The Marcus Corporation Q1 2023 Earnings Call
Putting actions taken during fiscal 2022 in response to inflation contributed to the balance of the increase in our admission per caps.
Our average concession food and beverage revenues per person at our comparable theaters increased by 5% during the first quarter of fiscal 2023 compared to last year's first quarter.
The increase in our concession and food and beverage per caps was driven by three items.
First more customers bought concessions food and beverage we refer to this as our hit rate, which we define as the ratio of concession food and beverage transactions to box office transactions.
Second customers bought more resulting in higher check averages. We believe customers are buying more as they make an experience of going to the movies and in part due to our new food and beverage menu introduced in the fourth quarter of last year, which we believe has positively impacted check averages.
Third prices were higher compared to the first quarter of last year as we are still seeing the impact of inflationary price increases implemented during 2022.
Our top 10 films in the quarter represented approximately 74% of the box office in the first quarter of fiscal 2023 compared to 85% for the top 10 films in the first quarter last year.
While there was an overall broader slate of films in the quarter.
There was not a lower concentration among the performers at the top at higher film cost and the rest of the slate performed better than last year's first quarter, resulting in an overall film cost as a percentage of admission revenues that was essentially flat.
Turning to our hotels and resorts Division revenues were $55 8 million for the first quarter of fiscal 2023, an increase of 6% compared to the prior year.
Sale of the Skirvin Hilton late in the fourth quarter of fiscal 2022 had a $3 $5 million negative impact on revenues in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022.
Excluding this impact comparable hotel revenues in the first quarter of fiscal 2023 increased $6 7 million or 13, 6%.
Total revenue before cost reimbursements at our seven comparable owned hotels increased over $4 8 million or.
Or 11, 5% over the first quarter of fiscal 2022.
Typically the first quarter is impacted by our normal seasonal winter headwinds that are predominantly Midwestern portfolio of owned hotel properties and while this winter was certainly no exception demand was also negatively impacted by an unusual lack of snowfall that limited the ski season at our Grand Geneva Resort and Spa.
We did continue to see improved conditions for group events compared to the first quarter last year.
Revpar for our comparable owned hotels grew 17, 5% during the first quarter compared to the prior year breaking out the first quarter numbers for the comparable owned hotels more specifically our overall revpar increased during the fiscal 2023 first quarter compared to fiscal 2022.
<unk> was due to a six 6% increase in our average daily rate or ADR and an overall occupancy rate increase of approximately five percentage points.
Our average fiscal 2023 first quarter occupancy rate for our owned hotels was 58%.
According to data received from Smith travel research comparable competitive hotels in our markets experienced an increase in Revpar of 25, 6% for the fiscal first quarter of 2023 compared to the first quarter of fiscal 2022.
Again, our competitors are playing a bit of catch up we believe that after our owned hotels outperformed the comparable competitive hotels with significant market share gains during 2000, 22021, and 2022, the comparable competitive hotels have begun to catch up resulting in revpar growth.
Rates that were higher than our owned hotel portfolio.
With this said the Revpar index for our hotels remains in excess of 100, indicating that we continue to take more than our share of the market, while normalizing closer to our pre pandemic index levels, which historically ran above 100.
In addition, the impact of the slow ski season, which has a greater impact on room demand at Grand Geneva. During the winter months allowed other hotels in our competitive set that are not reliant on the ski season to capture some market share during the quarter and resulted in our lower revpar growth.
Finally, our banquet and catering operations continued to perform well.
This is reflected in our food and beverage revenues, which were up four 7% in the first quarter of fiscal 2023 compared to the prior year.
The hotel adjusted EBITDA was negatively impacted by approximately 500000 from the sale of the skirvin compared to the first quarter of last year.
As we compare our adjusted EBITDA to the first quarter of last year, it's important to point out that in the first quarter of 2022, our expenses benefited from operating the hotel's below our targeted staffing levels due to labor shortages in the first half of last year.
With an improving labor market, we have been able to sustain more appropriate staffing levels for the current demand and occupancy levels, resulting in a negative impact to adjusted EBITDA from higher labor costs with increased staffing levels compared to the prior year first quarter.
We continue to work through finding the right balance of labor and there were some pockets of labor staffing inefficiencies in the first quarter, resulting from a softer first quarter than expected at some properties.
With this said, while our staffing levels are higher than last year. They are below our pre pandemic levels.
It is also important to highlight that we have seen a significant improvement in customer satisfaction scores compared to our scores last year in the first quarter. When we were short staffed and we believe customer satisfaction is key to the long term performance of our upper upscale hotels and resorts.
In addition in the first quarter of 2022, adjusted EBITDA benefited from an all hotel buyout at one of our condo hotel properties and event that doesn't happen every year and did not recur in the first quarter of 2023.
Finally, the first quarter of 2023 was negatively impacted by unfavorable timing of maintenance and repairs compared to the prior year.
Shifting to cash flow and the balance sheet, our cash flow from operations was a use of cash of $7 7 million in the first quarter of fiscal 2023.
Compared to cash provided by operations of $6 5 million in the prior year quarter.
Which included approximately $28 million of nonrecurring income tax refunds and government grants excluding.
Excluding the onetime benefit from receipt of these items in the prior year cash flow from operations improved approximately $14 million or 64%.
As a reminder, our cash flow from operations in the first fiscal quarter is historically impacted by seasonal changes in working capital, resulting from the slowdown in our businesses following the peak holiday season.
And by the timing of various year end accounts payable and compensation payments.
Capital expenditures during the first quarter of fiscal 2023 were $9 5 million compared to $3 1 million in the first quarter of fiscal 2022.
A large portion of our capital expenditures during the first quarter were invested in renovation projects in the hotels business with.
With the balance going to maintenance projects in both businesses.
At this early stage of the year I have no reason to make any major adjustments to our previous estimate for capital expenditures for fiscal 2023 of $60 to $75 million recognizing that the timing of several of our planned expenditures are still just estimates at this time, we are still finalizing the scope and timing of various projects.
And the actual timing of these projects will impact our final capital expenditure number for the year.
We will update our capital expenditure estimates as the year progresses.
We ended the first quarter with $10 million in cash and over $223 million in total liquidity with a debt to capitalization ratio of 30 ratio of 30% and net leverage of two one times net debt to adjusted EBITDA.
We continue to believe in maintaining a strong balance sheet with a manageable amount of debt, including owning the majority of our assets.
We view the strength of our balance sheet as a strategic advantage that provides flexibility and allows us to move quickly to invest in growth for the long term when actual opportunities are identified.
With that I will now turn the call over to Greg.
Thanks, Chad.
Good morning, everyone today is may 4th.
Very important date to star Wars fans out there because as they say may the fourth be with you.
We ended the year with a plan for growth and with the optimism that 2023 was expected to deliver another year of improvement in our businesses.
During the last couple of years working through the pandemic the pace of progress between our two businesses have been different and changes from quarter to quarter.
Throughout 2022, our hotels division led the recovery back to pre pandemic levels revenue levels and delivered a record year.
While our theater Division has had an extended recovery continued into 2023.
The first quarter generally played out as we expected 2023 to develop overall with theaters, leading the growth and improvement in our results and with the hotel is still growing comparable revenues, but at a more moderate rate of growth in fiscal 2022.
With the normal seasonal headwinds in our hotel business. The first quarter is always challenging so it's incredibly helpful. When we're able to get off to a good start as we did this quarter. The first quarter that we're reporting today continues to make year over year progress and we're pleased to be sharing these results with you.
I'll start with theaters.
Chad went over the numbers with you, including our continued significant increases in per person revenues as we shared with you on our last call.
Senior Division got off to a much better to a much stronger start than last year with higher attendance driven by a significantly stronger film slate led by carryover avatar, the way of water and pushing boots the last wish.
We were pleased to see the quantity of wide release films with exclusive theatrical windows increased significantly with 'twenty. One ride releases in the first quarter of fiscal 2023 compared to 12 in the prior year's first quarter.
Wide release films or what really drives our theater business.
And we've talked in the past about the importance of having a more consistent cadence of new theatrical wide releases to rehabilitate lies audiences to moviegoing.
This year's release calendar started to run a more steady weekly theatrical releases that began earlier in the year compared to the first quarter of last year.
It was also helpful for the number of films outperformed industry expectations for both their openings and their overall runs.
We were particularly thrilled to see this outperformance come from a variety of genres and mid sized films, including Meghan.
Called auto.
For Brady and cocaine there.
Having a balanced film slate that includes a healthy portion of box office coming from these mid sized films is critically important to the overall ecosystem of filmed entertainment.
She had shared that our admission revenues for <unk> grew nearly 9% year over year half of which was attributable to an increase in <unk> ticket sales driven by avatar.
I'd like to provide an update on our various strategic pricing initiatives that contributed to the other half of the admission per cap increase in the quarter and those initiatives that we expect will impact per caps throughout 2023.
As we approach to ticket pricing, we're always trying to balance supply with demand to optimize price and maximize attendance.
Our company has a long history with revenue management and hotel business.
Where we are essentially pricing rooms dynamically everyday also known as delivering the right price to the right customer at the right time.
We try to apply that philosophy to our theater business.
While we don't go as far with dynamic pricing in our theater business over the last nine months, we've made several adjustments to pricing for peak demand periods. While also continuing to provide discounts for our value oriented customers.
These changes include took pricing with higher ticket prices on holidays and weekends.
As well as lower ticket prices uncertain weekdays, such as student Thursday Young at Heart Senior Friday, Matt amazed and of course, our hugely popular in newly rebranded value Tuesday.
We let the industry in 2013, when we launched our first Tuesday discount program known as $5 Tuesday.
It was simple.
So roughly 50% discounted ticket on a weekday with otherwise low attendance with the goal of appealing to value oriented customers who'd stop coming to the movies at a regular prices.
To make it an even better deal we provided a free complementary sized popcorn, but we quickly discovered was that there was a significant group of price sensitive customers.
We stopped coming to the movies are never came at all who have become regular movie goers at this price point.
And it became an important component of our customer base.
I'm proud to say that we've committed been committed to our value oriented customers since the launch of our Tuesday discount program and we held the Tuesday ticket price at $5 for a long time nearly 10 years.
Last year's inflation put pressure on our costs across the business, we started to explore how to adjust our tuesday pricing, while still providing a great value for our customers and making the program even better.
We tested several different Tuesday changes in different markets beginning in October last year, and we were pleased to rollout our new value Tuesday program on March 28th.
Our new program features $6 missions for members of our free to join magical movie rewards loyalty program $7 missions for non loyalty customers.
60% off surcharges for our ultra screen and Super screen premium large format tickets.
Perhaps most importantly, 20% of all concessions food and non alcoholic drinks for MMR loyalty members instead of a small free popcorn, which appeals to many but not all our customers can now enjoy all of our great menu items from shapiro's pizza to burgers sandwiches wraps wings and traditional.
<unk> at a 20% discount on Tuesdays.
One of our customers pick up their order concession stand or have it delivered to their recliner seats in theater dining. They now can drive all of our great food options at a great value.
We believe that the expansion of Tuesday discounts to our entire food menu provides a more affordable offering that will increase the number of customers who are buying concessions food and beverage and also increase how much they're buying with the goal of increasing our overall F&B per caps.
While our new value Tuesday program launched in the last Tuesday during first quarter and the week since its launch the results have been positive as we expected from our pilot tests, we have not seen a negative impact on attendance or market share as a result of the admission price changes and we're seeing positive impacts on our per caps anecdotally customers who've been.
Pleasantly surprised when they learned of our new expanded discounts on food and beverage.
As we look ahead, the second quarter in our theater Division is off to a great start and of course I have to start with the Super Mario Brothers movie emphasis on the word Super Grateful that has blown away all expectations and it has played exceptionally well in our circuit with family audiences.
Beyond just the smashing smashing success of Mario April has continued the recent trend of a more balanced steady diet of wide release films across several genres with Dungeons and Dragons honor a month thieves.
<unk> and evil did rise all exceeding expectations.
Last week, Chad Niagara with our theater team at Cinema Khan and there were a couple of key observations that we came away with first.
There was a significant increase and the excitement and energy around theatrical exhibition overall.
The momentum in our industry feels much more positive than it did a year ago or even just a couple of quarters ago.
And our studio partners delivered a message that reaffirmed the importance of theatrical exhibition to the overall filmed entertainment ecosystem and our role in elevating their content.
We are encouraged by the additional releases that have been added to the film slate for 2023 in the recent months and we're now projecting 100 to 110 wide release films for the year.
Second we got a closer look at the film slate for the rest of 2023% to 2024 and based on what we saw we are really excited with what's coming there really is going to be something for everyone from action films like fast X, Indiana, Jones, and dial of Destiny and mission impossible dead reckoning to family and animated films like the little Mermaid element.
It'll and haunted mansion to superheroes like the flash spiderman across the Spyder version Guardians of the Galaxy volume three opening this weekend plus so many more in genres like comedy romance drama horror, we believe it's going to be a great summer films that will continue to bring audience is back to the theaters.
Shifting to our hotels and resorts division, you've seen the segment numbers and Chad shared some additional detail, including the bridge from our reported results to our comparable hotel results. Following the sale of describing hotel late last year.
Even the most of our company owned hotels are located in the Midwest, We typically lose money in the division during the winter months in the first quarter of fiscal 2023 was no exception.
Add in the winter without snow in our neck of the woods and you get a very disappointing ski season. So we certainly had some challenges in hotels for the quarter, but the team worked hard to navigate through.
There are a few highlights from the quarter that I would like to point out.
Overall revenue before cost reimbursements at our comparable properties grew over 11% compared to the prior year.
We continue to see a strong average daily we continue to see strong average daily rates and improving occupancy.
Revpar grew at all seven of our comparable owned hotels with average daily rate growth at all seven hotels and occupancy growth at five out of seven hotels, resulting in overall revpar growth of 17, 5%.
As Chad mentioned, while we underperformed the revpar growth of our competitive sets when you dig into why it was ultimately because occupancy at our hotels recovered faster in 2022, and the competitive hotels in our markets in other words competitive hotels in our markets. We are able to grow occupancy more than us this year compared to last year because of hydropower behind they were.
Our occupancy rates last year.
We still feel very good about the performance of our assets in their markets and their ability to take more than their share of the market.
Group business in the quarter continued to grow over the prior year, particularly mid week and the bookings continue to look good.
Group room revenue bookings for the remainder of fiscal 2023, our group pace in the year for the year are running ahead of where we were at the same time last year.
Banquet and catering space pace for the remainder of fiscal 2023 is similarly ahead of where we were at this time last year.
As we prepare to renovate the meeting and banquet space at Grand Geneva, and the Pfister. This year, we feel good about the outlook for group business. According to a recent Expedia survey, 71% of meeting planners surveyed indicated group travel is more important now than prepaid.
We believe our properties will be well positioned to capitalize on this trend.
Leisure travel, which has been so strong for our owned hotels as at the beginning of the pandemic did show some potential signs of softening. This is not particularly surprising given the cold winter and wet spring we experienced in the region, but we will continue to watch closely for further indicators broader changes in leisure demand.
Finally, Chad mentioned, our investments in the quarter and renovations in our owned hotels yesterday, we announced the renovation and redesign of Grand Geneva Resort and Spa is 358 Guestrooms will complete in time for Memorial day weekend at the end of this month.
This is the third investment in a series of recent extensive renovations for the resort, which included a lobby and lobby lounge renovation plus the launch of its 60 seat outdoor dining venue in 2021 completely new guestroom bathrooms, and heating and cooling for guest comfort in 2022.
And now newly transformed Guestrooms and suites, featuring a warm contemporary design.
Starting this week August checking and we'll enjoy the newly redesigned rooms in the coming months, we will finish this phase of the resort renovation with redesign meeting and event spaces.
I've talked in the past about our special hotel assets that perform so well with leisure group and business travel customers and Grand Geneva is a truly special asset that has appeal directly to the leisure traveler.
Tens of Midweek conference and stays for the weekend.
We are thrilled to complete this project and opened the refreshed rooms and time to deliver an exceptional experience to our guests. This summer.
Finally, I would like to once again express my appreciation for our dedicated associates at the Marcus Corporation. They.
Their outstanding work and commitment to serving our customers is responsible for our success and we appreciate all that they do every day.
Our most important asset so on behalf of our board of directors and our entire executive team. Thank you to all of our associates.
And 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 now to thank you Pat now.
J James remind picasa 19.
Glenn. Thank you asked your question. Please ensure that your line is muted.
Our first question today comes from Erik <unk> from <unk> Securities. Please go ahead, Amit Your line is now open.
Thank you.
Good morning, guys.
Two questions.
The hotel segment.
I guess when you talked about the competitive hotels.
In your market kind of catching up on the gains that you've made over the prior.
Two to three years I guess, maybe what do you see as a result of that within your market the markets and overall demand ramping enough to accommodate.
Kind of everything you need.
To make you need to make changes in your markets on pricing or marketing to adjust around kind of the competitive change your competitive landscape.
No not really I don't think so no.
Because it does not if what youre, saying is like are we havent really lower our price to remain competitive now.
We stayed consistent with our philosophy and how we are charging I think it's just you know.
It's just.
One of the advantages of <unk>.
Back to how we operated during the pandemic and you all remember we were very <unk>.
<unk> delivered about.
Saying, we want to get open as early as we can we want to be bid.
Business is it really as we can that allowed us to keep our teams in place in ways that others were certainly in our markets. I mean, there were some hotels that were closed.
And our markets certainly much longer than we were that gave us a leg up.
And if you go back and you go back into our albeit his story you can go back to a different cycles and remember that we were able to make investments in down cycles, we're able to perform better in down cycles because of how we structure our balance sheet and this was no different and so.
And so what happens is as things turn we come out ahead, but.
We we do end up having that there is some catch up but yet we still end up ahead at the end of the date and share but.
It's just catch up.
Eric I would just I would just add it's not really changing what we're doing when you think about our ADR increase all seven of our hotels grew ADR in the quarter and we still continue to grow occupancy at five out of seven and for the division overall, so we're still growing it's just that the other.
<unk> in our markets.
Have more occupancy to fill but but we're still leading the market.
Got it that's helpful and then.
I know you are weaker.
I think time timelines are not announced youre looking for that but kind of after the sale of the skirvin.
<unk> Hotel in December can you just give us a better sense of kind of when how rigid.
We're trying to guide you on again when the other.
Kind of.
Deadlines, maybe around is going to be other hotels that may be in that spend or not spend decision process just didn't get a better sense of kind of win.
We may or may not see.
Either ramp in spending or not kind of flowing into the model.
Yes, so we've got a couple of others that we're looking at Eric.
And I would expect sometime mid to late summer, we will have a real good sense on what the timelines on those projects look like whether or not we're going to be moving forward with them. We're still trying to do everything we can to get.
Net cost firmed up to get other external support frankly for some of these projects.
And so we're working through that dynamic and that takes some time, but.
We will have more to say we hope in the next couple of quarters.
Got it.
The follow up on that one.
It is the main.
Point on that at this point, you know kind of what the amount is likely to be on required on those properties and it's whether or not you think.
That spend you will get the ROI from it versus the sale or at this point is that that amount still a question mark.
I'll start and then I'll, let Greg comment so we have a real good sense of what the investment required would be it really is whether or not the ROI on the project is there and then what we can what we can do to help get get local support in some cases to make to get these projects too.
It makes sense.
I think I think at the end of the day and we're committing to our hotel business and.
So what the calendar of that is going to be because whether it's even in the assets we see it could be.
So we haven't really said what is the what is the exact we don't we don't want to give a calendar yet because we just can't because it'll just depend on.
Zero externally beyond our control in terms of specific assets as Jen alluded to what kind of support.
The significant assets like these do involve certain levels of external support that you can go beyond our balance sheet.
And I'm, not saying equity financing and I'm talking about.
Yes.
Public financing things like that and how.
How those shake out will have bearing on what we do but if we don't do a certain project.
I move that capital somewhere else.
But that could take a while.
We just don't know what the calendar is.
Got it thank you Luke.
Okay.
Thank you.
Next question comes from Jim Goss from Barrington Research. Please go ahead, Jim Your line is now open.
Alright, and good morning.
You mentioned that the <unk>.
Avatar represented about accounted for about half of the increase in admission prices.
I assume thats because it was intended to be viewed our mpls screens. So I was wondering if you could talk about the pls share of the mix in the first quarter and how you think that would work.
In the following quarters.
Yes, that's right Jim so the half of the increase in the per cap was due to the increased mix of <unk> ticket sales with <unk>.
Yes, right. So the half represents represents three D.
The overall pls mix.
This quarter was actually a couple of points lower than it was last last year in the quarter.
And when you look back at the mix of films.
With Spider man playing into into Q1 last year. That's that's.
<unk>.
Really why.
We're not talking about big changes so.
Im not going to give our exact pls percentage of total ticket sales, but that's generally been pretty stable.
<unk>, we built out the number of Pls and done that in most of the places where we can do it we added one pls screen in the first quarter this year.
We continue to look at are there other opportunities in the circuit to add pls, but.
I don't expect big step function changes in our Pls composition like we were building pre pandemic.
Okay. So are you charge by the way.
For <unk> <unk>.
Separately.
Both.
Sorry, Jim I didn't catch that.
I just meant where was there an upcharge for both Tls plus <unk>.
And is it takes precedence.
The impact of the change in Pls.
Percentage of Peel off of our total ticket mix was not significant it was really the three D is an increase but there is the first half of the increase is due to three D.
Okay. Thanks for clarifying.
Im sorry, Greg, where you're going to say something.
I was just going to say what it does reflect as we have probably one of the more significant installed basis of pls in the industry relative to size.
And as there has been a move.
Two customers wanting to experience that way.
It because obviously the ticket prices are higher.
It's it's been to our benefit.
Okay.
The food and beverage.
Increase that you're referring to is this sustainable.
The new level, we should assume in the future.
Customers used to this.
Yeah.
Okay.
That way it should be and we can grow from there.
In terms of the purchases and more per order and the higher prices.
I think look it's.
Okay.
If I had if I had a crystal ball I don't know.
I would say with I don't know for sure. We don't know for sure but there are some things that you can look to to say.
What are the things that we Havent I don't know as we get more customers and the lines a little bit longer is that going to impact those per caps I don't know.
What happens in the economy, I don't know, but sometimes that can go either way all of a sudden the families that are going out for dinner or may just big dinner and a movie theater and so that can cut both ways.
Things that we know for sure.
With our change to Tuesday, we know it's impacting our per cap that's a positive.
So.
That's not.
That's going forward, so thats a positive to per caps could offset anything so.
And we know as we get better with our App and we're really still in the early days of that.
The <unk> the ability to up sell the ability to do a last time offer those those features of the <unk>.
When you've got a long line and you're a young concession attendants standing at the concession line may not be trying to think how do I upsell that every customer I am just trying to get through the flurry, that's coming out and even the 730 show, but when the App isn't worried about that it just always up sells and so we think theres going to be up we know that theres up we're already starting to see some.
<unk> of it so there is so.
I can't I can always tell you, what we're seeing and what the what can with different things that can happen, but I think it's a positive story.
Okay, and maybe finally.
Let me share.
The Tuesday audiences are second in a week, some who on Friday, I think you've talked about that phenomenon and does your rewards program provide data and all of this.
Yes, it does as we can see who is coming.
I don't I don't have that don't know, but we don't have that data may be leaders wants to test.
On the call it could tell me the number if they have it off the top of their head, but I don't know that number and where we know there was a measurable percentage of it did.
And that's one of the things we liked about it as people.
Look it is the as we get back to that more normal cadence of release, we have more opportunity for that as well when theres less releases theres, just less opportunities for people to double up.
But we know we always knew that was one of the benefits.
For certain segments and yes, our rewards program contract that it is.
Now again with the change in the value Tuesday, and the the suite the discount for for being in the program. We're going to obviously have more members in the program and so we have more ability to track and have a better relationship with those customers.
Alright, thanks very much appreciate it.
<unk> came in and that we can answer your questions.
Let's see what the answer was and the answer session. Obviously.
[laughter].
There was.
That is not.
There was a specific on the on the upcharge for <unk>, which is.
Ultra screen it's.
<unk> is a $3 upcharge, so with the dollar.
I'm sorry.
<unk> is an extra dollar and ultra screen that was too I think Eric.
Eric's question, Okay. So maybe the answer on maybe the answer on overlap will come in shortly.
Yeah.
Alright, Thanks, Joe Thank you much.
Thank you. Your next question comes from Mike Hickey from Benchmark Company. Please go ahead, Mike Your line is now.
Thank you Greg.
Yes, good morning, guys.
Nice quarter congratulations.
Just a few questions from us.
Greg You mentioned cinema.
Great.
The Buzz was big this year.
Touched on I think some important narratives spinning out of the conference. This year, but just curious if you could double click on.
So product that obviously seems like the crux here when we look to bridge current box office the pre pandemic just curious any.
Incremental tidbits, you might have on sort of the commitment I guess from.
Traditional studios in terms of delivering wide release or otherwise.
So product I know you raised the numbers for this year then when you think about this year and next year.
Sort of bridging to where we were in terms of volume.
<unk>.
Enough here to get us there and then.
How are you thinking about stream.
Streamers.
Then at least my view, Greg you've been somewhat cautious there are a lot of that may be windowing, but it looks like Amazon and <unk>.
Apple standout this year in terms of real commitment.
In terms of putting some theaters in some some bigger films at that but just sort of curious your thoughts there.
Follow up.
Well.
I'll sort of talk generally.
Jack can add some specifics on sort of where lease numbers, but.
The.
<unk>.
I'm not ready to a victory lap.
I think we have to keep pressing the case.
The case for for theatrical.
Part of that ecosystem and a valuable part and it's good to see the players recognize that it's important.
That's the good vibe that we're all that we're all feeling in hearing that as people say, yes, you know what.
We would like some additional revenue and we would I would sort of describe it as.
Affinity.
Awareness and revenue right. So if you if you have if you make film content.
Let's start with I like some more money.
Put it in a theater and remember with the <unk>.
Old World of prints and advertising Princess gone so it really does recover your marketing costs.
If you would now have you now have in addition to revenue you have awareness. The second point I was making and that is that film when it now shows up in the ancillary markets actually has some meaning to people when they're looking at the one.
150 titles as they scroll through their streaming menu.
They see that they see that film and they say Oh, yes, I remember that that meant something so that that catches their eye and drives them to want to see it and then.
Then there is the.
Infinity, which is that something that that I think is so important.
To anyone with.
I think it was a product right. This idea that people come to me and they see.
Yes.
They know who I am and they will say.
And went to the movies with my dad.
Every month, we go every month and it's really important to us to do this I had someone come cry together.
Last month, how important it was during the pandemic to go to them.
No one is going to no kids are going to say I remember watching Super Mario for the first time on the couch with my parents.
They'll enjoy it but theyre not going to say that theyre going to say I think we're going to the movies for my first time with my parents to Super Mario What Ive got Super Mario was real.
My hand, they bought me my popcorn that affinity with the product is so important and I think that those things combined are what.
What we're seeing.
At the at the.
Cinema Con that realizations and the streamers because again their studios com streamers.
So those studios are seen.
And Thats why they want to participate and Thats I think thats.
And Thats a good thing and so we have to keep pressing that business case, because that all of the business case for why there is a lot of emotional reasons why people like theaters, but frankly I just laid out the business case for it and we have to keep pressing that and we will and so we're seeing the results of that with more film coming into the ecosystem to Chad if you want to be good.
Yes, I mean, just in the numbers. So as you probably noticed we took up the guide on the number of wide releases are touch we're now at a 100 to 110 and I'd just say we tend to be a conservative bunch. So there feels like there is probably some upside to the range.
As we progressed through the year things seem to be dropping in this year more than they seem to be sliding out of the calendar year. So that's a very different feeling in last year.
And from what we're here what our film buying folks are hearing is there may be a few more things that hopefully hopefully the drop into the holiday period later in the year. So we'll see but on the bridge back to pre pandemic wide release numbers at the top end of the range at 110 year, starting to get within throwing distance of the 115.
120 that we had before so we're not we're not there yet.
But we're making progress and when the streamers start to layer in incremental content.
We're very encouraged.
Helps.
That I would add to Greg's comments is when the films from the streamers perform well and over perform like air did and continues to play really well in our circuit.
I think that just hammer home the cases as to why they oddities. So some of the other titles coming later this year, whether it's Napoleon are killers of flower Moon, if things like that we're excited about how those films may perform to continue to persuade value streamers of the value proposition.
Thanks, Thanks, Greg I appreciate your thoughts there.
I guess when you.
It looks like you are.
Either apparel.
Greg is.
Down Q.
For the quarter.
I'm not sure if that's just owned versus managed or how you're thinking about the it looks like it's gone down a bit sort of adds to the.
Broader shutdown screenings, which I think.
<unk> sort of posed.
Since the pandemic I think is about 5% of the screens are gone dark.
Just curious if you're seeing obviously the rig goes back that's obviously when you think about.
Dark screening tier screens.
Shut down whether its permanent or temporary do you think we've sort of.
Reached a bottom here or do you think there's more screens that need to come out of the system.
On the flip side, you have created a tremendous amount of value over the years by.
Being able to acquire the.
Theater.
And adding sort of the market mix into them, whether it's recliners and food and beverage and sort of grown.
The overall EBITDA it seems like that then sort of the main driver for you.
Obviously your theaters are going down but are you actively.
Thinking about deals trying to fine.
Theater is especially with the backdrop you gave was kind of a decline in all the buzz and the <unk>.
Pork and studio streamers believes.
Believability that the theatrical medium is going to continue to grow over time and sustain itself are you now in a position to.
Looking to adding adding screens.
Sure.
Let me let me let me take the first part of the question on the contraction I will let Greg take the take the M&A piece. So we did close a couple of locations one in the quarter one since the end of the quarter.
On an ongoing.
Basis, we're always looking at the performance of individual locations.
A financial performance that attendance in local market competitive dynamics.
And what other what other locations we have in a market and so in these cases these were underperforming theaters that we just.
Thought our customers frankly in one case would go to one of our nicer theaters also in that market. So I'll call that pruning, where we're look we're looking at the portfolio and.
Doing what we think makes sense.
Thats, an ongoing process, but as to those specific theaters you shouldnt anticipate those reopening their permanent closures, but I think to your point and that is okay.
I have I've said.
As many theaters as people buy clothes that won't happen because what happens is the landlords looking.
You can say.
It's really an obsolete, which sounds like an example for our seems to be an opposite Peter.
It's either unless it's obsolete or are there is a higher and better use like for the land because generally the buildings themselves are not really that configurable reconfigurable in too. Many other things again, we've done in the past but.
It's not like a sports sporting goods tenant leaves.
Soft goods.
Clothing.
That's not doesn't have that kind of flexibility and so.
As things restructured leases tend to just get restructured in theaters don't go away.
Even some of the obsolete probably could.
What effect the country's national basis in terms of where the grosses will be because the bulk of the grosses don't come from.
A chunk of promotes.
Those smaller.
Essentially obsolete.
They aren't going away.
But again it doesn't matter to us too much because theres not a lot of we're not there's not a lot of market share that we picked it up.
Where we operate as opposed holdups hospitals nearby.
Great collections looking looking at ship market share.
Closings.
So that's sort of the dynamic.
ICL growth.
What's going on in the industry with those as it relates to M&A.
Look there hasnt been much going on and we're looking at things that are.
I would tell you that the one circuit that's in bankruptcy keeps moving around with their rejecting it's hard even though where they are right. This second.
And but they're keeping and so but we will look at those where the opportunities where they rejected in the landlords are looking for a new tenant.
But we would.
The price was right we could make an acquisition I do think that that basically don't one of the dynamics of the minimum on the small end because both of the let's face it nobody else once you get past the big circuits.
Private circuits.
Really big beneficiaries of the shutter venue operators and brands.
S five money.
<unk> got a lot of money from the government.
And that gave them a lot of breathing room, and so a bunch of them I'm sure are waiting to sort of see how things shake out where things stabilize somewhat just like being in the business and as we've always said this is a business that.
Is.
It doesn't have theres not theres no people don't sell on a pattern is not like a lot of bottom buying in settlement of sell it five years or seven years like a private equity fund.
Family owned they sell when it's on their time, if theres nobody took continue to run the business somebody wants to get out now that being said there may be some people who say okay. Yes. This last one wasn't a lot of fun.
I'm ready once it stabilizes, but the financial pressure is not their relationship.
Okay.
Okay. Thanks, guys.
I guess I'll sneak one more on the hotel side.
Yes.
Hilton Milwaukee I'm, just curious Greg.
I think that's sort of a strategic asset for you just given the.
The competitive dynamics.
Yes.
Changed so much I guess in your local market can add color, there wont and sort of where you are in terms of.
This meets capital or not.
Hold versus sell on that property.
Yeah.
As it relates to that specific asset.
<unk>.
It's a strategic asset.
But we evaluate.
Every asset every day.
We will we are looking at that asset right now there's good things happening in the market.
In terms of the Convention center expansion.
But at this point, we're really not prepared to comment.
What's going on with that asset.
But it's important.
Alright, Thanks, gentlemen, and good luck.
Thanks, Mike.
Thank you our next question comes from.
Brian Hamilton with Morgan Dempsey capital.
Please go ahead. Your line is now open.
Hey, guys fixed particular calls.
Well.
So kind of at the back of the line most of my questions have already been hit.
Terrific.
You touched in the past about.
Kid friendly films.
In better for food and beverage of assumptions are you still seeing it with movies like Mario is that being magnified with the use of technology in Europe .
Yes.
So we've had very healthy F&B per caps.
Here in the last the last quarter that we just reported I would say that.
Haven't frankly, I haven't seen our numbers for April yet today is the last day of our fiscal April .
But as I look at as I look at the regular reporting I think that trend continues.
One thing I'd, just say with the family films is sometimes you get this phenomena basket sharing where families are.
Ordering.
A menu item and they're sharing among multiple people and so it can have the effect of lowering the per caps.
But look we are selling more items and we don't take per caps to the bank, we take take EBITDA and cash and so families coming is driving volume.
And volte, driving F&B sales and EBITDA so.
Ultimately, it's a good thing.
Awesome awesome, well like I said most of my questions have been answered.
I appreciate the time and May the fourth be with you.
Thank you.
Thank you. Our next question comes from Chris Carter.
Please go ahead, Chris Your line is now open.
Hi, can you talk a little bit about what you think the real estate values might be of your.
It tells an owned theatre properties I ask because as a longtime shareholders frustrating to see where the stock is trading.
Relative to how well the business is now doing and how close you are to getting back to 2019 levels and I think that as.
I appreciate it more valuable.
Real estate holdings are the stock would not be trading at such a discount to their market values, there might even be putting a.
6% or 7%, 8% cap rate on your.
Expected EBITA anyways.
Anyways anything you can talk to talk to about.
What do you think your real estate values might be.
Apple.
Well.
Yes.
Yes, you are.
Youre absolutely right I think it's I think that is a hugely important point I don't know that we can specifically speak to our estimation of the value.
But.
It is.
I believe that our company when an investor who is looking at our company deserves the sum of the parts analysis.
Is it because it's because they are all very significant chunks. If you say well okay look at the hotel cash flow is easily identifiable and those have multiples that are easily identifiable in terms of comparable multiples.
<unk>.
The theater real estate is derived from a well.
A.
<unk> rental stream that you can that you can derive by looking at our overall cash flow and segment.
Does the rent coverage needs to be and then applying the multiples that you think are appropriate to that cash flow stream and that you have your then you have your theater tenants left and you apply that multiple to that to that remaining cash flow. So you are right. The analysis that is the way to do it and.
That's how I look at it and we have to get better telling that story and we're going to we're going to keep talking about this right.
Youre absolutely right.
Yes, the only thing the only thing I would add onto that is that from time to time, we do sell.
The hotel assets and we sold a hotel in the fourth quarter, providing a data point on valuation for what our hotels are worse and there is a slide in our investor deck that talks about that so.
Agree with Greg certainly that some of the parts and using different multiples for our two businesses.
Is the right way to look at it the other thing I would add is because.
Because we own.
A significant portion of our theatre real estate, we have superior free cash flow generation and as I think our business continues to improve and our free cash flow.
It gets to a more normal run rate on an LTM basis as we go through this year evaluating the company on a free cash flow basis is something that investors ought to be looking at.
Okay. Thanks for that just one other question.
So given where the stock is trading the discount is trading at relative to.
Those.
Those levels, we were talking about why wouldn't you be buying back stock now I mean, it's the.
On a buying your theme.
Theater and hotel properties.
Huge discounts to their markets.
Yes. So good good question with something we continuously reevaluate and returning capital to shareholders. As you know we turned on the dividend back with the third quarter last year, we have paid three of those now and as we get through a year, where we have significant cap.
<unk>, thats going and being reinvested into the business and projects that we believe have very high ROI to benefit our shareholders for the long term as that starts to.
AD and as the business continues to recover and we generate more free cash flow. We will continue to look at the right mix of dividend and potentially share repurchase depending on where the stock is is trading so it'll be an ongoing item that will continue to evaluate.
Okay. Thanks, guys.
Thank you that does conclude our Q&A session for today, So I'll hand, the call back over to Mr. Paris for any additional or closing remarks.
Oh.
Before we get to that question and it was actually Jim is talking about the <unk> stuff I just want to be clear I'm sorry.
And our Pos we pay a $3 upcharge for the ultras and then the <unk> would add $1 you got for total the regular screen <unk> is a $3 upcharge and so we were talking about the benefit of <unk> on avatar at the end of the day look at I'm not sure it's really material discussion because <unk>.
The businesses, it's a special thing it happens once in a while it's not I wouldn't I wouldn't be adjusting our model on the future of <unk> is all I'm, suggesting but I want to make sure that clearly.
Alright, well, we would like to thank you once again for joining US today, if you reschedule allow us please feel free to join us in person or via our webcast for our annual shareholder meeting next week Thursday May 11 that the Pfister hotel in Milwaukee, We look forward to talking to you once again in early August .
We release, our fiscal 2023 second quarter results until then thank you and have a good day.
Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect your lines.
[music].
Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect your lines.