Imax Corporation

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the IMAX Corporation Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your host, Jennifer Hoseley, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on today's third 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. Our historical Excel model is also posted to the website. I would like to remind you of the following information regarding forward-looking statements. Today's call, as well as the accompanying slide deck, may include statements that are forward-looking and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to differ. Please refer to our SEC filings for more detailed discussion of some of the factors that could affect our future results and outcomes. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information, future events, or otherwise. 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 the reconciliation to non-GAAP financial measures, are contained in this morning's press release and our earnings materials, which are available on the investor relations page of our website at IMAX.com. With that, let me now turn the call over to Mr. Richard Gelfand. Rich?

Thanks, Jennifer, and thanks, everyone, for joining us this morning. It is truly the best of times at IMAX. The company delivered a record performance in the third quarter. We've seen many good quarters, but few have exceeded our expectations like this. Adjusted EBITDA of $45 million, up 174% year over year, an EBITDA margin of 47%, an IMAX record for Q3. Significant year-over-year growth across revenue, gross margin, and adjusted EPS. Global box office of 347 million, our second highest grossing quarter of all time. We remain on pace to take our highest share of the global box office ever in 2023. And we've generated 120 signings, for new and upgraded IMAX systems worldwide today, including our biggest deal in four years. Almost every day yields new evidence of our commanding brand, market power, and demand for the IMAX experience. Fans traveled hours and hundreds of miles to experience Oppenheimer in IMAX films. Dune filmmaker Denis Villeneuve proclaimed IMAX, quote, the future of cinema. Our performance with Taylor Swift and Killers of the Flower Moon demonstrates we're expanding our brand to new audiences and genres. And Summer 2023 was our biggest summer of all time in 54 countries worldwide, from Argentina to Vietnam, the U.S. to China, underscoring the geographic breadth of our success. Our results and market share are through the roof, because IMAX has emerged as the preferred way to experience events around the world. We built the strongest, most diverse content portfolio in our history, reaching new audiences with Hollywood blockbusters, local language films, marquee theatrical releases by streamers, concert films, documentaries, and live events. And virtually all of it is working in our network. reducing volatility for the IMAX box office. In a highly dynamic environment for media and entertainment, the one constant is IMAX outperformance. We remain on track to deliver significant growth in system signings, installations, and adjusted EBITDA for the full year, and we've already surpassed our full 2022 box office. Today, I'd like to discuss how we're building our brand and market leverage with our box office results, and how that momentum is translating to worldwide network growth. Then I'll turn it over to Natasha to take you through our financial results before opening it up for your questions. The quarter was our second highest grossing quarter of all time at the global box office. The big driver, of course, was Oppenheimer. We've grossed more than $184 million with Oppenheimer to date, nearly 20% of the film's global tally during our run. While Oppenheimer was the cornerstone of our performance, it was hardly the only building block. In China, local release Creation of the Gods Part I delivered more than $32 million in IMAX. Lost in the Star is and no more bets from China also generated strong returns, and local releases from Japan and India also made meaningful contributions. 2023 is already our best year ever for local language box office, with more than $200 million to date and still almost three months to go. Through the third quarter, 22% of our global box office in 2023 has come from local language films compared to only 12% in 2019. We will program more than 50 local language films across our network this year as we expand our strategy into new markets, most recently Malaysia. Additionally, we continue to demonstrate IMAX as a premier destination for music as concert films show a surge in popularity at global multiplexes. Talking Heads Stop Making Sense was our highest-grossing IMAX live event to date, with its premiere event from the Toronto International Film Festival. The film helped set the table for Taylor Swift's The Eras Tour to deliver a great performance in IMAX, with an opening weekend of more than $13 million globally, including 12% of the film's domestic debut. Our pre-sales with Beyoncé's upcoming Renaissance concert film have also been quite strong. And we will deliver two prestige releases from Apple Films this fall, Killers of the Flower Moon and Napoleon. With Killers of the Flower Moon, we delivered 14% of domestic opening weekend box office. We're particularly pleased with our indexing on Killers, given this is our first release with Apple, which plans to spend $1 billion annually on theatrical releases with the transcendent scope and scale you'd expect from such a visionary company. From our recent local language to music tent poles to the Apple films, all these films have one thing in common. They were not on our slate at the beginning of the year. This speaks to our ability to strategically manage our programming in real time and the increasing diversity of our portfolio. We anticipate that there will be some movement in 2024 release dates due to the impact of the strikes. Given the strength of our performance this year, we believe there is upside for IMAX in Dune Part 2 moving to March 24, anchoring our first quarter box office. The highly anticipated sequel was shot 100% with IMAX cameras versus 40% for Dune 1. We also think movement in the 2024 slate could create space for us to release films we currently cannot, similar to the way the Dune move enables us to play the Marvels and the Hunger Games prequel in the current quarter. These additions show how agile and quick we can be to find new sources of content and box office revenue. In 2024, features new installments of IMAX-friendly franchises from Dune to Godzilla vs. Kong to Captain America, Joker, and more. As we look ahead, we believe IMAX has reset the calculus for the box office we can deliver in any given year. In 2023, we'll release 90 films. Pre-pandemic, we averaged about 61 releases per year. 2019, was our previous best year at the global box office. It was also the highest-grossing year in box office history, with nine releases in total that grossed more than $1 billion, from Endgame to The Rise of Skywalker. This year, we've seen only two $1 billion-grossing movies, and one of our biggest releases, Dune II, moved out of the year entirely. And yet, IMAX is tracking to similar box office levels as 2019. More than ever, our results and market share make it clear that we're a very different business than our partners in exhibition. Much in the way the Avatar sequel jump-started our system sales activity early this year, our performance with Oppenheimer has provided yet another jolt of momentum. We now have 120 signings this year for new and upgraded IMAX systems worldwide. Consistent with our focus on high PSA, high potential markets this year, we generated strong sales activity in APAC, including Malaysia, where we just completed a six system agreement with Golden Screen Cinemas. Despite a relatively small IMAX footprint, Malaysia has consistently been in our top 25 markets globally. Year to date, we've delivered more signings in Malaysia than any market globally outside the U.S. and China. In Japan, we completed installation of the seven systems we licensed to Aon earlier this year, which have already generated more than $2 million in box office since the first location opened in May. IMAX also returns this month to a very productive box office location with IMAX Sydney. Prior to its closure in 2016, IMAX Sydney was one of our top grossing theaters on the planet. The new system in the newly opened Darling Harbor Retail Hotel and Entertainment Complex features IMAX with laser and one of our biggest screens in the world. Given the extraordinary performance of our Melbourne location this year, where we expect to exceed $4 million in box office. We are very confident Sydney will make a meaningful contribution to our box office results. In its first week of operation, the new IMAX Sydney was our highest gross location in the world outside the US and the UK. Finally, just this month, we reignited growth in China with a 20-theater deal with Hengen Films, our biggest deal for new IMAX locations in four years. With regards to IMAX China, we announced earlier this month that our take private proposal did not garner the requisite 90% shareholder vote of independent shareholders for approval. While disappointed, we are far from deterred when it comes to our business in China. From our signings momentum to our dramatic box office recovery this year, it's clear that China remains a big opportunity for IMAX. We'll look for other ways to capture some of the transaction synergies as we strengthen our position in the Chinese entertainment ecosystem. In conclusion, our record-breaking results for the third quarter offer powerful evidence of the paradigm shift to IMAX in the global marketplace. We agree with Denis Villeneuve, IMAX is the future of cinema. We lead the shift to premium and movie-going. We're the only global premium theatrical platform. The emergence of concert films, a genre uniquely suited to IMAX sight, sound, and live capability, only strengthens our hand. Finally, We continue to expand our brand and technology across the ecosystem, having recently merged our IMAX enhanced licensing business and SimWave under a unified brand, IMAX streaming, and consumer technology. We are on track to deliver strong growth for the full year, continue our momentum into 2024, and drive future global growth across the IMAX network. There has never been a better time for IMAX. And we're excited for that to continue. Thank you. And with that, I'll turn it over to Natasha.