Q1 2022 Imax Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the IMAX Corporation first quarter 2022 earnings conference call.
Today's conference is being recorded at this time I would like to turn the conference over to have that Anthony of IMAX. Please go ahead ma'am.
Thank you operator, good afternoon, everyone and thank you for joining us on today's first quarter conference call on the call today to review the financial results are rich Gilbert our Chief Executive Officer, and Jos <unk>, Our interim Chief Financial Officer, Megan Colligan, President of IMAX Entertainment, Tortious, Fernandez, Chief Financial Officer and Rob.
Mr. Chief Legal officer are also joining us today.
Today's conference call is being webcast in its entirety on our website.
Replay of the webcast will be made available shortly after the call. In addition, the full text of our first quarter earnings press release, and the slide presentation have been posted on the Investor Relations section of our website at the conclusion of this call are historical and sell a lot of it will also be posted to the website I'd like to remind you. The following information regarding forward.
These statements.
Today's call as well as the accompanying slide presentation may include statements that are forward looking and that they pertain to future results or outcomes.
These statements are subject to risks and uncertainties that could cause actual future results or occurrences to differ.
Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and 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 maybe made to certain non-GAAP financial measures discussion of management's use of these measures and the definition of these measures as well as the reconciliation to non-GAAP financial measures, including adjusted net loss adjusted EPS and adjusted EBITDA as defined by our credit facility are contained in this afternoons.
Press release and in our earnings materials, which are available on the Investor Relations page of our website IMAX dot com with that let me now I'll turn the call over to Richard Alpine Rich. Thanks, Heather and good afternoon, everyone. Thank you for joining us.
We reported our first quarter results today on the Eve of a remarkable blockbuster season kicks off next week for the quarter, we exceeded consensus estimates across nearly all key metrics, including total revenue gross margin adjusted EBITDA and global box office.
And we drove strong double digit growth in total revenue.
Gross margin and adjusted EBITDA over the first quarter of 2021.
Our results demonstrate the solid financial momentum we've established over the last six quarters and our ability to consistently deliver improved results in a highly dynamic marketplace.
Next week, they gives a formidable slate a long awaited titles that stretches across the next two years and represents the most bankable franchises filmmakers and stars in the world.
We're also seeing the pace of deal activity begin to pick up including recently completed agreements in growth markets, such as Japan, and Thailand, How would you expect that to continue in the months ahead.
And we continue to work with all our major partners to map out the rollout of new or refurbished theaters, including recently completed successful agreements with AMC Cineworld Regal Pat de P V R and C. G V.
As a result, we see a strong opportunity to build on our momentum.
And deliver value for our shareholders.
As a premier global technology platform for entertainment and events. Our focus for 2022 is to expand our business beyond blockbusters and deliver new unique events and experiences to audiences globally by putting our technology in the hands of new creative.
And platform partners and becoming the destination for fandom of all kinds.
But immersive blockbuster filmmaking will always be the straw that stirs the drink, Brian Max and the blockbuster pipeline represents a significant opportunity.
To further drive box office revenue and capture market share and fuel the continued expansion of our business across live and interactive events and into the home.
As the slate takes off it's notable that streaming services face intensifying competitive pressures are renewed questions around the economic model for.
But in the streaming business, which could provide a tailwind for theatrical releases.
Yeah.
We've long held that as the virus is brought under control and people felt increasingly save consumers would be drawn back to communal out of home entertainment experiences. We're seeing evidence of this accrual across all aspects of life for people.
Returning to gyms to concerts, and sporting events to airlines and hotels reporting record breaking trends.
And recent consumer trends reaffirm reaffirm the irreplaceable value of a theatrical release how partners at the studios and streamers have told US unequivocally the theatrical window is pivotal to their strategic plans going forward.
And that content that benefits from a theatrical launch platform.
Four is far better on streaming.
And drives greater value throughout the chain. Most recently evidenced by the strong performance of Spider Man No way home and the ban on digital platforms. This creates potential opportunities for IMAX from streaming services using the IMAX global network to launch Tentpole.
Hi, P. Two additional streamers adopting IMAX enhanced technology as a competitive differentiator today I'd like to discuss our outlook for the 22 content slate and how it creates opportunities across our business.
How we're meeting the growing demand for IMAX technology, among filmmakers creators exhibitors and our fans and of course, our results for the first quarter.
Okay.
The first quarter prove that there is strong pent up demand for immersive cinematic spectacles spiderman has grossed more than $110 million in IMAX to date ranking as our eighth biggest title of all time.
The Batman exceeded expectations generating more than $54 million in the IMAX network. The Batman. Its total North American box office performance was on par with any other top grossing Q1 title of the last decade.
And with our events live strategy, we demonstrated that older audiences are ready to return to theaters for the right experiences with our successful launch of the Beatles get back with Disney plus which began as a limited one week IMAX exclusive engagement months. After it was really.
<unk> on the Disney plus streaming platform and went on to gross $2.5 million and a few IMAX theaters on the heels of this success comes a strong consistent flow of highly anticipated releases.
And more than ever. These films include IMAX DNA Hasnt been shot with our cameras or created to include IMAX exclusive expanded aspect ratio.
They leverage the powerful IMAX platform in new and creative ways to launch further demonstrating our ability to create global events.
It includes next weekend Doctor Strange sequel, which builds directly a spider man no way home and is driving strong pre sales globally.
Doctor Strange as a clean multi week run on the IMAX network before the arrival of top gun Maverick yet another film for IMAX release.
Paramount just hosted our first look screening of top gun at cinema Khan and the early reviews are absolutely phenomenal in fact, the audience was saying that the N play it again ive seen it in its phenomenal backed by a strong emotional story and some of the most stunning Ariel.
CAGR fee ever committed to film.
Following top gun as Jurassic World Dominion a franchise that has been very successful for IMAX over the years. We're also planning a live connected theater launch event for the film.
Pixar is light here, which was very well received at cinema Con that makes pioneering use of IMAX technology for animation.
The next installment of Thor, which was shot with IMAX cameras, and Jordan Peele, Nope, which was shot with IMAX film cameras I won't make never before seen use of our technology and his innovative storytelling.
On the heels of the summer fall. It has a number of highly anticipated releases, including Marvel's Black Panther sequel, and D. CS Black Adam and we continue to eagerly look forward to the December release of the Avatar.
Habits are the way of water. The first of four planned avatar sequels, given our history with this franchise and its alignment with our brand.
Disney provided exclusive first look at the new film at the Cinema Khan yesterday, and it looks incredible the studio will also attached.
Theatrical exclusive teaser trailer to Doctor Strange the original Avatar still stands as the highest grossing IMAX release of all time with more than $250 million in box office. Despite an initial footprint of less than 300 IMAX screens.
Okay.
And that's just the Hollywood slate, we continue to grow and diversify our local language slate building on a record breaking world local language box office of 2021.
In fact, we program seven local language titles worldwide in Q1, our most ever in the first quarter during the quarter. We saw strong box office performance for the China's battles like Tianjin to to India's RR to Japan.
Has jujitsu Kaiser.
Local language blockbusters.
Delivering for IMAX fans not only in their home countries, but around the world in particular Japanese anime is helping to drive network, leading PSA has in Japan. In fact, eight of our top 15 theaters worldwide in 'twenty, 'twenty, one where in Japan and strong performance.
In the U S and other key markets. This summer's blockbuster slate provides an excellent opportunity to advance our IMAX three point O strategy and evolve our global platform for events and experiences out of home and in the home.
We continue to test our connected network of theaters to create live and interactive events around our biggest releases.
As I mentioned, we're planning a live interactive fan of that around the release of Jurassic World Dominion and at this week's cinema Con we shared a number of upcoming live events and our network, including performances from a diverse range of acts, including Pink Floyd legend Roger waters.
<unk> had a partnership with I heart radio on dice Decembers iconic jingle ball concert.
The 2022 slate offers a significant opportunity to expand our IMAX enhanced initiative as well our goal is to expand the footprint of enhanced further across drilling platforms and high end devices given how much technology is featured throughout Disney slate.
For the year, we see a strong opportunity to expand our marquee IMAX enhanced partnership with Disney plus we're also leveraging our blockbuster slate to reignite, our IMAX documentary strategy.
Our newest project the Blue Angels shares DNA and strategic synergy with top gun frontier ambitious way it will use our cameras to our collaboration with producer Glen Paul One of the stars are top gun Maverick.
Blue Angels is also the first documentary project for our longstanding partners at J J Abrams is bad robot deepening our partnership with one of the most successful film makers in the World. We're excited about bringing a new generation of narrative driven modern IMAX dock.
You mentioned is to our network and see this as a viable business opportunity whether its expanded distribution beyond institutional theaters.
And into commercial locations or a strategic focus of distribution rights for IMAX dogs across streaming services, where we believe there are strong licensing opportunities.
The 2022 slate is proof positive that IMAX technology isn't growing demand among the world's best content creators and global audiences at least 10 blockbusters scheduled for 2022 will feature IMAX DNA.
And we continue to evolve and grow the IMAX global platform to meet that demand Denise bilodeau swept the technical Oscar categories with June a groundbreaking film created with IMAX digital cameras.
Tom cruise strapped digital cameras.
18, Super Hornets to create aerial combat scenes, the likes of which the world has never seen for top gun Maverick.
Of course, James Cameron is poised to blow the collective minds of moviegoers around the world with the new Avatar. We believe that the next several years are set to demonstrate that we are in a creative and technological Renaissance for immersive big screen filmmaking.
And fierce competition for who can deliver experiences that fans have never seen before anywhere IMAX technology is the key to this as a result, we are building and developing a new fleet of state of the art IMAX film cameras working in partnership with filmmaker.
Like Chris Nolan, Jordan Peele had cinematographer Hoyt Vanhoy Dumas, we're currently mapping out specs for the new cameras and we plan to put them into production later this year for use in 2023, the use of our cameras and the way that infuses IMAX DNA.
And exclusive elements into films is a strong driver over a box office and positions us to continue to take market share.
Last weekend, we hosted more than two dozen exhibitions Ceos from around the world at our annual CEO for for a three day program, where we give them access to leaders from across the studios and streamers as well as talented creators from <unk>.
Hollywood and the international filmmaking community.
And there was a consensus among attendees that blockbuster content will be even more important part of the ecosystem moving forward and that the need for studios and streamers to create global launch events around blockbuster releases will benefit theatrical and in particular IMAX.
Returning to our results for the quarter. The first quarter was light as projected on new releases globally. Despite this IMAX drove solid financial results in the quarter exceeding nearly all consensus estimates and driving year over year improvement.
Several key matrix total revenue gross margin and adjusted EBITDA, all showed strong double digit growth over the first quarter of 2021 .
And importantly, we continued to drive strong market share gains capturing a record four 7% of the domestic box office in the first quarter compared to our 4.4% of our full year share for 2021 and then.
3% market share we captured in the first quarter of a record breaking year 2019.
We continue to demonstrate confidence in our strategy and the results by being opportunistic with share repurchases, which accelerated under our plan in the current quarter for a total of approximately one 3 million shares repurchased year to date.
And China box office was also a bit softer than anticipated due to rolling closures of certain markets given the resurgence of Covid, we have implemented cost reductions in the market where appropriate and we are cautiously optimistic around the continued reopening of impacted market.
In China in fact, 65% of our theaters are now open in China up from 52% as of March 31.
Our 2007 theaters in Shenzhen have nearly all reopen our dead serious.
Jim Xi'an, Qingdao and Hong Kong have also reopened in the past 10 days. We're also encouraged that an increasing number of Hollywood titles are securing releases in China, including the Batman Fantastic Beast.
<unk> and Jurassic World and conclusion IMAX is poised to accelerate its momentum at the box office and the evolution of its business with a strong film slate launching next week and we will continue to drive our current momentum in new theater signings as well as well we are the premier.
Global platform for blockbuster content and in my 28 years with the company. This is one of the best blockbuster slate I've ever seen it provides an excellent opportunity to accelerate our financial momentum and further our transformation and took very near global technology platform for <unk>.
Attainment and events. Thanks again to all of you for joining us today.
I want to conclude by thanking Joe's Brasil for his excellent work and serving as our interim CFO and welcome Natascha Fernandez, who we announced last week as our new CFO Natasha's, a phenomenal homegrown talent more than 15 years of experience here at IMAX.
She knows our business inside out and I'm confident we will grow our strong financial position, while fueling new business opportunities under her leadership with that I'll turn it over to Joe. Thanks, Rich and good afternoon, everyone. We are pleased to report our first quarter results, which demonstrated once again.
That IMAX is the place to experience the biggest most compelling content.
As we look ahead to the remainder of 'twenty two.
And then to 'twenty three we couldnt be more excited about what's on deck.
So let's talk about the results in detail IMAX again demonstrated a differentiated financial model as an asset light business with low fixed cost minimal ongoing capex requirements and high incremental margins first quarter of 2022 total revenue was $60 million an increase.
A 55% compared to the $38 8 million in the first quarter of 2021.
Gross margins increased 84% to $31 8 million from $17 3 million last year.
First quarter, adjusted EBITDA increased substantially to $14 8 million versus adjusted EBITDA of $2 8 million in the year ago period.
As noted in our press release, we recorded a net noncash provision of $6 9 million or <unk> 12 per share driven by the uncertainty of collecting receivables and Russia.
This derision, which covers substantially all of our receivable exposure in the market was taken as an exercise of caution given the ongoing conflict in the Ukraine.
It should be noted that there are no joint venture sharing arrangements in the Russian market.
And the receivables primarily relate to the remaining terms of the existing long term sell as T L agreements, which averaged seven years.
It is difficult to predict how events will develop in the next few months, let alone the longer term future.
This has resulted in an adjusted net loss of <unk> 14 per share significantly reduced from a loss of 25 cents per share in last year's first quarter.
Excluding this noncash provision.
Adjusted EPS would've been a loss of two cents per share.
By way of reference over the past five years, Russia has represented on average approximately 3% of our annual box office.
IMAX technology revenue increased 59% to $32 2 million in the first quarter from $20 3 million in Q1 of 2021.
As rich mentioned this increase was largely due to the strength of blockbuster titles.
Such as the Batman Spiderman, no way home and the Chinese new year title the valve of late change and two gross box office for the quarter was $173 2 million or 57% increase from the first quarter of 2021.
Q1 gross margin for this business was $19 8 million a 95% increase from gross profit of $10 1 million last year.
Our margin rate of 61, 3% was 1100 40 basis points increase compared to the 49, 9% in the first quarter of 2021, once again illustrating the operating leverage inherent in the business model.
IMAX technology sales and maintenance revenue for the first quarter increased 48% to $25 2 million compared to $17 million in last year's first quarter.
During the quarter, we installed 14, new IMAX systems, four of which were new sales or S. Tls in comparison, we installed 12 IMAX systems in Q1 of last year, including two new sales arrest T cells.
Gross margins for this business increased to $12 2 million compared to $7 1 million, which was driven by substantially higher maintenance revenue and an increase in the number of new cell stl's installations versus the year ago period.
As mentioned on our February call. We continue to expect installation activity to increase over 2021 levels with seasonality similar to previous years, meaning increased activity in the second half.
Please note that there are no installs in Russia targeted for 2022.
Q1, SG&A, excluding stock based compensation was $24 5 million in the quarter relatively consistent with 2019 levels and higher than 2021 levels of $23 million.
The year over year increase was primarily driven by the expense associated with full staffing complements as compared to a reduced workforce last year.
We expect full year SG&A, excluding stock based compensation to be consistent with 2019 levels with modest growth.
Capitalizing on what we viewed as an undervalued stock price, we repurchased 380000 IMAX shares at an average price of $16 45 for a total of $6 3 million during the quarter.
Subsequent to Q1 through yesterday under our <unk> one plan. The company has repurchased 869000 shares at an average price of $16 42 for a total of $14 3 million.
IMAX, China repurchased one 5 million shares at an average price of $1 26 U S.
Per share for a total of $1 8 million.
Intend to continue to be optimistic and repurchasing shares when we view our stock price is disconnected from the underlying fundamentals of the business.
We ended the quarter with $162 3 million in cash and $234 million of debt, excluding deferred financing fees.
In March we amended and extended our revolving credit facilities on substantially similar terms.
The new facility doubles, the amount allowed to be invested in share buybacks in comparison to 2021 levels. The new maturity date is March 2027.
When combined with the $300 million available under our credit facility and $26 3 million available under our IMAX, China working capital loan, we have $488 6 million of available liquidity.
In the first quarter, we spent $5 9 million on capital expenditures, including $4 6 million invested in equipment for joint revenue sharing agreements.
This quarter further demonstrated our fans seek out the IMAX to experience the content they are passionate about.
With the exceptional 2022, and 2023 slates ahead of us and the vision, we have for expanding IMAX into new forms of content and into the home.
I'm incredibly optimistic about the business.
I've enjoyed helping the IMAX team over the past year as interim CFO and believe the table is set for continued growth and expansion.
I'm delighted to hand, the reins over to Natasha Fernandez, our new CFO I've had the pleasure of working with the tauscher for almost 10 years.
More recently, Natasha distinguished herself and spearheading a number of forward thinking successful moves to strengthen the company's balance sheet and provide maximum flexibility in navigating the pandemic.
Her deep understanding of IMAX passion for the business and diligence will serve the business well during this exciting time.
I look forward to seeing all of the good things to come with that I will turn the call back over to the operator for Q&A.
Thank you, ladies and gentlemen, if you would like to ask a question. Please see now by pressing star one on your telephone keypad.
Using a speaker phone. Please make sure your mute function is turned off to allow your season to reach our equipment.
Again press Star one to ask a question.
Our first question from Eric Wold with B Riley screen space.
Thank you.
Afternoon, everyone.
Yes.
First off rich maybe.
You talked a little bit about China, and kind of what you're seeing there in terms of the reopening of the theaters.
So far since the end of March maybe give us a sense of your thoughts on.
How quickly we could see visitation levels ramped back up once those does reopen.
With what the slate looks like and then.
Give them away.
We see with China recently in terms of limited.
Hollywood approvals for the country. When do you expect China to get back to kind of green lighting more towards the upper limit of what is allowed in each year.
So obviously.
Eric its hard to be precise and exactly how quickly they'll reopen but as I said in my remarks. It went from around 50% at the end of March to around 65% now and I noted a number of cities that have recently reopened.
Our team at IMAX, China, and again, let's be clear, they're not epidemiologists, but they think that Shang.
Shanghai is going to open in the next couple of weeks pretty much so.
I ask a lot of people so.
There's no one uniform answer, but if you remember even in the U S. Omnicom came through pretty quickly and then it moved on.
So I don't think there's going to be a long term issue there.
In terms of audience as reactions, we do have a few data points. We have the first data point is when the pandemic lifted off in China, and I guess 2020 and people return really quickly there and.
Judging by and other times. It shot every turn quickly so that would be my best guess and in fact in the last each of the last two years I believe that the highest grossing films in the world during those years, where Chinese blockbusters and by the way as an aside on their own.
Each shot with IMAX cameras.
So I feel pretty good about that in terms of movies.
Getting and Theres been a lot more or getting in.
This year than it was last year for a variety of reasons.
As I mentioned in my remarks, it hasnt been dated yet, but Jurassic World got in which is historically a film that does very well in China, given Jim Cameron's relationship.
China, and how well that movie did I'd be shocked if it didn't get it and then those are two of the biggest films of the year. So again, while it's very hard to pinpoint the trajectory I do thing throughout the year, you're going to see a fairly rapid return to normalcy.
The other thing I want to just remind the listeners, which you know well if that IMAX is an asset light business model and for other businesses. Although it takes a long time financially to ramp up after some kind of return are people in large numbers with IMAX had happened extremely quickly.
As you'll see through our financial results.
Typically in the fourth quarter of 2021 house, how about how quickly it fell to the bottom line. So we're still in the middle of the situation, which you can pin down.
But speaking a lot Cara team on the ground in China I think their expectation is that it's going to turn.
Faster than most people think.
Perfect and then just one quick one quick additional question I guess on the on our non theatrical business or in the live events and concerts.
What are your updated thoughts now you're kind of working on this a little bit in terms of how fast you can get up to scale on that with whatever you think the maximum number of cheaters are globally with the necessary technology and then what.
What would be your mind or the maximum number of events, we could see under that model without impacting traditional theatrical runways.
Well in terms of scale, we've been working really hard with our partner at Verizon as well.
International territories with the local telcos and.
I don't want to give specific numbers, because there's lots of variables like building permits and things like that but I do think youre going to see us scale up fairly rapidly towards the end of this year and then going forward after that how do we put a lot of resource and to making that happen.
In terms of on a global basis.
And in terms of the number of events in a year I think we could see a period of time. When you know when you compare all of the events, which includes launches of films with a Q&A in Cas and directors around music events. The other kinds of adds sport sports event.
As things, we Havent talked talked about yet.
I think it's it's it's kind of easy to see a time, where we could do at least 25 a year.
Perfect. Thanks rich.
We take our next question from Eric Handler with <unk> partners.
Good afternoon, and thanks for the question.
It does seem like you're having some good success.
On a relative basis with.
Your local language titles that you released recently in India, Japan.
I wonder how many non China local language titles, you have sort of queued up for 2022 at this point.
So I'm going to turn it over to Megan in a moment, but as I mentioned in the remarks, we did two in India already both of which before pretty well we did one in France.
Based on the fire at Notre Dame directed by Jon Jacques are nowhere, we had very good indexing for for national release on a small footprint.
And as I said, we had seven in the quarter Megan this year, what other countries and how many do you think.
Yes, we do.
We still have a couple in China right.
That's the lion's share of local language.
For this year.
<unk>.
Right.
This is an ongoing program.
We have five picture Yale with telco in Japan.
And it really does.
Pictures are still to come.
That is something that we are continuing to work on and we will continue to be.
And investing in.
Trading to be incredibly successful.
Okay, and then rich I know, it's a it's Eric sorry, sorry to interrupt but someone just gave me a note that there are two to three more in India schedule for this year.
Oh great.
I was going to say I know, it's barely been 24 hours, but.
Given the very positive reaction to.
What we've shown yesterday as cinema Khan with with Avatar, two I wonder.
Is that starting to.
Generate some more conversations about exhibitors trying to move more quickly to.
Get installs in place.
So.
You know, Eric I've been back and I left L. A I love Las Vegas yesterday to get here in L. A to do the earnings side wasn't really in the middle of talking exhibitors, but to me the the mood among exhibitors was actually quite good and as I mentioned earlier in the call.
There does seem to be increased activity and momentum around signings has you know for avatar won a lot of people called installs.
Lord.
It's too soon to comment on that but I mean, just the slate is so killer.
Again, I want to say this again I said it before but we have a doctor strange with the avatar trailer opening at a week then you got the top gun, which as I said I've seen it's crazy good and that's just going to be that's going to be part of the discussion now that it's been seen had collyn Trevor O <unk>.
Look at our C. L Forum, a lot about Jurassic world.
I think is also going to be.
On a par with previous Jurassic World.
Blockbusters may be better so I don't think its going to be a matter of people sitting around and saying you know what's the date avatar is going to come back, but we're just coming off of first quarter that was light on films and I think it's kind of the murderer's row of our lineup for the rest of the year going into avatar, So can't predict.
It now, but certainly there's never a better incentive than this film slate to get people to think about that.
Great. Thank you very much.
We'll take our next question from Chad Beynon with Macquarie.
Hi, good afternoon, Thanks, and best of luck, Joe and congrats Natasha.
Was wondering if you could talk a little bit more about some of these market share numbers that you have in your slide deck I understand that.
The call or the quantity of product is not where it will be in in a couple quarter.
Quarters here as some of the more midrange movies come out, but I was wondering just based on what's going on with the consumer particularly in the U S. Do you expect that as we come out of this your market share, particularly in the U S could be higher it seems like you know the U S consumer, particularly with with feeder is.
Has really moved more towards the luxury and premium ads. Thanks.
Yeah, I mean, you've seen some of that with the Batman.
When it came out hence the fact that things have come out and as far as way means that everybody is playing the same movie there are a lot of lots of.
Screens much more than they would've been previously so I do think as this competitive movies coming out in the marketplace and.
There are smaller movies coming out just as a matter of math you should see the trend you described the move to premium in general in IMAX, specifically I do think that will continue and again, while we're at Sina Com two days ago, we were reminded Danny Villa news.
Talk about the success of doing and I want to remind everyone. We did 25% of the box office and do it on less than 1% of the screens. So I mean, there are incredibly positive trends for Batman was a very big kind of screen film and introduce a lots of screens and we did 12.
Present, the opening weekend, so yes, and you know when you see some of the teams films I just referred to.
A doctor strange filmed with IMAX cameras top gun filmed with IMAX cameras.
Many of the nope filmed with IMAX cameras, typically we over index over market share when our cameras are being used and this year, It's 10 times so.
Take the global trend plus our DNA in the movies.
I feel good about that.
Thanks, Rich and then just wanted to ask about the back half loaded comment expectations for new installs I feel like you guys have talked about this for years.
Makes sense and kind of a normal year, but.
Just given the slate why wouldn't some.
Some of your exhibitor partners want to.
Install youre projectors ahead of that is this more of a product of where China is in a recovery or is it you know again, just kind of the normal seasonality. Thanks.
There is normal seasonality, but hopefully when we estimate for calls like this we look at historic patterns in past years, and that's the pattern. So I'm not going to predict that the pattern changes I hope the pattern changes.
But.
Again, particularly this year.
There's just so much going on all year I think also.
We are well you guys on the outside as analysts.
About a one way, but you got to remember in the real World. The first quarter was a pretty limited film slate and I just don't think.
The day that top gun opens there are going to say, let's accelerate installs and then the final point would be that some of these are new buildings and some of these I've refurbish Seaton and some of them. There are construction issues aside a theoretical thing so its not like the cavalry is waiting.
In the lobby and there are good results out of movie and they say, let's go in there guys that led to accelerated hopefully that happens, but I just think it's a hard one to predict.
I appreciate the extra color. Thanks.
Thanks, Hi, I'm glad you did I wasn't sure it went over so well so thanks.
Moving forward to Steven's Chahal with Wells Fargo.
Yes first I was just wondering if you could dig a bit deeper into the way you've talked about the install guidance for the year and I would guess at this early stage.
Some of the challenges or just that the lockdowns in China persisted, a little longer as well as maybe some rollover into eastern parts of Europe from the events there, but then the films.
Are performing really well in all the ways that you've talked about so.
Since you gave the last install guidance do you feel better about it is there any narrowing that we can think of to try to figure out why they might land.
That's the first one and then my second question is just on share repurchases I think your valuation multiple is like back to pandemic levels I'm, just how curious curious how aggressively you're looking at getting into the market and do you have such a strong balance sheet. Thank you.
So on install we haven't given specific guidance. We said, we expect to increase installs over 2021 levels, but not reach 2019 levels and I think what I know now would indicate that that's still accurate and I don't think there's been enough movement.
In the first quarter for us to have a different point of view on that I think we stick by that point of view and we'll have more color as the year unfolds.
The other thing I would say is just.
When when Heather came into her new role she reminded me of something I mean.
If we do $50000 in extra PSA that equals 10 installed.
T L installs in the year, so I mean.
Internally anyway, we obviously focus on what our projected results are for the year and how we think we can deliver I keep saying I think there's going to be a really strong year, but whether that comes through psa's or through installs are specifically, where it is it's just too early in the year.
Further narrow that down.
The second question about repurchases. So before we went into the blackout period and this year it was a fairly.
Large blackout period, because the fourth quarter was reported late in the year. This is the shortest time, we put in place a <unk> five one plan that put in certain purchases at prescribed levels. During this window, the blackout window, especially over the last set.
It'll weeks I think we have been as aggressive as we can be and share repurchases.
Every day I look at the stock price and I kind of at one level of appeal.
Disappointed about what we delivered in the fourth quarter and where we are in the industry and where we are in the recovery is it reflected in I lie if I said I didn't it didn't disappoint me on the other hand, the other side of me says, let's gobble up whatever we can as quickly as we can and we've been doing that Steve.
Great. Thank you.
Let me take over next question from Debbie Karnofsky with J P. Morgan.
Alright. Thank you rich you touched upon it a bit in your prepared remarks that you could just come from cinema economy deal for them. So I feel like I have to ask for any additional thoughts you have on how studios or looking at theatrical.
Does seem like with streaming growth slowing and that the pendulum is swinging back a bit in favor of film windows. So any view into the conversations you've been having with Hmm I.
I appreciate it.
Yes, I think for blockbuster films of the types of things that IMAX shows.
It's all theatrical for the studios I don't think you will see a hybrid model or a streaming model for any blockbuster film for 2022 .
Probably beyond I didn't hear one person.
And that and besides in those places over the last few weeks are Megan and I had meetings with virtually all of the studios and L. A it at high levels of those studios and I think that that the studios realize that that's a model that didn't really work and that.
Part of what I said during my script was forget about the whole financial model just look at the streaming model they said that.
Releases that had a theatrical window and then went to streaming did better on streaming.
And that's been two or three studios told me that empirically. So I just don't see how.
In light of that data and they go they go back to their their experiments, which didn't work in 2021 and the other thing I would say is and I mentioned this briefly in my remarks.
We also meet a lot with the streamers and I think given.
The demographic changes and the growth in subscribers and rich.
Tension in all of those things I would not be surprised as a matter of fact I would predict that some of the streamers start to go to theatrical windows for some of their bigger films. So I think.
It was kind of an existential threat hanging over.
The movie business for a long time that <unk>.
Given their chance, they're going to move it to streaming while they had their chance during an existential threat to the whole business and I call. It the biggest stress tests you ever could've design and it didn't work. So I just think that's an experiment that's over.
Yes.
Okay. Thank you for the color.
We'll take our next question from Mike Hickey with benchmark company.
Hey, Rich, Joe Heather Natasha Mega and congrats on the quarter guys.
Thanks for taking my questions just first one rich on.
Avatar two just curious again order.
In your initial thoughts here, maybe after you saw the demo I think it didn't include dialogues so it seems to be.
Very tech heavy and of course avatar was it sort of at least three D on us.
First came out just sort of curious sort of is it met or exceeded your expectations and what it could mean.
Moving forward in terms of maybe greater three D adoption here in domestic markets again.
And then the technology.
That creates barriers to some of your competitors screens, meaning if you want to see it in the most premium format you have a select number of screens I'm, assuming that would be used in going down.
From there so that's my first question.
Yes.
So on the first question.
It was a teaser trailer so they deliberately did it with or without.
Dialog and with with music and you call. It they were demonstrating their technology I thought they were demonstrating their images I mean, the images are amazing they are spectacular.
Technology is a ball in the 13 years since the last one came out and while that was fresh and innovative I thought this was spectacular and in a similar way and really happy to say it in terms of <unk> versus <unk>. The early.
Kind of discussion around it is that it will probably be released in both two D and three D and I think we have to assess what we're going to do in different countries.
In different theaters and different showtimes.
But.
The reason it's a good question is.
Not only on avatar.
But I believe that Doctor strange is going to be released and three D. In some theaters and remember there are four more avatars to come so I do believe it can partially lead to a three D Renaissance.
Don't think it will go back to where they made everything in three D and converted it but this kind of quality and this is kind of look I think will increase demand and.
We do have a massive competitive advantage there because we are such a market leader and we have a technology advantage there and.
I didn't intend to talk about what I'm going to say, but I will which is that.
We have so much hope for.
<unk> two that we've created an internal task force that crosses over technology.
Distribution.
Manufacturing maintenance marketing.
All kinds of areas to figure out a way as a company we can capitalize on it and we will because the last one the good news is we got caught off guard and as you know we had less than 300 theaters into $250 million I can tell you one thing if there's an opportunity here, we're going to be ahead of the curve.
On that and I think <unk> might be a part of that.
Nice thanks rich.
Last question on China Hollywood films going to China is it just your asset world that you sort of secure distribution to China at this point, maybe theres others curious on that and then what is there sort of a rule of thumb rich in terms of.
Timeline, where you get visibility.
The film's release or is it pretty variable thanks guys.
So in terms of China, I've heard that a number of films that were in the queue have passed censorship, but that doesn't mean that they have yet been approved to come into the country. So there are lots of films going in there are films that are past censorship, but I think actually.
They've taken a little bit of a breath, just because of what's going on with the theater closures. So they don't want to say yes.
They approved dress squirrel before kind of COVID-19 restrictions flowed through so I think they're kind of waiting to see where it goes from that but.
Every indication is that.
They will continue to lead in.
A.
Normal amount of Hollywood films, rather than 'twenty, 'twenty, one which was the victim of a lot of factors, including.
The pandemic and the second part of your Oh, how long does it take so you know if I was better at predicting the stock market.
It would be long retired by now but.
But if you ask my prediction I do think when people see the numbers coming out of the release is that start in like a week and they see people coming back and then they focus on the slate right. After that I would think it would be fairly rapid and that's happened before when there have been.
Closures and reopening some gaps in the slate.
Nice thanks for the color guys. Good luck.
Moving forward to Mike <unk> with Goldman Sachs.
Hey, good afternoon. Thank you very much for the question I was just wondering if you could expand a little bit more on the trends youre seeing and indexing. It seems like this blockbuster realization of movies should certainly help that.
What are you seeing relative to prepayment pre pandemic levels and any color.
On domestic versus international.
And then as a follow up could you just remind us what that avatar historical indexing look like.
Obviously things are very different now, but do you have an outlook for this time around thank you very much.
So on.
And your first question about indexing.
I think it's been very.
Positive everywhere in the world, but I can't compare international to domestic but I can tell you that on fantastic beasts.
We are vastly over indexed internationally.
I think actually our indexing in North America was was was higher too, but I think it's somewhat content dependent on a country by country basis, but the trend is is it is it is very clear. So for example in China, we've been over indexing for local.
Which films and Hollywood films in a fairly material way ever since China opened up.
In North America, as I said, the Batman did around 12% opening weekend and usually that's the kind of film because it opened so broadly that we probably would have been more like nine or 10% that has to be sort of around 10%. So pretty much consistently Michael we've been.
We've been indexing over indexing quite well and it's a trend that I think they'll continue just going I don't remember it was 13 years ago I have a pretty good memory, but not that good but we did about $250 million I think avatar overall did too.
$2 8 billion, so roughly around 10%, but at the time, we were at 300 theaters and now we're around close to 1800 theaters now obviously some of those theaters are going to cannibalize themselves. It's not a it's not a completely you can't just do math, let's say.
It's going to do that but given what our indexing.
The last time around with a lot less theaters I'm hopeful that we'll have strong indexing.
Great. Thank you for all the color rich that was really helpful.
Thank you Michael.
We'll take our next question from Jim Goss with Barrington Research.
Thanks.
I was thinking that most of the.
Local language film.
It was really good for the market in which it's.
Produced but I'm wondering if the Japanese anime.
Seems like something that could be different and more portable to other markets.
Is that sort of thing that.
It could be used in the United States or Europe or are there other areas.
Yes.
It is a growing trend.
That's been happening over the course of the last several years there is an export business.
That happened.
Particularly with Korean Japanese films and Indian content.
And there's no really rabid market outside of those countries for those countries film.
So you'll see us.
When they're that big.
And they don't play very nicely in both China and Japan.
You'll see with animated plays very well in markets all over the world when it hit, particularly I mean nowadays.
Tayo, Thanks, Bart extremely well.
Both in Europe , Canada, and the U S. So and.
I think that as a reflection of the.
Globalization of content coming from streaming and Oh.
Increased awareness of content that's out there.
Expat communities that live all over the world.
And that you are finding the communities, where they live and you're supporting them with the content is it a modest one fee and giving an experience out of the home and so it was definitely a marketplace for that and I think.
It's something that we at IMAX are really interested in exploring.
Through an increasingly.
Do any of them reached the level, where they might be better than the third or fourth week of even some of the blockbusters, who might have a downdraft it for the first week or two.
Yeah, I mean, there's a lot of popularity anime has a lot of popularity in there.
And it's growing steadily in the United States.
For sure.
Okay.
Example of that.
And the one other question I'd have is than narrative driven opportunity you brought up with the Blue Angels is that's something also that that could either be used than say IMAX screens. During a week during the middle of the week or on other screens in theaters.
Go beyond.
You know, what let them might've started it.
Yes, Jim that's what we intend to do and I think it will eventually go.
<unk> were all then.
Whereas streaming at some point seem like an existential threat I think that prevent provides an opportunity for us not only in the areas that I discussed, but in the areas of being able to finance.
Content after the money that's available there and I think Dr.
Documentaries or kind of a new supercharged category, which people I can in a cluttered market like docs IMAX docks means something really special so yes, I do think that's an opportunity.
Okay.
Yeah.
Thanks.
It appears there are no further question at this time I'd like to turn the call back to IMAX for any additional or closing remarks.
Thank you operator, and thanks, everybody for joining us so I really do think we're on the verge of a breakout at IMAX for a number of reasons first of all as I said multiple times.
And like I've been talking about top gun for awhile and the Buzz was there but not to the extent. It was today. After was shown at the cinema Khan and I think that's going to be true for a lot of things and it's not just going to now people are saying Oh Wow Spider Man was a one off for that meal is a one off I think that's it.
It would be a new narrative on a regular basis and it's going to start.
Soon.
To the theatrical experience.
Just came through the biggest challenge it's ever faced the dual threat of pandemic and streaming.
Going day, and date and I think thats the streaming part has been proven not to work.
People need a theatrical window and whether it's a studio.
Actually a streamer theres going to be windows around lots of things.
And I think that's gonna be apparent soon.
Third thing was the market share, which we just talked about.
Where IMAX has increased market share and a global basis and by the way some of that I think is coming out of the pandemic people are saying I'm really wants something special when I believe in the home and I think youre seeing that in a lot of other premium experiences.
And then finally, we're putting our money where our mouth is so if the rest of the world doesn't believe our story, we do and we're aggressively buying back our stock at these prices so.
Everybody can wait and see.
I'm, putting my money on the fact that this is going to turn pretty rapidly. So thank you all for joining and thank you for your interest in IMAX and we'll talk to you soon.
This concludes today's call. Thank you for your participation you may now disconnect.
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