A bounce back in local ad sales should help National Cinemedia deliver better revenues and profits than it envisioned for 2015, and offset Q3 results that were weaker than analysts anticipated, the company says today.
Shares are up about 1.9% post market — making up for a similar drop during the trading day.
The No. 1 movie theater ad sales company raised its maximum sales forecast for the year by nearly 2% to $441 million. Cash flow could come in as high as $229 million, 2.7% more than it expected three months ago. Revenue in Q4 could come in as much as 6% higher than in the period last year, with cash flow up as much as 2%.
CEO Kurt Hall calls this “a fantastic comeback after a tough 2014.” He plans to step down, and says the search for his replacement should be complete by year end.
The upbeat forecast is due in part to an improvement in sales for expected blockbusters including Star Wars: The Force Awakens. That’s seen most clearly in local ad sales; national brands are more likely to buy spots earlier in the upfront market.
NCM made sales to 16 new clients in the upfront.
Local sales were softer than expected in Q3, though — dropping 12% vs. the period last year. That affected the overall results: NCM reported net income of $7.7 million, up 60.4% vs the period last year, on revenues of $111.7 million, up 10.8%. Analysts thought the sales number would be a little higher at $112.74 million. Earnings at 13 cents a share were a penny below the Street’s expectations.
Some local buyers “took a brief pause” in Q3 while several regional buyers either ran national campaigns or moved their spending to Q4.
“We are confident that local revenue growth will return in Q4,” Hall says. “In fact, we are currently pacing significantly ahead for Q4 versus this same time last year and are projecting that Q4 2015 will be our highest local sales revenue quarter in our history.”
Hall says he also believes “the film schedule for the next few years looks quite strong.”
NCM has benefited as advertisers look for alternatives to television, where ratings are falling, Hall says. While many of those dollars are going to digital platforms, buyers still have questions about the medium. “This is the first time people are asking: Does it really work? How well does it work?… This whole issue of fraud and efficacy in general is going to be a continuing trend.”