MCS Marcus Theatres Q1 2026 Earnings Call 🔴LIVE Thurs Apr 30, 10AM CST 11AM EST

All right, y'all. Good morning. Happy Thursday, April 30th. In about 2 minutes, we have the Marcus Corp Q1 earnings call. This is the first of the movie exhibitors that are publicly traded that is reporting results. We have Cinemark and IMAX up next. I think I have a live stream scheduled this afternoon after market closes for one of those. I think it's Cinemark. And of course AMC will be reporting on May 5th. So we have our first glimpse into how Q1 went for this sector. Here with Marcus Corp. And if you are not familiar with the company, just keep in mind they do own both hotel properties and theaters. They're the fourth largest theater exhibitor in the United States. Fourth largest in the US, 78 theaters across 985 screens across 17 states. So it is a good proxy to compare with Cinemark and AMC. I do own Marcus Corp. The stock is trading down 4% this morning. I'm a little bit surprised because the news was pretty good. I bought this stock, we've been trading it in the Discord for a while. Let's see. Let me zoom out a little bit here. We bought in 2024 for 11.50, sold for 22 bucks, doubled our money. Waited for the price to come down, rebought. So this has been what? About a 5, 6-month hold for me. And I think I'm up about 35, 38% and you can see my green line here is my 12-month price target. Pretty close to analysts' price targets. And when we have profitable companies, we are able to compute price targets based on earnings. This is a net profitable company and I expect that this year will be a profitable year as well. It is more difficult, as you guys know, when you're analyzing something like AMC that has negative net earnings to tell you what a price model forecast might be. But it's a little bit easier with a company like Marcus Corp or Cinemark. Less speculative, you know, less risk, less return. But you know, I'm happy with 38%, 35%, whatever my gain is on this in the last few months. Let's check in on the call here and see how we're doing. Paul, you require assistance. Please press star and then zero and the tone. The baby here next to me. So if I got to leave the screen for a second, he starts crying. I'm going to be muting the mic here anyways for this call. President and Chief Executive Officer and Chad Paris, Chief Financial Officer and Treasurer. Michael, the movie Michael is excellent. I would highly recommend you guys go see it. Especially if you grew up in the '80s. Please go ahead, Chuck. Here we go.

Good morning and welcome to our 2026 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, which may be identified by our use of words such as believe, anticipate, expect, or other similar words. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements 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. 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 2026 first quarter results and in the risk factor section of our annual report on Form 10-K, which you can access on the SEC's website. Additionally, we refer you to the disclosures and reconciliations we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the investor relations page of our website at investors.marcuscorp.com. All right, let's begin. This morning, I'll start by spending a few minutes sharing the results from our first quarter with you and discuss our balance sheet liquidity. I'll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we are seeing ahead. We'll then open up the call for questions. I'll begin with an important reminder about our fiscal calendar that impacted our first quarter year-over-year comparisons. The first quarter of fiscal 2025 was the first quarter of transition to a calendar fiscal year and included five days at the beginning of the quarter during the week between the Christmas and New Year's holidays at the end of calendar 2024 that are significant days in our theater division. In fiscal 2026 and going forward, the first quarter began on January 1st, and as a result, our first quarter results faced the headwind of having five fewer operating days when compared to the first quarter of fiscal 2025. Going forward, our year-over-year quarterly comparisons will now be aligned ending on traditional calendar quarters. On the call today, I'll provide the as reported year-over-year changes in our results, as well as the growth on a comparable calendar quarter basis, excluding the impact of the extra days in the prior year to provide an apples-to-apples comparison. As you would expect, our growth for the comparable calendar quarter is even stronger than our as reported results. We are very pleased to report that we were able to overcome this headwind to deliver another quarter of solid execution and results with both divisions growing year-over-year revenue and an overall increase in adjusted EBITDA. In theaters, a significantly better first quarter film slate with improved product supply and better carryover of holiday films drove significant attendance and revenue growth leading to our overall improved results. In our hotel division, we continued to see year-over-year improvement in RevPAR and occupancy as we benefited from our renovated hotel assets being fully operational. Shifting to the numbers, I'll start with a few highlights from our consolidated results for the first quarter of 2026. Consolidated revenues of 154.4 million increased 5.6 million or 3.8% compared to the prior year quarter with revenue growth in both divisions. The five fewer operating days negatively impacted consolidated revenue growth by 15.3 million. On a comparable calendar quarter basis, excluding this impact, consolidated revenues increased 20.9 million or 15.6%. Operating loss for the quarter was 19.3 million, an improvement of 1.2 million compared to the prior year first quarter. Consolidated adjusted EBITDA for the first quarter was 2.6 million, an increase of 2.9 million over the first quarter of fiscal 2025. The year-over-year improvements in both operating loss and adjusted EBITDA were negatively impacted by 5.3 million due to the fewer operating days. On a comparable calendar quarter basis, adjusted EBITDA grew 8.2 million. Turning to our segment results, I'll start with our theater division. First quarter 2026 total revenue of 92.9 million increased 5.6 million or 6.4% compared to the prior year first quarter. The five fewer operating days negatively impacted theaters revenue growth by 12.2 million. On a comparable calendar quarter basis, excluding this impact, theaters revenues increased 17.8 million or 23.6%. For our fiscal first quarter 2026, comparable theater admission revenue increased 9.8% and comparable theater attendance increased 1.9% compared with our fiscal first quarter 2025. On a calendar quarter basis, first quarter 2026 comparable theater admission revenue increased 29% and comparable theater attendance increased 19.1% compared to the prior year first calendar quarter. When using our comparable fiscal days, according to data received from Comscore and compiled by us to evaluate our 2026 first quarter results, US box office receipts increased 5% during our 2026 first quarter compared to box office receipts during our fiscal 2025 first quarter, indicating our theaters outperformed the industry by approximately 4.8 percentage points. On a straight calendar quarter basis, we also outperformed the US box office by 7.6 percentage points. We believe our outperformance is primarily attributed to our strategic pricing actions, as well as a favorable film slate that featured several titles appealing to family audiences, a genre where our circuit typically performs very well. Average admission price increased 7.8% during the first quarter of 2026 compared to last year, benefiting from strategic ticket price optimization actions, an increased percentage of ticket sales from PLF screens, and a favorable daypart ticket mix. On average, our average concession food and beverage revenues per person at our comparable theaters increased by 2.4% during the first quarter of 2026 compared to last year's first quarter, which was primarily due to increases in movie theme merchandise sales and incidence rate, as well as inflationary price changes. Our top 10 films in the quarter represented approximately 62% of the box office in the first quarter of 2026 compared to approximately 66% for the top 10 films in the first quarter last year, with film costs as a percentage of admission revenues effectively flat for the first quarter compared to the prior year. Theater division adjusted EBITDA during the first quarter of 2026 was 8 million, an increase of 4.3 million. The year-over-year increase in adjusted EBITDA was negatively impacted by 5 million due to the fewer operating days. On a comparable calendar quarter basis, theater division adjusted EBITDA increased 9.3 million. Turning to our hotels and resorts division, revenues were 61.4 million for the first quarter of 2026, up 100,000 compared to the prior year. Total revenue before cost reimbursements at our seven owned hotels decreased 600,000 or 1.1% compared to the first quarter of fiscal 2025. The five fewer operating days negatively impacted hotels revenue growth by approximately 3.1 million. On a comparable calendar quarter basis, excluding this impact, hotels revenue before cost reimbursements increased 2.5 million or 5.1%. RevPAR for our comparable owned hotels grew 13.7% during the first quarter compared to the prior year, which resulted from an overall occupancy rate increase of 8.9 percentage points, partially offset by a 3.4% decrease in our average daily rate or ADR. Our average 2026 first quarter occupancy rate for our owned hotels was 59.2%. Our occupancy rate increase benefited from the Hilton Milwaukee being fully back in service compared to the first quarter last year when the hotel was under renovation and guest rooms were out of service. We estimate that the impact of the renovation in the prior year favorably impacted our RevPAR growth by approximately four percentage points during the first quarter. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced a decrease in RevPAR of 2.9% during the fiscal first quarter of 2026 compared to the first quarter of fiscal 2025, indicating that our hotels outperformed their competitive set by 16.6 percentage points. After adjusting for the prior year impact of the Hilton Milwaukee renovation, we believe our hotels RevPAR growth outperformed the competitive sets by 11.5 percentage points, which we attribute to continued strength in group business, as well as generally strong performance from our renovated assets. When comparing our RevPAR results to comparable upper upscale hotels throughout the United States, the upper upscale segment experienced an increase in RevPAR of 3.9% during our first quarter compared to the first quarter of fiscal 2025, indicating that our hotels outperformed the industry by 9.8 percentage points, and by 5.8 percentage points when adjusting for the estimated prior year impact of the renovation. Food and beverage average revenue has decreased 2.1% in the first quarter of 2026 compared to the prior year, and were negatively impacted by the decrease in operating days. Hotels' other revenues decreased by 1.4 million or 9.2%, primarily due to a weaker ski season at Grand Geneva Resort and Spa, and the impact of fees generated from an all hotel group buyout at one of our condo hotel properties in the first quarter of fiscal 2025, an event that doesn't happen every year and did not recur in the first quarter of 2026. Finally, hotels' adjusted EBITDA decreased 1.3 million in the first quarter of 2026 compared to the prior year quarter, primarily due to a $400,000 impact from the five fewer operating days, lower other revenues resulting from the weaker ski season, and the non-repeating group buyout in the prior year, which included high-margin rooms and banquet catering business, and higher benefits costs. Shifting to cash flow in the balance sheet, our cash flow from operations was a use of cash of 15.2 million in the first quarter of 2026 compared to cash used by operations of 35.3 million in the prior year quarter, with the increase in cash used primarily due to favorable timing of payments and accounts payable, higher EBITDA, and a one-time benefit of 3 million from the sale of historic tax credits related to the Hilton Milwaukee renovation. As a reminder, our cash flow from operations in the first quarter is historically impacted by seasonal changes in working capital resulting from the slowdown in our business following the peak holiday season, and by the timing of various year-end accounts payable and compensation payments. Total capital expenditures during the first quarter of 2026 were 6.6 million, a $16.4 million decrease compared to the first quarter of fiscal 2025. Our capital expenditures during the first quarter were primarily invested in maintenance and ROI projects in both businesses. Our capital investments and projects have progressed as planned, and we continue to expect capital expenditures for 2026 of 50 to 55 million, and we will update our capital expenditure estimates throughout the year. As we discussed last quarter, we continue to expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026, and this played out as expected in the first quarter with a $36.5 million improvement in free cash flow compared to the prior year. Our balance sheet remains strong, and we ended the first quarter with over 11 million in cash and over 194 million in total equity, with a debt-to-capitalization ratio of 28% and net leverage of 1.7 times. Our strong balance sheet and confidence in our businesses gives us the ability to continue investing in our businesses and pursuing growth while returning capital to shareholders through our quarterly dividend and opportunistic share repurchases. During the first quarter, we repurchased approximately 87,000 shares of our common stock for 1.3 million in cash. We will continue to allocate capital with a balanced approach that supports our strategic priority, while pursuing investments that provide the most attractive long-term returns to shareholders. With that, I will now turn the call over to Greg.

Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Drew from B. Riley Securities. Your line is now open.

Okay, thanks. Hey guys, good morning. Greg, you provided an update in your preamble on the various initiatives you've rolled out or plan to launch over the course of the year to drive concession revenue. Any early learnings or observations you can share, you know, the overall receptivity on the part of your patrons to these? And maybe for Chad, is the 2% cap rate reported 1Q a good quarterly run rate to think of as you progress through the year?

Yeah, Drew, on the concessions per cap increase, we said last quarter, you know, we're trying to get to low single digits. We were at 2.4% in the quarter. I think that kind of two to three range is probably about right. And in terms of the way we're getting there, we're trying to get to that 3% with just inflationary pricing and growing another point or so with the results of some of the initiatives that Greg's just talked about by increasing incidence and by increasing basket size. So I think that's a reasonable number for purposes of modeling.

Got it. Okay, thank you. Very helpful. And then just one follow-up on the hotels business, can you address the divergence between rooms and food and beverage revenue? I think you mentioned there were fewer operating days that impacted the food and beverage figure, but was there anything else that drove the divergence between the two?

There was. The one item that sticks out aside from the days difference, which, you know, some of those days come between the holidays and we actually do get a fair amount of F&B business in that period, but the all-group hotel buyout that we had at one of our properties that I mentioned in my remarks actually had a very heavy F&B component. That's a piece of business that we don't get every year. We had it last year. We had it three years earlier. It's on its own cycle, and so that had a heavier F&B impact than we normally would have had.

Got it. Okay, thanks, guys.

Your next question comes from the line of Mike Hickey of StoneX. Your line is now open.

Hey Greg, Chad. Congrats, guys, on a great 1Q. Thanks for taking our questions here. Just a few. First on windows, Greg, good to hear from you that you're excited. I think, you know, last year there was some big plans, but I think we felt stuck on windows moving anywhere positive. So just curious how impactful you think this new windows is, sort of when do you think the consumers' behavior might change and maybe the future of windows because it seems like this year at CinemaCon, there were a few studios talking maybe even longer windows.

Nice. Thanks for the call, Greg. Obviously on the concession side, you've really been doing some cool tech and looks like you're getting progress there. Curious on the seating side, if you see any sort of innovation or enhancements you could do on seating. And also curious about the Infinity Vision. Looks like sort of a mixed reception from operators on the Disney certification.

Nice. Last question on free cash flow. Obviously, it looks like you're inflecting this year. Just curious, Chad, your confidence there. Obviously, that's really resonating with investors. So, post 1Q after a strong quarter, I'm guessing you're more enthusiastic, but love to hear from you and then how you're thinking about carrying that into 27. Thanks, guys.

Yeah, Mike, I think we feel really good about it because, you know, we control the CapEx spend. We've got a $30 million planned decrease with our current guide on CapEx. And so, you know, that alone will provide a meaningful uplift and that's if the business is flat and we don't expect the business to be flat. And getting off to a really good start in Q1 certainly helps. So, you know, three quarters to go, but in terms of confidence, I feel good.

Great. Thanks, guys. Good luck.

Your next question comes from the line of Eric Wold of Texas Capital Securities. Your line is now open.

Thanks. Thanks, guys. Couple of questions. So, just first on the hotel and resorts division, now that you've completed the renovation of the Hotel Milwaukee, can you talk about the level of rate increases that you're looking to kind of push through or that you have pushed through at that property, maybe around both kind of group and leisure travel and how that compares to kind of what you're able to push through following the Pfister renovation a couple years ago.

Yeah, I can take that one. So, we absolutely have seen uplift from both group events that we're able to win and book into renovated properties. We're winning that business. And we're getting an uplift in transient rates that's driving growth in ADR at those properties. As a general rule, Eric, I would say we're on rates after we do main room renovations like this. And that's across our experience on the three major renovated properties, the Pfister, Grand Geneva, and now Hilton Milwaukee. But there's no doubt, once the customer knows that that room product has been refreshed and you are the desired asset in the market to stay at, you get to take share and you're commanding premium rates to do so.

Got it. And have you seen any reactions from others in the market on their pricing when you've taken rate changes or are they kind of playing catch-up a little bit given the lack of remodel?

I can start and then Greg can add his thoughts. I mean, I think at the end of the day, it's a perceived value on the quality of the product and the customer is making a choice on what experience they want to have and it's a dynamic pricing business. We're continuously adjusting prices based on where we see that demand and I think others in the market are doing the same. And so, you know, we're able to capture a premium because there is demand for the renovated product. I would believe that, you know, others are hurting from that loss of demand and they're adjusting prices to try to capture volume.

Got it. And then your last question here before I follow up on the free cash flow question from earlier. Given kind of the understanding of a relative lack of transaction activity in both the exhibition and hotel segments, how aggressive would you be willing to be on share purchases as that cash flow grows? Do you feel you need to build up a war chest in case transaction activity picks up or you're kind of really comfortable where your leverage is and possibly leveraging up for the right opportunity?

Yeah, I think we tend to have a very balanced approach. We're opportunistic when we see really attractive opportunities to buy back shares, we've leaned in and we've done that. But we are trying to maintain some dry powder to give us the ability to go and move quickly, which I think is one of our advantages in M&A. And, you know, we have seen across both businesses some activity and, you know, so far nothing has resulted in deals, but we're trying to maintain a balance.

Got it. Thank you, both.

If you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Your next question comes from the line of Patrick Scholes of Barrington Research. Your line is now open.

Hi. Thanks for taking the question. I was just wondering if you could maybe talk about how you're evaluating the lease footprint of your theaters and maybe just in general kind of with the box office expectations for 2026 and 2027, how you kind of just evaluate the overall within Marcus but also kind of the industry overall.

Well, I'll take the first part of that question on our footprint and Greg can elaborate about the industry. I mean, portfolio management is an ongoing part of our operating process. We're constantly looking at the store level performance of all of our locations, both our owned real estate, which is a little over 60% of our theater screens, even higher percentage of our cash flow in that business. And then our leased locations as well. And as leases mature, that gives you the opportunity to re-evaluate investment in those properties and renegotiate terms, which tends to be necessary because many of the leases were negotiated at a pre-pandemic box office. And so, that's an ongoing process. Historically, we've had a preference to own real estate, but we've certainly done M&A where, you know, often you are looking at acquiring leases as part of the deal. So, it's more about what's the actual financial performance, whether it's after rent or after a return on our invested capital in the real estate is how we look at it.

Okay. And then maybe just on concessions, to the extent that the film slate is a healthy contributor to incidents or on the merchandise side. I guess when you look at the upcoming film slate or maybe just sort of like the broader expansion of that film slate, as the film slate kind of broadens out, do you think it would be similarly supportive of concession per cap or do you think that could, as it maybe extends out, would that be a headwind or is that probably just too soon to tell?

And your question, Pat, is specifically around about merchandise?

Broader concession activity.

It all depends on the mix of films. You know, the right mix of films will drive better per cap. That really is what it comes down to in any given year. And I think you, but over time that does tend to even itself out. I don't think there's anything that, more films wouldn't drive down per cap.

Okay. Thank you.

Thank you. At this time, it appears that there are no other questions. And now I'd like to turn the call back to Mr. Paris for any additional or closing remarks.

We'd like to thank you once again for joining us today. We look forward to talking to you again in early August when we release our 2026 second quarter results. Until then, thank you and have a good day.

That concludes today's call. You may now disconnect. Goodbye.

All right. Well, that was mostly good news, I think. What do you guys think? I did just add to my position on Marcus Corp, which will, as I said in the comments there, increase my total cost basis because I was in the stock at 13.95. Just added at 17.81. I see it says 17.82 is the low on the day here. I don't know. I got a fill at 17.81. Could it go lower? Maybe. I don't know. But my 12-month price target is in alignment with many of the analysts who have price targets between $22 and $25. Mine is 24. And even with a step up in my basis, that will give me over 50% return on this ticker over the next 12 months if 2026 box office performs as we expect. I'm bullish on the box office. And it's one of the few where you can get daily updates on how the industry is doing with the box office results. So, I will see you guys after the market closes today. We have the IMAX earnings dropping today after market close. And then let's see what else we got here. We have Cinemark on May 1st, which is, is that tomorrow? Yeah, Cinemark tomorrow morning. Bang bang bang. Marcus Corp, IMAX, Cinemark, and then AMC on May 5th. So, I will see you guys back here on YouTube at market close for the IMAX earnings call. And in the Discord, I'll be here with you throughout the day. So, feel free to join in the conversation, drop questions. Let us know what other tickers you're looking at. As you guys know, if you're in the Discord, there are many tickers that we trade that I don't cover on YouTube. A lot of people aren't interested in making 30% returns over a year. We like profitable, safe trades. Yes, I speculate in some of the meme stocks and speculative swing trade tickers. Positioning the size of that trade to the risk. I'm not 100% meme stock trader, far from it. But when they hit, man, it's nice to book those out-sized gains. We want the bulk of our portfolio to be companies with profits, positive free cash flow, growing revenues, and growing net income. If you are interested in looking at some profitable tickers, if you're tired of losing money in speculative trades and people promising you that the naked shorts are about to be screwed and meanwhile you've been losing money for five years, join the Discord. It is free. And tune into the channel. Hit subscribe. And leave me a comment. Guys, we will see you after market close. Have a great trading day.

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