Imax CEO: “Greater China continues to be our biggest and fastest growing market outside of North America” (

28 July 2012 16 h 15 min Comments Off

Following its Q2 2012 financial results (six-fold jump in second-quarter profit), Rich Gelfond – Chief Executive Officer and Greg Foster – Chairman & President of Filmed Entertainment discussed with financial analysts.

The main info regarding China are selected from Earnings Call Transcript by

Rich Gelfond – Chief Executive Officer:

“In the second quarter we drove significant revenue and margin expansion across virtually every major business segment. Revenue increased 23% to $70.2 million from $57.2 million in the second quarter of 2011. Second quarter EBITDA increased 80% to $29 million, trailing 12 month EBITDA increased 29% to $87.9 million and cash flow from operations increased by roughly $30 million year-over-year.

Greater China continues to be our biggest and fastest growing market outside of North America. In 2012 our footprint is poised to grow by 50% year-over-year, which is on top of 2011’s 126% increase. Through the first six months, roughly 30% of our new theatre signed were in China, including deals in the second quarter with Bona Film, Aman Ajoy (ph) Cinemas, sorry for butchering that and developers Fandal (ph) and Wanda, fueling the interest in IMAX from Chinese exhibitors and developers, with the outside grosses our theatres consistently deliver in the marketplace.

Through the first six months of 2012, our IMAX theatres in Greater China have delivered box office per screen of more than $830,000 on average. At the end of June there were 97 IMAX theatres opened in Greater China, with a total of 132 in backlog. Of those 97, 78 are commercial theaters and approximately 40% of those JVs with our largest international partner, soon to be our largest partner and the largest cinema operator in the world, Wanda Cinemas.

It was announced during the second quarter that Wanda is acquiring AMC Theatres. We see this as exciting news, for our friends at AMC will now have an ownership structure that can infuse capital into the chain and we know that Wanda is a very savvy marketer, particularly as it relates to the IMAX brand.

The WTO agreement between the US and China announced earlier this years is also beginning to have a positive impact on our business in the PRC. Our DMRPs on certain titles in the second quarter began moving above the historical rate of 6.5% and we expect to continue to make incremental progress on increasing the DMRP in China toward our global rate of 12.5% over time.

On the marketing front, in the second quarter we launched our new brand campaign, IMAX – Is Believing. The theatre roll out is complete across North America, Europe and China with additional markets like Russia and Japan still to come.

Now, obviously we stepped back and we hear a lot things and the world is a challenging place right now. We hear about a China slowdown, but we are not seeing in IMAX. In fact our same store sales are up significantly.

So far this quarter we have about 10 new screens in the bank and I would say I feel the business activity is just as strong. So if you took away the more or less 50 that we signed since them, I feel the tone of the business is pretty much the same and in China we probably got discussions going on for somewhere between 50, 100 systems and again, let me caution, they are definitely not all going to happen, there is no way.

One of the questions we get frequently in China, is about what about third tier cities or fourth tier cities and we are seeing very good results out of there too and I don’t think it’s only the marketing. I think there’s more of a lack of entertainment options in some of those cities.”

Are you seeing any kind of pushing around of the schedule in mall building in China ?

“We haven’t yet. With our core client Wanda, they are pretty buttoned down and pretty far along in their build out scheduled and I don’t really expect to see much of that. Just to give you an example, there are 49 Wanda Malls and we’re in 47 of them. So they are not in office constriction, they are not in commercial construction, they are developing malls for the growing middle class and that’s where a lot of our theatres are. So in the Wanda area we really haven’t seen much slippage. In the non-Wanda backlog, I don’t really feel qualified to address that, because I haven’t had specific discussions, but I haven’t heard of a lot of that going on.”

Greg Foster, Chairman & President of Filmed Entertainment

There seems to be some conflict about the release of the Dark Knight is China clashing with Spiderman, supposedly August 30. I was wondering if there was any insight that you can add to that.

“The dates are not confirmed. Until the dates are confirmed you can’t rely on anything, especially in your window. Obviously its something that we know that Sony and Warner Brothers are likely spending lots of time addressing, but its their issue and we’ll follow through with whatever happens with them. But the dates have not been confirmed. I believe that we are cautiously optimistic that things are going to work out with those movies getting into the country, but until its official, its not official.

We should probably offer a minimum of five and it could be notably more international DMR (digital media remastering) films for this year and next year. China in particular will have the focal point of our DMR titles. We’ve already announced “CZ12″, “Chinese Zodiac”, there are some other titles that are fourth coming, especially during the December, January period and I think over the course of the next 12 months, we can comfortably say that we will have at five international DMR titles, but if I were a betting man I would suggest probably a one or two more.”

Source: (27/07/2012)

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