Good afternoon. This is Meghan Durkin. I cover U.S. theaters here at Credit Suisse. We're happy to have with us Richard Gelfond, the CEO, and Patrick McClymont, the CFO of IMAX Corporation. Thank you so much for being here, guys. So I'm going to just jump right into it. We only have 25 or 30 minutes for this session. So, Rich, the world is opening up. The market has been excited about this recovery for a few weeks. We're starting to hear about reopenings for the New York, the U.S. theaters. Can you give us an update on where you stand on opening your screens around the world, and maybe start with China?
So China still hasn't set a date, Meghan. We've heard rumors that it'll be late June, early July. But they and our people are dealing with the people in China about opening protocols. But the date is supposed to be set in the next week or two. In the rest of the world, it varies. So parts of Asia are already open. Now, Japan, Korea, Taiwan are open. The Middle East is open. I think parts of South America will be later than the rest. But I think most of the world, including the U.S., will open in early July. And that coincides with, you know, late in July is when the first major film releases should happen.
Okay. So, you know, what are the steps that need to be taken in order to get these screens open in the U.S.? What is the industry working on for the opening? You know, what are the processes that still have to be done?
So it depends a lot on local regulation. For now, a lot of the U.S. is there are planned openings. In California, it was left to the local municipality. That has to be worked through. New York is the other major market that still hasn't given guidance on when they're going to allow openings. A lot of the protocols have already been put in place. So for example, they'll open with some limited capacity. It'll be every other seat or every other row or a checkerboard in some way. And the likely limitations will be 25% or 50%. And then they'll open more and more over time. I think in most places, you'll see the employees at the theaters wearing masks. I think it'll vary whether food's going to be allowed for sale or not. And then it'll depend on how it goes.
It's actually a little bit curious, though, because when you get down to the basics of opening theaters, they actually should be, in theory, a lot safer than places like restaurants or sports stadiums. Because in those other environments, people are talking, people are clapping, there are people going by. In a theater, you kind of go into a row in a dark place. You're faced ahead. You sit there. You look at a screen. You leave. So the openings are rather confusing, what happens where. But when you take a step back, the theater seems to be a safer environment than a lot of other places that are opening.
Got it. And the capacity restrictions have obviously been a huge topic for investors. We get the question a lot. So can you talk about what you see as sellouts typically on your screens? And maybe if you could touch on what you're seeing so far in those markets where you are open?
Yes. So the markets we are open, it's varying from market to market. It's not new movies. It's re-releases, library movies or films that haven't been released in those territories, and with an asterisk, it's been surprisingly robust, and the asterisk is subject to capacity limitations. So I think it's in Denmark or somewhere in Scandinavia. They re-released a lot of Chris Nolan's movies, and we had sellouts every day, but there were sellouts in the context of a limited capacity. I think in Korea, we had Avengers: Endgame and Avengers: Infinity War. And they did very well, but again, it's in the context of very limited capacity. I think, you know, we don't think in the very early going that people should be looking at this and expecting huge box office numbers. For us, for IMAX, it's about getting open.
As you know, we have a very strong balance sheet. We have over a two-year runway to get open, so for us, it's about opening right and making sure people are healthy that go there, and equally important that they feel safe, and I'm a little bit concerned that people are very focused on, what's the opening weekend when you open? I think investors really have to get that out of their minds. It's not going to be, you know, it's not going to challenge Avengers: Endgame for the biggest opening of all time. That's just not happening. On the other hand, traditional cinema for a good year is typically at 20%-25% of capacity. IMAX, which had a record year just a few months ago that ended, our worldwide capacity was at 10%.
So capacity constraints aren't as big a negative as they might be in a restaurant or they might be in a Broadway theater. And the reason is that these boxes are built for big Friday nights and big Saturday nights. So the key is, can you spread it out during the week? And I think that's naturally going to happen before this vaccine. Because I think not everybody's going to want to run and go on Saturday night. I think people a little older, my contemporaries, are going to say, let's go Thursday afternoon because we're working staggered hours anyway. Or let's go, you know, Wednesday night. So, and then we're going to try and market to stagger the hours. So how do we move people from Saturday nights? Is it discounts? Is it promotions? What is it?
So I think, yeah, I think capacity is definitely an issue to think about it. But you can't think about it like you would in other businesses. Because this particular business is built for Friday, Saturday nights. So it's really, there's enough capacity there. The question, which I don't think any of us really know the answer to, is how does it spread out?
Can you talk a little bit about what, what the sellouts are on the weekends versus the weekdays? Because if you're averaging 10% for the last year, you know, that's highest on the Friday, Saturday night, right?
Yeah. I don't know what that answer is. But I can give you an idea in an indirect way, which is that a movie that we did 150, 100, that opened to $150 million by Captain Marvel, for example, that kind of movie, that was 50% utilization for IMAX. So, in fact, that's a pretty big movie. So we could accommodate, you know, reduced capacity. Again, it varied by city to city, but it gives you a general idea. For a film like Avengers: Endgame, which did much more than that, was the biggest movie of all time, that's when you start to see capacity utilizations affect you. So if you ask my guess, I think it will dampen the potential a little bit. But I don't think it'll dampen the potential as much as people might think in the abstract.
But again, to repeat what I said before, you know, I think limited capacity will exist for a while. And for IMAX, where we have a very long-term staying power, the issues are really how to reinforce the brand, how to reinforce the movie-going experience. And then, you know, as capacity opens, how to get into the bigger numbers.
Okay. Well, let's move to the film slate, which has been a huge topic. You know, Tenet shifted. Now, Mulan is the first big movie that's slated for July 24th. So now, you know, the initial product is expected to be library content. You know, what movies will you be showing initially? And then what do you expect will happen with Mulan and with Tenet at the end of July? Do you think they'll stay there? What are the puts and takes there?
So Warner Bros., when they move Mulan from the 17th to the 31st of July, announced that they're re-releasing Inception on the 17th. And I think that will do some business. And as you kind of framed in your question, I think there'll be library titles also at that time. And there's a Russell Crowe movie coming out in early July. So there will be some kind of product that gets people used to going back to the movies. Mulan is the first new blockbuster scheduled, which is on the 24th of July right now. And then a week later is Tenet. You never know until the release date is kind of the bottom line. Because we're dealing with government regulations. We're dealing with a virus. You know, anything could happen. However, I think Warner put a lot of thought into moving it to the 31st.
And it has to do with their own marketing campaign. And it has to do with their distribution on a worldwide basis and what opens where. So I think we have to assume that it's going to open at that time. I think they thought a lot about it. I know Chris Nolan and Emma were very involved in it. And that's our working assumption. I think it's highly likely. But I can't say 100%. For Mulan, Disney announced its intention to open it on the 24th. They announced it before Tenet moved. We sure hope it comes out on the 24th. And as a matter of fact, it presents an opportunity for us. Because when Tenet was going to open on the 17th, it would have been difficult in North America to play Mulan. But now that Mulan is earlier, we can actually play Mulan as well as Tenet.
Again, this is, it's proven to me so much more complicated than I would have thought, because IMAX is in the middle of the ecosystem, and we have relationships with exhibitors around the world, relationships with studios around the world, and filmmakers and governments. You realize how complicated it is, so I think the studios want to do the right thing by exhibitors, by moviegoers, by filmgoers, by their own economic concerns. And it's really hard to figure out when the right time is, but I think I've never seen better communication between all of those constituencies. And I think everybody's very much trying to do the right thing and on the same page about how do we make this work.
And then for the rest of 2020, it feels like, you know, there could be other movies that shift. You know, production has stopped. You know, there was already Warner Bros. sort of pushed back a bunch of their movies. And some slipped out of 2020 into 2021. How are you feeling about the rest of the year right now?
I think there's enough good movies out there who are far along in post-production that the slate for this year will be, you know, quite good. You're right. Things can move. But some of the movies were actually really good. Like I explained to you how we could now do Mulan and Tenet. Bond moved five days earlier. So that gives that a longer window to play. Wonder Woman moved into October. And I think that had a lot to do with the moving of Tenet. Because Wonder Woman was supposed to come out the second week in August. So it would have stepped a little bit on the toes of Tenet and got moved to August. Top Gun, of course, got moved to Christmas time. So I think the slate as it stands now is pretty well spread out.
And the movies that I mentioned to you are all far enough along where there's not an issue with them meeting their release dates. I think, you know, if things move further, it would likely have to do with issues like capacity or second waves. But I think absent those things, there's a pretty good chance what's in place now for the year will hold for the year.
And then what about for 2021? Because that's the risk for on the production delays, it feels like there's, it's unknown.
So 2021 was scheduled to be, you know, one of the best years in the last decade. There are currently five Marvel movies scheduled for 2021. By the way, for 2020, I forgot Black Widow, which is obviously a very big Disney Marvel movie. There are a lot of movies, five Marvel movies. There are two DC Comics movies. There's Mission: Impossible. There is Avatar scheduled for the end of the year. There's more. I'm not remembering. But there's a lot scheduled. I think some of them are in more advanced. King Kong just moved to 2021. I think Fast and Furious is in 2021. There are a lot of movies that are pretty far along in their production process. IMAX just hosted a CEO forum a couple of weeks ago for about 80% of the world's box office with IMAX partners on a global basis.
And we had Chuck Roven, the producer of Wonder Woman, talking about the scheduling. And he seemed pretty optimistic. Because the filming part of a movie is only really one-third of its whole production process. He seemed to think that as production opened up, which it's starting to do now, it wouldn't affect the 2021 slate that much. But again, there are a lot of things there. I think there's room for slippage. It would still be a very strong slate. But it's subject to the caveat I gave you before, you know, which is health issues.
Okay. Why don't we shift to PVOD? I think, you know, it's been a big topic. Trolls World Tour, obviously, was a big news story and the resulting dispute between AMC and Universal. You know, it it seems like something has to give there. So how do you think this could play out? What do you think on the exclusive theatrical window over time?
So I have to remind everybody that IMAX is in the blockbuster business. We play blockbusters. And I don't think that the issues around Trolls World Tour have anything to do with blockbusters. And people have focused on the fact that of Trolls World Tour going PVOD. But every other movie that was scheduled during the year is scheduled to move to a theatrical release. And that includes some of the ones I just mentioned, whether it's Top Gun or Tenet or Wonder Woman or Bond. So that was the exception. And anyway, you know, I don't, that certainly wasn't an IMAX kind of movie. And to give Universal credit, I understood why they moved it. It was scheduled to be released in April. They had spent purportedly $50 million in marketing money. And if they had to move it, that would be a sunk cost.
And they would have had to start over again. So it was a unicorn kind of event in that movie. They moved it. It did okay. But let's be clear, there's no evidence that a PVOD release is ever going to do for a blockbuster what a theatrical release did. And that's because the numbers were decent for it on PVOD. And Universal even compared them to some extent to what a theatrical release would have done. But it eliminated the ancillary windows. So after the theatrical release, it goes to electronic sell-through. It goes to television. It goes to streaming. There's lots of other revenue. International. After Trolls was released, it didn't go to, well, it went to international. But because it had already been released and there's a lot of piracy, the numbers in international were quite small.
So just if people come away with one thing, for blockbuster movies, PVOD doesn't work. For mid-level movies, it might work, the economics. But when you lose those ancillaries, it just doesn't happen. So there's been a lot of noise around it and a lot of media, as you said. But I think it's not going to have any effect on the kind of movies we do, blockbuster movies. For mid-level movies, the kinds of movies that compete with streaming now, you know, it's possible that some of those will move. It's also possible that it'll have an effect on the windows for those movies. But you know, there have been some interesting studies done in this period by a number of the studios that we've seen. And people's price point for PVOD, PVOD is $10 and below. That's in North America.
And the rest of the world isn't really equipped for large streaming releases. So again, the numbers didn't really work at $20. They certainly don't work at $10. And it's interesting why. I don't want to digress for too long. But I think you'll find this interesting, which is when PVOD was at a higher price point, there weren't a lot of streaming services. So when you have Disney+ selling a slate of content for $6 and you have, you know, Warner just coming out and Universal and Netflix, think through how many people are going to pay $20 for one piece of content. So I just think it's a model that doesn't work right now.
Got it. Well, I just wanted to kind of touch on the fact that, you know, AMC saying that they won't play Universal's titles, that could risk your screens not getting, you know, Fast 9 and Jurassic World sequels into your screens.
So I don't think so. Because first of all, I think things have warmed up there. I think, I think even Universal has said, they have not said they're releasing all their films in PVOD. I think they've said some of their films they might do in PVOD. And I can't imagine films like Fast and Furious and Jurassic World, you know, bypassing the theatrical window. As I said, when we have more time in the real world, I can go through the numbers. But the numbers just don't work for that. I think Universal doesn't release a blockbuster of that magnitude until next year. So I think there's a lot of time to work that out. And I would, I would make a big bet that this resolves itself.
Yeah, I agree with that. So my next topic is sort of a post-COVID world. You know, as the entertainment technology company, how is IMAX positioned beyond the current pandemic? And how do you think the industry will be changing?
So I think 2019, 2019 was a, you know, a fantastic year for us in China. We had record box office. Our network is growing globally by about 10%. We have a backlog, which is equivalent to about three years of installations. I should say even during this period of time, we're still having a lot of dialogue about new IMAX theaters going up. So I think we'll continue to expand our global footprint. I think that people are going to crave brands even more than they did before. I think there have been some changes in viewer habits to sitting on the couch and watching streaming things. But I think for blockbuster movies, what IMAX does, people are going to want to get out even more. I don't know if you saw the recent studies.
Bloomberg had an article in the last day or two that there's been a backlash against streaming, that people really want to get off their couches and do different things. And I think to the extent they want something really different, that's going to play right into what IMAX does. We're also working on other new ventures, as you're aware, including a way to make images in the home look better. It's called IMAX Enhanced on large televisions and IMAX Live. So, you know, can't wait till it gets back to normal. And I would add that as an organization, we didn't furlough people. We moved people to four-day work weeks. And we've had a very disciplined approach to what the future looks like.
So we've got teams of people working on things like how we could analyze more data, how we could market better, how we could use artificial intelligence to benefit our company, all kinds of initiatives. So, you know, I can't wait to open the door and start to put some of these things into the real world.
Yeah, that'll be interesting. So Patrick, why don't you update us on your theater installs and backlog? How will the timing shift given the crisis and how will that impact your your future financials?
Sure. Happy to. In terms of backlog, we're in close contact with all of our customers. And the important point is there's really no change. Historically, our backlog has been remarkably reliable. When theaters go into backlog, they come out as theaters. We don't see any attrition. And we don't expect to see any attrition from this. Our exhibitors have told us, you know, plan on continuing to grow with us over time. But you framed it the right way. It's a question of shifting the timing of installations. Obviously, we're not doing installations right now. We expect that will start again as theaters, as our partners start to get back into their multiplexes. But we do expect that installs will get shifted forward. Our partners are going to be focused on operations and back to business.
There's obviously changes in construction schedules for the malls where these multiplexes typically are installed, so we do expect that we'll be pushing things forward and have a reduced level of installations this year. We don't have specifics on timing yet, and we need to rely on our partners to come back to us, but the good news is we do expect that once things get back going again, back on a similar pace, and end up just shifting the curve out a bit.
Got it. And, you know, your balance sheet seems to be in great shape. You know, Rich talked about a two-year runway. You talked about a $10 million monthly cash burn, right? And how can you update us on that? Is that where you're about running?
Yes. That's, we talked about that being our average cash burn once we had gotten the full benefit of some of the cost reductions that we put in place, which we've now done. And we are tracking to that number. So we feel very good about that. We do have, as of our last disclosure, $350 million of cash. And with that modest cash burn, that gives us plenty of runway. And then you may have seen that last week we announced that we have worked with our banks. And we've got covenant relief through the first quarter of next year and then flexibility through the end of 2021. There's any issues on that front either. So we think we've done all the right things to protect the enterprise and give us real flexibility. And as Rich said, we also kept the team in place.
And we think that we're ready to scale up very quickly and hopefully lead the industry back when business returns.
Okay, and are there any other accounting implications from having a zero revenue environment that we should be aware of?
Yeah, actually, it's quite interesting. There's a number of things that just are different when you've got what essentially rounds to zero revenue, and some of this is really just going to end up being P&L geography, so the second quarter will be a little bit complicated, but some issues that we'll have to sort through are, we don't have any absorption from manufacturing. So our teams and the money that we're spending there, instead of that getting picked up in cost of goods sold, that will move down to SG&A. We've got a similar example on the DMR side where we take films and add value to them. Typically, that shows up as cost of goods sold on the DMR side of the house. In this environment, those also will move down to SG&A type expenses.
And then there are some things that are directly related to what we've worked through with our partners. So for example, we're not charging people for maintenance right now. We've extended all the contracts. So there's a four-month period where we're not charging. That'll get tacked on to the end of the contract. So that means that our revenue won't be reflecting maintenance. And then there are some of our theaters where we have minimum guarantees from our partners. Similar dynamic. We've suspended that for four months with the extension of the contract. So ultimately, we'll still get that same earnings. It's just we're getting a little bit of a time value of money reduction. So all of these complications filter through. In Q1, it wasn't too big of a deal. But in Q2, we'll have to spend some time walking people through these changes.
Okay, and Rich, with the two minutes we have left, do you care to sort of pontificate on when you think the U.S. box office can return to 2019 levels and then how IMAX share will change in the future?
So I'll start with the second part, which is easier, which is. You know, there's increased. If you look at the movie industry from a high level, there's a greater concentration of blockbusters that's been in place for the last five years. And I think if anything, that'll accelerate because I think with streaming going on, a lot of the smaller and mid-level movies will go streaming and the larger movies will go blockbuster. And I think the studios will continue to make more blockbusters. So I think that will be very good for IMAX. And I think that will increase our market share over time as those trends continue. I think also there'll be more of an interest in premium entertainment.
I think, again, to the extent people have gotten a little bit used to being in their house, I think when they want to do something social, something cultural, something with their families, you know, they're going to want to go to a nice big IMAX theater. In terms of the box office getting back to 2019 levels, I mean, I think if you assume that there is a vaccine or a treatment and that by, you know, early 2021, people are safe resuming their lives, then I'm incredibly optimistic about 2021. Because Avatar remains the biggest movie in IMAX's history. And that was over 10 years ago. And we did over $240 million 10 years ago. And we have, I'm not predicting that this works on a numbers basis. But we have five times as many theaters as we have then on a global basis.
And when you go back and you say, you know, five Marvel movies, Fast and Furious, Mission Impossible, I mean, it's it's a year designed to be a record year. But again, you have to go by my assumption that we put this thing behind us. And go back to what I said at the beginning. I think you just have to look at the macro trends. There's a lot of wind at IMAX's back. And I think if, you know, no matter what the speed it comes back, when it comes back, we'll be very well positioned.
Yeah, I think so. I agree. So we look forward to seeing your screens open. And good luck with the reopening.
Thank you.
Thanks, guys.
Thanks, Meghan. Appreciate it.