The Marcus 2026 Q2 Earnings Call

Please go ahead, sir. Good morning, welcome to our 2026 second quarter conference call.

I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as "believe," "anticipate," "expect," or other similar words. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements are only made as of the date of this conference call. We disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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 2026 second quarter results, and in the Risk Factors section of our fiscal 2025 annual report on Form 10-K, which you can access on the SEC's website. Additionally, we refer you to the disclosures and reconciliations we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the investor relations page of our website at investors.marcuscorp.com. All right. With that behind us, let's begin. I'll start this morning by spending a few minutes sharing the results from our second quarter and discuss our balance sheet and liquidity.

I'll turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we see ahead. We'll open up the call for questions. This morning, we reported our best second quarter since 2019. It was a quarter where the intersection of strong demand and both businesses outperforming their respective industries and concepts combined to deliver new post-pandemic second quarter records for consolidated The Marcus Corporation revenue and adjusted EBITDA. As we shared on our last call, the second quarter got off to a strong start in our theater division with the "The Super Mario Bros. Movie" creating great momentum heading into a strong slate for the summer moviegoing season. Audiences headed to our theaters for one great movie after another to deliver several positive surprises and our strongest second quarter in theater since the pandemic.

In our Hotel Division, we continued to benefit from strong group business and resilient leisure travel demand that drove overall revenue growth and another quarter of outperformance against our peers and the industry. Overall, we are very pleased with the second quarter results we reported this morning. Shifting to the numbers, I'll start with a few highlights from our consolidated results for the second quarter of 2026. Consolidated revenues of $232 million were up 12.5% compared to the prior year quarter, with revenue before cost reimbursements growing in both divisions. Operating income for the quarter was $27 million, more than doubling compared to $13 million in the prior year quarter. Consolidated adjusted EBITDA for the second quarter was $46.2 million, a 43% increase over the second quarter of 2025.

Finally, net earnings for the quarter increased 116% to $15.8 million, and net earnings per share increased over 121% to $0.51 per diluted common share, both compared to the prior year second quarter. Turning to our segment results, I'll begin this morning with our Theatre Division. Second quarter 2026 total revenue of $150.6 million increased 14.4% compared to last year's second quarter. Comparable theater admission revenue for the second quarter increased 16.6%, and comparable theater attendance increased 10.9% compared with our fiscal second quarter 2025. According to data received from Comscore and compiled by us to evaluate our second quarter results, U.S. box office receipts increased 11.5% during the 2026 second quarter compared to U.S. box office receipts during the second quarter of 2025, indicating our admissions revenue outperformed the industry by approximately five percentage points.

We believe that our box office outperformed during the second quarter was primarily attributable to strategic pricing actions as well as a favorable film slate that featured a higher mix of films that played well in our Midwestern markets, particularly family films. This contrasts with the second quarter last year, when our top markets underperformed the overall increase in the national box office and a quarter that was light on family film product. Average admission price increased 5.2% during the second quarter of 2026 compared to the prior year quarter, primarily due to strategic pricing actions. Our average concession food and beverage revenues per person at our comparable theaters increased by 2.4% during the second quarter of 2026 compared to last year's second quarter, which was driven by an increase in merchandise sales, pricing, and an increase in incidence rate.

Our top five films in the quarter represented approximately 55% of the box office in the second quarter of 2026, compared to 59% for the top five films in last year's quarter. The slightly less concentrated film slate resulted in a less than one percentage point decrease in overall film cost as a percentage of admission revenues compared to last year's second quarter. Finally, Theatre Division adjusted EBITDA during the second quarter of 2026 was $36.3 million, a nearly 37% increase over the prior year quarter. Turning to our Hotels & Resorts Division, total revenues before cost reimbursements were $70.8 million for the second quarter of 2026, a 9.6% increase compared to the prior year.

RevPAR for our comparable owned hotels increased 13.9% during the second quarter compared to the prior year, which benefited from an overall occupancy rate increase of 5.9 percentage points and a 4.7% increase in our average daily rate or ADR. Our average occupancy rate for our owned hotels was 73.2% during the second quarter of 2026. Our occupancy rate increase benefited from the Hilton Milwaukee being fully back in service compared to the second quarter last year when the hotel was under renovation and guest rooms were out of service. We estimate that the impact of the renovation in the prior year favorably impacted our RevPAR growth by approximately 4.4 percentage points during the second quarter.

According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced RevPAR growth of 7.8% for the second quarter of 2026 compared to the second quarter of 2025, indicating that our hotels outperformed their competitive set by 6.1 percentage points. After adjusting for the prior year impact of the Hilton Milwaukee renovation, we believe our hotel's RevPAR growth outperformed the competitive set by 1.1 percentage points, which we attribute to continued strength in group business and strong leisure demand. When comparing our RevPAR results to comparable upper upscale hotels throughout the U.S., the upper upscale segment experienced RevPAR growth of 5.7% during our second quarter compared to the second quarter of 2025, indicating that our hotels outperformed the industry by 8.2 percentage points and outperformed the industry by approximately 3.9 percentage points when adjusting for the estimated impact of the Hilton Milwaukee renovation.

With the steady growth in group business and events, our banquet and catering operations continued to grow with food and beverage revenues up 5.7% in the second quarter of 2026 compared to the prior year. Hotels' adjusted EBITDA increased $3.5 million or just over 31% in the second quarter of 2026 compared to the prior year quarter, which primarily benefited from our revenue growth and improved operating efficiencies on higher occupancy. Shifting to cash flow and the balance sheet, our cash flow from operations was $54 million in the second quarter of 2026, compared to cash flow from operations of $31.6 million in the prior year quarter, with the increase in cash flow primarily due to higher earnings. Total capital expenditures during the second quarter of 2026 were $10 million, compared to $16.9 million in the second quarter of 2025.

Our capital expenditures during the second quarter were primarily invested in maintenance and ROI projects in both businesses. For the first half of 2026, our capital expenditures decreased $23 million compared to the first half of fiscal 2025. Given that we are now halfway through the year, our capital investments project planning continues to evolve, and we now expect capital expenditures of $45 million-$50 million for 2026. We will continue to update our capital expenditure estimates as the year progresses. As we have discussed since the beginning of the year, we continue to expect our lower capital expenditures to result in a significant increase in free cash flow in 2026. In the second quarter of 2026, we generated $44 million in free cash flow, nearly tripling our free cash flow from the second quarter last year.

For the first half of 2026, free cash flow was $22 million, a $65 million increase compared to the first half of FY 2025. We ended the second quarter with approximately $26 million in cash and over $245 million in total liquidity with a debt to capitalization ratio of 25% and net leverage of 1.1 times. With that, I will now turn the call over to Greg.