Thank you very much for being here. Greatly appreciated. For those that do not know me, I am Eric Handler, the Media and Entertainment Analyst here at Roth Capital. Our next company today is IMAX Corporation. We're very happy to have Natasha Fernandes, the company's Chief Financial Officer. For those of you not familiar with IMAX, IMAX, obviously, you see all the time in movie posters and trailers. Very important to know, IMAX is not a movie theater company. They are an entertainment technology platform. I figure that's a good distinction. I know Rich, always a very important subject for Rich, near and dear to him. Natasha, thank you very much for being here.
Thanks for having us, Eric.
Let's talk big picture first, because this is definitely a very interesting geopolitical and economic time that we're in right now. You are a global company. Why do you think now is a good time to be invested in IMAX?
I think it's a great time to be invested in IMAX. First of all, I've been at IMAX for 18 years, so I've seen the company through all of its different seasons. I'm particularly excited about the season we are in and looking forward to in the next few years and beyond. You know, in this time, obviously, there's a lot going on in the markets and in just, you know, everything that's happening. The one thing about our business, as you said, is global. It's global in nature. What's helpful about that is in times when certain markets are not doing as well or economies are not doing as well, other countries are. For instance, you know, we are in the U.S., we are in China, we are in 90 countries around the world in where we operate.
You know, last year, the U.S. performed particularly well for us. It was our second best year from a box office perspective domestically, whereas China is already off to the races this year. I mean, we're already at 80% of our box office, full year box office in 2024 for China. You can see how that helps ebb and flow and create a strength to our model on the global scale. Also from a resiliency perspective, I mean, we've seen recessionary times. In those times, we've seen how going to the movies is an affordable luxury. We've actually done better during those times because we've come out of them stronger because, you know, people may not go on those trips or spend on bigger, expensive ticket items like cars or even big dinners. Going to a movie is very affordable. It's entertaining.
It's, you know, three hours of your time. You get to eat something, you can have, you know, beer or whatever. You're enjoying it with a communal experience. I think that's what's really important is, you know, I've been to particularly some very large theaters like Lincoln Square in New York. When it's packed and everybody's watching the movie, you hear everybody laugh together, you hear people clap, and it's just an enjoyable experience. From that perspective. Also, even this year, as we look, our Hollywood slate is stronger than ever with over 12 Filmed for IMAX titles, a record for us, which means it's using our technology. On top of that, that then leads to stronger operating leverage and margins.
You know, I'm really excited about the year ahead of us, regardless of where things are in the market right now.
That's great. You know, when you look at this year, this year is really the first year for the industry where you can't say, oh, there's a COVID impact that impacted the slate or the Hollywood strike is, you know, was impacted slate. I mean, it seems like you've got sort of clean air to go through. How do you feel about where the position the studios are in now in terms of, you know, the production slates? Particularly, obviously, you guys are focused on blockbuster movies. How do you feel about where the studios are right now in terms of how they're ramping up? Do you feel like they're devoting just as much time as ever to the blockbuster movies? You're in a good spot for that?
We feel very confident. I mean, I think we're in the best position we've ever been in the industry. It's been, you know, I think you can see it in our market share. Our market share, for instance, domestically has grown over 50% in the past few years. Even globally, it's grown 20%. That's showing the strength of the IMAX brand and the moat around our business. That also shows how studios and filmmakers are leaning into IMAX. I mean, in more recent days, filmmakers are the ones coming to us first. I'd say five, six years ago, you probably had the one major filmmaker coming to us, who we all know who that is. In more recent days, you have many filmmakers coming directly to us first and then the studios.
What is helpful about that is the studios are partnering more with us, coming to us because they want their movie to have an IMAX release with it because they understand what that could do to lift the box office for that movie and really associate it with a very strong global brand. In that, you know, they are leaning in when they market. They are marketing it as an IMAX experience and an IMAX title. Filmmakers are also going out there and saying, I filmed it with IMAX cameras. You need to see it in IMAX the way I intended you to see it. It is true. I have seen, you know, I have seen the same movie in multiple theaters and in the IMAX and not in IMAX just to see the difference as well.
You can see the technology and the difference, especially when they're using our cameras and the expanded aspect ratio. It fills the screen in a more immersive way too.
Yeah, it does seem like as a consumer has come back post-COVID, premium large formats have definitely increased in market share. People are looking for that premium experience. IMAX is the most premium experience. How has that sort of shaped you as you're talking to more directors? You're getting, you know, your studios want to work with you. You know, is that something leverageable for IMAX itself, you know, as you talk to the studios, as you talk to directors, as you talk to more theaters? You know, how is that positively impacting IMAX both on the theater side and on the studio side?
It is completely impacting us in a very positive way. I mean, one, the studios are coming to us well in advance. I do not think we have ever been in a position where we have had such good visibility into numerous years out, multiple years out. For instance, all of most of 2025, we knew before we even hit 2025, which I would say a few years ago, we would not have known most of the film slate. I mean, as we headed into 2024, when we sat in 2023 and I worked on budgets, for instance, I would have not known most of that film slate. Whereas this year, when we prepped the budget for 2025, you knew the film slate because the studios are coming in earlier and leaning in. The same with the filmmakers.
I think that that's all working towards that impact of exhibitors understanding they need to have an IMAX screen in order to capture the box office. Because if filmmakers and studios are leaning into IMAX and understanding that IMAX lifts the box office of titles and makes it a higher level title and movie for people to experience, then exhibitors also realize they need an IMAX screen. You know, as such, obviously, we gave out guidance this year to install 145-160 systems and continue to expand our network. You know, we're over 1,730 screens worldwide, 90 countries. That continues to grow. I think that growth is coming from the fact that studios and filmmakers are leaning in.
Let's talk about that for a second. I mean, when you look at your runway for growth, I know you've provided in the past, you know, sort of a total addressable market, and that has grown considerably over time. Where are you and where are your opportunities, do you think, for the most significant growth for expansion?
We have, we call it zones. We have about, we did the analysis, I'd say, a little over a year ago. We'll probably do one very soon as well. We do it every couple of years. The last time we did the analysis, we zoned about 3,600 locations worldwide. I mean, we're only at about 1,700 locations right now. We have a backlog of another 380 new screens. You know, about 2,000, you'd say, between our network and our confirmed backlog and pipeline that's going to feed into there. We still have another 1,600 locations to go, right, and to fill in. That pipeline continues to get filled in every year. I mean, we've already had 10 signings in Japan this year, and we're only, you know, a couple of months in. Some of those will get installed this year.
I think you're seeing that the pace of the signings and the installs are increasing versus prior years. I mean, the 145-160 guidance we gave for reference, we installed 146 last year, right? I think from that perspective, we're raising the bar each year as we continue to grow our footprint. That pipeline is all committed backlog. Having the backlog there feeds naturally into installations. You fill it again with new signings each year, and it continues to operate in a very healthy way to grow that footprint.
It's amazing to think for as long as IMAX has been around, you keep installing, I'll use a round number, 150 screens a year. You could double in another 10 years.
Yeah.
There is still a lot of white space for the company.
A lot of growth to still happen. You know, I think we've said it publicly already that we believe 2025 will be our best year ever for box office. We think as we continue to expand the footprint, that naturally feeds growth in box office along with the fact that our brand and our position in the industry is strengthening. You continue to capture more market share that way. Another area we've been focusing on is just utilization of our existing footprint. Expand your footprint, yes, that creates growth, but increase the utilization on your existing footprint. I mean, if you increased your utilization by just one point, that would be $75 million-$100 million of box office just on your existing base. Growth coming from your existing network and from expansion.
I'll come back to that in a minute. You know, when we do look at your, you know, your gross global box office guidance for the year of around $1.2 billion, can you maybe dissect a little bit of what sort of goes into that guidance and sort of like your key drivers to think about or that people can track to know how well you're doing at the moment?
Sure. Our guidance was over $1.2 billion of box office. That's a significant growth, over 30% growth versus the $900 million in 2024. You know, I think there's about three or four factors that we put into it when we came through. One would obviously be the China recovery. In 2024, box office was just shy of $200 million in China. We 100% believe that there would be a recovery in 2025, of which we've already seen, right, with already achieving 80% of 2024's number. There's still the rest of the year to go. Also, Hollywood and domestic, our growth in domestic. I mean, we talked about our market share doubling over the past handful of years domestically. That just continues to increase. In 2024, what's interesting is we actually signed agreements with eight new partners domestically.
There is still a lot of growth to be had domestically for IMAX in particular. I think that that is another area because those Filmed for IMAX titles, we have a trend of performing 20% higher or indexing 20% higher on opening weekends domestically. With a record number of those Filmed for IMAX titles this year, that lends towards the $1.2 billion. Our rest of world footprint, in 2024, we grew our rest of world footprint of screens by 5%. In the last handful of years, we have grown at 25%. If you think about the fact that we have now set up that rest of world, which is still underpenetrated, we have only penetrated about 35% of it, but we have grown at 25% in the handful of years.
Now it's set up to receive the really strong Hollywood slate that's set for this year. I think that will obviously have growth there and perform. That's built into the $1.2 billion. The last piece is local language. You know, I'd say, and you've been around a long time, local language used to be a very low contributor to our model. It was low single digits. Now it's 15%-20% of our box office. It continues to grow. Year-t o- date, we've already exceeded our local language full year of 2024. Just from that perspective, we're growing that too. You can see how easily our $1.2 billion was built.
Let's focus on China a little bit because China has had some stops and starts since coming out of the pandemic. This year, record Chinese New Year thanks to Ne Zha 2, which now has done $160 billion.
Over $2 billion worldwide. Yeah.
I mean, it's amazing to think that there's never been a movie that has done $1 billion in one specific market. And this one's done $2 billion in China. In the sort of what have you done for me lately, investment community, Ne Zha, fantastic way to start the year. We don't always have the best visibility into China. Is this a one-off for China or is China back and you have a lot of other good movies to look forward to as the year progresses?
Yeah, I think this is the beginning of a great year. Now, do I think there's another $2 billion movie coming out of there in one market? Maybe not. You never know. I mean, we didn't predict Ne Zha 2 for sure. I did go and see it actually at Metreon in San Francisco. It was fantastic. I think it feeds to all different, you know, demographics as well. I can see why it's doing so well. I think part of that is we actually do have more visibility into the year too. I mean, there's at least three Filmed for IMAX local language titles that we know of.
I might butcher the names, but Dongji Island, Yi Wu, and A Writer's Odyssey 2, I think, are the other three local language Filmed for IMAX titles that are scheduled to come out this year, along with the Hollywood slate. I mean, the Hollywood slate alone, there's a handful of titles at a minimum in there that really do lend well to the consumer base in China. Zootopia, which I don't think you would ever expect, but Zootopia has a really strong IP following in China. That actually part of their theme park over there has a specific Zootopia area. We think that'll do really well. Obviously, Jurassic World, if you listen to, I know you did, but if you listen to the earnings call, Rich actually mentioned a concept of creature features. What we found is like these creature features do really well in China.
Jurassic, the other one is How to Train Your Dragon, the live action, which actually I'm pretty excited about. I think it's going to do really well generally. And then Mission, Tom Cruise always does well in China. And then, you know, I think there's a potential for F1 as well to do really well among others in the slate too.
While Hollywood has definitely had a little bit of a tougher time post-pandemic in China, you know, the market still wants Hollywood movies. And this year, hopefully, will show that Hollywood could still succeed in China.
Yeah, I think what it comes down to is just like it is here in domestic, the consumers in China are discriminating as well. They want good content. I can't blame them for that. As good content comes across, we've seen they will show up. I mean, Ne Zha 2 shows you that if there's good content, they will come. We just need to provide that and do that in a specific way. We actually, Ne Zha 2, for instance, historically on local languages generally in China, we would have indexed 4%-5%. Animation, we would have indexed only about 2%. Taken about 2% of the market share.
For Ne Zha 2, we're at about, we're just over 7% of market share, which is amazing to see that how much not only are consumers coming out to IMAX, but it's because the studio is also leaning into IMAX and doing specific IMAX pushes as well. From a marketing perspective, back to the way that our relationships with studios have evolved. I think you couple that with our normal performance on Hollywood titles in China. I mean, we're usually mid-teens in China from a Hollywood perspective from a market share. There's that opportunity as well. Lots of growth to be had there too from just even the consumers coming out. I think they're there. We just got to give them the content they want to see similar to North America.
Yep. Now, you also talked about, you know, a couple of the other drivers, local language content and alternative content. Obviously, you've been well associated with Chinese local language content. Where else are you seeing success in the world with local language content?
We've seen a lot of success in India. We've spent the pandemic really honing in on trying to develop those relationships with local studios, which is why pre-pandemic, you know, local language was a very low single-digit contributor to our business. Taking that time to build the relationships with local studios, we've been able to capture a lot of growth in India from local language. Japan, this year, we're really excited about Demon Slayer. Demon Slayer is a very big IP in Japan. The first Demon Slayer was its top movie in Japan with $365 million. The second one is coming out this year, which we're excited for. We've actually seen that in even the signings that have happened. I mentioned earlier, we've had 10 signings already this year in Japan. We've grown our footprint.
We've actually doubled our footprint in Japan over the past few years. We continue to grow it, which is all in relation to the local language growth because actually local language does better in Japan, just like in China where local language does better. Growing the footprint as we have more local language to provide to exhibitors really helps the footprint growth too. Malaysia, we've seen a lot of growth, Indonesia from a local language perspective. It's exciting because we're actually doing our first Vietnamese and Arabic titles this year as well. Rich and I were actually in separate trips. We were in the Middle East in late 2024. We just see it as a really good market for growth right now. We're only about 20% penetrated. There's a lot of excitement.
They like entertainment and out-of-home premium brand experiences. IMAX fits very well into that economy as well.
It does seem if you are going to be a true global company and you want to, you know, significantly grow, you're going to have to, local language is going to be a key because, you know, we said, I think in India, it's like 90% local language. Japan is over 50%. You are really going to have to dig in on some of these markets if you want to truly succeed.
Yeah, no, exactly. We do have a part of our distribution team, actually we have built a local language team since the pandemic. We have built out, what I meant to talk about earlier is, we built out an actual process for remastering the content in a more efficient way in the cloud as well for local language because the issue with local language studios is they actually deliver the content very late. You do not have a lot of time to work on it like you do for Hollywood, right? For us, because we have built this cloud-based technology, we can essentially remaster it into that IMAX version of content in a much more efficient way. We have more access to more titles basically from a local language perspective.
That's what's been helping our growth in all the rest of world markets because yes, Hollywood does well in the rest of world regions. Really, even in France and Germany and other countries, they want their local language content as well. That's where we have an opportunity before us to have a lot of growth coming in the future is from local language.
Now, what about with alternative content? Like how significant is alternative content these days? I mean, it seems like there's always some one-offs. You just had the Led Zeppelin movie last year, that Queen: Rock Montreal. You do some stuff with A24. What's sort of like the specific strategy around alternative content and how meaningful could it be?
I mean, going back to the local language piece, if you think about a handful of years, it was a very low contributor, like a couple percent contributor to our model. There obviously is an opportunity for alternative content to be significant as well because local language has grown from 2%- 3% to now it's 15%-20% of our model. Alternative content is currently a small contributor to our model, low single digits. An opportunity to grow that business, I mean, it comes back to that utilization point. How do you increase the utilization on your existing footprint? That's by giving, you know, these one-time only concert films. Becoming Led Zeppelin, I mean, it's our highest concert film so far to date at over $4.5 million. We're doing Pink Floyd in April. We did Queen Rock last year.
But then also doing other events. Like what we found is the streaming platforms actually appreciate our very large distribution platform as a way to launch their series. And so, you know, we've done that with Amazon, like the Fallout series they've used us to launch their series. We've done Japanese content. I think it was Demon Slayer. We did a couple episodes of that as they launched their new season as well. And so lots of opportunity there. Plus we do our live Q&As. And then the last Wednesday, I believe, or Thursday of every month, we have a partnership with A24 where we essentially bring back an iconic A24 title into the theaters. And what it's done is created higher utilization for that one show than you would have had if it was like week three of Mickey 17, for instance, right?
Getting the ability to create more profitability on your existing footprint. You couple that with adding in other types of content like esports. League of Legends, we did in China, in Korea, across 150 locations. It was 90% capacity. What's great about that model is you're bringing new consumers to the IMAX experience because like we did exit surveys and polls. Most of those individuals who went to the League of Legends event had never been in an IMAX location before. Now when they go to the movies, they understand the experience of IMAX. Now you have a new fan base, right? I think what's great is it's creating this, opening the aperture and giving new content, but then getting new consumers into.
I think it was even last week we did Le Classique in France, which is soccer across a handful of screens. They were sold out within 24 hours. Lots of opportunity because sports is a really big area too, right?
Okay. We're quickly running out of time, but we've spent a lot of time talking about revenue. I think one of the underappreciated aspects of your business is there's a significant amount of operating leverage. You're now approaching 40% adjusted EBITDA margin. Can you maybe in 30 seconds or less quickly talk about the opportunity for margin expansion in your business?
Yeah, for sure. I mean, as you grow box office, we actually have a fixed cost base. As you grow box office, we don't have to spend more on film remastering costs or marketing or any of that. All of that falls straight to the bottom line. You know, you can see it straight go to margin and to EBITDA and to cash. The other part is we've spent a lot of time, and I've spent a lot of time personally on expense discipline and focusing all of our management on that. We've actually, that's how we achieved our 39% EBITDA margin in 2024. We're continuing to reduce our fixed cost base so that we can let all of those additional dollars fall through. You've seen it, like the Oppenheimer quarter, for instance, we had EBITDA margin of 48%.
There is a very large opportunity for us ahead with respect to operating leverage.
A lot more we could talk about, but we're.
This presentation has now.