Q4 2023 National CineMedia Inc Earnings Call

Operator: Good afternoon, and welcome to the National CineMedia fourth quarter and full year 2023 earnings conference call. All participants will be in listen-only mode.

Good afternoon, and welcome to the National Centre Media fourth quarter and full year 'twenty twenty-three earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: Please note, this event is being recorded. I would now like to turn the conference over to Chan Park, Vice President of Finance. Please go ahead.

Please note this event is being recorded.

I would now like to turn the conference over to Chan Park, Vice President of Finance. Please go ahead.

Chan Park: Good afternoon. I'm joined today by our Chief Executive Officer, Tom Lesinski, and our Chief Financial Officer, Ronnie Ng. I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that 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.

Good afternoon, I'm joined today by our Chief Executive Officer, Tom Lesinski, and our Chief Financial Officer Ronnie.

I would like to remind our listeners that this conference call contains forward looking statements within the meaning of 27 a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 as amended.

All statements other than statements of historical facts communicated during this conference call May come 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 SEC.

Thomas F. Lesinski: All four forward-looking statements are expressly qualified in their entirety by such factors. Further, our discussion today includes some non-GET measures. In accordance with Regulation G, we have reconciled these amounts back to the closest gap basis measurement. These reconciliations can be found at the end of today's earnings release or on the investor relations page of our website at ncm.com. Now, I'll turn the call over to Tom.

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 measurement piece.

These reconciliations can be found at the end of today's earnings release or on the Investor Relations page of our website at N C M Dot com.

Now I'll turn the call over to Tom Thank.

Thomas F. Lesinski: Thank you, Chan, and good afternoon, everyone. Welcome to our fourth quarter and full year 2023 earnings call. This year, we established the relevance of cinema to audiences and brands with box office hits like Barbenheimer, Taylor Swift's The Heiress Tour, and Super Mario Bros., all demonstrating the cultural power of cinema. By comparison, more moviegoers aged 18 and up went to the opening weekend of Barbernheimer than attended all four major league sporting events over 12 months. For example, Taylor Swift's concert film also drove significant demand, drawing in over 4 million attendees. That's five times more than her entire U.S. live concert tour.

Thank you Chad and good afternoon, everyone welcome to our fourth quarter and full year 2023 earnings call.

This year reestablish the relevance of cinema to audiences and brands with box office hits like Barb and Hymer Taylor Swift the Arris tour in the supermarket brothers, all demonstrating the cultural power of cinema.

By comparison more moviegoers age 18, it up went to the opening weekend of Barbara and Hymer than attended all four major league sporting events over 12 months.

For example, Taylor Swift concert film also drove significant demand drawing and over 4 million attendees. That's five times more than her entire U S Live concert tour.

Thomas F. Lesinski: Additionally, the success of films like Super Mario and Brothers the Movie became the number two grossing PG-rated film of all time with over 52 million attendees and continues to remind us of cinema's uniquely great ability to reach families. So turning to the fourth quarter, NCM attendance exceeded 82 million, reaching 94% of 2002 levels. Fourth quarter attendance levels were largely impacted by strike-related delays that pushed a number of strong releases into 2024 and beyond, including Dune Part II, Ghostbusters: Frozen Empire, and Kraven the Hunters. These changes to the slate negatively impacted attendance by approximately 20 million.

Additionally, the success of films like Super Mario Brothers. The movie became the number two grossing P. G rated film of all time with over 52 million attendees and continues to remind us of cinemas uniquely great ability to reach families.

So turning to fourth quarter and see them attendance exceeded 82 million, reaching 94% of 2002 levels.

Fourth quarter attendance levels were largely impacted by strike delayed strike related delays that pushed a number of strong releases into 2024 and beyond including due in part to Ghostbusters frozen Empire and craving the hunters.

These changes to the slate negatively impacted attendance by approximately $20 million. If these films were not pushed due to the strike we estimated that our total fourth quarter tenants would have been likely crossing 100 million, surpassing fourth quarter 2022 levels.

Thomas F. Lesinski: If these films were not pushed due to the strike, we estimated that our total fourth-quarter attendance would have likely crossed 100 million, surpassing fourth-quarter 2022 levels. It is clear to us that consumer demand for the cinema remains strong, and audiences are excited to see the latest movies on the big screen first. The fourth quarter of 2023 underscored the enduring appeal of the cinematic experience for American consumers. Our core demographic, Gen Z and Millennials, remains the cornerstone of the cinema audience, representing 70% of our viewership, with a cumulative reach of 32 million individuals for the quarter. Notably, during this period, Gen Z made up 41% of our audience, demonstrating a strong average weekly rating of 5.5. This rating significantly surpasses other premium video offerings, including NBC Sunday Night Football, which had an average rating of 2.2.

It is clear to us that consumer demand for the cinema remained strong and audiences are excited to see the latest movies on the big screen first.

For the fourth quarter of 2023 underscored the enduring appeal of the cinematic experience for American consumers.

Our core demographic Gen Z and millennials remains the cornerstone of the cinema audience.

Representing 70% of our viewership with a cumulative reach of 32 million individuals for the quarter.

Notably during this period Gen Z made up 41% of our audience demonstrating a strong average weekly rating of 5.5.

This rating significantly surpasses other premium video offerings, including NBC Sunday night football, which had an average rating of 2.2.

Thomas F. Lesinski: This kind of robust engagement underscores the considerable enthusiasm that this influential demographic holds for the in-theater cinema experience. The biggest brands continue to turn to NCM as they realize the power of being united with millions of young, diverse consumers who are at the movies each and every week. The fourth quarter of 23 also proved that consumers are going to the movie theaters to see more than just traditional Hollywood films, with brands quickly following to get in front of these highly engaged audiences. We saw this with Taylor Swift's The Error Store, where NCM sold out all of our available inventory for the initial four weeks. In particular, NCM facilitated 32 new ad deals for this film, including 12 with previously unassociated brands. More than half of these brands were our industry leaders, holding either a number one or a number two position in the marketplace. This trend extended even to non-Hollywood productions such as Godzilla Minus One and The Boy and the Heron, which also attracted sizable, diverse audiences.

This kind of robust engagement underscores the considerable enthusiasm that this influential demographic holds for the in theater cinema experience.

The biggest brands continued to turn to and see them as they realize the power of being United with millions of young diverse consumers, who have the movies each and every week.

The fourth quarter of twenty-three also probes that consumers are going to the movie theaters to see more than just traditional Hollywood films with brands quickly following to get in front of these highly engaged audiences.

We saw this with Taylor Swift, the Arris tour and see them sold out all of our available inventory for the initial four weeks, specifically MCM facilities 32, New AD deals for this film.

Including 12 with previously under social media brands.

More than half of these brands, where our industry leaders holding either number one or number two position in the marketplace.

This trend extended even to non Hollywood productions, such as Godzilla minus one and the boy in the Heron, which also attracted sizeable diverse audiences.

Thomas F. Lesinski: Tune in to our results. NCM's fourth quarter revenue was $90.9 million, comparable to the fourth quarter of 2022. These results were driven primarily by national sales and slightly offset by local sales.

Turning to our results.

And Sam's fourth quarter twenty-three revenue was $90 9 million comparable to the fourth quarter of 2022.

These results were driven primarily by national sales and slightly offset by local sales. We are very pleased that NCI kept pace on revenue in the fourth quarter. Despite a 6% drop in audience related to the impact of the of the actors strike on the release schedule.

Thomas F. Lesinski: We are very pleased that NCM kept pace on revenue in the fourth quarter despite a 6% drop in audience related to the impact of the actor strike on the release schedule. This is largely due to the resilience of our business model and strong performance across our organization. In fact, NCM set a record in the fourth quarter of 2023 for its highest revenue per attendee in the company's history. National revenue for the fourth quarter was up 2% compared to the same period in the prior period. Approximately 71% of the fourth quarter's national revenue was attributable to longer-term upfront commitments, and the fourth quarter saw much better scatter marketplace participation than in the same quarter of the prior year, with 83 active national advertisers compared to 58 in the fourth quarter of 2022, representing a 43% increase. Local demand continued to be led by government marketing initiatives but also saw much greater category diversity than in past years, as cyclical industries such as restaurants, non-alcoholic beverages, arts, and entertainment contributed a greater percentage of local revenue than the same period in the prior year.

This is largely due to the resilience of our business model and strong performance across our organization in fact and see them set a record in the fourth quarter of 2023 for its highest revenue per attendee in the company's history.

National revenue for the fourth quarter was up 2% compared to the same period in the prior period.

Approximately 71% of the fourth quarters National revenue was attributable to longer term upfront commitments and the fourth quarter saw much better scatter marketplace participation than in the same quarter. The prior year with 83 active national advertisers compared to 58 in the fourth quarter of 2022, representing a 43% increase.

Local demand continued to be led by government marketing initiatives, but also saw much greater category diversity than in past years as cyclical industries, such as restaurants, non alcoholic beverages Arts and entertainment contributed a greater percentage of local revenue in the same period in the prior year.

Thomas F. Lesinski: Turning to the full year and quarterly box office results, 2023 box office levels were at their highest point since 2019, proving the resilience of the cinema industry. For the full year, 23, the domestic box office was $8.9 billion, up 21% versus the prior year and at 78% of 2019 levels, driven by films like Barbie's Super Mario Bros., Spider-Man Across the Universe, Guardians of the Galaxy, and Oppenheimer.

Turning to the full year and quarterly box office results.

2023 box office levels were at their highest point since 2019 proving.

Proving the resilience of the cinema industry for.

For the full year 'twenty three the domestic box office was $8 9 billion up 21% versus the prior year and at 78% of 2019 levels driven by films like Barbie Super Mario Brothers Spiderman across the universe Guardians of the Galaxy and Oppenheimer.

Thomas F. Lesinski: Fourth quarter box office came in at $1.9 billion, approximately up 5% year over year and at 64% of 2019 levels, led by, of course, Taylor Swift and the Hunger Games, which brought in $179 and $159 million, respectively. Over the past 18 months, a slower ad market has impacted demand across both linear and traditional media. However, as a result of NCM's differentiated offerings and high ROI for advertisers, our revenue has been resilient in the face of tighter ad budgets. This said, in the fourth quarter, we began to see an ad spending bounce back across all channels and expect a more significant rebound as the consumer environment improves and inflation continues to normalize over the coming quarters. This quarter, we released key findings from our second attention study, which was completed by Lumen Research, a leading attention technology company, in October of 23. The study measures attention across 14 categories, covering a variety of ad links and an expanded list of competitors and mediums. This study proved yet again that cinema continues to rank number one in terms of attention.

Fourth quarter box office came in at $1 9 billion approximately up 5% year over year in that 64% of 2019 levels led by of course Taylor Swift.

And the hunger games, which brought in 179 and $159 million respectively.

Over the past 18 months are slower AD market has impacted demand across both linear and traditional media. However, as a result of mcm's differentiated offerings and high ROI for advertisers. Our revenue has been resilient in the face of tighter ad budgets.

This said in the fourth quarter, we began to see an AD spending bounced back across all channels and expect a more significant rebound as the consumer environment improves and inflation continues to normalize over the coming quarters.

This quarter, we released key findings from our second attention study, which was completed by Lumens research a leading attention technology company in October 23.

The study measures attention across 14 categories, covering a variety of AD links and an expanded list of competitors and mediums.

This study proved yet again that cinema continues to rank number one in terms of attention.

Cinemas attention advantage is two to three times that of live sports fast nets premium Avon and digital premium.

Thomas F. Lesinski: Cinema's attention advantage is two to three times that of live sports, fast nets, premium Avon, and digital premium, and podcasts, and it's seven to sixteen times higher than that of social or digital media. Additionally, cinema saw year-over-year growth in average seconds viewed up 17 percent for a 30-second spot compared to our previous study conducted in November of 22. Attention scores remain high across key demographics, including the hard-to-reach Gen Z audiences.

And podcasts and it's 7% to 16 times higher than that of social and digital media.

Cinema saw year over year growth in average seconds viewed up 17% for a 32nd spot compared to our previous study conducted in November of 'twenty two.

Attention scores remained high across key demographics, including the hard to reach Gen. Z audiences. The study also demonstrated that attention proves to be consistent across all AD links and both blockbusters in smaller Indian movies.

And see them as rapid lumen once again showcases cinema advertising unique ability to create captive audience and heart and high ROI for brands.

Building off this new study and see them also partnered with Adelaide, a leading company in attention measurement to provide attention rating guarantees for our cinema advertising clients. This is the first time. This innovative solution has been offered by premium video platform.

Thomas F. Lesinski: The study also demonstrated that attention proves to be consistent across all ad links and both blockbusters and smaller indie movies. NCM's work with Lumen once again showcases cinema advertising's unique ability to create a captive audience and high ROI for brands. Building off this new study, NCM also partnered with Adelaide, a leading company in attention measurement, to provide attention rating guarantees for our cinema advertising clients. This is the first time this innovative solution has been offered by a premium video platform.

These new guarantees enable and see them in Adelaide clients to transact against C attention metric, allowing for an apples to apples quality comparison across sites placements platforms channels and more with attention rating guarantees and <unk> offerings are even more attractive as brands, who choose to advertise with us are assured of ours.

Salts in an otherwise opaque environment.

And Sam is redefining the movie experience for our brands by offering advertisers the opportunity to make cinema advertising part of their multichannel marketing experience.

Thomas F. Lesinski: These new guarantees enable NCM and Adelaide clients to transact against the attention metric, allowing for an apples-to-apples quality comparison across sites, placements, platforms, channels, and more. With attention rating guarantees, NCM's offerings are even more attractive, as brands who choose to advertise with us are assured of results in an otherwise opaque environment. NCM is redefining the movie experience for brands by offering advertisers the opportunity to make cinema advertising part of their multi-channel marketing experience. As we continue to work with Transform Cinema Advertising, NCM is providing advertisers with a wide range of custom content solutions that drive scalable impact, including turnkey editorial sponsorships in our category-leading pre-show, show takeovers with long-form branded films, immersive experiential activations in theater lobbies, and much Take, for example, a new 15-minute short film from the leading cosmetic company, ELF, that debuted ahead of the Mean Girls movie on January 12.

We continue to work with to transform cinema advertising and seamless providing advertisers with a wide range of custom content solutions that drive scalable impact, including turnkey editorial sponsorships in our category, leading pre show show takeovers with long form branded films immersive experiential Activations in theater lobbies.

And much more to drive the connection between brands and consumers.

Cheryl social media moments that reach far beyond the individual moviegoer.

Take for example, a new 15 minutes short film from the leading cosmetic company E. L. F. That debuted ahead of the mean girls movie on January 12th. This is the longest brand content film MTM is ever aired on a big screen to date with an unprecedented 167% lift in awareness.

And 94% AD recall.

And CMS industry, leading reach ensures that it can take advantage of these trends.

We're also looking for new ways to offer brands more opportunities to advertise on screen, we're continuing to enhance and see them X. The most powerful data platform in cinema with new research capabilities and heightened data intelligence to drive business outcomes. After extensive testing over the past year, we are rolling our business guarantees for relevant ad Cam.

Paying kpis, such as web traffic app downloads foot traffic and sales lifts another first in the cinema advertising business.

Thomas F. Lesinski: This is the longest brand content film NCM has ever aired on a big screen to date, with an unprecedented 167% lift in awareness and 94% ad recall. NCM's industry-leading reach ensures that it can take advantage of these trends. We're also looking for new ways to offer brands more opportunities to advertise on screen. We're continuing to enhance NCMx, the most powerful data platform in cinema, with new research capabilities and heightened data intelligence to drive business outcomes. After extensive testing over the past year, we are rolling out business guarantees for relevant ad campaign KPIs, such as web traffic, app downloads, foot traffic, and sales lists, another first in the cinema advertising business. These new initiatives will leverage our industry-leading deterministic data on movie-going audiences to help brands optimize their spending.

These new initiatives will leverage our industry, leading deterministic data on the movie going on its just to help brands optimize their spending.

Additionally, this quarter, we completed our programmatic AD platform beta launch and conducted testing of self serve buying them send them ads. These programs will broaden the potential and see them advertising pool by expanding the ways in which current and new advertisers can tap into the company's highly valued big screen inventory.

Through programmatic grants can access real time data driven trading of cinema AD inventory and to self serve brands can plan by schedule and create their own cinema ads shown on the big screen from a single auditorium to 18000 screens.

Overtime, we expect these initiatives to lead to high commercial utilization across the network.

As we look ahead into the first quarter of 'twenty, four and some expects to earn total revenue.

Thomas F. Lesinski: Additionally, this quarter, we completed our programmatic ad platform beta launch and conducted testing of self-serve buying for CineMads. These programs will broaden the potential NCM advertising pool by expanding the ways in which current and new advertisers can tap into the company's highly valued big screen inventory. Through programmatic, brands can access real-time, data-driven trading of cinema ad inventory, and through self-serve, brands can plan by schedule and create their own cinema ads displayed on the big screen, from a single auditorium to 18,000 screens.

34.5 million to $35 5 million.

The first quarter started off with great films with the release of doomed to mean girls to beekeeper and we look forward to the release.

Ghostbusters frozen Empire coming this weekend.

Importantly, today, we also announced that our board has approved a new $100 million share repurchase program.

Which runs through the year 2027, representing our confidence in our business and into the future.

Our intent is to use this program opportunistically to repurchase shares at prevailing market prices.

Ronnie will discuss the news in greater detail later in the call.

Thomas F. Lesinski: Over time, we expect these initiatives to lead to high commercial utilization across the NCM network. As we look ahead into the first quarter of 2024, NCM expects to earn total revenue of $34.5 million to $35.5 million. The first quarter started off with great films, with the release of Doom II, Mean Girls, The Beekeeper, and we look forward to the release of Ghostbusters Frozen Empire coming this weekend.

The future Abbott in the future of cinema advertising is bright and we're continuing to take steps to prove our value proposition and optimize long term box office momentum.

And CMS and unparalleled premium video advertising platform and with innovations underway. We are set up to deliver impactful brand campaigns and continue to drive ROI.

Cinema advertising spend positioning our great business for growth and continued success.

With that I'll turn the call over to Ron <unk> to provide you with more details on our operating results and future outlook.

Thank you Tom and good afternoon.

Before I discuss the results of the quarter and full year I want to note that today I will be discussing N C. M. L. O fees operating results as it relates to full year 2023, which would have been similar to <unk>. Inc's result, if the businesses were consolidated for the entirety of the year.

Thomas F. Lesinski: Importantly today, we also announced that our board has approved a new $100 million share repurchase program, which runs through the year 2027, representing our confidence in our business and into the future. Our intent is to use this program opportunistically to repurchase shares at prevailing market prices. Ronnie will discuss the news in greater detail later in the call.

We are delighted to deliver strong results as NC I'm finished the year on a high note with our sales fundamentals continuing to improve.

As Tom mentioned, the fourth quarter of 2023 set a record for the highest revenue per attendee since the inception of the company.

Thomas F. Lesinski: The future of cinema advertising is bright, and we're continuing to take steps to prove our value proposition and optimize long-term box office momentum. NCM has an unparalleled premium video advertising platform, and with innovations underway, we are set up to deliver impactful brand campaigns and continue to drive ROI on cinema advertising spend, positioning our great business for growth and continued success. With that, I'll turn the call over to Ronnie to provide you with more details on our operating results and future outlooks. Thank you, Tom. And good afternoon,

The combination of our ability to capture more revenue per attendee and our disciplined expense management resulted in stronger than expected adjusted OIBDA for the quarter and.

Full year.

During the first quarter since we emerged from our chapter 11 process, our management and sales teams successfully drove record high monetization of impressions.

Excluding beverage revenue revenue per attendee for the fourth quarter was a dollar and seven cents.

More than 7% compared to the fourth quarter of 2022 and over 17% higher compared to the same period in 2019.

Ronnie Y. Ng: Before I discuss the results of the quarter and full year, I want to note that today I will be discussing NCM LLC's operating results as it relates to full year 2023, which would have been similar to NCM Inc's results if the businesses had been consolidated for the entirety of the year. We are delighted to deliver strong results as NCM finished the year on a high note with our sales fundamentals continuing to improve. As Tom mentioned, the fourth quarter of 2023 set a record for the highest revenue per attendee since the inception of the company. The combination of our ability to capture more revenue per attendee and our disciplined expense management resulted in stronger than expected adjusted OIVD for the quarter and for the full year.

Despite lower year over year attendance in the fourth quarter due to the writers and actors strikes.

We were able to significantly increase total advertising spend from certain key advertisers.

The top 10 national advertisers from this quarter increased their spend by over 42% collectively compared to the fourth quarter of 2022 <unk>.

Additionally, we saw strong growth across a number of traditional categories such as.

Financial services.

Consumer packaged goods and health care.

Although we continue to navigate through a choppy advertising market, we experienced growth in both the upfront and scatter market.

Ronnie Y. Ng: During the first quarter since we emerged from our Chapter 11 process, our management and sales teams successfully drove record-high monetization of impressions. Excluding beverage revenue, revenue per attendee for the fourth quarter was $1.07, up more than 7 percent compared to the fourth quarter of 2022 and over 17 percent higher compared to the same period in 2019. Despite lower year-over-year attendance in the fourth quarter due to the writers and actor strike, we were able to significantly increase total advertising spend from certain key advertisers. The top 10 national advertisers from this quarter increased their spend by over 42% collectively, compared to the fourth quarter of 2022. Additionally, we saw strong growth across a number of traditional categories, such as Financial Services, Consumer Packaged Goods, and Health Care.

The improvement in both markets was the result of improved utilization and firm pricing discipline during the quarter in fact.

If pricing and utilization for the quarter were both well above 2019 levels by 14 and 16% respectively.

N C. M's total revenue for the fourth quarter was 90.9 noma.

Which was comparable to the $91 7 million in the same period in the prior year and exceeded.

Our revenue guidance of 85 to 88 million.

National advertising revenue increased to $71 9 million up 2%.

Compared to 74 million in the fourth quarter of 2022, driven by a 14% increase.

In utilization and a slightly higher CPM.

But offset by 6% decrease in attendance.

Local and regional advertising revenue was $16 2 million down 5% compared to $17 1 million in the fourth quarter of 2022, driven primarily by decreased activity in the eastern region and reduce spend within the government and travel categories.

Ronnie Y. Ng: Although we continue to navigate through a choppy advertising market, we experienced growth in both the upfront and scatter market. The improvement in both markets was the result of improved utilization and firm pricing discipline during the quarter. In fact, both pricing and utilization for the quarter were both well above 2019 levels by 14 and 16 percent, respectively. NCM's total revenue for the fourth quarter was $90.9 million, which was comparable to the 91.7 million in the same period in the prior year and exceeded. Our revenue guidance of $85 to $88 million. National advertising revenue increased to 71.9 million, up 2%, compared to 70.4 million in the fourth quarter of 2022, driven by a 14% increase in Utilization and a slightly higher CPI, but offset by a 6% decrease in attendance. Local and regional advertising revenue was $16.2 million, down 5% compared to $17.1 million in the fourth quarter of 2022, driven primarily by decreased activity in the eastern region and reduced spend within the government and travel categories.

Turning to our expenses.

Fourth quarter operating expenses were $69 6 million compared to $63 6 million in the prior year.

This variance was driven by two factors.

First an increase in amortization expenses associated with purchase price adjustments to N. C. M. L. O sees intangible assets upon Reconsolidation on August seven 2023 and second.

An increase in expenses incurred due to N C. M. L. L. CS chapter 11 case and related Appeals.

Excluding charges related to our financial restructuring.

Other one time items depreciation amortization and noncash share based comp our adjusted operating expenses for the fourth quarter of 2023 were $51 1 million, 3% higher compared to $49 6 million during the same period last.

Here.

Ronnie Y. Ng: Turning to our expenses, fourth quarter operating expenses were $69.6 million compared to $63.6 million in the prior year. This variance was driven by two factors.

The increase in adjusted operating expenses was related to slightly higher theater access fees and affiliate costs as a result of the new Regal affiliate agreement.

Ronnie Y. Ng: First, an increase in amortization expenses associated with purchase price adjustments to NCMLLC's intangible assets upon reconsolidation on August 7, 2023. And second, an increase in expenses incurred due to NCMLLC's Chapter 11 case and related appeals. Excluding charges related to our financial restructuring, other one-time items, depreciation, amortization, and non-cash share-based comp, our adjusted operating expenses for the fourth quarter of 2023 were $51.1 million, 3% higher compared to 49.6 million during the same period last year.

Higher professional fees and.

And slightly higher personnel costs.

As a reminder.

A new Regal relationship is an affiliate agreement the expense. So the agreement was reclassified from E. S. A theater access fees and revenue share to advertising operating costs.

Fourth quarter adjusted OIBDA, excluding noncash charges and one time items was $39 8 million compared to $42 1 million in the prior year.

The result was.

Well exceeded our guidance range of 30 million to 33 million.

The OIBDA was driven by lower than expected fees paid to Esa and affiliate partners tighter management of operating expenses and steady revenue despite lower attendance.

Ronnie Y. Ng: The increase in adjusted operating expenses was related to slightly higher theater access fees and affiliate costs as a result of the new Regal Affiliate Agreement, hire professional services, and slightly higher personnel. As a reminder, since the new Rego relationship is an affiliate agreement, the expense of the agreement was reclassified from ESA theater access fees and revenue share to advertising operating costs. Fourth quarter adjusted Orbita, excluding non-cash charges and one-time items, was $39.8 million, compared to $42.1 million in the prior year. The result well exceeded our guidance range of 30 million to 33 million. Adjusted OIDA was driven by lower than expected fees paid to ESA and affiliate partners, tighter management of operating expenses, and steady revenue despite lower attendance. Total free cash flow for the quarter, as defined by cash flow from operations less capital expenditures, was negative $2.8 million.

Total free cash flow for the quarter as defined by cash flow from operations less capital expenditures was negative $2 8 million.

However, when excluding restructuring and related expenses the quarter would have generated positive free cash flow of $4 3 million.

Turning to the full year.

In 2023 N C M generated $259 8 million in total revenue, which was up 4% compared to total revenue of $249 2 million in 2022.

These results were largely driven by local up 18% compared to the prior year spin.

Specifically local saw a 28% increase in activity from the current year's top 10 advertising categories with notable gains in the government health care and education service categories.

Ronnie Y. Ng: However, when excluding restructuring-related expenses, the quarter would have generated positive free cash flow of $4.3 million. Turning to the full year, in 2023, MCM generated $259.8 million in total revenue, which was up 4% compared to total revenue of $249.2 million in 2022. These results were largely driven by local, about 18% compared to the prior year.

National revenue for the year was up 2% year over year, driven by a 9% increase in impressions sold and an 11% increase in network attendance compared to 2022.

Turning to our expenses.

We incurred a significant amount of one time expenses related to our chapter 11 restructuring in 2023.

For full year 2023, operating expenses were $440 7 million, which included $233 6 million in charges related to our financial restructuring other onetime items depreciation amortization and noncash.

Ronnie Y. Ng: Specifically, local saw a 28% increase in activity from the current year's top ten advertising categories, with notable gains in the government, healthcare, and education service categories. National revenue for the year was up 2% year over year, driven by a 9% increase in impressions sold and an 11% increase in network attendance compared to 2020. Turning to our expenses, we incurred a significant amount of one-time expenses related to our Chapter 11 restructuring in 2023. For full year 2023, operating expenses were $440.7 million, which included $233.6 million in charges related to our financial restructuring, other one-time items, depreciation, amortization, and non-cash share-based compensation. Excluding these charges, our adjusted operating expenses for 2023 were $207.1 million, 8% higher compared to the same period last year of $191.9 million. The increase in adjusted operating expenses was largely related to the 10% higher theater access fees and affiliate costs due to the increased attendance from the new Regal Affiliate Agreement.

Cash share based compensation.

Excluding these charges our adjusted operating expenses for 2023 were $207 1 million, 8% higher compared to the same period last year of $191 9 million.

The increase in adjusted operating expenses was largely related to the 10% higher theater access fees and affiliate costs due to the increase attendance from the new from the new Regal affiliate agreement.

Full year 2023, adjusted OIBDA, excluding noncash charges and onetime items was $52 7 million compared to $57 3 million in 2022.

Again, our full year result, substantially exceeded the midpoint of our estimates due to the previously mentioned rationale.

Total free cash flow for the year was negative $48 8 million. However, when excluding restructuring related expenses free cash flow for the year would have been $10 4 million.

Ronnie Y. Ng: Full year 2023 adjusted OEBDA excluding non-cast charges and one-time items was $52.7 million compared to $57.3 million in 2022. Again, our full year results substantially exceeded the midpoint of our estimates due to the previously mentioned rationale. Total free cash flow for the year was negative $48.8 million.

Further if we remove cash interest expense of 12 and a half no one for the year.

Then unlevered free cash flow for the year would have been $22 9 million.

Turning to our consolidated balance sheet.

At the end of the fourth quarter. The company had $37 6 million of cash cash equivalents restricted cash and marketable securities and total debt of 10, knowing compared to total debt net of cash of approximately $1 1 billion at the end of 2022.

Ronnie Y. Ng: However, when excluding restructuring-related expenses, free cash flow for the year would have been $10.4 million. Further, if we remove cash interest expense of $12.5 million for the year, then Unleveraged Free Cash Flow for the year would have been $22.9 million. Turning to our Consolidated Balance Sheet, At the end of the fourth quarter, the company had $37.6 million of cash, cash equivalents, restricted cash, and marketable securities, with total debt of $10 million, compared to total debt, net of cash, of approximately $1.1 billion at the end of 2020. The reduction in debt was related to our financial restructuring, which was completed in August of 2023, resulting in the elimination of approximately $90 million in annual fixed charges. As noted in Tom's remarks, our board has approved a new program authorizing the company to purchase up to $100 million of shares of our common stock.

The reduction in debt was related to our financial restructuring.

Which was completed in August of 2023, resulting in the elimination of approximately $90 million in annual fixed charges.

As noted in Tom's remarks, our board has approved a new program authorizing the company to purchase up to $100 million of shares of our common stock.

We plan to Opportunistically repurchase shares at prevailing market prices over the next three years, while also continuing to invest capital in growing our advertising network through new innovations.

Such as programmatic and self serve.

This share repurchase program demonstrates our confidence in the long term strength of our business and our commitment to deploying capital in a disciplined manner to maximize shareholder value through a balanced approach of investment and return of capital to.

Our stockholders.

The repurchase program is expected to be funded by operating cash flow distributions from MCM LLC generated over the course of the program.

Ronnie Y. Ng: We plan to opportunistically repurchase shares at prevailing market prices over the next three years while also continuing to invest capital in growing our advertising network through new innovations such as programmatic and self-serve. This share repurchase program demonstrates our confidence in the long-term strength of our business and our commitment to deploying capital in a disciplined manner to maximize shareholder value through a balanced approach of investment and return of capital to our stockholders The repurchase program is expected to be funded by operating cash flow distributions from NCM LLC generated over the course of the program. [inaudible] In addition, the repurchase authorization will be executed at the board's discretion and is subject to regulatory limitations. Turning to God.

In addition, the repurchase authorization will be executed at the board's discretion and is subject to regulatory limitations.

Turning to guidance.

Earlier this year, we did a review of our current operating structure and an assessment of our needs going forward.

For reference.

Our SG&A, excluding theater access fees and affiliate costs was $122 6 million in 2019 compared to dispatch year, It was $91 8 million or 25% lower compared to pre COVID-19.

In mid January 2024, we implemented additional cost savings initiatives, which included the consolidation of select business units.

Ronnie Y. Ng: Earlier this year, we did a review of our current operating structure and an assessment of our needs going forward. Our SG&A, excluding theater access fees and affiliate costs, was $122.6 million in 2019. Compared to this past year, it was $91.8 million, or 25% lower compared to pre-COVID.

And resulted in reductions in head count.

We estimate that these initiatives will result in over 5 million of net savings in SG&A, four 5% reduction compared to 2023.

These savings combined with the termination of certain network affiliate agreements will result in a total reduction of over 10 million in annual operating expenses.

Ronnie Y. Ng: In mid-January 2024, we implemented additional cost savings initiatives, which included the consolidation of select business units and resulted in a reduction in head count. We estimate that these initiatives will result in over $5 million of net savings in SG&A, for a 5% reduction compared to 2023. These savings, combined with the termination of certain network affiliate agreements, will result in a total reduction of over $10 million in annual operating expenses. With this in mind, for the first quarter of 2024, which is a seasonally slower quarter, we expect revenue to be between $34.5 million and $35.5 million. In addition, we expect the adjusted oeuvre for the first quarter of 2024 to be between negative seven and a half million and negative six and a half million. While we will not be giving formal full year 2024 guidance at this time, I would like to take a minute and discuss some of the trends we are seeing. We are expecting some softness in the 2024 film slate due to the prolonged industry strike that limited movie releases for the year.

With this in mind for the first quarter of 2024.

Which is a seasonally slower quarter, we expect revenue to be between 34, and a half Mellon and 35 and a half million dollars.

In addition, we expect adjusted OIBDA for the first quarter of 2024 to be between negative seven and a half mellon and negative six and a half mellon.

While we will not be giving formal full year 2020 for guidance at this time I would like to take a minute and discuss some of the trends we are seeing.

We are expecting some softness in the 2024 films slate due to the prolonged industry strike that limited movie releases for the year.

I would like to reiterate that we do not see this as a consumer issue interests in cinema is strong.

As proven by attendance levels at compelling theatrical releases over the past year.

That said there are still many films to be excited about as we look forward to 2024, both sequels and original content.

Such as Deadpool, three Gladiator too Wicked part one Mickey 17, the fall Guy Borderlands Despicable me four and mufasa.

Ronnie Y. Ng: I would like to reiterate that we do not see this as a consumer issue. Interest in cinema is strong, as proven by attendance levels at compelling theatrical releases over the past year. That said, there are still many films to be excited about as we look forward to 2024, both sequels and original content, such as Deadpool 3, Gladiator 2, Wicked Part 1, Mickey 17, The Fall Guy, Borderlands, Despicable Me 4, and Mufasa.

Looking to 2025, we anticipate the box office will rebound and say positive tone for the second half of the decade.

With a strong balance sheet and unmatched offerings and see them is well positioned for the future the.

The company is positioned to generate significant free cash flow due to low capital expenditures and with a historically adjusted OIBDA to Unlevered free cash conversion of over 80% and see them has multiple opportunities to generate value for its shareholders.

Operator: Looking to 2025, we anticipate the box office will rebound and set a positive tone for the second half of the decade. With a strong balance sheet and unmatched offerings, NCM is well positioned for the future. The company is positioned to generate significant free cash flow due to low capital expenditures, and with a historically adjusted OEBDA to unlever free cash conversion of over 80%, NCM has multiple opportunities to generate value for its shareholders. Operator, please open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

Operator, please open the line for questions.

We will now begin the question and answer session too.

To ask a question you May press Star then one on your telephone keypad.

If you were 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 is from Eric Wold with B Riley Securities. Please go ahead.

Thank you.

Good afternoon everybody.

Couple of questions I guess.

Thanks, Tom.

Reports out there that you.

Operator: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question is from Eric Wold with B. Reilly Securities. Please go ahead. Thank you. Good afternoon, everybody.

You will be offering kind of a business outcome guarantees around the upfronts in dollars committed.

You kind of contrast that with what was in place before what is the biggest change that doesn't kind of go to the customers as well as MCM.

Thomas F. Lesinski: A couple of questions, I guess. Thanks for what you do, Tom. Reports out there that you will be offering kind of the biggest outcome guarantees around the upfronts and dollars committed, um, can you kind of contrast that with what was in place before? What is the biggest change that that does, kind of both for the customers as well as NCM should the outcomes not be as expected? Well, this is the first time we've ever offered business outcome guarantees. So in the past, it was a very traditional way of selling inventory.

M CME should.

Should the outcome will not be as expected.

Well. This is the first time, we've ever offered business outcome guarantees so in the past.

It was a very traditional way of selling inventory to.

To go to this next step Eric it's really important that we had such faith in our ability from an attention and delivery point of view that we can promise outcomes. That's a major change in our in our way of doing business.

In fact very few.

Premium video companies operating in close to this some digital media companies do but this is a material change that we announced and it's going to have a significant impact we believe on the marketplace.

Thomas F. Lesinski: To go to this next step, Eric, it's really important that we have such faith in our ability from an attention and delivery point of view that we can promise outcomes. That's a major change in our way of doing business. In fact, very few premium video companies offer anything close to this.

Got it and then.

If you think about the new programmatic and self serve offerings that you are the expectations that those are mostly.

Helped drive inventory fills.

Thomas F. Lesinski: Some digital media companies do, but this is a material change that we announced, and it's going to have a significant impact, we believe, on the marketplace.

Or.

What do you think actually the impact could be on CPM through both of those.

So it's interesting when you think about utilizing.

<unk> inventory very few platform sell out inventory. That's one reason, we're offering programmatic, but the real reason we're offering it is there a significant budgets in Madison Avenue that are only in programmatic budgets that we never had access to.

Thomas F. Lesinski: And then, as you think about the new, you know, programmatic, and self-serve offerings, you know, are the expectations that those mostly help drive inventory fills, or what do you think actually the impact could be on CPMs for both of those? So it's interesting when you think about utilizing inventory; very few platforms sell out inventory. That's one reason we're offering programmatic, but the real reason we're offering it is there are significant budgets in Madison Avenue that are only in programmatic budgets that we never had access to. And just in the short time that we've been in programmatic, we've already attracted new accounts because of that. Our goal is to, you know, obviously sell inventory that we haven't been able to sell before through programmatic, which is going to have different CPM levels that we haven't disclosed compared to our traditional, more expensive inventory.

And just in the short time that we've been in programmatic, we've already attracted new accounts because of that.

Our goal is to obviously sell inventory that we haven't been able to sell before through programmatic.

It's going to have different CPM levels that we haven't disclosed.

Compared to our traditional more expensive inventory.

But I can tell you. The response, we've gotten already a programmatic has been significant.

And we're happy to be the first cinema company to do this.

And it's an important part of the growth of our company.

Being a technology platform as well as just being a traditional ad platform.

Sometimes we get further once we get further down the road on programmatic will be able to provide more specifics, but we're literally going to it just for one quarter.

And we'd be happy to share more details as it comes forward.

Helpful. Thank you.

Thomas F. Lesinski: But I can tell you the response we've gotten already on programmatic has been significant, and we're happy to be the first cinema company to do this. And it's an important part of the growth of our company, being a technology platform, as well as just being a traditional ad platform. I think once we get further down the road on programmatic, we'll be able to provide more specifics, but we're literally into programmatic for just one quarter, and we'll be happy to share more details as it comes forward. Helpful. Thank you. Again, if you have a question, please press star then 1. The next question is from Jim Goss with Barrington Research. Please go ahead. Good afternoon.

Sure.

Again, if you have a question. Please press Star then one the next question is from Jim Goss with Barrington Research. Please go ahead.

Good afternoon.

Couple of questions the first about <unk>.

Share buyback I know one of the.

<unk> key strengths and.

In attractions you voiced a pleasure with in terms of coming out of.

The.

The bankruptcy flirtation issue if you will.

Was that you had a very strong balance sheet no debt some cash and now you are coming up the share buyback program of 100 million over three years roughly do you have cash at the end of the.

Operator: A couple of questions first about the share buyback. I know one of the key strengths and attractions you voiced pleasure with in terms of coming out of the bankruptcy flirtation issue, if you will, was that you had a very strong balance sheet, no debt, some cash, and now you are coming up with this share buyback program of $100 million over three years, roughly. Do you have cash at the end of the quarter of $37.6 million, and you said you had an unlevered free cash flow of about $23 million?

Quarter of 37, 6 billion and you said you had unlevered free cash flow of about $23 million I. Just wanted you to walk through that.

Television behind.

<unk> so much toward buybacks and if you think it threatens that key benefit you thought or if it's if you're safe and making such a judgment over the several periods is a several year period.

Ronnie Y. Ng: I just wanted you to walk through the mentality behind allocating so much toward buybacks and if you think it threatens that key benefit you thought or if you're safe in making such a judgment over this several-year period. I'm going to have Ronnie walk you through the details of it, Jim, but I can tell you we've analyzed this substantially. We're very comfortable with our cash flow positions going forward and our projections, particularly going into 2025. But Ronnie, we'll kind of walk you through how we got around to that number.

I'm Gonna have Ronnie walk you through the details of it Jim but I can tell you. We've analyzed this substantially we're very comfortable with our cash flow positions going forward in our projections, particularly going into 'twenty five, but Ronnie will kind of walk you through how we got around close to that number yes.

Yeah. So so Jim it's a great question.

It is a three year program, which we are.

Is ending at the end of the first quarter of 2027, Oh. So it is inclusive of free cash flow for this year for 2025 and 2006 in the first quarter of 'twenty seven.

Ronnie Y. Ng: Yeah, so Jim, it's a great question. It is a three-year program that is ending at the end of the first quarter of 2027. So it is inclusive of free cash flow for this year, for 2025, and 2006, and for the first quarter of 2027. We think that over this period of time, there will be a recovery in the business that more than substantiates the $100 million share repurchase program or will cover more than the $100 million share repurchase program, and that the free cash flow obviously would be more than enough to cover that. If you look at it from a 22-year-old perspective, then of that $20 million that I cited in free cash flow before, sure, you could say that there doesn't seem to be enough.

Think that over this period of time, there would be a recovery in the business that board and substantiate the AR.

The $100 million share or will cover more than the $100 million share repurchase program and that the free cash flow, obviously would would be bored enough to cover to cover that.

If you look at it from a 22 perspective.

And of that 20, plus knowing that that I cited in free cash flow before I'm sure you could say that they're you know, they're there doesn't seem to be enough, but we do believe that over over the next three years the business, we'll we'll get back to a level.

Ronnie Y. Ng: But we do believe that over the next three years, business will get back to a level where the box office is recovering more fully. Okay, and just one follow-on to that part. You also indicated that it could be a combination of opportunistic, strategic-type repurchases versus more structured 10b5-1 elements, and I imagine there'd be an interest in front-loading this, given where the stock is and has been trading for a number of months. Does one thing work against another, or do you think it'll take place over that? The total total period of time.

Where we're at the box office is recovering.

More fully.

Okay, and just one follow on to that part you also indicated that.

It could be a combination of opportunistic strategic type for repurchases versus March.

Our structured can be five dish one element.

And I imagine there would be.

And interest in.

Frontloading this given where the stack.

Is and has been trading for a number of them.

There's one thing working against another or do you think do you think it'll take place over that.

Total.

Total period of time.

Ronnie Y. Ng: Well, I think what we put in here is a plan for a substantial period of time, or for the next three years, is what we're allowed to do with what's approved by the board. Now, how we go about executing it, we're obviously going to see what the market conditions are like, and that will mostly dictate what we do. I think it's reasonable, though, Jim, to think that in the current situation now, we believe the shares are undervalued, and there's going to be more acquisitions at lower prices earlier on.

Well I think what we put in here is a plan over over a substantial period of time or for next three years is what we're allowed to do with what what's what's approved by the board.

Now how we go about executing it.

You know, we're obviously going to see what the market conditions are like and Dow mostly dictate what we do I think it's reasonable, though Jim to think that.

And the current situation now that we believe the shares are undervalued is that theres going to be more.

<unk> at lower prices.

Thomas F. Lesinski: And, you know, obviously, this is a long-term plan, but it's logical to think that more of that share purchasing could happen now given where the price of the stock is today. Okay, and maybe one other separate issue: what is more important right now, improved penetration within existing advertiser budgets or growth in incremental numbers of advertisers? And is the latter setting the stage for a subsequent?

Earlier on and obviously this is a long term plan, but it's logical to think that more of that share purchasing could happen now.

Given where the price of the stock is today.

Okay, and maybe one other separate issue.

What is more important right now improved penetration within existing advertiser budgets or growth and.

Incremental numbers of advertisers and its the ladder setting the stage for a subsequent.

Thomas F. Lesinski: Ad Revenue Development, I imagine it is. So our goal, Jim, is to do two things: optimize and get more market share from existing advertisers and existing categories. And we've been doing a good job of that, particularly in this past fourth quarter.

AD revenue development I imagine it is.

So our our goal Jim is to do two things is to optimize and get more market share from existing advertisers in existing categories.

And we've been doing a good job with that particularly in this past fourth quarter, but I want you to know too that our real goal. In addition to that is to grow our advertiser base.

Thomas F. Lesinski: But I want you to know, too, that our real goal, in addition to that, is to grow our advertiser base. Just based on what we did in the fourth quarter, we added a significant number of new advertisers. And there are plenty of advertisers out there that have never advertised in cinema before. And I think with the addition of our research capabilities on NCMX, programmatic, those alone will help drive new customer interest, and they already have. We were never really in the pharma business until we could start doing a lot more attribution studies.

Just based on what we did in the fourth quarter, we added a significant number of new advertisers and there are plenty of advertisers out there that have never advertised in cinema before and I think with the addition of our research capabilities that NCL Max programmatic.

Those alone will help drive new customer interest and they already have we were never really in the pharma business until we can start doing a lot more attribution studies and now we've got some significant players in that space. So our goal is to.

Thomas F. Lesinski: And now we've got some significant players in that space. So our goal is to, you know, keep stealing share from existing advertisers' budgets but also to bring new advertisers on the platform. And that's a great way to grow the business.

Keep stealing share from existing advertisers' budgets, but also to bring new advertisers on the platform and that's a great way to grow the business.

Thomas F. Lesinski: All right, thanks very much. You're welcome. This concludes our question and answer session. I would like to turn the conference back over to Thomas Lesinski for any closing remarks. Okay, well, thank you for your questions in support of National CineMedia. Through our industry-leading scale, NCM continues to be a leader in this overall premium video advertising marketplace. The past year really affirmed that movies are back, and NCM continues to deliver these sought-after audiences, driving new and returning brands to our platform quarter after quarter. We have solid momentum coming out of 2023, and we're looking forward to the year ahead. So I want to thank the NCM team and the NCM Board for all their hard work and support, and I particularly thank our shareholders and advisors for their support and guidance over the past year. We appreciate you joining us on the call and look forward to seeing you all again at the movies. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Thomas Lesinski, Michael Hickey, Ronnie Ng, Dan Dorenkamp, National CineMedia Inc.

Alright, thanks very much.

Youre welcome Jim.

This concludes our question and answer session I would like to turn the conference back over to Tom Lesinski for any closing remarks.

Okay, well. Thank you for your questions and support of National Cinema media through our industry, leading scale and see them continues to be a leader in this overall premium video advertising marketplace. The past year really affirm that movies are back at MCM continues to deliver these sought after audiences driving new and returning brands.

Two our platform quarter after quarter.

But solid momentum coming out of 2023, and we're looking forward to the year ahead, so I want to thank the <unk> team.

The MCM board for all their hard work and support and are predicting thank our shareholders and advisors for their support and guidance over the past year.

We appreciate you joining us on our call and look forward to seeing you all again at the movies. Thank you.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].

Yeah.

[music].

Yeah.

Okay.

[music].