Heather Anthony - 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.

Eric O. Handler - MKM Partners LLC Benjamin E. Mogil - Stifel, Nicolaus & Co., Inc. Alexia S. Quadrani - JPMorgan Securities LLC Eric Wold - B. Riley & Co. LLC Aravinda Suranimala Galappatthige - Canaccord Genuity Corp. Steven B. Frankel - Dougherty & Co. LLC James C. Goss - Barrington Research Associates, Inc. Michael Hickey - The Benchmark Co.

LLC Robert Peters - Credit Suisse Securities (Canada), Inc.

Good day and welcome to the IMAX Corporation Third 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'd like to turn the conference over to Ms. Heather Anthony. Please go ahead, Ms.

Anthony..

Good afternoon, everyone, and thanks for joining us on today's third quarter 2015 earnings conference call. Joining me today in our Los Angeles office is our CEO, Rich Gelfond and our CFO, Joe Sparacio, who will have prepared remarks. Greg Foster, our Head of Entertainment, is with us and will be available for Q&A.

Also joining us is Rob Lister, Chief Legal Officer and Head of Business Development and Jessica Kourakos, our new Senior Vice President of Investor Relations.

I'd like to remind you the following information regarding forward-looking statements, our comments and answers to your questions on this call may include statements that are forward-looking and 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 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 reconciliations to adjusted EPS and adjusted EBITDA as defined by our credit facility, are contained in this afternoon's press release.

The full text of our third quarter earnings release along with supporting financial tables are available on our website, IMAX.com. Today's conference call is being webcast in its entirety on our website, and with that, let me now turn the call over to Rich Gilford..

Episode VIII. To wrap up, I'm optimistic about where we sit today. And with $279 million in cash and virtually no debt, our balance sheet has never been stronger. Fundamentally, we are seeing heightened levels of activity on all fronts, including signings, installations and box office, and strategically we are poised to deliver shareholder value.

This is particularly exciting position to be in when you consider that the next couple of years are filled with tent-pole titles that IMAX fans love. Before I turn it to Joe to go over the financials, I would also like to welcome Jessica Kourakos, who we recently hired to oversee the Investor Relations team of both our publicly traded companies.

Many of you know Jessica already, who joins us from CBS. She brings a wealth of experience to the company, and we're delighted to have her on our team. With that, I'll turn it over to Joe..

Thanks, Rich. On the operations side of the business, the combination of robust theater installations, solid box office and operating expense containment resulted in a 100% increase in income from operations year-on-year.

We delivered total revenues of $85.1 million, a 40% increase over last year, while adjusted net income and adjusted earnings per share both grew by over 50% to $12 million and $0.17 respectively. Attributable EBITDA in the third quarter was $26.3 million, again a 50% increase over last year.

From a strategic perspective, during the quarter, we purchased 1 million shares of IMAX Corp. stock at an average price of $34.25. In addition, as Rich mentioned, after quarter end we successfully completed our IMAX China IPO.

Looking at the offering in more detail, IMAX Corp., IMAX China and our minority shareholders raised $285 million before expenses through the sale of 71.3 million shares at a price of US$4. All in, IMAX net proceeds amounted to $161.9 million, $103.7 million to IMAX Corp. and $58.2 million to IMAX China.

In connection with the transaction, IMAX China also paid a dividend to IMAX Corp. of $38 million. These cash balances will be consolidated at the corporate level, so you'll see the combined proceeds on IMAX Corps' balance sheet in the fourth quarter.

It is important to note that the entity that holds our IMAX China interest is our Barbados company, hence the proceeds are generally easily accessible. If we repatriated back to Canada, we anticipate a tax rate of 13.25% on the secondary net proceeds received.

Statistics on installation signings and backlog are all in today's press release, so I won't get into too much detail other than to underscore Rich's remarks. Our installation pace continues to be robust and our theater deal pipeline remains healthy.

Our backlog at quarter end stood at 384 systems, and breaks down as 218 in greater China, and 166 in the rest of the world. Year-to-date, we've installed 80 new theater systems compared to 58 in the same period last year. As Rich had indicated, we are raising our 2015 full-year installation guidance to approximately 130 new theaters.

Of the approximate 50 new theater system installations planned for Q4, we expect 19 to 20 to be new sales type, 16 to 17 to be new full JVs and 13 to be hybrids. As Rich mentioned, we also expect to install an additional seven to eight laser upgrades in the fourth quarter. Half of which are JVs.

In 2016, we currently expect to install 115 to 120 new theater installations with the split breaking down as 60% JVs and 40% sales type. Moving on to the P&L, sales and sales type lease revenue was $26.6 million for the quarter versus $6.6 million in the third quarter last year.

This large increase was the result of the installation of 12 new sales type theaters in the most recent quarter compared to six sales type installations last year. Gross margin from new sales and sales type lease systems in the third quarter was 58.6%.

We also installed seven laser upgrades and one digital upgrade under sales and sales type lease arrangement in the most recent quarter, which generated $1.2 million of gross margin dollars in line with our previously disclosed expectation for this first generation of laser systems.

In 2016, at this time we expect to install about seven to eight laser upgrades, the majority of which are scheduled to install in the first quarter. On the joint revenue side of the business, we generated revenues of $19.8 million, a 30% increase over last year.

This increase was primarily the result of our larger JV network and as the result of eight hybrid installations this year versus five last year.

Due to the year-over-year increase in the number of hybrid installations and higher launch costs associated with 22 JVs installed in the quarter versus 14 last year, our JV margin rate was 61.3% in the third quarter compared to 61.6% in last year's third quarter.

As a reminder, the upfront costs we incur on JV installations are down-payment on our future earnings. Moving on to DMR, for the quarter we generated global box office of $189.8 million, approximately two-thirds of our box office or $129 million was generated internationally.

It is worth noting that our gross box office would have been approximately $20 million higher if foreign currency rates were constant with last year. Our third-quarter global PSA was $221,000. Our year-to-date global PSA is now $829,000, up 14% over last year, as we head into the heart of the fourth-quarter box office season.

DMR revenue of $20.9 million was up 14% over last year. Our margin percentage on the DMR line was 66.8% versus 73.4% last year, primarily reflecting higher marketing costs and our having shown 14 new releases in the third quarter this year compared to 10 last year's third quarter.

For the full year, we now expect DMR cost of goods to be at the higher end of our $25 million to $30 million guidance range.

Total gross margin was $42.4 million, up 20% compared to last year, primarily due to the previously mentioned high levels of upgrades and hybrid installations, our gross margin percentage was 49.8% compared to last year's 58.3%. Excluding the impact from laser upgrades, the third quarter gross margin rate would have been 55.2%.

Moving to expenses, operating expenses excluding stock comp decreased 5% year-over-year, driven by a reduction in R&D spend and a modest increase in SG&A expense of under $1 million, which brought SG&A to $20.7 million for the quarter versus $20.1 million last year.

We achieved this operating expense reduction despite incurring China IPO costs in the quarter of $400,000, an FX charge of $500,000 and new business initiative costs of $1.6 million. For the year-to-date period, FX, the China IPO and new business initiatives have totaled $5.9 million of operating expense.

Nevertheless, even with these additional costs, we continue to expect total operating expense growth, defined as SG&A excluding stock-based comp plus R&D, to be at the high end of our guidance range of 5% to 8% growth year-over-year, as we had discussed on our last call.

Stock-based compensation for Q3 was $4.3 million, and our full-year expectation for stock-based compensation is now approximately $22.3 million. The increase versus our previous guidance is largely due to certain equity awards in China that were contingent upon the completion of the China IPO.

Moving on to taxes, we now expect a full-year effective tax rate of between 24% and 25%. The reduction from previous guidance of 26% effective tax rate is largely attributable to a change in the mix of jurisdictional income, as well as the acceptance of certain previously disallowed deductions.

A portion of this reduction has been reflected in the 18.5% effective tax rate incurred in the third quarter. During the quarter, we recorded a non-controlling interest charge of $1.9 million, reflecting the 20% ownership stake of CMC and FountainVest in our China business. As a result of the IPO, IMAX Corp. now owns 68.5% of IMAX China.

Therefore, beginning with the fourth quarter, the minority interest line on our P&L will be reflective of a 31.5% minority interest versus the previous 20%. As a result, we are increasing our minority interest guidance on net income and EBITDA to $8 million to $8.5 million and $14 million to $15 million respectively.

All in all, it was a strong quarter on both the top and bottom line. We are extremely proud of everything accomplished over the past few months and look forward to the exciting months ahead. With that, I will turn it to Q&A..

Thank you. And we'll now take our first question from the line of Eric Handler with MKM Partners. Please go ahead..

Yes. Thanks a lot for taking my questions. So, Rich, you now have the high-class problem after the successful IPO and special dividend of being over-capitalized.

Just sort of wondering if you could walk through your priorities of cash, how you think of how much cash you want to have on hand at any one time, and what you think is a proper allocation for return of capital and also what about reinvesting in the business and what might those investments look like?.

So, Eric, first jokingly, I like to say can I have an hour to enjoy the cash before I give you a plan? Obviously, this plan was in the works for a while, but with the volatile markets in China, we weren't sure we'd get it done. So in all honesty, I'm going to give you a general answer, but we don't have – it's not fully developed.

So, as you know, because we've given a similar answer before, we're quite opportunistic and if we find the right kind of acquisition target, something that could lever off our brand, and lever off of our ecosystem, and by ecosystem I mean our relationships in the Hollywood community with exhibition on a worldwide basis, and it had an attractive rate of return, that would be very much a priority for us.

And that's something I think we'll take a more, what's the word, organized look at going forward. Second thing would be obviously we have a lot of new businesses, many of which we discussed at Investor Day, including our home theater, our day-and-date delivery system, some of the content ideas we discussed, and that's something that we'll invest in.

Third of all, obviously the JVs have fantastic rates of return on them on a worldwide basis, and we continue to invest in those. Fourth, as you saw during the quarter, we're not adverse to returning capital to shareholders.

As a matter of fact, we exist to make a return for our shareholders and we spent about $35 million buying in 1 million shares during the quarter. So I think all that is very much on the table and harking back to my smart aleck response at the beginning, I think we need to figure out how to prioritize those, and how to organize them.

But one thing you can be certain of, Eric, is that we're not going to just sit around with a lot of cash and look at it. Over time we'll figure out something productive to do with it as long as it generates a strong IRR or it involves return of capital..

Thanks, Rich. And just as a quick follow-up, one of the investment opportunities you have is you have a film fund in China that you invested with CMC. CMC already has a deal in place with DreamWorks Animation. They've got a deal now recently signed with Time Warner.

I'm just curious how you think that film fund could actually play out and what type of films you might be investing in?.

So the only kinds of films I think we'll invest in, Eric, are films that would be released through the IMAX network. So the ideal would be, we'll have sort of a very early proprietary look at many of the big blockbuster movies that are being made in China.

And if there are ones that we really find appealing, besides participating on the studio side and exhibitor side, we would also participate through the negative, as long as we were pari-passu. And there are one or two projects we've looked at so far have not decided to pull the trigger.

I think we will probably put in somewhere between $4 million and $8 million a movie, which gets you to around 10 movies, something like that, that we'll do. Although we are in discussions to perhaps take on additional investors and stay tuned to see what happens there..

Thanks a lot, Rich.

Your next question will come from Ben Mogil with Stifel. Please go ahead..

Hi, good afternoon. Thanks for taking my question. So the first one, just on the laser, I think, Joe, you talked about them obviously having a margin drag in the quarter, and we sort of saw that on the straight sales and then, over time, sequentially improving margins.

Can you talk a little bit about the margin drag? I mean is it marketing? Is it sort of the need to staff up on technicians? And then as the base installs, they get amortized over that? I'm curious on what the sort of cadence is on that front..

So, Ben, first of all, this is Rich. Hi. I want to remind you that going into this year when we discussed the laser launch we said that it would have virtually no margin or a low margin. We said $1 million for the year in margin, and actually we are tracking a little bit better than that.

So this isn't a surprise to us, and it shouldn't be a surprise to anyone who has followed us, because we are quite clear that the first round, the prototype round, was really built for screens 80 feet and larger and was not built as a high-margin commercial big rollout product.

Second point is, as Joe said during his remarks, the first 10 that we've opened, 10 or 11, we're really babysitting them, because this is a high generation, high technology product.

And for example, we have one in Leicester Square that opened to show Bond two days ago, and you don't want it going down, and you don't want to have to fly in parts from Toronto or wherever. So we're overstaffing them in the early days, just to make sure that it doesn't go down.

Third of all, that's all going to work itself out in the next couple of quarters, because if you look at the bulk of our backlog, which is replacing these very large theaters, it plays out in Q4 and Q1 next year. And when you do the math, you'll see that the margins for our existing business are exactly on point for where they were.

So I think it's just a transitional thing and it's one we talked about, one we expected, and it will get a little bit better, but it's going to have to wait until we have a commercial product, which we are working on..

Okay. Fair enough. Thanks, Rich. And then maybe, Rich, you can talk on the theater installation side eight to 10 in the fourth quarter in North America is a reasonably big number for a market that's not – there's not a ton of theaters being built in North America.

Are you seeing in general – not just North America, are you seeing in general the activity being retrofits? Is it largely new builds? Is it sort of B&C markets? If you want to call out specific countries, that's great, too. I'm sort of curious what you're seeing on the installation front from a sort of granular perspective..

So worldwide, I'd say there's probably more retrofits than there has been in a while, and the reason for that is you remember we coined the term the Avatar Effect years ago? Which is because Avatar did such good box office, people wanted to get into the IMAX business relatively quickly.

So it's not like that, but it's skewing more retrofits than it did over the past couple of years for that reason. And our increase in install guidance and the strong installs in the third quarter are also related to that phenomenon..

And geographically are you seeing the dollar, particularly in markets where there are some straight sales, are you seeing the dollar be a real pushback, or is it seemingly – are you seemingly able to get through that?.

I mean I don't think that's been a real issue, maybe a little bit in Brazil and Latin America. But other than those countries, our pipeline is really strong. We're on budget for the signings we forecast for this year, which was basically before the dollar became so strong. So, no, I don't really see that.

I mean it would actually be good, I think, if it caused more people to be interested in our joint revenue-sharing model, and we'll see where that plays out, but it hasn't been a big factor this year..

That's great. Thanks again, Rich..

Thanks, Ben..

Your next question will come from Alexia Quadrani with JPMorgan. Please go ahead..

Hi. Thank you. You mentioned earlier that Star Wars is likely to be released in China, hopefully in January.

I guess my question is any sense of the other international markets, and what films would IMAX be playing in international markets in that period where Star Wars has yet to be released, sort of after the December date?.

So, this is Greg. So first of all, the January date has not been confirmed. So that's purely conjecture. We're optimistic and hopeful, but until it's confirmed it's nothing other than a guesstimate. In January, first of all, Star Wars will come out in virtually every market in December, except China.

And our intention is to play Star Wars for as long as we possibly can. Rich spoke about the Avatar Effect, and I think many of you remember that when Avatar came out in December of 2009 it continued to play for many, many months, for I think an additional 10 weeks, well into March.

Our hope is that Star Wars, based on advanced ticket sales, is one of those movies. But we also have a very good line up in February, if need be, and we're going to see what happens as we go along. One of the advantages of our technology is that we're able to be nimble and put movies in opportunistically when we want and need them to be.

And that's what's available to us going forward, and that will continue to be the core strategy of filling in what we call the shoulder periods when and if we need to..

Having just seen the trailer in IMAX, I think that Star Wars is going to be one of those movies where when people see it the first time, obviously there's going to be capacity constraints, but it's the kind of movie like Avatar and what really led to the breakout of Avatar is people had to go back and see it in IMAX after they saw it somewhere else early.

And I can't pretend to have a crystal ball about that, but just from watching what I've seen so far, I think this could be that kind of movie..

Do you have the same sort of exclusivity of Star Wars outside the United States that you have in the United States here for the initial showing?.

For the initial part of December and into early January, we do. But again, we've given ourselves the opportunity to be able to snag titles, if we want to. And so we are able to juggle as we see fit. It's obviously – if the demand is there, we will continue to play it, but there's a lot of extra supply for us to be able to put in other titles.

And of course when we get into China and the Chinese New Year, there will be local language films in February that we will be playing in China..

Thank you very much..

We'll now take our next question from the line of Eric Wold with B. Riley. Please go ahead..

Thank you. A couple of questions on the system install guidance and the backlog.

I guess, one, on the initial 115 to 120 install guidance for next year, give us a sense of how much of that comes from current backlog versus the pipeline?.

I think the answer would be, Eric, and Joe could fill it in, we try and do this on a consistent basis year-over-year in terms of what's in backlog, and we take a reserve against our backlog for slippage.

And then we look at what's a reasonable number to sign? And I would say that we use the same amount of conservatism in preparing this that we have every year, including this year, where we've upped that considerably. So we were no more aggressive or less aggressive than we were in previous years.

But you can't really look at it the way you frame the question because, as I said, there's backlog, there's slippage against backlog, there's new signings. So if I told you the backlog number, that wouldn't include the slippage, and I don't think it makes sense to get into that amount of detail..

Fair enough. And then secondly, kind of looking at the backlog from this point last year to where we are now, there has been a meaningful shift in that backlog to kind of sales type lease from JVs, obviously partially due to signings and partially due to how the installs have gone.

And then you have the guidance for installs still tilted more towards JVs and sales type lease this year and next year.

Are we getting to a point where you are going to see signings and installs continue to shift towards sales type lease? Is that a function of the region of the world you are going into? Is it a function of your choice to de-risk certain markets? Or is it a function of now that exhibitors feel more comfortable with the IMAX format, they know it does well, they know you've got a great slate, they are more willing to take that risk upfront with the capital upfront and do a sales type lease versus maybe in the past years where JV was a better choice?.

Eric, I think really all of the above. I mean I think there's no one answer. It depends on the dynamic in the market. Now, obviously certain markets like India and Russia, where we don't do JVs, we do only sales-type leases, that's a part of it.

I think when someone asked before about the dollar, the stronger dollar; that may tend to push people toward JVs. I think you're right. People are comfortable with our business model. That might push people other ways. I think as we go into new territories, we don't know how they're going to react yet. So, it's all of the above..

Thank you, Rich..

Your next question will come from Aravinda Galappatthige, please go ahead – with Canaccord Genuity..

Good afternoon. Thanks for taking my questions. Rich, with respect to IMAX China, you mentioned that in the foreseeable future you wanted to maintain your control position. But you are at 68.5%, which still gives you some room for divestiture.

I was just curious; under what circumstances would you consider selling down to 51%? Is it simply price or share price appreciation?.

Well, as you know, Aravinda, because you are smarter than me at this, in investing in companies and stocks and things. It's always a case of price and prospects, right? I mean, so no, it's not purely a question of price.

But if my price went up five times from here and the prospects were the same, that would be an indication that maybe we would want to sell down a little. On the other hand, if the prospects went up tremendously, and even if the price went up we might not want to sell a share. I mean, today, I don't have any intention of selling down from where we are.

But I think we just wanted to be clear that we are going to maintain a control position over time from where we sit today. But we don't want to say no matter what happens in the world, we promise to be in this position..

Okay. Thanks for that, Rich. And really quickly, with respect to Japan, I was interested in the comments you made there, given the opportunity. Just remind us where you stand with Japan in terms of the top theater chains. I know that you've got number four and three, if I'm correct, Toho being number three, if I'm correct.

But I just wanted to give you a little bit of a chance to maybe elaborate on the Japanese opportunity, given that the focus is also shifting to the ex-China side of the business..

So, Toho is actually number one. And we are not in business with number two, we are not in business with number three. I'm not sure, we might be with four. I know we are in business with five. So, when Toho opens and the kind of numbers they've done as I indicated, they're tracking to over $4 million in their first year of operation.

You know, that gets noticed. Not just by them, but other chains in the country. And we have seen a pickup in discussions going on, and there are a bunch of different proposals floating around. As you know, you never know, I don't want to promise that one or others are going to sign. But it just seems like we've turned a corner there.

Actually we had started to turn a corner a few years ago before the triple disaster happened and we have really strong PSAs. We have a number of people in the business, but obviously the Japanese had much more important things to focus on at that point in time. And I think now that theaters are doing really well. Toho's theater is doing really well.

We are hearing from virtually all of the significant chains there. So I just have a feeling you are going to see that market open up. I've been doing this for too long to not see those signs. And I see those signs in Japan, so I'd be surprised if that activity didn't pick up..

Great. Thank you, Rich. I will pass the line..

Your next question will come from Steven Frankel with Dougherty and Company. Please go ahead..

Good afternoon.

Joe, could you just start by breaking down the PSA for us on a domestic and international basis?.

Sure. Domestic overall was $221,000 as I mentioned. Domestic was $161,000, China $301,000 and other international was $234,000..

China was very positively influenced during the quarter by a local movie called Monster Hunt, which is the biggest Mandarin film in the history of China and also the biggest Mandarin film in the history of IMAX. So, that's why you're seeing such strong PSAs come out of there..

Great. And then a couple of questions for Greg. Mockingjay wasn't mentioned as a play in China.

Why aren't you playing that film?.

Because we only have one screen per location and the way the sequencing works and given the fact that we're kind of all in on the Bond title, that's the title that we're playing.

So that opens up – we have a really strong line up in China over the course of the next month or two between Everest, Spectre, The Martian, and then the local language titles, The Ghouls, which also has another name that I'm blanking on right now, but I refer to it as The Ghouls. So we have a very, very strong lineup, and that's the primary reason.

Bond in the past in China has come out in January or February, a few months off the break and this is basically day-and-date, and it's done quite well there. So I think that's also an advantage. And the title itself is very much up our alley in terms of the fan boy nature of it..

Okay.

And then what did you learn from your two earlier releases during the quarter, and what might you do differently next time?.

Well, we've done it three times, and I think that when in doubt, look to the obvious success. And the obvious success was a franchise in Ghost Protocol, which was the fourth movie in the franchise. It needed a little bit of a jumpstart, but it had a brand to it.

And so I think that when we go forward and do the exclusivities, we'll likely be focused on a pre-existing franchise. Everest has done quite well for us, as I mentioned, is opening in China, will in all likelihood end up north of $30 million for the box office for that title. But there're some titles that it will work with and some that it won't.

And I think if anything, we'll be focused again more on franchise titles that have a high level of playability, but perhaps need a little bit of a jumpstart from a marketability point of view..

Okay. And then one last one either for you or for Rich. Given this film slate and how good it looks going out all the way to 2017, have any of the U.S.

majors talked about dropping a second screen into some of the zones in the urban areas that seem under screened today like New York City?.

Well, it's lucky I answered this, not Greg, because it happens to be Greg's obsession, because he thinks that there are enough titles now in IMAX, and with what's coming on the film slate that it's really a good opportunity. So the answer is, we've made proposals to them.

We're talking to some of them about it, but there are tricky issues, like what you do in the downtime, and you don't want to have a smaller screen in the same complex, so you need a complex where there are twin screens, and how do you deal with the economics when they are not playing? Do you let them not play IMAX films during the shoulder periods? So there are some complicated issues that we are working through, but yes, we are thinking about it to some extent.

And Greg is the leader of that parade..

Great. Thank you..

Your next question will come from Jim Goss with Barrington Research. Please go ahead..

Thanks.

Either for Greg or Rich, how much of next year's slate is set already, and is it unlikely that beyond Star Wars nothing will be more than a week or two at this stage with all the films coming through?.

Jim, we expect to have about the same number of films in 2016 as we have in 2017 – sorry, as we have in 2015. And that's because we again have the ability to be flexible and slot things in when we need to.

In terms of one or two weeks, I'm not going to make those – I think it's a mistake to make those statements, because again, if you have a title that has a nice runway for it, and it continues to do really well, particularly if there is a second screen, I had to get that in there, you can play it a little bit longer.

So, the goal for us is to always have – if we could have one movie that played for a month at a time and continued to generate business, of course, we would do it.

But because we have the ability with the foreign territories and because of the DMR teams that we have and our ability to convert a movie quite quickly, we're always going to be pouncing on an opportunity when it exists.

We know that there have been a couple of titles over the course of the last couple months that we had two-week commitments on that didn't perform, and it's our responsibility going forward to create 52 weeks of compelling content. And so we are on that going forward.

So if something isn't working, we're going to want to be in a position that we can put something in right away on that second week. So, we're aware of it, but at the same time the goal is to have the big titles play for as long a period of time as we can, as long as the demand is there..

Okay.

And with the declining per film DMR costs, is that going hand-in-hand with your success in China to create even more Chinese films in your brand?.

Well the....

And what will that mix be like?.

So, again, this year we've done more local language films than we ever have in China, and it's worked quite well. One of the reasons was because as many of you know from basically the middle of June when Jurassic World came out until the middle of August, or close to the middle of August when Terminator came out, there wasn't a Hollywood title.

So we did four movies in that period of time. So we always have films, local language films warming up in the bullpen, so to speak, ready to come in when there is a blackout period, or when it feels like a movie isn't going to work. That's on the global basis. And on the China basis, in particular, our pipeline of product is very, very strong.

We've got four or five titles, for instance, on Chinese New Year. We haven't made the decision on which ones we're going to do, but there are options for us over that two to three week period. So we will at the very least do the same number of movies I would suspect in China in 2016 that we did in 2015..

Lastly, are there any other markets where that same will hold, where the declining DMR costs will make it that much easier to create a Russian film or a French film or some other?.

Well, we do have two Russian movies in 2016. One is The Crew, and one is The Duelist, and there is another one that we're talking about for 2017.

And then we've flirted with Japanese titles, which particularly given the strength of the market, but we have to make sure that those titles have a long enough window and are movies that lend themselves to IMAX. So, the cost coming down certainly doesn't hurt..

Okay. Thanks very much..

Your next question will come from Mike Hickey with The Benchmark Company. Please go ahead..

Hey, guys. Thanks for taking my question and congratulations on your very successful IMAX China float. Awesome job. I guess this is a bit of a reach, but you did give us somewhat of a look at 2016. And so I was hopeful maybe you could provide some visibility on your SG&A growth expectation for 2016.

And then with your DMR expense tracking sort of towards the higher end of your expectations for 2015, would it be a reasonable assumption that that should trend lower into 2016?.

We're in the process of putting our budget together now. And I think it's premature to discuss that. We probably can probably give you some color on the end of the year call, but before we complete our budget it's just not prudent..

All right. Fair enough.

And then now that you've successfully floated the IMAX China piece, I'm just sort of curious how your world has changed businesswise in that region, if you have seen a pickup in theater signings, or perhaps sort of the regulatory framework in China can be sort of adjusted to your benefit when you think about how many films you can get into the region per year?.

It's a little soon to have seen dramatic shifts. But we – our level of activity, while China was having so much volatility issues in terms of signings and interest, went up, and I would say somewhat significantly and we signed two deals at the end of the third quarter with Stellar and with Omnijoi, both of which were state-owned enterprises.

So I can't say concretely, but I can say it hasn't done anything negative to us. The tone of the business feels pretty good over there..

All right. Thanks, guys. Good luck..

Your next question will come from Rob Peters with Credit Suisse. Please go ahead..

Hi. Thank you for taking my question. Greg and Rich, just maybe given the dynamic you've seen in China so far this year with the fact that you've seen a number of the Hollywood films being released day-and-date with the global releases, but we still did have the blackout period in July and August and even starting in June this year.

I was just wondering if you could maybe talk about kind of where you see the long-term success of the box office in China.

Is it more in local language films, or is it a more friendly Hollywood approach by the regulators there?.

So, I'm going to give you sort of a financial answer, and then Greg can give you kind of a view from the field. The financial answer is that the Chinese box office is forecast to pass the U.S. box office in 2017, and it's forecast to pass the number of screens also in 2017.

So what's happening is, there's a lot more capital flowing into producing Chinese movies, so the quality of the movies keeps getting better and better, and I think you see the results in things like Monster Hunt and Journey to the West and other films.

So, I think from a financial point of view, as their box office increases the films will be higher quality, bigger budget and I think especially when you talk about blowing them up or filming them with IMAX cameras, in terms of filming an IMAX image that's really important.

But I think the market dynamic itself will cause there to be more Chinese blockbusters and I think that that will likely be a trend that we've fed kind of organically through just capital formations.

Greg, do you want to add?.

Yes. So, two things. First of all, the title that I forgot the local language name to is the Wanda film Mojin – The Lost Legend, which is also known as The Ghouls, just to clarify. And secondly, Rich nailed it, it's because the quality is increasing, we don't really care.

Three years ago, four years ago, we would have periods of time when there was a blackout where we'd be kind of caught, and we're not in that position anymore.

So during the blackout period we kept releasing, in July and early August, we kept releasing local language films, like Monster Hunt, which I think is up to about $28 million so far and maybe it's $27 million, $28 million, something like that and we did really well.

So if the quality is increasing of the local language films, if there's a blackout period, we're able to go in there and give Chinese moviegoers something they clearly have demonstrated they like to see in IMAX. And conversely, if there's Hollywood titles out there, we'll have those as well.

So as long as we are covered 52 weeks a year, we don't care..

Perfect. Thank you very much. And maybe just to follow up with looking at the 2016 box office, given your success so far in 2015, how do you expect to see the pacing of the box office next year? It looks like you're going to benefit from Star Wars in Q1.

But then I think it would be fair to say that it might be a difficult comparison in the second quarter.

Or do you see the film slate kind of shaping up next year comparable to 2015?.

I think it's very hard to make those kinds of predictions because movies in the abstract sound different than movies that are actually out playing on the screen, and it really cuts both ways. I mean some of the movies you wouldn't have thought would be huge.

Look at Compton, for example, was really huge, and others that you thought would be huge weren't. And then also, before the year starts, there's probably going to be movements in dates, so it's really difficult to do that. Plus you have the Chinese release window, which doesn't necessarily match the U.S.

release window and you don't know when that's going to be. So, I'm sorry, but I don't even know the answer to that, so it'd be inappropriate to comment on it..

No. Fair enough. Thank you very much..

And there are no further questions at this time. I will turn the call back over to Mr. Rich Gelfond for closing remarks or additional comments..

So you can probably tell by our tone that we're really happy where we are and where we see that we're going.

Whatever indicia you want to look at compared to Q3 last year; revenues, EBITDA, adjusted earnings, cash, signings, installs, increased guidance, I mean sometimes internally I get frustrated because there are too many benchmarks and mathematically you can't hit every one all the time, but this is a quarter where it seems like we really delivered on a lot of things.

And if you're sitting in our seat and you've opened Spectre in England and you see those numbers, and it's opening wider in the next week or two, and then of course you go into Star Wars, and hate to come back to this, but wait till you see it on that screen. So I think it's a good time to be in the IMAX business.

And for those of you who have supported us through not such good times, we really appreciate it and we hope we can continue to deliver. Thank you..

Ladies and gentlemen, this does conclude the conference call for today. Thank you for your participation. You may now disconnect your lines..