Theater Ad Seller National CineMedia Inc. Prepares For Chapter 11 Filing


Movie theaters have continued to struggle post-COVID, as many consumers have gotten used to streaming films in their own home, and now may only go out to the theater to watch big-budget action films. This problem in the movie industry has spilled over to another sector—advertising on movie screens.

This segment is dominated by National CineMedia Inc., which is essentially an agency which sells ads, delivers them to the theaters, and then does a revenue share. The company provides a pre-movie show in 57 leading and national theater circuits which own 21K screens run by over 1,700 theaters and is all of the top 50 Designated Market Areas, or DMAs, as designated by Nielsen.

But not only is National CineMedia Inc. struggling with ad sales due to lower ticket sales, some of its major creditors aren’t paying their bills on time, including Cineworld Group PLC, the owner of Regal Cinemas which has filed for Chapter 11 Bankruptcy.

Ironically, Regal held a 23.6% stake in the company as of last November. However, given that its parent company Cineworld Group PLC is in a Chapter 11 proceeding, it has little control over which bills are paid until a Bankruptcy Judge approves a reorganization plan.


Although theater owners have a large stake in the company, it is publicly held and trades under the ticker NCMI. It was down 26.2% today, or 4 cents, closing at 10 cents per share in anticipation that it too will have to file for Chapter 11. It has hired law firm Latham & Watkins LLP as restructuring counsel, while its operating subsidiary National CineMedia LLC (which National CineMedia Inc. owns 48% of) hired the powerful law firm Paul Weiss Rifkind Wharton & Garrison LLP. FTI consulting has been hired as a restructuring advisor while Lazard Ltd. is their investment banker.

The best that the company can likely hope for at this point is that senior lenders will receive equity stakes in the company while all of the existing equity holders will be wiped out.

National CineMedia has yet to report its fourth quarter 2022 earnings. Although the company saw significant improvement in the first three quarters of 2022 compared with 2021, they are still losing a great deal of money. That, paired with the fact that it’s having problems with past due receivables have put the company into a liquidity crunch.

For the first three quarters of 2022, revenue was up 208.2% from $51.1 million for the first three quarters of 2021 to $157.5 million. Operating results improved, but there was still an operating loss of $21.2 million for the nine months ended September 29, 2022, down from $76.6 million for the nine months ended September 20, 2021.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization, a measure which many media companies use to gauge profitability) was $15.2 million for the first nine months ended September 29, 2022 from negative $43.1 million for the nine months ended September 20, 2021.

The company gave guidance for the fourth quarter of 2022, saying it expects total revenue in the range of $85-$95 million compared to Q4 2021 when it generated $63.5 million. Adjusted OIBDA is expected to come in at $32-$42 million for Q4 2022 versus $18.4 million for this metric in the fourth quarter of 2021.


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