Teri Loxam - Vice President-Investor Relations Richard L. Gelfond - Chief Executive Officer & Director Joseph Sparacio - Chief Financial Officer & Executive Vice President Greg Foster - Senior Executive VP & CEO-IMAX Entertainment Andrew Cripps - Executive Vice President & President-EMEA Region.

Eric O. Handler - MKM Partners LLC Steven B. Frankel - Dougherty & Co. LLC James M. Marsh - Piper Jaffray & Co (Broker) Kevin Hon Siong Lee - Stifel, Nicolaus & Co., Inc. Townsend Buckles - JPMorgan Securities LLC Eric Wold - B. Riley & Co. LLC Michael Hickey - The Benchmark Co. LLC Matthew Brooks - Macquarie Capital (USA), Inc.

James Charles Goss - Barrington Research Associates, Inc. Robert Peters - Credit Suisse (Canada).

Good day and welcome to the IMAX Corporation's Second Quarter 2015 Earnings Conference Call. All participants are currently in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Teri Loxam. Please go ahead..

Thanks, Alisha. Good morning and thanks for joining us on today's second quarter 2015 earnings conference call. Joining me today in our New York office is our CFO, Joe Sparacio, who will have prepared remarks, and Rob Lister, Chief Legal Officer, and Head of Business Development.

In addition our CEO, Rich Gelfond, who will also have prepared remarks, is joining us remotely from Vienna where he's attending the global premiere of Mission Impossible 5 tonight.

The premiere is being held at the Vienna Opera House, one of the most iconic locations in the world and has been retrofitted into an IMAX theater, which is the way Paramount and Tom Cruise wanted to position the movie for global audiences. Also with Rich in Vienna is Andrew Cripps, our President of EMEA Sales.

He will also be available for questions during the Q&A section of the presentation. In addition, Greg Foster, our Head of Entertainment, is joining us remotely from Los Angeles and he will be available for Q&A. I would like to remind you of the following information regarding forward-looking statements.

Our comments and answers to your questions on this call 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 more detailed discussion of some of the factors that could affect our future results or 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 reconciliation to adjust EPS and adjusted EBITDA as defined by our credit facility are contained in this morning's press release.

The full text of our second quarter earnings release along with the supporting financial tables are available on our website, imax.com. Today's covers call is being webcast in its entirety on our website. With that, let me turn the call over to Rich Gelfond..

growing our core theater business, continuing to grow our China business, expanding our content strategy, and expanding our distribution platforms including in-the-home. We're making progress across all of these areas, and we will continue to keep you posted as we achieve additional milestones going forward.

With that, I'll turn it over to Joe to go through the financials in more detail..

Thanks, Rich. Total revenue in Q2 of $107.2 million helped drive gross margins of $69 million or 64.4% of sales, a 400 basis point increase over the same period last year. In addition, adjusted EBITDA for the second quarter was $50.4 million, representing a 53% increase over Q2 last year.

Record global box office of $343 million was driven by the release of 11 new titles in the quarter, generating a worldwide PSA of $415,000. We had a nice rebound in domestic performance with $133.7 million of box office, resulting in a robust per screen average of $360,000, which was over 40% higher than Q2 last year.

But this quarter was not only about strong domestic performance as we generated 61% of our box office from international markets with strong per screen averages around the globe despite the strength of the U.S. dollar. Our international box office this quarter was $209.3 million, a 70% increase compared to 2014 and an international PSA of $459,000.

The IMAX China box office of $112.2 million in the quarter resulted in a per screen average of $512,000. The strong box office drove robust results for our recurring revenue lines. DMR revenue of $36.6 million was up 52% compared to Q2 last year with the resulting gross margin of $28.5 million or 77.8% of sales.

Our DMR cost of goods this quarter was $8.1 million as compared to $5.4 million in Q2 last year. The increase was primarily driven by higher marketing and production costs supporting the big blockbuster films this quarter. We continue to expect our full year DMR costs to be at the lower end of the $25 million to $30 million range.

Revenue from joint revenue-sharing arrangements was $31.6 million, up 63% from $19.4 million last year. Gross margin for the JV line was $24.1 million or 76.2% of sales, a 710 point increase over last year despite including seven hybrid JVs this quarter compared to only five in Q2 last year.

Revenue from sales-type lease arrangements was $18.7 million, a 29% increase over last year, primarily the result of four additional sales-type installations. Gross margin from full new sales and sales-type leases was 65.7% in the second quarter versus 61.7% in Q2 last year.

Of the 35 theaters systems that we installed this quarter, 15 of them were sales-type and 20 were joint revenue-sharing of which 7 were hybrids. These installations resulted in a quarter-end commercial network of 852 theaters spanning 65 countries.

As Rich mentioned, based on our pace of installations this year, which has been higher than originally anticipated, we are increasing our full year 2015 installation guidance. We now expect to install approximately 120 new theaters this year, just under 40% of them are anticipated to be sales-type installs with about 60% of them to be JV installs.

We also now expect to install about 30 hybrids this year. In terms of the cadence for the remainder of the year, we anticipate a more balanced install schedule across Q3 and Q4 as opposed to recent years which were more heavily weighted towards the fourth quarter.

For Q3, we expect to install approximately 35 new theaters with about 10 of them being sales-type and 25 JVs. Of the 25 JVs, we estimate that approximately 11 will be hybrids. In addition to the new theater installations, we continue to expect to install about 18 laser upgrades in the second half of the year.

In regards to signings in the second quarter, we signed deals for 30 theater systems with 28 new and 2 upgrades. This resulted in a backlog of 391 theaters at quarter-end. Roughly 87% of this backlog is scheduled to be installed in international markets. The majority of which are new builds.

Turning to operating expenses, SG&A excluding stock-based compensation was $23.9 million in the quarter compared to $18.8 million in Q2 2014. The increase was primarily driven by higher staff costs as well as additional expenses associated with the China IPO and new business initiatives as described during our June Investor Day.

R&D expense for the quarter was $2.3 million down from $3.3 million last year, reflecting tail end cost of laser and ongoing general R&D. Our OpEx guidance for the full year as defined by SG&A, excluding stock-based compensation, plus R&D, had been set to grow at 5% to 8% over last year.

Given the additional expenses for the China IPO along with new business initiatives and the FX impact so far this year, we now anticipate that we will likely land in the upper-end of that guidance range.

Our total tax rate for the quarter was 25.5% and we continue to expect our full-year 2015 tax rate to come in at around 26% with about $16 million to $19 million of cash taxes. In terms of EBITDA, we achieved substantial growth this quarter, despite realizing minority interest at a full 20% versus this time last year when it was only 10%.

The minority interest portion of EBITDA in the most recent quarter was $3.5 million. We expect the full year minority interest from the China transaction to reduce EBITDA by about $11 million to $12 million for the year.

On the P&L side, minority interest impacted net income by $2 million in the second quarter and we expect full year minority interest impact to net income to be approximately $7 million to $8 million.

The continued development of our in-home initiative with JV partner, TCL, resulted in an expense of $749,000 this quarter and we continue to expect roughly $2.5 million of expense for the full year associated with our TCL joint venture.

With regard to cash flow, we generated $8.5 million in operating cash flow in the quarter which was impacted by a build in receivables attributable to the strong box office in the quarter, as well as an inventory build up primarily related to laser.

We invested $6.7 million in the quarter in JVs and $11.8 million was invested on the completion of our new Playa Vista facility. We ended the second quarter with a cash balance of $146.4 million. Overall, we are pleased with the first half of 2015 and we are excited for what the future holds. With that, I will turn it over to the operator for Q&A..

Thank you, sir. We'll go first to Steve Handler (sic) [Eric Handler] (19:27) of MKM Partners..

Yeah. Thanks. That would be Eric Handler. But anyway, two quick questions for you guys. First, with regard to the IMAX China IPO, can you tell us what milestones are next to come before you actually can price the deal? And then secondly, for Joe, looking at free cash flow this year, you seem you have a higher working capital expense going on.

You've got higher CapEx more front-loaded. So just wondered how that should pan out in the back half of the year and how we should think about CapEx and free cash flow for the full year..

So I'll take the first question, Eric. It's Rich. The milestones that you should look for, although, I don't believe we'll publicly announce them, and as I said during my remarks, we're not going to comment on specific timing or that we have a formal hearing before the Hong Kong Stock Exchange.

Obviously there's interaction before the formal hearing where you get formal approval of the list. You get reports from equity analysts. It's done slightly differently in Hong Kong than it's done on other markets. So before you actually start your road show you get analyst reports which set out their opinions on valuation.

And then after that you start your road show and you list and those would be the steps that would happen.

Joe, do you want to answer the other question?.

Sure. In terms of the CapEx, Eric, for the rest of the year, I think it's really geared towards the JV investments, the spending on Playa Vista is basically completed this point. And then you'll have some general CapEx as well, but, certainly not at the run rate that we're running in the first six months.

In terms of working capital items, this quarter is a blip because of the high levels of box office and, as you're aware, our big JV deals settled with quarter after, so you're not going to see the cash impact from our earnings in the second quarter until really the third quarter. So I would expect that to even out through the rest of the year..

Thank you very much..

We'll go next to Steven Frankel of Dougherty..

Good afternoon. Film marketing was big in the quarter.

What should we anticipate you spending on the marketing side between now and the end of the year?.

Joe, do you want to answer that?.

Yeah, let me just pull that out. Hold on a second. So we would anticipate a marketing spend probably in the neighborhood of about $10 million for the full year, not for the half-year, for the full year..

Okay. And for Greg, so with the ARRI JV you can have a lot more films using the cameras.

How do you balance – wanted to have IMAX DNA in as many films as possible and not having so many that you kind of dilute the specialness of it?.

So that's absolutely the right question and that's precisely what we're doing. We're being very discreet about dealing with the supply/demand ratio. Many of you have heard me say we've turned down four or five, sometimes six movies for every movie we say yes to and the same thing that's starting to be the case with cameras.

The ARRI partnership has been fantastic. We are also working very hard on the development side of adding additional DNA, IMAX specific DNA into the camera. We've had a tremendous reaction, as you've already seen from the Avengers people, from Luc Besson, from Captain America, et cetera. There is more coming.

And we're going to be careful not to have every movie have specific IMAX DNA and cameras to it precisely for the reasons, Steve, that you just said. What we don't want to do is make it ubiquitous, and that's never been what we've done and it will continue to be something that we're very cautious and deliberate about..

Okay.

And lastly, for Rich, for a long time we've looked at Latin America as kind of the – one of the next big territories where you could attack and you've made some progress, but what do you think it takes to get to the tipping point where that business really starts to accelerate?.

Well, as you know, because you've followed us for a long time, it usually takes two elements. One is reference theaters that are successful and, two, competitors in the market. And you look at countries like the U.K. and Japan. You've seen our business really take off, Canada, when that environment was achieved.

We have that environment right now in Brazil. And I would've thought that it would kind of accelerated more quickly. I think what's going on in Brazil is because of the strength of the U.S. dollar and the weakness of the real and other issues in their economy, mall development and spending have really slowed down. So, I think that's more a macro issue.

I think from IMAX's point of view, we're in a position right now to take advantage of the market as long as the market is in a normal circumstance, but right now I think that's beyond our control. And we're doing fine in signing onesies or twosies, but we'll need some kind of economic turn to really capitalize..

Okay.

And, in India, has there been any progress in removing some of the structural roadblocks that have slowed that development down?.

Steve, you know that I'm a bear on India. So I've never been particularly optimistic. I think a combination of the judicial system, the slow pace of construction, the lack of transparency, I know the world is very optimistic that Mr.

Modi is going to be able to change things overnight, but I think they will change but I don't think that's an overnight thing. So the short answer is no..

Okay, great. Thank you..

Thank you..

We will go next to James Marsh of Piper Jaffray..

Great. Two quick questions. First, maybe just a follow up on the IMAX DNA comments you made earlier, Rich. Any chance to have more IMAX DNA showing up in foreign DMR films? Then just the second question probably – largely for Joe, but relates to foreign exchange.

Any estimate on what PSAs might have looked like if currency was constant? And then just as far as the currency impact on system sales, it sounds like maybe that's had a little bit of impact on Latin America, but just wondering if you're seeing much impact on system sales outside the U.S.?.

So I'll answer the first one about foreign DMR films, the answer is yes, James, and in fact, after we're done with the whole question, Greg ought to circle back, but there are Chinese films where we're committed to using our cameras. We're – obviously, we announced that Luc Besson film that is using an IMAX camera.

We're talking to people in Russia about it. So there's no doubt in my mind and we're even in discussions about keeping some of the cameras outside the U.S. So, yes, there will be more foreign DMR and Greg should add at the end. The second question you asked about the currency, is that affecting sales.

As you know I'm in Vienna and Andrew Cripps, who runs international for us, is with me. So, Andrew, do you think that the strength of the U.S.

dollar has had an impact on sales?.

It's had a minor effect in places like Russia where there's been a tremendous devaluation of the ruble. I think across Europe it's certainly it's an issue that exhibitors and customers are cognizant of, but I don't think it's impacted sales at this point, no..

Joe, do you want to answer the question about the FX effect on PSAs?.

Sure. On a ballpark basis, we estimate that foreign exchange impacted our box office by about $17 million for the quarter, which would be about $20,000 per screen..

Okay. Thanks a lot. Thanks very much guys..

Greg, do you want to add anything about the foreign films?.

Yeah, China in particular, I think Rich has already announced that we're going to have a post-production facility in China and that there's likely a camera that will be there.

And when you have a movie like Monster Hunt that's exceeded our expectations in terms of the actual performance so far over the first five days, rather actually six days, in a pretty significant way we're up to $12 million so far as of yesterday, what's happening is the phone calls start to come in at a rate that we haven't seen before.

So, we also, during these blackout periods, have a longer runway of being able to play a Mandarin language title, and that's what serves the cameras specifically best when you're able to really market it and accrue benefit from having the additional DNA to it.

So, I think China is the primary place that you can expect this to happen, although it will be in other places and I think many of you know we're doing a movie with Toho this summer as well called Titan 1, and we're actually doing the sequel Titan 2 which is also a market that I think has a potential to grow and become more DNA-focused on local language films going forward..

Thanks, guys, (29:48)..

We'll go next to Ben Mogil of Stifel..

Good morning. This is actually Kevin Lee for Ben. A quick question for you on the screen installation guidance increase. Can you kind of give us a sense of what's driving that and geographically where those installations are coming from? Thank you..

So the first part of the question, I think what's driving it are a couple of things.

First of all, the year is such a blockbuster driven year and the blockbusters are performing so well in IMAX that people are trying to get open before some of these movies come out, so it wouldn't surprise you that if you were going to open a theater on January 1 this year you would try to get it open two weeks earlier to get it open in time to play Star Wars day and day.

Using some of our previous history, if you get a theater open in time for a real blockbuster you can achieve a lot of your payback very quickly. The other thing we're seeing is a return to more sign and installs.

So, as you know, you can do new builds or you can do theaters that sign and install at the same time and, for whatever reason, I think it probably is movie driven reason plus trend line reason where people really see the results of having an IMAX theater versus a regular screen.

I think people have gone back to doing more retrofits, they did in the past. So if you look at past years, almost all of our signings or a lot of them were for new builds and at the beginning of the year we do a budget for sign and installs during a particular year and there are a lot of examples. There are people like the Vue in the U.K.

There's, in China, a big player, SFC, that's done a number of sign and installs, so there are just more people retrofitting their theaters. So I think those are primarily the two factors..

Thank you.

And geographically is it one way or the other more China, U.S., or...?.

I haven't seen a breakdown on it, but I can tell you that there have been a number in Europe and there have been a number in China and a couple in the U.S..

Thank you very much..

Thank you..

We'll go next to Townsend Buckles of JPMorgan..

Rich, with these strong box office results and a very promising slate for Q4 that's already spurring faster installs.

How have you seen your box office as a catalyst to new signings in the past? Would you expect an acceleration in signings ahead over the next few quarters and could the installed base remain elevated further out, do you think?.

Townsend, ordinarily you're putting a finger on something that we usually call the Avatar effect. When Avatar came out, our pace of signings went up very quickly. So, in the past we have seen an increase in box office performance lead to an increase in signings.

This year's a little bit different because it's not just one movie, it's kind of a lot of movies and it's around the globe. But you're also in an environment which we had some questions on before where the dollar is a little bit stronger.

So, I've not seen the Avatar effect take effect yet, but I would expect to see it and I hope to see it in the back half of the year..

And your new signings this year skewing a bit more toward sales over JVs.

Anything unique there whether it's a function of geographies or customer preference, is that a trend you're seeing going forward?.

Going forward, it's really hard to tell because it depends what markets you go into and how far out the projects are and the expected box office. But I think it's happening this year for a couple of reasons.

One, I think the slate is so good, I think some of our partners would rather put up the capital themselves rather than share it with us which I – that, to me, is a short-term issue. I don't think that's going to be a long-term issue.

The other issue would be when you see retrofits rather than new builds for some reason those seem to come with sales-type leases rather than joint ventures. So, again, I always hesitate, Townsend, to take a short-term thing that's happened through one or two quarters and say it changes the way you look at your business.

As you know, the trajectory of our business over a number of years has been 50/50. The short-term has been a little bit different, but I don't really expect that to be the long-term..

Got it. Thank you, Rich..

Thanks..

We'll go next to Eric Wold of B. Riley..

Thank you.

A couple of questions, one, kind of looking at China box office in the quarter (34:48) what is the mix there between local language content and Hollywood? And kind of what have you been seeing if you drill in, in those two, in terms of the underlying IMAX share of box office on Hollywood films versus local language? How does that been trending over the past year or couple of quarters?.

I'll answer it generally, and then I'll turn it over to Greg to be more specific.

But the second quarter was just such a great quarter for Hollywood product, when you look at the films that were playing there, the Fast and Furious and Jurassic World and Avengers did so well in China as well as the rest of the world that it kind of wiped out the whole box office during that quarter.

There wasn't a lot of time to show a lot else, so I don't think you can – it was way more dependent on Hollywood than it was on China. I think longer-term in China as more money – as their box office continues to grow as it has historically over the last number of years, I think you'll see more money going into production value in China.

You'll see more releases of Chinese movies and I think you'll see more releases of Chinese movies and that's why our position of playing both movies is where we like to be. So, the record opening we had this weekend for Monster Hunt was almost double what our previous weekend opening was for Mandarin language film.

Again, I certainly can't predict in the short run and who knows, but over the long run I think if the box office continues to increase in China you would see more of that contributing in the long-term.

Greg, would you like to add anything?.

Yeah. The only thing to add is that, as I mentioned earlier, it's definitely had an impact on what you're going to see as there are these windows. We are prepared to be able to be nimble one way or the other.

So when there is a Hollywood movie – so the second quarter there was very little, as Rich pointed out, local language films, because there wasn't a blackout period. During the third quarter, where we know for the first six to seven weeks of the quarter it's going to only be Mandarin titles, we're releasing four of those films.

So, we're able to adjust accordingly and because we know what's going on because of our relationships and have a better sense of the spacing of the so-called blackout period, what we're able to do is be able to have the right titles and do what we're doing in China what's happening in the U.S.

which is to be more a part of the spacing of these titles so we're able to have longer and more productive windows during those various releases..

Thank you. And then just one follow up question. I'm going to follow up on the last guy's question. You talk about you're seeing some trends a little bit in terms of exhibitors kind of moving towards sales-type leases and they look at the slate and get more excited and went for that capital up themselves to get more return.

How much of that can you reverse back into your favor? I mean, is there ever an instance do you kind of play the card where someone wants a sales-type lease, but you're kind of not willing to give it to them and say you're going to JV or that's it, given the great returns that can come to IMAX or is that just not something you play?.

I think you can play it, Eric, where there's competition for a specific site. So if you have a choice between two potential customers and one is offering a JV and you really like the location and the other isn't, you can sort of push it that way.

But there tends to be so many pieces involved in a transaction, I don't want to overstate what that means for us.

So, there's a question of what the location is, what the exclusivity is, how many years it's for? What our expected return on the film side is besides our expected return on the JV side, if it's an STL (38:42) what's the royalty there, what's the guaranteed minimum? So as you know, there are hybrids in there.

So I think it's way too complicated to generalize and I'm just going to use an example from last year. So in Russia, as you probably know, we don't do JVs for a variety of reasons. But, when you look at what the box office is in rubles, now this year that's worth less in dollars because of currency issues.

But we were making more on STLs (39:12) on a recurring revenue basis in Russia than we were on JVs in other countries because the box office was so large, so I think there's no easy answer to that..

No, that's helpful. Thanks guys..

Thank you..

We'll go next to Mike Hickey of The Benchmark Company..

Hey, guys, great quarter. Thanks for taking my questions. Just curious your view on online ticket pricing in China. How much this may have added to the recent strength in the box office in that region in your performance, I guess. And how long do you think this discounting can sustain? And I have a follow up..

As far as we can tell, it's not involved in the IMAX box office and we've actually – I don't want to lead you to believe that we've done a detailed study. But we don't think it's had an impact on IMAX.

In terms of its impact on the rest of the box office, you know I was over there about a month ago and there's a lot of speculation but no one seems to know the facts and since it doesn't really relate to us we haven't paid much attention to it..

Okay, thank you.

And then curious you'd be on competition from domestic POS solutions, particularly wondering you'd be on Dolby solution that seems to generate some support from the industry and if you think this could be impactful to your domestic business in the future?.

I mean, we just came off what is probably our best domestic quarter ever and we keep getting better and better as POS in general continue to proliferate including Dolby. We've always said there's room for good, better, best and we positioned ourselves as best and we've aligned ourselves with the right filmmakers.

Things like premieres and cameras and an end-to-end solution. We're the only one really offering a differentiated experience with the kind of brand. You look at the data over the last several years and percentage of multiplex and IMAX has gotten and has steadily increased as the number of POS has increased.

You look at performance on specific films especially these big blockbuster films. PSAs and IMAX continue to significantly outperform the POS. So, I think it's a final alternative for people who want it. I think it's probably a good business for the exhibitors but I don't really see it as a threat to us.

In terms of Dolby, we're approaching our 1,000 screen and Dolby has 5 screens. So I don't really see that as a material threat at the moment, either..

Fair enough. Thanks, guys. Good luck..

We'll go next to Matthew Brooks from Macquarie..

Good morning, guys. I was just wondering if it's possible for you to specify separately the revenue you got in Greater China, also signings backlog and whether you can say the IPO expenses..

Well, I'll start. The first part which is the IPO expenses that we've expensed in the quarter were about $1 million. And there are IPO expenses that are kind of held in advance and you amortize them against the deal when you have it. But, I'm not going to disclose that right now because that's not the road we're heading on.

Joe, do you want to answer the other parts of the question?.

Yeah, I'm just – just take a second to look that up, it's in the....

While he's looking that up, maybe you can make some sort of comment. You've had the display now I think in Shanghai for a while now – the new home product.

Do you have any more thoughts on maybe how many of those you might be able to install in a year based on maybe the level of interest you've got so far from the demo?.

Yeah, we had a number of leads – significant number of leads coming from the various demos we've had. But it's premature I mean, this just happened a month or two ago to draw a conclusions as to what the size of the market or how many converted to actual sales..

In terms of the revenue in China for the quarter, it was $26.3 million..

And could you say what the signings and backlog are in China now?.

No, we really can't comment on that right now..

Okay. Just another question as well. So Monster Hunt was like a record opening for local language.

I'm just wondering how that compares to the Hollywood movies when they open in terms of how you're going to go through the next few weeks if you're still in a Hollywood blackout?.

Greg, do you want to answer that?.

Yeah. We have a total of three movies between now and what we anticipate to be the end of the blackout period right around August 20, August 23.

We're going to continue to play Monster Hunt, which by the way I think is also worth noticing that the percentage of IMAX box office on that movie is higher and has gone up, which shows that the traction that we're having with local language films continues to grow and get stronger, which is obviously good news.

There are two other movies coming out in August that we'll be a part of. One is the title called To The Fore on August 7 which is a bike racing movie, and then there's another movie that has a title called – I'm just reading it verbatim at it is, Go Away Mr. Tumour, and that comes out on August 13.

And then sometime in the early 20s of August, we anticipate that there will be the wood movie released over the last couple months. So, we're kind of set for that window. I can't emphasize enough, whether it's a Mandarin title or a local – or a Hollywood title. We're prepared 52-weeks a year now in China..

Okay, good.

And just one final question if I can, I was wondering if you can comment on some of the new board appointments that you've had, and maybe what you think that they bring to the table in terms of maybe things that you want to do in the future or your strategy?.

Sure. So as the company has transitioned from a much smaller entity without significant cash generation into a much larger entity with significant cash generation, and our oars in a lot of different waters, I think we want to make sure that our board follow the similar diversification and ability to analyze opportunities.

And the two directors we put on, Darren Throop is the CEO of eOne Entertainment, and Dana Settle who is a partner of Alan Patricof in venture capital, both bring a skill set that we didn't have on our board.

So, Darren brings a little bit more of an international perspective, which is really important for a global company, and Dana brings a real technology background, and her background is especially in new media and she's sold a number of companies to the major studios and she's also got a lot of connections in that area where we didn't have them.

So I think as we assess both how to steer our core business and what the opportunities are going forward, having a broader array of skills will be good for our company..

So would it be fair to conclude that you might have something similar to like a Google Ventures where you invest in VC type deals based on Dana's experience in that sort of (47:22)?.

I don't think that's the direction we're going to go. And as a matter of fact, in the past we dabbled in sort of that kind of idea, but I think the business of startups is not really what IMAX is good at. I think what we're better at is figuring out how to leverage our brand and also our position in the ecosystem.

And I know I talk about this a lot and we spent a lot of time on it on Investor Day talking about it, but literally I'm sitting in a room looking outside at the Vienna Opera House, and I'm marveling at the fact that it's one of the most iconic locations in the world and for the world premiere of one of the most successful franchises they put an IMAX theater in there.

And this year the Jurassic World premiere, Furious 7 being in the first laser theater – look at the marketing around Mission Impossible 5. You can't look at it without seeing IMAX everywhere. The next two Avengers films being filmed with IMAX cameras.

I mean if you just have some perspective, year-over-year, we're in a – we're grateful for Hollywood and pleased to be in a very, very different place. And I think that utilizing and leveraging the brand and leveraging our place in the ecosystem rather than tinkering around with startups is probably a place we'd much more likely go..

We'll go next to Jim Goss with Barrington Research..

Thanks.

First I was noticing – I believe I counted only three of the 14 films on that early release syndication for 2016 that were in 3D, and I realize you're indifferent about 2D versus 3D, but I was wondering what's driving that discussion and do you have almost greater exclusivity if it is an IMAX 2D versus a 3D?.

Greg?.

Jim, your first point is the most accurate one, which is we really don't make decisions based on whether they are 2D or 3D. We do what we think is the best IMAX movie. Obviously, you point out, there's 14 films that have been announced, but we've been very clear about the fact, and this year is proving to be the case.

We'll do 40 or more movies this year we'll do 40 or more movies next year. So, the question is not about what 14 films we've announced, but what 25 films or so we haven't. An example of two exclusivities that are both 3D-focused are Everest and The Walk. So, we really don't make the decisions.

We do like 2D movies, Mission Impossible is a 2D movie, there's plenty of them coming up. But we can't pick our movies based on whether they are 2D or 3D because – then we'd miss out on terrific movies and again our goal is to find 52 weeks of compelling content and that's really the only focus we have..

Okay.

Also with the early – or the acceleration of the install pattern to earlier in the year, is the fact that you are increasingly international in that expansion driving that factor and are there other metric shifts you anticipate given the increasingly international footprint?.

You know, Jim, again as I said to an earlier question, I'm one of the most reluctant people to say after a quarter that it starts to trend. So, I think it's way too early to say that the matrix have really changed. As you know, our international PSAs have been better than our domestic PSAs.

Although this quarter, the domestic PSAs were extremely strong. As you also know, because we address it during our formal remarks, international is much less penetrated than domestic. So, I think those are kind of positive trends, but we'll see whether they continue or not..

Okay. And lastly, the China financial market turmoil, you said it's not going to affect the IPO.

How does that affect the timetable or can you just pick your spot in terms of when it actually takes place and it just depends on how you're analyzing the situation?.

Jim, just to be clear, I said that it has not altered our plans. You should know that the volatility in the Chinese market has been way more centered on Mainland China than it's been centered in Hong Kong and the run-up wasn't similar to Hong Kong as it was in Mainland China and the direction wasn't the same in Mainland China as it was in Hong Kong.

So, that's the environment we're looking at. But you need two factors to do an IPO. You need a company to be performing well and you need an external market that's receptive to it. And I'm just not going to make predictions about the latter at the present time and we still have plans to do it and we'll keep you posted..

We'll take our last question from Rob Peters of Credit Suisse..

Thanks very much for taking my question and, Rich, it sounds like you've got a better view than most of us this morning.

Just maybe for Greg, when you look at the blackout that you're seeing in China right now and the ability to kind of bring local language films into that spot, I was just wondering, a lot of the times you guys were saying, when you're getting IMAX DNA into the film you're turning away a number of films that want to work with you.

When these blackouts do come up, is that kind of a similar situation in China where you've got a lot of local language studios already kind of knocking at your door that it's just a matter of opening it up and say, all right, we'll do this, this, and this or is it a matter that you have to kind of go out and find these films?.

No, it's the former. An example is when we realize that the blackout period was going to be extended from its normal drop-off which is at the end of July into the second half of August, our team in China as well as Anthony Vogels from our L.A. office met in Beijing and I believe in a three-day period saw 14 movies that were offered to us.

So, we're able to – I don't want to say pick and choose because it's a partnership and it's incredibly collaborative and we have to obviously have the relationships with the filmmakers and the studios – but, we're in a fortunate position given the fact that the brand and the box office have been working so far as you've seen from the last – first half of the year to be able to have a little bit more of an interactive conversation about what makes the most sense for us and then we make what we think is the best business and partnership decision going forward.

So, I hope that answers your question..

At this time, that's all the time we have for questions. I'll turn the call back over to Ms. Loxam for any additional or closing comments..

Thanks, Alisha. Before turning it back over to Rich to close the call, I wanted to let you all know that today is my last earnings call with IMAX as I'll be leaving to pursue a new opportunity. I was not looking to leave, but a terrific opportunity was offered to me and I had to take it, despite all the exciting things that are happening at IMAX.

My time at IMAX, and my interactions with the IMAX team as well as all of our shareholders and analysts have truly been amazing and I'll forever be a fan and supporter of the company. I'll be around for the next few weeks to ensure a smooth transition and I'll be able to share more details about my new job over that time.

My predecessor and IMAX veteran, Heather Anthony, who was been heading up our budgeting and financial analysis activities, will be stepping back into IR on an interim basis until a full time replacement is found. And with that, I'll turn it back over to Rich Gelfond for some closing comments..

Okay. Thanks, Teri, and thank you Teri for all the great work you've done over the last couple of years. So when you look at the company through two kind of silos, you just have to be extremely pleased with where the quarter is and where the first half of the year is. So we've done over $0.5 billion in box office for the first half of the year.

And although, when you talk about domestic and international, you would mix apples and oranges, but by any measure a year that's going to approach $1 billion in box office is just quite a statement about where we've come over a period of time. During the quarter, we beat virtually every matrix that we could be measured against.

So we're delivering financially.

But as I say very frequently on these calls, one of the key things for me is really where you stand in the ecosystem and where you stand as a company and are you making progress? And I think, whether it's the scope of the things we're looking at from – we now have a film fund in China we announced, we now have a documentary film fund.

We have an in-home product we're looking at. We really built out our scope as well as the ecosystem in the substance where there really isn't a major blockbuster film that's coming out where we're not a part of the release pattern and we're not in the mix with the director and the producer and the studio.

So, I feel very gratified by not only the quarter's results but the strategic progress we've made over the year so far. And I think given the film slate particularly for the fourth quarter I think there's reason for optimism for the rest of the year. Thank you, everybody..

That does conclude our conference for today. We thank you for your participation..