IMAX. We're very pleased to have Natasha Fernandes, who's IMAX's CFO, and Heather Anthony. Well, I've known for many iterations at IMAX, many roles at IMAX, but your current role is Head of Enterprise Transformation. So welcome. It's a pleasure to have a majority of women on the stage. Yeah. For the first time ever. Love it. Love you. Yeah. We appreciate it. So I'll kick off. Despite all the concerns around exhibition, you've managed the business extremely well. It seems as though, having said that, that no matter what you do, you trade in line with other public exhibition companies. What is the market not understands about IMAX? First of all, thanks, Jessica, for having us here. You know what? IMAX is unique, and they just keep missing it, and they can't necessarily put us into where we actually belong, right? So they're trying to find a spot for us. So exhibition, is it media, is it tech? But our model is completely different from exhibition. We're technology products. We have services, and we have recurring license revenue streams. It's all different. And it's not burdened by those high operating costs that exhibition partners have. Also, IMAX is asset light, right? So we don't operate the complexes. We don't have the high staff costs or lease costs that exhibition has. We're a premium brand. We have strong relationships with not only the studios and exhibition partners, but also the filmmakers. And that makes us unique in that ecosystem. And it creates that growth of box office share for us too. And then we only participate in the tentpole and blockbusters, right? So we're not looking for the mid-market movies. We're looking for the ones that hit it out of the park. And we play those for one to two weeks and move on, right? And lastly, we're global with runway. So we're not operating in one particular market. We're operating in many markets, and markets in Japan, in China, Middle East, and India. There's really some great growth markets. Obviously, there's some big news today on the bankruptcy. I mean, just curious how you view that impacting the IMAX business. Yeah, there is a Regal Cineworld, so that came out this morning, so that was interesting. IMAX has a long-standing great partnership with them. We really do value their partnership. We have a great relationship with them. Rich, in particular, has a great relationship with them, and then as you look at us, we have a strong liquidity position and a flexible business model, so we can kind of maneuver and navigate changes in the exhibition landscape from that point of view. Specifically with Regal and Cineworld, our theaters operate under a master lease agreement, and so what that means is that we don't have single agreements for each screen. We have one agreement that governs them all that are open and in backlog, all under one, so if they trigger one of the systems, then it triggers the whole agreement, so that's a bit more complicated. So you're not exposed as much from that perspective as well. And then the last thing is that as you look at the restructuring and the bankruptcy that's been announced, it's basically to help them clean up the balance sheet and move forward and continue to operate going forward. So if they're going to operate, they're going to operate the top complexes. So clean up the underperforming complexes and either sell them off or do something with them. But that's not where IMAX screens are. IMAX screens are all in the top-performing complexes. Interesting. I mean, can I ask you a real question? Do you have a point of view on what ultimately happens with the number of screens in the U.S.? I think, well, part of this is you start to look at what screens are underperforming and do they trigger either closure or a transfer to another exhibition partner? I mean, you've seen other circuits like AMC buy chains this year. They've bought chains that haven't been able to continue to operate, so it's whether another partner picks it up or whether they close, and that is sort of up in the air right now. A lot of people just think the U.S. is overscreened, but in any case, your market share has grown during the second quarter in North America. I think you did 95% of 2019, which was a record year, while conventional cinema reached only 65% of 2019. I've got two questions. Why are you outperforming so significantly, and do you think it's sustainable? Sure, so I do think the recovery, particularly for IMAX, is real and sustainable. We're part of that. We're part of the experience economy. You're seeing folks wanting to get out and experience life again. We're seeing record levels of people traveling this summer, filling stadiums, going to concerts. Movie going is exactly the same thing. We're part of that economy, and people want to come out, and when they come out, they're seeking those premium experiences, and that's IMAX, and then we have the content that people want to experience. We operate within tentpole blockbusters. Those movies are in high demand, and that's where we play, and then there's a uniqueness. I think there's a fandom to the brand itself. And when people wake up on a Friday morning, there is an actual question of like, "Oh, I wonder what's playing in IMAX." And they'll go see what's in IMAX because they want that experience. And then as to the sustainability question, I do think there's a tremendously compelling slate ahead. Right now, we're obviously in a little bit of a quiet period. But once you get into October of this year with the latest DC franchise, Black Adam, starring Dwayne "The Rock" Johnson. In November, you've got the latest Marvel film, Black Panther, Wakanda Forever. And then, of course, we have Avatar, this iconic, truly milestone title for IMAX, was really a catalyst for our explosive growth during 2008, 2009. And then you get into next year and multiple Marvel titles, multiple DC Universe titles. The latest installment for Fast and Furious 10. You've got Christopher Nolan, who is a huge, iconic filmmaker in IMAX, debuting his latest title, Oppenheimer. We end the year on Aquaman for the holiday season. And many of these films also are using IMAX DNA. And then on top of that, to Natasha's earlier point, we are global in nature. We're leaning into local language content around the globe. Local language is a huge; it was one of our four pillars of content. This year, we've already crossed $100 million of local language films. It's only the third time in our history we've ever been able to do that. So we're definitely on a record pace. And we'll do about 36 or so local language titles this year across China, Japan, South Korea, India, France. And that's on top of 30 plus we did last year. So it will be a record number of titles as well. So we have a lot in our arsenal to play with to really keep the sustainable momentum that we're experiencing. Yeah. I mean, this is a good segue. I mean, you talked about, obviously, the outlook for some of these big films the end of this year and into 2023. But internally, how does IMAX think about, from a planning perspective, to optimize the slate in terms of the length of stay of a typical film due to capacity constraints versus the typical one to two weeks? How do you balance that as you think about all these exciting new movies that are coming? Yeah, when we look at the one to two weeks, I mean, we really think about the tentpoles. We have studio agreements that are long-term with our studio partners. And so you get a view into the future slate, right? And then you're looking at it to pick out which ones make sense for IMAX, which is great because then we get to pick the tentpoles that we think will really play to the IMAX screen. It'll be immersive. It'll be an experience that will come out of that. And that's how we've been able to basically create that 95% of 2019 box office domestically is by picking those films and doing the one to two weeks. Generally, it's one to two weeks. I mean, there are films like Avatar where it's not likely to be one to two weeks because you just want that to play more. Like Spider-Man, it played longer than one to two weeks. So if you know something's going to hit it out of the park, you'll definitely give it more time. So before I ask my real question, I just, both of you brought up Avatar 2. So what are you hearing? What are the expectations? What can you say? Because it sounds like there's a lot of anticipation. Oh, we are definitely looking forward to the remainder of this year and including Avatar 2. Our expectations are high for Avatar 2. I mean, Cameron, he's a master at his art, and he really cares deeply about his projects, and it's a spectacle, his projects, right? He's put a lot into it. I don't know if you've seen the trailer at all, but it's underwater this one. So can you imagine watching this? And it's in 3D. So bring us back to Avatar 1 that did $250 million across, I think it was 300 screens. We're now at 1,600 screens. It's a completely different landscape for us, and in China, that was significant for us. We did $24 million, I think. I'm going to look at my notes there on 14 screens. Because Disney was here earlier, and they said that they're re-releasing Avatar 1. Are you playing that? We are, yeah. September 23rd, it is getting re-released. Wow, so anyway, just in terms of models and distribution, everybody was experimenting in the pandemic with different windows, and now the industry seems to be coalescing around 45 days. I mean, of course, if it's a bigger movie, it will play in theaters even longer, as you mentioned, within a two-week window for Avatar 2 and maybe some others. Do you think it's possible to create an event or a film franchise if it goes directly to streaming? Do you think a hybrid strategy works, or should it really just be, does it really need to be a direct-to-theatrical and then the kind of the traditional windows? I think for the type of content that IMAX features, there really has to be a really proper traditional window first, theatrical first, and then go through the remaining corridors. We're working with studios that have multiple hundred-million-dollar films and budgets here. You really need to have that splash. You have to have the marketing, the P&A. You have to be able to cut through the clutter, really become part of the zeitgeist, right, to really create that awareness so that the further down it goes through the different corridors of earnings ability, you really have that momentum. I think otherwise, you're really just cutting off the tail and moving it to the front of the line, and you're not going to maximize your profitability. I think, fortunately, and I think David Zaslav last month basically said, "We fully embrace theatrical," and we were certainly very happy to hear that. I'm sure. Maybe we shift over to international. What are you seeing in the rest of the world ex-China, and how is that diverging from the US? We're seeing similarities and differences, but the appetite for tentpole blockbuster content, it's big around the world, around the globe. It's consistent that people want to go out to see those tentpole films. It's an event. They want to tweet about it, talk about it, Instagram it. Everyone wants to attend the events. And that's consistent with domestic, right? Domestic, when we operated, we talked about that stat already. But if we look at Rest of World, it operated at 85% of 2019. So they're pretty similar, right, with domestic at 95% and Rest of World at 85%. The only real difference right now is how the markets are driven. So some of the markets are driven more by local language right now. And that's where IMAX has the play, where we focus on local language. So let's take Japan, for instance. We released an anime there, and then it's highly exportable, so it was brought over to domestic as well, and the Japanese anime industry is a huge market, one that you can definitely capitalize on, so it's looking at the local language that we can offer and then seeing how can you export that as well to domestic to create that sort of larger ecosystem for the film. Going into China, I asked this question earlier to Lionsgate. What's your view for Hollywood movies to get back into China? And do you think the local Chinese films can fill the gap to the extent that they're not? I mean, they're certainly not where they were. One or two have gotten in, but I don't think any more recently. Yeah. I mean, well, obviously, we don't control whether the film gets into China or not, but there have been films that made it in this year, right? So it's whether or not the films meet the requirement. Particularly, IMAX films did make it in: The Batman, Jurassic, Fantastic Beasts, Minions. So those ones did make it in. I mean, the other ones, there were reasons why they didn't. Our anticipation is that Avatar will make it in. James Cameron has a relationship with China as well, and so we hope that that will make it in. They did a re-release of Avatar last year too, so I mean, they have played Avatar before in China. So we can't predict where that's going, but on the other hand, that's where IMAX, at least, fills the slate with local language. We've filled this entire summer mostly with local languages. We did Moon Man, which actually grossed over $15 million in IMAX box office. And there's a holiday this week, which we have two films getting released. And then we have the holiday in October as well, where there's films confirmed for that, local language films. I mean, if you think about it, Water Gate Bridge did over around $630 million over Chinese New Year. So there is a market for it. And we have the ability to capture that. Where does production activity currently stand in these markets for locally created films? What is your outlook for local production in some of these key international markets like China and India? It continues to elevate the production value. I mean, really, it even comes down to filmmakers, local language filmmakers wanting to use our cameras and creating that elevation as well. You're seeing a trend towards more local language, which we can't necessarily predict how much will happen in a year. It truly ebbs and flows based on location, based on what Hollywood titles are out there too. But there definitely is a demand for it. I mean, look at India as well, right? The title RRR, that's done amazingly too. And it's just because there are consumers who want that content. So you just have to pick the right content that's driving consumers to go see it. So switching gears, can we talk about live and how that rollout's going and what projects you're working on, what kind of content works? Sure. So I'll talk about the rollout first. So I think on our year-end call in February, we had about 70 or so, 70-plus connected theaters. As of late, we've been really starting to ramp up. On our Q3 call, we disclosed that we were up to 100 connected theaters. And our goal is 150 by the end of Q3 and then getting to 200 by year-end. And we've also becom e international. So we have open screens in Sweden, Switzerland, France, the US, Canada. Those are the ones I can think of off the top of my head. There's some in Asia as well. So now that once kind of it's a little bit of a chicken and the egg, right? If they build it, will they come? Now that we're getting to a certain size, we can really start trying out different types of events and formats. We've done some live concerts. We've done Q&As with filmmakers and talent. We did that with Peter Jackson and the Beatles movie in January. We've done Q&As for Fantastic Beasts, for Jurassic World, more recently with Jordan Peele for Nope. And really exciting today, we actually announced that we're doing a Q&A on September 19th with some of the cast and filmmaker Olivia Wilde of Don't Worry Darling. So that will be very exciting. Harry Styles will be there as well. And we are ready. We announced it this afternoon or this morning Pacific Time. And we're ready at probably 17-20 or so sellouts already. And we've got it lined up for about 105 screens. So really excited to see what we learn from that. How do you market these? How does that happen? This one actually marketed itself within minutes. Right. I mean, those Harry Styles fans are very, they're on it. In general, how would you market your live events? So, Instagram, all the social channels. Something I think that we're really trying to lean into is IMAX wants to be a place for fandom. As I was talking about earlier, we ourselves, the brand itself, has a fan base. But what you learn and you observe over the last couple of years is just the rabidness of certain types of fan structures, right? And how can you connect those fans with their most beloved artists or content or whatever it might be? So we find those pockets. We find those places. And the news gets out very quickly. But it's primarily on our social channels and. So, non-traditional or digital. Digital. Right. Expensive. Yeah. Yeah. This is a good segue. I mean, how do you view the positioning of IMAX just from an entertainment standpoint in a post-COVID world? How do you view yourselves in the overall landscape right now, now that the world has changed so much? It hasn't changed that much where we still view ourselves as the most immersive movie experience in the world. That's who we are, and that's what we focus on. It's our technology, right? We focus on how we view ourselves as camera tech. So using our suite of cameras to create IMAX DNA in the films like Nope, for instance, or Dune or Top Gun so that you feel that experience more and you really engage in it. It creates that high aspect ratio, so filling the screen more for certain scenes. Our DMR process. All about basically our technology and looking at it from that perspective. Are you at all concerned that your premium price could be a risk if the economy weakens further or if consumers start to tighten their budgets due to inflation? Jessica, if you look at even the past seven recessions, box office during those periods of time, it grew. It always grew, and actually, from the 2008 recession, that's when IMAX had the most growth. When you think about disposable income from moviegoers, they're going to cut out vacations, sporting events, concerts, but they won't necessarily cut out a movie because a movie is still within the affordability kind of range, right? You could still go out to experience something, and it could be affordable even during a recession versus taking a vacation. Yeah. Like at Q2, right? Q2, everything was talking about gas prices and inflation and recessionary period. In the height of all that, we had a tremendous box office period, right? Just to your point, basically back to our record 2019. The movie industry appears to be moving more and more towards this focus on big action, blockbuster-type films, and Top Gun sort of perfectly encapsulates this. I mean, can you discuss maybe how you best take advantage of this as what you refer to as this blockbusterization of the industry? And what does this mean for other genres like rom-coms or going forward as well? Sure. So certainly, I think that endures to our benefit. And I think certainly helps us as we think about gives us, in some ways, more visibility than maybe we've ever had. When you look at the slates coming down the pike and you hear about the different types of content that the studios are focusing on. What we want to make sure, though, is that we continue to build our market share as we have been as we've been seeing over the last few quarters, a couple of years. And so we want to make sure that the brand stands for something. And if we're making a promise on quality, we want to make sure we're delivering on that. So earlier this year, we announced that we're increasing our fleet of IMAX film cameras by 50%. IMAX is very scarce. That also builds it. Our footprint is fairly scarce in the world. We are less than 1% of worldwide screens, and our cameras are even more scarce because there's about seven of them or so in the whole world. We have increasing interest from filmmakers to use to shoot with IMAX cameras, so during the pandemic, we made sure that, again, one of the key learnings is let's lean into our uniqueness. Let's lean into our technology. It's kind of making a closed-end system, right? If you're going to shoot with IMAX, you're probably going to be able to market it as IMAX, and then this fandom is going to see it in IMAX, so that's how we really want to lean into blockbusterization, and then I think that will be a fuel and a catalyst for growth over time. Again, we're very excited about Avatar. Have we mentioned that? And certainly, looking at what it did to spur our growth several years ago, we fully expect to see that again this year. It's also, I think, filmmakers and creators are increasingly raising the bar on what they're delivering to audiences, right? So anyone that experienced Top Gun: Maverick, I certainly felt out of breath, and I certainly felt like I was in the cockpit with Tom Cruise and the other Miles Teller and everybody else in the film. And they strapped IMAX cameras to those planes, right? And then the rigor with which the actors, what they went through the training to learn how to deal with G-force, right? And to learn how to fly fighter jets, right? The standards keep getting raised as it relates to blockbusterization. James Cameron was at an event called Digital Day. People were talking about the rigor and the training that that cast is going through as far as learning to breathe, to hold their breath, and how to be underwater for extended periods of time. Those types of events really play into the IMAX experience and that immersion, right? That's what we bring when you come into an IMAX theater. We really want to partner with the creators. Whatever their immersion is, whatever their vision is, I think we're really well-suited and well-positioned to help them create their vision, make their vision a reality. So following up on what you just said, so when movies are shot with IMAX cameras, and I guess since there are only seven cameras, there aren't that many movies. But how do those movies typically perform versus the ones that are not shot with IMAX cameras? And who actually makes the decision to shoot? Is it the studio, the director? How does that decision get made? Typically, it's the filmmaker or the creator that chooses that they want to use an IMAX camera, and once they've used it, like Jordan Peele, for instance, once they use it, they want to use it again in another film or Chris Nolan, for instance. They understand the difference of it, and then you look at Dune with the Cinematography Award. It makes the difference, and so filmmakers are seeing that between each other too, and they have their community, so it's their decision to use an IMAX camera and the way they want to use it. Usually, for IMAX, it performs better by about 2-5 percentage points, and then all the tagging and marketing is all about films for IMAX or filmed in IMAX in the way that we push that forward, and it creates a bigger market share for us from that perspective. Do you have an education or a program to market to filmmakers so that they know what an IMAX camera can do for them? Yes. We do. Yeah. Yeah. And our team in LA works really closely with the filmmakers too, willing to spend time with them when they're going through post-prod as well, throughout the whole sequence of it to help them along. Just on your addressable market, there are currently over 1,600 IMAX theaters globally. There's a backlog of 381 more. Can you just provide an update on installments in the second half of the year and as you head into 2023? Sure. So in our Q2 earnings call, we discussed our installations, and we're still there where we talked about 80-100 installations this year. In the first half, we did 23. And as we look towards the back half, it'll be more heavily weighted in Q4. And as you think about the zones of where we are, the last time we did a study was in 2020, which gave us about 3,300 zones. And right now, we're about 50% penetrated based on that. But I think that shows how much good runway there is for us for further expansion, particularly in rest of world. So rest of world is not as penetrated as domestic or China. And so that's where we have the ability to push out globally further. I mean, how long do you think it'll take for you to be able to reach your entire addressable market? Any sort of timeframe or target? No timeframe. I mean, truthfully, the zones, they change. And so we'll probably do another study in a couple of years once the pandemic is behind us completely. But as that changes, then it also changes where we will push out for theater systems. I mean, we do have a backlog of 381 to still install. And we continue to have deal activity. We've had signings. I mean, we signed a deal with Cineworld just a month ago, and we've signed some deals with Japan exhibition partners as well. So for timing-wise, no, we don't necessarily know how long we will take because you kind of want to plan it properly too where you don't push all the installs in at once, right? You want to do markets and see how they're doing and performing, especially as you enter into new markets too. I mean, your market share of the box office continues to increase driven by this. I mean, do you have any targets of how big you want IMAX to become as part of the total global box office? Where we would want to be, of course, we want to have all the box office. But we're very pleased with the IMAX share trend. I mean, in the first half of 2022, we were 3.2% of global and 5.1% of domestic, which is much higher than previous. Both were record levels, and we're continuing to trend in that direction. We haven't given a long-term target, but there's always some ebbs and flows there depending on the slate. It's clear that blockbusters and premium experiences are what audiences want to see. When they're going out now, they want to go to that premium experience. That's where our market share continues to grow. I mean, on that point, I mean, last year, Disney introduced this IMAX Enhanced for the Disney+ streaming titles. What other ways can IMAX bring that expertise to improve the experience for home movie consumers as well? Heather? Yeah. So IMAX Enhanced is a feature that is on the Disney+ platform. And really, what we're doing is we're bringing the DMR process and DMR quality to particular titles on the IMAX Enhanced platform. And we certainly would like to do that on other platforms as well in a broad way. After a certain while, we did some market research asking subscribers kind of what they thought of IMAX Enhanced on the platform. And some of the respondents talked about how they thought that having Enhanced on the platform kept their acquisition, drove acquisitions, it enhanced engagement, and it also was helping with retention. About half of the survey respondents said that they would expect to pay a premium for knowing if IMAX Enhanced content was on the platform. And it actually was also a great feedback loop for IMAX Theatrical because just having the brand and the awareness on the platform kind of triggers back curiosity into, "Oh, IMAX. Well, what's playing in IMAX this weekend again?" Right? Kind of it helps to feedback to us on the other way. And I think generally, there's a real understanding of the improvement of the quality of the content that's on the platform. So it's certainly something that we would like to obviously, we're working on. We consider it a future growth initiative and certainly looking to expand on it in the future. So another area of growth is international. I have a series of questions. How much growth do you still see in international markets? And are they more or less attractive than North America? No, we think there's a significant growth in international markets. We're particularly interested in Japan, the Middle East, India, and other markets like Germany and other parts of Europe. But we have a lot to go. It's only about 35% penetrated. So we can definitely push there more and expand our theater footprint there. Right. And China is obviously, it seems to be. I shouldn't say obviously, there seems to be a lot of potential. But it's a very complex market, as we have all learned over the last few years. So first, let's start with the reopening in the near term. What are your expectations there as they start to open up in baby steps? Yeah. Well, we've seen good reopening progress as the year has progressed. They've ebbed and flowed between which theaters are open or regions are open. And what I actually think is impressive is that IMAX China actually put out a release last week that for Q3, end of August so far, that we're actually 34% higher than the comparative period last year. And just for the two months, it's higher than the full quarter of Q2. So even with theaters closed and whatever's happening there with lockdowns and COVID, there's still opportunity for box office. And you just have to pick the right content, which local language is where that is right now. And then I guess the last thing on China, but do you have any kind of base case expectations over the long term for China and the growth there? Yeah. We believe Hollywood titles have a place in China's business, and so that's sort of where we're not in a position to set out specific expectations, but we definitely think that there's a place for Hollywood titles and that there could be some growth there once those come back. Just shifting over to yields, how do you balance the different type of deal structures that you implement between sales-type lease arrangements or hybrid structures and traditional JVs in order to balance growth and capital efficiency? Yeah. So we have a couple of factors that drive our deal structures. But I think the overarching thing is the similarity between them is they both run on the same types of terms. Both are 10 to 12-year terms plus renewable periods. Both have recurring maintenance revenue streams. So that exists between both types of models. The sale and STL model, you get the upfront revenue, which you record from an accounting basis upfront. But then the JVs, you have the ongoing recurring revenue stream. So you do a nice mix of them, and they balance each other out for the longer-term revenue and profitability perspective. Let's just see if there are any questions from the audience. If not, then thank you so much for coming. Thank you for having us. Yeah. Thanks for having us. We really appreciate it. Thank you. Thank you.