Can we go? Okay, great. We're gonna get started. You'll notice we have a little bit of a unique setup today. On my left is Natasha Fernandes, CFO of IMAX, and up on the screen on my right, you'll see Rich Gelfond, CEO. Rich, thanks for being with us today. Why don't we start with you? It's been a while since investors have heard from you, maybe we could just start by having you kinda share your perspective on kinda recent business trends, what you're most excited about, what you've been focused on as you've come back from your temporary leave.
Thanks, David, and thanks for agreeing to this unique setup. As you know, I can't travel right now, and I really appreciate the opportunity to speak at the conference. In a way, the staging of my comeback is perfect with the summer slate kicking off right now, and all that's going on in the business. First of all, my primary thing that I've been focusing on is shareholder value and increasing shareholder value. To that end, you know, I started coming back in the last week or two, and we decided to initiate a buyback program a week ago, and we bought in over 12 million shares in the last week. You know, the stock has gone down for reasons. You know, I understand it. Some films overindex what you thought they were gonna do.
Some go under. We're on the doorstep of the big movie season. I think people are needlessly worried, but we're not. We're quite confident in the rest of the year and where we're gonna end up. You know, I wanna reiterate the guidance for $1.4 million in box office.
First thing I'm focusing on is shareholder value. We're really focused on filling in the slate for this year and next year in 2028. You know, without giving you specific titles, 'cause they're not all formally agreed to, but more agreed to by word, is 2028 is almost filled in for the summer. I'll talk a little bit more about it later, but I still think there's a number of things we might do in 2026 that make me other reasons for my confidence for box office for this year. I'm spending a lot of time working on the brand.
You know, I think our brand, by virtue of the fact that, we're indexing so high in all the movies, and, you know, our box office is pretty much so far equivalent to what it was last year with Odyssey, Toy Story and Dune Part 3 still to come, which comp very favorable to last year's titles. I think on a global basis, the brand has done phenomenal, and there's a lot more we could do around it. I don't know, David, if you had a chance to see Chris Nolan on either Colbert or 60 Minutes this past weekend. You know, when you understand what we have out there for the rest of the year, I think you'd be as excited as I am.
Got it. It was a great intro. Natasha, do you wanna add anything or?
Yeah, no, I think we're super excited. The repurchases, as Richard Gelfond said, is $12 million so far, that's been great because we believe that we're undervalued, and it's a great opportunity for us. I think that we're excited for the slate ahead of us. I wanted to reiterate what Richard Gelfond said about being on par. Last year, our biggest title of the year was Ne Zha 2 in the first quarter, then we went on to achieve $1.28 billion in the year. This year, we are right on par as of today with our box office of last year at this time, yet the biggest of our slate is yet to come.
Got it. Maybe we can unpack the $1.4 billion of box office a bit. Maybe just help us understand how you build the forecast, and I think it's also important to know how you dynamically manage that throughout the year.
The way we build the forecast, David, is, you know, when we do our budget the year before, we get estimates on a film-by-film basis for everything that's laid out for the next year. Our film department weighs into that, our finance department weighs into it, and, you know, I weigh into it based on comps, but other things. You know, is it film for IMAX? You know, is it film or is it digital? How long is it playing? All the factors like that. We know going into a year that not every film is gonna track exactly to the ultimate we put together. You know, you look at this year and things like Hail Mary and Michael have done much better than what our budget was coming into the year.
You know, other things have done worse than what we budgeted. It's a portfolio, and much like, you know, investors in, that you're hosting manage their as a portfolio, that's how we manage it. We're leaning in much more heavily to the programming end of it. We used to, our team was mostly staffed with people who came out of distribution in Hollywood, and the jobs of people in distribution is to sell a movie. If you had gone out and you sold movie X and it wasn't performing, you try and push movie X, and that was the skill set. It occurred to us about a year and a half ago that that wasn't the necessarily the best way to maximize box office.
We supplemented our team with people who came out of programming work for either a chain or, you know, thought of things differently. When the box office, let's say, isn't living up to its potential with a particular movie, we swap it out and we put another movie in. And, you know, things move out of the year, we move other things in. It's become a much more dynamic process and this year, or I should say last year for Thanksgiving, we played 3 movies and we maximized box office. You know, you look recently we brought back Hail Mary and Michael was originally slated for like 1 week or 2, and we brought it back this weekend. We're playing a much more active dynamic role.
Got it. Maybe, following up on box office, we did see a few weeks ago, Netflix delay Narnia into 2027, leaving a gap in the schedule around Thanksgiving. By definition, you know, that film would've had 100% indexing. First Rich, you know, how should investors view that as impacting your forecast? As a follow-up, right, if we go back to the Investor Day, you had spoken about Narnia as sort of a cultural event, a game changer. What does the absence of, you know, having that fully exclusive model over the 2 weeks kind of mean to your longer term ambitions?
Let me answer short term then long term, David.
Great. Yeah.
I think it's premature to take what you know, people thought Narnia was gonna do and subtract it, cause there's been a lot of demand for that slot and a lot of people are interested in, obviously it's a good time of year to release-
Great
a movie. I was hoping on this call to be able to announce what's going in that slot, and we're really close, and I'd be really surprised if in the next week we don't tell you what's going in that slot. You know, we're on the verge of replacing it and, you know, you'll be the first to know, but I'm quite encouraged by what we have in there. Longer term, I think the model that we put together will continue to exist. You know, it may be a different partner, it may be different specific terms, but I'm quite confident that we'll have an IMAX exclusive release that along the lines of what we talked about. The final thing I would say is Narnia itself.
As you know, February is traditionally a very weak month. It's moved to Super Bowl week, which is traditionally a very weak date. We have been working hard with Greta, as you'll recall from the press release. I think we played a role in Netflix agreeing to open it up very wide. We still have an exclusive for the first couple days going forward. They're gonna lean in with a lot of marketing to it. If I'm right and we have a really good replacement, you know, the movement today looks like not the best thing, but I think people will be comfortable that it's not only good for us, but good for the whole business 'cause we help turn that into a day and date release wide.
I should probably follow up there and ask you just about your thoughts on Netflix and, you know, the significance of them committing to that type of theatrical release, right? Just with a longer term view of supply.
Again, you probably should ask them 'cause- they'll really have the better answer. You know, I think that they, in doing the diligence for the Warner deal, you know, kind of learned more about the traditional movie business and the role that it could play. I think certainly they're leaning in heavier than they were, and I think if you look out longer, I think they'll be more open-minded to things like that.
Got it. You mentioned partnerships with filmmakers earlier. Obviously that's become central to what IMAX does. I think it's one of the things that sets you apart. Maybe we can discuss this a bit. Obviously with Christopher Nolan's The Odyssey set to release this summer, that's coming a lot more into view.
We have something called the CEO Forum at IMAX every year where we gather our exhibitors from around the world, the CEOs, and we put together some talent and panels. This year we don't usually talk about it, but it was so special I thought it was worth mentioning at this conference. Our guests this year were Tom Cruise, Timothée Chalamet, Christopher Nolan, Denis Villeneuve, Darren Aronofsky, Jon Favreau and many others. I don't know who could. By the way, they don't get paid to do this. They come, you know, to speak to our exhibitors. I don't know who else could pull that off. I don't think there is anyone except for maybe CinemaCon. That's the kind of talent that we put together on a consistent basis.
You know, you even look at this year, we have Mandalorian coming out right now, and Jon Favreau obviously is one of the fathers of Disney and these, you know, types of movies. Obviously we have Denis Villeneuve doing Dune 3 at the end of the year, then you mentioned Christopher Nolan. People work with IMAX, like, Joseph Kosinski last year did F1, next year he's doing Miami Vice. The best filmmakers in the world who have done well wanna work in IMAX, and that's really what drives us over time. The Odyssey, you know, I never like to jinx anything, but I've never seen something I've been this excited about in advance. One of the reasons is if you saw Christopher Nolan in any of those pieces, I mean, he's exuding confidence.
You know, there's way more than that. The cast looks like the red carpet at the Oscars. You know, it's a very expensive movie. Oppenheimer did almost $1 billion just shy. You know, Odyssey has a much more international appeal than Oppenheimer did. The marketing behind Odyssey, it sold out a lot of its tickets for film theaters a year in advance. We're playing it in 41 film theaters, whereas last time we only played it in 30. It just sets up well. At CinemaCon, I would say Dune was one of the surprises of the conference in terms of its reception. It was overwhelmingly received well. I don't know if you've seen the tracking for Toy Story, it's extraordinary. I saw somebody who said $150 million-$175 million for the opening weekend.
We've got Disclosure Day, the Spielberg movie. We've got Minions. I mean, it's just a locked thing. Again, I think the filmmakers leaning into it, as evidenced by Chris and Denis on Dune 3, they put tickets on sale for Christmas, and those have already largely sold out.
Got it. Maybe, relative to your outlook, you know, I've certainly gotten some investor questions on how to view China for the year. Natasha mentioned, Ne Zha Comp. I think earlier we saw some titles get moved out of the Chinese New Year period. What's the latest you're seeing in the region, you know, and how do you view the balance of the year?
The summer looks way stronger than the first half of this year. There's a lot of good Chinese local language coming in. Also, the Hollywood films like, Oppenheimer did very well in China. I think that, The Odyssey will do well. Also, movies that were not playing in North America because of conflicts such as Spider-Man and Avengers are gonna play in China. Historically, some of them have done very well. A very strong Hollywood slate along with, a much stronger local language at the back end of the year tells us that the back half of the year will be considerably stronger than the front half of the year.
Got it. One of the key drivers of IMAX box office has been higher indexing. We really saw that ramp in particular in the back half of 2025 across a range of film genres. Maybe you can talk to some of the factors like studio marketing, film for IMAX that have resonated with consumers. I wanna ask you on film for IMAX, right? You know, if you look at the ads, Disney seems to be leaning into that a lot for Mandalorian. Going back to CinemaCon, though, they did announce the Infinity Vision program for Avengers. Just how should we interpret that?
Okay. Actually, first I should start on Mandalorian, which, you know, opens in the next couple days. I must say I love the forecast for much of the U.S., which is lots of rain. You know, we love lots of rain on Memorial Day weekend.
I was just-
when we open summer blockbusters. Besides that, you know, I think people are comparing Mandalorian to other Star Wars movies, and it's different than other Star Wars movies. IMAX is new, the amount of marketing they put into it. I'm not gonna project the box office on Mandalorian. That's for Disney to do. I think IMAX will do a larger portion of this than we've done for any Star Wars movie, and that's partly 'cause Favreau is leaning in so hard and Disney is leaning in so hard. Those are examples when you say about indexing. The other part of indexing is, you know, I'm just amazed that Michael did over 15% in its opening weekend in IMAX. You know, Sing 2, as you know, did 20%, and Hail Mary did over 15%.
Traditionally, IMAX does, like, 10% of a blockbuster. There's been kind of a permanent change. Yes, I agree with all the things you said in terms of studio marketing, the filmmakers, but I think it has to do with habits that people are forming. Like, if you go back, almost all of these big blockbusters have done better than they've done in prior years 'cause consumers are in the habit of going to them, and I really expect that to continue. You mentioned Disney's Avengers: Infinity War. I think, you know, We were going to play Avengers when it was scheduled to release over the summer. We made a deal with Warner and Legendary to do Dune 3. As you know, we stick by our deals like we did with Mission Impossible.
We played a movie about an obscure physicist named Oppenheimer. It turned out okay that we kinda kept our word and did that. You know, we wish we could have played Avengers, and Disney understands that, and I think Disney's gonna do great with it. I hope they do. The problem for Disney was they didn't have their IMAX screens and, you know, other than in China, and I think that was really important to them. They created kind of a marketing vehicle called Infinity Vision, which enables them to brand, quote-unquote, you know, their release. It's important to note that there's no additional screens. It's just kind of a branding move on their part. Not only are there no additional screens, but there's no proprietary technology.
There is no, there is no attempt to really create a separate brand. It's like they're going out to existing PLF regardless of, you know, the dimensions of the theater, whether they're monitoring the experience in the theater. It's a different kind of thing and, you know, I hope they do well on it, but it has none of the attributes of what makes IMAX IMAX. You know, we're quite comfortable we'll do really well.
Here we are. We're at a conference focused on tech and AI, you know, what I want to ask you about is what I think is your most differentiated format, which is IMAX 70 millimeter film. Actually, I've said this to Natasha Fernandes, 1 of the ways I sometimes measure demand for IMAX is to look at Lincoln Center availability for 70 millimeter, right? I remember for Project Hail Mary on opening weekend, there was nothing, right? Every single showtime. Richard Gelfond, what resonates so much about this format and how do you capitalize on it?
Well, again, I don't want to spend too much time on this, Christopher Nolan said in the 60 Minutes interview, "If you wanna go big and you wanna go to something really special, you do IMAX film." You know, he's right about that. He's so right about it that we re-upped over the last year and we created a new camera to enable real-time dialogue in a film shot completely with IMAX cameras. It's a much quieter solution. You know, I think he might've said on that or at Colbert that the performances are different because the old version of the camera was loud. I think the film just says to the audience, it's really special. It's the biggest, it's the best. You know, we've now found more theaters to release it in.
You know, what was really impressive, David, about Hail Mary is it wasn't even filmed with the film cameras. It was filmed with digital cameras and then printed out to film. We're aggressively promoting either using the cameras or printing it out. With film, we have a program where we're visiting with the studios, we're visiting with the filmmakers, and there's a lot of interest in film now that there are more theaters that can show it. You know, I said this before, both Dune and Odyssey have already sold out a lot of their film screenings for, in the case of Dune, six months from now. I think film is really gonna help the brand, you know, help attendance and see, you know, very significant box office for those movies.
Got it. Since the pandemic, IMAX has seen significant growth from local language, that's moved beyond China. You've gotten notable traction in India, Japan. Maybe just for investors who are less familiar with international box office, what's important to know about local versus Hollywood mix, how that factors into your program strategy, how that's played into your network growth abroad?
Yeah, I think local language films, an important point is they don't only play in the country of origin, they also play in other countries. A lot of the Japanese anime has done better in China than it did in Japan, or for that matter, even in the United States. You know, we release films that have local appeal in a number of countries. The biggest ones are China, Japan, Korea, but they include, you know, more, I think Indonesia and Malaysia, we have films. What they do is they drive local audiences to come to IMAX for local films, and they increase utilization rate at the theaters, and they increase the economics for the theater operators. What that does is drive the financial return, and that drives more signings, that drives more installations.
It drives, you know, the whole flywheel that makes IMAX work. If you look at what's, you know, driven our growth over the last few years, it has a lot to do with local language. I think this year we'll have like 75 local films there. I don't remember exactly the number, the percentage. Natasha could jump in, but I think it was like 25% of our box office last year. It's become a significant part of what we offer.
Should we discuss also, Rich, just the role of alternative content in kind of filling out the schedule, including during the week where some of that gets utilized?
Yeah, it's the same thing, David, about capacity utilization. Like how do you find things in the off times or the non-blockbuster times that puts butts in seats? A week or 2 ago, we did a Formula One race in Miami. I think we're doing the Monaco Grand Prix either this coming weekend or next coming weekend. The Monaco Grand Prix plays at 9:00 A.M. in the morning. You're not really infringing on your slate, but you're bringing people in, and the Miami Grand Prix does a lot of business. Music is 1 place we've done very well with, particularly Led Zeppelin did especially well. Taylor Swift did particularly well. We're trying to mix and match and find out what brings people in with the lowest cost structure.
Again, you don't have the play time to really amortize the marketing costs. It's been a supplement that's been working well for us, and we just hired someone who comes out of that world. I think you'll see us do bigger things and more things, and we'll continue to evaluate and decide which of the things we should do and what doesn't work.
I think what's great about local language and alternative content for us is that as we continue to aim towards growing our total box office and growing and hitting those targets that we've talked about at Investor Day, for instance, it's growing all parts of the legs of the stool as opposed to looking at just one. Hollywood, where it used to be 90% of our box office, now it's about, you know, 65%-70% of our box office, but we're growing Hollywood still. You're growing local language and you're growing alternative, and that's where, you know, we can guide to $1.4 billion and then continue to look at how we grow that every year because you're getting more content in the stream.
I mean, the biggest part is that we're doing 120 pieces of content this year where that was half that a few years ago, right? Looking at the opportunity for growing that to create the higher utilization.
Obviously a natural driver of indexing is your network growth. In December at the Investor Day, you raised the TAM to 4,500 systems. I think that's less than 40% global penetration. Rich, what are the key strategic levers to execute toward that target? You know, there's an obvious also just, you know, question about the macro and whether that's impacting just the pace of installs or signings.
I think it's really the theater economics. David, like you know, last year was a record domestically for IMAX box office, and the per-screen averages were very high, and I don't think it was accidental that last year we added 7 more chains in North America, which is a mature market, so that's a pretty notable accomplishment. I think the way it works is you look at what the return is like to the exhibitor, based on the box office in that region or that country, and that drives incremental sales and, you know, that's why we got comfortable with raising the TAM. Years ago, I don't remember how many, but we thought we could only have 90 theaters in China, and that was our TAM.
Now it's 800 theaters open, and I think our TAM is, I don't know, 1,400 or approximately that. I think the better the box office does, the farther the reach, the more the capture is. It ties into what we talked about earlier, the brand and capacity utilization, and that's what really drives your growth.
Maybe we just follow up on the domestic opportunity, right? I guess theater owners, they weigh IMAX potentially against other proprietary brands, ScreenX, D-BOX, their own brands. I'm curious what opportunity you see to further fill out the U.S. footprint, either with the big three or just the longer tail of operators.
Yeah. There is a lot of potential in North America. As you know, we do sale deals, and we do joint venture deals and hybrids. You know, what we've been able to do is use our capital efficiently to help. You had asked about the macro as part of your question, which is, you know, some of the macro issues, 'cause we have so much cash, is we can supplement the economics or change the structure. I think, you know, there's no doubt that North America during the pandemic, obviously, the exhibitors didn't have the capital. We were able to be profitable during that period and continue to grow 'cause we used our capital smart. I do think there are opportunities and, you know, I don't remember the TAM. Again, if Natasha does, she should add it.
I think there's a way to go.
Got it.
Yeah, there's a lot of opportunity. I think as we just go back to the global question, David, I think what people don't actually know, 'cause we haven't talked about it a lot, is in the past year, we've actually signed deals with 23 new exhibitor partners globally. That's like, that's across 15 countries. There's a lot of opportunity for us to continue to execute against that TAM that we put out at Investor Day. We've been doing that, chipping that away, making a really big impact from that perspective. Also what's great is what we've seen from our experience is as soon as we sign up with an exhibitor partner, they come back for more IMAX. Like Aeon in Japan is a perfect example. 2 years ago, we signed up for 2 systems.
They wanted to test and see whether or not that would be a, you know, would be successful for them having an IMAX. Instead, now they've come back several other times now at this point and signed for more systems with us, and that's growing in a market like Japan where we have such good opportunity for a high return, box office and incrementality into our model. I think that that's really important.
Got it. Natasha, let's just touch upon EBITDA margins. The guide for the year, I think, has a floor of 45%. Maybe just talk to the incremental gross profit dynamics on box office and then cost efficiency actions on SG&A that underpin that.
Yeah. There's a lot of opportunity for incrementality in our model. You saw that clearly through last year. This year, with $1.4 billion, that will come through at a higher rate, which is why we moved our sort of range from being low 40s last year to being 45% plus for the mid-40s. That really is the opportunity for us. As soon as you hit over the $250 million of box office in a quarter, we have that 85% incrementality flow-through on each additional box office dollar. You couple that with all of the SG&A actions we've taken. I mean, we took significant, you know, restructurings last year. We've looked at internally just how do we have cost efficiencies and keeping a steady workforce, looking at technology.
As you grow the business, you know, the first inclination in, like, any business and company as you're growing is, okay, we need to invest more into people and resources. I think the team's done a really good job of looking at how do we operate more efficiently and look at using tools and technology. You know, we started doing digital delivery for a lot of our network, whereas we used to manually mail out all of those keys to, you know, theaters. When you're operating a global company, those add up, right? I think we have a lot of opportunity to keep looking at that, but I think we've made really good progress so far too.
On free cash flow, IMAX has guided to conversion of roughly 50% in 2026 and growing thereafter, and that's net of growth CapEx. It's a nice pickup from recent years, implies better working capital dynamics. Maybe you could just walk through how you're managing that and then how that growing cash flow factors into your kind of willingness to invest in different structures.
Well, the incrementality of the EBITDA margin, for sure.
Right
immediately flows right through to your free cash flow. A lot more opportunity in that, you know, our cost of the films stay static, right? A lot of that incrementality not only flows through, but then the dynamic that you have when you have a free cash flow conversion where you're capturing all of that box office in the year. I think our strong balance sheet helps us there too because we're being thoughtful about where we invest. Can we invest, as we did in 1st quarter, putting forward capital towards growing the network faster. Once you grow that network faster, it'll essentially grow the box office faster, and you'll get to capture that earlier in the year than later, and continue to capture that in the 10-year cycle of our systems as well.
I do think you've seen the incremental step that's happened in our free cashflow last year, and it'll just continue as we keep growing our network, and in turn our box office as well. I think that's all very good. Of course, we're spending to grow our network and invest back in it. Also, as Rich started off the call today in doing buybacks as well when we see an opportunity to do that.
Got it. I wanna circle back to the buyback that you just mentioned. I think going into it, the authorization you had was around $250 million. I think it's fair to say IMAX has been an astute buyer of its stock. Maybe just discuss what governs your philosophy and just, you know, here and now in the current buyback.
I think part of that is just we have a strong balance sheet. What are the competing priorities? One would be growing our network, through the investment and joint revenue sharing arrangements. The second piece would be stepping that up from doing this concept of lease incentives to be able to provide a little more help and capital towards growing the footprint in new locations, particularly domestically, is what we've been focused on. Third, the buybacks. There are always other opportunities that come up. I think that's where you keep a little bit of capital to make sure you're ready to do those. We're not a highly acquisitive company. It's not like we're going out and doing a lot of M&A.
I think that there are a little pieces of our capital structure that could be achieved and cleaned up as well as we look towards deploying capital too.
Great. Rich, we've got time for one last question. Maybe, it'd be great to just get you to sum up your current thoughts on the business and the path ahead.
As I said at the beginning, David, we couldn't be more excited. There has never been a summer slate that looks like it does now. We pretty much unless movies have moved out of the year, we have pretty much managed our portfolio and predicted it quite well. Our outlooks are generally spot on. I remember a few years ago when a big movie moved out of the year, we couldn't account for that late in the year it moved, coming out of the pandemic. We feel very good about where we are situated. A lot of investors trade us on a week-by-week box office kinda thing, but that is not the right way to look at it.
I think they're missing, pun intended, David, the big picture if they don't look at, you know, the holistic of what IMAX is and our strategy, how it's working.
All right. That's a good note to end on. Rich, it's great to see you. Natasha, thanks for being here.
Our pleasure.
Great.
Thank you, David.
Okay. Thanks, Rich