Alicia Reese

Alicia Reese inquired about the national advertising opportunity as National CineMedia shifts towards local, specifically asking if this represents incremental ad dollars or potential cannibalization, and how these revenues are categorized. She also asked if exhibitors' historical stance against political advertising has changed, opening new revenue opportunities.

Answer

Chief Financial Officer Ronnie Ng explained that the shift to local is situation-dependent, with some national advertisers seeking regional placements, which is beneficial to local advertising. He clarified that it's not cannibalization but rather accretive, increasing overall demand, and noted that local market CPMs can sometimes be at a premium to national. Chief Executive Officer Tom Lesinski confirmed that there is interest from select exhibitors in supporting political advertising, though not all, and some require an approval process. He expressed optimism for this opportunity, particularly in key swing states, as more exhibitors recognize the mutual benefits.

Alicia Reese asked about the national advertising opportunity shifting to local, specifically if it represents incremental ad dollars or cannibalization, and how CPM rates differ. She also inquired if exhibitors' historical stance against political advertising has changed.

Answer

CFO Ronnie Ng clarified that the shift to local is situation-dependent, with some national advertisers seeking regional campaigns, which is beneficial to local advertising. He emphasized it's not cannibalization but rather increasing overall demand, with local market CPMs sometimes at a premium to national. CEO Tom Lesinski stated that select exhibitors are showing interest in supporting political advertising, with some readily allowing it and others requiring an approval process. He expressed optimism for political demand, particularly in key swing states.

Alicia Reese of Wedbush Securities asked for the assumptions on CPMs and utilization baked into the Q3 guidance, the level of investment required for new inventory forecasting tools, and the expansion strategy for the local market Bullseye AI technology.

Answer

CEO Thomas Lesinski stated that the Q3 guide assumes improved year-over-year utilization and relatively stable CPMs. He explained that the inventory forecasting tool is a planned CapEx investment aimed at boosting utilization, especially in slower months. Regarding the Bullseye AI tech, he described the expansion as a combination of efficient technology, sales team education, and leveraging successful case studies, rather than a heavy capital investment.

Alicia Reese asked if performance guarantees are offered in the scatter market, how the shift toward scatter sales impacts gross margins, and whether NCM can participate in advertising for new live events, such as the live football games planned by IMAX.

Answer

CEO Thomas Lesinski confirmed that performance guarantees through the NCMx platform are available in both the upfront and scatter markets. CFO Ronnie Ng added that a shift to the higher-CPM scatter market could positively impact margins, assuming sustained demand. Lesinski also stated that NCM's advertising rights generally extend to live events, citing the successful monetization of the Taylor Swift concert film as a model, and noted the company is actively developing this business segment.

Alicia Reese of Wedbush Securities inquired about advertising trends, asking if there was a slowdown in ad bookings from tariff pressures on consumer brands and how the Fubo Sports Network FAST channel was contributing to performance.

Answer

CFO John Janedis noted continued softness in foreign auto but stated the overall impact was not significant. He highlighted strong double-digit growth in key categories like retail/e-commerce and tech, with no obvious tariff-related weakness. Janedis confirmed that FAST channels now represent a high-single-digit to low-double-digit percentage of total ad revenue and continue to grow at a strong double-digit pace, providing a modest positive tailwind to overall ad growth.

Alicia Reese asked for details on the performance of fubo's gamified and interactive ad formats and how these innovations can attract advertisers amid tightening budgets.

Answer

CFO John Janedis reported strong traction in what he termed 'interactive ads,' with revenue from this category up 37% year-over-year. He noted that overall ad products saw 41% growth in the first half and that interest is accelerating, with a new ad format generating significant interest from holding companies.

Alicia Reese of Wedbush Securities inquired about the dynamics of advertising ARPU during the quarter, specifically asking why political ad spending did not provide a more significant lift.

Answer

CFO John Janedis responded that while fubo had a record political advertising year, political ads are not as significant a percentage of revenue for fubo as for traditional broadcasters, thus limiting their impact on overall ARPU. Janedis identified the primary headwind for ad ARPU as the removal of Discovery Scripps content earlier in the year. He also noted that the company expects sequential improvement in ad ARPU in the fourth quarter.

Alicia Reese from Wedbush Securities asked for an update on the tariff situation, including supply chain diversification and product price elasticity. She also requested more detail on the market dynamics in Asia and inquired about any potential plans for a reverse stock split.

Answer

CFO and COO Brian McGee stated that the tariff impact is minimal as all U.S.-bound camera production has moved to Thailand, resulting in a 0% tariff rate on those products. He added that any remaining tariff costs on accessories would be offset by modest global price increases of 3-4%. Regarding Asia, he reiterated that a 'nationalistic trend' in China and macro issues in Japan and South Korea were driving weakness. On a reverse stock split, McGee indicated the focus is on improving financial performance to naturally increase the stock's value.

Alicia Reese of Wedbush Securities asked for a breakdown of the drivers for higher concession costs and inquired about the growth potential for merchandising, including its expansion into Latin America.

Answer

CFO Melissa Thomas specified that a higher merchandise mix was the main driver of increased concession COGS, accounting for over 100 basis points of the rise. CEO Sean Gamble expressed optimism for continued merchandise growth as an incremental revenue driver and confirmed the strategy, including e-commerce, is being actively pursued in both U.S. and Latin American markets.

Inquired about the drivers for lower concession costs in the quarter and the future outlook for that line item. Also asked for guidance on the 'other revenue' category, specifically how it will track on a per-patron basis considering the retail popcorn expansion and tough comparisons to prior quarters with concert film distribution fees.

Answer

Executives attributed lower concession costs to reduced spoilage from higher attendance, successful procurement, and rebates, expecting the trend to continue. They also noted that growing merchandise sales have a lower margin than traditional concessions, making the cost control more impressive. For 'other revenue,' they confirmed it includes retail popcorn and expect the per-patron metric to increase in 2025 as popcorn distribution expands, though the impact will vary with attendance.

Alicia Reese of Wedbush Securities Inc. questioned the drivers behind the lower-than-trend concession costs during the quarter and the outlook for this line item. She also asked for clarity on the 'other revenue' category, considering the expansion of retail popcorn and the tough comparison with Q4 2023's Taylor Swift distribution revenue, seeking guidance on its per-patron trend.

Answer

CFO Sean Goodman attributed the lower food and beverage costs to reduced spoilage from higher attendance, successful procurement efforts, and rebates, expecting Q4 costs to be similar to Q3. CEO Adam Aron added that the growing, but lower-margin, merchandise business makes the cost management success even more significant. Regarding 'other revenue,' Goodman confirmed it includes growing retail popcorn sales. He projected that while absolute sales will grow, the per-patron metric will see a more noticeable increase in the second half of 2025 as the popcorn distribution footprint expands significantly.