people aren't talking about they're talking about other trolls experiment, what youre alluding to but from my point of view the bigger headlines coming out of the pandemic that Burke.
Finally every blockbuster has been rescheduled for theatrical release date. So you know pause on that one for a second so people can speculating about the windows for really long period of time and effort if ever there was a time to lose a theatrical release it would be.
Now and it just hasn't happened and I think that reinforces the value of the theatrical window.
To the studios and to the filmmakers now in terms of controls on the Universal situation I think universal had a bit of special circumstances, because they're movie update already started the marketing campaign, they've actually at $50 million and costs in the marketing camp.
And it was scheduled for April release, So I think they faced a tough decision if they postpone that they would have had a relaunch at another time and we spend that money. So I think they decided to go on streaming it was kind of a unit court event families were sitting at home.
Kits were sitting at home.
Bye bye bye their accounts, it did pretty well and streaming and I guess you know that's not surprising given that there were no competitive movies and you know not not very much else to do especially for families I.
I don't think that changes the model I don't I think if you allow movies to release on streaming rather theatrical you would lose so many ancillary windows the wouldn't be it elektron himself window. It wouldn't be a streaming window, there wouldn't be a TV window, which skews off a bar.
Box office, so that model just doesn't make very much sense to me and certainly does it make sense for blockbuster.
Releases and the evidence isn't the fact that they've all been re schedule.
Thank you.
[noise]. Thank you well now go to my next question today from I lived in time Kinda talk take some kind of course. Please go ahead.
Good morning, Thanks for taking my questions two for me so small for rich on the and you consider the the financial challenges.
That are faced by the exhibition partners.
Especially when it comes to the joint revenue sharing agreements do instead of possibility that you would might have to have make sort of bigger concessions to them and potentially if that sort of footprint changes.
Much flexibility would they have in terms of perhaps reducing the county existing count.
And what options that you have in such a situation and with respect to the economy. The economics of the the a joint revenue sharing agreements would eat better prospects that potentially having to offer them. Some set as a subset of flexibility either permanent basis on a temporary basis and my second question is around this.
You know goals that Patrick I was wondering if you can provide us with sort of slow in terms of receivables. During the month of April obviously thing, David probably $65 million balance that I suspect. The vast majority is just an exhibition partners can you talk to sort of the duration instead of the floor you've seen since the end of the core.
Thanks.
So I'll add to your first question, which is I you know as I said to book for the exhibitors are in pretty good shape right now thanks to the capital markets and the prudent move that they've made up we carefully negotiate up all of our agreements, including a joint venture.
Sure agreements with auto worldwide basis, and they're binding contracts. So no I don't think there'll be changes to those agreements you know I think.
Both of us.
Put up a lot of capital, especially in the Jvs and we have modeled returns and we expect those returns without said when you're talking about temporary I mean.
There are things like I mentioned earlier, if they want to delay of rolling out.
Some joint ventures to preserve their own capital and that makes sense for them. So certainly we would consider delaying it they or other kinds of things that provided some temporary relief, but type period of time, where business with them for very long period in time and.
Intend to me, but fundamentally changing our business deal is not something that we would entertain.
Patrick you want to answer the other question.
Sure happy too.
The way, we look at the receivables now.
Short term you focus on our build on our crude accounts receivable.
Two third of that nobody exhibitor side and about one third is on the studios Doug.
And as you'd expect you haven't seen really any change on the studio side, we do expect them you good or side. It will start to see some some changes as the exhibition theaters are closed right now we're in discussions with Oliver exhibitor partners and so clear line of sight on that as soon as rich said more broadly used <unk> partners.
You were going to figure out ways to be be helpful.
Because we talked about on the call.
We did take a reserve against certain receivables a lot of that was related to the launch of Cecil County provision, which obviously.
It was implemented during a particularly interesting quarter that everything was going on up so we think well protected in that event and then in terms of concentration that's what you'd expect it's big partners and of that build them and accrued they are about 20% of it is across our top three to five partners. So there's not a whole lot of concentration.
Yeah.
So we think one reason, we just bought more monitoring it very closely.
Thank you very much.
[laughter] so can you.
We'll now go to question from Destiny covenants. So you know some kinda told me search.
Good morning, Rich I wanted to follow up on what you've said about blood bustos being rescheduled the and ER and so I'm. So if we look.
369 months after the merger that Theyll actually open so there will be one could say, but there would probably be a garage of blockbusters and IMAX kind of titles because you have the backlog.
They will get relief sent them then you productions were coming up and their own. There's so many opening frames and in the year. So one way to look at it would be to say it wouldn't get good for IMAX, because as a share of IMAX mogas over the box office would increase because they've got pedals would push out small.
Our sort of lionsgate kind of kind of films or another way would be it does she does the say that that could lead to cannibalization in revenue kind of realization for you. So I was wondering if you could help us think through that dynamic am I thinking about that's wrong.
I wouldn't say wrong for silly, but I think that.
You know most IMAX movie is always played for one or two weeks. So I can you know there are a lot of movies that we have to program in the interim.
That are kind of fillers. So I think if that problem, you're describing aim to be up if there was adequate spacing into movies and hopefully we'd work with the studios to ensure that there was it would be a good period of time for us I would add though that.
Part of this pandemic has shut down production.
For a few months, if we don't know how and when it's gonna open so even though it looks good right now for 2021 I think these things like water that rises to its level I think that you know the this extreme glut, you're expecting rather than coming all at the beginning of a year book.
Probably spread itself up as production cost shop online I don't think that's really going to be a significant issue.
Hi, Thank you.
[noise] 10-Q.
We have no further questions I would now like turn the conference back over to rich Gelfond for any additional or closing remarks.
Thank you all so much for joining us needless to say, it's been a very trying period.
For us at IMAX, and obviously were a tiny part of the world and especially the healthcare workers and sick people on the front lives. We've been using this period to try and innovate prepare move forward and you know come back.
With a bang up it's hard to believe but it's only a few months ago that we had a record year and.
Terrific earnings, which we released in February and by any measure if those return.
I think we're in really you know why did the theaters open if a win win when they open on a rolling global basis, I think well being a really good spot on to flourish. Once again and we're grateful for all of you have seen with us today and I want, especially thank our employees through this.
Oh situation and thanks for joining.
Schenkein, ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
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