National Cinemedia Inc
NASDAQ:NCMI
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National Cinemedia Inc
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Good day and welcome to the National CineMedia, Inc. Third Quarter 2024 Earnings Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Chan Park, Senior VP of Finance. Please go ahead.
Good afternoon. I'm joined today by our Chief Executive Officer, Tom 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 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.
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. Today, we will be discussing NCM LLC's operating results as they relate to the third quarter of 2024, which are largely similar to NCM, Inc.'s results. We are reporting NCM LLC's operating results to provide an accurate comparison to the third quarter of 2023 when we also reported NCM LLC's results given fiscal year 2023's results were unconsolidated.
Now I'll turn the call over to Tom.
Thank you, Chan, and good afternoon, everyone. Welcome to our third quarter 2024 earnings call. We're excited to report our fourth consecutive quarter of solid performance as the market continues to recognize NCM's improving execution and delivery of consistent results as the box office generates further meaningful growth.
The cinema industry once again built on its momentum through the third quarter of 2024, outperforming almost all expectations. The box office brought in almost $2.7 billion this quarter, up slightly compared to the same period last year with Deadpool & Wolverine, Despicable Me 4, Twisters and Beetlejuice Beetlejuice leading the way, supported by the success of smaller films, including It Ends with Us and Longlegs.
Several of these late summer hits broke records with Deadpool & Wolverine cementing itself as the highest grossing R-rated film ever and Beetlejuice Beetlejuice ranking as the second highest grossing September movie of all time. We also are encouraged by strong performance in alternative content as Longlegs became 2024's highest grossing indie horror film.
The increase at the box office year-over-year amidst tough comparisons given last summer's blockbuster hits, including Barbie, Oppenheimer, Sound of Freedom and Mission: Impossible 7 is a tremendous sign of sustainable growth and a testament to moviegoers' desire to go to the theaters and experience the content they love in the best viewing environment.
In the third quarter alone, 7 films earned over $100 million, highlighting the breadth of the box office recovery. The last time 7 or more films exceeded $100 million at the box office in a single quarter was back in the fourth quarter of 2019.
Looking month-to-month, July brought in almost $1.2 billion, the best month year-to-date. August surpassed both 2023 and 2019 levels and September was up 25% compared to the same period the previous year.
In fact, the third quarter's Deadpool & Wolverine and Despicable Me 4 performances cumulatively outperformed Barbenheimer, a true indication of box office momentum this quarter along with the consistent success of the film slate each summer. We are highly confident that the cinema industry will continue its positive momentum through the end of the year, leading to an exciting and highly anticipated 2025 slate.
Once again, cinema demonstrated its ability to cater to all demographics of moviegoers this quarter, with strength across a wide range of genres from family-friendly movies to R-rated films and the horror genre. Movie theaters continue to draw young, diverse and multigenerational audiences within a median age of just 30, much younger than the popular platforms like NFL, which has a median age of 54, or the NBA with a median age of 47. Advertisers see the value in NCM's ability to reach elusive audiences as Gen Z and millennials made up 64% of NCM's third quarter viewership.
For major titles, Gen Z and millennials represented 69% of the audience for Deadpool & Wolverine, 67% for Beetlejuice Beetlejuice and 58% for Despicable Me 4, highlighting cinema's unique ability to reach the most sought-after consumers. Gen Z alone accounted for 38% of our quarterly audience, averaging a strong 7.4 weekly rating compared to a 2.4 weekly rating for NFL Sunday Night Football and the 1.6 average rating across all 5 games of the recent World Series, where Gen Z comprised only 6% of the audience. NCM theatres also drew nearly 72 million of the hard-to-reach 18 to 34-year-old demographic with an average weekly rating of 7.9.
Finally, It Ends with Us exemplified the box office as appeal to younger audiences with 18 to 34-year-olds comprising 60% of the opening weekend audience with women comprising 84% of that group. In an evolving marketplace, cinema stands out apart from streaming and legacy linear TV in its ability to reach the desirable incremental audiences that marketers seek. And NCM continues to cater to the ad marketplace's changing demands. Given our unique ability to capture diverse audience, we are poised to continue growing and scaling the business through the ongoing shift in the premium video marketplace away from legacy linear broadcast and cable networks.
In the third quarter, we saw a continuation of recent trends in how advertisers are thinking about allocating their future spend, recognizing investment in video and streaming marketplaces continues to reach the same limited audiences with truly underwhelming attentiveness. Given these trends, it's no surprise that we saw increasing interest in the highly measurable and flexible buying options and inventory that NCM provides. Through our differentiated and high-value offerings, we are continuing to expand our client base across key national and local ad categories, demonstrating our ongoing attractiveness to a full spectrum of advertisers.
Year-to-date, NCM has welcomed 14 advertisers that are new or have placed their first major cinema advertising campaign since 2019, with new clients in the CPG, QSR, alcoholic beverages and beauty industries. We expect to drive continual growth in new client engagement through our innovative offerings, differentiated platform and delivery of hard-to-reach audiences.
Now onto our results. In the third quarter of 2024, revenue was $62.4 million, exceeding our guidance range of $56 million to $58 million and adjusted OIBDA was $8.8 million, exceeding our guidance range of $6 million to $8 million. Approximately 59% of the third quarter's national revenue was attributable to longer-term upfront commitments, while approximately 41% was attributable to the scatter market. Amidst an industry-wide challenged upfront market, we benefited from strong scatter market performance, which experienced a substantial increase in revenue per attendee year-over-year as advertisers are showing greater interest in closer to campaign real-time solutions.
NCM saw strength across multiple categories this quarter with wireless, automotive, retail and apparel, entertainment and travel representing nearly 60% of revenue. Several categories also demonstrated meaningful growth, including tech, which was up more than 10x year-over-year, retail and apparel, which was up 123% year-over-year and pharma up 59% year-over-year. This demonstrates how NCM's diverse portfolio of offerings appeals to a broad range of brands, whether through our continued strong performance in top verticals such as wireless and automotive or engagement with newer categories, including pharma.
Our category diversification further reduces our sensitivity to market volatility, ensuring a more stable and resilient revenue stream across varying economic conditions. Platinum, NCM's premier ad unit in the trailer pack is a coveted placement for advertisers because of its exclusivity and the offering is showing impressive signs of growth with sales up 2.4x compared to the third quarter of 2023. Platinum is becoming a key driver of interest with advertisers and we are continuing to see major advertisers leverage Platinum to gain moviegoer engagement and attention. Our newly introduced retargeting platforms, Boomerang and Boost, have already shown strong incremental value to advertisers, with Boomerang increasing post theater engagement by 20% with 15 deals to date and Boost expanding audience reach by 3x across premium video channels. For those unfamiliar with Boost, it is NCMx's digital offering that enables advertisers to retarget elusive moviegoing audiences at the national, regional and local level.
Boost connects cinema to TV audiences, combining exclusive cinema ad exposure data with leading identity graphs to create targeted CTV campaigns. Boost has been gaining notable traction in the marketplace while reaching multiple categories, including automotive, government and health care. Furthermore, we are increasing our innovative experiential marketing efforts due to positive momentum, providing new avenues for demand drivers, combined with nontraditional longer-form content on the big screen.
Because we are the #1 medium for consumer attention compared to linear, digital, social podcasts and others, advertisers are presented with a high-value opportunity to extend their ads through live experiences, creating a new way to convey their brand messages to sought-after audiences.
NCM has a unique ability to maximize creativity beyond the screen through in-person activations in movie theater lobbies and nearby locations in addition to the most premium video experience in an immersive theater environment. Some examples include a new in-lobby holographic activation for an entertainment client, which brought to life their highly anticipated new series and a customized original content segment linking an automotive client to Twisters.
NCM also partnered with one of the largest multinational retail corporations to activate a 5-minute long-form content campaign, which included a theatrical segment promoting back-to-school shopping, layered with our Boomerang technology to create a shoppable experience. Among moviegoers who scanned the code, an impressive 81% took action by shopping for back-to-school deals while viewing the content and the remaining 19% opted to set a reminder for later. These experiential and long-form content initiatives exemplify our flexibility and effectiveness in delivering engaging activations and effective shoppable ads and reinforce the shareable nature of the moviegoing experience.
Through breakthrough technology partnerships, NCM is continuing to democratize cinema data. In collaboration with our newest data cloud partner, Snowflake, we will utilize data clean rooms to securely share and analyze audience information while safeguarding sensitive data. Integrating our robust first and second-party deterministic cinema audience data with advertisers' proprietary data in Snowflake's clean room environment enables precise audience targeting, performance measurement and attribution. This approach allows advertisers to gain deeper insights into campaign effectiveness to optimize their strategies and achieve KPIs, all while ensuring compliance with data privacy regulations. [ NCMS ] continues to be the leader of revolutionizing cinema measurement as we continue enhancing the most powerful data platform in cinema, NCMx.
Year-to-date, 47% of our sales are directly tied to our advanced measurement capabilities provided by NCMx. We are leveraging NCMx to drive measurable results for clients' business growth, offering strategic audience insights, performance attribution, continued engagement and cross-channel reach. Our targeted insights have proved to lead to more than 30% higher engagement and a directly attributable 50% sales lift.
Driven by NCMx, our innovative approach to merging national awareness campaigns with local messaging and consumer retargeting marks a significant advancement for franchise categories. Throughout the third quarter, we have been collaborating with a major automotive company to assess campaign impact at key local dealerships in critical regions. This is essential to demonstrate the campaign's return on investment and encourage participation from additional auto dealership groups that did not engage in the current initiative.
Looking ahead, we are exploring ways to further develop our new and innovative client solutions, including expanding our programmatic and self-serve offerings to help unlock new demand channels for NCM. We continue to expand and invest in our programmatic offering and see an opportunity to build it into a meaningful revenue contributor in the coming years.
Self-serve, our fully automated cinema advertising solution that empowers local and regional companies to plan, buy, schedule and create their ads to run on the big screen, has continued to generate leads and deliver significant growth quarter-to-quarter due to its user-friendly characteristics, providing advertisers the ability to create ads in new and diverse ways.
In the third quarter, our self-serve offering had 59 unique advertisers, and we saw a sizable uptick in all aspects of the offering compared to the second quarter of 2024. In fact, self-serve had its biggest quarter since launch, with sales up 96% quarter-over-quarter. Additionally, in July, we added a new AI feature to answer customers' questions and have already seen strong initial results with an automation rate of 72% and over 28 hours of agent time saved. We continue to see a great opportunity to bolster local ad sales through an additional focus on self-serve. We expect it to keep growing and contributing to higher commercial utilization across the NCM network. Together, these offerings enable us to more efficiently capitalize on the shifting advertising marketplace dynamics.
With that, I'll turn the call over to Ronnie to provide you with more details on our operating results and future outlook.
Thank you, Tom, and good afternoon, everyone. For the third quarter, our revenue and adjusted OIBDA exceeded our guidance, resulting in higher-than-projected margins. This marks the fourth consecutive quarter where our results exceeded our expectations, demonstrating our commitment to executing on both ends of the P&L and driving predictable financial results. As Tom previously mentioned, while the overall advertising marketplace navigates through a challenged and evolving upfront market, our team continued to grow our scatter business, which was up 35% compared to the prior year.
NCM LLC's total revenue for the third quarter was $62.4 million, exceeding our revenue guidance of $56 million to $58 million. Total revenue for the quarter decreased 10% year-over-year, primarily due to an unusual high mix of harder to monetize G and PG-rated movies in July, impacting what is typically our highest revenue month of the quarter.
Excluding beverage revenue, total advertising revenue was $58.2 million, which was down 10% compared to the same period the previous year, while attendance declined 8% year-over-year. National advertising revenue was $46.8 million compared to $52 million the previous year, down 10% due to lower attendance in the quarter and a low single-digit percentage decrease in national advertising CPMs.
As previously mentioned, July had an outsized mix of G and PG audiences, which typically experienced lower advertising demand than other ratings categories. While July is historically the highest advertising demand month in the quarter, typically accounting for nearly half of third quarter revenue, this July contributed only 31%. As a result, revenue was weighted toward August and September, months with seasonally lower CPMs, resulting in the year-over-year decline in CPMs and a slight decrease of national revenue per attendee of 3%. This said, our sales team was able to capture upside in advertising revenue this quarter by optimizing pricing and packaging and deepening relationships with our advertisers.
Local and regional advertising revenue was $11.4 million, down compared to $12.9 million the previous year, primarily driven by lower attendance. While revenue was down, local and regional sales experienced an increase in contract activity and size within the automotive, health care, wireless and insurance categories. Additionally, we saw a 10% increase in average local client revenue and the continued adoption of our programmatic offerings across new categories.
Turning to our expenses. Third quarter total operating expenses were $69.9 million, down 68% versus the same period last year, primarily driven by onetime expenses related to our Chapter 11 restructuring. Excluding onetime items, depreciation, amortization and non-cash share-based compensation, our adjusted operating expenses for the third quarter of 2024 were $53.6 million, down 8% year-over-year. The decrease in adjusted operating expenses was primarily due to lower attendance-related expenses resulting from an 8% decrease in network attendance and our overhead cost savings initiatives, partially offset by higher per attendee fees.
Third quarter adjusted OIBDA, excluding non-cash charges and onetime items was $8.8 million, down compared to $11.3 million in the same period the previous year, exceeding our guidance range of $6 million to $8 million. The decrease in third quarter adjusted OIBDA was due to lower revenue, partially offset by an 8% decline in adjusted operating expenses driven by lower attendance and SG&A expenses.
Unlevered free cash flow for the third quarter improved significantly to negative $2.4 million compared to negative $43.9 million in the same quarter the prior year, reflecting the absence of restructuring expenses from the bankruptcy proceeding we exited in August of 2023. Year-to-date, NCM LLC's total revenue is $154.5 million compared to $168.9 million in the previous year. National advertising revenue of $117.9 million remained flat due to a 22.1% increase in national advertising utilization, offset by a slight decrease in CPMs for the 9 months ended September 26, 2024, compared to the same period in the prior year.
Local and regional advertising of $26.5 million decreased by 24%, largely due to the lingering effects of 2023 writer and actor strikes that impacted the film slate and reduced advertising inventory. NCM's total adjusted OIBDA year-to-date is $10.7 million compared to $12.9 million in the previous year.
Turning to our consolidated balance sheet. At the end of the third quarter, the company had $52.5 million of cash, cash equivalents, restricted cash and marketable securities compared to $56.8 million at the end of the second quarter of 2024, while total debt balance remained unchanged at $10 million.
NCM continues to opportunistically make strategic investments. And shortly after the end of this quarter, we invested $1 million in cash to acquire equity interest in an advertising-related company and also entered into an agreement with an entertainment company to exchange $2 million of on-screen advertising to be provided over a 3-year term for equity interest. While these were minor investments, we believe they are additive to our portfolio and we will continue to evaluate other opportunities as they arise.
To provide an update on our $100 million share repurchase program, since the launch of the program, we have repurchased 2.5 million shares for $12.8 million at an average share price of $5.07 as we continue to focus on returning value to our shareholders. This also includes the redemption of Cinemark's common membership units of approximately 130,000 shares. While we plan to continue to opportunistically repurchase shares at prevailing market prices through April of 2027, we are also focused on strategically investing capital in growing our advertising network through new innovations such as programmatic and self-serve.
Turning to guidance. For the fourth quarter of 2024, we expect revenue to be between $82 million and $86 million. In addition, we expect adjusted OIBDA for the fourth quarter of 2024 to be between $28 million and $30 million. Our guidance reflects a challenging year-over-year comp with Taylor Swift: The Eras Tour in October 2023 and higher theater access fees as attendance continues to recover. We also expect a similar audience mix shift in the fourth quarter to what we experienced in the third quarter. That said, we are confident that this is a temporary trend that will revert with the 2025 film slate.
Looking ahead to 2025, there is a lot to be excited about with the upcoming slate filled with highly anticipated films from a diverse range of studios. We have already seen great success in the fourth quarter through The Wild Robot and Terrifier 3, and we are confident this momentum will carry into 2025 for a resilient year at the box office.
We are particularly excited about the 2025 releases of Superman: Legacy, Avatar 3, Mission: Impossible 8, Captain America: Brave New World. NCM is uniquely positioned with its strong appeal to its high-value audience and we are optimistic advertisers will continue to turn to NCM and the valuable audiences we provide as the box office builds momentum in the years to come.
Operator, please open the line for questions.
[Operator Instructions] Today's first question comes from Eric Wold with B. Riley Securities.
A couple of questions. I guess, one, as we head towards the end of the year, can you update us on kind of your upfront visibility as we kind of head into next year? I guess not looking for specific guidance, but maybe any metrics you can share around kind of demand and pricing coming out of the upfront, kind of what you saw? And kind of you noted that at least in the third quarter, I forget what if you gave a year-to-date number, Ronnie, but 59% of national revenue was longer-term commitments in the quarter. What would be your goal going forward for long-term commitments as you look to grow programmatic and self-serve platforms? And I have a follow-up to that as well.
Let me talk to you a little bit more in general about the evolving upfront marketplace, Eric, and then I'll try to be a little more specific with metrics.
What we're seeing now for 2 straight years is an evolving size of the upfront market. And what's happening is, candidly, more and more advertisers are actually looking to buy closer to scatter. So the mix between upfront and scatter is changing. And while it's relatively immaterial on a percentage basis, it is worth noting.
But at the end of the day, we've been performing really well in scatter. And what's really happening is brands and agencies are really looking at spending closer to the actual campaign date than they have in the past. I think what's most notable, and this was literally published in Ad Age in the last 2 days, of all the big streaming companies out there, whether it's Hulu, Max, Netflix, Paramount+, et cetera, the average decay in CPMs during the upfront was anywhere from 10% to 30%.
We did much better in the upfront. I'm not going to quote you how we did, but we actually are quite happy with how cinema performed. But what's evolving in the upfront marketplace across all these big platforms, it's not just us, is less reliance on the upfront than in the past.
Having said that, our pricing in the upfront was basically stable year-on-year and we're actually doing better on a pricing basis than scatter. I can't tell you how that's impacting the other industry players, but I can tell you that our performance in the upfront was actually really solid. And I can tell you there's some other companies, major media companies, that had a much harder time sustaining pricing and revenue during the upfront.
That's helpful. And then my second question, obviously, Ronnie, you highlighted obviously what's looking to be a very attractive year next year for the film slate and it's going to have a very favorable slate for IMAX and other premium formats. Any early success or read on the demand you're seeing with the new kind of premium format ad package you're launching? And how is that marketed? I'm assuming that's marketed fairly well ahead of time, or do you think that's also going to play into the move to purchase a little closer to the campaign?
So, on the premium formats, Eric, there's -- we have a lot of momentum in building that new ad package. Not ready to give you any specific visibility on it yet. But clearly, you're seeing advertisers gravitate to the wider screens and also literally the biggest movies are playing on those bigger screens in a much higher proportion.
So we expect a lot of traction on that. It's truly a way to differentiate the movie business even further versus television or streaming. So we have a lot of momentum and we're putting a lot of effort behind that. And it's certainly riding a trend that we like.
We're not -- it doesn't really have anything to do, honestly, with how the upfront is doing that piece of it. But it is a separate initiative that we're actually really focused on and that the brands and agencies are responding to. So more of an update on that probably next quarter. But so far, that's been going really well.
And just one last quick follow-up on that. Given that the IMAX and kind of premium format runs tend to be relatively short runs of a film before it moves on to the next film. Would those premium ad packages be sold kind of on an exclusive basis to an advertiser?
Actually, we could do that, but it's more likely, given the amount of inventory, that it would go to multiple advertisers.
The next question is from Patrick Sholl with Barrington Research.
I was wondering with some of the different ad formats that you had, like to the extent that you're able to maybe integrate [indiscernible] the QR scanning ones, like to the extent that you're able to integrate some of those advertising formats with your cinema partners, whether it's like alcohol with concession purchasing or retail with some of their merchandise offerings.
So almost all the ad units we run are capable of running a QR code. And one of the significant changes over the last couple of years has been the percent of ads that run with the QR code. Many of them are used as part of our NCMx platform and allow us to not just retarget, but to monitor actual behavior from the theater into a fast food restaurant, for instance, or to any venue that's trying to actually match the viewership to real attribution or an outcome. So ironically, the QR code, which was just kind of birthed out of COVID restaurants and has now migrated to a very popular form of follow up with consumers, we've been taking a lot of advantage of that.
And one thing I will say is our QR code download rates are by far the highest that we're aware of in the industry compared to television or any other digital platform. So we're getting a lot of traction from advertisers using QR codes. And the uptake on actually using the code is really impressive compared to what we're seeing in the rest of the industry.
Okay. And then I guess on just the screen base, I guess, could you maybe talk about like the competitiveness of -- or openness of exhibitors in terms of, I guess -- yes, I guess just the market for the changing screen advertising providers?
I didn't quite get your question. Can you just rephrase that again, Pat?
I guess I'm just kind of wondering if the financial position of the exhibitors has sort of stabilized to the point that there's maybe going to be less exhibitors moving in or out of relationships kind of based upon whatever financial restructurings they're going in.
It's funny. During the course of the last 10 years, there hasn't been a significant amount of shifting between exhibitors in and out of various advertising companies. I would say there's just a lot more renewals than there are changes. I would say that every now and again, a midsized or large exhibitor comes up and obviously, we compete for that.
We're quite happy with our existing footprint. We are getting 70% of the opening weekend attendance. Having said that, there are still some attractive markets available and there are certainly some exhibitors that we would like to be in business more with or even [ fresh ] with. So it's something we focus on every quarter and we're actively talking to the exhibitors to opportunistically evolve our footprint into markets that we care a lot about and that advertisers care about.
The next question is from Mike Hickey with The Benchmark Company.
Tom, Ronnie, Chan, great quarter, guys. Just curious on the 4Q guide, Tom. Are you looking for attendance growth in the fourth quarter? Because it looks like the box office is set up here pretty good for 4Q growth. So just a little perplexed on your guide down in terms of total revenue. I know you gave a brief explanation, but wondering if you can double-click on that.
And then in terms of kind of segues into '25, I think we're all really excited to see the continued recovery of the box office in terms of attendance, '25, '26, '27 until we sort of get back towards pre-pandemic levels. I mean, how much of your growth, I guess, is dependent upon attendance coming back here, which seems pretty certain versus sort of your ability to sell those impressions?
Let me cover the '25 part and then Ronnie can cover the guide in the Q4 bit. We are very optimistic about '25. I mean the slate in '25 and '26, by the way, with a lack of any COVID overhang, a lack of any strike issue, we are looking at some really robust numbers for next year. And I can tell you, it's really being borne out by industry forecast, by all the analysts that cover the industry. So more on that next quarter for sure, in January.
But we are looking at attendance growth that's very attractive for next year. We also believe that the revenue per attendee will also increase a little bit. So we're set up for a really good 2025. And it will probably be the first, what I would call a normalized year of consumer behavior that we can measure against what was 2019.
What percent it will be of 2019, I'm not really willing to go out on a limb just yet on that. But I can tell you, it's going to be the best year since 2019 that we've had in a really long time.
So Ronnie, do you want to cover the other point?
Yes. So Mike, on the fourth quarter guidance, so there's a few things to point out. So last year in the fourth quarter, we had a fairly challenging comp on a year-on-year basis as Taylor Swift came out in October, which is typically a very soft advertising month. And so Taylor Swift really kind of helped pull forward demand into the quarter in a way that we just haven't seen before. So that's one thing that's affecting the comp on a year-on-year basis.
The second thing that we're seeing in the fourth quarter is similarly to the third quarter in July, where there was a lot of G/PG rated audiences, we're seeing a lot of that in December, actually, even much more so in the fourth quarter in December than even in July.
So that's -- those 2 things are affecting, I'll call, the comparable on a revenue per attendee basis for the year -- I mean, sorry, for the fourth quarter. So you take those things and then factor in, you're right, we are expecting an increase in overall attendance in the fourth that would then translate into a slight margin compression on a year-on-year basis.
Tom, are you as optimistic about your ability to grow in '25 as you are the box office? And is there -- assuming that you are expecting to grow in '25, is there a leverage opportunity here? I know you mentioned some cost pressures as attendance grows. How much leverage or operating leverage unlock do you have in '25, I guess with the backdrop of the first question I just asked on your enthusiasm for '25 growth?
I think one thing you have to just -- as you try to model this, is you have to look at the box office estimated growth and then the attendance. So obviously, the box office growth is higher based on the mix of wider screen, big screen formats as well as higher pricing. But the attendance growth is still a significant driver. And when you look at the estimates that we have and what others have provided, married to our high CPMs and potentially growing CPMs, we're in a really good position.
I don't know, Ronnie, do you want to talk a little bit about the operating leverage question?
Yes. So I think there's definitely still a significant amount of operating leverage that we can get heading into 2025. There's obviously still a lot more we can do even on a revenue per attendee basis. We've done a good job this year, especially in the first half of the year. And so -- and next year, we'll have a more normalized slate, so giving us an even better opportunity to improve that. So when you factor that in and where some of our deals have fixed screen fees built in them, that's actually helpful for our operating leverage.
So there's still, I think, a lot of opportunities to improve margin going into next year.
Last question on your capital allocation, it looks like -- I didn't do the math. It looks like the quarter, maybe it slowed. It sort of implied that given the average price you've been buying it back. And you mentioned some smaller investments here. It was kind of nebulous. But sort of are you -- at this point, maybe just given the success your stock has had as you've grown, your business bouncing more towards these sort of smaller M&A opportunities, could there be larger ones, Tom, here in the future? Or I guess just your enthusiasm here on the buyback versus the M&A.
By the way, good question -- good question. I think the things we did, the small ones, are opportunistic. Our focus is still on doing what's best for shareholders. Right now, that's focused on our share buyback program.
We certainly are going to look at other things that would make shareholders even more interested in the equity value of the company. We're having ongoing discussions with our Board about that. We do look at some of these additive things that we're doing as relatively small. I mean, I think we spent a total of $3 million on the 2 opportunities which is really not a material thing. But both of them fit strategically into our business and will allow us to grow revenue and also be better at doing certain things, including data gathering, attribution and outcome guarantees. So I wouldn't read that much into the small investments we made. They're exciting and interesting, but they're small.
And I think our focus right now is on the current shareholder base and making sure that they see the potential of this and continue to be attracted to it. And right now, 2025 is the best story we have. We'll continue our buyback program, but that's really the plan right now.
The next question comes from Alicia Reese with Wedbush.
I wanted to ask about the performance guarantees given the shift -- the mix shift from fewer -- from upfront contracts a bit more toward the scatter contracts closer to the air date. So I'm just wondering, are you able to offer the performance guarantees just as much in the scatter market, if at all, as you did in the upfront?
Yes, absolutely. Good question and a fair question. There's no difference really in offering a guarantee, whether it's in an upfront or a scatter market, as long as we have enough time to execute on it. And typically, we can put a performance guarantee package together in a really short period. So that expertise that we've built through NCMx, which, by the way, has gotten a tremendous amount of traction, a significant amount of advertisers at NCM are using outcome guarantees and attribution in our data analytics package. And as it relates to the mix between scatter and upfront, we can execute in either market on those kind of performance metrics.
Excellent. And as a follow-up, I'm wondering also because of the shift again from the upfront towards the scatter market that should positively impact gross margins, assuming that perhaps there's some also puts and takes on more or less expense related to building and maintaining the programmatic booking platforms that you have now that you didn't necessarily have before.
Yes. I think, Alicia, you're pointing to the fact that typically the scatter market has higher CPMs versus the upfront. So you're absolutely right. There's an opportunity there as the market continues to shift. Again, obviously, that's all with the backdrop of sustainability of demand and all that, which we expect demand to improve going into '25. So that could be a helpful setup going into next year.
As it relates to programmatic, your follow-up on to that, obviously, we're very bullish on the potential of programmatic in the marketplace. More and more money is shifting into programmatic every day. In some cases, advertisers are allocating 50% of their open-to-buy dollars into programmatic. Obviously, it's much more complicated doing it in a movie theater environment than it is in digital out-of-home or in CTV. But I can tell you, we're devoting a lot of time, effort and resources towards getting programmatic rolled out as broadly as possible. And it's definitely one of the most important initiatives we have in the company right now.
Excellent. And one last question, if I may. I'm curious to know if you're able to participate with any of your partners, exhibitor partners, or potentially even IMAX on some of the live events that they're starting to do. Obviously, you did with Taylor Swift's concert movie, but IMAX just announced that it's going to do a live football game. So I'm curious to know if you're able to participate in that and if not this one, anything in the future.
Yes. For the most part, all the advertising rights that garner to us are also available for live events and live programming. Obviously, we did a great job monetizing Taylor Swift and Beyonce and the other concerts. We're very interested in helping develop and evolve that business, and we have some active business development discussions going on, both with content providers as well as with exhibitors to grow that business.
We believe we can be a key part of facilitating it. And it's part of the business that also has a new idea and new business we're really focused on trying to develop. So we think that seeing certain things in theaters and the communal experience is very attractive and it's particularly attractive to advertisers.
You might recall during Taylor Swift, we had the most sold-out inventory position we've ever had around that movie and we also had probably the highest pricing we've ever had. So we see those opportunities with rabid fans being in a venue as a great opportunity to sell advertisers and sell through at a very premium price point.
Right. A tough comparison, of course, in the fourth quarter, but excellent work on that. And it seems like there's quite a bit more you could do in that arena going forward.
This concludes our question-and-answer session. I would now like to turn the call back over to Tom Lesinski for closing remarks.
Well, thank you, everyone, for joining the call today and your ongoing support of National CineMedia. And we're confident that 2024 is on solid footing, finishing the year, and we carry significant momentum into what everyone expects to be a great year of movies in 2025. So before we wrap up, I'm pleased to share that we'll be hosting an Investor Day in the spring of 2025 in New York City. More details will be forthcoming, but we look forward to doing our first Investor Day in a very long time. And importantly, I want to thank the entire NCM team for their hard work and thank our shareholders for their support. See you at the movies. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.