IMAX (IMAX) Q4 2022 Earnings Call Transcript

IMAX (IMAX 1.26%)
Q4 2022 Earnings Call
Feb 22, 2023, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the IMAX Corporation's fourth quarter and full-year 2022 earnings conference call. All participants are currently in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be given at that time.

As a reminder, today's call is being recorded. I would like to turn the conference over to Jennifer Horsley, senior vice president of investor relations. Please go ahead.

Jennifer Horsley -- Senior Vice President, Investor Relations

Thank you, and good afternoon, everybody. Thank you for joining us on today's fourth quarter and full-year 2022 earnings conference call. On the call today to review the financial results are Rich Gelfond, chief executive officer; and Natasha Fernandes, our 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 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 would 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 and that pertain to future results or outcomes. These forward-looking statements are subject to risks and uncertainties that could cause our actual future results to occur 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 reconciliations to non-GAAP financial measures, including adjusted net loss, adjusted EPS, and adjusted EBITDA, as defined by our credit facility, are contained in this press release and our earnings materials, which are available on the Investor Relations page of our website at imax.com. With that, let me turn the call over to Mr.

Richard Gelfond. Rich?

Rich Gelfond -- Chief Executive Officer

Thanks, Jennifer, and thank you, everyone, for joining us today. Since we last met on this call, there have been two terrific developments in our business: the massive global success of Avatar: The Way of Water and the rapid recovery of moviegoing in China. With these dual tailwinds propelling IMAX into 2023, it's clear that we're back to business, and there is strong evidence that our global operation, including China, is set to resume pre-pandemic levels of box office, as well as strong network growth. I've spoken often about what we call the Avatar effect.

After James Cameron's watershed 2009 release, IMAX saw a two-year period of outside growth across virtually all KPIs, signings, installs, PSAs, followed by a structural rebasing of our network business. As Avatar: The Way of Water delivers on our highest expectations, we're beginning to see history repeat itself with a surge of positive momentum and trends at hand. Avatar: The Way of Water is the No. 1 highest-grossing first-run IMAX release of all time worldwide and also in nearly 50 individual international markets.

Many of these countries and territories overlap with our top-priority growth markets around the world. Regions where we are under-penetrated in terms of theaters, we are seeing strong potential for local language growth. And moviegoing is thriving, yielding potential for box office growth. As a result, we're seeing encouraging signs of increasing demand for new and upgraded IMAX systems around the world, including recent multi-system agreements in Japan and Indonesia.

And the sequel is helping lead the dramatic resurgence of our business in China, which has taken a complete positive 180-degree turn in a span of just a few months. IMAX delivered its best Chinese New Year holiday ever for local language films with $61.3 million in total box office receipts, well over our budgeted projection of $42 million. And our lead title, Wandering Earth 2, is now our highest-grossing local language film of all time. Furthermore, key Hollywood tentpoles are again securing day-and-date releases in China, including the Marvel franchise, which returned to cinemas this past weekend for the first time since 2019.

Overall, we're very optimistic about 2023, and we expect to drive significant growth in IMAX system signings, installations, global box office, and adjusted EBITDA this year, including global box office back to our record-breaking 2019 of $1.1 billion, between 110 and 130 IMAX system installations worldwide and adjusted EBITDA in the mid-30% margin range. Today, I'd like to discuss our year-end results in global box office growth and network growth, our results for Avatar: The Way of Water, particularly internationally, our strong momentum in China, our strategic focus for sales in 2023, an update on our IMAX 3.0 strategy, and finally, I'll look ahead at the slate for 2023. And then I'll turn it over to Natasha to review our financial performance before taking your questions. First, for the second year in a row, IMAX captured its largest share ever of both the global and domestic box office in 2022.

This includes 3.3% of the global box office and 4.8% of the North American total, both about 9% over the previous record in 2021. These are impressive results given our network of 1,700 locations globally account for less than 1% of the hundreds of thousands of screens worldwide. Excluding China, our box office results were largely in line with our record-breaking 2019. In fact, our domestic box office in 2022 trailed '19 by only $5 million.

Overall, we delivered $850 million in global box office for the year, up 33% over 2021. We also drove our largest network growth since 2019, installing 92 IMAX systems worldwide in 2022. Our strong capital position allowed us to be very opportunistic in repurchasing shares in the weaker market environment, in 2022, shrinking our market capitalization by nearly 8% in only one year. For context, we had 61 million shares outstanding at the end of 2019.

Today, we have only 54 million shares outstanding. As I mentioned, Avatar: The Way of Water put an exclamation point on our '22 results and a strong tailwind for the years ahead. IMAX has delivered 11% of the film's global total, again, not only a fraction of overall screens. With this franchise and its revolutionary visual effects, Jim Cameron has created an experience that transcends cinema and yet another example of IMAX's ability to create an event and drive outside market share with the most ambitious blockbuster film in terms of scale and scope.

With this past weekend's debut of Ant-Man and the Wasp: Quantumania, we drove 10% of the North American box office, a better-than-average result certainly helped by the Avatar effect. Our $24 million global opening weekend for Ant-Man was more than the previous two Ant-Man films combined. We also start with our indexing on Dune and a record-breaking global box office for Top Gun: Maverick, which included more than 14% share of its North American debut. We're seeing it right now with Avatar and we expect to see it again this year with Christopher Nolan's Oppenheimer, as well as Dune: Part Two.

The world's best filmmakers continue to raise the bar and audiences almost invariably know they'll need to experience these films at IMAX. Back to China, among the most encouraging results we've seen with Avatar 2 is in China, where the film essentially reopened the market for moviegoing overnight with more than $50 million in Chinese box office to date. The film is our second highest-grossing release ever in China. And IMAX delivered an impressive 22% of the film's overall Chinese growth to date.

It served as a perfect setup for Chinese New Year holiday, where IMAX delivered record-breaking results with its local language sleep. Our box office of $61.3 million was up 72% over 2022, thanks to a strong diversified slate, including The Wandering Earth 2, Full River Red, Hidden Blade, and Deep Sea. Our $61 million result was significantly ahead of the $42 million, which we budgeted for box office during the Chinese New Year period. The speed with which the Chinese box office has recovered has been stunning.

In January, the Chinese box office more than doubled the North American box office overall. January marked the first time ever that we had both the local language and Hollywood title in IMAX at the same time in China, delivering more than $25 million in box office. And the Avatar sequel has cleared the way for key Hollywood tentpoles to gain entry into the market. February saw the long-awaited return of the Marvel franchise to China with Black Panther: Wakanda Forever and the latest Ant-Man.

IMAX China has delivered 21% of the Ant-Man debut on less than 1% of the screens. DC Shazam! Fury of the Gods will also receive a day-and-date release in China next month. And just last week, Paramount's forthcoming Dungeons & Dragons Film was also given a day-and-date China release from March 31. Beyond the IMAX network, Hollywood films, including Universal's M3GAN and Sony's The Son have also secured Chinese release dates.

As a result of these trends, we have a very bullish outlook on the Chinese box office for 2023. IMAX box office in China for the full year 2022 was $152.5 million. And we are already at more than $86 million or over half through of last year through less than two months of 2022. Our market share gains have record-breaking performance with Avatar has strengthened our standing with exhibitors around the world.

As a result, we're seeing very encouraging signs of demand for IMAX systems and technology. We already have 22 signings through the first two months of the year. For comparison, we had 23 signings for the entirety of the first quarter of 2019 pre-pandemic. This includes a deal expanding our partnerships with Japan's largest exhibitor, AEON, a rare sign-and-install deal that will see seven new locations open in this red-hot market by the end of the year.

This comes less than a year after striking a two-system deal with AEON. And with our $1.8 million per screen average in Japan in 2022, we see even more opportunity in that market. We also announced a deal with Cinema 21 that will double our commercial footprint in Indonesia to 20 locations. This is very encouraging given how underpenetrated we are in Indonesia relative to the company's enormous population.

We built great momentum in the market recently with our first Indonesian local language release in 2022 and Avatar: The Way of Water, which is now our highest-grossing Indonesian release of all time. The spike in cells we saw following the first Avatar was driven largely by China, where our eye-popping results on just 24 screens led to sweeping agreements like the 75-theater deal we signed with Wanda less than a year later. Given how much our network has grown and evolved since then, we expect the impact of Avatar 2 to play out differently, driving sales in pockets of our opportunity across the regions we are most underpenetrated, Southeast Asia, India, Latin America, and Continental Europe. Indeed, many of our highest priority markets for growth, including Germany, France, India, and South Korea are among the many, where Avatar 2 is the highest-grossing IMAX release of all time.

We're particularly optimistic about the outlook for growth in Asia, where I and many of our sales leaders have visited in recent months and been impressed by the enthusiasm for IMAX among exhibitors. Furthermore, our successful local language strategy continues to build our brand and profile in the markets, where we see the strongest network growth potential. Last month was our highest-grossing month of January ever for local language films with a great mix of releases from China, India, and Japan. In India, we delivered our biggest global box office ever for India local language titles in '22 with nearly $12 million, up from less than $1 million in 2019.

And our first local language film of 2023, Pathan is already our second highest-grossing Indian release ever with $3.6 million in global box office to date. We expect to program six to 10 local Indian titles this year, up from four last year, and ramp up to 10 to 15 annually in the coming years. We believe that level will give us a consistent enough market presence to drive significant network growth, introduce new audiences to IMAX, and potentially bolster our indexing on Hollywood titles as well. Given our box office and content progress in high-growth international markets, the calculus is clearly changing in terms of our global growth strategy and target markets.

As we saw a decade ago, the Avatar effect is not something that will fully play out in only a few months or even a year but rather over a sustained period, especially when considering there are multiple more Avatar installments on the horizon. Even as we capitalize on near-term opportunities to grow our network, we continue to advance our long-term IMAX 3.0 strategy to grow beyond blockbusters and deliver unique events and experiences globally across platforms. We concluded 2022 by hitting our goal of 250 connected theaters worldwide. Our global connected network now features more than 75,000 seats across 27 countries and territories in North America, Europe, and Asia.

As we map out our content strategy for the year ahead, we're being very selective about what we book on our network, given that our Hollywood blockbuster pipeline is a full, strong, and consistent as we've seen since before the pandemic. We'll complement those tentpole offerings with live interactive fan events in collaboration with our studio partners, including our upcoming event for the World Premier of MGM's Creed III, the first film for IMAX sports movie. Since our acquisition of SSIMWAVE last September, we've completed new agreements for all of its clients who are up for renewal at last year's end, while adding blue-chip global content and technology partners. As I've said, we're even more excited about the long-term application of SSIMWAVE technology, and the team is currently working on potentially transformative solutions for compressing video images while preserving quality and saving costs.

We're clearly in an environment where streaming platforms are under cost pressure. And we focused on -- we're focused on technology solutions that will help them cut costs materially while protecting filmmaker intent beyond theatrical. Furthermore, we continue to unlock synergies between SSIMWAVE and our IMAX Enhanced initiative and expect to more closely align those efforts with our go-to strategy. Now, I want to turn to the '23 slate.

We're very optimistic about what the slate looks like. As I mentioned earlier, it has complete balance as consistent as we've seen since 2019. Our film for IMAX slate features seven highly anticipated releases, including Christopher Nolan's Oppenheimer and Denis Villeneuve's Dune: Part Two, highly IMAX-created events from two of our biggest collaborators and advocates in the filmmaking community. IMAX drove indexing of more than 20% with both Nolan's Dunkirk and Dune: Part One during their runs on the network.

Multiple Marvel films with Maze Guardians of the Galaxy Vol. 3 in May. Multiple DC films, including the new Aquaman, we also have Tom Cruise's Mission: Impossible-Dead Reckoning Part One coming on the heels of an incredible IMAX run for Maverick, the new Fast and Furious, a new installment of Transformers and Indiana Jones and the Dial of Destiny, which we're very excited about. With our local language portfolio, we expect to program between 30 and 40 titles this year from across China, India, South Korea, and Japan.

In conclusion, we are as optimistic as we've been for years about the year ahead, given the rapid turnaround in China and the strong performance of the Avatar sequel. We feel good about our opportunity to drive further global growth in our theatrical network and box office as we carry our strong momentum through the year. At the same time, we will further our 3.0 strategy evolving beyond blockbusters. Our unique privileged position at the center of the entertainment ecosystem gives us a great perspective on the landscape, which is very valuable in navigating times of change like these.

And we've had a pretty good track record lately in calling how things shake out. We've correctly predicted that the studios would abandon day-and-date releases and the PVOD experiment, come back to exclusive theatrical windows for blockbuster movies. We saw a correction coming to the economic model for streaming services. It's easy to forget now, but there are a lot of folks who doubted Top Gun and Avatar before their releases this year.

But we were bullish on those blockbusters from the beginning, and we were right. And we've leaned into local language and the increasing globalization of content long before RRR and Japanese anime took the world by storm. We called last fall that China would begin to roll back COVID-Zero following the Party Congress had it in. And that Avatar would get dated in China and help reopen the gates for Hollywood releases.

In our own business, we hit our targets for installs and connected theaters for the year. And we're seeing the Avatar effect we've long predicted beginning to play out. We're driving record-breaking numbers in our business, and we know that our box office has historically thrived in economic downturns. So, our optimism for the year is well-founded and our credibility and track record well earned.

We look forward to updating you as the year progresses and to creating value for our business, our shareholders, and the millions of people around the world, who invest their time and money in the IMAX experience. I'd like to thank you all, and I'll turn it over to Natasha.

Natasha Fernandes -- Chief Financial Officer

Thanks, Rich, and good afternoon, everyone. As Rich highlighted, we are excited about 2023. We are returning to a pre-pandemic environment with a robust blockbuster slate, and we are experiencing a notable positive turnaround in China. As we look forward, we expect to benefit from a combination of the profit that will flow from a recovering box office, growth in our technology, system sales and installs propelled by the record-breaking performance of Avatar and our overall global momentum and the efficiency actions and cost discipline we implemented over the past few years.

With that in mind, we are establishing guidance for 2023, including IMAX gross box office back to the 2019 pre-pandemic level of $1.1 billion as compared to $850 million in 2022. With the return of box office in China and a 2023 slate that was made for IMAX screens, we envision it will be a year of market share gains, total installations of 110 to 130, which compares to 92 systems in 2022, reflecting growth of over 20%. Our contractual backlog, as well as the elevated rest of world deal activity, will enable us to reach this target. We foresee a similar sale and upgrade mix of 2022 with installation timing heavily weighted to Q4.

And we expect to realize adjusted EBITDA attributable margin in the mid-30s percent driven by our box office flow-through, coupled with our operating efficiency gains. Now, turning to Q4 and full-year results. Fourth-quarter results were in line with our expectations capped off by Avatar remarkably. Avatar delivered $140 million in box office in the last two weeks of December with 11% market share, making up more than half of Q4's total IMAX gross box office.

Revenue in Q4 was $98 million, compared to $109 million in Q4 '21 and adjusted EBITDA attributable to IMAX was $28 million, compared to $44 million in the prior year. These year-over-year variances were primarily driven by China as that market did not begin to normalize until late December and a one-time release of deferred maintenance revenue in Q4 '21. Adjusted EPS in Q4 was $0.19 versus $0.31 in the year-ago period and included a tax valuation allowance resulting in a negative impact on earnings of $2.1 million or $0.04 in Q4 '22. Looking at the full year, our '22 results were significantly above 21%, reflecting the continued box -- recovery in box office, our unique position in the entertainment industry, the strength of our business model and execution.

Rich shared our business highlights. And to build on that, I will share some financial highlights. Revenue of $301 million was up 18% despite the fact that China did not begin to normalize until late in '22. Driving revenue was gross box office from the IMAX network, which was up 33%, which compared to 22% for the exhibition industry, overall domestic box office from IMAX locations were on par with 2019 and rest of world, excluding China, was not far behind, leading to the strong full-year performance.

Moving on to installations. System installs were 52 in Q4 and 92 installs for the year, up 23% year over year from 75 systems and above the midpoint of our guidance of 80 to 100 systems. For '22, we earned gross margin of $156 million, which was up 16% over the prior year of $134 million and was 52% of revenue. Full-year adjusted EBITDA attributable to IMAX was $84.5 million or $1.47 on a per share basis, which reflects an increase of 23% over '21 of $68.6 million.

We recognized an adjusted EBITDA margin of 30%, reflecting flow-through on incremental box office and benefits from cost discipline effort. Adjusted EPS was $0.06 in '22, up from a loss of $0.14 in '21. The pandemic contributed to the recognition of tax valuation allowances, preventing the realization of any tax asset benefits. This had a negative impact on EPS of $0.29 for full year '22 and $0.25 in '21.

Once profits are realized in jurisdictions related to these tax assets, the reversal of the cumulative valuation allowance of $63 million will have a favorable impact on our EPS in future periods. As we turn to our balance sheet and cash flows, operating cash flow was positive in Q4 and propelled us to $17 million for the full year, which is up significantly from operating cash flow of $6 million in '21. Our cash flow generation continues to improve as revenue increases and as our exhibitor customers recover from the pandemic. We expect this trend to continue into '23.

We ended the quarter with $97 million in cash and $270.7 million of debt, excluding deferred financing costs. As of December 31, our available liquidity was $416 million, including cash and cash equivalents of 97 and $319 million in available borrowing capacity under the company's revolving facilities. Our strong balance sheet in '22 enabled us to execute on both the SSIMWAVE acquisition and the significant level of share repurchases. In Q4, we repurchased 1.9 million shares at an average price of approximately $14 per share for $27 million.

For the full year, we repurchased 5.4 million shares at an average price of approximately $15 per share or 9.2% of our beginning share count spending $82 million. We continue to capitalize on what we view as an undervalued stock price and the opportunity to return capital to shareholders. As of December 31, $193.4 million remains available under our share repurchase authorization. To conclude, we finished '22 on a strong note with Avatar and that momentum has only accelerated into '23 with a remarkable continued run of Avatar, the reopening of China leading to our record Chinese New Year results, and the strong demand for IMAX technology we are seeing from our partners in markets around the world.

We believe '23 will be a year where the combination of our unique position in the entertainment industry and our high-margin, asset-light, technology-focused business model will shine through. This will enable us to realize gross box office similar to pre-pandemic levels to deliver growth in installations and higher adjusted EBITDA margins. With that, I will turn the call over to the Operator for Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Eric Wold with B. Riley. Your line is open.

Eric Wold -- B. Riley Financial -- Analyst

Thank you. Good afternoon. All right. Two questions if I may.

I guess, first off, thinking about the guidance for adjusted EBITDA margin in the mid-30% range for this year, which is, if I look back to '19, is within a couple of percentage points of what you reported back then. I'm not looking for guidance beyond '23, but maybe that kind of what would you view as kind of the puts and takes in your business, what's changed structurally such that margins can go higher from here in the future? Is it still entirely dependent on box office? Or do you view that something else has changed as well?

Natasha Fernandes -- Chief Financial Officer

Hi, Eric. Definitely, it's box office completely, like there's a significant opportunity given the incremental box office that we can earn that could create over 30% growth. And as you said, it's proven by the historical years. And all of that flows right through.

As well, there's opportunity with SSIMWAVE and other businesses that we're exploring right now, too. And so, we do think that there's opportunity. And right now, as you look at SSIMWAVE and Live, that's sort of where our margin is now, but there's only upside there as you start to explore and expand the business model.

Eric Wold -- B. Riley Financial -- Analyst

Thank you. And then just a second question. You mentioned, Rich, obviously, on IMAX 3.0 you're going to be careful this year in terms of what you planned given how robust the Hollywood slate is. How far in advance do you feel you need to contract those live events to drive enough awareness and time to purchase tickets? And where do those marketing costs fall for those events between you and the content provider?

Rich Gelfond -- Chief Executive Officer

Well, on the second part of the question, Eric, it depends on the specific deal. So, in some deals, the content provider would do more of it and some we would do more of it and in others, it will be a shared or allocated. In terms of the first part of your question, how far in advance do you need to book? And, I mean, from our point of view, the further out the more optimal, and now that we have the network in place, I think it gives us the opportunity to program content further out. But you just never know.

It's the nature of the business. It's different than the movie business where it's a fixed timetable. And 18 months or two years after you start shooting you have a release state way in advance. You could really put it together.

The live business is still very much in its infancy. And I think we're still going to test and do different things, whether it's music or whether it's sports or whether it's Q&As around releases. I think it really depends on the kind of event. And I wish we had a fixed model on that, but it really is going to be event-specific.

Eric Wold -- B. Riley Financial -- Analyst

Understood. Thank you both.

Rich Gelfond -- Chief Executive Officer

Thanks, Eric.

Operator

Thank you. Our next question comes from Eric Handler with ROTH Capital. Your line is open.

Eric Handler -- MKM Partners -- Analyst

Good afternoon and thanks for the question. Just two questions here. First, as you look at your sort of outlook of $1.1 billion of gross box office this year, how are you thinking about growth in China relative to North America and international rest of the world?

Rich Gelfond -- Chief Executive Officer

So, I think in China, we think it will be a move toward normalcy and normalcy means sort of 2019 pre-pandemic levels. Again, I'm not going to get into the elements right now, but I think we see that moving toward normalcy. And I think in North America and the rest of the world, we feel incredibly good about the slate, as we said during our prepared remarks. And if you look at just very early in the year, as we said during those remarks, we had budgeted about $42 million for Chinese New Year, and it came in over $60 million.

And I could tell you that Ant-Man this past weekend did close to our total budget in just one weekend. So, early in the year, I think we're doing very well on all fronts and Avatar was obviously extremely strong. So, I think it will come from both places, Eric, I think, a return to normalcy in China and opportunity around this year's slate. And I also should highlight on the local language films that we do.

I don't think investors historically have paid enough attention to that and it's a pretty good reason because they didn't contribute that much. But last year, I think it was 17% of our box office was foreign language films. And I think this year, there'll be more films than that. And I think those kind of get overlooked when people look at the company, they sort of say, well, I see this blockbuster coming of this Marvel movie or this DC movie, but they forget there's a lot of money there.

In those slots, I think it will be all of the above.

Eric Handler -- MKM Partners -- Analyst

OK. Great. That's helpful. Next question, it's good to see you updating the addressable market of systems for the world.

I think it's been several years since you've done that. I've not been able to find the last time you did this. So, I'm curious, how big is 3,300 addressable markets? What was that last time you did a review if you could point out?

Rich Gelfond -- Chief Executive Officer

It was 3,300 the last time. We didn't revise it, Eric, and we specifically -- we do it every three years. We did it in '19. We didn't revise it because of the pandemic.

I'm sure we'll do it in the next year or two. But that's the guidance we've given before.

Eric Handler -- MKM Partners -- Analyst

Got it. OK. Very helpful. Thanks.

Operator

Thank you. Our next question comes from Steven Frankel with Rosenblatt Securities. Your line is open.

Steven Frankel -- Rosenblatt Securities -- Analyst

Good afternoon, Rich. Could you start with maybe an update on the camera program? Where are you in creating a pipeline of equipment that could materially expand the number of films that are created with IMAX cameras?

Rich Gelfond -- Chief Executive Officer

Well, Steve, I think we've already materially expand as the kind of cameras when we did our film for IMAX program and our digital cameras. And I don't remember, Megan, in this year, how many films are in --

Megan Colligan -- President, IMAX Entertainment

We have 10 films that are certified through our digital program, and we're in the process of developing new film [Inaudible] will be ready in probably 18 months or so, maybe two years. And so, those cameras for our film program, but we still have a steady stream of films that are shot with our film cameras, which Oppenheimer we shot with our film cameras, there's a movie that we haven't announced that is shooting in the next couple of weeks, we'll begin shooting and that's shooting with our film cameras. So, those are two different programs, but film for IMAX program has been extremely successful, I think, at raising our indexing and signaling audiences, intentionality of filmmakers, design these for the IMAX screen and for IMAX sound and to design for everything that our systems offer.

Rich Gelfond -- Chief Executive Officer

Yeah. So, again, circling back, there are lots of cameras because the digital program, there are add-ons to the digital cameras that most filmmakers use. So, we're doing the new film cameras just because we can expand the IMAX releases. But there's no shortage of cameras to film the film for IMAX program.

And as you know, we're doing a lot of that globally.

Steven Frankel -- Rosenblatt Securities -- Analyst

Great. Yeah, that was kind of where I was going. So, we're going to start to see more of that with the local language content like we have in China over the last year or so.

Rich Gelfond -- Chief Executive Officer

Well, actually, in the last three years, and each year, the biggest movie in China was one film with an IMAX camera and the film for IMAX program. So, we've been hugely successful there. But I think you will see it in other territories as well.

Steven Frankel -- Rosenblatt Securities -- Analyst

And then one more question, I heard you describe Creed as IMAX sports movie. Is that a hint of maybe some different content we might see coming in the future?

Rich Gelfond -- Chief Executive Officer

Well, I mean, it's a boxing movie. And people have seen it, say it's kind of incredible. And it feels like you've never seen a boxing movie that way in terms of the way the punches are portrayed maybe even more of the way they received on the other end. But sure, I mean, we're always looking at new opportunities.

We haven't announced anything else, but there are different sports movies that we're in the middle of talking about. Yes.

Steven Frankel -- Rosenblatt Securities -- Analyst

OK, great. Thank you.

Operator

Thank you. Our next question comes from Chad Beynon with Macquarie. Your line is open.

Chad Beynon -- Macquarie Group -- Analyst

Hi. Good afternoon, and thanks for giving all the guidance. I wanted to ask about the system backlog. You talked about this year, 110 to 130.

You have a backlog of 450, so great to see that this is increasing year over year. In terms of what's left beyond this year, can you kind of help us think about kind of what the gating factors are? Is this a good number to think of going forward just given the backlog is this big and now you have local language to help with that? Or are there other reasons why that's not a good way to think about it beyond '23? Thanks.

Rich Gelfond -- Chief Executive Officer

Well, I mean, the way to think about it is the world is coming back to normal. And as we mentioned during the call, in the first quarter, we signed a seven-theater deal in Japan, a 10-theater deal in Indonesia. There have been other deals that we signed that we haven't yet disclosed. The quarter so far is one of the best first quarters we've ever had and we're roughly halfway through it.

So, people are coming back. And the Avatar effect and the opening of China mean there's demand for IMAX theaters on a global basis. So, the number we gave for install guidance between 110 and 130, some of that will come from backlog and some of that will come from new signings. And it's too early in the year to say, how much will come from backlog and how much will come from new signings.

But as the year progresses, we'll have a better feel for that. But your question is about backlog, I'm answering you a little bit about signings. And I'm just saying that if you go back even six months, you are a company from a box office point of view was doing extremely well. And outside China, we finished close to 2019 levels.

But now we're seeing normalization in other areas of our business, including installs and signings, and I think we'll continue to see that.

Chad Beynon -- Macquarie Group -- Analyst

Great. Thanks, Rich. And then on the balance sheet, on Slide 27, you talk about net debt to EBITDA of two times, obviously, given your guidance that will come down. How should we think about the right leverage on this business given the return to stability and then maybe a balance of how you're thinking about share repos versus opportunistic M&A that remains? Thanks.

Natasha Fernandes -- Chief Financial Officer

Sure. I mean, we have liquidity of over $415 million. So, I think we're well equipped to be able to make selective decisions that would further our business like we did with buybacks this year and giving -- and reducing our share count and bringing value back to shareholders, but also the acquisition of SSIMWAVE. Our operating cash flow was $17 million in Q4, which the cash flow dynamics improve as the industry improves.

And personally, cash flow is a huge focus for me, as you know, Chad, because of just my background from coming from treasury and being focused on that. And so, I think we have -- we are equipped to be able to move forward and we can lever up as needed, but we've made a good acquisition with SSIMWAVE this year. And with buybacks, we're in a really good position. If you think about our convertible notes, they -- with the cap call in there, they're at $37, and we're making buybacks at $15 on average.

It's a great deal that we're sitting at right now.

Chad Beynon -- Macquarie Group -- Analyst

That's great. Appreciate it. Thank you very much.

Operator

Thank you. Our next question comes from [Inaudible] with Wells Fargo. Your line is open.

Unknown speaker -- Wells Fargo Securities -- Analyst

Good afternoon, guys, and thank you for taking my question. Rich, maybe first on going back to system signing, you talked about momentum in Q1 being strong and guidance seems to be ahead of expectations. Can you maybe give us some color on how the tone of those conversations with the other partners are changing? And what's the opportunity of some of the international markets that IMAX is underrepresented? And then I have a follow-up. Thanks.

Rich Gelfond -- Chief Executive Officer

Yeah. So, great question, Omar. First of all, we said, as I said in my script, records in 50 different markets for Avatar. And coincidentally, many of those markets are markets that were very underpenetrated in.

And in January, I went to India with our head of sales, and Mark Welton went to a bunch of countries in Southeast Asia, also with our head of sales. And the attitude was so different than it was even six months ago. People were ecstatic. I mean, so 50 countries had records just putting it simply, and they were all saying, how fast can I get more IMAXs, and its parallel after the first Avatar.

So, people are excited. And again, as I said in response to the last question, we have as many signings as we've had since 2019 in this period of time. And the tone is just extremely positive, and we feel really good about the number of discussions underway. And it's even places that you wouldn't necessarily think of.

So, for example, in France, we did almost $500,000 of screen for Avatar, and that's a vastly under-screened market, and there's been a lot of demand coming out of there. In Japan, where we signed the deal with AEON, there's a lot of other interest in Japan that we're working through. So, I think you're seeing a global rebound now where people really want to sign and install IMAXs much more rapidly than in the last couple of years. And while I think, China is probably behind that curve because they just opened.

I expect within six months to see China moving toward that kind of position. So, feel very good about that.

Unknown speaker -- Wells Fargo Securities -- Analyst

That's very helpful. And maybe on the 2023 contents play, it looks very strong as you alluded to. Just wondering, how do you -- maybe can you talk about how do you manage slotting screen sharing and schedules to maximize the 2023 box office? I know there's a period of very concentrated with lots of films, and then there's also appears like the back half of the year with low. Just can you give us some color on how you manage the slotting and screen sharing for your box office? Thank you.

Rich Gelfond -- Chief Executive Officer

Well, the good news for us is that almost every major studio and every major filmmaker wants their film released in IMAX. So, that's pretty much where it starts as they come to us in advance and they say, I want the July date or the May date or whatever it is. And if they've used our cameras, we give them two weeks. If they haven't, we give them one week or more depending on the nature of the movie.

So, that's how we sort of start to form our slate, then as the year goes on, people will say, well, I want to do my movie that date. We'll say, we can do it or we can't do it, based on what our commitments were up to that time. And we like to say we can. But unfortunately, we have to turn down movies because people have booked that data in advance.

And it's good when the dates are competitive because you can help facilitate an IMAX release by encouraging them to move to another time. So, I'd call it an art rather than a science. And you try to do your best in terms of balancing the box office potential for particular film with your expectation of the growth of that bill and with your expectation of how it will grow and how it will fit into the IMAX. But unfortunately, this is the good news, bad news story.

There are so many good things going on in '23 and as far as we could tell in '24 that most of the way you can program blockbusters sequentially and fit them all in. But unfortunately, there's just too many. And as a result, there are some you can't play, but that's the price of being a content curator like we are. And we're in a good place to make it work the best at for IMAX, but it's not always going to work perfectly.

Natasha Fernandes -- Chief Financial Officer

And if I can just jump in and say one quick thing, I think in a post-COVID world, exhibitors have gotten both on the exhibition side and on the studio side, there's been much more openness program to ensure that the IMAX screens are as utilized as they can possibly be in. So, there's been much more flexibility to do one-night-only special events to program, two movies on a weekend and to be smart about a movie that will program very well during the day and have another movie booked -- playing in the evening. So, there are times where we are programming multiple movies in a week, and we did that very effectively in the back half of 2023 -- sorry, '22, and we were very effective, I think, in making sure that we were utilizing our screens, I think, to the best of our ability. And you'll continue to see that.

I think there's a growing sense that that's -- that we need to be as effective as we can possibly be.

Unknown speaker -- Wells Fargo Securities -- Analyst

Thanks, guys.

Operator

Thank you. We have time for one last question. And our last question is from James Goss with Barrington Research. Your line is open.

James Goss -- Barrington Research -- Analyst

All right. Thank you. I was curious with, say, Top Gun last year offering an opportunity for reprise and when swaps might have been made available. Does Avatar: The Way of Water and possibly Wandering Earth 2 in China offer some similar opportunity for coming back to the screen?

Rich Gelfond -- Chief Executive Officer

Yes, I think they do, Jim. And especially, seeing what happens at the Academy Awards and what wins and what doesn't. But you probably know that we brought back Titanic for its 25th year anniversary this year. So, I think films that do especially well in IMAX center suited to the IMAX screens, the demand runs a very long time.

And I think you will see some of the big films come back again.

James Goss -- Barrington Research -- Analyst

OK. And maybe one other since getting late. In China, I think the platform is bigger than it was in 2019, but your PSAs have come back as well. I'm wondering if you look at the mix of platform growth in PSA, are you looking at that opportunity in China to move beyond what it might have been in 2019? And what do you think would be the more important source of incremental revenues?

Rich Gelfond -- Chief Executive Officer

Well, Jim, especially because we've increased local language film as a percentage of our slate and those films do particularly well in lower-tier cities. There's definitely an opportunity for higher PSAs not just in China, but in all the markets in the world, we're playing local language films. And again, if you look at Japan, our PSAs are $1.8 million or double North America. So, that's definitely an area of huge opportunity.

As you say, we've had platform growth there also. So, I think it's a matter of time before we could set records in China again, I don't want to predict that for 2023 because six weeks ago, people locked in their homes with drones flying over their heads and boxes at chicken thrown at their front doors because of the quarantine. And given how fast they've come to a record Chinese New Year, I think we're encouraged, but I think we also want to be a little bit measured about changing the world in another six weeks.

James Goss -- Barrington Research -- Analyst

Right. Well, thanks so much. I'll leave it at that. 

Operator

Thank you. There are no further questions at this time. I'd like to turn the call back over to Rich Gilford for closing remarks.

Rich Gelfond -- Chief Executive Officer

I think hopefully, it comes through in our presentation and to our answers to our questions. But on kind of every KPI for IMAX from an investor point of view, whether it's box office, whether it's signings, whether it's installs, whether it's margins, we're feeling really good about our business and extremely confident. And it's not like we only manage our business from afar. Many of us are on the road.

And I happen to be in L.A. right now meeting with studios and filmmakers and whatever our constituencies are, whether they're exhibitors, they're filmmakers, could be the studios, audiences, you look at the box office numbers, it just feels like a very good time to be in IMAX. And we feel that, as you saw in our guidance, that will be reflected in this year's financial results. So, thank you all for joining us, and we look forward to the first-quarter call.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Jennifer Horsley -- Senior Vice President, Investor Relations

Rich Gelfond -- Chief Executive Officer

Natasha Fernandes -- Chief Financial Officer

Eric Wold -- B. Riley Financial -- Analyst

Eric Handler -- MKM Partners -- Analyst

Steven Frankel -- Rosenblatt Securities -- Analyst

Megan Colligan -- President, IMAX Entertainment

Chad Beynon -- Macquarie Group -- Analyst

Unknown speaker -- Wells Fargo Securities -- Analyst

James Goss -- Barrington Research -- Analyst

More IMAX analysis

All earnings call transcripts