Good morning, everyone, and welcome to Marcus Corporation Second Quarter Earnings Conference Call. My name is Bailey, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded. Joining us today are Greg Marcus, Chairman, President and Chief Executive Officer; and Chad Paris, Chief Financial Officer and Treasurer of Marcus Corporation. At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Good morning, and welcome to our fiscal 2025 second quarter conference call. I need to begin by stating that we plan to make a number of forward-looking statements on our call today, which may be identified by our use of words such as believe, anticipate, expect or other similar words. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected or projected in our forward-looking statements. These statements are only made as of the date of this conference call, and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. The risks and uncertainties, which could impact our ability to achieve our expectations identified in our forward-looking statements are included under the heading Forward-Looking Statements in the press release we issued this morning announcing our fiscal 2025 second quarter results and in the Risk Factors section of our fiscal 2024 annual report on Form 10-K, which you can access on the SEC's website. Additionally, we refer you to the disclosures and reconciliations we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP financial measure, in evaluating our performance and its limitations, a copy of which is available on the Investor Relations page of our website at investors.marcuscorp.com. All right. With that behind us, let's begin. I'll start this morning by spending a few minutes sharing the results from our second quarter and discuss our balance sheet and liquidity. I'll then turn the call over to Greg, who will focus his prepared remarks on where our businesses are today and what we are seeing ahead. We'll then open up the call for questions. As we shared on our last call, the second quarter began with strong performances from…

Thanks, Chad, and good morning, everyone. When we spoke at this time last year, we were reporting a quarter that was impacted by the lingering effects of content supply challenges created by the Hollywood strikes in our theater business. What a difference a year makes? Today, we are thrilled to report second quarter results with significant growth that was driven by a high-quality and diverse film slate, coupled with strong consumer demand to experience these blockbuster films in the big screen. This was a quarter that showcased the enduring appeal of the theatrical experience and the remarkable resilience of our industry. In hotels, while the second quarter got off to a slower start, it picked up momentum and delivered results that were in line with our expectations overall. We completed major milestones on schedule in our renovation and construction projects while minimizing the impact on operations and still delivering exceptional experiences for our guests. Overall, we are pleased with the results for the quarter and we entered the third quarter with solid momentum. I'll start with our theater division. The most encouraging aspect of this quarter's success was the sheer diversity of the films that drove our performance. This wasn't a story about a single genre or franchise carrying the market, it was about multiple films from different studios with different target audiences, all succeeding at the same time. As we shared on our last call, the second quarter got off to an incredible start with the record-breaking A Minecraft Movie creating a cultural phenomenon that became a must-see film in theaters. With a total domestic growth of over $423 million, this film proved its ability to mobilize a massive, passionate and youthful fan base, creating an electric atmosphere in our auditoriums that simply could never happen at home and…

[Operator Instructions] We'll go first to Eric Wold with Texas Capital Securities.

One question on each of the two segments. I guess, first on the hotel segment. As you dig into the 20% gain that you're seeing in group pace looking out into 2026, is there any way you can separate the group pace between the Milwaukee area and outside of Milwaukee? Just trying to get a sense of kind of maybe what impact you're seeing from the convention center expansion, maybe what that may be driving in terms of group pace versus maybe kind of just the overall kind of business environment outside of Milwaukee. And then, on the theater side, you noted that you're now starting to take kind of that blockbuster kind of surcharge after the end of the second quarter. How large of a surcharge are you starting to implement? And any way to gauge kind of what percentage of your tickets that may impact kind of on a going-forward basis?

Sure, Eric. I'll start with the question on hotels and then I'll let Greg comment on what we're seeing with the convention center. Look, I think it's an important perspective, we have 7 hotels, 5 of them in Wisconsin, 3 of them in Milwaukee. And our group pace gains have in part been because we've got renovated meeting space and we've got it at 3 of the Wisconsin properties, 2 of them in Milwaukee and in Grand Geneva. And so we're winning in the market for group events with meeting planners because of the quality of the assets and the positioning. I think as we look out to '26, there's certainly some positive benefits of the convention center in the market. I don't have specific splits between how much is Milwaukee versus the rest of our portfolio. Maybe Greg can add some commentary anecdotally on what we're seeing with the convention center.

It's very anecdotal, just that it's going -- I think everyone is pleased with the trajectory. I mean it's -- we're definitely seeing increased activity because of the center now that it's open and people are coming to see it. But I don't have the specific numbers on where we are right this second.

Yes. And then I'll take the second question on theaters with the pricing. A couple of things. So I mentioned the changes to Everyday Matinee and the magnitude on those. Those will start to come through in Q3. That's moving that program from $7 to $7.50 and on certain films $8.50. And that $1 delta on certain films is what we're doing with generally with blockbuster pricing across a number of different films. And we're still going to be thoughtful about what types of films and what audiences were going to put blockbuster pricing on. As you know, our approach on this has been pretty cautious, and we're still very much committed to driving attendance because getting people in the door is really paramount to driving overall total revenue and the ancillary revenues that go with it. But it will provide uplift to admission per caps in the second half of the year.

Because one thing we do know is moviegoing is a ritual, you come, you see trailers and you come again. So that investment -- we view it as an investment to build that attendance.

The next question today comes from the line of Drew Crum from B. Riley Securities.

Wondering if you're willing to share some preliminary thoughts for the domestic box office going into the second half. And it looks like July ended down about 7%. The industry is going to be lapping a tough comparison in 4Q against what looks to be a pretty good slate for the holidays. So a lot of moving pieces there, but how do you see the second half shaking out for domestic box office?

Man, it's -- you're right. We're lapping some tough comparisons. But we also have some good film coming at least certainly at the end of the year, with Wicked then the Avatar, that should be very -- both should be very strong. We -- I find it very hard to predict how the box office is going to do in any period of -- any short period of time. It just it's -- you just don't know. But it looks very positive, and we should end up strong.

Yes. And Drew, I would just add to that one housekeeping item. So as -- as you may know, we've got a change in our fiscal year this year. And so last year, the year ended on December 26. This year, we will pick up the full week between Christmas and New Year's. And so for us, that fourth quarter growth will benefit from that. So we're going to have a good quality slate and a good number of films, and we're going to have a few more days.

Yes. Okay. Helpful. And then on the hotel segment, guys, I think a number of puts and takes on 3Q revenue. Can you address those? And how do you see that netting out for the current period?

Yes. I mean -- so we've done extremely well with our banquet and catering business and that really stems from the growth in group that we've seen over the last year and talked about for the last year coming into the bookings. And now those bookings are converting into business. And along with the rooms business for groups, you get the banquet and catering. It does come at a bit lower margins. And so that's a bit of the trade-off that we have going on there. And then added into a take for the quarter was the impact of the Hilton renovation. And when you strip that out, I think all things considered, we're pretty happy with the overall performance in the environment. And as Greg commented, we see stability in continuing bookings in the group business and our transient business is doing pretty well relative to other parts of the nation. So we're -- we'll see where the economy goes overall over the second half of the year, but at least we'll -- the headwind of the Hilton renovation will be behind us. And we should have a little bit easier path operationally.

[Operator Instructions] The next question today comes from [ Brighton ] Sholl from Barrington Research.

I guess I had another question on capital allocation. As we move past the reinvestment cycle in hotels, I guess, how long should we think of this kind of being in a maybe -- perhaps a lower CapEx level? Or is there like additional investments within the theater side that would look to step up? And maybe just for some of the properties outside of Wisconsin and how we should think about like the timing of reinvestment cycle for like the Chicago Hotel and the Nebraska Hotel?

Yes, Pat. So the last 3 years really, we've been going through this heavy reinvestment period coming out of the pandemic in CapEx and reinvesting into the hotels. A bit of that we would have done during the pandemic, but it just got deferred. And so we're catching up. The Hilton Milwaukee is by far the biggest project of the various things that we've done over the last 3 years, and it's a $40 million project with about 3/4 of that falling into this year. And then we go into a more normal run rate for CapEx in the hotel business. I would just say there's always some level of refresh or renovations going on across the portfolio with smaller projects but nothing like the magnitude of what we've just gone through. And so I'm not going to provide a specific guide on a number next year. I think if you look at big step up here in '25 and '24, and then you go back and look at where we were in hotels pre-pandemic, you could probably triangulate around what that might be. But I think point being we're going to see a big step in the run rate down next year. In the theater business, we're probably pretty close to the run rate that we've been at. We've done some ROI projects within that, call it, $20 million, $25 million that we're doing this year. And I don't see that range shifting very much going forward with the current footprint of theaters that we have today.

And I just even would add on the hotel side. We talked about this before. In addition to just being -- having deferred and bumping into a bunch of maintenance that came up, I mean that CapEx that came up, the nature of some of this CapEx, as we talked, there's 7-year CapEx, which is soft goods, there's 15- to 20-year CapEx, which is going to be more your case goods, your nightstand, things like that. And then you've got your, I would call it, 30- to 40-year CapEx, and that's things like gutting bathrooms and redoing those. And at the Fister, at the Grand Geneva and at the Hilton, we all had the significant bathroom projects that really even exacerbated which would have been a high CapEx period anyway. So it's not -- even as you think out even more long term, it's just not that we won't have those again.

Okay. On theaters, just with your value matinee pricing, with the increase that you implemented, where is that relative to where it had been before you implemented the value matinee program?

Can you ask that question again? What period are we trying to compare?

I guess maybe comparing the value matinee pricing compared to before instituting the $7 Everyday Matinee?

What was our pricing before the $7? It really was very market specific. It was sort of all over the place. And so we -- moving it to seniors and to kids 7 days a week, that was pretty broad. We did that. I have to go back and look and see exactly where we are for all these.

Okay. And then I guess, lastly, just on the theater footprint. I guess, can you maybe talk about the opportunities for new build or the acquisition market and how you are kind of seeing that evolve with maybe a stabilizing box office?

I think that the -- let's take the new build. I don't think there's a lot of new build opportunities. There's going to be some here and there as markets grow and markets will demand in terms of -- there'll be demand in new growth markets. So I don't think that's a huge thing. But we do see -- we are looking at a few here and there. And then on the M&A side, again, it's so hard to predict what's going to happen there. It's not -- it's very sporadic. These are not owned generally by funds that have 5- and 7-year hold period. They're owned by families, who sort of been marching to the beat of their own drummers.

At this time, it appears there are no other questions. So I'd like to turn the call back over to Mr. Paris for any closing remarks.

All right. Well, we'd like to thank everyone for joining us once again today, and we look forward to talking with you in early November when we release our third quarter results. Until then, thank you, and have a great day.

That concludes today's call. You may disconnect your lines at any time.