Q2 2023 The Marcus Corporation Earnings Call
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[music]. Thank you.
Good morning, everyone and welcome to the Marcus Corporation second quarter Earnings Conference call. My name is breaker and I'll be your moderator castle today.
At this time, all participants I need listen only mode.
We will conduct a question and answer session towards the end because it's quite different.
If at any time during the call you require assistance. Please press star zero and operate that we'd be happy to assist you.
As a reminder, this conference is being recorded joy.
Joining us today are Greg Marcus Chairman, President and Chief Executive Officer, and Chad, Paris, Chief Financial Officer, and Treasurer of Democracy Corporation.
At this time I'd like to turn the program over to Mr. Paris with opening remarks. Please go ahead Sir.
Okay.
Good morning, and welcome to our fiscal 2023 second quarter conference call I.
I need to begin by stating that we plan to make a number of forward looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the private Securities Litigation Reform Act.
Our forward looking statements may generally be identified by our use of words, such as we believe anticipate expect or words of similar import.
Our forward looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected.
Listeners are cautioned not to place undue reliance on our forward looking statements.
The risks and uncertainties, which could impact our ability to achieve our expectations identified in our forward looking statements are included under the heading forward looking statements in the press release, we issued this morning announcing our fiscal 2023 second quarter results and in the risk factors section of our fiscal 2022 annual report.
On Form 10-K, which you can access on the SEC's website.
We will also post all regulation G disclosures when applicable on our website at Marcus Corp Dot com.
The forward looking statements made during this conference call are only made as of the date of this conference call and we disclaim any obligation to publicly update such forward looking statements to reflect subsequent events or circumstances.
In addition, we routinely post news releases and other information regarding developments at our company the impact our investors customers vendors and other stakeholders.
Look at our two our website markets Corp, Dot com as an important source of information regarding our company.
We also refer you to the disclosures we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP measure used in evaluating our performance and its limitations a reconciliation of adjusted EBITDA to the nearest GAAP measure is provided in today's release.
Alright with that behind US, let's begin this morning, I'll start by spending a few minutes sharing the results from our second quarter with you and discuss our balance sheet and liquidity I'll, then turn the call over to Greg who will focus his prepared remarks on where our businesses are today and what we are seeing ahead.
Then open up the call for questions.
This morning, we reported another quarter of revenue and earnings growth with healthy customer demand and solid operational execution in both of our divisions in theaters strong increases in both our average ticket price and average concession revenue per customer coupled with our film slate featuring an increased number of.
A wide release films to drive the division's growth.
In our hotel Division comparable hotel revenues grew and we continued to see year over year improvement in both occupancy and average daily rates.
I'll start with our consolidated results.
Total revenues were $207 million in the second quarter, an increase of four 3% compared to the prior year quarter.
Operating income was $20 8 million in the second quarter, an increase of 10, 1% compared to the second quarter of fiscal 2022.
Below operating income the one item to highlight is our second quarter interest expense decreased by approximately $1 million or 24% as a result of our lower overall debt level, which was approximately $35 million or 16% lower than the end of the second quarter last year.
Net earnings for the second quarter were $13 5 million, an increase of over 50% compared to the second quarter last year.
Finally, adjusted EBITDA for the second quarter was $38 7 million or three 7% increase from the prior year's second quarter.
We provided a breakdown of our second quarter numbers by segment in our press release.
And as we will discuss today our earnings growth in the quarter was driven by strong results from both of our businesses, partially offset by the negative earnings impact of our sale of the Skirvin Hilton late last year.
Turning to our segment results in theaters, our second quarter fiscal 2023 admission revenue increased nine 4%.
Percent compared to the second quarter of 2022% with strong growth in our per capita revenues offsetting a decrease in comparable theater attendance of three 8%.
The decrease in attendance, primarily resulted from lower performances from the top three blockbuster films this year compared to the top three films last year during the second quarter, which was led by top gun Maverick, partially offset by an increase in the number of wide release films, debuting in the quarter, which Greg will discuss.
Further.
The film slate for the quarter not only featured more wide releases, but once again included a more balanced mix of smaller and mid sized films.
According to data received from Comscore and compiled by us to evaluate our fiscal 2023 second quarter results.
United States box office receipts increased 13, 6% during our fiscal 2023 second quarter compared to U S box office receipts during fiscal 2022.
Our comparable theater admission revenue growth of nine 7% lagged by approximately three nine percentage points, which we believe was attributable to a film mix that was more appealing to audiences in other parts of the U S outside of our primarily Midwestern markets.
We also believe that a dry may and June with few rainy days in the Midwest kept customers outside enjoying early summer weather negatively affected attendance.
Our admission average admission price increased by 14, 2% during the second quarter of fiscal 2023 compared to last year the.
The increase in average admission price in the quarter was primarily driven by one the favorable impact of a full schedule pricing actions taken during fiscal 2022 and at the beginning of 2023 in response to inflation.
And two by the impact of the changes to our value Tuesday promotion effective at the end of the first quarter of this year.
Looking forward as we have now lapped the one year mark of the pricing changes we implemented in mid June last year, we expect our average admission price growth rate to moderate in the third quarter. This year, while still growing from the impact of pricing changes implemented at the beginning of 2023 and the value Tuesday.
<unk> changes this was the first full quarter of the Tuesday changes. So we will continue to see this benefit to average admission price through the first quarter of next year.
Our average concession food and beverage revenues per person at our comparable theaters increased by seven 3% during the second quarter of fiscal 2023 compared to last year's second quarter.
The increase in our concession food and beverage per caps was driven by higher check averages, including the impact of higher menu prices compared to the second quarter of last year. As we are still seeing the impact of inflationary price increases implemented during the last year.
In addition to changes to our value Tuesday promotion, which replaced a free complementary sized popcorn with a 20% discount on all food and non alcoholic beverages positively impacted per caps as our customers bought more items with the 20% discount.
We also expect our average concession food and beverage revenues per person to grow at a more moderate rate beginning in the third quarter. This year.
Our top 10 films in the quarter represented approximately 82% of the box office in the second quarter of fiscal 2023 compared to 84% for the top 10 films in the second quarter last year, while there was an overall larger slate of films in the quarter. There was not a lower concentration among the top performers at higher.
Film costs.
Resulting in an overall film cost as a percentage of admission revenues that was essentially flat.
Theater Division adjusted EBITDA of $31 3 million during the second quarter of fiscal 2023 increased eight 7% compared to the prior year second quarter on our higher revenues.
Finally during the quarter, we closed three underperforming theaters as part of our ongoing evaluation of individual theater performance and to our footprint.
The closure of these locations is accretive to earnings and cash flow and the results of these theaters are excluded from our comparable theater financial metrics that I discussed today.
Turning to our hotels and resorts Division revenues were $70 1 million for the second quarter of fiscal 2023, an increase of one 5% compared to the prior year.
Sale of the Skirvin Hilton late in the fourth quarter of fiscal 2022 had a $4 $4 million negative impact on revenues in the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022.
Excluding this impact comparable hotel revenues in the second quarter of fiscal 2023.
Increased $5 5 million or eight 5% total revenue before cost reimbursements at our seven comparable owned hotels increased over $4 1 million or seven 2% over the second quarter of last year.
Revpar for our comparable owned hotels grew nine 1% during the second quarter compared to the prior year.
According to data received from Smith travel research comparable upper upscale hotels throughout the United States experienced an increase in revpar of four 8% during our second quarter compared to the second quarter of fiscal 2022, indicating that our hotels outperformed the industry by approximately four three.
<unk> points.
When comparing our revpar results to comparable competitive hotels in our markets the comparable competitive hotels experienced an increase in revpar of 10, 1% for the second quarter of fiscal 2023 compared to the second quarter of fiscal 2022, indicating that our hotels underperformed their competitive.
Set by approximately one percentage point.
As we discussed on our first quarter call. We believe that after our owned hotels outperformed the comparable competitive hotels with significant market share gains during 2000, 22021 and 2000 2022.
The comparable competitive hotels are catching up resulting in revpar growth rates that were higher than our owned hotel portfolio and.
In other words competitive hotels in our markets had more opportunity to grow year over year off a lower base last year.
Breaking out the second quarter numbers for the comparable owned hotels more specifically.
Our overall revpar increased during the fiscal 2023 second quarter compared to the second quarter of fiscal 2022 was due to a four 5% increase in our average daily rate or ADR and an overall occupancy rate increase of two nine percentage points.
Our average fiscal 2023 second quarter occupancy rate for our owned hotels was 68, 2%.
Finally, our banquet and catering operations continued to perform well.
Food and beverage revenue at our comparable owned hotels was up six 4% in the second quarter of fiscal 2023 compared to the prior year.
Hotel Division adjusted EBITDA was negatively impacted by approximately 900000 from the sale of the skirvin compared to the second quarter of last year. Excluding this impact comparable hotel adjusted EBITDA in the second quarter of fiscal 2023 increased 400000 or three 8% on higher revenues.
Shifting to cash flow and the balance sheet, our cash flow provided by operations was $55 million in the second quarter of fiscal 2023, an increase of $6 3 million or 12, 9% compared to the prior year second quarter.
Total capital expenditures during the second quarter of fiscal 2023 were <unk> 7 million compared to $9 8 million in the second quarter last year and were impacted by timing of cash payments for projects compared to the prior year.
Large portion of our capital expenditures during the second quarter were invested in the guest rooms renovation at the Grand Geneva resort and Spa with the balance of capital expenditures going to maintenance projects in both businesses.
On our current expectations for the timing of capital projects, we now expect capital expenditures of $40 million to $50 million for fiscal 2023, a decrease from our prior estimate of $60 million to $75 million. The decrease in our estimate is the result of a change in timing for a potential hotel renovation project.
Which we continue to evaluate and we no longer expect to begin in fiscal 2023.
We ended the second quarter with $44 6 million in cash and over $265 million in total liquidity with a debt to capitalization ratio of 28% and net leverage of one five times net debt to adjusted EBITDA.
Our balance sheet remains strong, which we view as a strategic advantage that provides flexibility and allows us to move quickly to invest in growth for the long term when actionable opportunities are identified.
With that I will now turn the call over to Greg. Thanks, Chad Good morning, everybody.
When we were last together for our quarterly update.
We knew that the ingredients were there to set up for a good second quarter in our Theatre Division the Super Mario Brothers movie started the quarter off with a huge positive surprise.
And we had a promising slate of films in front of us for the summer our hotels division was well positioned to serve our customers with excellence heading into the peak summer travel season in the Midwest.
I'm happy to report that excluding the impact of the divestiture and hotel division both of our businesses contributed to our revenue and earnings growth this quarter.
Our overall execution was strong and while there were some surprises along the way both positive and negative our teams are ready for our returning customers. This summer.
The second quarter that we're reporting today continues our trend of year over year improvement and we're pleased to be sharing these results with you.
I'll start with theaters.
<unk> went over the numbers with you, including our continued significant increases in per person revenues with our admission revenues per person growing over 14% year over year.
As I shared on our call last quarter, we expected that our strategic pricing initiatives would favorably impact our admission per caps in total admission revenue throughout 2023, and they certainly are.
The impact of the changes to our value Tuesday promotion, we are in full effect during the quarter with admissions per caps also benefiting from the impact of pricing changes we made late in the second quarter last year.
And at the beginning of this year.
As we've shared we were thoughtful and diligent and making these pricing changes and tested separately from versions of the program before rolling out our new value Tuesday program across our circuit in late March this year.
I am pleased to share that our experience with the changes to value Tuesday are producing the results we expected.
First.
We believe the changes have not negatively affected attendance on Tuesday isn't any meaningful or even measurable way.
With a $6 mission for members of our free to join magical movie rewards loyalty program and $7 mission for non loyalty customers. We continue to offer a significant discount on Tuesdays to regular pricing the rest of the week and provide a great value compared to other entertainment options.
We remain committed to our value oriented customers and we believe our new value Tuesday, offering because he used to deliver a great value for our customers, while making the program even better.
Second our new 20% discount on all concessions food and non alcoholic drinks for MMR loyalty members on value Tuesdays is resulting in higher concessions food and beverage per caps, which were up seven 3% during the second quarter of 2023 compared to the second quarter last year.
We are seeing customers not only buy popcorn in place of the free complementary sized popcorn offered under our old Tuesday program, but we're also seeing an increase in sales of other food and beverage menu items that are now offered at a 20% discount on Tuesdays instead of full price.
We believe that the expansion of Tuesday discounts to our entire food menu provides a more affordable offerings 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 all tenants was down in the second quarter compared to the prior year due to lower performances from the top films. We are encouraged by the improvement in the number of wide releases during the quarter, which again grew considerably from <unk> 19 last year to 29 this year.
Not all wide releases deliver the same results in this quarter featured a few positive surprises along with a few that missed the mark.
While the Mrs are disappointing it is not unusual some films work better than expected and subdue node, which is more important in the long runs of the quarter featured a more steady supply two or more wide releases each weekend for audiences to come out and see that help to come out to see that and that helps rehabilitated movie going.
As we look ahead, the third quarter in our theater Division has once again off to a great start with a with a positive surprise sound of freedom. Another film that has blown away expectations. It was played extremely well in our Midwest markets mission impossible dead Reckoning part one followed with the solid performance and then Gabe Barbie and Oppenheimer.
<unk>, otherwise known as Barb Manheimer.
These two great films, along with the others delivered the fourth largest domestic weekend box office ever.
And we were ready for them.
I'm, particularly proud of how well our team created excitement in our theaters from the creation of incredible lobby displays to Barbie blowout parties with early access screenings at 65 of our locations with bars and lounges, serving alcohol our associates delivered a great experience that helped build excitement and buzz for these films.
And what happens when you combine sound of freedom and mission impossible with the opening of Barbie and Oppenheimer in theaters that same week, we had our busiest weeks since the opening week of Star Wars. The rise of Skywalker in December of 2019.
The impressive performance of these films underscored in audience appetite for diverse non superhero narratives and it was a great reminder, to all of US in the entertainment industry of the power of theatrical exhibition in building awareness of great movies.
I also want to highlight an important example of how our investments in premium large format screens provided a significant operational advantage that continues to pay dividends for us.
Not only do we have a pls screen at 8%.
Of our theater locations, we actually have multiple pls at 73% of those pls theaters.
This allowed us to play both Barbie and Oppenheimer on tour more pls in the same location on opening weekend and maximize our Pls gross box office.
In addition, because our pls screens are almost entirely our proprietary ultra screens and super screens, we had the scheduling flexibility to split showtime's in our single Pls locations in short we didn't have to choose which show up to play on our pls by both.
As a result on opening weekend.
39% of our Barbie gross box office and 50% of our Oppenheimer gross box office was up Pls screens we've.
We view this as a significant advantage and according to Comscore data on opening weekend. Our circuit led the industry in gross box office Pls percentage on Barbie by a factor of over two times, so that 40% just two times better 40% of our Barbie box two times better than the rest of the industry and came in second among.
All U S exhibitors in gross box office PLL percentage on Oppenheimer.
As we look ahead to the film slate for the rest of the year, while Theres a lot to be excited about we acknowledged that the writers and actors strikes have disrupted film production and may impact the future release calendar.
While the timing of a resolution and the ultimate impact of the strikes is difficult if not impossible to handicap.
I'd like to share my perspective with you.
Here is what this is.
This isn't anyone questioning whether people want to go to the theater anymore.
Determined that they are going to watch everything while bolted to their sofa.
This isn't Hollywood, saying that theyre shifting moving to streaming nor suggesting the future is day and date releases.
This isn't people locked in their homes and our facilities closed or people concerned to be around one another.
What this is is it labor dispute that.
That will cause some interruptions in supply.
Does the business does a business on the men need this no of course, not but we can work through it and it doesn't come close to what we just went through I.
I guess, if we were a company with much higher levels of debt I might worry a bit more but we are not.
Today, we look around and we see Barbara and Hymer theatrical event that became the only thing in pop culture that people were talking about for weeks and still are these films. Once again proved the value of the theatrical piece of the ecosystem. Many times over audiences have spoken and they want to go to the movies Thankfully. This is not a demand problem, it's a supply.
Gene disruption.
Of course, the disruption from the strikes is not helpful and we don't yet know what the extent of the impact will be while there will likely be shifts in the film release calendar. We believe in the short term. We believe it is a short term dispute that will ultimately be resolved.
As metaphorically speaking mom and dad are fighting, but they have no choice, but to live in the same house.
In the long run I am far more encouraged by the examples that Mario Spiderman, Barbian Oppenheimer and others provide an illustrating the importance of theatrical to this industry.
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 the <unk> Hilton late last year.
We were happy to see the calendar past Memorial day for it it's really the start of our busy summer season.
There are a few highlights from the quarter that I'd like to point out.
Overall revenue before cost reimburse reimbursements at our comparable properties grew over seven 2% compared to the prior year.
We continue to see strong average daily rates and improving occupancy revpar.
Revpar grew at all seven of our comparable owned hotels with average daily rate growth at six of our seven hotels and occupancy growth in four out of seven hotels, resulting in overall Rev growth revpar growth of nine 1%.
Chad mentioned, while we outperformed the normal upper upscale revpar growth, we underperformed the revpar growth of our competitive set.
As was the case last quarter it was ultimately because occupancy at our hotels we.
Recovered faster in 2022, and the competitive hotels in our markets.
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 demand in the quarter continued to increase with weekday and weekend growth increasing our group rooms revenue to approximately 40% of our total rooms revenue in the second quarter of fiscal 2023 compared to approximately 38% in the second quarter last year.
This compares to our pre pandemic group mix of approximately 43% in the second quarter of 2019.
Group booking trends remain positive with our group room revenue bookings for the remainder of fiscal 2023.
Our group pace in the year for the year.
Excuse me running approximately 8% ahead of where we were at the same time last year.
Group pace for fiscal 2024 is running approximately 7% ahead of where we were at.
At the same time last year for fiscal 2023.
In addition, banquet and catering pace for the remainder of fiscal 'twenty, three and fiscal 'twenty for us.
Similarly, running ahead of where we were at this time last year.
The industry outlook for group events remains strong with no one in the industry provider of data insights on meetings and hospitality reported June 2023 meeting and event volume was up 30% over June 2022.
Leisure demand remains healthy, particularly on the weekends will showing signs of normalizing to pre pandemic levels on weekdays following record demand in fiscal 'twenty, two with higher weekday demand due to extended leisure stays.
<unk>.
Chad mentioned, our investments during the quarter renovations at our owned hotels and last quarter I shared that we completed the guestroom renovation at the Grand Geneva Resort and Spa. The finished product was ready just in time for our peak summer season, and the customer feedback has been great.
In June our team quickly moved to begin our next major project the renovation of the Pfister with the first phase commencing with the meeting space.
We are renovating the ballrooms, one at a time to minimize the disruption to operations and we completed the renovation of the 130 year old Imperial ballroom in time for its first post renovation event just over a week ago.
And I will tell you the results of restoring this historic ballroom our stunning.
And this is just the beginning of what is to come over the next several months the pfister.
Following the renovation of the meeting space This fall and winter, we would renovate the guestrooms and the historic tower of the hotel followed by a lobby renovation next spring.
Before we open up the call for questions I. Once again, thank all the people that work. So hard every single day, making ordinary days extraordinary for our guests.
We talk a lot about the investments that we make in our business. We can never lose sight of the fact that our people are our most important asset and they proved that once again this quarter.
With that at this time, Chad and I'd be happy to open the call up for any questions you may have.
Thank you.
We would like to ask a question. Please press star and one when you were testing the keypad.
We have.
Last question.
Jim Goss with Barrington research.
Okay.
Alright, thank you.
Wondering.
Thanks first.
Greg do you have any sense of how linked the.
Writers and actors.
Like actions might be.
Is one dependent on another or are they totally separate actions at this stage, we're just saying.
When you say I guess im looking at.
Let me just everything I really don't know what the mechanisms that they're dealing with and how if there is if youre asking about internal linkage.
Can talk about the external impacts for.
For example, the writers go on strike and all of a sudden there is no late night talk shows now Theres still the today show in the morning, Good morning America.
The other morning stuff and that there's lots of other avenues for actors, they're worried about their films when they were out promoting their films, but there was.
There was a chance that there is nowhere for the actors to go to promote on late night.
Now the extra don't even quoting there Phil so.
It doesn't matter that there is no late night shows.
So now I believe that shows come back it won't matter I'll say, they announced today that the.
They're getting back to the table.
It has something to do with the 100 day force Majeure clauses I, absolutely I was Google Youre trying to figure it out I don't even understand it but.
Because again I was just thinking whether or not you.
Then it gets solve together.
Or are they just separate issues that have to be coincident.
Above my pay grade in terms of how they impact here.
I just don't know.
Okay, a couple of other things.
How would you well what was the impact on your average ticket price per person in July .
Third quarter began from this.
Preponderance of kind of share from Pls.
Is it.
Now is it is it a noticeable impact I assume it would be.
And is there a way to quantify it.
Yes, I would say Jim for US we've had this large pls footprint and the flexibility that Greg talked about in his remarks in.
In the past and so if you're if you're comparing to.
Higher periods.
<unk> benefited from having that ability.
Our prior results. It just really stood out this quarter because you have two big films opening on the same weekend and it gave us that incremental flexibility I don't have a quantified impact here in July we're still we're still reviewing the July results, but look at net.
Its favorable but yet to your point, yes, our pls percentage.
To lead the industry in terms of performance relative performance compared to the overall box office.
A new impact.
Okay and couple of other things one with the.
Mexico movie rewards the way you structure, the $6 $7 pricing, obviously is sort of pushing people to join the club.
Are you getting a big uptick in subs and are there other key benefits.
From the 20% and the dollar discount.
Relatively speaking that you are.
Offering with the club at this point.
Because I know youre using that information as data to drive some promotions.
So.
Okay.
Yeah on the head.
Those are the two key benefits.
But theres other stuff, yes, if youre in the clubs Youll see discounts come your way, we use the market for discounts.
Some of them sit there, sometimes we do screenings and were.
Giving them the club members first.
We're always looking for ways to say well what are the benefits of being in the club.
Yes.
Yes, no no hotels.
Okay.
Go ahead go ahead.
No I'd just say on the question on MMR, we certainly have we certainly have seen an increase in the number of MMR sign ups as a result of the Tuesday changes.
I believe the current number is around $5 5 million now I'll circle back on that as we as we go through the call here, but.
That's up from roughly about $5 million at the beginning of the year.
Okay.
And on the hotel side.
Could you.
Walk us through the disruption to say the SR and other properties as you renovate them.
I'm sure there's never a good time to do those sort of things.
Well will there be a way to gauge how it's going to impact.
Near term results as it works its way through the system.
Okay.
We look at we're always looking.
Our businesses are seasonal so we're always looking for ways to minimize that disruption.
And.
And so we.
We have.
Got a quantifiable number to say, what we are but but we think we can minimize it pretty significantly. So for example, when you take the pfister when it's a really quiet period and we're not we're not renovating every single room would every single time were going floor by floor, we're only doing part of the building.
Just like now we did we did the ballrooms, we only did half the seventh floor on the Vista, which is where our volumes are and.
Get up there and you could use the other there was always a ballroom available and there is a similar impact just from scheduling on the ballrooms and that we try to do this out of out of peak season and do it around the Gallo season. So we're not displacing those events. So.
We've done this for a long time, our teams very good at project management and working with our commercial teams to minimize that impact I don't I don't have a quantified expected impacts from it for the pfister, but.
We're doing it at this our slowest periods.
Maybe one last thing then do.
Also implement sort of selective price increases as you go through these renovations so that if somebody wants to stay in one of the newly renovated rooms, they might pay a little bit more but get that premium aspect or is it is there a different aspect to your pricing strategy then.
No I mean, we're just looking at overall revenue management.
How do we given what the market is.
We believe our rooms are all at a certain level. So we're not going to say Oh, you can have a good rumor of backrooms.
So we want them, we all want them to a certain level and then we're just using the we're just using the revenue management tools to maximize our performance.
Yeah.
Yes.
Alright. Thanks.
Just to close out on your Jim just to close out on your earlier question. It was $5 5 million MMR members at the end of the second quarter and.
And that compares to around $5 billion at the beginning of the year.
Okay. Thanks, very much I appreciate it.
We now have.
Mike Hickey.
From the benchmark company.
Proceed with your question.
Hey, Greg.
Good morning, guys Great result.
Nice commentary this morning, as well I appreciate all of that I think I'm. Good guys. Jim asked all my questions Greg.
Thanks Glenn.
Few more on top of them.
Just curious.
On July guys Youre seeing some of your peer set.
You're seeing the numbers for the industry.
Pretty spectacular it looks like on them.
On a quarter to date, we are sort of up eight 2% just curious how you are.
Our network is indexing, obviously had some challenges.
In the second half serious.
Youre back to pace with the industry here and how youre thinking about momentum you see this sort of bar bernheimer effect.
Is it going to be follow on.
Momentum for additional films coming out.
Motivation maybe for the studios.
Just stick to plan here in terms of the pipeline for the remainder of the year versus some movement given the strike.
Yes, I'll take the I'll take the first part and then I'll, let Greg comment on the second part.
Look we we believe we're getting our share and with the benefit of our Pls that.
We covered on the call more than our share.
Box office on the two Big July films in really all of those films.
These are films that have played really well in the Midwest as well.
And we had record attendance the week of.
The premier at both of those films, we had over $1 1 million people come through the doors.
From Friday to Thursday on opening weekend for the film. So the indications are we're getting our share and our participation in the box office.
As for what the studios are going to I've got I.
I don't know.
I would like to.
I think I hope that they are that they are sitting there, saying wow what that what's what's going on is pretty bite the bullet and we're not done I mean again, we're all focused on <unk>, but I mean, it sound of freedom there going Wow.
Your arrival executive, saying, where did that come from and then we've got teenage mutant Ninja turtles about to open up and that looks like it is going to be really strong.
There is still some there's still some strong simpler so they're looking around and we'll see.
But this last thing with Barbie not the first time it's happened.
And it doesn't it doesn't.
I don't want to overstate its value to the industry and yet it does just highlight that what can happen with theatrical and really good market. If you got to give it to the Warner brothers getting I mean, they marketed this thing beautifully.
Really I mean, they just got people everywhere focused on it and talking about it it's been going on for at least like a month and it doesn't seem to be slowing down you don't get that anywhere else and so I hope the other ones are looking around and saying if we can if we can do it we will.
I just don't know what they are what they.
Theyre not invited me to the meetings to discuss strategy. Unfortunately.
Yes.
Greg how impactful is Barbie promotion do you think is kind of a lesson I think Greg.
Yeah.
Yeah.
Fortunately, Mike <unk>, you would only a few select others on this call or any idea. What you are talking about and because most people over the age of 17 never see that so but I will tell you look at we've leveraged tictac I've got to give them I got to say.
Joking aside and for those who haven't seen it. Please don't go look.
But the.
Or are.
People are social media, we tried in social media through lots of different things to get.
To get.
To leverage social media to help build awareness for our business, we always want to try and we want to try and sell and in addition, having the studios do the marketing.
<unk> are people, who in our social media group, especially the ones who are focused on the tick tock stuff. They have tapped into it and I would argue that of all the above exhibitors for sure. We have got the most unique approach to it I will pretty much do whatever they tell me to do because when I go on.
Our big ones, one you'll have 1 million views and so for us chain.
<unk> of our size to get things that get anywhere from a half million to a 1 billion views on stuff we put up.
Got to be beneficial to our business and so I will keep doing it if it will get the turnstile spending.
Yes, we continued maintenance turtles, Greg Meg to then.
And maybe trolls band together would be promo opportunities for you.
Okay.
You are not a lot of low pricing.
Please.
All right.
I guess last question you guys were early on the dividend.
That was a great Testament to return to your business and strong cash flows coming out of that.
Difficult stretch with.
But just curious and obviously, there's still some potential disruptions here, but obviously, what we're working through.
Im curious how youre thinking about it.
Vivid here moving forward.
It looks like your Capex is down a bit this year curious.
<unk>.
Buyback or debt reduction or plans I guess generally with some capital guys. Thanks.
Yeah. Thanks for the question Mike.
Look the.
The year has been trending really nicely along what we expected and now now we have a new event that has created some near term uncertainty but point taken.
We're feeling really good about the balance sheet.
And as we look at our capital investment in the business, Yes, we have some major projects going on in the hotel business.
<unk>.
The push at the pull down of the Capex guidance for the year doesn't mean that the projects go away its really a timing shift into 'twenty four.
Still focused on some of those internal investments and then also.
Although we have an action to anything yet working on opportunities for inorganic investments as those become available, which which we don't control the timing of but we want to be ready for.
So when we think about the dividend and it's an ongoing discussion that we're going to continue to revisit.
Each quarter, so state stay tuned.
I guess I'll add to that the way we are looking at it and we are every quarter. We're looking at it and we're thinking about where we should go with it.
Although we look at it on a quarterly basis, and we talk about what's happening right now with this work disruption, but we really are looking at is we want to look at the next three years and the total and say, okay, where to how comfortable we feel with what we're doing we don't want to be guided by we've said this a million times, we don't want to be guided by a quarterly.
By quarterly issues.
If we did that and we're going to go Crazy. This is as we've said a million times demonstrate lineup.
Did we zig around we'd get a little before we can move a little back.
And then but overall, we're moving forward.
Yes, just to follow up on that.
And a comment.
He added color there is that more I think.
Kind of M&A on that side.
Syed uncertainty more up there or is it just sort of your comfort level now.
Bill This is Frank.
Business outlook.
Or curious.
Look we're seeing a few things that we're taking a look at.
Nothing to announce today, but.
You do start to get a better picture long term of what the pipeline looks like and things stabilizing so.
<unk>.
We'll move on those things as opportunities become available but.
But nothing right now.
Alright, Thanks, guys. Good luck.
Thank you.
We now have Eric Wold with B Riley.
Thank you Mike.
Thank you good morning, guys I only have two questions, so I'm going to bring down the <unk>.
Average questions for call it pretty dramatically.
And a second so I guess two two.
Rooms.
One last question.
You made shot around.
With the Capex and the pushout on some some hotel projects when you more details on those are those.
So I believe being evaluated.
I mean it'd be pushed into 'twenty for the may not happen at all are they definitely pushing 24 are those related to the pips that youre considering on a couple of hotels any details around those.
Yes, it does relate to a pip on one of the owned hotels and it really is.
Just us continuing to evaluate trying to to make the <unk>.
Returns make sense and make sure that strategically as we think about the portfolio that this is this is the right move and then get get the right.
Local incentives to the extent that tax credits or other things are available for us. So we're working through it it takes time.
And it's a significant investment so we want to be disciplined about it and just because of the diligence that we're doing it as something thats not going to get done this year.
I know, it's certainly an area of interest and we will continue to provide updates on it as we go but right now it's looking like that's going to be 2024.
Is there a chance.
'twenty 'twenty four and not at all or are you committed to the project in some form.
Yeah.
There is that chance. We are we are as I said, we're trying to evaluate it and get the math to make sense and get comfortable with the risk around the project and we may conclude that there is a just a different strategic alternative that may make more sense. So it's obviously, it's something that we're spending a lot of time on to make sure that we get it right and.
There are a number of different paths that this could go.
Got it and then last question on Labor maybe.
Maybe update us on the labor situation in both segments.
Are you seeing now what kind of wage trends for theaters and hotels and then.
Where would you say you are relative to what you would consider kind of quote unquote full employment.
And average theater in an average hotel.
So those are the general labor environment.
<unk> sort of a similar feel to what we saw last quarter and that the wage pressure.
Has moderated a bit and it certainly is still there and call it kind of the mid single digit wage increases.
And availability of labor, we're able to fill those positions.
More easily people are showing up instead of no shows after after hires and examples like that in the hotel business, we're operating the business with about 90% of the the staffing or the head count that we had pre pandemic.
It feels like it's stabling stabilizing around there and we're really focused on getting.
The customer service levels back up to.
To deliver the level of service at our upper upscale properties that our customers expect and that has commanded by the rates that we're charging so that continues to be an area of focus.
And doing more with less but.
<unk>.
At times, so much variability from peak to trough in the staffing from week to week, particularly during our summer season, but.
That's got a similar feel to what we're getting we're getting the heads.
That we need there is some weeks, where theres pinch points, but.
It's nothing like what we saw last year.
Perfect. Thank you both I appreciate it.
Okay.
We now have Chris <unk> with northern border investments.
Hey, guys.
Thanks, great to see how well that.
Two businesses are doing I had a question about the.
Convertible notes.
Almost all of the.
Significant short interest in the stock happened immediately after you issued those notes in early 2020.
Our late 2020 should I say.
Since then.
You can see the the short interest rise and fall.
Share price.
Approaches or falls below the conversion price of those nodes.
And it's obvious that it's.
No.
The convert holders hedging out their equity risk.
My point is that the.
The convert is the convert seems to be a serious.
Since put serious pressure on the stock price is it almost always does with.
Small companies, the new liquid share structures.
So I realize.
You can't extinguish our redeem those notes.
Early and maybe that's not even in your desire to do so but you can certainly make it more.
More painful for the shorts and less desirable to be short.
By raising your dividend.
So I guess, it's not really a question, but more of a suggestion from us.
Long term optimistic about your prospects shareholder.
Yes, Chris I appreciate the comments and feedback.
We're certainly aware of the dynamic that we get in the in the capital structure as a result of the convert and.
At the moment, it's not our top priority with the capital structure, but it's something that we as we get closer to that maturity date, we continue to think about what that what that ultimate.
Refinancing looks like in <unk> and <unk>.
As I said earlier with respect to the dividend and Greg commented, it's an ongoing evaluation, but.
Understand the point.
And then if you permit me to ask one other question.
When you consider.
Pricing trends in your hotel business.
And all of the improvements you've made in the last few years.
All of the improvements that are going to accrue as a result of your current.
Capital program is there anything is there any thing you can say about what the revenue generating capacity of your hotel business will be in say 12 months relative to where it was in 2019.
I would argue that's more market dependent then renovation dependent I mean.
Because a lot of what we're doing is work that it just happened that happens as part of the reinvestment cycle that we've extended.
We've got behind.
<unk>.
It's sort of it's catch up capital investment.
Yes, it does allow us to continue to lead our markets and to be aggressive, but not sure I can put percentages, but this is going to really.
Propel us.
A bigger number because again, we're trying to.
Yes, we look at it that we don't do this one lab.
I was just going to say I think of it more as a defensive.
Investment of our market leading positions for these hotels to keep them fresh to command market leading rates.
And.
It's more maintenance capital, but just happens in big cycles over a over a longer period of time and we happen to be.
A big part of the cycle right now with a few of our properties.
Really because as Greg just said some of this was deferred due to the pandemic.
Okay. Thanks, guys.
We now have Angie chaparral non corn.
Yeah.
Hi, Thank you good morning, guys.
Just a few questions you mentioned closing some underperforming.
<unk>, where these money losers that will improve cash flow bottom line or just.
Hum.
Low cash flow generators that will improve your ROI metrics.
They were actually locations that are.
We are cash flow negative. So these are our some of our smaller locations in locations, where maybe we had other other presence.
Now I'll just tell you Andrew it's not game changing to the overall as a division it's accretive but it's.
These weren't huge cash flow leaders losers.
Yes, no I appreciate that I was just trying to understand that the cutoffs are your thresholds.
And along with that capital deployment, the governor with the government Covid venue grant money drying up.
That went to a lot of these.
Private.
Exhibitors, you know, you and ready and Cinemark and AMC getting qualified for the grant money, but with that grant money now drying up or you're seeing some cinema acquisition opportunities and as of yet.
Theres been a little bit of we've heard a little bit of.
Of activity, but and people.
Some stuff going on it's not worth changing and I don't think there wasn't either as one I know of that I wouldn't say, it's a lot of really high quality.
But.
So not a big not in a big way yet for people, who are going to wind up.
<unk> helped consolidate this industry that's still fragmented.
Not yet.
Is that right, Okay and then.
I'm looking forward to seeing your.
You're a tick tock.
But with respect to.
With respect to promotion.
Obviously, the lack of promotion did impact, Indiana Jones and mission impossible.
Somewhat and frankly, Barbara and hymer might even be <unk>.
Come or bigger if there was.
Promotion are there things that.
Both markets.
And more importantly, Nate.
NATO left the National cinema day or National Cinema week.
Ideas that were done on short notice last year, but with more advanced notice that I don't think the industry should roll it out.
During the success of Barbara and Hymer, but as things start slowing down end of August .
Is.
NATO thinking of doing something.
Kind of industry wide for <unk>.
Promotion and alternatively.
Is there any talk among.
Amongst the <unk>.
Studios.
Who choose to release their movies.
Theaters, but don't get the benefit from the promotion of their actors to potentially provide.
Rent breaks to the exhibitors that could be tied to your local promotional efforts.
That's a good idea I hope you send it to them.
The Idaho.
We haven't we haven't even there yet because if you have a direct line to them I don't yeah.
Yeah.
I don't so if you like the idea you should definitely feed it into them.
Yes.
Yes.
But we don't have I don't want.
We're not there yet.
That there hasnt been.
It hasn't been enough movement, yet at this point and.
The.
The issue.
We're trying to push them to be marketing more.
I don't.
If things are a little cyclical I think one of the things that happened in the streaming one of the things I thought was the allure of streaming was they wouldnt have to market individual movies, and so probably some of that.
That that.
That muscle strength.
As needed to be little more reinvigorated.
As we go back to saying you know what really theatrical matters and it's and it's a really good marketing piece for all the ancillary markets as well.
<unk>.
We are personally I can't I will speak more to what's going on inside of our company and we've had a very big push on onshore.
Showmanship and.
And that's what we call promoting in the theaters and.
We in the last year, I would say under really with Mark Graham's coming on and focusing in sort of bringing back some of the old playbook, we've been very focused on trying to get those.
Activities inside the theaters so the Barbie blowout parties, we did things like that around any kind of our events special drinks for things, but I've seen indeed, beginning to Ami Jones I wasn't one of our theaters and Theres, Indiana Jones display of like archaeological stuff is trying to create a more fun atmosphere. That's we call showmanship and we've had a big.
Push on that and im seeing the benefits of it.
As we've gone on.
As of late and that's.
The Tic Tac. It's just another example of it it's the Marcus theatres tick tack that nine nine really doesn't have much on it but the market leaders, which.
They've done they've done a graduate I'll say it again, they've done a fantastic job.
And.
I think some of the feedback from the National Cinema day was that it was kind of sprung on with.
Short notice and that with some advanced planning and it could have been or be much bigger.
Sure.
Activity.
Have you heard anything via NATO about.
Advanced planning for doing something this time with.
With greater strategic thought.
What NATO.
Later, we will announce whatever they're going to announce a number.
On their schedule.
We're always talking to me about what can we do to promote the industry.
And continue to rebuild this business and I'll leave it at that.
Okay, great well thank you.
Thank you at this time.
There are no question I'd like to turn the call back to you.
If the parents or any additional okay.
Great. Thank you well, we would like to thank you once again for joining US today, we look forward to talking with you again in early November when we release our fiscal 'twenty three third quarter results until then thank you and have a good day.
Thank you. This does conclude today's call you may now disconnect your lines.
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