Q2 2020 National Cinemedia Inc Earnings Call

Greetings and welcome to the National Cinemedia, Inc. Q2, 2020 earnings conference call.

Hi, all participants are in listen only mode, a question and answers that she will follow.

And station.

Anyone should require operator assistance during the conference. Please press Star zero on your telephone Keypad. As reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Ted.

Thank you Laura.

Thank you Lord and good afternoon, everyone I'm joined today by our CEO Tom Lozinski.

I would like to remind our listeners that this conference call contains forward looking statements within the meaning of section 27 eight of the Securities Act up 1933 as amended.

Section 21, he up the Securities and Exchange Act up 1934 as amended.

All statements, including our discussion about the future impacts of Cobot 19 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 can 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 or expressly qualified in their entirety bites such factors.

Further our discussion today include some non-GAAP measures in accordance with regulation G. We have reconciled these amounts back to the closest GAAP basis measurement. These reconciliations can be found at the end up todays earnings release, we're on the Investor Relations page of our website at NCM Dot com.

And now I'll turn the call over to Tom.

Thank you Ted and good afternoon, everyone welcome to our NCM second quarter earnings call.

Before we get started I'd like to again, thank everyone within and outside or NCM family for all they're doing during this challenging time.

I hope everyone is staying safe and making every effort to keep yourself your loved ones your colleagues and your community healthy.

Today, I'll be providing a high level update on but we've been doing to adjust our business in response to the ongoing challenges presented by the Koby 19 pandemic.

Ted will then provide more details about our second quarter and plans to continue to navigate these extraordinary an unprecedented times and position the company to hit the ground running one studio speak into released new films and theaters reopened later this month.

And then as always we'll open the life for your question.

After a strong start to the year no one could have predicted how profoundly the koby 19 pandemic what impact all our lives.

As discussed during our last call when that theatres were forced by local governments to close and film release schedules began to be pushed back.

We immediately took steps to build liquidity and cut our operating cost while at the same time selling in the advertising marketplace that continue to be very active.

Well almost all the theaters remain close throughout the entire second quarter. Our sales team continues to work with clients to shift existing commitments to future periods and negotiate new business.

I'm very appreciative Im proud of all the hard work our team has been doing during the crisis as it it has positioned us very well for when theaters begin to reopen.

NCM continues to benefit from our highly variable cost structure and the aggressive steps, we took to reduce nonessential costs beginning in late March when depend dynamic reached the U.S.

We also did not incur any theater access fees or affiliate revenue share cost well theaters remain close as these expenses are driven by attendance metrics inactive screens and active screens, which considerably reduced our monthly operating and administrative costs.

Pretty cold to versus pre coated 19 levels.

You significantly lower cost levels combined with our successful account receivable collection efforts have less just in a very strong liquidity position that should allow us to operate well beyond the negative impact of the cold in 19 pandemic.

We currently have a cash balance of 168.7 million.

And 13.2 million receivable balance at our operating company NCM LLC.

This strong liquidity position combined with the reduction of our monthly operating expenses debt service cost and nominal capital expenditures to nine to nine and a half million before any benefit from our digital revenue provides enough cash to operate for approximately 18 months, even if the theaters remain closed.

We also currently have 68.5 million of cash it NCM, Inc. The public company that could fund our current dividend level of seven cents per share for another three years, even with no additional cash distribution from NCM LLC.

As discussed during our Q1 earnings call in late March we implemented a plan that established various cost savings measures, including the temporary for a lot of approximately 30% of our staff and reduce pay for the remaining employees up to 50%, which in aggregate reduced our total compensation expense by 50.

For set.

This in conjunction with the elimination or delay if not essential operating cost through April reduced our core run rate expense by over 50% from nine and a half million per month to 4.7 million per month. It is important to note that this excludes approximately five to 600000 per month of net cash benefit from our.

Digital business during Q2.

Steve Anderson, our network begin to reopen in anticipation of tended launching at September 3rd we will continue to adjust our operating cost structure that discipline and phased approach to restart of business over the coming weeks.

We're continuing to evaluate the needs of the business and our goals remain flexible with our long term plans to react appropriately as the situation continues to evolve.

Until we have a better visibility to the feature film release schedule and the related pace of theater Reopenings and network attendance levels. Many of the measures outlined above we remain in place interestingly throughout the remainder of 2020, we believe our challenge will be whether or not there will be enough impressions to support our existing commitments as.

The AD market has been very active and there's been a reduction are very of available high price TV sports programming, along with TV production schedules getting delayed.

Throughout the pandemic, while theaters remain closed our various sales teams that continue to engage clients and AD agencies to reschedule existing commitments and look and book New business. So that adds are running on her network when theaters reopened.

Our national and regional team has been working closely with our clients.

To adjust their cinema advertising budgets to align with the shifting movie slate to ensure that they'll be back up on the big screen in front of our valuable movie audiences as soon as possible this year.

Our local team has also been successfully getting clients to put their synmat campaigns on pause ready to start up again when movie theaters reopened and they've also shifted many in theater commitments to our digital platforms.

While there have been budget cuts across several CLI categories that have been most impacted by the debt by the petrochemical there continues to be an active marketplace is tied to make advertising commitments for later this year end 2021.

Additionally.

You are professional games.

And the potential delay of the NFL and college football May force buyers to begin to look for other high quality premium video platforms, which is a dynamic that we believe will benefit and C. M.

As I mentioned it it's critical that even in the at the you even though theaters are closed we want to keep cinema and then see on top of mind with their clients and agencies.

We've been very thankful for the support Weve supersede from our clients. So far as many have been very flexible and supported the movie commitments. Originally planned for Q2 into Q3 in Q4 and into early 2021.

Especially within our key advertising categories that have not been affected negatively by koby 19, including streaming companies ecommerce companies and gaming companies to name a few.

Based on all on hundreds of video on other calls with clients overall interest in cinema advertising remains strong in fact as mentioned it limiting factor.

For us throughout the remainder of the year is likely to be the level of movie attendance and corresponding number of impressions. We can deliver given the momentum we experienced in Q1 in our sales activity over the last few months. We're confident that said no. We'll continue to be an important part of brand marketing plans going forward with some large sports and other out of home entertainment canceled.

And much of the new TV production delayed cinema will benefit from being one of the N. one of the few entertainment options with fresh high quality programming to growing audiences.

There are many highly anticipated big budget films like tenant the kings men, the new beans, and Wonder woman 1984 that are currently set for release very soon after theaters are allowed to reopen.

Our digital businesses continued to bringing revenue by helping advertisers reach movie audiences at home across our NCM digital and OTI offerings. It's notable that digital which was designed to be a bundled complement to our core on screen product has continued to generate revenue on its own.

And allowed us to redirect some local commitments by shifting those client campaigns to our digital platforms.

This will allow us the opportunity to grow our digital revenue year over year from 2019 to 2020, despite the pandemic, which is a promising sign. It's also important to note that our Q2 net digital revenue funded approximately 20% of our current lower monthly operating expenses.

This highlights the importance of diversifying our media inventory to provide a stronger multi platform product revenue stream. That's not just tied to theater attendance as such in addition to the expansion of our digital business, we're continuing to explore out of home advertising corporate development opportunities that could augment both our core cinema and existing.

Digital platforms.

Our digital platforms have also continued to help us expand our highly desirable movie goer consumer database to nearly 150 million datasets, which is on track with original business plan as we continued to increase in improved both the quality and quantity of our consumer data. It will help us strengthen our cinema accelerator product and offer.

Kind of one to one targeting that today's advertisers demand.

As we've discussed this is a critical part of our plan to improve our overall cinema marketing offering and make it even more attractive than it already is.

Throughout the remainder of 2020, we'll be enhancing orencia movie trivia platform, including the launch of a new movie trivia at later this summer.

We will also continue to expand our cross selling a data partnerships to further build our digital audience and increase our digital inventory and first party data.

We expect this growth will open monetization opportunities with those advertisers and studios looking to reach the important in highly valuable movie going audience.

In addition to all the other sales activities during the Q2, our president Cliff marks and Chief revenue Officer, Scott Feldstein, along with the other of our senior me Seals management team had held over 200 virtual back to the movies video meetings with top executives at the biggest national brands and advertising agencies in the countries.

Talk to them by the state of our industry and the many great films in advertising opportunities like or premium platinum spot and lifestyle and inventory.

They have to look forward to what theaters begin to reopen.

The message that we're getting from all these conversations is that our clients understand the value of our medium and that they want to start advertising instead of again just as soon as movie fans are back in theaters.

We've also been aggressively competing in the video upfront marketplace for the 2020 2021 upfront buying season. That's currently in process upfront deals are made several months to a year out from a campaign here today. So does critical that our national sales team is out in the marketplace actively pursuing these commitments now to position NCM to be able to hit the ground running.

In the remainder of 2020 and through 2021.

TV upfront discussions have slowed in the advertising marketplace overall due to the uncertainty surrounding TV programming schedules in cancellation or delays and other high CPM video offerings that cinema competes directly with like live sports concerts and other event programming. However, this delay in the October through September broadcast calendar up front marketplace.

Spending will actually be advantageous to us as it will ship budgets to a more cinema friendly calendar year, especially now that many of the big films moved out of 2020 and are expected to now be released in 2021.

Throughout this time, we have also engaged in conversation with several regional theater circuits about the possibility of joining around same network with exhibitor operating cash flows being significantly impacted by theater closures theater operators are looking for any way. They can't you increased your future cash flows our ability to generate higher advertising revenue per attendee and provide other financial incentives.

For long term commitments to join our number it looks more attractive than ever to regional theater operators in the current business environment.

Looking ahead as I mentioned do this shift in many big movie titles. The theatrical release schedule for the next 40 quarters is very strong with Penfolds like Warner Brothers, and Chris No one's tenant Wonder woman 1984. This year is big marble movie Black widow, the new animated movie sole which is the first black led Pixar feature.

The James Bond film no time to die.

Remake of Dune Westside story coming to America to closing out the year.

2021 looks even stronger now with tremendous box office potential featuring usually anticipated films like Cinderella Ghostbusters after life Disney's re in the last Dragon fast and furious 10 quite place to Godzilla versus Kong Jurassic World domination top gun Mavericks, Batman and the sequel to Spider Man.

And mission impossible to name just if you.

Movies or one of the ultimate forms of escapism, we all know that which is one of the reason is that said mess historically done so well during difficult or recessionary times and bleed believed that will continue as we emerged from this pandemic. Our NCM research team regularly pulls our exclusive behind the scenes pay a little movie Super fans and those that have already returned to see a movie on the big screen.

Okay and over 90% reported a positive experience.

For those in the areas of the country, where theaters have yet we opened their desire to get back to the big screen continues to grow stronger as people tired watching movies at home or run out of streaming platform series to watch 94% of respondents say they missed go into the movie theaters to watch movies, most importantly going to the movies ranks number one is.

The top out of home activity survey respondents were most looking forward to during a to do what's government restrictions are lifted.

Then as a long history of resilience and we remain confident that went theaters reopens. The studio starts are released new films that audience doubles will begin to build back towards normal levels over the next few quarters.

The movie goers, we surveyed 75% plan to return to theaters, either as soon as possible or within one to three months after theaters reopened.

With another 21% plenty to return after four months or more for a total of 96% of our core demo of movie lovers plenty to go back to the cinema soon.

There was also more recent news out of a study by you see Davis, which indicates that movie theaters may pose less cobot 19 risk than many other indoor venues as master being required and enhance cleaning procedures are being performed by our theater partners.

These are also expected to be safer because people are not facing or talking to either each other during a movie and social distancing can be maintained.

Well they remain uncertainties related to the cobot 19 pandemic, we had position our company well and have good reason to be optimistic let ANSI EMS future as we have successfully balanced the two priorities and maintaining a strong liquidity position and a sales and operating plan. It's very focused on making sure that we hit the ground running a labor day weekend with the announced release.

Tenet.

Well not all of our clients will be back to spending at pre cobot levels, we believe that our efforts to expand and diversify our client base combined with the delay in sports and other TV scripted programming will provide us with a strong client demand over the near to medium term.

Finally, our board of directors has left the NCM inc. dividend of seven cents per share unchanged for the second quarter. It will be paid on August 31st to shareholders of record on August 17th.

This quarterly dividend will result in a current yield of over 11% based on Fridays closing price of 247. After the Q2 2020 dividend payment of five and a half million. The NCM inc. cash balance would allow us to pay dividends for approximately three years, regardless of any cash being distributed to NCM, Inc.

Before I turn the call over to Ted I would like to thank everyone on the NCM team for their commitment support and hard work during this very difficult an unprecedented times.

None of what we accomplished over the last several months would have been Pos without the dedication and resilience of our NCM team.

I remain thankful for the strength and support.

All of our executive leadership team, our theater Circuit partners and it went especially knowledge how has been for all the people that have been furloughed well that have taken significant pay cuts for now more than four months.

Well there has been well it has helped NCM to make it through this crisis and will be well positioned for the future I look forward to the coming weeks when we can get back to work to deliver on our mission to unite brands with the power of movies and engage movie fans anytime and anywhere so.

So thank you all and thank you Ted for considering to hold down the Ford admirably, while we have temporarily delayed our CFO search until theaters begin to reopen and the business environment becomes more certain.

I'll now turn the call over to you to discuss our financial picture in more detail.

Thanks, Tom as Tom mentioned with theaters closed we only recorded a small amount of digital revenue.

During the current quarter involved focus most of my comments on providing an update on our liquidity position in our monthly operating expense along with capital expenditures and debt service obligations and as always we'll open the call to your questions.

The impact of Cobot 19 are on our second quarter and year to date results makes an analysis of our revenue and adjusted their when does not meaningful as it does not represent earlier are ongoing business.

Also our 10-Q was filed this afternoon and we have provided a supplemental presentation of our Q2, two and year to date results with comparison to prior periods on our website for your reference.

For the second quarter or total revenue was $4 million compared to $110.2 million in Q2 of 2019.

Due to the temporary closure of almost all the theaters in our network in response to the Cobot 19 pandemic.

The revenue recognized in the second quarter of 2020 was primarily related to revenue associated with our digital service offerings.

That revenue included both filled way or digital group as well as our local sales personnel. In fact, our local felt team was able to convert $1.3 million of on screen AD business toward digital platform in the quarter.

Due to the absence of any in theater advertising revenue total Q2, adjusted OIBDA was negative $12.7 million versus a positive $50.2 million in Q2 or 2009 team.

It is important to note that NCM LLC speed or access fees network affiliate payments.

In platinum revenue share payments are driven by attendance operating screens in revenue and therefore, we're not incurred wall theatres were close.

Additionally, through a disciplined and multi phased approach once all our initiative we're fully implemented in April we reduced our core run rate operating expenses by over 50% of $4.7 million per month.

Combined with our debt service obligations in nominal capital expenditures, we are averaging a total cash burn rate of approximately nine to nine and a half million dollars per month before the benefit of any revenue.

As Tom mentioned earlier with the anticipated release of tenant on September Threerd over the next few weeks, we will begin at phase return of our teams from furlough, what's will allow us to have our network fully operational in generating revenue again.

We continue to be thoughtful to this phase approach so as to minimize the impact of expenses during this transition.

For the six month of 2020 total revenue was 68.7 million versus $187.1 million for the first six months of 2019.

Adjusted OIBDA decreased to $1.7 million from $72.3 million in the first six months of 2019, and adjusted OIBDA margin decreased the 2.5% from 38.6% versus the first six month or 2019.

Again, all driven by the temporary theater closures in response to the Cobot 19 pandemic.

It is important to note we had great momentum going early in Q1 as demonstrated by the fact that February year to date revenue was up 3% over the same period in 2019 before the theater closures began in late March.

For the second quarter, we reported a GAAP diluted loss per share of 18 cents versus an earnings per diluted share of 11 cents in Q2 of 2019.

As adjusted to exclude the impairment of long lived assets and CEO transition costs.

GAAP diluted loss per share would have decreased to 17 cents per diluted share in the second quarter of 2020, while earnings per diluted share for Q2 of 2019 would have remained the same.

For the six month or 2020, we reported a GAAP diluted loss per share at 22 cents compared to an earnings per diluted share of 10 cents for the first six months of 2019.

For the first six months of 2020 capital expenditures were $5.5 million versus $6.9 million spent in 2019 due to the halt of non essential capital spending.

We now expect total capital expenditures to approximate $11 million in 2020.

It is important to note we continue to invest in ourself planning and inventory management platform that is in its testing phase.

While we had been very focused on preserving cash while the theaters are close this inventory management tools, a critical part of our plan to improve our in theater advertising product and we expect to launch the system in Q1 of 2021 as originally planned.

Since launch there will be immediate cost savings and other operating efficiencies that overtime will more than offset the capital currently being in Boston.

In the second quarter and for the first six months of 2020, we recorded $0 than $1.4 million respectively.

Integration and other encumbered theater payments, primarily from AMC, Carmike theatres versus 5.7 million, an $8.1 million respectively last year.

Because the encumbered theatres were temporarily temporarily closed during the second quarter 2020, no advertising cash flows could have been generated at the theatres were within NCM LLC as network and Duff No integration payments were earned during the three months ended June 20, Fiveth 2020.

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

Moving onto our balance sheet, our total debt outstanding at NCM LLC at the end of Q2, 2000 $21.1 billion versus $925 million at the end of Q2 2019, you probably due primarily to the increase in our revolver balance that with fully drawn in late March.

It's one of the theaters began to close.

Our revolver balance at the end of the second quarter in 2020, with a $167 million compared to 27 million at the end of Q2 2019.

Our average interest rate on all debt was approximately approximately 4.9% at the end of Q2 compared to 5.8% in Q2 2019, including our 265 million floating rate term loan bank debt and revolving credit facility that had a rate of approximately 3.6%.

Excluding revolver balances, 70% of our total debt outstanding at the end of Q2 2020 out of fixed interest rate.

As mentioned on our Q1 earnings call in anticipation of the impact of the pandemic unrelated theater closures on our trailing four quarter Covenant calculations, we obtained a senior bank facility waiver from or NCM LLC net senior secured and total bank debt leverage covenants through the quarter ended July for.

2021.

The NCM LLC bank debt Covenant waiver included a new requirement to maintain a minimum liquidity of $55 million, including cash and availability under our revolver.

Also NCM LLC will have new limitations on at the ability brings a waiver period to distribute a founding member theater circuits or NCM inc. any of us available cash as defined in the LLC operating agreement.

Looking at our leverage total net leverage at NCM LLC as of the end of Q2 2020 with approximately six times trailing four quarter adjusted OIBDA.

Versus 4.2 times in Q2 of 19, and a covenant of 6.25 times.

Our consolidated net senior secured leverage ratio with 4.6 times versus 3.1 times in the comparable period 2019, and a covenant of four and a half times.

As Tom mentioned, we entered the cobot 19 crisis with a strong liquidity position and we have maintained that strong position today.

At the end of Q2, NCM LLC, how to cash balance of 168.1 million and an accounts receivable balance of 25.3 million.

NCM Inc. had a cash and investment balance of $82 million.

Subsequent to the end of the second quarter, we paid 90% of our annual tax receivable obligations were founding members, leaving NCM inc. with a current cash balance at 68, and a half million dollars.

NCM LLC began to second quarter with a cash with the cash balance of 132.2 million and ended the second quarter, where the cash balance of 168.1 million as we collected $90 million or 82% of our pre cobot 19 accounts receivable balance.

In summary at the end of the second quarter NCM LLC, the 168.1 million of cash on hand, plus 25.3 million an accounts receivable. Good fun. Its average monthly operating expense nominal capital expenditures in debt service obligations totaling nine to nine and a half million for over 18 months.

It is also important to note that given the variable cost high margin nature of our business with the operating expense reductions. We made once theaters begin to reopen NCM LLC you can feel covered debt service and operating cost with revenue that is approximately 40% of the 2000.

19 total.

As Tom mentioned, we announced today that our board of directors is authorized NCM inc. regular quarterly cash dividend of seven cents per share of common stock.

The dividend will be paid on August 31st 2020, the thought holders of record on August 17th 2020.

This dividend level was 68, and a half million dollars of cash and short term investments that NCM inc.

We currently have enough cash available to cover three years of dividends that NCM eye with no other cash distributions being received from NCM LLC.

You should note that the recent bank waiver I mentioned earlier currently prohibits distribution through its members, including NCM Inc. and the new limitations remain through the quarter ended July Onest 2021, almost certain financial conditions are met.

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 overtime substantially all its free cash flow.

The nearly three years of dividend cushion of considerably longer than what we have historically targeted.

We will continue to monitor this dividend cushion level of theaters reopened and we get a better read on what the level of a theater attendance and in theater advertising revenue will be.

As mentioned for the remainder of 2020 or revenue will be primarily dependent on how many theater attendees and related advertising impressions, we can deliver.

Therefore, as always the declaration payment timing and amount of future dividends payable will be at the full discretion. The board of directors, who will consider general economic and advertising market conditions. The companys financial condition available cash current and anticipated cash needs and any other factors of the board.

Of directors considers relevant.

This includes short term and long term impact to the company related to cope with 19 pandemic and restrictions under the NCM LLC credit agreement.

Finally, consistent with our comments during our Q1 earnings call, we still do not have enough future visibility about the timing of all film releases related theater openings and network attendance to provide a reliable future revenue and adjusted OIBDA guidance, we will only begin providing guidance when we have access to more.

A reliable information regarding these key market data points.

This concludes our prepared remarks, and we'll now open the lines for questions operator.

At this time will be conducting a question answer session. If you would like to ask the question. Please press star one on your telephone keypad.

Indicate your line isn't the question Q you May proceed sorry, if you would like true of your question from the Q.

Since using the first let me maybe not there for you to pick up that.

Let's start.

My question.

[music].

The first question comes from the line of Eric.

You May proceed with your question.

Thank you good afternoon guys.

A couple of questions I guess just one.

You talked about continued you maintain and build up a healthy pipeline that commitments wall theaters remain closed.

Along with kind of shifting those candidates from prior periods in the kind of the.

Coming periods, how do you expect to be handled under an environment of limited impressions with years begin to to reopen in terms of how those dollars are allocated between what's going to be a diminished amount of impressions.

Well, it's going to come down to who has commitments and who wants to use them regarding any period in time. It memory flights have to line up ultimately to win a brand or.

And agency wants to use the inventory. So the first thing you've got to do is marry up timing because not everybody wants to run the minute tenants starts some people do some people will want to wait. So the first thing we have to do is look at it from a timing point of view.

And then we'll allocated in the most fairway, we possibly can across all our clients.

And obviously, we're going to start doing that.

Now that we know the tenant is what appears to be from where in the process of doing that and clip and his team in the sales planning team.

Our all working furiously on getting that balanced and worked out and thats going to be an ongoing process week to week in month to month really for the rest of the year.

Okay, and I don't know, we're kind of with new.

Hi, guys are coming in obviously someone wants to advertise let's say in.

[noise] January February of next year are.

Are they kind of if they come and now they're kinda back into line in terms of is the kind of go back through everyone else is kind of been a commitment pool and see if they want to go there first before you can open up to new people coming in or is that not the way it works.

If you want to answer that question.

Yeah sure.

Well, we'll be actively participating the upfront, which a lot of people. Please calendar money for January through December of 21 and.

We will we ever gauge or planning group has a gauge of what our current obligation is for people who are committed to us and we'll have a pretty good estimate based on what we think attendance will be based on how much new money, we can to Jim So it's a little bit it's a little bit of juggling, but and everyone understands that we're going to be true.

And stern and and sheer all the dealing with them and well do the best we can to maximize every dollar.

Yeah, clearly it doesn't seem that doesn't sound like that's impacting.

The ability to get new people looking at dollars, even with that increased competition, they're willing to kind of getting the pool so to speak.

That's right that's right I think you know I like it really shout out the relationship that cliff.

And our senior AD sales guys have had with the AD community in many cases for 20 to 30 years and it's at times like this.

Where there is still some uncertainty, but also a lot of potential that the relationships that he and Scott and the other key senior people are built gives us puts us in a really good position compared to other media companies that may not have the same experienced level that we have so.

The relationships matter and in this particular pace you will see the benefits of it frenzy EM.

Okay and final question for me with the.

What kind of that dig pool of committed AD dollars you out there obviously competition for an impression and how should we think about CPM and margin given.

What I think would be I, maybe wrong it an inability going to squeeze scatter adds into the mix given local commitments already there.

You know it would really be really difficult to give you an honest answer but I'll try to give you a forecast having actually not been in the market with <unk> with new inventory for four months, it's a little difficult to forecast what cpms are going to be what I will say.

Is that the industry going into Q4, not just the cinema advertising industry, but their media industry. Overall is expected to have lower budgets and lower Cpms I think if you're going to be flat you're going to be happy.

I think across the board most cpms are going to be down at least for the next probably quarter or too hard to say, what's going to happen for the rest of 2021.

But I cannot you want to add anything to that cliff based on your end market sort of experience lately.

Yeah. The one thing I would add has a lot of the business or slick water is already pre negotiated so cpms are established.

So really your questions more relevant for 21 and it is for fourth quarter.

Okay.

<unk>.

Please press star one.

One moment.

A question.

Our next question comes on line.

That would be production you may proceed with your question.

Hey, guys. Thanks for taking my call I just had a real quick question here since it theaters down and and your theater experiences are now what's the additional revenue resources you guys have been tapping into on the online O T T markets.

I'm going to let it slip to answer that first but let me start by saying and we've been building a digital business.

For over three years now.

And ironically, the only from a revenue we created on the digital side are behind our company created was monetizing both our own own our own own unknown EME assets as rolls whaling him through third parties. So could you can give a little more color on yeah, the digital revenue and where that's coming from.

And the benefit to our company.

The majority of the digital revenue came through our local sales team who are able to.

Work with their clients to shift money that was committed to us on screen just some of our digital product there could be mobile we also so.

Over the top.

Questions you know for third parties.

Our local team did a fantastic job of converting revenue and that's what 100%.

Revenue to Tom talked about is.

Yeah, well one last thing good top often that now that you know most of the major studios are pushing towards the O T for releases.

Are you guys looking at maybe possibly doing some some synergies synergistic work with like Netflix prime or send them or and these other.

Dreamy networks that are growing by the month.

Yes. So you know screaming is probably our most important if not our biggest category and we expect and I. Even mentioned this two quarters ago. We expect the biggest growth we have is going to come from the streaming players.

They love the fact that they can reach millennial and Gensix movie goers in a very efficient way.

Historically people like.

Amazon and Hulu and others have always come to our platform. So we expect as those industries continue to invest in marketing that we will benefit.

More so than even our market share from those types of advertisers.

Great. Thank you guys to be watching and following you guys. Thank you already.

Ladies and gentlemen, we have reached the end of the question answer session I would like to turn call back over to Mr. Tom.

Mark.

Okay. Thank you.

Our NCM leadership team, our board of directors and our employees remain deeply committed to position our company into whether this crisis and come out of this pandemic stronger than ever.

As of today, our three founding members the largest theater circuits in the U.S. AMC Centermark in regular plantings are we opened their doors and welcome my answers back to the movies beginning later this month.

Once that happens in attendance levels begin to reach and we believe that we're well positioned to deliver on the pillars of our growth strategy.

Strategy that we launched last year that included record Q4, 2019 AD revenue and also generated free cash flow growth stock price and dividend appreciation for our shareholders that existed prior to the started to covert crisis I.

I'd like to close by once again thanking all of my NCM teammates our board of directors are cinema partners lenders and other business partners for their support through this difficult time.

Film has always been a unique way of sharing stories of humanity.

The justice and change.

That helped bring people together.

When I look forward to the day soon we'll be can I'll get back together and go to the movies again.

Thank you for joining us on our call and I hope everyone continues to stay safe and healthy.

Thank you.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a great.

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