Imax Corp Q4 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to IMAX Corporation's Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today Jennifer Horsley, Head of Investor Relations and Senior Vice President. Please go ahead.

Good afternoon, and thank you for joining us on today's full year and fourth 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 posted to the website as well. 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 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 are contained in this afternoon's press release and our earnings materials which are available on the Investor Relations page of our website at imax.com. With that let me now turn the call over to Mr. Richard Gelfond. Rich?

Thanks, Jennifer, and thanks everyone for joining us today. IMAX powers awe-inspiring experiences for audiences around the world with a premium offering that invites people into exclusive and often impossible situations, worlds both real and imagined, alongside others who are equally immersed. Our business capitalizes on the limitlessness of human imagination, our innate desire for shared experiences, and the unceasing human demand for awe. These are evergreen market opportunities that transcend what Hollywood movie is playing at your local multiplex on any given weekend, which is why IMAX remains among the most consistent winners in global media and entertainment and why we delivered such strong results in 2023. Adjusted EPS for the full year was $0.94, up from $0.06 in 2022; growth of 25% or greater across revenue, gross margin and adjusted EBITDA; operating cash flow of $60 million, up from $17 million the prior year. We installed 128 IMAX systems worldwide at the high end of our guidance and signed agreements for 129 new and upgraded systems. And we grew global box office to nearly $1.1 billion, our second highest grossing year in our history. When you look at our results and growing demand for IMAX across the ecosystems, it's increasingly clear that IMAX is indeed the future of cinema. I'm in LA for the month and this is a growing refrain among Hollywood filmmakers, studios and producers, all of whom want to capitalize on the shift to IMAX at the box office and who see increased market pressure on exhibition to meet growing consumer demand for premium experiences, a trend across all out-of-home entertainment. Our global technology platform and asset-light model remain remarkably resilient. Our guidance was in line for the year, even with the fourth quarter heavily impacted by the labor strikes in Hollywood. Strike-related slate delays have impacted the current quarter as well. While we never like seeing our stock go down, this has created an opportunity for us to buy back more shares. We have repurchased more than $40 million in IMAX stock since October 23. We believe IMAX stock is very undervalued given our growth outlook and we expect to continue to use our strong balance sheet to be a buyer at depressed levels. Looking ahead, we expect to deliver another solid financial performance in 2024, including growth in system installs to between 120 to 150 for the full year, similar results to 2023 for global box office. Total adjusted EBITDA margin in the high 30s percent range. We expect 2025 to be a strong growth year including at least high single-digit revenue growth, mid-single-digit percentage network growth, total adjusted EBITDA margin of approximately 40%. Our strategy for the year ahead is two-pronged; accelerate global sales activity and network growth by capitalizing on our expanding content, portfolio, and the proven returns IMAX technology delivers for our clients. And two, curate diversified global content portfolio. We expect to deliver more than 100 IMAX Experiences for the first time in our history by expanding further into local language blockbusters, IMAX documentaries, and new and exclusive IMAX Experiences and events. Today, I'd like to discuss how we're advancing our strategy on both fronts while continuing to explore further opportunities for growth. Then I'll turn it over to Natasha to detail our financial results before opening it up to your questions. Network growth. First, we recently conducted a new worldwide zoning analysis of our technology network for the first time since 2019 to measure our total addressable market including how many IMAX locations can be sustained in each territory. As a result, IMAX is increasing its network zones to 3,619 globally from 3,318 previously. IMAX is a highly recognizable global brand in premium cinematic experiences. And yet we still have significant room to grow with our core technology product. By our analysis, we are only at 47% global penetration with our current footprint of open locations. And we can sell or open approximately 1,900 additional IMAX systems worldwide, more than double the size of our network. As a reminder, we update the zoning analysis every few years and we'll continue to do so. Our sales activity in 2023 underscores the strong demand for IMAX technology even in a period of uncertainty coming out of the strikes. Our 129 signings for the year were delivered with 36 partners, including seven new clients across 26 territories worldwide, 84% were for new IMAX locations. Of these 128 system installations we completed in 2023, an IMAX record 61 were in international markets outside of North America and China, further diversifying our unique footprint. These installs were weighted toward our most productive markets as well. Overall, installs were in territories delivering per screen averages that were more than 20% higher than the average PSA across our full network. Turning now to content. We are focused on curating a diversified global content portfolio and creatively managing a slate to deliver more than 100 IMAX Experiences in a single year for the first time in our history. We're appealing to a wider audience with awe-inspiring experiences drawn from across Hollywood, international film industries, documentaries, and events. This diversity continues to be a key differentiator for IMAX and the biggest reason why we are a growth platform worldwide. Despite a strike-impacted fourth quarter, IMAX Global Box Office in 2023 increased 2% over its 2017 to 2019 average, compared that to a 21% decline for exhibitors worldwide, based on estimates by Gower Street Analytics. We think of our portfolio in three product lines: first, Blockbusters, both Hollywood and local language; second, IMAX Documentaries; third, IMAX Events experiences that widen our aperture across genres, including music, gaming, sports, and more as well as live and interactive formats. First, although the 2024 Hollywood Slate has clearly been impacted by the strikes, we remain optimistic given the strong indexing we're driving on a title-by-title basis and a consistently high share of Box Office we capture in the post-pandemic world. This weekend's Dune: Part Two will offer an excellent example of the differentiating advantage of the IMAX platform. The film was shot entirely with IMAX cameras and will receive a limited run in IMAX 70-millimeter film, further feeding demand for the format, in the wake of 'Oppenheimer'. IMAX earned more than 22.5% of Dune: Part One's opening domestic weekend. Our IMAX exclusive preview screenings just a few days ago on Sunday approached sellout capacity throughout the United States. And our strong presales indicate that we will dramatically over-index. Presales exceed what we saw with Oppenheimer in the same window pre-launch. I've seen Dune: Part Two, and this is a very special film. Make no mistake about it. This film has been much anticipated in the past, but it exceeded my expectations. Look no further than the Academy Awards to see our broadening impact. IMAX releases scored more than 40 nominations, not just for Oppenheimer, but a variety of films across genres from Killers of the Flower Moon to the Japanese anime hit, The Boy and the Heron. Across this year, the Slate remains balanced with a consistent offering that will stand out in IMAX including Godzilla vs. Kong, Furiosa, Deadpool & Wolverine, A Quiet Place: Day One, JOKER 2, and Wicked. And this year is just a precursor to a stacked 2025 Slate, which includes Avatar 3, several entries from the retooled Marvel and DC franchises, including Fantastic Four and Captain America, as well as Superman: Legacy and the sequel to The Batman and of course Mission: Impossible 8. Our local language strategy also continues to be a powerful growth driver for IMAX. In 2023, we smashed our record for local language box office with $227 million in receipts from films across China, India, France, and Japan as well as Malaysia and Thailand. This year looks very promising as well, particularly in China where we expect the summer season to be among our best ever. Our relaunched IMAX documentaries unit continues to gain steam. And we'll see the release of the Blue Angels in partnership with Amazon Studios and J.J. Abrams' Bad Robot this May. We're also in production with Adam McKay's Stormbound, a film that will put IMAX cameras and our fans inside the most powerful hurricanes on the planet. We will continue to grow documentaries as a source of global box office with downstream streaming revenue potential, as well as a strong driver of our brand. We're also building out our portfolio of events and experiences beyond feature and documentary films as a key strategic priority. This strategy has already yielded success in the first quarter, most notably with Queen Rock Montreal, a first-time IMAX remastering of a seminal 1981 performance, which has delivered the best opening weekend ever for an IMAX exclusive event and has so far grossed about $5.4 million. We also held a one-night-only cinematic listening event for the new release from hip hop legend André 3000. The film, which recorded several sellouts and drove great utilization on an otherwise quiet Tuesday night in January, yielded a fee from the record label in addition to our standard box office take. Expanding our brand. We also continue to advance our streaming and consumer technology business, pushing further into new experiences beyond the cinema. IMAX was pleased to be among the launch partners for the Apple Vision Pro. Our goal is to test and define the IMAX experience on this exciting new platform, from user experience to content to monetization to new avenues for innovation across streaming and playback. But the IMAX app also has provided an exciting new application of our enterprise software StreamSmart, purpose-built to deliver the clearest picture for less money for streamers like Disney+. We continue to make steady progress, building out our streaming consumer technology business. While we don't want to steal a page from every other earnings call in the world, the technology we acquired by our acquisition of SSIMWAVE is AI-based. Through that acquisition, we have a team of 40 engineers specializing in machine learning and artificial intelligence. That team is working not only on streaming but broader applications across our business from image capture and optimization to improving our internal systems and processes. To conclude, 2023 was one of the best years on record for IMAX. Our technology continues to power awe-inspiring experiences that bring the entire range of human imagination to life. Consumers want the IMAX experience and we curate one of the most diverse portfolios of experiences from around the world. Consumers are gravitating towards visceral, you-are-there documentaries, and we're using our technology to tell stories that immerse audiences in the impossible. Consumers want unforgettable communal experiences, and we continue to open our aperture and expand the definition of the IMAX experience from using music to gaming to sports. And anyone who has watched the results of the award shows this year can't help but notice the influence of film and IMAX for audiences around the world. And this week again, filmed in IMAX, we open Dune 2, which we have high expectations for. As a result, demand for our technology is strong worldwide. We have already established IMAX as a premier global platform, and we see an opportunity to double our footprint. It is a great time to be in the IMAX business, and we look forward to growing our momentum and delivering results for our shareholders. Thank you. And with that I'll turn it over to Natasha.

Thanks Rich, and good afternoon, everyone. As Rich mentioned, IMAX delivered a strong performance in full year 2023. We stand out in the entertainment industry for our unique consumer experience and our robust financial model. Let's go over our Q4 and year-end results and then I'll elaborate on our expectations for 2024 and beyond. Our 2023 results highlight the strength of our model and the demand for the IMAX experience. Full year adjusted EPS rose significantly to $0.94 in 2023, compared to $0.06 the previous year, with $0.17 in Q4. The full year gross margin reached $214 million, growing 37% year-over-year, and gross margin percentage of 57% was up 500 basis points year-over-year. Q4 contributed $44 million with a gross margin percentage of 51%, which was an increase of 100 basis points year-over-year, as the lower box office impact was mitigated by cost discipline and reduced marketing expenses. Adjusted EBITDA attributable to IMAX grew by 52% to $128 million for the year, including $23 million in Q4. The full year adjusted EBITDA margin was 37%, a rise of 650 basis points year-over-year due to strong revenue growth and operating leverage in our business. Our total revenue increased by 25% year-over-year in 2023 to $375 million, driven by the expansion of the IMAX network and our diversified content portfolio. This was achieved despite a 12% revenue decline in the fourth quarter due to the impact of the Hollywood strikes. Our approach to programming across various content types allowed us to optimize our mix throughout the year. We maintained a strong global market share of 3.2% of the world's box office in 2023, supported by less than 1% of the screens globally. The impressive revenue growth in 2023 came from all segments, notably Content Solutions, which grew by 24%, and Technology Products and Services, which rose by 22%. Our all-weather revenue also doubled to $14 million for the year, propelled by growth in streaming and consumer technology. We continue to invest in R&D for long-term growth, with an expense of $10 million for the year, including $2.7 million in Q4, which is an increase of $4.8 million over 2022 due to our investments in new technology such as streaming optimization software StreamSmart. Our SG&A expenses, excluding stock-based compensation, amounted to $122 million for the year with $29 million in Q4, reflecting a $2 million increase from 2022 when excluding one-time costs related to transactions and SSIMWAVE expenses, acquired at the end of Q3 2022. As a percentage of revenue, SG&A excluding stock-based compensation was 33% in 2023, an improvement from 37% in 2022, showcasing the leverage in our business model and our commitment to cost discipline, including initiatives for cost efficiency in areas like IMAX China. We will maintain our focus on cost discipline in 2024. System installations and signings are crucial for our long-term growth. In 2023, we completed 128 system installations, a 40% increase over 2022, closing the year with 69 installations in Q4, a 33% year-over-year growth. Installations were predominantly in top markets with per screen averages approximately 20% higher than the network average, including Japan, South Korea, and France. This strong installation growth led to a 4% expansion of the IMAX commercial network. We signed 129 systems for the year, more than 2.5 times the previous year, with record signings in Thailand, Indonesia, and Malaysia, markets where we've recently added local language content. In Japan, we achieved our best total of 12 new signings since 2015. Strong growth was also seen in the Americas, particularly in Latin America, Mexico, and notably North America, where we had 26 signings overall, reflecting the demand for our technology. Our sales momentum continued in the fourth quarter with 35 signings, our best Q4 since 2015. The significant growth in signings throughout 2023 is a positive indicator for future growth. With installations and signings balancing out for the year, we enter 2024 with a substantial backlog of 450 systems, comprising 382 new systems and 68 upgrades. Historically, our backlog installs within two to three years, and with only 47% of our zones penetrated globally, we are confident in our ability to expand the IMAX network for years to come. Regarding cash flow and our balance sheet, operating cash flow for the year was $59 million, or $1.06 per share, which shows significant growth compared to $17 million or $0.30 per share in 2022. The tripling of our operating cash flow year-over-year is due to higher profits and improved cash conversion. Free cash flow before growth CapEx rose by $39 million to $44 million compared to $4.5 million in 2022. This measure reflects our efficiency and profitability. Our capital position is strong, ending the year with $76 million in cash and $257 million of debt, not including deferred financing costs. Notably, $230 million of our debt stems from convertible senior notes due in 2026, with a low interest rate of 0.5% per annum and a conversion price of $37 per share. Our current available liquidity is about $407 million, which includes $331 million in available borrowing capacity under our revolving facilities. From a capital allocation standpoint, we have been proactive in repurchasing our shares, which we believe are undervalued. Despite being in a blackout period for a significant portion of 2023, we repurchased $26 million in shares, with $24 million of that occurring in Q4. So far in 2024, we have bought back another $16 million, leaving us with $151 million available under our share repurchase authorization. Following a strong 2023 and the momentum from our signings and installations, we look forward to continued growth and progress in 2024. Our guidance for the year forecasts a higher number of system installations compared to 2023, estimated between 120 to 150 systems, and box office performance at a similar level as in 2023, driven by growth in local language and event box office. We expect our total consolidated adjusted EBITDA margin to be consistent with 2023, in the high 30%. This guidance focuses on the consolidated level instead of the attributable level. In 2024, we'll concentrate on discussing adjusted EBITDA at the total level to align with our fully consolidated results, which is more comparable with peer reporting and simplifies modeling for the market. For context, in 2023, our total consolidated adjusted EBITDA was $144 million at a margin of 38.4%, compared to $128 million attributable adjusted EBITDA at a margin of 36.7%. While we are not formally guiding for 2025, it is critical to offer investors a normalized view of our business and financial model, excluding impacts from strikes or COVID. We anticipate revenue growth in 2025 to be at least in the high single digits, driven by an increase in IMAX box office and mid-single-digit growth of our network, resulting in a steady expansion of adjusted EBITDA margins. Our target is for the total consolidated adjusted EBITDA margin to reach approximately 40% by 2025, driven by the considerable incrementality in our model as we scale. To sum up, 2023 was a year of significant growth for IMAX with impressive financial results fueled by accelerated signings and installations and a series of box office milestones. We see substantial opportunities to build on this momentum in 2024 and beyond. The demand for the IMAX Experience is high among global audiences, and stakeholders in the industry recognize the value of our premium technology platform and our unmatched global scale. This demand supports new system sales and our expansion into streaming and consumer technology. As we scale, our asset-light and highly incremental business model is yielding increasing margins, bottom-line profit growth, and robust cash flow generation. Thank you. Now, I will hand the call over to the operator for Q&A.

Thank you. Operator Instructions. Our first question comes from the line of Eric Handler with ROTH MKM. Your line is now open.

Good afternoon. Thank you for the question. Rich, could you analyze the global box-office outlook for this year? It's always challenging to project, but I'm curious about your perspective on Hollywood compared to local language content and any alternative content as well?

So Eric, in the first two months of this year, there was a lot of uncertainty due to the lingering effects of the strike and an overwhelming sense of negativity from outside. However, as we enter the year, I feel very optimistic. Looking ahead, I want to point out a few key things. Dune Part 2 exceeded my expectations; I actually preferred it over Dune 1. It's a fantastic story with stunning visuals, and after seeing it, I can't understand how anyone would choose to watch it in anything other than IMAX. I’m not the only one who feels this way. Recently, we had an IMAX-only screening that was nearly sold out despite minimal promotions. The presales are actually outperforming Oppenheimer at this point, which leaves me very hopeful about its success. There was a prevailing narrative in the first couple of months questioning whether people would return to theaters. I can confidently say that they are, and IMAX is definitely witnessing that comeback. Looking further into the year, I haven’t seen Godzilla vs. Kong yet, but I’ve heard good things from those who have, and I'm quite positive about its performance. The combination of Kong, Godzilla, and IMAX on a global scale suggests strong results. The Deadpool trailer has garnered a lot of views, and there’s significant excitement surrounding it. Additionally, the Joker featuring Lady Gaga and upcoming films like Wicked and Furiosa are generating plenty of buzz. Overall, I feel much more optimistic now than I did a few months ago since these projects are taking shape and gaining attention. On the Hollywood front, there are many more projects in the pipeline, with Gladiator 2 being just one of them. Regarding foreign language films, while we've had a few releases, most of our projects are slated for later this year. China’s summer lineup looks promising with films like Najat 2 and several others that have loyal fan bases. We are also looking to expand our offerings in India, Korea, and new regions, aiming to have more films than we did last year. We've recently developed the concept of a 'docubuster,' which combines the elements of documentary and blockbuster films. We have a film called Blue Angels coming out with Amazon in May, which I believe is outstanding. It was produced by the same team behind Top Gun: Maverick, with involvement from Glenn Powell and J.J. Abrams' Bad Robot. Additionally, we have several other documentaries in production, including one that explores extreme weather, which aligns perfectly with the IMAX narrative. In terms of alternative content, we had great success with Queen, becoming our highest-grossing re-release ever, earning around $5.5 million, and it still has more screenings ahead. Andre 3000's work and various other original content pieces are also in the works. Lastly, Taylor Swift's release in China back in January performed decently. Looking ahead, I think 2025 will be a remarkable year, but I also expect 2024 to be significantly stronger than many have anticipated.

Thank you.

Thank you. One moment for our next question please. Our next question comes from the line of Eric Wold with B. Riley Securities. Your line is now open.

Thank you. Good afternoon, everybody. Rich, I'd love to kind of get – or I guess anyone will chime in. Let's take your thoughts as you go from the 1,800 or so screens globally now to the potential TAM of 3,600. Would you expect kind of the global share of IMAX box office to kind of double-ish in line with that growth in systems? Would it essentially get stronger than a doubling, given that you're going in more productive PSA markets? Just trying to get a sense of what you think the linearity of margin and profitability looks like as you kind of move towards that TAM in the coming years?

It's a complex question, and a good one. Looking at 2023, our signings were strong, with 80% being new theaters. Many of these were in high PSA areas like Japan and North America, with several openings in Mexico through Cinemex, which have performed exceptionally well. The theaters that opened in Japan are also doing very well. Overall, the short-term outlook appears positive. However, while we're seeing growth elsewhere, the increase in China hasn't been as proportional. The market there is quite saturated, so I don't anticipate a doubling of numbers as we might see in other regions. Growth in more established markets is likely to outpace that of developing ones. That said, I hesitate to draw definitive conclusions due to numerous variables at play, including the new content we're introducing. This isn't the time for detailed discussions, but changes in the macro environment, like the dynamics of foreign language films and costs associated with versioning and special effects due to advancements in AI, make it challenging to make precise calculations. Nonetheless, I believe that the expansion of our theater network should focus on territories comparable or better than our current markets.

That’s helpful. Thanks, Rich.

Thank you. One moment for our next question. Our next question comes from the line of Omar Mejias with Wells Fargo. Your line is now open.

Thanks for the question, guys. Rich, if you can explain a little bit – I know you talked about China, you guys expect a very strong summer in China. We saw recovery last year versus 2022 when things were shut down. What inning is the recovery in China? And how do you feel about the opportunity there to grow in 2024 and into 2025? Maybe just give us like a state of the union address on how you feel about the China prospects going forward. Thanks.

Yes. Sure. Sure, Omar. Happy to do that. So, it will be a surprise to many people but the movie industry in China in general did pretty well in 2023. And our box office was around $300 million, which is up significantly from any time during the pandemic. And as you said, it really didn't open until January, and it wasn't fully open throughout the year. So I have a pretty positive outlook over the next couple of years. The macro trends appear good and movies are still an economically affordable luxury. And IMAX particularly, is even at a premium price point has done very well. Our indexing is very strong. So I think with China, the question is just how quickly does it continue to approach normal and what does the backlog slate look like, both for domestic films and for Hollywood imported films and other imported films. It's part of my nature, Omar. And I believe, and Natasha could jump in, but I believe we budgeted China this year to be better than it was in 2023. So looking into the future, we feel pretty good about it, but there are still a few variables that have to sort themselves out.

Really appreciate it. Thank you, guys.

Thank you. One moment for our next question. Our next question comes from the line of Steven Frankel with Rosenblatt Securities. Your line is now open.

Good afternoon. So you caught me a little off guard with the Latin America progress. That was a territory that always seems like it would be good for IMAX, and there were a bunch of reasons why it never scaled up. So maybe give us some insight into what's changed and how meaningful of a territory can that be for you?

So to be clear, I don't think much has changed yet, Steve. I think we're looking prospectively at what might change. And one of the biggest obstacles to us in South America has been very high tariffs. So whatever you charge in North America, it's approximately double because of the tariffs in the territory. And we made some progress, but to be clear, mostly from a modeling internal point of view, on ways that we could do things differently to mitigate some of those tariff costs. And I think that's given us some hope and expectation of better business there. The other thing, I would say, if you look at the per screen averages in Latin America, they've been really quite good. I mean much better than one would anticipate from the outside. And I'd say, the third thing is maybe from a relationship point of view, we made progress with certain of our pre-existing relationships over there. So I think if you put those three things together, it makes us more optimistic. But I don't want you to think that that's a done deal and we're predicting a breakout in Latin America this year. I think it's trending in the right direction.

Okay. And then one more China question. With a bit of an anomaly this year, that your box-office results for the Lunar New Year weren't very exciting. Was that just a function of what movies were available during that window? Or was there something else that went on during the holiday period?

When you say not very exciting, I mean our best year ever was last year when we did 33 and we did 28 this year. So I don't think it's necessarily a trend. It's kind of a range of rounding errors. But last year, we had Wandering Earth 2, which is the biggest local language movie of all time in China and sci-fi and very much in our sweet spot. And this year, it was more of a mixture of genres. So I think I would say we performed sort of like a typical Chinese New Year without the boost from that film. And also I would add, like I said about the summer, Steve, a lot of the movies that we would have liked to have seen in Chinese New Year are coming out this summer. So I think it will make up for a lot of that over the summer.

Okay. Very helpful. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Mike Hickey with The Benchmark Company. Your line is now open.

Congratulations to Rich, Natasha, and Jennifer on a successful 2023. I appreciate you taking the time to answer questions. Rich, you mentioned the slate for 2025, which looks impressive, especially considering the number of popular blockbuster films that perform well domestically and in China and other areas. I'm interested to know if this upcoming slate is affecting your current signings or installations, or if you believe it will in the future. Historically, before major films, we often see a slight uptick, and with a full year of exciting films ahead, it seems likely we could see a similar increase in signings. What's your perspective on this? Also, regarding installations, with the target of 120 to 150, Natasha, could you clarify the breakdown between sales, joint ventures, and hybrids? Will the quarterly distribution of these installations in 2024 mirror what we saw in 2023? Thank you.

Well, certainly our sales team, when they go out there, will prominently play the 2024 slate and the 2025 slate. And I think the extent to which we've laughed in movies so far in advance is much greater than it's historically been. So I would hope and think that that would help drive installs and signings this year. And a number of the films for 2025, it's not just films in the summer. There are some films earlier in the year that were pretty good. So we just had our internal sales meeting, and certainly, that will be our approach and that would be our hope and expectation. And I guess historically that's been true. But it's so early in the year. I think we're going to have to wait a little bit to see whether that plays out that way. And I'll turn it over to Natasha for your other question.

Hi, Mike. Yeah, on the sales cadence, on the installation cadence for the 120 to 150 systems, we think the cadence for installations will be similar to last year. Q4 heavily weighted, very similar. It's our standard historical type of model and as well, similar mix to last year between JVs and sales deals as well.

Thanks guys. Good luck.

Thank you. One moment for our next question please. Our next question comes from the line of Stephen Laszczyk with Goldman Sachs. Your line is now open.

Great. Thanks for the question. On capital allocation maybe for Natasha, on the back of the ramp in the repurchases over the last two quarters, I was hoping you could comment just a little bit on the pace of forward buybacks going forward, how reoccurring could we expect this to be? How sensitive might it be to share repurchases or the share price? And then maybe perhaps more broadly how you're thinking about balancing capital returns with maintaining balance sheet optionality for any potential future M&A? Thank you.

Hi, Stephen. We've made significant share repurchases over the past year, especially in the last quarter and so far this year, having already repurchased over $16 million year-to-date. As we've stated, when there's a chance to repurchase shares, we will do so at the right levels, in coordination with our Board and buyback committees. Our liquidity position is strong, allowing us to support these activities. We see many opportunities ahead. As mentioned in my prepared remarks, we are considering how to allocate our free cash flow while excluding growth capital expenditures since we want to continue expanding our network, particularly in regions with high-performing screens. We're looking into joint ventures in those areas for better returns, and we are being strategic in our capital allocation regarding joint ventures. Our free cash flow, excluding gross capital expenditures, sits at around 30%. If we look back to our averages from 2018 and 2019, we were closer to 50%, which is the direction we aim to move towards as we see more opportunities in the future.

Great. Thank you for the color.

Thank you. One moment for our next question please. Next question comes from the line of Jim Goss with Barrington Research. Your line is now open.

All right. Thank you. I'd like to pursue a little more of the subject Eric Wold raised with a 47% penetration in the nearly 2,000 more screens that you could add. I'm wondering what the limiting factors you would think would be in terms of accelerating that penetration. Would it be management, infrastructure, market development considerations, or even capital though you could shift to more joint venture options because that would be a good driver of equity values?

Our signings level between 2022 and 2023 has nearly tripled, indicating strong consumer demand. I’ve been in Los Angeles for about a month, meeting with top filmmakers and studios. A lot of feedback I’ve received highlights that, in a post-Oppenheimer world, films associated with IMAX garnered 40 nominations. We are also approaching the release of Dune, which was entirely filmed in IMAX, and the consensus is that to launch a blockbuster, IMAX must be involved. This sentiment isn't just from emerging filmmakers; even senior studio executives recognize this shift. The foundation has been laid for IMAX's involvement in major releases, and if we analyze sales from 2023, it’s clear that exhibitors and our partners are starting to grasp this. You’ll see the impact in box office performances for Dune and Deadpool, which also has IMAX elements. I anticipate that this trend will drive considerable sales growth. It's understandable that we wish for immediate changes, but it takes time for these developments to unfold. I find it hard to meet anyone in the industry who isn't aware of this shift. If there are no internal constraints, we can install as many systems as necessary, provided we have enough lead time. We are capable of manufacturing and designing what we need, positioning us well for a strong pace in signings.

Great. Thanks very much.

Thank you. One moment for our next question. Our next question comes from the line of Chad Beynon with Macquarie. Your line is now open.

Hey. Good afternoon. This is Aaron on for Chad. Thanks for taking our question. So you mentioned the recent Queen Concert film, which obviously builds upon a great success from Taylor Swift last year. As you do more of these events, are there any learnings or takeaways that you can roll forward? And any more color just on how you're approaching building the pipeline for more events like this?

Yes, there are several insights to consider. The Taylor Swift concert was a significant success, but it was distributed widely, not just through IMAX. Our analysis shows that emphasizing the IMAX visuals and sound enhances our performance in that format. We plan to continue this approach. It's also essential to view this globally. While Taylor Swift has a strong following in China, there are even bigger stars there that are less known internationally. We previously produced a concert film in France featuring a band called Indochine that performed exceptionally well, and we had similar success with the Queen concert in collaboration with Pathé in France and Japan. These experiences indicate that while Taylor Swift is quite unique, there is considerable talent worldwide that can yield positive results without high production costs. Regarding our pipeline, there's strong interest from creators after observing the successful outcomes of the Taylor Swift, Talking Heads, and Queen concerts. As long as we manage expenses effectively and leverage social media for promotion, I believe there's substantial potential in this business.

Great. That’s good. That's awesome color. And then just on SSIMWAVE I think last quarter you talked about merging SSIMWAVE with the IMAX Enhanced licensing business. So now that you have a couple more months under your belt, can you just talk about how you're planning to use this new brand? And what your vision is for what this could look like in a few years' time? Thank you.

Well, I remain incredibly excited about our consumer streaming technology. It's a way not only to save money for the streamers, but it's also a way to monitor quality and improve quality. We've been making strides not only in streaming content to the consumer, but also sports streaming content to the streamers and to the broadcast networks. So I think the TAM keeps getting larger. There I think one of the things we learned is that maybe the sales cycle is longer than we expected at the beginning because in these organizations it's not like, oh, well we’ve been waiting for you to invent a product like this. You have to figure out where it fits in and how you sell to the financial staff where the savings are. But I think we've done a very good job of building the infrastructure on both the sales side and the marketing side and the plug-and-play side. And it's not going to be tomorrow, but I feel good about our prospects for the remainder of the year.

Got it. Thank you very much. Good luck.

Thank you. I'm currently showing no further questions at this time. I'll turn the call back over to Mr. Richard Gelfond for closing comments.

Okay. Thank you very much, operator. I mean, I think in 2023 the financial results speak for themselves; they're extremely good. If you look at our multiples both on adjusted EPS and adjusted EBITDA and where we're trading from my point of view, they're surprisingly low, especially given the strong balance sheet and the asset-light model. Unlike other companies, there are zero existential risks around IMAX and there's a lot of wind at our backs. And if you look at our non-financial accomplishments, which include thanks to Oppenheimer and Avatar and other things introducing the importance of IMAX into the bloodstream of the future of cinema. I mean, I think we are a lot of what the future of cinema is. And I think that as long as we keep doing what we're doing, which we're going to continue doing very soon in a fairly material way, we'll be rewarded. And thank you for those of you who have been around for the ride, and we look forward to our next call.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.