IMAX - Earnings Call - Q1 2020
April 30, 2020
Transcript
Operator (participant)
Good day and welcome to the IMAX First Quarter 2020 Earnings Conference Call. All participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brett Harriss. Please go ahead.
Brett Harriss (Head of Investor Relations)
Thank you, Emma. Good morning, everybody, and thank you for joining us on today's First Quarter Earnings Conference Call. On the call today to review the financial results are Rich Gelfond, Chief Executive Officer, and Patrick McClymont, Chief Financial Officer. Megan Colligan, President of 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 First 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 on the website as well. I'd like to remind you of the following information regarding forward-looking statements.
Our comments and answers to your questions on this call, as well as the accompanying slide deck, may include statements that are forward-looking in that they pertain to future results or outcomes. Actual future results or occurrences may differ materially from these forward-looking statements. Please refer to our SEC filings for a more detailed discussion of some of the factors that could affect our future results and outcomes. During today's call, references may be made to certain non-GAAP financial measures as defined by Regulation G of the Securities and Exchange Commission. 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 Income, Adjusted EPS, and Adjusted EBITDA as defined by a credit facility, are contained in this morning's press release. With that, let me now turn the call over to Mr. Rich Gelfond. Rich?
Rich Gelfond (CEO)
Thanks, Brett. These are extraordinary times as our world, the entertainment industry, and IMAX Corporation confront an unprecedented challenge of COVID-19. As much as we look forward to theaters reopening, we fully support local officials and our exhibition partners around the world in closing theaters as necessary. We'll also be extremely cautious in markets like China that are beginning to reopen schools, restaurants, and other public spaces. I hope all of you joining us are staying healthy and safe. Today, I'd like to discuss the continued financial strain of IMAX, the health of our brand, and our ongoing efforts to enhance the IMAX experience for our audiences, the condition of our China business, IMAX's contributors in crafting a formidable upcoming film slate, and finally, our relationship and efforts to support our exhibition partners. Looking at the first quarter of 2020, clearly our results were impacted by COVID-19.
We reported revenues of $35 million and Adjusted EBITDA loss of $4.4 million, and Adjusted Net Income loss to common shareholders of $29 million or $0.48 per share. This includes a $0.10 credit provision that Patrick will discuss in greater detail. We installed 12 IMAX systems in the first quarter, and our commercial theater network now stands at 1,526 theaters, up 7.5% versus Q1 of last year. I want to underscore that IMAX is in a strong financial position to weather this crisis. We entered the year with more than $90 million in net cash on our balance sheet. At the end of March, we drew the balance of our $300 million Revolving Credit Facility to maintain maximum flexibility throughout the duration of theater closures.
As a result of this strong cash position and a commitment to controlling costs, we're confident in our ability to operate through an extended shutdown in a zero-revenue environment. We've already taken significant costs out of our 2020 operating structure and will continue to be flexible and respond accordingly as the situation evolves. We're a technology and licensing business. We don't have a lot of fixed assets, and we run the business with fewer than 700 full-time employees. Impressive when you think about how we have grown and managed a global brand that operates across 81 countries and territories, and our box office was in excess of $1 billion last year.
We managed the business conservatively over the preceding years, and as a result, we believe that we have the balance sheet to be ready for exhibitors, studios, filmmakers, and audiences when the entertainment industry is back up and running. Furthermore, as global economies restart, we believe consumers will turn to strong, trusted brands like IMAX. Prior to the challenges of 2020, IMAX was coming off two consecutive years of record-breaking global box office. Last year, we set records for global, local language, and international box office, including box office records in 27 countries worldwide. We entered 2020 with a record number of releases filmed using IMAX cameras. We have established a unique and powerful position in the entertainment ecosystem. Consumers seek out the IMAX experience for immersive blockbuster entertainment.
Studios value IMAX as the mark of a must-see film and a powerful partner in marketing, curating, and driving box office for their biggest releases. The world's best filmmakers and creators are increasingly using our end-to-end technology to bring their artistic visions to life. Exhibitors rely on our theaters to provide a premier experience that drives ticket pricing, volume, and differentiation. And finally, streaming services offer new opportunities for us to bring new event content to our theaters and to bring IMAX technology to home entertainment. This privileged position enables IMAX to take an active role in shaping how the entertainment industry emerges from this crisis. We're also using this time to reshape how we deliver for our audiences. The last time the theatrical business saw a crisis of this magnitude was in the early 2000s when many of the major exhibitors restructured.
And while IMAX is in a far stronger position today, during the last crisis, we fostered many of the innovations that enabled our global growth over the last two decades. We invented the proprietary digital imagery mastering process, which has made IMAX a coveted partner among studios and filmmakers throughout the world. We transitioned our theater operations and technology from analog to digital, and we developed a business model that has driven our theater sales business. We're taking a similar approach in this challenging time. We're accelerating the development of a comprehensive direct-to-consumer strategy to billed on the strength of our brand, create new touchpoints with our audiences, and drive more revenue opportunities. We're developing new technologies to bring additional interactivity to our theaters.
We're leveraging technologies like artificial intelligence and the cloud to better manage our internal workflows, and we're enhancing systems to better organize and codify our box office theater and financial data. Moving to China, our unique position in this market also offers us an insight into the COVID-19 situation. Given our vast network in China, where we have more than 700 theaters, IMAX has been managing through the impact of this virus since January. This provides us with an up-close, on-the-ground look at the potential trajectory of theater closures and reopenings and consumer behavior patterns, especially as China works to restart its economy. Schools are opening across China, in-store retail consumption is picking up, and TV and film production have also resumed under strict health guidelines, all positive signs.
As a matter of fact, just yesterday, a member of the Chinese government announced that he expected theaters to begin opening in early June. When theaters do reopen in China, we believe IMAX will benefit from an exceptional slate. We are prepared to immediately distribute many of the classic titles that are under consideration for release when the theaters resume operations, followed by many of the Hollywood titles from earlier in the year that have yet to be seen in China. And of course, the Chinese titles that were originally slated for release over the Chinese New Year. Additionally, there were positive signs that Chinese audiences are excited to return to the theaters. A survey released this month by Chinese ticketing platform Maoyan found that 72% of Chinese moviegoers were eager to get back to the movies, up from 54% just a month ago.
Turning to the broader film slate, in the back half of 2020 and into 2021, we will participate in a formidable content pipeline with which to relaunch the theatrical business in earnest. Given the uncertainty around theater reopenings, the slate is subject to change. But we've engaged in frequent conversations with our studio partners for being extremely thoughtful and aggressive to find compelling release windows and serve global audiences in the best way possible. While we will need to be creative in scheduling, it is clear that studios are deeply committed to theatrical releases for the biggest event movies of the year. There is simply no way to recoup the substantial financial commitment of a blockbuster film without a theatrical release.
In 2020, we are poised to set a new record for releases that are filmed in IMAX, with many of the year's biggest films, including Detective Chinatown 3 in China, Christopher Nolan's latest sci-fi film, Tenet, Wonder Woman 1984, the latest James Bond installment, No Time to Die, and Paramount's Top Gun: Maverick. Scheduled for 2021 is an exceptionally strong slate that as of now includes three Marvel titles, including the latest installment of Spider-Man, the highly anticipated new Batman film, new entries from global blockbuster franchises, including Fast and Furious, Mission: Impossible, and Jurassic World, and of course, James Cameron's Avatar 2, the sequel to the highest-grossing IMAX film of all time, currently remaining on schedule for the end of next year. In terms of slate changes, we're mostly seeing release shifts.
Studios with big blockbuster products hold major film slots, and with a two to three-month delay, many studios are simply shifting their entire schedules as a group. Disney is a great example, where they moved Black Widow, originally scheduled for this May, into the November Marvel slot previously held by the Eternals. As a result, 2022 is also currently filled with films such as Thor, Black Panther, Fast and Furious 10, and Mission: Impossible 8 that will hold strong audience appeal for IMAX consumers. The long-term product pipeline is about as robust as it's been. We look forward to working with our studio and exhibition partners to bring audiences the experiences they crave.
In the near term, we have incorporated a number of remote tools into our workflows and arranged for select staff to have safe access to our post-production facilities so we can continue work on forthcoming titles like Tenet. And just as in China, there are early encouraging indications that U.S. audiences are eager to get back to the movies. A survey released by research firm EDO earlier this month revealed that the overwhelming majority look forward to returning to the cinema when theaters reopen, albeit cautiously. More than 70% of respondents said they were likely to return to theaters when they reopened, including 75% of respondents between the ages of 13 and 39, which is the IMAX core audience. And while shelter-in-place guidelines have clearly driven at-home entertainment consumption, it's also clear that theatrical remains an essential part of the creative vision, consumer proposition, and economic model for blockbuster filmmaking.
As I said, the road for blockbuster filmmaking runs through IMAX, and we believe that we're well-positioned to reap the benefits of this rich content pipeline as it begins to flow later this year and beyond. Despite recent challenges, we're hopeful that our exhibition partners will also reap the benefits of a strong slate and will be able to manage through this temporary closure of theaters in the near term. Earlier this month, several exhibitors made important moves to extend their liquidity, lower their risk of bankruptcy, and manage through the crisis. The exhibitors are long-standing valued partners to IMAX, and these moves drive increased stability that will benefit the whole exhibition industry, entertainment industry, and IMAX. We've supported exhibitors as they were forced to close theaters and will continue to support them throughout this situation and beyond.
Agility is a hallmark of IMAX and our ability to service our partnership with exhibitors. As a result, we're confident we can resume installs when conditions improve. We've grown very fast and have the ability to ramp up screen installations quickly. You may recall that in the fourth quarter of 2019, we installed a record 95 systems, which represented more than 50% of our full-year installs, and we completed 57 installations in December alone. Additionally, we completed 12 installs in the first quarter of this year, despite the challenges provided by COVID-19 in key strategic markets, including China, Japan, South Korea, India, and North America. Now I'd like to talk about reopening. The process of reopening theaters will be measured, but will require time for the industry to billed the type of theater-going momentum capable of supporting a blockbuster release.
At first, we expect theaters to reopen with promotional pricing and library content in cooperation with Hollywood studios. For the limited reopenings we saw in China, theaters plan to play library content at discounted prices, with studios taking a smaller share of the ticket revenue. We also expect social distancing expectations and regulations to create limited seating arrangements. Given theaters typically operate with substantial excess capacity, we expect the industry in general and IMAX in particular to be able to generate incremental gross margin even with constrained seating. We also believe that our core audience, the younger fanboys and fangirls that most value an opening weekend blockbuster in IMAX, will be the first to resume experiential activities such as moviegoing. Let me caution that timing remains highly uncertain.
As I said, based on what we've heard from the government in China, we estimate that that opens in June, with the rest of the world opening sometime in July and August. This, of course, is just an estimate. We are fortunate in that, unlike most out-of-home entertainment businesses, it will cost us virtually nothing to reopen IMAX. If you think of other out-of-home entertainment businesses like sports or theaters, live theater, there's a lot of talent you have to bring in. You have to open a lot of infrastructure, and you have to hire a lot of staff. For IMAX, as a technology provider, we don't require additional employees or capital to reopen. We figuratively flip a switch. It's a distinct advantage of our technology and services licensing model. Given limited operating costs associated with our business, the first IMAX ticket sold generates incremental cash flow.
To conclude, COVID-19 poses an extraordinary challenge to the entertainment industry and the experience economy in general. While this is an unprecedented situation and the future is yet uncertain, we believe IMAX is well-positioned to meet the challenge, manage the crisis, and continue to thrive when it is behind us. We have the financial strength to endure, support our partners in these times, and be ready for audiences when they're ready to return to our theaters. Our brand and the IMAX experience have been in strong growing demand around the world. We're carefully monitoring the Chinese film industry, which in time will drive revenue along with insights in how to deal with safety, responsibility, and effectively relaunch theaters, and when these theaters reopen, we have a remarkably strong pipeline of blockbuster content that we are actively working to program through next year and beyond.
The unique privileged position we built in the ecosystem gives IMAX firm footing in difficult times, and we look forward to continuing our success, driving new opportunities for growth, and creating value in a post-COVID-19 world. Thanks again for joining us today, and please continue to do everything you can to stay safe and healthy. And with that, I'd like to turn it over to Patrick.
Patrick McClymont (CFO)
Thanks, Rich, and good morning, everyone. I hope you and your families are staying safe through this challenging time. The ties we've built with the global pandemic are unprecedented in both magnitude of impact and speed of onset. Because of our large presence in China, we started dealing with these issues earlier than most companies. Thanks to prudent, disciplined, and conservative financial management during the last several years, we remain in a strong position to meet the current set of challenges.
Our balance sheet is sound, providing stability to our business and organization. While we are planning for a resumption of our business this summer, we remain confident in our ability to operate through an extended business shutdown and a zero-revenue environment. We ended the first quarter with $352 million of cash on our balance sheet, which includes cash from a revolving credit facility, which we drew down in its entirety in March. We are in close contact with our banking group, which remains supportive of our business, financial strength, and transparency. While the duration of theater closures remains uncertain, we expect our network to reopen well before we exhaust our current liquidity. Based on our current cost structure, we estimate monthly spend of approximately $10 million for operating expenditures.
These costs primarily represent our full-time employees, facility costs, and fully reflect cost actions executed throughout the first four months of the year that will continue to phase in through the second quarter. One of the many challenges of the COVID pandemic is uncertainty. While we cannot control when the theaters ultimately will reopen, we can control our operational costs and capital allocation. In late January, almost two months ahead of the U.S. outbreak, theaters in China closed. In response, we took immediate cost action, curtailing some growth initiatives, non-essential capital expenditures, T&E, consulting projects, and non-core marketing. When the epidemic developed into a global pandemic, we took a deeper dive. In March, we completed a bottoms-up analysis of all our costs, looking at everything short of a reduction in full-time headcount. We reduced temporary non-staff employees, overtime, consultants, and our marketing budget.
In April, we moved the majority of our company to a four-day workweek. Departments that lack product demand or are not able to effectively function remotely, most notably those involved in equipment manufacturing and the DMR process, moved to either a two or three-days-per-week schedule. We accept these measures to reduce costs while maintaining our ability to quickly scale up operations as social distancing measures are lifted and our business resumes. Of course, should the shutdown of theaters last longer than we expect, we have the option to take additional cost measures, reducing our cash burn and extending our cash runway. Much of our CapEx is driven by the growth in our joint ventures. CapEx associated with our new JV and upgrade JV installations remains dependent on our outlook and that of our partners, which in turn is contingent on the pace of construction activity and theater reopenings.
As such, we do expect to make continued investments to develop our global network through the balance of the year, albeit at a reduced level compared to recent years. Excluding investments associated with our joint ventures, we anticipate spending less than $10 million in maintenance CapEx in 2020. In Q1 2020, we repurchased 2.5 million IMAX shares for $36.6 million or an average of $14.72 per share. IMAX China repurchased 480,000 shares for a total of $890,000 or an average of $1.85 per share. Our ownership of IMAX China now stands at 69.7%. Turning to our financial results. Before I jump into the details, I'd like to point out that our results were driven by the closure of our China business in late January and the subsequent closure of the majority of our network throughout March.
Please note we renamed our operating segments to better describe our underlying operating activities. Our network business is now called IMAX Technology Network. Our theater business was renamed IMAX Technology Sales and Maintenance. New business was renamed to New Business Initiatives. The other segment is now Film Distribution and Post-Production. Total revenue in the first quarter was $35 million, down 56% versus last year. In the first quarter, we saw the IMAX Technology Network business deliver a 91% decrease in gross profit based on a 64% decrease in revenue. Low revenue and gross margins were driven by the 63% decline in gross box office year over year given the closure of the network. The IMAX Technology Sales and Maintenance segment delivered gross profit that was down 64% on revenue down 50%.
The decline in revenue and gross margin was driven by lower sales and sales-type leases, which numbered two in the first quarter of 2020 versus six in Q1 2019. Maintenance revenue of $7.4 million declined from $13 million in the previous quarter as we did not recognize maintenance revenue on closed theaters since we could not provide the service. SG&A, excluding stock-based comp, was $24.9 million, down sequentially from the $29 million of expense that was recorded in the fourth quarter of 2019 and up $1.2 million year-over-year. The $1.2 million increase was primarily driven by increased staff costs and a foreign exchange loss, partially offset by decreases in marketing, T&E, events, and IT spending. R&D was up by $1 million. However, this was offset by a corresponding $1 million reduction in projects related to sustaining engineering, which hit system cost of sales.
In Q2, we expect operating expenses to decrease sequentially through the quarter as we realize the previously discussed cost actions. Adjusted EBITDA for the quarter was a loss of $4.4 million, down from $28.5 million. Net income for the quarter was a loss of $49.4 million or a loss of $0.82 per share, while Adjusted Net Income was a loss of $28.7 million or $0.48 per share versus a positive $0.18 per share last year. There are two specific items I would like to call out. First, we took a $0.10 per share charge for potential credit losses principally associated with our theater receivables. This charge represents a conservative reserve given the challenges facing our theater partners. This charge is excluded from our Adjusted EBITDA but included in our Adjusted Net Income.
Second, we took a one-time, non-cash deferred income tax charge of $0.23 per share related to withholding taxes on historic earnings from our IMAX China business. We had previously planned to indefinitely reinvest these funds offshore and, as a result, did not accrue any withholding taxes that would become due, assuming we repatriated the earnings out of China. The change in the company's plans reflects its desire for increased capital allocation flexibility to repatriate cash from China to support dividend payments by IMAX China, including to IMAX Corp. Because of this, we made an approximately 10% tax accrual on $200 million of retained earnings, which relates to the export tax payable upon moving the cash from China to Hong Kong. We expect IMAX China to continue to use its future earnings and cash flow to invest in growing its business.
This one-time, non-cash charge is excluded from both our Adjusted EBITDA and Adjusted EPS. Now, an update on installations. We installed a total of 12 IMAX systems in the first quarter versus 10. The breakdown for new systems was two sales-type leases, one hybrid, and two JVs. We also upgraded in Japan and the United States. To close, while the situation remains uncertain, we are confident IMAX has the financial stability to endure the challenges ahead and be ready to quickly delight our patrons once again when they return to the cinema. With that, I'll turn the call over to the operator for Q&A.
Operator (participant)
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment.
Again, to ask a question, please signal by pressing star one on your telephone. We will pause for just a moment to allow everyone an opportunity to signal for questions. We'll go to our first question today from Eric Wold from B. Riley. Please go ahead.
Eric Wold (Senior Analyst)
Thank you. Good morning, guys. Just a couple of questions. I guess one, on the backlog in the installation plans. I know it's kind of a little bit cloudy still in terms of when we will start reinstalling IMAX, and start kind of opening once again. Do you need a little color on the backlog?
Rich Gelfond (CEO)
Eric, could you talk a little closer to the phone or louder? Hard to hear you. Sorry.
Eric Wold (Senior Analyst)
Sorry, I'll take it off speaker for a moment. Sorry.
I know there's still uncertainty in terms of when the theater installs will resume this year, especially in China, but maybe give a little more color on the backlog in terms of how many theaters had been scheduled to install this year prior to the shutdown, maybe security of that backlog in terms of any ability of theaters either cancel or push out. And then, you know, if there is kind of a restart or kind of an accelerated restart of the industry in China, what is the ability to kind of really accelerate into year-end ahead of the holidays and Chinese New Year and kind of make up for lost time, so to speak?
Rich Gelfond (CEO)
So in terms of the backlog, Eric, everything in the backlog is legally binding, so there's no unilateral ability of anyone to get out of the backlog.
In terms of, we hadn't yet given install guidance for this year when the pandemic started, because when we're supposed to give it, it had already happened in China on our year-end call, so we didn't give. We decided not to give guidance. Even though it's legally binding, I think there is a possibility that we unilaterally agree with our partners to allow more time for them to install, because obviously if a partner is, you know, busy reopening theaters and rehiring and doing things like that, the nature of our relationship isn't one, "We're really going to say there's an install date of November 15th. You have to do that or we're going to sue you." So I think the way to think, I think there'll be a number of installs this year. As you know, there was a fair number in the first quarter.
As you saw, there were even signings in the first quarter. But, you know, we're not in a position to give guidance now, and I think you should expect that, it'll, you know, it'll be less than usual because of the closure time. I also, you know, I think it's just a fact that it's going to take some time to reopen, and I don't think people are going to want to manage reopening at the networks at the same time as they want to manage a rapid billed. So I hope that's somewhat helpful, Eric.
Eric Wold (Senior Analyst)
No, that's all for us. Thank you. I guess the last question is, you talked about obviously the Chinese market, you know, probably opens up with library titles, kind of delayed Hollywood and the Chinese New Year titles.
As you get past that and get into the back half of the year, which looks to be, at least in the U.S., you know, a fairly healthy and crowded kind of, you know, blockbuster film slate, how do you think the Chinese government will handle that over there, you know, given they need still to kind of approve a lot of titles for the back half of the year? How do you think they'll slot them to not let them overlap?
You know, what are your thoughts on how that will be handled over in China?
Rich Gelfond (CEO)
So, you know, China's always a country where things are weighed against each other, and, you know, you're alluding to the fact that they have a stated objective of playing as much Chinese content as they can.
But in this instance, I think the balance is going to swing towards getting the economy going again. And I think as we saw late last year, they tended to be more aggressive in letting Hollywood films in and more generous in giving different dates. And given that in China, of the 70,000 screens, a lot of them are in high-profile malls, my bet would be that they're going to allow in a lot of those films in order to encourage the consumer to go back into those malls and spend. And also, I think because production has been closed in China as it has been in the rest of the world, but longer in China, after they run through the New Year's movies and some other movies, I don't think there's going to be a lot of original content.
So I think both factors will lean towards more Hollywood content.
Eric Wold (Senior Analyst)
Perfect. Thank you, Rich.
Operator (participant)
Thank you. We'll go to our next question now from Eric Handler from MKM Partners. Please go ahead.
Eric Handler (Managing Director and Media & Entertainment Analyst)
Yes, good morning and thanks for the question. Rich, I'm just curious, when theaters start reopening and IMAX screens are part of that, obviously, are you going to be giving any best practices to your exhibitor partners on how they should be managing the screens in terms of sales or how to disinfect, you know, the equipment and everything? Is there something that you're saying you'll be telling the partners when those reopenings happen, or is everybody going to be operating on their own and everybody, there's no one-size-fits-all for these reopenings?
Rich Gelfond (CEO)
Yeah, so we're in all those studio partners on a worldwide basis.
I would say pretty much daily someone is talking to someone at all of these places. So it's ultimately the exhibitor's decision on when to reopen, subject to government regulation and how to reopen. But there's very much, Eric, an ongoing dialogue going on. So we have an internal team that we've put together, to assess what's the safest way that we can open our theaters, and I'm sure we wouldn't open them if we don't consider it to be safe. But the exhibitors are taking slightly different approaches, or at least in discussion phases. So, one exhibitor is talking about, every other seat at the beginning or every other row. Another exhibitor is talking about a new software program which allows families to stay together rather than every other seat. There's some international Hong Kong, I think, is allowing the theaters to open next week.
I think they're talking about a different kind of protocol. So we have input into those protocols, and we're highly focused on it internally. But so I don't think it's they or us deciding. I think, there'll be a lot of consultation, and there won't be one-size-fits-all.
Eric Handler (Managing Director and Media & Entertainment Analyst)
So will you be providing maybe some best practices to the Western theaters based on what's going on in Asia as they reopen?
Rich Gelfond (CEO)
As I said, Eric, it's not like we're mandating these or we're giving people a lift, but I think we're in the middle of a broad communication going on. We're kind of, if you think of a wheel, we're kind of in the center because of a lot of the relationships we have. So we're communicating that on a very regular basis.
I would expect if we say, "Hey, this is working in Thailand," and this isn't working in Korea, you guys should look at this. I mean, we're partners. I think we're going to figure it out together, although ultimately it's their responsibility.
Eric Handler (Managing Director and Media & Entertainment Analyst)
Thank you very much.
Operator (participant)
Thank you. Our next question now comes from Chad Beynon from Macquarie. Please go ahead.
Chad Beynon (Managing Director and Analyst)
Hi. Morning, Rich, Patrick. Hope you're well. I wanted to, I guess, continue the discussion on that last question, maybe asking it a different way. Can you, I guess, help us think about, maybe seat occupancies, or screen occupancies on the weekends or during big releases? You know, we're just trying to figure out how to think about indexing in the, in the socially distant, I guess, near-term opening world, and kind of how this could look.
Obviously, you've you know, put up some pretty incredible indexing, and if Tenet is the first movie, you know, I don't think we should assume it should be as strong as a Dunkirk or some of your historically successful films. So could you just kind of help us think about, you know, where occupancies are and if you can adjust screen times and some of those things? Thanks.
Rich Gelfond (CEO)
Sure. Well, first of all, no one at IMAX has seen it yet, but I've heard the movie is incredible and furthers the Chris Nolan legend of doing really cutting-edge phenomenal storytelling. So I really look forward to that. And I know Chris really would like to come out with the film that opens the theaters, but you know, that's up to a lot of things, including government regulations and the virus and all sorts of things.
So we've started to study the capacity issues, and as you probably know, a successful cinema chain over a long period of time, the occupancy rates are in the 15%-20% range. It's so one way to think about it is if they have a big multiplex and they have a lot of screens in it, depending how much product they have, they can do pretty well with, you know, with capacity constraints. IMAX, since it's a single-screen theater, has a different issue because, you know, let's say arbitrarily at the beginning, capacity is going to be set at 50%. And by the way, I should stop there and say, you know, there are no real rules on that. Where that comes from is what was talked about in China, but no one has said that that's what's going to happen.
But I think, you know, if that happens, that will be for a period of time. And then after that period of time lapses, there'll be adjustments made to that. But if you look at the IMAX numbers, and we've done some work on it, if a film opens in the U.S. to around $150 million a year, like if you look back at Captain Marvel last year, the IMAX capacity utilization on the opening weekend is around 50%. So that would mean that we wouldn't lose much. We wouldn't lose anything if the movie was $150 million or less. If there are bigger openings like Endgame, even that movie, by the second weekend, that was down to about 50% capacity utilization in IMAX. So the place where it really would affect us will be opening weekend for big movie on select days, Thursday, Friday, Saturday nights.
And part of the goal of our marketing would be to figure out how we can move people from Saturday night, by way of example, to Tuesday night or Tuesday afternoon. And I think given the brand association between someone like Chris Nolan and IMAX, I actually think that that's likely to happen. And we'll design marketing tools around that.
Chad Beynon (Managing Director and Analyst)
That's great. Thanks, Rich. And then lastly, just regarding the financial situations with your exhibition partners, are there other things that you're considering to help them, you know, get through this period, whether it's, you know, sale-leasebacks on their equipment? I'm guessing most of them are in JV or hybrids or delaying receivables.
And then also on that, and it's a different time, but when many of the exhibitors went through the bankruptcy process, I guess that was 20 years ago, you know, did they close or change any of the arrangements with you guys, or was that just too long ago to really have a data point on that? Thanks.
Rich Gelfond (CEO)
Oh, I remember that time very well, and no, they didn't really. The amount of theaters that were changed or canceled was de minimis. It, you know, it was next to nothing. I think there were a couple, so no. But, you know, we, our arrangements with the exhibitors, I mean, they're our partners. The really good news for them and for us is that I think the capital markets in the last several weeks have been quite amenable to financing exhibitors through this crisis.
I'm sure you saw Cinemark raise $250 million. AMC recently raised $500 million. I think they're on pretty good financial footing now, where I don't really see a bankruptcy as a significant risk to a number of chains right now. You know, I think there have been some smaller regional operators, but as far as we can tell right now, we don't think that's going to be a significant problem. With that said, you know, we've been in business with a lot of these people for a long time. Before some of these financings were completed, we said to some of our partners, you know, we're going to work with you. If you need to slow down installations, we understand that. If you need to slow down your payables, we understand that.
You know, now that they've returned to financial health, I think we want a more normalized business relationship. But those that aren't, I think we're going to work with them. We're not in the business, you know, for one quarter over one quarter. We've been in business for over 50 years, and one reason is we know how to work with our partners. And I think we'll continue to have that philosophy.
Chad Beynon (Managing Director and Analyst)
Thank you. Best of luck.
Operator (participant)
Thank you. Now go to our next question now from Mike Hickey from Benchmark Company. Please go ahead.
Mike Hickey (Senior Analyst)
Hey, Rich, Patrick. Hope you guys are good. Thanks for taking my questions.
Just to start, thinking about maybe more of the economic strain that the world's going to sort of deal with here, the recessionary environment that we're clearly in, can you just remind us sort of how moviegoers behave in a recessionary environment and how they sort of choose between a premium ticket, maybe a cheaper ticket? I have a follow-up.
Rich Gelfond (CEO)
The movie business in general tends to perform quite well in recessions. In fact, I think people see it as an affordable luxury. You know, they might cut out a trip or a restaurant if they're open or vacation or things like that. But movies are still a relatively low-priced way to escape and get away. Historically, cinemas have done well in downtimes.
In fact, we looked at our own data from the post-9/11 period and the 2008 and 2009 financial crisis, and our box office was either flat or up during that period of time. So I don't really see that as a significant headwind.
Mike Hickey (Senior Analyst)
Thanks, Rich Gelfond. The second question, I guess this is not your first pandemic. Obviously, this one is at a scale I don't think anyone's ever experienced before, but just sort of curious what you've learned from prior pandemics and moviegoers' willingness to bounce back.
Rich Gelfond (CEO)
So the only real reference point we have was the SARS situation in Hong Kong and to some extent in Canada. So what I remember from Hong Kong was that they opened a little bit slow and were down year-over-year for the first few months.
But the back end of the year, when they reopened, they were significantly up from the prior year. Again, I'm not sure it's a great analogy, because, as you say, it was a lot smaller and a lot more isolated, but that's really the only data point we have.
Mike Hickey (Senior Analyst)
All right. Thanks, guys. Best of luck. Be safe.
Operator (participant)
Thank you. We will now go to our next question from Alexia Quadrani from J.P. Morgan.
Alexia Quadrani (Managing Director)
Thank you. Thank you very much. The, there's quite a few questions. First is, do you see the studios perhaps reluctant to release films initially post-reopening given, you know, lower likely capacity, you know, suggesting the slate could be pushed out further?
Then my second question, Rich, is, do you see windows changing, I guess, following this current bout at Universal and more, you know, companies potentially considering a hybrid of kind of PVOD versus the theatrical? And I guess along those lines, does a potentially tighter window really impact you anyway?
Rich Gelfond (CEO)
I'll start there and say no, the window doesn't impact us that much because the typical IMAX movie plays for two weeks or less. If it's a Chris Nolan movie, it's an outlier. But you know, wherever the windows end up, the IMAX. It won't have a great impact on IMAX. I'll get back to the studio one, but on the windows question. But on the studios being reluctant, it's a complicated answer, Alexia. And that's because there are a lot of factors.
On the one hand, yes, the studio wants to make sure the theaters are back to capacity, and they want to make sure as many people see their movies as they can. On the other hand, a lot of these movies have a lot of capital tied up, the big carrying costs, and there are ancillary windows that flow off of the theatrical window, and they have their own reporting issues and their own accounting issues, and they want to get that stream rolling. So that's an incentive to go quicker. As I mentioned before, certain filmmakers are very anxious to have their movies released. So I don't know anyone in America who's pushing harder than Chris Nolan to get the theaters open and to get his movie released in July when it's scheduled for. It's really a balance.
And I think it's. I frankly never seen closer cooperation of the studios and the exhibitors than now. There's just almost a daily dialogue going on where everybody's trying to assess, you know, when are the likely opening dates and what is the optimal time. And I think people are really working together to make it happen. And I'll say before I transition into your next question about windows, that I think one of the things that people aren't talking about. They're talking about the Trolls experiment, which you're alluding to. But from my point of view, the bigger headline coming out of the pandemic is that virtually every blockbuster has been rescheduled for a theatrical release date. So, you know, pause on that one for a second. So people have been speculating about the windows for a really long period of time.
And never, if ever there was a time to lose a theatrical release, it would be now. And it just hasn't happened. And I think that reinforces the value of the theatrical window, to the studios and to the filmmakers. Now, in terms of, Trolls and the Universal situation, you know, I think Universal had a bit of special circumstances because their movie, they had already started the marketing campaign. They eventually had $50 million in costs in the marketing campaign. It was scheduled for April release. So I think they faced a tough decision. If they postponed it, they would have had a relaunch at another time and re-spend that money. So I think they decided to go, streaming. It was kind of a unicorn event. Families were sitting at home. Kids were sitting at home.
You know, by their account, it did pretty well in streaming. And I guess, you know, that's not surprising given that there were no competitive movies and, you know, not very much else to do, especially for families. You know, I don't think that changes the model. I don't think if you allowed movies to release on streaming rather than theatrical, you would lose so many ancillary windows. There wouldn't be an electronic sell-through window. There wouldn't be a streaming window. There wouldn't be a TV window, which keys off of box office. So that model just doesn't make very much sense to me and certainly doesn't make sense for blockbuster releases and the evidence is the fact that they've all been rescheduled.
Alexia Quadrani (Managing Director)
Thank you.
Operator (participant)
Thank you. We will now go to our next question today from Aravinda Galappatthige from Canaccord. Please go ahead.
Aravinda Galappatthige (Managing Director and Institutional Equity Research Analyst)
Good morning. Thanks for taking my questions. Two for me. First of all, for Rich on the, when you consider the financial challenges that are faced by the exhibition partners, especially when it comes to the joint revenue-sharing agreements, is there a possibility that you might have to make sort of bigger concessions to them? I mean, potentially, if there's sort of footprint changes, how much flexibility would they have in terms of perhaps reducing the count, the existing count, and what options would you have in such a situation? And with respect to the economics of the joint revenue-sharing agreements, is there a prospect of potentially having to offer them some sort of flexibility, either on a permanent basis or on a temporary basis? And my second question is around receivables, Patrick.
I was wondering if you can provide us with sort of the flow in terms of receivables during the month of April. Obviously, during the day, there's about a $65 million balance there. I suspect the vast majority is with the exhibitor partners. Can you talk to sort of the duration and sort of the flow you've seen since the end of the quarter? Thanks.
Rich Gelfond (CEO)
I'll answer your first question, which is, you know, as I said to you before, the exhibitors are in pretty good shape right now, thanks to the capital markets and the prudent moves that they've made. We carefully negotiate all of our agreements, including our joint venture agreements, on a worldwide basis. You know, they're binding contracts. So, no, I don't think there'll be changes to those agreements.
You know, I think both of us put up a lot of capital, especially in the JVs, and we have model returns, and we expect those returns. With that said, when you talk about temporary, I mean, you know, there are things, like I mentioned earlier, that they want to delay rolling out some joint ventures to preserve their own capital, and that makes sense for them. So certainly, we would consider delaying it. There were other kinds of things that provided them temporary relief for a tight period of time. We're in business with them for a very long period of time and intend to be. But fundamentally changing our business deal is not something that we would entertain. Patrick, do you want to answer the other question?
Patrick McClymont (CFO)
Sure. Happy to.
You know, the way we look at the receivables now, short-term, you focus on our bills and our prudent accounts receivable. It's about two-thirds of that is on the exhibitor side, and about one-third is on the studio side. And as you'd expect, we haven't seen really any change on the studio side. We do expect on the exhibitor side, you know, we'll start to see some changes as the exhibition, the theaters are closed right now. We're in discussions with all of our exhibitor partners and so have clear line of sight on this. And as Rich said more broadly, these are our partners, and, you know, we're going to figure out ways to be helpful. As we talked about on the call, we did take a reserve against certain receivables.
A lot of that was related to the launch of CECL, the new accounting provision, which obviously was implemented during a particularly interesting quarter with everything that was going on, so we think we're well protected in that event. And then in terms of concentration, it's what you'd expect. It's our big partners. And you know, of that billed and accrued AR, about 20% of it is across our top three to five partners. So there's not a whole lot of concentration, so we think we're in a reasonably good spot, and we're monitoring it very closely.
Aravinda Galappatthige (Managing Director and Institutional Equity Research Analyst)
Thank you very much.
Operator (participant)
Thank you. We will now go to a question from Vasily Karasyov from Cannonball Research.
Rich Gelfond (CEO)
Good morning. Rich, I wanted to follow up on what you said about blockbusters being rescheduled and so on.
Vasily Karasyov (Founder and Senior Analyst)
So if we look three, six, nine months after the movie theaters reopen, so there will be. One could say that there would probably be a glut of blockbusters and IMAX kind of titles because you have a backlog that will be released, and then the new productions will be coming up. And there are only so many opening frames in a year. So one way to look at it would be to say it would be good for IMAX because the share of IMAX movies of the box office would increase because bigger titles would push out smaller sort of Lionsgate kind of films. Or another way would be to see, to say that could lead to cannibalization in revenue cannibalization for you. So I was wondering if you could help us think through that dynamic. Am I thinking about that wrong?
Rich Gelfond (CEO)
I wouldn't say wrong, Vasily, but I think that, you know, most IMAX movies only play for one or two weeks. So I, and, you know, there are a lot of movies that we have to program in the interim, that are kind of fillers. So I think if that problem you're describing came to be, if there was adequate spacing in the movies, and, you know, hopefully we'd work with the studios to ensure that there was, it would be a good period of time for us. I would add, though, that, you know, part of this pandemic has shut down production, for a few months, and we don't know how and when it's going to open.
So even though it looks good right now for 2021, I think these things, you know, like water that rises to its level. I think that, you know, this extreme glut you're expecting, rather than coming all at the beginning of the year, will probably spread itself up as production comes back online. So I don't think that's really going to be a significant issue.
Vasily Karasyov (Founder and Senior Analyst)
All right. Thank you.
Operator (participant)
Thank you. If we have no further questions, I would now like to turn the conference back over to Rich Gelfond for any additional or closing remarks.
Rich Gelfond (CEO)
Thank you all so much for joining us. Needless to say, it's been a very trying period for us at IMAX. And, obviously, we're a tiny part of the world, and especially the healthcare workers and sick people on the front lines.
We've been using this period to try and innovate, prepare, move forward, and, you know, come back with a bang. It’s hard to believe, but it’s only a few months ago that we had a record year and terrific earnings, which we released in February. And by any measure, if those return, I think we're in really, you know, when the theaters open, if, when they open on a rolling global basis, I think we'll be in a really good spot to flourish once again. And we're grateful for all of you being with us today. And I want to especially thank our employees through this whole situation. And thanks for joining.
Operator (participant)
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.