Q2 2019 Earnings Call
Good day and welcome to the IMAX, the second quarter to 2019 earnings Conference call.
All participants seeking a listen only mode.
In addition, we will conduct a question and answer.
Session.
As a reminder, today's conference is being recorded.
This time I would like to turn the conference over to Mr., Stephen Davidson head of investors Relations. Please go ahead.
Thank you Bonnie.
Good day and thank you for joining us on today's second quarter 2009 earnings Conference call.
On the call today to review the financial results are rich Gelfond, Chief Executive Officer and Patterson.
Chief Financial Officer.
Megan Colligan, President IMAX Entertainment and Rob Lister Chief Legal officer are also with us in the room today.
Today's conference call is being webcast 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 second quarter release, and the slide presentation accompanying todays call have been posted on the Investor Relations section of our web site.
At the conclusion of this call are historically still model would be posted the website as well.
I would like to remind you of the following information regarding forward looking statements.
Our comments and answers to your questions on this call as well as the company top slide that May include statements that are forward looking and that they pertain to future results or outcomes.
As usual results or occurrences may differ materially from these forward looking statements.
Please refer to our filings for a more detailed discussion of some of the factors that could affect our future results and outcomes.
During today's call references made to certain non-GAAP financial measures as defined by regulation G of the Securities and Exchange Commission.
Discussion of the management uses these measures and the definition of these measures as well as reconciliations to adjusted net income adjusted EPS and adjusted EBITDA as defined by our credit facility are contained in todays press release.
With that let me now turn the call over to Mr. Rich Gelfond right. Thanks, Steve and good afternoon, everyone.
Our second quarter results make it clear that our strategy of focusing on our core business by enhancing our end to end technology solution that drives the differentiated IMAX experience more effectively marketing our brands and improving the performance of our China business continues to deliver as illustrated on slide four of the earnings presentation.
Our strong execution around our core business is reflected in the strength of key indicators, we recorded this quarter, including a 7% increase in revenue a 7% increase in IMAX Global box office to a quarterly record of $364.9 million at a 5% increase year to date, our commercial network has grown 10% to 1400 45 commercial theaters with an increasing presence outside of our primary markets enhancing our geographic diversification.
At our impressive performance in China, where we recorded a 29% increase year over year in greater China box office to $130 million up 41% in renminbi terms versus declines for the industry. This is the eighth consecutive quarter of year over year box office growth.
Same store sales growth of 9% and greater China year to date up 17% in RMB terms, and we have significant unmet momentum heading into what we believe will be a very strong second half.
Spiderman at Lion King have both generated strong global box office results.
Spider Man with Sony is biggest opening weekend ever the second biggest Sony IMAX result ever had passed the billion dollar Mark This past weekend. The Sky fall further more it was the biggest spiderman IMAX box office ever in China and internationally, reflecting continued demand for powerful franchises like these at alliance team is also now expected to cross the billion dollar Mark and it just a few weeks after opening.
As of this past Sunday Spiderman and licensing have generated a $110 million in box office for IMAX kicking off a strong start to the third quarter.
I don't remember $11 million is spiderman was captured in quarter two.
These films will be followed by what we believe is a powerful slate of movies ahead, including Pops in Shaw, if chapter two Joker Terminator dark phase frozen to Jim RG, The next level and Star Wars episode nine.
[noise] [noise] in summary, we believe that we are very well positioned for growth in the coming quarters and years ahead because of.
Our unique position in the entertainment ecosystem is superior and solution, which we leveraged to abandon size contact content and create the IMAX experience, we offer to consumers and partners the significant growth opportunities to have emphasized alternative content.
Our China business is delivering significantly improved performance, our expanding global network and of course, our dedicated employees all around the world will make this all this happen. These are the key attributes of our model and drivers of growth. So let me update you on where we stand with each.
First let's talk about our unique position in the ecosystem as illustrated on slide five.
Hi, Max is powerful position in the entertainment industry is driven by our ability to deliver unique value throughout the ecosystem to consumers studios filmmakers exhibitors and more recently streaming services.
Consumers continue to show increasing demand for the IMAX experience as they seek out big communal experiences and opportunities to share and cultural moments, which I will discuss in more detail later.
Those opportunities to come together are often blockbuster films and our vendors now the highest grossing film of all time is a perfect example of Conns consumers seeing IMAX as the go to place for event films.
For studios, we are a first choice partner, we have a more of a must see film and studios rely on us to have exercised their releases consolidation among content providers will only fueled this trend has a focus on franchise tent poles and IP intensifies benefiting the IMAX model.
Remember our core market is not the overall box office, our core market is the market for blockbusters, which is approximately 65% of the market in the us up from 54% in 2010, and we expect this market to continue to grow based on how Hollywood is structured.
With filmmakers her deep creative relationships fuel our business with an increasing number of the world's best filmmakers choosing IMAX cameras to bring their creative vision to life from Anthony and Joe Russo with the most recent events is to Christopher Nolan who is currently filming is highly anticipated ethnic tenet entirely with IMAX cameras next year as James Bond I Wonder woman are terribly shooting with IMAX film cameras are consistent unique value proposition is reflected in the higher indexing on films shot with IMAX DNA. So very pleased our cameras are being used in many of the biggest releases scheduled for 2020.
Top gun Maverick is also slated for 2020 and expect to be film using IMAX certified digital cameras.
Marvel recently announced that they will be releasing black widow any turtles in 2020, and we're also the carryover benefit a star wars into the first few months or 2020.
Exhibitors recognize the value, we add which translates into healthy ticket premiums. They charge. The premium is supported by our ability to punch far above our weight class.
Well the advantages in China for instance.
IMAX theatres were only 1% of the available screens, but we delivered 13% of the overall box office. We're also experimented with alternative content through our exhibitor partners to increase theater utilization, particularly in off peak and non blockbuster periods. For example, we recently partnered with Netflix to debut and M&A by Director, Paul Thomas Anderson and radio head front Man Thom Yorke. We also collaborated with life when the artist and screen a theatrical experience capturing sound gardens same 2013 performance at the will trim in Los Angeles, and we recently announced that visionary filmmaker Spike Jones as our first ever artist in residence for IMAX Entertainment, our own which he will help us identify that shape new experiences across.
First our network.
We are continuing to explore different avenues, we see these events as a clear indicator of the potential from alternative content and the increasing demand for out of home film experiences.
That meet our customers' increasing desire to enjoy communal experiences at IMAX.
Finally, we believe the emergence of streaming services will ultimately reinforce the importance of theaters as premium spaces for big to middle experiences where people can enjoy content engineer for the IMAX screens.
Continuing on slide five.
Let's turn to how we leverage technology to create the IMAX experience, we offer consumers and partners. Our end to end technology solution empowers creators and drive the commercial prospects for their work.
As previously mentioned, we are seeing growing demand from filmmakers to use IMAX cameras.
To meet this growing demand from the creative community, we're developing a new initiative to enable even more filmmakers to shoot IMAX expanded aspect ratio scenes in conjunction with our proprietary post production technology.
And to support our drive for more IMAX DNA and films were continuing to build out our award winning films to the fullest brand campaign, we launched last year.
The response from studios exhibitors and fans around the world to the IMAX campaign as designed system has been fantastic, we're developing even more custom campaigns without partners that further differentiate the IMAX brand to a broader movie going audience and extend our leadership position in the market.
On slide six as referenced earlier, we're seeing increased demand for out of home experiences that meet our customers' increasing desire to enjoy communal experiences in IMAX.
A proof point for this trend is the fact that the experience economy is expanding with global spending on experience set to rise to 18 to eight trillion dollars by 2030.
Florida, Edify millennials say attending live events makes them feel more connected to other people the community and the world and three at a formal any deals would rather spend money on a desirable experience. This rather than a tangible thing. This is why we believe our consumers are seeking out there to meet all experiences had opportunities to share and cultural moments.
Next I would like to update you on our China business on slide seven where we have seen significantly increased performance. The strategic actions. We took in 2017 are continuing to pay off as you can see on this slide.
We are very pleased with the record performance in China, where we are the premium offerings and the destination for blockbusters, which have grown to 54% of the market for 2018 up from just 32% in market in 2016.
And China opening weekend indexing is averaging 12% year to date on Hollywood films from 10% in 2018 and from 9% in 2017, our integration into the Chinese Entertainment ecosystem has only been enhanced by our strategic relationship with Marianne China's largest internet based entertainment platform and now Maryann has deepened their strategic alliance with 10 said one of the three Internet Giants in China. We expect that this alliance will only further enhance our growth in the entertainment industry in China.
No Xu our first local language animated film based on the iconic Chinese legend generated $8 million during its opening weekend. This past weekend setting a new IMAX record for the best opening weekend of all animated films released in China, surpassing Despicable me three we invested approximately 8% surpassing previous animated films and we view this as another proof point and are further penetration of the local market.
Our goal has been to achieve a leadership position in China, while maximizing revenue and doing it in the most capital efficient way.
Based on the trailing 12 months the ROI see on JV screens in China was in excess of 20%.
Most companies would be happy to print this level of returns all day long for investors, which is why the long term story for China is so compelling.
Lastly, with regard to trade issues with China, We believe that the Chinese government has no desire to her foot traffic to malls, where Chinese IMAX theaters are primarily located so we are optimistic that there will not be an impact on Hollywood content at this time.
In fact Hollywood content has been receiving more optimal release dates as shown by the release of adventures Spiderman and Lion King in China before other worldwide territories.
The core of our multi year growth story is our expanding global network as shown on slide eight we had a number of significant signings in the last month, including a 40 theater deal with CGP in China, and a 15 theater deal with center World for Regal locations throughout the United States. Our deal with CGD is our largest deal in China since 2017, and as a reminder, CGD is our third largest exhibitor partners globally by number of systems and our second largest client in China.
We've structured these deals to ensure we are driving profitable profitable growth to the company. The CGP deal. For example is primarily focused a tier one and tier two markets under joint venture revenue sharing model have tier three to five markets are under a hybrid model requiring no capital commitment from IMAX, which significantly de risks the theaters for those in those markets.
Lastly, the deal as a significant endorsement of IMAX laser in China, which we believe will spur other players in China to upgrade to laser and should help the box office as well.
The SIROWORLD deal will significantly grow our footprint of IMAX laser systems in the most successful regal theaters in the United States.
The demand for IMAX systems by exhibitors outside of our primary markets represented 20% of our commercial network growth year over year, reflecting our ongoing geographic diversification. We also signed several deals in Japan, and the middle East both attractive markets with strong growth prospects. Furthermore, we are very pleased that exhibitors are voting with their wallets and installing IMAX with glazer as was the case with 14 installations this quarter.
On slide nine we highlight the cost discipline that we have an exercise since we initiated a restructuring program two years ago.
We've been able to achieve a reduction in operating expenses of 8%. Since then while investing in information technology systems and marketing to build our brand differentiate the IMAX experience and drive box office growth all the while growing our commercial network, 25% to 14.
Hundred 45 commercial theaters.
Lastly on slide 10, we highlight the key attributes of our business, which will drive our future growth and we look forward to updating you on our progress in each area.
The momentum that we established last year has continued to build and we delivered a very solid first half of the year. We are moving strength from strength to strength with a strong slate of films for the remainder of the summer and the rest of the year. The slate for 2020 is still developing but based on the movies expected. We believe it will be a solid slate without lease three films shot with IMAX cameras, we are driving a greater demand for the IMAX experience throughout the entertainment ecosystem with a powerful technology and brands that are uniquely positioned to deliver value for creators and consumers studios and distributors.
We are a global company and we believe that the trends that we're seeing in the industry as it transforms our tailwinds for US we believe that the foundation has been set for continued strong financial performance reflected in our improving revenue generation margin profile and return metrics.
With that I'd like to now pass the call to Patrick for a review of our financial results Patrick. Thank you rich and good afternoon, everyone.
Im pleased to share our second quarter and first half results with you today.
Which continue to reflect the benefit of the strategic actions taken over the last two years designed to unlock the earnings power of the franchise.
For today I will begin with comments on first our IMAX Global box office and the positive momentum moving into our expectations of a strong back half of the year second our continued network expansion with increasing growth outside of our primary markets.
Third our financial results for the quarter and our strong balance sheet.
And finally, I will close with guidance for the full year 2019.
Before I begin as part of our ongoing drive to increase transparency and provide incremental insights into the power of our model we expanded disclosures in our earnings call deck. We welcome your feedback on this new approach.
With that let's start with our IMAX Global box office detailed on slide 12 of our earnings presentation.
In the quarter, we delivered 365 million in IMAX Global box office $22 million or 7% above a strong film slate in twoq of last year.
Vendors generated $208 million of the $365 million in the quarter.
Year to date second quarter, IMAX Global box office at $621 million.
5% above the prior year.
Box office growth continues into July kicked off with the strong performance of Spiderman and Lion King.
Now, let's turn to our network expansion detailed on slide 13.
We exited second quarter 2019, with backlog of 612 systems, reflecting our ability to replenish our systems pipeline with new signings after robust year of installs.
We averaged approximately 140 to 150, new installations annually a pace that provides excellent visibility into our revenue from installations over the next few years.
Drilling into the second quarter, our sales our sales team delivered 73 signings, including 19 upgrades.
We installed 27, new IMAX systems in the second quarter and upgraded eight systems.
New installs consider consisted of nine sales type 13, jvs and five hybrids.
Now, let's turn to our financial results on slide 14.
Total revenue in the second quarter is 105 million and an increase of $6 million or 7% compared to the prior year.
Driven principally by strong topline growth in our network and theater businesses.
As well as higher revenue in the other category.
Partially offset by lower new business revenue.
We generated 60 million of gross profit decrease of $1 million, which resulted in a gross margin of 57% down from 61% in the prior year period.
I will address the slight decline in gross profit in a moment as I review segment performance.
Operating expenses, which we define as SGN eight excluding stock compensation, plus R&D were $27 million versus $30 million last year, a decrease of $3 million or 11% driven principally by lower R&D expense.
Net income attributable to common shareholders for the quarter was $11 million or 19 cents per share compared to $8 million or 12 cents per share. While adjusted net income was $20 million or 32 cents per share up slightly from prior year levels.
Adjusted EBITDA for the quarter came in at $41 million up 5% compared to the prior year, producing adjusted EBITDA margins of 44% compared to 43% in the prior year.
Now drilling into our segment performance.
In our network business revenue growth of 6% was driven by a 7% increase in box office.
Including a 29% increase in China.
A 10% increase in our commercial network.
And an additional five new films released this quarter.
This growth was mostly mostly offset by higher cost of revenues principally due to higher contractual partner marketing costs driven by the strong performance with ventures.
And the increased number of films released.
We believe that the higher contractual marketing costs relative to the incremental revenue generated by the success of the vendors and the deepening of our relationships with our studio clients are dollars well spent.
Revenue growth of 13% and our theater business resulted from the benefit of three additional hybrids in the current quarter as well as the STL upgrade to IMAX with laser.
And higher maintenance revenue on an expanded global network.
Cost of revenues in theater business increase due to the mix of systems installed in the quarter compared to last year.
As well as higher engineering support costs to ensure the successful rollout of IMAX laser.
Average revenue per new theater system was $1.3 million compared to 1.2 million in Q2 of 2018.
New business margin decreased year over year due to 2018, including receipt of a onetime payment of $2.6 million related to our discontinued virtual reality initiative.
Now, let's turn to capital and liquidity on slide 15.
We ended the quarter with $106 million in cash of which $65 million in the PRC.
In terms of capital in China, We received approximately $5 million in cash dividends from China for the six months ended June Thirtyth 2019.
And IMAX, China repurchased 7 million shares year to date for a total of $17 million, which increases our share of earnings.
We are always examining ways to enhance capital efficiency between corporate IMAX China.
We have $25 million in debt outstanding from our revolver compared to 60 million at the end of the first quarter. So we have total available liquidity of $382 million, providing financial flexibility.
In the quarter, we opportunistically repurchased 88000 shares at an average price of $19.45 for a total of approximately $2 million spent.
$81 million of capacity remains on the outstanding repurchase authorization.
Lastly on slide 16, we have our full year guidance for 2019.
At the box office, we're off to a fast start in the second half of the year and through yesterday. Our July performance is up approximately 50% versus last year.
For the third quarter, we expect 13 sales type installations for hybrids 13 jvs.
Our annualized first half operating expenses are little light relative to our full year guidance, primarily related to the timing of various marketing initiatives moving to the back half of the year.
We expect these costs to be evenly split between the third and fourth quarter.
In summary, we are pleased with our results for the quarter and encouraged by the momentum moving into our expectations for a strong second half of 2019.
The investments we have made in our global brand.
Our end to end technology solution.
Our positioning within the ecosystem the entertainment industry and our network are all beginning to pay dividends and we believe that they have set the foundation for strong growth in the quarters and years ahead.
I would now like to open the call for questions and answers.
Thank you, ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you will using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again press star one to ask a question.
We'll pause for just a moment.
An opportunity to signal for questions.
Thank you.
And we actually do have our first question from Eric Handler and MKM partners.
Please go ahead Sir.
Thank you very much actually Patrick a couple of questions for you.
So you've done a great job of.
Keeping operating expenses flat this year the bit down the last couple of years.
As we look out over the next two three years like how well do you think.
Or to what degree will these costs are rising or can you keep them flat or maybe even as there's still some more cost cutting to go that could have them go lower.
Okay. Thanks for the question Eric.
I think the good news is the work we did in 2017 took hold and we weren't able to change the approach in change a little bit of a culture and that's what's allowed us to hold expenses.
Flat over the last couple of years the way that we've done is the combination of looking at existing expenses and working them down and then also reallocation of resources. So we've talked a lot about the fact that.
We have increased spending meaningfully and marketing.
We funded that by making sure that we are disciplined in other parts of the business and also the recognition that we spent the money we needed to on commercial laser and so we were able to downsize our R&D efforts for a period of time on a go forward basis, while at the same approach. Our goal is to manage the expenses tightly theres of course cost creep in different parts of the business.
But what we do is we look for ways to offset that with efficiencies and savings.
So well have more clarity of the year once weve been through the budget process, but.
Our our approach is try to keep those expenses under as much control as possible.
Great and then just as a follow up.
With more hybrids and the mix seemingly then.
Jvs at least on a long term basis.
How should there be any any meaningful impact on your overall capex, meaning the core capex plus your own JV investments, how should that be trending over the next few years.
Well, we talked about the fact that were installing something like a 140 150, new systems per year, we're now deep into the upgrade cycle with commercial laser and if some of those deals are do come with capital investment and so I don't expect to be a big change in terms of growth of the network Capex for the next couple of years.
Over time as some of the hybrids that are going into backlog now start to come out of backlog. It will start to switch over and we'll see a little bit less capex, but.
When I think about the next couple of years I think the pace that weve been at is the right way to think about it.
Okay, and then one last quick one for for Rich Rich Wonder if you could talk a little bit about in China. The current environment for locally produced films are we starting to see increased production or is there still some fears about government and.
Tax evasion and some of those issues that have been going on.
I haven't told Eric that those issues are behind the industry, there and I think you'll see that normalize over the net leverage over the next couple of months and in fact.
I think this month, we have three or four local produce films like in China. So I think that period has passed and again hopefully this recent weekends movie, which opened and you look at the box office. So hopefully a lot of that pent up demand will be met for the remainder of the year.
Thank you very much.
Thank you we have our next question from Eric Wold. Please go ahead.
Thanks, Good afternoon couple of questions.
I guess, one could think about China, you got to think about the terms that the 40 theater deal you did with the GGB a couple weeks ago and kind of pulling on hammers question, obviously, a clear trend towards more.
More hybrid, especially looking those tier three four and five cities in China.
As that becomes more the trend and the box office generating by you know those systems essentially gravy sensors, there is no capital at risk.
Yes. It does that make you know p. assays kind of less meaningful in that region other than fallen trend how should we think about.
ROI coming out of that shift in strategy.
Yeah, absolutely all right, we've been saying the last couple of years that he assays are less meaningful and remember you not only get the royalty from CGP or whoever did they the hybrid deal, but you also get paid on the other side by the studios. So it's not only no kind of gravy as you put it because there's no capital investment, but you get a a return on that no capital. So when you look at ROI on our overall enterprise basis. It should go up as that percentage goes up.
And I noticed that you reported same store sales your need for China should we expect kind of going forward. It seems your sales for the three main regions kind of giving a better better sense of how those trends are going.
You know Eric at predicting movies into the future and you know this better than anyone because you've been around a long time is a dangerous business.
In China. The reason you know we pulled it out is because as you know on same store sales have been under pressure there for a long time and I think the turnaround and that for US was more an indicator that the China situation have really changed as you know related to your last question I think we analyze these deals based on return on invested capital rather than same store sales, but I personally think of all the statistics, we had in China about a turnaround that might have been the most significant one.
Okay, and then there was legal I'm not going to officially launching a subscription service and confirming.
Under the terms of it with the main difference related to IMAX being you know Regal will charge, an upcharge for IMAX, where where AMC, but did not.
From the data you've seen so far how do you think about consumer behavior under both scenarios does to someone.
View, the IMAX I'm charge as you know somewhat immaterial given that the base ticket is now covered by the subscription or do they view it as.
You know elevated year on something you know high given that you know otherwise it's going to be free why pay for something on top of it.
So the good news is there's a lot of experience in Europe , and you know a number of changes putting oneone. It's in a world and have they some of them have been doing this for more than a decade and it seems to be a positive and it does not seem to be an impediment as a matter of fact in some of my discussions with some of the European operators. They think people already have a sunk cost in a subscription plan and it's only a small premium so they go in the same thing I'm seeing somebody holding true. This is subject to similar cinemark plan, which runs very much the same way. So I really don't think it'll it'll be an impediment and of course in the long run you know the question is I'm not only what creates better attendance for us for what creates a better return on investment to the exhibitors and I think they've been very happy with what they've done in Europe for a long time. So we think it's a solid.
The plan.
Perfect and just quick one for Patrick how many films were included in <unk>.
DMR costs in the quarter.
It is.
Oh 15 Hello.
One side.
[noise] [noise].
Yes, so team.
For the team. Thank you guys.
Thanks, Eric.
Thank you ladies and gentlemen, if you find that your question has been answered you can always remove yourself from the queue by pressing star too and as a reminder, it is star one to ask a question. Our next question from comes from Steven Frankel. Please go ahead.
Hi, good afternoon.
Rich women are wondering if you might give us some insight into what's happening with your ticket prices in China on a year over year basis.
So I don't have it on a year over year basis broken out, but anecdotally I do know that for the major blockbuster films, it's been higher and in fact, one of the surprising result, as some of the movies.
Like managers is that it was almost two times higher and without a significant drop off in attendance. So it seems somewhat in the last set of questions and really good I think for a premium experience. They are really willing to pay up and I think thats, partly contributed for the job and indexing, where we said you know in 2016, it was like 8% and this year, it's like around 12% which is.
50% increase in indexing and I think price has played a part on it.
And.
Quite sure Thats accurate, but I don't have it broken down specifically for the years.
But with the overall box office in China, and not growing that that that might not necessarily the same price dynamic might not be happening in standard tickets or other non blockbuster films.
So what does that cost.
Yeah, I think thats part of it I think.
Again back to a lot of the theme of this call.
People are willing to pay a premium for something that's been triggered by the IMAX technology than 10 solution and the event to size experience and that certainly playing out in China. That's part of the dynamic and there is no question that the same.
Kind of any last has any that were seeing is not a trend across all all markets. I mean, we're in a different business than they were in the blockbuster business, we use technology.
Top brass things were in place for a social experience, whereas status brand I mean, there's all kinds of things. So I think all of those things have contributed to consumers willing to spend more.
Okay and.
Building on this discussion of Highbridge from earlier, if you look to expand further into markets like India and Japan do you now think about tweaking the model for hybrid first rather than JV.
Well, Japan, I would say definitely not because the performance of the theaters in Japan is extraordinary.
As a matter of fact, we just opened one about a week or two ago and its first day. It did $53000 in its first weekend. It did 150000, so they wanted to joint venture.
With that we'd be open to that all the time and in fact, the performance of the Japan Theater is among the best in the World and turns a place like India again, it depends on the markets and the locations and Thats comparable to a first tier city and India. We have we've been doing very well our performance is very strong we'd be happy to JV and if it's more an unproven market I think the hybrid would be more attractive. So I think the principle is the same and it depends on the risk reward card and which model is better for us.
Okay. Thank you.
Thanks.
Thank you. Our next question comes from Alex Quadrani. Please go ahead.
Hi, Thank you very much.
The IMAX laser product you know where its been rolled out have you done any sort of Santander consumer researchers surveyed the general reaction, where they used to be pretty IMAX brand that comes with that format. I'm. Just curious if you had any feedback on that and then just a follow up on your I think you touched upon your talks with the streaming service providers.
Do you think IMAX is crazy, especially Ron if are you still planning on any comment on that any further color on that you still planning on sort of screening I believe the Amazon down even though they have taken you really stand and possibly shorter theatrical window.
So we havent done.
Scientifically valid.
Surveys on the places, we put laser and because it's very early but we've done exit surveys and the consumer reactions have been very positive.
On your second question about the Amazon film for those who aren't aware Amazon has decided to release it on streaming only two weeks after.
Limited theatrical release and.
And as we've always said when a stream I referenced.
Comport with the windowing, we're very interested but when it doesn't we're not a part of it. So we don't be it we don't expect to be part of that really is.
Hi, Thank you very much.
Thanks Alexia.
Thank you. Our next question comes from Chad Beynon. Please go ahead.
Hi, good afternoon, Thanks for taking my question.
Rich you mentioned that in 2020, there will be three films with IMAX DNA and given the the studios in your financial success with these films. How are you thinking about the run time for these you know is a second week of an IMAX DNA filmed a film a still higher P.S.A., then kind of an average one thanks.
So there are as I said there are at least three next year, a bond wonder woman too and tenant Chris Nolan movie, Although I think with our new camera program, which I talked a little bit about which is certified digital cameras, there's likely to be more filmed with IMAX cameras and.
Megan in the film team has been meeting with all the different studios and going through the benefits of using IMAX DNA and trying to sell that as a whole package and with that package as someone commits to use the cameras generally comes a longer running time, because we index better when the cameras is we want to incentivize the filmmakers and studios to do that one of these centers as longer playing time, but it's still the you know whether it's two weeks or three weeks depends on the movie time of year, what else is out there the economic.
Projections that we put together so I think you should assume there will be more than a week, but it's going to be situational depending on how much more.
Okay. Thanks.
And then Patrick on capital allocation I believe you've talked about your your first priority always being investing in the business in new units, you did repurchase a million and a half or 2 million worth of stock in the quarter, but there's still a lot left on that plan. How should we think about kind of where you are in terms of cash that's earmarked for other items in the back half of 2019, and maybe and beyond we're maybe getting a little bit more aggressive with repurchasing stock at these valuation levels. Thanks.
Hey, Chad.
There's really no change in how we think about this as you said the first priority is making sure that we're investing to drive profitable growth in the network, where we see opportunities and we'll continue to do that alongside that we're investing in making changes to the business whether it's on the IP side it to make sure that we're evolving and get into the best possible cost structure.
We always want to have liquidity available to extend some project pops up that we need to take a look at.
And then after that we conclude that we have excess cash and we see an opportunity in terms of the stock price and Thats when were opportunistic and step into the market and so you see that approach from us in the past and thus we will continue to see.
Okay. Thank you very much nice quarter.
Okay. Thanks.
Thank you. Our next question comes from Jim Goss. Please go ahead.
Thanks.
Aside from the C.D.V. deal and the Cineworld Regal deal.
A lot of the.
Incremental theaters have been fairly scattered among various markets I'm wondering.
Rich if you're intending to.
Ah intensify concentration in any particular markets, you've talked about Japan, Latin America, India.
In the past and if so how would you drive and that sort of approach.
We actually do Jim intend to concentrate more on specific markets. So we have we as a policy we've decided not to break out a lot of the single theater signings, but this year. If my recollection is right. We signed 11 theaters in Japan, which is a.
It will vary the largest number we've done it in one here and that's an example of a market we're targeting because of performance is so strong.
Other ones that we're going to spend more time on including the middle East and includes.
India, where the theaters are performing extremely well on some countries in Europe like Germany for example, which is doing extremely well.
Korea is a market that is very strong performance that we're focusing on.
There might be some others, Jim but what we're doing is allocating a little more resource to those places.
Okay and one other thing we've talked over the years about the screen splitting notion in the U.S. in particular I know, it's been a little easier to do in some of the international markets.
I'm wondering with the Disney's The addition of Fox, which might give it a more of a mix of.
Yes.
Acted.
Like live action movies. In addition to the animated and the Marvel sort of features if there is any greater opportunity to do screen splitting with with the Disney not being.
Offended that you would move to another studio because they can have a lot of it all within the same studio if there can maybe.
Breakup and break out this notion a little bit more in the U.S.
Well, Jim I mean, I don't completely follow the question, but in general if it's the same studio you have more open to screens flooding. So it isn't a Warner has back to back films are you committed you know two weeks to one and one week to the other I think they're more open to sharing that middle East, let's say because it's the same studio and we've done that with a number of studios, but I think the idea sharing with another studio is more difficult, particularly as you said in your question in North America, that's more common practice internationally.
Okay, No I guess I was just thinking with the Disney having a broader palette and now with the facts. In addition to all the other thing is if we gave them more of an opportunity to have that sort of thing take place.
But it would seem like it's easier to do it with within a studio rather than with Ah I know there should be involved.
All right Ah I think it is.
Thank you.
[noise].
Oh. Thank you. Our next question comes from Vasily Karasyov of please go ahead.
Thank you good afternoon, I think my question, both for reach and Patrick.
So looking back at the first half of the year the box office work and we see that it's primarily not primarily was driven by China and then rich in your prepared remarks, you said that China in local currency is not growing and I think in dollars. It's barely growing so youre. Your growth is driven by a very significant market share gains and my math is showing that you haven't had this share of the total box office since 2015. So if we if we take that and then look at 2020 or for you to continue growing so you either need to see a deal that the Chinese market to return to growth or continue these market share gains and grow beyond any historical levels. So I wonder how you guys think about that and I'm not asking for guidance for 2020 , but just puts and takes what.
What kind of trends you see building that can carry into into the next year.
I mean, if you look at our yes.
Which went from 8% in 2016 to over 12% this year on a fairly consistent basis, and it's not even from where we do have more screens, but it's still 100% of the screen. So it's it's it's been very significant and you look at price increases, which we talked about recently you know I think there are lots of ways. You can grow you can grow on price you can grow market share. He as you know we went to a different programming strategy in the last couple of years, what we've program multiple Chinese films.
The same high you know this to be really strategies. So I think there's a lot of ways you could sustain your growth without necessarily having to put that on the external box office. The other thing I would add one thing pretty special about this year is as you know and someone has the number of local films and the first half of this year was down and it's going to return to normalcy.
So I think there's a lot of ways that we can do better you want to add.
I was gonna have fun on the local films.
You see is we're doing much better in terms of our indexing our market share on local language films and we think that Thats. A result of our film selection strategy that gives us optionality and also much better marketing and so as local films rebound and they will second half of this year and into next year. We will continue to focus not focus on that make sure. We keep that market share and we can grow with a growing local mark yes, I'd also add to that that the Chinese box office overall is approaching the U.S. box office. So there's going to be more production you look at some of the experiences you're wondering are there for side by film and I understand there's another side Bitel, that's going to be released soon so there's different genres more genres that play to the IMAX consumer happening. So you know that there's just a lot of opportunity.
Thank you very much.
Thanks, so much.
Operator is another question.
There are no further questions at this time I'd just like to remind you why do you feel like this question. It is one.
Does not appeal, we have any further questions at this time I would like to hand, the conference back over to Mr. gelfond for any additional or closing remarks. Thank you.
Thanks, as you can see from our results were firing on all cylinders and that has translated.
And just solid second quarter and first half results the environment in which we operate is transforming what we believe that all the trends emerging from various disruptive forces from seeking to work with streamers with more content to event this size their offerings.
To consolidation among content generators, there are a lot of tailwinds for our business.
The human need for communal experiences where people can connect with others is not going away and I would argue with all the offerings in the home is intensified lastly, as you can see on slide 17, the key drivers of our business model or the expansion of our valuable network growth in box office and disciplined cost management, which we believe will drive significant shareholder valuation over the long run.
Thank you so much for your time and interest and we look forward to updating you again next quarter on our progress good evening.
Thank you ladies and gentlemen. This concludes today's call. Thank you for your participation you may now disconnect.
Great.