National CineMedia, Inc.

Please stand by. We're about to begin. Good day and welcome to the National CineMedia, Inc., Q4 and full year 2021 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Ronnie Ng, CFO. Please go ahead, sir.

Great. Thank you. Good afternoon. I'm joined today by our CEO, Tom Lesinski. I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A, of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended. All statements, including our discussion about the future impacts of COVID-19, other than statements of historical facts communicated during this conference call, may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed 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. Further, 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 ncm.com. Now I will turn the call over to Tom.

Thank you, Ronnie, and good afternoon, everyone. Welcome to our fourth quarter and full year 21 earnings call. It has been a very active and productive quarter for National CineMedia as we successfully navigated through the unique marketplace challenges that have impacted our business for nearly two years. I'm pleased to report that we've generated positive adjusted EBITDA for the first time in six quarters. In addition, we've strengthened our liquidity position and have begun to turn the corner operationally and once again our position for growth. With the strong box office performance since Labor Day weekend, CineMedia is back into the planning cycle of advertisers and their agencies. With this more consistent film release schedule and the record-breaking box office results of Spider-Man, Cinema is once again providing the broad reach our clients have been accustomed to. In fact, Spider-Man's opening weekend had higher ratings than even what the Super Bowl now delivers. Given this cinema recovery, we are very optimistic for 22. For the first time since the start of the pandemic, we're starting the year with meaningful upfront bookings, a packed and attractive film release slate, and growing consumer demand to return to the theaters as COVID infections levels plummet and mass mandates come to an end. During today's call, Ronnie and I will provide a high-level update on our company's enhanced liquidity position and our progress to rebuild our cash flow and working capital back to normalized levels. I will also address how we've taken steps to expand, diversify, and improve our business to enable us to capitalize on a strong 22 theatrical film slate with a return to exclusive release windows. The effectiveness of our sentiment network combined with our digital advertising platforms and exciting new audience-driven data solutions have never been more valuable to advertisers as TV ratings continue to fall and new questions are being raised about consumer privacy. We will also discuss how we are once again aggressively competing in the TV upfront and scatter marketplaces, and then we'll open the line for questions. While I realize that the long-term success of our business does not hinge on one film, Sony's Spider-Man No Way Home had a meaningful impact on our ad business as well as the cinema business. Despite its release schedule of December 17th, which coincided with the rise of the Omicron variant, Spider-Man broke multiple attendance records and demonstrated the cinema's cultural impact and ability to create huge marketing and PR awareness for a film. Spider-Man is currently the third highest grossing domestic film of all time with most of its attendance coming when Omicron cases were surging and the severity was still unknown. It enjoyed the biggest domestic December opening of all time at $260 million and was the first film to gross the billion dollar mark worldwide since 2019. The initial theatrical trailer garnered 355 million global views in a 24 hour period topping Black Widow, Avengers, Infinity War, and Star Wars The Last Jedi. Early ticket sales overwhelmed ticketing selling platforms such as Fandango, MovieTickets.com, the AMC and Regal sites, and first day ticket presale broke pandemic records for AMC and Cinemark. The film franchise has a social fan base of over 1.5 billion followers, with the film premiere hosted by TikTok garnering 50 billion views The most important statistic of note when speaking with the advertising community is that Spider-Man's opening weekend delivered a larger 18 to 34-year-old audience than the 2022 Super Bowl, with a rating of 28.3 compared to the Super Bowl rating of 24.1. This data point, coupled with commanding reach statistics along the moviegoer journey from trailer to ticket presales to opening weekend and beyond, has been a powerful selling tool in the recent scatter market, and more importantly during our preliminary 22-23 upfront meetings. Blockbuster theatrical releases bring enormous scale and cultural influence, especially among the highly coveted Gen Z and millennial consumers, which is very important to our advertising clients. This demonstrates the power of the cinema platform as a marketing launch pad, something that TV and streaming platforms just cannot provide to movie studios and producers. In addition to Spider-Man, we saw young, diverse audiences come out in droves for other fourth quarter releases such as Venom, Eternals, No Time to Die, Ghostbusters, and Dune. Nearly one in two adults aged 18 to 34 went to the movies in the fourth quarter. In addition, the fourth quarter box office of over $2 billion was 75% of 2019 levels and 73% of the five-year average for 2015 through 2019. This is a clear demonstration of the consumer demand for the big screen experience of the movie theater, and we expect that trend to continue and strengthen through this year and beyond as the film release schedule deepens. This year's film slate is so promising that there may in fact be several titles that could follow in Spider-Man's record-breaking footsteps, with 2022 potentially ribing other record box office years. There are a number of tenfold films opening in the first half of the year, such as The Batman, March 4th, Morbius on April 11th, Sonic the Hedgehog on April 8th, Doctor Strange on May 6th, Top Gun on May 27th, and Jurassic World on June 10th, as well as Pixar's Lightyear on June 17th. These highly anticipated sales are driving significant social buzz and high interest as we discuss them with advertisers, and they will get consumers back into the movie-going habit before the summer vacation months. It's also important to note that most film releases are confirmed for a 40-day exclusive theatrical window. As we saw in 2021, those films that opened exclusively on streaming services or day and date with cinema did not benefit from the huge marketing and P&R exposure provided by a broad initial theatrical launch. Now the streaming and other downstream platforms will once again be able to take advantage of the powerful launch platform that an exclusive cinema release provides. Even Netflix has begun to provide a short, exclusive theatrical window for select films. An initial theatrical release will also significantly reduce the risk of piracy that accompanies an initial online release, as Warner Brothers recently experienced with The Matrix Resurrections. While macroeconomic headwinds associated with supply chain disruptions and inflation continue to persist, Overall consumer demand and the job market continuing to strengthen, we expect the advertising marketplace to remain robust and for Gen Zs and millennials to be the fastest growing consumer segment. Millennials already spent $1 trillion annually, and that spending power will increase as their income reaches over $8 trillion by 2025 versus $6.4 trillion for Gen Xers and $1.1 trillion for baby boomers. This is great news for us as cinema is the best place for marketers to connect with this young and growing consumer segment. Throughout the pandemic, we have worked very hard to maintain client and agency relationships and sell this value proposition so that we were well positioned as theatrical release schedule normalizes and audience returns to the cinema. While our ad revenue recovery has lagged the cinema box office recovery somewhat, Due to the inability to participate in the 2020 broadcast and calendar or upfront selling seasons, this trend began to reverse itself in Q4 and is expected to continue to reverse due to higher level commitments received during the recent 2021-22 upfronts and the 2022-23 upfronts that are currently in the planning process. While first quarter is seasonally a slower quarter, we are pacing in line with projections and significantly ahead of Q1 2021, thanks in large part to this year's successful upfront. Our 22 calendar year upfront is currently tracking at similar levels that we previously shared with many deals still in active discussions. We expect most of the big brands who advertised with NCM in the past to make commitments to us again in 22, in addition to a few new brands, specifically in the crypto and online betting categories. We will also benefit from a higher sell-through of our platinum ad unit, our newest and highest value inventory that runs closest to the start of the film. We sold the Platinum units in November and December of 21, and we recently secured another Platinum come in from an advertiser in the travel category during March of 22. As you may recall, the Platinum unit was introduced just prior to the start of the pandemic in the second half of 2019. Thus, we are anticipating higher revenue from Platinum sales in 22 and beyond. In fact, it will be featured as part of our post-showtime product mix during the upcoming upfront selling season beginning this month. With the 2022 broadcast TV and 2023 calendar up for season approaching, we have planned for a very aggressive marketing and sales campaign that features a series of in-person, upfront meetings and film screening events. This spring, we are inviting marketers and media agencies in New York, LA, and Chicago to exclusive live presentations similar to the upfront meetings held by the TV networks in New York City in May, but much more intimate and focused on planning and buying decision makers as well as their clients. As media planners and buyers consider their option within the current media landscape, the power and importance of the theatrical advertising experience has great momentum after a strong Q4, anchored by the overwhelming success of Spider-Man. The trend of younger audiences abandoning ad-supported linear TV, and in some cases, never having watched it at all, making cinema a very attractive TV GRP replacement vehicle. In addition, while ad-supported streaming is growing, It only represents approximately 9% of overall video consumption and on any given weekend provides for far less reach and overall effectiveness than cinema. The results of an ad effectiveness study we conducted in Q4 demonstrated that cinema's ad recall is approximately three times higher than TV or social media advertising. During our upfront events, we will also make several new announcements to the advertising community and provide details on recent sales initiatives. For instance, we have a new transformative data-driven solution we've been testing that allows us to better serve advertisers' key consumer segments using our extensive data and knowledge of moviegoers and their behavior. NCM's ongoing commitment to growing our data sets also allows us to utilize digital to deliver one-to-one addressability. Our digital platforms are well positioned in our current offering as the past two years have served as an opportunity to leverage digital advertising to help brands reach movie fans. This proved to be particularly effective with our local advertisers as a complement to the big screen campaigns. These integrated selling efforts during the pandemic have positioned us very well as the cinema business recovers in the coming months. We've already had several big integrated wins in the travel category in Q1, and we'll continue to focus on integrated selling throughout the year. In October of 21, we launched a partnership with New Time Media, a media advertising Sales Representation Company that focuses on the black and Hispanic consumer to help us better serve marketers looking to reach African Americans and Hispanic audiences. Importantly, NCM's audience is 42% diverse. With NewTime, we're bringing to market two highly targeted specialty cinema advertising networks. NCM's Black Cinema Network, which includes 339 theaters with over 5,400 screens, expected to reach an audience of 11.4 million consumers monthly. as well as NCM's Hispanic Cinema Network, which includes over 449 theaters and over 6,000 screens expected to reach 15.4 million consumers monthly. Another area of strategic focus during our pandemic has been to reimagine our newbie pre-show by integrating into the show innovative content marketing opportunities for advertisers. In Q4 of 21, we began developing and producing new intellectual property Concepting ideas which would engage the movie-going audience while offering customizable sponsorships, integration, and branded content platforms to advertisers. Even before the massive success of Spider-Man, we leaned into the public's passion for franchises from the Marvel Cinematic Universe and DC Comics and created a superhero-themed original content series called The Newbie-Verse that were hosted by an array of social media influencers who discussed the upcoming fills and editorial content. Our Spider-Man-themed episode resonated with the public. It drove a 17% increase in followers on newbie social media. Throughout 2022, our marketing, digital, research, and sales planning teams will aggressively create and package new original and studio IP and content-led products for advertisers, elevating NCM's capability as a creative media company. During the pandemic, we also completed and launched our new cinema advertising management system that will allow us to more effectively utilize and price our inventory Shorten order to screen lead times, create more flexibility to meet advertiser budgets, and maintain lower IT and operating staffing levels. It will also provide strategic scheduling capabilities, creating more equitable rotation across the network, including the ability to better optimize campaigns in flight. This platform is an essential component to the foundation for future automation and programmatic offerings, both of which could significantly enhance our business. On the local and regional front, we completed the restructuring of our business model and selling organization to place more sales focused on the larger markets favored by advertisers and increase gross margins of this segment of our business. We now have four major markets, local and regional sales teams, which will place more focus on larger client partnerships as smaller local businesses recover from the pandemic and begin to market their businesses more aggressively. While advertising investment is picking up across the country, smaller local businesses are still challenged while larger businesses within three key categories, government, education, and healthcare have increased their share to now account for 62% of fourth quarter revenue for our local and regional business segment. Importantly, we have already started to see the benefit of this new implemented structure in the first quarter of this year. The pandemic required us to make many difficult choices in balancing the business and financial needs of the company while retaining a very high quality team and high quality relationships with our clients. We have right-sized and filled-in staffing where needed and restored full pay for all NCM employees beginning in January of 22. As we continue to evaluate the short, medium, and long-term needs of the business, we expect a stable workforce for 22 and beyond. I'm very, very proud of the job our entire NCM team did during the pandemic and the hard work that continues, and I would like to sincerely thank them, our board, and exhibition partners for their continued support as we navigate the evolution of our businesses together. We believe that we're well positioned for the future as we continue to maintain strong liquidity and begin to shift our focus to growth by executing on a sales and operating plan that will bring the unparalleled marketing power of the movies and our desirable and growing audiences to marketers and their brands. I'll now turn it back to Ronnie to discuss our financial results and conditions in more detail.