National Cinemedia Inc (NCMI) 2025 Q3 法說會逐字稿

Good day and welcome to the National Cinemedia Inc., Q3 2025 earnings conference call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Chan Park, Senior Vice President of Finance. Please go ahead.

Thank you, operator, and good afternoon. I'm joined today by our Chief Executive Officer, Tom Lesinski; and our Chief Financial Officer, Ronnie Ng.

I would like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. All statements other than statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties.

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

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

Now, I'll turn the call over to Tom.

Thank you, Chan. Hello, everyone, and thank you for joining our fiscal 2025 third-quarter earnings call.

As we shared on our last call, advertiser sentiment stabilized through the summer as brands regain confidence navigating the broader economic landscape. We were encouraged to see that momentum carried into the third quarter, where we saw a clear rebound in demand across key advertising categories including retail, automotive, wireless, and government, reflecting a return to normalized spending patterns after the tariff-related pullback earlier this year.

Driven by July's strong slate, including Jurassic World Rebirth, Superman, and The Fantastic Four: First Steps, we delivered results in line with our expectations, achieving top-line growth despite a softer late summer box office and industry-wide decline in attendance.

NCM's quarterly audience was 109 million across our network, down 11% compared with the third quarter of 2024, in line with the third-quarter box office. While overall attendance was lower, 11 films in the quarter grossed more than $50 million domestically, up from 9 titles last year, highlighting the strength and continued draw of tentpole releases, even in a slower market.

The successes of July's hit releases underscored the continued cultural relevance of cinema and reaffirmed the enduring power of our platform to connect brands with deeply engaged audiences. Importantly, attendance trends improved toward the back half of September, finishing on par with 2024 strong performance, which was the highest level since 2019. As such, we remain optimistic that the strong holiday slate ahead, featuring several highly anticipated titles, will reignite theater attendance in the fourth quarter.

Despite the overall decline in both the domestic box office and attendance, NCM delivered year-over-year growth in the third quarter with total revenue of $63.4 million and adjusted OIBDA of $10.2 million, both in line with our expectations and primarily driven by an increase in inventory utilization. This performance reflects the resilience of our business, one that continues to translate audience engagement into meaningful advertiser value, even in a weaker industry environment.

Throughout the third quarter, we continued to advance our key growth initiatives, scaling our programmatic offering, expanding our self-serve platform, and strengthening our local sales organization.

On the programmatic front, we continue to see strong year-over-year acceleration. This quarter we delivered approximately four times the programmatic revenue compared to last year, achieving our strongest programmatic quarter ever. With additional platforms coming online early next year, we will significantly expand our programmatic footprint and unlock an even larger addressable market. We anticipate the growth trajectory will continue as advertisers embrace our platform's ability to deliver targeted measurable campaigns at scale.

In self-serve, we continue to gain traction with mid-size and regional advertisers who value cinema's attention environment and the ease of direct booking. Our self-serve platform continues to accelerate adoption, with third-quarter revenue up 23% quarter over quarter, driven by expanded business development outreach and CRM-based activation.

Behind the scenes, predictive AI models now identify, score, and route high-value local leads, powering scalable small and medium businesses and mid-market expansion and helping our teams engage advertisers more efficiently. Together, our programmatic and self-serve channels are broadening NCM's reach, deepening relationships with brands, and positioning us to capture a greater share of the evolving advertising landscape.

Our local sales transformation is also progressing. We continue to work to enhance our team's capabilities, adding senior talent with deep regional expertise and refining our structure to align more closely with market opportunities. These changes are enabling a more data informed, consultative approach to engaging high-value local and regional advertisers, helping us connect cinema scale and storytelling power with the precision of locally relevant campaigns. We believe this refined strategy positions us to reduce churn and attract new advertisers to our platform.

Across our network, NCM's valuable inventory led by our premium Platinum Spot, continues to stand out among advertisers who recognize the environment, reach, and measurement capabilities of NCM's unique platform.

Platinum continues to deliver exceptional results, achieving an impressive 89% ad recall in a recent tech advertiser's campaign, passing industry benchmarks and driving strong gains across brand relevance, excitement, and preference. These benchmarks reinforce its position as the most engaging and high impact placement within the theatrical experience.

Additionally, we enhanced our Platinum offering at select theaters by reducing added flexibility within the ad spot, which has driven higher utilization and improved advertiser satisfaction. Our 4DX format is also exceeding expectations, achieving approximately 85% ad recall in a recent automotive advertisers' campaign and generating triple-digit lifts in awareness, reaffirming the power of immersive cinematic experiences in driving superior brand outcomes.

Complementing this inventory is our NCMx data platform, which continues to enhance advertisers campaigns with data-driven targeting, insights, and digital extensions.

Last quarter, we announced the launch of our Bullseye product, which is already seeing strong traction in the marketplace and demonstrating the power of localized data-driven storytelling. A recent cellular campaign delivered more than 283,000 verified incremental store visits, representing a 110% lift, underscoring Bullseye's ability to seamlessly integrate into our tech stack and enable scalable, high impact local activations.

Alongside Bullseye, our boost solution leverages our proprietary moviegoing data and new geo-triggered capabilities to target consumers near campaign specific locations, connecting brands with verified audiences in higher intent moments to drive measurable offline actions. Together, these initiatives strengthen our differentiated position as a performance-driven media platform that combines the power of the movies with data-enabled precision.

As we invest in our platform and innovation, we also remain focused on expanding NCM's advertiser base. In the third quarter, we strengthened our full funnel attribution through our partnership with iSpot, a leading real-time TV and video ad measurement platform. This integration incorporates theatrical exposure data into iSpot's cross-screen measurement framework, enabling advertisers to quantify cinema's incremental reach and conversion velocity alongside linear and streaming channels.

Early results are very compelling. A recent travel industry advertisers campaign delivered three times faster conversion rates than linear TV, 95% efficiency at 1/10 the cost of TV, and more than 8.4 million incremental impressions among audiences unexposed to television.

These results validate cinema's role as a high-performing, cost-efficient channel within diversified media mixes and reinforce the measurable impact of the theatrical experience in driving both upper and lower funnel performance. We are optimistic about the months ahead as we enter to what is historically NCM's strongest period of the year.

Upcoming tentpoles, including Wicked: For Good, Avatar: Fire and Ash, and Zootopia 2, are already driving significant advertiser excitement and early commitments across multiple categories. Demand for Wicked: For Good has been exceptionally strong, with inventory approaching sellout levels a month ahead of the film's upcoming release date.

The robust lineup coupled with steady improvements in pacing and demand reinforces our confidence in a strong finish to the year. Importantly, we expect sustained momentum to year end to further reinforce advertiser confidence in cinema as a high-performing media channel that delivers both attention and measurable impact.

With increased advertiser demand, a healthy box office pipeline, and continued traction across our programmatic and self-served platforms, we are well positioned to capitalize on expected strong attendance in the fourth quarter and execute against our strategic priorities for long-term growth.

With that, I'll now turn the call over to Ronnie.

Thank you, Tom, and good afternoon, everyone. For the third quarter, NCM delivered results consistent with our expectations, reflecting the continued momentum we saw towards the end of the second quarter in stability in the demand for cinema advertising, which led to the highest third-quarter monetization in the last five years.

As Tom noted, the tariff-driven uncertainty that weighed on earlier quarters subsided during the period with brands showing renewed confidence navigating the current macroeconomic environment. That stability translated into improved advertiser demand, particularly across several key categories, signaling progress from the pullback we experienced earlier in the year.

NCM's total revenue for the third quarter was $63.4 million within our guidance range of $62 million to $67 million and up 2% year over year. This increase was driven by stronger national advertising demand, improved inventory utilization, and continued traction across our programmatic and self-served channels, partially offset by lower local and regional spending and softer beverage revenue.

While the third-quarter box office underperformed versus industry expectations with inconsistent performance among new releases, the stabilization of advertiser demand drove higher monetization in July and August, offsetting some of the softness in attendance.

National advertising revenue totaled $49.9 million, up 6.6% from $46.8 million in the prior-year period. This was driven by strong scatter demand and improved utilization of inventory, as well as increased adoption of our digital buying platforms, partially offset by decline in CPMs and lower overall attendance.

Compared to the prior year, national CPMs held firm in the upfront marketplace, but declined in the scatter market due to an increase in programmatic buying and improved demand in the seasonally slower September month when compared to historical periods. That said, the third quarter marks our strongest programmatic performance since its launch, growing 82% sequentially.

Additionally, Platinum revenue was up 19% compared to the prior year, achieving the highest third-quarter platinum sales in NCM's history. Platinum monetization grew significantly with revenue per attendee up 33% year over year, driven by strong growth in inventory utilization and a slight increase in CPMs, an encouraging sign that our amended AMC deal, which has been in effect for only a short three months, is already driving results.

Overall, national revenue per attendee was $0.46, up 20% year over year and the highest third-quarter national ad revenue per attendee in the last five years, reflecting the success of our ongoing efforts to optimize pricing and yield through our programmatic and self-serve capabilities.

Local and regional advertising revenue was $9.6 million compared to $11.4 million in the prior year period. While local markets continue to recover more gradually, we are encouraged by improving activity in government and travel categories, which partially offset lingering softness in healthcare and professional services. As Tom outlined, we remain focused on strengthening this channel by enhancing our sales talent, new coverage models, and data-driven insights that better connect local advertisers with NCM's engaged audiences.

Turning to our expenses. Third-quarter total operating expenses were $65.2 million, down from $69.9 million in the same period last year. Excluding one-time items, depreciation, amortization, and non-cash share-based compensation, our adjusted operating expenses were approximately $53.2 million, a slight decrease year over year primarily attributable to lower attendance-driven costs. Due to our continued discipline cost management efforts, SG&A expenses remain relatively flat in the third quarter as we strategically offset important investment dollars elsewhere in the business.

Personnel-related expenses were slightly lower compared to the prior year period and theater access fees decreased year over year, reflecting lower attendance levels. Third-quarter adjusted OIBDA was $10.2 million, in line with our guidance range of $7.5 million to $11.5 million and exceeding $8.8 million in the same period last year, driven by the modest top-line growth.

Total and levered free cash flow for the quarter as defined by cash flow from operations, plus capital expenditures, was negative $1.8 million compared to negative $2.4 million in the prior year period, driven by slight year-over-year increases in capital expenditures and system optimization costs offset by improved adjusted OIBDA.

Year to date, NCM has generated total revenue of $150 million compared to $154.5 million in the same period last year. National advertising revenues were flat while local advertising revenues declined 22%, primarily reflecting macroeconomic uncertainty in the second quarter and offset by the third quarter stabilization in national advertising. Total adjusted OIBDA for the period was $1.9 million compared to $10.7 million in the prior year driven by the top-line headwinds offset by normalization following prior year cost reductions.

Turning to our consolidated balance sheet. At the end of the third quarter, the company had $32.9 million of cash, cash equivalents, restricted cash, and marketable securities compared to $40.3 million at the end of the second quarter of 2025. We have zero total debt outstanding at quarter end. Our capital allocation priorities remain focused on returning capital to our shareholders while investing in technology and talent to enhance our advertising platform.

Specifically, we continue to invest in expanding inventory monetization tools, improving our self-serve and programmatic capabilities and deepening advertiser relationships through new sales initiatives and training. Under the dividend program we reinstated this year, we announced a quarterly dividend of $0.03 per share today, amounting to $2.8 million. This quarter's dividend will be paid on November 26, 2025, to stockholders of record as of November 10, 2025.

There were no share repurchases during the third quarter, as we had accelerated repurchases opportunistically in the first half of the year and managed liquidity through a seasonally higher use of cash for working capital.

Year to date through September 25, 2025, NCM has repurchased 3.3 million shares at an average price per share of $5.78 for a total of approximately $18.8 million. Since quarter end, we've repurchased over 100,000 additional shares at an average price per share of $4.08 reflecting our continued confidence in the business.

We are optimistic that the advertising momentum from this quarter will continue heading into the fourth quarter. The remainder of the year includes a number of highly anticipated releases scheduled for the holiday release window, in particular, blockbuster events such as Wicked: For Good, Avatar, Fire and Ash, and Zootopia 2 have each generated strong advertiser demand and upfront sponsorship commitments. These releases are expected to drive both attendance and related revenues, positioning us for a strong close to the year.

Turning to our guidance. For the fourth quarter, we expect revenue to be between $91 million and $98 million and adjusted OIBDA to be between $30 million and $35 million. Notably, our fiscal fourth quarter includes an additional week compared to the prior year. As a result, we expect total attendance growth to outpace industry trends and lead to a correspondingly lower revenue per attendee.

We anticipate a strong holiday box office slate with optimism that greater consistency in film release cadence and performance will continue to attract advertisers to NCM's platform for our differentiated offerings and unmatched reach with sought-after audiences.

With advertisers already showing heightened interest in the Thanksgiving to Christmas slate, continued recovery at the box office, and regaining advertiser confidence against the macroeconomic backdrop, we remain well positioned to capture demand and deliver value for our shareholders.

Operator, please open the line for questions.

(Operator Instructions) Patrick Sholl, Barrington Research.

Hi, sorry, if you could talk a little bit more about the programmatic and the ad categories that are adopting that, to the extent that you can maybe talk about like just the -- if you're seeing expanded budgets from existing partners or maybe just some of the ad categories that, say, adopt that format?

So Patrick, thanks for the question. So we're really happy with the performance of programmatic. We've been investing in it for over a year now. Our programmatic business was approximately four times higher than it was a year ago. And I think importantly, the vast majority of clients who are coming in from programmatic are new clients, and the categories I can tell you are all over, are all over the map in terms of different segments. But I think the most important thing is we're literally reaching people who had never been cinema advertisers before.

And as programmatic grows as an industry level phenomenon as it continues to grow, we actually couldn't be happier with our investment in programmatic and the growth we're seeing it, especially driving new client relationships.

Okay, and then on the guidance that you provided on [EBITDA] with the revenue growth, is the renewal with AMC kind of the main driver of the maybe lower conversion of the revenue growth to profit growth? Or can you just maybe talk about like what sort of revenue increases you need to get a positive trend on EBITDA?

Yeah, so Patrick, this is Ronnie here, so thanks for the question. So as we noted in our prepared remarks that this quarter versus the prior year, there is an extra week here. And so our fiscal quarter year will end this year on January 1 versus last year, it was December 26. So what you have is this extra week of between essentially Christmas and New Year's that will have really high attendance.

And so because of that, we obviously would be paying more theater access fees versus the prior year and thus the margins will reflect that. As comparison, if you look back at last year, if you were to add that extra week, the attendance would increase almost 14% when you look at last year's fourth quarter.

Eric Wold, Texas Capital Securities.

Couple more questions. Real quick one just to follow-up on that last comment, Ronnie, on the incremental attendance in the extra week between Christmas and New Year. Obviously, typically a high attendance period of the year with people hitting movies and high attendance. Is the assumption that it's just the mix of films and maybe the mix of attendance is just not as valuable of an advertising attendance? And so yes, its high attendance may be not as valuable to advertisers for you to advertise in front of? Is that the thought process there in terms of the impact on the quarter?

So I think the way to think about it is that, obviously, the fourth quarter is very attractive to advertisers and that period really starts mid-November all the way up to Christmas, essentially. And that's the high seasons. We have consistent sellout demand, especially in Platinum, post-show periods are mostly sold out.

And when you get past that Christmas holiday season, that demand tends to soften a little bit despite a lot of more attendance showing up because a lot of families take their kids to the movies. So there, the demand is not -- although still high, it's just not anywhere near the same as the weeks leading up to the holidays.

Got it. And then maybe a high-level question, but I guess there's been obviously a lot of press. This is obviously nothing new. There's always been the question of known franchises versus new IP at the theater, and recently there's been a lot of press around smaller titles, new IP not doing well at the theater. Are you seeing any trend from advertisers?

Obviously, the blockbuster films you mentioned, Wicked selling out almost a month ahead of time, and I assume that's the case with most blockbuster films. With the new IP, are you seeing the patterns from advertisers maybe waiting a little bit closer now to release date and tracking and getting a better sense of tracking, especially now that they have the ability to use programmatic to latch on to it before they want to maybe commit to a campaign to get a better sense of how that film is likely to do before they want to commit their advertising to it? And if that is the case, how are you kind of planning around that?

I actually think, Eric, it's really not the case. People generally are buying impressions and they're buying forecasts and estimates. People are not really being that specific when it comes to a smaller independent release or a new IP and avoiding it. Generally speaking, people are buying the entire flight across a variety of movies.

So while, obviously, there's over performance on things like Wicked and Avatar and Zootopia, there's not a reverse effect on unknown IP. So we're not seeing that phenomenon. And yes, when a movie does really well that no one's heard of, there is incremental buying happening on it the following week, weekend, and some of that is programmatic or just bought in our regular scatter market.

(Operator Instructions) Mike Hickey, Benchmark Company.

Just curious, Tom, when you look at -- obviously, we've got a pretty good view of '25 here. There's been some opportunities and challenges for you guys. Just when you think about '26, Tom, can you sort of paint us a picture?

I think you're probably optimistic on attendance, but I'm just curious how NCM, from a growth perspective, fits into the '26 looking at national, local, your programmatic, and maybe the key catalyst that we should look forward to in terms of driving growth and leverage from your model? Thanks, guys.

So what I would say is that, first things first, so the fourth quarter, it's pacing very well, up a fair amount from the prior year. So I see the momentum from Q3 going into Q4 and the advertisers are back. Any of the tariff issues that we highlighted in Q2 have gone away. So we're looking at really good momentum from Q3 going into Q4, and we expect that to follow in through '26.

The box office estimates for next year look actually quite good. I think it's been pretty well documented that it's going to be another growth here in box office and attendance. So I think, fortunately, the momentum is really good right now. And the confidence we're seeing from advertisers and their relationships, they're growing, especially with the addition of programmatic and self-serve, and we're pretty confident that local is going to rebound as well. So I think the third quarter and the fourth are really setting up for momentum into next year. And we're confident that '26 is going to be a great year for us and for the box office.

Is your decision to put back the dividend here versus maybe a more aggressive buyback or M&A? Just curious, Ronnie, your view on capital allocation here and into '26.

Yeah, so on capital allocation, obviously we're committed to our dividend, and we continue to do that this quarter. We believe that's an important part of our capital allocation strategy and in a more -- a way to reward our shareholders on a more consistent basis. In terms of the buybacks, like we always said, obviously, we're opportunistic when it presents ourselves with that. We were doing that fairly aggressively in the first half of the year, buying up to nearly $19 million worth of stock.

Obviously, we slow down here, but that's really in cadence with the negative unlevered free cash flow that we're seeing in this period. And we're just mindful of the working capital needs of the company in the third quarter, especially in July and August. It's typically where we see a lot of uses of cash due to working capital.

I'll say that though, like we said in our prepared remarks, post the third quarter after September 25, well, we did pick up additional over $100,000 -- or 100,000 shares in the market. So I think it's really -- we'll continue to utilize and look at all the options available to us in terms of capital allocation and then also be mindful about the free cash flow nature seasonally throughout the year as well.

And then last question, how are you guys thinking about your cost structure here? Obviously, you've taken it down a lot. Are you comfortable with where you're at, or do you think there's opportunities here, AI or otherwise, in terms of getting maybe some incremental cost savings into '26?

Yeah, I think it's a little early to really talk about '26, but I do think we've taken a hard look at efficiencies in AI. Every year, I think we've done a good job of managing our expenses. We've been fairly engaged with AI opportunities, so more on that soon.

But clearly, there's some opportunities for us, I think, not just for efficiencies but also to generate more opportunity. AI is not just a cost savings tool. It's also a lead generation CRM tool that can enhance our ability to reaching clients, so we're looking at that, and we'll be able to give you more update on that next quarter.

Thank you. There are no further questions at this time. I would now like to hand the call back over to management for any closing remarks.

I want to thank you guys all for joining us today. NCM continues to attract top advertisers with our unmatched reach among the most sought-after audiences and our differentiated inventory complemented by our industry-wide leading data capabilities.

So after navigating a challenging second quarter, our clear focus and discipline in our strategic execution enables us to deliver solid results as the advertising market stabilized in the third quarter. Looking ahead, we're well positioned to capitalize on the exciting holiday film slate, and we're very optimistic that we'll carry positive momentum through the remainder of the year.

We're grateful for your support and we look forward to seeing you in all of the movies. Thank you.

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