• Consolidated Revenue: $233 million, an increase of over 11% year-over-year.
• Consolidated Operating Income: $32.8 million.
• Adjusted EBITDA: $52.3 million.
• Net Earnings (excluding convertible debt impacts): $24.8 million or $0.78 per share.
• Theater Division Revenue: $143.8 million, up 13.6% year-over-year.
• Comparable Theater Admission Revenue: Increased 9.5% over the prior year.
• Average Admission Price Increase: 2.6% year-over-year.
• Concession, Food, and Beverage Revenue: Up nearly 14% with per capita increase of 7.9%.
• Theater Division Adjusted EBITDA: $33.2 million, a 24.3% increase year-over-year.
• Theater Division Adjusted EBITDA Margin: 23.1%, 200 basis points higher than last year.
• Hotels and Resorts Division Revenue: $88.7 million, an increase of 8.1% year-over-year.
• RevPAR Growth for Owned Hotels: 9.8% increase year-over-year.
• Hotels Adjusted EBITDA: $23.1 million, an 18.7% increase year-over-year.
• Cash Flow from Operations: $30 million, up from $21 million in the prior year.
• Total Capital Expenditures: $18.5 million, compared to $10 million in the prior year.
• Share Repurchases: Approximately 693,000 shares for $9.7 million.
• Total Liquidity: Over $248 million.
• Debt to Capitalization Ratio: 27%.
• Net Leverage: 1.7 times net debt to adjusted EBITDA.

• Warning! GuruFocus has detected 5 Warning Signs with MCS.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Marcus Corp (NYSE:MCS) reported a record third quarter with consolidated revenues of $233 million, marking an over 11% increase year-over-year.
• The theater division exceeded pre-pandemic revenue and profitability for the first time, with a 13.6% increase in total revenue compared to the prior year.
• The hotel division benefited significantly from the Republican National Convention, driving strong revenue growth and profitability.
• Marcus Corp (NYSE:MCS) successfully repurchased $13.5 million of convertible senior notes, simplifying its capital structure and eliminating potential future dilution.
• The company resumed share repurchases, buying approximately 693,000 shares, reflecting confidence in its business and returning capital to shareholders.

Negative Points

• The repurchase of convertible senior notes resulted in a combined negative impact on net earnings of $1.5 million for the third quarter.
• Despite strong performance, the theater division's attendance was still 22% less than the third quarter of 2019.
• The hotel division underperformed its competitive set by 2.6% points, primarily due to a higher mix of contractual airline crew business at lower rates.
• October started slower than expected for the theater division, highlighting that not every big-budget movie performs well.
• The market for hotel transactions remains slow, with high interest rates impacting potential acquisitions and limiting growth opportunities.

Q & A Highlights

Q: Greg, do you think Marcus Corp is benefiting from a consumer trade-down due to inflation, given the value proposition of your pricing? A: Gregory Marcus, Chairman and CEO, noted that while it's hard to pinpoint, historically, theaters have performed well during recessions as they offer affordable entertainment. He acknowledged that a combination of factors, including product mix and operational changes like value promotions, likely contributed to their success.

Q: How are you approaching M&A opportunities, and do you feel positioned to be opportunistic? A: Gregory Marcus stated that Marcus Corp is open to M&A opportunities and will approach them thoughtfully. He mentioned that while there are some rumblings, many potential sellers are waiting for stability before making decisions.

Q: Can you estimate the impact of changes to your value Tuesday and $7 matinee promotions on your performance? A: Chad Paris, CFO, explained that while it's difficult to quantify the exact impact, customer feedback has been positive, and these promotions have driven attendance. The changes will be lapped in May next year, suggesting continued benefits in the interim.

Q: What factors would influence your decision to pursue hotel acquisitions, and how do interest rates play into this? A: Chad Paris indicated that the market for hotel transactions is slow, partly due to high interest rates. As rates potentially decrease, it might encourage more transactions, but currently, there are limited attractive opportunities.

Q: Have you introduced more merchandise or collectibles in concessions to drive stronger per capita sales? A: Chad Paris mentioned that while there isn't a significant increase in standalone merchandise, items like souvenir cups and popcorn tubs associated with films have helped drive concession sales.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.