Good morning, everyone, and welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Lauren, and I will be your operator for today. 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 The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Paris for his opening remarks. Please go ahead, sir.

Thanks, Lauren. Good morning, and welcome to our fiscal 2024 first quarter conference call. I need to begin by stating that we plan to make 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 similar terms. These 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 that 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 2024 first quarter results and in the 'Risk Factors' section of our fiscal 2023 annual report on Form 10-K, which you can access on the SEC's website. We will also post all Regulation G disclosures when applicable on our website at 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. Additionally, we routinely post news releases and other information regarding developments at our company that impact our investors, customers, vendors, and other stakeholders. You should look at our website, marcuscorp.com, as an important source of information regarding our company. We also refer you to the disclosures we provided in today's earnings press release regarding the use of adjusted EBITDA, a non-GAAP measure used in evaluating our performance and its limitations. A reconciliation of adjusted EBITDA to the nearest GAAP measure is provided in today's release. All right. With that behind us, let's begin. This morning, I'll start by spending a few minutes sharing the results from our first quarter with you and discuss our balance sheet and liquidity. We reported a quarter in which we expected to face significant headwinds. The first quarter is always a seasonally challenging quarter with slower leisure travel at our Midwestern hotels during the winter months and what is often a lighter movie slate coming out of Hollywood. In addition to the normal seasonality, this year we knew we would face content supply challenges resulting from the prolonged movie production shutdown during last year's Hollywood strikes. With these challenges in mind, our teams focused on closely managing our operations and the aspects we can control. Our first quarter results were mixed across our two segments. Our hotel division delivered revenue, RevPAR, and earnings growth on continued strength in our group business, while our theaters division was negatively impacted by the weaker film slate, with significantly lower attendance. We managed expenses well in light of these lower revenues. Here are a few highlights from our consolidated results for the first quarter of fiscal 2024: Consolidated revenues of $138.5 million decreased by $13.7 million or 9% compared to the prior year quarter, with revenue growth in our hotels and resorts division offset by the revenue decrease in our theater division. The operating loss for the quarter was $16.7 million, a decline of $7.7 million compared to the prior year quarter. Consolidated adjusted EBITDA for the quarter was $2.3 million, a decrease of $7.2 million over the first quarter of fiscal 2023. Turning to our segment results, starting with our hotels and resorts division, revenues for the first quarter of fiscal 2024 reached $57.2 million, representing a 2.5% increase compared to the prior year. Total revenue before cost reimbursements at our seven owned hotels increased over $1.7 million or 3.8% over the first quarter of fiscal 2023. RevPAR for our comparable owned hotels grew 2.1% during the first quarter compared to the prior year, resulting from an overall occupancy rate increase of 2.9 percentage points, partially offset by a 3.4% decrease in our average daily rate, or ADR. Our average occupancy rate for the first quarter was 53.7%. The decrease in ADR resulted from an increase in our group rooms as a percentage of our overall room mix, with growth in midweek group rooms sold, which generally increases occupancy at lower rates. Group rooms increased to 34.5% of our total room mix during the first quarter of fiscal 2024, compared to 28.9% in the prior year quarter. Enhanced revenue management during slower weeks and midweek nights in the first quarter led to increased occupancy and RevPAR at lower daily rate offerings to optimize overall room revenue. Our efforts in growing group business and better revenue management were evident when comparing our performance relative to our peers. According to data received from Smith Travel Research, comparable competitive hotels in our markets experienced effectively flat RevPAR growth of 0.1% for the fiscal first quarter of 2024 compared to the first quarter of fiscal 2023, indicating that our hotels outperformed their competitive set by 2.3 percentage points. When comparing our RevPAR results to comparable upper-upscale hotels throughout the United States, the upper upscale segment experienced a 2.0% increase in RevPAR during our first quarter compared to the equivalent quarter of fiscal 2023. This indicates that our hotels performed in line with industry trends nationally. With the growth in group business and events, our banquet and catering operations continued to grow, with food and beverage revenues up 6.4% in the first quarter of fiscal 2024 compared to the previous year. Overall, hotels adjusted EBITDA increased slightly in the first quarter of fiscal 2024, improving approximately $400,000 compared to the prior year quarter. Now turning to our theaters, our first quarter fiscal 2024 total revenue of $81.3 million decreased by 15.7% compared to the prior year first quarter. Comparable theater admission revenue decreased by 13.8% over the first quarter of 2023, with comparable theater attendance decreasing by 17.5%. Our first fiscal quarter began on December 29 and ended on March 28, and thus included 3 days between the holidays but excluded the opening weekend of Godzilla x Kong: The New Empire at the end of March. When comparing our results to other industry sources such as Box Office Mojo for the first quarter, it is crucial to note that the domestic box office decrease in the first calendar quarter was approximately 3.3 percentage points better than the domestic box office decrease for the comparable weeks in our first fiscal quarter. Utilizing our comparable fiscal weeks data received from Comscore, U.S. box office receipts decreased by 9% during our fiscal 2024 first quarter compared to fiscal 2023 first quarter, suggesting that our performance lagged the industry by about 4.8 percentage points. We attribute our lower box office performance during the first quarter to two primary factors: first, the biggest film of the quarter, Dune: Part Two, performed exceptionally well on IMAX screens, resulting in IMAX screens taking market share from our UltraScreen and SuperScreen PLF formats in specific markets. While we believe the overall customer experience on our PLF screens with recliner seating, laser projection, and Dolby Atmos sound is second to none, the market and promotional approach for this film negatively impacted our PLF market share this quarter. Secondly, the total box office in our top seven markets underperformed the overall decrease in the national box office, which we believe is due to an unfavorable film mix that was light on family content and the stronger relative performance of Dune in markets where we do not have a presence. Our average admission price increased by 4.9% during the first quarter of fiscal '24 compared to last year. This increase in our admission per caps was primarily due to strategic pricing actions taken during fiscal 2023, partially offset by a decrease in the percentage of 3D ticket sales during the first quarter of '24 compared to the first quarter last year, which was positively impacted by high 3D ticket sales from Avatar: The Way Of Water. Our average concession food and beverage revenue per person at our comparable theaters increased by 0.8% during the first quarter of fiscal 2024 compared to last year's first quarter. The increase was primarily due to inflationary pricing changes implemented during 2023, partially offset by a decrease in the number of concession items purchased per customer, which we believe resulted from the fewer blockbuster films in the quarter, which tend to result in larger average purchase sizes as customers make a bigger event of going to see major films. Our top ten films in the quarter accounted for approximately 62% of the box office in the first quarter of fiscal 2024 compared to 71% for the top ten films in the first quarter of last year. This less concentrated film slate led to an approximately 3 percentage point decrease in overall film cost as a percentage of admission revenues. On lower revenues, theater division adjusted EBITDA during the first quarter of fiscal 2024 was $6.2 million compared to $13.8 million in the prior year quarter. Given the soft film slate, we closely managed operating hours and labor throughout the quarter. Shifting to cash flow and the balance sheet, our cash flow from operations was a use of cash of $15.1 million in the first quarter of fiscal 2024 compared to cash used by operations of $7.7 million in the prior year quarter, with the increase in cash used primarily due to the lower EBITDA. Typically, our cash flow from operations in the first quarter is influenced by seasonal changes in working capital resulting from the slowdown in our businesses following the peak holiday season and by the timing of various year-end accounts payable and compensation payments. Total capital expenditures during the first quarter of fiscal 2024 were $15.4 million compared to $8.9 million in the first quarter of fiscal '23. A large portion of our capital expenditures during the first quarter were invested in renovation projects in the hotel business, particularly at The Pfister Hotel and Grand Geneva Resort & Spa, with the remaining funds allocated to maintenance projects in both businesses. Our capital investments and renovation projects have progressed as planned, and we continue to expect capital expenditures for fiscal 2024 to range from $60 million to $75 million, while recognizing that the timing of several of our planned expenditures remains estimates at this time. We are still finalizing the scope and timing of various projects, and the actual timing will influence our final capital expenditures number for the year. We will update our capital expenditure estimates as the year progresses. Additionally, during the first quarter, we invested approximately $4 million in a joint venture that acquired the Loews Minneapolis Hotel, a 251-room full-service luxury hotel that Greg will discuss further. This investment showcases the flexibility and strategic advantage provided by our strong balance sheet and liquidity, making us an attractive asset buyer to sellers and enabling us to move quickly when opportunities arise. Our balance sheet remains robust, ending the first quarter with $17 million in cash and over $237 million in total liquidity, with a debt-to-capitalization ratio of 27% and net leverage of 1.7x net debt to adjusted EBITDA. With that, I will now turn the call over to Greg.

Thanks, Chad. Good morning, everyone. We entered the year with a mixed outlook across our two businesses. In hotels, we observed a continuing trend of strong group bookings, a healthy economy with steady travel demand, significant events, and strong demand drivers in our markets alongside several recently renovated properties in our portfolio. Conversely, in theaters, we anticipated navigating a short-term content supply disruption stemming from the Hollywood strikes that would likely pose challenges for several quarters. As I mentioned on our last call, January and February had slow starts, and while I'm pleased to say that March showed improvements, it still proved to be a tough quarter for the movies. We expected these short-term challenges in our industry and managed the business accordingly. While the comparisons to last year are undoubtedly tough, the overall company first quarter results were actually slightly better than we expected. People often inquire about why we operate these two different businesses. This quarter, along with the past several years, have illustrated the advantages of our diversified business model, which allows us to mitigate periodic bumps in one of our segments. Although the short-term expectations for our theater and hotel divisions differ this year, our long-term outlook for both businesses remains positive and optimistic, and we anticipate growing momentum in the second half of the year. Focusing on our hotel and resorts division, you've seen the segment numbers, and Chad provided additional insights into performance metrics, including our outperformance against competitive set and our in-line performance with upper upscale hotels nationally. As discussed in previous years, our hotel business experiences significant seasonality since most of our company-owned hotels are located in the Midwest. We often incur losses in this division during winter months, and for the first quarter of fiscal 2024, we reported breakeven EBITDA, a notable improvement over last year's EBITDA loss. A few trends correspond with quarter performance that I'd like to highlight. Starting with average daily rates (ADR), our ADR was down 3.4% in the first quarter compared to the same quarter last year due to three factors: changes in our business mix, adjustments in our revenue management strategy, and general market softening. In the first quarter of 2024, group room revenue constituted over 34% of our overall mix compared to 29% last year. Although group business typically carries lower rates and dilutes ADR, it enables us to enhance midweek occupancy and is beneficial for our overall RevPAR. Furthermore, the robustness of our group business is driving growth in our banquet and catering operations, which experienced a 6.4% increase in the first quarter of 2024 relative to last year. We continue to refine and optimize our revenue management strategies. During the first quarter, we adjusted our approach at select hotels to sell rooms at lower daily rates during low demand periods, aiming to drive occupancy and maximize revenue with available room night capacity. This strategy proved particularly effective during winter months when demand traditionally drops, and we adopted a more aggressive stance on rates than we did last year. The net outcome was successful in driving our occupancy and overall RevPAR higher. RevPAR grew in three of our seven owned hotels, with average daily rate growth at two hotels and occupancy growth at four of seven hotels, leading to overall RevPAR growth of 2.1%. Our group business continues to thrive, and we are effectively capturing our share of it. We have previously indicated our strong group bookings over the past several quarters, and we are currently witnessing positive results. Our group room revenue bookings for the remainder of fiscal 2024 are running roughly 23% ahead of where we stood at this time last year, excluding the impact of the upcoming Republican National Convention in Milwaukee this summer. Even more encouraging, our group pace for fiscal 2025 is running over 60% ahead of where we were last year, similar trends apply to banquet and catering pace for fiscal '24 and '25. Chad already mentioned our investments in renovations in our owned hotels this quarter. One advantage of winter's seasonality and slower months is that it presents an opportunity for us to complete projects with minimal disruption to hotel operations. We have made excellent progress on our renovation projects, with most of the updated ballrooms and meeting space at Grand Geneva now back in service and guest room renovations in the historic tower of The Pfister Hotel on track for completion in June. The updated spaces look fantastic, and our team has excelled at executing these extensive and complex projects. As our hotel division enters the busier spring and summer travel months, we are excited about what lies ahead. The investments we are making in our properties position us well to succeed in our markets, and the Republican National Convention in July will be significant for the entire city of Milwaukee, and we are eager to showcase our wonderful community. Last quarter, I shared an update on our growth strategy in hotels and briefly commented on our recent acquisition of the Loews Minneapolis Hotel. Our joint venture successfully closed the hotel acquisition on March 1, and our team has begun management and execution of the repositioning strategy for this property. The luxury lifestyle hotel has been rebranded as The Lofton, a Tapestry Collection by Hilton Hotel, and it has been part of the Hilton reservation system since day one of our ownership and management. We plan to continue improving the hotel over the next year to create value from what we believe is a property with significant potential. Now turning to theaters, Chad provided the numbers, highlighting our continued increases in per person revenues. The first quarter began on a very different note compared to last year's, when the industry benefited from strong holdovers like Avatar: The Way of Water and Puss in Boots: The Last Wish. In fact, Avatar ranked as the #1 movie for the first five weeks of our fiscal 2023. While there were several good films in theaters over the holiday season carrying into the new year, we did not have a single blockbuster this January that maintained strong performance over that period. In terms of the total number of wide-release films, we had a similar roster with 24 wide releases in the first quarter of fiscal 2024 compared to 23 in the first quarter last year, yet the slate this year was weaker overall, with lesser performances and fewer blockbusters. Notably, no films in the first quarter had openings exceeding $100 million, and the average opening weekend U.S. box office gross per wide-release film was 25% lower than the same average for the first quarter last year. We believe this situation is another repercussion of last year's Hollywood strikes, which caused the delay of bigger titles and the release of smaller films that would typically only receive limited releases under stronger product supply conditions. However, there were some highlights this quarter, including Dune: Part Two exceeding industry expectations and performing strongly, alongside Bob Marley: One Love's strong opening and commendable run. Chad shared market share dynamics that impacted our market share on Dune, where the film significantly outperformed on IMAX screens nationally, which only account for three of our 125 premium large-format screens. As Chad discussed, performance on this film appears unique to Dune and its distribution strategy, and we witnessed a return to more standardized PLF market share with Ghostbusters: Frozen Empire. Chad also mentioned that our PLF strategy benefits us most when there is multiple significant films available in the market simultaneously. Our admission per caps increased by 4.9% in the first quarter, allowing us to overcome the high percentage of 3D ticket sales from Avatar last year. Nevertheless, as we look ahead, we expect our admission per cap growth rate to stabilize, given we have passed the one-year mark since pricing changes to our Value Tuesday promotion made last March. We will continue to evaluate our regular non-Tuesday ticket prices in our markets to ensure we remain competitive and provide attractive value for all types of customers. This will become increasingly crucial as we work to incentivize customers to maintain moviegoing habits during periods of product gaps in the release schedule. In April, we attended CinemaCon, where there were significant takeaways from this year's conference, first and foremost being the ongoing commitment from our studio partners, directors, and talent to the importance of theatrical exhibition to the broader film ecosystem and our role in enhancing their content. Secondly, we got an in-depth view of the upcoming film slate for the remainder of the year and into 2025. As we move past the supply chain obstacles triggered by the strikes, we are optimistic about several great titles arriving this summer and later this year, and we look forward to a considerably stronger slate for 2025. The summer movie season kicks off tomorrow with the release of The Fall Guy, followed by numerous anticipated titles including Kingdom of the Planet of the Apes, Furiosa: A Mad Max Saga, Inside Out 2, Horizon: An American Saga, A Quiet Place: Day One, Despicable Me 4, Twisters, and Deadpool & Wolverine. This fall, we are excited about Beetlejuice, Joker: Folie a Deux, Saw XI, and Venom: The Last Dance. During the holidays, we anticipate Gladiator II, Moana 2, Wicked, The Lord of the Rings: The War of the Rohirrim, Kraven the Hunter, Mufasa, and Sonic the Hedgehog 3. Looking to 2024, we continue to project 95 to 100 wide-release films. Furthermore, for 2025, we will see several prominent franchises, including Superman, Fast & Furious, Captain America, Mission: Impossible, Jurassic World, Karate Kid, The Fantastic Four, Snow White, Wicked 2, and Avatar 3, just to name a few. We have always maintained a long-term view in managing our businesses. With the projected product supply ramping back up to potentially exceed 2023 levels in 2025, we remain very positive and optimistic about the long-term future for both the industry and our theater business. Lastly, I want to express my deep appreciation for the incredible associates at The Marcus Corporation. Their outstanding work and commitment to customer service are fundamental to our success, and we cherish everything they do every day. They are our most valuable asset. So on behalf of our Board of Directors and our entire executive team, thank you to all of our associates. At this time, Chad and I would be happy to open up the call for any questions you may have.

Our first question comes from Eric Wold from B. Riley Securities.

A few questions based on some of the comments you made in your opening remarks. One, other than the theater segment, can you discuss any changes you're seeing from your theater customers regarding their willingness to spend or evolving spending patterns? Are there any shifts around ticket prices, upgrade options, days of the week they visit, or basket size, anything that provides more or less confidence in consumer health as we move into hopefully a strengthened film slate in the coming quarters?

It's difficult to specify which days they might be shifting to. We lack definitive data on that. However, the main takeaway is that historically, when consumer spending weakens, the movie industry tends to be the most appealing outdoor entertainment choice. In fact, during six of the last eight recessions, the movie industry saw improvements, suggesting that our pricing is crucial for attracting customers who might be feeling financial strain. That said, it's still too early to notice any significant changes.

Understood. And Chad, regarding the theater segment, you mentioned market share loss with Dune 2 due to the strength of IMAX promotions and what the film's marketing strategy did to bolster its exposure. Given that IMAX's strategy may involve more films shot with IMAX cameras in the coming years, even if we see a more varied and robust overall film slate, do you foresee a sustained shift in our market share due to this trend?

Dune was a unique film, and we did not see a comparable shift with similar movies last year. Our evaluation of other films that would suit PLFs indicated no such trend. When reviewing the other films in the first quarter that would be a solid fit for PLFs, we didn't experience that shift at all. Historically, our PLF performance returns to normal with successful films. We’ll continue monitoring the dynamics; we have a robust setup with PLFs across our circuit, and we typically perform well when there are several significant films in theaters during any given quarter.

Got it. Lastly, more of a corporate question. The stock price is at its lowest level in 10 years, excluding the pandemic downturn. Considering the optimism regarding a box office recovery and your hotel's ability to grow, when could share buybacks become a more favorable use of cash flow? I'm aware of uncertainties surrounding CapEx needs with the hotel segment, but I'm keen on your perspective given the potential we all see for both segments in the upcoming years.

You’re correct. We possess strong conviction and optimism for the long-term future of both segments. However, we are evaluating several variables in our capital allocation strategy. The CapEx estimates of $60 million to $75 million this year signify a substantial investment, along with other reinvestments as we approach next year. However, the favorable share price creates an advantageous opportunity for share repurchases, and we also want to improve our capital structure. We have an authorization for share buybacks that we can pursue opportunistically.

Our next question comes from Jim Goss from Barrington Research.

Regarding the hotel side and the conversion in Minneapolis to the Tapestry Collection, I'm not particularly familiar with that brand. Can you discuss its pricing level and the additional benefits you anticipate deriving from that property?

The Tapestry Collection is part of Hilton's soft brand. The objective is to integrate into the Hilton reservation system and loyalty program. Our expectations hinge on transitioning to this stronger system, which should drive improved performance, though we do not disclose specific hotel projections.

Thank you. Following up on Eric's earlier query about Dune, do you believe that particular film had a more urban-oriented focus? Could that urban aspect impact competition with IMAX in your markets?

Absolutely. Urban films typically perform differently in our markets compared to larger audiences, and this quarter's focus area and historical trends in film mix inform our perspective. Dune is significant, but it connects more with urban audiences, which may present challenges in our regions.

And finally, many companies in your sector are increasingly discussing alternative content. In your specific markets, are there types of content that might resonate particularly well with your customers, particularly during the week?

In the Midwest, faith-based films tend to resonate better with our customers. Retro screenings, like our Harry Potter series, have also seen substantial success. Our strategy now includes a broader range of content as we explore various offerings to determine what works best in appealing to our audience.

Our next question comes from Mike Hickey from The Benchmark Company. In the Midwest, faith-based films tend to resonate better with our customers. Retro screenings, like our Harry Potter series, have also seen substantial success. Our strategy now includes a broader range of content as we explore various offerings to determine what works best in appealing to our audience.

Greg, you noted potential softness in the hotel side relating to ADR weaknesses. Could you provide more insight into which aspects of that market might be softer and how you might adjust your strategy if this trend evolves further?

Let me clarify. The adjustments made to our strategy were not necessarily a reaction to market softness. Some of my revenue management staff commented we may have been overly aggressive last year in certain areas. Therefore, we adapted our strategy accordingly, which proved beneficial. While we strategically shift towards group bookings, we may sacrifice rates for the overall ancillary revenue growth it provides. If we observe actual consumer softness, we will assess market conditions and respond accordingly.

Understood. So, while you're experiencing varying performance, group traffic appears to be generating additional revenue for you, correct?

Yes, leisure travel has been down in our overall mix because we've driven more group business into the middle of the week. In terms of demand, leisure is holding, but compared to recent years, we have observed reduced rate growth driven mainly by leisure customers. Our expectation for the year is low single-digit overall RevPAR growth, primarily supported by increased occupancy rather than the ADR as it has been in previous years.

And on your gross profit within your concession business, there appears to be pressure—down nearly 6 percentage points in concession gross profit this quarter. Can you delve into that a bit further and what trend we should expect moving forward?

It's important not to extrapolate a trend from this. We made some minor adjustments to how we classify certain expenses in our P&L, aligning them better with our reporting standards. Though essentially immaterial, that accounted for the change, and it does not reflect underlying shifts in our concession business profitability.

On the hotel side, the shift in mix positively influences our margins. The leisure customer typically dines at our restaurants while the group mix more so engages in our banquet and catering operations, which is a more profitable endeavor.

Can you confirm that your gross profit margin in concessions in Q1 is 57%, down from 63% prior year, and your average margin last year was around 61.5%? Should we model this closer to the 57% going forward?

You may model it at 57% as that reflects where we will remain moving forward. However, there is an offset in other operating expenses that will reduce run rates overall.

But to clarify, should we anticipate that these adjustments will yield a net neutral situation?

Correct, it should be net neutral concerning total profitability.

Lastly, regarding your convertible note, while you have time, what scenarios are you contemplating for managing potential dilution from that note?

Indeed, we have roughly 1.5 years until we must address this. However, potential dilution concerns are minimal because we have a cap call transaction that mitigates that dilution below $17.75. This number adjusts slightly as we pay dividends. Currently, at our share price, there shouldn't be any dilution expectations from our side. We will look for the appropriate timing to address the note, but we favor a cash settlement rather than shares.

Thank you. At this time, it appears there are no other questions. I would like to turn the call back to Mr. Paris for any additional or closing remarks.

Great. Thanks, Lauren. We'd like to thank everyone for joining us today, and we look forward to talking to you again in early August when we release our second quarter results. Until then, thank you, and have a great day.

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