Marcus Corp Q1 FY2021 Earnings Call

Good morning, everyone, and welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Celine, and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President, 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 very much, and good morning, everybody, and welcome to our fiscal 2021 first quarter conference call. As usual, I need to begin by stating 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 government restrictions 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 or restaurant closures are expected to be permanent or 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. And 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 first 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 our Regulation G 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, which is where I will start with spending a few minutes briefly sharing a few numbers from our quarter with you, and I'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 for the near term and longer future. We'll then open the call up for questions. So you've seen the numbers. This will be the last quarter that we're comparing our results to a quarter that included pre-COVID results for the majority of the quarter. We did have multiple non-recurring items last year, all of which are detailed in a non-GAAP reconciliation that we included at the end of the press release. And so while this year's first quarter results were understandably worse than last year, they were also noticeably better than the last three quarters of fiscal 2020. Even after adjusting for one non-recurring item in our fiscal 2021 first quarter, a one-time state government grant, our non-GAAP adjusted EBITDA, while still negative, was over $10 million better than our fiscal 2020 fourth quarter, a sign of real progress and that's despite the fact that our first quarter is historically a weaker quarter than our fourth quarter. Our theater results were obviously still impacted by state and local restrictions and a significantly reduced number of new films. But our adjusted EBITDA from this division still improved by nearly $5 million compared to last quarter. And our hotels and resorts division reported adjusted EBITDA that was $6 million better than last quarter, and in fact, was over $2 million better than last year. Greg will go into a little more detail about these improvements in his remarks. There are couple of items worth noting in our numbers below operating income. As you'd expect, our interest expense increased during the first quarter due to increased borrowings and higher average interest rate. It's important to note however that our fiscal 2021 first quarter interest expense included over $600,000 of non-cash amortization of debt issuance costs compared to only $49,000 of such costs last year. Also want to point out that beginning in fiscal 2021, the accounting for our convertible notes changed. We've now showed the entire $100.1 million of convertible notes as debt. There is no longer a portion allocated to equity. As such, our reported interest expense this quarter did not have any non-cash debt discount, unlike our fourth quarter of fiscal 2020. We will also note that we reported net gains on disposition of assets during the first quarter of fiscal 2021. This net gain was due primarily to the sale of our interest in the joint venture during the period. Our effective income tax rate was 27.7% during the quarter, and we anticipate that our effective income tax rate for the remaining quarters of fiscal 2021 will be or may be in that 24% to 26% range that we've typically seen. Of course, our actual fiscal 2021 effective income tax rate may be different depending upon actual facts and circumstances. Shifting gears away from the earnings statement just for a moment, our total cash capital expenditures during the first quarter of fiscal 2021 totaled approximately $1.5 million. Most of these dollars were spent on two projects, a theater renovation mentioned in our press release and a lobby renovation that we've initiated at our Grand Geneva Resort & Spa. We're still estimating that our fiscal 2021 capital expenditures may be in the $15 million to $25 million range, with many of our projected expenditures back-loaded to the second half of the year. Let me now provide some brief financial comments on our operations for the quarter, beginning with theaters. Total attendance was down 81.4% compared to the prior year first quarter, reflecting the large number of theaters closed for all or portions of the quarter and the fact that our open theaters were only operating on Tuesdays and weekends. Now according to the data received from Comscore and compiled by us to evaluate our fiscal 2021 first quarter results, United States box office receipts decreased 89.7% during our fiscal 2021 first quarter. As a result, we believe our admission revenues decline of 80.7% for comparable theaters during the first quarter of fiscal 2021 outperformed the industry average by 9 percentage points. Our average admission price for our comparable theaters increased 3.7% during the first quarter and our average concession and food and beverage revenues per person at our comparable theaters increased 16% for the first quarter. Shorter lines at the concession stand, the emphasis we are placing on encouraging guests to purchase their concessions and food and beverage ahead of time, either online or using our mobile app and the success of our Marcus Private Cinema program, particularly for several family films that were released during the quarter contributed to our increased per capita revenues. Shifting to our hotels and resorts division, our total revenue per available room or RevPAR for our eight owned hotels decreased 46.4% during the first quarter compared to last year's same period. Once again, now comparing it to the industry, however, when you compare, according to data received from Smith Travel Research and compiled by us in order to compare our results, our hotels outperformed comparable upper upscale hotels throughout the United States during the first quarter by approximately 8 percentage points. The data also indicates that our hotels outperformed competitive hotels in our market by approximately 6 points, 6 percentage points during the first quarter. Breaking out the numbers for all eight hotels more specifically, our fiscal 2021 first quarter overall RevPAR decrease was due to an overall occupancy rate decrease of 25.9 percentage points, partially offset by a 2.6% increase in our average daily rate or ADR. Our average first quarter occupancy rate for our owned hotels was 28.3%, with several hotels performing much better than that. Now finally, before I turn the call over to Greg, let me also briefly comment on our balance sheet liquidity position. You may recall that we reported cash and revolving credit availability of approximately $227 million at the end of December. Thanks to the receipt of a remaining fiscal 2019 income tax refund, several state government grants and continued strong cost controls at every level of our organization, our cash and revolving credit availability was still an extremely strong $213 million at the end of our fiscal 2021 first quarter. We also used proceeds from the previously mentioned sale of a joint venture to pay down our term loan by over $4 million during the quarter. And now that we have filed our fiscal 2020 income tax return, we anticipate an additional income tax refund of approximately $24 million later in the year, along with tax loss carryforwards that may be used in future years. We will continue to pursue additional opportunities to reinforce our liquidity in the future as well, which would include sales of surplus real estate and other non-core real estate. We have over $8 million of carrying value in additional assets currently under contract or letters of intent to sell later in 2021. We continue to believe we'll receive total sales proceeds from real estate sales during the next 12 to 18 months, totaling approximately $10 million to $40 million, depending on demand for the real estate in question. Our significant liquidity combined with the receipt of expected income tax refunds and proceeds from the sale of surplus real estate positions us to continue to meet our obligations as they come due and continue to sustain operations throughout fiscal 2021 and into 2022 even in the very unlikely event that our properties continue to generate significantly reduced revenues. With that, I'll now turn the call over to Greg.

Thanks, Doug. During our year-end earnings call in early March, I opened my remarks by recognizing that there still may be some bumpy weeks and/or months ahead of us, but that we were very encouraged by a number of green shoots that were springing forth in both of our businesses. Well now, two months later, I think we all agree that most of the news since then has been largely encouraging and some of those green shoots are starting to bud. The rollout of vaccinations has gone better than expected with over 50% of the eligible adult population having now received at least one shot, both nationwide and most importantly, in our markets. As you know from prior calls, I'm a huge proponent of the vaccines and their role on getting this country and our businesses back to normal. There's still work to be done to get more people vaccinated. The most eager have now been vaccinated. Now the heavy lifting begins as we work to motivate others to get vaccinated. But you have to be encouraged by the progress thus far and the resulting improvements we are seeing in the COVID numbers across the country. As we said in our press release, we truly do see a recovery beginning to take hold. Having said that, this is no time to get complacent. We know the recovery will not be an overnight process. So our team still has a lot of work ahead of us, as we rebuild our businesses. Our priority will continue to be the safety and well-being of our associates, customers and communities. This has guided everything we've done so far and will guide us in the weeks and months ahead as well. So let's start with our hotel division. Doug shared some of the numbers with you, including 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 outperformance in recent quarters has widened significantly. It's fair to assume that as demand increases and all hotels are fully operating, we might expect that our percentage of outperformance might decrease somewhat. But as I shared with you last quarter, I think our numbers speak to a flight to quality. It should be beneficial in the future and our ability to consistently outperform in our markets. Stated simply, we've always had some of the best properties in our respective markets. And it doesn't surprise us that they've outperformed during this challenging time. But I will look at some of the other numbers Doug shared with you about the first quarter did surprise us. Our first quarter is historically our weakest quarter of the year. So without meaningful business travel yet, we did not necessarily expect to report quarterly results that will end up better than last year even after adjusting for some non-recurring costs last year. But thanks to stronger-than-expected drive to leisure customer demand, that's exactly what we did. The majority of our customers have been transient leisure customers who are looking to get away and change their scenery after months of staying home. As a result, not surprisingly, weekend business was the strongest at all of our hotels and during spring break weeks in March. We even saw a stronger than expected business midweek. Properties like the Grand Geneva Resort & Spa and Timber Ridge Lodge performed the best among our hotels, as they are well suited for families looking to get away. But our Downtown hotels also saw an uptick in leisure business as well. During our last call, I shared with you that we had a record ski season at Grand Geneva. We've been at or near sellout on multiple Saturdays at this resort. It wasn't that we didn't have any transient business in group business; we continued to have weddings and some small group business, and we continue to have success booking Major League Baseball teams and NBA basketball teams. And as I shared with you in March, there are also some green shoots in individual business travel, and we believe the continued progress with the vaccine rollout will further spark growth in both of these business travel segments. I think one of the first steps leading towards the resumption of business travel will be the reopening of offices. And although it is slow, we're starting to see progress on that front. Our improved first quarter numbers are also a direct result of the continued hard work of Michael Evans, our hotel division president and his entire team. They've done a fantastic job of streamlining our operations, reducing both variable costs and costs we might have previously been fixed in order to keep our hotels open and operating at reduced occupancy levels. They've done incredible work focusing our marketing efforts on reaching to drive to leisure market through aggressive campaigns, promoting creative packages for our guests, contributing to our outperformance. Looking to future periods, our group room revenue bookings for fiscal 2021 commonly referred to in the hotels and resorts industry as group pace is running significantly behind where we would historically be at the same time in prior years. But we are beginning to experience increased booking activity for later in 2021 and particularly for 2022 and beyond. Banquet and catering revenue pace for fiscal 2021 is running behind where we'd typically be at the same time in prior years, but not as much as group room revenues due in part to increases in wedding bookings. Many of our canceled group bookings due to COVID-19 are rebooking for future dates, excluding one-time events that could not be rebooked for future dates. The average lead time for reservation in the leisure segment continues to be approximately three days, making it very difficult to forecast occupancy from this customer segment. Having said that, everything we've seen thus far supports our belief within the industry that leisure travel will continue to be quite strong, particularly during the upcoming summer months. It's our hope that as we get to the fall and midweek leisure travel subsides as kids go back to school, we'll also be experiencing continued improvement in the business segments. Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets. Finally, let me end my remarks about hotels by once again noting that we would have an interest in growing this division in the future. We see opportunities to pursue less capital intensive strategies, such as strategic partnerships, the creation of a fund or straight management contracts. No one really knows yet what the hotel transactional market might look like and whether there may be opportunities to acquire hotels that might be experiencing some distress. Regardless of opportunities that arise, we want to be prepared on the other side of this. So let's shift to our theater division. Doug went over the numbers with you. We started the quarter off with only 52% of our theaters opened due to temporary restrictions put back in place in several of our markets in the fourth quarter. As those restrictions were lifted, we began reopening theaters once again, and as a result, we ended the first quarter with approximately 74% of our theaters open. And as we noted in our press release, beginning this coming weekend, we will have nearly 90% of our theaters opened, many with expanded operating hours and days. Like our hotel division, the highlight of the quarter was our outperformance versus the industry. As Doug shared with you, based on industry data available to us, we believe we outperformed the industry by approximately 9 percentage points this quarter. In fact, based upon the metric, we believe we were the top performing theater circuit during the first quarter of fiscal 2021 compared to the top 10 circuits in the US. Additional data received and compiled by us from Comscore indicates our admission revenues during the first quarter of fiscal 2021 represented approximately 4.8% of the total admission revenues in the US during the period, commonly referred to as market share in our industry. This represents an approximately 55% increase over our reported market share of approximately 3.1% during the first quarter of fiscal 2019 prior to the pandemic. We certainly recognize the closed theaters in other markets in the US contributed to our outperformance of both these metrics. So we expect our outperformance to lessen in future periods as more theaters open. But that still doesn't lessen the fact that our theaters outperformed the rest of the industry open or closed, a great job all around by Rolando Rodriguez and his entire team. During our year-end earnings call in early March, we talked about one of the primary contributors to this outperformance. Faced with limited new film product and the pandemic that was further limiting customer willingness to go to public places, our team had to get creative. We had to move forward with innovative promotions and programs that would encourage the return of moviegoing to an audience who we believe wanted to come back, but was reticent to do so. Out of that came the development of Marcus Private Cinema, or as we refer to it internally, MPC. Developed and introduced in the second half of the fourth quarter, this program really took off during the first quarter of fiscal 2021. Sales attributable to Marcus Private Cinema have exceeded expectations, partially offsetting reduced traditional attendance. During the last 11 weeks of fiscal 2021 first quarter, we averaged over 1,500 MPC events per week, accounting for approximately 21% of our admission revenues during those weeks. MPC works particularly well with family films, so not surprisingly, our top three films during the quarter were Raya and the Last Dragon, Tom and Jerry and The Croods: A New Age. All three of these films were available to customers in other formats. So that is a lot about what we believe is a strong desire on the part of consumers to see movies the way they were meant to be seen on the big screen. Industry optimism around the consumers becoming anxious to return to movie theaters has been further supported by the early second quarter box office results of King Kong and most recently, Mortal Kombat and Demon Slayer, easily becoming the best performing film since the onset of the pandemic. Recent surveys by the National Association of Theater Owners have indicated that approximately 65% of those surveyed said they are very or somewhat comfortable going to the movies right now, with the percentage climbing to the mid-80s when the participants indicate they are vaccinated. This is up from around 47% at the beginning of the year, which is an exciting improvement in just a short period of time. Vaccines and reducing COVID numbers not only play a critical role in getting customers comfortable with returning to movie theaters in larger numbers, but these external factors are also critical as studios make decisions on the release of new blockbuster films. With the strong performance of the three films I just mentioned, it should encourage the studios to move ahead with future scheduled release dates of new films. Our press release lists several films that are slated for release during the rest of May and June. And once we hit July, there is a long list of films currently scheduled to be released each and every week. It also continues to be very encouraging the key markets in New York and California reopening, San Francisco, Los Angeles and New York City to name a few, are very important markets for the film studios and all current signs point towards these markets being much more open by the time we hit the summer film schedule, which bodes well for the studios' willingness to hold to their current summer release plans. Now like my comments about the hotel division, please don't interpret my optimism about what lies ahead to suggest that we may not still face challenges in the near term. There certainly is the possibility that there may be further changes in the release schedule and the studios continue to experiment with the theatrical window. We have yet to learn how that might change consumer behavior in the future when the world is back to normal. We know there are uncertainties in the weeks ahead, but I believe we are prepared to navigate through any further challenges as we redefine, refocus and rebuild our industry-leading theater business. In closing, while it will take some time for both of our businesses to return to pre-pandemic levels, the quality of our assets, the industry-leading out-of-home entertainment and hospitality experiences we provide and our continued focus on service and safety have positioned both Marcus Theatres and Marcus Hotels & Resorts for continued recovery. We are encouraged by the improvements we are seeing and remain optimistic for the future. And I can't end my prepared remarks without saying that I continue to be thankful for our experienced and dedicated associates throughout our organization. Never has my grandfather's oft-repeated statement rung more true than during this past year; our associates are truly our most important asset. With that, at this time, Doug and I would be happy to open the call up for any questions you may have.

Thank you. We'll go first with a question for Mike Hickey with The Benchmark Company. Your line is open.

Hey Greg, Doug, congrats, guys, on the quarter and taking the questions. Obviously, we're seeing, I think the drumbeat, a positive evidence cinema is coming back. So in Asia, we're seeing in the US, we're seeing in your circuit specifically just sort of curious how opportunistic you think you can be on potentially growing your network given that we are seeing the bounce back and we are seeing theaters like ArcLight and Pacific go dark in California, just curious if you think you can grow your network here and if you've looked at those deals specifically?

Look, I think the first thing and I'll repeat what others in our industry probably similarly situated say. First job one is just keep our balance sheet solid and get ourselves in the right place. We will look for opportunities to grow the network as we can with great properties. Yes, I know I have to notice that there are quite a number of theaters going dark; it caught my attention. What caught my attention, first, I would say that ArcLight is not reopening. I’ll take that bet with anybody who wants to bet me on that. Those theaters are so productive nationally that they will reopen. I just don't know who will control them. We certainly welcome those discussions, not that I can speak to right this second, but I think that we're one of the best operators in this business. We have great food and beverage, we have great experience, and I think our hotel side helps influence our theater side from a level of service. So for people who have theater properties, they've made some significant investments, to the extent that we can come in and help them as we get through it, we are open to discussions.

Thanks, Greg. One more, I guess from Netflix you're seeing Zack Snyder's upcoming film, Army of the Dead, which sounds pretty exciting. It looks like it's going to have an exclusive theatrical release for one week looks like window and it's getting some fairly broad distribution from some of your peers. Curious if you plan to show this down and the opportunity you see from OTT content maybe being part of the new normal?

Yes, we are planning to show it. It falls within the realm of experimentation and is indeed a short-term trial. I've mentioned this before; I'm not sure if I've discussed it on our calls, but there's an overwhelming amount of content available. If the over-the-top services begin to introduce some of this content to theaters, it could offset the diminishing release windows with potentially more favorable content. I don’t have specific updates for you today or predictions about what will happen, but I believe it presents a great opportunity. However, the interesting aspect of the Oscars was the challenge posed by the fact that many people were unfamiliar with the films. It's challenging to establish a consistent schedule because some of these films are not as commercially viable, but there's undeniable value in experiencing a film in a theater rather than at home. After watching a movie on the big screen, the experience feels markedly different, giving me confidence in the long-term prospects of this business once we navigate the current situation.

That's great. Yes, it's impressive. For my last question, regarding the hotel side, the Grand Geneva Resort & Spa is really standing out during this challenging period. Are you considering putting it up for bidding, Greg, or is it more of a key asset you'd prefer to keep? Also, about Summerfest, is that officially confirmed, and how is it progressing? How significant can it be in comparison to similar events, as it could potentially be very large? I'm interested in your views on that event and whether it's positively influencing the situation.

At Grand Geneva, we believe we have identified a new line of business that could be beneficial in the long term. We had a lot of success with athletic events, attracting attendees that we don’t typically see in the first quarter. This is something we expect to continue positively in the future. It’s challenging to assess the transactional market right now, but Grand Geneva is an invaluable asset that has performed well this quarter. Regarding Summerfest, it has moved to the fall, and we’ve heard that it's still happening. There's an interesting dynamic at play; summer leisure activities should thrive in our area. While I'm unsure how festivals will unfold, people are eager to engage and leave their homes, which should also be advantageous for theaters.

Nice. Thanks, guys. That's all.

Thanks, Mike.

Thank you. We have our next question coming from the line of Eric Wold with B. Riley Securities. Your line is open.

Thanks. Good morning, Greg and Doug.

Good morning, Eric.

So just a couple of questions, I guess, one is can you kind of talk about the beginning of the market share gains you're seeing on the theater side and kind of came back later obviously you acknowledge that some of that is due to theaters that haven't reopened yet, and you've obviously gained share at their expense. I guess, obviously, that dynamic can change as people come back. But I guess, thinking about the markets that you're in, have you seen theaters permanently close in those markets? Any way to quantify, what that impact could be as everything kind of starts coming back online?

No, not yet. It's difficult to quantify; we aren't sure what will reopen. I recently noticed a theater in one of our markets that we thought would close, but now it's set to reopen. There will be closures and reopenings, and if you're a landlord with a theater, you might find someone to run it for the rent. Ultimately, I think there will be fewer theaters than there are now, and some of our markets could benefit from that, particularly since many outdated theaters are located in smaller markets. This could lead to some people traveling farther to see a movie if the closer options are closed.

And Eric, just to set the numbers, when you're comparing to the national numbers, of course, we're going to look better because we are more open than others. I mean Regal, for example, was closed the entire time. Having said that, keep in mind, we started the quarter with only 52% of our theaters open and ended the quarter with 74%, and yet we still had that kind of performance. So I don't want to say it was all just because of closures nationwide.

Got it. And then on the concession trends, obviously great. So it seems like gain, you're going to talk about that being driven by the combination of shorter concession lines and more in-app ordering. Assuming lines eventually get longer as people come back, is there a way to parse out as tough, but what you saw came from the outside of the benefit in terms of what kind of tailwind could come back as more people feel comfortable ordering on that? Obviously, it is easier to promote people to grow bigger basket sizes when not on an app, is there any way to think about what the sustainable number could be versus historical levels?

I think it's really hard to do that right now, Eric. I mean we're surmising that the app ordering and the online are helping, but it's still hard to quantify exactly, because we also have shorter lines, and in this particular quarter, we had three family films where we did a lot of really good MPC business. And so we saw most of our growth in our traditional concession business. So it's hard. Certainly, we've always said, I mean this is pre-COVID and everything else, we've always known in this industry that shorter lines help.

I would believe that too. I think your comment, Eric, is exactly right about building baskets. The app won't miss the upsell opportunity, while the human standing behind the line may only be focused on filling the popcorn bucket as fast as they can. So the app, I think, will create a better opportunity. But the other side is oiling the labor side of that; if we get more people ordering on the app, that means less concession stand labor now. So that could be financially beneficial for us.

Got it. And the final question, the $10 million to $40 million of potential assets that you highlighted, Doug, and you talked about it on the last call as well. How would you quantify that versus the total universe of potential assets contributes excluding hotels and larger properties the surplus? Is that kind of the upper end of the surplus asset basket? Or is there a way to think about what could go beyond that $10 million to $40 million?

Look, it can go beyond that number. We haven't put a specific number out there, but we have more than that. We're trying to give a range for what could get done in the next year or so. Some of these outliers might go a little longer. I'll just say it could be higher than that in the long run.

Thank you. I believe we have our next question coming from the line of Jim Goss with Barrington Research. Your line is open.

Thanks. I might start by following up on what Eric was just asking regarding the real estate. What do you envision your own versus managed properties ultimately being in terms of an end game in the hotel division?

Well, wholly-owned, I don't see a lot of new wholly-owned acquisitions right this second. So my guess is short to medium term, it's going to be looking at stuff we can do where we're going to take management contracts, some small co-investment, where we acquire assets with partners to build out on that platform. I think we're seeing the benefits of some diversity right now. I think that's been, as we said, the greatest news has been really very helpful.

And the growth would skew things a little bit more to the right. So some growth that we expect to probably be more likely on the less capital-intensive side, the only other thing that would change might be you're also headed toward has might we reduce the number of owned properties we have, and we've talked about that in the past.

Okay. And also on the hotel side, you've usually given a little bit of an update on your latest project, Saint Kate - The Arts Hotel. Any comment on how that seems to be going and what your expectations are for that?

Well, it's going okay. I mean, we're open for business. That was a positive, and we’ve gotten unbelievable reviews. I think we all know that it's gotten one kind of NAST awards; it's won Best in the Country award. It really has been well received from an accolade perspective. And the guests, if you look at Tripadvisor, traveler reviews, it is now the number three hotel in Milwaukee from traveler reviews and in its class. The team has really done a fantastic job of running the hotel. But the problem we have is we really didn't get a chance to establish it. Nobody knew what Saint Kate was, and we needed to be able to get those accolades. Even though we were closed, we made sure the public spaces were open; we got some NBA basketball teams in there that were originally planned for spring. Now we’ve opened seven days a week, and we're starting to gain traction there. We're pleased with the reaction we're getting; we got a lot of room to grow, but the team is committed, and they know they have something really special on their hands.

Okay, thank you. And over on the theater side, so IMAX has been over-indexing and I believe the PLF experience in general has been outpacing or taking the larger share to normal. Have you had that same experience? And do you think it will continue beyond the initial return of customers? And maybe separately, regarding the impact of windows and streaming, if that creates a skew to blockbusters and fewer smaller films, how will that affect your overall business?

Yes, we've certainly seen strong performance with our proprietary large format screens and ultra screens in the past, and now we have fewer products and lower attendance overall. It's clear that when people choose to go to the theater, they prefer to see films on the big screen when seats are available. It's not a situation where these formats are sold out; customers are looking for other auditoriums. This has contributed to the increase in our average admission price this quarter, despite a higher percentage of large format sales. We expect this trend to continue. Those formats are consistently the first to sell out for major blockbusters. Even with the price premium, that's where audience interest lies, and we’ve invested capital over the years to increase the number of those large format screens.

I'm not sure if I know, but I wouldn't be surprised if it was, but to be careful to draw any conclusion right now, the consumer who now says I'm going out is treating themselves to something they haven't done in a while. So very tough to extrapolate going forward. I want to talk about the small things for a second; the small films. Again, I don't know what's going to happen in terms of will the small films go away? Again, the trend had been away from those, but there is some things that are changing that might impact that in the other direction with so much over-the-top content being produced. The studios are grappling with the big cost to release a smaller film. VPFs are burning off, so the cost of prints is starting to go away. We've talked about this before, and VPFs will start to go away, which could unhit a cost model. And advertising is something we need to work on; I believe we can find ways to ensure studios can effectively market smaller films.

Sure. That notion of working with Amazon and Netflix, with some films that are only going to go on those services might be something that you and the rest of the industry can pursue.

Yes. It goes back to the same comment I made earlier. It can be in the theater and then it’s exclusive on their service; it's still exclusive on their service and will drive traffic to their services. Of course, they're going to want some premieres, but there's a lot of content that I think again, these are not wages; you cannot decide which washer and dryer you want and pick from a big selection. If you like a piece of content, it is exclusive to wherever it's playing.

Makes sense because you don't really want the blockbuster to be in 12 of your 14 screens or something like that because you need to support some variety to get the rest of the audience.

Yes.

Thanks, Jim.

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

Certainly, I want to thank everybody once again for joining us today. Tomorrow, we'll be holding our 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 our Investor Relations section of our company's website, www.marcuscorp.com, or through the direct link provided in the press release that we issued dated April 27, 2021, and selecting guest when logging in. Shareholders who register with a control number will be able to vote and ask questions during the meeting. We also look forward to talking to you once again in approximately three months when we release our fiscal 2021 second quarter results. Until then, thank you, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.