National CineMedia Stock

National CineMedia, Inc. (NCM) operates as a media company.

The company is the largest cinema advertising network in North America. It is America's Movie Network.

NCM's Noovie show is presented exclusively in 47 leading national and regional theater circuits, including AMC, Cinemark, Regal and 44 network affiliate theaters as of December 29, 2022. NCM's cinema advertising network offers broad reach and unparalleled audience engagement with over 20,000 screens in over 1,500 theaters in 195 Designated Market Areas ('DMA') (including all of the top 50). NCM digital and Digital-Out-Of-Home ('DOOH') go beyond the big screen, extending in-theater campaigns into online, mobile and place-based marketing programs to reach entertainment audiences.

The company derives revenue principally from the sale of advertising to national, regional and local businesses through Noovie On-Screen, the company's cinema advertising and entertainment show seen on movie screens across the U.S., on the company's 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 company also sells digital online and mobile advertising through Noovie Audience Accelerator, across the company's suite of Noovie digital properties, such as the company's 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.

In 2022, NCM launched NCMx, the company's 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. The broad reach and digital delivery of the company's network provides an effective platform for national, regional and local advertisers to reach a large, young, engaged and affluent audience on a targeted and measurable basis.

Noovie On-Screen Advertising

Noovie On-Screen-The company's on-screen Noovie show provides an entertaining pre-movie experience for theater patrons while serving as an incremental revenue source for the company's theater circuits. The Noovie show gives movie audiences a reason to arrive at the theater early to discover what's next, with exclusive entertainment content and engaging advertising from national, regional and local brands, as well as long-form entertainment and advertising content provided to the company under exclusive multi-year arrangements with leading media, entertainment, technology and other companies ('content partners').

The company presents two different formats of its Noovie show depending on the theater circuit in which it runs. 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 a lights down segment that runs for five minutes after the advertised showtime with trailer lighting; and a 30- or 60-second Platinum Spot ('Post-Showtime Inventory'). As of December 29, 2022, theaters presenting the updated Noovie format with Post-Showtime Inventory made up 59.3% of the company's network. All other NCM network theater circuits, which make up the remaining 40.7% of the company's 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 company's Noovie show.

Because the Noovie show is customized by theater circuit, theater location/market, film rating, film genre and film title, the company produces and distributes 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.

The company has 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 the company's 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. Additional specialty networks include the NCM Black Cinema Network and the NCM Hispanic Cinema Network, reaching those audiences where they over index in top DMAs.

All versions of the Noovie show are produced by the company's internal creative team, which gives the company significant flexibility while offering advertisers opportunities for sponsorship and integration into the company's movie and pop culture content series. The company also offers pre- and post-production advertising creative services to the company's clients (primarily local clients who may not have their own creative agency), as well as branded content creation for national brands for a fee.

Noovie Show Structure Including Post-Showtime Inventory-The Noovie show with Post-Showtime Inventory format is consisted 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 total length of the Noovie show plus the company's Post-Showtime Inventory is the same as the Classic Noovie show as the amount of time displayed prior to the advertised showtime is reduced by the sum of five minutes plus the aggregate length of time of the Platinum Spot, if any.

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. NCM programs exclusive Noovie content at the beginning of the show that gives audiences a look at what's happening in the movie and pop culture arenas and features long-form entertainment from the company's content partners. The company launched several new Noovie editorial series in 2022 featuring celebrities, creators and journalists to appeal to both the company's moviegoing audience and to advertisers for sponsorship and integration opportunities. These include The Noovie Trivia Show, where the company's 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 the company's content partners. This segment also typically includes a spot for Noovie programming, such as Noovie Trivia, Noovie Cultural Celebrations (e.g. original content around Black History Month or Hispanic Heritage Month, which can also be sponsored by advertisers), and shorter segments from the editorial series mentioned above.

Segment one runs closest to the advertised showtime and features primarily national advertisements, which are generally 30 or 60 seconds, as well as a long-form entertainment content segment from one of the company's content partners. Segment one also includes an advertisement for the founding members' beverage supplier and a courtesy public service announcement ('courtesy PSA') (e.g. Silence Your Cell Phones).

The Showcase Segment features a post-showtime lights down segment with trailer lighting beginning at the advertised showtime with approximately 5 minutes of national advertisements which generally range between 30 or 60 seconds, followed by a courtesy PSA and a 30 second or a 60 second advertisement for the founding members' beverage supplier; and

The Platinum position features an additional single advertising unit that is either 30 or 60 seconds deeply embedded within the movie trailers at trailer level lighting and at similar volume levels, directly prior to the last one or two trailers preceding the feature film, which the company refers to as the 'Platinum Spot'.

Classic Noovie Show Structure-The Classic Noovie show is consisted of up to four segments, each approximately four to ten minutes in length running prior to the advertised showtime. The company revised the structure beginning November 1, 2019, and the structure below incorporates the changes made. The following graphic is for illustrative purposes and is not to exact scale.

References to the Noovie show relate to both the Classic Noovie show and the Noovie show including Post-Showtime Inventory formats, unless specified otherwise.

National, Regional and Local Advertising-The company's cinema advertising business has a diverse customer base, consisting of national, regional and local advertisers. National and regional on-screen advertising in the Noovie show is sold on a CPM basis to national and regional clients. The company generally sells its national advertising units across the company's national network by film rating or groups of ratings, or by individual film or film genre grouping. This ability to target various groups of films offers national advertisers a way to target specific audience demographics at various price points and overall cost levels, which expands the number of potential clients. Local advertising is typically sold on a per-theater, per-week basis.

As with other premium video mediums like TV, the company sells its 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).

During the year ended December 29, 2022, the company derived 75.1% of its advertising revenue from national clients (including advertising agencies that represent the company's clients) and 17.5% of the company's advertising revenue from regional and local advertisers across the country (including advertising agencies that represent these clients).

Beverage Advertising: The company has a long-term agreement to exhibit the advertising of the founding members' beverage concessionaires. Under the ESAs, up to 90 seconds of the Noovie program can be sold to the founding members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements.

During 2022, the company sold 60 seconds to two of the founding members and 30 seconds to one of the founding members to provide on-screen advertising for their beverage concessionaires. During 2022, the beverage concessionaire revenue from the founding members' beverage agreements was approximately 7.5% of the company's total revenue. In the instance of certain theaters that are acquired by the founding members but are not incorporated into the company's network because of an existing on-screen advertising agreement with an alternative provider, the company remains 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.

Content: Beyond the Noovie-branded content during the Noovie show, the majority of the company's entertainment and advertising content segments are provided to the company by content partners. Under the terms of the contracts, the company's content partners create original long-form entertainment content segments and make commitments to buy a portion of the company's advertising inventory at a specified CPM over a one- or two-year period with options to renew, exercisable at the content partner's option. The 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. In 2022, the company 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. 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. This time is provided to the theater operator at no charge.

Noovie Digital Products

Noovie digital products is an integrated suite of products designed to innovate the moviegoing experience in ways that help brands tap into the excitement, emotion and magic of the movies. Noovie digital products take the Noovie experience beyond the big screen with the company's Noovie Trivia and robust audience data and digital advertising capabilities to create the perfect immersive marketing solution for brands.

Noovie Trivia-Noovie Trivia is an app that launched in 2020 which unites all of the company's popular movie trivia games into one place. Noovie Trivia lets fans level up their movie obsession and test their movie knowledge in multiple ways with games to play, including Name That Movie and Noovie Shuffle. New challenges are added on a regular basis. Fans can also make their voice heard on fun movie topics through Noovie Motion Picks.

Name That Movie started in 2017 as a trivia segment for the company's Noovie show, social media channels and digital properties in order to further entertain and engage moviegoers and is now included within the company's Noovie Trivia app. The company also offers the opportunity for the company's advertising clients to sponsor the Name That Movie segments and incorporate advertising into the game.

Data & Digital Advertising

In 2022, the company launched NCMx, its 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. NCM clients are able to leverage NCMx to execute advanced audience-matching against key geographic, behavioral and contextual targets on the big screen, as well as use the NCMx capabilities to retarget moviegoers with digital ads and mobile offers. NCM provides marketers access to one of the largest collections of deterministic moviegoer data in the industry. 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. Neustar, iSpot, Catalina, Affinity Solutions, 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.

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. The company's Noovie digital products are designed to not only provide digital advertising inventory to further enhance the marketability of the company's 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 the company's mobile apps. 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 the company's network, all contribute to NCMx data records.

Noovie Audience Accelerator - In addition to the company's ad-supported consumer-facing digital products, the company's Noovie Audience Accelerator digital product, formerly known as Cinema Accelerator, expands cinema advertising campaigns beyond the big screen to reach movie audiences wherever they seek out movie content online and on mobile devices. Noovie Audience Accelerator identifies moviegoers through the company's first-, second- and third-party unique data records. The company can target specific demographics, genres or layer on other data to provide the company's clients with a match against their target audience. Digital ads are then distributed through multiple channels, including online and mobile banners, online and mobile pre-roll video and social media newsfeeds through the company's owned and operated ad inventory, as well as third-party ad inventory across multiple platforms, including the Internet, mobile devices and over-the-top (OTT) devices/connected televisions (CTV) to reach moviegoers wherever they may be seeking entertainment information and content.

The company sells NCM's data platform and digital products through a digital sales group that is embedded as part of the company's national and local sales organizations to enable collaborative, integrated selling. The company's new and upcoming digital products can be sold in combination with in-theater advertisements as integrated marketing packages. The company plans to continue to invest in its digital platform in 2023 and beyond.

Lobby Advertising

Lobby Entertainment Network-The company's LEN is a network of video screens strategically located throughout the lobbies of all digitally equipped founding members' theaters, as well as the majority of the company's network affiliates' theaters. The LEN screens are placed in high-traffic locations, such as concession stands, box offices and other waiting areas. Programming on the company's LEN consists of an approximately 30-minute loop of branded entertainment content segments created specifically for the lobby with advertisements running between each segment. The company has the scheduling flexibility to send different LEN programming to each theater through the company's DCN, and the same program is displayed simultaneously on all LEN screens within a given theater, which provides the maximum impact for the company's advertisers. The company sells national and local advertising on the LEN individually or bundled with on-screen or other lobby promotions.

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. Additionally, subject to certain limitations, the LEN programming includes up to two minutes (one minute of which the company provides 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 the company 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 the company's 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.

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. 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-The company also sells a wide variety of advertising and promotional products in theater lobbies across the company's founding members and network affiliates. These products can be sold individually or bundled with on-screen, LEN or digital advertising. 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.

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 the company.

The company's ability to provide in-lobby marketing and promotional placements in conjunction with the company's cinema advertising products allows the company to offer integrated marketing solutions to advertisers that provide multiple touchpoints with theater patrons throughout the movie-going experience, which is a competitive advantage over other national media platforms.

Digital Out-of-Home Products

NCM's Digital Out-of-Home ('DOOH') group is embedded as part of the company's national and local sales organizations and was created in October 2020 to further unite brands with the power of movies by extending movie-centric Noovie entertainment content, trivia and advertising beyond movie theaters to a variety of complementary venues, including restaurants, convenience stores and college campuses. In 2022, NCM sold DOOH media inventory on a national, regional, local and programmatic level in relationships with digital place-based properties, including ATM.TV, Trooh and Ziosk.

Network

Noovie On-Screen is distributed across NCM LLC's national theater network - the largest digital in-theater network in North America - through the use of the company's proprietary DCN and Digital Content Software ('DCS'). With the DCN and DCS, the company is able to schedule, deliver, play and reconcile advertising and entertainment content for the Noovie show and the LEN on a national, regional, local, theater and auditorium level.

The DCN is the combination of a satellite distribution network and a terrestrial management network. The company also employs a variety of technologies that aid in distribution where satellite delivery is not available to provide service to the company's 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 the company to monitor and initiate repairs to the equipment in the company's digital network of theaters.

Advertising and entertainment content for the company's Noovie show and LEN is uploaded to the company's cinema advertising management system and is delivered via multicast technology to the theaters in the company's network and received by the company's Alternative Content Engine. The Alternative Content Engine holds the content until displayed in specified theater auditoriums and lobbies according to contract terms. 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 the company's advertising clients.

In 2022, more than 394 million moviegoers attended theaters that are under contract to present the Noovie show.

As of December 29, 2022, the company's Noovie show was displayed on network movie screens using digital projectors. Almost all screens within the company's network receive content through the company's DCN and are equipped with more powerful digital cinema projectors, with the remainder consisted of LCD projectors.

The company's advertising network consisted of 20,095 screens (16,062 operated by the founding members) located in 1,598 theaters (1,182 operated by the founding members) in 47 states and the District of Columbia, including each of the top 25, 50 and 100 DMAs, and 195 DMAs in total, as of December 29, 2022.

Seasonality

The company's revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by the company's advertising clients and to a lesser extent the attendance patterns within the film exhibition industry. Historically, both advertising expenditures and theater attendance tend to be higher during the second, third, and fourth fiscal quarters (year ended December 2022). 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. Based on the company's historical experience, the company's first quarter typically has less revenue than the other quarters of a given year due primarily to lower advertising client demand and increased inventory availability in competitive advertising mediums. Given the temporary closure of the company's theaters in 2020 and disruptions in the release of motion pictures and regular theater attendance patterns due to the COVID-19 Pandemic, the company's 2020 and 2021 quarterly results varied from the historical trend. There can be no assurances that seasonal variations will not materially affect the company's results of operations in the future.

Strategy

The company is continuing to pursue a growth strategy that will create significant value following the normalization of the company's operations. The company's strategy includes the following key components: increasing the value of cinema media and diversifying the company's revenue model.

Intellectual Property Rights

The company has secured the U.S. trademark registrations for NCM, National CineMedia, Noovie and NCMx.

Research and Development

For the year ended December 29, 2022, the company recorded $4.6 million in research and development expense.

History

National CineMedia, Inc., a Delaware corporation, was founded in 2006. The company was incorporated in 2006.