Q4 2020 National Cinemedia Inc Earnings Call

Greetings and welcome to the National set of media incorporated fourth quarter, 2020 earnings Conference call.

At this time all participants are in a listen only mode.

A brief question the answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

And it's now my pleasure to introduce your host Ted Watson Senior Vice President of Finance. Thank you Sir you may begin.

Alright, Thank you Victor.

Good afternoon, everyone I am joined today by our CEO, Tom Lesinski and I would like to remind our listeners that this conference call contains forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended and <unk>.

Section 21 E of the Securities and Exchange Act of 1934 as amended.

All statements, including our discussion about the future impacts of COVID-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 and the risk factors contained in the company's filings with the SEC.

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

Further our discussion today includes some non-GAAP measures in accordance with regulation G. We have reconciled these amounts back to the closest GAAP basis of measurement. These reconciliations can be found at the end of today's earnings release or on our Investor Relations page of our website at M. C M Dot com now.

I'll turn the call over to Tom.

Thank you Ted and good afternoon, everyone.

Welcome to our fourth quarter and full year 2020 earnings call.

And I hope that you're all continuing to stay safe and healthy and the Arris cautiously optimistic as we are about the positive impact of the COVID-19 vaccine rollout.

We continue to be confident that once the vaccine rollout of achieves critical mass later this spring and early summer people will flock back to the movies capture of year of being locked down.

Today, I will provide a high level update on steps, we've been taking to not only enhance our liquidity position, but also to expand and diversify and improve our business. Despite the ongoing challenges presented by the COVID-19 pandemic.

With our recently announced bank facility Amendment that has provided covenant relief through Q3, 2020, and a new $50 million debt facility, which will provide additional liquidity for the company to continue to execute on its growth initiatives. We believe we are very well positioned to weather the waning months of the pandemic.

Ted will provide more detail on how we continue to manage our expenses and our overall liquidity that will allow us to continue to navigate these extraordinary times and to ensure that the company is ready to quickly benefit from the return of movie audiences that will now starting Q2 as new films to begin to get released and then as always we'll be open for questions.

And.

Looking back on the fourth quarter of 2020, it should come as no surprise that it continues to be a challenging time for our business and the entire out of home entertainment and advertising industries.

As of the end of December 60% of our theaters and our National Cinema advertising network remained closed due to the state and local COVID-19 restrictions and many continue to operate under reduced operating hours and resulting in significant declines in Q4 network attendance revenue and adjusted OIBDA that Ted will discuss in more details and a few minute.

Yes.

When the global COVID-19 crisis began in March of our business was beginning to grow again, and we have just increased our dividend and we're in a very strong liquidity position.

This financial strength and our highly variable cost structure combined with the significant cost cutting cutting measures. We instituted shortly after the pandemic began and the U S enabled us to not only absorbed the impact of COVID-19, but.

But we also made significant progress on our strategic initiatives in 2020, as we expanded our cinema advertising network and took meaningful steps towards diversifying our business into new out of home entertainment venues.

Despite the significant decline and our network attendance several major national clients have remained with us through the pandemic.

While this is obviously encouraging and may also reflect the broader market trend that could be meaningful and beneficial to our business and in the future.

As consumers have shifted their TV viewing to subscription based streaming services. There are now less <unk> available on television and creating a favorable supply and demand economic benefit per Mcf.

As demonstrated by the recent Super Bowl ratings, even higher quality of sports program may be finding and more difficult to attract our core younger 18 to 49 year old audience Tom.

Top brands and key categories, including insurance <unk> digital and the streaming services retail CPG gaming automotive and I'll call on beverages have continued to run on screen and our new the pre show and those areas of the country of our theatres are still open.

It is clear that advertiser demand for cinema continues to be strong the limiting factor for US is movie audiences. We continue to be confident that once the government mandated restrictions are lifted and the rollout of the vaccine progresses. The significant cabinet paper that has been building for a year will drive consumers back to the theaters, allowing movie studios.

Rely on theater was once again to be the primary launching pad for their films.

Since the pandemic began the studios have delayed the vast majority of the theatrical releases.

Those film set of open and streaming services exclusively or day and date with cinema have not benefited from the huge marketing and PR provided by our broad theatrical launch I.

And I'm confident that once the major market theaters reopen and the audience is return film producers will once again take advantage of the powerful marketing and PR launch platform that cinema provides.

This will also significantly reduce the risk of piracy that accompanies and initial online release.

We are very encouraged by the recent announcements at theaters can begin to reopen and major cities and particular in New York City that can now with the 25% capacity.

Based on the proprietary behind the scenes panel of 5000 movie fans, we know that the audiences want to get back to the big screen as soon as they feel it's safe to do so.

Our research shows that there's already been a steady returns of movie theaters with 43% of respond and saying they had been back to the movies of since the original theater closures last spring.

And those responded and said that they've been back of the movies and average of five four times during the pandemic consistently reporting and overwhelmingly positive and safe movie going experience.

Based on what these movie fans continue to tell us moviegoing is trending and a positive direction.

92% said the news of the COVID-19 vaccine would positively impact their movie going outlook.

88% instead of the shortened theatrical window has no negative impact on their desire to watch movies and theaters.

And 90% agreed that the quality of the movie watching experience is far superior and the theater versus at home, particularly according to those who recently so I wonder when the 1984.

In addition to our own internal research and one can look at the return of moviegoers abroad, particularly in China, and Japan, and South Korea if.

And if the contents available people will come to the theater look no further than the opening day box office in China for Detective Chinatown, three grossing a greater than expected $163 million and sales, beating the previous record set by Avengers endgame and 2019.

And so all of the theaters until the theater audiences return, we have continued to aggressively focus on maintaining a high level of liquidity.

The cost reduction measures that we've instituted plus our current cash balances, including the new $50 million of debt facility will ensure that we have sufficient liquidity to operate our business for the next 12 to 13 months without considering the benefit of any revenue beyond the rollout of the vaccine and returned to positive cash flow.

As discussed on previous calls beginning in March 2020, we took significant steps to cut costs and reduce operating and capital expenditures than in November 2020, as the pandemic persisted and there were additional delays and the movie releases, we took additional steps to reduce costs, including re implementing a combination of temporary furloughs permanent layoffs and further salary reductions.

And early January of 2021, with the COVID-19 surge following the holidays, we reinstituted reached the dated up to 50% of salary reductions for almost all employees and implemented additional temporary furloughs and further salary reductions.

To date.

Over a third of our head count has been permanently eliminated or on for low since the start of the pandemic over 20% of our current head count is on reduced work schedules of 50 to 60 and almost all remaining employees are at salary reductions of up to 20%.

Those cumulative measures reduced our actual total Q2 to Q3 2020 run rate cost by 50% versus the same period, and 2019 and by 52% versus our pre Covid run rate.

And as we continue to evaluate the short and medium term needs of our business. We've been very focused on also ensuring that we do not permanently impair our business, including make sure that we retain a high quality team. So that we are ready to quickly return to a normal operating level when the theater and just return.

We also continue to strategically make capital investments, most notably and our new cinema advertising management system that was launched last month. This new inventory management system will provide a more efficient seamless sales process, which will allow us to better compete with other video and digital ad platforms.

This new streamlined and then process is expected to result in significant cost revenue and other and other.

<unk> per Mcf incur.

Including more efficient pricing and inventory placement, resulting in reduced make good obligations and and expansion of our client base. Our new system also lays the foundation to develop a solution to sell our theater inventory programmatically as we do know what our digital inventory, creating additional monetization opportunities and the future.

We've also continued to expand our cinema advertising that look with the recent announcement of a new long term network affiliate agreement with the Harkins Theater circuit.

Hopkins as one of the Premier movie exhibitors of the Western U S and the fifth largest exhibitor and America.

The addition, with the addition of Harkins theaters and in May of this year and CMS National Theatre Network will include all of the top five the exhibitors and the country.

Our newly appreciate entertainment program will now be seen by millions of additional movie fans across the southwest and over 500, Harkins screens and 33 Premier theater locations in Arizona, California, Colorado and Oklahoma.

Harkins industry, leading and growing attendance per screen and addition to its state of the art theaters and key markets enhances our already strong national media network and will particularly both of our coverage and Phoenix the number of 11 DMA.

Harkins joins the Mcm's navigate and optimistic time and both the moving and advertising industry. The 2021 film slate of stacking up for a big summer fall and holiday movie season, following the COVID-19 vaccine rollout.

Meanwhile, as mentioned earlier younger audiences are coming are continuing to abandon AD supported TV.

And the audience of all ages are eager to get off the couch and get back out to the movies.

Per brands seeking to reach the highly sought after 18% to 49% and 18 to 34 year old audience demographic cinema isn't attractive television Gee ERP replacement.

During the pandemic. We've also made significant progress on our strategy to diversify our media inventory and ways that are complementary to our core cinema business and strengthen our unique bundle of on screen and digital advertising products.

In October of 2020, we launched our new National Sin immediate digital out of home group, which was created to further unite brands with the power of movies by extending movie centric entertainment content trivia and advertising beyond theaters to a variety of complimentary out of home venues are unique bundle of out of home advertising products will be sold by our existing.

High quality sales force, creating many selling and operating cost benefits.

Our initial partners that we've recently announced include some of the top out of home networks, and the space, including Captivate, our leading location based digital video and network with screens and Premier office and residential properties.

Coinstar with the new AD planet screens that set of top coinstar kiosks, and grocery stores and the <unk> the industry, leading technology platform for guest entertainment and engagement and restaurants and.

We're also continuing to pursue partnerships with other networks and retail locations nationwide.

This new high quality out of home and and media inventory gives us over 1 billion additional impressions available for our existing sales force to sell monthly and allows us to package the strength and effectiveness of cinema and digital and these new out of home venues together to create innovative integrated campaigns for brands that engage movie fans beyond the <unk>.

Screen.

All of these new out of home relationships also provide us access to additional first and second party consumer data.

That will enhance the nearly $171 million datasets and our current consumer database.

This consumer data is critical currency and todays highly competitive media environment that we can utilize across all of our advertising platforms.

Audience data drives AD revenue and increases our ability to deliver the kind of targeting and attribution that our clients demand the.

And that we've been able to continue to generate revenue from our digital business and deliver mobile audiences to our brand partners across other complementary mediums and while theaters have been closed is directly due to our ability to leverage our unique first and second party data.

This continued growth and our consumer database is combined with the capabilities of our recently launched new inventory management system will position us well to provide marketers with and even stronger unique bundle of advertising products.

During the Covid 2019, COVID-19 pandemic, our sales teams have been tirelessly working to keep cinema and NCI on top of mind and the marketplace.

Our local sales team has also done a great job of shifting in theater advertising commitments to our digital platforms as reflected by our Q4 digital business growing 24% over Q4 2019 and.

As a result of all of this hard work media buyers remain enthusiastic about the cinema that will include create many great upcoming films and the unique advertising opportunities that we have to offer.

And have become even stronger since the pandemic began.

I am very proud of the job that our entire and cm team continues to do under very difficult circumstances.

And I'd like to thank them of our board and our distributor partners again sincerely for the continued support as we navigate this historic and turbulent time together.

And finally because of the pandemic continuing into spring 'twenty, one and the extension of our Bank Amendment waiver through Q3 of 22, our board of directors has trimmed the MCM Q4 dividend slightly from <unk> to <unk> <unk> per share. This will allow adequate cushion for funding the dividend while available cash distributions from <unk>.

And LLC is restricted during the bank amendment period, the dividend will be paid on April five 2021 to stockholders of record on March 'twenty to 'twenty one.

This quarterly dividend will result in the current yield of four 2% based on Fridays closing share price of $4 75.

Before the Q4 2020 dividend payment of $3 9 million and the NCI, Inc. Cash balance of $57 9 million would allow us to pay dividends well beyond our business recovery period, regardless of any cash being distributed to <unk>, Inc. Commencing on LLC.

While uncertainties related to the COVID-19 pandemic remain we believe that we have positioned our company well and have good reason to be confident about it and it seems future as we continue to effectively balance the two priorities of maintaining strong liquidity and executing on the sales and operating plan focused on bringing the unparalleled marketing power of the movies to even.

More brands and finding new ways to engage with the fans anywhere and everywhere.

I'll now turn the call back over to Ted to discuss our financial picture and more detail.

Okay.

Alright, Thanks, Tom.

And as Tom mentioned, despite the impact of COVID-19, we have made significant progress over the last year to bolster our liquidity position.

Actively growing our network and diversifying our lines of business.

And with up to 60% of our network theaters closed during the fourth quarter and over 50% still close we recorded $15 $7 million of Q4 revenue and increase of 162% over Q3.

Obviously, the impact of the COVID-19 pandemic on our business mix and analysis of our revenue and adjusted OIBDA versus prior periods not meaningful because the.

Current results do not purely represent our ongoing business.

Therefore, I will focus most of my comments today on our current improved liquidity position and our success and limiting our monthly cash flow burn rate, while minimizing the impact of the longer term prospects of our business.

Yes.

Due to our efforts to reduce our operating expenses total Q4, adjusted OIBDA was negative $9 $9 million.

A 12% and 22% improvement over the $11 2 million and $12 7 million negative adjusted of with the recorded in Q3 and Q2, respectively.

The combination of our highly variable operating cost structure, and our proactive overhead cost reductions allowed us to limit our adjusted OIBDA losses during a period, where over our Q4 network attendance was down 92% compared to the same period and 2019.

Our Q4 average burn rate was reduced to approximately $11 million per month versus $12 million and $13 million and Q3 and Q2, respectively.

The majority of our operating cost reductions have related the personnel during Q4 over 40% of our employee base were furloughed eliminated or have salary reductions of up to 50%.

The remaining employees had their salaries reduced by up to 20%.

These additional cost reduction measures reduced our core operating expense in Q4 to $5 $2 million per month compared to our pre COVID-19 run rate of $95 million per month or a savings of 45%.

And as we've discussed in the past due to our high growth operating margins as revenue levels build we will achieve operating cash flow breakeven after debt service on our quarterly revenue reaches approximately 50% of 2019 levels.

Our total of 2020 revenue was $94 million versus $444 8 million for 2019 as a strong start to the year was completely derail by the spread of the COVID-19 pandemic to the U S and mid March.

Adjusted OIBDA decreased to a negative $19 $4 million from $207 $5 million and 2019.

Again, all driven primarily by the temporary theater closures and response to the COVID-19 pandemic.

For the fourth quarter, we reported a GAAP loss per diluted share of <unk> 45 versus and earnings per diluted share of <unk> 24 cents from Q4 of 2019 and for 2020, we reported a GAAP loss per diluted share of <unk> <unk> compared to earnings per diluted share of <unk> 46, and 2019 both.

Earnings decreases where again the result of the significant network attendants decline, resulting from the COVID-19 pandemic.

For 2020 capital expenditures were $11 $2 million versus $15 $3 million spent in 2019 due to a halt of all non essential capital spending.

Significant part of our capital spend was related to finishing the investment and our cinema advertising management system. The Tom previously mentioned compete.

Completing this investment and this inventory management system will result in immediate expense savings and incremental revenue opportunities as at the world as it will allow for more efficient use and pricing of our inventory and making buying of our network easier for media buyers.

During high demand periods.

In fact, the implementation of this new system is expected to reduce personnel expenses and other operating overhead by approximately $8 million per year from the historical run rate of a couple of years ago, and $1 $2 million per year from our 2020 run rate, but all of it already reflects staffing reductions we have undertaken over the last 18 months.

Yeah.

And the fourth quarter and for fiscal year, 2020, we recorded $0 and $1 $4 million, respectively of integration and other encumbered theater payments, primarily from AMC carmike theaters versus $8 6 million and $22 3 million respectively last year.

The AMC integration payments are based on what MCM could have earned had those theaters and then sold as part of our network.

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

Moving to our balance sheet, our total debt net of cash at MCM LLC at the end of 2020, only increased by $13 million to $928 million versus $915 million at the end of 2019.

Our average interest rate on all debt was approximately 5% at the end of 2020 compared to five 5% at the end of 2019, including our $263 million of floating rate term loans bank debt and revolving credit facility that had a rate of approximately three 7%.

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

And as Tom mentioned earlier, we just completed an amendment to our senior secured credit agreement, providing an extension to the waiver of the financial leverage covenants through Q2 of 2022 with an additional step down to 675 times for the total leverage ratio and five five times for the senior secured.

Leverage ratio and Q3 of 'twenty two before full compliance must resume for the full year of 2022.

This MCM LLC Bank debt Amendment will continue to include the requirement to maintain them of minimum minimum liquidity of $55 million Inc.

Including cash and availability under our revolver.

And Sam LLC will also not be permitted to distribute available cash during the amendment period through its founding member of circuit owners or and <unk>, Inc.

Therefore, the company must be in compliance with its credit agreement and net senior secured leverage ratio must be less and four times and our revolver balance must be less and its pre COVID-19. The COVID-19 average outstanding balance of $39 million before available cash distributions to the MCM LLC owners can resume.

And as part of the amendment terms to obtain the waiver. The company has also agreed to an increase and its existing <unk> debt and revolving credit facility of pricing grids.

In conjunction with the existing bank debt facility Amendment. We have also entered into a new $50 million senior secured term loan b tranche.

This new debt facility will mature in December of 2024 with pricing of LIBOR, plus 800 basis points with a 1% amortization per year.

The additional funding provided provides us with the additional liquidity to execute our strategic growth plan as we emerge from the COVID-19 pandemic.

Okay.

And Sam Llc's current cash balance, including the new term loan b proceeds of $147 million plus $6 million and accounts receivable.

Assuming an average of 11 5 million of $12 million per month, the cash burn rate, including the impact of our new amendment and debt facility. We have the liquidity runway of 12% to 13 months before the consideration of the bank debt liquidity minimum financial covenant.

With our high operating cash flow margins and revenue expected to build into the back half of 2021, we believe that this 12 to 13 months zero revenue liquidity runway is actually longer.

Also as mentioned, we need revenue to equal approximately 50% of 2019, the breakeven on a cash basis after debt service.

And as Tom mentioned, our board of Directors has authorized and Sam Inc. Quarterly cash dividend of <unk> <unk> per share of common stock.

Given the current <unk> cash balance of $58 million are current and <unk> dividend can be paid for the next three years with no additional MCM LLC distributions, the and see them Inc.

The company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the board of directors.

The nearly three years of dividend cushion is considerably longer than we have historically targeted we will continue to monitor the cushion and related dividend level consistent with the company's intention to distribute over time substantially all of its free cash flow.

Our board of directors will continue to evaluate the future dividend levels as our network attendance levels trend back towards historical leverage levels, and we get a better read on advertising revenue growth.

And as always the declaration of payment timing and amount of future dividends payable will be at the sole discretion of the board of directors, who will consider general economic and advertising market conditions, the company's financial condition available cash current and anticipated cash needs and.

Any other factors of the board of directors considers relevant <unk>.

<unk> short term and long term impacts of the company and related to the COVID-19, pandemic and restrictions under the MCM LLC credit agreement.

Finally, consistent with our comments over the last quarters, we do not have enough visibility into the timing of film releases related theater openings and network attendance to provide a reliable future and adjusted OIBDA guidance, we will only begin providing revenue and adjusted OIBDA guidance. When we have access to more reliable information.

These key market data points.

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

Okay.

Thank you.

We will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate that your line is and the question queue.

You May also press the star too if you'd like to term of your questions on the queue.

One moment, please while we now poll for questions.

Our first question comes from Eric Wold with B Riley Securities. Please proceed with your question.

Thank you and good afternoon.

Just a couple of questions and it gets one.

You didn't give us a sense of kind of what you've been seeing with the advertising pipeline.

In recent weeks of kind of as you know New York was announced could open vaccine distribution fill and say stabilizing sort of kind of what the in recent weeks versus what you saw in Q4 in terms of the trend and then.

Try and get a sense of.

And the level of upfront commitments still kind of in the pipeline as the.

As the film and start to be shown.

And just kind of what you'll be the.

And the Orange and the scatter gather on demand.

I'll answer the first question and I'll turn the second one over to Ted What's interesting in our company is every week, we have at the entire sales team on on phone calls and.

And I always listen and to those calls and in the past two to three weeks given the positive news on vaccinations.

And theater openings and major markets the.

The amount of volume and the amount of activity associated whats happening and the SBS has significantly increased and I was really pleased to take care of that after a relatively long period of time, where many of our biggest advertisers were sitting on the sidelines. So I was highly encouraged by the amount of active.

And the quality of the Rfps and negotiations and discussions happening with advertisers and so they see you.

You know the light at the end of the tunnel has two we and part of that is really a testament to the fact that we've kept our sales people engage with our biggest agencies and clients for the last year.

And to make sure that cinema advertising was really forefront.

And always something that is part of the media mix.

As it relates to kind of where we are I mean, the upfront and do you want to comment on that in terms of the pipeline.

Yes, Eric I mean, we're not giving any specific guidance on the pipeline at this juncture of what I will tell you is that it's clearly a second half of the year.

Pipeline, that's really where we're talking to folks and.

Looking at commitments I would say that historically the up.

Upfront is let's call it 65% of revenue and scatter is the other 35.

Obviously, I think of it very well will probably be flipped to some degree this year.

Scatter revenue.

But there is a solid pipeline and the back half of the year and specifically in the Q4 is what I would say.

Perfect and then just my final question on the.

On the digital out of home opportunity.

And clearly you got into this for for the longer term opportunities and handling any.

Wait and give a sense of.

Your goals of your revenue goals under that segment over the coming years, and how that margin profile and that'd be leveraging your existing sales force of how that margin profile will look compared to the existing business and how much of an overlap is there between.

The advertiser customer base.

<unk> versus the year is it.

The attractive overlaps and you can you can put you on the stronger campaign and the combine all of that or is there enough differentiate on now your Tam has improved in terms of of new areas and get into.

We get a lot of questions and let me try to most people want the right I'm sorry.

Okay, and we'll try to remember the volume if I don't feel free to remind you. We started I'm looking at diversifying our company's revenue streams long before COVID-19.

Covid happened it was part of our whole you know long term planning process and the goal was always to try to find other.

The other digital out of home opportunities that correlate to the young demo debt is so coveted and theaters. So when we looked at things we looked at demo match and we also looked importantly, its scale and people wanted to make sure that things were large it's not much of a of a stretch to talk about restaurant goers and moviegoer.

You know the dinner and the movie concept has been part of it.

First of all of American culture for a long time.

So that was a natural one and in terms of giving you a sense of you know the.

The size of it talent and and where we hope to be you know, we're not really giving any guidance on that yet, but I will tell you, though is that we do expect the.

This business to be meaningful in 'twenty, two and we believe this next six to seven months, we'll be laying the foundation for that.

On the initial response, we've gotten from advertisers as part of the dynamic of cinema and this has been really positive.

And people get it and they get the correlation to it and I wouldn't want to understate. The data piece of this as all of these out of home.

And the ships involved a significant amount of additional data.

There are opportunities for us to continue and grow our digital out of home business beyond the.

The core once we've announced there was a major.

Additional retail group debt will to help the announcing in the next.

A couple of weeks. So this is something that's going to keep growing and we look at it as a real opportunity for our company.

Perfect. Thank you.

Thank you.

Our next question comes from Eric Handler with <unk> and partners. Please proceed with your question.

Yes, thanks for the question and good evening.

And just wanted to follow up on Eric's question.

When you look at this is there's a lot of home business.

Are you already selling are you up and running this business.

And we will actually maybe start seeing a little bit of revenue start trickling in.

And.

Right now are there any incremental costs.

And the associated with this business. So just kind of think of a little bit deeper into this business. So the revenue will start trickling in and we literally.

Started positioning the product and the market pace and the last month or so.

We've hired a head of that group.

We're committed to having the right staffing for that group. In addition to utilizing our substantial local sales force.

I would look at the next six months is really building it out but there will be some revenue this year.

And you know we're excited about it cinema will always be the most important thing to national set of media, but it seems obvious with the infrastructure that we have.

And with the sales organization that we have and with our new digital systems that we've been the amount of implemented.

We can really optimize our overhead.

On pursuing some of these alternatives.

And you know we have a very invigorated sales team around it right now.

And we're excited about marrying all of these digital out of home opportunities with cinema.

And we do believe that one plus one and that's going to equal more than more than two and many cases like this.

Was there a second part of your question and I wanted to make sure I answered it well.

Well on.

Other question.

With regards to you know.

And I think another $50 million.

Of liquidity in the fourth quarter, you already had a good amount of liquidity.

Already.

Is there any particular reason why you felt there was the need to draw down further and.

You know what.

And what Youre thinking about the timing of debt.

Do you want to take that one.

Yeah, I'll take that yes.

You're right, Eric we did preserve and we've had a fair amount of liquidity, but the.

The answer to your question is at the end of the day, it's the ensure that we can get through the other side and really.

The main issue.

From our business as the working capital lag. So while we had plenty of cash we do have to maintain a minimum liquidity of $55 million.

So as you think about the the business.

<unk> backup and and as we start generating sales of our typical kind of days sales outstanding of like 90 to 100 days. So we will have a little bit of of lagged.

Collecting that revenue from one of its recognized and that's really the primary reason for doing this.

Great. Thank you very much.

Thank you and the other thing I would add to that answer just as that having that additional liquidity will keep us our ability to be aggressive on the digital out of home side as well as on any acquisitions that may come up on the affiliate exhibition side.

So the.

Those are other additional rationales for what.

And what we might do with the additional liquidity.

Thank you.

Our next question comes from Mike Hickey with the benchmark company.

Please proceed with your question.

Hey, Tom and thanks for taking my questions guys I appreciate it.

I guess the first question is just on <unk>.

The seating obviously that was there.

Trend going and I guess pre pandemic and the accelerated obviously now.

<unk> tried to operate.

Without so much personnel.

Are you seeing I guess in the odd.

Of the Koreans and terms of attendance behavior.

With reserve and sort of the 100% maybe.

Some of the taking of some of the year the affiliates and so on the numbers well you know, it's really hard to draw conclusions in this particular time period, just because of the odd.

Strict and seeding situation the restrict the number of screenings.

And most importantly, a very limited release schedule.

In terms of what's out there what I can say is without being too specific is and many of the key markets, particularly and in major states like Texas, where there's a a lot of theaters open and the actual attendance levels and the consumer satisfaction has been very high and encouraging and fact higher than we would have even thought.

But I I would be hesitant to extrapolate one market out to the rest of.

We know preliminarily debt with the announcement of New York that Theres been a lot of.

Evidence about those kinds of restricted theaters already selling out but.

But I think we really need a couple of months of theater openings on a national scale and real movies to draw conclusions on.

And I think drawing any conclusions from what's happened or any of the dynamic of pandemic would be really premature.

Obviously, we're keeping an eye on everything happening, but I look at this as a very sort of a false sense of reality in terms of the behavior.

Particularly from a product point of view of.

And as you've seen and it's the way some of the movie separate leased.

Is there do you sense, any pushback and will be paid and.

And on.

Yeah.

Range and.

And the Showtime.

And the nature.

And sort of.

Some.

So and I guess nervousness.

Extend the duration there waiting for the movie.

Start.

You know we track all of this equal.

Track this very heavily and our consumer studies.

And we haven't seen any negativity on that so far.

And obviously something we keep track of.

You know candidly with the.

Pandemic and with the processing of getting people through people have arrived.

Generally earlier than they normally do.

Which is the good thing for us obviously.

It's something we have to keep an eye on over the course of the next several quarters, though.

How do you think about your overall screen network side, Tom the kind of.

And of course is sort of of the belief that maybe overall, we'll see a reduction in total of screens and the U S.

Flip side of that as you've seen that the.

And at least one big deal here with harp on this.

Billy its size and how do you balance those two and you.

Think about your total of screen size of over the next 12 to 18 months and <unk>.

On.

Screen based on malls.

Moving and sort of what are the duopoly markets and run them yes.

Yeah. So the way the way we look at it is there's always room to grow our network.

We believe especially not knowing what the consumer behavior is going to be like as it relates to per.

Host COVID-19 or as it relates to less the theaters being open.

That will continue to be aggressive and bringing new affiliates on board, obviously, we're very happy with the harkins.

Announcements and what that brings to our family of.

But as I've mentioned on on multiple calls.

And we believe that there's a real rationale to wall and you'd be part of the largest theatre network.

And there's a real benefit to it for exhibitors.

So.

You know not knowing what the screen count won't be like or how many theaters may close over the next year or two.

We look at our position of the marketplace is something that's attractive to exhibitors.

We will continue to add affiliates as they become available.

In terms of commenting on our what our competitors are doing it I don't think it's something that we're prepared to do at this time.

And last question from me appreciate the answers.

Yes.

You mentioned and the sales and modest.

No.

Challenging environment pieces of your compensation loans.

Commence and variable.

Wondering how are you.

And I'll close on the sales T mobile on how about how much turnover.

All of that meaningful sort of the Tom we've lots of rebuild.

Well you know I can bring cliff on as the guests responded to this cliff are you on right now.

Got you there and let me just perhaps it by saying that the you know do the clips of leadership, which has been steady.

The steady and significant.

On the loyalty that he has created not just with our sales team.

But with our clients is really exceptional and.

Credit goes to him for.

And where we are today, but also how we've weathered the storm so and in terms of.

You know any kind of significant attrition.

And I can tell you that we haven't lost a senior sales person in the past year. Obviously, there has been some attrition at lower levels, but I'll, let cliff answer more specifically.

Yes, Hi, Mike we've done a we've done a really.

The really good job.

And for being our team and what's going on and keeping them and the loop and and just perhaps.

And the medium and the company and for the most part we maintained most of our people as Tom alluded to yes, we've lost some lower level of people.

But I feel really good about the team we're going to put out on the field and.

Just a month from now or whenever the.

The the movies open up and we're going to be ready to rock and we're going to be very competitive.

Right on spot.

Good luck.

Yes.

Thank you.

There are no further questions at this time I'd like to turn the floor back over to management for any closing remarks.

Okay.

As I mentioned previously and we're very well positioned for the future as we leave 2020 behind.

And focus on the road ahead, and we're looking forward to the return of theater audiences as the Covid vaccine rollout accelerates and herd immunity takes hold.

All of our research indicates strong consumer demand to see films on the big screen once again and with all of the 2020 films delayed many of them into 'twenty one the film sales very strong and the upcoming years.

So despite the challenges of 2020 of the hard work of our team to expand our network and begin to diversify our advertising impressions base leaves us very optimistic about capturing additional video advertising market share is television and <unk> continued to decline, which makes our young audience, even more attractive to media buyers.

I want to particularly thank our senior management team and I.

Our entire staff once again for all of their hard work. During these very difficult times and I want to thank our shareholders and lenders, particularly for their support and patience.

So we appreciate all of the joining the call and I hope that everyone continues to stay safe and healthy and look forward to seeing you very soon again at the movies. Thank you.

Ladies and gentlemen. This concludes today's web conference you may now disconnect your lines at this time.

Thank you for your participation and have a great day.

Okay.

Okay.

Yeah.

Yeah.

Okay.

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