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What changed in National CineMedia, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of National CineMedia, Inc.'s 2023 and 2024 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 2024 report.

+570 added−715 removedSource: 10-K (2024-03-18) vs 10-K (2023-04-13)

Top changes in National CineMedia, Inc.'s 2024 10-K

570 paragraphs added · 715 removed · 345 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

111 edited+46 added−49 removed56 unchanged
Biggest changeSilence 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”.
Biggest change“Silence Your Cell Phones”) and a 30 second or a 60 second advertisement for the ESA Parties' beverage supplier. • 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”. • The Classic Noovie Show does not contain the Pre-Trailer Pod of the Platinum Spot and after the Gold Pod concludes there is an advertisement for the ESA Parties’ beverage supplier and a courtesy PSA.
Because the Noovie show is customized by theater circuit, theater location/market, film rating, film genre and film title, we produce and distribute many different versions of Noovie each month. This programming flexibility provides advertisers with the ability to target specific audience demographics and geographic locations and ensure that the content and advertising are age-appropriate for the movie audience.
Because The Noovie Show is customized by theater circuit, theater location/market, film rating, film genre and film title, we produce and distribute many different versions of The Noovie Show each month. This programming flexibility provides advertisers with the ability to target specific audience demographics and geographic locations and ensure that the content and advertising are age-appropriate for the movie audience.
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.
The 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.
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.
Advertising and entertainment content for The 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.
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.
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 The Noovie® Show.
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.
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.
We have also launched several specialty networks to cater to specific audiences, including the Elevate Cinema Network, a strategic sales partnership with Spotlight Cinema Networks which combines nearly 1,500 of our premier screens with Spotlight’s existing premier network of over 1,200 screens. This combined network provides reach and recall to brands targeting the upscale, educated, adult demographic with disposable income.
We have also launched several specialty networks to cater to specific audiences, including the Elevate Cinema Network, a strategic sales partnership with Spotlight Cinema Networks which combined nearly 1,500 of our premier screens with Spotlight’s existing premier network of over 1,200 screens. This combined network provides reach and recall to brands targeting the upscale, educated, adult demographic with disposable income.
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.
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 NCMx™ data platform makes cinema advertising more measurable, targetable and attributable than ever before.
In 2022, we launched several specialty networks to cater to specific audiences, including the Elevate Cinema Network, a strategic sales partnership with Spotlight Cinema Networks which combines nearly 1,500 of our premier screens with Spotlight’s existing premier network of over 1,200 screens. This combined network provides reach and recall to brands targeting the upscale, educated, adult demographic with disposable income.
In 2022, we launched several specialty networks to cater to specific audiences, including the Elevate Cinema Network, a strategic sales partnership with Spotlight Cinema Networks which combined nearly 1,500 of our premier screens with Spotlight’s existing premier network of over 1,200 screens. This combined network provides reach and recall to brands targeting the upscale, educated, adult demographic with disposable income.
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.
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 The Noovie Show program provides a high-quality entertainment experience for theater audiences and an effective marketing platform for advertisers.
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).
As with other premium video mediums like TV, we sell The 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).
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 currently derive revenue principally from the sale of advertising to national, regional and local businesses through The Noovie® Show, 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.
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.
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 10 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 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.
Because we offer local and national “pods” within The Noovie Show (that is, groupings of ads interspersed among 15 video content), our format is consistent with the grouping of ads on television networks, which allows advertisers to more easily integrate The 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 16 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 mediums.
Certain implementation costs of our SaaS platforms were capitalized during the implementation period and are recognized within operating income over the term of the SaaS contract once the systems are fully implemented. Our Strategy We are continuing to pursue a growth strategy that we believe will create significant value following the normalization of our operations.
Certain implementation costs of our SaaS 16 platforms were capitalized during the implementation period and are recognized within operating income over the term of the SaaS contract once the systems are fully implemented. Our Strategy We are continuing to pursue a growth strategy that we believe will create significant value following the normalization of our operations.
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.
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.
We also regularly post information about the Company on the Investor Relations page. We do not incorporate the information on our website into this document and you should not consider any information on, or that can be accessed through, our website as part of this document.
We also regularly post information about the Company on the Investor Relations page. We do not incorporate the information on our website into this document and you should not consider any information on, 18 or that can be accessed through, our website as part of this document.
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.
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 2024 by continuing to gather first-party data through our Noovie digital products, as well as additional second- and third-party data sources and segments.
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.
In 2023, 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.
Additionally, subject to certain limitations, the LEN programming includes up to two minutes (one minute of which we provide to the founding members at no cost and one minute of which the founding members may purchase) to promote certain non-exclusive cross-marketing relationships entered into by the theater operators for the purpose of increasing theater attendance, which we call “strategic programs.” Under the terms of the ESAs, the founding members also have the right to install a second network of additional screens in their theater lobbies which would not display our LEN programming, but would be used to promote strategic programs or products sold in their theater concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty programs and special events presented by the founding member and vendors of services provided to theaters, so long as such promotion is incidental to the vendor’s service.
Additionally, subject to certain limitations, the LEN programming includes up to two minutes (one minute of which we provide to the ESA Parties at no cost and one minute of which the ESA Parties may purchase) to promote certain non-exclusive cross-marketing relationships entered into by the theater operators for the purpose of increasing theater attendance, which we call “strategic programs.” Under the terms of the ESAs, the ESA Parties also have the right to install a second network of additional screens in their theater lobbies which would not display our LEN programming, but would be used to promote strategic programs or products sold in their theater concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty programs and special events presented by the ESA Parties and vendors of services provided to theaters, so long as such promotion is incidental to the vendor’s service.
Competitive Strengths We believe that several strengths position us well to compete in an increasingly fragmented media landscape.
Competitive Strengths 14 We believe that several strengths position us well to compete in an increasingly fragmented media landscape.
These downloads and the acquisition of second- and third- party data, including deterministic ticket transaction data from exhibitors and geo-location and micro-event data for moviegoers that enter theaters in our network, all contribute to NCMx data records.
These downloads and the acquisition of second- and third- party data sets, including deterministic ticket transaction data from 11 exhibitors and geo-location and micro-event data for moviegoers that enter theaters in our network, all contribute to NCMx data records.
In the instance of certain theaters that are acquired by the founding members but are not incorporated into our network because of an existing on-screen advertising agreement with an alternative provider, we remain entitled to these encumbered theater beverage payments under the terms of the ESA which are treated as a reduction to the intangible asset and not classified as revenue.
In the instance of certain theaters that are acquired by the ESA Parties but are not incorporated into our network because of an existing on-screen advertising agreement with an alternative provider, we remain entitled to these encumbered theater beverage payments under the terms of the ESA which are treated as a reduction to the intangible asset and not classified as revenue.
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 ESA Parties and network affiliates in new and acquired theaters, ESA provisions requiring the ESA Parties 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.
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.
We introduced this new inventory at select network affiliate theaters beginning in early 2020, continuing throughout 2021, 2022 and 2023, and plan to continue to work toward expanding the portion of our network including this new inventory.
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 .
The original content produced by these content partners typically features upcoming media programming or technology products. In 2023, the content partner segments were between 90 and 120 seconds in length. Courtesy PSA .
Our exclusive first and second party data, including the valuable data derived from our owned and operated digital products, help us 18 power our Noovie Audience Accelerator product to better reach advertising clients’ target audiences with higher degrees of accuracy and measure a variety of business outcomes more accurately.
Our first and second party data, including the valuable data derived from our owned and operated digital products, help us power our Audience Accelerator product to better reach advertising clients’ target audiences with higher degrees of accuracy and measure a variety of business outcomes more accurately.
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.
The Noovie Show also includes time slots for the ESA Parties 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 LEN programming includes up to two minutes for founding members’ advertisements to promote activities associated with the operation 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 LEN programming includes up to two minutes for ESA Parties’ advertisements to promote activities associated with the operation 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.
Each theater auditorium and lobby has hardware and/or software architecture that controls the content to be shown. After playback of content, confirmation of playback is returned to NCM and is included in “post” reports provided to our advertising clients. In 2022, more than 394 million moviegoers attended theaters that are currently under contract to present the Noovie show.
Each theater auditorium and lobby has hardware and/or software architecture that controls the content to be shown. After playback of content, confirmation of playback is returned to NCM and is included in “post” reports provided to our advertising clients. In 2023, more than 438 million moviegoers attended theaters that are currently under contract to present The Noovie Show.
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.
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 28, 2023, approximately 7.3 million movie-goers have downloaded our mobile apps.
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.
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 ESA Parties’ 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 The Noovie Show played.
(“JPM”) in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”); (ii) the Revolving Credit Agreement, dated as of June 20, 2018 among NCM LLC as Borrower, JPM in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement 2018”); (iii) the Revolving Credit Agreement dated as of January 5, 2022 among NCM LLC as Borrower, JPM in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement 2022”); and (b) prepetition noteholders under (i) the Secured Notes Indenture dated as of October 8, 2019 and Computershare Trust Company, National Association (“Computershare”) in its capacity as indenture trustee (as amended, supplemented or otherwise modified from time to time, the “Secured Notes Indenture” and together with the Term Loan Credit Agreement, Revolving Credit Facility 2018, and Revolving Credit Agreement 2022, the “Prepetition Secured Debt Documents”) and (ii) the Unsecured Notes Indenture dated as of August 19, 2016 with Computershare in its capacity as indenture trustee (as amended, supplemented or otherwise modified from time to time, the “Unsecured Notes Indenture”).
(“JPM”) in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”); (ii) the Revolving Credit Agreement, dated as of June 20, 2018 among NCM LLC as borrower, JPM in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement 2018”); (iii) the Revolving Credit Agreement dated as of January 5, 2022 among NCM LLC as borrower, JPM in its capacity as administrative agent, and the lenders party thereto (as amended, supplemented or otherwise modified from time to time, the “Revolving Credit Agreement 2022”); and (b) prepetition noteholders under (i) the Secured Notes Indenture dated as of October 8, 2019 and Computershare Trust Company, National Association (“Computershare”) in its capacity as indenture trustee for NCM LLC’s 5.875% Senior Secured Notes due 2028 (as amended, supplemented or otherwise modified from time to time, the “Secured Notes Indenture” and together with the Term Loan Credit Agreement, Revolving Credit Facility 2018, and Revolving Credit Agreement 2022, the “Prepetition Secured Debt Documents”) and (ii) the Unsecured Notes Indenture dated as of August 19, 2016 with Computershare in its capacity as indenture trustee for NCM LLC’s 5.750% Senior Unsecured Notes due 2026 (as amended, supplemented or otherwise modified from time to time, the “Unsecured Notes Indenture”).
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.
Competition Our advertising business competes in the estimated $352.0 billion U.S. advertising industry with many other forms of marketing media, including television, radio, print, internet, mobile and outdoor display advertising.
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 ESA Parties, our existing network affiliate relationships and the addition of new network affiliates.
We believe this inventory constitutes prized and impactful ad spots and expect these improvements to increase the value of the inventory that we can offer to our national clients. We believe our local and regional clients will also benefit from better inventory as their placement will now be closer to the advertised showtime.
We believe this inventory constitutes prized and impactful ad spots and expect these improvements to increase the value of the inventory that we can offer to our national clients. We believe our local and regional clients also benefit from better inventory as their placement is closer to the advertised showtime.
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.
Given the impact of the Chapter 11 Case and 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.
Under the terms of the ESAs, the founding members may conduct a limited number of lobby promotions at no charge in connection with strategic programs that promote motion pictures; however, such activities will not reduce the lobby promotions inventory available to us.
Under the terms of the ESAs, the ESA Parties may conduct a limited number of lobby promotions at no charge in connection with strategic programs that promote motion pictures; however, such activities will not reduce the lobby promotions inventory available to us.
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 ESA Parties to use certain proprietary software for the delivery of digital advertising and other content through our DCN to screens in the U.S.
Extensive national market coverage —Our contractual agreements with our founding members and network affiliates provide long-term exclusive access (subject to limited exceptions) to sell cinema advertising across the largest network of digitally-equipped theaters in the U.S.
Extensive national market coverage —Our contractual agreements with our ESA Parties and network affiliates provide long-term exclusive access (subject to limited exceptions) to sell cinema advertising across the largest network of digitally-equipped theaters in the U.S.
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™ .
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 ESA Parties. We have secured U.S. trademark registrations for NCM ® , National CineMedia ®, Noovie® and NCMx™ .
Neustar, iSpot, Catalina, Affinity Solutions, PlaceIQ, Crossix, Kochava and ElementalTV are all partners on the 13 new platform. NCM is leading the cinema advertising industry as it transforms into a data-first media company that reaches audiences at scale with the most engaging content.
Neustar, iSpot, Catalina, Affinity Solutions, Adelaide, TransUnion, PlaceIQ, Crossix, Kochava and ElementalTV are all partners on the new platform. NCM is leading the cinema advertising industry as it transforms into a data-first media company that reaches audiences at scale with the most engaging content. Audience Accelerator.
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.
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 27.9% and 30.4% of our total revenue for the years ended December 28, 2023 and December 29, 2022, respectively.
Under the terms of the ESAs and common unit adjustment agreement with the founding members and our network affiliate agreements, all new theaters built or acquired (subject to existing advertising sales agreements) by the founding members or network affiliates will become part of our network.
Under the terms of the ESAs and Common Unit Adjustment Agreement with the ESA Parties and our network affiliate agreements, all new theaters built or acquired (subject to existing advertising sales agreements) by the ESA Parties or network affiliates will become part of our network.
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, including Name That Movie and the Noovie Trivia app, 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.
This Post-Showtime Inventory consists of a total of five minutes between the lights down segment beginning just after the advertised movie showtime and including trailer lighting and the 30- or 60-second Platinum Spot deeply embedded within the movie trailers with trailer lighting and full trailer volume.
This Post-Showtime Inventory consists of a total of five to ten minutes depending upon the affiliate between the lights down segment beginning just after the advertised movie showtime and including trailer lighting and the 30- or 60-second Platinum Spot deeply embedded within the movie trailers with trailer lighting and full trailer volume.
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, which are not part of our Noovie show.
All other NCM network theater circuits, which make up the remaining 34.6% of our network, present the Classic Noovie Show, which ends approximately at the advertised movie showtime when the movie trailers begin, which are not part of The Noovie Show.
Contractual theater circuit and advertiser relationships —Our exclusive multi-year contractual relationships with our founding members and network affiliates allow us to offer advertisers a national network with the scale, flexibility and targeting to meet their marketing needs.
Contractual theater circuit and advertiser relationships —Our exclusive multi-year contractual relationships with our ESA Parties and network affiliates allow us to offer advertisers a national network with the scale, flexibility and targeting to meet their marketing needs.
Including our founding members and network affiliates, our net screens have increased in eight out of the last ten fiscal years . We believe this expansion continues to improve our geographic coverage and enhances our ability to compete with other national advertising mediums, which allows our exhibitor clients to maximize the advertising value of their audiences.
Including our ESA Parties and network affiliates, our net screens have increased in seven out of the last ten fiscal years. We believe this expansion continues to improve our geographic coverage and enhances our ability to compete with other national advertising mediums, which allows our exhibitor clients to maximize the advertising value of their audiences.
Cineworld Proceeding — On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA with NCM LLC, 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 (the “Cineworld Proceeding”).
Regal Advertising Agreement —On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., formerly a party to an ESA with NCM LLC, and Regal CineMedia Holdings, LLC, formerly a party to other agreements with NCM LLC and the Company, filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas.
We also sell digital online and mobile advertising through Noovie Audience Accelerator, across our suite of Noovie digital properties such as our Noovie Trivia , on third-party 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.
We also sell digital online and mobile advertising through Audience Accelerator, across our suite of digital properties, and with third-party internet partners, 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.
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%).
Further, based upon an average of 7 years of research studies including 323 advertisers across various categories, advertising on the big screen has generated brand lift for the critical key performance indicators of awareness (increase of 62.0%) and consideration (increase of 24.0%).
The following table reflects the quarterly percentage of total revenue for the fiscal years ended 2020, 2021 and 2022 and a historic average for FY 2016-2019 for comparison given the impacts of COVID-19 on the film release schedule and audience behaviors: First Quarter Second Quarter Third Quarter Fourth Quarter FY 2020 71.6 % 4.4 % 6.6 % 17.4 % FY 2021 4.7 % 12.2 % 27.7 % 55.4 % FY 2022 14.4 % 26.9 % 21.9 % 36.8 % FY 2016-2019 Average 17.3 % 24.8 % 25.6 % 32.3 % Government Regulations Currently, we are not subject to regulations specific to the sale and distribution of cinema advertising.
The following table reflects the quarterly percentage of total NCM LLC revenue for the fiscal years ended 2021, 2022 and 2023 and a historic average for FY 2017-2019 for comparison given the impacts of COVID-19 on the film release schedule and audience behaviors: First Quarter Second Quarter Third Quarter Fourth Quarter FY 2021 4.7 % 12.2 % 27.7 % 55.4 % FY 2022 14.4 % 26.9 % 21.9 % 36.8 % FY 2023 13.4 % 24.8 % 26.8 % 35.0 % FY 2017-2019 Average 17.4 % 24.4 % 25.7 % 32.4 % Government Regulations Currently, we are not subject to regulations specific to the sale and distribution of cinema advertising.
For the year ended December 29, 2022, our capital expenditures and other investments were $4.2 million, of which $1.9 million were associated with digital product development; $0.9 million were associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system; $0.4 million were associated with network affiliate additions; and $0.1 million were for certain implementation and prepaid costs associated with Cloud Computing arrangements.
For the year ended December 28, 2023, our capital expenditures and other investments were $5.3 million, of which $1.5 million were associated with digital product development; $2.0 million were associated with upgrades to our existing systems related to the planned upgrade of our cinema advertising management system; $0.3 million were associated with network affiliate additions; and $1.3 million were for certain implementation and prepaid costs associated with Cloud Computing arrangements.
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.
A summary of the screens and theaters in our advertising network is set forth in the table below: Our Network (As of December 28, 2023) As of December 28, 2023, The Noovie Show was displayed on network movie screens using digital projectors.
We present two different formats of our Noovie® show depending on the theater circuit in which it runs.
We present multiple different formats of The Noovie Show depending on the theater circuit in which it runs.
We launched several new Noovie editorial series in 2022 featuring celebrities, creators and journalists to appeal to both our moviegoing audience and to advertisers for sponsorship and integration opportunities.
We continued several new Noovie Show editorial series from 2022 featuring celebrities, creators and journalists to appeal to both our moviegoing audience and to advertisers for sponsorship and integration opportunities.
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 exclusive contractual relationships with our content partners and courtesy PSA sponsors, as well as our agreements to satisfy the ESA Parties’ on-screen marketing obligations to their beverage concessionaires, provide us with a significant upfront revenue commitment, accounting for approximately 28.4% and 25.6% of our total revenue for the years ended December 28, 2023 and December 29, 2022, respectively.
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.
The Company has implemented a number of targeted initiatives to increase employee engagement and satisfaction, including team and culture-building activities, career and succession planning and ongoing analysis and enhancements of our total rewards program. Total Rewards —We invest in our employees by providing comprehensive benefits and compensation packages.
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”).
In Cinemark, Regal and certain other network affiliate theaters, after The Noovie Show ends at the advertising showtime, NCM offers additional post-show advertising inventory which may consist of a lights down segment that runs after the advertised showtime with trailer lighting and may consist of a 30- or 60-second Platinum Spot, as further described below (“Post-Showtime Inventory”).
In February and March of 2023, Cinemark redeemed 43,690,797 of its outstanding membership units in exchange for shares of NCM, Inc. common stock, reducing Cinemark’s ownership to 0.0% as of March 23, 2023. NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant to the NCM LLC Operating Agreement.
On February 23, 2023 and March 23, 2023, Cinemark redeemed all of their outstanding membership units in exchange for shares of NCM, Inc. common stock reducing Cinemark’s ownership interest in NCM LLC to 0.0% as of December 28, 2023. NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant to the NCM LLC Operating Agreement.
The new partnership now enables advertisers to reach the largest network of lobby screens in movie theaters across the country programmatically for the first time. Lobby Promotions —We also sell a wide variety of advertising and promotional products in theater lobbies across our founding members and network affiliates.
The partnership enabled advertisers to reach the largest network of lobby screens in movie theaters across the country programmatically for the first time. Lobby Promotions —We also sell a wide variety of advertising and promotional products in theater lobbies across our ESA Parties and certain network affiliates.
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.
While adoption across our affiliate network is expected to take some time, 65.4% of our network affiliates are running our Post-Showtime Inventory as of December 28, 2023, which including Regal and Cinemark, accounted for 34.6% of our total network attendance based on 2023 levels. Our relationships with our exhibitors are a key focus of our business.
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 .
The following graphic is for illustrative purposes and is not to exact scale. 9 • The Silver Pod is the first sections of The Noovie Show which contain the entertaining content that is a core element of The Noovie Show programming.
With over 374.4 million unique data records as of December 29, 2022, NCMx makes 26.2 million unique data records available over a 90-day look back period, delivering marketers a 360-degree view of recent consumer behavior with performance metrics to refine campaign plans and generate a better return on their advertising investment.
With over 703.3 million unique data records as of December 28, 2023, NCMx makes 99.3 million unique data records available over a 90-day look back period, delivering marketers a 360-degree view of recent consumer behavior with performance metrics to refine campaign plans and generate a better return on their advertising investment.
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.
The DCN is integrated with NCM’s cinema advertising management system to seamlessly schedule and distribute advertising content. 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.
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.
In 2023, we had one agreement throughout the year 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. There are two agreements in place for 2024. Theater Circuit Messaging.
DMAs®, respectively, and 61.3% of all DMAs® nationally, providing an attractive platform for national advertisers who want exposure in larger markets or on a national basis; • The average screens per theater in our network during 2022 was 12.6 screens; and • The aggregate annual attendance per screen of theaters included in our network during 2022 was 19,647.
DMAs®, respectively, and 59.1% of all DMAs® nationally, providing an attractive platform for national advertisers who want exposure in larger markets or on a national basis; • The average screens per theater in our network during 2023 was 12.8 screens; and • The aggregate annual attendance per screen of theaters included in our network during 2023 was 23,854.
In December 2022, AMC and Regal each redeemed all of their outstanding membership units, 5,954,646 and 40,683,797, respectively, in exchange for shares of NCM, Inc. common stock, reducing AMC’s and Regal’s ownership to 0.0% as of December 29, 2022.
In December 2022, AMC and Regal each redeemed all of their outstanding membership units in exchange for shares of NCM, Inc. common stock, reducing AMC’s and Regal’s ownership interest in NCM LLC to 0.0% as of December 29, 2022.
Data & Digital Advertising In 2022, we launched NCMx™, our new data, insights, and analytics platform that taps the Company’s comprehensive knowledge and extensive data about moviegoer behavior to connect brands with custom audiences in theaters, as well as on digital screens before and after attending movies.
This time is provided to the theater operator at no charge. Data & Digital Advertising In 2022, we launched NCMx™, our data, insights and analytics platform that utilizes the Company’s comprehensive knowledge and extensive data about moviegoer behavior to connect brands with custom audiences in theaters, as well as, on digital screens before and after attending movies.
In May 2022, the Company’s Lobby Entertainment Network launched a programmatic offering through partnership with Place Exchange, a leading supply-side platform (SSP) for programmatic out-of-home media. This new automated offering allows advertisers to access and purchase available LEN programming through partner demand-side platform (DSP) websites.
In 2024, we plan to expand the Company’s LEN programmatic offering to on-screen advertising. The LEN programmatic offering was launched in 2022 through partnership with Place Exchange, a leading supply-side platform (SSP) for programmatic out-of-home media. This automated offering allows advertisers to access and purchase available LEN programming through partner demand-side platform (DSP) websites.
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.
Each of the ESA Parties 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.
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.
NCM, Inc. has no business operations or material assets other than its cash and ownership interest of 100.0% of the common membership units in NCM LLC as of December 28, 2023.
We also created NCM Black Cinema Network and NCM Hispanic Cinema Network in connection with NuTime Media, a Black-owned media sales representation company, to better serve marketers looking to reach African-American and Hispanic audiences.
We also created NCM Black Cinema Network and NCM Hispanic Cinema Network in connection with NuTime Media, a Black-owned media sales representation company, to better serve marketers looking to reach African-American and Hispanic audiences. In 2023, we paired with Religion of Sports to cater to specific audiences for a new content partnership.
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.
Further, 47.0% of our moviegoers have a household income greater than $100,000 (versus 41.0% of the general population), with a median moviegoer household income of $94,000, and 38.0% have received a bachelor’s degree or higher (versus 35.0% of the general population) according to the 2023 Spring Doublebase MRI Simmons Study.
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.
During the years ended December 28, 2023 and December 29, 2022, NCM LLC derived 73.2% and 75.1% of its advertising revenue from national clients (including advertising agencies that represent our clients) and 19.7% and 17.5% of its advertising revenue from regional and local advertisers across the country (including advertising agencies that represent these clients). Beverage Advertising.
These include The Noovie Trivia Show , where our Emmy-award winning host Maria Menounos quizzes celebrities about their career through the lens of movie trivia; Noovieverse , which stars popular social media influencers who analyze upcoming superhero blockbuster movies; and Perri’s Picks , starring movie expert Perri Nemiroff, who shares her insider reviews on what movies to watch and why. • 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.
These include The Noovie Trivia Show, where our Emmy-award winning host Maria Menounos quizzes celebrities about their career through the lens of movie trivia ; Noovieverse, which stars popular social media influencers who analyze upcoming superhero blockbuster movies; and Perri’s Picks, starring movie expert Perri Nemiroff, who shares her insider reviews on what movies to watch and why.
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.
NCM LLC’s annual operating income and Adjusted OIBDA margins were (69.6)% and 20.3%, and 2.8% and 23.0%, for the years ended December 28, 2023 and December 29, 2022, respectively, due to the impact of the Chapter 11 Case and the lingering impact of the COVID-19 pandemic on our operations. Refer to “Item 7.
The Human Resources department also focuses on defining and embedding the NCM culture into all people-related practices and policies to help us recruit, develop and retain a world-class team to grow the business.
Compliance with mandatory training requirements is tracked by our Human Resources department and management is notified when the requirements are not met. The Human Resources department also focuses on defining and embedding the NCM culture into all people-related practices and policies to help us recruit, develop and retain a world-class team to grow the business.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese 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.
Biggest changeThese 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; • the film production process may be impacted by production delays, writers’ or actors’ strikes, such as those that took place in 2023, incidents on sets, government regulation, or other factors that could limit the number of films available and cause films to be delayed; • government regulations or theater operating policies that require higher levels of social distancing, restriction of capacity or prohibition of operations; • 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, one or more of NCM LLC’s network theater circuits 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. 21 Any of these circumstances could reduce our revenue because our national and regional advertising revenue, and local advertising revenue to a lesser extent, depends on the number of theater patrons who attend movies.
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.
Trends in patron behavior that could reduce viewership of The 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.
The temporary or permanent loss of our computer equipment, networks, data or software systems through ransomware, data exfiltration, and other cyberattacks and other security threats, termination of a material technology license or contract, operating malfunction, software virus, human error, natural disaster, power loss, terrorist attacks or other catastrophic events could disrupt our operations and cause a material negative impact and the steps that we have taken to mitigate these risks may prove to be ineffective.
The temporary or permanent loss of our computer equipment, networks, data or software systems through 28 ransomware, data exfiltration, and other cyberattacks and other security threats, termination of a material technology license or contract, operating malfunction, software virus, human error, natural disaster, power loss, terrorist attacks or other catastrophic events could disrupt our operations and cause a material negative impact and the steps that we have taken to mitigate these risks may prove to be ineffective.
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.
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 25 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.
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.
These valuable 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 The Noovie Show and where they go in the days and weeks afterwards.
The COVID-19 Pandemic led to several changes impacting patron attendance at theaters including studios electing to shorten or eliminate the “release window” between the release of major motion pictures to alternative delivery methods or released motion pictures directly to alternative delivery methods bypassing the theater entirely.
The COVID-19 Pandemic also led to several changes impacting patron attendance at theaters including studios electing to shorten or eliminate the “release window” between the release of major motion pictures to alternative delivery methods or released motion pictures directly to alternative delivery methods bypassing the theater entirely.
Given the pervasive impact of this new system on the Company's processes, problems with the systems and software could cause operational difficulties, lead to errors within our financial reporting and slow or prevent the growth of our business in the future.
Given the pervasive impact of this new system on the Company's processes, problems with the system and software could cause operational difficulties, lead to errors within our financial reporting and slow or prevent the growth of our business in the future.
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.
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.
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.
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.
As sole manager of NCM LLC, we control NCM LLC, and our interest in NCM LLC is not an “investment security” as that term is used in the Investment Company Act of 1940.
As sole manager of NCM LLC, we control NCM LLC, and our interest in NCM LLC is not an “investment security” as that term is 31 used in the Investment Company Act of 1940.
On September 7, 2022, Cineworld Group plc, the parent company of Regal, 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 (the “Cineworld Proceeding”).
On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., formerly a party to an ESA, and Regal CineMedia Holdings, LLC, formerly 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 (the “Cineworld Proceeding”).
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).
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 2023 (excluding 2020).
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.
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 the ESA Parties, 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.
NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal 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.
NCM LLC filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal 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.
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.
This system replaced many of our internally developed systems and provides 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 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.
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 currently in progress, 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.
The failure to upgrade and maintain our technology allowing our advertising to reach a broader audience and allow for more targeted marketing products similar to other products in the inventory could hurt our ability to compete. Under the ESAs, the founding members are required to provide technology that is consistent with that in place at the signing of the ESA.
The failure to upgrade and maintain our technology allowing our advertising to reach a broader audience and allow for more targeted marketing products similar to other products in the inventory could hurt our ability to compete. Under the ESAs, the ESA Parties are required to provide technology that is consistent with that in place at the signing of the ESA.
Should Regal or another founding member liquidate or dispose of theaters or remove theaters from our network through bankruptcy or for other business reasons, if the acquirer did not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our advertising revenue.
Should Regal or another ESA Party liquidate or dispose of theaters or remove theaters from our network through bankruptcy or for other business reasons, if the acquirer did not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our advertising revenue.
For further information, refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document. Our future issuance of preferred stock could dilute the voting power of our common stockholders and adversely affect the market value of our common stock.
For further information, refer to Note 6 to the Consolidated Financial Statements included elsewhere in this document. Our future issuance of preferred stock could dilute the voting power of our common stockholders and adversely affect the market value of our common stock.
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.
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 even more substantially quarter-to-quarter.
If the founding members do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters to maintain the level of operating functionality that we have today, or if such equipment becomes obsolete, we may have to make additional capital expenditures or our advertising revenue and operating margins may decline.
If the ESA Parties do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters to maintain the level of operating functionality that we have today, or if such equipment becomes obsolete, we may have to make additional capital expenditures or our advertising revenue and operating margins may 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.
If a court were to determine that the non-competition provisions are unenforceable, the counterparties could compete directly against us or enter into an agreement with another cinema advertising provider that competes against us.
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.
These provisions are intended to prevent the counterparties 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.
Depending on the nature and scope of a future disruption, if any technology network or systems were to fail and we were unable to recover in a timely manner, we would be unable to fulfill critical business functions, which could lead to a loss of clients and revenue, harm our reputation or interfere with our ability to comply with financial reporting and other regulatory requirements.
Depending on the nature and scope of a disruption, if any technology network or systems fail and we are unable to recover in a timely manner, we may be unable to fulfill critical business functions, which could lead to a loss of clients and revenue, harm our reputation or interfere with our ability to comply with financial reporting and other regulatory requirements.
Due to the impacts to our operations, we were required to take drastic measures to ensure our business survived the COVID-19 Pandemic, including incurring additional debt financing, furloughing and terminating employees, extending payment terms on accounts payable, and reducing or delaying planned operating and capital expenditures.
Due to the impacts to our operations, we were required to take drastic measures to ensure our business survived the COVID-19 Pandemic, including furloughing and terminating employees, extending payment terms on accounts payable, and reducing or delaying planned operating and capital expenditures.
This could influence their decisions regarding whether and when we should dispose of assets, and whether and when we or NCM LLC should incur indebtedness.
This could influence Cinemark’s decisions regarding whether and when we should dispose of assets, and whether and when we or NCM LLC should incur indebtedness.
Each ESA provides NCM LLC with a five-year right of first refusal for the services that it provides to the founding members, which begins one year prior to the end of the term of each respective ESA.
Each ESA provides NCM LLC with a five-year right of first refusal for the services that it provides to the ESA Parties, which begins one year prior to the end of the term of each respective ESA.
Some of these laws and regulations also apply directly to us and NCM LLC. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on the founding members’, our network affiliates’ and our respective businesses.
Some of these laws and regulations also apply directly to us and NCM LLC. Changes in existing laws or implementation of new laws, regulations and practices could have a significant impact on the ESA Parties’, our network affiliates’ and our respective businesses.
The ESAs require the continuing cooperation, investment and support of the founding members, the absence of which could adversely affect us. Pursuant to the ESAs, the founding members must make investments to replace network equipment within their theaters and equip newly constructed theaters with digital network equipment.
The ESAs require the continuing cooperation, investment and support of the ESA Parties, the absence of which could adversely affect us. Pursuant to the ESAs, the ESA Parties must make investments to replace network equipment within their theaters and equip newly constructed theaters with digital network equipment.
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.
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 The Noovie 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 NCM LLC’s network theaters.
As another example, Standard General is in the business of making investments in companies and may hold, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly compete with us.
As another example, Blantyre Capital is in the business of making investments in companies and may hold, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly compete with us.
Other than the maximum number of authorized shares of common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock that we may issue upon redemption of an NCM LLC founding member’s common membership units in NCM LLC.
Other than the maximum number of authorized shares of common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock that we may issue upon redemption of an ESA Party’s common membership units in NCM LLC.
The distribution of cash flows and other transfers of funds by NCM LLC to us are subject to statutory and contractual restrictions based upon NCM LLC’s financial performance, including NCM LLC’s compliance with the covenants in its Senior Secured Credit Facility, Revolving Credit Facility and indentures, and the NCM LLC Operating Agreement.
The distribution of cash flows and other transfers of funds by NCM LLC to us are subject to statutory and contractual restrictions based upon NCM LLC’s financial performance, including NCM LLC’s compliance with the covenants in the Revolving Credit Facility 2023 and the NCM LLC Operating Agreement.
If we or NCM LLC’s founding members are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted. We do not believe that we are an “investment company” under the Investment Company Act of 1940, as amended.
If we are determined to be an investment company, we would become subject to burdensome regulatory requirements and our business activities could be restricted. We do not believe that we are an “investment company” under the Investment Company Act of 1940, as amended.
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.
Changes in theater patron behavior could result in declines in the viewership of The Noovie® S how which could reduce the attractiveness of cinema advertising and our revenues.
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.
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.
If this were to occur and if one or more of NCM LLC’s founding members was insolvent or bankrupt or otherwise unable to make payment under its indemnification obligation under the TRA, then NCM, Inc.’s financial condition could be negatively impacted.
If this were to occur and if one or more of the ESA Parties was insolvent or bankrupt or otherwise unable to make payment under its indemnification obligation under the TRA, then NCM, Inc.’s financial condition could be negatively impacted.
For this reason, it is not possible for us to predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs.
For this reason, it is not possible for us to predict whether, or to what extent, a court would enforce the non-competition provisions contained in the ESAs and network affiliate agreements.
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.
If the ESA Parties 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.
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).
Certain counterparties 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 27 attendance or revenue (other than revenue from the sale of advertising).
The ESAs and certain of our network affiliate agreements include automatic annual cost or fee increases. The theater access fees under the ESAs are composed of a fixed payment per patron, increasing by 8% every five years, and a fixed payment per digital screen connected to the DCN, increases annually by 5%.
The theater access fees under the ESAs are composed of a fixed payment per patron, increasing by 8% every five years, and a fixed payment per digital screen connected to the DCN, increasing annually by 5%, and certain of our network affiliate agreements include annual increases in the minimum fee per patron payable.
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.
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 the ESA Parties’ agreements to purchase on-screen advertising for their beverage concessionaires.
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.
As a result, the financial provisions and the other terms of these agreements, such as covenants, contractual 30 obligations on our part and on the part of the ESA Parties 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.
Even the perception that our business or the business of founding members and network affiliates may be impacted, could lead to decreased advertising expenditures and other significant disruption to our business. Future pandemics could require us to implement measures similar to those implemented in response to the COVID-19 Pandemic.
Even the perception that our business or the business of network’s theaters may be impacted, could lead to decreased advertising expenditures and other significant disruption to our business. Future pandemics could require us to implement measures similar to those implemented in response to the COVID-19 Pandemic.
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 ultimate impact of these actions following NCM LLC’s emergence from bankruptcy 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.
For example, our certificate of incorporation and bylaws: • provide veto rights to the directors designated by Cinemark and Regal over certain actions specified in our certificate of incorporation; • authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares, making a takeover more difficult and expensive; • prohibit stockholder action by written consent; and • do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
For example, our certificate of incorporation and bylaws: • authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the number of outstanding shares, making a takeover more difficult and expensive; • prohibit stockholder action by written consent; and • do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of stockholders to elect director candidates.
The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including NCM LLC’s results of operations, financial condition, earnings, capital requirements, limitations in NCM LLC’s debt agreements and legal requirements.
The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and will depend upon many factors, including NCM LLC’s results of operations, financial condition, earnings, capital requirements, limitations in the Revolving Credit Facility 2023 and legal requirements.
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.
If a bankruptcy case were commenced by or against another ESA Party, it is possible that all or part of the ESA with the applicable ESA Party 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 ESA Party, and thus not be enforceable.
The founding members and our network affiliates are subject to various federal, state and local laws, regulations and administrative practices affecting their movie theater business, including provisions regulating antitrust, health, safety and sanitation standards (including in connection with the COVID-19 Pandemic), access for those with disabilities, environmental, and licensing.
The ESA Parties and our network affiliates are subject to various federal, state and local laws, regulations and administrative practices affecting their movie theater business, including provisions regulating antitrust, health, safety and sanitation standards (including in connection with the COVID-19 Pandemic or other public health events), access for those with disabilities, environmental, and licensing.
The ESA with AMC has an initial term of 30 years and the ESAs with Cinemark and Regal (as amended by the 2019 ESA Amendments) have a term of 34 years, each such term beginning February 13, 2007.
The ESA with AMC has an initial term of 30 years and the ESA with Cinemark (as amended by the 2019 ESA Amendment) has a term of 34 years, each such term beginning February 13, 2007.
The use of LEN or lobby promotions by the founding members for these advertisements and programs could result in the founding members creating relationships with advertisers that could adversely affect our current LEN and lobby promotions advertising revenue and profitability, as well as the potential we have to grow that advertising revenue in the future.
The use of LEN or lobby promotions or other inventory by the theater counterparties for these advertisements and programs could result in the theater counterparties creating relationships with advertisers that could adversely affect our advertising revenue and profitability, as well as the potential we have to grow that advertising revenue in the future.
The ESAs and the other contractual agreements that we have with NCM LLC’s founding members were originally negotiated in the context of an affiliated relationship in which representatives of NCM LLC’s founding members and their affiliates comprised our entire Board of Directors.
The ESAs and the other contractual agreements that we have with the ESA Parties were originally negotiated in the context of an affiliated relationship in which representatives of the ESA Parties and their affiliates comprised our entire Board of Directors.
The agreements between us and NCM LLC’s founding members were made in the context of an affiliated relationship and may contain different terms than comparable agreements with unaffiliated third parties.
The agreements between us and the ESA Parties were made in the context of an affiliated relationship and may contain different terms than comparable agreements with unaffiliated third parties.
We cannot predict the effect, if any, that market sales of shares of common stock by Regal, Cinemark, AMC, Standard General or any of our significant stockholders will have on the market price of our common stock from time to time.
We cannot predict the effect, if any, that market sales of shares of common stock by Blantyre Capital, Cinemark, or any of our significant stockholders will have on the market price of our common stock from time to time.
Changes in the ESAs with, or lack of support by, the founding members could adversely affect our revenue, growth and profitability. The ESAs with the founding members are critical to our business.
Changes in the ESAs with, or lack of support by, the ESA Parties could adversely affect our revenue, growth and profitability. 22 The ESAs with the ESA Parties are critical to our business.
Our TRA with NCM LLC’s founding members is expected to reduce the amount of overall cash flow that would otherwise be available to us and will increase our potential exposure to the financial condition of NCM LLC’s founding members.
Our TRA with the ESA Parties is expected to reduce the amount of overall cash flow that would otherwise be available to us and will increase our potential exposure to the financial condition of the ESA Parties.
We may not be successful in increasing the number of theaters in which NCM LLC has the right to display Post-Showtime Inventory.
We may not realize the anticipated benefits of additional Post-Showtime inventory or be successful in increasing the number of theaters in which NCM LLC has the right to display Post-Showtime inventory.
On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA.
On October 21, 2022, Regal filed a motion to reject its ESA without specifying an effective date for the rejection and indicated that Regal intended to negotiate with the Company regarding the ESA.
We have structured the NCM LLC Senior Secured Credit Facility, Revolving Credit Facility and indentures to allow NCM LLC to distribute cash to its members (including us and NCM LLC’s other members) in amounts sufficient to cover their tax liabilities and management fees, if any.
The Revolving Credit Facility 2023 is structured to allow NCM LLC to distribute cash to its members (including us and NCM LLC’s other members, if any) in amounts sufficient to cover their tax liabilities and management fees, if any.
These strategic marketing relationships can include the use of one minute on the LEN per 30-minute cycle and certain types of lobby promotions and can be provided at no cost, but only for the purpose of promoting the products or services of those businesses while at the same time promoting the theater circuit or the movie-going experience.
Some of these strategic marketing relationships can include the use of on-screen, LEN and certain types of lobby promotions and can be provided at no cost, but only for the purpose of promoting the products or services of those businesses while at the same time promoting the theater circuit or the movie-going experience and some of these exceptions are broader.
There can be no assurance that the COVID-19 Pandemic and associated impacts will not return in the future, or a future pandemic will not lead to public safety restrictions or consumer behavior that will negatively impact our business, advertiser sentiment, or audience attendance. In-theater advertising revenue remained below historical levels in 2021 and 2022.
There can be no assurance that the COVID-19 Pandemic and associated impacts will not return in the future, or a future pandemic will not lead to public safety restrictions or consumer behavior that will negatively impact our business, advertiser sentiment, or audience attendance.
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 COVID-19 virus, have disrupted and are continuing to disrupt our business and the business of NCM LLC’s network theaters, which has and could continue to materially affect our operations, liquidity and results of operations.
Additionally, the bankruptcy of our founding members, or negative news regarding the theater industry, cinema advertising generally or us could lead to increased volatility in revenue from quarter to quarter. These variations in our financial results could contribute to volatility in our stock price.
Additionally, the bankruptcy of one of NCM LLC’s significant network theater circuits, or negative news regarding the theater industry, cinema advertising generally or us could lead to increased volatility in revenue from quarter to quarter. These variations in our financial results could contribute to volatility in our stock price.
Significant declines in theater attendance could reduce the attractiveness of cinema advertising and could reduce our revenue. Our business is affected by the level of attendance at the theaters in our advertising network that operate in a highly competitive industry and whose attendance is reliant on the presence of motion pictures that attract audiences.
Our business is affected by the level of attendance at the theaters in our advertising network that operate in a highly competitive industry and whose attendance is reliant on the presence of motion pictures that attract audiences.
We may incur significant costs in protecting our own intellectual property rights or defending or settling intellectual property infringement claims and may face significant damage awards (including the potential for awards of attorneys’ fees) if we are found to be infringing third-party intellectual property rights.
We may incur significant costs in protecting our own intellectual property rights or defending or settling intellectual property infringement claims and may face significant damage awards (including the potential for awards of attorneys’ fees) if we are found to be infringing third-party intellectual property rights. 29 Our in-theater, online and mobile services facilitate the distribution of content, and we create content for others.
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.
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 be able to generate sufficient revenue to satisfy any minimum guarantees required to enter into agreements for Post-Showtime inventory or sufficient minimum average CPMs required to display the Platinum Spot in Cinemark’s theaters; • 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; or • the increased fees payable in connection with the Post-Showtime Inventory with certain counterparties may exceed the increase, if any, in revenue resulting from the access to the Post-Showtime inventory.
It is possible that the interests of Cinemark, Regal and Standard General may in some circumstances conflict with our interests and the interests of our other stockholders.
It is possible that the interests of these stockholders may in some circumstances conflict with our interests and the interests of our other stockholders.
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.
Pandemics or disease outbreaks such as the COVID-19 virus, including variants, have and are continuing to disrupt our business and the business of NCM LLC’s network theaters.
We may request that the founding members upgrade the equipment or software installed in their theaters, but we must negotiate with the founding members as to the terms of such upgrade, including cost sharing terms, if any.
We may request that the ESA Parties or other theaters in our network upgrade the equipment or software installed in their theaters, but we must negotiate as to the terms of such upgrade, including cost sharing terms, if any.
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).
The Revolving Credit Facility 2023 may limit NCM LLC’s ability to distribute cash to its members, including us, based upon certain financial 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.
The ESAs allow the founding members to engage in activities that might compete with certain elements of our business, which could reduce our revenue and growth potential. The ESAs contain certain limited exceptions to our exclusive right to use the founding members’ theaters for our advertising business.
Our contracts for theater advertising allow certain counterparties to engage in activities that might compete with certain elements of our business, which could reduce our revenue and growth potential. The ESAs and network affiliate agreements contain certain limited exceptions to our exclusive right to use the counterparties’ theaters for our advertising business.
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.
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.
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.
As a result, this stockholder could be 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 and the approval of mergers and other significant corporate transactions.
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.
Beginning with the 2019 ESA Amendment with affiliates of Cinemark in 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 in Cinemark and certain other network affiliates’ theaters.
We have agreed in our TRA with NCM LLC’s founding members to pay to NCM LLC’s founding members 90% of the amount by which NCM, Inc.’s tax payments to various tax authorities are reduced as a result of the increase in tax basis.
We have agreed in our TRA with the ESA Parties to pay to the ESA Parties 90% of the amount by which NCM, Inc.’s tax payments to various tax authorities are reduced as a result of the increase in tax basis associated with the ESA Parties’ share of certain tax assets.
If the non-competition provisions of the ESAs are deemed unenforceable, the founding members could compete against us and our business could be adversely affected.
If the non-competition provisions of the ESAs or other advertising agreements are deemed unenforceable, the counterparties could compete against us and our business could be adversely affected.
With certain limited exceptions, each of the ESAs prohibits the applicable founding member from engaging in any of the business activities that we provide in the founding member’s theaters under the amended ESAs, and from owning interests in other entities that compete with us.
With certain limited exceptions, each of the ESAs and other network affiliate agreements prohibits the applicable counterparty from engaging in any of the business activities that we provide in the counterparty’s theaters under the ESAs and network affiliate agreements, and the ESAs and certain network affiliate agreements prohibit the counterparty from owning interests in other entities that compete with us.
For example, Cinemark and Regal may have different tax positions from us, especially in light of the TRA we entered into with founding members that provides for the payment by us to the founding members of 90% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize.
For example, Cinemark may have different tax positions from us, especially in light of the TRA that provides for the payment by us to Cinemark of 90% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, due to Cinemark’s portion of certain tax assets.
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.
In addition, the ESAs give the ESA Parties the right to object to certain content in The Noovie ® Show, including content that competes with us or the applicable ESA Party.
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.
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.

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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 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.
Biggest changeItem 2. Properties The Company's headquarters are located in Centennial, Colorado. As of December 28, 2023, the Company also leases offices in New York, Los Angeles and Chicago. 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.
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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 changeWe 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 litigation currently pending that would have a material adverse effect on our operating results or financial condition.
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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
Item 3. Legal Proceedings On June 26, 2023, the Bankruptcy Court entered an order authorizing NCM LLC’s entry into the Regal Advertising Agreement and the Regal Termination Agreement (the “Regal Order”). On June 27, 2023, the Bankruptcy Court entered the Confirmation Order approving the Disclosure Statement on a final basis and confirming the Company’s Plan.
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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
On August 7, 2023, the conditions precedent to the Plan were satisfied and NCM LLC emerged from bankruptcy. On June 29, 2023, AMC and Cinemark filed a notice of appeal of the Confirmation Order, and a week later appealed the Regal Order.
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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
Subsequently, AMC and Cinemark sought a stay of the Confirmation Order and Regal Order in the Bankruptcy Court, the District Court for the Southern District of Texas, and the Fifth Circuit Court of Appeals, all of which denied the request.
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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
The consolidated appeals of the Confirmation Order and the Regal Order on the merits are pending in the District Court for the Southern District of Texas. We are sometimes involved in legal proceedings arising in the ordinary course of business.
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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.
Removed
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.
Removed
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 changeNg 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.
Biggest changeNg 44 Chief Financial Officer Scott D. Felenstein 55 President of Sales, Marketing & Partnerships Maria V. Woods 55 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 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 previously served as the Chief Financial Officer and Head of Corporate Development of Allen Media Group from October 2018 until September 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.
Lesinski served as the Non-Employee Chairman of the Board of Directors of NCM, Inc. since August 2018 and as a member of the Board of Directors of NCM, Inc. since 2014. In addition to his roles on the Board of Directors of NCM, Inc., Mr.
Lesinski served as the Non-Employee Chairman of the Board of Directors of NCM, Inc. since August 33 2018 and as a member of the Board of Directors of NCM, Inc. since 2014. In addition to his roles on the Board of Directors of NCM, Inc., Mr.
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.
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 64 Chief Executive Officer Ronnie Y.

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. 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
Biggest changePeriod (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 29, 2023 through October 26, 2023 — $ — — N/A October 27, 2023 through November 30, 2023 — $ — — N/A December 1, 2023 through December 28, 2023 — $ — — N/A Item 6. [RESERVED] 35
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 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 284 stockholders of record as of March 14, 2024 (does not include beneficial holders of shares held in “street name”).
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.
Dividend Policy At the discretion of the Board of Directors, it is the Company’s intention to distribute substantially all its free cash flow to stockholders through dividends.
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.
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.
Removed
Dividend Policy We intend to distribute substantially all of our free cash flow (distributions from NCM LLC less income taxes and payments under the tax receivable agreement with the founding members) in the form of dividends to our stockholders.
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Issuer Purchases of Equity Securities 34 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.
Removed
Under Delaware law, dividends may be payable only out of surplus, which is our total assets minus total liabilities less the par value of our common stock, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal ye ar.
Removed
For tax purposes, our dividends paid in 2021 and 2022 were treated as non-dividend distributions to stockholders.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeResults of Operations - NCM LLC The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data) for the years ended December 28, 2023 and December 29, 2022 for NCM LLC: Years Ended $ Change % Change ($ in millions) Dec. 28, 2023 Dec. 29, 2022 2022 to 2023 2023 to 2022 Revenue $ 259.8 $ 249.2 $ 10.6 4.3 % Operating expenses: Advertising operating costs 48.4 27.2 21.2 77.9 % Network costs 8.9 8.4 0.5 6.0 % ESA theater access fees and revenue share 72.7 82.3 (9.6) (11.7) % Selling and marketing costs 44.1 42.8 1.3 3.0 % Administrative and other costs 75.9 32.7 43.2 132.1 % Loss on impairment of Regal ESA 125.7 — 125.7 100.0 % Impairment of long-lived assets 8.9 5.8 3.1 53.4 % Administrative fee—managing member 21.7 11.0 10.7 97.3 % Depreciation expense 4.6 6.5 (1.9) (29.2) % Amortization expense 29.8 25.0 4.8 19.2 % Total operating expenses 440.7 241.7 199.0 82.3 % Operating (loss) income $ (180.9) $ 6.9 $ (187.8) (2721.7) % Adjusted OIBDA $ 52.7 $ 57.3 $ (4.6) (8.0) % Adjusted OIBDA margin 20.3 % 23.0 % (2.7) % (2.7) % Total theater attendance (in millions) (1) 438.9 394.8 44.1 11.2 % 42 (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.
NCM LLC has also filed an adversary proceeding against Regal seeking declaratory relief and an injunction prohibiting Regal 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.
NCM LLC also filed an adversary proceeding against Regal seeking declaratory relief and an injunction prohibiting Regal 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.
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 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.
Critical Accounting Estimates The significant accounting policies of the Company are described in Note 1 to the audited Consolidated Financial Statements included elsewhere in this document. Certain accounting policies involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, which management considers critical accounting policies.
Critical Accounting Estimates and Policies 49 The significant accounting policies of the Company are described in Note 1 to the audited Consolidated Financial Statements included elsewhere in this document. Certain accounting policies involve significant judgments, assumptions and estimates by management that have a material impact on the carrying value of certain assets and liabilities, which management considers critical accounting policies.
In order to develop future undiscounted net cash flows, we utilize estimates and assumptions based on historical data and 61 consideration of future market conditions while incorporating management’s expectations as of the balance sheet date.
In order to develop future undiscounted net cash flows, we utilize estimates and assumptions based on historical data and consideration of future market conditions while incorporating management’s expectations as of the balance sheet date.
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 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 2023 contained 52 weeks and fiscal year 2022 contained 52 weeks.
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.
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 2023, our provision for income taxes was $0.0 million.
(3) These fees relate to advisor and legal costs incurred for advice pertaining to an alternative debt transaction that was abandoned in the fourth quarter of 2021 and an alternative equity transaction that was abandoned in the fourth quarter of 2022.
(2) These fees relate to advisor and legal costs incurred for advice pertaining to an alternative debt transaction that was abandoned in the fourth quarter of 2021 and an alternative equity transaction that was abandoned in the fourth quarter of 2022.
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.
The movie trailers presented by the theater circuits that run before the feature film are not part of The 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.
Once the Company returns to a more normal operating level and emerges from a three-year cumulative pre-tax book loss position, part or all the valuation allowance is expected to reverse, resulting in an inverse impact to the payable to founding members under the tax receivable agreement which would increase to reflect future payments to the founding members at that time.
Once the Company returns to a more normal operating level and emerges from a three-year cumulative pre-tax book loss position, part or all the valuation allowance is expected to reverse, resulting in an inverse impact to the payable to ESA Parties under the tax receivable agreement which would increase to reflect future payments to the ESA Parties at that time.
Following the increase in the valuation allowance as of December 31, 2020, the Company recorded a corresponding $151.9 million reduction to the “Payable to founding members under the tax receivable agreement” equal to the portion of the payable related to 90% of the amortization of the expected benefits from the realization of the deferred tax assets deemed not more-likely-than-not to be realized as of December 31, 2020.
Following the increase in the valuation allowance as of December 31, 2020, the Company recorded a corresponding $151.9 million reduction to the “Payable to ESA Parties under the tax receivable agreement” equal to the portion of the payable related to 90% of the amortization of the expected benefits from the realization of the deferred tax assets deemed not more-likely-than-not to be realized as of December 31, 2020.
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.
Per the ESA with AMC, the time sold to the 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 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 ESA Parties’ theaters, limited to the highest advertising CPM being then-charged by NCM LLC.
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.
Discussions of fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021 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 29, 2022.
Basis of Presentation Prior to the completion of our IPO, NCM LLC was wholly-owned by its founding members. In connection with the offering, NCM, Inc. purchased newly issued common membership units from NCM LLC and common membership units from NCM LLC’s founding members and became a member of and the sole manager of NCM LLC.
Basis of Presentation Prior to the completion of our IPO, NCM LLC was wholly-owned by its ESA Parties. In connection with the offering, NCM, Inc. purchased newly issued common membership units from NCM LLC and common membership units from NCM LLC’s ESA Parties and became a member of and the sole manager of NCM LLC.
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.
Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark receives and Regal previously received 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.
On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal planned on negotiating with the Company.
On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal planned on negotiating with NCM LLC.
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.
This section of this Form 10-K generally discusses fiscal 2023 and fiscal 2022 items and year-to-year comparisons between fiscal 2023 and fiscal 2022.
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).
Capital expenditures in 2023 were $5.3 million (including $2.0 million associated with upgrades to our existing systems related to the continued upgrades of our cinema advertising management system; $1.5 million associated with digital product development; $1.3 million associated with certain implementation and prepaid costs associated with Cloud Computing arrangements and $0.3 million associated with network affiliate additions) compared to $4.2 million for the 2022 period (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).
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 results of operations data for the years ended December 28, 2023 and December 29, 2022 and the balance sheet data as of December 28, 2023 and December 29, 2022 are derived from the audited Consolidated Financial Statements of NCM, Inc. included elsewhere in this document.
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.
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 ESA Parties after the completion of these transactions.
Recent Developments Cineworld Proceeding — On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA with NCM LLC, 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.
Regal Advertising Agreement —On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., formerly a party to an ESA with NCM LLC, and Regal CineMedia Holdings, LLC, formerly 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.
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.
Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA, income taxes and any stock buybacks or declared dividends for the foreseeable future at the discretion of the Board of Directors.
A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business.
A limitation of both of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in NCM LLC’s 44 business.
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 2024 fiscal year will also contain 52 weeks. Throughout this document, we refer to our fiscal years as set forth below: Reference in Fiscal Year Ended this Document December 28, 2023 2023 December 29, 2022 2022 Results of Operations Fiscal Years 2023 and 2022 Revenue .
Unforeseen events, changes in circumstances and market conditions and material differences in estimates of future cash flows could adversely affect the fair value of our assets and could result in impairment charges. Share-Based Compensation Nature of Estimates Required.
Unforeseen events, changes in circumstances and market conditions and material differences in estimates of future cash flows could adversely affect the fair value of our assets and could result in impairment charges. Income Taxes Nature of Estimates Required.
(2) The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the Senior Secured Credit Facility and a portion is available for letters of credit.
(3) The revolving credit facility portion of NCM LLC’s total borrowings that was available, subject to certain conditions, for general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under the previous senior secured credit facility, and a portion was available for letters of credit.
Theater Access Fees —In consideration for NCM LLC’s access to the founding members’ theater attendees for on-screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby promotions, the founding members receive a monthly theater access fee under the ESAs.
Theater Access Fees —In consideration for NCM LLC’s access to the ESA Parties’ theater attendees for on-screen advertising and use of lobbies and other space within the ESA Parties’ theaters for the LEN and lobby promotions, the ESA Parties receive a monthly theater access fee under the ESAs.
If we were to fail to meet certain of the requirements of the TRA, we could be subject to additional payments to taxing authorities or to the founding members.
If we were to fail to meet certain of the requirements of the TRA, we could be subject to additional payments to taxing authorities or to the ESA Parties.
We focus on many operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national and regional advertising pricing (CPM), local advertising rate per theater per week, national, local, regional and total advertising revenue per attendee.
We focus on many operating metrics including changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, advertising pricing (CPM), local advertising rate per theater per week, advertising revenue per attendee, as well as significant operating expenses and related trends.
Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation.
Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management use this non-GAAP financial measure to evaluate operating performance, to forecast future results and as a basis for compensation.
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.
The Company believes the presentation of this measure 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, non-cash share-based compensation programs, executive transition costs, advisor fees related to abandoned financing transactions, impairment of long-lived assets, sales force reorganization costs, termination of the Regal ESA and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case, interest rates, debt levels or income tax rates.
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.
We currently derive revenue principally from the sale of advertising to national, regional and local businesses in The Noovie® Show, our cinema advertising and entertainment show seen on movie screens across the U.S. We present multiple formats of The Noovie® Show depending on the theater circuit in which it runs, which may include Post-Showtime advertising inventory after the advertised showtime.
Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should it be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA.
Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should it be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP.
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.
We expect approximately $3.2 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, $ 1.5 million towards network affiliate additions, $1.5 million towards digital products and data sets and $0.2 million towards leasehold improvements.
The available cash distribution to the members of NCM LLC for the combined three months ended March 31, 2022, three months ended June 30, 2022, three months ended September 29, 2022 and three months ended December 29, 2022 was calculated as approximately negative $20.5 million, of which NCM, Inc.'s share is approximately negative $5.2 million.
The available cash distribution to the members of NCM LLC for the combined three months ended March 31, 2023, three months ended June 29, 2023 and three months ended September 28, 2023 was calculated as approximately negative $50.6 million, of which NCM, Inc.'s share is approximately negative $50.6 million.
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 Company believes this is an important supplemental measure of operating performance because it eliminates 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.
Beverage Revenue —Under the ESAs, up to 90 seconds of the Noovie® show program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements.
Known Trends and Uncertainties Beverage Revenue —Under the ESAs, up to 90 seconds of The Noovie® Show program can be sold to the ESA Parties to satisfy their on-screen advertising commitments under their beverage concessionaire agreements.
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.
A summary of our financial liquidity is as follows (in millions): Years Ended $ Change December 28, 2023 December 29, 2022 2022 to 2023 Cash, cash equivalents and marketable securities (1) $ 34.6 $ 62.7 $ (28.1) NCM LLC’s Revolving Credit Facility 2023 availability (2) 44.4 — 44.4 NCM LLC’s revolver credit facility availability (3) — 7.2 (7.2) Total liquidity $ 79.0 $ 69.9 $ 9.1 46 (1) Included in cash and cash equivalents as of December 28, 2023 and December 29, 2022 there was $31.9 million and $59.4 million, respectively, of cash held by NCM LLC which is not available to satisfy NCM, Inc.'s dividend payments and other NCM, Inc. obligations.
The results of operations data for the years ended December 31, 2020, December 26, 2019 and December 27, 2018 and the balance sheet data as of December 31, 2020, December 26, 2019 and December 27, 2018 are derived from the audited Consolidated Financial Statements of NCM, Inc. that are not included in this document. 47 Results of Operations Data Years Ended ($ 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.
Results of Operations Data - Consolidated Years Ended ($ in millions, except per share data) Dec. 28, 2023 Dec. 29, 2022 Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Revenue $ 165.2 $ 249.2 $ 114.6 $ 90.4 $ 444.8 OPERATING EXPENSES: Advertising operating costs 30.7 27.2 18.4 10.3 38.3 Network costs 6.3 8.4 7.4 8.6 13.5 ESA theater access fees and revenue share 43.1 82.3 51.1 24.6 82.7 Selling and marketing costs 29.6 42.8 34.7 37.6 64.9 Administrative and other costs 57.3 44.3 36.0 30.9 43.8 Impairment of long-lived assets — 5.8 — 1.7 — Depreciation expense 3.1 6.5 10.9 13.1 13.6 Amortization expense 22.4 25.0 24.7 24.6 26.7 Total 192.5 242.3 183.2 151.4 283.5 OPERATING (LOSS) INCOME (27.3) 6.9 (68.6) (61.0) 161.3 NON-OPERATING (INCOME) EXPENSE (724.0) 73.1 49.8 (96.9) 62.2 INCOME (LOSS) BEFORE INCOME TAXES 696.7 (66.2) (118.4) 35.9 99.1 Provision for income taxes — — — 162.2 12.4 CONSOLIDATED NET INCOME (LOSS) 696.7 (66.2) (118.4) (126.3) 86.7 Less: Net (loss) income attributable to noncontrolling interests (8.5) (37.5) (69.7) (60.9) 50.6 NET INCOME (LOSS) ATTRIBUTABLE TO NCM, Inc. $ 705.2 $ (28.7) $ (48.7) $ (65.4) $ 36.1 38 EARNINGS (LOSS) PER NCM, INC.
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.
We also monitor free cash flow, cash balances, the fixed charge coverage ratio and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs, debt obligations and any future dividends declared by our Board of Directors.
All statements other than statements of historical facts included in this Form 10-K, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and statements related to the impact of the current COVID-19 Pandemic on our business and results, may constitute forward-looking statements.
All statements other than statements of historical facts included in this Form 10-K, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward-looking statements.
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.
As of December 28, 2023, 100% 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 theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increased by 4% on November 1, 2022 and will increase by 8% every five years, with the next increase occurring in 2027.
The theater access fee is composed of a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron increases by 8% every five years, with an increase occurring in the current year and the next increase occurring in 2027.
Sources of Capital and Capital Requirements NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of December 29, 2022 were $62.7 million (including $59.4 million of cash held by NCM LLC).
Sources of Capital and Capital Requirements NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances and marketable securities, which as of December 28, 2023 were $37.6 million (including $34.9 million of cash and restricted cash held by NCM LLC).
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.
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 August 7, 2023, NCM LLC entered into the Revolving Credit Facility 2023 with CIT Northbridge Credit LLC as agent.
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.
The weighted average remaining term of the ESAs and the network affiliate agreements is 11.9 years as of December 28, 2023. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. The Noovie Show and our LEN programming are distributed predominantly via satellite through our proprietary DCN.
Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share-based compensation costs, executive officer transition costs, 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 and impairments of long-lived assets.
Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude amortization of intangibles, non-cash share-based payment costs, executive transition costs, advisor fees related to abandoned financing transactions, impairment of long-lived assets, sales force reorganization costs, termination of the Regal ESA and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case.
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.
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.
Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company. Allowance for Doubtful Accounts Nature of Estimates Required.
Because of the nature of the judgments and assumptions made by management, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and liabilities and the results of operations of the Company. Deconsolidation of NCM LLC NCM LLC does not have a readily determinable fair value.
Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers now increases at a fixed rate of 2.0% each year.
Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers now increases at a fixed rate of 2.0% each year. As of July 14, 2023, the effective date of the Regal Advertising Agreement, the Company no longer receives ESA beverage revenue from Regal.
Given the additional pre-tax book losses in 2022, we have a valuation allowance in the amount of $245.5 million against the deferred tax asset as of December 29, 2022.
Given the additional pre-tax book losses in 2022, the Company continues to have a valuation allowance in the amount of $146.0 million against the deferred tax asset as of December 28, 2023.
The following table shows the changes in operating expense for 2021 and 2022 (in millions): Fiscal Year $ Change % Change 2022 2021 2021 to 2022 2021 to 2022 Advertising operating costs $ 27.2 $ 18.4 $ 8.8 47.8 % Network costs 8.4 7.4 1.0 13.5 % Theater access fees and revenue share—founding members 82.3 51.1 31.2 61.1 % Selling and marketing costs 42.8 34.7 8.1 23.3 % Administrative and other costs 44.3 36.0 8.3 23.1 % Impairment of long-lived assets 5.8 — 5.8 100.0 % Depreciation expense 6.5 10.9 (4.4) (40.4) % Amortization of intangibles recorded for network theater screen leases 25.0 24.7 0.3 1.2 % Total operating expenses $ 242.3 $ 183.2 $ 59.1 32.3 % Advertising operating costs .
The following table shows the changes in operating expense for 2022 and 2023 (in millions): 40 Fiscal Year $ Change % Change 2023 2022 2022 to 2023 2022 to 2023 Advertising operating costs $ 30.7 $ 27.2 $ 3.5 12.9 % Network costs 6.3 8.4 (2.1) (25.0) % ESA theater access fees and revenue share 43.1 82.3 (39.2) (47.6) % Selling and marketing costs 29.6 42.8 (13.2) (30.8) % Administrative and other costs 57.3 44.3 13.0 29.3 % Impairment of long-lived assets — 5.8 (5.8) 100.0 % Depreciation expense 3.1 6.5 (3.4) (52.3) % Amortization expense 22.4 25.0 (2.6) (10.4) % Total operating expenses $ 192.5 $ 242.3 $ (49.8) (20.6) % Advertising operating costs .
Valuation allowances are to be established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company generated a three-year cumulative pre-tax book loss during 2021 driven by the impact of the COVID-19 Pandemic on the Company’s operations in 2020 and 2021.
The Company generated a three-year cumulative pre-tax book loss during 2021 driven by the impact of the COVID-19 Pandemic on the Company’s operations in 2020 and 2021.
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.
As of December 29, 2022, the amount available under the NCM LLC revolving credit facilities pursuant to the Credit Agreement 2018 and the Revolving Credit Agreement 2022 in the table above was net of the amount outstanding under the revolving credit facilities of $217.0 million and outstanding letters of credit of $0.8 million.
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.
Financial Condition and Liquidity Liquidity and Capital Resources 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 interest or principal payments on our Revolving Credit Facility 2023, income tax payments, TRA payments, available cash payments (as defined in the NCM LLC Operating Agreement) to Cinemark and AMC in the event the ESA Parties hold NCM LLC membership units and amount of dividends to NCM, Inc.’s common stockholders.
Refer to Note 5 to the audited Consolidated Financial Statements included elsewhere in this document. National advertising revenue. National advertising revenue increased by $102.9 million, or 122.2%, from $84.2 million in 2021 to $187.1 million in 2022.
Refer to Note 6 to the audited Consolidated Financial Statements included elsewhere in this document. Revenue. Revenue increased $10.6 million, or 4.3%, from $249.2 million for the year ended 2022 to $259.8 million for the year ended 2023. National advertising revenue increased by $2.9 million, or 1.5%, from $187.2 million in 2022 to $190.1 million in 2023.
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.
NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its Revolving Credit Facility 2023 and cash on hand. NCM LLC drew down $10.0 million of its Revolving Credit Facility 2023 immediately upon emergence from bankruptcy on August 7, 2023.
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.
The following table reconciles operating income to Adjusted OIBDA for NCM LLC for the periods presented (dollars in millions): Years Ended Dec. 28, 2023 Dec. 29, 2022 Dec. 30, 2021 Dec. 31, 2020 Dec. 26, 2019 Operating (loss) income $ (180.9) $ 6.9 $ (68.6) $ (61.0) $ 161.3 Depreciation expense 4.6 6.5 10.9 13.1 13.6 Amortization expense 29.8 25.0 24.7 24.6 26.7 Share-based compensation costs (1) 5.5 7.1 8.1 2.2 5.5 Advisor fees related to abandoned financing transactions (2) — 0.5 0.1 — — Executive transition costs (3) — — 0.1 — 0.4 Impairment of long-lived assets (4) 8.9 5.8 — 1.7 — Sales force reorganization costs (5) — 0.4 — — — Loss on termination of Regal ESA, net (6) 125.6 — — — — Advisor fees related to the Cineworld Proceeding (7) 59.2 5.1 — — — Adjusted OIBDA $ 52.7 $ 57.3 $ (24.7) $ (19.4) $ 207.5 Total revenue $ 259.8 $ 249.2 $ 114.6 $ 90.4 $ 444.8 Adjusted OIBDA margin 20.3 % 23.0 % (21.6) % (21.5) % 46.7 % (1) Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the accompanying Consolidated Financial Statements.
NCM, Inc. expects to use its cash balances and cash received from future available cash distributions to fund payments associated with the TRA with the founding members and future dividends as declared by the Board of Directors or make other strategic investments as approved by the Board of Directors.
NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Revolving Credit Facility 2023) to fund payments associated with the TRA, stock repurchases and future dividends as declared by the Board of Directors.
(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.
Our ESA Party and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in the U.S.
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.
At the discretion of the Board of Directors, it is the Company’s intention to distribute substantially all its free cash flow to stockholders through dividends.
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.
In addition, Adjusted OIBDA and Adjusted OIBDA margin have the limitation of not reflecting the effect of the Company’s depreciation, amortization of intangibles, non-cash share-based payment costs, executive transition costs, advisor fees related to abandoned financing transactions, impairments of long-lived assets, sales force reorganization costs, termination of the Regal ESA and advisor fees related to involvement in the Cineworld Proceeding or Chapter 11 Case.
Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA with the founding members, payments of NCM, Inc. specific expenses, purchases of low risk investments and for future payment of dividends to NCM, Inc. stockholders.
The $34.9 million of cash at NCM LLC will be used to fund operations. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA and for future payment of dividends to NCM, Inc. stockholders.
The capital expenditures have typically been satisfied through cash flow from operations. All capital expenditures related to the DCN within the founding members’ theaters have been made by the founding members under the ESAs. We expect they will continue to be made by the founding members in accordance with the ESAs.
The capital expenditures have typically been satisfied through cash flow from operations. All capital expenditures related to the DCN within the ESA Parties’ theaters have been made by the ESA Parties under the ESAs.
The selected financial and operating data should be read in conjunction with the other information contained in this document, including “Item 1. Business,” the audited historical Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been included in this document.
Business,” the audited historical Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited Consolidated Financial Statements, which have not been included in this document.
Theater access fees and revenue share increased $31.2 million, or 61.1%, from $51.1 million in 2021 to $82.3 million in 2022.
ESA theater access fees and revenue share. Theater access fees and revenue share decreased $39.2 million, or 47.6%, from $82.3 million in 2022 to $43.1 million in 2023.
In addition, due to the basis differences resulting from our IPO-related transactions (including the TRA with the founding members) and subsequent adjustments pursuant to the common unit adjustment agreement, we are required to make cash payments under the TRA to the founding members in amounts equal to 90% of our actual tax benefit realized from the tax amortization of the basis difference for certain deferred assets noted above.
As we do expect to generate pre-tax book income following the complete recovery from the lingering impacts of the COVID-19 Pandemic and Chapter 11 Case, we have recorded an impact from the Net Business Interest Expense Limitation IRC § 163(j) on our payable to ESA Parties under the TRA. 50 In addition, due to the basis differences resulting from our IPO-related transactions (including the TRA with the ESA Parties) and subsequent adjustments pursuant to the Common Unit Adjustment Agreement, we are required to make cash payments under the TRA to the ESA Parties in amounts equal to 90% of our actual tax benefit realized from the tax amortization of the basis difference for certain deferred assets noted above.
This increase was primarily due to a $5.1 million increase in legal and professional fees incurred related to the Cineworld Proceeding in 2022.
This increase was primarily related to a $44.6 million increase in advisor and legal fees related to the Chapter 11 Case and Cineworld Proceeding.
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.
These fees are also based upon a fixed payment per patron of $0.052 beginning on November 1, 2022 and (iv) increasing 8% every five years beginning November 1, 2027. As of July 14, 2023, Regal rejected and terminated the Regal ESA and the Regal Advertising Agreement became effective.
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.
In addition, we sell digital online and mobile advertising through our Audience Accelerator , across our suite of Noovie digital properties and a variety of complementary out of home venues in order to reach entertainment audiences beyond the theater. As of December 28, 2023, approximately 7.3 million moviegoers have downloaded our mobile apps.
Accordingly, deferred tax assets and liabilities arise from the differences between the tax basis of an asset or liability and its reported amount in the audited Consolidated Financial Statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law.
Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are to be established when necessary to reduce deferred tax assets to the amount expected to be realized.
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.
As of December 28, 2023, theaters presenting The Noovie Show format with Post-Showtime Inventory made up approximately 65.4% of our network. All other NCM network theater circuits, which make up the remaining 34.6% of our network, present The Noovie Show, without Post-Showtime advertising inventory.
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.).
NCM LLC is required, pursuant to the terms of the NCM LLC Operating Agreement, to distribute its available cash, as defined in the NCM LLC Operating Agreement, quarterly to its members (only NCM, Inc. as of December 28, 2023). The other members are only able to receive available cash when they hold units.
Network costs. Network costs increased $1.0 million, or 13.5%, from $7.4 million in 2021 to $8.4 million in 2022.
Network costs. Network costs decreased $2.1 million, or 25.0%, from $8.4 million in 2022 to $6.3 million in 2023.
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.
These facilities were terminated on August 7, 2023 in conjunction with the Chapter 11 Case. We have generated and used cash as follows (in millions): Years Ended 2023 2022 Operating cash flow $ (6.7) $ (47.3) Investing cash flow $ 32.6 $ (0.4) Financing cash flow $ (52.1) $ 10.3 Cash Flows – Fiscal Years 2023 and 2022 Operating Activities.
The following table shows the changes in non-operating expense for 2022 and 2021 (in millions): Fiscal Year $ Change % Change 2022 2021 2021 to 2022 2021 to 2022 Interest on borrowings $ 79.7 $ 64.8 $ 14.9 23.0 % (Gain) Loss on modification and retirement of debt, net (5.9) 1.2 (7.1) (591.7) % Loss (Gain) on re-measurement of the payable to founding members under the tax receivable agreement 2.2 (16.1) 18.3 (113.7) % Gain on sale of asset (2.2) — (2.2) 100.0 % Other non-operating income (0.7) (0.1) (0.6) 600.0 % Total non-operating expense $ 73.1 $ 49.8 $ 23.3 46.8 % The increase in non-operating expense was primarily due to a $14.9 million increase in interest on borrowings primarily related to the increase in the weighted average interest rate from 5.6% in 2021 to 7.3% in 2022.
The following table shows the changes in non-operating income for 2023 and 2022 (in millions): Fiscal Year $ Change % Change 2023 2022 2022 to 2023 2022 to 2023 Interest on borrowings $ 27.9 $ 79.7 $ (51.8) (65.0) % Loss (gain) on modification and retirement of debt, net 0.4 (5.9) 6.3 (106.8) % Loss on re-measurement of the payable under the tax receivable agreement 9.3 2.2 7.1 322.7 % Gain on sale of asset (0.3) (2.2) 1.9 (86.4) % Gain on deconsolidation of affiliate (557.7) — (557.7) 100.0 % Gain on re-measurement of investment in NCM LLC (35.5) — (35.5) (86.4) % Gain on reconsolidation of NCM LLC (167.8) — (167.8) 100.0 % Other non-operating income (0.3) (0.7) 0.4 (57.1) % Total non-operating (income) expense $ (724.0) $ 73.1 $ (797.1) (1090.4) % The increase in non-operating income was primarily due to a $557.7 million gain on deconsolidation of affiliate, a $167.8 million gain on reconsolidation of NCM LLC and a $35.5 million gain on remeasurement of NCM LLC recorded after NCM LLC emerged from bankruptcy and was reconsolidated on August 7, 2023, as well as a $51.8 million decrease in interest on borrowings primarily due to the discharge of historical debt that occurred upon NCM LLC’s emergence from bankruptcy and reconsolidation on August 7, 2023.
For 2022 and 2021, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The founding members’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future.
The ESA Parties’ current 45 long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising, although such commitments could change in the future.
(4) Executive transition costs represent costs associated with the search for the Company’s new CFO during the third quarter of 2021, the search for the company’s CEO in 2019, and CEO transitions costs incurred in 2018. (5) The impairment of long-lived assets primarily relates to the write down of certain internally developed software no longer in use.
(3) Executive transition costs represent costs associated with the search for the Company’s new CFO during the third quarter of 2021 and the search for the company’s CEO in 2019.
The net negative available cash distributions for 2020, 2021 and 2022 can be used to offset a positive available cash distribution in the second quarter of 2023 in accordance with the NCM LLC Operating Agreement after the Extended Covenant Waiver Holiday.
Negative available cash distributions for the years of 2022 and 2021 are expected to be netted in accordance with the NCM LLC Operating Agreement against future positive available cash distributions.
These increases were partially offset by a $0.7 million decrease in non-cash barter expense in 2022, as compared to 2021. 53 Administrative and other costs. Administrative and other costs increased $8.3 million, or 23.1%, from $36.0 million in 2021 to $44.3 million in 2022.
This increase was partially offset by a $1.3 million decrease due to a discontinuation of a sales partnership and a $0.8 million decrease in bad debt expense in 2023, as compared to 2022. Administrative and other costs. Administrative and other costs increased $43.2 million, or 132.1%, from $32.7 million in 2022 to $75.9 million in 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk The primary market risk to which we are exposed is interest rate risk. The Notes due 2026 and the Notes due 2028 bear interest at fixed rates, and therefore are not subject to market risk.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk The primary market risk to which we are exposed is interest rate risk. On August 7, 2023, NCM LLC entered into the Revolving Credit Facility 2023. The maximum capacity that NCM LLC has access to under the Revolving Credit Facility 2023 is $55.0 million.
A 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
A 100 basis point fluctuation in market interest rates underlying the Revolving Credit Facility 2023 would have the effect of increasing or decreasing our interest expense by approximately $0.1 million for an annual period on the $10.0 million outstanding as of December 28, 2023. 51
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).
As of December 28, 2023, the interest rate risk that we are exposed to is related to our $10.0 million draw upon the Company’s Revolving Credit Facility 2023.
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The interest rate under the Revolving Credit Facility 2023 is a base rate or SOFR benchmark plus (i) 3.75% if less than 50.0% of revolving commitments are utilized or (ii) 4.50% if 50.0% or more of revolving commitments are utilized (utilizing the average revolver usage for the prior calendar month as a benchmark for this determination).

Other NCMI 10-K year-over-year comparisons