Q1 2025 IMAX Corp Earnings Call
Speaker Change: Those are some of the years! I truly hope it doesn't apply to Bloody Mary haircut. I can't wait to see what we can do with them. Check out the full video on our TV channel. Or follow me on twitter!
Speaker Change: David Karnovsky, Jennifer Horsley, David Karnovsky, David Karnovsky, David Karnovsky, Jennifer Horsley,
City of Love
Speaker Change: Thank you for standing by and welcome to Imax, 1st quarter, 2020-25, Ernie's conference call.
Speaker Change: At this time, all participants aren't able to listen to only mode. After the speaker presentation there will be a question and answer session.
Speaker Change: To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Jennifer Horsley, head of investor relations for Imax. Please, go ahead.
Speaker Change: Good afternoon, and thank you for joining us for IMAX's first quarter 2025 earnings conference call. 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.
Speaker Change: 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 to the investor relations section of our site.
Speaker Change: Our Historical Excel model is posted to the website as well. I would like to remind you of the following information regarding forward-looking statements. Today's call, as well as the accompanying slide deck, may include statements that are forward-looking and that pertain to future results or outcomes.
Speaker Change: 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 of the factors that could affect our future results and outcomes.
Speaker Change: 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.
Speaker Change: During today's call, references may be made to certain non-GAAP financial measures.
Speaker Change: Discussion of Management's use of these measures and the definition of these measures, as well as a reconciliation to non-GAAP financial measures .
Speaker Change: Arcontained in this afternoon's press release and our earnings materials which are available on the investor relations page of our website at Imax.com With that, let me now turn the call over to Mr. Richard Gelfond. Rich?
Richard Gelfond: Thanks, Jennifer, and thank you everyone for joining today. Imax got off to an excellent start in the first quarter.
Richard Gelfond: We banked nearly $300 million dollars in global box office our best first quarter ever.
Richard Gelfond: We've signed agreements for more than 100 new and upgraded systems year-to-date, compared to 130 in all 2024. And we kicked off a great summer slate with a run of eight consecutive film prime acts releases.
The fundamentals of our business have never been stronger.
Richard Gelfond: In recent weeks, that fact has been obscured by noise around tariffs, China and speculation about the potential impact on the Hollywood slate.
Richard Gelfond: We've looked deeply at this issue. We've talked to every studio and our industry partners throughout China, talked about it across our 30 years of doing business in the country.
that the quote, moderate reduction in Hollywood imports.
Richard Gelfond: announced by China Film Administration will largely target films with limited box office potential in the market. Smaller budget, kind of fair, not the kind of films that drive Imax's business.
Richard Gelfond: So we're not letting the noise distract us from the opportunity ahead. We drove double digit growth in revenue and adjusted EBITDA in the first quarter and adjusted EBITDA margin of 43%.
Richard Gelfond: The Hollywood slate is ramping up, building to the year-end crescendo of Avatar, Firenash in December .
Richard Gelfond: We've already seen select footage and are very enthusiastic. We've had many promising new locations set to open across high PSA markets in Asia, Australia, North America and the Middle East.
Richard Gelfond: and Imax uniquely benefits from a very positive confluence of trends in global content.
Richard Gelfond: The rapid rise of big budget, high production value, local language blockbusters from around the world and to the continued resurgence of the Hollywood sleigh with releases from the biggest filmmakers and ten pole franchises lined up through the end of the decade. David Karnovsky, David Karnovsky, David Karnovsky, David Karnovsky,
Richard Gelfond: We continue to wield our leverage in the industry to provide a diverse, dynamic, truly global programming slate. On the content side, first 2025 is shaping up to be a watershed year for our growing successful local language strategy.
Richard Gelfond: Chinese New Year exceeded our wildest expectations with $182 million in IMAX box office, triple our previous record.
Richard Gelfond: Like Top Gun Maverick, Hoppin Heimer, and Doon Part II before it, Nezha II became synonymous with IMAX as we've earned more than $164 million to date with the film.
Richard Gelfond: We index 7.5% with the film in China, on less than 1% of the screens, about double our average with local animated releases.
Richard Gelfond: As a reminder, Imax collects a higher fee in China with local language releases than it does with Hollywood releases.
Richard Gelfond: We see tremendous opportunities ahead with the international films. It's quite possible that Imax delivers its highest grossing local language films of all time in China, Japan, and India this year.
Richard Gelfond: In Japan, Demon Slayer, Infinity Castle, the sequel to the highest grossing Japanese film of all time arrives in July followed by a global release in the fall.
Richard Gelfond: and in India, War II has the potential to join the ranks of India's biggest blockbusters when it comes out in August .
Richard Gelfond: These well-established markets are building bankable and often exportable franchises to rival Hollywood releases.
Richard Gelfond: We're tapping into fast-growing film industries in priority markets like Saudi Arabia, Vietnam, Indonesia and Thailand to expand our content portfolio and drive network growth.
Richard Gelfond: In 2019, local language film accounted for 12% of our total global box office. In 2023, that figure rose to 21%, and in the first quarter of 25, it was 868% of our box office.
Richard Gelfond: We've already delivered more local language box office this year than we did in all of 2024 and we remain very bullish on a Hollywood slate that features more IMAX DNA than ever.
Richard Gelfond: Every Hollywood release scheduled from now to August was filmed with Imax cameras.
Richard Gelfond: Joseph's past weekend, we delivered 20% of the domestic opening of sinners which was shot in Park for IMAX with IMAX 70 millimeter film.
Richard Gelfond: And on Monday, sinners continued its toured pace in Imax, chopping off very little from Sunday and delivering $2 million in indicating a great hold is likely for this week.
Speaker Change: Yet again, when an author, filmmaker, like Ryan Kugler, leans into IMAX, audiences heed the call and turn out for the platform in a big way.
Richard Gelfond: This outperformance is consistent with what we've seen with the big IMAX 70 millimeter releases like Oppenheimer and Dune Part II.
Richard Gelfond: Sinners also delivered our biggest domestic opening weekend ever for a horror film. Over the next few months, Buzz is building for our film for IMAX Slate.
Richard Gelfond: Mission impossible, the final reckoning will make a splashy debut at Conn in just a few weeks, followed by the one that in New York premieres in Imax.
Richard Gelfond: Insiders are high on both Marvel's Thunderbolts and Fantastic Four. The trailers for Superman have racked up hundreds of millions of views online.
How to train your driving, screened to acclaim at Cinematon.
Richard Gelfond: An early Imax exclusive F1 precells are strong and we have many Imax exclusive elements and events throughout its promotional campaign.
Richard Gelfond: This year concludes LeZootopia 2, an Avatar Firenash. The first two Avatar films earn more than $250 million a piece in Imax.
Richard Gelfond: 2026 kicks off with the Avatar carryover and features Christopher Nolan's The Odyssey, as well as Avengers
Super Mario Brothers
Richard Gelfond: Toy Story, Greta Girlwoods, Narnia, and The Doon Sequel from Denise Villanue.
Richard Gelfond: and 2027, already both in other Avengers and Star Wars, as well as Batman 2 and Frozen 3.
Speaker Change: Once viewed as a competitive threat, streaming services are leaning into Imax in a big way.
Speaker Change: or Apple prioritizing an IMAX release before securing a studio partner for F1 or IMAZON purchasing our original documentary Blue Angels and committing tent poles like Project Hail Mary and Mercy to the FilmFriMAX program.
Speaker Change: And as we open our content aperture, we continue to drive incremental box office without growing slate of events and experiences.
Speaker Change: including a record-breaking exclusive debut of Becoming Led Zeppelin and this weekend's Pink Floyd Live at Pompeii.
Our exclusive re-release of Studio Ghibli's classic
Speaker Change: Princess Manonoki, which earned $4 million in its debut, the biggest iMac's domestic opening ever from local language film, and are sold out live sports tests in France with the annual
Global Network and Technology.
Speaker Change: Looking at our global network, our system signings and installations are a strong indicator of anticipation among exhibitors and the prevailing sentiment that Imax will be the preferred choice for consumers worldwide as the slate rolls out.
Speaker Change: We installed 21 systems worldwide in the first quarter, our second best first quarter ever for installs and we've signed agreements year to date for 101 new and upgraded IMAX systems worldwide.
Speaker Change: This includes a major agreement with AMC, which will add 12 new Imax locations on upgrade virtually its entire IMAX footprint in the US to IMAX with laser.
Speaker Change: We also continue to expand our roster of partners in the U.S. This year alone will open at least 11 locations with regional partners that we signed up in the past 12 months.
Speaker Change: International Japan continues to be a priority market for us. Year-to-date Imax is now signed agreements for 11 new and upgraded locations in Japan.
including a rare location with two auditoriums in Tokyo.
Speaker Change: We also expanded across Western Europe with our fast-growing partners at Canopoulos in a multi-territory agreement spanning France, Belgium, Spain, the Netherlands as well as the US and Canada.
To close, it's a very exciting time at IMAX.
Speaker Change: Our business has proven to be resilient and able to thrive in many different economic cycles.
Speaker Change: We have no doubt that will remain true. We have visibility to a more promising slate through the end of the decade than we've ever seen in the future at a strong trajectory for continued network growth.
Speaker Change: We look forward to seizing the opportunity to deliver results for all of our shareholders. Thank you. With that, I'll turn it over to Natasha.
Natasha Fernandes: Thanks, Rich, and good afternoon everyone. In the first quarter, Imax exceeded its expectations across global box office, system signing, system installations, and adjusted EBITDA.
Natasha Fernandes: Our results in the quarter were driven by record box office and 40% year-over-year growth in IMAX system installations worldwide. And this outperformance, again, highlighted the operating leverage in our model with a total adjusted EBITDA margin of 42.7%.
Natasha Fernandes: We are on track to achieve our guidance for the full year, including a record 1.2 billion in global box office.
Natasha Fernandes: Taking a closer look at our Q1 results, we delivered revenues of 87 million, up 10% from the prior year first quarter.
Natasha Fernandes: Driven by our record Chinese New Year box office and our overall programming strategy which featured a mix of content including Hollywood, local language, re-releases, concert films and sports.
Natasha Fernandes: Our best ever Q1 box office also led to a high Q1 global market share of 3.5% on less than 1% of screens globally and a record of 5.4% in China, both of which reflect Imax's outperformance in the quarter.
Natasha Fernandes: Technology products and services revenues of $51 million was up 17% year-over-year with gross margin of $29 million of 23% driven in part by growth in global box office.
Natasha Fernandes: The quarter also saw growth in installation, 21 versus 15 systems in the prior year, which included a higher mix of failed type arrangements.
Natasha Fernandes: The geographic mix of installations was evenly spread with seven systems in each of domestic, public, rest of the world, and China.
Natasha Fernandes: Exhibitors globally are shifting into investment mode in advance of the strong upcoming IMAX late.
Natasha Fernandes: Similarly, encouraging with the strength in Q1 signing, which at 95 systems was up 87 from the prior year, and included signings in high-per-screen average markets such as the US, Europe , and Japan.
Natasha Fernandes: The strong Q1 signings lifts the IMAX backlog to 516 systems, up 74 systems or 17% year-over-year representing a solid pipeline for future global growth of the IMAX network.
Natasha Fernandes: The gross margin performance in Q1 of 61% increased 200 basis points year-over-year, reflecting high incremental profits flow through from the stronger box office performance.
Thank you. Thank you.
Natasha Fernandes: Operating expenditures defined as research and development and selling general and administrative expenses, excluding stock-based compensation with $30 million and increased $950,000 year over year driven primarily by timing of expenses.
Natasha Fernandes: We continue to take proactive steps to enhance operational efficiency and reduce annual costs, while optimizing Imax's organizational structure, including eliminating redundant roles and centralizing select functions which positively impacts both margin and offense.
Natasha Fernandes: Overall, first quarter total consolidated adjusted EBITDA of $37 million increased $5 million or 15% year-over-year, driven by the higher revenues and growth margin.
Natasha Fernandes: This resulted in an adjusted even a margin of 42.7% up over 200 basis 0.0 over year.
Natasha Fernandes: First-quarter adjusted EPS was 13 cents, which includes a higher year-over-year reduction for non-controlling interests associated with a strong IMAX China result.
Natasha Fernandes: The tax rate was 47% in the quarter, primarily reflective of the geographic mix of profits that led to a higher tax valuation allowance of $3.2 million or negative fixed-sen impact year over year.
Natasha Fernandes: For the full year, we expect the tax rate to be at a more normalized rate based on the historical trends and our geographic forecast of annualized profits.
Turning to cashflow and the balance sheet. David Karnovsky, David Karnovsky,
Natasha Fernandes: Cash flow from operations provided $7 million in Q1, which is an $18 million improvement over the prior year period. A good start to the year given seasonally, Q1 is generally a lower cash flow quarter based on the timing of revenues and payments such as annual compensation payouts.
Natasha Fernandes: Similar to total adjusted EBITDA, the dynamics of cash flow are quite positive as box office expands, leading to incrementality, particularly considering the cash flow characteristics of our joint revenue sharing contracts, where the capital expenditure is at the beginning of an average 10-year contract term.
Natasha Fernandes: During Q1, we used our available capital to invest in the business, including $12 million spent on growth of CAPEX related to partnering with exhibitor customers to grow and upgrade the IMAX network through joint revenue sharing arrangement.
Natasha Fernandes: Our capital position remains very strong with cash of 97 million.
Jet, excluding deferred financing costs with 282 million.
Natasha Fernandes: As a reminder, 230 million of our debt comes from our convertible senior notes due in April 2026 that bear an interest rate of 0.5% per annum with a cap-call leading to a $37 per share conversion price.
Natasha Fernandes: With our strong liquidity position and available facilities, we have the ability to be opportunistic as we assess the timing of when to address these notes.
Natasha Fernandes: Our current available liquidity is over 400 million, which includes over 300 million in available boring capacity, under the company's various revolving facilities.
We are confident about our outlook for 2025 and beyond.
Natasha Fernandes: While still early in the year, we are ahead of our expectations, and we have started the second quarter off strong with good box office from Minecraft and Centers, which leads into summer titles with larger potential, including five more film-for-Imax titles in Q2 alone.
Natasha Fernandes: The visibility into Imax's future slate has never been as good, including a standout 2026, and the significant runway to grow our network further is clear as Imax location zones are less than 50% penetrated.
Natasha Fernandes: Longer term, we are confident in our future as the demand for Imax increases and we achieve greater network scale, deep in our relationships with exhibitors, studios, and filmmakers, and broad in our content aperture to distribute even more content across our global platform.
Natasha Fernandes: We believe with the strength of the IMAX brand, our strong balance sheet and business model that IMAX's well-positioned to deliver sustainable growth, expanding margins, and increasing cash flows in 2025 and beyond.
Natasha Fernandes: With that, I will turn the call over to the operator for Q&A.
Thank you.
Natasha Fernandes: As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again.
Natasha Fernandes: We ask that you limit yourself to one question and one follow-up to allow everyone the opportunity to participate.
Our first question.
Speaker Change: Come from the line of Eric Wold of Texas Capital Securities. Please go ahead, Eric.
Eric Wold: Thank you. Good afternoon, everybody. A couple of questions. One question on China and one on China made for IMAX.
Outlook, you mentioned an expectation that...
Eric Wold: Any modest production in Hollywood film imports, you know, would be focused on either smaller budget films that...
Eric Wold: You would not really impact, you know, the IMAX slate. So I have to assume then that there has also not been the adverse shift in tone from Chinese
Speaker Change: Eric, we're coming off our best quarter in China ever, which we just reported today.
and that's what effects.
Theatre Owners and people making movies and things like that.
Speaker Change: So I would say there's not only not a reduction in activity in the market within China, there's an increase, there's more incoming calls, there's more interest in movies.
Speaker Change: We were just a key member of the Beijing Film Festival this weekend where a panel talked about the future of film and there was almost no one in the panel.
Who didn't talk about IMAX and how important it was?
Speaker Change: because they're looking, you know, it's coming off in their jaw and then, you know, three, a record by over three times of any film we've ever done. So the narrative.
In China's completely...
You know, positive in a very material way.
Speaker Change: In terms of the reduction of films, moderate reduction coming in, let's just do a reality check.
Speaker Change: So Thunderbolts opens in a week and a half. That's been approved. It's getting at it. Today they dated, Lilo and Stitch.
in China.
Speaker Change: There were about three other films submitted in the last couple of weeks.
Speaker Change: You know, we've talked to almost every Hollywood studio and they expect all their major films [inaudible]
to get in in discussions with...
the Chinese government, no our relationships in China.
Speaker Change: Have told us that the kind of reductions, if there are any, would be kind of a...
Speaker Change: Les Financially, on broad ones, then the kinds of films I'm at typically place. So, you know, I think, um...
Speaker Change: You know, I make very confident about China in a lot of ways and I don't think that the moderate film reduction will have a material impact on Imax.
Speaker Change: Not, that's perfect. And then my follow-up one, you're going to made for Imax with now the big run of made for Imax film is starting
What is the primary dating factor to having? [inaudible]
Speaker Change: A larger percentage of a film shot with Imax cameras in the years ahead of the purely the number of Imax cameras that are available to be used you need. [inaudible]
Speaker Change: DGD broader sign-off from a greater number of studios and producers, and then, you know, kind of what is that right number, do you think without potentially diluting, you know, the, you know, the, the kind of the meat for IMAX TESHA?
Eric Wold: So, Eric, I can say it has more to do with slots than anything else.
Speaker Change: So, you know, for example, we have eight films in a row coming right now, so there just aren't more films we could have done in this period of time and plus we really want to be discriminating about it [inaudible]
Speaker Change: So I don't think you should look at our success as how many we're doing in a particular period of time because I think it needs to be the right kind of film for us to do it and as a matter of fact
Speaker Change: In terms of the film camera, that's a little bit different.
Speaker Change: There is a limiting factor there in the number of cameras on the digital side.
There isn't
Speaker Change: But right now, as you know, the Nolan's are shooting an Odyssey with a significant number of IMAX cameras which we're very excited about, obviously, for next summer, but we can't really shoot.
more than two simultaneously with the film cameras.
Speaker Change: and once they're done shooting, then I think you'll see us film some other climax made.
Speaker Change: of film cameras. Once that concludes, you know, somewhat later this year. But I say, you know, that I don't want you to think too much about supply of cameras. It's much more an issue of the right slots and the right content.
Perfect, thanks Hickey
David Karnovsky, Jennifer Horsley,
Thank you.
Speaker Change: Our next question comes from the line of Chad Beynon. Up McCquirey, please go ahead Chad.
Speaker Change: Hi, good afternoon. Thanks for taking my question. Rich, another one on China, but focusing on the positive outcome for the first quarter, I know, I guess
You know, thinking about the last several quarters. Imax Corp.
Speaker Change: It was your focus to zone in on Tier 1 and Tier 2 in terms of new distribution zones, but as we look at the first quarter out performance in China, can you talk about where that strength came from and if? [inaudible]
Speaker Change: It did come from tier 3 to 5 cities if that might change the outlook of the aperture of your zones in that market. Thank you.
I don't have that data at my fingertips.
Speaker Change: Chad. However, I believe it was uniform across all markets. And I think...
Speaker Change: You know, there are a couple factors for it. Obviously, the movie itself was very special.
Speaker Change: and you know, that total of audiences, as you know, I said, might prepare.
Speaker Change: Comments that our market share was up significantly, especially in the animation area and
Speaker Change: You know, the other thing was on the marketing side. We tried a very different marketing approach and we um...
Speaker Change: We kind of joined that chart with a number of entities, including the studio that made Nesha, and we did combine promotions and then we've leaned much more into the right social media, so TikTok was a key component of where we placed our marketing, we're trying to re-examine.
Speaker Change: Not only in China, but throughout the world, historically films the market on billboards and bus stations.
Speaker Change: and you know, it's transitioned somewhat, but we found for this film in particular that social marketing and that our investment in that was extremely successful. And I think that went a lot to do with the result.
Speaker Change: Okay, great, thank you. And then with respect to the signings announced in the quarter and around Sinmikan.
Speaker Change: Has anything changed just in terms of the general terms or how you guys are thinking about JVs versus STLs? Not getting into specific...
Speaker Change: Contracts, but just given the weight of the signings in the first quarter if anything changed generally in terms of how you're talking to future partners. Thank you.
Speaker Change: Thanks, not at all. And as a matter of fact, you know, our signings were quite diverse.
Speaker Change: You know, as I said, and I script, we have over 100 now just to put in context, we had 130 for the year last year, but demand is very strong and I think what's fueling that is the film slate for this year in 26 and how far out the backlog of films.
Goss, but in terms of our...
Returns. No, and I'll tell you.
Speaker Change: You'll kind of something you'll find interesting, so given the success of Nezha,
Speaker Change: We discussed whether we would want to sign a lot more theaters in China because obviously the IMAX brand and market share is going in the right direction and we said no, we want to be as careful as we always were in terms of who the partner is and what the terms are and what the box office is. [inaudible]
Speaker Change: So we're looking at the same ROI calculus that we always have.
Thanks, Rich.
Thank you so much.
Speaker Change: Thank you. Our next question comes from the line of David Karnovsky of JP Morgan. Your question, please David.
David Konofsky: Hey, thank you. Rich theatrical windows are a big topic with exhibitors and studios right now and I know it's much less of an issue for Imax given you.
David Konofsky: Typically, Terry Movies for a week or two, but you have screen films recently with Windows, Peavod. I think it's short of 17 or 24 days, and so I'm curious on your view of how you kind of see this issue whether there's risk now or maybe whether there's any risk to consider down the line.
David Konofsky: Yeah, so, you know, I don't, we don't really pay attention . . .
David Konofsky: to what the Peavod Windows are, because we don't really view that as competitive. I'm actually right that, you know, exhibitors are really focused on that issue. And as you know, it's Cinemacon, that was a big subject. I definitely understand windowing being important to exhibitors.
David Konofsky: But, we had a very good quarter because we have global diversification. [inaudible]
David Konofsky: As you know, the North American Exhibitor, so it was very challenging . . .
Quarter. Again,
David Konofsky: I know it's going to be controversial, but I think they should really focus on the kind of content.
David Konofsky: and getting more content which we're trying to do with bar language films and alternative things.
David Konofsky: and the last one, whether the window is 30 or 45 days, I just don't think that's going to make a material difference.
David Konofsky: to their faces at the end of the day and for us it makes...
You'll virtually know the difference at all I…
We're sympathetic to not trowsing on their theatrical.
Well, ladies, but-
David Konofsky: You know, I think just way too much has been made of it, and you know, I don't think that's going to save the industry. I think more good content and more diversified content is much more important.
Speaker Change: Okay, and then just two for Natasha, I guess first from the higher install activity year over year.
Speaker Change: How should we interpret this? You highlighted in the DAC 40% growth, but maintain the guide. Is it reasonable to assume the higher end at least is more achievable now and then just on the. Well.
Speaker Change: Content Solutions Gross Margin, really outsized in the quarter, assuming that had to do with China performance, but can you walk through the drivers here to get any of that marketing shift that Rich mentioned a few minutes ago on, you know, the social play role at all. [inaudible]
Speaker Change: So our guidance for the year, we reiterated as 145 to 160 for installations. It's just simply as timing makes David as to, you know, an exhibitor came to the table and wanted to install.
Speaker Change: Sooner than we had originally planned, which is a good thing, I mean ahead of the split that's coming up.
Speaker Change: It isn't everyone's best interest to get installed, but it also comes down to timing of capital allocation from there and what they're able to do. And so from a mixed perspective and timing, we still believe the back end of the year is going to be the heaviest period of time. Normally we install 50% of our systems in the last quarter. And so I would say the same sort of mix as last year with respect to timing. And then
Speaker Change: and a mix of J.V. versus sales as well. We still reiterate the same violence we gave, where it would be heavier towards J.V.'s this year, which is good as we look towards…
Speaker Change: capturing the incrementality on the box office, which leads into the answer for your second question with respect to the margin and content solutions. That is a prime example of what we've been talking about on our prior calls with respect to incrementality.
When you start to work through...
The ability of achieving the entire bus stop at levels [inaudible]
Thanks for its flows mostly to the bottom line without additional costs.
Speaker Change: You know, if you look through, we do have a correlation slide in our investor presentation on the website, but if you look through that when you start to see box office levels over 250 million, you can start to see a higher flow through incrementality of about, you know, 85% of every dollars is flowing right through to from revenue to EBITDA and I think that's where you're starting to see that come through on that constant margin. Also coupled with that is Q1, it was heavily driven by Chinese New Year's
David Karnovsky, David Karnovsky,
Speaker Change: and so local language content does cost us less from a climax remastering perspective and also from a marketing perspective rich touched on it just now but marketing through social media channels versus print is obviously less expensive as well so that gave us the opportunity on the margin there to.
Thanks.
David Karnovsky, David Karnovsky, David Karnovsky,
Thank you.
Next question.
Speaker Change: Comes from the line of Eric Handler of Roth Capital. Please go ahead, Eric.
Eric Handler: Thank you very much. Good afternoon. Thanks for the question. Rich, I want you to just give a little insight into how much runway do you have in terms of visibility for what movies are going to be shown in China and to Q and
Eric Handler: May we talk about some other areas for local language content around the world and to Q.
Yeah, we have an awful lot of visibility [inaudible]
Eric Wold: Eric into China, as a matter of fact, the earlier today we had Orion Max China.
Eric Wold: Ward meeting and we went through the slate for the rest of the year and you know Natasha jump in if you want to but I think they're like six or seven local language movies that are already being announced. [inaudible]
Eric Wold: for this year, a number of them filmed with IMAX cameras.
Eric Wold: A number of them, we've been on set there, we've seen clips, we've interacted.
with the studios and we feel pretty good about it and...
Speaker Change: If you look for a trend, Eric, that's gotten more favorable to us over time. It used to be a little bit more of a black box.
Process, but the China Film Regulators have gotten.
Better at kind of giving us
Speaker Change: Slade, and what the films are about, and the studios and the filmmakers have been much more willing.
Speaker Change: to show us footage and put together marketing plans. So again, I know some of the names. I...
Speaker Change: Well enough to talk about them, but I could say that our CEO of IMAX China's quite optimistic about the slate of local language films for this year.
Speaker Change: Eric, if it's helpful, we have added a slide in our deck as well, but there's 10 local languages confirmed in China that we've put on that slide to be a little more helpful to everybody to see visibility into this year as well as the Hollywood slate as well that we expect to come through.
Speaker Change: Okay. And then, just as a follow-up, what if you could talk about centers a little bit? I mean, 20% market share, it's fantastic, you know, wonder if there's a few things that maybe you could point to why, you know,
Speaker Change: Well, how that got to, how sinners got to 20% versus other movies that are, you know,
Speaker Change: Moe to mid-double digits. What sort of work really well there?
So, I'd say in a, in a.
and a couple of things. [inaudible]
Speaker Change: Number one, it's a really good movie, and really well shot by an author or filmmaker, and you know there was close to 100% on Rotten Tomatoes, and as you know, Imax delivers the best.
Speaker Change: When it's a really great filmmaker, it's a really great film and cinema files really want to see it so I think that was kind of you know the film was the kind of film. [inaudible]
Speaker Change: But maybe even more importantly, equally a more, is that Ryan Cougar and Michael B. Jordan really leaned into it. Eric Handler, I don't know if you saw the piece that Michael know that Ryan created, where he went through all the film formats and how people issues. [inaudible]
Speaker Change: He should see it and why they should see it in Imax and he did a lot of, he kind of followed, you know, some of the Chris Nolan playbook.
Speaker Change: which is to talk about why it was important to him to make it an IMAX film, why people should see it that way, what the benefits are, and then throughout the opening weekend, he went to a number of IMAX theaters throughout North America and talked about it and showed up and I understand Michael would be Jordan showed up at the BFI and London over the weekend and when they did talk shows and they talked about the movie. IMAX was an integral. IMAX was an integral. IMAX was an integral.
Part of the movie.
Eric Wold: And we've always thought that was a key point, but this is like a clear demonstration of that. And then Eric also, besides the indexing, a really good thing has happened this week, which is usually, for Imax release, a Monday is typically 10% of the weekends.
Gross, but on sears this Monday was 20%.
Eric Wold: of the Weekends Gross, and then Sinners on Tuesday was 20% of the Weekends Gross. Now I'm not talking about the percentage of box office that also held their 20, but I'm talking about the gross proceeds. David.
Eric Wold: So that it loads very well for the run. One of the things we were hoping.
Eric Wold: Was that because the movie was so good and so well received by fans and critics that it would broaden out and that Imax was a tool for it to broaden out. And again, you know, not
Eric Wold: saying it's going to be numbers like Oppenheimer and Doom, but it's the same kind of effect we're seeing and very similar numbers where the IMAX film has enabled this broadening out of that. [inaudible]
Thanks, Richard. Appreciate it.
Speaker Change: Thank you. In the interest of time, we now ask everyone to limit themselves to one question, to allow everyone the opportunity to participate. Our next question.
Speaker Change: Come from the line of David Joyce of Seaport Research Partners, your question please David.
David Joyce: Thank you. I wanted to ask about the health of the consumer. I'm just wondering if you had
Conversations anecdotally with the theater owners related to how well...
David Joyce: You know, Minecraft and sinners have done, and while Captain America overall was soft, I think he still did fine there. Just wondering if the theater owners that also have regular screens have any comments about, you know,
David Joyce: You know, people skewing more to the IMAX showtime. You did talk about having higher share, of course, to that kind of answer to the question. I'm just wondering, are they also, like, asking for more IMAX showtimes? Are they trying to fit more in? I just wonder if you had any more anecdotes about the consumer. Thanks.
Speaker Change: [inaudible] I mean, this is in China where the consumers are not as prosperous as they are here, and it's something we traditionally index.
Speaker Change: in the three-ish percent range, and we did seven-and-a-half, and at the end of the run, we were at 13%.
Speaker Change: So, I think that's kind of a test lab for consumers. It's an affordable luxury. So, you know, although obviously, you know, their challenges as they're always are.
Speaker Change: But going to an IMAX movie is kind of a special thing and it...
Speaker Change: Since I've been here, they're probably in three or four recessionary periods and every year on the box office is up during those periods that I've been here than it was before.
Speaker Change: So, if it's something more expensive, vacation, travel, restaurant, I could see it having much more of an impact.
Speaker Change: But in a way, because this is something special and it doesn't cost that much more, I haven't really seen an effect from that and I haven't heard about it from Eric Collins. Thanks.
Alright, thank you.
Speaker Change: Thank you. Our next question comes from the line of Omar Mahidz of Wells Fargo. Please go ahead, Omar.
Thank you.
Thank you for taking my question, Rich!
Speaker Change: Maybe stick with China. In the US, historically, the box office has been resilient during recessionary periods because movie going remains an affordable form of entertainment. [inaudible]
Speaker Change: Can you provide any any color on how the Chinese box office performs during recessionary periods and if you have any concerns that a potentially economic slow in them could pressure consumers in China and limit attendance? Thanks
Speaker Change: Well, my first comment Omar is during the first quarter it was a pretty slow economic period in China and we set records by multiples so we have some fairly recent data that we can [inaudible]
draw on
Bye now.
Speaker Change: But, you know, I just don't think it's gonna be different in China. Remember, we're in 90 countries.
Speaker Change: So I don't think the Chinese behavior is different than other countries and I think for good products and well marketed, you know that the market will be there and you know it's too early to say obviously but we haven't seen any evidence of that.
David Karnovsky, David Karnovsky
Thank you.
Speaker Change: And I think the other thing to consider Omar is government support during recessionary periods as well like Chinese New Year there was government support through there and we saw some last year and they've announced that the Beijing Festival as well as they'll be continued support so I think even from that perspective. We have, um,
Speaker Change: that there's always support during this recessionary periods. And when you think about it, the most discretionary part of movie going is concessions, and so they still want to go out and experience something but there's an opportunity to, if you really need to save money, you're not spending as much on concessions, you're going to enjoy the experience.
Richard Gelfond: and Imax will not make any of its money from concessions.
Speaker Change: Very clear. Thank you guys. Appreciate it. Be helpful.
Speaker Change: Thank you. Our next question comes from the line of Steven Frankel, of Rosemblatt Securities. Please go ahead, Steven.
Stephen Frankel: Thanks. Rich, given the step-op in the number of films for Imax...
Stephen Frankel: Titles, and traditionally these very labor-intensive DMR processes, what are you doing to make sure that featuring more film for Imax doesn't cause some incremental pressure on Gross Margin.
Thank you for watching!
Stephen Frankel: Yeah, so first of all, DMR conversion is not labor intensive and we've made a lot of progress over the years so automating it.
Stephen Frankel: Obviously there's some quality control aspects, we have to check it and make sure it's right. I'm second of all.
for a lot of our foreign language.
titles, especially those in Asia.
India, China, we outsource, so we partner.
Stephen Frankel: with local firms there that helped with the DMR process and that was facilitated by us putting DMR in the cloud.
Stephen Frankel: So our margins have gotten better on the DMR side over the years. And we continue to look at that aspect of our business.
Stephen Frankel: That's a priority for us, continuing to evolve the process and continuing.
to make it more automated.
So I don't really see margins being squeezed.
Do you want to add anything to trust? [inaudible]
I think the only thing, Steve, is...
Steve: You know, the two-week windows and I think what I'm hearing from your question is that if you keep doing film for IMAX and they're back to back, you're gonna lose the opportunity for incrementality of playing it longer. But I don't see that as something necessarily hindering us in that the first weekend and the second weekend are usually your biggest box office recruitment periods. [inaudible]
Steve: And then we always have the ability to find time in other spots during the year to bring titles back or to slot things in. I mean...
Steve: We can go back to Maverick, which was a couple years ago, but we brought it back four to five times for a year. And so I think and we've done that with other titles, we brought back re-releases. So there's whenever we see something that plays really well across the IMAX network, we look for opportunities to bring it back.
Speaker Change: Thank you. At the time we have time for one last question. Our final question.
Come from the line of Patrick Sholl, of Barrington Research
Please go ahead, Patrick.
Patrick Scholl: Hi, thanks for taking the questions. I was just wondering if you could drill in a little bit more on that, like, the available dating slots for, like, the film denying action.
Speaker Change: Managing like international distribution, that also kind of conflicts with expanding the film's R&X.
Imax Corp.
line-up in international markets. Thank you very much.
John , we do the local language films as you know, I can now.
Other countries we use IMAC's cameras. [inaudible]
Speaker Change: But, you know, you have to look at the slate and look at what the competition is from Hollywood and kind of see where you have open shows and open times and ways to do it. But, you know, we've been able to balance it. I think that's what you were asking or I'm admising the point of your question. [inaudible]
Yeah, that was mostly it. Thank you.
Speaker Change: Okay, by the way, Alfred, we have time for a few more questions, so if there are any.
Excellent, sir. Our next question
comes from the line of...
Mike Hickey, of the Benchmark Company, please go ahead, Mike.
A. Rich, Natasha Jennifer, Dr. Bob,
Speaker Change: Great first quarter, guys, congratulations. Thanks for choosing a sandwich. I appreciate that.
Speaker Change: Obviously with a very unique environment here, we're all sort of operating through and we definitely appreciate your confidence. Very nice to see you're in terms of film product even in the.
Speaker Change: and the China. I guess how do you think about the risk that Hollywood film studios could delay films until there are 100% file for that?
Speaker Change: for the film to be approved for distribution in China. I guess, are you seeing a mirroring and compenets? I guess some of the Hollywood studios and some of the things that I'm brought up yet. And then the second question, which you're trying to use consumers, UI Max? Thanks.
Speaker Change: as an American brand, and I saw this was in a counter between expect to encounter any.
Speaker Change: Pushback or Blanc sensitivity as a result, and obviously I realize it goes across the push border and have significant market share that I'm just wondering as this sort of carry up to the end of the team is there could be some pushback on the brand or not. Thanks guys.
So,
Speaker Change: My clothes were buddies. I'm going to be exceptionally blunt, which is, you know, I think I answered the question about films getting into China for different times and, you know, maybe I wasn't clear.
Speaker Change: The Thunderbolts is opening in a week. There are five other films submitted. We've been told by the studios that they've been told by the Chinese that the films have been getting in. And we've been told that by the Chinese. We've been told that they've been told by the Chinese. We've been told that they've been told by the Chinese.
Speaker Change: We're talking to studios about the release patterns of those.
Speaker Change: So I'm not very concerned about that. Could there be small phones that don't get in? There could be, but I don't think it's gonna have a material impact on a business.
Speaker Change: Number two, historically 25% of our profit comes from China. And this year, we've already had a first quarter that blew away.
So, you know, China...
Speaker Change: Suffer from small films, it's virtually, it's a very little concern to me.
Speaker Change: Remember, we have 800 theaters. It's like a local prestige brand. And in our brand service, people value it.
Speaker Change: Imax is a Canadian company for those of you who don't know that. So, you know, I don't know what the Canadian backlash is in China, but
You know, I'm...
Speaker Change: Mike, next time you'll buy me a drink to apologize for too many of micromanaging of the China
Speaker Change: I'm not even being ambiguous or covering myself, I just couldn't be clear about it.
Thanks, Reg.
Speaker Change: Thank you. I would now like to turn the conference back to Rich Gelfond for closing remarks, sir.
So thank you very much operator and thank you all [inaudible]
for joining, I mean...
The Pivot Time Prime Act is right now.
I mean, we've talked about now.
for a pretty long time.
Speaker Change: You know, we've got eight film primax movies in a row coming out.
Speaker Change: two of them that we started with Minecraft and sinners on both beat our budget. For the quarter, Minecraft has and sinners is on a path to beat our budget. After that, we have mission, train your dragon, Formula One, Superman, fantastic four. I mean, there's never been a period of time where that kind of lineup film for IMAX has existed in front of us.
Speaker Change: You know, this is it. We've talked about it for a long time. Now it's the time to happen and it's all happening in the aftermath.
Speaker Change: Where I have to say we partly got lucky in the first quarter. I mean we had a Chinese film which beat our previous record by over three times and we have that in the back.
Speaker Change: So, you know, I just feel very good about our business and, you know, very confident about the course we're on and now it's our turn to execute and we believe we will and thank you all for joining in for your questions. Thank you very much.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
David Karnovsky, David Karnovsky, David Karnovsky, Jennifer Horsley
David Karnovsky, Jennifer Horsley,
Speaker Change: David Karnovsky, Jennifer Hickey, Jennifer Hickey, Jennifer Hickey
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