Q3 2023 IMAX Corp Earnings Call

Okay.

Good day, ladies and gentlemen, thank you for standing by welcome to the IMAX Corporation third quarter 2023 earnings Conference 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.

Ask a question during the session you will need to buy star one on your telephone you will.

Ghanaian automatic message advising you had this race. Please note that today's conference is being recorded I will now hand, the conference over to your host Jennifer <unk> head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on todays third quarter 2023 earnings conference call on the call today to review the financial results are rich Galvan, Chief Executive Officer, and Natasha 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 a 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. Our historical Excel model is also posted to the website I would like.

To remind you of the following information regarding forward looking statements today's call as well as the accompanying slide deck may include statements that are forward looking and that pertain to future results or outcomes. These forward looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to dip.

Or.

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 a reconciliation to non-GAAP financial measures are contained in this morning's press release and our earnings materials, which are available on the Investor Relations page of our website at IMAX Dot com.

With that let me now turn the call over to Mr. Richard <unk> rich.

Thanks, Jennifer and thanks, everyone for joining us. This morning. It is truly the best of times that IMAX. The company delivered a record performance in the third quarter. We've seen many good quarters, but few have exceeded our expectations like this adjusted EBITDA of 45.

$5 million up 174% year over year, and EBITDA margin of 47% and IMAX record for Q3 significant year over year growth across revenue gross margin and adjusted EPS.

Global box office of $347 million, our second highest grossing quarter of all time, we remain on pace to take our highest share of the global box office ever in 2023, and we generated 120 signings for new and upgraded IMAX system worldwide.

Today, including our biggest deal in four years.

Almost every day yields new evidence of our commanding brand market power and demand for the IMAX experience.

Fans traveled hours and hundreds of miles to experience Oppenheimer.

IMAX film.

June filmmaker Denise Villa new proclaimed IMAX quote the future of cinema outperformance with Taylor Swift and killers that the power Mon demonstrates we're expanding our brand to new audiences and genres and summer 2023 was our biggest summer of all time.

In 54 countries worldwide from Argentina to Vietnam, The U S to China underscoring the geographic breadth of our success.

<unk> in market share are through the roof, because IMAX has emerged as the preferred way to experience events around the world. We built the strongest most diverse content portfolio in our history, reaching new audiences with Hollywood blockbusters local language films Marquis.

Theatrical releases by streamers concert films documentaries and live events and virtually all of it is working in our network reducing volatility for the IMAX box office.

In a highly dynamic environment for media and entertainment. The one constant is IMAX outperformance, we remain on track to deliver significant growth and system signings installations and adjusted EBITDA for the full year and we've already surpassed our full.

2022 box office today I'd like to discuss how we are building our brand and market leverage with our box office results and how that momentum is translating to worldwide network growth then I'll turn it over to Natasha to take you through our financial results before opening it.

For your questions.

The quarter was our second highest grossing quarter of all time at the global box office. The Big driver of course was Oppenheimer.

We have growth more than $184 million.

With Oppenheimer to date, nearly 20% of the films global tally during out run.

While Oppenheimer was the cornerstone of our performance it was hardly the only building block in China local release creation of the gods part one delivered more than $32 million in IMAX.

Lost in the stores and no more beds from China also generated strong returns and local releases from Japan, and India also made meaningful contributions.

222023 is already our best year ever for local language box office with more than $200 million.

To date and still almost three months to go.

Through the third quarter, 22% of our global box office in 2023 has come from local language films compared to only 12% in 2019, we will program more than 50 local language films across our network. This year as we expand our strategy.

It's a new more markets. Most recently, Malaysia. Additionally, we continue to demonstrate IMAX is a premier destination for music as concert films show a surge in popularity at global Multiplexes.

Talking heads stop making sense was our highest grossing IMAX live event to date with its premier event from the Toronto International Film Festival. The film helped set the table for Taylor Swift the Arris tour to deliver a great performance in IMAX with an opening.

Weekend of more than $13 million globally, including 12% of the films domestic debut our pre sales with BR <unk> upcoming Renaissance concert film have also been quite strong and we will deliver to prestige releases from Apple films. This fall killers that the flu.

Our moon and Napoleon with kill or is it a flower moon, we delivered 14% of domestic opening weekend box office, we're particularly pleased with our indexing on killers. Given this is our first release with Apple, which plans to spend $1 billion annually at theatrical releases with.

The transcendental scope and scale you would expect from such a visionary company from our recent local language to music tent Poles to the Apple films. All these films have one thing in common they were not on our slate at the beginning of the year. This speaks to our ability to strategically.

Managing our programming in real time, and the increasing diversity of our portfolio. We anticipate that there will be some movement in 2024 release states due to the impact of the strikes given the strength of our performance this year.

I'll leave there is upside for IMAX and due in part to moving to March 24, anchoring our first quarter box office.

The highly anticipated sequel was shot 100% with IMAX cameras versus 40% for June one.

We also think movement in the 2024 slate could create space for us to release films. We currently cannot similar to the way. The June move enables us to play the marvels and the hunger games prequel in the current quarter.

These additions show, how agile and quick we can be to find new sources of content and box office revenue.

And 2024 features new installments of IMAX friendly franchises from June to Godzilla vs Com to Captain America, Joker and more as we look ahead, we believe IMAX has reset the calculus for the box office, we can deliver in any given year.

In 2023, we released 90 films pre pandemic, we averaged about 61 releases per year.

2019 was our previous best year at the Global box office. It was also the highest grossing year in box office history with nine releases in total that grows more than $1 billion from endgame to the rise of Skywalker. This year, we've seen only too.

$1 billion grossing movies and one of our biggest releases during two moved out of the year entirely and yet IMAX is tracking to similar box office levels as 2019.

More than ever our results in market share makes it clear that we're a very different business than our partners and exhibition.

Much in the way the Avatar sequel, Jumpstarted, our system sales activity early this year our performance with the Oppenheimer has provided yet another jolt in momentum. We now have 120 signings this year for new and upgraded IMAX systems worldwide.

With our focus on high PSA high potential markets. This year, we generated strong sales activity in APAC, including Malaysia, where we just completed a six system agreement with Golden screen cinemas, despite a relatively small IMAX footprint, Malaysia is consistent.

<unk> been in our top 25 markets globally year to date, we've delivered more signings in Malaysia than any market globally outside the U S and China.

In Japan, we completed installation of the seven systems.

We licensed to <unk> early this year, which have already generated more than $2 million in box office. Since the first location opened in May IMAX also returns this month to a very productive box office location with IMAX Sidney.

Prior to its closure in 2016, IMAX Sydney was one of our top grossing theaters on the planet the new system and the newly opened Darling Harbour retail Hotel and entertainment complex features IMAX with laser in one of our biggest screens a world.

Given the extraordinary performance of our Melbourne location this year, where we expect to exceed $4 million in box office. We are very confident Sydney will make a meaningful contribution to our box office results in its first week of operation the new IMAX Sidney.

With our highest gross location in the world outside the U S and the UK.

Finally, just this month, we reignited growth in China with a 'twenty theater deal with Hanjin films are biggest steel for new IMAX locations in four years.

Okay.

With regards to IMAX, China, we announced earlier this month that our take private proposal did not garner the requisite 90% shareholder vote of independent shareholders for approval.

While disappointed we are far from the turn when it comes to our business in China from our signings momentum to our dramatic box office recovery. This year, it's clear that China remains a big opportunity for IMAX.

Look for other ways to capture some of the transaction synergies as we strengthen our position in the Chinese entertainment ecosystem.

In conclusion, our record breaking results for the third quarter offer powerful evidence of the paradigm shift to IMAX and the global marketplace, we agree with Denny villain, New IMAX is the future of cinema.

We lead the shift to premium and Moviegoing, we are the only global premium theatrical platform.

The emergence of concert films.

<unk> uniquely suited to IMAX sight sound and live capability only strengthens our hand.

Finally, we continue to expand our brand and technology across the ecosystem, having recently merged our IMAX enhanced licensing business and Sim wave under a unified brand IMAX dreaming and consumer technology.

We're on track to deliver strong growth for the full year continue our momentum into 2024 and drive future global growth across the IMAX network.

There has never been a better time for IMAX and we're excited for that to continue thank you and with that I'll turn it over to Natasha.

Unknown Attendee: Good Day, ladies and gentlemen, thank you for sending by. Welcome to the IMAX Corporation, third quarter 2023 earnings conference call. At this time, more participants on the list and only mode.

Unknown Attendee: After the speakers presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will earn an automatic message advising your hand is raised.

Thanks, Rich and good morning, everyone. Our fantastic results for Q3 speak to the growing demand for the IMAX experience and the expansion of our content portfolio across our global system footprint.

More than ever we are able to optimize our programming and maximize annualized box office to greater level.

Unknown Attendee: Please note that today's conference is being recorded.

This in turn drive stronger global demand for IMAX systems, creating a very positive long term growth dynamic.

Jennifer Horsley: I will now hand a conference over three hours, Jennifer Horsley, head of investor relations. Please go ahead. Good morning, and thank you for joining us on today's third quarter 2023 earnings conference call.

In the quarter, we established a new Q3 box office record of $347 million.

In our Q3, adjusted EBITDA margin record at 47%.

Jennifer Horsley: On the call today to review the financial results are Rich Gelfond, Chief Executive Officer, and Natasha Fernandes, 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. A replay of the webcast will be made available shortly after the call. In addition, the full text of our earnings press release in the slide presentation have been posted on the investor relations section of our site. Our historical Excel model is also posted to the website.

Signings are now two and a half times, what we did for all of 2022 and the pace of installations is accelerating as we finish off the year.

Furthermore, we achieved a record Q3 adjusted EPS of <unk> 35 more.

More than 50% higher than it was in 2019, reflecting our greater earnings power coming from the combination of higher profits and less shares outstanding.

We are well on track to meet or beat all of our full year guidance measures. We expect IMAX box office of at least $1 1 billion installations of 110 to 130 IMAX system and adjusted EBITDA margin is trending higher than original expectations of mid <unk> for the full year.

Jennifer Horsley: I would like to remind you of the following information regarding forward-looking statements. Today's call, as well as the accompanying slide deck, may include statements that are forward-looking and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to differ. Please refer to our SEC filings for 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.

Now for a closer look at the third quarter.

Box office of $347 million was up 96% year over year, putting us at $889 million year to date.

As rich highlighted we are regularly seeing outsize share on Hollywood in local language opening weekends above our historical norm looking into 2024. There are numerous confirmed titles, where we expect to over index with June part two being the most significant in the first half.

Jennifer Horsley: During today's call, references may be made to certain non-gap financial measures. Discussion of management, use of these measures, and the definition of these measures, as well as a reconciliation to non-gap financial measures are contained in this morning's press release and our earnings materials, which are available on the investor relations page of our website at imax.com.

Dan part, one IMAX delivered $55 million in global box office and index more than 17% worldwide for the entire run. Despite the fact that the film is released during the pandemic and available simultaneously on HBO Max.

Richard Gelfond: With that, let me now turn the call over to Mr. Richard Gelfon. Rich? Thanks, Jennifer, and thanks everyone for joining us this morning.

We're excited to see what June part two can do especially given it was shot 100% in IMAX versus 40% for the first film.

Richard Gelfond: It is truly the best of times at imax. The company delivered a record performance in the third quarter. We've seen many good quarters, but few have exceeded our expectations like this. Adjusted EBITDA of $45 million, up 174% year-over-year, an EBITDA margin of 47% and imax record for Q3. Significant year-over-year growth across revenue, gross margin, and adjusted EPS. Global box office of 347 million, our second highest grossing quarter of all time. We remain on pace to take our highest share of the global box office ever in 2023.

Total revenue in Q3 was $104 million up 51% from $69 million in Q3 2022.

Given the relatively fixed nature of our cost this growth resulted in high profit flow through with gross profit of $63 million up 98% year over year and overall led to a 60% gross margin in Q3.

Both segments contributed to the higher level of revenue and gross profit year over year.

Content solutions revenue of $44 million comprised 43% of total revenue and grew 101% year over year, driven by strong IMAX box office performance.

Gross profit of $26 million grew 189% year over year and came in at a 60% margin illustrating the significant operating leverage in our model that gets amplified with higher levels of box office.

Richard Gelfond: And we've generated 120 signings for new and upgraded imax system worldwide today, including our biggest deal in four years. Almost every day yields new evidence of our commanding brand, market power, and demand for the IMAX Experience. Fans traveled hours and hundreds of miles to experience Oppenheimer in IMAX Film. June filmmaker Denis Villanue proclaimed IMAX, quote, the future of cinema. Our performance with Taylor Swift and Killers of the Flower Moon demonstrates we're expanding our brand to new audiences and genres.

Technology products and services revenue of $56 million comprised 54% of total revenue and grew 23% year over year gross profit of $34 million grew 55% year over year. This very strong result was driven by growth in IMAX box office and system installations under sales are.

Hybrid arrangements.

In total we have 30 installations in the quarter compared to <unk> 17 in the prior year period of the installations, 16, where sale or hybrid and 14 were joint revenue sharing leases.

Richard Gelfond: And summer 2023 was our biggest summer of all time in 54 countries worldwide, from Argentina to Vietnam, the US to China, underscoring the geographic breadth of our success. Our results in market share are through the roof because IMAX has emerged as the preferred way to experience events around the world. We built the strongest, most diverse content portfolio in our history, reaching new audiences with Hollywood blockbusters, local language films, marquee theatrical releases by streamers, concert films, documentaries, and live events. And virtually all of it is working in our network, reducing volatility for the IMAX box office. In a highly dynamic environment for media and entertainment, the one constant is IMAX Outperformance.

As exhibitors balance sheets recover they are clearly investing in premium and this is accelerating our pace of installations positioning us overall for a strong full year 2023.

This is also reflected in our signings momentum we're at 120, signing through today more than doubled with 47% all of 2022, the stats behind our signings to date showcase the broad demand for the IMAX experience.

101 of the signings are over 84% were new system compared to 30 for all of 2022.

20%, where in the U S and Canada and 13% in Europe, 38% were in Japan, and Southeast Asia, and we're seeing signing begin to pickup in China now at 24 to date with the hangar NGL Rich mentioned earlier.

Turning to operating expenses, we are investing for long term growth and to exploit our differentiation and strong brand.

Richard Gelfond: We remain on track to deliver significant growth in system signings, installations, and adjusted EBITDA for the full year, and we've already surpassed our full 2022 box office. Today I'd like to discuss how we're building our brand and market leverage with our box office results and how that momentum is translating to worldwide network growth. Then I'll turn it over to Natasha to take you through our financial results before opening it up for your questions.

R&D expense of $2 $8 million, increasing $1 7 million, reflecting our investment in new technology, including streaming optimization software.

G&A, excluding stock based compensation of $31 $4 million increased $3 5 million from Q3, 2022, However, SG&A was roughly flat year over year, when we net out onetime transaction costs and the inclusion of assimilate expenses, which were not in the prior year given the acquisition closed at the end of <unk>.

Richard Gelfond: The quarter was our second highest grossing quarter of all time at the global box office. The big driver of course was Oppenheimer. We've grossed more than $184 million with Oppenheimer to date, nearly 20% of the film's global tally during our run. While Oppenheimer was the cornerstone of our performance, it was hardly the only building block. In China, local release creation of the Gods Part One delivered more than $32 million in IMAX.

Q3 2022.

As a percentage of revenue SG&A, excluding stock based compensation was 30% versus 41% in Q3 2022, an improvement of approximately 1100 basis points, reflecting the leverage in our business model coupled with our continued focus on cost discipline effort.

Adjusted EBITDA attributable to IMAX was $45 million, a growth of $29 million or 174% year over year the growth across our segments and our strong operating leverage in our business model drove this excellent result.

From a margin perspective, adjusted EBITDA attributable to IMAX was 47% one of our one of the highest quarters in our history.

Richard Gelfond: Lost in the Starris and no more bets from China also generates strong returns and local releases from Japan and India also made meaningful contributions. 2023 is already our best year ever for local language box office with more than $200 million to date and still almost three months to go. Through the third quarter, 22% of our global box office in 2023 has come from local language films compared to only 12% in 2019.

Looking at the bottom line adjusted EPS in Q3 of 35 improved significantly from the <unk> loss in the prior year period, reflecting the growth in adjusted EBITDA.

Operating cash flow through nine months was 55 million or <unk> 99 per share representing significant growth versus the 480000 for the <unk>.

First nine months of 2022, the year over year improvement reflects our higher profits and the accelerating business recovery of our exhibition customers post COVID-19 for further context on a consolidated basis operating cash flow for the entire year of 2022 was $17 million. Thus September.

Richard Gelfond: We will program more than 50 local language films across our network this year as we expand our strategy into new more markets, most recently Malaysia. Additionally, we continue to demonstrate IMAX as a premier destination for music as concert films show a surge in popularity at global multi plus. Talking heads, stop making sense with our highest grossing IMAX live event to date with its premiere event from the Toronto International Film Festival. The film helps set the table for Taylor Swift's The IRIS tour to deliver a great performance in IMAX with an opening weekend of more than $13 million globally, including 12% of the film's domestic debut.

Year to date operating cash flow is more than three times, what it was for the full year of 2022.

Our capital position remains very strong as we ended the quarter with $109 million in cash.

$258 million of debt.

<unk> deferred financing costs.

$230 million of our debt comes from our convertible senior notes due in 2026 that bear an interest rate of 5% per annum with a capped call of $37 per share.

Our current available liquidity is approximately $439 million, including cash and cash equivalents of $109 million and $330 million in available borrowing capacity under the company's various revolving facilities.

Richard Gelfond: Taylor Swift, Beyonce's upcoming Renaissance concert film have also been quite strong. And we will deliver two prestige releases from Apple films this fall, Killers of the Flower Moon and Napoleon. With Killers of the Flower Moon, we delivered 14% of domestic opening weekend box office. We're particularly pleased with our indexing on Killers given this is our first release with Apple, which plans to spend $1 billion annually. On theatrical releases with the transcendent scope and scale you'd expect from such a visionary company.

From a capital allocation perspective, the IMAX, China transaction outcome results in us having greater available capital. We believe our stock is greatly undervalued and thus we will continue to prioritize share repurchases as a use of cash just as we did in 2022.

Late in the fourth quarter, we have repurchased approximately $4 million worth of shares and have $187 million remaining available under our share repurchase authorization.

To conclude Q3 is the most emphatic demonstration yet that this is a breakthrough year for IMAX, we're delivering a steady stream of IMAX box office market share and financial records.

Richard Gelfond: From our recent local language to music, tent poles, to the Apple films, all these films have one thing in common. They were not on our slate at the beginning of the year. This speaks to our ability to strategically manage our programming in real time and the increasing diversity of our portfolio.

Effectively managing our content portfolio to maximize results.

The table has been reset post pandemic and we have been merit emerge stronger on an annualized basis.

The opportunities in front of us in 2024 and beyond are even more significant demand for the IMAX experience is at an all time high we are regularly setting market share records across genres of film, which is expanding our fan base demographics Judy.

Richard Gelfond: We anticipate that there will be some movement in 2024 release dates due to the impact of the strikes. Given the strength of our performance this year, we believe there is upside for IMAX in June part two moving to March 24, anchoring our first quarter box office. The highly anticipated sequel was shot 100% with IMAX cameras versus 40% for June 1. We also think movement in the 2024 slate could create space for us to release films we currently cannot.

Studios filmmakers and exhibitors are all realizing that IMAX is the most premium entertainment technology company in our space with unmatched global scale. This is fueling our system sales and propelling us into new market segments, such as streaming and consumer technology.

And importantly, as our growth accelerates our asset light highly incremental business model is resulting in expanding margins.

Richard Gelfond: Similar to the way the Dune move enables us to play the marbles and the Hunger Games prequel in the current quarter. These additions show how agile and quick we can be to find new sources of content and box office revenue. And 2024 features new installments of IMAX friendly franchises from Dune to Godzilla versus Kong to Captain America, Joker and more.

Bottom line profit growth and robust cash flow generation in summary, our ability to optimize our results through a portfolio of content combined with the growing demand for our technology solutions is positioning us well relative to our full year guidance and setting us up for long term success.

With that I will turn the call over to the operator for Q&A.

Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone and wait for your name to be announced.

Richard Gelfond: As we look ahead, we believe IMAX has reset the calculus for the box office we can deliver in any given year. In 2023, we released 90 films pre-pandemic we averaged about 61 releases per year. 2019 was our previous best year at the global box office. It was also the highest grossing year in box office history with nine releases in total that grossed more than $1 billion from end game to the rise of Skywalker.

Please standby, while we compile the Q&A Ross.

Our first question coming from the line of Eric.

Eric Wold with B Riley your line is open.

Thank you good morning. So one question with a quick follow up afterwards, I guess just one.

Impressive leverage in the.

Quarter on the strength of the box office is box office continues to.

Richard Gelfond: This year, we've seen only two $1 billion grossing movies and one of our biggest releases during two moved out of the year entirely. And yet, IMAX is tracking the similar box office levels as 2009. 18. More than ever, our results in market share make it clear that we're a very different business than our partners in exhibition. Much in the way the Avatar sequel jumps started our system sales activity early this year.

Ramp and exceed pre pandemic levels in the coming years can you talk about what has changed structurally within the content solutions segment's influence margins versus prior levels I guess take into accounts.

The large number of films that will be released into more regions along with stronger average film performance just trying to get a sense of where those margins can go in that segment over time.

Yes, Eric we've said for a long time.

As as the box office and revenues increase you'll see margin expansion and that was that's the primary driver and if you look back to 2019 at where our margins are.

Richard Gelfond: Our performance with Oppenheimer has provided yet another jolt of momentum. We now have 120 signings this year for new and upgraded IMAX systems worldwide. Consistent with our focus on high PSA, high potential markets this year, we generated strong sales activity in APAC, including Malaysia, where we just completed a six system agreement with Golden Screen Cinemas. Despite a relatively small IMAX footprint, Malaysia has consistently been in our top 25 markets globally. Year-to-date we've delivered more signings than Malaysia than any market globally outside the US and China.

And then the last few years, which are heavily influenced by the pandemic.

<unk> back to sort of the levels of margin that we thought we could deliver at those kinds of box office level. So I think if the box office continues at these.

Strong levels of margin increases will continue where the margin levels will continue.

Eric and just following on that if you think about the way that we're doing local language as well in different regions local language content does not cost us much for us to convert to remaster, and then to distribute as well and to market. The dollar works differently and goes a lot further in different countries and so as you look.

Richard Gelfond: In Japan, we completed installation of the seven systems we licensed to Aeon earlier this year, which have already generated more than $2 million in box office since the first location opened in May. IMAX also returns this month to a very productive box office location with IMAX Sydney. Prior to its closure in 2016, IMAX Sydney was one of our top grossing theaters on the planet. The new system and the newly opened, darling harbor, retail hotel, and entertainment complex features IMAX with laser and one of our biggest screens in the world.

At our costs, our cost continued to remain relatively fixed and predictable, but the box office expansion creates all of that revenue growth again, sorry to dwell too much on this but one fact, we don't talk about that much is that our margin on local language, meaning our gross paid from the studios.

Richard Gelfond: Given the extraordinary performance of our Melbourne location this year, where we expect to exceed $4 million in box office, we are very confident Sydney will make a meaningful contribution to our box office results. In its first week of operation, the new IMAX Sydney with our highest gross location in the world outside the US and the UK.

As good as Hollywood and several countries better than Hollywood, So as that flows through lower costs and higher revenues.

Thank you that helps your follow up question.

Obviously this year you talked about Youll see it next year, whereas films do move gives you. Some flexibility you can actually just studio chooses to move out and they're already agreed upon IMAX window.

It's just that film later, it's another window today.

Writes that original window. They had committed to you or does it go up for grabs for any studio and that becomes your choice you get about what's you replace there.

Richard Gelfond: Finally, just this month, we reignited growth in China with a 20-theter deal with Hengen Films, our biggest deal for new IMAX locations in four years. With regards to IMAX China, we announced earlier this month that our take private proposal did not garner the requisite 90% shareholder vote of independent shareholders for approval. While disappointed, we are far from deterred when it comes to our business in China. From our signings momentum to our dramatic box office recovery this year, it's clear that China remains a big opportunity for IMAX. We'll look for other ways to capture some of the transaction synergies as we strengthen our position in the Chinese entertainment ecosystem.

No. It is completely up for grabs Eric the agreement applies to a specific movie at a specific time and then we have to negotiate.

A new window and a good example of that would be just in the last few days when Paramount decided to move mission impossible eight.

Memorial Day 2025, it was.

If it were a completely new negotiation.

What the marketing was in this case its been filmed with IMAX cameras and how much play time, we get it its a complete kind of duo whereas if the original deal didn't exist.

Sure.

Helpful. Thank you guys.

Thank you and our next question coming from the line.

Eric handler with Rod.

Richard Gelfond: In conclusion, our record breaking results for the third quarter will offer powerful evidence of the paradigm shift to IMAX in the global marketplace. We agree with Denis Villanue. IMAX is the future of cinema. We lead the shift to premium and movie going. We are the only global premium theatrical platform. The emergence of concert films, a genre uniquely suited to IMAX site sound and live capability only strengthens our hand. Finally, we continue to expand our brand and technology across the ecosystem, having recently merged our IMAX enhanced licensing business and Simwave under unified brand IMAX streaming and consumer technology. We are on track to deliver strong growth for the full year, continue our momentum into 2024 and drive future global growth across the IMAX network.

Your line is now open.

Good morning, and thanks for the question Richard wanted to talk about what do you need to see in the specific markets too.

To run a local language films, such as what Youre doing in Malaysia now.

Really what markets do you see as opportunities.

So Eric I mean, the first place you start is what's the box office in the market. So.

How much of the cost could you amortize through.

Through the local language network second you'd look at weather would also play in other markets, where there is an interest in.

For example.

Not that familiar with Malaysia specifics, but I would think.

Malaysian movies would probably play in the middle East and they probably play.

And India and places like that and other southeast Asian countries. So not just the country of origin, but other countries and how they do there and then I think you obviously look at the movie the kind of movie isn't as an IMAX movie.

Richard Gelfond: There has never been a better time for IMAX and we're excited for that to continue.

Natasha Fernandes: Thank you and with that, I'll turn it over to Nitas. Thanks, Rich and good morning everyone. Our fantastic results for Q3 speak to the growing demand for the IMAX experience and the expansion of our content portfolio across our global system footprint. More than ever, we are able to optimize our programming and maximize annualize box office to greater levels. This in turn drives stronger global demand for IMAX systems, creating a very positive long-term growth dynamic.

Look at your relationship with the with the filmmaker and with the studio in that country and then of course, you run a model and you look like what your P&L would look like in doing that and then I would say one other thing would be you look at the potential for that market.

Natasha Fernandes: In the quarter, we established a new Q3 box office record of $347 million and a Q3 adjusted even a margin record of 47%. Signings are now two and a half times what we did for all of 2022, and the pace of installations is accelerating as we finish off the year. Furthermore, we achieved a record Q3 adjusted EPS of 35 cents, more than 50% higher than it was in 2019, reflecting our greater earnings power coming from the combination of higher profits and less shares outstanding.

And India as you know we've been doing a lot more local language.

Films and the reason is not just because of the other criteria I mentioned, but because it's potentially a much larger market for us and to the extent you can help increase the PSA has in that market and help the exhibitors do better it really helps your growth in that market. So those would be pretty much the factors.

Okay and then.

I'm curious now as you look at your backlog I don't know sort of what your bottlenecks are in terms of you actually need construction to be completed for three years, but in terms of you know.

Theaters that are already in existence is there any way to maybe accelerate the installation process with these theaters.

Natasha Fernandes: We are well on track to meet or beat all of our full year guidance measures. We expect IMAX box office of at least 1.1 billion, installations of 110 to 130 IMAX systems, and adjusted EBITDA margin is trending higher than original expectations of mid-30s for the full year.

I mean, I think it depends mostly obviously on the schedule of our local exhibition partner.

Obviously with retrofits it goes a lot faster than with Newbuild. So as I said on my prepared comments in Japan, We signed a seven theater deal with <unk> and we've already installed all seven of them. This year I believe the one we just announced in China with Hanjin even.

Natasha Fernandes: Now for a closer look at the third quarter. Box office of 347 million was up 96% year-over-year, putting us at 889 million year-to-date. As Rich highlighted, we are regularly seeing outside share on Hollywood and local language opening weekends above our historical norm. Looking into 2024, there are numerous confirmed titles where we expect to over index with Dune Part 2 being the number one. This is the most significant in the first half.

Some of those are being as a matter of fact.

As I recall at six this year, even though we just signed that deal in.

October.

So and those are retrofits, obviously, the newbuild, there's less flexibility because obviously you've got to build a building and put that in there I would say beyond that the only thing that would really accelerated beyond that would be the film slate. So if there is a film coming out that people want to open four.

Natasha Fernandes: With Dune Part 1, IMAX delivered 55 million in global box office and indexed more than 17% worldwide for the entire run, despite the fact that the film was released during the pandemic and available simultaneously on HBO Max. We are excited to see what Dune Part 2 can do, especially given it was shot 100% in IMAX versus 40% for the first film. In Q3 was 104 million up 51% from 69 million in Q3 2022.

And also there is a typical seasonality as you know.

In the fourth quarter and partly that's because the fourth quarter before Christmas time tends to be not that busy on a global basis. So they can shut the existing theater down for a little while and they can put the new one in and then they could open up for Christmas, but if you look at our.

Percentage of installs in the fourth quarter is historically always been extremely high.

Natasha Fernandes: Given the relative sixth nature of our cost, this growth resulted in high profits flow through with growth profit of 63 million, up 98% year-over-year, and overall led to a 60% growth margin in Q3. Both segments contributed to the higher level of revenue and growth profit year-over-year. Content solutions revenue of 44 million comprised 43% of total revenue and grew 101% year-over-year driven by strong IMAX box office performance. Growth profit of 26 million grew 189% year-over-year and came in at a 60% margin, illustrating the significant operating leverage in our model that gets amplified with higher levels of box office.

Thanks Rich.

Thank you.

Question coming from the line of.

David <unk> with Jpmorgan Your line is open.

Alright, thank you.

So your revenue take rate on that Fox had content solutions, but especially strong in the quarter. Just wondering if you could speak to what drove that and how sustainable. It is and then rich I think last quarter you spoke to some early conversations with exhibition partners about maybe adding screens and exclusivity zones wanted to see if there was any update there and then.

Put your exclusivity zones of barrier, you're getting higher penetration in the domestic market.

Natasha Fernandes: Technology products and services revenue of 56 million comprised 54% of total revenue and grew 23% year-over-year, of the year. Grossed profit of 34 million grew 55 percent year over year. This very strong result was driven by growth in IMAX box office and system installations under sales or hybrid arrangements. In total, we had 30 installations in the quarter compared to 17 in the prior year period. Of the installations, 16 were sale or hybrid and 14 were joint revenue sharing leases. As exhibitors balance sheets recover, they are clearly investing in premium.

Hi, David.

So as we looked at the quarter, we actually had a really good mix of local language and Hollywood content in the quarter. It was our sector. It was our best ever summer local language quarter for China, and so the take rate in China.

Runs higher versus Hollywood content in China, and so as we pushed local language for China between creation of the gods part one nomar bets and a couple other titles.

Definitely helped US also also ended the quarter at the beginning of the October holiday on the very last days until that that led a lot of the take rate wins as well.

Natasha Fernandes: And this is accelerating our pace of installation, positioning us overall for a strong, full year 2023. This is also reflected in our signing momentum. We're at 120 signings through today, more than double the 47 in all of 2022. The stats behind our signings to date showcase the broad demand for the IMAX experience. 101 of the signings or over 84 percent were new systems compared to the 30 for all of 2022. 20 percent were in U.S, and Canada and 13 percent in Europe.

The other component of that is Oppenheimer Oppenheimer's take rate worked better for us in our film locations just based on the.

Specific arrangements that we had for that film and so that.

That also optimized our take rate in the quarter.

So David in terms of discussions we've had about adding theaters within zones with exhibitors I'd say they continued during the quarter Theres nothing that we announced but there haven't been any setbacks. We've just youll continue those discussions.

Natasha Fernandes: 38 percent were in Japan and Southeast Asia. And we're seeing signings begin to pick up in China now at 24 to date with the differentiation and strong brand. R&D expense of $2.8 million increased $1.7 million reflecting our investment in new technology, including streaming optimization software. S-DNA excluding stock based compensation of $31.4 million increased $3.5 million from Q3 2022. However, S-DNA was roughly flat year over year when we net out one-time transaction costs and the inclusion of similar expenses, which were not in the prior year given the acquisition closed at the end of Q3 2022.

I expect there to be some results from that but just not today.

On what how much of a barrier or the exclusive zones.

Growth in the markets. So I think you know that on a regular basis, we review what our total addressable market is and.

That changes in our analysis is for the next three years, so giving you historical perspective in China. Our original estimate was for 90 theaters now.

Now I think our estimate is about 1200 or something like that and we.

We have 800 open and over 200 in backlog so that becomes a moving target obviously the number of zones that are closed that closed down because as exclusivity influences.

Natasha Fernandes: As a percentage of revenue S-DNA excluding stock based compensation was 30 percent versus 41 percent in Q3 2022 and improvement of approximately 1100 basis points reflecting the leverage in our business model coupled with a continued focus on cost discipline efforts. Adjusted EBITDA attributable to IMAX was $45 million, a growth of $29 million or 174 percent year over year. The growth across our segments and the strong operating leverage in our business model drove this excellent result.

Influences, what that addressable market is but I'd like to give you a <unk>.

Interesting examples North America, which is one of our most heavily penetrated markets. There is still a lot of zones open and something like 25% of our signings before this quarter were in North America. This year. So there's still a lot of room to go and a lot of growth.

Occasionally for various reasons.

Sure.

Some of them will give up an IMAX theater and it just so happens that recently in two zones people.

Natasha Fernandes: From a margin perspective, adjusted EBITDA attributable to IMAX was 47 percent, one of the highest quarters in our history. Looking at the bottom line, adjusted EPS and Q3 of $35 improved significantly from the $5 loss in the prior year period reflecting the growth in adjusted EBITDA. Operating cash flow through nine months was $55 million or $0.99 per share representing significant growth versus the $480,000 for the first nine months of 2022. The year over year improvement reflects our higher profits and the accelerating business recovery of our exhibition customers post-COVID.

Shut down a multiplex they didnt shutdown, an IMAX theater, but they shut down a multiplex first whether it's real estate or whatever the reason is and within weeks, we resold those zones.

To another exhibitor because the exclusivity activity had gone away so.

It does influence it but it also protects us in many ways because we've demonstrated the viability of the box office in that zone.

Natasha Fernandes: For further context on a consolidated basis, operating cash flow for the entire year of 2022 was $17 million. Thus, September year-to-date operating cash flow is more than three times what it was for the full year of 2020. 2022. Our capital position remains very strong as we ended the quarter with $109 million in cash and $258 million of debt, excluding deferred financing costs. $230 million of our debt comes from our convertible senior notes due in 2026 that bear an interest rate of 0.5% per annum with a caped call of $37 per share.

For whatever reason something happens we have a very good proof point to resell that zone.

All helpful color. Thank you.

Okay.

Thank you.

Our next question coming from the line of Chad Beynon with Macquarie. Your line is open.

Good morning, Thanks for taking my question.

Given the IMAX China situation.

Or does anything change in terms of how youre thinking about capital allocation buybacks or M&A, given where the balance sheet is and maybe some.

Some cash debt.

Ready to be used thank you.

Natasha Fernandes: Our current available liquidity is approximately $439 million, including cash and cash equivalents of $109 million and $330 million in available boring capacity under the company's various revolving facilities. From a capital allocation perspective, the IMAX China Transaction Outcome results in us having greater available capital. We believe our stock is greatly undervalued and thus we will continue to prioritize share repurchases as a use of cash just as we did in 2022. To date, in the fourth quarter we have repurchased approximately $4 million worth of shares and have $187 million remaining available under our share repurchase authorization.

Hi, Jeff.

The.

China transaction, we are continuing to operate business as is I think.

We just had the deals sign that we announced 20 system deal with Nbn and we think that the market has returned we've been doing well in China. We had our best ever Q1, we've had our best summer local language title.

So as we look at China, you will continue to operate it as is but from a capital allocation perspective at the consolidated level that will continue as well we've done share repurchases already.

We did $2 million in the quarter and then after the quarter subsequently, we've already done a little over $4 million and so as we think about capital allocation.

Natasha Fernandes: To conclude, Q3 is the most empathetic demonstration yet that this is a breakthrough year for IMAX. We are delivering a steady stream of IMAX box office, market share and financial records. We are effectively managing our content portfolio to maximize results. The table has been reset post-pandemic and we have emerged stronger on an annualized basis. The opportunities in front of us in 2024 and beyond are even more significant. Demand for the IMAX experience is at an all-time high.

Our continued strategy that if we see that we're undervalued, we'll be opportunistic about it.

With the cash on hand that we have.

Thanks, and then rich just thinking about some of these these new programming events, particularly the concerts you talked about talking heads Taylor Swift beyond say I guess these are these are global artists but.

More focused on North America or their local language artistic opportunities say, maybe a big.

Natasha Fernandes: We are regularly setting market share records across genres of films which is expanding our fan-based demographics. Studios, filmmakers and exhibitors are all realizing that IMAX is the most premium entertainment technology company in our space with unmatched global scale. This is stealing our system sales and propelling us into new market segments such as streaming and consumer technology. And importantly, as our growth accelerates, our asset light, highly incremental business model is resulting in expanding margins, bottom-line profit growth and robust cash flow generation.

Chinese artist or singer.

We could see years down the road this coming into kind of the local language content or does that just not to kind of drive the PSA that are needed.

To book, a window and your screens.

When you were asking the question I was wondering whether you were tapping into my phone over the last couple of weeks because the answer is yes. There are definitely local language opportunities and specifically I think there are in China, and we're starting to think about how to address that but I also want to reach.

Natasha Fernandes: In summary, our ability to optimize our results through a portfolio of content combined with the growing demand for our technology solutions is positioning as well relative to our full-year guidance and setting us up for long-term success.

Mind, you that a couple of quarters ago.

Did an event with a.

Our concert event with a band Indo chain, which is very popular in France.

Unknown Attendee: With that, I will turn the call over to the operator for Q&A. Thank you, Alisa and Jalman. As a question, you will need to press star 1-1 on your telephone and wait for your name to be announced.

It was extremely successful in France, and I think that's led not only for us.

Unknown Attendee: Please, then, I will be complicate in a rest. Now, first question coming from the line-up.

<unk>.

Talent, but other talent around the world to look to replicate that bottle and in fact, our hone in I think it's probably a bigger opportunity for us for local talent and local markets than it is for using Taylor Swift is a model because she's so wildly successful.

Eric Wold: Eric Wold would be Riley, Yelena Sopens. Thank you. Good morning.

As well as beyond say, there arent a lot of models like that but I think there are a lot of models of particular talent in a particular market.

Richard Gelfond: So one question that would work, a quick follow-up afterwards. I guess one, obviously, the impressive leverage in the quarter on the strength of the box office. The box office continues to ramp and exceed pre-pandemic levels in the coming year. If you talk about what has changed structurally within the content solutions segment to influence margins versus part of levels, I guess, taking an account, the large number of films that will be released into more regions, along with stronger average film performance.

That I think we will replicate.

Thanks, Rich really nice results for that congrats.

Thank you.

Yes.

Thank you and our next question coming from the line up.

And the last system with Goldman Sachs. Your line is open.

Hey, Greg maybe for rich just a follow up on the 120 system signings year to date it sounds like some of the signings are coming in on the quicker side I was wondering if you could maybe just talk a little bit about this expected pacing.

Richard Gelfond: Just trying to get a sense of where those margins can go in that segment over. Eric, we've said for a long time that as the box office and revenues increase, you'll see margin expansion and that's the primary driver. And if you look back to 2019 at where our margins are, and then the last few years which are heavily influenced by the pandemic, this is back to the levels of margin that we thought we could deliver.

Richard Gelfond: We're at those kinds of box office levels, so I think if the box office continues at these strong levels, the margin increases will continue, where the margin levels will continue. Eric, and just following on that, if you think about the way that we're doing local language as well, in different regions, local language content does not cost as much for us to convert to remaster and then to distribute as well. And to market and the dollar works differently and goes a lot further in different countries.

Installs for this vintage of signings on balance.

Is there anything in your conversations that might suggest that they could come in quicker over the next few years and what we've seen historically.

Yes, thanks, Stephen So I think that Youre right. They have been coming in more quickly certainly I mean, we're up to 120 versus <unk> 47 for all last year and we still have two five months to go and I think that's largely the function of our performance we reported.

IMAX is performance, but obviously our exhibition partners are doing extremely well with IMAX as well because their PSA is a better yield based on pretty much the same investment so their rois are better.

So as a result, that's why signings are coming in more quickly as to the second part of your question. This year I think there was a faster turn.

Signing to install and I would attribute that.

Richard Gelfond: And so as you look at our cost, our cost continues to remain relatively fixed and predictable, but the box office expansion creates all of that revenue growth. Again, sorry to dwell too much on this, but one fact we don't talk about that much is that our margin on local language meaning our gross take from the studios is as good as Hollywood and several countries better than Hollywood. So that flows through, you have lower costs and higher revenues. Thank you.

Partly to the growth in retrofit such as what I mentioned earlier about <unk> in Japan, and what I mentioned, a moment ago about hanjin installing six and the rest of this year going forward.

And I think that's also a function of seeing the strong box office.

As far as speculation, but I think.

Lot of the exhibitors are saying rather than invest in new builds because theres been a lot of.

Richard Gelfond: The following question. You talked to senior and obviously this year, you talked about you'll see it next year where films do move, give you some flexibility in that plate. If the studio chooses to move out of an already agreed upon IMAX window, and shift that film later to another window, do they have first rights that original window they had committed to or did it go up for grabs then for any studio that becomes your choice to get about what to replace.

Obviously, theres a lot of screens, particularly in North America, and Theres a lot of building going around the world and also the high cost of capital is probably a detriment to do doing new builds at the same pace. So I think they are saying well, we can increase our revenues and our profitability by signing up with IMAX.

Max and getting it going quicker rather than a newbuild, which is a two to three year plan and again at a higher capital costs. So I think some of those macro trend.

Richard Gelfond: No, it's completely up for grabs Eric. The agreement applies to a specific movie at a specific time. And then we have to negotiate, you know, a new window and, you know, a good example that would be just in the last few days when Paramount decided to move mission and possible eight on to Memorial Day 2025. It was, you know, as if it were a completely new negotiation and, you know, what the marketing was and in this case it's being filmed with IMAX cameras and how much play time we get it.

Trends are also speeding up both the signings and the installed base.

Got it. Thanks, that's helpful. And then maybe a follow up on that for Natasha could you talk a little bit more about the expected pacing of the JV equipment Capex over the course of the next year or two maybe on the back of Rich's comments on the install opportunity. Thank you.

Okay.

So I think if we just look at our backlog about 50, it's about 50 50 JV to sales arrangements and so.

Historically, even are split on an annual basis is usually about 50 50, I mean, there is an opportunity for us as we start to look at rest of world regions is in the <unk>.

Unknown Attendee: It's a complete kind of duo or as if the original deal didn't exist. Helpful. Thank you both. Thank you.

PSA market could we push out more JV Capex then.

Of course, if we were sitting on the cash I would it would be all for supporting and for US moving forward with the JV and so and that would get us a bigger bigger return when you think about box office quarters like the one we had this quarter.

Eric Handler: And our next question coming from the line up.

Eric Handler: Eric Handler would brought MKM, you know, it's open.

Richard Gelfond: Good morning and thanks for the question. Richard, what is it to talk about, you know, what do you need to see in the specific markets to, to run a local language film as such as, you know, what you're doing in Malaysia. And, and where really what markets do you see as a, of opportunities. Eric, I mean, the first place you star is what's the box office in the market. So, how much of the cost could you amortize through the local language network?

Richard Gelfond: Second, you'd look at whether it would also play in other markets, whether it's an interest, and for example, I'm not that familiar with Malaysia specifics, but I would think that Malaysian movies would probably play in the Middle East, and they'd probably play in Indian places like that, in other Southeast Asian countries. So, not just the country of origin, but other countries in how they do there. And then I think you obviously look at the movie, the kind of movie isn't an IMAX kind of movie.

Just expand your margins significantly with the fixed cost between <unk> and and content and so.

I think there is an opportunity there for us to use cash towards JV, but.

It's all part of how much cash flow do you have on hand, and what's the return on those particular locations. So I think youll constantly see a mix.

Especially because our pipeline and committed backlog is weighted pretty even but.

I think theres always opportunities out there should there be high Psa market.

Great. Thank you.

Okay.

Thank you.

Next question coming from the line of James Goss with Barrington Research. Your line is open.

Jim Goss I don't know did you here's who called you out.

Richard Gelfond: You look at your relationship with the filmmaker and with the studio in that country, and then of course, you run a model, and you look like what your P&L would look like in doing that. And then I'd say one other thing would be you look at the potential for that market. So, in India, as you know, we've been doing a lot more local language films, and the reason is not just because of the other criteria I mentioned, but because it's potentially a much larger market for us, and to the extent you can help increase the PSAs in that market, and help the exhibitors do better, it really helps your growth in that market.

You might be on mute.

You might be on mute Jim.

We will go to our next question.

Our next question coming from the line of.

Richard Gelfond: So, those would be pretty much the factors.

Michael <unk> with the benchmark company. Your line is now open.

Hey, rich Natasha Jennifer congratulations guys, great great quarter. So.

Nominal job just two questions you sort of touched on this rich.

Obviously signings here year to date crushing what you did in <unk>.

22, I think is still a bit.

Below pre pandemic.

Richard Gelfond: Okay. And then I'm curious now, as you look at your backlog, I don't know sort of what your bottlenecks are in terms of, you actually need construction to be completed for theaters, but in terms of, you know, theaters that are already in existence, is there any way to maybe accelerate the installation process with these theaters? I mean, I think it depends mostly, obviously, on the schedule of our local exhibition partner, and again, obviously with retrofits, it goes a lot faster than with new builds.

As Sean mentioned the momentum here.

And signings and nice to see.

China is starting to come back with signings as well I mean is it are we to the point now where we should be.

Comparable.

You get some installation growth off your guidance. This year, so installation growth and 24 is that a fair assumption at this point.

Second question Rich you talked about.

Obviously, you have a crystal ball, maybe you can't get a read on that but.

The labor dispute here now feels.

Richard Gelfond: So, as I said on my prepared comments in Japan, we signed a seven-feeder deal with Aeon, and we've already installed all seven of them this year. I believe the one we just announced in China with Hen Gen, even some of those are being, as a matter of fact, as I recall, it's six this year, even though we just signed that deal in October. So, and those are retrofits, obviously. The new builds has less flexibility, because obviously you've got to build a building and put that in there.

Feels like the final earnings definitely.

Tom.

Some disruption due is right you did note the amount of gallons you have from a late breaking films in.

Particular from from Apple. They didn't you didn't have had earlier in the year. So just curious.

Given that uncertainty when you look at 'twenty four you're comfortable at.

At this point.

Maybe not comfortable but are you more confident that you can continue.

To drive growth here from a global box office given though.

Notable performance.

Richard Gelfond: I would say beyond that, the only thing that would really accelerate it beyond that would be the film slate. So, if there's a film coming out that people want to open for, and also there's a typical seasonality, as you know, in the fourth quarter, and partly that's because the fourth quarter, before Christmas time, tends to be not that busy on a global basis. So, they can shut the existing theater down for a little while, and they could put the new one in, and then they could open up for Christmas. But if you look at our percentage of installs in the fourth quarter, it's historically always been extremely high.

<unk> three.

So how important is China.

Local language and streaming product driving your enthusiasm thanks guys.

Unknown Attendee: Thank you.

So we're about eight questions in there.

Try and parse through them.

As best as I can.

<unk>.

The first part I think was about signings and as it relates to install guidance for 2024 as you know we don't give install guidance until typically early in the next year.

In the middle of doing our budget right now so we're looking at that carefully.

Some of the external indicia of like the number of theaters, we have in backlog.

Fact that China had very few installs this year.

David Karnovsky: And our next question coming from the line-up, David Karnovsky with Shopee Morgan, you're on his open. Thank you. For Natasha, your revenue take rate on Imax Fox had content solutions looked especially strong in a quarter, just wondering if you could speak to what drove that and how sustainable it is. And then Rich, I think last quarter, you spoke to some early conversations with exhibition partners about maybe adding screens and ex-usivity zones, wanted to see if there was any update there.

Jess that 'twenty four should be a stronger year, but we haven't yet done our budget. So im not yet prepared to comment specifically on that in terms of the labor dispute.

Sure.

They met yesterday into the evening and my understanding is they are meeting again today and in the real world.

Allow me to caveat in a minute there's not a lot of open issues out. There. So you would think that this thing would be settled relatively.

David Karnovsky: And then how much are exclusivity zones a barrier to you getting higher penetration in the domestic market? Thanks. Hi, David. So as we looked at the quarter, we actually had a really good mix of local language and Hollywood content in the quarter. It was our best ever summer local language quarter for China. And so the take rate in China runs higher versus Hollywood content in China. And so as we pushed local language for China between creation of the gods, part one, no more bets and a couple other titles, it definitely helped us.

The near term, but again theres so much emotion involved in these things and when emotion clashes with the real world, It's very hard to make concrete predictions, but for what it's worth and im not at the bargaining table.

I think this thing will settle in the not too distant future in terms of how it affects 2020 for I mean, I've said this consistently it depends when it settles. So if it doesn't settle until six months from now yes, we're going to have an <unk>.

David Karnovsky: And we also ended the quarter with the beginning of the October holiday on the very last days until that led a lot of the take rate wins as well. The other component of that is Oppenheimer. Oppenheimer's take rate worked better for us in our film locations just based on the specific arrangements that we had for that film. And so that also optimized our take rate in the quarter. So David, in terms of discussions, we've had about adding theaters within zones, with exhibitors. I'd say they continued during the quarter. There's nothing that we announced, but there haven't been any setbacks. We just continue those discussions. And I expect there to be some results from that, but just not today.

Issue in 'twenty four because a lot of the films that are on our slate for the second half of 'twenty four Havent finished filming.

If it settles in the next couple of months.

Thanks, giving I'll feel a lot better about it.

That's beyond our control and very hard to predict but one of the things that turns out to have been I think a good rate for US is the fact that June moved to the first quarter of 'twenty four and.

As we said during our comments doing one was filmed with 40% with IMAX cameras. This one is 100% with IMAX cameras. There have been some really good additions to the cast including Austin Butler people have seen the film have said really good things about it. So that's a really nice anchor for us.

Natasha Fernandes: On how much of a barrier are the exclusive zones to growth in the markets? So I think you know that on a regular basis, we review what our total addressable market is. And that changes. And our analysis is for the next three years. So give me a historical perspective. In China, our original estimate was for 90 theaters. And now I think our estimate is about 1200 or something like that. And you know, we have 800 open and over 200 in backlog.

To have in the first quarter and then as you go through the first half of the year. There are also a number of.

I think films that will do very well, including another Fury road.

Godzilla vs Com.

Another Apple moving in the first half of the year.

And a bunch of other things so for the first half that looks pretty solid for the second half if the strike settles in the not too distant future. There is a lot of things going on there, but again I have to go back and you've been asked this as part of your question. The local language. There are some very promising things.

Natasha Fernandes: So that becomes a moving target. Obviously, the number of zones that are closed down, closed down because this exclusivity influences what that addressable market is. But I like to give you a few interesting examples. North America, which is one of our most heavily penetrated markets, there are still a lot of zones open. And something like 25% of our signings before this quarter were in North America this year. So there's still a lot of room to go and a lot of growth.

Rumored to be coming out Chinese new year.

There is.

Alternative content like contour, it's much more streaming product coming onboard so I don't want to answer your question quite specifically because we're in the middle of the stride, but theres a lot in play there where I think.

Natasha Fernandes: And occasionally for various reasons. Someone will give up an IMAX theater and it just so happens that recently in two zones people shut down a multi-pux that didn't shut down an IMAX theater but they shut down a multi-pux for you know whether it's real estate or whatever the reason is and within weeks we resold those zones to another exhibitor because the the IMAX Explicitivity had gone away so you know it does influence it but it also protects us in many ways because we've demonstrated the viability of the box office in that zone and if for whatever reason something happens we have a very good proof point to re-stell that zone. I'll call her. Thank you.

Things fall in the right way 2024, certainly can be a year of growth for us. The other thing I want to say, it's sort of obvious, but we don't say it.

Maybe because it's too obvious as an exhibitor who programs a multiplex needs lots of movies to program that multiplex and if you look at IMAX. This year, where we're running consistent with our best year ever 2019, and exhibition is pretty far behind that.

It's because there have been enough blockbuster really good films. So at the end of the second half of the year is kind of hurdle little bit by the strike in general all IMAX needs as one blockbuster one concert or one streaming film in that period. So one thing I will certainly say.

I feel better about our growth prospects than exhibitions growth prospects irrespective of when the strike settles.

Richard Gelfond: Thank you and our next question coming from the line up Chad Beynon with McQuarrie you want us open. Good morning thanks for taking my question. Given the IMAX China situation Natasha does anything change in terms of how you're thinking about capital allocation buybacks or M&A given where the balance sheet is and maybe some. Some cash that's you know ready to be used thank you. Hi Chad. Well we you know the China transaction we are continuing to operate business as is I think it's you know we just have the deals sign that we announced 20 system deal with in India and we think that the market has returned we've been doing well in China we are best ever Q1 we've had our best summer local language title and so you know as we look at China you will continue to operate it as is but from a capital allocation perspective at the consolidated level that will continue as well.

Thank you guys.

Yes.

Thank you one moment please for our next question.

And our next question coming from the line of James Goss with Barrington Research. Your line is open.

Okay.

Okay.

Kim Scott Your line is now open.

And I'm showing no further questions in the queue at this time I'll turn the call back over to Mr. Richard Gibson for any closing remarks.

Okay. Thank you operator.

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I just have a few things to say.

To our shareholder base and thank you for being supportive all through these years in the ups and downs, but one thing is that's management's credibility is based on is delivering what they say, they're going to deliver and I've got to say if you look back even over the pandemic.

Richard Gelfond: We've then share repurchases already we did two million in the quarter and then after the quarter subsequently we've already done a little over four million. And so you know as we think about capital allocation that's our continued strategy that if we see that we're undervalued will be opportunistic about it and with with the cash on hand that we have. Thanks and then Rich just thinking about some of these these new programming events particularly the concerts you talked about talking heads Taylor Swift beyond say I guess these are these are global artists but you know more focused on North America.

And the last couple of years and our guidance this year.

There's been a lot of consensus people, saying streaming is going to last forever and then the theatrical experience is dead and then bankruptcies are going to destroy the.

The industry and Youll IMAX is.

An exhibitor or look at them in their results and we've consistently bought back on those false narratives. In every one of them that we've said has proven to come through and they just haven't proven to come true in some theoretical abstract way, we promised years out in the future we've really <unk>.

Richard Gelfond: Are there local language artistic opportunities you know say maybe a big Chinese artist or singer. Where we could see you know yours down the road this coming into kind of the local language content or does that just not kind of drive the PSAs that are needed to to book a window in your screens thanks. I'm when you're asking the question I was wondering whether you were tapping into my phone over the last couple weeks put the answers yes.

Over this year and in particular, we have.

Really delivered this quarter across every imaginable index, whether it's financial or whether it's signings or whether it's our position in the ecosystem or even in small ways. Many of you don't see which is in our leverage in the day to day business and we are like a must have.

Richard Gelfond: There are definitely local language opportunities and specifically I think there are in China and we're starting to think about how to address that but I also want to remind you that I a couple quarters ago. We did an event with a concert event with a band Indochine which is very popular in France and it was extremely successful in France and I think that's led you know not only French talent but other talent around the world to look to replicate that model.

For blockbuster films on a global basis, and we've been able to use that to improve our slate not only in the movie business, but whether it's in the concert business or in the streaming business and that continues to go ahead and that all feeds in to something I ended the last call on <unk>.

As Matt I mean, I think if you look at where our EBITDA is look at what our multiple was in 2019 pre pandemic and look at where our multiple is today and.

Richard Gelfond: And if I have to hone in I think it's probably a bigger opportunity for us for local talent in local markets than it is for using Taylor Swift as a model because she's so wildly successful, as well as Beyonce. There aren't a lot of models like that but I think there are a lot of models of particular talent in a particular market that I think we will replicate. Thanks, Rich.

It's just I think there is an awful lot of upside in IMAX.

All the stories everybody tells you.

You could just sit down with the pen and I guess the final point I should remember is since 2019, we bought in a lot of shares so yes.

Yes.

I would urge everyone to look at those criteria and figure out what a good valuation is Brian that time, certainly rarely been as confident as I am today. So again, thank you for joining us and we look forward to our year end call.

Unknown Attendee: Really nice result today, congrats. Thank you.

Steven Laszczyk: And our next question coming from the lineup, Steven Laszczyk, Whitgoldman, Saxeel, on his open. Hey, great. Maybe for Rich, just to follow up on the 120 system signings you could date. It sounds like some of these signings are coming in on the quicker side. I was wondering if you could maybe just talk a little bit about this expected pacing of installs for this vintage of signings on balance. Is there anything in your conversations that might suggest that they could come in a little bit quicker over the next few years and what we've seen historically.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.

Okay.

[music].

Steven Laszczyk: Yeah, thanks, Steven. So I think that you're right. They have been coming in. More quickly, certainly, I mean, we're up to 120 versus 47 for all last year and we still have two and a half months to go. And I think that's largely the function of our performance. And you know, we report IMAX's performance, but obviously our exhibition partners are doing extremely well with IMAX as well because their PSAs are better.

Okay.

[music].

Steven Laszczyk: You'll based on pretty much the same investment. So there are a wise or better. And so as a result, that's why signings are in coming in more quickly. As for the second part of your question, this year, I think there was a faster turn in signing to install. And I would attribute that partly to the growth in retrofit, such as what I mentioned earlier, that A on in Japan, what I mentioned a moment ago about HAN Gen installing six in the rest of this year going forward.

Yes.

Hum.

[music].

Steven Laszczyk: And I think that's also a function of seeing the strong box office. This far speculation, but I think a lot of the exhibitors is saying, rather than invest in new builds, because there's been a lot of, obviously, there's a lot of screens, particularly in North America, and there's a lot of building going around the world. And also the high cost of capital is probably a detriment to doing new builds at the same pace.

Yes.

[music].

Yes.

Steven Laszczyk: So I think they're saying, well, we can increase our revenues and our profitability by signing up with IMAX and getting it going quicker rather than a new bill, which is a two to three year plan, and again, at a higher capital cost. So I think some of those macro trends are also speeding up both the signings and the install pace. Yeah, thanks, that's helpful. And then maybe I'll follow up on that for Natasha.

Steven Laszczyk: Could you talk a little bit more about the expected pacing of the JV equipment gap X over the course of the next year or two, maybe on the back of Rich's comments on the install opportunity. Thank you. So I think if we just look at our backlog about 50, it's about 50, 50 JV to sales arrangements. And so, you know, historically even our split on an annual basis is usually about 50, 50.

Steven Laszczyk: I mean, there's an opportunity for us as we start to look at rest of world regions is, you know, in the high PSA markets, could we push out more JV CapEx and, you know, of course, if we were sitting on the cash, I would, I would be all for supporting and for us moving forward with the JVs. And so that would be at a bigger, bigger return when you think about box office quarters, what the one we had this quarter, it just expands your margins significantly with the fixed costs between JVs and content.

Steven Laszczyk: And so, you know, I think there's an opportunity there for us to use cash towards JVs, but, you know, it's all part of how much cash will do you have on hand and what's the return on those particular locations. So I think you'll constantly see a mix. Especially because our pipeline and committed backlog is weighted pretty even, but, you know, I think there's always opportunities out there should there be high PSA markets. Margaret. Great. Thank you.

Unknown Attendee: And our next question coming from the line of James Goss with Beyn, Barrington Researcher on his open.

James Goss: Jim Goss, I don't know, did you hear she called you out? You might be on mute, Jim.

Unknown Attendee: We'll go to our next question. Our next question coming from the line of Michael Hickey with the benchmark company on his open. Hey Rich, Natasha, Jennifer, congratulations guys, a great, great quarter. So phenomenal job. Just two questions. You can sort of test on this Rich. Obviously signings here, here today, crushing what you did in 22. I think you're still a bit below pre-pandemic, but I think Natasha mentioned momentum here. Still and signings and nice to see China starting to come back with signings as well.

Unknown Attendee: I mean, is it, are we to the point now where we should be comfortable that you can get some installation growth off your guidance this year? So installation growth for 24 is out of fair assumption at this point. In the second question, Rich, you talked about obviously you have a crystal ball that maybe you can't get a read on this, but the labor dispute here now feels like when in the final innings.

Unknown Attendee: This definitely taught me to his movie, some disruption to his flight. You did note the amount of films you have and for the late breaking films, it's particular from Apple that didn't even have planned earlier in the year. So just curious, given that I'm certain to you, when you look at 24, are you comfortable at this point that maybe not comfortable, but are you somewhat confident that you continue to drive growth here from the global box office? Given the incredible performance on 23 and if so, how important is sort of China, local language and streaming product and driving enthusiasm? Thanks, guys. There were about eight questions in here.

Richard Gelfond: I'll try and parse through them as best as I can. The first part I think was about signings and as it relates to install guidance for 2024. As you know, we don't give install guidance until typically early in the next year. We are in the middle of doing our budget right now, so we're looking at that carefully. Some of the external indicia like the number of theaters we have in backlog, the fact that China had very few installs this year suggests that 24 should be a stronger year.

Richard Gelfond: But we haven't yet done our budget, so I'm not yet prepared to comment specifically on that. In terms of the labor dispute. They met yesterday into the evening and my understanding is they're meeting again today and in the real world, which allowed me to caveat in a minute, there's not a lot of open issues out there. So you would think that this thing would be settled relatively in the near term, but again, there's so much emotion involved in these things and when emotion clashes with the real world, it's very hard to make concrete predictions, but for what it's worth and I'm not at the bargaining table.

Richard Gelfond: I think this thing will settle in the not too distant future. In terms of how it affects 2024, I mean, I've said this consistently, it depends when it settles. So if it doesn't settle until, you know, six months from now, yeah, we're going to have an issue and we're going to have 2024 because a lot of the films that are on our slate for the second half of 24 haven't finished filming.

Richard Gelfond: If it settles, you know, in the next couple months, by Thanksgiving, I'll feel a lot better about it. And it's, you know, that's beyond our control and very hard to predict. But, you know, one of the things that turns out to have been, I think a good break for us is the fact that Dune moved to the first quarter of 24. And, you know, as we said during our comments, Dune one was filmed with 40% with IMAX cameras.

Richard Gelfond: This one is 100% with IMAX cameras. There have been some really good additions to the cast, including Austin Butler. People have seen the film have said really good things about it. So that's a really nice anchor for us to have in the first quarter. And then, you know, as you go through the first half of the year, there are also a number of. You know, I think films that will do very well, including another fury road, Godzilla versus Kong, another Apple movie in the first half of the year and a bunch of other things.

Richard Gelfond: So for the first half, it looks pretty solid. For the second half, if the strike settles, you know, in the not too distant future, there's a lot of things going on there. But again, I have to go back and you have been asked this as part of your question. You know, the local language, there are some very promising things rumored to be coming out Chinese New Year. You know, there is alternative content like concerts, much more streaming product coming on board.

Richard Gelfond: So I don't want to answer your question quite specifically because we're in the middle of the strike. But there's a lot in play there where I think if, you know, things fall in the right way, you know, 2024 certainly can be a year of growth for us. The other thing I want to say, it's sort of obvious, but we don't say it. Maybe because it's too obvious is an exhibitor who programs a multiplex needs lots of movies to program that multiplex.

Richard Gelfond: And, you know, if you look at IMAX this year, where we're running consistent with our best year ever, 2019, an exhibition is pretty far behind that. It's because there have been enough blockbuster, really good films. So if the second half of the year is kind of hurt a little bit by the strike, in general, all IMAX needs is one blockbuster or one concert or one streaming film in that period. So one thing I'll certainly say is I feel better about our growth prospects than exhibitions growth prospects irrespective of when the strike sets.

Unknown Attendee: Thank you, guys. Thank you.

Unknown Attendee: One moment please. One next question. Not next question. Coming from the line of James Goss with Barrington, research on his open. James Goss, your line is open. I'm showing an offer to questions in the queue at this time.

Richard Gelfond: I'll turn the call back over to Mr. Richard Gelfond for any closing remarks. Okay. Thank you, operator. I just have a few things to say, you know, to our shareholder base. And thank you for being supportive, you know, all through these years and the ups and downs. But, you know, one thing that's management's credibility is based on is delivering what they say they're going to deliver. And, you know, I've got to say if you look back, even over the pandemic and the last couple of years and our guidance this year, you know, there's been a lot of consensus people saying, streaming is going to last forever.

Richard Gelfond: And then that the act of a low experience is dead. And then, you know, bankruptcies are going to destroy the industry and, you know, I'm access and exhibitor look at them and their results. And we've consistently fought back on those false narratives and every one of them that we've said has proven to come true. And they just haven't proven to come true in some theoretical abstract way. You know, when we promised years out in the future, we've really delivered this year.

Richard Gelfond: And in particular, we really, we've really delivered this quarter across every imaginable index, whether it's financial or whether it's signings or whether it's our position in the ecosystem, or even in small ways, many of you don't see, which is in our leverage in the day to day business. And we're like, I must have for blockbuster films on a global basis. And we've been able to use that to improve our slate, you know, not only in the movie business, but whether it's in the concert business or in the streaming business.

Richard Gelfond: And that continues to go ahead. And that all feeds in, you know, to something I ended the last call on, which is map. I mean, I think if you look at where our EBITDA is, look at what our multiple was in 2019, pre-pandemic, and look at where our multiple is today. And, you know, it's just, I think there's an awful lot of upside in IMAX and, you know, all the stories everybody tells and, you know, you could just sit down with a pen.

Richard Gelfond: And I guess the final point I should remember is since 2019, we bought in a lot of shares. So, you know, I would, I would urge everyone to look at those criteria and, you know, figure out what a good valuation is for IMAX. I'm certainly rarely been as competent as I am today.

Richard Gelfond: So, again, thank you for joining us and we look forward to our year end. Please, thank you all for your participation.

Unknown Attendee: You may now disconnect.