National CineMedia, Inc.

Good day and welcome to the National Cinemedia Inc. Q3 2025 Earnings Conference Call. All participants will be in a 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 your telephone keypad. 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, Senior Vice President of Finance. Please go ahead.

Thank you, Operator, and good afternoon. I'm joined today by our Chief Executive Officer, Tom Lisinski, and our Chief Financial Officer, Ron Ying. I would like to remind our listeners that this conference call contains four 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 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 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. Now, I'll turn the call over to Tom.

Thank you, Chan. Hello, everyone. and thank you for joining our fiscal 2025 third quarter earnings call. As we shared on our last call, advertiser sentiment stabilized through the summer as brands regained confidence navigating the broader economic landscape. We were encouraged to see that momentum carry into the third quarter, where we saw a clear rebound in demand across key advertising categories, including retail, automotive, wireless, and government, reflecting a return to normalized spending patterns after the tariff-related pullback earlier this year. Driven by July's strong slate, including Jurassic World Rebirth, Superman, and the Fantastic Four First Steps, we delivered results in line with our expectations, achieving top-line growth despite a softer late-summer box office and industry-wide decline in attendance. NCM's quarterly audience was 109 million across our network. down 11% compared with the third quarter of 2024, in line with the third quarter box office. While overall attendance was lower, 11 films in the quarter grossed more than $50 million domestically, up from nine titles last year, highlighting the strength and continued draw of tentpole releases, even in a slower market. The successes of July's hit releases underscored the continued cultural relevance of cinema, and reaffirmed the enduring power of our platform to connect brands with deeply engaged audiences. Importantly, attendance trends improved toward the back half of September, finishing on par with 2024's strong performance, which was the highest level since 2019. As such, we remain optimistic that the strong holiday slate ahead, featuring several highly anticipated titles, will reignite theater attendance in the fourth quarter. Despite the overall decline in both the domestic box office and attendance, NCM delivered year-over-year growth in the third quarter, with total revenue of $63.4 million and adjusted OIBIT of $10.2 million, both in line with our expectations and primarily driven by an increase in inventory utilization. This performance reflects the resilience of our business, one that continues to translate audience engagement into meaningful advertiser value, even in a weaker industry environment. Throughout the third quarter, we continued to advance our key growth initiatives, scaling our programmatic offering, expanding our self-serve platform, and strengthening our local sales organization. On the programmatic front, we continue to see strong year-over-year acceleration. This quarter, we delivered approximately four times the programmatic revenue compared to last year, achieving our strongest programmatic quarter ever. With additional platforms coming online early next year, we will significantly expand our programmatic footprint and unlock an even larger addressable market. We anticipate the growth trajectory will continue as advertisers embrace our platform's ability to deliver targeted measurable campaigns at scale. In self-serve, we continue to gain traction with mid-size and regional advertisers who value cinema's attention environment and the ease of direct booking. our self-serve platform continues to accelerate adoption with third quarter revenue up 23% quarter over quarter, driven by expanded business development outreach and CRM-based activation. Behind the scenes, predictive AI models now identify, score, and route high-value local leads powering scalable small and medium businesses and mid-market expansion and helping our teams engage advertisers more efficiently. Together, Our programmatic and self-serve channels are broadening NCM's reach, deepening relationships of brands, and positioning us to capture a greater share of the evolving advertising landscape. Our local sales transformation is also progressing. We continue to work to enhance our team's capabilities, adding senior talent with deep regional expertise, and refining our structure to align more closely with market opportunities. These changes are enabling a more data-informed, consultative approach to engaging high-value local and regional advertisers, helping us connect cinema scale and storytelling power with the precision of locally relevant campaigns. We believe this refined strategy positions us to reduce churn and attract new advertisers to our platform. Across our network, NCM's valuable inventory, led by our premium platinum spot, continues to stand out among advertisers who recognize the environment, reach, and measurement capabilities of NCM's unique platform. Platinum continues to deliver exceptional results, achieving an impressive 89% ad recall in a recent tech advertiser's campaign, surpassing industry benchmarks and driving strong gains across brand relevance, excitement, and preference. These benchmarks reinforce its position as the most engaging and high-impact placement within the theatrical experience. Additionally, we enhanced our platinum offering at select theaters by reducing added flexibility within the ad spot, which has driven higher utilization and improved advertiser satisfaction. Our 4DX format is also exceeding expectations. achieving approximately 85% ad recall in a recent automotive advertisers campaign, and generating triple-digit lifts in awareness, reaffirming the power of immersive cinematic experiences in driving superior brand outcomes. Complementing this inventory is our NCMX data platform, which continues to enhance advertisers' campaigns with data-driven targeting, insights, and digital extensions. Last quarter, we announced the launch of our Bullseye product, which is already seeing strong traction in the marketplace and demonstrating the power of localized data-driven storytelling. A recent cellular campaign delivered more than 283,000 verified incremental store visits, representing a 110% lift, underscoring Bullseye's ability to seamlessly integrate into our tech stack and enable scalable, high-impact local activations. Alongside Bullseye, our Boost solution leverages our proprietary movie-going data and new geo-triggered capabilities to target consumers near campaign-specific locations, connecting brands with verified audiences in high purchase intent moments to drive immeasurable offline actions. Together, these initiatives strengthen our differentiated position as a performance-driven media platform that combines the power of the movies and with data-enabled precision. As we invest in our platform and innovation, we also remain focused on expanding MCM's advertiser base. In the third quarter, we strengthen our full funnel attribution through our partnership with iSpot, a leading real-time TV and video ad measurement platform. This integration incorporates theatrical exposure data into iSpot's cross-screen measurement framework, enabling advertisers to quantify cinema's incremental reach and conversion velocity alongside linear and streaming channels. Early results are very compelling. A recent travel industry advertiser's campaign delivered three times faster conversion rates than linear TV, 95% efficiency at one-tenth the cost of TV, and more than 8.4 million incremental impressions among audiences unexposed to television. These results validate cinema's role as a high-performing, cost-efficient channel within diversified media mixes and reinforce the measurable impact of the theatrical experience in driving both upper and lower photo performance. We are optimistic about the months ahead as we enter what is historically NCM's strongest period of the year. Upcoming 10 polls, including Wicked for Good, Avatar, Fire & Ash, and Zootopia 2, are already driving significant advertiser excitement and early commitments across multiple categories. Demand for Wicked for Good has been exceptionally strong, with inventory approaching sellout levels a month ahead of the film's upcoming release date. The robust lineup, coupled with steady improvements in pacing and demand, reinforces our confidence in a strong finish to the year. Importantly, we expect sustained momentum through year-end to further reinforce advertiser competence in cinema as a high-performing media channel that delivers both attention and measurable impact. With increased advertiser demand, a healthy box office pipeline, and continued traction across our programmatic and self-serve platforms, we are well-positioned to capitalize on expected strong attendance in the fourth quarter and execute against our strategic priorities for long-term growth. With that, I'll now turn the call over to Ronnie. Thank you, Tom, and good afternoon, everyone. For the third quarter, NCM delivered results consistent with our expectations, reflecting the continued momentum we saw towards the end of the second quarter and stability in the demand for cinema advertising, which led to the highest third quarter monetization in the last five years. As Tom noted, the tariff-driven uncertainty that weighed on earlier quarters subsided during the period, with brands showing renewed confidence navigating the current macroeconomic environment. That stability translated into improved advertiser demand, particularly across several key categories, signaling progress from the pullback we experienced earlier in the year. NCM's total revenue for the third quarter was 63.4 million, within our guidance range of 62 million to 67 million, and up 2% year over year. This increase was driven by stronger national advertising demand, improved inventory utilization, and continued traction across our programmatic and self-serve channels. partially offset by lower local and regional spending and softer beverage revenue. While the third quarter box office underperformed versus industry expectations with inconsistent performance among new releases, the stabilization of advertiser demand drove higher monetization in July and August, offsetting some of the softness in attendance. National advertising revenue totaled $49.9 million, up 6.6% from $46.8 million in the prior year period. This was driven by strong scatter demand and improved utilization of inventory, as well as increased adoption of our digital buying platforms, partially offset by decline in CPMs and lower overall attendance. Compared to the prior year, national CPMs held firm in the upfront marketplace, but declined in the scatter market due to an increase in programmatic buying and improved demand in the seasonally slower September month when compared to historical periods. That said, the third quarter marks our strongest programmatic performance since its launch, growing 82% sequentially. Additionally, platinum revenue was up 19% compared to the prior year, achieving the highest third quarter platinum sales in NCM's history. Platinum monetization grew significantly, with revenue per attendee up 33% year over year, driven by strong growth in inventory utilization and a slight increase in CPMs. An encouraging sign that our amended ANC deal, which has been in effect for only a short three months, is already driving results. Overall, national revenue per attendee was 46 cents, up 20% year over year, and the highest third quarter national ad revenue per attendee in the last five years. reflecting the success of our ongoing efforts to optimize pricing and yield through our programmatic and self-serve capabilities. Local and regional advertising revenue was $9.6 million compared to $11.4 million in the prior year period. While local markets continue to recover more gradually, we are encouraged by improving activity in government and travel categories, which partially offset lingering softness in healthcare and professional services. As Tom outlined, we remain focused on strengthening this channel by enhancing our sales talent, new coverage models, and data-driven insights that better connect local advertisers with NCM's engaged audiences. Turning to our expenses, third quarter total operating expenses were 65.2 million, down from 69.9 million in the same period last year. Excluding one-time items, depreciation, amortization, and non-cash share-based compensation, our adjusted operating expenses were approximately 53.2 million, a slight decrease year over year, primarily attributable to lower attendance driven costs. Due to our continued discipline cost management efforts, SG&A expenses remain relatively flat in the third quarter. As we strategically offset important investment dollars elsewhere in the business. Personnel-related expenses were slightly lower compared to the prior year period, and theater access fees decreased year over year, reflecting lower attendance levels. Third quarter adjusted EBITDA was 10.2 million. In line with our guidance range of 7.5 million, to 11 and a half million and exceeding 8.8 million in the same period last year, driven by the modest top line growth. Total and levered free cash flow for the quarter as defined by cash flow from operations plus capital expenditures was negative 1.8 million compared to negative 2.4 million in the prior year period. driven by slight year-over-year increases in capital expenditures and system optimization costs, offset by improved adjusted OIVDA. Year-to-date, NCM has generated total revenue of $150 million, compared to $154.5 million in the same period last year. National advertising revenues were flat while local advertising revenues declined 22%, primarily reflecting macroeconomic uncertainty in the second quarter and offset by the third quarter stabilization in national advertising. Total adjusted OIDA for the period was $1.9 million compared to $10.7 million in the prior year. driven by the top line headwinds offset by normalization following prior year cost reductions. Turning to our consolidated balance sheet, at the end of the third quarter, the company had 32.9 million of cash, cash equivalents, restricted cash, and marketable securities, compared to 40.3 million at the end of the second quarter of 2025. we have zero total debt outstanding at quarter end. Our capital allocation priorities remain focused on returning capital to our shareholders while investing in technology and talent to enhance our advertising platform. Specifically, we continue to invest in expanding inventory monetization tools, improving our self-serve and programmatic capabilities and deepening advertiser relationships through new sales initiatives and training. Under the dividend program we reinstated this year, we announced a quarterly dividend of 3 cents per share today, amounting to 2.8 million. This quarter's dividend will be paid on November 26, 2025, to stockholders of record as of November 10th, 2025. There were no share repurchases during the third quarter as we had accelerated repurchases opportunistically in the first half of the year and managed liquidity through a seasonally higher use of cash for working capital. Year to date through September 25th, 2025, NCM has repurchased 3.3 million shares at an average price per share of $5.78 for a total of approximately 18.8 million. Since quarter end, we've repurchased over 100,000 additional shares at an average price per share of $4.08, reflecting our continued confidence in the business. We are optimistic that the advertising momentum from this quarter will continue heading into the fourth quarter. The remainder of the year includes a number of highly anticipated releases scheduled for the holiday release window. In particular, blockbuster events such as Wicked for Good, Avatar Fire and Ash, and Zootopia 2 have each generated strong advertiser demand and upfront sponsorship commitments. These releases are expected to drive both attendance and related revenues, positioning us for a strong close to the year. Turning to our guidance. For the fourth quarter, we expect revenue to be between $91 million and 98 million, and adjusted EBITDA to be between 30 million and 35 million. Notably, our fiscal fourth quarter includes an additional week compared to the prior year. As a result, we expect total attendance growth to outpace industry trends and lead to a correspondingly lower revenue per attendee. We anticipate a strong holiday box office slate with optimism that greater consistency in film release cadence and performance will continue to attract advertisers to NCM's platform for our differentiated offerings and unmatched reach with sought after audiences. With advertisers already showing heightened interest in the Thanksgiving to Christmas slate, continued recovery at the box office, and regaining advertiser confidence against the macroeconomic backdrop, we remain well positioned to capture demand and deliver value for our shareholders.