National CineMedia, Inc. (NCMI) Q4 2019 Earnings Report, Transcript and Summary

Greetings. Welcome to National CineMedia, Inc. Full Year and Fourth 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 would now like to turn the conference over to your host, Katie Scherping. Thank you. You may begin.

Thanks, Savvy. Good afternoon, everyone. I am joined today here in Denver by our CEO, Tom Lesinski. 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 could 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 or on our Investor Relations page of our website at ncm.com. Now, I'll turn the call over to Tom.

Thank you, Katie, and good afternoon everyone. Welcome to our fourth quarter and full year 2019 earnings call. I'll be sharing some high level insights regarding our strong Q4 performance and our better than expected full year results and our plans for 2020. Katie will then provide more detail about our 2019 results and our 2020 guidance. And then as always, we will open up the line for your questions. I'm very happy to report that we finished 2019 on a strong note, posting record Q4 advertising revenue and a record full year national revenue. This top line revenue growth resulted in better than expected adjusted OIBDA growth for both the current quarter and the full year, and this momentum is continuing into 2020. I'll talk more about 2020 and our progress against the strategic plan that we laid out in November in just a few minutes. Q4 2019 revenue, overall, increased just over 7% year-over-year, driven by a 13% increase in Q4 national revenue. As I mentioned, our company posted record fourth quarter advertising revenue, driven by higher national sales demand and the launch of our new inventory after the advertised Showtime in Cinemark and Regal Theaters. This new premium inventory features five minutes of advertising that runs right after the advertised Showtime as the auditorium lights dim, which we call lights-down inventory. And one minute inventory that runs just before the last one or two trailers prior to the feature film that we call our platinum inventory. Our Q4 growth reflected strong national inventory utilization as well as the sale in December of our new platinum inventory to a leading technology company, an automobile manufacturer and a major retailer. It's important to note that the platinum CPMs were where more than 50% above our national pre-show average, as these markets clearly appreciated the value provided by the higher reach, and better engagement not available in other premium video media options. Although our regional and local business inched a bit softer than I would have liked in Q4, there were times at recent strategy changes we made in these parts of our business will begin to take effect in 2020. Due to the strong Q4 national demand and lower than expected holiday movie attendance, we did have a slightly higher-than-expected make good at $8.7 million. Unfortunately, the attendance for the first month and, excuse me, fortunately, the attendance for the first month and half of 2020 has been stronger than expected. And we already have delivered a large portion of that make good. I'm very proud of the NCM team for their hard work to implement our new strategic plan, including the launch of our new Premium inventory strategy in Q4. This has resulted in stronger than expected adjusted OIBDA growth for the year and great momentum going into 2020. Our largest national ad core categories in 2019 included media and entertainment, insurance, telecom, electronics and automotive with the highest growth for the year coming from the insurance, retail, CPG, electronics and restaurant categories. It's also notable that we have started to break through the large CPG category, and experienced the lowest advertiser churn in five years indicating that marketers appreciate our brand building capabilities and our ability to cut through the clutter of digital and TV platforms. Much of our 2019 growth is driven by higher utilization, as our CPMs were negatively impacted by a higher percentage of upfront revenue versus our revenue from sales in the scatter market in 2019 compared to 2018. This is a favorable trade off given the benefits of locking in dollars upfront versus the uncertainty of the scatter market quarter-to-quarter and year-to-year. Moving forward, we expect our lights-down inventory to help increase average upfront CPMs as we get into the 2020, 2021 upfront selling season. We just recently wrapped up our 2019-2020 upfront season, and I'm pleased to say we had another strong upfront versus last year, even though we did not have our new after-Showtime inventory in our product mix during most of the upfront selling process. Our 2020-2021 upfront kicks off in the next couple of months, and we will aggressively take to market our new premium inventory format that will further improve our platforms to reach and engagement, while delivering an even more captive cinema experience. We are confident that our new Platinum inventory will sell well in the upfront market as it requires more advanced planning by marketers, which is why it's a major focus of our 2020-21 up front strategy. Given the high gross margin of our platinum inventory, it will be a key part of our plan to expand our margins and grow adjusted OIBDA. And with the success in 2019 of our focus meetings directly with brand and ad agency decision makers, during the upfront season, it will be an important part of our 2020 and 2021 selling strategy. Additionally, we continue to see benefits from our digital investments. The demand for the bundling of digital impressions with our onscreen advertising continues to grow. During 2019, we had an almost 6% increase, and the number of clients who had additional component integrated into their reline media buy and over 41% of our national and 26% of our local and regional ad revenue included and integrated digital campaign. These integrated campaigns resulted in 133% higher contract value versus onscreen omni contracts and are helping to grow our average CPMs along with driving higher inventory utilization. The continued expansion of our apps and other digital products and data offerings drove a 12% increase in digital revenue in 2019 over 2018. This past year, brands like Ball Park, Hotdogs and Slate Farm and innovative integrated digital campaigns with our Noovie Arcade and Trivia products, respectively. As demonstrated by our strong 2019 finish, our five pillars of growth strategy that we outlined in our November call is already creating meaningful shareholder value, and once again, providing a unique investment vehicle that delivers both the substantial cash return to our dividend and stock appreciation, as we continue to drive free cash flow growth. The first key pillar of growth that involved increasing the quality and value of our on-screen inventory was launched in November in Regal and Cinemark Theaters. The early reaction from markers has been very positive as we sold our first platinum spots in December and received strong interest from high profile clients for both lights-down inventory as well as our platinum stock. In fact, recent research indicates that consumer recall and engagement for the platinum stock has been outstanding. As these new premium-priced higher quality products require more advanced planning by advertisers, we believe that there will be a very attractive addition to our product mix during the 2020-21 upfront selling season and allows to aggressively bundle this higher value inventory with our Noovie pre-show program to increase both utilization end average CPM. You should also note that since a portion of our national inventories moves to the after the advertised Showtime, the quality of our local and regional inventory will also improve, as it moves closer to the Showtime. The second pillar involves the planned upgrade of our sales planning, proposal and inventory tracking systems. Our companywide initiative to increase our operational efficiency and effectiveness with new processes and technologies is twofold. First, designed to improve our speed to market that has become even more important with the growth of digital. And secondly, will allow us to be more efficient with our delivery of impressions that will help increase utilization and help to reduce our quarter and make good liability. We will begin our testing of the systems later this year with an expected launch in Q1 of 2021. The third growth pillar is the continued investment in compelling digital entertainment apps and games. As mentioned, 2019 was saw the successful launch of several of these new digital products, including initial versions of our Trivia games, named at movie and Shuffle. Consumer demand for these fun-entertaining games grew meaningfully in 2019 as they were played over 7.6 million times compared to 1.7 million times in 2018. Based on this growth and our consumer research, moviegoers wanted more Trivia-related games with more content, more depth, more with the IP and more ways to play with friends. So in 2020, we will be enhancing and expanding our Trivia offerings with major upgrades to Shuffle and name that movie as well as integrated web gaming at movie.com, where people can find and play all of our digital games. All these digital products create new ways for brands to engage with movie audiences beyond the big screen to reach them before and after the movie, anytime and anywhere. This also provides us with our own digital ad inventory and extremely valuable addressable first party customer data, which brings me to the fourth strategic pillar for growth, building a data-driven business. Creating a more data-centric ad platform is critical for us to be able to more effectively compete in today's modern video advertising marketplace. We've continued to grow our first and second party data sets from 27 million in 2018 to over 106 million, which exceeded our goal of 100 million by the end of 2019. We're expecting to almost double that number to 200 million data sets by the end of 2020, representing almost 20% of the moviegoing audience. We believe this represents the critical math that allows to really begin to effectively monetize that data by retargeting audiences with digital advertising through our Cinema Accelerator product, and more effectively support cinema campaign ROI for our advertisers. Importantly, the vast majority of our digital campaigns are now using one-to-one targeting. And finally, the fifth pillar of our growth strategy is to optimize our affiliate network by adding key exhibitors in select markets that will increase our overall impression base and extend our geographic reach and market coverage. We are currently in discussions with several circuits about joining our networks and are reviewing the profitability of a few affiliate contracts relative to their strategic benefit. Our affiliate partnership team is also working on expanding our new premium inventory to our existing assets, so we can sell all our onscreen products across a large portion of our network. So far 10 of our current affiliate partners have agreed to display the new premium inventory in addition to Regal and Cinemark. We’re expecting to have up to 15 affiliates participating in our new and approved show format in 2020. By the end of the year, we expect to be selling our new premium inventory across almost 60% of our networks attendance. As you can see, I have good reasons to be very optimistic about NCM's suture. I'm also becoming more optimistic about the 2020 Box Office as some early Q1 films such as Bad Boys, 1917, Parasite, and most recently Sonic the Hedgehog, have opened much stronger than expected. Looking further ahead, there is high anticipation for movies like Wonder Woman 1984, Black Widow, Minions: The Rise of Gru, Fast and Furious 9, Venom 2, the new Bond film No Time to Die, The Eternals, Ray on The Last Dragon and Disney's live-action remake of Mulan. As always, it will be undoubted, there will be a few surprise hits with the 2020 Box Office relying more on a broader number of films rather than a few huge temples. In summary, the unique immersive big screen social experience of the cinema continues to resonate with all demographic groups, especially the millennial and Gen Z audiences. The video ad market also remains strong as marketers look for strong brand building, less cluttered media platforms to augment their digital buys. I believe with the successful execution of our growth strategy, the NCM is positioned for a very bright future in 2020 and beyond. Our Board of Directors also shares our optimism on the growth as we see ahead. As a result, I’m pleased to announce the Board has authorized a 12% increase in the company's regular quarterly cash dividend from $0.17 to $0.19 per share of common stock, bringing the annualized dividend to $0.76 per share. This increase in our dividend reflects our belief in our strategic growth plan and our intention to distribute substantially all of the free cash flow to shareholders. This level of dividend along with our cash balances will allow us to maintain the financial flexibility that will support our investment in future growth initiatives. For anyone who would like an even deeper dive into our current view of the business and our longer-term business strategy, we will be holding an Investor Day on Wednesday, March 4, at NASDAQ markets like New York City for existing and potential investors and analysts. Please plan to join us as our NCM management team and expert panelists delivered informative presentations and discussions addressing such topics as near and long-term growth strategy, the state of the media industry and a closer look at the overall media and advertising businesses. Details can be found in the investor relations section of our website. Before I turn it over to Katie, I wanted to acknowledge that this is her final earnings call, the last one before she retires from NCM in three weeks. We will miss Katie’s leadership and passion for her work. She's been a key leader for over three years and has put in valuable perspective to our company's executive leadership team. Her last official duty will be to host our Investor Day on March 4th before moving into a consulting role to provide her expertise and guidance to me and the team and to support the transition to a new CFO. We have no specific news to report yet on her successor, but we are in discussions with several excellent candidates and helped to have something to announce shortly. So, thank you, Katie. And I will now turn the call over to you.

Thanks, Tom. It's been my privilege to work with NCM to accomplish so many major initiatives for the company over the past several years, and I know that I leave our company in the very capable hands of our executive team. It's also essentially nice to go out on a high note with a record Q4 and an impressive finish to the year. I'll now walk through the Q4 and full year operating results that Tom highlighted in further detail, and then provide our full year 2020 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 fourth quarter, our total advertising revenue was a record $147.2 million compared to $137.4 million in Q4 2018, an increase of 7.1%. These better-than-expected results reflect a strong quarter for our national advertising sales team, partially offset by a decrease in regional and local revenue and lower beverage revenue. Total Q4 adjusted OIBDA was $83.5 million, representing an increase of $7.3 million or 9.6% versus Q4 of 2018. The adjusted OIBDA margin for the quarter increased to 56.7% compared to 55.4% during the same period last year, due to an increase in the mix of our higher margin national revenue, including the benefit from our first sales at the high-margin platinum unit. The increase in adjusted OIBDA and adjusted OIBDA margins was driven by a 13% increase in our national business related to very strong demand from advertisers as reflected by our network inventory utilization of 156%, driven primarily by an 11.4% increase in impressions sold for the quarter. The increase in inventory utilization from the 127% in Q4 of 2018, in part related to the delivery of impressions from the prior quarter and make good balance, partially offset by a 9.1% decrease in attendance versus prior year. The impact of our higher, national inventory utilization was partially offset by a 1.8% decrease in CPMs related to the higher mix of lower CPM upfront campaign, driven by her desire to expand our client base into new categories that included entry-level pricing with the goal of expanding our overall utilization. I would also note that our December platinum spot is not included in our calculation of CPMs for Q4, 2019, for competitive reasons. Our Q4 regional business started to show signs of stabilization as regional ad revenue decreased by a modest $200,000 or 1.9% versus Q4 2018 to $10.5 million. The small decrease was due to a decrease in average contract value for contracts under $100,000, and a slight decrease in regional digital revenue. Q4 local ad revenue decreased 9.7% or $2.1 million to $19.6 million from $21.7 million in 2018. This decrease in local advertising revenue was due to a decrease in the volume of local contracts and a decrease in the average contract value. With the restructuring of our local selling strategy and commission structures late last year, and better local inventory placement within our Noovie pre-show resulting from the shift of some of the national inventory to after the advertised Showtime, we are confident our local business will begin to grow once again in 2020. Our local business will also continue to benefit from the strength in our local digital products. Overall, our Q4 digital revenue increased nearly 24% as we continued to see growth in the percentage of customers that were integrated with local on-screen ad buys. Q4 beverage revenue decreased $600,000, or 8.1%, from $7.4 million to $6.8 million versus Q4 2018, driven by an 8.2% decrease in family member attendance, partially offset by a slightly higher CPM. Our Q4 2019 advertising revenue mix was 75% national, 7% regional, 13% local and 5% beverage versus 71%, 8%, 16%, and 5%, respectively, in Q4 2018. For the full year, total revenue increased 0.8% or $3.4 million to $444.8 million from $441.4 million in 2018. Due to better-than-expected 2019, results were negatively impacted by a slightly higher make good that ended the year at $8.7 million versus $8 million at the end of 2018. As Tom mentioned, with some better-than-expected early Q1 2020 film openings, this higher year in make good is providing benefit to our Q1 2020 results. Our full year adjusted OIBDA increased $2.1 million, or 1%, to $207.5 million from $205.4 million in 2018. And adjusted OIBDA margins increased to 46.7% from 46.5% in 2018. Including a $2 million noncash one-time Q3 investment impairment, adjusted OIBDA for the year would have grown 2% over 2018. Full year 2019 national ad revenue increased 3.9%, or $12.2 million, to $324.2 million versus 2018. This increase was driven by a 2.5% increase in impressions sold and increases in branded content and platinum sales, partially offset by a 3.2% decrease in CPM due to a mix shift from scatter so the upfront. The increase in impressions sold was a result of an increase in utilization to 125.9% from 113.5%, offset by decrease in network attendance of 7.6% compared to 2018 that was driven by a record 2018 Box Office. Consistent with Q4, the decrease in CPM is reflected a higher mix of upfront deals versus scattered deals, and entry level pricing for new clients. For the full year 2019, regional ad revenue decreased 9.5% to $24.7 million from $27.3 million in 2018. This decrease is driven by the shift from regional advertising to national advertising by several large clients, and a decrease in average contract value, driven by a reduction in spend from a few large returning customers in 2019. These decreases are partially offset by a significant increase in contract volume and the 18.3% increase in digital sales revenue from regional clients in 2019 versus 2018. Moving forward in 2020, we will be adding the regional revenue results into our national revenue for our revenue reporting to reflect the fact that our regional sales team is managed as part of our national team due to the significant crossover with many clients. Consolidating the small part of our overall revenue into our national revenue will provide consistency between the way we run these parts of our business and the way we discussed them in our external financial reporting. For the full year, local ad revenue decreased 5.4%, or $3.8 million, from $70.7 million to $66.9 million compared to 2018. The decrease in local advertising revenue was due to a decrease in the volume of local contracts, partially offset with 16.7% higher local digital sales revenue. We expect clients to increasingly integrate their local cinema ad buys with our digital retargeting capabilities after patents leave the cinema. Full your beverage revenue decreased 7.6%, or $2.4 million, from $31.4 million to $29 million versus 2018 due to a 7.1% decrease in founding member attendance, partially offset by a slight contractual increase in beverage CPM. For the fourth quarter, we reported GAAP diluted earnings per share increase of 14% to $0.24 versus the earnings per diluted share of $0.21 in Q4 2018. When adjusting for CEO transition costs, diluted earnings per share for the fourth quarter of 2019 would have increased 4.3% to $0.24 versus the pro forma $0.23 per diluted share in Q4 2018. For the year, we reported a GAAP diluted earnings per share increase of 24.3% to $0.46 compared to earnings per diluted share of $0.37 in 2018. The 2019 results included a decrease in deferred tax expense of $11.2 million from 2018 due to the re measurement of our deferred tax assets in 2018 as a result of a state tax law change. As adjusted for CEO transition costs and the reversal of deferred tax in 2018, diluted EPS for 2019 would have increased 27% to $0.47 versus the same $0.37 per share in 2018. Our capital expenditures for 2019 were $15.3 million, which included $2 million of implementation costs and prepaid expenses related to our upcoming cloud based technology system, and $7.6 million related to our digital product development and the creation of more robust consumer databases compared to the $6.9 million spent in 2018. This total CapEx was at the high end of our stated guidance range of $14 million to $15 million and slightly below the $15.4 million spent in 2018. In the fourth quarter and for the full year 2019, we received $5.4 million and $21.7 million, respectively of integration and other encumbered theater payments associated with AMC Rave theaters and AMC Carmike theaters versus $5.4 million and $22.7 million respectively in 2018. As a reminder, these integration and other encumbered theater payments are added to adjusted OIBDA for debt compliance and partnership cash distribution purposes but are not included in reported revenue or adjusted OIBDA as they're recorded as a reduction to net and tangible assets on the balance sheet. It should be noted that the AMC Carmike theater integration payments of approximately $19 million will continue through 2037, the remaining term of the AMC ESA, while the Rave theaters have now been moved onto our network for 2020. Our total debt upstanding at MCM LLC at the end of Q4 2019 was $3 million higher than the end of Q4 2018. Our bank term debt and bonds were $897 million versus $904 million at the end of Q4 2018, and a revolver balance at the end of the current quarter was $39 million compared to $27 million at the end of Q4 2018, due primarily to funding the October bond refinancing costs out of our revolver. Our average interest rate on all debt was approximately 5.5% for Q4 2019 versus 5.7% for Q4 2018, including our $267 million floating rate term loan bank debt, and revolving credit facility that had a rate of approximately 4.8% versus 5.3% last year. Our interest expense increased $2.6 million during Q4 2019 due to a 30-day overlap from the October refinancing of the $400 million notes. Excluding our bank revolver balances, 70% of our total debt outstanding at the end of Q4 2019 had a fixed interest rate. Our total net leverage at MCM LLC as of the end of Q4 2019 was four times trailing four quarter adjusted OIBDA, which is well below our consolidated net total leverage maintenance covenant of 6.25 times. Our consolidated net senior secured leverage ratio of three times is also comfortably below the covenant of 4.5 times. Our consolidated cash and investment balances at year-end was $81 million with $69 million of this balance at NCMI. We currently have enough cash available to cover nearly five quarters of dividend at NCMI at $0.19 per share with over $0.88 per share of cash on hand at the end of 2019. As Tom mentioned earlier, we announced today that the Board of Directors have authorized the increase of the company's regular quarterly cash dividend to $0.19 per share of common stock. This dividend will be paid on March 17, 2020 to stockholders of record on March 3, 2020. The company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors consistent with the company's intention to distribute substantially all of its free cash flow to shareholders through its quarterly dividend. The declaration, payment, timing, and amount of future dividends payable will be at the sole discretion of the Board of Directors, who will consider general economic and advertising market business conditions, the company's financial condition, available cash, current and anticipated cash needs, including opportunities to reinvest in the business and any other factors that the Board of Directors considers relevant. Our annualized dividend yield at $0.76 per share is currently 9.5% based on today's closing share price of $8. As a reminder, currently 100% of our dividend is tax deferred for income tax purposes. Now turning to our guidance. For the full year of 2020, total revenue is expected to be up between 1.2% and 4.5% versus 2019, or in a range of $450 million to $465 million. Adjusted OIBDA is expected to be down 2.7% to up 2.2%, or in a range of $202 million to $212 million. Looking deeper into our adjusted OIBDA guidance for 2020, there were a few factors to consider. One, consistent with 2020 cinema industry Box Office expectations, we are estimating the 2020 industry attendance to be down mid-single digits. Two, we expect sales of our platinum spot to increase throughout 2020 with momentum taking hold in the later part of the year. It is important to remember that the gross margin of our platinum inventory is 75%, and as we gain traction throughout the year, it is expected to drive an increase in adjusted OIBDA margin and dollars. Three, the additional theater access fee for the ESA amendments are expected to increase year-over-year by $9 million to $10 million, in addition, the following our other assumptions that were made in preparing our projections to underlie our 2020 guidance. We project beverage revenue to be down approximately 3% to 4%, driven by attendance down mid-single digits offset by a blend of CPM increase of approximately 1.8%. We expect approximately $19 million of integration payments and other encumbered theater payments from AMC associated with Carmike theaters. We expect 2020 CapEx to be in the $14 million to $16 million range or a little over 3% of revenue. The digital investment portion is expected to be approximately $7 million as we continue to invest in our digital and data platforms. We expect 2020 interests on borrowings to decrease $3 million to approximately $55 million, driven by lower average interest rates and lower average debt outstanding, which includes approximately $52 million to $53 million of cash interest and $2.5 million related to the non-cash amortization of deferred loan costs. Turning now to NCM LLC's available cash calculation for 2020, starting with our adjusted OIBDA guidance of $204 million to $208 million, we'll add the integration payments of approximately $19 million. As a reduction to available cash, we will subtract the following. Cash interest expense of approximately $52 million to $53 million, annual scheduled debt principal amortization of $2.7 million, capital expenditures of $14 million to $16 million and non-cash stock comp for Inc. employees of approximately $3 million to $3.5 million. $1.2 million to $1.7 million of onetime operating costs associated with the implementation, severance and retention costs for our back-end inventory management system, which are adjusted out of our operating income estimates. These are the components that will allow you to arrive at a projection for available cash at NCM LLC in 2020, which has paid to the three members of the partnership Regal, Cinemark and NCMI quarterly based on their ownership at the end of each quarter. In addition to the available cash distributed to NCMI from NCM LLC and consistent with prior years, we project approximately $3 million to $3.5 million to be paid to NCMI from NCM LLC for management fees, plus $1 million of cash interest earned on NCMI cash balances. NCMI’s cash has reduced by the expected payout of $14 million to $15 million for payments under the tax receivable agreement to our founding members. This will allow you to arrive an estimate of the net cash available for NCMI to fund dividend payments. This concludes our prepared remarks. Now, we'll open the call for your questions.

Thank you. [Operator Instructions] Our first question comes from Jim Goss with Barrington Research. Please g ahead.

I’ve got a couple here. One at the beginning of the conversation, I think, Tom, you mentioned $8.7 million of make-good. And you've already delivered a big chunk of these so far this year. I was wondering what the forgone cost of that inventory was? Or was were the make-good supply do largely unsold inventory?

I'm not sure about foregone cost, what I can say is it in the first six weeks of the year we've worn -- we've taken almost $4 million out of the make-good, given the overall performance of the Box Office in January and half of February. Does that answer your question? Or are you asking something different?

Yeah. No. That sometimes, yes -- that largely answered it, but sometimes it seems like you have a lot of spots, and not all of them are sold. And I thought there might allow for some of it without really pitching too much.

Yes. And I think in Q1, Jim, we typically have less inventory sold. And just historically, Q1 is a lower inventory sales quarter than any other quarters. So easier for us to run out make-good, but also the Box Office outperforming helped us in the first quarter as well.

Okay. And there was also comment you just recently been ramping up the last upfront within the couple of months, will be starting in the next one. It seems like they're running together a little closer than I thought they might. Why would that have been?

Well, the new upfront starts in two months, Jim. So the most recent upfront ended, basically just ended about a month ago. So there's really about a 3-month period between the two. Our sort of ends later than traditional television and cable and the sequencing is typically network TV, then cable, then outdoor and cinema go at the end. So we're always at the end of a television upfront, which starts earlier, almost more than six weeks earlier, so but there was about a 3-month period roughly at least between the two.

Okay. And you were making some -- you were distinguishing your inventory between like the new post five minutes plus the platinum stat in the earlier inventory. And then you also mentioned that about 60% of the audience would be onboard with the new format. How is wind up having sort of a blended upfront pricing strategy, especially when you also mentioned that region regional is moving to national, and I would imagine those prices are not exactly the same? How do -- is this more of a reporting issue than a sales issue?

It's not a sales issue when we have very distinguished buckets between platinum pricing, lifestyle pricing, and the traditional pre-show pricing. Sometimes they are bounded together and it's blended, but we have significant different CPMs and all three of those buckets. And I think from a reporting point of view, I could let maybe Katie to speak to that. But …

Yeah, I think, our CPM is typically on upfront is a little bit higher, but this year we had a little bit lower. I think we're looking forward to kind of a bundling program with the new inventory and it's hard to pinpoint where that CPM is going to have.

Okay. And lastly, have audiences caught on to the shift in when the ads are run and adjusted the timing of arrival to the extent you can determine that?

There has been no shift to people coming in later based on the new start time. It's only really a difference of six minutes at the end of the day. And we only started really in December. So it's too early to say whether there's any impact from a consumer point of view. We haven't seen any one showing up later as a result.

[Operator Instructions] Our next question comes from Alexia Quadrani with JP Morgan. Please go ahead.

This is Anna [indiscernible] on for Alexia. Thank you so much for the question. I'm just wondering if you expect the stronger trends that you were seeing in national advertising through the end of 2019 and kind of softer local and regional advertising trends to continue into 2020, and also what is your level of comfort with your 2020 guidance? Thank you.

So in terms of local and regional, we've changed strategically how we staff those businesses. In particular, on the regional business, we've decided to only allocate the top 11 DMAs into their regional business, and the remaining DMAs from 11 on are now going back into our local business. And we're seeing some early indications that that new strategy on the organization is helping to stabilize both those businesses, and potentially being both active growth rates in 2020. In terms of our guidance in 2020, I think we have optimism based on how 2019 finished and how the early interest in platinum and in lights-down, has contributed to a really new way to look at NCM. And many advertisers and brands are looking at the company in many cases for the first time, but also old customers are looking us in a different way. So we feel really good about our guidance going into 2020, especially coming off 2019 with our new inventory taking hold at the end of last year.

Our next question is from Eric Handler with MKM Partners. Please go ahead.

Yes. Thank you for the question. I tuned in a little late, so hopefully I'm not asking you to repeat anything. But with the new inventory strategy, are you seeing any difference in the advertisers that are either making requests for proposals or signing up for these new pods?

Yeah. It's a good question. One of our first three platinum spots was sold to a one of the largest retailers in the U.S. who had never advertised in the history of National CineMedia. We also have recently added a CPG company, who hadn't been on the platform ever. So one of the goals of platinum and of lights-down was to bring new categories and new companies into our platform. And in the short time, we've been selling it and we've seen two major advertisers to come in who were never part of our platform. So that was one of the key objectives in creating the new platinum and lights-down in inventory.

And are you drawing them in with discounted first-time buyer status? Or are they paying full freight?

Well, every deal is different, I can say that. I can tell you that the platinum deals have not been discounted. Sometimes it would be our brand new advertiser will create some incentive to come in, but we are keeping platinum at a very high price point. So, hopefully that answers your question.

Our next question is from Mike Hickey with The Benchmark Company. Please go ahead.

Congrats on the quarter. I was on and off the call. I apologize if these questions were asked. But I wanted to make sure to ask just in case. On the – your ad shift to post Showtime, have you done any consumer feedback studies in terms of how people are reacting to ads in the new spot? Because, I think that was sort of meeting issue with one of your partners, the fear that you'd be upsetting movie pay attention, and that's why they didn't necessarily sign up.

Let me answer that question in two different ways. The one piece of research we already did just recently, which we haven't published yet, because it's really came off the presence just in the past week, was the engagement from our ads is -- has been as high as we've ever had in terms of how the new advertising platinum spots are effecting consumers. So it's been really a pleasant result so far that as the new platinum spots are rolled out, that they're really resonating and from an effectiveness point of view with consumers. We've also got a lot of anecdotal feedback from the affiliates that there really isn't an issue with the advertising running and then closer to the movies. And obviously, we’re sensitive to that. But candidly, as people have gotten used to it, the few comments that did happen really become actually fairly small. So, we're pleased that the response from a consumer point of view has been really positive.

That's great. And you said 60% of that work, I think you expect to participate. How do you close the gap there, Tom, that other 40%? What are the key metrics you need to share with your partners?

It's a matter of adding more affiliates. We expect to add 15 affiliates onboard by the end of 2020. Some are big, some are small. And it's a matter of really talking to each one of them, which I've been doing along with our affiliate team, along with cliff, and it's going to each one individually. A lot of the affiliates wanted to see how it worked with Cinemark and Regal in 2019. And given the success of that, and the consumer acceptance, I think we'll get a really good attachment rate on the affiliates that we go out to, and many of them have already signed up. We just haven't announced it yet.

Yes. And a last question for me. Shocked to see the dividend [indiscernible] normal question given investor seems like is the dividend safe, so quite the statement raising the dividends here. And of course, I’m curious, sort of how you – it’s obviously show the great level of confidence as well in the ‘20 guidance, but you've sort of been vulnerable historically to variability, ready to scatter money. And so I’m curious if this is because you've got more upfront money user or businesses or what's giving you the visibility and confidence, I guess, to raise the dividend there?

I think I think the way the Board and management have looked at is really this strategic growth plan that we have put in place and the success so far platinum. Then it's also our commitment to payout almost substantially all the actual annual cash flows of the company. But really the strategic plan and the elements are in it, there's a lot of confidence than I have as well as the Board. And that's what really drove the increase in the dividend.

And then, I guess last one on -- your Analyst Day coming up here in March, would you expect to have a new CFO at that or is that two things there?

I think, optimistically we'd like to have a new CFO on board. It'll -- we have three or four really good finalists right now. But I can't commit to that. But if, obviously, that person has been hired by them, then they'll be In New York.

Our next question is Eric Wold with B. Riley FBR. Please go ahead.

Just a couple of questions. Just kind of touch on the platinum spot. Just kind of think about the selling strategy around the spot in terms of kind of want, I guess, kind of what committed run times you are acquiring to get people into that part of the spot? And then, I guess, how much you -- maybe not a dollar amount, maybe frame percentage, how much would be the pricing on platinum varies at all between kind of an upfront buy and scatter buy?

The difference in upfront versus scatter pricing is going to be consistent on a percentage basis. So, obviously, there's going to be a premium on the scatter side. I don't want to specifically get into the actual pricing for competitive reasons, even how new the platinum is. But obviously, we're not interested in discounting platinum much since it's a brand new product. And obviously, it's a big focus of the upfront, coming up soon. And I think the true test of how big platinum will be will really come once we get out of selling in the upfront marketplace. But the response in scatter has been very good and the pricing that we promised, a 50% lift in platinum pricing has been more than delivered on the initial platinum sales. And we're optimistic that that lift will continue through and hopefully get even potentially higher as we get towards the second half of the year.

And then, lastly, on that kind of -- first one, I guess, first part of the first question was kind of -- is there kind of a committed run time or kind of a mid max on how long you have someone run a platinum spot? And then, given the premium pricing on that and the margins on that in a scatter environment, can you allow kind of a faster turnaround to get those onto screens? Or is there been inherent limit on how fast you can get new content screens regardless?

So I'll try to answer those separately. Right now, we have a relatively short amount of time that will allow us to get a platinum spot on, we can't do it overnight. When our entire new sales planning system gets on board, we can do it almost same day, but if we really need to, we can get a platinum spend on within 24 hours to 48 hours. So from a friction point of view, we can do that. Especially, since right now there's only Cinemark and Regal onboard. And as we add the other 10 to 15 affiliates, it’s manageable. I don't want to get into specifically what the advertising requirements are in terms of the number of weeks for competitive reasons. It's really a proprietary selling strategy that we have. So I can't tell you at this point what the requirements are. It's just not something we want to disclose at this point.

We have reached the end of the question-and-answer session. And I will now turn the call over to Tom Lesinski for closing remarks.

Before Tom jumps in here for closing remarks, I just wanted to make a correction to the available cash calculation adjusted over the guidance that was quoted. It should be $202 million to $212 million. So the correction to the adjusted OIBDA guidance is $202 million to $212 million. Okay, Tom, you can take it from here.

Okay. So I'm very pleased to be ending 2019 with the best fourth quarter ad sales in our company's history, and the biggest year ever for our national sales team. Our new growth strategy has to be done to show results on both our top and bottom lines and we're continuing that forward momentum into 2020 with our focus on creating long-term shareholder value to a unique combination of free cash flow growth and increased dividends. Our team is deeply committed to our company's mission statements to unite brands with the power of movies and engage movie fans anytime and anywhere. I look forward to continuing to work very closely with our Board of Directors, our founding member and affiliate partners, and our great NCM team to continue to drive our strategic vision for growth and leverage our unique position as the cinema expert in the media marketplace to benefit stockholders, employees, exhibitor partners and advertising clients like. Thank you for joining us on the call. And we'll see you at the movies.

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