Greetings and welcome to the National CineMedia Inc., Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Katie Scherping, Chief Financial Officer for National CineMedia. Thank you, Ms. Scherping. You may begin.

Thank you, Doug, and good afternoon, everyone. I'd 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 Act of 1934 as amended. All statements, other than statements of historical fact communicated during this conference call, may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the Company's expectations are disclosed in the risk factors contained in the Company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors. Further, our discussion today includes some non-GAAP measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP basis measurement. These reconciliations can be found at the end of today's earnings release, which may be found on the Investor Page of our website at www.ncm.com. Now, I'll turn the call over to Andy England, CEO of National CineMedia.

Thanks, Katie. Good afternoon, everyone. Welcome and thank you for joining us on our second quarter 2018 earnings call. I will begin today's call by reviewing the Company's second quarter and first half of 2018 results and highlights. Katie will then provide a more detailed discussion of our financial performance and our guidance. As always, we will leave time for questions. I am very pleased to report that we have kept the momentum going from our great start to the year and continued the revenue and adjusted OIBDA growth into second quarter for a solid first half of 2018. Total revenue for the second quarter ended June 28, 2018 increased 17.1% to $113.7 million from $97.1 million for the comparable quarter last year. Adjusted OIBDA increased 23.6% to $52.3 million for the second quarter of 2018 from $42.3 million for the second quarter of 2017. As we look back on the first half of the year, total revenue for the first six months ended June 28, 2018, increased 14.7% to $193.9 million from $169 million for the comparable period last year. Adjusted OIBDA increased 26.2% to $75.6 million for the first six months of 2018 from $59.9 million for the first six months of 2017. Both our national and local and regional sales teams performed well in the second quarter. National advertising revenue was up 19.4% to $78.8 million in the second quarter of 2018 versus $66 million in the second quarter of 2017, excluding beverage revenue from the founding members. As in the first quarter, this $12.8 million increase was largely driven by scatter, as advertisers are trending more towards spending their money much closer to campaign air dates. And network attendance was up 21.3% in Q2, thanks to the highest quarterly box office on record. We saw a…

Thanks, Andy. I'll walk through our results that Andy highlighted in further detail and discuss our thoughts on the quarter and our outlook for the rest of the year. Then we’ll open the call to your questions. But before I get into the numbers, I'll refer you to the supplemental presentation on our Investor Relations section of ncm.com. For the second quarter, our total revenue increased 17.1% or $16.6 million to $113.7 million versus $97.1 million in Q2 2017, driven by a 19.4% or $12.8 million increase in national advertising revenue and 11.9% or $2.8 million increase in local and regional advertising revenue and a 13.2% or $1 million increase in beverage revenue. Total Q2 2018 adjusted OIBDA increased 23.6% or $10 million to $52.3 million from $42.3 million in the second quarter of 2017 and adjusted OIBDA margin increased to 46% from 43.6% in Q2 2017. It's worth pointing out that the adjusted OIBDA growth generated in the second quarter includes the impact of almost $1 million of non-recurring legal and professional fees related to our settlement with Standard General this year, a 15% or $2.8 million increase in theater access fees related to the record Q2 box office, and our continued investment in the Noovie digital ecosystem. For the first six months of 2018, total revenue increased 14.7% or $24.9 million to $193.9 million from $169 million in the first six months of 2017. Adjusted OIBDA increased $15.7 million or 26.2% to $75.6 million from $59.9 million in the first six months of 2017, and adjusted OIBDA margin increased to 39% from 35.4% versus six months of 2017. The Q2 and year-to-date increases are driven by an increase in high margin national advertising revenue due to a significantly stronger scatter market in 2018 compared to last year. In…

Thank you. [Operator Instructions] Our first question comes from the line of Eric Handler with MKM Partners. Please proceed with your question.

Yes, thanks for taking my question. Good afternoon. Just wondering if you could dig in a little bit on revenue, particularly on the national side, your utilization went down on a year-over-year basis, but CPM shot up to 13.4%. We haven’t had a double-digit quarter in about six quarters. And so I’m just curious how you balanced a lot of excess impressions that you had to sell versus CPMs and sort of what – is there anything in particular that made scatter so strong?

Well, thanks for the question Eric. A couple of thoughts, as I mentioned, Q2 box office was a – was actually a record. It was a record for the U.S. box office, not just for a second quarter, but for any quarter. And so obviously that was partly driven by attendance. So if you look at the attendance across our network, it was up slightly over 21%. So right there, you'll see, we grew revenue just over 17% when attendance was up just over 21% and that’s fundamentally, why utilization is down a little bit. The CPM piece to your exact point was very much driven by scatter and we had a very successful scatter quarter. I think we feel good about the economy. We feel good about the advertising economy. What I will say is that we increasingly have advertisers who wish – who are willing to pay more to buy late. So much as we continue to push the upfront, and we feel good about our efforts in the upfront, what's interesting is we do see scatter dollars getting placed later, and we've seen them placed at CPMs by buyers who are keen to place, but not concerned about the savings that come with booking much earlier. So that's kind of the overall context, I think.

Was there any one advertise of maybe a couple advertisers that help drive it up or was this – what were you seeing was pretty fluid throughout the quarter?

I think it was fairly fluid, and then we clearly have – as you know, as a medium, we’re relatively high churn. We have advertisers who didn't return. We had advertisers who came in, and in some cases, came in having not been with us for a while. So, I think, we have a – even though we have a relatively high level of churn. We also have a high level of interest. So there are certainly similar important advertisers, as we mentioned in [indiscernible] like Telco who came in with Gusto if you like. But it’s difficult to point to any one particular advertiser that was just I think a healthy level of movement and people who are looking to reach millennials found us.

Okay. And then just one last question. Last quarter, I mean, you guys said that 2Q was off to a very good start, and obviously, that flowed through the rest of the quarter. I'm curious to see how – or curious to know what commentary you can give us about 3Q, especially, as comparisons start to become a little bit more difficult?

Yes. So here's what I would say, Eric. I mean, what we know today has been factored into our expectations or guidance for the year. And I'd say, if the business momentum remains as strong as it has been, then it would certainly be reasonable to expect guidance to be raised further, as we progress throughout the year. But in an effort to be somewhat conservative, this is where we feel comfortable raising the guidance today.

Got it. Thank you very much.

You’re welcome. Thank you, Eric.

Our next question comes from the line of Jim Goss with Barrington Research. Please proceed with your question.

Thanks. A couple of questions about the way you’re branding yourself somewhat. You note that you're the biggest millennial we can network, which used to be the biggest network, aside from bigger than broadcasting, in general. Is this shift in language meant to change the thrust of your business or is there – should anything be read into that or is it – how would that go?

To answer your question, Jim, I think, it's certainly not an intent to downsize the impact of that story. I think, it's more of an attempt to focus on just how important we are with millennials, and we certainly do very well with advertisers who are looking at millennials, so that's really very much our focus. But no, it's not intended to be another filter in order to position us as the largest. I think, we are the largest without that word millennial attached.

Okay. And maybe in a related vein. You mentioned the new focus on some of the pre-show games you might play with the apps and the stream. Have the efforts to do that sort of thing affected the rest of the audience at all that might not be so anxious to play or does it? I think it's been intended to go quite a bit before when the first of the ads would be shown, so it would be something even earlier yet. But does that make a difference to the rest of the audience?

Here's what I'll tell you about it, Jim. I think, firstly, we think gaming is a huge idea for us related to your first question, because millennials love gaming. And so, we think it's a very fertile territory for us, and I would tell you that we have very positive feedback on it. We also have – once in a while, we had feedback that people don't appreciate it, but for the most part, I would say that the feedback is overwhelmingly positive. To your point, we put those games, at least right now pretty early in the show, and the reason we do is because that's frankly, where we have inventory that is available to be used for such things. But we also – it's very much our intention, as we get sponsorships, for example, to potentially push it later in the show. So we happen to sell our first sponsorship of Noovie ARcade, it's going to happen in the fourth quarter, I obviously, can't tell you who the advertiser is, but we saw the sponsorship of it, which give us an opportunity to move it later in the show. So we'll certainly learn. We get feedback the whole time direct from consumers, and we think, overall, this is very positive thing would be our interpretation of the feedback.

Okay. And last question. I know the PSA is not broken out the way beverage is, and I think it hasn't actually been. Is that of any greater or lesser relevance than it used to be and where are you just including that in your national ad revenues?

That’s just included, and I think, you're referring to the silence of your cell phones that we do get sponsored. That's just included in our national revenue. We certainly think it's important. We sell it for a considerable amount of money. I think there are too many advertisers who sponsor it, and we see it as being an important part of our offering. But it is bundled international.

Okay. Thank you.

Thank you, Jim.

Our next question comes from the line of Mike Hickey with The Benchmark Company. Please proceed with your question.

Hey Andy, Katie, Ted.

Hi Mike.

Hi Mike.

Thanks for taking my questions. Appreciate it. I guess the first one, you hit it on a little bit, but assuming the first half of the year, it looks like you're up $25 million in sales and $16 million in EBITDA compared to the prior year. So maybe just were just a deeper look at the guide, I'm curious [indiscernible] visibility and how your upfront money is attracting for the second half of the year because it sounds like content partner among its more weighted towards the second half of the year. So it seemed like you were less reliant sort of [indiscernible]. And then on the local side, obviously, since restructuring for our guidance [indiscernible] continued growth player in Q3? And I guess the last question on scatter, you mentioned – it sounds like potentially impactful to the second half, not being kind of strong – it’s doesn’t necessarily drive the national or foreign business, but curious with the success of scatter in the first half [indiscernible] those money more tied to a successful strong form scatter – strong box office?

There is a lot there Mike and I can’t really – we miss some of it, you are breaking up a little bit. To your point, we ended the first half, well ahead of last year, and frankly I wouldn’t want you to read too much into our guidance. You'll know, having followed us for quite a while, that we've been ahead of ourselves guidance in a couple of previous years, and we have don't plan to get ahead of ourselves on guidance, hence the point about the conservatism. I think you mentioned attendance. I think we are looking at the second half and trying to understand what attendance expectations are. There are quite a few analyst reports out there that have different – substantially different numbers, particularly around Q3. But so, we're literally trying to understand that. And, I think, also, I mentioned the scattered tends to be a book later and later, partly because of the advertisers who are booking it. So, I think, we found ourselves in previous quarters being concerned at the beginning of the quarter and found those concerns allayed as the later booking came in. So, all of which means that we feel very good about the cinema medium, we think we are a great place to in a market, where TV is really struggling. The main digital guys are offering you a box instead of humans, and we think Cinemark is a great place to be where excited about the 2019 slight as well by the way. We just want to make sure that we don't mislead our investors and stay appropriately conservative.

Okay, thank you. I guess the last question perhaps, on some of the new pricing models that are starting to, sort of, get some traction here. Obviously, AMC is looks to have a very successful subscriber plan and obviously, that is intended to drive attendance among so a lot of other things. But just curious, sort of how you see your business evolving, which greater adoption of subscription plans to move regards in the pickup of attendance that we expect we'll see over the next several years.

Well, as you know we don’t care about box office. We care about attendance. I mean we care about box office, because we want to add to circuits and other affiliates to be successful. But what we have fundamentally care about is attendance. And so the way I look at it is the subscription plans are a good thing. I think, if movie pass has proved anything, it's proved that the people like the idea. We can debate the price and the business model but certainly, people like the idea. It seems to drive greater usage, like any really good loyalty program. So we are encouraged and delighted to see how aggressive AMC was with their plan. But certainly, we are interested in Cinemark's plan as well. So overall, we see it as being a positive for the industry and certainly, a positive for us.

Okay, thanks guys. That’s enough.

Thank you, Mike. End of Q&A

[Operator Instructions] There are no further questions in a queue. I’d like to hand the call back to management for closing comments.

Thank you, Doug. It has been a very productive Q2, and a great first half of 2018. We achieved strong revenue and Adjusted OIBDA growth and continued to attract new and returning advertisers to cinema and to our new Noovie digital ecosystem, all while successfully launching Noovie ARcade, reaching an agreement with Standard General, refinancing our senior secured credit facility, eliminating the AMC stock overhang, and moving our corporate headquarters to a great new modern facility. This enables us to continue to focus on the strategy of growing our business, being the first choice for our customers, developing our people and capabilities and allocating resources to strategy. Thank you for participating in our Q2 2018 earnings call, and I'll see you at the Noovie’s.

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.