The Marcus Corporation 2026 Q3 Earnings Call

Please go ahead, sir. Good morning, and welcome to our fiscal 2026 third 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, and 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 fiscal 2026 third 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 third quarter, and then 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. We'll then open up the call for questions. This morning, we reported another record quarter with results that exceeded our expectations and broke third-quarter revenue records in both divisions. In theatres, a strong film slate led by blockbuster hits kept audiences coming to the movies deep into the summer to deliver the highest total revenue for the summer movie season in Marcus Theatres' history. In hotels, we continued to see strength in leisure demand during our seasonally busiest quarter that drove record third-quarter revenue. The record third-quarter revenue in both divisions combined to deliver the highest quarterly revenue for any quarter in company history. I'll start with a few highlights from our consolidated results for the third quarter of 2026.

Consolidated revenues of $238 million were up 13.1% compared to the prior year quarter. Operating income for the quarter was $30.3 million, an increase of $7.6 million or 33% to the prior year quarter. Adjusted EBITDA for the third quarter was $49.1 million, a 21% increase over the third quarter of fiscal 2025. Net earnings for the quarter were $18.8 million or $0.60 per share, compared to prior year third quarter net earnings of $13.2 million or $0.42 per share, excluding the impact of a non-recurring gain of property insurance settlement of $3 million or $0.10 per share net of tax. Turning to our segment results, I will begin this morning with our theater division.

Third quarter 2026 total revenue of $145 million increased approximately 21% compared to the prior year third quarter, primarily due to the strong performances from "Spider-Man: Brand New Day" and "The Odyssey," as well as stronger carryover of films that released in the second quarter compared to last year's carryover. Comparable theater admission revenue for the third quarter increased 21.8%, and comparable theater attendance increased 16.8% compared with the third quarter last year. Based on data from Comscore, U.S. box office receipts increased 27% during the 2026 third quarter compared to U.S. box office receipts during the third quarter of 2025. There are three factors that impacted our admissions revenue growth when compared to the reported national box office growth.

First, based on our review of box office data, it is important to note that our admissions revenue in the third quarter of 2025 included box office revenues from two films with national grosses that were not reported by certain streaming content providers to Comscore. The exclusion of the grosses for these films from the prior year resulted in higher national box office growth, and our admission revenue growth rate was negatively impacted by 2.8 percentage points when compared to the national box office growth rate. Second, during the third quarter of 2026, we made the strategic decision to not play two films due to distributor terms, which we believe negatively impacted our admissions revenue growth by approximately one percentage point.

While these decisions to pass films are never easy, we are committed to achieving competitive market terms for film rent, and we were pleased to reach a resolution with the distributor going forward. When adjusting for the impact of these two factors, our admissions revenue for the third quarter grew 25.6%, indicating that our admissions revenue performance trailed the industry by approximately 1.4 percentage points. We believe that our slightly lower box office performance relative to the nation during the third quarter was primarily attributable to an unfavorable film mix that included the number 2 film in the quarter, "The Odyssey," that played stronger in other parts of the U.S. where we do not have a presence, and in premium formats with significantly elevated average ticket prices. Our average admission price increased 4.3% during the third quarter of 2026 compared to last year.

Our admission per caps were favorably impacted by strategic pricing changes, a higher percentage of our attendance on PLF screens, and a decrease in the percentage of attendance coming on Value Tuesday compared to last year's quarter due to one additional Tuesday that fell in last year's calendar third quarter compared to this year's third quarter. We also grew our average concession, food, and beverage revenues per person at our comparable theaters, which increased by 3.8% during the third quarter of 2026 compared to last year's third quarter, and was driven by an increase in movie-themed merchandise sales and menu pricing. Our top 10 films in the quarter represented approximately 80% of the box office, compared to 72% for the top 10 films in the third quarter last year.

The more concentrated film slate weighted towards blockbuster films compared to the less concentrated slate in the third quarter last year resulted in a less than one percentage point increase in overall film cost as a percentage of admission revenues. Finally, theater division Adjusted EBITDA during the third quarter of 2026 was $46.3 million, an over 46% increase over the prior year quarter, primarily due to the higher attendance volumes. Turning to our hotels and resorts division, total revenues before cost reimbursements were $82 million for the third quarter of 2026, a 2% increase compared to the prior year. RevPAR for our owned hotel portfolio increased 2.1% during the third quarter compared to the prior year, which resulted from a 3.3% increase in our average daily rate, or ADR, partially offset by an overall occupancy rate decrease of just less than one percentage point.

Our average occupancy rate for our owned hotels was 77.5% during the third quarter of 2026. For our comparable owned hotels, which excludes The Marc Hotel that opened in early 2026 as a new independent hotel with a new competitive set, RevPAR grew 7.4%. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced an increase in RevPAR of 6.2% for the third quarter of 2026 compared to the third quarter last year, indicating that our hotels outperformed their competitive set by 1.2 percentage points. We believe our outperformance resulted primarily from strong transient demand and slightly improved business travel, while we experienced a somewhat softer group demand environment. Group business as a percentage of our total business mix was approximately 39% compared to 43% in the third quarter last year.

When comparing our RevPAR results to comparable upper upscale hotels throughout the U.S., the upper upscale segment experienced an increase in RevPAR of 7.8% during the third quarter compared to the third quarter last year, indicating that our hotels underperformed the industry by approximately 5.7%. We believe our underperformance to the industry nationally this quarter primarily relates to transient demand related to major events, particularly the World Cup, that occurred in other markets where we do not have a presence, as well as softer group demand in our markets. With the softness in group business and events, our banquet and catering operations decreased modestly with food and beverage revenues down 1.4% in the third quarter of 2026 compared to the prior year quarter.

Finally, hotels Adjusted EBITDA decreased $600,000 in the third quarter of fiscal 2026 compared to the prior year quarter and was negatively impacted by increased repair and cleanup expenses following severe storm damage at Grand Geneva Resort & Spa, which occurred on July 3rd leading into the Independence Day holiday weekend. While our team worked incredibly hard to recover and serve resort guests that weekend, the storm event resulted in operational challenges, cancellations, golf course closures, and incremental cleanup and repair expenses. We expect the damage to the resort to be covered by property insurance, and we expect the event led to an approximately $500,000 negative impact on Adjusted EBITDA due to incremental cleanup costs and lost revenue during the holiday weekend. When excluding the impact of the storm, our Adjusted EBITDA was essentially flat.