IMAX (IMAX) Q4 2021 Earnings Call Transcript

IMAX (IMAX -1.13%)
Q4 2021 Earnings Call
Feb 23, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the IMAX Corporation full year 2021 earnings conference call. Today's conference is being recorded. At this time, I would now like to turn the conference over to Mr. Brett Harriss.

Please go ahead, sir.

Brett Harriss -- Senior Vice President of Investor Relations

Thank you, operator. Good afternoon everyone and thank you for joining us on today's fourth quarter and full-year earnings conference call. On the call today to review the financial results are Rich Gelfond, chief executive officer; and Joe Sparacio, our interim chief financial officer. Megan Colligan, president, IMAX Entertainment; and Rob Lister, chief legal officer, are 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 fourth quarter earnings press release and the slide presentation have been posted on the investor relations section of our website. At the conclusion of this call, our historical excel model will be posted to the website as well. I'd 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 in that they pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause actual future results 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, including adjusted net loss, adjusted EPS, and adjusted EBITDA as defined by our credit facility, are contained in this morning's -- afternoon's press release and in our earnings materials, which are available on the investor relations page on our website at imax.com. With that, let me now turn the call over to Mr. Richard Gelfond.

Rich?

Rich Gelfond -- Chief Executive Officer

Thanks, Brett and good afternoon, everyone. Thank you for joining us today. In the world of entertainment, differentiation has always been the calling card of IMAX. We command powerful global reach and a unique end-to-end technology.

We empower visionary creators with proprietary cameras and image enhancement, and we create global events around the world-class content with unmatched clarity and sound, scope, and scale. Our runaway performance in the fourth quarter and the way we outpaced the global film in industry and drove profitability for full-year 2021 drives that differentiation home. IMAX is a premier global technology platform for entertainment and events. We are not an exhibitor, we have never been one, and will never be one.

And with our industry leading momentum, we are taking the next evolutionary step for our business. IMAX 1.0 was about creating a premier showcase for groundbreaking documentary filmmaking in institutions, such as museums and science centers. We dramatically expanded our scope with IMAX 2.0, bringing the biggest blockbusters to audiences worldwide. With IMAX 3.0, we are pushing further into our future, growing beyond blockbusters to include unique events and experiences globally.

By putting our technology in the hands of an expanding set of creative and platform partners and becoming a destination for fandom of all kinds. Just look of some of what we did in the fourth quarter alone. IMAX was the tip of the spear in the record breaking release of Spider-Man: No Way Home, a film shot with our cameras featuring IMAX exclusive expanded aspect ratio. We launched IMAX Enhanced on Disney+ a major partnership that extends our brand and technology further into the streaming environment.

And we screened our first ever live concert shot with IMAX cameras, delivering a cinematic quality live feed with low latency into the IMAX network nationwide. The event featured Kanye West and Drake, sold out shows, engaged new fans and a promising relationship with Amazon. For years, IMAX has represented the pinnacle of the theatrical experience, but increasingly we transcended it and we're just getting started. Today, I'd like to discuss our results for the fourth quarter and full year, our strategy to build our most robust, comprehensive content portfolio ever.

And how we're evolving and growing our platform through technology. First, our strong results for the fourth quarter of 2021 demonstrate our leadership position in the industry, differentiation and the strong demand for the IMAX Experience. Across key metrics, our performance was in line with or exceeded pre-pandemic levels. And we beat initial analyst estimates.

Our operating income and gross profit topped our fourth quarter of 2019, which was our best year ever in terms of both global box office and total revenue. We returned to positive adjusted earnings per share of $0.31 and our strong EBITDA of $44 million demonstrated the overall continued performance and profitability of the company. Underpinning these results is a box office performance that stands alongside our best ever. Our Q4 global box office beat Q4 2019 by 15%.

As a reminder, 2019 was our highest grossing year ever. This was our sixth highest grossing quarter ever. We delivered our best month of October ever with $118 million worldwide beating our previous 2013 high by 50%. For the full year 2021 IMAX grew global box office year over year by 146%, doubling the estimated 78% growth in the traditional exhibition industry.

And we captured our largest share of the global box office ever 3% global market share for the full year. This accelerated in the fourth quarter with IMAX taking 3.3% of the global box office and 5.6% of the domestic box office. IMAX drove $68.6 million in EBITDA for the full year, demonstrating the strength of our model and our ability to quickly capitalize on box office momentum. We've generated positive EBITDA every quarter, going back to Q4 2020.

We finished 2021 with $516 million in available liquidity, having raised more than $200 million in a convertible debt offering at extremely attractive rates. And we were opportunistic in repurchasing $14 million of IMAX stock during the year. Certainly, we benefited from studios recommitting to exclusive theatrical releases and audiences returning to theaters wanting the best, most immersive experience. With the separation we've created at the global box office is also the result of a multi-year strategic effort.

We built the most robust, comprehensive IMAX content portfolio ever comprised of Hollywood blockbusters with more and more films shot with IMAX cameras, local language blockbusters, exclusive events and experiences from a growing roster of new partners, and, of course, documentaries. In 2022, IMAX will feature one of the strongest Hollywood slates we've ever seen. And with the Batman and Uncharted approved for release in China and dated for mid-March, early indications are that Hollywood films will have improved access to the Chinese market this year. What makes this slate truly unique? However, is that it should include more IMAX DNA, more blockbusters film with our cameras and more sequences featuring IMAX expanded aspect ratio than any before it.

Thanks to our strategic effort to infuse more DNA through our certified camera program, at least 10 releases in 2022 should include exclusive IMAX elements, reflecting a rapidly diversifying set of talented, ambitious filmmakers, creating specifically for the IMAX platform. This effort to expand the film that IMAX program has been a key driver of our strength at the box office. In 2021, seven of our 10 top releases included IMAX DNA. And more than 50% of our global box office for the year came from films with IMAX DNA.

This ignites a virtuous cycle. We are one of the only global platforms that can create events around content throughout the entirety of its lifecycle. By putting tools in the hands of creators, we can drive brand intention throughout the filmmaking process from filmmakers, studios, and audiences. Dune, a visually stunning film for IMAX title for which we are in 22% of the opening weekend gross and then popped up to 30% in the second weekend.

Thanks to fantastic word of mouth for the IMAX Experience. IMAX is a powerful mark of must see content in theaters and at home. Beyond Hollywood, we continue to tap into rich growing local language film industries in countries around the world, diversifying our creative partnerships and engaging our fans with highly relevant content where they live, 2021 was our highest grossing year ever for local language films with more than $181 million, up 36% over our previous best set in 2019. For the second year in a row, the world's highest grossing local language film, China's The Battle at Lake Changjin was filmed for IMAX using our certified cameras.

And we kicked off the 2022 Chinese New Year by earning $23.3 million in box office with The Battle at Lake Changjin II over the six day period. We've dramatically accelerated our local language strategy during the pandemic. In China and Japan, we continue to embed even deeper in the local filmmaking ecosystems from putting our technology in the hands of local filmmakers to becoming an important player for anime blockbusters in Japan. Several upcoming Chinese blockbusters are being filmed with IMAX cameras, including the 2022 summer tentpole, Mozart from Space.

In Japan, IMAX has renewed its five pictures slate deal with Toho, the company's first slate deal with the studio outside of Hollywood. And we're in discussions with several Japanese blockbuster productions on shooting with IMAX cameras. We're also strategically targeting international film markets poised for post-pandemic comeback, including India, Russia, South Korea, and France. IMAX sees a lot of opportunity in India in 2022, given that unlike China, Japan, local studios have held back releases over the last two years and a significant pipeline of local blockbusters are set for 2022.

IMAX is also eyeing local language blockbusters in Russia and South Korea. And we'll release our first film at IMAX French titled Notre-Dame du Roule in 2022 as well. Even as we diversified geographically, IMAX is moving beyond blockbusters, transforming the company into a global platform, presents an experiences of all kinds and bringing an entirely differentiated offering to market. We are connecting our theaters to build a high speed network capable of broadcasting the IMAX Experience with high definition video and high fidelity audio around the world.

This creates an effect, a decentralized global arena, already the size of Madison Square Garden currently spread across 79 locations in three countries. By the end of this year, we will be even more global. Shooting with IMAX offers artists cinematic picture and sound with low latency live. This is why creators love it.

They can align with our premium brand and use the tool to create intimate events at scale. Every one of the 300 seats in each of our theaters is the front row seats. In one week alone in December, we demonstrated the promise and breadth of this effort with a rapid fire succession of successful special events, including a special exclusive one-night only screening of Joel Coen, The Tragedy of Macbeth, including a live Q&A with Coen and actress Frances McDormand, streamed from our Lincoln Square location to 17 theaters worldwide in participation with Apple and A24. An exclusive streaming of West Side Story featuring a live Q&A with director Steven Spielberg and his cast stream from our City Theater to 10 IMAX locations worldwide in partnership with Disney.

But the Kanye West and Drake event truly showed what we've been capable of as an events platform. Kanye approached IMAX first to broadcast his one night only performance with Drake live from the Coliseum in Los Angeles. We work closely with his creative team to ensure the production had a cinematic look stick for our screens, even helping the team secure the same IMAX certified cameras that were used to shoot Dune. We collaborated closely with Amazon Music as well.

Once Amazon Prime came on board as the exclusive streaming partner for the event and we delivered the event live to 35 IMAX theaters in the U.S. and Canada, earning strong ticket sales and seven sellouts. Even though the concert was also available live on Amazon Prime for free. And the events started well after midnight on the East Coast and the clips from many of those screens were like nothing I've ever seen.

Fans jumping up and down, singing along, almost more excited than if they were actually at the concert. If you haven't seen it, check out the video we posted on our IR site of the Kanye concert. Seeing is believing, and in this case in particular, you really need to see the audience's reaction to understand the potential of IMAX live. Just like IMAX has been the best way to see the biggest blockbusters for more than a decade, we want IMAX live to be a global showcase for the biggest artists.

We believe this is a significant opportunity for us. The live cinema, music events that exponentially grow, and artists reach without sacrificing the quality and intimacy of an in-person experience. In fact, in some ways we thought that in-person experience with crystal clear stunning visuals and sound capabilities that approach what it's like to sit in the front row of a live event. That's the kind of technology and innovation that we believe is needed to evolve this theatrical experience and that we are employing to transform the company.

We continue to focus on delivering the best, most immersive, possible out-of-home experience as fans around the world are rediscovering the magic of going to the movies. And our unique end-to-end technology is proprietary from image capture through image distribution. In the fourth quarter, we rolled out the last of our landmark Xenon projectors off the factory line. The next step in our transition to an all laser product line.

We expanded our IMAX with laser product suite in the fourth quarter with a new offering aimed at meeting the diverse needs of our global exhibition partners. We continue to evolve our platform with connectivity, enabling the delivery of live and interactive content with low latency and superior visual and audio clarity. Our network of partners is growing rapidly beyond exhibition of studios as we extend out to reach across platforms by collaborating with the many of the companies reshaping the entertainment landscape. IMAX is a powerful tool to create events around premier content across platforms.

And we are proving that we can be a bridge between the theatrical and streaming experiences. Streaming services can provide a robust pipeline of new content and experiences for IMAX, particularly as those services look for new high impact ways to launch their titles and differentiate them. And as seen with Disney+, IMAX can be a mark of quality and differentiation on streaming platforms as well. As I mentioned earlier, we had a very successful collaboration with Amazon for the Kanye West performance that sets the framework for future partnerships with various streaming companies.

It was a unique, more key event that we helped produce and amplify for the service. We drove incremental ticket revenue in an off peak period time for exhibitors. And we attracted an audience beyond our core a moment when that is critically important. Our partnership with Apple on the Macbeth screens was a similar model with the added benefit of putting the IMAX brand behind prestige arthouse filmmaking, as it looks to drive theatrical momentum.

And more recently, we partnered with Disney for an exclusive theatrical release of The Beatles fame rooftop concert. Our launch event, which featured an interactive Q&A with Director Peter Jackson recorded virtual sellouts in more than 65% of connected theaters in a limited run across 400 theaters. The film has gross more than 2 million in IMAX, despite the fact that it's already been available on Disney+ for months with our Disney plus on enhanced partnership, our successful launch in which IMAX enhanced was a critical part of November's Disney plus day event is showing sustained value for this service. Initial research shows that audiences are greatly enjoying the offering and seeing it as a real value add and consideration for retention on Disney+.

These attributes are very important to streamers that will help us expand IMAX enhance to new platforms. Beyond partnership, IMAX is also aggressively pursuing ways to build direct connections to our fans globally. We are creating new value with our loyal audience, engaging them more frequently outside the theater and moving them across a growing suite of offerings. We've had success with our direct to consumer platform in China, and we're building on that to create a similar offering for global audiences.

In conclusion, IMAX is separated from the pack at the worldwide box office and it's strategic initiatives to expand the brand and grow our business demonstrating that we are the premier global platform for blockbuster content. And we are in the early innings of transforming IMAX into a premier global technology platform for entertainment and events besides film. Our unique exclusive events that reimagine what's possible for our out-of-home entertainment platform. IMAX is the only end-to-end solution to bring these entertainment experiences to life, and we believe breaking new ground and expanding what we can do as a brand new technology will continue to grow and transform our business.

Thanks again to all of you for joining us today. And with that, I'll turn it over to our interim chief financial officer, Joe Sparacio.

Joe Sparacio -- Interim Chief Financial Officer

Thanks, Rich, and good afternoon, everyone. We believe our strong fourth quarter serves as a preview of what is to come in 2022, as IMAX brings to market a historically strong slate of Hollywood franchise titles, an expected record number of titles with IMAX DNA, a diverse and growing offering of local language films, and a new innovative content experience in IMAX and in the home through IMAX enhanced. Throughout 2021, IMAX benefited from industry leading momentum and sustained market share gains. Unlike some entertainment companies, we generate positive and increasing adjusted EBITDA every quarter this year ending the full year with 68.6 million of adjusted EBITDA.

This momentum accelerated dramatically in the fourth quarter with the full return of Hollywood releases. As Rich mentioned, our global box office of 277.5 million was among our best of all time eclipsing our pre pandemic 2019 fourth quarter results by 15% and representing our sixth highest grossing quarter of all time. This included our best of October that it exceeded the previous record by approximately 50%. More impressively, our global box office strength was broad based generating across our global network and a variety of titles, genres, and events.

In Q4 five films exceeded 25 million, including the sixth highest-grossing movie of all time, Spider-Man: No Way Home. Spider-Man in particular through record attendance and generated rapid repeat visits by IMAX super fans demonstrating the loyalty of our audience and our brand affinity with the most bankable Hollywood IP. This strength combined with our unique asset licensing business model drove profitability growth across our key financial metrics, more than doubling initial street Q4 adjusted EBITDA expectations. In addition, this year, we significantly strengthen our balance sheet liquidity by success placing 230 million of convertible bonds with only a 50-basis-point coupon.

During the year, we were active in repurchasing our shares, we repurchased 841,000 IMAX shares and an average price of $16.51 for a total of 13.9 million. And IMAX China repurchased 6.7 million shares at an average price of $1.50 for a total of 10 million. We intend to be opportunistic and repurchasing shares when we view our stock prices disconnected from the underlying fundamentals of the business. Let's talk about the results in detail.

Fourth quarter 2021 revenue almost doubled to a 108.6 million from 56 million in 2020, and increased 86% to 255 million for the full year. Fourth quarter adjusted EBITDA increased a 44 million versus EBITDA of 10 million in the year ago period and adjusted EPS substantially improved to a $0.31 positive from a loss of $0.21 in comparison to the year ago period. For the full year adjusted EBITDA increased 81.7 million to 68.6 million and adjusted EPS improved to a loss of $0.14, as compared to a loss of a $1.89 in the year ago period. I would also like to point out that EPS for the year was constrained by a $14.7 million valuation allowance to reduce the value of deferred tax assets due to the pay pandemic, creating uncertainty regarding ultimate realization.

Excluding that non cash charge, earnings would've been a positive adjusted EPS of $0.11. Our financial performance highlights the operating leverage demonstrated in both the quarter and for the full year. Now let's talk about the segments. IMAX technology network revenue increased to 51.3 million in the fourth quarter from 17.7 million in Q4 of 2020.

This increase was largely due to the continued global reopening of the company's network and a return of major Hollywood franchise titles, particularly in the U.S. and international markets, more than tripling the box office to 277.5 million. Q4 gross margins for this business were 36.8 million, which increased from 7.3 million in Q4 2020, largely due to the increased gross box office and the fundamental operating leverage in our business model. For the full year, IMAX technology network revenue increased 153% to 116.8 million and gross margins increased from 4.2 million to 66.5 million.

Again, largely due to the increase in box office from 259.2 million in 2020, as compared to 638.2 million in 2021. IMAX technology sales and maintenance revenue for the fourth quarter increased to 53.4 million from 36.4 million last year. Given the strength of our business as we have already discussed, we ended our temporary relief program for exhibitors in Q4 and recognized 6.3 million of maintenance revenue, which had previously been deferred, 3.8 million related to the first three quarters of 2021 with the remainder related to 2020. Excluding this item, maintenance revenue increased 58% to 13.8 million as our network continued to reopen.

This quarter, we installed 28 IMAX Systems, 16 of which were new sale or STLs. In comparison, we installed 33 IMAX systems in Q4 of last year, including 14 new sales or STLs. Gross margins for this business increased to 26.2 million, compared to 13.6 million due to the higher maintenance revenue and more profitable sales and STLs. For the full year, IMAX technology sales and maintenance revenue increased 59% to 126.8 million, and gross margin increased by 130% to 64.3 million.

This is commensurate with the continued reopening of the network, which drove increases in system sales and maintenance revenue. For the full year, we installed 75 IMAX systems, 35 of which were new sales or STLs, compared to 71 IMAX system installations in 2020, which included 27 new sale or STLs. In 2022, we expect installations to increase over 2021 levels with seasonality similar to prior years. Q4 SG&A excluding stock-based comp was 28.2 million in the quarter, which was at levels consistent with 2019.

SG&A excluding stock-based compensation for the full year was 93.5 million, as compared to 87.8 million in the prior year, representing a 7% year-over-year increase. The increase in SG&A excluding stock-based compensation was driven by increased business activity associated with the continued reopening of the company's global network and the return of Hollywood films. We ended the quarter with 189.7 million in cash and 234 million of debt excluding deferred financing fees. When combined with the 300 million available under our credit facility and the 26 million available under our IMAX China working capital loan, we have 516 million of available liquidity.

In the fourth quarter, we spent 6.8 million on capital expenditures, including 4.7 million invested in equipment for joint revenue sharing theaters. For the full year, capex was 17.8 million, including 10.1 million for joint revenue sharing theaters. Last quarter, we talked about a turning point. Consumers had returned enlarged numbers to our network studios, recommitted to the exclusive theatrical release for IMAX friendly blockbusters.

And we saw momentum across our business. Well, this quarter we showed what our network can do as blockbusters returned in earnest. And with the 2022 slate ahead of us and the vision we have for expanding IMAX into new forms of content and into the home, I have never been more optimistic about the business. With that, I will turn the call back to the operator.

Questions & Answers:

Operator

Thank you. And I would now like to turn the call over to Mr. Richard Gelfond for some final comments before we go to Q&A.

Rich Gelfond -- Chief Executive Officer

Thank you, operator. Just to add, last night, we presented another concert with Kanye West, which was our most successful live event yet broadcast from Miami to 60 IMAX theaters nationwide with a remarkable 48 sellouts. That's almost 20,000 fans. Again, our virtual Madison Square Garden who purchased tickets for an event that was announced a little over 48 hours prior to show time.

Given the success of our first concert, it's not surprising that Kanye came back to IMAX so quickly. We are excited that it recognizes the unique value of our technology and brand and can bring premier live events to life. So yet another excellent proof of concept of our strategy. And with that, I'll turn it back to you, operator for Q&A.

Operator

Thank you. [Operator instructions]. And we will go to our first question from Eric Handler of MKM Partners.

Eric Handler -- MKM Partners -- Analyst

Thank you for the question. Good afternoon. Rich, if I could dig in a little bit on the live events, in terms of how many events do you think you could ultimately [Inaudible] marketing, give people more than 48-hour notice? Maybe you talk about the TAM and sort of the profit level of these events?

Rich Gelfond -- Chief Executive Officer

Thanks, Eric. So as you know, the forecast for kind of the experiential economy and the growth rates are extremely high. So over the next five years as we look out on it, we think there's a very large addressable market. IMAX right now only has 79 theaters wired, but the ideas to be aggressive and wiring it.

And I think when you to the longer-term economics of it as we said, in the script, it's like a Madison Square Garden now. But as you go to 200, 300, 500 theaters and you model it out globally, we think over time it could be a significant revenue and earnings contributor. In terms of the number of events, right now, we're somewhere between putting together a comprehensive slate and testing different ideas. So as you know, we've done mostly music, we've done some sports things.

I think you'll see us do comedy. We're talking to certain people about whether we could put together a slate deal. And I think in our minds for now, we're thinking about in the short run doing sort of a major event once a quarter, at least, and then doing smaller events throughout the quarter. In terms of price point for this Kanye concert last night, the most expensive tickets were around $30 and the other tickets were priced more in line with typical IMAX.

So I think we're also going to experiment with price. So try and learn about the elasticity. But I think there's a very large market out there. I think our technology is really unique and over time, I think it could be a significant contributor to our company.

Eric Handler -- MKM Partners -- Analyst

Great. That's helpful. And just speaking a little bit more on your install expectations, I know you said [Inaudible] versus 2021. But when you think about a normal like here pre pandemic, you were looking at around 130 installs, [Inaudible] and 2021 and 130 normalized, where do you think you might fall there?

Rich Gelfond -- Chief Executive Officer

Eric, we remain optimistic about the trajectory of the installs. Especially given the recent momentum we've seen at the box office, our market share growth and the upcoming slate. As I mentioned on the call, we expect installs increase over 2021 levels. But not likely reach 2019 levels, as you know, installs are back half loaded and we will have more color on that as the year unfolds, with the fantastic Q2 slate and the prospects for Avatar later this year could be a catalyst for an installation growth.

And we'll give you more color on that as the year progresses.

Eric Handler -- MKM Partners -- Analyst

Fair enough. Thank you very much.

Operator

And we'll go next to Steven Cahall.

Rich Gelfond -- Chief Executive Officer

Thanks, operator. Next question please.

Operator

We'll go next to Steven Cahall of Wells Fargo.

Steven Cahall -- Well Fargo Securities -- Analyst

Thanks. Maybe first to follow up on the installations question, just wondering if you could speak to some of those regional dynamics, are you seeing that stronger in China or led by the U.S., or kind of a combination of both, and as you get to that install level between 2021 and 2019, how do we think about the gross margin in the technology sales and maintenance business? Is there anything that would make that margin improve over prior years or is it pretty consistent? Then I've got a quick follow up on the technology business.

Rich Gelfond -- Chief Executive Officer

So I'm going to answer the first part of the first question. And then Joe will answer the second part. We are incredibly focused as an organization on getting our network growth back to pre pandemic levels. And over the last quarter or so, we've been engaging with our clients in a very detailed worldwide basis to confirm the backlog and to try and get specific dates and ensure we get as many installs as we can as soon as possible.

And we made a lot of progress in firming those up, and again, it remains a priority of ours, and Joe, why don't you continue on that answer.

Joe Sparacio -- Interim Chief Financial Officer

Yes, I mean, in terms of sale installs, we would expect consistent margins in that business. However, as Rich mentioned in his comments, we recently released the XT system, which has a lower cost of goods, so we should realize improve margins as that gets rolled out.

Steven Cahall -- Well Fargo Securities -- Analyst

Great. And then kind of a similar question on the technology business with kind of a record slate this year for IMAX DNA, does that have any impact on gross margin at the technology business? I mean, I know that when you do higher split of the box office, that's how basically going to drive higher margin, but just wondering how we should think about the IMAX DNA as kind of a leading indicator of future earnings.

Rich Gelfond -- Chief Executive Officer

Well, we found is that films that have IMAX DNA generally over index, what they would typically do. And as you know, there's significant amount of operating leverage in that business. So every incremental dollar that you can generate over and above the norm is going to drop to the bottom line. So, it definitely has improved the profile of that business.

Steven Cahall -- Well Fargo Securities -- Analyst

Great. Thank you.

Operator

We will go next to Mike Hickey of The Benchmark Company.

Mike Hickey -- The Benchmark Company -- Analyst

Hey, Rich, Joe, Brett, congrats guys on the quarter and the year. Really encouraging performance held bounce back. A couple questions on the -- I guess the two initiatives IMAX to enhance in your life and interact then, I mean, is one bigger than the other Rich or I guess the path to monetization here maybe for your lives event to sort of curious how you look at those two and if there's any incremental extents going toward sort of developing those two new verticals for you? And then I guess the second question would be the live interactive advance, is this sort of like Fathom, Rich, is this sort of like what your exhibitor partners are doing and have done for a while. It's just going to be sort of exclusive to your network.

And I guess also now that you expand your relationship with all these great partners, if there's any ancillary benefits in terms of marketing or margin. Thanks guys.

Rich Gelfond -- Chief Executive Officer

So the one I'd like to answer first is about Fathom. So we're nothing like Fathom. What Fathom does is take preexisting content. And they put it through kind of a conventional distribution system.

IMAX is a high-end complete ecosystem that intends to replicate the cinematic effect that IMAX has today in the live space. So we capture images with IMAX cameras. We translate them with proprietary IMAX technology, and then we have special pipes that go into the theaters that create the highest experience possible. So we're not interested in playing conventional off-the-shelf technology.

What we are doing is creating special events for IMAX audiences. So think about what the IMAX film business is, where studios seek us out and filmmakers and talent, because we provide these unique global events. That's the analogy you should think about. And we are going to do large events.

I mean, already what the two Kanye's with no disrespect to Fathom, I can't think of an event that they put together on that kind of scale, and certainly with not -- with that kind of technology. And again if you go on our website and you look at the clip we put up, you'll see people dancing in the theaters, shining lights, yelling, it's a real interactive experience in certain respects better than being at the concert. In terms of which has more potential live or enhance, I hate to choose between our children. That's generally not a good place to be.

But I do think given the growth in experiential entertainment as a mark, that live has larger potential over the next number of years. Now, with enhanced, as you know, we went on Disney+ and I talked a little about this during my comments, but on the market research, we've done was extraordinarily positive and things like churn and with retention rates and willingness to pay a premium, we're really very promising. And we've had other inquiries and we're working on those and we've got more CE partners there. I'm optimistic about that also.

In terms of marketing, do you want to take that Megan, how it's going to affect the brand and the marketing overall?

Megan Colligan -- President, IMAX Entertainment

Sure. I mean, I think what we're talking about really fundamentally is creating tools that are end-to-end solutions for creators. It's what we fundamentally have always done. When we're talking about blockbuster films, we're giving filmmakers proprietary tools that create the best films that they can possibly make.

And now that we're expanding into the live space, we're working with an expanded suite of creators and we're working with an expanded list of partners, whether we're talking about in some cases, streamers, and in some cases we're talking about tech companies that are doing gaming, we're talking about music companies, we're talking about an enhanced group of content providers, but we're giving them the opportunity to work with the highest level of creator tools. And on the backend, when you're talking about enhanced, you're talking about a solution for an ancillary home for these materials where the very best way for these – for this content to live ultimately is in an enhanced way in streaming or on VOD with a proprietary technology that gives you an exceptional way to experience it. So ultimately what we do as service fans with excellent technology and that's what we're doing, extending that brand recognition throughout an ecosystem.

Mike Hickey -- The Benchmark Company -- Analyst

Thanks, guys.

Brett Harriss -- Senior Vice President of Investor Relations

Thank you.

Operator

And thank you. We'll move to our next question from Chad Beynon of Macquarie.

Chad Beynon -- Macquarie Group -- Analyst

Hi, good afternoon. Nice results. And thanks for taking my question. Regarding China, we can obviously see the Q4 results in your press release the China's New Year results, but can you provide a little bit more color just in terms of where the market is understanding that it's a very large market with different things going on, obviously in the U.S.

indoor mask mandates are being lifted, is China close to that? And what did you see after Chinese New Year? Was it kind of a return to prior restrictions or has that been relatively eased? Thanks.

Rich Gelfond -- Chief Executive Officer

So as you know, China as a country that has more tightly managed COVID than any other one in the world, in terms of contact tracing, in terms of lack of ability to travel outside the country. And I don't have a great visibility into that. But I can tell you, that for the last two years China's been the biggest box office in the world. And for the right movies, Chinese audiences really want to come out.

And also for the second year in a row, the biggest movie of Chinese New Year's was filmed with IMAX cameras. This year, the big movie The Battle at Lake Changjin II indexed about 6% with IMAX, which was higher than our historic indexing. So I think like other places in the world, people are showing a demand for IMAX. In terms of the film slate for the year, there's a lot of local language films that we're very involved in and including using our cameras including Mozart in Space.

But the other question is how many Hollywood movies get in. And again, we don't know the answer to that, but recently there have been some optimistic signs. The Batman, which is a highly anticipated movie that we've seen, and we are really enthusiastic asked about, got in about a month in advance. So there's time to market it right, and time to do other things.

But I think in China, the issue is less a mask wearing thing, because people are used to wearing masks and they're used to the contact tracing and more of the quality of movies that come out. And as I say, some encouraging signs on the Hollywood side, and there's a pretty decent slate of local language films.

Chad Beynon -- Macquarie Group -- Analyst

Thanks, Rich. And then, Joe, just a modeling question regarding the 6.3 million of recognized deferred maintenance in the quarter, is there still deferred maintenance opportunities that could fall into the first half from a recognition standpoint? And then just any other color in terms of if the maintenance stream should start to be a little bit more normalized here? Thanks.

Joe Sparacio -- Interim Chief Financial Officer

Yes, I think we're at the point where the maintenance stream after this quarter will be normalized. And if you look at the numbers and the breakout, only 2.5 million was out of the year, meaning it related back to 2020. So if you take 3.8 million of the number and add it, that gives you a normalized year for 2021 as well, saw some of the discounts we gave earlier in the year. But I think as of this point, we are on a normalized level.

Chad Beynon -- Macquarie Group -- Analyst

Perfect. Thank you very much. Appreciate it.

Operator

And we'll go to our next question from Mike Ng of Goldman Sachs.

Mike Ng -- Goldman Sachs -- Analyst

Hey, good afternoon. Thank you very much for the question. I just had one on installs, could you talk a little bit about the nature of the installations in the quarter? What geographies were they primarily in? And would you just talk a little bit more about the footnote about theater system relocations, what would drive that from an exhibitor standpoint and what happens from an economic standpoint when that occurs? Thank you.

Joe Sparacio -- Interim Chief Financial Officer

Yes, I mean, in the quarter, a big chunk of the installs were in China. I don't have the exact breakout with me right here. And in terms of the relocations, what you have in many cases is an upgrade of an existing system and then movement of a system to a new location. So ultimately it's a net add for the company.

In those cases, in many cases, we earn a very nice margin from those relocations.

Mike Ng -- Goldman Sachs -- Analyst

Great. Thank you, Joe. And also I was wondering if I could ask about the programming slate for the first half of the year. Would you mind just running through some of the key films and maybe you talk about some of the films that you're particularly excited about.

Thank you.

Megan Colligan -- President, IMAX Entertainment

Sure. There's -- this slate is filled with some exceptional movies. We have a number of movies that were shot with our cameras, which include three Marvel movies, including Doctor Strange and so which we are in the first half of the movie -- first half of the year, we have Top Gun, which is in the first half of the year. We have Buzz Lightyear, which has 1-43 aspect ratio, which is obviously not shot with our cameras, this is animated, but it is a 1-43 aspect ratio film.

Joe Sparacio -- Interim Chief Financial Officer

We have Jurassic World, Batman --

Megan Colligan -- President, IMAX Entertainment

Batman, which we know is on tracking and is looking to be a rather large movie is coming out with exclusive IMAX shows on Tuesday, March 1st and is expected to be a very big movie, has three weeks of IMAX. We have Fantastic Beasts, which we're very excited about from Warners. It's a really strong slate throughout the year and there's basically once you get into March there's a very consistent play of films, a slate of films that doesn't really let up throughout the year. Nope, also is in July, which is, I guess the midpoint of the year shot with IMAX film cameras from Jordan Peele.

There's a really great slate of movies.

Mike Ng -- Goldman Sachs -- Analyst

Great. Thank you very much.

Operator

And we'll move to our next question from Steven Frankel of Colliers.

Steven Frankel -- Colliers International -- Analyst

Good afternoon. I'm going to go back to this notion of acceleration in the install rate. How much of that is coming from things that are already in the backlog and your firming up dates versus the notion that we talked about a couple of quarters ago that given this film slate, you might see exhibitors kind of have a rush to get the more IMAX screened up ahead of what's going to be a obviously [Inaudible] at the box office, especially in the back half.

Rich Gelfond -- Chief Executive Officer

Well, those are really, both the answers to the questions. I mean, we're seeing an acceleration in the backlog, I think partly because the film slate is so good this year. If you're asking is it coming from signings and new installs? I mean, it's a little early for that, given that the omicron in LA we're still wearing masks here. But the level of our business activity in terms of new signings has certainly picked up in light of the film slate.

And I think you will see some sign in installs take place this year, so you'll see both.

Steven Frankel -- Colliers International -- Analyst

OK, great. And then on the building out the live network is that a material amount of capex that we would see over the next couple years as you scale that out and are the economics to you any materially different on a live event versus the typical blockbuster?

Rich Gelfond -- Chief Executive Officer

No, it's not a material amount of capex. You won't see a big spike because of that. And the second part of your question, the economics are different than a blockbuster, but on a project-by-project basis, they may be better or they may be worse. So if we're just doing a distribution kind of thing, I think that will be similar to what you've seen in a blockbuster.

But where we're helping on the production end, where renting cameras, where we're involved in the design of it, I think you'll see better economics.

Steven Frankel -- Colliers International -- Analyst

And is there a second revenue stream akin to DMR on something where you're involved like that?

Rich Gelfond -- Chief Executive Officer

Yeah, I mean, there could be for sure. I mean there's another part of the model we did a -- we did Macbeth with A24 and Apple, and that was a four-wall deal where they pay to rent all our theaters. And we expect to be doing more of that too. It'll vary from project to project, but we'll budget everything to be profitable.

The one thing you have to realize is we have 79 theaters right now. So on a pro form basis it'll become more and more profitable as we build out the connected network and we're going to try and do that as rapidly as possible.

Joe Sparacio -- Interim Chief Financial Officer

Steve, a perfect example is The Beatles where we had -- we did a live performance, it generated 400,000 to 500,000 for that one night. And then we took that and we showed it in IMAX theaters, 400 of them in special screenings. And we earned 2 million of incremental box office from those screenings on otherwise, dead time at the theater level.

Steven Frankel -- Colliers International -- Analyst

That's great. Thank you.

Operator

And with no other questions in the queue, I would now like to turn the call back over to Richard Gelfond for any additional or closing remarks.

Rich Gelfond -- Chief Executive Officer

Thank you, operator. I'd just like to say that the whole IMAX organization couldn't be more excited about where we've been coming from recently and where we're headed. The fourth quarter was one of our best quarters in the history of IMAX. When you look at where consensus was not only now, but a month ago, we just blew it away at almost every matrix along the way.

So our financial performance, our balance sheet is incredibly strong. We have virtually no debt and over $500 million in liquidity. And in the last month and a half we've done live activations with Steven Spielberg, The Beatles, Kanye West, Apple, Amazon. It's just an incredible period of time in IMAX.

And we look forward to getting back to you with updates on all of these things and thank you for joining us.

Operator

[Operator signoff]

Duration: 63 minutes

Call participants:

Brett Harriss -- Senior Vice President of Investor Relations

Rich Gelfond -- Chief Executive Officer

Joe Sparacio -- Interim Chief Financial Officer

Eric Handler -- MKM Partners -- Analyst

Steven Cahall -- Well Fargo Securities -- Analyst

Mike Hickey -- The Benchmark Company -- Analyst

Megan Colligan -- President, IMAX Entertainment

Chad Beynon -- Macquarie Group -- Analyst

Mike Ng -- Goldman Sachs -- Analyst

Steven Frankel -- Colliers International -- Analyst

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