Greetings. Welcome to National CineMedia, Inc. 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 would now like to turn the conference over to your host, Katie Scherping, you may begin.

Thanks Darrel. Good afternoon, everyone. I am joined today here in Denver by our CEO, Tom Lesinski; and joining us by phone is Cliff Marks, who will be available for Q&A later in the call. 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 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 measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP 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 ncm.com. And with that I would turn the call over to Tom.

Thank You Katie and good afternoon everyone. I assumed leadership role here at NCM roughly three months ago with a simple objective to return to our public company roots by delivering a substantial dividend through long-term topline growth, high adjusted OIBDA margins and high-quality earnings as measured by conversion of earnings to free cash flow. And so after providing you with a few observations about our recent quarter I'd like to share with you our vision for the company moving forward. Then as always Katie will provide more details about results and our 2019 guidance and then we will be open, we open the line for your questions. I'm very excited about the progress that we've been making to transform our business into a more effective, entertainment and advertizing distribution platform that is more data-driven and nimble in today's changing video advertising market place. With these significant strategic developments in our business all the changes to our ownership and leadership and the recently announced ability to sell ads closer to the feature film we are poised for growth in 2020 and beyond. As we noted on our call in August we got off to a strong start to the third quarter with our pipeline pacing ahead of last year. While we were able to slightly grow our Q3 top-line revenue over last year as our national business continued to perform well we finished the quarter a bit softer than we expected. A couple of national deals didn't close resulting in scatter revenue well below Q3, 2018, our regional business continued to underperform and/or may could come in higher as a few August and September films underperformed expectations. As a result our Q3 revenue and adjusted OIBDA came in below our Q3 expectations. our Q3 adjusted OIBDA was also negatively impacted…

Thanks Tom. I walk through the operating results that Tom highlighted in further detail, discuss our thoughts on our Q3 results as well as our full year 2019 outlook. Then we'll open the call to your questions. As always we will be providing a supplemental presentation of these results on our website for your future reference. For the third quarter our total revenue was $110.5 million compared to $110.1 million Q3, 2018, an increase of 0.4%. This $400,000 change was driven by a $1.5 million increase in national advertising revenue offset by a decrease in regional, local and beverage revenue. Total Q3 readjusted OBIDA was $51.7 million a decrease of $1.9 million or 3.5% versus Q3, 2018. The adjusted OBIDA margin for the quarter was 46.8% compared to 48.7% during the same period last year primarily due to a $2.7 million increase in operating expenses driven by a one-time $2 million non-cash impairment charge related to equity investments recorded in prior years in exchange for unused advertising inventory as well as the increased investment in our digital team. Our theater access fees increased $400,000 or 2% to $20.1 million in Q3 this year compared to last year as a result of the 5.5% annual increase in digital screen fees partially offset by founding member attendance decreasing point 0.3% versus the third quarter last year. For the third quarter 2019 national ad revenue was $82.3 million a $1.5 million or 1.9% increase versus $80.8 million in Q3 2018. The change was driven by a 0.4% increase in impression sold and higher branded content revenue partially offset by 9% decrease in CPM. The increase in impressions sold was driven by a 1.2% increase in inventory utilization to 134.8% from 133.2% in Q3, 2018 as we delivered impressions from the prior quarter and…

Thank you. At this time, we'll be conducting a question and answer session. [Operator Instructions]. Our first question comes from the line of Eric Handler of MKM Partners. Please proceed with your question.

Yes, thank you very much for the question, good evening. Tom, just could if you could talk a little bit about customer reaction now that you've had some time to speak with all these advertisers. Obviously, it was good enough for one person to buy the Platinum Spots, which is great, but I'm just saying, just thinking of, playing or trying to balance higher prices versus is, close to the air time for movies, what's been the reaction from clients there?

The reaction to the Platinum Spots, in particular has been really positive. And the announcement about moving five minutes into the post show time period has also been really positive. It's really been matter of timing. We've only been in the marketplace for a little over four or five weeks and candidly, it was the end of the year. But we know that the 2020 interest level beyond what we've done in November and December has been really strong. So, there's a lot of enthusiasm. We've probably talked to over 100 different advertisers already. And we're confident that 2020 is going to be a big year for both post-show and for Platinum.

So, you think the advertisers are fully buying into close lights down close to the air time of the movie a good value for paying a higher price or higher CPM?

Yes. And I think what's important is that many of the advertisers have been wondering what actually took so long. And the acceptance is actually there hasn't been really pushback on the pricing front. And it's been more about excitement over the fact that the advertising inventory is closer to the actual movie. And that's been very attractive. I would ask Cliff Marks, Cliff, if you want to make a comment or two, on how you feel the program has been going, this would be a good time to do it.

Yes, I think that our advertisers are very excited. I've never seen reception to a product that we've had in the market like we have had to Platinum. The problem was we were too late to get to the market most of the money was spent by the time we got to market, but the response Eric has been excellent.

That's great. Congratulations.

Yes.

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

Hey Tom, Katie and [indiscernible] last question, is it more difficult to sort of instructions China [technical difficulty]. You don't have your full network to pay [indiscernible] sort of adjusted programming [technical difficulty]?

Yes, yes. What was what we're selling is a network that is partially our old program lineup and partially our new. Our advertisers and agencies understand that it's going to take some time to get buying across the whole network. And we're pricing it accordingly. So, 56% of our network has the new program lineup, and we're pricing that accordingly and the remainder of the network does not have that. So, we're not pricing a premium on that. I think they're all very patient. Most advertisers understand that it's going to take exhibition some exhibitor’s time to get comfortable with it. And they respect it. It has not been difficult at all.

Okay, thank you. And then just in prior [indiscernible] you had a major Star Wars down, I think you remember demand be significant enough that sort of selling on to the inventory than actually stretching some of those five to [indiscernible] that’s Q1 this time around is that some way this time or is it less demand sort of a advertise of the Star Wars, Q2 period?

Bob I didn't know…..

I think what you're asking is, let me try to clarify because we're having a hard time hearing your mic, so you can tell me if I'm off-base with why but I heard you say is, you are asking about, does the Q4 sell-out bleed into Q1 with the demand in advertising are you talking about maker good or you talking about the fact that Star Wars is only running for the last week of the year? And people want to advertise in film of Star Wars move to Q1 as well?

That's right. Yes, usually I remember the demand [indiscernible] than high enough that sell-out sort of Star Wars weekend, some of that -- some of those five premium in Q1, well. So that's sort of demand from media buyers and these sort of in front of [indiscernible] and doing that in terms like, I'm just curious with similar demand is similar what you've seen entire quarters and think so where is so much demand.

Yes, we would expect Q1 at 2020 to benefit from Star Wars. For us, only really the first week is in our 2019 number. So, Q1 would be the most benefitting of the Star Wars ads.

Okay. The last question from me, I guess with the lights down inventory, you're also moving your local and mutual ad thoughts closer to show time. Are you seeing any positive impact from those borrows and now that you're leading to that, little pull up some show time and what that lead?

I think it's fair to say that we've been looking, going to -- give me just say one thing and then Cliff you can also add on to it. We've certainly been highlighting the fact to our local and regional buyers that as our inventory moves nationally closer to the actual advertised show time that your local and regional advertising becomes more valuable as well. But Cliff, why don’t you talk to that as well.

Yes. Well remember, I just started this past weekend, right. So, it's new in the market. The reception from our local clients has been excellent, I mean everyone likes the fact locally and regionally that we have the inventory closer to show time now. But now Mike, we got to go out and we educate people about this because this's been a long time that they've known our show to be one format. So, it's going to take some time for us to go we educate a lot of local and regional client. But unequivocally it's looked at highly positively.

Thanks guys, thanks a lot.

Our next question comes from the line of Eric Wold of B. Riley & Company. Please proceed with your question.

Thank you and good afternoon. A few questions just on as far as stand dynamics around scatter and timing decisions, vis-à-vis kind of what impacted Q3 and kind of what you're seeing so far in Q4, I guess. First of all, you noted that some of the pressure on CPMs in the quarter was due to lower scatter persons and more of a mix a shift to more kind of upfront purchases. And then you also noted that advertiser moving, increasely moving to more last minute scatter purchases close to the campaign. I guess, kind of two questions from that. 1) When would you expect that dynamic to trough and potentially start to benefit results from more of a mix shift towards scatter. And then, 2) I guess normally you'd expect the ship is scattered to be more positive for CPMs. But I guess they are you noted there are so many choices out there they can make this last one decision without much concern about sustain our dollars, does that indicate that our like CPMs are likely to be pressured even when that ship is scatter?

I think there are two questions there. One is a timing of when we been in the pipeline when we have scatter deals because of the nature of scatter there they're placed on very close to the campaign time. So, that is impacting Q3 because we had a fairly robust pipeline early in the quarter that really declined overtime as we got close through the end of the quarter. And then, from a CPM standpoint, the less scattered dollars you have on the year-over-year basis is what drives the CPM as a percentage down. So, when we start, we had about 27% decline in the CPM revenue year-over-year, so when you have that --.

Scatter revenue.

Scatter revenue, sorry. You have a pressure on the CPM. So, the scatter dollar is typically our higher premium price CPM but when we saw the pipeline evaporating that impacted Q3 this year for us.

Okay. Now I have to supplicate. I guess more is on a go-forward basis though. If advertiser increasingly having a lot more choices to make their last minute decisions on scatter, that would seem to imply that there is enough choices out there that they're not going to be frantic at the pay up to get their needs. I mean that is that fair or can you still expect scatter to scatter pricing to continue to move higher even in that environment.

I think we still think scatter will go higher. I think it's more of a convenience and friction issue. Literally, if you're on Facebook today, you can buy an ad an hour before it runs. And that doesn't exist in the cinema advertising business or in the television business. We're making a lot of efforts on the operational side beginning hopefully as early as next year to be able to be much closer to the actual advertised time that we can place an add. But I think they're two different things and I think one is an operational thing and one's a pricing thing. We don’t see those are being related. And then Cliff, if you want to opine on that as well you can.

Well yes Katie, what I would tell you is the good news is, is that got a lot more of our scatter dollars to be committed upfront. That's a good thing. We lock them in, we know it's on the books and it's ours. Now, of course that comes in a lower CPM because it's moved upfront, what you need is enough of a pipeline to follow it up and have more scatter at this higher CPMs and that scatter is out there, we're just fighting for with more advertisers with more media companies than there ever were. But there is a lot of upside spilled to us creating a lot of new scatter clients that just don’t exist today. It's specially with this new inventory. The choice going to attract come brands, I'd talk to many of them myself when and if may not have thought about cinema in a long time that are interested in this inventory. That I think will create new demand for scatter, that'll be last minute and be premium.

Okay. And then just final question if I may. I don’t know if anything's changed in general I guess with that kind of move too close range. How close is this spending happening to campaigns in general from your point-of-view, I know you noted that obviously some of the buyer fees will get into our before they want to but it's not possible in deed. And so for NCM, how close is this spend happening to a campaign or some kind of screen because thinking about you sort of marketing the new pull show type of strategy in mid-September but noting that it was too late and then Q4 the dollars had been stamped. So, I guess how far in advance is that going to cut off the base?

Well, I think you're asking two different questions. I mean, with we write business a week before, I mean we'll write a deal on a Thursday that'll start on a Monday or Tuesday I mean that's not so uncommon. We just were to big fourth quarter scatter deal like that. With the situation with the money that we had kind of joined up for fourth quarter. When you're looking for big money for these platinum deals with big money for the pull show time deals, that a lot of that was committed early, it was committed upfront. But there is a lot of scatter the brakes that we write sometimes we prefer or same week of and now let's see Tom's point we like to be even, we'd like to be able to do it day out of two days before we're just not there yet.

Got it, and that's helpful. Thanks, guys.

Yes.

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

Okay. A couple of first in terms of the approach the selling the platinum spot, are you looking at generally a single advertiser to block of films for say a consumer product with broader appeal across demographics. Or are you instead looking to say multiple targeted ads that might fit whatever genre or ratings or whatever might differentiate the movies.

One of the things that's flexible about our network visibility to customize it by, whether it's demographically or by rating. So, we're really looking for big brands with big budgets that appreciate cinema and they want their kind of imagery and brand on a big screen and are willing to make a commitment both financially and with a piece of creative. So, I think what you'll see it's a real early to tell since we're really just coming out with it but I think you'll see a number of advertisers coming in the platform on a regular basis.

Okay. So, you might do sort of a mix of those two approaches, is that what you're basically saying? If somebody will buy everything, obviously your own, okay. And I think you mentioned you were using some technologies for identifying movie covers entering the theatres and following out with relevant ads, and I'm wondering if you're thinking about or experiencing likely to some push back as customers noticed this connection?

We have not done any push back on, we've done a half a dozen sort of programs like this using location based resources and candidly most consumers who are seeing ads on the cell phones or on the internet are often being attributed from another ad or from another advertiser. So, it's pretty common practice in the advertising business to attribute back and we haven’t had any negative response.

Well and very importantly we follow all the rules related to privacy, so if you walk into our theater we don't know your name, we don't know who you are all we can do is identify your phone and know that you were in that theater. So everything we do is within the standard guidelines of the digital advertising medium.

All right, thank you much.

Yes.

Our final question comes from the line of Jason [indiscernible] of Goldman Sachs. Please proceed with your question.

Great. Thank you for taking my questions. So in terms of the shorter lead cycle for advertisements what sort of technology or other investments you think envision making to make the buying experience a bit more seamless for advertisers? Any magnitude of the investment you think you can share with us?

Well, we have a major initiative going on in our company that will really streamline the advertising process from the beginning to end which will allow us to be nearly as dynamic as a digital advertiser and we've made a commitment in this process starting almost two years ago really in the planning phases we haven't actually commented on the size of that investment but I think we can get to that probably next year when we actually get to our full year forecasts and guidance for 2020 but I can issue it's a major initiative by our company. It is significant opportunity and investment for our company as well.

And Jason just as a note as we continue to migrate our technology systems and improve those systems our focus is on cloud-based applications. So what you see with a cloud-based application is significantly less capital investment than what we've traditionally had with our homegrown internally developed system and you'll see an increase in potentially an increase in OpEx and a decrease in CapEx. So you see a benefit to the cash flow of the business without having to make those large initial investments because it's a software in the cloud application. So that's as we move forward in our technology platform that's the direction we're heading.

Okay. Got it. That's helpful. And then in terms of the guidance reduction for the years and imply fourth quarter guidance [indiscernible] your third quarter results how much of your sort of a guidance that take down is related to just being with a more conservative with a scattered business versus just so much of the business just coming at the very last week of the year such as leaving some room for conservatism like what are you attributing to them in terms of adjustments to your assumptions there?

So let me say this just about the fourth quarter so we feel confident in our revised guidance and we've guided conservatively for the remainder of the year given how the backend loaded film schedule looks and the potential for significant make goods depending on it. So as you know December is one of the strongest months of the year. There is obviously some really big movies happening during that time including Star Wars. So but we feel that our guidance is conservative and Katie you can add to that if you'd like.

Yes. I mean I think there are definitely some moving parts to it at the end of the year which may drive that $8 billion make good either positive from that or negatively from that. So it just depends on how Star Wars opens up against the projections that everybody is estimating and then we're the full five weeks the last five weeks of the year really where all the money is for us in the quarter. So we want to be somewhat conservative given what we saw in Q3 with a robust pipeline that really tailed off towards the end of the quarter. So we're being cautious about that I think is how I would put it.

Thanks for your thoughts.

Okay. Thanks Jason.

Thanks for the questions. Go ahead.

Sorry, I was going to say we have reached the end of the question-and-answer session and I'll turn the call back over to Tom Lesinski.

Okay. Thank you for your questions. I'm very proud to be leading NCM and its talented hard-working management team and staff into the future. Although third quarter was not as strong as we had expected we still grew our top line and to put a strategic growth plan in place that's designed to create shareholder value in many ways. Number one, increasing the quality and value of our media inventory. Number two, upgrading our sales planning proposal and inventory tracking systems to make it easier and faster for advertisers to buy cinema and to continuing, three, to invest in digital entertainment products to improve consumer engagement and create new digital ad inventory and data. Four, building a data-driven business to be able to meet the needs of today's modern video advertising marketplace and monetizing our digital products and five, expanding our affiliate network by primarily focusing on adding key affiliates and more screens in select markets which will increase our overall impression space and strengthen our network reach. The strategic plan will allow us to return to our original focus of providing investors with a unique investment opportunity that delivers a combination of high current dividends and stock price growth potential. I look forward to working closely with our NCM team to continue to drive our strategic vision and leverage our unique position in the medium marketplace as the leading company, uniting brands with the power of movies and engaging movie fans anytime and everywhere and accelerating NCM's growth and increasing the value of our company for our stockholders, employees, exhibition partners and advertising clients alike. Thank you for listening to our call and we'll see you at the movies.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful evening.