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IMAX CEO: ‘There's no doubt’ of a summer movie box office boom

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IMAX Corporation CEO Richard Gelfond joins Yahoo Finance Live to discuss the success of 'Top Gun: Maverick', summer box office expectations, and the outlook for upcoming movie releases.

Video Transcript

BRIAN SOZZI: All right, switching gears from fast food to movies, "Top Gun, Maverick" is flying high after breaking box office records in its Memorial Day weekend opening, giving a positive outlook for the summer box office, as blockbuster releases like "Jurassic World Dominion" and "Thor, Love and Thunder" await their debuts. Joining us now to discuss is IMAX CEO Richard Gelfond. Richard, good to have you back on the show here. Do you think we're looking at a box office boom this summer?

RICHARD GELFOND: I do think so, Brian. I think there's not much doubt about it. I mean, let's go back a few weeks, and "Dr. Strange" is now zeroing in on about $900 million in total gross. I think it'll get close to a billion. As you mentioned in your intro, "Top Gun" had a phenomenal opening weekend, close to $300 million globally. And then we looked at yesterday's results, which was a Tuesday, and typically, for a really good run for a movie, a movie will do about 10% of what a three-day weekend was. But this film, at least in IMAX, did 10% of a four-day weekend. So we had done about $34 million for the Memorial Day weekend. And then we did $3.4 million on Tuesday. So every sign you look at shows that it's really going to play for some time.

And then, in only a week and a half, as you mentioned, you have "Jurassic World" out of the line-up. You left out "Lightyear" from Pixar. You've got "Thor" coming. You've got "Nope" from Jordan Peele coming. You know, you've got "Black Panther" later in the year. Biggest movie of all time, "Avatar," the sequel. So there's just no doubt in my mind that movies are open for business, and they're going to overperform.

BRAD SMITH: I'm excited about so many of those titles that you mentioned, Richard. I wonder, though, for consumers who are also excited, how much of a premium they're willing to pay, recognizing that ticket prices are higher right now.

RICHARD GELFOND: Yeah, I mean, I can only answer that in the context of IMAX. And since the pandemic, both our market share has been going up and our indexing, which our indexing means the percentage of the movies. So we did 14% of the domestic box office on 1% of the screens over the weekend. And we did 14% again yesterday. And our ticket premium is usually $5 or $6 over an ordinary ticket.

So that's a bigger premium-- that's a bigger indexing, and our market share has been going up. So I think for quality, people will pay up. And I think the same thing has been evident in other forms of entertainment, whether it's sporting events or rock concerts. I think people just spent so much time sitting on their couch that if they get something really special, like IMAX, they're going to be happy to pay more for it.

BRIAN SOZZI: I can't sit on my couch anymore, Richard. There's a big dent in it because of everything that's been happening in the past 2 and 1/2 years. But let me ask you this. Last time we talked to you, Shanghai and China was still locked down, key market for your company. What are you seeing in that region now?

RICHARD GELFOND: Well, today is actually a key day because yesterday, Shanghai announced that it was relaxing a lot of its restrictions, and it was on its way to opening up. So I don't remember exactly when we talked last, but it was about 70% of IMAX theaters were open in China. It's now about 85%, maybe even a little bit higher. So it's definitely starting to come back. As I said, Shanghai, Beijing, restrictions coming off.

Maybe what's most important to me is that movies started getting dated again in China. So if you look at "Jurassic World," that's opening up day and day June-- I think it's the 10th-- with the rest of the world. So, for them to announce a big Hollywood opening on that day, I think they're expecting business to start to return to normal. And then there's a big Chinese local language film called "Mozart in Space," which is opening around July 15. And again, they just announced that that was dated. So I don't think you'd see the combination of the announcements and the reopenings unless they had some confidence that things were going to start returning to normal.

BRAD SMITH: Across the footprint of IMAX locations that you have, I mean, that's an astounding index that you do, 14% of the domestic sales this past weekend on 1% of the screens that are out there. But I also think about what's necessary to operate the number of screens and locations that you do have, even if it is such a comparison and kind of a fraction of what is required for some of the larger movie theater chains that are out there. How are you navigating retention right now?

RICHARD GELFOND: So we don't operate the theater, as our exhibitor partners do. So one thing that's very desirable about our business model is, when it opens, a lot goes right to the bottom line. We don't have fixed costs. We don't have leases. We have no net debt in the company. So when our revenue stream returns to normal, a lot of it just falls down to operating margin, and then, once we cover SG&A, bottom line margin, so there's not a lot there.

On the indexing, I may have left out something that was even more impressive, which is, over the weekend, we did about 8 and 1/2% of the international box office. And we're a lot less than 1% of the screens on an international business. So it's a really high operating leverage business, and it's built for now when the movies reopen and this big box office. That's when we make a lot of money. And you could see it in our results in the fourth quarter last year. The fourth quarter last year was our best fourth quarter ever. And it beat 2019 in terms of box office, which was our best year ever, 2019, for the fourth quarter. So the cost of operating for us is very minimal. It's the exhibitors that operate it.

BRIAN SOZZI: And Richard, just given the comeback of sorts here for the movie theater industry, do you think the industry is now getting ready to go back into growth mode? Because before the pandemic, you have the likes of AMC and a lot of its rivals, too, out there opening a good number of new theaters here across the country.

RICHARD GELFOND: I can't really address the model for exhibitors because IMAX is not an exhibitor. We're a technology-licensed company. We don't own real estate. We don't lease real estate. We don't have debt. We license our IMAX technology to exhibitors that have those characteristics. So for them, the challenge is really getting back to that breakeven point and what the size of that box office is before they cover their fixed costs and then contribute to earnings on the bottom line. As I said, we have very little fixed costs.

So it's just a different model. And I think you'd have to look at it on a case by case basis. We've been profitable on the EBITDA line and cash flow for over a year and a half. You know, I don't know any of them that have been. So one of the things that drives me crazy is when people compare us to exhibitors because we're a totally different kind of animal.

BRIAN SOZZI: Absolutely. Always great to get some time with you. Richard Gelfond, IMAX CEO. Always good to see you.

RICHARD GELFOND: Great to see you, Brian. Thank you