IMAX Corporation (IMAX) Earnings Call Transcript & Summary

Okay. Great. Thank you all for joining us this afternoon. Again, my name is John Hodulik. I'm the media and telecom analyst at UBS. And our next presenter comes to us from IMAX. Today, we have the CEO, Rich Gelfond; the Interim CFO, Joe Sparacio; and the Head of Investor Relations, Brett Harriss. Guys, thanks for joining us today.

Thanks for having us, John.

And we got about 40 minutes for Q&A to put together a bunch of questions. So why don't we start on what we always like to do at this conference since late in the year. Obviously, a pretty eventful 2021. Could you give -- can you guys give us a sense of what the company's priorities are as we look out into 2022?

Sure. I think our major priorities fall into 2 categories. One is getting the network back to normal. We've had -- we've come back a long way. September was consistent with our best year ever in box office which was 2019. And October of this year was our biggest October by 50% [ rounded for us ]. So one of our 10 best months in IMAX's history. So we feel we're really on our way to doing that. Obviously, the variant is playing a little bit of games right now. But we're in 85 countries and virtually all our theaters are open, but our first priority is just getting things back to normal again and -- from a film point of view, operational point of view, audience coming point of view, all those things. Second key priority is to focus on our new businesses. And I know we will talk about this later in the discussion, but we have several -- we have something called IMAX Enhanced, which is a way people can watch movies at home in the IMAX -- in the IMAX format and a better image than they would otherwise see. We recently announced a deal with Disney+ to bring that service to their streaming platform. And then the other thing would be IMAX Live, which again, I'll talk more about later, but that's where we're starting to wire a number of our theaters and bring events to IMAX theaters around the world. And the third one would be our direct-to-consumer application, all of which we're very excited about. And as we go through this, I'll tell you more about them.

That sounds great. So again, let's dive in on the -- pushing on COVID and the most recent variant, I mean how do you expect -- how are you seeing customers react to the Omicron variant and how do you think that as this plays out? And obviously, none of us have a crystal ball, but do you have a sense for how maybe it's affecting your business now and what you foresee going forward?

So it's interesting because of the way films roll out this year and next year. So the fourth quarter was very strong. December, has I think the most anticipated film of the year, Spider-Man coming out. There's not a lot going on right now. So we did decent numbers for Ghostbusters, West Side Story opens next weekend. But the real -- the rest of this year comes down to Spider-Man and the Matrix, which are released mid- to late December. If you look at our Spider-Man presales, they're astounding. They're close to the best presales in IMAX's history. They're very much neck and neck with Avengers: Endgame, which is the second biggest movie overall of all time and I think the second largest -- second biggest IMAX movie of all time. There's still almost 2 weeks to go and we have over $10 million in presales. The other film Matrix just went on sale yesterday, actually, maybe the day before, and ticket sales there was strong too. So to me that's an indicator that the public isn't being scared away by the variant. Obviously, they bought those tickets, they intend to use them. So that's real-world data. In terms of next year, I talked about how the schedule lays out. The schedule is fantastic for 2022, best year ever in terms of what it looks like in anticipation. However, the first quarter really doesn't have much in it. The big thing for IMAX in the first quarter is Chinese New Year, which is late January, early February. And I don't think the variant has really hit China. And if it does, the Chinese have their own protocols where they close things down per day, reopen them. So I don't expect it to have an impact on that. The second quarter is when really the blockbuster line-up gets going. And I would hope whatever happens with this variant, it's dealt with by that time. So I don't really think it will have a material impact.

Got it. So I mean, I think what you're saying is pretty encouraging, right? I mean, it sounds like customers are comfortable, I guess, as it stands now, going back to theaters. I mean, how tightly do these presales that you were referencing in regard to Spider-Man, how highly those are correlated to what you see through the theatrical release? I mean, is that a really good sign for -- or is it sort of losing and sometimes you get [ positive ].

Well, the one thing I left out in that answer, John, so, I am glad you asked this, they all went on sale after the Omicron virus was announced. So it's not like they were there before. So people are measuring. Also because we're in so many countries, we have sort of a crystal ball, not about this variant, but how audiences react to COVID. And in China, which opened a lot before the U.S., people came back in record numbers for the right kind of films. So last year, in China, we did a film called The Eight Hundred, which was filmed with IMAX cameras and was the #1 global film in the world and did tremendous numbers. And then this year, the #1 film in the world was also shot with IMAX camera that was called The Battle at Lake Changjin. And in China, again, the numbers were really high. In Japan, where it's been up and down with COVID. During the periods where it's been kind of lower COVID levels, we released what became the #1 film in the history of Japan called Demon Slayer. So our experience is that where people feels safe, they're coming back in record numbers.

So are you seeing sort of variability across different geographies? So it sounds like China is still up and running and doing well. Japan sounds good. I mean, how about Europe? First of all, what's your exposure in Europe? We've heard certainly the cases are heading in the wrong direction there, especially in some of the Northern European countries. Countries are starting to talk about [ marchings ] again and travel restrictions. Can you give us sort of a little spin geographically to give us a sense of what you're seeing and at the same time your exposure to each one of those areas?

Yes. So about 1/3 of our revenues are from North America, 1/3 from China and 1/3 from the rest of the world. Your question was specifically focused on Europe and maybe I'll go a little broader than that. The pre-sales for Spider-Man have also been exceedingly strong in Europe. So I don't have all of them, but I've looked at France and the U.K. and some other places and they've been pretty strong. It's important to remember that unlike earlier in the pandemic, things really didn't go to lockdown. So as far as I know, the only country in Europe that's now closed to theaters is Austria, and they're scheduled to announce in the next day or 2, whether they're going to reopen. I think our best guess is they're going to reopen in time for Christmas and Spider-Man movies. Places like the Middle East have been doing really good business throughout this period of time. I think even in Mexico, which is somewhat surprising, our results on movies like [ BAM ] have been extremely good during this period. So I think the places that are kind of suffering the most are India and LatAm where that wouldn't surprise you because I think they've been [ a little ] deeper into the pandemic longer than some other places.

Right. You announced a deal with Disney+, as you said in your opening remarks, with IMAX Enhanced service and many people think of IMAX as predominantly a theatrical experience. Can you just walk through the Enhanced business and explain the significance of the deal with Disney+?

Sure. But first, I'd like to put it into a little bit of context, strategic context. So when I was part of a group that bought the company almost 30 years ago, IMAX was in science centers and institutions that did almost exclusively documentaries, that's IMAX 1.0. IMAX 2.0 is kind of where we transitioned it into doing Hollywood films with prominent directors. We still have the documentary business, but most of our revenues come from Hollywood movies, global releases, scale, blockbusters, and that's been a very good model for us, and that's what I call 2.0. We're in the process of evolving into IMAX 3.0. And what 3.0, just like 2.0 incorporated 1.0, 3.0 incorporate the others. But what we would add to it is, we'd be more like a place where people gather to experience event type content which is broader than just movies. It could be sports, it could be other kinds of streaming content, it could be all kinds of things. And I thought maybe what I would do is give you examples of this week what we're doing because this is really the first conference where I've kind of put it together in a strategic discussion. But on Sunday of this week, Apple made a movie called Macbeth, that stars Denzel Washington and Frances McDormand and it was made by Joel Coen. And in order to help promote that movie, the distributor A24 with Apple, kind of [ 4-walled ] about 25 IMAX theaters in the world. And one of our new products is IMAX Live, where we wired some of our theaters, and you can do a livestream into the theater. So for that event on Sunday, Frances McDormand and the Director, Joel Coen, were questioned by the Head of MoMA's film curation department and it became sort of an event. So we were performing a service for Apple because it's not really going to be released in theaters and we were just kind of creating an event around it. Yesterday, which was Monday, we did an event with Disney and Steven Spielberg where we showed -- we did a livestream with Steven Spielberg first to...

West Side Story.

To talk about West Side story and he did a half-hour, which I was -- didn't attend that, that was fantastic. So again, we're creating an event around that movie. And if you believe what you read in the rumor mill and I can't confirm it or deny it at least for a few more hours it's the Kanye, Drake concert on Thursday will be streamed into IMAX theaters as part of a deal with Amazon. So it happens to be a big week for that. So you caught me at the right time, John, to talk about different examples of how that strategy is coming together. And then at the same -- so that's called IMAX Live. And I think as I said by way of intro, we're going to try and create events around live content around the world, and I think there's a big upside. Again, I'm not prepared to go deeply into it, but what makes it special is it's in IMAX. So I know that theaters have attempted to show content in movie theaters. But when it's in IMAX, so when it's live and when it's with Steven Spielberg and Frances McDormand and other people, it's a whole different level. We did one already around Ghostbusters when it was released. Then the other part of the strategy is Enhanced, which is your specific question, which, as I mentioned, we did this deal with Disney+. When you go on Disney+ and you want to watch the big Marvel movies, you could watch them kind of a regular way or you could watch them in IMAX Enhanced. And when you watch it in IMAX Enhanced, it fills the full television screen rather than being bars, rather than the letter box kind of thing that you become used to. And that's a model where we get paid on over time on 2 ends. One, we'll get a royalty from the streamer or the studio or whoever we're doing the service for and the other one is, we get a royalty on the consumer electronics end. And right now, we're in business with 4 to 7 biggest CE players, including Sony, their large-scale television sets. So I think there's potential for that. And then going back to the 3.0, that's a world where we can exist out of the traditional movie structure. If it's live, we can do it with streaming service, we do it with a concert, do it with a sports league. If it's Enhanced, we can do it with a studio, we can do it with a streaming service. And that kind of puts an envelope around that strategy. And then we're also launching a new direct-to-consumer app this year. And what that will do is try and tie together a lot of these live experiences and be a place where we could eventually sell ancillaries such as merchandise and other kinds of experiential things.

That's great. A lot of detail here. So maybe we'll start with the live. I mean, I'm definitely intrigued by how big of a business could that be? I mean, obviously, huge demand for live events these days coming out of COVID, again, assuming everything continues to move in the right direction. You talked about movie launches. I think you talked -- mentioned sports. I'd love to hear what you think the opportunity is in, I guess -- I guess what you'd be doing is sort of broadcasting within your facilities live sports, which I think you see all these fan zone type things all over the place or whether it's soccer or football or anything. So the whole live opportunities, I'd love to hear more about it and what some of your ideas are and really how big that could be.

So we've done tests with hockey league. We've done some tests with soccer in a few locations, but we're going to be quite thoughtful and strategic about it. So I don't want people watching this to think we're doing the Super Bowl in a month because we're not. And we, right now, will have about 18 wired theaters. We're the first phase of this out of the 1,600 theaters in the world. So we're trying different kinds of events like the ones I mentioned to you so we can get sort of pro forma results, and then I can give you a good answer into how big it could be. But obviously, the out-of-home markets are fairly large one. And seeing it in IMAX is just -- I was personally just so impressed to watch Macbeth you wouldn't think that would be a kind of an IMAX movie. But actually we got a couple of tweets. Someone said, who would have known, I thought it was for superhero movies. This was maybe more interesting than that. And I also think it gives us a play into the streaming world because, as you know, there's the issue of windows and what's appropriate. But if we can do premiers or a series of premiers to help create events around some of the content that the streaming services, it gives us that opportunity. So I think both strategically and financially, it holds a lot of promise for us. But I think it's too early to try and talk about the size of that market.

Got it. And maybe talk about the D2C app launch later this year. Is that -- I mean, is that going to be -- how would that work? I mean, would that have content on there? Would that be sort of an SVOD service or maybe a little bit of color on it?

No, for the time being, it will just be a way that we can establish more of a direct relationship with our consumers. And as you know, some of the world's best directors, whether it's Chris Nolan or J.J. Abrams or very recently in Dune, Denis Villeneuve, our fans are rather fans. So if there was a way they can get looks, behind the scenes or updates or find out special content and the idea would be to use that as a tool both to maximize capacity at our theaters and sell tickets. And over time, I think we also see it as a place where we and our content providers can sell merchandise and other things.

Got it. And lastly, again, on those remarks, the Disney+ deal, is that exclusive to Disney+? I mean, is that something to do with the other SVOD platforms or is that an exclusive relationship?

No. It's not an exclusive relationship. And we've been talking to a number of the streaming services over the last year or so. And we were kind of waiting for the right opportunity to launch this. And I think you couldn't find a better partner than Disney to launch it. The reasons being everybody knows, they're pretty discriminating in terms of who they partner with and what it means to share their bandwidth and their platform with. So we felt strategically, that was a terrific place to start, and we'll figure out where we go from here.

Yes. Okay. So beginning, if we sort of step back and take a look at sort of the broader film business, beginning on Labor Day, studios really seem to recommit to the theatrical window and consumers started returning to the theaters. Can you remind what drove studios to recommit to the exclusive theatrical releases and what does that look like in a post-COVID world? If you could fast forward to mid next year, what is the windowing -- film windowing look like [ is coming out ]?

So I think what drove them to an exclusive theatrical window is that the kind of hybrid releases just didn't work. They didn't create the financial results on the movie side, and they didn't create the number of new subscribers on the other side. I think it was just a model. And if you think about it, this battle over windowing was going on for a decade almost. And there was never a better time for the studios and the streamers to do that because if you wanted to think of putting an industry through a stress test, right, when every theaters were closed, then they were starting to open, you take away the content and you offer them an at-home option. But surprisingly, it just didn't work, not enough people wanted to watch movies, particularly the kind of movies that IMAX does, the blockbuster movies, and you can read the numbers as well as I do. But a lot of movies that were slated to do really big numbers didn't do big numbers. Then on Labor Day weekend Disney pivoted and did Shang-Chi. And those numbers were really strong numbers, much stronger than the hybrid release numbers and now it's online. In a way, the studios were cannibalizing their own business. Piracy was a big issue, one I don't think that had really been well thought through. So you put these pristine copies on the Internet and what a shock, people voted #1 for free to see them. And if you look at the release patterns in places like China, China didn't provide release windows for a lot of those movies because the piracy rates were just so high. So never again will there be -- I shouldn't say that, hopefully, never again, will there be an experience like that to test the resiliency of the theatrical experience, but clearly, it passed. And then the last -- it passed the test, and people want to see these big movies in theaters. And then I should mention Dune, which Warner Bros. released and they released at the same time, day and date on their streaming services as in theaters. IMAX has done over $50 million on Dune, and we indexed over 20% in most places where we played it. So think about that, you could get it for free, and people were paying an IMAX as a premium ticket price of around $15 to $20, depending on the category. So I think the evidence was just so overwhelming that for the right kind of movie people want the theatrical spirit. So it seems to have now settled around a 45-day window. It's too complicated for this kind of a call, but if you think of it as 45 days and I think barring lockdowns and things like that again, for blockbuster movies, I think that's where it's going to stay. For IMAX that's terrific because we only play movies from 1 or 2 weeks and also -- and we found this through the demand from the studios and even the streaming services is IMAX, as I said earlier, creates an event around the movie. So there's a shorter window and a lot more revenue is on -- or ancillaries on the back end, whether it's streaming or merchandising or theme parks or whatever it is, it makes IMAX even more valuable in the ecosystem because you really want to create an event around that movie. The one place, I think, that there will be changes that affects is some of the smaller movies where the marketing is expensive. I think those movies will likely go more to streaming than they did previously for financial reasons, and I think the crisis proved some of that out. But while I'm hopeful that it doesn't really affect IMAX, but for people in the theatrical exhibition business, I'm hoping that the streaming services release some of their movies in the context of the shorter window to make up for them from some of that content, which is going direct to streaming.

Yes. I mean, the way you explained it, it almost looks -- it almost seems as if the streaming could really -- I don't know, I think [ the most part, say, ] would be a benefit for IMAX, but it really doesn't have that big of an impact, given the fact that the shorter window doesn't really affect you. You really don't have the movies [indiscernible] for that long anyway. There's so many more movies being created, especially if you include Netflix in that category. I mean, it almost seems like it would make sense to have a short window, theatrical release just to drive excitement around the content.

One way we think of IMAX is like a curator of content. So if you want a movie that you want to stand out when it's in IMAX, it says to the audience at large, that it's something special. And we've done studies with a number of the studios. So when people see a movie in IMAX, they actually like it better, the top box is higher. And it has been a little bit of -- I don't want to use inappropriate language in a good way, some kind of show since all this has happened, where the studios are kind of fighting to get the IMAX release slates and even the few things I mentioned to you, something with Apple, something to Amazon, I do think when you have a greater need to stand out in the world that the company that helps you stand out is going to do better.

Right. That makes sense. So we started off talking about the '22 slate and you kind of suggested the first quarter not much going on with Chinese New Year, but it really starts to kick in 2Q. Can you give us a sense for the sort of highlights for next year? What are some of the movies that you're most excited about?

Yes. I mean, there are so many highlights I can't limit it to the most excited, but we have 3 Marvel movies, including the next Black Panther and Thor. We've got a number of DC movies coming out, which are very exciting. We have a bunch of sequels, including top gun 2, which I've had the privilege of seeing and it's incredible.

I hear it's fantastic. Yes, I hear it's fantastic.

And in IMAX for reasons you would understand the aerials and the [indiscernible]. It's beyond fantastic. We have Mission: Impossible 7. We have Jurassic World. That's not a tough sell to IMAX audiences, right? Dinosaurs big, IMAX big, that one is kind of a natural. And then at the end of the year, we have Avatar. And I should remind people that Avatar is still the biggest movie ever done in IMAX, when we had about 150 theaters. We're now at $250 million on Avatar. And this Avatar -- Avatar and IMAX have sort of a brand association with consumers. We re-released Avatar in China earlier this year. And on 1% of the screens, we did 30% of the business in China. So I feel -- again, I don't want to James to knock wood on it, but I think that can be very big. So I mean next year is kind of crazy in terms of the amount of IMAX kind of movies coming out.

I mean, I don't want to jinx it either, but if you look to where you were sort of pre-COVID, I mean, just -- and again, this is the guidance, but do you feel like you're in a better -- in a position this year 2022 could [ probably be ] the best year you guys have had in the past?

I'd like to think so. But when I woke up 2 weeks ago there was a new variant and they didn't know what it was going to do with all the little enthusiasm.

I think that's a good idea. I think I might have just jinxed it even in asking the question. Okay. So IMAX adds value to movies through its DMR process and you guys often discuss movies with IMAX DNA. Can you give us just a brief description of both of those concepts and maybe discuss what is driving the secular growth in IMAX DNA films?

So the DMR process is -- there are 2 ways that we could release a film. Either remaster a Hollywood film digitally to make it look great on the big screen so we're not just a projector on a big screen. We actually treat the content and that's done through algorithms. The other way to capture it is through IMAX cameras. And when we use IMAX cameras, we call that special IMAX DNA. And the reason is because like when we were talking about IMAX Enhanced on Disney, IMAX has a different aspect ratio. It's more a vertical ratio. It's not letter [ logs ] like traditional cinema. So when you use our cameras, you get the IMAX aspect ratio, and you also get higher resolution than you do through the DMR process. And we found that our movies over-index when we use more IMAX DNA, more IMAX of it, it could be the aspect ratio, it could be the camera. And there's years of proof about that. Of course, the Chris Nolan movies, whether Batman ones or Interstellar or Dunkirk, he filmed with IMAX cameras, and he's the one who really pioneered that for commercial films. And our indexing like for Dunkirk, I think, was over 20%. And then, as I said, for Dune, Denis Villeneuve used -- filmed it with IMAX cameras. And again, our indexing was over 20%. So when it's filmed with our cameras or our DNA, we get greater market share from doing that. And for 2022, there are 12 IMAX films filmed with IMAX cameras. And the most we've ever had in any year was 6 and that includes local language films. So we have films shot outside the U.S. using IMAX cameras. And there are a lot of reasons for that behind -- besides the better experience. The director is more vested, the studio spends more marketing money on it, premiers are in IMAX, all kinds of reasons. But our percentage of the box office is much better when that goes on. So one of the reasons it's happening now is you used to have to only film with film cameras, IMAX film cameras, and a lot of directors were more comfortable shooting with their favorite digital cameras. So we developed a suite of lenses that work with a variety of digital cameras, where they could shoot in a way that they're happy, but also get the IMAX effect of doing it. And we've also been quite aggressive on a worldwide basis of meeting with studios and meeting with filmmakers and articulating the benefits of using an IMAX camera to film it. Of course, when you're releasing a regular movie, you just print it down so you can use the IMAX camera for the whole run. But I think our technical efforts as well as our marketing efforts have been pretty successful.

So do you think that number continues to grow over time? I mean, is there any downside to using IMAX cameras? Like is it more costly? Or I guess, you said that the directors aren't really used to it where you said they have their own sort of ways of doing things. And I guess, what are the positives and negatives of -- from a film producer standpoint of using IMAX cameras and how do you see that evolving?

So for the digital cameras, there's less negatives. On the film cameras, they're not as director easy to use as a regular film camera. And the reload times are quicker and they're bigger and stuff like that. For the digital cameras, I'd say the only negative, but I think it's a positive, is you have to shoot a little differently because there's a different field of vision in it and some of the special effects, you have to format for the IMAX format. So it's not traditional. I think given the number of people doing it and given the success, I would hope that it would go up. But it depends -- they are artists, right, like any other artists. So trying something new, that will be probably the biggest resistance. But again, Cary Fukunaga, who was the Director of the new -- the most recent Bond movie, said that he felt like he has been flying in coach his whole life until he used the IMAX cameras. Then he said that felt like first class and he said he doesn't want to go back behind the curtain again. So I think once they try it, most of them like it.

It's great. [ If that is ] moving in one direction it would be great. Maybe a couple of questions on China. I mean, obviously, our relationship with China seems to ebb and flowing and now with increasing trade tensions there's some concern about the access of Hollywood films to China. How important for your overall business is showing Hollywood films in Chinese market? And it's -- I guess it's about a third of screens.

So I'll give you a 2-part answer. One, it's important, but 2, it's not as important as it used to be. So we do both Hollywood films and local language films in China. And on the local language front, we're up about 50% from 2019 in the revenues from local language in the world and in China, the same thing. We're up about 50% from 2019. And I think that Chinese local content will be about half of the box office in normal times. So it's not years ago, we were much less than that. So we tried to diversify a little bit away from Hollywood content. But China has put out a goal to make -- to have 100,000 screens. I think there are about 80,000 now. I'm talking about [ party document ] and direction to go. And if they want to fill those theaters and fill the malls where they're built in, they're going to need Hollywood films because they just don't have enough production to do that. During 2021, a number of things happened. Obviously, relations weren't at their high point, but I don't think that's the main reason to less Hollywood films. Other things going on because of the pandemic, there were a lot of Chinese films in backlog that hadn't been released. So I think they didn't want to say, hey, bring your films here, U.S. until they got -- when you're a government that controls the economy, you get to do that. You can't do that in a lot of places, but that was one of the factors. I think there were unique sensitivities around some of the films that all of us have read about in the papers that were fueled by social media. I think the day and date experiment, which we talked about, I think, the piracy. So remember, the government gets a cut of the film revenue of everything that comes in. When they read in the piracy numbers and they saw how many -- and in China, there's a piracy issue without putting pristine copies on the Internet. So that they didn't let in a lot of those day and date movies. So I think a lot was going on. Going forward, we'll see where the bilateral situation ends up. But one of my favorite saying is it's never as good as it looks or as bad as it seems. So I think we'll approach normalcy. There'll still be some of the movies that there's political stuff going on. But when you take away the backlog caused by the pandemic and you take away the day and date stuff, I think it will start to approach a normal period of time.

What do you think, over time, again, none of us have a crystal ball, but if you look out over the next 5 years, you got -- there's a lot of moving parts there. Do you expect the number of films accessing the Chinese market to grow over time? I mean, it sounds like given the growth in theaters in China, like you said, there's going to be inventory, there's real sort of monetary benefits from the government from showing those films. How do you expect that market to evolve?

If we had a couple of hours, I can give you a more specific answer, but China is a really complicated place. And the good news is we've been there for over 20 years. So as an organization -- and we have a very -- we have a fairly big office there. So we understand a lot of the nuance. When the U.S. looks at China, they look at it through a bilateral lens. But if you're in China, it's about this guy fighting this. It's not different than U.S. politics layered in terms of what makes them make decisions one way or the other. And next year is the election again in China. It's all too -- if you ask me on economics if China were a western country would it go up, I think, for sure, it would and there is a lot of demographic reasons and theater growth and stuff like that. But it's so driven by politics, I can't guess on that one.

Got you. Okay. Can you discuss your network growth through the pandemic and beyond and what would you say -- has COVID changed the TAM of your business in your view?

So what we do is every 3 years, we update what could be in the addressable market. And right now, we have about 1,600, 1,700 theaters open. We have another like 400 in backlog, and we've set our addressable market as 3,300 theaters. But we said our addressable market in China 15 years ago was 90 theaters and now we have 650 open -- 750, sorry, I missed the week. So that number keeps moving. So I think in the short run, yes, the pandemic has probably slowed things down in some areas of the world. But I think our success and the fact that we're doing more movies with IMAX DNA and I didn't talk about this in the Disney+ context, but every time someone in the world clicks on it, they see IMAX Enhanced on it. So our brand reach is growing. I'd like to think that will increase over time, but probably not in the short run because of the pandemic.

Got it. And what markets would you say you see the most opportunity? You've talked about China a lot, but any other markets you think are especially attractive?

Yes. Japan, we've been really killing it. So I think we have like 40 theaters open in Japan, something like that. The per screen average in Japan during the pandemic last year was $1.5 million and the second best market was Australia, which was $750,000 because most of the world was closed. And as I said to you, we were involved in the biggest movie, the second biggest movie in the history of Japan and off the bat to that is we're doing very well. So I think that will be a very good market for growth for us when things kind of open up. I think the Middle East, specifically Saudi Arabia, as you know, that market only opened cinema in the last 2 or 3 years. I think we have about 30 theaters in backlog, about 7 open right now. And I think not only Saudi Arabia, but the whole Middle East has a lot of possibility, which we've just started to mine. And then I think Western Europe, certain countries like Germany, we just opened the largest IMAX theater in the world in Germany. It's the size of a 737. But we haven't really -- because it's been 2 years of basically a shutdown, we haven't had a chance to gain traction. But I think there's lots of room to grow in a lot of European places. And then ultimately, India and LatAm are very underpenetrated. But as I said in answering one of your other questions, I think that will take a little longer.

Got it. And we're running up against the time here. But last question for me. Obviously, you have a lot of opportunities to expand global basis, existing markets, new markets. You also have a buyback in place and were active with the buyback last quarter. How do you view sort of capital allocation? How do you make the decision sort of how to put the -- where to put the incremental dollar? And then could the buyback be part of even within that equation going forward?

Yes. I mean the buyback can be part of it. And as a matter of fact, we've been buying back this quarter. People -- when they got spooked, we know what our long-term outlook looks like and we're confident in our business. Other than buybacks, we allocate our capital, some of it to new businesses, which we talked about earlier. Part of our business model is joint ventures where we put up some of the capital, we get a larger percentage of the box office and return, and we're continuing to do that at the right locations where we think return on investment is attractive. We have about $500 million in liquidity because our business model is very asset light. We didn't burn a lot of cash during the pandemic and we raised a little bit of capital at very attractive rates during the pandemic. So I think we'll be opportunistic. We'll -- I think -- I'd like to think that as these new businesses prove themselves out if and as they do, that will use some of that capital to accelerate their growth.

Well, perfect. Guys, thank you very much for joining us. I definitely enjoyed spending time with you guys [ and hearing ] more about the company. So we appreciate you participating.

Thank you, John. Take care.

Thanks again. Take care, everyone.