National CineMedia(NCMI) - 2024 Q4 - Annual Report

Company Overview - National CineMedia (NCM) is the largest cinema advertising platform in the US, with over 18,000 screens in more than 1,400 theaters across 196 Designated Market Areas (DMAs) [22]. - NCM generates revenue primarily from advertising through The Noovie® Show and strategically-placed screens in theater lobbies, extending reach via NCM Boost across various digital and out-of-home venues [23]. Bankruptcy and Restructuring - NCM LLC emerged from Chapter 11 bankruptcy on August 7, 2023, after a restructuring plan was confirmed, allowing it to reconsolidate into NCM, Inc.'s financial statements [35]. - The company made a capital contribution of $15.0 million to NCM LLC as part of the restructuring support agreement [32]. - Following the emergence from bankruptcy, NCM, Inc. retained approximately 13.8$15.0 million, with $14.5 million contributed by NCM LLC and$0.5 million from NCM, Inc. [38]. - As of December 26, 2024, NCM LLC held a total of $3.0 million within escrow accounts for finalizing unsecured creditors' claims [37]. - The restructuring plan included the issuance of new common membership units to secured debt claim holders, allowing them to exchange units for shares of NCM, Inc.'s common stock [38]. - The company emerged from bankruptcy on August 7, 2023, which required significant management focus on negotiations rather than business operations [131]. - The ongoing litigation with AMC and Cinemark regarding the confirmation of the bankruptcy plan could impact future cooperation under the ESAs [130]. Financial Performance - The company executed a one-for-ten reverse stock split on August 3, 2023, reducing outstanding shares from 174,112,385 to 17,411,323, and later to 13,343,065 after share cancellations [40]. - A stock repurchase program was approved on March 18, 2024, allowing the company to repurchase up to$100 million of its common stock over three years, with 2,524,991 shares repurchased in the year ended December 26, 2024 [41]. - The company entered into a $45 million senior secured revolving credit facility on January 24, 2025, maturing on January 24, 2028, which is expected to reduce overall interest expenses [42]. - The company's revenue is seasonal, with the first quarter typically generating 15.5% of total revenue for FY 2024, compared to 35.8% in the fourth quarter [86]. - The company reported that 62.0% of its audience in 2023 was between the ages of 12-34, with a median age of 30, highlighting its appeal to younger demographics [95]. - The cinema advertising business derived 78.1% of its revenue from national clients and 16.2% from regional and local advertisers for the year ended December 26, 2024 [54]. - Exclusive contractual relationships accounted for approximately 19.0% and 28.4% of total revenue for the years ended December 26, 2024, and December 28, 2023, respectively [101]. - NCM LLC's Adjusted OIBDA margin was 20.3% for the year ended December 28, 2023, but decreased to (69.6)% in 2024 due to various operational impacts [102]. - The average annual attendance per screen in the network was 21,674 in 2024 [97]. - The company generates a significant portion of its revenue from a small number of large advertisers, with one agency accounting for over 14.7% of the gross outstanding receivable balance as of December 26, 2024 [165]. Advertising Strategies and Innovations - In 2024, the company launched several specialty content platforms targeting diverse audiences, including sustainability and sports, to attract higher disposable income demographics [47]. - The company launched programmatic and self-serve advertising marketplaces in 2024, allowing real-time data-driven trading and enabling local businesses to manage their own ad purchases [55]. - NCMx™, the company's data analytics platform, had over 824.4 million unique data records as of December 26, 2024, providing advertisers with extensive insights into moviegoer behavior [62]. - In 2024, the company launched NCM Boost, enhancing cinema advertising campaigns by extending reach beyond the big screen, allowing for precise targeting of moviegoers using first-, second-, and third-party data [63]. - The NCM Boomerang retargeting solution was introduced in 2024, enabling advertisers to reconnect with moviegoers three hours after their theater experience, maximizing campaign impact [64]. - The company's Digital Out-of-Home (DOOH) group sold media inventory on a national, regional, local, and programmatic level in 2024, expanding advertising reach beyond theaters [74]. - The Noovie Show's Post-Showtime Inventory is utilized by 65.0% of network affiliates, enhancing advertising opportunities [105]. - The company aims to expand its affiliate network and strengthen relationships with exhibitors to increase revenue and market reach [106]. Market Challenges and Risks - The company experienced significant impacts on theater attendance due to production delays from writers' and actors' strikes in 2023, which are expected to affect attendance throughout 2024 [120]. - Future pandemics or health-related incidents could lead to public safety restrictions that negatively impact attendance and advertising revenue [121]. - The company faces risks related to the enforceability of non-competition provisions in its ESAs, which could allow competitors to enter the market [133]. - Changes in consumer behavior, such as increased online ticket purchases, may reduce the number of patrons present to view advertising content [129]. - Regal announced plans to optimize the number of theaters it operates, which may reduce advertising impressions and revenue if theaters are closed or liquidated [138]. - The competitive advertising market includes significant competition from digital platforms, which may affect NCM's market position and revenue [153]. - Changes in the number and mix of films shown in theaters could lead to reduced advertising spending if the audience does not match advertisers' target demographics [155]. - Economic uncertainty and a decline in consumer spending in the U.S. may adversely impact demand for the company's services and delay payments from advertising clients [160]. Technology and Cybersecurity - The company implemented a new cinema advertising management system in early 2021, which replaced many internally developed systems and aims to optimize delivery, inventory management, and revenue recognition [157]. - The company maintains a cybersecurity management program, regularly updated to address identified risks and threats [198]. - The company has established a cybersecurity incident response plan to manage potential incidents, requiring notification to a response team for risk assessment and appropriate action [200]. - The Audit Committee oversees the company's cybersecurity program, receiving updates quarterly on risk management effectiveness and identified threats [202]. - The Chief Information Officer, with over 30 years of experience, leads the cybersecurity team and reports to the Audit Committee on incident prevention and mitigation efforts [203]. Corporate Governance and Shareholder Relations - The company is a holding entity with no independent operations, relying on distributions from NCM LLC to meet obligations [179]. - The declaration of future dividends will depend on NCM LLC's financial condition and results of operations [179]. - The company's bylaws contain anti-takeover provisions that may impede strategic transactions beneficial to stockholders [188]. - The management discussion includes forward-looking statements regarding financial conditions and results of operations for fiscal 2024 compared to fiscal 2023 [220].