National Cinemedia Inc (NCMI) 2016 Q1 法說會逐字稿

Greetings and welcome to the National CineMedia, Inc. First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I'd now like to turn the conference over to your host, Mr. David Oddo, Senior Vice President, Finance. Thank you. Mr. Oddo, you may begin.

Good afternoon. I'd like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended.

All statements other than the statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the Company's expectations are disclosed in the risk factors contained in the Company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors.

Further, our discussion today includes some non-GAAP measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP-basis measurement. These reconciliations can be found at the end of today's earnings release which may be found on the Investor page of our website at www.ncm.com.

Now, I'll turn the call over to Andy England, CEO of National CineMedia.

Thanks, David. Good afternoon, everyone. Welcome and thanks for joining us for our first quarter 2016 earnings call. Before I begin, I'd like to join all of the movie fans out there and wishing you a happy Star Wars day, May the Force Be With You.

During this call, I will spend a few minutes highlighting the Company's first quarter results, progress against that 2016 business plan and what I have learned during my first four months with National CineMedia. David will then provide a more detailed discussion of the financial performance for Q1 and provide guidance for Q2 and full year 2016. And then, as always, we will open the line for questions.

I'm pleased that we were able to deliver a solid performance overall in the first quarter exceeding the top end of our revenue guidance and achieving the top end of adjusted OIBDA guidance, especially as we were up against a record Q1 2015 comparison. While both the national and local and regional advertising businesses benefited from a few late-breaking deals, the revenues for each of these businesses remained relatively flat versus a record Q1 2015 and beverage revenue decreased 5% as expected.

Q1 national revenue decreased slightly less than 1% reflecting a greater percentage of upfront commitments, including content partner commitments allocated to the second half of 2016 versus comparable upfront commitment allocations in 2015. This lower upfront allocation to the first quarter was nearly offset by an increase in scatter revenue and an 8% increase in CPMs versus Q1 2015.

The box office continued to show strength well into the first quarter of 2016 with help from Star Wars: The Force Awakens' carryover, the surprising strength of Deadpool and Cinetopia and Batman v Superman to finish up the quarter. Such popular film product which the studios continue to spread throughout the year, gives our network a stable and desirable impression base with a consistent reach and millennial audience that advertisers value speaking of which our Q1 network attendance grew nearly 7% versus Q1 of 2015. That's over 97% of that Q4 2015 network attendance and 105% of that Q3 2015 network attendance proving that our network provides advertisers with tremendous reach all year long.

National CineMedia's presence during the main broadcast week at the May upfronts in New York continues to establish our Company as a serious competitor in the video advertising marketplace and this year should be no different as we will hold our fifth annual upfront presentation on May 18.

As usual, our national sales forces has held hundreds of upfront meetings with the advertising clients well in advance of the event itself and will continue to work with advertising decision makers during the commitment process to follow.

The success of our upfront strategy to-date has allowed us to be a more central and timely part of these annual discussions with marketers allowing them to evaluate a highly engaging video advertising networks unique place in an increasingly fragmented media landscape. As the media landscape evolves, a major challenge for mass marketers is reach and NCM can offer that reach, particularly with millennials. Because of that we continue to attract new major national brands to the big screen and I'm happy to say that we continue to expand and diversify our national client base during the first quarter, adding 17 new national clients in 13 different industries including apparel, beer, cable TV, computer hardware, financial products, home products, hotels and resorts, Internet sites, movie studios, personal care, prepared foods, restaurants and tourism. These new additions to our client roster and changes in that category mix means greater diversification of our national client base, which of course is good for the overall health of that business.

As a part of this strategy we are creatively seeking out unique ways to acquaint new clients with our medium. As discussed on our last call, National CineMedia was recently appointed as the official United States representative of the Cannes Lions Festivals managing the Young Lions Competitions. This partnership provides us with a unique opportunity to build relationships with potential clients through our support of both the American and global advertising creative communities.

Moving on from national to the local and regional advertising portion of our business, this team posted yet another first-quarter record for the fourth year in a row. Our first quarter local and regional revenue grew slightly versus Q1 2015, but what's noteworthy is that we were able to grow this revenue with fewer larger value contracts, reflecting the continued expansion and diversification of our local and regional client base.

The box office buzz surrounding the first quarter films certainly helped drive interest in our local and regional video advertising product as advertisers were able to quickly take advantage of box office strength of our Turbo process which enables them to get their ads on screen in as little as 24 hours of contract. We are also seeing the benefits of having field sales positions for the expansion of our local and regional sales force that began last year.

As you may recall, we recently entered the national spot TV advertising market place for the first time through our partnership with STRATA, a leader in media buying and selling software that allows its extensive client base of agencies to now buy select NCM inventory through that system.

So far in 2016, we have already submitted a meaningful number of proposals to buyers and have already begun to book regional deals with incremental first time NCM advertisers through STRATA.

Lastly, as we move through another political year in which brands may be forced out of TV due to tight inventory, preemptions or a desire to stay away from negative political ads, I'm proud to say that the National CineMedia network will remain a politics-free zone throughout the rest of 2016. It has always been a popular selling point for our team and has created increased opportunities for our local and regional business by allowing them to help advertisers to reach their customers in a positive and highly engaging entertainment environment.

Consistent with the growth of the overall online and mobile advertising marketplace, we experienced very strong Q1 online and mobile revenue growth of 42% versus Q1 of 2015. While it still remains a small part of our total advertising revenue, our strategy of packaging our in-theater inventory with our online and mobile inventory through our Cinema Accelerator product is important as it gives marketers a unique way to reach our movie-going audiences before, during and after the movie and connects the dots of the movie-going experience to create a more cohesive cinema marketing plan.

The ongoing expansion and improvement of our NCM network continue to enhance our competitive positioning as a portion of the Texas-based Santikos Theatres' affiliate screens joined us during the first quarter with the remaining screens to be connected during the second quarter. At the end of Q1, we had nearly 20,400 network screens, an increase of 1.5% versus Q1 of 2015 and coverage in 187 of the 210 TV DMAs. All of our network screens utilize digital projectors and our FirstLook pre-show is delivered to approximately 98% of our network attendance over a digital distribution network.

One of the key strengths of our network continues to be the stable impression base provided by our exhibitor partners and by the world-class movie studio content created for their theaters. While our current network provides strong national coverage, a focus on the expansion of our overall impression base and improved geographic coverage will allow us to compete more effectively with traditional and emerging video networks.

In addition to Santikos Theatres joining our network this year, we continue to look for opportunities to sign more affiliates and I remain confident that National CineMedia will continue to be the best advertising solution for them.

It's also important to remember that when our founding members acquired theater circuits, such as AMC's acquisition of our Starplex affiliate last December, the acquired theaters immediately become part of the higher margin founding member fee structure and related long-term contracts, unless the acquired theater circuit is under contract with another advertising provider.

While the Starplex theaters became part of our network, immediately there were 223 additional screens with approximately 8 million annual attendees acquired by our founding members in 2013 that will join our network in November 2018 once their contract with another advertising provider expires. Until then the founding members will continue to make integration payments to NCM LLC for these screens.

Additionally while we can't comment on any of the potential outcomes or implications to NCM of the planned acquisition of Carmike by AMC should the transaction close and contracts with AMC will govern how NCM LLC common units are issued and the nature of any required payments.

And last but certainly not least, as you know we began increasing capital investment spending in 2015 to accelerate the timeline to complete the upgrade of our sales proposal and inventory management systems, as well as the development of new audience targeting systems and data management platforms. The integration of these improved systems with our digital distribution network will now for the further shortening of campaign lead times and provide more targeted and efficient campaigns with detailed reporting declines. We're especially excited about our new data management platform which we will be talking about in more detail during our upfront presentation. We are also encouraged by early results from our beacon network that we currently have installed in approximately 115 of our network theatres. First party cinema audience data combined with a host of additional second and third party data sources in our new DMP will allow us to provide marketers with the expanded audience targeting and data analytics capabilities that are a necessity in today's competitive video advertising marketplace.

During my first four months at National CineMedia, I've been focused on successfully transitioning the business and getting to know many of our employees, advertising clients, theatre circuit partners, investors and analysts. I recently attended my first CinemaCon industry conference in Las Vegas, which was a great opportunity to talk with many of our studio and circuit partners and I'm excited about the upcoming film slate and what the next year will bring. All of this has reinforced that we have a strong, core cinema advertising business and has helped me think about how to move that business forward. As we forge ahead our NCM team will focus on strategies that strengthen our core business while actively working on adjacent opportunities.

Before I turn the call over to David, I want to thank our National CineMedia employees, along with our stockholders for their continued support. One thing is clear, given the ongoing fragmentation in the local video advertising marketplace and building skepticism about the efficacy of many online and mobile platforms, NCM is in a unique position. A combination of broad national millennial reach, reliable and high impact of viewable impressions and engaged audience and high quality event programing positions us very well for the future.

Now I will turn the call over to David to give you some more details concerning our Q1 operating performance and more specific color that supports our Q2 and 2016 guidance.

Thanks, Andy. For the first quarter, our total revenue decreased 0.9% versus Q1 2015, driven by a 5.3% or $400,000 decrease in beverage revenue and a 0.8% decrease in national advertising revenue, partially offset by a 0.5% increase in local advertising revenue. Total Q1 adjusted OIBDA decreased 13.4% and adjusted OIBDA margin decreased to 31.5% from 36.0% versus Q1 2015 reflecting the decrease in 100% margin beverage revenue, increases in theater access fees related to higher founding member attendance and contracted increases in digital screen fees and higher selling and marketing costs related to the timing and focus on certain marketing and research initiatives.

We also recorded $100,000 of AMC Rave and Cinemark Rave integration payments for the first quarter versus $300,000 in Q1 2015. You should note that these integration payments are added to adjusted OIBDA for debt compliance purposes, but are not included in our reported revenue and adjusted OIBDA as they are recorded as a reduction to net intangible assets on our balance sheet. We continue to expect to record approximately $3 million of these integration payments from our founding members during 2016.

Our Q1 2016 advertising revenue mix was 66% national, 25% local and 9% beverage versus Q1 2015 that was 66%, 24% and 10% respectively. The Q1 national ad revenue that decreased 0.8% versus Q1 2015 was primarily driven by a 13.4% decrease in impressions sold, partially offset by a 7.7% increase in CPMs versus Q1 2015. The decrease in impressions sold was driven by a decrease in inventory utilization to 81.3% from a record 99.9% in Q1 2015 due to a greater percentage of upfront commitments, including content partner commitments allocated to the second half of 2016 versus comparable upfront commitment allocations in 2015. This decrease in inventory utilization rate was partially offset by a 6.8% increase in network attendance that benefited from the strong Q1 2016 box office.

Our quarter-end make-good balance decreased to $1.8 million from $3.4 million at the end of 2015. The Q1 local and regional ad revenue that increased 0.5% was primarily driven by an 8.6% increase in total contract volume, but nearly offset by an 8.5% decrease in average contract value versus Q1 2015.

The increase in total contract volume was due to the expansion of our sales force and diversification of our client base and the decrease in average contract value was driven by lower average contract value for contracts above $10,000. The Q1 beverage revenue that decreased 5.3% or $400,000 versus Q1 2015 was driven by a decrease of $1.5 million related to the 32nd decrease in time by one of our founding members that began July 1, 2015, partially offset by the 5.7% increase in beverage CPMs for 2016 and the 8.9% increase in founding member attendance versus Q1 2015.

Looking briefly at diluted earnings per share, for the first quarter we reported a GAAP diluted EPS loss of $0.07 versus a loss of $0.15 in Q1 2015. Excluding terminated merger costs and amortization of terminated derivatives recorded in Q1 2015 and CEO transition cost recorded in Q1 2016, diluted EPS loss would have been $0.05 versus EPS of $0.01 in Q1 2015. Our capital expenditures were $4 million for the first quarter compared to $2.1 million for Q1 2015. As previously discussed, we continue to accelerate the development of our inventory management systems and audience-targeting platforms to more effectively compete in the video advertising marketplace. And we continue to estimate that our full year 2016 capital expenditures will be in the $14 million to $15 million range or just 3% of our total revenue guidance for the full year.

Moving on to our balance sheet, our total debt outstanding at NCM LLC at the end of Q1 2016 was $955 million versus $938 million at the end of Q1 2015. This increase was due to the timing of available cash distributions and receivables related to higher Q4 2015 revenue versus Q4 2014. As discussed on our previous earnings calls, our revolver balances will decrease by $25.5 million when the remaining merger-related expenses are reimbursed through a reduction in available cash distributions in the third quarter of 2016 as required by our NCM LLC operating agreement.

Our average interest rate on all debt was approximately 5.3% at the end of Q1 including our $270 million floating rate term loan bank debt and revolver credit facility that had a rate of approximately 2.7%. Excluding revolver balances, 69% of our total debt outstanding at the end of Q1 2016 had a fixed interest rate. Our consolidated cash and investment balances as of Q1 2016 decreased by approximately $4 million to $74 million from the end of Q1 2015, with $69 million of this balance at NCM Inc.

Excluding tax reserves and after the payment of the recently announced $0.22 per share dividend to be paid on June 2, 2016, we would be able to pay our current dividend per share for over four additional quarters even if no cash were distributed up to NCM Inc. from NCM LLC. Our annual dividend yield is currently 6.1% based on today's closing share price of $14.34.

Our pro forma net senior secured leverage at NCM LLC as of the end of Q1 2016 was approximately 3.4 times trailing fourth quarter adjusted OIBDA, which is well below our senior secured leverage maintenance covenant of 6.5 times. You should also note that while we have no NCM LLC total leverage covenant, our total leverage at NCM LLC net of NCM LLC cash balances was approximately 4.3 times at the end of Q1 2016 versus 4.6 times at the end of Q1 2015.

Turning to our guidance, for the second quarter, we expect total revenue to be in the range of $111 million to $118 million and adjusted OIBDA to be in the range of $56 million to $63 million versus a tough comp that posted record results with Q2 revenue and adjusted OIBDA in 2015 that grew 22% and 30% respectively versus Q2 2014. These Q2 ranges project a mid-single digit to low double-digit decline in national advertising revenue versus Q2 2015, driven by meaningful shifts in upfront commitments, primarily [must spend] content partner commitments to the second half of the year and mostly falling in the fourth quarter.

We also built in some downside protections should our Q2 make-good be higher than historical averages. Our local and regional advertising revenue remained strong and is expected to increase mid to high single digits in the second quarter, while our beverage revenue is projected to decline low double digits, due primarily to the decrease in time by one of our founding members, partially offset by the beverage CPM increase for 2016.

For the full year 2016 we continue to expect total revenue to be in the range of $463 million to $473 million or an increase of 4% to 6% versus 2015 and adjusted OIBDA to be in the range of $238 million to $248 million or an increase of 4% to 8% versus 2015. As noted on our last earnings call, we had expected our 2016 national revenue to be weighted towards the second half of 2016 due to the allocation of upfront commitments. Having said that, our proposal activity remains healthy and while it's still early we are currently pacing as expected for the second half of the year.

That concludes our prepared remarks and we'll now open up the line for questions.

Thank you, David. Ladies and gentlemen, at this time we'll be conducting a question-and-answer session. (Operator Instructions) Eric Wold, B. Riley.

Couple of questions. I guess first one, David, you mentioned in the opening comments about an inability to comment on the AMC, Carmike acquisition and its impact. I think there is some confusion out there in terms of what the impact would be on the P&L. [I wonder if you guys just try and give] a broad brush in terms of shares to be issued, integration payment you think and what may be the net impact to the bottom line would be?

Yes, I'll just talk top level there. I'll let everyone out there make their assumptions on the number of attendees and point out to some public sort of calculations that are out there. One is the common unit adjustment calculation. And that's disclosed on 8-K at least once annually. So I would just point people in that direction if they want to assume attendees and other assumptions to run through that pretty simple calculation. And so whatever that calculation spits out the number of units that we would have to issue, the idea when we issue units to a founding member that buys a circuit that's still under contract with another advertising providers the way that works is, we will issue the units, but we have to be made whole through what we call integration payments.

And so there is another calculation in our documents, in our operating agreement and ESAs that talk about how you calculate that fee.

Having said that, the intent is to make it a neutral transaction where if we issue units, then we get paid back somewhere near the adjusted OIBDA per attendee that we would have earned on those attendees if we were able to sell them. So I'll leave it at that and sort of point to the calculations out there.

If I could just add to that, our point there really is that we don't know what's going to happen with that proposed deal. But what we would do is encourage analysts to ask questions of AMC, Carmike -- AMC or Carmike on whether it will close, when it will close, what the deal is likely to look like when it closes, et cetera. And so what we want to do is avoid speculation on our part that's essentially ill informed as to whether or not that deal will close and in what form.

That's helpful, both of you. And then I guess one follow-up, as you move towards the upfront in a few weeks in a couple of weeks, how quickly can you start kind of thinking about our offering broader campaigns to the advertisers that include not just the pre-show but a more Lobby presence, user concession packaging, all of that, is that something you could see at the upfront now? And then as that maybe becomes a broader part of campaigns, how do you think about the value of those impressions relative to other pre-show?

Here is what I was saying about that. I think we are going to focus on three areas during the upfront and I'm a strong believer in telling them what you are going to tell them, telling them and telling what you tell them. And what we're going to talk about is we're going to talk about a tremendous millennial reach, we're going to talk about fabulous content and we're going to talk about data.

So in terms of the pre-show, it's going to be around, what we call, CATO which is a data enhanced, if you like, pre-show advertising offering, which really helps the advertiser better understand the audience and target by genre et cetera. But we'll also be talking about Cinema Accelerator which is our digital offering that layers on top of that. So data will be a really important part of the offering and we certainly want to sell Cinema Accelerator as part of that offering.

I think when it comes to the Lobby I think as we look at our Lobby offering that is a business that is a good business for us, but it's been in a little bit of decline, I think, frankly because it feels a bit like same old same old. So, that's certainly something we'll be thinking about over the coming months as to how we might make the Lobby more interesting. But it's certainly obviously available to advertisers, but won't be a focus of our upfront presentation.

Alexia Quadrani, JPMorgan.

This is Julia Yue on for Alexia. With a much stronger than expected box office in the first quarter and year-to-date as films increasingly being staged out better through the year as you mentioned, do you think the advertisers might change their perception of Q1 as perhaps a lower demand period and instead allocate a greater portion of their budget there? And going forward, do you think that this could be an area of potential opportunities for you guys?

Thank you for the question there and it's a great question because I had the same one coming in. You'll note that the attendance in Q1 of 2016 was almost that of the attendance in Q4 of 2015 and then it won't be lost on you that we do a much better job of monetizing the fourth quarter than we do the first quarter. And as I look at that, I think there are frankly a number of reasons. I think one is just habit. I think for whatever reason we and perhaps the studios have trained advertisers to expect the greatest tent-pole movies in the summer and in the holidays. So cinema is not top of mind during the first quarter for advertisers, even though it clearly is for consumers. So I think we have some retraining, frankly, to do of both ourselves and advertisers around the first quarter of the year.

I think there are probably some other factors that play into it. But I think, that's probably the largest thing that we really need to sort of -- you could certainly argue competition actually. When you look at some of the other things that we compete with for first quarter dollars I think whether it's the NFL playoffs or March Madness or the Grammys or the Oscars, there are certainly other places where our more experiential higher CPM advertisers like to go during that time period. So that's certainly a second factor, but fundamentally, I agree with you that it feels like we should be able to do better in the first quarter.

Barton Crockett, FBR Capital Markets.

Thanks for taking the question. Andy, I guess a couple of things around the ad environment. One is, just stepping back very big picture, it seems like the secular story around TV and advertisers looking for things outside of TV is really different now than it was last year heading into your upfront. Last year, TV was on its heels, the story was that advertisers are looking for ways to reach audiences outside of TV and that was seen as a great backdrop for theater which could pick up some of the money moving out of TV. Now the TV networks are into the returning cycle, they are reporting great advertising growth, they are talking about money coming back into TV. And I was just wondering what do you see in terms of the demand for theater advertising? Is the moving of money out of TV and the theater, has it weakened at all as TV is going to be getting stronger heading into this upfront?

Well, thank you Barton, that's a good question. It's certainly our belief that we're very well positioned in the long term. And I think, to your point, what the atmosphere is like for the big TV media companies during any given upfront season is going to vary from year to year but there's certainly a longer-term trend there that they, I'm sure, are very concerned about. That's why when we look at a competitive situation in the marketplace, candidly, that's why we're focused on millennials, content and data. We're focused on millennials because that millennial reach is extraordinary and the average age of that consumer is so much younger than the TV guy. So we have a very valuable millennial audience.

We're focused on content because first-run movies are the best content and video without question. And thirdly, we are upping our game in data to make sure the very least we're as good as anybody else in data and hopefully better. So we believe that relative to TV we're in a very advantaged long-term strategic position. That positioning on a year-by-year basis or on a quarter-by-quarter basis may vary, but over the long-term we believe that's a powerful argument that's going to prevail.

Okay. And then if I could get a little bit more kind of near term and one of the things that you guys are saying is that scatter CPM pricing is at a big premium right now to the upfront pricing you got last year which makes them encouraged about [I think owning] this upfront. Just wondering if you could talk about what you see at NCM in terms of the scatter premium to upfront and what type of backdrop that could create for pricing going into the upfront for you?

The upfront versus scatter game and I mean game in the sense of game theory, if you like, is an important one, right. I think one of the things that's driven the strength of scatter is frankly that I think the big TV networks sold a lot of inventory in upfront last year and left themselves in a situation when after there was under delivery and they had to deliver a lot of make goods, they left themselves in a very tight scatter situation that's led to some substantial scatter premiums. And so, if you're an advertiser, looking at those substantial scatter premiums you probably are going to be more aggressive in buying in the upfront.

So these things have an odd way of playing out and obviously the game theory part of it is how much do you want to sell in upfront based on the opportunities you have and how much do you want to hold back for scatter based on your beliefs about the scatter market. And I think in general the smart way to play this is to hedge to try and don't be greedy but try and make sure you lock in a good amount while making sure that you've got some upside left in scatter. And I think, every media player whose in the upfront is going to play that a little differently based on their perceptions.

Okay. Can you tell us a little about how you guys are playing it or not willing at this point?

Well, exactly that and to be honest with you Barton, I think, we don't have a number in mind and as discussed on the previous call, we don't plan to talk about a percentage going forward on upfront because we could debate whether 60% or 80% or somewhere in the middle is the right number. It entirely depends and we're going to use our best judgment as to -- when we get into the upfront as to where we want to match out, based on where the demand is and where we believe scatter will play out. And I'd just say that we'll use our best judgment on the time and we'll see how it plays out for us.

James Dix, Wedbush Securities.

I had three, I guess the first would be as you look at your second quarter outlook, is it much different than what you expected when you first gave guidance for the year, given the allocations of content and partner and other things that have changed?

And then the second would be, is there any statistics to give or description you could give of where you stand in terms of business which is on the books for the year as a midpoint of your scatter budget now versus this time last year? And then I've just one follow-up concerning audience metrics.

Yes, James, I would say that our original thoughts on Q2 back at when we gave full-year guidance are a little bit less than we expected. There were some additional shifts out of the quarter. As you know, we've got these must spend content partner commitments and they allocate based on their marketing needs throughout the year and we're generally pretty accommodating if they need to move some of their spending and for whatever reason the stars aligned and they've got a lot of priorities in the fourth quarter this year. So I would say marginally a little bit less than we had expected, hitting into the second quarter over the last couple of months.

As far as talking about where we're booked percentages, that were booked to budgets and things like that. On the last call we talked about a shift in sort of the -- and how we talk about that. And so we're not going to -- going forward, not talk about sort of percentages where we're booked to in the third quarter or the fourth quarter or scatter or upfront and things like that. Just kind of generally gives you an idea of where our upfronts are falling out and our content partner allocations are falling out and sort of generally where we are versus where we're expected in our bookings. So we're trying to stay clear of just giving actual numbers there.

Okay. Okay, fair enough. I do recall that now. And then I guess just my last one was just I guess on the -- I don't know whether it's the official term of our, the [bugs and seeds] factor you apply to the attendance which is running through your network to determine exactly what audience is seeing a spot at a particular point in the pre-show? Has that factored is changing much over the past few years with any changes that are occurring within the circuits at online ordering or was there a seating or anything else? And do you have any particular assumptions regarding that over the next couple years? Thanks.

Thank you for that, James, let me share a couple of thoughts on that. I think -- overall I think it's fair to say that the circuits, particularly our founder circuits are investing in their theatres in a way that it is making the experience more exciting and more enjoyable for their guests. So I think that always has to be a good thing and that is -- I do believe that's a factor in the ongoing stabilization and health of the industry. So, getting people actually in the movie theaters is just a very good thing that I think is being helped by everything from reserved seating to recliner seats, the in-dining and all the rest.

In terms of when people actually get to their seat in each individual auditorium, we don't have good numbers on that and we have a very mixed data suggesting one way or another whether all of this is helping us. I think, for the most part there is a belief that reserved seating might not be helping us, but there's a lot of sense that when there's a big tent-pole movie people like to get to their seats early anyway just because it's a habit and it's something they're excited about doing.

I think the growth of dining in has to be helping us, frankly, because that's getting close to 5% of our network and when people want to dine in they often want to get start at eating well before the movie such that they're fully settled in for when it actually happens. So there is some mixed stuff playing.

Overall, I think when you're offering that better experience as our founder circuits and our affiliates are doing, I think that's good for the -- good to the business and good for getting people in the theaters, and I think there are mixed factors in terms of when they actually get to their seats.

Okay, great. So would you say it's fair to say that you don't think that timing of arrivals is going to -- that's not having a big impact on your outlook over the next year or two in terms of actual audience deliveries?

I don't think so. I think, obviously there are a lot of different factors that play here. I think to the extent the studios keep turning out great content and movie theaters continue to be places that millennials in particular want to go I think, there's always going to be hustle and bustle and activity there and it's difficult to read in the short or medium term what the impact is going to be.

(Operator Instructions) Jim Goss, Barrington Research.

Following up on James' thoughts about the timing of people getting into the seats, are you getting any empirical evidence in terms of like the local and regional ads, the earlier ones in terms of demand there or pricing that might talk to that issue?

Hey, Jim. That's a good question. I mean, in general, I'd say the answer is no. I think our local and regional business has been healthy. In fact, if you look at it since the IPO, our local and regional business has grown faster than our national business from a CAGR point of view. And we've seen no slowdown in that happening. So our local and regional business is healthy. And as we talked about the addition of working with STRATA to enable spot buying, I think is just going to help our regional and local business. So no, we don't see a correlation at present.

Okay. And has any of the other founding members follow down that 30-second cut in beverage?

No.

Is that that still stable? No. And finally a while back there was a cutback on CPMs to try to stabilize the business and drive in more demand. Are you at a point where you think you might be able to increase CPMs again or at least sort of move in that direction, especially given the high expectations for upfront that may provide some cover in that regard?

Well, it's an interesting question. And I would tell you that I'm somewhat agnostic between if I had to choose between CPMs and the utilization I'm somewhat agnostic. I like -- obviously driving CPMs certainly gives the feeling of a healthy business, but on the other hand, so does the utilization. When you're bringing in more advertisers and expanding your advertiser base, that's a healthy thing too. If you look at that first quarter I believe our CPMs were up 7.7%. So first quarter really was a CPM story. Part of me wishes it has been a utilization story instead, right. So I think it's -- we're some more agnostic between the two, and frankly I care more about the net revenue and OIBDA lines and so I am a little agnostic as to how we get there.

All right. Good point. Thanks very much. That's it.

There are no further questions at this time. I'll turn the call back over to Andy for any closing remarks.

Thank you. Well first quarter is in the books. It's my first quarter as the Chief Executive Officer and as you probably gathered I have been on a learning tour and one in which I've really enjoyed getting to know the team, our affiliates, our founder circuits and many of you. So I look forward to putting that knowledge into practice as we go forward and we're making good progress in developing our strategy first as a leadership team and secondly, in conjunction with our Board and more of our employees. So we're feeling good about our business and about the ideas we have to move forward and we, as ever, appreciate your support. Thanks, very much.

Ladies and gentlemen, this does conclude today's teleconference. We thank you for your time and participation today. You may disconnect your lines at this time and have a wonderful rest of your day.