Good morning, everyone, and welcome to The Marcus Corporation Third Quarter Earnings Conference Call. My name is Lydia, and I'll be your operator today. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today are Greg Marcus, Chairman, 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, everyone. Welcome to our fiscal 2024 third 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 2024 third quarter results and in the Risk Factors section of our fiscal 2023 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 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…

Thanks, Chad. Good morning, everyone. When we were together last quarter, we discussed the improving trends that we were seeing, including an improving film slate with stronger quality film product and what felt like an inflection point in June. The third quarter got off to a strong start in July, and we know that the ingredients were there setting up for a good quarter in both of our businesses. I'm incredibly pleased to report the rest of the quarter continued the early trends, and our teams were able to deliver record results in both divisions and a record third quarter for the company overall. That played very well in our markets helped drive us to record revenue, operating income and adjusted EBITDA in theatres, beating our prior pre-pandemic records in the third quarter of 2019. While we said the long-term recovery for the theatre industry has been a winding road with several short-term disruptions, this quarter marked significant progress, and we're clearly building momentum heading into 2025. The hotel division broke our third quarter records with the Republican National Convention in Milwaukee, driving significant growth in average daily rates and illustrating the long-term potential for future events in this market to drive room demand. While the growth and recovery in our industry is not a straight line and not every quarter is going to break records, this one feels very good, and I'm very pleased to share our third quarter results with you today. I'll start today with our theatre division, as Chad mentioned, we outperformed the industry by nearly 6 percentage points for the quarter and there are a few factors that we believe drove this. First, the film slate was very good and played extremely well to our markets, particularly in July when we had a heavy dose…

[Operator Instructions] We'll go first to Mike Hickey with Benchmark Company.

Greg, Chad, congratulations, guys. What a great quarter. Well done. Just 2 questions. First one, Greg, on the consumer. I know you're pretty close to your consumers. Do you think you're benefiting from sort of a trade down here? Obviously, we've seen the inflation impact, broadly speaking, on the consumer and the economy. And when you sort of reflect on your pricing. You don't give attendance, but pricing, I'm guessing per ticket sort of sub-10, concessions sub-8. So you're sort of getting a few hours outside the home plus food for under $20. So the value proposition, I guess, in this market seems remarkable, especially when you consider, as you alluded to, the '25 slate that has got a lot of exciting movies, and I think sentiment overall for moviegoing has increased. So I'm just curious if you think you're sort of benefiting in that broad scenario I just outlined. And then the second question would be on capital allocation. You seem way ahead of your peers here, and you did mention a buyback, which is exceptional to see. I'm curious how you're thinking about M&A. I mean, obviously, you've not looked away from it. Are you seeing activity? Do you feel like you're in a position now to be opportunistic? I know you did one theatre deal, I think, last quarter, but how you're sort of thinking about the opportunity to sort of grow your asset base given where you are in your capital allocation recovery?

Look, great point on what could be happening in the broader economy and its impact. And we've talked -- look, I can't tell you that I know the answer, Mike. I wish I knew for sure. But we've always talked about 6 out of the -- we always use that stat, 6 out of the last 8 recessions, the theatre business got better because you're right, it becomes apparent that it's the cheapest form of outside the home entertainment. And so if someone wants to go out and then they have -- and they don't want to spend the money that some of the more expensive things can do, that's going to benefit us. But look, I think it's a combination of so many things, and it could be that -- it's probably some of that. It's some of -- it's the product mix. I can't -- I would love to take credit for that, but that's just to some extent, we got lucky, but they say what is luck is the intersection of opportunity and preparation. So -- and we were prepared because we did do some things that operationally were important in this idea of sort of relooking at what we -- the changes we've made to Tuesday 1.5 years ago to what we -- to bringing back the free popcorn and then focusing on the family and making sure that we were priced so that a family could come to the movies affordably. Those were important changes along with all the other marketing things we're doing and more to come. But the -- and then a little bit of a reversion to the mean because a year ago, we were -- some of the things we had done and we're always going to try new things, and…

By the way, that Mystery Movie, genius idea. Congrats, man. So good luck, guys.

But I'm going to tell you right now, thank you. The only thing that was genius about it was copying everybody else doing it. My grandfather had a saying the only originals were Adam and Eve, everything else is a copy. There's other guys in the industry doing it, and we saw it and said, oh, we should do that. So I will only take credit for being smart enough to see a good idea and go with it.

Our next question comes from Eric Wold with B. Riley.

Two questions. I guess, one, obviously, you talked about some of the share gains and outperformance in the quarter with some of it was driven by the changes you made to Value Tuesday and the $7 Matinee. Anyway, Chad, to estimate what that might have benefited in the quarter? I know it's tough to figure out if someone shifted for another day to that or whatnot, but maybe just kind of some guesstimate of what it may have been. And then remind us when you lap those changes in the coming quarters? And I have a follow-up as well.

Yes, Eric, thanks for the question. Very difficult to pull apart and see on an A and B test once we've rolled it out on putting some of these Tuesday changes in place. We know, though, that it's -- the customer feedback and our NPS scores and the anecdotal feedback has been overwhelmingly positive, and it's brought back some of the deeply value-oriented customers to drive attendance who then are in the building buying other things. And so it has been a net positive. Certainly, I'd say the film slate was the other big one this quarter, genres that played really well to our audiences. And then to your final question, we lap -- we will lap the most recent Tuesday changes in May next year. So we think there is still a fair amount of year-over-year incremental benefit that we'll see for a while here.

Got it. And then a follow-up on the last question around M&A, just more so on the hotel side. I know you've talked in the past about potential to do more on-balance sheet transaction, hotels, where it makes sense. I guess what would you need to see -- obviously, if you see an attractive target and attractive opportunity. But I guess, broadly speaking, what would you need to see there? I mean how much more would you need to see rates come down? Or how much of a factor that in the decision versus really maybe just not seeing anything out there that even remotely seems attractive at this point?

I think it's more toward the end of your last point. It's a slow market in terms of transactions being done. I think that just you have so many assets that with -- when interest rates went up, you have a bunch of people who bought them with interest rates lower and probably wrote lower cap rates into their models. And so they really they didn't want to sell if they didn't have to. And since there hasn't -- the economy has been okay, and they've been able to continue. So as rates come down, the impact might be that, that's going to actually loosen up the markets and people will start to transact again.

[Operator Instructions] Our next question comes from Patrick Sholl with Barrington Research.

Just sort of following up on the improving kind of attendance trends within the theatre side. I was just wondering if you've got a sense that you had recovered all of the share that you had lost? And I guess, if not, how -- if that's something you think you would build up to? And then I'm just wondering if that's sort of bringing people that had sort of maybe thought that just cinema in general was too high price and coming back into theatres or if they were coming from the more competitive markets?

Pat, I assume you're referring to the Tuesday changes specifically.

Yes. Yes.

Yes. I mean I think it's really more of the latter, tough to tell, but it's more about the customer that either comes or doesn't come. But in many of our markets, I don't think it's really so much as they're going to one theatre operator versus another. The Tuesday changes are directed at deeply value-driven customers. And we're trying to make sure that there's a price point on a day of the week or a certain showtimes, whether it's our Everyday Matinee program that appeals to them. And it's not just day of the week, it's also making sure that there's non-PLF options available at good showtimes alongside the PLF options. So for somebody who maybe doesn't want the PLF upcharge, those options are available to them. And when they look at the total ticket, the total cost of going out to the movies, inclusive of food and beverage and the experience for the family that we've driven or we've provided an offering that is attractive for them and gets them to come out. So I think it's more about coming versus not coming.

Okay. And then like the stronger concession per cap, have you started to introduce like more merchandise or collectible -- in addition to collectible items into the concession offering? Or is it more just people finding the, I guess, combined value of the movie plus concession being an attractive opportunity?

Not a ton of merchandise on a stand-alone basis, Pat, but we have had an increase in things like souvenir cups and souvenir popcorn tubs that do create a must-have item associated with some of these films, and we do think that, that's helped driving concession purchases, but not a ton of stand-alone merchandise.

At this time, it appears there are no other questions. So I'd like to turn the call back to Mr. Paris for any additional or closing comments.

We'd like to thank you once again for joining us today, and we look forward to talking with you again in February when we release our 2024 fourth quarter results. Until then, thank you, and have a good day.

This concludes our call. Thank you for joining. You may now disconnect your lines.