National CineMedia, Inc. Annual Report 2019

FY2019 Annual Report · National CineMedia, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________

FORM 10-K

__________________________________________________________

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 26, 2019
or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________
Commission file number: 001-33296
__________________________________________________________

NATIONAL CINEMEDIA, INC.

(Exact name of registrant as specified in its charter)
__________________________________________________________

Delaware
(State or other jurisdiction of
incorporation or organization)

6300 S. Syracuse Way, Suite 300
Centennial, Colorado
(Address of principal executive offices)

20-5665602
(I.R.S. Employer
Identification No.)

80111
(Zip Code)

Registrant’s telephone number, including area code: (303) 792-3600
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, par value $0.01 per share

Trading symbol
NCMI

Name of each exchange on which registered

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer
Accelerated filer

Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition method for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Based on the closing sales price on June 27, 2019, the aggregate market value of the voting and non-voting common stock held by non-
affiliates of the registrant was $328,535,741.
As of February 18, 2020, 79,751,489 shares of the registrant’s common stock (including unvested restricted stock), par value of $0.01 per
share, were outstanding.

Certain portions of the registrant’s definitive proxy statement to be used in connection with its Annual Meeting of Stockholders and to be
filed within 120 days of December 26, 2019 are incorporated by reference into Part III, Items 10-14, of this report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

TABLE OF CONTENTS

PART I

Item 1.

Business ..........................................................................................................................................................

Item 1A.

Risk Factors ....................................................................................................................................................

Item 1B.

Unresolved Staff Comments...........................................................................................................................

Item 2.

Properties ........................................................................................................................................................

Item 3.

Legal Proceedings...........................................................................................................................................

Item 4.

Mine Safety Disclosures .................................................................................................................................

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.........................................................................................................................................................

Item 6.

Selected Financial Data ..................................................................................................................................

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.........................

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk.........................................................................

Item 8.

Financial Statements and Supplementary Data ..............................................................................................

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.........................

Item 9A.

Controls and Procedures .................................................................................................................................

Item 9B.

Other Information ...........................................................................................................................................

PART III

Item 10.

Directors, Executive Officers and Corporate Governance .............................................................................

Item 11.

Executive Compensation ................................................................................................................................

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ......

Item 13.

Certain Relationships and Related Transactions, and Director Independence ...............................................

Item 14.

Principal Accounting Fees and Services.........................................................................................................

PART IV

Item 15.

Exhibits, Financial Statement Schedules........................................................................................................

Item 16.

Form 10-K Summary......................................................................................................................................

Signatures

........................................................................................................................................................................

Page

In this document, unless the context otherwise requires:

Certain Definitions

•

“NCM, Inc.,” “the Company,” “we,” “us” or “our” refer to National CineMedia, Inc., a Delaware corporation, and
its consolidated subsidiary National CineMedia, LLC.

“NCM LLC” refers to National CineMedia, LLC, a Delaware limited liability company, which commenced
operations on April 1, 2005, and is the current operating company for our business, which NCM, Inc. acquired an
interest in, and became a member and the sole manager of, upon completion of our initial public offering, or
“IPO,” which closed on February 13, 2007.

“ESAs” refers to the amended and restated exhibitor services agreements entered into by NCM LLC with each of
NCM LLC’s founding members upon completion of the IPO, which were further amended and restated on
December 26, 2013 in connection with the sale of the Fathom Events business and, in the case of the ESAs with
Cinemark and Regal, were further amended on September 17, 2019 (the “2019 ESA Amendments”) to extend the
terms of the ESAs and modify the program distributed by NCM LLC through its DCN for exhibition in Cinemark
and Regal theaters.

“AMC” refers to AMC Entertainment Inc. and its subsidiaries, National Cinema Network, Inc., or “NCN,” which
contributed assets used in the operations of NCM LLC and formed NCM LLC in March 2005, AMC ShowPlace
Theatres, Inc., AMC Starplex, LLC and American Multi-Cinema, Inc., which is a party to an ESA with NCM
LLC.

“Cinemark” refers to Cinemark Holdings, Inc. and its subsidiaries, Cinemark Media, Inc., which joined NCM
LLC in July 2005, and Cinemark USA, Inc., which is a party to an ESA with NCM LLC.

“Regal” refers to Cineworld Group plc, Regal Entertainment Group and its subsidiaries, Regal CineMedia
Corporation, which contributed assets used in the operations of NCM LLC, Regal CineMedia Holdings, LLC,
which formed NCM LLC in March 2005, and Regal Cinemas, Inc., which is a party to an ESA with NCM LLC.

“Founding members” refers to AMC, Cinemark and Regal.

“network affiliates” refers to certain third-party theater circuits with which NCM LLC has long-term network
affiliate agreements.

“Adjusted OIBDA” refers to a non-GAAP financial measure which management defines as operating income
before depreciation and amortization expense adjusted to also exclude amortization of intangibles recorded for
network theater screen leases, non-cash share-based payment costs, merger-related administrative costs, CEO
transition costs and early lease termination expense.

“Adjusted OIBDA margin” is a non-GAAP financial measure calculated by dividing Adjusted OIBDA by total
revenue.

“LEN” refers to NCM LLC’s Lobby Entertainment Network.

“CPM” is a basis for which advertising is sold by the cost per thousand viewers.

“DCN” refers to NCM LLC’s Digital Content Network.

“TRA” refers to the tax receivable agreement entered into by NCM, Inc. and the founding members.

Market Information

Information regarding market share, market position and industry data pertaining to our business contained in this

report consists of estimates based on data and reports compiled by industry professional organizations (including, but not
limited to, Nielsen Media Research, Inc. (“Nielsen”), the Motion Picture Association of America, and the National Association
of Theatre Owners) and analysts, and our knowledge of our revenues and markets. Designated Market Area® is a registered
trademark of Nielsen. We take responsibility for compiling and extracting, but have not independently verified, market and
industry data provided by third parties, or by industry or general publications, and take no further responsibility for such data.
Similarly, while we believe our internal estimates are reliable, our estimates have not been verified by any independent sources,
and we cannot assure you as to their accuracy.

Cautionary Statement Regarding Forward-Looking Statements

In addition to historical information, some of the information in this Form 10-K includes “forward-looking
statements.” All statements other than statements of historical facts included in this Form 10-K, including, without limitation,
certain statements under “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
3

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,” “will,” “can,” “should,” “expects,” “forecasts,”
“projects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of
those words and other comparable words. These forward-looking statements involve known and unknown risks and
uncertainties, assumptions and other factors, including, but not limited to, the following:

•

potential significant declines in theater attendance;

changes in theater patron behavior could result in declines in viewership of the Noovie pre-show;

• we may not realize the anticipated benefits of the 2019 ESA Amendments;

• we may not be successful in increasing the number of theaters in which NCM LLC has the right to display Post-

Showtime Inventory;

changes to relationships with NCM LLC's founding members;

our plans for developing additional revenue opportunities may not be implemented and may not be achieved;

competition within the overall advertising industry;

•

• we may not maintain our technological advantage;

•

national, regional and local economic conditions;

• we may not be able to grow our advertising revenue in line with the growth of our contractual costs;

•

the potential loss of any major content partner or advertising client;

potential inability to retain or replace our senior management;

founding member and network affiliate government regulation could slow growth;

failure to effectively manage or continue our growth;

potential failures or disruptions in our technology systems;

possible infringement of our technology on intellectual property rights owned by others;

the content we distribute and user information we collect and maintain through our in-theater, online or mobile
services may expose us to liability;

changes in regulations relating to the Internet, privacy or other areas of our online or mobile services;

our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which could
increase the volatility of our stock price;

an ineffective system of internal controls over financial reporting could adversely affect our ability to accurately
report our financial results and market confidence in our reported financial information;

• we are a holding company with no operations of our own, and we depend on distributions and payments under the
NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and
to pay cash dividends on our common stock;

•

risks and uncertainties relating to our significant indebtedness and investments, including the availability and
adequacy of cash flows to meet our debt service requirements and any other indebtedness that we may incur in the
future;

• NCM LLC’s other members or their affiliates may have interests that differ from those of us or our public
stockholders and they may be able to influence our affairs, compete with us or benefit from corporate
opportunities that might otherwise be available to us;

•

future issuance of membership units or preferred stock could dilute the interest of our common stockholders;

determination that NCM, Inc. or any of NCM LLC’s founding members is an investment company;

determination that any amount of our tax benefits under the TRA should not have been available;

the effect on our stock price from the substantial number of our shares eligible for sale;

the interests of our largest stockholder and NCM LLC’s other members may be different from or conflict with
those of our other stockholders; and

•

other factors described under “Risk Factors” or elsewhere in this Annual Report on Form 10-K.

This list of factors that may affect future performance and the accuracy of forward-looking statements are illustrative

and not exhaustive. Our actual results, performance or achievements could differ materially from those indicated in these
statements as a result of additional factors as more fully discussed in the section titled “Risk Factors,” and elsewhere in this
Annual Report on Form 10-K. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-
looking statements.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are
expressly qualified in their entirety by these cautionary statements. We disclaim any intention or obligation to update publicly any
forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under
applicable securities laws.

PART I

Item 1.

Business

The Company

NCM, Inc., a Delaware corporation, was organized on October 5, 2006 and began operations on February 13, 2007

upon completion of its IPO. NCM, Inc. is a holding company that manages its consolidated subsidiary, NCM LLC. NCM, Inc.
has no business operations or material assets other than its cash and ownership interest of approximately 48.8% of the common
membership units in NCM LLC as of December 26, 2019. NCM LLC’s other members, Cinemark and Regal, two of the three
largest motion picture exhibition companies in the U.S., held the remaining 51.2% of NCM LLC’s common membership units
as of December 26, 2019. NCM, Inc.’s primary source of cash flow from operations is distributions from NCM LLC pursuant
to the NCM LLC operating agreement. NCM, Inc. also receives management fees pursuant to a management services
agreement with NCM LLC in exchange for providing specific management services to NCM LLC.

Our Business

We are America’s Movie Network. As the largest cinema advertising network in North America, we unite brands with
the power of movies and engage movie fans anytime and anywhere. According to Nielsen, more than 700 million moviegoers
annually attend theaters that are currently under contract to present NCM’s Noovie pre-show in 57 leading national and regional
theater circuits including AMC, Cinemark and Regal and 54 network affiliate theaters. NCM’s cinema advertising network
offers broad reach and unparalleled audience engagement with over 21,200 screens in over 1,700 theaters in 190 Designated
Market Areas® (including all of the top 50).

We currently derive revenue principally from the sale of advertising to national, regional and local businesses in Noovie,

our cinema advertising and entertainment pre-show seen on movie screens across the U.S., as well as on our LEN, a series of
strategically-placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater
lobbies. We also sell digital online and mobile advertising through our Cinema Accelerator product and across our suite of
Noovie digital properties, including Noovie.com, Noovie Shuffle, Name That Movie, Noovie Arcade, and Fantasy Movie
League, in order to reach entertainment audiences beyond the theater.

NCM LLC has long-term ESAs with the founding members and multi-year agreements with our network affiliates. In

September 2019, NCM LLC entered into amendments to the ESAs with Cinemark and Regal (collectively, the “2019 ESA
Amendments”). The 2019 ESA Amendments extended the contract life of the ESAs with Cinemark and Regal by four years
resulting in a weighted average remaining term of the ESAs with the founding members (based on attendance) of
approximately 19.8 years as of December 26, 2019. The network affiliate agreements expire at various dates between March
15, 2020 and July 22, 2031. The weighted average remaining term (based on attendance) of the ESAs and the network affiliate
agreements together is 17.1 years as of December 26, 2019. The ESAs and network affiliate agreements grant NCM LLC
exclusive rights in the founding member and network affiliate theaters to sell advertising, subject to limited exceptions.

We believe that the broad reach and digital delivery of our network provides an effective platform for national, regional

and local advertisers to reach a large, young, engaged and affluent audience on a targeted and measurable basis.

Noovie On-Screen Advertising

Noovie On-Screen—Our on-screen Noovie pre-show provides an entertaining pre-movie experience for theater patrons
while serving as an incremental revenue source for our theater circuit partners. Noovie gives movie audiences a reason to arrive
early to discover what’s next in entertainment, and it consists of national, regional and local advertising, as well as long-form
entertainment and advertising content provided to us under exclusive multi-year arrangements with leading media,
entertainment, technology and other companies (“content partners”).

Beginning in November 2019 following the completion of the 2019 ESA Amendments, we now present two different
formats of our Noovie pre-show depending on the theater circuit in which it runs. In Regal and Cinemark and certain affiliate
theaters, Noovie now includes advertising inventory after the advertised showtime consisting of (1) the new lights down
segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the new 30- or 60-second Platinum
Spot, as further described below ("Post-Showtime Inventory"). As of December 26, 2019, theaters presenting the new Noovie
format with Post-Showtime Inventory made up approximately 54% of our network based upon attendance. Since December 26,
2019 we have added ten additional affiliates and including three to eight more that we expect to add in 2020, we expect
approximately 57% to 59% of our network based upon 2019 attendance to present the new Noovie format during 2020. All
other NCM network theater circuits, which make up the remaining 46% of our network based upon attendance as of December
26, 2019, present the Classic Noovie pre-show, which ends approximately at the advertised movie showtime when the movie
trailers begin. The movie trailers that run before the feature film are not part of Noovie.

Because Noovie is customized by theater circuit, theater location/market, film rating, film genre and film title, we
produce and distribute many different versions of Noovie each month. We rotate Noovie’s long-form content segments between
theaters approximately every two weeks to ensure that frequent moviegoers are entertained by fresh content. This programming
flexibility provides advertisers with the ability to target specific audience demographics and geographic locations and gives us
the ability to ensure that the content and advertising are age-appropriate for the movie audience. During 2019, we launched
NCM LuxeNet, which is a specialty cinema network to connect luxury brands with cultured, affluent movie audiences. NCM
LuxeNet is a carefully curated network of premium movie theaters in the top 25 Designated Market Areas (“DMA®”) featuring
contemporary lobbies, state-of-the-art auditoriums, luxury seating, expanded amenities including bars and dine-in options and a
sophisticated movie slate ranging from the best independent and Oscar-nominated films to Hollywood’s biggest blockbusters.

All versions of Noovie are produced by our internal creative team, which is cost-effective and gives us significant

flexibility. We also offer pre- and post-production advertising creative services to our clients (primarily local clients who may
not have their own creative agency) for a fee.

Classic Noovie Show Structure—Classic Noovie is comprised of up to four segments, each approximately four to ten
minutes in length. The Company revised the structure beginning November 1, 2019 and the structure below incorporates the
changes made. The following graphic is for illustrative purposes and is not to exact scale.

•

Segment four is the first section of Noovie and contains the entertaining content that is a core element of
Noovie. NCM programs an exclusive Noovie content pod at the beginning of the show that gives audiences
a look at “what’s Noovie”, including movies (Noovie Backlot and Noovie Genius), music (Noovie
Soundcheck), trivia (Name That Movie) and more.

Segment three features a long-form entertainment content segment from one of our content partners and
advertising from local clients.

Segment two features primarily local and regional advertisements, which generally range between 15 to 90
seconds, as well as a long-form entertainment content segment from one of our content partners. This
segment also typically includes a 45-second Noovie Arcade slot where audiences have the opportunity to
play our featured interactive augmented reality (“AR”) game on the big screen using their mobile phones.

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 our
content partners. Segment one also includes an advertisement for the founding members’ beverage supplier
and a public service announcement (“PSA”).

Noovie Show Structure Including Post-Showtime Inventory—The Noovie with Post-Showtime Inventory format is
comprised of substantially the same segments included within the Classic Noovie pre-show, each approximately four to ten
minutes in length, as well as the following two additional advertising segments after the advertised showtime. The total length
of the Noovie pre-show including Post-Showtime Inventory is the same as the Classic Noovie pre-show as the amount of time
displayed prior to the advertised showtime is reduced by the sum of five minutes plus the aggregate length of time of the
Platinum Spot, if any. The following graphic is for illustrative purposes and is not to exact scale.

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

• An additional single advertising unit that is either 30 or 60 seconds of the Noovie pre-show deeply

embedded within the movie trailers at trailer level lighting and at full trailer volume, directly prior to the
last one or two trailers preceding the feature film, which we refer to as the "Platinum Spot".

References to the Noovie pre-show relate to both the Classic Noovie and Noovie including Post Showtime Inventory

formats, unless specified otherwise.

National, Regional and Local Advertising—Our cinema advertising business has a diverse customer base, consisting of

national, regional and local advertisers. National and regional on-screen advertising in Noovie is sold on a CPM basis to
national and regional clients. We generally sell our national advertising units across our national network by film rating or
groups of ratings, or by individual film or film genre grouping. 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 we believe
expands the number of potential clients. Local advertising is sold on a per-screen, per-week basis.

Noovie pre-show inventory is also available in the FreeWheel (formerly known as STRATA) and Mediaocean systems,

media buying and selling software which allows advertising agencies to buy cinema advertising in the “National Spot TV”
marketplace where advertising is purchased by national advertisers in several markets of their own selection. Being able to buy
both TV and cinema locally in the National Spot TV marketplace makes it significantly easier for agencies to include cinema in
the media mix for their clients and allows us to tap into the pool of advertising dollars budgeted for National Spot TV.

As with other premium video mediums like TV, we sell our Noovie pre-show inventory in both the upfront and scatter

markets. Upfront is a term that describes the practice of buying advertising time “up front” on an annual basis for the upcoming
year, purchasing inventory in advance and locking in the advertising rates (CPM’s). Consistent with the television industry
upfront booking practices, a portion of our upfront commitments have cancellation options or options to reduce the amount that
advertisers may purchase that could reduce what is ultimately spent by clients that have made upfront commitments. Scatter
refers to the buying of advertising on a shorter-term basis closer to when the advertisements will run, which often results in a
pricing premium compared to upfront rates. The mix between the upfront and scatter markets is based upon a number of
advertising market factors, such as pricing, demand for advertising time and economic conditions. The demand in the scatter
market impacts the pricing achieved for our remaining advertising inventory not sold upfront and can vary throughout the year.

From February 13, 2007 through December 26, 2019, 597 national advertisers across a wide variety of industries have

advertised with us. During the year ended December 26, 2019, we derived 73% of our advertising revenue from national clients
(including advertising agencies that represent our clients) and 21% of our advertising revenue from thousands of regional and
local advertisers across the country (including advertising agencies that represent these clients).

Beverage Advertising. We have 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. Historically, the time sold to the founding
member beverage supplier has been priced equal to the advertising CPM for the previous year charged by NCM LLC to
unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show, limited to the highest advertising
CPM being then-charged by NCM LLC pursuant to the ESAs. Beginning in 2020 and in accordance with the 2019 ESA
Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers will instead increase 2% each year. The
time sold to AMC’s beverage supplier will continue to be priced based upon the annual increase in CPMs as outlined above.

Each of the founding members has a relationship with a beverage concessionaire supplier under which they are

obligated to provide on-screen advertising time as part of their agreement to purchase branded beverages sold in their theaters.
During 2019, we sold 60 seconds to two of the founding members and 30 seconds to one of the founding members. During
2019, the beverage concessionaire revenue from the founding members’ beverage agreements was approximately 6% of our
total revenue. In the instance of certain theaters that are acquired by the founding members but are not incorporated into our
network because of an existing on-screen advertising agreement with an alternative provider, we remain entitled to these
encumbered theater beverage payments under the terms of the ESA which are treated as a reduction to the intangible asset and
not classified as revenue.

Content. Beyond the Noovie-branded content at the beginning of the pre-show, the majority of our entertainment and

advertising content segments are provided to us by content partners. Under the terms of the contracts, our content partners
create original long-form entertainment content segments that are entertaining, informative or educational in nature exclusively
for our Noovie pre-show and make commitments to buy a portion of our advertising inventory at a specified CPM over a one or
two-year period with options to renew, exercisable at the content partner’s option. The original content produced by these
content partners typically features behind-the-scenes looks at the “making-of” feature films, upcoming media programming, or
technology products. In 2019, the content partner segments were approximately 90 seconds in length.

PSA. In 2019, we had four agreements to exhibit a 40-second courtesy “silence your cell phone” PSA reminding

moviegoers to silence their cell phones and refrain from texting during feature films which expired at the end of 2019. We
signed an additional four new agreements for 2020.

Theater Circuit Messaging. The Noovie program 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 and generally includes 45 seconds within 15 minutes prior to the advertised showtime, 15
seconds of which will be placed within 12 minutes prior to the advertised showtime and the remainder placed elsewhere during
the Noovie pre-show at our discretion.

Noovie Digital Products

The Noovie pre-show includes the following onscreen digital products:

Noovie Shuffle. During 2019, we launched Noovie Shuffle, a collection of card-based movie-trivia mini-games. New

games and card decks are added to Noovie Shuffle on an ongoing basis to match the current film slate and keep Noovie
Shuffle fresh and challenging for players. We are also working closely with movie studios to create custom games and card
decks that highlight specific new movie releases.

Noovie Arcade. Starting in 2018, movie audiences nationwide can play big screen interactive augmented reality (“AR”)

games on their mobile phones by using Noovie Arcade, the revolutionary companion app for the Noovie pre-show. Noovie
Arcade games and AR experiences have included the Ball Park® Brand Hot Dog Derby (our first-ever branded game), movie
studio collaborations including Ralph Breaks the Internet and It: Chapter Two, Escape from Waddleville®, Cinevaders®, Emoji
Escape, The Horror Experience and Hollywood Highway. Noovie Arcade games can be sponsored by advertisers or customized
by brands to create unique and engaging experiences for movie audiences.

Name That Movie. During 2017, we entered into a licensing agreement authorizing the production of Name That Movie

trivia segments for our Noovie pre-show, social media channels and digital properties in order to further entertain and engage
moviegoers. We also offer the opportunity for our advertising clients to sponsor the Name That Movie segments and incorporate
advertising into the game. In 2019, we developed and released Name That Movie iOS and Android mobile apps.

Digital Advertising

At its core, Noovie is NCM’s pre-show that audiences experience before the movie, but Noovie also stretches beyond

the theater as an integrated digital ecosystem delivering entertaining content, purposeful commerce and interactive gaming
opportunities. The Noovie pre-show serves as a “trailer” for the Noovie digital experience, driving movie audiences from the
big screen to NCM’s digital properties and back again. We believe that by creating a compelling consumer experience for
moviegoers, we can further enhance the marketability of our product offerings to our advertising clients. The Noovie digital
products are designed to provide digital advertising inventory and capture exclusive first party data, and includes:

Gaming—Our digital gaming products, including Noovie Arcade, Fantasy Movie League, Name That Movie and Noovie

Shuffle, can be played on their respective mobile apps. As of December 26, 2019, approximately 4.0 million movie goers have
downloaded our mobile apps. These downloads and the acquisition of second party data have resulted in first and second party
data sets of over 100 million as of December 26, 2019. Noovie Arcade can also be played on Noovie.com. During 2020, we plan
to release a standalone Noovie Shuffle mobile app on iOS and Android, release a version of the game on Noovie.com in the
summer of 2020 and integrate Name That Movie and Noovie Shuffle with Noovie.com.

Noovie.com—NCM officially launched Noovie.com in 2019 as a search and discovery platform where audiences can

discover new movies, watch the latest trailers, find theaters and showtimes and buy tickets. Noovie.com is a smart movie guide
and a place fans turn to decide what to watch next, whether in theater or at home, as well as a community hub for fans to
connect, discover and share their love of movies.

NCM advertisers also benefit as Noovie.com connects brands to valuable movie audiences around engaging and
customized digital experiences. Noovie.com is a natural companion to the Noovie pre-show extending the brand, re-enforcing
the on-screen offering and creating valuable cross-platform advertising opportunities.

Cinema Accelerator – In addition to our ad-supported consumer-facing digital products, our Cinema Accelerator digital

product expands cinema advertising beyond the theater environment to reach digitally-connected moviegoers before and after
the movie experience, both online and on mobile devices. Cinema Accelerator identifies moviegoers through exclusive first and
second party data sources including geo-location services and micro-event data for moviegoers that enter theaters in our
network. Using the moviegoer as our filter, we can target specific demographics, genres or layer on other data to provide our
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 our owned and operated ad inventory
as well as third party ad inventory to reach moviegoers wherever they may be seeking entertainment information and content.

We sell NCM’s digital products through a digital sales group that is embedded as part of our national and local sales

organizations to enable collaborative, integrated selling. We believe that our new and upcoming digital products can be sold in
combination with in-theater advertisements as integrated marketing packages as discussed in “Business—Our Strategy”. We
plan to continue to invest in our digital platform in 2020 and beyond.

Lobby Advertising

Lobby Entertainment Network—Our LEN is a network of video screens strategically located throughout the lobbies of

all digitally equipped founding members’ theaters, as well as the majority of our network affiliates’ theaters. As of
December 26, 2019, our LEN had 3,007 screens in 1,553 theaters in our network. The LEN screens are placed in high-traffic
locations such as concession stands, box offices and other waiting areas. Programming on our LEN consists of an
approximately 30-minute loop of branded entertainment content segments created specifically for the lobby with
advertisements running between each segment. We have the scheduling flexibility to send different LEN programming to each
theater through our DCN, and the same program is displayed simultaneously on all LEN screens within a given theater, which
we believe provides the maximum impact for our advertisers. We sell 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 we provide to the founding members at no cost and one minute
of which the founding members may purchase) to promote certain non-exclusive cross-marketing relationships entered into by
the theater operators for the purpose of increasing theater attendance, which we call “strategic programs.”

Under the terms of the ESAs, the founding members also have the right to install a second network of additional screens

in their theater lobbies which would not display our LEN programming, but would be used to promote strategic programs or
products sold in their theater concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty
programs and special events presented by the founding member and vendors of services provided to theaters, so long as such
promotion is incidental to the vendor’s service.

Lobby Promotions

We also sell a wide variety of advertising and promotional products in theater lobbies. 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 us.

Our ability to provide in-lobby marketing and promotional placements in conjunction with our cinema advertising

products allows us to offer integrated marketing solutions to advertisers that provide multiple touchpoints with theater patrons
throughout the movie-going experience, which we believe is a competitive advantage over other national media platforms.

Our 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 our proprietary DCN and Digital Content Software, we are able to schedule, deliver, play
and reconcile advertising and entertainment content for Noovie 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. We also employ
a variety of technologies that aid in distribution where satellite delivery is not available to provide uninterrupted service to our
network of theaters. The DCN is controlled by our Customer Experience Center located in NCM’s headquarters in Centennial,

Colorado, which operates 12 hours a day, seven days a week to proactively monitor and manage our network. NCM's DCN
dynamically controls the quality, placement, timing of playback and completeness of content within specific auditoriums, and it
also allows us to monitor and initiate repairs to the equipment in our digital network of theaters.

Advertising and entertainment content for our Noovie pre-show and LEN is uploaded from our Customer Experience

Center to our satellite distribution network and is delivered via multicast technology to the theaters in our network and received
by our Alternative Content Engine. The Alternative Content Engine holds the content until displayed in specified theater
auditoriums and lobbies according to contract terms. Each theater auditorium and lobby has a hardware and software
architecture that controls the content to be shown. After playback of content, confirmation of playback is returned via satellite
to our Customer Experience Center to be included in “post” reports provided to our advertising clients.

According to Nielsen Cinema Audience Reports for 2019, more than 700 million moviegoers annually attend theaters

that are currently under contract to present the Noovie pre-show, including the founding members and over 54 leading national
and regional theater network affiliates. A summary of the screens and theaters in our advertising network is set forth in the table
below:

Our Network
(As of December 26, 2019)

Advertising Network

Theaters

Total Screens

% of Total

Founding Members .........................................................................................
Network Affiliates...........................................................................................
Total............................................................................................................

1,267

467

1,734

16,880

4,328

21,208

79.6%

20.4%

100.0%

As of December 26, 2019, our Noovie pre-show was displayed on 100% of network movie screens using digital
projectors, with approximately 98% of those screens receiving content through our DCN, representing approximately 98% of
our total network attendance. As of December 26, 2019, 20,183, or 95%, of 21,208 total digital screens are equipped with more
powerful digital cinema projectors, with the remainder comprised of LCD projectors. Those screens not connected to our DCN
display national and regional advertisements on digital projectors with content delivered on USB drives that are shipped to the
theaters via overnight delivery services.

Our Team

We had 531 employees as of December 26, 2019. Our employees are located in our Centennial, Colorado headquarters,
in our advertising sales offices in New York, Los Angeles, Chicago and Detroit, our digital development offices in Los Angeles
and New York and our software development office in Minneapolis. We also have many local advertising account executives
and field maintenance technicians that work primarily from their homes throughout the U.S. None of our employees are
covered by collective bargaining agreements. We believe that we have a good relationship with our employees.

Competition

Our advertising business competes in the estimated $226.2 billion U.S. advertising industry with many other forms of
marketing media, including television, radio, print, internet, mobile and outdoor display advertising. While cinema advertising
represents a small portion of the overall advertising industry today, we believe it is well-positioned to capitalize on the shift of
advertising spending away from traditional media, in particular television where consumers can skip advertisements through
DVRs and other technology, to newer and more targeted forms of media.

Our advertising business also competes with many other providers of cinema advertising, which vary substantially in size.

As the largest cinema advertising network in the U.S., we believe that we are able to generate economies of scale, operating
efficiencies and enhanced opportunities for our clients to reach an engaged movie audience on both a national and local level to
allow us to better compete for premium video dollars in the larger advertising marketplace.

Competitive Strengths

We believe that several strengths position us well to compete in an increasingly fragmented media landscape. We

believe that our cinema advertising network is an attractive option for advertisers on a national, regional and local level and
delivers measurable results for our clients that are comparable, and preferred, to the television, online and mobile or other video
advertising options that we compete against in the marketplace.

Extensive national market coverage—Our contractual agreements with our founding members and network affiliates

provide long-term exclusive access (subject to limited exceptions) to sell cinema advertising across the largest network of
digitally-equipped theaters in the U.S. This allows us to offer advertisers the broad reach and national scale that they need to
effectively reach their target audiences.

• Our advertising network consisted of 21,208 screens (16,880 operated by the founding members) located in

1,734 theaters (1,267 operated by the founding members) in 47 states and the District of Columbia, including
each of the top 25 and 50 DMAs®, and 190 DMAs® in total, as of December 26, 2019;

• Over 700 million people attended theaters in our network in 2019 based on Nielsen estimates and 69%, 65%
and 65% of the total theater attendance in theaters that present advertising in the top 10, 25 and 50 U.S.
DMAs®, respectively and 61% of all DMAs® nationally, providing an attractive platform for national
advertisers who want exposure in larger markets or on a national basis; and

• The average screens per theater in our network during 2019 was 12.2 screens, 1.7 times the U.S. theater

industry average and the aggregate annual attendance per screen of theaters included in our network during
2019 was 30,714, versus the U.S. theater industry average attendance per indoor screen of 28,209, using
metrics reported by the National Association of Theatre Owners.

Scalable, state-of-the-art digital content distribution technology—Our use of the combination of satellite and

terrestrial network technology, combined with the design and functionality of our Digital Content Software and Customer
Experience Center infrastructure, makes our network efficient and scalable and also allows us to target specific audiences and
provide advertising scheduling flexibility and reporting. National, local and regional advertisers are generally able to run their
ads in the Noovie pre-show less than 72 hours following the proposal which is comparable to the lead time of television
advertising and which is a significant improvement over the cinema industry’s historical turn-around time frame, giving
businesses that rely on time-sensitive promotional advertising strategies the opportunity to take advantage of the power of
cinema. The Company plans to further decrease this lead time following the upgrade of our planning, proposal and inventory
tracking system, as further discussed below.

This scalability of our distribution technology has allowed us to expand our cinema advertising network with minimal
additional capital expenditures or personnel, and we expect to benefit from this scalability in the future as we add new theaters
from the founding members, our existing network affiliate relationships and the addition of new network affiliates.

Access to a highly attractive, engaged audience—We offer advertisers the ability to reach highly-coveted target

demographics, including young, affluent and educated “Millennial” and “Gen Z” moviegoers. According to Nielsen Cinema
Audience Reports for 2019, 53% of the NCM LLC audience were between the ages of 12-34, compared to 53% in 2018, with a
median age of 28 in 2019. Further, 45% of our moviegoers have a household income greater than $100,000 (versus 34% of the
general population), with a median moviegoer household income of $92,100 in 2019, and 42% have received a bachelor’s
degree or higher (versus 31% of the general population) according to the 2019 Doublebase GfK MRI Study.

Because of the impact of cinema’s state-of-the-art immersive video and audio presentation, we also believe that movie

audiences are highly engaged with the pre-show advertising and entertainment content that they view in our theater
environment. According to Nielsen, cinema advertising has significantly higher recall rates than advertising shown on
television, and cinema is one of the few advertising mediums where the ability to bypass marketing messages is limited. Recent
attribution studies conducted for the Company by Foursquare, a location based services company, demonstrated that cinema
advertising resulted in a 17% increase in store visits for a cellphone retailer, 20% increase in store visits to a quick service
restaurant, and a 12% increase in store visits to a holiday retailer. Further, a recent attribution study conducted for the Company
by Comscore and PlaceIQ, media management and analytics companies, demonstrated that cinema advertising resulted in a
12% increase in the intent to view a cable program.

World-class entertainment and innovative, branded pre-feature content—The film content created by Hollywood
studios is considered by many to be the finest entertainment content in the world, which creates a highly-desirable advertising
environment for brands. We believe that our Noovie pre-feature program provides a high-quality entertainment experience for
theater audiences and an effective marketing platform for advertisers. By partnering with leading media, entertainment,
technology and other companies, we are able to provide better original content for our audience and more impact for the
advertiser. Because we offer local and national “pods” within our Noovie pre-show, we are consistent with the placement of ads
on television networks, which allows us to be more easily integrated into traditional sight-sound-and-motion media buys.

Prime movie audience data, measurability and targeting—As with many other advertising mediums, we are measured

by third-party research companies such as Nielsen Holdings PLC that provide us with the percentage of the total attendance
that are in their seats during our Noovie pre-show. What differentiates us from other advertising mediums, however, is that we
also receive monthly attendance information by film, by rating and by screen for all of the founding member theaters and
monthly and by location for the theaters operated by our network affiliates, which allows us to report the actual audience size
for each showing of a film where our Noovie pre-show played. We believe that the ability to provide detailed information to our
clients gives us a distinct competitive advantage over traditional media platforms whose measurement is based only on
extrapolations of a very small sample of the total audience.

In 2019, we continued to invest in the development of our cloud-based Data Management Platform which we believe will
allow us to provide even more robust audience insights and analytics to our clients. To further enhance the connection between
brands and movie audiences, we accumulate exclusive first and second party audience data from several sources within our
Data Management Platform. This audience data is then leveraged for targeting of ad campaigns and can also serve to deliver
closed-loop attribution reporting. We expect to continue to enhance the capabilities of the platform in 2020 by continuing to
gather exclusive first-party and second-party data through our Noovie digital products, as well as additional second-party data
sources and segments.

Integrated marketing and digital products—Our ability to bundle our on-screen advertising opportunities with

integrated lobby and digital marketing products allows us to offer advertisers multiple touchpoints to reach movie audiences
before, during and after the film to execute true 360-degree marketing programs. We believe these multiple marketing
impressions throughout the entire entertainment experience allow our advertisers to extend the exposure for their brands and
products and create a more engaging relationship with movie audiences in every stage of their movie journey. Additionally, our
digital products provide us with valuable, exclusive first party data which can be utilized by our advertising clients through our
Cinema Accelerator product to better reach their target audience with higher degrees of accuracy and measure business
outcomes more accurately.

Contractual theater circuit partner and advertiser relationships—Our exclusive multi-year contractual relationships

with our founding members and network affiliates allow us to offer advertisers a national network with the scale, flexibility and
targeting to meet their marketing needs. Our exclusive multi-year contractual relationships with our content partners and PSA
sponsors, as well as our agreements to satisfy the founding members’ on-screen marketing obligations to their beverage
concessionaires, provide us with a significant upfront revenue commitment, accounting for approximately 23% of our total
revenue for the year ended December 26, 2019. In addition, our participation in the annual advertising upfront marketplace has
allowed us to secure significant annual upfront commitments from national advertisers looking to secure premium cinema
inventory. These upfront commitments accounted for approximately 14% of our total revenue for the year ended December 26,
2019.

Strong operating margins with limited capital requirements—Our annual operating income and Adjusted OIBDA
margins have been consistently strong, ranging from approximately 33.1% to 38.7% and 46.5% to 51.5%, respectively, over the
last five years. Refer to “Item 6. Selected Financial Data-Notes to the Selected Historical Financial and Operating Data” for a
discussion of the calculation of Adjusted OIBDA margin, which is a non-GAAP financial measure, and a reconciliation of
Adjusted OIBDA margin to operating income.

Our capital expenditures have ranged from approximately 2.9% to 3.5% of revenues over the last five years. For the

year ended December 26, 2019, our capital expenditures and other investments were $15.3 million, of which $7.6 million was
related to investments in our digital infrastructure and $2.0 million related to certain implementation and prepaid costs
associated with Cloud Computing Arrangements related to the planned upgrade of our planning, proposal and inventory
tracking system. We expect the level of investment in our digital products to decline over the next few years as our previous
investments have built the foundation for our digital platform. We believe our expected level of Adjusted OIBDA and capital
expenditures should provide us with the strategic and financial flexibility to pursue the further expansion of our national theater
network, invest in our digital products and other growth opportunities, opportunistically repay NCM LLC’s debt and continue
to make dividend payments to our stockholders. Further, due to the network equipment investments made in recent years by our
founding members and network affiliates in new and acquired theaters, ESA provisions requiring founding members to make
future investments for equipment replacements and the scalable nature of our Customer Experience Center and other
infrastructure, we do not expect to need to make major capital investments to grow our operations as our network of theaters
continues to expand. As we continue to move our technology to cloud based software as a service (SaaS) platforms, we will
continue to reduce our annual capital expenditure spending. However, operating expenses associated with the SaaS licenses
will continue to increase. Certain implementation costs of our SaaS platforms are capitalized during the implementation period
and will be recognized within operating income over the term of the SaaS contract after the systems are fully implemented.

Our Strategy

We are continuing to pursue a growth strategy that we believe will create significant stockholder value making NCM a

unique investment vehicle by delivering a substantial dividend driven by long term revenue and free cash flow growth. Our
strategy includes the following five pillars of growth:

Increase the Quality and Value of Our Media Inventory

We intend to increase the quality and value of our media inventory. Achieving one of our key initiatives in this strategy,

we introduced new inventory in our Noovie pre-show after the advertised showtime within Regal and Cinemark theaters in
November 2019 following the completion of the 2019 ESA Amendments. This Post-Showtime Inventory consists of a total of
five minutes between the lights down segment beginning just after the advertised movie showtime and including trailer lighting
and the 30- or 60-second Platinum Spot deeply embedded within the movie trailers with trailer lighting and full trailer volume.
14

We believe this new inventory constitutes prized and impactful ad spots and expect these improvements to increase the value of
the inventory that we can offer to our national clients. We believe our local and regional clients will also benefit from better
inventory as their placement will now be closer to the advertised showtime. We also expect to introduce this new inventory at
select network affiliate theaters in 2020 and plan to continue to work toward expanding the portion of our network including
this new inventory. We believe this higher value inventory, combined with an entertaining and engaging pre-show program that
is integrated with our Noovie digital ecosystem, provides a unique cross-platform premium video product that will stand out in
the media marketplace. We also believe it will help mitigate the potential future impact of reserved seating on our business.

We are also actively continuing to work on new ways to reinvent our Noovie pre-show program to connect with today’s
“Millennial” and “Gen Z” moviegoers to create an in-theater experience that will keep audiences coming back for more, as well
as drive traffic to our digital properties.

Upgrade Our Planning, Proposal and Inventory Tracking System

We are in the process of upgrading our sales planning, proposal and inventory tracking systems to achieve the more

seamless digital buying experience required by today’s media buyers and solve the speed-to-market friction issues associated
with our cinema product. We expect this new system will make it easier and faster for advertisers to buy cinema with NCM and
we expect full implementation will occur in 2021.

Invest in the Creation of Digital Entertainment Products and Digital Ad Inventory

We intend to continue to invest in the creation of compelling digital entertainment products that we believe will improve
the entertainment value of our pre-show and produce incentives for movie-goers to go to theaters and get into their seats earlier.
This will in turn create digital ad inventory and a unique cross platform media product focused exclusively on our movie
audience throughout their moviegoing journey, both in-theater and on-line. For the year ended December 26, 2019, integrated
on-screen and digital campaigns resulted in a 33% higher contract value compared to onscreen only contracts and is expected to
be a key to future growth.

We plan to continue to expand our Noovie digital ecosystem and user base of movie fans with NCM owned-and-

operated products like Noovie.com, Noovie Arcade, Noovie Shuffle, Fantasy Movie League, and Name That Movie. These
products create new ways for brands to engage with movie audiences beyond the big screen, reaching them anytime (before
and after the movie), anywhere with new higher-margin digital ad inventory and creating valuable addressable first-party
customer data. We expect to then monetize this data through advertising sales and sponsorships, as well as by leveraging our
Cinema Accelerator product.

Build a Data-Driven Business

Along with growing our digital products, we plan to build a data-driven business that will allow us to meet the needs of

today’s modern video advertising marketplace. We had 27.2 million and 106.5 million first and second party data sets as of
December 27, 2018 and December 26, 2019, respectively. We are projecting to double that by the end of 2020. These valuable
data sets consist of both our own NCM first-party data from our owned-and-operated digital products, as well as a variety of
key second-party data addressable consumer records, including location-based data that allows us to track when our audiences
go to the movie theater to see our Noovie pre-show and where they go in the days and weeks afterwards. This initiative will
allow us to re-target audiences with digital advertising through our Cinema Accelerator product and more effectively evidence
the value of cinema campaigns for our advertisers.

It is important that we accelerate the growth and scale of our theater audience data to a critical mass to be able to

effectively use that audience data to deliver value to our clients. It is that scale that we believe will make our NCM digital
capabilities increasingly attractive to advertisers, and especially to national brands who buy both our national and regional
inventory.

Expand Our Affiliate Network by Primarily Focusing on Adding Key Affiliates and Screen Counts in Select Markets

Our relationships with our exhibitors are a key focus of our business. Our Affiliate Partnership team is dedicated to

serving the needs of our founding member theater circuits and our 54 network affiliates nationwide as of December 26, 2019.
We plan to continue to expand our affiliate network by primarily focusing on adding key affiliates and screen counts in select
markets by strategically targeting priority exhibitors who are not currently part of our network and whose cinema advertising
contracts we expect will be coming up for renewal in the next several years. This will allow us to increase our revenue by
increasing the number of impressions we have available to sell to advertisers, extending our reach to additional markets to
further improve our national footprint for brands looking to reach those audiences, and strengthening our reach in markets we
are already in for greater saturation in those DMAs.

A key part of our affiliate strategy going forward is the intention to increase the number of affiliate theaters in our
network showing the improved Noovie pre-show format featuring the premium Post-Showtime Inventory. While adoption
across our affiliate network is expected to take some time, ten network affiliates have agreed to participate in the new format,
15

and we expect to have approximately thirteen to eighteen of our network affiliates running our Post-Showtime Inventory in
2020, which account for an additional 3% to 4% of our total network.

Under the terms of the ESAs and common unit adjustment agreement with the founding members and our network

affiliate agreements, all new theaters built or acquired (subject to existing advertising sales agreements) by the founding
members or network affiliates will become part of our network. Including our founding members and network affiliates, our net
screens have increased in nine of our last ten fiscal years. We believe this expansion continues to improve our geographic
coverage and enhances our ability to compete with other national advertising mediums, which allows our exhibitor clients to
maximize the advertising value of their audiences.

Intellectual Property Rights

We have been granted a perpetual, royalty-free license from the founding members to use certain proprietary software

for the delivery of digital advertising and other content through our DCN to screens in the U.S. We have made improvements to
this software since the IPO date and we own those improvements exclusively, except for improvements that were developed
jointly by us and the founding members.

We have secured U.S. trademark registrations for NCM, National CineMedia and Noovie. We also have U.S. trademark

registrations pending for “What's Noovie?”. It is our practice to defend our trademarks and other intellectual property rights,
including the associated goodwill, from infringement by others. We are aware that other persons or entities may use names and
marks containing variations of our registered trademarks and other marks and trade names. Potentially, claims alleging
infringement of intellectual property rights, such as trademark infringement, could be brought against us by the users of those
other names and marks. If any such infringement claim were to prove successful in preventing us from either using or
prohibiting a competitor’s use of our registered trademarks or other marks or trade names, our ability to build brand identity
could be negatively impacted.

Government Regulation

Currently, we are not subject to regulations specific to the sale and distribution of cinema advertising. We are subject to
federal, state and local laws that govern businesses generally such as wage and hour and worker compensation laws as well as
federal and state privacy, information security and consumer protection-related laws and regulations.

Available Information

We maintain a website at www.ncm.com, on which we will post free of charge our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports under the heading “Investor
Relations” located at the bottom of the home page after we electronically file such material with, or furnish it to, the Securities
and Exchange Commission (the “SEC”). We also regularly post information about the Company on the Investor Relations
page. We do not incorporate the information on our website into this document and you should not consider any information
on, or that can be accessed through, our website as part of this document. The SEC also maintains a website that contains our
reports and other information at www.sec.gov.

Item 1A.

Risk Factors

Ownership of the common stock and other securities of the Company involves certain risks. Holders of the Company’s

securities and prospective investors should consider carefully the following material risks and other information in this
document, including our historical financial statements and related notes included herein. The material risks and uncertainties
described in this document are not the only ones facing us. If any of the risks and uncertainties described in this document
actually occur, our business, financial condition and results of operations could be adversely affected in a material way. This
could cause the trading price of our common stock to decline, perhaps significantly, and you may lose part or all of your
investment.

Risks Related to Our Business and Industry

Significant declines in theater attendance could reduce the attractiveness of cinema advertising and could reduce our
revenue

Our business is affected by the level of attendance at the founding members’ theaters and to a lesser extent our network
affiliates, who operate in a highly competitive industry and whose attendance is reliant on the presence of motion pictures that
attract audiences. Over the last 10 years, theater attendance has fluctuated from year to year but on average has remained
relatively flat. The value of our advertising business could be adversely affected by a decline in theater attendance or even the
perception by media buyers that our network is no longer relevant to their marketing plan due to the decreases in attendance
and geographic coverage. Factors that could reduce attendance at our network theaters include the following:

•

•
•

•

if NCM LLC’s network theater circuits cannot compete with other out-of-home entertainment due to an increase in the
use of alternative film delivery methods (and the shortening of the “release window” between the release of major
motion pictures to the alternative delivery methods), including network, video streaming and downloads via the
Internet;
theater circuits in NCM LLC’s network continue to renovate auditoriums in certain of their theaters to install new
larger, more comfortable seating, which reduces the number of seats in a theater auditorium. This renovation has been
viewed favorably by patrons and many theater circuits have noted an intent to continue such renovations;
changes in theater operating policies, including the number and length of trailers for upcoming films that are played
prior to the start of the feature film, which if the length of trailers increases, may result in most or all of the Noovie
pre-show starting further out from the actual start of the feature film;
any reduction in consumer confidence or disposable income in general that reduces the demand for motion pictures or
adversely affects the motion picture production industry;
the success of first-run motion pictures, which depends upon the production and marketing efforts of the major studios
and the attractiveness and value proposition of the movies to consumers compared to other forms of entertainment;
if the theaters in our network fail to maintain their theaters and provide amenities that consumers prefer;
if studios begin to reduce the number of feature films produced for theater exhibition and their investments in those
films or reduce the investments made to market those films;
if future theater attendance declines significantly over an extended time period, one or more of the founding members
or network affiliates may face financial difficulties and could be forced to sell or close theaters or reduce the number
of screens it builds or upgrades or increase ticket prices; and

• NCM LLC’s network theater circuits also may not successfully compete for licenses to exhibit quality films and are
not assured a consistent supply of motion pictures if they do not have long-term arrangements with major film
distributors.

Any of these circumstances could reduce our revenue because our national and regional advertising revenue, and local
advertising to a lesser extent, depends on the number of theater patrons who attend movies. Additionally, if attendance declines
significantly, the Company will be required to provide additional advertising time (makegoods) to national advertisers to reach
agreed-on audience delivery thresholds. Certain of these circumstances can also lead to volatility within our utilization. We
have also experienced volatility in our utilization over the years, with annual national inventory utilization ranging from
113.5% to 128.3% from 2015 through 2019. We experience even more substantial volatility quarter-to-quarter.

Changes in theater patron behavior could result in declines in the viewership of our Noovie pre-show which could

reduce the attractiveness of cinema advertising and our revenues.

The value of our national and regional on-screen advertising and to a lesser extent our local advertising is based on the
number of theater patrons that are in their seats and thus have the opportunity to view the Noovie pre-show. Trends in patron
behavior that could reduce viewership of our Noovie pre-show include the following:

•

theater patrons are increasingly purchasing tickets ahead of time via on-line ticketing mediums and when available
reserving a seat in the theater (offered in approximately 84.9% of our network as of December 26, 2019), which could
affect how early patrons arrive to the theater and reduce the number of patrons that are in a theater seat to view most
or all of the Noovie pre-show; and
changes in theater patron amenities, including, online ticketing, bars and entertainment within exhibitor lobbies
causing increased dwell time of patrons.

National advertising sales and rates are dependent on the methodology used to measure audience impressions. If a change
is made to this methodology that reflects fewer audience impressions available during the pre-show, this could adversely affect
the Company’s revenue and results of operations.

We may not realize the anticipated benefits of the 2019 ESA Amendments.

On September 17, 2019, NCM LLC entered into the 2019 ESA Amendments with affiliates of each of Cinemark and
Regal. Among other things, the 2019 ESA Amendments provide that, beginning November 1, 2019, NCM LLC is entitled to
display up to five minutes of the Noovie pre-show after the scheduled showtime of a feature film and a Platinum Spot that is
either 30 or 60 seconds of the Noovie pre-show in the trailer position directly prior to the “attached” trailers preceding the
feature film.

We expect the 2019 ESA Amendments to result in an increase in average CPM, revenues and Adjusted OIBDA, however

we may not realize any or all such benefits. Potential difficulties and uncertainties that may impair the full realization of the
anticipated benefits include, among others:

•

the behavior of theater patrons may change in response to the display of a portion of the Noovie pre-show after the
advertised showtime, or in response to the combination of advertising and trailers before the start of the feature film,
resulting in a reduction to the number of patrons that are in a theater seat to view most or all of the Noovie pre-show;
exhibitors may encounter issues in displaying a portion of the Noovie pre-show after the advertised showtime because
of technical issues, access issues with their content providers, or other issues that may arise in the future;
potential advertisers may not view the Post-Showtime Inventory as attractive due to inability to run across our entire
network or view it as a premium advertising opportunity and the average CPMs for the Noovie pre-show may not
increase as much as anticipated, or at all;

• NCM LLC may not satisfy the minimum average CPM which is required by the 2019 ESA Amendments for it to have

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the right to display the Platinum Spot for more than one concurrent advertiser;
the extended length of time between the advertised showtime and the beginning of the feature film may decrease the
average CPM for that portion of the Noovie pre-show appearing before the advertised showtime, which may partially
or fully offset any increase in average CPM for the Post-Showtime Inventory; and
the increased theater access fees payable to Cinemark and Regal in connection with the Post-Showtime Inventory and
revenue share applicable to the Platinum Spot may exceed the increase, if any, in revenue resulting from the 2019 ESA
Amendments.

The anticipated benefits we expect to receive as a result of the 2019 ESA Amendments are subject to factors that we do not

and cannot control. Failure to realize the anticipated benefits could result in decreases in revenue and Adjusted OIBDA and
diversion of management’s time and energy, and could adversely affect our business, financial condition and operating results.

We may not be successful in increasing the number of theaters in which NCM LLC has the right to display Post-

Showtime Inventory.

As a result of the 2019 ESA Amendments, NCM LLC is entitled to display up to five minutes of the Noovie pre-show after

the scheduled showtime of a feature film and a Platinum Spot that is either 30 or 60 seconds of the Noovie pre-show in the
trailer position directly prior to the “attached” trailers preceding the feature film. However, at this time NCM LLC is only
displaying Post-Showtime Inventory in Cinemark and Regal operated theaters, which constituted approximately 54.0% of the
attendance in our network as of December 26, 2019. We have entered into agreements to provide similar access to inventory as
the 2019 ESA Amendments with ten of our other current network affiliates, and we expect that the inventory will begin to be
displayed in these network affiliates theaters throughout 2020.

While we intend to seek to enter into agreements that provide similar access to inventory as the 2019 ESA Amendments

with more of our current network affiliates and other potential network affiliates, there can be no assurance that we will be
successful in increasing either the number of theaters of current network affiliates or potential network affiliates in which NCM
LLC has the right to display advertising, including Post-Showtime Inventory. AMC, which constituted approximately 28.9% of
the attendance in our network as of December 26, 2019, has announced that it has no plans to introduce commercial advertising
close to the start of a feature film’s commencement. In addition, any agreements with other network affiliates or new network
affiliates may be on terms less favorable to us than the current network affiliate agreements and the 2019 ESA Amendments. If
we are unable to expand the number of theaters displaying our advertising, including the Post-Showtime Inventory, we will be
limited to only experiencing the benefit of our advertising in our current theaters and our post-showtime advertising, if any, in
Cinemark, Regal and participating affiliate theaters.

Changes in the ESAs with, or lack of support by, the founding members could adversely affect our revenue, growth and

profitability.

The ESAs with the founding members are critical to our business. The ESA with AMC has an initial term of 30 years and

the ESAs with each of Cinemark and Regal (as amended by the 2019 ESA Amendments) have a term of 34 years, each such
term beginning February 13, 2007. Each ESA provides NCM LLC with a five-year right of first refusal for the services that it
provides to the founding members, which begins one year prior to the end of the term of each respective ESA. The founding
members’ theaters represent approximately 79.6% of the screens and approximately 82.9% of the attendance in our network as
of December 26, 2019. If any one of the ESAs was terminated, not renewed at its expiration or found to be unenforceable, it
would have a material adverse effect on our revenue, profitability and financial condition.

The ESAs require the continuing cooperation, investment and support of the founding members, the absence of which
could adversely affect us. Pursuant to the ESAs, the founding members must make investments to replace digital network
equipment within their theaters and equip newly constructed theaters with digital network equipment. If the founding members
do not have adequate financial resources or operational strength, and if they do not replace equipment or equip new theaters to
maintain the level of operating functionality that we have today, or if such equipment becomes obsolete, we may have to make
additional capital expenditures or our advertising revenue and operating margins may decline. In addition, the ESAs give the

founding members the right to object to certain content in our Noovie pre-show, including content that competes with us or the
applicable founding member. If the founding members do not agree with our decisions on what content, strategic program or
partnerships are permitted under the ESAs, we may lose clients and the resulting revenue, which would harm our business. On
October 24, 2019, AMC redeemed 197,118 membership units, which were issued to AMC in March 2019 in accordance with
the terms of the common unit adjustment agreement with the founding members, in exchange for shares of our common stock.
AMC is eligible to be issued additional shares pursuant to the terms of the common unit adjustment agreement. We are
uncertain how AMC’s lack of ownership interest in NCM LLC may affect its cooperation with us under its ESA or otherwise
going forward.

Our plans for developing additional digital revenue opportunities may not be implemented and may not be achieved.

We have invested significant resources in pursuing potential opportunities for revenue growth, which we describe in this
annual report on Form 10-K under “Business-Our strategy.” We had 27.2 million and 106.5 million first- and second-party data
sets as of December 27, 2018 and December 26, 2019, respectively. These valuable data sets consist of both our own NCM
first-party data from our owned-and-operated digital products, and a variety of key second-party data addressable consumer
records, including location-based data that allows us to track when our audiences go to the movie theater to see our Noovie pre-
show and where they go in the days and weeks afterwards. Our ability to increase our first- and second-party data sets requires
us to invest in third-party relationships and develop innovative digital properties that will increase the number of users of our
online and mobile advertising network and mobile apps. Our ability to collect and leverage first and second party movie
audience data remains at an early stage, is under increasing competitive pressure and may not deliver the future benefits that we
are expecting. It is important that we achieve a critical mass of audience data to make our digital offering more attractive to
advertisers, including national brands who buy both our national and regional advertising inventory. If we are unable to execute
on products relevant to the marketplace or integrate these digital marketing products with our core on-screen and theater lobby
products, and if these offerings do not continue to provide relevant data or to grow in importance to advertising clients and
agencies, they may not provide a way to help expand our cinema advertising business as it matures and begins to compete with
new or improved advertising platforms including online and mobile video services. As such, there can be no assurance that we
will recoup our investments made pursuing additional revenue opportunities.

The markets for advertising are competitive and we may be unable to compete successfully.

The market for advertising is very competitive. Cinema advertising is a small component of video advertising in the U.S.

and thus, we must compete with established, larger and better known national and local media platforms such as cable,
broadcast and satellite television networks and other video media platforms including those distributed on the internet and
mobile networks. In addition to these video advertising platforms, we compete for advertising directly with several additional
media platforms, including radio, various local print media and billboards, and online and mobile advertising. We also compete
with several other local and national cinema advertising companies. We expect all of these competitors to devote significant
effort to maintaining and growing their business at our expense. We also expect existing competitors and new entrants to the
advertising business, most notably the online and mobile advertising companies and video media platforms distributed on the
internet and mobile networks, to constantly revise and improve their business models to meet expectations of advertising
clients. In addition, the pricing and volume of advertising may be affected by shifts in spending toward online and mobile
offerings from more traditional media, or toward new ways of purchasing advertising, such as through automated purchasing,
dynamic advertising insertion, third parties selling local advertising posts and advertising exchanges, some or all of which may
not be as advantageous to the Company as current advertising methods. Expenditures by advertisers tend to be cyclical,
reflecting overall economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of
advertisers, industries, such as retail or consumer products, or the economy in general could alter current or prospective
advertisers’ spending priorities. If we cannot respond effectively to changes in the media marketplace, changes in the
advertising market, new entrants or advances by our existing competitors, our business may be adversely affected.

Additionally, the mix of film ratings of the available motion pictures, such as a higher proportion of G and PG rated films,

could cause advertisers to reduce their spending with us as the theater patrons for these films may not represent those
advertisers’ target markets.

Advertising demand also impacts the price (CPM) we are able to charge our clients. Due to increased competition from
other national video networks, including online and mobile advertising platforms, television networks and other out-of-home
video, combined with seasonal marketplace supply and demand characteristics, we have experienced volatility in our pricing
(CPMs) over the years, with annual national CPM increases (decreases) ranging from (4.2%) to 9.7% from 2015 to 2019.

If we do not continue to upgrade our technology, our business could fail to grow and revenue and operating margins

could decline.

Failure to successfully or cost-effectively implement upgrades to our in-theater advertising network and proposal and
inventory control, audience targeting and other management systems could limit our ability to offer our clients innovative
unique, integrated and targeted marketing products, which could limit our future revenue growth. New advertising platforms
such as online and mobile networks, and traditional mediums including television networks are beginning to use new digital
technology to reach a broader audience with more targeted marketing products, and failure by us to upgrade our technology
could hurt our ability to compete with those companies. Under the ESAs, the founding members are required to provide
technology that is consistent with that in place at the signing of the ESA. We may request that the founding members upgrade
the equipment or software installed in their theaters, but we must negotiate with the founding members as to the terms of such
upgrade, including cost sharing terms, if any. If we are not able to come to an agreement on a future upgrade request, we may
elect to pay for the upgrades requested which could result in our incurring significant capital expenditures, which could
adversely affect our results.

We also have many internally developed systems which support our operations due to the unique nature of our business

model. The failure to continue to develop or the failure of the system to meet our needs may require us to make significant
additional investments in our infrastructure or seek alternative technology which may impact our costs and prevent our growth.
In order to address this risk, we expect to implement a new licensed sales planning, proposal and inventory tracking system in
2021 which will replace many of our internally developed systems and house the end to end sales process from proposal to
inventory delivery. We expect that the system will achieve a more seamless digital buying experience required by today's media
buyers and solve the speed-to-market friction issues associated with our cinema product. The system will also interface with
our accounting system thus driving client invoicing and revenue recognition. Given the pervasive impact of this new system on
the Company's processes, the failure or delay in implementation of the system or problems with the integration with our other
systems and software could cause operational difficulties and slow or prevent the growth of our business in the future. In
addition, the failure or delay in implementation of such upgrades or problems with the integration of our systems and software
could slow or prevent the growth of our business. Also, as we continue to move our technology to cloud based SaaS platforms,
we will continue to reduce our annual capital expenditure spending. However, operating expenses associated with the SaaS
licenses will increase and the costs of implementing this system and the related ongoing service costs may exceed our current
estimates. Certain implementation costs of our SaaS platforms are capitalized during the implementation period and expensed
to operating income over the term of the SaaS contract.

Economic uncertainty or deterioration in economic conditions may adversely impact our business, operating results or

financial condition.

The financial markets have experienced extreme disruption and volatility at times. A decline in consumer spending in the
U.S. may lead to decreased demand for our services or delay in payments by our advertising clients. As a result, our results of
operations and financial condition could be adversely affected. These challenging economic conditions also may result in:

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increased competition for fewer advertising and entertainment programming dollars;
pricing pressure that may adversely affect revenue and gross margin;
declining attendance and thus a decline in the impressions available for our pre-show;
reduced credit availability and/or access to capital markets;
difficulty forecasting, budgeting and planning due to limited visibility into the spending plans of current or prospective
clients; or
client financial difficulty and increased risk of uncollectible accounts.

Our Adjusted OIBDA is derived from high margin advertising revenue. The reduction in spending by or loss of a
national or group of local advertisers or failure to grow our advertising revenue in line with the growth of our contractual
costs could have a meaningful adverse effect on our business.

We generate all of our operating income and Adjusted OIBDA from our high margin advertising business. Advertisers will
not continue to do business with us if they believe our advertising medium is ineffective or overly expensive. In addition, large
advertisers generally have set advertising budgets, most of which are focused on online and mobile networks and traditional
media platforms like television. Reductions in the size of advertisers’ budgets due to local or national economic trends, a shift
in spending to advertising mediums like the internet and mobile platforms or other factors could result in lower spending on
cinema advertising. Advertisers are spending in the scatter market closer to the start date of their advertising campaign. A
substantial portion of our advertising revenue relates to contracts with terms of a month or less, and clients have many video
media choices and can adjust where ads are placed up until their airdates without the risk of securing desired impressions. We
have been successful in increasing the dollar value of upfront advertising agreements, but as advertising spending shifts in the
20

scatter market closer to the start date of advertising campaigns, our ability to maintain high CPMs in the upfront markets may
decrease. Because of the high incremental margins on our individual advertising contracts, if we are unable to remain
competitive and provide value to our advertising clients, they may reduce their advertising purchases or stop placing
advertisements with us. Even the loss of a small number of clients on large contracts would negatively affect our results.

In addition, the ESAs and certain of our network affiliate agreements include automatic annual cost or fee increases. The

theater access fees under the ESAs are composed of a fixed payment per patron, increasing by 8% every five years, and a fixed
payment per digital screen connected to the DCN, increases annually by 5%. The digital screen fees may exceed the traditional
theater access fees in the future because of the higher rate of growth of the digital screen fees. In addition, pursuant to the 2019
ESA Amendments, we have agreed to pay a fixed payment per patron in consideration for NCM LLC’s access to certain on-
screen advertising inventory after the advertised showtime of a feature film, which amount will increase by fixed amounts until
November 1, 2022 and then increase by 8% every five years beginning November 1, 2027. If we are unable to grow our high
margin advertising revenue at a rate at least equal to that of our contractual obligations, our margins and results would be
negatively affected.

The loss of any major content partner or advertising client could significantly reduce our revenue.

We derive a significant portion of our revenue from our contracts with our content partners, PSAs and NCM LLC’s
founding members’ agreements to purchase on-screen advertising for their beverage concessionaires. We are not direct parties
to the agreements between the founding members’ and their beverage concessionaires but expect that each founding member
will have an agreement with a beverage concessionaire to provide advertising for the foreseeable future. None of these
companies individually accounted for over 10% of our total revenue during the year ended December 26, 2019. However, the
agreements with the content partners, PSAs and beverage advertising with the founding members in aggregate accounted for
approximately 23% and 26% of our total revenue during the years ended December 26, 2019 and December 27, 2018,
respectively. Because we derive a significant percentage of our total revenue from a relatively small number of large
companies, the loss of one or more of them as a customer could decrease our revenue and adversely affect current and future
operating results.

The ESAs allow the founding members to engage in activities that might compete with certain elements of our business,

which could reduce our revenue and growth potential.

The ESAs contain certain limited exceptions to our exclusive right to use the founding members’ theaters for our
advertising business. The founding members have the right to enter into a limited number of strategic cross-marketing
relationships with third-party, unaffiliated businesses for the purpose of generating increased attendance or revenue (other than
revenue from the sale of advertising). These strategic marketing relationships can include the use of one minute on the LEN
per 30-minute cycle and certain types of lobby promotions and can be provided at no cost, but only for the purpose of
promoting the products or services of those businesses while at the same time promoting the theater circuit or the movie-going
experience. The use of LEN or lobby promotions by the founding members for these advertisements and programs could result
in the founding members creating relationships with advertisers that could adversely affect our current LEN and lobby
promotions advertising revenue and profitability, as well as the potential we have to grow that advertising revenue in the future.
The LEN and lobby promotions represented approximately 4.7% of our total advertising revenue for the year ended
December 26, 2019. The founding members do not have the right to use their movie screens (including the Noovie pre-show or
otherwise) for promoting these cross-marketing relationships, and thus we will have the exclusive rights to advertise on the
movie screens, except for limited advertising related to theater operations.

The founding members also have the right to install a second network of video monitors in the theater lobbies in excess of
those required to be installed for the LEN, and the founding members have exercised this right to install a significant number of
video monitors in their theater lobbies. This additional lobby video network, which we refer to as the founding members’ lobby
network, may be used by the founding members to promote products or services related to operating the theaters, such as
concessions, bars and dining operations, online ticketing partner promotions, gift card and loyalty programs, and special events.
The presence of the founding members’ lobby network within the lobby areas could reduce the effectiveness of our LEN,
thereby reducing our current LEN advertising revenue and profitability and adversely affecting future revenue potential
associated with that marketing platform.

We depend upon our senior management and our business may be adversely affected if we cannot retain or replace

them.

Our success depends in part upon the retention of our experienced senior management with specialized industry, sales and

technical knowledge and/or industry relationships. In November 2018, our Chief Executive Officer stepped down and a new
Chief Executive Officer was appointed in August 2019. Our Chief Financial Officer will retire following the later of March 12,

2020 or the filing of this annual report on Form 10-K. The Company has engaged a national search firm and is in the process of
identifying a new Chief Financial Officer. If we are not able to find qualified internal or external replacements for critical
members of our senior management team, the loss of these key employees could have a material adverse effect on our ability to
effectively pursue our business strategy and our relationships with advertisers and content partners. We do not have key-man
life insurance covering any of our employees.

If the non-competition provisions of the ESAs are deemed unenforceable, the founding members could compete against

us and our business could be adversely affected.

With certain limited exceptions, each of the ESAs prohibits the applicable founding member from engaging in any of the
business activities that we provide in the founding member’s theaters under the amended ESAs, and from owning interests in
other entities that compete with us. These provisions are intended to prevent the founding members from harming our business
by providing cinema advertising services directly to their theaters or by entering into agreements with third-party cinema
advertising providers. However, under state and federal law, a court may determine that a non-competition covenant is
unenforceable, in whole or in part, for reasons including, but not limited to, the court’s determination that the covenant:

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is not necessary to protect a legitimate business interest of the party seeking enforcement;
unreasonably restrains the party against whom enforcement is sought; or
is contrary to the public interest.

Enforceability of a non-competition covenant is determined by a court based on all of the facts and circumstances of the

specific case at the time enforcement is sought. For this reason, it is not possible for us to predict whether, or to what extent, a
court would enforce the non-competition provisions contained in the ESAs. If a court were to determine that the non-
competition provisions are unenforceable, the founding members could compete directly against us or enter into an agreement
with another cinema advertising provider that competes against us. Any inability to enforce the non-competition provisions, in
whole or in part, could cause our revenue to decline.

If one of the founding members declared bankruptcy, the ESA with that founding member may be rejected, renegotiated

or deemed unenforceable.

Each of the founding members currently has a significant amount of indebtedness. In 2000 and 2001, several major motion

picture exhibition companies filed for bankruptcy including United Artists, Edwards Theatres and Regal Cinemas (which are
part of Regal), and General Cinemas and Loews Cineplex (which are part of AMC). The industry-wide construction of larger,
more expensive megaplexes featuring stadium seating in the late 1990s that rendered existing, smaller, sloped-floor theaters
under long-term leases obsolete and unprofitable, were significant contributing factors to these bankruptcies. If a bankruptcy
case were commenced by or against a founding member, it is possible that all or part of the ESA with that founding member
could be rejected by a trustee in the bankruptcy case pursuant to Section 365 or Section 1123 of the United States Bankruptcy
Code, or by the founding member, and thus not be enforceable. Alternatively, the founding member could seek to renegotiate
the ESA in a manner less favorable to us than the existing agreement. Should the founding member seek to sell or otherwise
dispose of theaters or remove theaters from our network through bankruptcy or for other business reasons, if the acquirer did
not agree to continue to allow us to sell advertising in the acquired theaters the number of theaters in our advertising networks
would be reduced which in turn would reduce the number of advertising impressions available to us and thus could reduce our
advertising revenue.

The founding members and our network affiliates are subject to substantial government regulation, which could slow

their future growth of locations and screens and in turn slow our growth prospects.

The founding members and our network affiliates are subject to various federal, state and local laws, regulations and
administrative practices affecting their movie theater business, including provisions regulating antitrust, health and sanitation
standards, access for those with disabilities, environmental, and licensing. Some of these laws and regulations also apply
directly to us and NCM LLC. Changes in existing laws or implementation of new laws, regulations and practices could have a
significant impact on the founding members, our network affiliates’ and our respective businesses. For example, to the extent
that antitrust laws, regulation and enforcement policy restrict the ability of the founding members or the network affiliates to
acquire additional theaters, it may slow the future growth of those founding members or network affiliates and in turn the
growth of our network.

We may be unable to effectively manage changes to our business strategy to continue the growth of our advertising

inventory and network.

If we do not effectively implement the changes within our strategy, we may not be able to continue our historical growth.

To effectively execute on our strategy to expand our digital offerings and continue to grow our inventory, we will need to

develop additional products. These enhancements and improvements could require an additional allocation of financial and
management resources and acquisition of talent. High turnover, loss of specialized talent or insufficient capital could also place
significant demands on management, the success of the organization, and our strategic outlook.

The amount of inventory we have to sell is limited by the length of the Noovie pre-show. In order to maintain in-theater
growth we will need to expand the number of theaters and screens in our network. Considering our current market share, we
may not be able to continue to expand our network which could negatively affect our ability to add new advertising clients. If
we are unable to maintain the size of our network, or grow our network, our revenue and operating results could be adversely
impacted.

Our business relies heavily on our technology systems, and any failures or disruptions may materially and adversely

affect our operations.

In order to conduct our business, we rely on information technology networks and systems, some of which are managed by

third parties, to process, transmit and store electronic information and manage and support a variety of business processes and
activities. The temporary or permanent loss of our computer equipment, audience data or software systems through cyber and
other security threats, termination of a material technology license or contract, operating malfunction, software virus, human
error, natural disaster, power loss, terrorist attacks or other catastrophic events could disrupt our operations and cause a material
adverse impact. These problems may arise in both internally developed systems and the systems of third-party service
providers. We devote significant resources to maintaining a disaster recovery location separate from our operations, network
security and other measures to protect our network from unauthorized access and misuse. However, depending on the nature
and scope of a disruption, if our technology systems were to fail and we were unable to recover in a timely way through our
disaster recovery site, we would be unable to fulfill critical business functions, which could lead to a loss of clients and could
harm our reputation. Technological breakdown could also interfere with our ability to comply with financial reporting and other
regulatory requirements.

Our business, services, or technology may infringe on intellectual property rights owned by others, which may interfere

with our ability to provide services or expose us to increased liability or expense.

Intellectual property rights of our business include the copyrights, trademarks, trade secrets and patents of our in-theater,

online, and mobile services, including the websites we operate at ncm.com and Noovie.com, our digital gaming products
including Noovie Arcade, Fantasy Movie League, Name That Movie and Noovie Shuffle, and the features and functionality,
content, and software we make available through those websites and apps. We rely on our own intellectual property rights as
well as intellectual property rights obtained from third parties to conduct our business and provide our in-theater, online, and
mobile services. We may discover that our business or the technology we use to provide our in-theater, online, or mobile
services infringes patent, copyright, or other intellectual property rights owned by others. In addition, our competitors or others
may claim rights in patents, copyrights, or other intellectual property rights that will prevent, limit or interfere with our ability
to provide our in-theater, online, or mobile services either in the U.S. or in international markets. Further, the laws of certain
foreign countries may not protect our intellectual property rights to the same extent as do the laws of the U.S.

The content we distribute through our in-theater, online or mobile services may expose us to liability.

Our in-theater, online, and mobile services facilitate the distribution of content. This content includes advertising-related
content, as well as movie, television, music, gaming and other media content, much of which is obtained from third parties. Our
websites and social media channels also include features enabling users to upload or add their own content to the websites and
modify certain content on the websites. As a distributor of content, we face potential liability for negligence, copyright, patent
or trademark infringement, or other claims based on the content that we distribute. We or entities that we license content from
may not be adequately insured or indemnified to cover claims of these types or liability that may be imposed on us.

The user information we collect and maintain through our online and mobile services may expose us to liability.

In order to take advantage of some of the online and mobile services we provide, users may, now or in the future, be
required to establish an account on one of our websites. As a result, we may collect and maintain personal information about
those users. We also may, now or in the future, collect and maintain information about users who view certain advertising
displayed through our online and mobile services and users who enter the theaters in our network. The collection and use of this
information is governed by applicable privacy, information security and consumer protection-related laws and regulations.
These laws continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and
regulations may increase our operating costs and adversely impact our ability to interact with users of our online and mobile
services. Our collection and use of information, including personal information, regarding users of our online and mobile
services could result in legal liability. For example, the failure, or perceived failure, to comply with applicable privacy

information security or consumer protection-related laws or regulations or our posted privacy policies could result in actions
against us by governmental entities or others. If an actual or perceived breach of our data occurs, the market perception of the
effectiveness of our security measures could be harmed, and we could lose users of these services and the associated benefits
from gathering such user data.

Changes in regulations relating to the Internet or other areas of our online or mobile services may result in the need to

alter our business practices or incur greater operating expenses.

A number of regulations, including those referenced below, may impact our business as a result of our online or mobile
services. The Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, liability for posting,
or linking to third-party websites that include materials that infringe copyrights or other rights. Portions of the
Communications Decency Act are intended to provide statutory protections to online service providers who distribute third-
party content. The Child Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of
materials considered harmful to children and impose additional restrictions on the ability of online services to collect
information from minors. The California Consumer Protection Act and other privacy laws give residents of certain states
additional rights with regards to their personal information. The costs of compliance with these regulations, and other
regulations relating to our online and mobile services or other areas of our business, may be significant. The manner in which
these and other regulations may be interpreted or enforced may subject us to potential liability, which in turn could have an
adverse effect on our business, results of operations, or financial condition. Changes to these and other regulations may impose
additional burdens on us or otherwise adversely affect our business and financial results because of, for example, increased
costs relating to legal compliance, defense against adverse claims or damages, or the reduction or elimination of features,
functionality or content from our online or mobile services. Likewise, any failure on our part to comply with these and other
regulations may subject us to additional liabilities.

Our revenue and Adjusted OIBDA fluctuate from quarter to quarter and may be unpredictable, which could increase

the volatility of our stock price.

A weak advertising market or the shift in spending of a major client from one quarter to another, the performance of films

released in a given quarter, a disruption in the release schedule of films or changes in the television scatter market could
significantly affect quarter-to-quarter results or even affect results for the entire fiscal year. In addition, our revenue and
operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our advertising clients and, to
a lesser extent, the attendance patterns within the film exhibition industry. Advertising expenditures tend be higher during the
second, third, and fourth fiscal quarters. Because our results may vary from quarter to quarter and may be unpredictable, our
financial results for one quarter cannot necessarily be compared to another quarter or the same quarter in prior years and may
not be indicative of our financial performance in subsequent quarters. These variations in our financial results could contribute
to volatility in our stock price.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud, and as a result, stockholders could lose confidence in our financial and other
public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together
with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required controls, or
difficulties encountered in implementing new or improved controls, could cause us to fail to meet our reporting obligations. In
addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by
our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence
in our reported financial information, which could have a negative effect on the trading price of our common stock.

Risks Related to Our Corporate Structure

We are a holding company with no operations of our own, and we depend on distributions and payments under the
NCM LLC operating and management services agreements from NCM LLC to meet our ongoing obligations and to pay
cash dividends on our common stock.

We are a holding company with no operations of our own and have no independent ability to generate cash flow other than
interest income on cash balances. Consequently, our ability to obtain operating funds primarily depends upon distributions from
NCM LLC. The distribution of cash flows and other transfers of funds by NCM LLC to us are subject to statutory and
contractual restrictions based upon NCM LLC’s financial performance, including NCM LLC’s compliance with the covenants

in its senior secured credit facility and indentures, and the NCM LLC operating agreement. The NCM LLC senior secured
credit facility and indentures limit NCM LLC’s ability to distribute cash to its members, including us, based upon certain
leverage tests, with exceptions for, among other things, payment of our income taxes and a management fee to NCM, Inc.
pursuant to the terms of the management services agreement (incorporated in the ESA). Refer to the information provided
under Note 10 to the audited Condensed Consolidated Financial Statements included elsewhere in this document for leverage
discussion. The declaration of future dividends on our common stock will be at the discretion of our Board of Directors and
will depend upon many factors, including NCM LLC’s results of operations, financial condition, earnings, capital requirements,
limitations in NCM LLC’s debt agreements and legal requirements. In the event NCM LLC fails to comply with these
covenants and is unable to distribute cash to us quarterly, once NCM, Inc. cash balances and investments are extinguished, we
will be unable to pay dividends to our stockholders or pay other expenses outside the ordinary course of business.

Pursuant to the management services agreement between us and NCM LLC, NCM LLC makes payments to us to fund our

day-to-day operating expenses, such as payroll. However, if NCM LLC has insufficient cash flow to make the payments
pursuant to the management services agreement, we may be unable to cover these expenses.

As a member of NCM LLC, we incur income taxes on our proportionate share of any net taxable income of NCM LLC.

We have structured the NCM LLC senior secured credit facility and indentures to allow NCM LLC to distribute cash to its
members (including us and NCM LLC’s other members) in amounts sufficient to cover their tax liabilities and management
fees, if any. To the extent that NCM LLC has insufficient cash flow to make such payments, it could have a material adverse
effect on our business, financial condition, results of operations or prospects.

NCM LLC’s substantial debt obligations could impair our financial condition or prevent us from achieving our

business goals.

NCM LLC is party to substantial debt obligations. The senior secured credit facility and indentures contain restrictive
covenants that limit NCM LLC’s ability to take specified actions and prescribe minimum financial maintenance requirements
that NCM LLC must meet. Because NCM LLC is our only operating subsidiary, complying with these restrictions may prevent
NCM LLC from taking actions that we believe would help us to grow our business. For example, NCM LLC may be unable to
make acquisitions, investments or capital expenditures as a result of such covenants. Moreover, if NCM LLC violates those
restrictive covenants or fails to meet the minimum financial requirements, it would be in default, which could, in turn, result in
defaults under other obligations of NCM LLC. Any such defaults could materially impair our financial condition and liquidity.
For further information, refer to Note 10 to the audited Condensed Consolidated Financial Statements included elsewhere in
this document.

If NCM LLC is unable to meet its debt service obligations, it could be forced to restructure or refinance the obligations,
seek additional equity financing or sell assets. NCM LLC may be unable to restructure or refinance these obligations, obtain
additional equity financing, sell assets on satisfactory terms or at all or make cash distributions. In addition, NCM LLC’s
indebtedness could have other negative consequences for us, including without limitation:

•
•

•

limiting NCM LLC’s ability to obtain financing in the future;
requiring much of NCM LLC's cash flow to be dedicated to interest obligations and making it unavailable for other
purposes, including payments to its members (including NCM, Inc.);
limiting NCM LLC’s liquidity and operational flexibility in changing economic, business and competitive conditions
which could require NCM LLC to consider deferring planned capital expenditures, reducing discretionary spending,
selling assets, restructuring existing debt or deferring acquisitions or other strategic opportunities; and

• making NCM LLC more vulnerable to an increase in interest rates, a downturn in operating performance or decline in

general economic conditions.

Despite NCM LLC’s current levels of debt, it, or NCM, Inc. may still incur substantially more debt, including secured

debt, which would increase the risks associated with NCM LLC’s level of debt

The agreements relating to NCM LLC’s debt, including the Notes due 2026 and Notes due 2028 and the senior secured
credit facility, limit but do not prohibit NCM LLC’s ability to incur additional debt, and do not place any restrictions on NCM,
Inc.’s ability to incur debt. Accordingly, NCM, Inc. or NCM LLC could incur additional debt in the future, including additional
debt under the senior secured credit facility, additional senior or senior subordinated notes and additional secured debt. If new
debt is added to current debt levels, the related risks that we now face, including those described above under “NCM LLC’s
substantial debt obligations could impair our financial condition or prevent us from achieving our business goals,” could
intensify.

NCM LLC’s other founding members or their affiliates may have interests that differ from those of our public

stockholders and they may be able to influence our affairs.

So long as either Cinemark or Regal owns at least 5% of NCM LLC’s issued and outstanding common membership units,

if the two directors appointed by Cinemark or the two directors appointed by Regal to our Board of Directors (except that if
either Cinemark or Regal has only appointed one director, and such director qualifies as an “independent director” under the
applicable rules of the Nasdaq Stock Market LLC, then such director) vote against any of the corporate actions listed below, we
and NCM LLC will be prohibited from taking any such actions:

•

assign, transfer, sell or pledge all or a portion of the membership units of NCM LLC beneficially owned by NCM,
Inc.;
acquire, dispose, lease or license assets with an aggregate value exceeding 20% of the fair market value of the
business of NCM LLC operating as a going concern;

• merge, reorganize, recapitalize, reclassify, consolidate, dissolve, liquidate or enter into a similar transaction;
•

incur any funded indebtedness or repay, before due, any funded indebtedness with a fixed term in an aggregate amount
in excess of $15.0 million per year;
issue, grant or sell shares of NCM, Inc. common stock, preferred stock or rights with respect to common or preferred
stock, or NCM LLC membership units or rights with respect to membership units, except under specified
circumstances;
amend, modify, restate or repeal any provision of NCM, Inc.’s certificate of incorporation or bylaws or the NCM LLC
operating agreement;
enter into, modify or terminate certain material contracts not in the ordinary course of business as defined under
applicable securities laws;
except as specifically set forth in the NCM LLC operating agreement, declare, set aside or pay any redemption of, or
dividends with respect to membership interests;
amend any material terms or provisions (as defined in the Nasdaq rules) of NCM, Inc.’s equity incentive plan or enter
into any new equity incentive compensation plan;

•

• make any change in the current business purpose of NCM, Inc. to serve solely as the manager of NCM LLC or any

•

change in the current business purpose of NCM LLC to provide the services as set forth in the ESAs; and
approve any actions relating to NCM LLC that could reasonably be expected to have a material adverse tax effect on
NCM LLC’s founding members.

Pursuant to a director designation agreement, so long as Cinemark or Regal owns at least 5% of NCM LLC’s issued and

outstanding common membership units, such NCM LLC founding member will have the right to designate a total of two
nominees to our Board of Directors who will be voted upon by our stockholders. One such designee by each of Cinemark and
Regal must meet the independence requirements of the stock exchange on which our common stock is listed. If, at any time,
Cinemark or Regal owns less than 5% of NCM LLC’s then issued and outstanding common membership units, then such NCM
LLC founding member shall cease to have any rights of designation. AMC no longer has seats on our Board of Directors or the
right to nominate any person to serve on our Board of Directors.

If any director designee to our Board of Directors designated by Cinemark or Regal is not appointed to our Board of
Directors, nominated by us or elected by our stockholders, as applicable, then Cinemark and Regal (so long as such they each
continue to own at least 5% of NCM LLC’s issued and outstanding common membership units) will be entitled to approve
specified actions of NCM LLC.

For purposes of calculating the 5% ownership threshold for the director veto rights and director designation agreement

provisions discussed above, shares of our common stock held by a founding member and received upon redemption of NCM
LLC common membership units will be counted toward the threshold. Common membership units issued to NCM, Inc. in
connection with the redemption of common membership units by an NCM LLC founding member will be excluded, so long as
such NCM LLC founding member continues to hold the common stock acquired through such redemption or such NCM LLC
founding member has disposed of such shares of common stock to another NCM LLC founding member. Shares of our
common stock otherwise acquired by NCM LLC’s founding members will also be excluded, unless such shares of common
stock were transferred by one founding member to another and were originally received by the transferring NCM LLC
founding member upon redemption of NCM LLC common membership units.

Under these circumstances, our corporate governance documents allow NCM LLC’s other members and their affiliates to

exercise a greater degree of influence in the operation of our business and that of NCM LLC and the management of our affairs
and those of NCM LLC than is typically available to stockholders of a publicly-traded company. Even if NCM LLC’s other
members or their affiliates own a minority economic interest (but not less than 5%) in NCM LLC, they may be able to continue
exerting such degree of influence over us and NCM LLC.

Different interests among the founding members or between the founding members and us could prevent us from

achieving our business goals.

For the foreseeable future, we expect that our Board of Directors will include directors and certain executive officers of

Cinemark and Regal and other directors who may have commercial or other relationships with Cinemark and Regal. The
majority of NCM LLC’s outstanding membership interests also are owned by Cinemark and Regal. Such members compete
with each other in the operation of their respective businesses and could have individual business interests that may conflict.
Their differing interests could make it difficult for us to pursue strategic initiatives that require consensus among NCM LLC’s
current members. In addition, to the extent the founding members sell some or all their NCM LLC membership units, such as
was the case for AMC during 2017, 2018 and 2019, the founding members could have increasingly different interests because
they no longer mutually benefit from an increase in NCM LLC’s revenues or the value of the NCM, Inc. common stock into
which the NCM LLC membership units are convertible.

In addition, the structural relationship we have with NCM LLC’s founding members could create conflicts of interest
among NCM LLC’s founding members, or between NCM LLC’s founding members and us, in a number of areas relating to
our past and ongoing relationships. These conflicts of interests could also increase upon the sale of NCM LLC membership
units by a founding member because the founding member would have little incentive to agree to changes that may result in
higher revenue for NCM LLC or a higher price for our common stock. There is not any formal dispute resolution procedure in
place to resolve conflicts between us and an NCM LLC founding member or between NCM LLC founding members. We may
not be able to resolve any potential conflicts between us and an NCM LLC founding member and, even if we do, the resolution
may be less favorable to us than if we were negotiating with an unaffiliated party.

The corporate opportunity provisions in our certificate of incorporation could enable NCM LLC’s members to benefit

from corporate opportunities that might otherwise be available to us.

Our certificate of incorporation contains provisions related to corporate opportunities that may be of interest to NCM
LLC’s other members and us. It provides that if a corporate opportunity is offered to us, NCM LLC or one or more of the
officers, directors or stockholders (both direct and indirect) of NCM, Inc. or a member of NCM LLC that relates to the
provision of services to motion picture theaters, use of theaters for any purpose, sale of advertising and promotional services in
and around theaters and any other business related to the motion picture theater business (except services as provided in the
ESAs as from time to time amended and except as may be offered to one of our officers in his capacity as an officer), no such
person shall be liable to us or any of our stockholders (or any affiliate thereof) for breach of any fiduciary or other duty by
reason of the fact that such person pursues or acquires such business opportunity, directs such business opportunity to another
person or fails to present such business opportunity, or information regarding such business opportunity, to us. This provision
may apply even if the business opportunity is one that we might reasonably be deemed to have pursued or had the ability or
desire to pursue if granted the opportunity to do so.

In addition, our certificate of incorporation and the NCM LLC operating agreement expressly provide that NCM LLC’s
founding members may have other business interests and may engage in any other businesses not specifically prohibited by the
terms of the certificate of incorporation, including the exclusivity provisions of the ESAs. The parent companies of NCM
LLC’s founding members could develop new media platforms that could compete for advertising dollars with our services.
Further, we may also compete with NCM LLC’s founding members or their affiliates in the area of employee recruiting and
retention. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results
of operations or prospects if attractive corporate opportunities are allocated by NCM LLC’s founding members to themselves
or their other affiliates or we lose key personnel to them.

The agreements between us and NCM LLC’s founding members were made in the context of an affiliated relationship

and may contain different terms than comparable agreements with unaffiliated third parties.

The ESAs and the other contractual agreements that we have with NCM LLC’s founding members were originally
negotiated in the context of an affiliated relationship in which representatives of NCM LLC’s founding members and their
affiliates comprised our entire Board of Directors. As a result, the financial provisions and the other terms of these agreements,
such as covenants, contractual obligations on our part and on the part of NCM LLC’s founding members and termination and
default provisions may be less favorable to us than terms that we might have obtained in negotiations with unaffiliated third
parties in similar circumstances.

Our certificate of incorporation and bylaws contain anti-takeover protections that may discourage or prevent strategic

transactions, including a takeover of our Company, even if such a transaction would be beneficial to our stockholders.

Provisions contained in our certificate of incorporation and bylaws, the NCM LLC operating agreement, and provisions of

the Delaware General Corporation Law (“DGCL”), could delay or prevent a third party from entering into a strategic
transaction with us, even if such a transaction would benefit our stockholders. For example, our certificate of incorporation and
bylaws:

•

•
•

provide veto rights to the directors designated by Cinemark and Regal over certain actions specified in our certificate
of incorporation;
authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to increase the
number of outstanding shares, making a takeover more difficult and expensive;
prohibit stockholder action by written consent; and
do not permit cumulative voting in the election of directors, which would otherwise allow less than a majority of
stockholders to elect director candidates.

NCM LLC’s operating agreement also provides that NCM LLC’s other members will be able to exercise a greater degree

of influence over the operations of NCM LLC, which may discourage other nominations to our Board of Directors, if any
director nominee designated by NCM LLC’s other members is not elected by our stockholders. In addition, we entered into a
letter agreement with Standard General L.P., our largest stockholder, on June 1, 2018, that contains customary standstill
provisions that may discourage a third party from seeking to enter into a strategic transaction with us.

These restrictions could keep us from pursuing relationships with strategic partners and from raising additional capital,

which could impede our ability to expand our business and strengthen our competitive position. These restrictions could also
limit stockholder value by impeding a sale of us or NCM LLC. Further, these restrictions could restrict or limit certain investors
from owning our stock.

Any future issuance of membership units by NCM LLC and subsequent redemption of such units for common stock
could dilute the voting power of our existing common stockholders and adversely affect the market value of our common
stock.

The common unit adjustment agreement and the ESAs provide that NCM LLC will issue common membership units to
account for changes in the number of theater screens NCM LLC’s founding members operate and which are made part of our
advertising network. Historically, in most years each of NCM LLC’s founding members has increased the number of screens it
operates. If this trend continues, NCM LLC may issue additional common membership units to NCM LLC’s founding
members to reflect their increase in net screen count. Each common membership unit may be redeemed in exchange for, at our
option, shares of our common stock on a one-for-one basis or a cash payment equal to the market price of one share of our
common stock. If a significant number of common membership units were issued to NCM LLC’s founding members, NCM
LLC’s founding members elected to redeem such units, and we elected to issue common stock rather than cash upon
redemption, the voting power of our common stockholders could be diluted. Other than the maximum number of authorized
shares of common stock in our certificate of incorporation, there is no limit on the number of shares of our common stock that
we may issue upon redemption of an NCM LLC founding member’s common membership units in NCM LLC. For further
information, refer to Note 5 to the audited Condensed Consolidated Financial Statements included elsewhere in this document.

Our future issuance of preferred stock could dilute the voting power of our common stockholders and adversely affect

the market value of our common stock.

The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of
our other classes of voting stock, either by diluting the voting power of our other classes of voting stock if they vote together as
a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate
class vote even if the action were approved by the holders of our other classes of voting stock.

The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other
economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by
making an investment in the common stock less attractive. For example, investors in the common stock may not wish to
purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of
the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic
dilution to the holders of common stock.

If we or NCM LLC’s founding members are determined to be an investment company, we would become subject to

burdensome regulatory requirements and our business activities could be restricted.

We do not believe that we are an “investment company” under the Investment Company Act of 1940, as amended. As sole

manager of NCM LLC, we control NCM LLC, and our interest in NCM LLC is not an “investment security” as that term is
used in the Investment Company Act of 1940. If we were to stop participating in the management of NCM LLC, our interest in
NCM LLC could be deemed an “investment security” for purposes of the Investment Company Act of 1940. Generally, a
company is an “investment company” if it owns investment securities having a value exceeding 40% of the value of its total
assets (excluding U.S. government securities and cash items). Our sole material asset is our equity interest in NCM LLC. A
determination that such asset was an investment security could result in our being considered an investment company under the
Investment Company Act of 1940. As a result, we would become subject to registration and other burdensome requirements of
the Investment Company Act. In addition, the requirements of the Investment Company Act of 1940 could restrict our business
activities, including our ability to issue securities.

We and NCM LLC intend to conduct our operations so that we are not deemed an investment company under the

Investment Company Act. However, if anything were to occur that would cause us to be deemed an investment company, we
would become subject to restrictions imposed by the Investment Company Act of 1940. These restrictions, including
limitations on our capital structure and our ability to enter into transactions with our affiliates, could make it impractical for us
to continue our business as currently conducted and could have a material adverse effect on our financial performance and
operations.

We also rely on representations of NCM LLC’s founding members that they are not investment companies under the
Investment Company Act. If any NCM LLC founding member were deemed an investment company, the restrictions placed
upon that NCM LLC founding member might inhibit its ability to fulfill its obligations under its ESA or restrict NCM LLC’s
ability to borrow funds.

Our TRA with NCM LLC’s founding members is expected to reduce the amount of overall cash flow that would
otherwise be available to us and will increase our potential exposure to the financial condition of NCM LLC’s founding
members.

Our initial public offering and related transactions have the effect of reducing the amounts NCM, Inc. would otherwise pay

in the future to various tax authorities as a result of an increase in its proportionate share of tax basis in NCM LLC’s tangible
and intangible assets. We have agreed in our TRA with NCM LLC’s founding members to pay to NCM LLC’s founding
members 90% of the amount by which NCM, Inc.’s tax payments to various tax authorities are reduced as a result of the
increase in tax basis. After paying these reduced amounts to tax authorities, if it is determined as a result of an income tax audit
or examination that any amount of NCM, Inc.’s claimed tax benefits should not have been available, NCM, Inc. may be
required to pay additional taxes and possibly penalties and interest to one or more tax authorities. If this were to occur and if
one or more of NCM LLC’s founding members was insolvent or bankrupt or otherwise unable to make payment under its
indemnification obligation under the TRA, then NCM, Inc.’s financial condition could be negatively impacted.

The substantial number of shares that are eligible for sale could cause the market price for our common stock to

decline or make it difficult for us to sell equity securities in the future.

We cannot predict the effect, if any, that market sales of shares of common stock by Regal, Cinemark, or Standard General

will have on the market price of our common stock from time to time. Sales of substantial amounts of shares of our common
stock in the public market, or the perception that those sales will occur, could cause the market price of our common stock to
decline or make future offerings of our equity securities more difficult. If we are unable to sell equity securities at times and
prices that we deem appropriate, we may be unable to fund growth. Cinemark and Regal may receive up to 81,508,369 shares
of common stock as of December 26, 2019 upon redemption of their outstanding common membership units of NCM LLC.
The resale of these shares of common stock has been registered as required by the terms of the registration rights agreement
between NCM, Inc. and the founding members. Standard General also owns 15,808,390 shares that it may sell at any time.
Additionally, once options and restricted stock held by our employees become vested and/or exercisable, as applicable, to the
extent that they are not held by one of our affiliates, the shares acquired upon vesting or exercise are freely tradable. Refer to
Note 11 to the audited Consolidated Financial Statements included in our annual report on Form 10-K.

The interests of our largest stockholder and NCM LLC’s other members may be different from or conflict with those of

our other stockholders.

Standard General beneficially owns 15,808,390 shares of our common stock, and as of December 26, 2019, Cinemark and

Regal held NCM LLC membership interests that are convertible into another 81,508,369 shares of our common stock. As a

result, each of Regal, Cinemark and Standard General is in a position to influence or control to some degree the outcome of
matters requiring stockholder approval, including the adoption of amendments to our certificate of incorporation or bylaws and
the approval of mergers and other significant corporate transactions. Their influence or control of our Company and NCM LLC
may have the effect of delaying or promoting a change of control of our Company and may adversely affect the voting and
other rights of other stockholders. In addition, each of Regal, Cinemark and Standard General has the right to designate
directors to our Board. These directors have the authority, subject to applicable rules and regulations, to issue additional stock,
implement stock repurchase programs, declare dividends and make other decisions.

It is possible that the interests of Regal, Cinemark and Standard General may in some circumstances conflict with our

interests and the interests of our other stockholders. For example, Cinemark and Regal may have different tax positions from
us, especially in light of the TRA we entered into with founding members that provides for the payment by us to the founding
members of 90% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize. This could
influence their decisions regarding whether and when we should dispose of assets, and whether and when we or NCM LLC
should incur indebtedness. As another example, Standard General is in the business of making investments in companies and
may hold, and may from time to time in the future acquire, interests in or provide advice to businesses that directly or indirectly
compete with us.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

The Company's headquarters are located in Centennial, Colorado. As of December 26, 2019 the Company also leases

advertising sales offices in New York, Los Angeles, Chicago, and Detroit; digital development offices in Los Angeles and New
York, and a software development office in Minneapolis. We own no material real property. We believe that all of our present
facilities are adequate for our current needs and that additional space is available for future expansion on acceptable terms.

Item 3.

Legal Proceedings

We are sometimes involved in legal proceedings arising in the ordinary course of business. We are not aware of any

other litigation currently pending that would have a material adverse effect on our operating results or financial condition.

Item 4.

Mine Safety Disclosures

Not applicable.

Information about our Executive Officers

Shown below are the names, ages as of the filing date of this Form 10-K, and current positions of our executive officers.

There are no family relationships between any of the persons listed below, or between any of such persons and any of the
directors of the Company or any persons nominated or chosen by the Company to become a director or executive officer of the
Company.

Name

Age

Position

Thomas F. Lesinski......................
Clifford E. Marks.........................
Katherine L. Scherping................
Sarah Kinnick Hilty.....................
Scott D. Felenstein.......................

60
58
60
49
51

Chief Executive Officer
Company President
Chief Financial Officer
Executive Vice President, General Counsel and Secretary
Executive Vice President and Chief Revenue Officer

Thomas F. Lesinski. Mr. Lesinski was appointed Chief Executive Officer of NCM, Inc. in August 2019. Prior to his

current position, Mr. Lesinski served as the Non-Employee Chairman of NCM, Inc. since August 2018 and as a member of the
Board of Directors of NCM, Inc. since 2014. In addition to his roles on the Board of Directors of NCM, Inc., Mr. Lesinski also
served as the Chief Executive Officer of Sonar Entertainment, an independent entertainment studio, from January 2016 to
August 2019. Mr. Lesinski served as the founder and CEO of Energi Entertainment, a multi-media content production
company, from August 2014 until December 2015. From 2013 to 2014, Mr. Lesinski was President of Digital Content and
Distribution at Legendary Entertainment, a leading media company dedicated to owning, producing and delivering content to
mainstream audiences with a targeted focus on the powerful fandom demographic. Prior to that role, from 2006 to 2013,
Mr. Lesinski served as President, Digital Entertainment at Paramount Pictures, a global producer and distributor of filmed

entertainment. Mr. Lesinski also served as President of Worldwide Home Entertainment at Paramount Pictures for three years,
prior to which, he spent ten years in various leadership positions at Warner Bros. Entertainment and was a Managing Director
for an advertising agency.

Clifford E. Marks. Mr. Marks was appointed President in May 2016. Mr. Marks served as the Interim Chief Executive
Officer of NCM, Inc., in addition to his role of President, from November 2018 to August 2019. Prior to his current position,
Mr. Marks served as President of Sales and Marketing of NCM, Inc. since February 2007 and held those same positions with
NCM LLC since March 2005. He has been an advertising, marketing and sales professional for 25 years. Mr. Marks also served
as president of sales and marketing with Regal Entertainment Group’s media subsidiary, Regal CineMedia Corporation, from
May 2002 to May 2005. Before joining Regal CineMedia, Mr. Marks was a senior vice president at ESPN/ABC Sports where
he oversaw its advertising sales organization from 1998 to May 2002.

Katherine L. Scherping. Ms. Scherping was appointed Chief Financial Officer in August 2016 and plans to retire in

March 2020. Prior to joining NCM, Inc., Ms. Scherping served as Chief Financial Officer of QCE LLC and subsidiaries (d/b/a
Quiznos) from December 2013 to July 2016 and as interim President and Chief Executive Officer from June 2016 to July
2016. From October 2011 through July 2016, Ms. Scherping was a guest faculty member at Deloitte University, providing
leadership training to partners and other executives. From June 2005 to July 2011, she served as Chief Financial Officer of Red
Robin Gourmet Burgers, Inc.

Sarah Kinnick Hilty. Ms. Hilty was appointed Senior Vice President, General Counsel and Secretary in February 2018

and named Executive Vice President, General Counsel and Secretary in January 2020. Prior to joining NCM, Inc., Ms. Hilty
served as Deputy General Counsel - Corporate of CH2M HILL Companies, Ltd. from 2006 to 2018 leading a team responsible
for legal corporate enterprise matters including mergers, acquisitions, and divestitures; securities compliance; treasury and
finance activities, real estate, and board and subsidiary governance. Prior to working at CH2M HILL Companies, Ltd., Ms.
Hilty was a partner at Hogan & Hartson LLP.

Scott D. Felenstein. Mr. Felenstein was appointed Executive Vice President and Chief Revenue Officer in April 2017.

Prior to joining NCM, Inc., Mr. Felenstein served as Executive Vice President, National Advertising Sales for Discovery
Communications, Inc. since 2013 and Senior Vice President, National Advertising Sales for Discovery Communications, Inc.
since 2000. Prior to working at Discovery Communications, Inc., Mr. Felenstein served on the digital ad sales team at
Excite@Home and worked as an account executive at CBS Sports.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

Market Information

Our common stock, $0.01 par value, is traded on The Nasdaq Global Market under the symbol “NCMI”. There were

190 stockholders of record as of February 14, 2020 (does not include beneficial holders of shares held in “street name”).

Dividend Policy

We intend to distribute substantially all of our free cash flow (distributions from NCM LLC less income taxes and
payments under the tax receivable agreement with the founding members) in the form of dividends to our stockholders. The
declaration, payment, timing and amount of any future dividends payable will be at the sole discretion of our Board of
Directors who will take into account general economic and advertising market business conditions, our financial condition, our
available cash, our current and anticipated cash needs, including opportunities to reinvest in the business and any other factors
that the Board of Directors considers relevant. The Company intends to pay a regular quarterly dividend for the foreseeable
future at the discretion of the Board of Directors consistent with the Company’s intention to distribute substantially all its free
cash flow to stockholders through its quarterly dividend. Under Delaware law, dividends may be payable only out of surplus,
which is our total assets minus total liabilities less the par value of our common stock, or, if we have no surplus, out of our net
profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. For tax purposes, our dividends
paid in 2018 and 2019 were treated as a return of capital to stockholders.

Unregistered Sales of Equity Securities and Use of Proceeds

NCM, Inc.’s Amended and Restated Certificate of Incorporation and the Third Amended and Restated Limited Liability
Company Operating Agreement, as amended, of NCM LLC provide a redemption right to the NCM LLC members to exchange
common membership units of NCM LLC for shares of NCM, Inc.’s common stock on a one-for-one basis, or at NCM, Inc.’s
option, a cash payment equal to the market price of one share of NCM, Inc.’s common stock.

On October 10, 2019, NCM LLC received a Notice of Redemption from AMC, relating to the redemption and

exchange of 197,118 units for 197,118 shares of NCM, Inc. common stock. In connection with delivering the Notice of
Redemption, AMC surrendered common membership units to NCM LLC for cancellation and NCM, Inc. contributed shares of
its common stock to NCM LLC in exchange for an amount of newly issued common units equal to the number of units
surrendered by AMC. NCM LLC distributed the shares of NCM, Inc.’s common stock to AMC to complete the redemption on
October 24, 2019. The issuance of shares in this redemption was exempt from registration as the transaction by NCM, Inc. did
not involve a public offering.

Issuer Purchases of Equity Securities

The table below provides information about shares delivered to the Company from restricted stock held by Company

employees upon vesting for the purpose of funding the recipient’s tax withholding obligations.

Period
September 26, 2019 through October 24, 2019 .................
October 25, 2019 through November 28, 2019 .................
November 29, 2019 through December 26, 2019..............

(a)
Total Number
of Shares
Purchased

(b)
Average Price
Paid Per Share

1,038

653

733

8.53

8.45

6.71

(d)
Maximum
Number (or
Approximate
Dollar Value)
of Shares that
may yet be
Purchased under
the Plans or
Programs

—

N/A

N/A
N/A

Item 6.

Selected Financial Data

Selected Historical Financial and Operating Data

The following table sets forth our historical selected financial and operating data for the periods indicated. The selected

financial and operating data should be read in conjunction with the other information contained in this document, including
“Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the audited historical
Consolidated Financial Statements and the notes thereto included elsewhere in this document, and historical audited
Consolidated Financial Statements, which have not been included in this document.

The results of operations data for the years ended December 26, 2019, December 27, 2018 and December 28, 2017 and

the balance sheet data as of December 26, 2019 and December 27, 2018 are derived from the audited Consolidated Financial
Statements of NCM, Inc. included elsewhere in this document. The results of operations data for the years ended December 29,
2016 and December 31, 2015 and the balance sheet data as of December 28, 2017, December 29, 2016 and December 31, 2015
are derived from the audited Consolidated Financial Statements of NCM, Inc. that are not included in this document.

Results of Operations Data

Years Ended

($ in millions, except per share data)
Revenue.................................................................................. $
OPERATING EXPENSES:

Advertising operating costs...............................................
Network costs....................................................................
Theater access fees and revenue share—founding
members ............................................................................
Selling and marketing costs ..............................................
Merger termination fee and related merger costs..............
Administrative and other costs..........................................
Depreciation expense ........................................................
Amortization expense (1)..................................................
Amortization of intangibles recorded for network theater
screen leases (1) ................................................................
Total..............................................................................
OPERATING INCOME.........................................................
NON-OPERATING EXPENSES (INCOME).......................
INCOME BEFORE INCOME TAXES............................
Provision for income taxes ...............................................
CONSOLIDATED NET INCOME ..................................

Less: Net income attributable to noncontrolling
interests ...............................................................................
NET INCOME ATTRIBUTABLE TO NCM, Inc. ................ $
EARNINGS PER NCM, INC. COMMON SHARE:
Basic....................................................................................... $
Diluted.................................................................................... $

Dec. 26,
2019

Dec. 27,
2018

Dec. 28,
2017

Dec. 29,
2016

Dec. 31,
2015

444.8

441.4

426.1

447.6

446.5

38.3

13.5

82.7

64.9

—

43.8

13.6

—

26.7

283.5
161.3

62.2

99.1

12.4

86.7

50.6

36.1

0.47

0.46

37.4

13.3

81.7

66.5

—

48.3

12.6

27.3

—

287.1
154.3

50.6

103.7

23.5

80.2

50.4

29.8

0.39

0.37

32.4

15.8

76.5

72.0

—

37.9

11.0

26.6

—

272.2
153.9
(140.9)
294.8

180.3

114.5

56.2

58.3

0.89

0.48

30.0

17.1

75.1

72.8

—

43.8

8.8

27.0

—

274.6
173.0

64.1

108.9

14.4

94.5

61.6

32.9

0.55

0.54

30.8

17.8

72.5

72.3

34.3

38.6

9.6

22.6

—

298.5
148.0

47.9

100.1

27.9

72.2

48.3

23.9

0.41

0.35

Balance Sheet Data (in millions)
Cash, cash equivalents and marketable securities (2) ......... $
Receivables, net ..................................................................
Property and equipment, net ...............................................
Total assets (3).....................................................................
Borrowings, gross ...............................................................
Payable to founding members under tax receivable
agreement .........................................................................
Equity/(deficit) ....................................................................
Total liabilities and equity (3) .............................................

Dec. 26,
2019

Dec. 27,
2018

As of

Dec. 28,
2017

Dec. 29,
2016

Dec. 31,
2015

80.9

75.6

59.5

68.7

170.8

33.2

1,130.0

935.6

198.0
(121.2)
1,130.0

149.9

33.6

1,141.8

931.4

211.1
(89.2)
1,141.8

160.6

30.7

1,173.1

932.0

232.2
(74.8)
1,173.1

160.5

29.6

1,215.5

935.0

419.1
(232.2)
1,215.5

85.4

148.9

25.1

1,238.2

936.0

439.3
(229.9)
1,238.2

Other Financial and Operating Data

Years Ended

(in millions, except cash dividend declared per common share and
screen data)
Adjusted OIBDA (4) ........................................................... $
Adjusted OIBDA margin (4)...............................................
Capital expenditures............................................................ $
Cash dividend declared per common share......................... $
Founding member screens at period end (5) (9) .................
Total screens at period end (6) (9).......................................
DCN screens at period end (7) (9) ......................................
Total attendance for period (8) (9) ......................................

Dec. 26,
2019

207.5

46.7%

15.3

0.68

Dec. 27,
2018

205.4

46.5%

15.4

0.68

Dec. 28,
2017

205.1

48.1%

12.3

0.88

Dec. 29,
2016

230.7

51.5%

13.3

0.88

Dec. 31,
2015

229.9

51.5%

13.0

0.88

16,880

21,208

20,770

651.4

16,768

21,172

20,741

705.1

16,808

20,850

20,419

655.8

17,022

20,548

20,080

688.8

16,981

20,361

19,760

694.7

Notes to the Selected Historical Financial and Operating Data

(1) Following the adoption of ASC 842, as discussed within Note 1 to the audited Consolidated Financial Statements

included elsewhere in this document, amortization of the ESA and affiliate intangible balances is considered a form
of lease expense and has been reclassified to this account as of the adoption date, December 28, 2018. The
Company adopted ASC 842 prospectively and thus, prior period balances remain within amortization expense.

(2) Includes short-term and long-term marketable securities.
(3) During the first quarter of 2016, the Company adopted Accounting Standards Update 2015-03, Interest –

Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”)
and Accounting Standards Update 2015-15, Interest – Imputation of Interest (“ASU 2015-15”), on a retrospective
basis, which provide guidance for simplifying the presentation of debt issuance costs. In connection with the
adoption of ASU 2015-03 and ASU 2015-15, the Company reclassified net deferred financing costs related to
NCM LLC’s term loans, secured and unsecured notes in the Consolidated Balance Sheet as a direct deduction from
the carrying amount of those borrowings, while net deferred financing costs related to the revolving credit facility
remained an asset in the Consolidated Balance Sheet. The amounts presented above for total assets and total
liabilities and equity reflect this reclassification as of December 26, 2019, December 27, 2018, December 28, 2017
and December 29, 2016. Amounts presented as of December 31, 2015 do not reflect the reclassification. If
adjusted, the reclassification for ASU 2015-03 and ASU 2015-15 would reduce both total assets and total liabilities
and equity shown above by $12.7 million as of December 31, 2015.

(4) Adjusted OIBDA and Adjusted OIBDA margin are not financial measures calculated in accordance with GAAP in
the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense
adjusted to also exclude amortization of intangibles recorded for network theater screen leases, non-cash share
based compensation costs, the merger termination fee and related merger costs, early lease termination expense and
Chief Executive Officer transition costs. 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, amounts of amortization of intangibles recorded for network theater screen leases, non-cash share based
compensation programs, levels of mergers and acquisitions, CEO turnover, early lease termination expense,
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 amortization of intangibles recorded for network theater
screen leases, share-based payment costs, costs associated with the terminated merger with Screenvision, LLC
(“Screenvision”), costs associated with the resignation of the Company’s former Chief Executive Officers, or early
lease termination expense. Adjusted OIBDA should not be regarded as an alternative to operating income, net
income or as indicators of operating performance, nor should they 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. 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.

Adjusted OIBDA does not reflect integration and other encumbered theater payments as they are recorded as a
reduction to intangible assets. Integration payments and other encumbered theater payments received are added to
Adjusted OIBDA to determine our compliance with financial covenants under our senior secured credit facility and
included in available cash distributions to NCM LLC’s founding members. During the years ended December 26,
2019, December 27, 2018, December 28, 2017, December 29, 2016 and December 31, 2015, the Company
recorded integration and other encumbered theater payments of $22.3 million, $21.4 million, $20.9 million, $2.6
million and $2.7 million, respectively, from NCM LLC’s founding members.

(5) Represents the total number of screens within NCM LLC’s advertising network operated by NCM LLC’s founding

members.

(6) Represents the total screens within NCM LLC’s advertising network.
(7) Represents the total number of screens that are connected to the DCN.
(8) Represents the total attendance within NCM LLC’s advertising network as provided by our founding members and

affiliate partners.

(9) Excludes screens and attendance associated with certain AMC Rave, AMC Carmike Cinemas, Inc. (“Carmike”)
and Cinemark Rave theaters for all periods presented. Refer to Note 5 to the audited Consolidated Financial
Statements included elsewhere in this document.

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

Operating income......................................................... $
Depreciation expense ...................................................
Amortization expense (1).............................................
Amortization of intangibles recorded for network
theater screen leases (1) ...............................................
Share-based compensation costs (2) ............................
Merger-related administrative costs (3) .......................
CEO transition costs ....................................................
Early lease termination expense (4).............................

Adjusted OIBDA..................................................... $
Total revenue................................................................ $
Adjusted OIBDA margin.........................................

Dec. 26,
2019

Dec. 27,
2018

Years Ended

Dec. 28,
2017

Dec. 29,
2016

Dec. 31,
2015

161.3

154.3

153.9

173.0

148.0

13.6

—

26.7

5.5

—

0.4

—

12.6

27.3

—

7.8

—

3.4

—

11.0

26.6

—

11.2

—

0.6

1.8

8.8

27.0

—

18.3

—

3.6

—

9.6

22.6

—

14.8

34.3

0.6

—

207.5

444.8

205.4

441.4

205.1

426.1

230.7

447.6

229.9

446.5

46.7%

46.5%

48.1%

51.5%

(1) Following the adoption of ASC 842, as discussed within Note 1 to the audited Consolidated Financial Statements

in the accompanying audited Consolidated Financial Statements.

(3) Merger termination fee and related merger costs primarily include the merger termination payment and legal,
accounting, advisory and other professional fees associated with the terminated merger with Screenvision.
(4) Early lease termination expense represents an expense recorded upon the early termination of the lease of our
corporate headquarters because the early termination payment made by the Company was reimbursed by the
landlord of the new building.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As discussed in Part 1, some of the information in this Annual Report on Form 10-K includes “forward-looking

statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in
this Form 10-K, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”, may constitute forward-looking statements. 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,” “predicts,” “potential” or “continue” or the negative of those words and other
comparable words. These forward-looking statements involve risks and uncertainties. The following discussion and analysis
should be read in conjunction with our historical financial statements and the related notes thereto included elsewhere in this
document. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

This section of this Form 10-K generally discusses fiscal 2019 and fiscal 2018 items and year-to-year comparisons

between fiscal 2019 and fiscal 2018. Discussions of fiscal 2017 items and year-to-year comparisons between fiscal
2018 and fiscal 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal
year ended December 27, 2018.

Overview

We are America’s Movie Network. As the largest cinema advertising network in North America, we unite brands with
the power of movies and engage movie fans anytime and anywhere. We currently derive revenue principally from the sale of
advertising to national, regional and local businesses in Noovie, our cinema advertising and entertainment pre-show seen on
movie screens across the U.S., as well as on our LEN, a series of strategically-placed screens located in movie theater lobbies,
and other forms of advertising and promotions in theater lobbies. We also sell digital online and mobile advertising through our
Cinema Accelerator product and across our suite of Noovie digital properties, including Noovie.com, Noovie Shuffle, Name
That Movie, Noovie Arcade, and Fantasy Movie League, in order to reach entertainment audiences beyond the theater. As of
December 26, 2019, approximately 4.0 million moviegoers have downloaded our mobile apps. These downloads and the
acquisition of second party data have resulted in first and second party data sets of over 106 million as of December 26, 2019.
We have long-term ESAs (approximately 19.8 weighted average years based on attendance remaining as of December 26,
2019) with the founding members and multi-year agreements with network affiliates, which expire at various dates between
March 15, 2020 and July 22, 2031. The weighted average remaining term (based on attendance) of the ESAs and the network
affiliate agreements is 17.1 years as of December 26, 2019. The ESAs and network affiliate agreements grant NCM LLC
exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie pre-show and LEN programming
are distributed predominantly via satellite through our proprietary DCN. Approximately 98% of the aggregate founding
member and network affiliate theater attendance is generated by theaters connected to our DCN (the remaining screens receive
advertisements on USB drives) and 100% of the Noovie pre-show is projected on digital projectors (95% digital cinema
projectors and 5% LCD projectors).

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 changes in revenue, Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed in
“Notes to the Selected Historical Financial and Operating Data” above, as some of our primary measurement metrics. In
addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national
and regional advertising pricing (CPM), local advertising rate per screen per week, national and local and regional and total
advertising revenue per attendee. We also monitor free cash flow, the dividend coverage ratio, financial leverage ratio (net debt
divided by Adjusted OIBDA plus integration payments and other encumbered theater payments), cash balances and revolving
credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our
working capital needs and debt obligations and current and future dividends declared by our Board of Directors.

Summary Historical and Operating Data

You should read this information in conjunction with the other information contained in this document, and our audited

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). Refer to “Item 6. Selected Financial Data—Notes to the Selected Historical Financial and Operating
Data” for a discussion of the calculation of Adjusted OIBDA and reconciliation to operating income.

($ in millions)
Revenue ........................................................................................................... $
Operating expenses:

Advertising .................................................................................................
Network, administrative and unallocated costs ..........................................
Total operating expenses........................................................................
Operating income ............................................................................................
Non-operating expenses ..................................................................................
Income tax expense .........................................................................................
Net income attributable to noncontrolling interests ........................................

Net income attributable to NCM, Inc. ........................................................ $

Net income per NCM, Inc. basic share............................................................ $
Net income per NCM, Inc. diluted share......................................................... $

Adjusted OIBDA ............................................................................................. $
Adjusted OIBDA margin .................................................................................
Total theater attendance (in millions) (1) ........................................................

207.5

46.7%

651.4

Years Ended

% Change

Dec. 26,
2019

Dec. 27,
2018

2018 to 2019

444.8

441.4

0.8 %

177.8

105.7

283.5

161.3

62.2

12.4

50.6

36.1

0.47

0.46

181.3

105.8

287.1

154.3

50.6

23.5

50.4

29.8

0.39

0.37

205.4

46.5%

705.1

(1.9)%

(0.1)%

(1.3)%

4.5 %

22.9 %

(47.2)%

0.4 %

21.1 %

20.5 %

24.3 %

1.0 %

0.2 %

(7.6)%

(1)

Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated
with certain AMC Rave, AMC Carmike and Cinemark Rave theaters that are currently part of another cinema
advertising network for all periods presented. Refer to Note 5 to the audited Consolidated Financial Statements
included elsewhere in this document.

Our Network—The net screens added to our network by the founding members and network affiliates during 2019 were

as follows.

Balance as of December 27, 2018...................................................................
Lost affiliates, net of new affiliates (1)......................................................
Openings, net of closures ...........................................................................
Balance as of December 26, 2019...................................................................

16,768

—

112

16,880

4,404
(246)
170

4,328

21,172
(246)
282

21,208

Number of screens

Founding
Members

Network
Affiliates

Total

(1)

Represents the loss of three of our affiliates that did not renew their contracts resulting in a reduction of 250 affiliate
screens to our network, offset by the addition of one new affiliate which added 4 new screens to our network during the
year ended December 26, 2019.

We believe that adding screens and attendees to our network will provide our advertising clients with a better
marketing product with increased reach and improved geographic coverage. We also believe that the continued growth of our
market coverage could strengthen our selling proposition and competitive positioning against other national, regional and local
video advertising platforms, including television, online and mobile video platforms and other out of home video advertising
platforms.

Basis of Presentation

Prior to the completion of the IPO, NCM LLC was wholly-owned by its founding members. In connection with the

offering, NCM, Inc. purchased newly issued common membership units from NCM LLC and common membership units from
NCM LLC’s founding members and became a member of and the sole manager of NCM LLC. We entered into several

agreements to effect the reorganization and the financing transaction and certain amendments were made to the existing ESAs
to govern the relationships among NCM LLC and NCM LLC’s founding members after the completion of these transactions.

The results of operations data discussed herein were derived from the audited Consolidated Financial Statements and

accounting records of NCM, Inc. and should be read in conjunction with the notes thereto.

We have a 52-week or 53-week fiscal year ending on the first Thursday after December 25. Fiscal years 2017, 2018 and

2019 contained 52 weeks. Our 2020 fiscal year will contain 53 weeks. Throughout this document, we refer to our fiscal years
as set forth below:

Fiscal Year Ended
December 26, 2019.................................................................................................................................
December 27, 2018.................................................................................................................................
December 28, 2017.................................................................................................................................

Reference in

this Document

2019

2018

2017

Results of Operations

Fiscal Years 2019 and 2018

Revenue. Total revenue increased $3.4 million, or 0.8%, from $441.4 million for 2018 to $444.8 million for 2019. The

following is a summary of revenue by category (in millions):

Fiscal Year

$ Change

% Change

2019

2018

2018 to 2019

National advertising revenue....................................................... $
Local advertising revenue............................................................
Regional advertising revenue ......................................................
Founding member advertising revenue from beverage
concessionaire agreements .......................................................

324.2

312.0

66.9

24.7

29.0

70.7

27.3

31.4

Total revenue...................................................................... $

444.8

441.4

12.2
(3.8)
(2.6)

(2.4)
3.4

3.9 %

(5.4)%

(9.5)%

(7.6)%

0.8 %

The following table shows data on revenue per attendee for 2019 and 2018:

Fiscal Year

% Change

2019

2018

2018 to 2019

National advertising revenue per attendee ................................................... $
Local advertising revenue per attendee ........................................................ $
Regional advertising revenue per attendee................................................... $
Total advertising revenue (excluding founding member
beverage revenue) per attendee ................................................................. $
Total advertising revenue per attendee......................................................... $
Total theater attendance (in millions) (1) .....................................................

$
$

0.498

0.103
0.038

0.638

0.683

651.4

0.442

0.100
0.039

0.581

0.626

705.1

12.5 %

2.4 %
(2.1)%

9.8 %

9.1 %

(7.6)%

(1)

Represents the total attendance within NCM LLC’s advertising network, excluding screens and attendance associated
with certain AMC Rave, AMC Carmike and Cinemark Rave theaters for certain periods presented. Refer to Note 5 to
the audited Consolidated Financial Statements included elsewhere in this document.

National advertising revenue. The $12.2 million, or 3.9%, increase in national advertising revenue (excluding beverage
revenue from the founding members) was due primarily to a $16.2 million increase in Platinum Spot and branded
content segment revenue in 2019, as compared to 2018. The increase was also due to an increase in national advertising
utilization from 113.5% in 2018 to 125.9% in 2019, despite a 7.6% decrease in network attendance. Inventory
utilization is calculated as utilized impressions divided by total advertising impressions, which is based on eleven 30-
second salable national advertising units in our Noovie pre-show, which can be expanded, should market demand

dictate. These increases were partially offset by a 3.2% decrease in national advertising CPMs (excluding beverage and
Platinum Spot CPMs) driven by a change in the mix of customers with a higher proportion of upfront clients and less
scatter market clients in 2019, as compared to 2018. The scatter market represents inventory not included within an
upfront or content partner commitment sold closer to the advertisement air date for typically higher CPMs.

Local advertising revenue. The $3.8 million, or 5.4%, decrease in local advertising revenue was primarily due to a
10.5% decrease in the volume of contracts. This decrease was partially offset by an increase in local digital sales
revenue driven primarily by an increase in the average digital contract value in 2019, compared to 2018.

Regional advertising revenue. The $2.6 million, or 9.5%, decrease in regional advertising revenue was primarily due to
the shift of a handful of larger clients from regional advertising to national advertising and a reduction in spend of a few
large customers in 2019, compared to 2018. These decreases were partially offset by a significant increase in the
volume of contracts and an increase in regional digital sales revenue in 2019, compared to 2018.

Founding member beverage revenue. The $2.4 million, or 7.6%, decrease in national advertising revenue from
founding members' beverage concessionaire agreements was primarily due to a 7.1% decrease in founding member
attendance, partially offset by a 0.7% increase in beverage revenue CPMs in 2019, compared to 2018. The 2019
beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2017 to 2018, which
increased 0.7%.

Operating expenses. Total operating expenses decreased $3.6 million, or 1.3%, from $287.1 million for 2018 to $283.5

million for 2019. The following table shows the changes in operating expense for 2019 and 2018 (in millions):

Fiscal Year

$ Change

% Change

2019

2018

2018 to 2019

Advertising operating costs ......................................................... $
Network costs ..............................................................................
Theater access fees and revenue share—founding members ......
Selling and marketing costs.........................................................
Administrative and other costs ....................................................
Depreciation expense...................................................................
Amortization expense..................................................................
Amortization of intangibles recorded for network theater
screen leases ................................................................................

38.3

13.5

82.7

64.9

43.8

13.6

—

26.7

37.4

13.3

81.7

66.5

48.3

12.6

27.3

—

Total operating expenses ........................................................... $

283.5

287.1

0.9

0.2

1.0
(1.6)
(4.5)
1.0
(27.3)

26.7
(3.6)

2.4 %

1.5 %

1.2 %

(2.4)%

(9.3)%

7.9 %

(100.0)%

100.0 %

(1.3)%

Advertising operating costs. Advertising operating costs increased $0.9 million, or 2.4%, from $37.4 million in 2018 to
$38.3 million in 2019. The increase was due to a $0.4 million increase in production costs associated with content
produced for national advertisers and a $0.3 million increase in personnel related expenses related to a slight increase in
headcount in advertising operations.

Network costs. Network costs increased $0.2 million, or 1.5%, from $13.3 million in 2018 to $13.5 million in 2019.

Theater access fees and revenue share—founding members. Theater access fees and revenue share increased $1.0
million, or 1.2%, from $81.7 million in 2018 to $82.7 million in 2019. The increase was due to $2.5 million of
payments to Cinemark and Regal as compensation for post-showtime and Platinum Spot advertising in accordance with
the 2019 ESA Amendments and a $1.9 million increase in the expense associated with the founding member digital
screens that are connected to the DCN (nearly 100% of our screens as of December 26, 2019), including higher quality
digital cinema projectors and related equipment, due to the annual 5% rate increase specified in the ESAs. These
increases were partially offset by a $3.4 million decrease in the expense associated with founding member attendance
from a 7.1% decrease in attendance at founding members’ theaters.

Selling and marketing costs. Selling and marketing costs decreased $1.6 million, or 2.4%, from $66.5 million in 2018 to
$64.9 million in 2019. This decrease was primarily related to a $2.9 million decrease in non-cash barter expense related
to a decrease in the volume of barter arrangements in 2019, compared to 2018, and a $2.8 million decrease in personnel
related expenses. The decrease in personnel related expenses was driven by lower salaries and commissions due to a
reduction in the local sales force in late 2018 and lower non-cash share-based compensation expense due to a decrease
in the volume of awards granted in 2019, compared to 2018. These decreases were partially offset by 1) a $2.0 million
non-cash impairment charge realized in 2019, compared to a $0.4 million impairment charge realized in 2018 related to

investments obtained in prior years in exchange for advertising services, 2) a $1.4 million increase in Cinema
Accelerator expense due in part to the increase in digital advertising sales and 3) a $1.1 million increase in Company
advertising expense associated with promotions of our digital products on online and social media platforms in 2019,
compared to 2018.

Administrative and other costs. Administrative and other costs decreased $4.5 million, or 9.3%, from $48.3 million in
the year ended 2018 to $43.8 million in the year ended 2019. Administrative and other costs decreased primarily due to
1) a $3.0 million decrease in CEO transition fees related to costs incurred in 2018 following the resignation of our
former CEO, as well as costs related to the search to identify a permanent CEO, 2) a $1.9 million decrease in legal and
professional services largely due to the absence of legal and professional fees incurred during the second quarter of
2018 related to the negotiation of the settlement agreement with a large shareholder, 3) a $1.6 million decrease in
personnel related expenses primarily due to a $0.9 million decrease in compensation expense due to the absence of a
CEO during a portion of 2019 and a $0.4 million increase in capitalized personnel costs driven by the nature of the
work being performed by our information technology department in 2019, compared to 2018 and 4) a $0.3 million
decrease in moving expenses incurred in 2018 associated with the move of our corporate headquarters. These decreases
were partially offset by a $0.9 million increase in personnel related costs for our digital service offerings and a $0.5
million increase in consulting services.

Depreciation expense. Depreciation expense increased $1.0 million, or 7.9%, from $12.6 million in 2018 to $13.6
million in 2019 primarily due to new fixed assets placed into service.

Amortization expense and Amortization of intangibles recorded for network theater screen leases. Amortization of the
ESA and affiliate intangibles was $26.7 million in 2019 down from $27.3 million in 2018. Following the adoption of
ASC 842, as discussed within Note 1 to the audited Condensed Consolidated Financial Statements included elsewhere
in this document, amortization of the ESA and affiliate intangible balances is considered a form of lease expense and
has been reclassified from amortization expense to amortization of intangibles recorded for network theater screen
leases as of the adoption date, December 28, 2018. The Company adopted ASC 842 prospectively and thus, prior period
balances remain within amortization expense. The $0.6 million decrease was due to the four year extension of the
contractual life of the intangible assets for Cinemark and Regal following the 2019 ESA Amendments during the third
quarter of 2019.

Non-operating expense. Total non-operating expenses increased $11.6 million, or 22.9%, from $50.6 million in 2018 to

$62.2 million in 2019. The following table shows the changes in non-operating expense for 2019 and 2018 (in millions)

Fiscal Year

$ Change

% Change

Interest on borrowings .......................................................... $
Interest income ......................................................................
Loss on early retirement of debt, net.....................................
Loss (gain) on re-measurement of the payable to
founding members under the tax receivable
agreement ...........................................................................
Other non-operating income .................................................

Total non-operating expense ............................................ $

58.0
(2.1)
5.6

1.1
(0.4)
62.2

NM = Not meaningful.

2019

2018

2018 to 2019
2.6
$
(0.6)
4.9

2018 to 2019

4.7 %
40.0 %
NM

55.4
(1.5)
0.7

(3.8)
(0.2)
50.6

4.9
(0.2)
11.6

NM
(100.0)%
22.9 %

The increase in non-operating expense was due primarily to 1) a $1.1 million loss on the re-measurement of the payable
to founding members under the tax receivable agreement for 2019 as compared to a $3.8 million gain on the re-measurement of
the payable for 2018 due to a change in the deferred tax rate related to a change in state tax law regarding sales sourcing during
2018, 2) a $4.9 million increase in the loss on early retirement of our debt due to the $4.0 million premium paid to redeem our
Notes due 2022 as well as the write off of the $1.9 million of associated debt issuance costs following the extinguishment of the
notes in the fourth quarter of 2019, and 3) a $2.6 million increase in interest on borrowings due to a one month overlap between
the issuance of the Notes due 2028 and the redemption of the Notes due 2022 where the Company incurred interest on both
notes, a 0.1% increase in the weighted average interest rate for 2019, as compared to 2018, and an increase in the average debt
outstanding on the Company's revolver during 2019 as compared to 2018.

Income tax expense. Income tax expense decreased $11.1 million from $23.5 million for 2018 to $12.4 million for 2019.

The decrease in income tax expense was primarily due to a decrease in deferred tax expense for the year ended December 26,

2019, compared to the year ended December 27, 2018 related to the Company's re-measurement of its deferred tax assets as a
result of a 2018 state tax law change. The remaining decrease was primarily due to lower income before income taxes for the
year ended December 26, 2019, compared to the year ended December 27, 2018.

Net income. Net income increased $6.3 million from $29.8 million in 2018 to $36.1 million in 2019. The increase was

due to an $11.1 million decrease in income tax expense and a $7.0 million increase in operating income related to higher
revenue and lower operating expense, partially offset by an $11.6 million increase in non-operating expenses.

Known Trends and Uncertainties

Beverage Revenue—Under the ESAs, up to 90 seconds of the Noovie pre-show program can be sold to the founding
members to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. For the years
ended 2019 and 2018, two of the founding members purchased 60 seconds of on-screen advertising time and one founding
member purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. The founding
members’ current long-term contracts with their beverage suppliers require the 30 or 60 seconds of beverage advertising,
although such commitments could change in the future. Per the ESA with AMC, the time sold to the founding member
beverage supplier is priced equal to the advertising CPM for the previous year charged by NCM LLC to unaffiliated third
parties during segment one (closest to showtime) of the Noovie pre-show, limited to the highest advertising CPM being then-
charged by NCM LLC, which in 2019 decreased 0.3%. Thus, the CPM on our beverage concessionaire revenue related to AMC
in 2020 will decrease by 0.3% compared to 2019. Beginning in 2020 and in accordance with the 2019 ESA Amendments, the
price for the time sold to Cinemark and Regal's beverage suppliers will instead increase at a fixed rate of 2.0% each year.

Theater Access Fees—In consideration for NCM LLC’s access to the founding members’ theater attendees for on-

screen advertising and use of lobbies and other space within the founding members’ theaters for the LEN and lobby
promotions, the founding members receive a monthly theater access fee under the ESAs. The theater access fee is composed of
a fixed payment per patron and a fixed payment per digital screen (connected to the DCN). The payment per theater patron
increases by 8% every five years, with the next increase occurring in fiscal year 2022. Pursuant to the ESAs, the payment per
digital screen increases annually by 5%. Pursuant to the 2019 ESA Amendments, Cinemark and Regal each receive an
additional monthly theater access fee beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen
advertising inventory after the advertised showtime of a feature film. These fees are also based upon a fixed payment per patron
beginning at $0.025 per patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per
patron beginning on November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increasing 8% every
five years beginning November 1, 2027.

Platinum Spot—In consideration for the utilization of the theaters post-showtime for Platinum Spots, Cinemark and
Regal are entitled to receive 25% of all revenue generated for the actual display of Platinum Spots in their applicable theaters,
subject to a specified minimum. If NCM LLC runs advertising in more than one concurrent advertisers’ Platinum Spot for any
portion of the network over a period of time, NCM LLC will be required to satisfy a minimum average CPM for that period of
time.

Financial Condition and Liquidity

Liquidity

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts
receivable balances and operating expenditure payments, as well as, available cash payments (as defined in the NCM LLC
Operating Agreement) to Cinemark and Regal, interest or principal payments on our term loan and the Notes due 2026 and
Notes due 2028, income tax payments, TRA payments to the founding members and the amount of quarterly dividends to
NCM, Inc.’s common stockholders.

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

Cash, cash equivalents and marketable securities (1) ......... $
Revolver availability (2)......................................................

Total liquidity.................................................................. $

80.9

132.4

213.3

75.6

143.2

218.8

5.3
(10.8)
(5.5)

Years Ended

December 26, 2019

December 27, 2018

$ Change

2018 to
2019

(1)

Included in cash and cash equivalents as of December 26, 2019 and December 27, 2018 there was $11.4 million and
$7.2 million, respectively, of cash held by NCM LLC which is not available to satisfy NCM, Inc.'s dividend payments
and other NCM, Inc. obligations.

(2)

The revolving credit facility portion of NCM LLC’s total borrowings is available, subject to certain conditions, for
general corporate purposes of NCM LLC in the ordinary course of business and for other transactions permitted under
the senior secured credit facility, and a portion is available for letters of credit. NCM LLC’s total capacity under the
revolving credit facility was $175.0 million less $3.6 million of outstanding letters of credit or $171.4 million as of
December 26, 2019 and $175.0 million less $4.8 million of outstanding letters of credit or $170.2 million, as of
December 27, 2018.

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

Years Ended

2019

2018

Operating cash flow................................................................................................... $
Investing cash flow.................................................................................................... $
Financing cash flow................................................................................................... $

143.6

1.6
$
(130.7) $

150.3
(16.1)
(123.0)

Cash Flows – Fiscal Years 2019 and 2018

Operating Activities. The $6.7 million decrease in cash provided by operating activities for 2019, compared to 2018 was

due primarily to 1) a decrease in the change in accounts receivable of $31.6 million related to timing of collections in 2019,
compared to 2018, 2) a $6.3 million decrease in deferred income tax expense net of the increase in the loss on re-measurement
of the payable to founding members under the TRA due to a change in the deferred tax rate related to a change in state tax law
regarding sales sourcing during 2018 and 3) a $2.3 million decrease in non-cash share-based compensation expense related to a
decrease in the projected vesting of performance based awards and a lower volume of awards as of 2019, compared to 2018.
These decreases were partially offset by 1) a $21.7 million increase in cash provided by operating activities due to the
reclassification in the current period of founding member integration and other encumbered theater payments from cash flows
from financing activities upon adoption of ASC 842, as further discussed within Note 1 to the audited Consolidated Financial
Statements included elsewhere in this document, 2) a $6.5 million increase in consolidated net income and 3) a $4.9 million
increase in the loss on early retirement of our debt due to the extinguishment of the Notes due 2022 in 2019.

Investing Activities. The $17.7 million increase in cash provided by investing activities for 2019, compared to 2018 was
due primarily to a decrease in purchases of marketable securities, net of proceeds, of $14.6 million and a $2.8 million increase
in the proceeds from the notes receivable from the founding members in 2019, compared to 2018.

Financing Activities. The $7.7 million increase in cash used in financing activities during 2019, compared to 2018, was

due primarily to a $22.7 million decrease in cash inflows from financing activities due to the reclassification in the current
period of founding member integration and other encumbered theater payments to cash flows from operating activities upon
adoption of ASC 842, as further discussed within Note 1 to the audited Consolidated Financial Statements included elsewhere
in this document. This increase in cash used was partially offset by a $10.2 million decrease in distributions to founding
members, period over period, a decrease of $2.3 million in the payment of debt issuance costs, a $1.1 million decrease in
restricted stock tax withholdings, and a $0.8 million decrease in dividend payments in 2019, as compared to 2018.

Sources of Capital and Capital Requirements

NCM, Inc.’s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM

LLC as well as its existing cash balances and marketable securities, which as of December 26, 2019 were $69.5 million
(excluding $11.4 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 revolving credit facility and cash on hand. Refer to Note 10 to the
audited Consolidated Financial Statements included elsewhere in this document and “Financings” below for a detailed
discussion of the debt transactions in 2018 and 2019 and the debt outstanding as of December 26, 2019.

Management believes that future funds generated from NCM LLC’s operations and cash on hand and availability under
the revolving credit facility should be sufficient to fund working capital requirements, NCM LLC’s debt service requirements,
and capital expenditures, through the next twelve months. Cash flows generated by NCM LLC’s distributions to NCM, Inc. and
the founding members can be impacted by the seasonality of advertising sales, interest on borrowings under our revolving
credit agreement and to a lesser extent theater attendance. NCM LLC is required pursuant to the terms of the NCM LLC
Operating Agreement to distribute its available cash, as defined in the operating agreement, quarterly to its members (Regal,
Cinemark and NCM, Inc.). The available cash distribution to the members of NCM LLC for 2019 was approximately $148.9
million, of which approximately $72.5 million was distributed to NCM, Inc. NCM, Inc. expects to use cash received from
future available cash distributions and its cash balances to fund payments associated with the TRA with the founding members
and current and future dividends as declared by the Board of Directors, including a dividend declared on February 20, 2020 of
$0.19 per share (approximately $14.8 million) on each share of the Company’s common stock (not including outstanding
restricted stock) to stockholders of record on March 3, 2020 to be paid on March 17, 2020. The Company will also consider

opportunistically using cash received for partial repayments of NCM LLC's outstanding debt balance, while ensuring the
Company's financial flexibility is maintained. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient
to fund payments associated with the TRA with the founding members, income taxes and its regular dividend for the
foreseeable future at the discretion of the Board of Directors. The declaration, payment, timing and amount of any future
dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and
advertising market business conditions, the Company’s financial condition, available cash, current and anticipated cash needs,
including opportunities to reinvest in the business and any other factors that the Board of Directors considers relevant. The
Company intends to pay a regular quarterly dividend for the foreseeable future at the discretion of the Board of Directors
consistent with the Company’s intention to distribute substantially all its free cash flow to stockholders through its quarterly
dividend.

Capital Expenditures

Capital expenditures of NCM LLC include digital applications being developed primarily by our programmers and

outside consultants, capitalized software development or upgrades for our Digital Content Software and advertising proposal
and inventory management, audience targeting and data management systems, equipment required for our Customer
Experience Center and content production and post-production facilities, office leasehold improvements, desktop equipment for
use by our employees, and in certain cases, the costs necessary to digitize all or a portion of a network affiliate’s theaters when
they are added to our network. Capital expenditures in 2019 were $15.3 million (including $7.6 million associated with digital
product development; $2.0 million associated with certain implementation and prepaid costs associated with Cloud Computing
Arrangements related to the planned upgrade of our planning, proposal and inventory tracking system; and $0.8 million
associated with network affiliate additions) compared to $15.4 million (including $6.9 million associated with digital product
development; $1.9 million in leasehold improvements at our new corporate headquarters, of which $1.1 million was reimbursed
by the landlord for a net cash expenditure of $0.8 million; and $0.9 million associated with network affiliate additions) for the
2018 period. The capital expenditures have typically been satisfied through cash flow from operations. All capital
expenditures related to the DCN within the founding members’ theaters have been made by the founding members under the
ESAs. We expect they will continue to be made by the founding members in accordance with the ESAs.

We expect to make approximately $14.0 million to $16.0 million of capital expenditures in fiscal 2020, including

approximately $7.0 million for digital product development. We expect these digital products to allow us to capture exclusive
first party data on our movie audiences and build our own foundational capabilities for digital ad buying, selling and serving.
We also expect approximately $2.4 million of capital expenditures related to upgrades to our Digital Content Software
distribution and content management software and our other internal management systems, including our proposal, inventory
and data management systems, reporting systems, network equipment related to currently contracted network affiliate theaters,
server and storage upgrades and software licensing. Our capital expenditures may increase as we add additional network
affiliates. We expect that additional expenditures, if any, would be funded in part by additional cash flows associated with
those new network affiliates. The commitments associated with our operating lease requirements are included in “Contractual
and Other Obligations” below.

Financings

On October 8, 2019, NCM LLC completed a private offering of $400.0 million aggregate principal amount of 5.875%

senior secured notes due 2028. The 2028 Notes will mature on April 15, 2028. Interest on the 2028 Notes accrues at a rate of
5.875% per annum and is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15,
2020. NCM LLC will pay interest to those persons who were holders of record at the close of business on the April 1 and
October 1 immediately preceding the interest payment date. At any time prior to April 15, 2023, NCM LLC may redeem all or
any portion of the 2028 Notes at a redemption price equal to 100% of the principal amount plus a make-whole premium, plus
accrued and unpaid interest, if any, to the redemption date. On or after April 15, 2023, NCM LLC may redeem all or any
portion of the 2028 Notes at specified redemption prices, plus accrued and unpaid interest, if any, to the redemption date. In
addition, at any time prior to April 15, 2023, NCM LLC may on any one or more occasions redeem up to 35% of the original
aggregate principal amount of the 2028 Notes from the net proceeds of certain equity offerings at a redemption price equal to
105.875% of the principal amount of the 2028 Notes redeemed, plus accrued and unpaid interest, if any, to the redemption date,
provided that at least 65% of the original aggregate principal amount of the 2028 Notes remains outstanding after each such
redemption and the redemption occurs within 90 days after the closing of such applicable equity offering.

On November 7, 2019, NCM LLC redeemed the entire $400.0 million aggregate principal amount of NCM LLC’s
existing Notes due 2022. The redemption price for the Notes due 2022 was 101.000% of the principal amount thereof plus
accrued and unpaid interest thereon, to but not including the redemption date.

In June 2018, we entered into a credit agreement to replace NCM LLC's previous senior secured credit facility.
Consistent with the structure of the previous facility, the new credit agreement consists of a term loan facility and a revolving
credit facility for $270.0 million and $175.0 million, respectively. The new agreement extended the maturity dates by 5.5 years

to June 20, 2025 for the term loan facility and 3.5 years to June 20, 2023 for the revolving credit facility. The interest rate under
the term loan facility is either the LIBOR index plus 3.00% or the base rate plus 2.00% and the rate under the revolving credit
facility is either the LIBOR index plus an applicable margin ranging from 1.75%-2.25% or the base rate plus an applicable
margin ranging from 0.75%-1.25%. The applicable margin for the revolving credit facility is determined quarterly and is
subject to adjustment based upon a consolidated net senior secured leverage ratio for NCM LLC. As of December 26, 2019,
NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility and a $266.6 million term loan,
following NCM LLC's required principal amortization payments of $3.4 million which reduced the outstanding balance to
$266.6 million from $270.0 million.

NCM LLC repurchased and canceled a total of $5.0 million and $15.0 million of the Notes due 2026 during 2019 and
2018, respectively, reducing the principal amount to $230.0 million as of December 26, 2019. These repurchases were treated
as partial debt extinguishments and resulted in the realization of a non-operating gain, net of written off debt issuance costs, of
$0.3 million and $0.6 million during the years ended December 26, 2019 and December 27, 2018, respectively. These re-
purchases are expected to result in interest savings to maturity of approximately $8.9 million.

The senior secured credit facility contains a number of covenants and various financial ratio requirements, including,
(i) a consolidated net total leverage ratio covenant of 6.25 times for each quarterly period and (ii) with respect to the revolving
credit facility, maintaining a consolidated net senior secured leverage ratio of equal to or less than 4.50 times on a quarterly
basis for each quarterly period in which a balance is outstanding on the revolving credit facility. In addition, NCM LLC is
permitted to make quarterly dividend payments and other restricted payments with its available cash as long as NCM LLC’s
consolidated net senior secured leverage ratio (after giving effect to any such payment) is below 5.50 times and no default or
event of default has occurred and continues to occur under the senior secured credit facility. As of December 26, 2019, NCM
LLC’s consolidated net senior secured leverage ratio was 3.0 times (versus the dividend payment restriction of 5.50 times and
the covenant of 4.50 times) and NCM LLC's consolidated net total leverage ratio was 4.0 times (versus the covenant
of 6.25 times).

There are no borrower distribution restrictions as long as NCM LLC’s consolidated net senior secured leverage ratio is

below 5.5 times and NCM LLC is in compliance with its debt covenants. If there are limitations on the restricted payments,
NCM LLC may not declare or pay any dividends, make any payments on account of NCM LLC, set aside assets for the
retirement or other acquisition of capital stock of the borrower or any subsidiary, or make any other distribution for obligations
of NCM LLC. When these restrictions are effective, NCM LLC may still pay the services fee and reimbursable costs pursuant
to terms of the management agreement. NCM, Inc. can also make payments pursuant to the TRA in the amount, and at the time
necessary to satisfy the contractual obligations with respect to the actual cash tax benefits payable to NCM LLC’s founding
members.

As a result of the issuance of the Notes due 2028 and redemption of the Notes due 2022, we extended the average

maturities of our debt and as of December 26, 2019, the weighted average remaining maturity was 6.9 years. As of
December 26, 2019, approximately 67% of our total borrowings bear interest at fixed rates. The remaining 33% of our
borrowings bear interest at variable rates and as such, our net income and earnings per share could fluctuate with market
interest rate fluctuations that could increase or decrease the interest paid on our borrowings.

Critical Accounting Policies

The significant accounting policies of the Company are described in Note 1 to the audited Consolidated Financial

Statements included elsewhere in this document. Certain accounting policies involve significant judgments, assumptions and
estimates by management that have a material impact on the carrying value of certain assets and liabilities, which management
considers critical accounting policies. The judgments, assumptions and estimates used by management are based on historical
experience, knowledge of the accounts and other factors, which are believed to be reasonable under the circumstances and are
evaluated on an ongoing basis. Because of the nature of the judgments and assumptions made by management, actual results
could differ from these judgments and estimates, which could have a material impact on the carrying values of assets and
liabilities and the results of operations of the Company.

Allowance for Doubtful Accounts

Nature of Estimates Required. The allowance for doubtful accounts represents management’s estimate of probable

credit losses inherent in its trade receivables, which represent a significant asset on the balance sheet. Estimating the amount of
the allowance for doubtful accounts requires significant judgment and the use of estimates related to the amount and timing of
estimated losses based on historical loss experience, consideration of current economic trends and conditions and debtor-
specific factors, all of which may be susceptible to significant change. Amounts deemed uncollectible within the account
receivable balance are charged against the allowance, while recoveries of amounts previously charged are credited to the
allowance. A provision for bad debt is charged to operations based on management’s periodic evaluation of the factors
previously mentioned, as well as, other pertinent factors. To the extent actual outcomes differ from management estimates,
additional provision for bad debt could be required that could adversely affect earnings or financial position in future periods.
44

Sensitivity Analysis. As of December 26, 2019, our allowance for doubtful accounts was $6.2 million, or 3.5% of the
gross accounts receivable balance. A 10% difference in the allowance for doubtful accounts as of December 26, 2019 would
have affected net income attributable to NCM, Inc. by approximately $0.6 million.

Share-Based Compensation

Nature of Estimates Required. NCM, Inc.’s 2016 Equity Incentive Plan and its 2007 Equity Incentive Plan, as amended
(the “Equity Incentive Plans”) are treated as equity plans under the provisions of Accounting Standards Codification ASC 718 –
Compensation – Stock Compensation, and the determination of fair value of options, restricted stock and restricted stock units
for accounting purposes requires that management make estimates and judgments. Stock options are granted using the Black-
Scholes option pricing model to estimate the fair value of stock option grants, which was affected by our stock price and a
number of assumptions, including expected term, expected volatility, risk-free interest rate and expected dividends.

The fair value of restricted stock and restricted stock units is based on the closing market price of our common stock on

the date of grant. Restricted stock vest upon the achievement of Company three-year cumulative performance measures and
service conditions or only service conditions whereby they vest ratably over three years. Restricted stock units vest after the
completion of a service period of thirteen months. Compensation expense equal to the fair value of each restricted stock award
or restricted stock unit is recognized ratably over this requisite service period. For the restricted stock awards including
performance vesting conditions, compensation expense is based on management’s projections and the probability of
achievement of those targets, which requires considerable judgment. We record a cumulative adjustment to share-based
compensation expense in periods that we change our estimate of the number of shares expected to vest. Additionally, we
ultimately adjust the expense recognized to reflect the actual vested shares following the resolution of the performance
conditions. Further, we estimate a forfeiture rate to reflect the potential separation of employees.

Assumptions and Approach Used. In determining the value of stock options, we estimated an expected term based upon
historical actuals and company peer actuals and adjusted it by the cost of equity in order to incorporate the impact of the market
condition, expected dividend yield based upon our expectation of the dividend that would be paid out on the underlying shares
during the expected term of the option. Expected volatility is based on our historical stock prices using a mathematical formula
to measure the standard deviation of the change in the natural logarithm of our underlying stock price over a period of time
commensurate with the expected term. The risk-free interest rate is derived from the zero coupon rate on U.S. Treasury
instruments with a term commensurate with the award’s expected term.

For restricted stock with vesting contingent on the achievement of Company performance conditions, the amount of

compensation expense is estimated based on the expected achievement of the performance condition. This requires us to make
estimates of the likelihood of the achievement of Company performance conditions, which is highly judgmental. We base our
judgments as to the expected achievement of Company performance conditions based on the financial projections of the
Company that are used by management for business purposes, which represent our best estimate of expected Company
performance. We evaluate the assumptions used to value stock-based awards on a quarterly basis. If factors change and we
employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the
past. If there are any modifications or cancellations of stock-based awards, we may be required to accelerate, increase or
decrease any remaining, unrecognized stock-based compensation expense. To the extent that we grant additional stock-based
awards, compensation expense will increase in relation to the fair value of the additional grants. Compensation expense may be
significantly impacted in the future to the extent our estimates differ from actual results. Further, we estimate a forfeiture rate of
restricted stock based upon historical forfeitures. If future forfeitures differ significantly from our past experience our
compensation expense may be significantly impacted.

Income Taxes

Nature of Estimates Required. We account for income taxes in accordance with ASC 740 – Income Taxes, which requires

an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred tax assets and
liabilities arise from the differences between the tax basis of an asset or liability and its reported amount in the audited
Consolidated Financial Statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the
taxes will actually be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are to be
established when necessary to reduce deferred tax assets to the amount expected to be realized. We recognized a deferred tax
asset associated with the basis difference in our investment in NCM LLC. However, a portion of the total basis difference will
only reverse upon the sale of our interest in NCM LLC, which we expect would result in a capital loss. Therefore, as of
December 26, 2019 we have a valuation allowance in the amount of $80.6 million against the deferred tax asset to which this
portion relates. We have incurred taxable losses in recent years due primarily to amortization of intangible assets recorded on
our tax returns resulting from an election by NCM LLC made under Internal Revenue Code § 754 of the Internal Revenue
Code to step-up the Company’s outside basis in its share of NCM LLC’s inside basis of assets under IRC §743(b). No
valuation allowance is deemed necessary for these deferred tax assets as we expect future taxable income (as amortization of
these items will cease) and we expect to be able to utilize our net operating loss carryforwards prior to their expiration. Further,

we have and continue to expect to generate pre-tax book income. On December 22, 2017, the U.S. government enacted the Tax
Act. This legislation led to adjustments to our net deferred tax assets and payable to founding members under the TRA
primarily due to the reduction in the U.S. federal corporate tax rate. Further due to our expectation of future taxable income we
have not recorded any impact of the Net Business Interest Expense Limitation IRC § 163(j) on our payable to founding
members under the TRA.

In addition, due to the basis differences resulting from our IPO-related transactions (including the TRA with the founding

members) and subsequent adjustments pursuant to the common unit adjustment agreement, we are required to make cash
payments under the TRA to the founding members in amounts equal to 90% of our actual tax benefit realized from the tax
amortization of the basis difference for certain deferred assets noted above. The requirements of the TRA, as amended, are
highly technical and complex and involve management’s judgment, including judgments to determine hypothetical tax
outcomes exclusive of the IPO date transaction and agreements. If we were to fail to meet certain of the requirements of the
TRA, we could be subject to additional payments to taxing authorities or to the founding members. We recognize the tax
benefit from an uncertain tax position only when it is more likely than not, based on the technical merits of the position, that the
tax position will be sustained upon examination, including the resolution of any related appeals or litigation. The tax benefits
recognized in the audited Consolidated Financial Statements from such a position are measured as the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate resolution.

For fiscal 2019, our provision for income taxes was $12.4 million. Changes in management’s estimates and

assumptions regarding the enacted tax rate applied to deferred tax assets and liabilities, the ability to realize the value of
deferred tax assets, or the timing of the reversal of tax basis differences and judgments used to determine hypothetical tax
outcomes exclusive of the IPO date transaction and agreements could impact the provision for income taxes and change the
effective tax rate.

Recent Accounting Pronouncements

For a discussion of the recent accounting pronouncements relevant to our business operations, refer to the information

provided under Note 1 to the audited Consolidated Financial Statements included elsewhere in this document.

Related-Party Transactions

For a discussion of the related-party transactions, refer to the information provided under Note 9 to the audited

Consolidated Financial Statements included elsewhere in this document.

Off-Balance Sheet Arrangements

Our operating lease obligations, which primarily include office leases, are not reflected on our balance sheet. Refer to
“—Contractual and Other Obligations” for further detail. We do not believe these arrangements are material to our current or
future financial condition, results of operations, liquidity, capital resources or capital expenditures.

Contractual and Other Obligations

Our contractual obligations as of December 26, 2019 were as follows:

Payments Due by Period (in millions)

Within
1 fiscal year

1-3
fiscal years

3-5
fiscal years

Thereafter

Total

Borrowings (1) ....................................................................... $
Cash interest on borrowings (2).............................................
Office leases...........................................................................
Payable to founding members under TRA (3) .......................

Total contractual cash obligations..................................... $

50.2

3.7

14.2

70.8

2.7

5.4

99.2

7.6

28.5

44.4

98.6

7.7

29.4

883.1

118.4

18.8

125.9

935.6

366.4

37.8

198.0

140.7

180.1

$ 1,146.2

$ 1,537.8

(1) We have a $175.0 million variable rate revolving credit facility of which $39.0 million was outstanding as of

December 26, 2019 and $3.6 million is restricted due to outstanding letters of credit. Debt service requirements under
this agreement depend on the amounts borrowed and the level of the base interest rate, in addition to a commitment fee
on the unused portion of the revolving credit facility. Refer to further discussion of the secured credit facility under “—
Financial Condition and Liquidity-Financings” above.
The amounts of future cash interest payments in the table above are based on the amount outstanding on the Senior
Secured Notes due 2028, Senior Unsecured Notes due 2026, term loans and revolving credit facility, as well as,
estimated rates of interest over the term of the variable rate revolving credit facility and term loan. The Senior Secured
Notes due 2028 are at a fixed rate of 5.875%. The Senior Unsecured Notes due 2026 are at a fixed rate of 5.750%. In

(2)

(3)

addition, we have variable rate term loans and a revolving credit facility. Debt service requirements under this
agreement depend on the amounts borrowed and the level of the base interest rate, in addition to a commitment fee on
the unused portion of the revolving credit facility. Refer to further discussion of the secured credit facility under “—
Financial Condition and Liquidity-Financings” above.
The TRA entered into at the completion of our IPO provides for the payment by us to the founding members of 90% of
the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as
a result of certain increases in our proportionate share of tax basis in NCM LLC’s tangible and intangible assets. The
payments to NCM LLC’s founding members are based, in part, on actual annual income and as such, will vary based on
our operating results. The value in the table represents the estimated amounts payable under the TRA as of
December 26, 2019.

The ESAs require payments based on a combination of founding member attendance, the number of digital screens of

each founding member and the number of higher quality digital cinema systems of each NCM LLC founding member. The
amount relating to the attendance factor will vary from quarter to quarter and year to year as theater attendance varies, while the
amount relating to the digital screens and digital cinema systems will also vary quarter to quarter and year to year as screens are
converted to digital screens and other screens are added or removed through acquisition, divestiture or closure activities of the
founding members. The payments made to the founding members also will vary due to the escalation of the rates paid for each
factor pursuant to the amended and restated ESAs. The rate per attendee increases 8% every five years, with the next such
increase taking effect for fiscal year 2022, while the rate per digital screen and digital cinema system screen increase 5%
annually. Following the 2019 ESA Amendments, Cinemark and Regal also receive an additional monthly theater access fee
beginning November 1, 2019 in consideration for NCM LLC's access to certain on-screen advertising inventory after the
advertised showtime of a feature film. These fees are also based upon a fixed payment per patron beginning at $0.025 per
patron on November 1, 2019, (ii) $0.0375 per patron beginning on November 1, 2020, (iii) $0.05 per patron beginning on
November 1, 2021, (iv) $0.052 per patron beginning on November 1, 2022 and (v) increase 8% every five years beginning
November 1, 2027. The theater access fee paid in the aggregate to all founding members cannot be less than 12% of NCM
LLC’s aggregate advertising revenue (as defined in the ESA), or it will be adjusted upward to reach this minimum payment.
Payments to affiliates vary based on revenue attributed to the affiliate for the period and thus will vary from quarter to quarter
and year to year as advertising revenue varies. If a network affiliate achieves the attendance set forth in their respective
agreement, the Company has guaranteed minimum revenue for the network affiliate per attendee if such amount paid under the
revenue share arrangement is less than its guaranteed amount. The table above does not include amounts payable under the
ESAs or to affiliates as they are based on variable factors, which are not capable of precise estimation. Refer to Note 13 to the
audited Consolidated Financial Statements included elsewhere in this document for the maximum guarantee amount under the
affiliate agreements.

Seasonality

Our revenue and operating results are seasonal in nature, coinciding with the timing of marketing expenditures by our

advertising clients and to a lesser extent the attendance patterns within the film exhibition industry. Both advertising
expenditures and theater attendance tend to be higher during the second, third, and fourth fiscal quarters. 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. The
actual quarterly results for each quarter could differ materially depending on these factors or other risks and uncertainties.
Based on our historical experience, our 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. Accordingly, there can be no assurances that seasonal variations will not materially affect our results of operations in
the future.

The following table reflects the quarterly percentage of total revenue for the fiscal years ended 2017, 2018 and 2019:

FY 2017 ..........................................................................................
FY 2018 ..........................................................................................
FY 2019 ..........................................................................................

16.9%
18.2%
17.3%

22.8%
25.8%
24.8%

27.3%
24.9%
24.8%

33.0%
31.1%
33.1%

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

The primary market risk to which we are exposed is interest rate risk. The Notes due 2026 and the Notes due 2028 bear

interest at fixed rates, and therefore are not subject to market risk. As of December 26, 2019, the interest rate risk that we are
exposed to is related to our $175.0 million revolving credit facility and our $266.6 million term loan. A 100 basis point
fluctuation in market interest rates underlying our term loan and revolving credit facility would have the effect of increasing or
decreasing our cash interest expense by approximately $3.1 million for an annual period on the $39.0 million and $266.6
million outstanding as of December 26, 2019 on our revolving credit facility and term loan, respectively.

Item 8.

Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

National CineMedia, Inc. and Subsidiary

Report of Independent Registered Public Accounting Firm..............................................................................................

Consolidated Balance Sheets as of December 26, 2019 and December 27, 2018 ............................................................

Consolidated Statements of Income for the years ended December 26, 2019, December 27, 2018 and December 28,
2017 ...................................................................................................................................................................................

Consolidated Statements of Equity/(Deficit) for the years ended December 26, 2019, December 27, 2018 and
December 28, 2017............................................................................................................................................................

Consolidated Statements of Cash Flows for the years ended December 26, 2019, December 27, 2018 and December
28, 2017 .............................................................................................................................................................................

Notes to Consolidated Financial Statements .....................................................................................................................

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of
National CineMedia, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of National CineMedia, Inc. and subsidiary (the "Company")
as of December 26, 2019 and December 27, 2018, the related consolidated statements of income, comprehensive income,
equity(deficit), and cash flows for each of the three years in the period ended December 26, 2019 and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 26, 2019 and December 27, 2018, the results of its operations
and its cash flows for each of the three years in the period ended December 26, 2019 in conformity with accounting principles
generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 26, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 20, 2020, expressed an unqualified opinion on the Company's internal control over
financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company changed its method of accounting for leases effective
December 28, 2018 due to adoption of Accounting Standards Codification Topic 842 - Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Deloitte & Touche LLP
Denver, Colorado
February 20, 2020

We have served as the Company’s auditor since 2006.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)

December 26, 2019

December 27, 2018

ASSETS

CURRENT ASSETS:

Cash and cash equivalents ............................................................................................................................... $

Short-term marketable securities .....................................................................................................................

Receivables, net of allowance of $6.2 and $6.0, respectively .........................................................................

Income tax receivable ......................................................................................................................................

Amounts due from founding members, net .....................................................................................................

Current portion of notes receivable - founding members (related parties of $0.0 and $4.2, respectively) .....

Prepaid expenses and other current assets .......................................................................................................

Total current assets.....................................................................................................................................

NON-CURRENT ASSETS:

Property and equipment, net of accumulated depreciation of $70.7 and $62.5, respectively .........................

Intangible assets, net of accumulated amortization of $198.9 and $172.7, respectively.................................

Deferred tax assets, net of valuation allowance of $81.6 and $80.1, respectively ..........................................

Other investments ............................................................................................................................................

Long-term marketable securities......................................................................................................................

Debt issuance costs, net ...................................................................................................................................

Other assets ......................................................................................................................................................

Total non-current assets .............................................................................................................................

55.9

17.5

170.8

—

6.6

—

3.5

254.3

33.2

643.7

162.1

1.0

7.5

3.9

24.3

875.7

TOTAL ASSETS.................................................................................................................................................... $

1,130.0

LIABILITIES AND EQUITY/(DEFICIT)

CURRENT LIABILITIES:

Amounts due to founding members, net .......................................................................................................... $

Payable to founding members under the TRA (related party payables of $10.3 and $11.2, respectively)......

Accrued expenses.............................................................................................................................................

Accrued payroll and related expenses..............................................................................................................

Accounts payable .............................................................................................................................................

Deferred revenue..............................................................................................................................................

Short-term debt ................................................................................................................................................

Other current liabilities ....................................................................................................................................

Total current liabilities ...............................................................................................................................

NON-CURRENT LIABILITIES:

Long-term debt, net of debt issuance costs of $9.0 and $7.8, respectively .....................................................

Payable to founding members under the TRA (related party payables of $133.5 and $141.1, respectively)..

Other liabilities.................................................................................................................................................

Total non-current liabilities........................................................................................................................

Total liabilities ...........................................................................................................................................

COMMITMENTS AND CONTINGENCIES (NOTE 13)

EQUITY/(DEFICIT):

NCM, Inc. Stockholders’ Equity/(Deficit):

Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding, respectively

Common stock, $0.01 par value; 175,000,000 shares authorized, 77,568,986 and 76,976,398 issued and
outstanding, respectively..............................................................................................................................

Additional paid in capital (deficit)...................................................................................................................

Retained earnings (distributions in excess of earnings)...................................................................................

Total NCM, Inc. stockholders’ equity/(deficit)..........................................................................................

Noncontrolling interests...................................................................................................................................

Total equity/(deficit) ..................................................................................................................................

36.8

14.2

22.1

13.8

20.7

7.6

2.7

1.6

119.5

923.9

183.8

24.0

1,131.7

1,251.2

—

0.8

(209.2)

(171.1)

(379.5)

258.3

(121.2)

41.4

24.0

149.9

0.3

5.8

5.6

3.9

230.9

33.6

684.5

173.9

3.0

10.2

5.0

0.7

910.9

1,141.8

30.0

15.5

21.7

15.3

18.0

7.3

2.7

—

110.5

920.9

195.6

4.0

1,120.5

1,231.0

—

0.8

(215.2)

(153.6)

(368.0)

278.8

(89.2)

TOTAL LIABILITIES AND EQUITY/DEFICIT ................................................................................................. $

1,130.0

1,141.8

Refer to accompanying notes to Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except share and per share data)

Revenue (including revenue from related parties of $23.0, $28.4
and $29.9, respectively) ............................................................................... $
OPERATING EXPENSES:

Advertising operating costs ........................................................................
Network costs .............................................................................................
Theater access fees and revenue share to founding members
(including fees to related parties of $56.6, $69.0 and $76.5,
respectively) ............................................................................................
Selling and marketing costs........................................................................
Administrative and other costs ...................................................................
Depreciation expense .................................................................................
Amortization expense.................................................................................
Amortization of intangibles recorded for network theater screen leases ...
Total.......................................................................................................
OPERATING INCOME........................................................................

NON-OPERATING EXPENSES:

Interest on borrowings................................................................................
Interest income ...........................................................................................
Loss on early retirement of debt, net..........................................................
Loss (gain) on re-measurement of the payable to founding
members under the TRA.........................................................................
Other non-operating income.......................................................................
Total .......................................................................................................
INCOME BEFORE INCOME TAXES ..........................................................
Income tax expense ....................................................................................
CONSOLIDATED NET INCOME.................................................................
Less: Net income attributable to noncontrolling interests.........................
NET INCOME ATTRIBUTABLE TO NCM, INC.........................................
COMPREHENSIVE INCOME ATTRIBUTABLE TO NCM, INC. .............. $

NET INCOME PER NCM, INC. COMMON SHARE:

Basic ........................................................................................................... $
Diluted........................................................................................................ $

December 26,
2019

Years Ended

December 27,
2018

December 28,
2017

444.8

441.4

426.1

38.3

13.5

82.7

64.9

43.8
13.6

—

26.7

283.5

161.3

58.0
(2.1)
5.6

1.1
(0.4)
62.2

99.1

12.4

86.7

50.6

36.1

0.47

0.46

37.4

13.3

81.7

66.5

48.3
12.6

27.3

—

287.1

154.3

55.4
(1.5)
0.7

(3.8)
(0.2)
50.6

103.7

23.5

80.2

50.4

29.8

0.39

0.37

32.4

15.8

76.5

72.0

37.9
11.0

26.6

—

272.2

153.9

52.8
(1.2)
—

(192.2)
(0.3)
(140.9)
294.8

180.3

114.5

56.2

58.3

0.89

0.48

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic ...........................................................................................................
Diluted........................................................................................................

77,345,577
77,782,567

76,859,087
157,403,910

65,226,817
151,067,270

Refer to accompanying notes to Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EQUITY/ (DEFICIT)
(In millions, except share and per share data)

NCM, Inc.

Common Stock

Consolidated

Amount

Additional
Paid in
Capital
(Deficit)

Retained
Earnings
(Distribution
in Excess of
Earnings)

Noncontrolling
Interest

Balance—December 29, 2016 ............................................ $

(232.2)

59,874,412

Distributions to founding members ....................................

NCM LLC equity issued for purchase of
intangible asset.................................................................

Income tax and other impacts of NCM LLC
ownership changes ...........................................................

(85.0)

201.8

(23.6)

—

Issuance of shares to founding members ............................

84.9

15,600,000

NCM, Inc. investment in NCM LLC ..................................

Comprehensive income, net of tax......................................

Share-based compensation issued.......................................

Share-based compensation expense/capitalized .................

Cash dividends declared $0.88 per share............................

Balance—December 28, 2017 ............................................ $

Cumulative-effect adjustment for adoption of 2014-09......

Distributions to founding members ....................................

NCM LLC equity issued for purchase of
intangible asset.................................................................

Income tax and other impacts of NCM LLC
ownership changes ...........................................................

Comprehensive income, net of tax......................................

Share-based compensation issued.......................................

Share-based compensation expense/capitalized .................

Cash dividends declared $0.68 per share............................

Balance—December 27, 2018 ............................................ $