Imax Corp Q3 FY2023 Earnings Call

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. Please note that today’s conference is being recorded. I will now hand the conference over to your host, Jennifer Horsley, 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 Gelfond, Chief Executive Officer; and Natasha Fernandes, 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 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 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 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 Gelfond. 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; and 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 to date, 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 film. Dune filmmaker Denis Villeneuve proclaimed IMAX '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 1 delivered more than $32 million in IMAX. Lost in the Stars 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 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 | 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 are 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 transcendence scope and scale you would 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 Two 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. And 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 gross 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 2 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 jumpstarted 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 AEON 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 and the newly opened Darling Harbour 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 U.S. and the UK. Finally, just this month we reignited growth in China with a 20 theater deal with Hengdian 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 are 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 SSIMWAVE under the unified brand IMAX Streaming & 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.

Thanks Rich, and good morning, everyone. Our fantastic results for Q3 speak to the growing demand for the IMAX experience and the expansion of our content portfolio across our global system footprint. More than ever, we are able to optimize our programming and maximize annualized box office to greater levels. This in turn drives stronger global demand for IMAX systems, creating a very positive long-term growth dynamic. In the quarter, we established a new Q3 box office record of $347 million and a Q3 adjusted EBITDA margin record of 47%. Signings are now 2.5x what we did for all of 2022 and the pace of installations is accelerating as we finish off the year. Furthermore, we achieved a record Q3 adjusted EPS of $0.35, more than 50% higher than it was in 2019, reflecting our greater earnings power coming from the combination of higher profits and fewer shares outstanding. We are well on track to meet or beat all of our full year guidance measures. We expect IMAX box office of at least $1.1 billion, installations of 110 to 130 IMAX systems, and adjusted EBITDA margin is trending higher than original expectations of mid-30s for the full year. Now, for a closer look at the third quarter. Box office of $347 million was up 96% year-over-year, putting us at $889 million year to date. As Rich highlighted, we are regularly seeing outsized share on Hollywood and local language opening weekends above our historical norm. Looking into 2024, there are numerous confirmed titles where we expect to over-index with Dune: Part Two being the most significant in the first half. With Dune: Part One, IMAX delivered $55 million in global box office and indexed more than 17% worldwide for the entire run, despite the fact that the film was released during the pandemic and available simultaneously on HBO Max. We're excited to see what Dune: Part Two can do, especially given it was shot 100% in IMAX versus 40% for the first film. Total revenue in Q3 was $104 million, up 51% from $69 million in Q3 2022. Given the relative fixed nature of our costs, this growth resulted in high profit flow-through with gross profit of $63 million, up 98% year-over-year, and overall led to a 60% gross margin in Q3. Both segments contributed to the higher level of revenue and gross profit year-over-year. Content Solutions revenue of $44 million comprised 43% of total revenue and grew 101% year-over-year, driven by strong IMAX box office performance. Gross profit of $26 million grew 189% year-over-year and came in at a 60% margin, illustrating the significant operating leverage in our model that gets amplified with higher levels of box office. Technology Products and Services revenue of $56 million comprised 54% of total revenue and grew 23% year-over-year. Gross profit of $34 million grew 55% year-over-year. This very strong result was driven by growth in IMAX box office and system installations under sales or hybrid arrangements. In total, we had 30 installations in the quarter compared to 17 in the prior year period. Of the installations, 16 were sale or hybrids and 14 were joint revenue-sharing leases. As exhibitors' balance sheets recover, they are clearly investing in premium, and this is accelerating our pace of installations, positioning us overall for a strong full year 2023. This is also reflected in our signings momentum. We are at 120 signings through today, more than double as 47 in all of 2022. The stats behind our signings to-date showcase the broad demand for the IMAX experience. A 101 of the signings or over 84% were new systems, compared to 30 for all of 2022. 20% were in the U.S. and Canada and 13% in Europe, 38% were in Japan and Southeast Asia. And we are seeing signings begin to pick up in China now at 24 to-date with the Hengdian deal Rich mentioned earlier. Turning to operating expenses, we are investing for long-term growth and to exploit our differentiation and strong brand. R&D expense of $2.8 million increased $1.7 million, reflecting our investment in new technology including streaming optimization software. SG&A excluding stock-based compensation of $31.4 million increased $3.5 million from Q3 2022. However, SG&A was roughly flat year-over-year when we net out one-time transaction costs and the inclusion of SSIMWAVE expenses, which were not in the prior year given the acquisition closed at the end of Q3 2022. As a percentage of revenue, SG&A excluding stock-based compensation was 30% versus 41% in Q3 2022, an improvement of approximately 1,100 basis points, reflecting the leverage in our business model, coupled with a continued focus on cost discipline efforts. Adjusted EBITDA attributable to IMAX was $45 million, a growth of $29 million or 174% year-over-year. The growth across our segments and the strong operating leverage in our business model drove this excellent result. From a margin perspective, adjusted EBITDA attributable to IMAX was 47%, one of the highest quarters in our history. Looking at the bottom line, adjusted EPS in Q3 of $0.35 improved significantly from the $0.05 loss in the prior year period, reflecting the growth in adjusted EBITDA. Operating cash flow through nine months was $55 million or $0.99 per share representing significant growth versus the $480,000 for the first nine months of 2022. The year-over-year improvement reflects our higher profits and the accelerating business recovery of our exhibition customers post-COVID. For further context, on a consolidated basis, operating cash flow for the entire year of 2022 was $17 million. Thus, September year-to-date operating cash flow is more than 3x what it was for the full year of 2022. Our capital position remains very strong as we ended the quarter with $109 million in cash and $258 million of debt excluding deferred financing costs. $230 million of our debt comes from our convertible senior notes due in 2026 that bear an interest rate of 0.5% per annum with a capped call of $37 per share. Our current available liquidity is approximately $439 million, including cash and cash equivalents of $109 million and $330 million in available borrowing capacity under the company's various revolving facilities. From a capital allocation perspective, the IMAX China transaction outcome results in us having greater available capital. We believe our stock is greatly undervalued and thus we will continue to prioritize share repurchases as a use of cash just as we did in 2022. To date, in the fourth quarter, we have repurchased approximately $4 million worth of shares and have $187 million remaining available under our share repurchase authorization. To conclude, Q3 is the most emphatic demonstration yet, that this is a breakthrough year for IMAX. We are delivering a steady stream of IMAX box office, market share and financial records. We are effectively managing our content portfolio to maximize results. The table has been reset post-pandemic, and we have emerged stronger on an annualized basis. The opportunities in front of us in 2024 and beyond are even more significant. Demand for the IMAX experience is at an all-time high. We are regularly setting market share records across genres of films, which is expanding our fan base demographics. Studios, filmmakers and exhibitors are all realizing that IMAX is the most premium entertainment technology company in our space with unmatched global scale. This is fueling our system sales and propelling us into new market segments such as Streaming & Consumer Technology. And importantly, as our growth accelerates, our asset-light, highly incremental business model is resulting in expanding margins, bottom line profit growth, and robust cash flow generation. In summary, our ability to optimize our results through a portfolio of content, combined with the growing demand for our technology solutions, is positioning us well relative to our full year guidance and setting us up for long-term success. With that, I will turn the call over to the operator for Q&A.

First question coming from the line of Eric Wold with B. Riley.

One question, or it’s a quick follow up afterwards. I guess, one, obviously the impressive leverage in the quarter on a strength of box office. I guess, as box office continues to ramp and exceed pre-pandemic levels in the coming years, can you talk about what has changed structurally within the Content Solutions segment to influence margins versus prior levels? I guess, taking into account the larger number of films that will be released into more regions along with stronger average film performance. Just trying to get a sense of where those margins can go in that segment over time?

Yes, Eric, we've said for a long time that as the box office and revenues increase, you'll see margin expansion. And that's the primary driver. And if you look back to 2019, at where our margins are and then the last few years, which are heavily influenced by the pandemic, this is back to sort of the levels of margin that we thought we could deliver at those kinds of box office levels. So I think if the box office continues at these strong levels, the margin increases will continue or the margin levels will continue.

Eric, and just following on that, if you think about the way that we're doing local language as well in different regions, local language content does not cost as much for us to convert, to remaster and then to distribute as well and to market. And so as you look at our costs, our costs continue to remain relatively fixed and predictable, but the box office expansion creates all of that revenue growth.

Yes. Sorry to dwell too much on this, but one fact we don't talk about that much is that our margin on local language, meaning our gross take from the studios is as good as Hollywood or in several countries, better than Hollywood. So as that flows through, you have lower costs and higher revenues.

If a studio decides to shift the release of a film from its originally agreed IMAX window to a later date, do they retain the first rights to that initial window, or does that window become available to any other studio for selection?

No, it's completely up for grabs, Eric. The agreement applies to a specific movie at a specific time, and then we have to negotiate a new window. And a good example of that would be just in the last few days when Paramount decided to move Mission Impossible 8 to Memorial Day 2025. It was as if it were a completely new negotiation and what the marketing was and in this case it's being filmed with IMAX cameras and how much play time we get, it’s a complete kind of do-over as if the original deal didn't exist.

And our next question coming from the line of Eric Handler with ROTH MKM.

Rich, I wanted to discuss what you need to see in specific markets to successfully release a local language film like what you are doing in Malaysia now, and which markets you identify as opportunities.

So Eric, the first thing to consider is the box office potential in the market. You need to assess how much of the cost can be covered through the local language network. Next, you should evaluate whether the film could perform well in other markets that might be interested, such as the Middle East, India, and other Southeast Asian countries, not just the country of origin. Additionally, you need to think about the type of movie it is, whether it’s suitable for IMAX, and consider your relationship with the filmmaker and the studio in that region. After that, you would run a model to analyze what your profit and loss statement would look like. Moreover, it's important to look at the market's potential. For example, in India, we have been increasing our production of local language films, not only because of the criteria I've mentioned but also because it represents a significant growth opportunity for us. By enhancing the public service announcements and supporting exhibitors, you can facilitate your growth in that market. Those are the key factors to consider.

Okay. And then I am curious now, as you look at your backlog, I don't know sort of what your bottlenecks are in terms of you actually need construction to be completed for theaters. But in terms of theaters that are already in existence, is there any way to maybe accelerate the installation process with these theaters?

It mainly depends on the schedule of our local exhibition partner. With retrofits, the process is typically much quicker than with new builds. For instance, in Japan, we signed a deal for seven theaters with AEON and have installed all of them this year. In China, we announced a deal with Hengdian, and we are already working on six installations this year, despite signing the deal just in October. These are retrofits. New builds, on the other hand, have less flexibility since a building needs to be constructed for installation. Additionally, the film slate can accelerate installations; if a popular film is set to release, it might prompt quicker openings. The fourth quarter also experiences a typical seasonality where the period before Christmas is generally slower globally, allowing existing theaters to close temporarily for upgrades, with the new installations ready to open for the holiday season. Historically, our installation percentage in the fourth quarter has always been very high.

And our next question coming from the line of David Karnovsky with JPMorgan. Your line is open.

All right. Thank you. For Natasha, your revenue take rate on net box had Content Solutions especially strong in the quarter. Just wondering if you could speak to what drove that and how sustainable it is? And then, Rich, I think last quarter, you spoke to some early conversations with exhibition partners about maybe adding screens and exclusivity zones, wanted to see if there was any update there. And then how much are exclusivity zones of barrier to you getting higher penetration in the domestic market? Thanks.

Hi David. So as we looked at the quarter, we actually had a really good mix of a local language and Hollywood content in the quarter. It was our best ever summer local language quarter for China. And so the take rate in China runs higher versus Hollywood content in China. And so as we pushed local language for China between Creation of the Gods Part 1, No More Bets and a couple of other titles, it definitely helped us. And we also ended the quarter with the beginning of the October holiday on the very last days. And so that led to a lot of the take rate wins as well. The other component of that is Oppenheimer, Oppenheimer's take rate worked better for us in our film locations, just based on the specific arrangements that we had for that film. And so, that also optimized our take rate in the quarter.

So David, regarding our discussions about adding theaters with exhibitors, these conversations have continued throughout the quarter. While we haven't made any announcements yet, there have been no obstacles. We are still in talks and I anticipate some outcomes from these discussions in the future, but not at this moment. As for how the exclusive zones affect growth in the markets, we regularly assess our total addressable market, which does evolve, with our analysis covering the next three years. Historically in China, we initially estimated needing 90 theaters, but that estimate has now increased to about 1,200, with 800 currently operational and over 200 in backlog. This number can fluctuate. The number of closed zones due to exclusivity affects our addressable market. However, I'd like to share some notable examples. In North America, one of our most saturated markets, there are still many open zones, with approximately 25% of our signings before this quarter occurring in North America this year. This demonstrates that there’s still significant potential for growth. Occasionally, for various reasons, an entity might relinquish an IMAX theater. Recently, in two zones, multiplexes were closed, though IMAX theaters remained operational for reasons related to real estate or other factors. Within weeks, we were able to resell those zones to different exhibitors, as the exclusivity had ended. While exclusivity does have an impact, it can also protect us because we've proven that the box office in that area is viable. If circumstances change, we have a strong case to resell that zone.

Thank you. And our next question coming from the line of Chad Beynon with Macquarie.

Given the IMAX China situation, Natasha, does anything change in terms of how you're thinking about capital allocation, buybacks or M&A given where the balance sheet is and maybe some cash that's ready to be used? Thank you.

Hi, Chad. Well, the China transaction, we are continuing to operate business as is. I think, we just had the deals signed that we announced, 20 system deal with Hengdian and we think that the market has returned. We've been doing well in China. We had our best-ever Q1, we've had our best summer local language title. And so, as we look at China, we will continue to operate it as is. But from a capital allocation perspective, at the consolidated level, that will continue as well. We've done share repurchases already. We did $2 million in the quarter and then after the quarter subsequently, we've already done a little over $4 million. And so, as we think about capital allocation, that's our continued strategy that if we see that we're undervalued, we'll be opportunistic about it, and with the cash on hand that we have.

And then Rich, just thinking about some of these new programming events, particularly the concerts you talked about Talking Heads, Taylor Swift, Beyoncé, I guess these are global artists, but more focused on North America. Are there local language artistic opportunities, say maybe a big Chinese artist or singer, where we could see years down the road this coming into kind of the local language content? Or does that just not kind of drive the PSAs that are needed to book a window in your screens? Thanks.

When you were asking the question, I was wondering whether you were tapping into my phone over the last couple of weeks, because the answer is yes. There are definitely local language opportunities and specifically I think there are in China, and we're starting to think about how to address that. But I also want to remind you that a couple of quarters ago, we did an event with a concert event with a band Indochine, which is very popular in France. And it was extremely successful in France. And I think that's led not only French talent, but other talent around the world to look to replicate that model. And if I have to hone in, I think it's probably a bigger opportunity for us, for local talent in local markets than it is for using Taylor Swift as a model because she's so wildly successful as well as Beyoncé. There aren't a lot of models like that, but I think there are a lot of models of particular talent in a particular market that I think we will replicate.

And our next question coming from the line of Stephen Laszczyk with Goldman Sachs.

Maybe for Rich, just a follow-up on the 120 system signings year-to-date. It sounds like some of these signings are coming in on the quicker side. I was wondering if you could maybe just talk a little bit about this expected pacing of installs for this vintage of signings on balance. Is there anything in your conversations that might suggest that they could come in a little bit quicker over the next few years than what we've seen historically?

Thanks, Stephen. You're correct that signings have been coming in more quickly. We've reached 120 signings compared to 47 for the entire last year, and we still have two and a half months remaining. This acceleration is largely due to our performance. While we report on IMAX's metrics, our exhibition partners are also thriving with IMAX because their PSAs have improved with relatively the same investment. Consequently, their returns on investment are better, which has led to quicker signings. Regarding the second part of your question, this year there has been a swifter transition from signing to installation. I believe this is partly influenced by the growth in retrofits, such as the recent discussion about AEON in Japan and Hengdian planning to install six more this year. Additionally, the robust box office performance plays a role. While this is partly speculative, it seems many exhibitors prefer to increase their revenues and profitability by partnering with IMAX for quicker projects, rather than investing in new builds that take two to three years and require higher capital. These broader market trends are contributing to both the speed of signings and the pace of installations.

Got it. That's helpful. And then maybe a follow-up on that for Natasha. Could you just talk a little bit more about the expected pacing of the JV equipment CapEx over the course of the next year or two, maybe on the back of Richard's comments on the install opportunity? Thank you.

So I think if we just look at our backlog, it is about 50-50 JV to sales arrangements. And so, historically, even our split on an annual basis is usually about 50-50. I mean, there is an opportunity for us as we start to look at rest of world regions in the high PSA markets, could we push out more JV CapEx? And of course, if we were sitting on the cash, I would be all for supporting us moving forward with the JVs. And so that would be at us a bigger return when you think about box office quarters like the one we had this quarter. And it just expands your margins significantly with the fixed costs between JVs and content. And so, I think there is an opportunity there for us to use cash towards JVs. But it is all part of how much cash flow do you have on hand, and what's the return on those particular locations. So I think you will constantly see a mix, especially because our pipeline and committed backlog is weighted pretty even. But I think there are always opportunities out there should there be high PSA markets.

Thank you. And our next question coming from the line of James Goss with Barrington Research. Your line is open.

I don't know. Did you hear she called you out? You might be on mute, Jim?

Sure. We will go to our next question. Our next question coming from the line of Michael Hickey with The Benchmark Company. Your line is open.

Hey, Rich, Natasha, Jennifer, congratulations on a great quarter. You've done a phenomenal job. I have two questions. First, you've touched on this, Rich. Year-to-date, your signings are significantly better than what you achieved in 2022. Although you are still slightly below pre-pandemic levels, Natasha mentioned there's still momentum in signings, and it's encouraging to see China starting to show signs of recovery in this area as well. Should we feel confident that you can achieve installation growth based on your guidance for this year? So, is it reasonable to assume installation growth for 2024 at this stage? The second question: Rich, you mentioned that while you can't predict everything, the ongoing labor dispute seems to be nearing its conclusion. Tom's transition to his movie has caused some disruptions to the schedule. You noted that you have a considerable number of films, particularly those that came in late from Apple that weren't planned earlier. Given this uncertainty, as you look towards 2024, do you feel somewhat confident in your ability to continue driving growth in the global box office, especially considering the outstanding performance in 2023? If so, how significant are local language content and streaming products in fueling your optimism? Thanks, everyone.

We're about eight questions in, and I'll address them to the best of my ability. The first question was regarding signings and how it relates to our install guidance for 2024. As you know, we typically don’t provide install guidance until early next year. We are currently in the process of preparing our budget and examining various factors closely. Some external indicators suggest that 2024 should be a stronger year, especially since we have a backlog of theaters and China had very few installs this year. However, since our budget is not finalized, I can't comment specifically on it yet. Regarding the labor dispute, a meeting took place yesterday and members are meeting again today. In the real world, there aren't many open issues, which leads me to believe this could be resolved soon. However, emotions often complicate these situations, making precise predictions difficult. Despite being outside the bargaining process, I think this could be resolved in the near future. As for how this will impact 2024, I’ve consistently stated that it depends on when the issue gets resolved. If it drags on for six months, it would affect 2024 since many films scheduled for the latter half of the year have not finished filming. Conversely, if it settles in the next couple of months, such as by Thanksgiving, I’d feel more optimistic. This is beyond our control and hard to predict. One positive aspect for us is that Dune has moved to the first quarter of 2024. Dune One was filmed with 40% IMAX cameras, while this sequel is 100% filmed with them. The cast has some excellent additions, such as Austin Butler, and early viewers have shared positive feedback. This gives us a solid anchor for the first quarter. Looking into the first half of the year, I believe there are several films that will perform well, including another Fury Road, Godzilla Vs. Kong, and another Apple movie, among others. So, the first half looks promising. If the strike ends soon, there are additional prospects in the second half of the year. There are also rumors of exciting releases during Chinese New Year and an increase in alternative content like concerts and streaming products. While I can't answer your question with great specificity due to the ongoing strike, there are many factors that indicate that, if things go well, 2024 could be a growth year for us. The other thing I want to say, it's sort of obvious, but we don't say it, maybe because it's too obvious, is an exhibitor who programs a multiplex needs lots of movies to program that multiplex. And if you look at IMAX this year where we're running consistent with our best year ever 2019 and exhibition is pretty far behind that, it's because there have been enough blockbuster really good films. So if the end of the second half of the year has kind of hurt a little bit by the strike, in general, all IMAX needs is one blockbuster or one concert or one streaming film in that period. So one thing I'll certainly say is I feel better about our growth prospects than exhibitions' growth prospects, irrespective of when the strike settles.

Now, next question coming from the line of James Goss with Barrington Research.

All right. And I'm showing no further questions in the queue at this time. I'll turn the call back over to Mr. Richard Gelfond for any closing remarks.

Thank you, operator. I want to express my gratitude to our shareholders for their continued support over the years, despite the challenges we've faced. Management's credibility relies on our ability to deliver what we promise. If you reflect on the past few years, particularly during the pandemic, many have claimed that streaming is here to stay, that the theatrical experience is over, and that the industry will be ravaged by bankruptcies. However, as an exhibitor, IMAX has consistently countered these misleading narratives, and each time we've shown that our predictions hold true. Not only have we delivered on our promises this year, and especially this quarter, across all significant metrics—whether financial, signings, or our standing in the ecosystem—we've also enhanced our daily business leverage in ways that may not be immediately visible. IMAX has become essential for blockbuster films globally, which has allowed us to strengthen our offerings in movies, concerts, and streaming. This aligns with a point I made in the last call about the numbers. If you analyze our EBITDA and compare our multiple from 2019, before the pandemic, to today's multiple, there's substantial upside for IMAX. The narratives shared by others can easily be scrutinized. Additionally, we have repurchased a significant number of shares since 2019. I encourage everyone to evaluate these factors when considering IMAX's valuation. I have rarely felt as confident as I do now. Thank you for joining us, and we look forward to our year-end call.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.