Greetings and welcome to the National CineMedia Fourth Quarter and Fiscal Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Katie Scherping. Please go ahead.

Thanks, Stacy. Good afternoon, everyone. 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 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 financial measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP basis measurement. These reconciliations can be found at the end of today’s earnings release, which maybe found on the investor page of our website at www.ncm.com. With that, I’ll turn the call over to Andy England, CEO.

Thanks, Katie. Good afternoon, everyone. Welcome and thank you for joining us for our fourth quarter and full-year 2016 earnings call. During this call, I will spend a few minutes highlighting the company’s fourth quarter and full-year 2016 results, and Katie will then provide a more detailed discussion of financial performance for Q4 and full-year 2016, as well as guidance for 2017. And then as always, we will open the line for questions. As you know, 2016 was my first year as CEO of National CineMedia, and I’m happy to say that it was a good one, especially in Q4. Total revenue for the fourth quarter of 2016 increased 4.5% to a record $142.5 million and adjusted OIBDA increased 14.9% over Q4 of last year to a record $86.4 million. Our National sales team bought in yet another one for the record books with $96.4 million in national advertising revenue in Q4 compared to $88.8 million in Q4 of 2015. Both CPMs and utilization rose in the fourth quarter, driven mainly by a significant spike in December that resulted in the CPM increase of 19.8% and a 3.9% increase in utilization. Our digital sales team had a solid Q4 as well. On the downside, our local and regional advertising revenue fell below last year’s record fourth quarter numbers by 3.2% to $39.3 million. As per our results for full-year 2006, excuse me, 2016, 2015 was a very tough year to beat, both at the movies and for NCM. But just at the 2016 box office revenue record, NCM’s revenue and adjusted OIBDA for the full-year 2016 set a new record since the sale of the Fathom Events business in 2013. Full-year 2016 total revenue increased 0.2% to $447.6 million from $446.5 million in 2015 and adjusted OIBDA increased 0.3% to…

Thanks, Andy. I’m going to reiterate some of the results that Andy previously touched on, in case, you didn’t catch them before. For the fourth quarter, our total revenue increased 4.5% to a record $142.5 million breaking the previous record of $136.4 million in Q4 2015, driven by an 8.6% increase in national advertising revenue, partially offset by a 3.2% decrease in local and regional advertising revenue, and a 2.9% decrease in beverage advertising revenue. With the higher Q4 national advertising revenue growth, our Q4 advertising revenue mix shifted to 68% national, 27% local and regional, and 5% beverage versus 65%, 30% and 5%, respectively, for Q4 2015. And our full-year advertising revenue mix shifted to 70% national, 24% local and regional, and 6% beverage versus 69%, 24%, and 7%, respectively, for fiscal year 2015. For the fourth quarter, national ad revenue was $96.4 million, a $7.6 million, or 8.6% increase from Q4 2015, which was driven by a 19.8% increase in CPM, partially offset by a 4.1% decrease in impressions sold combined with the decline in other revenue versus Q4 2015. This increase in CPMs was primarily due to higher CPMs on upfront commitment and to a lesser extent to scatter market. The decrease in impressions sold was due to a 7.2% decrease in attendance with inventory utilization increasing to 136% from 132.1% in Q4 last year. For the full-year, national ad revenue was $311.9 million, an increase of $4.9 million, or 1.6% versus 2015, driven by a 9.6% increase in CPMs, partially offset by an 8.2% decrease in impressions sold. Our higher 2016 CPMs reflect the success of our upfront strategy and to a lesser extent strength in the scatter market. The decrease in impressions sold is the result of a decrease in inventory utilization from 128.3% to…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Barton Crockett with FBR Capital Markets. Please proceed.

Okay, great. Thanks for taking the question. I would trace about one kind of bigger picture thought about the business. Now, we have completed a year where you had a good fourth quarter, but overall for the year pretty flattish. We’re going into a year and we felt good about the upfront, but near-term environment is a little bit tougher and the outlook also is kind of flattish. Under the previous CEO, we got the message that NCM should be a growth business that there should be a growth story here, partly taking share from television and advertising. The trend last year and the outlook for this year ahead doesn’t looks like much of a growth story. I was just wondering if you could give us your view – do you think theatre advertising is the meaningful growth story at this point, or is that kind of more of a level of maturity – more maturity perhaps than we would have expected couple of years ago?

Well, Barton, firstly, thank you for the question. I think it would be helpful to stop by level setting history. And so if, for example, you take the NCMI did its IPO in 2007. And if you look at that – if you take a nine-year CAGR from 2007 to 2016, what you’ll find is our net revenue grew 3.2% and our adjusted OIBDA grew at 2.7%. So there’s certainly growth there whether you characterize that as a growth business, I don’t know, but there is certainly underlying growth there, and we believe there will continue to be some underlying growth there. However, if we’re going to be a more exciting growth story, frankly, we need to execute our core business well, which means that we need to grow affiliates. We need to grow with our founders. We need to find new advertisers. We need to build national spot as we’ve talked about. But most importantly, if we want to grow at a greater rate, we have to crack digital. And that’s exactly why we plan to invest in digital going forward, as Katie talked about. So that’s – hopefully that helps.

Okay. And just one kind of more detailed point. In your outlook for the year, just to be clear on that, so if I mean I think AMC is required to move 19 theaters to the Screenvision network, is that factored into your guidance for loss of those screens, or is that not really factored in at this point?

Frankly, we don’t see that as being material. We don’t have an agreement with AMC about the transfer of advertising to screens at the moment. But regardless, we don’t see it is being material, so that won’t impact our guidance.

Okay. All right. I’ll leave it there for now. Thank you very much.

Thank you, Barton.

Thank you. Our next question comes from James Dix with Wedbush Security. Please proceed.

Good afternoon. Couple of questions. I guess, first is in terms of the full-year outlook, is – are there any specific assumptions is to national as opposed to local advertising growth for the year? And then just in terms of the first quarter, I guess, I’m interested in what benchmarks you use to indicate that – for TV scatter market is slow. I mean, since I’ve heard different things from different networks about how slow the scatter market is, but you’ve mentioned it, so I figured out, I would just ask like what your benchmark is on that? And then I’ve one follow-up on the AMC transaction?

Okay. Well, on the first one, I’ll ask Katie when it comes to national versus local relative expectations.

Yes, and I think between the two, we expect national to go a little bit higher than the regional business. And again, regional having some opportunity, because they’re coming off of a little bit slower quarter with the momentum being built in the 2017. So national will probably grow a little bit faster than local, but not materially different.

Okay.

When it comes to scatter, I think, it’s not a surprise to you that the media people know other media people. And so without naming names, I can tell you that we’ve talked to a number of people across the broader media industry. And as I sense that the scatter out there is thin, but you may have a different laed on it.

Okay. Did you guys sense as to when that – when you started hearing that about the market? When this kind of market started to slowdown?

Probably towards the end of January, I think, we really thought surprise us…

Yes, I mean, certainly during January the sense was, there’s not a lot out there, but these things can change, right, these things can change with advertiser optimism and so we’re just providing that as some perspective and you may have a different perspective, which we certainly respect James.

Okay. And then on the AMC transaction, any estimate or like how many shares are going to be issued to AMC’s result of the Carmike deal? And then is there any plans to divest shares pursuant to the DOJ agreement?

I would say, I’m going to be very careful in how I answer that James as you might imagine.

Yes.

I think we don’t know the number yet for multiple different reasons and that’s all part of our negotiation. So we don’t know the exact number. What I can tell you is that, we will work extremely cooperatively with AMC to make sure that we have the right strategy and we have the right plan to execute a sensible and careful placement of those shares such that the market is disrupted as little as possible, while understanding obviously, it’s a large number of shares.

Okay, great. Thank you.

Thank you.

[Operator Instructions] Our next question comes from Mike Hickey with Benchmark Company. Please proceed.

Hey, guys, thanks for taking my question. Appreciate it. There – I guess, there used to be sort of the belief that there is a relationship between media buyer interest for your platform and the relative strength of the slate at the box office. So, curious how you sort of think about, maybe not as much Q1, but the remainder of the year, given that the slate looks fairly appealing yet, maybe we’re not seeing the media buyer interest that we would normally see, given the strength of the slate? I have a quick follow up. Thanks.

Yes. Thank you, Mike. So we’ve spent sometime looking at this actually to try and get – we haven’t done a regression analysis, but we try to get a sense of the correlation between box office and our business. And I can tell you that for the 10 of the last 12 quarters, they have been positively correlated, meaning, if box office was up, NCMs net revenue was up, and if the box office was down, NCMs revenue was down. And so that clearly is an underlying correlation there. Q4 that was clearly not the case. In the fourth quarter, box office was significantly down and we had a very healthy quarters and that would obviously be an exception. I think we’re not being held by the current state of the Q1 box office. Although I think the belief is that once Beauty and the Beast kicks off, the rest of 2017 film slate will be a tailwind rather than the headwind. It’s – so that certainly maybe a factor and the fact that box office is down year-to-date. I think in general, it’s certainly – when box office is good, it certainly helps our local business that’s pretty clear, because they – those orders come to – tend to come in real-time, so it’s – so if an opening weekend is good, you can be on the next weekend, which is great. If a movie is expected to be big, so obviously, I’d point the Star Wars in the fourth quarter of 2017, which certainly everyone expects to be very think. I think, if you call that it’s going to be big, I think that certainly helps. When something is unexpectedly big, that doesn’t necessarily help, because it’s difficult to call. So that would be my observations around that topic.

Cool. Yes, that helps, it’s helpful. Thank you. The last question for me, curious about the trend Board’s [ph] big sales and assigned seating. And it seems to be increasingly going in that direction, especially with the larger releases like Star War, et cetera, which obviously a big factor I think in 2017 and 2018 slate. Also, I guess, the move to the recliners and pullback and seating capacity also is probably a motivator to make sure, you get a sweet suite for the show. So I’m curious if – I mean, I guess the implied assumption is that, if you are getting your seat assigned in a P ticket sale that you’re less enthusiastic about sitting through commercials, maybe that’s the case. But I’m curious if you’re finding that to be true, and I’m also curious if perhaps that perception is somewhat seated within the media buyers view? Thank you.

Yes, it’s good question, Mike. Firstly, I would show you the FirstLook show looks terrific from one of those comfy recliner seats. So I’d encourage you to give it a shot sometime. I think the impact of a signed or reserved seating can be a bit misleading, because there may be an impact on the margin. But particularly, the tent-poles, people want to get to the cinema early as part of the experience than we’ve heard that a lot. I also think there’s a material benefit from the growth of dine-in theatres, which are leading consumers to get to their seats early. So they can eat before the movie. So, I think it’s a mixed bag about 19% of theatres in that network currently offer reserves seating, well, obviously, that number is getting higher. I believe a similar percentage of movie tickets are bought online somewhere around the 20% mark, with the remainder still purchased at the box office. So I think it’s not as clear as that. It’s certainly a question we get asked by advertisers, advertisers want to know the impact. And certainly, the most objective third-party data we have is from Nielsen, which would tell you that it hasn’t made a difference. And so, it’s – we don’t expect everybody to be in the seat 20 minutes before show time. So we’ll always expect an audience build and Nielsen would tell you that audience build hasn’t changed. So I think it’s – the data is muddy, but it’s certainly something we watch very carefully.

All right. Thanks, guys. Good luck.

Thank you, Mike.

Thank you. Our next question comes from Jim Goss with Barrington Research. Please proceed.

Thanks. This might tie-in a little bit of what you’ve been talking about. But I’m sort of wondering about the impact of the usage of more of the weeks of the year by the major studios four major films and the consistency of demand and CPM levels, especially since the advertisers don’t know any better than anybody else exactly which of those films will wind up being the biggest hit. So I would think that usage of the full-year might play the advantage in that regard, so does it?

Well, Jim, that’s a great question. I think, I certainly think your premise is appropriate, which is, if you look at the seasonality of the box office, it’s a lot less than people think. And I think the general population and I think media buys as well think that the cinema business is driven by the summer and holidays. And the summer and holidays is certainly important, but frankly, the audience is pretty healthy throughout the year. One stat that I always like to quote is that the movie audience in the first quarter of 2016 was 97% of the audience in the fourth quarter of 2015, which just gives you a sense. If you think the first quarter is tiny and fourth quarter is huge, that happen to be a strong first quarter. But nonetheless, it’s not that seasonal. Now that said, media buys are also looking at when they need impressions, and they’re also looking at particularly where the millennials are at any given month, any given season. And so, they have – they certainly have a bias towards buying this at the summer and the holidays, there’s no doubt, and that’s the core of that business. But we are not on and ever never ending if you like a journey to help folks understand that that is the studio strategy. There are millennials to be had every month of the year, every week of the year, and we try to aim for continuity of buys with the major advertisers as a result. But it’s – your observation is fair, we just – it requires a continued work.

Are you getting any more traction with your notion that you compete directly with the major television networks and that you’re the biggest TV network effectively on Friday and Saturday night that always sort of spoke to me, and I’m wondering if it’s resonating?

I think it is. I think people understand that that is a core part of that process. It’s interesting to know, if you look at how media is bought in the U.S., each of the media planning and buying agencies typically has different groups to buy different forms of media. And you’ll find that approximate – when it comes to national advertising, approximately half of that is bought by TV buyers and about half of it is bought by outdoor buyers. And so when you’re talking to a TV buyer, you obviously want to be talking their language when you’re talking to an outdoor buyer, you want to be talking their language. But nonetheless, we feel being with a TV buyer in any given agency is a good thing for our medium, because we have a stable audience. We have tons of millennials. They’re much younger than the TV nets. Our average audience age is way younger than the average audience nets. So we think we have a great opportunity there and we continue to tell our story.

Okay. And maybe lastly, when NCM try to go into the upfront market, I think the original core upfront sales were really things you have traditional or advertisers you have traditionally dealt with anyway. I’m wondering if you have been able to layer on more and more non-traditional advertisers, so that it has, in fact, created the stability that you’ve been seeking to achieve?

That’s a difficult one to answer. What I will say is, I think, I believe we first did an upfront presentation and sought to sign up upfront customers in 2012. And I would say between 2012 and two 2016, we have established ourselves as the player and upfront week in New York. And so people are expecting our presentation, they’re expecting to hear news from us, and they’re expecting to have separate presentations, or meetings around the upfront before and after. So I think, we’ve established ourselves as a player in upfront and I think that’s really important. In terms of whether that in itself has changed our advertiser mix, it’s hard to say, because our advertiser mix has certainly changed over time, but whether that’s because of upfront, or whether just because of the changing nature of the marketplace. And I think I have to take that offline and think about it.

Okay. Thanks very much. I appreciate it.

Yes. Thank you, Jim.

Thank you. Our next question comes from Omar Sheikh with Credit Suisse. Please proceed.

Hi, everyone. Just couple of questions one for Andy, one for Katie. Andy just going back to reserve seating point circuit continuing back – continuing on that same. You talked about, I think 19% of your circuit has reserved seating, well, again the available screens have reserved seating. Do you have any sort of data points on whether that’s resulting in people coming later and you’re delivering lower impression. And if that’s the case, what’s the feedback you’re getting from advertisers about, how they think about that? So obviously, if you’re seeing an increase in that percentage over time, I guess is going to come more and more important? And the second question for Katie, just on – just kind of final thing, I wonder the numbers you gave in your guidance for the year. I think I heard you say that do you said beverage CPMs is going to be up 10% in the full-year based on flat attendance. I wonder whether you could give us some help understanding what those numbers would be for CPMs and attendance for national advertising and what’s embedded in your guidance on those two upfront? Thank you very much.

Yes. So on the first one, Omar, thanks for the questions. I think, I can’t add a whole lot to what I said before. I think the most objective source we have on the impact of reserve seating and how it impacts our audience build the Nielsen. And according to Nielsen numbers, there has been no material change in the audience built as a result of reserve seating. So, given that’s the best data that we have and the only third-party objective data that we have, that’s our belief. It’s certainly something that comes up with advertisers, advertisers ask that question, and it’s certainly the one we get into discussion on snow wall. What I’ll also tell you, however, the – is that, when it comes to digital, they can interview ability discussions. And when it comes to TV, they get into all sorts of discussions about whether people are looking at four other screens at the same time, et cetera. So I think, the way I would summarize that is that, each medium has its challenges. I think, obviously, getting butts in seats is something that’s very important to us, is something that I found the circuit as now is important to us. It’s one of the reasons why we’re taking a good hard look at our pre-show and thinking about the things that we could do differently to make it a more compelling experience for consumers, and so it’s a focus. Thanks for the question, Katie.

Okay. So your question was on the beverage CPM increase of 10% on roughly flat attendance. So, on a revenue standpoint coming off about $28 million of revenue that equates close to $3 million lift in beverage revenue. Are you asking how that’s calculated as that would the back, I couldn’t understand.

No, no. So I just wonder what the equivalent numbers of CPM and attendance expectations were for national advertising?

We don’t – we’re not going to give that detail. We don’t – we’re not disclosing what our assumptions are right now.

Okay. Thanks very much.

Thank you, Omar.

I would now like to turn the floor back over to Andy England for closing comments.

Okay. Thank you, Stacy. So I’m obviously pleased with the way we finished 2016, such that we were able to take both the top and bottom lines for the full-year into record territory. And the media industry that’s in deep disruption, National CineMedia offers advertises a compelling opportunity to reach millennials. And in 2017 and beyond, National CineMedia has the plans and the people to make good things happen. Thank you for listening and participating and thank you holding our stock.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.