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What changed in National CineMedia, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of National CineMedia, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+635 added−455 removedSource: 10-K (2023-04-13) vs 10-K (2022-03-03)

Top changes in National CineMedia, Inc.'s 2023 10-K

635 paragraphs added · 455 removed · 377 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

117 edited+51 added−29 removed48 unchanged
Biggest changeNCM programs exclusive Noovie content at the beginning of the show that gives audiences a look at “what’s Noovie?, ” including movies ( Noovie Backlot and Noovie Genius), music ( Noovie Soundcheck), trivia ( Name That Movie® ) and more. • Segment three features a long-form entertainment content segment from one of our content partners. • Segment two features primarily local and regional advertisements, which generally range between 15 to 90 seconds, as well as a long-form entertainment content segment from one of our content partners.
Biggest changeNCM programs exclusive Noovie content at the beginning of the show that gives audiences a look at what’s happening in the movie and pop culture arenas and features long-form entertainment from our content partners.
Digital Advertising NCM’s consumer-facing digital products all feature advertising opportunities that allow brands to continue to reach movie audiences across multiple platforms, including sponsorships, digital ad inventory such as leaderboards, banner ads, half- and full-page ads, and a variety of digital video ad inventory.
NCM’s consumer-facing digital products all feature advertising opportunities that allow brands to continue to reach movie audiences across multiple platforms, including sponsorships, digital ad inventory such as leaderboards, banner ads, half- and full-page ads and a variety of digital video ad inventory.
Lobby promotions typically include: • advertising on concession items such as beverage cups, popcorn bags and kids’ trays; • coupons and promotional materials, which are customizable by film and are distributed to ticket buyers at the box office or as they exit the theater; • tabling displays, product demonstrations and sampling; • touch-screen display units and kiosks; and • signage throughout the lobbies, including posters, banners, counter cards, danglers, floor mats, standees and window clings.
Lobby promotions typically include: • advertising on concession items such as beverage cups, popcorn bags and kids’ trays; 14 • coupons and promotional materials, which are customizable by film and are distributed to ticket buyers at the box office or as they exit the theater; • tabling displays, product demonstrations and sampling; • touch-screen display units and kiosks; and • signage throughout the lobbies, including posters, banners, counter cards, danglers, floor mats, standees and window clings.
The Noovie pre-show also includes time slots for the founding members and network affiliates to advertise various activities associated with the operations of the theaters, including concessions, online ticketing partners, gift card and loyalty programs, special events presented by the theater operator and vendors of services provided to theaters, so long as such promotion is incidental to the vendor’s service or products sold in the theater.
The Noovie show also includes time slots for the founding members and network affiliates to advertise various activities associated with the operations of the theaters, including concessions, online ticketing partners, gift card and loyalty programs, special events presented by the theater operator and vendors of services provided to theaters, so long as such promotion is incidental to the vendor’s service or products sold in the theater.
We believe this higher value inventory, combined with an entertaining and engaging pre-show program that is integrated with our Noovie digital ecosystem, provides a unique cross-platform premium video product that will stand out in the media marketplace. We also believe it will help mitigate the potential future impact of reserved seating on our business.
We believe this higher value inventory, combined with an entertaining and engaging show program that is integrated with our Noovie digital ecosystem, provides a unique cross-platform premium video product that will stand out in the media marketplace. We also believe it will help mitigate the potential future impact of reserved seating on our business.
Further, due to the network equipment investments made in recent years by our founding members and network affiliates in new and acquired theaters, ESA provisions requiring founding members to make future investments for equipment replacements, and the scalable nature of our Customer Experience Center and other infrastructure, we do not expect any necessary major capital investments to grow our operations as our network of theaters continues to expand.
Due to the network equipment investments made in recent years by our founding members and network affiliates in new and acquired theaters, ESA provisions requiring founding members to make future investments for equipment replacements, and the scalable nature of our Customer Experience Center and other infrastructure, we do not expect any necessary major capital investments to grow our operations as our network of theaters continues to expand.
Additionally, unlike some other advertising mediums, we also receive attendance information by film at least monthly, by rating and by screen for all of the founding member theaters, and by location for the theaters operated by our network affiliates at least monthly, which allows us to report the actual audience size for each showing of a film where our Noovie pre-show played.
Additionally, unlike some other advertising mediums, we also receive attendance information by film, by rating and by screen at least monthly for all of the founding member theaters, and by location for the theaters operated by our network affiliates at least monthly, which allows us to report the actual audience size for each showing of a film where our Noovie show played.
As with other premium video mediums like TV, we sell our Noovie pre-show inventory in both the upfront and scatter markets. Upfront is a term that describes the practice of buying advertising time “up front” on an annual basis for the upcoming year, purchasing inventory in advance and locking in the advertising rates (CPMs).
As with other premium video mediums like TV, we sell our Noovie show inventory in both the upfront and scatter markets. Upfront is a term that describes the practice of buying advertising time “up front” on an annual basis for the upcoming year, purchasing inventory in advance and locking in the advertising rates (CPMs).
National, local and regional advertisers are generally able to run their ads in the Noovie® pre-show less than 72 hours following the close of the proposal which is comparable to the lead time of television advertising, giving businesses that rely on time-sensitive promotional advertising strategies the opportunity to take advantage of the power of cinema.
National, local and regional advertisers are generally able to run their ads in the Noovie® show less than 72 hours following the close of the proposal which is comparable to the lead time of television advertising, giving businesses that rely on time-sensitive promotional advertising strategies the opportunity to take advantage of the power of cinema.
Under the ESAs, up to 90 seconds of the Noovie® program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. Beginning in 2020 and in accordance with the 2019 10 ESA Amendments, the price for the time sold to Cinemark and Regal beverage suppliers increases 2% each year.
Under the ESAs, up to 90 seconds of the Noovie® program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal beverage suppliers increases 2% each year.
The time sold to AMC’s beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to AMC’s beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show in AMC’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC pursuant to the ESAs.
The time sold to AMC’s beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to AMC’s beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie show in AMC’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC pursuant to the ESAs.
Because we offer local and national “pods” within our Noovie pre-show (that is, groupings of ads interspersed among video content), our format consistent with the grouping of ads on television networks, which allows advertisers to more easily integrate our Noovie® pre-show into traditional sight-sound-and-motion media buys.
Because we offer local and national “pods” within our Noovie show (that is, groupings of ads interspersed among video content), our format is consistent with the grouping of ads on television networks, which allows advertisers to more easily integrate our Noovie® show into traditional sight-sound-and-motion media buys.
Advertising revenue is primarily correlated with new product releases, advertising client marketing priorities and economic cycles and to a lesser extent theater attendance levels. Seasonal demand during the summer is driven by the absence of alternative attractive advertising mediums and during the winter holiday season due to high client demand across all advertising mediums.
Advertising revenue is primarily correlated with new product releases, advertising client marketing priorities and economic cycles and to a lesser extent theater attendance levels. Seasonal demand during the summer is driven by the absence of alternative attractive advertising mediums and during the winter holiday season due to high client demand across all advertising 16 mediums.
Each of the founding members has a relationship with a beverage concessionaire supplier under which it is obligated to provide on-screen advertising time as part of its agreement to purchase branded beverages sold in its theaters and we have a long-term agreement to exhibit the advertising of the founding members’ beverage concessionaires.
Each of the founding members has a relationship with a beverage concessionaire supplier under which it is obligated to provide on-screen advertising time as part of its agreement to purchase branded beverages sold in its theaters. We have a long-term agreement to exhibit the advertising of the founding members’ beverage concessionaires.
Scalable, state-of-the-art digital content distribution technology —Our use of the combination of satellite and terrestrial DCN network technology, combined with the design and functionality of our DCS and Customer Experience Center infrastructure, makes our network efficient and scalable and also allows us to target specific audiences and provide advertising scheduling flexibility and reporting.
Scalable, state-of-the-art digital content distribution technology —Our use of the combination of satellite and terrestrial DCN network technology, combined with the design and functionality of our DCS and Customer Experience Center 17 infrastructure, makes our network efficient and scalable and also allows us to target specific audiences and provide advertising scheduling flexibility and reporting.
We intend to build and monetize digital and data driving solutions. We continue to invest in the creation of compelling digital entertainment products and expand our Noovie digital ecosystem and user base of movie fans with NCM owned-and-operated products like Noovie Trivia (including Noovie Shuffle and Name That Movie) and Noovie ARcade.
We intend to build and monetize digital and data driving solutions. We continue to invest in the creation of compelling digital entertainment products and expand our Noovie digital ecosystem and user base of movie fans with NCM owned-and-operated products like Noovie Trivia (including Noovie Shuffle and Name That Movie) .
Noovie Show Structure Including Post-Showtime Inventory —The Noovie pre-show with Post-Showtime Inventory format is comprised of substantially the same segments included within the Classic Noovie pre-show , each approximately four to ten minutes in length, as well as two additional advertising segments after the advertised showtime as described below.
Noovie Show Structure Including Post-Showtime Inventory —The Noovie show with Post-Showtime Inventory format is comprised of substantially the same segments included within the Classic Noovie show , each approximately four to ten minutes in length, as well as two additional advertising segments after the advertised showtime as described below.
With the DCN and DCS, we are able to schedule, deliver, play and reconcile advertising and entertainment content for the Noovie pre-show and the LEN on a national, regional, local, theater and auditorium level. The DCN is the combination of a satellite distribution network and a terrestrial management network.
With the DCN and DCS, we are able to schedule, deliver, play and reconcile advertising and entertainment content for the Noovie show and the LEN on a national, regional, local, theater and auditorium level. The DCN is the combination of a satellite distribution network and a terrestrial management network.
National and regional on-screen advertising in the Noovie pre-show is sold on a CPM basis to national and regional clients. We generally sell our national advertising units across our national network by film rating or groups of ratings, or by individual film or film genre grouping.
National and regional on-screen advertising in the Noovie show is sold on a CPM basis to national and regional clients. We generally sell our national advertising units across our national network by film rating or groups of ratings, or by individual film or film genre grouping.
We have made improvements to this software since our IPO and we own those improvements exclusively, except for improvements that were developed jointly by us and the founding members. We have secured U.S. trademark registrations for NCM ® , National CineMedia ® and Noovie® .
We have made improvements to this software since our IPO and we own those improvements exclusively, except for improvements that were developed jointly by us and the founding members. We have secured U.S. trademark registrations for NCM ® , National CineMedia ®, Noovie® and NCMx™ .
References to the Noovie pre-show relate to both the Classic Noovie pre-show and the Noovie pre-show including Post-Showtime Inventory formats, unless specified otherwise. National, Regional and Local Advertising —Our cinema advertising business has a diverse customer base, consisting of national, regional and local advertisers.
References to the Noovie show relate to both the Classic Noovie show and the Noovie show including Post-Showtime Inventory formats, unless specified otherwise. National, Regional and Local Advertising —Our cinema advertising business has a diverse customer base, consisting of national, regional and local advertisers.
It is that scale that we believe will make our NCM digital capabilities increasingly attractive to advertisers, especially to national brands who buy both our national and regional inventory. We also intend to enter into synergistic business opportunities.
It is that scale that we believe will make our NCM digital and data capabilities increasingly attractive to advertisers, especially to national brands who buy both our national and regional inventory. We also intend to enter into synergistic business opportunities.
Due to the COVID-19 Pandemic, the Company was not able to participate in the 2021 upfront market, and thus, outside of content partner and PSA agreements, the majority of 2021 deals were sold in the scatter market.
Due to the COVID-19 Pandemic, the Company was not able to participate in the 2021 upfront market, and thus, outside of content partner and courtesy PSA agreements, the majority of 2021 deals were sold in the scatter market.
Achieving one of our key initiatives in this strategy, we introduced new inventory in our Noovie® pre-show after the advertised showtime within Cinemark and Regal theaters following the 2019 ESA Amendments.
Achieving one of our key initiatives in this strategy, we introduced new inventory following our Noovie® show after the advertised showtime within Cinemark and Regal theaters following the 2019 ESA Amendments.
We currently derive revenue principally from the sale of advertising to national, regional and local businesses in our Noovie On-Screen, our cinema advertising and entertainment pre-show seen on movie screens across the U.S., on our LEN, a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies.
We currently derive revenue principally from the sale of advertising to national, regional and local businesses through Noovie On-Screen, our cinema advertising and entertainment show seen on movie screens across the U.S., on our LEN, a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies.
We sell NCM’s digital products through a digital sales group that is embedded as part of our national and local sales organizations to enable collaborative, integrated selling. We believe that our new and upcoming digital products can be sold in combination with in-theater advertisements as integrated marketing packages as discussed in “Business—Our Strategy”.
We sell NCM’s data platform and digital products through a digital sales group that is embedded as part of our national and local sales organizations to enable collaborative, integrated selling. We believe that our new and upcoming digital products can be sold in combination with in-theater advertisements as integrated marketing packages as discussed in “Business—Our Strategy”.
In 2021, we continued to invest in the development of our cloud-based Data Management Platform (DMP) which we believe will allow us to provide even more robust audience insights and analytics to our clients. To further enhance the connection between brands and movie audiences, we accumulate audience data from several sources within our DMP.
In 2022, we continued to invest in the development of our cloud-based Data Management Platform (DMP) which we believe will allow us to provide even more robust audience insights and analytics to our clients. To further enhance the connection between brands and movie audiences, we accumulate audience data from several sources within our DMP.
We plan to continue to invest in our digital platform in 2022 and beyond. Lobby Advertising Lobby Entertainment Network —Our LEN is a network of video screens strategically located throughout the lobbies of all digitally equipped founding members’ theaters, as well as the majority of our network affiliates’ theaters.
We plan to continue to invest in our digital platform in 2023 and beyond. Lobby Advertising Lobby Entertainment Network —Our LEN is a network of video screens strategically located throughout the lobbies of all digitally equipped founding members’ theaters, as well as the majority of our network affiliates’ theaters.
The Company has also implemented a number of targeted initiatives to increase employee engagement and satisfaction, including surveys, career and succession planning and analyzing our total rewards program. Total Rewards —We invest in our employees by providing comprehensive benefits and compensation packages.
The Company has also implemented a number of targeted initiatives to increase employee engagement and satisfaction, including surveys, career and succession planning and analysis of our total rewards program. Total Rewards —We invest in our employees by providing comprehensive benefits and compensation packages.
Because of the impact of cinema’s state-of-the-art immersive video and audio presentation, we also believe that movie audiences are highly engaged with the pre-show advertising and entertainment content that they view in our theater environment.
Because of the impact of cinema’s state-of-the-art immersive video and audio presentation, we also believe that movie audiences are highly engaged with the Noovie show advertising and entertainment content that they view in our theater environment.
The Noovie pre-show gives movie audiences a reason to arrive at the theater early to discover what's next, with exclusive entertainment content, in-theater gaming, and engaging advertising from national, regional and local brands, as well as long-form entertainment and advertising content provided to us under exclusive multi-year arrangements with leading media, entertainment, technology and other companies (“content partners”).
The Noovie show gives movie audiences a reason to arrive at the theater early to discover what's next, with exclusive entertainment content and engaging advertising from national, regional and local brands, as well as long-form entertainment and advertising content provided to us under exclusive multi-year arrangements with leading media, entertainment, technology and other companies (“content partners”).
This audience data is then leveraged for the targeting of ad campaigns and can also serve to deliver closed-loop attribution reporting. We expect to continue to enhance the capabilities of the platform in 2022 by continuing to gather first-party data through our Noovie digital products, as well as additional second- and third-party data sources and segments.
This audience data is then leveraged for the targeting of ad campaigns and can also deliver closed-loop attribution reporting. We expect to continue to enhance the capabilities of the platform in 2023 by continuing to gather first-party data through our Noovie digital products, as well as additional second- and third-party data sources and segments.
Competition Our advertising business competes in the estimated $265 billion U.S. advertising industry with many other forms of marketing media, including television, radio, print, internet, mobile and outdoor display advertising.
Competition Our advertising business competes in the estimated $287 billion U.S. advertising industry with many other forms of marketing media, including television, radio, print, internet, mobile and outdoor display advertising.
Our employees are located in our Centennial, Colorado headquarters, in our advertising sales offices in New York, Los Angeles, and Chicago, our digital development offices in Los Angeles and New York and our software development office in Minneapolis. We also have many local advertising account executives and field maintenance technicians that work primarily from their homes throughout the U.S.
Our employees are located in our Centennial, Colorado headquarters, in our advertising sales offices in New York, Los Angeles and Chicago and our digital development offices in Los Angeles and New York. We also have many local advertising account executives and field maintenance technicians that work primarily from their homes throughout the U.S.
These valuable data sets consist of both our own NCM first-party data from our owned-and-operated digital products, as well as a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie pre-show and where they go in the days and weeks afterwards.
Our valuable unique data records consist of both our own NCM first-party data from our owned-and-operated digital products, as well as a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie show and where they go in the days and weeks afterwards.
NCM’s cinema advertising network offers broad reach and unparalleled audience engagement with over 20,700 screens in over 1,600 theaters in 195 Designated Market Areas® (“DMA ® ”) (including all of the top 50). NCM digital and Digital-Out-Of-Home (“DOOH”) go beyond the big screen, extending in-theater campaigns into online, mobile, and place-based marketing programs to reach entertainment audiences.
NCM’s cinema advertising network offers broad reach and unparalleled audience engagement with over 20,000 screens in over 1,500 theaters in 195 Designated Market Areas® 9 (“DMA ® ”) (including all of the top 50). NCM digital and Digital-Out-Of-Home (“DOOH”) go beyond the big screen, extending in-theater campaigns into online, mobile and place-based marketing programs to reach entertainment audiences.
The total length of the Noovie pre-show including Post-Showtime Inventory is the same as the Classic Noovie pre-show as the amount of time displayed prior to the advertised showtime is reduced by the sum of five minutes plus the aggregate length of time of the Platinum Spot, if any.
The total length of the Noovie show plus our Post-Showtime Inventory is the same as the Classic Noovie show as the amount of time displayed prior to the advertised showtime is reduced by the sum of five minutes plus the aggregate length of time of the Platinum Spot, if any.
We believe that the broad reach and digital delivery of our network provides an effective platform for national, regional and local advertisers to reach a large, young, engaged and affluent audience on a targeted and measurable basis.
The broad reach and digital delivery of our network provides an effective platform for national, regional and local advertisers to reach a large, young, engaged and affluent audience on a targeted and measurable basis.
NCM's DCN dynamically controls the quality, placement, timing of playback and completeness of content within specific auditoriums, and it also allows us to monitor and initiate repairs to the equipment in our digital network of theaters.
NCM's integrated system dynamically controls the quality, placement, timing of playback and completeness of content within specific auditoriums, and it also allows us to monitor and initiate repairs to the equipment in our digital network of theaters.
World-class entertainment and innovative, branded pre-feature content —The film content created by Hollywood studios is considered by many to be the finest entertainment content in the world, which creates a highly-desirable advertising environment for brands. We believe that our Noovie pre-show program provides a high-quality entertainment experience for theater audiences and an effective marketing platform for advertisers.
World-class entertainment and innovative, branded pre-feature content —The film content created by Hollywood studios is considered some of the finest entertainment content in the world, which creates a highly-desirable advertising environment for brands. We believe that our Noovie show program provides a high-quality entertainment experience for theater audiences and an effective marketing platform for advertisers.
We introduced this new inventory at select network affiliate theaters beginning in early 2020 and plan to continue to work toward expanding the portion of our network including this new inventory.
We introduced this new inventory at select network affiliate theaters beginning in early 2020, expanding throughout 2021 and 2022, and plan to continue to work toward expanding the portion of our network including this new inventory.
It is important that we accelerate the growth and scale of our theater audience data to a critical mass to be able to effectively use that audience data to deliver value to our clients.
It is important that we accelerate the growth, scale, targeting and measurability of our theater audience data to maintain a critical mass to be able to effectively use that audience data to deliver value to our clients.
These and subsequent developments are referred to as the “COVID-19 Pandemic.” Noovie ® On-Screen Advertising Noovie On-Screen —Our on-screen Noovie pre-show provides an entertaining pre-movie experience for theater patrons while serving as an incremental revenue source for our theater circuits.
These and subsequent developments are referred to throughout this Annual Report as the “COVID-19 Pandemic.” Noovie ® On-Screen Advertising Noovie On-Screen —Our on-screen Noovie show provides an entertaining pre-movie experience for theater patrons while serving as an incremental revenue source for our theater circuits.
Our benefits packages include comprehensive health insurance with a wellness program for all employees working 30 hours or more a week, parental leave for all new parents for the birth or adoption of a child or placement of foster care, 401k plan with a comprehensive financial wellness component and voluntary benefits employees can tailor to their specific needs ranging from additional life insurance to pet insurance.
Our benefits packages include comprehensive health insurance with a wellness program for all eligible employees, parental leave for all new parents for the birth or adoption of a child or placement of foster care, 401k plan with a comprehensive financial wellness component and voluntary benefits employees can tailor to their specific needs ranging from additional life insurance to pet insurance.
Further, based upon an average of 5 years of research studies including 262 advertisers across various categories, advertising on the big screen has generated brand lift for the critical KPIs of awareness (increase of 64%) and consideration (increase of 24%).
Further, based upon an average of 5 years of research studies including 262 advertisers across various categories, advertising on the big screen has generated brand lift for the critical key performance indicators of awareness (increase of 64.0%) and consideration (increase of 24.0%).
Name That Movie started in 2017 as a trivia segment for our Noovie® pre-show, social media channels and digital properties in order to further entertain and engage moviegoers. We also offer the opportunity for our advertising clients to sponsor the Name That Movie segments and incorporate advertising into the game.
Name That Movie started in 2017 as a trivia segment for our Noovie® show, social media channels and digital properties in order to further entertain and engage moviegoers and is now included within our Noovie Trivia app. We also offer the opportunity for our advertising clients to sponsor the Name That Movie segments and incorporate advertising into the game.
During 2021, we sold 60 seconds to two of the founding members and 30 seconds to one of the founding members to provide on-screen advertising for their beverage concessionaires. During 2021, the beverage concessionaire revenue from the founding members’ beverage agreements was approximately 10% of our total revenue.
During 2022, we sold 60 seconds to two of the founding members and 30 seconds to one of the founding members to provide on-screen advertising for their beverage concessionaires. During 2022, the beverage concessionaire revenue from the founding members’ beverage agreements was approximately 7.5% of our total revenue.
Access to a highly attractive, engaged audience —We offer advertisers the ability to reach highly-coveted target demographics, including young, affluent and educated “Millennial” and “Gen Z” moviegoers. According to Epicenter for 2021, 57% of the NCM LLC audience were between the ages of 12-34, compared to 53% in 2019, with a median age of 30 in 2021.
Access to a highly attractive, engaged audience —We offer advertisers the ability to reach highly-coveted target demographics, including young, affluent and educated “Millennial” and “Gen Z” moviegoers. According to Epicenter for 2022, 62.0% of the NCM LLC audience were between the ages of 12-34, compared to 53.0% in 2019, with a median age of 29 in 2022.
Given the impact of the COVID-19 Pandemic on our operations, our current focus is on cash containment and non-essential capital expenditures were reduced in 2020 and 2021 accordingly.
Given the impact of the COVID-19 Pandemic on our operations, our current focus is on cash containment and non-essential capital expenditures were reduced in recent years accordingly.
In 2020, NCM's DOOH group was created to further unite brands with the power of movies by extending movie-centric entertainment content, trivia and advertising beyond theaters to a variety of complementary Digital Out-Of-Home platforms.
NCM's DOOH group serves to further unite brands with the power of movies by extending movie-centric entertainment content, trivia and advertising beyond theaters to a variety of complementary Digital Out-Of-Home platforms.
It is the Company’s intention to increase the number of affiliate theaters in our network showing the improved Noovie pre-show format featuring the premium Post-Showtime Inventory.
It is the Company’s intention to increase the number of affiliate theaters in our network showing the improved Noovie show format followed by the premium Post-Showtime Inventory.
Content. Beyond the Noovie -branded content at the beginning of the pre-show, the majority of our entertainment and advertising content segments are provided to us by content partners.
Content. Beyond the Noovie -branded content during the Noovie show, the majority of our entertainment and advertising content segments are provided to us by content partners.
Consistent with the television industry's upfront booking practices, a portion of our upfront commitments have cancellation options or options to reduce the amount that advertisers may purchase that could reduce what is ultimately spent by clients that have made upfront commitments.
Consistent with the television industry's upfront booking practices, a portion of our upfront commitments have cancellation options or options to reduce the amount that advertisers may purchase up until their commitment begins airing. These options could reduce what is ultimately spent by clients that have made upfront commitments.
A summary of the screens and theaters in our advertising network is set forth in the table below: Our Network (As of December 30, 2021) As of December 30, 2021, our Noovie pre-show was displayed on network movie screens using digital projectors.
A summary of the screens and theaters in our advertising network is set forth in the table below: Our Network (As of December 29, 2022) 15 As of December 29, 2022, our Noovie show was displayed on network movie screens using digital projectors.
In Cinemark, Regal and certain affiliate theaters, the Noovie pre-show includes advertising inventory after the advertised showtime consisting of (1) a lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) a 30- or 60-second Platinum Spot, as further described below (“Post-Showtime Inventory”).
In Cinemark, Regal and certain network affiliate theaters, after the Noovie show ends at the advertising showtime, NCM offers additional post-show advertising inventory consisting of (1) a lights down segment that runs for five minutes after the advertised showtime 10 with trailer lighting and (2) a 30- or 60-second Platinum Spot, as further described below (“Post-Showtime Inventory”).
The following graphic is for illustrative purposes and is not to exact scale. 9 • The Showcase Segment features a post-showtime lights down segment with trailer lighting beginning at the advertised showtime with approximately 5 minutes of national advertisements which generally range between 30 or 60 seconds, followed by a PSA and one or two 30 second advertisements for the founding members' beverage supplier; and • The Platinum Position features an additional single advertising unit that is either 30 or 60 seconds of the Noovie pre-show deeply embedded within the movie trailers at trailer level lighting and at similar volume levels, directly prior to the last one or two trailers preceding the feature film, which we refer to as the “Platinum Spot”.
Silence Your Cell Phones). • The Showcase Segment features a post-showtime lights down segment with trailer lighting beginning at the advertised showtime with approximately 5 minutes of national advertisements which generally range between 30 or 60 seconds, followed by a courtesy PSA and a 30 second or a 60 second advertisement for the founding members' beverage supplier; and • The Platinum position features an additional single advertising unit that is either 30 or 60 seconds deeply embedded within the movie trailers at trailer level lighting and at similar volume levels, directly prior to the last one or two trailers preceding the feature film, which we refer to as the “Platinum Spot”.
Noovie Audience Accelerator – In addition to our ad-supported consumer-facing digital products, our Noovie Audience Accelerator digital product, formerly known as Cinema Accelerator , expands cinema advertising campaigns beyond the big screen to reach movie audiences wherever they seek out movie content online and on mobile devices. Noovie Audience Accelerator identifies moviegoers through our first-, second- and third-party data sets.
Noovie Audience Accelerator – In addition to our ad-supported consumer-facing digital products, our Noovie Audience Accelerator digital product, formerly known as Cinema Accelerator , expands cinema advertising campaigns beyond the big screen to reach movie audiences wherever they seek out movie content online and on mobile devices.
Further, 44% of our moviegoers have a household income greater than $100,000 (versus 35% of the general population), with a median moviegoer household income of $91,100, and 39% have received a bachelor’s degree or higher (versus 32% of the general population) according to the 2020 Doublebase GfK MRI Study.
Further, 44.0% of our moviegoers have a household income greater than $100,000 (versus 37.0% of the general population), with a median moviegoer household income of $91,000, and 38.0% have received a bachelor’s degree or higher (versus 33.0% of the general population) according to the 2021 Doublebase GfK MRI Study.
Our exclusive contractual relationships with our content partners and PSA sponsors, as well as our agreements to satisfy the founding members’ on-screen marketing obligations to their beverage concessionaires, provide us 16 with a significant upfront revenue commitment, accounting for approximately 29%, 27% and 23% of our total revenue for the years ended December 30, 2021, December 31, 2020 and December 26, 2019, respectively.
Our exclusive contractual relationships with our content partners and courtesy PSA sponsors, as well as our agreements to satisfy the founding members’ on-screen marketing obligations to their beverage concessionaires, provide us with a significant upfront revenue commitment, accounting for approximately 25.6% and 29.1% of our total revenue for the years ended December 29, 2022 and December 30, 2021, respectively.
Our Affiliate Partnerships team is dedicated to serving the needs of our founding member theater circuits and our 47 network affiliates nationwide as of December 30, 2021.
Our Affiliate Partnerships team is dedicated to serving the needs of our founding member theater circuits and our 44 network affiliates nationwide as of December 29, 2022.
Our capital expenditures were 5.6% and 12.5% of revenue for the years ended December 30, 2021 and December 31, 2020, due to the impact of the COVID-19 Pandemic on our operations.
Our capital expenditures were 1.7% and 5.6% of revenue for the years ended December 29, 2022 and December 30, 2021, due to the impact of the COVID-19 Pandemic on our operations.
Advertising and entertainment content for our Noovie pre-show and LEN is uploaded from our Customer Experience Center to our satellite distribution network and is delivered via multicast technology to the theaters in our network and received by our Alternative Content Engine. The Alternative Content Engine holds the content until displayed in specified theater auditoriums and lobbies according to contract terms.
Advertising and entertainment content for our Noovie show and LEN is uploaded to our cinema advertising management system and is delivered via multicast technology to the theaters in our network and received by our Alternative Content Engine. The Alternative Content Engine holds the content until displayed in specified theater auditoriums and lobbies according to contract terms.
Our annual operating income and Adjusted OIBDA margins were (59.9%) and (21.6%), and (67.5%) and (21.5%), for the years ended December 30, 2021 and December 31, 2020, respectively, due to the impact of the COVID-19 Pandemic on our operations. Refer to “Item 7.
Our annual operating income and Adjusted OIBDA margins were 2.8% and 23.0%, and (59.9)% and (21.6)%, for the years ended December 29, 2022 and December 30, 2021, respectively, due to the impact of the COVID-19 Pandemic on our operations. Refer to “Item 7.
Prime movie audience data, measurability and targeting —As with many other advertising mediums, we are measured by third-party research companies. Prior to September 2020, Nielsen measured our audience. In January 2021, Epicenter Experience LLC began measuring our audience, including the total attendance that are in their seats during our Noovie pre-show.
Prime movie audience data, measurability and targeting —As with many other advertising mediums, we are measured by third-party research companies. Epicenter Experience LLC measures our audience, including the total attendance that are in their seats during our Noovie show.
We expect to finalize the functionality for LEN in 2022, followed by local and national onscreen programmatic. Intellectual Property Rights We have been granted a perpetual, royalty-free license from the founding members to use certain proprietary software for the delivery of digital advertising and other content through our DCN to screens in the U.S.
Intellectual Property Rights We have been granted a perpetual, royalty-free license from the founding members to use certain proprietary software for the delivery of digital advertising and other content through our DCN to screens in the U.S.
NCM, Inc. has no business operations or material assets other than its cash and ownership interest of approximately 48.3% of the common membership units in NCM LLC as of December 30, 2021.
NCM, Inc. has no business operations or material assets other than its cash and ownership interest of approximately 74.6% of the common membership units in NCM LLC as of December 29, 2022.
Under the terms of the contracts, our content partners create original long-form entertainment content segments that are entertaining, informative or educational in nature, exclusively for our Noovie pre-show and make commitments to buy a portion of our advertising inventory at a specified CPM over a one- or two-year period with options to renew, exercisable at the content partner’s option.
Under the terms of the contracts, our content partners create original long-form entertainment content segments and make commitments to buy a portion of our advertising inventory at a specified CPM over a one- or two-year period with options to renew, exercisable at the content partner’s option.
The following graphic is for illustrative purposes and is not to exact scale. • Segment four is the first section of the Noovie pre-show and contains the entertaining content that is a core element of Noovie programming .
The following graphic is for illustrative purposes and is not to exact scale. • Segment four and Segment three are the first sections of the Noovie show which contain the entertaining content that is a core element of Noovie programming .
In addition, our participation in the annual advertising upfront marketplace has allowed us to secure significant annual upfront commitments from national advertisers looking to secure premium cinema inventory. These upfront commitments accounted for approximately 24%, 28% and 14% of our total revenue for the years ended December 30, 2021, December 31, 2020, and December 26, 2019, respectively.
In addition, our participation in the annual advertising upfront marketplace has allowed us to secure significant annual upfront commitments from national advertisers looking to secure premium cinema inventory. These upfront commitments accounted for approximately 30.4% and 23.9% of our total revenue for the years ended December 29, 2022 and December 30, 2021, respectively.
While adoption across our affiliate network is expected to take some time, 44% of our network affiliates are running our Post-Showtime Inventory as of December 30, 2021, which including Regal and Cinemark, accounted for approximately 57% of our total network attendance based on 2021 levels. 17 Our relationships with our exhibitors are a key focus of our business.
While adoption across our affiliate network is expected to 19 take some time, 55.6% of our network affiliates are running our Post-Showtime Inventory as of December 29, 2022, which including Regal and Cinemark, accounted for 59.3% of our total network attendance based on 2022 levels. Our relationships with our exhibitors are a key focus of our business.
The Company plans to further decrease this lead time following additional upgrades of our cinema advertising management system, as further discussed below. 15 This scalability of our distribution technology allows us to expand our cinema advertising network with minimal additional capital expenditures or personnel, and we expect to benefit from this scalability in the future as we add new theaters from the founding members, our existing network affiliate relationships and the addition of new network affiliates.
This scalability of our distribution technology allows us to expand our cinema advertising network with minimal additional capital expenditures or personnel, and we expect to benefit from this scalability in the future as we add new theaters from the founding members, our existing network affiliate relationships and the addition of new network affiliates.
Segment one also includes an advertisement for the founding members’ beverage supplier and a public service announcement (“PSA”).
Segment one also includes an advertisement for the founding members’ beverage supplier and a courtesy public service announcement (“courtesy PSA”) (e.g.
Our Noovie digital products are designed to not only provide 11 digital advertising inventory to further enhance the marketability of our cinema advertising product offerings, but also to capture exclusive first-party data. As of December 30, 2021, approximately 6.5 million movie-goers have downloaded our mobile apps.
Our Noovie® digital products are designed to not only provide digital advertising inventory to further enhance the marketability of our cinema advertising product offerings, but also to capture exclusive first-party data, which is funneled into NCMx™. As of December 29, 2022, approximately 7.3 million movie-goers have downloaded our mobile apps.
This allows us to offer advertisers the broad reach and national scale that they need to effectively reach their target audiences. • Our advertising network consisted of 20,740 screens (16,436 operated by the founding members) located in 1,668 theaters (1,219 operated by the founding members) in 47 states and the District of Columbia, including each of the top 25, 50 and 100 DMAs®, and 195 DMAs® in total, as of December 30, 2021; • Over 250.7 million people attended theaters in our network in 2021 and 71%, 67% and 64% of the total theater attendance in theaters that present cinema advertising in the top 10, 25 and 50 U.S.
This allows us to offer advertisers the broad reach and national scale that they need to effectively reach their target audiences. • Our advertising network consisted of 20,095 screens (16,062 operated by the founding members) located in 1,598 theaters (1,182 operated by the founding members) in 47 states and the District of Columbia, including each of the top 25, 50 and 100 DMAs®, and 195 DMAs® in total, as of December 29, 2022; • Over 394 million people attended theaters in our network in 2022 represented 72.2%, 68.4% and 65.2% of the total theater attendance in theaters that present cinema advertising in the top 10, 25 and 50 U.S.
During the years ended December 30, 2021 and December 31, 2020, we derived 75% and 74% of our advertising revenue from national clients (including advertising agencies that represent our clients) and 16% and 19% of our advertising revenue from regional and local advertisers across the country (including advertising agencies that represent these clients). Beverage Advertising.
During the years ended December 29, 2022 and December 30, 2021, we derived 75.1% and 73.5% of our advertising revenue from national clients (including advertising agencies that represent our clients) and 17.5% and 16.8% of our advertising revenue from regional and local advertisers across the country (including advertising agencies that represent these clients). 12 Beverage Advertising.
We believe these multiple marketing impressions throughout the entire entertainment experience allow our advertisers to extend the exposure for their brands and products and create a more engaging relationship with movie audiences in every stage of their movie journey.
We believe these multiple marketing impressions throughout the entire entertainment experience allow our advertisers to extend the exposure for their brands and products and create a more engaging relationship with movie audiences in every stage of their movie journey. Additionally, our new NCMx™ data platform makes cinema advertising more measurable, targetable and attributable than ever before.
The original content produced by these content partners typically features behind-the-scenes looks at the “making-of” feature films, upcoming media programming, or technology products. In 2021, the content partner segments were between 90 and 120 seconds in length. PSA.
The original content produced by these content partners typically features upcoming media programming or technology products. In 2022, the content partner segments were between 90 and 120 seconds in length. Courtesy PSA .
Classic Noovie Show Structure —The Classic Noovie® pre-show is comprised of up to four segments, each approximately four to ten minutes in length. The Company revised the structure beginning November 1, 2019, and the structure below incorporates the changes made.
Classic Noovie Show Structure —The Classic Noovie® show is comprised of up to four segments, each approximately four to ten minutes in length running prior to the advertised showtime. The Company revised the structure beginning November 1, 2019, and the structure below incorporates the changes made. The following graphic is for illustrative purposes and is not to exact scale.
In January 2021, we entered into an exhibitor agreement with Harkins Theaters, the fifth largest exhibitor in the U.S., increasing our network by over 501 screens and 33 theaters beginning in May 2021 through December 2037.
In January 2021, we entered into an exhibitor agreement with Harkins Theaters, the fifth largest exhibitor in the U.S., increasing our network by over 501 screens and 33 theaters beginning in May 2021 through December 2037. In September 2022, we entered into an exhibitor agreement with VIP Cinemas, a family-owned and operated circuit of seventeen theaters across eight states.
In 2021, we had two agreements to exhibit a 40-second courtesy “silence your cell phone” PSA reminding moviegoers to silence their cell phones and refrain from texting during feature films, one of which expired in 2021 and the other renewed its agreement to continue its courtesy PSA for 2022. Theater Circuit Messaging.
In 2022, we had one agreement throughout the year and one additional agreement for the fourth quarter to exhibit a 40-second “silence your cell phone” courtesy PSA reminding moviegoers to silence their cell phones and refrain from texting during feature films. The agreement in place throughout 2022 was renewed for 2023. Theater Circuit Messaging.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile we intend to seek to enter into agreements that provide similar access to inventory as the 2019 ESA Amendments with more of our current network affiliates and other potential network affiliates, there can be no assurance that we will be successful in increasing either the number of theaters of current network affiliates or potential network affiliates in which NCM LLC has the right to display advertising, including Post-Showtime Inventory.
Biggest changeThere can be no assurance that our efforts with current and potential network affiliates will be successful in increasing either the number of theaters in which NCM LLC has the right to display advertising, including Post-Showtime Inventory. Certain of our theater partners have previously indicated that they have no plans to introduce our Post-Showtime Inventory in their theaters.
It provides that if a corporate opportunity is offered to us, NCM LLC or one or more of the officers, directors or stockholders (both direct and indirect) of NCM, Inc. or a member of NCM LLC that relates to the provision of services to motion picture theaters, use of theaters for any purpose, sale of advertising and promotional services in and around theaters and any other business related to the motion picture theater business (except services as provided in the ESAs as from time to time amended and except as may be offered to one of our officers in his capacity as an officer), no such person shall be liable to us or any of our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by 31 reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.
It provides that if a corporate opportunity is offered to us, NCM LLC or one or more of the officers, directors or stockholders (both direct and indirect) of NCM, Inc. or a member of NCM LLC that relates to the provision of services to motion picture theaters, use of theaters for any purpose, sale of advertising and promotional services in and around theaters and any other business related to the motion picture theater business (except services as provided in the ESAs as from time to time amended and except as may be offered to one of our officers in his capacity as an officer), no such person shall be liable to us or any of our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.
These challenging economic conditions also may result in: • increased competition for fewer advertising and entertainment programming dollars; • pricing pressure that may adversely affect revenue and gross margin; • declining attendance and thus a decline in the impressions available for our pre-show; • reduced credit availability and/or access to capital markets; • difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective clients; • client financial difficulty and increased risk of uncollectible accounts; or • financial difficulty for our founding members or network affiliates.
These challenging economic conditions also may result in: • increased competition for fewer advertising and entertainment programming dollars; • pricing pressure that may adversely affect revenue and gross margin; • declining attendance and thus a decline in the impressions available for our show; • reduced credit availability and/or access to capital markets; • difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective clients; • client financial difficulty and increased risk of uncollectible accounts; or • financial difficulty for our founding members or network affiliates.
If our cinema advertising management system does not successfully provide all of the services we expect, if we are unable to continue to successfully and cost-effectively implement further upgrades to the system, including a programmatic advertising sales option, or if we lose access to the system through termination of the agreement or otherwise, our ability to offer our clients innovative, unique, integrated and targeted marketing products may be impacted, which could limit our future revenue growth.
If our cinema advertising management system does not successfully provide all of the services we expect, if we are unable to continue to successfully and cost-effectively implement further upgrades to the system, including a programmatic advertising sales option, or if we lose access to the system through termination of the agreement or otherwise, our ability to offer our clients innovative, unique, integrated and targeted marketing products may be impacted, which could limit our future 32 revenue growth.
Additionally, if attendance underperforms against expectations or declines significantly, the Company will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. Certain of these circumstances can also lead to volatility within our utilization, which typically varies more than 10% on an annual basis and we experience even more substantial volatility quarter-to-quarter.
Additionally, if attendance underperforms against expectations or declines significantly, the Company will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. Certain of these circumstances can 28 also lead to volatility within our utilization, which typically varies more than 10% on an annual basis and we experience even more substantial volatility quarter-to-quarter.
The NCM LLC Senior Secured Credit Facility, Revolving Credit Facility and indentures limit NCM LLC’s ability to distribute cash to its members, including us, based upon certain leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc. pursuant to the terms of the management services agreement (incorporated in the ESA).
The NCM LLC Senior Secured Credit Facility, Revolving Credit Facility and indentures limit NCM LLC’s ability to distribute cash to its 36 members, including us, based upon certain leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc. pursuant to the terms of the management services agreement (incorporated in the ESA).
Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to display up to five minutes of the Noovie ® pre-show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film.
Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to display up to five minutes of the Noovie ® show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie show in the trailer position directly prior to the “attached” trailers preceding the feature film.
Our business uses a variety of intellectual property rights, including copyrights, trademarks, trade secrets, domain names and patents or patentable ideas in the provision of our advertising services, the websites we operate at ncm.com and Noovie.com , our digital gaming products including Noovie Trivia and Noovie ARcade, and the features and functionality, content, and software we make available through those websites and apps.
Our business uses a variety of intellectual property rights, including copyrights, trademarks, trade secrets, domain names and patents or patentable ideas in the provision of our advertising services, the websites we operate at ncm.com and Noovie.com , our digital gaming products including Noovie Trivia and the features and functionality, content and software we make available through those websites and apps.
If we are not able to come to an 24 agreement on a future upgrade request, we may elect to pay for the upgrades requested which could result in our incurring significant capital expenditures that could adversely affect our profitability. Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating results or financial condition.
If we are not able to come to an agreement on a future upgrade request, we may elect to pay for the upgrades requested which could result in our incurring significant capital expenditures that could adversely affect our profitability. Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating results or financial condition.
During the COVID-19 Pandemic, we had an increase in voluntary turnover and implemented a temporary pay reduction for all employees of up to 50% and each of our named executive officers agreed to a 20% reduction of their base salary and other employee cuts. These temporary pay reductions were removed for all employees at the beginning of 2022.
During the COVID-19 Pandemic, we had an increase in voluntary turnover and implemented a temporary pay reduction for all employees of up to 50% and each of our named executive officers agreed to a 20% reduction of their base salary and other employee benefit cuts. These temporary pay reductions were removed for all employees at the beginning of 2022.
As a result, the financial provisions and the other terms of these agreements, such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third parties in similar circumstances.
As a result, the financial provisions and the other terms of these agreements, 39 such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third parties in similar circumstances.
The COVID-19 Pandemic occurred shortly after NCM LLC was entitled to this inventory, disrupting our ability to utilize it. We expect the 2019 ESA Amendments to ultimately result in an increase in average CPM, revenues and Adjusted OIBDA, however we may not realize any or all such benefits.
The COVID-19 Pandemic occurred shortly after NCM LLC was entitled to this inventory, disrupting our ability to utilize it. 29 We expect the 2019 ESA Amendments to ultimately result in an increase in average CPM, revenues and Adjusted OIBDA, however we may not realize any or all such benefits.
As a result of the 2019 ESA Amendments, NCM LLC is entitled to display up to five minutes of the Noovie ® pre-show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the feature film.
As a result of the 2019 ESA Amendments, NCM LLC is entitled to display up to five minutes of the Noovie ® show after the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie show in the trailer position directly prior to the “attached” trailers preceding the feature film.
Our ability to invest in our existing digital business and our new digital out-of-home business have been and will continue to be negatively impacted by the COVID-19 Pandemic, which may decrease the growth of these businesses. The amount of in-theater inventory we have to sell is limited by the length of the Noovie pre-show.
Our ability to invest in our existing digital business and our new digital out-of-home business have been and will continue to be negatively impacted by the COVID-19 Pandemic, which may decrease the growth of these businesses. The amount of in-theater inventory we have to sell is limited by the length of the Noovie show.
The ultimate impact of these actions on our operations in the future remains to be seen, including increased difficulties in accessing lending or capital markets or other sources of liquidity, increased employee turnover or litigation, actual or potential impairment charges, and advertisers perception and willingness to invest with us.
The ultimate impact of these actions on our operations in the future remains to be seen, including increased difficulties in accessing lending or capital markets or other sources of liquidity, increased employee turnover or litigation, actual or potential impairment charges, 27 and advertisers perception and willingness to invest with us.
The loss of any major content partner or advertising client could significantly reduce our revenue. We derive a significant portion of our revenue from our contracts with our content partners, PSAs and NCM LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires.
The loss of any major content partner or advertising client could significantly reduce our revenue. We derive a significant portion of our revenue from our contracts with our content partners, courtesy PSAs and NCM LLC’s founding members’ agreements to purchase on-screen advertising for their beverage concessionaires.
Risks Related to Our Corporate Structure 28 We are a holding company with no operations of our own, and we depend on distributions and payments under the NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and to pay cash dividends on our common stock.
Risks Related to Our Corporate Structure We are a holding company with no operations of our own, and we depend on distributions and payments under the NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and to pay cash dividends on our common stock.
The founding members do not have the right to use their movie screens (including the Noovie ® pre-show or otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the movie screens, except for limited advertising related to theater operations.
The founding members do not have the right to use their movie screens (including the Noovie ® show or otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the movie screens, except for limited advertising related to theater operations.
As a result, Cinemark, Regal and Standard General are in a position to influence or control to some degree the outcome of matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions.
As a result, Cinemark, Regal and Standard General are in a position to influence or control to some degree the 38 outcome of matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and the approval of mergers and other significant corporate transactions.
If the founding members do not agree with our decisions on what content, strategic program or partnerships are permitted under the ESAs, we may lose advertising clients and the resulting revenue, which would harm our business.
If the founding members do not agree with our decisions on what content, strategic program or partnerships 30 are permitted under the ESAs, we may lose advertising clients and the resulting revenue, which would harm our business.
The value of our national and regional on-screen advertising and to a lesser extent our local advertising is based on the number of theater patrons that are in their seats and thus have the opportunity to view the Noovie pre-show.
The value of our national and regional on-screen advertising and to a lesser extent our local advertising is based on the number of theater patrons that are in their seats and thus have the opportunity to view the Noovie show.
For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.
For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of 40 the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.
These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters or by entering into agreements with other third-party cinema 27 advertising providers.
These provisions are intended to prevent the founding members from harming our business by providing cinema advertising services directly to their theaters or by entering into agreements with other third-party cinema advertising providers.
We rely on our own intellectual property rights, as well as intellectual property rights obtained from third parties (including through open-source licenses), to conduct our business and provide our in-theater, online, mobile and creative services.
We rely on our own intellectual property rights, as well as intellectual property rights obtained from third parties (including through open-source licenses), to conduct our business and provide our in- 35 theater, online, mobile and creative services.
Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could 33 cause the market price of our common stock to decline or make future offerings of our equity securities more difficult.
Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to decline or make future offerings of our equity securities more difficult.
The collection and use of this information is governed by applicable privacy, information security and consumer protection-related laws and regulations that continue to evolve and may be inconsistent from one jurisdiction to another.
The collection and use of this information is governed by applicable privacy, information security and consumer protection laws and regulations that continue to evolve and may be inconsistent from one jurisdiction to another.
Certain patrons avoided crowds and other public indoor spaces and governments restrictions impacted the ability of theaters to operate at normal capacity. Following some successful theatrical releases in 2021, it is unclear whether consumers and studios will revert to their pre-COVID-19 Pandemic behavior or if these changes are long-term trends.
Certain patrons avoided crowds and other public indoor spaces and governments restrictions impacted the ability of theaters to operate at normal capacity. Following some successful theatrical releases in 2021 and many successful theatrical releases in 2022, it is unclear whether consumers and studios will revert to their pre-COVID-19 Pandemic behavior or if these changes are long-term trends.
Additionally, the COVID-19 Pandemic has impacted the consumer traffic and available impressions at a number of locations we have the right to display digital out-of-home advertising, and the traffic has not yet recovered and may not recover to historic levels. As such, there can be no assurance that we will recoup our investments made pursuing this business.
Additionally, the COVID-19 Pandemic has impacted the consumer traffic and available impressions at a number of locations we have the right to display digital out-of-home advertising, and the traffic may not recover to historic levels. As such, there can be no assurance that we will recoup our investments made pursuing this business.
If any director designee to our Board of Directors designated by Cinemark or Regal is not appointed to our Board of Directors, nominated by us or elected by our stockholders, as applicable, then Cinemark and Regal (so long as such they each continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve specified actions of NCM LLC.
If any director designee to our Board of Directors designated by Cinemark is not appointed to our Board of Directors, nominated by us or elected by our stockholders, as applicable, then Cinemark (so long as they each continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve specified actions of NCM LLC.
Changes in theater patron behavior could result in declines in the viewership of our Noovie® pre-show which could reduce the attractiveness of cinema advertising and our revenues.
Changes in theater patron behavior could result in declines in the viewership of our Noovie® show which could reduce the attractiveness of cinema advertising and our revenues.
We receive certain information regarding users who enter the theaters in our network, including places visited before entering the theater and after leaving the theater, from third parties to supplement or enhance the information we collect and maintain about users of our online and mobile services or individuals who view advertising or enter theaters.
We receive certain personal information regarding consumers who enter the theaters in our network, including places visited before entering the theater and after leaving the theater, from third parties to supplement or enhance the information we collect and maintain about users of our online and mobile services or individuals who view advertising or enter theaters.
These valuable data sets consist of both our own NCM first-party data from our owned-and-operated digital products, and a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie pre-show and where they go in the days and weeks afterwards.
These valuable unique data records consist of both our own NCM first-party data from our owned-and-operated digital products, and a variety of key second- and third-party data addressable consumer records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie show and where they go in the days and weeks afterwards.
The agreements relating to NCM LLC’s debt, including the Notes due 2026 and Notes due 2028, the Senior Secured Credit Facility and the Revolving Credit Facility limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM, Inc.’s ability to incur debt.
The agreements relating to NCM LLC’s debt, including the Notes due 2026 and Notes due 2028, the Senior Secured Credit Facility, the Revolving Credit Facility 2018 and the Revolving Credit Facility 2022 limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM, Inc.’s ability to incur debt.
It is important that we achieve a critical mass of audience data to make our digital offering more attractive to advertisers, including national brands who buy both our national and regional advertising inventory.
It is important that we maintain a critical mass of audience data to make our digital offering more attractive to advertisers, including national brands who buy both our national and regional advertising inventory.
Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus), including the Delta and Omicron variants, have and are continuing to disrupt our business and the business of our founding members’ and network affiliates’ theaters.
Pandemics or disease outbreaks such as the novel coronavirus (COVID-19 virus), including variants, have and are continuing to disrupt our business and the business of our founding members’ and network affiliates’ theaters.
We are a holding company with no operations of our own and have no independent ability to generate cash flow other than interest income on cash balances. Consequently, our ability to obtain operating funds primarily depends upon distributions and payments under the NCM LLC operating and management services agreement from NCM LLC.
We are a holding company with no operations of our own and have no independent ability to generate cash flow other than interest income on cash balances or other securities owned. Consequently, our ability to obtain operating funds primarily depends upon distributions and payments under the NCM LLC operating and management services agreement from NCM LLC.
So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we and NCM LLC will be prohibited from taking any such actions: • assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially owned by NCM, Inc.; • acquire, dispose, lease or license assets with an aggregate value exceeding 20% of the fair market value of the business of NCM LLC operating as a going concern; • merge, reorganize, recapitalize, reclassify, consolidate, dissolve, liquidate or enter into a similar transaction; • incur any funded indebtedness or repay, before due, any funded indebtedness with a fixed term in an aggregate amount in excess of $15.0 million per year; • issue, grant or sell shares of NCM, Inc. common stock, preferred stock or rights with respect to common or preferred stock, or NCM LLC membership units or rights with respect to membership units, except under specified circumstances; • amend, modify, restate or repeal any provision of NCM, Inc.’s certificate of incorporation or bylaws or the NCM LLC Operating Agreement; • enter into, modify or terminate certain material contracts not in the ordinary course of business as defined under applicable securities laws; • except as specifically set forth in the NCM LLC Operating Agreement, declare, set aside or pay any redemption of, or dividends with respect to membership interests; • amend any material terms or provisions (as defined in the Nasdaq rules) of NCM, Inc.’s equity incentive plan or enter into any new equity incentive compensation plan; • make any change in the current business purpose of NCM, Inc. to serve solely as the manager of NCM LLC or any change in the current business purpose of NCM LLC to provide the services as set forth in the ESAs; and • approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse tax effect on NCM LLC’s founding members.
So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, which is calculated to include shares of common stock received upon redemption of NCM LLC membership units, but excluding shares of our common stock otherwise acquired subject to limited exceptions, if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we and NCM LLC will be prohibited from taking any such actions: • assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially owned by NCM, Inc.; • acquire, dispose, lease or license assets with an aggregate value exceeding 20% of the fair market value of the business of NCM LLC operating as a going concern; • merge, reorganize, recapitalize, reclassify, consolidate, dissolve, liquidate or enter into a similar transaction; • incur any funded indebtedness or repay, before due, any funded indebtedness with a fixed term in an aggregate amount in excess of $15.0 million per year; • issue, grant or sell shares of NCM, Inc. common stock, preferred stock or rights with respect to common or preferred stock, or NCM LLC membership units or rights with respect to membership units, except under specified circumstances; • amend, modify, restate or repeal any provision of NCM, Inc.’s certificate of incorporation or bylaws or the NCM LLC Operating Agreement; • enter into, modify or terminate certain material contracts not in the ordinary course of business as defined under applicable securities laws; • except as specifically set forth in the NCM LLC Operating Agreement, declare, set aside or pay any redemption of, or dividends with respect to membership interests; • amend any material terms or provisions (as defined in the Nasdaq rules) of NCM, Inc.’s equity incentive plan or enter into any new equity incentive compensation plan; • make any change in the current business purpose of NCM, Inc. to serve solely as the manager of NCM LLC or any change in the current business purpose of NCM LLC to provide the services as set forth in the ESAs; and • approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse tax effect on NCM LLC’s founding members.
This renovation has been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations; • changes in theater operating policies, including the number and length of trailers for films that are played prior to the start of the feature film, which increase in time, may result in most or all of the Noovie® pre-show starting further out from the actual start of the feature film; • any reduction in consumer confidence or disposable income in general that reduces the demand for motion pictures or adversely affects the motion picture production or exhibition industries; 20 • the success of first-run motion pictures, which depends upon the production and marketing efforts of the major studios and the attractiveness and value proposition of the movies to consumers compared to other forms of entertainment; • if political events, such as terrorist attacks, or health-related epidemics, such as flu outbreaks and pandemics, such as the COVID-19 Pandemic, cause consumers to avoid movie theaters or other places where large crowds are in attendance; • government regulations or theater operating policies that require higher levels of social distancing, restriction of capacity or prohibition of operations, including those put in place as a response to the COVID-19 Pandemic; • if the theaters in our network fail to maintain and clean their theaters and provide amenities that consumers prefer; • if studios shift the expected film slate or begin to reduce the number of feature films produced for theater exhibition or their investments in producing those films or reduce the investments made to market those films; • if future theater attendance declines significantly over an extended time period, including as a result of the COVID-19 Pandemic, one or more of the founding members or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number of screens it builds or upgrades or increase ticket prices; and • NCM LLC’s network theater circuits also may not successfully compete for licenses to exhibit quality films and are not assured a consistent supply of motion pictures.
These renovations have been viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations; • changes in theater operating policies, including the number and length of trailers for films that are played prior to the start of the feature film, which may result in most or all of the Noovie® show starting further out from the actual start of the feature film; • any reduction in consumer confidence or disposable income in general that reduces the demand for motion pictures or adversely affects the motion picture production or exhibition industries; • the success of first-run motion pictures, which depends upon the number of films produced for theater exhibition and the production and marketing efforts of the major studios and the attractiveness and value proposition of the movies to consumers compared to other forms of entertainment; • if political events, such as terrorist attacks, or health-related epidemics, such as flu outbreaks and pandemics, such as the COVID-19 Pandemic, cause consumers to avoid movie theaters or other places where large crowds are in attendance; • government regulations or theater operating policies that require higher levels of social distancing, restriction of capacity or prohibition of operations, including those put in place as a response to the COVID-19 Pandemic; • if the theaters in our network fail to maintain and clean their theaters and provide amenities that consumers prefer; • if future theater attendance declines significantly over an extended time period, including as a result of the COVID-19 Pandemic, one or more of the founding members or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number of screens it builds or upgrades or increase ticket prices; and • NCM LLC’s network theater circuits also may not successfully compete for licenses to exhibit quality films and are not assured a consistent supply of motion pictures.
Our ability to increase our data sets requires us to invest in third-party relationships, to comply with evolving privacy and data security laws, rules and regulations and to develop innovative digital properties that will increase the number of users of our online and mobile entertainment and advertising network and mobile apps.
Our ability to increase our unique data records requires us to invest in third-party relationships, to comply with evolving privacy and data security laws, rules and regulations and to develop innovative digital properties that will increase the number of users of our online and mobile entertainment and advertising network and mobile apps.
In addition, pursuant to the 2019 ESA Amendments, we have agreed to pay a fixed payment per patron in consideration for NCM LLC’s access to certain on-screen advertising inventory after the advertised showtime of a feature film, which amount will increase by fixed amounts until November 1, 2022 and then increase by 8% every five years beginning November 1, 2027.
In addition, pursuant to the 2019 ESA Amendments, we have agreed to pay a fixed payment per patron in consideration for NCM LLC’s access to certain on-screen advertising inventory after the advertised showtime of a feature film, which amounts increased by fixed amounts until November 1, 2022 and then now increase by 8% every five years beginning November 1, 2027.
Risks Related to Our Business and Industry Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus), have disrupted and are continuing to disrupt our business and the business of our founding members and network affiliates, which has and could continue to materially affect our operations, liquidity and results of operations.
Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (COVID-19 virus), have disrupted and are continuing to disrupt our business and the business of our founding members and network affiliates, which has and could continue to materially affect our operations, liquidity and results of operations.
Changes to these and other regulations may impose additional burdens on us or otherwise adversely affect our business and financial results because of, for example, increased costs relating to legal compliance, defense against adverse claims or damages, the reduction or elimination of features, functionality or content from our online or mobile services, or our inability to use our data sets effectively.
Changes to these and other regulations may impose additional burdens on us or otherwise adversely affect our business and financial results because of, for example, increased costs relating to legal compliance, defense against claims, adverse rulings or damages, the reduction or elimination of features, functionality or content from our online or mobile services, or our inability to use unique data records effectively.
In addition, the ESAs give the founding members the right to object to certain content in our Noovie ® pre-show, including content that competes with us or the 22 applicable founding member.
In addition, the ESAs give the founding members the right to object to certain content in our Noovie ® show, including content that competes with us or the applicable founding member.
If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins could decline. In early 2021, we implemented a new cinema advertising management system, Advertising Accord, which is developed by a third-party vendor.
If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins could decline. In early 2021, we implemented a new cinema advertising management system which was developed by a third-party vendor.
Additionally, the mix of film ratings of the available motion pictures, such as a higher proportion of G and PG rated films or a shift in the types of films being shown in theaters, could cause advertisers to reduce their spending with us as the theater patrons for these films may not represent those advertisers’ target markets.
Additionally, the number of films and mix of film ratings of the available motion pictures, such as the proportion of G and PG rated films or a shift in the types and numbers of films being shown in theaters, could cause advertisers to reduce their spending with us as the theater patrons for the available films may not represent those advertisers’ target markets.
We may not be able to resolve any potential conflicts between us and an NCM LLC founding member and, even if we do, the resolution may be less favorable to us than if we were negotiating with an unaffiliated party.
We may not be able to resolve any potential conflicts between us and an NCM LLC founding member and, even if we do, the resolution may be less favorable to us than if we were negotiating with another third-party.
Potential difficulties and uncertainties that may impair the full realization of the anticipated benefits include, among others: 21 • the behavior of theater patrons may change in response to the display of a portion of the Noovie pre-show after the advertised showtime, or in response to the combination of advertising and trailers before the start of the feature film, resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the Noovie pre-show; • exhibitors may encounter issues in displaying a portion of the Noovie pre-show after the advertised showtime because of technical issues, access issues with their content providers or other issues that may arise in the future; • potential advertisers may not view the Post-Showtime Inventory as attractive due to inability to run across our entire network or view it as a premium advertising opportunity and the average CPMs for the Noovie pre-show may not increase as much as anticipated, or at all; • NCM LLC may not satisfy the minimum average CPM or the other restrictions which are required by the 2019 ESA Amendments for it to have the right to display the Platinum Spot for more than one concurrent advertiser; • the extended length of time between the advertised showtime and the beginning of the feature film may decrease the average CPM for that portion of the Noovie pre-show appearing before the advertised showtime, which may partially or fully offset any increase in average CPM for the Post-Showtime Inventory; and • the increased theater access fees payable to Cinemark and Regal in connection with the Post-Showtime Inventory and revenue share applicable to the Platinum Spot may exceed the increase, if any, in revenue resulting from the 2019 ESA Amendments.
Potential difficulties and uncertainties that may impair the full realization of the anticipated benefits include, among others: • the behavior of theater patrons may change in response to the display of a portion of the Noovie show after the advertised showtime, or in response to the combination of advertising and trailers before the start of the feature film, resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the Noovie show; • potential advertisers may not view the Post-Showtime Inventory as attractive due to inability to run across our entire network or view it as a premium advertising opportunity and the average CPMs for the Noovie show may not increase as much as anticipated, or at all; • NCM LLC may not satisfy the minimum average CPM or the other restrictions which are required by the 2019 ESA Amendments for it to have the right to display the Platinum Spot for more than one concurrent advertiser; • the extended length of time between the advertised showtime and the beginning of the feature film may decrease the average CPM for that portion of the Noovie show appearing before the advertised showtime, which may partially or fully offset any increase in average CPM for the Post-Showtime Inventory; and • the increased theater access fees payable to Cinemark and Regal in connection with the Post-Showtime Inventory and revenue share applicable to the Platinum Spot may exceed the increase, if any, in revenue resulting from the 2019 ESA Amendments.
Trends in patron behavior that could reduce viewership of our Noovie pre-show include the following: • theater patrons are increasingly purchasing tickets ahead of time via on-line ticketing mediums and when available reserving a seat in the theater (offered in approximately 87% of our network as of December 30, 2021), which could affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view most or all of the Noovie pre-show; • during the COVID-19 Pandemic, certain consumers changed their behavior in order to avoid large groups and other public indoor activities, and these behavior changes could become a long-term trend; • certain theater chains have increased the number of trailers and time devoted to other programming prior to the display of the feature film, and in combination with our Post-Showtime Inventory, may cause patrons to arrive later to theaters and reduce the number of patrons that are in a theater seat to view most or all of the Noovie pre-show; and • changes in theater patron amenities, including, online ticketing, bars and entertainment within exhibitor lobbies causing increased dwell time of patrons.
Trends in patron behavior that could reduce viewership of our Noovie show include the following: • theater patrons are increasingly purchasing tickets ahead of time via online ticketing mediums and when available reserving a seat in the theater (offered in a significant percentage of our network), which could affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view most or all of the Noovie show; • during the COVID-19 Pandemic, certain consumers changed their behavior in order to avoid large groups and other public indoor activities, and these behavior changes could become a long-term trend; • certain theater chains have increased the number of trailers and time devoted to other programming prior to the display of the feature film, and in combination with our Post-Showtime Inventory, may cause patrons to arrive later to theaters and reduce the number of patrons that are in a theater seat to view most or all of the Noovie show; and • changes in theater patron amenities, including bars and entertainment within exhibitor lobbies causing increased dwell time of patrons.
Even if NCM LLC’s other members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC, they may be able to continue exerting such degree of influence over us and NCM LLC. Further, Standard General L.P.
Even if NCM LLC’s other members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC or our common stock in certain situations, they may be able to continue exerting such degree of influence over us and NCM LLC. Further, Standard General L.P.
Advertising demand also impacts the price (CPM) we are able to charge our clients. Due to increased competition, combined with seasonal marketplace supply and demand characteristics, we have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (4.2%) to 9.7% from 2015 to 2021 (excluding 2020).
Advertising demand also impacts the price (CPM) we are able to charge our clients. Due to increased competition, combined with seasonal marketplace supply and demand characteristics, we have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (4.2%) to 23.6% from 2015 to 2022 (excluding 2020).
Reductions in the size of advertisers’ budgets due to local or national economic trends, epidemics, pandemics, other natural disasters or similar events, a shift in spending to advertising mediums like the internet and mobile platforms, perception of uncertainty in advertising mediums, or other factors could result in lower spending on our advertising inventory.
Reductions in the size of advertisers’ budgets due to local or national economic trends, epidemics, pandemics, other natural disasters or similar events, a shift in spending to other advertising mediums, perception of uncertainty in advertising mediums, or other factors could result in lower spending on our advertising inventory.
Although the Company maintains robust procedures, internal policies and technological security measures to safeguard its systems, including disaster recovery systems separate from our operations, robust network security and other measures to help protect our network from unauthorized access and misuse, and a cyber-security insurance policy, the Company’s information technology systems could be penetrated by internal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes.
Although the Company maintains robust procedures, internal policies and technological security measures to safeguard its systems, including disaster recovery systems separate from our operations, robust network security and other measures to help protect our network from unauthorized access and misuse, and a cyber-security insurance policy, the Company’s information technology systems or systems of our founding members, network affiliates or third-party service providers could be penetrated by internal or external parties intent on extracting information, corrupting information, stealing intellectual property or trade secrets, or disrupting business processes.
This system will replace many of our internally developed systems and provide delivery optimization, inventory management and monetization, intelligent dynamic scheduling, increased flexibility, and workflow automation. The system will also interface with our accounting system thus driving client invoicing and revenue recognition.
This system replaced many of our internally developed systems and provide delivery optimization, inventory management and monetization, intelligent dynamic scheduling, increased flexibility, and workflow automation. The system also interfaces with our accounting system thus driving client invoicing and revenue recognition.
If a bankruptcy case were commenced by or against a founding member, it is possible that all or part of the ESA with that founding member could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy Code, or by the founding member, and thus not be enforceable.
As a result of the Cineworld Proceeding, or if a bankruptcy case were commenced by or against another founding member, it is possible that all or part of the ESA with the applicable founding member could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy Code, or by the founding member, and thus not be enforceable.
We are uncertain how AMC’s minimal ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise going forward. Our plans for developing additional digital or digital out-of-home revenue opportunities may not be implemented and may not be achieved.
We are uncertain how these founding members’ lack of ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise going forward. Our plans for developing additional digital or digital out-of-home revenue opportunities may not be implemented and may not be achieved.
We have previously been successful in increasing the dollar value of upfront advertising agreements, but as advertising spending shifts in the scatter market closer to the start date of advertising campaigns, our ability to maintain high CPMs in the upfront markets may decrease.
We have previously been successful in securing favorable upfront advertising agreements, but as advertising spending shifts in the scatter market closer to the start date of advertising campaigns, our ability to maintain high CPMs in the upfront markets may decrease.
The resale of these shares of common stock has been registered as required by the terms of the registration rights agreement between NCM, Inc. and the founding members. Standard General also owns 17,449,272 shares that it may sell at any time.
The resale of these shares of common stock has been registered as required by the terms of the registration rights agreement between NCM, Inc. and the founding members. Standard General also owns 12,932,382 shares that it may sell at any time.
In addition, NCM LLC’s indebtedness could have other negative consequences for us, including without limitation: • limiting NCM LLC’s ability to obtain financing in the future; • requiring much of NCM LLC's cash flow to be dedicated to interest obligations and making it unavailable for other purposes, including payments to its members (including NCM, Inc.); • limiting NCM LLC’s liquidity and operational flexibility in changing economic, business and competitive conditions which could require NCM LLC to consider deferring planned capital expenditures, reducing discretionary spending, selling assets, restructuring existing debt or deferring acquisitions or other strategic opportunities; and • making NCM LLC more vulnerable to an increase in interest rates, a downturn in operating performance or decline in general economic conditions. 29 Despite NCM LLC’s current levels of debt, it, or NCM, Inc. may still incur substantially more debt, including secured debt, which would increase the risks associated with NCM LLC’s level of debt.
In addition, NCM LLC’s indebtedness could have other negative consequences for us, including without limitation: • limiting NCM LLC’s ability to obtain financing in the future; • requiring much of NCM LLC's cash flow to be dedicated to interest obligations and making it unavailable for other purposes, including payments to its members (including NCM, Inc.); • limiting NCM LLC’s liquidity and operational flexibility in changing economic, business and competitive conditions which could require NCM LLC to consider deferring planned capital expenditures, reducing discretionary spending, selling assets, restructuring existing debt or deferring acquisitions or other strategic opportunities; and • making NCM LLC more vulnerable to an increase in interest rates, a downturn in operating performance or decline in general economic conditions.
The founding members’ theaters represent approximately 79% of the screens and approximately 80% of the attendance in our network as of December 30, 2021. If any one of the ESAs was terminated, not renewed at its expiration or found to be unenforceable, it could have a material negative impact on our revenue, profitability and financial condition.
The founding members’ theaters represent approximately 79.9% of the screens and approximately 81.0% of the attendance in our network as of December 29, 2022. If any one of the ESAs was terminated, not renewed at its expiration or found to be unenforceable, it could have a material negative impact on our revenue, profitability and financial condition.
As such, there can be no assurance that we will recoup our investments made pursuing additional revenue opportunities. The user information we collect and maintain through our online and mobile services may expose us to liability or cause us to incur greater operating expenses.
As such, there can be no assurance that we will recoup our investments made pursuing additional revenue opportunities. The personal information we collect and maintain through our online and mobile services, as well as from third-party sources, may expose us to liability or cause us to incur greater operating expenses.
Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, such NCM LLC founding member will have the right to designate a total of two nominees to our Board of Directors who will be voted upon by our stockholders.
Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units, which is calculated in a similar manner as under our Certificate of Incorporation, such NCM LLC founding member will have the right to designate a total of two nominees to our Board of Directors who will be voted upon by our stockholders.
As a result of the COVID-19 Pandemic, each of the founding members temporarily closed all of their theaters in the United States and furloughed the majority of their employees for a portion of 2020 and chose to seek additional financing through various methods.
In addition, each of the other founding members currently has a significant amount of indebtedness. As a result of the COVID-19 Pandemic, each of the founding members temporarily closed all of their theaters in the United States and furloughed the majority of their employees for a portion of 2020 and chose to seek additional financing through various methods.
Additional factors that could reduce attendance at our network theaters include the following, which may be accelerated by actions taken in response to the COVID-19 Pandemic: • if NCM LLC’s network theater circuits cannot compete with other entertainment due to an increase in the use of alternative film delivery methods (and the shortening or elimination of the “release window” between the release of major motion pictures and releasing to alternative delivery methods or releasing motion pictures directly to alternative delivery methods simultaneously with theater release or bypassing the theater entirely), including network and online video streaming and downloads; • theater circuits in NCM LLC’s network are expected to continue to renovate auditoriums in certain of their theaters to install new larger, more comfortable seating or adjust seating arrangements, reducing the number of seats and the audience size in a theater auditorium.
Additional factors that could reduce attendance at our network theaters include the following: • if NCM LLC’s network theater circuits cannot compete with other entertainment due to an increase in the use of alternative film delivery methods (and the shortening or elimination of the “release window” of major motion pictures bypassing the theater entirely), including network and online video streaming and downloads; • theater circuits in NCM LLC’s network are expected to continue to renovate auditoriums in certain of their theaters to install new larger, more comfortable seating or adjust seating arrangements, reducing the number of seats and the audience size in a theater auditorium.
Because our results may vary from quarter to quarter and may be unpredictable, our financial results for one quarter cannot necessarily be compared to another quarter or the same quarter in prior years and may not be indicative of our financial performance in subsequent quarters. These variations in our financial results could contribute to volatility in our stock price.
Because our results may vary from quarter to quarter and may be unpredictable, our financial results for one quarter cannot necessarily be compared to another quarter or the same quarter in prior years and may not be indicative of our financial performance in subsequent quarters.
Because of the high incremental margins on our individual advertising contracts, if we are unable to remain competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing advertisements with us. Even the loss of a small number of clients on large contracts would negatively affect our results.
If we are unable to remain competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing advertisements with us. Even the loss of a small number of clients on large contracts that we are not able to replace would negatively affect our results.
These conflicts of interests could also increase upon the sale of NCM LLC membership units by a founding member because the founding member would have little incentive to agree to changes that may result in higher revenue for NCM LLC or a higher price for our common stock.
These conflicts of interests could also increase upon the sale of NCM LLC membership units by a founding member, as is the case for AMC and Regal, because the founding member may have less incentive to agree to changes that may result in higher revenue for NCM LLC or a higher price for our common stock.
Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to interact with users of our online and mobile services, and could result in legal liability.
Compliance with all such laws and regulations may increase our operating costs and adversely impact our ability to offer our clients advertising targeted to moviegoer demographics or to interact with users of our online and mobile services, and could result in legal liability.
If we are unable to sell equity securities at times and prices that we deem appropriate, we may be unable to fund growth. Cinemark, Regal and AMC may receive up to 86,188,344 shares of common stock as of December 30, 2021 upon redemption of their outstanding common membership units of NCM LLC.
If we are unable to sell equity securities at times and prices that we deem appropriate, we may be unable to fund growth. Cinemark, Regal and AMC may receive up to 43,690,797 shares of common stock as of December 29, 2022 upon redemption of their outstanding common membership units of NCM LLC.
We are not direct parties to the agreements between the founding members’ and their beverage concessionaires but expect that each founding member will have an agreement with a beverage concessionaire to provide advertising for the foreseeable future. None of these companies individually accounted for over 10% of our total revenue during the year ended December 26, 2019.
We are not direct parties to the agreements between the founding members’ and their beverage concessionaires but expect that each founding 33 member will have an agreement with a beverage concessionaire to provide advertising for the foreseeable future. There was one company that individually accounted for over 10% of our total revenue during the year ended December 29, 2022.
National advertising sales and rates are dependent on the methodology used to measure audience impressions. If a change is made to this methodology that reflects fewer audience impressions available during the pre-show, this could adversely affect the Company’s revenue and results of operations. We may not realize the anticipated benefits of the 2019 ESA Amendments.
National advertising sales and rates are dependent on the methodology used to measure audience impressions. If a change is made to this methodology that reflects fewer audience impressions available during the show, this could adversely affect the Company’s revenue and results of operations.
The LEN and lobby promotions represented approximately 0.7% and 4.7% of our total advertising revenue for the year ended December 30, 2021 and December 26, 2019, respectively.
The LEN and lobby promotions represented approximately 0.8% and 0.7% of our total advertising revenue for the year ended December 29, 2022 and December 30, 2021, respectively.
The ESAs contain certain limited exceptions to our exclusive right to use the founding members’ theaters for our advertising business. The founding members have the right to enter into a limited number of strategic cross-marketing relationships with third-party, unaffiliated businesses for the purpose of generating increased attendance or revenue (other than revenue from the sale of advertising).
The founding members have the right to enter into a limited number of strategic cross-marketing relationships with third-party, unaffiliated businesses for the purpose of generating increased attendance or revenue (other than revenue from the sale of advertising).
Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns and may be impacted by the conditions caused by the COVID-19 Pandemic. A decline in the economic prospects of advertisers, industries, such as retail or consumer products, or the economy in general could alter current or prospective advertisers’ spending priorities.
Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of advertisers, industries, such as retail or consumer products, or the economy in general could alter current or prospective advertisers’ spending priorities, including changes in prospects caused by inflationary pressures, pandemics or other events.
If a court were to determine that the non-competition provisions are unenforceable, the founding members could compete directly against us or enter into an agreement with another cinema advertising provider that competes against us. Any inability to enforce the non-competition provisions, in whole or in part, could cause our revenue to decline.
If a court were to determine that the non-competition provisions are unenforceable, the founding members could compete directly against us or enter into an agreement with another cinema advertising provider that competes against us.
We also entered into agreements to obtain similar access to similar inventory with certain of our other current network affiliates. At this time NCM LLC is displaying Post-Showtime Inventory in theaters that constitute approximately 57% of the attendance in our network based upon pre-COVID-19 attendance levels as of December 30, 2021.
We also entered into agreements to obtain similar access to similar inventory with certain of our other current network affiliates. At this time NCM LLC is displaying Post-Showtime Inventory in theaters that constitute approximately 59% of the attendance in our network as of December 29, 2022.
On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments with affiliates of Cinemark and Regal.
We may not realize the anticipated benefits of the 2019 ESA Amendments. On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments with affiliates of Cinemark and Regal.
In order to conduct our business, we rely on information technology networks and systems, including those managed and owned by third parties, to process, transmit and store electronic information and manage and support business processes and activities.
Our business relies heavily on technology systems, and any failures or disruptions may materially and adversely affect our operations. In order to conduct our business, we rely on information technology networks and systems, including those managed and owned by third parties, to process, transmit and store electronic information and manage and support business processes and activities.
We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in this annual report on Form 10-K under “Business-Our strategy.” We had 171.0 million and 274.0 million data sets as of December 31, 2020 and December 30, 2021, respectively.
We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in this annual report on Form 10-K under “Business—Our Strategy.” We had 273.7 million and 374.4 million unique data records as of December 30, 2021 and December 29, 2022, respectively.
High turnover, loss of specialized talent or insufficient capital could also place significant demands on management, the success of the organization, and our strategic outlook.
These enhancements and improvements could require an additional allocation of financial and management resources and acquisition of talent. High turnover, loss of specialized talent or insufficient capital could also place significant demands on management, the success of the organization, and our strategic outlook.
For example, during a portion of the COVID-19 Pandemic, health and safety laws restricted the ability of the founding members and network affiliates from opening their theaters and operating at full capacity, which significantly impacted their and our businesses.
For example, during a portion of the COVID-19 Pandemic, health and safety laws restricted the ability of the founding members and network affiliates from opening their theaters and operating at full capacity, which significantly impacted their and our businesses. 34 We may be unable to effectively manage changes to our business strategy to continue the growth of our advertising inventory and network.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties The Company's headquarters are located in Centennial, Colorado. As of December 30, 2021, the Company also leases advertising sales offices in New York, Los Angeles, and Chicago; digital development offices in Los Angeles and New York, and a software development office in Minneapolis. We own no material real property.
Biggest changeItem 2. Properties The Company's headquarters are located in Centennial, Colorado. As of December 29, 2022, the Company also leases advertising sales offices in New York, Los Angeles and Chicago and digital development offices in Los Angeles and New York. We own no material real property.
We believe that all of our present facilities are adequate for our current needs and that additional space is available for future expansion on acceptable terms.
We believe that all of our present facilities are adequate for our current needs and that additional space is available for future expansion on acceptable terms. 41

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are sometimes involved in legal proceedings arising in the ordinary course of business. We are not aware of any other litigation currently pending that would have a material adverse effect on our operating results or financial condition.
Biggest changeWe are not aware of any other litigation currently pending that would have a material adverse effect on our operating results or financial condition.
Added
Legal Proceedings On September 7, 2022, Cineworld Group plc and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas.
Added
On October 21, 2022, Regal Cinemas, Inc. filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal Cinemas, Inc. planned on negotiating with NCM LLC.
Added
NCM LLC has also filed an adversary proceeding against Regal Cinemas, Inc. seeking declaratory relief and an injunction prohibiting Regal Cinemas, Inc. from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third-party or bringing any of the services performed by NCM LLC in-house.
Added
On February 1, 2023, Cineworld filed a motion for summary judgment on NCM LLC’s adversary proceeding with a hearing scheduled during the second quarter of 2023. On April 11, 2023, NCM LLC filed a voluntary petition for reorganization with a prearranged Chapter 11 plan under Chapter 11 of title 11 of the United States Code in the U.S.
Added
Bankruptcy Court for the Southern District of Texas. The Chapter 11 Case is being administered under the caption In re: National CineMedia, LLC , Case No. 23-90291.
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The Company will continue to act as the manager of NCM LLC, the “debtor in possession” under the jurisdiction of the Bankruptcy Court, and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
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In general, as debtor in possession under the Bankruptcy Code, NCM LLC is authorized to continue to operate as an ongoing business but may not engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court.
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Pursuant to “first day” motions filed with the Bankruptcy Court, the Bankruptcy Court authorized NCM LLC to conduct NCM LLC’s business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing NCM LLC to consensually use cash collateral, pay employee wages and benefits and pay vendors and suppliers in the ordinary course for all go forward goods and services.
Added
NCM LLC will continue to pursue approval of a proposed plan of reorganization, which will incorporate the terms of the Restructuring Support Agreement. We are sometimes involved in legal proceedings arising in the ordinary course of business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFelenstein served on the digital ad sales team at Excite@Home and worked as an account executive at CBS Sports. Maria V. Woods. Ms. Woods was appointed Executive Vice President and General Counsel in September 2021. Ms.
Biggest changeFelenstein served as Executive Vice President, National Advertising Sales for Discovery Communications, Inc. since 2013 and Senior Vice President, National Advertising Sales for Discovery Communications, Inc. since 2000. Prior to working at Discovery Communications, Inc., Mr. Felenstein served on the digital ad sales team at Excite@Home and worked as an account executive at CBS Sports. Maria V. Woods. Ms.
Ng previously served as the Chief Financial Officer and Head of Corporate Development of Allen Media Group from October of 2018 until September of 2021 where he led the company's finance organization and oversaw multiple large scale acquisitions and the refinancing of the company's capital structure. Before joining Allen Media Group, Mr.
Ng previously served as the Chief Financial Officer and Head of Corporate Development of Allen Media Group from October 2018 until September 2021 where 42 he led the company's finance organization and oversaw multiple large scale acquisitions and the refinancing of the company's capital structure. Before joining Allen Media Group, Mr.
Ng served as Vice President in the Fixed Income Group for TCW Group from 2013 to 2018 where he invested in investment grade corporate bonds, high-yield bonds and leveraged loans. 34 Prior to joining TCW Group, Mr. Ng was an investment banker for approximately 10 years.
Ng served as Vice President in the Fixed Income Group for TCW Group from 2013 to 2018 where he invested in investment grade corporate bonds, high-yield bonds and leveraged loans. Prior to joining TCW Group, Mr. Ng was an investment banker for approximately 10 years.
There are no family relationships between any of the persons listed below, or between any of such persons and any of the directors of the Company or any persons nominated or chosen by the Company to become a director or executive officer of the Company. Name Age Position Thomas F. Lesinski 62 Chief Executive Officer Ronnie Y.
There are no family relationships between any of the persons listed below, or between any of such persons and any of the directors of the Company or any persons nominated or chosen by the Company to become a director or executive officer of the Company. Name Age Position Thomas F. Lesinski 63 Chief Executive Officer Ronnie Y.
Ng 42 Chief Financial Officer Scott D. Felenstein 53 President of Sales, Marketing & Partnerships Maria V. Woods 53 Executive Vice President, General Counsel and Secretary Thomas F. Lesinski. Mr. Lesinski was appointed Chief Executive Officer of NCM, Inc. in August 2019. Prior to his current position, Mr.
Ng 43 Chief Financial Officer Scott D. Felenstein 54 President of Sales, Marketing & Partnerships Maria V. Woods 54 Executive Vice President, General Counsel and Secretary Thomas F. Lesinski. Mr. Lesinski was appointed Chief Executive Officer of NCM, Inc. in August 2019. Prior to his current position, Mr.
Woods previously served in several key leadership roles on NCM’s legal team from 2010 through 2015, rising to the role of National CineMedia, LLC’s EVP and General Counsel. Ms. Woods previously served as General Counsel for Lucky’s Market from June of 2015 to June of 2020, including during their bankruptcy proceedings in January of 2020.
Woods was appointed Executive Vice President and General Counsel in September 2021. Ms. Woods previously served in several key leadership roles on NCM’s legal team from 2010 through 2015, rising to the role of National CineMedia, LLC’s EVP and General Counsel. Ms.
Felenstein was appointed Executive Vice President and Chief Revenue Officer in April 2017. Prior to joining NCM, Inc., Mr. Felenstein served as Executive Vice President, National Advertising Sales for Discovery Communications, Inc. since 2013 and Senior Vice President, National Advertising Sales for Discovery Communications, Inc. since 2000. Prior to working at Discovery Communications, Inc., Mr.
Felenstein was appointed as President of Sales, Marketing & Partnerships in July 2021. Prior to this appointment, Mr. Felenstein served as Executive Vice President and Chief Revenue Officer since April 2017. Prior to joining NCM, Inc., Mr.
In between her role at Lucky’s Market and returning to NCM in September 2021, Ms.
Woods previously served as General Counsel for Lucky’s Market from June of 2015 to June of 2020, including during their bankruptcy proceedings in January of 2020. In between her role at Lucky’s Market and returning to NCM in September 2021, Ms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The table below provides information about shares delivered to the Company from restricted stock held by Company employees upon vesting for the purpose of funding the recipient’s tax withholding obligations. 35 Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs October 1, 2021 through October 28, 2021 — $ — — N/A October 29, 2021 through December 2, 2021 40,128 $ 3.18 — N/A December 3, 2021 through December 30, 2021 — $ — — N/A
Biggest changeIssuer Purchases of Equity Securities The table below provides information about shares delivered to the Company from restricted stock held by Company employees upon vesting for the purpose of funding the recipient’s tax withholding obligations. 43 Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs September 30, 2022 through October 27, 2022 — $ — — N/A October 28, 2022 through December 1, 2022 — $ — — N/A December 2, 2022 through December 29, 2022 — $ — — N/A
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 its free cash flow to stockholders through its quarterly dividend.
The Company intends to pay a regular dividend for the foreseeable future at the discretion of the Board of Directors consistent with the Company’s intention to distribute substantially all its free cash flow to stockholders through a dividend.
For tax purposes, our dividends paid in 2020 and 2021 were treated as non-dividend distributions to stockholders.
For tax purposes, our dividends paid in 2021 and 2022 were treated as non-dividend distributions to stockholders.
The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of our Board of Directors who will take into account general economic and advertising market business conditions, our financial condition, our available cash, our current and anticipated cash needs, including opportunities to reinvest in our business and any other factors that the Board of Directors considers relevant which includes short-term and long-term impacts to the Company related to the COVID-19 Pandemic and restrictions under the NCM LLC Credit Agreement and the New Revolving Credit Agreement.
The declaration, payment, timing and amount of any dividends payable will be at the sole discretion of our Board of Directors who will take into account general economic and advertising market business conditions, our financial condition, our available cash, our current and anticipated cash needs, including opportunities to reinvest in our business and any other factors that the Board of Directors considers relevant which includes short-term and long-term impacts to the Company related to the COVID-19 Pandemic and restrictions under the NCM LLC Credit Agreement and the Revolving Credit Agreement 2022 (as defined herein), entered into on January 5, 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, $0.01 par value, is traded on The Nasdaq Global Market under the symbol “NCMI”. There were 196 stockholders of record as of February 24, 2022 (does not include beneficial holders of shares held in “street name”).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock, $0.01 par value, is traded on The Nasdaq Global Select Market under the symbol “NCMI”. There were 221 stockholders of record as of April 10, 2023 (does not include beneficial holders of shares held in “street name”).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSummary Historical and Operating Data Our Operating Data —The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data). 41 Years Ended % Change ($ in millions) Dec. 30, 2021 Dec. 31, 2020 2021 to 2020 Revenue $ 114.6 $ 90.4 26.8 % Operating expenses: Advertising 95.4 61.9 54.1 % Network, administrative and unallocated costs 87.8 89.5 (1.9) % Total operating expenses 183.2 151.4 21.0 % Operating loss (68.6) (61.0) 12.5 % Non-operating expense (income) 49.8 (96.9) (151.4) % Income tax expense — 162.2 (100.0) % Net loss attributable to noncontrolling interests (69.7) (60.9) 14.4 % Net loss attributable to NCM, Inc. $ (48.7) $ (65.4) (25.5) % Net loss per NCM, Inc. basic share $ (0.61) $ (0.84) (27.4) % Net loss per NCM, Inc. diluted share $ (0.61) $ (0.84) (27.4) % Adjusted OIBDA $ (24.7) $ (19.4) 27.3 % Adjusted OIBDA margin (21.6) % (21.5) % (0.1) % Total theater attendance (in millions) (1) 250.7 138.2 81.4 % (1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with AMC Carmike theaters that are currently part of another cinema advertising network for each of the periods presented.
Biggest changeSummary Operating Data Our Operating Data —The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data). 50 Years Ended % Change ($ in millions) Dec. 29, 2022 Dec. 30, 2021 2022 to 2021 Revenue $ 249.2 $ 114.6 117.5 % Operating expenses: Advertising operating costs 27.2 18.4 47.8 % Network costs 8.4 7.4 13.5 % Theater access fees and revenue share to founding members 82.3 51.1 61.1 % Selling and marketing costs 42.8 34.7 23.3 % Administrative and other costs 44.3 36.0 23.1 % Impairment of long-lived assets 5.8 0.0 100.0 % Depreciation expense 6.5 10.9 (40.4) % Amortization of intangibles recorded for network theater screen leases 25.0 24.7 1.2 % Total operating expenses 242.3 183.2 32.3 % Operating income (loss) 6.9 (68.6) (110.1) % Non-operating expense 73.1 49.8 46.8 % Income tax expense — — — % Net loss attributable to noncontrolling interests (37.5) (69.7) (46.2) % Net loss attributable to NCM, Inc. $ (28.7) $ (48.7) (41.1) % Net loss per NCM, Inc. basic share $ (0.35) $ (0.61) (42.6) % Net loss per NCM, Inc. diluted share $ (0.35) $ (0.61) (42.6) % Adjusted OIBDA $ 57.3 $ (24.7) (332.0) % Adjusted OIBDA margin 23.0 % (21.6) % 44.6 % Total theater attendance (in millions) (1) 394.8 250.7 57.5 % (1) Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated with AMC Carmike theaters that are currently part of another cinema advertising network for each of the periods presented.
Management’s Discussion and Analysis of Financial Condition and Results of Operations As discussed in the forepart of this report, some of the information in this Annual Report on Form 10-K includes “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 (the “Exchange Act”), as amended.
Management’s Discussion and Analysis of Financial Condition and Results of Operations As discussed in the forepart of this report, some of the information in this Annual Report on Form 10-K includes “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 (the “Exchange Act”).
In determining the value of stock options, we estimated an expected term based upon historical actuals and company peer actuals and adjusted it by the cost of equity in order to incorporate the impact of the market condition, expected dividend yield based upon our expectation of the dividend that would be paid out on the underlying shares during the expected term of the option.
In determining the value of stock options, we estimated an expected term based upon historical actuals and company peer actuals and adjusted it by the cost of equity in order to incorporate the impact of the market condition and the expected dividend yield based upon our expectation of the dividend that would be paid out on the underlying shares during the expected term of the option.
The declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant, which includes short-term and long-term impacts to the Company related to the COVID-19 Pandemic and restrictions under the NCM LLC Credit Agreement.
The declaration, payment, timing and amount of any dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant, which includes short-term and long-term impacts to the Company related to the COVID-19 Pandemic and restrictions under the NCM LLC Credit Agreement.
In addition, we sell digital online and mobile advertising through our Noovie Audience Accelerator , across our suite of Noovie digital properties, including Noovie Shuffle , Name That Movie and Noovie ARcade, on third party’s internet sites, as well as a variety of complementary out of home venues, including restaurants, convenience stores and college campuses, in order to reach entertainment audiences beyond the theater.
In addition, we sell digital online and mobile advertising through our Noovie Audience Accelerator , across our suite of Noovie digital properties, including Noovie Shuffle and Name That Movie on third-party’s internet sites, as well as a variety of complementary out of home venues, including restaurants, convenience stores and college campuses, in order to reach entertainment audiences beyond the theater.
Per the ESA with AMC, the time sold to the founding member beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the founding member beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show in the founding member’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC.
Per the ESA with AMC, the time sold to the founding member beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the founding member beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie show in the founding member’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC.
In Regal and Cinemark and a portion of our network affiliates’ theaters, the Noovie pre-show now includes Post-Showtime advertising inventory after the advertised showtime consisting of (1) the lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the 30- or 60-second Platinum Spot.
In Regal and Cinemark and a portion of our network affiliates’ theaters, the Noovie show now includes Post-Showtime advertising inventory after the advertised showtime consisting of (1) the lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the 30- or 60-second Platinum Spot.
Restricted stock units granted to non-employee directors vest after the completion of a service period of thirteen months. Compensation expense equal to the fair value of each restricted stock award or restricted stock unit is recognized ratably over this requisite service period once the performance-based metric has been determined, if applicable.
Restricted stock units granted to non-employee directors usually vest after the completion of a service period of thirteen months. Compensation expense equal to the fair value of each restricted stock award or restricted stock unit is recognized ratably over this requisite service period once the performance-based metric has been determined, if applicable.
We believe that our market coverage strengthens our selling proposition and competitive positioning against other national, regional and local video advertising platforms, including television, online and mobile video platforms and other out of home video advertising platforms by allowing advertisers the broad reach and national scale that they need to effectively reach their target audiences.
We believe that our market coverage strengthens our selling proposition and competitive positioning against other national, regional and local video advertising platforms, including television, online and mobile video 51 platforms and other out of home video advertising platforms by allowing advertisers the broad reach and national scale that they need to effectively reach their target audiences.
We currently derive revenue principally from the sale of advertising to national, regional and local businesses in Noovie® , our cinema advertising and entertainment pre-show seen on movie screens across the U.S. We present two different formats of our Noovie® pre-show depending on the theater circuit in which it runs.
We currently derive revenue principally from the sale of advertising to national, regional and local businesses in our Noovie® show, our cinema advertising and entertainment show seen on movie screens across the U.S. We present two different formats of our Noovie® show depending on the theater circuit in which it runs.
The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures.
The Company believes these are 48 important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures.
The movie trailers that run before the feature film are not part of our Noovie pre-show. We also sell advertising on our LEN, a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies.
The movie trailers that run before the feature film are not part of our Noovie show. We also sell advertising on our LEN, a series of strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies.
Additionally, pursuant to the terms of the Credit Agreement Second Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the quarter ending on or about September 29, 2022, and, thereafter, NCM LLC may only make available cash distributions if: (i) no default or event of default under the Credit Agreement has occurred and is continuing; (ii) the senior secured financial covenant leverage ratio is equal to or less than 4.00 to 1.00; and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less.
Additionally, pursuant to the terms of the Credit Agreement Second Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the quarter ending on or about December 29, 2022, and, thereafter, NCM LLC may only make available cash distributions if: (i) no default or event of default under the Credit Agreement has occurred and is continuing; (ii) the senior secured financial covenant leverage ratio is equal to or less than 4.00 to 1.00; and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less.
If NCM LLC runs advertising in more than one concurrent advertisers’ Platinum Spot for any portion of the network over a period of time, NCM LLC will be required to satisfy a minimum average CPM for that period of time.
If NCM LLC runs advertising in more than one concurrent advertisers’ Platinum Spot for any portion of the network over a period of time, then NCM LLC will be required to satisfy a minimum average CPM for that period of time.
We entered into several 42 agreements to effect the reorganization and the financing transaction and certain amendments were made to the existing ESAs to govern the relationships among NCM LLC and NCM LLC’s founding members after the completion of these transactions.
We entered into several agreements to effect the reorganization and the financing transaction and certain amendments were made to the existing ESAs to govern the relationships among NCM LLC and NCM LLC’s founding members after the completion of these transactions.
NCM LLC is required pursuant to the terms of the NCM LLC Operating Agreement to distribute its available cash, as defined in the operating agreement, unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Regal, Cinemark and NCM, Inc.).
NCM LLC is required pursuant to the terms of the NCM LLC Operating Agreement to distribute its available cash, as defined in the operating agreement, unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Cinemark and NCM, Inc.).
Also on January 5, 2022, NCM LLC entered into the New Revolving Credit Agreement. The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
Also on January 5, 2022, NCM LLC entered into the Revolving Credit Agreement 2022. The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
Interest on the 2028 Notes accrues at a rate of 5.875% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2020.
Interest on the 2028 Notes accrues at a rate of 5.875% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 60 2020.
We also monitor free cash flow, the dividend coverage ratio, financial leverage ratio (net debt divided by Adjusted OIBDA plus integration payments and other encumbered theater payments), cash balances and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs and debt obligations and current and future dividends declared by our Board of Directors.
We also monitor free cash flow, the dividend coverage ratio, financial leverage ratio (net debt divided by Adjusted OIBDA plus integration payments and other encumbered theater payments), cash balances and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs and debt obligations and any future dividends declared by our Board of Directors.
Among other things, the Credit Agreement Second Amendment provides for: (i) certain modifications to the negative covenants;(ii) a waiver of non-compliance with the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the quarter ended June 30, 2022; (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 6.75 to 1.00 and 5.50 to 1.00, respectively, for the quarter ending on or about September 29, 2022, and (iv) with respect to NCM LLC’s audited financial statements for the fiscal year ended December 31, 2020, a waiver of the requirement to deliver such financial statements without a “going concern” or like qualification or exception.
Among other things, the Credit Agreement Second Amendment provides for: (i) certain modifications to the negative covenants;(ii) a waiver of non-compliance with the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the quarter ended June 30, 2022; (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 6.75 to 1.00 and 5.50 to 1.00, respectively, for the quarter ending on or about September 29, 2022, and (iv) with respect to NCM LLC’s audited financial statements for the fiscal year ended December 30, 2021, a waiver of the requirement to deliver such financial statements without a “going concern” or like qualification or exception.
The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
The results of operations data discussed herein were derived from the audited Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto. We have a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal year 2020 contained 53 weeks and fiscal year 2021 contained 52 weeks.
The results of operations data discussed herein were derived from the audited Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the notes thereto. We have a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal year 2022 contained 52 weeks and fiscal year 2021 contained 52 weeks.
The New Revolving Credit Agreement provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022.
NCM, Inc.’s 2020 Omnibus Equity Incentive Plan, 2016 Equity Incentive Plan and its 2007 Equity Incentive Plan, as amended (the “Equity Incentive Plans”) are treated as equity plans under the provisions of Accounting Standards Codification ASC 718 – Compensation – Stock Compensation, and the determination of fair value of options, restricted stock and restricted stock units for accounting purposes requires that management make estimates and judgments.
NCM, Inc.’s 2020 Omnibus Equity Incentive Plan, 2016 Equity Incentive Plan and its 2007 Equity Incentive Plan, as amended (the “Equity Incentive Plans”) are treated as equity plans under the provisions of ASC 718 – Compensation – Stock Compensation, and the determination of fair value of options, restricted stock and restricted stock units for accounting purposes requires that management make estimates and judgments.
The New Revolving Credit Agreement provides for (i) a cash interest rate of term SOFR plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the New Revolving Credit Agreement at any time before maturity.
The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term SOFR plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity.
The tax benefits recognized in the audited Consolidated Financial Statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. For fiscal 2021, our provision for income taxes was $0.0 million.
The tax benefits recognized in the audited Consolidated Financial Statements from such a position are measured as the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. For fiscal 2022, our provision for income taxes was $0.0 million.
We also expect approximately $1.1 million of capital expenditures related to upgrades to our Digital Content Software distribution and content management software and our other internal management systems, including our cinema advertising management system, reporting systems, network equipment related to currently contracted network affiliate theaters, server and 49 storage upgrades and software licensing.
We also expect approximately $1.0 million of capital expenditures related to upgrades to our Digital Content Software distribution and content management software and our other internal management systems, including our cinema advertising management system, reporting systems, network equipment related to currently contracted network affiliate theaters, server and storage upgrades and software licensing.
The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie pre-show and LEN programming are distributed predominantly via satellite through our proprietary DCN.
The ESAs and network affiliate 45 agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie show and LEN programming are distributed predominantly via satellite through our proprietary DCN.
Financing — Subsequent to year-end, on January 5, 2022, NCM LLC entered into the third amendment (the “Credit Agreement Third Amendment”) to its Credit Agreement, dated as of June 20, 2018, among NCM LLC, the several banks and other financial institutions or entities from time to time parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as previously amended (the “Credit Agreement”).
Financing — On January 5, 2022, NCM LLC entered into the third amendment (the “Credit Agreement Third Amendment”) to its Credit Agreement, dated as of June 20, 2018, among NCM LLC, the several banks and other financial institutions or entities from time to time parties thereto, and JPMorgan Chase Bank, N.A., as administrative agent, as previously amended (the “Credit Agreement”).
Further, NCM LLC can make available cash 50 distributions to its members (AMC, Cinemark, Regal and NCM, Inc.) during the Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $277.0 million and outstanding loans under the revolving credit facility are equal to or less than $39.0 million.
Further, NCM LLC can make available cash distributions to its members (Cinemark and NCM, Inc.) during the Covenant Holiday Period only if trailing 12-month Consolidated EBITDA (as defined in the Credit Agreement) equals or exceeds $277.0 million and outstanding loans under the revolving credit facility are equal to or less than $39.0 million.
The New Revolving Credit Agreement also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. Selected Historical and Operating Data The following table sets forth our historical selected financial and operating data for the periods indicated.
The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. Selected Historical and Operating Data The following table sets forth our historical selected financial and operating data for the periods indicated.
Platinum Spot —In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal are entitled to receive a percentage of all revenue generated for the actual display of Platinum Spots in their applicable theaters, subject to a specified minimum.
Platinum Spot —In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and Regal receive a percentage of all revenue generated for the actual display of Platinum Spots in their applicable theaters, subject to a specified minimum.
The New Revolving Credit Agreement provides for (i) a cash interest rate of term Secured Overnight Financing Rate (“SOFR”) plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the New 38 Revolving Credit Agreement at any time before maturity.
The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term Secured Overnight Financing Rate (“SOFR”) plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity.
Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document. Our Network —The net screens added to our network by the founding members and network affiliates during 2021 were as follows.
Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document. Our Network —The net screens added to our network by the founding members and network affiliates during 2022 were as follows.
The Company also had reduced cash payments during the period when theaters within the Company's network were closed or attendance levels were low as expenses related to theater attendance were either not incurred or incurred at lower levels (i.e. theater access fees, Platinum Spot revenue share and network affiliate revenue share payments).
The Company also had reduced cash payments during the period when theaters within the Company ’ s network were closed or attendance levels were low as expenses related to theater attendance (i.e., theater access fees, Platinum Spot revenue share and network affiliate revenue share payments) were either not incurred or incurred at lower levels.
The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense. (2) Share-based payments costs are included in network operations, selling and marketing and administrative expense in the accompanying audited Consolidated Financial Statements.
The Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense. (2) Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying Consolidated Financial Statements.
Discussions of fiscal 2019 items and year-to-year comparisons between fiscal 2020 and fiscal 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Discussions of fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2021.
Our capital expenditures may increase as we add additional network affiliates. We expect that additional expenditures, if any, would be funded in part by additional cash flows associated with those new network affiliates. Financings Subsequent to year-end, on January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.
Our capital expenditures may increase as we add additional network affiliates. We expect that additional expenditures, if any, would be funded in part by additional cash flows associated with those new network affiliates. Financings On January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.
To ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic, we continued to manage our liquidity position through various cost control methods discussed further within the “Financial Condition and Liquidity” section below.
To ensure sufficient liquidity to endure the impacts of the COVID-19 Pandemic and other macroeconomic factors, we continued to manage our liquidity position through various cost control methods discussed further within the “Financial Condition and Liquidity” section below.
The New Revolving Credit Agreement provides for (i) a cash interest rate of term SOFR plus 8.0%, with a 1.0% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the New Revolving Credit Agreement at any time before maturity.
The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term SOFR plus 8.00%, with a 1.00% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity.
Also on January 5, 2022, NCM LLC entered into a Revolving Credit Agreement (the “New Revolving Credit Agreement”) among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent.
Also on January 5, 2022, NCM LLC also entered into the Revolving Credit Agreement 2022 among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent.
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 its free cash flow to stockholders through its quarterly dividend.
The Company intends to pay a regular dividend at the discretion of the Board of Directors consistent with the Company’s intention to distribute substantially all its free cash flow to stockholders through its quarterly dividend.
This section of this Form 10-K generally discusses fiscal 2021 and fiscal 2020 items and year-to-year comparisons between fiscal 2021 and fiscal 2020.
This section of this Form 10-K generally discusses fiscal 2022 and fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021.
Capital expenditures in 2021 were $6.5 million (including $1.7 million associated with digital product development; $1.6 million associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system; $1.5 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements; and $0.6 million associated with network affiliate additions) compared to $11.2 million (including $4.6 million associated with digital product development; $2.4 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements; $2.0 million associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system; and $0.2 million associated with network affiliate additions) for the 2020 period.
Capital expenditures in 2022 were $4.2 million (including $1.9 million associated with digital product development; $0.9 million associated with upgrades to our existing systems related to the continued upgrades of our cinema advertising management system; $0.4 million associated with network affiliate additions and $0.1 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements) compared to $6.5 million for the 2021 period (including $1.7 million associated with digital product development; $1.6 million associated with upgrades to our existing systems related to the upgrade of our cinema advertising management system; $1.5 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements; and $0.6 million associated with network affiliate additions).
Our 2022 fiscal year will contain 52 weeks. Throughout this document, we refer to our fiscal years as set forth below: Reference in Fiscal Year Ended this Document December 30, 2021 2021 December 31, 2020 2020 Results of Operations Fiscal Years 2021 and 2020 Revenue .
Our 2023 fiscal year will contain 52 weeks. Throughout this document, we refer to our fiscal years as set forth below: Reference in Fiscal Year Ended this Document December 29, 2022 2022 December 30, 2021 2021 Results of Operations Fiscal Years 2022 and 2021 Revenue .
Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, are not incurred when theaters are closed and attendance-based fees will be reduced for the period of time that attendance is lower than historical levels.
Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, were not incurred when theaters were closed and attendance-based fees were reduced for the period of time that attendance was lower than historical levels.
The results of operations data for the years ended December 30, 2021 and December 31, 2020 and the balance sheet data as of December 30, 2021 and December 31, 2020 are derived from the audited Consolidated Financial Statements of NCM, Inc. included elsewhere in this document.
The results of operations data for the years ended December 29, 2022 and December 30, 2021 and the balance sheet data as of December 29, 2022 and December 30, 2021 are derived from the audited Consolidated Financial Statements of NCM, Inc. included elsewhere in this document.
The Company's ability to advertise within theaters once opened was limited for part of the year due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of new major motion picture releases as compared to prior years due to the COVID-19 Pandemic.
The Company's ability to advertise within theaters once opened in 2021 was limited due to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of new major motion picture releases as compared to prior years due to the COVID-19 Pandemic.
Financial Condition and Liquidity Liquidity Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined in the NCM LLC Operating Agreement) to Cinemark and Regal, interest or principal payments on our term loan and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to the founding members and the amount of quarterly dividends to NCM, Inc.’s common stockholders.
Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined in the NCM LLC operating agreement) to Cinemark, interest or principal payments on our term loans and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to the founding members and amount of dividends to NCM, Inc.’s common stockholders.
These fees are also based upon a fixed payment per patron beginning at $0.025 per patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per patron beginning on November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increasing 8% every five years beginning November 1, 2027.
These fees are also based upon a fixed payment per patron: (i) $0.0375 per patron beginning on November 1, 2020, (ii) $0.05 per patron beginning on November 1, 2021, (iii) $0.052 per patron beginning on November 1, 2022 and (iv) increasing 8% every five years beginning November 1, 2027.
Since the beginning of the COVID-19 Pandemic, the Company has significantly reduced payroll related costs through a combination of temporary furloughs, permanent layoffs and salary reductions, and these changes have resulted in a headcount reduction of 35% as of December 30, 2021, as compared to headcount levels prior to the COVID-19 Pandemic.
Since the beginning of the COVID-19 Pandemic, the Company has significantly reduced payroll related costs through a combination of temporary furloughs and salary reductions and permanent layoffs. These changes have resulted in a headcount reduction of 39% as of December 29, 2022, as compared to headcount levels prior to the COVID-19 Pandemic.
To the extent actual outcomes differ from management estimates, additional provision for bad debt could be required that could adversely affect earnings or financial position in future periods. 51 Sensitivity Analysis. As of December 30, 2021, our allowance for doubtful accounts was $1.7 million, or 3.1% of the gross accounts receivable balance.
To the extent actual outcomes differ from management estimates, additional provision for bad debt could be required that could adversely affect earnings or financial position in future periods. Sensitivity Analysis. As of December 29, 2022, our allowance for doubtful accounts was $1.7 million, or 1.8% of the gross accounts receivable balance.
COMMON SHARE: Basic $ (0.61) $ (0.84) $ 0.47 $ 0.39 $ 0.89 Diluted $ (0.61) $ (0.84) $ 0.46 $ 0.37 $ 0.48 39 Other Financial and Operating Data Years Ended (in millions, except cash dividend declared per common share and screen data) Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Dec. 28, 2017 Adjusted OIBDA (1) $ (24.7) $ (19.4) $ 207.5 $ 205.4 $ 205.1 Adjusted OIBDA margin (1) (21.6) % (21.5) % 46.7 % 46.5 % 48.1 % Capital expenditures $ 6.5 $ 11.2 $ 15.3 $ 15.4 $ 12.3 Cash dividend declared per common share $ 0.20 $ 0.40 $ 0.68 $ 0.68 $ 0.88 Founding member screens at period end (2) (5) 16,436 16,515 16,880 16,768 16,808 Total screens at period end (3) (5) 20,740 20,450 21,208 21,172 20,850 Total attendance for period (4) (5) 250.7 138.2 651.4 705.1 655.8 Notes to the Selected Historical Financial and Operating Data (1) Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States.
COMMON SHARE: Basic $ (0.35) $ (0.61) $ (0.84) $ 0.47 $ 0.39 Diluted $ (0.35) $ (0.61) $ (0.84) $ 0.46 $ 0.37 Other Financial and Operating Data Years Ended (in millions, except cash dividend declared per common share and screen data) Dec. 29, 2022 Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Adjusted OIBDA (1) $ 57.3 $ (24.7) $ (19.4) $ 207.5 $ 205.4 Adjusted OIBDA margin (1) 23.0 % (21.6) % (21.5) % 46.7 % 46.5 % Capital expenditures $ 4.2 $ 6.5 $ 11.2 $ 15.3 $ 15.4 Cash dividend declared per common share $ 0.11 $ 0.20 $ 0.40 $ 0.68 $ 0.68 Founding member screens at period end (2) (5) 16,062 16,436 16,515 16,880 16,768 Total screens at period end (3) (5) 20,095 20,740 20,450 21,208 21,172 Total attendance for period (4) (5) 394.8 250.7 138.2 651.4 705.1 Notes to the Selected Historical Financial and Operating Data (1) Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in the United States.
The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, executive officer turnover, legal fees related to an abandoned financing transaction, early lease termination expense, impairments of long-lived assets, interest rates, debt levels or income tax rates.
The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management, helps improve their ability to understand the Company’s operating performance and makes it easier to compare the Company’s results with other companies that may have different depreciation and amortization policies, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation programs, executive officer turnover, legal fees related to abandoned financing transactions, costs related to the reorganization of the sales force, advisor fees related to involvement in the Cineworld Proceeding, impairments of long-lived assets, interest rates, debt levels or income tax rates.
During the years ended December 30, 2021, December 31, 2020, December 26, 2019, December 27, 2018 and December 28, 2017, the Company recorded integration and other encumbered theater payments of $1.6 million, $1.4 million, $22.3 million, $21.4 million and $20.9 million, respectively, from NCM LLC’s founding members.
During the years ended December 29, 2022, December 30, 2021, December 31, 2020, December 26, 2019 and December 27, 2018, the Company recorded integration and other encumbered theater payments of $5.4 million, $1.6 million, $1.4 million, $22.3 million, and $21.4 million, respectively, from NCM LLC’s founding members.
Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA with the founding members, income taxes and its regular dividend for the foreseeable future at the discretion of the Board of Directors.
Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA with the founding members, income taxes and any declared dividends for the foreseeable future at the discretion of the Board of Directors.
The $58.6 million of cash at NCM LLC as of December 30, 2021 will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is held for future payment of dividends to NCM, Inc. stockholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.
The $59.4 million of cash at NCM LLC as of December 29, 2022 will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is held for future payment of dividends to NCM, Inc. stockholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.
NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of December 30, 2021 and December 31, 2020.
NCM LLC’s total capacity under the revolving credit facility was $175.0 million as of December 29, 2022 and December 30, 2021.
Pursuant to the 2019 ESA Amendments, Cinemark and Regal each receive an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film.
Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark and Regal each receive an additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film.
There can be no assurance that the cases of the COVID-19 virus will continue to decline; new variants will not emerge and spread; studios will not reschedule movie releases; mask mandates will not negatively impact network attendance, advertiser sentiment, and our business in general; social distancing, capacity restrictions, and other public safety measures will not be reintroduced; when or if theaters within our network will return to historic attendance levels; and that the theaters which have reopened will remain open; or if any of the changes in consumer behavior or changes to the theatrical window in response to the COVID-19 Pandemic will become permanent.
There can be no assurance that studios will not reschedule movie releases; that post-production delays will not negatively impact network attendance, advertiser sentiment, and our business in general; social distancing, capacity restrictions, and other public safety measures will not be reintroduced; when or if theaters within our network will return to historic attendance levels; and that the theaters which have reopened will remain open; or if any of the changes in consumer behavior or changes to the theatrical window in response to the COVID-19 Pandemic will become permanent.
Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document. 40 The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions): Years Ended Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Dec. 28, 2017 Operating (loss) income $ (68.6) $ (61.0) $ 161.3 $ 154.3 $ 153.9 Depreciation expense 10.9 13.1 13.6 12.6 11.0 Amortization expense (1) — — — 27.3 26.6 Amortization of intangibles recorded for network theater screen leases (1) 24.7 24.6 26.7 — — Share-based compensation costs (2) 8.1 2.2 5.5 7.8 11.2 Legal fees related to abandoned financing transaction (3) 0.1 — — — — Executive transition costs (4) 0.1 — 0.4 3.4 0.6 Early lease termination expense (5) — — — — 1.8 Impairment of long-lived assets (6) — 1.7 — — — Adjusted OIBDA $ (24.7) $ (19.4) $ 207.5 $ 205.4 $ 205.1 Total revenue $ 114.6 $ 90.4 $ 444.8 $ 441.4 $ 426.1 Adjusted OIBDA margin (21.6) % (21.5) % 46.7 % 46.5 % 48.1 % (1) Following the adoption of ASC 842, as discussed within Note 13 to the audited Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018.
The following table reconciles operating income to Adjusted OIBDA for the periods presented (dollars in millions): 49 Years Ended Dec. 29, 2022 Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Operating income (loss) $ 6.9 $ (68.6) $ (61.0) $ 161.3 $ 154.3 Depreciation expense 6.5 10.9 13.1 13.6 12.6 Amortization expense (1) — — — — 27.3 Amortization of intangibles recorded for network theater screen leases 25.0 24.7 24.6 26.7 — Share-based compensation costs (2) 7.1 8.1 2.2 5.5 7.8 Advisor fees related to abandoned financing transactions (3) 0.5 0.1 — — — Executive transition costs (4) — 0.1 — 0.4 3.4 Impairment of long-lived assets (5) 5.8 — 1.7 — — Sales force reorganization costs (6) 0.4 — — — — Advisor fees related to the Cineworld Proceeding (7) 5.1 — — — — Adjusted OIBDA $ 57.3 $ (24.7) $ (19.4) $ 207.5 $ 205.4 Total revenue $ 249.2 $ 114.6 $ 90.4 $ 444.8 $ 441.4 Adjusted OIBDA margin 23.0 % (21.6) % (21.5) % 46.7 % 46.5 % (1) Following the adoption of ASC 842, as discussed within Note 13 to the audited Consolidated Financial Statements included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018.
We expect to make approximately $6.5 million to $7.5 million of capital expenditures in fiscal 2022, including approximately $3.3 million for digital product development. We expect these digital products to allow us to capture exclusive first party data on our movie audiences and build our own foundational capabilities for digital ad buying, selling and serving.
We expect to make approximately $7.0 million to $8.0 million of capital expenditures in fiscal 2023, including approximately $2.4 million for digital product development. We expect these digital products to allow us to capture exclusive first party data on our movie audiences and build our own foundational capabilities for digital ad buying, selling and serving.
In March 2020, we drew down an additional $110.0 million on our revolving credit facility and in March 2021 we received $43.0 million in proceeds under incremental term loans that mature on December 20, 2024.
In March 2020, we drew down an additional $110.0 million on our revolving credit facility, in March 2021, we received $43.0 million in net proceeds under incremental term loans that mature on December 20, 2024, and in January 2022 we received $43.3 million in net proceeds under an incremental revolving credit facility that matures on June 20, 2023.
As of December 30, 2021, approximately 57% of our total borrowings bear interest at fixed rates. The remaining 43% of our borrowings bear interest at variable rates and as such, our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.
As of December 29, 2022, approximately 54% of our total borrowings bear interest at fixed rates. The remaining 46% of our borrowings bear interest at variable rates and as such, our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.
The interest rate under the term loan facility is either the LIBOR index plus 3.00% or the base rate plus 2.00% and the rate under the revolving credit facility is either the LIBOR index plus an applicable margin ranging from 1.75%-2.25% or the base rate plus an applicable margin ranging from 0.75%-1.25%.
The interest rate under the term loan facility is either the LIBOR index plus 4.00% or the base rate plus 3.00% and the rate under the revolving credit facility is either the LIBOR index plus an applicable margin ranging from 3.00%-3.50% or the base rate plus an applicable margin ranging from 2.00%-2.50%.
Among other things, the Credit Agreement Third Amendment provides for: (i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein, including maintaining a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC’s revolving credit facility through the fourth quarter of 2023; (ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022 (the “Extended Covenant Waiver Holiday”); (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, 2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter, and (iv) with respect to NCM LLC’s audited financial statements for the fiscal year ended December 30, 2021, a waiver of the requirement to deliver an auditor’s opinion for such financial statements without a “going concern” or like qualification or exception.
Among other things, the Credit Agreement Third Amendment provides for: (i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein, including maintaining a total 46 balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC’s revolving credit facility through the fourth quarter of 2023; (ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022 (the “Extended Covenant Waiver Holiday”) and (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, 2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter.
As of December 30, 2021 and December 31, 2020, the amount available under the NCM LLC revolving credit facility in the table above, was net of the amount outstanding under the revolving credit facility of $167.0 million and $167.0 million, respectively, and net letters of credit of $1.2 million and $3.6 million, respectively.
As of December 29, 2022 and December 30, 2021, the amount available under the NCM LLC revolving credit facility in the table above, was net of the amount outstanding under the revolving credit facility of $167.0 million and $167.0 million, respectively, and net letters of credit of $0.8 million and $1.2 million, respectively.
The Company does not expect to make a TRA payment in 2022 for the 2021 tax year. The Company will also consider opportunistically using cash received for partial repayments of NCM LLC's outstanding debt balance, while ensuring the Company's financial flexibility is maintained.
The Company will owe a TRA payment for the 2022 tax year. The Company will also consider opportunistically using cash received for partial repayments of NCM LLC's outstanding debt balance, while ensuring the Company's financial flexibility is maintained.
NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility, as of January 5, 2022, its New Revolving Credit Agreement and cash on hand.
NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility and cash on hand.
In accordance with the Credit Agreement Amendment (as defined below) and the Credit Agreement Second Amendment, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the third quarter of 2022, NCM LLC must maintain a total balance of $55.0 million of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility.
In accordance with the Revolving Credit Agreement 2022 and the Credit Agreement Third Amendment, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the fourth quarter of 2023, NCM LLC must maintain a minimum liquidity balance of $55.0 million consisting of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility (the “Minimum Liquidity Requirement”).
A summary of our financial liquidity is as follows (in millions) Years Ended $ Change December 30, 2021 December 31, 2020 2020 to 2021 Cash, cash equivalents and marketable securities (1) $ 102.5 $ 181.8 $ (79.3) Revolver availability (2) 6.8 4.4 2.4 Total liquidity $ 109.3 $ 186.2 $ (76.9) (1) Included in cash and cash equivalents as of December 30, 2021 and December 31, 2020 there was $58.6 million and $123.9 million, respectively, of cash held by NCM LLC which is not available to satisfy NCM, Inc.'s dividend payments and other NCM, Inc. obligations.
A summary of our financial liquidity is as follows (in millions): Years Ended $ Change December 29, 2022 December 30, 2021 2021 to 2022 Cash, cash equivalents and marketable securities (1) $ 62.7 $ 102.5 $ (39.8) Revolver availability (2) 7.2 6.8 0.4 Total liquidity $ 69.9 $ 109.3 $ (39.4) (1) Included in cash and cash equivalents as of December 29, 2022 and December 30, 2021 there was $59.4 million and $58.6 million, respectively, of cash held by NCM LLC which is not available to satisfy NCM, Inc.'s dividend payments and other NCM, Inc. obligations.
NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 in order to supplement the decrease in cash provided by operating activities during the period our network theaters were closed.
NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 in order to supplement the decrease in cash provided by operating activities during the period our network theaters were closed. On January 5, 2022, the company entered in the Revolving Credit Agreement 2022 and drew down upon the revolving credit facility of $50.0 million.
The New Revolving Credit Agreement also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. As of December 30, 2021, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended.
The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. As of December 29, 2022, NCM LLC was in compliance with the requirements of the Credit Agreement Third Amendment and the Revolving Credit Agreement 2022.
As of December 30, 2021, theaters presenting the new Noovie pre-show format with Post-Showtime Inventory made up approximately 57% of our network. All other NCM network theater circuits, which make up the remaining 43% of our network, present the Classic Noovie pre-show, which ends approximately at the advertised movie showtime when the movie trailers begin.
As of December 29, 2022, theaters presenting the new Noovie show format with Post-Showtime Inventory made up approximately 59.3% of our network. All other NCM network theater circuits, which make up the remaining 40.7% of our network, present the Classic Noovie show, which ends approximately at the advertised movie showtime when the movie trailers begin.
Subsequent to year-end, on January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.
On January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment.
(2) Represents the closure of 72 screens, net of new screens added, across our founding members and network affiliates. Excludes temporary theater closures in response to the COVID-19 Pandemic. Our founding member and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in the U.S.
(2) Represents the closure of 354 screens, net of new screens added, across our founding members and network affiliates. Our founding member and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in the U.S.
Results of Operations Data Years Ended ($ in millions, except per share data) Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Dec. 28, 2017 Revenue $ 114.6 $ 90.4 $ 444.8 $ 441.4 $ 426.1 OPERATING EXPENSES: Advertising operating costs 18.4 10.3 38.3 37.4 32.4 Network costs 7.4 8.6 13.5 13.3 15.8 Theater access fees and revenue share—founding members 51.1 24.6 82.7 81.7 76.5 Selling and marketing costs 34.7 37.6 64.9 66.5 72.0 Administrative and other costs 36.0 30.9 43.8 48.3 37.9 Impairment of long-lived assets — 1.7 — — — Depreciation expense 10.9 13.1 13.6 12.6 11.0 Amortization expense — — — 27.3 26.6 Amortization of intangibles recorded for network theater screen leases 24.7 24.6 26.7 — — Total 183.2 151.4 283.5 287.1 272.2 OPERATING (LOSS) INCOME (68.6) (61.0) 161.3 154.3 153.9 NON-OPERATING EXPENSE (INCOME) 49.8 (96.9) 62.2 50.6 (140.9) (LOSS) INCOME BEFORE INCOME TAXES (118.4) 35.9 99.1 103.7 294.8 Provision for income taxes — 162.2 12.4 23.5 180.3 CONSOLIDATED NET (LOSS) INCOME (118.4) (126.3) 86.7 80.2 114.5 Less: Net (loss) income attributable to noncontrolling interests (69.7) (60.9) 50.6 50.4 56.2 NET (LOSS) INCOME ATTRIBUTABLE TO NCM, Inc. $ (48.7) $ (65.4) $ 36.1 $ 29.8 $ 58.3 (LOSS) EARNINGS PER NCM, INC.
The results of operations data for the years ended December 31, 2020, December 26, 2019 and December 27, 2018 and the balance sheet data as of December 31, 2020, December 26, 2019 and December 27, 2018 are derived from the audited Consolidated Financial Statements of NCM, Inc. that are not included in this document. 47 Results of Operations Data Years Ended ($ in millions, except per share data) Dec. 29, 2022 Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Dec. 27, 2018 Revenue $ 249.2 $ 114.6 $ 90.4 $ 444.8 $ 441.4 OPERATING EXPENSES: Advertising operating costs 27.2 18.4 10.3 38.3 37.4 Network costs 8.4 7.4 8.6 13.5 13.3 Theater access fees and revenue share to founding members 82.3 51.1 24.6 82.7 81.7 Selling and marketing costs 42.8 34.7 37.6 64.9 66.5 Administrative and other costs 44.3 36.0 30.9 43.8 48.3 Impairment of long-lived assets 5.8 — 1.7 — — Depreciation expense 6.5 10.9 13.1 13.6 12.6 Amortization expense — — — — 27.3 Amortization of intangibles recorded for network theater screen leases 25.0 24.7 24.6 26.7 — Total 242.3 183.2 151.4 283.5 287.1 OPERATING INCOME (LOSS) 6.9 (68.6) (61.0) 161.3 154.3 NON-OPERATING EXPENSE (INCOME) 73.1 49.8 (96.9) 62.2 50.6 (LOSS) INCOME BEFORE INCOME TAXES (66.2) (118.4) 35.9 99.1 103.7 Provision for income taxes — — 162.2 12.4 23.5 CONSOLIDATED NET (LOSS) INCOME (66.2) (118.4) (126.3) 86.7 80.2 Less: Net (loss) income attributable to noncontrolling interests (37.5) (69.7) (60.9) 50.6 50.4 NET (LOSS) INCOME ATTRIBUTABLE TO NCM, Inc. $ (28.7) $ (48.7) $ (65.4) $ 36.1 $ 29.8 (LOSS) EARNINGS PER NCM, INC.
Known Trends and Uncertainties COVID-19— As discussed within the ‘ Recent Developments’ section, due to the COVID-19 Pandemic certain theaters within the Company’s network were temporarily closed during a portion of the year ended December 30, 2021.
Known Trends and Uncertainties COVID-19 and Other Macroeconomic Factors —As discussed within the ‘ Recent Developments ’ section, due to the COVID-19 Pandemic certain theaters within the Company’s network were temporarily closed during a portion of 2021.
In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the resignation and hiring of the Company’s executive officers, legal fees related to an abandoned financing transaction, early lease termination expense, or impairments of long-lived assets.
In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s amortization of intangibles recorded for network theater screen leases, share-based payment costs, costs associated with the resignation and hiring of the Company’s executive officers, legal fees related to abandoned financing transactions, costs related to the reorganization of the sales force, advisor fees related to involvement in the Cineworld Proceeding or impairments of long-lived assets.
We have generated and used cash as follows (in millions): Years Ended 2021 2020 Operating cash flow $ (95.2) $ 55.3 Investing cash flow $ (5.4) $ 15.6 Financing cash flow $ 21.5 $ 53.5 Cash Flows – Fiscal Years 2021 and 2020 Operating Activities.
We have generated and used cash as follows (in millions): Years Ended 2022 2021 Operating cash flow $ (47.3) $ (95.2) Investing cash flow $ (0.4) $ (5.4) Financing cash flow $ 10.3 $ 21.5 Cash Flows – Fiscal Years 2022 and 2021 Operating Activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed1 unchanged
Biggest changeA 100 basis point fluctuation in market interest rates underlying our term loan and revolving credit facility would have the effect of increasing or decreasing our cash interest expense by approximately $4.8 million for an annual period on the $167.0 million, $261.2 million and $49.8 million outstanding as of December 30, 2021 on our revolving credit facility and term loans, respectively. 53
Biggest changeA 100 basis point fluctuation in market interest rates underlying our term loan and revolving credit facility would have the effect of increasing or decreasing our interest expense by approximately $5.2 million for an annual period on the $217.0 million, $258.5 million and $49.3 million outstanding as of December 29, 2022 on our revolving credit facility and term loans, respectively. 63
As of December 30, 2021, the interest rate risk that we are exposed to is related to our $175.0 million revolving credit facility, our $261.2 million term loan (first tranche) and our $49.8 million term loan (second tranche).
As of December 29, 2022, the interest rate risk that we are exposed to is related to our $225.0 million revolving credit facility, our $258.5 million term loan (first tranche) and our $49.3 million term loan (second tranche).

Other NCMI 10-K year-over-year comparisons