IMAX Corporation (IMAX) Earnings Call Transcript & Summary

Welcome to our 32nd Annual Media and Telecom Conference. We're thrilled to start the day with Rich Gelfond, CEO of IMAX, and Rich has a lot to talk about today.

So you've clearly managed your business extremely well and what is only -- can only be described as a very challenging box office environment post pandemic. What impact has your global programming strategy had on your business?

A really significant impact, Jessica. As a matter of fact, if you look at the theatrical industry, in general and particularly North American box office, it's having a very challenging year. For IMAX, this will be a record year. And we've guided to $1.2 billion in box office revenue, and we're tracking very well against that number. As a matter of fact, the only reason I'm going to reveal this is because online at the end of every month, we post our box office, so we're going to post it today. So quarter-to-date, we're at about $270 million, and consensus is $286 million, and we have a month to go. So while others in theatrical have kind of been negative and saying the box office is terrible, not to go too overboard with it, but quarter-to-date, we're up 40% from last year. And the North American exhibitors in North -- with their box office is down14% quarter-to-date. So we're just in a completely different business. And we've been saying that for years. And this is -- last year, I guess, the first year investors really understood that much more, and our stock has been on a tear, and we're close to a 5-year high on a consistent basis. But who cares about that? What I care about is how the business is doing, and it reflects very much reality. So some of the key points, I'm sure we'll get into this, is we've really pivoted where we do not just North American movies, but global content. So 1/3 of our box office year-to-date is foreign language film. We're doing a film now called Demon Slayer, which is a Japanese film, and it has already become the biggest film in Japan in the history of IMAX. I don't remember exactly the number offhand, but we're releasing it in 40 other countries. And this movie will do really high numbers for us. And I bet most people here never even heard of the movie. And I think one of the bigger issues with Hollywood is that they have a mantra, which is streaming, streaming, streaming, and they've been just so focused on streaming. So pre-pandemic Hollywood's market share was 80% of content. Last year it was 60%. So if I were running a company, I think I'd have a lot to answer for losing 40% market share over that period of time, but everybody seems to be doubling down on streaming whereas the only ones I can think of are IMAX and Netflix that have really been looking globally for box office and it's been really...

I was going to say that you sound like the Netflix of theatrical. So you take a lot of local content and it translates.

Yes. And it's not just in the country, it plays in. Demon Slayer is a good example because we're showing that in 40 other countries. And then just briefly, we also do alternative content. So in the last week or 2, we've done a dead rerelease of a film, a Dead live concert from Golden Gate Park. We have prints playing right now. Later in the year, we have the Stones. So we all -- we program it like almost like, someone who owned a box would program it. We did League of Legends in China, the final and it's sold out in 160 theaters, pretty quickly. So we have a totally different view. We think -- we know we have a platform and we're in 90 countries, and it's just a different business.

All Right. We will get back to some of those, the comments that you made. But in a world where premium or demand for premium is so great. How do you think about the positioning of IMAX in the overall landscape?

Well, I think your point about premium applies beyond theatrical. So if you look at sporting events, things like F1 or Formula One or you look at concerts, the public post pandemic seems to really be seeking out premium experiences. And we have competitors, their biggest similarity is they have an X in the name that's how they compete with us. But the public really wants premium experiences, and they're willing to pay extra for them. And our market share has gone up consistently. We have a 40% higher market share than we had pre-pandemic. And one of my favorite statistics is in indexing in the United States in our 50-plus year history. Before this year, we had 5 films where we did over 20% of the box office on 1% of the screens. In the last 3 months, we've had 3 films that have done over 20% of the box office on 1% of the screens. And when you look at the demand, because part of your question was how do you sustain that? The ecosystem really gets numbers. So the studio is really leaning in. The directors are certainly leaning in. And what we do is we have a film for IMAX program where we use IMAX Cameras both film and digital to capture images. And for 2026, we already have 11 films committed, which is about the number we had for all of this year and '27, '28, we even have films for '29. So I think it's become like a virtuous cycle where I talked to one director last week who called me up to talk about the next few films he was making. And he said, well, I need dates for '27 and '28. And he said, we got to talk about it now because I'm not going to release the film if it's not released in IMAX.

So on that topic films for IMAX films, I think you've more than doubled the number of titles this year since -- in the past year or almost doubled. Can you talk a little bit about how you're able to drive studios and filmmakers to use the technology in production?

Yes. As a matter of fact, I like to think about how much content we put through the network. And this year, we'll have 130 separate piece of content. So that includes Hollywood films or local language films or alternative, all that. We don't have to push it through this demand. So this anecdote, I was telling you about the filmmaker, I mean, he called me last week on vacation to make sure that he gets these dates. And there are projects out '28, '29, where the filmmakers are driving it and the studios are driving it. And one of our most difficult nuts to crack not surprisingly, historically was the Walt Disney Company because they're so -- their brand is so strong, and they lean into their brand, but they observe that IMAX was doing all this over-indexing. So really, it started on their own they said we want to lean in heavily to the IMAX brand, and they do it really way in advance. So Avatar is the end of this year, we already with them have great brand campaign centered obviously around Jim Cameron in the movie, but IMAX is a really big part of it. So it's much more their ability to read the financial results and then they're coming to us.

Right. So what is the typical difference in how these films perform, the films in IMAX versus call it a regular film like...

Well, in IMAX, we used to be about 10% of the domestic box office for kind of a blockbuster sort of like a Marvel film or another kind of action film. But this year, we're doing 15% on those kinds of films. So if you're dating a blockbuster film, it kind of sounds hard for me to believe, even though I'm saying it is a lot of the studios plan their release schedule around the availability of IMAX screens. And a lot of behind the scenes trading takes place where a studio is saying, "I'm going to release a film on this date," but we're booked with someone else, and they move the date. There were 2 films dated on the same day, Predator from Disney and Running Man from Paramount this year and that we were going to share screens for both of them, but they worked it out, so they moved the dates. So now we have a full week to play Predator and a full week to play Running Man. So it's kind of ironic because all this is very much in the background, but where we play a strong role in curating how these films fall together, like it's not an accident that a lot of blockbusters aren't dated on the same date because the studios really want an IMAX release.

And do you envision a point in time where most or all of your films across your network are filmed for IMAX?

I don't think so, Jessica. And the reason is we like to do special films. So obviously, coming up in '26, one of the most special is The Odyssey that Chris Nolan is doing. And Chris approached us, I don't know, 1.5 years ago to say, could I have July 17, 2026. And we usually don't make this bigger commitment, but we committed 3 weeks to him to do that. And increasingly, that's very much what happened. So in '26, we're playing the new Star Wars, the Mandalorian film. We locked that down. I don't know, 6 months, 8 months ago. If you think of the real Avatar we locked up a long time ago. So the studios and the filmmakers recognize the incremental box office. And also, this kind of sounds weird, especially at a financial conference because you would think it's all about the money. But for the filmmakers, it's about more than the money, it's about painting on the biggest canvas on the planet, and it's the way they want their movie shown in the way they want to do it. So when they work with us, and they have really good financial results. And we've done tests where you ask how much the audience likes a film after they've seen it in IMAX and you ask how much they like the film seeing in a regular theater. And by the way, it's -- we -- they are separate groups who ask, but that you get a much higher like score. So it actually -- it makes the film better for the audience and going back to one of your earlier points, especially at a time where people are leaning into premium and especially coming off a time when they got a little tired of watching everything on the couch and taking all kinds of breaks and their kids coming in and out, this has become a much more popular way to watch movies and the filmmakers really know that.

So there's a lot going on. We've kind of alluded to streaming or talked about streaming a little bit already. But -- so I'm going back to that. There's just so much going on in theatrical production and distribution even with the streamer. So you have Amazon, MGM with coming releases, Mercy and also Project Hail Mary. Apple released Formula F1. Netflix, K-Pop Demon Hunters went from streaming to theaters. So now with the streamers coming to theaters, could you talk about the implications for this on your business and theatrical overall?

Well, first, at a very high level, what drives IMAX are the slots that we have. So even though I said there's 130 pieces of content, the main blockbuster slots, I don't know, there are 15 of them that drive a lot of the box office during the year. And you have the studios competing for those slots. Well, now you have the streamers competing for those slots. So if there are 5 people competing for these slots, you now have 8 because you have Apple and you have Amazon and you have Netflix. So like in any business, having a stable supply but more demand. I mean that's a really good thing for your business in the most simple terms. And we made a particular push into streamers. A lot of people have treated streaming or theatrical as like a religion. I'll never show something streamed or I'll never take my product and put it in a theater. But we have a much more pragmatic view and I really think we're going to succeed at. It's the new model, it's going to be some kind of hybrid. And we figured out that we want to be part of that hybrid. So a couple of very quick examples. In F1, which was produced by Jerry Bruckheimer and Joe Kosinski directed it, both of whom did Top Gun and they did Top Gun with IMAX, where we're really successful. A year or 2 before they started the movie, they came to see us. And they said, tell us what an IMAX date could be because we haven't succeeded theatrically and we want to lean into theatrical. So we were a part of it. Their distributors were Warner Bros, but they didn't hire their distributor until about 6 months after we reached a deal. So they did an unconventional route. They didn't go through a studio. They want us. And we're close to $100 million in IMAX in F1 and the film has done about $600 million worldwide. So we're about 15% of the global box office. And it's a different movie in IMAX. So I wouldn't say that about every movie, but if you see it is just a completely different movie. And then I don't know. As you know, I could talk about this for a month, but Narnia is coming out the end of '26 and that's a Netflix film. And everybody knows that Netflix has had kind of a bias against theatrical and everybody is fighting with everybody else. So Greta Gerwig is the one who really started it. She felt that she was really making an IMAX movie. And she always wanted to make an IMAX movie and she and we came up with a plan, where we talk to Netflix. And so -- in Thanksgiving of '26, the film is coming out in IMAX a month before it comes out on streaming. And the agreement we made, which -- you understand, we didn't have to do that movie. So we're not like a theatrical North American exhibitor that needs the content we have more demand than we have supply. So we were able to drive a deal that worked for IMAX, which is one where we said. Okay, we'll do it, but we want theatrical marketing. We want Greta to do her interviews, real premiers, you'll see the marketing, which we're already working on, much of which is going to say, see it on IMAX and in Netflix and it's exclusive to the IMAX network. So our roughly 1,800 theaters worldwide. So if you're not in the IMAX business, you're not showing that movie. So I think that's a tremendous opportunity. And we saw this weekend even with the K-Pop movie that Netflix released that despite at a high level, people fighting, the audience is really happy to see the right movie which you could stream in a theatrical way. And it's really worked. And Netflix can see it for themselves, but at Netflix, I think there are a lot of people, including Ted to some extent, that think this is a good experiment and are looking forward to the results of it. And I know it's hard to believe, but we get along really well. We're working together. And I do think the other part of your question had to do a traditional exhibitors. I do think over time, there's going to be a model where theatrical and streaming work together, I think this weekend was just the beginning of it. And I do think not only because of the slots, but because the filmmakers will be significant beneficiaries of that.

No, all things definitely seems to point to theatrical even with Netflix, which is a huge change. But there's also other stuff going on in the industry. It seems like finally, after years and years of expecting this, that media consolidation is just seems inevitable. And we're starting to see the beginning with Paramount and Skydance and this ramp in speculation about legendary and Lionsgate or Lionsgate and somebody, likely sale of Warner Bros, post the split from Warner WBD. Are there any implications of all of this on your business?

Yes. I think they're mostly good ones because I think what you do is you bring more capital to studios or entities that are undercapitalized. So Paramount guidance is a really good example. So David Ellison announced that, I guess, some conference recently, that he's going to do, I think, 20 blockbusters sorts of films rather than Paramount was doing 80 a year just because of the capital constraints that they were operating under. And I don't remember the number, but we've done probably 15 movies or more with Skydance over the years. We have a great relationship with David and with Jeff. And we're already discussing more movies that they could do in IMAX. So that's kind of one example. And then your other part about consolidation, another place I would go is like Amazon MGM. So Amazon was very kind of leaning away from theatrical, and then they bought MGM. And on the list, you mentioned Hail Mary and Mercy and a number of other movies, they're very interested in IMAX release. And then there's the numbers. I mean, despite what some people say, you can't deny the fact that a theatrical release enhances the value of streaming. And in fact, we did a study. I don't talk that much about it because it's not the most scientific thing, but I think directionally is important, where we showed consumers, movie posters and some of them said, see it in IMAX and some didn't. And we said, how likely would you be to want to see this movie in streaming. And again, one reason I want to push it too hard because it was almost too good to be true. But when you put the IMAX name on the poster, so many more people said they want to see the streaming version. I think F1 is going to be a great test right now because Apple really held a fairly long window originally, they made it for streaming. But I think we're going to see great streaming numbers. And I think it's going to work for them. And then I think the exhibitors like we just saw this week and are just going to decide how is it better for me not to play that content? I mean I just think it's like kids in a sandbox. But when people kind of get real about what's best for their business, they're going to converge in a way that's going to be good for everyone.

So maybe moving on to markets outside of the U.S. I mean you generated the majority of your revenue outside of North America. How much more runway is left for growth in these markets where you still seeing somewhat underpenetrated?