UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-Q

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


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

For the quarterly period ended September ~~28, 2017~~

29, 2022


☐			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~~

~~20-5665602~~

Delaware

20-5665602

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

~~9110 East Nichols Avenue, Suite 200~~

~~Centennial, Colorado~~

~~80112-3405~~

6300 S. Syracuse Way, Suite 300

Centennial

Colorado

80111

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (303) 792-3600

Securities registered pursuant to Section 12(b) of the Act:


Common Stock, par value $0.01 per share	NCMI	The Nasdaq Stock Market LLC
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ☒No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

☐

Accelerated filer

☐

☒

Non-accelerated filer

☐

~~(Do not check if a smaller reporting company)~~

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~~period 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 Exchange Act). Yes ☐ No ☒

As of November ~~2, 2017, 78,501,468~~3, 2022, 82,000,152 shares of the registrant’s common stock (including unvested restricted shares), par value of $0.01 per share, were outstanding.

TABLE OF CONTENTS

PART I

Item 1. Financial Statements

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share data)

(UNAUDITED)


								As of
	September 28, 2017			December 29, 2016				September 29, 2022		December 30, 2021
ASSETS							ASSETS
CURRENT ASSETS:							CURRENT ASSETS:
Cash and cash equivalents	$	30.4		$	23.0		Cash and cash equivalents	$	73.5	$	101.2
Short-term marketable securities		3.7			26.1		Short-term marketable securities	0.3		0.3
Receivables, net of allowance of $6.0 and $6.3, respectively		118.4			160.5
Prepaid expenses		4.1			3.1
Income tax receivable		0.4			2.4
Current portion of notes receivable - founding members		4.2			5.6
Other current assets		0.5			0.4
Receivables, net of allowance of $1.7 and $1.7, respectively							Receivables, net of allowance of $1.7 and $1.7, respectively	58.8		53.0

Other current assets and prepaid expenses							Other current assets and prepaid expenses	4.7		3.9
Total current assets		161.7			221.1		Total current assets	137.3		158.4
NON-CURRENT ASSETS:							NON-CURRENT ASSETS:
Property and equipment, net of accumulated depreciation of $69.3 and $64.1, respectively		29.2			29.6
Intangible assets, net of accumulated amortization of $138.8 and $118.9, respectively		732.6			560.5
Deferred tax assets		199.0			209.1
Long-term notes receivable, net of current portion - founding members		8.3			8.3
Property and equipment, net of accumulated depreciation of $55.7 and $59.9, respectively							Property and equipment, net of accumulated depreciation of $55.7 and $59.9, respectively	12.7		21.3
Intangible assets, net of accumulated amortization of $263.9 and $245.6, respectively							Intangible assets, net of accumulated amortization of $263.9 and $245.6, respectively	596.8		606.3
Deferred tax assets, net of valuation allowance of $227.5 and $223.8, respectively							Deferred tax assets, net of valuation allowance of $227.5 and $223.8, respectively	—		—
Other investments		3.6			6.6		Other investments	0.8		0.8
Long-term marketable securities		15.8			19.6		Long-term marketable securities	1.0		1.0
Debt issuance costs, net		1.4			1.9		Debt issuance costs, net	4.8		4.5
Other assets		1.8			0.7		Other assets	22.0		25.1
Total non-current assets		991.7			836.3		Total non-current assets	638.1		659.0
TOTAL ASSETS	$	1,153.4		$	1,057.4		TOTAL ASSETS	$	775.4	$	817.4
LIABILITIES AND EQUITY/(DEFICIT)							LIABILITIES AND EQUITY/(DEFICIT)
CURRENT LIABILITIES:							CURRENT LIABILITIES:
Amounts due to founding members	$	24.0		$	42.7
Payable to founding members under tax receivable agreement		15.9			18.4
Amounts due to founding members, net							Amounts due to founding members, net	$	14.1	$	11.8
Payable to founding members under tax receivable agreement (including payables to related parties of $0.3 and $0.0, respectively)							Payable to founding members under tax receivable agreement (including payables to related parties of $0.3 and $0.0, respectively)	0.4		—
Accrued expenses		22.4			19.6		Accrued expenses	15.8		13.4
Accrued payroll and related expenses		9.7			12.2		Accrued payroll and related expenses	9.6		7.9
Accounts payable		14.0			17.4		Accounts payable	18.3		16.3
Deferred revenue		5.7			10.3		Deferred revenue	9.6		15.0
Short-term debt							Short-term debt	220.2		3.2
Other current liabilities							Other current liabilities	2.2		2.2
Total current liabilities		91.7			120.6		Total current liabilities	290.2		69.8
NON-CURRENT LIABILITIES:							NON-CURRENT LIABILITIES:
Long-term debt, net of debt issuance costs of $9.2 and $10.7, respectively		910.8			924.3
Deferred tax liability		68.2			48.3
Income tax payable		0.4			2.0
Payable to founding members under tax receivable agreement		144.2			143.4
Long-term debt, net of debt issuance costs of $8.6 and $10.5, respectively							Long-term debt, net of debt issuance costs of $8.6 and $10.5, respectively	901.0		1,094.3
Payable to founding members under tax receivable agreement (including payables to related parties of $14.1 and $11.9, respectively)							Payable to founding members under tax receivable agreement (including payables to related parties of $14.1 and $11.9, respectively)	19.4		16.4
Other liabilities							Other liabilities	18.6		20.4
Total non-current liabilities		1,123.6			1,118.0		Total non-current liabilities	939.0		1,131.1
Total liabilities		1,215.3			1,238.6		Total liabilities	1,229.2		1,200.9
COMMITMENTS AND CONTINGENCIES (NOTE 7)
COMMITMENTS AND CONTINGENCIES (NOTE 8)							COMMITMENTS AND CONTINGENCIES (NOTE 8)
EQUITY/(DEFICIT):							EQUITY/(DEFICIT):
NCM, Inc. Stockholders’ Equity/(Deficit):							NCM, Inc. Stockholders’ Equity/(Deficit):
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued and outstanding, respectively		—			—		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, 75,230,298 and 59,874,412 issued and outstanding, respectively		0.8			0.6
Common stock, $0.01 par value; 260,000,000 and 175,000,000 shares authorized, 81,701,661 and 80,626,889 issued and outstanding, respectively							Common stock, $0.01 par value; 260,000,000 and 175,000,000 shares authorized, 81,701,661 and 80,626,889 issued and outstanding, respectively	0.8		0.8
Additional paid in capital/(deficit)		(111.6	)		(207.7	)	Additional paid in capital/(deficit)	(189.1)		(195.5)
Retained earnings (distributions in excess of earnings)		(250.5	)		(215.6	)	Retained earnings (distributions in excess of earnings)	(376.5)		(332.0)
Total NCM, Inc. stockholders’ equity/(deficit)		(361.3	)		(422.7	)	Total NCM, Inc. stockholders’ equity/(deficit)	(564.8)		(526.7)
Noncontrolling interests		299.4			241.5		Noncontrolling interests	111.0		143.2
Total equity/(deficit)		(61.9	)		(181.2	)	Total equity/(deficit)	(453.8)		(383.5)
TOTAL LIABILITIES AND EQUITY/DEFICIT	$	1,153.4		$	1,057.4
TOTAL LIABILITIES AND EQUITY/(DEFICIT)							TOTAL LIABILITIES AND EQUITY/(DEFICIT)	$	775.4	$	817.4

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In millions, except share and per share data)

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

REVENUE (including revenue from founding members of
   $6.7, $7.6, $22.7 and $22.1, respectively)

$
116.4

$
113.5

$
285.4

$
305.1

OPERATING EXPENSES:

Advertising operating costs

8.9

7.5

21.4

20.8

Network costs

3.7

4.1

11.9

12.9

Theater access fees—founding members

18.1

19.2

57.4

56.8

Selling and marketing costs

17.2

16.8

54.2

54.5

Administrative and other costs

8.8

8.6

28.6

32.9

Depreciation and amortization

9.4

8.9

28.2

26.5

Total

66.1

65.1

201.7

204.4

OPERATING INCOME

50.3

48.4

83.7

100.7

NON-OPERATING EXPENSES:

Interest on borrowings

13.1

14.3

39.4

41.2

Interest income

(0.2
)

(0.3
)

(1.0
)

(1.3
)
Accretion of interest on the discounted payable to
   founding members under tax receivable agreement

3.2

3.4

9.5

10.4

Loss on early retirement of debt

—

10.4

—

10.4

Other non-operating income

—

—

(0.1
)

—

Total

16.1

27.8

47.8

60.7

INCOME BEFORE INCOME TAXES

34.2

20.6

35.9

40.0

Income tax expense (benefit)

2.3

(1.1
)

2.6

1.3

CONSOLIDATED NET INCOME

31.9

21.7

33.3

38.7

Less: Net income attributable to
   noncontrolling interests

22.5

13.5

27.4

28.0

NET INCOME ATTRIBUTABLE TO NCM, INC.

$
9.4

$
8.2

$
5.9

$
10.7

NET INCOME PER NCM, INC. COMMON SHARE:

Basic

$
0.15

$
0.14

$
0.10

$
0.18

Diluted

$
0.15

$
0.13

$
0.10

$
0.18

WEIGHTED AVERAGE SHARES OUTSTANDING:

Basic

63,993,273

59,846,496

61,637,445

59,763,012

Diluted

64,281,581

60,878,806

62,074,577

60,479,977

Dividends declared per common share

$
0.22

$
0.22

$
0.66

$
0.66


	Three Months Ended				Nine Months Ended
	September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
REVENUE (including revenue from related parties of $3.9, $2.7, $11.3 and $4.7, respectively)	$	54.5	$	31.7	$	157.5	$	51.1
OPERATING EXPENSES:
Advertising operating costs	6.3		5.2		19.3		9.9
Network costs	2.1		2.0		6.2		5.7
Theater access fees and revenue share to founding members (including fees to related parties of $15.4, $11.4, $45.2, and $19.8, respectively)	21.3		16.7		62.4		31.0
Selling and marketing costs	10.4		8.2		31.0		24.8
Administrative and other costs	10.8		9.6		30.2		29.4
Impairment of long-lived assets	—		—		5.8		—
Depreciation expense	1.5		2.5		5.1		8.4
Amortization of intangibles recorded for network theater screen leases	6.3		6.2		18.7		18.5
Total	58.7		50.4		178.7		127.7
OPERATING LOSS	(4.2)		(18.7)		(21.2)		(76.6)
NON-OPERATING EXPENSES (INCOME):
Interest on borrowings	19.8		16.6		57.3		48.2
Interest income	(0.1)		—		(0.1)		(0.1)
(Gain) loss on modification and retirement of debt, net	—		—		(5.9)		0.8
(Gain) loss on re-measurement of the payable to founding members under the tax receivable agreement	(2.2)		(1.8)		4.0		(3.2)
Other non-operating (income) expense	—		—		(0.2)		0.1
Total	17.5		14.8		55.1		45.8
LOSS BEFORE INCOME TAXES	(21.7)		(33.5)		(76.3)		(122.4)
Income tax expense	—		—		—		—
CONSOLIDATED NET LOSS	(21.7)		(33.5)		(76.3)		(122.4)
Less: Net loss attributable to noncontrolling interests	(12.8)		(18.3)		(41.5)		(65.1)
NET LOSS ATTRIBUTABLE TO NCM, INC.	$	(8.9)	$	(15.2)	$	(34.8)	$	(57.3)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NCM, INC.	$	(8.9)	$	(15.2)	$	(34.8)	$	(57.3)

NET LOSS PER NCM, INC. COMMON SHARE:
Basic	$	(0.11)	$	(0.19)	$	(0.43)	$	(0.72)
Diluted	$	(0.11)	$	(0.19)	$	(0.43)	$	(0.72)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	81,605,806		80,359,723		81,371,370		79,652,152
Diluted	81,605,806		80,359,723		81,371,370		79,652,152

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (UNAUDITED)

Nine Months Ended

September 28,
2017

September 29,
2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income

$
33.3

38.7

Adjustments to reconcile consolidated net income to net cash provided by
   operating activities:

Deferred income tax expense

4.1

3.8

Depreciation and amortization

28.2

26.5

Non-cash share-based compensation

8.3

13.7

Accretion of interest on the discounted payable to founding members
   under tax receivable agreement

9.5

10.4

Impairment on investment

3.1

0.7

Amortization of debt issuance costs

2.0

2.0

Redemption premium paid and write-off of debt issuance costs related to
   redemption of Senior Notes due 2021

—

10.4

Reversal of tax contingency reserve

(1.7
)

(2.9
)
Other

(0.2
)

(0.1
)
Changes in operating assets and liabilities:

Receivables, net

42.1

16.0

Accounts payable and accrued expenses

(1.7
)

(7.9
)
Amounts due to founding members

(0.4
)

(0.7
)
Payment to founding members under tax receivable agreement

(17.3
)

(23.5
)
Deferred revenue

(4.6
)

5.1

Income taxes and other

(0.7
)

(1.3
)
Net cash provided by operating activities

104.0

90.9

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(7.7
)

(9.0
)
Acquisition of a business

(0.2
)

—

Purchases of marketable securities

(21.7
)

(45.0
)
Proceeds from sale and maturities of marketable securities

48.4

50.5

Purchases of intangible assets from network affiliates

(1.7
)

(1.6
)
Proceeds from notes receivable - founding members

1.4

—

Net cash provided by (used in) investing activities

18.5

(5.1
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of dividends

(42.1
)

(41.4
)
Proceeds from borrowings under the revolving credit facility

60.0

105.0

Repayments of borrowings under the revolving credit facility

(75.0
)

(168.0
)
Proceeds from issuance of Senior Notes due 2026

—

250.0

Redemption of Senior Notes due 2021

—

(207.9
)
Payment of debt issuance costs

—

(4.7
)
Founding member integration and other encumbered theater payments

6.1

1.7

Distributions to founding members

(60.1
)

(42.2
)
Proceeds from stock option exercises

0.6

0.4

Repurchase of stock for restricted stock tax withholding

(4.6
)

(4.8
)
Net cash used in financing activities

(115.1
)

(111.9
)
CHANGE IN CASH AND CASH EQUIVALENTS

7.4

(26.1
)
Cash and cash equivalents at beginning of period

23.0

31.7

Cash and cash equivalents at end of period

$
30.4

$
5.6


	Nine Months Ended
	September 29, 2022		September 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net loss	$	(76.3)	$	(122.4)
Adjustments to reconcile consolidated net loss to net cash used in operating activities:

Depreciation expense	5.1		8.4
Amortization of intangibles recorded for network theater screen leases	18.7		18.5
Non-cash share-based compensation	5.1		6.5
Impairment of long-lived assets	5.8		—
Amortization of debt issuance costs	6.7		3.0
(Gain) loss on modification and retirement of debt, net	(5.9)		0.8
Non-cash loss (gain) on re-measurement of the payable to founding members under the tax receivable agreement	4.0		(3.2)
Other	0.5		0.3
Founding member integration and other encumbered theater payments	2.6		0.3
Payment to the founding members under tax receivable agreement (including payments to related parties of $0.0 and $0.6, respectively)	—		(0.9)
Other cash flows from operating activities	0.2		(0.1)
Changes in operating assets and liabilities:
Receivables, net	(6.5)		(12.3)
Accounts payable and accrued expenses (including payments to related parties of $0.0 and $0.6, respectively)	7.6		4.8
Amounts due to/from founding members, net	1.3		2.0
Deferred revenue	(5.4)		6.0
Other, net	(0.2)		(4.2)
Net cash used in operating activities	(36.7)		(92.5)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(2.0)		(3.9)

Proceeds from sale and maturities of marketable securities	—		0.3

Net cash used in investing activities	(2.0)		(3.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends	(9.5)		(12.9)


Issuance of revolving credit facility	50.0		—
Issuance of term loans	—		50.0
Repayment of Notes due 2028	(19.8)		—
Repayment of term loan facility	(2.4)		(2.3)
Payment of debt issuance costs	(7.0)		(7.2)

Repurchase of stock for restricted stock tax withholding	(0.3)		(1.7)
Net cash provided by financing activities	11.0		25.9
CHANGE IN CASH AND CASH EQUIVALENTS:	(27.7)		(70.2)
Cash and cash equivalents at beginning of period	101.2		180.3
Cash and cash equivalents at end of period	$	73.5	$	110.1

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)

(UNAUDITED)


	Nine Months Ended							Nine Months Ended
	September 28, 2017			September 29, 2016				September 29, 2022		September 30, 2021
Supplemental disclosure of non-cash financing and investing activity:							Supplemental disclosure of non-cash financing and investing activity:
Purchase of an intangible asset with NCM LLC equity	$	201.8		$	21.1		Purchase of an intangible asset with NCM LLC equity	$	10.4	$	14.1
Accrued distributions to founding members	$	27.2		$	25.3

Purchase of subsidiary equity with NCM, Inc. equity	$	77.8		$	—		Purchase of subsidiary equity with NCM, Inc. equity	$	—	$	6.6
Decrease in dividends not requiring cash in the period	$	(1.3	)	$	(0.4	)
Increase in cost and equity method investments	$	—		$	2.0
Dividends declared not requiring cash in the period							Dividends declared not requiring cash in the period	$	0.7	$	1.0
Supplemental disclosure of cash flow information:							Supplemental disclosure of cash flow information:
Cash paid for interest	$	34.9		$	38.0		Cash paid for interest	$	48.9	$	42.3
Cash paid for income taxes, net of refunds	$	1.5		$	0.5
Cash refunds for income taxes							Cash refunds for income taxes	$	(0.1)	$	(0.1)

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY/(DEFICIT)

(In millions, except share and per share data)

(UNAUDITED)

NCM, Inc.

Retained

Additional

Earnings

Paid in

(Distribution

Common Stock

Capital

in Excess of

Noncontrolling

Consolidated

Shares

Amount

(Deficit)

Earnings)

Interest

Balance—December 31, 2015

$
(171.7
)

59,239,154

$
0.6

$
(221.5
)

$
(186.1
)

$
235.3

Distributions to founding members

(35.2
)

—

—

—

—

(35.2
)
NCM LLC equity issued for purchase
   of intangible asset

21.1

—

—

9.2

—

11.9

Income tax and other impacts of NCM
   LLC ownership changes

(2.8
)

—

—

(4.2
)

—

1.4

Comprehensive income, net of tax

38.7

—

—

—

10.7

28.0

Share-based compensation issued

(4.4
)

614,652

—

(4.4
)

—

—

Share-based compensation
   expense/capitalized

14.0

—

—

9.4

—

4.6

Cash dividends declared $0.66 per share

(41.0
)

—

—

—

(41.0
)

—

Balance— September 29, 2016

$
(181.3
)

59,853,806

$
0.6

$
(211.5
)

$
(216.4
)

$
246.0

Balance—December 29, 2016

$
(181.2
)

59,874,412

$
0.6

$
(207.7
)

$
(215.6
)

$
241.5

Distributions to founding members

(47.4
)

—

—

—

—

(47.4
)
NCM LLC equity issued for purchase
   of intangible asset

201.8

—

—

78.8

—

123.0

Income tax and other impacts of NCM
   LLC ownership changes

(32.2
)

—

—

16.2

—

(48.4
)
Issuance of shares

77.8

14,600,000

0.2

77.6

—

—

NCM, Inc. investment in NCM LLC

(77.8
)

—

—

(77.8
)

—

—

Comprehensive income, net of tax

33.3

—

—

—

5.9

27.4

Share-based compensation issued

(4.0
)

755,886

—

(4.0
)

—

—

Share-based compensation
   expense/capitalized

8.6

—

—

5.3

—

3.3

Cash dividends declared $0.66 per share

(40.8
)

—

—

—

(40.8
)

—

Balance—September 28, 2017

$
(61.9
)

75,230,298

$
0.8

$
(111.6
)

$
(250.5
)

$
299.4


			NCM, Inc.
						Additional Paid in Capital (Deficit)		Retained Earnings (Distribution in Excess of Earnings)		Noncontrolling Interest
			Common Stock
	Consolidated		Shares	Amount
Balance—July 1, 2021	$	(349.0)	80,238,751	$	0.8	$	(197.6)	$	(317.4)	$	165.2



Income tax and other impacts of NCM LLC ownership changes	0.1		—	—		0.3		—		(0.2)


Comprehensive loss, net of tax	(33.5)		—	—		—		(15.2)		(18.3)
Share-based compensation issued, net of tax	(0.4)		178,759	—		(0.4)		—		—
Share-based compensation expensed/capitalized	1.7		—	—		1.1		—		0.6
Cash dividends declared $0.05 per share	(4.1)		—	—		—		(4.1)		—
Balance— September 30, 2021	$	(385.2)	80,417,510	$	0.8	$	(196.6)	$	(336.7)	$	147.3

Balance—June 30, 2022	$	(431.3)	81,492,426	$	0.8	$	(190.4)	$	(364.9)	$	123.3


Income tax and other impacts of NCM LLC ownership changes	(0.2)		—	—		0.1		—		(0.3)


Comprehensive loss, net of tax	(21.7)		—	—		—		(8.9)		(12.8)
Share-based compensation issued, net of tax	(0.1)		209,235	—		(0.1)		—		—
Share-based compensation expensed/capitalized	2.2		—	—		1.4		—		0.8
Cash dividends declared $0.03 per share	(2.7)		—	—		—		(2.7)		—
Balance—September 29, 2022	$	(453.8)	81,701,661	$	0.8	$	(189.1)	$	(376.5)	$	111.0


			NCM, Inc.
						Additional Paid in Capital (Deficit)		Retained Earnings (Distribution in Excess of Earnings)		Noncontrolling Interest
			Common Stock
	Consolidated		Shares	Amount
Balance—December 31, 2020	$	(268.6)	78,040,818	$	0.8	$	(207.5)	$	(266.4)	$	204.5


NCM LLC equity issued for purchase of intangible asset	14.1		—	—		6.8		—		7.3
Income tax and other impacts of NCM LLC ownership changes	(0.2)		—	—		1.2		—		(1.4)
Issuance of shares	6.6		1,390,567	—		6.6		—		—
NCM LLC common membership unit redemption	(6.6)		—	—		(6.6)		—		—
Comprehensive loss, net of tax	(122.4)		—	—		—		(57.3)		(65.1)
Share-based compensation issued, net of tax	(1.8)		986,125	—		(1.8)		—		—
Share-based compensation expensed/capitalized	6.7		—	—		4.7		—		2.0
Cash dividends declared $0.15 per share	(13.0)		—	—		—		(13.0)		—
Balance— September 30, 2021	$	(385.2)	80,417,510	$	0.8	$	(196.6)	$	(336.7)	$	147.3

Balance—December 30, 2021	$	(383.5)	80,626,889	$	0.8	$	(195.5)	$	(332.0)	$	143.2

NCM LLC equity issued for purchase of intangible asset	10.4		—	—		4.9		—		5.5
Income tax and other impacts of NCM LLC ownership changes	0.4		—	—		(1.6)		—		2.0


Comprehensive loss, net of tax	(76.3)		—	—		—		(34.8)		(41.5)
Share-based compensation issued, net of tax	(0.3)		1,074,772	—		(0.3)		—		—
Share-based compensation expensed/capitalized	5.2		—	—		3.4		—		1.8
Cash dividends declared $0.11 per share	(9.7)		—	—		—		(9.7)		—
Balance—September 29, 2022	$	(453.8)	81,701,661	$	0.8	$	(189.1)	$	(376.5)	$	111.0

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. THE COMPANY

Description of Business

National CineMedia, Inc., a Delaware corporation (“NCM, Inc.”) ~~was incorporated in Delaware as~~, is a holding company with the sole purpose of becoming a member and sole manager of National CineMedia, LLC (“NCM LLC”), a Delaware limited liability ~~company~~company. NCM LLC is currently owned by NCM, Inc.~~, American Multi-Cinema, Inc. and AMC ShowPlace Theatres, Inc., wholly owned subsidiaries of AMC Entertainment, Inc. (“AMC”)~~, Regal Cinemas, Inc. and Regal CineMedia ~~Holdings, LLC,~~Corporation, wholly owned subsidiaries of Cineworld Group plc and Regal Entertainment Group (“Regal”) ~~and~~, Cinemark Media, Inc. and Cinemark USA, Inc., wholly owned subsidiaries of Cinemark Holdings, Inc. (“Cinemark”), and American Multi-Cinema, Inc., a wholly owned subsidiary of AMC Entertainment, Inc. (“AMC”). The terms “NCM”, “the Company” or “we” shall, unless the context otherwise requires, be deemed to include the consolidated entity. AMC, Regal, Cinemark and their affiliates are referred to in this document as “founding members”. ~~NCM LLC~~

The Company operates the largest ~~digital in-theater~~cinema advertising network reaching movie audiences in ~~North America, allowing NCM LLC to sell~~the U.S. and sells advertising under long-term exhibitor ~~services~~service agreements (“ESAs”) with the founding members ~~(approximately 19 years remaining as of September 28, 2017)~~ and with certain third-party ~~theater circuits, referred to in this document as “network affiliates”~~network affiliates, under long-term network affiliate agreements. The impacts from the COVID-19 Pandemic have had and continue to have an effect on the world and our business. The movie slate for 2022 has improved from prior years but continues to be limited by post-production delays and major motion picture release schedule changes. The attendance level has increased from the prior year, but it has not met historical levels and has not been consistent throughout the year due to timing of major motion picture releases. In-theater advertising revenue for the year ended December 30, 2021 and the nine months ended September 29, 2022 also remained below historical levels due in part to a lag between the recovery of attendees and advertisers, as well as current macroeconomic factors.

On September 17, 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 (weighted based upon pre-COVID-19 attendance levels) of approximately 17.0 years as of September 29, 2022. The network affiliate agreements ~~which have terms from one to twenty years.~~

expire at various dates between November2022 and December 2037. The weighted average remaining term of the ESAs and the network affiliate agreements together is 15.1 years as of September 29, 2022 (weighted based upon pre-COVID-19 attendance levels).

As of September ~~28, 2017,~~29, 2022, NCM LLC had ~~154,069,410~~172,030,901 common membership units outstanding, of which ~~75,230,298 (48.8%~~81,701,661(47.5%) were owned by NCM, Inc., ~~27,871,862 (18.1%~~40,683,797 (23.6%) were owned by Regal, 43,690,797 (25.4%) were owned by Cinemark ~~27,574,620 (17.9%) were owned by Regal~~ and ~~23,392,630 (15.2%~~5,954,646 (3.5%) were owned by AMC. The membership units held by the founding members are exchangeable into NCM, Inc. common stock on a one-for-one ~~basis.~~

basis, at the discretion of the holder.

Basis of Presentation

The Company has prepared the unaudited Condensed Consolidated Financial Statements and related notes of NCM, Inc. in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). ~~Accordingly, certain~~Certain information and footnote disclosures typically included in an annual report have been condensed or omitted for this quarterly report. The balance sheet as of December ~~29, 2016~~30, 2021 is derived from the audited financial statements of NCM, Inc. Therefore, the unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K filed for the fiscal year ended December ~~29, 2016.~~

30, 2021.

In the opinion of management, all adjustments necessary to present fairly in all material respects the financial position, results of operations and cash flows for all periods presented have been ~~made. The~~made and all intercompany accounts have been eliminated in consolidation. Historically, the Company’s business ishas been seasonal and for this and other reasons operating results for interim periods ~~may~~have not bebeen indicative of the Company’s full year results or future performance.As a result of the various related party agreements discussed in Note 4—5—Related Party Transactions, the operating results as presented are not necessarily indicative of the results that might have occurred if all agreements were with non-related third parties.The Company manages its business under one operating and reportable segment of advertising.

Estimates—The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to the reserve for uncollectible accounts receivable, share-based compensation and income taxes. Actual results could differ from ~~those~~ estimates.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Going Concern—The accompanying unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company, through NCM LLC, has borrowings under two Revolving Credit Facilities with $217.0 million outstanding as of September 29, 2022, that mature on June 20, 2023 (refer to Note 6—Borrowings). The Company does not have available liquidity to repay the full outstanding balance on the date of maturity. Additionally, based on current projections, the Company does not expect to meet certain financial covenants for the period ending March 30, 2023. Further, if the Company’s independent registered public accounting firm includes a “going concern” or like qualification or exception, other than for debt maturing within one year, in its report on the Company’s financial statements for the year ending December 29, 2022, this would be an event of default under the Company’s Credit Agreement at the time the Company’s financial statements for the year ending December 29, 2022 are filed. Under the Credit Agreement, failure to remain in compliance with these covenants or inability to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and payable. It would also result in an event of default for the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and payable. Should the Company’s borrowings become due and payable, the Company would not be able to repay the Company’s total outstanding debt balance. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. In response to these conditions, management’s plans include amending NCM LLC’s Revolving Credit Facilities to extend the maturity dates, amending its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtaining additional debt financing through a loan from third parties, and/or NCM, Inc. Management expects to conclude one of these alternatives; however, there can be no assurance that the Company will be successful in completing any of these options. As a result, management’s plan cannot be considered probable and thus does not alleviate the substantial doubt about the Company’s ability to continue as a going concern.

The unaudited Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Significant Accounting Policies

The Company’s annual financial statements included in its Form 10-K filed for the fiscal year ended December ~~29, 2016~~30, 2021 contain a complete discussion of the Company’s significant accounting policies. Following is additional information related to the Company’s accounting policies.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Revenue Recognition—The Company derives revenue principally from the advertising business, which includes advertising through its on-screen cinema network, lobby network (LEN) and lobby promotions in theaters, and on websites, mobile applications and out-of-home locations owned by NCM LLC and other companies. Revenue is recognized over time as the customer receives the benefits provided by NCM LLC’s advertising services and the Company has the right to payment for performance to date. The Company considers the terms of each arrangement to determine the appropriate accounting treatment. The Company has changed the classification of the make good provision, retrospectively, to now be included within “Deferred Revenue” on the unaudited Consolidated Balance Sheet rather than “Accrued Expenses” as of September 29, 2022.

Concentration of Credit Risk and Significant Customers—~~Bad debts are provided~~The risk of credit loss related to the Company's trade receivables and unbilled receivables balances is accounted for ~~using~~through the allowance for doubtful accounts, ~~method based on~~a contra asset account which reduces the net receivables balance. The allowance for doubtful accounts balance is determined by pooling the Company's receivables with similar risk characteristics, specifically by type of customer (national or local/ regional) and then age of receivable and applying historical ~~experience and management’s evaluation~~write off percentages to these pools in order to determine the amount of ~~outstanding receivables at the end~~expected credit losses as of the ~~period. Receivables~~balance sheet date. National receivables are ~~written off when management determines amounts are uncollectible. Trade accounts receivable are uncollateralized and represent a~~with large ~~number of geographically dispersed debtors. The collectability risk with respect to national and regional advertising is reduced by transacting with founding members or large, national~~ advertising agencies ~~who have~~with strong reputations in the advertising industry and clients with stable financial ~~positions.~~positions and good credit ratings, represent larger receivables balances per customer and have significantly lower historical and expected credit loss patterns. Local and regional receivables are with smaller companies sometimes with less credit history, represent smaller receivable balances per customer and have higher historical and expected credit loss patterns. The Company has smaller contracts with ~~thousands of~~many local clients that are not individually significant. AsThe Company also considers current economic conditions and trends to determine whether adjustments to historical loss rates are necessary. The Company also reserves for specific receivable balances that it expects to write off based on known concerns regarding the financial health of ~~September 28, 2017 and December 29, 2016, there were~~the customer. Receivables arewritten off when management determines amounts are uncollectible.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company had no ~~advertising agency groups or individual customers~~agencies through which ~~the Company sources national~~it sourced advertising revenue ~~representing~~that accounted for more than 10% of the Company’s gross outstanding receivable balance as of September 29, 2022. The Company had one agency through which it sourced advertising revenue that accounted for 15.7% of the Company's gross outstanding receivable ~~balance.~~balance as of December 30, 2021. During the three and nine months ended September ~~28, 2017 and September~~ 29, ~~2016,~~2022, the Company had ~~no customers~~one customer that accounted for ~~more than 10%~~14.6% and 15.0% of ~~revenue.~~

the Company’s revenue, respectively. During the three and nine months ended September 30, 2021, the Company had one customer that accounted for11.8% and 11.6% of the Company's revenue, respectively.

Long-lived Assets—The Company assesses impairment of long-lived assets pursuant to Accounting Standards Certification 360 – Property, Plant and Equipment. This includes determining whether certain triggering events have occurred that could affect the value of an asset. The Company recorded losses of $0.0 million, $0.0 million, $5.8 million and $0.0 million related to the write-off of certain internally developed software during the three months ended September 29, 2022 and September 30, 2021 and nine months ended September 29, 2022 and September 30, 2021, respectively.

Share-Based Compensation—The Company has issued stock options, ~~and~~ restricted stock, ~~to certain employees~~ and restricted stock units to certain employees and its independent directors. The ~~Company has not granted~~restricted stock ~~options since 2012. In 2016~~ and ~~2017, the~~ restricted stock unit grants for Company ~~officers~~management vest upon the achievement of Company performance measures and/or service conditions, while ~~non-officer~~non-management grants vest only upon the achievement of service conditions. Compensation expense of restricted stock and restricted stock units that ~~vests~~vest upon the achievement of Company performance measures is based on management’s financial projections and the probability of achieving the projections, which require considerable judgment. A cumulative adjustment is recorded to share-based compensation expense in periods that management changes its estimate of the number of shares of restricted stock and restricted stock units expected to vest. Ultimately, the Company adjusts the expense recognized to reflect the actual vested shares following the resolution of the performance conditions. Dividends are accrued when declared on unvested restricted stock and restricted stock units that isare expected to vest and are only paid with respect to shares that actually vest. ~~During~~On February 28, 2021, March 2, 2021 and January 19, 2022, the Company’s Board of Directors approved certain modifications to equity awards awarded under the Company’s 2016 Equity Incentive Plan and 2020 Omnibus Equity Incentive Plan to adjust performance metrics, vesting amount and future performance goals in light of the COVID-19 Pandemic resulting in incremental share-based compensation expense of $0.1 million, $0.2 million, $0.5 million and $1.7 million for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September 30, 2021, respectively. During the three months ended September 29, ~~2016, 20,204, 15,492, 1,028,322~~2022 and ~~909,322~~September 30, 2021 and the nine months ended September 29, 2022 and September 30, 2021, 230,689, 268,782, 1,155,817 and 1,394,321 shares of restricted stock and restricted stock units vested, respectively. During the three and nine months ended September 28, 2017 and three and nine months ended September 29, 2016, 0, 7,078, 58,450 and 30,528 stock options were exercised at a weighted average exercise price of $0, $12.86, $11.04 and $12.98 per share, respectively.

Consolidation—NCM, Inc. consolidates the accounts of NCM LLC under the provisions of ASC 810,Consolidation ~~(“ASC 810”)~~. The following table presents the changes in NCM, Inc.’s equity resulting from net income attributable to NCM, Inc. and transfers to or from noncontrolling interests (in millions):

Nine Months Ended

September 28,
2017

September 29,
2016

Net income attributable to NCM, Inc.

$
5.9

$
10.7

NCM LLC equity issued for purchase of intangible asset

78.8

9.2

Income tax and other impacts of subsidiary ownership
changes (1)

16.2

(4.2
)
Change from net income attributable to NCM, Inc. and
transfers from noncontrolling interests

$
100.9

$
15.7


	Three Months Ended				Nine Months Ended
	September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
Net loss attributable to NCM, Inc.	$	(8.9)	$	(15.2)	$	(34.8)	$	(57.3)
NCM LLC equity issued for purchase of intangible asset	—		—		4.9		6.8
Income tax and other impacts of subsidiary ownership changes	0.1		0.3		(1.6)		1.2
NCM LLC common membership unit redemption	—		—		—		(6.6)
Issuance of shares to founding members	—		—		—		6.6
Change from net loss attributable to NCM, Inc. and transfers from noncontrolling interests	$	(8.8)	$	(14.9)	$	(31.5)	$	(49.3)

~~(1)~~

Subsequent to the issuance of the December 29, 2016 financial statements, an error was identified to the recording of related party balances between the Company and NCM LLC. As of September 28, 2017, the Company recorded an increase of approximately $3.6 million to its additional paid in capital balance and recorded an equivalent reduction to its noncontrolling interests equity balance related to the correction of out of period errors.

Recently Adopted Accounting Pronouncements

During the first quarter of ~~2017,~~2021, the Company adopted Accounting Standards Update ~~2016-07,~~ ~~Investments- Equity Method and Joint Ventures:~~ 2019-12, Income Taxes (Topic 740): Simplifying the ~~Transition~~Accounting for Income Taxes (“ASU 2019-12”), which removes the following exceptions for the Company to analyze in a given period: the exception to the ~~Equity Method of Accounting~~ ~~(“ASU 2016-07”) on a prospective basis. ASU 2016-07 eliminates~~incremental approach for intraperiod tax allocation; the ~~requirement~~exception to ~~apply~~accounting for basis differences when there are ownership changes in foreign investments; and the ~~equity method of~~exception in interim periods income tax accounting ~~retrospectively when a reporting entity obtains significant influence over a previously held investment.~~for year-to-date losses that exceed anticipated losses. The Company’s adoption of ASU ~~2016-07~~2019-12 did not have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~In the first quarter of 2017, the Company adopted~~

Recently Issued Accounting ~~Standards Update 2016-17,~~ ~~Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control~~ ~~(“ASU 2016-17”) on a retrospective basis to all periods since its adoption of Accounting Standards Update 2015-02,~~ ~~Consolidation (Topic 810): Amendments to the Consolidation Analysis~~ ~~(“ASU 2015-02”) in the first quarter of 2016. ASU 2016-17 changes the evaluation of whether a~~

Pronouncements

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

~~reporting entity~~

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, Reference Rate Reform (“ASU 2020-04”), which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company concluded the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. The adoption of ASU 2016-17LIBOR transition did not have a material impact on the ~~Condensed Consolidated Financial Statements or notes thereto.~~

~~Recently Issued Accounting Pronouncements~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB revised the effective date for this standard to annual and interim periods beginning on or after December 15, 2017, with early adoption permitted, but not earlier than the original effective date of annual and interim periods beginning after December 15, 2016, for public entities. ASU 2014-09 allows for either a full retrospective or a modified retrospective transition method. The Company expects to adopt this guidance using the modified retrospective transition method during the first quarter of 2018. The Company expects to identify the same performance obligations under ASU 2014-09 as compared with deliverables and separate units of account previously identified. ASU 2014-09 will impact the accounting for barter transactions where the Company exchanges advertising time for products and services used principally for selling and marketing activities. The Company currently recognizes revenue for these transactions at the estimated fair value of the advertising exchanged based on the fair value received for similar advertising from cash paying customers. Under the new guidance, the Company expects to recognize revenue for these transactions based upon the fair value of the products and services received, rather than the value of the advertising provided. The Company has evaluated ASU 2014-09 and does not expect the effect of adopting this guidance to be material to theCompany’s unaudited Condensed Consolidated Financial ~~Statements, however, the Company does expect additional disclosures in its notes to the unaudited Condensed Consolidated Financial~~ Statements. ~~The Company intends to design and implement changes to certain processes and internal controls related to its adoption of ASU 2014-09.~~

~~In January 2016, the FASB issued Accounting Standards Update 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“ASU 2016-01”), which requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in earnings (rather than reported through other comprehensive income) and updates certain presentation and disclosure requirements. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies and should be adopted on a prospective basis. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~In February 2016, the FASB issued Accounting Standards Update 2016-02,~~ ~~Leases (Topic 842)~~ (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~In June 2016, the FASB issued Accounting Standards Update 2016-13,~~ ~~Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements~~ (“ASU 2016-13”), which requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted and is to be adopted on a modified retrospective basis. The Company is currently evaluating the impact that adopting this guidance will have on the unaudited Condensed Consolidated Financial Statements or notes thereto.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~In August 2016, the FASB issued Accounting Standards Update 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~ (“ASU 2016-15”), which provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. A retrospective transition method should be used in the application of the amendments within ASU 2016-15. If retrospective application is considered impracticable, retrospective application may be used as of the earliest date practicable. The Company is currently evaluating the impact that adopting this guidance will have on the Condensed Consolidated Financial Statements or notes thereto.

~~In November 2016, the FASB issued Accounting Standards Update 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash~~ (“ASU 2016-18”), which requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. If restricted cash is presented separately from cash and cash equivalents on the balance sheet, companies will have to reconcile the amounts presented on the statement of cash flows to the amounts on the balance sheet. Companies will also need to disclose information about the nature of the restrictions. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect the adoption of ASU 2016-18 to have a material impact on the unaudited Condensed Consolidated Financial Statements or notes thereto.

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

2. ~~EARNINGS~~REVENUE FROM CONTRACTS WITH CUSTOMERS AND ACCOUNTS RECEIVABLE

Revenue Recognition

The Company derives revenue principally from the sale of advertising to national, regional and local businesses in the Noovie® pre-show, the Company’s cinema advertising and entertainment pre-show. The Company also sells advertising through the LEN, a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, the Company sells online and mobile advertising, including through Noovie Audience Accelerator, through NCM's digital gaming products including Noovie Trivia, Name That Movie and Noovie Shuffle, which can be played on the mobile appsand through partnerships with certain internet platforms. Further the Company sells advertising in a variety of complementary out of home venues, including restaurants, convenience stores and college campuses. The Company also has a long-term agreement to exhibit the advertising of the founding members’ beverage suppliers.

The Company makes contractual guarantees to deliver a specified number of impressions to view the customers’ advertising. If the contracted number of impressions are not delivered, the Company will run additional advertising to deliver the contracted impressions at a later date. The deferred portion of the revenue associated with undelivered impressions is referred to as a make-good provision. The Company defers the revenue associated with the make-good until the advertising airs to the audience specified in the advertising contract or the make-good period expires. The make-good provision is recorded within deferred revenue in the unaudited Condensed Consolidated Balance Sheet.

The Company does not have any contracts with customers with terms in excess of one year that are noncancellable as of September 29, 2022. Agreements with a duration less than one year are not included within this disclosure as the Company elected to use the practical expedient in ASC 606-10-50-14 for those contracts. In addition, the Company’s other contracts longer than one year that are cancellable are not included within this disclosure.

Disaggregation of Revenue

The Company disaggregates revenue based upon the type of customer: national, local and regional and beverage concessionaire. This method of disaggregation is in alignment with how revenue is reviewed by management and discussed with, and historically disclosed to investors.

The following table summarizes revenue from contracts with customers for the three months and nine months ended September 29, 2022 and September 30, 2021 (in millions):


	Three Months Ended				Nine Months Ended
	September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
National advertising revenue	$	39.7	$	22.6	$	116.7	$	34.3
Local and regional advertising revenue	9.8		5.7		26.4		10.8
Founding member advertising revenue from beverage concessionaire agreements	5.0		3.4		14.4		6.0
Total revenue	$	54.5	$	31.7	$	157.5	$	51.1

Deferred Revenue and Unbilled Accounts Receivable

Revenue recognized in the nine months ended September 29, 2022 that was included within the Deferred Revenue balance as of December 30, 2021 was $12.0million. As of September 29, 2022 and December 30, 2021, the Company had $6.5 million and $4.4 million in unbilled accounts receivable, respectively.

Allowance for Doubtful Accounts

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The allowance for doubtful accounts balance is determined separately for each pool of the Company's receivables with similar risk characteristics. The Company has determined that two pools, national customers and local/regional customers, is appropriate. The changes within the allowance for doubtful accounts balances for the nine months ended September 29, 2022 and September 30, 2021, respectively, were as follows (in millions):


	Nine Months Ended
	September 29, 2022		September 30, 2021
	Allowance for National Customer Receivables	Allowance for Local/ Regional Customer Receivables	Allowance for National Customer Receivables	Allowance for Local/ Regional Customer Receivables
Balance at beginning of period	0.3	1.4	0.2	2.1
Provision for bad debt	0.4	0.3	0.1	(0.2)
Write-offs, net	(0.4)	(0.3)	—	(0.5)
Balance at end of period	0.3	1.4	0.3	1.4

3. LOSS PER SHARE

Basic ~~earnings~~loss per share is computed on the basis of the weighted average number of common shares outstanding. Diluted ~~earnings~~loss per share is computed on the basis of the weighted average number of common shares outstanding plus the effect of potentially dilutive common stock options, restricted stock and restricted stock units using the treasury stock method. The components of basic and diluted ~~earnings~~loss per NCM, Inc. share are as follows:

	Three Months Ended				Nine Months Ended
	September 28, 2017		September 29, 2016		September 28, 2017		September 29, 2016			Three Months Ended				Nine Months Ended
Net income attributable to NCM, Inc. (in millions)	$	9.4	$	8.2	$	5.9	$	10.7
										September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
Net loss attributable to NCM, Inc. (in millions)									Net loss attributable to NCM, Inc. (in millions)	$	(8.9)	$	(15.2)	$	(34.8)	$	(57.3)

Weighted average shares outstanding:									Weighted average shares outstanding:
Basic		63,993,273		59,846,496		61,637,445		59,763,012	Basic	81,605,806		80,359,723		81,371,370		79,652,152
Add: Dilutive effect of stock options and restricted stock		288,308		1,032,310		437,132		716,965
Add: Dilutive effect of stock options, restricted stock and exchangeable membership units									Add: Dilutive effect of stock options, restricted stock and exchangeable membership units	—		—		—		—
Diluted		64,281,581		60,878,806		62,074,577		60,479,977	Diluted	81,605,806		80,359,723		81,371,370		79,652,152
Income per NCM, Inc. share:
Loss per NCM, Inc. share:									Loss per NCM, Inc. share:
Basic	$	0.15	$	0.14	$	0.10	$	0.18	Basic	$	(0.11)	$	(0.19)	$	(0.43)	$	(0.72)
Diluted	$	0.15	$	0.13	$	0.10	$	0.18	Diluted	$	(0.11)	$	(0.19)	$	(0.43)	$	(0.72)

The effect of ~~90,069,881, 77,320,333, 87,769,713~~90,329,240, 86,188,344, 88,964,109 and ~~76,920,803~~85,601,326 weighted average exchangeable NCM LLC common units held by the founding members for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, respectively, have been excluded from the calculation of diluted weighted average shares and ~~earnings~~loss per NCM, Inc. share as they were ~~antidilutive.~~anti-dilutive. NCM LLC common units do not participate in dividends paid on NCM, ~~Inc’s~~Inc.’s common stock. In addition, there were ~~935,912, 11,801, 433,224~~7,275,326, 4,797,243, 7,275,326 and ~~26,387~~4,797,243 stock options and non-vested (restricted) shares for the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, respectively, excluded from the calculation as they were ~~antidilutive.~~anti-dilutive. The Company’s non-vested (restricted) shares do not meet the definition of a participating security as the dividends will not be paid if the shares do not vest.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

4. INTANGIBLE ASSETS

Intangible assets consist of contractual rights to provide the Company’s services within the theaters of the founding members and network affiliates and are stated at cost, net of accumulated amortization. The Company’s intangible assets with its founding members are recorded at the fair market value of NCM, Inc.’s publicly traded stock as of the date on which the common membership units were issued. The NCM LLC common membership units are fully convertible into NCM, Inc.’s common stock. In addition, the Company records intangible assets for up-front fees paid to network affiliates upon commencement of a network affiliate agreement. The Company’s intangible assets have a finite useful life and the Company amortizes the assets over the remaining useful life corresponding with the ESAs or the term of the network affiliate agreement.

During the third quarter of 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions of reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas (the “Cineworld Proceeding”). On October 21, 2022, Regal filed a motion to reject the ESA without

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA. NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house. The Company determined that this announced restructuring and subsequent developments constituted a triggering event for the intangible asset related to Regal under ASCNo. 360, Impairment and Disposal of Long-Lived Assets. Management considered possible scenarios in a probability-weighted estimated future undiscounted cash flow analysis, including the potential of further permanent closure of the theaters within the Company's network, renegotiation of the ESA terms and other potential adverse impacts to the Company’s intangible asset resulting from the Cineworld Proceeding.The estimated future cash flows from the ESA calculated within the probability-weighted analysis were in excess of the net book value of the intangible asset and no impairment charge was recorded in the three and nine months ended September 29, 2022. Such analysis required management to make estimates and assumptions based on historical data and consideration of future market conditions. While the Company believes that the rights will survive any attempted rejection in the bankruptcy court by Regal, given the uncertainty inherent in any projection, heightened by the possibility of unforeseen additional effects of the Cineworld Proceeding, actual results may differ from the estimates and assumptions used, or conditions may change, which could result in impairment charges in the future.

Common Unit Adjustments—In accordance with NCM LLC’s Common Unit Adjustment Agreement with its founding members, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by the founding members based on theater additions, new builds or dispositions during the previous year. In the event a founding member does not have sufficient common membership units to return, the adjustment is satisfied in cash in an amount calculated pursuant to NCM LLC’s Common Unit Adjustment Agreement. In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for a specific founding member if its acquisition or disposition of theaters, in a single transaction or cumulatively since the most recent Common Unit Adjustment, results in an attendance increase or decrease in excess of two percent of the annual total attendance at the prior adjustment date.

During the first quarter of ~~2017,~~2022, NCM LLC issued ~~2,351,029~~4,140,896 (6,483,893 issued, net of 2,342,997 returned) common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions, ~~by the founding members~~ to NCM LLC’s network during the ~~2016~~2021 fiscal year. ~~Also during the first quarter~~The net impact as a result of ~~2017, NCM, Inc. and NCM LLC entered into a binding Memorandum of Understanding (“MOU”) with AMC to effectuate aspects of~~ a final judgment (the “Final Judgment”) entered into by the Department of Justice (the “DOJ”) in connection with AMC’s acquisition of Carmike Cinemas, Inc. (“Carmike”). Pursuant to the MOU, the Company issued ~~18,425,423 NCM LLC~~ ~~common membership units to AMC in respect of the annual attendance at such Carmike theaters in accordance with~~ the Common Unit Adjustment ~~Agreement during the first quarter of 2017.~~ ~~AMC’s acquisition of Carmike meets the criteria for a Common Unit Adjustment because it resulted in an extraordinary attendance increase of approximately 9.5%.~~ ~~Further, the Final Judgment required AMC to transfer advertising rights to 17 theaters from NCM LLC to another advertising provider. Pursuant~~ to the MOU, AMC surrendered 4,657,673 NCM LLC common membership units in respect of such theaters. The 4,657,673 NCM LLC common membership units were comprised of (i) 2,850,453 NCM LLC common membership units pursuant to the adjustment for divested theaters in the Common Unit Adjustment Agreement and (ii) an additional 1,807,220 NCM LLC common membership units valued at $25.0 million ~~to compensate for NCM LLC’s lost operating income for these theaters during the 10-year term of the Final Judgment~~. To facilitate the theater transfers, during the first quarter of 2017, AMC and Regal entered into an amendment of its ESA with NCM LLC and Cinemark entered into a waiver of certain rights under its ESA. NCM LLC recorded a net intangible asset ~~of $201.8~~was $10.4 million during the first quarter of ~~2017 related to these transactions.~~

2022.

During the first quarter of ~~2016,~~2021, NCM LLC issued ~~1,416,515~~3,047,582 common membership units to ~~its~~two founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions, ~~by the founding members~~ to NCM LLC’s network during the ~~2015~~2020 fiscal year and ~~NCM LLC recorded~~calculated a negative common membership unit adjustment for one founding member resulting in a receivable included within “Other assets and prepaid expenses” on the unaudited Consolidated Balance Sheet. The net ~~intangible asset of $21.1 million during the first quarter of 2016~~impact as a result of the Common Unit ~~Adjustment.~~

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Adjustment to the intangible asset was $4.8 million during the first quarter of 2021.

Integration Payments and Other Encumbered Theater Payments—If an existing on-screen advertising agreement with an alternative provider is in place with respect to any acquired theaters (“encumbered theaters”), the founding members may elect to receive common membership units related to those encumbered theaters in connection with the Common Unit Adjustment. If the founding members make this election, then they are required to make payments on a quarterly basis in arrears in accordance with certain run-out provisions pursuant to the ESAs (“integration payments”). Because the Carmike Cinemas, Inc. (“Carmike”) theaters acquired by AMC are subject to an existing on-screen advertising agreement with an alternative provider, AMC ~~will make~~makes integration payments to NCM LLC. The integration payments will continue until the earlier of (i) the date the theaters are transferred to NCM LLC’s network or (ii) the expiration of the ESA. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements. The ~~ESA~~ESAs additionally ~~entitles~~entitle NCM LLC to payments related to the founding members’ on-screen advertising commitments under their beverage concessionaire agreements for encumbered theaters. These payments are also accounted for as a reduction to the intangible ~~asset.~~assets. During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, the Company recorded a reduction to net intangible assets of ~~$6.9~~ $0.3million, ~~$0.7~~$0.2 million, ~~$11.6~~$1.6 million and ~~$1.5~~$0.3 million, respectively, related to ~~integration and~~ other encumbered theater payments. ~~These payments received from AMC related to their acquisitions of theaters from Carmike and Rave Cinemas and from Cinemark related to their acquisition of theaters from Rave Cinemas.~~ During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, AMC and Cinemark paid a total of ~~$4.6~~$1.2 million, ~~$0.7~~$0.2 million, ~~$6.1~~$2.6 million and ~~$1.7~~$0.3 million, respectively, in integration and other encumbered theater payments (as payments are made one quarter and one month in arrears, respectively). If common membership units are issued to a founding member for newly acquired theaters that are subject to an existing on-screen advertising agreement with an alternative provider, the amortization of the intangible asset commences after the existing agreement expires and NCM LLC can utilize the theaters for all of its services.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. RELATED PARTY TRANSACTIONS

Founding Member Transactions—In connection with NCM, Inc.’s initial public offering (“IPO”), the Company entered into several agreements to define and regulate the relationships among NCM, Inc., NCM LLC and the founding ~~members. They include~~members which are outlined below. AMC has owned less than 5% of NCM LLC since July 2018 and is no longer a related party. AMC remains a party to the ~~following:~~

ESA, Common Unit Adjustment Agreement, Tax Receivable Agreement (“TRA”) and certain other original agreements and is a member under the terms of the NCM LLC operating agreement, subject to fulfilling the requirements of Section 3.1 of the NCM LLC operating agreement. AMC will continue to participate in the annual Common Unit Adjustment and receive available cash distributions or allocation of earnings and losses in NCM LLC (as long as its ownership is greater than zero), TRA payments and theater access fees. Further, AMC will continue to pay beverage revenue, among other things. AMC's ownership percentage does not impact future integration payments and other encumbered theater payments owed to NCM LLC by AMC. As of September 29, 2022, AMC’s ownership was 3.5% on an as converted to NCM, Inc.’s common stock basis.

The material agreements with the founding members are as follows:

•ESAs. Under the ESAs, NCM LLC is the exclusive provider within the United States of advertising services in the founding members’ theaters (subject to pre-existing contractual obligations and other limited exceptions for the benefit of the founding members). The advertising services include the use of the digital content network (“DCN”) equipment required to deliver the on-screen advertising and other content included in the Noovie® pre-show, use of the ~~lobby entertainment network (“LEN”)~~LEN and rights to sell and display certain lobby promotions. Further, NCM LLC’s founding members have elected to purchase 30 seconds to 60 seconds of advertising, ~~included~~out of the 90 seconds allowed for under the ESA, in the Noovie pre-show ~~is sold to NCM LLC’s founding members~~ to satisfy the founding members’ on-screen advertising commitments under their beverage concessionaire agreements. In consideration for access to the founding members’ theaters, theater patrons, the network equipment required to display on-screen and LEN video advertising and the use of theaters for lobby promotions, the founding members receive a monthly theater access fee.

In conjunction with the 2019 ESA Amendments, NCM LLC agreed to pay Cinemark and Regal incremental monthly theater access fees and, subject to NCM LLC's use of specified inventory, a revenue share in consideration for NCM LLC's access to certain on-screen advertising inventory after the advertised showtime of a feature film beginning November 1, 2019, and the underlying term of the ESAs were extended until 2041. The ESAs and 2019 ESA Amendments with Cinemark and Regal are considered leases with related parties under ASC 842.

•Common Unit Adjustment Agreement. The ~~common unit adjustment agreement~~Common Unit Adjustment Agreement provides a mechanism for increasing or decreasing the membership units held by the founding members based on the acquisition or construction of new theaters or sale or closure of theaters that are operated by each founding member and included in NCM LLC’s network.

•Tax Receivable Agreement. The ~~tax receivable agreement~~TRA provides for the effective payment by NCM, Inc. 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 is actually realized as a result of certain increases in NCM, Inc.’s proportionate share of tax basis in NCM LLC’s tangible and intangible assets resulting from the IPO and related transactions.

•Software License Agreement. At the date of the Company’s IPO, NCM LLC was granted a perpetual, royalty-free license from NCM LLC’s founding members to use certain proprietary software that existed at the time for the delivery of digital advertising and other content through the DCN to screens in the U.S. NCM LLC has made improvements to this software since the IPO date and NCM LLC owns those improvements, except for improvements that were developed jointly by NCM LLC and NCM LLC’s founding members, if any.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

The following tables provide summaries of the transactions between the Company and the related party founding members (in millions):

Three Months Ended

Nine Months Ended

Included in the Condensed Consolidated Statements of Income:

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

Revenue:

Beverage concessionaire revenue (included in
   advertising revenue) (1)

$
6.7

$
7.5

$
22.7

$
21.8

Advertising inventory revenue (included in
   advertising revenue) (2)

—

0.1

—

0.3

Operating expenses:

Theater access fee (3)

18.1

19.2

57.4

56.8

Purchase of movie tickets and concession products
   and rental of theater space (included in selling
   and marketing costs) (4)

0.4

0.4

1.2

1.2

Purchase of movie tickets and concession products
   and rental of theater space (included in advertising
   operating costs) (4)

—

—

0.1

—

Purchase of movie tickets and concession products
   and rental of theater space (included in
   administrative and other costs) (4)

—

—

—

0.1

Non-operating expenses:

Interest income from notes receivable (included in
   interest income) (5)

0.2

0.2

0.5

0.6

~~(1)~~

For the nine months ended September 28, 2017 and September 29, 2016, two of the founding members purchased 60 seconds of on-screen advertising time and one founding member purchased 30 seconds (with all three founding members having a right to purchase up to 90 seconds) from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 second equivalent cost per thousand (“CPM”) rate specified by the ESA.

~~(2)~~

~~The value of such purchases is calculated by reference to NCM LLC’s advertising rate card.~~

~~(3)~~

Comprised of payments per theater attendee and payments per digital screen with respect to the founding member theaters included in the Company’s network, including payments for access to higher quality digital cinema equipment.

~~(4)~~

~~Used primarily for marketing to NCM LLC’s advertising clients.~~

~~(5)~~

On December 26, 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company (AC JV, LLC) owned 32% by each of the founding members and 4% by NCM LLC. In consideration for the sale, NCM LLC received a total of $25.0 million in promissory notes from its founding members (one-third or approximately $8.3 million from each founding member). The notes bear interest at a fixed rate of 5.0% per annum, compounded annually. Interest and principal payments are due annually in six equal installments commencing on the first anniversary of the closing.

As of

Included in the Condensed Consolidated Balance Sheets:

September 28,
2017

December 29,
2016

Current portion of notes receivable - founding members (1)

4.2

5.6

Long-term portion of notes receivable - founding members (1)

8.3

8.3

Interest receivable on notes receivable (included in other
   current assets) (1)

0.1

0.3

Common unit adjustments, net of amortization and integration
   payments (included in intangible assets) (2)

702.2

529.9

Current payable to founding members under tax receivable
   agreement (3)

15.9

18.4

Long-term payable to founding members under tax receivable
   agreement (3)

144.2

143.4

~~(1)~~

~~Refer to the discussion of notes receivable from the founding members above.~~

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Three Months Ended				Nine Months Ended
Included in the unaudited Condensed Consolidated Statements of Income:	September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	3.9	$	2.7	$	11.3	$	4.7
Operating expenses:
Theater access fee and revenue share to founding members (2)	$	15.4	$	11.4	$	45.2	$	19.8
Selling and marketing costs (3)	$	0.1	$	—	$	0.1	$	—
Advertising operating costs (3)	$	—	$	—	$	—	$	0.1

~~(UNAUDITED)~~

~~(2)~~

~~Refer to Note 3—Intangible Assets~~ ~~for further information on common unit adjustments and integration payments.~~

(1)For the three and nine months ended September 29, 2022 and September 30, 2021, Cinemark and Regal purchased 60 seconds of on-screen advertising time from NCM LLC to satisfy their obligations under their beverage concessionaire agreements at a 30 seconds equivalent cost per thousand impressions (“CPM”) rate specified by the ESA. Beverage revenue was limited for periods of reduced attendance due to the COVID-19 Pandemic.

~~(3)~~

The Company paid the founding members $17.3 million in the second quarter of 2017 which was for the 2016 tax year. The Company paid the founding members $23.5 million in the first quarter of 2016, of which $2.7 million was net operating loss carrybacks for the 2013 year and $20.8 million was for the 2015 tax year.

(2)Comprised of payments per theater attendee, payments per digital screen with respect to the founding member theaters included in the Company’s network and payments for access to higher quality digital cinema equipment. Following the 2019 ESA Amendments this also includes payments to Cinemark and Regal for their share of the revenue from the sale of an additional single unit 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 (the “Platinum Spot”). Theater access fees and revenue share expenses were reduced for periods of reduced attendance due to the COVID-19 Pandemic.

(3)Includes purchase of movie tickets, concession products, rental of theater space primarily for marketing to NCM LLC’s advertising clients and other payments made to the founding members in the ordinary course of business.


	As of
Included in the unaudited Condensed Consolidated Balance Sheets:	September 29, 2022		December 30, 2021

Common unit adjustments and ESA extension costs, net of amortization and integration payments (included in intangible assets) (1)	$	580.7	$	589.6
Current payable to founding members under tax receivable agreement (2)	$	0.3	$	—
Long-term payable to founding members under tax receivable agreement (2)	$	14.1	$	11.9

(1)Refer to Note 4—Intangible Assets for further information on common unit adjustments and integration payments. This balance includes common unit adjustments issued to all founding members (including AMC).

(2)The Company paid Cinemark and Regal $0.2 million and $0.4 million during 2021, respectively, in payments pursuant to the TRA which were for the 2019 tax year.

Pursuant to the terms of the NCM LLC ~~Operating Agreement~~operating agreement in place since the completion of the Company’s IPO, NCM LLC is required to make mandatory distributions on a proportionate basis to its members of available cash, as defined in the NCM LLC ~~Operating Agreement,~~operating agreement, on a quarterly basis in arrears. ~~Mandatory~~Due to the continued recovery from the COVID-19 Pandemic during the nine months ended September 29, 2022, the mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc. for the three ~~and nine~~ months ended September ~~28, 2017~~29, 2022 were calculated as negative $7.7 million (including negative $2.0 million for Cinemark, negative $1.9 million for Regal and ~~September 29, 2016 were as follows (in millions):~~

Three Months Ended

Nine Months Ended

September 28,
2017

September 29,
2016

September 28,
2017

September 29,
2016

AMC

$
8.1

$
7.8

$
16.3

$
11.3

Cinemark

9.6

8.6

15.6

11.8

Regal

9.5

8.9

15.5

12.1

Total founding members

27.2

25.3

47.4

35.2

NCM, Inc.

25.9

19.6

39.0

26.6

Total

$
53.1

$
44.9

$
86.4

$
61.8

negative $3.8 million for NCM, Inc.). The mandatory distributions of available cash by NCM LLC to its related party founding members and NCM, Inc. for the ~~three~~nine months ended September ~~28, 2017~~29, 2022 were calculated as negative $39.9 million (including negative $10.5 million for Cinemark, negative $9.8 million for Regal and negative $19.6 million for NCM, Inc.). Therefore, there will be no payment made for the third quarter of ~~$27.2 million is included~~2022. Under the terms of the NCM LLC operating agreement, these negative amounts will be netted against future positive available cash distributions for the second quarter each fiscal year after the extended covenant waiver holiday, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Third Amendment defined within Note 6—Borrowings and in ~~amounts~~accordance with the NCM LLC operating agreement.

Amounts due to related party founding members, ~~on the unaudited Condensed Consolidated Balance Sheets~~net, as of September ~~28, 2017 and will be made in the fourth quarter of 2017. The mandatory distributions to NCM, Inc. are eliminated in consolidation.~~

~~Amounts due to founding members as of September 28, 2017~~29, 2022 were comprised of the following (in millions):

AMC

Cinemark

Regal

Total

Theater access fees, net of beverage revenues
and encumbered theater payments

$
1.2

$
0.9

$
1.3

$
3.4

Distributions payable to founding members

8.1

9.6

9.5

27.2

Integration payments due from founding members

(6.2
)

(0.3
)

—

(6.5
)
Cost and other reimbursement

(0.1
)

—

—

(0.1
)
Total amounts due to founding members

$
3.0

$
10.2

$
10.8

$
24.0

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	7.4	$	3.9	$	11.3



Total amounts due to founding members, net	$	7.4	$	3.9	$	11.3

Amounts due to related party founding members, net as of December ~~29, 2016~~30, 2021 were comprised of the following (in millions):


	Cinemark		Regal		Total
Theater access fees and revenue share, net of beverage revenues and other encumbered theater payments	$	5.1	$	6.3	$	11.4


Total amounts due to founding members, net	$	5.1	$	6.3	$	11.4

AMC

Cinemark

Regal

Total

Theater access fees, net of beverage revenues
and encumbered theater payments

$
1.6

$
0.9

$
1.4

$
3.9

Distributions payable to founding members

12.3

13.6

14.0

39.9

Integration payments due from founding members

(0.7
)

(0.3
)

—

(1.0
)
Cost and other reimbursement

—

(0.1
)

—

(0.1
)
Total amounts due to founding members

$
13.2

$
14.1

$
15.4

$
42.7

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Common Unit Membership Redemption~~—The NCM LLC Operating Agreement provides a redemption right of the founding members to exchange common membership units of NCM LLC for shares of the Company’s common stock on a one-for-one basis, or at the Company’s option, a cash payment equal to the market price of one share of NCM, Inc. common stock. During the third quarter of 2017, AMC exercised the redemption right of an aggregate 14.6 million common membership units for a like number of shares of NCM, Inc.’s common stock. Pursuant to ASC 810-10-45, the Company accounted for the change in its ownership interest in NCM LLC as an equity transaction whereby, the issuance of shares of NCM, Inc. common stock were offset by the purchase of NCM LLC’s (a subsidiary’s) equity within the Condensed Consolidated Statement of Equity. Further, no gain or loss was recognized in the Condensed Consolidated Statements of Income. AMC also exercised the redemption right of an aggregate 200,000 common membership units for a like number of shares of NCM, Inc.’s common stock in December 2015. During the three months ended September 28, 2017, 12.0 million of these shares were sold and as of September 28, 2017, 2.8 million of these shares remained outstanding. The Company did not receive any proceeds from the sale of its common stock by AMC. The 2.8 million shares were subsequently sold on September 29, 2017. During the three and nine months ended September 28, 2017 and September 29, 2016, AMC received cash dividends of approximately $0.0 million, $0.0 million, $0.1 million and $0.1 million on its shares of NCM, Inc. common stock. During the nine months ended September 28, 2017, the Company recorded a reduction to deferred tax assets of $2.4 million for its additional ownership interest in NCM LLC as a result of these redemptions to reflect the tax effective difference between the tax basis and the book basis, the majority of which will be amortized over a 15-year period for federal income tax purposes. In addition, the Company recorded a decrease of $1.1 million during the nine months ended September 28, 2017 in its long-term payable to founding members for the estimated payment 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 the Company expects to realize as a result of the deferred tax asset, which is recorded at its present value. The discount on this liability is a temporary difference that resulted in the reduction of $0.4 million to the deferred tax liability during the nine months ended September 28, 2017.

~~Memorandum of Understanding with AMC~~— Pursuant to the Final Judgment, AMC is required to divest the majority of its equity interests in NCM LLC and NCM, Inc., so that by June 20, 2019 it owns no more than 4.99% of NCM LLC’s common membership units and NCM, Inc. common stock, taken together, on a fully converted basis (“NCM’s outstanding equity interests”). AMC must complete the divestiture per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15.0% of NCM’s outstanding equity interests, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. Pursuant to the MOU, AMC also has agreed, among other things, subject to limited exceptions to retain at least 4.5% of NCM’s outstanding equity interests during the term of the Final Judgment, subject to certain exceptions which allow for certain sell downs after the 30-month anniversary of the MOU. As of September 28, 2017, AMC ~~owned 15.2%~~ ~~of NCM’s outstanding equity interests.~~ AMC also agreed to reimburse the Company for its incurred and ongoing costs and expenses in connection with the Final Judgment including, but not limited to, its financial advisor and legal fees up to $1.0 million of such costs and expenses. During the nine months ended September 28, 2017, the Company ~~incurred $1.3 million of~~ these costs, of which $1.0 million was reimbursed through the “Amounts due to founding members” within the Condensed Consolidated Balance Sheets and the remaining $0.3 million is included in administrative costs within the Condensed Consolidated Income Statement.

AC JV, LLC Transactions—In December 2013, NCM LLC sold its Fathom Events business to a newly formed limited liability company, AC JV, LLC, owned 32% by each of the founding members and 4% by NCM LLC. The Company accounts for its investment in AC JV, LLC under the equity method of accounting in accordance with ASC 323-30,Investments—Equity Method and Joint Ventures (“(“ASC 323-30”) because AC JV, LLC is a limited liability company with the characteristics of a limited partnership and ASC 323-30 requires the use of equity method accounting unless the Company’s interest is so minor that it would have virtually no influence over partnership operating and financial policies. Although NCM LLC does not have a representative on AC JV, LLC’s Board of Directors or any voting, consent or blocking rights with respect to the governance or operations of AC JV, LLC, the Company concluded that its interest was more than minor under the accounting guidance. The Company’s investment in AC JV, LLC was ~~$1.1~~$0.7 million and ~~$1.0~~$0.7 million as of September ~~28, 2017~~29, 2022 and December ~~29, 2016,~~30, 2021, respectively. ~~Equity in earnings from AC JV, LLC for~~During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016, were~~30, 2021, NCM LLC received cash distributions from AC JV, LLC of $0.0 million, $0.0 million, ~~$0.1~~$0.2 million and $0.0 million, respectively. Equity in earnings (losses) from AC JV, LLC of $0.0 million, $0.0 million, $0.2 million and $(0.1) million for the three months and nine months ended September 29, 2022 and September 30, 2021, respectively, ~~and is~~are included in “Other non-operating ~~expenses~~income” in the unaudited Condensed Consolidated Statements of Income.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Related Party Affiliates~~—NCM LLC has an agreement with LA Live, an affiliate of The Anschutz Corporation to provide in-theater advertising. The Anschutz Corporation is a wholly-owned subsidiary of the Anschutz Company, which is the controlling stockholder of Regal. During the three and nine months ended September 28, 2017 and September 29, 2016, there was $0.1 million, $0.1 million, $0.2 million and $0.2 million, respectively, included in advertising operating costs related to LA Live, and there was approximately $0.1 million and $0.1 million of accounts payable with this company as of September 28, 2017 and December 29, 2016, respectively.

~~Other Transactions—NCM LLC has an agreement with AEG Live, an affiliate of The Anschutz Corporation, for AEG Live to showcase musical artists in NCM LLC’s~~ ~~Noovie~~ pre-show. During the three and nine months ended September 28, 2017 and September 29, 2016, NCM LLC recorded approximately $0.4 million, $0.5 million $1.0 million and $1.3 million, respectively, in revenue from AEG Live. As of September 28, 2017 and December 29, 2016, NCM LLC had approximately $0.1 million and $0.2 million, respectively, of accounts receivable from AEG Live.

6. BORROWINGS

The following table summarizes NCM LLC’s total outstanding debt as of September ~~28, 2017~~29, 2022 and December ~~29, 2016~~30, 2021 and the significant terms of its borrowing arrangements (in millions):


	Outstanding Balance as of
Borrowings	September 29, 2022		December 30, 2021		Maturity Date	Interest Rate
Revolving credit facility 2018	$	167.0	$	167.0	June 20, 2023	(1)
Revolving credit facility 2022	50.0		—		June 20, 2023	(1)
Term loans - first tranche	259.2		261.2		June 20, 2025	(1)
Term loans - second tranche	49.4		49.8		December 20, 2024	(1)
Senior secured notes due 2028	374.2		400.0		April 15, 2028	5.875%
Senior unsecured notes due 2026	230.0		230.0		August 15, 2026	5.750%
Total borrowings	1,129.8		1,108.0
Less: debt issuance costs and debt discounts related to term loans and senior notes	(8.6)		(10.5)
Total borrowings, net	1,121.2		1,097.5
Less: current portion of debt	(220.2)		(3.2)
Carrying value of long-term debt	$	901.0	$	1,094.3

Outstanding Balance as of

Borrowings

September 28,
2017

December 29,
2016

Maturity
Date

Interest
Rate

Revolving credit facility

$
—

$
15.0

November 26, 2019

(1)

Term loans

270.0

270.0

November 26, 2019

(1)

Senior secured notes due 2022

400.0

400.0

April 15, 2022

6.000%

Senior unsecured notes due 2026

250.0

250.0

August 15, 2026

5.750%

Total borrowings

$
920.0

$
935.0

Less: debt issuance costs related to term
loans and senior notes

(9.2
)

(10.7
)

Carrying value of long-term debt

$
910.8

$
924.3

(1)The interest rates on the revolving credit facilities and term loans are described below.

~~(1)~~

~~The interest rates on the revolving credit facility and term loans are described below.~~

Senior Secured Credit Facility—NCM LLC’s credit agreement, as amended, (the “Credit Agreement”) consists of a term loan facility and a revolving credit facility. As of September ~~28, 2017,~~29, 2022, NCM LLC’s senior secured credit facility consisted of a $175.0 million revolving credit facility, a $259.2 million term loan (first tranche) and a ~~$270.0~~$49.4 million term ~~loan.~~ loan (second tranche). The obligations under the senior secured credit facility are secured by a lien on substantially all of the assets of NCM LLC.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

On ~~May 26, 2016,~~March 8, 2021, NCM LLC entered into a second amendment to its Credit Agreement (“Credit Agreement Second Amendment”). Among other things, the Credit Agreement Second Amendment provides for certain modifications to the negative covenants, additional waivers and term changes outlined below and grants security interests in certain assets of NCM LLC and other potential loan parties that are not currently pledged to the lenders. In addition, pursuant to the Credit Agreement Second Amendment, NCM LLC incurred a second tranche of the term loans in an ~~incremental~~aggregate principal amount of $50.0 million, the net proceeds of $43.0 million to be used for general corporate purposes. Upon execution of the Credit Agreement Second Amendment, the Company recorded $2.3 million as a discount, $3.9 million as debt issuance costs and $0.8 million within “(Gain) loss on modification and retirement of debt, net” within the nine months ended September 30, 2021.

On January 5, 2022, NCM LLC entered into a third amendment to its Credit Agreement (“Credit Agreement Third Amendment”). Among other things, the Credit Agreement Third Amendment provides for: (i) certain modifications to and extensions to modifications of ~~its~~the affirmative and negative covenants therein; (ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022; (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, 2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter. Upon execution of the Credit Agreement Third Amendment, $6.4 million was recorded as debt issuance costs and $0.4 million was recorded within “(Gain) loss on modification and retirement of debt, net” during the year ended December 30, 2021.

The senior secured credit facility ~~whereby~~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, each of which has been modified by the Credit Agreement Third Amendment. Pursuant to the terms of the Credit Agreement Third Amendment, NCM LLC is restricted from making available cash distributions until after NCM LLC delivers a compliance certificate for the quarter ending on or about December 28, 2023, and, thereafter, NCM LLC may only make available cash distributions if: (i) no default or event of default under the Credit Agreement has occurred and is continuing; (ii) the consolidated net senior secured leverage ratio is equal to or less than 4.00 to 1.00; and (iii) the aggregate principal amount of all outstanding revolving loans under the Credit Agreement is $39.0 million or less. As of September 29, 2022, NCM LLC was in compliance with the requirements of the Credit Agreement Third Amendment described above and the noncompliance with the financial covenants was automatically waived.

Term Loans—First Tranche—The interest rate on the initial tranche of term loans was originally a rate chosen at NCM LLC’s option of either the LIBOR index plus 3.00% or the base rate plus 2.00%. The rate increased ~~by $40.0~~from LIBOR index plus 2.75% or the base rate plus 1.75%. The interest rate on the term loans as of September 29, 2022 was 6.56%. The term loans amortize at a rate equal to 1.00% annually, to be paid in equal quarterly installments.As of September 29, 2022, NCM LLC has paid principal of $10.8 million, ~~from $135.0~~reducing the outstanding balance to $259.2 million.

Term Loans—Second Tranche—The interest rate on the second tranche of term loans is the LIBOR index plus 8.00%. The interest rate on the term loans as of September 29, 2022 was 10.56%. The term loans amortize at a rate equal to 1.00% annually, to be paid in equal quarterly installments. As of September 29, 2022, NCM LLC has paid principal of $0.6 million, reducing the outstanding balance to ~~$175.0~~$49.4 million.

Revolving Credit Facility 2018—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. During March 2020, NCM LLC drew down an additional $110.0 million on the revolving credit facility to fund operations during the period of expected disrupted cash flows due to the temporary closure of the theaters within NCM LLC's network due to the COVID-19 Pandemic.As of September ~~28, 2017,~~29, 2022, NCM LLC’s total availability under the $175.0 million revolving credit facility was ~~$170.2~~$6.8 million, net of ~~$4.8~~$167.0 million outstanding and $1.2 million in letters of credit. The unused line fee is 0.50% per ~~annum.~~annum which is consistent with the previous facility. Borrowings under the revolving credit facility bear interest at NCM LLC’s option of either the LIBOR index plus an applicable margin ranging from 1.75% to 2.25% or the base rate ~~(Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility)~~ plus an applicable ~~margin.~~margin ranging from 0.75% to 1.25%. The margin changed to the aforementioned range from a fixed margin of LIBOR index plus 2.00% or the base rate plus 1.00%. 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 (the ratio of secured funded debt less unrestricted cash and cash equivalents ~~over a non-GAAP measure~~of up to $100.0 million, divided by Adjusted EBITDA for debt purposes, defined ~~in the senior secured credit facility).~~

~~Term Loans—The interest rate on the term loans is a rate chosen at~~as NCM ~~LLC’s option of either the LIBOR index~~LLC's net

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

income before depreciation and amortization expense adjusted to also exclude non-cash share based compensation costs for NCM LLC plus ~~2.75% or the base rate (Prime Rate or the Federal Funds Effective Rate, as defined in the senior secured credit facility) plus 1.75%~~integration payments received). The weighted-average interest rate on the ~~term loans~~revolving credit facility as of September ~~28, 2017~~29, 2022 was ~~4.0%~~6.18%.

Revolving Credit Facility 2022—On January 5, 2022, NCM LLC also entered into a new revolving credit agreement (the “Revolving Credit Agreement 2022”). ~~Interest~~The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022. The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term Secured Overnight Financing Rate (SOFR) plus 8.00%, with a 1.00% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity. The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. As of September 29, 2022, NCM LLC’s total availability under the $50.0 million revolving credit facility was $0.0 million. The weighted-average interest rate on the ~~term loans is currently paid monthly.~~

~~The senior secured~~revolving credit facility ~~contains a number of covenants and financial ratio requirements, with which NCM LLC was in compliance~~ as of September 28, 2017, including maintaining a consolidated net senior secured leverage ratio of equal to or less than 6.5 times on a quarterly basis. In addition, there are no borrower distribution restrictions as long as NCM LLC’s consolidated net senior secured leverage ratio is below 6.5 times and NCM LLC is in compliance with its debt covenants. As of September 28, 2017, NCM LLC’s consolidated net senior secured leverage ratio29, 2022 was ~~3.2 times (versus the covenant of 6.5 times)~~10.86%.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Senior Secured Notes due 2022~~—On April 27, 2012, NCM LLC completed a private placement of $400.0 million in aggregate principal amount of 6.000% Senior Secured Notes (the “Notes due 2022”) for which the registered exchange offering was completed on November 26, 2012. The Notes due 2022 pay interest semi-annually in arrears on April 15 and October 15 of each year, which commenced on October 15, 2012. The Notes due 2022 are senior secured obligations of NCM LLC, rank the same as NCM LLC’s senior secured credit facility, subject to certain exceptions, and share in the same collateral that secures NCM LLC’s obligations under the senior secured credit facility. The Notes due 2022 contain certain non-maintenance covenants with which NCM LLC was in compliance as of September 28, 2017.

Senior Unsecured Notes due 2026—On August 19, 2016, NCM LLC completed a private placement of $250.0 million in aggregate principal amount of 5.750% Senior Unsecured Notes (the “Notes due 2026”). for which the registered exchange offering was completed on November 8, 2016. The Notes due 2026 pay interest semi-annually in arrears on February 15 and August 15 of each year, which commenced on February 15, 2017. The Notes due 2026 were issued at 100% of the face amount thereof and are the senior unsecured obligations of NCM LLC and will be effectively subordinated to all existing and future secured debt, including the Notes due 2022, its senior secured credit facility and any future asset backed loan facility. The Notes due 2026 will rank equally in right of payment with all of NCM LLC’s existing and future senior indebtedness, including the Notes due 2022, NCM LLC’s existing senior secured credit facility, any future asset backed loan facility, in each case, without giving effect to collateral arrangements. The Notes due 2026 will be effectively subordinated to all liabilities of any subsidiaries thatLLC. NCM LLC ~~may form or acquire in the future, unless those subsidiaries become guarantors~~repurchased and canceled a total of $20.0 million of the Notes due ~~2026.~~2026 during 2019 and 2018, reducing the principal amount to $230.0 million as of September 29, 2022.

Senior Secured Notes due 2028—On October 8, 2019, NCM LLC ~~does not currently have any subsidiaries, and~~completed a private offering of $400.0 million aggregate principal amount of 5.875% Senior Secured Notes due 2028 (the “Notes due 2028”) to eligible purchasers. The Notes due 2028 will mature on April 15, 2028. Interest on the Notes due ~~2026 will not be guaranteed by any subsidiaries that NCM LLC may form or acquire~~2028 accrues at a rate of 5.875% per annum and is payable semi-annually in ~~the future except in very limited circumstances.~~arrears on April 15 and October 15 of each year, commencing on April 15, 2020. The Notes due ~~2026 contain certain non-maintenance covenants with which NCM LLC was in compliance as~~2028 were issued at 100% of ~~September 28, 2017.~~

~~6. INCOME TAXES~~

~~The Company is subject to taxation~~the face amount thereof and share in the ~~U.S. and various states. The Company has established a contingency reserve for material, known tax exposures. The Company’s reserve reflects management’s judgment as to~~same collateral that secures NCM LLC's obligations under the resolution of the issues involved if subject to judicial review or other settlement. While the Company believes its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to the reserve, the Company’ income tax expense would include (i) any changes in tax reserves arising from material changes during the period in the facts and circumstances (i.e., new information) surrounding a tax issue and (ii) any difference from the Company’s tax position as recorded in the financial statements and the final resolution of a tax issue during the period. Such resolution could materially increase or decrease income tax expense in the unaudited Condensed Consolidated Financial Statements in future periods and could impact operating cash flows.

Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the unaudited Condensed Consolidated Financial Statements. The total amount of unrecognized tax benefits as of September 28, 2017 and December 29, 2016, was $0.3 million and $1.6 million, respectively, excluding accrued interest and penalties, which if recognized would affect the effective tax rate. The Company recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense in the unaudited Condensed Consolidated Statements of Income and records the liability in income taxes payable in the unaudited Condensed Consolidated Balance Sheets. The Company recognized $0.0 million, $0.0 million $0.0 million and $0.1 million in interest and penalties during the three and nine months ended September 28, 2017 and September 29, 2016, respectively. The Company has accrued $0.0 million and $0.4 million for the payment of interest and penalties as of September 28, 2017 and December 29, 2016, respectively.

During the three and nine months ended September 28, 2017, the Company reversed approximately $1.7 million of its contingency reserve ($1.3 million of unrecognized tax benefits and $0.4 million of accrued interest and penalties) because the statute of limitations expired. It is reasonably possible that the Company’s total unrecognized tax benefits will decrease by approximately $0.3 million during the next twelve months due to the expiration of certain statutes of limitations.

~~During~~senior secured credit facility. In the nine months ended September ~~28, 2017, the Company recorded a reduction to its deferred tax assets of approximately $35.0~~29, 2022, NCM Inc. purchased $25.8 million ~~related to the tax effective difference between the tax basis and book basis~~ of the ~~intangible assets recorded for~~Notes due 2028 on the ~~extraordinary Common Unit Adjustment,~~open market, reducing the principal amount owed by NCM LLC to third parties to $374.2 million as ~~discussed further~~of September 29, 2022 and resulting in ~~Note 3 –~~ ~~Intangible Assets. The Company recorded~~ a ~~deferred tax liability~~$6.0 million gain on extinguishment of ~~approximately $15.8 million during~~debt in the nine months ended September ~~28, 2017 related to imputed interest on the integration payments associated with the extraordinary Common Unit Adjustment. These items also resulted~~29, 2022.

7. INCOME TAXES

Changes in ~~a net reduction to additional paid-in capital of approximately $50.8 million. Further,~~ the Company’s Effective Tax Rate—The Company recorded income tax expense of $0.0 million for the nine months ended September 29, 2022 and for the nine months ended September 30, 2021 resulting in an effective tax rate of 0.0% for both periods. The Company recorded a full valuation allowance on its net deferred tax ~~asset balance~~assets as of December 30, 2021 following the determination it was more-likely-than-not that the Company will not be able to realize the benefit of those assets. The Company maintained a full valuation allowance as of September ~~28, 2017, includes a~~29, 2022, resulting in deferred tax ~~basis note receivable~~expense of ~~$27.4~~$0.0 million ~~in connection with~~

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

for the ~~common membership unit redemption that occurred on~~nine months ended September ~~7, 2017, as discussed further in Note 4 –~~ ~~Related Party Transactions~~29, 2022 and the Company’s effective tax rate of 0.0%.

8. COMMITMENTS AND CONTINGENCIES

Legal Actions—The Company is subject to claims and legal actions in the ordinary course of business. The Company believes such claims will not have a material adverse effect individually ~~and~~or in the aggregate on its financial position, results of operations or cash flows.

~~Minimum Revenue Guarantees―As part of the network affiliate agreements~~

Operating Commitments - Facilities—The Company has entered into ~~in the ordinary course of business under which the Company sells advertising~~operating lease agreements for ~~display in various network affiliate theater chains, the~~its corporate headquarters and other regional offices. The Company has ~~agreed to certain minimum revenue guarantees~~right-of-use (“ROU”) assets of $17.4 million and short-term and long-term lease liabilities of $2.2 million and $18.6 million, respectively, on ~~a per attendee basis. If a network affiliate achieves~~ the ~~attendance set forth in their respective agreement,~~balance sheet as of September 29, 2022 for all material leases with terms longer than twelve months. These balances are included within “Other assets”, “Other current liabilities” and “Other liabilities”, respectively, on 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.~~unaudited Condensed Consolidated Balance Sheets. As of September ~~28, 2017, the maximum potential amount of future payments~~29, 2022, the Company ~~could be required~~had a weighted average remaining lease term of 6.9 years on these leases. When measuring the ROU assets and lease liabilities recorded, the Company utilized its incremental borrowing rate in order to ~~make pursuant~~determine the present value of the lease payments as the leases do not provide an implicit rate. The Company used the rate of interest that it would have paid to borrow on a collateralized basis over a similar term for an amount equal to the ~~minimum revenue guarantees is $84.3 million over~~lease payments in a similar economic environment. As of September 29, 2022, the ~~remaining terms~~Company’s weighted average annual discount rate used to establish the ROU assets and lease liabilities was 7.4%.

During the three months ended September 29, 2022 and September 30, 2021, the Company recognized the following components of total lease cost (in millions). These costs are presented within “Selling and marketing costs” and

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

“Administrative and other costs” within the unaudited Condensed Consolidated Statements of Income depending upon the nature of the ~~network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from one to twenty years, prior to any renewal periods of which some are at the option~~use of the ~~Company. During~~facility.


	Three Months Ended				Nine Months Ended
	September 29, 2022		September 30, 2021		September 29, 2022		September 30, 2021
Operating lease cost	$	0.9	$	0.8	$	2.6	$	2.6

Variable lease cost	0.1		0.2		0.4		0.4
Total lease cost	$	1.0	$	1.0	$	3.0	$	3.0

The Company made total lease payments of $0.9 million, $0.9 million, $2.9 million and $2.9 million during the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, respectively. These payments are included within cash flows from operating activities within the unaudited Condensed Consolidated Statement of Cash Flows.

Operating Commitments - ESAs and Affiliate Agreements—The Company ~~paid $0.1 million~~has entered into long-term ESAs with the founding members and ~~$0.0 million, respectively, related to these minimum guarantees. For these periods, there are no other~~multi-year agreements with certain network affiliates, or third-party theater circuits. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. The Company recognizes intangible assets upon issuance of membership units to the founding members in accordance with ~~guaranteed minimums in excess~~NCM LLC’s Common Unit Adjustment Agreement and upfront cash payments to the affiliates for the contractual rights to provide the Company’s services within their theaters as further discussed within Note 4 - Intangible Assets. These ESAs and network affiliate agreements are considered leases under ASC 842 once the asset is identified and the period of control is determined upon the scheduling of the ~~revenue share arrangement.~~

~~Theater Access Fee Guarantees~~—showtimes by the exhibitors, typically one week prior to the showtime. As such, the leases are considered short-term in nature, specifically less than one month. Within ASC 842, leases with terms of less than one month are exempt from the majority of the accounting and disclosure requirements, including disclosure of short-term lease expense. No ROU assets or lease liabilities were recognized for these agreements and no change to the balance sheet presentation of the intangible assets was necessary. However, the amortization of these intangible assets is considered lease expense and is presented within “Amortization of intangibles recorded for network theater screen leases” within the unaudited Condensed Consolidated Statement of Income.

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, a fixed payment per digital screen (connected to the DCN) and a fee for access to higher quality digital cinema equipment. The payment per theater patron increases by 8% every five ~~years, with this increase occurring for~~years. The payment per theater patron increased in 2022 and will again in fiscal year ~~2017,~~2027, and the payment per digital screen and for digital cinema equipment increases annually by 5%. 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. As of September ~~28, 2017~~29, 2022 and December ~~29, 2016,~~30, 2021, the Company had no liabilities recorded for the minimum payment, as the theater access fee was in excess of the minimum.

Following the 2019 ESA Amendments, Cinemark and Regal receive an additional monthly theater access fee that began on 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: (i) $0.0375 per patron beginning on November 1, 2020, (ii) $0.05 per patron beginning on November 1, 2021, (iii) $0.052 per patron beginning on November 1, 2022 and (iv) increase 8% every five years beginning November 1, 2027. Additionally, following the 2019 ESA Amendments, beginning on November 1, 2019, NCM LLC is entitled to display the Platinum Spot, an additional single unit 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. The “attached” trailers are those provided by studios to Cinemark and Regal that are with the feature film, which is at least one trailer, but sometimes two or more trailers. In consideration for the utilization of the theaters for the Platinum Spots, Cinemark and Regal are entitled to receive a percentage 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, then NCM LLC will be required to satisfy a minimum average CPM for that period of time. The Company did not owe the founding members any theater access fees or any Platinum Spot revenue share when the theaters were not displaying the Company's pre-show or when the Company did not have access to the theaters. As such, the Company did not owe these fees for the period of time the founding members' theaters were temporarily closed due to the COVID-19 Pandemic and future fees will be reduced if attendance remains lower than historical levels. The digital screen fee is calculated based upon average screens in use during each month.

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The network affiliates compensation is considered variable lease expense and varies by circuit depending upon the agreed upon terms of the network affiliate agreement. The majority of agreements are centered around a revenue share where an agreed upon percentage of the advertising revenue received from a theater’s attendance is paid to the circuit. As part of the network affiliate agreements entered into in the ordinary course of business under which the Company sells advertising for display in various network affiliate theater chains, the Company has agreed to certain minimum revenue guarantees on a per attendee basis. 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. As of September 29, 2022, the maximum potential amount of future payments the Company could be required to make pursuant to the minimum revenue guarantees is $122.8 million over the remaining terms of the network affiliate agreements. These minimum guarantees relate to various affiliate agreements ranging in term from three years to twenty years, prior to any renewal periods of which some are at the option of the Company. The Company accrued $0.6 million and $0.4 million related to affiliate agreements with guaranteed minimums in excess of the revenue share agreement as of September 29, 2022 and December 30, 2021, respectively within “Accounts payable” in the Unaudited Condensed Consolidated Balance Sheet. As the guaranteed minimums are based upon agreed upon minimum attendance or affiliate revenue levels, the Company will not incur minimum revenue share fees during a period of time the minimum theater attendance or revenue levels are not met by the affiliate.

9. FAIR VALUE MEASUREMENTS

All current assets and liabilities are estimated to approximate their fair value due to the short-term nature of these balances. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Non-Recurring Measurements—Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. These assets include long-lived assets, intangible assets, ~~cost and equity method~~other investments, notes receivable and borrowings.

Long-Lived Assets, Intangible Assets and Other Investments ~~and Notes Receivable~~—The Company regularly reviews long-lived assets (primarily property, plant and equipment), intangible assets and investments accounted for under the cost or equity method ~~and notes receivable~~ for impairment whenever certain qualitative factors, events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. When the estimated fair value is determined to be lower than the carrying value of the asset, an impairment charge is recorded to write the asset down to its estimated fair value.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Other investments consisted of the following (in millions):


	As of
	September 29, 2022		December 30, 2021
Investment in AC JV, LLC (1)	$	0.7	$	0.7
Other investments	0.1		0.1
Total	$	0.8	$	0.8

As of

September 28,
2017

December 29,
2016

Investment in AC JV, LLC (1)

$
1.1

$
1.0

Other investments (2)

2.5

5.6

Total

$
3.6

$
6.6

~~(1)~~

~~Refer to Note 4—Related Party Transactions~~.

(1)Refer to Note 5—Related Party Transactions. This investment is accounted for utilizing the equity method.

~~(2)~~

The Company received equity securities in privately held companies as consideration for a portion of advertising contracts. The equity securities were accounted for under the cost method and represent an ownership of less than 20%. The Company does not exert significant influence on these companies’ operating or financial activities.

During the three months ended September 29, 2022 and September 30, 2021 and nine months ended September ~~28, 2017~~29, 2022 and September ~~29, 2016,~~30, 2021, the Company recorded ~~other-than-temporary~~ impairment charges of $0.0 million, ~~$0.7~~$0.0 million, ~~$3.1~~$0.1 million and ~~$0.7~~$0.0 million, respectively, on certain of its investments due to ~~a significant deterioration in the business prospects of the investee or~~ new information regarding the fair value of the investee, ~~in the nine months ended September 28, 2017. These impairment charges~~ which

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

brought the ~~investments to a~~total remaining ~~fair value of $0.1 million. The fair~~ value of the ~~other~~respective impaired investments ~~has not been estimated~~to $0.1 million as of September ~~28, 2017 and December~~ 29, ~~2016~~2022. As of September 29, 2022, no other observable price changes or impairments have been recorded as ~~there were no~~a result of the Company’s qualitative assessment of identified events or changes in the circumstances ~~that had a significant adverse effect on~~of the ~~fair value of those investments and it is not practicable to do so because the equity securities are not in publicly traded companies.~~remaining investments. The investment in AC JV, LLC was initially valued using comparative market multiples. The other investments were recorded based upon the fair value of the services provided in exchange for the investment. As the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs, they have been classified as Level 3 in the fair value hierarchy.

As of September 28, 2017 and December 29, 2016, the Company had notes receivable totaling $12.5 million and $13.9 million, respectively, from its founding members related to the sale of Fathom Events, as described in Note 4—~~Related Party Transactions~~. These notes were initially valued using comparative market multiples. There were no identified events or changes in circumstances that had a significant adverse effect on the fair value of the notes receivable. The notes are classified as Level 3 in the fair value hierarchy as the inputs to the determination of fair value are based upon non-identical assets and use significant unobservable inputs.

Borrowings—The carrying amount of the revolving credit ~~facility is~~facilities are considered a reasonable estimate of fair value due to its floating-rate terms. The estimated fair values of the Company’s financial instruments where carrying values do not approximate fair value were as follows (in millions):


	As of September 29, 2022				As of December 30, 2021
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans - first tranche	$	259.2	$	171.1	$	261.2	$	236.4
Term loans - second tranche	$	49.4	$	34.6	$	49.8	$	48.1
Notes due 2026	$	230.0	$	50.9	$	230.0	$	179.4
Notes due 2028	$	374.2	$	216.3	$	400.0	$	357.0

As of September 28,
2017

As of December 29,
2016

Carrying Value

Fair Value (1)

Carrying Value

Fair Value (1)

Term loans

$
270.0

$
269.6

$
270.0

$
272.7

Notes due 2022

400.0

409.5

400.0

414.5

Notes due 2026

250.0

233.8

250.0

256.7

(1)If the Company were to measure the borrowings in the above table at fair value on the balance sheet they would be classified as Level 2 based upon the inputs utilized.

~~(1)~~

The Company has estimated the fair value on an average of at least two non-binding broker quotes and the Company’s analysis. If the Company were to measure the borrowings in the above table at fair value on the balance sheet they would be classified as Level 2.

~~NATIONAL CINEMEDIA, INC. AND SUBSIDIARY~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

Recurring Measurements—The fair values of the Company’s assets and liabilities measured on a recurring basis pursuant to ASC 820-10,Fair Value Measurements and Disclosuresare as follows (in millions):


			Fair Value Measurements at Reporting Date Using
	Fair Value as of September 29, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:
Cash equivalents (1)	$	10.7	$	10.7	$	—	$	—
Short-term marketable securities (2)	0.3		—		0.3		—
Long-term marketable securities (2)	1.0		—		1.0		—
Total assets	$	12.0	$	10.7	$	1.3	$	—


			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:
Cash equivalents (1)	$	37.1	$	37.1	$	—	$	—
Short-term marketable securities (2)	0.3		—		0.3		—
Long-term marketable securities (2)	1.0		—		1.0		—
Total assets	$	38.4	$	37.1	$	1.3	$	—

Fair Value Measurements at Reporting Date Using

Fair Value as of
September 28,
2017

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

ASSETS:

Cash equivalents (1)

$
22.3

$
22.3

$
—

$
—

Short-term marketable securities (2)

3.7

2.0

1.7

—

Long-term marketable securities (2)

15.8

13.7

2.1

—

Total assets

$
41.8

$
38.0

$
3.8

$
—

Fair Value Measurements at Reporting Date Using

Fair Value as of
December 29,
2016

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other
Observable
Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)

ASSETS:

Cash equivalents (1)

$
5.3

$
0.3

$
5.0

$
—

Short-term marketable securities (2)

26.1

5.2

20.9

—

Long-term marketable securities (2)

19.6

17.3

2.3

—

Total assets

$
51.0

$
22.8

$
28.2

$
—

~~(1)~~

~~Cash Equivalents~~—The Company’s cash equivalents are carried at estimated fair value. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

(1)Cash Equivalents—The Company’s cash equivalents are carried at estimated fair value following the Company's election of the fair value option. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts and commercial paper with original maturities of three months or less, which are classified as Level 2 and are valued as described below.

~~(2)~~

~~Short-Term and Long-Term Marketable Securities~~—The carrying amount and fair value of the marketable securities are equivalent since the Company accounts for these instruments at fair value. The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third party broker quotes. The value of the Company’s government agency bonds is derived from quoted market information. The inputs in the valuation are generally classified as Level 1 given the active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. For the three and nine months ended September 28, 2017 and September 29, 2016, there was an inconsequential amount of net realized gains (losses) recognized in interest income and an inconsequential amount of net unrealized holding gains (losses) included in other comprehensive income. Original cost of short-term marketable securities is based on the specific identification method. As of September 28, 2017 and December 29, 2016, there was an inconsequential amount of gross unrealized losses related to individual securities of $1.4 million that had been in a continuous loss position for 12 months or longer.

(2)Short-Term and Long-Term Marketable Securities—The carrying amount and fair value of the marketable securities are equivalent since the Company accounts for these instruments at fair value. The Company’s government agency bonds, commercial paper and certificates of deposit are valued using third party broker quotes. The value of the Company’s government agency bonds is derived from quoted market information. The inputs in the valuation are

NATIONAL CINEMEDIA, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

classified as Level 1 if there is an active market for these securities; however, if an active market does not exist, the inputs are recorded at a lower level in the fair value hierarchy. The value of commercial paper and certificates of deposit is derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. As of September 29, 2022 and December 30, 2021, there were $1.0 million and $1.0 million, respectively, of available-for-sale debt securities in unrealized loss positions without an allowance for credit losses. The Company has not recorded an allowance for credit losses for the marketable securities balance as of September 29, 2022 or December 30, 2021 given the immaterial difference between the amortized cost basis and the aggregate fair value of the Company's securities.

The amortized cost basis, aggregate fair value and maturities of the marketable securities the Company held as of September ~~28, 2017~~29, 2022 and December ~~29, 2016~~30, 2021 were as follows:


	As of September 29, 2022
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:





Short-term certificates of deposit	$	0.3	$	0.3	0.2
Total short-term marketable securities	0.3		0.3


Long-term certificates of deposit	$	1.0	$	1.0	1.3
Total long-term marketable securities	1.0		1.0
Total marketable securities	$	1.3	$	1.3


	As of December 30, 2021
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:


Short-term certificates of deposit	$	0.3	$	0.3	0.9




Total short-term marketable securities	0.3		0.3


Long-term certificates of deposit	1.0		1.0		2.0
Total long-term marketable securities	1.0		1.0
Total marketable securities	$	1.3	$	1.3

As of September 28, 2017

Amortized Cost
Basis
(in millions)

Aggregate Fair
Value
(in millions)

Maturities (1)
(in years)

MARKETABLE SECURITIES:

Short-term U.S. government treasury bonds

$
1.2

$
1.2

0.1

Short-term U.S. government agency bonds

0.8

0.8

0.9

Short-term certificates of deposit

1.7

1.7

0.2

Total short-term marketable securities

3.7

3.7

Long-term municipal bonds

1.9

1.9

2.4

Long-term U.S. government agency bonds

11.9

11.8

2.5

Long-term financial certificates of deposit:

2.1

2.1

2.0

Total long-term marketable securities

15.9

15.8

Total marketable securities

$
19.6

$
19.5

(1)Maturities—Securities available for sale include obligations with various contractual maturity dates some of which are greater than one year. The Company considers the securities to be liquid and convertible to cash within 30 days.

As of December 29, 2016

Amortized Cost
Basis
(in millions)

Aggregate Fair
Value
(in millions)

Maturities (1)
(in years)

MARKETABLE SECURITIES:

Short-term U.S. government treasury bonds

$
1.2

$
1.2

0.8

Short-term municipal bonds

2.9

2.9

0.6

Short-term U.S. government agency bonds

1.0

1.0

0.5

Short-term commercial paper

13.0

13.0

0.1

Short-term certificates of deposit:

Financial

7.7

7.7

0.6

Industrial

0.3

0.3

0.9

Total short-term marketable securities

26.1

26.1

Long-term municipal bonds

1.9

1.8

2.7

Long-term U.S. government agency bonds

15.6

15.5

3.5

Long-term certificates of deposit

2.2

2.3

2.6

Total long-term marketable securities

19.7

19.6

Total marketable securities

$
45.8

$
45.7

~~(1)~~

~~Maturities~~—Securities available for sale include obligations with various contractual maturity dates some of which are greater than one year. The Company considers the securities to be liquid and convertible to cash within 30 days.

9.10. SUBSEQUENT EVENT

On October 17, 2022, NCM LLC elected not to make an interest payment in the amount of $11.8 million, $0.8 million of which relates to notes held by NCM, Inc., due October 17, 2022 under the Senior Secured Notes due 2028, and entered a 30-day grace period under the indenture governing the Senior Secured Notes due 2028. The Company made the payment on November 4, 2022, prior to the end of the applicable grace period.

On November 3, ~~2017,~~2022, NCM LLC and NCM, Inc. entered into a Receivable Sales Agreement pursuant to which, NCM, Inc. acquired the ~~Company declared~~right to approximately $4.9 million of NCM LLC’s accounts receivable at a purchase price equal to the book value of the accounts receivable in exchange for a cash dividend of $0.22 per share (approximately $16.8 million) on each share of the Company’s common stock (not including outstanding restricted stock which will accrue dividends until the shares vest) to stockholders of record on November 16, 2017 to be paid on December 1, 2017.

~~On October~~ payment.

20 2017, AMC exercised its redemption right of an aggregate 1.0 million common membership units for a like number of shares of NCM, Inc.’s common stock which increased the Company’s ownership to 49.5%.

Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations

Some of the information in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, statements related to the impact of the current COVID-19 Pandemic on our business and results of operations, and statements relating to NCM LLC’s current debt facilities and potential amendments or ability to raise additional debt 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. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading “Risk Factors” ~~contained~~ below and in our annual report on Form 10-K for the Company’s fiscal year ended December ~~29, 2016.~~30, 2021. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis is a supplement to and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our annual report on Form 10-K for the Company’s fiscal year ended December ~~29, 2016.~~30, 2021. In the following discussion and analysis, the term net income refers to net income attributable to NCM, Inc.

Overview

We are ~~America's~~America’s Movie Network. As the ~~#1 weekend~~largest cinema advertising network ~~for Millennials (age 18-34)~~ in the U.S., we ~~are~~unite brands with young, diverse audiences through the ~~connector between brands~~power of movies and ~~movie audiences.~~popular culture. We currently derive revenue principally from the sale of advertising to national, ~~regional~~local and ~~local~~regional businesses in ~~Noovie~~,our Noovie® pre-show, our cinema advertising and entertainment pre-show seen on movie screens across the U.S.

We present two different formats of our Noovie pre-show depending on the theater circuit in which it runs. In Regal and Cinemark and a portion of our network affiliates’ theaters, the Noovie pre-show now includes Post-Showtime advertising inventory after the advertised showtime consisting of (1) the lights down segment that runs for five minutes after the advertised showtime with trailer lighting and (2) the 30- or 60-second Platinum Spot. As of September 29, 2022, theaters presenting the new Noovie pre-show format with Post-Showtime Inventory made up approximately 59% of our network. All other NCM network theater circuits, which make up the remaining 41% of our network, 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 our Noovie preshow.

We also sell advertising on our LEN, a series of ~~strategically-placed~~strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell online and mobile advertising through our ~~Cinema~~Noovie Audience Accelerator, across our suite of Noovie digital ~~product~~properties, including Noovie Trivia, Noovie Shuffle, and Name That Movie®, as well as a variety of complementary out of home venues, including restaurants and convenience stores, in order to reach entertainment audiences beyond the theater. As of September 29, 2022, over 7.2 million moviegoers have downloaded our mobile apps. These downloads and the acquisition of second- and third-party data have resulted in data sets of approximately 346.5 million as of September 29, 2022. We have long-term ESAs (approximately 1917.0 weighted average years ~~remaining as of September 28, 2017)~~remaining) with the founding members and multi-year agreements with our network affiliates, which expire at various dates between ~~March 5, 2018~~November2022 and ~~July 22, 2031.~~December 2037. The weighted average remaining term ~~(based on attendance)~~ of the ESAs and the network affiliate agreements is ~~17.1~~15.1 years as of September ~~28, 2017.~~29, 2022. 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~~digital content 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 (91% digital cinema projectors and 9% LCD projectors) as of September 28, 2017.~~

(“DCN”).

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators to manage our business, determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplace in which we operate. Senior executives hold meetings at least once per quarter with officers to discuss and analyze operating results and address significant variances to budget and prior year in an effort to identify trends and changes in our business. We focus on operating metrics including changes in revenue, ~~OIBDA,~~ Adjusted OIBDA and Adjusted OIBDA margin, as defined and discussed below, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, national and ~~local and~~ regional advertising pricing (CPM), local ~~and regional~~ advertising rate per ~~screen~~theater per week, and 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 ~~including~~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.

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled “Risk Factors” below and in our annual report on Form 10-K filed with the SEC on ~~February 24, 2017~~March 3, 2022 for our fiscal year ended December 30, 2021.

Recent Developments

The impacts from the COVID-19 Pandemic have had and continue to have an effect on the world and our business. The movie slate for 2022 has improved from prior years but continues to be limited by post-production delays and major motion picture release schedule changes. The attendance level has increased from the prior year, but it has not met historical levels and has not been consistent throughout the year due to timing of major motion picture releases. In-theater advertising revenue for the year ended December 30, 2021 and the nine months ended September 29, ~~2016.~~

2022 also remained below historical levels due in part to a lag between the recovery of attendees and advertisers, as well as current macroeconomic factors.

On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA with NCM LLC, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas (the “Cineworld Proceeding”). On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA. NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house. Although there can be no assurances that NCM LLC’s request for declaratory relief will be successful, the Company believes these rights will survive any attempted rejection in the bankruptcy court by Regal. In the event that NCM LLC’s or NCM, Inc.’s agreements with Regal and its affiliates are rejected, it could have a materially negative impact on the Company’s operations or financial condition.

To ensure sufficient liquidity during the recovery from the impacts of the COVID-19 Pandemic, we managed our liquidity position through various cost control methods discussed further within the “Financial Condition and Liquidity” section below. Since the beginning of the COVID-19 Pandemic, the Company has significantly reduced payroll related costs through a combination of temporary measures as well as a headcount reduction of approximately 44% as of September 29, 2022, as compared to headcount levels prior to the COVID-19 Pandemic. Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or in-theater advertising revenue, and therefore, were not incurred for the duration of time that the theaters were closed and attendance-based fees will continue to be reduced for the period of time that attendance is lower than historical levels. We were still required to pay these screen-based fees when theaters were open, which were reduced for months where screens were in use for only part of the month.

On January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment. Among other things, the Credit Agreement Third Amendment provides for: (i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein; (ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022; and (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, 2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter.

On January 5, 2022, NCM LLC also entered into the Revolving Credit Agreement 2022 among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire amount of which was funded on January 5, 2022. The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term SOFR plus 8.00%, with a 1.00% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity. The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement.

Summary Historical and Operating Data

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

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

% Change

Q3 2017

Q3 2016

YTD 2017

YTD 2016

Q3 2017 to
Q3 2016

YTD 2017 to
YTD 2016

Revenue

$
116.4

$
113.5

$
285.4

$
305.1

2.6
%

(6.5
%)
Operating expenses:

Advertising

43.3

42.6

130.8

129.2

1.6
%

1.2
%
Network, administrative and unallocated
costs

22.8

22.5

70.9

75.2

1.3
%

(5.7
%)
Total operating expenses

66.1

65.1

201.7

204.4

1.5
%

(1.3
%)
Operating income

50.3

48.4

83.7

100.7

3.9
%

(16.9
%)
Non-operating expenses

16.1

27.8

47.8

60.7

(42.1
%)

(21.3
%)
Income tax expense

2.3

(1.1
)

2.6

1.3

NM

100.0
%
Net income attributable to noncontrolling interests

22.5

13.5

27.4

28.0

66.7
%

(2.1
%)
Net income attributable to NCM, Inc.

$
9.4

$
8.2

$
5.9

$
10.7

14.6
%

(44.9
%)

Net income per NCM, Inc. basic share

$
0.15

$
0.14

$
0.10

$
0.18

7.1
%

(44.4
%)
Net income per NCM, Inc. diluted share

$
0.15

$
0.13

$
0.10

$
0.18

15.4
%

(44.4
%)

OIBDA

$
59.7

$
57.3

$
111.9

$
127.2

4.2
%

(12.0
%)
Adjusted OIBDA

$
62.6

$
60.9

$
122.5

$
144.3

2.8
%

(15.1
%)
Adjusted OIBDA margin

53.8
%

53.7
%

42.9
%

47.3
%

0.1
%

(4.4
%)
Total theater attendance (in millions) (1)

150.6

179.6

492.1

524.1

(16.1
%)

(6.1
%)

~~NM = Not meaningful.~~

~~(1)~~

Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike, AMC Rave and Cinemark Rave theaters that are currently part of another cinema advertising network for all periods presented.


													% Change
	Q3 2022			Q3 2021			YTD 2022			YTD 2021			Q3 2021 to Q3 2022		YTD 2021 to YTD 2022
Revenue	$	54.5		$	31.7		$	157.5		$	51.1		71.9	%	208.2	%
Operating expenses:
Advertising	35.9			29.2			106.2			60.4			22.9	%	75.8	%
Network, administrative and unallocated costs	22.8			21.2			72.5			67.3			7.5	%	7.7	%
Total operating expenses	58.7			50.4			178.7			127.7			16.5	%	39.9	%
Operating loss	(4.2)			(18.7)			(21.2)			(76.6)			(77.5)	%	(72.3)	%
Non-operating expenses	17.5			14.8			55.1			45.8			18.2	%	20.3	%
Income tax expense	—			—			—			—			—	%	—	%
Net loss attributable to noncontrolling interests	(12.8)			(18.3)			(41.5)			(65.1)			(30.1)	%	(36.3)	%
Net loss attributable to NCM, Inc.	$	(8.9)		$	(15.2)		$	(34.8)		$	(57.3)		(41.4)	%	(39.3)	%

Net loss per NCM, Inc. basic share	$	(0.11)		$	(0.19)		$	(0.43)		$	(0.72)		(42.1)	%	(40.3)	%
Net loss per NCM, Inc. diluted share	$	(0.11)		$	(0.19)		$	(0.43)		$	(0.72)		(42.1)	%	(40.3)	%

Adjusted OIBDA	$	7.0		$	(8.2)		$	15.2		$	(43.1)		(185.4)	%	(135.3)	%
Adjusted OIBDA margin	12.8		%	(25.9)		%	9.7		%	(84.3)		%	38.7	%	94.0	%
Total theater attendance (in millions) (1)	106.6			75.7			306.8			138.6			40.8	%	121.4	%

_________________________

(1)Represents the total attendance within our advertising network, excluding screens and attendance associated with certain AMC Carmike theaters that were part of another cinema advertising network during the periods presented. Refer to Note 4 to the unaudited Condensed Consolidated Financial Statements included elsewhere in this document.

Non-GAAP Financial Measures

Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”)~~, 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~~expense adjusted to also exclude amortization ~~expense. Adjusted OIBDA excludes from OIBDA~~of intangibles recorded for network theater screen leases, non-cash ~~share based~~share-based compensation costs, ~~Chief Executive Officer~~impairment of long-lived assets, advisor fees related to involvement in the Cineworld Proceeding, executive transition costs and ~~early lease termination expense.~~costs related to the reorganization of the sales force. 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~~the Company's operating performance and so 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~~policies, amortization ~~policies,~~of intangibles recorded for network theater screen leases, non-cash share based compensation programs, ~~CEO turnover, early lease termination expense,~~impairment of long-lived assets, costs related to sales force reorganization, advisor fees related to founding member restructuring, executive transition costs, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization of intangibles recorded for network theater screen leases, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company’s ~~share based~~share-based payment costs, the impairment of long-lived assets, costs ~~associated with~~related to sales force reorganization, executive transition costs or advisor fees related to the ~~resignation of the Company’s former Chief Executive Officer or early lease termination costs. OIBDA or~~Cineworld Proceeding. Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as ~~indicators~~an indicator of operating performance, nor should ~~they~~it be considered in isolation of, or as ~~substitutes~~a substitute for, financial measures prepared in accordance with GAAP. The Company believes that operating ~~income~~loss 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.

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

Q3 2017

Q3 2016

YTD 2017

YTD 2016

Operating income

$
50.3

$
48.4

$
83.7

$
100.7

Depreciation and amortization

9.4

8.9

28.2

26.5

OIBDA

$
59.7

$
57.3

$
111.9

$
127.2

Share-based compensation costs (1)

2.8

3.4

8.3

13.7

CEO transition costs (2)

0.1

0.2

0.5

3.4

Early lease termination expense (3)

—

—

1.8

—

Adjusted OIBDA

$
62.6

$
60.9

$
122.5

$
144.3

Total revenue

$
116.4

$
113.5

$
285.4

$
305.1

Adjusted OIBDA margin

53.8
%

53.7
%

42.9
%

47.3
%


	Q3 2022			Q3 2021			YTD 2022			YTD 2021
Operating loss	$	(4.2)		$	(18.7)		$	(21.2)		$	(76.6)
Depreciation expense	1.5			2.5			5.1			8.4
Amortization of intangibles recorded for network theater screen leases	6.3			6.2			18.7			18.5
Share-based compensation costs (1)	2.1			1.7			5.1			6.5
Executive transition costs (2)	—			0.1			—			0.1
Impairment of long-lived assets (3)	—			—			5.8			—
Sales force reorganization costs (4)	—			—			0.4			—
Advisor fees related to the Cineworld Proceeding (5)	1.3			—			1.3			—
Adjusted OIBDA	$	7.0		$	(8.2)		$	15.2		$	(43.1)
Total revenue	$	54.5		$	31.7		$	157.5		$	51.1
Adjusted OIBDA margin	12.8		%	(25.9)		%	9.7		%	(84.3)		%

____________________________________________

~~(1)~~

(1)Share-based compensation costs are included in network operations, selling and marketing and administrative expense ~~(YTD 2016 includes $2.3 million of expense associated with modifying the former CEO’s equity awards in the first nine months of 2016)~~ in the accompanying ~~unaudited Condensed Consolidated Financial Statements.~~

~~(2)~~

~~Chief Executive Officer transition costs represent severance, consulting and other costs.~~

~~(3)~~

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.

~~Basis of Presentation~~

~~The results of operations data for the three and nine months ended September 28, 2017 (third quarter of 2017) and September 29, 2016 (third quarter of 2016) was derived from the~~ unaudited Condensed Consolidated Financial ~~Statements and accounting records of NCM, Inc. and should be read in conjunction~~Statements.

(2)Executive transition costs represent costs associated with the ~~notes thereto.~~

~~Results of Operations~~

~~Third Quarter of 2017 and Third Quarter of 2016~~

~~Revenue.~~ ~~Total revenue increased 2.6%, from $113.5 million~~search for the ~~third quarter of 2016 to $116.4million for the third quarter of 2017. The following is a summary of revenue by category (in millions):~~

$ Change

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

Q3 2017 to
Q3 2016

National advertising revenue

$
84.5

$
82.3

$
2.2

2.7
%
Local and regional advertising revenue

25.2

23.7

1.5

6.3
%
Founding member advertising revenue from
beverage concessionaire agreements

6.7

7.5

(0.8
)

(10.7
%)
Total revenue

$
116.4

$
113.5

$
2.9

2.6
%

~~The following table shows data on theater attendance and revenue per attendee for the third quarter of 2017 and the third quarter of 2016:~~

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

National advertising revenue per attendee

$
0.561

$
0.458

22.5
%
Local and regional advertising revenue per attendee

$
0.167

$
0.132

26.5
%
Total advertising revenue (excluding founding
member beverage revenue) per attendee

$
0.728

$
0.590

23.4
%
Total advertising revenue per attendee

$
0.773

$
0.632

22.3
%
Total theater attendance (in millions) (1)

150.6

179.6

(16.1
%)

~~(1)~~

~~National advertising revenue.~~The $2.2 million, or 2.7%, increase in national advertising revenue (excluding beverage revenue from the founding members) was due primarily to an increase of $2.7 million, or 29.9%, in online, mobile and other revenue not included in the inventory measured by impressions sold or CPMs and a 2.0% increase in impressions sold, partially offset by a 2.7% decrease in national advertising CPMs (excluding beverage). The increase in impressions sold was due to higher demand in the scatter market in the third quarter of 2017, compared to the third quarter of 2016, partially offset by lower upfront and content partner spending quarter over quarter, which resulted in an increase in national inventory utilization from 132.5% in the third quarter of 2016 to 161.3% in the third quarter of 2017, on a 16.1% 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. The decrease in national advertising CPMs (excluding beverage) in the third quarter of 2017, compared to the third quarter of 2016, was due to lower CPMs on scatter revenue, and to a lesser extent on revenue from upfront advertisers, year over year.

~~Local and regional advertising revenue.~~ The $1.5 million, or 6.3%, increase in local and regional advertising revenue was primarily due to an increase in revenue from contracts over $100,000, driven primarily by higher advertising within the automotive category and a $0.6 million increase in online and mobile revenueCompany’s new CFO during the third quarter of ~~2017, compared~~2021.

(3)The impairment of long-lived assets primarily relates to the ~~third~~write down of certain internally developed software no longer in use.

(4)Sales force reorganization costs represents redundancy costs associated with changes to the Company’s sales force implemented during the first quarter of ~~2016. These increases~~2022.

(5)Advisor and legal fees incurred in ~~local and regional advertising revenue were partially offset by lower revenue on contracts less than $100,000~~connection with the Company’s involvement in the ~~third quarter of 2017, compared to the third quarter of 2016.~~

~~Founding member beverage revenue.~~ The $0.8 million, or 10.7%, decrease in national advertising revenue from the founding members’ beverage concessionaire agreements was primarily due to an 18.1% decrease in founding member attendance, partially offset by a 10.2% increase in beverage revenue CPMs, in the third quarter of 2017, compared to the third quarter of 2016. The 2017 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2015 to 2016, which increased 10.2%.

~~Operating expenses.~~ ~~Total operating expenses increased$1.0million, or 1.5%, from $65.1 million for the third quarter of 2016 to $66.1million for the third quarter of 2017. The following table shows the changes in operating expense for the third quarter of 2017 and the third quarter of 2016 (in millions):~~

$ Change

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

Q3 2017 to
Q3 2016

Advertising operating costs

$
8.9

$
7.5

$
1.4

18.7
%
Network costs

3.7

4.1

(0.4
)

(9.8
%)
Theater access fees—founding members

18.1

19.2

(1.1
)

(5.7
%)
Selling and marketing costs

17.2

16.8

0.4

2.4
%
Administrative and other costs

8.8

8.6

0.2

2.3
%
Depreciation and amortization

9.4

8.9

0.5

5.6
%
Total operating expenses

$
66.1

$
65.1

$
1.0

1.5
%

~~Advertising operating costs.~~ Advertising operating costs increased $1.4 million, or 18.7%, from $7.5 million for the third quarter of 2016 to $8.9 million for the third quarter of 2017. This increase was primarily due to a $1.2 million increase in affiliate advertising payments related to higher revenueCineworld Proceeding during the third quarter of ~~2017, compared to the third quarter of 2016 and a 14.6%, or 500 screen, increase in the number of average affiliate screens for the third quarter of 2017, compared to the third quarter of 2016.~~

~~Network costs.~~ Network costs decreased $0.4 million, or 9.8%, from $4.1 million for the third quarter of 2016 to $3.7 million for the third quarter of 2017. This decrease was primarily due to a $0.2 million decrease in personnel related expenses due primarily to a lower bonus expense (related to lower performance against internal targets) in the third quarter of 2017 compared to the third quarter of 2016.

~~Theater access fees—founding members.~~ Theater access fees decreased $1.1 million, or 5.7%, from $19.2 million for the third quarter of 2016 to $18.1 million for the third quarter of 2017. The decrease was due to a $1.3 million decrease in the expense associated with founding member attendance, partially offset by a $0.2 million increase in the expense associated with the founding member digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment. The $1.3 million decrease in the theater access fee expense based upon attendance decreased $2.2 million due to a 18.1% decrease in founding member attendance, partially offset by $0.9 million increase due to a contractual 8% rate increase this year (the payment per patron rate increase occurs every five years with this increase taking place in 2017). The $0.2 million increase in digital screen fee expense increased primarily due to an annual 5% increase specified in the ESAs.

2022.

~~Selling and marketing costs.~~Selling and marketing costs increased $0.4 million, or 2.4%, from $16.8 million for the third quarter of 2016 to $17.2 million for the third quarter of 2017. These expenses increased $0.7 million in online publisher expense related to higher online and mobile revenue, partially offset by $0.3 million in personnel related expenses driven by a decrease in noncash share-based compensation expense (related to lower performance against internal targets).

~~Administrative and other costs.~~ Administrative and other costs increased $0.2 million, or 2.3%, from $8.6 million in the third quarter of 2016 to $8.8 million in the third quarter of 2017 due primarily to $0.2 million in legal and professional fees associated with the Final Judgement related to AMC’s acquisition of Carmike that were above the reimbursement limit in the MOU.

~~Depreciation and amortization.~~ Depreciation and amortization expense increased $0.5 million, or 5.6%, from $8.9 million for the third quarter of 2016 to $9.4 million for the third quarter of 2017 primarily due to an increase in depreciation expense driven by more software being placed into service during the period.

~~Non-operating expenses.~~ Total non-operating expenses decreased $11.7 million, or 42.1%, from $27.8 million for the third quarter of 2016 to $16.1 million for the third quarter of 2017. The following table shows the changes in non-operating expense for the third quarter of 2017 and the third quarter of 2016 (in millions):

$ Change

% Change

Q3 2017

Q3 2016

Q3 2017 to
Q3 2016

Q3 2017 to
Q3 2016

Interest on borrowings

$
13.1

$
14.3

$
(1.2
)

(8.4
%)
Interest income

(0.2
)

(0.3
)

0.1

(33.3
%)
Accretion of interest on the discounted
payable to founding members under
tax receivable agreement

3.2

3.4

(0.2
)

(5.9
%)
Loss on early retirement of debt

—

10.4

(10.4
)

(100.0
%)
Total non-operating expenses

$
16.1

$
27.8

$
(11.7
)

(42.1
%)

The decrease in non-operating expense was due primarily to the absence of a $10.4 million loss on early retirement of debt recorded in the third quarter of 2016 as a result of the redemption of senior unsecured notes and a $1.2 million decrease in interest on borrowings primarily related to a one-month period between the issuance of and redemption of notes during the third quarter of 2016, whereby interest was paid on both notes for one month in the third quarter of 2016.

~~Net Income~~. Net income increased $1.2 million from $8.2 million for the third quarter of 2016 to $9.4 million for the third quarter of 2017. The increase in net income was due to a decrease in non-operating expenses of $11.7 million, as discussed above and a $1.9 million increase in operating income, partially offset by a $9.0 million increase in net income attributable to noncontrolling interests related to higher consolidated net income and a $3.4 million increase in income tax expense related to higher taxable income and a decrease in the tax benefit realized quarter over quarter due to the reversals of the reserve for uncertain tax positions.

~~Nine Months Ended September 28, 2017 and September 29, 2016~~

~~Revenue~~. Total revenue decreased 6.5%, from $305.1 million for the nine months ended September 29, 2016 to $285.4 million for the nine months ended September 28, 2017. The following is a summary of revenue by category (in millions):

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

National advertising revenue

$
194.9

$
215.5

$
(20.6
)

(9.6
%)
Local and regional advertising revenue

67.8

67.8

—

0.0
%
Founding member advertising revenue from
beverage concessionaire agreements

22.7

21.8

0.9

4.1
%
Total revenue

$
285.4

$
305.1

$
(19.7
)

(6.5
%)

~~The following table shows data on theatre attendance and revenue per attendee for the nine months ended September 28, 2017 and September 29, 2016:~~

Nine Months Ended

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

National advertising revenue per attendee

$
0.396

$
0.411

(3.6
%)
Local and regional advertising revenue per attendee

$
0.138

$
0.129

7.0
%
Total advertising revenue (excluding founding
member beverage revenue) per attendee

$
0.534

$
0.541

(1.3
%)
Total advertising revenue per attendee

$
0.580

$
0.582

(0.3
%)
Total theater attendance (in millions) (1)

492.1

524.1

(6.1
%)

~~(1)~~

~~National advertising revenue.~~ The $20.6 million, or 9.6%, decrease in national advertising revenue (excluding beverage revenue from NCM LLC’s founding members) was due primarily to an 8.5% decrease in national advertising CPMs (excluding beverage) and a 5.3% decrease in impressions sold in the first nine months of 2017, compared to the first nine months of 2016, partially offset by a $4.0 million, or 12.9%, increase in online, mobile and other revenue not included in the inventory measured by impressions sold or CPMs. The decrease in national advertising CPMs was due primarily to lower CPMs on revenue from upfront advertisers, including content partners, year over year. The decrease in national advertising impressions sold was primarily due to lower content partner spending and demand in the scatter market for the first nine months of 2017, compared to the first nine months of 2016. However, national inventory utilization remained almost consistent, with a slight increase from 112.9% in the first nine months of 2016 to 113.9% in the first nine months of 2017, on a 6.1% 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.~~

~~Local and regional advertising revenue.~~ Local and regional advertising revenue remained constant at $67.8 million for the first nine months of 2017 and 2016, primarily due to an increase in revenue from contracts over $100,000, driven primarily by higher sales within the automotive industry and a $1.5 million increase in online and mobile revenue during the first nine months of 2017, compared to the first nine months of 2016. These increases in local and regional advertising revenue were offset by an equivalent decrease in the amount of contracts less than $100,000 in the first nine months of 2017, compared to the first nine months of 2016.

~~Founding member beverage revenue.~~ The $0.9 million, or 4.1%, increase in national advertising revenue from the founding members’ beverage concessionaire agreements was due primarily to a 10.2% increase in beverage revenue CPMs, partially offset by an 8.0% decrease in founding member attendance in the first nine months of 2017, compared to the first nine months of 2016. The 2017 beverage revenue CPM is based on the change in CPM during segment one of our pre-show from 2015 to 2016, which increased 10.2%.

~~Operating expenses.~~ Total operating expenses decreased $2.7 million, or 1.3%, from $204.4 million for the nine months ended September 29, 2016 to $201.7 million for the nine months ended September 28, 2017. The following table shows the changes in operating expense for the nine months ended September 28, 2017 and September 29, 2016 (in millions):

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

Advertising operating costs

$
21.4

$
20.8

$
0.6

2.9
%
Network costs

11.9

12.9

(1.0
)

(7.8
%)
Theater access fees—founding members

57.4

56.8

0.6

1.1
%
Selling and marketing costs

54.2

54.5

(0.3
)

(0.6
%)
Administrative and other costs

28.6

32.9

(4.3
)

(13.1
%)
Depreciation and amortization

28.2

26.5

1.7

6.4
%
Total operating expenses

$
201.7

$
204.4

$
(2.7
)

(1.3
%)

~~Advertising operating costs.~~ Advertising operating costs increased $0.6 million, or 2.9%, from $20.8 million for the first nine months of 2016 to $21.4 million for the first nine months of 2017. This increase was primarily the result of a $1.0 million increase in affiliate advertising payments and a $0.6 million increase in personnel related expenses. The

increase in affiliate advertising payments was primarily driven by a 10.7%, or 367 screen, increase in the number of average affiliate screens for the first nine months of 2017, compared to the first nine months of 2016. The increase in personnel related expenses were primarily related to higher salary expense in the first nine months of 2017, compared to the first nine months of 2016. These increases in advertising operating costs were partially offset by a $1.0 million decrease in production costs related to lower revenue in the first nine months of 2017, compared to the first nine months of 2016.

~~Network costs.~~ Network costs decreased $1.0 million, or 7.8%, from $12.9 million for the first nine months of 2016 to $11.9 million compared to the first nine months of 2017. This decrease was primarily related to a $0.5 million decrease in personnel related expenses due to lower salaries and bonus expense (related to lower performance against internal targets) and a $0.2 million decrease in network maintenance costs related to our DCN in the first nine months of 2017, compared to the first nine months of 2016.

~~Theater access fees—founding members.~~ Theater access fees increased $0.6 million, or 1.1%, from $56.8 million for the first nine months of 2016 to $57.4 million for the first nine months of 2017. The increase was due to a $0.8 million increase in the expense associated with the founding member digital screens that are connected to the DCN, including higher quality digital cinema projectors and related equipment, partially offset by a $0.2 million decrease in the expense associated with founding member attendance in the first nine months of 2017, compared to the first nine months of 2016. The $0.8 million increase in digital screen fee expense increased primarily due to an annual 5% increase specified in the ESAs. The $0.2 million decrease in the theater access fee expense based upon attendance decreased $2.9 million due to an 8.0% decrease in founding member attendance, partially offset by an increase of $2.7 million due to a contractual 8% rate increase (the payment per patron rate increase occurs every five years with this increase taking place in 2017).

~~Selling and marketing costs.~~ Selling and marketing costs decreased $0.3 million, or 0.6%, from $54.5 million for the first nine months ended 2016 to $54.2 million for the first nine months ended 2017. This decrease was primarily due to a $1.8 million decrease in personnel related expenses due primarily to lower commission based expense and lower non-cash share-based compensation expense (related to lower revenue and lower performance against internal targets) and a $1.0 million decrease in non-cash barter expense related to the nature and timing of these expenses in the first nine months of 2017, compared to the first nine months of 2016. These decreases in selling and marketing costs were partially offset by a $2.4 million increase in non-cash impairment expense recorded during the first nine months of 2017, compared to the first nine months of 2016, related to investments obtained in prior years in exchange for advertising services.

~~Administrative and other costs.~~ Administrative and other costs decreased $4.3 million, or 13.1%, from $32.9 million for the first nine months of 2016 to $28.6 million for the first nine months of 2017 due primarily to 1) a $3.0 million decrease in CEO transition costs because of severance expense that occurred during the first nine months of 2016, and 2) $2.3 million of expense related to the modification of the former CEO’s equity awards that occurred during the first nine months of 2016. In addition, personnel related expenses decreased approximately $1.4 million during the first nine months of 2017, compared to the first nine months of 2016 due to lower bonus expense and non-cash share-based compensation (related to lower performance against internal targets). These decreases to administrative and other costs were partially offset by a $1.8 million early lease termination charge for our corporate headquarters (the payment of which was reimbursed by the new landlord).

~~Depreciation and amortization.~~ Depreciation and amortization expense increased $1.7 million, or 6.4%, from $26.5 million for the first nine months of 2016 to $28.2 million for the first nine months of 2017. The increase was due to an increase in depreciation expense primarily from more software being placed into service.

~~Non-operating expenses.~~ Total non-operating expenses decreased $12.9 million, or 21.3%, from $60.7 million for the nine months ended September 29, 2016 to $47.8 million for the nine months ended September 28, 2017. The following table shows the changes in non-operating expense for the nine months ended September 28, 2017 and September 29, 2016 (in millions):

Nine Months Ended

$ Change

% Change

September 28,
2017

September 29,
2016

YTD 2017 to
YTD 2016

YTD 2017 to
YTD 2016

Interest on borrowings

$
39.4

$
41.2

$
(1.8
)

(4.4
%)
Interest income

(1.0
)

(1.3
)

0.3

(23.1
%)
Accretion of interest on the discounted payable to founding members under tax receivable agreement

9.5

10.4

(0.9
)

(8.7
%)
Loss on early retirement of debt

—

10.4

(10.4
)

(100.0
%)
Other non-operating expense

(0.1
)

—

(0.1
)

(100.0
%)
Total non-operating expenses

$
47.8

$
60.7

$
(12.9
)

(21.3
%)

The decrease in non-operating expense was due primarily to the absence of a $10.4 million loss on early retirement of debt recorded in the first nine months of 2016 as a result of the redemption of senior unsecured notes and a $1.8 million decrease in interest on borrowings primarily related to a one-month period between the issuance of and redemption of notes during the third quarter of 2016, whereby interest was paid on both notes for one month in the third quarter of 2016.

~~Net Income~~. Net income decreased $4.8 million from $10.7 million for the first nine months of 2016 to $5.9 million for the first nine months of 2017. The decrease in net income was due to a $17.0 million decrease in operating income related to lower revenue as outlined above and a $1.3 million increase in income tax expense related to a decrease in the tax benefit realized period over period due to the reversals of the reserve for uncertain tax positions, partially offset by a $12.9 million decrease in non-operating expenses, as described further above, and a $0.6 million decrease in net income attributable to noncontrolling interests related to lower net income.

~~Known Trends and Uncertainties~~

~~Trends and Uncertainties Related to our Business, Industry and Corporate Structure~~

~~Our Marketplace—~~Changes in the current macro-economic environment and changes in the national, regional and local advertising markets present uncertainties that could impact our results of operations, including the timing and amount of spending from our advertising clients as expenditures from advertisers tend to be cyclical, reflecting overall economic conditions, as well as our clients’ budgeting and buying patterns. In the current environment, it is difficult to know if these changes are short-term or temporary in nature or are long-term trends and changes. These changes include increased competition related to the expansion of online and mobile advertising platforms as well as fluctuations from quarter to quarter of the demand from national and local advertisers. Further, we could negatively be impacted by factors that could reduce the viewership of our ~~Noovie~~ pre-show, such as the expansion of reserved seating (utilized in approximately 41.2% of our network as of October 3, 2017), online ticketing, an increase in the number and length of trailers for upcoming films, increased dwell time of patrons in exhibitor lobbies before showtime and lower network attendance, which could result from shortening of release windows, more alternative methods of delivering movies to consumers, lower consumer confidence and disposable income and a decline in the motion picture box office. These factors may affect the attractiveness of our offerings to advertisers. If pre-show viewership declines significantly, we will be required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. National advertising sales and rates also 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 would adversely affect our revenues and results of operations. The impact to our business associated with these issues could be mitigated over time due to factors including the increase in salable advertising impressions, better geographic coverage related to the expansion of our network, diversification and growth of our advertising client base, improvements in ~~Noovie~~ pre-show engagement and upgrades to our inventory management and data management systems. We could also benefit if the effectiveness of cinema advertising improves relative to other advertising mediums.

We continue to participate in the television upfront advertising selling process and believe that over time, a shift toward more upfront commitments would allow us to bundle several client flights throughout the year in an effort to stabilize month-to-month and quarter-to-quarter volatility. 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 and we would need to rely on the scatter market to replace those commitments. In addition, advertising sold through our upfront commitments may be placed throughout the period very irregularly which may affect our overall sales; for example, if a substantial portion of advertising from our upfront commitments is scheduled for peak periods of advertising demand, we will have fewer peak period advertising slots available for sale into the higher priced scatter market. Volatility in scatter market demand could cause our financial results to vary period to period.

Our Network—The change in the number of screens in our network by the founding members and network affiliates during the ~~first~~ nine months ~~of 2017~~ended September 29, 2022 was as follows.


	Number of screens
	Founding Members	Network Affiliates	Total
Balance as of December 30, 2021	16,436	4,304	20,740
Lost affiliates (1)	—	(288)	(288)
Closures, net of openings (2)	(281)	30	(251)
Balance as of September 29, 2022	16,155	4,046	20,201

Number of screens

Founding Members

Network Affiliates

Total

Balance as of December 29, 2016

17,022

3,526

20,548

New affiliates (1)

—

475

475

AMC screen transfers (2)

(318
)

—

(318
)
Openings, net of closures

6

(50
)

(44
)
Balance as of September 28, 2017

16,710

3,951

20,661

~~(1)~~

~~Represents five new affiliates added to our network during the first nine months of 2017.~~

~~(2)~~

~~Refer to~~ ~~Memorandum of Understanding with AMC~~ ~~below for further information.~~

~~Thus far~~(1)Represents the loss of three of our affiliates resulting in ~~2017, we have also contracted with two more new network affiliates for 77~~a reduction of 288 affiliate screens ~~that will be added~~ to our network ~~later~~as of September 29, 2022.

(2)Represents the closure of 251 screens, net of new screens added, across our founding members and network affiliates.

Our founding member and network affiliate agreements allow us to sell cinema advertising across the largest network of digitally equipped theaters in ~~2017 and early 2018.~~the U.S. 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 have begun to offer our advertising clients better audience targeting capabilities and more robust campaign data analytics that we believe will provide a better product offering and should expand our overall national client base. We also believe that the continued growth of our market coverage ~~could strengthen~~strengthens 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~~out-of-home video advertising ~~platforms.~~

~~Memorandum~~platforms by allowing advertisers the broad reach and national scale that they need to effectively reach their target audiences.

Basis of ~~Understanding~~Presentation

The results of operations data for the three months ended September 29, 2022 (third quarter of 2022) and September 30, 2021 (third quarter of 2021) and the nine months ended September 29, 2022 and September 30, 2021 was derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the accompanying notes.

Results of Operations

Third Quarter of 2022 and Third Quarter of 2021

Revenue. Total revenue increased 71.9%, from $31.7 million for the third quarter of 2021 to $54.5million for the third quarter of 2022. The following is a summary of revenue by category (in millions):


					$ Change		% Change
	Q3 2022		Q3 2021		Q3 2021 to Q3 2022		Q3 2021 to Q3 2022
National advertising revenue	$	39.7	$	22.6	$	17.1	75.7	%
Local and regional advertising revenue	9.8		5.7		4.1		71.9	%
Founding member advertising revenue from beverage concessionaire agreements	5.0		3.4		1.6		47.1	%
Total revenue	$	54.5	$	31.7	$	22.8	71.9	%

The following table shows data on theater attendance and revenue per attendee for the three months ended September 29, 2022 and September 30, 2021:


					% Change
	Q3 2022		Q3 2021		Q3 2021 to Q3 2022
National advertising revenue per attendee	$	0.372	$	0.299	24.4	%
Local and regional advertising revenue per attendee	$	0.092	$	0.075	22.7	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.464	$	0.374	24.1	%
Total revenue per attendee	$	0.511	$	0.419	22.0	%
Total theater attendance (in millions) (1)	106.6		75.7		40.8	%

________________________________________________________

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

National advertising revenue.National advertising revenue increased by $17.1 million, or 75.7%, from $22.6 million for the third quarter of 2021 to $39.7 million for the third quarter of 2022. The increase was due to a 49.1% increase in impressions soldand a 34.5% increase in national advertising CPMs (excluding beverage) in the third quarter of 2022, compared to the third quarter of 2021. The increase in impressions sold was primarily due to a 40.8% increase in network attendance for the third quarter of 2022.

Local and regional advertising revenue. Local and regional advertising revenue increased by $4.1 million, or 71.9%, from $5.7 million for the third quarter of 2021 to $9.8 million for the third quarter of 2022. The increase in local and regional advertising revenue was driven by an increase in revenue from the transportation, travel and public health categories in the third quarter of 2022, compared to the third quarter of 2021 following a significant increase in network attendance.

Founding member beverage revenue. National advertising revenue from the founding members’ beverage concessionaire agreement increased $1.6 million, or 47.1%, from $3.4 million for the third quarter of 2021 to $5.0 million for the third quarter of 2022.The increase was due to a 42.8% increase in founding member attendance for the third quarter of 2022, compared to the third quarter of 2021 when founding member attendance was negatively impacted by a limited movie slate and COVID-19 related theater closures and restrictions. The increase was also due to contractual increases in the beverage revenue CPMs in 2022, compared to 2021.

Operating expenses. Total operating expenses increased$8.3million, or 16.5%, from $50.4 million for the third quarter of 2021 to $58.7million for the third quarter of 2022. The following table shows the changes in operating expense for the third quarter of 2022 (in millions):


					$ Change		% Change
	Q3 2022		Q3 2021		Q3 2021 to Q3 2022		Q3 2021 to Q3 2022
Advertising operating costs	$	6.3	$	5.2	$	1.1	21.2	%
Network costs	2.1		2.0		0.1		5.0	%
Theater access fees and revenue share—founding members	21.3		16.7		4.6		27.5	%
Selling and marketing costs	10.4		8.2		2.2		26.8	%
Administrative and other costs	10.8		9.6		1.2		12.5	%
Depreciation expense	1.5		2.5		(1.0)		(40.0)	%
Amortization of intangibles recorded for network theater screen leases	6.3		6.2		0.1		1.6	%
Total operating expenses	$	58.7	$	50.4	$	8.3	16.5	%

Advertising operating costs. Advertising operating costs increased $1.1 million, or 21.2%, from $5.2 million for the third quarter of 2021 to $6.3 million for the third quarter of 2022. The increase in advertising operating costs was due to $0.9 million of higher advertising affiliate and partner expense, which was driven by higher revenue for the third quarter of 2022, as compared to the third quarter of 2021.

Network costs. Network costs increased $0.1 million, or 5.0%, from $2.0 million for the third quarter of 2021 to $2.1 million for the third quarter of 2022.

Theater access fees and revenue share—founding members. Theater access fees and revenue share increased by $4.6 million, or 27.5%, from $16.7 million for the third quarter of 2021 to $21.3 million for the third quarter of 2022. This increase was primarily due to a $4.0 million increase caused by the substantial increase in founding member theater attendance for the third quarter of 2022 as compared to the third quarter of 2021 and a $0.6 million increase in Platinum Spot revenue share in the third quarter of 2022, compared to the third quarter of 2021.

Selling and marketing costs. Selling and marketing costs increased $2.2 million, or 26.8%, from $8.2 million for the third quarter of 2021 to $10.4 million for the third quarter of 2022. This increase was primarily due to a $1.3 million increase in commission expense, driven by higher revenue in the third quarter of 2022, compared to the third quarter of 2021. Revenue share expenses increased by $0.5 million driven by increased revenue and a $0.2 million increase in software costs in the third quarter of 2022, compared to the third quarter of 2021.

Administrative and other costs. Administrative and other costs increased $1.2 million, or 12.5%, from $9.6 million for the third quarter of 2021 to $10.8 million for the third quarter of 2022. This increase was primarily due to $1.3 million in advisor fees incurred related to the Cineworld Proceeding during the third quarter of 2022 and a $0.2 million increase due to reduced capitalized personnel costs in our technology department during the third quarter of 2022, as compared to the third quarter of 2021. These increases werepartially offset by a $0.4 million decrease in other legal and professional fees.

Depreciation expense. Depreciation expense decreased $1.0 million, or 40.0%, from $2.5 million for the third quarter of 2021 to $1.5 million in the third quarter of 2022, primarily due to the write-off of internally developed software in the first quarter of ~~2017, NCM, Inc.~~2022.

Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen increased $0.1 million, or 1.6%, from $6.2 million for the third quarter of 2021 to $6.3 million for the third quarter of 2022.

Non-operating expenses. Total non-operating expenses increased $2.7 million, or 18.2%, from $14.8 million for the third quarter of 2021 to $17.5 million for the third quarter of 2022. The following table shows the changes in non-operating expense for the third quarter of 2022 and ~~NCM LLC entered into~~the third quarter of 2021 (in millions):


					$ Change		% Change
	Q3 2022		Q3 2021		Q3 2021 to Q3 2022		Q3 2021 to Q3 2022
Interest on borrowings	$	19.8	$	16.6	$	3.2	19.3	%
Interest income	(0.1)		—		(0.1)		—	%

(Gain) loss on the re-measurement of the payable to founding members under the tax receivable agreement	(2.2)		(1.8)		(0.4)		22.2	%

Total non-operating expenses	$	17.5	$	14.8	$	2.7	18.2	%

The increase in non-operating expense was primarily due to a ~~binding MOU~~$3.2 million increase in interest on borrowings primarily related to the issuance of the Revolving Credit Agreement 2022 in January of 2022 as well as rising interest rates, partially offset by a $0.4 million increase in the gain on the re-measurement of the payable to founding members under the tax receivable agreement for the third quarter of 2022, compared to the third quarter of 2021.

Net Loss. Net loss decreased $6.3 million from net loss of $15.2 million for the third quarter of 2021 to $8.9 million for the third quarter of 2022. The decrease in net loss was due to a $14.5 million decrease in operating loss,offset by a $5.5 million decrease in net loss attributable to noncontrolling interests and a $2.7 million decrease in non-operating expense.

Nine months ended September 29, 2022 and September 30, 2021

Revenue. Total revenue increased 208.2%, from $51.1 million for the nine months ended September 30, 2021 to $157.5million for the nine months ended September 29, 2022. The following is a summary of revenue by category (in millions):


	Nine Months Ended				$ Change		% Change
	September 29, 2022		September 30, 2021		YTD 2021 to YTD 2022		YTD 2021 to YTD 2022
National advertising revenue	$	116.7	$	34.3	$	82.4	240.2	%
Local and regional advertising revenue	26.4		10.8		15.6		144.4	%
Founding member advertising revenue from beverage concessionaire agreements	14.4		6.0		8.4		140.0	%
Total revenue	$	157.5	$	51.1	$	106.4	208.2	%

The following table shows data on theater attendance and revenue per attendee for the nine months ended September 29, 2022 and September 30, 2021:


	Nine Months Ended				% Change
	September 29, 2022		September 30, 2021		YTD 2021 to YTD 2022
National advertising revenue per attendee	$	0.380	$	0.247	53.8	%
Local and regional advertising revenue per attendee	$	0.086	$	0.078	10.3	%
Total advertising revenue (excluding founding member beverage revenue) per attendee	$	0.466	$	0.325	43.4	%
Total revenue per attendee	$	0.513	$	0.369	39.0	%
Total theater attendance (in millions) (1)	306.8		138.6		121.4	%

________________________________________________________

National advertising revenue. National advertising revenue increased by $82.4 million, or 240.2%, from $34.3 million for the nine months ended September 30, 2021 to ~~effectuate aspects~~$116.7 million for the nine months ended September 29, 2022. The increase was due to a significant increase in impressions sold and a 31.6% increase in national advertising CPMs for the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021. The increase in impressions sold was primarily due to a 121.3% increase in network attendance and a 44.0% increase in national advertising utilization due in part to the Company’s ability to participate in the 2022 upfront marketplace, as compared to 2021 when the theaters were closed and the return of advertisers to the ~~Final Judgment entered into~~network in the nine months ended September 29, 2022.

Local and regional advertising revenue. Local and regional advertising revenue increased by $15.6 million, or 144.4%, from $10.8 million for the nine months ended September 30, 2021 to $26.4 million for the nine months ended September 29, 2022. The increase in local and regional advertising revenue was due primarily to the closure of approximately 40% of our network for three of the nine months ended September 30, 2021.The increase was also driven by an increase in advertiser interest in the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021, following a significant increase in network attendance primarily due to an improved movie slate and the removal of COVID-19 Pandemic related restrictions.

Founding member beverage revenue. National advertising revenue from the founding members’ beverage concessionaire agreement increased $8.4 million, or 140.0%, from $6.0 million for the nine months ended September 30, 2021 to $14.4 million for the nine months ended September 29, 2022. The increase was due to a 127.0% increase in founding member attendance for the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021. The increase was also due to contractual increases in the beverage revenue CPMs in 2022, compared to 2021.

Operating expenses. Total operating expenses increased$51.0million, or 39.9%, from $127.7 million for the nine months ended September 30, 2021 to $178.7million for the nine months ended September 29, 2022. The following table shows the changes in operating expense for the nine months ended September 29, 2022 and September 30, 2021 (in millions):


	Nine Months Ended				$ Change		% Change
	September 29, 2022		September 30, 2021		YTD 2021 to YTD 2022		YTD 2021 to YTD 2022
Advertising operating costs	$	19.3	$	9.9	$	9.4	94.9	%
Network costs	6.2		5.7		0.5		8.8	%
Theater access fees and revenue share—founding members	62.4		31.0		31.4		101.3	%
Selling and marketing costs	31.0		24.8		6.2		25.0	%
Administrative and other costs	30.2		29.4		0.8		2.7	%
Impairment of long-lived assets	5.8		—		5.8		100.0	%
Depreciation expense	5.1		8.4		(3.3)		(39.3)	%
Amortization of intangibles recorded for network theater screen leases	18.7		18.5		0.2		1.1	%
Total operating expenses	$	178.7	$	127.7	$	51.0	39.9	%

Advertising operating costs. Advertising operating costs increased $9.4 million, or 94.9%, from $9.9 million for the nine months ended September 30, 2021 to $19.3 million for the nine months ended September 29, 2022. The majority of the increase was due to $8.9 million of higher advertising affiliate and partner expense, which was driven by higher revenue for the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021 and $0.2 million increase in personnel related costs due to the reinstatement of full salaries to all employees in the first quarter of 2022 impacting the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021 when temporary salary and wage reductions were in place.

Network costs. Network costs increased $0.5 million, or 8.8%, from $5.7 million for the nine months ended September 30, 2021 to $6.2 million for the nine months ended September 29, 2022. The increase was primarily related to a $0.5 million increase in personnel related costs due to the reinstatement of full salaries to all employees in the first quarter of 2022 impacting the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021 when temporary salary and wage reductions were in place.

Theater access fees and revenue share—founding members. Theater access fees and revenue share increased by $31.4 million, or 101.3%, from $31.0 million for the nine months ended September 30, 2021 to $62.4 million for the nine months ended September 29, 2022. This increase was primarily caused by an $18.6 million increase due to the substantial increase in founding member theater attendance for the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021, and an $11.1 million increase due to the 38.8% increase in average active screens for the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021. This increase was also due to a $1.7 million increase in Platinum Spot revenue share in the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021.

Selling and marketing costs. Selling and marketing costs increased $6.2 million, or 25.0%, from $24.8 million for the nine months ended September 30, 2021 to $31.0 million for the nine months ended September 29, 2022.This increase

was primarily due to a $3.1 million increase in personnel related expenses following the reinstatement of full salaries to employees in the first quarter of 2022 impacting the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021 when temporary salary and wage reductions were in place. The increase was also due to a $2.3 million increase in selling related expenses due to increased marketing activity, a $0.8 million increase in bad debt expense driven by the ~~DOJ~~increase in ~~connection with AMC’s acquisition of Carmike. Pursuant~~revenue and a $0.4 million increase in software costs for the nine months ended September 29, 2022, compared to the ~~MOU, AMC received NCM LLC common membership units~~nine months ended September 30, 2021. These increases were partially offset by a $0.7 million decrease in ~~respect~~non-cash barter expense for the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021.

Administrative and other costs. Administrative and other costs increased $0.8 million, or 2.7%, from $29.4 million for the nine months ended September 30, 2021 to $30.2 million for the nine months ended September 29, 2022. This increase was primarily due to a $1.3 million increase in advisor and legal fees related to the Cineworld Proceeding during the third quarter of 2022, a $0.4 million increase in cloud computing expense related to our cinema advertising management system and a $0.5 million increase related to corporate expenses. The increase was also partially offset by a $0.3 million decrease in other legal and professional fees and a $1.0 million decrease in personnel related expenses driven by a $1.3 million decrease in share-based compensation expense, partially offset by a $0.7 million decrease in capitalized personnel costs in the nine months ended September 29, 2022, compared to the nine months ended September 30, 2021.

Impairment of long-lived assets. Impairment of long-lived assets increased $5.8 million, or 100%, from $0.0 million for the nine months ended September 30, 2021 to $5.8 million for the nine months ended September 29, 2022. This increase in impairment expense consisted of the ~~annual attendance at such Carmike theaters in accordance with the Common Unit Adjustment Agreement~~write-off of certain long-lived assets during the first quarter of ~~2017. Since these theaters are subject to an existing on-screen advertising agreement with an alternative provider, AMC will make integration payments to us reflecting~~2022.

Depreciation expense. Depreciation expense decreased $3.3 million, or 39.3%, from $8.4 million for the ~~estimated~~ advertising cash flow that we would have generated if we had exclusive access to sell advertising in those theaters. The integration payments will continue until the earlier of (i) the date the theaters are transferred to our network or (ii) the expiration of the ESA. Integration payments are calculated based upon the advertising cash flow that the Company would have generated if it had exclusive access to sell advertising in the theaters with pre-existing advertising agreements and fluctuate based on earnings and Adjusted OIBDA. The ESA additionally entitles NCM LLC to payments related to the founding members’ on-screen advertising commitments under their beverage concessionaire agreements for encumbered theaters. These payments are also accounted for as a reduction to the intangible asset. During the three and nine months ended September ~~28, 2017 and September 29, 2016,~~30, 2021 to $5.1 million for the Company recorded a reduction to net intangible assets of $6.9 million, $0.7 million, $11.6 million and $1.5 million, respectively, related to integration and other encumbered theater payments. During the three and nine months ended September ~~28, 2017 and September~~ 29, ~~2016, AMC and Cinemark paid a total~~2022, primarily due to the write-off of ~~$4.6million, $0.7 million, $6.1million and $1.7 million, respectively.~~

~~Further, during~~internally developed software in the first quarter of ~~2017,~~ ~~AMC transferred 17 theaters (318 screens)~~2022.

Amortization of intangibles recorded for network theater screen leases. Amortization of intangibles recorded for network theater screen leases increased $0.2 million, or 1.1%, from $18.5 million for the nine months ended September 30, 2021 to ~~another advertising provider~~$18.7 million for the nine months ended September 29, 2022.

Non-operating expenses. Total non-operating expenses increased $9.3 million, or 20.3%, from $45.8 million for the nine months ended September 30, 2021 to $55.1 for the nine months ended September 29, 2022. The following table shows the changes in ~~accordance with~~non-operating expense for the ~~Final Judgment, for which AMC surrendered~~nine months ended September 29, 2022 and September 30, 2021 (in millions):


	Nine Months Ended				$ Change		% Change
	September 29, 2022		September 30, 2021		YTD 2021 to YTD 2022		YTD 2021 to YTD 2022
Interest on borrowings	$	57.3	$	48.2	$	9.1	18.9	%
Interest income	(0.1)		(0.1)		$	—	—	%
(Gain) loss on modification and retirement of debt, net	(5.9)		0.8		$	(6.7)	(837.5)	%
Loss (gain) on the re-measurement of the payable to founding members under the tax receivable agreement	4.0		(3.2)		$	7.2	(225.0)	%
Other non-operating (income) expense	(0.2)		0.1		$	(0.3)	(300.0)	%
Total non-operating expenses	$	55.1	$	45.8	$	9.3	20.3	%

The increase in non-operating expense was primarily due to a $9.1 million increase in interest on borrowings primarily related to the issuance of the Revolving Credit Agreement 2022 in January of 2022 as well as rising interest rates and a $7.2 million increase in the loss on the re-measurement of the payable to founding members under the tax receivable agreement. These increases were partially offset by a $6.7 million increase in the gain on the modification and retirement of debt driven by NCM Inc.’s purchase of $25.8 million of the Notes due 2028 on the open market in the second quarter of 2022, reducing the principal amount owed by NCM LLC ~~common membership units during the first quarter of 2017. At the end of the 10-year term of the Final Judgment, these theaters will revert back~~ to us. Also, in April 2017, AMC completed a sale of five theaters on our network pursuant to the Final Judgment. AMC will surrender NCM LLC common unit membership units to NCM LLC for these divestures pursuant to the Common Unit Adjustment Agreement at the next Adjustment Date. These 22 transferred and sold theaters represent approximately 1.3% of our total theater networkthird parties as of September ~~28, 2017. The Common Unit Adjustments are discussed further within~~ ~~Trends Related to Ownership in NCM LLC~~ ~~below.~~

29, 2022.

~~Lastly, AMC also agreed to reimburse us~~Net Loss. Net loss decreased $22.5 million from net loss of $57.3 million for ~~our incurred and ongoing costs and expenses in connection with~~ the ~~Final Judgment including, but not limited to, our financial advisor and legal fees up to $1.0 million of such costs and expenses. During the first~~ nine months ~~of 2017, we incurred $1.3~~ended September 30, 2021 to $34.8 million ~~of these costs, of which $1.0 million~~for the nine months ended September 29, 2022. The decrease in net loss was ~~recorded as a reduction to “Amounts~~ due to ~~founding members”~~a $55.4 million decrease in operating loss, partially offset by a $23.6 million decrease in net loss attributable to noncontrolling interests and a $9.3 million increase in non-operating expense.

Known Trends and Uncertainties

COVID-19 and Other Macroeconomic Factors—As discussed within the ~~Condensed Consolidated Balance Sheets and the remaining $0.3 million is included within administrative costs within the Condensed Consolidated Income Statement.~~

~~Utilization and Pricing~~— We have experienced volatility in our pricing (CPMs) over the years, with annual national CPM increases (decreases) ranging from (16.4%) to 9.6% over the last four years. In the first nine months of 2017, we experienced a decline of 8.5%, in national advertising CPMs (excluding beverage revenue) compared to the first nine months of 2016. This volatility in pricing can be driven by increased competition from other national video networks, including online and mobile advertising platforms, television networks and other out-of-home video networks and seasonal marketplace supply and demand characteristics. Volatility in pricing is also caused by changes in our customer mix period to period‘Recent Developments’ section, due to the ~~variation~~COVID-19 Pandemic certain theaters within the Company’s network were temporarily closed during a portion of 2021. The Company's ability to advertise within theaters once opened in ~~CPMs charged~~2021 was limited due to each customer. We have also experienced volatility in our utilization over the years, with annual national inventory utilization ranging from 109.3% to 128.3% over the last four years. We experience even more substantial volatility quarter-to-quarter. This volatility in utilization can be driven by the loss or addition of one or more significant national contracts, wherebyreduced movie schedules and patron capacities at many network theaters and the timing and ~~amount~~frequency of ~~these national contracts~~new major motion picture releases as compared to prior years due to the COVID-19 Pandemic. Our theater access fees, network affiliate payments and Platinum Spot revenue share payments are driven by attendance, active screens and/or revenue, and therefore, were not incurred when theaters were closed and attendance-based fees were reduced for the period of time that attendance was lower than historical levels.

We are currently unable to fully determine the extent of the impact of the COVID-19 Pandemic and other current macroeconomic factors on our business in future periods due to the lingering impacts on our business environment and related market volatility. However, we continue to monitor the situation and its potential impacts on our financial position, results of operations, liquidity and cash flows.

Cineworld Proceeding—As discussed within the ‘Recent Developments’ section, on September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA. NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house. Although there can be ~~based upon~~no assurances that NCM LLC’s request for declaratory relief will be successful, the ~~advertising budgets of our customers, product launches,~~Company believes these rights will survive any attempted rejection in the bankruptcy court by Regal. In the event that NCM LLC’s or NCM, Inc.’s agreements with Regal and its affiliates are rejected, it could have a materially negative impact on the Company’s operations or financial ~~performance of our customers or other industry or macro-economic factors. We expect our CPMs and utilization to continue to be impacted period to period based upon the factors described above.~~

condition.

Beverage Revenue—Under the ESAs, up to 90 seconds of the~~Noovie~~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 first three and nine months of ~~2017~~2022 and ~~2016,~~2021, 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. ~~Should the amount of time acquired as part of these beverage concessionaire agreements decline with the other founding members, this premium time will be available for sale to other clients.~~ Per the ~~ESAs,~~ESA with AMC, the time sold to the founding member beverage supplier is priced equal to the greater of (1) the advertising CPM charged by NCM LLC in the previous year for the time sold to the founding member beverage supplier and (2) the advertising CPM for the previous year charged by NCM LLC to unaffiliated third parties during segment one (closest to showtime) of the Noovie pre-show in the founding member’s theaters, limited to the highest advertising CPM being then-charged by NCM LLC. ~~Due~~Beginning in 2020 and in accordance with the 2019 ESA Amendments, the price for the time sold to Cinemark and Regal’s beverage suppliers now increases at a ~~10.2% increase in segment one CPMs in 2017, the CPM on our beverage concessionaire revenue increased during the first quarter~~fixed rate of ~~2017 by 10.2% and the remainder of 2017 will increase by an equivalent percentage.~~

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 ~~this~~an increase occurring ~~for fiscal~~in the current year ~~2017~~ and the next increase occurring in 2027. Pursuant to the ESAs, the payment per digital screen increases annually by 5%. Pursuant to the ~~ESAs, the~~2019 ESA Amendments, Cinemark and Regal each receive an additional monthly theater access fee ~~paid~~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: (i) $0.0375 per patron beginning on November 1, 2020, (ii) $0.05 per patron beginning on November 1, 2021, (iii) $0.052 per patron beginning on November 1, 2022 and (iv) 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 receive a percentage 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, then NCM LLC will be required to satisfy a minimum average CPM for that period of time.

Financial Condition and Liquidity

Liquidity and Capital Resources

Our cash balances can fluctuate due to the ~~members~~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 ~~included an additional fee for access~~operating agreement) to Cinemark and Regal, interest or principal payments on our term loans and the Notes due 2026 and Notes due 2028, income tax payments, TRA payments to the ~~higher quality digital cinema systems. This additional fee will~~founding members and amount of dividends to NCM, Inc.’s common stockholders.

As discussed within the ‘Recent Developments’ section, due to the COVID-19 Pandemic, certain theaters within the Company’s network remained temporarily closed during a portion of 2021 and the Company's ability to advertise within the reopened theaters in 2021 was limited due to lower than historical levels of attendance due in part to reduced movie schedules and patron capacities at many network theaters and the timing and frequency of major motion picture releases as compared to prior years due to the COVID-19 Pandemic. The Company’s attendance levels have continued to improve but still remain below historic levels, which continues to impact cash receipts and advertising revenue. Further, there is a lag between when revenue is generated and when the Company ultimately collects the associated accounts receivable balance. The Company also had reduced cash payments during the period when theaters within the Company's network were closed or attendance levels were low as expenses related to theater attendance (i.e., theater access fees, Platinum Spot revenue share and network affiliate revenue share payments) were either not incurred or incurred at lower levels. As all of the theaters within our network were open during the first nine months of 2022, the screen-based portion of these expenses returned to historical levels and the attendance-based portion of these expenses is expected to continue to increase as ~~additional screens are equipped~~attendance increases following the continued release of many major motion pictures. The Company also implemented the following cost-saving measures in order to preserve cash at the start of the COVID-19 Pandemic, and those measures remain in place as of the filing date:

•Offered the option for the Board to receive the cash retainers beginning with the ~~new digital cinema equipment~~first quarter of 2021 in equivalent value of the Company’s common stock in lieu of cash;

•Curtailed certain non-essential operating expenditures, including marketing, research, and consulting services;

•Temporarily suspended the ~~fee increases annually~~401K employee match program;

•Terminated or deferred certain non-essential capital expenditures;

•Strategically worked with our vendors, and other business partners to manage, defer, and/or abate certain costs during the disruptions caused by ~~5%. As of September 28, 2017, 97% of~~the COVID-19 Pandemic;

•Decreased our founding member network screens were showing advertising on digital cinema projectors, and thus the future impact on the theater access fee related to additional digital cinema installations within existing founding member theaters is expected to be minimal. The theater access fee paidquarterly dividend beginning in the ~~aggregate to all founding members cannot be less than 12%~~second quarter of ~~NCM LLC’s aggregate advertising revenue (as defined~~2020 through the second quarter of 2022 and suspended our quarterly dividend in the ~~ESA), or it will be adjusted upward to reach this minimum payment. As~~third quarter of ~~September 28, 2017~~2023, which results in cash savings of $15.5 million in the third quarter of 2022 and ~~December 29, 2016, we had no liabilities recorded~~ cash savings of $99.9 million for NCM, Inc. since the ~~minimum payment, as the theater access fee was in excess~~beginning of the ~~minimum.~~

~~Trends~~COVID-19 Pandemic; and ~~Uncertainties Related to Liquidity and Financial Performance~~

~~Debt—During the past several years,~~

•Introduced an active cash management process, which, among other things, requires CEO or CFO approval of all outgoing payments.

In March 2020, we ~~amended our senior secured credit facility to extend the maturity, expand the revolver availability and reduce the interest rate spreads. In August 2016, we completed a private placement of $250.0~~drew down an additional $110.0 million in aggregate principal amount of 5.750% Senior Unsecured Notes due in 2026. A portion of the proceeds were used to redeem our $200.0 million 7.875% Senior Unsecured Notes due in 2021. The remaining proceeds, after the payment of fees and the redemption premium were used to pay down the balance on our revolving credit facility. As a result of these financing transactions on our revolving credit facility, in March 2021, we received $43.0 million in proceeds under incremental term loans that mature on December 20, 2024, and ~~senior notes,~~in January 2022 we ~~extended the average maturities~~received $43.3 million in proceeds under an incremental revolving credit facility that matures on June 20, 2023. The$60.9 million of ~~our debt and~~cash at NCM LLC as of September 29, 2022 will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is held for future payment of dividends to NCM, Inc. stockholders, income tax payments, income tax receivable payments to NCM LLC’s founding members and other obligations.

On January 5, 2022, NCM LLC entered into the Credit Agreement Third Amendment. Among other things, the Credit Agreement Third Amendment provides for: (i) certain modifications to and extensions to modifications of the affirmative and negative covenants therein; (ii) the suspension of the consolidated net total leverage and consolidated net senior secured leverage financial covenants through the fiscal quarter ending December 29, 2022; (iii) the consolidated net total leverage ratio and consolidated net senior secured leverage ratio financial covenants to be set to 9.25 to 1.00 and 7.25 to 1.00, respectively, for the fiscal quarter ending on or about March 30, 2023, 8.50 to 1.00 and 6.50 to 1.00, respectively, for the fiscal quarter ending on or about June 29, 2023, 8.00 to 1.00 and 6.00 to 1.00, respectively, for the fiscal quarter ending on or about September 28, ~~2017~~2023, and 6.25 to 1.00 and 4.50 to 1.00, respectively, for the fiscal quarter ending on or about December 28, 2023 and each fiscal quarter thereafter, and (iv) with respect to NCM LLC’s audited financial statements for the fiscal year ended December 30, 2021, a waiver of the requirement to deliver an auditor’s opinion for such financial statements without a “going concern” or like qualification or exception.

Also on January 5, 2022, NCM LLC also entered into the Revolving Credit Agreement 2022 among NCM LLC, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Revolving Credit Agreement 2022 provides for revolving loan commitments of $50.0 million of secured revolving loans, the entire

amount of which was funded on January 5, 2022. The Revolving Credit Agreement 2022 provides for (i) a cash interest rate of term SOFR plus 8.00%, with a 1.00% floor, (ii) a maturity date of June 20, 2023 and (iii) a termination premium if NCM LLC terminates the commitments under the Revolving Credit Agreement 2022 at any time before maturity. The Revolving Credit Agreement 2022 also contains covenants, representations and warranties and events of default that are substantially similar to the Credit Agreement. In accordance with the Revolving Credit Agreement 2022 and the Credit Agreement Third Amendment, for the period beginning in the second quarter of 2020 through the date that NCM LLC delivers a compliance certificate for the fourth quarter of 2023, NCM LLC must maintain a minimum liquidity balance of $55.0 million consisting of a combination of unrestricted cash on hand and availability under NCM LLC's revolving credit facility (the “Minimum Liquidity Requirement”). As of September 29, 2022, NCM LLC was in compliance with the requirements of the Credit Agreement, as amended, and the Revolving Credit Agreement 2022.

During October 2022, in order to preserve NCM LLC’s liquidity in light of the Minimum Liquidity Requirement, NCM LLC elected not to make an interest payment in the amount of $11.8 million, $0.8 million of which relates to notes held by NCM, Inc., due October 17, 2022 under the Senior Secured Notes due 2028, and entered a 30-day grace period under the indenture governing the Senior Secured Notes due 2028. The Company made this payment on November 4, 2022, prior to the end of the applicable grace period.

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


	As of						$ Change		$ Change
	September 29, 2022		December 30, 2021		September 30, 2021		YE 2021 to Q3 2022		Q3 2021 to Q3 2022
Cash, cash equivalents and marketable securities (1)	$	74.8	$	102.5	$	111.3	$	(27.7)	$	(36.5)
NCM LLC revolving credit facility availability (2)	6.8		6.8		6.8		—		—
Total liquidity	$	81.6	$	109.3	$	118.1	$	(27.7)	$	(36.5)

_________________________

(1)Included in cash, cash equivalents and marketable securities as of September 29, 2022, December 30, 2021 and September 30, 2021, was $74.8 million, $58.6 million and $64.4 million, respectively, of cash held by NCM LLC that is not available to satisfy dividends declared by NCM, Inc., income tax, tax receivable payments to NCM LLC’s founding members and other 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 pursuant to the Credit Agreement was $175.0 million as of September 29, 2022, December 30, 2021 and September 30, 2021. As of September 29, 2022, December 30, 2021 and September 30, 2021, the amount available under the NCM

LLC revolving credit facility pursuant to the Credit Agreement in the table above was net of the amount outstanding under the revolving credit facility of $167.0 million, $167.0 million and $167.0 million, respectively, and net letters of credit of $1.2 million, $1.2 million and $1.2 million, respectively.

As of September 29, 2022, the weighted average remaining maturity of our debt was ~~5.0~~3.5 years. As of September ~~28, 2017,~~29, 2022, approximately ~~71%~~53% of our total borrowings bear interest at fixed rates. The remaining ~~29%~~47% 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.

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


	Nine Months Ended
	September 29, 2022		September 30, 2021
Operating cash flow	$	(36.7)	$	(92.5)
Investing cash flow	$	(2.0)	$	(3.6)
Financing cash flow	$	11.0	$	25.9

•Operating Activities. The ~~senior secured credit facility contains~~$55.8 million decrease in cash used in operating activities for the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021, was primarily due to 1) a ~~number~~$46.1 million decrease in consolidated net loss, 2) a $7.2 million increase in the noncash gain on the remeasurement of ~~covenants~~the payable to founding members under the TRA, 3) a $5.8 million increase in accounts receivable collections during the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021, 4) a $5.8 million increase in the impairment of long-lived assets related to the write down in the first quarter of 2022 of certain internally developed software no longer in use, 5) a $2.8 million decrease in payments of accounts payable and ~~financial ratio requirements, with which~~accrued expenses due in part to the cash preservation actions taken by the Company to mitigate the impact of the COVID-19 Pandemic and 6) a $2.3 million increase in integration and other encumbered theater payments driven by higher revenue. These decreases in cash used were partially offset by a $11.4 million decrease in deferred revenue driven by higher advertising revenue and a $6.7 million increase in the gain on the modification and retirement of debt, net.

•Investing Activities. The $1.6 million decrease in cash used in investing activities for the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021, was due to a $1.9 million decrease in purchases of property and equipment in the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021.

•Financing Activities. The $14.9 million decrease in cash provided by financing activities for the nine months ended September 29, 2022, as compared to the nine months ended September 30, 2021 was primarily due to the issuance of the $50.0 million second tranche of term loans that occurred in the first quarter of 2021 and a $19.8 million increase in the purchase of Notes due 2028, partially offset by the issuance of the $50.0 million Revolving Credit Facility 2022 in the first quarter of 2022 and a $3.4 million decrease in dividends paid related to the decrease in the dividend amounts declared from $0.15 per share during the nine months ended September 30, 2021 to $0.11 per share during the nine months ended September 29, 2022.

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 ~~was in compliance at September 28, 2017, including a consolidated net senior secured leverage ratio~~as well as its existing cash balances and marketable securities, which as of September ~~28, 2017~~29, 2022 were $74.8 million (including $60.9 million of ~~3.2versus a covenant~~cash held by NCM LLC). NCM LLC’s primary sources of ~~6.5 times~~liquidity and capital resources are its cash provided by operating activities, availability under its revolving credit facility and cash on hand. NCM LLC drew down an additional $110.0 million of its revolving credit facility in March 2020 in order to supplement the decrease in cash provided by operating activities during the period our network theaters were closed. On January 5, 2022, NCM LLC entered in the Revolving Credit Agreement 2022 and drew down upon the new revolving credit facility of $50.0 million. The$60.9 million of cash at NCM LLC will be used to fund operations during the period of expected reduced cash flows. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA with the founding members and for ~~each quarterly period. For purposes~~future payment of ~~calculating~~dividends to NCM, Inc. stockholders.

Cash flows generated by NCM LLC’s distributions to NCM, Inc. and the ~~net consolidated senior secured leverage ratio (senior secured debt divided by Adjusted OIBDA), Adjusted OIBDA includes integration payments~~founding members have been affected by the ~~founding members.~~impact of the COVID-19 Pandemic on our operations and may be deferred through the quarter ending December 28, 2023 or longer due to the limitations instituted by the Credit Agreement First Amendment, Credit Agreement Second Amendment and

Credit Agreement Third Amendment. NCM LLC is ~~permitted~~required pursuant to the terms of the NCM LLC operating agreement to distribute its available cash, as defined in the operating agreement, unless prohibited by NCM LLC's Credit Agreement, quarterly to its members (Regal, Cinemark, AMC and NCM, Inc.). The available cash distribution to NCM LLC’s members for the nine months ended September 29, 2022 was calculated as approximately negative $41.3 million, of which NCM, Inc.'s share is approximately negative $19.6 million. Further there was $93.7 million and $85.2 million of negative available cash generated during the years ended December, 30, 2021 and December 31, 2020, respectively. Pursuant to the NCM LLC operating agreement and the Credit Agreement amendments, there will be no available cash distributions made for the first, second or third quarter of 2022. Negative available cash distributions for the years of 2021 and 2020 are expected to be netted in accordance with the NCM LLC operating agreement against future positive available cash distributions after the extended covenant waiver holiday, contingent upon the Company's compliance with the covenants outlined within the Credit Agreement Third Amendment defined within Note 6—Borrowings and in accordance with the NCM LLC operating agreement.

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the Credit Agreement) to fund payments associated with the TRA with the founding members and future dividends as declared by the Board of Directors. The Company did not make ~~quarterly dividend payments and other payments based on leverage ratios~~a TRA payment in 2022 for the 2021 tax year. The Company will also consider opportunistically using cash received for partial repayments of NCM LLC's outstanding debt balance. Distributions from NCM LLC and ~~its subsidiary so long as no default or event of default has occurred and continues~~NCM, Inc. cash balances should be sufficient to ~~occur. The quarterly dividend~~fund payments ~~and other distributions are made if~~associated with the ~~consolidated net senior secured leverage ratio is less than or equal to 6.5 times. Refer to Note 5—Borrowings~~ toTRA with the ~~unaudited Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q for more information regarding the Company’s borrowings.~~

~~Dividends— At times our cash flow available for the payment of dividends (NCM LLC’s Adjusted OIBDA, less capital expenditures, interest expense, distributions to NCM LLC’s~~ founding members, income taxes ~~tax receivable agreement payments to NCM LLC’s founding members~~ and plus integration payments and certain other cash items) has been less than our regular dividend payment. Any deficit has been funded by NCM, Inc.’s cash and marketable securities balances. We expect that such deficits may occur in the future depending on factors such as future operating performance and the number of shares of NCM, Inc. common stock outstanding. We expect to fund any ~~future deficits with NCM, Inc.’s cash and marketable securities balances. As of September 28, 2017, these cash and marketable securities balances totaled $47.3million (excluding NCM LLC). We intend to pay a regular quarterly dividend~~declared dividends for the foreseeable future at the discretion of the Board of Directors. At the discretion of the Board of Directors, ~~consistent with our~~it is the Company’s intention to distribute ~~over time a substantial portion of our~~substantially all its free cash ~~flow.~~flow to stockholders through dividends. 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 and any other factors that the Board of Directors considers ~~relevant. While it is the intention of~~relevant, which includes short-term and long-term impacts to the Company to continue our practice of distributing a high proportion of our free cash flow, actual results, ongoing reinvestment in our network and product offerings, as well as, prudent capital management may reduce such distributable free cash flow in future periods. As a result, the Board of Directors continues to review these factors to determine a sustainable distribution rate which balances our operating and strategic needs with those of our lenders and stockholders.

~~Trends Related to Ownership in NCM LLC~~

~~Common Unit Adjustments~~—In accordance with NCM LLC’s Common Unit Adjustment Agreement with its founding members, on an annual basis NCM LLC determines the amount of common membership units to be issued to or returned by the founding members based on theater additions or dispositions during the previous year. In addition, NCM LLC’s Common Unit Adjustment Agreement requires that a Common Unit Adjustment occur for a specific founding member if its acquisition or disposition of theaters, in a single transaction or cumulatively since the most recent Common Unit Adjustment, results in an attendance increase or decrease in excess of two percent of the annual total attendance at the prior adjustment date.

~~During the first quarter of 2017, the following Common Unit Adjustments occurred:~~

~~Annual Common Unit Adjustment for 2016 Fiscal Year~~—During the first quarter of 2017, NCM LLC issued approximately 2.4 million common membership units to its founding members for the rights to exclusive access to the theater screens and attendees added, net of dispositions by the founding members to NCM LLC’s network during the 2016 fiscal year.

~~Extraordinary Common Unit Adjustment for AMC’s Acquisition of Carmike~~—Pursuant to the MOU, NCM LLC issued approximately 18.4 million NCM LLC common membership units to AMC in respect of the annual attendance at Carmike theaters in accordance with the Common Unit Adjustment Agreement. AMC’s acquisition of Carmike meets the criteria for a Common Unit Adjustment for this acquisition because it resulted in an extraordinary attendance increase of approximately 9.5%.

~~Surrendered Units for AMC Screen Transfers~~—The Final Judgment required AMC to transfer advertising rights to 17 theaters from NCM LLC to another advertising provider. Pursuant to the MOU, AMC surrendered approximately 4.7 million NCM LLC common membership units in respect of such theaters. The 4.7 million NCM LLC common membership units were comprised of (i) approximately 2.9 million NCM LLC common membership units pursuant to the adjustment for divested theaters in the Common Unit Adjustment Agreement and (ii) approximately 1.8 million NCM LLC common membership units valued at $25.0 million ~~to compensate for lost operating income for these theaters during the 10-year term of the Final Judgment~~.

During the third quarter of 2017, AMC exercised the redemption right of an aggregate 14.6 million common membership units for the like number of shares of NCM, Inc.’s common stock. The Company accounted for the change in its ownership interest in NCM LLC as an equity transaction and no gain or loss was recognized in the Condensed Consolidated Statements of Income.

Overall, NCM, Inc.’s ownership in NCM LLC increased to 48.8% as of September 28, 2017 compared to 43.7% at December 29, 2016 due primarily to AMC’s redemption of units for shares of NCM, Inc.’s common stock, partially offset by the common unit adjustments described above, which has proportionally increased net income attributable to NCM, Inc. and decreased net income attributable to noncontrolling interests.

On October 20, 2017, AMC exercised its redemption right of an aggregate 1.0 million common membership units for a like number of shares of NCM, Inc.’s common stock which increased the Company’s ownership in NCM LLC to 49.5%.

~~AMC Mandatory Ownership Divestitures—Pursuant~~related to the ~~Final Judgment,~~ ~~AMC is required to divest the majority of its equity interests in NCM LLC~~COVID-19 Pandemic and NCM, Inc., so that by June 20, 2019 it owns no more than 4.99% of NCM LLC’s common membership units and NCM, Inc. common stock, taken together, on a fully converted basis (“NCM’s outstanding equity interests”). AMC must complete the divestiture per the following schedule: (i) on or before December 20, 2017, AMC must own no more than 15.0% of NCM’s outstanding equity interests, (ii) on or before December 20, 2018, AMC must own no more than 7.5% of NCM’s outstanding equity interests and (iii) on or before June 20, 2019, AMC must own no more than 4.99% of NCM’s outstanding equity interests. Pursuant to the MOU, AMC also has agreed, among other things, subject to limited exceptions to retain at least 4.5% of NCM’s outstanding equity interests during the term of the Final Judgment, subject to certain exceptions which allow for certain sell downs after the 30-month anniversary of the MOU. As of September 28, 2017, AMC owned 17.0% of NCM’s outstanding equity interests. On September 29, 2017, AMC sold 2.8 million shares of NCM, Inc. common stock and as of September 29, 2017 AMC owned 15.2% of NCM’s outstanding equity interests. When AMC redeems its common membership units for NCM, Inc. common stock, NCM, Inc.’s ownership would increase proportionally and the number of shares outstanding of NCM, Inc. common stock would increase, which would also result in greater dividend payments by NCM, Inc. The increase in NCM, Inc.’s ownership would also result in higher available cash payments to NCM, Inc. (and lower available cash payments to AMC).

~~Financial Condition and Liquidity~~

~~Liquidity and Capital Resources~~

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as available cash payments (as defined inrestrictions under the NCM LLC Operating Agreement) to NCM LLC’s founding members, interest or principal payments on our term loan and the Senior Secured Notes and Senior Unsecured Notes, income tax payments, tax receivable agreement payments to NCM LLC’s founding members and amount of quarterly dividends to NCM, Inc.’s common stockholders (including special dividends).

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

As of

$ Change

$ Change

September 28,
2017

December 29,
2016

September 29,
2016

Q3 2017 to
YE 2016

Q3 2017 to
Q3 2016

Cash, cash equivalents and marketable securities (1)

$
49.9

$
68.7

$
54.0

$
(18.8
)

$
(4.1
)
NCM LLC revolver availability (2)

170.2

158.8

170.8

11.4

(0.6
)
Total liquidity

$
220.1

$
227.5

$
224.8

$
(7.4
)

$
(4.7
)

~~(1)~~

~~Included in cash, cash equivalents and marketable securities as of September 28, 2017, December 29, 2016 and September 29, 2016, was $2.6million, $10.7 million and $1.4~~million, respectively, of cash and marketable securities held by NCM LLC that is not available to satisfy NCM, Inc.’s dividend, income tax, tax receivable payments to NCM LLC’s founding members and other obligations.

Credit Agreement.

~~(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 as of September 28, 2017, December 29, 2016 and September 29, 2016. As of September 28, 2017, December 29, 2016 and September 29, 2016, the amount available under the NCM LLC revolving credit facility in the table above, was net letters of credit of $4.8 million, $1.2 million and $1.2 million, respectively.

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

Nine Months Ended

September 28,
2017

September 29,
2016

Operating cash flow

$
104.0

$
90.9

Investing cash flow

$
18.5

$
(5.1
)
Financing cash flow

$
(115.1
)

$
(111.9
)

~~Operating Activities.~~ The $13.1 million increase in cash provided by operating activities for the nine months ended September 28, 2017, compared to the nine months ended September 29, 2016 was due primarily to an increase in the change in accounts receivable of $26.1 million related to higher collections during the nine months ended September 28, 2017, compared to the nine months ended September 29, 2016, and a $6.2 million decrease in payments to founding members under the tax receivable agreement, partially offset by a $17.0 million decrease in operating income, as discussed above.

~~Investing Activities.~~ The $23.6 million increase in cash provided by investing activities for the nine months ended September 28, 2017, compared to the nine months ended September 29, 2016 was due primarily to lower purchases of marketable securities, net of proceeds, of approximately $21.2 million and $1.4 million higher proceeds from founding member notes receivable due to timing of payments.

~~Financing Activities.~~ The $3.2 million increase in cash used in financing activities for the nine months ended September 28, 2017, compared to the nine months ended September 29, 2016 was due primarily to $37.4 million of proceeds from the issuance of the Senior Notes due 2026, net of the redemption of the Senior Notes due 2021 in the first nine months of 2016 and a $17.9 million increase in distributions to founding members, partially offset by $48.0 million of higher repayments, net of proceeds, under our revolving credit facility and a $4.4 million increase in integration payments and other encumbered theater payments related to founding member encumbered theater acquisitions in the first nine months of 2017, compared to the first nine months of 2016.

~~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 September 28, 2017 were $47.3 million (excluding 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.

Management believes that future funds generated from NCM LLC’s operations and cash on hand should be sufficient to fund working capital requirements, NCM LLC’s debt service requirements, and capital expenditure and other investing requirements, 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, stock option exercises, 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 (NCM LLC’s founding members and NCM, Inc.). The available cash distribution to the members of NCM LLC for the nine months ended September 28, 2017 was approximately $86.4 million, of which approximately $39.0 million was distributed to NCM, Inc. NCM, Inc. expects to use cash received from future available cash distributions and its cash balances to fund income taxes, payments associated with the tax receivable agreement with the founding members and current and future dividends as declared by the Board of Directors, including a dividend declared on November 3, 2017 of $0.22 per share (approximately $16.8 million) on each share of the Company’s common stock (not including outstanding restricted stock) to stockholders of record on November 16, 2017 to be paid on December 1, 2017. Distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the tax receivable agreement with NCM LLC’s founding members, income taxes and regular dividends 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, and any other factors that the Board of Directors considers relevant.

Critical Accounting Policies

For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited Condensed Consolidated Financial Statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations –~~ Operations—Critical Accounting Policies” contained in our annual report on Form 10-K filed for the fiscal year ended December ~~29, 2016~~30, 2021 and incorporated by reference herein. As of September ~~28, 2017,~~29, 2022, there were no significant changes in those critical accounting policies.

Recent Accounting Pronouncements

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

~~Related Party Transactions~~

~~For a discussion of related party transactions, see the information provided under Note 4—Related Party Transactions~~ ~~to the unaudited Condensed Consolidated Financial Statements in Item 1 of this Form 10-Q.~~

~~Off-Balance Sheet Arrangements~~

Our operating lease obligations, which primarily include office leases, are not reflected on our balance sheet. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual and Other Obligations” contained in our annual report on Form 10-K for the fiscal year ended December 29, 2016 and incorporated by reference herein. 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~~

~~There were no material changes to our contractual obligations during the three months ended September 28, 2017.~~

~~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. 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 lower theater industry attendance levels. 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 2014, 2015 and 2016.~~

First

Second

Third

Fourth

Quarter

Quarter

Quarter

Quarter

FY 2014

17.8%

25.4%

25.6%

31.2%

FY 2015

17.2%

27.2%

25.0%

30.6%

FY 2016

17.0%

25.8%

25.4%

31.8%

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary market risk to which we are exposed is interest rate risk. The Notes due ~~2022~~2026 and the Notes due ~~2026~~2028 are at fixed rates, and therefore are not subject to market risk. As of September ~~28, 2017,~~29, 2022, the only interest rate risk that we are exposed to is related to our ~~$175.0~~$225.0 million revolving credit ~~facility~~facilities and our ~~$270.0 million~~ term ~~loan.~~loans. A 100-basis point fluctuation in market interest rates underlying our term ~~loan~~loans and revolving credit ~~facility~~facilities would have the effect of increasing or decreasing our cash interest expense by approximately ~~$2.7~~$5.3 million for an annual period on the ~~$270.0~~$217.0 million in revolving credit balances, $49.4 million term loan and $259.2 million incremental term loan outstanding as of September ~~28, 2017. For a discussion~~29, 2022.

In response to the COVID-19 Pandemic, the government lowered the Federal Reserve interest rate leading to historically low interest rates. However, to combat macroeconomic headwinds, the government consistently raised the Federal Reserve interest rate throughout the nine months ended September 29, 2022. These increases have had the effect of ~~market risks, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” contained in our annual report on Form 10-K for~~increasing the ~~fiscal year ended December 29, 2016 and incorporated by reference herein.~~

Company's interest rate risk. If interest rates continue to rise, this will increase the Company’s interest rate risk.

Item 4. Controls and Procedures

~~We maintain~~

The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed ~~by us~~ in the Company's reports ~~that we file or submit to the SEC~~filed under the Exchange Act, ~~as amended,~~ is recorded, processed, summarized and reported within the time periods specified by the ~~Commission’s~~SEC’s rules and forms, and that such information is accumulated and communicated to ~~our~~

management, including the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosure. ~~As of September 28, 2017, our management evaluated,~~

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange ~~Act.~~Act as of September 29, 2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based on ~~that~~such evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures as of September ~~28, 2017~~29, 2022 were effective.

~~There~~

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

Changes in Internal Control Over Financial Reporting

There were no changes ~~in the Company’s~~to our internal ~~controls~~control over financial reporting that occurred during the quarter ended September ~~28, 2017~~29, 2022 that have materially affected, or are reasonably likely to materially affect, ~~the Company’s~~our internal ~~controls~~control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

On September 7, 2022, Cineworld Group plc and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas. On October 21, 2022, Regal Cinemas, Inc. filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal Cinemas, Inc. currently plans on negotiating with NCM LLC regarding the ESA. NCM LLC has also filed a complaint against Regal Cinemas, Inc. seeking declaratory relief and an injunction prohibiting Regal Cinemas, Inc. from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house.

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 1A. Risk Factors

Excluding the risk factor outlined ~~further~~ below, there have been no material changes from risk factors as previously disclosed in our annual report on Form 10-K filed with the SEC on ~~February 28, 2017~~March 3, 2022 for the fiscal year ended December ~~29, 2016.~~

30, 2021.

The ~~markets for advertising are competitive and we~~ESA with a founding member that has declared bankruptcy may be ~~unable~~rejected, renegotiated or deemed unenforceable.

On September 7, 2022, Cineworld Group plc, the parent company of Regal, and certain of its subsidiaries, including Regal, Regal Cinemas, Inc., a party to ~~compete successfully~~

~~The market~~the ESA, and Regal CineMedia Holdings, LLC, a party to other agreements with NCM LLC and NCM, Inc., filed petitions for ~~advertising~~reorganization under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas (the “Cineworld Proceeding”). In addition, each of the other founding members currently has a significant amount of indebtedness. As a result of the COVID-19 Pandemic, each of the founding members temporarily closed all of their theaters in the United States and furloughed the majority of their employees for a portion of 2020 and chose to seek additional financing through various methods. As a result of the Cineworld Proceeding, or if a bankruptcy case were commenced by or against another founding member, it is ~~very competitive. Cinema advertising~~possible that all or part of the ESA with the applicable 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. On October 21, 2022, Regal filed a motion to reject the ESA without specifying an effective date for the rejection and indicated that Regal currently plans on negotiating with the Company regarding the ESA. NCM LLC has also filed a complaint against Regal seeking declaratory relief and an injunction prohibiting Regal from breaching certain exclusivity, non-compete, non-negotiate and confidentiality provisions in the ESA by entering into a new agreement with a third party or bringing any of the services performed by NCM LLC in-house. Although there can be no assurances that NCM LLC’s request for declaratory relief will be successful, the Company believes these rights will survive any attempted rejection in the bankruptcy court by Regal. While the Cineworld Proceeding is currently in early stages and the potential impact of the Cineworld Proceeding on NCM LLC’s operations is unknown, in the event that NCM LLC’s agreements with Regal and its affiliates is rejected or renegotiated, it could have a ~~small component~~materially negative impact on the Company’s operations or financial condition. In addition, as a part of ~~video~~the Cineworld Proceeding, Regal has announced plans to optimize the

number of theaters it operates and has announced the closures of certain theaters. Should Regal or another founding member liquidate or 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 ~~U.S.~~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 ~~we must compete~~could reduce our advertising revenue.

We may be unsuccessful in extending the maturity dates of NCM LLC’s Revolving Credit Facilities, amending its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtaining additional debt financing from third parties. The failure to obtain such an extension, waiver or obtain additional debt financing could lead to our failure to pay outstanding debt when due and an event of default, which gives rise to substantial doubt about our ability to continue as a going concern.

The Company has borrowings under two Revolving Credit Facilities with ~~established, larger and better known national and local media platforms such~~$217.0 million outstanding as ~~cable, broadcast and satellite television networks and other video media platforms including those distributed~~of September 29, 2022, that mature on June 20, 2023. The Company does not have available liquidity to repay the full outstanding balance on the ~~internet~~date of maturity. Under the Credit Agreement, failure to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and ~~mobile networks. In addition~~payable. It would also result in an event of default for each tranche of the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and payable. The Company does not have available liquidity to repay any accelerated principal of term loans or tranches of the outstanding senior notes upon an event of default within one year after the date that the financial statements are issued. Additionally, based on current projections, the Company does not expect to meet certain financial covenants for the period ending March 30, 2023. Further, if the Company’s independent registered public accounting firm includes a “going concern” or like qualification or exception, other than for debt maturing within one year, in its report on the Company’s financial statements for the year ending December 29, 2022, this would be an event of default under the Company’s Credit Agreement at the time the Company’s financial statements for the year ending December 29, 2022 are filed. Under the Credit Agreement, failure to remain in compliance with these ~~video advertising platforms, we compete~~covenants or inability to repay borrowings under the Revolving Credit Facilities at maturity would result in an event of default for ~~advertising directly with several additional media platforms, including radio, various local print media~~the term loans, which would allow a majority of the lenders under the Credit Agreement to accelerate the maturity of the principal amounts of outstanding term loans to become due and ~~billboards. We~~payable. It would also ~~compete with several other local~~result in an event of default for the senior notes, which would allow the indenture trustee or senior note holders of each tranche of senior notes to accelerate the maturity to become due and ~~national cinema advertising companies. We expect all~~payable. Should the Company’s borrowings become due and payable, the Company would not be able to repay the Company’s total outstanding debt balance. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern. Management believes it will be able to amend NCM LLC’s Revolving Credit Facilities to extend the maturity dates, amend its Senior Secured Credit Facility to extend a waiver 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, to constantly revise and improve their business models to meet expectations of advertising clientsfinancial covenants or ~~competing media platforms, including us. In addition, the pricing and volume of advertising may be affected by shifts in spending toward online and mobile offerings~~obtain additional debt financing through a loan 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~~ and/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 or the economy in general could alter current or prospective advertisers’ spending priorities. If we cannot respond effectively to changes in the media marketplace in response to new entrants or advances by our existing competitors, our business may be adversely affected.

~~In addition, advertisers’ willingness to purchase advertising from the Company may be adversely affected by lower theater attendance and viewership of our~~ ~~Noovie~~ ~~pre-show. If pre-show viewership declines significantly,~~NCM, Inc., but there is no assurance that the Company will be ~~required to provide additional advertising time (makegoods) to national advertisers to reach agreed-on audience delivery thresholds. National advertising sales and rates also are dependent~~successful in completing any of these options in a timely manner, or on acceptable terms, if at all.

Management believes that based on the ~~methodology used~~Company’s current financial position and liquidity sources, including current cash balances, and forecasted future cash flows, the Company can meet its operating obligations as they become due.

During October 2022, in order to ~~measure audience impressions.~~preserve NCM LLC’s liquidity in light of the Minimum Liquidity Requirement, NCM LLC delayed paying certain invoices and did not make an interest payment in the amount of $11.8 million, $0.8 million of which relates to notes held by NCM, Inc., due October 17, 2022 under the Senior Secured Notes due 2028, and entered a 30-day grace period under the indenture governing the Senior Secured Notes due 2028. The Company made this payment on November 4, 2022, prior to the end of the applicable grace period. NCM LLC expects to continue to preserve liquidity in order to maintain compliance with the Minimum Liquidity Requirement throughout the fourth quarter of 2022.

However, the failure to amend the Revolving Credit Facilities to extend the maturity dates, amend its Senior Secured Credit Facility to extend a waiver of these financial covenants or obtain additional debt financing through a loan from third parties and any associated events of default under the Credit Agreement or NCM LLC’s senior notes would have a material adverse effect on our financial condition, which gives rise to substantial doubt about our ability to continue as a going concern. If we are unable to continue as a ~~change~~going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is ~~made to this methodology~~likely that ~~reflects fewer audience impressions available during the pre-show, this would adversely affect the Company’s revenue and results~~investors will lose all or a part of ~~operations.~~

their investment.

Item 2. Unregistered Sales of ~~Equi~~tyEquity Securities and Use of Proceeds

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

(a)
Total Number of Shares Purchased

(b)
Average Price Paid Per Share

(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs

(d)
Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
June 30, 2017 through July 27, 2017

985

$
7.53

—

N/A
July 28, 2017 through August 31 2017

3,527

$
6.98

—

N/A
September 1, 2017 through September 28, 2017

—

$
—

—

N/A


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
July 1, 2022 through July 28, 2022	—	$	—	—	N/A
July 29, 2022 through September 1, 2022	2,074	$	1.65	—	N/A
September 2, 2022 through September 29, 2022	—	$	—	—	N/A

Item 3. Defaults Upon Senior Securities

~~None~~

None.

Item 4. Mine Safety Disclosures

Not ~~Applicable~~

Applicable.

Item 5. Other Information

~~None~~

On November 3, 2022, NCM LLC and NCM, Inc. entered into a Receivable Sales Agreement pursuant to which, NCM, Inc. acquired the right to approximately $4.9 million of NCM LLC’s accounts receivable at a purchase price equal to the book value of the accounts receivable in exchange for a cash payment. The foregoing description of the Receivables Sales Agreement is qualified in its entirety by reference to the complete copy of a form of Receivables Sales Agreement filed as Exhibit 10.2 to the Quarterly Report and incorporated by reference herein.

Item 6. Exhibits


Exhibit	Reference	Description

10.1	(1)	Employment Agreement dated August 1, 2022 between National CineMedia, Inc. and Thomas F. Lesinski.
10.2	*	Form of Receivable Sales Agreement, dated November 3, 2022, between National CineMedia, LLC and National CineMedia, Inc.
31.1	*	Rule 13a-14(a) Certification of Chief Executive Officer.
31.2	*	Rule 13a-14(a) Certification of Chief Financial Officer.
32.1	**	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	**	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
101.SCH	*	Inline XBRL Taxonomy Extension Schema Document
101.CAL	*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

__________________________________

~~Exhibit~~	~~Reference~~	~~Description~~
*				Filed herewith.
~~31.1~~ **			*	~~Rule 13a-14(a) Certification of Chief Executive Officer.~~ Furnished herewith.
~~31.2~~ (1)			*	~~Rule 13a-14(a) Certification of Chief Financial Officer.~~
~~32.1~~	**	~~Certification of Chief Executive Officer Pursuant~~Incorporated by reference to ~~18 U.S.C. Section 1350.~~
~~32.2~~	**	~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.~~
~~101.INS~~	*	~~XBRL Instance Document~~
~~101.SCH~~	*	~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~	*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~	*	~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~	*	~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~	*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

*	~~Filed herewith.~~ Exhibit 10.3 from the Registrant’s Quarterly Report on Form 10-Q (File No. 001-33296) filed on August 8, 2022

**	~~Furnished herewith.~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		NATIONAL CINEMEDIA, INC.
		(Registrant)

Date:	November 7, ~~2017~~ 2022	/s/ ~~Andrew J. England~~ Thomas F. Lesinski
		~~Andrew J. England~~ Thomas F. Lesinski
		Chief Executive Officer and Director
		(Principal Executive Officer)

~~Date:~~


Date:	November 7, ~~2017~~ 2022	/s/ ~~Katherine L. Scherping~~ Ronnie Y. Ng
		~~Katherine L. Scherping~~ Ronnie Y. Ng
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	~~Page~~
		Page

	PART I
��
Item 1.	Unaudited Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income	2
	Unaudited Condensed Consolidated Statements of Cash Flows	3
	Unaudited Condensed Consolidated Statements of Equity/(Deficit)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	35 34

	PART II

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36 37
Item 4.	Mine Safety Disclosures	36 37
Item 5.	Other Information	36 37
Item 6.	Exhibits	36 37

Signatures		37 38

				NCM, Inc.
											Retained
								Additional			Earnings
								Paid in			(Distribution
				Common Stock				Capital			in Excess of			Noncontrolling
	Consolidated			Shares		Amount		(Deficit)			Earnings)			Interest
Balance—December 31, 2015	$	(171.7	)		59,239,154	$	0.6	$	(221.5	)	$	(186.1	)	$	235.3
Distributions to founding members		(35.2	)		—		—		—			—			(35.2	)
NCM LLC equity issued for purchase of intangible asset		21.1			—		—		9.2			—			11.9
Income tax and other impacts of NCM LLC ownership changes		(2.8	)		—		—		(4.2	)		—			1.4
Comprehensive income, net of tax		38.7			—		—		—			10.7			28.0
Share-based compensation issued		(4.4	)		614,652		—		(4.4	)		—			—
Share-based compensation expense/capitalized		14.0			—		—		9.4			—			4.6
Cash dividends declared $0.66 per share		(41.0	)		—		—		—			(41.0	)		—
Balance— September 29, 2016	$	(181.3	)		59,853,806	$	0.6	$	(211.5	)	$	(216.4	)	$	246.0

Balance—December 29, 2016	$	(181.2	)		59,874,412	$	0.6	$	(207.7	)	$	(215.6	)	$	241.5
Distributions to founding members		(47.4	)		—		—		—			—			(47.4	)
NCM LLC equity issued for purchase of intangible asset		201.8			—		—		78.8			—			123.0
Income tax and other impacts of NCM LLC ownership changes		(32.2	)		—		—		16.2			—			(48.4	)
Issuance of shares		77.8			14,600,000		0.2		77.6			—			—
NCM, Inc. investment in NCM LLC		(77.8	)		—		—		(77.8	)		—			—
Comprehensive income, net of tax		33.3			—		—		—			5.9			27.4
Share-based compensation issued		(4.0	)		755,886		—		(4.0	)		—			—
Share-based compensation expense/capitalized		8.6			—		—		5.3			—			3.3
Cash dividends declared $0.66 per share		(40.8	)		—		—		—			(40.8	)		—
Balance—September 28, 2017	$	(61.9	)		75,230,298	$	0.8	$	(111.6	)	$	(250.5	)	$	299.4

	Three Months Ended				Nine Months Ended
Included in the Condensed Consolidated Statements of Income:	September 28, 2017		September 29, 2016		September 28, 2017		September 29, 2016
Revenue:
Beverage concessionaire revenue (included in advertising revenue) (1)	$	6.7	$	7.5	$	22.7	$	21.8
Advertising inventory revenue (included in advertising revenue) (2)		—		0.1		—		0.3
Operating expenses:
Theater access fee (3)		18.1		19.2		57.4		56.8
Purchase of movie tickets and concession products and rental of theater space (included in selling and marketing costs) (4)		0.4		0.4		1.2		1.2
Purchase of movie tickets and concession products and rental of theater space (included in advertising operating costs) (4)		—		—		0.1		—
Purchase of movie tickets and concession products and rental of theater space (included in administrative and other costs) (4)		—		—		—		0.1
Non-operating expenses:
Interest income from notes receivable (included in interest income) (5)		0.2		0.2		0.5		0.6

	As of
Included in the Condensed Consolidated Balance Sheets:	September 28, 2017		December 29, 2016
Current portion of notes receivable - founding members (1)		4.2		5.6
Long-term portion of notes receivable - founding members (1)		8.3		8.3
Interest receivable on notes receivable (included in other current assets) (1)		0.1		0.3
Common unit adjustments, net of amortization and integration payments (included in intangible assets) (2)		702.2		529.9
Current payable to founding members under tax receivable agreement (3)		15.9		18.4
Long-term payable to founding members under tax receivable agreement (3)		144.2		143.4

	As of September 28, 2017				As of December 29, 2016
	Carrying Value		Fair Value (1)		Carrying Value		Fair Value (1)
Term loans	$	270.0	$	269.6	$	270.0	$	272.7
Notes due 2022		400.0		409.5		400.0		414.5
Notes due 2026		250.0		233.8		250.0		256.7

			Fair Value Measurements at Reporting Date Using
	Fair Value as of September 28, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:
Cash equivalents (1)	$	22.3	$	22.3	$	—	$	—
Short-term marketable securities (2)		3.7		2.0		1.7		—
Long-term marketable securities (2)		15.8		13.7		2.1		—
Total assets	$	41.8	$	38.0	$	3.8	$	—

			Fair Value Measurements at Reporting Date Using
	Fair Value as of December 29, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
ASSETS:
Cash equivalents (1)	$	5.3	$	0.3	$	5.0	$	—
Short-term marketable securities (2)		26.1		5.2		20.9		—
Long-term marketable securities (2)		19.6		17.3		2.3		—
Total assets	$	51.0	$	22.8	$	28.2	$	—

	As of September 28, 2017
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government treasury bonds	$	1.2	$	1.2		0.1
Short-term U.S. government agency bonds		0.8		0.8		0.9
Short-term certificates of deposit		1.7		1.7		0.2
Total short-term marketable securities		3.7		3.7

Long-term municipal bonds		1.9		1.9		2.4
Long-term U.S. government agency bonds		11.9		11.8		2.5
Long-term financial certificates of deposit:		2.1		2.1		2.0
Total long-term marketable securities		15.9		15.8
Total marketable securities	$	19.6	$	19.5

	As of December 29, 2016
	Amortized Cost Basis (in millions)		Aggregate Fair Value (in millions)		Maturities (1) (in years)
MARKETABLE SECURITIES:
Short-term U.S. government treasury bonds	$	1.2	$	1.2		0.8
Short-term municipal bonds		2.9		2.9		0.6
Short-term U.S. government agency bonds		1.0		1.0		0.5
Short-term commercial paper		13.0		13.0		0.1
Short-term certificates of deposit:
Financial		7.7		7.7		0.6
Industrial		0.3		0.3		0.9
Total short-term marketable securities		26.1		26.1

Long-term municipal bonds		1.9		1.8		2.7
Long-term U.S. government agency bonds		15.6		15.5		3.5
Long-term certificates of deposit		2.2		2.3		2.6
Total long-term marketable securities		19.7		19.6
Total marketable securities	$	45.8	$	45.7

													% Change
	Q3 2017			Q3 2016			YTD 2017			YTD 2016			Q3 2017 to Q3 2016			YTD 2017 to YTD 2016
Revenue	$	116.4		$	113.5		$	285.4		$	305.1			2.6	%		(6.5	%)
Operating expenses:
Advertising		43.3			42.6			130.8			129.2			1.6	%		1.2	%
Network, administrative and unallocated costs		22.8			22.5			70.9			75.2			1.3	%		(5.7	%)
Total operating expenses		66.1			65.1			201.7			204.4			1.5	%		(1.3	%)
Operating income		50.3			48.4			83.7			100.7			3.9	%		(16.9	%)
Non-operating expenses		16.1			27.8			47.8			60.7			(42.1	%)		(21.3	%)
Income tax expense		2.3			(1.1	)		2.6			1.3		NM				100.0	%
Net income attributable to noncontrolling interests		22.5			13.5			27.4			28.0			66.7	%		(2.1	%)
Net income attributable to NCM, Inc.	$	9.4		$	8.2		$	5.9		$	10.7			14.6	%		(44.9	%)

Net income per NCM, Inc. basic share	$	0.15		$	0.14		$	0.10		$	0.18			7.1	%		(44.4	%)
Net income per NCM, Inc. diluted share	$	0.15		$	0.13		$	0.10		$	0.18			15.4	%		(44.4	%)

OIBDA	$	59.7		$	57.3		$	111.9		$	127.2			4.2	%		(12.0	%)
Adjusted OIBDA	$	62.6		$	60.9		$	122.5		$	144.3			2.8	%		(15.1	%)
Adjusted OIBDA margin		53.8	%		53.7	%		42.9	%		47.3	%		0.1	%		(4.4	%)
Total theater attendance (in millions) (1)		150.6			179.6			492.1			524.1			(16.1	%)		(6.1	%)

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
FY 2014		17.8%		25.4%		25.6%		31.2%
FY 2015		17.2%		27.2%		25.0%		30.6%
FY 2016		17.0%		25.8%		25.4%		31.8%

Period	(a) Total Number of Shares Purchased		(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased under the Plans or Programs
June 30, 2017 through July 27, 2017		985	$	7.53		—	N/A
July 28, 2017 through August 31 2017		3,527	$	6.98		—	N/A
September 1, 2017 through September 28, 2017		—	$	—		—	N/A