Q4 2021 Imax Corp Earnings Call
Good day and welcome to the IMAX Corporation full year 2021 earnings Conference call Today's conference is being recorded.
At this time I would now like to turn the conference over to Mr. Brett Harris. Please go ahead Sir.
Thank you operator, good afternoon, everyone and thank you for joining us on todays fourth quarter and full year earnings conference call on the call today to review the financial results are rich <unk>, Chief Executive Officer, and Joe <unk>, Our interim Chief Financial Officer, Megan Colligan, President IMAX Entertainment, and Rob Lister Chief legal.
Also joining us today.
Today's conference call is being webcast in its entirety on our website a replay of the webcast will be made available shortly after the call. In addition, the full text of our fourth quarter earnings press release, and a slide presentation have been posted on the Investor Relations section of our website at.
The conclusion of this call our historical excel model will be posted to the website as well.
I'd like to remind you of the following information regarding forward looking statements.
Today's call as well as the accompanying slide deck may include statements that are forward looking and that they pertain to future results or outcomes. These forward looking statements are subject to risks and uncertainty that could cause our actual future results or occurrences to different.
Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results or outcomes any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information future events or otherwise.
During today's call references may be made to certain non-GAAP financial measures discussion of management's use of these measures and the definition of these measures as well as reconciliations to non-GAAP financial measures, including adjusted net loss adjusted EPS adjusted EBITDA as defined by our credit facility are contained in this morning and this afternoon.
The press release and in our earnings materials, which are available on the Investor Relations page of our website at IMAX Dot com with that let me now turn the call over to Mr. Richard California Rich.
Thanks, Brett and good afternoon, everyone. Thank you for joining us today.
In the World of Entertainment differentiation has always been the calling card of IMAX, We command powerful global reach and a unique end to end technology, we empower visionary creators with proprietary cameras and image enhancement and we create global events around.
The World class top that with unmatched clarity and Sal scope and scale.
A runaway performance in the fourth quarter and the way, we outpaced the global film industry and drove profitability for full year 2021 drives that differentiation home.
IMAX is a premier global technology platform for entertainment and events, we are not an exhibitor, we've never been one and will never be one without.
With our industry, leading momentum we had taken the next evolutionary step for our business.
IMAX 1.0, well, it's about creating a premier showcase so groundbreaking documentary filmmaking.
<unk>, such as museums and science centers.
Dramatically expanded our scope with IMAX to Plano, bringing the biggest blockbusters so audiences worldwide.
With IMAX three point al.
We are pushing further into our future rolling beyond blockbusters.
<unk> unique events and experiences globally.
Putting our technology in the hands of an expanding set of creative and platform partners and becoming a destination for fandom of all times just look of some of what we did in the fourth quarter.
IMAX was the tip of the sphere and the record breaking really a spiderman no way home I'll films shot without cameras, featuring IMAX exclusive expanded aspect ratio.
We launched IMAX enhanced and Disney plus a major partnership that extends our brand and technology further into the streaming environment.
We screened our first ever live concert shot with IMAX cameras, delivering a cinematic quality live with low latency into the IMAX network nationwide.
Kanye West and Dray sold out shows engaged new fans and a promising relationship with Amazon.
For years IMAX is represented.
All of the theatrical experience.
Increasingly we transcend.
We're just getting started.
Today I'd like to discuss our results for the fourth quarter and full year, our strategy to build our most robust comprehensive content portfolio ever and how we're evolving and growing our platform through technology.
First our strong results for the fourth quarter of 2021 demonstrate our leadership position in the industry differentiation and the strong demand for the IMAX experience.
Key metrics.
<unk> was in line with or exceeded pre pandemic levels.
Initial analyst estimates.
Our operating income and gross profit topped out fourth quarter of 2019, which was our best year ever in terms of both global box office and total revenue.
We returned to positive adjusted earnings per share of 31 cents.
Strong EBITDA of $44 million demonstrated the overall continued performance and profitability of the company.
Underpinning. These results is the box office performance that stands alongside our best.
Our Q4 global box office.
Q4, 2019 by 15%.
A reminder, 2019 was our highest grossing here.
This was the sixth highest grossing quarter ever we delivered our best month of October ever with $118 million worldwide, beating our previous 2013 to high 50%.
For the full year 2021.
IMAX grew global box office year over year by 146%.
The estimated 78% growth.
And the traditional exhibition industry.
And we captured our largest share of the global box office ever 3% global market share for the full year.
This accelerated in the fourth quarter with IMAX, taking three 3% of the global box office and five 6% of the domestic box office.
IMAX drove $68 6 million and EBITDA for the full year, demonstrating the strength of our model and our ability to quickly capitalize on box office momentum.
We generated positive EBITDA every quarter going back to Q4 2020.
We finished 2021 with $516 million and available liquidity, we raised more than $200 million in a convertible debt offering at extremely attractive rates.
And we were opportunistic in repurchasing $14 million of <unk>.
That stock during the year.
Certainly we benefited from studios recommitting to exclusive theatrical releases and audience is returning to theaters wanting the best most immersive experience, but the separation we've created at the global box Office is also the result of a multi year strategic effort.
We built the most robust comprehensive IMAX content portfolio ever comprised the Hollywood blockbusters with more and more films shot with IMAX cameras.
Local language blockbusters.
Exclusive events and experiences from our growing roster of new partners and of course documentaries.
In 2022, IMAX will feature one of the strongest Hollywood slate we've ever seen.
The Batman and uncharted approved for release in China and data from mid March early indications are that Hollywood films will have improved access to the Chinese market. This year.
What makes this slate truly unique however is that it should include more IMAX DNA more blockbuster films without cameras and more sequences featuring IMAX expanded aspect ratio.
Before it.
Thanks to our strategic effort to infuse more DNA.
Certified camera program at least 10 releases in 2022 should include exclusive IMAX element, reflecting are rapidly diversifying set of talented ambitious filmmakers creating.
Specifically for the IMAX platform. This effort to expand the filmed in IMAX program has been a key driver of our strength at the box office.
In 2020, 170, great and top releases included IMAX DNA.
More than 50% of our global box office for the year came from films with IMAX DNA.
It's a nice a virtuous cycle, we are one of the only global platforms that can create events around content throughout the entirety of its lifecycle.
By putting tools in the hands of creators, we can drive brand attention throughout the filmmaking process filmmakers studios and audiences.
Hey June a visually stunning film for IMAX title for which we earned 22% of the opening weekend gross and then popped up to 30% in the second weekend. Thanks to fantastic word of mouth for the IMAX experience.
<unk>.
IMAX is a powerful mark must see content in theaters and at home.
Beyond Hollywood, we continue to tap into the rich growing local language film industries and countries around the world.
We're supplying our creative partnerships and engaging our fans with highly relevant.
Where they live.
2021 was our highest grossing year ever for local language films with more than $181 million up 36% over our previous best set in 2019.
For the second year in a row, the world's highest growth grossing local language films China's the battle of late Tien Tsin was film for IMAX using our certified cameras.
We kicked off the 22 Chinese new year by earning $23 $3 million in box office with the battle of late Tien Tsin too over the six day period.
We dramatically accelerated our local language strategy during the pandemic.
In China, and Japan, we continue to embed even deeper in the local filmmaking ecosystems, so I'm, putting our technology in the hands of local filmmakers to becoming an important player for anime blockbusters in Japan.
Several upcoming Chinese blockbusters are being filmed with IMAX cameras, including the 2022 summer Tentpole Mozart from space.
In Japan, IMAX has renewed its five pictures slate deal with Tahoe, the company's first slate deal with the studio outside of Hollywood.
We're in discussions with several Japanese blockbuster productions and shooting with IMAX cameras.
We're also strategically targeting international film markets poised for a post pandemic comeback, including India, Russia, South Korea and France.
IMAX sees a lot of opportunity in India in 'twenty, two given that unlike China, Japan local studios have held back releases over the last two years and a significant pipeline of local bond blockbusters.
For 'twenty two.
This is also.
Local language blockbusters in Russia, and South Korea. It will release, our first filmed in IMAX French title Notre Dame.
Good day, and 2022 as well.
Even as we diversify geographically IMAX is moving beyond blockbusters transforming the company into a global platform for events and experiences of all time and bringing in it is highly differentiated offering to market. We are connecting our theaters to build a high speed network.
Capable of broadcasting the IMAX experience with high definition video and high fidelity audio around the world.
This creates an effect a decentralized global arena.
Already the size of the Madison Square Garden currently spread across 79 locations in three countries.
By the end of this year.
We will be even more global shooting with IMAX office artists cinematic picture and sound with low latency live. This is why creators love it they could align with our premium brand and use the tool to create intimate events at scale.
One of the 300 seats in each of our theaters is the front row seat.
In one week alone in December we demonstrated the promise and breadth of this effort with a rapid succession of successful special events, including a special.
The one night only screening of Joel cones, the tragedy of Macbeth, including a live Q&A with cone and actress Frances Mcdormand stream from our Lincoln Square location to 17 theatres worldwide in participation with Apple and 824.
An exclusive streaming of West side story, featuring a live Q&A with director Steven's barreled Spielberg and his cast stream from our century City theater.
IMAX locations worldwide.
Ship with Disney.
Tanya Western Drake of it truly show what we've been capable of has been events platform.
Approached IMAX first.
Yes, there's one I'd only performance with great life on the Colosseum in Los Angeles.
We work closely with with his creative team to ensure the production had a cinematic look big breast screening even helping the team secured the same IMAX certified cameras that we use the chute zone.
We collaborated closely with Amazon music as well once Amazon Prime came onboard as the exclusive partner for the event and.
We delivered the event lot to 35 IMAX theaters in the U S and Canada strong tepid sales and seven seller.
Even though the concert was also available live on Amazon Prime for free and the event started well after midnight on the East coast.
The clips from many of those screens like nothing I've ever seen and jumping up and down single wall.
Most more excited than if they were actually at the concert if you haven't seen it check out the video we posted on our IR site of the tiny a concert.
Seeing is believing and in this case in particular do you really need to see the audience reaction.
Understand the potential of <unk>.
Next slide.
Just like the IMAX has been the best way to see the biggest blockbusters for more than a decade.
IMAX was to be a global showcase for the biggest artists.
We believe this is a significant opportunity for us.
Well Ive cinema music events that exponentially grow at artist reach without sacrificing the quality and intimacy.
Well the in person experience.
In fact in some ways, we top that in person experience with crystal clear stunning visuals and sound capabilities that approach what it's like to sit in the front row of a live event.
That's the kind of technology and innovation that we believe is needed to evolve the theatrical experience.
And that we are employing.
<unk> formed the company.
We continue to focus on delivering the best most immersive possible out of home experience as fans around the world are rediscovering the magic of going to the movies and our unique end to end technology is proprietary for image capture through image distributions and the <unk>.
Fourth quarter, we rolled out the last of our landmark xenon projectors off the factory line. The next step in our transition.
All laser product line.
We expanded our IMAX with laser product suite in the fourth quarter with a new offering aimed at meeting the diverse needs of our global exhibition partners.
Continue to evolve our platform with connectivity, enabling the delivery of live and interactive content with low latency and superior visual and audio clarity.
Our network of partners is growing rapidly.
The exhibition that studio as we extend out to reach across platforms by collaborating with many of the companies reshaping the entertainment landscape.
IMAX is a powerful tool to create events around premier content across platforms and we are proving that we can be a bridge between the theatrical and streaming experiences.
Streaming services can provide a robust pipeline of new content and experiences for IMAX, particularly as those services look for new high impact waves to launch their titles and differentiate them and as seen with Disney plus IMAX to be a mark of quality.
And differentiation on streaming platforms as well.
As I mentioned earlier, we had a very successful collaboration with Amazon for the Kanye West performance that sets the framework for future partnerships with various streaming companies. It was a unique marquee event that we helped produce an amplifier for the service we drove incremental.
Ticket revenue and an off peak period of time for exhibitors and we attracted an audience beyond our core.
But when that is critically important.
Our partnership with Apple.
Thats screenings was there a similar model with the added benefit of putting the IMAX brand behind prestige Art House filmmaking.
To drive theatrical moment and more recently, we partnered with Disney for an exclusive theatrical release of the Beatles game rooftop concert.
Our launch event, which featured an interactive Q&A with director Peter Jackson recorded virtual sellouts.
And more than 65%.
Of connected theaters and a limited run across 400 theaters the films growth more than $2 million in IMAX. Despite the fact that it has already been available a Disney plus per month.
With our Disney plus an enhanced partnership.
The launch and which IMAX enhanced was a critical part of November as Disney plus day event is Shelley sustained value for the service initial.
Initial research shows that audiences are greatly enjoy the offering and seeing that as a real value add.
Consideration for retention on Disney plus these attributes are very important to streamers, who will help us expand IMAX enhanced to new platforms beyond partnership IMAX is also aggressively pursuing ways to build a direct connection to our fans globally, we are creating new.
Value with our loyal audience engaging them more frequently outside the theater and moving them across a growing suite of offerings.
We've had success with our direct to consumer platform in China, and we're building on that to create a similar offering for global audiences and.
In conclusion IMAX is separated from the pack worldwide box office and its strategic initiatives to expand the brand and grow our business.
Demonstrating that we are the premier global platform for blockbuster content.
We are in the early innings of transforming IMAX into a premier global technology platform for entertainment and events. Besides Phil our unique exclusive events that re imagine what's possible for our out of home entertainment platform.
The only end to end solution to bring these entertainment experiences to life.
We believe breaking new ground and expanding what we can do as a brand new technology, we will continue to grow and transform our business.
Again to all of you for joining us today.
I'll turn it over to our interim Chief Financial Officer Jos Brasil.
Thanks, Rich and good afternoon to everyone.
We believe our strong fourth quarter serves.
Serves as a preview of what is to come in 2022 as IMAX brings to market.
Historically strong slate of Hollywood franchise titles and.
An expected record number of titles with IMAX DNA.
A diverse and growing offering of local language films and a new innovative content experience in IMAX and then the home through IMAX enhanced.
Throughout 2021, IMAX benefited from industry, leading momentum and sustained market share gains. Unlike some entertainment companies, we generated positive and increasing adjusted EBITDA every quarter. This year ending the full year was $68 6 million of adjusted EBITDA.
This momentum accelerated dramatically in the fourth quarter with the full reserve.
Return of Hollywood releases.
As rich mentioned, our global box office of 277 5 million was among our best of all time eclipsing our pre pandemic 2019 fourth quarter results by 15% and representing our sixth highest grossing quarter of all time.
This included our best Arbor October that exceeded the previous record by approximately 50%.
More impressively, our global box office strength was broad base generating across our global network and a variety of titles or genres and events.
Q4, five films exceeded $25 million, including the sixth highest grossing movie of all time Spiderman, Norway Hall.
Spiderman in particular drew record attendance and generated rapid repeat visits by IMAX Super fans, demonstrating the loyalty of our audience and our brand affinity with the most bankable Hollywood IP.
This strength combined with our unique asset licensing business model drove profitability growth across our key financial metrics more than doubling initial street Q4, adjusted EBITDA expectations.
In addition, this year, we significantly strengthened our balance sheet liquidity by successfully placing 230 million of convertible bonds with only a 50 basis point coupon.
During the year, we were active in repurchasing our shares.
We repurchased 841000 IMAX shares at an average price of $16 51.
For a total of $13 9 million.
In IMAX, China repurchased six 7 million shares at an average price of U S $1 50 for a total of $10 million.
We intend to be opportunistic in repurchasing shares when we view our stock prices disconnected from the from.
From the underlying fundamentals of the business.
Let's talk about the results in detail.
Fourth quarter 2021 revenue almost doubled to 100, $608 6 million from $56 million in 2020.
And increased 86% to $255 million for the full year.
Fourth quarter, adjusted EBITDA increased to $44 million versus EBITDA of $10 million in the year ago period, and adjusted EPS substantially improved to a 31 set positive from a loss of 21 cents in comparison to the year ago period.
Full year adjusted EBITDA increased 81, 7 million to $68 6 million and adjusted EPS.
Improved to a loss of 14.
As compared to a loss of $1 89 in the year ago period.
I would also like to point out that EPS for the year was constrained by a $14 $7 million valuation allowance to reduce the value of deferred tax assets due to the pandemic, creating uncertainty regarding ultimate realization excluding.
Excluding that non cash charge earnings would have been a positive adjusted EPS of <unk> 11.
Our financial performance highlights the operating leverage demonstrated in both the quarter and for the full year.
Now, let's talk about the segments.
IMAX technology network revenue increased to $51 3 million in the fourth quarter from $17 7 million in Q4 of 2020.
This increase was largely due to the continued global reopening.
Of the company's network and a return of major Hollywood franchise titles, particularly in the U S and international markets more than tripling the box office to $277 5 million.
Q4 gross margins for this business were $36 8 million, which increased from $7 3 million in Q4 2020, largely due to the increased.
Gross box office and the fundamental operating leverage in our business model.
For the full year IMAX technology network revenue increased by 153% to $116 8 million and gross margins increased from $4 2 million to $66 5 million again, largely due to the increase in box office from $259 2 million.
2020, as compared to $638 2 million in 2021.
IMAX technology sales and maintenance revenue for the fourth quarter increased to $53 4 million.
From $36 4 million last year.
Given the strength of our business as we have already discussed we ended our temporary relief program for exhibitors in Q4.
We recognized $6 3 million of maintenance revenue, which had previously been deferred.
$3 8 million related to the first three quarters of 2021 with the remainder related to 2020.
Excluding this item maintenance revenue increased 58% to $13 8 million as our network continued to reopen.
This quarter, we installed 28, IMAX systems, 16 of which were new sale or SQL and comparison, we installed 33 IMAX systems in Q4 of last year, including 14, new sales or Stl's.
Gross margins for this business increased to $26 2 million compared to $13 6 million due to the higher maintenance revenue and more profitable sales and sdl's.
For the full year, IMAX technology sales and maintenance revenue increased 59% to $126 8 million and gross margin increased by 130% to $64 3 million. This is commensurate with the continued reopening of the network, which drove increases in system.
Sales and maintenance revenue.
For the full year, we installed 75, IMAX systems, 35 of which were new sales or stl's compared to 71 IMAX system installations in 2020, which included 27, new sale or S. Tls in.
In 2022.
We expect installations to increase over 2021 levels with seasonality similar to prior years.
Q4, SG&A, excluding stock based comp was $28 2 million in the quarter, which was at levels consistent with 2019.
SG&A, excluding stock based compensation for the full year was $93 5 million as compared to 87 8 million in the prior year, representing a 7% year over year increase.
The increase in SG&A, excluding stock based compensation was driven by increased business activity associated with the continued reopening of the company's global network and the return of Hollywood films.
We ended the quarter with $189 $7 million in cash and $234 million of debt, excluding deferred financing fees.
When combined with the $300 million available under our credit facility and the $26 million available under our IMAX, China working capital loan, we have $516 million of available liquidity.
In the fourth quarter, we spent $6 8 million on capital expenditures, including $4 7 million invested in equipment for joint revenue sharing theatres for the full year Capex was $17 8 million, including $10 1 million for joint revenue sharing theatres.
Last quarter, we talked about a turning point.
<unk> had returned in large numbers to our network studios recommitted to the exclusive theatrical release for IMAX friendly blockbusters, and we saw momentum across our business.
While this quarter, we showed what our network can do as well as blockbusters returned in earnest.
And with the 2022 slate ahead of us and the vision, we have for expanding IMAX into new forms of content into the home I have never been more optimistic about the business with that I will turn the call back to the operator.
Thank you.
And I would now like to turn the call over to Mr. Richard <unk> for some final comments before we go to Q&A.
Yes.
Thank you operator, just to add last night, we presented another concert with Kanye West, which was our most successful live event, yet broadcast from Miami to 60, IMAX theaters nationwide with a remarkable 48 sellouts, that's almost 20000 vans again our virtue.
Madison Square Garden, who purchase tickets for an event that was announced a little over 48 hours prior to Showtime given the success of our first Sir it's not surprising that kind of came back to IMAX. So quickly. We're excited that he recognizes the unique value of our technology and brand.
And can bring premier.
Live events to life.
So yet another excellent proof of concept of our strategy and with that I'll turn it back to you operator for Q&A.
Thank you.
Like to ask a question. Please signal by pressing star one on your telephone keypad and if youre using a speakerphone. Please make sure. Your mute function is turned off to about your signal to reach our equipment again that is star one for our questions.
And we will go to our first question from Eric Handler of <unk> partners.
Thank you for the question.
Rich I wonder if you could dig in a little bit.
Events.
In terms of how many events do you think you can.
Ultimately Julian here.
No.
We can put little marketing to get people more than 48 hours notice.
Maybe just talk about sort of the profit level of expense.
Thanks, Eric.
So as you know the forecast for kind of the experiential economy and the growth rates are extremely high so over the next five years as we look out on it. We think there is a very large addressable market.
IMAX right now only has 79 theaters wired, but the idea is to be aggressive in wiring and I think when you look to the longer term economics of it.
As we said in the script, it's like a Madison Square Garden now, but as you go to 200, 300, 500 theaters and you model. It out globally, we think over time it can be a significant revenue and earnings contributor.
In terms of the.
The number of events right now somewhere between.
Together, a comprehensive slate had testing different ideas. So as you know we've done most of the music. We've got some sports things I think youll see us do comedy.
Talking of certain people about whether we could put together a slate deal.
I think in our minds for now we're thinking about in the short run doing sort of a major event once a quarter at least and then doing smaller events.
Throughout the quarter.
In terms of price point.
It's highly a concert last night.
The most expensive tickets were around $30.
The other thing that's what price more in line with typical IMAX. So I think we're also going to experiment with price.
Try and learn about the elasticity, but I think there is a very large market out there I would take our technology is really unique and over time.
It can be a significant contributor to our company.
Great.
That's helpful.
More.
And so our expectations I know you said.
Is 2021.
But if you think about a normalized here.
We're looking at about 130.
Pauls.
No.
Yes.
Clinton.
2021, and 130 normalized where do you think you might fall there.
No Eric we remain optimistic about the trajectory of the installs, especially given the recent momentum we've seen at the box office our market share growth.
Coming slate.
As I mentioned on the call we expect in <unk>.
The increase over 2021 levels.
But not.
Not likely reached 2019 levels.
As you know installs are back half loaded and we will have more color on that as the year unfolds.
With fantastic Q2, slate and the process prospects for Avatar later this year.
Could be a catalyst for an installation growth.
We'll give you more color on that as the year progresses.
Fair enough. Thank you very much.
Yes.
Yeah.
And we'll go next to thanks. Operator next question. Please we will go next to Steven Cahall of Wells Fargo.
Thanks, Sam maybe first to follow up on the installations question. Just wondering if you could speak to some of those regional dynamics are you seeing that stronger in China or led by the U S or kind of a combination of both and as you get to that install level between 2021 and 2019, how do we think about.
The gross margin and the technology sales and maintenance business is there anything that would make that margin improve over prior years or or is it pretty consistent and then I've got a quick follow up on the technology business.
So I'm going to I'm going to answer the first part of the first question.
Joe will answer the.
The second part we are incredibly focused as an organization on getting our network growth back to pre pandemic levels at over the last quarter or so we've been engaging with our clients in a very detailed worldwide basis to confirm the backlog had to.
Try and get specific dates and ensure we get as many installs as we can as soon as possible and we've made a lot of progress in firming those up and again it remains a priority of ours and Joe why don't you continue on that I mean in terms of a cell installs we would expect.
Consistent margins in that business. However.
Rich mentioned in his <unk>.
Comments, we recently released the <unk> system, which has a lower cost of goods. So we should realize improved margins as that gets rolled out.
Great and then kind of a similar question on the technology business.
With kind of a record slate this year for IMAX DNA does that have any impact on gross margin at the technology business I mean, I know that when you do hire split at the box office, that's obviously going to drive higher margin, but just wondering how we should think about the IMAX DNA is kind of a leading indicator of future earnings.
Well, we have found is that films that have IMAX DNA generally over index, what they would typically do.
And as you know there is.
<unk> amount of operating leverage in that business. So.
Every incremental dollar that you can generate over and above the norm is going to drop to the bottom line. So.
It is definitely has improved the profile of that business.
Great. Thank you.
And we'll go next to Mike Hickey of the benchmark company.
Hey, rich.
Hi.
In the year.
Currency.
Yes.
Hell of a bounce back.
Couple of question on R&D.
I guess two initiatives IMAX enhanced and Dubai.
And interact and so.
One thing and the other richer.
Or I guess, the past monetization here, maybe for you or you're alive.
Curious how are you.
You look at those two and if there's any incremental.
Extents.
Going towards sort of developing those two verticals.
Yes.
And then I guess the second question would be.
The live interactive advances this sort of like fathom rich, it's sort of like.
With your exhibitor partners are doing and have done for a while she is going to be sort of exclusive.
Two.
Your network and I guess also now that you've expanded relationship with all these great partners.
Any ancillary benefits.
In terms of marketing margin thanks, guys.
So.
We wanted to do I can so first is about fathom. So we're not saying like fathom, what fathom does is take pre existing content and.
They put it through kind of a conventional distribution system IMAX is a high end complete ecosystem that intends to replicate the cinematic affect that IMAX has today in the live space. So we capture images.
With IMAX cameras, we translate them with proprietary IMAX technology, and then we have a special pipes that go into the theaters that create the highest experience possible. So we're not interested in playing conventional off the shelf technology.
We're doing is creating special events for IMAX audiences. So think about what the IMAX film business is where studios seek us out and filmmakers and talent because we provide these unique global events. That's the analogy you should think about and we're going to do.
Two large events.
You know already what the two <unk>.
No disrespect to Fathom I can't think of an event that they put together on that kind of scale and certainly with not with that kind of technology and again. If you go on our website and you look at the clip we put up you'll still see people dancing in the theaters shiny lights yelling.
I'd say its a real interactive experience in certain respects better than being at the Cod Sir.
In terms of which.
As more.
More potential live or enhance.
I hate to choose between our children.
That's generally not a good place to be but I do think given the growth inexpert experiential entertainment as a market that <unk> has larger potential over the next number of years now with enhanced says you know we went on Disney plus.
And I talked a little about this during my comments, but on the market research. We've done was extraordinarily positive things like churn and retention rates and willingness to pay a premium we're really very promising.
We've had other enquiries that were working on those.
We've got more seeking partners there so I'm optimistic about that also.
In terms of marketing.
Do you want to take that Megan how it's going to affect the brand and the marketing overall sure I mean, I think what we're talking about really fundamentally is creating tools that our antenna solutions for creators. It's what we fundamentally have always done.
When we're talking about.
Blockbuster films were giving filmmakers proprietary tools that create the best that they can possibly make and now that we're expanding into the live space for working with an expanded suite.
Creators and we're working with.
And lift.
Partners, whether we're talking about in some cases streamers in some cases, we're talking about.
Tech companies that are doing gaming, we're talking about and music companies are talking about an enhanced.
Content providers that we're giving them the opportunity to work with the highest level.
Creator tool and on the back end when you were talking about enhanced youre talking about.
So leasing for and ancillary home for the materials were the very best way for the content they have ultimately.
In an enhanced way in streaming or on Vod with a proprietary technology that gives you an exceptional way to experience. So ultimately what we do is surface fans with excellent technology and that's what we're doing doing is extending that.
And brand recognition throughout an ecosystem.
Thanks, guys.
Thank you.
Thank you we'll move to our next question from Chad Beynon of Macquarie.
Hi, Good afternoon, nice results and thanks for taking my question.
Regarding China, we can obviously see the <unk>.
Q4 results and you.
Press release, the Chinese new year results, but can you provide a little bit more color just in terms of where the market is understanding that it's a very large market with different things going on.
Obviously in the U S indoor masks.
Mandates are being lifted.
As China close to that and.
What did you see after Chinese new year or was it kind of a return to prior restrictions or has that been relatively east. Thanks.
So as you know China is a country that is more tightly managed COVID-19 than any other one in the world in terms of contact tracing in terms of.
Lack of ability to travel outside the country and I don't have a great visibility into that but.
But I can tell you that for the last two years, China has been the biggest box office in the world and.
For the right movies Chinese audiences really wanted to come out and also for the second year in a row on the biggest movie of Chinese New years was filmed with IMAX cameras. This year, the big movie Battle of like Gen. Two.
<unk> about 6%.
With IMAX, which was higher than our historic indexing. So I think like other places in the world.
People are selling of demand.
Our IMAX.
In terms of the films slate for the year Theres a lot of local language films that were very involved in and including using our cameras, including Mozart in space.
The question is how many Hollywood movies get in and again, we don't know the answer to that but recently there have been some optimistic signs.
Batman.
<unk>, which is a highly anticipated movie.
That we've seen and we're really enthusiastic about got in about a month in advance. So there is.
This time to market it right and time to do other things, but I think in China. The issue is less a mask wearing thing because people are used to wearing mask and they're used to the pack.
Tracing and more of the quality of movies that come out and as I say, some encouraging signs on the Hollywood side, and there's a pretty decent slate of local language films.
Thanks, Rich and then Joe just.
Modeling question regarding the $6 3 million of recognized deferred maintenance in the quarter.
Is there still deferred maintenance opportunities that could fall into the first half from a recognition standpoint.
And then just any other color in terms of if the maintenance.
Stream should start to.
<unk> be a little bit more normalized here. Thanks.
I think I think we're at the point where our.
Maintenance stream.
After this quarter will be normalized.
If you look at the numbers and the breakout only two and a half million was out of the year.
Meaning it related back to 2020, so if you take $3 8 million of the number.
Got it.
That gives you a normalized year for 2021 as well.
So on some of the discounts we gave earlier in the year.
But I think as of this point we are.
On a normalized level.
Perfect. Thank you very much I appreciate it.
And we'll go to our next question from Mike <unk> of Goldman Sachs.
Hey, good afternoon. Thank you very much for the question.
I just had one.
On installs could you just talk a little bit about the nature of the installations.
In the quarter, what geographies, where they primarily in.
And would you just talk a little bit more about the footnote about.
Theater system relocations.
What would what would drive that from an exhibitor standpoint.
What happens from an economic standpoint, when that occurs thank you.
Yes.
In the quarter.
A big chunk of the installs were in China.
I don't have the exact breakout with me right here and in terms of the relocations. What you have in many cases as an upgrade of an existing system.
And then movement of a system to a new location. So ultimately it's a net add for the company.
In those cases in many cases, we are in a very nice margin from those relocations.
Great. Thank you Joe.
And also I was wondering if I could ask about the programming slate for the first half of the year would.
Would you mind, just running through some of the key films and maybe talk about some of the films that you're particularly excited about thank you.
Alright.
Lee is.
Rick.
Exceptional movies, and we have a number of movies that were shot with our cameras that can create.
<unk>, Marvel movies, and creating and Doctor Strange and store, which we are in the first half of it.
First half of the air we have and top gun, which is in the first half of the year.
As we have that.
Light year, which has $1 three aspect ratio.
That's how we got camera animated by the $1 three aspect ratio.
We have.
Jurassic World.
Yeah, Batman, which we know I'm tracking and is looking to be a rather large maybe coming out with that.
Exclusive IMAX showed the IMT day March 1st.
It is expected to be.
Very big movie has three weeks in IMAX.
And we have fantastic Beast, which we're very excited about for mourners and ink Inc.
Really strong slate throughout the year and Theres basically once you get into March.
Very consistent play.
Alan.
Our slate of films that.
Does it really let up throughout the year Nope also in July .
Okay.
Cleanup the ear shot with IMAX film cameras, and Jordan Peele.
Really great slate of movies.
Great. Thank you very much.
And our next question from Steven Frankel of Colliers.
Thanks, Good afternoon I wanted to go back to this notion of <unk>.
Celebration and the install rate.
Yes.
How much of that.
Is coming from things that are already in the backlog is firming.
Permitting up date versus the notion that we talked about a couple of quarters ago that given the film slate.
C exhibitors kind of have a rush to get more IMAX screens up ahead of what's going to be obviously, a huge year at the box office, especially in the back half.
Well those are really post the answers to the questions.
We're seeing an acceleration in the backlog I think partly because the films slate is so good this year.
If you are asking is it coming from signings of new installs.
Early for that given that the.
Amit problem in L. A we're still wearing masks here, but the level of our business activity in terms of new signings has certainly picked up in light of the film slate and I think.
You will see some sign and installs take place this year, so you'll see both.
Okay great.
And then on the filling out the live network.
Is that a material amount of capex.
We would see over the next couple of years as you scale that out and are the economics to you any materially different on a live event versus the typical blockbuster.
So no it's not a material amount of Capex, you won't see a big spike because of that and the second part of your question. The economics are different than a blockbuster.
But on a project by project basis, they may be better or they may be worse. So if we're just doing a distribution kind of thing I think there'll be similar to what you've seen in a blockbuster but.
There were.
Helping on the production end, where we're renting cameras, where we're involved in the design of it I think youll see better economics.
And is there a second.
Revenue stream, a kin to DMR on something where youre involved like that.
Yeah I mean.
There could be for sure I mean, and there is another there is another part of the model. We did it we did make bad with 824 at Apple and that was a four wall deal where they pay direct all our theaters.
We expect to be doing more of that to it'll vary from project to project.
We'll we'll budget everything to be profitable, but one thing you have to realize is we have 79 theaters right now so on a pro forma basis.
It will become more and more profitable as we build out the connected network and we're going to try and do that as rapidly as possible.
Steve a perfect Apple.
A perfect example is the Beatles, where we had we did a large performance generated $4 to 500000.
One night and then we took that we showed it in IMAX theaters 400 level and special screenings, and we earned $2 2 million of incremental box office from those screenings on otherwise.
Dead time on at the theater level.
That's great. Thank you.
Okay.
And with no other questions in the queue I would now like to turn the call back over to Richard Calvin for any additional or closing remarks.
Thank you operator, I'd, just like to say that.
The whole IMAX organization.
Couldnt be more excited about where we've been coming from recently and where we're headed of the fourth quarter was one of our best quarters in the history of IMAX.
We when you look at where consensus was not only now but a month ago. We just blew it away at almost every matrix along the way so our financial performance our.
Our balance sheet is incredibly strong we have virtually no debt and over $500 million and liquidity and in the last.
And a half we've done live activations with Steven Steven Spielberg the Beatles.
<unk> West.
Apple Amazon.
It's just an incredible period of time in IMAX.
We look forward to getting back to you with updates on all of these things and thank you for joining us.
Okay.
And so ladies and gentlemen.
This concludes today's call. Thank you for your participation you may now disconnect.
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