Q4 2019 Earnings Call

[music].

Greetings and welcome to National Cinemedia, Inc. full year and fourth quarter 2019 earnings conference call.

This time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Please note. This conference is being recorded I will now turn the conference over to your host Katy Scherping. Thank you you may begin.

Thanks, Bobby good afternoon, everyone.

I'm joined today here in Denver by our CEO travel Censky.

I'd like to remind our listeners that this conference call contains forward looking statements within the meaning of section 27, eight other Securities Act of 1933 as amended and section 21. He of the Securities Exchange Act of 1934 as amended.

All statements other than statements of historical facts communicated during this conference call may constitute forward looking statements.

These forward looking statements involve risks and uncertainties important factors that could cause actual results to differ materially from the company's expectations are disclosed in the risk factors contained in the company's filings with the FCC.

All forward looking statements are expressly qualified in their entirety by such factors.

Further our discussion today includes a non-GAAP measures in accordance with regulation G. We reconcile these amounts it back to the closest GAAP basis measurement. These reconciliations can be found at the end of todays earnings release or on our Investor Relations website page of our website at NCM.

Dot com.

Now I'll turn the call over to talk [laughter]. Thank you Katy and good afternoon, everyone welcome to our fourth quarter and full year 2019 earnings call.

I'll be sharing some high level insights regarding our strong Q4 performance at or better than expected full year results and our plans for 2020.

Kt will then provide more detail about our 2019 results and our 2020 guidance and then as always we will open up the line for your questions.

I'm very happy to report that we finished 2019 on a strong note posting record Q4 advertising revenue.

Record full your national revenue. This topline revenue growth resulted in better than expected adjusted OIBDA growth for both the current quarter and the full year and this momentum is continuing into 2020.

Talk more about 2020 at our progress against the strategic plan that we laid out in November and just a few minutes.

Q4, 2019 revenue overall increase to just over 7% year over year, driven by a 13% increase in Q4 national revenue.

As I mentioned, our company posted record fourth quarter advertising revenue driven by higher national sales demand and the launch of our new inventory after the advertise Showtime in center, Mark and Regal theaters.

This new premium inventory features five inch of advertising that runs right. After the advertise Showtime as you ought to train lights, Jim, which we call lights down inventory and one minute of inventory their lunch just before the last one or two trailers prior to the feature films that we color platinum inventory.

Our Q4 broke reflected strong national inventory utilization as well as the sale in December of our new platinum inventory to a leading technology company, an automobile manufacturer and a major retailers.

It's important to note that the platinum cpms were more than 50% above our national pre show average.

Marketers clearly appreciated the value provided by the higher reach and better engagement not to build and other premium video media options.

Although our regional and local business finished a bit softer than I would've liked in Q4, there were signs at the recent strategy changes we made in these parts of our business will begin to take effect and 2020.

[noise] due to the strong Q4 national demand at lower than expected holiday movie attendance. We did have a slightly higher than expected make good to 8.7 million. Unfortunately attendance for the first month excuse me Fortunately the attendance for the first month and a half of 2020 has been stronger than expected and we already have a delivered a large portion of that make good.

[noise] I'm very proud of the NCM team for their hard work to implement our new strategic plan, including the launch of our new premium inventory strategy. In Q4. This has resulted in stronger than expected adjusted OIBDA growth for the year and great momentum going into 2020.

Our largest nationally at core categories. In 2019 included media and Entertainment insurance Telecom electronics, and automotive with the highest growth for the year coming from the insurance retail CPG electronics and restaurant categories.

It's also notable that we'd have started to break through the large CPG category and experienced the lowest advertiser churn in five years, indicating that markers appreciate our brand building capabilities and our ability to cut to the clutter of digital and TV platforms.

Much of our 2019th growth was driven by higher utilization as our cpms were negatively impacted by a higher percentage of upfront revenue versus our revenue from sales and the scatter market in 2019 compared to 2018. This is a favorable trade offs given the benefits of locking in dollars upfront versus the uncertainty of the scatter market quarter to quarter.

Her and year to year.

Moving forward, we expect our lights down inventory to help increase average upfront cpms as we get into the 2020 2021 upfront selling season.

We just recently ramped up our 2019 2020 upfront season, and I'm pleased to say, we had another strong upfront versus last year.

Even though we did not have arden, new after Showtime inventory in our product mix during most of the upfront selling process.

Our 2020 2021 upright kicks off in the next couple of months and we will aggressively take tomorrow at our new premium inventory format that will further improve our platforms reach and engagement, while delivering and even more capsid cinema experience.

We're confident that our new platinum inventory will sell well in the upfront market as it requires more advanced planning by marketers, which is why it's a major focus of our 20 2021 upfront strategy.

Given the high gross margin of our platinum inventory it will be a key part of our plan to expand our margins and grow adjusted OIBDA.

And what the success in 2019 of our focus meetings directly with brand in AD agency decision makers during the upfront season will be an important part or 2020 and 2021 selling strategy.

Additionally, we continue to see benefits from our digital investments the demand for the bundling up digital impressions with our on screen advertising continues to grow.

During 2019, we had an almost 6% increased and the number of clients when a digital component integrated into their media buying.

And over 41% of our national and 26% of our local and regional AD revenue included an integrated digital campaign.

These integrated campaigns resulted in a 133% higher contract value versus onscreen only contracts and are helping to grow our average cpms along with driving higher inventory utilization.

The continued expansion of our absent other digital products and data offerings drove a 12% increase in digital revenue in 2019 over 2018. This past year brands like ballpark Hot dogs and state farm rent innovative integrated digital campaigns with our newly arcade and trivia products respectively.

As demonstrated by our strong 2019 finished our five pillars of growth strategy that we outlined in our November call. It's all reading, creating has already creating meaningful shareholder value and once again, providing a unique investment vehicle that delivers bloody substantial cash return to our dividends and stock appreciation as we continue to draw.

Hi, free cash flow growth.

The first key pillar of growth and involved increasing the quality and value of our on screen inventory was launched in November in recon Cinemark theaters.

It really reaction from markers has been very positive as we sold our first platinum spots in December and received strong interest from high profile plans for both lifestyle inventory as well as our platinum spot.

In fact recent indeed recent research indicates that consumer recall and engagement for the platinum spot has been outstanding.

These new premium priced higher quality products required more advanced planning by advertisers. We believe that there will be at very attractive addition to our product mix during the 2000 2021 upfront selling season.

It allows to aggressively bundled this higher value inventory with our duty pre show program to increase both utilization and average CPM.

You should also note that since a portion of our national inventories moves to the after to after the advertise Showtime the quality of our local and regional inventory will also improve as it moves closer to the Showtime.

Second till involves the plant upgrade of our sales planning proposal and inventory tracking systems, our companywide initiative to increase our operational efficiency and effectiveness with new processes and technologies is twofold first designed to improve our speed to market does become even more.

Important with the growth of digital and secondly, you allow us to be more efficient with our delivery of impressions that will help increase utilization and helped to reduce our quarter end make good liability. We'll begin our testing of the systems. Later this year with an expected launch in Q1 of 2021.

The third <unk> growth pillar is the continued investment in compelling digital entertainment absent games as mentioned 2019 was saw the successful launch of several these new digital products, including initial versions of our trivia games name that movie in shuffle consumer demand for these funds entertaining games grew meaningfully in 29 team is 2019 as they were played out.

Over 7.6 million times compared to 1.7 million times in 2018.

Based on this growth in our consumer research movie goers wanted more trendy related games with more content more debt more we the IP in more ways to play with rent.

So in 2020, well be enhancing and expanding our trade the offerings with major upgrades to shuffle name that movie as well as integrated web gaming Newby Dotcom, where people can find in play all of our digital games.

All these digital products create new ways for branch to engage with movie audiences beyond the big screen to reach them before and after the movie anytime and anywhere.

This also provides us with our own digital AD inventory in extremely valuable addressable first party customer data.

Which brings me to this fourth strategic pillars for growth building, a data driven business.

Creating a more data centric AD platform is critical for us to be able to more effectively compete in today's modern video advertising marketplace.

We continue to grow our first and second party datasets from 27 million in 2018 to over 106 million, which exceeded our goal of 100 million by the end of 2019.

Expecting to almost double that number to 200 million datasets by the end of 2020.

Representing almost 20% of the movie going audience.

We believe this represents the critical mass that will allow us to really begin to effectively monetize that data by retarding audiences with digital advertising through our cinema accelerator product and more effectively support cinema campaign ROI for our advertisers.

Importantly, the vast majority of our digital campaigns are now using one to one targeting.

And finally, the fifth pillar of our growth strategy is to optimize our affiliate network.

Adding key exhibitors in select markets that will increase our overall impression base and extend our geographic reach and market coverage. We are currently in discussions with several circuits about joining our network and our reviewing the profitability of a few affiliate contracts relative their strategic benefit.

Affiliate partnership team is also working and expanding our new premium inventory to our existing has said so we can sell all around screen products across a large portion of our network. So far 10 of our current affiliate partners have agreed to display the new premium inventory in addition to Regal and cinemark.

We expect to have up to 15 affiliates participating in our new unapproved show format in 2020.

By the end of year, they expect to be selling our new premium inventory across almost 60% of our network attendance.

As you can see at good reasons to be very optimistic about NCM suture I'm also becoming more optimistic about the 2020 box office as some early Q1 films such as Dad voice 1917 parasite in most recently Sonic the Hedgehog have opened much stronger than expected.

Looking further ahead, there was high anticipation from at least like Wonder woman 1984, Black widow minions, the rise of Grill fast and furious nine denim to the new Bond film No time to died the turtles Ray on the last Dragon and Disney's live action remake of luck.

As always there will be undoubtedly be a few surprise hits, but the 2020 box office relying more on a broader number of films.

Then if you huge temples.

In summary.

The unique immersive big screen, social expensive to cinema continues to resonate with all demographic groups, especially the millennial and gensix audiences. The video AD market also remained strong as Macpherson looked for strong brand building less cluttered media platforms to augment their digital buys I believe with the successful execution of our growth strategy.

The NCM is positioned for a very bright future in 2020 and beyond.

Our board of Directors also shares our optimism on the growth as we see ahead as a result, I'm pleased to announce the board has authorized a 12% increase and the company's regularly regular quarterly cash dividend from 17 cents to 19 cents per share a common stock, bringing the annualized dividend to 76 cents per share. This.

The increase in our dividend reflects our belief in our strategic growth plan and our intention to just to distribute substantially all of the free cash flow to shareholders.

This level of dividend along with our cash balances will allow us to maintain the financial flexibility that will support our investment in future growth initiatives.

For anyone who would like to and even deeper dive into our current view of the business and our longer term business strategy will be holding an investor day on Wednesday March 4th at NASDAQ markets, like New York City for existing and potential investors and analyst.

Lease plan to join us as our NCM management team.

And expert panel us deliberate and former presentations and discussions addressing such topics as near and long term growth strategy. The state of the media industry and a closer look at the overall media and advertising businesses.

Details can be found on the Investor Relations section of our website.

Before I turn it over to Kt and wanted to acknowledge the fact is just her final earnings call. The last one before she retires men cm in three weeks, we'll Miss Kitties leadership and passion for her work. She has been a key leader for over three years, that's putting valuable perspective to our company's executive leadership team.

For last official duty will be to host our Investor day on March 4th before moving into a consulting role to provider expertise in guidance to me and the team and to support the transition to a new CFO.

We have no specific news to report yet on her successor, but we're in discussions with several excellent candidates and helped up something to announce shortly.

So thank you Katy and I'll now turn the call over to you.

Tom It's been my privilege to work with NCM to accomplish so many major initiatives for the company over the past several here and I know that I leave our company in the very capable hands of our executive team. It's also especially nice to go out on high now with a record Q4 and impressive finish to the year.

I'll now walk to the Q4 and full year operating results. The Tom highlighted in further detail and then provide our full year 2020 outlook. Then we'll open the call to your question.

As always we will be providing a supplemental presentation. These results on our website for your future wrap Brent.

For the fourth quarter, our total advertising revenue with a record $147.2 million compared to $137.4 million in Q4, 2018, an increase of 7.1%.

These better than expected to result reflect a strong quarter for our national advertising sales team, partially offset by a decrease in regional and local revenue and lower beverage revenue.

Total Q4, adjusted OIBDA was $83.5 million, representing an increase of 7.3 million or 9.6% versus Q4 2018.

The adjusted OIBDA margin for the quarter increased to 56.7 per cent compared to 55.4%. During the same period last year due to an increase in the mix of our higher margin national revenue, including the benefit from our first sales at the high margin Platinum unit.

The increase in adjusted OIBDA and adjusted OIBDA margins was driven by a 13% increase international business related to very strong demand from advertisers as reflected by our network inventory utilization of 156% driven primarily by an 11.4% increase it impressions.

For the quarter the increase in inventory utilization from 127% in Q4 2018 in part related to the delivery of impressions from the prior quarter and make good balance partially offset by 9.1% decrease in attendance versus prior year.

The impact of our higher national inventory utilization was partially offset by a 1.8% decrease in cpms related to the higher mix of lower CPM upfront campaigns, driven by or desire to expand our client base into new categories that included entry level pricing with the goal of expanding our overall utilization.

I would also note that our December plateau spot is not included in our calculation of Cpms for Q4 2019 for competitive reasons.

Q4 regional business started to show signs of stabilization as regional AD revenue decreased by a modest $200000 or 1.9% versus Q4, 2000 $18 million to $10.5 million.

This small decrease was due to a decrease in average contract value for contracts under $100000 and a slight decrease in regional digital revenue.

Q4, local AD revenue decreased 9.7% or $2.1 million to $19.6 million from $21.7 million in 2018.

This decrease in local advertising revenue was due to a decrease in the volume of local contract and a decrease in the average contract value.

With the restructuring of our local selling strategy and commission structures late last year and better local inventory placement within our newly pre show, resulting from the shift of some of the time some of that national inventory. After the advertise Showtime we are confident our local business will begin to grow once again in 2020.

Our local business will also continue to benefit from the strength in our local digital products.

Overall, our Q4 digital revenue increased nearly 24% as we continue to see growth in the percentage of customers that were integrated with local onscreen ad buys.

Q4 beverage revenue decreased $600000 or 8.1% from $74 million $7.4 million to $6.8 million versus Q4, 2018, driven by an 8.2 per cent decrease in founding member attendance, partially offset by a slightly higher CPM.

Our Q4 2019 advertising revenue mix was 75% national 7% regional 13% local and 5% beverage.

First a 71%, 8%, 16% in 5% respectively in Q4 2018.

For the full year total revenue increased 0.8% or $3.4 million to $444.8 million from $441.4 million in 2018.

These better than expected 2019 results were negatively impacted by a slightly higher Baker said the ended the year at $8.7 million versus $8 million at the end up 22018.

As Tom mentioned with some better than expected early Q1, 2020 film openings. This higher here and make that is providing benefit to our Q1 2020 result.

Our full year, adjusted OIBDA increased $2.1 million or 1% to $207.5 billion from $205.4 million in 2018, and adjusted OIBDA margins increased to 46.7% from 46.5% in 2018.

Including a $2 million noncash onetime Q3 investment impairment adjusted OIBDA for the year would have grown 2% over 2018.

Full year 2019 National AD revenue increased 3.9% or $12.2 million to $324.2 million versus 2018.

This increase was driven by a 2.5% increase in impressions sold and increases in branded content and platinum sales, partially offset by a 3.2% decrease in CPM due due to a mix shift from scatter to the upfront.

The increase in oppression sold was the result of an increasing utilization to 125.9% from 113.5% offset by a decrease in network attendance of 7.6% compared to 2018 that was driven by a record 2018 box office.

Consistent with Q4, the decrease in Cpms reflected a higher mix of upfront upfront deals versus scattered deals and entry level pricing for new clients.

For the full year 2019 regional AD revenue decreased 9.5% to $24.7 million from 20 to 27.3 million in 2018.

This decrease is driven by the ship original advertising to national advertising by several large clients and the decrease in average contract value driven by a reduction in spend from a few large returning customers in 2019.

These decreases were partially offset by a significant increase in contract volume and the 18.3% increase in digital sales revenue from regional clients in 2019 versus 2018.

Moving forward in 2020, we will be adding the regional revenue result into our national revenue for our revenue reporting to reflect the fact that our regional sales team is man as part of our national team due to the significant crossover with many clients.

Consolidating the small part of our overall revenue international revenue will provide consistency between the way we run these parts of our business and the way we discuss them in our external financial reporting.

For the full year local address local AD revenue decreased 5.4% or $3.8 million from $70.7 million to $66.9 million compared to 2018.

The decrease in local advertising revenue was due to a decrease in the volume of local contracts, partially offset with 15.5% to 7% higher local digital sales revenue.

We expect clients increasingly integrate their local cinema AD buys with our digital re targeting capabilities after patrons lead the cinema.

Full year beverage revenue decreased 7.6% or $2.4 million from $31.4 million to $29 million versus 2018 due to 7.1% decrease in founding member attendance, partially offset by a slight contractual increases in beverage cpms.

For the fourth quarter, we reported GAAP diluted earnings per share increased 14% to 24 cents versus the earnings per diluted share of 21 cents in Q4 2018.

When adjusting for CEO transition costs diluted earnings per share for the fourth quarter of 2019 would have increased 4.3% to 24 cents versus the pro forma 23 cents per diluted share in Q4 2018.

For the year, we reported a GAAP diluted earnings per share increase of 24.3% to 46 cents compared to earnings per diluted share of 37 cents in 2018.

2019 result included a decrease in deferred tax expense of $11.2 million from 2018 due to the re measurement of our deferred tax assets in 2018 as a result, other state tax law change.

As adjusted for CEO transition costs, and the reversal of the deferred tax in 2018 diluted EPS for 2019 would have increased 27% to 47 cents versus the same 37 cents per share in 2018.

Our capital expenditures for 2019 were $15.3 million, which included $2 million of implementation costs and prepaid expenses related to our upcoming cloud based technology systems and $7.6 million related to our digital product development and the creation of more robust consumer databases compared to the 6.9 million spent into that.

And the team.

This total capex up it was at the high end of our stated guidance range of $14 million to $15 million and slightly below the $15.4 million spent in 2018.

In the fourth quarter and for the full year 2019, we received 5.4 million and $21.7 million, respectively of integration and other encumbered theater payments associated with AMC rape theaters, and AMC, carmike theatres versus 5.4 million and to $22.7 million respectively in 2018.

As a reminder, these integration and other encumbered theater payments are added to adjusted OIBDA for Dot compliant and partnership cash distribution purposes, but are not included in reported revenue or adjusted OIBDA as they are recorded as a reduction to net intangible assets on the balance sheet.

It should be noted that the AMC Carmike theater integration payments of approximately $19 million will continue through 2037, the remaining term of the am AMC USA, while the rate theaters have now been moved onto our network for 2020.

Our total debt outstanding at NCM LLC at the end of Q4, 2019 was $3 million higher than the end of Q4 2018.

Our bank term debt by and bonds were $897 million versus 9900 $4 million at the end of Q4, 2018, and a revolver balance at the end of the current quarter was $39 million compared to $27 million at the end of Q4 2018, due primarily to funding the October bond refinancing costs out of our revolver.

Our average interest rate on all that was approximately 5.5% for Q4 2019 versus 5.7% for Q4 2018, including our $267 million floating rate term loan bank that and revolving credit facility. They had a rate of approximately 4.8% versus 5.3% last year.

Our interest expense increased $2.6 million during Q4 2019 due to a 30 day overlap from the October refinancing of the 400 million dollar notes.

Excluding our bank revolver balances, 70% of our total debt outstanding at the end of Q4 2019 had a fixed interest rate.

Our total net leverage it NCM LLC as at the end of Q4 2019 was four times trailing four quarter adjusted EBITDA, which is well below our consolidated net total leverage maintenance covenant of 6.25 Todd.

Our consolidated net senior secured leverage ratio of three times is also comfortably below the covenant of 4.5 times.

Our consolidated cash and investment balances at year end was $81 million with $69 million that this balance at NCM high.

We currently have enough cash available to cover nearly five quarters of dividends at NCM I at 19 cents per share with over 88 cents per share of cash on hand at the end of 2019.

As Tom mentioned earlier, we announced today that the board of directors has authorized the increase at the company's regular quarterly cash dividend to 19 cents per share common stock. This dividend will be paid on March 17th 2020 to stockholders of record on Mark's third 2020.

The company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the board of directors consistent with the company's intention to distribute substantially all its free cash flow to shareholders through its quarterly dividends.

The declaration payment timing and amount of future dividends payable will be at the sole discretion of the board of directors, who will consider general economic in advertising market business conditions, the companys financial condition available cash current and anticipated cash needs, including opportunities to reinvest in the business and any other factors that the board of directors considers relevant.

Our annualized dividend yield at 76%.

76 cents per share is currently 9.5% based on today's closing share price of $8.

As a reminder, currently 100% of our dividend is tax deferred for income tax purposes.

Now turning to our guidance for the full year 2020.

Total revenue is expected to be up between 1.2% and 4.5% versus 2019 or in the range of $450 million to $465 million.

Adjusted OIBDA is expected to be down 2.7% to up 2.2% or in the range of 202 million to $212 million.

Looking deeper into our adjusted OIBDA guidance for 2020, there were a few factors to consider.

One consistent with 2020 sentiment cinema industry box office expectations, we are estimating the 2020 industry attendant to be down mid single digit.

Two we expect sales of our platinum spot to increase throughout 2020 with momentum taking hold in the later part of the year.

It is important to remember that the gross margin of our platinum inventory is 75% and as we gain traction throughout the year is expected to drive an increase in adjusted OIBDA margin and dollars.

Sorry, the national be additional theater access fee for the say amendment are expected to increase year over year by $9 million to $10 million.

In addition, the following our other assumptions that were made in preparing our projections that underlie our 2020 guidance.

We project beverage revenue to be down approximately 3% to 4% three or 4% driven by attendance down mints mid single digit offset by a blended CPM increase of approximately 1.8%.

We expect approximately $19 million of integration payments and other uncovered theater payments from AMC associated with Carmike theatres.

We expect 2020 capex to be in the $14 million to $16 million range or a little over 3% of revenue.

The digital investment portion is expected to be approximately $7 million as we continue to invest in our digital and data platform.

We expect 2020 interest on borrowings decreased $3 million to approximately $55 million driven by lower average interest rates and lower average debt outstanding which includes approximately $52 million to $53 million of cash interests and $2.5 million related to the noncash amortization of deferred loan costs.

Turning now to NCM LLC is available cash calculation for 2020, starting with our adjusted OIBDA guidance of two four to 208 million.

We'll add the integration payments of approximately $19 million.

As a reduction to available cash you will subtract the following.

Cash interest expense of approximately $52 million to $53 million.

Annual scheduled debt principal amortization of $2.7 million.

Capital expenditures of $14 million to $16 million, a noncash stock comp for Inc. employees of approximately three to three and a half million dollars.

One to two $1.2 million to $1.7 million of one time operating costs associated with the implementation severance and retention costs for our Bakken inventory management system, which are adjusted out of our operating income estimates.

These are the component that will allow you to arrive at a projection for available cash at NCM LLC in 2020, which has paid to the three members of the partnership Regal cinema market NCM I quarterly based on their ownership at the end of each quarter.

In addition to the available cash distributed to NCM I from NCM LLC and consistent with prior years, we project approximately 3 million to $3.5 million to be paid to MCM I from NCM LLC for management fees, plus $1 million of cash interest earned on NCM I cash balances.

CMS cash is reduced by the expected payout of $14 million to $15 million for payment under the tax receivable agreement try founding members.

This will allow you to arrive an estimate of the net cash available for NCM I to fund dividend payments.

This concludes our prepared remarks now we'll open the call for your question.

Thank you.

At this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question Q you May press Star too if you would like to remove your question from the Q for participants using speaker equipment and may be necessary to pick up.

Your handset before pressing the star Keith one moment, please what we pull for questions.

Okay.

Correct.

Our first question comes from Jim Goss with Barrington Research. Please go ahead.

Alright, Thanks, I've got a couple here one at the beginning of the conversation.

Yeah, Tom you mentioned, a 8.7 million to make goods and you've already delivered a big chunk of these so far this year I was wondering what the foregone cost.

That inventory was or was where the make goods applied due largely unsold inventory.

I'm not sure you mean by foregone cost what I can say is that in the first six weeks of the year Weve worn we've taken almost 4 million out of the make good.

Given the over performance of the box office in January and half of February.

Does that answer your question are you asking something different yeah, no that sometimes oh.

Yes.

That largely answered it but it's sometimes it seems like.

Yeah, a lot of spots and not all of them are sold mess up that might allow for some of that without really pinching too much yet I think in Q1, Jim we typically have less inventory sold just historically Q1 is a lower inventory fail quarter than any of that other quarters. So it's easier easier for us to run off make good but also the box office.

As outperforming helped us in the first quarter as well.

Okay and the there was also a comment that you just.

Recently been.

Wrapping up the last upfront, but then a couple of months should be starting in the next one it seems like a they're running together a little closer than I thought there might that why why would that have been.

While these it seems like the new upfront starts in two months Jim So the most recent up front ended.

Basically just ended about a month ago. So there is really about a three month period between the two are sort of ends later than traditional television and cable and the sequencing is typically network. TV then cable then outdoor and cinema go at the end.

So we're always at the end of the television upfront, which starts earlier almost more than six weeks earlier, so but there was about a three month period roughly at least between the two.

Okay, and you were making some your distinguishing your inventory between like the.

The new.

Five minutes plus the platinum spot and the earlier inventory and then you also mentioned that about 60% of the audience would be onboard with the new format.

However, this wind up having sort of a blended upfront.

Shifting strategy, especially when you also mentioned that region regional is moving to national and I would imagine those prices are not exactly the same.

How do how do is this more of a reporting issue then the sales issue.

It's not a sales issue and we have very distinguished buckets between platinum pricing lifestyle pricing and the traditional pre show pricing, sometimes they are bundled together and as blended.

But we have significant different cpms at all three of those buckets.

And I think from a reporting point to be like it let maybe kt to speak to that but.

Yeah, I, either I think our CPM is.

Typically on upfront is a little bit higher but this year, we had a little bit lower I think we're looking forward to kind of a bundling program with that new inventory and.

It's hard to pinpoint where that CPM is going ahead.

Okay, and lastly have audiences.

Caught on to the a shift than when the ads are run and adjusted the timing of arrival.

Turning to the extent you can determine that there has been no.

Shift to people coming in later based on the new start time, and it's only really a difference of six minutes at the end today.

And if we only started really in December so it's too early to say, whether there's any impact from a consumer point, but we haven't seen any one showing up later as a result.

Okay. Thanks, very much appreciate it welcome.

Once again to ask a question please press star one.

Our next question comes from Alexia Quadrani with JP Morgan. Please go ahead.

Hi, This is analyze all on a like yeah. Thank you. So much further question I'm just wondering if you would in fact, the stronger trends that you were seeing a national advertising near the end of 29, he and I never thought your local and regional advertising trends to continue into 2020 and also what is your.

Our level of comfort with yard.

Thank you.

So in terms of local and regional.

We've changed strategically how we staff those businesses.

In particular on the regional business, we've decided to only allocate the top 11 de amaze into that a regional business and the remaining dnase from 11 on are now going back into our local business and we're seeing some early indications that that new strategy on the organization is helping to stabilize both those.

Businesses and potentially being in both back to growth rates in 2020.

In terms of our guidance in 2020.

I think we have optimism based on how 2019 finished and how the early interest in platinum and lifestyle has contributed to a really new way to look at NCM and many advertisers and brands are looking at the company in many cases for the first time, but also old customers are looking at us in a different way.

So we feel really good about our guidance I'm going into 2020, especially coming off 2019 with our new inventory.

Taking hold at the end of last year.

Great. Thank you.

Our next question is from Eric Handler with MKM partners. Please go ahead.

Yes. Thank you for the question I tuned it a little late so hopefully I'm not asking repeat anything but with the new inventory strategy are you seeing any difference in the advertisers that are either making request for proposal proposals or signing up for these for these.

New parts, yes, it's a good question.

Well one of our first three platinum spots was sold to a one of the largest retailers in the US who had never advertised in the history of National Cinemedia.

We also have recently added a CPG company.

Who had been on the platform ever so one of the goals of platinum end of lifestyle was to bring new categories and new companies into our platform.

And in the short time, we've been selling and we've seen.

Two major advertisers come in.

Who would never part of our platform so.

That was one of the key objectives in creating the new platinum and lifestyle on inventory.

And our you drawing them in with discounted first time buyer status or are they pick for freight.

Well every deal is different I can say that I can tell you that the platinum deals have not been discounted sometimes with Veeva brand new advertiser will create.

There's some incentive to come in but we are keeping platinum added very high price point.

So hopefully that answers your question.

Thank you welcome.

Our next question is from Mike Hickey with the benchmark company. Please go ahead.

Hey, Tom Kb. Thanks for taking my questions guys. Congrats on the quarter I was on and off the call I apologize. These questions were asked but I wanted to.

Make sure to ask I'm just in case the.

On the your adds shift to post Showtime have you that maybe consumer feedback studies in terms of.

How people are reacting.

To ads.

The new spot because I think that was sort of maybe issue with one of your partners.

The fear that you'd be upsetting movie patrons and and that's why they didn't necessarily sign up well, let me let me.

Let me answer that question two different ways. The one piece of research we already did just region, which we haven't published yet because it's really came up the presses just in the past week was the engagement.

From our ads is as been as high as we've ever had in terms of how the new advertising platinum sponsor affecting consumers. So it's been really a pleasant.

Results, so far that as the new platinum starts it rolled out that there really resonating and from ineffectiveness point of view with consumers.

We've also got a lot of anecdotal feedback from.

The affiliates that there really isn't an issue with the advertising running in closer to the movies.

And obviously you know we're sensitive to that but candidly as people have gotten used to it.

A few comments that did happen it really.

Become actually fairly small so we're pleased that the response from a consumer point of view, it's been really positive.

That's great. So you said, 60% on network I think you expect to participate and close the gap that talks about 40% what are the key.

That's it seemed to show your partners.

It's really it's a matter of adding more affiliates, we'd expect to have 15 of affiliates onboard by the end of 2020.

Some are big summer small and it's a matter of really talking to each one of them, which I've been doing along with our affiliate team.

Along with cliffs, and it's going to each one individually a lot of the affiliates wanted to see how it worked with Centermark in regular 2019.

And given the success of that and the consumer acceptance I think we'll get a really good attachment rate on the affiliates that we go out to and many of them have already signed up we just haven't announced it yet.

Okay.

Last question for me shocked to see the dividend.

Normal question, given bastards seems like it is the dividend say, so quite a statement raising the dividend here and of course.

Curious and sorry.

It's obviously show the level of confidence as well and 20 guidance.

But sort of them vulnerable historically to see variability related to scatter fundings and so I'm. Just curious if you just because you've got more up up money loser businesses, what's giving you the visibility and confidence I guess to raise the dividend.

I think I think the way the board and management of looked at its really the strategic growth plan that we play in place and the success so far platinum.

It's also our commitment to pay out almost substantially all of the actual annual cash flows of the company, but really the strategic plan and the elements are and if theres a lot of confidence that I have as well as the board and that's what really drove the increase in the dividends.

And then I guess last one on analyst day coming up here in March we expect to have.

So at that or is that two things.

I think I think optimistically.

We'd like to have a new CFO onboard it'll we have three or four really good finalist right now, but I can't commit to that but if obviously that person has been hired by the and then there will be in New York.

Okay, all right, thanks, Tom Petty per se.

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Our next question is from Eric Wold with B. Riley FBR. Please go ahead.

Thank you good afternoon guys.

Just a couple of questions just kind of thoughts on has done a platinum spot.

It's kind of thing other than the selling strategy around the spot in terms of.

Kind of one of its going to what committed run times are going to be you're acquiring together.

People into that plant in spot and then I guess you would how would you maybe not not dollar amount, we're going to maybe frame percentage how much would be the pricing on platinum very if at all between kind of an upfront buying scatter bye.

Yes, the the difference in upfront versus scatter pricing is going to be consistent on a percentage basis. So obviously, there's going to be a premium on the scatter side I.

I don't want to specifically get into the actual pricing for competitive reasons, given how new the platinum is but obviously, we're not interested in discounting platinum much. It's it's a brand new product and obviously, it's a big focus of the upfront coming up soon.

But I think the true test of how big platinum will be will really come and once we get out selling in the upfront marketplace, but the response and scatters been very good and the pricing that we promised a 50% lift in platinum pricing has been more than delivered on the initial platinum sales.

And we're optimistic that that lift will continue through and hopefully get even potentially higher as we get towards the second half of the year.

And then lastly on that kind of first one I guess.

First from the first question was going to them because they're gonna committed run time, we're going to amend Maxim how long you've had some when running flat in the spot and then.

Given the premium pricing on that and the margins on that.

In the scatter environment can you allow kind of a faster turnaround to get those on to screens or they're just inherently bid on.

How fast you can get new content and screens regardless.

So I'll try to answer those separately right now we have a relatively short amount of time that will allow us to get a platinum spot on we can't do it overnight when our entire new sales planning system gets onboard we can do it almost same day, but if we really need till we can get a platinum spent on within 24 to 48 hours.

So from a friction point of view, we can do that.

Especially since right now there's only so the market Regal onboard and as we had the other 10 to 15 affiliates manageable.

I don't want to get into specifically what the advertising requirements are in terms of the number weeks.

For competitive reasons, it's really a proprietary selling strategy that we have.

So I can't I can't tell you at this point what the requirements are it's just not something we want to disclose at this point.

Understood. Thanks.

Sure.

[noise], we have reached the end of the question and answer session and I will now turn the call over to Tom Lynskey for closing remarks.

Four times I'm, saying here on my closing remarks, I just wanted to make a correction to be available cash calculation. Adjusted OIBDA guidance that was quoted it's it should be 202 to 200 at $12 million. So the correction to the adjusted OIBDA guidance to over two to 212, Okay. Tom you can take it from here. Okay. So I'm very pleased to be ending 29.

On team with the best fourth quarter AD sales in our company's history, and the biggest year ever for our national sales team.

Our new growth strategy has begun to show results on both our top and bottom lines and we're continuing to afford momentum into 2020, but our focus on creating long term shareholder value through a unique combination of free cash flow growth and increased dividends.

Our team is deeply committed to our company's mission statement to unite brands with the power of movies and engaged movie fans anytime and anywhere.

I look forward to continuing to work very closely with our board of directors, our founding member and affiliate partners and our great NCM team to continue to drive our strategic vision for growth and leverage our unique position as these cinema expert in the media marketplace to benefit stockholders and police exhibitor partners and advertising clients like.

Thank you for joining us on the call and we'll see it the movies.

This concludes today's conference and you May now disconnect. Your lines at this time. Thank you for your participation.

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Mhm.

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