Q3 2021 National Cinemedia Inc Earnings Call
Good day and welcome to the National Cinema media.
Third quarter 2021 earnings conference call all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask a question Press Star then one on they touchtone phone to withdraw your question Press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Ronnie a CFO. Please go ahead.
Thank you Tom Good afternoon, I'm joined today by our CEO Tom was asking.
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 $19 33, as amended and section 21 E of the Securities Exchange Act of $19 34 has them at all.
All statements, including our discussion about 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.
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 SEC.
All forward looking statements are expressly qualified in their entirety by such factors.
Other our discussion today includes some non-GAAP measures.
In accordance with regulation G. We have reconciled these amounts back to the closest GAAP based measurement.
These reconciliations can be found at the end of today's earnings release or on the Investor Relations page of our website at <unk> Dot Com now I will turn the call over to Tom.
Yes.
Thank you Ronnie and great to have you on the team.
Good afternoon, everyone and welcome to our third quarter 'twenty one earnings call.
I hope that you all are having a happy and healthy fall.
During the call today I'm going to provide a high level update on the continued recovery of our advertising business.
And the ongoing steps that we're taking to diversify our business and drive cinema advertising revenue growth.
Now that the theater tenants just trending towards historical levels.
I will also provide an update on the expansion and growth of our digital business as it continues to drive the growth of our consumer databases that provide more robust audience analytics to our clients.
Tony will then provide more details about our financial results and how we continue to manage our overall liquidity.
And then as always we'll open the line for your questions.
The fall Moviegoing season has delivered powerful box office results that are getting close to historical levels.
With the opening of build Big films to October we had three weekends in a row with box office of more than 100 million and six weekends in a row with box office results, averaging over 100 billion per weekend. This.
This is the first time that theres been a consistent and meaningful week to week audience that is so important to our clients.
Marvel studio Shang Chi and the legend of the 10 rings setting all time and Labor day opening weekend record and has grossed in over $223 million through last weekend.
And with the consecutive week in openings in October of denim, but there'd be carnage. The latest in the James Bond franchise, no time to die Halloween kills in June the box office in October delivered 637 9 million the best ticket sale Hall at the domestic box office of any month in 2021.
Given these results it is clear that consumer demand for the communal big screen experience of the movie theaters continues to be strong.
We expect that trend to continue throughout the rest of Q4 and into 'twenty two with a powerful Q4 release schedule that includes Sony's Spider Man No way home.
And Ghostbusters afterlife, Disney's and Concho Warner brothers, the matrix Resurrection and Universal thing to.
Most of which will have exclusive theatrical windows, including Disney and Marvel He tunnels, which had a strong 71 billion opening this past weekend and a worldwide take a $161 $7 million. The second best opening in 'twenty one.
<unk> hundred $63 million as you may recall after the huge labor day opening of Marvel studio Shang Chi.
Disney announced the rest of the 'twenty, one slate would have an exclusive theatrical window.
The awakening of the theatrical box office. This fall has reignited advertiser demand for our core in theater products and are desirable hard to reach demographic of diverse young adults aged 18 to 34.
This is an important part of our value proposition for advertisers as this demographic makes up 76 million Americans, who spent significantly across many categories, including fashion electronics travel dining and entertainment with forecasted buying power of an estimated eight three trillion by 2025.
Since the opening of F&I that kicked off the summer moviegoing season week over week. These young patients had been the first to come back to the cinema and they have compromised a higher percentage of the opening weekend attendance, including 50% of Black widow, and free Guy 15, 9% of Chang Qi, 69% of Candyman and 64% event.
Most recently Halloween kills put the top choice for this younger demo was $62 for making this trip to see the new timeline its opening weekend. Despite a streaming option that had no additional charge beyond the monthly subscription fee.
While the various film release strategy experiments of the traditional Hollywood Studios and New Tech companies continues to play out there are strong signs that an exclusive theatrical window remains the best approach to maximize profitability for content producers.
As mentioned after being one of the first studios to try a day and date release strategy Disney recently committed to release all six of the remaining films on into 'twenty, one slate exclusively in theaters.
Warner Brothers has followed suit with its 22 release schedule.
Disney also recently confirmed the release scheduled for 'twenty, two film slate, enabling a longer term view for the box office and audience projections.
With all the consumer awareness word of mouth, and other free marketing and PR benefits cinema provides and the significant loss revenue due to streaming related piracy and it's become increasingly clear that studios are leaving money on the table with their data streaming strategies.
These realities may underlie recent announcements by all major studios that they will maintain or reconsidering the exclusive cinema release window for most if not all of their films in 'twenty two.
There are also signs that some of the new non studio stemming services will start to consider a theatrical release for some of their productions.
This strong recovery of the cinema business. In addition to continued deterioration of the AD supported television business and slowing screaming growth has created a great environment for our sales efforts as we are seeing much more significant advertiser demand.
Also while macro.
Replace dynamics are still evolving as the supply chain issues get resolved analysts continue to expect healthy economic growth due to increases in consumer spending.
This strong consumer spending is expected to drive a healthy overall AD marketplace and given our work to maintain client and agency relationships. During the pandemic, we are very well positioned during the recent calendar year upfront selling season.
We have already completed numerous upfront commitments and are actively engaged in finalizing many other negotiations with major advertisers for annual marketing campaigns that will start both in the fourth quarter of 'twenty, one and first quarter of 'twenty two.
Currently our 2022 calendar year upfront is tracking at approximately 75% of 2019 levels with multiple deals still in discussion.
We have already received commitments for more than 15 national brands, including several advertisers who are first time NCS clients.
Approximately half of our top 20 upfront partners from 2019 have closed deals with us for 'twenty, one with several additional clients expected to make commitments by the end of this year.
With larger and more consistent theater attendance levels over the last several weekends. We're also experiencing strong momentum in the fourth quarter scatter market, including a sizeable recently closed integrated deal with a new client and category for MCM, who is committed to a 62nd spot in our platinum position during November and December.
Top 2019 advertisers, who have committed to return in the fourth quarter 21 include brands in all major categories, including Entertainment insurance automotive social media retail gaming dining <unk> mobile consumer products and tourism.
Our fourth quarter pipeline also includes categories, such as alcohol media financial and transportation.
The robust upfront market demand that we're seeing may also be related to some changes in TV audience demos and viewing behavior caused by the pandemic as traditional TV consumers are aging and favoring S. Vod.
High quality video Gop's are becoming harder and harder for marketers to find.
So as linear TV arpus continue to drop.
Networks are increasingly increasing their pricing to secure the same level of upfront commitment.
This dynamic creates a real opportunity for us as marketers must buy on your premium video <unk> elsewhere, and our CPM superior more competitive putting cinema in a much stronger competitive position, especially with strong film slate for the remainder of 'twenty, one and 'twenty two.
Looking at our regional and local advertising businesses local cinema AD sales have been impacted by the COVID-19 related broader economic supply chain and staffing challenges that a bit more generally negatively impacted small businesses across the country.
These smaller companies scale back on marketing and advertising expenditures faced.
Faced headwinds in starting or expanding their businesses to meet increasing consumer demand after the pandemic.
While our local and regional business has had challenges and most client categories. Three key categories were less impacted by the supply and staffing issues government education and healthcare.
The fourth quarter local sales pipeline has picked up and we expect to trend back towards 2019 sales level levels in 'twenty two.
Our core in theater AD products have also been strengthened by the progress, we're making to create a more robust consumer analytics database with the launch of our new cinema advertising management system in the first quarter of 'twenty one.
This new management system is not only driving more efficient use of our available impression base. It's also making our existing sales process more efficient for our clients and laying the foundation for programmatic selling to our on screen the lobby entertainment network inventory in the future.
This management system will also allow us to integrate our growing consumer databases more efficiently into our selling process.
This is particularly valuable competitive advantage in light of the restricted AD targeting policies that are causing advertisers to shift spending away from social and mobile platforms.
Given the strategic benefits, we are committed to aggressively aggregate highly valuable consumer data both from our consumer facing apps like newly trivia newbie arcade and for movie ticketing data being provided by our founding member exhibitors.
These important movie audience data sources are expected to grow our datasets to approximately $300 million by year end greatly expanding our ability to create more robust targeting solutions and post campaign analytics and to create custom closed loop attribution measurements for brands and movie Studios alike.
This data was an important part of an integrated AD deal. We recently completed with a pharmaceutical company. Our goal is to become the premier source of movie related consumer data and analytics to enhance our growing industry position as the movie audience exports.
This will put us in an even stronger competitive position with TV and larger digital advertising platforms and it's an important part of supporting our premium CPM value proposition.
With the expansion of our digital platforms. We are also aggressively bundling piece impressions within Theodore impressions, and our new out of home venues by bundling, our highly coveted theater audiences with online impressions and other consumers that visit our other digital out of home partner locations, we are creating a unique offering for our clients versus our.
Digital and TV competitors.
These new integrated marketing offerings allow advertisers to engage movie fans before during and after the movie anytime and anywhere as I mentioned, we recently closed a groundbreaking integrated advertising partnership for a pharmaceutical client that included national and regional ads on a big screen and on our digital platforms.
In addition to our ability to provide impressions across all three of our advertising platforms, our ability to provide robust data and related analytics was also key to closing that deal.
We are also seeing success with our Tic Toc.
Custom social Influencer offering that we have developed and a unique partnership with the digital specialty group Redd intelligence.
This new bundled offering has been particularly successful on the local side given our local sales team, an easy and affordable way for small business advertisers to participate in the world's biggest social platforms, along with our onscreen ads, creating a powerful marketing package that reaches young consumers.
Advertisers currently using this tool include branch in the education recruitment and government categories.
And while supply.
And while current supply chain issues continue to impact some part of our client base, most notably the automotive brands and there are lingering concerns about new COVID-19 variance as colder weather approaches we remain optimistic.
The increasing vaccine levels recent FDA recommendations for vaccine approval in children age five to 11 strong movie release schedule and pent up consumer demand will bode well for our cinema partners and our efforts to rebuild our book of in theater AD commitments for the remainder of 'twenty, one and 'twenty two.
As I mentioned, our pipeline for 'twenty two continues to build as the key negotiating window for the 'twenty two calendar year upfront period has been underway for a few months and will continue through December.
To date, we have completed a significant amount of our projected upfront revenue target for the 'twenty two calendar year upfront, which is well ahead of our typical pacing at this time in the process and is trending at approximately 75% of our 2019 upfront bookings.
With this strong momentum going into 'twenty. Two we are planning to launch a very aggressive proactive sales strategy. During the 'twenty two 'twenty three broadcast upfront process that will begin in the first quarter of 'twenty two.
These meetings are with key planning and buying decision makers throughout first quarter and early second quarter of 2002. In addition to in person one on one meetings. We're also planning larger upfront events in key markets during that time we.
We are confident the combination of a more personal in person approach combined with larger in theater marketing events will allow us to enhance our market position and secure a higher level of commitments beginning in the fourth quarter of 2002.
Unfortunately, due to the timing of theater reopening certain relaxing of local government restrictions in 'twenty. One we were not able to meet in person and compete as aggressively would've liked in the 'twenty one 'twenty two broadcast upfront process with.
But the selling process trending back towards normal it provides a much better environment for us to pitch creative marketing solutions that can only be delivered on the big screens.
With the audience just returning to the cinema. The strong 22 film slate and continued TV ratings challenges, we are very well positioned to make NCA about larger part of the marketing plans of national brands and local and regional businesses.
As we enter the fourth quarter of 'twenty, one and with 22 on the horizon I'm really encouraged by our ability to maintain our strong client relationships. During the pandemic. This combined with the progress we have made to reshape and restart our business will allow us to resume the momentum we were experiencing in 2019 and early 2020 before the <unk>.
Pandemic started.
I feel more than ever that <unk> is well positioned for success in a post pandemic world for all the reasons I have described on this call.
I would also like to acknowledge the support of our board, our exhibitor partners and our advertising clients and their agencies and again sincerely. Thank them for their continued support as we emerge from this historic and difficult time, together and stronger than ever.
So I'd like to welcome our recent additions to the NCL executive leadership team as we have killed. Many we have filled many key roles, including Chief Financial Officer General Counsel, Chief Marketing Officer, Chief Human Resources Officer, and senior VP of research and analytics.
While they've only been with us for a short time, they are already making a meaningful contribution.
So with that I will now turn the call over to Ronnie one of the newest members of our senior management team to discuss in more <unk> or more in more detail, our financial results liquidity position and outlook Ronnie.
Yes.
Yes.
Thank you Tom.
The third quarter saw our network began to emerge from the pandemic with attendance beginning to accelerate with a strong labor day weekend box office, which exceeded that of the 2019 Labor day weekend.
Through the third quarter, our cumulative year to date attendance levels already surpassed full year of 2020 and for the third quarter of 2021. Our attendance was nearly 10 times that of the prior year and one five times of the prior quarter and was trending back up.
Pre pandemic attendance levels.
We also experienced improved advertising sales fundamentals with continued improvement in CPM and market demand.
For the third quarter of 2021, our National CPM was up low single digits compared to the same period in 2020 and up mid single digits compared to the second quarter of 2021.
Our national utilization rates were also improved with third quarter of 2021 up 831 basis points compared to the third quarter of 2020 and up to three times compared to the second quarter of 2021.
We expect these trends will improve even further and fourth quarter.
Despite these recent improvements in business activity and pricing.
And as we mentioned on our last call advertising demand tends to lag the resurgence on the box office by a few months as clients need time to reallocate their budgets back to cinema and as Tom mentioned, one to ensure that there is a meaningful and consistent.
Tendance level weekend to weekend.
This is analogous to the standard advertising delays during the beginning of a recessionary recovery, where advertisers exhibit a wait and see approach.
In addition.
Since the prior upfront selling period was during a time when theatergoing was significantly restricted by local governments or where in some cases still closed.
<unk> also affected our ability to fully benefit from the theater attendance recovery that accelerated rapidly over the last few months.
As a result.
We recorded $31 7 million of third quarter revenue.
Which was up 428%.
<unk> to the third quarter of 2020, and up 126% sequentially compared to the second quarter of 2021.
It was still below the 110 and have no one in the third quarter of 2019.
Given the continued impact of the pandemic on our business throughout the current and prior year quarterly and nine month periods.
We'll focus much of my remaining comments today.
On our current liquidity position and our continued success in limiting our monthly cash flow burn, while continuing to spend as needed to quickly we startup business.
And thoughts on how we see our business continuing the path to recovery in the fourth quarter and 2022.
Total third quarter, adjusted OIBDA was negative $8 2 million compared.
Compared to negative $11 two milling in the third quarter of 2020, and a 10 and a half now on improvement to the second quarter of 2021.
This higher third quarter adjusted OIBDA reflects the revenue growth driven by a return of moviegoers to the theater and increasing advertiser demand, partially offset by higher founding member theater access fees associated with the significant.
Increase in theater attendance during the quarter.
As mentioned this lag between the increase in theater attendance and increases in AD revenue was related to media buyers wanting to confirm and critical mass of AD impressions before they made meaningful ad commitments.
As Tom mentioned earlier, the strong box office over the last six weeks.
Has finally put that concern to bet and advertisers are returning enforce to drive a material quarter over quarter improvement as we move into the fourth quarter.
Our third quarter average cash burn rate was approximately $11 2 million per month.
And 18, 2% improvement.
Of the $13 7 million average during this second quarter.
As a result of third quarter revenue growth and.
And further improvement in working capital management.
We expect the cash burn rate decrease on the fourth quarter to an average of $3 million to $4 million per month.
In the fourth quarter is expected to be our first quarter of positive adjusted OIBDA.
Since the first quarter of 2020 with expected positive free cash flow in 2022.
During the third quarter as business activity began to pick up the ball.
<unk> staff back very selective.
And restored based compensation levels.
Most full time staff numbers to pre pandemic levels.
Our cost reduction measures.
The start of the pandemic have helped reduce our core operating expenses significantly.
In the third quarter, our core operating expenses averaged approximately $6 million per month.
<unk> to our pre Covid run rates of $9 5 million per month.
Or a savings of 37%.
While we expect these average monthly operating expenses to increase somewhat as our business trends back to historical levels. Some of these savings are expected to be permanent.
For the nine month period totaled.
Total 2021 revenue was $51 1 million compared to $74 7 million in 2020, a decline of $23 6 million driven by the first quarter of 2020 being mostly unaffected by the pandemic.
Adjusted OIBDA for the nine months period decreased to a negative $43 1 million from negative $9 5 million in 2020, again, driven primarily by positive adjusted OIBDA of $14 Formula in the first quarter of 2020 that was mostly unaffected by the pandemic versus <unk>.
$16 2 million of negative adjusted OIBDA in the first quarter of 2021.
For the third quarter, we reported a GAAP loss per diluted share of <unk> 19.
Versus a loss per diluted share of <unk> 16.
In the third quarter of 2020.
And net loss per share in 2021, and 2020 was again the result of the impact of the pandemic on the cinema business.
For the nine months of 2021, we reported a GAAP diluted loss per share of <unk> 72.
Parents, a loss per diluted share of <unk> 39.
In the first nine months of 2020.
Again, the 2020 results were positively impacted by the first quarter results were not materially impacted by the pandemic.
For the nine months of 2021 capital expenditures were $4 3 million versus $7 9 million in 2024, a reduction of $3 6 million.
This decrease was related to the completion of our cinema advertising management system.
First quarter of this year.
Halt of all non essential capital spending once the pandemic started.
Total expanded total capital expenditures are expected to be approximately five to $5 5 million in 2021.
In the third quarter and for the first nine months of 2021.
We received 200000 and 300000 of integration and other Encumbering theater payments, primarily from AMC, carmike theaters versus zero and $1 4 million respectively last year.
The AMC integration payments are based on what <unk> could have earned had advertising been sold in those theatres by our sales teams.
As a reminder, these integration and other encumbered theater payments are added to adjusted OIBDA for debt compliance and partnership cash distribution purposes, but are.
Not included in our reported revenue or adjusted OIBDA.
<unk> recorded as a reduction to 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 the third quarter of 2021 increased to 135 million to 1.04 billion compared to 905 million at the end of the third quarter of 2020.
Our average interest rate on all debt was approximately five 6% at the end of the third quarter compared to four 9%.
At the end of the same period of the prior year due primarily to the new $50 million term loan funded earlier this year.
Excluding revolver balances.
<unk>, 72% of our total debt outstanding at the end of the third quarter of 2021 had a fixed interest rate.
MCM LLC current cash balances are.
<unk> 6.9, milling and including the $6 8 million of availability on there to revolver.
MCM LLC total liquidity is approximately $73 7 million, which is in compliance compared to our liquidity covenant that requires a minimum liquidity of $55 million.
Due to the timing difference between the collection of MCM LLC accounts receivables.
And payment of various expenses, including debt service.
We have received board approval to enter into a revolving debt facility between <unk>, Inc. An MCM LLC and to seek additional outside debt financing.
We are also actively pursuing an amendment to our senior secured credit agreement to among other things extend the existing waivers of our senior secured credit facility financial covenants.
Finalizing these credit agreement amendment and net borrowing commitments over the near term.
We'll ensure that MCM LLC will not only maintain compliance with its financial covenants.
It will also allow us to be well positioned.
Take advantage of the recovery of our business.
Our board of Directors has authorized an MCM, Inc. Quarterly cash dividend of <unk> <unk> per <unk> per share of common stock.
The dividend will be paid on December seven 2021 to stockholders of record on November 20.
2021.
This quarterly dividend will result in a current yield.
Five 2% based on today's closing share price of $3 88.
The <unk>, Inc. Cash balance will be $43 1 million after payment of this most recent dividend.
And thus our current <unk> dividend can be paid for the next two and a half years.
With no additional <unk>.
<unk> LLC distributions to NCI, Inc.
This is well beyond the MCM LLC distribution restrictions contained in our recent bank debt amendment that terminate at the end of the third quarter of 2022 subject to certain limitations.
The two and half years of dividend Cushing is considerably longer than we have historically targeted.
We'll continue to monitor discussion and related dividend level consistent with our intention to distribute over time substantially all our free cash flow, resulting from distributions from MCM LLC once they resume.
As always the declaration.
Amen.
<unk> 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 business conditions. The.
Companys financial condition available cash current and anticipated cash needs and any other factors that the board of directors considers relevant.
This includes impacts at MCM LLC related to the pandemic and restrictions under the MCM LLC credit agreement.
While market conditions have improved considerably during the third quarter. There continues to be some uncertainty related to the lingering impact of the pandemic on our business, making it difficult to provide specific reliable future revenue and adjusted OIBDA guidance.
However.
We would expect fourth quarter revenue to increase meaningfully and cash burn to decrease sequentially each month to approximately $9 million to $12 million for the quarter.
Compared to over $33 million for the fourth quarter of 2020.
Fourth quarter will be our first quarter in 2021 with modest upfront revenue versus almost no upfront revenue in our <unk>.
Fourth quarter of 2020, and the first three quarters of this year.
Said.
I would still expect approximately 60% of our fourth quarter national revenue to be scattered before returning to a more normal split of approximately $60 40 of upfront and scatter mix in 2022.
Finally, with four quarter, increasing meaningfully from the third quarter as mentioned, we expect it to be our first quarter of positive adjusted OIBDA.
First quarter of 2020.
In summary.
Our overall business is starting to experience meaningful recovery.
And with all the steps we took during the pandemic to maintain strong relationships with our clients.
Diversify our sources of advertising impressions and build our consumer databases, we are well positioned to accelerate the market momentum we had coming out of the third and early fourth quarters.
With that we will now open the lines for questions operator.
Okay.
Yes.
We will now begin the question and answer session to ask a question Press Star then one on <unk>.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Eric Wold with B Riley Securities. Please go ahead.
Yes.
Thanks, guys.
A few questions.
I guess one.
<unk>.
You noted that.
About half of your 2019 upfront averages.
However, as the partners have closed deals for the upcoming upfront period, Yeah, I understand that some of those are still probably under discussion that haven't signed but for those that have not or a past is there a kind of a main reason that you've heard.
As to why that is the case, maybe other than just wanted to see more visibility and then if we.
Think about the.
75%.
19 that you've locked in for 2022, what would you normally see at this point of the year.
Looked relative to kind of the previous years bookings.
So of the 20 or so.
Advertisers that we referenced.
Candidly, it's still really a moving target in terms of what of that group will actually be part of the upfront or not I can tell you that there is no category or a major brand or advertiser that has an issue with the platform.
So there is no sort of silver bullet that some people are looking for the only exception I would say we'd be in the case of the auto business. If there is a chip shortage, which there has been with some significant big advertisers that could compound it but theres no.
There's no trend or any particularly large group of advertisers who are individuals that have an issue with the platform.
The 75% is higher than we normally would be.
In prior Upfronts.
Have all of the percentages before that but the 75% is trending much higher than it was before in 2019.
And I think the most important indicator we have for the advertising platform of success is people looking.
Not just in the fourth quarter, but in the next four quarters of 'twenty two.
And Thats, where the confidence is the commitment are being made and it's really predicated on the fact that we've had finally six weekends in a row of really good box office.
With some inconsistency a little bit earlier than that but now that we have consistency we are seeing the benefit from it in the upfront.
And like I said before every key category.
That is advertised with us before has made commitments.
And scattered in the upfront so.
There is no issues right now with the advertising cinema media business as it relates to advertising interest or acceptance.
Perfect and then just final question.
Okay.
We're tracking towards the yen.
You're obviously still expect 60% Q4 national revenue to come from from scatter and then kind of at the beginning you noted that you're seeing Pos momentum in the scatter market. If I heard you correctly that Scott will also include a <unk>.
Platinum spot commitments for.
November and December have you always thought.
I heard that correctly, if you always thought the platinum would be in scanner given kind of the budget commitment you would think we would expect to that slide.
Slides.
And then how should we think about platinum.
Demand in general heading into next year, and all of its pricing holding up to that.
Well platinum will be definitely part of the upfront package that we're currently selling.
We were quite happy with bringing in a new advertiser in the scatter market.
And the pricing on that platinum spot was in fact high.
A higher than we had priced in the past.
Going back to the pre pandemic level, so platinum pricing is alive, and well and actually higher than we had expected.
It is currently was recently part of a scatter buy given the opportunistic nature of this advertiser.
And the availability, but going forward. It will continue to be both a mix of scatter and in the upfront part of our world.
Perfect. Thank you.
Youre welcome.
The next question comes from Karen Miller with Cantor Fitzgerald. Please go ahead.
Hi, This is actually Joe Ferra Shelly question on on the theater access fees since where we're seeing a cadence to your business that we wouldn't have seen before the third quarter is up materially from second which was obviously up from first.
What is the the delay there to realizing revenue.
So im assuming you are.
You're buying your access ahead of <unk>.
<unk> your ads.
I'm not sure I understand your question Youre asking about theater access fees are you asking about AD revenue.
Well.
They should be related and I am seeing an increase in your theater access fees and how far in advance do you pay for your access before you realize the revenue.
Well, we pay monthly theater access fees.
So they're paid 30 days after the after the attendance level runs.
So would the.
<unk>.
So then there should be a correlation between the access fees and the growth in revenue and your national and regional AD revenue right.
No not necessarily.
No you got to remember that the theater access fees are correlated to attendance and a consumer can choose to go into a theater. The day of the movie a week before or the day before advertising commitments are made often months ahead of time, if not multiple quarters ahead of time.
So there isn't a direct correlation always between.
Theater.
<unk> and advertising, particularly during this COVID-19 recovery period that we're just getting really finally through.
It's only been over the last several months where attendance has gotten consistent.
That advertisers have gotten particularly comfortable making commitments out front.
Prior to Covid, there was a higher correlation but until we've really gotten through this COVID-19 period, which is finally ending.
We will eventually start seeing more of a true up between.
Actual attendance theater access fees and AD revenue.
Okay.
And then question thank you for explaining that.
Your liquidity once you take away the 55 million reserve on the revolver. It leaves you with $18 7 million.
Wondering what's left on the $20 million unsecured revolver.
And if the expectation is to get the financing done during the fourth quarter.
Yeah. So.
They actually.
Like we said earlier the expectation is to get our financing done here in the very near term.
And one of the one of the things that we are working through as amendment.
For for the credit facilities, and then also the ink loan to LLC has been approved by by the board.
And so but in addition, we've been given.
Also permission to to seek additional liquidity.
For for the company as well, so we expect to to move towards.
Completing that.
Before the before to haul.
The year end holiday season.
Okay, and I'm, sorry, so the $20 million from ink.
Is it available or it hasnt been dark fiber.
Fully documented yet.
So the documentation for that is nearly completed.
So we haven't executed it just yet.
Again as we are we are also working through the alternatives as well.
Okay got it I appreciate the explanation. Thank you.
Again, if you would like to ask a question.
And then wanted to join the queue. The next question comes from Jim Goss with Barrington Research. Please go ahead.
Thanks.
A couple also.
First I was wondering how how do you position your upfront AD sales right.
You are looking at an assumption of a total market size you expect versus 2019 or are you also trying to.
Put in place the successful approach rebroadcast reserve been able do stress the available concentration of high valued demo and maybe not have.
Sort of two <unk>.
That variance.
For the marketplace over the next 12 months.
Obviously, we've been doing this for a long time and you know what the slate is.
And there is much more of a reliable forecast available for that married to that of course is the.
Hi.
Demand there is for reaching 18 to 34 year olds that are millennial Gen Z audience is very valuable and with the lack of availability of those <unk> and TV.
We see a lot of interest in reaching that demo in the upfront market over the next 12 months and currently what we're booking right now.
So I hope that answers your question.
Yes.
Tom are you.
I think you might have talked about this in the past but is there a.
Granular linking of pricing and AD mix to the nature of the films or is that.
Pretty tough one to predict ahead of time and also the new AD categories like gaming that might be coming in.
Creating any pressure on AD demands that are helping your pricing as well.
Okay.
We can directly link.
Pricing to a particular movie.
As you know Jim we sell in flights and across those flights are multiple movies there are certain individual movies that attract.
The advertisers.
Particularly the Marvel movies for example that are highly correlated to that 18 to 34 year old demo.
But basically we sell more correlated to what an advertising schedule looks like for a client or for an agency for their brand and its usually across flights which includes typically multiple movies.
Not just one.
And I didn't hear the second half of your question Jim can you repeat the second half.
Yes thinking.
There were some new AD categories, you were mentioning like gaming, which has been coming up in a number of media Company Conference calls I'm wondering if some of these newer categories such as that or.
Adding to the AD demand.
That's affecting pricing as well.
There are definitely new categories that are coming into our business.
Everything from gaming to potentially.
Sports and E gaming to even some of the crypto currency types of companies. So we have some very large categories that we'll be adding to our platform and that we already are part of the upfront.
We know that Theres been a high correlation between the gaming demo and movie goers. So we've always had big publicly traded gaming companies and now we're getting what I would call more mobile gaming.
And even gaming along sort of sports in the gaming. So those are important categories for us as you know you can't really watch TV base without seeing a lot of gaming advertising.
Happening online and.
On TV. So those are categories that we're excited about.
But I think more importantly, the fact that every category thats been with us for the past 20 years is with US right now.
On the National front is really encouraging.
And it's a real testament to the strength of our National AD sales company that the relationships we've built over time.
Are still really well developed.
And we're taking advantage of that and we've proven to the AD market for a long time that cinema advertising is unique and impactful and powerful and we just had a little bit of a period, where the COVID-19 card of it.
Hurt our ability to actually deliver those audiences, but now that we see the recovery of the marketplace.
Particularly in the last six to eight weeks in the upfront.
Really confident about our recovery as well as the pricing.
The inventory.
Okay, and one last small one.
Cinema mentioned.
Alternative content to the other day and it's Carl and I was wondering if that's any.
<unk> been a short four in CMI.
Well.
It's kind of a simple question, but it is complicated based on what rights, we have or don't have.
I don't really want to get ahead of myself on that Jim, but I think over the next couple of quarters I'll be able to give you some more visibility on what we might be able to do to help our theater partners.
Okay. Thanks very much.
Alright, Thanks, Jim.
The next question comes from Alex graph with Cowen <unk> Co. Please go ahead.
Thank you for taking my question.
Just wanted to get some clarification here given the.
A lot of time between.
Advertisers advertising demand and what we're seeing in the box office attendance can you, perhaps comment a little bit more on what youre seeing in the scatter market specifically as it relates to.
Discounting how.
How are we kind of tracking versus historical levels.
2019.
In the second quarter, I think you were discounting a little bit.
To draw advertisers Andrew Okay.
For some insight on that.
Yeah.
On the scatter market, obviously, its very competitive.
And there is more pricing optionality and there is more pricing opportunities for brands to take advantage of the marketplace.
It's <unk>.
Not as critical as part of our future going forward from a pricing point of view, we're seeing a lot of stability.
On our pricing on the upfront side of things.
So candidly, we have a really premium priced product.
And we're doing everything we can to keep it that way.
So while there may be some flexibility that we havent scatter, it's not a long term strategy.
Our plan is to continue to drive a high price for this young demo.
So that's our plan.
As we go forward into Q4 scatter as well as into the whole upfront for next year.
Understood.
And then in terms of how we should think about how that kind of translate into.
AD revenue.
Per attendee.
I would suspect that.
Likely remain depressed relative to the fourth quarter of 2019.
And the upcoming fourth quarter.
How should we kind of think about that in the fourth quarter.
And two.
On a go forward basis.
More like a run rate.
Okay.
I don't think we can provide guidance right now on Q4 or on the next year as it relates to that specific question.
At a point, where we're going to go back to providing guidance, we'd be able to do that.
So I can't I can't give you any specifics on that I don't know if you have anything to add.
I think I think that's right.
If you give.
If you just in general if you look at the revenue per attendee or per year for this.
This year.
Thanks.
It's been lagging obviously compared to 2019, we do see again a lot of improvement.
Exiting out of the third quarter entering.
Yes, yes.
The fourth quarter and so we expect again.
Like I said before fourth quarter to be much less from Craig.
Ill.
So you would have to kind of working the math based on other estimates around attendance levels around that.
Great.
David Your comments.
Thanks for taking my question.
Youre welcome.
This concludes our question and answer session I will now turn the conference back over to Tom Lesinski for.
Perfect.
Yes.
Okay. Thank you for your questions.
As we mentioned previously we're very well positioned for the future as our audiences and advertisers returned to the movies.
The strengthening box office indicates pent up consumer demand to see films on the big screen once again, especially among the highly coveted hard to reach 18 to 34 year old diverse audience that we own.
We remain optimistic about capturing additional video advertising market share is declining TV <unk> make our young audience, even more attractive to media buyers the progress youre, making to execute all of our business strategy is combined with an incredibly strong film slate for the remainder of 'twenty one into 'twenty two.
Including a constant a concerted shift back to exclusive theatrical windows should ensure a continued recovery and growth of our business.
Once again, we'd like to thank all of Mcm's team's hard work.
We unite brands with the power of cinema expand our cinema network strengthen our digital offerings and diversify our advertising inventory beyond the big screen.
I also want to thank our cinema operating partners, our advertising clients and our shareholders and lenders for their continued support and patience. In addition to the one hundreds of <unk> employees.
We truly appreciate you joining us on this call and hope that everyone continues to stay safe and healthy and look forward to seeing you again soon at the movies. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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