Marcus (MCS) Q3 2025 Earnings Call Transcript

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Date

Friday, Oct. 31, 2025, at 11 a.m. ET

Call participants

• Chief Financial Officer — Chad Paris
• President and Chief Executive Officer — Gregory S. Marcus

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Risks

• Theater segment box office weakness — Consolidated revenue declined 9.7% in the third quarter of fiscal 2025 (period ended September 25, 2025), with theater segment revenue down 16%, due to the absence of a major blockbuster, a less favorable film slate, and management directly cited underperformance versus the national box office by 3.8 percentage points.
• Hotel RevPAR pressure — Comparable owned hotel RevPAR declined 1.5%, and management linked the decrease to challenging prior-year comparisons driven by the 2024 Republican National Convention, while three hotels saw persistent ADR weakness caused by unfavorable market dynamics, or local supply.

Takeaways

• Consolidated revenue -- $210 million, a 9.7% decrease, with the decline substantially attributable to the theater segment's performance.
• Net earnings -- $6.2 million, or $0.52 per share, including a $3 million nonrecurring insurance settlement gain; excluding this, net earnings were $13.2 million, or $0.42 per share, compared to $24.8 million, or $0.78 per share, in the third quarter of fiscal 2024 on a like-for-like basis.
• Theater revenue -- $119.9 million, down approximately 16%; comparable theater admission revenue declined 15.8%, and comparable theater attendance fell 18.7% as the division missed national box office trends by 3.8 percentage points.
• Admission per cap -- Increased 3.6% year-over-year, driven by pricing actions such as blockbuster surcharges, and a higher share of PLF (Premium Large Format) screen attendance.
• Concession and beverage revenue per person -- Rose 2.1% in comparable theaters, with merchandise sales contributing positively, and no substantive change in buyer behavior despite inflationary price increases.
• Theater adjusted EBITDA -- Theater division adjusted EBITDA was $22.1 million, a 33% decrease over the prior year quarter, primarily reflecting lower attendance volumes.
• Hotels and resorts revenue -- $80.3 million before cost reimbursements, up 1.7%; RevPAR for comparable owned hotels declined 1.5% due to the prior-year RNC event, but group customer sales and recent property renovations contributed to outperforming market competitors by 5.2 percentage points in RevPAR.
• Hotels adjusted EBITDA -- Hotels adjusted EBITDA remained essentially flat compared to the prior year quarter, despite a shift from high-margin rooms to lower-margin food and beverage revenues; banquet and catering revenue grew 8.3% in the third quarter of fiscal 2025 compared to the prior year.
• Operating cash flow -- Operating cash flow was $39.1 million, compared to $30.5 million in the prior year quarter, primarily due to timing of working capital payments.
• Capital expenditures -- $20.9 million, mostly directed toward Hilton Milwaukee renovations, with total fiscal 2025 capital expenditures expected at $75 million-$85 million, and a projected meaningful step down to $50 million-$55 million of capital expenditures in 2026.
• Share repurchases -- 600,000 shares bought for $9.1 million, bringing year-to-date repurchases to over 1 million shares, or 3.2% of outstanding shares; cumulative repurchases since resuming share repurchases in 2024 now exceed 1.7 million shares, or approximately 5.3% of shares at program resumption.
• Liquidity and leverage -- Ended the quarter with $7 million in cash, $214 million in total liquidity, a debt-to-capitalization ratio of 20%, and net leverage of 1.7 times, comfortably below management’s stated target range of 2.25-2.5 times.
• Share repurchase authorization -- Management announced a 4 million share increase, expanding the total available authorization to 4.7 million shares, and indicated continued opportunistic buybacks in the absence of attractive growth investments.

Summary

Marcus (NYSE:MCS) reported lower year-over-year consolidated revenue and net earnings for the third quarter of fiscal 2025 (period ended Sept. 25, 2025), with theater attendance decreased 18.7%, and box office receipts trailed industry benchmarks by 3.8 percentage points due to the absence of major blockbusters and a less favorable film mix. Hotels outperformed market competitors in RevPAR by 5.2 percentage points despite a difficult comparison period, supported by group business strength, property renovations, and food and beverage growth. Management emphasized strategic capital allocation, with significant progress on renovations, a step-down in future capital expenditures, and an expansion of the share repurchase program, while maintaining ample liquidity and conservative leverage amidst ongoing market uncertainty.

• Gregory S. Marcus stated the 2026 film slate holds higher historical box office potential, with four franchise films whose predecessors each previously grossed over $500 million domestically for the 2026 slate, highlighting favorable future theatrical demand signals.
• Group room pace for 2026 is approximately 14% ahead of this point last year, and banquet and catering revenues are also trending well, bolstering hotel segment visibility into next year.
• Chad Paris directly cited that free cash flow in 2026 will “grow significantly” as capital expenditures decline, with operating leverage most pronounced in theaters, where management historically captures about 50% of top-line growth in the bottom line.

Industry glossary

• PLF (Premium Large Format): Enhanced movie theater auditoriums featuring advanced sound and screen technology, typically commanding a pricing premium and higher per-patron revenue.
• RevPAR (Revenue Per Available Room): A key hotel metric calculated as average daily room revenue divided by the number of available rooms, reflecting combined occupancy and pricing performance.
• ADR (Average Daily Rate): The average rental income earned per paid occupied hotel room in a given time period.
• CapEx (Capital Expenditures): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for one-time or non-cash items, used as a non-GAAP measure of operational performance.
• Per cap: Short for “per capita,” refers here to the average revenue per guest or per admission in theaters (e.g., average concession spending per ticket sold).

Full Conference Call Transcript

Chad Paris: Good morning, and welcome to our fiscal 2025 third 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, 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 identified in our forward-looking statements are included under the heading Forward-Looking Statements in the press release we issued this morning announcing our third 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. Alright. With that speed behind us, let's begin.

I'll start this morning by spending a few minutes sharing the results from our third quarter and then discuss our balance sheet with liquidity and capital allocation. 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. This morning, we reported a quarter with solid results overall, despite somewhat mixed results in our divisions relative to our expectations. In hotels, we exceeded our expectations and were able to overcome a very challenging prior year comparison to deliver revenue growth and outperformance relative to our competitive set.

In theaters, we saw a less concentrated film slate with several films that performed well relative to our own expectations, but the slate lacked a major breakthrough tentpole that we've seen in the third quarter the last couple of years. During our seasonally busiest quarter, our teams in both businesses remain focused on serving our guests with excellence to deliver memorable experiences. I'll start with a few highlights from our consolidated results for 2025. Consolidated revenues of $210 million were down 9.7% compared to the prior year quarter. Operating income for the quarter was $22.7 million, a decrease of $10.1 million compared to the prior year quarter.

Consolidated adjusted EBITDA for the third quarter was $40.14 million, a decrease of $11.9 million compared to 2024. Net earnings for the quarter were $6.2 million or $0.52 per share, and were favorably impacted by a nonrecurring gain on a property insurance settlement of $3 million or $0.10 per share net of tax. Excluding the impact of the gain, net earnings for the third quarter were $13.2 million or $0.42 per share compared to prior year's third quarter net earnings of $24.8 million or $0.78 per share excluding the impacts of our convertible debt repurchases last year.

The change in our fiscal year-end quarters had an immaterial impact on our third quarter results with one additional operating day during the quarter in fiscal 2025 compared to last year. Turning to our segment results, I'll begin this morning with our theater division. Third quarter fiscal 2025 total revenue of $119.9 million decreased approximately 16% compared to the prior year third quarter, primarily due to weaker performances from the top films in the quarter compared to the top films in the quarter last year, and less carryover of films that released in the second quarter compared to last year's carryover.

Comparable theater admission revenue for the third quarter decreased 15.8%, and comparable theater attendance decreased 18.7% compared with our fiscal third quarter 2024. While our market share in 2025 was in line with our historical third quarter share, including our third quarter share in 2023, this year's film mix did not help us. Notably, the film slate did not include a family animated film in the top five movies of the quarter, a genre that our circuit typically outperforms in.

When using our comparable fiscal days, US box office receipts decreased 12% during our fiscal 2025 third quarter compared to US box office receipts during our fiscal third quarter last year, indicating our admissions revenue performance trailed the industry by 3.8 percentage points. We believe that our lower box office performance relative to the nation during the third quarter was primarily attributable to our strong performance in the third quarter last year when our circuit outperformed the national box office growth by nearly six percentage points.

As you may recall, a year ago, our third quarter 2024 box office results benefited from a favorable film mix in which we achieved above our historical average market share for each of our top six movies in the quarter, including several films such as Inside Out 2, Despicable Me 4, and Twisters, where we significantly outperformed our typical share. Our admission revenues did benefit from several pricing changes that we discussed with you last quarter, with average admission price increasing 3.6% during 2025 compared to last year. Our admission per caps were favorably impacted by strategic pricing changes, including adjustments to our everyday matinee program and pricing surcharges on select high-demand summer blockbuster films.

In addition, admission per caps were also favorably impacted by a higher percentage of our attendance on PLF screens compared to last year's quarter. We also grew our average concession and beverage revenues per person at our comparable theaters, which increased by 2.1% during 2025 compared to last year's third quarter and was driven by an increase in merchandise sales and pricing. Our top 10 films in the quarter represented approximately 72% of the box office in 2025 compared to 83% for the top 10 films in the third quarter last year.

The less concentrated film slate featuring fewer blockbuster films compared to the more concentrated slate in the third quarter last year resulted in an approximately three percentage point decrease in overall film cost as a percentage of admission revenue. Finally, theater division adjusted EBITDA during 2025 was $22.1 million, a 33% decrease over the prior year quarter primarily due to the lower attendance volumes. Turning to our hotels and resorts division, total revenues before cost reimbursements were $80.3 million for 2025, a 1.7% increase compared to the prior year.

RevPAR for our comparable owned hotels decreased 1.5% during the third quarter compared to the prior year, which resulted from an overall rate increase of 1.7 percentage points offset by a 3.6% decrease in our average daily rate, or ADR. Our average occupancy rate for our owned hotels was 78.4% during the third quarter of 2025. As you may recall, our third quarter 2024 results benefited from the Republican National Convention and its significant impact on the results at our three Milwaukee hotels, resulting in approximately $3.3 million of incremental revenue. The RNC primarily had the effect of increasing average daily rates, and when we adjust out that one-time impact, we achieved some very impressive rate and RevPAR growth.

When excluding the impact of the RNC on our three Milwaukee hotels from last year's results, our average daily rate during 2025 grew approximately 5% compared to the prior year quarter, and RevPAR grew approximately 7.5%. According to data received from Smith Travel Research, comparable competitive hotels in our market experienced a decrease in RevPAR of 6.7% for 2025 compared to 2024, indicating that our hotels outperformed the competitive set by 5.2 percentage points. We believe our outperformance resulted primarily from strong sales results with our group customer segment as well as a strong summer season at Grand Geneva Resort & Spa, and higher results from the recently renovated properties in our portfolio.

When comparing our RevPAR results to comparable upper upscale hotels throughout the US, the upper upscale segment experienced a decrease in RevPAR of 1.3% during our third quarter compared to 2024, indicating that our hotels generally performed in line with the industry despite the growth headwind from the prior year RNC impact, and they outperformed the industry by nearly nine percentage points when adjusting for the estimated impact of the RNC on our RevPAR growth.

With the strong growth in group business and events, our banquet and catering operations continued to grow with food and beverage revenues up 8.3% in the third quarter of fiscal 2025 compared to the prior year, which includes the impact of the headwind from prior year RNC-related banquet and catering events. Finally, hotels adjusted EBITDA was essentially flat in 2025 compared to the prior year quarter, which we believe was a significant achievement given the changes in our revenue mix with a decrease in high-rate, high-margin rooms revenue in the prior year due to the RNC and the increase in comparatively lower-margin food and beverage revenue.

Shifting to cash flow and the balance sheet, our cash flow from operations was $39.1 million in 2025, compared to cash flow from operations of $30.5 million in the prior year quarter, with the increase in cash flow primarily due to differences in the timing of various working capital payments. Total capital expenditures during 2025 were $20.9 million compared to $18.5 million in the third quarter of fiscal 2024. A large portion of our capital expenditures during the third quarter were invested in the Hilton Milwaukee renovation, with the balance going to maintenance projects in both businesses.

Our capital investments and renovations projects have progressed as planned, and we now expect capital expenditures for fiscal 2025 of $75 million to $85 million. The timing of several projects will impact our final capital expenditure number for the year. Looking ahead, as we get past the heavy part of the reinvestment cycle that we are in this year with our current hotel portfolio, we see a meaningful step down in capital expenditures in 2026. Our preliminary expectation is for approximately $50 million to $55 million of capital expenditures in 2026, with this range subject to adjustment for the final timing of payments for our 2025 projects.

We ended the third quarter with approximately $7 million in cash and over $214 million in total liquidity, with a debt to capitalization ratio of 20% and net leverage of 1.7 times. Finally, in today's earnings release, we announced that during the third quarter, we repurchased approximately 600,000 shares of our common stock for $9.1 million in cash. This brings our share repurchases this year to just over 1 million shares or approximately 3.2% of our outstanding shares at the beginning of the year. Our cumulative buybacks since resuming share repurchases in 2024 are now over 1.7 million shares or approximately 5.3% of our outstanding share count when we began, returning nearly $26 million in capital to shareholders.

Our strong balance sheet and confidence in our businesses gives us the ability to continue pursuing growth investments while returning capital to shareholders through our quarterly dividend and opportunistic share repurchases. We will continue to allocate capital with a balanced approach that supports our strategic priorities while pursuing investments that provide the most attractive returns to shareholders. Greg will further discuss our capital allocation approach and today's announcement of an increase in our share repurchase authorization. And with that, I will now turn the call over to Greg.

Greg Marcus: Thanks, Chad. Good morning, everyone. When we were together last quarter, we shared that our summer was off to a solid start in both of our businesses. In theaters, a more diverse film slate was bringing out audiences with a series of solid performances. In hotels, we were gaining momentum as we entered the third quarter and were well-positioned with several newly remodeled properties. As the rest of the third quarter played out, we saw some divergence between the results of our two divisions.

In theaters, we saw a late summer movie season that included several films that performed well and met our own expectations, but it lacked a runaway hit blockbuster film that we've had the last couple of years, and the film mix was challenging for our market. In hotels, our team executed exceptionally well, capitalizing on both group and leisure demand, and delivered a quarter that outperformed their competitors in the nation, overcoming a very difficult comparison to our record third quarter results last year. As I will discuss today, while the overall result was a mixed quarter compared to our own expectations, there were many positives that we think will benefit us in the long term.

I'll start with our theater division. In a quarter where there has been much industry discussion about a national box office that was down nearly 12%, I'd like to step back for a moment with some perspective. Start with a few things we thought were positive. We have good product supply with 32 wide releases in the third quarter this year, compared to 29 last year. The film slate was less concentrated, performed better on average than they performed last year. When you get past the top six movies in the quarter, the average box office gross per film for the next 14 films in the top 20 was up over 11%. That there is an appetite for mid-sized films.

And contrary to some of the narrative in the trade press, audiences want to come out to theaters to see these movies in theaters. Second, there were several films that outperformed expectations. James Gunn's Superman opened to $125 million domestically, achieving over $350 million in box office during its domestic run and grossing over $600 million globally. More importantly, the success of this DC franchise film sets a promising outlook for future sequels with more DC adventures on the horizon. Zack Greger's horror hit Weapon crossed $100 million in domestic box office in just two weeks, on its way to over $150 million for the run.

The Conjuring: Last Rights smashed box office records with both the highest domestic and global opening for a horror film, going on to become the highest-grossing film in the series. Demon Slayer Infinity Castle, with a $70 million domestic opening, has continued to play strong to become the highest-grossing movie ever in the US with anime, and they illustrate the audience appeal for a wide range of content to crush on. So where did the summer box office come up short compared to last year? We think it ultimately comes down to a couple of simple facts. First, we didn't have a breakout smash hit this year in the summer as we've seen the last two years.

The number one film in the third quarter last year was Deadpool and Wolverine, and in 2023, it was Barbie, with both films grossing approximately $630 million domestically in the quarter. As I discussed earlier, the number one film in the quarter this year, Superman, was a great success for many reasons, but at $300 million gross, it was approximately $280 million lower. We've been in this industry for a long time, and this dynamic with varying levels of box office hits from year to year isn't new. It's just the nature of our business. Second, the third quarter summer box office was lighter on the family films, a genre where we typically outperform.

Last year, our top five films in the third quarter included Despicable Me 4 at number two, and Inside Out 2 as the number five film, which was a second-quarter release that carried over and held strong in the third quarter to contribute $183 million to the third quarter domestic box office. This year's third quarter did not have a family animated film in the top five and didn't benefit from carryover family films released in Q2. This isn't really a new phenomenon, but it did create a tough comparison to last year, particularly for our circuit, which historically has outperformed in family films.

Chad discussed the factors we believe are impacting our box office growth relative to the nation, and while we underperformed the nation by just under four percentage points, this was primarily due to our strong outperformance in last year's third quarter coupled with a film mix this year that didn't include many family films. I'm pleased to share that we continue to make progress in optimizing prices to capture premium during peak periods and maintain the right balance of value-oriented options for more price-sensitive customers during lower demand periods. As expected, our admission per caps improved during the third quarter as we implemented blockbuster pricing on high-demand films.

Looking ahead to the next several quarters, we're looking forward to an exciting fall and holiday film slate with Wicked: For Good, Zootopia 2, Freddy's 2, SpongeBob Movie: Search for SquarePants, and Avatar: Fire and Ash. Pre-sales for Wicked have been strong and are currently trending over three times ahead of pre-sales for last year's Wicked. As we look ahead to next year, the 2026 film slate features major franchises including Spider-Man: Brand New Day, Super Mario Galaxy Movie, Moana, Jumanji 3, two different movies, Toy Story 5, Mega Minions, The Mandalorian and Grogu, Dune: Messiah, and Avengers: Doomsday, just to name a few.

There are many more great films coming, and as noted in today's earnings release, the 2026 film slate continues to build, and the early indicators are that while there are a similar number of franchises, the potential is greater based on their historical predecessor box office performances. The 2026 slate currently includes four films where the predecessor earned over $500 million at the domestic box office compared to only one such film in 2025. Moving to our hotel and resorts division, you've seen the segment numbers, and Chad shared some additional detail on performance metrics, including our outperformance to the competitive set.

We expected this quarter to be a challenging comparison to last year for hotels, given the significant impact the RNC had on our year, and I'm thrilled to share that our team met the challenge and delivered absolute growth to overcome the tough comp. The RNC was an extraordinary event for our largest market, and when we back out the RNC impact from our prior year results, our core business performed very well. In particular, two of our newly renovated properties, Grand Geneva Resort and Spa and The Pfister Hotel, benefited from our investments in renovations and great execution by our teams to deliver outstanding results this quarter.

There were several notable items in the quarter that I'd like to highlight. Average daily rates during the quarter were generally strong, with rate growth at four of our seven hotels when adjusted for the prior year RNC impact. We have been successful in achieving higher rates at our hotels with newly renovated room products, including The Pfister, Grand Geneva Resort & Spa, and Hilton Milwaukee, with occupancy growth at six of our seven hotels. The combination of strong ADR and occupancy growth resulted in our properties once again outperforming the competitive set.

Group business during the full year fiscal 2025 on pace, in the year for the year, we're running slightly behind where we were at this time last year, which includes the RNC year. Even more encouraging, group room pace for 2026 is running approximately 14% ahead of this time last year for the next year out, with banquet and catering revenues similarly running ahead of pace. The current state of our hotel business remains stable and consistent with our view last quarter. While some markets have seen some more significant leisure softening, our own portfolio has generally held up well.

Leisure transient demand remains soft in some markets around the country, but our hotel portfolio has not seen significant signs of softness or significant volatility. We believe our upper upscale positioning, drive-to-market locations, and broad segmentation lessen our exposure to any one type of customer. We'll see less volatility if further economic softness occurs. There remains an increased level of economic uncertainty compared to where we were a year ago, and if we begin to see softness, we are prepared to react and adjust quickly. Our operations team is continuously focused on labor efficiency, and we've developed a strong track record of successfully managing through changing demand.

Finally, I'd like to close with our views on capital allocation and returning capital this year. The last couple of years, we've made significant reinvestments in our assets, and as Chad discussed, we expect to move past this heavy CapEx cycle next year as we shift back to a more typical maintenance and ROI CapEx mix. We're seeing great results from our renovated properties, and we believe these investments will continue to have attractive long-term returns. On the growth front, we continue to look for opportunities to deploy capital to grow both of our businesses through accretive investments. We have confidence in our businesses and a strong balance sheet that allows us to move quickly when we see good opportunities.

We have a history of executing when they arise. To the extent that we don't see attractive investments that are actionable, we expect to return excess capital to shareholders through share repurchases or dividends. As Chad described in greater detail, we've repurchased over 5% of our outstanding shares through opportunistic share repurchases since we began repurchasing shares in the third quarter of 2024. Between cash dividends and share repurchases, we have returned over $25 million or approximately $0.80 per share to shareholders in the last four quarters. This morning, we announced our Board of Directors has approved a 4 million share increase in our current repurchase authorization, bringing our current share repurchase authorization to 4.7 million shares.

In the absence of growth investments with attractive returns, we will continue to use this authorization to opportunistically repurchase shares and return capital to shareholders, and this new authorization will give us flexibility to act quickly as opportunities arise. Throughout our company's history, we've taken a balanced approach of investing in long-term growth while returning capital to shareholders, and you should expect us to continue to do both going forward. We're generally opportunistic, investing where we see value at attractive returns, whether it be in new deals or in buying back our stock, as we've done recently. Finally, tomorrow marks an important milestone in our history.

On November 1, 1935, my grandfather, Ben Marcus, founded what became The Marcus Corporation with the purchase of a single-screen movie theater in Ripon, Wisconsin. During the month of November, we will celebrate the company's 90th anniversary, and our theme for the year has been the spirit of innovation, one of the guiding principles my grandfather and dad instilled in all of us, and our company's future will be built on that same entrepreneurial legacy. We are called on to push, change, and evolve because, as we know from our 90 years of history, the only constant is change.

I'm excited to celebrate our 90th anniversary with our associates, by the way, my grandfather taught us, are our most important asset, as we both recognize our achievements and look ahead to a future that will continue the legacy of these great businesses for many years to come. Before we open up the call for questions, I want to conclude my remarks by saying thank you to all the hardworking associates of The Marcus Corporation. I don't want to ever take for granted what each and every one of them does to contribute to the success of both of our businesses. Thank you.

With that, at this time, Chad and I would be happy to open the call up to any questions you may have.

Operator: Thank you. Please press star followed by the number one if you'd like to ask a question. And ensure your device is unmuted locally when it's your turn to speak. Our first question today comes from Eric Wold with Texas Capital. Please go ahead. Your line is open.

Eric Wold: Good morning, guys. Couple of questions. You mentioned on the hotel side, you mentioned that you had rate growth in four of the seven hotels in the quarter. I guess for the other three, is that something that was more of a short-term issue? Is that something that's kind of been more than one quarter where you haven't had rate growth at those three hotels? Is that something you think is more of a competitive issue in those markets? I don't want to lean on that too much, but I just want to understand if it's something that's been short-term or something that's been more than a quarter.

And then is that something you think that's more of a competitive issue or something that may require an investment as you look in the next couple of years?

Chad Paris: Thanks, Eric. Yeah, I mean, it's the three hotels where we didn't see ADR growth, I would say they're more market dynamics. Two of them have been persistent market dynamics that are more generated by supply in the market. And in the third, it really was just a little bit of softening very recently in demand. But I don't know, two of the three I don't see significant CapEx investments. We have one of those that we're gonna be doing some small refreshes to, but nothing anywhere near what we've done at the three major properties over the last few years.

I would describe it as a more normal course refresh that is embedded in our $50 to $55 million of CapEx that we expect for next year.

Eric Wold: Got it. And on that $50 million to $55 million that includes refreshes, is that considered, I guess, more of a maintenance CapEx number kind of going forward? Anything that would be kind of unusual in that number?

Chad Paris: It's not 100% maintenance. There is some ROI that we're doing in that, and we've done some of that this year in the theater business, and there'll be some of that again as we look forward in both of the businesses. There's always some of those types of activities. But it is primarily maintenance and ROI capital.

Eric Wold: Got it. And then last question, I know you touched on this a little bit with the capital return comments. With the increased share repurchases this year and the new buyback authorization, should M&A opportunities come up on either the hotel or the exhibition side, can you talk a little bit about your comfort taking on leverage to the balance sheet and kind of, you know, what's kind of your comfort level on kind of a leverage ratio?

And then also, should the equity get back to a more, whatever in your mind, be a more appropriate valuation, would you use equity for M&A in the future, or is that in your view the more appropriate kind of a way to go about that?

Chad Paris: Yeah. On the first part of your question on M&A, I think if we have something that's actionable, we will move on it. We have been allocating a lot of capital to share repurchases lately. And at the current leverage at 1.7 times, we're very comfortable, and we actually have a target leverage that's a bit above that, closer to two and a quarter to two and a half. So we have some capacity to do that. And if we found the right type of M&A opportunity, we have some flexibility and can flex up a bit and then bring ourselves back down to somewhere in that target level.

But very comfortable with where we're operating right now, and there's actually some room to do a bit more and continue to invest.

Greg Marcus: You know, as for whether it be, yeah, I mean, look. We have a history, and if you look at, you know this, Eric. Go back. When we think there's, when we think that the opportunity to return capital to shareholders through stock repurchases makes sense, we do that. When we believe the stock is at a price where we think it's appropriate to use it as capital, we do that as well. And so it will just depend on, you know, market conditions. We are not a company that just says, well, we programmatically buy stock no matter what the price is. We're gonna sell stock just to raise equity.

We will do it based on what we do within the price is and how that makes sense. And just to be clear, you know, at the current levels, obviously, we're in the market and we were repurchasing shares during the quarter. And so that's kind of the level that we're at right now. You wouldn't see us issue equity at the current share price to go.

Eric Wold: We understand. Appreciate it. Thanks, guys.

Operator: Our next question comes from Patrick Sholl with Barrington Research. Your line is open.

Patrick William Sholl: I just curious on concessions. Just with the current macro environment, have you seen any change in how consumers are, like, just consumer uptake or, I guess, hesitant with regard to price increases and ability to offset inflationary pressures there?

Chad Paris: Hi, Pat. No. We haven't really seen a lot to speak of over the summer in changes in consumer buying patterns. The hit rate and the basket sizes have been pretty consistent. We've moved through inflationary type price increases, nothing overly aggressive as we've seen in our per caps. There's actually been more propensity for our customers to buy merchandise associated with concession purchases.

Patrick William Sholl: That's good.

Chad Paris: But nothing that we've seen that would tell you there's a change going on and the willingness to buy concessions.

Patrick William Sholl: Okay. And then maybe just a question on the M&A market. Kind of with the, I guess, softening macro environment in hotels and maybe some stability in the film slate. I was kind of curious how you're seeing the various macro factors kind of affecting the M&A market in those two segments?

Chad Paris: Still volume.

Operator: Thank you. Our next question comes from Drew Crum with B. Riley Securities. Please go ahead.

Andrew Edward Crum: Okay. Thanks again. Good morning. I think you talked about expectations for admission per cap growth over the next few quarters. Does that incorporate or contemplate any further changes to your pricing strategy? And if so, what are those? And any early learnings from the pricing increases you took at the beginning of 3Q?

Chad Paris: Hi, Drew. Yeah. It does not contemplate a lot of significant changes prospectively beyond what we did in the third quarter. It's more the annualization benefit and tailwind that we'll get from, you know, frankly, flipping from a headwind on some of the discount programs that we've been comping for the last year to now moving to some strategic pricing moves that have increased pricing, and that becomes a tailwind. During the third quarter, we had blockbuster pricing on a number of films, and our pricing approach in that evolved a bit throughout the quarter in terms of the length of period that we had blockbuster pricing on. And everyday matinee evolved a bit during the quarter.

But I think we've hit a level that makes sense. Pricing, as we talked about last quarter, continues to be an area where the industry has done various experimenting. And so we'll continue to watch what others are doing. But in what we did in the third quarter, it is having the effect that we expected it would.

Andrew Edward Crum: Got it. Okay. And then you guys discussed the composition of the slate in March having a negative impact on your theater admissions. Now as you look at 4Q, how are you viewing mix? Is it a positive for your circuit? Negative or, you know, too tough to tell?

Chad Paris: Yeah. I'll start first. And, like, Greg, get on his thoughts. I mean, I think it's a little bit tough to tell. It's easy to forget that we had a Moana film in the fourth quarter last year, and we don't have something quite like that. We do have a couple of family films coming up in the quarter. And we have an Avatar, which we didn't have last year. So there's several puts and takes. It's frankly tough to tell on mix.

Andrew Edward Crum: So, thanks, guys.

Operator: Thank you. And just as a reminder, please press star followed by the number one if you'd like to ask a question. We'll move to our next question from Mike Hickey with Benchmark. Please go ahead.

Mike Hickey: Hey, Greg. Chad. Thanks for taking our questions. I guess for first, Greg, obviously, I heard your prepared comments on 2026 for both your segments. Sounded pretty bullish, actually, encouraging. Just would love to get sort of your off-script thoughts, Greg, on the growth opportunity you see from theaters and hotels and any catalysts or major drivers. Obviously, you list a lot of films. That sounds encouraging. Maybe something that's very relevant to your demo.

And on the hotel side, I don't know if the mark seems like a really interesting project that you guys are doing with back of the catalyst or any other initiatives that you think can move the needle for you guys across your two segments in 2026. I got a couple of follow-ups.

Greg Marcus: Sure. Of films. And that'll give us a range. Then I don't know what then and then in some years, it's gonna be better or some years, you know, the biggest Memorial Day on the, so you just don't know. Point to look and say, well, look at the number of franchise films next year. But if you look back at the historical grossing of what franchise films that are coming around, this time certainly more robust than we had in '25. So I'm not gonna ignore that stat now. Go to bed feeling good about that. Getting always hard to continue to us, which the, you know? Opportunistically.

You know, we have we from the if the city and the community decides they wanna go in a certain direction because of further any further investment in health, frankly, is gonna require some. Then if not, that will become a different use. But while it's waiting, let's warehouse it.

Chad Paris: Cash flow. Mike, I just wanna add one comment on the 2026 slate in terms of film mix. The one thing that does stand out is when you look at family content next year and you look at the franchises, we have a Mario Brothers, we have a Toy Story, we have a Minions movie. We have Moana. We have a Jumanji. The family mix comparatively to 2025 is very helpful for our circuit.

Mike Hickey: Nice. But I guess given that you guys seem optimistic on growth, how should we think about the bottom line here, EBITDA growth? Potential operating leverage and free cash flow conversion. I know that's come up a lot when you think about, I guess, catalyst to your valuation. I think free cash flow in 2026 would probably stand out as the largest.

Chad Paris: Yeah. No doubt. I mean, just by virtue of the CapEx coming down, our free cash flow is going to grow significantly next year. And then I think as the highest leverage is in the theater business, and so if you assume, you know, the hotel business kind of continues steady as you go as it has with the stable economy, if you believe the 2026 slate will grow, our operating leverage in theaters has historically contributed around 50% to the bottom line in and top line growth.

So, you know, we continue to focus on managing our cost structure, and getting better at managing these buildings when you're in the troughs of the content supply, that's really critical to holding that type of contribution margin because the peaks and valleys, you know, have been pronounced the last couple of years. But, yeah, the EBITDA, you know, the EBITDA should flow through with what the top line grows as you would expect.

Mike Hickey: Nice. Thanks, Chad. Last question. Obviously, recent news that Mark is retiring. Sad to hear that. Fifty-five years, you never hear that sort of tenure with the company. So congrats to him. Just curious on the transition plan. And if this could also be a potential catalyst for maybe a change in strategy on how you manage your theater assets?

Greg Marcus: Well, thanks, Mike. Thank you.

Operator: At this time, it appears there are no other questions. So I'd like to turn the call back to Mr. Paris for any additional or closing comments.

Chad Paris: We'd like to thank everybody for joining us today, and we look forward to talking to you once again in late February when we release our fourth quarter results. Until then, thank you, and have a good day.

Operator: This concludes today's call. You may disconnect your line at any time.

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