National CineMedia, Inc. (NASDAQ:NCMI) Q3 2022 Earnings Conference Call November 7, 2022 5:00 PM ET Corporate Participants Dan Dorenkamp - Finance Director Tom Lesinski - Chief Executive Officer Ronnie Ng - Chief Financial Officer Conference Call Participants Eric Wold - B. Riley Jim Goss - Barrington Research Operator Good day, and welcome to the National CineMedia, Inc. Q3 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Dan Dor ...

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income, cash flow, and equity statements, with detailed notes on business and accounting policies - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information and SEC rules[30](index=30&type=chunk) - The company operates as one operating and reportable segment: advertising[31](index=31&type=chunk) - Management's plans to address going concern issues include amending credit facilities, seeking waivers, or obtaining additional debt financing, but success is not assured[35](index=35&type=chunk) [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$775.4 million** by September 29, 2022, while total liabilities increased to **$1,229.2 million**, primarily due to short-term debt Condensed Consolidated Balance Sheet Data (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $73.5 | $101.2 | | Total current assets | $137.3 | $158.4 | | Total non-current assets | $638.1 | $659.0 | | **TOTAL ASSETS** | **$775.4** | **$817.4** | | Total current liabilities | $290.2 | $69.8 | | Total non-current liabilities | $939.0 | $1,131.1 | | **Total liabilities** | **$1,229.2** | **$1,200.9** | | Total equity/(deficit) | $(453.8) | $(383.5) | | **TOTAL LIABILITIES AND EQUITY/(DEFICIT)** | **$775.4** | **$817.4** | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) The company reported a consolidated net loss of **$76.3 million** for the nine months ended September 29, 2022, an improvement driven by increased revenue to **$157.5 million** Condensed Consolidated Statements of Income Data (in millions) | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenue | $54.5 | $31.7 | $157.5 | $51.1 | | Total Operating Expenses | $58.7 | $50.4 | $178.7 | $127.7 | | Operating Loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | | Total Non-Operating Expenses (Income) | $17.5 | $14.8 | $55.1 | $45.8 | | Loss Before Income Taxes | $(21.7) | $(33.5) | $(76.3) | $(122.4) | | Consolidated Net Loss | $(21.7) | $(33.5) | $(76.3) | $(122.4) | | Net Loss Attributable to NCM, Inc. | $(8.9) | $(15.2) | $(34.8) | $(57.3) | | Basic Net Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | | Diluted Net Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly decreased to **$36.7 million** for the nine months ended September 29, 2022, resulting in a **$27.7 million** decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Data (in millions) | Metric | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Consolidated net loss | $(76.3) | $(122.4) | | Net cash used in operating activities | $(36.7) | $(92.5) | | Net cash used in investing activities | $(2.0) | $(3.6) | | Net cash provided by financing activities | $11.0 | $25.9 | | Change in cash and cash equivalents | $(27.7) | $(70.2) | | Cash and cash equivalents at end of period | $73.5 | $110.1 | - Non-cash financing and investing activities included the purchase of an intangible asset with NCM LLC equity of **$10.4 million** in 2022 and **$14.1 million** in 2021[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Equity/(Deficit)](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity%2F(Deficit)) Consolidated equity/(deficit) for NCM, Inc. decreased to **$(453.8) million** by September 29, 2022, primarily due to net loss and cash dividends Consolidated Equity/(Deficit) Data (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Total NCM, Inc. stockholders' equity/(deficit) | $(564.8) | $(526.7) | | Noncontrolling interests | $111.0 | $143.2 | | **Total equity/(deficit)** | **$(453.8)** | **$(383.5)** | - Cash dividends declared decreased from **$0.15 per share** in 2021 to **$0.11 per share** in 2022[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures for the financial statements, covering business, accounting policies, revenue, loss per share, intangible assets, related parties, borrowings, and subsequent events [Note 1. The Company](index=9&type=section&id=Note%201.%20The%20Company) NCM operates the largest cinema advertising network in the U.S. but faces substantial doubt about its ability to continue as a going concern due to maturing debt and covenant non-compliance - NCM operates the largest cinema advertising network in the U.S.[27](index=27&type=chunk) - The weighted average remaining term of ESAs with founding members is approximately **17.0 years**, and with network affiliates is **15.1 years** as of September 29, 2022[28](index=28&type=chunk) - The company faces substantial doubt about its ability to continue as a going concern due to **$217.0 million** in revolving credit facilities maturing on June 20, 2023, and expected non-compliance with financial covenants for March 30, 2023[35](index=35&type=chunk) - Management plans to amend credit facilities, seek waivers, or obtain additional debt financing, but success is not assured[35](index=35&type=chunk) [Note 2. Revenue from Contracts with Customers and Accounts Receivable](index=12&type=section&id=Note%202.%20Revenue%20from%20Contracts%20with%20Customers%20and%20Accounts%20Receivable) This note details revenue by category, including national, local, and beverage concessionaire advertising, and provides information on deferred revenue and allowances for doubtful accounts Revenue by Category (in millions) | Category | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | National advertising revenue | $39.7 | $22.6 | $116.7 | $34.3 | | Local and regional advertising revenue | $9.8 | $5.7 | $26.4 | $10.8 | | Founding member beverage concessionaire revenue | $5.0 | $3.4 | $14.4 | $6.0 | | **Total revenue** | **$54.5** | **$31.7** | **$157.5** | **$51.1** | - Revenue recognized from deferred revenue as of December 30, 2021, was **$12.0 million** for the nine months ended September 29, 2022[54](index=54&type=chunk) - The allowance for doubtful accounts for national customer receivables remained at **$0.3 million**, while for local/regional customer receivables it remained at **$1.4 million** for the nine months ended September 29, 2022[57](index=57&type=chunk) [Note 3. Loss Per Share](index=13&type=section&id=Note%203.%20Loss%20Per%20Share) This note presents the net loss attributable to NCM, Inc. and the corresponding basic and diluted loss per share, along with weighted average shares outstanding Loss Per NCM, Inc. Common Share | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss attributable to NCM, Inc. (in millions) | $(8.9) | $(15.2) | $(34.8) | $(57.3) | | Basic Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | | Diluted Loss Per Share | $(0.11) | $(0.19) | $(0.43) | $(0.72) | - Weighted average shares outstanding (basic and diluted) for the nine months ended September 29, 2022, were **81,371,370**[58](index=58&type=chunk) [Note 4. Intangible Assets](index=13&type=section&id=Note%204.%20Intangible%20Assets) Intangible assets, primarily contractual rights, were assessed for impairment due to Regal's bankruptcy, with no charge recorded, but future impairment remains a risk - Intangible assets consist of contractual rights to provide services in founding members' and network affiliates' theaters[59](index=59&type=chunk) - Cineworld Group plc (parent of Regal) filed for Chapter 11, leading to Regal's motion to reject the ESA, which triggered an impairment assessment for the related intangible asset[59](index=59&type=chunk)[61](index=61&type=chunk) - No impairment charge was recorded for the Regal intangible asset as estimated future cash flows exceeded net book value, but future impairment is possible due to ongoing uncertainty[61](index=61&type=chunk) - A net impact of **$10.4 million** was recorded to intangible assets in Q1 2022 due to the issuance of **4,140,896** common membership units to founding members for added theater screens[63](index=63&type=chunk) [Note 5. Related Party Transactions](index=15&type=section&id=Note%205.%20Related%20Party%20Transactions) This note details related party transactions, including revenue and costs with founding members, and discusses mandatory distributions and amounts due to founding members - AMC's ownership was **3.5%** as of September 29, 2022, making it no longer a related party, though it remains party to key agreements[67](index=67&type=chunk) Related Party Transactions (in millions) | Metric | 3 Months Ended Sep 29, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 29, 2022 | 9 Months Ended Sep 30, 2021 | | :------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Beverage concessionaire revenue | $3.9 | $2.7 | $11.3 | $4.7 | | Theater access fee and revenue share | $15.4 | $11.4 | $45.2 | $19.8 | | Selling and marketing costs | $0.1 | $0.0 | $0.1 | $0.0 | | Advertising operating costs | $0.0 | $0.0 | $0.0 | $0.1 | - Mandatory distributions of available cash to members were negative **$7.7 million** for Q3 2022 and negative **$39.9 million** for the nine months ended September 29, 2022, meaning no payment was made[73](index=73&type=chunk) - Amounts due to founding members, net, were **$11.3 million** as of September 29, 2022, primarily for theater access fees and revenue share[76](index=76&type=chunk) [Note 6. Borrowings](index=17&type=section&id=Note%206.%20Borrowings) This note details total outstanding debt, including revolving credit facilities and term loans, and discusses credit agreement amendments, distribution restrictions, and debt extinguishment gains Total Outstanding Debt (in millions) | Borrowings | Sep 29, 2022 | Dec 30, 2021 | Maturity Date | Interest Rate | | :----------------------------------- | :----------- | :----------- | :------------ | :------------ | | Revolving credit facility 2018 | $167.0 | $167.0 | June 20, 2023 | Variable | | Revolving credit facility 2022 | $50.0 | $0.0 | June 20, 2023 | Variable | | Term loans - first tranche | $259.2 | $261.2 | June 20, 2025 | Variable (6.56%) | | Term loans - second tranche | $49.4 | $49.8 | Dec 20, 2024 | Variable (10.56%) | | Senior secured notes due 2028 | $374.2 | $400.0 | April 15, 2028 | 5.875% | | Senior unsecured notes due 2026 | $230.0 | $230.0 | August 15, 2026 | 5.750% | | **Total borrowings** | **$1,129.8** | **$1,108.0** | | | - The Credit Agreement Third Amendment suspended certain financial covenants through December 29, 2022, and set new leverage ratios for subsequent quarters[82](index=82&type=chunk) - NCM LLC is restricted from making available cash distributions until after Q4 2023 compliance certificate, and only if specific conditions are met[83](index=83&type=chunk) - NCM Inc. purchased **$25.8 million** of Notes due 2028 on the open market, resulting in a **$6.0 million** gain on extinguishment of debt[91](index=91&type=chunk) [Note 7. Income Taxes](index=19&type=section&id=Note%207.%20Income%20Taxes) Income tax expense was **$0.0 million** for both periods, with an effective tax rate of **0.0%** due to a full valuation allowance on deferred tax assets - Income tax expense was **$0.0 million** for the nine months ended September 29, 2022, and September 30, 2021[92](index=92&type=chunk) - Effective tax rate was **0.0%** for both periods due to a full valuation allowance on net deferred tax assets[92](index=92&type=chunk) [Note 8. Commitments and Contingencies](index=19&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note outlines ROU assets and lease liabilities for facilities, lease costs, and the treatment of ESAs as short-term leases, along with maximum potential future payments for minimum revenue guarantees - The company has ROU assets of **$17.4 million** and lease liabilities of **$2.2 million** (short-term) and **$18.6 million** (long-term) for facilities leases as of September 29, 2022[94](index=94&type=chunk) - Total lease cost for facilities was **$1.0 million** for Q3 2022 and **$3.0 million** for the nine months ended September 29, 2022[98](index=98&type=chunk) - ESAs and network affiliate agreements are treated as short-term leases (less than one month) under ASC 842, with amortization of related intangible assets recognized as lease expense[99](index=99&type=chunk) - The maximum potential future payments for minimum revenue guarantees under network affiliate agreements is **$122.8 million** over their remaining terms[103](index=103&type=chunk) [Note 9. Fair Value Measurements](index=21&type=section&id=Note%209.%20Fair%20Value%20Measurements) This note provides the fair value of borrowings, classifies cash equivalents and marketable securities by fair value hierarchy, and reports impairment charges on certain investments Fair Value of Borrowings (in millions) | Borrowings | Carrying Value (Sep 29, 2022) | Fair Value (Sep 29, 2022) | Carrying Value (Dec 30, 2021) | Fair Value (Dec 30, 2021) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Term loans - first tranche | $259.2 | $171.1 | $261.2 | $236.4 | | Term loans - second tranche | $49.4 | $34.6 | $49.8 | $48.1 | | Notes due 2026 | $230.0 | $50.9 | $230.0 | $179.4 | | Notes due 2028 | $374.2 | $216.3 | $400.0 | $357.0 | - Cash equivalents are classified as Level 1 (**$10.7 million**) and Level 2 (**$0.0 million**), while marketable securities are Level 2 (**$1.3 million**) as of September 29, 2022[113](index=113&type=chunk) - The company recorded **$0.1 million** in impairment charges on certain investments for the nine months ended September 29, 2022[109](index=109&type=chunk) [Note 10. Subsequent Event](index=23&type=section&id=Note%2010.%20Subsequent%20Event) NCM LLC initially missed an **$11.8 million** interest payment on Senior Secured Notes but made it within the grace period, and NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable - NCM LLC initially missed an **$11.8 million** interest payment on Senior Secured Notes due 2028 on October 17, 2022, but made the payment on November 4, 2022, within the grace period[117](index=117&type=chunk) - NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable on November 3, 2022, for a cash payment equal to book value[118](index=118&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, highlighting COVID-19 and Cineworld bankruptcy impacts, liquidity management, and significant revenue growth with reduced net losses - The company operates the largest cinema advertising network in the U.S., reaching audiences through its Noovie pre-show, lobby network, and digital platforms[120](index=120&type=chunk)[122](index=122&type=chunk) - Management focuses on revenue, Adjusted OIBDA, Adjusted OIBDA margin, advertising inventory utilization, pricing, and free cash flow as key performance indicators[123](index=123&type=chunk) - The company faces ongoing challenges from the COVID-19 pandemic's impact on movie slates and attendance, and the Cineworld Proceeding involving Regal's bankruptcy[125](index=125&type=chunk)[126](index=126&type=chunk) [Overview](index=24&type=section&id=Overview) National CineMedia, Inc. operates America's largest cinema advertising network, utilizing its Noovie pre-show, Lobby Entertainment Network, and digital properties with long-term exhibitor agreements - NCM operates the largest cinema advertising network in the U.S.[120](index=120&type=chunk) - The Noovie pre-show has two formats: one with Post-Showtime advertising (**59%** of network) and the Classic format (**41%** of network)[121](index=121&type=chunk) - The company also sells advertising through its LEN, online, mobile apps (Noovie Audience Accelerator, Trivia, Name That Movie, Shuffle), and other out-of-home venues[122](index=122&type=chunk) - Weighted average remaining term of ESAs and network affiliate agreements is **15.1 years** as of September 29, 2022[122](index=122&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) The company faces ongoing impacts from COVID-19 on attendance and revenue, challenges Regal's ESA rejection in Cineworld's bankruptcy, and manages liquidity through cost controls and new debt financing - Movie slate for 2022 improved but attendance remains inconsistent and below historical levels[125](index=125&type=chunk) - Cineworld Group plc (Regal's parent) filed for Chapter 11, and Regal moved to reject its ESA with NCM LLC, which NCM LLC is contesting[126](index=126&type=chunk) - The company reduced payroll costs by **44%** and managed liquidity through cost controls and new debt financing, including a **$50.0 million** Revolving Credit Agreement in January 2022[127](index=127&type=chunk)[129](index=129&type=chunk) - The Credit Agreement Third Amendment suspended certain financial covenants through Q4 2022 and set new leverage ratios for subsequent quarters[128](index=128&type=chunk) [Summary Historical and Operating Data](index=25&type=section&id=Summary%20Historical%20and%20Operating%20Data) The company achieved significant revenue growth of **71.9%** in Q3 2022 and **208.2%** year-to-date, driven by increased theater attendance, leading to substantially reduced operating and net losses Summary Historical and Operating Data (in millions, except percentages) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | Q3 % Change | YTD % Change | | :----------------------------------- | :------ | :------ | :------- | :------- | :---------- | :----------- | | Revenue | $54.5 | $31.7 | $157.5 | $51.1 | 71.9% | 208.2% | | Total operating expenses | $58.7 | $50.4 | $178.7 | $127.7 | 16.5% | 39.9% | | Operating loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | (77.5)% | (72.3)% | | Net loss attributable to NCM, Inc. | $(8.9) | $(15.2) | $(34.8) | $(57.3) | (41.4)% | (39.3)% | | Total theater attendance (in millions) | 106.6 | 75.7 | 306.8 | 138.6 | 40.8% | 121.4% | [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted OIBDA, a non-GAAP measure, significantly improved to **$7.0 million** (12.8% margin) in Q3 2022 and **$15.2 million** (9.7% margin) year-to-date, reflecting enhanced operating performance - Adjusted OIBDA is operating income before depreciation, amortization of intangibles for network theater screen leases, non-cash share-based compensation, impairment of long-lived assets, advisor fees related to Cineworld Proceeding, executive transition costs, and sales force reorganization costs[132](index=132&type=chunk) Adjusted OIBDA Reconciliation (in millions) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :----------------------------------- | :------ | :------ | :------- | :------- | | Operating loss | $(4.2) | $(18.7) | $(21.2) | $(76.6) | | Depreciation expense | $1.5 | $2.5 | $5.1 | $8.4 | | Amortization of intangibles | $6.3 | $6.2 | $18.7 | $18.5 | | Share-based compensation costs | $2.1 | $1.7 | $5.1 | $6.5 | | Impairment of long-lived assets | $0.0 | $0.0 | $5.8 | $0.0 | | Advisor fees related to Cineworld Proceeding | $1.3 | $0.0 | $1.3 | $0.0 | | **Adjusted OIBDA** | **$7.0** | **$(8.2)** | **$15.2** | **$(43.1)** | | Adjusted OIBDA margin | 12.8% | (25.9)% | 9.7% | (84.3)% | [Our Network](index=27&type=section&id=Our%20Network) The advertising network decreased to **20,201 screens** by September 29, 2022, due to affiliate losses and net closures, though broad market coverage remains a competitive advantage Number of Screens in Network | Category | Dec 30, 2021 | Sep 29, 2022 | Change | | :------------------- | :----------- | :----------- | :----- | | Founding Members | 16,436 | 16,155 | (281) | | Network Affiliates | 4,304 | 4,046 | (258) | | **Total** | **20,740** | **20,201** | **(539)** | - The decrease in screens was due to the loss of three affiliates (**288 screens**) and net closures (**251 screens**)[136](index=136&type=chunk)[137](index=137&type=chunk) - The company believes its market coverage strengthens its competitive position against other advertising platforms[138](index=138&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section details financial performance for Q3 and YTD 2022, showing significant revenue growth across all categories, driven by increased attendance, leading to reduced operating and net losses - Total revenue increased by **71.9%** in Q3 2022 and **208.2%** year-to-date 2022[141](index=141&type=chunk)[156](index=156&type=chunk) - Operating loss decreased by **77.5%** in Q3 2022 and **72.3%** year-to-date 2022[131](index=131&type=chunk) - Net loss attributable to NCM, Inc. decreased by **41.4%** in Q3 2022 and **39.3%** year-to-date 2022[131](index=131&type=chunk) [Third Quarter of 2022 and Third Quarter of 2021](index=28&type=section&id=Third%20Quarter%20of%202022%20and%20Third%20Quarter%20of%202021) Q3 2022 saw total revenue increase by **71.9%** to **$54.5 million**, driven by a **40.8%** rise in theater attendance and higher national advertising CPMs, leading to a reduced net loss Revenue by Category (in millions, with % change) | Category | Q3 2022 | Q3 2021 | $ Change | % Change | | :------------------------------------------ | :------ | :------ | :------- | :------- | | National advertising revenue | $39.7 | $22.6 | $17.1 | 75.7% | | Local and regional advertising revenue | $9.8 | $5.7 | $4.1 | 71.9% | | Founding member beverage concessionaire revenue | $5.0 | $3.4 | $1.6 | 47.1% | | **Total revenue** | **$54.5** | **$31.7** | **$22.8** | **71.9%** | - Total theater attendance increased by **40.8%** to **106.6 million** in Q3 2022[141](index=141&type=chunk) - National advertising CPMs increased by **34.5%** in Q3 2022[142](index=142&type=chunk) - Operating expenses increased by **$8.3 million** (**16.5%**), driven by a **$4.6 million** increase in theater access fees and revenue share to founding members[145](index=145&type=chunk)[148](index=148&type=chunk) - Net loss decreased by **$6.3 million**, from **$15.2 million** in Q3 2021 to **$8.9 million** in Q3 2022[155](index=155&type=chunk) [Nine months ended September 29, 2022 and September 30, 2021](index=30&type=section&id=Nine%20months%20ended%20September%2029%2C%202022%20and%20September%2030%2C%202021) Year-to-date 2022 total revenue surged by **208.2%** to **$157.5 million**, with attendance up **121.4%**, leading to a **$22.5 million** reduction in net loss despite increased operating expenses and impairment charges Revenue by Category (in millions, with % change) | Category | YTD 2022 | YTD 2021 | $ Change | % Change | | :------------------------------------------ | :------- | :------- | :------- | :------- | | National advertising revenue | $116.7 | $34.3 | $82.4 | 240.2% | | Local and regional advertising revenue | $26.4 | $10.8 | $15.6 | 144.4% | | Founding member beverage concessionaire revenue | $14.4 | $6.0 | $8.4 | 140.0% | | **Total revenue** | **$157.5** | **$51.1** | **$106.4** | **208.2%** | - Total theater attendance increased by **121.4%** to **306.8 million** year-to-date 2022[156](index=156&type=chunk) - National advertising CPMs increased by **31.6%** and utilization by **44.0%** year-to-date 2022[157](index=157&type=chunk) - Operating expenses increased by **$51.0 million** (**39.9%**), with theater access fees and revenue share to founding members increasing by **$31.4 million** (**101.3%**)[160](index=160&type=chunk)[162](index=162&type=chunk) - Impairment of long-lived assets increased by **$5.8 million** due to write-off of certain long-lived assets[166](index=166&type=chunk) - Net loss decreased by **$22.5 million**, from **$57.3 million** in YTD 2021 to **$34.8 million** in YTD 2022[170](index=170&type=chunk) [Known Trends and Uncertainties](index=33&type=section&id=Known%20Trends%20and%20Uncertainties) The company faces uncertainties from COVID-19, macroeconomic factors, and the Cineworld Proceeding, with revenue streams like beverage and theater access fees subject to contractual terms and attendance levels - COVID-19 pandemic and macroeconomic factors continue to impact business, with attendance below historical levels[171](index=171&type=chunk)[172](index=172&type=chunk) - Regal's bankruptcy (Cineworld Proceeding) and motion to reject the ESA create uncertainty and potential material negative impact[173](index=173&type=chunk) - Beverage revenue is subject to contractual increases (**2.0% annually** for Cinemark and Regal) and attendance levels[174](index=174&type=chunk) - Theater access fees increase by **8%** every five years for patron-based fees and **5%** annually for digital screen fees[175](index=175&type=chunk) - Platinum Spot revenue share is based on a percentage of revenue generated, subject to a minimum average CPM[176](index=176&type=chunk) [Financial Condition and Liquidity](index=33&type=section&id=Financial%20Condition%20and%20Liquidity) Cash balances fluctuate due to seasonality and debt, with liquidity managed through cost-saving measures and additional debt, but substantial doubt about going concern persists due to maturing credit facilities and covenant non-compliance - Cash balances fluctuate due to seasonality, receivables, operating expenditures, and debt payments[178](index=178&type=chunk) - Cost-saving measures include reducing payroll (**44%** headcount reduction), curtailing non-essential expenditures, temporarily suspending 401K match, and decreasing/suspending dividends[179](index=179&type=chunk)[182](index=182&type=chunk) - NCM LLC drew down **$110.0 million** on its revolving credit facility in March 2020 and **$50.0 million** on a new facility in January 2022 to fund operations[180](index=180&type=chunk) - The company has **$217.0 million** in revolving credit facilities maturing on June 20, 2023, and does not have sufficient liquidity to repay the full balance, raising substantial doubt about its ability to continue as a going concern[184](index=184&type=chunk) Summary of Financial Liquidity (in millions) | Metric | Sep 29, 2022 | Dec 30, 2021 | | :----------------------------------- | :----------- | :----------- | | Cash, cash equivalents and marketable securities | $74.8 | $102.5 | | NCM LLC revolving credit facility availability | $6.8 | $6.8 | | **Total liquidity** | **$81.6** | **$109.3** | [Sources of Capital and Capital Requirements](index=36&type=section&id=Sources%20of%20Capital%20and%20Capital%20Requirements) NCM, Inc. relies on NCM LLC's cash distributions and its own cash, while NCM LLC depends on operating cash flows and its revolving credit facility, with distributions negatively impacted by Credit Agreement amendments - NCM, Inc.'s primary liquidity source is quarterly available cash distributions from NCM LLC and existing cash balances (**$74.8 million** as of Sep 29, 2022)[190](index=190&type=chunk) - NCM LLC's primary liquidity sources are operating cash flows, revolving credit facility availability, and cash on hand[190](index=190&type=chunk) - Available cash distributions to NCM LLC's members were approximately negative **$41.3 million** for the nine months ended September 29, 2022, with NCM, Inc.'s share being negative **$19.6 million**[192](index=192&type=chunk) - No available cash distributions were made for Q1, Q2, or Q3 2022, and negative amounts are expected to be netted against future positive distributions after the extended covenant waiver holiday[192](index=192&type=chunk) - The company intends to distribute substantially all free cash flow to stockholders through dividends, subject to Board discretion and Credit Agreement restrictions[193](index=193&type=chunk) [Critical Accounting Policies](index=37&type=section&id=Critical%20Accounting%20Policies) The company refers to its annual report for critical accounting policies, noting no significant changes as of September 29, 2022 - No significant changes in critical accounting policies as of September 29, 2022[194](index=194&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) The company adopted ASU 2019-12 and considered ASU 2020-04, neither of which had a material impact, and no other recent pronouncements are expected to be material - Adoption of ASU 2019-12 (Income Taxes) had no material impact[45](index=45&type=chunk) - LIBOR transition (ASU 2020-04) had no material impact[48](index=48&type=chunk) - No other recently issued accounting pronouncements are expected to have a material impact[49](index=49&type=chunk)[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, with **47%** of borrowings at variable rates, where a **100-basis point** fluctuation impacts annual cash interest expense by **$5.3 million** - Primary market risk is interest rate risk, affecting variable-rate debt[196](index=196&type=chunk) - **47%** of total borrowings bear interest at variable rates[189](index=189&type=chunk)[196](index=196&type=chunk) - A **100-basis point** fluctuation in interest rates would change annual cash interest expense by approximately **$5.3 million**[196](index=196&type=chunk) - Rising Federal Reserve interest rates in 2022 have increased the company's interest rate risk[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 29, 2022, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 29, 2022[200](index=200&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended September 29, 2022[202](index=202&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Regal Cinemas, Inc. filed for Chapter 11 bankruptcy and moved to reject its ESA with NCM LLC, which NCM LLC is challenging with a complaint seeking declaratory relief and an injunction - Regal Cinemas, Inc. (a founding member) filed for Chapter 11 bankruptcy and moved to reject its ESA with NCM LLC[204](index=204&type=chunk) - NCM LLC filed a complaint against Regal seeking declaratory relief and an injunction to prevent breaches of exclusivity, non-compete, and confidentiality provisions[204](index=204&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from the potential rejection or renegotiation of the ESA with Regal due to its Chapter 11 bankruptcy, and substantial doubt about its going concern ability if debt maturities are not extended or financing secured - The ESA with Regal, a founding member in bankruptcy, may be rejected, renegotiated, or deemed unenforceable, potentially having a materially negative impact on operations or financial condition[207](index=207&type=chunk) - Regal's plans to optimize theaters could lead to closures or removals from NCM's network, reducing advertising impressions and revenue[208](index=208&type=chunk) - Failure to extend maturity dates of Revolving Credit Facilities (**$217.0 million** due June 20, 2023) or obtain additional financing raises substantial doubt about the company's ability to continue as a going concern[209](index=209&type=chunk) - A failure to comply with covenants or repay debt could lead to an event of default and acceleration of all outstanding debt, which the company cannot repay with current liquidity[209](index=209&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported unregistered sales of **2,074** equity shares purchased from employees for tax withholding at an average price of **$1.65 per share** between July and September 2022 Shares Purchased for Tax Withholding | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----------------------------------- | :----------------------------- | :--------------------------- | | July 29, 2022 through September 1, 2022 | 2,074 | $1.65 | [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None[215](index=215&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[216](index=216&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable at book value on November 3, 2022, via a cash payment - NCM, Inc. acquired **$4.9 million** of NCM LLC's accounts receivable on November 3, 2022, for a cash payment equal to book value[217](index=217&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including agreements, certifications, and XBRL taxonomy documents - Exhibit 10.2: Form of Receivable Sales Agreement, dated November 3, 2022, between NCM LLC and NCM, Inc.[218](index=218&type=chunk) - Includes Rule 13a-14(a) Certifications of CEO and CFO (Exhibits 31.1, 31.2)[218](index=218&type=chunk) SIGNATURES [Signatures](index=42&type=section&id=Signatures) The report is signed by Thomas F. Lesinski (CEO) and Ronnie Y. Ng (CFO) on November 7, 2022, certifying its submission - Signed by Thomas F. Lesinski (CEO) and Ronnie Y. Ng (CFO) on November 7, 2022[222](index=222&type=chunk)

National CineMedia, Inc. (NASDAQ:NCMI) Q2 2022 Earnings Conference Call August 8, 2022 5:00 PM ET Company Participants Dan Dorenkamp - Finance Director Tom Lesinski - Chief Executive Officer Ronnie Ng - Chief Financial Officer Conference Call Participants Eric Wold - B. Riley Securities Jim Goss - Barrington Research Operator Good day, and welcome to the National CineMedia, Inc. Q2 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________ FORM 10-Q ____________________________________________ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 001-33296 _____________________________________________ ...

National CineMedia, Inc. (NASDAQ:NCMI) Q1 2022 Earnings Conference Call May 9, 2022 5:00 PM ET Company Participants Dan Dorenkamp - Finance Director Ronnie Ng - CFO Tom Lesinski - CEO Conference Call Participants Eric Wold - B. Riley Mike Hickey - Benchmark Company Jim Goss - Barrington Research Operator Greetings, and welcome to National CineMedia Incorporated Q1, 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the for ...

[PART I — FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Financial Statements](index=4&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of income and comprehensive income, cash flows, and equity/(deficit), along with detailed notes explaining the company's business, accounting policies, revenue recognition, loss per share, intangible assets, related party transactions, borrowings, income taxes, commitments, contingencies, fair value measurements, and a subsequent event [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | Metric | March 31, 2022 (in millions) | December 30, 2021 (in millions) | | :----- | :--------------------------- | :------------------------------ | | Total Assets | $821.6 | $817.4 | | Total Liabilities | $1,243.0 | $1,200.9 | | Total Equity/(Deficit) | $(421.4) | $(383.5) | | Cash and cash equivalents | $113.8 | $101.2 | | Receivables, net | $43.0 | $53.0 | | Long-term debt, net | $1,143.3 | $1,094.3 | [Unaudited Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | Change (YoY) | | :----- | :---------------------------------------------- | :--------------------------------------------- | :----------- | | Revenue | $35.9 | $5.4 | +$30.5 | | Operating Loss | $(22.5) | $(28.3) | +$5.8 | | Non-Operating Expenses | $23.5 | $13.7 | +$9.8 | | Consolidated Net Loss | $(46.0) | $(42.0) | $(4.0) | | Net Loss Attributable to NCM, Inc. | $(25.2) | $(19.4) | $(5.8) | | Basic EPS | $(0.31) | $(0.25) | $(0.06) | | Diluted EPS | $(0.31) | $(0.25) | $(0.06) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | | :----- | :---------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(23.6) | $(25.0) | | Net cash used in investing activities | $(0.7) | $(2.0) | | Net cash provided by financing activities | $36.9 | $37.4 | | Change in cash and cash equivalents | $12.6 | $10.4 | | Cash and cash equivalents at end of period | $113.8 | $190.7 | - Cash paid for interest increased to **$15.6 million** in Q1 2022 from **$10.9 million** in Q1 2021[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Equity/(Deficit)](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity%2F%28Deficit%29) | Metric | December 30, 2021 (in millions) | March 31, 2022 (in millions) | | :----- | :------------------------------ | :--------------------------- | | Total Equity/(Deficit) | $(383.5) | $(421.4) | | NCM, Inc. Stockholders' Equity/(Deficit) | $(526.7) | $(552.1) | | Noncontrolling interests | $143.2 | $130.7 | - Cash dividends declared were **$4.2 million** for the three months ended March 31, 2022, and **$4.5 million** for the three months ended April 1, 2021[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. THE COMPANY](index=9&type=section&id=Note%201.%20THE%20COMPANY) - NCM operates the largest cinema advertising network in the U.S., selling advertising under long-term exhibitor service agreements (ESAs) with founding members (AMC, Regal, Cinemark) and third-party network affiliates[26](index=26&type=chunk) - The COVID-19 pandemic significantly impacted the business, with in-theater advertising revenue remaining below historical levels in Q1 2022 despite resumed major motion picture releases and increased attendance since Q3 2021[27](index=27&type=chunk) - Weighted average remaining term of ESAs with founding members is approximately **17.5 years**, and with network affiliates is **15.2 years** as of March 31, 2022[28](index=28&type=chunk) - NCM, Inc. owned **47.4%** of NCM LLC common membership units as of March 31, 2022, with founding members Regal (**23.7%**), Cinemark (**25.4%**), and AMC (**3.5%**) holding the remainder[29](index=29&type=chunk) [Note 2. REVENUE FROM CONTRACTS WITH CUSTOMERS AND ACCOUNTS RECEIVABLE](index=11&type=section&id=Note%202.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS%20AND%20ACCOUNTS%20RECEIVABLE) - Revenue is derived from advertising in the Noovie® pre-show, Lobby Entertainment Network (LEN), lobby promotions, and online/mobile advertising platforms[45](index=45&type=chunk) - The company defers revenue associated with "make-good" provisions until advertising airs or the make-good period expires[46](index=46&type=chunk) | Revenue Category | Three Months Ended March 31, 2022 (in millions) | Three Months Ended April 1, 2021 (in millions) | | :--------------- | :---------------------------------------------- | :--------------------------------------------- | | National advertising revenue | $26.3 | $3.2 | | Local and regional advertising revenue | $6.1 | $1.7 | | Founding member advertising revenue from beverage concessionaire agreements | $3.5 | $0.5 | | Total revenue | $35.9 | $5.4 | - Revenue recognized in Q1 2022 from the Deferred Revenue balance as of December 30, 2021, was **$4.5 million**[50](index=50&type=chunk) [Note 3. LOSS PER SHARE](index=12&type=section&id=Note%203.%20LOSS%20PER%20SHARE) | Metric | Three Months Ended March 31, 2022 | Three Months Ended April 1, 2021 | | :----- | :-------------------------------- | :------------------------------- | | Net loss attributable to NCM, Inc. (in millions) | $(25.2) | $(19.4) | | Basic Loss per NCM, Inc. share | $(0.31) | $(0.25) | | Diluted Loss per NCM, Inc. share | $(0.31) | $(0.25) | | Basic Weighted Average Shares Outstanding | 81,040,652 | 78,481,355 | | Diluted Weighted Average Shares Outstanding | 81,040,652 | 78,481,355 | - **86,233,848** and **84,427,289** weighted average exchangeable NCM LLC common units for Q1 2022 and Q1 2021, respectively, were excluded from diluted EPS as they were anti-dilutive[54](index=54&type=chunk) [Note 4. INTANGIBLE ASSETS](index=13&type=section&id=Note%204.%20INTANGIBLE%20ASSETS) - Intangible assets consist of contractual rights to provide services in founding members' and network affiliates' theaters, amortized over their useful lives[55](index=55&type=chunk) - In Q1 2022, NCM LLC issued **6,483,893** common membership units and reduced **2,342,997** units, resulting in a net **$10.4 million** increase to intangible assets[57](index=57&type=chunk)[59](index=59&type=chunk) - A reduction of **$0.2 million** to net intangible assets was recorded in Q1 2022 related to other encumbered theater payments[61](index=61&type=chunk) [Note 5. RELATED PARTY TRANSACTIONS](index=14&type=section&id=Note%205.%20RELATED%20PARTY%20TRANSACTIONS) - AMC's ownership in NCM LLC was **3.5%** as of March 31, 2022, and it is no longer considered a related party for certain accounting purposes but remains a party to key agreements[62](index=62&type=chunk) | Metric (in millions) | Three Months Ended March 31, 2022 | Three Months Ended April 1, 2021 | | :------------------- | :-------------------------------- | :------------------------------- | | Beverage concessionaire revenue (related parties) | $2.8 | $0.4 | | Theater access fee and revenue share to founding members (related parties) | $12.8 | $1.3 | - Mandatory distributions of available cash by NCM LLC to its members were calculated as negative **$26.3 million** for Q1 2022, meaning no payment will be made, and negative amounts will be netted against future positive distributions[70](index=70&type=chunk) - Amounts due to related party founding members, net, were **$8.4 million** as of March 31, 2022, primarily for theater access fees and revenue share[71](index=71&type=chunk) [Note 6. BORROWINGS](index=17&type=section&id=Note%206.%20BORROWINGS) | Borrowing Type | March 31, 2022 (in millions) | December 30, 2021 (in millions) | Maturity Date | Interest Rate (March 31, 2022) | | :------------- | :--------------------------- | :------------------------------ | :------------ | :----------------------------- | | Revolving credit facility 2018 | $167.0 | $167.0 | June 20, 2023 | 4.50% (weighted-average) | | Revolving credit facility 2022 | $50.0 | — | June 20, 2023 | 9.11% (weighted-average) | | Term loans - first tranche | $259.9 | $261.2 | June 20, 2025 | 5.00% | | Term loans - second tranche | $49.5 | $49.8 | December 20, 2024 | 9.00% | | Senior secured notes due 2028 | $400.0 | $400.0 | April 15, 2028 | 5.875% | | Senior unsecured notes due 2026 | $230.0 | $230.0 | August 15, 2026 | 5.750% | | Total borrowings | $1,156.4 | $1,108.0 | | | - NCM LLC entered into a Third Amendment to its Credit Agreement on January 5, 2022, suspending consolidated net total leverage and senior secured leverage financial covenants through December 29, 2022, and setting new ratios thereafter[78](index=78&type=chunk) - A new **$50.0 million** secured revolving credit facility was entered into on January 5, 2022, fully funded, with a cash interest rate of term SOFR plus **8.00%** (**1.00%** floor) and maturity on June 20, 2023[85](index=85&type=chunk) [Note 7. INCOME TAXES](index=19&type=section&id=Note%207.%20INCOME%20TAXES) - Income tax expense was **$0.0 million** for both Q1 2022 and Q1 2021, resulting in a **0.0%** effective tax rate[89](index=89&type=chunk) - The company maintains a full valuation allowance on its net deferred tax assets, indicating uncertainty about realizing their benefits[89](index=89&type=chunk) [Note 8. COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=Note%208.%20COMMITMENTS%20AND%20CONTINGENCIES) - No legal proceedings are expected to have a material adverse effect on operating results or financial condition[90](index=90&type=chunk) | Metric (in millions) | March 31, 2022 | | :------------------- | :------------- | | ROU assets (facilities) | $18.3 | | Short-term lease liabilities (facilities) | $2.2 | | Long-term lease liabilities (facilities) | $19.8 | | Weighted average remaining lease term (facilities) | 7.3 years | | Weighted average annual discount rate | 7.4% | - ESAs and network affiliate agreements are treated as short-term leases (less than one month) under ASC 842, with amortization of related intangible assets recognized as lease expense[94](index=94&type=chunk) - Maximum potential future payments for minimum revenue guarantees to network affiliates is **$121.5 million** over remaining terms[99](index=99&type=chunk) [Note 9. FAIR VALUE MEASUREMENTS](index=21&type=section&id=Note%209.%20FAIR%20VALUE%20MEASUREMENTS) - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[102](index=102&type=chunk)[103](index=103&type=chunk) | Borrowing Type | March 31, 2022 Carrying Value (in millions) | March 31, 2022 Fair Value (in millions) | December 30, 2021 Carrying Value (in millions) | December 30, 2021 Fair Value (in millions) | | :------------- | :------------------------------------------ | :-------------------------------------- | :--------------------------------------------- | :------------------------------------------- | | Term loans - first tranche | $259.9 | $233.9 | $261.2 | $236.4 | | Term loans - second tranche | $49.5 | $46.8 | $49.8 | $48.1 | | Notes due 2026 | $230.0 | $165.6 | $230.0 | $179.4 | | Notes due 2028 | $400.0 | $349.0 | $400.0 | $357.0 | | Asset Type (in millions) | March 31, 2022 Fair Value | Level 1 | Level 2 | Level 3 | | :----------------------- | :------------------------ | :------ | :------ | :------ | | Cash equivalents | $33.1 | $33.1 | — | — | | Short-term marketable securities | $0.3 | — | $0.3 | — | | Long-term marketable securities | $1.0 | — | $1.0 | — | | Total assets | $34.4 | $33.1 | $1.3 | — | [Note 10. SUBSEQUENT EVENT](index=23&type=section&id=Note%2010.%20SUBSEQUENT%20EVENT) - A cash dividend of **$0.03 per share** (approx. **$2.4 million**) was declared on May 9, 2022, payable June 7, 2022[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the first quarter of 2022 compared to 2021, covering business overview, recent developments, revenue and expense analysis, known trends, liquidity, capital resources, and critical accounting policies [Overview](index=24&type=section&id=Overview) - NCM is America's Movie Network, the largest cinema advertising network in the U.S., deriving revenue from advertising in its Noovie® pre-show, LEN, and digital properties[117](index=117&type=chunk)[119](index=119&type=chunk) - As of March 31, 2022, approximately **57%** of the network presents the new Noovie pre-show format with Post-Showtime advertising inventory, while the remaining **43%** presents the Classic Noovie pre-show[118](index=118&type=chunk) - The company monitors key operating metrics including revenue, Adjusted OIBDA, advertising inventory utilization, national/regional advertising pricing (CPM), local advertising rate per theater per week, and advertising revenue per attendee[120](index=120&type=chunk) [Recent Developments](index=25&type=section&id=Recent%20Developments) - In-theater advertising revenue for Q1 2022 remained below historical levels due to a lag between attendee recovery and advertiser return, despite all network theaters being open since Q3 2021[123](index=123&type=chunk) - The company significantly reduced payroll-related costs through temporary measures and a **45%** headcount reduction as of March 31, 2022, compared to pre-pandemic levels[124](index=124&type=chunk) - On January 5, 2022, NCM LLC entered into a Third Amendment to its Credit Agreement, suspending certain financial covenants through December 29, 2022, and establishing new leverage ratios for subsequent quarters[125](index=125&type=chunk) - A new **$50.0 million** secured revolving credit facility was funded on January 5, 2022, with a maturity date of June 20, 2023[126](index=126&type=chunk) [Summary Historical and Operating Data](index=25&type=section&id=Summary%20Historical%20and%20Operating%20Data) | Metric | Q1 2022 (in millions) | Q1 2021 (in millions) | % Change (YoY) | | :----- | :-------------------- | :-------------------- | :------------- | | Revenue | $35.9 | $5.4 | 564.8% | | Operating loss | $(22.5) | $(28.3) | (20.5)% | | Net loss attributable to NCM, Inc. | $(25.2) | $(19.4) | 29.9% | | Adjusted OIBDA | $(6.8) | $(16.2) | (58.0)% | | Adjusted OIBDA margin | (18.9)% | (300.0)% | 281.1% | | Total theater attendance | 76.0 | 13.8 | 450.7% | - Adjusted OIBDA is a non-GAAP measure used by management to evaluate operating performance, excluding depreciation, amortization of intangibles, non-cash share-based compensation, impairment of long-lived assets, and sales force reorganization costs[129](index=129&type=chunk) | Network Screens | December 30, 2021 | March 31, 2022 | Change | | :-------------- | :---------------- | :------------- | :----- | | Founding Members | 16,436 | 16,361 | (75) | | Network Affiliates | 4,304 | 4,244 | (60) | | Total | 20,740 | 20,605 | (135) | [Results of Operations](index=27&type=section&id=Results%20of%20Operations) [First Quarter of 2022 and First Quarter of 2021](index=27&type=section&id=First%20Quarter%20of%202022%20and%20First%20Quarter%20of%202021) - Total revenue increased by **564.8%** to **$35.9 million** in Q1 2022, compared to **$5.4 million** in Q1 2021[134](index=134&type=chunk) | Revenue Category | Q1 2022 (in millions) | Q1 2021 (in millions) | $ Change (YoY) | % Change (YoY) | | :--------------- | :-------------------- | :-------------------- | :------------- | :------------- | | National advertising revenue | $26.3 | $3.2 | $23.1 | 721.9% | | Local and regional advertising revenue | $6.1 | $1.7 | $4.4 | 258.8% | | Founding member beverage revenue | $3.5 | $0.5 | $3.0 | 600.0% | | Total revenue | $35.9 | $5.4 | $30.5 | 564.8% | | Revenue per Attendee | Q1 2022 | Q1 2021 | % Change (YoY) | | :------------------- | :------ | :------ | :------------- | | National advertising revenue per attendee | $0.346 | $0.232 | 49.1% | | Local and regional advertising revenue per attendee | $0.080 | $0.123 | (35.0)% | | Total revenue per attendee | $0.472 | $0.391 | 20.7% | | Total theater attendance (in millions) | 76.0 | 13.8 | 450.7% | - Total operating expenses increased by **$24.7 million** (**73.3%**) to **$58.4 million** in Q1 2022, primarily due to higher advertising affiliate expense, increased theater access fees, and personnel costs[139](index=139&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) - Non-operating expenses increased by **$9.8 million** (**71.5%**) to **$23.5 million**, mainly due to a **$7.9 million** increase in loss on re-measurement of the TRA payable and a **$2.5 million** increase in interest on borrowings[147](index=147&type=chunk) - Net loss attributable to NCM, Inc. increased by **$5.8 million** to **$(25.2) million** in Q1 2022, driven by higher non-operating expenses, partially offset by a decrease in operating loss[148](index=148&type=chunk) [Known Trends and Uncertainties](index=30&type=section&id=Known%20Trends%20and%20Uncertainties) - The COVID-19 pandemic's impact on future periods remains uncertain, with attendance-based fees reduced when attendance is lower than historical levels[149](index=149&type=chunk)[150](index=150&type=chunk) - Beverage revenue pricing for founding members is based on the greater of previous year's CPM or unaffiliated third-party CPM for AMC, while Cinemark and Regal's beverage supplier pricing increases at a fixed rate of **2.0%** annually[151](index=151&type=chunk) - Theater access fees to founding members are composed of fixed payments per patron (increasing **8%** every five years, next in 2027) and per digital screen (increasing **5%** annually)[152](index=152&type=chunk)[153](index=153&type=chunk) - Cinemark and Regal receive a percentage of revenue from Platinum Spots, subject to a specified minimum average CPM if multiple advertisers run concurrently[154](index=154&type=chunk) [Financial Condition and Liquidity](index=31&type=section&id=Financial%20Condition%20and%20Liquidity) - Liquidity is affected by seasonality, receivables collection, operating expenses, available cash payments to founding members, debt payments, income taxes, and dividends[155](index=155&type=chunk) - The company implemented cost-saving measures including reduced Board compensation, curtailed non-essential operating/capital expenditures, suspended 401K match, managed vendor costs, decreased quarterly dividend, and active cash management[157](index=157&type=chunk) | Metric (in millions) | March 31, 2022 | December 30, 2021 | April 1, 2021 | | :------------------- | :------------- | :---------------- | :------------ | | Cash, cash equivalents and marketable securities | $115.1 | $102.5 | $192.2 | | NCM LLC revolving credit facility availability | $6.8 | $6.8 | $5.6 | | Total liquidity | $121.9 | $109.3 | $197.8 | - As of March 31, 2022, NCM LLC held **$76.2 million** in cash, not available for NCM, Inc. dividends or TRA payments[162](index=162&type=chunk) - Management believes the company can meet operating and debt obligations for the next year based on current financial position and forecasted cash flows[159](index=159&type=chunk) [Critical Accounting Policies](index=34&type=section&id=Critical%20Accounting%20Policies) - No significant changes to critical accounting policies as of March 31, 2022, from those disclosed in the annual report on Form 10-K for December 30, 2021[168](index=168&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) - Adoption of recently issued accounting pronouncements is not expected to have a material impact on the unaudited Condensed Consolidated Financial Statements[169](index=169&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate risk, affecting its variable-rate revolving credit facilities and term loans, with a 100-basis point fluctuation impacting annual cash interest expense by approximately $5.3 million - Primary market risk is interest rate risk, affecting variable-rate revolving credit facilities and term loans[170](index=170&type=chunk) - A **100-basis point** fluctuation in market interest rates would increase/decrease annual cash interest expense by approximately **$5.3 million** on **$217.0 million** in revolving credit balances and **$309.4 million** in term loans outstanding as of March 31, 2022[170](index=170&type=chunk) - Historically low interest rates as of March 31, 2022, reduced interest rate risk, but an increase would raise this risk[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2022, concluding they were effective with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[173](index=173&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2022[176](index=176&type=chunk) [PART II — OTHER INFORMATION](index=35&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings in the ordinary course of business but does not anticipate any material adverse effect on its operating results or financial condition - No legal proceedings are expected to have a material adverse effect on operating results or financial condition[178](index=178&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the annual report on Form 10-K for the fiscal year ended December 30, 2021 - No material changes to risk factors from the annual report on Form 10-K filed March 3, 2022[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on shares delivered to the company from restricted stock upon vesting to cover employees' tax withholding obligations | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :----- | :------------------------------- | :--------------------------- | | December 31, 2021 through January 27, 2022 | — | $— | | January 28, 2022 through February 24, 2022 | 18,773 | $3.17 | | February 25, 2022 through March 31, 2022 | 42,672 | $2.97 | [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities[182](index=182&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not Applicable[183](index=183&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) No other information was reported - None[184](index=184&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including amendments to the Bylaws and Certificate of Incorporation, and amendments to the Credit Agreement and a new Revolving Credit Agreement - Key exhibits include amendments to Bylaws and Certificate of Incorporation (May 4, 2022), Amendment No. 3 to the Credit Agreement (January 5, 2022), and a new Revolving Credit Agreement (January 5, 2022)[186](index=186&type=chunk) [Signatures](index=37&type=section&id=Signatures) The report was signed by Thomas F. Lesinski, Chief Executive Officer, and Ronnie Y. Ng, Chief Financial Officer, on May 9, 2022 - Report signed by CEO Thomas F. Lesinski and CFO Ronnie Y. Ng on May 9, 2022[192](index=192&type=chunk)

Financial Data and Key Metrics Changes - National CineMedia reported total revenue of $63.5 million for Q4 2021, a 305% increase compared to the same period in the prior year and more than double the revenue for Q3 2021 [41] - The company achieved positive adjusted OIBDA of $18.4 million in Q4 2021, marking the first positive adjusted OIBDA since the pandemic began, compared to negative $9.9 million in Q4 2020 and negative $8.2 million in Q3 2021 [46] - For the full year 2021, total revenue was $114.6 million, a 26.8% increase from $90.4 million in 2020 [48] Business Line Data and Key Metrics Changes - The total network theater attendance for Q4 2021 was 112.1 million, which was 48% higher compared to Q3 2021 [43] - Advertising pricing improved, with national CPMs slightly exceeding those of Q4 2019 and up 38% compared to Q3 2021 [43] - Core operating expenses averaged approximately $5 million per month in Q4 2021, a 47% reduction compared to the pre-COVID run rate of $9.5 million per month [45] Market Data and Key Metrics Changes - The fourth quarter box office exceeded $2 billion, reaching 75% of 2019 levels and 73% of the five-year average from 2015 to 2019 [16] - The company noted that nearly 1 in 2 adults aged 18 to 34 attended movies in Q4 2021, indicating strong consumer demand for the cinema experience [16] Company Strategy and Development Direction - The company is focusing on expanding, diversifying, and improving its business to capitalize on a strong 2022 theatrical film slate with a return to exclusive release windows [10] - National CineMedia is enhancing its digital advertising platforms and audience-driven data solutions to provide more value to advertisers as TV ratings decline [11] - The company is also restructuring its sales organization to focus on larger markets favored by advertisers, aiming to increase gross margins [33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, citing strong upfront bookings and a packed film release slate as indicators of recovery [9] - The company anticipates that the advertising marketplace will remain robust, particularly among Gen Z and millennials, who are expected to be the fastest-growing consumer segment [20] - Despite macroeconomic headwinds, management believes that the cinema experience remains a powerful marketing platform for advertisers [20] Other Important Information - National CineMedia's cash balance at the end of 2021 was $58.6 million, with total liquidity of approximately $65.4 million, exceeding the liquidity covenant of $55 million [53] - The company announced a quarterly cash dividend of $0.05 per share, resulting in a current yield of 6.8% based on the closing share price [56] Q&A Session Summary Question: Update on the 2022 calendar upfront - Management noted that the upfront is tracking stronger than originally forecasted, correlating well with box office estimates for the year [64][66] Question: Components of upfront commitments - Management highlighted that advertisers are committing a year ahead of time, maintaining premium pricing despite uncertainties in the box office [68][69] Question: Attracting new advertisers - Management mentioned new opportunities in the crypto and sports gambling sectors, while noting that the automotive sector is facing supply chain challenges [77][78] Question: Political advertising opportunities - Management acknowledged potential opportunities in political advertising but emphasized the need to ensure that such advertising does not disrupt the movie-going experience [80][81]

Financial Performance - Q4 2021 - Total revenue increased by 304% to $63.5 million compared to Q4 2020[15] - National and Regional Sales revenue increased by 329% to $50.2 million compared to Q4 2020[15] - Local revenue increased by 134% to $8.2 million compared to Q4 2020[15] - Beverage revenue increased to $5.1 million from $0.5 million in Q4 2020[15] - Adjusted OIBDA improved from negative $9.9 million to positive $18.4 million[15] Financial Performance - FY 2021 - Total revenue increased 27% to $114.6 million compared to FY 2020[27] - National and Regional Sales revenue increased 28% to $85.7 million compared to FY 2020[27] - Local revenue increased 2% to $17.8 million compared to FY 2020[27] - Beverage revenue increased 79% to $11.1 million compared to FY 2020[27] - Adjusted OIBDA decreased 27% to negative $24.7 million[27] Liquidity and Capital Structure - NCM LLC began the fourth quarter of 2021 with a cash balance of $64.4 million and ended with $58.6 million[6] - The accounts receivable balance increased from $28.5 million to $53.0 million during Q4 2021[6] - A new $50 million revolving credit facility was secured on January 5, 2022, resulting in a ratings upgrade from S&P and $99.7 million of cash on hand[12] Cost Reduction - NCM LLC's headcount has been reduced by over 40% compared to pre-COVID-19 pandemic levels[8] Dividend - The dividend declared on March 3, 2022, is $0.05 per share for Q1 2022, representing an annualized dividend of $0.20 per share[40] Outlook - The company expects revenue of $32.0 to $35.0 million and Adjusted OIBDA of negative $7.0 million to negative $4.0 million for the first quarter of 2022[43]

Part I [Business](index=8&type=section&id=Item%201.%20Business) NCM operates North America's largest cinema advertising network, leveraging its Noovie® pre-show and expanding digital offerings amidst post-pandemic recovery - NCM, Inc. is a holding company that manages NCM LLC, holding a **48.3% interest** as of December 30, 2021, with founding members Cinemark and Regal holding the remaining **51.7%** and former founding member AMC holding **0.0% ownership** at year-end[28](index=28&type=chunk) - The company's primary business is its cinema advertising network, featuring the Noovie® pre-show, which includes over **20,700 screens** in more than **1,600 theaters** across **195 Designated Market Areas® (DMAs)**[30](index=30&type=chunk) - The COVID-19 pandemic caused most network theaters to close for approximately **six months in 2020**, with revenue and attendance remaining below pre-pandemic levels despite all theaters reopening by **Q3 2021** and improved attendance with major film releases[34](index=34&type=chunk)[35](index=35&type=chunk) - The Noovie® pre-show includes a "Classic" version and a "Post-Showtime Inventory" format, with the latter present in theaters representing approximately **57% of the network's attendance** as of year-end 2021[37](index=37&type=chunk) - NCM is expanding its digital footprint with products like Noovie Trivia, Noovie ARcade, and the Noovie Audience Accelerator, with mobile apps downloaded approximately **6.5 million times** and contributing to a data set of over **274 million records** for targeted advertising as of December 30, 2021[55](index=55&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) Advertising Revenue Mix (FY 2021 vs. FY 2020) | Revenue Source | FY 2021 | FY 2020 | | :--- | :--- | :--- | | National Clients | 75% | 74% | | Regional & Local Advertisers | 16% | 19% | - The company's growth strategy involves increasing the value of cinema media through premium Post-Showtime Inventory and affiliate network expansion, diversifying its revenue model with branded content and digital/data solutions, and optimizing operational effectiveness by enhancing technology infrastructure[101](index=101&type=chunk)[106](index=106&type=chunk)[111](index=111&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business and industry risks, including pandemic impacts and competition, alongside corporate structure risks from debt and founding member influence - **Business & Industry Risks:** - **COVID-19 Pandemic:** The pandemic continues to disrupt business, with potential for new variants, government restrictions, and permanent changes in consumer behavior (e.g., adoption of streaming) posing significant threats - **Theater Attendance:** Declines in attendance, whether from competition with alternative film delivery methods or changes in patron behavior like reserved seating, could reduce the value of cinema advertising - **Dependence on Founding Members:** The business is critically dependent on the ESAs with Cinemark and Regal, where termination, lack of cooperation, or bankruptcy of a founding member could have a material negative impact - **Competition:** The company competes with all other forms of advertising, including larger and better-known platforms like television and digital media, for a share of the estimated **$265 billion U.S. advertising market**[118](index=118&type=chunk)[123](index=123&type=chunk)[135](index=135&type=chunk)[85](index=85&type=chunk) - **Corporate Structure Risks:** - **Holding Company Structure:** NCM, Inc. has no operations and depends on cash distributions from NCM LLC, which are subject to restrictions under NCM LLC's debt agreements - **Substantial Debt:** NCM LLC's significant debt contains restrictive covenants that limit its ability to make investments, acquisitions, and distribute cash, potentially impairing financial condition - **Influence of Founding Members:** Cinemark and Regal can designate directors and hold veto power over certain major corporate actions, potentially creating conflicts of interest - **Tax Receivable Agreement (TRA):** The obligation to pay **90% of realized tax benefits** to founding members reduces cash flow that would otherwise be available to the company[171](index=171&type=chunk)[174](index=174&type=chunk)[178](index=178&type=chunk)[200](index=200&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[203](index=203&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company owns no material real property, leasing its corporate headquarters in Centennial, Colorado, and additional offices in major cities - The Company's headquarters are located in Centennial, Colorado, with additional leased advertising sales offices in New York, Los Angeles, and Chicago, and development offices in Los Angeles, New York, and Minneapolis[204](index=204&type=chunk) [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is not aware of any pending legal proceedings expected to materially affect its financial condition or operating results - The company is not currently involved in any litigation that is expected to have a material adverse effect on its financial condition or results of operations[205](index=205&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[206](index=206&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "NCMI", with a dividend policy subject to Board discretion and debt covenants, and includes details on Q4 2021 equity purchases - The company's common stock (**$0.01 par value**) is traded on The Nasdaq Global Market under the symbol "**NCMI**"[213](index=213&type=chunk) - The company intends to pay a regular quarterly dividend, but the declaration and amount are at the sole discretion of the Board of Directors and are dependent on business conditions, financial health, and restrictions under NCM LLC's credit agreements[214](index=214&type=chunk) Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Oct 29 - Dec 2, 2021 | 40,128 | $3.18 | [Reserved](index=37&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[218](index=218&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2021 revenue increased to **$114.6 million** driven by attendance recovery, but operating losses continued, with liquidity managed through credit facility amendments Fiscal Year 2021 vs. 2020 Performance Summary (in millions) | Metric | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $114.6M | $90.4M | 26.8% | | Operating Loss | $(68.6)M | $(61.0)M | 12.5% | | Net Loss Attributable to NCM, Inc. | $(48.7)M | $(65.4)M | (25.5)% | | Adjusted OIBDA | $(24.7)M | $(19.4)M | 27.3% | | Total Theater Attendance | 250.7M | 138.2M | 81.4% | - The increase in total revenue was primarily driven by the **81.4% increase** in network attendance and a **48.0% increase** in impressions sold as theaters reopened and major films were released[252](index=252&type=chunk) - Operating expenses rose **21.0%** to **$183.2 million**, largely due to a **107.7% increase** in theater access fees paid to founding members, which are tied to active screens and attendance[255](index=255&type=chunk)[257](index=257&type=chunk) - The company's liquidity position decreased, with total liquidity (cash plus revolver availability) at **$109.3 million** at year-end 2021, down from **$186.2 million** in 2020, and operating activities used **$95.2 million** in cash in 2021, a significant shift from providing **$55.3 million** in 2020[277](index=277&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) - Subsequent to year-end, in January 2022, NCM LLC amended its credit agreement to suspend financial covenants through **Q4 2022** and entered into a new **$50.0 million** revolving credit agreement to bolster liquidity[231](index=231&type=chunk)[232](index=232&type=chunk) - A key critical accounting estimate is the valuation allowance against deferred tax assets, with the company maintaining a valuation allowance of **$223.8 million** due to a three-year cumulative loss, which significantly reduces the corresponding payable to founding members under the Tax Receivable Agreement (TRA)[309](index=309&type=chunk)[310](index=310&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its variable-rate debt, which constituted **43%** of total borrowings at year-end 2021 - The company is exposed to interest rate risk on its variable-rate debt, which constituted **43% of total borrowings** at year-end 2021[301](index=301&type=chunk) - A hypothetical **100 basis point (1%) change** in market interest rates would increase or decrease annual cash interest expense by approximately **$4.8 million** based on the debt levels outstanding at December 30, 2021[314](index=314&type=chunk) [Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for fiscal years 2021 and 2020, highlighting a **$48.7 million** net loss, a **$383.5 million** total deficit, and **$95.2 million** net cash outflow from operations [Consolidated Balance Sheets](index=58&type=section&id=Consolidated%20Balance%20Sheets) As of December 30, 2021, total assets were **$817.4 million**, total liabilities **$1,200.9 million**, and a total stockholders' deficit of **$383.5 million** Consolidated Balance Sheet Summary (in millions) | | Dec 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $101.2 | $180.3 | | Receivables, net | $53.0 | $16.2 | | Intangible assets, net | $606.3 | $627.8 | | **Total Assets** | **$817.4** | **$886.2** | | **Liabilities & Equity** | | | | Long-term debt, net | $1,094.3 | $1,049.6 | | Payable to founding members under TRA | $16.4 | $33.5 | | **Total Liabilities** | **$1,200.9** | **$1,154.8** | | **Total Equity/(Deficit)** | **$(383.5)** | **$(268.6)** | [Consolidated Statements of Income](index=59&type=section&id=Consolidated%20Statements%20of%20Income) Fiscal 2021 revenue reached **$114.6 million**, but **$183.2 million** in operating expenses resulted in a **$68.6 million** operating loss and a **$48.7 million** net loss attributable to NCM, Inc Consolidated Statement of Income Summary (in millions) | | Year Ended Dec 30, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Revenue | $114.6 | $90.4 | | Operating Loss | $(68.6) | $(61.0) | | Net Loss Attributable to NCM, Inc. | $(48.7) | $(65.4) | | Net Loss Per Share (Basic & Diluted) | $(0.61) | $(0.84) | [Consolidated Statements of Cash Flows](index=61&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Fiscal 2021 saw **$95.2 million** net cash used in operating activities, a reversal from 2020, with overall cash and cash equivalents decreasing by **$79.1 million** Consolidated Cash Flow Summary (in millions) | | Year Ended Dec 30, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(95.2) | $55.3 | | Net cash (used in) provided by investing activities | $(5.4) | $15.6 | | Net cash provided by financing activities | $21.5 | $53.5 | | **Change in Cash and Cash Equivalents** | **$(79.1)** | **$124.4** | [Notes to Consolidated Financial Statements](index=63&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and balances, covering revenue recognition, intangible assets, income taxes, related-party transactions, debt, and commitments - **Note 2 (Revenue):** Revenue is disaggregated by customer type: National/regional, Local, and Founding Member beverage revenue, with a provision for potential "make-goods" (undelivered ad impressions) of **$2.4 million** at year-end 2021[396](index=396&type=chunk)[399](index=399&type=chunk) - **Note 5 (Intangible Assets):** The company's intangible assets, primarily related to ESAs with founding members, had a net book value of **$606.3 million**, with no impairment charges recorded in 2021 despite triggering events due to adverse macroeconomic trends[408](index=408&type=chunk)[409](index=409&type=chunk)[412](index=412&type=chunk) - **Note 10 (Borrowings):** Total outstanding debt was **$1.108 billion** as of Dec 30, 2021, with the company securing amendments to its credit agreement to waive non-compliance with financial covenants and provide liquidity, and entering a new **$50 million** revolving credit agreement subsequent to year-end[449](index=449&type=chunk)[451](index=451&type=chunk)[452](index=452&type=chunk) - **Note 13 (Commitments):** The ESAs and affiliate agreements are considered short-term leases under ASC 842, exempting them from balance sheet recognition as ROU assets/liabilities, and the company has minimum revenue guarantees to network affiliates of up to **$126.3 million** over the agreements' remaining terms[485](index=485&type=chunk)[489](index=489&type=chunk) - **Note 16 (Subsequent Events):** In January 2022, the company further amended its credit agreement, extending the covenant waiver holiday through **Q4 2022**, and in March 2022, declared a quarterly cash dividend of **$0.05 per share**[504](index=504&type=chunk)[508](index=508&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=88&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable, indicating no changes in or disagreements with the company's accountants - Not applicable[509](index=509&type=chunk) [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 30, 2021, with no material changes identified - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of **December 30, 2021**[511](index=511&type=chunk) - Management concluded that the Company's internal control over financial reporting was effective as of **December 30, 2021**, based on the COSO framework[512](index=512&type=chunk) - The company's independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[514](index=514&type=chunk)[518](index=518&type=chunk) [Other Information](index=90&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[525](index=525&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=90&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the Company's 2022 Proxy Statement[528](index=528&type=chunk) [Executive Compensation](index=90&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive and director compensation is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[530](index=530&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership by beneficial owners and management, and equity compensation plans, is incorporated by reference from the 2022 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[531](index=531&type=chunk)[532](index=532&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=90&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[533](index=533&type=chunk)[534](index=534&type=chunk) [Principal Accounting Fees and Services](index=90&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on fees paid to independent auditors for accounting and other services is incorporated by reference from the company's 2022 Proxy Statement - Information required by this item is incorporated by reference from the Proxy Statement[535](index=535&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=91&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section indexes all exhibits filed with the Form 10-K, including corporate governance documents, material contracts, and certifications, referencing financial statements and schedules - This item refers to the Index to Financial Statements on page **55** and the Exhibit Index beginning on page **92** of the report[537](index=537&type=chunk) [Form 10-K Summary](index=96&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company's filing - Not applicable[544](index=544&type=chunk)

Financial Data and Key Metrics Changes - The third quarter revenue was $31.7 million, up 428% compared to Q3 2020 and up 126% sequentially from Q2 2021, but still below the $110.5 million in Q3 2019 [47] - Adjusted OIBDA for Q3 was negative $8.2 million, an improvement from negative $11.2 million in Q3 2020 and a $10.5 million improvement from Q2 2021 [49] - The average cash burn rate for Q3 was approximately $11.2 million per month, an 18.2% improvement from $13.7 million in Q2 [51] Business Line Data and Key Metrics Changes - National CPMs increased low-single digits compared to Q3 2020 and mid-single digits compared to Q2 2021 [44] - National utilization rates were up 831 basis points compared to Q3 2020 and up 2.3 times compared to Q2 2021 [45] - Local cinema ad sales faced challenges due to COVID-related economic supply chain and staffing issues, but government, education, and healthcare categories were less impacted [22][23] Market Data and Key Metrics Changes - The attendance for Q3 2021 was nearly 15 times that of the prior year and 1.5 times that of the prior quarter, trending back towards pre-pandemic levels [43] - The fourth quarter is expected to see a significant increase in revenue, with a forecast of $9 million to $12 million for the quarter compared to over $33 million in Q4 2020 [67] Company Strategy and Development Direction - The company is focusing on diversifying its business and driving cinema advertising revenue growth as theater attendance trends towards historical levels [7] - A new cinema advertising management system was launched to enhance consumer analytics and improve sales efficiency [24][25] - The company aims to become a premier source of movie-related consumer data and analytics, enhancing its competitive position against TV and digital platforms [28][29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the cinema business, citing strong box office results and increased advertiser demand [17][34] - The company expects to achieve positive adjusted OIBDA in Q4 2021, marking the first quarter of positive adjusted OIBDA since Q1 2020 [52][69] - There is confidence in capturing additional video advertising market share as TV ratings decline, making the young audience more attractive to advertisers [111] Other Important Information - The company has a current cash balance of $66.9 million, with total liquidity of approximately $73.7 million, which is in compliance with liquidity covenants [60] - A quarterly cash dividend of $0.05 per share was authorized, resulting in a current yield of 5.2% based on the closing share price [63] Q&A Session Summary Question: What is the main reason for advertisers not closing deals? - Management noted that there is no significant issue with the advertising platform, but the auto business is affected by chip shortages [73] Question: How is the pricing for Platinum Spots? - Platinum pricing is currently higher than pre-pandemic levels, and it will continue to be part of both scatter and upfront sales [77] Question: What is the correlation between theater access fees and ad revenue? - Theater access fees are paid monthly and are correlated to attendance, but advertising commitments are often made months in advance, leading to a lag [84][85] Question: How is the upfront ad sales positioned? - The company is seeing high demand for reaching the 18 to 34-year-old demographic, which is valuable due to the lack of availability in traditional media [90][91] Question: Are new ad categories like gaming affecting demand? - New categories such as gaming and e-gaming are entering the market, contributing to ad demand and pricing [94][95]