Q1 2023 Imax Corp Earnings Call
Okay.
Good day, and thank you for standing by and welcome to the Q1 2023 IMAX Corporation earnings Conference call.
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I'd like to hand, the conference over to MS. Jennifer <unk> head of Investor Relations.
You may now begin.
Good afternoon, and thank you for joining us on today's first quarter 2023 earnings conference call on the call today to review the financial results are rich <unk>, Chief Executive Officer, and then possibly Fernandez, our Chief Financial Officer.
Rob Lister Chief Legal officer is 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 the slide presentation have been posted on the Investor Relations section of our site.
A question of this call our historical Excel model will be posted to the website as well.
Like to remind you.
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.
Not occur or occurrences to differ please.
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 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 the reconciliation to non-GAAP financial measures, including adjusted net income adjusted EPS and adjusted EBITDA as defined by our credit facility are contained in this afternoon's press release, and our earnings materials, which are available on the investor related.
Page of our website at IMAX Dot com.
With that let me now turn the call over to Mr. Rich Gelfand rich.
Rich.
Thanks, Jennifer and thank you everyone for joining us today too.
2023 is off to a very strong start.
Across our network sales in global box office, we are soaring to historic highs.
Sure enough.
Well in both the near term and long term simply.
Simply put it's a great time to be in the IMAX business.
Sales activity is booming year to date, we've already completed 63 signings for new and upgraded IMAX systems around the world significantly more than the 47 signings. We did in all of 2022, we delivered our highest growth in Q1 ever at the global box office, we can.
<unk> three 5% global market share in the period up over our full year record set in 2022, and we drove extremely strong double digit year over year growth in quarterly revenue and adjusted EBITDA and improved adjusted EPS of <unk> 30 zero.
Over year, and operating cash flow $25 million year over year.
What's exciting is the geographic composition of these results because they offer proof that IMAX is even more global than ever.
Many of our signings came in high value International markets validating our strategy to focus on countries, where we are generating high per screen averages the first quarter with our highest grossing ever for local language films.
Our global box office was driven by non Hollywood films that included our highest grossing Chinese new years ever for local language films and top three all time IMAX releases in Japan and India.
Many of these films, including India has passed on and RR and Japan, Susan May drove box office in countries outside their home markets further establishing IMAX as a leader in the global export of local language blockbusters.
As a result, we remain firm that will drive significant growth and system signings installations global box office and adjusted EBITDA throughout this year.
I'd like to provide updates on our network growth in sales activity and our global box office and film slate and then I'll turn it over to Nick posture to take you through our financial results in detail before opening it up to questions.
First our sales activity has broken out in a significant way, which is a very positive indicator for long term growth across our global network box office and financial results.
As I mentioned, our sales strategy. This year is focused on high box office markets around the world, particularly those where we drove record breaking performance with avatar the way of water and have made significant gains with local language content.
Strategy resulted in 28 system signings in the first quarter, all but one of which were for new locations and 63 signings year to date.
It's important to note that all signings are not equal many of these agreements are high quality in terms of market psa's in increasing our footprint and a high potential growth markets.
For the deals we signed during the first quarter the aggregate per screen average was nearly $1 million during.
During 2022 that includes Japan, a market, where we drove $1 8 million PSA in 2022, and recently signed an agreement with Aon to install seven new systems. This year, we signed our biggest deal ever in Indonesia for 10 systems, which will.
Double our footprint in the world with.
Most populous nation, we struck an agreement for up to 10.
Laser systems in Thailand, which will also significantly expand our footprint in that market around the world. We remain in active discussions on new signings with exhibitors that even extends to our most highly penetrated market North America.
Cinemark Com earlier this week, we announced our biggest agreement for new screens with a new partner in the United States in a decade with Evo entertainment and innovative exhibitor with ambitious plans for national expansion.
Furthermore, we continue to generate new opportunities for IMAX enhanced while strengthening our go to market strategy for similar just last week, our partners at HP announced plans to bring the world's first IMAX enhanced certified personal computer to market at similarly.
We installed a new chief revenue officer, a veteran digital executive who has served in that role for subsidiaries of Tivo and Nielsen and lastly, IMAX made its first appearance at the Nab show in.
In Las Vegas, we assimilate Vod monitor one a product of the year award and we held more than 100 meetings to discuss potential new and expanded partnerships.
It's notable that in a time of cost cutting among streamers at high churn among SaaS based solution providers. Similarly.
<unk> its entire client base underscoring its value as a cost saving solution.
We also remain bullish on the long term applications of similar technology, including potentially transformative solutions for streamers that allow them to compress video images, while preserving optimal quality and saving significant cost for both <unk> and IMAX enhanced.
We view 2023 is an important stepping stone for these initiatives to make more meaningful contributions to our revenue next year and beyond.
Without global IMAX system network, almost fully online for the first time in three years, we reap the benefit of having a full diversified content pipeline could push through an avatar the wave of water anchor the quarter, concluding its two months and our network.
As the highest grossing IMAX first run release of all time with $255 million in box office.
And with the Avatar effect cleared and our strong sales activity. We are very excited that there is still three installments of this box office juggernaut to come through 2028, we continue to capture an outsized share of the box office on a core of blockbusters, including <unk>.
10% of the domestic opening weekend for <unk>, III and 11% for John Wick four.
Our success in Q1 goes well beyond Hollywood blockbusters, we delivered more than $80 million.
And local language box office, our highest grossing quarter for local language films ever a highly successful Chinese new year holiday accounted for the lion's share of that figure headlined by wandering earth to our highest grossing local language film of all time the quarter also saw the <unk>.
Release of Indias paired down our third highest grossing Indian release of all time, and Japan <unk> climbed to second on our list of highest grossing Japanese titles of all time as it continues its global rollout our local language strategy strategy has played out in <unk>.
Three distinct phases first we strategically ramped up our local language pipeline in key markets.
The COVID-19 pandemic to diversify beyond Hollywood as U S studios postponed releases or conducted failed experiments with day and date streaming.
This yielded several bid and damage here from.
<unk> 800, the first Chinese films shot with IMAX cameras to our highest grossing Japanese title ever with demons Flair.
Second we shifted perception of our brand and critical markets like India, and Japan before the pandemic, we reviewed as a platform for Hollywood Blockbusters now we're seen as a first choice purveyor of local blockbusters as well.
Today, we're entering a third phase our success with local language films is extending beyond their home markets and IMAX is becoming a critical player in launching these films around the world.
Here are just a few examples Susan made deliberate greater IMAX box office in China than it has in its home market Japan.
<unk> has delivered greater IMAX box office in Japan than it has in India.
Alan has recorded greater IMAX box office outside of India, and a diverse collection of markets across North America, Europe , the middle East and Asia.
And IMAX delivered 30% of the opening weekend box office for wandering Earth to when it debuted in the U S.
We've only begun to tap the potential here as local film industries around the world grow more advanced and streaming further acclimate global audiences to local language content and viewing with subtitles.
This month offers a great example of our unique diversified content portfolio with the breath record breaking animated debut a Super Mario brothers anchoring a slate that also includes France Indian and Japanese local language releases, playing an IMAX markets throughout the world.
Sure.
In a month with only one Hollywood tent pole on the slate are April box office through last weekend is more than double what it was in April a year ago.
The floodgates open wide for Hollywood Blockbusters next month and through July with a very strong IMAX friendly slate that includes new installments of many of Hollywood's biggest franchises, including Guardians of the galaxy fast and the furious the little Mermaid spine.
Demand across the Spider verse.
Farmers.
I asked which played extremely well at cinema Con, Indiana Jones mission impossible.
And of course, Christopher Nolan to Oppenheimer shot with IMAX cameras.
The back half of the year has strong titles as well anchored by film for IMAX releases due in part to <unk> and a loss kingdom.
And we remain committed to the 30 to 40 local language titles for the full year as well as exclusive IMAX live events like our successful world premiere of Creek III around overall, a diversified set of creators and content owners. It's clear IMAX is a must have.
Partner for the launch of global blockbuster content.
In conclusion, we are delivering on the strong prime is 2023 holds for IMAX with diverse high quality, new signings in key growth markets a record breaking quarter at the box office continued global market share growth and significant progress in our global diversification.
Occasion of our branded business, we are confident in our ability to drive further global growth across the IMAX network and box office as we carry our strong momentum throughout this year. We look forward to updating you on our progress as the year continues and to creating value for our business.
Our shareholders and audiences around the world that continue to embrace the IMAX experience.
Thank you and with that I'll turn it over to Natasha.
Thanks, Rich and good afternoon, everyone as rich highlighted we are off to a strong start for 2023 and that positive momentum is clear in our results.
During Q1, IMAX box office of 273 million.
Revenue growth of 45% over the prior year adjusted.
Adjusted EBITDA attributable margin of $27 million or 34% of attributable revenue adjusted EPS of <unk> 16, and.
And operating cash flow of $21 2 million.
The positive business momentum has continued into Q2 with strong global box office and sales activity in the period to date, we are particularly encouraged by the quality and mix of our 63 signings. So far this year.
This equal or renew system compared to 30 for all of 2022 23 with exhibition partners, who are new to IMAX and <unk> in the past year.
25% or in the U S and Canada 17.
17% in Europe , and 44% were in Japan, and Southeast Asia.
And as mentioned earlier in the call. The vast majority were in high Psa country.
As announced at the time of our Q4 earnings we re segmented our business to two reportable segments, which we believe are better aligned with how we operate and provide a clear view of our entertainment technology business model.
The first segment is content solutions, which consists primarily of revenue from our agreements with studios and filmmakers for the Remastering and distribution of content to our network, including Postproduction services as well as documentary production and live events.
The second segment and technology products and services, which is focused on our IMAX system network and primarily includes revenues related to the sale lease and maintenance of IMAX system through our exhibitor customer.
Lastly, businesses, which are not yet material enough to comprise their own segment are included in all other.
At this time the primary components of all other IMAX enhanced and suddenly.
I encourage those looking for more detail on our segment reporting to you our updated historical financial model posted on our IR website.
Now onto the results.
First quarter results exceeded our expectations driven by record IMAX Global box office and the accompanying profit increments holiday.
Notable contributors were the long planned avatar into February and the robust return of the China box office, and our diversified portfolio of Hollywood and local language blockbusters that created a strong opportunity to maximize box office.
As rich noted the benefit of our global content curation strategy with fully on display in Q1 with about a third of our box office coming from local language film.
This includes 15% of local language box office generated outside the country of content creation.
This local to global extension of our strategy is proving highly successful. One. Recent example is the Japanese animated blockbuster generated $6 million of box office in Japan, but we didn't stop there given the film's success and the global demand for enemy. We have now export of this film to target regions and cities.
Generating an incremental $10 million in U S, China and rest of world.
The winning combination.
Hollywood in local language content enables us to lower the volatility from Hollywood releases and to optimize the programming of our network to maximize box office for our exhibitor customers, which in turn is driving greater demand for IMAX systems, creating a positive growth dynamic.
Our box office performance led to a record Q1 global market share of three 5% on less than 1% of the screens up from two 6% in Q1 of 2022.
Our revenue in Q1 was $87 million up 45% from $60 million in Q1 2010 at 57, 5% gross margin, we recognize gross profit of $50 million, which reflects growth of 58% year over year.
This higher level of revenue and gross profit was driven by improvement in both segments.
Content solutions revenue of $32 million comprised 37% of total revenue and grew 53% year over year, driven by strong IMAX box office growth globally, with North America up 25% rest of world up, 60% and China up 97% year over year.
Gross profit of $18 million grew 43% year over year, driven by the profitable flow through a box office, while gross margin came in at 56, 1% of revenue down from 60% in <unk> driven by higher film marketing expenses and costs to operate the IMAX connected network, which SKU.
In the back half of 2010.
Technology products and services revenue of $52 million comprised 59% of total revenue and grew 36% year over year.
Or this segment gross profit of $30 million grew 63% year over year with a gross margin of 57, 8%, which was up from $48.
5% in 2002.
This strong result was driven in part by an increase in systems revenue rental revenue, resulting from box office growth of 52% associated with our revenue sharing model, which also generated higher revenue flow through to margin.
Also contributing to our technology products and services results were a higher level of installations under sales are hybrid arrangements and system renewals.
In total we had nine installations in the quarter eight of which were sales as sales type leases and one which was the joint revenue sharing lease consistent with our expectations total installations were in keeping with historical seasonality.
System signings of 28 were at their highest Q1 level since 2018 and compared to seven in Q1 'twenty. Two 'twenty seven of these signings were from international markets, which are driving strong TSA and see a clear opportunity to grow our system footprint and in turn box office.
This momentum has continued into Q2 with 35 signings already achieved this is a very positive signal and we'll feel long term future growth considering the relatively low level of IMAX system penetration, particularly in rest of world.
All other of $3 2 million comprised 4% of total revenue and grew 168% year over year, reflecting the addition of assembly as the acquisition closed mid September 'twenty, two as well as the growth in IMAX enhanced.
Turning to operating expenses SG&A, excluding stock based compensation of $29 million increased $4 5 million from Q1, 2002, driven by normalized level of business activity, including higher sac costs over the prior year as we have returned to full staffing complement following the pandemic in it.
And the inclusion of <unk> expenses contributed $1 5 million of the increase.
As a percentage of revenue SG&A, excluding stock based compensation was 33% versus 41% in Q1, 'twenty two an improvement of 740 basis points.
<unk> cost discipline efforts and the strong operating leverage in our business.
Adjusted EBITDA attributable to IMAX was $27 3 million or 34, 4% of attributable revenue and grew 84% compared to $14 8 million in prior year.
Driven by growth across our segments and specifically the high level of box office performance flow through to profit.
Adjusted EPS in Q1 was 16.
Which would have been 19, except for the negative tax valuation impact of $1 6 million or <unk> <unk> in Q1 'twenty three.
This compares to adjusted EPS loss of <unk> 14 from a year ago period, which includes a negative tax valuation impact of $5 million or <unk> <unk>.
We anticipate for the foreseeable future and approximate $1 million to $2 million or three to four quarters.
Quarterly negative tax valuation allowance impact.
As we turn to our balance sheet and cash flow operating cash flow of $21 million or almost 70% of adjusted EBITDA in the first quarter, representing significant growth of $25 million from the use of cash of $4 million in the prior year period.
This improvement reflects our higher profits year over year, and the accelerating business recovery of our exhibition customers post COVID-19.
For context operating cash flow for the entire year of 2022 with only $17 million.
A tremendous start to the year in what generally has been in recent years of weaker operating cash flow quarter.
Our capital position remains strong as we ended the year with $99 million in cash and $266 million of debt, excluding deferred financing costs $230 million of which is our convertible senior notes due in 2020 that bear an interest rate of 5% per annum with a capped call it $37 per share.
As of March 31, our available liquidity was $423 million, including cash and cash equivalents of $99 million and $324 million in available borrowing capacity under the company's revolving facility. Furthermore, as of March 31, $192 million remains available under.
Our share repurchase authorization.
This concludes.
The first quarter was a strong start to the year.
As I said last quarter, we believe and are now seeing that 2023 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 and the long term opportunities for growth are even more significant the ceiling is very high.
And when you factor in our global system under penetration along with the emerging potential of our streaming technology backed by our strong brand.
Look forward to reporting on our progress on all these fronts going forward with that I will turn the call over to the operator for Q&A.
Yes.
Thank you.
As a reminder to ask a question. Please press star one one on your phone and wait for your name to be announced to withdraw your question. Please press star one again.
Standby as we compile the Q&A roster.
Okay.
And one moment, please our first question.
Our first question will come from Eric Wold of B Riley Securities. Your line is open.
Thanks.
Hey, good afternoon I guess.
Quest two questions from me I guess rich.
The 63 signings, you've announced year to date and I guess, probably what's what's in discussion and it hasn't been announced.
I know you talked about.
The strength of avatar, and what that kind of driving these accelerated discussions I mean, there have been a series of other box office strength in the past 10 plus years in the prior avatar what makes this.
Different possibly from those other periods and then how does this impact your thoughts around kind of ultimately back selling or penetrating certain markets as you see where this demand is emanating from.
So Eric I think that.
<unk> was a factor and the avatar effect, which we've talked about but I think in the quarter. There was much more going on than Avatar first of all let's talk about avatar, which as you know we did 11% of the box office.
Less than 1% of the screens and the $255 million, but 13 years ago with avatar and the Avatar effect. There was one avatar now we have avatar is coming every two years or three.
Three more of them. So in one way I think of it as an off balance sheet asset. So if you are.
If you are someone thinking of getting into the IMAX business you know for the next.
A number of years that you have an avatar coming so I think maybe the avatar effect even gets.
<unk> to a certain extent, but I think besides avatar.
What happened was a lot more kind of systemic event so as.
As you know our local language content both in it.
In its place of origin and in other markets, what's almost a third of our box office in the quarter and that's that's kind of a totally different look than we've had in the past. So to give you. An example, this past weekend I think we did about $4 5 million.
Super Mario and people say Oh, they played Superman, but overall our box office for the weekend was over $13 million.
So I think it gets way more likely that you can't just look at the latest Hollywood release, that's coming out and again coming but let's fast forward to this week and it's labor day in China, which is a five day holiday and we've got three we think going to be very successful films playing there.
In India, one of the most anticipated films of the year is opening this weekend so.
In the old days with IMAX. So if you look at it and say well, there's not a lot coming in North America.
It's hard to predict I don't know, but.
But when you look at it this year I think there'll be a bow on mario's opening in Japan, you'll look at it in piece all that together and you say Wow, there's a lot of box office coming out of there and I forget it lessens the volatility and the dependence on Hollywood blockbusters.
People in their markets Theyre, not just looking at avatar, but if you're in China you are looking at.
Panama.
Fewer in Canada, you're looking at India and releases and I think when you put that all together it all adds up to a much more predictable stable box office, which of course avatar is part of but I think it's a lot more than that.
No.
Rich and I guess last question.
Obviously you are.
In the critical problem of having to full of a slave to that you've got.
Moving to slide to give incentive for room on IMAX, but you are still somewhat tied to a.
Film releases and film successes, and then think about Sim wave what needs to happen for that technology to become a true kind of a recurring revenue stream that's decoupled from any.
Kind of content release calendar on streaming platforms otherwise.
What needs to happen to that to become the case.
I think we need to wait a little while to rollout the products in a more broader.
Broader way, but the product itself you don't recall.
Basically does streaming optimization, which is a figure it's out the optimal compression rates on different kinds of content in order to save streamers money and as a matter of fact that product.
Just wanted to award as best New product in its category at Nab This last weekend.
At Nab, we had way more discussions are way more leads in some way as ever had before so I think we just closed on it five months ago, obviously, the narrative of how streamers can save money, it's a really important narrative in that world the total addressable market.
It is quite large and now it's time for us to roll it out now we have clients for.
For different similar products, including Disney.
Disney plus and Comcast Paramount plus some.
Lots of other clients, but we haven't really pushed this product.
This product at this time, which we believe over time could be a game changer now do I think it is going to contribute significant revenues in the third quarter no I don't but I do think as we launch this product and people understand that it's going to gain traction and I'm quite excited about its potential.
Diversify our revenue and profit streams.
Helpful. Thanks Rich.
Thank you.
One moment please for our next question.
Okay.
Okay.
Our next question will come from Eric Handler of Rob <unk>. Your line is open.
Thank you very much for the question good afternoon.
Rich I wanted to.
Talk a little bit about the local language.
<unk>, obviously had a very high percentage in the first quarter as you Mark.
Your full year box office guidance for this year.
What are your.
Language could potentially account for that.
And where do you think that amount could go over the next three or four years.
So Eric as you know, it's dangerous to predict how particular movies are going to do and I'd, rather look at it from a portfolio basis.
Because part of it is what do you think Hollywood movies, and then they do and what percentage that is going to be but certainly when we put together our guidance, which we gave on the last call.
Understood that the impact of foreign films could be significant and Thats part of what got us to where we came out and.
We'll have more local language films than we had last year in the second quarter I believe I just went through.
This coming weekend, but but again I think it's going to be choppy and I think some of it is going to depend on China, because China is our first and biggest market for local language films and again.
Mentioned this on the call, but I think it's worth underlining that last weekend in China for anime Japanese movie called Slam Dunk, we did $5 $5 million. So this is really a growing area for us and it involves how fast it grows and how far it grows and it also.
But Hollywood films too so I think trying to SaaS. The percentage is very very difficult other than to say I think the absolute number will be bigger than it was last year.
Fair enough.
Let me ask this question then.
Let's see we continue to see very good.
Language films over the next several years, let's say doubled.
Volume.
Your local language film.
Not have any consequential impact on your DMR costs.
I don't think so Eric although you're giving me the opportunity to mention that for local language films.
We're actually doing our DMR cost and many of the territories. They are being released so for example in India. We just started DMR in.
Indian films in India in Chinese films, we do in China, and the cost of DMR are cheaper in those territories and they are doing them in the United States. So the more product we do there as a percentage of the total product the average cost should come down.
Thanks Mark.
Thank you.
One moment please for our next question.
Our next question will come from David Panofsky.
J P. Morgan your line is open.
Alright, Thanks, Rich I appreciate the success Youre seeing in China with local content, but if we look at kind of Hollywood films, and we start to see more get dates I think the recent performances mix, especially for some of the comic book features. So I'm wondering if you think theres been shifted all in local taste over the prior three years or is this just too much.
Through from.
From a relatively small sample.
Well, David we're not yes, I think it is a relatively small sample I mean, we're only four months away from avatar, which during the height of the pandemic.
A significant part of the country was locked down and we did over $50 million and you go through the slide even add man.
Which as you know didn't perform well in China. It wasn't that far off of what the previous and maps had done. So one problem I have is that a very short sample size begins being characterized as a trend.
I think it's way too early and if you look at some of the films that have already got NAND.
Fast and furious and Transformers, and I believe mentioned a possible we'll get in.
Those are usually very big performers in China. So.
I think we just have to wait and give it some time, but I personally I'm very optimistic that movies that played well before that those genres of movies will continue to do well.
And one other thing I should add as well.
With two parts to it.
Films that have gotten in and China have gotten in a lot earlier than they used to so it is much more time for a proper marketing campaign and public awareness to bill and that that's something extremely positive and then.
I also think that.
There'll be momentum so there were big Hasnt been Hollywood film last year very much because of the pandemic and other actions I think once film start to come in like in the rest of the World you trail or other one momentum sort of bill and I think.
I've met some will.
Improve the performance of following films, so I don't see that as an issue right now.
Okay, and then just with the potential for a writer's strike wondering how if at all you think this could impact IMAX I would think studios would hold pretty tight to their IMAX dates, but any risk if we got into a very extended strike that could lead to some movies maybe later.
And the year getting pulled off this lead to help plug a future gap in the schedule.
So I think.
Almost every movie I hesitate to say every movie, but close to that is already pretty much locked. So I think there is very little risk for the rest of this year and again, because we become much broader than Hollywood, we have much more ability than almost anyone else to slot in other movies.
At that time and also remember that only one third of our revenues from North America. So it doesn't impact us much a lot of other territories, but im pretty confident in saying this year I don't really think it would have.
Much of an impact now if it's a really prolonged strike and it goes well into 'twenty four of course, it could have an impact but that's not what we're hearing is going to happen.
Yes.
Thank you.
One moment please for our next question.
Yes.
And our next question will come from Omar <unk>.
Wells Fargo. Your line is open.
Good afternoon, guys and thank you for taking my question.
Going back to signing it seems like you guys are reaching an inflection point here with findings and this is all happening without China.
Can you give us some context on what's changed.
How are your conversations different with exhibitors.
And then also maybe you can talk about so how should we think about the timing of some of these signings are they mostly 23 events are 24 events, just trying to sort of triangulate here.
As it relates to I think you guys are are the signings are accelerating and you don't even have China in the mix. So would it be fair to think that you have a clear path to get back to pre pandemic levels signing.
We move beyond 2003.
So I think there are several factors Omar I think.
One of them is kind of the percentage of the box office, that's being done by blockbuster and <unk>.
As you know.
Percentage of movies that were IMAX kind of movies has been rising steadily but.
The pandemic kind of accelerated that because a lot of the smaller and mid level movies went to streaming. So I think it just gives us a full slate.
More comprehensive slate I don't want it.
To repeat myself, but the globalization of the film slate has also made or the.
The outlook of your someone considering getting into the IMAX business you have more confidence in less dependence.
On on Hollywood.
Think market share is a big part of it.
Our market share is up about 50% in North America since pre pandemic at all.
Overall in the World it's up about.
Mid <unk> percent, so I think.
People are just more comfortable with the economics.
I'll give you one for like a micro example of that of Japan, Our PSA is around $1 8 million and.
And in India, They are pretty close to what they are in the U S. So if you're thinking of getting into the IMAX business to put a model together it looks really attractive.
To do that and then I think all of that stems a little bit from the fact that the pandemic has changed consumer behavior. So after sitting on the couch for a number of years not just in IMAX, but.
And concerts and sports and special events people when they go out.
We're getting used to paying a premium price for a premium experience and thats become more and more important to them.
When you put all that together and you model it.
Just makes the case for us to go into the IMAX business more compelling. So I think it's all of that.
The second part of your question about pre pandemic levels. It depends on the year and again you have to divide the signings you have to divide them into Newbuild switch out.
New theatres, which put us in more territories and remember we don't just get paid from the theaters, we get paid when the studios on that so that has kind of a double of that and you have to look at upgrades. So I think if you looked at kind of new.
Yes.
New locations.
I do think that bill could start to approach pre pandemic levels.
And even this year, we're only four months into it with 63 signings. So even this year could approach those levels, but I think going forward.
Remember Omar that all of this is happening where in some areas of the world. The exhibitors are still under some financial restraints. So in North America, We announced the biggest deal we've announced in a decade and you still have exhibitors that are challenged.
Yes.
In Asia, I think that's a lot better and I think that's one reason a lot of the signings have come from there because there.
I'm out sooner and they're better capitalized and I think China, there'll probably be a six.
Six to nine month lag time in their box office is coming back, but when you put it altogether I think once people get through this period of time.
No reason, we can't go back to historical levels.
That's very helpful and maybe going.
Going back to similarly, I know you talked about.
It's been around five months since we closed the deal you've been sued in a new head of sales there.
Maybe give us a timeline of what are some of the the key.
The top priorities that you have over the next six to 12 months, there and what's the long term opportunity, but not only from from an external standpoint, but also how how technology could help.
IMAX internally as well thanks.
So the timeline is.
We have developed.
A number of leads like I said at NAV.
We don't want in the first instance necessarily to aim for the biggest clients in the world I think we want to go for small and mid sized streaming companies to demonstrate the use case and document some data that we can use <unk> quite literally today.
Following up on those leads and we're trying to get in as many demos and as broad a territory as we can and then as the use case.
Keeps rolling out and as you mentioned, thank you I forgot that in my previous answer that we hired.
Our new head of revenue and sales who has actually been at the company recently, which he took from like $30 million in sales to 80 and a couple of years. So I think you just have to put those pieces in place.
When the process of doing and then I think you demonstrate your use case and then Hugh.
You try and blow it out in a broader way and we're going to be as aggressive as we prudently can be.
But as I said before I don't think Youll see youll see meaning.
Meaningful numbers to IMAX Corporation come in into some time.
Mid 24% to 25.
Thank you that's very helpful.
Thank you.
One moment please for our next question.
Our next question will come from Stephen <unk> of Goldman Sachs. Your line is open.
Hey, great. Good afternoon, Rich you mentioned imax's share the global box office I was wondering if you'd talk a little bit more about your expectations for share of total box as you look at the slate for the rest of 2023, thank that the strong trends in 2022.
And <unk> continue to hold or do you think theres some reversion to mean that takes place this year.
Yes.
I think the whole period, hopefully they go up I'd be really surprised to see our aversion.
So the mean because the world has changed and a lot of ways mid level movies are going to streaming.
Foreign language films are going to different countries.
But the level of blockbusters is increasing.
Went through a kind of briefly on the call, but the slate for April was not one when you looked at it on the outside.
Mario you thought would be okay, but it was not like a summer blockbuster.
<unk>.
We more than doubled what our forecasts were for April and what last April looked at so.
As of still April it's looking like really good. So I don't think in a period, where you go into guardians of the Galaxy and fast and furious and Indiana Jones.
Mission impossible films that are kind of franchises that are always done great in IMAX.
<unk>.
I'd be shocked if our market share went down at that period of time and.
Also.
Remember is that our network footprint is going to grow I mean, obviously, we've given install guidance for this year. So we will have a larger footprint than we had and at the same time, our footprint is increasing at least in North America. Some of the conventional footprint is decreasing and even though they are not direct competitors.
I think that will also give us incremental market share so I'd like to be able to predict but I don't want to get ahead of myself that it will continue to go up but I certainly don't see it going down.
Great. Thank you that's helpful. And then maybe just one on the opportunity in ticket pricing and we've seen some of the major theater operators start to talk more seriously about dynamic ticket pricing.
Over the last six quarters I was curious what your views were on dynamic pricing for the box office more broadly and then perhaps more specifically the opportunity for IMAX on pricing over the long term.
So I'm actually going to start a little more general and then then to answer your question, which is one thing I didn't mention.
I was talking recently to one of our important European exhibitors and I said are you are you over screen and he said no. It's not a too much screen problem. It's a revenue problem revenue per seat and he said to me by the way one of the deals we sign he said, whereas in the past.
I, probably would've invested and more screens.
Said, but the ROI on putting in premium things like IMAX is much better than investing in screens. So I do think the ability to get that ticket price premium is one way they see.
Going forward. He said to me when I do my own internal model and I convert my network over to much more premium.
Keep my screen count the same and box office doesn't have to grow by much and have a very different economic model. So I think ticket pricing is another example of that if you look historically during inflationary periods, it's been relatively easy to raise tickets as I said earlier in another.
Other context.
Look at the price of concert tickets.
Sure. It's tickets, it's not like we're pushing against a tired what kind of with the tide and.
Also.
The ticket prices even for IMAX.
Our way lower than for comparable special experiences in other theater cod.
So it's all of those things. So I think there's a lot of way to move whether the answer is dynamic pricing or not I'm just not sure and it's also a complicated question because the studios have a pony in that race too and as studios have traditionally resisted dynamic pricing I don't know if theyre going to.
Feel differently about at this time.
And also dynamic pricing models, where the price goes down over time.
It's higher for better seats, and IMAX to our percentage of great seats is much higher than most of our films. We play for one to two weeks. So we don't have to fill a box.
For a week five like data. So I think the arguments for dynamic pricing are much less convincing in IMAX.
Great. Thanks rich.
Thank you.
One moment please for our next question.
Our next question will come from Steven Frankel Rosenblatt.
Your line is open.
Good afternoon, and thank you rich, we talked a lot about local language, but one element.
We haven't dug into yet is the injection of IMAX DNA into films in markets other than China, I know it took us several years to get there in China now.
Regular feature kind of what's the path.
Having other local language content, that's either shot in IMAX or has material IMAX DNA to it.
Yes, it's something that we're starting to focus on Steve more and more and I think.
I'm not.
Up to speed on a project by project basis, but I know in Japan, and India. We've had specific conversations about using our cameras. In this one filmmaker I know of and <unk> I've talked to my itself with starting a project probably in about six months, who intends to filmed with IMAX cameras.
So I do think that's going to be more and more.
A part of our strategy.
Particularly the digital cameras, because it's not that much more expensive to shoot with them.
I would also say and.
Japan in particular because of the popularity of IMAX suggest.
It makes sense for them to do it so.
I think that's a trend you'll likely to see.
Okay and maybe some.
Okay.
Your latest thoughts on.
IMAX wise, obviously now for your cut Brian it's over with content, but.
Maybe some of your thoughts on how you think best to use that capacity.
So as you know we acquired 250 theaters that was our target for the end of last year.
And I think we need to further refine our content strategy and we're in the process of doing that now I think the things that work very well.
Marketing related events. So we're doing a guardians of the Galaxy then I think next week with a number of members of the cast.
Just last week.
We actually did something original which was with Paramount plus we took the cast of per card.
Show that streamed on Paramount plus some we did an IMAX live event around that.
I think we did an event with Scorsese this week.
Bose afraid or maybe it was last week.
And those events I think are good marketing tools.
The talent is able to promote its own content. We did create three we did live from the Red carpet.
Significant number of theatres and that worked very well. So I think we're going to focus a lot on that in the near term I think we'll continue to experiment with things like <unk>.
Sports.
Concerts.
Other kinds of things I think we will focus more on the distribution model, which is the one thats used by IMAX in the film business than the original production model, because again thats not where the history of whats made IMAX what it is and then.
If it continues to deliver.
Good marketing events, so we could add up the numbers and find really good distribution events. Then we'll go to the next level, which is 500 more.
500, rather than $2 50, so we're in the.
We're in the process of using it for and what we know works and testing it for what we hope works.
The short way to think about it.
Great. Thank you.
Thank you.
One moment please for our next question.
Okay.
Our next question will come from Chad Beynon of Macquarie.
Macquarie Your line is open.
Good afternoon, and thanks for taking my question.
That's on the quarter and the signings levels I wanted to start with capital allocation.
Natasha <unk>, you and the team have reduced the share count nicely in the last few years as noted, particularly in <unk> and 'twenty two by I believe 5 million shares.
Stock market is always fluid, but it certainly looks like free cash flow for you guys is moving in the right direction. So how are you thinking about opportunistic or programmatic buybacks as we look forward. Thanks.
Thanks, Todd Yes. So we are continuing to think opportunistically about it when the stock prices in the right.
Level, we'll buy back we were actually in a blackout for most of Q1, which is why.
You saw some buybacks, but not as significant as we have historically as we pretty much only had a two week open window during that period, and we did put in <unk>, but that startup.
It gets locked in and then it does what it does vary based on the price during that time, but.
You saw our cash flows for the quarter was a great start to the year operating cash flow in Q1 of $21 million exceeded all of 22017.
It's a second good cash flow quarter in a row and in general with box office is tracking to $1 billion or higher good things happen with.
Margin and in turn cash and third incremental nature of our business, though.
As you've seen in the past when we have excess cash we go through a cycle of doing repurchases.
That's great interesting. Thank you and then rich I wanted to ask about just the change in direction with the streaming debate I know this hasnt really affected you guys as much in the past couple of years, just given your focus on block Buster physician, but I know this was certainly a positive takeaway for the overall industry.
From cinema Con. So I'm wondering if you could just kind of opine on updated views on this if moviegoing begets moviegoing and maybe you get some more people out to the theater. If this is a positive or a kind of a non event.
For you guys. Thank you.
Well I mean, I think the data is clear that a theatrical release really helps us streaming release.
I've read some of the data that is being shared witness streamers and it's just not a question theatrical release helps boost the entire value chain. I mean, there is a reason why people have done it forever like reselling our product building above all.
All of those reasons are really positive.
Part of it I think Thats, what you were referring to was Apple and Amazon.
Deciding to release their streaming movies.
Theatrically I think for some movies it'll be really good the blockbuster ones and the more the merrier I don't think its a game changer for us because our slate was really.
A lot on it but for some of the big movies I think so.
It's a really good addition, and even some of the ones. This year looking into whether we need to get involved with them. So it's nothing but a net positive.
Thank you very much I appreciate it.
Thank you.
Yes.
We have time for one more question.
And our next question will come from James Scott of Barrington Research. Your line is open.
Okay.
Alright, Thank you very much.
Rich I wanted to ask you about two of the international markets.
In Asia, and India, Indonesia, because it's brand new but very large I think you said number four population I wonder if you could characterize the market.
Is it mostly Hollywood content or is it mostly local language or some sort of blend with regard to India.
I was wondering if there are certain characteristics within the type of movies that are made their local language wise that plays, particularly well in IMAX and I'm wondering if the local production is starting to gravity.
Gravitate toward.
Meeting those.
Elements.
So for India, Indonesia, it's mostly a Hollywood market and Thats. The partner, we signed with we've been in business for a while and.
Succeeded by mostly doing Hollywood films, However, we actually as part of our overall theme on this call. We actually did a local language Indonesian film there that sort of did okay, and we're talking to them about doing more films there, but I think they are primarily for the time being.
Is it dependent on Hollywood, just I know you know this Jim but to remind everyone. Its the fourth most populous nation on the planet. So I think there is possibility there too.
To do a lot more obviously, depending on demographic issues and other things like that.
In India.
I was over there for a week meeting with a bunch of exhibitors and studios and I think two real positives for US is one the.
The amount of local language content that we're doing in India has gone up and that's an important part of their box office I mentioned earlier, we have almost the same TSA in India that we have in North America, which is close to $1 billion. So certainly the economics in India.
Work work work.
Pretty well.
I think Andy.
India has other kind of structural issues.
Like.
The potential partners there are much more highly fragmented than they are in other parts of the world. So there's a lot of independents. There. So like if you look at China, We could do a 50 theater deal with gives us really blow it opened and the wired a lot of opportunities.
To do that in India, it's much more blocking and tackling and.
It will take some time and then the <unk>.
Third thing I would say about India is.
That construction.
And rollout takes much more time, there there's more bureaucracy. This more approvals this are more government intervention.
Actually pretty optimistic on the Indian market, but I don't think thats going to turn overnight I think it's going to take a little time on one of the things we're doing in India with the right clients.
Redoing, our revenue share deals, which we never did in India before and of course, we'll diversify our risk.
We're very selective in who its web, but we're doing that to try and move it along quicker quicker and try and fight some of the structural headwinds.
Okay and one other thank you and one other question last one.
Going back to one of the comments you made about the.
Premium preference I wonder if.
There is any growing appetite for multiple IMAX screens per theater.
U S or internationally, along those lines, where you can either.
Good times are multiple.
And at the same weekend or that sort of thing.
So we've thought a lot about that over the year as Jim and I.
The pluses for the really big movies, you could really packet, but someone used the analogy for me.
IMAX is like the charge that's built for Easter Sunday.
Not every weekend as Easter Sunday. So my concern is how you program it.
During slower periods of time, and I, certainly wouldn't want to do something that couldnt be an economic success. So what I think is a much better idea would be.
Filling in the zone. So for example, if an exhibitor has a zone.
There are two theater answer I don't know 10 miles apart and they own that zone, what I'd like to see them do is put a third theater at the midway point and I think thats, a much better model than multiple theaters in one location and that's one that I've specifically discussed with exhibit.
And I think there is some interest in that.
Okay. Thanks very much.
Thank you.
This will conclude the Q&A portion of the conference I would now like to turn the conference back to CEO rich <unk> for closing remarks.
Thank you very much. So this is usually I close by summing up the <unk>.
Call.
Going to be a slightly different direction, which is I think over the last decade, plus it's kind of been theatrical versus streaming and I'd say, there was how who's going to win and how much. Each one is going to cost the other one in fighting and head on and I have recently been coming.
More and more to the conclusion that streaming and theatrical can help each other and I think one of the examples was one of the last questions were more content will help more content from streaming will help theatrical and I think the performance of theatrical will help streaming but.
But for me and even more interesting example is kind of a worldwide phenomenon around anime, which has done really well in IMAX and anime is actually created through streaming platforms, where they have lots of data about the individuals who are online and then they take that.
Online community and a turn it into a theatrical community it could be TV or it could be movies.
Or another example, I would give like with local language content, where.
Exhibitors have less people, who go to India in local language films and they promote.
When there is a cricket match on so as I look to the future I think a lot less about how streaming as a threat and I think a lot more about how both sides are going to be able to figure out how to make the pie much bigger and thats the way Im starting to think about it and I just shared because I hope so.
Some of you think about it that way and I really appreciate you being on the call as I said at the beginning.
Great time to be at IMAX and look forward to the next quarterly call.
This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
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