Good day, ladies and gentlemen, and welcome to the IMAX China first half 2021 earnings conference call. All participants are currently in a listen-only mode. Following the presentation, we will conduct a question- and- answer session. To ask a question, please press star one on your telephone keypad. As a reminder, 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.
Good morning, everyone, and thank you for joining us on IMAX China first half 2021 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 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 first half 2021 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. With that, let me now turn the call over to Rich Gelfond. Rich?
Thank you, Karen, and good morning, everybody. As the global market travels the road to recovery, China continues to lead the way with new highs in key theatrical windows, including the New Year holiday, Chinese New Year, and Labor Day. The rising value of IMAX to consumers, filmmakers, and exhibitors drove our strong first half revenue and earnings rebound to levels approaching that of 2019, despite the temporary delay of major Hollywood tentpoles, which historically represented 70%-80% of second quarter industry box office and more than 90% of IMAX China's.
Our local language box office reached $68 million, a record high for the six-month period, driven by our growing indexing across multiple local blockbusters. Our robust installs and signings underscore the importance of IMAX to exhibitors. With our technology network revenue surpassing that of the first half of 2019. While it has taken longer than expected, the release dates of Hollywood films have started to normalize in certain key markets around the world. As a result, we expect significantly more Hollywood films to be released in mainland China in the second half of 2021, further driving our box office and network revenue on top of our strengthening local footprint.
A year into reopening, a clear picture is emerging of the post-COVID theatrical world, which gives us greater confidence in IMAX China's premium positioning and our ability to capture growth opportunities ahead. First, the pandemic has accelerated the amount of premium content as a trend in Chinese content consumption behavior. Second, content creation is gravitating towards higher production value and genres that lend themselves well to the IMAX experience. Our first half financial results reflect positive momentum across both our network and our sales business.
For the first half of 2021, a dramatic profit turnaround to $21.3 million adjusted earnings versus a net loss of over $15 million in the prior period last year. We delivered strong revenue growth, reporting $53.4 million, up from a COVID-impacted $7 million a year ago, and almost in line with the first half of 2019, when mega-blockbuster Hollywood film, Avengers: Endgame was released. Since theaters reopened in July 2020, our average opening weekend indexing for Hollywood titles accelerated to 13%, up from 11% in 2019, positioning us well to take advantage of the strong slate over the next 12- 18 months.
We grew local language indexing to approximately 5% with record local language box office of $68 million. We further grew our network to 759 screens, including 237 in backlog. Our contracted network in Greater China reached close to 1,000 theater milestone. Given our strengthening moat across the board and our ability to generate strong levels of free cash flow. We are pleased to increase our interim dividend payment to $9.6 million on a higher earnings payout ratio of 50%. As blockbusterization in content consumption and creation accelerates post-pandemic, IMAX China's competitive positioning as the go-to premium theatrical platform has never been stronger.
Since theaters reopened, 13 titles crossed the CNY 1 billion box office milestone, 11 of which were available on IMAX. Among them, Detective Chinatown 3 and The Eight Hundred, both shot entirely with IMAX cameras, are now ranked within the top 15 all-time releases in Chinese box office. It has become clear that a post-pandemic theatrical business will demand increasingly differentiated offerings, both in content and in exhibition.
While consumers are eager to return to the movies, a larger portion than previously are now going for the most immersive experience and a brand they trust, something that home theaters are not able to offer. Studios are prioritizing IMAX runs to eventize their movies, while filmmakers look to IMAX DNA to bring back their creative work to the next level. Finally, exhibitors are differentiating their offerings, with IMAX being their anchor entertainment choice, demonstrated by our robust installs and signings activity.
We started 2021 on a strong note with a record-high New Year holiday box office, more than three times that of the prior year, driven by Shock Wave 2, a local title which IMAX represented approximately 12% of the film's grossing, an indexing level comparable to Hollywood content. This was followed by a record-breaking Chinese New Year opening weekend led by Detective Chinatown 3, our third highest grossing local title of all time. Clearly, local language films have been and will continue to be a major driving force at the box office.
As a complement to local language films, the successful re-release of Avatar, strong opening of Godzilla vs. Kong, and Fast and Furious 9 underscores Chinese audiences' strong appetite for Hollywood films the IMAX experience. Avatar, released more than a decade after its first hit in theaters, has recorded more than CNY 300 million in box office, with IMAX representing a stunning 30% of the total re-release on only 1% of the screens. Godzilla vs. Kong earned more than CNY 1 billion at the box office, becoming the highest grossing title among the Monsterverse franchise, with IMAX indexing close to 14%.
Fast and Furious set a further record as our biggest Hollywood opening since Avengers: Endgame, with IMAX achieving a franchise-best indexing of 9%. As a result, our average opening weekend indexing on Hollywood titles accelerated to approximately 13%, with our market share at 8%, up from 7% pre-pandemic. This bodes very well for us as we welcome the summer blockbuster season, an incredibly strong slate that extends well beyond 2021. Some of the highly anticipated titles for this year include Dune and blockbuster franchises, among which are Bond: No Time to Die, Top Gun: Maverick, Venom, and Spider-Man, many of which are filmed in IMAX.
In fact, we have nine titles with IMAX-specific DNA that could potentially release in mainland China in the second half of 2021. 2022 lineup looks equally powerful with a number of anticipated commercially proven IP franchises, including Jurassic World III, Mission: Impossible 7, The Batman, several Marvel entries, and of course, the sequel to Avatar, which has become brand synonymous with IMAX.
COVID has yielded an extraordinary period during which studios have experimented with hybrid distribution strategies. However, this experimentation is slowing as the global theatrical market reopens, with major Hollywood studios endorsing an exclusive theatrical window of around 45 days, starting in 2022. A two week IMAX run has therefore become even more important to studios and exhibitors to publicize a movie and maximize theatrical box office dollars. This is best illustrated by our robust signings activities with leading exhibitors, including a four laser theater deal with Broadway across iconic commercial locations in Shanghai.
Exhibitors are increasingly leaning to the premium theatrical experience represented by IMAX to differentiate and attract audiences. Edwin will provide more details in a moment. Now, financial strength. Finally, as evidenced by our strong earnings rebound, IMAX China's unique v alue proposition and technology license model has been the cornerstone of our financial strength and strong balance sheet, with $115 million of cash. For first half 2021, our Board approved the payment of an interim dividend of $0.03 per share on an increased payout ratio of 50%.
This underscores IMAX China's commitment to deliver long-term value to our shareholders while growing our earnings power organically. With our unique premium positioning, the strength of our brand, technology, and content pipeline that is increasingly catered towards IMAX DNA, we believe IMAX China is set to benefit from the consolidation of movie-going dollars for its tent poles and top-of-the-class experience. Thank you for joining us today, and please continue to do everything you can to stay safe and healthy. With that, I would like to pass the call to Edwin.
Thanks, Rich, and a very good morning to everyone. As consumers increasingly seek premium content with premium experience, the value of the IMAX brands of filmmakers and exhibitors has been greatly strengthened. As a result, we have gained ground in our local language programming since theaters reopened and expanded new theater signings with our exhibition partners as we grow our network across all tier cities.
For first half 2021, we have completed 23 installations, and we closed a total of 12 signings, highlighted by a four-laser theater deal with Broadway across iconic commercial locations in downtown Shanghai. Including our 237 backlog, IMAX Greater China network shall reach approximately 1,000 theaters. As more developers expand their footprint and increase their entertainment and cultural features, IMAX has often come into play their flagship offering.
Going into the second half of the year, we expect installation activities to further accelerate as the industry navigates towards a full return to normalcy. During our last earnings call, we talked about how IMAX can benefit from an industry consolidation, given our concentrated footprint in top-performing multiplexes, with 95% of our box office generated from the top 20% of complexes. 2021 has so far proven that this is playing out with our growing theater penetration across all the top 500 theater cohort groups.
We are present in close to 70 out of the top 100 highest-grossing complexes in China, including seven of the top 10. Our growing market share in local titles across diversifying genres reflects the early success of our local language programming capability. From "The Wandering Earth, Ne Zha" in 2019, "The Eight Hundred, Shock Wave 2" in 2020, to "Detective Chinatown 3" and "Cliff Walkers" in 2021, we have been indexing consistently over 5% in major blockbusters, up from 1%-2% historically. As local content gravitates towards high production value genres, filmmakers are increasingly leaning into IMAX DNA to bring their franchise to the next level.
For example, "Mozart from Space." [Non-English content ]. First installment of the new IP, directed by Chen Sicheng of the "Detective Chinatown" franchise, is again filmed in IMAX and will be released among other highly anticipated big-budget productions, including "Fengshen Trilogy, Fengshen Sanbuqu," and "The Battle at Lake Changjin, Hu." Lu Yang, Director of "A Writer's Odyssey," a visual effects-laden film in which we index approximately 6%, is currently planning for its second installment.
The sequel to "The Wandering Earth 2, Liú Làng Dì Qiú Èr ," the fourth highest grossing title of all time, and IMAX China's highest grossing local title, is also being planned for Chinese New Year 2023. To conclude, our rising market share in both Hollywood and local titles, growing involvement of IMAX DNA in content production, has further strengthened IMAX China's positioning in the post-pandemic entertainment ecosystem and allowed us to explore new opportunities for growth. We look forward to a full return to normalcy as a steady flow of Hollywood blockbusters return to the big screen and installation activities continue to pick up for the balance of the year. With this, I would now like to pass the call to Jim for a review of our financial results. Jim?
Thanks, Edwin, and good morning, everyone. We are pleased to report that our growing box office market share, pick-up in installation activities, combined with our disciplined cost management and asset-light business model, has driven strong revenue and earnings rebound. For the first half of 2021, we generated $53.4 million in total revenue, up from $6.7 million in the prior year period. $21.3 million in adjusted earnings versus $15.5 million loss in the first half of 2020. Let me go through our financial results in more detail.
IMAX technology network revenue was $21.7 million, up from $1.1 million the same period last year, driven by strong box office recovery and increase in take rate to 16.3%, up 120 basis points year- over- year. For the first half, we delivered $133 million in total box office, despite capacity constraints and a temporary delay of major Hollywood tent poles, which historically account for more than 70% of IMAX China's box office during the period. We expect our take rates to see further upside in the long term as local language titles account for rising contribution to our box office.
Network business margin was 60.3%, benefiting from the inherent operating leverage of our business model. IMAX technology sales and maintenance revenue was $31.7 million, up from $5.4 million in the prior year period, and 25% higher than that of the first half of 2019, driven by increased installation activity, higher mix of sale installs, and removal of the maintenance holiday as theaters reopened.
For the first half of 2021, we installed a total of 23 theaters, including 20 new installations, one laser upgrade, and two relocations, versus three installs in the same period last year. Of these new installs, eight were sales, four were hybrid, and eight were full revenue share, including one sale laser upgrade, and two relocations. This brings our total sales installations to 11. Sales and maintenance gross margin was 63.1%, up from 29.3% in the same period last year, given larger number of sale installs resulting in overall gross margin of 62%.
Our Greater China network now stands at 759 theaters, up 6% year- over- year, with a contractual backlog of 237, over 80% of which does not require our net capital commitment. This includes 82 full sales, 110 in hybrid, and 45 in full revenue sharing arrangements. We signed agreements for 12 theater systems, nine of which were sales and three were full revenue share. As Edwin mentioned, we expect installation activities to further pick up in the second half of this year, and total technology sales and maintenance revenue to come in largely in line with 2019 levels for the full year.
Moving to operating expenses, SG&A, excluding stock-based compensation, was $5.7 million, down 4% year-over-year as we continue to manage our costs prudently. On the back of continued demand recovery, we delivered two consecutive reporting periods of earnings growth, with $21.3 million adjusted net profit for first half 2021. Moving to our balance sheet. CapEx for first half 2021, predominantly related to our JV network growth, was $2.8 million, up from $1.3 million in the prior year period on increased installation activities.
We expect full year CapEx ratio to remain lower than historical levels as our network seems less CapEx driven on rising scalability. As of June 30th, our cash balance was $115 million, factoring in $15 million gross proceeds from the sale of an investment and $7 million dividends paid, up from $88.5 million by the end of 2020. As announced during our last earnings call, we increased our dividend payout ratio from 33%- 50% of net income, given our strong cash flow generation ability and expectation of full return to normalcy for the balance of this year.
For first half 2021, our Board approved an interim dividend of $0.03 per share, representing a dividend payment of $9.6 million, up from approximately $7 million in prior years. We remain committed to increased shareholder return on the back of a strong balance sheet, sustainable cash flow, and earnings growth. In summary, our first half results demonstrate the growing demand for IMAX and underlying strength of our business. We look forward to building on the momentum as we capitalize on a strong pipeline of blockbusters, both Hollywood and local, for the rest of the year and into 2022. With that, I will turn it over to the operator for Q&A.
Thank you.
Before we take Q&A.
Go ahead. Thank you.
Thank you. Before we take Q&A, in our prerecorded prepared remarks, we indicated our Board approved an interim dividend of $0.03 per share. We would like to clarify the interim dividend approved by the board was calculated at $0.028 per share, representing a dividend payment of approximately $9.7 million . Thank you. With that, I will turn it back over to the operator.
Thank you, Jim. Ladies and gentlemen, if you would like to ask a question, once again, please signal by pressing star one on the telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will now take our first question from Mavis Lam of Jefferies. Your line is open. Please go ahead.
Hi, management. Thank you for taking my questions. Thank you for the movie slate mentioned earlier, but as we see a movie like Black Widow was released in U.S. already, but not yet in China. May I know if there is any concern in getting approval on those imported films? Besides, can you also comment about the mix of domestic and Hollywood films in five or 10 years' time? Thank you.
In terms of your first question, historically, it hasn't necessarily been day- and- date, and there have been a number of films which have opened first in the U.S. and then played later in China, or recently even F9 opened first in China and played in the U.S. So I don't think it's necessarily indicative of whether it gets China run. I think what's been happening recently with the simultaneous day-and-date releases in the U.S., because of the incidents of piracy in the U.S., which has then spread into China, it is raising some concerns in China about whether it'll get in and what the box office will be after that.
So I do think it's a legitimate issue that you're raising. For example, Black Widow had been dated for early May, and it got into China, and then the movie moved to July. The release of the movie, there was a significant amount of piracy. July was a blackout month in China, and I believe Disney's waiting approval to see whether it gets into China or not. Disney has said it's not sure whether it's going to get the approval or not.
So that is a concern. However, I think the model of day-and-date releases was developed because of the pandemic. Almost every studio in the U.S. has gone to an exclusive theatrical window, and I think Disney said it will reevaluate once the pandemic starts to fade. So although it is potentially an issue, I think it's not going to be much of an issue as the theatrical window gets settled. I think the second part of your question was what the mix will be between Hollywood and local content five years from now.
I think it's a very difficult question to answer. I think the one part I could say for sure is, I think there'll be more local content as a percentage than there is today. I think the Chinese local content in IMAX has been very well received. Our indexing has gone up significantly since the pandemic started on local language content. The budgets have gone up in local language content. The genres have expanded. So I'm very comfortable saying it'll be more, whether it's 50/50 or even more Chinese content than Hollywood. That would be speculative, but I think it'd certainly be more than today.
Great. Thank you very much.
Thank you. We will now take our next question from Shen Jia of China International Capital Corporation. Your line is open. Please go ahead.
Thanks, gentlemen, for taking my question. We saw a strong pipeline for Hollywood movies. However, considering that the overseas pandemic is still in an uncertain situation, except for July in China, how do we view the supply of Hollywood movies in China in the second half of the year and the potential impact on our business? Thank you.
I believe that-- Remember that there were not very many movies released anywhere in the world by Hollywood, except online, until the last several months. For the second half of the year, there are a lot more Hollywood movies scheduled for release, including a number of potential blockbusters, including two Marvel movies, a Bond film, the sequel to Top Gun, and many more films. I think we would say, in the back half of the year, there will be more Hollywood films released in China than the first half of the year. I left out Venom.
There are a number more. I think we will start to see, beginning in September, a significant pickup in the number of Hollywood films that are released in China. I think 2022, which is a year filled with blockbuster movies, including Doctor Strange, Jurassic World, The Batman, Mission: Impossible 7, Avatar, The Marvels, Black Panther. I think as of now, we are expecting there to be a normal Hollywood release slate in China.
Thank you.
Thank you. Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We will now take our next question from Sarah Wang from Morgan Stanley. Your line is open. Please go ahead.
Thank you for the opportunity to ask a question. My question is regarding the new installations and backlog signing. For the past fiscal period, how does that compare with your expectations? I noticed that the outlook is that the net results came in as revenue to recover to 2019 levels. What do you think is the driver behind, given the overall box office in China is still under pressure? My second question is that, do you think it is harder nowadays to attract moviegoers back in cinemas? It seems that if it is not blockbuster, then in a normal time, or if it is a normal title, then the box office performance is gradually weaker than pre-COVID levels. May I ask what is your view on this? Thank you.
I will answer the second question, Jim, and then I will ask you to answer the first one. I think, remember, the world is still in a recovery mode. We are coming out of the pandemic period. I think it is a little early to make generalizations about how the box office will compare for blockbuster films versus non-blockbusters. As you said in your question, blockbuster films have come all the way back. As we talked about during our prepared comments, IMAX has come back even stronger, and our indexing in China for blockbusters has been extremely strong.
I think for IMAX, we feel quite confident about the comeback of the box office in our blockbuster niche. In terms of non-blockbuster movies, that is not really our business, and I think it is just too soon into the reopening after the pandemic to draw conclusions. Jim, why don't you answer the first question?
Sure. Yes. Basically, one of the questions you were asking was about the drivers of our outlook in new installations and so on. I think that just dovetails on exactly what Rich just said. Our indexing is much stronger on Hollywood films. Our indexing is much stronger on local language films. As we are starting to open, there is an expectation, obviously, that Hollywood films, as things normalize, are going to be playing quite regularly in theaters.
Our indexing, coupled with our performance on local language films, coupled with all of the steps that we are taking to drive that indexing, whether it is using our cameras or aspect ratios or working with filmmakers or whatever else it is, I think people are noticing that, and they basically want to include IMAX more today in their complexes to drive revenue and drive box office when those big blockbuster films come up.
Again, one of the narratives that we have been talking about is there is this premiumization of films going on. The big films are getting much bigger, and those things really lend themselves quite well to IMAX. Whether it be a local language film or a Hollywood film, those big production budgets with visuals and sound and so forth lend themselves to be seen on our screens. It ties in nicely with us. We feel a lot of that is driving our installation activity and our ongoing signing activity.
Got it. Thank you.
Thank you. Ladies and gentlemen, once again, if you would like to ask a question, please press star one. We will now take our next question from Emerson Chan of Bank of America. Your line is open. Please go ahead.
Hi. Thank you, management. My question is regarding our future revenue drivers. I just wonder if we have any new initiatives here in China to drive our long-term revenue growth beyond the box office sharing and the sales of the IMAX screen. Thank you.
Yeah. We've looked at a number of different business initiatives and both in the parent company in North America and in China, there are some initiatives on the drawing board. However, as you can appreciate, during the global pandemic, we kept investment at a fairly low level just to make sure we preserved capital. We have been working on a number of things. Some of them are promising, but we'll wait till they're more developed and until we're willing to commit more capital before we provide details.
Okay. Thank you.
Once again, ladies and gentlemen, if you would like to ask a question, please press star one. It appears there are no further. Oh, there you go. There's another question in queue. We'll now take our next question from Alvin of JP Morgan. Your line is open. Please go ahead.
Hi, good morning. Management, can I get your view about box office this year? Do you think total box office this year can surpass 2019 level? Thank you.
Are you talking about IMAX box office or global box office? Please clarify.
Sorry, I mean China box office.
Overall China box office, can it surpass 2019? It's the movie business, so you never know. But I think it's highly unlikely given that Hollywood films were disrupted for so long. We're now in or end of July, and they're really only starting to hit the market at this point. And typically, as you know, Hollywood box office is about 50%, maybe a little less, of the overall Chinese box office. So I think given the absence of Hollywood films for so long, it's unlikely that the total box office would exceed 2019.
Okay. Got it. Thank you.
Thank you. It appears there are no further questions at this time. I'd now like to turn the conference back to Mr. Rich Gelfond for closing remarks.
Thank you very much, operator, and thank you for joining us on the call. We were quite pleased by our first half results at IMAX China. As you know, over a year ago period, we went from a loss of $15 million in EBITDA, to a gain of $21 million in EBITDA. I think the Chinese New Year period was very promising. The local language results are very promising, and the missing piece right now is the Hollywood blockbusters.
We're entering into a period where over the next couple months, we'll start to see the Hollywood blockbusters come in. I think we're well-positioned to take advantage of that. When you add to the fact that we have a strong balance sheet, that we're an asset-light model, you can see how quickly the turnaround happened and how much falls to the bottom line. I think we're in a promising period going forward. With that, I'd like to thank you all for participating.
Thank you very much, gentlemen. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.