Jessica Kourakos - SVP-Global Investor Relations Richard L. Gelfond - CEO & Director Greg Foster - SEVP & CEO of IMAX Entertainment Patrick S. McClymont - CFO Robert D. Lister - Chief Legal Officer & Chief Business Development Officer.

Stan Meyers - Piper Jaffray & Co. Steven Frankel - Dougherty & Co. LLC Benjamin Mogil - Stifel Nicolaus Alexia Quadrani - JPMorgan Securities James Goss - Barrington Research Associates, Inc. Robert Peters - Credit Suisse Securities Aravinda Galappatthige - Canaccord Genuity Darren Aftahi - ROTH Capital Partners LLC Eric Wold - B. Riley & Co.

Eric Handler - MKM Partners.

Good day and welcome to the IMAX Corporation Third Quarter 2016 Conference Call. All participants are currently in a listen-only mode. Following the presentation, we will conduct a question-and-answer session at which time you will be requested to press "*1" to ask a question. Today's conference is being recorded.

And at this time, I'd like to turn the conference over to Ms. Jessica Kourakos, Senior Vice President of Global Investor Relations. Please go ahead Miss..

Good morning and thanks for joining us on today's third quarter 2016 earnings conference call. Joining me today in our New York office is our CEO, Rich Gelfond; our CFO, Patrick McClymont; and our Head of Entertainment, Greg Foster, who will each have prepared remarks and will be available for Q&A.

Also joining us is Rob Lister, Chief Legal Officer and Head of Business Development. Today’s conference call is being webcast in its entirety on our Web site. A replay of the webcast will be made available shortly after the call.

In addition, the full text of our third quarter release and a slide presentation accompanying today’s call have been posted on the Investor Relations section of our Web site. I’m pleased to announce that we will now be providing quarter-to-date box office results on the IMAX Investor Relations Web site beginning next week.

We expect to provide these updates every Friday with a one week lag. We’ve also created a new Investor Relations Twitter account handle IMAX_investors that will include this box office disclosure as well as other items that maybe of interest to the investor community.

Finally, 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 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 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 reconciliations to adjusted net income, adjusted EPS and EBITDA as defined by our credit facility, are contained in this morning's press release. With that, let me now turn the call over to Rich Gelfond..

Thanks, Jess, and thank you all for joining us this morning. The third quarter served as another example of the strong demand for IMAX theaters that we've seen throughout 2016.

In the third quarter alone, we signed agreements for 162 new IMAX theaters, most notably our 150 theater deal with Wanda, which was the single largest deal in the Company's 50 year history. Year-to-date we’ve signed agreements for 293 new theaters, which is by far the most we’ve signed in a single year let alone in a nine-month period.

In addition to continued signing strength, in China, we’ve executed a number of agreements with partners in Western Europe such as Kinépolis, in Belgium, Cinemark in Denmark, UCI in Italy, and just a couple weeks ago we announced a five theater deal with Pathé, which is their second deal with us this year, and our largest agreement in France in our history.

In fact, I was in Europe last week where I met with senior management of several exhibitors and I was very encouraged by IMAX's position in that market. Overall, I think there is a robust opportunity for us in Europe.

The market tends to have strong PSAs and recent consolidation, such as AMC's acquisition of Odeon and UCI, could lead to more activity in that market. Given our record level of signings activity this year, our backlog has grown to an all-time high of 547 theaters at quarter end and is derived from exhibitors in 46 countries.

This backlog provides us with an excellent visibility into future installs and when taken together with our exciting existing commercial network of roughly a 1,050 theaters means that our footprint should grow to approximately 1,600 screens over the next few years.

That is 50% larger than it stands today and doesn't include additional theaters that we will sign and install within that period of time. Our increased level of signings activity over the past year is accomplished by heightened installation activity, which as you know is a key driver of our growth.

In the third quarter, we installed 48 new theaters and now believe we will install between 155 and 160 new theaters for the year, which exceeds our pace of installations in recent years. As we look to 2017, while still early, initial indications suggest that installation should be similar to 2016's levels.

On all, we’re very pleased by exhibitor partners desire to not only add additional IMAX theaters, but to get them up and running as quickly as possible. With regard to the expansion opportunities I mentioned earlier, we’re continuing to make progress all over Asia.

In addition to China, countries such as Japan are very attractive, given the overall opportunity in that market and the success of our partnership with Toho, which follows our success with many other exhibitors, including Tokyo.

Another market that I'm excited about is the Middle East, with its relative under penetration of IMAX screens, strong PSAs and growing interest of exhibitors.

As a matter of fact, the number one IMAX theater in the world for solely Magnificent Seven and Deepwater Horizon with the Mall of Emirates, in Dubai which recently installed our laser projection system.

Greg, why don’t you now take a minute to walk us through the film side of the business?.

The Han Solo Spinoff, Toy Story 4, Warner Bros. DCs Aquaman, Fantastic Beasts 2, Mission Impossible 6, and the Avatar sequel to name a few. Again, the anticipated strength of the film slate over the next 24 months coupled with our quickly expanding network should position us well to take advantage of the years ahead.

With that, I will pass the call back over to Rich..

Thanks, Greg. As we’ve said, box office cycles are short-lived and we try to get not so caught up in the month-to-month or quarter to quarter variability that is inherent in our business.

So rather than fixate on one metrics, I think what's important that we continue to focus on expanding the network, improving our technology, containing costs, and creating exciting experiences for our consumers. A pickup in box office will come and based on what Greg just discuss, it sounds like it should come sooner rather than later.

I'd like now to briefly touch on a couple new initiatives outside of our core business and are particularly excited about on our key focuses of mine. One is the original content strategy and the other is virtual-reality.

Touching first on our content strategy, as I mentioned earlier, with the commercial network of over 1,050 theaters, an additional 550 theaters in backlog, we now have critical mass to leverage our distribution platform in more ways than we've done in the past.

You may recall that we established both the Documentary Film Fund and China Film Fund to invest in content and are currently exploring new opportunities and partnerships to invest in original content and facilitate its development and release.

We view this strategy as being a natural evolution to our existing content strategy, as this new content would help fill the gaps in our film slate and not disrupt existing windowing patterns.

We’ve had a lot of interest from filmmakers and a wide array of content creators to partner with us, with the draw stemming for our limited release window availability, global reach, and attractive target demographic. For new or less known franchise, in particular, having IMAX associated with your content can provide a boost.

We are in discussions with a number of these content creators regarding the opportunity, so stay tuned as I believe we will have more updates on this initiative in the relatively near future.

The second area of focus is VR, as many of -- virtual reality, as many of you on this call know IMAX is in a unique business with deep expertise across a number of disciplines. On the film side, we help capture and remaster content, we work with exhibitors to install theaters.

We are technology producer and integrator and at the heart of it all we’ve a tremendously valuable brand with global recognition. The core requirements of launching a location-based VR experience lineup nicely with our Company's core skill sets.

We’ve studio and filmmaker relationships on the content side, capture mechanisms for new content, relationships with exhibitors and real estate developers for potential VR sites and a brand that is synonymous with immersive experiences.

Since we announced our VR strategy, there's been strong interest for partnerships content deals and many other opportunities.

And unlike many other VR offerings out there, which are targeting the at home experience, we’re focused on the location-based offering which have the ability to provide a broader array of high quality, more immersive content experiences with a social element out of the home.

Our national plan is to open our first two pilot locations, one in LA and the other with Odeon in the U.K., test the concept and assuming this concept works, embark on a more aggressive rollout schedule.

In terms of what the experience will look like, the IMAX VR centers will employ a new modular design proprietary IMAX that will consist of several VR pods to allow multiple people to engage in the experience. So you can go with friends to enjoy the interactive exciting movable VR experiences.

We expect our initial pilot location in LA and the U.K to open by year-end. With regards to economics, we plan to adopt a JV model similar in nature to our cinema business. I don't want to get too far ahead of ourselves, we continue to be very excited about this initiative.

I look forward to sharing more about our business after we get our pilot sites up and running. I want to underline the word pilot. This is a test. We are not investing a lot of money at this time in the initiative. We are doing a test.

If the test works, we will go forward and I think it's a very exciting business for IMAX and I’m quite optimistic, but we’re certainly not getting ahead of ourselves. All in all, the Company is in a very exciting place.

We’re signing installing theaters at a record pace which positions the core business to take advantage a robust film slate and in addition to the core business we’re in the late stages of launching some exciting new initiatives. With that said, let me turn the call over to our new Chief Financial Officer, Patrick McClymont.

Patrick?.

Thank you, Rich, and good morning, everyone. It’s a pleasure to participate my first earnings call as CFO of IMAX. Before diving into the results, I thought it might be worthwhile to share some of my initial observations of the Company and a few of my areas of focus in the months ahead.

It goes without saying that IMAX holds very strong brand equity and generate compelling economics for our exhibitor and studio partners around the world. This is evidenced by the impressive network growth during the last several years, and more importantly by the record number of theaters in backlog.

Clearly, the uptick in signings levels signal ongoing strong network growth for the foreseeable future. With continued growth as a backdrop, it's my goal to ensure the finance department work seamlessly with the various business units, so that we can continue to grow quickly, efficiently, and of course profitably.

As IMAX invest in promising new areas of business, we will look to be disciplined as we optimize our use of capital, focus efforts around cost control and operating leverage, and ultimately maximize our returns.

I believe there is tremendous opportunity to execute the expansion of the core business, while also leveraging IMAX's brand equity for new areas of growth, I’m excited to be a part of this next chapter in IMAX's development. With that, let me review some of the key results within our core business for the third quarter.

The sustained momentum on the signings front has facilitated a healthy environment for IMAX theater installations. During the quarter, we installed a total of 48 new IMAX theaters, exceeding our Q3 guidance of 40 theaters and marking a record number of installs for the third quarter as theater operators ramped up ahead of 2017's promising film slate.

On the new installation, 15 were sales type arrangements, 24 full JVs, and nine were hybrid JV arrangements. Additionally, we had two laser upgrades in the quarter. As Rich mentioned, we will likely end up installing between a 155 and 160 new theaters this year.

Of the roughly 63 new theaters expected to install in Q4, we anticipate approximately 17 to be sales type arrangements, 35 to be full JVs, and 11 to be hybrid JVs.

Moving on to our financial performance, our Q3 revenues were $86.6 million, which resulted in total gross profit of $44.9 million or 51.9% of revenues, which is up from 49.8% from Q3 last year. Our JV and DMR revenues were $19.7 million and $21.5 million, respectively and generated margins of 55.7% and 57.8%, respectively.

For the JV business, it's important to note that our margins were diluted slightly by large number of installations completed in the quarter. Increased JV depreciation expense as our JV network expands and other upfront marketing and commission costs associated with those installs.

As mentioned previously, we installed a total of 24 full JVs and nine hybrid JVs versus last year's 14 full JVs and eight hybrid JVs. In the case of our hybrid JVs, we fully expense those system cost during the quarter of installation.

Moving onto OpEx, SG&A excluding stock-based compensation was $23 million in the quarter with approximate $600,000 related to the new business initiatives. For 2016, we expect SG&A from our core business to be approximate $91 million in line with 2015 levels.

SG&A related to new business initiatives is expected to be approximately $3 million consistent with last year. R&D for the quarter was $4.5 million, which primarily reflects development of our commercial laser product, the development of our digital delivery system, and costs related to our home initiatives.

Given the accelerated development of our commercial laser product, we currently expect core R&D expenses of approximate $12.5 million in 2016 and R&D related to new business investments is expected to be approximately $3.5 million in 2016 versus $2.8 million last year.

In total, core OpEx is expected to be approximately $103 million to $104 million in 2016, up about $3 million to $4 million versus last year. OpEx from new initiatives is expected to be approximately $6.5 million for the year, essentially in line with 2015.

We think it's important to look at the core business, excluding our new business initiatives to demonstrate the underlying economics of the core. Remember that these new businesses are still in the investment stage and as such typically have an initial dilutive impact to earnings.

Our adjusted EBITDA for Q3 excluding new business and minority interest was $31 million compared to $30.7 million last year, resulting in EBITDA margins of 36% in both periods. Digging a bit deeper, our EBITDA reduction from new initiatives was $1.8 million this year versus $1 million in Q3, 2015.

The total minority interest impact to EBITDA was $4.7 million and its impact to earnings was $1.9 million in the quarter. We expect our full-year minority interest expense as it relates to EBITDA to be between $19 million and $20 million as a result of weaker box office in China over the last few months.

The impact to earnings is expected to be between $11 million and $12 million. Adjusted EBITDA including new businesses and after minority interest was $24.5 million for the quarter, down 6.7% from the prior year.

However, please take into account that our China ownership has been reduced to 68%, down from 80% in the third quarter of last year, which causes an uneven comparison year-on-year. Also keep in mind that the fourth quarter will be the first year -- the first quarter in which we will have an apples-to-apples comparison for this metric.

As minority interest was reduced to 68% in Q4 '15. Adjusted net profit was $7.9 million or $0.12 per share in the quarter compared with $12 million or $0.17 per share last year. This reflects a third quarter tax rate of 33.5%, which was higher than last year's result of the overall geographic mix of box and installs.

For the full-year, we now expect our tax rate to be approximately 25%. Looking at the balance sheet, we ended the quarter with $218 million of cash on hand. This reflects the $15 million we spent in the quarter repurchasing 500,000 IMAX shares under our existing buyback program.

Through the first nine months of 2016, we’ve spent approximately $100 million under our buyback program repurchasing more than 3 million shares. We also saw a buildup of inventory as a result of the relatively large number of installs expected in the fourth quarter and the year ahead.

Before I wrap, I want to highlight some new things we’re trying out on the IR front. We will now be providing weekly box office results on our IMAX IR Web site starting next week. Our intention is to provide these updates every Friday for the prior week's box office.

We believe this will increase transparency and help eliminate the guessing game that is required to the analysts and investors, given the difficulty in obtaining updated and precise international box office data.

We’ve also created an IR Twitter account under the Twitter handle IMAX_investors, which will include this box office disclosure, as well as other items more relevant to our investor community. We will be trying out other disclosure and IR initiatives over time and welcome feedback and ideas from all of you.

To wrap, we’ve a terrific business model and with the existing network growing at a rapid pace, we’re well-positioned to take advantage of the anticipated strength of the upcoming film slates.

As I mentioned before, I think finance is a great role to play as a strategic partner to our business units, and I'm looking forward to being a part of a very exciting time here at IMAX. At this time, I'd like to turn the call over to the operator for Q&A..

Thank you. [Operator Instructions] And your first question comes from Stan Meyers of Piper Jaffray. Please go ahead..

Thank you. Good morning. Rich, I guess, congrats on record signings and installs in the quarter.

I was hoping you can comment a bit more -- in a bit more detail on your Wanda deal, maybe the cadence of installs, locations, and maybe any other strategic plans with your largest global partner in terms of content or VR?.

Sure. So, in terms of the signings where they are, not all of them have been identified. But they pretty much follow a pro rata, the patterns of where we are today in China.

So for example, the end of last year about 17% of our theaters were in Tier 1 cities and our recent installs this year in China were similar with the rest cascading across the other tiers. And the new deal, as I say, it's not all identified.

But it's generally across all four tiers of cities and again subject to filling in size and roughly the same ratio going forward.

The economics of the deal are similar to our existing deal where we are today, under that deal and there are nuances, so laser is priced differently than xenon, but when you kind of step back and look at it, it's very similar. In terms of VR we’re talking to Wanda about perhaps doing a pilot location.

We haven't ironed that out yet, but Wanda has a great interest in VR and its investing resources in looking at it. Our relationship with Wanda continues to be very strong. As you know, Wanda owns AMC and our relationship isn't only good with Wanda, but it's good with AMC and AMC recently bought Odeon or it hasn’t closed yet and Carmike.

But in connection with the signing of the Odeon deal, Adam Aron, the CEO of AMC said that they expect it to roll out IMAX theaters in Western Europe and Odeon in UCI locations and we’re advancing those discussions and we’ve terrific relationship with AMC and what they're doing. So I think in general stand, the relationship with Wanda is excellent..

Thanks. And I had one for Greg.

Greg, you mentioned few China drivers in the quarter and I was wondering if we’ve seen sort of this step down in pricing and promotion or are we going to see more of these -- more of this play out or is this sort of a one step function in Q3?.

Stan, I don’t think you can say it's completely over, but I do think you can say that it ultimately is contingent on the titles that where there. There wasn’t a lot of compelling content, particularly IMAX focused content. There was a romantic comedy.

There were a handful of movies, but there was not a breakout movie over the course of the last three to six months in China. In fact, if you look particularly in the July summer period where in 2015 you had monster hunt. There was nothing even remotely close to that this year.

Obviously, the slate is it as it moves forward, we see some incredible titles for the Chinese New Year period. And by the way we’re evaluating which one of those titles to do, they have all been offered to us and we see other titles like The Great Wall, which is going to be a big hit in December, in China. So it's a cyclical process.

I don't think you can say that it's -- this is how it is going forward nor do I think you can say it's all completely done. But I think the content drives a lot of it and the content looks like it's promising as we turn the page on this last quarter..

So Stan, the one -- just to give you a little more color, in China it's not the same as the U.S where the ticket price is fixed from film to film. In China, they will charge more for a film that has more demand and less for a film that has less demand.

So, following up on what Greg said, with Fast and Furious sequel coming out and Rogue One and things like that, I think it will be our expectation that they would charge higher ticket prices for that and for the content that was around this year..

All right. Thank you, guys..

Your next question will come from the line of Steven Frankel of Dougherty Markets. Please go ahead..

Good morning. First just, Greg, you had a mouthful of figures. Could you repeat for me what the international ex-China PSA was and what the China PSA was? And then I’ve a follow-up on China..

Let me get my notes. So the international Q3 PSA overall was a $185,000, geographically speaking 8% growth in domestic. International ex-China was $214,000, China was 171 -- $171,000..

So it's in -- accompanying this call are some slides and it's on the slide the case you get it, didn't get it all that time, you could get it there..

Great.

And then as a follow-up, now that you’re been at China for a while and where do you think a normal full-year PSA ends up in China?.

Well, I think it's largely film dependent as Greg just said, I think we’ve seen a range last year, it was around $1.3 million as you know. It's not only depending on the film, its depending on the RMB also. This year its significantly less than that. My guess is over time that for a normal year, it will be somewhere in the middle.

But we will have to say we are opening an awful lot of theaters as Greg said in his script. Last year we opened at a very rapid pace. In fact, there was 86 new theaters that we opened, which is a 37% increase in China and it takes 24 months for those theaters to ripen more mature.

So the question is when you say normal, I mean, do we normal with 37% growth, do we need normal with not a lot of good films, do we normal with loss of blockbusters, I mean, I think it is all those variables, but I would say, it's probably somewhere between last year and this year..

Okay. And then, in terms of Japan, you’ve made some progress there.

Should we expect another good spate of orders coming from that territory in the coming months?.

We have an extremely good strong backlog from there. So I think you could expect to see installs and the new theaters that have opened, especially Toho opened two or three this year are doing extremely well. There are some things in negotiation, but I think there is something like 20 in backlog that are yet to open.

So I think you'll see the -- actually there is 26 open and I don't remember the backlog number, but it's somewhere between 10 and 20. But I think you will see those roll through over the next year and there is still dialogues going on. So we’re optimistic about that..

And on the laser upgrades and installs that you’re doing currently, how are the gross margins progressing relative to where you thought they would be by this time?.

I’m sorry, could you repeat that?.

What are the gross margins like on the laser systems? I know they started at a very low gross margin and you had plans to cost them down or to get your gross margins up, what happened with that year-to-date?.

I think on the GT laser product that we’re installing now that continues to be an expensive product and has thinner margins in the xenon business. Rich mentioned in his comments, and I mentioned that we’re spending R&D dollars right now on a commercial laser product and that is designed to be a broader application.

It will have margins that are more consistent with the traditional systems..

Okay, great. Thank you..

[Operator Instructions] And we will go and take our next question from Ben Mogil of Stifel. Please go ahead..

Great. Good morning and thanks for taking my question. So, Greg, I wanted to touch a little more about China in your comments around the ticket pricing. So certainly I think the comments that you made later on about the market or Rich made about the market being sort of one with much more dynamic pricing, so good movies pricing moves up and vice versa.

But when you look at kind of theaters that have been open for more than a year, so you of cycle through some of the newness, if you will, are you -- can you maybe talk a little bit what -- by what the RMB pricing trends are?.

Well, the pricings changed, we know that last year there was a proliferation of discount tickets, promotional tickets that were offered by the ticket buying services offered in conjunction with the theaters and there's a little bit less of that now. So the prices last year were, let's say, 10 to 12 RMB and they’ve gone up in many locations ….

In dollars..

Dollars, yes, dollars and they’ve gone significantly up this year as the ticket buying discounts have sort of been eliminated in certain places. So I think it's sort of even now in terms of becoming a little bit more consistent. But again, these things happen based on the demand of the films.

So when there is not a lot of demand, all of a sudden you see discounts. When all of a sudden there's a demand, it goes up. So that's sort of my answer and I do think it's stabilizing and I think as we get into a year that has such incredible brand recognition on titles like Furious 8 etcetera, it will be very -- it will be a lot more stable..

And in general when you say look at a B or C market compared to an A market, what’s the ticket price gap just so we can get a sense as you add more and more screens in B and C markets to sort of understand what where sort of the puts and takes? You’re almost thinking about the [indiscernible] retail perspective, in terms of stores that you add in sort of second tier markets, if you will?.

Again we have theaters across all markets, all tiers, and they're not concentrated in Tier 1. As a matter of fact, as I said before, it is only 17% of our theaters roughly in Tier 1 markets, 47% in Tier 2, 13% in Tier 3, and 13% in Tier 4 markets. The prices are less variable than you would think.

And the top-tier markets higher about 75 renminbi for the ticket price, but interestingly in two, three, and four, they’re very similar. They’re all grouped around RMB50..

Okay.

And then just on, I think, your Interest on Latin America, I know Brazil has got sort of specific issues, given economic growth and the taxation issue, but ex-Brazil maybe you can talk about Latina America when you made some positive comments around PSAs, but more onscreen installation sort of activity, signings etcetera?.

Richard L. Gelfond:.

d:.

That’s great. Thanks, Rich. Thanks, Greg. I appreciate the color..

Your next question will come from the line of Alexia Quadrani of JPMorgan. Please go ahead..

Thank you. Just sort of back on China, specifically on the local language down there, can you expand a bit on your strategy there? You mentioned there are bunch of films coming up and evaluate them sort of film by film.

Is that still the plan kind of sort to take them as they go or do you have a bigger, maybe broader commitment to sort of expand your commitment to the local language film? And then, also you mentioned sort of the new theater conversions are ramping, it takes a while before they become really beneficial to the system.

I guess, any sense when you look at '17, is that still a headwind or does that eventually convert into a tailwind for '17?.

So this is Greg. I’m going to talk first about the pictures and then Rich can talk about the theater growth. What we are doing is, we’re fully committed to the local language films and we will continue to be and we do so in concert with the Hollywood films.

So during the so-called blackout periods, which would be December, which would be Chinese New Year, which would be October, we tend to have a variety of options to pick from.

Let's talk for instance, I’m not going to get into the titles, because I don’t want to put anyone in a bad spot, but there are been a handful of titles that have been offered to us for the Chinese New Year and we’re going to pick what we think is the best title.

In the past, we picked a little early often before actually seeing the films, and now we put ourselves in a position that we’re able to actually watch the movies before we pick.

So we will be doing that over the course of the next month or so and I would say in the end of December for the Chinese New Year title, we will announce which one we’re going to do. But we will continue to have 6, 8, 10 local language Chinese films throughout the year in the film slate and we've seen great results with many of them.

Some of them are gap fillers and don't do as well like a regular Hollywood business, but it's a big portion of our Chinese business and it's something that’s also terrific about building up our relationships with Chinese filmmakers and studios.

And we also have an inclination to begin to include IMAX DNA, IMAX cameras into Chinese productions to go with our Chinese Film Fund. So we’re fully committed to it going forward..

So Alexia, I think it's both. You ask is it a headwind or a tailwind in the new theaters? So tailwind pushing us forward is the network growth and China is extremely rapid. I don't remember the exact number, but in the fourth quarter there is a lot of installs going on back end loaded now in China.

And then for next year, as I said, the install guidance has picked up worldwide and a lot of those are coming out of China. So when you look at it as a percentage, again you know this is rough, so every disclaimer at the beginning calls here.

But I think that we’re looking at a post 30% network growth in China again next year and even higher if you look at the quarter.

So, yes, it's going to take a while for those to mature, but on the other hand the 86 we installed since third quarter last year are going to be open for a year and that will increase, how that develops in an equilibrium is a too complex an algorithm for me to do at the moment, but I think it's both a tailwind and a headwind..

And Rich you mentioned or you talked a bit about the dynamic pricing in China.

Do you ever see that model or at least for the IMAX theaters coming here in the U.S?.

No, it's -- as I’m sure you know the studios have talked about dynamic pricing for a long time and the exhibitors have discussed as well. So for those on the call who aren't familiar with the concept, it would be when you're showing Star Wars, you charge $3 more than when you're charging -- showing a small romantic comedy.

But neither the exhibitors nor the studios have really embrace that model in the U.S., but China kind of grew up later as a market and that's not official but it's more embedded in the Chinese ecosystem..

Thank you very much..

Your next question comes from the line of Jim Goss of Barrington Research. Please go ahead..

Thanks. First, Greg congratulations on your promotion to -- you are given the Board seat..

Thanks..

And maybe for you or Rich, the notion of the programming mix continues to evolve and I'm wondering if at this stage what you think is the optimal number of films per year and how you allocate these screen time? You picked up at least one or two potential or major blockbusters every month in 2017.

Do you tend to -- are you tending to allocate the two weeks or three weeks as an initial thought depending on whether it's going to work and then fill it in with a couple of others or you know how is that progressing at this stage?.

So, Jim, well first of all thanks for [indiscernible] on the Board and secondly we’re trying to show as much flexibility as possible. So for instance, you recall last year we didn't play The Lego Movie. This year we’ve two Lego movies and '17 on our schedule. We often play movies for three or four weeks.

Certainly in the past we did them a lot more frequently, that’s come back down a little bit. I would say the average movie is probably two weeks, but we probably have -- not probably, we definitely have a lot more one-week movies than three-week movies.

But then when we’ve a title like a Star Wars or a title like Chris Nolan movie, we’re going to really dig in and play that movie, because it's innate to our DNA. So we have to be flexible. We will be flexible. What we’re not getting to do is come up with sort of these religious statements of we don't do that. We’re open for everything.

We’re open for what we think creates the most compelling content 52 weeks a year and sometimes it will be one week, sometimes it will be two weeks, sometimes it will be three weeks and every once in a while it will be four weeks. We do this also very much in concert with our exhibitor partners. We’re in constant contact with them.

They certainly have a strong point of view on certain things and we listen to them, because they’re our partner, we also work with the studio and we also usually tend to honor the relationships and the filmmakers who mean an awful lot to us. So there's no hard and fast rule. It's not as simple as the science. There's definitely some variability to it.

But I would say in general we’re more inclined to play things for two weeks now than we used to which would be three or four..

Okay.

And with the continued evolution of programming in China, are you getting any sense that any of the Chinese product could travel well to the United States or are we still not quite there with subtitles or however it would work?.

I think we are moving in that direction, Jim. I think that, that’s certainly the plan when you meet with people who understand kind of the long-term goals of the Chinese studios and the government, it's definitely to become -- you're not just to make movies for internal consumption, but to make them for export as well.

And it's starting to kind of trickle, we've done some of them in IMAX. Its early mixed results, but I think over time you’re going to see more of that. But I don't think that’s an imminent development in the industry..

Okay. And one final financial sort of thing. sales type lease adds -- tend to add a penny or something of that nature, rule of thumb to EPS.

When you have the hybrid JV type structure, does that also have that blended little bit of the JV and therefore, that there would also be an initial favorable impact in the quarter when the addition took -- takes place?.

Well, the hybrid JVs you end up expensing the system cost upfront. And then there's the typical sort of installation ramp up expenses. So the initial impact is going to be a drag and then you’re sharing in the economics over time. So the IRR project is quite attractive, but the initial upfront is an expense..

Okay. Okay. All right. Thank you very much..

Your next question will come from the line of Robert Peters of Credit Suisse. Please go ahead..

Great. Thank you very much for taking my call. Greg, I was wondering, you gave us some really great color on the 2017 and 2018 film slate with a number of good Hollywood titles coming up.

But I was wondering when you look at that film slate for China, is there any of those Hollywood titles that you think will do extremely -- do well in those markets? For example, in the past we’ve seen titles like Fast 7 do extremely well, but other titles like Star Wars haven't got it as much attraction.

I was just wondering if there's anything that jumped to the front of your mind when we look forward to the international film slate?.

So certainly you’re going to see great results from Disney. We saw what happened, for instance with a title like Utopia [ph] last year where it did such huge business. I expect the Beauty and the Beast will do remarkably well and the animation titles do really well there. Furious 8 in going to be giant.

Furious 7 was a massive title there and I think that the pent-up interest in seeing that movie in China will be very strong. Transformers has China DNA in it for several titles now. That until recently was the highest grossing Hollywood title in all of China. So I’ve no doubt that will do remarkably well. I think Guardians will do well also.

There's just so many of them. Spiderman has tended to do particularly well in China and then I think there are titles that are co-productions, if you will. So for instance the Great Wall, I am confident that the Great Wall, in China, in particular, will do very, very well.

So, I don't think there is going to be a shortage of high performing titles over the course of the next 12 months. And there is often other ones that come out that surprise you. For instance, in June, and who knows if it's getting in, I’m sure it will, but there's the Kingsman that’s coming out from Fox.

And the Kingsman last year, the original one, that’s Kingsman 2, did great business in China. By the way there's also movies like Despicable Me 3 that are coming out. So there's -- I can just keep going down the list. There's quite a lot to choose from and I would anticipate that '17 has some more traditional home runs than '16 has had..

Perfect.

And maybe just a follow-up on that, if we look at the quota, I believe the next round of WTO negotiations is starting in 2017, I’m just wondering if you guys could share any thoughts you might have on the current quota system and kind of where you see that going over the long-term?.

There are a number of open issues between China and the U.S. In terms of film distribution in China I will name three of the major ones, there are more than that. But three of the major ones, one is as you say the quota, another one is the city of [indiscernible] and another is the distribution pattern being dominated by China film group.

And I think those are the primary issues for discussion and the talks in '17. I don't think that all three of those are going to break one way or the other, but I think there will be some adjustments as a whole that will probably -- what's the word I’m looking for probably be favorable to the Hollywood community.

But how that gets divided up and which ones they are -- they don't know and we don't know yet..

Fantastic. Thanks, Rich. And maybe just one last question, then I will pass the line. When you’re looking at obviously increasing your film count and offered more international titles and being flexible.

Wondering if you could just talk about any trends you’re seeing in DMR costs on a per title basis? Do you see that going up over time or is there some way you can look to improve that process and reduce the cost?.

They’re definitely coming down. You have to remember that there are certain titles for particularly if we have cameras in use or aspect ratio, we're going to surround that movie and make sure that it's done with multiple passes to ensure that it's the best version of the IMAX experience.

But for instance, doing an animated title tends to be a little less expensive than doing a live action title and it's not something that we're not cutting the cost in half, but I would say it's a 5% -- 5% to 10% reduction and it's something that we're working on, we also have more teams doing it which helps make it more efficient and so we don't have to have as much over time and I think that’s something its very, very important and that’s on the actual physical production DMR.

Now part of that is offset by the fact that we’re also contributing more marketing to the titles. It's very important to us that we make sure that people know that these are IMAX movies and we work very closely. Eileen Campbell, our CMO and her team worked very closely with our studio partners on the marketing side.

So it's a little bit of lower the cost on one end, but then add some of it back into the marketing to make sure that people are buying tickets. So it works hand-in-hand. We’ve also found quite great cooperation with the marketing departments at the studios and with exhibition, because of the strength of our slate, particularly going forward.

So it's a little bit of take from -- some from one hand and move it to -- move it to the other..

Thank you very much..

[Operator Instructions] Thank you. Our next question will come from the line of Aravinda Galappatthige of Canaccord Genuity. Please go ahead..

Good morning. Thanks for taking my question. Rich, I was wondering if you can just touch on the buybacks. Obviously, $100 million is pretty sizable, but we’ve seen the buyback that have ease a little bit as we get into Q3.

So given the balance sheet and the fact that arguably this is not responding as well as we would like, given to the strong signings, maybe just touch on your thoughts going forward about maintaining that momentum?.

So as we said at the beginning, we thought the stock was a good investment. We thought that we were going to be opportunistic is what we said and I think we follow through on that, Aravinda. We’ve our plan is $200 million that was voted in by the Board.

Patrick is looking for the number but we bought in a hundred this year and we bought in some more than that last year..

About a 160, little bit less than 160 all in..

160 all in. So we told you what we were going to do. We are on the road to doing what we are going to do and then I think we evaluate it. As I said earlier with VR and our content strategy, we’re not really using a lot of cash right now.

However, should we get convinced that those are good initiatives with good IRR's, I think we -- just like on our JVs, I think we would use cash at that point. So I think given that we still have room under our existing Board program, it's too early to discuss what we will do after that..

Great. Thank you, Rich..

Our next question will come from the line of Darren Aftahi of ROTH. Please go ahead..

Good morning. Thanks for taking my questions. Just couple, if I may. If you exclude Wanda to your signings this year, are you kind of look at -- kind of the outlook going 12 months forward. What’s your kind of sense on the cadence of the theater signings. And secondarily on your Warner Bros.

[indiscernible] deal, any material change on the DMR fees? Thanks..

No material change on the DMR fees going forward. We do have different discussions with the studios about marketing support and I think as we go forward they are certainly encouraging us to do more of that and spend more on the movies and as Greg just said, we are doing that.

In terms of signings, if you exclude the Wanda deal, which I don’t know why you would, but happy to do the hypothetical. So it's 295 less 150, which is 145 which still beats last year and still beats most years and we have a quarter to go. So I’m feeling really good about sizes, lots of activity around the world, even excluding the Wanda deal.

By the way, by way of color in my remarks, I talked a little bit about Europe, but France is a territory that’s been relatively slow to develop, but Pathé has had tremendous results from the theaters they open, especially other two laser theaters and that led directly to the new deal in Belgium.

I’m excited about opening our first theater with Kinépolis, in Japan. The results have been extremely good and yet.

You have to remember that's with a stronger U.S dollar, so it's translating in ways that less than what it would translated a year-ago, but France's PSAs were up 10% in the third quarter and as Greg mentioned Latin America is doing very well. So it's not just the China story, but the China story is a pretty good one..

Thanks..

Our next question comes from the line of Eric Wold of B. Riley. please go ahead..

Thanks. Good morning. Question I’ve, I guess, on virtual-reality. I know its early, Rich, and you mentioned in the beginning that you’re kind of focus that model similar to the JV model here.

I guess, one, is that kind of the sole focus of that or is it a situation where we could see depending on the market and the partner kind of a three-pronged strategy like we have with the core cinema turning to an upfront hybrid and then JV.

And then, second part on content -- as you think about the content deals that you would be striking for those VR experiences and kind of competition at home with gaming etcetera, what you envision the split to be in terms of exclusive content like maybe you're the only place you can fly the millennium falcon for Star Wars, and Lucas and all that versus maybe more generic VR content deal, otherwise that are non-exclusive?.

So Eric, you know our business very well. So I think even though in the short-term we are doing JVs. In the long-term I wouldn’t exclude it evolving in virtual reality the way you suggest. So again today we won't do JVs in Russia because of transparency and political risk and things like that.

If we go into Russia, I would expect we would follow a similar model and we think this is a very huge opportunity. And there are -- if we could do a big deal where someone wanted to own and operate a number of them and give us a really good margin I think we would be very open to doing that also.

But our preferred way of going is going to be the JV and we think especially early on we are going to create a terrific product with our great brand that people are going to want and we’re going to drive it to the JV model, but we’re open-minded. In terms of content, I think it will follow similar to the way the industry works now.

So I think content will go through windows, so that will be VR content, so the first window would probably be IMAX location-based entertainment and maybe certainly eventually there will be others that evolve out of home, that I think they'll cascade into other windows including in-home windows.

Earlier in the game, I think there will be opportunities to have exclusive IMAX VR windows and we’re looking at bringing in different financing partners, so maybe do that where we could profit on both the content side and the distribution side.

But I think it's going to be a developing market and it's just a guess, but my guess is it will develop consistent with the way the cinema market develop..

Thank you..

Our next question comes from the line of Eric Handler of MKM Partners. Please go ahead..

So this is our last question. This is our last question, so go ahead, Eric..

All right. Thanks for getting me under the wire, Rich. Your install outlook for next year I thought was great and probably better than most people had anticipated in their models. And when you combine that with on paper what looks to be a very good film slate, the revenue outlook for the Company has the potential to be very strong next year.

My question is when you look at your expenses, are you committed to allow for margins to expand to a level of at least you know that 37%, 38%, 39% range that you -- we've seen over the last several years or maybe even getting closer to 40%..

So Eric, as you know, because you know us very well. We don't look at it that way as targeting a target margin. We do have a lot of installs next year on the outlook, but you have to be clear a lot of them are JV install, so it's not going to be kind of one-time revenues coming in. So you’ve got to account for that.

Expenses were always focused on the margins and if you saw our SG&A growth this year was in line for the core business or maybe better than we thought it would be going in to the year. However, following up on the last question by the other, Eric, we’re obviously trying to do grow our business in different ways too.

So I think as you look at the business and you separate it, we're going to try and be a little more transparent on this going forward. When you look at the core business, I think we’re very focused on the operating margins and we are very focused on improving them.

That doesn’t mean we’re not going to invest in other businesses that we think show promise and as I said earlier, we are not going to invest a lot of money, but we’re going to dabble until we see if they work and if they work we are going to invest more money.

So it depends how you look at, I think, probably analysts as insightful as you are, we will be able to understand that the core business margins are expanding and we’re investing them in the new business now, you’re going to have to make a judgment as they come together whether those are good businesses and we know we're doing, how we should spend more or they’re not.

I’m sorry, I know that was a rather long answer, but the short answer is we’re very focused on margin. So that's a good point to kind of conclude the call.

You know as we said during the call, kind of my two sentence summary is, if you're a long-term investor in IMAX and you look at long-term success, the things like network growth, it's things like PSAs and new territories, it's things like backlog, it's things like what other opportunities we're looking at.

Unfortunately from a box office point of view, it wasn't one of the best quarters ever, but we think box office tends to be ephemeral. So hopefully next -- on our next call after Rogue One and after Fantastic Beast and Doctor Strange and the 217 slate, we will see our long-term strategy come into financial focus. So thank you all very much..

Ladies and gentlemen, there are no further questions. I'd like to hand it back over to your speakers for closing. And this concludes today's call. Thank you for your participation. You may now disconnect your line..