MCS

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 five 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 1st, and as a result, our first quarter results faced the headwind of having five 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 five 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 five 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 five fewer operating days negatively impacted theater's 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%. 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 day part ticket mix. On average 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-themed 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 cost 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 seven owned hotels decreased $600,000, or 1.1% compared to the first quarter of fiscal 2025. The five 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 hotel's 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 U.S., 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. 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 five fewer operating days, lower other revenues resulting from the weaker ski season and the non-repeating group buyout in the prior year, which included high margin rooms and banquet and catering business and higher benefits costs.

Shifting to cash flow in 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 one-time 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 dollar 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-$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 dollar improvement in a 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. Hotels continued to grow RevPAR and revenue without 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. We're pleased to be sharing these results with you. I'll start with our theater division. Our theater division got off to a much stronger start than last year. 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 product 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 and 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 continued 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. 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. We remain very optimistic about the coming attractions. The momentum from the first quarter continued into April with the blockbuster success of The Super Mario Bros. Movie and last weekend's record opening of Michael, getting the second quarter off to a solid start. We kick 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 Kombat II, Star Wars, The Mandalorian & Grogu, Supergirl, 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 3, 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. We remain very positive and optimistic about the long-term future for the industry and our theater business. Excuse me. Moving to our hotel and resorts division.

You've seen the segment numbers. Chad shared some additional detail on the performance metrics, including our outperformance to our competitive sets and to upper upscale hotels nationally. We have made significant investments in several of our hotels over the last three 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 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 and group rooms business. While we did not see these events repeat this year, these or 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 two factors.

First, all of the Hilton Milwaukee rooms are back in service, resulting in less rate pressure with more room supply. This contrasts with last year when we were able to create some rate compression in the Milwaukee market with the reduced available room count due to the renovation. Second, at Grand Geneva, the weaker ski season resulted in weekend transient demand that was softer and resulted in lower rates compared with 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 prove that once again this quarter. With that, at this time, Chad, I'd be happy to open the call up for any questions you may have.

Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star and then one on your telephone keypad. That's star followed by one on your telephone keypad. Your first question comes from the line of Drew Crum of B. Riley Securities. Your line is now open.

Okay, thanks. Hey, guys. Good morning. 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, you know, the overall receptivity?

On the part of your patrons of 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. You know, we see a number of things. One is, you know, the QR codes are being very well accepted, 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. You know, one of the things that can happen is if you order and you don't sit in the right seat, your food is delivered to the seat that you ordered it to, you don't get your product, everybody's unhappy. We were seeing better efficiency, if nothing else, with people going to their seat because the QR code is linked to their seat.

The food arrives, it arrives hot, and it just makes the whole operation much better. That's very helpful. You know, the other thing that we've seen, and I don't have a number to give you yet, but we know that, I think we've talked about before, and one of the, you know, 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. We primarily, that comes from, you know, that never missing on, you know, whether it's an upsell. You know, if you've got, you know, 10 people deep in a concession line, you're just trying to get through a Friday night.

You may not be, you know. You may not always try to upsell that medium soda to a large. Digital, it never misses. We have a thing we can't do even live. It's a last chance offer, last time offer we call it. Before you check out, "Oh, you know, do you want popcorn with that soda? Do you want, you know, whatever it might be with that." A dessert with your food. We're able to do that suggestive selling and upselling much better digitally. We feel with that and then making the whole experience more frictionless for the customer, we're gonna have an opportunity to increase our concession sales.

Yeah, Drew, on the concessions, per cap increase, we said last quarter, you know, we're trying to get to low single digits. We were at 2.4% in the quarter. I think that kinda 2-3 range is probably about right.

Mm-hmm

In terms of the way we're getting there, we're trying to get to that 3% with just inflationary pricing and growing another one point or so with the results of some of the initiatives that Greg's just talked about, by increasing it in incidence.

Mm-hmm

By increasing basket size. I think that's a reasonable number for purposes of modeling.

Got it. Okay. Thank you. Very helpful. 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, was there anything else that drove the divergence between the two?

There was. The one item that sticks out aside from the days difference.

Mm-hmm

You know, some of those days come between the holidays, and we actually do get a fair amount of F&B business in that period. The all-group hotel buyout that we had.

Mm-hmm

On 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 three years earlier. It's on its own cycle, and so that had a heavier F&B impact than we normally would have had.

Got it. Okay. Thanks, guys.

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

Hey, Greg, Chad. Congrats, guys, on a great 1Q, thanks for taking our questions here. Just a few. First on windows, Greg, good to hear from you that you're excited. I think, you know, last year there was some big plans, I think we felt stuck too on windows moving anywhere positive. Just curious how impactful you think this new windows is, sort of, when you think the consumer's 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.

Yeah. Look, I'd start with, you know, what's the word that in the finance community? The trend is your friend. You know, I'd say that the trend is our friend here. It didn't just happen overnight. I credit, you know, Michael O'Leary at Cinema United with really starting to really raise the issue publicly a year ago at CinemaCon and say, "This is really important." This is not something that happened overnight. It's an education, it's an understanding, it's the evidence that we see on, you know, the importance of a window. Let's be very clear, you know, the studios control the window, the studios are not doing it, you know, we, you know, it's not a charity, the theater business.

They know that, you know, a health of theatrical business is good for the overall ecosystem. It maximizes the value of their product. That whole concept that we've talked about many times, you know, windowing. You know, selling the same thing to the same person over and over again. Well, if you mash those windows too tight together, you lose that second or third or fourth sale. If you create some space. You know, not only do you get people who pay more because remember, the other concept of windowing that's important is a high that you start with your highest per capita set of eyeballs.

To the extent that you, that you trade, you know, somebody paying, you know, $12, whatever it might be, to, you know, putting, you know, five people in a room splitting $20, it's a much better deal to catch those per capita eyeballs, if nothing else. Then you get that second sale on top of it or that third sale when somebody consumes it in a, in a transactional video on demand or a streaming video on demand environment.

The other thing too is you don't have people saying, "Well, I'll just wait for it at home." We've been very, you know, very clear to say that that very short 17-day window was one of the contributors to this idea that. 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 email saying, "Hey, you know, get it now." It doesn't say it's. They maybe don't pay enough attention, and it just feels like it's coming so fast. Stretching that out, continuing to educate the customer that it's stretched out is really important.

Universal in this, 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. You've got Tom Rothman at Sony saying it's real, theatrical's important, and for theatrical to be healthy, it has to have a window. As Steven Spielberg said, 45 days is a good start, but how about 60 or more? I would presumably say, you know, an easy way to explain that, I think, is my mantra should be two and five. What's two and five? Two months for transactional, five months for streaming, video on demand. I'm for the two and five model.

Very simple to understand for everybody. I think it will be good for theatrical. What's good for theatrical will be good for the overall ecosystem.

Nice. Thanks for the color, Greg. 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. Also curious about the Infinity vision. Looks like sort of a mixed reception from operators on Disney's decertification.

You know, on the, let's start with the seating. Any new seating stuff that you? You know, there's D-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 gonna be able to do. We've had others experiment with just charging more for premium seats, I don't know that that went so well, but on the inside. I don't, you know, they'll be on the margins maybe a little bit here and there, but nothing earth-shattering. I mean, the recliner investment we made was so significant, you know, for us it was great. We made ours with, you know, $2,015.

You know, that's, that I think has been very helpful for us. The, on the, on the Disney thing, you know, I'm not familiar with the exact details of it. Although look it, you know, the ability to brand PLFs, it's very interesting if you think about it. I think that the, you know, 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, you know, double IMAX in size. You know, on 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.

You know, when you speak with one voice, you speak louder. You know, everyone getting together to speak with one voice is much more effective. 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. 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. Post 1Q after a strong quarter, I'm guessing you're more enthusiastic, but love to hear from you and then how you're thinking about carrying that into 2027. Thanks, guys.

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

Yeah. I wanna add one thing, Mike, on your question about premium large format. That is, you know, one thing let's not lose sight of, that is still 80% of our business is regular, you know, traditional screens. You know, theatrical has always been known as the, you know, the least expensive form of out-of-home entertainment. It's a cheap date, so to speak, I think we always have to remember that. I think in our theater, specific to our platform, we have probably the highest incidence of PLF in the industry. Yet we also have a very robust discount program with our Tuesday program and our Marcus Movie Club.

I like to think about it as we've talked about this before, learnings from our hotel business. You know, the right price for the right customer at the right time. Our averages look sort of in line, but I think that we offer a real wide breadth of opportunity for our customers.

Great. Thanks, guys. Good luck.

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

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

Yeah, I can take that one. 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 a 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%-15% on rates after we do major rooms renovations like this. And that's across our experience on the three major renovated properties, the Pfister, Grand Geneva, and now Hilton Milwaukee.

There's no doubt once the customer knows that 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. 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, you know, making a choice on what experience they wanna have. 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. You know, we're able to capture a premium because there is demand for the renovated product. I would believe that, you know, others are hurting from that loss of demand, and they're adjusting prices, you know, to try to capture volume.

Joe, the other thing too that could happen is it may not look though 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. Our rates could go up, and you can't see it specifically in like a STR report because they don't divulge the specific hotel's rates. You know, 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. Just a last question, kind of a follow-up on the free cash flow question from earlier. You know, given kind of the understanding there's kind of a relative lack of, you know, transaction activity in both the exhibition and hotel segments, I guess, you know, 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, you know, transaction activity picks up, or are you kind of really comfortable where your leverage is and, you know, possibly leveraging up for the right opportunity?

Yeah, I think we tend to have a very balanced approach. We're opportunistic when we see, you know, really attractive opportunities to, you know, buy back shares. We've leaned in, and we've done that. 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. You know, we have seen across both businesses some activity and, you know, so far nothing has resulted in deals, you know, we're trying to maintain a balance.

Got it. Thank you both.

Your next question comes from the line of Patrick Shull of Barrington Research. Your line is now open.

Hi. Thanks for taking the question. I was just wondering if you could maybe talk about how you're evaluating the lease footprint of your theaters and maybe just in general kind of with the box office expectations for 2026 and 2027, how you kind of just evaluate the overall screen base both within Marcus 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, I 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 leased locations as well. As leases mature, that gives you the opportunity to, you know, reevaluate investment in those properties and renegotiate terms, which, you know, tends to be necessary because many of the leases were negotiated on a pre-pandemic box office. That's an ongoing process.

Historically, we've had a preference to own real estate, but we've certainly done M&A where, you know, often you're looking at acquiring leases as part of the deal. 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, how we look at it.

You know, overall, you know, 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, you know, leads me to the point of... We talked earlier about windows. There's probably two factors that will be very helpful to getting the business, you know, in a good place, and that is in a better place, and that is, one, it would be to have windows extend. The other is getting enough product in the pipeline and enough product on the shelves. Right now, you know, we've got some room on the shelves.

To the extent that we can get a full year's calendar's worth of films, you know, that will drive, you know, more sales, and then those leases will start to look better. Otherwise, people will be trying to figure out, you know, what to do with some of the space in their theaters, you know, to some of the bigger ones. We are different. We've been very conservative about how big we build our theaters for the most part, we don't see that as much.

Okay. Maybe just on concessions, to the extent that, like, the film slate is a, you know, 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, you know, as the film slate kind of like broadens out, do you think it would be similarly supportive of concession per cap? Do you think that could, as it maybe expands out, would that be, you know, like a headwind or is that, you know, probably just too soon to tell?

Your question, Patrick, is specifically around, about merchandise?

Broader concession activity.

It all depends on the mix of films. You know, the right mix of films will drive better per cap film. That really is what it comes down to in any given year. I think 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.

Okay.

Right. Because merchandise is a component of our concessions and food and beverage per cap, you know, merchandise tends to lend itself to more event-driven type of product. 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 it gets back to Greg's point on product mix being part of this.

Okay. Thank you.

Thank you. 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.