National CineMedia Inc (NCMI) Reports Mixed Q3 2023 Results Amid Restructuring
Q3 2023 revenue increased by 27.7% year-over-year, with total attendance up 23.5%.
NCM LLC's operating loss widened to $150.7 million due to a charge related to Regal's ESA termination.
NCM Inc. reports a net income of $181.8 million, largely due to gains on re-measurement and reconsolidation of NCM LLC.
NCM LLC expects Q4 2023 total revenue of $85.0 million to $88.0 million, with adjusted OIBDA of $30.0 million to $33.0 million.
On November 7, 2023, National CineMedia Inc (NASDAQ:NCMI) disclosed its financial results for the third quarter of 2023, which ended on September 28, 2023. The company, which operates the largest cinema advertising platform in the U.S., reported a significant increase in revenue and attendance, indicating a strong recovery in the cinema advertising sector. However, the quarter was also marked by a substantial operating loss due to charges associated with the termination of an agreement with Regal Cinemas.
Financial Highlights and Challenges
NCM LLC, the operating arm of National CineMedia Inc, saw its total operating revenue climb to $69.6 million, a 27.7% increase from the $54.5 million reported in the same quarter of the previous year. This growth was attributed to a 31.0% rise in national advertising revenue and a 31.6% increase in local and regional advertising revenue. Despite these gains, NCM LLC experienced an operating loss of $150.7 million, primarily due to a $125.6 million charge related to Regal's termination of its ESA.
Company-Wide Results and Restructuring
NCM Inc.'s total revenue was $24.7 million, a decrease of 54.7% from the third quarter of 2022. This decline was largely due to the deconsolidation of NCM LLC from April 11, 2023, through August 7, 2023. Despite the operating loss of $12.3 million, NCM Inc. reported a net income of $181.8 million, or $2.89 per share, compared to a net loss of $8.9 million, or $1.09 per share, in the prior year. This turnaround was largely driven by a $35.3 million gain on re-measurement and a $168.0 million gain on reconsolidation of NCM LLC following its emergence from bankruptcy.
Balance Sheet and Shareholder Actions
As part of its financial restructuring, NCM LLC eliminated $1.2 billion of debt, resulting in negative net debt of $13.0 million, net of cash. The company also underwent a reverse stock split and cancellation of shares previously owned by Regal Cinemas, which significantly reduced the number of shares outstanding. As of September 28, 2023, there were 96,784,236 shares outstanding.
Forward Outlook
Looking ahead to the fourth quarter of 2023, NCM LLC expects total revenue to be between $85.0 million and $88.0 million, with adjusted OIBDA anticipated to be in the range of $30.0 million to $33.0 million. These projections are lower than the total revenue and adjusted OIBDA reported for the fourth quarter of 2022.
Conference Call and Investor Relations
NCM hosted a conference call and audio webcast on November 7, 2023, to discuss the quarterly results and provide further insights into the company's performance and outlook. Interested parties can access a replay of the call until November 23, 2023.
For value investors and potential GuruFocus.com members, National CineMedia Inc's mixed third-quarter results highlight the company's resilience in driving revenue growth and attendance in a challenging environment. The successful restructuring and the strategic moves made by the company's management could position NCM for future growth, despite the significant operating loss incurred due to the termination of the Regal ESA. Investors will likely watch closely how the company's strategic initiatives unfold in the coming quarters.
Explore the complete 8-K earnings release (here) from National CineMedia Inc for further details.
This article first appeared on GuruFocus.
