Q2 2022 Marcus Corp Earnings Call
Billion and consolidated adjusted EBITDA was $94 million.
We provided a breakdown of our second quarter numbers by segment in our press release, where you can see that in the second quarter. Our theater Division contributed approximately 71% of the combined $40 million of adjusted EBITDA Prior to unallocated corporate expenses, we continue to trend towards our historical portfolio mix of EBIT generation.
<unk> as the theater business recovers.
Our second quarter interest expense decreased by approximately 850000, primarily benefiting from lower short term debt and reduced borrowings, resulting from our improved operating results the.
The reduction in interest expense was partially offset by investment losses on marketable securities this quarter compared to last year.
Turning to our segment results theaters continues to experience increased per capita spending by our customers. Our average admission price increased by three 3% during the second quarter of fiscal 2022 compared to last year and increased by nine 3% compared to fiscal 2019.
This increase was primarily the result of targeted admission price increases implemented during the second quarter in response to cost inflation as well as continued strong customer demand for our premium large format screens.
Meanwhile, our average food, our average concession food and beverage revenues per person at our comparable theaters increased by two 9% during the second quarter of fiscal 2022 compared to last year, which was primarily due to pricing changes implemented in response to food cost inflation. These pricing changes we're implementing.
Rented in early June and provided approximately one month of impact to the quarter when.
When compared to fiscal 2019, our per capita average concession food and beverage revenues increased by 23%.
Which we believe is the result of several factors, including our industry, leading mix of non traditional food and beverage options shorter lines at the concession stand. The emphasis we are placing on online ordering through our mobile app as well as pricing changes.
As a significant number of theaters in both our circuit and the industry as a whole were closed during large portions of the second quarter of last year. We continue to believe a comparison of our box office results to pre pandemic results in fiscal 2019 may be the best way to compare our performance to the industry.
Our second quarter fiscal 2022 admission revenues were down 24% during the quarter when compared to 2019. According to data received from Comscore and compiled by us to evaluate our fiscal 2022 second quarter results United States box office receipts decreased 26, 6% during our fiscal <unk>.
Due to the impact of three strong blockbusters released during the second quarter of fiscal 2022, which were top gun Maverick Doctor Strange in the multi verse of madness, and Jurassic World Dominion The second quarter box office.
More weighted towards our top movies as compared with the second quarter of fiscal 2021 and fiscal 2019. These.
These films drove significant pls sales, but at the same time resulted in higher film cost as a percentage of admission revenues.
While film costs as a percentage of admission revenues increased significantly year over year due to a limited number of new films and fewer blockbusters last year, resulting in abnormally low film cost percentages in the prior year. They were generally in line with our costs in the second quarter of fiscal 2009 2019.
Prior to the pandemic with that said we are thrilled with the success of these blockbuster films that drove new audiences to return to the movies for the first time since the pandemic began.
Shifting to our hotels and resorts Division revenues were $69 million for the second quarter of fiscal 2022, as we continue to see strong seasonal demand for leisure travel in the early summer and improving conditions for business travel the.
The division delivered $11 8 million of adjusted EBITDA, which is a record second quarter for any fiscal year.
We continue to believe comparing our results to pre pandemic levels in fiscal 2019 helps provide perspective on the pace of the current recovery.
Second quarter total revenue for the division was nearly 99% of 2019 levels a post pandemic high.
As I've mentioned last quarter, the Saint Kate was closed for the majority of the first half of 2019 during its conversion from a branded property, but if you take the Saint Kate out of both years numbers, our fiscal 2022, adjusted second quarter revenues were still 92% of adjusted 2019 levels.
Our revpar for our seven comparable owned hotels decreased six 3% during the second quarter compared to the same quarter during fiscal 2019.
According to data received from Smith travel research for the fiscal 2022 in fiscal 2019 periods and compiled by US in order to evaluate our results comparable competitive hotels in our markets experienced a decrease in revpar of 9% during our fiscal second quarter compared to the second quarter.
For fiscal 2019, indicating that our hotels once again outperformed by approximately two seven percentage points during the second quarter.
When comparing our revpar results comparable upper upscale hotels throughout the United States the industry experienced an increase in revpar of 0.8% during our fiscal second quarter compared to the second quarter of fiscal 2019.
We believe our results compared to the national numbers reflect an increased mix customer mix of group business at our properties during midweek days at lower daily rates as more corporate and industry events return, while the increase in group business. During the week has resulted in a lower mix of leisure customers, which are typically at <unk>.
Higher average daily rates the increase in group business resulted in higher food and beverage revenues from our banquet and catering operations, which are not reflected in revpar, but are accretive to the division results as a whole.
Food and beverage revenues were up 98, 2% in the second quarter of fiscal 2022 compared to the prior year and were up two 1% compared to the second quarter of fiscal 2019.
Breaking out the second quarter numbers for the seven comparable hotels more specifically our overall revpar decrease during the fiscal 2022 second quarter compared to fiscal 2019 was due to an overall occupancy rate decrease of approximately 11 two percentage.
Points offset by a nine 3% increase in our average daily rate or ADR, our average fiscal 2022 second quarter occupancy rate for our owned hotels was 66, 3%.
Shifting to cash flow and the balance sheet, our cash flow from operations was $48 8 million in the second quarter of fiscal 2022, an increase of over $45 million compared to the prior year.
Total cash capital expenditures during the second quarter of fiscal 2022 were $9 8 million or <unk>.
Large portion of these dollars were spent on the completion of the first phase of a guest room renovation project at our Grand Geneva Resort and Spa with the rest going toward normal maintenance projects in both of our businesses.
We ended the second quarter with $57 7 million of cash and nearly $280 million in total cash and revolving credit available liquidity with no borrowings on our $225 million revolving credit facility.
Our debt to capitalization ratio was 37% and our net leverage was two four times net debt to adjusted EBITDA at the end of the second quarter.
Following the strong cash generating quarter and with our bolstered liquidity today. We are pleased to announce that subsequent to the end of the quarter. We completed two key steps on a recovery path following the pandemic.
First in late July we repaid $46 6 million of short term borrowings repaying in full and retiring early the term loan facility. We took on to help manage through the pandemic that was set to mature in September of this year.
Our priority in managing our balance sheet has been to first reduce the incremental debt. We took on during the pandemic and we have now executed this significant step.
Which then brought us to our second step. This morning, we announced our board of directors has reinstated our quarterly dividend declaring a <unk> <unk> dividend to common shareholders of record on August 25 to be paid on September 15th.
Greg will comment further on how we think about capital allocation, but from a purely financial perspective, the strength of our balance sheet and liquidity coupled with the steady progress in the recovery of our businesses and strong free cash flow generation gave us the confidence to once again return capital to our shareholders.
With that I will now turn the call over to Greg.
Thanks, Chad.
We ended the quarter with a momentum of improving conditions in both of our businesses that gave us the optimism that the second quarter was setting up to be a big step in our recovery.
Film slate looks stronger.
Customers are indicating that we're increasingly comfortable coming back and business travel was starting to show early signs of returning.
The stage was set and our team was ready to execute.
I am pleased to report the trend we saw early in the quarter continued and our team delivered our best quarter since the onset of the pandemic.
Our customers came back to the movies in huge numbers because finally, there was a lot to see.
Our hotels saw group's return that hadn't held an event in three years overall was incredibly encouraging to see the real progress in both businesses.
While it's not back to normal yet and at times, we may take two steps forward and one step back as we go from one quarter to the next but this quarter, we took a big step forward in our recovery and we're pleased to be sharing these results with you.
So let me start my remarks, our theater Division.
Chad went over the numbers with you, including our continued increases in per person revenues, our outperformance in the industry and strong cash generation with nearly $29 million of adjusted EBITDA in the quarter.
Our customers showed up in huge numbers proving once again, the consumer demand for the immersive theatrical moviegoing experience remains strong.
Several key themes this quarter stood out first this was the first quarter since the pandemic began when we had a consistent string of theatrically released films.
Second the content this quarter included something for everyone and it brought back audiences that hadn't yet come back until now.
Of course, there were the blockbuster the blockbusters that everyone's heard about by now led by top gun Maverick.
Not only is top gun already a top 10 grossing film of all time, but perhaps more importantly, its opening weekend was more than 50% comprised of people over 35%.
For anyone who follows our industry. This is not the norm for movie with a box office of this size and it's an indication of audience interest for a broad variety of movie types and genres.
And of course, there was no better to wait to see top gun that on the big screen.
Other blockbusters delivering strong performances included Doctor strange in the multi years of madness and Jurassic World Dominion.
Additionally, there were several family films that did well during the quarter, including the bad guys Sonic the Hedgehog too in light year. The performance of these films demonstrated that families. We're ready to come back to the movies. This summer and this trend continued into the early third quarter with minions. The rise of grew pause a theory and DC League of Super pads. It was only a.
A quarter ago, when industry skeptics pointed out families hasnt gone back to the movies.
It didn't surprise us that when we finally had family movies to show this audience came back to the movies enforce.
Finally, we had a series of midsized films that appeal to diverse audiences and performed really well Downton Abbey, a new era premiered to a box office audience that was estimated at 48% over 55 years of age and 73% women.
Elvis attracted not only the audience that grew up with his music, but also drove box office because younger audience embraced the film and a rate on a rising star.
And everything everywhere all at ones play strong through most of the quarter exceeding everyones expectation and actually just crossed $100 million in total box office with a great milestone that is the performance of these films continues to demonstrate the important role that theatrical exhibition plays in the overall economic success of film content over its lifetime and customers' continued.
Show they want to see films on the big screen.
We were thrilled to see the success of these films and the overall improvement in the quantity of films, we brought to audience this quarter.
All of the top five films in the quarter debuted with an exclusive theatrical run prior to release on streaming services compared to where we were a year ago. When three of the top five films in the second quarter release day and date.
We continue to work with our studio partners to increase the number of films released theatrically and worked with additional content providers to take advantage of the unique theatrical experience to showcase some of their best content.
We believe exclusive theatrical runs can deliver an important incremental revenue source for content providers not only do we believe this the data increasingly backs. This up one need only look at the recent debut of films like Doctor Strange and sing too respectively number one and two rings streaming films, a few weeks ago not only the destock deliver important.
Theatrical revenue to their studios. They also delivered top notch streaming performance and even more impressive was it seemed to us the ethical Dubuque was about six months ago.
It's clear from data like this films of all sizes benefit their studios from a multi layered approach.
A multi layered approach to distribution that includes the agriculture.
As I've shared before in my updates a recovery is not going to be a straight line, while the second quarter steadily ramped up with increasing quantities of films and box office during the quarter. We expect the third quarter, we'll file the opposite pattern with a stronger film slate in the first half of the quarter softens heading into the early fall before increasing once again in the fourth quarter. Several films have already played well in the third quarter.
Including minions the rise of grew Thor Love and Thunder note in D. C League of Supercuts and we're excited for the release of bullet train this weekend.
You had mentioned in his remarks, we implemented several pricing changes to mitigate the impact of cost increases we've seen in <unk>.
Both labor and the cost of food these.
These changes were rolled out in June and benefited a portion of the quarter. Our approach with these price changes has been very targeted and focused in areas, where our customers have shown a strong preference and willingness to pay a premium for certain days of the week, where showtime's or for a premium entertainment experience on our premium large format screens.
This is an ongoing effort and we will continue to test different dynamic pricing models in different markets as we further optimized pricing.
In addition, we continue to offer attractive discount opportunities for our value oriented customers as we work to bring customers back to the movies.
Last quarter I mentioned, our new subscription programs, we launched earlier this year in select markets. The owners will be flexibly flex plus we believe these subscription programs are a way to drive recurring traffic through our theaters and we're testing a unique approach designed to promote a tenants for some of the smaller films that play an important supporting role around Tentpole features as well as extended length of runs and more popular.
Bill.
While the program remains very much a work in process.
That we will continue watching the tweaking we are seeing positive signs for example movie flex cost US movie Flex plus members are 150% more likely to see a small or mid sized spill than our control. We believe the program as a potential opportunity for distributors to extend theatrical runs for larger films and promote smaller and mid sized films by offering them.
Flex plus library, we have more work to do to further develop the program, including companion tickets and family offerings, but we are making progress and we're working hard to create a program that is a win win for everyone, while enhanced enhancing the depth and breadth of content.
Now I'll turn to our hotel Division Chad shared some of the numbers with you including comparisons to our pre pandemic fiscal 2019 numbers and the fact that indicates that we once again outperformed our competitive sets this quarter.
I want to start by recognizing our hotels team for delivering a record $11 8 million of adjusted EBITDA for the second fiscal quarter, a record for any second quarter, either pre or post pandemic Rev.
<unk> revenues were at 92% of 2019 levels on a same hotel basis and the breadth of the recovery. We are now seeing is broadening beyond the leisure traveler, who as you know have really led the way for the last year.
As we shared in our last few calls we saw the improvement in group booking trends earlier in the year and we're now seeing the business comes through as group and corporate events return.
To provide some perspective on the change in the mix of our business. During the second quarter of 2022 are non group business, which includes leisure travel represented approximately 63% of our total rooms revenue. This compares to 75% for non group rooms revenue a year ago in the second quarter of 2021, and 57% for non group rooms revenue prior to the <unk>.
<unk> in the second quarter of 2019.
Overall, our business is starting to shift back closer to a more normal mix, which was in line with our expectations.
As I said in the past, we believe we have special assets that make our portfolio unique these assets allowed us to successfully pivot to serve an increasing number of leisure customers. During the pandemic and our team is now successfully executing our plan to optimize revenue management and deliver outstanding service to returning business travelers and group events.
Our group room revenue bookings for fiscal 2022, commonly referred to in the hotels and resorts industry as group pace is now running with an 8% of where you would historically be at this time and pre pandemic years.
And is up significantly from where we were at this time last year and from the prior quarter.
We are encouraged by the increased amount of activity in leads we are experiencing in our sales teams remain focused on continuing to close the gap as business travel activity recovers.
Banquet and catering revenue pace for fiscal 2022 is also trending similar to the improvement in group pace, while still running behind where it would typically be at the same time in prior years. We are closing the gap and pace has sequentially improved from the first quarter of this year.
We continued to experience very strong wedding bookings and some of the bigger events of the past are once again booking for the remainder of this year 2023 and beyond.
In general the overall demand environment remains supportive of strong average daily rates and we continue to see occupancy pace build even with higher rates. We are pleased with the continued strength of our average daily rate during the second quarter growing more than 24% over last year and over 9% compared to 2019 rates for the quarter.
As we stand here today, we are not yet seeing indications of consumer demand slowing or macroeconomic softness.
As we look forward, we expect continued progress in the overall recover the industry, particularly for group business travel with that said, we know that our properties will face a difficult comparison to our third quarter results last year, which included nonrecurring business from the Ryder Cup, the Milwaukee Bucks playoff championship run and summer Fest, which shifted from the third quarter last year to mostly in the second quarter. This year.
Overall, we generally expect our revenue trends to track, where hopefully continue to exceed the overall industry trends for our respective markets as in the past our results from this division will vary quarter by quarter.
Due to the seasonality of our property has historically experienced but on a relative year over year basis. We look forward to continued improvement during this ongoing recovery.
Finally, I want to briefly remark on financial milestones that Chad discussed in his remarks.
<unk> always believed that maintaining a strong balance sheet with a manageable amount of debt, including owning the majority of our assets. We believe that core philosophy played a large part in our ability to successfully navigate the pandemic and contributed to the speed in which we were able to restore the balance sheet to the point we are today.
We will continue to pursue growth and investment opportunities in our businesses generate strong returns for our shareholders, whether those opportunities are through investments in our existing assets or through acquisitions to the extent that we generate cash flow in excess of our investment and liquidity requirements. We will also return capital to our shareholders.
The Marcus Corporation has a long history of returning capital to shareholders either through dividend or share repurchases and our board has been committed to reinstating a dividend when we reached the point, where we had sufficient liquidity retire the incremental term loan we took on during the pandemic and when we had the confidence in the recovery of our businesses. We are excited to announce.
And today that we have reached that point and we are thrilled to begin returning capital to our shareholders again.
As you know we view the world through a long term lens. We are excited to report these great results to you today, but we also recognize that our recovery path is not a straight line our rate of improvement will vary from quarter to quarter as we expect it to next quarter, but I am confident that we will continue to make consistent long term progress we manage the business day to day.
But at the same time, we look at the overall performance of our investments with a much longer lines.
Finally, I'd like to once again express my appreciation for our dedicated associates of the Marcus Corporation.
Their outstanding work and commitment to serving our customers is responsible for our success and we appreciate all they do everyday.
So on behalf of our board of directors and our entire executive team.
Thank you to all of our associates.
With that at this time, Chad and I will be happy to open the call up for any questions you may have.
Thank you if you would like to ask a question. Please press star one on your telephone keypad will stop two if you wish to withdraw your question.
Our first question today comes from Jim Goss of Barrington Research. Please go ahead.
Thank you and good morning, nice results that was great.
Good morning, I would like to.
Explore a little more on the admissions and concessions trends, obviously boats have been.
Out of out of norm.
With admissions coming back.
With the inflationary pricing plus a mix element and then on the concession side you made a comment Greg that there were shorter lines and the concession stands and that might have actually helped some of the.
Some of the sales and I'm just wondering how you how you look at those two things normalizing and as are there trends, we should be thinking about.
So they come back over the next couple of quarters.
Yes.
Thanks, Jim.
We did we saw a lot of a lot of traffic in the theaters and ultimately.
Customers showed a preference.
We're seeing some of these movies on Pls and Peel off was a huge piece of the mix in the quarter.
And as as we mentioned we put through some pricing changes both on box office admission and on.
On food and beverage that provide an uplift to the per caps on on both fronts and customers did not show resistance or extreme price sensitivity to those changes in part because the product was great.
And so I think that overcame some of the mix that you might be referring to with with some of the family meals films that may have had more matinee lower daytime prices.
But overall I think it really comes down to the strength of the product and the fact that people wanted to go back to the movies.
Yeah and building on that to your point about Lincoln line, we know it to dissolve.
The longer the lines you just have we lose people for us the future is really getting people on the app and getting people because that shrinks the lines and and I'm already seeing the benefit of it yet we just actually introduced on the App.
And upsell.
And so if you go on the App and you order something.
Youre going to get an up sell and we also have a will last chance offer which doesn't come every time. So we don't train everyone should just wait for that last chance offer. So we're going to leverage technology, we arent there yet not going as fast as I would like to see it happen, but that's the way we're going and that's the way we're going to we're going to continue to have improvements in our performance of the concession stands.
Mike do you have any displays in the.
At the front end like Mcdonald's does sometimes where you could if they're tired of waiting in the line the quarter and when it gets delivered how are you doing anything of that nature from a technology standpoint, we'll see that as well yes absolutely.
Also I was wondering.
Is there any continuing pushing anywhere for a day and date given evidence that it's a bad idea.
Or is that sort of.
We've taken care of that issue.
Yes.
Look I think that all the numbers point to the fact that that a theatrical window is a positive for the entire ecosystem of film distribution as we talked about it.
Is it is it is the way to distinguish.
Product in a way that can't happen in today's modern world of streaming.
And.
<unk> the.
The.
The benefit as you know because we just can't play we don't have an unlimited number of titles and so sometimes.
No.
No no no restrictions as its own zone challenge, because it's hard to distinguish things and so we are able to distinguish product.
And we provide that base and look at the longer you make the shorter the window gets it devalues the theatrical experience and the values that people will pay for it.
Or you'll just lose some of those marginal customers because I think it comes out so soon on streaming and I think if you look to sing too and say Wow, what a great success and frankly.
Doctor Strange as well, but sitting two came out six months ago and I didn't even mention this but they had they have a $10 million in DVD sales I mean they had.
Remember the concept of windows selling the same thing to the same person over and over again and I do understand why everyone sort of says well Gee, let's let's bag that modeled stopped selling things over and over and Gulf, where just one sale with a subscription model that seemed like it seemed like the siren song of of the stock market was alluring and yet.
The day hurdling.
Pardon me.
I agree with what Youre, saying totally Im just wondering if anybody is pushing or is that a.
Done deal.
And then.
Some of the streaming services starting to look for theatrical releases.
As.
It seems to be the case for a while.
I think that there.
The testing the waters.
I can't we don't discuss any specific ones just yet, but we're seeing some things that we've done in experiments, we've done but I think it shows for.
The streaming for it to work they have to remember they have to have a marketing campaign you can't just put it in the movie theaters and expect it to work.
But also I'd point to the streamers to suggest that they leverage their subscriber base.
As an additional incentive to somehow to work to say well, maybe there's a theatrical incentive to being a streaming subscribers in and see something of the theatrical experience as well and they can tap a very big marketing base to help make that happen. So I think theres a lot of interesting opportunities that can happen, where we can be again mutually beneficial to one another where we're the pie gets larger.
It's not a zero sum game.
Okay. The last thing on the hotel side.
You've noted a shifting back to a more normalized mix of business versus leisure travel.
What sort of timeframe do you have in mind in terms of when that normalization sort of.
Fulfills itself comes to fruition.
Do you think it's another couple of quarters or are we getting there faster than that.
Yeah, I'll start and then I'll, let Greg follow so Greg outlined the kind of percentage of our mix, where we were a year ago, where we are now and what it was pre pandemic and we're we're sort of midway through that shift.
Back to where we were pre pandemic as to how long it takes us to get to get all the way back. There I think will also be influenced by potential macroeconomic changes and whether or not there is some sort of recession on the horizon in future quarters, but it.
It feels like maybe that at some point in 2023, you start to get back to a mix, that's even a little bit closer to where we were.
Yes.
I don't think don't think that we know exactly and I think things are things are changing a lot, but there is this new term bleser.
Business and leisure get combined and our hotels, so many of our hotels fit that perfectly right.
So I sort of described I jokingly Simpson E mailed or our guidance at this like a molecule.
Business in the front part of the back.
I don't think that people at the Pfister, one I know that I, just called them all of them.
But the but it's.
You can you can come to our hotels for our business experience and a very high end in a very sophisticated business experience in the state for the state for some fund too and I think that is this is a trend that we totally don't know the impacts of all of that yet and how we're going to categorize it at the end of it and the good news is because everybody's money is the same color and.
And we will take it however, they want to bring it to us.
Sounds good thanks very much appreciate it thanks Jim.
Our next.
<unk> comes from Eric Wold from B Riley Securities. Please go ahead.
Thanks.
Good morning, guys.
So maybe a quick follow up.
On on Jim's question drug concessions there is good demand.
Different way I guess.
Is the kind of the increased demand for concessions.
Kind of a rising tide lifts all boats, you kind of seeing across all demos all going to.
Parts of the week, maybe not the statement.
The best way, but are they kind of.
Tuesday discount Tuesdays kind of cheaper demo is getting cheaper in terms of what they spend at eight most pressured in terms of.
The higher prices inflationary expenses or does everyone kind of pushing through it kind of an equal way.
Yes, Eric I don't I don't know that we've got the.
The great visibility to track through specifically to certain demographics.
What that that concession.
Trend is in specific customer groups the Tuesday.
Session.
Numbers have done done well and we've actually implemented some pricing changes to concession specific to Tuesday.
We hadn't done before where we had some highly discounted product and now we've started to charge for it.
There's a little bit of a change there.
<unk>.
We're trying to be sensitive to the needs of the value customer and continue to stimulate demand and give them reasons to come back to the theaters, but I would say as best as we know generally across the board.
Concession demand has been healthy.
Got it and I'm not sure if you mentioned it before but.
Frequency and basket size kind of moving in tandem or is one dominated over the other.
Well, Greg mentioned, the upsell opportunities. So we are seeing that upsell play through driving some increases in basket size and to the extent that we can keep the lion's share and keep people ordering through the mobile app.
We also see the benefits in frequency. So I think it's a combination of both.
Got it and then.
Last question.
Given the kind of.
Labor costs wage inflation.
Everyone's seeing would you say that youre holding back at all on staffing levels somewhat either in theaters or hotels or both because of that or would you still prefer to staff.
Further from these levels with the belief that those.
Extra cost covered by <unk>.
Greater revenues greater services to provide greater revenue generated or price hikes or both.
Where you are where you want to be with us.
Yeah, Great question. So I think the trend is similar in both of the businesses. We are we are certainly not back to <unk>.
2019 staffing levels.
In either of the businesses and we are however, better than we were a quarter ago or even certainly two quarters ago, but we're not throttling back that that staffing.
Intentionally are abnormally were still having some some challenges in hiring to the level that we'd like to get to having said that.
Ultimately the new normal is probably not staffing at the levels that we were at 2019, it's going to look at is going to look different and it's going to look different in part because of technology is going to look different because we've worked hard to take labor hours out of out of the system and drive efficiency and productivity and how.
We deliver service to the customers. So we're not we're not going to get all the way back there.
But we're trying to do things to improve.
The efficiency and offset the impact that we're seeing in rate I think sequentially.
Compared to a quarter ago, the labor market looks like it's improving.
Loosening, a little bit we're still seeing turnover higher than we would like.
But not quite as much pressure on wage rates.
But helpful. Bill. Thank you build on your question Erinn I'll, just add on the Tuesday concession per cap and while we don't give the numbers specifically every Tuesday, we are making a little bit of headway, we're actually a little ahead.
We were which Chad alluded to I think we're probably just doing some better pricing on on our Tuesdays, which typically as you know, it's a more value oriented customer and.
But on a percentage basis, we're doing a little bit better than sort of the whole overall circuit the hotel versus overall circuits ahead, but.
But Tuesday is having and we will do and even little bit better because our pricing is we're doing better strategically so felt that answered your question.
Yes, Thanks, Greg.
Yes.
As a reminder for any further questions. Please press star one on your telephone keypad. Our next question comes from Mike Hickey of benchmark. Please go ahead.
Hey, Greg Chad Congrats guys are awesome quarter.
Wonderful come back so great job.
Yes.
And I guess congrats to for sure on the <unk>.
Dividend.
Statement I think you are definitely the first theater operator to come out of sort of Covid here and restate that really show. So many things in your business, but definitely here.
Relative strength of your balance sheet and your cash flow.
But just sort of curious to sort of double click here on them.
On the dividend the confidence of your business and certainly given that we're in a recession now.
Go ahead reinstate it just sort of curious if you could add anything incremental there and how you think about the path.
Of the dividend back to sort of where it was over time.
And then I guess the.
Other piece of the puzzle would be share repurchase.
Done that I think some level historically way back in the day, Greg before Chad was here.
But how do you think about repurchases given where your stock is and your relative multiple will be such a discount versus the group.
Sure let me start on that one Mike.
And again, thanks for your support so on the dividend.
Look it's an exciting first step coming out of what we've been through and we discuss things that gave us the confidence to be able to do this and really it comes down to the.
The recovery in the business and sustainable free cash flow generation and being able to make the investments back in the business that we need to make and we had significant capex this quarter and certainly still had the confidence to restart the dividend.
Relative to where it was historically.
It's it's fairly small, but its a first step.
And at the moment, we are limited in the magnitude of the dividend and our credit agreement.
We will look to see that open up at some point hopefully next year a bit and then based on the progress that we make we will recalibrate on the dividend quarter to quarter, and that's going to be an ongoing evaluation.
In terms of the mix between share repurchase and dividend.
I don't think they have to be mutually exclusive it is a function of where the stock price is and the multiple that we're trading at and the amount of capital that we have to allocate to returning to shareholders in both forms and potentially in the future. It could be some mix of both of those but today the first step really.
Does getting the dividend back online.
Not to build on that.
That's what gets it.
Yes.
Okay.
Do you have an authorization now to.
To buy back stock.
We do we do it hasn't been used in and some time, obviously, but there is a pretty substantial.
Authorization is still outstanding.
Okay great.
Thanks for the color on that the other piece I guess.
Which was sort of part of normal.
Pre COVID-19 was.
Building theaters.
Peter as being fairly mature definitely mature business domestically.
<unk> growth through consolidation.
I think a strong track record there.
Building EBITDA effectively.
Through M&A, just curious if youre seeing any.
Increase in deal activity your motivation to sort of.
Now start leaning forward and maybe being more proactive and looking for opportunities here and expand their network.
Yes.
Are always open to opportunities.
There is rumbaugh.
Rumblings, but nothing to report to you today and it's as though there is lots of big stuff happening.
<unk>.
I think that.
I think there's been enough stability.
Look I think there are some people who might be under pressure with different financial situations, but.
For the most part I think people are just sort of in a let's get let's get it stabilized and then we'll go from there I think we're still at that period would it surprise me then if somewhere down the line Couldnt tell your wins and people start to say, okay I've had enough.
Yes.
I wrote it out and now I'm done that Wouldnt surprise me and we could be people to be positioned to take advantage of that and let's take advantage of it or at least to capitalize on it and to offer people way to do that.
We'll be open to it.
And we think our balance sheet provides us a position of strength should those opportunities arise.
Alright, Thanks, guys best of luck.
Okay.
Thanks, Mike.
Our next question is from Paul finale at Gabelli funds. Please go ahead.
Good morning can you hear me.
Yes, good morning, Paul.
Hi, how are you doing great corner.
Thanks for taking my questions.
Just two from me.
Talking about the box office weightings toward the top movies in the quarter.
Obviously, you have avatar coming out this fall mission impossible next year that should kind of continue the trend.
Long do you expect that sort of weighting towards the top movies to persist.
The puts and takes that reverts over time, and I guess sort of in that vein.
Obviously, a lot of those big films are optimized for large format screens. So how does that mix evolve as maybe that trend normalizes.
Yes, I think what made this quarter a little bit different is we had three blockbusters you normally have at least one in a quarter, perhaps perhaps too sometimes.
But the three together really.
Drove a higher percentage of the total box office.
And as we look forward over the next few quarters.
Don't see things aligning to kind of recreate that that dynamic.
But.
Even with the three ultimately the film cost as a percentage of box office revenues was slightly higher than where it would have been in 2019 pre pandemic.
But not not hugely higher so it's just notable because it was a lot higher than where we were at last year. When we just didn't have the same number of films. We had some legacy contents, we had a number of different things that drove it to be abnormally low so.
I think we're on a run rate basis, probably.
And a pretty normal place.
Actually if you look at the ultimate the message that we really want is an industry that we won't Hollywood to here is that we need a broad breadth of film both small and large as I said as I said recently and you can't we can't we aren't going to survive on just general alone.
Three square meals, a day, and and frankly Hollywood needs that too because it's not.
Yes.
They want they need.
There's the overall ecosystem of media and then there is sub <unk> systems in the theatrical as a sub ecosystem and I think the benefits that we talked about earlier to their streaming services are very R. R.
Bearing out in the data and if they want that to continue and they want a place to really maximize the revenue, especially on their big Tentpoles. They need also to.
Feed us.
Other films as well and not every.
The product is not every product in the grocery store has the same margin.
And I think that the.
In order to maintain our ecosystem they all need to be aware of and they are aware of the fact that we need.
Wide breadth of films.
Well it benefits everybody.
And so that's the message that we have to keep delivering.
Thanks, That's helpful. And then I guess just the last one for me.
Early learnings from the movie Flex subscription products any other color you can put around that.
No.
For us.
The Big question is depth of the market is that going to be how the whole.
Betting the future of the company not a subscription service.
But but we think again, it's an important piece of what we're doing and it's an important piece of building.
Talk about in the hotel business, sometimes of shrinking the size of the hotel by taking a certain number of rooms, and we devote them to a to a group of certain nature and then by doing that we're able to then sell to other rooms at even more at a better price in a way by building in a base of people.
Revenue recurring revenue stream, that's really helpful. And then also get getting people to start seeing those smaller in those mid size movies and even to as we've seen the surprise I think the other thing we haven't thought as much about was at the beginning of it was extending the runs of movies. We're seeing that's really been even some of the bigger films, we're seeing some of the studios.
Let's try this isn't a matter we are totally in test mode.
But it's.
<unk> seen the scene.
Seeing that the bigger films later in their runs going into the program.
Is good for them as well and so and at the end of the day. This has to be something that really is going to be an industry wide idea. It can't be something that's just for us I mean, just for us it's not going to be enough. I mean, these have to be beneficial to again to the entire theatrical ecosystem. So.
The question is how deep is that market is enough to warrant all the things that we're going to do it but the initial signs are promising but we'll be back in more calls in the future like and how it's going.
Great. Thank you.
Thanks, Paul.
Our next question is from Andrew Shapiro from Lawndale Capital Management. Please go ahead.
Alright, thank you.
With your.
Bank agreements.
Somewhat.
And you needed to be overcome for the stock buyback, let's talk about <unk>.
<unk> Avenue.
Shareholder value creation.
That is.
The enormous economies of scale.
Our available through consolidation and acquiring synergistic chains lot of private equity owned chains.
Which are heavily leveraged.
Or not as well positioned as Markus has in terms of affected you have deleveraged very nicely.
You've seen opportunities out there or is the board and management focused on trying to pick up perhaps.
Accretive acquisition at this time before the recovery.
De leverages those potential acquisition targets.
Look as I said earlier in the call we have seen a ton of activity just yet, but we are our fault line is open.
That's interesting.
But I don't as.
As I said I think I think people are in.
Because between the.
The government subsidies that were put in place a lot of these guys were able to really weather the storm, okay, and they're able to get by and they are waiting for a period of stability before they do and I don't think theres a huge amount of pressure.
In some of the some of the surface that you referenced I also just would address the point of scale economies of scale. There are I don't know that I would call them enormous.
But there's certainly benefits too.
Sure.
Acquiring surface and we see them.
But.
But in a way remember these are local almost franchise like businesses.
The economies of scale at the national level, making a movie needs big National economies of scale, where you can advertise.
Cross National.
National.
Marketing.
Cheers.
Yes.
Don't need the.
SG&A infrastructure, you don't need the second film buyer, you don't need a second CFO et cetera et cetera. So there's a lot of that was of the costs I guess I'm referring to.
The fixed costs.
Below the line in the theater margin.
Youre absolutely right I, just didn't want to quantify them is enormous.
Okay.
As I say better than a poke in now with a sharp stick.
Yes.
So I just wanted to make sure I mean youre right.
Yes, because your relative size to cinemark Theres, a big gap between number three and number four.
So just those opportunities it seems and I didn't know if.
Strategic planning wise, our focus wise you guys had an eye to wanting to add a wave pre pandemic that you were starting to pick up the pace of.
Accretive growth acquisitions, and they didn't know if that was of interest to the family and to management.
Two.
<unk> be looking out for taking advantage of that if there are.
Those circumstances that exist out there coming out of this pandemic.
People have decided.
Some family owned chain, they've had enough and they don't they don't want to continue.
I think the way to look at Anders to say look if you look over the history of our company. We are opportunistic and we are conservative and those two things will go hand in glove and we will continue to be that way no matter, what the business opportunity. So with that so yes, we will continue to be that way.
Alright, well, thank you and congrats on over indexing.
Thank you Andrew.
At this time, we have no further questions in the queue. So I will hand, the call back.
We'd like to thank you once again for joining US today, we look forward to talking to you again in early November when we release our fiscal third quarter results until then thank you and have a good day.
This concludes today's conference call. Thank you very much for joining you may now disconnect your lines.