Imax Corp

NYSE:IMAX

Earnings Call Transcript 2023-Q1

[Conference Call Participants]

Eric Wold - B. Riley

Eric Handler - ROTH Capital

David Karnovsky - J.P. Morgan

Omar Mejias - Wells Fargo

Steven Laszczyk - Goldman Sachs

Steven Frankel - Rosenblatt

Chad Beynon - Macquarie

James Goss - Barrington Research

[Operator]

Good day and thank you for standing by. Welcome to the Q1 2023 IMAX Corporation Earnings Conference Call. At this time all participants are currently in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Ms. Jennifer Horsley, Head of Investor Relations. You may now begin.

[Jennifer Horsley, Senior Vice President of Investor Relations]

Good afternoon and thank you for joining us on today's first quarter 2023 earnings conference call. On the call today to review the financial results are Rich Gelfond, Chief Executive Officer; and Natasha Fernandes, our Chief Financial Officer. Rob Lister, Chief Legal Officer is also joining us today.

Today's conference call is being webcast in its entirety on our website. A replay of the webcast will be made available shortly after the call. In addition, the full text of our earnings press release and the slide presentation have been posted on the Investor Relations section of our site. At the conclusion of this call, our historical Excel model will be posted to the website as well.

I would like to remind you of the following information regarding forward-looking statements. Today's call, as well as the accompanying slide deck, may include statements that are forward-looking and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to not occur or occurrences to differ. Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and outcomes.

Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information, future events or otherwise.

During today's call, references may be made to certain non-GAAP financial measures. Discussion of management's use of these measures and the definition of these measures, as well as reconciliations to non-GAAP financial measures, including adjusted net income, adjusted EPS and adjusted EBITDA, as defined by our credit facility, are contained in this afternoon's press release and our earnings materials, which are available on the Investor Relations page of our website at imax.com.

With that, let me now turn the call over to Mr. Rich Gelfond. Rich?

[Richard Gelfond, Chief Executive Officer]

Thanks Jennifer and thank you everyone for joining us today. 2023 is off to a very strong start. Across our network sales and global box office we are soaring to historic highs that position us very well in both the near-term and long-term. Simply put, it's a great time to be in the IMAX business. Sales activity is blooming. Year-to-date we've already completed 63 signings for new and upgraded IMAX systems around the world, significantly more than the 47 signings we did in all of 2022.

We delivered our highest growth in Q1 ever at the global box office. We captured 3.5% global market share in the period, up over our full year record set in 2022 and we drove extremely strong double digits year-over-year growth in quarterly revenue and adjusted EBITDA and improved adjusted EPS of $0.30 year-over-year and operating cash flow $25 million year-over-year. What's exciting is the geographic composition of these results because they also prove that IMAX is even more global than ever.

Many of our signings came in high value international markets, validating our strategy to focus on countries where we're generating high per screen averages. The first quarter was our highest grossing ever for local language films. Nearly a third of our global box office was driven by non-Hollywood films. That included our highest grossing Chinese New Year's ever for local language films and top 3 all-time IMAX releases in Japan and India.

Many of these films including India's Pathaan and RRR and Japan's Suzume drove our South Asian countries outside our home markets, further establishing IMAX as the leader in the global expert of local language blockbusters. As a result we remain firm that we will drive significant growth in system signings, installations, global box office and adjusted EBITDA throughout this year.

Today, I'd like to provide updates on our network growth and sales activity and our global box office and film slate and then I'll turn it over to Natasha to take you through our financial results in detail before opening it up to questions.

First our sales activity has broken out in a significant way, which is a very positive indicator for long-term growth across our global network, box office and financial results. As I mentioned, our sales strategy this year is focused on high box office markets around the world, particularly those where we drove record breaking performance with Avatar: The Way of Water, and have made significant gains with local language content.

Our strategy resulted in 28 system signings in the first quarter, all but one of which were for new locations and 63 signings year-to-date. It's important to note that all signings are not equal. Many of these agreements are high quality in terms of market PSAs and increasing our footprint in high potential growth markets.

For the deals we signed during the first quarter, the aggregate per screen average was nearly $1 million during 2022. That includes Japan, a market where we drove $1.8 million PSA in 2022 and recently signed an agreement with AEON to install seven new systems this year. We signed our biggest deal ever in Indonesia for 10 systems, which will double our footprint in the world's fourth most populous nation.

We struck an agreement for up to 10 IMAX with laser systems in Thailand, which will also significantly expand our footprint in that market. Around the world we remain in active discussions on new signings with exhibitors. That even extends to our most highly penetrated market North America. At CinemaCon earlier this week we announced our biggest agreement for new screens with a new partner in the United States in a decade with EVO Entertainment, an innovative exhibitor with ambitious plans for national expansion.

Furthermore, we continue to generate new opportunities for IMAX Enhanced while strengthening our go-to-market strategy for SSIMWAVE. Just last week, our partners at HP announced plans to bring the world's first IMAX Enhanced certified personal computer to market. At SSIMWAVE we installed a New Chief Revenue Officer, a veteran digital executive who has served in that role for subsidiaries of TiVo and Nielsen. And last week IMAX made its first appearance at the NAB Show in Las Vegas where SSIMWAVE's VOD Monitor won a Product of the Year award and we held more than a hundred meetings to discuss potential new and expanded partnerships.

It's notable that in a time of cost cutting among streamers at high churn among SaaS based solution providers SSIMWAVE has retained its entire client base, underscoring its value as a cost saving solution. We also remain bullish on the long-term applications of SSIMWAVE technology, including potentially transformative solutions for streamers that allow them to compress video images while preserving optimal quality and saving significant costs. For both SSIMWAVE and IMAX Enhanced we view 2023 as an important stepping stone for these initiatives to make more meaningful contributions to our revenue next year and beyond.

With our global IMAX system network almost fully online for the first time in three years, we reaped the benefit of having a full diversified content pipeline to push through it. Avatar: The Way of Water anchored the quarter concluding its two months in our network as the highest grossing IMAX first run release of all time with 255 million in box office. And with the Avatar effect clear in our strong sales activity, we are very excited that there are still three installments of this box office juggernaut to come through 2028. We continue to capture an outside share of the box office on our core blockbusters, including 10% of the domestic opening weekend for Ant-Man 3 and 11% for John Wick 4.

But our success in Q1 goes well beyond Hollywood blockbusters. We delivered more than $80 million in local language box office, our highest grossing quarter for local language films ever. Our highly successful Chinese New Year holiday accounted for the lion's share of that figure, headlined by The Wandering Earth 2, our highest grossing local language film of all time. The quarter also saw the release of India's Pathaan, our third highest grossing Indian release of all time and Japan's Suzume climbed to second on our list of highest grossing Japanese titles of all time as it continued its global rollout.

Our local language strategy has played out in three distinct phases. First, we strategically ramped up our local language pipeline in key markets during the COVID pandemic to diversify beyond Hollywood as U.S. studios postponed releases or conducted failed experiments with day and day streaming. This yielded several big pandemic era hits from The Eight Hundred, the first Chinese film shot with IMAX cameras to our highest grossing Japanese title ever with Demon Slayer.

Second, we shifted perception of our brand in critical markets like India and Japan. Before the pandemic we were reviewed as a platform for Hollywood blockbusters. Now we're seen as a first choice purveyor of local blockbusters as well. Today we're entering a third phase. Our success with local language films is extending beyond their home markets, and IMAX is becoming a critical player in launching these films around the world.

Here are just a few examples. Suzume delivered greater IMAX box office in China than it has in its home market Japan. RRR has delivered greater IMAX box office in Japan than it has in India. Pathaan has recorded greater IMAX box office outside India in a diverse collection of markets across North America, Europe, the Middle East, and Asia. And IMAX delivered 30% of the opening weekend box office for The Wandering Earth 2 when it debuted in the U.S. We've only begun to tap the potential here as local film industries around the world grow more advanced and streaming further acclimates global audiences to local language content and viewing with subtitles.

This month offers a great example of our unique diversified content portfolio with the record breaking animated debut of Super Mario Bros. anchoring a slate that also includes French, Indian and Japanese local language releases playing in IMAX markets throughout the world. In a month with only one Hollywood Tentpole on the slate, our April box office through last weekend is more than double what it was in April a year ago.

The floodgates open wide for Hollywood blockbusters next month and through July with a very strong IMAX friendly slate that includes new installments of many of Hollywood's biggest franchises, including Guardians of the Galaxy, Fast and the Furious, The Little Mermaid, Spider-Man: Across the Spider-Verse, Transformers, The Flash, which played extremely well at CinemaCon, Indiana Jones, Mission Impossible, and of course Christopher Nolan's Oppenheimer shot with IMAX cameras.

The back half of the year has strong titles as well, anchored by film for IMAX releases, Dune: Part Two and Aquaman and the Lost Kingdom. And we remain committed to the 30 to 40 local language titles for the full year, as well as exclusive IMAX live events, like our successful world premier of Creed III. Around the world for a diversifying set of creators and content owners, it's clear IMAX is a must have partner for the launch of global blockbuster content.

In conclusion, we are delivering on the strong promise 2023 holds for IMAX with diverse, high quality new signings in key growth markets, a record breaking quarter at the box office, continued global market share growth and significant progress in the global diversification of our brand and business. We are confident in our ability to drive further global growth across the IMAX network and box office as we carry our strong momentum throughout this year. We look forward to updating you on our progress as the year continues and to creating value for our business, our shareholders and audiences around the world that continue to embrace the IMAX experience.

Thank you, and with that, I'll turn it over to Natasha.

[Natasha Fernandes, Chief Financial Officer]

Thanks Rich and good afternoon everyone. As rich highlighted, we are off to a strong start to 2023 and that positive momentum is clear in our results, including Q1 IMAX box office of $273 million, revenue growth of 45% over the prior year. Adjusted EBITDA attributable margin of $27 million or 34% of attributable revenue, adjusted EPS of $0.16, an operating cash flow of $21.2 million.

The positive business momentum has continued into Q2 with strong global box office and sales activity in the period to date. We are particularly encouraged by the quality and mix of our 63 signings so far this year. 54 were new systems compared to 30 for all of 2022, 23 with exhibition partners who are new to IMAX in the past year. 25% were in U.S. and Canada, 17% in Europe and 44% were in Japan and Southeast Asia. And as mentioned earlier in the call, the vast majority were in high PSA countries.

As announced at the time of our Q4 earnings, we resegmented our business to two reportable segments, which we believe are better aligned with how we operate and provide a clear view of our entertainment technology business model. The first segment is Content Solutions, which consists primarily of revenues from our agreements with studios and filmmakers for the remastering and distribution of content to our network, including post-production services as well as documentary production and live events.

The second segment is Technology Products and Services, which is focused on our IMAX system network and primarily includes revenues related to the sale, lease and maintenance of IMAX systems to our exhibitor customers.

Lastly, businesses which are not yet material enough to comprise their own segment are included in All Other. At this time the primary components of All Other are IMAX Enhanced and SSIMWAVE. I encourage those looking for more detail on our segment reporting to view our updated historical financial model posted on our IR website.

Now onto the results. First quarter results exceeded our expectations driven by record IMAX global box office and the accompanying profit incrementality. Notable contributors were the long play of Avatar into February and the robust return of the China box office and our diversified portfolio, Hollywood and local language blockbusters that created a strong opportunity to maximize box office.

As Rich noted, the benefit of our global content curation strategy was fully on display in Q1 with about a third of our box office coming from local language films. This includes 16% of local language box office generated outside the country of content creation. This local to global extension of our strategy is proving highly successful. One recent example is Suzume. The Japanese animated blockbuster generated $6 million of box office in Japan, but we didn't stop there. Given the film's success and the global demand for anime, we have now exported this film to target regions and cities generating an incremental $10 million in U.S., China and rest of world.

The winning combination of Hollywood and local language content enables us to lower the volatility from Hollywood releases and to optimize the programming of our network to maximize box office for our exhibitor customers, which in turn is driving greater demand for IMAX systems creating a positive growth dynamic.

Our box office performance led to a record Q1 global market share of 3.5% on less than 1% of the screens up from 2.6% in Q1 of 2022. Revenue in Q1 was $87 million, up 45% from $60 million in Q1, 2022. At a 57.5% gross margin we recognized gross profit of $50 million, which reflects growth of 58% year-over-year. This higher level of revenue and gross profit was driven by improvement in both segments.

Content Solutions revenues of $32 million, comprised 37% of total revenue and grew 53% year-over-year driven by strong IMAX box office growth globally with North America up 25%, rest the world up 60% and China up 97% year-over-year. Gross profit of $18 million grew 43% year-over-year driven by the profitable flow through of box office while gross margin came in at 56.1% of revenue, down from 60% in 2022, driven by higher film marketing expenses and costs to operate the IMAX connected network which scaled in the back half of 2022.

Technology Products and Services revenue of $52 million comprised 59% of total revenue and grew 36% year-over-year. For this segment, gross profit of $30 million grew 63% year-over-year with a gross margin of 57.8%, which was up from 48.5% in 2022. This strong result was driven in part by an increase in systems rental revenues resulting from box office growth of 52% associated with our revenue sharing model, which also generated higher revenue flow through to margin.

Also contributing to our Technology Products and Services results were a higher level of installations under sales or hybrid arrangements and system renewals. In total, we had nine installations in the quarter, eight of which were sales or sales type leases and one which was a joint revenue sharing lease. Consistent with our expectations, total installations were in keeping with historical seasonality.

System signings of 28 were at their highest Q1 levels since 2018 and compared to seven in Q1, 2022. 27 of these signings were from international markets, which were driving strong PSAs and see a clear opportunity to grow our system footprint and in turn box office. This momentum has continued into Q2 with 35 signings already achieved. This is a very positive signal and will fuel long-term future growth considering the relatively low level of IMAX system penetration, particularly in rest of world.

All Other of $3.2 million comprised 4% of total revenue and grew 168% year-over-year reflecting the addition of SSIMWAVE as the acquisition closed in September 2022 as well as the growth in IMAX enhanced.

Turning to operating expenses, SG&A excluding stock-based compensation of $29 million, increased $4.5 million from Q1 2022, driven by normalized level of business activity, including higher staff costs over the prior year as we have returned to a full staffing compliment following the pandemic. In addition, the inclusion of SSIMWAVE expenses contributed $1.5 million of the increase. As a percentage of revenue SG&A excluding stock based compensation was 33% versus 41% in Q1 2022, an improvement of 740 basis points reflecting cost discipline efforts and the strong operating leverage in our business.

Adjusted EBITDA attributable to IMAX was $27.3 million or 34.4% of attributable revenue and grew 84% compared to $14.8 million in the prior year, driven by growth across our segments and specifically the high level of box office performance flow through to profit. Adjusted EPS in Q1 was $0.16, which would've been $0.19 except for the negative tax valuation impact of $1.6 million or $0.03 in Q1 2023. This compares to adjusted EPS loss of $0.14 in the year ago period, which includes a negative tax valuation impact of $5 million or $0.09. We anticipate for the foreseeable future an approximate $1 million to $2 million or $0.03 to $0.04 quarterly negative tax valuation allowance impact.

As we turn to our balance sheet and cash flows, operating cash flow was $21 million or almost 70% of adjusted EBITDA in the first quarter, representing significant growth of $25 million from the use of cash of $4 million in the prior year period. This improvement reflects our higher profits year-over-year and the accelerating business recovery of our exhibition customers post COVID. For context, operating cash flow for the entire year of 2022 was only $17 million, a tremendous start to the year in what generally has been in recent years, a weaker operating cash flow quarter.

Our capital position remained strong as we ended the year with $99 million in cash and $266 million of debt excluding deferred financing costs, $230 million of which is our convertible senior notes due in 2026 that bear an interest rate of 0.5% per annum with a capped call of $37 per share. As of March 31st, our available liquidity was $423 million, including cash and cash equivalents of $99 million and $324 million in available borrowing capacity under the company's revolving facility. Furthermore, as of March 31, $192 million remains available under our share repurchase authorization.

To conclude, the first quarter was a strong start to the year. As I said last quarter, we believe and are now seeing that 2023 will be a year where the combination of our unique position in the entertainment industry and our high margin, asset-light technology focused business model will shine through and the long-term opportunities for growth are even more significant. The ceiling is very high when you factor in our global system under penetration, along with the emerging potential of our streaming technology backed by our strong brand. We look forward to reporting on our progress on all these fronts going forward.

With that, I will turn the call over to the operator for Q&A.

[Operator]

Thank you. [Operator Instructions] Our first question will come from Eric Wold of B. Riley Securities. Your line is open.

[Eric Wold]

Thanks. Good afternoon. I guess a couple of questions, two questions from me. I guess Rich, with the 63 signings you've announced year-to-date, and I guess probably what's in discussion and hasn't been announced, can you, I think you talked about the strength of Avatar and whatnot kind of driving these accelerated discussions. I mean there have been periods of other box office strengths in the past 10 plus years since the prior Avatar. What makes this different possibly from those other periods and then how does this impact your thoughts around your kind of ultimately backfilling or penetrating certain markets as you see where this demand is emanating from?

[Richard Gelfond, Chief Executive Officer]

So Eric, I think that Avatar was a factor and the Avatar effect, which we've talked about, but I think in the quarter there was much more going on than Avatar. First of all, let's talk about Avatar, which as you know, we did 11% of the box office on less than 1% of the screens and did $255 million, but 13 years ago with the Avatar and the Avatar effect, there was one Avatar. Now we have Avatars coming every two years and there are three more of them. So in one way I think of it as an off balance sheet asset. So if you are someone thinking of getting into the IMAX business, you'll know for the next number of years that you have an Avatar coming. So I think maybe the Avatar effect even gets magnified to a certain extent.

But I think besides Avatar what happened was a lot more kind of systemic events. So as you know, our local language content both in it's place of origin and in other markets was almost a third of our box office in the quarter, and that's kind of a totally different look than we've had in the past. So to give an example, this past weekend, I think we did about $4.5 million on Super Mario and people say, oh, they played Super Mario. But overall our box office for the weekend was over $13 million.

So I think it gets way more likely that you can't just look at the latest Hollywood release that's coming out and again, coming -- let's fast forward to this weekend, it's Labor Day in China, which is a five-day holiday, and we've got three, we think going to be very successful films playing there. And in India, one of the most anticipated films of the year is opening this weekend. So in the old days with IMAX, if you look at it, you'd say, well, there's not a lot coming in North America. You know, it's hard to predict, I don't know.

But when you look at it this year, I think it would be, oh, and Mario is opening in Japan. You look at it and piece all that together and you'll say, wow, there's a lot of box office coming out of there. And I think it lessens the volatility and the dependence on Hollywood blockbusters. So I think people in their markets, they're not just looking at Avatar, but if you are in China, you are looking at anime. If you are in Canada, you're looking at Indian releases. And I think when you put that all together, it, it all adds up to a much more predictable, stable box officer, which of course Avatar is part of, but I think it's a lot more than that.

[Eric Wold]

No, that that's perfect, rich. And I guess last question, obviously you have a "problem" of having too full of a slate. I mean, you've got, movies fighting against each other for room on IMAX, but you're still somewhat tied to film releases and film successes. And I think about SSIMWAVE, what needs to happen for that technology to become a true kind of recurring revenue stream that's decoupled from any kind of content release calendar on the streaming platforms or otherwise? And, what needs to happen for there for that to become the case?

[Richard Gelfond, Chief Executive Officer]

I think we need to wait a little while to roll out the products in a more a broader way. But the product itself, if you don't recall, basically does streaming optimization, which is it figures out the optimal compression rates on different kinds of content in order to save streamers money. And as a matter of fact, that product just won an award as best new product in its category at NAB this last weekend. And at NAB we had way more discussions and way more leads than SSIMWAVE has ever had before. So I think we just closed on it five months ago. Obviously, the narrative of how streamers can save money is a really important narrative in that world. The totable addressable market is quite large and now it's time for us to roll it out.

Now, you know, we have clients for different SSIMWAVE products including Disney Plus and Comcast and Paramount Plus and lots of other clients, but we haven't really pushed this product and it's this product at this time, which we believe over time could be a game changer. Now do I think it's going to contribute significant revenues in the third quarter? No, I don't, but I do think as we launch this product and people understand that it's going to gain traction and I'm quite excited about its potential to diversify our revenue and profit streams.

[Eric Wold]

Helpful, thanks Rich.

[Operator]

Thank you. [Operator Instructions] Our next question will come from Eric Handler of ROTH MKM. Your line is open.

[Eric Handler]

Thank you very much for the question. Good afternoon. Rich, I wonder, we talked a little bit about the local language films. You obviously had a very high percentage in the first quarter. As you look at your full year box office guidance for this year of $1.1 billion, what do you think local language could potentially account for, for that total and where do you think that amount could go over the next three, four years?

[Richard Gelfond, Chief Executive Officer]

So Eric, as you know, it's dangerous to predict how particular movies are going to do and I'd rather look at it from a portfolio basis, because part of it is what do you think Hollywood movies are going to do and what percentage that's going to be? But certainly when we put together our guidance, which we gave on the last call, we understood that the impact of foreign films could be significant and that's part of what got us to where we came out. And we'll have more local language films than we had last year in the second quarter I believe I just went through this coming weekend. But, but again, I think it's going to be choppy and I think some of it's going to depend on China because China is our first and biggest market for local language films.

And again, we mentioned this on the call, but I think it's worth underlining that last weekend in China for an anime Japanese movie called Slam Dunk, we did $5.5 million. So this is really a growing area for us and it involves how fast it grows and how far it grows and it also involves what Hollywood films do. So I think trying to assess the percentage is very, very difficult other than to say, I think the absolute number will be bigger than it was last year.

[Eric Handler]

Fair enough. And so let me ask you this question then, let's say we continue to see very good success with local language films over the next several years. Let's say you've doubled the volume of your local language film count. Would that have any consequential impact on your DMR costs?

[Richard Gelfond, Chief Executive Officer]

I don't think so, Eric, although you've given me the opportunity to mention that for local language films we're actually doing our DMR costs in many of the territories they're being released in. So for example, in India we just started DMR in Indian films in India and Chinese films we do in China and the cost of DMR are cheaper in those territories than they are doing them in the United States. So the more product we do there as a percentage of the total product, the average cost should come down.

[Eric Handler]

That's very helpful. Thanks a lot.

[Operator]

Thank you. One moment please for our next question. Our next question will come from David Karnovsky of J.P. Morgan. Your line is open.

[David Karnovsky]

Hi, thanks. Rich, I appreciate the success you're seeing in China with local content, but if we look at kind of Hollywood films and we've started to see market dates, I think the recent performances, mix especially for some of the comic book features. So I'm wondering if you think there's been a shift at all in local taste over the prior few years, or is this just too much read through from a relatively small sample?

[Richard Gelfond, Chief Executive Officer]

Well, David, we're not, yes, I think it's a relatively small sample. I mean, we're only four months away from Avatar, which at during the height of the pandemic when a significant part of the country was locked down and we did over $50 million. And you go through the slate, even Ant-Man which as you know, didn't perform well in China, it wasn't that far off of what the previous Ant-Mans had done. So one problem I have is that a very short sample size begins being characterized as a trend and I think, I think it's way too early.

And if you look at some of the films that have already gotten in like Fast and Furious and Transformers and I believe Mission Impossible will get in, those are usually very big performers in China. So, I think we just have to wait and give it some time, but I personally am very optimistic that movies that played well before that those genres and movies will continue to do well.

And one other thing I should add is, with two parts to it, is the films that have gotten in in China have gotten in a lot earlier than they used to. So there's much more time for a proper marketing campaign and public awareness to build and that's something extremely positive. And then I also think that there'll be momentum. So there would be, there hasn't been Hollywood film last year very much because of the pandemic and other issues. And I think once films start to come in, like in the rest of the world, you trail or other ones and momentum sort of builds and I think the momentum will improve the performance of following films. So I don't see that as an issue right now.

[David Karnovsky]

Okay. And then just with the potential for a writer's strike, wondering how or if at all you think this could impact IMAX, I would think studios would hold pretty tight to their IMAX dates, but any risk if we got into a very extended strike that could lead to some movies maybe later in the year and getting pulled off the slate to help plug a future gap in the schedule?

[Richard Gelfond, Chief Executive Officer]

So I think almost every movie, I hesitate to say every movie, but close to that is already pretty much locked. So I think there's very little risk for the rest of this year, and again because we've become much broader than Hollywood, we have much more ability than almost anyone else to slot in other movies at that time. And also remember that only one-third of our revenues are from North America, so it doesn't impact us much a lot of other territories. But I'm pretty confident in saying this year I don't really think it would have much of an impact. Now if it's a really prolonged strike and it goes well into 2024, of course it could have an impact. But that's not what we're hearing is going to happen.

[Operator]

Thank you. One moment please for our next question. And our next question will come from Omar Mejias of Wells Fargo. Your line is open.

[Omar Mejias]

Good afternoon guys and thank you for taking my questions. Maybe going back to signings, it seems like you guys are reaching an inflection point here with signings and this is all happening without China. Can you give us some context of what's changed? How are your conversations different with exhibitors? And then also maybe talk about, so how should we think about the timing of some of these signings? Are they mostly 2023 events or 2024 events? Just trying to sort of triangulate here as it relates to, I think you guys are, the signings are accelerating and you don't even have China in the mix. So would it be fair to think that you have a clear path to get back to like pre-pandemic level signings as we move beyond 2023? Thanks.

[Richard Gelfond, Chief Executive Officer]

So I think there are several factors, Omar. I think one of them is kind of the percentage of the box office that's being done by blockbusters and as you know the percentage of movies that were IMAX kind of movies has been rising steadily. But the pandemic kind of accelerated that because a lot of the smaller and mid-level movies went to streaming. So I think, it just gives us a fuller slate, a more comprehensive slate. I don't want to repeat myself, but the globalization of the film slate has also made our, the outlook of someone considering getting into the IMAX business, you have more confidence and less dependence on Hollywood. I think market share is a big part of it. You know, our market share is up about 50% in North America since pre-pandemic and overall in the world it's up about mid 30s percent.

So I think people are just more comfortable with the economics. And I'll give you one, like a micro example of that in Japan, our PSA is around $1.8 million and in India they're pretty close to what they are in the U.S. So if you are thinking of getting into the IMAX business and to put a model together, it looks really attractive to do that. And then I think all of that stems a little bit from the fact that the pandemic has changed consumer behavior. So after sitting on the couch for a number of years, not just in IMAX but in concerts and sports and special events, people when they go out are getting used to paying a premium price for a premium experience. And that's become more and more important to them. And I think when you put all that together and you model it, it just makes the case to go into the IMAX business more compelling. So I think it's all of that.

As to the second part of your question about pre-pandemic levels, it depends on the year. And again, you have to divide the signings, you have to divide them into new builds, which new theaters, which put us in more territories. And remember, we don't just get paid from the theaters; we get paid from the studios on that. So that has kind of a double effect and you have to look at upgrades. So I think if you looked at kind of new locations, I do think that they'll start to approach pre-pandemic levels and even this year we're only four months into it with 63 signings.

So, even this year could approach those levels. But I think going forward and remember Omar, that all this is happening where in some areas of the world, the exhibitors are still under some financial restraints. So in North America, we announced the biggest deal we've announced in a decade and you still have exhibitors that are challenged. In Asia, I think it's a lot better and I think that's one reason a lot of the signings have come from there because they are -- they came out sooner and they're better capitalized. And I think China, they'll probably be, a six to nine-month lag time and their box office is coming back. But when you put it all together, I think once people get through this period of time, there's no reason we can't go back to historical levels.

[Omar Mejias]

That's very helpful. And maybe going back to SSIMWAVE, I know you've talked about, it's been around five months since you closed the deal. You've been still new head of sales there. Can you maybe give us a timeline of what are some of the key time -- just the top priorities that you have over the next six to 12 months there and what's the long-term opportunity, but not only from an external standpoint, but also how their technology could help IMAX internally as well. Thanks.

[Richard Gelfond, Chief Executive Officer]

So the timeline is, we've developed a number of leads, like I said, at NAB. We don't want in the first instance necessarily to aim for the biggest clients in the world. I think we want to go for small and mid-sized streaming companies to demonstrate the use case and document some data that we can use. So I think like literally today, we're following up on those leads and we're, trying to get in as many demos in as broader territory as we can. And then as the use case keeps rolling out and as you mentioned, thank you, I forgot that in my previous answer that we hired, a new head of revenue and sales who has actually, been at a company recently, which he took from like $30 million in sales to $80 million in a couple of years.

So I think you just have to put those pieces in place which we're in the process of doing, and then I think you demonstrate your use case and then you try and blow it out in a broader way. And we're going to be as aggressive as we prudently can be. But as I said before, I don't think you'll see meaningful numbers to IMAX corporation come in into sometime, mid 2024 to 2025.

[Omar Mejias]

Thank you, that's very helpful.

[Operator]

Thank you. [Operator Instructions] Our next question will come from Steven Laszczyk of Goldman Sachs. Your line is open.

[Steven Laszczyk]

Hey, great. Good afternoon. Rich, you mentioned IMAX's share, the global box office. I was wondering if you could talk a little bit more about your expectations for share of total box as you look at the slate for the rest of 2023. You think that the strong trends in 2022 and in 1Q continue to hold or do you think there's some reversion to the, I mean that takes place this year?

[Richard Gelfond, Chief Executive Officer]

Yes, I think they hold period, hopefully they go up. I'd be really surprised to see a reversion to the mean, because the world has changed in a lot of ways. Mid-level movies are going to streaming, foreign language films are going to different countries, the level of blockbusters is increasing and, just went through it kind of briefly on the call. But the slate for April was not one when you looked at it on the outside, maybe Mario you thought would be okay, but it was not like a summer blockbuster season. And we more than doubled what our forecasts were for April and what last April looked at. So as of still April it's looking like really good.

So I don't think in a period where you go into Guardian to the Galaxy and Fast and Furious and Indiana Jones and Mission Impossible, films that are kind of franchises that have always done great in IMAX that I'd be shocked if our market share went down at that period of time. And, also remember it is that our network footprint is going to grow. I mean obviously we've given install guidance for this year, so we'll have a larger footprint than we had. And at the same time our footprint is increasing at least in North America, some of the conventional footprint is decreasing. And even though they're not direct competitors, I think that will also give us incremental market share. So, I'd like to be able to predict, but I don't want to get ahead of myself, that it will continue to go up, but I certainly don't see it going down.

[Steven Laszczyk]

Great, thank you. That's helpful. And then may be just one on the opportunity in ticket pricing. We've seen some of the major theater operators start to talk more seriously about dynamic ticket pricing over the last few quarters, I was curious, what your views were on dynamic pricing for the box office more broadly, and then perhaps more specifically the opportunity for IMAX on pricing over the long-term.

[Richard Gelfond, Chief Executive Officer]

So I'm actually going to start a little more general and then answer your question, which is one thing I didn't mention. I was talking recently to one of our important European exhibitors and I said, are you are you over screen? And he said, no, it's not a too much screen problem. It's a revenue problem, revenue proceed. And he said to me, and by the way, one of the deals we signed, he said, whereas in the past I probably would have invested in more screens. He said, but the ROI on putting in premium things like IMAX is much better than investing in screens. So I do think the ability to get that ticket price premium is one way they see going forward. And he said to me, when I do my own internal model and I convert my network over to much more premium, I could keep my screen count the same and box office doesn't have to grow by much, and I have a very different economic model.

So I think ticket pricing is another example of that. If you look historically during inflationary periods, it's been relatively easy to raise tickets. As I said earlier in another context, look at the price of concert tickets, sports tickets, it's not like we're pushing against a tide, we're kind of with the tide. And also the ticket prices even for IMAX are way lower than for comparable special experiences in other theater, concerts, all those things. So I think there's a lot of way to move. Whether the answer is dynamic pricing or not, I'm just not sure and it's also a complicated question because the studios have a pony in that race too, and the studios have traditionally resisted dynamic pricing.

I don't know if they're going to feel differently about it this time. And also, dynamic pricing like models where the price goes down over time and it's higher for better seats. In IMAX our percentage of great seats is much higher and most of our films we play for one to two weeks, so we don't have to fill a box in week four or week five, like they do. So I think the arguments for dynamic pricing are much less convincing in IMAX.

[Steven Laszczyk]

Great. Thanks, rich.

[Operator]

Thank you. [Operator Instructions] Our next question will come from Steven Frankel of Rosenblatt. Your line is open.

[Steven Frankel]

Good afternoon and thank you, Rich. We talked a lot about local language, but one element that we haven't dug into yet is the injection of IMAX DNA into films and markets other than China. I know it took you several years to get there in China, and now that's a regular feature. Kind of what's the path to having other local language content that's either shot in IMAX or has material IMAX DNA to it?

[Richard Gelfond, Chief Executive Officer]

Yes, it's something that we're starting to focus on Steve more and more. And I think, I'm not up to speed on a project-by-project basis, but I know in Japan and in India we've had specific conversations about using our cameras. And this one filmmaker I know of in India, I've talked to myself who's starting a project probably in about six months, who intends to film it with IMAX cameras. So I do think that's going to be more and more a part of our strategy, particularly the digital cameras, because it's not that much more expensive to shoot with them. And I would also think in Japan in particular, because of the popularity of IMAX, it just makes sense for them to do it. So I think that's a trend you're likely to see.

[Steven Frankel]

Okay. And may be some of your latest thoughts on IMAX Live, obviously now as your cup runs over with content, but maybe some of your thoughts on how you think best to use that capacity?

[Richard Gelfond, Chief Executive Officer]

So we've wired 250 theaters. That was our target for the end of last year. And I think we need to further refine our content strategy and we're in the process of doing that now. I think the things that worked very well are these marketing related events. So we're doing a Guardian to the Galaxy event I think next week with a number of members of the cast. Just last week, we actually did something original, which was with Paramount Plus. We took the cast of Picard the show that's streamed on Paramount Plus, and we did an IMAX live event around that. I think we did an event with Scorsese this week around Beau is Afraid, or maybe it was last week. And those events, I think are good marketing tools that the talent is able to promote its own content.

We did Creed III, we did live from the red carpet in a significant number of theaters and that worked very well. So I think we're going to focus a lot on that in the near-term. I think we'll continue to experiment with things like sports, concerts, other kinds of things. I think we'll focus more on the distribution model, which is the one that's used by IMAX in the film business than the original production model. Because again, that's not where the history of what's made IMAX what it is. And then, if it continues to deliver good marketing events and we could add up the numbers and find really good distribution events, then we'll go to the next level which is 500 more, 500 rather than 250. So when the process of using it for what we know works and testing it for what we hope works, that's sort of the short way to think about it.

[Steven Frankel]

Great, thank you.

[Operator]

Thank you. [Operator Instructions] Our next question will come from Chad Beynon of Macquarie. Your line is open.

[Chad Beynon]

Good afternoon. Thanks for taking my question and congrats on the quarter and the signings levels. I wanted to start with capital allocation. Natasha, you've -- you and the team have reduced the share count nicely in the last few years as noted particularly in 2022 by I believe 5 million shares. Stock market is always fluid, but it certainly looks like free cash flow for you guys is moving in the right direction. So how are you thinking about opportunistic or programmatic buybacks as we look forward? Thanks.

[Natasha Fernandes, Chief Financial Officer]

Thanks Chad. Yes, so we are continuing to think opportunistically about it. When the stock price is in the right level we'll buy back. We were actually in a blackout for most of Q1, which is why you saw some buybacks, but not as significant as we have historically, as we pretty much only had a two week open window during that period. And we did put in 10b5-1, but that sort of gets locked in and then it does what it does during, based on the price during that time.

But we -- you saw our cash flows for the quarter, it was a great start to the year operating cash flow in Q1 of $21 million exceeded all of 2022 of $17 million and it's a second good cash flow quarter in a row. And in general, if box office is tracking to $1 billion or higher, good things happen with margin and in turn cash. And so it's the incremental nature of our business. So as you've seen in the past, when we have excess cash, we go through a cycle of doing repurchases.

[Chad Beynon]

That's great, interesting. Thank you. And then Rich, I wanted to ask about just I guess, the change in direction with the streaming debate. I know this hasn't really affected you guys as much in the past couple years, just given your focus on blockbusterization, but I know this was, certainly a positive takeaway for the overall industry from CinemaCon. So wondering if you could just kind of opine on updated views on this, if movie going beget movie going and maybe you get some more people out to the theater if this is a positive or kind of a non-event for you guys. Thank you.

[Richard Gelfond, Chief Executive Officer]

Well, I mean, I think the data is clear that a theatrical release really helps our streaming release and I've read some of the data that is being shared with the streamers and it's just not a question, a theatrical release helps boost the entire value chain. I mean, there's a reason why people have done it forever. Like reselling a product, building a buzz, all of those reasons are really positive. The other part of it and I think this is what you were referring to was Apple and Amazon deciding to release their streaming movies theatrically.

I think for some movies it will be really good, the blockbuster ones and the more the merrier. I don't think it's a game changer for us because our slate was really, there was a lot on it. But for some of the big movies, I think it's a really good addition and even some of the ones this year looking into whether we could get involved with them. So it's nothing but a net positive.

[Chad Beynon]

Thank you very much. I appreciate it.

[Operator]

Thank you. We have time for one more question. And our next question will come from James Goss of Barrington Research. Your line is open.

[James Goss]

All right, thank you very much. Rich, I wanted to ask you about two of the international markets, Indonesia and India. Indonesia because it's brand new, but very large, I think you said number four population. I wonder if you could characterize the market? Is it mostly Hollywood content or is it mostly local language or some sort of blend? And with regard to India, I was wondering if there are certain characteristics within the type of movies that are made there, local language-wise that play particularly well in IMAX. And I'm wondering if the local production is starting to gravitate toward meeting those elements.

[Richard Gelfond, Chief Executive Officer]

So for Indonesia, it's mostly a Hollywood market and that's -- the partner we signed with, we've been in business for a while and they've succeeded by mostly doing Hollywood films. However, we actually, as part of our overall theme on this call, we actually did a local language, Indonesian film there that sort of did okay. And we're talking to them about doing more films there. But I think they're primarily for the time being dependent on Hollywood and just, I know this Jim, but to remind everyone it's the poorest most populous nation on the planet. So I think, there's possibility there to do a lot more obviously depending on demographic issues and other things like that.

In India, I was over there for a week meeting with a bunch of exhibitors and studios. And I think two real positives for us is one the amount of local language content that we're doing in India has gone up and that's an important part of their box office. And I mentioned earlier we have almost the same PSA in India that we have in North America, which is close to $1 million dollars. So, certainly the economics in India work pretty well.

I think, India has other kind of structural issues like the potential partners there are much more highly fragmented than they are in other parts of the world. So there's a lot of independence there. So like if you looked at China, we could do a 50 theater deal, we could just really blow it open and there weren't a lot of opportunities to do that in India. It's much more blocking and tackling and it will take some time. And then the third thing I would say about India is that construction and rollout takes much more time there. There's more bureaucracy, there's more approvals, there's more government intervention.

So I'm actually pretty optimistic on the Indian market, but I don't think it's going to turn overnight. I think it's going to take a little time. And one of the things we're doing in India is with the right clients we're actually going to be doing our revenue share deals, which we never did in India before. And of course we'll diversify our risk and be very selective in who it's with, but we're doing that to try and move it along, quicker and try and fight some of the structural headwinds.

[James Goss]

Okay. And one other, thank you. And one other question, the last one, going back to one of the comments you made about the premium preference, I wonder if there is any growing appetite for multiple IMAX screens per theater, either in the U.S. or internationally along those lines where, you can either dagger times or have multiple content at the same weekend or that sort of thing.

[Richard Gelfond, Chief Executive Officer]

So we've thought a lot about that over the years, Jim and I think the pluses for the really big movies, you could really pack it. But someone used the analogy for me, like IMAX is like the church that's built for Easter Sunday and not every weekend is Easter Sunday. So my concern is how you program it during slower periods of time. And I certainly wouldn't want to do something that couldn't be an economic success.

So what I think is a much better idea would be filling in the zone. So for example, if an exhibitor has a zone that the two theaters are, I don't know, 10 miles apart and they own that zone, what I'd like to see them do is put a third theater at the midway point. And I think that's a much better model than multiple theaters in one location. And that's one that I've specifically discussed with exhibitors and I think there's some interest in that.

[James Goss]

Okay. Thanks very much.

[Operator]

Thank you. This will conclude the Q&A portion of the conference. I would now like to turn the conference back to CEO, Rich Gelfond for closing remarks.

[Richard Gelfond, Chief Executive Officer]

Thank you very much. So this is -- usually I close by summing up the call, but I'm going to be going a slightly different direction, which is I think over the last decade plus it's kind of been theatrical versus streaming and I think, there was how -- who's going to win and how much each one is going to cost the other one and fighting and head on. And I've recently been coming more and more to the conclusion that streaming and theatrical can help each other. And I think one of the examples was one of the last questions where, more content will help, the more content from streaming will help theatrical and I think the performance of theatrical will help streaming.

But for me, an even more interesting example is kind of the worldwide phenomenon around anime, which has done really well in IMAX and anime is actually created through streaming platforms where they have lots of data about the individuals who are online and then they take that online community and they turn it into a theatrical community. It could be television, it could be movies or another example I would give like with local language content where, exhibitors have lists of people who go to Indian local language films and they promote them when there's a cricket match on.

So as I look to the future, I think a lot less about how streaming is a threat and I think a lot more about how both sides are going to be able to figure out how to make the pie much bigger. And that's the way I'm starting to think about it and I just share it because I hope some of you think about it that way. And I really appreciate you being on the call. As I said at the beginning, it's a great time to be at IMAX and look forward to the next quarterly call.

[Operator]

This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.