Imax Corp

NYSE:IMAX

Earnings Call Analysis

IMAX Sees Spirited Growth and Expanding Margins in 2023

In 2023, the IMAX experience saw the demand reflected in a significant full year adjusted EPS growth to $0.94, up from $0.06 in the previous year. The year's final quarter contributed $0.17 to this EPS high. A 37% year-over-year increase brought gross margins to $214 million, with a notable 57% margin percentage, up 500 basis points. The final quarter's gross margin percentage sat at 51%, despite a 12% revenue decline due to Hollywood strikes. Adjusted EBITDA soared by 52% to $128 million. Total revenue climbed by 25% to $375 million, pushed by IMAX's network expansion and content diversification, achieving a global market share of 3.2%. The company also reported a 40% increase over the previous year in system installations, with an aggressive projection to double their footprint globally, backed by a backlog of 450 systems.

A Remarkable Turnaround with a Focus on Growth

The IMAX Corporation has weathered the storm and charted a remarkable course of financial recovery and strategic growth. CEO Richard Gelfond highlighted a significant uptick in adjusted earnings per share (EPS), with a jump to $0.94 in 2023, a substantial leap from $0.06 in 2022. This impressive performance underpins the company's resilience and points to the effective execution of its growth strategies.

Expansion through System Installs and Content Diversification

IMAX has been aggressive in expanding its global footprint, installing 128 systems worldwide in line with the upper range of guidance, and penning agreements for 129 new and upgraded systems. This expansion is not limited to hardware; the company is also pushing boundaries in content by diversifying its portfolio. In a first for the company, more than 100 IMAX Experiences are slated to be delivered, building upon the local language blockbuster strategy that smashed box office records with $227 million across multiple regions.

Strategic Financial Outlook

Looking to the future, Gelfond shares an optimistic financial forecast, predicting similar install rates and global box office results in 2024 to those seen in 2023. An even stronger year is anticipated in 2025, with expected high single-digit revenue growth, mid-single-digit network growth, and an adjusted EBITDA margin around 40%. These figures outline a clear trajectory of upward momentum for the company.

Robust Capital and Aggressive Share Repurchasing

The financial foundation of IMAX remains solid, ending the year with $76 million in cash and $257 million of debt. This leaves the company with a considerable liquidity pool of approximately $407 million, including available borrowing capacity. Furthermore, IMAX has confidently executed $26 million in share repurchases in 2023, with an aggressive $24 million concentrated in the fourth quarter, asserting their belief in the undervaluation of their shares. They maintain a substantial allowance for future repurchases, with $151 million available for authorization.

Capital Allocation and Free Cash Flow Management

The financial strategy of IMAX is keenly focused on capital allocation and management of free cash flow, excluding growth CapEx. While the current free cash flow stands around 30%, the company aims to revisit the higher margins of past years, approaching 50%, suggesting a keen eye on sustainable, strategic growth.

Tripling Signings and Integrating into the Film Industry

IMAX is becoming an integral part of the mainstream film industry. The signings between '22 and '23 have almost tripled, signaling robust consumer demand and industry recognition. With involvement in critically acclaimed projects and future blockbusters, IMAX has positioned itself as a necessary component for launching high-profile films according to studio executives and filmmakers alike.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and thank you for standing by. Welcome to IMAX Corporation's Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jennifer Horsley, Head of Investor Relations and Senior Vice President. Please go ahead.

[Jennifer Horsley, executive]

Good afternoon, and thank you for joining us on today's full year and fourth 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. Our historical Excel model is 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 a reconciliation to non-GAAP financial measures 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. Richard Gelfond. Rich?

[Richard L. Gelfond, executive]

Thanks, Jennifer, and thanks, everyone, for joining us today. IMAX powers awe-inspiring experiences for audiences around the world with a premium offering that invites people into exclusive and often impossible situations, worlds both real and imagined, alongside others who are equally immersed.

Our business capitalizes on the limitlessness of human imagination, our innate desire for shared experiences and the unceasing human demand for awe. These are evergreen market opportunities that transcend what Hollywood movie is playing at your local multiplex on any given weekend, which is why IMAX remains among the most consistent winners in global media and entertainment and why we delivered such strong results in 2023: adjusted EPS for the full year of $0.94, up from $0.06 in 2022; growth of 25% or greater across revenue, gross margin and adjusted EBITDA; operating cash flow of $60 million, up from $17 million the prior year.

We installed 128 IMAX systems worldwide, at the high end of our guidance and signed agreements for 129 new and upgraded systems. And we grew global box office to nearly $1.1 billion, our second highest grossing year in our history.

When you look at our results and growing demand for IMAX across the ecosystems, it's increasingly clear that IMAX is indeed the future of cinema. I'm in LA for the month, and this is a growing refrain among Hollywood filmmakers, studios and producers, all of whom want to capitalize on the shift to IMAX at the box office and who see increased market pressure on exhibition to meet growing consumer demand for premium experiences, a trend across all of out-of-home entertainment.

Our global technology platform and asset-light model remain remarkably resilient. Our guidance was in line for the year, even with the fourth quarter heavily impacted by the labor strikes in Hollywood. Strike-related slate delays have impacted the current quarter as well.

While we never like seeing our stock go down, this has created an opportunity for us to buy back more shares. We have repurchased more than $40 million in IMAX stock since October 23. We believe IMAX stock is very undervalued, given our growth outlook. And we expect to continue to use our strong balance sheet to be a buyer at [indiscernible].

Looking ahead, we expect to deliver another solid financial performance in 2024, including growth in system installs to between 120 to 150 for the full year, similar results to 2023 for global box office; total adjusted EBITDA margin in the high 30s percent range. We expect 2025 to be a strong growth year, including at least high single-digit revenue growth, mid-single-digit percentage network growth, total adjusted EBITDA margin of approximately 40%.

Our strategy for the year ahead is two-pronged: accelerate global sales activity and network growth by capitalizing on our expanding content portfolio and the proven returns IMAX technology delivers for our clients; and two, curated diversified global content portfolio. We expect to deliver more than 100 IMAX Experiences for the first time in our history by expanding further into local language blockbusters, IMAX documentaries and new and exclusive IMAX Experiences and events.

Today, I'd like to discuss how we're advancing our strategy on both fronts while continuing to explore new further opportunities for growth. Then I'll turn it over to Natasha to detail our financial results before opening it up to your questions.

Network growth. First, we recently conducted a new worldwide zoning analysis of our technology [indiscernible] for the first time since 2019 to measure our total addressable market, including how many IMAX locations can be sustained in each territory. As a result, IMAX is increasing its network zones to 3,619 globally from 3,318 previously.

IMAX is a highly recognizable global brand in premium cinematic experiences. And yet, we still have significant room to grow with our core technology product. By our analysis, we are only at 47% global penetration with our current footprint of open locations. And we can sell or open approximately 1,900 additional IMAX systems worldwide, more than double the size of our network. As a reminder, we update the zoning analysis every few years, and we'll continue to do so.

Our sales activity in 2023 underscores the strong demand for IMAX technology even in a period of uncertainty coming out of the strikes. Our 129 signings for the year were delivered with 36 partners, including 7 new clients across 26 territories worldwide. 84% were for new IMAX locations. Of these 128 system installs we completed in '23, an IMAX record 61 were in international markets outside of North America and China, further diversifying our unique footprint.

These installs were weighed toward our most productive markets as well. Overall installs were in territories delivering per screen averages that were more than 20% higher than the average PSA across our full network.

Turning now to content. We are focused on curating a diversified global content portfolio and creatively managing a slate to deliver more than 100 IMAX Experiences in a single year for the first time in our history.

We're appealing to a wider audience with awe-inspiring experiences drawn from across Hollywood, international film industries, documentaries and events. This diversity continues to be a key differentiator for IMAX and the biggest reason why we are a growth platform worldwide. Despite a strike-impacted fourth quarter, IMAX global box office in 2023 increased 2% over its 2017 to '19 average compare that to a 21% decline for exhibitors worldwide based on estimates by Gower Street Analytics.

We think of our portfolio in 3 product lines: first, blockbusters, both Hollywood and local language; second, IMAX documentaries; third, IMAX events, experiences that widen our aperture across genres including music, gaming, sports and more as well as live and interactive formats.

First, although the 2024 Hollywood slate has clearly been impacted by the strikes, we remain optimistic given the strong indexing we're driving on a title-by-title basis and a consistently high share of box office we capture in the post-pandemic world. This weekend's Dune Part 2 will offer an excellent example of the differentiating advantage of the IMAX platform. The film was shot entirely with IMAX cameras and will receive a limited run in IMAX 70-millimeter film, further feeding demand for the format in the wake of Oppenheimer.

IMAX earned more than 22.5% of Dune Part 1 opening domestic weekend. Our IMAX exclusive preview screenings just a few days ago on Sunday approached sellout capacity throughout the United States. And our strong presales indicate that we will dramatically over-index. Presales exceed what we saw with Oppenheimer in the same window prelaunch.

I've seen Dune Part 2, and this is a very special film. Make no mistake about it. This film has been much anticipated in the past, but it exceeded my expectations. Look no further than the Academy Awards to see our broadening impact.

IMAX releases scored more than 40 nominations, not just for Oppenheimer, but a variety of films across genres, from Killers of the Flower Moon to the Japanese anime hit, The Boy and The Heron. Across this year, the slate remains balanced with a consistent offering that will stand out in IMAX, including Godzilla vs. Kong, Furiosa, Deadpool and Wolverine, A Quiet Place Day 1, Joker 2 and Wicked.

And this year is just a precursor to a stacked 2025 slate, which includes Avatar 3, several entries from the retooled Marvel and DC franchises, including Fantastic 4 and Captain America as well as Superman Legacy and the sequel to the Batman and, of course, Mission Impossible 8.

Our local language strategy also continues to be a powerful growth driver for IMAX. In 2023, we smashed our record for local language box office with $227 million in receipts from films across China, India, France and Japan as well as Malaysia and Thailand. This year looks very promising as well, particularly in China, where we expect the summer season to be among our best ever.

Our relaunched IMAX documentaries unit continues to gain steam. And we'll see the release of the Blue Angels in partnership with Amazon Studios and J.J. Abrams' Bad Robot this May. We're also in production with Adam McKay's Stormbound, a film that will put IMAX cameras and our fans inside the most powerful hurricanes on the planet. We will continue to grow documentaries as a source of global box office with downstream streaming revenue potential as well as a strong driver of our brand.

We're also building out our portfolio of events and experiences beyond feature and documentary films as a key strategic priority. This strategy has already yielded success in the first quarter, most notably with Queen Rock Montreal, a first-time IMAX remastering of a seminal 1981 performance, which has delivered the best opening weekend ever for an IMAX-exclusive event and has so far grossed about $5.4 million.

We also held a 1-night-only cinematic listening event for the new release from hip hop legend, Andre 3000. The film, which recorded several sellouts and drove great utilization on an otherwise quiet Tuesday night in January, yielded a fee from the record label in addition to our standard box office tape.

Expanding our brand. We also continue to advance our streaming and consumer technology business, pushing further into new experiences beyond the cinema. IMAX was pleased to be among the launch partners for the Apple [indiscernible] pro. Our goal is to test and define the IMAX experience on this exciting new platform from user experience to content to monetization to new avenues for innovation across streaming and playback.

But the IMAX app also has provided an exciting new application of our enterprise software StreamSmart, purpose built to deliver the clearest picture for less money for streamers like Disney+. We continue to make steady progress building out our streaming consumer technology business.

While we don't want to steal a page from every other earnings call in the world, the technology we acquired by our acquisition of SSIMWAVE is AI-based. Through that acquisition, we have a team of 40 engineers specializing in machine learning and artificial intelligence. That team is working not only on streaming, but broader applications across our business from image capture and optimization to improving our internal systems and processes.

To conclude, 2023 was one of the best years on record for IMAX. Our technology continues to power awe-inspiring experiences that bring the entire range of human imagination to life.

Consumers want the IMAX experience, and we curate one of the most diverse portfolios of experiences from around the world. Consumers are gravitating towards visceral you-are-there documentaries, and we're using our technology to tell stories that immerse audiences in the impossible.

Consumers want unforgettable communal experiences, and we continue to open our aperture and expand the definition of the IMAX Experience from using music to gaming to sports. Anyone who has watched the results of the award shows this year can't help but escape noticing the influence of film and IMAX for audiences around the world.

And this week, again, filmed in IMAX, we open Dune 2, which we have high expectations for. As a result, demand for our technology is strong worldwide. We have already established IMAX as a premier global platform, and we see an opportunity to double our footprint. It is a great time to be in the IMAX business. And we look forward to growing our momentum and delivering results for our shareholders.

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

[Natasha Fernandes, executive]

Thanks, Rich, and good afternoon, everyone. As Rich mentioned, IMAX delivered a strong performance in full year 2023. We have a business that stands out in the entertainment industry, both for the experience it provides consumers and our financial model. Let's review our Q4 and year-end results, and then I'll expand on our expectations for 2024 and beyond.

Our 2023 results underscore the strength of our model and demand for the IMAX experience. Full year adjusted EPS grew significantly to $0.94 in 2023, up from $0.06 the year prior with $0.17 coming in Q4. Full year gross margin of $214 million grew 37% year-over-year, and gross margin percent of 57% was up 500 basis points year-over-year. $44 million of that came in Q4 at a gross margin percent of 51%, which was up 100 basis points year-over-year as the impact of the lower box office was offset by cost discipline and lower marketing expense.

Adjusted EBITDA attributable to IMAX grew 52% to $128 million for the year, including $23 million in Q4. Full year adjusted EBITDA margin was 37%, up 650 basis points year-over-year driven by strong revenue growth and operating leverage in our business.

We grew total revenue 25% year-over-year in 2023 to $375 million driven by expansion of the IMAX network and our diversified content portfolio. We did this even with a 12% revenue decline in the fourth quarter due to the impact of the Hollywood strikes on the slate.

Our portfolio approach to programming are [indiscernible] local language, documentary and event content [indiscernible] to optimize our mix across the year. We continue to post strong global market share, 3.2% of the world's box office in 2023 on less than 1% of the screens globally.

Our robust revenue growth in 2023 reflects strong performances from all of our segments led by Content Solutions up 24%; and Technology Products and Services up 22%. We also doubled revenue in [indiscernible] to $14 million for the full year driven by our growth in streaming and consumer technology.

Within operating expenses, we invest for long-term growth and to exploit our differentiation and iconic brand. R&D expense was $10 million for the full year, of which $2.7 million was in Q4 and increased $4.8 million for the full year over '22, reflecting our investments in new technology, including streaming optimization software, StreamSmart, along with continued investment in our core business.

SG&A, excluding stock-based compensation, was $122 million for the full year, of which $29 million was in Q4 and increased $2 million from full year 2022, which excludes onetime transaction costs and the inclusion of SSIMWAVE expenses, which were not in most of the prior year given the acquisition closed at the end of Q3 2022.

As a percentage of revenue, SG&A, excluding stock-based compensation, was 33% in 2023, lower than the 37% in 2022, an improvement of approximately 400 basis points reflecting the leverage in our business model coupled with the focus on cost discipline, including actions to gain cost efficiencies in areas of our business, including IMAX China. Our cost discipline efforts will continue in 2024.

System installations and signings remains a key driver for our long-term growth. In 2023, we completed 128 system installations, up approximately 40% over 2022. We closed the year strong with 69 installations in Q4, growth of 33% year-over-year.

Installations were weighted to top markets with higher per screen averages, approximately 20% above our network average. Examples include Japan, South Korea and France as well as domestic. This robust installation growth resulted in 4% growth of the IMAX commercial network.

We signed 129 systems for the full year, more than 2.5x the prior year. And 55 systems were signed and installed in the same year, resulting in immediate network expansion. Asia Pacific was the biggest driver with 34 signings, nearly double our previous high. We delivered record signings in Thailand, Indonesia and Malaysia, all markets where we've recently expanded into local language content to strengthen our position. In Japan, we delivered 12 new signings, our best total in the market since 2015.

We also saw strong growth in the Americas, highlighted by resurgent activity in Latin America, Mexico and most notably, North America. Our ability to drive expansion in even our most mature market, 26 signings in total and 3 new clients, demonstrates the demand for our technology. Our sales momentum continued in the fourth quarter with 35 signings, our best Q4 since 2015.

Overall, the robust growth in signings in 2023 is a positive leading indicator for future growth. And with installations and signings relatively equal for the year, we continue to have a substantial committed backlog entering into 2024 of 450 systems, of which 382 are new systems and 68 are upgrades. Our backlog, which historically installs within 2 to 3 years along with the fact that our zones are only 47% penetrated globally gives us confidence in our ability to expand the IMAX network for years to come.

Turning to cash flow and the balance sheet. Operating cash flow for the year was $59 million or $1.06 per share, representing significant growth versus the $17 million for 2022 or $0.30 per share. The tripling of our operating cash flow year-over-year is a result of our higher profits and improved cash conversion.

Free cash flow before growth CapEx, defined as investment in joint revenue sharing arrangements, improved by $39 million to $44 million versus $4.5 million in 2022. This is the cash flow measure that best reflects our efficiency and profitability.

Our capital position remains very strong as we ended the year with $76 million in cash and $257 million of debt, excluding deferred financing costs. As a reminder, $230 million of our debt comes from our convertible senior notes due in 2026 that bear an interest rate of 0.5% per annum with a cap call leading to a $37 per share conversion price. Our current available liquidity is approximately $407 million, which includes $331 million in available borrowing capacity under the company's various revolving facilities.

From a capital allocation perspective, these last few months, we have been aggressive in repurchasing our shares as we believe they are significantly undervalued. In 2023, although we were in a blackout period for a significant portion of the year, we repurchased $26 million worth of shares with $24 million of that coming in Q4. To date, in 2024, we have repurchased an additional $16 million worth of our shares, and we have $151 million remaining available under our share repurchase authorization.

On the back of a strong 2023 and the signings and installations momentum we carried into the year, we look forward to continued growth and progress in 2024. Our guidance for the year includes a higher level of system installations compared to 2023 in the range of 120 to 150 systems, which is wider to reflect China's reopening and continued recovery; box office at a similar level to 2023 driven by growth in local language and event box office.

Total consolidated adjusted EBITDA margin, we expect to be consistent with 2023 and in the high 30s percent. This guidance is at the consolidated level as opposed to the attributable level.

In 2024, we will focus our discussions at the total adjusted EBITDA level to reflect the results of our fully consolidated business, consistent to how we discuss revenue, gross profit and most other financial metrics. We believe this is more in line with peer reporting and simplifies modeling for the Street.

For context, in 2023, our total consolidated adjusted EBITDA was $144 million at a 38.4% margin versus the attributable adjusted EBITDA of $128 million at a 36.7% margin. While we are not formally guiding to 2025, we believe it is important to provide investors a normalized view of our business and financial model absent strike or COVID impact.

Looking to 2025, we expect revenue growth of at least high single digits driven by accelerating [indiscernible] box office and mid-single-digit network growth, which will result in steady adjusted EBITDA margin expansion. We target total consolidated adjusted EBITDA margin to be approximately 40% by 2025 driven by the strong incrementality in our model as we scale.

To conclude, 2023 was a year of robust growth for IMAX with strong financial results driven by accelerated signings and installations and a number of box-office milestones. We see significant potential to build on our momentum in 2024 and beyond.

With consumers, genres of films come and go. We transcend genre, which makes IMAX the preferred platform for a growing array of awe-inspiring experiences. Demand for the IMAX Experience among audiences worldwide is high. Studios, exhibitors, filmmakers and artists recognize the value of our premium technology platform and our unrivaled global scale. This fuels new system sales and our expansion into streaming and consumer technology. And as we grow our scale, our asset-light, highly incremental business model is delivering expanding margins, bottom line profit growth and robust cash flow generation.

Thank you. And with that, I will turn the call over to the operator for Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Eric Handler with ROTH MKM.

[Eric Handler, analyst]

Rich, I wonder if you could -- if you're able to dissect the global box-office view for this year, obviously very -- always very difficult to project. But I'm just curious how you're thinking about Hollywood versus local language content and maybe alternative content as well?

[Richard L. Gelfond, executive]

So Eric, during the first 2 months of this year, when kind of the hangover from the strike existed, I think there wasn't a lot of visibility. And I think there was, frankly, a lot of external negativism. But as we're like right at the starting gate now of the year turning around, I feel very good about it.

I mean as I go through these, I'm not going to mention everything, just a number of things. But as I mentioned in the remarks, Dune Part 2 was better than I thought, and I had high expectations for it. I liked it better than Dune 1. I think it's a great story. Visually, it's spectacular. After seeing it, I don't understand how you can't see it in IMAX. It's like a made for IMAX kind of movie, and I'm not alone in thinking that.

And just this past Monday -- Sunday, sorry, we had an IMAX-only screening one show a day throughout our North American network. And it was virtually sold out with very little publicity going around it. The presales are better than they were for Oppenheimer at the same time. So I'm extremely optimistic about that.

And I think the narrative that prevailed during the first 2 months of this year were, are people coming back to the movies? And I can tell you, the answer is yes, and IMAX is very little question about that.

Then you go throughout the year, I have not seen it, but I've talked to some people who have seen Godzilla vs. Kong, and I feel very good about that. And again, you don't have to be a genius to think Kong, Godzilla, IMAX, global. I think there's going to be -- I think that will perform very well.

Deadpool was the most watched trailer as you know, and there's a lot of positive sentiment going on around that movie. The Joker with Lady Gaga is highly anticipated, Wicked later in the year. Furiosa, I think, has also gotten a lot of positive buzz. I just feel much better than I felt a few months ago now that these projects are coming into focus and people are looking at them.

And I'm just giving you the top of the trees. There's a lot of other things, Gladiator 2, a lot of other things. So that's on the Hollywood side.

On the foreign language side, we've been -- we just had a few releases. Most of our releases are scheduled for later in the year. But particularly in China, the China summer is looking very strong and movies like [ Najat 2 ] and a number of other movies which have very strong fan bases are coming up, and I think we're going to have a big summer in China. We're working on filling it out with India, Korea and a couple of new territories. And I think we'll have more movies than we had last year.

And we've recently internally coined the term docubuster, which is like a documentary blockbuster. And we have Blue Angels coming out with Amazon in May, and I've seen kind of a final cut of it. And I think it's spectacular. It was shot by the crew that shot Top Gun Maverick and Glenn Powell's involved, J.J. Abrams' Bad Robot. And we have 2 or 3 other docs in production, including one about being in the middle of storms, which fits right off the IMAX narrative with Adam McKay and a number of other things.

And then alternative content, as I mentioned, Queen killed it. I think it was our #1 ever like original rerelease. It's a 40-year-old movie, and we did about $5.5 million. And I think there's still some more runs to go for it.

And as we mentioned, Andre 3000. I think there's a number other of original kind of alternative content that we're coming up with. And Taylor Swift opened in China in January, and that did pretty good numbers. So overall, I mean, I think '25 is a dream year, but I think '24 is going to be a much stronger the year than people anticipated.

[Operator]

[Operator Instructions] Our next question comes from the line of Eric Wold with B. Riley Securities.

[Eric Wold, analyst]

Rich, I'd love to kind of get -- or I guess anyone will chime in. Let's take your thoughts as you go from the 1,800 or so screens globally now to the potential TAM, 3,600, would you expect kind of the global share of IMAX box office kind of double-ish in line with that growth in systems? Would it essentially get stronger than a doubling, given that you're going in more productive PSA markets? Just trying to get a sense of what you think the linearity of margin and profitability looks like as you kind of move towards that TAM in the coming years?

[Richard L. Gelfond, executive]

It's a complex question, Eric, and a good one. I think if you look at '23, our signings, which were quite good during the year, 80% of them were new theaters. The territories we did them in, many of them were in high PSA areas like Japan and North America. A bunch of [indiscernible] with Cinemex, and they've performed extremely well. Of the ones that have opened in Japan, those are also very good. So the short-term indication is pretty good.

I think when we increase the numbers, it did not increase proportionally in China the way they did in the rest of the world. And China is a pretty screened market. So I don't think you'll see -- like if we forecast a doubling, I don't think China is going to double. The growth in that market is slower.

So I think the growth in the more traditionally established markets will be better than it will be in kind of the developing markets. Again, though, I hesitate to have a conclusion because there's so many variables going on, Eric.

Obviously, there's all this new kind of content we're putting in. This is not the call to get into detail, but changes in the macro world like in foreign language film, the cost of versioning, the cost of special effects because of AI and other things, I think it's very hard to put the calculation that way. But I do think that the growth in our theater network should be in territories that are at least as good as where our network lies today.

[Operator]

[Operator Instructions] Next question comes from the line of Omar Mejias with Wells Fargo.

[Omar Mejias Santiago, analyst]

Rich, if you can explain a little bit -- I know you talked about China, you guys expect a very strong summer in China. We saw recovery last year versus 2022 when things were shut down. What inning is the recovery in China? And how do you feel about the opportunity there to grow in '24 and into '25? Maybe just give us like a state of the union address on how you feel about the China prospects going forward.

[Richard L. Gelfond, executive]

Yes. Sure. Sure, Omar. Happy to do that. So it will be a surprise to many people, but the movie industry in China, in general, did pretty well in '23. And our box office was around $300 million, which is up significantly than any time during the pandemic. And as you said, it really didn't open until January, and it wasn't fully open throughout the year.

So have a pretty positive outlook over the next couple of years. The macro trends appear good, and movies are still an economically affordable luxury. And IMAX particularly is even at a premium price point, has done very well. Our indexing is very strong.

So I think with China, the question is just how quickly does it continue to approach normal and what does the backlog slate look like, both for domestic films and for Hollywood imported films and other imported films.

It's part of my nature, Omar. And I believe, and Natasha could jump in, but I believe we budgeted China this year to be better than it was in 2023. So looking into the future, we feel pretty good about it, but there are still a few variables that have to sort themselves out.

[Operator]

[Operator Instructions] Our next question comes from the line of Steven Frankel with Rosenblatt Securities.

[Steven Frankel, analyst]

So you caught me a little off guard with the Latin America progress. That was a territory that always seems like it would be good for IMAX, and there were a bunch of reasons why it never scaled up. So maybe give us some insight into what's changed and how meaningful of a territory can that be for you?

[Richard L. Gelfond, executive]

So to be clear, I don't think much has changed yet, Steve. I think we're looking prospectively what might change. And one of the biggest obstacles to us in South America has been very high tariffs. So whatever you charge in North America, it's approximately double because of the tariffs in the territory. And we made some progress, but to be clear, mostly from a modeling internal point of view on ways that we could do things differently to mitigate some of those tariff costs. And I think that's given us some hope and expectation of better business there.

The other thing I would say, if you look at the per screen averages in LatAm, they've been really quite good. I mean much better than one would anticipate from the outside.

And I'd say the third thing is maybe from a relationship point of view, we made progress with certain of our pre-existing relationships over there. So I think if you put those 3 things together, it makes us more optimistic. But I don't want you to think that, that's a done deal, and we're predicting a breakout in LatAm this year. I think it's trending in the right direction.

[Steven Frankel, analyst]

Okay. And then one more China question. With a bit of an anomaly this year that your box-office results for the Lunar New Year weren't very exciting. Was that just a function of what movies were available during that window? Or was there something else that went on during the holiday period?

[Richard L. Gelfond, executive]

When you say not very exciting, I mean, our best year ever was last year when we did 33, and we did 28 this year. So I don't think it's necessarily a trend. It's kind of an [indiscernible] of rounding errors.

But last year, we had Wandering Earth 2, which is the biggest local language movie of all time and in China and sci-fi and very much in our sweet spot. And this year, it was more a mixture of genres. So I think I would say we performed sort of like a typical Chinese New Year without the boost from that film. And also, I would add, like I said about the summer, Steve, a lot of the movies that we would have liked to have seen in Chinese New Year are coming out this summer. So I think it will make up for a lot of that over the summer.

[Operator]

[Operator Instructions] Our next question comes from the line of Mike Hickey with The Benchmark Company.

[Michael Hickey, analyst]

Rich, Natasha, Jennifer, congrats, guys, on a great 2023. Just curious, I guess to start on -- Rich, you mentioned the '25 slate, and it does look pretty amazing, especially when you look at the amount of sort of fan boy blockbusters that do so great with at least domestically in China, other regions. So just curious if that slate is having any influence, I guess, on your current [indiscernible] or installations or if you think it will.

I mean it seems like historically before, big films, you would see a little spike. And imagine now we've got a full year of great films. So we'd see a corresponding spike in signings. And just curious your view there.

And then on the installations, 120 to 150, just curious, Natasha, the sort of mix there between sales JV, hybrid, it's somewhere to what you had in '23 and if we should expect the quarterly phasing of those installations in '24 similar to '23.

[Richard L. Gelfond, executive]

Well, certainly, our sales team, when they go out there will prominently play the '24 slate and the '25 slate. And I think the extent to which we've [indiscernible] movies so far in advance is much greater than it's historically been. So I would hope and think that, that would help drive installs and signings this year.

And a number of the [indiscernible] for '25, it's not just films in the summer. There are some films earlier in the year that were pretty good. So we just had our internal sales meeting, and certainly, that will be our approach, and that would be our hope and expectation.

And I guess, historically, that's been true. But it's so early in the year. I think we're going to have to wait a little bit to see whether that plays out that way. And I'll turn it over to Natasha for your other question.

[Natasha Fernandes, executive]

Mike, yes, on the sales cadence on the installation cadence for the 120 to 150 systems, we think the cadence for installations will be similar to last year. Q4 heavily weighted, very similar. It's our standard historical type of model and as well, similar mix to last year between JVs and sales deals as well.

[Operator]

[Operator Instructions] Our next question comes from the line of Stephen Laszczyk with Goldman Sachs.

[Stephen Laszczyk, analyst]

On capital allocation, maybe for Natasha, on the back of the ramp in the repurchases over the last 2 quarters, I was hoping you could comment just a little bit on the pace of forward buybacks going forward, how reoccurring could we expect this to be? How sensitive might it be to share repurchases or the share price, excuse me? And then maybe perhaps more broadly, how you're thinking about balancing capital returns with maintaining balance sheet optionality for any potential future M&A?

[Natasha Fernandes, executive]

Yes, we've done a great amount of share repurchases over the past year and particularly in the last quarter and into this year, I mean we've already repurchased over $16 million in this -- just year-to-date so far. And as we've always said, with our capital allocation, when there's an opportunity for us to repurchase, obviously, with -- in conjunction with our Board and buyback committees, we will be in the market repurchasing at the right levels.

And we have a healthy liquidity position, as you know, and a strong balance sheet to be able to support that. And so we have lots of opportunity. And as we're starting to look at our model and you would have heard it in my prepared remarks, we're thinking about how do we start to allocate from a free cash flow, excluding growth CapEx, because really, we want to continue to grow the network and as Rich mentioned, particularly in the regions where there are high-performing screens.

And so a JV model in those regions, that will give us greater return. And so we are being thoughtful about the way that we are allocating capital with respect to JVs. But our free cash flow, excluding gross CapEx, is around 30%. And in -- really, when you think about the targets of that back in average of 2018, 2019, we were closer to 50%. So that would be where we'd continue to move towards and see the opportunity growing over time.

[Operator]

[Operator Instructions] Next question comes from the line of Jim Goss with Barrington Research.

[James Goss, analyst]

All right. I'd like to pursue a little more of the subject Eric Wold raised with a 47% penetration in the nearly 2,000 more screens that you could add. I'm wondering what the limiting factors you would think would be in terms of accelerating that penetration. Would it be management, infrastructure, market development considerations or even capital though you could shift to more joint venture options because that would be a good driver of equity values.

[Richard L. Gelfond, executive]

So Jim, as you know, our signings level between '22 and '23 virtually tripled. So I mean that's a pretty good sign of consumer demand there. I'm in L.A. for about a month right now, and I've been meeting with leading filmmakers and studios and whatnot. And a lot of the feedback I've gotten is in a world after Oppenheimer.

And as I mentioned in my remarks, films that IMAX was involved with got 40 nominations. And then we're going into a world in the next week, the next few days with Dune, which was 100% filmed in IMAX. And the feedback I'm getting is if you want to launch a blockbuster, you need IMAX to be part of it. And this is not just from low-level filmmakers. This is from studio -- senior studio executives.

The groundwork has really been laid where IMAX needs to be part of these releases. And I think if you look at the sales in '23, I think exhibition, our partners there is really starting to understand that. And I think you'll see the indexing, and you'll see the box office on Dune and you'll see it on Deadpool, which is also -- has IMAX DNA on it. And as that continues, I would expect it to drive significant sales growth. And I think we'll start to see that.

Remember, it's disappointing to all of us that within 5 minutes of something happening, the world doesn't change, but it takes a little longer than that. And I just can't go to a meeting in this town without people understanding what that means.

So I think you'll see if there are no internal constraints, as you know, Jim, we can install as many as we need to as much as -- as long as we have sufficient lead time. We could manufacture whatever we need to. We could design whatever we need to. And I think we're well positioned to have a good signings pace.

[Operator]

[Operator Instructions] Our next question comes from the line of Chad Beynon with Macquarie.

[Aaron Lee, analyst]

This is Aaron on for Chad. So you mentioned the recent Queen concert film, which obviously builds upon a great success from Taylor Swift last year. As you do more of these events, are there any learnings or takeaways that you can roll forward? And any more color just on how you're approaching building the pipeline for more events like this?

[Richard L. Gelfond, executive]

Yes. I think there are a number of learnings. I think -- remember the Taylor Swift concert was extremely successful, but it was not just released in IMAX. It was released more broadly.

But I think if you look at our indexing and you look at our results in China, the more you lean into the IMAX visuals and the IMAX sound system and the specialness of the IMAX Experience, I think you'll drive higher numbers in IMAX. And we're going to do that.

And I think also, you have to look at this on a global basis. So for example, Taylor Swift is a very big name in China, but there are much bigger names in China that you've never heard of. And we did a concert film in France a few years ago with a band named [indiscernible], which was an extremely big success.

As a matter of fact, a lean concert we did in conjunction with [indiscernible] in France. And it did really well in France and really well in Japan. So some of the lessons are Taylor Swift is somewhat unique, but there is talent in different parts of the world. And it's not a really high production cost, where you can really find golden nuggets and do really good business in those markets.

And the other part of your question in terms of a pipeline, it won't surprise you. There is a pretty good pipeline because people who saw the Taylor Swift results and saw that Talking Heads results, which is another one we did and saw the Queen results, I mean, they're approaching us, and they're interested. And as I said, as long as you manage your costs and you use social media and use the group to help promote it, I think there's a pretty good business there.

[Aaron Lee, analyst]

Great. That's awesome color. And then just on SSIMWAVE, I think last quarter, you talked about merging SSIMWAVE with the IMAX Enhanced licensing business. So now that you have a couple more months under your belt, can you just talk about how you're planning to use this new brand? And what your vision is for what this could look like in a few years' time?

[Richard L. Gelfond, executive]

Well, I mean, I remain incredibly excited about our consumer streaming technology. It's a way not only to save money for the streamers, but it's also a way to monitor quality and improve quality. We've been making strides not only in streaming content to the consumer but also sports streaming content to the streamers and to the broadcast network. So I think the TAM keeps getting larger.

There, I think one of the things we learned is that maybe the sales cycle is longer than we expected at the beginning because in these organizations, it's not like oh, well, we've been waiting for you to invent a product like this. You have to figure out where it fits in and how you sell to the financial staff, where the savings are.

But I think we've done a very good job of building the infrastructure on both the sales side and the marketing side and the plug-and-play side. And it's not going to be tomorrow, but I feel good about our prospects for the remainder of the year.

[Operator]

I'm currently showing no further questions at this time. I'll turn the call back over to Mr. Richard Gelfond for closing comments.

[Richard L. Gelfond, executive]

Okay. Thank you very much, operator. I mean I think in 2023, the financial results were -- speak for themselves. They're extremely good. If you look at our multiples both on adjusted EPS and adjusted EBITDA and where we're trading, from my point of view, they're surprisingly low, especially given the strong balance sheet and the asset-light model.

Unlike other companies, there are 0 existential risks around IMAX, and there's a lot of wind at our backs. And if you look at our nonfinancial accomplishments, which include, thanks to Oppenheimer and Avatar and other things, introducing the importance of IMAX into the bloodstream of the future of cinema. I mean I think we are a lot of what the future of cinema is. And I think that as long as we keep doing what we're doing, which we're going to continue doing, very soon in a fairly material way, we'll be rewarded. And thank you for those of you who have been around for the ride, and we look forward to our next call.

[Operator]

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.