Imax Corp Q1 FY2022 Earnings Call

Good day, ladies and gentlemen, and welcome to the IMAX Corporation First Quarter 2022 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Heather Anthony of IMAX. Please go ahead, ma'am.

Thank you, operator. Good afternoon everyone and thank you for joining us on today's first quarter conference call. On the call today to review the financial results are Rich Gelfond, our Chief Executive Officer; and Joe Sparacio, our Interim Chief Financial Officer. Megan Colligan, President, IMAX Entertainment; Natasha Fernandes, Chief Financial Officer; and Rob Lister, Chief Legal Officer, are 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 fourth quarter earnings press release and the slide presentation have been posted on the Investor Relations section of our website. At the conclusion of this call, our historical Excel model will also be posted to the website. I'd 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 in that they pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause actual future results 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. 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 a reconciliation to non-GAAP financial measures, including adjusted net loss, adjusted EPS and adjusted EBITDA as defined by our credit facility, are contained in this afternoon’s press release and in our earnings materials, which are available on the Investor Relations page on our website at imax.com. With that, let me now turn the call over to Rich Gelfond. Rich?

Thanks, Heather, and good afternoon, everyone. Thank you for joining us. We reported our first quarter results today on the eve of a remarkable blockbuster season set to kick off next week. For the quarter, we exceeded consensus estimates across nearly all key metrics including total revenue, gross margin, adjusted EBITDA, and global box office. And we drove strong double-digit growth in total revenue, gross margin, and adjusted EBITDA over the first quarter of 2021. Our results demonstrate the solid financial momentum we've established over the last six quarters and our ability to consistently deliver improved results in a highly dynamic marketplace. Next week begins a formidable slate of titles that stretches across the next two years and represents the most bankable franchises, filmmakers, and stars in the world. We're also seeing the pace of deal activity begin to pick up, including recently completed agreements in growth markets, such as Japan and Thailand, and we expect that to continue in the months ahead. We continue to work with all our major partners to map out the rollout of new or refurbished theaters, including recently completed successful agreements with AMC, Cineworld, Regal, Pathé, PVR, and CGV. As a result, we see a strong opportunity to build on our momentum and deliver value for our shareholders. As a premier global technology platform for entertainment and events, our focus for 2022 is to expand our business beyond blockbusters and deliver new, unique events and experiences to audiences globally, by putting our technology in the hands of new creative and platform partners, and becoming a destination for fandom of all kinds. But immersive blockbuster filmmaking will always be the straw that stirs the drink for IMAX, and a blockbuster pipeline represents a significant opportunity to further drive box office revenue, capture market share, and fuel the continued expansion of our business across live and interactive events and into the home. As the slate takes off, it's notable that streaming services face intensifying competitive pressures and renewed questions around the economic model for the streaming business, which could provide a tailwind for theatrical releases. We've long held that as the virus is brought under control and people feel increasingly safe, consumers will be drawn back to communal out-of-home entertainment experiences. We're seeing evidence of this across all aspects of life, from people returning to gyms, to concerts and sporting events, to airlines and hotels reporting record-breaking trends. Recent consumer trends reaffirm the irreplaceable value of a theatrical release. Our partners at the studios and streamers have told us unequivocally that a theatrical window is pivotal to their strategic plans going forward, and that content that benefits from a theatrical launch platform performs far better on streaming and derives greater value throughout the chain, most recently evidenced by the strong performance of Spider-Man: No Way Home and The Batman on digital platforms. This creates potential opportunities for IMAX from streaming services using the IMAX global network to launch tentpole IP to additional streamers adopting IMAX Enhanced technology as a competitive differentiator. Today, I'd like to discuss our outlook for the '22 content slate and how it creates opportunities across our business. We're meeting the growing demand for IMAX technology among filmmakers, creators, exhibitors, and our fans, and of course, our results for the first quarter. The first quarter proved that there's strong pent-up demand for immersive cinematic spectacles. Spider-Man has grossed more than $110 million in IMAX today, ranking as our eighth biggest title of all time. The Batman exceeded expectations, generating more than $54 million in the IMAX network. The Batman's total North American box office performance was on par with any other top grossing Q1 title of the last decade. Our events live strategy demonstrated that older audiences are ready to return to theaters for the right experiences with our successful launch of The Beatles: Get Back with Disney Plus, which began as a limited one-week IMAX exclusive engagement months after it was released on the Disney Plus streaming platform, and went on to gross $2.5 million in a few IMAX theaters. On the heels of this success comes a strong and consistent flow of highly anticipated releases. More than ever, these films include IMAX DNA, having been shot with our cameras or created to include IMAX exclusive expanded aspect ratio, where they leverage the powerful IMAX platform in new and creative ways for launch, further demonstrating our ability to create global events. The slate includes next weekend's Doctor Strange sequel, which builds directly on Spider-Man: No Way Home and is driving strong pre-sales globally. Doctor Strange has a clean multi-week run on the IMAX network before the arrival of Top Gun: Maverick, yet another film for IMAX release. Paramount just hosted a first look screening of Top Gun at CinemaCon, and the early reviews are absolutely phenomenal. In fact, the audience was saying at the end, 'play it again.' I've seen it and it's phenomenal, backed by a strong emotional story and some of the most stunning aerial photography ever committed to film. Following Top Gun is Jurassic World Dominion, a franchise that has been very successful for IMAX over the years. We're also planning a live connected theater launch event for the film, alongside Pixar's Lightyear, which is very well received at CinemaCon, and makes pioneering use of IMAX technology for animation. The next installment of Thor, which was shot with IMAX cameras, and Jordan Peele's Nope, which was shot with IMAX film cameras, will make never-before-seen use of our technology in innovative storytelling. The summer follows a number of highly anticipated movies including Marvel's Black Panther sequel and DC's Black Adam, and we continue to eagerly look forward to the December release of Avatar: The Way of Water, the first of four planned Avatar sequels, given our history with this franchise and its alignment with our brand. Disney provided an exclusive first look at the new film at CinemaCon yesterday, and it looks incredible. The studios will also attach a theatrical exclusive teaser trailer to Doctor Strange. The original Avatar still stands as the highest grossing IMAX release of all time with more than $250 million in box office despite an initial footprint of less than 300 IMAX screens. And that's just the Hollywood slate. We continue to grow and diversify our local language slate, building on our record-breaking local language box office of 2021. In fact, we programmed seven local language titles worldwide in Q1, our most ever in the first quarter. During the quarter, we saw strong box office performance from China's The Battle at Lake Changjin II, to India's RRR, and Japan's Jujutsu Kaisen. Local language blockbusters are delivering for IMAX fans not only in their home countries but around the world. In particular, Japanese anime is helping to drive network-leading PSAs in Japan. In fact, eight of our top 15 theaters worldwide in 2021 were in Japan, with strong performances in the U.S. and other key markets. This summer's blockbuster slate provides an excellent opportunity to advance our IMAX 3.0 strategy and evolve our global platform for events and experiences, both out of home and in the home. We continue to test our connected network of theaters to create live and interactive events around our biggest releases. As I mentioned, we're planning a live interactive fan event around the release of Jurassic World Dominion. At this week's CinemaCon, we shared a number of upcoming live events in our network, including performances from a diverse range of acts, including Pink Floyd legend Roger Waters, and a partnership with iHeartRADIO on December's iconic Jingle Ball concert. The 2022 slate offers a significant opportunity to expand our IMAX Enhanced initiative as well. Our goal is to expand the footprint of enhancement further across streaming platforms and high-end devices. Given how much technology is featured throughout Disney's slate for the year, we see a strong opportunity to expand our marquee IMAX Enhanced partnership with Disney Plus. We're also leveraging our blockbuster slate to reignite our IMAX documentary strategy. Our newest project, the Blue Angels, shares DNA and strategic synergy with Top Gun from the ambitious way it will use our cameras to our collaboration with producer Glen Powell, one of the stars of Top Gun: Maverick. Blue Angels is also the first documentary project for our long-standing partners at JJ Abrams' Bad Robot, deepening our partnership with one of the most successful filmmakers in the world. We're excited about bringing a new generation of narrative-driven modern IMAX documentaries to our network and see this as a viable business opportunity. Whether it's expanded distribution beyond institutional theaters and into commercial locations where our strategic focus is, or distribution rights for IMAX docs across streaming services, we believe there are strong licensing opportunities. The 2022 slate is proof positive that IMAX technology is in growing demand among the world's best content creators and global audiences. At least 10 blockbusters scheduled for 2022 will feature IMAX DNA, and we continue to evolve and grow the IMAX global platform to meet that demand. Denis Villeneuve swept the technical Oscar categories with Dune, a groundbreaking film created with IMAX digital cameras. Tom Cruise strapped digital cameras to F/A-18 Super Hornets to create aerial combat scenes the likes of which the world has never seen for Top Gun: Maverick. And of course, James Cameron is poised to blow the collective minds of moviegoers around the world with the new Avatar. We believe that the next several years are set to demonstrate that we are in a creative and technological renaissance for immersive big-screen filmmaking and fierce competition for who can deliver experiences that fans have never seen before anywhere. IMAX technology is the key to this. As a result, we are building and developing a new fleet of state-of-the-art IMAX film cameras, working in partnership with filmmakers like Chris Nolan, Jordan Peele, and cinematographer Hoyte van Hoytema. We're currently mapping out specs for the new cameras, and we plan to put them into production later this year for use in 2023. The use of our cameras and the way that it infuses IMAX DNA and exclusive elements into film is a strong driver of our box office and positions us to continue to take market share. Last weekend, we hosted more than two dozen exhibition CEOs from around the world at our annual CEO forum for a three-day program, where we give them access to leaders from across the studios and streamers, as well as talented creators from across Hollywood and the International filmmaking community. There was a consensus among attendees that blockbuster content will be an even more important part of the ecosystem moving forward, and that the need for studios and streamers to create global launch events around blockbuster releases will benefit theatrical and, in particular, IMAX. Returning to our results for the quarter, the first quarter was light as projected on new releases globally. Despite this, IMAX drove solid financial results in the quarter, exceeding nearly all consensus estimates and driving year-over-year improvement across several key metrics. Total revenue, gross margin, and adjusted EBITDA all showed strong double-digit growth over the first quarter of 2021. Importantly, we continue to drive strong market share gains, capturing a record 4.7% of the domestic box office in the first quarter, compared to our 4.4% of our full year's share for 2021, and the 3% market share we captured in the first quarter of our record-breaking year 2019. We continue to demonstrate confidence in our strategy and the results by being opportunistic with share repurchases, which accelerated under our plan in the current quarter for a total of approximately 1.3 million shares repurchased year-to-date. In China, box office was also a bit softer than anticipated due to rolling closures of certain markets given the resurgence of COVID. We've implemented cost reductions in the market where appropriate, and we are cautiously optimistic around the continued reopening of impacted markets in China. In fact, 65% of our theaters are now open in China, up from 52% as of March 31. Our 27 theaters in Shenzhen have nearly all reopened, and theaters in Nanshan, Xian, Qingdao, and Hong Kong have also reopened in the past 10 days. We're also encouraged that an increasing number of Hollywood titles are securing releases in China, including The Batman, Fantastic Beasts, Ambulance, and Jurassic World. In conclusion, IMAX is poised to accelerate its momentum at the box office and the evolution of its business with the strong film slate launching next week. We will continue to drive our current momentum in new theater signings as well. We are the premier global platform for blockbuster content. In my 28 years with the company, this is one of the best blockbuster slates I've ever seen. It provides an excellent opportunity to accelerate our financial momentum, and further our transformation into premier global technology platform for entertainment and events. Thanks again to all of you for joining us today. I also want to conclude by thanking Joe Sparacio for his excellent work in serving as our interim CFO and welcome Natasha Fernandes, whom we announced last week as our new CFO. Natasha has phenomenal homegrown talent, more than 15 years of experience here at IMAX. She knows our business inside and out, and I'm confident we'll grow our strong financial position while fueling new business opportunities under her leadership. With that, I'll turn it over to Joe.

Thanks, Rich, and good afternoon, everyone. We are pleased to report our first quarter results which demonstrated once again that IMAX is the place to experience the biggest, most compelling content. As we look ahead to the remainder of '22 and into '23, we couldn't be more excited about what's on deck. Let's talk about the results in detail. IMAX again demonstrated a differentiated financial model as an asset-light business with low fixed costs, minimal ongoing CapEx requirements, and high incremental margins. First quarter of 2022 total revenue was $60 million, an increase of 55% compared to the $38.8 million in the first quarter of 2021. Gross margins increased 84% to $31.8 million from $17.3 million last year. First quarter adjusted EBITDA increased substantially to $14.8 million versus adjusted EBITDA of $2.8 million in the year-ago period. As noted in our press release, we recorded a net non-cash provision of $6.9 million or $0.12 per share, driven by the uncertainty of collecting receivables in Russia. This provision, which covers substantially all of our receivable exposure in the market, was taken as an exercise of caution given the ongoing conflict in Ukraine. It should be noted that there are no joint venture sharing arrangements in the Russian market and the receivables primarily relate to the remaining terms of the existing long-term sale STL agreements, which average seven years. It is difficult to predict how events will develop in the next few months, let alone the longer-term future. This has resulted in an adjusted net loss of $0.14 per share, significantly reduced from a loss of $0.25 per share in last year's first quarter. Excluding this non-cash provision, adjusted EPS would have been a loss of $0.02 per share. By way of reference, over the past five years, Russia has represented on average approximately 3% of our annual box office. IMAX technology revenue increased 59% to $32.2 million in the first quarter from $20.3 million in Q1 of 2021. As Rich mentioned, this increase was largely due to the strength of blockbuster titles, such as The Batman, Spider-Man: No Way Home, and the Chinese New Year title, The Battle at Lake Changjin II. Gross box office for the quarter was $173.2 million, a 57% increase from the first quarter of 2021. Q1 gross margin for this business was $19.8 million, a 95% increase from gross profit of $10.1 million last year. Our margin rate of 61.3% was a 1140 basis points increase compared to the 49.9% in the first quarter of 2021, once again illustrating the operating leverage inherent in the business model. IMAX technology sales and maintenance revenue for the first quarter increased 48% to $25.2 million compared to $17 million in last year's first quarter. During the quarter, we installed 14 IMAX systems, four of which were some new sales or STLs. In comparison, we installed 12 IMAX systems in Q1 of last year, including two new sales or STLs. Gross margins for this business increased to $12.2 million compared to $7.1 million, which was driven by substantially higher maintenance revenue and an increase in the number of new sale STLs installations versus the year-ago period. As mentioned on our February call, we continue to expect installation activity to increase over 2021 levels with seasonality similar to previous years, meaning increased activity in the second half. Please note that there are no installs in Russia targeted for 2022. Q1 SG&A excluding stock-based compensation was $24.5 million in the quarter, relatively consistent with 2019 levels and higher than 2021 levels of $20.3 million. The year-over-year increase was primarily driven by the expense associated with full staffing complements as compared to a reduced workforce last year. We expect full year SG&A excluding stock-based compensation to be consistent with 2019 levels with modest growth. Capitalizing on what we viewed as an undervalued stock price, we repurchased 380,000 IMAX shares at an average price of $16.45 for a total of $6.3 million during the quarter. Subsequent to Q1 through yesterday, under our 10b5-1 plan, the Company has returned repurchased 869,000 shares at an average price of $16.42 for a total of $14.3 million. IMAX China repurchased 1.5 million shares at an average price of $1.26 per share for a total of 1.8 million. We intend to continue to be optimistic in repurchasing shares when we view our stock price as disconnected from the underlying fundamentals of the business. We ended the quarter with $162.3 million in cash and $234 million of debt excluding deferred financing fees. In March, we amended and extended our revolving credit facilities on substantially similar terms. The new facility doubles the amount allowed to be invested in share buybacks compared to 2021 levels. The new maturity date is March 2027. When combined with the $300 million available under our credit facility and $26.3 million available under our IMAX China working capital loan, we have $488.6 million of available liquidity. In the first quarter, we spent $5.9 million on capital expenditures, including $4.6 million invested in equipment for joint revenue sharing agreements. This quarter further demonstrated that fans seek out IMAX to experience the content they are passionate about. With the exceptional 2022 and 2023 slates ahead of us and the vision we have for expanding IMAX into new forms of content and into the home, I am incredibly optimistic about the business. I've enjoyed helping the IMAX team over the past year as interim CFO and believe the table is set for continued growth and expansion. I'm delighted to hand the reins over to Natasha Fernandes, our new CFO. I've had the pleasure of working with Natasha for almost 10 years. More recently, Natasha distinguished herself in spearheading a number of forward-thinking successful moves to strengthen the Company's balance sheet and provide maximum flexibility in navigating the pandemic. Her deep understanding of IMAX, passion for the business and diligence will serve the business well during this exciting time. I look forward to seeing all of the good things to come. With that, I will turn the call back over to the operator for Q&A.

Thank you. We'll take our first question from Eric Wold with B. Riley Securities.

First off, Rich, can you talk a little bit about China and kind of what you're seeing regarding the reopening of the theaters? Since the end of March, maybe give us a sense of your thoughts on how quickly we could see visitation levels ramped back up once those reopen with what the slate looks like? And given what you've seen in China recently in terms of limited Hollywood approvals for the country, when you expect China to get back to greenlighting more towards the upper limit of what is allowed each year?

So, obviously, Eric, it's hard to be precise about exactly how quickly we will reopen. But as I said in my remarks, it went from around 50% at the end of March to around 65% now, and I noted a number of cities that have recently reopened. Our team in IMAX China, and again, let's be clear, they're not epidemiologists, but they think that Shanghai is going to open in the next couple of weeks. I asked a lot of people. So, there's no one uniform answer. But if you remember, even in the U.S., Omicron came through pretty quickly and then it moved on. I don't think this is going to be a long-term issue there. And in terms of audience reactions, we do have a few data points. The first data point is when the pandemic lifted off in China, and I guess in 2020, people returned really quickly. Judging by other times that they shut down, they return quickly. That would be my best guess. In fact, in the last two years, I believe that the highest grossing films in the world, during those years were Chinese blockbusters. And by the way, as an aside, they were each shot with IMAX cameras. I feel pretty good about that. In terms of movies getting in, there's been a lot more this year than last year for a variety of reasons. As I mentioned in my remarks, it hasn't been dated yet but Jurassic World got in, which is historically a film that does very well in China. Given Jim Cameron's relationship with China, and how well that movie did, I’d be shocked if it didn't get in. Those are two of the biggest films of the year. While it's very hard to pinpoint their trajectory, I think throughout the year, you're going to see a fairly rapid return to normalcy. The other thing I wanted to just remind the listeners, which you know well, is that IMAX is an asset-light business model. For other businesses, it takes a long time financially to ramp up after some kind of return of people in large numbers. With IMAX, it happens extremely quickly, as you see through our financial results. Specifically on the fourth quarter of 2021, it fell to the bottom line quickly. So we're still in the middle of a situation, which you can't pin down. Speaking to our team on the ground in China, I think their expectation is that it's going to turn faster than most people think.

Before I get into this. One quick additional question. I guess, on the nontheatrical business in the live events and concerts, what are your updated thoughts on that? How fast can you get up to scale with whatever you think the maximum number of features are globally with the necessary technology? And then what do you think the maximum number of events we could see under that model without impacting traditional theatrical runways?

Well, in terms of scale, we've been working really hard with our partners at Verizon, as well in international territories with the local telcos. I don't want to give specific numbers because there are lots of variables like building permits and things like that. But I do think you're going to see us scale up fairly rapidly towards the end of this year, and then going forward. We've put a lot of resources into making that happen globally. In terms of the number of events in a year, I think it’s kind of easy to see a time when we could do at least 25 events a year, which includes launches of films with a Q&A and casts, directors around music events, and sports events—things we haven't talked about yet.

We'll take our next question from Eric Handler with MKM Partners.

It seems like you're having some good success on a relative basis with your local language titles that you released recently in India and Japan. I wonder how many non-China local language titles you have sort of queued up for 2022 at this point.

So, I'm going to turn it over to Megan in a moment. But as I mentioned in the remarks, we did two in India already, both of which performed pretty well. We did one in France, called 'Notre-Dame on Fire', directed by Jean-Jacques Annaud, where we had very good indexing for national release on a small footprint. We had seven in the quarter. Megan, this year, what other countries and how many do you think?

We still have a couple left in China. But that's the lion's share of local language for this year. However, this is an ongoing program—a five-picture deal with Toho in Japan, and those pictures are still to come. This is something we are continuing to work on, and we will continue to invest in, as it has proven to be incredibly successful.

Rich, I know it's very early to gauge, but given the very positive reaction to what was shown yesterday at CinemaCon with Avatar 2, is that starting to generate some more conversations about exhibitors trying to move more quickly to get installs in place?

Eric, I've been back and I left LA, I left Las Vegas yesterday to get here in LA to do the earnings. I wasn’t really in the middle of talking to exhibitors, but the mood among exhibitors was actually quite good. The mood seems to be increased activity and momentum around signings. In past years, when Avatar 1 was released, a lot of people pulled installs forward. It’s too soon to comment on that, but I mean, just the slate is so great. Again, I want to reiterate that we have Doctor Strange with the Avatar trailer opening in a week. You go to Top Gun, which I said was incredibly good. I don't think people are going to sit around saying, what's the date Avatar is going to come back for installations. We're coming off a first quarter that was light on films, and I think it’s an excellent lineup for the rest of the year going into Avatar. So, I can’t predict it now, but this film slate could incentivize people to think about installations.

We'll take our next question from Chad Beynon with Macquarie.

I was wondering if you could talk a little bit more about some of these market share numbers that you have in your slide deck. I understand that the quality or quantity of product is not where it will be in a couple of quarters here. But given what's going on with the consumer, particularly in the U.S., do you expect that, as we come out of this, your market share, particularly in the U.S., could be higher? It seems like the U.S. consumer, particularly with theater, has really moved more towards the luxury and premium end?

Yes, I mean, you've seen some of that with The Batman when it came out. The fact that things are delayed means that everybody is playing the same movie. There are lots of screens, much more than previously. As more competitive movies come out in the marketplace, we should see the trend of the move to premium in general in IMAX specifically. And again, while we were at CinemaCon, Denis Villeneuve talked about Dune's success. I want to remind everyone that we did 25% of the box office for Dune, yet we had less than 1% of the screens. So, there are positively correlated transfers occurring—Batman was a big screen film that did 12% opening weekend. Many films this year were shot using IMAX cameras. Typically, we over-index market-wise when our cameras are being used, and this year it’s even more. So, I feel good about the combination of global trends and our technology's DNA in films.

Just wanted to ask about the back half loaded comment expectations for new installs. It seems like you guys have talked about this for years. But, just given the slate, why wouldn't some of your exhibiting partners want to install your projectors ahead of that? Is this more a product of where China is in their recovery, or is it again, just the normal seasonality?

Well, there is normal seasonality, but when we estimate for calls like this, we look at historic patterns in past years, and that's the pattern. I’m not going to predict that the pattern changes, but I hope it does. Particularly this year, there’s a lot going on throughout the year. But some of these are new buildings, some have refurbished seats in them. It’s not a theoretical thing. It’s not like the cavalry is waiting in the lobby. They’re not saying let's accelerate installations for Top Gun's performance. Hopefully that happens, but the industry typically follows a pattern.

Appreciate the extra colors. Thanks.

Thanks. I am glad you did. I wasn't sure it went over so well. So thanks.

Moving forward to Steven Cahall with Wells Fargo.

Yes, first, I was just wondering if you could dig a bit deeper into the ways you’ve talked about the install guidance for the year. I would guess at this early stage, some challenges are just that the lockdowns in China have persisted a little longer, as well as maybe some rollover into eastern parts of Europe from the events there. But then, the film's performing really well in all the ways that you've talked about. Since you gave the last install guidance, do you feel better about it? Is there any narrowing that we can think of to figure out where that might land?

So, we haven't given specific guidance. We've said we expect to increase installs over 2021 levels but not reach 2019 levels, and I believe what I know now would indicate that that's still accurate. I think we stick by that. We will have more color as the year unfolds. When Heather came into her new role, she reminded me of how IMAX operates. If we do $50,000 in extra PSA, that equals 10 STL installations in a year. Internally, we focus on projected results for the year and how we think we're going to deliver. I keep saying that I think this is going to be a really strong year, but whether that comes through PSAs or installs, it’s too early to narrow that down.

The second question is just on share repurchases. Your valuation multiple seems back to pandemic levels. Just how aggressively are you looking at the market, given your strong balance sheet?

Before we went into the blackout period, we put in place a 10b5-1 plan that put in certain purchases at prescribed levels. During the blackout window, we’ve been aggressive with share repurchases. I look at the stock price every day and feel disappointed that our fourth-quarter delivery isn’t reflected in the stock price. On one hand, I’m optimistic and trying to buy back shares quickly. On the other hand, it’s disappointing to see the disconnect.

We take our next question from David Karnovsky with JP Morgan.

Rich, you touched upon it a bit in your prepared remarks that you did just come from CinemaCon and your CEO forum. What additional thoughts do you have on how studios are looking at theatrical? It does seem like re-streaming growth is slowing as the pendulum is swinging back a bit in favor of film windows. Any insights from the conversations you've been having would be appreciated.

Yes, I think for blockbuster films, the kind of films that IMAX shows, it’s all theatrical for the studios. I don’t think you will see a hybrid model for any blockbuster film for 2022 or probably beyond. I didn’t hear one person mention that. During the last few weeks, Megan and I met with virtually all the studios at high levels. The studios realized that model didn't work. Many studios have observed that theatrical releases and then streaming performed better on streaming than purely streaming releases. Given that data, they’re unlikely to return to their experiments which didn’t work in 2021. I predict that some streamers may go to theatrical windows for some of their bigger films.

We take our next question from Mike Hickey with The Benchmark Company.

Hey, Rich, Joe, Heather, Natasha, Megan, congrats on the quarter, guys. Thanks for taking my question. Rich, on Avatar 2, just curious about your initial thoughts regarding the demo you saw. It didn't include dialogue, so it seems very tech-heavy. Did it meet or exceed your expectations? What could this mean for greater 3D adoption in domestic markets and create barriers for your competitor's screens?

So, on the first question, it was a teaser trailer. They deliberately did it without dialogue and with music. It was demonstrating their images, which are amazing and spectacular. Technology has evolved in the 13 years since the first release, and while that was fresh and innovative, I thought this was spectacular in a similar way. In terms of 3D versus 2D, the early discussion indicates that it will probably be released in both formats. That's a good question; not only for Avatar but also for Doctor Strange, which will have 3D in some theaters. There are four more Avatar films to come. This quality will likely increase demand for 3D films, and we have a massive competitive advantage there. We've created an internal task force to capitalize on Avatar 2, focusing on technology, distribution, manufacturing, maintenance, and marketing to be ahead of the curve.

The last question on China—are you the only asset around that has secured distribution to China at this point? How variable is the timeline to get visibility in front of films' release?

In terms of China, I’ve heard that several films in the queue have passed censorship, but that doesn't mean they’ve been approved to enter the country yet. There are films that have passed censorship, but they're waiting to see how the theater closures play out. An indication is that they will continue to let in a normal amount of Hollywood films, rather than 2021 when the market was affected by various factors, including the pandemic. Regarding timelines, I can’t predict the stock market accurately, but I think when people see the release numbers, it should start in a week, and they will focus on the slate afterward, which I believe will lead to a rapid return to normalcy.

Moving forward to Mike Ng with Goldman Sachs.

I was just wondering if you could expand a little bit more on the trends you're seeing in indexing. It seems that this blockbuster realization of movies should help that. What trends are you seeing relative to pre-pandemic levels, and any color on domestic versus international? Could you also remind us what that Avatar historical indexing looks like? Do you have an outlook for this time around?

On indexing, I think it's been positive everywhere, but I can’t compare international to domestic. However, I can tell you that on Fantastic Beasts, we vastly over-indexed internationally. Our indexing in North America was high too, somewhat content-dependent. The trend is clear; for instance, we've been over-indexing for local language films and Hollywood films since China opened up. In North America, The Batman did approximately 12% its opening weekend, which is better than the typical 9% or 10%. Consistently, we've been over-indexing well, and I recall that in the past, Avatar did around 10% with far fewer screens. Given our expanded footprint today, I’m hopeful for strong indexing this time around.

We take our next question from Jim Goss with Barrington Research.

I was thinking that most of the local language film is really good for the market in which it's produced. But I'm wondering if the Japanese anime seems like something that could be different and more portable to other markets. Is that the sort of thing that could be used in the United States or Europe or other areas?

Yes, it is a growing trend that's been happening over the years. There's an export business, particularly with Korean films, some Japanese films, and Indian content, where there's a large market outside of those countries. For example, when there’s a big hit in Korea, it’ll also play very nicely in both China and Japan. You'll see that with anime; it plays well around the world when it's a significant hit. This reflects the globalization of content and the awareness of content. Expats living all around the world want to see the content they enjoy, so there's definitely a marketplace for this. We're very interested in exploring this more as we expand our reach.

Do any of them reach a level where they might be better than the third or fourth week of blockbusters who might have a downdraft for the first week or two?

Yes, there are popular anime films that are steadily increasing in popularity, particularly in the United States. It just takes one example of a genre to catapult this success.

And the narrative-driven opportunity you brought up with the Blue Angels? Is that something that could either be used on, say, IMAX screens during the middle of the week or on other screens in theaters? Can it go beyond what one of those may have started at?

Yes, Jim, that's what we intend to do. I think it will eventually go onto the streaming world. Streaming at some point seemed like an existential threat, but I believe it provides us with opportunities, not only in the areas discussed but in financing content off the money available there. Documentaries are a new supercharged category people enjoy. In a cluttered market, IMAX documentaries mean something special. Yes, there are definite opportunities.

It appears there are no further questions at this time. I'd like to turn the call back to IMAX for any additional closing remarks.

Thank you, operator, and thanks, everybody for joining us. I really think we're on the verge of a breakout at IMAX for several reasons. First of all, as I said, the slate—I've been talking about Top Gun for a while and the buzz is high, especially after the CinemaCon reveal. That's going to be true for a lot of releases. It's not just going to be one-off successes like Spider-Man or The Batman; it's going to be a new regular narrative. Secondly, the theatrical experience just came through its greatest challenge with the dual threat of the pandemic and streaming. The streaming part has proven not to work, and people need a theatrical window. That applies to studios and streamers, leading to more windowing around releases. Third, the market share we've increased shows that people are looking for special experiences when leaving home, which aligns with other premium experiences. Finally, we are leveraging our belief in our story by aggressively buying back stock at these prices. Thank you all for joining and for your interest in IMAX. We will talk to you soon.

That concludes today's call. Thank you for your participation. You may now disconnect.