IMAX China Holding, Inc.

Ladies and gentlemen, and welcome to IMAX China's full year 2022 earnings conference call. All participants are currently in the listen-only mode. Following the presentation, we will conduct a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Karen Chan, Vice President of Investor Relations. Please go ahead, ma'am.

Good morning, everyone, and thank you for joining us on IMAX China's Full Year 2022 Earnings Conference Call. Joining me today is our Chairman Rich Gelfand, CEO Daniel Mann Waring, and CFOs and COO Jim Athanasopoulos, who will have prepared remarks. Also joining us is Megan Colligan, President of Entertainment IMAX Corporation. For the purpose of this call, all financial figures will be provided in U.S. dollars unless stated otherwise. Furthermore, the financials are in accordance with IFRS accounting standards, which may differ in some respects to U.S. accounting standards. I would also like to remind you of the following regarding forward-looking statements. Our comments and answers to your questions on this call may include statements that are forward-looking and to pertain to future results or outcomes. Forward-looking statements involve a number of risks, uncertainties, or other factors beyond our control. Actual future results or occurrences may differ materially from these forward-looking statements. We are under no obligation to and expressly disclaim any such obligation to update the forward-looking statements as a result of new information, future events, or otherwise. The full text of our full year 2022 earnings release along with supporting financial statements and a slide presentation we have prepared for this call are available on our website, climax.cn. Today's conference call is also being webcast in its entirety on our website. With that, let me now turn the call over to Rich Galvant. Rich?

Thanks, Karen, and good morning, everyone. Over the past three months, we have seen a dramatic, positive turnaround in the film industry in China, driven by the rapid lift of COVID restrictions and broader reopening of the country, the return of day-and-date Hollywood blockbuster releases, led by the strong performance of Avatar, The Way of Water, and a remarkable Chinese New Year, IMAX's highest-grossing Chinese New Year holiday of all time. Demand for moviegoing is soaring in China, and the country has quickly reclaimed its title as the world's top-grossing theatrical market. In fact, Chinese box office more than doubled North American box office in January, and it's clear that IMAX China, the largest and most successful premium theatrical platform in the country, is back in business. A record-breaking Chinese New Year box office of 231 million RMB was up 54% over 22, thanks to a strong diversified slate, including The Wandering Earth 2, Full River Red, Hidden Blade, and Deep Sea. We delivered our highest grossing January box office of all time. In one month, IMAX China delivered two of its top three all-time releases, with the Avatar sequel and The Wandering Earth 2, with each earning more than $50 million. Finally, Marvel films have made a long way to return to Chinese theaters, with IMAX China delivering a 20% opening weekend indexing on Ant-Man and the Wasp, Quantumania. IMAX China's diversified content strategy of blockbuster local content complemented by a robust Hollywood slate is showing strong returns early in 2023. We are beginning to see an accelerated pipeline of imported titles gaining entry into China, including the upcoming Shazam, Fury of the Gods, Dungeons and Dragons, Honor Among Thieves, and Japan's Suzume, a consistent cadence of blockbusters with ample release time to implement effective marketing and promotional campaigns. It's clear that China is refocusing policy on driving economic growth and domestic consumption. And with COVID-related theater closures, and a shortage of Hollywood content hopefully behind us, IMAX China sees significant opportunity in 23, a compelling slate of blockbusters and a potential for network expansion. Today, IMAX China in 23 has already delivered over $86 million in box office, well over half of what we delivered in full year 22. Today, I would like to discuss the strong rebound of our box office performance The robust and reinvigorated Blockbuster content pipeline, which heavily features IMAX DNA, our unique value proposition built on years of technology investment, and our progress on new business initiatives as we look to grow beyond Blockbusters and expand consumer reach into the home. First, as the country pivoted away from COVID zero policies, the majority of our theaters resumed operation by mid-December. With quality content available and consumers free to enjoy out-of-home entertainment, Chinese audiences continue to show very strong demand for the IMAX experience. The December release of Avatar The Way of Water, first of four new sequels planned through 2028, attracted a huge IMAX fan turnout in spite of the significant ramp-up in COVID cases during the month of December. Our screens captured over $52 million in box office and 22% indexing, a record for a first-run Hollywood release in China. Of the top 20 locations in China, IMAX theaters accounted for 18 of them. Chinese New Year further proved that enthusiasm for moviegoing remains as strong as ever, with industry box office up a healthy 12% over 22%. IMAX China box office outpaced the market of 54%, representing a market share of 3.4%, up 90 basis points year over year. And The Wandering Earth 2, a film for IMAX title, led the way, now our highest-grossing local language release of all time. Year-to-date, IMAX China's market share reached 4.4%, meaningfully up from 2.2% during the same period of last year. As more high production value Hollywood and Chinese blockbusters enter the market, consumers are choosing to experience them in IMAX. We expect this trend to continue, driven by an IMAX-friendly blockbuster slate and the release of pent-up consumer demand, much like IMAX is experiencing in the rest of the world. For example, IMAX theaters in Hong Kong reopened in late April and almost immediately capitalized on the release of Top Gun Maverick. Our five screens contributed to 22% of opening weekend box office, and IMAX drove an impressive per-screen average of U.S. $2.3 million for the year, which came in almost 70% higher than pre-pandemic levels in 2019. IMAX captured an 8% market share in box office on less than 2% of the screens. Throughout the pandemic around the world, IMAX has continually demonstrated how quickly it can recover where audiences feel safe and great content is available. Now turning to content, we see a strong diversified content slate ahead in 23. This includes local blockbusters such as Born to Fly, a showcase of China's Air Force power to be released on April 28th. Post Truth, which opened the Hainan International Film Festival to great acclaim and will be released on March 10th. And the first installment of a big budget trilogy production, Creation of Gods. Demand is growing among Chinese filmmakers to use IMAX cameras and a growing number of them are incorporating IMAX DNA. which ultimately translate into strong box office performance. The top-grossing title in each of the past three years in the country of China, 800, The Battle of Lake Shenzhen, and Watergate Bridge, were all filmed for IMAX, either shot with our cameras or created to include an expanded aspect ratio exclusive to IMAX theaters. Films with IMAX DNA accounted for 31% of IMAX China's box office and 20% of the industry. Equally as encouraging is the renewed flow of Hollywood content. The return of Marvel titles and the rare theatrical extension of Avatar The Way of Water over Chinese New Year, a typical blackout window for imported titles, demonstrates that Hollywood remains a key contributor to the growth of China's box office. Looking into 2023, the Hollywood film slate has no shortage of commercially successful franchises in the China market that hopefully will be admitted in, including the latest installment of Fast and Furious and Transformers, the highly acclaimed Mission Impossible 7, sequels to Aquaman and Dune, and additional Marvel titles including the Marvels and Guardians of the Galaxy. Our market share for Hollywood titles has always been strong, and that has only further strengthened. Our average opening weekend indexing reached 17% in 2022, up from 14% the previous year. This positions us well to reap the rewards from a reboot in the Hollywood film slate, given the number of mega blockbuster franchise releases slated in the years ahead. While we are still early into the industry recovery, IMAX is uniquely positioned to lead the market in the long term, given our unmatched brand power that has grown synonymously with blockbusters, both Hollywood and local language. Our unrivaled premium footprint with 95% of our box office generated from the top 20% of multiplexes in China. our unique end-to-end technology that empowers blockbuster filmmaking from production all the way through the chain to exhibition, and the premium prices and high per-screen averages we generate, despite the size of our network. We also offer Chinese studios and filmmakers unique access to our global network of more than 1,600 theaters. The latest example is The Wandering Earth 2. The film was originally released day and date in North America on 31 IMAX screens, which contributed to approximately 30% of its opening box office, all of which underscores our differentiated value proposition to Chinese filmmakers, exhibitors, and consumers. With more than 20 years of technological innovation and investment, IMAX China is developing into a leading immersive entertainment ecosystem. leveraging our brand and technology to expand our reach across platforms and create new revenue streams. Our IMAX enhanced in-home entertainment initiative and IMAX Corp's recent acquisition of streaming technology company, SimWave, are on the leading edge of this effort. SimWave is a cutting-edge provider of software that allows streamers to optimize video quality while significantly saving on content delivery and bandwidth costs. We are actively exploring opportunities to offer SimWave's technology in China and believe there are significant places with streaming, gaming, and social media platforms where SimWave will fit. Through IMAX Enhanced, we optimize blockbuster content for in-home entertainment delivered through high-end consumer devices. More than 50 films are now available on Enhanced in China across the country's top streaming platforms, including Tencent Video and iQIYI, from Hollywood franchises like Spider-Man to local hits like The Battle of Lake Tianjin. Our certified device partners for IMAX Enhanced in China include industry leaders such as Honor, TCL, Hisense, and Xiaomi. While these businesses are in their earliest stages, we are excited about their long-term potential. To conclude, IMAX China is off to a remarkably strong start in 2023, with the early acceleration in the content pipeline and strong signs of consumer demand exceeding our expectations. And we expect the year ahead to be one not only of recovery, but of growth. With that, I would like to introduce Mr. Daniel Manwaring, our newly appointed Chief Executive Officer of IMAX China. Daniel brings IMAX China a wealth of experience and insights from across the Chinese media landscape, having most recently served as the head of CAA's China Motion Picture Group. With his proven experience in business development and strong network in the China film industry, I look forward to Daniel leading the company and maximizing opportunities while creating new growth avenues for IMAX China. Before I pass this on to Daniel, I would like to sincerely thank Jenda Chen for his excellent work in serving as our interim CEO and look forward to his continuing participation as vice chairman of our board. So with that, I would like to pass the call to Daniel for his first public remarks as our new CEO, Daniel.