The Marcus Corporation (MCS) Q3 2026 Earnings Call Transcript

Operator: Good morning everyone, and welcome to The Marcus Corporation's third quarter 2026 earnings conference call. My name is Jonathan, and I will be your operator for today. At this time, all participants are in listen-only mode. We will host a question and answer session towards the end of this conference. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. If at any point during this call you require assistance, please press star zero and an operator will be happy to assist you. As a reminder, this conference is being recorded. Joining us today are Greg Marcus, Chairman, President and Chief Executive Officer, and Chad Paris, Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I would like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Chad Paris: Good morning, and welcome to our fiscal 2026 third quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as believe, anticipate, expect, or other similar words. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements are only made as of the date of this conference call, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The risks and uncertainties which could impact our ability to achieve our expectations identified in our forward-looking statements are included under the heading Forward-Looking Statements in the press release we issued this morning announcing our fiscal 2026 third quarter results, and in the Risk Factors section of our fiscal 2025 annual report on Form 10-K, which you can access on the SEC's website. Additionally, we refer you to the disclosures and reconciliations we provided in today's earnings press release regarding the use of Adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the investor relations page of our website at investors.marcuscorp.com. All right. With that behind us, let's begin. I'll start this morning by spending a few minutes sharing the results from our third quarter, and then discuss our balance sheet, liquidity, and capital allocation. I'll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we are seeing ahead. We'll then open up the call for questions. This morning, we reported another record quarter with results that exceeded our expectations and broke third-quarter revenue records in both divisions. In theatres, a strong film slate led by blockbuster hits kept audiences coming to the movies deep into the summer to deliver the highest total revenue for the summer movie season in Marcus Theatres' history. In hotels, we continued to see strength in leisure demand during our seasonally busiest quarter that drove record third quarter revenue. The record third-quarter revenue in both divisions combined to deliver the highest quarterly revenue for any quarter in company history. I'll start with a few highlights from our consolidated results for the third quarter of 2026. Consolidated revenues of $238 million were up 13.1% compared to the prior year quarter. Operating income for the quarter was $30.3 million, an increase of $7.6 million or 33% to the prior year quarter. Adjusted EBITDA for the third quarter was $49.1 million, a 21% increase over the third quarter of fiscal 2025. Net earnings for the quarter were $18.8 million or $0.60 per share, compared to prior year third quarter net earnings of $13.2 million or $0.42 per share, excluding the impact of a non-recurring gain of property insurance settlement of $3 million or $0.10 per share net of tax. Turning to our segment results, I will begin this morning with our theater division. Third quarter 2026 total revenue of $145 million increased approximately 21% compared to the prior year third quarter, primarily due to the strong performances from "Spider-Man: Brand New Day" and "The Odyssey," as well as stronger carryover of films that released in the second quarter compared to last year's carryover. Comparable theater admission revenue for the third quarter increased 21.8%, and comparable theater attendance increased 16.8% compared with the third quarter last year. Based on data from Comscore, U.S. box office receipts increased 27% during the 2026 third quarter compared to U.S. box office receipts during the third quarter of 2025. There are three factors that impacted our admissions revenue growth when compared to the reported national box office growth. First, based on our review of box office data, it is important to note that our admissions revenue in the third quarter of 2025 included box office revenues from two films with national grosses that were not reported by certain streaming content providers to Comscore. The exclusion of the grosses for these films from the prior year resulted in higher national box office growth, and our admission revenue growth rate was negatively impacted by 2.8 percentage points when compared to the national box office growth rate. Second, during the third quarter of 2026, we made the strategic decision to not play two films due to distributor terms, which we believe negatively impacted our admissions revenue growth by approximately one percentage point. While these decisions to pass films are never easy, we are committed to achieving competitive market terms for film rent, and we were pleased to reach a resolution with the distributor going forward. When adjusting for the impact of these two factors, our admissions revenue for the third quarter grew 25.6%, indicating that our admissions revenue performance trailed the industry by approximately 1.4 percentage points. We believe that our slightly lower box office performance relative to the nation during the third quarter was primarily attributable to an unfavorable film mix that included the number two film in the quarter, "The Odyssey," that played stronger in other parts of the U.S. where we do not have a presence, and in premium formats with significantly elevated average ticket prices. Our average admission price increased 4.3% during the third quarter of 2026 compared to last year. Our admission per caps were favorably impacted by strategic pricing changes, a higher percentage of our attendance on PLF screens, and a decrease in the percentage of attendance coming on Value Tuesday compared to last year's quarter due to one additional Tuesday that fell in last year's calendar third quarter compared to this year's third quarter. We also grew our average concession, food, and beverage revenues per person at our comparable theaters, which increased by 3.8% during the third quarter of 2026 compared to last year's third quarter, and was driven by an increase in movie-themed merchandise sales and menu pricing. Our top 10 films in the quarter represented approximately 80% of the box office, compared to 72% for the top 10 films in the third quarter last year. The more concentrated film slate weighted towards blockbuster films compared to the less concentrated slate in the third quarter last year resulted in a less than one percentage point increase in overall film cost as a percentage of admission revenues. Finally, theater division Adjusted EBITDA during the third quarter of 2026 was $46.3 million, an over 46% increase over the prior year quarter, primarily due to the higher attendance volumes. Turning to our hotels and resorts division, total revenues before cost reimbursements were $82 million for the third quarter of 2026, a 2% increase compared to the prior year. RevPAR for our owned hotel portfolio increased 2.1% during the third quarter compared to the prior year, which resulted from a 3.3% increase in our average daily rate, or ADR, partially offset by an overall occupancy rate decrease of just less than one percentage point. Our average occupancy rate for our owned hotels was 77.5% during the third quarter of 2026. For our comparable owned hotels, which excludes The Marc Hotel that opened in early 2026 as a new independent hotel with a new competitive set, RevPAR grew 7.4%. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced an increase in RevPAR of 6.2% for the third quarter of 2026 compared to the third quarter last year, indicating that our hotels outperformed their competitive set by 1.2 percentage points. We believe our outperformance resulted primarily from strong transient demand and slightly improved business travel, while we experienced a somewhat softer group demand environment. Group business as a percentage of our total business mix was approximately 39% compared to 43% in the third quarter last year. When comparing our RevPAR results to comparable upper upscale hotels throughout the U.S., the upper upscale segment experienced an increase in RevPAR of 7.8% during the third quarter compared to the third quarter last year, indicating that our hotels underperformed the industry by approximately 5.7%. We believe our underperformance to the industry nationally this quarter primarily relates to transient demand related to major events, particularly the World Cup, that occurred in other markets where we do not have a presence, as well as softer group demand in our markets. With the softness in group business and events, our banquet and catering operations decreased modestly with food and beverage revenues down 1.4% in the third quarter of 2026 compared to the prior year quarter. Finally, hotels Adjusted EBITDA decreased $600,000 in the third quarter of fiscal 2026 compared to the prior year quarter and was negatively impacted by increased repair and cleanup expenses following severe storm damage at Grand Geneva Resort & Spa, which occurred on July 3rd leading into the Independence Day holiday weekend. While our team worked incredibly hard to recover and serve resort guests that weekend, the storm event resulted in operational challenges, cancellations, golf course closures, and incremental cleanup and repair expenses. We expect the damage to the resort to be covered by property insurance, and we expect the event led to an approximately $500,000 negative impact on Adjusted EBITDA due to incremental cleanup costs and lost revenue during the holiday weekend. When excluding the impact of the storm, our Adjusted EBITDA was essentially flat. In addition, Adjusted EBITDA in the third quarter compared to the prior year was also negatively impacted in hotels by adverse property tax assessments and quarterly shifts in timing of annual maintenance projects compared to when those projects occurred in fiscal 2025. Shifting to cash flow and the balance sheet, our cash flow from operations was $38.4 million in the third quarter of 2026, compared to cash flow from operations of $39.1 million in the prior year quarter, with a slight decrease in cash flow, primarily due to differences in the timing of various working capital payments. Total capital expenditures during the third quarter of 2026 were $10 million, compared to $20.9 million in the third quarter of fiscal 2025, with CapEx in the quarter primarily going to maintenance projects in both businesses. Our capital expenditures for the year are progressing as planned, and we continue to expect capital expenditures for fiscal 2026 of $45 million to $50 million. The timing of several projects will impact our final capital expenditure number for the year. We ended the third quarter with approximately $60 million in cash and over $219 million in total liquidity, with debt to capitalization ratio of 24% and net leverage of 0.8 times. We are well-positioned with a very strong balance sheet, which coupled with confidence in our businesses, gives us the ability to continue pursuing growth investments while returning capital to shareholders through our quarterly dividend. We will continue to allocate capital with a balanced approach that supports an appropriate level of reinvestment in our existing assets, pursuing shorter-term payback EBITDA-enhancing investments that provide attractive returns and investments in our long-term strategic growth priorities. With that, I'll now turn the call over to Greg.

Greg Marcus: Thanks, Chad. Good morning, everyone. As we shared with you on our last quarterly call, the summer was off to a strong start, and with the film slate ahead of us, we saw the potential for our best summer box office in years. What has played out since our last update has been truly historic, breaking many records for both the industry and our company. In our theatre division, a robust film slate that appealed to a wide variety of audiences kept moviegoers coming back to our theatres deep into the summer. In our hotels and resorts division, strong leisure travel supported the steady trend of average daily rate and RevPAR growth that we have seen all year. Although there were a few surprises that we had to navigate in the quarter, our team responded and executed well. Today, we are thrilled to report the highest quarterly revenue in our company's history and a quarter in which both of our businesses achieved their highest third-quarter revenue ever. I will start with our theatre division, and as this quarter wrapped up the summer moviegoing season, which runs from the first Friday in May through Labor Day, I would like to begin with some perspectives on just how strong this summer was, as this was one for the history books. For the season, with our highest attendance since 2019, Marcus Theatres recorded its highest total revenue in company history, with new records for highest box office, concessions, food and beverage, and merchandise sales. We also set new records for both per capita admissions revenue and per capita concession merchandise, and food and beverage spend for the summer moviegoing season. As an industry, we saw four consecutive months from May through August that each topped $1 billion in domestic box office. That kind of sustained performance only happens when we have a deep film slate that gives audiences a reason to return week after week. In the third quarter, we had a strong carryover of films that opened in the second quarter, combined with two blockbuster films in *Spider-Man: Brand New Day* and *The Odyssey* that broke opening weekend records and more importantly, held strong week after week deep into the summer. When you combine these massive tentpoles with such a diverse array of counterprogramming, you get a theatrical ecosystem firing on all cylinders. Beyond the blockbuster films, we also had a more balanced slate that included family films such as *Minions & Monsters*, *Moana* and strong carryover from *Toy Story 5* that played well in our markets. Horror continues to draw audiences with *Resident Evil* making a meaningful contribution to the third quarter. Not only did the top films perform better this quarter than last year, but we had more movies with 32 wide releases compared to 30 in the quarter last year. Chad discussed the puts and takes that made comparisons to the reported national box office growth a bit more challenging this quarter, but when you cut through the noise and look at the numbers on an apples-to-apples basis, there were really two things that drove our underperformance to the national box office growth. First, we intentionally passed a couple of smaller films this quarter as we worked to achieve competitive film terms with a distributor. While we never like to do this was a strategic decision as we are committed to controlling our costs at sustainable levels for the long term. This ability to make decisions for the long term is just another example of the benefits of our strong balance sheet. Others with a short-term focus may not have that option. Second, the number two film in the quarter, The Odyssey, played stronger in other regions of the country, particularly the West Coast where we do not have a presence. Exhibitors in these markets were also realizing significantly elevated ticket prices, particularly with 70-millimeter showings of the film around the clock. While we achieved solid market share within our markets and also had a couple of 70-millimeter prints of the film, the film did disproportionately well outside of our markets. Conversely, I want to highlight that we did very well with the biggest film of the quarter, Spider-Man: Brand New Day, which played on all of our PLF screens immediately on opening weekend. With PLF showings representing 49% of the box office over the entirety of its run, we believe that on a relative basis, we have the highest percentage of PLF penetration in the industry, allowing us to take advantage of times just like this. Looking ahead, the fourth quarter is off to a good start with solid domestic box office growth in October and a few positive surprises, including You Can See Everything. The holiday film slate ahead features the highly anticipated Avengers: Doomsday and Dune: Part Three, and advanced ticket sales for Avengers: Doomsday are incredibly strong. Beyond these tentpoles, the fourth quarter slate includes several other exciting films, including The Cat in the Hat, Godzilla Minus Zero, The Hunger Games: Sunrise on the Reaping, Focker-in-Law, Hexed, and Jumanji: Open World. Looking even further ahead, the 2027 film slate also looks strong with major franchises including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, Man of Tomorrow, The Legend of Zelda, Avengers: Secret Wars, and many more. There are many more great films coming noted in today's earnings release. In summary, we are thrilled with the year that has taken shape for our theater business. More importantly, this isn't just a post-pandemic recover anymore. This is a recognition of the importance of the theatrical model to the overall content ecosystem. We see more opportunities ahead of us as we continue to get more film product from new sources and theatrical windows extending out. While this industry has always had some years with huge hits and others with not as many, we see the long-term trends as very positive, and we like where things are headed. 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 the competitive sets. Once again, the hotel division achieved record third quarter revenue for the third consecutive year, and we were able to successfully navigate a few challenges along the way. There were several notable items in the quarter that I'd like to highlight. At a high level, for our overall portfolio, rooms demand in the quarter remained steady, and the overall travel environment appears to remain healthy. However, the dynamics continue to vary by market, and there was some shift in our business mix compared with last year's quarter. In some markets, notably Chicago, we saw strength and higher demand due to an increase in the number of citywide events and convention business that drove very high occupancy and rates. This contrasts with our Milwaukee market, where we saw some softness in group business with a weaker citywide event schedule compared with last year. In some cases, lower attendance at group events resulted in some group room blocks not selling out. This softness resulted in a decrease in group business as a percentage of our rooms revenue, with stronger transient leisure and business travel growing as a percentage of our rooms mix. While this tends to help with average daily rate and total rooms revenue, we did see a decrease in food and beverage revenue tied to the decrease in banquet and catering business for group events. RevPAR grew at six of our seven comparable hotels during the second quarter compared to the prior quarter, with both occupancy and average daily rate growing at five of our seven comparable hotels. As Chad mentioned, early in the third quarter, we navigated through the impact of a major severe storm event that hit our Grand Geneva property in July. First, I am truly grateful that all of our associates and guests were safe, and there were no major injuries from the storm, which was truly remarkable in light of the sudden approach of the storm, high winds and debris, and damage to the golf course. The July 3rd timing of the storm was especially challenging during what is always a busy holiday weekend, and I am incredibly proud of the hard work and dedication of our associates to recover from the storm and continue to serve guests. While we were able to mitigate the revenue impact to the week following the storm, it did create a revenue and expense headwind in the quarter. Looking ahead, the fourth quarter in hotels is off to a strong start in October, and we benefited from the Milwaukee Brewers' run to the World Series. As a lifelong Brewers fan, we were excited and proud to host visiting teams and fans, international media, and many Brewers VIPs to our hotels during this historic postseason run. Group bookings for the rest of the year look stable, with our group room revenue bookings for 2026 or group pace in the year for the year running approximately 5% of where we were at this time last year. Looking a bit further ahead to 2027, group room pace is running approximately 10% ahead of 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 the remainder of 2026 is running in line with where we were at last year at this time and is running approximately 14% ahead for 2027. Overall, the division had another good quarter, and the current state of our hotel business remains stable and on track with our expectations for the year. While transient demand has remained healthy, volatility in key travel costs, including high gas prices and rising airfares have persisted. If market conditions change and we begin to see softness, we are prepared to react and adjust quickly. Finally, I'd like to close with a brief comment on our balance sheet. We continue to remain on track to deliver very strong free cash flow in 2026, and we're building cash in our balance sheet as dry powder for future growth investments. We are disciplined and patient when evaluating growth investments, and we continue to look for opportunities to deploy capital to grow both of our businesses with value-accretive investments. Our strong balance sheet allows us to move quickly when we see good opportunities, and we have a history of executing when they arise. I want to add my congratulations to the Milwaukee Brewers, the world champions, the winners of the World Series last night in Tampa. Not only is it exciting for the city and for everyone involved with the team, it is exciting for our entire community and for our company because it reflects so well on Milwaukee, where we have significant investments. We are in the press around the world, and that can't help but be beneficial to our community and to our company. Before we open up the call for questions, I want to conclude my remarks by saying thank you to all the hardworking associates of The Marcus Corporation. I especially want to thank our associates at Grand Geneva that worked so hard on a holiday weekend to recover from the storm and continue serving our guests with excellence to deliver great hospitality. I don't want to ever take for granted what each and every one of them does to contribute to the success of both of our businesses. With that, at this time, Chad and I would be happy to open the call up for any questions you may have.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Eric Wold from Texas Capital Securities. Your line is now open. Please go ahead.

Eric Wold: Thanks. Good morning, and congrats on the Brewers. Couple questions, I guess I will do one on each segment. I guess, if you think about the theatre segment and the pricing environment, I know it comes up a lot given the consumer environment we are in and the tough economy. How aggressive are you being in this environment in terms of baseline ticket prices? Seeing any signs of resistance, and what are your thoughts early into how that could play out over the next few quarters?

Greg Marcus: You hit a hot button issue for me, Eric Wold. It is something that we watch very carefully. We are at market with our pricing. We watch what the market is doing. What we want is moviegoing to be a habitual experience, it is a momentum business. It is going back regularly. For that to happen, it has to be an affordable experience and night out. It remains so. Not only do we benchmark across, we look at all the different costs. We look at the costs, what people are charging to go to other movie theatres. We look at what people are charging to go to other out-of-home event based experiences, which obviously are much higher than going to the movies. We also watch the price of streaming, which has been going up. So we are comfortable with where we are. We believe that we also offer ourselves a variety of price points. The customer that wants that premium first-night experience and a PLF, well, we have no shortage of PLFs, as you know. Yet our Tuesday remains extremely robust, where we are offering the value customer value pricing at the concession stand as well as at the box office. I will tell you, we are probably not going to lead on raising the prices as high as we can. We are probably also not going to leave money on the table either.

Eric Wold: Got it. Helpful. Then on the hotel segment, I know you recently completed the major renovations, The Pfister a couple of years ago, the Hilton, and then obviously adding the short course to Grand Geneva. You talked about leaving your balance sheet strong and look at other return-generating investments. How much more room do you have, do you think, in the hotel segment with existing properties to make renovations or changes that would have a decent-sized return in terms of either small additions or changes you have yet to make at the properties?

Chad Paris: Hey, Eric, I'll take that one. In terms of balance sheet capacity, as I mentioned on the call, we have a lot of room. For us, it's really more about finding opportunities that have the right return profile. The hotel business can tend to be fairly capital intensive, so we're looking for really special assets when we do something new and acquire an asset. We're also looking at doing more of the joint venture type of structures as we make new investments so that we can deploy smaller chunks of capital into more opportunities and achieve some diversity in the markets that we participate in. We have a lot of room to do there. As you point out, our core assets, the three that we recently renovated, are all in really great condition. We're seeing very good uplift from those renovations, and the returns are playing out generally in line as we expected. We'll be thoughtful as other renovations come up at other properties over the next several years. There's always a cycle. We don't have anything major that's imminent like we just went through. Within the guidance on CapEx that we provide, there's always some level of refresh that's happening, and we're keeping our assets in good condition.

Greg Marcus: I'd also add, specific to the Grand Geneva, that is an asset that we're actually right in the middle of, or we're just beginning a planning exercise there to look how to really maximize what we have there. It is a really special asset that we've taken great care of and made investments along the way. We think there's going to be some opportunity for further, really good ROI investments, property that we know, in a market that we know, with land that we own. It's a pretty good combination. I think you'll hear more in the future about opportunity we have there as well.

Eric Wold: Perfect. Thank you both. Appreciate it.

Operator: Your next question comes from the line of Patrick Sholl from Barrington Research. Your line is now open. Please go ahead.

Patrick Sholl: Hi, thank you, and congrats on the Brewers. On the theatre segment, could you maybe talk about the mix of attendees versus loyalty members versus people that weren't in the program? When you get a surge of attendance, I guess any sort of success in onboarding them onto the loyalty program to help improve, maybe, your ability to reach them in the future. Just the broader retraining of the consumer and any sort of progress you're seeing on that process with the longer, more established windows. Thank you.

Chad Paris: Yeah, I can take the first part of that question just on loyalty, and I'll wrap into that our Marcus Movie Club subscription program. In the quarter, we did see a pretty meaningful uptick in loyalty members. I think that happens in any quarter when you have as robust of a slate that brings people out to the theatres who maybe haven't been there in a while. That was encouraging to see. We also had an uptick in the percentage of our attendance with Marcus Movie Club redemptions, and that's expected. You have customers who are earning credits every month. They may not be going every month, and so when we have a robust slate, you see a higher uptick in those redemptions. We think that's a good thing. We're seeing people use the program, and it makes it stickier, and they'll stay in the program longer and reduce churn in the program. Our experience has been that we're on a net basis. We are, I would say, slowly and steadily growing that program. We did not see a giant uptick in sign-ups in the quarter, but it's been more slow and steady progress, and that's in line with what we expect, and we have continued goals for that next year. Pat, can you repeat the second part of the question?

Patrick Sholl: Yeah. The second part was just on, I think you guys had talked about retraining the consumer to not wait for a movie to be available on streaming, and just more about that process with the significant increase in the number of films in the quarter and just the more solidity in the window.

Greg Marcus: I just think that's something that's going to take time as we go along, and the consumer starts to see, realize it's not available. The thing that we've found the most challenging, I think. There's two challenges with it, but the most is that this idea of a film being available at 17 days. Even though it's a premium video-on-demand customer, a transactional video-on-demand customer, a lot of people just get an email, and it says, "Available at home." They're not paying attention to when it's available. It just feels like it's at home, and they're thinking it's free when it really could be $20, $25 to rent it for a couple of days. Really, the first thing that the industry needed to do and is moving away from that, because that's very deleterious. We've seen data. This is the most interesting thing that I think. The data that is put out by the groups that do the research for the industry show that the propensity to buy transactional video-on-demand at that price really is about the same in week two through week eight. In other words, that customer is a specific customer that is buying in week two, and they'll be the same customer that's sitting there in week eight. Our position as an industry has been, look, if that same customer is going to be there, you're impacting a lot of other downstream customers when you put it out there in week two. If you could wait, you'll still have roughly the same number of transactional sales, and yet you will now increase the theatrical box office, which inures to your benefit. That seems like a win-win for us, and I think that the industry is coming around to that and realizing because they're seeing the same research that we see. That idea of pushing out that transactional window, as you see, has been going on, and that's, I think, very helpful. The next thing is we really need to get the time to what we call time to free, which is the time to streaming pushed out as well. Because that customer is also looking, and again, we think that the trade-off, and I think the data shows the trade-off of being able to have something in a theatre that does business, that catches the customer's eye, that ultimately, when it shows up as a tile on your screen, you're trying to pick what you're going to watch streaming is actually a good trade-off to push it off just a little while. Then again, make it a win-win for the entire ecosystem, not just for theatrical, not just for streaming, but to make the pie larger. That works to all of our benefits, and that's our goal when we, as an industry, push for longer windows.

Patrick Sholl: Okay. Thank you. If I could just get one question in on the hotel segment. Could you maybe just talk a little bit more about the group pace for 2027 and I guess how sensitive you view that being with the elevated travel costs with higher fuel costs and things like that? Thank you.

Chad Paris: Yeah. We're running ahead, as we shared in the prepared remarks, for next year. A lot of that group business, the fluctuations in pace and bookings is tied to the calendar of events in the markets that we're in. What really becomes the variable is the attendance at the events. So it's really tough to know this far out what type of impact continued high travel costs will have on participation in those events. We haven't seen events getting canceled, but it's more how well attended are they, and I just don't know that we have the visibility to make a call on that relationship for 2027.

Patrick Sholl: Okay. Thank you.

Operator: Your next question is from the line of Drew Crum from B. Riley Securities. Your line is now open. Please go ahead.

Drew Crum: Okay. Thanks. Good morning, everyone, and yes, congratulations on the Brewers. Maybe just start with the Theatres division, guys. Just looking at 4Q, what are the kind of primary puts and takes when thinking about your performance and specifically admissions revenue relative to the industry?

Chad Paris: Yeah. When we look at the composition of the mix of films and think about the big films in the quarter, a couple of things to keep in mind. One, here in October, the industry's up. Our primary markets actually have been impacted somewhat by really two things. One is this Brewers run has been on weekends for the home games, and so that actually will have some modest impact on our theatre business while it benefits the hotel business. It's happening in the smaller part of the quarter. So a net positive for the company, but it'll impact our performance relative to the nation somewhat, at least in the month of October. On mix of films, just a couple of things stand out. Last year we had "Wicked" in the fourth quarter, did very well on that film. When I look at the big films in the quarter this year, we've got a couple of family films in "Hexed" and "The Cat in the Hat" that traditionally family content plays well in our markets. A film like "Avengers," we should get our natural share on. I think "Dune" tends to play a little bit better on the coast than it does in our part of the country. So those are really the puts and takes. I think- regardless, it's going to be a very robust fourth quarter box office, and it looks like October up, November likely down year-over-year, with December being up pretty meaningfully.

Drew Crum: Got it.

Chad Paris: Yeah.

Drew Crum: Helpful.

Greg Marcus: I'd even. Go ahead. just add a little color to what Drew said, just some color on the October movie slate. Not only is October a quieter month for the industry, it generally doesn't play to our strength because you're going to get a lot more of the Oscar contenders, art film, things like that, which we do okay on, but it's not our bread and butter. I think historically it's less impactful given where we are.

Drew Crum: Got it. Okay. Then maybe one more. I know you guys don't provide quarterly guidance, but we can kind of back in to what CapEx should be for Q4. What are the other kind of key swing factors when thinking about your cash flow generation and your ability to grow free cash flow year-on-year in the fourth quarter? Thanks.

Chad Paris: Yeah. Good question. On fourth quarter CapEx there is no doubt there is a lot of with the guidance, there is a lot of CapEx to be spent in the fourth quarter. But seasonally, given the timing of our projects and when we try to get things done coming out of the summer season, there is a lot that's going to get done in the fourth quarter. So I do expect that we'll get to the range that we disclosed on CapEx. On the rest of free cash flow, we'll see just normal seasonality in working capital in our negative working capital, which tends to be a source of cash as we ramp up the business at the end of the year in theatres. Then there's the big unwind in the first quarter. So those are the puts and takes, and whatever your outlook is on earnings, that'll obviously fall through.

Drew Crum: Got it. Okay. Thanks, guys.

Operator: As a reminder, if you would like to ask a question, please press star one to raise your hand. If you would like to withdraw your question, press star one again. Your next question is from the line of Mike Hickey from StoneX. Your line is now open. Please go ahead.

Mike Hickey: Hey, Greg, Chad. Great quarter, guys. Congrats on the Brewers. Awesome. Just curious, you guys both sort of hit on the strength of your balance sheet here and mentioned growth investments. I think you unpacked that a little bit, Greg, on the hotel side. But just sort of curious if you could dig in a little bit on what you're thinking on the, as much as you can, on the theatre side, if M&A is becoming more of a possibility. Obviously, since the recovery, it really hasn't reset itself, but maybe it's time. And also, how you're thinking about premium amenities. We talk a lot about screens, but I know you've been testing seats as well with D-BOX and sort of curious the early learnings there and maybe some consumer feedback.

Greg Marcus: Well, as it relates to, start with M&A. We're starting to hear stuff is out there, but it's not much. It's such a weird industry in terms of M&A, in terms of just when people want to sell. We've got to wait for that time. It's not like there's this institutional market where people are trading assets all the time. We stay connected to the industry. We've been in it long enough. We pretty much know most all the players, and we're active in industry leadership and industry participation. Should stuff become available, it's stuff that we will look at, but we will then remain disciplined, and if it makes sense, we'll do it, and if it doesn't, we won't. But we will continue to get into how do we get more out of our box? That's the question we ask ourselves every day. That's something we can control. We can't control the M&A market as much. Not at all. You're right. D-BOX, we don't have it going yet. It's just starting to get rolled out, so I can't give you any feedback on that. We've been doing ScreenX, and we're pleased with our initial results from the screen. We had one for a while. We've added three more. We're pleased with the results. I think that the feeling on ScreenX is there's a customer that really likes it. It is not for everybody, but it appeals to a. For me, I actually personally am a big fan of ScreenX. I love it because one of the things that's very interesting about ScreenX is that the sidewalls, and for those who don't know what it is, basically it's a three-screen setup where you have a screen in front of you and then two screens surrounding you, one on each side. It's not always running. It doesn't run continuously, which is the thing that I like the most about it because my senses can only take so much assault. I like that there's a pause, and it's used for when it's perfect. I saw the Mission: Impossible biplane scene, and it was just incredible to watch it sort of shoot around the theater. When you mix that with great sound, it's a great experience, I think. We have a customer for it, and the ones that like it are very enthusiastic about it. Our biggest question is going to be how do you price it, and where else do we go with it? We'll continue to figure out how do we get more out of our boxes. It's things like that to do that. I like D-BOX. The one good thing about D-BOX, and what we like to see is that it gives you sort of a premium format inside of a standard, which gives you great showtime flexibility. One of the challenges we face with premium formats is making sure that we offer in this discussion that we had a little bit earlier about what's the right price to charge somebody. Not every customer wants the PLF experience. In fact, most of our business really does come from a standard screen. But showtime, the customer makes their decision to go to the movies based on showtime primarily. That is generally their first decision. Offering the showtimes is really important in having them in a variety of formats. When you get D-BOX, you're able to offer a premium experience at the exact same time you're offering a standard experience. That is our thesis, and we would like to see that play out.

Mike Hickey: How does the family demo, which is really strong for you guys, how does that index to D-BOX? I mean, normally for a more expensive PLF, I think families tend to avoid it, but do families adopt more, I guess, the premium seating than they would the screen?

Greg Marcus: I do not have the answer to that yet, just because we do not have the experience with it yet.

Chad Paris: Mike, we are a few weeks into the test, but those are exactly the types of things that we are trying to understand and learn about how it will play in our particular circuit.

Mike Hickey: Okay. Last one from us, guys. When you look at the success of 2026, I kind of want to ask you, Greg, what surprised you the most? But I think maybe the question is, what is repeatable? You mentioned a lot of it today, whether it is the numbers of the movies, the quality, the windows. I do not know if there is a trade-down or an economic consideration. You have mentioned before the youth, and certainly there has been a lot of momentum. But I guess as you look at sort of the attribution to the growth this year, what would you call out, and what do you think is most repeatable in 2027? I think whenever you have a breakout success like this, I think the challenge is obviously the durability of it. That is sort of part one, and then part two, when you look at the 2027 slate, and you mentioned the films, but a lot of family films, "Frozen 3," "Shrek 5," "Minecraft 2," maybe "Star Wars: Starfighter," but it really seems like a setup that you guys should index really well on. I am guessing just how Hollywood plays the trends. I am sure we will have plenty of horror movies, too.

Greg Marcus: Yeah. What we need is we need some comedies. We need more comedies from Hollywood here. But you are right. You are also right in that the, we never know how things are going to go year to year, month to month, quarter to quarter. This is a very tough industry in that regard to predict. But I think the most interesting thing that I think bodes well for our industry over the long term that is repeatable is the amount of the kids that are back. When we look at the segmentation of who wants to go to the movies? The audience that is the most robust now is the younger audience, which I would like the older audience back, and if we can get some more dramas and comedies into program sort of the shoulders, so to speak, not necessarily in terms of time, but sort of the idea of the demo, the shoulder demos, to get the adults off the couch, that would be great. But having that long-term customer, I think, a kid who is young, who starts to build that habit of going to the movies and says, "I love going to the movies." Now, in the long run, that is great for the business. Again, we are seeing this data, this data that I talk about that we have been exposed to, that we see. We have seen over time this index of this question that they ask in the survey, "Do you want to see a movie at home? Where do you prefer? In a theater or at home?" After the pandemic, it flipped in favor of at home, but it started to come back. This last survey, they showed us to it in cohorts, and what they showed us is the kids, their propensity to see movies in the theater versus see in the home has flipped back to the old relationship where the theater was preferred over the home. I think that is really comforting, great data that should have some durability over time. Will it have its periods of ups and downs over time? Sure. Of course, it will. It depends on the product, the quality of the product, who it's aimed at, who it appeals to. But seeing that propensity, that desire to go at a young age is, I think, very exciting for us.

Mike Hickey: I guess I saw on the 2027 slate, Greg. Looks pretty good. You must be pretty excited, just given the mix of films.

Greg Marcus: Yeah, I always wait to see what shows up, then someone says, "What are you most looking forward to?" It's whatever is the big surprise. There will be a big surprise.

Mike Hickey: Yeah.

Greg Marcus: I mean, let's just think about the surprise of the last month with the Elizabeth Holmes movie. Where did that come? All of a sudden, everyone's supposed to see a three-hour documentary. Great. I'm looking forward to seeing it.

Chad Paris: Mike, just on 2027, I think you're right to point out as it relates to our geographies and the films that play well, 2027 looks more favorable, and we're encouraged by that. We think we're well-positioned.

Mike Hickey: All right. Thanks, guys. Good luck.

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

Chad Paris: All right. We'd like to thank you once again for joining us today. We look forward to talking to you next in late February when we release our fiscal 2026 fourth quarter results. Until then, thank you and have a good day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.