0:07 Good morning, everyone and welcome to the Marcus Corporation Fourth Quarter Earnings Conference Call. My name is Charlie and I'll be coordinating your call today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. [Operator Instructions] As a reminder, this conference is being recorded. 0:30 Joining us today are, Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President and 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. Please go ahead sir.

0:46 Thank you, Charlie and good morning, everybody. Welcome to our fiscal 2021 fourth quarter conference call. As usual, I need to begin by stating that we plan to make 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. 1:13 Our forward-looking statements are subject to certain risks and uncertainties which may cause our actual results to differ materially from those expected. Listeners are cautioned not to place undue reliance on our forward-looking statements. 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 that we issued this morning, announcing our fiscal 2021 fourth quarter results and in the risk factors section of our most recent quarterly report on Form 10-Q and our fiscal 2020 annual report on Form 10-K, each of which you can access on the SEC's website. 1:52 We'll also post our Regulation G disclosures when applicable on our website at www.marcuscorp.com. The forward-looking statements made during this conference call 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. 2:11 In addition, we routinely post news releases and other information regarding developments in our company that impact our investors, customers, vendors and our shareholders and you should look to our website www.marcuscorp.com, as an important source of information regarding our company. 2:28 So with that behind, let's begin. Our call will follow the usual format…

12:48 Thanks, Doug. Before I make a few comments on our operating businesses, I want to briefly pick up where Doug just left off. Last quarter I started my prepared remarks by highlighting a few key differentiators for The Marcus Corporation, including our balance sheet, significant real estate holdings and our diversified business portfolio, all 3 of those elements were on display again for all to see during the fourth quarter as well. 13:15 You just heard from Doug about the continued strength of our balance sheet and liquidity position. He also shared with you that we continued to selectively monetize surplus and non-core real estate during the quarter, further strengthening our balance sheet. And with a much more limited exposure to fixed monthly lease payments, we enter fiscal 2022 with a minimal amount of deferred rent and a greater more flexibility than our peers. 13:41 In addition, our diversified business model once again paid off as well. Last quarter, we had just reported our first profitable quarter since the start of the pandemic. Thanks in large part to a very strong performance from our hotels and resorts division. As winter arrived and the hotel business experienced its typical seasonal slowdown, we were still able to report another profitable quarter this time and the strength has significantly improved theater results. 14:09 As you know, we view the world through a long-term lens. As I've said since the onset of the pandemic, the recovery path we are on may not always be a straight line and we recognize that neither of our businesses are back to pre-pandemic levels yet. But I do believe unequivocally that these key differentiators for The Marcus Corporation are major strengths for our company and have contributed to both our long-term progress and our long-term success. 14:38…

29:32 Thank you. [Operator Instructions] We'll go first to Jim Goss of Barrington Research. Jim Goss, your line is now open.

29:53 All right. Thank you and good morning.

29:55 Good morning, Jim.

29:58 I would -- good morning. So I would begin with asking about the Gurnee Mills the Wall. How do sports rates come into play there? Are you able to be treated as another bar and you don't have any issues dealing with that? How exactly -- if this could be a good template for you and the industry?

30:17 Yeah, that's exactly right, Jim. What we've done here is, we have taken this screen and basically converted to a sports bar, it will not play theatrical content anymore. This is now a dedicated sports bar, it has multiple screens, it has some really -- we have some really interesting technology here where you can bring your iPhone or your Android device and load an app on and put your earphones in and you can then select which broadcast you want to watch. So if you're not -- we'll have one over the main speakers, but if you don't want to watch it on the main speakers, you can watch all the others. But again we feel that this is essentially -- we converted this away from being a movie theater where we're projected, where we are selectively putting up sports events to a sports bar.

31:13 Okay. And have you basically taken-out the seats then and put high-rise tables or something like that for the viewers?

31:24 Jim, it’s the most comfortable versus last part of world or comfortable things. No, we've got actually -- I think that said have kiddingly, but we probably actually argue to take some seats out. We haven't figured out which ones yet, but we're going to do -- we're looking for some opportunities to put some high tops in. We're trying – we got to be careful of viewing angles.

31:43 Right.

31:44 We also could potentially put in a portable bar in this space as well. We're going to have food and beverage delivered to the seats. So that again as a sports bar, we will be -- and to differentiate really anywhere else in the theater, we'll be delivering the food and beverage everything to the seats. But it is -- but yeah, we're going to keep those seats in, because that's really one of the things we think makes us special.

32:08 Okay. One of the other things is, there were a number of footnotes in the...

32:15 Oh, I'm sorry, Jim...

32:17 [Indiscernible].

32:17 The other thing that differentiate us that on the sports issue thing, is we're not charging to get in.

32:24 Okay. Yes, that would be [Indiscernible].

32:28 I can look for you then. You can walk right in, the goal is to make money in food and beverage.

32:33 Okay. In the statements where you're taking out net income to adjusted EBITDA, pretty much all of the footnotes relate to COVID-19 type events from over the past year. I wonder if you might talk about some of those and how much of those would be ongoing or well at some point you'd be sort of even from those COVID-related adjustments and what ones do you think are significant to you?

33:09 Well, Jim, really when you look at most of them are in the past, right? I mean, the biggest thing that happened this particular quarter was the government grants and federal tax credits, which was a -- we had to actually reduce the number. We took a favorable event and took it out in order to come down to adjusted EBITDA. 33:30 Our unadjusted EBITDA was higher than what we reported. But as you can see, we had nearly $7.4 million in additional COVID-related government grants and there was -- and a portion of that was also some federal tax credits that we were entitled to also related to some COVID legislation. 33:51 So, I mean will there be any more of that in the future? I don't know, I can't -- we don't have anything that we immediately see, but that's really the main thing that happened during this quarter and for the year. If you look at it, we had almost -- we had over $10 million of that for the full fiscal year, all favorable this year. We also had some minor impairment charges in both the quarter and the year and those are more related to some of the real estates we're evaluating and some -- and but these are all small amounts that were just around the edges. 34:31 So as you see, last year there were all sorts of these other additional COVID adjustments related to reopening expenses, closing expenses et cetera, but you don't see a lot of that this year, and we would expect going forward that there would be less adjustments like that.

34:51 Okay. And lastly from me for now. The Searchlight Capital joint venture which I think is tremendous, it seems to fit really well into the strategy you've had. How aggressive are you expecting this to be in terms of securing property and how quickly say this Kimpton Monaco Pittsburgh hit the financials? How important will it be on the cost and expense side and how quickly?

35:22 Yes, let me take the second half of that first and I'll let Greg talk to the kind of the overall arrangement and everything else. Look, because this is off-balance sheet, right, we have a minority interest in this property. The only thing you'll see will be on the kind of below the line, below operating income, you will see that equity earnings and losses and joint ventures. And so our share of that of any earnings or losses from that property will show up on that line, not particularly, I mean it was a small amount this particular quarter, we only had it for half of December. 36:05 And so not really -- you can't really judge anything from what you're seeing in this particular quarter. On a going-forward basis for any individual property with only a 10% interest, it won't be a particularly large number one way the other, but as we continue to execute on the strategy, we would expect that you would start seeing some more impact there and we'll have to do a good job of explaining that and making sure that you guys as investors understand that the value that we have there in these ownership interest and some of these properties. 36:47 The only other thing I'd mention is that of course, we also have a management contract. And so that management contract that does show up in the P&L up in our other revenues. And again, you wouldn't see it this quarter, but on an ongoing basis we also have those management fees coming in.

37:05 Anything to build on that a little bit, I think you just got to -- it makes things a little more lumpy because we expect to see here eventually value realizations. And so if you go back and you think about sort of what happened with the Westin Atlanta perimeter for those of you who have been with us [Indiscernible] Jim I know you have been the – we saw a big value realization when the asset was monetized. So there should be more of that going forward. 37:32 Look how aggressive. I mean, I won't -- I don't like to -- aggressive is not the word I like to use, because we're not typically we're not aggressive, we're opportunistic. And our job number one is to deliver great returns to our investment partners and our investors in our company. And so we are looking for these assets aggressively to make opportunistic investments. And as the markets present themselves, we will be able to do that, the markets have been pretty aggressive generally, so we are looking at – we're looking very carefully at every asset that we can, this fit our template, it's a special asset. 38:15 We've said and if anything the pandemic has highlighted, a strategy that maybe I don't know that I could have said that we were intentional about necessarily accepting just sort of maybe in our fiber that we always wanted to have really special grade assets, whether it's the Pfister or The Saint Kate or The Grand Geneva or the Skirvin. These are these assets and these markets that sort of transcend just being a business hotel or a leisure hotel and again this Kimpton Hotel Monaco in Pittsburgh is not just a business hotel, it attracts leisure traveler, it has a very broad base. So, we'll keep looking for these special assets and when the opportunity -- when we see an opportunistic game play, we're going to get our partners on board and go for it.

39:00 Yes, just one refinement, does the 10% stake mirror what you do in every case, or can you participate to a larger extent if you want to from an investment standpoint?

39:15 It would be an asset-by-asset decision, I mean we've said previously, Jim, you've heard us talk about that in general, that's the neighborhood that we see ourselves participating and as we move forward on deals, but again it would just depend.

39:32 Okay. Thank you very much.

39:39 Thank you for your questions. Jim. [Operator Instructions] Our next question comes from Eric Wold of B. Riley. Eric, your line is now open.

39:56 Thank you. Good afternoon. Just a follow-up question on the -- a follow-up question on the last comment around hotel monetization opportunities. I guess, how do you think about that opportunity in general? How much is driven by current demand trend, the kind of the opportunity to recover? Is there a mindset that you just want to lessen kind of hard asset ownership in general, you're just not sure which property it may be or is there a scenario where nothing may be sold?

40:36 I don't think – I don’t think it's a scenario where we want to lessen our hard asset investment. I think it's more of a -- it's more of an issue with portfolio management as we said in the remarks, what fits with our portfolio, what makes sense, what are the markets look like, what are the big reinvestment needs in any particular asset and so again that all comes under portfolio management, where do we want to put the capital, where should we be making the investments, because these assets do require reinvestment. But as we've always talked about again, this is as we get to a cash flow positive position again, what are we going to do with our cash flow? 41:20 Our theater business really doesn't need a lot of investment, that theater business as we've said it's like buying a brand new car at this point, we really upgraded the whole fiscal plan significantly. But over the last 5 years or so maybe going back 7 years if you think about it. The -- and so as we look to do with cash flow, we're going to do we've always done which is see about returning capital to shareholders and making other investments which is good, so we can put capital to work for people very tax efficiently.

41:55 Got it. Thank you. And then kind of looking back at some of the comments earlier in the call, in the press release around the outperformance of both the theater division and hotel division, Q4 as well as full-year, clearly the Q4 outperformance amounts were lower than the full-year, obviously, competitors have reopened probably at a slower pace than Marcus had? So there's some catch-up from the competitive set there I imagine? But anything to read into that in terms of just that cadence and how should we think -- where are your thoughts kind of you look forward to 2022 in terms of the ability to maintain and potentially you can grow market share and our performance levels?

42:44 Well, I think you're right that seeing people reopen is moderating our gains. But I also think that some of that's going to be a more permanent gain because of just above when you called path dependency, it's couple of things, one is the economic theory of the old horse follows the path once they've wanted in and so the advantage of getting people to move to your facilities where that's possible it will be – is important. The -- but again we're looking at on a national basis which we did, just having the other guys open up is helpful. 43:28 But we believe we have a superior product, we have superior teams, our teams are even -- it's even -- we see this in all of our businesses, where we made a decision as we've talked about early on which was we wanted to stay open as best we could if we could basically lose less money being open or closed, this was a decision a year and a half ago in the height of the pandemic. 43:54 We did that for a couple of reasons, and one was, so we keep employing people, we thought that was really important. And then we also felt it was important just to keep the business with momentum. And I think that pays-off now. We have teams in place that we were – that we kept in place, where others didn't have that. And so I think that should work to our advantage. Can I quantify it? No, I can't quantify it, but I think it's to our advantage.

44:23 Very helpful. I think last question and the last point on labor. Maybe update kind of on what you're seeing right now with labor availability in your markets, wage rates, how much higher wage rates right now than they were back in '19 for example and beyond taking price where you're seeing the best opportunities to leverage that and become more efficient?

44:53 Well, let me walk backwards and I'll let Doug maybe speak to more specific numbers. In terms of just where do we see opportunities, what we talked about is, I think it's going to be how do we leverage technology for the most part to extend what is -- which is a limited labor force, a shrunken labor force. Now look, I do think that there is going to be -- and we are even seeing some of the labor force come back, but I'm not here on this call to tell you all, it's all back to where it was, not. But especially I think a lot of our segment is as saving start to get -- I think look, we know there have been historically high savings rates in the country, as saving start to – if you're not working and savings start to get eaten into, you start to go back to work in, anecdotally, I don't have a mathematical number to tell you. 45:45 We're finally starting to see across many of our businesses, but we actually put up job postings, people showing up for interviews, which is a positive. But yet still, we know that we're still facing a tougher labor market and inflation and all those things. And so it's going to be things like, I think I was really cool, we talked about the use of a robot to clean bathrooms, to make our housekeeping labor force more efficient. It's going to be -- we have movie tavern, we shift in the model of movie tavern where we had, and this was actually pre-pandemic. One of the challenges that we had was with the model of people coming up and having their servers take the order. 46:27 We moved to a model where now you can order on your app on your phone. And so we're moving and just going to runners, that obviously makes that labor force much more efficient, again relying on technology and we're doing that in our theaters with orders, we're going to be really focused on getting the book order on their phones, because that gets shortens up the line, the concession, which also works to our benefit in multiple ways in terms of helping that per cap. 46:56 So really across – you could be in one of our hotels and be in some of our restaurants, probably our most highest end restaurant, but you might be ordering your food – you might order your food off the app, and have it run to you as opposed to having a server as just due to the fact that we can't be as reliant in the labor markets. So there is all sorts of ways to do that, that we're working with.

47:18 And then first part of your question Eric, look, we don't have a one size – I don't have a one-size-fits-all kind of percentage or number for you, because our labor forces are quite different in our hotels, in our theaters. We've seen increases across the board, no question about it and what we've -- in our wage rates in both of our businesses. 47:40 Having said that, that's where it gets interesting right, because yet -- we also shared with you our per capita increases, Greg just talked about it in a second go on our theater side for example. Those – it's not that we took -- it doesn't mean that we took an 11% increase in our ticket prices or a 15% to 20% increase in our concession prices. We were able to generate more person, which significantly helps some of these labor issues that we're talking about, and it wasn't, and it's not just by just raising prices. 48:16 Greg in his prepared remarks talked about, I mean we're going to take -- we are and have been looking at our strategies include looking at pricing and how to basically do revenue management which we've been doing forever in our hotel business. And so we will continue to experiment and test some different ways to be able to be smart about our pricing and try different ways to do that, in ways that can also then help to offset some of these wage increases that we are seeing. We've done some experimenting already and we expect to do some more in the future.

48:59 Perfect. Thank you, guys.

49:05 Thank you. At this time, it appears we have no further questions. I'd like to turn the call back to Mr. Neis for any additional or closing remarks.

49:12 Well, thank you. Like – certainly, I like to thank all of you once again for joining us today. We look forward to talking to you once again in early May when we release our fiscal 2022 first quarter results. Until then, thank you and have a great day.

49:29 That concludes today's call. You may now disconnect your lines and have a wonderful day.