National CineMedia, Inc.

Good day, and welcome to the National Cinemedia Inc. Q1 2024 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Chan Park, VP of Finance. Please go ahead.

Good afternoon. I'm joined today by our Chief Executive Officer, Tom Leszczynski, and our Chief Financial Officer, Ronnie Ng. I'd 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. 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. These reconciliations can be found at the end of today's earnings relief or on the investor relations page of our website at ncm.com. Now, I'll turn the call over to Tom.

Thank you, Chan, and good afternoon, everyone. Welcome to our first quarter 2024 earnings call. The first quarter of 24, once again, demonstrated that consumer demand for the movies is strong. The domestic box office brought in $1.6 billion this quarter, exceeding expectations and ending with great momentum, showing areas of strong performance and enduring interest in cinema. Films such as Dune Part II and Kung Fu Panda IV led the box office during the quarter, bringing in $400 million collectively. Dune II's opening of $82.5 million was more than double the box office opening of the original Dune film. Additionally, several titles performed better than estimates, including Mean Girls and Bob Marley, One Love. Mean Girls eclipsed studio projections by 40% in its opening weekend, while Bob Marley, One Love finished nearly 70% above its first week projections. Additionally, this quarter we saw continued consumer interest in non-traditional content, including Cabrini and the fourth season of the Chosen series. Meanwhile, other titles were very successful in reaching targeted demographics, including Kung Fu Panda, where 56% of the audience was comprised of families, and the Demon Slayer sequel, which attracted an audience where 77% of the moviegoers were of diverse ethnicities. Although the first quarter reflected the lingering effects of the industry strikes, including limited product availability and postponed releases, a wide range of films delivered outsized results. Film production is up and running again, and we are optimistic about the growth of film volume in the coming years. While it is typical for the first quarter to be seasonally low for advertising, we are encouraged that NCM experienced strong revenue as the box office continues to recover. we have consistently proven that as a result of our differentiated offering and high ROI for advertisers, that our revenues are more resilient despite the overall advertising climate being slower as a whole. Additionally, as we look across the advertising industry, we have continued to see speeding bounce back across several categories, and coupled with the resilience of consumer spending, we expect a more significant rebound in the coming quarters. In the first quarter, NCM attendance was 75.8 million. As previously mentioned, the first quarter attendance levels were largely impacted by strike-related delays, which pushed titles like The Fall Guy and It Ends With Us and others out of the first quarter. These changes to the slate negatively impacted attendance by approximately 11 million. If these films had not been postponed, we estimated that our total first quarter evidence would have been on par to 23 levels. As we've noted on prior calls, when the movies are there, audiences consistently show up to the cinema due to its diverse range and wide array of highly anticipated releases. U.S. box office hits cater to all demographics and movie lovers in the quarter. Our core demographic, Gen Z millennials, represented 76% of our viewership in the first quarter, with a cumulative reach of approximately 35 million individuals. During this period, Gen Z compromised 44% of our audience, demonstrating a robust average weekly rating of 5.5, up 8% year over year. This rating continues to surpass other premium video offerings, including the current NBA playoffs, which draw an average of around 1.0. These engagement levels demonstrate Gen Z's interest in the theater experience, and reinforce why the biggest brands continue to turn to NCM to engage these hard-to-reach, young, diverse audiences. Turning to our results, NCM's first quarter 24 total revenue was $37.4 million, up 7.2% year-over-year, representing the highest first quarter revenue NCM has reported since before the COVID-19 pandemic. We are particularly pleased with these results given that the box office was actually down nine, nearly 7% compared to the same period of 23, reaffirming the appeal of our offerings, improving our ability to perform through different market conditions. More specifically, national revenue for the first quarter was up 31% compared to the same period in the prior year. Approximately 70% of the first quarter's national revenue was attributable to longer term of print commitments up nearly 16% compared to the same period in 2023. Success in the scatter market continued to drive revenue growth, utilization, and pricing in the first quarter, with scatter revenue of $8.8 million doubling year over year. Further, additional scatter inventory helped drive incremental revenue as movie attendance began to surpass expectations. Advertisers in the travel industry in particular continue to recognize the value of the movie-going audience, as travel advertisers compromised approximately 24% of total NCM national ad spending this quarter, up 41% year-over-year. Government spending also demonstrated strength, both nationally and locally, almost double compared to the prior year. Additionally, business outcome and attention metric-measured deals continue to drive growth in historically underrepresented cinema ad categories, including pharma up 142% year-over-year and CPG up 165% year-over-year. Our platinum advertising offering experienced growth as well this quarter. For those unfamiliar with platinum ads, they play after the announced showtime, ahead of the movie, right before the last two trailers typically, and have a longer runtime than a conventional 30-second TV spot. With more than $2.5 million of Platinum commitments, this was the best first quarter performance since we introduced Platinum back in 2019, up more than 130% compared to the first quarter of 2023. Longer form branded content in the first quarter also opened up additional avenues for advertisers to tell their brand stories, including the 15-minute short film from a leading cosmetics company that debuted ahead of the Mean Girls movie on January 12th. We are seeing these success metrics lead to greater appetite from advertisers to go beyond the traditional 30-second unit in future quarters. Additionally, we welcomed our latest courtesy partners who sponsored the silence your cell phone messaging prior to the trailer pack. This quarter, we made significant progress with data-driven, advanced targeted campaigns resulting in wins across various categories including retail, auto, and pharma. The positive impact Our advertising has on brands demonstrates why they continue to turn to NCM. One example is a leading auto brand that saw 22% lift in foot traffic to dealerships during a campaign, with 69% of visits occurring within five days of seeing the ad in theater and 53% of the visits within five miles of the theater. On a different note, for the past nine years, NCM has served as the U.S. representative of the Cannes Lions International Festival of Creativity, the most prestigious advertising award show in the world. This year, we announced that we are launching an official network with the U.S. Lions community, which will offer ongoing value as a vital hub of collaboration, thought leadership, and career growth opportunities to U.S. brands, agencies, media companies, and other organizations within the advertising industry. We also kicked off the start of 24 with NCM's new tagline, We Get Audiences, to better align with our evolution as a premium video advertising platform that reaches young, diverse audiences at scale. As you may know, NCM has been at the forefront of revolutionizing cinema measurement through our data intelligence platform, NCMX. Today, NCMX is the most powerful data platform in cinema, with heightened data intelligence driving strong business outcomes, and we are continuing to enhance its capabilities. Our new brand encompasses how we charge Transforming Cinema into a modern, full funnel media initiative that delivers brand building and performance marketing solutions and signals our continued commitment to innovation. As we look ahead, we're continuing to focus on our expanded solutions for our clients. February 24 marked the official launch of NCM's on-screen programmatic offering. Our programmatic platform provides additional opportunities for current NCM customers to seamlessly purchase incremental cinema audience on an as-needed basis. The new offering has now positioned cinema to serve as an attractive option for advertisers who have not historically purchased cinema on a direct basis, enabling NCM to access different agency buyers and parts of client budgets that were previously unavailable. We're seeing strong momentum with these offerings and have successfully secured programmatic guarantee deals that include business outcome measurements. During the first quarter, A total of 15 advertisers purchased programmatic offerings, ranging from small local government buys to well-known national advertisers. As we look to the remainder of the year, we have nine programmatic deals in the pipeline and two deals that have already closed in the second quarter of 24. We are continuing to build on our programmatic pipeline and actively looking at integrating with additional supply-side platforms to further increase our coverage. We are also seeing positive results with our new self-serve offering and are continuing to redefine the movie experience for advertisers throughout through sponsored content, alternative distributions, and experiential activations. According to research conducted by the Video Advertising Bureau, 89% of moviegoers eagerly anticipate a new movie and 95% of moviegoers recommend seeing a movie in theaters to friends and families based on these experiences, proving consumers are looking for a way to connect participate and share these experiences with others. Experiences remain the most prized possessions and no industry better exemplifies this phenomenon than the theater. NCM has seen firsthand the positive impact of the rise of the experience economy, amplifying the opportunity for brands to reach highly sought after audiences. Let's move on to guidance. For the second quarter of 2024, NCM expects to earn total revenue of $49.5 million to $51.5 million. We have already seen strong performance from Godzilla vs. Kong, The New Empire, and Civil War, and look forward to several upcoming major releases. Based on our first-hand experience at screenings at CinemaCon last month in Las Vegas, there is a lot to be excited about with the diverse 2024 movie slate. both original content and sequels, such as Deadpool 3, Inside Out, Gladiator 2, Joker 2, Mufasa, The Lion King, Despicable Me 4, Venom, Mad Max, the list goes on and on, including prequels like Twister and Kingdom of the Planet of the Apes, Wicked and If. Looking to 25, we expect the box office will pick up where 23 left off, given the number of high-profile films that have been pushed into that year, including Avatar 3, Superman, Mission Impossible 8, Wicked Part 2, Captain America, Brave New World, Snow White, Jurassic World 4, and many, many more. Last quarter, importantly, we announced a new $100 million share repurchase program, which runs through 2027, representing our confidence in our business now and into the future. Since then, our business has continued to perform. In fact, we reported free cash flow of $22.6 million marking the highest figure in the past 15 quarters. Given these results, we initiated share repurchases in the first quarter following the announcement. Ronnie will discuss this in greater detail later in the call. NCM continues to lead the cinema advertising business, launching impactful offerings to its advertisers, including business guarantees, programmatic, AI, transforming cinema advertising into a modern, full funnel media solution. There's no doubt that consumers are enthusiastic about experiencing films in an elevated cinematic setting, and cinema continues to be the premium video platform for consumer attention. We are encouraged by our momentum as we look ahead to the remainder of 24 and into 25. With that, I'll turn the call over to Ronnie to provide you with more details on our operating results and future outlook.