National CineMedia, Inc.

Good day and welcome to the National CineMedia Inc. Third Quarter 2024 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Chan Park, Senior 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 would like to remind our listeners that this conference call contains four 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 four looking statements. These four 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 four 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 release or on the investor relations page of our website at ncm.com. Today, we will be discussing NCM LLC's operating results as they relate to the third quarter of 2024, which are largely similar to NCM Inc.' 's results. We are reporting NCM LLC's operating results to provide an accurate comparison to the third quarter of 2023. When we also reported NCM LLC's results, given fiscal year 2023's results were unconsolidated. Now, I'll turn the call over to Tom.

Thank you, Chan, and good afternoon, everyone. Welcome to our third quarter 2024 earnings call. We're excited to report our fourth consecutive quarter of solid performance as the market continues to recognize NCM's improving execution and delivery of consistent results as the box office generates further meaningful growth. The cinema industry once again built on its momentum through the third quarter of 2024, outperforming almost all expectations. The box office brought in almost $2.7 billion this quarter, up slightly compared to the same period last year, with Deadpool and Wolverine, Despicable Me 4, Twisters, and Beetlejuice Beetlejuice leading the way, supported by the success of smaller films, including It Ends With Us and Long Legs. Several of these late summer hits broke records, with Deadpool and Wolverine submitting itself as the highest-grossing R-rated film ever, and Beetlejuice Beetlejuice ranking as the second highest grossing September movie of all time. We also are encouraged by strong performance in alternative content, as Long Legs became 2024's highest grossing indie horror film. The increase at the box office year over year, amidst tough comparisons given last summer's blockbuster hits, including Barbie, Oppenheimer, Sound of Freedom, and Mission Possible 7, is a tremendous sign of sustainable growth and a testament to moviegoers' desire to go to the theaters and experience the content they love in the best viewing environment. In the third quarter alone, seven films earned over $100 million. highlighting the breadth of the box office recovery. The last time seven or more films exceeded $100 million at the box office in a single quarter was back in the fourth quarter of 2019. Looking month to month, July brought in almost $1.2 billion. The best month year to date, August surpassed both 2023 and 2019 levels, and September was up 25%. compared to the same period the previous year. In fact, the third quarter's Deadpool and Wolverine and Despicable Me 4 performances cumulatively outperformed Barbenheimer, a true indication of box office momentum this quarter, along with the consistent success of the film slate each summer. we are highly confident that the cinema industry will continue its positive momentum through the end of the year, leading to an exciting and highly anticipated 2025 slate. Once again, cinema demonstrated its ability to cater to all demographics of moviegoers this quarter with strength across a wide range of genres, from family-friendly movies to R-rated films and the horror genre. Movie theaters continue to draw young, diverse, and multi-generational audiences within a median age of just 30, much younger than the popular platforms like 10FL, which has a median age of 54, or the NBA with a median age of 47. Advertisers see the value in NCM's ability to reach elusive audiences, as Gen Z and Millennials made up 64% of NCM's third quarter viewership. For major titles, Gen Z and millennials represented 69% of the audience for Deadpool and Wolverine, 67% for Beetlejuice Beetlejuice, and 58% for Despicable Me 4, highlighting cinema's unique ability to reach the most sought-after consumers. Gen Z alone accounted for 38% of our quarterly audience, averaging a strong 7.4 weekly rating compared to a 2.4 weekly rating for NFL Sunday Night Football, and the 1.6 average rating across all five games of the recent World Series, where Gen Z comprised only 6% of the audience. NCM Theaters also drew nearly 72 million of the hard-to-reach 18- to 34-year-old demographic, with an average weekly rating of 7.9. Finally, It Ends With Us exemplified the box office's appeal to younger audiences by with 18 to 34-year-olds comprising 60% of the opening weekend audience, with women comprising 84% of that group. In an evolving marketplace, cinema stands out apart from streaming and legacy linear TV in its ability to reach the desirable incremental audiences that marketers seek. And NCM continues to cater to the ad marketplace's changing demands. Given our unique ability to capture a diverse audience, we are poised to continue growing and scaling the business through the ongoing shift in the premium video marketplace away from legacy linear broadcast and cable networks. In the third quarter, we saw a continuation of recent trends in how advertisers are thinking about allocating their future spend. Recognizing investment in video and streaming marketplaces continues to reach the same limited audiences with truly underwhelming attentiveness. Given these trends, it's no surprise that we saw increasing interest in the highly measurable and flexible buying options and inventory that NCM provides. Through our differentiated and high-value offerings, we are continuing to expand our client base across key national and local ad categories. demonstrating our ongoing attractiveness to a full spectrum of advertisers. Year-to-date, NCM has welcomed 14 advertisers that are new or have placed their first major cinema advertising campaign since 2019, with new clients in the CPG, QSR, alcoholic beverages, and beauty industries. We expect to drive continual growth in new client engagement through our innovative offerings, differentiated platform, and delivery of hard-to-reach audiences. Now, onto our results. In the third quarter of 2024, revenue was $62.4 million, exceeding our guidance range of $56 million to $58 million. And adjusted OIVDA was $8.8 million, exceeding our guidance range of $6 million to $8 million. Approximately 59% of the third quarter's national revenue was attributable to longer-term upfront commitments, while approximately 41% was attributable to the scatter market. Amidst an industry-wide challenged upfront market, we benefited from strong scatter market performance, which experienced a substantial increase in revenue per attendee year over year, as advertisers are showing greater interest In closer to campaign, real-time solutions. NCM saw strength across multiple categories this quarter, with wireless, automotive, retail and apparel, entertainment, and travel representing nearly 60% of revenue. Several categories also demonstrated meaningful growth, including tech, which was up more than 10 times year-over-year, retail and apparel, which was up 123% year-over-year, and pharma up 59% year-over-year. This demonstrates how NCM's diverse portfolio of offerings appeals to a broad range of brands, whether through our continued strong performance in top verticals such as wireless and automotive, or engagement with newer categories including pharma. Our category diversification further reduces our sensitivity to market volatility, ensuring a more stable and resilient revenue stream across varying economic conditions. Platinum, NCM's premier ad unit in the trailer pack, is a coveted placement for advertisers because of its exclusivity, and the offering is showing impressive signs of growth, with sales up 2.4 times compared to the third quarter of 2023. Platinum is becoming a key driver of interest with advertisers, and we are continuing to see major advertisers leverage Platinum to gain moviegoer engagement and attention. Our newly introduced retargeting platforms, Boomerang and Boost, have already shown strong incremental value to advertisers, with Boomerang increasing post-theater engagement by 20% with 15 deals to date, and Boost expanding audience reach by three times across premium video channels. For those unfamiliar with Boost, it is NCMX's digital offering that enables advertisers to retarget elusive movie-going audiences at the national, regional, and local level. Boost connects cinema to TV audiences, combining exclusive cinema ad exposure data with leading identity graphs to create targeted CTV campaigns. Boost has been gaining notable traction in the marketplace while reaching multiple categories, including automotive, government, and healthcare. Furthermore, we are increasing our innovative experiential marketing efforts due to positive momentum. providing new avenues for demand drivers, combined with non-traditional, longer-form content on the big screen. Because we are the number one medium for consumer attention, compared to linear, digital, social, podcasts, and others, advertisers are presented with a high-value opportunity to extend their ads through live experiences, creating a new way to convey their brand messages to sought-after audiences. NCM has a unique ability to maximize creativity beyond the screen through in-person activations in movie theater lobbies and nearby locations, in addition to the most premium video experience in an immersive theater environment. Some examples include a new in-lobby holographic activation for an entertainment client, which brought to life their highly anticipated new series, and a customized original content segment linking an automotive client to twisters. NCM also partnered with one of the largest multinational retail corporations to activate a five-minute long-form content campaign, which included a theatrical segment promoting back-to-school shopping, layered with our boomerang technology to create a shoppable experience. Among moviegoers who scanned the goat, an impressive 81% took action by shopping for back-to-school deals while viewing the content, and the remaining 19% opted to set a reminder for later. These experiential and long-form content initiatives exemplify our flexibility and effectiveness in delivering engaging activations and effective shoppable ads and reinforce the shareable nature of the movie-going experience. Through breakthrough technology partnerships, NCM is continuing to democratize cinema data. In collaboration with our newest data cloud partner, Snowflake, we will utilize data clean rooms to securely share information and analyze audience information while safeguarding sensitive data. Integrating our robust first- and second-party deterministic cinema audience data with advertisers' proprietary data in Snowflake's cleanroom environment enables precise audience targeting, performance measurement, and attribution. This approach allows advertisers to gain deeper insights into campaign effectiveness to optimize their strategies and achieve KPIs, all while ensuring compliance with data privacy regulations. NCMX continues to be the leader of revolutionizing cinema measurement as we continue enhancing the most powerful data platform in cinema, NCMX. Year-to-date, 47% of our sales are directly tied to our advanced measurement capabilities provided by NCMX. We are leveraging NCMX to drive measurable results for clients' business growth, offering strategic audience insights, performance attribution, continued engagement, and cross-channel reach. Our targeted insights have proved to lead to more than 30% higher engagement and a directly attributable 50% sales lift. Driven by NCMX, our innovative approach to merging national awareness campaigns with local messaging and consumer retargeting marks a significant advancement for franchise categories. Throughout the third quarter, we have been collaborating with a major automotive company to assess campaign impact at key local dealerships in critical regions. This is essential to demonstrate the campaign's return on investment and encourage participation from additional auto dealership groups that did not engage in the current initiative. Looking ahead, we are exploring ways to further develop our new and innovative client solutions, including expanding our programmatic and self-serve offerings to help unlock new demand channels for NCM. We continue to expand and invest in our programmatic offering and see an opportunity to build it into a meaningful revenue contributor in the coming years. SelfServe, our fully automated cinema advertising solution that empowers local and regional companies to plan, buy, schedule, and create their ads to run on the big screen, has continued to generate leads and deliver significant growth quarter to quarter due to its user-friendly characteristics. providing advertisers the ability to create ads in new and diverse ways. In the third quarter, our self-serve offering had 59 unique advertisers, and we saw a sizable uptick in all aspects of the offering compared to the second quarter of 2024. In fact, self-serve had its biggest quarter since launch, with sales up 96% quarter over quarter. Additionally, in July, We added a new AI feature to answer customers' questions and have already seen strong initial results with an automation rate of 72% and over 28 hours of agent time saved. We continue to see a great opportunity to bolster local ad sales to an additional focus on self-serve. We expect it to keep growing and contributing to higher commercial utilization across the NCM network. Together, these offerings enable us to more efficiently capitalize on the shifting advertising marketplace dynamics. With that, I'll turn the call over to Ronnie to provide you with more details on our operating results and future outlook.