National CineMedia, Inc.
Q4 2015 Earnings Call Transcript

Published: 26 Feb 2016

[Operator:]

Greetings, and welcome to the National CineMedia Fourth Quarter and Full Year 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Oddo, SVP of Finance. Thank you, Mr. Oddo. You may begin.

[David J. Oddo:]

Good afternoon. I'd like to remind our listeners that this conference call contains forward-looking statements within the meaning of Section 27-A of the Securities Act of 1933, as amended, and Section 21-E of the Securities Exchange Act of 1934, as amended. All statements other than the statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties. Important factors that can cause actual results to differ materially from the company's expectations are disclosed in the risk factors contained in the company's filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors. Further, our discussion today includes some non-GAAP measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP-basis measurement. These reconciliations can be found either at the end of today's earnings release or on the Investor page of our website at www.ncm.com. Now, I'll turn the call over to Andy England, CEO of National CineMedia.

[Andrew J. England:]

Thanks, David. Good afternoon, everyone. Welcome and thanks for joining us for our 2015 earnings call. Before we get into our results, I'd like to thank the exceptionally talented National CineMedia team for building one of America's premiere video advertising networks. This team has established a strong foundation from which we can continue to build. I'm extremely privileged to take on the CEO role with NCM, especially with the company having just finished a year that posted both record advertising revenue and adjusted OIBDA. At a time when the entire video advertising landscape is shifting and brands are seeking better and more engaging ways to reach consumers, I'm very excited to be joining one of the top millennial networks in the country, and I look forward to working with our National CineMedia team, our advertising clients, and all our theater network circuit partners to build on NCM's core business and advance our key strategic initiatives. With that said, I'd now like to spend a few minutes highlighting the company's record fourth quarter and annual results, our progress against the business plan, and how we begin to plan for the future. David will then provide a more detailed discussion of financial performance for Q4 and all of 2015 and provide guidance for Q1 and full year 2016. And then, as always, we will open the line for questions. We are very pleased with our record fourth quarter advertising revenue and adjusted OIBDA results which exceeded our guidance ranges and increased 11% and 4% respectively versus record Q4 revenue and adjusted OIBDA in 2014. This outstanding performance was driven by increases in national advertising CPMs, a strong demand in the advertising scatter market during the fourth quarter, and significant growth in our local and regional advertising business as the Q4 box office fueled by the success of Star Wars

[David J. Oddo:]

Thanks, Andy. For the fourth quarter, our total revenue increased 10.8% versus Q4 2014, driven by a 5.7% increase in national advertising revenue and a 41.6% increase in local and regional advertising revenue, partially offset by a 31.4% or $3.2 million decrease in beverage advertising revenue. With a higher Q4 local and regional advertising revenue growth, our Q4 advertising revenue mix shifted to 66% national, 29% local and regional, and 5% beverage, versus 69%, 23% and 8% respectively for Q4 2014. With a higher full year national advertising revenue growth, our full year advertising revenue mix shifted to 69% national, 24% local and regional and 7% beverage, versus 66%, 25% and 9% respectively for fiscal year 2014. For the fourth quarter, the 5.7% increase in national ad revenue was driven by a 10.2% increase in CPMs, partially offset by a 6.2% decrease in impressions sold versus Q4 2014. This increase in CPMs is primarily due to another quarter of strong scatter pricing, while the decrease in impressions sold was due to a decrease in inventory utilization to 132.1%, from 138.7%, on a 2.9% decrease in network attendance. Excluding the additional week in our fiscal fourth quarter of 2014, our Q4 network attendance would have increased 2.7%. For the full year, national ad revenue increased 19.6% versus 2014, driven by a 14.2% increase in impressions sold and a 6.7% increase in CPMs. The increase in impressions sold was due to an increase in inventory utilization to 128.3% from 115.7%, on a 1% increase in network attendance due to an overall expansion of our client base, related in part to the success of our strategy to compete in the national television upfronts. Our higher 2015 CPMs reflected the success of our upfront strategy and strong scatter pricings during our higher demand Q2 through Q4 periods. We entered the fourth quarter of 2015 with a $2.9 million make-good balance, and as of the end of the year, we had a $3.4 million make-good balance, with high December advertising demand pressure our inventory availability. Our Q4 local and regional advertising revenue increased 41.6% due to a 35.2% increase in average contract value, and a 4.2% increase in total number of contracts versus Q4 2014. The significant increase in average contract value was primarily due to a $9 million, or 124% increase in the total dollar value of contracts over $100,000. For the full year, our local and regional ad revenue grew 10.5% versus 2014, and was primarily driven by a $6.9 million, or 21.7% increase in the total dollar value of contracts over $100,000. The increase in volume and value of these larger contracts was due to increased sales through agencies that are responsible for larger regional advertising budgets, and client interest related to the record 2015 box office. Q4 beverage revenue decreased 31.4%, or $3.2 million versus Q4 2014, driven by the 14.4% decrease in 2015 beverage CPMs that was tied to the percentage decrease in 2014 national segment one CPMs, which is the segment closest to the advertised show time. Approximately $1.4 million of this decrease in Q4 beverage revenue was due to one of our founding members reducing their beverage advertising from 60 seconds to 30 seconds beginning July 1, 2015. You should note that this beverage inventory is available for sale to other national advertising clients. For the full year, beverage revenue decreased 21.9% or $8.4 million versus 2014, driven by the 14.4% decrease in beverage CPMs, with approximately $2.7 million related to the reduction of time by one of our founding members. Total Q4 adjusted OIBDA increased 3.7% on an adjusted OIBDA margin of 55.1% versus 58.9% in Q4 2014. This Q4 margin decrease related to higher commission and bonus expense related to better performance against targets in 2015 compared to 2014, and approximate $2 million reduction in bad debt reserves during the fourth quarter of 2014 that did not occur in 2015 and the decrease in 100% margin beverage revenue previously discussed, partially offset by the increase in high-margin national and local and regional ad revenue. Full year adjusted OIBDA increased 15.4% on an adjusted OIBDA margin of 51.5% versus 50.6% in 2014. This full year margin increase related primarily to the increase in high-margin national, local, and regional ad revenue, partially offset by the decrease in 100% margin beverage revenue and the Q4 2014 and 2015 expense items just discussed. We recorded $900,000 of AMC and Cinemark integration payments for the fourth quarter versus $800,000 for Q4 2014. For the full year, we recorded $2.7 million of these integration payments versus $2.2 million in 2014. You should note that integration payments are added to adjusted OIBDA for debt compliance purposes, and NCM LLC's pro rata available cash distributions to the three founding members and NCM, Inc., but they are not included in our reported revenue and adjusted OIBDA, as they were recorded as a reduction to net intangible assets on our balance sheet. Looking briefly at diluted earnings per share, for the fourth quarter, we reported GAAP diluted EPS of $0.11 versus $0.14 in Q4 2014. Excluding terminated merger costs and income tax reserve, and certain other non-recurring items, the diluted EPS for Q4 2015 and Q4 2014 would have been $0.20 and $0.19 respectively. For the full year, we reported GAAP diluted EPS of $0.26 versus $0.23 in 2014. Excluding these same items for the full year 2014 and 2015, the diluted EPS for 2015 would have been $0.51, an increase of 42% versus $0.36 in 2014. Our capital expenditures were $4.7 million in Q4, and $13 million for the full year versus $8.8 million for full year 2014, or just 2% to 3% of total revenue in both years. While our 2015 capital expenditures came in at the low end of the range provided on our last earnings call, the increase versus 2014 was primarily due to the acceleration of the development of our inventory management and audience targeting systems to more effectively compete with other video advertisers. Moving on to our balance sheet, our total debt outstanding at NCM LLC as of the end of 2015 was $936 million versus $892 million at the end of 2014. This increase was due to the increase in our revolver borrowings that was driven by the payment of the Screenvision termination fee and merger-related costs by NCM LLC primarily in Q1 of 2015 and timing of available cash distributions and receivables related to higher 2015 revenue. As discussed in our previous earnings calls, our revolver balances will decrease by $25.5 million when the remaining merger-related expenses are reimbursed through a reduction of available cash distributions during the third quarter of 2016 as required by our NCM LLC operating agreement. Our average interest rate on all debt was approximately 5.3% at the end of 2015, including our $270 million floating rate term loan bank debt and revolver credit facility that had an average rate of approximately 2.8%. Excluding revolver balances, 69% of our total debt outstanding at the end of 2015 had a fixed interest rate. Our consolidated cash investment balances as of the end of 2015 increased by approximately $4 million to $85 million from the end of Q3 2015, with $82 million of this balance at NCM, Inc. and $3 million at NCM LLC. Excluding tax reserves and after the payment of the recently announced $0.22 per share dividend to be paid on March 24, 2016, we would be able to pay our current dividend per share for over four additional quarters, even if no cash were distributed up to NCM, Inc. from NCM LLC. Our pro forma net senior secured leverage at NCM LLC as of the end of 2015 was approximately 3.3 times trailing fourth quarter adjusted OIBDA, which is well below our senior secured leverage maintenance covenant of 6.5 times. You should also note that while we have no NCM LLC total leverage maintenance covenant, our total leverage at NCM LLC net of NCM LLC cash balances was 4.1 times at the end of 2015. Shifting to our 2016 guidance, Q1 revenue is expected to be in the range of $71 million to $75 million and adjusted OIBDA is expected to be in the range of $20 million to $24 million versus a tough comp that posted record Q1 revenue and adjusted OIBDA in 2015 that grew 10% and 23% respectively versus Q1 2014. These Q1 ranges project low single-digit decreases in both national and local advertising revenue versus Q1 2015. While Q1 2016 national scatter revenue is up versus Q1 2015, our Q1 2016 total national revenue is being impacted by a greater percentage of upfront commitments, including content partner commitments that are allocated to the second half of 2016 versus comparable upfront commitment allocations in 2015. We also built in some downside protection should our Q1 make-good be higher than past experience in case the March box office does not perform as well as expected. These factors are partially offset by an expected increase in Q1 2016 average CPMs versus Q1 2015. Beverage revenue is projected to be down approximately 10%, due primarily to the decrease in time by one of our founding members partially offset by a beverage CPM increase for 2016. You should note that Q1 is historically our lowest revenue and adjusted OIBDA quarter in any given year. For the full year 2016, total revenue is expected to be up 4% to 6% versus 2015 or in the range of $463 million to $473 million. And adjusted OIBDA is expected to be up 4% to 8% or in the range of $238 million to $248 million. This annual guidance provides for some downside protection should the 2016 scatter market prove to be softer than expected, the cancellation of upfront commitments be higher than past experience, or our 2016 upfront not be as successful as last year, which could reduce Q4 national revenue to a level lower than projected. In addition, the following are additional assumptions that were made in preparing the projections that underlie our 2016 guidance. We have planned for our 2016 national advertising revenue to grow mid-single digits. You should note that while we have been less exposed to the scatter market due to our upfronts over the last two years, we may continue to see variability in our CPMs and utilization from quarter-to-quarter, depending on scatter market demand, client mix, content partner spend, inventory availability and level of upfront cancellations. We will continue to use our standard 30-second units as a denominator in our national utilization calculations to ensure period-to-period comparability. As we have mentioned before, for 2016, we can expand the FirstLook show to a total of 16 30-second national units that could result in utilization of over 100% if there is sufficient market demand and we are comfortable that an expanded pre-show will not get too cluttered and reduce ad effectiveness. We have planned for our 2016 local and regional advertising revenue to increase mid-single digits. This growth is expected to be driven primarily by low single-digit organic growth, efficiencies provided by the expansion of our local sales force, the addition of the Santikos affiliate circuit, and the opportunity to increase regional revenue from our participation in the national spot market. We have planned for our beverage revenue to be down low single digits versus 2015, due to the 30-second reduction in time by one of our founding members that began July 1, 2015. This time reduction is expected to reduce our first six months of 2016 beverage revenue by approximately $3 million versus the first six months of 2015. As mentioned, this unit is available for sale to other clients that could help offset this decrease in 100% margin beverage revenue. The $3 million impact of the time reduction during the first six months of 2016 will be partially offset by a 5.7% increase in our 2016 beverage CPM versus 2015 as our contracts with our founding members provide that our annual beverage CPM will increase or decrease by the same annual percentage change as our actual FirstLook segment 1 national advertising CPM during the previous year. Adjusted OIBDA margins for 2016 are planned to increase versus 2015. This planned increase is primarily due to the planned increases in our high-margin national and local advertising revenue, and an approximate $2.7 million OIBDA benefit related to the shift to the higher-margin founding member fee structure provided by the Starplex affiliate acquisition by AMC last December. While we no longer have any Fathom Events revenue or adjusted OIBDA due to the sale of that business at the end of 2013, it is important to note that NCM LLC will receive approximately $5 million in note – note, principal and interest payments in Q4 of 2016. This will be the third of six annual note payments with interest that we will receive. While these payments are not included in adjusted OIBDA, they will be included in NCM LLC's pro rata available cash distributions to the three founding members and NCM, Inc. We are also planning to receive approximately $3 million of integration payments from our founding members in 2016. While these payments are not included in adjusted OIBDA, they will be included in our debt covenant calculations and NCM LLC's pro rata available cash distributions to the three founding members and NCM, Inc. We expect 2016 CapEx to be in the $14 million to $15 million range, or approximately 3% of revenue as we continue to accelerate management development related to our audience targeting software and sales proposals and inventory management systems. CapEx related to digitizing our affiliates' screens is expected to be slightly lower than 2015 but could increase should ongoing conversations with new network affiliates lead to additional contracts. We expect 2015 interest on borrowings to increase slightly to $53 million, which includes approximately $50 million of cash interest and $3 million related to non-cash amortization of deferred loan costs. In addition to the available cash distributed to NCM, Inc. from NCM LLC and consistent with prior years, we project an approximate $6 million cash benefit at NCM, Inc. due to the NCM LLC management fees, interest earned on NCM, Inc. cash balances and net proceeds from the exercise of employee stock options. Lastly, as you model 2017 and after, I'd like to remind everyone that the attendance-based (33

[Operator:]

Thank you. Our first question comes from the line of Eric Handler with MKM Partners. Please proceed with your question.

[Eric O. Handler:]

Yes, thanks. Andy, welcome to NCM. Quick question. Now that you've been in the seat for a couple months, you're stepping in, the machine's running pretty well. Curious to see where you think you can have the biggest impact on the business. And then, looking at the overall business – and, David, maybe you could shed some light on this in terms of your guidance, how do you think of the balance between utilization versus CPMs this year?

[Andrew J. England:]

Well, firstly, thank you, Eric. I appreciate the question and the welcome. In terms of the biggest impact, I think it's really about – to your point, this is a well-managed business and it's a successful business and I see my job as to essentially accelerate that performance. So particularly when you look at the core business, we have a terrific core business and my objective will be to bring in more circuits, bring in more advertisers and enhance the business in any way I can to make sure that marketers see this as just a terrific solution in a fragmenting media world. Secondarily, of course, I'll be looking to see where else we can expand from that platform. But it's really – job one is about building the core business. The second part?

[David J. Oddo:]

And, Eric, on the guidance for utilization and CPMs, we've guided to – our national ad revenue to be up mid-single digits and decided just to leave it at that. We're off to a good start. Obviously, our upfront CPMs are up and we've just guided to Q1 CPMs being up as well. But we'll just leave those metrics to fall out as they will throughout the year. Obviously, it'll be a combination of both in some way.

[Eric O. Handler:]

Thank you both.

[Andrew J. England:]

Thank you.

[Operator:]

Our next question comes from the line of Alexia Quadrani with JPMorgan. Please proceed with your question.

[Julia Yue:]

Hi. Thank you. This is Julia Yue on for Alexia. In a year when a lot of people are talking about fewer tent-pole films and maybe a broader base of mid-sized films filling out the slate, how do you think this may affect your business? And are there any particular benefits or opportunities from it? Or is it more of a headwind? And kind of as a follow-up to that, you've talked about before packaging different ad spots together so advertisers can hit their overall goals, and it seems like this might be more relevant this year with the slate of potentially a lot more smaller films. So do you think this process has gotten easier for the advertiser, or do you think there still needs to be progress here to make the experience easier or more seamless?

[Andrew J. England:]

Well, Julia, thank you. Thanks for the question. Obviously, this is my first year in the business. And so I look at the film slates with a great deal of interest and as I talk to our founder circles and I talk to my colleagues about film slates and what's a bigger or better film slate than what isn't, I'm certainly aware of what the consensus view is on 2016 and 2017. But I'm also aware that the consensus view on Deadpool was that it was a decent movie that would do perhaps $60 million in its first weekend and it did over the four-day weekend, I think, $150 million. So you'll forgive me if I'm a little skeptical about the experts' views on what the slate's going to do in 2016. So net-net, the slate matters. Clearly it matters and if films do better, it's certainly going to help us. It's our intention to make sure that we have such a strong platform that that's not the driver of our business, however. So we shall see. I'm not sure I fully understood your question about packaging ads together. We typically do package ads together by rating. Obviously, as we look to get smarter and offer our advertisers better solutions, part of our intent going forward as we improve our inventory management system is to be able to offer genres as well. And so we will be offering different packages and, frankly, more complex packages to our advertisers going forward. Not sure if that answers your question but...

[Julia Yue:]

Yeah. That's very helpful. Thank you.

[Andrew J. England:]

You're welcome.

[Operator:]

Our next question comes from the line of James Dix with Wedbush Securities. Please proceed with your question.

[James G. Dix:]

Good afternoon. Andrew, welcome. I guess my first question is just looking at the base of advertisers that you have, like the categories, the verticals, what is that mix now as you looked back at 2015 and where do you see particular upside as you look at the advertisers that use television versus the ones that use cinema? I knew there's always an issue of trying to get advertisers to get involved in some of your lower utilization months. But I'm just wondering when you look at the advertisers using the medium, where do you see particular upside? And then I had one follow-up.

[Andrew J. England:]

Yeah. That's a difficult one to answer, James, but thank you for your question. I think we do already have a tremendous base of advertisers. As mentioned, there are some categories where we do particularly well. And it tends to be, candidly, those categories who are buying premium video. So if you look across the broader $70 billion to $80 billion U.S. premium video marketplace, they're already buying the more expensive, higher-engagement premium video. So those are, if you like, our bread and butter. I think our opportunity to your push is to bring in more advertisers who might choose to advertise at a more financially acceptable time to them. And certainly CPGs, for example, would be one area. But I think we have a whole lot of opportunity with the other advertisers. I think the other opportunity, of course, we have is to have those advertisers advertise with us more consistently, and that'll obviously be part of it as well. So to the extent that we can continually demonstrate success for their businesses by advertising with us, that's an opportunity as well.

[James G. Dix:]

Great. And then just following up a little bit on remarks you made about mobile, where do you see the longer-term potential there? Because it always seemed to me as though there's been a little bit of tension between the circuits and maybe you, as an ad platform, as to how to integrate the mobile phone into the theater experience. But it does seem like there's a lot of upside potentially to integrate the mobile phone with your advertisings. I'm just wondering whether you have any longer-term thoughts about where that should be going.

[Andrew J. England:]

I think firstly, I'd say certainly our founder circuits as represented in our board meetings and elsewhere are very supportive of us chasing the digital and mobile advertising dollar. And I think as we look at the moviegoer, we have an option to reach them before, during and after their movie-going experience. And I think from a circuit point of view, there's no issue with the before and the after. There's some discussion about the during for the obvious reason that they ask that you mute your phone before the movie itself. So obviously, they don't want other patrons to be disrupted. But beyond that, I think they're very supportive and that's certainly an area we believe there's potential.

[James G. Dix:]

Great. Thanks very much.

[Andrew J. England:]

You're welcome. Thanks, James.

[Operator:]

Our next question comes from the line of Barton Crockett with FBR Capital Markets. Please proceed with your question.

[Barton E. Crockett:]

Okay, great. Thanks for taking the question. I was a little bit interested in looking at the guidance a little bit more. I guess really kind of two things in particular. One is your guiding for in revenue growth and OIBDA growth at about the same level, so not much in the way of margin expansion. But I would think your ad revenues come in at a very high contribution margin, and I would think that 4% to 6% revenue growth could be margin expansive. Is there some type of unusual expense that is weighing on margins as we look ahead? So that's one part of it. Another question I was curious about is you're probably seeing lumpiness in revenues with the first quarter down but the full year up. Which quarters are the inverse of what we see in the first quarter as you look ahead to the year? Where should we see more growth to offset the step-down in the first quarter?

[Andrew J. England:]

Thank you, Barton. I'm going to just start and I'm going to hand over to David. I think that the first thing I'd point out is, firstly, we do have high gross margins to begin with, as you know. I'd also point out that if you look at our cost base, a significant part – in fact, really over half of our costs are either contractual or related directly to sales commissions. So we do have a cost base that is somewhat static, but certainly a little opportunity for leverage. David?

[David J. Oddo:]

Yeah, I mean, Barton, one of the things that weighs down – that has been weighing down and will weigh down – continue a little bit on margin is just the change in the beverage revenue and the 30 seconds reduction. As I mentioned, we expect it to be – even with the increase in the CPMs of 5.7%, we expect it to still be down low single digits on the beverage. So I think if you exclude the beverage on both sides of revenue and OIBDA, you'll see a little bit more margin expansion there. Other than that, there's really nothing else really to point to. Again, we noted that we added some downside protection on the guidance there. What was the other part of your question on the quarters?

[Barton E. Crockett:]

Yeah, I was just wondering, I mean, if the first quarter is down and the full year is up, where do we see good growth? Is it the third quarter, second quarter, fourth quarter? When you guys have mapped out the year, what offsets this stuff down in the first quarter?

[David J. Oddo:]

Yeah, as I mentioned, we're giving you high-level guidance on where the upfront allocations are laying out. And when I gave the Q1 guidance, I mentioned that our upfront allocations in 2016 are weighted more towards the back half of the year, so the third quarter and the fourth quarter of the year and – versus if you looked at the same upfront allocations last year. And this is inclusive of content partners as well. So it's just the way that the dollars are being spread throughout the year.

[Barton E. Crockett:]

Okay. All right. Great. Thanks a lot.

[Andrew J. England:]

Thank you, Barton.

[Operator:]

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

[James Charles Goss:]

Thanks. I would like to ask a little bit more about the first quarter decline and the 30-second reduction related to beverage. I thought the beverage contract was one of the ones that are sort of cast in stone. How did that develop? And if you had to look at the comp issue, the beverage contract, and the small size of the quarter, how do those blend in to create the decline in the first quarter?

[David J. Oddo:]

Yeah. Well, the beverage contracts basically say, with our ESAs, with the founding members, that we have to provide them up to 90 seconds of advertising if they need it, their individual contracts that they have with Coke (47

[James Charles Goss:]

Okay.

[David J. Oddo:]

And also wanted to point out that – which shows the health of the scatter market is that our scatter dollars are up in the first quarter versus last year's scatter dollars. And I also pointed out that we just wanted to create just a little bit of downside protection on the low end of our guidance range just in case the box office didn't perform as well as we expected in March.

[James Charles Goss:]

All right. That's a good definition. And Andy, I would add my welcome as well. And you did with the...

[Andrew J. England:]

Thanks.

[James Charles Goss:]

...with the advertising background you bring to the table, you made an interesting comment about genre. And that traditionally, I think there wasn't a lot of matching of the advertising to the types of movies. And maybe it's because things can be moved around in a fluid (49

[Andrew J. England:]

The short answer would be yes, Jim. Thank you for your welcome. I think up until now, the focus of our sales has been by rating – by G, PG-13, R, et cetera. And so yes, the opportunity to advertise by genre essentially enables the marketer to better match against their target audience. And so, that requires us to have the systems improvement on the inventory management side. But once we have that up and running, that's our intent and obviously to supply the kind of data and analytics that will help the marketer make that match between their brand and their target audience provided by the rest of the genres. So with the obvious benefit to us we think (50

[James Charles Goss:]

Okay. And one other question I have is the subject of make-goods came up. And in most broadcast settings make-goods are a cost. They've been less of a cost, I think for NCMI because of the fact that (51

[David J. Oddo:]

Yeah. Jim, this is David. No, it hasn't changed. Our softer periods are generally when we reported make-good at the end of the quarter, the next month has plenty of room to absorb that make-good and if not then in the following month as well. And typically, three quarters out of our four quarters we've got a pretty soft month historically after the end of the quarter. January, for example, April, October, July is the only one that sometimes we may have some make-good that spills over into August and September, but nothing there has changed. We still recognize all the revenue.

[James Charles Goss:]

Okay. Thank you very much.

[Andrew J. England:]

Thank you very much.

[Operator:]

Our next question comes from the line of Anthony Nemoto with Credit Suisse. Please proceed with your question. N. Anthony Nemoto - Credit Suisse Securities (USA) LLC (Broker) Hi. Thanks for taking the question. I have a question around reserve seating. How are you guys thinking about that? And anything you're doing specifically in the mobile and online space that you were discussing earlier in the call to specifically approach that potential trend? And then secondly, when can we expect to see impacts from the DMP and other analytics offerings in the numbers? Is this an offering that you'll plan on looping into this year's upcoming upfronts? Thank you.

[Andrew J. England:]

Yeah. Thank you, Anthony. I think the first piece of that, reserve seating, I think we shall see. Clearly, reserve seating has, and in particular, recliner seats, et cetera, worthwhile for the circuits. And you see that continue to expand. From what I understand from the circuits, there is a limit to where they can expand it based on the type of market and the sensitivity to pricing, et cetera. We certainly think that that continues to give us an opportunity to market to those individuals and plan to do so as we do to all those folks who we can capture through our partnerships around data. In terms of the impact from our data and analytics, we plan to talk about that at the upfront. We believe we'll be in a position to talk more clearly about data and analytics and what our plan will be and how it will help our business at the upfront. And obviously, we will see how that plays out with our advertising customers. N. Anthony Nemoto - Credit Suisse Securities (USA) LLC (Broker) Great. Thank you.

[Operator:]

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

[Eric Wold:]

Thank you and good afternoon. There's understandably been some cost around the 2016 slate, tough comps to last year's record, and I presume that's playing into the guidance and upfront demand and allocation from your advertisers. That being said, it's also pretty well-believed that 2017 is going to be an extremely strong year once again with the return of a bunch of key franchises and tent-pole films. Tell me (54

[Andrew J. England:]

Yeah, I mean it's a good question and I'm certainly in the learning curve as to the importance of the slate. Obviously, a great slate brings in more moviegoers but how accurately we can gauge those slates beforehand seems to be an art rather than a science, to say the least. With that said, if you think about our upfront this year, we talked to our advertisers about really five quarters. We talked to them about the fourth quarter of 2016 all the way through 2017. And so that's exactly – and May of this year in New York is exactly when we'll begin to really talk up the 2017 slate as well as the fourth quarter of 2016 slate. And to the extent that the advertisers share the prognosticators' views about the strength of that slate, that should help us.

[Eric Wold:]

Perfect. Thank you.

[Andrew J. England:]

Thanks, Eric.

[Operator:]

There are no further questions at this time. I would like to turn the floor back over to Mr. England for closing comments.

[Andrew J. England:]

Good. Thank you. Well, thank you for joining us today. I just, again, want to reiterate my thanks to the National CineMedia team particularly David Oddo and Jeff Cabot who, for the last three years, have been Co-Interim CFOs and done an exceptional job in those capacities. We have an exciting business. We have a business that operates within the premium video space. We think we have lots of opportunity. Hopefully, you began to get a sense of that on this call and I look forward to future discussions with you all, both collectively and individual. Thanks very much.

[Operator:]

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.