National CineMedia Inc

Previous wording

Some of the information in this Quarterly Report on Form 10-Q includes “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 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward-looking statements. In some cases, you can identify these “forward-looking statements” by the specific words, including but not limited to “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” in our annual report on Form 10-K for the Company’s fiscal year ended December 28, 2023. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis is a supplement to and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our annual report on Form 10-K for the Company’s fiscal year ended December 28, 2023. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

Current wording

Some of the information in this Quarterly Report on Form 10-Q includes “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 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward-looking statements. In some cases, you can identify these “forward-looking statements” by the specific words, including but not limited to “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the Company’s fiscal year ended December 28, 2023. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis is a supplement to and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our Annual Report on Form 10-K for the Company’s fiscal year ended December 28, 2023. In the following discussion and analysis, the term net income refers to net income attributable to the Company.

Previous wording

We also sell advertising on our lobby network (“LEN”), a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising through our Audience Accelerator, across our suite of Noovie digital properties, as well as a variety of complementary out of home venues in order to reach entertainment audiences beyond the theater. As of March 28, 2024, over 7.3 million moviegoers have downloaded our mobile apps. These downloads and the acquisition of second- and third-party data have resulted in approximately 794.0 million data sets as of March 28, 2024. We have long-term exhibitor service agreements (“ESAs”) (approximately 14.8 weighted average years remaining) and multi-year agreements with our network affiliates, which expire at various dates between January 2025 and July 2033. The weighted average remaining term of the ESAs and the network affiliate agreements is 11.7 years as of March 28, 2024. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie show and LEN programming are distributed predominantly via satellite through our proprietary digital content network (“DCN”).

Current wording

We also sell advertising on our lobby network (“LEN”), a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising through our Audience Accelerator, across our suite of Noovie digital properties, as well as a variety of complementary out of home venues in order to reach entertainment audiences beyond the theater. As of June 27, 2024, 7.4 million moviegoers have downloaded our mobile apps. These downloads and the acquisition of second- and third-party data have resulted in approximately 824.2 million data sets as of June 27, 2024. We have long-term exhibitor service agreements (“ESAs”) (approximately 14.6 weighted average years remaining) and multi-year agreements with our network affiliates, which expire at various dates between January 2025 and July 2033. The weighted average remaining term of the ESAs and the network affiliate agreements is 10.6 years as of June 27, 2024. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie Show and LEN programming are distributed predominantly via satellite through our proprietary digital content network (“DCN”).

Previous wording

Share Repurchase Program—On March 18, 2024, the Board of Directors of the Company approved a stock repurchase program under which the Company is authorized to use assets of the Company to repurchase up to $100.0 million of shares of the Company’s Common Stock, exclusive of any fees, commissions or other expenses related to such repurchases, from time to time over a period of three years. During the three months ended March 28, 2024, 8,000 shares were repurchased on the open market. In accordance with ASC 505—Equity, these shares were retired and any excess over par value paid was recorded as a reduction to retained earnings.

Current wording

Share Repurchase Program—On March 18, 2024, the Board of Directors of the Company approved a stock repurchase program under which the Company is authorized to use assets of the Company to repurchase up to $100.0 million of shares of the Company’s Common Stock, exclusive of any fees, commissions or other expenses related to such repurchases, from time to time over a period of three years. Shares may be repurchased under the program through open market purchases, block trades, or accelerated or other structured share repurchase programs. During the three and six months ended June 27, 2024, 1,911,587 and 1,919,587 shares, respectively, were repurchased on the open market. In accordance with Accounting Standards Codification ("ASC") 505 —Equity, these shares were retired and any excess over par value paid was recorded as a reduction to retained earnings of $9.3 million and $9.5 million for the three and six months ended June 27, 2024, respectively.

Previous wording

On April 11, 2023 NCM LLC filed a voluntary petition for reorganization (the “Chapter 11 Case”) with a prearranged Chapter 11 plan under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). During the Chapter 11 Case, the Company was deemed to no longer control NCM LLC for accounting purposes and NCM LLC was deconsolidated from the Company’s financial statements prospectively as of April 11, 2023. NCM, Inc. continued to operate as the manager of the debtor-in-possession pursuant to the authority granted under Chapter 11 of the Bankruptcy Code throughout the Chapter 11 Case.

Current wording

On April 11, 2023 NCM LLC filed a voluntary petition for reorganization (the “Chapter 11 Case”) with a prearranged Chapter 11 plan under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). During the Chapter 11 Case, the Company was deemed to no longer control NCM LLC for accounting purposes and NCM LLC was deconsolidated from the Company’s financial statements prospectively as of April 11, 2023 and recorded a gain on deconsolidation of $557.7 million within the second quarter of 2023. NCM, Inc. continued to operate as the manager of the debtor-in-possession pursuant to the authority granted under Chapter 11 of the Bankruptcy Code throughout the Chapter 11 Case.

Previous wording

The results of operations data for the three months ended March 28, 2024 (first quarter of 2024) and March 30, 2023 (first quarter of 2023) was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the accompanying notes.

Current wording

The results of operations data for the three months ended June 27, 2024 (second quarter of 2024) and June 29, 2023 (second quarter of 2023) and the six months ended June 27, 2024 and June 29, 2023 were derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the accompanying notes.

Previous wording

Our Network—The change in the number of screens in our network by the ESA Parties and network affiliates during the three months ended March 28, 2024 was as follows.

Current wording

Our Network—The change in the number of screens in our network by the ESA Parties and network affiliates during the six months ended June 27, 2024 was as follows.

Previous wording

(1)Represents the loss of two of our affiliates following the end of their affiliate agreements resulting in a reduction of 89 affiliate screens to our network as of March 28, 2024.

Current wording

Represents the loss of two of our affiliates following the end of their affiliate agreements resulting in a reduction of 89 affiliate screens to our network as of June 27, 2024.

Previous wording

(2)Represents the closure of 17 screens, net of new screens added, across our ESA Parties and network affiliates.

Current wording

Represents the closure of 35 screens, net of new screens added, across our ESA Parties and network affiliates.

Previous wording

Revenue. Total revenue increased 7.2%, from $34.9 million for the first quarter of 2023 to $37.4 million for the first quarter of 2024. The following is a summary of revenue by category (in millions):

Current wording

Revenue. Total revenue increased $39.9 million, or 269.6%, from $14.8 million for the second quarter of 2023 to $54.7 million for the second quarter of 2024. The following is a summary of revenue by category (in millions):

Previous wording

Operating expenses. Total operating expenses decreased $5.4 million, or 8.2%, from $65.5 million for the first quarter of 2023 to $60.1 million for the first quarter of 2024. The following table shows the changes in operating expense for the first quarter of 2024 (in millions):

Current wording

Operating expenses. Total operating expenses increased $44.3 million, or 224.9%, from $19.7 million for the second quarter of 2023 to $64.0 million for the second quarter of 2024. The following table shows the changes in operating expense for the second quarter of 2024 (in millions):

Previous wording

Non-operating expense. Total non-operating expense decreased $11.4 million, or 48.7%, from $23.4 million in non-operating expense for the first quarter of 2023 to $12.0 million in non-operating expense for the first quarter of 2024. The following table shows the changes in non-operating income/expense for the first quarter of 2024 and the first quarter of 2023 (in millions):

Current wording

Non-operating income. Total non-operating income decreased $549.6 million, or 99.9%, from $550.2 million in non-operating income for the second quarter of 2023 to $0.6 million in non-operating income for the second quarter of 2024. The following table shows the changes in non-operating income/expense for the second quarter of 2024 and the second quarter of 2023 (in millions):

Previous wording

National advertising revenue. National advertising revenue increased by $7.0 million, or 31.1%, from $22.5 million for the first quarter of 2023 to $29.5 million for the first quarter of 2024. The increase in national advertising revenue was primarily due to a 61.6% increase in national advertising utilization in the first quarter of 2024, as compared to the first quarter of 2023 as well as a 1.2% increase in national advertising CPMs. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in our Noovie show, which can be expanded, should market demand dictate. These increases were partially offset by a 15.8% decrease in network attendance due to a decreased movie slate in the first quarter of 2024 compared to the first quarter of 2023, caused by the writer and actor strikes in 2023.

Current wording

National advertising revenue decreased by $2.6 million, or 5.9%, from $44.3 million for the second quarter of 2023 to $41.7 million for the second quarter of 2024. The decrease in national advertising revenue was primarily due to a 31.2% decrease in attendance due to a decreased movie slate in the second quarter of 2024 compared to the second quarter of 2023, caused by the writer and actor strikes in 2023. The decrease was partially offset by a 26.1% increase in national advertising utilization in the second quarter of 2024, as compared to the second quarter of 2023, as well as a 5.0% increase in CPMs in the second quarter of 2024, as compared to the second quarter of 2023. Inventory utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-second salable national advertising units in NCM LLC’s Noovie show, which can be expanded should market demand dictate.

Previous wording

ESA Party beverage revenue. National advertising revenue from the ESA Parties’ beverage concessionaire agreement decreased $1.8 million, or 40.9%%, from $4.4 million for the first quarter of 2023 to $2.6 million for the first quarter of 2024. The decrease was due to a due to Regal’s termination of their ESA in 2023 and the resulting discontinuation of their beverage revenue as well as an 8.7% decrease in ESA Party attendance for the first quarter of 2024, as compared to the first quarter of 2023.

Current wording

ESA Party beverage revenue decreased $3.5 million, or 52.2% from $6.7 million for the second quarter of 2023 to $3.2 million for the second quarter of 2024. The decrease was due to Regal’s termination of its ESA in 2023 and the resulting discontinuation of its beverage revenue as well as a 26.2% decrease in ESA Party attendance for the second quarter of 2024, as compared to the second quarter of 2023.

Previous wording

ESA Parties and network affiliate fees. ESA Parties and network affiliate fees decreased by $1.3 million, or 5.5%, from $23.8 million for the first quarter of 2023 to $22.5 million for the first quarter of 2024. The decrease was primarily due to the 15.8% decrease in network attendance, as well as the rejection of certain affiliate agreements through the bankruptcy proceedings in 2023. These decreases were partially offset by the increase in fees owed under the Regal Advertising Agreement, which commenced on July 14, 2023, as well as due to contractual rate increases for the first quarter of 2024, as compared to the first quarter of 2023.

Current wording

ESA Parties and network affiliate fees. ESA Parties and network affiliate fees decreased by $3.2 million, or 10.7%, from $29.9 million for the second quarter of 2023 to $26.7 million for the second quarter of 2024. The decrease was primarily due to a 31.2% decrease in network attendance, as well as the rejection of certain affiliate agreements through the bankruptcy proceedings in 2023. These decreases were partially offset by the increase in fees owed under the Regal Advertising Agreement, which commenced on July 14, 2023, as well as due to contractual rate increases with the ESA parties for the second quarter of 2024, as compared to the second quarter of 2023.

Previous wording

Depreciation expense. Depreciation expense decreased $0.3 million, or 23.1%, from $1.3 million for the first quarter of 2023 to $1.0 million in the first quarter of 2024. This decrease was primarily due to the fair value adjustments to NCM LLC’s property and equipment upon reconsolidation on August 7, 2023.

Current wording

Depreciation expense. Depreciation expense decreased $0.2 million, or 15.4%, from $1.3 million for the second quarter of 2023 to $1.1 million in the second quarter of 2024. This decrease was primarily due to the fair value adjustments to NCM LLC's property and equipment upon reconsolidation by NCM, Inc. on August 7, 2023.

Previous wording

Amortization expense. Amortization expense increased $3.3 million, or 53.2%, from $6.2 million for the first quarter of 2023 to $9.5 million for the first quarter of 2024. The increase was primarily due to the fair value adjustments to NCM LLC’s intangible assets upon reconsolidation with NCM, Inc. on August 7, 2023.

Current wording

Amortization expense. Amortization expense increased $3.3 million, or 53.2%, from $6.2 million for the second quarter of 2023 to $9.5 million for the second quarter of 2024. The increase was primarily due to the fair value adjustments to NCM LLC's intangible assets upon reconsolidation by NCM, Inc. on August 7, 2023.

Previous wording

The decrease in non-operating expense was primarily due to a $23.6 million decrease in interest on borrowings primarily due to the discharge of historical debt that occurred upon NCM LLC’s emergence from bankruptcy and reconsolidation by NCM, Inc. on August 7, 2023, a $0.7 million increase in other non-operating income primarily due to a $0.4 million decrease in loss on modification and retirement of debt. This was partially offset by a $12.9 million increase in the loss on re-measurement of the payable under the tax receivable agreement due to the inclusion of three years of projected taxable book income/(loss) within the calculation of the TRA payable in the first quarter of 2024, as compared to only one year in the first quarter of 2023, due to management’s ability to more accurately forecast following the conclusion of the COVID-19 pandemic.

Current wording

The increase in non-operating expense was primarily due to the $557.7 million gain on deconsolidation of LLC recognized in the second quarter of 2023. Additionally, there was a $8.8 million increase in the loss on the re-measurement of the payable to the founding members under the tax receivable agreement due to the inclusion of three years of projected taxable book income/(loss) within the calculation of the TRA payable in the six months ended June 27, 2024, as compared to only one year in the six months ended June 29, 2023, due to management’s ability to more accurately forecast following the conclusion of the COVID-19 pandemic. This increase was partially offset by a $26.2 million decrease in interest on borrowings primarily due to the discharge of historical debt that occurred upon NCM LLC’s emergence from bankruptcy and reconsolidation by NCM, Inc. on August 7, 2023, a $1.1 million increase in interest income and a $1.0 million increase in other non-operating income.

Previous wording

Our Operating Data—The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data):

Current wording

The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data) for the six months ended June 29, 2023 and June 27, 2024 for NCM LLC:

Previous wording

Non-GAAP Financial Measures

Current wording

Non-GAAP Financial Measures for NCM LLC

Previous wording

Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, impairment of long-lived assets, workforce reorganization costs and fees and expenses related to involvement in Regal’s Chapter 11 case (the “Cineworld Proceeding”) and the Chapter 11 Case. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, impairment of long-lived assets, workforce reorganization costs and fees and expenses related to involvement in the Cineworld Proceeding and Chapter 11 Case, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, impairments of long-lived assets, workforce reorganization costs and fees and expenses related to involvement in the Cineworld Proceeding and Chapter 11 Case. Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should it be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in the Company’s debt agreement.

Current wording

Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, workforce reorganization costs, satellite transition costs and fees and expenses related to involvement in the Cineworld Proceeding and Chapter 11 Case. Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, workforce reorganization costs, satellite transition costs and fees and expenses related to involvement in the Cineworld Proceeding and Chapter 11 Case, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in NCM LLC’s business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, workforce reorganization costs, satellite transition costs and fees and expenses related to involvement in the

Previous wording

The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions):

Current wording

The following table reconciles operating income to Adjusted OIBDA for NCM LLC for the periods presented (dollars in millions):

Previous wording

(1)Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying unaudited Condensed Consolidated Financial Statements.

Current wording

Share-based compensation costs are included in network operations, selling and marketing and administrative expense in NCM LLC’s unaudited Condensed Consolidated Financial Statements

Previous wording

(3)Workforce reorganization costs represents redundancy costs associated with changes to the Company’s workforce primarily implemented during the first quarter of 2024.

Current wording

Workforce reorganization costs represents redundancy costs associated with changes to the Company’s workforce primarily implemented during the first quarter of 2024.

Previous wording

(4)Advisor and legal fees and expenses incurred in connection with the Company’s involvement in the Cineworld Proceeding and Chapter 11 Case during the first quarter of 2024, as well as retention related expenses.

Current wording

Advisor and legal fees and expenses incurred in connection with the Company’s involvement in the Cineworld Proceeding and Chapter 11 Case and related litigation during the first and second quarter of 2024, as well as retention related expenses and retainers to the members of the special and restructuring committees of the Company's Board of Directors.

Previous wording

Beverage Revenue—Under the ESAs, up to 90 seconds of The Noovie®Show program can be sold to the ESA Parties to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. In 2023 and 2022, Cinemark and Regal, prior to its termination of the ESA, purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The ESA Parties’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future. Per the ESA with AMC, the time sold to the beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of The Noovie Show in the ESA Parties’ theaters, limited to the highest advertising CPM being then-charged by NCM LLC. Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers now increases at a fixed rate of 2.0% each year. From and after July 14, 2023, the effective date of the Regal Advertising Agreement, the Company no longer receives ESA beverage revenue from Regal.

Current wording

Beverage Revenue—Under the ESAs, up to 90 seconds of The Noovie®Show program can be sold to the ESA Parties to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. In 2023, Cinemark and Regal, prior to the termination of Regal's ESA, purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. In the first six months of 2024, Cinemark purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The ESA Parties’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future. Per the ESA with AMC, the time sold to the beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of The Noovie Show in the ESA Parties’ theaters, limited to the highest advertising CPM being then-charged by NCM LLC. Beginning in 2020 and in accordance with the 2019 ESA Amendment, the price for the time sold to Cinemark's beverage supplier and Regal’s beverage suppliers, prior to the termination of Regal's ESA, now increases at a fixed rate of 2.0% each year. From and after July 14, 2023, the effective date of the Regal Advertising Agreement, the Company no longer receives ESA beverage revenue from Regal.

Previous wording

Theater Access Fees—In consideration for NCM LLC’s access to the ESA Parties’ theater attendees for on-screen advertising and use of lobbies and other space within the ESA Parties’ theaters for the LEN and lobby promotions, the ESA Parties receive a monthly theater access fee under the ESAs. The theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with an increase occurring in the current year and the next increase occurring in 2027. Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark receives and Regal previously received an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film. These fees are also based upon a fixed payment per patron of $0.052 beginning on November 1, 2022 and (iv) increasing 8% every five years beginning November 1, 2027. On July 14, 2023, Regal rejected and terminated the Regal ESA and the Regal Advertising Agreement became effective. The payments under the Regal Advertising Agreement are based on the attendance at Regal’s theaters and the revenue generated by the Company through advertising displayed in Regal’s theaters and recorded within “ESA Parties and network affiliate fees” in the unaudited Condensed Consolidated Statement of Operations.

Current wording

Theater Access Fees—In consideration for NCM LLC’s access to the ESA Parties’ theater attendees for on-screen advertising and use of lobbies and other space within the ESA Parties’ theaters for the LEN and lobby promotions, the ESA Parties receive a monthly theater access fee under the ESAs. The theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with the most recent increase occurring in 2022 and the next increase occurring in 2027. Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark receives and Regal, prior to the termination of Regal's ESA, received an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film. These fees are also based upon a fixed payment per patron of $0.052 beginning on November 1, 2022 and (iv) increasing 8% every five years beginning November 1, 2027. On July 14, 2023, Regal rejected and terminated the Regal ESA and the Regal Advertising Agreement became effective. The payments under the Regal Advertising Agreement are based on the attendance at Regal’s theaters and the revenue generated by the Company through advertising displayed in Regal’s theaters and recorded within ‘ESA Parties and network affiliate fees’ in the unaudited Condensed Consolidated Statement of Operations.

Previous wording

(1)Included in cash, cash equivalents and marketable securities as of March 28, 2024, December 28, 2023 and March 30, 2023, was $54.8 million, $31.9 million and $54.7 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, TRA payments and other obligations.

Current wording

Included in cash, cash equivalents and marketable securities as of June 27, 2024, December 28, 2023 and June 29, 2023, was $51.9 million, $31.9 million and $0.0 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, TRA payments and other obligations.

Previous wording

(2)The Revolving Credit Facility 2023 portion of NCM LLC’s total borrowings that is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the Revolving Credit Facility 2023, which subject to fluctuations in underlying the assets, is $55.0 million as of March 28, 2024. As of March 28, 2024, the amount available under the NCM LLC Revolving Credit Facility 2023 in the table above is net of the amount outstanding under the Revolving Credit Facility 2023 of $10.0 million, and net letters of credit of $0.6 million.

Current wording

The Revolving Credit Facility 2023 portion of NCM LLC’s total borrowings that is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the Revolving Credit Facility 2023, which subject to fluctuations in the underlying assets, is $55.0 million as of June 27, 2024. As of June 27, 2024, the amount available under the NCM LLC Revolving Credit Facility 2023 in the table above is net of the amount outstanding under the Revolving Credit Facility 2023 of $10.0 million, and net letters of credit of $0.6 million.

Previous wording

As of March 28, 2024, the weighted average remaining maturity of our debt was 2.4 years. As of March 28, 2024, 100.0% of our borrowings bear interest at variable rates and our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.

Current wording

As of June 27, 2024, the weighted average remaining maturity of our debt was 2.1 years. As of June 27, 2024, 100.0% of our borrowings bear interest at variable rates and our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.

Previous wording

•Operating Activities. The $13.7 million increase in cash provided by operating activities for the three months ended March 28, 2024, as compared to the three months ended March 30, 2023, was primarily due to 1) $33.6 million decrease in net loss adjusted for non-cash items during the three months ended March 28, 2024, as compared to the three months ended March 30, 2023, 2) a $4.9 million change in other operating assets and liabilities primarily due to the commencement of new leases in the three months ended March 28, 2024, 3) a $4.2 million increase in deferred revenue, 4) a $1.8 million decrease in payments to the ESA parties and 5) a $0.9 million decrease in prepaid expenses during the three months ended March 28, 2024, as compared to the three months ended March 30, 2023. The increases in cash provided by operating activities were partially offset by 1) a $23.5 million increase in payments of accounts payable and accrued expenses, 2) a $4.8 million decrease in account receivable collections and 3) a $3.6 million decrease in integration and other encumbered theaters payments received in the three months ended March 28, 2024, as compared to the three months ended March 30, 2023.

Current wording

Operating Activities. The $27.3 million increase in cash provided by operating activities for the six months ended June 27, 2024, as compared to the six months ended June 29, 2023, was due to 1) a $45.5 million decrease in net loss adjusted for non-cash items, 2) a $16.3 million decrease in the change in prepaid expenses, 3) a $3.1 million increase in deferred revenue and 4) a $1.1 million decrease in amounts due to/from unconsolidated affiliate, during the six months ended June 27, 2024, as compared to the six months ended June 29, 2023. These increases in cash provided by operating activities were partially offset by 1) an $18.8 million increase in payments of accounts payable and accrued expenses due to Regal’s termination of their ESA in 2023 and the terms of the Regal Advertising Agreement entered into in 2023, 2) a $12.2 million decrease in account receivable collections, 3) a $3.4 million decrease in integration and other encumbered theaters payments received, 4) a $3.4 million change in other operating assets and liabilities, and 5) a $1.0 million decrease in payments to the ESA parties during the six months ended June 27, 2024, as compared to the six months ended June 29, 2023.

Previous wording

•Investing Activities. The $0.6 million increase in cash used in investing activities for the three months ended March 28, 2024, as compared to the three months ended March 30, 2023, was primarily due to a $0.5 million increase in purchases of property and equipment in the three months ended March 28, 2024, as compared to the three months ended March 30, 2023, in connection with the commencement of new leases.

Current wording

Investing Activities. The $1.6 million increase in cash used in investing activities for the six months ended June 27, 2024, as compared to the six months ended June 29, 2023, was primarily due to a $1.7 million increase in purchases of property and equipment during the six months ended June 27, 2024, as compared to the six months ended June 29, 2023, in connection with the commencement of new leases.

Previous wording

•Financing Activities. The $2.1 million decrease in cash used in financing activities for the three months ended March 28, 2024, as compared to the three months ended March 30, 2023, was primarily due to a $1.2 million decrease in payments of debt issuance costs due to an amendment to the Credit Agreement 2018 and Revolving Credit Agreement 2022 in the three months ended March 30, 2023, as well as a $0.8 million decrease in repayment of the term loan facility due to the discharge of NCM LLC’s historical debt through its Chapter 11 Case in 2023.

Current wording

Financing Activities. The $41.8 million decrease in cash used in financing activities for the six months ended June 27, 2024, as compared to the six months ended June 29, 2023, was primarily due to the removal of $49.6 million of cash caused by the deconsolidation of NCM LLC in the second quarter of 2023. Additionally, there was a $1.2 million decrease in payments of debt issuance costs due to an amendment to the Credit Agreement 2018 and Revolving Credit Agreement 2022 in the six months ended June 29, 2023, as compared to no activity within the six months ended June 27, 2024. These decreases were partially offset by a $9.2 million increase in payments made to repurchase shares of NCM, Inc.'s common stock and $0.7 million increase in cash redemptions of NCM LLC common membership units during the six months ended June 27, 2024.

Previous wording

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of March 28, 2024 were $60.1 million (including $54.8 million of cash and restricted cash held by NCM LLC). NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its Revolving Credit Facility 2023 and cash on hand. NCM LLC drew down $10.0 million of its Revolving Credit Facility 2023 immediately upon emergence from bankruptcy on August 7, 2023. The $54.8 million of cash at NCM LLC will be used to fund operations. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA, stock repurchases and for future payment of dividends to NCM, Inc. stockholders.

Current wording

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of June 27, 2024 were $56.7 million (including $51.9 million of cash and restricted cash held by NCM LLC). NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its Revolving Credit Facility 2023 and cash on hand. NCM LLC drew down $10.0 million of its Revolving Credit Facility 2023 immediately upon emergence from bankruptcy on August 7, 2023. The $51.9 million of cash at NCM LLC will be used to fund operations. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA, stock repurchases and for future payment of dividends to NCM, Inc. stockholders if and when declared by the Board of Directors.

Previous wording

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and NCM LLC’s other members were deferred during the Chapter 11 Case. NCM LLC is required, pursuant to the terms of the NCM LLC Operating Agreement, to distribute its available cash, as defined in the NCM LLC Operating Agreement, quarterly to its members (only NCM, Inc. as of March 28, 2024). The other members are only able to receive available cash when they hold units. The available cash distribution to the members of NCM LLC for the three months ended March 28, 2024 was calculated as approximately negative $10.2 million, due entirely to NCM, Inc, as the sole holder of NCM LLC units as of March 28, 2024. Pursuant to the NCM LLC Operating Agreement, there were no available cash distributions made for the first quarter of 2024. NCM, Inc. has the option to defer payment at its discretion.

Current wording

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and NCM LLC’s other members were deferred during the Chapter 11 Case. NCM LLC is required, pursuant to the terms of the NCM LLC Operating Agreement, to distribute its available cash, as defined in the NCM LLC Operating Agreement, quarterly to its members (only NCM, Inc. as of June 27, 2024). The other members are only able to receive available cash when they hold units. The available cash amount to the members of NCM LLC for the three months ended June 27, 2024 was calculated as approximately $1.3 million, due almost entirely to NCM, Inc., as the primary holder of NCM LLC units as of June 27, 2024. Pursuant to the NCM LLC Operating Agreement, no available cash distributions will be made for the second quarter of 2024, as the amounts were offset by the accumulated negative available cash balance. NCM, Inc. has the option to defer payment of any available cash distributions payable to NCM, Inc. at its discretion.

Previous wording

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Revolving Credit Facility 2023) to fund payments associated with the TRA, stock repurchases and future dividends as declared by the Board of Directors. The Company does not expect to make a TRA payment in 2024 for the 2023 tax year and did not make a TRA payment in 2023 for the 2022 tax year. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA, income taxes and any stock buybacks or declared dividends for the foreseeable future at the discretion of the Board of Directors. At the discretion of the Board of Directors, it is the Company’s intention to distribute substantially all its free cash flow to stockholders through dividends. The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant.

Current wording

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Revolving Credit Facility 2023) to fund payments associated with the TRA, stock repurchases and future dividends if and when declared by the Board of Directors. The Company does not expect to make a TRA payment in 2024 for the 2023 tax year and did not make a TRA payment in 2023 for the 2022 tax year. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA, income taxes and any stock repurchases or declared dividends for the foreseeable future at the discretion of the Board of Directors. At the discretion of the Board of Directors, the Company will consider returning a portion of its free cash flow to stockholders. The declaration, payment, timing and amount of any future stock repurchases or dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant.