Good day, and welcome to the IMAX China first half 2020 conference call. Good day, and welcome to the IMAX China first half 2020 conference call. Currently, all participants are in a listen-only mode, and following the presentation, we will conduct a question and answer session. Please press star one to join the question queue at that time. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Karen Chan, Vice President of Investor Relations. Please go ahead, ma'am.
Thank you, operator. Good morning, everyone, and thank you for joining us on IMAX China's half year 2020 earnings conference call. Joining me today is our Chairman, Rich Gelfond, CEO Edwin Tan, and Jim Athanasopoulos, our CFO and COO, who will have prepared remarks. Also joining us is Jiande Chen, Vice Chairman, and Megan Colligan, President of IMAX Entertainment. For the purpose of this call, all financial figures will be provided in U.S. dollars unless stated otherwise. Furthermore, the financials we provide to you today will follow IFRS accounting standards, which may differ in some respects to U.S. GAAP. I would also like to remind you of the following information regarding forward-looking statements.
Our comments and answers to your questions on this call may include statements that are forward-looking and pertain to future results or outcomes. Forward-looking statements involve a number of risks, uncertainties, or other factors beyond our control. Actual future results or occurrences may differ materially from these forward-looking statements. We are under no obligation to, and expressly disclaim any such obligation to, update the forward-looking statements as a result of new information, future events, or otherwise. The full text of our half year 2020 earnings release, along with supporting financial statements and the slide presentation we have prepared for this call, are available on our website, imax.cn. Today's conference call is also being webcast in its entirety on our website. Now, with that, let me now turn the call over to Mr. Rich Gelfond. Rich?
Thank you, Karen, and good morning, everyone. You will notice my voice is a little bit off, so I am sorry if it is painful to listen to, but I feel fine, and I will just plow my way through it. Around the world, we are navigating through an unprecedented and challenging time of COVID-19. On behalf of IMAX China, I would like to express our deepest compassion for those who have been impacted by loss of life, illness, and financial difficulty. We are, nonetheless, relieved to see continued recovery in China under the coherent effort of all parties in the community. Our sincere gratitude goes to all medical professionals on the front line and government officials who are still fighting relentlessly against this global pandemic, and to all of our employees who have been showing unwavering commitment and tremendous understanding during this period of time.
For today's call, I'm going to discuss our financial strength, reopening strategy, IMAX's involvement in the compelling film slate that extends beyond 2020, and most importantly, why we feel confident about our positioning as theaters reopen. Edwin will share with you an update on our installations, signings, which include a recently announced 20-theater deal with Wanda, and how we think about our opportunities in a post-COVID world. Jim will then review the financial results and the actions we have taken to ensure ample financial flexibility. As you know, the movie industry, like many others, has gone through widespread disruption since the closure of theaters on January 24, 2020. We are happy to report that theaters in China's Mainland started to reopen on July 20 under China Film Administration's guidelines.
More than 5,000 cinemas are now open, generating approximately RMB 90 million in box office over its first opening weekend, despite only 50% of daily shows, 30% capacity control, and 40% of nationwide theaters opening. As of today, 401 of our approximately 700 IMAX screens in Chinese Mainland have resumed operations, with at least 600 IMAX theaters in total expected to open by mid-August. Over the past weekend, we generated an IMAX box office of $750,000 with the releases of "Bloodshot" and "Dolittle", representing close to 10% of their box office. The two titles had yet to open in the Chinese market due to the pandemic but had released in a wide number of other markets in Q1 2020.
Last week, in addition to theater reopenings, we were also encouraged to see the upcoming release date announcements of four IMAX films that have not yet played in Chinese Mainland due to COVID, and one classic re-release. Edwin will elaborate more on this later in his remarks. This week, global filmmakers and fans have also once again been brought together for the 23rd Shanghai International Film Festival, the first such event in China since the COVID outbreak. We're happy to report that over 120,000 tickets were sold in the first hour of pre-sale, and all IMAX tickets were sold out in the first 30 minutes. While a big opening weekend may still take some time, we're encouraged that consumers turn to trusted brands like IMAX when they feel comfortable returning to cinemas, and in particular, large auditoriums where social distancing can be effectively managed.
As IMAX theaters open, our exhibitor partners will be ensuring safety protocols are being properly implemented in their complexes. This includes mask on requirements, increased sanitation, a 30% capacity control, and reduced number of shows per day, all of which we believe will not compromise the unparalleled theatrical experience and are necessary measures in these early days of reopening to ensure the safety and well-being of consumers. In the event of overwhelming demand, we will work together with our exhibitor partners to focus on ways to spread out attendance to non-peak hours by adjusting showtimes or encouraging people to go to less crowded shows.
We believe the prolonged period of theater closures and the global travel restrictions currently in place should lead to a release in pent-up demand for out of home domestic entertainment as theaters reopen in Mainland China, and when the new content returns to the big screen, similar to what happened after the 2003 SARS pandemic in Hong Kong. A good example was the movie "Peninsula", a sequel to the South Korean movie "Train to Busan", which set opening day records in multiple countries since the COVID outbreak. In Taiwan, we generated approximately $277,000 U.S. box office on opening weekend for 10 IMAX screens, representing close to 6% of box office. The second highest grossing IMAX non-Hollywood film in Taiwan. In Korea, the film generated over 2 million admissions in its opening week, a record for 2020, and the third highest grossing IMAX local language title in the market.
While we do not expect material box office contribution during the early reopening period in China, we have made full preparations to market what we believe to be a strong slate of upcoming blockbusters, including, first of all, Christopher Nolan's highly anticipated "Tenet." Filmed with IMAX cameras, it just announced its global rollout, starting with Canada, Europe and Asia on August 26. This film is a must-see in IMAX theaters, best demonstrated by our over-indexing on previous titles. "Dunkirk" and "Interstellar" each generated 15% of their IMAX Mainland China box office on our IMAX screens during opening weekend. We remain hopeful on a Chinese release date in the near future.
Other films in IMAX titles include "Wonder Woman 1984", " No Time to Die", and of course, local titles that were originally scheduled for Chinese New Year, including "Detective Chinatown 3", entirely shot with IMAX cameras, "The Rescue" and "Leap", both of which were produced with an exclusive IMAX expanded aspect ratio. Also included in the pipeline is "The Eight Hundred", a high production war epic, entirely shot with IMAX cameras. Our ability to introduce IMAX DNA into the filmmaking process has historically translated into a greater share of the box office for IMAX. Looking into 2021, we look forward to what we see as an exceptionally strong slate, including Marvel titles, including Spider-Man and the first Asian Marvel superhero, Shang-Chi. New installments of blockbuster franchises, including Fast & Furious, Mission: Impossible, and Jurassic World.
Top Gun: Maverick, a reprise of the military action classic filmed with IMAX cameras. We are confident that consumers will return to IMAX in eagerness on the back of a compelling content pipeline that lends itself to IMAX. Blockbusters are meant to be best experienced in a communal setting, and the China Film Administration has been a leading proponent of safeguarding theatrical releases. With the majority of Hollywood and domestic movies being rescheduled to a later date in 2020 or 2021, it is clear that studios are deeply committed to a theatrical debut for their biggest IP, which is of vital importance to maximize revenue and showcase the film to recoup high production and marketing expense. We do not think opening blockbusters via streaming is a sustainable and commercially viable model to both studios and online platforms.
Despite the challenging conditions in the first half of 2020, we continue to build new partnerships and extend existing ones with exhibitors such as Universal and Wanda. Edwin will provide more details on those signings later. This illustrates the value of trusted brands like IMAX during uncertain times from the perspective of both audiences and exhibitors. With our network heavily skewed towards top-performing theater complexes, we see any critical industry consolidation as an opportunity rather than a risk. We are at present in 17 of the top 25 highest-grossing complexes in China, representing a 70% penetration. In 2019, we were located in close to 50% of China's top 100 complexes and generated an 11% box office market share in those locations, as opposed to 1%-2% by other branded offerings. Within those complexes with an IMAX screen in China, we contributed approximately 22% of their box office.
All these metrics underscore IMAX's strong commercial value and demonstrates why we believe our positioning will not be challenged by the risk of disruption. Finally, I would like to underscore IMAX China's financial strength that is built upon our unique technology and service licensing model. A strong balance sheet with nearly $75 million in net cash as of June 30, 2020, as well as our disciplined cost management over the years, with a controlled monthly cash burn of $1 million during the theater closure period. Without exposure to theater rental commitments or fixed capital costs incurred in content production, we operate an asset-light business model and are able to generate incremental margins and cash flows nearly immediately on the first ticket sold.
Our financial strength also allowed us to both support our partners during this unprecedented theater closure period and continue to uphold our commitment to delivering value to our shareholders. For the first half of 2020, our board approved the payment of an interim dividend of $0.02 per share, or the equivalent of HKD 1.155 per share, consistent with prior years in absolute terms, a reflection of our stability and confidence in the long-term growth potential of China's film industry. While this pandemic has imposed tremendous challenges across the globe, I strongly believe our business can emerge stronger, leveraging on the blockbuster trend that will continue to play out in our favor, as well as the strength of our brand, technology, and balance sheet. We look forward to welcoming back our loyal fans.
Thank you for joining us today, and please continue to do everything you can to stay well and healthy. With that, I'd like to pass the call over to Edwin.
Thanks, Rich. Good morning to everyone. As Rich mentioned, the COVID-19 pandemic has imposed challenges to the world in ways never thought imaginable. But we take great comfort in the humanity displayed and all of us who remain strong in the face of adversity. In addition to currently showing "Bloodshot" and "Dolittle", we are excited to welcome back our IMAX China fans with a slate of new titles that were originally scheduled earlier this year, as well as classic re-releases. Including in this are "Interstellar" on August 2nd, "1917" and "Ford v Ferrari" on August 7th, "Bad Boys for Life", as well as "Harry Potter and the Sorcerer's Stone in 3D" on August 14th. More announcements are expected to be in the near future. While the outbreak has caused short-term disruption to our installation schedules, our backlog increased to 271 theaters as of June 30th, 2020.
Over 75% of which does not require a capital commitment. We continue to bring in new signings in 2020, one of which included the largest commercial IMAX with Laser system in Beijing, to be located at the Universal Beijing Resort. We also further strengthen our Wanda partnership, the largest exhibitor in China, with laser upgrades at 10 of our top-grossing Wanda IMAX theaters and the addition of 10 IMAX cinemas in new Wanda locations across the country. Including backlog, this brings the total number of contracted IMAX theaters in Greater China to 985. We are encouraged that despite the temporary closures of theaters in China and across the world, in the long term, our existing partners continue to see the value of IMAX to their customers and business. We think this demonstrates the continued growth potential of our business beyond the current pandemic.
While we do expect certain delays, our installation schedule has always displayed very strong seasonality with the fourth quarter historically representing close to half of our full-year installs. At this point in time, we are coordinating closely with all our exhibition partners as we work through their installation plans for the balance of the year. We remain focused on driving our network expansion across all CFCs and balancing our installation mix between full sales and revenue-sharing arrangements, with minimum box office guarantees in many areas. When all things settle, we believe some of the structural trends we observed pre-COVID will continue to play out, enabling IMAX China to emerge from this crisis with a stronger foothold. In 2019, our top 10 grossing titles accounted for close to half of China's box office. For the top 50, represented approximately 80% of the total industry gross box office.
We expect to see the similar effects of blockbusterization in content creation with value being increasingly consolidated towards high-quality titles. This plays well into IMAX China's premium position as bigger films are getting bigger. Second, adding local language movies as an increasingly important driver of China's film industry, accounted for approximately 63% of total box office in 2019. Our earliest success in 2019 with Chinese films such as "Ne Zha" has proved that gravitation of local content towards high production value genres that fit nicely with the IMAX experience, presents us with a proven opportunity to gain more box office market share with local titles. Currently at around 2% compared to over 7% with Hollywood films. Looking into the 2020 and 2021 local film slate, we have identified multiple blockbuster-caliber local titles, many of which have completed principal photography and are already in post-production stage.
Some of these include New Gods: Nezha Reborn. This is a high production value 3D animation about the story of Ne Zha's return. A Writer's Odyssey, a fantasy thriller adopted from a novel to be released in Chinese New Year 2021, and the Fengshen Trilogy, an Eastern fantasy epic that recreates the mythical wars between humans, immortals, and monsters. To conclude, while there is no doubt this is an unprecedented situation, our strong brand, technology, unique and premium positioning gives IMAX China a firm footing in difficult times. We remain optimistic about 2021 and beyond with our new signings, the continued adoption of our laser technology among our exhibitors, and many of the high-profile local and Hollywood films to be released on the big screen. With that, I would now like to pass the call to Jim for a review of our financial results. Jim?
Thanks, Edwin, and good morning, everyone. I hope you and your family are staying well and safe. The COVID-19 outbreak has no doubt posed a profound impact to the global economy and many businesses, including ours. That said, our prudent and disciplined cash management over the years has strengthened our resilience to help us navigate through an extended business shutdown. Preserving our strong balance sheet has been and remains a top priority. In response to the current shutdown, we have taken a full bottoms-up evaluation of our cost structure. Given we do not have exposure to theatrical rental commitments nor fixed costs in content production, our major items primarily represent our full-time employees and facility costs.
Without making a reduction to our full-time headcount, we have moved the majority of our company to a three or four-day workweek while maintaining our ability to quickly scale operations once theaters reopen and business normalizes. We have also significantly reduced marketing, T&E, and other discretionary expenditures. The above cost actions, in addition to our asset-light business model, has allowed us to keep our monthly cash burn in check at approximately $1 million. Factoring in $7 million annual dividend paid and share repurchases of $1.5 million, we entered the first half of 2020 with a net cash balance of $73.8 million. In addition to our cash balance, we recently renewed a RMB 200 million credit facility that currently remains largely undrawn.
While COVID-19 has inevitably delayed our system installation schedule, on-site development activities gradually resumed towards the end of the second quarter and should further pick up going into the third quarter. As Edwin indicated, our installation tends to be back-end loaded, with this year being exceptionally so. With theaters having reopened for a week, we would defer any guidance with respect to second half 2020 installations until we have greater visibility. Despite an extended pause in the entire industry, we are encouraged to see major exhibition players continue to embrace IMAX with Laser to stay at the forefront of technology. As a result of the 22 signings Edwin previously mentioned, our contractual backlog increased to 271 as of June 30, 2020, up from 253 at the end of last year.
This includes 83 full sales and the rest in hybrid and full revenue sharing arrangements, representing a similar network mix compared to 2019 and providing a tangible path to future installations. A majority of our CapEx is related to the growth of our JV network. We expect some of our partners to continue deploying IMAX systems through the JV model, both through new installs and upgrades, albeit at a reduced level compared to last year. Our strong financial position, with ample liquidity and balance sheet flexibility, enables us to uphold our capital management policy, where we return capital to shareholders through dividends and buybacks. In the first half of 2020, we repurchased 906,000 shares for a total amount of $1.5 million.
Our board also approved the payment of a stable interim dividend of approximately $7 million, representing $0.02 per share, or the equivalent of HKD 0.155 per share. We remain prudent in capital deployment and will continue to review our policy in the context of the ongoing business environment. Now let me briefly discuss our first half results. Before we begin, please note we renamed our operating segments to better describe their underlying businesses. Our network business is now called the IMAX Technology Network. Our theater business was renamed IMAX Technology Sales and Maintenance. Due to the COVID-19 pandemic, all of our approximately 700 IMAX theaters in Chinese Mainland have been temporarily closed for the most part of the first half of 2020, which has significantly impacted our financial results. Total revenue was approximately $6.7 million, down nearly 89% year-on-year.
IMAX Technology Network business revenue declined by approximately 97% due to the loss in box office. IMAX Technology Sales and Maintenance revenue was down approximately 79%, driven by reduced number of sale and hybrid installations. We completed one sale and sale type lease install versus five installs and one laser upgrade in the prior year period, and we completed one hybrid install compared to seven in the first half of 2019. For the first half of 2020, we installed a total of three systems compared to 24 in the same period last year. Our Greater China network now stands at 714 theaters. During the closure period, we offered our partners a maintenance holiday and extended our agreements by the same timeframe accordingly. Operating expenses, excluding stock-based compensation, were approximately $16.7 million, which includes approximately $10 million in provisions taken associated with receivables and other assets.
Excluding that, adjusted operating expenses would have been approximately $6.5 million, down 36% year-over-year. The provisions include certain general provisions taken in relation to COVID-19. For the first half of 2020, we reported a net loss of approximately $35.2 million, which includes an $18.5 million non-recurring non-cash deferred income tax charge for withholding tax to allow higher flexibility in capital allocation and reinforces our commitment to consistently return capital to shareholders. This charge is excluded on an adjusted basis with adjusted net loss for the first half of 2020 at approximately $15.5 million. To close, with a much larger nationwide network, more diversified film slate empowered by IMAX DNA, and more advanced technology than when we first started building our China presence many years ago, IMAX China is very well positioned to navigate with resilience and continue to drive market share gains as a premium market leader.
With that, I will turn it back to the operator for Q&A.
Thank you. If you would like to ask a question at this time, please press star one on your telephone keypad. If you are listening today using the speakerphone, please pick up your handset before pressing the corresponding digits. Once again, please press star one at this time if you have a question. We will pause for just a moment. We will take our first question from Xueqing Zhang with CICC. Please go ahead.
Hi, management. Thanks for taking my question. My first question is related to box office. As mentioned, the closing IMAX across China began to resume operations on July 20. Could you please suggest more on how you view the recovery of the box office in the following quarters and the next year? My second question is that the online streaming cinemas had a tough time in this month. How do you view the trend of integrations and the mergers and the potential influence may have on our business? Thank you.
Jim, I had trouble hearing the question. Do you want to answer it?
Sure. I had trouble as well. The first question had to do with how do we view the recovery of box office in the second half of this year. Am I correct in saying that?
Right. Well, I'll-
Anyway, I think. Sure.
I was going to say that the first weekend, as we mentioned in our remarks, we somewhat found it encouraging. The numbers were better than we expected. As we've looked in other territories, as the COVID rate goes down, the box office goes up. I don't think it's going to go back to a full, regular box office right away. I think it's going to take a little time. But if it remains safe and if there's good content, with time, I think eventually the box office will go back to normal levels. What was the other part of the question?
Hi, Rich. This is Karen. I think your second question is about how do we view the merger and consolidation opportunity in the exhibition industry. Am I correct? Yeah.
Wherever in the world there's been mergers and consolidations, IMAX has been the winner. So when Regal merged with Cineworld, when AMC acquired Odeon, all over the world. And the reason is that the larger exhibitors tend to be the ones, and the stronger ones, who are in business with IMAX and have a big interest and understand IMAX. So to the extent there's consolidation in China, obviously it depends who, but we would think that to the extent the stronger and the bigger chains acquire other exhibitors, like it's been in the rest of the world, we would see that as a positive for IMAX because wherever that's happened, it's been to our advantage.
Once again, that is star one if you'd like to ask a question on today's call. We'll pause for just another moment. Then we'll go ahead and take our next question from Thomas Chong with Jefferies. Please go ahead.
Good morning. This is Anne who is asking on behalf of Thomas. So could management comment more about the revenue trend in second half? And then can you comment more about the new theaters plan in second half? Thank you.
Jim, why don't you answer that?
Sure. First question in terms of the revenue trend, I think as Rich said, it's early. We're encouraged obviously that our theaters are starting to reopen, and we're encouraged by a pretty solid slate of films that haven't actually had release dates announced yet. Overall, it seems pretty encouraging in addition to obviously, Bloodshot, Dolittle, Interstellar, 1917, Ford v Ferrari. Other big films like Tenet, Wonder Woman 1984, No Time to Die, Black Widow, Mulan, in addition to the Chinese films like Detective Chinatown 3, The Rescue. There is a full slate of good potential titles once they actually get release dates announcement. It's still early. The theaters are slowly opening up. We're encouraged by the early results, but we're being obviously cautiously optimistic.
As the sort of time progresses and films get dated, I think we'll basically have more that we can kind of comment on, but we're again encouraged by the theaters opening up and we're encouraged by the potential films that are going to be coming out overall. On new theaters and installations going forward, it's still early. We are in active discussions with a lot of our exhibitor partners. We are sort of looking at their build schedule, and things are starting to build once again. We have a backlog of 271 theaters as we talked about beforehand, so they're all firm contractual commitments that we look forward to executing on overall.
Albeit it being a little bit slow this year for the beginning of the first half obviously given everything that's going on, we're working with our partners to sort of execute on that backlog and then once we have a little bit further clarification after the theaters have reopened for some time and everybody's back in business in some time, we should see things start to normalize in the very near future.
Thank you.
And once again, that is star 1 if you would like to ask a question on today's call. We will pause for just another brief moment. And it appears that there are no further questions at this time. I would like to turn the call back over to Mr. Rich Gelfond for any additional or closing remarks.
Thank you very much, operator, and thank you very much for everybody on the call. It has been a long time since the theaters were open. It has been hard to keep our patience. But the events of the last couple weeks, the reopening in China, the strong box office over the first week, or at least stronger than we expected, the opening of "Tenet", the announcement of a lot of new movies in China coming out have given us reason for optimism for the first time in a while. We believe our asset-light model, our film slate, our brand, we are well-positioned to take advantage as the theaters reopen. And we thank you all for participating today.
Once again, that does conclude today's conference. Thank you very much for your participation. You may now disconnect your phone lines.