National CineMedia, Inc.: Form 10-Q for the period ended Mar 27, 2025

Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may constitute forward-looking statements. In some cases, you can identify these “forward-looking statements” by the specific words, including but not limited to “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the Company’s fiscal year ended December 26, 2024. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak to the information only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis is a supplement to and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our Annual Report on Form 10-K for the Company’s fiscal year ended December 26, 2024. In the following discussion and analysis, the term net income refers to net income attributable to the Company.

Overview

National CineMedia is the largest cinema advertising platform in the U.S. With unparalleled reach and scale, NCM connects brands to sought-after young, diverse audiences through the power of movies and pop culture. A premium video, full-funnel marketing solution for advertisers, NCM enhances marketers’ ability to measure and drive results. 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. As of March 27, 2025, theaters presenting The Noovie Show format with Post-Showtime Inventory made up approximately 65.2% of our network. All other NCM network theater circuits, which make up the remaining 34.8% of our network, present The Noovie Show, without Post-Showtime advertising inventory. Following the 2025 AMC Agreement defined within “Recent Developments” below, 96.5% of our network will present the Noovie Show format with Post-Showtime Inventory. 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 lobby network (“LEN”), a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell data and digital advertising through NCMx™, NCM BoostSM and NCM BoomerangSM services and through our Noovie digital properties. We also sell advertising across a variety of complementary out of home venues. In combination, our multimedia advertising connects brands with audiences across all screens, both in theaters and beyond, before, during and after their moviegoing experience. As of March 27, 2025, 7.4 million moviegoers have downloaded our mobile apps. These downloads and the acquisition of second- and third-party data have resulted in approximately 1.3 billion data sets as of March 27, 2025. We have long-term ESAs (approximately 13.8 weighted average years remaining, 16.4 years remaining subsequent to the 2025 AMC Agreement, as defined below) and multi-year agreements with our network affiliates, which expire at various dates between July 2025 and July 2033. The weighted average remaining term of the ESAs and the network affiliate agreements is 11.0 years as of March 27, 2025. Subsequent to the 2025 AMC Agreement, defined within “Recent Developments” below, the weighted average remaining term of the ESAs and the network affiliate agreements is 12.6 years. The ESAs and network affiliate 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 digital content network (“DCN”).

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators to manage our business, determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplace in which we operate. We focus on many operating metrics including 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. 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.

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 6, 2025 for our fiscal year ended December 26, 2024.

Recent Developments

***2025 AMC ESA Agreement—***On April 11, 2025, the Company and AMC entered into the Second Amended and Restated Exhibitor Services Agreement (the “2025 AMC Agreement”). The 2025 AMC Agreement extends the term of the ESA with AMC, modifies the program distributed by NCM LLC in AMC theaters and adjusts the consideration paid by NCM LLC. The term of the 2025 AMC Agreement is extended by five years through February 13, 2042. In consideration for the rights to display advertising, the Company and AMC agreed to revise the payment structure, which will be based on the attendance, the operating screens and the revenue generated by the Company through advertising displayed in AMC’s theaters. The revised consideration will be effective beginning on July 1, 2025 (the “New Agreement Effective Date”). AMC will continue to pay the Company for the time used to satisfy AMC’s on-screen advertising commitments under its beverage concessionaire agreement. The Company will continue to have the exclusive right to display third-party advertising in AMC theater lobbies and the parties have agreed to work together to modernize the lobby video screen network. The Pre-Feature Program Show Structure in AMC theaters has also been adjusted to closely align with the predominant pre-feature program show structure in NCM LLC's advertising network, including the amount and timing of display. The parties have also agreed that in limited circumstances during the 3-month period beginning on the 18-month anniversary of the New Agreement Effective Date, there is a limited right to revert certain provisions back to the provisions of the parties' ESA prior to this amendment.

On April 11, 2025, the Company and AMC also entered into a separate termination agreement (the “AMC Termination Agreement”) by and among NCM LLC, the Company and AMC, AMC waived all rights and interests as to the Tax Receivable Agreement, the Common Unit Adjustment Agreement, the Director Designation Agreement, the Registration Rights Agreement and all the other joint venture agreements described in NCM LLC’s Third Amended and Restated Limited Liability Company Operating Agreement, as amended. Under the AMC Termination Agreement, the Company and NCM LLC, and AMC waived and released claims against the other party. In connection with the Termination Agreement, NCM LLC and AMC agreed to dismiss with prejudice the ongoing litigation between the parties related to the confirmation of NCM LLC’s Chapter 11 plan.

***Debt Agreement—***On January 24, 2025, NCM LLC, as borrower, entered into a Loan and Security Agreement with U.S. Bank National Association, as lender (the “2025 Credit Facility”). The agreement provides for a $45.0 million senior secured revolving credit facility that matures on January 24, 2028. In connection with entering into the 2025 Credit Facility, NCM LLC repaid in full the $10.0 million balance outstanding and terminated all commitments under its Revolving Credit Facility 2023, and in connection with this termination, paid a prepayment fee equal to 1% of the total commitment. The 2025 Credit Facility is expected to result in a meaningful reduction of the Company’s overall interest expense, extends the maturity date to 2028 and is a cash flow-based revolving loan compared to the asset-based revolving loan of the Revolving Credit Facility 2023. As of March 27, 2025, NCM LLC has not made any borrowings under the 2025 Credit Facility. Borrowings under the 2025 Credit Facility may be used for, among other things, working capital and other general corporate purposes of the Company and bear interest at a floating rate equal to term SOFR (subject to a floor of zero) plus an applicable margin of 2.00%, which is subject to increase by an additional 2.00% upon the occurrence of an event of default.

***Share Repurchase Program—***On March 18, 2024, the Board of Directors of the Company approved a stock repurchase program under which the Company is authorized to use assets of the Company to repurchase up to $100.0 million of shares of the Company’s Common Stock, exclusive of any fees, commissions or other expenses related to such repurchases, from time to time over a period of three years. Shares may be repurchased under the program through open market purchases, block trades, or accelerated or other structured share repurchase programs. During the three months ended March 27, 2025, 1,455,668 shares were repurchased on the open market. In accordance with *Accounting Standards Codification (“*ASC”) 505 —Equity, these shares were retired and any excess over par value paid was recorded as a reduction to retained earnings of $9.0 million for the three months ended March 27, 2025. As of March 27, 2025, 4,804,257 shares have been repurchased on the open market since the program's inception.

Bankruptcy Filing, Deconsolidation and Reconsolidation of NCM LLC

On April 11, 2023 NCM LLC filed a voluntary petition for reorganization (the “Chapter 11 Case”) with a prearranged Chapter 11 plan under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). During the Chapter 11 Case, the Company was deemed to no longer control NCM LLC for accounting purposes and NCM LLC was deconsolidated from the Company’s financial statements prospectively as of April 11, 2023 and recorded a gain on deconsolidation of $557.7 million within the second quarter of 2023. NCM, Inc. continued to operate as the manager of the debtor-in-possession pursuant to the authority granted under Chapter 11 of the Bankruptcy Code throughout the Chapter 11 Case.

On June 27, 2023, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming NCM LLC’s Modified First Amended Plan of Reorganization of National CineMedia, LLC Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 428] (as may be amended, modified, or supplemented form time to time, the “Plan”) and approving the Amended Disclosure Statement for First Amended Chapter 11 Plan of Reorganization of National CineMedia, LLC [Docket No. 250] (the “Disclosure Statement”) on a final basis. Following confirmation of the Plan on August 7, 2023 (the “Effective Date’), all the conditions to effectiveness of the Plan were satisfied or waived, the Restructuring Transactions (as defined in the “Plan”) were substantially consummated and NCM LLC emerged from bankruptcy. Among other things, on the Effective Date, in accordance with the Plan, all common units under the NCM

LLC’s Third Amended and Restated Limited Liability Company Operating Agreement (the “NCM LLC Operating Agreement”) were canceled and extinguished, NCM, Inc. received NCM LLC common units and transferred the NCM Capital Contribution (as defined in the Plan) of approximately $15.5 million to NCM LLC, NCM LLC assumed certain unexpired Executory Contracts and Unexpired Leases (each, as defined in the Plan), including AMC’s and Cinemark’s ESAs, NCM LLC transferred $8.8 million of cash to a professional fees escrow account and $15.0 million to an unsecured creditor settlements escrow account for the General Unsecured Claim Pool (as defined in the Plan). NCM LLC commenced distributions to creditors, including the issuance of shares of NCM, Inc. common stock to holders of Secured Debt Claims (as defined in the Plan) and NCM LLC entered into an Exit Facility (as defined in the Plan and also referred to as the "Revolving Credit Facility 2023") to support operations upon emergence. As a result of the Plan, all historical debt of NCM LLC was discharged and NCM LLC recorded a gain on bankruptcy of $916.4 million for the year ended December 26, 2024.

Additionally, upon emergence from bankruptcy, NCM, Inc., regained control and retained 100.0% ownership of NCM LLC, after taking into account elections by the holders of Secured Debt Claims to receive NCM, Inc. common stock in lieu of NCM LLC common units and was therefore reconsolidated into the Company’s financial statements prospectively as of August 7, 2023 akin to an acquisition under ASC 805 – Business Combinations. In accordance with ASC 805 – Business Combinations, the assets and liabilities of NCM LLC were adjusted to their estimated fair value as of the Effective Date. All activity during the Chapter 11 Case from April 11, 2023 to August 7, 2023 when NCM LLC was deconsolidated from NCM, Inc. represents activity and balances for NCM, Inc. standalone. All activity and balances prior to the deconsolidation of NCM LLC on April 11, 2023 and after the reconsolidation of NCM LLC on August 7, 2023 represent NCM, Inc. consolidated, inclusive of NCM LLC.

As of March 27, 2025, the Company had not completed all agreed upon payments to the General Unsecured Claim Pool and held a total of $3.0 million within the escrow accounts and accruals, presented within ‘Restricted cash’ and ‘Accounts payable’ on the unaudited Condensed Consolidated Balance Sheet as of March 27, 2025. On March 28, 2025, a final decree was entered by the Bankruptcy Court administratively closing the Chapter 11 Case. After this administrative closing the Bankruptcy Court will continue to have jurisdiction over the ongoing claims related to the Chapter 11 Case.

Summary Historical and Operating Data

You should read this information with the other information contained in this document, and our unaudited historical financial statements and the notes thereto included elsewhere in this document.

***Our Operating Data——***The following table presents operating data and Adjusted OIBDA (dollars in millions, except share and margin data):

(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. Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

Non-GAAP Financial Measures

Adjusted OIBDA and Adjusted OIBDA margin are financial measures that are not calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude non-cash share-based compensation costs, impairment of long-lived assets, workforce reorganization costs, system optimization costs, satellite transitions costs and advisor fees related to involvement in Regal’s Chapter 11 case (the “Cineworld Proceeding”) and the Chapter 11 Case. 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. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes 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, non-cash share-based compensation programs, impairment of long-lived assets, workforce reorganization costs, system optimization costs, satellite transition costs and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case, interest rates, debt levels or income tax rates. 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. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s share-based payment costs, impairments of long-lived assets, workforce reorganization costs, system optimization costs, satellite transition costs and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case. 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, and operating margin is the most directly comparable GAAP financial measure to Adjusted AOIBDA margin. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies, or calculations in the Company’s debt agreement.

The following table reconciles operating loss and operating margin to Adjusted OIBDA and Adjusted OIBDA margin for the periods presented (dollars in millions):

(1) Share-based compensation costs are included in network operations, selling and marketing and administrative expense in the Company's unaudited Condensed Consolidated Financial Statements.

(2) The impairment of long-lived assets primarily relates to the write down of certain assets related to leasehold improvements no longer in use.

(3) Workforce reorganization costs represent redundancy costs associated with changes to the Company’s workforce primarily implemented during 2024, as well as related office relocations.

(4) System optimization costs represent costs incurred related to a one-time assessment of the technology surrounding the Company's programmatic offerings beginning in the third quarter of 2024.

(5) One-time costs of transitioning satellite providers during 2024.

(6) Advisor and legal fees and expenses incurred in connection with the Company’s involvement in the Cineworld Proceeding and Chapter 11 Case and related appeals, as well as insurance and retention related expenses.

Basis of Presentation

The results of operations data for the three months ended March 27, 2025 (first quarter of 2025) and March 28, 2024 (first quarter of 2024) were derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the accompanying notes.

Results of Operations

First Quarter of 2025 and First Quarter of 2024.

Revenue. Total revenue decreased $2.5 million, or 6.7%, from $37.4 million for the first quarter of 2024 to $34.9 million for the first quarter of 2025. The following is a summary of revenue by category (in millions):

The following table shows data on theater attendance and revenue per attendee for the three months ended March 27, 2025 and March 28, 2024:

(1) Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike theaters that were part of another cinema advertising network during the periods presented.

National advertising revenue. National advertising revenue decreased by $2.1 million, or 7.1%, from $29.5 million for the first quarter of 2024 to $27.4 million for the first quarter of 2025. The decrease in national advertising revenue was primarily due to a 7.6% decrease in national advertising utilization in the first quarter of 2025, as compared to the first quarter of 2024 as well as a 4.6% decrease in network attendance. These decreases were partially offset by a 1.3% increase in national advertising CPMs in the first quarter of 2025, as compared to the first quarter of 2024.

Local and regional advertising revenue. Local and regional advertising revenue decreased by $0.4 million, or 7.5%, from $5.3 million for the first quarter of 2024 to $4.9 million for the first quarter of 2025. The decrease in local and regional advertising revenue was primarily due to a decrease in contract activity and size within the dining, automotive, wireless and healthcare categories for the first quarter of 2025 compared to the first quarter of 2024 due in part to the 11.6% decline in the domestic box office as well as advertisers' decreased spending due to economic uncertainty. These decreases were partially offset by an increase in contract activity and size within the travel and professional services categories in the first quarter of 2025, as compared to the first quarter of 2024.

ESA Party beverage revenue. ESA Party beverage revenue remained at $2.6 million for the first quarter of 2025, consistent with the first quarter of 2024.

Operating expenses. Total operating expenses decreased $1.3 million, or 2.2%, from $60.1 million for the first quarter of 2024 to $58.8 million for the first quarter of 2025. The following table shows the changes in operating expense for the first quarter of 2025 (in millions):

Network operating costs. Network operating costs decreased $0.5 million, or 13.9%, from $3.6 million for the first quarter of 2024 to $3.1 million for the first quarter of 2025. The decrease in network operating costs was primarily due to a $0.2 million decrease in personnel related expenses, a $0.2 million decrease in costs associated with our digital offerings in line with the decrease in revenue and a $0.1 million decrease in satellite costs for the first quarter of 2025, as compared to the first quarter of 2024.

Theater exhibition fees. Theater exhibition fees decreased by $0.8 million, or 3.6%, from $22.5 million for the first quarter of 2024 to $21.7 million for the first quarter of 2025. The decrease was primarily related to a $0.9 million decrease in fees caused by the 4.6% decrease in network attendance and a $0.1 million decrease in fees related to the number of active screens in the first quarter of 2025 compared to the first quarter of 2024. These decreases were partially offset by a $0.4 million increase in fees due to contractual rate increases primarily within the ESAs for the first quarter of 2025, as compared to the first quarter of 2024.

Selling and marketing costs. Selling and marketing costs increased $0.7 million, or 7.0%, from $10.0 million for the first quarter of 2024 to $10.7 million for the first quarter of 2025. The increase in selling and marketing costs was primarily due to a $1.3 million increase in selling related expenses largely driven by the timing of our company-wide sales meeting which occurred in the first quarter of 2025 and did not occur in 2024 and a $0.3 million increase in variable costs associated with certain sales partnerships for the first quarter of 2025, compared to the first quarter of 2024. These increases were partially offset by a $0.5 million decrease in severance expense due to the workforce reorganization in the first quarter of 2024, a $0.2 million decrease in other personnel related expenses and a $0.2 million decrease in lease related expenses for the first quarter of 2025, as compared to the first quarter of 2024 following the relocation of two offices during 2024.

Administrative and other costs. Administrative and other costs decreased $0.6 million, or 4.4%, from $13.5 million for the first quarter of 2024 to $12.9 million for the first quarter of 2025. The decrease was primarily due to a $1.0 million decrease in personnel costs primarily due to retention related expenses in 2024 related to the Chapter 11 proceedings with no comparable activity in 2025, a $0.6 million decrease in severance expense due to the workforce reorganization in the first quarter of 2024 and a $0.3 million decrease in other personnel related costs. These decreases were partially offset by a $0.6 million increase in legal and professional fees related to the Chapter 11 Case and Cineworld Proceeding due to the timing of certain hearings, a $0.5 million increase in stock based compensation following new grant activity in the first quarter of 2024 and a $0.5 million increase in cloud computing costs for the first quarter of 2025, as compared to the first quarter of 2024.

Depreciation expense. Depreciation expense increased $0.1 million, or 10.0%, from $1.0 million for the first quarter of 2024 to $1.1 million in the first quarter of 2025.

Amortization expense. Amortization expense decreased $0.2 million, or 2.1%, from $9.5 million for the first quarter of 2024 to $9.3 million for the first quarter of 2025.

Non-operating expense. Total non-operating expense decreased $5.2 million, or 43.3%, from $12.0 million for the first quarter of 2024 to $6.8 million for the first quarter of 2025. The following table shows the changes in non-operating expense for the first quarter of 2025 and the first quarter of 2024 (in millions):

24

The decrease in non-operating expense was primarily due to a $6.8 million decrease in the loss on the re-measurement of the payable under the tax receivable agreement largely due to the addition of two years of estimates in management's forecast for future years in 2024 following increased insight into the respective movie slates and market demand as compared to the addition of one new forecasted year in the first quarter of 2025 to replace the completed prior year within the calculation. The decrease is also due to a $0.3 million increase in interest income and a $0.2 million decrease in interest expense in the first quarter of 2025 compared to the first quarter of 2024. These decreases were partially offset by a $1.8 million increase in loss on debt extinguishment in the first quarter of 2025 following the Company's termination of its Revolving Credit Facility 2023 and a $0.3 million decrease in non-operating income related to the Company's equity method investment in ACJV, LLC.

Known Trends and Uncertainties

***ESA Party 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. In the first quarter of 2025, Cinemark purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. In 2024, Cinemark purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The ESA Parties’ 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. 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. Beginning in 2020 and in accordance with the 2019 ESA Amendment, the price for the time sold to Cinemark's beverage supplier and Regal’s beverage suppliers, prior to the termination of Regal's ESA, now increases at a fixed rate of 2.0% each year. Beginning in 2026 and in accordance with the 2025 AMC Agreement, the time sold to AMC's beverage supplier will also increase at a fixed rate of 2.0% each year.

***Theater exhibition fees—***In consideration for NCM LLC’s access to the ESA Parties’ and network affiliate theaters for on-screen and LEN advertising and lobby promotions, the ESA Parties and network affiliates receive access fees based either upon number of attendees, a revenue share or a combination, including a minimum revenue guarantee per attendee. Many of these agreements contain annual increases to the respective fee structures or guaranteed minimums, either per patron, per theater and/or per digital screen. The payments under the ESA Parties' agreements and network affiliate agreements are recorded within ‘ESA Parties and network affiliate fees’ in the unaudited Condensed Consolidated Statement of Operations.

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 and principal payments on our 2025 Credit Facility, if any, income tax payments, TRA payments and 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, as well as the amount of dividends to NCM, Inc.’s common stockholders. Upon the effectiveness of the 2025 AMC Agreement, AMC will no longer be eligible to receive available cash payments.

On January 24, 2025, NCM LLC, as borrower, entered into the 2025 Credit Facility with U.S. Bank National Association, as lender. The agreement provides for a $45.0 million senior secured revolving credit facility that matures on January 24, 2028. In connection with entering into the 2025 Credit Facility, NCM LLC repaid in full the $10.0 million balance outstanding as of December 26, 2024 and terminated all commitments under its Revolving Credit Facility 2023(as defined below), and in connection with this termination, paid a prepayment fee equal to 1% of the total commitment. As of March 27, 2025, NCM LLC had not made any borrowings under the 2025 Credit Facility. Borrowings under the 2025 Credit Facility may be used for, among other things, working capital and other general corporate purposes of the Company and bear interest at a floating rate equal to term SOFR (subject to a floor of zero) plus an applicable margin of 2.00%, which is subject to increase by an additional 2.00% upon the occurrence of an event of default. No amounts have been drawn under the facility as of March 27, 2025.

On August 7, 2023, NCM LLC entered into a Loan, Security and Guarantee Agreement (the “Revolving Credit Facility 2023”) with CIT Northbridge Credit LLC as agent, which was terminated in connection with the 2025 Credit Facility. The Revolving Credit Facility 2023 was an asset backed line facility where the capacity depends upon NCM LLC’s trade accounts receivable balance, as adjusted for aged balances and other considerations. The maximum availability NCM LLC had access to under the revolver is $55.0 million. The proceeds of the Revolving Credit Facility 2023 could have been used for, inter alia, working capital and capital expenditures. The Revolving Credit Facility 2023 was to mature on August 7, 2026. The interest rate under the Revolving Credit Facility 2023 was a base rate or SOFR benchmark plus (i) 3.75% if less than 50% of revolving commitments are utilized or (ii) 4.50% if 50% or more of revolving commitments are utilized (utilizing the average revolver usage for the prior calendar month as a benchmark for this determination). The Revolving Credit Facility 2023 also contained a financial maintenance covenant requiring that the fixed charge coverage ratio ending on the last day of each fiscal month is at least 1.1 to 1.0 during a “Trigger Period.” A Trigger Period began upon (i) an event of default or (ii) if availability was less than the greater of (a) $5.0 million and (b) 10% of aggregate revolving commitments. A Trigger Period ended only if (i) no event of default existed for the preceding 30 consecutive days and (ii) availability is greater than both (a) $5.0 million and (b) 10% of aggregate revolving commitments.

A summary of our financial liquidity is as follows (in millions):

(1) Included in cash, cash equivalents and marketable securities as of March 27, 2025, December 26, 2024 and March 28, 2024, was $26.9 million, $63.5 million and $54.8 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, TRA payments and other obligations.

(2) The 2025 Credit Facility portion of NCM LLC’s total borrowings that 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. NCM LLC’s total capacity under the 2025 Credit Facility is $45.0 million as of March 27, 2025. As of March 27, 2025, the amount available under the 2025 Credit Facility in the table above is net letters of credit of $0.6 million.

(3) The Revolving Credit Facility 2023 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 senior secured credit facility, and a portion was available for letters of credit. NCM LLC’s total capacity under the Revolving Credit Facility 2023, which was subject to fluctuations in the underlying assets, was $55.0 million as of March 27, 2025.

As of March 27, 2025, the weighted average remaining maturity of our debt facility was 2.8 years. However, no amounts have been drawn on the 2025 Credit Facility as of March 27, 2025. As of March 27, 2025, 100.0% of our borrowings bear interest at variable rates and 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.

We have used and generated cash as follows (in millions):

• Operating Activities. The $18.1 million decrease in cash provided by operating activities for the three months ended March 27, 2025, as compared to the three months ended March 28, 2024, was due to 1) $9.2 million decrease in accounts receivable collections, 2) an $8.4 million decrease in the change in deferred revenue, 3) a $1.0 million decrease in net loss adjusted for non-cash items and 4) a $0.9 million decrease in the change in prepaid expenses. These decreases in cash provided by operating were partially offset by a $0.9 million increase in the change in ESA amounts due to/from, net and a $0.3 million decrease in payments of accounts payable and accrued expenses for the three months ended March 27, 2025, as compared to the three months ended March 28, 2024.
• Investing Activities. The $0.6 million decrease in cash used in investing activities for the three months ended March 27, 2025, as compared to the three months ended March 28, 2024, was primarily due to the $0.8 million decrease in purchases of property and equipment. This was partially offset by a $0.2 million decrease in proceeds received from an equity method investment for the three months ended March 27, 2025, as compared to the three months ended March 28, 2024.
• Financing Activities. The $20.1 million increase in cash used in financing activities for the three months ended March 27, 2025, as compared to the three months ended March 28, 2024, was primarily due to the $10.0 million repayment of the Revolving Credit Facility 2023, the $8.8 million increase in payments made to repurchase shares of NCM, Inc.'s common stock and a $1.5 million increase in payments of debt issuance costs associated with the termination of the Revolving Credit Facility 2023 and commencement of the Credit Facility 2025 during the three months ended March 27, 2025.

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 March 27, 2025 were $59.8 million (including $26.9 million of cash held by NCM LLC). NCM LLC’s primary sources of liquidity and capital resources are its cash provided by operating activities, availability under its 2025 Credit Facility and cash on hand. The $26.9 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, stock repurchases and for future payment of dividends to NCM, Inc. stockholders if and when declared by the Board of Directors.

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and NCM LLC’s other members were deferred during the Chapter 11 Case. 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. The other members are only able to receive available cash when they hold units. The available cash amount to the members of NCM LLC for the three months ended March 27, 2025 was calculated as approximately negative $13.4 million, due almost entirely to NCM, Inc., as the primary holder of NCM LLC units as of March 27, 2025. NCM, Inc. has the option to defer payment of any available cash distributions payable to NCM, Inc. at its discretion. Any negative amounts can only be offset against positive available cash within the second quarter of future years, in accordance with the agreement. As of March 27, 2025, NCM LLC owed NCM, Inc. $14.8 million in deferred available cash distribution.

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the 2025 Credit Facility) to fund payments associated with the TRA, stock repurchases and future dividends if and when declared by the Board of Directors. The Company will make a TRA payment in 2025 for the 2024 tax year and did not make a TRA payment in 2024 for the 2023 tax year. The Company also expects to make a TRA payment in 2026 for the 2025 tax year. Deferred distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA, income taxes and any stock repurchases or declared dividends for the foreseeable future at the discretion of the Board of Directors. At the discretion of the Board of Directors, the Company will consider returning a portion of its free cash flow to stockholders. The declaration, payment, timing and amount of any future stock repurchases or 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.

Critical Accounting Policies

For further discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited Condensed Consolidated Financial Statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” contained in our Annual Report on Form 10-K filed for the fiscal year ended December 26, 2024 and incorporated by reference herein. As of March 27, 2025, there were no other significant changes in those critical accounting policies.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see the information provided under Note 1—The Company to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited Condensed Consolidated Financial Statements.

Interest Rate Risk

The primary market risk to which we are exposed is interest rate risk. On January 24, 2025, NCM LLC entered into the 2025 Credit Facility. The maximum capacity that NCM LLC has access to under the 2025 Credit Facility is $45.0 million. The interest rate under the 2025 Credit Facility is a floating rate equal to term SOFR (subject to a floor of zero) plus an applicable margin of 2.00%, which is subject to increase by an additional 2.00% upon the occurrence of an event of default. As of March 27, 2025, the Company has not drawn down on the 2025 Credit Facility. If the Company had drawn down on the maximum capacity of the 2025 Credit Facility of $45.0 million, a 100-basis point fluctuation in market interest rates would have the effect of increasing or decreasing our cash interest expense by approximately $0.5 million for an annual period.

The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the Company's reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of March 27, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures as of March 27, 2025 were effective.

In designing and evaluating our disclosure controls and procedures, management recognizes that any control, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting that occurred during the quarter ended March 27, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from risk factors as previously disclosed in our Annual Report on Form 10-K filed with the SEC on March 6, 2025 for the fiscal year ended December 26, 2024.