Imax Corporation

Thank you for standing by and welcome to IMAX Corporation's second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. I would now like to hand the call over to Jennifer Horsley, Head of Investor Relations. Please go ahead.

Good afternoon and thank you for joining us on IMAX's second quarter 2023 earnings conference call. On the call today to review the financial results are Rich Gelfand, Chief Executive Officer, and Natasha Fernandez, our Chief Financial Officer. Rob Lister, Chief Legal Officer, is also joining us today. Today's conference call is being webcast in its entirety on our website. A replay of the webcast will be made available shortly after the call. In addition, the full text of our earnings press release and the slide presentation have been posted on the investor relations section of our site. At the conclusion of this call, our historical Excel model will be posted on the website as well. I would like to remind you all of the following information regarding forward-looking statements. Today's call as well as the accompanying slide deck may include statements that are forward-looking and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to differ. Please refer to our FCC filings for a more detailed discussion of some of the factors that could affect our future results and outcomes. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information, future events, or otherwise. During today's call, references may be made to certain non-GAAP financial measures. Discussion of management's use of these measures and the definition of these measures, as well as reconciliations to non-GAAP financial measures, are contained in this afternoon's press release and our earnings materials, which are available on the investor relations page of our website at imax.com. With that, let me now turn the call over to Mr. Richard Gelfond.

Thanks, Jennifer. And thanks, everyone, for joining us today. What a weekend and what a quarter. We're pleased to join you today on the heels of a historic few days at the global box office, a weekend where moviegoing reasserted itself as an unparalleled cultural and commercial force. And IMAX demonstrated its ever-strengthening position at the vanguard of cinema. The paradigm shift to IMAX has never been more apparent. IMAX obliterated expectations with a $35 million opening for Oppenheimer, delivering a staggering 20% of the film's global debut on only 740 screens. In China, we delivered more than 16% for local blockbuster Creation of the Gods on just 1% of total screens, our best ever indexing for a China film. And we scored 20% of the debut of Mission Impossible 7 in Japan on just 48 screens. All this combined to lift IMAX to a $46.4 million weekend, the fourth best in the history of IMAX. There is real heat around our brand and technology in the marketplace right now, and this is evident in our strong financial results for the second quarter. IMAX drove more than 30% year-over-year growth across revenue, as well as adjusted EBITDA, net income, and earnings per share, including nearly $33 million in adjusted EBITDA and adjusted EPS of 26 cents per share. We grew signings for new and upgraded IMAX systems with 84 worldwide year-to-date, far more than the 47 we achieved in all of 22. And we maintained our record-breaking share of the global box office from 2022, even as more non-IMAX and mid- and low-budget films returned to the theatrical market. As a result, we remain on track to deliver significant growth in system signings, installations, global box office, and adjusted EBITDA for the full year. What's remarkable is we delivered, despite a Q2 slate, that yielded mixed results at the box office. This speaks to the differentiation of IMAX and the diversification of our business across box office and network sales, as well as Hollywood and local language content. This potent mix makes IMAX a consistent winner in a dynamic global marketplace for entertainment. Increasingly, it is clear the future of the movie business is IMAX. The shift to premium experiences in moviegoing that IMAX created is no longer just a post-COVID trend. It's the new normal, the way forward. IMAX is a strong global brand and a time when local language content is exploding as a future growth driver of the global box office. International markets continue to offer our biggest opportunity for network growth. Finally, as studios hone their distribution strategies across theatrical and streaming, our end-to-end technology is well positioned to deliver the highest possible quality across both. Additionally, we recently took a significant strategic step with our proposal to acquire full ownership of our IMAX China subsidiary. Our expansive footprint, strong market share, brand, and industry relationships and our mix of Hollywood and local language films make us very optimistic about our business in China. Today, I'd like to provide updates on our box office and film slate with a focus on the shift to IMAX we're seeing and movie going. Global momentum behind our brand with a focus on network sales activity and local language. And then I'll turn it over to Natasha to take you through our financial results in detail before opening it up to questions. First, as we look at our global box office, the dominant trend continues to be our market share. Through June of this year, our share of global box office is 3.3%, and this month is on pace to be one of our best Julys ever. In North America, for the first time ever, we've delivered more than 10% of the opening weekend box office for six consecutive releases of $50 million or more. The second quarter also saw IMAX continued to expand its impact in animation. We reached our number one and two biggest animated movies of all time with the Super Mario Brothers movie and Spider-Man across the Spider-Verse. Perhaps the best indicator of the power of IMAX was the significant attention devoted to our play times for Mission Impossible, Dead Reckoning Part One, and Oppenheimer, and the competition for our screens in the broader summer marketplace. and IMAX is delivering with both excellent films. Our debut with Oppenheimer gave us our best indexing of any major release ever, global, domestic, and international. It is the biggest IMAX debut in our long and wildly successful partnership with Christopher Nolan, and it helped turn the film into an unmistakable cultural event, with IMAX selling out 4 a.m. shows and people traveling hours and sometimes flying across borders to see it in IMAX film. Mission Impossible 7 delivered the highest-grossing IMAX debut of the franchise and has earned more than $33 million globally for IMAX to date. The back half of the year has strong titles as well, including film for IMAX releases Dune II and Aquaman and the Lost Kingdom. Apple's Napoleon from Ridley Scott and Killers of the Flower Moon from Martin Scorsese, both scheduled for exclusive theatrical release. While there is some concern about release dates shifting due to the labor strikes, we believe nearly all our second half slate has wrapped shooting. Additionally, given our surging indexing, we believe studios will be reluctant to move films on our slate and potentially sacrifice an already agreed to IMAX window. Furthermore, our diversified programming strategy will help offset the impact of a shifting Hollywood slate. Local language films will continue to bolster our slate in the second half. We now expect to program more than 40 local language films worldwide in 23. Up from the 30 to 40 we initially projected. We've had several solid wins in local language in recent months. IMAX delivered more than $10 million with the Chinese blockbuster Lost in the Stars, a mystery thriller we opportunistically added to our slate within a matter of days in the quarter. As I mentioned earlier, we delivered $8.6 million this weekend with Creation of the Gods 1, King of Storms, 16.6% indexing, and our biggest summer debut ever for a Chinese film. And in Japan, IMAX was granted its first ever day-and-date release, for a Studio Ghibli film, How Do You Live?, the final film from the legendary Japanese director, Hayao Miyazaki. How Do You Live? delivered one of the biggest IMAX opening weekends of Japan of all time, with IMAX earning 16% of the film's debut box office on just 44 screens. To date, IMAX has delivered more than $2.8 million with the film. We expect it will have a long run in Japan and select markets worldwide throughout the rest of the year. Our performance across a unique mix of local language blockbusters continues to be a catalyst for network growth. And we see potential for Oppenheimer to drive further growth as we've seen with films like Avatar 2 where we vastly outperformed. As I said earlier, we now have 84 signings this year compared to 47 for all of last year. We're seeing exhibitors bring more IMAX to their existing multiplexes globally to drive growth, rather than adding more conventional screens, such as multinational exhibitor Canopolis, which in May signed a deal to double its IMAX footprint. We also more than doubled installations in Q2 over Q1 of 23, with 20 in the period. And that number reflects our continued focus on high-growth markets beyond North America and China. Year to date, we've grown our rest of the world footprint by nearly 6%. While there continues to be discussion about China and the economy, we remain bullish. Like many of the world's most successful multinational category leaders, we built a robust business in China over decades, yielding hundreds of millions of dollars in revenue. This year, IMAX box office in China through mid-July is up more than 150% year over year versus exhibition which is up almost 60 percent our market share in the first half has been remarkably strong 4.6 percent of the overall box office on less than one percent of the screens we program a healthy mix of local hollywood and international content particularly japanese anime and while hollywood blockbusters have shown softness in china our average opening weekend indexing for Hollywood releases has soared to 15% in China, again, on 1% of the screens, up from 10.7% in 2019. As China emerges further from COVID and moviegoing recovers, we believe there's upside for Hollywood and local films in the market. As we expand across the world, we are expanding across platforms. In the second quarter, We announced an agreement to sell worldwide rights to our forthcoming documentary, The Blue Angels, to Amazon Studios, a first-of-its-kind deal that will see the film go to Prime Video following an exclusive run in the IMAX network. We continue to refine our go-to-market strategy with SimWave, and we're seeing a positive response with streamers encouraged by our efforts to champion quality in that space. We remain focused on solutions for streamers that allow them to compress video images while preserving optimal quality and creating significant cost savings. In conclusion, we believe our performance and broader market trends demonstrate a paradigm shift in cinema with IMAX getting increasing market share. And that for our remarkable indexing is clear evidence of a structural change in movie going where increasing numbers of consumers on a global basis seek out IMAX. The future of the movie business is IMAX, and it's a bright future. We created and continue to lead the shift to premium moviegoing that is most in demand among audiences, filmmakers, and studios. We are the only global premium theatrical platform with unparalleled scale in a time when global markets and local content are the most promising drivers of future growth. Finally, our strong brand and technology enable us to expand and create value across the ecosystem and capitalize on the interconnectivity between theatrical and in-home entertainment. We are confident in our ability to build on our momentum, deliver a strong second half to 23, and drive further global growth across the IMAX network. Thank you, and with that, I'll turn it over to Natasha.