National CineMedia Q3 2026 Earnings Call Transcript

National CineMedia (NASDAQ:NCMI) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

National CineMedia Inc. reported third-quarter revenue of $61.4 million, including a $2.6 million contribution from the recent acquisition of Captivate. Excluding Captivate, revenue was $58.8 million, down about 7% year-over-year.

Adjusted EBITDA was $3.3 million, with a $700,000 contribution from Captivate, compared to $10.2 million in the prior year. The decline was attributed to timing of attendance and shifts in advertising budgets, notably due to the FIFA World Cup.

The company completed its acquisition of Captivate, expanding its advertising network to approximately 48,000 digital screens. This acquisition is expected to diversify revenue streams and increase resilience against seasonal advertising fluctuations.

Attendance increased 16% year-over-year to approximately 126 million, driven by strong movie performances later in the quarter, but higher theater access fees impacted profitability.

Operational transformation initiatives are expected to exceed the original 2026 savings target, with anticipated $11 million in annualized cost savings. The company is actively working on integrating Captivate to achieve $3.5 million in annual run-rate cost synergies.

For the fourth quarter, the company expects revenue between $117 million and $124 million and adjusted OIBDA between $42 million and $48 million, supported by a strong film slate and Captivate’s contributions.

CEO Thomas Lesinski announced his retirement effective December 31, with a transition plan underway to find a new CEO to lead the next phase of growth.

The company is optimistic about future growth, bolstered by the Captivate acquisition and anticipates a more favorable advertising environment in the fourth quarter and 2027.

Full Transcript

OPERATOR

Good day and welcome to the National CineMedia Inc. third quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Please note this event is being recorded. I would now like to turn the conference over to Chan Park, Vice President of Finance. Please go ahead.

Chan Park (Vice President of Finance)

Thank you, operator. Good afternoon. I’m joined today by our Chief Executive Officer Thomas Lesinski and our Chief Financial Officer Ronnie Ng. I would like to remind our listeners that this conference call contains 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, as amended. All statements other than statements of historical facts communicated during this conference call may constitute forward-looking statements. These forward-looking statements involve risks and uncertainties.

Important factors that can cause actual results to differ materially from the company’s expectations are disclosed in the Risk Factors contained in the company’s filings with the SEC. All forward-looking statements are expressly qualified in their entirety by such factors. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. Further, our discussion today includes some non-GAAP measures. In accordance with Regulation G, we have reconciled these amounts back to the closest GAAP-basis measurement. These reconciliations can be found at the end of today’s earnings release or on the Investor Relations page of our website at ncm.com. Now I’ll turn the call over to Tom.

Thomas Lesinski (Chief Executive Officer)

Thank you, Chan, and good afternoon, everyone. We appreciate you attending today’s call. Before turning to the quarter, I want to address the announcement we made today. As part of a planned transition, I will retire as Chief Executive Officer with an anticipated departure date of December 31. It has been a tremendous privilege to lead National CineMedia and work alongside such a talented and dedicated team. I’ve been part of National CineMedia for 12 years, having joined the board in 2014 and appointed as CEO in 2019.

Over my career in media, from Warner Brothers to Paramount to National CineMedia, I can honestly say that serving as CEO of National CineMedia has been one of the great honors of my life. It has been a privilege to lead National CineMedia and its talented team. I’m incredibly proud of what we’ve accomplished together to transform the business and establish a strong and diverse foundation for the future. I have tremendous confidence in the opportunities ahead for National CineMedia.

With the Captivate acquisition complete, the Board and I believe now is the time to pass the baton to a new leader who can carry our momentum forward with this new chapter. The Board has retained Korn Ferry, a leading global executive search firm, to assist with the comprehensive search for National CineMedia’s next CEO. I will continue to lead the company and work closely with the Board and our leadership to ensure an orderly transition. Now turning to the third quarter, the third quarter marked an important milestone for National CineMedia as we completed our acquisition of Captivate on September 18th. This acquisition brought together two complementary advertising networks and established a leading premium video and digital out-of-home advertising platform in the United States.

With a combined network of approximately 48,000 digital screens spanning theaters, office buildings, and residential properties, we have significantly expanded our reach, diversified our advertising offerings, and created a new opportunity for advertisers to connect with consumers and business decision makers where they work, live, and play, all through a single premium medium partner. I’d like to welcome the Captivate team to National CineMedia.

We’re incredibly excited to be entering this next chapter together. I will cover our integration priorities shortly, but first I’d like to turn to our third quarter results. National CineMedia reported total revenue of 61.4 million, including a 2.6 million contribution from Captivate following the closing date. Excluding Captivate, National CineMedia generated 58.8 million, down approximately 7% year over year. Adjusted EBITDA was 3.3 million, including a $700,000 contribution from Captivate, compared to 10.2 million in the prior year period.

These results were below our expectations, reflecting two factors: 1) the timing of attendance relative to advertiser demand and 2) shifts in client advertising budgets toward the FIFA World Cup media event. Most national advertisers commit their third quarter spending in July and early August, timed to the summer release schedule. While this was also true this year, attendance was softer than expected in early July as Minions and Monsters and Moana underperformed relative to expectation, which limited monetization during the period of peak ad demand.

Later in the quarter, however, The Odyssey and Brand New Day substantially outperformed expectations. Spider-Man set an all-time domestic opening weekend record of 360 million and both films sustained strong runs through August and into September. Those runs helped drive total attendance across our cinema network to approximately 126 million, up 16% versus the third quarter of last year, or approximately 135 million including the Spotlight Network.

While these breakout successes indicate robust consumer demand for theatrical entertainment, much of the incremental attendance arrived during the seasonally softer second half of the quarter, outside the peak window for advertiser demand. Additionally, as we discussed on our second quarter call, the World Cup attracted substantial investment from many of the same national advertisers and categories that are core to cinema. The shift in spending was greater than we anticipated, with U.S. advertisers having spent roughly $1.2 billion on the tournament’s domestic broadcast, nearly three times the 2022 World Cup.

As a result, several major advertisers reduced or paused their cinema campaigns during the tournament window, and scatter demand remained constrained for the rest of the quarter. We estimate that spending shifts among six major national advertisers alone reduced cinema advertising commitments by approximately $9 million. Together, attendance timing and shifts in national advertising budgets limited our ability to translate better-than-expected attendance into advertising revenue.

At the same time, higher attendance drove higher theater access fees, which weighed on profitability. While our results fell short of expectations, we believe these headwinds were specific to the quarter, and we anticipate a more favorable advertising environment in the fourth quarter and in 2027. Looking ahead, we are focused on creating greater flexibility in how we package and sell our advertising inventory to better monetize cinema attendance. The addition of Captivate further strengthens our resilience by diversifying our revenue mix and expanding our reach into business-to-business and other advertising categories that are less dependent on the theatrical release calendar.

We are encouraged by fourth quarter trends, supported by a robust upcoming theatrical slate and Captivate bookings pacing more than 30% ahead of the same point in the prior year with double the visible pipeline. Together, these indicators reinforce our confidence that the effects felt in the third quarter were temporary and provide a more encouraging outlook for the fourth quarter, supported by expectations for stronger box office activity. We also continue to make progress on our strategic initiatives. Our operational transformation initiatives are delivering results ahead of expectations, and we anticipate exceeding our original 2026 savings target while remaining on track to realize approximately $11 million in annualized run rate cost savings. In local, we continued investing in our sales organization, expanding premium inventory, and strengthening advertiser relationships.

These efforts have helped diversify our local advertiser base, reducing our reliance on large individual contracts that drove results in the prior year period and building a more sustainable foundation for growth. Additionally, as I’ll discuss shortly, bringing our local sales team to Captivate’s network is one of the most significant opportunities in front of us. Our premium products continue to lead our cinema portfolio. Platinum delivered its strongest sales quarter on record, marking its second record-setting quarter this year. The quarter also reinforced the value of Premium Large Format advertising, where National CineMedia represents approximately 70% of the industry’s Premium Large Format screens. As exhibitors continue investing in premium theatrical experiences, we expect these offerings to remain an important driver of long-term growth.

We also continued rolling out our new Premium Lobby Network with AMC, which brings multiple large-format digital screens to more than 280 AMC locations. Over 30 locations are now live, and we now expect to complete the rollout in the first half of 2027. Turning to Captivate, this acquisition is a key step in our strategy to build a broader, more diversified advertising platform. As the leading operator of office and residential digital video advertising in North America, Captivate adds more than 27,000 screens across more than 11,000 buildings in over 170 markets in the U.S. and Canada. Its core business is concentrated in more than 1,500 Class A and Class B office buildings with approximately 30% penetration in its major markets, including New York, Chicago, and Boston.

Captivate also brings a growing residential network that has expanded to more than 9,700 locations since launching in 2023. Captivate’s current footprint represents less than 10% of the addressable market of more than 140,000 office and residential buildings, presenting a meaningful opportunity for future growth. Across its network, Captivate expands our access to business-to-business budgets across technology, financial services, and professional services, while bringing best-in-class programmatic capabilities.

Captivate’s business has a different seasonal profile than our cinema business and is less dependent on the theatrical release calendar and peak moviegoing periods. Its office network is driven primarily by B2B advertising in the second quarter and retail advertising in the fourth quarter. These complementary trends help diversify our revenue streams and balance seasonality across the combined platform. Since the close, we have quickly turned our focus to strategically bringing the two networks together. This includes aligning back-office functions while maintaining continuity across sales operations and advertiser relationships. We are also planning for the migration of our Theater Lobby network onto Captivate’s proven digital out-of-home technology platform, which we expect will enhance efficiency, streamline network management, and support future scalability.

As I previewed, the most significant near-term opportunity is developing a combined local go-to-market strategy that delivers the strengths of both networks. Captivate’s footprint closely aligns with our existing cinema network, creating opportunities to expand our reach and deliver more comprehensive advertising solutions. In its top market, New York City, approximately 80% of Captivate’s buildings are located within one mile or less of a National CineMedia theater, highlighting the natural connectivity between our networks.

By bringing together National CineMedia’s established local sales capabilities and Captivate’s premium office and residential inventory, we see a meaningful opportunity to expand our advertising base and connect brands with highly sought-after audiences in premium, high-attention, video-enabled environments where they live, work, and play. We are actively working with Captivate to execute the strategy and expect to begin rolling it out in the first half of 2027.

We also remain on track to achieve more than 3.5 million in annual run-rate cost synergies within the first year after close, which Ronnie will cover in further detail. While we are still in the early stages of the integration, we are encouraged by the progress to date and confident in the growth opportunities and financial benefits of the combined platform. Turning to the fourth quarter, in cinema, November brings highly anticipated releases including The Cat in the Hat and The Hunger Games, Sunrise on the Reaping. Later in the quarter, Avengers, Doomsday, and Dune Part Three are slated to open in the holiday window. We expect to carry moviegoing momentum into early 2027. At Captivate, we’re seeing positive momentum across the network, driven by strong demand from technology advertisers, including companies investing in artificial intelligence, as well as retail and financial services.

Across our combined platform, we are excited to see fourth quarter advertising pacing ahead of the same point last year, with Captivate pacing significantly ahead and our cinema network tracking in line with the prior year. As we move through the remainder of the year, we are prioritizing returning local advertising to growth, expanding premium inventory, improving how we monetize attendance, and successfully integrating Captivate. We also remain committed to realizing our targeted acquisition synergies while maintaining a disciplined approach to expenses and capital allocation.

So despite the third quarter challenges, we are very optimistic about our fourth quarter performance and confident in the opportunities ahead. With our leading cinema network, Captivate’s complementary advertising footprint, and continued investments in sales and technology, we believe we have a strong foundation for long-term growth. Now I’ll turn the call over to Ronnie to provide some details on the operating results and outlook.

Ronnie Ng (Chief Financial Officer)

Thank you, Tom, and good afternoon, everyone. Before I begin, I want to thank Tom for his leadership and partnership. He guided National CineMedia through a period of significant change and positioned us for this next chapter. With Captivate, we look forward to working with him to ensure a seamless transition. As Tom discussed, our third quarter results reflected a challenging national advertising environment and the timing of stronger-than-expected moviegoing attendance. While attendance exceeded expectations, shifts in advertising spending toward the FIFA World Cup media event and the timing of the quarter’s strongest theatrical releases limited our ability to fully monetize that growth. Despite these challenges, we fully implemented our operational transformation initiatives and completed the acquisition of Captivate, marking important milestones in our effort to further diversify our advertising platform.

Before discussing our results, I’d like to highlight a few reporting considerations. Our consolidated third quarter results include approximately 14 days of Captivate operations from the September 18 closing date through the end of our fiscal quarter on October 1st. Prior year comparisons reflect National CineMedia’s historical business excluding Captivate. Beginning with the fourth quarter, our results will reflect a full quarter of the combined company.

Beginning this quarter, we have also extended our definition of adjusted OIBDA to exclude Captivate’s acquisition and integration costs, consistent with our existing treatment of Spotlight acquisition and integration costs. Total revenue for the third quarter was 61.4 million, including a 2.6 million partial-period contribution from Captivate. Excluding Captivate, National CineMedia generated revenue of 58.8 million, down approximately 7% year over year, reflecting the factors Tom outlined. Total cinema advertising revenue was 55.3 million, down 7% from 59.5 million in the prior year period. Advertising revenue per attendee declined approximately 25% to $0.41 compared to $0.55 in the prior year period, reflecting lower inventory utilization and higher attendance.

Total attendance excluding Spotlight increased 16% year over year to 125.5 million, compared to 108.7 million in the prior year period. Including Spotlight, attendance totaled 135.2 million, primarily driven by The Odyssey and Spider-Man: Brand New Day. As Tom highlighted, the strong performances of these two films occurred later in the quarter when advertising demand is seasonally softer, limiting our ability to monetize the additional attendance.

Turning to our national cinema business, national advertising revenue totaled 46.1 million during the quarter, down 8% from the prior year. Performance reflected increased competition for advertising spending from the FIFA World Cup media event and lower utilization resulting from the timing of stronger-than-expected attendance. As a result, national utilization declined 15% versus the prior year period, while CPMs decreased approximately 4%. Local cinema advertising revenue totaled 9.1 million, down 5% from 9.6 million in the prior year period. The decline primarily reflects one large film-specific campaign in the prior year period that did not recur. Excluding this campaign, local advertising revenue increased approximately 17% year over year, reflecting the strength of our core local business. We continue to make progress diversifying our local advertiser base with a broader mix of customers and less reliance on individual advertising commitments.

We saw growth across the professional and trade, retail and apparel, dining, healthcare, and entertainment categories. Looking ahead, we remain focused on driving sales productivity, expanding premium inventory, and deepening advertiser relationships to support future growth. Turning to Captivate’s performance, its full third quarter revenue was 15 million, up 2.7% year over year. Despite facing similar advertising headwinds related to the FIFA World Cup, Captivate delivered year-over-year revenue growth in each month of the quarter. Performance was broad-based, supported by strength across the technology and consulting services categories, partially offset by softer spending by financial services and telecommunications brands.

Total impressions sold increased 1% year over year, driven primarily by growth in the residential network, while a greater mix of residential impressions contributed to slightly lower overall CPMs. Pricing in the commercial network increased 3.5% compared to the prior year period. Turning to expenses, total operating expenses for the third quarter were 83 million, compared to 65.2 million in the prior year period, reflecting higher attendance-driven exhibitor fees and costs associated with the Captivate acquisition. Adjusted operating expenses for our cinema business totaled 56.3 million, up 6% from 53.2 million in the prior year period, primarily reflecting higher attendance-driven exhibitor fees. Theater access fees increased 24% to 40.2 million compared to 32.3 million last year, reflecting higher attendance.

These increases were partially offset by adjusted SG&A, which declined 23% year over year to 16.1 million compared to 20.9 million in the prior year period, reflecting continued savings from our operational transformation initiatives. As Tom highlighted, we have now fully implemented the operational transformation initiatives announced earlier this year, marking a key milestone in our efforts to improve operating efficiency and establish a more streamlined cost structure.

Given our efficient execution, we now anticipate exceeding our previously announced 2026 savings target of 6 million, with an updated estimate of more than 7.5 million. We remain on track to achieve approximately 11 million in annualized run-rate cost savings once fully realized and expect these savings to continue flowing through to our results over the coming quarters. These savings will help offset higher attendance-related expenses while creating additional flexibility to invest in our strategic growth priorities.

Turning to profitability, operating loss for the quarter totaled 21.6 million compared to a loss of 1.8 million in the prior year period. Net loss was 17.2 million, or $0.18 per diluted share, compared to net income of 1.6 million, or $0.02 per diluted share, in the third quarter of 2025. Adjusted EBITDA totaled 3.3 million, including a contribution of 700,000 from Captivate, compared to 10.2 million in the prior year period, with adjusted OIBDA margin of 5.4%.

Excluding Captivate, National CineMedia generated 2.6 million in adjusted OIBDA during the quarter, with adjusted EBITDA margin of 4.4%. The decline primarily reflects lower cinema advertising revenue and higher attendance-related exhibitor fees, partially offset by savings from our operational transformation initiatives. Despite a challenging advertising environment due to the Winter Olympics, World Cup, and the timing of theatrical attendance, National CineMedia delivered modest year-over-year revenue growth. Year to date, total revenue for the period reached 153.8 million, including Captivate’s partial-period contribution. Excluding Captivate, National CineMedia generated revenue of 151.2 million, up approximately 1% compared to 150 million in the prior year period.

Cinema advertising revenue increased approximately 1.6% year over year to 141.5 million, supported by higher attendance across National CineMedia’s network. Adjusted EBITDA for year to date was negative 5.2 million compared to 1.9 million in the prior year period. With revenue largely in line with last year, the year-over-year decline primarily reflected a 17.4 million increase in theater access fees associated with higher attendance, partially offset by an 8.4 million reduction in SG&A primarily driven by savings from our operational transformation initiatives, as well as a 0.7 million partial-period contribution from Captivate.

We remain on track to achieve more than 3.5 million in annual run-rate acquisition synergies in the first year after close and have already realized more than 60% of the targeted synergies. We expect these savings to support improved profitability and cash flow generation over time. Turning to cash flow, unlevered free cash flow totaled negative 3.4 million during the quarter compared to negative 1.8 million in the prior year period, reflecting changes in working capital and lower profitability, and excludes one-time acquisition-related cash outflows.

Year to date, unlevered free cash flow was 12.9 million compared to negative 3.1 million in the prior year period. Capital expenditures totaled 1 million during the quarter compared to 1.6 million in the prior year period. Turning to our consolidated balance sheet, at quarter end, National CineMedia had approximately 35.8 million in cash, cash equivalents, and restricted cash, including approximately 8 million in restricted cash. In connection with the Captivate acquisition, we entered into a 275 million senior secured term loan and a 25 million revolving credit facility, with 10 million drawn on the revolver at closing. These facilities mature on September 2031 and were used with cash on hand to fund the acquisition, refinance our previous credit facility, and cover related transaction and financing expenses.

Our trailing twelve-month net leverage ratio was approximately 4.4 times, including the pro forma impact of 3.5 million in anticipated cost savings related to the Captivate acquisition and the remaining 6.4 million in savings from our operational transformation initiative. Looking ahead, we remain focused on reducing leverage over time, with a long-term net leverage ratio target of 2.5 to 3 times. We are committed to strengthening our balance sheet primarily through free cash flow generation and the realization of our synergy and operational transformation targets.

Now turning to our fourth quarter outlook: for the fourth quarter we expect consolidated revenue within the range of 117 million to 124 million and adjusted OIBDA within the range of 42 million to 48 million, reflecting the first full quarter of Captivate’s contribution and continued savings from our operational transformation initiative. This outlook also reflects the strength of the fourth quarter film slate, which we expect to drive year-over-year attendance growth.

As we move through the rest of the year, we remain focused on disciplined execution, reducing leverage, and investing in the initiatives we believe will generate the strongest long-term returns. Operator, please open the line for questions.

OPERATOR

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster.

The first question today comes from Mike Hickey with StoneX. Please go ahead.

Mike Hickey (Analyst)

Hey Tom, Ronnie, thanks for taking our questions. First topic, maybe Ronnie here, just free cash flow and debt reduction. What should we be thinking about in terms of free cash flow conversion, Ronnie, in terms of maybe an annual target now that you’ve got Captivate in your books here, and how much debt do you expect to repay over the next year? And I guess, why do you think two and a half to three times leverage is the right level for your business moving forward?

Ronnie Ng (Chief Financial Officer)

Yeah, thanks, Mike. So the Captivate EBITDA-to-free-cash conversion, or unlevered free cash conversion, is actually very similar to our profile. I think we stated that on our last call when we announced the deal. So we look at the conversion around 70% to 80%—so call it 75% of EBITDA to unlevered free cash conversion. So when we state that, hey, we’re looking at this thing with a long-term leverage target of two and a half to three times, it’s on somewhat of a conservative outlook that we believe, hey, that’s going to be easy to achieve, and that’s why we have that as a target. Do we think this balance sheet can get lower than that? We absolutely think that can be achieved as we utilize all free cash flow to delever the balance sheet.

Mike Hickey (Analyst)

Thank you, Ronnie. The next topic would be maybe guidance philosophy and growth outlook. Obviously there’s been a lot of volatility on a quarter-to-quarter basis. I think it’s a challenge to really guide. Have you thought of giving more of an annual guidance? I guess the question is, would you plan to guide 2027 on an annual and sort of move away from this forward-quarter type strategy? And then how should we think—looks like Captivate’s cranking here—how should we think about growth from your elevator business and your core business in 2027 on revenue?

And then it looks like you’re baking in here a lot of cost savings. You’re realizing some of that already. You know, how much operating leverage should we expect here in 2027 and moving forward?

Ronnie Ng (Chief Financial Officer)

Yeah. So in regards to the guide, we obviously paused the guide in the last quarter because of the acquisition and the timing of the close. And here we have a full fourth-quarter outlook for the guide. Because we own the business, we will have Captivate for the whole entire fourth quarter. We will always review how we really communicate with the Street. We believe that having full and better transparency is of the most importance as we think through the guidance. And definitely one of them is looking at it on an annualized basis—something that we as management will always review and would have potentially the possibility of doing that in the future, moving away from a quarterly guide.

In terms of your questions on the growth of Captivate, I think as the read-through from our fourth-quarter guide, you can assume that what we assumed in the fourth quarter at the time of announcement is playing out. So, meaning the purchase multiple associated with Captivate from this point on, we feel very comfortable with what we provided about two months ago when we announced the acquisition. So, meaning Captivate is on target to our expectations when we were diligencing the transaction.

And it’s obviously, I think, one of the reasons why we thought the acquisition made a lot of sense with Captivate sustaining that kind of growth trajectory. And yes, we do think that there is operating leverage between the two businesses that we will further uncover here. We’re still—as Tom said on the call—we’re still getting underway in terms of the full integration. We did announce a $3.5 million cost savings plan at the time of the announcement. We obviously believe that’s very achievable, and we’ll see if we can do a little bit better than that. But we’re definitely on track to do the $3.5 million of cost savings.

Mike Hickey (Analyst)

Tom, you’re passing the baton here. When you look to the new CEO, what should their top priority be? What should their experience be? You can comment on that in terms of putting National CineMedia in their best position for future growth.

Thomas Lesinski (Chief Executive Officer)

That’s a good question. And, you know, obviously it’s a collective discussion I’m having with the board as we look for the new leader. I think the important thing is to focus on the integration and the synergy created between Captivate and NCM. I think that’s the priority right now. Remember, the Captivate acquisition is only just a little over six weeks old. We’re already seeing significant amounts of opportunities between those two platforms and the synergy being created, not just on the cost side, but also on the revenue side.

And I think, you know, any great leader will tell you that it’s about running an organization optimally, solving problems, and being able to create new opportunities. So I know that the board’s well underway with executive recruiters identifying people, and I’m confident we’re going to find a great leader to take this company to its next phase.

Mike Hickey (Analyst)

Thank you, Tom.

Thomas Lesinski (Chief Executive Officer)

You’re welcome.

OPERATOR

The next question comes from Patrick Scholl with Barrington Research. Please go ahead.

Patrick Scholl (Analyst)

Hi, thanks for taking the question. If I could follow up on some of your commentary on guidance with the Q4 guidance, could you maybe talk about what’s sort of driving the—I think you said 30% pacing ahead, the Captivate pacing 30% ahead of a year ago. Is that just more inventory, or is that part of the revenue synergies—like how much of that would be revenue synergies you talked about, as opposed to that being kind of still a future opportunity?

And then on the cinema side, how should we think about that segment’s contribution to Q4? You said it was kind of pacing in line. I think, as you said, you expected overall attendance growth, and it’s been a solid start to the year. I was kind of curious how those two segments overall—you’re thinking about their contribution to Q4. Thank you.

Ronnie Ng (Chief Financial Officer)

Yeah. So, Patrick, on that—so Captivate is trending over 30%, or their current booked business is 30% ahead of the prior year. So in terms of if any of that has really come through with the synergy of the two businesses, the answer is no. So this is actually just on Captivate on its own. We’ve, again, just closed the acquisition about a month ago or so, so we’re still working through plans on how best to actually partner up between Captivate and NCM on creating sales or revenue synergies.

So we’re still working through that. None of the fourth-quarter guide actually includes any synergies for Captivate. In terms of NCM on the fourth quarter, the guide does imply that on a revenue basis NCM will be relatively flat on a year-on-year basis versus the fourth quarter of 2025. So you can then kind of see what the contribution is between NCM and Captivate based on that commentary.

Patrick Scholl (Analyst)

Okay. And then just with another follow-up on Captivate, have you identified much in the way of, you know, just the audience overlap and maybe just how those budgets are allocated in terms of the opportunity with buying cinema versus buying Captivate? Maybe talk about how those different budgets are allocated and what investments in audience measurement kind of need to overlap or be replicated within those two businesses.

Thomas Lesinski (Chief Executive Officer)

So there’s really three different businesses when you look at it. Obviously there’s our core cinema business, and then Captivate has a B2B business, a B2C business, and they’ll also be taking over our lobby business. The B2C business has a significant amount of overlap with the NCM business. It’s very much the same type of customer. So we expect a significant amount of NCM’s current advertisers to extend their reach and frequency as cinema advertisers into the B2C lobbies that are owned by Captivate.

On the B2B side, we’re already seeing some overlap, particularly on the luxury side. We have half a dozen luxury advertisers in our cinema network that are also going to be participating in the B2B lobby network. So a key initiative that we’re doing right now is identifying all of the overlap, not to mention our ability to actually package and bundle advertising across the two platforms. So we’re already getting a lot of inbound calls from advertisers who want to buy both, which has really been part of the whole plan to begin with.

So there’s a lot of excitement on Madison Avenue over these combined assets. And I think the last thing is our local network—we have one of the best small local advertising companies—and there was not a real Captivate local advertising presence. So we’ve already initiated the NCM local team on the ad side selling Captivate. So there’s a lot of overlapping clients and budgets, and we’re looking at the combination of those drawing up a lot of synergy revenue across all the different verticals that we’re in today.

Patrick Scholl (Analyst)

Okay, thank you.

Thomas Lesinski (Chief Executive Officer)

You’re welcome.

OPERATOR

Again, if you have a question, please press star then one. The next question comes from Drew Crum with B. Riley. Please go ahead.

Drew Crum (Analyst)

Okay, thanks. Hey, guys, good afternoon. Maybe one for Ronnie and one for Tom. Ronnie, just to go back to the fourth-quarter guidance, it looks like you’re assuming some OIBDA margin compression with the operational transformation and recognition of synergies from Captivate. What’s driving that view? And then for Tom, just more broadly speaking, in your preamble, you talked about focusing on improving monetization of attendance. What specific initiatives or things are you doing to recognize that?

Ronnie Ng (Chief Financial Officer)

So, Drew, on the fourth-quarter guide, the margin compression that you’re alluding to—you really see what we’re baking into the guide is actually a continued increase in attendance on a year-on-year basis. So when you have, on the NCM side, relatively flat revenue on a year-on-year basis with attendance up, you’re going to see some margin compression just from the attendance fees. That’s what’s driving the margin compression.

Thomas Lesinski (Chief Executive Officer)

Okay, can you just repeat your question again, Drew, for my half of it?

Drew Crum (Analyst)

Yeah. Tom, in your preamble you talked about focusing on improving monetization of your attendance, and I was curious whether or not you could share some of the initiatives you have underway or planned for next year.

Thomas Lesinski (Chief Executive Officer)

Yeah. So the biggest initiative we have is growing our new customer base. So what we’ve done is allocated a significant amount of overhead towards a new group within our sales department whose exclusive job is to drive revenue from new customers and improve churn. That’s a key part of it. I think the second key part of it is going to be this combined packaging of Captivate-NCM inventory. The third part of it is NCM’s ad sales company helping support the B2C initiatives—the lobby initiatives—at Captivate.

And then lastly, there’s a significant amount of overlap of advertisers that we’ve already identified that we believe we can get more out of. So there’s probably a half a dozen different things, Drew, that we’re working on that are going to help drive revenue. And I think importantly, next year too, we’re not going to have the Olympics and we’re not going to have the World Cup to have to compete with. So we’re optimistic about the 2027 numbers. We think the box office should be solid again, so we’re looking forward to a really productive 2027.

Drew Crum (Analyst)

Got it. Okay. Thanks, guys.

OPERATOR

This concludes our question-and-answer session. I would like to turn the conference back over to Thomas Lesinski for any closing remarks.

Thomas Lesinski (Chief Executive Officer)

Okay. Thank you all for joining us today and for your continued support of National CineMedia. While our third quarter presented challenges, we remain confident in the underlying strength of our business and the opportunities ahead as indicated in our fourth quarter guidance. So despite the headwinds, we continue to make progress on our strategic priorities including expanding our premium advertising inventory, strengthening our local business and improving operational efficiency. These efforts remain central in our strategy as we look to capitalize on continued consumer demand for theatrical exhibition and strengthen our business over time.

Looking ahead, the addition of Captivate marks an important new chapter for National CineMedia, expanding our reach to a complementary, sought-after audience and diversifying our business and advertising platform beyond the silver screen. We are encouraged by early fourth quarter trends and the steps we’ve taken to make our business more efficient. We remain focused on successfully integrating Captivate and driving greater value for our advertisers, exhibitor partners and shareholders.

I want to express my gratitude to our theatrical exhibition partners, our advertisers, the National CineMedia board and all of our shareholders for their trust and support during my seven years as CEO. And I’m proud of what we have accomplished together and grateful to everyone who’s contributed to National CineMedia’s success. And lastly, and most importantly, I want to thank the entire National CineMedia and Captivate teams for their dedication, hard work and commitment to our unique culture. I remain confident in the future outlook of the combined National CineMedia and Captivate teams’ ability to accelerate our position as a leading premium video and digital out-of-home advertising platform. It is the unique combination of the special talent and assets of these two one-of-a-kind organizations that will drive significant synergy, value and support the company’s continued success.

Thank you again for your ongoing support and look forward to seeing you all at the movies.

OPERATOR

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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