Good morning, and welcome to the Marcus Corporation First Quarter Earnings Conference Call. My name is Stephanie, and I will be your operator for today. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today is Greg Marcus, President and CEO; and Doug Neis, Executive Vice President and Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I’d like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you, Stephanie, and good morning, everybody. Welcome to the fiscal 2020 first quarter conference call. As usual, I do need to begin by stating that we plan on making a number of forward-looking statements on our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act. Our forward-looking statements may generally be identified by our use of words such as we believe, anticipate, expect or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected, including, but not limited, to the adverse effects of the COVID-19 pandemic on our theater and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness and the duration of the COVID-19 pandemic and related shelter-at-home and social distancing requirements and the level of customer demand following the relaxation of such requirements. Our forward-looking statements are based upon our assumptions which are based only upon currently available information, including assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic; the assumption that our theater closures, hotel closures and restaurant closures are not expected to be permanent or to reoccur; the continued availability of our workforce following the temporary layoffs we have implemented as a result of the COVID-19 pandemic; and the temporary and long-term effects of the COVID-19 pandemic in our business. Listeners are cautioned not to place undue reliance on our forward-looking statements. Additional factors, 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…

Thanks, Doug. As Doug noted earlier, I’m going to focus my remarks on where we are today, what we have done to date and continuing to do to manage through this crisis and what some of our plans are for the future. As you can imagine, there are a lot of unknowns yet about what the future months will look like, so our plans will continue to evolve as the situation unfolds. The fact is, that while the COVID-19 pandemic has affected everyone, our two industries, movie theaters and hotels, are among the hardest hit. Within this unprecedented environment, our priority, as it has been throughout our history, is the safety and well-being of our associates, customers and communities. This has guided everything we have done so far and will guide us in the weeks and months ahead as well. As leaders, we always try to anticipate the challenges and opportunities that lie ahead and plan for them, but I don’t think anyone could have imagined a day would come when we would be forced to temporarily close all of our movie theaters and hotels. I’ll briefly share how we are managing through this crisis in a minute, but first, I need to acknowledge our team. Extraordinary times call for extraordinary solutions and extraordinary leadership. Our executive team faced the challenges head-on and has worked literally night and day to develop and execute strategies that will get us through this crisis and put us in a strong position for continued growth over the long term. We’re very fortunate to have such an experienced and dedicated leadership team. We’re working to strike a balance between taking care of our people and helping to slow the spread of the coronavirus, while, at the same time, making decisions that are in the best,…

And we’ll go first with Jim Goss with Barrington Research.

Good luck to all of you through this crisis. I was wondering if you could talk a little more about the nature of the reopenings on the hotel side versus the theatrical side. It would seem like the theaters could pretty much open simultaneously at some stage, but the hotels are more likely to be uneven, just as your closings were uneven. And maybe I’m wrong on that, but I wonder if you could talk about that. And also maybe talk about the nearly contactless food and beverage, maybe go into a little more detail on just how that’s being executed.

Sure. Well, look, I think that there’ll be, I think, uneven – yes, I think that’s the word. I think they’ll be generally uneven, depending – it depends on the market. So if you look at a market like Milwaukee. Might we open all three hotels at the exact same time? Probably not. We might – we’ll phase in as demand – and that’s just unique to us, right? As demand starts – as demand builds, we’ll be able to respond to what’s coming. And frankly, each market will be separate in that regard. Theaters, you’re right, a little more homogenous. However, still, I think that we’ll be – we won’t open everything all at once. I don’t think we’re just going to flip the switch because we’re going to be testing and trying, again, things to see how they’re working, to understand, again, to take the efficiencies of demand. We might not have every complex open in the market right away, but it would move faster than hotels, I think. But frankly, I think we just don’t know, again, all demand dependent. Speaking to your question about the contactless experience. Yes. We – so we’ve got this focus on what we call low to no contact, how do you make that whole experience in really either of our businesses. And they both lend themselves to it with technology, a low to no contact experience for the customer. In the theater side, you can start off and you can order your ticket on your phone, so you don’t have to go to the box office. You can order your concessions on your phone. It’s – we’ve been working on it now for, I don’t know, maybe for well over a year. But I think about nine months ago, we were…

Okay. Maybe my last question then would be – the $64,000 question is your opinion about customer attitude toward taking the “risk of attending even if you are socially spaced” and whatever approaches you might have to mitigating or reducing those concerns. Are there – like do you intend to funnel people through a channel and take their temperatures or something of that nature? Or are there other things you have in mind? But I think you’ve gone through quite a bit already. But are there any other opinions you have about the attitude people might have about coming back to even a supposedly safe environment?

Yes. We – first of all, it will be about – there’ll be a number of things that we’re going to do. We haven’t decided everything yet, but we know that all of our associates will be wearing proper PPE in terms of having the masks, gloves, and there’ll be a very visual sanitation process going on so that people can see that this is a clean environment. This is – so that – so from our – and our employees’ temperatures will be taken. They will – I mean when they come to work, the – so that we know that our employee base is going to present a safe experience for our guests. We also offer masks to our guests if they want them, and there’ll be – and there’s other things, too, that we’re looking. And I’m sure at the end of the day, look, the one thing – we’ve seen some survey work and it basically says half the people will pretty much come back, are comfortable or at levels – others showing what experience and the time that we’ve created a safe environment for everybody. The – so I think that that’s how we’ll get there.

All right, well thank you very much. I appreciate it.

Next, we will have Mike Hickey with The Benchmark Company. Please go ahead.

Greg, Doug, hope you guys are doing good here, definitely unprecedented challenges. But look, solid execution from your team. So tough work, but good job. The – I guess as you think about reopening here, can you give us some perspective on revenue or attendance that you read from your theater and hotel segments be cash flow positive?

Mike, I’ll start with – so on the hotel side, and this is – this kind of follows on a little bit as well to Jim’s earlier question. There is not a one-size-fits-all answer to that question. And it was evidenced by the fact that we close – we didn’t close them all down initially as well. So a property – a big-box property with lots of outlets, et cetera, functions differently with a different cost structure than a property that’s more select service like the AC in Chicago as an example and et cetera, et cetera. So each of our eight owned properties and then you get into our managed properties as well really are different animals, and so our team is really focused in on a property-by-property basis what those metrics might be. Keep in mind that when we close, and a lot of times, people ask us about occupancy. And while certainly occupancy is important, RevPAR is more important. RevPAR is the combination of rate and occupancy. And so we’ll be doing – and we are doing, and we will continue to do a lot of analysis. And we’re in the process of really trying to get a good handle on that right now to understand for each property what the right RevPAR, what the right occupancy levels need to be in order to be – in order to reach that point where it’s incrementally time for us to be opening up. And so it really will be a hotel-by-hotel decision and market by market. On the theater side, look, I mean, you’ve all heard the statistics. I mean the “occupancy statistics” that are sometimes attributed to the theater industry that talk about total occupancy be at 20%, give or take. I mean I’ve heard 20% to…

Because another thing, too, to build on that, Doug – to build on that just a little bit is going to be just, again, that we will react to what’s coming in the door. In a hotel, if it’s a certain percentage, if we’re doing a certain AER and occupancy, we will have to have a – we will provide a service that is commensurate with what’s coming in, and it may not be the service that we had before but still a high level of service. But it would just depend on, as I said, on what we’ve got – what right side of the ship to what’s coming in. And by the way, just on the theater side thing, just because – to make it more clear in case I wasn’t clear. To go back, the reason – the experience we were talking about with the recliners is since we were among the first in line of our markets to put recliners in, what we saw, first, was that big share shift. And while there was only – as that share shifted, there was only a certain amount of seats, even when you had all of them going. And in that, we found people, well, okay, they came later, they came earlier, they found other shows to go to so they can get to see what they wanted to see. So in that regard, if there’s excess demand, we think it will slide into these other show times or days.

The – appreciate that, guys. The – I guess, again, on your reopening, you mentioned increase in demand. I guess that’s not impossible to measure when you’re closed. You can look at economic considerations, slate, et cetera, peers. But when you think about reopening, obviously, there’s an expense there. Of course, you anticipate inflecting and being cash flow positive. But I guess how do you factor in what appears to be sort of the real possibility of a second wave that – not necessarily would close you down but could sort of compress your attendance or your occupancy? And so does that – is there a way to measure that? Or how do you sort of balance that consideration into your reopening process?

Well, I guess I would say that we don’t – it’s really hard to have any idea what that might look like or when that might come or will there be a therapeutic before that happens. I mean what – that’s so hard. So for us, and this is where I’ll pass to Doug as to say, we want to make sure is that we have the balance sheet to be able to work through whatever that might be because it’s just – that’s the unknown, and that’s why our balance sheet is the way it is. And I’ll let Doug take it from there.

Well, the only thing I’d add, Mike, is that – and it also harkens back to some of our comments earlier is that we see technology as being an important part of this and because that can also help from a cost perspective and a cost structure perspective. We were focused on that before this happened. Before this all happened, what did you hear from us call after call? Our number – our biggest opportunity was to deal with labor costs and shortage of labor and just, in general, labor costs and rising labor costs. Well, the fact of the matter is, is that technology could help us in this situation, staff properly and have a cost structure that still allows us to have it be – make sense for us to be open and operating and profitable ultimately.

Last one for me on that point, assuming we get back to sort of a more normalized future, which I’m sure we will. And you sort of used this disruption to embrace change with technology. What – is this meaningful to sort of your future profitability profile compared to what it’s been historically?

Mike, again, I mean, it’s – we don’t know. I mean the fact of the matter is, is that if a larger percentage of customers embrace ordering their food, for example, their concessions, that certainly could impact how we staff, but we haven’t – I mean, we have – I don’t have numbers to share in terms of saying that, well, if all of a sudden, 20% or 30% or 40% or whatever the percentage is, but we certainly think that it’s – that, that would be overall helpful, and we thought that was the case before this happened.

And that’s why we were developing the software we were developing. And I do think that we’re ahead of a lot of the industry, actually, in this and that we were – just because of the labor markets. And we were like, yes, we got to – we need to be able to employ technology to the best of our abilities, and so that’s why we were in a position actually right now to be able to literally flip the switch to say, okay, okay, all of our theaters, you can order online. We had to put a little bit of technology in some of them. But for the most part, we’ve been thinking that way. So it’s just accelerated that.

Thanks guys.

[Operator Instructions] We will now take Eric Wold with B. Riley.

Thank you. Good morning, Greg. A couple of questions, not to harp on it. I think some of the same ones have been asked every which way to Sunday already. But I guess on the – on kind of the reopening plans of hotels, I guess trying to understand kind of the thought on how you’d make the decision because, clearly, you’ve got to turn on the switch to begin accepting reservations for a certain date before you may know what demand is starting on that date for hotel occupants. So I guess are you looking at when flights start kind of getting rebooked again, when events start kind of coming back into play in Milwaukee and other markets? What kind of gets that decision point to when you want to flip on and start taking reservations? And then how easy is it to initially staff a hotel at low levels? Clearly, you can open half the floors and offer half the rooms and kind of commensurately kind of bring in half the cleaning staff and hotel staff, et cetera. But how easy is that to do versus a theater?

Well, it depends on – well, let’s see, how will we know? That is the big question. How do we know when the right time is. I think, look, we’ll start to – as the economy start to open up, and this – we will start to see a demand for travel. And you can look at the other countries to see sort of as they open themselves up sort of what that curve had looked like, so we’ve got some level of guidance that will be a part of that. It will then also have bearing on where these properties are. One – so for example, the Grand Geneva is a – is really a drive-to property, right? So for us, we actually think that as people become comfortable with traveling – and what we do believe that leisure is going to be the first travel to come back, right? So that’s where we’re going to be looking. So as the leisure guests says in Chicago or Milwaukee or in other sort of Mid- to Western areas around yours is, I want to – if I could just get away. I’ve been locked in my house for the last number of months. I want to get away to just take a couple of days, go somewhere. A resort like the Grand Geneva is actually easy to get to. You don’t have to get on a plane to go there. And for the most of our – for most of our properties, they’re not in gateway markets. So we’re not international markets, so we’re not sitting there waiting for international flights to book up again. So I think that there’s going to be a fair amount of emphasis on drive-to business. And again, it starts with leisure. But we’ll – and again, we sort of – we’re just going to have to wait and see and watch and see as the economies open up. And as I said, we can use guidelines, such as what’s come out of Asia and Europe as they’ve started to reopen their economies and their lodging facilities. It’s a gradual growth, but it does grow into a – you start to see business show up again. And then, I’m sorry, was that – what was the other question?

Just kind of on the ease of operating hotels with lower staffing, yes.

The ease. It’s not easy, but I know our teams are working very hard on it and trying to figure out what is the right amount of staffing to be able to put in place as we start things off. That’s – we won’t have – for example, we’re not going to have it first as much banquet business because there just to be – given sort of the way the world is going, they’ll probably start to be subbed now that we socially distance, that kind of a thing. But we would just bring staff back as the business demands it.

Okay. And then second question, the last question, I guess, on the theater side. I know you’ve done a great job in past years with the – you have a $5 Tuesday promotion kind of shifting attendance into that slot and kind of making a new big day of the week. And you said there’s been talk about, obviously, consumers naturally migrating to the other days in this post-COVID environment. Would you try to kind of help that migration? I mean do you see a room to kind of – maybe not necessarily promote but somehow kind of proactively push people to go to Monday, Wednesday, Thursday, not only to spread attendance, but also possibly to ease the burden on your staff in kind of that post-COVID environment kind of reduce kind of the pressure kind of on you guys as well?

We haven’t made plans to yet, but I wouldn’t put – I wouldn’t doubt it that we might do some stuff like that. Again, we’re going to have to get a look and see what the business looks like in getting there.

What I would add, Eric, is that, look, this is another case – this is another situation where the – having a loyalty program with now 4 million members really pays off because we have the ability to communicate. And so we have been, during this time of being closed, as you can imagine, we have kept in touch with our customers, and we have and continue to try to keep them engaged. And so it’s already proved extremely beneficial just in this time. And if we were to decide to do things along what you’re suggesting, that would be a vehicle that would allow us to do that. And so that it’s once again a case of where that program becomes extremely important, and that’s how we would do it.

Perfect, thank you both.

And we will now take Ryan Hamilton with Morgan Dempsey. Please go ahead.

Good morning, gentlemen. I’d like to echo a previous caller on the solid execution from your team. It sounds like you are doing the most with the hand that’s been dealt, so kudos to you. Most of the questions have been answered. I guess I’ve just got one. Any conversations with vendors, supply chain issues that may come up as you plan on reopening anything on that front?

What kind of issues?

Well, maybe inability for them to provide, as they have in the past, maybe if they’re struggling along the lines of staffing or whatever it might be? I’m just thinking outside the box a little bit.

I mean we’ve been in constant contact with all of our key vendors through this process, Ryan. And obviously, you have to start with the studios. And so that’s – so it’s on the theater side. That’s – and so obviously, we’ve had – we remain in constant contact with them. And as we – in our prepared remarks, we talked about some of the plans to initially open up possibly with library product and things along those lines until we get to the point where the new films are ready to debut, but we continue to talk to all of our vendors. And at this point in time, there – we really don’t see any problems with our existing suppliers on the theater side, and I believe that’s generally true as well on the hotel side. They all seem to be in the...

And on the food and beverage as well, I’m just – again, I’m just thinking from staffing and maybe the inability for them to get certain products, maybe menu changes, just kind of getting a picture for what it might look like when you do reopen. Maybe a limited menu, I’m just thinking here.

Well, I think our menus might be a little bit limited when we open, not necessarily because of just of the inability to get something but more along the lines of just trying to keep the process easy to be able to social – properly social distance, things like that. That’s where we might start, not because we’re having the vendor that we have – we’ve heard of anything in vendor issues. And I will – we’ll just adjust the menu.

Okay. Thank you very much.

At this time, it appears there are no further questions. I would like to turn the call back to Mr. Neis for any additional or closing comments.

Well, we certainly like to thank all of you again today for joining us. Tomorrow, we’ll be holding our first-ever virtual annual meeting at 9:00 AM Central Time. Interested parties can listen to a live audio webcast and view presentation slides by logging on to the Investor Relations section of the company’s website, www.marcuscorp.com, or through the direct link that’s provided in our press release that was dated April 15, 2020, and selecting guest when logging in. Shareholders can log in with the control number that was provided on their proxy card. We also look forward to talking to you once again in approximately three months when we release our fiscal 2020 second quarter results. Until then, thank you, and stay safe and stay healthy. And please, have a good day.

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