Good day and welcome to the IMAX Corporation Fourth Quarter 2014 Earnings Conference Call. All participants are currently in a listen-only mode. Following the presentation, we’ll conduct a question-and-answer session. [Operator Instructions]Today's conference is being recorded. At this time, I’d like to turn the conference over to Ms. Teri Loxam, Vice President of Investor Relations. Please go ahead.

Thanks, Michelle. Good morning, everyone. And thanks for joining us on today’s fourth quarter 2014 conference call. Joining me today is our CEO, Rich Gelfond; and our CFO, Joe Sparacio, who will have prepared remarks. Also with us today is Greg Foster, our Head of Entertainment; and Rob Lister, Chief Legal Officer and Head of Business Development. 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 may 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 these 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 reconciliation to adjusted EPS and adjusted EBITDA as defined by our credit facility are contained in this morning’s press release. The full text of our fourth quarter earnings release, along with supporting financial tables is available on our website www.imax.com. Today’s conference call is being webcast in its entirety on our website. With that, let me turn the call over to Richard Gelfond.

Thanks, Teri. For IMAX, 2014 was a year of setting the stage to optimize growth for the long term. We launched our world-class laser projection system, sold 20% of our IMAX China business to two prominent Chinese funds, signed multi-year picture deals with Disney and Universal and Legendary, restructured our marketing organization, began rolling out our new brand campaign and continued to grow the network and sign new theater deals globally. We believe these accomplishments and many others position us well to take advantage of what looks like to be a blockbuster film slate for 2015 and beyond. Kicking off with our network growth, we had another solid year of building new theatres and globalizing our network. We installed 121 theater systems in 2014 resulting in the expansion of our total network to 934 theatres globally. In fact, we expect to pass the 1,000 theater mark in the second half of 2015 which is an important milestone for IMAX. We also signed a 118 theater agreements last year, which helped to replenish our backlog to almost 400 theaters and provide us with a good pipeline for network growth in future years. We now operate in 62 countries worldwide with 55% of our commercial network and 61% of our box office coming from international markets. Over 70% of our signings in 2014 were for international theatres spanning 26 countries. Given this fact we continue to expect a greater proportion of our box office to be derived from international markets as we continue to expand our theater network globally and take advantage of positive international box office trends particularly in China. China continues to generate healthy growth for us throughout the year with about 40% year-over-year revenue growth. And we will look forward to what’s to come from this market in 2015…

Thanks, Rich. Let's start with box office. In the fourth quarter we generated $226.9 million in global box office with $134.2 million or almost 60% coming from international markets. Our global PSAs in the fourth quarter came in at $292,000 with the domestic PSA of $248,000 and an international PSA of $333,000. Our annual global box office of $750 million was up roughly 3% from last year. Global PSAs for the year came in at $1.020 million with domestic and international PSA coming in at $800,000 and $1.235 million respectively. As Rich mentioned based on our solid indexing in 2014 especially domestically, we continue to believe that our decline in PSAs in 2014 was a function of the challenging film slate. The 2015 film slate is stronger and we are off to a solid start to the year so far. It was another strong box office year in China with about quarter of our annual in Q4 box office coming from this region. Annual PSAs for the country came in at $1.2 million which is consistent with the previous two years despite [Technical Difficulty]. We are back with you, sorry for the interruption. I'll start in terms of talking about the company's revenues for the year. The Company generated $102.5 million in total revenues in the fourth quarter, down from $105 million in the same period last year. Full year revenues of $290.5 million was up about 1% from the prior year and overall gross margins for the year as a percentage of revenue increased 250 basis points to 59.7%. Revenue from sales types and installation was $33.2 million in the quarter compared to $32.6 million in Q4 of 2013, reflecting the installation of 26 full new sales type theater systems in the most recent fourth quarter compared to 24…

[Operator Instructions] Our first question comes from Eric Handler of MKM Partners. Please go ahead.

Yes. Thanks for taking my question. Wonder if I could focus a little bit on China right now. Would you be willing to give what the total revenue and EBITDA was for 2014 in China just so that we can start thinking about the progression as you move towards an IPO? And then along those lines, do you have any idea what multiple was given for the movie theater IPO there? I am blanking on your biggest partner there. But does that accelerate your thinking about a possible IPO from what Wanda came out at their IPO and does that change your thinking at all from IPO perspective there?

So first of all, Eric, we can't yet breakout the revenues and the EBITDA and the earnings in China, although during my remarks I went through that on general based. Did you want to add something there, Joe?

Yes. We have in the K which will be published today, the revenues in Greater China was $78.8 million for the year. So that we can disclose.

Okay. In terms of your second question, it's Wanda which is our largest partner in China that went public and they went public at 22 RMB and the last I heard it was trading at about 80 RMB. I have no idea what multiple that is, Eric. You probably can get that through one of the services. But I don't know. The answer is since we brought in our partners in China we have mentioned that part of our long term strategy would include the possibility of an IPO of our China business at some point. And there are lots of things to monitor on the health of the business, our growth curve, signings, and the films we are playing, all sorts of things as well as the capital market in China. And I would say we continue to monitor all those things when we decide what we are doing it, if it is an IPO or some other route.

Thank you. The next question comes from Townsend Buckles of JP Morgan. Please go ahead.

Hi, thanks. Can you - for Joe maybe, can you give how much of your backlog of new screens and upgrades is laser systems? And maybe for Rich, as you talk to exhibitors about building new screens, what is the receptivity to building new larger laser screens and should these be a bigger part of new signings going forward?

So I'll answer that first and then Joe will give you the numbers. There is a lot of interest in building larger screens. As you know just to make sure everybody else understands it, because the laser system throws out more light there is a potential to build larger screens over time and as we keep engineering it will be larger and larger and it won't surprise you Townsend that there is an appetite for building larger screens particularly in Asia and in developing parts of the world where is obviously capacity constraints in smaller theater so you take a market like India which has a lower ticket price but you can put a lot of people in those theatres. That's why we are seeing increase about that. And I would be surprised if over the next several years you didn't see a generation of IMAX screens that was materially larger than the large ones that are out there today. And Joe the other part of the --

Yes. In terms of the total numbers in the backlog at the end of the year it was 71 systems including 25 upgrades.

Lasers, you are saying.

Laser upgrades, yes.

Okay, thanks. And, Greg, you tried a lot of new things this quarter. And it seems like they have been pretty successful. Looking ahead beyond your real tent pole titles that you will devote the full network to, do you see the model shifting more towards playing the top movie at the time regardless of genre, and giving exhibitors more of a choice what they want to play at least in this fuller months like we are seeing right now with Fifty Shades.

So we are definitely going to continue to support more than anything else our pillar titles, that’s the sort of hallmark of what we do. The Chris Nolan movies, the Marvel movies, Star Wars et cetera. But we’re definitely going to continue to show within shoulder periods more flexibility to meet demands of customers, of moviegoers. What we can't do is -- the word I am using is a sort of fundamentalism, we can't say this is the movie that we are going to play and we only play fan boy movies and that's that. We have to be careful to not cross the sort of boundary of what an IMAX movie is and what's not. But at the same time like we did with the American Sniper which obviously proved to be quite successful and which we picked eight days before the movie came out or Game of Thrones or what we did last weekend with Fifty Shades of Grey, we have to show flexibility particularly in those shoulder periods and that's what we will continue to do.

Thank you. The next question comes from Ben Mogil of Stifel. Please go ahead.

Hi, good morning. And thanks for taking the questions. So Townsend got my one on programming. So my questions sort of more broadly, you have sort of accelerated install run rate if you will on the fourth quarter. Can you talk about what your -- sort of preliminary what kind of comments you are getting from exhibitors as they head into 2015 slate? Are you seeing accelerated RFP activity or you are seeing, you sort of given the cadence so when you see the installs, but I am kind of curious in terms of what's not yet in backlog but what you think is probable going forward, what kind of sort of commentary are you getting from your partners.

Well, every year when we put together our budget, part of our budget and what we give you as our proposed -- our analyzed installs for the year as the sign and install bucket and what we have done this year is we’ve done it consistent with past practices. So what that sign and install bucket is. I think what you are -- kind of what you are asking indirectly is it possible that that could be more than we think because the slate is so strong this year. And the answer is yes, that is possible. That's not the way we forecast it, that's not the way we are setting up expectations. But there is a lot of excitement about the 2015 slate throughout the industry and one thing it is important just to remind everyone, is that so much of our business is international. So films that you guys may never have heard of like we open Dragon Blade in China today and we had Wolf Totem last week, those are exciting Chinese exhibitors in a way that they are not particularly exciting US exhibitors. So you have to break it out on a country by country basis and look at it. But there is a lot of optimism around the world in the exhibition industry about the slate. And I should add, we are optimistic too. I mean we think it is going to be really good year for film.

And Rich, and I want to follow up to that. I mean in some markets where the economics are really weak and or the currency is really weak and maybe we can even just set aside Russia because that's obviously very unique situation. Are you seeing any kind of more tentative scope in some of the exhibitors there who were previously sort of much more gung-ho and adding installs.

Well, remember that a lot of -- about half of our business is joint venture. So the currency may affect their proposed payback terms and but we are putting up the money so in a sense the stronger dollar helps our investment side in some of these countries because we are putting up the capital. But the shorter answer is no. Really haven't seen much of a change. You nicely didn't ask but happy to comment on Russia as well, which is that in Russia few things are going on. One, if you look at the box office in ruble it is actually just as strong as it has been. It is doing very well including in the Ukraine by the way. If you look at in dollars obviously the conversion makes it look somewhat different. One way we are protected in much of the world is our royalties are paid in dollars with minimum royalties in dollars. So we are less subject to movement of the dollar than many other companies. That doesn’t mean in a place like Russia we are not interested in making some short-term concession and we've done that in exchange for concessions from the other side of the table. So we’ve spent a lot of time thinking about currency risks. But because of -- and the fact that the minimums are generally paid in US dollars, we don't think we are as sensitive to currency risks as many other multinationals companies might be.

And those minimum you are talking about sort of on the JV side. It is the usual formula but there is a floor. Is that where you are referring to?

Yes. On the sales type leases, there is a minimum royalty which is payable on dollars. So there is no currency risk with that happens on the JV side, there are mix things and obviously in local currency if we are investing in dollars, we can get more our dollars at local currency. So that might help our cost on some of the JVs. On the ticket price side, obviously it could have somewhat of an impact if the dollar weakens but overall we don't it is going to be a big deal for us. It definitely could impact us a little bit. But I don't think you should think about as a typical multinational company because of the fact that of this natural hedge from the dollar minimums.

Thank you. The next question comes from Eric Wold, B. Riley. Please go ahead.

Thank you, good morning. So couple of sort of follow up questions to previous questions asked. I guess one on kind of the pipeline the guidance for installs includes assumption of some deal signs, does it get inherently more difficult for signing and installs in a given year? Especially you move through with more the business focused on international and new theater builds versus retrofit?

Really good question, Eric. The answer is in general yes. And that's why we have taken a fairly conservative approach to signing and install this year in our guidance. On the other hand though when you have a year like this one which the films slate is so expected to perform very well, I think that would cut against it in certain ways. And we have seen some early interest in signing and installs that we hadn't seen before. So I don't think we are going to get bite by your observation but again who knows it is too early in the year. But I do think it is possible that there are more signing and installs than we expect.

Perfect And then second question. I know you are trying to voting more dollars towards marketing to build the brand. I guess question for maybe Greg, as you think about the choice of films that are put on the screens like 75 towards Fifty Shades of Grey and Game of Thrones and maybe some smaller limited run, is the goal always to make a profit on those runs above the DMR cost or are you going to kind of take a little bit loss as kind of marketing development brand and keep those screens filled?

I think the answer is we are not looking to not make a profit. But at the same time if there is something that we could do like Game of Thrones that generated so much chatter and was clearly beneficial to what we are trying to build in terms of alterative content et cetera. We are willing to do it. We are always looking for new and innovative ways to create 52 weeks of compelling programming for our theatres. That's what our goal is. And when I looked at our slate before this conversation, we basically have one week this year that I don't know what we are programming, that's it. That doesn't mean all the movies are going to work. And when they don't work we will be able to move things in and move things out obviously in consultation with our exhibitors and studio partners. But we are in a pretty good spot right now with 51 of the 52 weeks present and then again just directly answering the question that we will take some risks if we think it is in a long-term benefit of our brand and our customers.

By the way, Eric, I think Game of Thrones was profitable.

Yes. It was literally profitable for sure. It was even more profitable on a brand basis.

Thank you. The next question comes from Steve Frankel of Dougherty. Please go ahead.

Hi, good morning. Given the slate this year and next year, have you had any discussions with your domestic partners about splitting some of the zones to increase your density in some of the bigger metro markets in the US?

They always had been able to put a second theater in their zone, Steve. And you know that something that we encourage in the fact there are number of them that have a second theater in their zones. But specifically the answer is no, not in relation to that but that something we always talked to them about. We are always like with our major clients say why not go on this multiplex in this zone, why not go on this multiplex in that zone. And that's ongoing. We do it all the time not specifically in relation to the 2015 slate.

Okay. And in China, the PSAs continue to look impressive. But if you kind of broke that down and looked at the more mature markets, maybe the ones you went in to a couple years ago, have those PSAs held up and is it just the new builds that are maintaining the average or are you still getting good performance in some of those older markets?

No, there does not appear to be any deterioration because of the new building which is another way of answering your question. But no Steve, its pretty much uniform across.

Thank you. The next question comes from Aravinda Galappatthige of Canaccord Genuity. Please go ahead.

Good morning. Thanks for taking my questions. Rich, I was wondering if you can comment a little bit more on the signings outlook. You had 104 new systems signed in 2014, as you look to 2015 in addition to China, is there any sort of other international markets you’re starting to see more traction from, wanted to get some commentary on that. And secondly, with respect to the TCL joint venture, I know you touched on the timing there. But I wanted to maybe see if you can provide some additional commentary around what progress has been made on that front thus far. And what to the extent that you can, how you see the magnitude of that opportunity, thanks?

So first, your question about signings, our level of business activity is really good. Aravinda, we have a monthly call with their sales force around the world, and we had it, I think, last week. And in fact, the level of activity seems to be as it’s been the last several years quite strong. I think lot of stuff going on in Europe, in the Middle East, believe it or not, Russia there’s a number of things that surprises you and surprises me. Japan, we had a very key strategic signing with Toho. And Toho is the number one exhibitor in Japan, as well as the number one studio, and they’d never been in our business. And their opening is in early mid-April actually, and I think that’s from – and it’s in downtown Tokyo. So I think if that one goes well, that could certainly open up that market in a more material way. Latin America is starting to open up a little bit more than it had before, the Middle East, China as you alluded to is just a juggernaut. So our budget is consistent with our past years budget for signings, and you haven’t seen any slowdown. And then maybe to add a little more to that, usually when it’s a good film year, there tends to be an uptick, we didn’t budget for that to happen. But when people – remember 80% of our signings come from existing customers. So when people see really good results come, they tend to want to go more into the IMAX business. So I feel pretty good about the top that tone. In terms of the TCL, I think you’re mixing two TCLs. One is a TCL theater in California, where we’re converting to laser, and that’s expected to open at some point in April. I think when you were asking about TCL, were you asking about the home theater business? Aravinda, I think that’s what you’re asking about?

Yes, Rich, the home theater system in China.

Okay. So that business, we recently hired a CEO to run that business with some good experience. There are some very straightforward benchmarks that we’re putting in, and our commitment as well at TCL's commitment to that venture is based on meeting those benchmarks and that rollout. And I think by later this year, we’ll understand more and one of the reasons we said Investor Day, for June, is I think we’ll talk in a lot more detail at that point, about that overall strategy.

Thank you. The next question comes from Daniel Ernst of Hudson Square. Please go ahead.

Yes, good morning. Thanks for taking my call. Two questions if I might. First, you’re looking at your operating cash flow, up 57% year-over-year. I think that speaks to the benefit of the scale you’re seeing in the size of your network, and so as you look at how you deploy that cash. Does it make more sense, giving success you’re seeing from that scale to invest in more scale, or can you grow your network faster understanding that rollout, the new builds in China, are you waiting in property development but around the world or even domestically you’re making smaller zones. Is there a way to grow the network quicker than you have been, which is arguably, has been faster, but given a success for cash flow it seems like there’s an opportunity to potentially accelerate. And then secondly as it relates to China, notwithstanding the success of the Wanda Cinema IPO the property market in China declined or the growth rate declined substantially in 2014, that’s having the impact on the pace of new builds for Wanda, your other partners in China? Thanks.

So your first question, can we accelerate the growth of the network because of our cash position? The answer is, we’re always trying to do that, but the limitation is really new builds internationally so that you can’t build a mall faster than you can build the mall. So if it takes two years to build a mall in India no matter how much cash you have. You can’t build it in four months. So through conventional ways it's difficult to accelerate or build out just because of the inherent timing of building new buildings which is a lot of our international growth. With that said though and I’m really glad you asked the question. IMAX’s place in the ecosystem of Hollywood has changed radically over the last number of years. So when days are set for release of movies, most studios virtually all for blockbusters consider the possibility of an IMAX date and when that movie might be released. And it's not a complete coincidence that this year a lot of the blockbusters at three weeks apart and that we are involved with virtually all of them or the vast majority of them. So from those relationships with studios and from those relationships with filmmakers has come a lot of interesting opportunities our way. And they include things like Game of Thrones; they include things like Crouching Tiger. They include a lot of things that we're experimenting with. And I think some of those things, there’s a lot we are not talking about because we want to flush them out farther. And I think if we flush them out and if we get convinced that there are good opportunities, I think there would be places where we would feel a high, like of a very good return on our…

Thank you. The next question comes from Mike Hickey with The Benchmark Company. Please go ahead.

Hey, guys, great quarter. It's sort of a fun question I guess but I’m sort of curious what you think your top three films would be for your domestic market? As it relates to your fiscal 2015 performance opportunity and maybe China if you can. And then any local China films that you see potential that we should consider. That would be helpful. Thanks. And a quick follow up.

Well, there’s no way I’m going to talk about 2015 without talking about Star Wars. So that’s the safest but most honest answer I’ve ever given in my entire life. Obviously, the Marvel titles are always have a built-in audience but I think what’s really interesting this year is and this is not the place for me to be a prognosticator. So I’m not going to do it but on this call, but if you go and look at the slate you’ll see that there are handful of really, really interesting movies that I think have the potential to breakout. And one of the things that are most interesting about this year as I was relating to the fact that we have 51 of our 52 weeks already programmed. Is there a pretty interesting amount of films that have moved to what you would traditionally call the shoulder periods? One I will point out which I’m personally quite interested in is a movie called , The Walk which is the Bob Zemeckis movie which comes out in early October. There’s just a lot of really interesting movies that have moved to different timeframes which gets to the bigger notion that seasonality is a bit of the thing of the past, it's not completely but we have a movie like American Sniper opening up in the middle of January and it does $300 million plus and you combine that with the year earlier when Gravity opened up in early October and did what it did. I think there’s lots of opportunity to kind of come in different areas. So anyway that’s the answer to that one and obviously Jurassic World there’s just so many of them, Terminator, but the other things, Hunger Games -- the other thing that I think is interesting in China is that the amount of movies that we've gotten in is quite fascinating and significant as we mentioned on the call it's 28 last year, and my guess is it’ll be about that if not more this year. But five, six, seven of those movies are always local language films as Rich mentioned Dragon Blade opened up very nicely and Wolf Totem already had this week which is Chinese New Year there’s more to go with that. And I think you can find, you can count on a robust international Mandarin language slate for us so there’s my answer.

Thanks, Greg. And you touched on this briefly, by the way that’s helpful. And I guess you don’t always have the most visibility on this as you would want when you look at sort of your top films for 2015, I’m curious how you see those films successful entry into China. And maybe any comparable launch timing issues I guess or relative to the domestic launches that we should consider. Thank you.

Yes, that’s all about China film group and I think it's not something that we're in the middle of. Obviously, our goal is for to be as fast as we can in terms of day and date but that’s not something that -- we don’t have any behind the scenes impact in that, that’s all done through the studios and through China Film. And that’s we go along for the ride. So, so far, so good but we’ll see what happens as the year progresses.

Thank you. We have time for one more question. Our last question comes from Rob Peters of Credit Suisse. Please go ahead.

Thanks. And thanks very much for squeezing me in. I was just going to -- I just wanted to clarify I think Joe may have already touched on this but you’ve got a very strong start to year. And it looks like there are a number of titles coming out in Q1 and just kind of how we should think about the number of releases for the back half of the year and I know previously you’ve done kind of mid 30s but should we be looking above that going forward?

I mean globally we’ll hit 40 this year between the Mandarin titles, the quick switches and the shoulder periods and the slate that we've already announced. I would be very surprised if the first number and the number of titles that we released globally didn’t have 4 in it.

So I’d like to wrap it up and just kind of share with you a little bit about how we think about our own business. So I stole this comment from someone else at a recent conference, but what the person said was when trains dominated transportation. People in the train industry saw the advent of alternative means of transportation like cars and eventually planes and boats as competition because they thought of themselves as being in the train business. I just want to make sure everyone understands that we don’t see ourselves as being the IMAX business as narrowly defined as it exists today. We are seeing ourselves as being the entertainment technology business. And we think there are unbelievable opportunities jumping out around us from all the changes going on and we think we're just extremely well positioned in the infrastructure and we see ourselves as innovators, we see ourselves as not holding on to the status quo for dear life, we see changes in area of opportunities for us and as I alluded to and we'll pull -- put more meat on the bones later. I think these are among the most exciting times at IMAX and I think you could focus on the 2015 slate and you could get really excited but unintended you could focus on the bigger picture. And I think IMAX is really well positioned. Thank you.