Okay, let's get started with our next session. Thank you everyone for taking the time to join us today. My name is Stephen Laszczyk, and I'm the lead analyst for the entertainment sector here at Goldman Sachs. We are excited to welcome to the Communacopia + Technology Conference this year, Rich Gelfond, the CEO of IMAX Corporation. Rich, thanks for being with us today. My pleasure, Stephen. Rich, you've spoken about the strengths of the IMAX brand in the past, and the uniqueness of the IMAX experience. Those were on display this summer, with the company having the best July ever for global box office, driven by the success of Oppenheimer and Creation of the Gods in China. So maybe to start, I was wondering if you could spend some time talking about what you believe makes IMAX unique from both a content perspective, as well as for moviegoers? Well, IMAX is really not like an exhibitor at all. IMAX has a technology model, and we license our technology to studios, to filmmakers, to exhibitors, and we get a royalty from all of that. We don't sell popcorn, we don't have leases, we don't have leverage. We're a completely different kind of company than exhibitors. But from the consumer point of view, what makes us different and special is we provide experiences, not movies. So what works in IMAX is typically something visually stunning. We work with the filmmakers for, in the case of Oppenheimer, almost two years in advance, and sort of the biggest, best movies in the world wanna be displayed on IMAX. So we could use Oppenheimer as example. Chris Nolan approached us 18 months in advance. He asked me to read the book to talk to him about it. He licensed IMAX cameras to help film the movie. He talked about the distribution plan, both in film and in digital, and we were integrated greatly in the marketing plan, and Chris was a leading spokesman for that. You know, as you know, we've done about 20% of the world's box office on that movie, on less than 1% of the screens. Even in China, it opened this weekend, six weeks into the run, and we did 30% of the Chinese box office, or about $9.5 million. That's just a microcosm. If you look at our box office, we're tracking towards 2019 levels for box office. We have a very different model than anyone else in the business. I think one of the reasons people have issues understanding us is because we're a unicorn, but I'd say that in a very good way. We're a unicorn, and that even during the pandemic, we were positive EBITDA, and that we've had a very good year so far this year. You mentioned the differences in the business model and how you're a bit of a unicorn. Could you maybe talk about what you feel like is the most underappreciated aspect of your business model? You mentioned not selling popcorn, being asset light. I think the most underappreciated thing is we have nothing to do with being an exhibitor, and I think a lot of analysts compare us to the exhibition community, and I think that comparison is really misplaced. I mean, the exhibition community is about 70% of the box office in 2019, whereas as I said, we're tracking towards it. We charge a much different price structure, typically about 50% more, 40%-50% than a typical exhibitor. We don't own any theaters. We license our technology. We don't have any net debt. Obviously, exhibitors have a lot of net debt. So just to sum it up, I would say everything is the most underappreciated thing. You know, analysts, sorry, Stephen, to be so forward, but including you, comp us against exhibition, and I think, you know, you might as well comp us, it's closer to comp us against Netflix or a tech company. So I think the most underappreciated asset is that we have nothing to do with being an exhibitor other than we show movies. We can dive certainly into some of the differences there and the secular trend that IMAX is exposed to, that maybe some other parts of the ecosystem aren't to the same degree. But maybe starting with one of the secular trends that I think is most important for IMAX, and that's the premiumization of the moviegoing experience. You know, post-pandemic, there's been a clear increase for moviegoers in terms of interest of viewing movies on premium format screens. I think Comscore has data out that suggests that 17% of the total box so far in 2023 is premium format, up from about 9% in 2019. What factors do you believe are driving this, and do you think that's sustainable going forward, or is there some aberration that we're seeing post-pandemic that's still playing out? Well, I mean, I think you're seeing premiumization in a lot of industries. Look at the Taylor Swift concert, right? The ticket prices they got and the incredible demand, over $1 billion. To see that, I think in the sports world, you're seeing premium seats go, boxes. You know, kind of across the entertainment landscape, there's a drive to premium, and I think it was partly caused by the pandemic, meaning that people were locked on their couches. They got tired of, you know, not sitting there and experiencing entertainment, more or less shutting it on and off and taking snacks. And I think when people go out, they want something really special and really differentiated, and you know, IMAX is clearly at the top end of that. It's not just a North American phenomenon, as you know. We're in about 90 countries, and it's globally. So I mentioned in China, we did 30% of Oppenheimer. Right now, even for local language films in other countries, we're doing a disproportionate share. For Japanese anime in Japan, we're out-indexing. For Indian films in India, we're out-indexing. So it's a global phenomenon, not just a U.S. phenomenon. And, you know, the second part of your question was, do I think it will last? Well, you know, it lasted certainly in 2022. 2022 had a fairly thin slate, but yet outside of China, we pretty much met 2019 in 2022. And, you know, this year, of course, China's not all the way back, but it started to come back. So this isn't just like a, you know, a one-week trend. You know, it seems like years ago, but Avatar was earlier this year, and as you know, we heavily over-indexed in Avatar, even though it showed up, you know, virtually on every screen that was available. So I think there's no question in my mind that this is a trend that's gonna last, and as a matter of fact, I think our customers, who are the exhibitors, understand that. And we recently did a fairly significant deal in Europe, and the exhibition partner who licensed our technology said to me: "Well, I could build more screens, or I could invest in IMAX. And if I build more screens, you know, there seems to be an over-screening phenomenon in most places. But if I build an IMAX and I bring in incremental revenue, that's a much better ROI for me." So I think, you know, our exhibitors have started to recognize that as well. And, you know, there's no question, you know, we'll talk later about Dune, I'm sure. But on Dune in 2022, we did 22% on the global box office on 0.8% of the screens. So this, you know, this definitely isn't a fad. And then the last thing I would add, you said premium screens. So yes, there are things that call themselves premium screens, and mostly they're owned by exhibitors, and then, and then there's IMAX. So a premium screen is, by and large, a large screen, with a regular projector on it, and when you blow up the image, it actually looks worse than it does on a smaller screen 'cause the image degrades. IMAX is an end-to-end solution, and we're involved with whether it's filming the image in IMAX, or it could be using our algorithms to convert it, into IMAX. It's proprietary projection systems, which we've invented to make sure there's no degradation of the image when it gets that large. There's monitoring, in every theater in real- time in the world. So if the volume is too low, we call up the theater and tell them to raise it, or if a belt is gonna break, we call them up and we, we have a, two centers, one in China and one in Toronto, that, manage it in real- time. So, you know, although you're quite right that the trend is towards premium, within that trend is very heavily weighted to IMAX. And as you know, our market share in North America is up about 50% from pre-pandemic, and our market share in the world is up about 40%. That's, that's helpful. Maybe touching on another trend that you mentioned briefly earlier, and that's the international growth opportunity. You currently have 1,200 screens, over 1,200 screens internationally, up from about 1,000 in 2018. How big is the install opportunity internationally for IMAX, and what markets do you see the most opportunity to grow screens in at this moment? I think the opportunity is large, and, you know, I don't think about it as international or domestic, although I agree with your point, international is probably bigger 'cause there are just more untouched territories there. But this year, so far, we've had 87 signings year to date, and that's about double what we had all of last year, and we still have four months to go this year. The signings have been very much on a global basis, less so in China, because China's a little later coming out of COVID than the rest of the world. But a great example is Japan, where we have per-screen average of about $2 million a screen. To put that in context, that's about double North America. We had a seven-theater deal with the largest chain there, called AEON, earlier this year, and they've all been installed, and they're all doing pretty well, some better than others, obviously. But when you look at it, once we add a new theater, we get revenues from the studios, we get revenues from the exhibitors, it leads to more awareness. And again, I'll harp a little on the AEON example. They only got into the IMAX business in mid-2022, and I think they did two theaters or three, and they were so successful that this year they added the seventh. But that's just a micro example of what's going on globally. And in terms of what markets most excite us, I think Japan is very exciting because of the very strong PSAs. We've done very well this year in Southeast Asia, places like Vietnam and Thailand and Indonesia, which are extremely under-screened. You know, India, we have only, I think, like, 30 screens in all of India, and it has a population similar to China, where we have over 800 screens in China. And then I think even Western Europe, France, is under-screened. We have only 10 screens in all of Germany, and that's similar to the number of screens we have in some Latin American countries. So I think our growth trajectory is extremely strong. You mentioned the productivity in Japan, that the $2 million a screen. This comes up a lot in conversations with investors, where I think one of the concerns of- about international expansion is that the, the incremental screen, maybe in, in markets like, China or Southeast Asia or in India, have lower productivity rates than, than what the existing install base has today. How do you think about this? Like, what, what are the return profiles of the incremental screens that, that you're putting in? Do you need a- as great of productivity on a dollar basis to, to achieve similar levels of returns? So our productivity of our backlog, and our backlog is signed theaters not yet open, which is about 500, is very similar to our existing network. So if you look at the markets it's going into, it's virtually the same markets. So that's, you know, kind of a question we get: Are you going into lower-tier markets more than before? And the answer is no. And as a matter of fact, you know, the territories I mentioned to you are pretty high PSA territories, so there's been no degradation. If you look at the 87 signings this year, you know, if anything, they're probably a better demographic because of places like China and Southeast Asia than they were before. And, and in lower demographic areas like China, for example, where the per-screen averages are lower, we've changed our business model in some of the second-tier places. Just for the benefit of the audience, we have two models. One is where we sell our equipment, and the other is where we do joint ventures. So as we've penetrated the higher-tier markets, where we might have been happy to do joint ventures in the lower-tier markets, we're now doing much more sales or hybrids, where they take a lot of the risk. So we've used our business model to insure ourselves against that. And also, I mean, China, they have about 80,000 screens, and we have 800 open and another 200 in backlog. And by the way, I think we'll do considerably more there. But I think, you know, a lot of the lower PSA markets are fairly penetrated, so I don't think that's at all a systemic issue for us. That's helpful. Maybe sticking with the opportunity in international for a moment, IMAX has developed a very robust local language strategy, working with directors in markets like China and Japan to make films for those audiences. Could you talk a little bit more about your local film strategy and the opportunity you see yourselves going after over the next, you know, five to 10 years? So, we started doing local language film pre-pandemic and, you know, it was a small niche business for us. But the pandemic forced us to really double down on that strategy because there weren't films coming out of Hollywood because of the COVID restrictions. We've been very aggressive in that area, and I must say I've been surprised by how quickly it's grown traction. So in the first quarter of this year, 30% of our box office was from local language films, and just in the last week, this year has become our biggest local language film year ever. I think we'll pass $200 million probably in the next week or so, and again, with four months to go. This year, we're gonna do about 50 local language films. But for me, the most surprising part about local language is not Chinese films doing well in China, and they do. We did a film called Wandering Earth 2, that did over $50 million in China. We did a film in China over the last couple of weeks called Creation of the Gods, which has done $35 million, and those are impressive numbers. But what's really surprised me is how those movies have transported to other places. So the best example is Japanese anime, which, as you know, has become somewhat of a worldwide phenomenon that we're the leading edge on. So, you know, there was a film called Dragon Ball 2 that did better in China than it did in Japan, in IMAX, and it also did extremely well in Korea. When I look at the results, it's surprising, like, it's done extremely well in Scandinavia. We're doing a film now by Miyazaki, the famous Japanese anime filmmaker, and it's opening in the U.S. later this year. Again, in Japan, the weekend it opened, we did 16% of the Japanese box office on less than 1% of the screens there. So I think that's a big opportunity for us. You know, as a matter of fact, your first question was really, you know, distinguish ourselves from exhibitors. You know, exhibitors don't do that. They show films that Hollywood gives them. They show them when Hollywood tells them to show them, but we're incredibly nimble. So I forget the number, but in the next two months, I think we're doing something like close to 10 foreign language films this week. What's today? Wednesday? I think today we open a film in India, which is supposed to be one of the biggest films of the year in India. Then we have another Indian film opening two weeks from now. We have a Korean film out there now. So, you know, I think as you look forward, as I said, we're, you know, our first quarter was $30. We're doing somewhere in the $20s, but I think that's a number you're going to see going up over time. Helpful. Back in 2009, when Avatar first came out, you called out the Avatar effect, where exhibitors wanted to install more IMAX screens to take advantage of the strong box office demand on the back of that movie and the success of movies in the series. I'm curious, with the success of Oppenheimer this year, are you seeing a similar Oppenheimer effect take hold, perhaps, you know, movie or theaters wanting to install more IMAX screens, the 70 mm projectors, more directors wanting to work with IMAX cameras? In terms of the theater rollout, I think we will see that, but it's still playing and, you know, last weekend it did $11 million in its sixth or its seventh weekend. So I think, you know, they're, they're still catching their breaths, counting their money, you know, rather than looking to the next thing. But on an early basis, you know, we have seen that. There have been a lot of inquiries about, you know, more theaters, but it's gonna take some time. It's not, you know, it's not gonna happen in a week or two, but I do think we'll see it. On the filmmaker side, you know, we're definitely seeing it.... So, one of the films that's due out next year in 2024, the studio making the film has approached us and said, "Could we do film versions and release them in IMAX film theaters?" Someone else I'm going to L.A. after this, I'm meeting with, but I've already had a meeting about filming a big epic blockbuster with IMAX cameras. On my way from the airport yesterday, I got a call from an agent for a very famous filmmaker, who said that filmmaker wants to shoot their next movie using IMAX cameras, so we can do it. So that one's been more immediate. I mean, you know, maybe instead of the Oppenheimer effect, we should call it the Nolan effect. 'Cause it's not just the cameras. Chris does such an amazing job articulating why it's special in IMAX. I don't know whether you've seen Oppenheimer or not, but if you were designing a movie, you wouldn't necessarily say a movie that had black and white. Yes, it has the bomb sequence, but it had a lot of, you know, close-up sequences and a lot of dialogue. You wouldn't ordinarily say that that's the kind of film that's gonna do really well in IMAX. But in fact, it was because, you know, the combination of Chris being a master storyteller and knowing how to use IMAX cameras, and the use of those cameras and availability really turned it into a global phenomenon. You mentioned the interest of the theaters and the back of a movie like Oppenheimer, and the robust demand for IMAX screens and the interest in IMAX screens more broadly. You have a significant backlog of installs, almost 500 screens, I believe, at the end of the second quarter. How should investors think about the pace of those screen backlogs converting into installs over the next few years? Well, historically, it's been over a three or four-year period. For the theaters we signed this year, the 87 I've mentioned a few times, those seem to be going in a little bit quicker than they did historically. So I don't remember the number, but I would guess it's more than 1/3 than what we signed this year, will go in this year. So, the pace has sort of quickened up. It's really good to have that backlog, 'cause when we give guidance each year about what our installs are gonna be, we're not kind of putting our finger in the air and saying, "Which way is the wind blowing?" You know, we work with the exhibitors, we have teams on the ground, looking at the sites, looking at the construction plans, and we have a pretty good idea of how it's gonna roll out. As you know, this year, we guided to between 80 and 100 installs, and, you know, we're on pace to... She's whispering. To what? 110. 110-130. Thank you. Good catch, Natasha. 110-130. That was last year's guidance. 110-130, and, you know, we're certainly still on pace to do that this year. So we think there's a normal cadence to these things. Some of those come from out of backlog, and some of those come from new signings. I think one of the conversations that's emerged on the new signing point and the pace of new signings this year has been the impact of the potential writers strike and sort of the uneven, if I could call it that, pace of reopening post-COVID and sort of the stress that's had on the broader exhibitor ecosystem. I'm curious if you're having any conversations or if you're seeing any hesitancy from your theater partners on the strike, on, you know, the trajectory of the films later over the next 12 months, that might be giving them some hesitancy on converting a signing into an install. Yeah, I mean, I don't think it gets to that level, Stephen, where, you know, exhibitors pay day-to-day attention of where the strike is. And if there's. You know, I've been kind of saying this, and I hope you have a sense for it, but IMAX is an incredibly nimble company. So, you know, the strike is going on. There's been a lot of publicity about it. Dune moved from this year to 2024. But instead of playing Dune, we're playing The Marvels and Hunger Games and Killers of the Flower Moon for more time. So we had a problem, which we're a single screen operator, so we can't, we don't fill a multiplex. That's not what we try and do. But we had to play only one of Dune, Hunger Games, and The Marvels. But now that it moved, in fact, we can play all three, and we have a great title for next year in Dune. And when I think through this month and a little of October, it's, it's kind of incredible if you think about it, but when you started this year, we didn't have Killers of the Flower Moon from Apple. We didn't have Napoleon from Apple and Sony. We didn't have Barbie, which Warner just agreed to do with us two weeks ago. We didn't have the Taylor Swift concert, which we're doing in October. We didn't have Hunger Games. We didn't have Marvels. So that's what? Five or six movies added this month. So, you know, our, our customers don't, you know, kind of sit around and shake their heads, and I certainly don't do that. Because I think, you know, given what we are and what our brand represents, it's highly likely that we'll fill things in. And I didn't even add the foreign language films, like, as I mentioned before, like the Japanese anime that's playing here in the U.S. And, I'm trying to remember, I think it's called Jawan, the Indian film that's coming out. But that opens in some screens in the United States and other places. So we have a lot of levers to push. So no, I don't, I don't think people are that worked up about the strike. Yeah. Just two quick questions. Can you talk about JVs and the impact they have on new screens going forward? And also, how should we think about your cameras-... Also, on the production side, how should we think about cameras and post-production? I mean, you touched on them, but does that just strengthen the brand? Does it help the model? I mean, how does that look three to five years from now? So in terms of JVs, and again, for those of you who aren't aware, we have different kinds of models. One is we sell our equipment, and we get a small license fee, or we give them the equipment, and we get a bigger license fee. And then there's a hybrid in the middle, where we get a little money upfront, and then we get kind of a medium license fee. So the ratio is pretty much the same as it's been historically. I'd say, if anything, we're doing less JVs, partly 'cause of the reasons I mentioned to Stephen's question before, in the lower tier cities, where we can't really make the kind of return that we have historically had. We won't JV there. We'll do a hybrid or we'll do a sale, and we're trying affirmatively to do more of that. So I think you'll still see JVs, but maybe a little lower as a percentage of what we've done historically. In terms of the cameras, we've announced that we're building four more film cameras. And again, let me give a little bit of background. So you can get an IMAX film in three ways. One, it can be a regular film, and then we have proprietary algorithms that would translate it into an IMAX film. And, you know, a lot of them, like Indiana Jones, for example, or Spider-Verse, we use that conversion technology. Then we have digital cameras, where people film them with special IMAX attachments to them, so they turn out to be an IMAX-type image, and it's not that much more to film with them. But we've developed these ways you can use digital cameras, and you could use a variety of digital cameras. And then the third way is film cameras, which is what Chris Nolan used, and it's what, Bond was filmed with, film cameras. Nope, Jordan Peele was filmed with film cameras. You know, a number of filmmakers use film cameras. We're building four more of those film cameras, that should be ready probably sometime in 2024. And I think, you know, we're in the process, post-Oppenheimer, of analyzing whether we need more of them and how that fits in to our strategic plan. But, I didn't mention this, but all of the film theaters, or virtually all, for Oppenheimer, are still playing Oppenheimer. In certain cities like New York and London and in Melbourne, I think they're sold out through the end of September. You literally can't get a ticket for that. I think we're looking at what those trends are and mean and should we, you know, pay more attention to that, but we haven't figured all that out yet. The one negative on the film side is it's more expensive to use the film and to use the film cameras. Now, obviously, the box office is a lot higher, so we have to do that kind of analysis. We don't wanna do it unless we make more money. That's the reason to do it. Rich, maybe on the box office for a moment. You mentioned that the movie is into the end of the year. You have a guidance for approximately $1.1 billion in global box, IMAX box, for 2023. Just curious if you can maybe update us on how you're feeling about that. I think you're at just here, just under $800 million through mid-August. Any upsides it to that on the back of the success of Oppenheimer and some of these other big titles coming in? You know, if we change guidance, we'll do it on our fourth quarter call, not ad hoc, but we'll see how it's going. But as you say, I mean, with the first quarter was the best box office first quarter we've ever had. The third quarter will be one of the best box office third quarters we've ever had. So intuitively, we're tracking very well against those, you know, those kinds of metrics. But Stephen, that gives me a good opportunity to ask you a question, which is, you know, Goldman's had a sell on IMAX for two years. First, the price target was $12, then another sell on $14, then another sell and moved $15. So you keep moving the price target up, but it's always a sell, and now the price is $19, and it's still a sell, and we're tracking, in answer to your question, in excess of, you know, kind of the best year ever in IMAX. What do we have to do to demonstrate to you and Goldman that, you know, we're not an exhibitor? And by the way, you know, almost every other analyst has a buy on us. I'm just curious about that. I know we've discussed this in the past before, but I think it really is a function of the broader theatrical ecosystem. I appreciate the differences of the IMAX business model and the success, certainly, so far this year. But being an extension of the exhibitor, of the CapEx and of the broader moviegoing ecosystem, more broadly, that the leverage and exposure to that has given us some concern. We're, I think, more broadly negative on the outlook for the box than we are on any particular one company or one company's business model. I think for us, it's seeing some of those more structural outputs of the industry, post-pandemic, getting back to the pre-pandemic levels that would give us more confidence on the trajectory of CapEx spend at the theaters and how that translates into installs and some of the habitual recurring nature of moviegoing coming back to the degree that we saw. I promise I'll drop it after this. But when I look at Goldman's five-year model, it has a 20% compound annual growth rate on EPS. I look through the other Goldman coverage universe, and companies that have 20% CAGRs are almost all buys. You know, as to the last point, the structural issues, Cineworld is out of bankruptcy. AMC has just started accessing its ATM, so their cash doing very well. You know, it's a fantastic year for signings. IMAX is an alternative to theater CapEx, as I said, because they don't have to build new multiplexes, they just put them in. You don't have to answer this, but I just don't understand the thesis. I think it's more in our valuation and our outlook for companies isn't predicated on absolute growth in isolation. It's for us, where consensus, where street expectations are for a company and where we are relative to that is one factor in addition to it as well. But we can certainly discuss that, and then for anyone who's interested in our position on IMAX, you can certainly get in touch with me on that. But, you know, I'm curious, you know, just with the few minutes we have every minute, you mentioned, you know, CapEx being a replacement and Cineworld emerging from bankruptcy. How do you see the structure of the industry emerging over the next couple of years, the health of the ecosystem, the path to getting back to pre-pandemic levels of overall box? Well, we're over the pre-pandemic levels of box. And so last year we were, not including China, and this year we expect to be overall over the pre-pandemic. So, you know, structurally, I think the industry's working well. You asked some great questions. The move to premium, the move to blockbusters, the globalization, every one of those trends benefits IMAX. Now, if you talk about the regular, exhibition industry, as I said before, I'm, you know, happy to comment on that, like I am about steel companies, which have about as much to do with IMAX's results as that industry. But what I expect to be happening to them is there'll be some consolidation, there'll be closing of screens. There'll have to be some rationalization of debt. I mean, they're gonna have to pay some of it down because all the fixed leases and, and the fixed costs on debt, you know, I don't think are sustainable over a very long period of time. But I think they're starting to do that. I mean, Cineworld did that during its bankruptcy. AMC, I think is doing that as their leases expire. So-- and as I mentioned, a lot of clients aren't spending money on new theaters and new multiplexes. Instead, they're spending money on IMAX theaters. So I think all of that will help them out of it. We have a few minutes left. I wanna make sure I touch on this one last topic, which is IMAX China. In July, you announced your proposal to acquire the remaining 20% of IMAX China not owned by yourselves for $124 million. Could you maybe just, you know, spend a minute or two explaining the rationale for acquiring the remaining stake and what you believe the benefits, you know, looking forward, a full economic ownership will be for your company? So IMAX China has done quite well as a business, and even during the pandemic, it was profitable. It hasn't done well as a stock for whatever reasons. I'm not an expert on the Hong Kong Stock Exchange. And you know, pretty much so, we've spent a lot of money keeping it public, trying to investor relations, all kinds of things like that. So we think we could save a lot of money doing that, so it'd be good for the parent company, and we also think it'll be good to offer liquidity to the shareholders in China, because it just has, as I said, it has just not worked well as a stock. I think also, structurally, we can operate it a little bit differently, so we could introduce some new products to China. It's complicated because you need independent directors and Hong Kong approval to do that. And then I think there are other advantages we can do in terms of, like, global tax planning and manufacturing things, and different issues that have hamstrung us in our ability to maximize its value. Good place to end, Rich. Always appreciate the debate. Thanks for spending time with us today, and look forward to having you back next year. Thank you, Stephen. Yeah. Take care.