National Cinemedia Inc (NCMI) 2020 Q4 法說會逐字稿

Greetings, and welcome to the National CineMedia Incorporated, Fourth Quarter 2020 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ted Watson, Senior Vice President of Finance. Thank you, sir. You may begin.

All right. Thank you, Victor. Good afternoon, everyone. I am joined today by our CEO, Tom Lesinski. And I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities and Exchange Act of 1934 as amended. All statements, including our discussion about the future impacts of COVID-19, other than statements of historical facts communicated during this conference call may constitute forward-looking statements.

These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed in the Risk Factors contained in the company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors.

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

Now I'll turn the call over to Tom.

Thank you, Ted, and good afternoon, everyone. Welcome to our fourth quarter and full Year 2020 earnings call. I hope that you're all continuing to stay safe and healthy and that you're as cautiously optimistic as we are about the positive impact of the COVID-19 vaccine rollout. We continue to be confident that once the vaccine rollout achieves critical mass later this spring and early summer, people will flock back to the movies after a year being locked down.

Today, I'll provide a high-level update on steps we've been taking to not only enhance our liquidity position, but also to expand, diversify and improve our business despite the ongoing challenges presented by the COVID-19 pandemic. With our recently announced bank facility amendment, that has provided covenant relief through Q3 2020 and a new $50 million debt facility, which will provide additional liquidity for the company to continue to execute on its growth initiatives, we believe we are very well positioned to weather the waning months of the pandemic.

Ted will provide more detail on how we continue to manage our expenses and our overall liquidity that will allow us to continue to navigate these extraordinary times and to ensure that the company is ready to quickly benefit from the return of movie audiences that will now start in Q2 as new films begin to get released. And then as always, we'll be open for questions.

Looking back on the fourth quarter of 2020, it should come as no surprise that it continues to be a challenging time for our business and the entire out-of-home entertainment and advertising industries. As of the end of December, 60% of our theaters in our national cinema advertising network remained closed due to state and local COVID-19 restrictions, and many continued to operate under reduced operating hours, resulting in significant declines in Q4 network attendance, revenue and adjusted OIBDA that Ted will discuss in more details in a few minutes.

When the global COVID-19 crisis began in March, our business was beginning to grow again, and we had just increased our dividend, and we were in a very strong liquidity position. This financial strength and our highly variable cost structure, combined with the significant cost-cutting measures we instituted shortly after the pandemic began in the U.S. enabled us to not only absorb the impact of COVID-19, but we also made significant progress on our strategic initiatives in 2020 as we expanded our cinema advertising network and took meaningful steps towards diversifying our business into new out-of-home entertainment venues.

Despite this significant decline in our network attendance, several major national clients have remained with us through the pandemic. While this is obviously encouraging, it may also reflect a broader market trend that could be meaningfully beneficial to our business in the future. As consumers have shifted their TV viewing to subscription-based streaming services, there are now less GRPs available on TV, creating a favorable supply and demand economic benefit for NCM. As demonstrated by the recent Super Bowl ratings, even the higher quality sports program may be finding it more difficult to attract our core younger 18- to 49-year-old audience.

Top brands in key categories, including insurance, QSR, digital and streaming services, retail, CPG, gaming, automotive and, I'll call it, beverages have continued to run on screen in our Noovie pre-show in those areas of the country where theaters are still open. It's clear that advertiser demand for cinema continues to be strong. The limiting factor for us is movie audiences. We continue to be confident that one's government-mandated restrictions are lifted and the rollout of the vaccine progresses, the significant cabinet fever that has been building for a year will drive consumers back to the theaters, allowing movie studios to reliant theaters once again to be the primary launching pad for their films.

Since the pandemic began, the studios have delayed the vast majority of theatrical releases. Those films that have opened in streaming services exclusively or day in date with cinema have not benefited from the huge marketing and PR provided by our broad theatrical launch. I'm confident that once the major market theaters reopen and the audiences return, film producers will once again take advantage of the powerful marketing and PR launch platform that cinema provides.

This will also significantly reduce the risk of piracy that accompanies an initial online release. We are very encouraged by the recent announcements that theaters can begin to reopen in major cities, in particular, New York City that can now reopen to 25% capacity.

Based on the proprietary behind-the-scenes panel of 5,000 movie fans, we know that audiences want to get back to the big screen as soon as they feel it's safe to do so. Our research shows there has already been a steady return to movie theaters with 43% of respondents saying they have been back to the movies since the original theater closures last spring. And those respondents said that they've been back to the movies an average of 5.4x during the pandemic, consistently reporting an overwhelmingly positive and safe moviegoing experience.

Based on what these movie fans continue to tell us, moviegoing is trending in a positive direction. 92% said the news of COVID-19 vaccine would positively impact their moviegoing outlook. 88% said that the shortened theatrical window has no negative impact on their desire to watch movies in theaters, and 90% agree that the quality of the movie-watching experience is far superior in a theater versus at home, particularly according to those who recently saw Wonder Woman 1984.

In addition to our own internal research, one can look at the return of moviegoers abroad, particularly in China, Japan and South Korea. If the content is available, people will come to the theater. Look no further than the opening day box office in China for Detective Chinatown 3 grossing a greater-than-expected $163 million in sales, beating the previous record set by Avengers: Endgame in 2019.

Until the theater audience has returned, we have continued to aggressively focus on maintaining a high level of liquidity. The cost reduction measures that we've instituted plus our current cash balances, including the new $50 million debt facility, will ensure that we have sufficient liquidity to operate our business for the next 12 to 13 months without considering the benefit of any revenue beyond the rollout of the vaccine and return to positive cash flow.

As discussed on previous calls, beginning in March 2020, we took significant steps to cut costs and reduce our operating capital expenditures. Then in November 2020, the pandemic persisted and there were additional delays in movie releases, we took additional steps to reduce costs, including reimplementing a combination of temporary furloughs, permanent layoffs and further salary reductions.

In early January of 2021, with the COVID-19 surge following the holidays, we reinstated up to 50% salary reductions for almost all employees and implemented additional temporary furloughs and further salary reductions. To date, over 1/3 of our head count has been permanently eliminated or on furlough since the start of the pandemic. Over 20% of our current head count is on reduced work schedules of 50 to 60 and almost all remaining employees are at salary reductions up to 20%. Those cumulative measures reduced our actual total Q2 to Q3 2020 run rate cost by 50% versus the same period in 2019 and by 52% versus our pre-COVID run rate.

As we continue to evaluate the short and medium-term needs of our business, we've been very focused on also ensuring that we do not permanently impair our business, including to make sure that we retain a high-quality team so that we are ready to quickly return to a normal operating level when theater audiences return.

We've also continued to strategically make capital investments, most notably in our new cinema advertising management system that was launched last month. This new inventory management system will provide a more efficient, seamless sales process, which will allow us to better compete with other video and digital ad platforms.

This new streamlined end-to-end process is expected to result in significant cost revenue and other efficiencies for NCM, including more efficient pricing and inventory placement, resulting in reduced make-good obligations and an expansion of our client base. Our new system also lays the foundation to develop a solution to sell our theater inventory programmatically as we do now with our digital inventory, creating additional monetization opportunities in the future.

We've also continued to expand our cinema advertising network with the recent announcement of a new long-term network affiliate agreement with the Harkins Theatres circuit. Harkins is one of the premier movie exhibitors of the western U.S. and the fifth largest exhibitor in America.

The addition -- with the addition of Harkins Theatres in May of this year, NCM's national theater network will include all the top 5 exhibitors in the country. Our Noovie pre-show entertainment program will now be seen by millions of additional movie fans across the Southwest and over 500 harken screens in 33 premier theater locations in Arizona, California, Colorado and Oklahoma. Harkins' industry-leading and growing attendance per screen in addition to its state-of-the-art theaters in key markets enhances our already strong national media network and will particularly bolster our coverage in Phoenix, the #11 DMA.

Harkins joined NCM's network at an optimistic time in both the movie and advertising industry. The 2021 film slate is stacking up for a big summer, fall and holiday movie season following the COVID-19 vaccine rollout. Meanwhile, as mentioned earlier, younger audiences are coming -- are continuing to abandon ad-supported television, and the audience of all ages are eager to get off the couch and get back out to movies. For brand seeking to reach the highly sought-after 18 to 49 and 18 to 34-year-old audience demographic, cinema is an attractive TV GRP replacement.

During the pandemic, we've also made significant progress in our strategy to diversify our media inventory in ways that are complementary to our core cinema business and strengthen our unique bundle of on-screen and digital advertising products. In October of 2020, we launched our new national CineMedia Digital Out-of-Home group, which was created to further unite brands with the power of movies by extending movie-centric entertainment content, trivia and advertising beyond theaters to a variety of complementary out-of-home venues. Our unique bundle of out-of-home advertising products will be sold by our existing high-quality sales force, creating many selling and operating cost benefits.

Our initial partners that we've recently announced include some of the top out-of-home networks in this space, including Captivate, a leading location-based digital video network with screens and premier office in residential properties. Coinstar, with the new ad-planted screens that sit at top of Coinstar kiosks in grocery stores; and Ziosk, the industry-leading technology platform for guest entertainment and engagement in restaurants. And we're also aiming to pursue partnerships with other networks in retail locations nationwide.

This new high-quality out-of-home and media inventory gives us over 1 billion additional impressions available for our existing sales force to sell monthly and allows us to package the strengths and effectiveness of cinema, digital and these new out-of-home venues together to create innovative, integrated campaigns for brands that engage movie fans beyond the big screen.

All these new out-of-home relationships also provide us access to additional first and second-party consumer data that will enhance the nearly 171 million data sets in our current consumer database. This consumer data is critical currency in today's highly competitive media environment that we can utilize across all of our advertising platforms. Audience data drives ad revenue and increases our ability to deliver the kind of targeting and attribution that our clients demand. The fact that we've been able to continue to generate revenue from our digital business and deliver movie audiences to our brand partners across other complementary mediums while theaters have been closed is directly due to our ability to leverage our unique first and second-party data. This continued growth in our consumer database is combined with the capabilities of our recently launched new inventory management system, will position us well to provide marketers with an even stronger, unique bundle of advertising products.

During the COVID-19 pandemic, our sales teams have been tirelessly working to keep cinema and NCM top of mind in the marketplace. Our local sales team has also done a great job of shifting in-theater advertising commitments to our digital platforms, as reflected by our Q4 digital business growing 24% over Q4 2019. As a result of all this hard work, media buyers remain enthusiastic about the cinema that will include many great upcoming films and the unique advertising opportunities that we have to offer that have become even stronger since the pandemic began.

I'm very proud of the job that our entire NCM team continues to do under very difficult circumstances. I'd like to thank them, our Board and our distributor partners, again, sincerely for the continued support as we navigate this historic and turbulent time together.

Finally, because of the pandemic continuing into spring '21 and the extension of our bank amendment waiver through Q3 of '22, our Board of Directors has trimmed the NCM Q4 dividend slightly from $0.07 to $0.05 per share. This will allow adequate cushion for funding the dividend while available cash distributions from NCM LLC is restricted during the bank amendment period. The dividend will be paid on April 5, 2021, to stockholders of record on March 22, '21.

This quarterly dividend result in a current yield of 4.2% and based on Friday's closing share price of $4.75. Before the Q4 2020 dividend payment of $3.9 million, the NCM Inc. cash balance of $57.9 million would allow us to pay dividends well beyond our business recovery period regardless of any cash being distributed to NCM, Inc. from NCM LLC.

While uncertainties related to the COVID-19 pandemic remain, we believe that we have positioned our company well and have good reason to be confident about NCM's future as we continue to effectively balance the 2 priorities of maintaining strong liquidity and executing on the sales and operating plan focused on bringing the unparalleled marketing power of the movies to even more brands and finding new ways to engage movie fans anywhere and everywhere.

I'll now turn the call back over to Ted to discuss our financial picture in more detail. Ted?

All right. Thanks, Tom. As Tom mentioned, despite the impact of COVID-19, we have made significant progress over the last year to bolster our liquidity position while actively growing our network and diversifying our lines of business. With up to 60% of our network theaters closed during the fourth quarter and over 50% still closed, we recorded $15.7 million of Q4 revenue, an increase of 162% over Q3.

Obviously, the impact of the COVID-19 pandemic on our business makes an analysis of our revenue and adjusted OIBDA versus prior periods not meaningful, as the current results do not fairly represent our ongoing business. Therefore, I will focus most of my comments today on our current improved liquidity position and our success in limiting our monthly cash flow burn rate while minimizing the impact of the longer-term prospects of our business.

Due to our efforts to reduce our operating expenses. Total Q4 adjusted OIBDA was negative $9.9 million, a 12% and 22% improvement over the $11.2 million and $12.7 million negative adjusted OIBDA recorded in Q3 and Q2, respectively. The combination of our highly variable operating cost structure and our proactive overhead cost reductions allowed us to limit our adjusted OIBDA losses during a period, where over -- where our Q4 network attendance was down 92% compared to the same period in 2019. Our Q4 average burn rate was reduced to approximately $11 million per month versus $12 million and $13 million in Q3 and Q2, respectively.

The majority of our operating cost reductions have related to personnel. During Q4, over 40% of our employee base were furloughed, eliminated or had salary reductions of up to 50%. The remaining employees had their salaries reduced by up to 20%. These additional cost reduction measures reduced our core operating expense in Q4 to $5.2 million per month compared to our pre-COVID run rate of $9.5 million per month or savings of 45%. As we have discussed in the past, due to our high gross operating margins as revenue levels build, we will achieve operating cash flow breakeven after debt service when our quarterly revenue reaches approximately 50% of 2019 levels.

Our total 2020 revenue was $90.4 million versus $444.8 million for 2019 as a strong start to the year was completely derailed by the spread of the COVID-19 pandemic to the U.S. in mid-March. Adjusted OIBDA decreased to a negative $19.4 million from $207.5 million in 2019, again, all driven primarily by the temporary theater closures in response to the COVID-19 pandemic.

For the fourth quarter, we reported a GAAP loss per diluted share of $0.45 versus an earnings per diluted share of $0.24 in Q4 of 2019, and for 2020, we reported a GAAP loss per diluted share of $0.84 compared to earnings per diluted share of $0.46 in 2019. Both earnings decreases were again the result of the significant network attendance decline resulting from the COVID-19 pandemic.

For 2020, capital expenditures were $11.2 million versus $15.3 million spent in 2019 due to a halt of all nonessential capital spending.

A significant part of our capital spend was related to finishing the investment in our cinema advertising management system that Tom previously mentioned. Completing this investment in this inventory management system will result in immediate expense savings and incremental revenue opportunities as it will allow for more efficient use in pricing of our inventory and making buying of our network easier for media buyers, especially during high demand periods. In fact, the implementation of this new system is expected to reduce personnel expenses and other operating overhead by approximately $8 million per year from the historical run rate of a couple of years ago and $1.2 million per year from our 2020 run rate that already reflect staffing reductions we have undertaken over the last 18 months.

In the fourth quarter and for fiscal year 2020, we recorded $0 and $1.4 million, respectively, of integration and other encumbered theater payments primarily from AMC Carmike Theaters versus $8.6 million and $22.3 million, respectively, last year. The AMC integration payments are based on what NCM could have earned had those theaters been sold as part of our network. As a reminder, these integration and other encumbered theater payments are added to adjusted OIBDA for debt and compliance and partnership cash distribution purposes but are not included in reported revenue and adjusted OIBDA as they are recorded as a reduction to the net intangible assets on the balance sheet.

Moving to our balance sheet. Our total debt net of cash at NCM LLC at the end of 2020 only increased by $13 million to $928 million versus $915 million at the end of 2019. Our average interest rate on all debt was approximately 5% at the end of 2020 compared to 5.5% at the end of 2019, including our $263 million floating rate term loan bank debt and revolving credit facility that had a rate of approximately 3.7%. Excluding revolver balances, 70% of our total debt outstanding at the end of 2020 had a fixed interest rate.

As Tom mentioned earlier, we just completed an amendment to our senior secured credit agreement, providing an extension to the waiver of the financial leverage covenants through Q2 of 2022, with an additional step down to 6.75x for the total leverage ratio and 5.5x for the senior secured leverage ratio in Q3 of '22 before full compliance must resume for the full year 2022. This NCM LLC bank debt amendment will continue to include the requirement to maintain a minimum liquidity of $55 million, including cash and availability under our revolver. NCM LLC will also not be permitted to distribute available cash during the amendment period to its founding members circuit owners or NCM, Inc.

Therefore, the company must be in compliance with its credit agreement, and net senior secured leverage ratio must be less than 4x, and our revolver balance must be less than its pre-COVID average outstanding balance of $39 million before available cash distributions to the NCM LLC owners can resume. As part of the amendment terms to obtain the waiver, the company has also agreed to an increase in its existing TLB debt and revolving credit facility pricing grids.

In conjunction with the existing bank debt facility amendment, we have also entered into a new $50 million senior secured Term Loan B tranche. This new debt facility will mature in December of 2024 with pricing of LIBOR plus 800 basis points with a 1% amortization per year. This additional funding provides us with the additional liquidity to execute our strategic growth plan as we emerge from the COVID-19 pandemic.

NCM LLC's current cash balance, including the new Term Loan B proceeds is $147 million, plus $6 million in accounts receivable. Assuming an average of $11.5 million to $12 million per month cash burn rate, including the impact of our new amendment and debt facility, we have a liquidity runway of 12 to 13 months before the consideration of the bank debt liquidity minimum financial covenant.

With our high operating cash flow margins and revenue expected to build into the back half of 2021, we believe that this 12- to 13-month 0 revenue liquidity runway is actually longer. Also, as mentioned, we need revenue to equal approximately 50% of 2019 to breakeven on a cash basis after-debt service.

As Tom mentioned, our Board of Directors has authorized NCM, Inc.'s quarterly cash dividend at $0.05 per share of common stock. Given the current NCM cash balance of $58 million, our current $0.05 dividend can be paid for the next 3 years with no additional NCM LLC distributions to NCM, Inc.

The company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors. The nearly 3 years of dividend cushion is considerably longer than we have historically targeted. We will continue to monitor this cushion and related dividend level consistent with the company's intention to distribute over time substantially all its free cash flow.

Our Board of Directors will continue to evaluate the future dividend levels as our network attendance levels trend back towards historical levels, and we get a better read on advertising revenue growth. As always, the declaration, payment, timing and amount of future dividends payable will be at the full discretion of the Board of Directors, who will consider general economic and advertising market conditions, the company's financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant. This includes short-term and long-term impacts to the company related to the COVID-19 pandemic and restrictions under the NCM LLC credit agreement.

Finally, consistent with our comments over the last quarters, we do not have enough visibility into the timing of film releases, related theater openings and network attendance to provide a reliable future and adjusted OIBDA guidance. We will only begin providing revenue and adjusted OIBDA guidance when we have access to more reliable information regarding these key market data points.

This concludes our prepared remarks, and we'll now open up the lines for questions. Operator?

(Operator Instructions) Our first question comes from Eric Wold with B. Riley Securities.

Just a couple of questions. I guess one, can you give a sense of kind of what you've been seeing with the advertising pipeline in recent weeks, just kind of as New York was announced, could open vaccine distribution going -- stabilizing, so kind of what's in recent weeks versus what you saw in Q4 in terms of the trend? And then trying to get a sense of the level of upfront commitments still kind of in that pipeline as the film start to be shown versus kind of what you'll be leading on in terms of to gather that demand?

I'll answer the first question, and I'll turn the second one over to Ted. What's interesting in our company is every week we have the entire sales team on phone calls. And I always listen into those calls. And in the past 2 to 3 weeks, given the positive news on vaccinations and theater openings in major markets, the amount of volume and the amount of activity associated what's happening in the ad space has significantly increased. And I was really pleased to hear that after a relatively long period of time where many of our biggest advertisers were sitting on the sidelines. So I was highly encouraged by the amount of activity and the quality of the RFPs and negotiations and discussions happening with advertisers.

So if they see the light at the end of the tunnel, as do we, and part of that is really a testament to the fact that we've kept our salespeople engaged with our biggest agencies and clients for the last year to make sure that cinema advertising was really forefront and always something that is part of the media mix.

As it relates to where we are, I mean the upfront, Ted, do you want to comment on that in terms of pipeline?

Yes. Eric, I mean, we're not giving any specific guidance on the pipeline at this juncture. What I will tell you is that it's clearly a second half of the year pipeline. That's really where we're talking to folks. And looking at commitments. I would say that historically, the upfront is, call it, 65% of revenue, and scatter is the other $35 million. Obviously, I think very well they'll probably be flipped to some degree this year, higher scatter revenue. But there is a solid pipeline in the back half of the year and specifically into Q4, is what I would say.

Perfect. And then just my final question on the Digital Out-of-Home opportunity. Clearly, you've gone into this for longer-term opportunities at hand. Any way you can give a sense of your goals, your revenue goals under that segment over the coming years, how that margin profile may be leveraging your existing sales force, how that margin profile will look compared to the existing business?

And how much of an overlap is there between the advertiser customer base of DOH versus in theater? Is it an attractive overlap so that you can put together a stronger campaign that combine all of that? Or is there enough differentiator that now your TAM has improved in terms of new areas you get into? Multipart question, sorry.

We guessed a lot of questions, so let me try to answer all of them. So it's okay. We'll try to remember them all. If I don't, feel free to remind me.

We started looking at diversifying our company's revenue streams long before COVID happened. It was part of our whole long-term planning process. And the goal was always to try to find other Digital Out-of-Home opportunities that correlate to the young demo that is so coveted in theaters.

So when we looked at things, we looked at demo match, and we also looked importantly at scale. We wanted to make sure that things were large. It's not much of a stretch to talk about restaurant-goers and moviegoers. The dinner and movie concept has been part -- and parts of American culture for a long time. So that was a natural one.

In terms of giving you a sense of the size of it and where we hope to be, we're not really giving any guidance on that yet. What I will tell you, though, is we do expect this business to be meaningful in '22. And we believe this next 6 to 7 months will be laying the foundation for that. The initial response we've gotten from advertisers as part of the dynamic of cinema, and this has been really positive when people get it and they get the correlation to it. And I wouldn't want to understate the data piece of this as all of these out-of-home initiatives involve a significant amount of additional data.

There are opportunities for us to continue to grow. Our Digital Out-of-Home business beyond the core ones we've announced. There's a major additional retail group that we'll be announcing in the next couple of weeks. So this is something that's going to keep growing, and we look at it as a real opportunity for our company.

Our next question comes from Eric Handler with MKM Partners.

Just wanted to follow up on Eric's question. When you look at this Digital Out-of-Home business, are you already selling? Are you up and running this business so we'll actually maybe start seeing a little bit of revenue start trickling in right now? Are there any incremental costs associated with this business? So just kind of think a little bit deeper into this business.

So the revenue will start trickling in. We literally started positioning the product in the marketplace in the last month or so. We've hired ahead of that group. We're committed to having the right staffing for that group in addition to utilizing our substantial local sales force.

I would look at the next 6 months as really building it out, but there will be some revenue this year. And we're excited about it. Cinema will always be the most important thing to National CineMedia, but it seems obvious with the infrastructure that we have and with the sales organization that we have and with our new digital systems that we've implemented, we can really optimize our overhead, pursuing some of these alternatives.

We have a very invigorated sales team around it right now. And we're excited about marrying all these Digital Out-of-Home opportunities with cinema. And then we do believe that 1 plus 1 is going to equal more than 2, in many cases like this.

Was there a second part of your question? I want to make sure I answered it.

No, well, I have another question. With regards to adding another $50 million of liquidity in the fourth quarter. You already had a good amount of liquidity already. Is there any particular reason why you felt there was a need to draw down further and what you're thinking about the timing of that?

Do you want to take that one, Ted, or do you want me to do it?

Yes, I'll take that. Yes. You're right, Eric, we did preserve, and we had a fair amount of liquidity, but the answer to your question is, at the end of the day, it's to ensure that we can get through the other side. And really, the main issue from our business is the working capital lag. So while we had plenty of cash, we do have to maintain a minimum liquidity of $55 million.

So as you think about the business ramping back up and as we start generating sales, our typical kind of days sales outstanding is like 90 to 100 days. So we will have a little bit of a lag of collecting that revenue from when it's recognized. And that's really the primary reason for doing this.

The other thing I would add to that answer, just, is that having that additional liquidity will keep us -- our ability to be aggressive on the Digital Out-of-Home side as well as in any acquisitions that may come up on the affiliate exhibition side. So those are other additional rationales for what we might do with that additional liquidity.

Our next question comes from Mike Hickey with The Benchmark Company.

I guess the first question is just on the reserve seating. Obviously, that was trend going into, I guess, pre-pandemic, and it sort of accelerated obviously now as theaters try to operate without so much personnel. I mean how -- what are you seeing, I guess, in the auditoriums in terms of attendance behavior with reserves seatings being sort of 100% maybe of some -- taking your -- some of your affiliates and family members?

Well, it's really hard to draw conclusions in this particular time period just because of the odd restricted seating situation, the restricted number of screenings and, most importantly, a very limited release schedule in terms of what's out there. What I can say is, without being too specific, is in many of the key markets, particularly in major states like Texas, where there's a lot of theaters open, the actual attendance levels and the consumer satisfaction has been very high and encouraging, in fact, higher than we would have even thought.

But I would be hesitant to extrapolate one market out to the rest. We know preliminarily that with the announcement of New York that there's been a lot of evidence about those kinds of restricted theaters already selling out. But I think we really need a couple of months of theater openings on a national scale and real movies to draw conclusions. I think drawing any conclusions from what's happened during the pandemic would be really premature. Obviously, we're keeping an eye on everything happening, but I look at this as a very sort of false sense of reality in terms of the behavior, particularly from a product point of view as you've seen in the way some of the movies have released.

Is there -- do you sense any pushback from movie patrons on the duration between showtime and movie? I mean is there sort of some, I guess, nervousness in extended duration there, waiting for the movie to start. I mean, it's...

We track all this -- we track this very heavily in our consumer studies. And we haven't seen any negativities on that so far. Obviously, it's something we keep track of. Candidly, with the pandemic and with the processing of getting people through, people have arrived generally earlier than they normally do, which is a good thing for us, obviously. So it's something that we're going to have to keep an eye on over the course of the next several quarters or so.

How do you think about your overall screen network size, Tom, I mean you're kind of doing forces, sort of the belief that maybe, overall, we'll see a reduction until the screens in the U.S. Flip side of that is you seem to be winning at least one big deal here with Harkins on the affiliate side. So how do you balance those 2 when you think about your total screening size over the next 12 to 18 months? And any thoughts on how Screenvision is behaving and sort of what is the dual operating market between you and them?

Yes. So the way we look at it is there's always room to grow our network. We believe especially not knowing what the consumer behavior is going to be like as it relates to post-COVID or as it relates to less theaters being open that we'll continue to be aggressive in bringing new affiliates on board.

Obviously, we're very happy with the Harkins announcement and what that brings to our family. But as I've mentioned on multiple calls, we believe there's a real rationale to wanting to be part of the largest theater network. And there's a real benefit to it for exhibitors.

So not knowing what the screen count will be like or how many theaters may close over the next year or 2, we look at our position in the marketplace as something that's attractive to exhibitors. So we'll continue to add affiliates as they become available. In terms of commenting on our -- what our competitors are doing, I don't think it's something that we're prepared to do at this time.

No. Fair enough. The last question from me. You mentioned your sales team. Obviously, this is has been a challenging environment and a piece of your compensation is commission and variable. So just wondering how your -- Cliff and your sales team overall is held up? How much turnover you've had, if any, and if there's sort of a time you're going to have to rebuild a good piece of that or not?

I can bring Cliff on as a guest responding to this. Cliff, are you on right now? Cliff, are you there?

Yes. I'm here.

So there let me just preface it by saying that due to Cliff's leadership, which has been steady and significant, the loyalty that he has created, not just with our sales team, but with our clients is really exceptional. And credit goes to him for where we are today but, also, how we've weathered the storm. So in terms of any kind of significant attrition. I can tell you that we haven't lost a senior salesperson in the past year. Obviously, there's been some attrition at lower levels, but I'll let Cliff answer more specifically.

Yes. Mike, we've done a really -- I mean really good job at informing our team what's going on, keeping them in the loop and just asking them to have faith in the medium and the company, and for the most part, we've maintained most of our people, as Tom alluded to. Yes, we've lost some lower level people. But I feel really good about the team we're going to put out on the field in just a month from now or whenever the movies open up, and we're going to be ready to rock, and we're going to be very competitive.

No further questions at this time. I'd like to turn the floor back over to management for any closing remarks you may have.

Okay. As I mentioned previously, we're very well positioned for the future as we leave 2020 behind and focus on the road ahead. We're looking forward to the return of theater audiences as the Covid vaccine rollout accelerates and heard immunity takes hold.

All of our research indicates strong consumer demand to see films on the big screen once again. And with all the 2020 films delayed many of them into '21, the film set looks very strong in the upcoming years. So despite the challenges of 2020, the hard work of our team to expand our network and begin to diversify our advertising impression space leaves us very optimistic about capturing additional video advertising market share as TV GRPs continue to decline, which makes our young audience even more attractive to media buyers.

I want to particularly thank our senior management team and our entire staff, once again, for all their hard work during these very difficult times, and I want to thank our shareholders and lenders, particularly for their support and patience.

So we appreciate all of you joining the call, and I hope that everyone continues to stay safe and healthy and look forward to seeing you very soon again at the movies. Thank you.

Ladies and gentlemen, this concludes today's web conference. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.