Our next fireside chat is with IMAX CEO, Rich Gelfond. Rich, thank you for joining us today.
Thanks for having us, Omar.
Well, maybe to start, there's been some scheduling shifts going on on the 2024 slate. Can you talk a little bit about what differentiates IMAX from just traditional exhibitors? And maybe to that end, why should investors be optimistic about IMAX financial trajectory in 2024 and beyond?
So let's start with the most obvious thing. IMAX is not an exhibitor. We're a technology licensing company. We don't sell popcorn, we don't own theaters, we don't have leases, we don't have debt. We have about as much in common with theaters as we have with steel companies. But that narrative is not very well understood. Our balance sheet is extremely strong. We have no net debt, more than 90 countries globally. We play content from all over the world. So over 20% of our box office is non-North American box office, local language box office. We get revenue. We announced this morning a Queen concert, which we're doing in 2024. In 2019, there were 9 films which did over $1 billion, and that was our high box office.
In 2023, there were two films that did over $1 billion, and yet our box office this year is very similar to 2019, even though traditional exhibition is down over 20%. So it's just a completely different model, completely different revenue streams, marketing streams. So part of what's been driving our growth is more people are seeking out premium content. And IMAX, you know, IMAX is not really in the movie business, we're in the experience business. So we do massive percentages of, you know, great experience, great experiences. So even in movies that don't break out, like Napoleon, we played it on half of our showtimes, and we did about 16% of the box office.
Obviously, for Oppenheimer, the Chris Nolan movie, we did about 25%-30% domestically on 1% of the screens, and internationally, we did about 20%. So, we're a place people go to experience events, and the events could be movies, or they could be other things. And, I think, you know, in consumer surveys we've done, people feel that they've done something really special, and they've improved their lives, and they've done something outside of the box, bad analogy, by seeing things in IMAX, and that's what drives us. So now I'll answer the second part about 2024 and beyond. So until the pandemic hit, we were growing at a very rapid pace. You know, even during the last few years of the pandemic, we were positive EBITDA.
2022, we're almost back to pre-pandemic levels outside of China. As I said, this year not only was a strong year for box office, but we have close to 130 signings, which is new theaters growing our network on a global basis, which is almost triple what it was last year. So, you know, it's been a terrific year. Then the strike happened this year, and it ended, I don't know, two weeks ago. I think what people have done is said, "Well, a couple movies are moving out of this year, including Mission: Impossible and, well, you know, some of the Marvel movies." I think a lot of outsiders have said, "Oh, therefore, 2024 is gonna be a really questionable year." I could just tell you, it's way too early.
In two weeks, you can't predict what the whole slate is for 2024. And I came out here for this conference, among other things, that I've met with, I don't know, four different studios in the last two days, and things are moving around on almost a daily basis. So what happened was then, when the strike settled, people moved a couple of big movies. They didn't announce yet what they were gonna do this year, and a lot of films got dated in 2024 on top of each other. Now that it's a few weeks out, people have taken a breath, films are starting to move around, new things are coming in. We opened, you know, as I mentioned, Napoleon, which wasn't on our slate until a couple of months ago, for 2023. Beyoncé opens this weekend.
Queen, we announced today. This year, we had 55 foreign language films. I think we'll have close, closer to 60 or 65 next year. So it's in flux, but I believe 2024 will be a growth year over 2023.
So maybe staying with the 2024 IMAX slate, another event, Warner Bros. and Legendary recently announced that they were moving Dune up to March first, just basically to secure an extended showing on IMAX. Can you describe why there's such a close relationship with Dune, similar or along the lines of Oppenheimer and Avatar? And maybe more broadly, as studios realign their release dates for 2024, how much does an IMAX window factor into it? Thinking, how are you guys managing demand?
The relationship to IMAX counts a lot, and especially, you know, Oppenheimer, where we did, you know, such a big percentage of the box office. I mean, if you had told me for a, a black and white biopic about a physicist that IMAX would do $185 million, I wouldn't have believed you. But again, it's back to this thing about events and seeing things in a special way, and that's why our market share has been going up so much. So Dune One was released in North America during the pandemic, and it was released day and date on HBO Max, which is what it was called at the time. And despite that, where you could kinda get it for free, globally, IMAX did over 20% of the worldwide box office.
So there's very much a brand synergy between IMAX and Dune. Denis Villeneuve, the filmmaker, filmed 40% of the last film with IMAX cameras. This one, he filmed 100% of the film with IMAX cameras. I mean, he's called IMAX the future of cinema. The good news for us is the future's here today, not, you know, not in five years. And the move up to March first was, you know, partly because when they originally moved it to March fifteenth, but no one knew what other movies were moving around. And the Godzilla, I think it was, was moved to the end of March, so we would've only had 2 weeks to play it. But this is a great example of what I was talking about.
Once the dust settled, they said, "You know, we can move it back two weeks and give IMAX more play time." And they did that, and that's an extreme positive for us, given we did a run on Dune One, like a financial model, and in weeks five and six, I could be wrong with the exact, but we did something like 20% of the box office. 'Cause IMAX isn't like a movie exhibitor, that it's one and done, you know, it opens on a weekend and you know, the experience is still very special, you know, more weeks out. And you know, a lot of films have our DNA in them, which is either our aspect ratio or shot with IMAX cameras.
And more and more, given the success. And, you know, we forget, but Avatar just played this January, and we did, I think, $250 million just in IMAX. So the, you know, the studios might not always get it all right, but I think they understand the consumer appeal and the consumer draw, and they design their slates. And then, the last thing I would add is, if you're an exhibitor, you have to fill a 20-plex, so you need lots of movies. IMAX has to fill... I don't know if there's such a word as a one-plex, but, you know, we need one movie to work. We don't need a lot of movies to work. So even though 2024 will be impacted by the strike, it'll be a relatively minimal impact on us.
Any other titles you're excited about in 2024? And you, like you talked before, are you expecting the slate to fill out as it did in 2023, maybe until the strike?
I am expecting it to fill out more, but of the ones that are out there, I'm excited about King Kong. I mean, it's not hard for IMAX fans to understand. You know, big gorilla, big screen. You know, you don't have to market a lot around that, and we have good experience with it. I'm very excited about Joker, which comes out later in the year. And for those who don't know, it's not only Joaquin Phoenix, but it's Lady Gaga, and it's a very different take on it. And, you know, I've seen some of the trailers and whatnot. I think it's going to be really good. Universal's put a lot of money into Wicked One and Wicked Two, and it stars Ariana Grande. And again, it's a spectacle, and it's an event. You know, the kind of thing that does extremely well.
I'm really excited about Deadpool. You know, there are a gain, and those are examples. Like, Deadpool resumed filming a week after the strike ended, and they're scheduled to come out in July, and I've been told by, you know, people at the studio that they're gonna make that date. So there's a lot of, you know, there's a lot of good things out there. I'm sure I'm missing some of them. I'm hopeful on Chinese New Year, because, you know, this year, China just reopened after the pandemic. So China was a year behind the rest of the world, and our experience in the rest of the world was it kinda takes a year to come back to normal. Although China was pretty good for us this year, I think Chinese New Year and the year should add more box office than they did this year.
Maybe it's a little bit early, but beyond 2024, given all the scheduling shifts, how are you feeling about the 2025 slate?
It's not early for that, because what happened is, because some things couldn't go in production because of the strike, when the strike settled, it was like a land grab for 2025. So, our summer slate is almost completely booked up for 2025. So I'll, I'll start with the most obvious one, which is after the summer, which is Avatar 3, comes out, and that's the end of 2025, which is terrific. But in the summer, Top Gun 3 was filmed with IMAX cameras, and that'll be coming out Memorial Day. Superman is coming out over the summer that year. We haven't fully nailed it down yet, but I've seen a lot of the footage around, Formula One, and that's Joe Kosinski, who did, Top Gun: Maverick, which is hugely successful for us.
Oh, and Jerry Bruckheimer is directing it, and that's an Apple IMAX release that I'm, you know, very psyched about. And, Natasha's trying to tell me what I left out for the summer. All right. Oh, Mission: Impossible is, yeah, I wish there was another Top Gun, but, you know, I think, I think that would be a pretty quick turnaround. It's not going to happen that fast. Yeah, Batman, Captain America, there's a lot. 2025 is going to be a breakout year.
Well, maybe, maybe shifting gears to local language, which has been another record-breaking year. This year already have done over $200 million box office. What's driving local language strength around the world, and how do you expect that momentum to carry into 2024 and beyond?
So the first thing that's driving it is our strategic focus on it. So there's always been local language films, but, you know, we were known more as a place to see Hollywood films and Hollywood experiences. If there are any benefits to the pandemic, one of it was it forced us to really focus on diversifying away from Hollywood and finding more alternative sources of content. So we really grew our local language content. So to give you one statistic, in 2019, I think we had three Indian movies, and in 2023, I think we'll have, like, 15. And we have movies from Korea, from Japan, China, where we have an obvious footprint. This year, I think we even had one from Indonesia and one from Thailand.
But the real development out there, which I think we're early on this trend, I think you'll see it in a much bigger way, is that films are not only playing in their local territories. I left out one of the most promising ones, which is Japan. So films aren't only playing in their local territories, but they're playing in other territories. So Japanese anime has been a real breakout for us. So we actually played the Miyazaki film in Japan a few months ago, and I think we're playing it in December or January in the U.S. The Boy and the Heron, it's called. There's a lot of interest in that, and a lot of the anime films have played.
And it's kind of bizarre when you look at where we're making money, but we're making money, like, on an Indian film in Holland or a Japanese film in France. So it's turned out to be actually better than I thought. I thought, Gee, you can make money on Japanese films in Japan, but I didn't realize how big they could be in other territories. And, you know, we're really trying to make a bigger push on that.
Maybe shifting gears to signings, and you guys had a solid step up in the number of signings in 2023. How has that just not been the sheer number of signings, but also just the makeup of these signings? Can you elaborate a little bit into why are not all signings created equal, and what's the opportunity globally?
Sure. So there are 1,700 IMAX theaters in the world. Our TAM is 3,300, and we have 450 in backlog, which means if we do nothing else except open up our backlog in the next couple of years, that's a 25% growth rate in our installed base. And, by the way, we'll be updating our TAM later in the year, and, you know, it, it's gonna go up higher than that. We just haven't announced yet what it is. But, in 2022, we had 47 signings. We have 129, I think, year to date now. And these signings are in really high-performance markets.
So the IMAX model, I mean, there are a number of ways we make money, but just to put it very simply, is we get 18% of the box office wherever the theater is. So, this year, a lot of our signings are in Southeast Asia, and they're in Japan, and, the per-screen average in Japan is $2 million, whereas the per-screen average in the United States is $1 million. So a signing in Japan is worth twice as much to us as a signing is in North America. North America is still pretty good. And, you know, typically on these signings where there's a JV, we have about a 30% IRR on them. So, and also we have a split, as you know, between joint ventures and, and ones where people pay us for the site.
So if you're joint venturing, in particular, you're getting a bigger part of the box office. So obviously, getting a better part of the box office in a high-return territory is worth much more to us. Also, this year was interestingly kind of the reemergence of North America. So North America is one of the more penetrated markets, but this year, something like 20% of our signings have come from North America, which is a good thing. And we're seeing a lot more geographic diversity. There are some markets which are, you know, just for whatever reason, lagging behind. So Germany, which has, I don't know, 70 million people or so, only has nine IMAX theaters. We just signed four more in the last month.
I was in Australia a couple of weeks ago with our head of sales, and that's probably the highest PSA country in the world. We have about $3.5 million per theater on only two screens, and I spoke at an exhibitor convention there, and I asked them what their problem was, whether they drank too much, and they didn't understand that they didn't want to make money. I didn't understand. We have 9 in Ecuador, but we have two in Australia, and we actually have one i n Iraq and one in Kosovo. So after I spoke, I think we'll see some business build there. We have a global team. Again, you don't need a lot of people to do this because they're high-ticket items, kind of like selling boats or airplanes or things like that.
So, you know, this year, we do, we'll do over 130 signings. It's not like you need 100 salesmen. You know, you only need, like, five people. But we target markets that have high per-screen averages. We use those per-screen averages as examples. We use publicity as a way to communicate what the results are, and then we try and get multiple players in a territory and try and play them off against each other to get more rapid growth. I think it's working, and I think there's enormous growth potential in our markets. Now, obviously, the last three years, with countries being closed because of COVID, you know, there hasn't been rapid growth. But there's certainly been growth in our backlog and growth in our signings.
Maybe, maybe staying on that line of thought, how does, how does the combination of this year's signings and a healthy backlog with installs in 2024, could drive just the continued momentum installation, especially with, with the prospect of a big slate in 2025? You just named all the excellent number of films that are coming. How can that drive an accelerated install pace?
So we haven't yet we're in the process of finishing our budget for 2024, so we haven't yet given install guidance 'cause we're not exactly sure what it is yet. And however, you know, I'm as confident as one can be, well, before the budget is finished, that 2024 will be a better year for installs than where we end up in 2023.
Fair enough. Maybe stepping back a little bit and talking about sort of the post-pandemic shift in demand for IMAX and premium experiences and the blockbusterization of cinema, what does that mean for IMAX, and how can, how can that impact the market share potential for IMAX? How could your installs or TAM increase? I think you talked about giving an update later this year. How should we think about that?
So our market share in North America is up 50% from where it was pre-pandemic, and our market share in the rest of the world is up 40% since pre-pandemic. So I mean, again, I've said this before, but I wanna even be more clear about it. We're at pretty much 2019 box office levels, while regular exhibitors are at least 20% or more below. And the reason is that we're taking a bigger piece of the market. The reason is more films are being made, as you said, that are blockbuster and more IMAX kind of films.
The reason is, I think there have been some fundamental changes since the pandemic, so I think when people go out, they really want something special. You know, they've spent enough time streaming movies and sitting on their couch, and I think, you know, especially with bigger screens in the home, you know, they want something that's more special. So I think that, you know, our growth in market share, as well as local language, as well as our growth in network size by the signings, you know, all set the table for a pretty good growth story.
Maybe shifting gears to China, I know that's was a big piece of your story. But so far this year, we've seen a solid recovery from China, but it hasn't been steady, and it hasn't been a full year recovery, because things have been shut down. What inning of the recovery you think we're in, and how do you feel about the China and the opportunity to grow up from here as we head into 2024?
So first of all, China's been surprisingly good performer, not just for us, but for the Chinese movie industry in general. So I don't remember the exact- This was the biggest summer they ever had in the history of China, which is somewhat amazing, considering that it just reopened in late December, early January. And for IMAX, we weren't back to 2019 levels, but we're a lot closer to those levels than they were, you know, during the pandemic part of it. And a lot of that has to do because of our pivot to local language. So there's some changing tastes in China. So when we showed only Hollywood movies, I think as their taste shifted away, you know, that affected us in a negative way.
But this year, I don't remember the number, but it's well over 50% of our box office is from local language film in China. So what inning? You know, to put it that way, I mean, I don't know. I think probably the fifth or the sixth, something like that. So when we're budgeting China for next year, we're budgeting it, box office to be up from where it was this year. And, you know, Avatar, the, literally, the theaters opened on the day Avatar opened, which was, you know, the country was shut down in quarantine, drones flying over people's houses. You know, it was a pretty bleak situation. And on Avatar, we did over $50 million, so it snapped back pretty quickly.
Then, during Chinese New Year, it was our best Chinese New Year ever, and we did a film called Wandering Earth II, which we did $52 million there. And if you look at our indexing in China, which is our percentage of the box office, when we're involved in a film, it's pretty much at record levels. So, you know, I think it's got a ways to go, but I think it's on a good trajectory.
Are you starting to see some pickup in activity from conversations you're having with studios over there in terms of just installs and signings and just as you know, as the recovery is taking hold?
We announced about a month ago a new signing with a company called Hengdian. That was a 20-theater deal, which was the biggest deal we've done in three years. We have started to see activity picking up in terms of growth, and I think in the fourth quarter, we'll see more installs in China than we've seen in other quarters this year. We saw the same pattern. You know, China was just a year behind, so China was a 2022-end of 2022, 2023 reopening story. For example, Europe was much more a end of 2021, 2022 story, and then this year, 2023, after a full year, Europe did, you know, much better than it did in the initial year, and even North America, the same thing happened. I have every reason to believe the same pattern will emerge in China.
Maybe shifting gears to your consumer in tech-your in-home tech business. You recently announced that you were bringing that under a new group called IMAX Streaming and Consumer Technology. Can you give us an update on the latest there? How is that business developing?
Sure. So we bought a relatively small company, I think it was a $20-$25 million acquisition, that had fantastic technology, but it was kind of a small disruptor. And what the technology does is it measures quality in an objective way, using AI technology, even before that was a great buzzword to get your stock moving at the time we bought it. And what the company does is it so some of our clients are Disney+, Comcast, HBO, you know, Apple, but in a very small way, 'cause they were a small company, and they were dealing at, you know, lower levels of those organizations. And what it does is it calibrates what device the consumer is looking at, and it calibrates how much the streamer should compress the image.
So if you're watching the news on an iPhone, you can really compress that because, you know, you're not, you're not looking for high resolution on your iPhone for the news. But if you're watching, Oppenheimer on a 100-inch screen, you can't compress that very much. So when you compress, the signal, you save a lot of money. So at the moment, we believe we can save about 20% of streaming costs, and we bought that company at a time when streamers became very cost-conscious, rather than just subscriber-conscious. So since we've bought that company, we integrated it with IMAX, which is what you said, and we think the brand helps a lot. The company was called SSIMWAVE.
So when you knock on, you know, a big streaming company and say, "Hey, we're SSIMWAVE," you know, they send you to the sub-basement to meet the assistant to the assistant. When you say you're IMAX, you know, you get a meeting with the CFO or the head of technology, and we've been starting to do that. So we're now meeting a lot of the right people. We have a lot of the sales force in place, and a lot of the product, when we bought it, required to be more plug-and-play. It was kind of somewhat customized. So we spent the last year really beefing up how to make it plug-and-play, how to connect with the right relationships, and how to put together the right sales force. I think we're in a pretty good place now, and I think in 2024, we'll start to see the results of that.
When do you think you will start making meaningful contributions to the IMAX bottom line? Will that be 2024
Well, well
Maybe more of a two to three years?
The good news is a SaaS revenue model, so it's super high margins, like in the 80% range. So on the revenue line, you know, I think it'll probably take a couple of years before it impacts our revenues. But on the EBITDA line and the earnings line, I would hope it would start in 2024.
That's great. With expectations for continued top-line growth, can you describe what's the opportunity for EBITDA to grow faster, given your asset light model and your operating leverage in the business? Any, any high-level thoughts on how should we think about 2024 and 2025?
Well, we were gonna have an investor day before the strike, but we thought that wasn't a terribly good timing. So we're going to have one this year. And, you know, when we run out our 5-year model, I mean, you know, I think we could significantly grow our EBITDA. I'm looking at Natasha, whether she wants me to say this or not, but she works for me, so I guess I could say it. For those of you who don't know, Natasha is our CFO, and I'm afraid of her, obviously. So, you know, we could double our EBITDA over a five to seven year span.
We'll take that. Maybe to wrap things up, how should we think about capital allocation priorities for IMAX as you generate inc- you know, your free cash has increased, operating cash flows has also risen. How should we think about just your capital allocation priorities as we move into 2024?
Well, we've been very aggressive in buying back our stock over the last number of years. We bought in $80 million, I think, last year. We've shrunk our capitalization by 15% since the pandemic, which is, you know, just an interesting point. The guidance for this year is very similar to where we finished 2019, and we have 15% less shares outstanding, but our stock trades a lot lower than it did at that time in a market, which is up significantly. So I think a lot of people, you know, just don't understand our story, and they think we get swept away with the exhibitor kind of narrative that's out there, which is a totally different narrative.
So, you know, we've continued buying in stock, using capital, because we think our stock is, you know, has been very cheap recently. We invest a lot of our free cash flow in joint ventures, which is in growing the network. So one of our models is in, you know, use a place like Japan with a very high per-screen average, and we'll sell our equipment for about $1 million, roughly. But if someone doesn't want to put up their capital and they say: You want to joint venture with us in the right locations, we'll do that. And we use a significant amount of capital doing that, and that has about a 30% IRR on it to us.
You know, our R&D tends to come in clumps, so when we change platforms, like we've changed recently to all. Eventually, it'll be all laser, versus just- we went from analog to digital to laser. But we've pretty much put a lot of that behind us. So we're, our R&D spend is not very high. And then, you know, we're not really on the hunt for acquisitions, but if there are, you know, small things like SSIMWAVE, which fit in, I think that's something we'd be open to.
Thank you very much, Rich. That was great.