The Marcus Corporation (MCS) Q3 2021 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to the Marcus Corporation’s Third Quarter Earnings Conference Call. My name is Mel, and I will be your operator for today. At this time all participants are in a listen-only mode. [Operator Instructions] Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President, Chief Financial Officer of the Marcus Corporation. At this time I’d like to turn the program over to Mr. Neis for his opening remarks. Sir, please go ahead.

Well, thank you very much, and good morning, everybody. Welcome to our fiscal 2021 third quarter conference call. As usual, I need to begin by stating that we plan on making a number of forward-looking statements in 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 and 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 government restrictions and social distancing requirements and various other mandates 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, restaurant closures are not expected to reoccur, and our assumptions about the release of new movies and the temporary and long-term effects of the COVID-19 pandemic on 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 issued this morning announcing our fiscal 2021 third quarter results and in the Risk Factors section of our fiscal 2020 annual report on Form 10-K, which you can access on the SEC’s website. We’ll also post all Regulation G disclosures, both disclosures when applicable on our website at www.marcuscorp.com. So with that behind us, let’s begin. Our call will follow the usual format where I start by spending a few minutes briefly sharing a few numbers from our quarter with you, and we’ll also discuss our balance sheet and liquidity. I’ll then turn the call over to Greg, who will focus his prepared remarks and where our businesses are today and what we’re seeing ahead, both short and long term. And then we’ll then open the call up for questions. Well, you’ve seen the numbers. It truly is a pleasure to be reporting to you today that we hit a couple of major milestones this quarter. For the first time since the COVID-19 pandemic outbreak now over 19 months ago, we’re thrilled to be reporting both positive adjusted EBITDA and positive net earnings for the quarter. Needless to say, we’ve been looking forward to this day. The third quarter numbers in this morning’s release obviously compare our results this quarter to the third quarter last year, where the majority of our properties were either closed for a large portion of the quarter, or we’re operating under pretty distressed conditions. As a result, as I go through some of these numbers, I will sometimes reference of comparisons to pre-pandemic numbers in fiscal 2019 in order to provide some added perspective. Now, we did have a couple of nonrecurring items this year and last year, all of which are detailed in a non-GAAP reconciliation we included at the end of the press release, and as we discuss adjusted EBITDA in our remarks today, I do want to refer you to the disclosures we provided in the press release regarding the use of this non-GAAP measure in evaluating our performance and its limitations. So, what a difference a year makes? During our third quarter last year, we reported adjusted EBITDA of a negative $25.8 million. This year, we’re reporting adjusted EBITDA of a positive $24.5 million, a swing of over $50 million. We’ll be providing a breakdown of these adjusted EBITDA numbers by operating segment in our Form 10-Q that will be filed by next Tuesday. But as a preview, I’m happy to share with you that the nearly $25 million of adjusted EBITDA this quarter includes approximately $17 million from our hotels and resorts division and nearly $11 million from our theaters division, partially offset by unallocated costs in our corporate segment. This is the second straight quarter that our hotels and resorts division reported positive adjusted EBITDA, and it’s the first time our theater division has produced positive adjusted EBITDA for a quarter since the pandemic hit. Now getting back to the financial statement for a second. There were a few variations in our numbers below operating income, is worth briefly mentioning. As you’d expect, our interest expense continues to run higher during the third quarter and the first third quarters of the year compared to prior years due to increased borrowings, a higher average interest rate, and an increase in noncash amortization of debt issuance costs. Now offsetting that increase in expenses, however, was an increase in gains from disposition of property, equipment and other assets this quarter due to the sale of several parcels of surplus land. In addition, last year during the third quarter we reported a larger loss from unconsolidated joint ventures resulting in a favorable variation this year. Shifting gears away from the earnings statement for a moment, you probably saw in the supplemental information that our total capital expenditures, cash capital expenditures during the first three quarters of fiscal 2019 totaled approximately $9 million. And a large portion of these dollars were spent really on two projects, a theater renovation and a lobby renovation at the Grand Geneva Resort & Spa, with the rest really going towards normal maintenance projects. We’ll continue to keep capital expenditures relatively low for the remainder of this year, but we will be prepared to increase expenditures in 2022 assuming conditions continue to improve. Let me now provide some brief financial comments on our operations for the third quarter and first three quarters, and I’ll start with the theater division. We continue to experience increased per capita spending by our customers in the theaters. Comparisons to last year’s third quarter are not particularly useful given that most of our theaters were closed during July and August last year, but our average admission price at our comparable theaters has increased 6.1% during the first three quarters of fiscal 2021 compared to last year and has increased 8.4% compared to the first three quarters of fiscal 2019. Our premium large format screens continue to outperform compared to our regular screens, contributing to this overall increase in our average admission price. Meanwhile, our average concession in food and beverage revenues per person at our comparable theaters increased by 15.7% for the first three quarters of the year compared to last year and have increased by 24% compared to the first three quarters of fiscal 2019. Our industry-leading mix of nontraditional food and beverage options, shorter lines of the concession stand, the emphasis we’re placing on encouraging guests to purchase their concessions in food and beverage ahead of time, either online or using our mobile app and possibly this pent-up demand for a return to normal likely has contributed to our increase per capita revenues. Now, since most theaters in both our circuit and the industry as a whole, were closed during large portions of the third quarter last year, we believe a comparison of our results to pre-pandemic results in fiscal 2019 may be the best way to compare our performance to the industry this quarter. So, when you compare our third quarter and first three quarters admission revenues to fiscal 2019, you’ll see that our admission revenues were down approximately 45% during the third quarter and are down approximately 65% for the first three quarters of the year, both compared again to fiscal 2019. Now, according to the data that we receive from Comscore and compiled by us to evaluate our fiscal 2021 results, United States box office receipts decreased nearly 53% during our fiscal 2021 third quarter, and approximately 71% during the our fiscal 2021, first three quarters, both again compared to U.S. box office receipts during fiscal 2019. So, you can do the math. As a result, we believe our admission revenues decline that we just reported, outperformed the industry average by nearly eight percentage points during the third quarter and approximately six percentage points for the first three quarters of fiscal 2021. Now, shifting to our hotels and resorts division, the same kind of logic applies. Comparing our total RevPAR or revenue per available room to last year does not really provide particularly meaningful numbers. We believe comparing the same metric to pre-pandemic levels in fiscal 2019, however, does help provide perspective on the pace of the current recovery. Our RevPAR for our seven comparable owned hotels decreased just around 12% during the third quarter and approximately 33% during the first three quarters compared to the same period during fiscal 2019. Now, these numbers exclude the Saint Kate, which had just reopened during the third quarter of fiscal 2019, and it was closed for major portions of the year for the first three quarters of fiscal 2019. Now according to data that we’ve compiled from Smith Travel Research for the fiscal 2021 and fiscal 2019 periods, in order to compare our results, our hotels outperformed the comparable upper upscale hotels throughout the United States during the third quarter and first three quarters by a significant 14 percentage points and 11 percentage points, respectively. The data also indicates that our hotels outperformed competitive hotels in our markets by approximately seven points and eight points, again respectively, for the third quarter and first three quarters of the year compared to fiscal 2019. Now breaking out the third quarter numbers for the seven hotels a little bit more specifically, our overall RevPAR decrease during the fiscal 2021 third quarter compared to fiscal 2019 was due to an overall occupancy rate decrease of approximately 17 percentage points, offset by an impressive 10.3% increase in our average daily rate or ADR. Our average fiscal 2021 third quarter occupancy rate, the occupancy rate for the current quarter we’re reporting and for our owned hotels was approximately 66%. Finally, before I turn the call over to Greg, let me also briefly comment on our balance sheet and liquidity position. As our press release notes, our liquidity remains extremely strong with $197 million in cash and revolving credit availability at the end of fiscal 2021 third quarter. We’re still waiting for an income tax refund of approximately $22 million, which we hope to receive in the fourth quarter and of course, will only further improve this significant liquidity. In addition to the monetization of two life insurance assets during our third quarter that we told you about during our last call, we also had proceeds from the sale of surplus land of nearly $5 million during the quarter as we continue to take advantage of opportunities within our substantial real estate portfolio. You’ll also notice on our condensed balance sheet that we now have nearly $13 million of carrying value in additional assets currently under contract to sell later in fiscal 2021 or early 2022. Finally, just as a reminder, early in our third quarter, we amended our revolving credit agreement and made an early payment on our term loan facility, reducing the balance of our short-term borrowings from approximately $84 million to $50 million and extending the maturity data remaining term loan facility to September 2022. We also favorably tweaked our existing debt covenants through fiscal 2022 as well. With that, I’ll turn the call over to Greg.

Thanks, Doug. Before I make a few comments on our operating businesses, I want to briefly pick up where Doug just left off. You certainly have heard us refer to our balance sheet and our real estate holdings fairly often in the past. But I think our results this quarter warrant a couple of comments about what I believe are key differentiators for The Marcus Corporation. In fact, I would argue that today’s announced results are a poster child for the value we believe we’ve been able to gain from owning our real estate and having a diversified business portfolio. We’re thrilled to be reporting a return to profitability this quarter, and I think it’s fair to say this may have been faster than many had anticipated. So let’s talk about this for a moment. Starting with our diversified businesses. Marcus Hotels and Resorts reported a very strong third quarter, with overall revenues at nearly 90% of pre-COVID numbers in the third quarter of fiscal 2019. Our theater business gets a lot of attention as it should. But in this recovery, from an unprecedented time for our customers and our country as a whole, our hotels and resorts business has continued to surprise us and has accelerated our overall company-wide recovery. Those of you who have followed us for a long time know that we have had multiple legs at the proverbial stool over the years, and while our business mix has and still may change over time, our diversified business model has served us well and clearly differentiates us from our theater peers. Another differentiator is our substantial real estate holdings. By owning the majority of our theater real estate, not only do we believe it enables us to be more nimble and faster to market with new amenities and other changes to our business model, but it also has a direct impact on our financial results. There is no question in my mind that one of the reasons we’ve been able to return to profitability as quickly as we have is due to the fact that we have a more limited exposure to fixed monthly lease payments. And here’s the thing. Without leases, it might be reasonable to expect to find that we have more debt on the balance sheet than our peers, but that’s simply not the case. We have the lowest debt to capitalization ratio of any of our theater peers by far, and that’s even with the substantial hotel assets I just mentioned. Another benefit of our real estate is the fact that selected monetization of surplus and noncore real estate is provided and continues to provide an additional source of liquidity for us, further strengthening our balance sheet. Personally, I don’t think we always get enough credit for the value of our diversified business model, our significant real estate holdings, and our strong balance sheet provides, but I’ll leave that for the market to decide. We view the world through a long-term lens. As I said last quarter, the recovery journey we are on may not always be a straight-line, and we clearly are not back to pre-pandemic levels in either of our businesses yet. But I do believe unequivocally that the key differentiators for the Marcus Corporation are major strengths for our company and have contributed to both our short-term progress and our long-term success. This quarter was another step on that journey, and we’re pleased to be sharing these results with you today. So let me start my remarks with our hotel division. Doug shared some of the numbers with you, including comparisons to our pre-pandemic fiscal 2019 numbers and the fact that the data indicates that we once again significantly outperformed both the industry and our competitive sets this quarter. As you know, our hotels have consistently outperformed their markets in prior years as well, but the amount of our performance in recent quarters has widened significantly. And while an overall occupancy rate of approximately 66% during the third quarter is certainly still below where we were in 2019, I can honestly say that our performance in this division has continued to surprise us to the positive each and every month so far this year. The leisure customer was certainly out in force this summer, and as we noted in our press release, several special events particularly in Milwaukee, contributed to our higher average daily rate and our much stronger performance this quarter. And while you’ve heard me say this before, it bears repeating. Our outperformance is also a direct reflection on the quality of our hotels and resorts and the operational excellence of our outstanding teams, both in the corporate office and in each hotel. Stated simply, we’ve always had some of the best properties and best people in our respective markets, and it doesn’t surprise us that we’ve outperformed during this period of recovery. We certainly still have a ways to go with the business traveler and group business. But even there, there are a number of indicators suggesting that improvement may continue in these important segments. We’ve always believed that in order for the business travel to return to pre-pandemic levels, it all begins with employees returning to offices. That then can lead to businesses getting comfortable with their employees getting back on the road to see clients, potential clients, remote offices, plants, et cetera. Available data suggests that office occupancies have been gradually increasing and as a result, it appears travel intentions continue to rise as well. We’re beginning to see that in our markets, which is encouraging. Continued progress in the business traveler segment would be particularly helpful in the coming months as the weather worsens. Leisure travel returns to being more weekend focused, and we experienced our typical seasonality associated with primarily Midwestern based hotels and resorts. As for group business, we continue to have a very strong wedding season, and we’re experiencing increases in smaller group business as well. Our group room revenue bookings for fiscal 2022, commonly referred to in the hotels and resorts industry as group pace, is currently running approximately 20% behind where we would historically be at the same time in pre-pandemic years. But that’s quite an improvement from where we were earlier in the year and the increased amount of activity in leads we are experiencing suggests to us that we may end up better than that percentage by the time we get through 2022. Banquet and catering revenue pace for fiscal 2022 is also running behind where we would typically be at the same time in prior years, but not as much as group room revenues due in part to the strength of wedding bookings. Overall, we generally expect our revenue trends to track or hopefully continue to exceed the overall industry trends for our segment of the industry, particularly in our respective markets. As in the past, our results in this division will vary by quarter due to the seasonality our properties historically experienced. But on a relative year-over-year basis, we look for continued improvement during this ongoing recovery, and as I’ve said in the past, we believe we have special assets that make our portfolio unique and give us the ability to pivot to other customer segments where we wait for business travel to fully return. In the near term, I would be remiss if I didn’t note that our hotels continue to be challenged by the ongoing labor shortage that we and many other businesses, including our theaters are experiencing. An unusual twist, this challenge is likely helping our operating margins currently, but it is a challenge nonetheless. Our people are working extremely hard in both our businesses, and we continue to focus on opportunities to use technology to reduce our labor needs, but we will need to add staff as the recovery continues. Finally, as the press release notes, we officially took over the Hyatt Regency, Coralville Hotel and Conference Center during our fiscal 2021 third quarter, and we will continue to seek opportunities to strategically grow our hotel portfolio in the future. So let’s shift to our theater division. Doug went over the numbers with you. And as you saw, the steady improvement has continued in this division. We returned to positive adjusted EBITDA from this division during our third quarter, which was a major milestone for our team. And with virtually all of our theaters reopened and an increasing number of new films being released we continue to see good progress in the growth of our admission revenues as the recovery continues. And as Doug pointed out, we’re very pleased with the results from our concession and food and beverage portion of our business. I think the numbers really put this recovery path in perspective. It may seem like a long time ago, but we began this fiscal year with January box office results equal to only 16% of our fiscal 2019 pre-pandemic numbers. As more theaters opened, the vaccination rate increase and film studios began slowly releasing new product, our fiscal 2021 second quarter end with admission revenues during the month of June equal to approximately 48% of 2019. That improvement then continued into the third quarter with both August and September, producing admission revenues of 60% or more compared to 2019. And as our press release noted, that percentage relative to 2019 for both us and the industry increased quite a bit in October as more hit films were released at a faster pace, resulting in the single best month of the box office we’ve had since the pandemic began in March of 2020. Like our hotel division, one of the highlights of the quarter was our continued outperformance versus the industry. As Doug shared with you, based on industry data available to us, we believe we once again outperformed the industry during the third quarter, and for that matter, throughout fiscal 2021. Additional data received and compiled by us from Comscore indicates our admission revenues during the third quarter and first three quarters of fiscal 2021 represented approximately 3.5% and 3.6%, respectively, of the total admission revenues in the U.S. during the same two periods. This is commonly referred to as market share in our industry. This represents a material increase over our reported market share of approximately 3.1% during the comparable periods of fiscal 2019, prior to the pandemic. Once again, I want to call out our outstanding teams in our theaters in our corporate office, like their counterparts in their hotel division, they’ve had to navigate through an uncharted period of time while dealing with some of the same labor shortages most businesses are dealing with these days, and they’ve done so with incredible effort and dedication. So one of the obvious questions is, where does the business go from here? We have no illusions that we’re back to normal whatever that ultimately means, but several indicators do suggest we’re on the right path that the pace of recovery is accelerating. First off, the October box office results show that more and more movie are ready to return to seeing films the way they are meant to be seen, on a bigger screen, with incredible sound, recliner seating and some of the best concession in food and beverage options in the industry. Recent surveys by the National Association of Theater Owners backed this up. The percentage of those surveyed saying they are very or somewhat comfortable going to the movies is once again approaching 80% after dipping into mid- to high 60s a couple of months ago as concerns over the Delta variant took hold throughout the country. So while there’s still a portion of the movie going audience who needs a little more time it’s very encouraging to see this percentage increase once again. Of course, another major development during the quarter was an increased commitment seen from our film studio partners to stick with their film release schedule. And just as significant, reaffirm a commitment to the importance of an exclusive theatrical window. As we all know, there’s been a lot of experimenting by multiple studios during the pandemic. But as the smog clears we continue to believe the entire film ecosystem performs better when a film is first released exclusively in theaters. Theatrical exhibition still represents an important component of the financial model of a film and its distribution. In addition to other important benefits, theatrical exhibition spurs millions of people to collectively seek a shared experience on any given weekend. Theatrical exhibition is a film, Gravitas that can’t be achieved with a tile on a TV screen. Theatrical exhibition creates franchises like nothing else can. Theatrical exhibition makes piracy more difficult, and most importantly, theatrical exhibition makes money for the studios. Thus, we weren’t surprised when Warner Bros indicated it intends to return to an exclusive theatrical window with a significant number of films in 2022, when Disney announced the remainder of their 2021 films to receive an exclusive theatrical window after the success of Shang-Chi and the Legend of the Ten Rings. And when it comes to positive indicators of future performance, last, but certainly not least is a really impressive upcoming film slate. We listed a number of films scheduled to be released during the remainder of the fourth quarter, beginning with Marvel’s, the Eternals this weekend, and the list of films scheduled for 2022 reads like a who’s who of successful film franchises. As a result, we’re excited about building upon the progress we’ve made so far in our theater division, and we look forward to continued improvement in the periods ahead. As I wrap up, I want to note that this week; we’re celebrating 86 years for the Marcus Corporation. Starting on November 1, 1935, with a single movie theater Ripon, Wisconsin. Our remarkably resilient company and collection of businesses has navigated and adapted to change for the entire 86 years of our existence. And I’m confident that we will continue to adapt and thrive in the months and years ahead. And as first said by my grandfather, Ben Marcus, when asked what he attributed to the company’s success to, it all starts and ends with our people. With Thanksgiving right around the corner, I want to publicly express how thankful my dad, our entire executive team and I am for our dedicated associates throughout our organization. They are simply the best and everything we’ve accomplished during this recovery and return to profitability are due to their extraordinary efforts. With that, at this time, Doug and I would be happy to open the call up for any questions you may have.

Thank you. [Operator Instructions] We will go first to Eric Wold with B. Riley. Your line is now open. You may ask a question.

Thank you. Good morning.

Good morning, Eric.

A couple of questions. I guess one on labor. You obviously mentioned the fact you need to hire more staff as the business continues to rebound with both segments. Is the lack of staff to date more driven by the lack of available workers or a desire to kind of avoid higher wage rates? And then as you think about these wage rates heading into next year, how are you thinking about those in regards to kind of seasonal labor? Is it something you envision will to kind of remain these levels or could possibly be to moderation?

First, I think I’ll try and remember all the questions there. But the first one, I think that that’s my memory. Thanks very great test. There is a lack of available staff. I mean, that is the first part. It’s a challenge to get all the work done. And so we’re going to need more people. Look, we will be looking for ways, as I said in my remarks, to work smarter and to use technology and to leverage technology. I mean one of the things we’ve talked about in the past was just thinking about our movie Tavern. One of the reasons we came into the pandemic with our food and beverage app ready to go where so people could order remotely in a low contact environment was because we were already seeing labor issues with our movie Tavern with the ability to attract servers and so the idea of getting the customer to be able to order on the app and then just run the food out was something that we were already focused on. So just what did they say? The intersection of opportunity and preparation is luck. So we were lucky in that regard. So we will continue to focus on that and but we’re going to need more people and as the business continues to come back, we will need more people. And as for what the rates are going to be, you tell me what’s going to happen with inflation, I’ll tell you what’s going to happen with the rates. We’re not modeling an exorbitant increase into our budgets for next year. We’re motoring more of a market increase sort of what we’ve historically been doing. But it’s something I didn’t talk about in my remarks. But the one thing that we have is an advantage in both of our businesses, in both the theaters and in the hotels, which is when you think about it, essentially very high real estate businesses, we adjust our prices every day. And so we can react to inflation with, unfortunately, increased prices, but it does a lot – we’re not sitting here with a 10-year lease, where inflation is eating us away, and we can’t change what we’re at the revenue side of that equation. So it’s a delicate dance, and we will make the changes as appropriate.

The only thing I would add, Eric, is that, look, we’ve already had to make a deal with some rising wages this year. I mean, so the numbers you’re looking at reflect maybe less people but paying some of these people, paying people more. So we’re already dealing with some of that today.

Got it. And then last question, I’ll make this one more distinct, Greg. You mentioned that you expect obviously, CapEx to increase next year. How much of that is getting to hear more towards hotels in a sense that are we getting to a point where the decision has to be made on how much to spend on hotels and renovations versus possibly looking to reduce the portfolio, so to speak?

Yes. I mean, Eric, you nailed it in terms of the calculus that we go through because as these properties, hotels have a cycle of reinvestment. And so that typically our kind of decision-making about properties kind of tends to coincide with those cycles. And so, we’ve look, we’ve already indicated that we’ve done a renovation of the lobby at the Grand Geneva and Grand Geneva is lined up to receive a larger renovation beginning in 2022. And we’ve got other properties that are lined up as well, but that is part of the math that we go through as we think about other properties and where they are in the cycle and how much do you spend? Do you spend it? Do you think about, you referenced monetization, it’s certainly an option. So those are the kind of things that we go through. I mean, to in a call like this, we’re not going to indicate what our current thinking is at any given asset. But we do expect in 2022 to have some increased capital spending in the hotel business because we’ve got a couple of big properties that are due for some of that.

Maybe just ask a different way. Not ask you to call out some other properties, but are there any of those properties where a decision has to be made potentially the decision that you made in 2022 as better not spend?

I mean there are a couple of big properties. I mean, yes. I mean, there’s a couple that I would say, 2022, 2023, there are a couple of properties that are going to be in line that we’ll have to go through that calculus.

Perfect. Thanks, Doug, Greg.

Thank you. We had the next question comes from the line of Jim Goss with Barrington Research. Your line is now open. You may ask your question.

Okay. Thanks. First, I’d like to ask is the streamed availability of films and the shorter windows hurting the legs of most films in that there may be fewer return visits and also then the ultimate theatrical box office. And is this limiting the ultimate potential to return to past domestic totals, especially since some of the smaller films may be more likely to go direct to streaming rather than get a theatrical window.

Well, let’s break that into multiple questions, Jim. The first question, let’s say, is day and date streaming impacting films? I think yes, I think we can see that. I don’t think that’s a big secret. I think we can see a day and day streaming model is not having, is impacting the ultimate performance of a film. The good news for our industry is it’s having a lot of negative impact just beyond theatrical in that there’s a huge issue with this piracy issue. I mean, I guess I couldn’t have anticipated it when they started talking about it. But it’s a real negative for them because it’s just they have a pristine copy out 14 seconds after they release a movie day and date, is not helpful for their whole distribution model. What will the shortened windows mean? And they are shortening? Yes, I really don’t know yet. I don’t think anybody knows yet. Because in a way, the consumer has changed, they expect everything like it’s immediately. Everybody wants everything immediately. And so what does for 45 days, if anybody wants to go see something in the theater, will they even wait, they won’t wait for anything anymore. We talked about that on these calls before bad shape had noted that 45 days for kids today is an eternity. It is an eternity. And so I don’t know what the effect will be of that overall. Your other question relates to what kind of content are we going to see? Are we going to see those smaller or medium-sized films? What kind of window will there be? I don’t know, again, I don’t want to predict. It’s so hard to make predictions right this minute over what things are going to look like ultimately. There’s a lot of content that we aren’t playing that other producers are putting out that may come with a window as they start to see, what, maybe we’d like to get that halo effect that comes from playing in a movie theater that will actually help our streaming service. We don’t talk about that a lot. But because it’s not like it’s not going to be exclusive to their streaming service after it plays in the theater and that going back to that, moving tens of millions of people to get off their couches and go do something, a very active event versus the passive laying on the sofa with your remote in your hand and flipping through things, while you look at your phone and the dog is barking and maybe you’re eating something and the lights are on, leaving the house and going to a theater and submersing yourself in that experience. That’s really powerful, and to then say, yes, that now it’s available exclusively on streaming service, can’t get it anywhere else. In a world where the streaming is getting clearly very competitive, and there’s no shortage of the product they’re making. So, you can argue lots of different ways about the way this is going to play out, and then also, we also have our eyes out looking for what other content can we play on our screens too, if there’s going to be a change. We’re not just going to sit here and say, well, you know what, I guess, there’ll be use less movies. We’ll be looking for a few things to do. One of our competitors announced Esports. We’re all looking at different alternative content that can become more important as we’ve built out our loyalty programs, and we know how to reach out to our customers better. We can provide content that be more tailored to them. So if there’s a lot of ways this can play out and to try and predict it, I just don’t know. But I’m positive you’ll see good things.

Okay. A couple of things, more market specific. Your concessions gain was significantly better than admissions, and I wonder if you might talk about that relationship and how sustainable that is. And then on the hotel side, I wonder if you might talk about the specific hotels and markets and whether certain areas are doing better than others and what opportunity you’re seeing on that side?

Well, I’ll take the first part of it here, Jim. And so I mean, look, it’s been very consistent over the years that our growth in our per capita spending for our concessions in food and beverage is faster than our ticket price. I mean, we’re very sensitive to the ticket price. We obviously is, one of the key components of our success is our discount day on Tuesdays, and so overall, what we try to accomplish on the admission pricing side of things is by trying to offer the right price at the right time. And so we have difference, we have some discount programs. On the other hand, as we talked about, we’re seeing increases in our overall admission price because of the popularity of our PLFs, our ultrascreens and our superscreens and those are the first theaters that people gravitate to when these big pictures come out. And so we’ve made a big investment in that and we have a higher percentage of those types of theaters than most. And so that’s one of the key contributors to why you’re seeing the increase you are on the admission side. The concession side, look, there’s no way I consider today and tell you that I think we’re going to consistently have 15% to 24% increases in our per capita spending on that particular metric. But if you look at our history, we’ve traditionally had some pretty healthy well over inflation increases in that category as we’ve continued to expand the food and beverage amenities that we offer, we’re really good at it. I mean, I don’t want to underplay that. I mean, we merchandise it well. We sell it well. The product that we offer, and I’m biased, but we think it’s the best in the industry with our pizza products and things along those lines. So we do continue to expect that, that will see healthy increases. But right now, for all the reasons we said in our prepared remarks, there is some explanations for why the percentages are probably as high as they are right now.

Okay. And in terms of the hotel markets or specific properties?

Well, look, this quarter, we called out some special events that occurred and so there’s no question in this particular quarter that we benefited from, here in our Milwaukee market, where we have three hotels. We benefited from the Bucks playoff run, we benefited from Summerfest. We moved into three weekends in September, the Ryder Cup, up an hour north of here in September. So, we had just major league baseball and fans being back and tending and so there certainly were some things that look “normal conditions” we always have very special events in all of our markets, we just didn’t have them last year. And so Milwaukee had a wealth of them this particular quarter and so certainly, that market performed extremely well this particular quarter, but all eight of our properties had increases.

So, I’ll add to that, again, we’ve talked about it. I think we reflected in the remarks too little, but our properties and for the most part, are pretty are really special assets. They don’t play in one narrow lane, whether the Pfister, Saint Kate or the Grand Geneva and others, I could name almost all of them. They aren’t just strictly a business hotel, they play the business very well. They’ve got great group space, but they appeal to the leisure traveler, because they’re special assets and someone does it want to go on vacation, and they really get to experience something that’s special beyond sort of your really strictly group box or you’re strictly business box. And so we’ve had that advantage.

Okay. Thanks. I’ll let it go at that. Great quarter.

Thanks, Jim.

Thank you. [Operator Instructions] Next question, we have the line of Mike Hickey of the Benchmark Company. Your line is now open, you may ask your question.

Hey Guys, Greg, Doug, congrats on an awesome quarter.

Thank you.

What a journey compared to where we were last year. So congrats to your entire team and really remarkable to see that EBITDA creation. Awesome job.

Really appreciate it.

Yes. Two questions. One, I guess, in your hotel and resorts, obviously, leisure was spectacular. It looks like. I think it’s on a segment perspective, maybe a record quarter for EBITDA for hotels and resorts. So great success there on top of your theater in EBITDA. But I guess, historically, when you look at your hotels and resorts, where does the sort of balance between leisure and business or group, I guess, revenue for you? What’s the historical balance between the two? And as we sort of think forward here, maybe the perception is that you have a sustained step down in business travel, but on the flip side, do you think we may also have sort of a sustained pickup here in domestic leisure travel that can sort of offset that? Just sort of curious your thoughts there? And I have a quick follow-up.

Let me do the first part and let Greg do the second part of it here. But I mean, Mike, we’ve always been a little cautious about giving like a mix and saying, this is what our mix is because it really does vary by, we only have eight properties. I mean I’ve typically kind of when I try to roll them all together, I would tell you, historically, if you take the two business segments, group travel and business traveler, the kind of that transient business traveler. Historically, I guess we probably said if you mix everything all together, 60:40 kind of feels like it’s about where it has historically been where those first two groups are 60 and the leisure is 40. Obviously, that’s not what we’re currently experiencing. This is heavily weighted right now towards the leisure traveler and some of the small business, small traveler. That 60:40 mix is probably, keep in mind, our biggest properties are the Grand Geneva, the Milwaukee Hilton and the Pfister. Those three are much bigger than the other five properties. And so you’ve got a convention hotel, you have a resort that can be a lot of leisure, but it also has a ton of meeting space and has a lot of business group typically. And so we probably normally skew a little bit more towards that group. But as you’ve seen, and you saw in the numbers, I mean, nobody, for the most part, has a lot of business travel right now. Nobody has a lot of group travel, and yet we outperformed the industry by 14 points. And so that disclosed to Greg’s earlier comment about the type of properties we have that we have the type of properties that can pivot and in turn focus on that leisure customer. So, I guess that’s kind of how I answered the first half of the question. Do you remember the second?

I remember that. Thanks let me to the prediction. That’s really kind. I tell you, look, the predicting is hard. I’ll work backwards. Look, at the end of the day, well no matter what I say, I would tell you that we’re positioned, as we’ve been now sort of reiterating, for whatever the mix looks like, I think we have the assets, that will play and capture what’s out there. And people look at, one of the things we’ve always talked about, people want to be together, and people like to get out and travel. In whatever format that is, whether it’s their work or for themselves personally. I think we saw this, let’s get out of the house. And to your point, I’m going to extend [indiscernible] thinking, well, people are working from home, they’re going to be itching to get out, right? So okay, that’s good for that consumer that’s going to travel. But let’s assume that that’s going to modulate back and people are going to be going back to the office. Well, they’re going to be having business travel. And I know that the businesses are itching to travel. And then to try to tell you what I can predict in the short run, very hard. The summary we were getting ready for the business traveler to come back in the fall and then we were surprised to the downside that the business traveler wasn’t back in the fall because of Delta. But I’ll tell you, in a small way, surprise, at least I have been on the other side of that, which is I’m still seeing, anecdotally, just I’ll be in one of the hotels, and I’ll look at who’s in the hotel, what’s going on? Just on, here’s the meeting rooms, and there’s meetings going on and association is getting together, and I’ve started the go-to meetings, and I’ve gone to a few gallos. And I’ll tell you the most amazing thing is watching how much money these – because that’s a big piece of our social business and where we have these group, these the convention floors and stuff and the conference this gallo business where a nonprofit is getting together to raise money, and they have their dinner and their fundraiser. And the amount of money they’re raising is staggering. It’s really a record for their events. And then I recently went to one that someone still had virtually, and it really was unimpressive. Looking at a bunch of heads on a screen, just that you cannot replace getting together. And so that’s really good. Now when is that all going to happen? I can’t tell you what quarter that’s going to be for sure. But what does they say in the financial world, the trend is your friend, while the trend is moving in a positive direction.

Right. Thank you for that. Last question for me, and this is sort of last deal, Greg. So be prepared here, but just sort of curious, I guess, on – I mean, I guess we’re early days, new normal, maybe new normals, old normal, who knows. But I guess, in itself, we’re getting closer to the new normal, we are in it maybe. But when you look around and you see sort of the TAC trends and you see the change in behaviors and that’s obviously shaping your current businesses today with hotels and resorts and theaters. When you sort of think entrepreneurial, which, obviously, your company has a big history of doing, do you see the opportunity for a new ventures, new verticals in terms of maybe some interesting restaurant concepts or some hotel concepts that have sort of been shaped by the pandemic that could offer you something interesting on the growth side over the next few years?

Yes. I mean, look, you’re right. We do like to think that way and where is the world going and what are we doing, and I would tell you, I think less industry specific, like, we’re looking at this new business or that new thing. We’re probably really more focused on how do we keep our assets and make them more productive. And we have a program on our theater side, and we call it the future is now. And we’re looking at what are the different things that could go on in the box. In addition to bringing people back, what different things can we do? I was alluding to it earlier? I would tell you, there’s no better way to watching a sporting event than watching it on a movie screen, on a screen in a theater. It’s not call it a movie screen, but in a screen in auditorium, it’s insane to watch something like that. There’s the e-sports stuff that people really are starting to try to figure out and see how that’s going to play out. Again, all the alternative content. We’re really focused on what does – if we look at our business and say, we’re about people getting together in whatever format that is, and we have the facilities to do that, how do we do that? Really, that applies to both of our businesses. And what does it look like on the hotel side, you’re right. The restaurants have been interesting as to sort of that’s come back where we had, that’s been really interesting to see a lot of the people want to get out and eat again, this desire to get out. We are seeing it. We’re seeing our restaurants come back in a lot of cases, it’s not across the board, but it seems to surprise us. I’ll tell you, I’m not sitting, I’m not on this call saying we’re going to do anything with this. But I will not – we have been surprised just to call one little piece of our business is Safehouse. We opened the Safehouse. It’s small little fun, really fun restaurant here in Milwaukee, and it’s an institution. And we were like, okay, let’s open it up. We didn’t know what it was going to do. And it has surprised us. So thinking about how people get together and congregate is what we will do, and we will be looking for the opportunities.

Nice. Thanks, Guys. Best of luck.

Thanks Mike.

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

Thanks, Mel, and listen, thank you, everybody, once again for joining us today. We look forward to talking to you once again in early 2022 when we release our fiscal 2021 fourth quarter and year-end results. Until then, thank you. Have a great Thanksgiving, and have a good day.

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