Q4 2022 Imax Corp Earnings Call
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Okay.
Good day, ladies and gentlemen, and welcome to the IMAX Corporation fourth quarter and full year 2022 earnings Conference call. All participants are currently in a listen only mode.
Following the presentation, we will conduct a question and answer session.
This will be given at that time.
As a reminder, today's call is being recorded.
I'd now like to turn the conference over to Jennifer <unk> Senior Vice President of Investor Relations.
Please go ahead.
Thank you and good afternoon, everybody. Thank you for joining us on todays fourth quarter and full year 2022 earnings conference call on the call today to review the financial results are rich <unk>, Chief Executive Officer, and Natasha Fernandez, our Chief Financial Officer.
Collagen President IMAX Entertainment and Rob Lister 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 earnings press release and slide presentation have been posted on the Investor Relations section of our website at.
At the conclusion of this call our historical Excel model will be posted to the website as well.
I would 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 pertain to future results or outcomes. These forward looking statements are subject to risks and uncertainties that could cause our actual future results to occur 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.
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 and adjusted EBITDA as defined by our credit facility Arkansas.
And in this press release and our earnings materials, which are available on the Investor Relations page of our website at IMAX Dot com.
With that let me turn the call over to Mr. Richard <unk> rich.
Thanks, Jennifer and thank you everyone for joining us today since we last met on this call. There have been two terrific developments in our business. The massive global success of Avatar, the way of water and a rapid recovery of movie going in China with these dual tailwind propelling IMAX into 'twenty.
Three it's clear that we're back to business and there is strong evidence that our global operation, including China is set to resume pre pandemic levels, a box office as well as strong network growth.
Were spoken often about what we call the avatar effect after James Cameron's watershed, two thirds of the nine release imac saw two year period of outside growth across virtually all kpis signings installs psa's followed by a structural re basing of.
Our network business.
I would try to weigh a water deliveries on our highest expectations. We're beginning to see history repeat itself with a surge of positive momentum and trends at hand.
Avatar the way of water is the number one highest grossing first run IMAX release of all time worldwide and also in the early 50 individual international markets. Many of these countries and territories overlap with our top priority growth markets around the world.
<unk>, where we are underpenetrated in terms of theaters, we are seeing strong potential for local language growth and moviegoing is thriving yielding potential for box office growth.
As a result, we are seeing encouraging signs of increasing demand for new and upgraded IMAX systems around the world, including recent multi system agreement in Japan and Indonesia.
And the sequel is helping lead to dramatic resurgence of our business in China, which has taken a complete positive 180 degree turn in a span of just a few months.
IMAX delivered its best Chinese new year holiday ever for local language films with $61 3 million in total box office receipts, well over our budget or projection of $42 million.
And our lead title wandering Earth too is now our highest grossing local language film of all time.
Furthermore, key Hollywood tent Poles are again, securing day and date releases in China, including the Marvel franchise, which returned to cinemas. This past weekend for the first time since 2019.
Overall, we're very optimistic about 2023, and we expect to drive significant growth in IMAX system signings installations Global box office and adjusted EBITDA This year, including global box office back to our record breaking 2019 of $1 one.
Billion.
Between 110, and 130 IMAX system installations worldwide and adjusted EBITDA in the mid 30% margin range.
Today I'd like to discuss our year end results in global box office growth and network growth are results for avatar, the way of water, particularly internationally, our strong momentum in China.
Our strategic focus for sales in 2023, an update on our IMAX three point out strategy and finally I'll look ahead at the slate for 2023.
And then I'll turn it over to Natasha to review our financial performance before taking your questions.
First for the second year in a row IMAX captured its largest share ever of both the global and domestic box office in 2022.
This includes three 3% of the global box office and four 8% at the North American total both up 9% about 9% over the previous record in 2021.
These are impressive results given our network of 17 100 locations globally account for less than 1% of the hundreds of thousands of screens worldwide, excluding China. Our box office results were largely in line with our record breaking 2019 and fat.
Our domestic box office in 2022 trail 19 by only $5 million overall, we delivered $850 million in global box office for the year up 33% over 2021.
We also drove our largest network growth since 2019, installing 92 IMAX systems worldwide in 2022.
Our strong capital position allowed us to be very opportunistic in repurchasing shares in a weaker market environment in 2020 to shrinking our market capitalization by nearly 8% in only one year for context, we had 61 million shares outstanding at the.
End of 2019 today, we have only 54 million shares outstanding as I mentioned avatar the way of water put an exclamation point on R 22 results and a strong tailwind for the years ahead.
IMAX has delivered 11% of the films Global total again I'd only a fraction of overall screens with this franchise and its revolutionary visual effects, Jim Cameron has created an experience that transcends cinema.
And yet. Another example of IMAX has the ability to create an event and drive outsized market share with the most ambitious blockbuster films.
In terms of scale and scope.
With this past weekend's debut of anthem and man and the Wasp quite Romania, we drove 10% of the North American box office, a better than average result, certainly helped by the avatar effect, our $24 million.
Global opening weekend for Ant man was more than the previous two and then films combined.
We also saw we are indexing on June at a rate record breaking global box office for top gun Maverick, which included more than 14% share of its north American debut.
We're seeing it right now with Avatar and we expect to see it again this year with Christopher <unk> Oppenheimer as well is due in part to.
The world's best filmmakers continue to raise the bar and audiences almost invariably now they will need to experience. These films in IMAX.
Back to China, among the most encouraging results we've seen with Avatar two is in China with a film essentially reopened the market for moviegoing overnight with more than $50 million in Chinese box office to date. The film has the second highest grossing louise ever in China and IMAX.
Delivered an impressive 22% other films overall Chinese growth to date.
Served as a perfect setup for Chinese new year holiday, where IMAX delivered record breaking results, whether it's local language slate.
Our box of $61 3 million was up 72% over 2022, thanks to a strong diversified slate, including the wandering Earth to full river, Ed hidden blade and deep Sea are $61 million result was significantly ahead of the 42 million.
Which we budgeted for box office during the Chinese new year period.
Speed with which the Chinese box office has recovered has been stunning in January the Chinese box office more than doubled the North American box office overall January marked the first time ever that we have both the local language and Hollywood title.
IMAX at the same time in China, delivering more than $25 million in box office and the Avatar sequel has cleared the way for key Hollywood tent poles to gain entry into the market.
February saw along the way to return of the Marvel franchise to China with Black Panther will conduct forever and our latest ant man.
IMAX, China has delivered 21% of at the end man debut on less than 1% of the screens.
<unk> Shazam theory, the gods will also receive a day and date release in China in the next month and just last week Paramount's forthcoming Dungeons and Dragons film was also given a day and date China release from March 31 beyond the IMAX network Hollywood films, including Universals.
Megan and Sony is the Sun have also secured Chinese release dates as a result of these trends we have a very bullish outlook on the Chinese box office for 2023, IMAX box office in China for the full year 2022 was $152 5 million.
And we are already at more than $86 million or over half of last year through less than two months of 2022 are market share gains our record breaking performance with avatar have strengthened our standing with exhibitors around the world as a result, we are seeing very encouraging.
Signs of demand for IMAX systems and technology.
We already have 22 signings through the first two months of the year for comparison, we had 23 signings for the entirety of the first quarter of 2019 pre pandemic. This includes the deal expanding our partnerships with Japan's largest exhibitor aon a rare sign it.
Install deal that will see seven new locations opened in this red Hot market.
The end of the year this comes less than a year after the strike into two system deal with E. On.
Our $1 $8 million per screen average in Japan in 2022, we see even more opportunity in that market. We also announced a deal with cinema 21 that will double our commercial footprint in Indonesia to 20 locations. This is very encouraging given how <unk>.
You're penetrated we are in Indonesia relative to the Companys enormous population.
We built great momentum in the market recently with our first Indonesia local language release in 2022 and Avatar the way of water, which is now our highest grossing Indonesian release of all time.
The spike in sales we saw following the first avatar was driven largely by China, where our eye popping results I'd, just 24 screens led to sweeping agreements like the 75 theater deal, we signed with Wanda less than a year later.
Given how much our network has grown and evolved since then we expect the impact of avatar two to play out differently driving sales in pockets of opportunity across the region. We're most underpenetrated Southeast Asia, India, Latin America and Continental Europe .
Indeed, many of our highest priority markets for growth, including Germany, France, India, and South Korea are among the many where avatar two is the highest grossing IMAX release of all time.
We are particularly optimistic about the outlook for growth in Asia.
And many of our sales leaders have visited in recent months and been impressed by the enthusiasm for IMAX amongst exhibitors.
Furthermore, our successful local language strategy continues to build our brand and profile and the markets, where we see the strongest network growth potential.
Last month was our highest grossing month of January ever for local language films with a great mix of releases from China, India and Japan.
In India, we delivered our biggest global box office ever for India local language titles in 'twenty, two with nearly $12 million.
Up from less than $1 million in 2019 at our first local language film of 2023 per tonne is already our second highest grossing Indian release ever with $3 $6 million in global box office to date.
We expect to program six to 10 local Indian titles. This year up from four last year and ramp up to 10 to 15 annually in the coming years, we believe that level will give us a consistent enough market presence to drive significant network growth introduced new audiences to <unk>.
IMAX and potentially bolster our indexing on Hollywood titles as well.
Given our box office in content progress in high growth International markets. The calculus is clearly changing in terms of our global growth strategy and target markets.
As we saw a decade ago. The avatar effect is not something that will fully play out and only a few months or even a year, but rather over a sustained period, especially when considering there are multiple more avatar installments on the horizon.
Even as we capitalized on near term opportunities to grow our network. We continue to advance our long term IMAX three point out strategy to grow beyond blockbusters and deliver unique events and experiences globally across platforms. We concluded 2022 by hitting our goal.
<unk> of 250 connected theaters worldwide.
Our global connected network now features more than 75000 seats.
<unk> 27 countries and territories in North America, Europe and Asia.
As we map out our content strategy for the year ahead, we're being very selective about what we book on our network given that our Hollywood blockbuster pipeline is as full strong and consistent as we've seen since before the pandemic.
Will complement those tempo offering with live interactive fan events in collaboration with our studio partners, including our upcoming event for the world premiere of Mgm's create three.
The first film for IMAX Sports movie.
Since our acquisition of <unk> last September we've completed new agreements for all of its clients who are up for renewal at last years end, while adding blue chip global content and technology partners.
As I said, we're even more excited about the long term application of <unk> technology and the team is currently working on potentially transformative solutions for compressing video images, while preserving quality and saving costs, we're clearly in an environment where streaming.
Platforms are under cost pressure and we focused on we're focused on technology solutions that will help them cut costs materially while protecting filmmaker intern beyond theatrical. Furthermore, we continue to unlock synergies between <unk> and our IMAX enhanced initiative.
And expect to more closely align those efforts with our go to strategy.
Okay.
Now I want to turn to the 23 slate.
We're very optimistic about what the slate looks like as I mentioned earlier. It says complete balances consistent as we've seen since 2019, our film for IMAX slate features seven highly anticipated releases, including Christopher Nolan.
Oppenheimer and Denny villain as June part too.
Hi, Lee IMAX created events from two of our biggest collaborators and advocates in the filmmaking community IMAX drove indexing up more than 20% with both Nolan Dunkirk and due in part one during their runs on the network.
Multiple Marvel films with Mays Guardians of the Galaxy volume three and May multiple DC films, including the New Acland, Matt. We also have Tom cruises mission impossible dead Reckoning part one coming on the heels of an incredible IMAX run from Maverick.
The new fast and furious a new installment of Transformers.
Indiana Jones, and the dial of Destiny, which we're very excited about with our local language portfolio. We expect to program between 30 and 40 titles this year from across China, India, South Korea and Japan.
In conclusion, we are as optimistic as we then for years about the year ahead, given the rapid turnaround in China and the strong performance of the Avatar sequel, we feel good about our opportunity to drive further global growth in our theatrical network in box office as we carry our strong momentum through.
The year at the same time, we will further our three point out strategy evolving beyond blockbusters are unique privileged position at the center of the entertainment ecosystem gives us a great perspective on the landscape, which is very valuable and navigating times of change like these and we've had.
A pretty good track record lately, and calling how things shake out we correctly predicted that the studios would abandon day and date releases and the <unk> experiment.
Come back to exclusive theatrical windows for blockbuster movies, we saw a correction coming for the economic model for streaming services, it's easy to forget now, but there are a lot of folks who doubted top gun and avatar before their releases this year, but we were bullish on those blockbusters for the begin.
And we were right and we've leaned into local language and the increasing globalization of content long before RR and Japanese anime took the world by storm, we call last fall that China would begin to roll back Covid zero following the party Congress and it did.
And that Avatar would get data in China and help reopen the gates for Hollywood releases, and our own business, we hit our targets for installs and connected theaters for the year and we're seeing the avatar effect, we've long predicted beginning to play out with drive at record breaking numbers in our business.
And we know that our box office has historically thrived and economic downturn. So our optimism for the year is well founded and our credibility and track record well.
We look forward to updating you as the year progresses and to creating value for our business, our shareholders and the millions of people around the world, who invest their time and money and the IMAX experience I'd like to thank you all and I'll turn it over to Natasha.
Thanks, Rich and good afternoon, everyone as rich highlighted we are excited about 2023, we are returning to a pre pandemic environment with a robust blockbusters slate.
And we are experiencing a notable positive turnaround in China.
As we look forward, we expect to benefit from a combination of the profit that will flow from our recovering box office growth in our technology system sales and installs propelled by the record breaking performance of Avatar and our overall global momentum and the efficiency actions and cost discipline, we implemented over the past.
10 years.
With that in mind, we are establishing guidance for 2023, including IMAX gross box office back to the 2019 pre pandemic level of $1 1 billion as compared to $850 million in 2022 with a return of box office in China, and a 2023 slate that was made for <unk>.
Imacs screen, we envision it will be a year of market share gains.
Total installations of 110 to $1 30, which compares to 92 systems in 2022, reflecting growth of over 20%.
Our contractual backlog as well as the elevated rest of world deal activity will enable us to reach this target we foresee a similar sale and upgrade mix as 2022.
Installation timing heavily weighted to Q4 <unk>.
And we expect to realize adjusted EBITDA attributable margin in the mid <unk> percent driven by our box office flow through coupled with our operating efficiency gain.
Now turning to Q4 and full year results.
Fourth quarter results were in line with our expectations capped off by Avatar remarkably avatar delivered $140 million in box office in the last two weeks of December with 11% market share, making up more than half of Q4s total IMAX gross box office.
Revenue in Q4 was $98 million compared to $109 million in Q4, 'twenty, one and adjusted EBITDA attributable to IMAX was $28 million compared to $44 million in the prior year.
These year over year variances were primarily driven by China as that market did not begin to normalize until late December and a onetime release of deferred maintenance revenue in Q4 'twenty one.
Adjusted EPS in Q4 was 19.
Versus 31 in the year ago period, and included a tax valuation allowance, resulting in a negative impact on earnings of $2 1 million or four in Q4 2010.
Looking at the full year, our 'twenty two results were significantly above 21, reflecting the continued recovery in box office, our unique position in the entertainment industry, the strength of our business model and execution.
<unk> shared our business highlights and to build on that I will share some financial highlights.
Revenue of $301 million was up 18%. Despite the fact that China did not begin to normalize until late in 2002.
Driving revenue with gross box office from the IMAX network, which was up 33%, which compared to 22% for the exhibition industry overall domestic box office from IMAX locations were on par with 2019 and rest of world, Excluding China was not far behind leading to the strong full year.
Performance.
Moving on to installations system installs were 52 in Q4, and 92 installs for the year up 23% year over year from 75 systems and above the midpoint of our guidance of 80 to 100 systems.
For 'twenty two we earned gross margin of $156 million, which was up 16% over the prior year at 134 million and was 52% of revenue.
Full year adjusted EBITDA attributable to IMAX was $84 5 million or $1 47 on a per share basis, which reflects an increase of 23% over 'twenty one of $68 6 million.
We recognized an adjusted EBITDA margin of 30%, reflecting flow through on incremental box office and benefits from cost discipline efforts.
Adjusted EPS was <unk> in 'twenty two.
Up from a loss of 14 and 21, the pandemic contributed to the recognition of tax valuation allowances, preventing the realization of any tax asset benefit.
This had a negative impact on EPS of <unk> 29 per <unk>.
Full year, 2002, and 25 and 'twenty one.
When profits are realized in jurisdictions related to these tax assets. The reversal of the cumulative valuation allowance of $63 million will have a favorable impact on our EPS in future periods.
As we turn to our balance sheet and cash flows operating cash flow was positive in Q4 and propelled us to $17 million for the full year, which is up significantly from operating cash flow of $6 million in 'twenty, one our cash flow generation continues to improve as revenue increases and as I.
Our exited our customers recover from the pandemic.
We expect this trend to continue into 'twenty three.
We ended the quarter with $97 million in cash and $277 million of debt, excluding deferred financing costs.
As of December 31, our available liquidity was $416 million, including cash and cash equivalents of $97 million and $319 million in available borrowing capacity under the companys revolving facilities.
Our strong balance sheet and 22 enabled us to execute on both the <unk> acquisition and a significant level of share repurchases.
In Q4, we repurchased one 9 million shares at an average price of approximately $14 per share for $27 million for the full year, we repurchased five 4 million shares at an average price of approximately $15 per share.
Or nine 2% of our beginning share count spending $82 million, we continue to capitalize on what we view as an undervalued stock price and the opportunity to return capital to shareholders as of December 31, $193 4 million remains available under our share repurchase authorization.
To conclude we finished 22 on a strong note with avatar and that momentum has only accelerated into 'twenty three with the remarkable continued run of avatar, the reopening of China, leading to our record Chinese new year results and the strong demand for IMAX technology, we are seeing from our partners and.
Markets around the world.
We believe 23 will be a year, where the combination of our unique position in the entertainment industry and our high margin asset light technology focused business model will shine through.
This will enable us to realize gross box office similar to pre pandemic levels to deliver growth in installations and higher adjusted EBITDA margins.
With that I will turn the call over to the operator for Q&A.
Thank you if you'd like to ask a question.
One one.
And for your questions.
We have yourself from the queue. Please press star one again.
While we compile the Q&A roster.
Our first question comes from Eric Wold with B Riley Your line is open.
Thank you.
Hi, good afternoon.
Two questions if I may I guess, I guess first off.
Thinking about the guidance for.
Adjusted EBITDA margin in the mid 30% range for this year, which is if I look back at the 19.
And within a couple of percentage points of what you reported back then I'm not looking for guidance beyond 'twenty, three but maybe kind of what would you view as sort of.
The puts and takes in your business, what's changed structurally such that margins can go higher from here in the future is still entirely dependent on box office or do you view it as something else has changed as well.
Hi, Eric.
Definitely its box office completely like there is a significant opportunity given the incremental box office that we can earn that.
And that could create over 30% growth and as you said, it's proven by the historical year.
And all of that flows right through as well theres opportunity with.
Similarly, and other other businesses that we're exploring right now too and so we do think that there is opportunity and right now as you look at some wave and lives that's sort of where our margin is now but there is only upside there as we start to explore and expand the business model.
Thank you and then just second question.
You mentioned rich.
IMAX three point, though.
You'd be careful this year in terms of what you plan given how robust the Hollywood slate is.
How far in advance do you feel you need to contract those live events to drive awareness.
Time to purchase tickets.
Where do those marketing costs fall for those events between between you and.
The content provider.
But on the second part of the question Erika.
Hands on a specific deal so in some deals the content provider.
Do more of it and some we would do more of it and in others. It will be shared and or allocated in terms of the first part of your question how far in advance do you need to book I mean from our point of view the farther out the more optimal and now that we have the network in place I think it gives us the opportunity to program content.
Farther out.
<unk>.
But you just never know it's the nature of the business is different than the movie business, where its a fixed timetable and you know <unk>.
18 months or two years. After you start shooting <unk> state way in advance you could really put it together the Lai business is still very much in its infancy, and I think we're still going to test and do different things, whether it's music or whether it's sports Sir.
Whether it's.
Q&A is around releases I think it really depends on the kind of event.
I wish we had.
A fixed model on that but it really is going to be event specific.
Understood. Thank you both.
Thanks, Eric.
Thank you. Our next question comes from Eric Handler with Roth Capital. Your line is open.
Good afternoon, and thanks for the question rich.
Two questions for you first.
As you look.
Your sort of outlook of $1 $1 billion of gross box office. This year, how are you thinking about growth.
In China relative to North America, and international rest of the World.
So I think in China, we think it'll be a move towards normalcy normalcy means sort of.
2019, pre pandemic levels again, I'm not going to get into the elements right now, but I think we see that moving towards normalcy and I think in North America and the rest of the world.
We feel incredibly good about the slate as we said during our prepared remarks.
If you look at just very early in the year as we said during those remarks, we had budgeted at about $42 million for Chinese new year and it came in over 60 million. Then I can tell you that AD man. This past weekend did close to our total budget and just one weekend. So early in the year I think we're doing very well.
On all fronts and Avatar was obviously extremely strong.
It'll come from both places.
Eric I think a return to normalcy in China and opportunity around this year's slate and I also should highlight the local language films that we do.
Think investors historically have paid enough attention to that and there is a pretty good reason because they didn't contribute that much but last year I think it was 17% of our box office was foreign language films and I think this year it will be.
Be more films than that.
Thank you.
Those kind of get overlooked when people look at the company there is sort of say well I see this.
Blockbuster coming of this Marvel movie of this DC movie, but they forget theres a lot of money there and those slot. So I think it will be all of the above.
Okay, Great Thats helpful.
Next question.
It was good to see you updating the.
The addressable market.
Our systems for the World.
It's been several years since you've done that.
They have not been able to find.
<unk>. The last time, you did that so I'm curious.
How big is 3300.
Adjustable market.
What was that last time, you did a review if you could point out.
It was 3300 the last time, we didn't revise it.
Eric can we typically we do it every three years, we did it in 19, we didn't revise them because of the pandemic I'm sure. We will do it in the next year or two but that's the guidance we've given before.
Got it okay very helpful. Thanks.
Thank you. Our next question comes from Steven Frankel with Rosenblatt Securities. Your line is open.
Good afternoon, Rich could you start with maybe an update on the camera program, where are you in creating a pipeline of equipment that could materially expand the number of films that are created with IMAX cameras.
Well, Steve I think we've already.
Materially expanded the kind of cameras when we did our.
Phil for IMAX program, and our digital cameras.
I don't remember, making this year, how many films.
Chinese films today certify through our digital program and we are in the project.
Developing new.
Okay.
The camera.
Well be ready.
Probably 18 months or so.
Two years and so those cameras for film program, but we still have a steady stream of films that are shot with our film cameras, which Oppenheimer, we shot with our film.
And cameras.
Maybe that we haven't announced that.
Shooting in the next couple of weeks, we'll begin shooting that shooting with our film cameras. So those are two different programs, but.
Film for IMAX program has been extremely successful I think it raising our indexing.
Ian.
Hence analogy at film makers.
Designed to be.
As far as the IMAX screen and for IMAX downturn to design for <unk>.
For everything that our systems offer.
Yes, so again circling back up there are lots of cameras because the digital program.
There are add ons to the digital cameras that most filmmakers use so we're doing the new film cameras, just because we can expand that.
Hi, Matt its leases.
There is no shortage of cameras to film.
The film for IMAX program as you know, we're doing a lot of that globally.
Great, Yes that was kind of where I was going but we're going to start to see more of that with the local language content like we have in China over the last year or so.
Well actually in the last three years and each year. The biggest movie in China was one film with an IMAX camera and the film for IMAX program. So we've been usually successful there, but I think you will see it in other territories as well.
And then one more question I heard you describe.
As IMAX sports movies that a hint.
Maybe some different content, we might see coming.
Coming in the future.
Well I mean, it's a boxing movie.
People have seen I'd say its kind of incredible.
Feels like you've never seen a boxing movie that way in terms of.
The way the punches are portrayed maybe even more of the way they're received on the other end but.
Sure I mean, we're always looking at new opportunities, we havent announced anything else, but there are different sports movies. We're in.
We're in the middle of talking about yes.
Okay, great. Thank you.
Thank you.
Our next question comes from Chad Beynon with Macquarie. Your line is open.
Hi, good afternoon, Thanks for taking my question.
Thanks for giving all the guidance I wanted to ask about the.
The system backlog you talked about this year 110 to $1 30, you have a backlog of $4 50, so great to see that this is increasing year over year.
In terms of what's left beyond this year can you kind of help us.
Think about.
Kind of what the gating factors are.
Is this a good number to think of going forward just given the backlog is this big and now you have local language to help with that or are there other.
Other reasons why.
That's not a good way to think about it beyond 'twenty three thanks.
Well I mean, the way to think about it is the world is coming back to normal and as we mentioned during the call in the first quarter, we signed a seven theater deal in Japan attempt theater deal in Indonesia, there have been other deals that we signed that we havent yet disclosed the quarters. So far is one of the best.
First quarters, we've ever had and we're roughly halfway through it so people are coming back and the avatar effect and the opening of China being theres demand for IMAX theaters on a global basis. So the number we gave for install guidance between one.
10, and 130 some of that will come from backlog and some of that will come from new signings.
It's too early in the year to say, how much will come from backlog and how much will come from new signings, but as the year progresses, we'll have a better feel for that but.
Your question was about backlog.
Answering you a little bit about signings and Im just saying that if you go back even six months you are a company from a box office point of view was doing extremely well outside China. We finished close to 2019 levels, but now we're seeing.
Normalization there are other areas of our business, including installs and signings and I think we'll continue to see that.
Great. Thanks rich.
And then on the balance sheet.
On Slide 27, you talk about net debt to EBITDA of two times, obviously, given your guidance that will come down how should we think about the right leverage on this business given the return to stability and then maybe a balance of how youre thinking about share repos versus opportunistic M&A.
That remains.
Sure I mean, we.
Have liquidity of over $415 million. So I think we're well equipped to be able to make.
Selected decisions that would further our business like we did with buybacks this year in giving.
And reducing our share count and bringing value back to shareholders, but also the acquisition of some ways.
Our operating cash flows.
$17 million in Q4, which the cash flow dynamics improve as the industry improves and personally cash flow is a huge focus for me as you know Chad because of just my background from be coming from Treasury and being focused on that and so I think we have we are equipped to be able to move forward and we can lever up if need.
But we've made a good acquisition with some wave this year in with buybacks. We're in a really good position. If you think about our convertible notes.
With the cap call in there at.
At $37 and we're making buybacks at 15 on average it's a great deal that we're sitting at right now.
That's great I appreciate it thank you very much.
Okay.
Thank you. Our next question comes from with.
With Wells Fargo. Your line is open.
Good afternoon, guys and thank you for taking my question.
Let's maybe first on going back to the system signing you talked about momentum in Q1 being strong in guidance seems to be ahead of expectations can you maybe give us some color on how the tone of those conversations with the other partners are changing and what's the opportunity with some of the international markets that IMAX is under <unk>.
Presented and then I have a follow up thanks.
Yes, so great question Omar first of all we.
We said as I said in my script records in 50 different markets for Avatar and coincidentally many of those markets are markets that we're very under penetrated and in January .
Two.
India with our head of sales and Mark welcome.
Went through a bunch of countries in southeast Asia also with our head of sales and.
The attitude was so different than it was even six months ago people were ecstatic coming so 50 countries had records just putting it simply and they were all saying how fast can I get more IMAX is in parallel.
After the first avatar. So people are excited and again as I said in response to the last question we have.
Many signings as we've had since 2019 in this period of time and the.
Tone is just extremely positive and we feel really good about the number of discussions underway and.
It's even in places that you wouldn't necessarily think of so for example in France, we did almost $500000 of screen for avatar and Thats, a vastly under screen market and theres been a lot of demand coming out of there and Japan, where we signed the deal with <unk>, There's a lot of <unk>.
Other interest in Japan.
Working through so I think youre seeing a global rebound now where people really want to sign and install imax's much more rapidly than in the last couple of years and while I think China is probably be behind that curve because they just opened I expect within six.
Months to see China.
Moving towards that kind of position so.
No.
Feel very good about that.
That's very helpful and maybe on the on this point 23 content play it looks very strong as you alluded to just wondering how do you maybe can you talk about how do you manage slotting screen sharing schedules to maximize the 2023 box office I know there is a period of very concentrated with lots of films and then there are.
Also.
So it's about half of the year with low.
Can you give us some color on how you manage.
The slotting and screen sharing.
For your box office, Thank you will.
The good news for US is that almost every major studio and every major filmmaker once Theyre film released in IMAX, So thats pretty much where it starts as they come to us in advance and they say I want the July date, or they made or whatever it is and if they have used our cameras.
We give them two weeks if they haven't we give them one week or more depending on the nature of the movie. So that's how we sort of start to form our slate that as the year goes on people will say well I want to do my movie that they will either say, we can do it or we cant do it based on what our commitments.
We're up to that time.
We like to say, we can but unfortunately, we have to turn down movies because people have booked that data in advance.
Good one the dates of competitive because you can help.
Facilitate an IMAX release by encouraging them to move to another time, so I call. It an art rather than a science and you try and do your best in terms of balancing the box a potential for a particular film with your expectation of the growth of that film with your expectation.
How is the growth and how it will fit in to the IMAX, but.
Fortunately this is the good news bad news story there is so many good things going on in 'twenty, three and as far as we can tell in 'twenty for that most of the.
Wei U can program blockbusters sequentially and fit them all in but unfortunately, there's just too many and as a result, there is some you can't play, but that's the price of being a content curator like we are in.
We're in a good place to make it work the best they can for IMAX, but it's not always going to work perfectly and if I. If I can just jump in and say one quick thing.
I think in a post COVID-19 world.
Exhibitors have gotten.
Both on the exhibition side and on the CDN side, there has been much more openness to program.
Ensure that the IMAX screens are utilized as they can possibly be and so there has been much more flexibility to do one night only special events to program to movies on a weekend than to be smart about movie that will program very well great day and have another maybe be playing in the <unk>.
So there are times, where we are programming multiple movies in a week and we did that very effectively in the back half of 'twenty.
23.
2022, and we were very effective I think in making sure that we were.
Utilizing our screens I think to the best of our ability and.
And Youll continue to see that I think there is a.
<unk>.
Does that mean.
Need to be as effective as we can possibly be.
Great. Thanks, guys.
Excellent.
Thank you we have time for one last question and our last question is from James Goss with Barrington Research. Your line is open.
Alright. Thank you I was curious with say top gun last year offering an opportunity for reprise.
When slats made of.
They're made available.
<unk>.
<unk> wastewater.
And possibly wandering Earth two in China for some similar opportunity for coming back to the screen.
Yes, I think they do Jim.
Especially.
<unk> seen what happens at the Academy Awards.
Wins and what doesn't.
Probably know that we brought back Titanic for its 25 year anniversary. This year, so I think films that especially well in IMAX centre suited to the IMAX screens as the <unk>.
Demand runs a very long time and.
I think you will see some of the big films come back again.
Okay, and maybe one other since it's getting late.
In China I think.
The platform is bigger than it was in 2019, but your PSA has come back as well I'm wondering if you'll look at the mix of platform growth and PSA are you looking at that opportunity in China to move beyond where it might've been in 2019, and where do you think would be a more important source of cash.
Incremental revenues.
Well, Jim, especially because we've increased local language film.
As a percentage of our slate and those films do particularly well in lower tier cities. There is definitely an opportunity for higher PSA is not just in China, but in all the markets in the world. We're applying local language films and again Youll get Japan, our PSA is our $1 $8 million.
Our double North America, So that's definitely an area.
Huge opportunity as you say we've had pi.
Platform growth. There also so I think it's a matter of time before we could set records in China again, I don't want to predict it for 2023 six weeks ago people locked in their homes with drones flying over their heads and boxes of chicken thrown at their front doors because of the quarantine.
Given how fast they've come to a record Chinese new year I think we're encouraged but I think we're also want to be a little bit measured about.
Changing the world and another six weeks.
Alright, well, thanks, Mark I'll leave it go at that.
Thank you there are no further questions at this time I'd like to turn the call back over to rich Gilbert for closing remarks.
I think hopefully it comes through in our presentation and to our answers to our questions, but on kind of every kpis for IMAX from an investor point of view.
Its box office, whether it's signings, whether it's installs whether its margins were feeling really good about our business and extremely confident and it's not like we only manage our business from afar. Many of US are on the road.
Happy to be in La right now meeting with studios and filmmakers and whatever our constituencies are whether they're exhibitors there filmmakers.
Could be the studios.
<unk> says you look at the box office numbers.
It just feels like a very good time to be in IMAX and <unk>.
We feel that.
As you saw in our guidance that that will be reflected in this year's financial results. So thank you all for joining us and we look forward to the first quarter call.
Thank you for your participation you may now disconnect everyone have a great day.
The conference will begin shortly two reasons lower Johan during Q&A, you can dial star one one.
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