Imax Corp Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to IMAX's Fourth Quarter 2025 Earnings Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Horsley. Please go ahead.

Good afternoon, and thank you for joining us for IMAX's Fourth Quarter 2025 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 as we review our results for a record-breaking year and look ahead to a very promising 2026. 2025 was a truly transformational year for the company in which we firmly established IMAX as a premier global platform for entertainment and events with a powerful position among out-of-home experiences and a content pipeline that continues to grow richer and more diverse. We finished with a record $1.28 billion in global box office, up 40% year-over-year. We captured our biggest share of the global box office ever, up 700 basis points year-over-year. We achieved our highest-grossing year ever for local language films with $405 million worldwide with 67 international releases from 14 countries, including 2 of our top 5 in Ne Zha 2 and Demon Slayer: Infinity Castle. And we drove significant network growth with agreements for 166 new and upgraded IMAX systems and 160 systems installed worldwide, including 8% network growth in the rest of the world. We are an unqualified winner in a complex entertainment landscape. Signs of our impact are everywhere. Studios put IMAX front and center in their marketing campaigns, driving record indexing and enormous media value for our brand. The New York Times, Wall Street Journal, and Los Angeles Times have all published features highlighting our unique success. Our stock is among the best performers in global media and entertainment, up over 44% in 2025. And IMAX releases earned 58 Academy Award nominations, including 5 of the 10 best picture nominees. Every one of Warner Bros.' 30 nominations was for a film that played in IMAX, including Sinners, which was shot with IMAX film cameras, and One Battle After Another, which received an IMAX 70-millimeter film run. We delivered at least 20% of the domestic opening for Sinners, One Battle After Another and F1. Our financial results reflect our progress and the strength and incrementality in our model. We beat projections across almost every key financial metric, setting several company records. We delivered a record $410 million in total revenue in 2025. We achieved double-digit percentage beats on original consensus estimates for adjusted EBITDA and EPS with $185 million and $1.45, respectively, for the full year. We delivered a 45% EBITDA margin, a record and our first time breaking 40% since 2019, record operating cash flow of $127 million for the full year. And in the fourth quarter, we delivered record box office and over 50% growth in adjusted EBITDA and adjusted EPS. We expect another outstanding year in 2026 with a projected $1.4 billion in global box office, 160 to 175 system installations worldwide, and total adjusted EBITDA margin in the mid-40s range with a floor of 45%. And through 2028, we aim to drive revenue growth at high single to low double-digit compound annual growth rate, adjusted EBITDA margin of over 50% by 2028, adjusted EPS growth at twice the rate of revenue, and free cash flow conversion of approximately 50% in 2026 and growing. We believe we are far from our peak but rather in a period of evolution and growth. With superior immersive technology and unmatched scale, IMAX is the premier global platform for blockbuster content, and blockbuster content continues to grow in importance across the global ecosystem. The world's greatest filmmakers, studios, and even streamers are leaning into blockbuster theatrical releases as drivers of IP and value throughout the chain. As this trend accelerates, IMAX becomes an increasingly valuable player. We're the only game in town with a global platform, content portfolio, and well-recognized brand. We're able to leverage the shift to premium and consumer demand for great out-of-home experiences. And with a very strong slate booking all the way into 2029 and an expanding total addressable market for IMAX systems, we are capitalizing on our strong position and delivering for our shareholders. The slate for '26 is arguably the strongest we've ever seen, highlighted by massive films for IMAX tentpoles, headlining a record of at least 12 films for IMAX releases worldwide, including Christopher Nolan's The Odyssey, the first theatrical feature shot entirely with IMAX film cameras. Tickets for select IMAX 70-millimeter showings sold out a full year in advance, and we will have 40 film locations for Odyssey's debut in July. The Mandalorian and Grogu, the big-screen debut of the massively popular Disney+ former TV series from Director John Favreau, who crafted the film with cutting-edge technology specifically for IMAX screens. Dune Part Three, the next installment in Denis Villeneuve's franchise and the first of the series shot with IMAX film cameras. And next month's Project Hail Mary, a film for IMAX space adventure that is earning excellent buzz and will screen in IMAX 70-millimeter across 16 locations, an indicator of strong indexing for recent releases. Highly anticipated family releases in a time when family films are leading the box office and IMAX is capturing a greater box office share of family films than ever before, including Super Mario Galaxy Movie, which we're hearing is testing extremely well, Minions 3 and Toy Story 5. The previous installments of these films all gross near or above $1 billion, a diverse collection of distinctive and filmmaker-driven releases that we believe hold real upside from Michael to Zach Cregger's Resident Evil, another strong offering of local language films from around the world, including the eagerly awaited sequel Godzilla Minus Zero from Japan and the Indian epic, Ramayana. And finally, Barbie Director Greta Gerwig's Narnia, a pioneering partnership with Netflix that we believe will deliver greater value to our exhibition partners. Furthermore, we are already 60% booked for 2027 with blockbusters including Top Gun: Maverick and F1 Director Joe Kosinski's Miami Vice, which will be filmed for IMAX; Star Wars: Starfighter from Deadpool and Wolverine Director Shawn Levy. The film looks to be a throwback to the galaxy-spanning adventure of the original trilogy; The Thomas Crown Affair from Academy Award nominee, Michael B. Jordan; Avengers Secret Wars and the Batman 2. And for '28, we look forward to being involved in Sam Mendes' groundbreaking Beatles, a 4-film event. With 2 months down in '26, we feel good about our projected box office for the year as we enter one of the most promising periods. Our global box office in January was up 16% year-over-year. Avatar: Fire and Ash extended our success with that franchise, earning more than $188 million in IMAX, our sixth highest-grossing release of all time and our highest indexing of the series with 13% worldwide. The Chinese New Year holiday delivered $28 million on the strength of Pegasus 3, our biggest Chinese title since Ne Zha 2 and we continue to diversify our content slate, securing an agreement with Apple to stream live broadcasts of Formula 1 World Championship races to IMAX locations this season and delivering a very successful exclusive opening of Baz Luhrmann's Elvis Doc EPiC. We also continue to drive strong system sales and network growth worldwide, particularly in underpenetrated high-value rest of the world markets, where we installed a record 118 systems in 2025. We now work with more exhibition partners globally than ever before, 257 in total last year, up 28% over 2019. Surging demand for IMAX supported an expansion of our total addressable market to nearly 4,500 total zones worldwide, double our current systems in operation and backlog. To capture that opportunity, we're executing against a 4-pronged strategy: One, focusing on high-growth underserved markets. We've had tremendous success here, driving our biggest year ever for sales and installations in Japan in 2025, tripling our network in Australia since 2023 and making strong progress in France and Germany. Second, continuing to unlock new opportunities in North America. Domestic is an engine of growth for us with new and existing partners alike, dispelling the notion that this is a fully mature market. In 2025 alone, we struck agreements with each of the biggest exhibitors in the U.S., AMC, Cinemark and Regal, that advance key strategic priorities, including new locations in Los Angeles and New York with Regal and 3 new IMAX 70-millimeter film locations with Cinemark. Third, identifying opportunities to add a second IMAX location in high-performing zones. For all our success with marquee locations in major metropolitan areas, we are still deeply underpenetrated in many, presenting an opportunity to grow within our best market centers. For instance, we have only 5 IMAX locations serving a population of 1.6 million people in Manhattan, including our first new location in 15 years set to open in Battery Park. And we see a lot of opportunities in metropolitan areas, including Chicago, Boston, San Antonio, and San Jose, among others. And lastly, finally, we continue to explore innovative deal structures that leverage our liquidity. Given our strong balance sheet and momentum, we can help our partners get more IMAX into their circuits quickly through upfront capital expenditures that pay for themselves given our strong market share gains and the impressive film slate lying ahead. In sum, 2025 was a transformational record-breaking year for IMAX. We exceeded our targets for financial performance and finished with a strong fourth quarter. We drove great results for our exhibition partners, breaking box office records as fans, filmmakers, and studios clamor for more of the IMAX experience. We continued network expansion with significant runway to grow further even as we capture a record share of the global box office. In every way, we've leveled up our performance. With an incredibly promising slate locked in for the next several years, we continue to believe the best is yet to come. We're focused on strengthening our position, executing with financial discipline, providing the most immersive entertainment experience on the planet, and delivering for our shareholders. Thank you all. And now I'll turn it over to Natasha.

Thanks, Rich, and good afternoon, everyone. In a time of limitless entertainment options and more discerning global audiences, IMAX delivered record fourth quarter and full year results, exceeding our guidance and street expectations across key measures. Fourth quarter box office was $336 million, up 16% versus the prior Q4 record, driving full year box office to $1.28 billion. We captured a record 3.8% of global box office, up 700 basis points year-over-year, underscoring the increasing value the IMAX platform delivers to exhibitors and to the broader industry. Strong demand for the IMAX experience also drove us to the high end of our installation guidance with 160 systems installed in 2025, up 10% year-over-year. As we keep our focus on delivering value for shareholders from a profitability perspective, our operating leverage resulted in an adjusted EBITDA margin of 45% for full year 2025, above our guidance of low 40s percent. And adjusted EPS reached a new full year record of $1.45, an increase of $0.50 year-over-year. Importantly, these results translated into our highest ever cash from operations of $127 million with cash conversion directly benefiting from the margin expansion. Our standout 2025 financial results once again illustrate the uniqueness of IMAX's operating model and position as a leading entertainment platform. And we believe the momentum is carrying into 2026 as we look toward the exceptional slate. With all the major tentpole Hollywood releases still in front of us, many with breakout potential, we believe we are well positioned to achieve another year of strong performance. We expect IMAX box office will build through the year with Q1 representing the lowest box office quarter. Specifically in China, we expect a more balanced year as opposed to 2025, where 46% of China's box office was in Q1 as 2 of the largest local language titles Once Upon a Time in the Middle East and Penghu did not make it into Chinese New Year and will likely release mid- to late this year, along with there being a more balanced and compelling Hollywood release setup for Greater China. Taking a closer look at our Q4 and full year 2025 results, we had a strong close to 2025 with fourth quarter revenues up 35% year-over-year, which drove us to a full year revenue record of $410 million, an increase of 16% over 2024's full year revenue of $352 million. Gross margin continues to grow faster than revenues, clearly demonstrating the value proposition of our business model, which enables a high level of incremental profit flow-through as we scale our platform and box office growth. Q4 gross margin was at a 58% margin, a 540 basis point improvement over the prior year period, while full year gross margin was $246 million at a 60% margin, up 600 basis points year-over-year. Looking at our results at the segment level, Content Solutions revenues grew significantly, driven by higher box office with fourth quarter revenues of $38 million or 50% growth over the prior year comparative period and full year content revenue growth of 21%. We have continuously focused on diversifying our content offerings and sought to outperform expectations, and 2025 displayed the success of our strategies. Every quarter of 2025 had a different content storyline enabled by our diverse programming strategy. Q1 box office was local language driven. Q2 into Q3, our Filmed for IMAX program delivered some of our highest indexing levels in our history. Q3 benefited from a diverse mix of local language, horror titles, and alternative content, and Q4 anchored the year with large Hollywood tentpoles. Fourth quarter Content Solutions gross profit was $22 million, while full year Content Solutions gross profit of $100 million grew 50% year-over-year, more than twice the rate of revenue, actualizing a proof point of the significant operating leverage in our model. As a result, we delivered a 66% gross margin for 2025, a substantial increase of 1,260 basis points from the 53% in 2024. Turning to our Technology Products and Services segment. Fourth quarter revenues were up 32% year-over-year with a gross profit margin of 58%, up approximately 500 basis points year-over-year, while full year revenues for this segment grew 16% with a gross profit margin of 57%, up approximately 400 basis points year-over-year, driven by higher systems installed under sales arrangements, growth in box office driving a higher level of rental revenues and increasing maintenance revenue associated with the growing network. In the fourth quarter, we installed 65 systems, up from 58 last year. For the full year, installations reached 160 systems at the high end of our guidance, driving 3.5% growth in our commercial footprint, led by 4% growth in our domestic network and just over 8% in the rest of the world, a very strong result, reflecting our growth prioritization. We're expanding in the strongest box office markets, including in the U.S., Japan, France, and Australia. Japan grew almost 20%, while Australia more than doubled its footprint. We believe growing in our strongest markets will both scale our platform and meaningfully increase our network productivity. And the engine for future growth remains strong as we completed 166 system signings in 2025, an increase of 28% year-over-year. More than 25% of the signings were signed and installed in the same year, reflecting the demand by our exhibitor partners to get IMAX locations quickly up and running to capitalize on the strengthening IMAX slate. We expect the same dynamic in 2026, given the outstanding film slate in front of us. Turning to operating expenditures, defined as research and development and selling, general and administrative expenses, excluding stock-based compensation, was $29 million in the fourth quarter and $118 million for full year 2025. Full year operating expenses increased only 1% year-over-year, a much lower rate than the 16% growth rate in revenues, reflecting continued expense and cost discipline that helped to offset the impact of inflation and continued investment in the business. We will continue in 2026 to focus on optimizing our uses of technology and evaluating work processes to enhance productivity across our business as we aim to crystallize a high level of flow-through to gross profit and to the bottom line. Included in Q4 results is $22 million of onetime charges, $15 million for the strategic repurchase of over 99% of the convertible notes due 2026 and $7 million resulting from a noncash goodwill impairment of the legacy SSIMWAVE business associated with the monitoring of content quality. We continue to lean in on our core business where we see tremendous opportunity to gain share and expand the network. We have been repositioning our streaming and consumer technology business to enhance our differentiation, particularly in support of live streaming content across the IMAX platform as well as the evolution of our core DMR and system technologies. With this shift in strategy, we have also been reviewing and optimizing the cost structure of the SSIMWAVE business. Overall, our strong operational performance led to a record full year total consolidated adjusted EBITDA of $185 million. Adjusted EBITDA grew 33% for the full year, more than twice the rate of revenue growth, reflecting the operating leverage stemming from higher revenues coming from both box office and system sales. This resulted in an above-expectation full year adjusted EBITDA margin of 45%, up approximately 570 basis points year-over-year and placing us above our full year guidance of low 40s percent. Full year adjusted EPS was $1.45, up $0.50, driven by the strong profit growth. 2025's results reflect a 28% tax rate compared to 13% in 2024 or a year-over-year headwind of $0.16 per share. No tax benefits were recognized for the onetime charges in 2025, while 2024's tax rate was unusually low, having benefited from an internal asset sale to more closely align intellectual property rights with its global operations. Turning to cash flow and the balance sheet. Cash flow from operations of $127 million set a new full year record, exceeding the previous high of $110 million in 2018. And full year free cash flow, which includes $28 million of investment in the IMAX network through joint revenue sharing systems, was $85 million, which equates to a record adjusted EBITDA conversion of 46% or a conversion of 61%, excluding this investment in network growth CapEx. We believe these results reflect the positive incrementality in our model as well as improvements in working capital, which we expect to continue as box office and our network expands. Turning to investing cash flows. We continue to prioritize the use of our available capital to invest in the business, including partnering with exhibitor customers to grow and upgrade the IMAX network through joint revenue sharing arrangements, allowing us to benefit from the rising demand for IMAX and the stellar IMAX slate in 2026, '27, '28 and beyond. Our capital-light model and execution have resulted in a strong capital structure. As of year-end 2025, we held $151 million in cash, an increase of 50% from year-end 2024, and $289 million in debt with a net leverage of 0.7x. During 2025, we strengthened our liquidity and reduced dilution risk through strategic transactions. We renewed and expanded our 5-year revolving credit facility to $375 million, adding $75 million of liquidity. And in November, we refinanced our 2021 convertible notes with $250 million of new convertible notes at a very attractive 0.75% interest rate. And through this transaction, we simultaneously retired the vast majority of the 2021 notes with cash of $46 million to minimize dilution. Importantly, we also entered into a capped call on the new notes, raising the effective conversion price from a company dilution standpoint to $57 per share. Together, the cash payment for the outperformance in the 2021 notes and the new capped call equates to approximately $70 million, strategically spent to maximize the opportunity for shareholders to benefit from the growth we expect in the coming years and in our view, is akin in some respects to that of a share repurchase. To sum up, we aim to build on the momentum in 2025. And as Rich shared, the table is set for '26 and '27 with mega titles like Odyssey, 2 Star Wars movies, Narnia, Dune, and Avengers; beloved proven family content, including Toy Story, Moana, Minions, Shrek, and Frozen; large fan-based video game IP such as Super Mario, Mortal Kombat, Zelda, and Minecraft; Tier 1 Superhero franchise films around Spider-Man, Batman, and Superman, as well as potential for new breakout IP like the upcoming Project Hail Mary film, music-centered content like the Twenty One Pilots concert and Michael, and new sports ventures such as recently announced with Apple TV for live F1 races. As we highlighted at our recent Investor Day, we believe we have a clear strategy to continue to expand our entertainment platform in 2026 and beyond to bring the IMAX experience to more audiences. We are focused on deepening our relationships with leading filmmakers and building new connections with a diverse array of content creators and studios. At the same time, we are aiming to grow our footprint, box office, and productivity of our network along with the value we can bring to our exhibitor partners. As we have shown, the growth in box office and our increasing network scale will positively impact our bottom line and cash flows given the incrementality in our financial model and our laser focus on keeping operating expenses as flat as possible. Given these dynamics, we expect to drive total adjusted EBITDA margin to over 50% in the coming years. That's why we believe IMAX's position has never been as strong. We are focused on executing on the significant opportunity in front of us to deliver on our guidance and expectations for 2026 and beyond and to drive ever-increasing shareholder returns. With that, I will turn the call over to the operator for Q&A.

Our first question comes from Omar Mejias with Wells Fargo.

Rich or Natasha, can you give us an update on the state of the Chinese box office and the early start to the Chinese New Year? We saw Pegasus 3 start very strong and outperform initial expectations. But just curious about how is the overall health of the market and the slate ahead.

So Omar, I don't think you could take 10 days to discuss the state of the Chinese box office. Looking at China, this year's Chinese New Year slate was what I would classify as average and quite similar to the slate for 2024. Several titles that were meant to debut during Chinese New Year were delayed due to production issues and have now been rescheduled for this summer. This shift explains the modest results we saw during that time. However, I believe the summer will perform better than we had initially anticipated since we thought those movies would have already been released. Therefore, the results are more about timing rather than any underlying trends in the Chinese box office.

That's very helpful. And maybe my second question on local language and alternative content. You guys had a record year in 2025 with over $400 million in box office, recently announced a new deal with Apple to air F1 races. And based on your investor presentation, it looks like you have a big slate ahead. So how much runway does IMAX have to drive local language and alternative content box office alongside Hollywood content? Is there a certain limit to the growth of non-Hollywood content box office?

Well, I don't think we view it that way, Omar. We aim to provide the best content for each market throughout the year. One of your questions seems to be whether we are too focused on Hollywood films to include many foreign language films. However, it really depends on the scheduling and performance. We may introduce something new if another film is underperforming or adjust the schedule if one is doing particularly well. This year, there are a few significant international films, including one called Ramayana, an Indian film that the director and producer are preparing for global release later this year. It's hard to predict how they will perform, just like with Ne Zha last year. However, I believe there is enough opportunity and capacity to host more international and local language films than we did last year. We are quite satisfied with their current outlook, and I anticipate that this will remain a vital aspect of our business.

Our next question comes from Eric Wold with Texas Capital Securities.

A couple of questions on kind of just pricing. I know it's kind of come up in the past, Rich or Natasha. I know you can't directly control ticket pricing with your exhibitor partners. But can you talk about what you've seen maybe over the past year, kind of maybe an average ticket price increase for IMAX showings as exhibitors look to take advantage of kind of this shift in moviegoer demand? And does any expectation for additional increases play into your box office outlook for '26? Or could that be an incremental upside driver if they do kind of play into that demand with additional price hikes?

I'm not certain about the numbers for 2025, Eric. However, for 2026, we cannot dictate pricing to exhibitors as that is their responsibility. However, considering the strong lineup of films, particularly the event movies this year such as Mandalorian, Dune 3, and Odyssey, there is potential for price increases. Historically, exhibitors have charged the same for film as they do for digital, and Hail Mary will soon be released in around 16 locations. Therefore, there are certainly opportunities to raise prices. If we operated theaters, we would definitely pursue that strategy. I'm hopeful that with many high-demand films this year, exhibitors will be inclined to experiment with higher pricing.

And then just a follow-up on that. As you build out some of these emerging markets that are maybe a little bit newer to IMAX screens and build them out, can you talk about what you typically see with the exhibitor partners there on their pricing? Do they tend to be a little more conservative given the consumer may not be fully aware of the IMAX product as much as more developed markets and then kind of ramp pricing from there? Or do they tend to be, I don't want to say aggressive, but maybe as aggressive as other developed markets at the get-go?

We provide our partners with information about the IMAX premium in various countries as part of the sales process. They are aware of this premium, which is one reason they choose to buy in; they see it as a percentage rather than just a specific amount, since ticket prices can vary significantly between places like India and Japan. They have the tools to understand this. We've noticed that depending on the country, they tend to charge a similar premium as they would in other locations, so it's not a major concern. They know how to optimize their profits.

Our next question comes from Michael Hickey with StoneX.

Rich, Natasha, Jennifer, congrats, guys, on amazing development. First question, Rich, just on your film cameras, really remarkable run here you've had with centers in '25 and getting 16 Oscar nominations is really remarkable and One Battle for Another as well, which I think was on your digital cameras...

Sorry, Mike. We got like over 50 Oscar nominations overall.

Absolutely. I focused on centers, but you're right. It's truly remarkable. In '23, we had Oppenheimer. This year, we have Odyssey and the next-generation cameras that are quieter and lighter. I’m curious, Rich, how do you determine which films to choose? Some selections are obvious, but with centers, that wasn't clear at all, yet it turned out to be a fantastic success. What's your process for identifying the right films? With such consistent success, what opportunities do you see? I imagine your phone is ringing more than ever with installations and potentially better chances to expand on 70-millimeter film projects or strengthen your relationships with filmmakers and talent, enhancing your competitive edge overall. I'm curious about how this shapes your long-term opportunities.

So Mike, it's a great time to address that question because I've been in L.A. for over a month meeting with filmmakers, studios, and producers. You're right; the demand is significantly higher than it was before. I can share a couple of examples, one being that well-known filmmakers now approach us with pitches for IMAX films, explaining their vision and why it's crucial for them. Just last week, we received a pitch from some renowned filmmakers, and while it's a bit unconventional, we were interested because it stood out. Another important aspect is the relationships we have with existing filmmakers. For instance, we have collaborated with Joe Kosinski for many years. After his success with Top Gun: Maverick, which performed exceptionally well in IMAX, he worked with us on F1, which, though less known, became one of our top films of the year. Joe is developing his next project, Miami Vice, and we're discussing how to incorporate IMAX into that. Studios are also actively engaging with filmmakers to explore shooting in IMAX, especially given the Oscar nominations Warner has received. There are numerous opportunities arising, particularly from filmmakers who have worked with us previously and are eager to use IMAX technology. Over the past month, I've had an unprecedented level of meetings and discussions with talent and executives, resulting in a wealth of incoming projects. If we don't know a filmmaker well, we evaluate their reputation and past work. A significant factor for us is filmmakers embracing the IMAX format. A recent example is Ryan Coogler with Sinners, who promoted IMAX extensively, which made a positive impact. Overall, there are many avenues we are exploring.

The second question is about the important film Narnia and its partnership. I am curious if you feel that the team you are in contact with is more driven to make this movie. Do you sense that there is a larger opportunity in the future with the model you’ve developed, which seems quite clever, compared to your usual approach? I would like to hear your thoughts on your excitement for Narnia, the input from Netflix, and the future prospects you envision for yourself and the broader context.

So the first point, Mike, is that we make movies with filmmakers and studios or streamers are part of the system. So Greta, as you know, came to us because she was excited about releasing it in IMAX. And together, we planned to talk this through with Netflix and brought Netflix into the fold. So the most important thing is that Greta is incredibly excited. And when she thinks about how to make the movie and she thinks about the sets and she thinks about the magnitude and scale, she really leans in. And it's too early to see a rough cut. But from conversations with her, I believe she's making a movie that's going to look fantastic in IMAX. And that's the thing that probably makes me the most confident. In terms of the business model, I mean, Netflix has approached us about a number of projects since we did that deal with Greta. And some of them we did under different sorts of models like Frankenstein with Guillermo del Toro and a number of other things over time. And we're always talking to them about different ideas. My hope when I did this deal was this model is going to work so well, and I'm not talking about only the box office. But remember, the point of it is to create a buzz and a cultural event. And I think when Greta releases this in IMAX, it will be a cultural event. And I think they're going to get the benefit from that of increased streaming hits after that. Remember, it's a series of books. It's not a one-off, and it's going to help build an event. And I think that's what we really do. So I'm very optimistic that when the IMAX audience sees that movie, there's going to be the kind of reaction, which is going to lead to a number of good things.

Our next question comes from Chad Beynon with Macquarie Capital.

You guys at the Investor Day and reiterated today, talked about the high single-digit, low double-digit growth through '28 and hopefully beyond. I think a big component of that is that underpenetrated rest of world opportunity that you've spoken about. So Rich, what do you think the main catalyst is at this point? The business model makes more sense every year for these exhibitors. You're clearly putting up the results, local language is working. So what's the next inflection point to grow the pipeline for that rest of world?

So when you look at the slate going ahead this year, and I believe the financial returns that follow for the exhibitors. For us, we've talked a lot about that. But for the exhibitors, I think it just makes so much sense. And obviously, exhibition has had its challenge in its traditional industry. And I think it's certainly looking for growth opportunities for its network and its strategy. And I think they look at their box or someone else's box next door that's selling out and is getting very attractive paybacks. I think that's going to have a big influence. And using some examples for markets in Japan in 2025, the per screen average was up an enormous amount from 2024. So the returns to the exhibitors are much more attractive. So it probably doesn't surprise you that there's a lot of activity coming out of Japan in '26, and our team was over there, and there's a fairly large number of deals under discussion. Also, Avatar really did extremely well in certain areas like France and Germany, where it was among the leading markets in the world and numbers that were a step change over the previous year. So there's a lot of activity this year, inquiries coming out of France and Germany. So I think, in general, it's looking at performance and trying to replicate it and bring it forward. But then you add some kind of obvious things like the slate this year, and there's lots of movies, as I said in my prepared remarks, whether it's Mandalorian or whether it's Odyssey or whether it's Dune: Part Two. And I think people want to get open in advance of that. The people who opened before Avatar, we looked at the number, I don't recall, but I think we opened like 27 theaters right before Avatar opened. And you look at the performance of those theaters by being open for Avatar, their ROI and their payback period were far superior to what would have been if they waited. And our team around the world is using that data and sharing it. And I think that's what's helping create a catalyst. We're also being a little bit more flexible, as we talked about in our prepared remarks, in using some of our capital in different places in the world where we know the results are really terrific. So I'll use Japan again as an example. But the numbers were so strong and compelling. The payback periods are fairly short, and the economics are very good. So we're seeding some of those markets by using a small amount of our capital to help jump start them. So I'd say all of that.

Our next question comes from Steve Frankel with Rosenblatt Securities.

Rich, you had a big install quarter in Q4. Given the demand situation, how much more can you ramp your team and to take that to another level?

Yes, it's just a question of timing, Steve. If you ask me how many we could install in the fourth quarter, the answer is a significant number because it functions like a supply chain. We need to consider if we can order the parts in advance, complete the designs, and deploy the teams. In any given year, the potential number is much larger than what we're currently achieving. If someone wants to launch something in three weeks, that's more challenging. However, over the long term, while I wouldn't use the term infinite, there is certainly the capacity to open many more if desired, with minimal constraints.

Our next question comes from David Joyce with Seaport Research Partners.

Given that you've got a lot of cash on your balance sheet now, how are you seeing your mix of sales versus JRSAs this year? Given that you've got more of that cash and it's a strong box office here, how are you thinking of the relative ROI between those approaches?

David, we see a lot of opportunities to utilize our balance sheet. We mentioned this at Investor Day, discussing ways to enhance the speed of installations in top-performing areas by providing financial support, as Rich noted, and in return, potentially adjusting our deal structure or economics to secure that return while allowing theaters to open sooner. With our strong balance sheet and a liquidity position of $550 million, this represents a significant opportunity for us to accelerate the rollout of our backlog and explore additional possibilities. We also discussed at Investor Day the potential for second screens in leading locations and flagship venues. While we're focused on investing in our technology and operations, like the Filmed for IMAX program and our camera investments, we're also considering network expansion. This past year, we increased our domestic network by 4% and our international network by over 8%. We are effectively utilizing our capital right now, and we see the potential to increase that investment.

Our next question comes from David Karnovsky with JPMorgan.

This is Kiscada Hastings on for David Karnovsky. I just want to ask on STL installs and upgrades this year. Is there any insight you can give us on expectations regarding market mix? You've been talking about more opportunities in the U.S. and whatnot. Should we expect revenue per install and revenue per upgrade to be relatively stable year-over-year?

So generally, yes, I think that we have a standard sort of selling price. Now the opportunity is that the box office grows, and you would have seen it in the incrementality in our model in 2025, the JV systems, we have the ability to capture more box office there and as our box office grows. And so I think that as you look at the mix, we did guide towards 160 to 175 systems with a mix of 45% to 55% sales to JV mix. So I think we're still tracking towards that. That's what we've guided publicly, and we'll keep working towards that. I think the opportunity, though, is looking at how do we capture more from those JV locations as the box office grows there as well. And that was one of the significant contributors to us not only having the over 45% adjusted EBITDA margin but also our cash flows that came in at a record level.

Our next question comes from Eric Handler with ROTH Capital.

Following up on that last question, could you discuss your thoughts on capital allocation right now? With no debt due until 2030 and expected to generate more free cash flow than last year, how are you considering buybacks? You've had positive results with the JRSAs. Where else do you see opportunities for internal investment that could yield high returns?

So Eric, I think the best place we can invest is in our network growth. And that's because when you look at PSAs this year compared to last year, when you look at the films that we have in '26 to slate, but maybe more importantly, you look at the backlog of films in '27 and '28, like we have an insight that most operators around the world don't have, which is we know what our slate is going to be going forward. And we have kind of a unique perspective on how it's going to perform. And we have a perspective also on how IMAX fits into the ecosystem. So if we have an opportunity to leverage our network growth or leverage our returns through maybe steering a deal one way or the other way. We think the releveling of IMAX is probably the best opportunity there is in terms of where to put our money. Now I would also add that people didn't think of it this way, but Natasha mentioned it briefly in her remarks. But when we issued our new convert and we took out the old convert, we could have taken out the shares that were in the money in 2 ways. One, we could have given people shares; or two, we could have used cash. And we took them out with cash, which effectively lowered dilution and was analogous to a share buyback. So obviously, we're open to being opportunistic in various ways, but we're very focused on how to capitalize on our growth.

Our next question comes from Patrick Sholl with Barrington Research.

Just in terms of installing into like a second screen in a zone versus entering a new market, is there sort of any difference in the return profile or the speed of getting to sort of like, I guess, a steady state of PSAs?

There doesn't seem to be a difference because if we're adding a second theater in an area where the exhibitor already operates, it indicates a successful area with a well-known brand. This allows us to build on our previous success. We have mentioned for some time that we would pursue this strategy more, and we have now taken concrete steps with various exhibitors to identify specific locations for adding a second screen and are currently in discussions. Exhibitors appear to be more receptive to this idea than in previous years, particularly following the strong results in '25. Therefore, I believe you should anticipate a similar return profile, and I would be surprised if you didn't see some of these developments this year.

Pat, the other thing to consider is that we have a very experienced team who is involved in the analysis of the returns on locations and really assessing what is best for the IMAX business. And I think that's one thing we've proven over the years is that as we continue to expand, we're expanding in locations that are returning to our bottom line as well. And we do analyze each of our locations as we look through signing new deals, signing upgrades, signing whether it's second screens or flagships and assessing to make sure that it hits our ROI hurdles.

Yes. And I think I'd also like to remind you that the converts we issued, the interest rate is 75 basis points. So this is a well-priced capital for us.

Our last question comes from Drew Crum with B. Riley Securities.

Rich, I want to go back to the discussion around alternative content and the partnership with Apple TV for Formula 1. It looks like the initial launch is U.S. only. Do you have the ability to add international screens? And more broadly speaking, how are you thinking about bringing more live sports into your programming mix? With 2026 being a World Cup year, is that a consideration?

Sure. The answer is that for Formula 1, Apple only controls the North American rights. We secured the best deal possible with them, but we are exploring options to include international races separately and are actively pursuing that. However, it's still early to discuss in detail. We are definitely interested in expanding our offerings. In the sports arena, we’ve received various opportunities, but sports can be complex. Finding the right fit with the IMAX experience is essential, and rights issues are often complicated and costly. We need to analyze which sports can deliver a good return. We have had discussions about the World Cup, but there are challenges, such as the finals coinciding with the opening of Odyssey. It’s not as simple as it might seem. There are intricate issues to navigate, but we are working on some intriguing possibilities, and I believe some will materialize.

I'm not showing any further questions. I'd like to turn the call back to Rich for any further remarks.

Thank you very much for joining us today. I truly appreciate the support from our long-term investors. The year 2025 has really brought everything together, and as a management team, we had great expectations that all the elements would align to elevate our position. The quantitative results speak for themselves in our reports, while the qualitative aspects may not be as clear to you. However, if you had experienced my past month in L.A., they would be quite apparent. It's very rewarding to be perceived as a different company in such a significant position, not just in Hollywood but globally. Our responsibility is to leverage this situation and our momentum to sustain and potentially increase our growth rate, ensuring we fully capitalize on the opportunities we’ve gained. Thank you all for your participation.

Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.