Q1 2021 Marcus Corp Earnings Call
Good morning, everyone and welcome to the Marcus Corporation first quarter earnings Conference call.
My name is Celine and I will be your operator for today at this time all participants are in a listen only mode.
We'll conduct a question and answer session towards the end of this conference if at any time during the call you require assistance. Please press star zero, and and operator, we'll be happy to listen and SKU at.
As a reminder, this conference is being recorded joining.
Joining us today are Greg Marcus President and Chief Executive Officer, and Doug Knight Executive Vice President and Chief Financial Officer, and Treasurer of the Marcus Corporation.
At this time I'd like to turn the program over to Mr. Knight for his opening remarks. Please go ahead Sir.
Thank you very much and good morning, everybody and welcome to our fiscal 2021 first quarter conference call.
And as usual you know I need to begin by stating that we plan on making 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 your 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, including but not limited to the adverse effects of the COVID-19 pandemic on our theater and hotels and resorts businesses.
<unk> of operations liquidity and cash flows financial condition and access to credit markets and the ability to service, our existing and future indebtedness.
And the duration of the COVID-19, pandemic and related government restrictions and social distancing requirements and the level of customer demand. Following the relaxation of such requirements are for.
Forward looking statements are based upon our assumptions, which are based only upon currently available information, including the assumptions are all about our ability to manage difficulties associated with are related to the COVID-19 pandemic.
And the assumption that our theater closures hotel closures, and Roche restaurant closures and and I expect it to be permanent or to reoccur.
And our assumptions about the release of new movies, and the temporary and long term effects of the COVID-19 pandemic on our business.
Listeners are cautioned not to pay for the place undue reliance on our forward looking statements and additional factors risks and uncertainties, which could impact our ability to achieve our expectations identified and are forward. Looking statements are included under the heading forward looking statements and the press release, we issued this morning announcing our fiscal 2021 first quarter results and.
And and the risk factors section of our fiscal 2020 annual report on form 10-K, which you can access on the SEC's website.
Also post all regulation G disclosures when applicable on our website at Www Marcus Corp Dot com.
So with that behind US lets begin our call will follow the usual format, which is where I will start with the spending a few minutes briefly sharing a few numbers from our quarter with you and I.
And also discuss our balance sheet and liquidity.
I'll, then turn the call over to Greg who will focus his prepared remarks, and where our businesses are today and what we're seeing for the near term and longer term future.
Well then open the call up for questions.
So you've seen the numbers this will be the last quarter that we're comparing our results to a quarter that included pre COVID-19 results for the majority of the quarter.
We did have multiple non recurring items last year, all of which are detailed and a non-GAAP reconciliation that we included at the end of the press release and.
And so while this year's first quarter results were understandably worse than last year. They were also noticeably better than the last three quarters of fiscal 2020.
Even after adjusting for one nonrecurring item in our fiscal 2021 first quarter, a onetime state government grant our non-GAAP adjusted EBITDA, while still negative with over $10 million better than our fiscal 2020 fourth quarter, a sign of real progress.
And that's despite the fact that our first quarter is historically, a weaker quarter than our fourth quarter.
Our theatre results were obviously still impacted by state and local restrictions and a significantly reduced number of new films.
But our adjusted EBITDA from this division still improved by nearly $5 million compared to last quarter.
And our hotels and resorts Division reported adjusted EBITDA that was $6 million better than last quarter and in fact was over $2 million better than last year.
Greg will go into a little more detail about these improvements and his remarks.
And there are a couple of items worth, noting and our numbers below operating income as you'd expect our interest expense increased during the first quarter due to increased borrowings and a higher average interest rate.
It's important to note however that our fiscal 2021 first quarter interest expense included over $600000 of noncash amortization of debt issuance costs compared to only $49000 of such costs last year.
Also want to point out that beginning in fiscal 2021 and the accounting for our convertible notes changed we now show the and the entire $100.1 million of convertible notes as debt, there's no longer a portion allocated to equity.
As such our reported interest expense this quarter did not have any noncash debt discount.
Unlike what we our fourth quarter of fiscal 2020.
You'll also note that we reported net gains and disposition of assets during the first quarter of fiscal 2020. One. This net gain was due primarily to the sale of our interest and the joint venture during the period.
Our effective income tax rate was 27, 7% during the quarter and.
And we anticipate that our effective income tax rate for the remaining quarters of fiscal 'twenty. One 2021 will be or may be and that 24% to 26% range that we've typically seen of.
Of course, our actual fiscal 2021 effective income tax rate may be different depending upon actual facts and circumstances.
Shifting gears away from shifting gears away from the earnings statement just for a moment, our total cash capital expenditures during the first quarter of fiscal 2021 totaled approximately $1 $5 million more.
Most of these dollars were spent on two projects a theater renovation mentioned and our press release and a lobby renovation that we've initiated and our Grand Geneva resort and Spa.
We're still estimating that our fiscal 2021 capital expenditures may be and the $15 million to $25 million range with many of our projected expenditures back loaded to the second half of the year.
Let me now provide some brief financial comments on our operations for the quarter beginning with theaters.
Total attendance was down 81, 4% compared to the prior year first quarter.
Reflecting the large number of theaters closed for all or a portion for the quarter and the fact that our open theaters, we're only operating on Tuesdays and weekends.
Now according to data received from Comscore and compiled by us to evaluate our fiscal 2020, one first quarter results.
And other states box office receipts decreased 89, 7% during our fiscal 2021 first quarter.
As a result, we believe our admission revenues decline of 87% for comparable theaters during the first quarter of fiscal 2021 outperformed the industry average by nine percentage points.
Our average admission price for our comparable theaters increased three 7% during the first quarter and our average concession and food and beverage revenues per person at our comparable theaters increased 16% for the first quarter.
Shorter lines the concession stand on the emphasis we're placing on encouraging guests to purchase their concessions and food and beverage ahead of time, either online or using our mobile app and the success of our Marcus private cinema program, particularly for several family films that were released during the quarter contributed to our increased for capital revenues.
Shifting to our hotels and resorts division, our total revenue per available room or Revpar for our eight owned hotels decreased 46, 4% during the first quarter compared to last year's same period.
Once again now comparing it for the industry. However, when you compare.
According to data received from Smith travel research and compiled by us and in order to compare our results.
Our hotels outperformed comparable upper upscale hotels throughout the United States during the first quarter by approximately eight percentage points.
The data also indicates that our hotels outperformed competitive hotels on our market by approximately six points six percentage points during the first quarter.
Breaking out the numbers for all eight hotels more specifically our fiscal 2021 first quarter overall Revpar decrease was due to an overall occupancy rate decrease of 25 nine percentage points.
Partially offset by a two 6% increase and our average daily rate or ADR.
Our average first quarter occupancy rate for rate for our owned hotels was 28, 3% with several hotels performing much better than that.
And finally before I turn the call over to Greg. Let me also briefly comment on our balance sheet liquidity position you.
You may recall that we reported cash and revolving credit availability of approximately $227 million at the end of December.
Thanks for the receipt of our remaining fiscal 2019 income tax refund several state government grants and continued strong cost controls at every level of our organization, our cash and revolving credit availability was still on extremely strong $213 million at the end of our fiscal 2021 first quarter.
We also used proceeds from the previously mentioned sale of joint venture debt pay down on our term loan by over $4 million during the quarter.
And now that we have filed our fiscal 2020 income tax return, we anticipate and additional income tax refund of approximately $24 million later in the year, along with tax loss carryforwards that may be used in future years.
And we'll continue to pursue additional opportunities to reinforce our liquidity and the future as well, which would include sales of surplus real estate and other non core real estate.
We have over $8 million of carrying value and additional assets currently under contract or letters of intent to sell later in 2020 one we.
We continue to believe will receive total sales proceeds from real estate sales. During the next 12 to 18 months totaling approximately $10 million to $40 million, depending on demand for the real estate and question.
Our significant liquidity combined with the receipt of expected income tax refunds and proceeds proceeds from the sale of surplus real estate positions us to continue to meet our obligations as they come due and continue to sustain operations throughout fiscal 2021 and into 2022, even in the very unlikely event that are proper.
<unk> continue to generate significantly reduced revenues.
With that I'll now turn the call over to Greg.
Thanks, Doug.
During our year end earnings call in early March I opened my remarks by recognizing that there's still maybe some bumpy weeks and months ahead of us.
But that we were very encouraged by a number of green shoots that we were that were springs and fourth and both of our businesses.
I will now two months later I think we all agree that most of the news. Since then has been largely encouraging and some of those green shoots are starting to but the <unk>.
Rollout of vaccinations has gone better than expected with over 50% of the eligible adult population, having now received at least one shot both nationwide and most importantly, and our markets.
As you know from prior calls I'm, a huge proponent of the vaccines and their role on getting this country and our business is back to normal.
There's still work to be done to get more people vaccinated.
And most eager have now been vaccinated and now the heavy lifting begins as we work to motivate others to get vaccinated, but.
But you have to be encouraged by the progress thus far and the resulting improvements we are seeing and the COVID-19 numbers across the country.
As we said in our press release, we truly do see a recovery beginning to take hold and having said that this is no time to spike the ball on the five yard line, we know the recovery will not be and overnight process. So our teams still have a lot of work ahead of us as we rebuild our businesses our priority will continue to be the safety and wellbeing of our associates customers and communities. This is guidance everything.
And we've done so far and will and will guide us and the weeks and months ahead as well.
So let's start with our hotel Division, Doug shared some of the numbers with you, including the fact that the data indicates that we once again significantly outperformed both the industry and our competitive sets. This quarter as you know our hotels have consistently outperformed their markets and prior years as well, but the amount of outperformance in recent quarters has widened significantly it's fair to assume that as demand increases and all.
Hotels are fully operating we might expect that our percentage of outperformance might decrease somewhat but as I shared with you last quarter I think our numbers speak to a flight to quality that should be beneficial and the future and our ability to consistently outperform and our markets.
Stated simply we have always had some of the best properties and our respective markets and it doesn't surprise us that they've outperformed during this challenging time.
But I will admit that some of the other numbers Doug shared with you about the first quarter did surprise us our first quarter is historically, our weakest quarter of the year, so without meaningful business travel yet we did not necessarily expect to report quarterly results that would end up better than last year, even after adjusting for some nonrecurring costs last year.
But thanks to stronger than expected drive to leisure customer demand and that's exactly what we did the majority of our customers had been transient leisure customers, who are looking to get away and change their scenery after months of staying home and.
As a result, not surprisingly weekend business was the strongest and all of our hotels and during spring break weeks in March we even saw stronger than expected business midweek properties like the Grand Geneva Resort and Spa and timber Ridge Lodge performed the best them on our hotels as they are well suited for families looking to get away, but our downtown hotels also saw an uptick in leisure.
On this as well.
During our last call I share with you that we had a record ski season and Grand Geneva, we have been at or near Sellouts on multiple Saturdays at this resort.
Wasn't that we didn't have any transient business and group business. We continue to have weddings and some small group business and we continue to have success booking major league baseball teams and NBA basketball teams and as I shared with you and March there were also some green shoots and individual business travel and we believe the continued progress with the vaccine rollout will further spark growth and both of these business.
Evel segments, I think one other first steps leading towards the resumption of business travel will be the reopening of offices and although it is slow and we're starting to see progress on that front.
Our improved first quarter numbers are also a direct result of the continued hard work of Michael Evans.
Our hotel Division President and his entire team.
And they've done a fantastic job of streamlining our operations, reducing both variable costs and costs, we might have previously deemed fixed and order to keep our hotels open and operating at reduced occupancy levels, they've done incredible work, focusing our marketing efforts on reach and to drive to leisure markets through aggressive campaigns promoted creative packages for our guests and contributing to our outperformance.
Yes.
Looking to future periods, our group room revenue bookings for fiscal 2021, commonly referred to and the hotels and resorts industry as group pace is running significantly behind where we would historically be at the same time and prior years, but we are beginning to experience increased booking activity for later in 2021, and particularly for 2022 and be on banquet and catering.
<unk> revenue pace for fiscal 2020. One is behind is running behind where we'd typically be at the same time and prior years, but not as much as group room revenues due in part to increases and wedding bookings.
Many of our canceled group bookings due to COVID-19 are rebooking for future dates excluding one time events that could not rebooked for future dates.
The average lead time for a reservation and leisure segment continues to be approximately three days, making it very difficult to forecast occupancy from this customer segment, having said that everything we've seen thus far supports a belief within the industry that leisure travel will continue to be quite strong, particularly during the upcoming summer months, It's our hope that as we get to the fall and midweek leisure travel subsides.
Kids go back to school will also be experiencing continued improvement and the business segments.
Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly and I respect the markets.
Finally, let me and my remarks about hotels by once again, noting that we would have an interest and growing this division and the future we see opportunities to pursue less capital intensive strategies, such as strategic partnerships. The creation of a fund or straight management contracts no. One really knows yet what the hotel transactional market might look like and whether there may be opportunities to acquire hotels that might be experiencing some distress.
Regardless if opportunities arise we want to be prepared on the other side of this.
So let's shift to our theater division.
Doug went over the numbers with you we started the quarter off with only 52% of our theaters open due to temporary restrictions put back and put back in place and several of our markets and the fourth quarter.
And as those restrictions were lifted we began reopening theaters once again and as a result, we ended the first quarter with approximately 74% of our theaters open and as we noted in our press release, beginning this coming weekend, we will have nearly 90% of our theaters opened many with expanded operating hours and days.
Like our hotel division the highlight of the quarter was our outperformance versus the industry as Doug shared with you based on industry data available to US. We believe we outperformed the industry by approximately nine percentage points. This quarter and fact based upon the metrics. We believe we were the top performing theater circuit during the first quarter of fiscal 2021 compared to the top 10 circuits and the U S. Additional.
Data received and compiled by us from Comscore indicates our admission revenues during the first quarter of fiscal 2021 represented approximately four 8% of the total admission revenues and the U S. During the period, commonly referred to as market share and our industry. This represents an approximately 55% increase over our reported market share of approximately three 1% during the first.
Quarter of fiscal 'twenty nine prior to the pandemic, we certainly recognize the closed leaders and other markets and the U S contributed to our outperformance of both of these metrics. So we expect our outperformance to lessen in future periods as more theaters open but that still doesn't lessen the fact that our theatres outperformed the rest of the industry open or closed a great job all around by Rolando Rodriguez and his entire team.
During our year end earnings call in early March we talked about one of the primary contributors to this outperformance.
Faced with limited amount of new film product and a pandemic that was further limiting customer willingness to go to public places our team had to get creative we have to move up with innovative promotions and programs that would encourage the return of moving go into and audience, who we believe wanted to come back but was reticent to do so.
Out of that came the development of Marcus private cinema or as we refer to it internally MPC for short.
Developed and introduced in the second half of the fourth quarter. This program and really took off during the first quarter of fiscal 2021.
Sales attributable to Marcus private cinema have exceeded expectations, partially offsetting reduced traditional attendance. During the last 11 weeks of fiscal 'twenty, one 2020, one first quarter, we averaged over 500 MPC events per week accounting for approximately 21% of our admission revenues during those weeks and.
MPC worked particularly well with family films, so not surprisingly our top three films during the quarter were Rye at Alaska, and the last Dragon, Tom and Jerry and the crudes and new age all three of these films were available to customers and other formats. So that says a lot about what we believe is a strong desire on the part of consumers to see movies. The way they were meant to be seen on the big screen.
Industry optimism that consumers are anxious to return to movie theaters has been further supported by the early second quarter box office results.
Our first of the first King Kong and most recently mortal Kombat and deepens layer.
Easily becoming the best performing films since the onset of the pandemic recent surveys by the National Association of theater owners have indicated that approximately 65% of those surveyed say they are very or somewhat comfortable going to the movies right now with the percentage climbing to the mid eighties.
And when the participants indicate they are vaccinated. This is up from around 47% at the beginning of the year, which is an exciting improvement and just a short period of time.
And that seems and reducing COVID-19 numbers not only play a critical role in getting customers comfortable with returning to movie theaters and larger numbers, but these external factors are also critical with studios and make decisions on the release of new blockbuster films with the strong performance of the three films I just mentioned and should encourage the studios to move ahead with future scheduled release dates of new films our press release.
Lists several films that are slated for release during the rest of May and June and once we hit July there was a long list of films currently scheduled to be released each and every week.
And it also continues to be very encouraging the key markets and New York and California are reopening San Francisco, Los Angeles, and New York City to name a few are very important markets for the film Studios and all current signs point towards these markets being much more open by the time, we hit the meat of the summer film schedule, which bodes well for the studios' willingness to hold to their current summer release.
Yes.
Now I'd like my comments about the hotel Division. Please don't interpret my optimism about what lies ahead to suggest that we may not still face challenges and the near term.
And there certainly is the possibility that there may be further changes and the release schedule and the studios continue to experiment with the theatrical window.
We have yet to learn how that might change consumer behavior and the future. When the world is back to quote unquote normal. We know there are uncertainties and the weeks ahead, but I believe we are prepared to navigate through any further challenges as we redefine refocus and rebuild our industry leading theater business.
In closing while it will take some time for both of our business to return to pre pandemic levels the quality of our assets the industry, leading out of home entertainment and hospitality experiences, we provide and our continued focus on service and safety and position, both Marcus theaters, and Marcus hotels and resorts for the continued recovery.
We are encouraged by the improvements we are seeing and remain optimistic for the future and.
And I cant and my prepared remarks, I was saying that I continue to be thankful for our experienced and dedicated associates throughout our organization.
Never has my grandfather's oft repeated statement wrong more truth and during this past year, our associates are truly our most important asset.
With that at this time, Doug and I would be happy to open the call up for any questions you may have.
Thank you at this time and I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Again that is star then the number and one on your telephone keypad.
Pause for just a moment to compile the Q&A roster.
Well go first with a question for Mike Hickey with the benchmark Company. Your line is open.
Hey, Greg.
And congrats guys on the quarter and time for questions.
The other.
Obviously, we're seeing I think.
Good drumbeat, and I think a positive attitude and soon and what's coming back.
And in Asia, and seeing it and the USC and your your search.
And specifically.
And.
Just sort of curious.
And how opportunistic do you think you can be on potentially growing.
And your network given that.
We are seeing the bounce back and we are seeing theaters like arc light and.
Pacific go Dark and California, just curious.
And you can draw your network here and if you've looked at that those deals specifically.
You know look I think the first thing and I'll repeat what others in our industry, probably similarly, situated say first job. One is just keep on our balance sheet keep it keep it solid get ourselves and in the right place.
We will look for as we thought we will look for opportunities to grow the network as we as we can with with great properties, Yes, I happened to notice that are quite think it caught my attention what caught my attention at first I was like what archives and that reopening arc lights reopening I'll I'll take that debt with anybody who wants to have debt me on that those theatres are so productive nationally.
They will reopen and I, just don't know who will control them and we are we certainly are.
And welcome those discussions.
Nothing I can speak to right. This second.
But I think that any look at I would.
And I've said this way I think we're one of the best operators and this business you know we have great food and beverage we have great experience and I think our hotel side helps influence our theater side from a level of if you really want the quality operator, where your team and.
We not only do we do just great theaters period, we understand hospitality, which probably becomes even more important as we go on and so you know for people, who have leaner properties, where they've got and investing significant investments to the extent that we can come in and help them as we get through it we are all opening hours to do it.
And nothing to report right this second but.
We are open and available total two discussions.
Thanks, Greg.
One more I guess on them from Netflix you've seen Zack snyder's upcoming.
Army of the debt.
Sounds pretty exciting.
It looks like it's going to have.
Exclusive.
The agile cool release.
One week, it looks like window and.
It's getting some fairly broad distribution from some of your peers curious thing.
You plan to show this film.
And the opportunity you see from OTT content and maybe.
And part of the new normal.
Yes, we are playing.
It's an and.
And if we're in the world of experimentation and a and it's an experiment.
Obviously, a very short window.
The.
The look and I.
And I've talked about this before I'm not sure I've talked about it on our calls but you know there is such a tremendous amount of content out there to the extent that the.
The over the top players start to extend some of that to theatrical.
That could be the other side of what might make up for decreasing windows is going to be more content and at at.
Potentially.
More advantageous terms I don't have anything to tell you about that today I can't I can't tell you, that's what's going to happen, but you know I mean.
I think it's.
Great.
For the interesting thing the Oscars work.
It was.
It was.
And they were challenged because nobody even knew the movies.
And on a regular because some of these movies tend to be less other commercial films, but you know there is something to the benefit of.
And I don't know about you but.
I've become a TV expert and a look at the truth of the matter is most people that watch and I'm a big movie Goer. The study show most people that go to the movies are big Cock.
Big consumers of content, just generally and so you watch stuff on over the top on television and watching trying to find something to watch with all these services. It just gets harder every single day and jumping between apps and trying to remember what I was going on well, maybe I'll watch that and then I'll get to.
Things just disappear quickly and the theaters, we can't have unlimited product at any given time right and it's not.
Right now basically the way the ultimate prison is complete.
And total choice.
The unbounded choice and that sort of what you're almost gets struggles and over the top leaders. Okay. So what are we going to have at any given time and how many pieces of content and 15, I mean, so you get that debt that halo and that spotlight put on certain pieces of content that I think would be good for its Greg with it looking for they know they know for the studio.
The historical studios have known that forever I think that the over the top game can start to take advantage of that as well and potentially provide a theatrical window, so that because it because our economics dictate that and then have it be exclusive on there and think it's so interesting to me somehow people seem to view content and sometimes a widget.
But you know what if you want on watch Star Wars, you really only have one place to go do it net Disney plus after it's been and a movie theater you cant go watch it on anybody elses place and so they get to maintain their exclusivity and yet they can run it and theatrical first so and get those front and in dollars, which are really important that's per capita.
So I.
I think that there's going to be I think you know I don't have anything for.
And for sure to say that but there should be hopefully more content that will come our way that we can use the spotlight and I will say Frances Mcdormand was right I went to the movies and saw Nomad land.
This week. This last this last weekend and I and and I went with my my my wife, and I went with another couple who'd actually seen it already on TV and they they were so into it they wanted to see it again.
And on and they said it was just a different experience and do you think you know that kind of film you'd say Oh, that's not a big theatrical tentpole, that's not that doesn't put the theaters benefit but the truth is you know first of all I had some western vistas, which visually we're very appealing but the story. If you know the story I mean these are some really intense stories of people who are homeless and they said you just.
Seeing their faces on the big screen 50 feet, we weren't even on our monster, So we weren't and our pls and Illumina on a.
Premium large format, we went on a 50 foot screen, but that all encompassing.
And emerge immersion was and it's just different and being at home and debt I mean, I walked out of there and I thought Wow. This experience is just so differentiated there's no difference between watching over the top and linear and it just isn't but there's a big difference between watching something at home with your phone and the lights and the dog and.
And and watching something on a theater, where you sit there and do that and so it gave me great comfort that we used for.
For the long term of this business once we get past what's going on now.
That was a long guidance or I'm sorry, yeah.
You really you really wound him up.
[laughter] for you.
Yeah and thoughtful.
Last question for me on.
The hotel side.
The Grand Geneva resort, and Spa asset really shining here and.
Difficult time, I mean is this something that.
And you would look for a bid on Greg or is this sort of like.
For trophy asset you wouldn't want to sell and.
On the.
On summer fast.
And just confirmed and sort of how is that tracking and how big can that be on a comparable basis, obviously comparable basis I think it would be.
Huge.
Curious your thoughts on that event.
Positive and can be thanks, guys.
On Grand Geneva, I mean, yeah, Wow, [laughter] and even better the Guy and said you know we think we've found a new line of business that you know in terms of because one of the things that was really that we had a lot of that was.
Youth Athletic stuff and you dance I'm, sorry <unk>.
Political and dance, we got people in the in that first quarter, who we typically don't see and they think that's going to be a line of business, it's going to be good for us for the long term, we don't have any other.
And I don't know again, and just going back to our commerce and transactional market I think it's impossible to even really figured anything out in that regard. It is a it's a great irreplaceable asset.
And then Kevin for it right now it's been really and it's been really important to us.
And this and this quarter and really pretty.
Amazing.
It's as it goes to summer Fest.
<unk> moved into the fall.
And so far we're hearing is still on it's a really interesting dynamic a lot of other festivals a lot of the time.
Is a really interesting thing that speaks for the movie business.
And I think summer leisure should be pretty good around here as we've talked about so and I'm not sure what I think for what we might see for festivals not being here is going to be made up just for people wanting to get out and get on the road and get out of their houses I know that I know that feeling personally I want to be out.
On the the theater side, though should benefit and there's not going to be a lot to do in terms of getting entertained really anywhere I mean and the country. So many of these act have had to cancel because if you think about it for a for if Youre performing act.
Many shows can you do a day one.
Probably not too and you got to play to a limited size audience well that you know if you can only have fill a.
Our venue that limits, what you can do and not knowing what the constricts constraints will be and you've got a plan that was so far ahead on the theaters, even with capacity restrictions, we usually had showtime's and we could stretch out.
Even if we have limited seating capacity is for individual shows we're actually able to sort of.
Sort of increased virtual virtually increase our capacity by just adding showtime's on on the earlier and later periods so and.
People are looking to get entertained I think its go to a baseball game or watch a movie that is going to be getting out of your house. So I think that it's.
That it should get and positives and.
And negatives on both side of the business again, I'll just be happy when we get past all of this and there's positives on all sides, but but I think things and we'll see we'll see different and different impacts on either side.
Thanks, guys.
Mike.
Thank you we have our next question coming from the line of Eric Wold with B Riley Securities. Your line is open.
Thanks, Good morning, Greg and Doug.
Good morning.
So just.
Just a couple of questions I guess, one and you kind of I can't remember, which are you talking on but you talked about the beginning.
Market share gains you're seeing on the theater side, and then kind of came back later on and acknowledge that.
Some of that is due to theaters that haven't reopened yet and you've.
And obviously gained share at their expense I guess, obviously that dynamic could change as people come back, but I guess thinking about the markets that you're in.
Have you seen theaters permanently close in those markets and any way to quantify kind of.
You know what that impact could be as everything kind of turns coming back on line.
You know.
No not yet because it's too hard to quantify we don't know necessarily what will open and I just saw one.
And one of our markets that we thought was going to close and now its reopening I mean.
And I look there will be stuff that will close and that reopened again. My guess is that's going to tend to be the stuff, that's really obsolete or right on top of something else, but if you know otherwise it's got a if you're a landlord and you've got you've got a piece of real estate, that's a movie theater again.
You will almost be may take whatever you may find someone to operate it and take what you would get and the door. So when does it all when it all shakes out I think there'll be less leaders and there are today and some of our markets that could benefit us and the smaller markets because as I said, the obsolete and stuff tends to be and the smaller markets and so could.
Could we see people driving a longer distance to go to a movie.
Cause something closer to them was closed and yet still is and some of our markets. We might see some of that I don't think I could ever quantified just yet.
But as I've seen in the past on these things as the world and the first time the movie business has put upside down and usually what will happen is not as much as you think somewhat and some will close but not as much as we all think and and Eric.
For the numbers I mean, absolutely when youre comparing to the national numbers of course are you know.
We're going to look better because were more open and not compared to I mean, what Regal, which was closed the entire time, having said that keep in mind, we started the quarter with only 52% of our theaters open ended the quarter with 74 I think is what we said it was so so we didn't have all of our theaters open either during the hope for.
Quarter, and yet we still had that kind of performance. So is it so I don't want and I don't want to say it was all just because some theaters were closed nationwide.
Got it.
And then on the concession trends.
Obviously, great. So it seems and gain you kind of talked about that being driven by the combination and shorter concession lines and more in app ordering assuming.
You know line da Vinci and get longer and as people come back.
As a way to parse out and his tongue.
And what you saw with kind of from from the and outside of the benefit in terms of what kind of tailwind could come back as more people from a comfort wording on that obviously eager to promote people too.
And the back and basket size and whatnot on and off and anyway to kind of think about what the sustainable.
Number could be versus historical levels.
I think it's really hard to do that right now Eric I mean, as you know even you know.
Even I mean, we're surmises on that that the app ordering and the online and is helping but it's so hard to quantify exactly because we also have the shorter lines and.
And this particular quarter. We you know we had three family films with with that where we did a lot of really good.
MPC business and so you know so we saw most of our growth we saw was and our traditional concession business. So.
So it's it's hard I mean, certainly we've always said I mean, this is pre COVID-19 and everything else. We've always we've always known and in this industry that shorter lines helps.
And so you can bet, we're going to be trying to figure out how to.
Continue that dynamic as you know and and and it's not just throwing people at and it's gonna be the technology part of it as well to be able to and you know.
On the kind of keep that dynamic because we and because we just know and we've seen it now it was actually.
And not in the way, we'd like to document it but we were able to actually document how much impact it has.
So I would build on that too because I think I think your comment here.
And because exactly right about building basket size and that's a nice way of saying I hadn't heard that before I went out and steel that hope you don't mind, but.
The idea of Upselling right and you just don't especially as you get busier too right you look at the App won't ever missed the upsell opportunity.
And humans standing behind the state with a line 10 deep.
As the humans, a kid is saying how do I just fill the popcorn bucket as fast as I can on not worrying about hey, do you want to go from a medium to a large soda so the app I think as we.
What's the opportunity on the revenue side, there, but the other side, let's not forget is the labor side of that because.
If we can get more people to order on the App that means west concession stand labor now for now we delivered to the seat and.
So that may be that will offset a little bit of that but we do think that there is there are two pieces of this equation that should be financially.
Beneficial to us.
Got it and then.
And final question.
The $10 million to $40 million and a potential assets that could be sold.
Doug and I know you talked about on last call as well.
And.
How would you quantify that versus the total universe and potential.
Assets contributes electrical meaning excluding kind of hotels and larger property is kind of the surplus assets that kind of the.
The upper end of the surplus asset basket or is there a way to think about what could go beyond that 10 to 40.
You know look there.
It can go beyond that number.
And we haven't put a number out there.
But we've got more than that and.
We were just try and we're trying to we're trying to give a range for what could get done and the next year or so.
And.
And some of this some of these out lots and some of these other things might go a little longer and and.
So I'll, just say it could be higher than that and the long run.
Perfect. Thanks, guys.
Okay, and you know like our cash question simply press Star then the number one on your telephone keypad and again that is star then the number one on your telephone keypad.
We have our next question coming from the line of Jim Goss with Barrington Research. Your line is open.
Thanks, Amit.
And I might start by following up on what Eric was just asking regarding the real estate.
What do you envision your owned versus managed properties ultimately.
Being in terms of it and.
And game and the hotel of the divisions.
Well wholly owned.
I don't see a lot of new wholly owned acquisitions right. This second so my guess is short to medium term, it's going to be looking at stuff, we can do and where we're going to take on management contracts and some small co investment where we acquire assets with partners.
And.
To build out on that platform.
I think we're seeing the benefits of some diversity right now I think thats.
And that's been as we said the Grange and who has been.
Very helpful. Other hotels have been helpful and were seeing the benefits to our to right now what's going on our business and having that.
Where does the world go we're going to be opportunistic and will.
We will we will.
Direct capital, where we are when we get band for the place that we can start directing capital to where we see the best returns and.
And so so just to follow up on that Jim I mean the.
The growth.
And would skew things a little bit more Reits or if there's some growth that we expect it to probably be more likely on the less capital intensive side.
The only other thing that would change and maybe what Youre also headed towards was.
Might we reduced the number of owned properties that we have and we've talked about that and the past as you well know and and obviously.
This is probably not a sellers market right now and so I, it's hard to predict exactly when we might revisit a strategy that might include monetizing any assets. If it was at the appropriate time so.
But obviously two things could happen right, we could end up with less of those and we but we also and then it was more of the other with a less capital intensive as well, but but we have no timetable on that right now and.
But that's that's how it could change.
Okay and also on the hotel side.
Usually given a little bit of and update on your latest project Saint Kate The Arts Hotel.
Any comment on how that seems to be going and what your expectations are for that.
Well.
<unk> it.
It's it's going it's going Okay. We're open for business. That's a pause debt was a positive you that hotel and a way it was really tough for me.
It has been unbelievably well reviewed I think we all know that it's gotten one kind of and asked awards.
It's one USA data and best in the Country Award and it really has been well received from a from an.
Accolade perspective, and not only that the guests on.
If you look at Tripadvisor traveler reviews is now the number three hotel in Milwaukee.
From travel and reviews and in its class casino on Tripadvisor. It mixes all sorts of hotels up Theres no.
There is no.
It doesn't pay attention to class and it'll ratio against the frankly, the Hilton Garden Inn, which is a nice hotel, but it's.
It's not really what you would call for comp set of Saint Kate It is the number one.
You'd hotel by travelers and its comp set and that team has really done a fantastic job of running that hotel and Thats current reviews, but so what happened was you know, but the problem. We have is we really didn't get a chance to establish it but one thing I learned early on as we opened it was nobody knew what the Saint Kate was and we needed to be able to get those accolades from people Google Best hotels.
Milwaukee right after they see the tie between the Pfister and the Saint Kate and the Hilton right behind it and I'm going to give it out for everybody, but the.
He is the.
And yet then all of a sudden what nine months it and were closed and so we really didn't get a chance to establish it but because it was so well regarded.
We when we got a chance to even just go get number or math and early on was on we'd better off open and close and even if it was close let's get that at least get the public spaces opened at the Saint Kate get the artist get it going again.
And make sure the galleries are fresh because that's one of the cool things about it the galleries change out and we did that.
Now we've just as we opened for the weekends, we got some NBA basketball teams and their that was originally as we were in the spring now. We've opened we are open seven days a week and we're starting to get traction. There. So we're pleased with the traction we're getting we've got a lot of room to go and a lot of room to grow for the team is committed and they know they have something really special on their hands and so we're caught.
And it's going to take time it is a new brand and so it is establish a new brand and take some time, but it really is especially there is nothing like it and there was really a special place so we'll be patient with it.
Okay. Thank you nowhere on the theater side. So IMAX has been over indexing and I believe the pls experience and general has been.
Outpacing.
Or taking a larger share to normal have you had that same experience and.
And do you think it will continue beyond the initial return of customers.
And.
And maybe separately regarding the.
Impact of.
Windows and streaming.
And if that creates a skewed of blockbusters and fewer smaller films, how will that affect your overall business.
Well, let me tackle the first part of it here.
Yes sure.
We have definitely I mean, we were over indexing.
With our Pls, our proprietary pls, our ultra screens and super screens before and when when now you have less product and just less attendance and general.
There's no question that that the people there.
And our go to the theater, they like seeing and on the big screen and their seats are available. So there. So it's not a case, where a well that shows sold out and I'll go to a different auditorium and so so I think that's certainly probably certainly contributed to our increase and our average admission price. This quarter was the fact that we had probably a higher.
Percentage of.
P L F sales.
And.
And but we expect that to continue Jim I mean, the fact of matter is is that is that that's where those are always the first shows that sellout when we when we have the new big blockbusters that come out and so even with the price premium that's where people gravitate and so that's why we spent so many capital dollars over the last number of years.
<unk>.
Increasing the number of super screens, and and ultra screens that we have.
The mid rivers theater that we've mentioned in our press release, that's reopening on Friday.
We have we've added and the Super screen.
It's what the customer wants and we have we believe the highest percentage on it.
And on a percentage of theaters that have these large format screens and the in the in the country. We believe it's certainly among the top 10 chains. So so yeah. We are over index thing and expect to continue to on that.
And I'm also asking is that disparity wider than it had been.
Earlier and is that persisting.
And I understand there are alert and large screens R. R.
We are getting a larger share of revenues, but I wonder if the degree to which that.
Over indexing.
As for taking place right now is greater than it was earlier on.
Okay and.
Not sure I'm not sure if I know, but I wouldn't be surprised if it was but I think what to be careful to draw any conclusions right now about it and what the world's going on the consumer who knows as on going out.
And maybe treating themselves as something they havent done and a while we know there's a lot of stimulus dollars floating around that may have a few extra bucks and their pocket because they weren't able to spend so much because they were sort of and a lockdown phase. So very tough I think to extrapolate going forward. Although the overall trend has been to the PLO.
I think it was happening before any of this all happens. So so I do think that you'll continue to see a trend in that direction I. Just don't know what you can extrapolate from it I don't want to talk about the small thing for the small cell and thing for a second.
I don't know what's going to happen in terms of will the small films go away again, the trend had been away from those.
Theres some things that are changing in the world that might that might impact that and the other direction and that is you know.
Again, so much over the top content being produced.
And what are the two of the big incremental cost to our studio to release, a smaller film they grappled with right PNA Princeton advertising.
And well be PFS are burning off so the cost of print is going to start to go away and we talked about this before in terms of I thought maybe there'll be an independent film and potentially much easier for independent films to play on our screens.
And.
They don't have to pay a virtual print fee they used to.
And it became it was a very interesting dynamic years ago, what happened and the day of film before digital came along was if you had a big moving and they played for a long time before going to any ancillary markets. You could do it was noticed caravanning, a print and you'd have a printer and it would play at one theater and that you've moved that same printer and other theater and then do another theater and you'd have until it wore out.
And that means your cost of P and the PNA goes down.
As you are.
And.
So now but now we go to the world of EPS. There was no care of adding a print anymore, whereas EPS go away its going to be better than caravanning prints and there won't be any print cost and then advertising that's what's going to be incumbent upon us and I would tell you. We are not there yet as a company we have to get better at it.
And my admonition to the team is busy and we've got to figure how to help the studios get rid of the cost of advertising using our on the small films using our.
And loyalty members got to be able to get to those customers and help them and maybe become better at local marketing as well we may.
Be able to then Spencer.
And as terms of appropriate spend local marketing dollars and a way that weren't spent before to drive traffic and so for studios can get rid of that incremental plus they virtually have no incremental cost of putting a film on our screen and so to the extent that they give us a window on let us use the money for the advertising it would be out of the rent.
There may be an interesting dynamic coming forward.
We just don't know what that's going to be on neither Italia I have the answer but I would also tell you don't discount it either.
So the notion of working with Amazon and Netflix that sort of thing with some of the films that are there.
Only going to go on those services might be something that.
You and the rest of the industry and pursue.
Yes, I guess it goes and it goes back to that same comment I made earlier, if it can be and the theater and then it is exclusive on that.
Their service is still exclusive on their surface and will drive traffic to their to their to their services.
And of course, they're going to want to do some specialty stuff always premiering on this thing, but theres a lot of content that I think you know again.
And these are not widgets and you cannot it's not like you can decide which washer and dryer you want and then you can pick any one of them. If you like a piece of content. It is.
And is exclusive to wherever it's playing.
And it makes sense, because you don't really want the blockbuster to be on.
12 of your 14 screens or something like that because we need some variety to get the rest of the audience.
Yeah.
But okay well. Thank you very much I appreciate it.
Thanks, Tim.
Thank you at this time it up here and there are no other questions I'd like to turn the call back over to Mr. Knight for any additional or closing comments.
Well certainly want to thank everybody once again for joining us today and tomorrow, we'll be holding our virtual annual meeting at nine a M central time.
Interested parties can listen to a live audio webcast and view presentation slides by logging on to our Investor Relations section of the of our company's website Www Marcus Corp, Dot com or through the direct link provided in our press release that we issued dated April 27th 2021, and selecting guest when logging in.
Shareholders, who register with a control number will be able to vote and ask questions. During the meeting.
We also look forward to talking to you once again and approximately three months when we release our fiscal 2021 second quarter results until then thank you and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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