Good morning, everyone and welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Maxine, and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Chad Paris, Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Thank you, operator, and good morning and welcome to our fiscal 2023 first quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect, or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected. Listeners are cautioned not to place undue reliance on our forward-looking statements. The risks and uncertainties which could impact our ability to achieve our expectations identified in our forward-looking statements are included under the heading forward-looking statements in the press release we issued this morning announcing our fiscal 2023 first quarter results and in the Risk Factors section of our Fiscal 2022 Annual Report on Form 10-K which you can access on the SEC's website. We will also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. The forward-looking statements made during this conference call are only made as of the date of this conference call and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. In addition, we routinely post news releases and other information regarding developments at our company that impact our investors, customers, vendors and other stakeholders. You should look at our website marcuscorp.com as an important source of information regarding our company. We also refer you to the disclosures we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP measure used in evaluating our performance and its limitations. A…

Thank you. [Operator Instructions] Our first question today comes from Eric Wold from B. Riley Securities. Please go ahead, Eric. Your line is now open.

Thank you. Good morning, guy. Two questions on the hotel segment. I guess when you talked about the competitive hotels in your market kind of catching up on the gains that you've made over the prior two to three years. I guess maybe what are you seeing as a result of that within your market? Are the markets -- and overall demand ramping enough to accommodate kind of everything you need to make changes in your markets on pricing or marketing to adjust around kind of that competitive -- changing competitive landscape?

No, not really. I don't think so. No. Because it's not like -- what you're saying is like, are we having to like lower our price to remain competitive? No, We've stayed consistent with our philosophy and how we're charging. I think it's just -- one of the advantages of -- if you go back to how we operated during the pandemic, and you all remember, we were very deliberate about saying we want to get open as early as we can. We want to be in business as early as we can. That allowed us to keep our teams in place in ways that others were certainly in our markets. I mean, there were some hotels that were closed in our markets certainly much longer than we were. That gave us a leg up. That is -- if you go and you go back and I'll be in the story, when you go back to different cycles. And remember that we can -- we were able to make investments in down cycles. We're able to perform better in down cycles because of how we structure our balance sheet. And this was no different. And so we -- and so what happens is, things turned and we come out ahead. But we do end up having -- there is some catch-up. But yet, we still end up ahead at the end of the day in share, but they're just it's just catch up.

Yes, Eric, I would just add, it's not really changing what we're doing. When you think about our ADR increase, all seven of our hotels grew ADR in the quarter. And we still continue to grow occupancy at five out of the seven for the division overall. So we're still growing. It's just the other competitors in our markets have more occupancy to fill, but we're still leading the market.

Got it. That's helpful. And then I know you're always hesitant to maybe give specific time lines. I'm not looking for that, but kind of after the sale of Skirvin hotel in December, can you just give us a better sense of kind of when -- however, general time frame you want to give, when the other kind of pit deadlines may be around kind of the other hotels that may be in that spend or not spend decision process, just so we can get a better sense of kind of when we may or may not see ramp in spending or not kind of flowing into the model.

Yes. So we've got a couple of others that we're looking at, Eric. And I would expect sometime mid to late summer, we'll have a real good sense on what the time lines on those projects look like whether or not we're going to be moving forward with them. We're still trying to do everything that we can to get cost firmed up to get other external support, frankly, for some of these projects. And so, we're working through that dynamic and that takes some time. But we'll have more to say, we hope, in the next couple of quarters.

Got it. And I guess to follow up on that, what is the main point on that? At this point, do you know kind of what the amount is likely to be on required on those properties and whether or not you think that spend, you'll get the ROI from it versus the sale? Or at this point, is that amount still a question mark?

I'll start, and then I'll let Greg comment. So we have a real good sense of what the investment required would be. It really is whether or not the ROI on the project is there and then what we can do to help get local support in some cases to make -- to get these projects to make sense.

I think at the end of the day, we're committing dollars to our hotel business. And I don't -- so what the calendar of that is going to be because whether it's even in the assets we see, it could be -- we haven't really said what is the exact -- we don't want to give a calendar yet because we just can't, because it will just depend on things that are externally beyond our control in terms of specific assets, as Chad alluded to, what kind of support. The significant assets like these do involve certain levels of external support that you can go beyond our balance sheet. And I think equity financing I'm talking about public finance and things like that. And how those shake out will have bearing on what we do. But if we don't do a certain project, we might move that capital somewhere else. But that could take a while. So we just don't know what the calendar is.

Got it. Thank you both. Appreciate it.

Our next question comes from Jim Goss from Barrington Research. Please go ahead, Jim. Your line is now open.

All right. Good morning. You mentioned that Avatar was represented about or accounted for about half of the increase in admission prices. And I assume that's because it was tended to be viewed on PLF screens. So I was wondering if you could talk about the PLS share of the mix in the first quarter and how you think that would work in the following quarters.

Yes, that's right, Jim. So the half of the increase in the per cap was due to the increased mix of 3D ticket sales.

3D MPLS, that’s the word.

Yes, right. So the half represents 3D. The overall PLF mix this quarter was actually a couple of points lower than it was last year in the quarter. And when you look back at the mix of films with Spider-Man playing into Q1 last year, that's really why. Though we're not talking about big changes. So our -- I'm not going to give our exact PLF percentage of total ticket sales, but that's generally been pretty stable because we've built out the number of PLFs and done that in most of the places where we can do it. We added one PLF screen in the first quarter this year. We continue to look at are there other opportunities in the circuit to add PLFs, but I don't expect big step function changes in our PLF composition like we were building pre-pandemic.

Okay. So were you charging [indiscernible] 3D and PLF separately, both?

Sorry, Jim, I didn't catch that.

I just meant were -- was there an up charge for both PLF plus 3D in the ticket pricing [indiscernible]?

The impact of the change in PLF percentage of PLF of our total ticket mix was not significant. It was really the 3D. There is -- yes. Half of the increase is due to 3D.

Okay. Thanks for clarifying. I'm sorry, Greg, were you going to say something?

Well, I was just going to say, what it does reflect is, we have probably one of the more significant installed bases of PLFs in the industry relative to size. And as there's been a move to customers wanting to experience that way, [indiscernible] liking it because, obviously, ticket prices are higher, it's been to our benefit.

Okay. And the food and beverage increase that you're referring to, is this sustainable? Is this the new level we should assume in the future that you have customers used to this? And is that the way it should be and we can grow from there in terms of the purchases and more per order and higher prices?

I think -- look, it's -- if I had a crystal ball, I don't know. I would say I don't know for sure. We don't know for sure. But there are some things that you can look to, to say, what are the things that we have -- I don't know as we get more customers and the lines go a little bit longer, is that going to impact those per caps. I don't know. What happens in the economy, I don't know. But sometimes, that can go either way. All of a sudden, the families are going out for dinner or may just big dinner at a movie theater. And so that can cut both ways. Things that we know for sure, with our change to Tuesday, we know it's impacting our per capital. That's a positive. So that's not -- that's going forward. So that's a positive per caps. It could offset anything. So -- and we know as we get better with our app, and we're really still in the early days of that, the ability to upsell, the ability to do a last time offer. Those features of the app -- when you got a long line and you're a young concession attendant, standing at the concession line, you may not be trying to think how do I upsell that every customer? I'm just trying to get through the flurry that's coming at me for the 7:30 show. But when the app isn't worried about that, it just always upsells. And so, we think there's going to be -- we know that there's up, we're already starting to see signs of it. So there's -- so again, I can't -- I can tell you what we're seeing and what different things that can happen, but I think it's a positive story.

Okay. And maybe finally, any sense what share of the Tuesday audiences are second in a week, some who went Friday, I think you've talked about that phenomenon. And does your rewards program provide data and all of these.

It does. We can see who's coming. I don't have that now, but we don't have that data maybe as some from theaters wants to [Indiscernible] number if they have it off the top of their head, but I don't know that number anymore. We know there was a measurable percentage that did, and that's one of the things we liked about it as people get -- and look, as we get back to that more normal cadence of release, we have more opportunity for that as well. When there's less releases, there's just less opportunities for people to double up. But we know -- we always knew that was one of the benefits for a certain segment. And yes, our rewards program can track that and is now again with the change in the -- to the value Tuesday and the discount for being in the program, we're going to obviously have more members in the program. And so, we'll have more ability to even track and have a better relationship with those customers.

All right. Thanks very much. Appreciate it.

Wait, the text came in. Maybe we can answer your question. Let's see what the answer was. [indiscernible]

It was the specific on the upcharge for 3D, which is an UltraScreen, 3D is a $3 upcharge. So it's a $1 -- I'm sorry. 3D is an extra dollar in UltraScreen. That was two, I think, Eric's question.

Maybe the answer on overlap will come in shortly. Thanks, Jim.

All right. Thank you much.

Thank you. The next question comes from Mike Hickey from Benchmark Company. Please go ahead, Mike. Your line is now open.

Nice. Thank you. Hi, Greg, Chad. Good morning, Guys. Nice quarter. Congratulations. Just a few questions from us. Greg, you mentioned CinemaCon, I agree with you, Amanda. The bars was big this year. You touched on, I think, some important narratives spinning out of the conference this year, but just curious if you could double quick on film product. That obviously seems like the crux here when we look to bridge current box office to pre-pandemic. Just curious, any incremental tidbits you might have on sort of the commitment, I guess, from traditional studios in terms of delivering wide release or otherwise film product, I know you raised your numbers for this year than when you think about this year and next year and sort of bridging to where we were in terms of volume pre-pandemic, if you think there's enough here to get us there? And then how you're thinking about streamers. I know you've been -- at least my view, Greg, you've been somewhat cautious there. A lot of that may be windowing, but it looks like Amazon and Apple seemed to stand out this year in terms of real commitment in terms of putting films to theaters and some bigger films at that. But just sort of curious your thoughts there. And I've got a follow-up.

Well, I'll sort of talk generally and Chad can add some specifics on sort of release numbers. But the -- I'm not ready to a victory lap. I think we have to keep pressing the case and the case for theatrical, being a part of that ecosystem in a valuable part. And it's good to see the players recognize that it's important. And that's the good vibe that we're all feeling and hearing and that is people saying, yes, you know what, we would like some additional revenue. And we would -- I'd sort of describe it as affinity, awareness and revenue, right? So if you have -- if you make film content, well, let's start with, I like some more money, who doesn't, right? Put it in the theater. And remember, in the old world of Prince and advertising, Prince has gone. So all they really do is recover your marketing cost. And you now have in addition to revenue, you have awareness the second point I was making. And that is that film when it now shows up in the ancillary markets, actually has some meaning to people when they're looking at the 150 tiles as they scroll through their streaming menu, they see that film and they say, Oh, yes, I remember that, I got to meant something. So that catches their eye and drives them to want to see it and then there's the affinity, which is that something that I think is so important to anyone with as a product, right? This idea that people [indiscernible] because they know who I am and they'll say, what's the movies of my dad every month. We go every month, and it's really important to us to do this. I think someone come cry the other way the…

Yes. I mean just in the numbers. So as you probably noticed, we took up the guide on the number of wide releases a touch. We're now at 100 to 110. And I'd just say we tend to be a conservative bunch. So there feels like there's probably some upside to the range as we progress through the year, things seem to be dropping in this year more than they seem to be sliding out of the calendar year. So that's a very different feeling than last year. And from what we're here, what our film buying folks are hearing is there may be a few more things that hopefully dropping to the holiday period later in the year. So we'll see. But on the bridge back to pre-pandemic wide release numbers at the top end of the range at 110, you're starting to get within throwing distance of the 115 to 120 that we had before. So we're not there yet, but we're making progress. And when the streamers start to lay in incremental content, we're very encouraged. What helps, that I'd add to Greg's comments is when the films from the streamers perform well and over perform like Air did and continues to play really well in our circuit. I think that just hammers home the case as to why they ought to do this. So some of the other titles coming later this year, whether it's Napoleon or Killers of the Flower Moon, things like that, we're excited about how those films may perform to continue to persuade value the streamers of the value proposition.

Nice. Thanks, Greg. I appreciate your thoughts there. I guess when you -- it looks like your theater count, Greg, is down too for the quarter. I'm not sure if that's just how it owned versus managed or how you're thinking about that, but it looks like it's gone down a bit, it sort of adds to the broader shutdown of screens, which I think sort of post sense of pandemic, I think it's about 5% of the screens have gone dark. So just curious if you think -- obviously, we goes back there saying, that's obviously fluid. But when you think about dark screens here, screens being shut down, whether it's permanent or temporary, do you think we've sort of reached a bottom here? Do you think there's more screens that need to come out of the system? And on the flip side, you've created a tremendous amount of value over the years by being able to acquire theater networks and adding sort of the Marcus mix into them, whether it's recliners, food and beverage and sort of growing your overall EBITDA. It seems like that's been sort of the main driver for you. Obviously, your theaters are going down, not up, but are you actively thinking about deals, trying to find theaters, especially with the backdrop you gave with CinemaCon and all the buzz and the support from studios and streamers and the believability that the theatrical medium is going to continue to grow over time and sustain itself. Are you now in a position to looking to be adding screens, not shrinking.

Let me take the first part of the question on the contraction, I'll let Greg take the M&A piece. So we did close a couple of locations, one in the quarter, one since the end of the quarter. We -- on an ongoing basis, we're always looking at the performance of individual locations in terms of financial performance and attendance and local market competitive dynamics and what other locations we have in a market. And so, in these cases, these were underperforming theaters that we just thought our customers, frankly, in one case, would go to one of our nicer theaters also in that market. So I'll call that pruning, where we're looking at the portfolio and doing what we think makes sense. I mean, that's an ongoing process. But as to those specific theaters, you shouldn't anticipate those reopening, they are permanent closures.

But I think to your point and that is, look, I've said there were -- as many theaters as people think might close that won't happen because what happens is the landlords look and say, unless it's really an obsolete theme, which is like an example for ours. It seems to be an obsolete theater. Either unless it's obsolete or there's a higher and better use like for the land because generally the buildings themselves are not really that configurable -- reconfigurable with too many other things. They can, and we've done it in the past. But it's not like a sporting goods tenant leaves and a soft goods, holding tenant moves in. That's not -- that kind of flexibility. And so, as things restructure, leases tend to just get restructured and the theaters don't go away as much even some of the obsolete probably could go away and won't affect the country on a national basis in terms of where the grosses will be because the bulk of the grosses don't come from a chunk from those smaller theaters that are essentially obsolete, but they aren't going away. And -- but again, it doesn't matter too much because there's not a lot of -- we're not -- there's not a lot of market share to be picked up in the marker where we operate as oppose to closer – nearby. Again, for us we are actually just looking if we can shift market share when we close the deal. So that's sort of dynamic, I see it [indiscernible] what's going on in the industry with those. As it relates to M&A, look, there hasn't been much going on. We're looking at things that are I would tell you that the one circuit that some bankruptcy keeps moving around what…

Okay. Thanks, guys. I guess I'll sneak one more on the hotel side. The Hilton Milwaukee, I'm just curious, Greg, if you still think that's sort of a strategic asset for you just given the competitive dynamics that have changed so much, I guess, in your local market. You can add color there, if you want, and sort of where you are in terms of if this meets capital or not and how you think hold versus sell on that property. Thank you.

As it relates to that specific asset, it's a strategic asset. And -- but we evaluate every asset every day. And we will -- we're looking at that asset right now. There's good things happening in the market in terms of the convention center expansion. But at this point, we're really not prepared to comment on what's going on with that asset for a second. But it's important.

All right. Thanks gentlemen. Good luck.

Thanks, Mike.

Our next question comes from Ryan Hamilton from Morgan Dempsey Capital Management. Please go ahead. Your line is now open.

Hey, guys. Thanks for taking my calls. Since I'm kind of at the back of the line, most of my questions have already been answered. You've touched in the past about kid-friendly films being better for food and beverage concessions. Are you still seeing that with movies like Mario? And is that being magnified with the use of technology in your app?

Yes. I mean we -- so we've had very healthy F&B per caps here in the last quarter that we just reported. And I'd say that it's I haven't -- frankly, I haven't seen our numbers for April yet today is the last day of our fiscal April. But as I look at the regular reporting, I think the trend continues. One thing I'd just say with the family films is sometimes you get this phenomena of basket sharing, where families are ordering a menu item and they're sharing it among multiple people. And so it can have the effect of lowering the per caps. But look, we're selling more items, and we don't take per caps to the bank, we take EBITDA and cash. And so families coming is driving volume and driving F&B sales and EBITDA. So it's -- ultimately, it's a good thing.

Awesome. Awesome. Well, like I said, most of my questions have been answered. So I appreciate the time and may the fourth be with you. Thanks.

Thank you.

Thank you. Our next question comes from Chris Potter from Northern Border Investment. Please go ahead, Chris. Your line is now open.

Hi. Can you talk a little bit about what you think the real estate values might be of your hotels and owned theater properties. I ask because as a longtime shareholder is frustrating to see where the stock is trading, relative to how well the business is now doing and how close you are to getting back to 2019 levels. And I think that if people appreciated more how valuable your real estate holdings are, the stock would not be trading at such a discount to their market values. They might even be putting a 6% or 7% or 8% cap rate on your expected EBITDA. Anyway, anything you can talk to about what you think your real estate values might be would be helpful.

Well, yes. All I want to say is yes. You're absolutely right. I think it's -- I think that is a hugely important point. I don't know that we can specifically speak to our estimation of the value -- but it is -- I believe that our company, when an investor is looking at our company, it deserves a sum of the parts analysis. It's -- because it's -- because they're all very significant chunks if you say, Well, okay, look, the hotel cash flow is easily identifiable and those have multiples that are easily identifiable in terms of comparable multiples. The theater real estate is derived from a potential rental stream that you can derive by looking at our overall cash flow and saying, Oh, what does the rent coverage need to be? And then applying the multiples that you think are appropriate to that cash flow stream and then have then your theater tenant left and you apply that multiple to that remaining cash flow. That -- and so you're right. The analysis is that is the way to do it. And that's how I look at it. And we have to get better at telling that story and we're going to keep talking about this because you're absolutely right.

Yes. The only thing I'd add on to that is that from time to time, we do sell the hotel assets, and we sold the hotel in the fourth quarter, providing a data point on valuation for our hotels are worth. And there's a slide in our investor deck that talks about that. So I agree with Greg, certainly that some of the parts and using different multiples for our two businesses is the right way to look at it. The other thing I'd add is, because we own a significant portion of our theater real estate, we have superior free cash flow generation. And as I think our business continues to improve and our free cash flow gets to a more normal run rate on an LTM basis as we go through this year, evaluating the company on a free cash flow basis is something that investors ought to be looking at.

Okay. Thanks for that. Just one other question. So given where the stock is trading, the discount is trading at relative to those levels we were talking about, why wouldn't you be buying back stock now? I mean it's the equivalent of buying your theater and hotel properties at a huge discount to their market value.

Yes. So good question. With something we continuously reevaluate in returning capital to shareholders. As you know, we turned on the dividend back with the third quarter last year. We've paid three of those now. And as we get through a year where we have a significant CapEx that's going and being reinvested in the business and projects that we believe have very high ROI to benefit our shareholders for the long term as that starts to add and as the business continues to recover and we generate more free cash flow, we will continue to look at the right mix of dividend and potentially share repurchase depending on where the stock is trading. So it will be an ongoing item that we'll continue to evaluate.

Okay. Thanks, guys.

Thank you. That does conclude our Q&A session for today. So I'll hand the call back over to Mr. Paris for any additional or closing remarks.

Before we get the Chad, to that question, and it was actually Jim, I was talking about the 3D stuff. I just want to be clear, I sort of bubble. In our PLFs, we pay a $3 upcharge for the Ultras and then the 3Ds that added dollars, so you got $4 total. The -- in a regular stream 3D is a $3 upcharge. And so we were talking about the benefit of 3D on Avatar. At the end of the day, look, I'm not sure it's really a material discussion because 3D not the business is -- it's a special thing. It happens once in a while. It's not -- I wouldn't be adjusting a model on the future of 3D is all I'm suggesting. But I want to make sure that clearly.

All right. Well, we would like to thank you once again for joining us today. If your schedule allows, please feel free to join us in person or via our webcast for our Annual Shareholder Meeting next week, Thursday, May 11, at the Pfister Hotel in Milwaukee. We look forward to talking to you once again in early August when we release our fiscal 2023 second quarter results. Until then, thank you, and have a good day.

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect your line.