Marcus Corporation Aktie

Good morning, everyone, and welcome to Marcus Corporation's First Quarter Earnings Conference Call. My name is Ellie, and I will be your operator for today. [Operator Instructions] 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 Marcus Corporation.

At this time, I'd now like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Good morning, and welcome to our 2026 First 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 2026 first quarter results and in the Risk Factors section of our 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. Let's begin. This morning, I'll start by spending a few minutes sharing the results from our first 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. We'll then open up the call for questions.

I'll begin with an important reminder about our fiscal calendar that impacted our first quarter year-over-year comparisons. The first quarter of fiscal 2025 was the first quarter of transition to a calendar fiscal year and included 5 days at the beginning of the quarter during the week between the Christmas and New Year's holidays at the end of calendar 2024 that are significant days in our theater division. In fiscal 2026 and going forward, the first quarter began on January 1. And as a result, our first quarter results faced the headwind of having 5 fewer operating days when compared to the first quarter of fiscal 2025. Going forward, our year-over-year quarterly comparisons will now be aligned ending on traditional calendar quarters.

On the call today, I'll provide the as-reported year-over-year changes in our results as well as the growth on a comparable calendar quarter basis, excluding the impact of the extra days in the prior year to provide an apples-to-apples comparison. As you would expect, our growth for the comparable calendar quarter is even stronger than our as-reported results.

We are very pleased to report that we were able to overcome this headwind to deliver another quarter of solid execution and results with both divisions growing year-over-year revenue and an overall increase in adjusted EBITDA. In theaters, a significantly better first quarter film slate with improved product supply and better carryover of holiday films drove significant attendance and revenue growth, leading to our overall improved results. In our hotel division, we continued to see year-over-year improvement in RevPAR and occupancy as we benefited from our renovated hotel assets being fully operational.

Shifting to the numbers, I'll start with a few highlights from our consolidated results for the first quarter of 2026. Consolidated revenues of $154.4 million increased $5.6 million or 3.8% compared to the prior year quarter, with revenue growth in both divisions. The 5 fewer operating days negatively impacted consolidated revenue growth by $15.3 million.

On a comparable calendar quarter basis, excluding this impact, consolidated revenues increased $20.9 million or 15.6%. Operating loss for the quarter was $19.3 million, an improvement of $1.2 million compared to the prior year first quarter. Consolidated adjusted EBITDA for the first quarter was $2.6 million, an increase of $2.9 million over the first quarter of fiscal 2025. The year-over-year improvements in both operating loss and adjusted EBITDA were negatively impacted by $5.3 million due to the fewer operating days. On a comparable calendar quarter basis, adjusted EBITDA grew $8.2 million.

Turning to our segment results. I'll start with our theater division. First quarter 2026 total revenue of $92.9 million increased $5.6 million or 6.4% compared to the prior year first quarter. The 5 fewer operating days negatively impacted theaters revenue growth by $12.2 million. On a comparable calendar quarter basis, excluding this impact, theaters revenues increased $17.8 million or 23.6%. For our fiscal first quarter 2026, comparable theater admission revenue increased 9.8% and comparable theater attendance increased 1.9% compared with our fiscal first quarter 2025.

On a calendar quarter basis, first quarter 2026 comparable theater admission revenue increased 29% and comparable theater attendance increased 19.1% compared to the prior year first calendar quarter.

When using our comparable fiscal days, according to data received from Comscore and compiled by us to evaluate our 2026 first quarter results, U.S. box office receipts increased 5% during our 2026 first quarter compared to box office receipts during our fiscal 2025 first quarter, indicating our theaters outperformed the industry by approximately 4.8 percentage points.

On a straight calendar quarter basis, we also outperformed the U.S. box office by 7.6 percentage points. We believe our outperformance is primarily attributed to our strategic pricing actions as well as a favorable film slate that featured several titles appealing to family audiences, our genre where our circuit typically performs very well.

Average admission price increased 7.8% during the first quarter of 2026 compared to last year, benefiting from strategic ticket price optimization actions, an increased percentage of ticket sales from PLF screens and a favorable daypart ticket mix.

Our average concession food and beverage revenues per person at our comparable theaters increased by 2.4% during the first quarter of 2026 compared to last year's first quarter, which was primarily due to increases in movie theme merchandise sales and incidence rate as well as inflationary price changes.

Our top 10 films in the quarter represented approximately 62% of the box office in the first quarter of 2026 compared to approximately 66% for the top 10 films in the first quarter last year, with film costs as a percentage of admission revenues effectively flat for the first quarter compared to the prior year.

Theater division adjusted EBITDA during the first quarter of 2026 was $8 million, an increase of $4.3 million. The year-over-year increase in adjusted EBITDA was negatively impacted by $5 million due to the fewer operating days. And on a comparable calendar quarter basis, theater division adjusted EBITDA increased $9.3 million.

Turning to our hotels and resorts division. Revenues were $61.4 million for the first quarter of 2026, up $100,000 compared to the prior year. Total revenue before cost reimbursements at our 7 owned hotels decreased $600,000 or 1.1% compared to the first quarter of fiscal 2025. The 5 fewer operating days negatively impacted hotels revenue growth by approximately $3.1 million. On a comparable calendar quarter basis, excluding this impact, hotels revenue before cost reimbursements increased $2.5 million or 5.1%.

RevPAR for our comparable owned hotels grew 13.7% during the first quarter compared to the prior year, which resulted from an overall occupancy rate increase of 8.9 percentage points, partially offset by a 3.4% decrease in our average daily rate or ADR. Our average 2026 first quarter occupancy rate for our owned hotels was 59.2%. Our occupancy rate increase benefited from the Hilton Milwaukee being fully back in service compared to the first 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 percentage points during the first quarter.

According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced a decrease in RevPAR of 2.9% during the fiscal first quarter of 2026 compared to the first quarter of fiscal 2025, indicating that our hotels outperformed their competitive set by 16.6 percentage points. After adjusting for the prior year impact of the Hilton Milwaukee renovation, we believe our hotels RevPAR growth outperformed the competitive sets by 11.5 percentage points, which we attribute to continued strength in group business as well as generally strong performance from our renovated assets.

When comparing our RevPAR results to comparable upper upscale hotels throughout the United States, the upper upscale segment experienced an increase in RevPAR of 3.9% during our first quarter compared to the first quarter of fiscal 2025, indicating that our hotels outperformed the industry by 9.8 percentage points and by 5.8 percentage points when adjusting for the estimated prior year impact of the renovation.

Food and beverage revenues decreased 2.1% in the first quarter of 2026 compared to the prior year and were negatively impacted by the decrease in operating days. Hotels other revenues decreased by $1.4 million or 9.2%, primarily due to a weaker ski season at Grand Geneva Resort & Spa and the impact of fees generated from an all hotel group buyout at one of our condo hotel properties in the first quarter of fiscal 2025, an event that doesn't happen every year and did not recur in the first quarter of 2026.

Finally, hotels adjusted EBITDA decreased $1.3 million in the first quarter of 2026 compared to the prior year quarter, primarily due to a $400,000 impact from the 5 fewer operating days, lower other revenues resulting from the weaker ski season and the nonrepeating group buyout in the prior year, which included high-margin rooms and banquet and catering business and higher benefits costs.

Shifting to cash flow and the balance sheet. Our cash flow from operations was a use of cash of $15.2 million in the first quarter of 2026 compared to cash used by operations of $35.3 million in the prior year quarter, with the increase in cash used primarily due to favorable timing of payments and accounts payable, higher EBITDA and a onetime benefit of $3 million from the sale of historic tax credits related to the Hilton Milwaukee renovation. As a reminder, our cash flow from operations in the first quarter is historically impacted by seasonal changes in working capital resulting from the slowdown in our business following the peak holiday season and by the timing of various year-end accounts payable and compensation payments.

Total capital expenditures during the first quarter of 2026 were $6.6 million, a $16.4 million decrease compared to the first quarter of fiscal 2025. Our capital expenditures during the first quarter were primarily invested in maintenance and ROI projects in both businesses. Our capital investments and projects have progressed as planned, and we continue to expect capital expenditures for 2026 of $50 million to $55 million, and we will update our capital expenditure estimates throughout the year.

As we discussed last quarter, we continue to expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026. And this played out as expected in the first quarter with a $36.5 million improvement in free cash flow compared to the prior year.

Our balance sheet remains strong, and we ended the first quarter with over $11 million in cash and over $194 million in total liquidity with a debt-to-capitalization ratio of 28% and net leverage of 1.7x. Our strong balance sheet and confidence in our businesses gives us the ability to continue investing in our businesses and pursuing growth while returning capital to shareholders through our quarterly dividend and opportunistic share repurchases.

During the first quarter, we repurchased approximately 87,000 shares of our common stock for $1.3 million in cash. We will continue to allocate capital with a balanced approach that supports our strategic priorities while pursuing investments that provide the most attractive long-term returns to shareholders.

With that, I will now turn the call over to Greg.

Thanks, Chad. Good morning, everyone. We entered the year with a plan for projected growth in both of our businesses. In theaters, we expected a stronger film slate in 2026, coupled with improvements in per capita sales to drive growth in the theater division. In hotels, we expected our recently renovated properties to drive outperformance within our competitive sets after several years of significant investment in an overall stable macroeconomic environment. We're happy to report that the first quarter generally played out a little better than we expected with strong outperformance in both divisions. Theaters led the growth and improvement in our results on a better-than-expected box office and hotels continue to grow RevPAR and revenue with outperformance being driven by our renovated hotels.

As Chad discussed, we were able to overcome the headwind from having fewer operating days in the quarter, which was no small feat considering the week of the year that those days fell in the first quarter last year. With the normal seasonal headwinds in our hotel business, the first quarter is always challenging. So it's incredibly helpful when we're able to get off to a good start as we did this quarter. The first quarter that we are reporting today continues to make year-over-year progress, and we're pleased to be sharing these results with you.

I'll start with the theater division. Our theater division got off to a much stronger start than last year and what a difference a year makes. A stronger film slate drove significantly higher attendance for the comparable quarter with a combination of solid carryover performances from several holiday films, successful original family films in Hoppers and Goat and a major tentpole in Project Hail Mary that delivered blockbuster results, all contributing to deliver the best first quarter in the U.S. box office since the pandemic. This quarter was a great reminder of what is possible with better product supply when there are several things working at once. It also demonstrates that audiences will come out whenever there are good movies, not just during the peak summer and holiday periods, and the industry needs to continue to fill in the slate across the calendar. The first quarter national box office was up over 21%, and there is still a lot more opportunity for further growth with additional products in the future.

As Chad discussed, we continued to realize strong per capita growth during the quarter with average ticket prices benefiting from our ongoing price optimization efforts and continued growth in merchandise sales, which are included in our concession revenues. Last quarter, I shared several initiatives we are executing this year to drive per capita sales growth. As an update, we have now completed our rollout of tap-to-pay terminals to all ticketing and food and beverage points of sale, both in-store and our mobile wallets for our digital purchasing channels.

This week, we will complete the rollout of in-seat QR code mobile food and beverage ordering to all 20 of our dine-in theaters, which we believe makes food ordering faster and easier for customers. Looking ahead, we continue to work redesigning a best-in-class food and beverage digital purchase experience in our mobile web and app for all theater locations that we expect to roll out in time for the holidays later this year.

A couple of weeks ago, we were with our theater team at CinemaCon, and once again, our studio partners, film directors and talent all continue to reaffirm the importance of theatrical exhibition and our critical role to the overall movie and media ecosystem. After years of experimentation and discussion around the length of the exclusive theatrical window, I believe we have reached an inflection point and recognition by studios and distributors that a longer theatrical window enhances the overall performance of films across the ecosystem, and we applaud the significant announcements from major studios, including Universal, Sony and Paramount, extending or committing to minimum exclusive theatrical windows. While the industry has more work to do on windows and improving product supply, we are heading in the right direction.

Second, we got a closer look at the film slate for the rest of the year and into 2027, and we remain very optimistic about the coming attractions. The momentum from the first quarter continued into April with the blockbuster success of Super Mario Galaxy movie and last weekend's record opening of Michael, getting the second quarter off to a solid start. We kicked off the summer movie season this week with the opening of The Devil Wears Prada 2, which will be followed by a number of big titles, including Mortal Combat 2, Star Wars: The Mandalorian and Grogu, Super Girl, The Odyssey and Spider-Man: Brand New Day. I am particularly excited for the widely appealing family features such as Toy Story 5, Minions & Monsters and Moana.

The fall and holiday film slate is also exciting with Avengers, Doomsday, Dune: Part Three and Jumanji: Open World, just to name a few. There are many more great films coming noted in today's earnings release. Looking even further ahead, the 2027 film slate also looks strong with major franchises, including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, The Batman Part II, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, Man of Tomorrow, The Legend of Zelda, Avengers: Secret Wars and many more.

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 some additional detail on the performance metrics, including our outperformance to our competitive sets and upper upscale hotels nationally. We have made significant investments in several of our hotels over the last 3 years, and we continue to see customer demand for newly renovated room product and freshly redesigned meeting and event spaces. These amenities allow us to drive strong rates and outperform within our markets, and our sales teams have done a great job capitalizing on this opportunity.

As we've discussed in past years, there is significant seasonality in our hotel business given that most of our company-owned hotels are located in the Midwest. We often lose money in this division during the winter months as was the case this year with adjusted EBITDA that was slightly negative. In addition to having fewer days in the quarter, there were headwinds from a few items in the first quarter of fiscal 2025, including Milwaukee hosting the men's NCAA basketball tournament, an all-school -- I'm sorry, an all hotel group buyout at one of our condo hotels last year and favorable weather for ski season that did not recur this year in the first quarter. This is the nature of event-driven group rooms business. And while we did not see these events repeat this year, these are similar events will likely return in the coming years.

There were a few notable items in the quarter I would like to highlight. While average daily rates decreased around 3% in the first quarter, this was not unexpected and was primarily driven by 2 factors. First, all of the Hilton Milwaukee rooms are back in service, resulting in less rate pressure with more room supply. This contrast to last year when we were able to create some rate compression in the Milwaukee market with the reduced available room count due to renovation.

And second, at Grand Geneva, the weaker ski season resulted in weekend transient demand that was softer and resulted in lower rates compared to last year. The decrease in rates was more than offset by the significant increase in occupancy from the Hilton Milwaukee rooms back in service, resulting in overall RevPAR growth of 13.7%.

Group bookings remain stable with our group room revenue bookings for 2026 or group pace in the year for the year, running approximately 5% ahead of where we were at this time last year. Looking a bit further ahead to 2027, group room pace is running in line with where we were at this time last year for the next year out. Although this far out, the timing of bookings can vary significantly. Banquet and catering space for the remainder of 2026 is running in line with where we were at this time last year.

As our hotel division heads into the busier spring and summer travel months, we believe we are well positioned to win in our markets. While transient demand has remained healthy, it is important to acknowledge there continues to be an elevated level of economic uncertainty with recent volatility in key travel costs, including gas prices and airfare. If market conditions change and we begin to see softness, we are prepared to react and adjust quickly.

Before we open the call up for questions, I want to once again thank all the people that work so hard every single day, making our ordinary days extraordinary for our guests. We talk a lot about the investments that we make in our businesses, but 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.

[Operator Instructions] Your first question comes from the line of Drew Crum of B. Riley Securities.

Greg, you provided an update in your preamble on the various initiatives you've rolled out or plan to launch over the course of the year to drive concession revenue. Any early learnings or observations you can share just the overall receptivity on the part of your patrons to these?

And maybe for Chad, is the 2% cap rate reported in 1Q a good quarterly run rate to think of as you progress through the year?

I'll go first with the question on what we're seeing. We see a number of things. One is the QR codes are being very well accepted, and we're happy with how that's going. That makes for a better experience for everybody. If nothing else, we get better customer service because it's really interesting. One of the things that could happen is if you order and you don't sit in the right seat and your food is delivered to the seat that you ordered it to, you don't get your product and then everybody is unhappy. And so we were seeing better efficiency, if nothing else, with people going to their seat and they -- because the QR code is linked to their seat. So the food arrives, it arrives hot and it just makes the whole operation much better. So that's very helpful.

The other thing that we've seen, and I don't have a number to give you yet, but I think we talked about before, one of the -- I talked about how we're really working to develop a best-in-class food and beverage experience for our customers' ordering experience digitally because we know that basket sizes are larger when people order digitally. And primarily that comes from that never missing on whether it's an upsell.

If you've got 10 people deep in a concession line, you're just trying to get through a Friday night, you may not be -- you may not always try to upsell that medium soda to a large. But digital, that never misses. And we have a whole -- I think we can't do even live. It's a last chicken saw, last time offer, we call it. So before you check out, oh, do you want a popcorn with that soda? Do you want whatever it might be with that, a dessert with your food? And so we're able to do that suggestive selling and upselling much better digitally. So we feel with that and then making the whole experience more frictionless for the customer, we're going to have an opportunity to increase our concession sales.

Yes, Drew, on the concessions per cap increase, we said last quarter, we're trying to get to low single digits. We were at 2.4% in the quarter. I think that kind of 2% to 3% range is probably about right. And in terms of the way we're getting there, we're trying to get to that 3% with just inflationary pricing and growing another point or so with the results of some of the initiatives that Greg has just talked about by increasing incidents and by increasing basket size. So that's -- I think that's a reasonable number for purposes of modeling.

Got it. Okay. Very helpful. And then just one follow-up on the hotels business. Can you address the divergence between rooms and food and beverage revenue? I think you mentioned there were fewer operating days that impacted the food and beverage figure. But was there anything else that drove the divergence between the 2?

There was. The one item that sticks out aside from the days difference which some of those days come between the holidays and we actually do get a fair amount of F&B business in that period. But the all group hotel buyout that we had in one of our properties that I mentioned in my remarks, actually had a very heavy F&B component. That's a piece of business that we don't get every year. We had it last year. We had it 3 years earlier. It's on its own cycle. And so that had a heavier F&B impact than we normally would have had.

Your next question comes from the line of Mike Hickey of StoneX.

Chad, congrats guys on a great 1Q. Just a few. First on windows, Greg, good to hear from you that you're excited. I think last year, there were some big plans, but I think we felt stuck too on windows moving anywhere positive. So just curious how impactful you think this new windows is sort of when you think the consumers' behavior might change and maybe the future of windows because it seems like this year at CinemaCon, there were a few studios talking maybe even longer windows.

Yes. Look, I'd start with -- what's the word in the financial community, the trend is your friend. I'd say that the trend is our friend here. This is -- but it didn't just happen overnight. I credit Michael O'Leary at the Cinema United but really starting to really raise the issue publicly a year ago at CinemaCon and say, this is really important. So this is not something that happened overnight. It's an education. It's an understanding. It's the evidence that we see on the importance of a window.

And let's be very clear, studios control the window and the studios are not doing -- it just not charity, the theater business. They know that a help of theatrical business is good for the overall ecosystem, and it maximizes the value of their product. That whole concept that we've talked about many times, windowing, selling the same thing to the same person over and over again.

Well, if you match those windows too tight together, you lose that second or third or fourth sale. But if you create some space, not only do you get people who pay more -- remember, the other concept of windowing is important is a high -- that you start with your highest per capita set of eyeballs. And to the extent that you trade somebody paying $12, $15, whatever it might be, to putting 5 people in the room splitting $20, it's a much better deal to catch those per capita eyeballs and nothing else, and then you get that second sale on top of it or that third sale when somebody consumes it in a transactional video-on-demand or a streaming video-on-demand environment.

And so I thought that -- and the other thing, too, is you don't have people saying, well, I'll just wait for it at home. And we've been very clear to say that, that very short 17-day window is one of the contributor -- was one of the contributors to this idea that because people don't -- they're not paying enough attention. They just hear at home now. They don't know that it's $20. They get something in their e-mail saying, "Hey, get it now." It doesn't say it's -- and they maybe don't pay enough attention. It just feels like it's coming so fast. So stretching that out, continuing to educate the customer that stretched out is really important. And Universal who just recently made the announcement that they are going to move back from their pandemic era experimentation and go to a standard -- go to 45 days, I thought was unbelievably important and signals that, and you've got Tom Rothman of Sony saying it's theatrical is important and for theatrical to be healthy, it has to have a window.

And so as Stephen Spielberg said 45 days is a good start, but how about 60 or more? And I would presently say an easy way to explain that, I think, is my mantra should be 2 and 5. That's 2 and 5, 2 months for transactional, 5 months for streaming video-on-demand. So I'm for the 2 in 5 model. Very simple to understand for everybody. And I think it will be good for theatrical and what's good for theatrical will be good for the overall ecosystem.

Right. Obviously, on the concession side, you've really been doing some cool tech and it looks like you're getting progress there. Curious on the seating side, if you see any sort of innovation or enhancements you could do on seating. And also curious about the Infinity vision. It looks like sort of a mixed reception from operators on Disney certification.

Well, the -- on the -- let's start with the seating. Any new seating stuff that you -- there's de box, there's things like that, that can be experimented with. There's things we can do. I don't think there's anything huge that we're going to be able to do. We've had others experiment with just charging more for premium seats, and I don't know that, that went so well. But on the -- so I don't -- so there'll be on the margins, maybe a little bit here and there, but nothing sharing. I mean the recliner investment we made was so significant. And for us, it's great. We made ours with 2,000, let's call it, $15. So that I think has been very helpful for us.

On the Disney thing, I'm not familiar with the exact details of it, although look, the ability to brand PLFs, it's very interesting if you think about it, I think the -- taking out IMAX out of the PLF. IMAX is a PLF. But taking IMAX out, I think that the footprint of PLFs in the country is double IMAX in size. And so, in any given weekend, the ability to unify that marketing effort, I understand why Disney is trying to do what they're trying to do. Now whether they'll be the ones to do it, I don't know. But there's power -- when you speak with one voice, you speak louder. Everyone getting together to speak with one voice is much more effective. And so I see -- I understand what they're trying to do, whether that's the model that works, I don't know, but I'm not against the idea. And so that's my feeling on that.

Nice. Last question on free cash flow. Obviously, it looks like you're inflecting this year. Just curious, Chad, your confidence there. Obviously, that's really resonating with investors. So post 1Q, after a strong quarter, I'm guessing you're more enthusiastic, but I love to hear from you and then how you're thinking about carrying that into '27.

Yes. Mike, I think we feel really good about it because we control the CapEx spend. We've got a $30 million planned decrease with our current guide on CapEx. And so that alone will provide a meaningful uplift and that if the business is flat, and we don't expect the business to be flat. And getting off to a really good start in Q1 certainly helps. So 3 quarters to go, but in terms of confidence, I feel good.

I want to just build -- I want to add one thing, Mike, on your question about premium large format, and that is one thing that's not lose sight of and that is still 80% of our business is regular traditional screens. And that's a customer that we -- theatrical has always been known as the least expensive form of out-of-home entertainment. It's a cheap date, so to speak. And I think we always have to remember that. And I think in our theater, specific to our platform, we have probably the highest incidence of PLF in the industry. And yet we also have a very robust discount program with our Tuesday program and our Marcus Movie Club. And I like to think about it as we've talked about this before, learnings from our hotel business, the right price for the right customer at the right time. And so our averages look sort of in line, but I think that our -- we offer a real wide breadth of opportunity for our customers.

Your next question comes from the line of Eric Wold of Texas Capital Securities.

A couple of questions. I guess first on the hotel and resorts division, now that you've completed the renovation of Hilton Milwaukee, maybe talk about the level of rate hikes that your rate increases or that you're looking to kind of push through that you have pushed through at that property maybe around both kind of group and leisure travel and how that compares to kind of what you're able to push through following a Pfister renovation a couple of years ago?

Yes, I can take that one. So we absolutely have seen uplift from both group events that we're able to win and book into renovated properties. We're winning that business, and we're getting an uplift in transient rates that's driving growth in ADR at those properties.

As a general rule, Eric, I would say we're in the range of 10% to 15% on rates after we do make rooms renovations like this. And that's across our experience on the 3 major renovated properties, the Pfister, Grand Geneva and now Hilton Milwaukee. But there's no doubt you -- once the customer knows that room product has been refreshed and you are the desired asset in the market to stay at, you get to take share and you're commanding premium rates to do so.

Got it. And have you seen any reaction from others in the market on their pricing when you've taken rate changes? Or are they kind of playing catch up a little bit given the lack of remodel?

I can start and then Greg can add his thoughts. I mean, I think at the end of the day, it's a perceived value on the quality of the product and the customer is making a choice on what experience they want to have. And it's a dynamic pricing business. We're continuously adjusting prices based on where we see that demand. And I think others in the market are doing the same. And so we're able to capture a premium because there is demand for the renovated product. I would believe that others are hurting from that loss of demand, and they're adjusting prices to try to capture volume.

The other thing too that could happen is, it may not look on its face as if the rates are going up as much because it can also be a mix of business thing, too, that you may not see like just looking at the rates. And so our rates do go up, and you can't see it specifically in like a [ Star ] report because they don't divulge the specific hotels rates. But you can see that our rates are improving because we're moving out lower-rated business out of a hotel like the Hilton where we have so many rooms, and we're able to move that business -- that lower-rated business out.

Got it. And then just the last question, kind of a follow-up on the free cash flow question from earlier, given kind of the understanding there's kind of a relative lack of transaction activity in both the exhibition and hotel segments, I guess how aggressive would you be willing to be on share repurchases as that cash flow grows? Do you feel you need to build up a war chest in case transaction activity picks up? Or are you kind of really comfortable where your leverage is and possibly leveraging up for the right opportunity?

Yes. I think we tend to have a very balanced approach. We're opportunistic when we see really attractive opportunities to buy back shares. We've leaned in and we've done that. But we are trying to maintain some dry powder to give us the ability to go and move quickly, which I think is one of our advantages in M&A. And we have seen across both businesses, some activity. And so far, nothing has resulted in deals, but we're trying to maintain a balance.

[Operator Instructions] Your next question comes from the line of Patrick Sholl of Barrington Research.

I was just wondering if you could maybe talk about how you're evaluating the leased footprint of your theaters and maybe just in general, kind of with the box office expectations for 2026 and 2027, how you kind of evaluate the overall screen base both within markets, but also kind of the industry overall?

Well, I'll take the first part of that question on our footprint and Greg can layer on about the industry. I mean, portfolio management is an ongoing part of our operating process, really. We're constantly looking at the store level performance of all of our locations, both our owned real estate, which is a little over 60% of our theater screens, even higher percentage of our cash flow in that business. And then our lease locations as well. And as leases mature, that gives you the opportunity to reevaluate investments in those properties and renegotiate terms, which tends to be necessary because many of the leases were negotiated on a pre-pandemic box office. And so that's an ongoing process. Historically, we've had a preference to own real estate, but we've certainly done M&A where often you're looking at acquiring leases as part of the deal. So it's more about what's the actual financial performance, whether it's after rent or after a return on our invested capital in the real estate is how we look at it.

Overall, it is -- we've talked about this before, there's a lot of leases that are very expensive compared to the level of business, which leaves me the point of there's been -- we talked earlier about windows and the 2 factors that really will be very helpful to getting the business in a good place, and that is in a better place. And that is, one, it would be to have windows extend. And the other is getting enough product in the pipeline and enough product on the shelves. Right now, we've got some room on the shelves. And so to the extent that we can get a full year's calendar's worth of films that will drive more sales and then those leases will start to look better. Otherwise, people will be trying to figure out what to do with some of the space in their theaters to some of the bigger ones. We've been -- we are different. We've been very conservative about how big we build our theaters for the most part. And so we don't see that as much.

Okay. And then maybe just on concessions. To the extent that like the film slate is a healthy contributor to incidents or on the merchandise side, I guess when you look at the upcoming film slate or maybe just sort of like the broader expansion of that film slate, as the film slate kind of like broadens out, do you think it would be similarly supportive of concession per cap? Or do you think that could -- as it maybe expands out, would that be a headwind? Or is that probably just too soon to tell?

And your question, Pat, is specifically around merchandise?

Broader concession activity.

It all depends on the mix of films. The right mix of films will drive better per cap. That really is what it comes down to in any given year. And I think -- but over time, that does tend to even itself out. I don't think there's anything that would -- more films wouldn't drive down per cap.

And then because merchandise is a component of our concessions and food and beverage per cap, merchandise tends to lend itself to more event-driven type of product. And so in any given period, when we've got a heavy mix of big event films, we are seeing more merchandise sales that provide some uplift in those periods, which gets back to Greg's point on product mix being part of this.

At this time, it appears that there are no other questions. I'd now like to turn the call back to Mr. Paris for any additional or closing remarks.

We'd like to thank you once again for joining us today. We look forward to talking to you again in early August when we release our 2026 second quarter results. Until then, thank you, and have a good day.

That concludes today's call. You may now disconnect. Goodbye.

Good morning, everyone, and welcome to Marcus Corporation's fourth quarter earnings conference call. My name is Drew, and I will be your operator for today. [Operator Instructions] 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 Marcus Corporation.

At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Thank you, Drew. Good morning, and welcome to our fiscal 2025 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, 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 fourth quarter results and in the Risk Factors section of our 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, 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. And then 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 for 2026. We'll then open up the call for questions.

This morning, we reported a quarter of solid execution and results, with both divisions delivering year-over-year revenue and earnings growth and outperforming their industries. In theaters, a film slate that featured a favorable film mix, coupled with strong per cap growth drove meaningfully improved market share. In hotels, our renovated properties were winning in their markets, attracting increased leisure demand at higher rates that drove our RevPAR outperformance, capping a record revenue and EBITDA year for the division.

Turning to the numbers and starting with a few highlights from our consolidated results for the fourth quarter of fiscal 2025. We generated consolidated revenues of $193.5 million, a 2.8% increase compared to the fourth quarter last year, with revenue growth in both divisions. Our fourth quarter operating income of $1.7 million was negatively impacted by $5.2 million of noncash impairment charges in the Theater division, which are excluded from adjusted EBITDA. Excluding the charges, our fourth quarter operating income was $6.9 million, growing 5.2% compared to operating income of $6.6 million in the fourth quarter of fiscal 2024, excluding impairment charges and nonrecurring expenses in the prior year. We delivered $26.8 million of consolidated adjusted EBITDA, a 3.6% increase over the prior year fourth quarter.

There is one unusual item in the fourth quarter below operating income that impacted our net earnings and earnings per share that I'd like to highlight. Our fourth quarter and full year income tax benefit includes an approximately $7.6 million or $0.24 per share benefit from federal and state historic tax credits earned related to the completion of the Hilton Milwaukee renovation. The impact of the credits is excluded from our adjusted EBITDA operating results.

For the full year fiscal 2025, consolidated revenues increased just over 3% from the prior year with revenue growth in both divisions. Consolidated operating income for the year was $17.1 million. Excluding the fourth quarter theaters impairment charges, full year operating income was $22.2 million compared to operating income of $25.9 million in fiscal '24, excluding impairments and nonrecurring expenses in the prior year. Finally, adjusted EBITDA for the full year decreased 3.1% to $99.3 million.

Turning to our segment results. I'll start with theaters. Our fourth quarter fiscal 2025 total revenue of $123.8 million increased 2.2% compared to the prior year fourth quarter. It is important to note the shift in our fiscal calendar favorably impacted our revenue and attendance comparisons over the prior year periods. Our fiscal year ended on December 31st this year compared to December 26 in fiscal 2024, resulting in 5 additional days in our fiscal fourth quarter during the busy week between the holidays compared to the prior year, while removing 4 days in late September, when business is slower and resulting in 1 net additional operating day for the quarter.

The shift in our fiscal calendar and additional days between the holidays had a 6.8 percentage point favorable impact on admissions revenue growth and a 6.4 percentage point favorable impact on attendance growth compared with the prior year fourth quarter. Comparable theater admission revenue increased 6.1% over the fourth quarter of 2024, with a more favorable mix of family films that played well in our markets. On a calendar quarter basis in both periods, comparable theater admission revenues decreased 0.7%. Comparable theater attendance decreased 5.7% in the fourth quarter of fiscal 2025 compared with the prior year fiscal fourth quarter, while on a calendar quarter basis in both periods, comparable theater attendance decreased 12.1%.

Average admission price increased 12.7% during the fourth quarter of fiscal 2025 compared to last year and was positively impacted by strategic ticket price optimization actions implemented during peak demand periods, changes to promotions during the holiday periods and a higher mix of 3D tickets. According to data received from comScore and compiled by us to evaluate our fiscal 2025 fourth quarter results using our comparable fiscal weeks, U.S. box office receipts decreased 1.5% during our fiscal 2025 fourth quarter compared to U.S. box office receipts in the fourth quarter of 2024, indicating our theaters lead the industry, outperforming by approximately 7.6 percentage points.

We believe our outperformance is primarily attributed to our strategic pricing actions as well as a favorable film slate that featured multiple titles appealing to family audiences, a genre where our circuit typically performs well.

Per capita concession food and beverage revenues increased by 7.2% during the fourth quarter of fiscal 2025, compared to last year's fourth quarter, which was driven by increases in incidence rate, higher merchandise sales, and concessions pricing changes.

Our top 10 films in the quarter represented approximately 70% of the box office in the fourth quarter of fiscal 2025 compared to approximately 75% for the top 10 films in the fourth quarter last year, with a slightly less concentrated film slate resulting in less than 1 percentage point decrease in overall film cost as a percentage of admission revenues for the fourth quarter. For the full year, film cost as a percentage of admission revenues was flat compared to fiscal 2024. On the higher revenues, Theater division adjusted EBITDA was $24.1 million, a just under 2 percentage point increase compared to the prior year quarter.

Turning to our Hotels and Resorts division. The fourth quarter capped another record year for division revenue and adjusted EBITDA. Revenues before cost reimbursements were $60.4 million for the fourth quarter of fiscal 2025, a 5% increase compared to the prior year. The shift in our fiscal calendar and net 1 additional operating day in the quarter had an insignificant impact on the Hotel division revenues and results.

RevPAR for our owned hotels grew 3.5% during the fourth quarter compared to the prior year, growing at 3 of our 7 owned hotels. The RevPAR increase was driven by a 1.2 percentage point decrease in our occupancy rate compared to the fourth quarter of fiscal 2024, with our average occupancy rate for our owned hotels at 60.2% during the fourth quarter fiscal 2025. Average daily rates grew 5.6% during the fourth quarter compared to the prior year quarter as our newly renovated hotels continue to attract demand and drive higher rates.

Our properties continue to perform well against the industry as a whole. Based on data from STR, when comparing our RevPAR results to comparable upper upscale hotels throughout the U.S., the upper upscale segment experienced an increase in RevPAR of 0.8% during the fourth quarter compared to the fourth quarter of fiscal 2024, indicating that our hotels outperformed the industry by 2.7 percentage points. Comparable competitive hotels in our markets experienced a RevPAR decrease of 2% for the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024, indicating that our hotels outperformed their competitive set by 5.5 percentage points.

We believe our outperformance versus the competitive set is primarily due to strong demand for our renovated hotels as well as a heavier mix of transient leisure demand at higher rates.

Group demand remained generally steady during the fourth quarter of 2025, with group rooms representing 35% of our total room mix in the fourth quarter of fiscal 2025 compared to 36% of our room mix in the fourth quarter last year. Our group mix in the fourth quarter of 2024 benefited from group business related to the election with our group mix in the fourth quarter of 2025, reverting to more typical levels. Finally, Hotel's fourth quarter adjusted EBITDA was $7.3 million, an increase of 3.4% compared to the prior year quarter, driven primarily by higher revenues.

Shifting to cash flow and the balance sheet. Our cash flow from operations was $48.8 million in the fourth quarter of fiscal 2025 compared to $52.6 million in the prior year quarter, with the decrease in cash flow from operations due to unfavorable working capital changes related to the timing of payments relative to our fiscal year-end. For the full year, cash flow from operations was $84.2 million compared to just under $104 million in fiscal 2024, which was also impacted by unfavorable timing of working capital payments at the end of fiscal 2025, compared to favorable timing of working capital payments at the end of fiscal '24.

Total capital expenditures during the fourth quarter of fiscal 2025 were $22.4 million compared to $25.4 million in the fourth quarter of fiscal '24, which was primarily comprised of Hilton Milwaukee renovation project payments and maintenance projects in both businesses. Total capital expenditures for fiscal 2025 were $83.2 million compared to $79.2 million in fiscal 2024.

During the fourth quarter, we repurchased approximately 118,000 shares of our common stock for $1.8 million in cash. This brings our share repurchases for 2025 to just over 1.1 million shares for approximately $18 million in cash, or approximately 3.6% of our outstanding shares at the beginning of the year. Our cumulative buybacks since resuming share repurchases in the third quarter of 2024 are now over 1.8 million shares, or approximately 5.7% of our outstanding share count when we began, returning nearly $28 million in capital to shareholders. In total, over the last 2 years, we have returned over $45 million in capital to shareholders through share repurchases and dividends paid during fiscal 2024 and 2025.

Our balance sheet remains well positioned as we head into 2026. We ended the fourth quarter with over $23 million in cash and over $230 million in total liquidity, with a debt-to-capitalization ratio of 26% and 1.5x net leverage.

As we look forward, I'd like to provide an overview of our current capital allocation priorities for 2026. While we will continue to invest in maintaining our portfolio of high-quality assets in both of our businesses, we expect a meaningful step down in capital expenditures in 2026, as we move past the heavy reinvestment cycle of the last few years in our Hotel division. In fiscal 2026, we expect to continue to make maintenance and ROI investments in hotels, as well as investments in maintaining and enhancing the customer experience in theaters. For fiscal 2026, we expect total capital expenditures of $50 million to $55 million based on our current portfolio of assets, with approximately $25 million to $30 million in hotels and $20 million to $25 million in theaters. The timing of our planned capital projects may impact our actual capital expenditures during fiscal 2026, and we will continue to provide updates as the year progresses.

We expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026, which will be allocated to opportunistic growth investments and returning capital to shareholders. While we often don't control the timing or availability of deals, we continue to actively search for opportunities to deploy capital to grow our businesses, and we are disciplined in our approach.

We remain committed to returning capital to shareholders. In fiscal 2025, we returned $27 million or approximately 32% 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.

With that, I will now turn the call over to Greg.

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. As is often the case with our 2 divisions, the story of the year was a bit mixed. We delivered another record year in our Hotel division while successfully executing on some very big projects that we expect to have long-term returns.

In theaters, while the box office came up short of expectations for the year, audiences continue to come out and have strong demand for the theatrical experience when we have periods of steady product supply. Because of the hits-driven nature of the business, the difference between a decent year and what would have been considered a great success was essentially 1 or 2 films that didn't hit as expected.

For our company specifically, our fourth quarter results were quite strong with both businesses outperforming their industries. In theaters, a diverse film slate with family content that played well in our markets helped us achieve strong market share. In hotels, strong leisure demand, particularly at our recently renovated assets helped us end the year on a high note. More importantly, we exit the year with good momentum. And as we look ahead to 2026, we're encouraged by the growth opportunities that we see ahead.

I'll start today with our Theater division. Chad went over the numbers for the quarter with you, including our strong per cap growth for both concessions, food and beverage as well as average ticket price that drove our outperformance for the quarter.

Overall, the fourth quarter film slate featured a diverse mix of films across genres that appeal to wide ranges of audiences that was particularly appealing to families, which played well in our Midwestern markets. We achieved above-average market share for 7 of the top 10 films in the quarter, with particularly strong share from Wicked: For Good, Zootopia 2, Avatar: Fire and Ash, Blackphone 2, and The Housemaid. Second-tier films beyond the top 10 also made important contributions to the overall box office with midsized films like Regretting You, One Battle After Another, Marty Supreme, and Song Sung Blue delivering compelling stories that audiences wanted to experience on the big screen, not sitting at home on their couch.

The well-rounded holiday slate offered something for everyone, and it is a great example of when our industry is at its best. While we had great blockbuster films like Avatar and Wicked that drew big crowds, the box office was so much more than the tent poles, with multiple films working at once that appeal to different types of audiences. Our market share was also strong with several movies in the second tier of films, including double our normal market share for the Milwaukee-based hometown favorite story, Song Sung Blue.

While the overall industry box office was softer than anticipated, we continue to believe this is largely a function of product supply and individual film performance. October was impacted by softer carryover from September releases than we saw last year, as well as a few titles that didn't hit as we hoped. The November slate had one less tentpole film over the Thanksgiving holiday compared to 2024, when the box office included Wicked, Moana 2, and Gladiator 2. And we had a more robust film slate in December, we again saw audiences come out as we would expect. This dynamic continues to illustrate the importance of maintaining consistent and steady product supply that is balanced throughout the year to support the momentum of moviegoing.

As Chad discussed, we saw strong per capita growth during the quarter with average ticket prices benefiting from our ongoing price optimization efforts. As we've discussed throughout 2025, this has been an evolving effort to strike the right balance between capturing price during peak demand periods, as we did during the busy holiday periods in the fourth quarter, and maximizing attendance by having various price points for different types of customers. In addition to optimizing price, we are focused on other opportunities to grow per capita sales. And during the quarter, we made progress testing several initiatives that we believe will be drivers of per cap growth in 2026.

First, during the fourth quarter, we began rolling out a new queuing line system that consolidates multiple concession lines into a single line that then is served by multiple concession attendants. The single line moves faster, improving customer perception, and the queue is lined with merchandise displays that enhance product visibility and are proving effective at increasing per capita candy and merchandise sales. We deployed the new queuing process and displays at 14 test locations in the fourth quarter, and we anticipate continuing to roll these out to additional locations in the first half of this year.

Second, we continue to focus on improving the customer experience by looking at every step in the customer journey. For a significant majority of our customers, their first interaction with us is the digital ticket purchase. And while we've offered web and mobile app-based ticketing for many years, we saw an opportunity to improve this purchase experience. We have completely redesigned our digital ticketing experience to make the purchasing experience as easy, fast and frictionless as possible. In November, we launched a new digital ticketing experience for mobile web browsers and our mobile app, followed by the launch of an entirely newly designed marcustheatres.com website in early February. The new site simplifies finding the movie, theater and showtimes that work for customers while speeding up the process of seat selection and payments. We're very encouraged by the early feedback from customers, and we are well positioned for the ramp-up in business as we head into spring and summer movie season.

Third, we are working on improving the digital ordering experience for our best-in-class menu of expanded food and beverage options. Again, the goal here is simple. We're going to make the ordering process as easy and frictionless as possible. We know from experience that when customers order concessions, food and beverage on our mobile app, they buy more as they are consistently presented with upsell and cross-sell offers. We're working to significantly improve our mobile web ordering experience for those customers who want a fast digital ordering experience but haven't yet downloaded our app.

In December, we began testing in-seat QR code, food and beverage ordering for delivery to seats at 2 of our dine-in Movie Tavern locations, and expanded this test to 3 more locations in January. The QR code ordering is simple and fast with integrated digital wallet payment options that significantly speed up the transaction process. The early results have shown encouraging growth in F&B per caps at these locations, and we are in the process of rolling out QR code ordering to all our 20 Movie Tavern and dine-in theaters. This will be followed by a redesigned food and beverage digital purchase experience in our mobile web and app for all locations later this year.

For those customers who prefer the more traditional purchase experience, the box office, concession stand and our bars and restaurants, we began rolling out new tap-to-pay terminals in the fourth quarter, and we expect to have the rollout complete at all points of sale by the end of the first quarter.

We expect these investments in technology will not only make the purchasing process easier for our customers and enhance per caps, but we expect to gain additional data and insight into our customers and their preferences through the new payment technology we are integrating across our various sales channels. We expect to leverage these insights to better tailor our communications and marketing with more customized offers that highlight coming events of interest.

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 Marcus Movie Club. These programs can also have the added benefit of bringing customers out to see a broader range of small and midsized 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 they are important drivers of long-term future attendance. In November, we reached the 1-year anniversary of Marcus Movie Club, our subscription program that offers monthly or annual memberships with several great benefits for customers, including a 20% food and beverage discount, access to additional companion tickets for $9.99 and waive digital ticketing convenience fees.

After our first year of Movie Club, we added free Marcus Mystery movies as a new benefit for members, and we continue to look for ways to drive membership and usage of the program. Approximately, 38% of members have selected the annual membership, which we believe supports our long-term goal of driving repeat moviegoing. Marcus Movie Club is one of several programs that promote and incentivize repeat moviegoing, including Marcus Passports, Marcus Mystery Movie and our loyalty program, Marcus Magical Movie Rewards, which now has 6.9 million members.

As we look ahead, we are very excited by a 2026 movie slate that includes several potentially very strong titles, including Spider-Man: Brand New Day, the Super Mario Galaxy Movie, Moana, Jumanji 3, Toy Story 5, Minions and Monsters, The Odyssey, The Mandalorian and Grogu, Dune Messiah -- I'll get that right, and Avengers: Doomsday, just to name a few. There are many more great films coming noted in today's earnings release. The current slate has a stronger mix of tent-pole films and the grossing potential of 2026 franchises is greater based on their historical predecessor box office performances.

Looking even further ahead, the early look at the 2027 film slate also looks strong with major franchises, including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, the Batman Part II, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, The Legend of Zelda, Avengers: Secret Wars, and many more. 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 the comp sets and upper upscale hotels nationally. So I'll focus my comments on the year overall and looking ahead.

We're pleased to report that after another strong quarter to end the year, our hotels team delivered another record-breaking revenue and adjusted EBITDA year in fiscal 2025. This is quite the achievement given that we are comparing against a record fiscal 2024 that benefited from the Republican National Convention and election-related business that did not recur in 2025. It's even more impressive considering that we also completed the largest hotel renovation project in our history at the Hilton Milwaukee, which disrupted operations and negatively impacted results with a significant number of rooms at the hotel out of service during the first half of the year. Even with the negative impact of the renovation, our RevPAR growth outperformed our competitive set for the year by 1.2 percentage points, and we really saw an inflection point once we completed the renovation as we outperformed the competitive sets by over 5 percentage points in the second half of the year.

The demand environment was mixed in 2025, with group demand generally remaining strong, particularly at our properties that play well to group business. Leisure demand was mixed across our portfolio in 2025 compared to last year, with some markets seeing softest while others were positive. Demand remains strongest at the upper end of the market. Thus, our upper upscale properties are performing well in an environment where consumers continue to gravitate toward premium experiences.

The Hilton Milwaukee renovation wrapped up in the fourth quarter with the lobby and lounge, marking the end of a renovation that updated 554 guestrooms, ballrooms, meeting space and public common spaces. It looks fantastic, and it is a convention center hotel that Milwaukee can be proud of.

While we have made significant capital investments in our hotels over the last few years, we have also been disciplined with the returns required for these projects. Hilton Milwaukee is a good example of our approach as we chose not to renovate the 175-room west wing of the hotel and remove the rooms from the Hilton system at the end of December. In mid-January, we reopened the west wing as the Marc Hotel, an independent select service hotel connected to the Baird Center via skywalk. The rebranding and repositioning to create a new hotel with a different type of product allows us to continue to operate with minimal capital investment.

As Chad discussed, the heavy part of the capital investment cycle that we've been going through the last few years is now behind us. We are winning in our key markets with our newly renovated room product and meeting space, and we've been able to capitalize on that opportunity.

As we look ahead to 2026, we're very excited to open our new 11-hole short golf course at the Grand Geneva, known as Wee Nip. We completed the construction and the growing phase of the course in the late season last year and play will begin this spring. We believe the course will allow us to capitalize on a growing segment of golf with a great complementary option to our 2 existing 18-hole courses on the resort, the Brute and the Highlands. With customers looking for distinctive experiential destinations, 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 and other social activity with conferences, training events and outings.

As we look ahead, our outlook for 2026 remains positive with our expectations for low single-digit RevPAR growth, led by modest growth in group business and steady leisure and business travel. Group bookings remain healthy with our group room revenue bookings for fiscal 2026, or group pace in the year for the year, running approximately 3% ahead of where we were at this time last year. Looking a bit further out to 2027, group room pace is slightly behind where we were at this time last year for the next year out, although this far out, the timing of bookings can vary significantly. Banquet and catering pace for 2026 and 2027 is ahead of where we were at this time last year. Based on the current demand environment and our future bookings, our outlook for 2026 remains positive.

We are 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.

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.

With that, at this time, Chad and I would be happy to open the call up for any questions you may have.

[Operator Instructions] We'll go to Eric Wold from Texas Capital Securities.

I guess first question on the Theater segment. There was a lot of kind of shifts in kind of the pricing strategy. Last May, you started lapping some of the headwinds. It sounds like you kind of implemented a few more things in the holiday period. Maybe give us a sense of what we should expect throughout 2026, maybe in terms of cadence based on the programs currently in place, kind of what you'll come up against this May and kind of how that should play out throughout the year?

Yes, in terms of the cadence through the year, really our key -- it's going to be the anniversarying of our price changes that we made midyear in 2025. I don't see big changes to our programs prospectively. Again, we're trying to be very thoughtful about customer sensitivity to price changes, and we do want to continue to drive attendance. So it's really, I would say, through the first 2 quarters, the year-over-year benefit that we're going to see of the actions that really didn't start to show up until late June in 2025. And then as we look forward, it's really going to be more about driving per caps in that business on the F&B side, and that's where our focus is going to be.

Then on the hotel side, there was a comment in the quarter about seeing increased leisure demand and higher ADR as the renovations have come to fruition last year. Maybe give us a sense of kind of what you're seeing in terms of bookings on leisure versus your business travel group kind of in this year? And if you expect to see more of a shift back to leisure with that, especially given the comments you made around group pace in '27. I know it's early, but should we see more of a shift back to leisure in your mind? And if that is the case, kind of what do you see as the implications of that?

So let me start with the very last part of your question on group pace. You may recall at the beginning of '25, we were seeing very significant increases in group pace early in the year and then that flattened out a bit, and we ended the year with growth that was kind of mid-single digits, but we started the year much higher than that. And so we had a huge step-up early in the year last year, which is, I think, in part why our pace for '26 is, right at the moment, low single digit and because we had a big step-up last year. And when you're looking as far out as '27, timing of when those events get booked really can vary from year-to-year. And so I wouldn't read too much into what we're seeing right now for '27. It's still pretty early.

Group overall remains healthy. And as we've said a few times over the last few months or a few quarters, our renovated properties are winning really well with groups.

What we have seen, at least in the fourth quarter is we're also doing a really nice job even in the slow season capturing strong leisure demand. And we did that here in the fourth quarter around the weekends. Upper upscale continues to perform really well with the premium products performing better than the lower end of the market. And our properties play well to that type of customer. So I think it's going to be one where even in a flat overall demand environment in leisure, we can capture share nicely.

The good thing about our properties that we've talked about before is that they play in both group and leisure. That is the nature of our properties. I've called them special assets before. And if you look at them, they're located and they're designed -- so if we see softening in one area, we can start to be more aggressive in another if we see improved demand there. And you see it play out year after year.

Our next question comes from Mike Hickey from StoneX.

Greg, Chad, congrats guys on a great 4Q with outperform. Greg, your '26 setup here sounds very encouraging, both on the hotel side, just given the level of investment and pacing here on group theater side, slate looks exceptional. It seems like it will meet your demo really well. Do you see sort of a, step-up is a big word, but at least relative to your '25 growth on the top line, do you think you can exceed that? And how much leverage should we expect on sort of a mid-single-digit type growth and free cash flow conversion? And I've got a follow-up.

Well, hopes be eternal in the theater business. I mean it's certainly, as you said, on paper it looks good. And it looks like it plays to our markets, and it looks -- and we talked about. In '25, we didn't have one blockbuster over $500 million. That is a challenge. And it looks like the potential for these is better. It's an art form. We don't know how it's going to turn out. But we're prepared to capitalize and maximize on whatever comes our way, and it's on the top line and the bottom line.

We're very focused on, as you know, our pricing strategies and making sure that our prices are market appropriate and that we're offering the right product to the right customer. We have a very significant PLF footprint. It's probably the -- on a relative basis, we have the highest penetration of PLFs in the industry. So when those customers are there, we're going to be able to capture them. And yet we've got lots of programs for the customers that don't want to spend as much. We've got -- our Tuesday program remains very robust.

A big push for us this year is going to be our Movie Club, as we continue to really -- if you are in our theaters now, you will be -- if you don't join the club, you're not paying attention. I mean there's just -- we're really working hard to build that base of business. It reminds me a lot of the hotel business where you sometimes fill a hotel with a base of customers to sort of shrink the size of your hotel. And I think others in the industry who've seen a significant buildup in membership on the theater side enjoy that benefit of a continued income stream. So we're very focused on that as well.

Then on the hotel side, I think that we'll continue to see the benefits of all the investment we've made in these properties. They look so good. And so that's going to -- and that line in Milwaukee as our convention center continues to perform better than we opened a few years ago, that will dovetail nicely. And then we should see good performance as long as the economy stays solid, we'll be in good shape. As you know, hotels are very GDP dependent.

Yes, Mike, I'll take the last. The only thing I'd add on the film mix is I do think that the family slate that we see ahead for '26 should benefit a circuit like ours in the markets that we're in. In the summer of '25, we didn't really have a family animated film that hit. And we saw the power of that over the holidays with Zootopia. As we look at the slate for the summer '26, I do think that's a net positive for Marcus Theatres.

In terms of contribution and leverage on the incremental revenue, historically, the theater business contributes at around 50% on the contribution margin line historically to EBITDA. And with our step down in CapEx this year, I think our free cash flow conversion on that is going to be very strong.

I guess on M&A, you said actively searching. I don't know if I've heard that from you before. Are you sort of a little bit more aggressive, I guess, now looking at M&A? And I guess, specifically, maybe some -- regardless of that, maybe some color there because I wonder with the Warner Bros deal hanging here, Greg, if that sort ices theater deals or not.

Then on the hotel side, I'm not sure how active the market is, but I don't think it's been great. So just curious where you're focusing your attention and you see the biggest opportunity, whether it's theaters, hotels or maybe another area that could be complementary to your overall business today?

That's a very good point. Yes, you're right. Look, I'll sort of work the hotels -- I think everybody knows the hotel transaction market has been pretty slow just across the entire industry. And so we have to be -- just because it goes back to this cap rates got elevated as interest rates went up. But people were doing well enough to know there was no -- they weren't forced sale. The economy is strong enough. So it basically gave people the ability to continue to -- I wouldn't even say pretend and extend because there's no pretending. I mean, they just -- the businesses are okay. But if you wrote a pro forma, so much of these pro formas when you have these investors, not necessarily us, we're not looking at it like this, but a lot of private equity investors with a 5-year hold and they write a cap rate. And if cap rates are 100 to 200 basis points higher, it messes up the returns pretty significantly. And so they can wait or at least they're going to try and wait. So it's a waiting game. So that's really slowed up that market a fair amount.

So we can look for other ways to grow that business and other ways to drive some revenue there, which we do in adjacencies. And on the theater side, yes, again, there's not a lot of transaction activity and very little transaction activity you're seeing. So we'll look at anything that would come our way if we think it makes sense.

A big challenge a lot of these guys have are very expensive leases. And so a lot of that needs to be figured out. But on the -- but then you bring up a very interesting point, which we talk about, which is, okay, well, what other adjacencies can we have? We've worked through these huge capital investments that we've had to go through. And so now when we have free cash flow, we're looking at someone -- you'll ask them, what are you going to do? Well, if we can find good investments, we'd like to make them.

It's very tax efficient to not pay the capital out if we can keep it invested within the company for our investors. That's a great -- that can be a great return. And if we can, then we will distribute cash as we've talked about as the levers we can pull, whether it's buying back stock or dividends.

Our next question comes from Drew Crum from B. Riley Securities.

I wanted to ask about the occupancy rate. It was down year-on-year in 4Q. Was that election related in the year ago period? Was it the closing of the west wing of the Hilton Milwaukee or was it something else? And would you anticipate that rebounding in 2026?

Drew, yes, I'd start with occupancy in the fourth quarter last year did get a benefit from a bunch of group business related to the election and a number of visits that we had in Milwaukee in our key market. And so that definitely provided a tailwind last year.

I do think in some of our markets this year, there's clearly some softness. And so it is very much a mix story that is market-specific and at times even property specific. But it's not an obvious softening trend in our markets where we're at, and we're outperforming the softness generally because of the quality of the assets and the investments that we've made. So I think the way to think about it is we should look to outperform what our markets do even if we see some of the softness.

Then Mike's last question focused on M&A. Given the opportunity to review the portfolio in the past, you guys have made selective divestitures. Any updates there? Any comments you can give us in terms of how you're thinking about that?

Look, we're always looking at our assets. And we have -- we come at it from a very strong real estate mentality. And these assets, one of the things that's important, as you know, as you saw in the last few years is that as sort of bubble came across of investment, we have to look and decide, okay, is the investment going to be a good investment for us. And if we don't think the investment is the right investment for us, we can then divest ourselves of the asset, and that will happen occasionally.

We don't have any major divestitures planned right at this minute. But if something makes sense or the markets get very hot, we're always looking at that and saying, okay, what is the right long-term choice for these assets for our company.

Drew, we tend to immediately think about hotels in that context. But we own a lot of theater real estate and portfolio management is an ongoing process that we're continuously looking at the performance of individual theater locations and highest and best use for the real estate. And so I would just suggest that store management will continue to be part of a potential source of making changes, and we could add some locations, too. But in the past, we have monetized noncore real estate in our theater business.

We might take investment and change some of the uses on some of our theater sites, and we can make investments to do that, too. Again, we view ourselves -- one of our hidden assets is our real estate, and we view it -- we've come at this for decades from a real estate perspective. And we may make investments on our properties and that would maximize the highest and best use of that real estate.

Our next question is from Patrick Sholl from Barrington Research.

Just maybe another question around like capital allocation and M&A. Could you maybe sort of discuss some of the, I guess, differences in underwriting or opportunities in like expansion, whether organic or M&A and like maybe the differences in underwriting just additional new builds versus the -- I know you talked about the difficulty with some of the leases and potential M&A. But just any sort of update on those competing priorities?

I mean, we're -- in the theater business, the challenge on M&A, and we have looked at a number of things in the last year plus and done a fair amount of work on different opportunities. And the challenge consistently has been the leases at some of these locations. And the number of locations in a theater circuit that work and don't work when you look at a circuit overall, that mix of locations that don't work has made it very hard to get deals done if you're going to have to assume the lease. And so it really requires a more of a ground game in looking and doing onesie, twosie type deals where you're picking up individual theaters in that space. And that's really how we look at the underwriting is at a more granular level than in the past.

New builds, we think about it. We think about attractive markets. But right now, I think with the product supply challenges, it's just tough to get the math to work on new construction. And so we're going to keep looking at it. But at the moment, it's not something I think you're going to see us do a lot of in the near term.

Then on concessions, you had mentioned the QR ordering is helping to increase incidents. I was wondering what other components of the per cap trends in the quarter? What other -- what else contributed to the per cap trends in the quarter or if that -- yes, like between pricing or mix and things like that?

Yes. So in the fourth quarter, the QR code ordering actually had a really small impact. I think that's more of a 2026 benefit. We were doing a handful of test locations late in the quarter. But at those test locations, we are really encouraged by what we're seeing. And I think that that's going to be a meaningful piece of our per cap uplift for our dine-in theaters in the coming year. In the fourth quarter, specifically, it was mostly incidence rate and capturing more customers.

It was some of the queuing line benefit that Greg talked about and getting the basket size to grow with customers that are going to the concession stand. We've seen some traction with that, which is really encouraging. And there was a little bit of price, but price wasn't really the primary component of what we saw in the fourth quarter. And I think there was some benefit certainly in a holiday quarter of people making events of going out to the movies and just generally spending more. And I think that's encouraging to see the health of the consumer that we saw or continue to see in the fourth quarter.

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

Thanks, Drew. We would like to thank everybody for joining us today, and we look forward to talking to you once again in May when we release our first quarter 2026 results. Until then, thank you, and have a great day.

That concludes today's call. You may disconnect your line at any time.

Good morning, everyone, and welcome to Marcus Corporation's Third Quarter Earnings Conference Call. My name is Lydia, and I will be your operator today. [Operator Instructions] 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 Marcus Corporation. At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Good morning, and welcome to our fiscal 2025 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 third quarter results, and in the Risk Factors section of our fiscal 2024 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.markuscorp.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 a quarter with solid results overall despite somewhat mixed results in our divisions relative to our expectations.

In hotels, we exceeded our expectations and were able to overcome a very challenging prior year comparison to deliver revenue growth and outperform our competitive sets. In theaters, we saw a less concentrated film slate with several films that performed well relative to our own expectations, but the slight lacked a major breakthrough of tent pole that we've seen in the third quarter the last couple of years.

During our seasonally busiest quarter, our teams in both businesses remain focused on serving our guests with excellence to deliver memorable experiences. I'll start with a few highlights from our consolidated results for the third quarter of 2025. Consolidated revenues of $210 million were down 9.7% compared to the prior year quarter. Operating income for the quarter was $22.7 million a decrease of $10.1 million compared to the prior year quarter. Consolidated adjusted EBITDA for the third quarter was $40.4 million, a decrease of $11.9 million compared to the third quarter of fiscal 2024.

Net earnings for the quarter were $16.2 million or $0.52 per share and were favorably impacted by a nonrecurring gain on a property insurance settlement of $3 million or $0.10 per share net of tax. Excluding the impact of the gain net earnings for the third quarter were $13.2 million or $0.42 per share compared to prior year third quarter net earnings of $24.8 million or $0.78 per share excluding the impacts of our convertible debt repurchases last year. The change in our fiscal year-end quarters had an immaterial impact on our third quarter results with 1 additional operating day during the quarter in fiscal 2025 compared to last year.

Turning to our segment results. I'll begin this morning with our theater division. Third quarter fiscal 2025 total revenue of $119.9 million decreased approximately 16% compared to the prior year third quarter, primarily due to weaker performances from the top films in the quarter compared to the top films in the quarter last year and less carryover of films that released in the second quarter compared to last year's carryover. Comparable cedar admission revenue for the third quarter decreased 15.8% and comparable theater attendance decreased 18.7% compared with our fiscal third quarter 2024.

While our market share in the third quarter of 2025 was in line with our historical third quarter share, including our third quarter share in 2023, this year's film mix did not help us. Notably, the film slate did not include a family animated film in the top 5 movies of the quarter, a genre that our circuit typically outperforms in. When using our comparable fiscal days, U.S. box office receipts decreased 12% during our fiscal 2025 third quarter compared to U.S. box office receipts during our fiscal third quarter last year, indicating our admissions revenue performance trailed the industry by 3.8 percentage points.

We believe that our lower box office performance relative to the nation during the third quarter, was primarily attributable to our strong performance in the third quarter last year when our circuit outperformed the national box office growth by nearly 6 percentage points. As you may recall, a year ago, our third quarter 2024 box office results benefited from a favorable film mix in which we achieved above our historical average market share for each of our top 6 movies in the quarter, including several films such as Insight out, Despicable Me 4 and TWSTRS where we significantly outperformed our typical share.

Our admissions revenues did benefit from several pricing changes that we discussed with you last quarter, with average admission price increasing 3.6% during the third quarter of fiscal 2025 compared to last year. Our admission per caps were favorably impacted by strategic pricing changes, including adjustments to our everyday [indiscernible] program and pricing surcharges on select high-demand summer blockbuster films.

In addition, admission per caps were also favorably impacted by a higher percentage of our attendance on PLF screens compared to last year's quarter. We also grew our average concession food and beverage revenues per person at our comparable theaters, which increased by 2.1% during the third quarter of fiscal 2025 compared to last year's third quarter, and was driven by an increase in merchandise sales and pricing.

Our top 10 films in the quarter represented approximately 72% of the box office in the third quarter of fiscal 2025, compared to 83% for the top 10 films in the third quarter last year. The less concentrated film slate featuring fewer blockbuster films compared to the more concentrated slate in the third quarter last year, resulted in an approximately 3 percentage point decrease in overall film cost as a percentage of admission revenues.

Finally, Theater Division adjusted EBITDA during the third quarter of fiscal 2025 was $22.1 million, a 33% decrease over the prior year quarter, primarily due to the lower attendance volumes.

Turning to our Hotels and Resorts division. Total revenues before cost reimbursements were $80.3 million for the third quarter of fiscal 2025, a 1.7% increase compared to the prior year. RevPAR for our comparable owned hotels decreased 1.5% during the third quarter compared to the prior year, which resulted from an overall occupancy rate increase of 1.7 percentage points offset by a 3.6% decrease in our average daily rate, or ADR. Our average occupancy rate for our owned hotels was 78.4% during the third quarter of 2025.

As you may recall, our third quarter 2024 results benefited from the Republican National Convention and its significant impact on the results at our 3 Milwaukee hotels, resulting in approximately $3.3 million of incremental revenue. The R&C primarily had the effect of increasing average daily rates. And when we adjust out that onetime impact, we achieved some very impressive rate and RevPAR growth. When excluding the impact of the R&C on our 3 Milwaukee hotels from last year's results, our average daily rate during the third quarter of 2025 grew approximately 5% compared to the prior year quarter, and RevPAR grew approximately 7.5%.

According to data received from Smith Travel Research, Comparable competitive hotels in our markets experienced a decrease in RevPAR of 6.7% for the third quarter of 2025 compared to the third quarter of fiscal '24, indicating that our hotels outperformed the competitive set by 5.2 percentage points. We believe our outperformance resulted primarily from strong sales results with our group customer segment as well as a strong summer season at Grand Geneva Resort & Spa and higher results from the recently renovated properties in our portfolio.

When comparing our RevPAR results to the to comparable upper upscale hotels throughout the U.S. The upper upscale segment experienced a decrease in RevPAR of 1.3% during our third quarter compared to the third quarter of fiscal '24, indicating that our hotels performed generally in line with the industry despite the growth headwind from the prior year R&C impact, and they outperformed the industry by nearly 9 percentage points when adjusting for the estimated impact of the R&C on our RevPAR growth.

With the strong growth in group business and events, our banquet and catering operations continued to grow with food and beverage revenues up 8.3% in the third quarter of fiscal '25 compared to the prior year, which includes the impact of the headwind from prior year R&C related banquet and catering events.

Finally, hotels adjusted EBITDA was essentially flat in the third quarter of fiscal 2025 compared to the prior year quarter, which we believe was a significant achievement given the changes in our revenue mix, with a decrease in high rate, high-margin rooms revenue in the prior year due to the R&C and the increase in comparatively lower margin food and beverage revenue.

Shifting to cash flow and the balance sheet. Our cash flow from operations was $39.1 million in the third quarter of fiscal 2025 compared to cash flow from operations of $30.5 million in the prior year quarter, with the increase in cash flow primarily due to differences in the timing of various working capital payments. Total capital expenditures during the third quarter of fiscal 2025 were $20.9 million compared to $18.5 million in the third quarter of fiscal 2024. A large portion of our capital expenditures during the third quarter were invested in the Hilton Milwaukee renovation, with the balance going to maintenance projects in both businesses.

Our capital investments and renovations projects have progressed as planned, and we now expect capital expenditures for fiscal 2025 of $75 million to $85 million. The timing of several projects will impact our final capital expenditure number for the year.

Looking ahead, as we get past the heavy part of the reinvestment cycle that we are in this year with our current hotel portfolio, we see a meaningful step down in capital expenditures in 2026. Our preliminary expectation is for approximately $50 million to $55 million of capital expenditures in 2026 with this range subject to adjustment for the final timing of payments for our 2025 projects. We ended the third quarter with approximately $7 million in cash and over $214 million in total liquidity with a debt-to-capitalization ratio of 26% and net leverage of 1.7x.

Finally, in today's earnings release, we announced that during the third quarter, we repurchased approximately 600,000 shares of our common stock for $9.1 million in cash. This brings our share repurchases this year to just over 1 million shares or approximately 3.2% of our outstanding shares at the beginning of the year. Our cumulative buyback since resuming share repurchases in the third quarter of 2024 are now over 1.7 million shares or approximately 5.3% of our outstanding share count when we begin returning nearly $26 million in capital to shareholders.

Our strong balance sheet and confidence in our business gives us the ability to continue pursuing growth investments while returning capital to shareholders through our quarterly dividend and opportunistic share repurchases. We will continue to allocate capital with a balanced approach that supports our strategic priorities while pursuing investments that provide the most attractive returns to shareholders. Greg will further discuss our capital allocation approach and today's announcement of an increase in our share repurchase authorization.

And with that, I will now turn the call over to Greg.

Thanks, Chad. Good morning, everyone. When we were together last quarter, we shared that our summer was off to a solid start in both of our businesses. In theaters, a more diverse film slate was bringing out audiences for a series of solid performances. In hotels, we were gaining momentum as we entered the third quarter, and we're well positioned with several newly remodeled properties in our portfolio. As the rest of the third quarter played out, we saw some divergence between the results of our 2 divisions.

In theaters, we saw a late summer movie season that included several films that performed well and met our own expectations, but it lacked a runaway hit blockbuster film that we've had the last couple of years, and the film mix was challenging for our markets. In hotels, our team executed exceptionally well, capitalizing on both group and leisure demand and delivered a quarter that outperformed our competitors in the nation, overcoming a very difficult comparison to our record third quarter results last year.

As I will discuss today, while the overall result was a mixed quarter compared to our own expectations, there were many positives that we think will benefit us in the long term.

I'll start with our theater division. In a quarter where there has been much industry discussion about a national box office that was down nearly 12%. I'd like to step back for a moment with some perspective and start with a few things that we thought were positive.

First of all, we have good product supply with 32 wide releases in the third quarter this year compared to 29 last year. The film slate was less concentrated, and many of the smaller and midsized pictures actually performed better on average than they performed last year. When you get past the top 6 movies in the quarter, the average box office gross per film for the next 14 films in the top 20 was up over 11%. We believe this illustrates that there is an important role for small and midsized films in theatrical in contrary to some of the narrative of the trade press audiences want to come out to see these movies and theaters.

Second, there were several films that outperformed expectations. James Gun Superman opened to $125 million domestically achieving over $350 million in box office during its domestic run and grossing over $600 million globally. More importantly, the success of this DC franchise film sets up a promising outlook for future sequels with more DC adventures on the horizon. Zac Kreger's Horii weapons crossed $100 million in domestic box office in just 2 weeks and its way to over $150 million for the run. [ Condrin, last rights ] Smash box office records with both the highest domestic and global opening for Ahorafilm going on to become the highest grossing film in the Condrin series. Demesier Infinity Castle broke the anime record with a $70 million domestic opening and has continued to play strong to become the highest grossing international movie ever in the U.S. with a domestic run now of over $132 million.

These were all great results for these films, and they illustrate the audience appeal for a wide range of content across genres. So where did the summer box office come up short compared to last year? We think it ultimately comes down to a couple of simple factors. First, we didn't have a breakout smash hit this year that was the musty film of the summer, as we've seen in the last 2 years, the #1 film in the third quarter last year, was Deadpool in Wolverine. And in 2023, it was Barbie with both films grossing approximately $630 million domestically in the quarter.

As I discussed earlier, the #1 film in the quarter this year, Superman was a great success for many reasons, but at $350 million, its gross was approximately $280 million lower. We've been in this industry for a long time, and this dynamic with varying levels of box office hits from year-to-year isn't new. It's just the nature of our business. Second, in the third quarter, the summer box office was lighter on family films, a genre or we typically outperform.

Last year, our top 5 films in the third quarter included Despicable Me 4 and number two, and Inside Out 2 is the #5 bill, which was the second quarter release that carried over and held strong into the third quarter. This contributed $183 million to the third quarter domestic box office. This year's third quarter did not have a family animated film on the top 5 and didn't benefit from carryover of family films released in Q2. Again, this isn't really a new phenomenon, but it did create a tough comparison to last year, particularly for our circuit, which historically has outperformed on family films.

Chad discussed the factors we believe are impacting our box office growth relative to the nation and while we underperformed the nation by just under 4 percentage points. This was primarily due to our strong outperformance last -- in last year's third quarter, coupled with a film mix this year that didn't include many family films. I'm pleased to share that we continue to make progress on optimizing prices to capture premium during peak periods and maintain the right balance of value-oriented options for more price-sensitive customers during lower demand periods.

As expected, our admission per caps improved during the third quarter as we implemented blockbuster pricing on high-demand films and continue to adjust pricing for our everyday [indiscernible] program. We expect continued growth in our admission per caps for the next several quarters. We're looking forward to an exciting fall and holiday film slate with wicket for Good, Zootopia 2, Five9 at Freddies 2, the SpongeBob movie search for Square pants and Avatar Fire & Ash, just to name a few.

Advanced ticket sales of who got for good have been strong and are currently trending over 3x ahead of presales for last year's wicket. As we look ahead to next year, the 2026 film slate features major franchises, including Spider-Man, Brand New Day, the Super Mario Galaxy movie, Moana Jumanji 3, Moana, Jumanji 3, 2 different bets, to Story 5, Megameno, Mandalorian and Gogo, Dune, Masaya and Avengers, Dooms Day just to name a few. There are many more great films coming noted in today's earnings release, the 2026 film slate continues to fill in and the early indication is that while there are a similar number of franchise films in 2026 compared to this year, the grossing potential of 2026 franchise is greater based on the historical predecessor box office performances.

The 2026 slate currently includes 4 films where the predecessor earned over $500 million at the domestic box office compared to only 1 such films in 2025.

Moving to our Hotels and Resorts division. You've seen the segment numbers, and Chad shared some additional detail on the performance metrics, including our outperformance to the competitive sets. We expected this quarter to be a challenging comparison to last year for the hotel division, given the significant impact the RNC had in our Milwaukee hotels in the third quarter last year. And I'm thrilled to share that our team met the challenge and delivered absolute growth to overcome a tough comp. The R&C was an extraordinary period -- extraordinary event for our largest market, and we back out the R&C impact from our prior year results, our core business performed very well. In particular, 2 of our newly renovated properties, Grand Geneva Resort & Spa and Fister hotel benefited from our investments in renovations and great execution by our teams to deliver outstanding results this quarter.

There were several notable items in the quarter that I'd like to highlight. Average daily rates during the quarter were generally strong, with rate growth at 4 of our 7 hotels when adjusted for the prior year R&C impact. We have been successful in achieving higher rates at our hotels with newly renovated room product, including the Fister, Grande never Resort and Spa, Hilton, Milwaukee. Occupancy remains strong with occupancy growth at 6 of our 7 hotels the combination of strong ADR and occupancy growth resulted in our properties once again outperforming their competitive sets with impressive RevPAR growth of 7.5% when adjusted for the prior year impact of the R&C.

Group business during the quarter was stable. And as we approach the end of the year, our group room revenue bookings for full year fiscal 2025 or group pace in the year for the year are running slightly behind where we were at this time last year, which includes the R&C Group business last year. Even more encouraging. Group room pace for 2026 is running approximately 14% ahead of where we were at this time last year, for the next year out with banquet and catering revenues similarly running ahead of last year's pace. The current state of our hotel business remains stable and consistent with our view last quarter.

While some markets have seen some more significant leisure softening, our owned portfolio has generally performed well. Leisure transient demand remains soft in some markets around the country. But our hotel portfolio has not seen significant signs of softening or significant cancellations of group business. We believe our upper upscale positioning, drive to market locations and a broad segmentation lessening our exposure to any 1 type of customer. we'll see less volatility if further economic soften occurs. There remains an increased level of economic uncertainty compared to where we were a year ago.

And if we begin to see softness, we are prepared to react and adjust quickly. Our operations team is continuously focused on labor efficiency, and we've developed a strong track record of successfully managing through a changing demand environment.

Finally, I'd like to close with our views on capital allocation and returning capital to shareholders. For the last couple of years, we've made significant reinvestments in our assets. And as Chad discussed, we expect to move past this heavy CapEx cycle next year as we shift back to a more typical maintenance and ROI CapEx mix. We're seeing great results from our renovated properties, and we believe these investments will continue to have attractive long-term returns. On the growth front, we continue to look for opportunities to deploy capital to grow both of our businesses with value-accretive investments.

We have confidence in our businesses and a strong balance sheet that allows us to move quickly when we see good opportunities. And we have a history of executing when they arise. To the extent that we don't see attractive investments that are actionable, we expect to return excess capital to shareholders through share repurchases or dividends. As Chad described in greater detail, we repurchased over 5% of our outstanding shares through opportunistic share repurchases since we began repurchasing shares in the third quarter of 2024.

Between cash dividends and share repurchases, we have returned over $25 million or approximately $0.80 per share to shareholders in the last 4 quarters. This morning, we announced that our Board of Directors has approved a 4 million share increase in our current repurchase authorization, bringing our current share repurchase authorization to 4.7 million shares in the absence of growth investments with attractive returns, we will continue to use this authorization to opportunistically repurchase shares and return capital to shareholders. And this new authorization will give us the flexibility to move quickly as opportunities arise.

Throughout our company's history, we've taken a balanced approach of investing in long-term growth opportunities while returning capital to shareholders, and you should expect us to continue to do both going forward. It won't be all of one or the other. We continue to pursue growth opportunities in both of our businesses, and we're generally opportunistic investing where we see value and attractive returns, whether it be in new deals or in buying back our stock as we've done recently.

Finally, tomorrow marks an important milestone in our history. On November 1, 1935, my grandfather, Ben Mark, was founded, but became the Marcus Corporation with the purchase of a single screen boy theater in Ripon, Wisconsin. During the month of November, we will celebrate the company's 90th anniversary, and our theme for the year has been the spirit of entrepreneurship. One of the guiding principles that my grandfather and Dad instilled in all of us in our company's future will be built on that same entrepreneurial legacy.

We are called on to push change and evolve because as we know, from our 90 years of history, the only constant has changed. I'm excited to celebrate our 90th anniversary with our associates who, by the way, my grandfather taught us, our most important asset. As we both recognize our achievements and look ahead to a future that will continue the legacy of these great businesses for many years to come.

Before we open up the call for questions, I want to conclude my remarks by saying thank you to all the hard-working associates of the Marcus Corporation. I don't want to ever take for [indiscernible] what each and every one of them does to contribute to the success of both of our businesses. Thank you.

With that, at this time, Chad and I would be happy to open the call up for any questions you may have.

[Operator Instructions] Our first question today comes from Eric Wold with Texas Capital.

A couple of questions. You mentioned -- on the hotel side, you mentioned that you had rate growth in 4 of the 7 hotels in the quarter. I guess for the other 3, is that something that was more of a short-term issue? Is that something that's kind of been more than 1 quarter where you haven't had rate growth at those 3 hotels something that's we think more of a competitive issue in those markets. I don't want to lean on that too much, but I just want to get a bit more of a -- something that's been short term or something that's been more than a quarter. And is that something you think that's more of a competitive issue or something that may require an investment as you look in the next couple of years.

Thanks, Eric. Yes, I mean, the 3 hotels where we didn't see ADR growth, I would say there are more market dynamics. Two of them have been persistent market dynamics that are more generated by supply in the market. And in the third, it really was just a little bit of softening very recently in demand. But I don't know, 2 of the 3, I don't see significant CapEx investments. We have 1 of those 3 that we're going to be doing some small refreshes too, but nothing anywhere near what we've done at the 3 major properties over the last few years. I would describe it as a more normal course refresh that is embedded in our $50 million to $55 million of CapEx that we expect for next year.

Got it. And on that $50 million to $55 million, that considered including refreshes, is that considered, I guess, more of a maintenance CapEx number kind of going forward? Anything that would be kind of unusual in that number?

It's not 100% maintenance. There is some ROI that we're doing in that, and we've done some of that this year in the theater business, and there'll be some of that again as we look forward in both of the businesses. There's always some of those types of activities, but it is primarily maintenance and ROI capital.

Got it. And then just last question. And you touch on this a little bit with the capital return comments. With the increased share repurchases this year and the new buyback authorization, should M&A -- I know obviously, you had some increased free cash flow with the reduced CapEx next year and presumably going forward. But should M&A opportunities come up on either the hotel or the exhibition side.

Can you talk a little bit about your comfort taking on leverage to the balance sheet? And kind of what's kind of your comfort level on leverage ratio, and then also, should the equity get back to a more, whatever, in your mind, be a more appropriate valuation would you use equity for M&A in the future? Or is that, in your view, the more appropriate way to go about that?

Yes. On the first part of your question on M&A, I think if we have something that's actionable, we will move on it. We have been allocating a lot of capital to share repurchases lately. And at the current leverage at 1.7x we're very comfortable, and we actually have a target leverage that's a bit above that, closer to 2.25% to 2.5%. So we have some capacity to do that. And if we found the right type of M&A opportunity, we have some flexibility and can flex up a bit and then bring ourselves back down to somewhere in that target level, but very comfortable with where we're operating right now, and there's actually some room to do a bit more and continue to invest.

As for whether we -- the -- taking out more leverage and doing things. We have that balance sheet capacity, as Chad pointed out, Would we use equity? Yes, I mean, look, we have a history, if you look and you know this, Eric, if you go back, when we think there's -- when we think that we the opportunity to return capital to shareholders through stock repurchases make sense, we do that.

When we have -- when we believe the stock is at a price where we think it's appropriate to use it as capital, we do that as well. And so it will just depend on market conditions. We are not a company that just says, well, we programmatically buy stock, no matter what the price is, we're going to sell stock to grow just to raise equity. We will do it based on where we think the price is and whether it makes sense.

And just to be clear, at the current levels, obviously, we're in the market and we were repurchasing shares during the quarter. And so that's the level that we're at right now, you wouldn't see us issue equity at the current share price to go do M&A.

Our next question comes from Patrick Sholl with Barrington Research.

Just curious on concessions. Just with the current macro environment, have you seen any change in how consumers are like just consumer uptake or I guess, hesitate with regard to price increases and the ability to offset inflationary pressures there?

Pat. No, we haven't really seen a lot to speak of over the summer and changes in consumer buying patterns. The hit rate and the basket sizes have been pretty consistent. We've moved through inflationary-type price increases. Nothing overly aggressive as we've seen in our per caps. And there's actually been more propensity for our customers to buy merchandise associated with concession purchases. That's been a nice part of the uplift. But nothing that we've seen that would tell you there's a change going on in the willingness to buy concessions.

Okay. And then maybe just a question on the M&A market. Just kind of with the, I guess, softening macro environment in hotels and maybe some stability in the film slate. I'm just kind of curious how you're seeing like the various macro factors kind of affecting the M&A market in those 2 segments?

It feels like there's some more trends. I mean look, if you look at a macro level and you back up, the market is still very, very sluggish in terms of transaction volume. But it's -- if I -- how do the feel right this minute, it's starting to feel like there's some more stuff happening. I don't think we're seeing so much selling pressure from anyone feeling the pressure to sell from performance standpoint yet, I think you get people who just own things too long, and that's their issue. The thing I think we bumped -- and by the way, if interest rates as they come down, that will help because, again, I think one of the bigger challenges that we bump into is if you wrote a pro forma to buy an asset and you had a negative cap that's significantly below where cap rates are now, you're going to -- and you don't have to sell, you're going to hold on to can.

And so since the economy has held up, we're not seeing people feeling pressure on forced sales. You're seeing people where now they're starting to say, well, okay, I'm going to make the reinvestment in the next cycle, because we've got -- because PIPs are coming up on people going to -- am I going to want to reload that, and that's probably where we're seeing some opportunity it's more along that. We're not feeling that as you might be alluding to some economic pressure as the economy slows down.

Our next question comes from Drew Crum with Riley Securities.

So I think you talked about expectations for admission per cap growth over the next few quarters. Does that incorporate or contemplate any further changes to your pricing strategy? And if so, what are those? And any early learnings from the pricing increases you took at the beginning of 3Q?

Drew, yes, the -- it does not contemplate a lot of significant changes prospectively beyond what we did in the third quarter, it's more the annualization benefit and tailwind that we'll get from, frankly, flipping from a headwind on some of the discount programs that we've been comping for the last year to now moving to some strategic pricing moves that have increased pricing and that becomes a tailwind.

During the third quarter, we had blockbuster pricing on a number of films that our pricing approach and that evolved a bit throughout the quarter in terms of the length of period that we had blockbuster pricing on and every day [indiscernible] evolved a bit during the quarter. But I think we've hit a level that makes sense. Pricing, as we talked about last quarter, continues to be an area where the industry has done various experimenting. And so we'll continue to watch what others are doing. But in what we did in the third quarter, it is having the effect that we expected it would.

Got it. Okay. And then you guys discussed the composition of the fleet in 3Q having a negative impact on your state admissions. As you look at 4Q, how are you viewing mix? Is it a positive for your circuit negative or too tough to tell?

Yes, I'll start first and let Greg add on his thoughts. I mean I think it's a little bit tough to tell. It's easy to forget that we had a [indiscernible] film in the fourth quarter last year, and we don't have something quite like that. We do have a couple of family films here coming up in the quarter. And we have an Avatar, which we didn't have last year. So there are several puts and takes. It's frankly tough to tell on mix.

It's so hard. It is really hard to tell. We've never. Again, a got to top got Wick, that will play this should play good in our markets. SpongeBob, I'm a fan. So -- but we'll have to see how it goes.

[Operator Instructions] We'll move to our next question from Mike Hickey with Benchmark.

Greg, a I guess first, Greg, obviously, I heard your prepared comments on '26 for both your segments, sounded pretty bullish actually encouraging. Just would love to get sort of your off-script thoughts great on the growth opportunity you see from Cedars and hotels and any catalysts or major drivers. Obviously, you list a lot of films that sounds encouraging. Maybe something that's very relevant to your demo.

And on the hotel side, I don't know if the mark, it seems like a really interesting project that you guys are doing [indiscernible] catalyst or any other initiatives you thing to move the needle for you guys across your 2 segments in 26. I've got a couple of follow-ups.

Sure. Look, on the theater side, Mike, I'm not -- I tend to hate to try to predict how things are going to go. It's I always go down to let's just count the number of films, and that will give us a range. And then I don't know what -- and then in some years, it's going to be better or some years in some periods, it will be not as good. I mean I keep reminding myself, oh, yes, Memorial Day this year was the biggest Memorial Day on the history of the movie business and then summer slowed down. So you just don't know. But I thought it was a really interesting data point. look and say, well, look at the number of franchise films next year pretty much like this year, I think maybe on less.

But if you look back at the historical grossing of what the franchise zones that are coming around this time certainly more robust than we had in '25. So I'm not going to ignore that stat. Now go to bed, feeling good about that, but again, always hard to predict. On the hotel side, look, we've made a lot of investments that should continue to bear fruit for us, which is great. There's that old saying that both smells and new cells.

And so that's very good for us, and we should see that. I don't want to overplay the Mark thing. The Mark was done opportunistically, frankly. We have -- we've been very disciplined about the amount of investment we want to put into the here into the Milwaukee [indiscernible]. And in we were -- we had made the decision that we weren't going to renovate the entire property. We were going to actually close 176 keys. And we looked at it -- but we worked on a close immediately, and we had demand for the rooms.

And so while there's demand for the rooms, we're not going to actually make much of an investment in it. We're just going to separated out from the Hilton system basically that will run as an independent. And it's a wait if it's there, what's -- there's well, let's get some cash flow off the ball there, but always figure out where it's going. And if the city and the community decides they want to go in a certain direction because it will involve all of them that -- any further investment to tell, frankly, is going to require a subsidy. And if that's going to happen, then we're all ears. If not, that will become a different use. But while it's waiting let's warehouse it and get some cash flow from it.

Mike, I just want to add 1 comment on the '26 slate in terms of fuel mix. The one thing that does stand out is when you look at family content next year and you look at the franchises, we have Maria Brothers, we have a Toy Story, we have Minions movie, we have Moana, we have a Jumanji. I think the family mix comparatively to '25 is very helpful for our circuit.

Next. Then I guess given that you guys seem optimistic on growth, how should we think about the bottom line here, EBITDA growth potential operating leverage and free cash flow conversion? I know that's come up a lot, when you think about, I guess, catalyst to your valuation. I think free cash flow in '26 would probably stand out is the largest.

Yes. No doubt. I mean just by virtue of the CapEx coming down, our free cash flow is going to grow significantly next year. And then I think as the -- the highest leverage is in the theater business. And so if you assume the hotel business kind of continue steady as you go as it has with a stable economy, if you believe the '26 slate will grow, our operating leverage in theaters has historically contributed around 50% to the bottom line and top line growth.

So we continue to focus on managing our cost structure and getting better at managing these buildings when you're in the troughs of the content supply, that's really critical to holding that type of contribution margin because the peaks and valleys have been pronounced the last couple of years. But yes, the EBITDA should flow through with what the top -- if the top line grows, as you would expect for the slate.

Last question. Obviously, recent news that Mark is retiring sad to hear that 55 years, you never hear that sort of tenure of the company, so congrats to him. Just curious on the transition plan, and if this could also be a potential catalyst for maybe a change in strategy and how you manage your theater asset?

Well, we are -- we're in the middle of a search for the new leader. We're looking at internal and an external candidates. We have both. And the -- with the new leader, look, the idea is that we hopefully will see new ideas and new approaches. And yes, look, we're celebrating our 90th anniversary. I don't think that we're going to see like -- we're going to wake up with a wholesale change as to how we approach the business. But I like to get of new ideas and bringing out new approaches. And we will -- and we're always trying to do new things to figure out what will work. And most of it doesn't. But every 1 in a while, you find 1 and we have well run with it. I can't say It's like the surprise movie. I never know what it's going to hit, but there always is money.

Thanks, Mike.

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.

We'd like to thank everybody for joining us today, and we look forward to talking to you once again in late February when we release our fourth quarter results until then. Thank you, and have a good day.

This concludes today's call. You may disconnect your line at any time.

Good morning, everyone, and welcome to Marcus Corporation Second Quarter Earnings Conference Call. My name is Bailey, and I will be your operator for today. [Operator Instructions] 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 Marcus Corporation.

At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Good morning, and welcome to our fiscal 2025 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, 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 2025 second quarter results and in the Risk Factors section of our fiscal 2024 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 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.

As we shared on our last call, the second quarter began with strong performances from several blockbuster films that exceeded expectations in April. This strong momentum in our theater division continued into the summer with a significantly improved film slate, bringing a string of great box office performance that delivered year-over-year growth for the second quarter. In our hotel division, we executed on strong group bookings that drove overall revenue growth even with the disruptions from hotel renovations.

I'll start with a few highlights from our consolidated results for the second quarter of 2025. Consolidated revenues of $206 million were up 17% compared to the prior year quarter, with revenue before cost reimbursements growing in both divisions. Operating income for the quarter was $13 million, an increase of $10.8 million compared to the prior year quarter. Consolidated adjusted EBITDA for the second quarter was $32.3 million, a nearly 47% increase over the second quarter of fiscal 2024.

Net earnings for the quarter was $7.3 million or $0.23 per share compared to a net loss of $5.2 million or $0.17 per share, excluding the impacts of our convertible debt repurchases in the second quarter last year. The change in our fiscal year and quarters did not impact our second quarter results with a comparable number of operating days during the quarter in both fiscal 2025 and fiscal 2024.

Turning to our segment results. I'll begin this morning with our theater division. Second quarter fiscal 2025 total revenue of $131.7 million increased nearly 30% compared to the prior year second quarter. Comparable theater admission revenue for the second quarter increased 29.3% and comparable theater attendance increased 26.7% compared with our fiscal second quarter 2024. When using our comparable fiscal days, according to data received from Comscore and compiled by us to evaluate our second quarter results, U.S. box office receipts increased 36.5% during our fiscal 2025 second quarter compared to U.S. box office receipts during the second quarter last year, indicating our admissions revenue performance trailed the industry by approximately 7 percentage points.

We believe that our lower box office performance during the second quarter was primarily attributable to two factors. First, while the other major exhibitors implemented blockbuster pricing surcharges on many films during the quarter, our pricing strategies during the quarter continued to focus on driving attendance and the ancillary revenue that goes with it. We continue to optimize pricing with a variety of promotions for different types of customers while capturing a premium for peak days of the week, showtimes and holiday periods. And second, several films, including F1, Mission: Impossible - The Final Reckoning, Ballerina, and Karate Kid did not perform as well in our Midwestern markets as in other parts of the country. The total box office in our top markets underperformed the overall increase in the national box office. We believe this is partially attributable to the stronger relative performance of these films in markets where we do not have a presence, particularly on the coast.

Average admission price increased 2% during the second quarter of fiscal 2025 compared to last year, which was impacted by a favorable mix of films that attracted audiences to PLF screens and by headwinds from our strategies to drive attendance through various value-oriented programs and promotions that are designed to encourage repeat moviegoing. Our Everyday Matinee program was introduced at the end of May 2024 and will no longer be a headwind to our admission per cap growth beginning in the third quarter this year. This program recently moved from the initial $7 pricing to $7.50 and on some films $8.50. In addition, we began implementing pricing surcharges on select high-demand summer blockbuster films at the end of the second quarter, which we expect will benefit our admission per cap growth going forward.

Our average concession food and beverage revenues per person at our comparable theaters increased by 3.1% during the second quarter of fiscal 2025 compared to last year's second quarter, which was driven by an increase in merchandise sales and pricing. Merchandise sales, which are included in our concession food and beverage revenues are typically at lower margins than our traditional concessions offerings due to the higher cost of product, while merchandise sales are dilutive to concessions margins, they have resulted in incremental revenue and earnings.

Our top 10 films for the quarter represented approximately 76% of the box office in the second quarter of fiscal 2025 compared to 73% for the top 10 films in the second quarter last year. The more concentrated film slate featuring more blockbuster films compared to a weaker slate in the second quarter last year resulted in an approximately 2 percentage point increase in overall film cost as a percentage of admission revenues.

Finally, theater division adjusted EBITDA during the second quarter of fiscal '25 was $26.5 million, a 76% increase over the prior year quarter.

Turning to our hotels and resorts division. Total revenues before cost reimbursements were $64.6 million for the second quarter of fiscal 2025, a 1.2% increase compared to the prior year. The RevPAR for our comparable owned hotels decreased 2.9% during the second quarter compared to the prior year, which resulted from an overall occupancy rate decrease of 5.4 percentage points, partially offset by a 5% increase in our average daily rate, or ADR. Our average occupancy rate for our owned hotels was 67.3% during the second quarter of 2025.

Our occupancy rate decrease was impacted by the Hilton Milwaukee renovation, while guest rooms were out of service. The summer travel and convention season ramped up, generating higher demand for rooms throughout the week, as expected, the impact of having rooms out of service and turning business away to competitors in the market during the renovation was more pronounced. While we were able to shift business to our two other hotels, the Fister and St. Kate, to mitigate the impact of the renovation on the overall portfolio, there was occupancy displacement from business turned away due to the reduced available rooms.

As we recently announced, the guestroom renovation portion of the project was completed at the end of June with all rooms returned to service. While the renovation of the meeting in common space will continue over the next several months, we expect a more limited impact to room sales beginning in the third quarter. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced RevPAR growth of 2.9% for the second quarter of 2025 compared to the second quarter last year, indicating that our hotels underperformed the competitive set by 5.8 percentage points.

Our lower performance relative to the competitive sets results primarily from displacement at the Hilton Milwaukee well under renovation, which we believe unfavorably impacted our RevPAR growth by nearly 4 percentage points while favorably impacting competing hotels RevPAR growth by approximately 1 percentage point. After adjusting for the impact of the Hilton Milwaukee renovation, we believe our hotels RevPAR growth was within less than 1 percentage point of the competitive set and attribute the slightly lower performance to new hotel room supply within one of our markets.

When comparing our RevPAR results to comparable upper upscale hotels throughout the United States, the upper upscale segment experienced effectively flat RevPAR growth during our second quarter compared to the second quarter last year, indicating that our hotels underperformed the industry by 2.9 percentage points but outperformed the industry by approximately 1 percentage point when adjusting for the estimated impact of the Hilton Milwaukee renovation.

With the strong growth in group business and events, our banquet and catering operations continue to grow, with food and beverage revenues up 10.5% in the second quarter of fiscal 2025 compared to the prior year. Finally, hotels adjusted EBITDA decreased $200,000 in the second quarter of fiscal 2025 compared to the prior year quarter and was impacted by changes in our revenue mix, with a decrease in higher-margin rooms revenue due to the impact of the Hilton Milwaukee renovation, offsetting the increase in comparatively lower margin food and beverage revenue.

Shifting to cash flow and the balance sheet. Our cash flow from operations was $31.6 million in the second quarter of fiscal 2025 compared to cash flow from operations of $36 million in the prior year quarter, with the decrease in cash flow primarily attributed to timing of accounts payable and certain annual payments. Total capital expenditures during the second quarter of fiscal '25 were $16.9 million compared to $19.8 million in the second quarter of fiscal '24. A large portion of our capital expenditures during the second quarter were invested in the Hilton Milwaukee renovation with the balance going to maintenance projects in both businesses.

Our capital investments and renovation projects have progressed as planned, and we continue to expect capital expenditures for fiscal 2025 of $70 million to $85 million. The timing of several projects will impact our final capital expenditure number for the year, and we will update our estimates as the year progresses.

We ended the second quarter with approximately $15 million in cash and over $214 million in total liquidity with a debt-to-capitalization ratio of 29% and net leverage of 1.6x.

With that, I will now turn the call over to Greg.

Thanks, Chad, and good morning, everyone. When we spoke at this time last year, we were reporting a quarter that was impacted by the lingering effects of content supply challenges created by the Hollywood strikes in our theater business. What a difference a year makes? Today, we are thrilled to report second quarter results with significant growth that was driven by a high-quality and diverse film slate, coupled with strong consumer demand to experience these blockbuster films in the big screen. This was a quarter that showcased the enduring appeal of the theatrical experience and the remarkable resilience of our industry.

In hotels, while the second quarter got off to a slower start, it picked up momentum and delivered results that were in line with our expectations overall. We completed major milestones on schedule in our renovation and construction projects while minimizing the impact on operations and still delivering exceptional experiences for our guests. Overall, we are pleased with the results for the quarter and we entered the third quarter with solid momentum.

I'll start with our theater division. The most encouraging aspect of this quarter's success was the sheer diversity of the films that drove our performance. This wasn't a story about a single genre or franchise carrying the market, it was about multiple films from different studios with different target audiences, all succeeding at the same time. As we shared on our last call, the second quarter got off to an incredible start with the record-breaking A Minecraft Movie creating a cultural phenomenon that became a must-see film in theaters.

With a total domestic growth of over $423 million, this film proved its ability to mobilize a massive, passionate and youthful fan base, creating an electric atmosphere in our auditoriums that simply could never happen at home and living rooms. Lilo & Stitch captured the hearts of families and grossed over $420 million domestically. While Sinners delivered a triumph of originality. In an era often dominated by sequels and established IP, Sinners proved that a bold original R-rated film can become both a critical and commercial success. This historical horror film earned both critical and audience acclaim driving incredible word of mouth to become the highest grossing original horror film in North American history, while demonstrating a strong market appetite for fresh stories aimed at an adult audience.

This trio of our top films in the quarter was supported by the steady reliable performance of beloved franchises. Mission: Impossible - The Final Reckoning and live-action adaptation of How to Train Your Dragon delivered the blockbuster action and adventure that audiences expect from summer tentpoles, rounding out a truly robust and varied slate.

The film slate was stronger, both in terms of the quantity of wide release films, which grew from 28 in the second quarter last year to 32 this year and also in terms of a steady cadence of quality releases with a diverse slate of films that brought audiences back to our theaters. Chad discussed the factors we believe are impacting our box office performance relative to the nation, and I'd like to expand on this a bit.

As we shared the last few quarters, our strategy has been focused on driving long-term attendance, total revenue and overall profitability. Box office growth relative to the nation is one of several measures we look at to evaluate our performance, but we're really focused on optimizing total revenue growth, including ancillary revenue and the ultimate contribution that each incremental customer brings to the bottom line.

While our pricing strategies and promotional programs over the last year created a short-term headwind to our admission forecast, we believe they are important drivers of long-term future attendance. Over the last year, since introducing these programs, we've seen attendance growth rates that have outperformed other major exhibitors in 3 out of the last 4 quarters, and we believe these attendance gains help build our base of regular moviegoing customers.

As we pass the 1-year mark for these changes, we expect improved admission per cap growth in the second half of this year. The competitive pricing environment in our industry continues to change with several exhibitors experimenting with different strategies. We continue to optimize our regular ticket prices in our markets to ensure we remain competitive and offer attractive value to all types of customers while capturing a premium during our peak demand periods.

Last quarter, I shared that we were working on several investment projects focused on increasing per capita revenues. I'm pleased to provide an update that in June, we completed projects to add concession stands, two of our formerly dine-in only Movie Tavern locations in New York and Pennsylvania, with the third location in Kentucky completed in July. These locations previously only offered customers concessions, food and beverage ordering through our mobile app or at the bar for delivery to your seat. By adding walk-up concession stands where customers can order all food and concession items as well as pickup for mobile concessions orders and self-serve soda, we expect to capture higher per capita concession sales while streamlining labor from our service delivery model at these locations.

Looking ahead to the third quarter, the summer movie season continued in July with solid performances from Jurassic World Rebirth, Superman and last weekend's opening of The Fantastic Four. The remainder of the summer includes the Naked Gun, the Bad Boys 2, Freakier Friday, The Conjuring: Last Rites, and Downton Abbey: The Grand Finale. We're looking forward to an exciting fall and holiday film slate with Tron: Ares, Wicked: For Good, Zootopia 2 and Avatar Fire and Ash, just to name a few. There are many more great films coming noted in today's earnings release.

Looking even further ahead, 2026 film slate also looks strong with major franchises, including Spider-Man: Brand New Day, Super Mario Bros. Movie 2, Moana, Jumanji 3, Toy Story 5, Mega Minions, The Mandalorian & Grogu, and the Avengers: Doomsday, just to name a few. In summary, we continue to see improvements in content supply, and this quarter of growth was another significant step forward.

Moving to our hotels and resorts division. You've seen the segment numbers, and Chad shared some additional detail on the performance metrics, including our strong average daily rate growth. I'll start with an update on the Hilton Milwaukee renovation. As we plan this project, we intentionally scheduled as much of the guest room renovation work as possible during our seasonally slower winter months in our fourth quarter last year and first quarter this year to minimize disruption. As we expected and planned for, some of the work trailed into the spring and resulted room displacement while rooms were out of service during the second quarter.

I'm pleased to share that our team executed the largest renovation project in our company's history on schedule, and all of the guest rooms went back in service at the end of June. As planned, the meeting space, ballrooms and common area renovations will continue for the next several months, but the most significant work and disruptions are behind us.

I want to thank our outstanding project management team and the team at Hilton Milwaukee for successfully completing the most operationally difficult phase of the project. I would also like to thank our teams the Fister and St. Kate hotels in Milwaukee for accommodating customers and delivering exceptional service as we shifted business between the hotels during the project.

There are several other notable items in the quarter that I'd like to highlight. We continue to drive rate growth with average daily rate growth at 5 of our 7 hotels. In addition to our focus on optimizing revenue management, our rate growth has benefited from our ability to command higher rates at our hotels with newly renovated room product, including the Fister, Grand Geneva and the newly renovated rooms at Hilton Milwaukee.

Group business during the quarter was stable, and we continue to win in the market. Once again, helped by our newly renovated meeting space and ballroom at several properties, the bookings continue to look solid with our group room revenue bookings for fiscal 2025 or group pace in the year for the year, running slightly ahead of where we were at this time last year, even when including the RNC group business in the third quarter last year. Even more encouraging, group room pays for 2026 continues to run 20% ahead of where we were at this time last year for the next year out, with banquet and catering revenues similarly running ahead of last year's pace.

While some industry surveys have seen a pullback in consumer spending on travel nationally and some markets have seen more significant leisure softening, our own portfolio has generally performed well. We believe our upper upscale positioning and drive-to-market locations and a broad segmentation lessening our exposure to any one type of customer. We'll see less volatility if further economic softening occurs. The current state of our hotel business remains stable and consistent with our view last quarter.

While we've not yet seen any meaningful change in transient demand or significant cancellations of group business at our portfolio hotels, there remains an increased level of incremental uncertainty compared to where we were a year ago. If we begin to see softness, we are prepared to react and adjust quickly.

Finally, I'd like to briefly comment on capital allocation. Chad reiterated our capital expenditure guidance earlier in the call. We still have a lot of work remaining on our capital projects this year. As we start to think about 2026, we do see a meaningful step down in capital expenditures as we get past the heavy part of the reinvestment cycle, and that we are in this year with our current hotel portfolio. We continue to look for opportunities to deploy capital to grow both of our businesses with value-accretive investments. We have confidence in our businesses and a strong balance sheet that allows us to move quickly when we see good opportunities. And we have a history of executing when they arise. To the extent that we don't see attractive investments that are actionable, we expect to return excess capital to shareholders through share repurchases or dividends.

Before we open up the call for questions, I want to once again thank all the people that work so hard every single day making our ordinary days extraordinary for our guests. We talk a lot about the investments that we make in our businesses, we can never lose sight of the fact that our people are our most important asset, and they proved that once again this quarter.

And with that, at this time, Chad and I would be happy to open up the call up for any questions you may have.

[Operator Instructions] We'll go first to Eric Wold with Texas Capital Securities.

One question on each of the two segments. I guess, first on the hotel segment. As you dig into the 20% gain that you're seeing in group pace looking out into 2026, is there any way you can separate the group pace between the Milwaukee area and outside of Milwaukee? Just trying to get a sense of kind of maybe what impact you're seeing from the convention center expansion, maybe what that may be driving in terms of group pace versus maybe kind of just the overall kind of business environment outside of Milwaukee. And then, on the theater side, you noted that you're now starting to take kind of that blockbuster kind of surcharge after the end of the second quarter. How large of a surcharge are you starting to implement? And any way to gauge kind of what percentage of your tickets that may impact kind of on a going-forward basis?

Sure, Eric. I'll start with the question on hotels and then I'll let Greg comment on what we're seeing with the convention center. Look, I think it's an important perspective, we have 7 hotels, 5 of them in Wisconsin, 3 of them in Milwaukee. And our group pace gains have in part been because we've got renovated meeting space and we've got it at 3 of the Wisconsin properties, 2 of them in Milwaukee and in Grand Geneva. And so we're winning in the market for group events with meeting planners because of the quality of the assets and the positioning. I think as we look out to '26, there's certainly some positive benefits of the convention center in the market. I don't have specific splits between how much is Milwaukee versus the rest of our portfolio. Maybe Greg can add some commentary anecdotally on what we're seeing with the convention center.

It's very anecdotal, just that it's going -- I think everyone is pleased with the trajectory. I mean it's -- we're definitely seeing increased activity because of the center now that it's open and people are coming to see it. But I don't have the specific numbers on where we are right this second.

Yes. And then I'll take the second question on theaters with the pricing. A couple of things. So I mentioned the changes to Everyday Matinee and the magnitude on those. Those will start to come through in Q3. That's moving that program from $7 to $7.50 and on certain films $8.50. And that $1 delta on certain films is what we're doing with generally with blockbuster pricing across a number of different films. And we're still going to be thoughtful about what types of films and what audiences were going to put blockbuster pricing on. As you know, our approach on this has been pretty cautious, and we're still very much committed to driving attendance because getting people in the door is really paramount to driving overall total revenue and the ancillary revenues that go with it. But it will provide uplift to admission per caps in the second half of the year.

Because one thing we do know is moviegoing is a ritual, you come, you see trailers and you come again. So that investment -- we view it as an investment to build that attendance.

The next question today comes from the line of Drew Crum from B. Riley Securities.

Wondering if you're willing to share some preliminary thoughts for the domestic box office going into the second half. And it looks like July ended down about 7%. The industry is going to be lapping a tough comparison in 4Q against what looks to be a pretty good slate for the holidays. So a lot of moving pieces there, but how do you see the second half shaking out for domestic box office?

Man, it's -- you're right. We're lapping some tough comparisons. But we also have some good film coming at least certainly at the end of the year, with Wicked then the Avatar, that should be very -- both should be very strong. We -- I find it very hard to predict how the box office is going to do in any period of -- any short period of time. It just it's -- you just don't know. But it looks very positive, and we should end up strong.

Yes. And Drew, I would just add to that one housekeeping item. So as -- as you may know, we've got a change in our fiscal year this year. And so last year, the year ended on December 26. This year, we will pick up the full week between Christmas and New Year's. And so for us, that fourth quarter growth will benefit from that. So we're going to have a good quality slate and a good number of films, and we're going to have a few more days.

Yes. Okay. Helpful. And then on the hotel segment, guys, I think a number of puts and takes on 3Q revenue. Can you address those? And how do you see that netting out for the current period?

Yes. I mean -- so we've done extremely well with our banquet and catering business and that really stems from the growth in group that we've seen over the last year and talked about for the last year coming into the bookings. And now those bookings are converting into business. And along with the rooms business for groups, you get the banquet and catering. It does come at a bit lower margins. And so that's a bit of the trade-off that we have going on there. And then added into a take for the quarter was the impact of the Hilton renovation. And when you strip that out, I think all things considered, we're pretty happy with the overall performance in the environment. And as Greg commented, we see stability in continuing bookings in the group business and our transient business is doing pretty well relative to other parts of the nation. So we're -- we'll see where the economy goes overall over the second half of the year, but at least we'll -- the headwind of the Hilton renovation will be behind us. And we should have a little bit easier path operationally.

[Operator Instructions] The next question today comes from [ Brighton ] Sholl from Barrington Research.

I guess I had another question on capital allocation. As we move past the reinvestment cycle in hotels, I guess, how long should we think of this kind of being in a maybe -- perhaps a lower CapEx level? Or is there like additional investments within the theater side that would look to step up? And maybe just for some of the properties outside of Wisconsin and how we should think about like the timing of reinvestment cycle for like the Chicago Hotel and the Nebraska Hotel?

Yes, Pat. So the last 3 years really, we've been going through this heavy reinvestment period coming out of the pandemic in CapEx and reinvesting into the hotels. A bit of that we would have done during the pandemic, but it just got deferred. And so we're catching up. The Hilton Milwaukee is by far the biggest project of the various things that we've done over the last 3 years, and it's a $40 million project with about 3/4 of that falling into this year. And then we go into a more normal run rate for CapEx in the hotel business.

I would just say there's always some level of refresh or renovations going on across the portfolio with smaller projects but nothing like the magnitude of what we've just gone through. And so I'm not going to provide a specific guide on a number next year. I think if you look at big step up here in '25 and '24, and then you go back and look at where we were in hotels pre-pandemic, you could probably triangulate around what that might be. But I think point being we're going to see a big step in the run rate down next year. In the theater business, we're probably pretty close to the run rate that we've been at. We've done some ROI projects within that, call it, $20 million, $25 million that we're doing this year. And I don't see that range shifting very much going forward with the current footprint of theaters that we have today.

And I just even would add on the hotel side. We talked about this before. In addition to just being -- having deferred and bumping into a bunch of maintenance that came up, I mean that CapEx that came up, the nature of some of this CapEx, as we talked, there's 7-year CapEx, which is soft goods, there's 15- to 20-year CapEx, which is going to be more your case goods, your nightstand, things like that. And then you've got your, I would call it, 30- to 40-year CapEx, and that's things like gutting bathrooms and redoing those. And at the Fister, at the Grand Geneva and at the Hilton, we all had the significant bathroom projects that really even exacerbated which would have been a high CapEx period anyway. So it's not -- even as you think out even more long term, it's just not that we won't have those again.

Okay. On theaters, just with your value matinee pricing, with the increase that you implemented, where is that relative to where it had been before you implemented the value matinee program?

Can you ask that question again? What period are we trying to compare?

I guess maybe comparing the value matinee pricing compared to before instituting the $7 Everyday Matinee?

What was our pricing before the $7? It really was very market specific. It was sort of all over the place. And so we -- moving it to seniors and to kids 7 days a week, that was pretty broad. We did that. I have to go back and look and see exactly where we are for all these.

Okay. And then I guess, lastly, just on the theater footprint. I guess, can you maybe talk about the opportunities for new build or the acquisition market and how you are kind of seeing that evolve with maybe a stabilizing box office?

I think that the -- let's take the new build. I don't think there's a lot of new build opportunities. There's going to be some here and there as markets grow and markets will demand in terms of -- there'll be demand in new growth markets. So I don't think that's a huge thing. But we do see -- we are looking at a few here and there. And then on the M&A side, again, it's so hard to predict what's going to happen there. It's not -- it's very sporadic. These are not owned generally by funds that have 5- and 7-year hold period. They're owned by families, who sort of been marching to the beat of their own drummers.

At this time, it appears there are no other questions. So I'd like to turn the call back over to Mr. Paris for any closing remarks.

All right. Well, we'd like to thank everyone for joining us once again today, and we look forward to talking with you in early November when we release our third quarter results. Until then, thank you, and have a great day.

That concludes today's call. You may disconnect your lines at any time.