Good day, and welcome to the National CineMedia, Inc. Fourth Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. And 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, Vice President of Finance. Please go ahead..

Thank you, Operator. 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 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 uncertainty.

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 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 fourth quarter and full year of 2024, which are largely similar to National CineMedia, Inc. results.

We're reporting NCM LLC's operating results to provide an accurate comparison to the fourth quarter and full year of 2023, when we also reported NCM LLC's results, given fiscal year 2023 results for unconsolidated entities. Now, I'll turn the call over to Tom..

The Lion King," which brought in nearly $450 million combined. Thanksgiving weekend 2024 was an especially historic moment for the domestic box office. The industry brought in $420 million over the Thanksgiving weekend, breaking the previous all-time record of $315 million set in 2018.

December 2024 was also exceptionally strong, featuring a wave of highly anticipated films, driving the fifth highest-grossing month since 2019. Looking at the year as a whole, the total domestic box office for 2024 reached $8.6 billion, driven by a robust second half.

While the first half of 2024 was impacted by the residual effect of the 2023 industry strikes, the second half recovery underscored moviegoers' enduring passion for the cinema, culminating in the fourth quarter.

Notably, approximately 80 additional movies were released that drew meaningful attendance on top of the planned slate, keeping theaters buzzing with a diverse range of content. "Inside Out 2" was the highest-grossing movie of 2024, the highest-grossing film of the year since "Finding Dory" became the highest-grossing movie of 2016.

Additionally, "Deadpool and Wolverine," the second highest-grossing film of 2024, had the sixth biggest domestic opening of all time among any film and broke the record for the highest-grossing R-rated film domestically.

The strength of our core audience, which is predominantly made up of Gen Z and Millennials, continues to be a key driver of our success. These groups accounted for 69% of our total viewership in the fourth quarter, cumulatively reaching over 43 million moviegoers.

Gen Z, in particular, represents 38% of our audience, maintaining a strong 6.6 weekly rating throughout the quarter. Our reach with this young, highly sought-after audience compares favorably to sports programming. For example, the recent Super Bowl drew an audience with a median age of 48, with Gen Z comprising just 12% of viewers.

Meanwhile, National CineMedia, Inc.'s audience has a median age of 30. Among the coveted 18 to 34-year-old demographic, 57 million individuals attended National CineMedia, Inc. theaters, averaging a 6.1 weekly rating in the fourth quarter.

This demographic remains critical for advertisers, and we're proud to have captured such a significant share of their attention. In fact, seven of the top ten event programs among 18 to 34-year-olds in 2024 were theatrical releases within the National CineMedia, Inc. network. The other three were NFL football games.

As we've discussed in prior quarters, we see a continued shift in how advertisers allocate their spending. Increasingly, brands are moving away from saturated streaming and video platforms and turning to cinema, which offers broader reach and greater engagement. Advertisers realize that platforms like National CineMedia, Inc.

deliver a unique and powerful opportunity to connect with audiences. In the fourth quarter, we welcomed 25 new advertisers who launched major cinema campaigns for the first time since the pandemic. These brands are drawn to National CineMedia, Inc.

for our ability to deliver unmatched audience engagement tied to culturally relevant content and for our proven track record of driving measurable results, including in-store traffic and online sales. Now on to our results.

The fourth quarter marked the fifth consecutive quarter where our results surpassed our expectations, reflecting our strategic focus on advertising growth as the box office continues its momentum. For the fourth quarter of 2024, National CineMedia, Inc.

reported revenue of $86.3 million, which slightly exceeded our revenue guide of $82 million to $86 million. Adjusted OIBDA was $35 million, well surpassing our guidance range of $28 to $30 million.

Approximately 51% of the fourth quarter's national on-screen revenue was attributed to the scatter market as advertisers continue to demonstrate interest in closer-to-campaign real-time solutions. During the fourth quarter, National CineMedia, Inc.

partnered with 84 unique advertisers, with retail emerging as the top advertising category for the quarter. We also saw significant growth from wireless and insurance advertisers, as well as strong performance in the travel and leisure sectors.

Our fourth quarter attendance of 101 million attendees was buoyed by new titles in the movie slate, led by "Wicked Part One," "Moana 2," and "The Wild Robot." For the full year, National CineMedia, Inc. results were approximately in line with the domestic box office. Specifically, National CineMedia, Inc.

reported full-year 2024 revenue of $240.8 million compared to $259.8 million in 2023 and adjusted OIBDA of $45.7 million compared to $52.7 million.

Despite the industry-wide headwinds in the first half of the year, our total 2024 attendance was 390.7 million, primarily driven by the performance of key titles, including "Inside Out 2," "Wicked Part One," and "Deadpool and Wolverine." Our platinum advertising product continues to be a key growth driver.

Sales have increased significantly for this top-tier inventory, with revenue more than doubling year over year. This growth was driven primarily by strength across the government, wireless, entertainment, and dining categories.

Fourth-quarter platinum revenue was up 28% over the prior year period, and we're encouraged by continued demand for this premium offering by category-leading advertisers. Additionally, our standard attention ratings enable brands to push the boundaries of traditional advertising. National CineMedia, Inc.

brought Xfinity's campaign for Universal's "Wicked Part One" to life in the first-ever U.S. 4DX ad, running via platinum, combining dynamic on-screen visuals with synchronized movie seats and hyper-realistic environmental effects. We ran another unique campaign with U.S.

Cellular, who was looking for an out-of-the-box opportunity to help increase local awareness and sales. National CineMedia, Inc. set up U.S. Cellular-branded activations at select theaters, connecting the brand with current and prospective customers on a one-on-one basis.

These campaigns highlight how advertisers can creatively engage National CineMedia, Inc.'s audience through immersive and experiential solutions. Our industry-leading data intelligence platform, NCMx, is playing an increasing role in our success.

We continue to leverage NCMx to create measurable impact and value for our advertising partners, offering strategic audience insights, performance attribution, continued engagement, and cross-channel reach. In the fourth quarter, National CineMedia, Inc.

successfully delivered on key performance indicators for major retail advertisers, driving thousands of incremental visits to brands featured on our screens. On average, these brands saw a 47% lift in retail foot traffic thanks to the power of National CineMedia, Inc. moviegoers.

Nearly half of our sales revenue is now supported by NCMx initiatives, as advertisers continue to leverage these advanced measurement tools to optimize their campaigns and maximize ROI.

As we look to 2025 as a whole, we're encouraged by the continuation of the momentum we saw in the fourth quarter, both within our business and across the cinema industry. This said, we expect some near-term variability in the first half of 2025.

For the first quarter, we're expecting softer performance compared with the prior year, driven by a weaker slate and consequently a slight decline in attendance year over year.

The advertising market is seasonally slower in the fourth quarter, and we are also seeing headwinds from reductions in government spending and ongoing tariff uncertainty, leading advertisers in certain categories to delay spending till later in the year. Ronnie will provide further detail on these factors.

By the strong sales pacing we're already seeing for the second quarter, signaling positive momentum for the remainder of the year. Our focus remains on innovation and growth as we continue to invest in our client solutions, including programmatic and self-serve, which we expect to continue to grow in revenue in the coming years.

With that, I will turn the call over to Ronnie to provide you with more details on our operating results and future outlook..

First Step," and "How to Train Your Dragon." National CineMedia, Inc. holds a distinctive advantage with its strong connection to highly valuable audiences, and we are confident that advertisers will continue to rely on National CineMedia, Inc. and the premium audiences we deliver as the box office gains momentum in 2025 and beyond.

We will be providing more detail on what we expect for 2025 at our upcoming investor day in March. Operator, please open the line for questions..

Thank you. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. And at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Patrick Sholl with Barrington Research. Please go ahead..

Hi. Thanks for taking the question.

I was wondering if you could provide a little bit more detail on what you're expecting on how temporary you expect these advertising headwinds to be, specifically if you could talk a little bit about what you're seeing in the second half of the year, especially since that was kind of the stronger period for the box office..

Hi. Hey, Patrick. It's Tom. I think what I would say is that the pacing in the second quarter is very encouraging compared to last year. The first quarter is always kind of an odd quarter to forecast. And I think, you know, some of the exogenous things out there like the tariffs and policy shifts affected some of the commitments.

But as I look at Q2, which is an important quarter and typically significantly larger than Q1, I'm looking at the pacing for Q2, which looks very good compared to the prior year. I can't really get into the second half yet, really at this point. But we're very encouraged by what's going on in Q2 right now..

Okay. And you had talked about some of the KPI-based ad sales. I'm just wondering how that has supported advertiser retention, realizing it's pretty early in that process, but advertiser retention and efforts to increase the client base..

What I can say in general is within our NCMx team that supports a lot of the outcome-based advertising commitments, basically, half of our business is supported through NCMx. Whether it's through a KPI or some other measurement, so it's pretty much a significant piece of what we're doing every day. So we're really encouraged by that.

And we've put a lot of money and effort into it. So we're really happy with the attention we're getting from our clients..

Okay. And then I guess the last question I had, you talked about bringing back more of the advertisers that hadn't been spending since COVID. I was kind of curious what sort of share of, like, your national advertisers are maybe still on the sidelines on cinema advertising..

Can you say what percent of them? What was the question again? I'm sorry..

The number of advertisers you had pre-pandemic, how many of them have yet to sort of return?.

I think we need to calculate that for you, but I don't have that off the top of our head, but we can get it to you, you know, in short order..

Okay. Thank you. Again, if you have a question, please press star then one. Our next question will come from Mike Hickey with The Benchmark Company. Please go ahead..

Hey, Tom. Ronnie. Thanks for taking our questions here, and congratulations on a better-than-expected Q4 and 2024, especially with the headwinds on attendance. I guess that segues, Tom. You know, it looks like 2025 and 2026 film volume is going higher. Obviously, the expectation here is we should continue to see a strong recovery in attendance.

But I guess the question is, what are your expectations for attendance growth in 2025, 2026? Is that sort of in line with what the market is thinking? And is higher attendance sort of the primary driver of your revenue growth, or do you see more of an opportunity today in better monetizing your existing ad inventory?.

I would say attendance is always the number one driver, and I think the quality of the attendance is probably the second driver in terms of the demographic mix. You know, the more it's geared towards PG-13, the more we can monetize it.

I think as I look at all of the forecasts for 2025 and 2026, and they're actually relatively uniform across the whole base of forecasters, I'm feeling, you know, pretty much in sync with most of the big analysts and most of the big forecasters in terms of how 2025 and particularly 2026 look.

So, you know, I think truthfully, this is an important year for the industry. You know, it's the first real year without a strike and post-COVID, so we're anxious to see how, you know, the movies perform and how many releases come out this year and next year.

But we have a very focused sales team, you know, talking about the year all the way out through the end of this year, and the response we've gotten from advertisers in looking at the slate and looking at all the, you know, data around it is encouraging..

It makes sense. I mean, I guess, how is advertiser sentiment for your medium, Tom, sort of compared to prior years? Obviously, we knew there was some lack of product given the Hollywood strikes, and I think there was a box office that was better than we thought. We thought it was going to be down 10%.

It did better than we thought, but obviously, we weren't expecting growth. We're expecting growth this year. So the slate's improving. The demo you have is obviously very attractive, I would think, for media buyers. The attribution work you're doing is certainly something you've never had before, and it looks like you're getting good feedback.

On the product side, programmatic, self-serve, obviously, those are sort of industry standards, and you're in the right direction there.

So I guess, how is sentiment today given all the improvements in the macro and in your business, and when do you think that'll sort of translate into the higher media buys?.

You know, I think the sentiment's really good right now. When you think about all the negative sentiment we had to deal with for the past several years, even in the first half of last year, I think we're finally in a state where there shouldn't be any surprises from an industry point of view.

So I think the advertising side of the story is actually looking really good. And for the first time, we can really communicate with them looking at a schedule that's unencumbered by any of the crazy things that have impacted our industry.

And I think we're really lined up nicely with all of the key capabilities that we've built over the last couple of years, particularly on the data side. So we're really encouraged.

You know, every now and again, you're going to have situations where, you know, a certain industry, in the case of government spending, you know, creates a little bit of a hiccup on our forecasting, but I don't think anyone could have predicted that. In Q1.

As we look to Q2 and beyond, we're really optimistic about how the industry is going to be performing against the box office..

Is that higher advertiser sentiment, Tom, does that sort of put you in a better position this year in terms of driving maybe some growth in the upfront season? I know last year, that was certainly not the case. Scatter was a larger factor.

It seemed like that was more secular, but given all the movement in the market and your business, do you think you have a better shot at driving higher upfront costs?.

I think we'll do as well, you know, proportionally in the upfronts, given that our industry is doing really well compared to linear television and broadcast television. I think the question is how are people buying versus how they used to buy. I do think we'll have a better upfront than we had last year.

But I think as you look at it, there's still an unusual mix between scatter and upfront where people are buying closer and closer to the actual broadcast date. But remember, like, you're right. Last year when we were doing the upfront, there were still some theatrical business. We were still coming off the strike.

So this next opportunity would be one of probably the cleanest upfronts we've had since 2019..

Nice. I know premium obviously has been a very hot area of the box office, and I think you've been sort of trying to corner that market a little bit, Tom, through maybe IMAX and POS.

Just sort of what are you seeing in terms of advertiser demand to get on the premium screens, and how big of a factor can that be for you in 2025 as we see?.

Well, everybody wants to be on those premium screens. Everyone wants to be on those premium screens. And it's always a topic of discussion. And as that's married to our platinum inventory in particular, it's where the biggest advertisers want to go first.

So whenever we're working either with a new advertiser or someone with a particularly interesting piece of creative, they're always focused on platinum and on these large screen formats.

So I think as that trend continues, which it seems to be at all the major exhibitors in terms of their investment plans and their growth, it's only going to benefit us and help us from an advertiser interest point of view..

Last question from us, Tom. On moving away from national, looking at the local regional piece of your business. Obviously, pre-pandemic, it had pretty good scale, and I think you've gone through here a restructuring process.

Just what are you seeing, I guess, from your local and regional teams, the excitement there to sort of scale and grow the business in 2025 and 2026?.

So, you know, historically, local, you know, pre-COVID was a really significant part of our business. During the COVID period and during, you know, even the recovery period, we, you know, as we cut back on cost, local, I think, was impacted pretty significantly.

Given what a, you know, individual sales sort of kind of business that is, we've reinvested in our sales team locally and allocated more resources to them. So we're really optimistic that local is going to have a nice comeback in 2025 and 2026..

Thank you, guys..

You're welcome..

This concludes our question and answer session. I would like to turn the conference back over to Mr. Tom Lesinski for any closing remarks. Please go ahead, sir..

Okay. Thank you for your questions, everyone, and your support of National CineMedia, Inc. With our unmatched scale, National CineMedia, Inc. has maintained its position as a top player in this premium video advertising space. This past year has proven that movies are thriving once again, and National CineMedia, Inc.

is consistently connecting advertisers with high-value audiences, attracting both new and loyal brands to our platform every quarter. Further, we believe National CineMedia, Inc. is well-positioned for the future with strong growth catalysts, a fortified balance sheet, positive cash flow, and an opportunistic share repurchase program.

As we look forward to 2025, we are energized by our momentum and eagerly anticipate the opportunities that await us in this year ahead. So as a final reminder, National CineMedia, Inc. will be hosting its 2025 Investor Day in New York City on Thursday, March 13th, at 3 o'clock.

We're excited for you to hear more about our strategy, innovation, and performance from myself, Ronnie, and other members of our talented management team. So finally, I want to thank our National CineMedia, Inc. team as always for their hard work and dedication, and thank you to our shareholders for their support as well. See you at the movies..

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