Earnings call transcript: Marcus Corporation Q4 2024 misses EPS, stock falls

Marcus Corporation (market cap: $657 million) reported its fourth-quarter 2024 earnings, revealing a notable miss on earnings per share (EPS) but surpassing revenue expectations. The company’s EPS was $0.03, falling short of the forecasted $0.06. Revenue, however, came in at $188.3 million, exceeding the expected $176.17 million. Following the announcement, Marcus Corporation’s stock price dropped by 9.77%, closing at $18.83, reflecting investor disappointment over the earnings miss despite the revenue beat. According to InvestingPro analysis, analysts maintain a strong buy consensus on the stock with a 29% potential upside from current levels.

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Key Takeaways

• Marcus Corporation’s Q4 EPS was $0.03, missing the forecast of $0.06.
• Revenue surpassed expectations, reaching $188.3 million.
• The stock declined by 9.77% post-earnings announcement.
• The company introduced new initiatives, including the Marcus Movie Club.
• Capital expenditure for fiscal year 2025 is projected between $70-$85 million.

Company Performance

Marcus Corporation showed mixed results for the fourth quarter of 2024. While the revenue increased by 16% year-over-year, the company reported an operating loss of $2.2 million due to a substantial non-cash impairment charge of $6.4 million. The adjusted EBITDA for the quarter rose by 42% year-over-year to $26 million. Over the full year, however, the company’s adjusted EBITDA declined by 5.8% to $102.4 million, reflecting challenges in maintaining profitability. InvestingPro data shows the company’s last twelve months EBITDA stands at $84 million, with a concerning current ratio of 0.54, indicating potential liquidity challenges.

Financial Highlights

• Revenue: $188 million, up 16% year-over-year.
• Operating Loss: $2.2 million, impacted by a $6.4 million impairment charge.
• Adjusted EBITDA: $26 million, a 42% increase year-over-year.
• Full Year Operating Income: $16.2 million.

Earnings vs. Forecast

Marcus Corporation’s actual EPS of $0.03 fell short of the forecasted $0.06, representing a 50% miss. Despite this, the company exceeded revenue expectations by $12.13 million, achieving $188.3 million against the forecast of $176.17 million. This mixed performance highlights the company’s ability to generate revenue while struggling with profitability due to exceptional charges.

Market Reaction

Following the earnings release, Marcus Corporation’s stock experienced a significant drop of 9.77%, closing at $18.83. This decline reflects investor concerns about the company’s earnings miss, despite the positive revenue performance. The stock’s movement places it closer to its 52-week low of $9.56, indicating a challenging environment for the company within the broader market. InvestingPro’s Fair Value analysis suggests the stock is currently trading near its Fair Value, with a beta of 1.53 indicating higher volatility than the broader market. Despite recent challenges, the stock has delivered an impressive 50% return over the past six months.

Outlook & Guidance

Looking ahead, Marcus Corporation has provided guidance for fiscal year 2025, projecting capital expenditures between $70 and $85 million. The company anticipates low to mid-single-digit growth in revenue per available room (RevPAR) and a strong slate of movie releases in 2025 and 2026. Group bookings for 2025 are also running approximately 6% higher than the previous year, signaling potential growth in the hotel segment. InvestingPro’s Financial Health Score of 2.49 (rated as "FAIR") suggests moderate stability, while the company maintains its three-year dividend growth streak with a current yield of 1.34%.

For comprehensive analysis including detailed valuation metrics, growth projections, and peer comparisons, explore the full Marcus Corporation Research Report, available exclusively on InvestingPro.

Executive Commentary

CEO Greg Marcus emphasized the company’s focus on innovation and adaptation, stating, "Our theme for the year is the spirit of entrepreneurship." He highlighted the importance of evolving with market changes, echoing his father’s sentiment that "the only constant is change." These statements underscore the company’s commitment to growth through strategic initiatives and market adaptation.

Risks and Challenges

• Non-cash impairment charges affecting profitability.
• Market volatility impacting stock performance.
• Dependence on the movie release schedule for theater revenue.
• Competitive pressures in the hospitality industry.
• Economic uncertainties potentially affecting consumer spending.

Q&A

During the earnings call, analysts inquired about the impact of the Marcus Movie Club on attendance growth and market share. Executives confirmed their strategy to leverage pricing and value programs to enhance customer engagement. Additionally, the flexibility of hotel assets was discussed, highlighting the company’s ability to cater to different market segments.

Full transcript - Marcus Corp (MCS) Q4 2024:

Operator: Good morning, everyone, and welcome to the Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Lydia and I’ll be your operator today. At this time, all participants are in listen only mode. We’ll conduct a question and answer session towards the end of this conference. As a reminder, this conference is being recorded.

Joining us today are Greg Marcus, Chairman, President and Chief Executive Officer and Chad Paris, Chief Financial Officer and Treasurer of the Marcus Corporation. At this time, I’d like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: Thank you, operator. Good morning, and welcome to our fiscal twenty twenty four fourth quarter conference call. 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 twenty twenty fourth quarter results and in the Risk Factors section of our annual report on Form 10 ks, which you can access on the SEC’s website. We will also post all Regulation G disclosures, when applicable, on our website at marcuscorp.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 that impact our investors, customers, vendors and other stakeholders.

You should look at our website, marcuscorp.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. Reconciliation of adjusted EBITDA to the nearest GAAP measure is provided in today’s release. All right. This morning, I’ll start by spending a few minutes sharing the results from our fourth quarter and the full year and discuss our balance sheet, liquidity and capital allocation.

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 for fiscal twenty twenty five. We’ll then open up the call for questions. This morning, we reported strong year over year improvement in our fourth quarter operating performance that continued the trend that began in the third quarter and capped off a year that began slowly but accelerated in the second half and exceeded our expectations overall. In Theaters, significant attendance growth was driven by a much stronger film slate that featured several blockbuster films. In Hotels, continued strength in group business and strong revenue management delivered RevPAR growth that outperformed the industry in the fourth quarter.

I’ll start with a few highlights from our consolidated results for the fourth quarter fiscal twenty twenty four. We generated consolidated revenues of $188,000,000 an over 16% increase compared to the fourth quarter last year with revenue growth in both divisions. Our fourth quarter operating loss of $2,200,000 was negatively impacted by a $6,400,000 noncash impairment charge in the theater division as well as $2,400,000 of non recurring expenses, both of which are excluded from adjusted EBITDA. Excluding these items, our fourth quarter operating income was $6,600,000 compared to operating income of $1,200,000 in the fourth quarter of fiscal twenty twenty three. We delivered nearly $26,000,000 of consolidated adjusted EBITDA, a 42% increase over the prior year fourth quarter.

For the full year fiscal twenty twenty four, consolidated revenues increased just under 1% from the prior year with growth in our Hotel division overcoming the decrease in revenue in theaters. Our $16,200,000 of consolidated operating income for the year was negatively impacted by $6,800,000 of non cash impairment charges and $2,900,000 of non recurring expenses. Excluding these items, full year operating income was $25,900,000 compared to operating income of $33,900,000 in fiscal twenty twenty three. Finally, adjusted EBITDA for the full year decreased 5.8% to $102,400,000 There are two unusual items below operating income that impacted our net earnings and earnings per share that I want to highlight. First, our fourth quarter and full year income tax benefit and includes an approximately $6,000,000 benefit from the release of valuation allowances on our state deferred tax assets, reflecting the improved performance of the businesses and our expectation to realize future tax benefits from utilization of state net operating loss carryforwards.

Second, while the fourth quarter impact from the final convertible debt repurchases was insignificant, our full year net loss was negatively impacted by $16,700,000 or $0.52 per share of debt conversion expense and related tax impacts of the convertible senior note repurchases. Excluding the impacts of the convertible senior notes repurchases, net earnings for fiscal twenty twenty four was $9,000,000 or $0.27 per diluted common share. Both the tax valuation allowance adjustment and debt conversion impacts are excluded from our adjusted EBITDA operating results. Turning to our segment results, I’ll start with theatres. Our fourth quarter fiscal twenty twenty four total revenue of $121,200,000 increased nearly 23% compared to the prior year fourth quarter.

It is important to note our fiscal calendar negatively impacted our revenue and attendance comparisons over the prior year periods. Our fiscal year ended on December 26 this year compared to December 28 in fiscal twenty twenty three, resulting in two fewer days in our fiscal fourth quarter during the busy week between the holidays compared to the prior year, while adding days in late September when business is slower. The loss of the days between the holidays had a 3.2 percentage point negative impact on our attendance growth and a 2.9 percentage point negative impact on admission revenues growth compared with the prior year fourth quarter. Comparable theater admission revenue increased 15.4% over the fourth quarter of twenty twenty three with a significantly stronger film slate that included a heavy mix of family films, driving a 29.1% increase in comparable theater attendance. Average admission price decreased 10.6% during the fourth quarter of fiscal twenty twenty four compared to last year, which was not unexpected and was primarily due to two factors.

First, approximately half of the decrease was due to the prior year favorable impact of Taylor Swift: The Era’s Tour, which was the number one film in the fourth quarter of twenty twenty three at higher event cinema ticket prices. Second, as we have shared throughout 2024, we continue to execute on our strategies to drive attendance through various value oriented promotions and programs that are designed to encourage repeat moviegoing, and we believe they were validated by our strong attendance growth. These programs include Value Tuesday, which we made available to our customers on one more Tuesday during the holidays this year than last year and $7 everyday matinee for children and seniors, which saw significant attendance during the fourth quarter with a family heavy film slate. While these promotions created a headwind for our admission per caps in the fourth quarter, we believe they are an important driver of long term attendance growth that benefits us with incremental concession sales and ancillary revenues, while supporting the total value of the big screen experience that promotes long term moviegoing. These impacts on admission per caps were partially offset by a higher percentage of attendance on our PLF screens with a slate that featured more blockbuster films than the fourth quarter last year.

According to data received from Comscore and compiled by us to evaluate our fiscal twenty twenty four fourth quarter results using our comparable fiscal weeks, United States box office receipts increased 22.9% during our fiscal twenty twenty four fourth quarter compared to U. S. Box office receipts during our fiscal twenty twenty three fourth quarter, indicating that our theaters underperformed the industry by approximately 7.5 percentage points. We believe our 29% attendance growth was ahead of the industry and we attribute our lower box office performance primarily to the differences in our pricing strategies during the quarter compared to those of other major exhibitors. Concession food and beverage revenue at comparable theaters was up 24%, even with per capita concession food and beverage revenues decreasing by 3.9% during the fourth quarter of fiscal twenty twenty four compared to last year’s fourth quarter.

The per capita decrease was primarily due to a decrease in our incidence rate, partially offset by an increase in average basket size, which we believe was due to the heavier family film mix that tends to result in more sharing of food items within families and lower sales of higher priced food items and alcoholic beverages. Our top 10 films in the quarter represented approximately 75% of the box office in the fourth quarter of fiscal twenty twenty four, compared to approximately 58 for the top 10 films in the fourth quarter last year. While the more concentrated film slate resulted in a six percentage point increase in overall film cost as a percentage of admission revenues for the fourth quarter compared to the prior year quarter. This was not unexpected given the stronger slate and was approximately one percentage point lower sequentially than the third quarter of fiscal twenty twenty four. For the full year, film cost as a percentage of admission revenues increased less than one percentage point compared to fiscal twenty twenty three.

On the higher revenues, theater division adjusted EBITDA was $23,700,000 an increase of 61% compared to the prior year quarter. Adjusted EBITDA margin during the fourth quarter of fiscal twenty twenty four was 19.5%, which was four sixty basis points higher than our fourth quarter margins last year, largely driven by better operating leverage on the higher attendance and revenues. Turning to our Hotels and Resorts division. The fourth quarter capped a record year for the division revenue and adjusted EBITDA. Revenues before cost reimbursements were $57,600,000 for the fourth quarter of fiscal twenty twenty four, an increase of 5.4% compared to the prior year.

RevPAR for our comparable owned hotels grew 3.6% during the fourth quarter compared to the prior year quarter, growing at four of our seven owned hotels. The RevPAR increase was driven by a two percentage point increase in our occupancy rate compared to the fourth quarter of fiscal twenty twenty three with our average occupancy rate for our owned hotels at 61.4% during the fourth quarter of fiscal twenty twenty four. Average daily rates were essentially flat during the fourth quarter compared to the prior year quarter. During the fourth quarter, we announced a major renovation of the Hilton Milwaukee, one of our three downtown Milwaukee hotels. This approximately $40,000,000 project includes the renovation of five fifty four of the hotel’s guest rooms as well as the ballrooms, lobby and meeting space.

The renovation of the guest rooms began in November as we headed into the seasonally slower winter months and we are able to shift business to our two other hotels, the Pfister and St. Kate, to mitigate the impact of the renovation on the overall portfolio. However, on peak weekend nights, there was some rate displacement as we turned away higher rate transient business due to our commitments for groups and airline crew business as well as occupancy displacement from business turned away due to the reduced available rooms. And we estimate that the renovation negatively impacted our RevPAR growth by approximately 1.3 percentage points during the fourth quarter. Our properties continued to perform well against the industry as a whole.

According to data received from Smith Travel Research, when comparing our RevPAR results to comparable upper upscale hotels throughout The United States, the upper upscale segment experienced an increase in RevPAR of 2.2% during our fourth quarter compared to the fourth quarter of fiscal twenty twenty three, indicating that our hotels outperformed the industry by 1.4 percentage points despite the negative impact of the Hilton Milwaukee renovation. Comparable competitive hotels in our markets experienced RevPAR growth of 4.4% for the fourth quarter of fiscal twenty twenty four compared to the fourth quarter of the prior year, indicating that our hotels underperformed their competitive set by less than one percentage point, including the negative impact of the Hilton Milwaukee renovation and slightly outperformed the competitive set when adjusting for the estimated impact of the renovation. Group demand remained steady during the fourth quarter of twenty twenty four, particularly during mid week, with group rooms representing 36% of our total room mix in both the fourth quarter of fiscal twenty twenty four and the prior year. During the quarter, we saw an uptick in transient business travel with weekday occupancy continuing to improve compared to the prior year quarter, growing one percentage point to 53.2% during the fourth quarter of fiscal twenty twenty four.

Weekend occupancy improved 4.8 percentage points to 79.5%. With the continued growth in group business and events, our Banquet and Catering operations grew with food and beverage revenues up 5.6% in the fourth quarter of fiscal twenty twenty four compared to the prior year. Finally, Hotels’ fourth quarter adjusted EBITDA was $7,100,000 compared to $7,400,000 in the prior year quarter and was negatively impacted by timing of higher incentive compensation expense on the record results for the overall year. Shifting the cash flow and the balance sheet. Our cash flow from operations was $52,600,000 in the fourth quarter of fiscal twenty twenty four compared to $34,000,000 in the prior year quarter, with the increase in cash flow from operations due to the higher EBITDA and favorable seasonal working capital changes.

For the full year, cash flow from operations was just under $104,000,000 compared to $102,600,000 in fiscal twenty twenty three. Total (EPA:TTEF) capital expenditures during the fourth quarter of fiscal twenty twenty four were $25,400,000 compared to $13,000,000 in the fourth quarter of fiscal twenty twenty three. A large portion of our capital expenditures continued to be invested in the hotel business during the fourth quarter, including the renovation at the Hilton Milwaukee. The remaining balance of capital expenditures during the quarter were for maintenance projects in both businesses. With the completion of our refinancing transactions early in the year, our balance sheet is well positioned as we head into 2025.

We ended the fourth quarter with nearly $41,000,000 in cash and over $260,000,000 in total liquidity with a debt to capitalization ratio of twenty six percent and one point three times net leverage. Our convertible debt is fully retired and refinanced on a long term basis and we do not face any meaningful maturities until 2027. As we look forward to fiscal twenty twenty five, I would like to provide an overview of our current capital allocation approach, which we view in terms of three priorities. First, we are investing in maintaining our portfolio of high quality assets in both of our businesses. In fiscal twenty twenty five, we expect to continue to make significant investments in the Hotel division with the Hilton Milwaukee renovation project and other ROI investments, as well as investments in maintaining and enhancing the customer experience in theaters.

For fiscal twenty twenty five, we expect total capital expenditures of $70,000,000 to $85,000,000 with $50,000,000 to $60,000,000 in hotels and $20,000,000 to $25,000,000 in theaters. The timing of our planned capital projects may impact our actual capital expenditures during fiscal twenty twenty five, and we will continue to provide updates as the year progresses. As we move past the hotel renovations in 2025, we expect to return to a more normal annual CapEx rate of around $50,000,000 to $55,000,000 per year based on our current portfolio of assets. Second, we continue to pursue growth investment opportunities in both businesses. We often don’t control the timing or availability of deals and we are disciplined in our approach, but we continue to actively search for opportunities to deploy capital to grow our portfolios.

And third, we are committed to returning capital to shareholders. In fiscal twenty twenty four, we returned $19,000,000 or approximately 18% of our cash from operations to shareholders through our quarterly dividend and share repurchases. We plan to grow the dividend over time and opportunistically repurchase shares when we generate cash in excess of our near term ability to reinvest or deploy for strategic growth. Finally, I’ll close today with one housekeeping item. In the fourth quarter, we announced that in fiscal twenty twenty five, we will transition from our current fiscal year to a calendar fiscal year with quarters ending on March 31, June ’30, September ’30 and December 31.

We believe this change will better assist with comparisons of our performance to others in both of our industries and it will remove the shift in our year end during the busy weekend theaters between the Christmas and New Year holidays that I discussed earlier. This change was made prospectively and the transition will add four additional days to our first quarter ending March 31 and one additional day in both our third and fourth quarters in fiscal twenty twenty five compared to fiscal twenty twenty four. With that, I will now turn the call over to Greg.

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Thanks, Chad. Good morning, everyone. With Chad covering many of the details of the quarter, I’d like to start today by reflecting a bit on the year. Our plan for the year projected a slow start due to the trailing impact from the twenty twenty three Hollywood strikes with an expected improving film slate and big special events driving demand in our hotel business in the second half of the year. Our businesses are seasonal to begin with and these unique industry dynamics amplified the seasonality even more, setting up the classic hockey stick plan, which can be a challenge to manage through.

As I look at the final results and our overall performance, the team handled the challenges of the uneven year extremely well. We delivered a record year in our hotel division and one that exceeded our expectations in theaters. As I’ll discuss today, we accomplished a lot in both of the businesses in 2024. And the results exceeded our plan for the year. More importantly, we exited the year with improving trends and good momentum as we head into 2025 and we look forward to a year of growth.

Our fourth quarter results continued the improving trends we started to see during the summer. In theaters, a stronger Thanksgiving and Christmas holiday film slate brought out families to watch several blockbusters on the big screen, driving our strong increase in attendance. In Hotels, we continue to benefit from strong group business, particularly at our recently renovated assets. The fourth quarter and fiscal year we are reporting today reflect a year of great execution by our team, and I’m very pleased to share these results with you. I’ll start today with our theater division.

Chad went over the numbers for the quarter with you, including our strong overall revenue and attendance growth. Overall, the film slate in the fourth quarter offered significantly stronger product than a year ago, particularly in November and December, driving a near 30% increase in attendance for the fourth quarter compared to the quarter last year. Once again, families came out to see movies on the big screen in huge numbers with Wicked, Moana two, The Wild Robot, Sonic the Hedgehog and Mufasa: The Lion King, making up five of the top 10 films this quarter. The strength of the slate was further demonstrated by a 23% increase in national box office despite two fewer wide releases during the quarter this year, with a nearly 31% increase in box office revenues per wide release. I want to expand on our pricing strategies that we executed this quarter, particularly because it was different than many of the national exhibitors.

Throughout the year, we’ve discussed our focus on driving attendance, particularly during periods of film supply disruptions like we had earlier in the year. Our industry is one that benefits from maintaining momentum through building a routine and habit of regular moviegoing, not to mention the ancillary business that attendance drives. When our customers come to see a movie, they see the trailers for coming attractions and it drives future visits to the theater. We believe it’s very important to have programs that promote and incentivize repeat moviegoing, and we’ve created several with this goal in mind including Marcus Passports, Marcus Mystery Movie and the recently launched Marcus Movie Club. These programs can also have the added benefit of bringing customers out to see a broader range of small and mid sized films.

In addition to the blockbuster films, which we believe supports a healthier overall exhibition ecosystem. While these programs offer a lower ticket price in the short term, we believe that they are important drivers of long term future attendance. Secondly, we continue to believe it’s important to offer various price points to different types of customers, including value customers. We’ve done this through programs like Value Tuesday and $7 Everyday Matinee for Kids and Seniors, which offer a strong value to customers during our non peak weekdays and show times and drive attendance by capturing the customer who won’t come at higher prime time ticket prices. During the fourth quarter, we saw many customers take advantage of these programs, which we believe contributed to our strong attendance growth at a lower average ticket price.

Finally, in fiscal twenty twenty three, our average ticket prices grew nearly 11% and as a result, we took a more moderate approach to base ticket price changes in 2024 compared to other exhibitors. In addition, with a white film slate in the first half of the year, we recognize that some of our customers might be returning to theaters for the first time this year during the holidays. We wanted to ensure that customers continue to perceive moviegoing as a great entertainment value. And when customers return to see blockbuster films during the holidays, we did not want their first impression to be significant increases to ticket prices and surcharges. Our approach was in contrast to others in the industry that implemented ticket price increases on the big films during the holidays.

Again, while in the short term our ticket price our ticket per cap and box office growth was lower, we are focused on long term sustainable attendance growth. In mid November, we launched Marcus Movie Club, our new subscription program that offers memberships for $9.99 per month or $109 annually with several great benefits for customers including one movie credit per month with carryover of unused credits, a 20% food and beverage discount, access to additional companion tickets for $9.99 dollars and waived digital ticketing convenience fees. While we are in the first two months of the program, we are encouraged by the early level of customer interest and sign ups with over 30% of subscribers selecting the annual membership. We expect membership to continue to grow and contribute to long term attendance growth in the years to come. We also grew our Free to Join Magical Movie Rewards loyalty program membership by 10% during 2024 to over 6,400,000 members.

We continue to develop ways to leverage data from our Magical Movie Rewards loyalty program and Marcus Movie Club to deliver tailored marketing and promotions to drive greater engagement and attendance. As we look ahead, we are excited by a 2025 movie slate that includes several strong titles including Thunderbolts, Mission Impossible: Final Reckoning, Jurassic World: Rebirth, Superman: Legacy, F1: The Fantastic Four, Avatar, Fire and Ash and many more noted in today’s earnings release. Looking even further ahead, the early look at the 2026 film slate also looks strong with major franchises including The Avengers, Doomsday, Spider Man four, Super Mario Bros. Movie two, Moana, Jumanji three, Toy Story five, Mega Millions and The Mandalorian and Grogu. We are excited about the momentum that is building in theaters and the film slate ahead in the coming years and we remain very positive and optimistic about the long term future for the industry and our theater business.

Moving to our Hotel and Resorts division. You’ve seen the segment numbers and Chad shared the highlights of our performance metrics for the quarter, including our outperformance to upper upscale hotels nationally. So I will focus my comments on the year overall and looking ahead. We expected 2024 to be a strong year with gradually improving occupancy and the Republican National Convention helping drive strong rate growth. However, the year was not made just by this one week and there were several other bright spots to highlight.

For full year fiscal twenty twenty four compared to fiscal twenty twenty three, occupancy grew by nearly 2.5 percentage points, average daily rate grew by 2.3% and RevPAR grew by 6.2%, outperforming the industry by four percentage points. Our RevPAR growth underperformed our competitive set for the year by less than one percentage point with our underperformance related to our mix of contractual airline crew business during the RNC compared to our peers and the renovation projects at our hotels. The strong growth of our group business was a big part of our success in 2024. And I would like to congratulate our sales and marketing teams for an outstanding job. For the year, our group business increased from 37.2% of our total rooms mix in fiscal twenty twenty three to 41.9% in fiscal twenty twenty four, and it is now above our pre pandemic group mix of approximately 40% in 2019.

Even without the impact of the RNC, group business was 40.4% of our total mix. Our success in group business also speaks to the versatility of our special assets. With the investments that we’ve made in maintaining and enhancing our room product and amenities in our hotels, we have the unique ability to appeal to customers across market segments including leisure, group and business travel. And we can adapt our sales focus based on market conditions. We are positioned to win in our markets with our newly renovated assets and we’ve been able to capitalize on that opportunity.

While leisure demand softened at some of our properties during 2024 compared to last year, we expected this demand normalization and we’ve been able to offset the softness of this customer segment with increased group business. Business travel continues to have slow but steady improvement with business travel increasing at six of our seven hotels during the fourth quarter. One of our significant accomplishments in 2024 was the successful execution of several major renovation projects in our hotels. During the year, we completed a guestroom and lobby renovation in the historic tower at the Pfister and completed renovating the ballrooms and meeting space at the Grand Geneva Resort and Spa. The finished product at both hotels looks great and the reinvestment in our existing properties to maintain and enhance their value is part of our overall portfolio management strategy.

We believe these investments provide substantial returns to our shareholders over the long term at these core assets. In addition, in the fourth quarter, we began two new projects. First, we began construction of a new 10 hole short course short golf course, known as a short course, at the Grand Geneva, which we expect to open in spring of twenty twenty six. It will be known as We Nip, as in a small drink of scotch or your drink of choice. As many golfers know, there’s been a significant growth in interest and demand for short courses with notable openings at Bandon Dunes, Pinehurst, Sand Valley, Pebble Beach.

Short courses feature a more laid back vibe that appeals to a wider audience, including casual golfers, beginners and families with holes that are 90 to 120 yards, a round that takes an hour or less. With 1,300 acres of our Grand Geneva property, we saw an opportunity to capitalize on a growing segment of golf with a great complementary option to our existing two eighteen hole course on the resort, The Brut and The Highlands. With customers looking for distinctive experiential destinations, we believe this added amenity aligns with industry trends and we expect the short course to enhance the overall appeal of the resort to both leisure customers and group customers looking to mix in another social activity with conferences, training events and outings. We continue to look for additional opportunities to further develop the Grand Geneva property in the future. Shifting to our second new project during the fourth quarter, we began a major renovation of the historic Hilton Milwaukee, which will renovate five fifty four of the guestrooms in the historic tower as well as renovate and update the ballrooms and meeting space.

This hotel is connected to Milwaukee’s newly expanded convention center and the over $40,000,000 investment in new room product will help elevate the quality of rooms available to meeting and event planners for events at the New Baird Center. We evaluate the returns for each of these investments carefully and for the major renovations we underwrite we re underwrite our entire investment in the hotel, including assessing each asset’s competitive market, strategic positioning, financial performance over time, current valuation and consideration of alternatives such as divestiture. After extensive analysis and looking at numerous options, we believe we have rightsized the investment in the Hilton Milwaukee to match the current market conditions with the required returns for the investment. As we look ahead, our outlook for 2025 remains positive with our expectation for low to mid single digit RevPAR growth led by strong group business with modestly improving business travel and steady leisure. Group bookings remain strong with our group room revenue bookings for fiscal twenty twenty five or group pace in the year for the year running approximately 6% of where we were at this time last year, even when including the RNC group business in the prior year.

Looking a bit further out to 2026, group room pace is up nearly 50% of where we were at this time last year for the next year out. Banquet and catering pace for 2025 and 2026 is similarly ahead of where we were at this time last year. Based on the current demand environment and our future bookings, our outlook for 2025 remains very positive. Finally, we continue to work on our growth strategy and are actively seeking opportunities to invest in new hotels and increase the number of rooms under management. While 2024 was a challenging market for hotel transactions, we acquired the Loews (NYSE:L) Minneapolis Hotel earlier in the year as part of a joint venture and began executing our value creation strategy for the asset, repositioning and branding as the Lofton Hotel, part of the Hilton Tapestry (NYSE:TPR) collection.

We continue to look at many deals and we are disciplined in our approach, focusing on opportunities where we can leverage our expertise to create value. We’re excited about the opportunities for future growth in the Hotels business and I would like to congratulate Michael Evans and our Hotels and Resorts team for delivering a great and record year. Finally, in November, we marked the eighty ninth anniversary of the Marcus Corporation, which makes 2025 an exciting milestone as we celebrate our ninetieth year. Our theme for the year is the spirit of entrepreneurship, one of the guiding principles that my grandfather and dad instilled in all of us and our company’s future will be built on that same entrepreneurial legacy. We are called on to push, change and evolve because as my dad Steve likes to remind me the only constant is change.

I’m excited for a year focused on new ideas and growth that will continue the legacy of these great businesses in the future for many years to come. I’d like to once again express my appreciation for our dedicated associates at the Marcus Corporation. Their outstanding work and commitment to serving our customers is responsible for our success and we appreciate all that they do every day. They are 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 would be happy to open the call up for any questions you may have.

Operator: Thank you. Our first question today comes from Mike Hickey with The Benchmark Company. Please go ahead. Your line is open.

Mike Hickey, Analyst, The Benchmark Company: Hey, Greg. Chad, Greg Quarter guys, great 2024 as well. Congratulations. The obviously, Greg, listening to you, it looks like the ’25, certainly ’25 and ’26 thumb slate looks very compelling, certainly setting the stage for growth here. But I guess how are you thinking about sort of average ticket price, especially coming off Q4 and attendance growth compared to 24%?

And then just given your excitement, Greg, on 25%, twenty six %, like how does that influence your screen count growth just given the backdrop that you’re down about 11% in screens from 4Q twenty nineteen? I have a follow-up. Thanks, guys.

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Well, thanks, Mike. Yes, look, we are watching our pricing strategy very, very intently. And I think that one thing to remember is that looking at our pricing, we really got, I think, pretty aggressive coming in 2023 with our pricing. And so we were sort of we’re triangulating, trying to find the right price. It’s something we learned in the hotel business that we applied to the theater business.

What’s the right price for the right person at the right time? That’s revenue management. And we continue to refine that. But we, in the theater business, are really focused on attendance because that drives so much other stuff. And so we were very pleased with what we’d like to see more box office revenue, we were very pleased with seeing the attendance that we drove by putting in these programs.

And we evaluate them. We will continue to evaluate them every quarter and every day, real continually and try to decide what’s right as we go. Because for example, we’ve just introduced Value Tuesday is going nowhere. That’s a government license. It’s not leaving.

It’s a great program. The but as we introduce like Marcus Movie Club that is going to be something that’s going to that’s a value proposition. And we’ll sort of look at that in the tapestry of all the different value propositions we have and make decisions about how we charge. And again, with our North Star being attendants. Thinking forward with the twenty five and twenty six on screen count, I mean, screen count is important.

I do agree. And but what’s more important is cash flow. And so I like where our cash flow has been going. And yet, you have to continue to grow. And we will be looking for growth opportunities.

And we have to just sort of see where they go. Again, it’s one of those things where as we’ve talked about in the past, we just we don’t know what’s going to happen until things start to show up. And so far, that’s it’s been pretty quiet on the transaction front. I don’t think we know of really anybody that’s been doing any transactions.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: Maybe I’ll just make a couple of quick comments on the film slate. Look, we’re as you know, quality in the first half of the year in 2024 was a challenge. And as we look ahead to 2025, you’re going to see modestly increasing number of wide releases. We were 113 this year. We think it will be somewhere around 115 to 120, not a huge growth number of wide releases.

But I think the quality of the product that we’re going to see is really what’s going to be the big change. And, ’26 the early look at ’26 is also very strong. There’s a lot that’s still going to drop in the back half of 2025 and even more in 2026. So we’ll see what the fill in looks like. But early indications are very positive, which will tell us we should have very strong growth in 2025.

Mike Hickey, Analyst, The Benchmark Company: Nice. Hope you’re right, Chad. Looks good though. I guess last question guys, concessions continues to be a real bright spot in your business amongst a few others. Any strategies, Greg, or offerings that you think could further enhance per cap spend?

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: I think that the greater my sense of

Chris Potter, Analyst, Northern Border Investments: this is, and I’m going

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: to this is Chad, would you please read the forward looking statement because I can’t guarantee what I’m going to tell you. But one of the things that I think that we’re seeing is and we’re still in the early stages of analyzing this is that as we I don’t know that we can add more food, but we’ll keep coming up with stuff. But our food’s great. Our pizza’s great. Our burgers are great.

I mean, it is it’s the best in the industry. And as I

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: would tell I always tell people,

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: I would think just go eat there even if I’m not seeing a movie. But the and our popcorn is, of course, delicious. But as we move to a more digital environment, we think there’s an opportunity. We think it looks the data is not clear yet. We’re working on it now.

But as we move to a digital environment, we think there’s an ability to have increased spend. If you just think about it, firstly, we used to think it was going to be we’re going to save money if people order digitally. We’ll have less labor. And maybe there’s some of that. But really what it is, we think, is that the sales basket gets bigger.

Because if you just think about you go there on a busy Friday night, you’ve got a young kid working behind the concession stand and they’re 10 deep and they’re just trying to get the popcorn out and get the soda ordered, are they necessarily going to say, would you like to make that medium or large? Digital when you order digitally, it is it does not differentiate between the people in line. It just gives everybody that. And we do things like last time offers right before you check out of the on your digital basket. We do upsizing.

We do all suggestive selling that just doesn’t miss. And so we think there’s going to be an opportunity there. I’m not here to give you a number. I’m not here to tell you that I know for sure. But if you’re asking me where I think it’s going, that’s where I think it’s going.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: I’ll just add there’s also a related element of that on digital, which in addition to the cross selling and the second chance upselling, we’re also working on making that digital purchase experience more frictionless and easier on the customer. Because as you know, if they walk into the building and they see long concession lines, they tend to bypass. And the easier that we can make that mobile ordering experience either on the mobile website or in our app on the customers so that they don’t have to have a profile, they can just use their mobile wallet and make that purchase within just a handful of clicks and get the prompting that Greg described, that’s an opportunity for us. I think we believe we can enhance that.

Mike Hickey, Analyst, The Benchmark Company: Nice. The, Greg, on the you mentioned the Movie Club, it looks like it’s sort of you just launched it 4Q twenty nineteen. It looks like you’re getting pretty good adoption here. And I think you noted in your prepared comments that a lot of people are signing up for the annual. So must be some good value there.

But how impactful I guess, how do you see it evolving and how impactful can this be as a sort of longer term driver for attendance and engagement? And how impactful can it be? You said maximizing attendance, you can spread it to other places. I guess you said concessions, right? But how impactful can it be on all the pieces of your business that matter?

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Well, I mean, I think it can be very impactful for a number of reasons. First of all, it’s a nice steady cash flow stream. You get people to sign up for a year. I mean, I like that. You’re invested in the idea of moviegoing.

If you’re even if you’re going month to month, you’re sort of saying to yourself, yes, it’s important. I’m going to go at least once a month and show up and go to the movies. And maybe that and moviegoing begets moviegoing, so it should be important. And I would love to tell you that we were the geniuses that invented this, but we’re not. There’s another company who has the same approach who seems to have done very well with it.

And imitation is the most sincere form of flattery, so we’re flattering them. And yet, I don’t know that the one thing that I would but I would be very careful not to extrapolate their performance to ours. And for the one reason is because our Tuesday program is so strong. I think it’s the strongest in the industry in terms of its performance and what the allowable attendance that it drives that we’re covering that value customer there who might be in the club at some level. And so we think I mean, we don’t know.

We would just look at it. It’s really early days. The people who we’ve been flattering imitating have been at it for five, six years now. So we’re just on the front end of it. And we’ll see how it goes.

But I think it has good potential.

Chris Potter, Analyst, Northern Border Investments: All right, gentlemen. Thanks for taking the questions. Good luck.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: Thanks, Mike.

Operator: Our next question comes from Patrick Scholl with Barrington Research. Please go ahead. Your line is open.

Patrick Scholl, Analyst, Barrington Research: Hi. Maybe just another question, sort of following up on Movie Club. I guess, my sort of sense is that your pricing relative to the company that you’re imitating tends to be a little bit higher. And I was just kind of wondering how that played into your decision on the pricing for Movie Club?

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: I think we’re pretty close. Maybe even not as high as

Operator: the market. Okay, fair enough.

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: All right.

Patrick Scholl, Analyst, Barrington Research: I guess, could you maybe talk about your views on the capacity of the circuit and the ability to sustain market share with box office or maybe to grow market share depending on how the dynamics of the slate work out, but to grow market share in 2025?

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Amit, look, we have the capacity to grow. I mean, growing market share, look, I hope the things that we do help us grow with market share, the way we operate our business, the things that we’re doing will hopefully get us to grow some market share. You got to remember, we don’t I think that’s we’re we don’t think about it. We’re trying to grow it and we’re trying we’re just trying to keep executing and grow with the industry and try to stay a little ahead of it.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: Yes. Pat, maybe just on the capacity question. I mean, I think we have enough capacity that at peak times with the advanced showtime scheduling that we’ve focused on and really optimizing which films are getting which screens and the flexibility that our proprietary PLFs allow us to have versus others where we might be told what film to put on those screens. It gives us, the ability to really load manage the customers across the day and across the week. And as you know, we’ve got a number of different programs designed to drive people to non peak days as well to help with that, when we’ve got a very strong film slate and the number of films opening on a single weekend.

So I don’t see seat capacity as a huge limitation for us.

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Yes. I mean, actually, as you got me thinking about it, the our footprint of PLS, for example, is relatively probably relatively the largest where we have all these PLS. It allows us to play multiple films that are PLF worthy where someone might have to make a decision and say, well, I can only play one. We may have an Ultra Screen and a Super Screen and a Complex. And so we’re able to actually address the customer that’s looking for the premium experience when the big films are out probably as best as anybody.

Patrick Scholl, Analyst, Barrington Research: Okay. And on the hotel side, can you maybe just talk about the leisure environment and maybe just the extent that that helps inform if there is any sort of softness on the leisure side, if that informs any of your views like kind of just across the company overall?

Greg Marcus, Chairman, President and Chief Executive Officer, Marcus Corporation: Well, look, we’ve been seeing we saw we’ve been watching the trend for a long time, and that is that the leisure customer came out very strong few years ago as we came out of the pandemic, just that revenge travel, get out of the house, get going. Now, we’ve seen that business soften, but it’s being replaced as with more business travel, more group travel and we’re getting back to a more normal cadence. The and so now the thing you but if you think about our assets, one of the things that we try to be thoughtful about, I read a reference to having special assets. Our assets tend to play in all of those segments pretty well, so we can adjust. So, for example, if you think about our hotels, the Grand Geneva and the Pfister, it plays really well, the St.

Kate. A leisure customer likes to be there. But just as much as a business customer can be there and be in the heart of the business districts and take care of their business. And just as much as the group customer wants to be in our hotels and the banquet and catering facilities that we have. And so this portfolio of special assets allows us to pivot to whoever really is coming through the door as opposed to just maybe being a and we just being a business box somewhere in downtown, which is not a bad thing, but it gives us more flexibility.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: I think, Pat, also our positioning in upper upscale helps us just across as compared to other segments in leisure travel. We aren’t seeing a ton of softness among leisure customers seeking upper upscale amenities and resorts. And even in the last couple of months here, Grand Geneva has seen really strong weekend leisure demand because conditions have been conducive for our ski business. So we’re I think our assets for leisure are still really well positioned compared to some other parts of the market.

Patrick Scholl, Analyst, Barrington Research: Okay. Thank you.

Operator: Thank you. We have a question from Chris Potter with Northern Border Investments. Please go ahead.

Chris Potter, Analyst, Northern Border Investments: Hey, guys. I just had a maybe a bigger picture question about margins a year or two out. And it’s really so great to see all the progress you guys have made over the last couple of years. And it looks like you might be back at 2019 revenue levels by 2026, at least that’s where the analysts have you. And you have less debt now than you did pre pandemic.

And the box office is coming back strong and your hotels are renovated. Is there any reason why you can’t be back at a $50,000,000 net income level in a year or two?

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: Yes. I mean, Chris, that’s going to be very much dependent upon where the senior business box office takes us and what that looks like. There’s a lot of operating leverage in that business. And in the third quarter of this year, we demonstrated that on 20% less attendance, we can get back to the old margins in the theater business. But now we need to get there on a sustained basis and have a full year where you’ve got that type of volume going through the business.

It’s probably, somewhat somewhere around attendance down 15% compared to 2019 where we get to the same level of margins in that business. And if that happens and the volume is there and the revenue is there, we’ve a lot’s changed in the last five years. We’re comparing to some time ago, but we’ve worked hard to manage the cost structure and we think it’s possible. But as to the exact timing in your question in a year or we’ll see. We’re optimistic about what the slate looks like in the next couple of years and we hope that the box office continues to grow.

Chris Potter, Analyst, Northern Border Investments: Great. Thanks guys.

Operator: Thank you. At this time, it appears there are no other questions. So I’d like to turn the call back to Mr. Paris for any additional or closing comments.

Chad Paris, Chief Financial Officer and Treasurer, Marcus Corporation: We’d like to thank everybody for joining us today and your support during 2024. We look forward to talking to you once again in early May when we release our twenty twenty five first quarter results. Until then, thank you very much and have a good day.

Operator: This concludes today’s call. You may disconnect your line at any time.

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