Quarterly Report for Quarter Ending July 2, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Some of the information in this Quarterly Report on Form 10-Q includes "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 (the "Exchange Act"), as amended. All statements other than statements of historical facts included in this Form 10-Q, including, without limitation, certain statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" may constitute forward-looking statements. In some cases, you can identify these "forward-looking statements" by the specific words, including but not limited to "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "forecasts," "predicts," "potential" or "continue" or the negative of those words and other comparable words. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these statements as a result of certain factors as more fully discussed under the heading "Risk Factors" in our Quarterly Report on Form 10-Q for the three months ended April 2, 2026 and in our Annual Report on Form 10-K for the Company's fiscal year ended January 1, 2026. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak to the information only as of the date they are made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. The following discussion and analysis is a supplement to and should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herein and the audited financial statements and other disclosure included in our Annual Report on Form 10-K for the Company's fiscal year ended January 1, 2026. In the following discussion and analysis, the term net income refers to net income attributable to the Company.

Overview

National CineMedia is the largest cinema advertising platform in the U.S. With unparalleled reach and scale, NCM connects brands to sought-after young, diverse audiences through the power of movies and pop culture. A premium video, full-funnel marketing solution for advertisers, NCM enhances marketers' ability to measure and drive results. We currently derive revenue principally from the sale of advertising to national, regional and local businesses in The Noovie® Show, our cinema advertising and entertainment show seen on movie screens across the U.S. within the NCM Network, and the Cinelife® Show within the Spotlight Cinema Network. We present multiple formats of The Noovie® Show and Cinelife® Show depending on the theater circuit in which it runs, with almost all theater circuits including Post-Showtime advertising inventory after the advertised showtime. The movie trailers presented by the theater circuits that run before the feature film are not part of our preshows.

We also sell advertising on our lobby entertainment network ("LEN"), a series of strategically placed screens located in movie theater lobbies, as well as other forms of advertising and promotions in theater lobbies. In addition, we sell data and digital advertising through the NCMx™ suite of products and through our Noovie digital properties. We also sell advertising across a variety of complementary out of home venues. In combination, our multimedia advertising connects brands with audiences across all screens, both in theaters and beyond, before, during and after their moviegoing experience. We have long-term ESAs (approximately 15.1 weighted average years remaining) and multi-year agreements with our network affiliates, which expire at various dates between August 31, 2026 and July 13, 2033, with our largest affiliate agreement expiring on July 13, 2033. The weighted average remaining term of the ESAs and the network affiliate agreements is 11.4 years as of July 2, 2026. The ESAs and network affiliate agreements grant NCM LLC exclusive rights in their theaters to sell advertising, subject to limited exceptions. Our Noovie Show and LEN programming are distributed predominantly via satellite through our proprietary digital content network ("DCN") and Media Director.

Management focuses on several measurements that we believe provide us with the necessary ratios and key performance indicators to manage our business, determine how we are performing versus our internal goals and targets, and against the performance of our competitors and other benchmarks in the marketplace in which we operate. We focus on many operating metrics including revenue, Adjusted OIBDA and Adjusted OIBDA margin, as some of our primary measurement metrics. In addition, we monitor our monthly advertising performance measurements, including advertising inventory utilization, advertising pricing ("CPM"), local advertising rate per theater per week, advertising revenue per attendee, as well as significant operating expenses and related trends. We also monitor free cash flow, cash balances, the fixed charge coverage ratio and revolving credit facility availability to ensure financial debt covenant compliance and that there is adequate cash availability to fund our working capital needs, debt obligations and any future dividends declared by our Board of Directors

Our operating results may be affected by a variety of internal and external factors and trends described more fully in the section entitled "Risk Factors" in our Annual Report on Form 10-K, filed with the SEC on February 26, 2026, for our fiscal year ended January 1, 2026 and in the Quarterly Report on Form 10-Q filed with the SEC on May 12, 2026 for the quarter ended April 2, 2026.

Recent Developments

On March 31, 2026, the Company introduced a transformation initiative to increase operational efficiencies and allow for the ultimate automation of certain functions ("2026 Transformation Initiative"). The Company eliminated the positions of approximately 10.0% of its workforce and transitioned the positions of an additional portion of its workforce to an outsourced service provider. The 2026 Transformation Initiative is expected to be completed in the third quarter of 2026. For the three and six months ended July 2, 2026, the Company recognized severance expense and other incremental personnel costs of $1.7 million and $2.7 million, respectively, related to the eliminated positions and will recognize additional severance and transition costs in the third quarter of 2026 related to transitioning employees to the outsourced service provider. In conjunction with this initiative, the Company reviewed all

vendor relationships and is in the process of terminating its relationship with certain vendors resulting in estimated termination fees of $0.5 million and $3.1 million for the three and six months ended July 2, 2026, respectively. The Company also engaged the services of third-party consultants to assist with the 2026 Transformation Initiative and recorded a charge of $0.5 million and $1.6 million in the three and six months ended July 2, 2026, respectively, related to these services.

On November 14, 2025, NCM LLC entered into a Membership Interest Purchase Agreement ("MIPA") with Spotlight Cinema Networks ("Spotlight"), a niche cinema advertising company, whereby the Company acquired 100.0% of Spotlight. The acquisition of Spotlight added high-scale luxury screens and exhibitors that offer unique and engaging customer experiences to the Company's platform, unlocking new advertising and preshow entertainment inventory. Spotlight's exhibitor partners, including Cinépolis Luxury Cinema, Landmark Theatres, Flix Brewhouse and LOOK Dine-In Cinemas, complement NCM's national theater network and extend NCM's reach among culturally engaged premium audiences. The addition of Spotlight's footprint increased NCM's national market share by more than 6.0% and expanded its theater presence by approximately 30.0% in the critical New York and Los Angeles markets. Spotlight was consolidated within the Company's financial statements as of November 15, 2025. Refer to Note 4-Business Combinations for more information regarding the acquisition and consolidation of Spotlight.

On April 17, 2025, the Company and AMC, entered into the Second Amended and Restated Exhibitor Services Agreement (the "2025 AMC Agreement") and a separate termination agreement (the "AMC Termination Agreement") by and among NCM LLC, NCM, Inc. and AMC. The 2025 AMC Agreement extends the term of the ESA by five years and more closely aligns the program distributed by NCM LLC in AMC theaters to the predominant pre-feature program show structure in the rest of NCM LLC's advertising network and adjusts the consideration paid by NCM LLC. The AMC Termination Agreement waives AMC's rights under certain agreements entered into at the time of the IPO. The agreements were accounted for in accordance with the lease modification guidance within ASC 842-Leases as the amended ESA contains a short-term operating lease of AMC's screens. The agreements were considered combined as they were entered into contemporaneously by the same parties. As a result of the agreements, in the year ended January 1, 2026, NCM LLC released $24.8 million of the 'Payable under the TRA' and reversed the receivable of $10.6 million from AMC, related to unpaid integration payments and the receivable under the Common Unit Adjustment Agreement within 'Prepaid expenses and other assets' on the Company's unaudited Condensed Consolidated Balance Sheet. NCM will no longer have an obligation to make TRA payments to AMC, provide common units as a part of the Common Unit Adjustment Agreement or distribute NCM LLC's available cash to AMC and the Company received the benefits of the revised ESA, including enhancements related to the pre-feature show structure and NCM's exclusive right to advertise in AMC's theaters. The net impact of these reversals was recorded to the 'Intangible Assets, net of amortization' as AMC's forfeiture of this net payable was considered akin to a lease incentive. The reduction in the intangible asset for the ESAs and the extension of the term of the ESA will result in reduced amortization expense, as it is considered akin to lease expense, for the remainder of the contract term. Refer to Note 5-Intangible Assets, Note 8-Income Taxes, and Note 9-Commitments and Contingencies and the Company's Form 8-K filed with the SEC on April 23, 2025 for additional detail surrounding these agreements.

On January 24, 2025, NCM LLC, as borrower, entered into a Loan and Security Agreement with U.S. Bank National Association, as lender (the "2025 Credit Facility"). The agreement provides for a $45.0 million senior secured revolving credit facility that matures on January 24, 2028. In connection with entering into the 2025 Credit Facility, NCM LLC repaid in full the $10.0 million balance outstanding and terminated all commitments under its Revolving Credit Facility 2023, and in connection with this termination, paid a prepayment fee equal to 1% of the total commitment. The 2025 Credit Facility is expected to result in a meaningful reduction of the Company's overall interest expense, extends the maturity date to 2028 and is a cash flow-based revolving loan compared to the asset-based revolving loan of the Revolving Credit Facility 2023. As of July 2, 2026, NCM LLC has an outstanding balance of $12.0 million under the 2025 Credit Facility. Borrowings under the 2025 Credit Facility may be used for, among other things, working capital and other general corporate purposes of the Company and bear interest at a floating rate equal to term SOFR (subject to a floor of zero) plus an applicable margin of 2.00%, which is subject to increase by an additional 2.00% upon the occurrence of an event of default.

On March 18, 2024, the Board of Directors of the Company approved a stock repurchase program under which the Company is authorized to use assets of the Company to repurchase up to $100.0 million of shares of the Company's Common Stock, exclusive of any fees, commissions or other expenses related to such repurchases, from time to time over a period of three years. Shares may be repurchased under the program through open market purchases, block trades, or accelerated or other structured share repurchase programs. There were 0.1 million, 1.8 million, 0.3 million and 3.3 million shares repurchased on the open market during the three and six months ended July 2, 2026 and June 26, 2025, respectively. In accordance with Accounting Standards Codification ("ASC") 505 -Equity, these shares were retired and any excess over par value paid was recorded as a reduction to retained earnings of $0.2 million, $9.9 million, $0.8 million and $18.8 million for the three and six months ended July 2, 2026 and June 26, 2025, respectively. As of July 2, 2026, 6.9 million shares have been repurchased on the open market since the program's inception.

Summary Historical and Operating Data

You should read this information with the other information contained in this document, and our unaudited historical financial statements and the notes thereto included elsewhere in this document.

Our Operating Data--The following table presents operating data and Adjusted OIBDA (dollars in millions, except share, margin and screen data):

Non-GAAP Financial Measures

Adjusted OIBDA and Adjusted OIBDA margin are financial measures that are not calculated in accordance with GAAP in the United States. Adjusted OIBDA represents operating income before depreciation and amortization expense adjusted to also exclude non-cash share-based compensation costs, workforce and system transformation costs, satellite transition costs, Spotlight acquisition and integration costs and advisor fees related to involvement in Regal's Chapter 11 case (the "Cineworld Proceeding") and NCM LLC's Chapter 11 Case (the "Chapter 11 Case"). Adjusted OIBDA margin is calculated by dividing Adjusted OIBDA by total revenue. Our management uses these non-GAAP financial measures to evaluate operating performance, to forecast future results and as a basis for compensation. The Company believes these are important supplemental measures of operating performance because they eliminate items that have less bearing on its operating performance and highlight trends in its core business that may not otherwise be apparent when relying solely on GAAP financial measures. The Company believes the presentation of these measures is relevant and useful for investors because it enables them to view performance in a manner similar to the method used by the Company's management, improves their ability to understand the Company's operating performance and makes it easier to compare the Company's results with other companies that may have different depreciation and amortization policies, non-cash share-based compensation programs, workforce and system transformation costs, satellite transition costs, Spotlight acquisition and integration costs and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case, interest rates, debt levels or income tax rates. A limitation of these measures, however, is that they exclude depreciation and amortization, which represent a proxy for the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business. In addition, Adjusted OIBDA has the limitation of not reflecting the effect of the Company's share-based payment costs, workforce and system transformation costs, satellite transition costs, Spotlight acquisition and integration costs and advisor fees related to involvement in the Cineworld Proceeding and Chapter 11 Case. Adjusted OIBDA should not be regarded as an alternative to operating income, net income or as indicators of operating performance, nor should it be considered in isolation of, or as substitutes for financial measures prepared in accordance with GAAP. The Company believes that operating income is the most directly comparable GAAP financial measure to Adjusted OIBDA, and operating margin is the most directly comparable GAAP financial measure to Adjusted OIBDA margin. Because not all companies use identical calculations, these non-GAAP presentations may not be comparable to other similarly titled measures of other companies or calculations in the Company's debt agreement.

The following table reconciles operating loss and operating margin to Adjusted OIBDA and Adjusted OIBDA margin for the periods presented (dollars in millions):

Basis of Presentation

The results of operations data for the three months ended July 2, 2026 (second quarter of 2026) and June 26, 2025 (second quarter of 2025) were derived from the unaudited Condensed Consolidated Financial Statements and accounting records of NCM, Inc. and should be read in conjunction with the accompanying notes.

Results of Operations

Second Quarter of 2026 and Second Quarter of 2025.

Revenue. Total revenue increased $6.6 million, or 12.7%, from $51.8 million for the second quarter of 2025 to $58.4 million for the second quarter of 2026. The following is a summary of revenue by category (in millions):

The following table shows data on theater attendance and revenue per attendee for the second quarter of 2026 and 2025:

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(1) Represents the total attendance within NCM LLC's advertising network, including Spotlight subsequent to November 15, 2025.

National advertising revenue. National advertising revenue increased by $3.7 million, or 9.0%, from $41.2 million for the second quarter of 2025 to $44.9 million for the second quarter of 2026. The increase in national advertising revenue was primarily due to a 19.3% increase in network attendance and an 11.2% increase in CPMs, partially offset by a 7.2% decrease in national advertising utilization, as well as decreased revenue associated with the Courtesy segment of The Noovie® Show in the second quarter of 2026, as compared to the second quarter of 2025.

Local and regional advertising revenue. Local and regional advertising revenue increased by $3.1 million, or 48.4%, from $6.4 million for the second quarter of 2025 to $9.5 million for the second quarter of 2026. The increase in local and regional advertising revenue was primarily due to the sale of a higher percentage of premium inventory at higher CPMs, as well as an increase in activity within the retail and apparel, gaming and entertainment categories for the second quarter of 2026, as compared to the second quarter of 2025. These increases were partially offset by a decrease in activity within the government category in the second quarter of 2026, as compared to the second quarter of 2025.

ESA Party beverage revenue. ESA Party beverage revenue decreased by $0.2 million, or 4.8%, from $4.2 million for the second quarter of 2025 to $4.0 million for the second quarter of 2026. The decrease in ESA Party beverage revenue was primarily due to a decrease in the length of the on-screen advertising purchased by an ESA party in accordance with its underlying beverage concessionaire agreement in the second quarter of 2026, as compared to the second quarter of 2025. This decrease was offset by a 12.6% increase in ESA Party attendance in the second quarter of 2026, as compared to the second quarter of 2025.

Operating expenses. Total operating expenses increased $7.4 million, or 11.6%, from $63.8 million for the second quarter of 2025 to $71.2 million for the second quarter of 2026. The following table shows the changes in operating expense for the second quarter of 2026 and the second quarter of 2025 (in millions):

Network operating costs. Network operating costs increased $0.5 million, or 15.6%, from $3.2 million for the second quarter of 2025 to $3.7 million for the second quarter of 2026. The increase was primarily related to a $0.3 million increase in severance, transition and retention related compensation incurred in conjunction with the 2026 Transformation Initiative and a $0.2 million increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider in the second quarter of 2026, as compared to the second quarter of 2025.

Theater exhibition fees. Theater exhibition fees increased by $6.7 million, or 21.7%, from $30.9 million for the second quarter of 2025 to $37.6 million for the second quarter of 2026. The increase was primarily related to a $3.8 million increase due to the 19.3% increase in network attendance partially driven by the acquisition of Spotlight, a $1.8 million increase driven by contractual rate increases within and renegotiations of our exhibitor agreements and a $0.9 million increase corresponding to the increase in platinum revenue in the second quarter of 2026, as compared to the second quarter of 2025.

Selling and marketing costs. Selling and marketing costs decreased by $0.2 million, or 2.0%, from $9.8 million for the second quarter of 2025 to $9.6 for the second quarter of 2026. This was primarily due to a $1.3 million decrease in selling related expenses due to the 2026 Transformation Initiative, primarily caused by the cancellation of certain contracts as well as

decreased personnel related costs. These decreases were partially offset by a $0.3 million increase in commission expense driven by the increase in revenue in the second quarter of 2026, as compared to the second quarter of 2025, a $0.3 million increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider, a $0.3 million increase in other transition costs incurred in conjunction with the 2026 Transformation Initiative and $0.2 million increase in bad debt expense in the second quarter of 2026, as compared to the second quarter of 2025.

Administrative and other costs. Administrative and other costs increased $0.2 million, or 1.9%, from $10.6 million for the second quarter of 2025 to $10.8 million for the second quarter of 2026. The increase was primarily due to $1.2 million in transition related administrative expenses and severance, transition and retention expenses incurred in conjunction with the 2026 Transformation Initiative and a $0.4 increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider. These increases were partially offset by a $0.5 million decrease in personnel related costs due to the 2026 Transformation Initiative, a $0.4 million decrease in stock-based compensation due to the completion of the amortization of the expense associated with the 2024 management equity incentive plan in 2025, a $0.2 million decrease in cloud computing expenses and a $0.1 million decrease in lease expense in the second quarter of 2026, as compared to the second quarter of 2025.

Depreciation expense. Depreciation expense increased $0.4 million, or 36.4%, from $1.1 million for the second quarter of 2025, to $1.5 million for the second quarter of 2026. The increase was primarily due to assets placed in service in late 2025 related to the completion of certain leasehold improvements.

Amortization expense. Amortization expense decreased $0.2 million, or 2.4%, from $8.2 million for the second quarter of 2025 to $8.0 million for the second quarter of 2026. The decrease was due to the reduction in and extension of the useful life of the intangible asset related to the ESA Parties following the 2025 AMC Agreement in the second quarter of 2025 as further discussed in Note 5-Intangible Assets and Note 8-Income Taxes.

Non-operating income. Total non-operating income increased $1.6 million, or 123.1%, from $1.3 million for the second quarter of 2025 to $2.9 million for the second quarter of 2026. The following table shows the changes in non-operating income for the second quarter of 2026 and the second quarter of 2025 (in millions):

The increase in non-operating income was primarily due to a $1.5 million increase in gain on the re-measurement of the payable under the tax receivable agreement largely due to the subsequent decrease in the forecast during the second quarter of 2026, as compared to the original forecast, as well as a $0.3 million increase in other non-operating income related to the Company's equity method investments in the second quarter of 2026, compared to the second quarter of 2025.

Six months ended July 2, 2026 and June 26, 2025

Revenue. Total revenue increased $5.8 million, or 6.7%, from $86.6 million for the six months ended June 26, 2025 to $92.4 million for the six months ended July 2, 2026. The following is a summary of revenue by category (in millions):

The following table shows data on theater attendance and revenue per attendee for the six months ended July 2, 2026 and June 26, 2025:

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(1) Represents the total attendance within NCM LLC's advertising network, including Spotlight subsequent to November 15, 2025.

National advertising revenue. National advertising revenue increased by $3.7 million, or 5.4%, from $68.6 million for the six months ended June 26, 2025 to $72.3 million for the six months ended July 2, 2026. The increase in national advertising revenue was primarily due to a 3.1% increase in national advertising utilization, as well as a 17.6% increase in network attendance in the six months ended July 2, 2026, as compared to the six months ended June 26, 2025. These increases were partially offset by a 3.0% decrease in national advertising CPMs, as well as decreased revenue associated with the Courtesy segment of The Noovie® Show in the six months ended June 26, 2025, as compared to the six months ended July 2, 2026.

Local and regional advertising revenue. Local and regional advertising revenue increased by $2.7 million, or 24.1%, from $11.2 million for the six months ended June 26, 2025 to $13.9 million for the six months ended July 2, 2026. The increase in local and regional advertising revenue was primarily due to the sale of a higher percentage of premium inventory at higher CPMs, as well as an increase in contract activity and size within the retail and apparel, gaming, entertainment, wireless and travel categories for the six months ended July 2, 2026, as compared to the six months ended June 26, 2025. These increases were partially offset by a decrease in contract activity and size within the government, education and healthcare categories for the six months ended July 2, 2026, as compared to the six months ended June 26, 2025.

ESA Party beverage revenue. ESA Party beverage revenue decreased $0.6 million, or 8.8%, from $6.8 million for the six months ended June 26, 2025 to $6.2 million for the six months ended July 2, 2026. The decrease in ESA Party beverage revenue was primarily due to a decrease in the length of the on-screen advertising purchased by an ESA party in accordance with its underlying beverage concessionaire agreement for the six months ended July 2, 2026, as compared to the six months ended June 26, 2025. This decrease was offset by a 9.3% increase in ESA Party attendance, as well as contractual rate increases within the ESAs for the six months ended July 2, 2026, as compared to the six months ended June 26, 2025.

Operating expenses. Total operating expenses increased $9.6 million, or 7.8%, from $122.5 million for the six months ended June 26, 2025 to $132.1 million for the six months ended July 2, 2026. The following table shows the changes in operating expense for the six months ended July 2, 2026 and June 26, 2025 (in millions):

Network operating costs. Network operating costs increased $1.5 million, or 24.2%, from $6.2 million for the six months ended June 26, 2025 to $7.7 million for the six months ended July 2, 2026. The increase was primarily related to a $0.5 million increase in severance, transition and retention related compensation incurred in conjunction with the 2026 Transformation Initiative, a $0.4 million increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider, a $0.2 million increase in annual licensing costs, a $0.1 million increase in network delivery costs due to temporary duplicative costs incurred during the transition from satellite to broadband delivery during 2026 and $0.1 million incurred during the integration of Spotlight into the Company's processes for the six months ended July 2, 2026, compared to the six months ended June 26, 2025.

Theater exhibition fees. Theater exhibition fees increased $9.5 million, or 18.1%, from $52.6 million for the six months ended June 26, 2025 to $62.1 million for the six months ended July 2, 2026. The increase was primarily related to a $5.7 million increase due to the 17.6% increase in network attendance partially driven by the acquisition of Spotlight, a $2.5 million

increase driven by contractual rate increases within our exhibitor agreements and a $1.4 million increase corresponding to the increase in platinum revenue for the six months ended July 2, 2026, compared to the six months ended June 26, 2025.

Selling and marketing costs. Selling and marketing costs decreased $1.2 million, or 5.9%, from $20.4 million for the six months ended June 26, 2025 to $19.2 million for the six months ended July 2, 2026. The decrease in selling and marketing costs was primarily due to a $1.7 million decrease in selling related expenses driven by the timing of our periodic company-wide sales meeting during the first quarter of 2025 and the cancellation of certain contracts in relation to the 2026 Transformation Initiative, a $0.9 million decrease in personnel related costs due to the 2026 Transformation Initiative and a $0.3 million decrease in variable partnership costs for the six months ended July 2, 2026 compared to the six months ended June 26, 2025. These decreases were partially offset by a $0.6 million increase in severance expense and a $0.5 million increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider in conjunction with the 2026 Transformation Initiative, $0.2 million increase in barter expenses, a $0.2 million in transformation costs incurred in conjunction with the 2026 Transformation Initiative and a $0.2 million increase in production related expenses for the six months ended July 2, 2026, compared to the six months ended June 26, 2025.

Administrative and other costs. Administrative and other costs increased $0.6 million, or 2.6%, from $23.5 million for the six months ended June 26, 2025 to $24.1 million for the six months ended July 2, 2026. The increase is primarily due to a $4.6 million increase in transition related administrative expenses and severance, transition and retention expenses incurred in conjunction with the 2026 Transformation Initiative, a $0.5 million increase in medical costs driven by higher claim activity due in part to transitioning employees to an outsourced service provider in conjunction with the 2026 Transformation Initiative and a $0.2 million increase temporary transition costs incurred during the integration of Spotlight into the Company's processes. These increases were partially offset by a $1.7 million decrease in legal and professional fees related to the Chapter 11 Case and Cineworld Proceeding, a $1.3 million decrease in stock-based compensation due to the completion of the amortization of the expense associated with the 2024 management equity incentive plan in 2025, a $0.7 million decrease in other administrative expenses partially related to disciplined cost management, a $0.6 million decrease in personnel related expenses due to the 2026 Transformation Initiative and a $0.3 million decrease in lease related expenses for the six months ended July 2, 2026, compared to the six months ended June 26, 2025.

Depreciation expense. Depreciation expense increased $0.8 million, or 36.4%, from $2.2 million for the six months ended June 26, 2025 to $3.0 million for the six months ended July 2, 2026. The increase was primarily due to assets placed in service in late 2025 related to the completion of certain leasehold improvements.

Amortization expense. Amortization expense decreased $1.6 million, or 9.1%, from $17.6 million for the six months ended June 26, 2025 to $16.0 million for the six months ended July 2, 2026. The decrease was due to the reduction in and extension of the useful life of the intangible asset related to the ESA Parties following the 2025 AMC Agreement in the second quarter of 2025, as further discussed in Note 5-Intangible Assets and Note 8-Income Taxes.

Non-operating (income) expense. Total non-operating income increased $6.6 million, or 120.0%, from $5.5 million of expense for the six months ended June 26, 2025 to $1.1 million of income for the six months ended July 2, 2026. The following table shows the changes in non-operating (income) expense for the six months ended July 2, 2026 and June 26, 2025 (in millions):

The increase in non-operating (income) expense was primarily due to a $4.9 million increase in (gain) loss on the re-measurement of the payable under the tax receivable agreement largely due to the addition of one new forecasted year in 2026 to replace the completed prior year within the calculation, the subsequent decrease in the forecast during the six months ended July 2, 2026, as compared to the original forecast and the inclusion of the AMC Termination Agreement within the calculation in 2026. The increase was also due to a $1.8 million decrease in loss on debt extinguishment incurred in the six months ended July 2, 2026, compared to the six months ended June 26, 2025. The increase is also due to a $0.4 million increase in other operating income in the six months ended July 2, 2026, compared to the six months ended June 26, 2025. These increases were partially offset by a $0.3 million decrease in interest income and a $0.2 million increase in interest expense in the six months ended July 2, 2026, compared to the six months ended June 26, 2025.

Known Trends and Uncertainties

Beverage revenue-Under the ESAs, up to 90 seconds of The Noovie® Show program can be sold to the ESA Parties to satisfy their on-screen advertising commitments under their beverage concessionaire agreements. In 2025, Cinemark purchased 60 seconds of on-screen advertising time and AMC purchased 30 seconds to satisfy their obligations under their beverage concessionaire agreements. In 2026, one ESA party began purchasing less on-screen advertising time for nine months of the year in accordance with its beverage concessionaire agreement. This change in the ESA party's obligation will result in lower beverage revenue in 2026, as compared to 2025. The price for the time sold will increase at a fixed rate of 2.0% each year.

Theater exhibition fees-In consideration for the Company's access to the ESA Parties' and network affiliate theaters for on-screen and LEN advertising and lobby promotions, the ESA Parties and network affiliates receive access fees based either upon number of attendees, a revenue share or a combination, including a minimum revenue guarantee per attendee. Many of these agreements contain annual increases to the respective fee structures or guaranteed minimums, either per patron, per theater and/or per digital screen. In May 2026, the Company implemented changes in the fee structure of an ESA party's beverage agreement which will result in increased theater exhibition fees in 2026, as compared to 2025. The payments under the ESA Parties' agreements and network affiliate agreements are recorded within 'Theater exhibition fees' in the unaudited Condensed Consolidated Statements of Operations.

Financial Condition and Liquidity

Liquidity and Capital Resources

Our cash balances can fluctuate due to the seasonality of our business and related timing of collections of accounts receivable balances and operating expenditure payments, as well as interest and principal payments on our 2025 Credit Facility, if any, income tax payments, TRA payments to Cinemark and available cash payments (as defined in the NCM LLC Operating Agreement) to Cinemark in the event Cinemark holds NCM LLC membership units, as well as the amount of dividends paid to NCM, Inc.'s common stockholders.

On January 24, 2025, NCM LLC, as borrower, entered into the 2025 Credit Facility with U.S. Bank National Association, as lender. The agreement provides for a $45.0 million senior secured revolving credit facility that matures on January 24, 2028. In connection with entering into the 2025 Credit Facility, NCM LLC repaid in full the $10.0 million balance outstanding, as of December 26, 2024, and terminated all commitments under its Revolving Credit Facility 2023 (as defined below), and in connection with this termination, paid a prepayment fee equal to 1% of the total commitment. As of July 2, 2026, NCM LLC had an outstanding balance of $12.0 million under the 2025 Credit Facility. Borrowings under the 2025 Credit Facility may be used for, among other things, working capital and other general corporate purposes of the Company and bear interest at a floating rate equal to term SOFR (subject to a floor of zero) plus an applicable margin of 2.00%, which is subject to increase by an additional 2.00% upon the occurrence of an event of default.

A summary of our financial liquidity is as follows (in millions):

As of July 2, 2026, the weighted average remaining maturity of our debt facility was 1.6 years. As of July 2, 2026, NCM LLC has an outstanding balance of $12.0 million under the 2025 Credit Facility. All of our borrowings bear interest at variable rates and our net income and earnings per share could fluctuate with market interest rate fluctuations that could increase or decrease the interest paid on our borrowings.

We have used and generated cash as follows (in millions):

Sources of Capital and Capital Requirements

NCM, Inc.'s primary source of liquidity and capital resources is the quarterly available cash distributions from NCM LLC as well as its existing cash balances, which as of July 2, 2026, were $43.1 million (including $36.7 million of cash held by NCM LLC). NCM LLC's primary sources of liquidity and capital resources are cash provided by its operating activities, availability under the 2025 Credit Facility and cash on hand. The $36.7 million of cash at NCM LLC will be used to fund operations and strategic investments. Cash at NCM, Inc. is used to fund income taxes, payments associated with the TRA, stock repurchases and for future payment of dividends to NCM, Inc. stockholders if and when declared by the Board of Directors.

NCM LLC is required, pursuant to the terms of the NCM LLC Operating Agreement, to distribute its available cash, as defined in the NCM LLC Operating Agreement, quarterly to its members. The members are only able to receive available cash when they hold units. The available cash amount to the members of NCM LLC, for the six months ended July 2, 2026, was calculated as approximately negative $21.7 million, associated entirely with NCM, Inc., as the only holder of NCM LLC units as of July 2, 2026. NCM, Inc. has the option to defer payment of any available cash distributions payable to NCM, Inc. at its discretion. Any negative amounts can only be offset against positive available cash within the second quarter of future years, in accordance with the agreement. As of July 2, 2026, NCM LLC owed NCM, Inc. $52.7 million in deferred available cash distributions.

NCM, Inc. expects to use its cash balances and cash received from future available cash distributions (as allowed for under the 2025 Credit Facility) to fund payments associated with the TRA, stock repurchases and future dividends if and when declared by the Board of Directors. The Company made an estimated TRA payment in 2025 for the 2024 tax year and did not make a TRA payment in 2024 for the 2023 tax year. The Company made an estimated TRA payment in 2026 for the 2025 tax year. Deferred distributions from NCM LLC and NCM, Inc. cash balances should be sufficient to fund payments associated with the TRA, income taxes and any stock repurchases or declared dividends for the foreseeable future at the discretion of the Board of Directors. At the discretion of the Board of Directors, the Company will consider returning a portion of its free cash flow to stockholders. The declaration, payment, timing and amount of any future stock repurchases or dividends payable will be at the sole discretion of the Board of Directors who will take into account general economic and advertising market business conditions, the Company's financial condition, available cash, current and anticipated cash needs and any other factors that the Board of Directors considers relevant.

Critical Accounting Policies

For further discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited Condensed Consolidated Financial Statements, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" contained in our Annual Report on Form 10-K, filed for the fiscal year ended January 1, 2026, and incorporated by reference herein. As of July 2, 2026, there were no other significant changes in those critical accounting policies.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see the information provided under Note 1-The Company to the unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its unaudited Condensed Consolidated Financial Statements.