Greetings. Welcome to the National CineMedia, Incorporated First Quarter 2019 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] Please note this conference is being recorded. I'll now turn the conference over to your host, Katie Scherping, Chief Financial Officer. Ms. Scherping you may begin.

Thanks, Omer. Good afternoon. I'm joined today here in Denver by Cliff Marks, our President and Interim CEO; and Tom Lesinski, our Chairman of the Board is joining us by phone. 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 Exchange 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 Going, we have reconciled those 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. Now, I'll turn the call over to Tom.

Thank you. Good afternoon and welcome everyone. Before I turn the call over to Cliff Marks to discuss our results, I would like to update you on our CEO search. As you know, our goal is to identify a leader who can capitalize on the strengths and future opportunities of our company, and our unique video advertising medium and innovate around NCM's core business to ensure that we are best positioned for sustainable profitable growth and value creation for our advertising partners and shareholders alike. With the help of a national search firm, our CEO search committee has talked to a high -- excuse me, has talked to a number of highly qualified candidates and had narrowed the field down to a very small group of seasoned executives that we feel would be a cultural fit for NCM with a strong mix of media, advertising and digital experience that would help strengthen NCM's core advertising products and accelerate our future growth. We expect to make a final decision before the end of May. I'd like to take a minute to thank Cliff, who has continued to do an excellent job leading NCM as our interim CEO, while also continuing to spearhead our media sales strategy. Cliff will continue to play an important role to ensure his seamless leadership transition, when our new CEO virtually comes on board, and of course, continue to drive advertising sales growth once the new CEO is hired. With that, I'll now turn it over to Cliff to make a few remarks on the business before Katie reviews the financial results for the first quarter and provides insight into our 2019 guidance.

Thanks Tom. Hello everyone, and thanks for joining us on today's call. I will be providing a few observations and highlights about our first quarter 2019 operating results, and Katie will then provide a detailed discussion about our financial performance and reaffirm our 2019 revenue and adjusted OIBDA guidance. As always, we will then leave time for questions. You may recall that Q1 2018 was a record for us, and while I always wanted to bore, I was pleased with our first quarter results given the tough box office comp and its impact on the timing of 2019 client spending. Our total revenue for the first quarter ending March 28, 2019 decreased 4.1% versus the comparable first quarter record that was set last year. Despite this slightly lower total revenue, we were also able to control costs and maintain our margins as adjusted OIBDA decreased 5.2% versus the first quarter of 2018. Our national advertising team experienced strong demand for marketers, as our 2019 national bookings during Q1 were at the highest levels ever for first quarter. This strong demand was driven by our upfront commitments from a good mix of existing and new advertisers in categories, including financial products and services, computer software, liquor and apparel footwear and accessories. Unfortunately, our Q1 revenue was adversely impacted by the lower attendance, as we simply did not have enough impressions to satisfy our make-good obligations combined with a few clients, who opted to move their make-good from 2018 to future quarters. This prevented us from realizing the full revenue potential from the 2018 carryover in Q1 as expected. The good news is, this is only a timing difference and a higher make-good at the end of Q1 will be recognized in future 2019 quarters. Our make-good at the end of Q1…

Thanks, Cliff. I'll walk through the results that Cliff highlighted in further detail, discuss our thoughts on the quarter as well as our full year outlook then we'll open the call to your questions. We will be providing a supplemental presentation of these results on our website for your future reference. For the first quarter, our total revenue was $76.9 million compared to $80.2 million in Q1 2018, a reduction of 4.1%. This $3.3 million change was driven by a $1.3 million decrease in beverage revenue, a $1.2 million decrease in local and regional advertising revenue and an $800,000 decrease in national advertising revenue. Total Q1 adjusted OIBDA was $22.1 million, a decrease of $1.2 million or 5.2% versus Q1 2018. The adjusted OIBDA margin for the quarter was 28.8% compared to 29.1% during the same period last year, primarily due to a decrease in beverage revenue that flows through at 100%, which was partially offset by our continued focus on cost control. I would note that the adjusted OIBDA result include a decline in operating expenses of 3.7% or $2.1 million, primarily related to a $1.5 million decrease in theater access fees driven by a 15.8% decrease in founding member attendance. Further savings of $900,000 resulted from ongoing operating cost optimization and $500,000 of higher capitalizable labor, because of our digital initiatives ramping up, partially offset by $300,000 of higher affiliate fees due to an increase in the number of affiliate screens this year. Our Q1 2019 advertising revenue mix was 70% national, 17% local, 4% regional and 9% beverage versus Q1 2018 that was 68%, 16%, 6% and 10% respectively. For the first quarter of 2019, national ad revenue was $54 million, only an $800,000 or 1.5% decrease versus a record Q1 2018. The change was driven by…

[Operator Instructions] Our first question comes from Eric Handler, MKM Partners. Please proceed with your question. Q – Eric Handler: Good afternoon. Thank you for the question. Katie, just curious with Avengers being as strong as it is, did you put a lot of inventory into the film already or did you -- were you able to soak up the make-goods that weren't pushed out to the back half of the year? Were you able to soak up those make-goods with excess Avengers' impressions? And then secondly, I wonder you guys have always done best with PG-13 movies or R movies, Lion King does it make a difference if it's PG or PG-13, given how strong it's expected to be? A – Katie Scherping: Yes I'll answer the second one first. So the upcoming slate is pretty heavily weighted to G and PG. So Aladdin, Lion King, Toy Story, so that may prove a rating mix challenge for us to actually get the inventory in the right spots for the advertisers who're wanting to place it. So that could create an end of quarter make-good or continue to have make-good challenging us using inventory throughout the balance of the year. But we're hopeful that we can manage through that inventory. As far as the Avenger strength, yes I mean going well above the projected box office was a good thing for us. And what did allow us to soak up some of that quarter end make-good and actually it was our beyond the April -- our May-month end. So that's hopefully going to bode well for coming out of May. Now June is another very strong month with a lot of late-breaking slate. So we'll see where June make-goods plan.

Okay. Thank you.

Our next question comes from Eric Wold, B. Riley FBR. Please proceed with your question.

Thank you. Got couple questions. If one on the digital offering -- maybe update us where you're on the spending behind getting that to where you want to be both on operating basis and CapEx basis? Kind of when do you expect that to level out or possibly decline from here? And then how impactful has that been in terms of being a corporate and various advertising campaigns. Is there a way to think about digital being net contributory to adjusted OIBDA at some point on its own? And when that might be? And I have a follow-up.

Yes. So our CapEx last year for digital spend was about $7 million. We expect between $7 million and $8 million again this year. Last year our OpEx was somewhere close to $9 million. We expect that will increase probably in the $12 million to $13 million range for this 2019 from the OpEx side. So that gives you kind of a sense for the investment we are making, and then Cliff can speak to the integration.

Yes. The integration part's really important to us. We see more brands who want multiple touch points. And if you look at the new reshuffle that we just launched last week in Avengers, you will note that State Farm was our partner to launch that. You'll note that they're taking a position with us not only on-screen, but on mobile and other areas and they want to be able to touch consumer throughout the experience. So I think you will continue to see a lot of brands integrate on-screen, online, on mobile. And I think that's an important part of our strategy going forward.

Okay. Just quick back Katie on the spend for this year. Does that -- you know we have guided next year but that OpEx spend need to go up next year other than normal inflationary increases? And what about CapEx as well?

We're probably going to be fully staffed by the end of this year so you will have a full year in 2020. You will have to bake that in. So it will be a little bit higher on the run rate OpEx side. CapEx will probably begin to wind down a bit in 2020. So I'm not going to be specific about that, but I would guess it will start to wind down in 2020 as we build out a lot of the digital platform and the base product that we're using and then just continue to refresh those products as we move forward.

Okay. And then just last question, sort of capital allocation question -- dividend was obviously reduced a year and change ago to fund the launch of the digital offering. Now that's becoming kind of peak spending level. I'm not arguing for the dividend to go back up, but clearly you're not giving credit to the dividend where it is now still yielding 9%. Why not try to get more authorization to repurchase more of the senior notes which clearly would have much more of a benefit operationally than our -- kind of earnings-wise than a dividend which is not getting a lot of credit out there?

No, I think those are all good questions. But certainly definitely use of our capital allocation and it comes from the capital allocation at LLC first, and then as the byproduct at NCMI of what happens to the dividend. So as we increase -- or wind down advancements in digital if you will that gives us more room to potentially pay down debt. There is lot of things that are alternatives to that use of capital. So we'll be evaluating that continually as we always do.

Yes. Thank you.

[Operator Instructions] Our next question comes from Jim Goss, Barrington Research. Please proceed with your question.

All right. Thanks. The regional ads sound a lot like National Spot. And I'm wondering if they are -- if this is effectively a newer category that increases your ad demand and helps in pricing? And sort of in a related vein, how many do you have on the sales staff right now? And are you, sort of, poaching some of the TV ad sales staff to fill those roles since they would be dealing with those sort of opportunities?

Are you specifically asking how many are on the regional sales staff or in total?

Yeah, yeah, yes, more on the regional, yeah.

Yeah. You know listen I'm glad you kitted [ph] on regional. We really see regional as an interesting kind of middle ground of upside for us. It is completely synonymous with National Spot take the way you said that is exactly correct. We're going to build our National Spot sales organization that allows us to get that money in the middle. We do a great job at national. We do a really strong job at local. But there is a whole business out there, especially with FreeWheel and Mediaocean. There is a whole business of money out there that we think we can capitalize more on, by having a strong regional presence to compete in the National Spot marketplace. If you look at NCM's ratings in any National Spot market, New York, L.A., Chicago, San Francisco we actually out rate most of the strongest stations in the market. We believe there is a great opportunity there. We have -- we currently have six people on that team, and looking to grow it. So you will see regional, while still a small portion of our total business 4% or 5%, become a more important part of our business going forward.

Okay. And separately, you discussed the potential naming of a new CEO, over the next month. I'm wondering if there is any preview of the degree of change we might expect? Are you looking to evolve? Or have someone with a lot of free reign that might shake up certain things more? What is there to expect with this change?

So this is Tom. Let me answer that question. I think it would be premature to talk about what the CEO is or isn't going to do. Clearly, we've been looking for somebody with a diverse background that can really help grow the business in a lot of different areas. But I think until that person comes onboard, it would be premature for us to talk about change and/or any movements in our strategy. But soon enough, towards the end of May we will have identified this person. So, come soon possibly as early as June. We will be able to communicate to you a little bit about, who that person is? And what the plans are for the company?

All right, thanks Tom. I appreciate it.

We have reached the end of the question-and-answer session. I'll now turn the call back over to, Cliff Marks for closing remarks.

Thank you, Omer. I remain very optimistic about NCM's business. Demand from national advertisers remain strong and the excitement around the movie slate for the remainder of the year is absolutely amazing. As digital becomes increasingly cluttered and considers a lot of privacy spread and TV audiences, increasingly age up and fragment, and while our ratings continue to decline, cinema continues to be an uncluttered haven for advertisers, looking to supplement their reach, and target valuable young post cutters with a passion for entertainment, brands and a full movie experience. Thank you for participating in our Q1 2019 earnings call. And I'll see you at the movies.

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