Q2 2023 IMAX Corp Earnings Call
[music].
Thank you for standing by and welcome to IMAX Corporation second quarter, 2020 three earnings call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one one on your telephone.
I would now like to hand, the call over to Jennifer Horsley.
Of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us on Imax's second quarter 2023 earnings conference call on the call today to review the financial results are rich Galperin, Chief Executive Officer, and Natasha Fernandez, Our Chief Financial Officer, Rob Lister Chief Legal Officer is also joining us today.
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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 at the conclusion of this call our historical Excel model will be posted on the website as well.
I would like to remind you all that 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 not occur or occurrences to differ please refer to our SEC filings for a more detailed discussion of some.
The factors that could affect our future results and outcomes.
Any forward looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information future events or otherwise.
During today's call references maybe made to certain non-GAAP financial measures.
Discussion of management's use of these measures and the definition of these measures as well as reconciliations to non-GAAP financial measures are contained in this afternoon's press release, and our earnings materials, which are available on the Investor Relations page ever website at IMAX Dot com with that let me now turn the call over to Mr. Richard Gephardt.
Thanks, Jennifer and thanks, everyone for joining us today, what a weekend and water quarter. We're pleased to join you today on the heels of the historic few days at the global box office of weekend wear moviegoing reasserted itself has an unparallel cultural and.
Gulf ports and IMAX demonstrated its ever been.
Okay.
At the Vanguard of cinema.
The paradigm shift to IMAX has never been more apparent.
IMAX obliterated expectations with a $35 million opening for Oppenheimer, delivering a staggering 20% of the films global debut on only 740 screens.
In China, we delivered more than 16% for local blockbuster creation of the gods.
Just 1% of total screens, our best ever indexing for China film and we scored 20% of the debut of mission impossible seven in Japan on just 48 screens. All this combined to lift IMAX to a $46 4 million dollar weekend the fourth best in it.
History of IMAX, there is real heat around our brand and technology in the marketplace right now and this is evident in our strong financial results for the second quarter.
IMAX drove more than 30% year over year growth across revenue as well as adjusted EBITDA net income and earnings per share, including nearly $33 million and adjusted EBITDA and adjusted EPS of <unk> 26 cents per share we grew signs.
For new and upgraded IMAX systems with 84 worldwide year to date far more than the 47, we achieved and all of 'twenty two.
And we maintained our record breaking share of the global box office for 2022, even as more non IMAX and mid and low budget films return because it's the optical market.
As a result, we remain on track to deliver significant growth and system signings installations Global box office and adjusted EBITDA for the full year. What's remarkable is we deliver despite Q2 slate that yielded mixed results at the box office. This speaks to the differentiation.
IMAX and the diversification of our business across box office and network sales as well as Hollywood in local language content. This potent mix makes IMAX, a consistent winner and our dynamic global marketplace for entertainment.
Increasingly it is clear the future of the movie business is IMAX the shift to premium experiences and moviegoing that IMAX created is no longer just a post COVID-19 trend, it's the new normal the way forward.
IMAX is a strong global brand and a time when local language content is exploding as a future growth driver of the global box office International markets continue to offer our biggest opportunity for network growth.
Finally, as studios hone their distribution strategies across the Africa on streaming our end to end technology is well positioned to deliver the highest possible quality across both.
Additionally, we recently took a significant strategic step with our proposal to acquire full ownership of our IMAX China subsidiary.
Our expansive footprint strong market share brand and industry relationships and our mix of Hollywood and local language films make us very optimistic about our business in China.
Today I'd like to provide updates on our box office and film slate with a focus on the shift to IMAX, we're seeing and moviegoing.
Global momentum behind our brands with a focus on network sales activity and local language and then I'll turn it over to Natasha to take you through our financial results in detail before opening it up to questions.
First as we look at our global box office, the dominant trend continues to be our market share through June of this year, our share of global box office is three 3% and this month is on pace to be one of our best July ever in North America for the first time ever we.
We delivered more than 10% of the opening weekend box office for six consecutive releases of $50 million of more the second quarter also saw IMAX continued to expand its impacted animation, we reach our number one and two biggest animated movies of all time with the Superman.
Brothers movie and spiderman across the Spider verse, perhaps the best indicator of the power of IMAX was a significant attention devoted to our play times for mission impossible dead Reckoning part one at Oppenheimer and the competition for our screens and a broader summer marketplace.
And IMAX is delivering with both excellent films our debut with Oppenheimer gave us our best indexing of any major release ever global domestic and international is the biggest IMAX debut in a long and wildly successful partnership with Christopher Nolan and it helped turn.
The film and two an unmistakable cultural event with IMAX settling out for AAM shows and people traveling hours and sometimes flying across borders to see it in IMAX film mission impossible seven delivered the highest grossing IMAX debut of the franchise and has earned more than 33 million.
Globally for IMAX today, the back half of the year as strong cardholders as well, including film for IMAX releases due to an <unk> and a loss kingdom apples Napoleon from Ridley, Scott and killers that the power mode from Martin Scorsese, both schedule for <unk>.
So the <unk> release.
There is some concern about release states shifting due to the labor strikes we believe nearly all our second half slate has wrapped shooting. Additionally, given our surging indexing. We believe studios will be reluctant to move films on a site potentially sacrifice a already.
Great to IMAX window. Furthermore, our diversified programming strategy will help offset the impact of a shifting Hollywood slate.
Local language films will continue to bolster escalate in the second half we now expect a program more than 40 local language films worldwide in 'twenty three.
Upfront in the 30 to 40, we initially projected we've had several solid wins in local language in recent months IMAX delivered more than $10 million with the Chinese blockbuster lost and the stars a mystery thriller we opportunistically added to our slate within a matter of days in the quarter.
As I mentioned earlier, we delivered $8 6 million this weekend with creation of the gods, one king of storms 16 six.
6% indexing and our biggest summer debut ever for Chinese film and in Japan, IMAX was granted its first ever day and date release for studio Ghibli film How do you live the final film from the legendary Japanese Director Hi, Hugh <unk>.
How do you live delivered one of the biggest IMAX opening weekends of Japan of all time with IMAX earnings 16% of the films debut box office, and just 44 screens to date IMAX has delivered more than $2 $8 million with the film we expect it will have a long run in Japan.
Select markets worldwide throughout the rest of the year our performance across a unique mix of local language blockbusters continues to be a catalyst for network growth and we see potential for Oppenheimer to drive further growth as we've seen with films like Avatar, two where we vastly.
As I said earlier, we now have 84 signings this year compared to 47% for all of last year, we're seeing exhibitors, bringing more IMAX to their existing multiplexes globally to drive growth rather than adding more conventional screens such as multinational exhibitor kannapolis.
Which it may signed a deal to double its IMAX footprint. We also more than doubled installations in Q2 over Q1 of 'twenty three with 20 in the period and that number reflects our continued focus on high growth markets beyond North America, and China year to date, we've grown our rest of the world foot.
Print.
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While there continues to be discussion about China and the economy, we remain bullish.
Many of the world's most successful multinational category leaders, we built a robust business in China over decades, yielding hundreds of millions of dollars in revenue. This year IMAX box office in China through mid July is up more than 150% year over year, Bruce It's exhibition, which is up.
Almost 60%.
Our market share in the first half has been remarkably strong four 6% of the overall box office on less than 1% of the screens, we program a healthy mix of local Hollywood and international content, particularly Japanese anime.
And while Hollywood blockbusters have shown softness in China, our average opening weekend indexing for Hollywood releases has sort of 15% in China again on 1% of the screens up from 10, 7% in 2019 as China emerges.
Further from Covid and Moviegoing recovers, we believe there is upside for Hollywood and local films in the market.
As we expand across the world, we are expanding across platforms in the second quarter, we announced an agreement to sell worldwide rights to our forthcoming documentary the Blue Angels to Amazon Studios, a first of its kind deal that will see the film go to Prime video following it.
Exclusive Ron and the IMAX network.
We continue to refine our go to market strategy with <unk> and we're seeing a positive response with stream is encouraged by our efforts to champion quality in that space. We remain focused on solutions for streamers that allow them to compress video images, while preserving optimal quality and.
Adding significant cost savings in conclusion, we believe our performance in broader market trends demonstrate a paradigm shift in cinema with IMAX getting increasing market share and that for a remarkable indexing is clear evidence of a structural change and moviegoing.
Increasing numbers of consumers on a global basis seek out IMAX the future of the movie business is IMAX and it has a bright future we created and continue to lead the shift to premium movie going that is most in demand among audiences filmmakers and studios.
We are the only global premium theatrical platform with unparalleled scale and a time when global markets and local content are the most promising drivers of future growth.
Finally, our strong brand and technology enabled us to expand and create value across the ecosystem and capitalize on the interconnectivity between theatrical and home entertainment.
We are confident in our ability to build on our momentum to deliver a strong second half to 23 and drive further global growth across the IMAX network. Thank you and with that I'll turn it over and Natasha.
Thanks, Rich and good afternoon, everyone. As rich said Q2 was an excellent quarter, which showcased the diversity and strength of our technology centered business model. Our signings momentum continues and installations are ramping of our box office grew through a burst mix of content and without the benefit of any mega hits like top gun and the pre.
Here year quarter.
In summary, our results included IMAX box office of $268 million revenue growth of 32% over the prior year adjusted EPS of 26 up from <unk> in the prior year period, and adjusted EBITDA attributable at $33 million or 35% of attributable revenue.
As I noted last quarter, we are seeing the winning portfolio of Hollywood and local language content create perhaps lower volatility from Hollywood releases as we optimize the programming of the IMAX network to maximize box office.
This in turn is driving greater demand by exhibition customers for IMAX systems, creating a positive growth dynamic.
And as rich highlighted Q3 is off to an incredible docs often start with our biggest July opening weekend ever global and domestic led by Oppenheimer as well as local language titles locked in the star creation of the gods part one and how do you live putting us on track to achieve our highest average July box office.
Now for a closer look at the second quarter.
IMAX box office of 268 was up 8% year over year and roughly in line with Q1 box office with very positive profit flow through given the mix of titles.
This included hit animated titles not historically, the mainstay of IMAX, such as Super Mario and Spider man across the Spider verse, coupled with good contribution from blockbusters like Guardians of the Galaxy and fast turn.
Add to that China box office that was fueled by a mix of local language and Hollywood titles. The performance in greater China led to IMAX box office market share in Q2.
Five, 2% and 1% of the screen driven in part by an average indexing up 15% on Hollywood releases.
Total revenue in Q2 with $98 million up 32% from $74 million in Q2 2022 at a 59% gross margin, we recognize gross profit of $58 million, which equates to growth of 31% year over year.
This higher level of revenue and gross profit year over year was driven by improvement in both segments.
Content solutions revenue of $31 million comprised 32% of total revenue and grew 6% year over year, driven by IMAX box office growth.
Gross profit of $20 million or 64% of revenue grew 15% year over year, driven by the positive profit flow through from stronger box office performance, along with lower film marketing expense, given the mix of titles and recovery of China.
Technology products and services revenue of $64 million comprised 65% of total revenue and grew 49% year over year.
This segment gross profit of $36 million grew 42% year over year. This very strong result was driven by a higher level of IMAX system installations under sales or hybrid arrangements as well as system renewals and amendments.
In total we had 20 installations in the quarter.
14 of which were sales are hybrid and seven which are joint revenue sharing leases.
The installations 14 were in international markets, reflecting the strong momentum we are seeing in those geographies.
Signings momentum also continues with 46 coming in Q2, which is more than three times. The 13 signings in Q2 of 2022.
The rest of world strength is evident in the 84 signings we've had so far this year.
68 of signings over 80% were new systems compared to 30 for all of 2022 26, Wherewith exhibition partners, who are new to IMAX in the past year.
25% were in the U S and Canada and 13% in Europe .
Nearly half were in Japan, and southeast Asia, including the seven Aon signings from January which are all installed and off to a strong start.
Three signings were in China, all of which signed within the last month and the vast majority were in high Psa countries.
Turning to operating expenses, we are investing for long term growth and to exploit our differentiation and strong brand.
R&D expense of $2 8 million increased one 4 million, reflecting our investments in new technology, including streaming optimization software for assembly.
SG&A, excluding stock based compensation of $32 million increased $2 6 million from Q2 2022, driven by the inclusion of assimilate expenses, which were not in the prior year given the acquisition closed at the end of Q3 2022.
As a percentage of revenue SG&A, excluding stock based compensation was 33% versus 40% in Q2, 2002 and improvement of approximately 700 basis points, reflecting the strong operating leverage in our business model, coupled with continued cost discipline efforts.
Adjusted EBITDA attributable to IMAX was $32 8 million a growth of 29% over prior year of $25 4 million the growth across our segments highlighted earlier and the strong incrementals and operating leverage in our business model drove this excellent result.
From a margin perspective, adjusted EBITDA attributable to IMAX was in the mid <unk> at 35, 4%.
And the strong performance flowed directly to the bottom line with adjusted EPS in Q2 of 'twenty six.
Which compares to seven in the prior year period.
As we turn to our balance sheet and cash flows operating cash flow through six months was $25 9 million representing significant growth of $31 million from the use of cash of $5 3 million in the first half of 2022.
This improvement reflects our higher profits year over year, and the accelerating business recovery of our exhibition customers post COVID-19, including year to date collections of $43 million in China for.
For context on a consolidated basis operating cash flow for the entire year of 2022 was $17 million.
Our capital position remains strong as we ended the quarter with $95 million in cash and $262 million of debt, excluding deferred financing costs.
Of the $262 million of debt $230 million reflects our convertible senior notes due in 2026 that bear an interest rate of 5% per annum with a capped call taking us to $37 per share.
As of June 30, our available liquidity was $420 million, including cash and cash equivalents of $95 million and $325 million in available borrowing capacity under the company's various revolving facilities.
Furthermore, during the quarter, our board approved a three year extension to our share repurchase program through June 2026.
As of the end of Q2, there was $191 million remaining available under our share repurchase authorization.
Our strong liquidity position gives us ample resources to fund the $124 million to acquire full ownership of IMAX, China as announced on July 12.
To conclude our.
Our results through the second quarter, despite the strength of our business coming from the combination of our unique position in the entertainment industry and our high margin asset light technology focused business model.
And we continue to believe that the opportunities in front of us are even more significant when considering three factors first as Oppenheimer results underscore there is strong demand specifically for IMAX as the most premium entertainment technology company with unmatched global scale second the success, we're having in programming a diverse array.
Of content across our platform, which is supercharging, our signings signings momentum in installations and third the emerging potential of our semi streaming technology backed by our strong brand. We 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.
As a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press Star one one again.
Please standby, while we compile the Q&A roster.
Okay.
Okay.
Our first question.
Comes from the line of Eric Handler of Ross M J M.
Good afternoon, and thanks for the question.
Rich I Wonder if you could talk a little bit about your Chinese local language market share I mean, correct me, if I'm wrong, I mean pre pandemic I remember.
Good movie would do like a local language would be China would do like three to five maybe 6%, but you seem to be consistently getting better from that and obviously, 16% from creation of God's way above average.
Is there anything that you.
You can point to in China or are they just getting used to seeing their own biggest films in the IMAX format is there any marketing going on anything you could point to there.
So Eric I think about around the time.
Pre pandemic a few years before that we made a strategic shift to doing local language films in IMAX and I think before that audiences, where conditions are seeing Hollywood films in IMAX, but they weren't condition, just seeing Chinese language films and iron.
That said I think once we started that.
<unk> got used to it so.
Wasn't a place that was associated with Hollywood films. It was the place associated with films of all types and Youre right I don't have the data in front of me.
My memory.
To be correct.
But I think we used to do like two and a half 3% other market our Chinese local language films and most recently, it's been more in the 5% to 6% range and Thats part of a global trend I mean, one of the points. We're trying to make on the call is there has been this paradigm shift.
Where IMAX was kind of ancillary to the movie.
What youre seeing now is IMAX as the future of cinema will like primary of the movie and I think what about flexes during the pandemic people kind of got tired of sitting on their couches, and especially in China, where smaller apartments in less less room, and I think Dave decided when they.
They go out they want something really special to go out too.
As you said the market share for this weekend's film was kind of unprecedented and in my introductory remarks I talked about.
Japan, and even the anime in Japan, which is homegrown and IMAX has really outgrowth.
It's all part of this bigger model, where people are seeking out our IMAX as a separate thing and instead of just saying Oh Oppenheimer, Let's go see it in IMAX, there, saying, let's look at what's in the IMAX and let's go see that and Thats been our long range plan for a while.
Great and then just as a follow up last year, you did very well with local Indian content.
It looks like you had been getting some really good momentum in that market haven't heard as much. This year I have no clue, what big blockbusters. They have on their slate are how those are spaced.
Spaced out, but anything you could say about the India market.
Yes, I can so first of all I should say that Oppenheimer was the biggest the opening in the history of India. So I think I'm just talking about the business in general in terms of local language, we do have.
Some are going to show in the second half of the year overall I think we had a 20% 30 international films in the second half of the year, but it is even a very major one Eric which I.
I don't remember the title of it.
Issued out before this call Lance I'll come back to it but there are several and Ian one.
As you know strategically we want to do more of them.
Thank you very much.
Okay.
Thank you. Please standby for your next question.
Our next question comes from the line of Steven Frankel of Rosenblatt Securities.
Yeah.
Good afternoon rich. Thank you for letting me ask the question can you talk a little bit about alternative content, given the potential risk of a protracted strike.
What have you thought about that.
Types of events you could do in <unk>.
With IMAX wide alternative content that that could really have some traction.
So we spent a lot of time, obviously, Steve assessing.
How long the strike is going to last.
What kind of content could we play what's out there and pretty much for the rest of the year.
No matter what happens the content statements are about.
So none of this is really likely to be a 2023 issue in terms of 2024.
If a strike lasts a long time, it likely wouldn't affect a lot of content in the first half of 2004 with more likely affect content in the second half of 'twenty four and we have a.
Question addresses so we're looking at local language films, we could lock in early.
Particularly ones like anime or Indian films that would be exportable to other places.
We're looking at things like bringing back so obviously.
Not only Oppenheimer is going to be a great great bringing back after ron's, but mission of Possibles. Ron was truncated I think that's something when you bring back and do very well on documentaries as I mentioned in my prepared remarks, we have one coming out this October and another one was.
We've sold to Amazon is coming out of 24.
<unk> really excited about it it's very much okay action kind of documentary.
So you mentioned in your question you don't live in different events, we've green lit a number of events and looking forward to putting that together.
But to be clear.
The strike is not likely to have a short term impact and it's only if it goes along.
Alongside that it has an impact.
We will do our best in the ways that I enumerated to you to make sure that we have as much content as possible when I think of a strike last a long time.
<unk> going to be content shortfalls, but I don't believe that's.
The most likely event.
Great. Thank you.
Thank you.
Okay.
Our next question.
Comes from the line of Omar <unk> of Wells Fargo.
Good afternoon, guys. Thank you for taking my questions.
Maybe first on signings.
So you guys only have 19 screens domestically and 30 worldwide capable of playing 70 millimeter films with the recent success of Oppenheimer.
This blog, a new wave of demand for IMAX systems or upgrades in North America and global globally, just just wanted to get your thoughts on.
What are you hearing from exhibitors and studios from this type of format and just overall in general.
B sort of like get Avatar effect, the Oppenheimer effect and how are you guys thinking about the potential impact of it.
Yeah. So Omar we are analyzing that data and looking at as you probably remember.
We've already said that we're going to build several more film cameras, so that way filmmakers who has the ability to do it the projectors.
All their data and it sounds like a new generation, but we are exploring more of them that we could possibly refurbish and bring into service at remember it's hard to believe given all the publicity around barb and hymer than it has only been there for four or five days, but we are taking out.
There are opportunities in building, new 70 millimeter projectors are there opportunities and branding other 70 millimeter projectors with either.
Certainly we'll have an outreach to filmmakers because the numbers are so spectacular about the shooting with 70 millimeter. Phil. So we are aggressively examining the possibility of how we could lever off.
Just kind of amazing culture all of that.
You will see us buy different ways to do it going forward.
That's very helpful and maybe I think you alluded to this on your prepared remarks, but there was recent media reports.
Talking about the Warner brothers was strongly considering moving their release dates for dune I'm just wanted to get your thoughts on what gives you confidence that.
That won't be the case or just your thoughts in general what's the likelihood of this happening and if so what are the options are you considering it.
For the replacement of the doing swaps and just see here on the back half of the year.
Right.
During the specifically I mean, there is another great movie coming out around the same time, which is the marvels from Marvel and we can't play because we are committed to June . So June moves will just go over to Mark <unk>.
Having a <unk> as a backup is that the word is positioned today and in the world, but in terms of Doom.
My own opinion is that it's highly unlikely.
To move and it's an educated opinion.
<unk> spent a lot of time on the bats. So June is already in the midst of a marketing campaign or trailers out there is lots of materials out.
The presentation a lot of the conferences, it's a matter of fact, the journey dealer do <unk> are presented at the IMAX CEO Forum. So it's kind of out of the gate. So if you put it back in the game you've got to get.
Duplicate those expenses at some time in the future.
Putting it out of the Gate. In addition June has a very long run time, and IMAX up to five or six weeks and it just was fortuitous that there were no other conflicting projects, but if they were to move that to.
Next year at some time, it's highly unlikely that they would have that amount of run time and just to remind you IMAX was about 20% of the growth on June one.
I know theres a lot of marketing plan due to if they move June two is the carrying cost call it 10% or whatever it is so.
How it how are they going to make up for that cost plus the other incremental costs.
IMAX release is a really important element to their release pattern and as I said, just a minute ago.
I don't think that's replicable for them to have that kind of run time again, so when I look at it from their point of view from a dollars and cents.
Numbers perspective, it just does it make any sense to me that they would move it because and again the only reason they would move it is I would say the active strike is golf and they want to get a premier and put it on the.
The Tonight show or wherever they put the actors but.
No disrespect to Timothy shallow Bay are you going to be able to make up for losing the six week IMAX release is going to be made about the cost of capital and carry it for a year are you going to move into an uncertain year. When you have no idea, what's going to be booked against you when they have virtually no.
Competition right now in the marketplace, it doesn't really make any sense and.
When you look at the other movies I think thats one of the most compelling non jumbo, but you could go through all the.
The same logic kind of applies so I think.
I talk to the distributor that Tom Warner Brothers.
They don't know where that article came from in the press.
They've certainly told me that that article is not true. So all I can do is give you my logical perspective on it but I feel quite strongly that it's not going to vote.
I appreciate that thanks.
Yeah.
Thank you.
Operator before I go on.
A major engine titles in Q3, and the last question so on and severe.
One reason, we have fewer MD in titles in Q1, and Q2 was because of the Hollywood schedule It wasn't really room.
To play them and Big Japanese titles in Q4, our Godzilla minus one despite <unk> family and the boy in the hearing which is EMEA Zaki, Bill, which will play for a very long period of time.
You could go back to the next question.
Thank you.
Our next question comes from the line of Michael Hickey of the benchmark company.
Yes.
Hey, rich Natasha Rob.
Jennifer congratulation guys on a great quarter, thanks for taking my questions.
Rich, obviously phenomenal success here with Oppenheimer I love it that the IMAX brand has never been so high and I think that obviously gives you a lot of leverage to build the business and you've been running at now almost two years. So.
We have an incredible perspective I'm just curious how you think about.
So over the next three to five years here, obviously, we've always got near term turbulence labor strikes. Some films are great. Some films are not some regions some reasons or not but just curious how you think sort of medium to longer term. How excited you are.
It's very in the growth of your business given your perspective.
I guess how material maybe some of these new avenues of revenue like family.
For you guys.
Well I would say this week I've never found IMAX are happy our place and it's not just because Oppenheimer did.
It did so well in the Hollywood headlines, but Oppenheimer, you've kind of got to get into the math.
I'm not going to tell you what our ultimate loss for the movie meeting what our projection was.
We'll tell you that where that movie ends up is very far in excess of where our projections were coming into it.
Not only is the.
The positioning and what it means for our brand and doing like one third the box office in the United States, One fifth of it in the world on eight tenths of 1% of the screens.
Ruminate on those numbers for a second but the strategic side, what it could do to sidings in.
The avatar effect again, but what it means for our financial position.
For the third quarter, where we just had our best July .
July is not over but we've already had our best July and the film theaters are sold out pretty much everywhere for the next three weeks in a pre sales are fantastic. So at every level in the short run I will say, it's been hard to feel better about IMAX, then I feel right now.
When you go out and you look at our five year plan.
Shows very favorable growth pattern.
Driven by our increased market share.
Which.
North America is up like 50% from where it was pre pandemic.
And as you know we've guided to pre pandemic levels and then.
You look at the growing network, we have 85 ish signings this year already.
80% of the new signings are new theatres, which means theyre not upgrades. They are places, where we're going to get royalties not only from the exhibitors, but putting the studios as well as well so model out that growth.
And then you add business slide simply been enhanced.
Hi.
We're tremendously optimistic.
About done, particularly simply where we think we're really onto a product that streamers to rain on the mode of saving costs can save costs on a very advantageous basis. So five Europe plan is very optimistic.
As I said without <unk>.
Overstating the point it hard to abate it IMAX that are more optimistic on that.
They are right now.
Can you get more.
I know when you look at sort of the year.
Penetration globally.
Big buckets of opportunity.
No.
Rest of World has been.
Significant for you guys, what's happening in Japan and India.
China has also been significant.
Yes.
Market.
Growth.
But curious just on the domestic.
How you look at the <unk>.
Opportunity I know you signed the deal.
Canada.
Incremental.
It seems like certainly in certain urban areas.
Have more screens than others, some zoning restrictions and so forth I'm just curious if there is any flexibility there.
In the future.
So you can get more screens with the same operator on this specific zone and if you think now that IMAX.
I mean does it make any sense at all.
Highly populated areas to have two screens per complex. Thanks, guys.
So I'll start by saying.
Pretty ambivalent about whether it's the U S or.
Overseas the theaters generally do the same except of the zinc Japan.
PSA is per screen averages are double North America, and just as an anecdote I mentioned it briefly on the call, but our vehicle little deeper and we signed a seven theater deal with Aon early this year. All seven are open and all seven are on track to do between one and 2 million.
PSA a year, which is the U S. PSA is 900000.
I mean, there is enormous leverage.
And global growth.
Thats why I don't necessarily.
So what am I doing North America, because it's worth twice as much to meet Baidu in Japan, but in North America, we still were much more penetrated than other places in the world.
We still could do a lot more.
I'm trying to remember somewhere in the room will tell me, but I think something like 25% approximately of our signings in.
Our in North America.
This year. So I think we did a five theater deal with a company called Eva.
And they could do a lot more was it 88 theater deal sort of Evo and they could do a lot more.
Don't want to get ahead of myself a promise this but we're starting to look at areas of exclusivity, where we could even bill so.
AMC owns a particular market.
Can't put additional theaters in that market, because it's analogous to like a franchise kind of thing.
But we're starting to think about what we put additional theaters in exclusivity zones to drive North American.
Box office, even higher and we are at.
In some early cargo stations about things like that.
Thank you rich Natasha a quick one for you I realize.
I don't know if you touched on the guidance sorry, if you did I'm guessing you don't want them.
Change in global box office estimate given how much stress we have on potential shifts in play given.
Alright, so curious on installations. It looks like you are tracking really well there.
I just can you update your <unk>.
Are you reiterating your guidance sort of in the high end do you think this new sort of thing.
Dollar wise, you could add would be great. Thanks.
Yeah, I think we.
Feel really good about our guidance, we haven't we obviously haven't come out and change that we feel like we're at $541 million in box office, we're halfway done.
The level that we guided to and with respect to installations, it's been exactly as we talked about on our on our calls.
A few quarters ago, where we think it will be backend loaded very similar to our historic years, and we had a really good quarter with 20.
'twenty 'twenty installations.
Were getting there we had a great quarter from a tech products.
Services segment, as well with really strong margins and performance there.
And I just think our guidance is exactly where it's supposed to be same with EBITDA as well because that's the quarter of 35% attributable EBITDA margin too so.
We're just tracking exactly like we thought it Andy is here.
Yeah.
Thanks, Thanks, guys. Good luck.
Thank you.
Our next question.
It comes from the line of Chad Beynon Macquarie.
Hi, good afternoon.
For taking my question Rich I know in the past we were always focused on kind of a ramping period for new installations and when you mentioned some of these PSA is close to $1 million that kind of jogged my memory. So with the increased local language product and just the strength overall.
There been any change in terms of the ramp period.
And I guess, what I'm getting at I'm, assuming maybe some of these.
These locations are ramping a little faster. Obviously every every region is different but just wondered if you could opine on that thanks.
Yes, so as I said in Japan, we signed a seven figure deal on within six months opened all seven I don't ever remember seeing that before.
We used to say that it was two to three years to work through our backlog I would say, we haven't done that calculation.
I don't know, but I would say of our signings. This year. The number that are turning to installs. This year feels to me a little higher than it's been in the past, but I can't give you a thoughtful and current clients.
Okay, Great and then on <unk>.
IMAX enhanced I guess were four or five months.
From holiday shopping season should we expect to see more home consumer products kind of out there in the stores I know you've kind of hinted at some of this with with some bigger companies working with you guys.
I know, it's not a huge initiative, but certainly that would something that would continue to help the brand and help the P&L. Thanks.
There are active discussions going on but the results are binary you'll either sign them worry about so.
I can't predict until it's signed whether we're going to sign them or not but there are some interesting discussions going on and if we sign them <unk>.
Will there be additional ones that you can't predict.
Great. Thank you very much nice quarter.
Yes.
Thank you.
Our next question.
From the line of James Goss Barrington Research.
Alright, thank you.
Earlier on as you rolled out China rich.
There was a big difference in the PSA is as you moved into the.
Smaller markets for us.
Still relatively large I'm wondering if that variance has continued or thereafter.
As you've gotten people more used to seeing local language product in.
And IMAX, if that as that gap has narrowed somewhat.
Yes.
A recovery year.
In China, because remember I know it seems like a long time ago, but in December they still have acquired teams at shutdowns. So I think it's really too early to detect a trend.
Coming back to a normal state Saudi that there yet.
Hi.
I think it's too early to tell.
Okay.
Another thing is I'm wondering if there is anything contractual in your film release Windows.
Either in your favor the other favor or is it just a point of honor will soon for example, if you have a five or six week window.
And you do have marvell as an opportunity does that give you some ability to consider.
Sharing with.
Sharing that window.
Yeah.
Yes, I mean of course.
Typically we committed are not going to go into specifics, but to a two week window.
In the film Brian Max program. So we could play the minimum or we could offer more time. So if your question is.
Do we have flexibility.
We do.
So.
They wanted both the movie.
There would be consequences to them of doing it as I said they would look at it.
So all the windows.
In my mind will be very hard to replicate that in future years.
But you would have the same flexibility. So can you force the issue as well. So it has worked that way or is it a matter of creating this.
Owner system, So that you do a spread things out over the course of the year.
Jim as you probably read in the media with top gun.
Top gun with mission impossible seven and with.
Oppenheimer, we make commitments and when we come in to somebody and we stick with it and I would say.
Thanks to the quality of of Oppenheimer. Its brand association with IMAX and by the way I Love Mission I thought it was a great movie.
<unk> being a company of principal outstanding by <unk>.
And it pays off for us So we don't really play games like that.
Okay understood.
And lastly, you've touched a little bit on the.
Yes.
The rollout in terms of number of sites and I Wonder if given how you feel.
So it's hot right now.
There is any consideration towards in general accelerating that rollout in terms of numbers maintain some same sort of percentage I know, it's not that.
Itemized in terms of certain.
Sellers are earned such a percent, but do you think an acceleration is warranted given the number of markets you have and.
The reception to your.
Format.
Hi, Joe This is asher.
We have our guidance out there for 110 to $1 30 for the year of course, there'll be ebbs and flows.
Timing of the rollout, but that's.
That depends on many factors it depends on timing of the exit exhibition customers and whether theyre cash flowing just at the time to do a rollout the timing of.
Other types of factors as well and so.
Of course, if we if we have the opportunity to rollout installed data sooner, we will but right.
Right now and based on our cadence of historical years, we will continue to reiterate that.
Q4 loaded.
Yeah, all right. Thank you. This made this may sound obnoxious and I don't want to be this way, but I want to put it into perspective.
People should take out.
And I look at the Oppenheimer numbers and look at the predictions on whether by more installs or less or 10 is going to really make a difference in imax's year.
I just think when you look at the Big picture pun intended with IMAX the signings the installs I mean, the way that we're firing on all cylinders.
I think looking at this year from where we sit now whether it's a few more installs I don't think as part of an important investment thesis.
Okay.
Actually not just this year, but in a broader sense.
Thanks Julien.
Future, Jim if you ask what our future here. So I think that was an avatar effect.
You see it this year.
China.
I think it's still continuing and I think.
When you look at the bar, we Didnt really break this out but some individual IMAX theaters are going to do a $1 million on Oppenheimer.
Many of them have been two to $300000. So if you model for the theater side, what it means to them and their IR office.
They are logical it should lead to what you are asking about.
Alright, well, thanks a lot.
Thank you.
Yes.
Thank you.
Our final question.
Comes from the line of David Konoski of J P. Morgan.
Hey, thanks.
Rich thought it was interesting to see the pull in on the calendar for IMAX.
Maybe I.
Don't know if you can give any background to this I think it's your first content deal with Apple.
And what potential do you kind of see for more releases here, if they didn't do any indication of better sleep.
Well not only flowers scorsese movie, but the.
Napoleon.
Which is.
Really Scott.
There's also another Apple movie, which is which is interesting David because they are two different studio city distributing them one is paramount and the other is Sony So.
Yes, we are discussing other projects with Apple and Apple is committed to theatrical exclusive window and I think they see us part of.
This one specific one in mind that we haven't agreed to but we have a verbal understanding. The next couple of years, it's not in the near term. So yes, I do think we'll get more and more content from Apple and probably Amazon as well because they are committed to a theatrical window.
Thank you.
Thank you David.
Thank you I would now like to turn the conference back to Richard <unk> for closing remarks.
Thanks, so much operator, and thank you all for joining us today so.
We just announced on this call.
A very.
Tract of successful second quarter, which followed a very successful attractive first quarter and.
Now over in the first month of our third quarter.
Just had our best July ever in terms of box office and as we look into August as a pre sales and the potential for Oppenheimer and then we look at the other movies.
Coming on down the slate.
Yeah.
I think IMAX has moved in a way.
From people considering a story stock two elements of being a value stock and I think people probably.
As I said before to take out a pan and put numbers to some of these things and look at we've been shrinking our capitalization our shares outstanding have gone down our EBITDA has gone up and people.
I don't think it has to be believing the story I think in Savannah.
10, and doing some math and I really.
I don't remember being in a more attractive physician at IMAX and a very long time.
Thank you all for joining us.
I hope to update you with more good news on the next call.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Okay.
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Okay.
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Tim.