Marcus (MCS) Q4 2025 Earnings Call Transcript

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DATE

Thursday, February 26, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• President & CEO — Gregory S. Marcus
• Chief Financial Officer — Chad Paris

TAKEAWAYS

• Consolidated Revenue -- $193.5 million, up 2.8%, with both Theatres and Hotels & Resorts reporting growth.
• Operating Income -- $1.7 million, including $5.2 million in non-cash theater impairment charges; excluding these charges, operating income was $6.9 million, up 5.2% on an adjusted basis.
• Consolidated Adjusted EBITDA -- $26.8 million, a 3.6% increase over the prior year’s fourth quarter.
• Income Tax Benefit -- $7.6 million, or $0.24 per share, from federal and state historic tax credits tied to Hilton Milwaukee renovation; this benefit excluded from adjusted EBITDA.
• Theatre Revenue -- $123.8 million, up 2.2%; favorable fiscal calendar shift increased admissions revenue growth by 6.8 percentage points and attendance growth by 6.4 percentage points.
• Comparable Theater Attendance -- Decreased 5.7%; on a calendar-quarter basis, attendance was down 12.1%.
• Average Admission Price -- Increased 12.7% due to ticket price optimization, revised promotions, and more 3D ticket sales.
• Concession, Food & Beverage Per Capita Revenue -- Up 7.2%, driven by incidence rate, concession pricing changes, and higher sales, especially with family film releases.
• Theatre Division Adjusted EBITDA -- $24.1 million, rising just under 2%.
• Hotel RevPAR (Owned Hotels) -- Increased 3.5%; average daily rates were up 5.6%, with occupancy at 60.2% (down 1.2 percentage points).
• Hotel Industry Comparison -- Marcus hotels' RevPAR outperformed upper-upscale U.S. hotels by 2.7 percentage points and their competitive set by 5.5 percentage points.
• Hotels Adjusted EBITDA -- $7.3 million, up 3.4% year over year.
• Operating Cash Flow -- $48.8 million for the quarter, down from $52.6 million, attributed to timing of payments.
• Full-Year Capital Expenditures -- $83.0 million, primarily for Hilton Milwaukee renovation and maintenance, compared to $79.2 million in the prior year.
• Share Repurchases -- 1.1 million shares repurchased in 2025 (3.6% of shares), totaling $18 million; cumulative buybacks since Q3 2024 are 1.8 million shares (5.7%) and $28 million in capital returned.
• 2026 Capital Expenditure Guidance -- Projected $50 million to $55 million, with $25 million to $30 million for hotels and $20 million to $25 million for theaters, expected to drive a significant free cash flow increase.
• Digital Initiatives -- Debut of a redesigned online ticketing system, expedited roll-out of QR code ordering in dine-in locations, and implementation of tap-pay terminals at all points of sale anticipated to complete by end of Q1.
• Loyalty & Subscription Programs -- One-year anniversary of Marcus Movie Club with 38% annual membership adoption and 6.9 million members in Marcus Magical Movie Rewards.

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RISKS

• Operating income was negatively impacted by $5.2 million in non-cash impairment charges in the theater division.
• Comparable theater attendance decreased 5.7% (down 12.1% on a calendar-quarter basis), attributed to softer carryover from prior film releases and fewer top-performing tentpole films.
• Hotel occupancy declined by 1.2 percentage points, with management citing mixed and property-specific leisure demand and no clear trend reversal indicated.
• Full-year adjusted EBITDA decreased 3.1% to $99.3 million, driven by lower operating income after adjusting for impairments and nonrecurring expenses.

SUMMARY

The Marcus Corporation (NYSE:MCS) reported year-over-year revenue growth for both its Theatres and Hotels & Resorts divisions, while adjusted EBITDA declined on a full-year basis despite stronger fourth-quarter results. Fiscal calendar changes provided a temporary lift to theater segment results, although adjusted attendance declined and hotel occupancy remained under pressure, reflecting uneven demand. Management emphasized continued investment in digital customer experiences, subscription programs, and disciplined capital allocation, including a reduction in 2026 capital expenditures aimed at maximizing free cash flow. Additionally, leaders cited a robust upcoming film slate and accelerating adoption of loyalty initiatives as key levers for anticipated growth, even as they acknowledged limited M&A opportunities and persistent industry-wide transaction inertia.

• Gregory S. Marcus said, "We achieved above-average market share for seven of the top 10 films in the quarter."
• Ongoing price optimization, queue improvements, and increased incidence rates were cited as primary contributors to strong per-capita metrics in Theatres during 2025, with price alone not being the main driver.
• The rollout of QR code ordering and digital ticketing improvements are expected to contribute more significantly to per-capita revenue in 2026, with 2025 results benefiting mostly from menu and queue enhancements.
• Management stated that share repurchases and dividends returned over $45 million to shareholders in fiscal 2024 and 2025 combined, reflecting adherence to stated capital return priorities.
• No major asset divestitures are planned, but management reiterated an ongoing review of real estate portfolio efficiency, including noncore theater sites.
• Future hotel division performance may rely increasingly on group and premium leisure segments to offset market- or asset-specific softness, according to management's commentary.

INDUSTRY GLOSSARY

• RevPAR: Revenue per available room, used to measure hotel division performance, calculated as room revenue divided by the number of available rooms during a period.
• PLF: Premium Large Format; specialized cinema auditoriums (e.g., IMAX, Dolby) offering enhanced audio/visual experience at higher ticket prices.
• Incidence Rate: Proportion of customers making concession, food, or beverage purchases per visit.

Full Conference Call Transcript

All right. With that behind us, this morning, I will start by spending a few minutes sharing the results from our fourth quarter and the full year, and discuss our balance sheet, liquidity, and capital allocation, and then I will turn the call over to Gregory S. Marcus who will focus his prepared remarks on where our businesses are today and what we see ahead for 2026. We will then open up the call for questions. This morning, we reported a quarter of solid execution and results, with both divisions delivering year-over-year revenue and earnings growth and outperforming their industries. In theaters, a film slate that featured a favorable film mix coupled with strong per-cap growth drove meaningfully improved market share. In hotels, our renovated properties were winning in their markets, attracting increased leisure demand at higher rates that drove our RevPAR outperformance, capping a record revenue and EBITDA year for the division for the 2025. Turning to the numbers and starting with a few highlights from our consolidated results, we generated consolidated revenues of $193,500,000, a 2.8% increase compared to the fourth quarter last year, with revenue growth in both divisions. Our fourth quarter operating income of $1,700,000 was negatively impacted by $5,200,000 of non-cash impairment charges in the theater division, which are excluded from adjusted EBITDA. Excluding the charges, our fourth quarter operating income was $6,900,000, growing 5.2% compared to operating income of $6,600,000 in 2024, excluding impairment charges and nonrecurring expenses in the prior year. We delivered $26,800,000 of consolidated adjusted EBITDA, a 3.6% increase over the prior-year fourth quarter. There is one unusual item in the fourth quarter below operating income that impacted our net earnings and earnings per share that I would like to highlight. Our fourth quarter and full-year income tax benefit includes an approximately $7,600,000, or $0.24 per share, benefit from federal and state historic tax credits earned related to the completion of the Hilton Milwaukee renovation. The impact of the credits is excluded from our adjusted EBITDA operating results. For the full year fiscal 2025, consolidated revenues increased just over 3% from the prior year with revenue growth in both divisions. Consolidated operating income for the year was $17,100,000. Excluding the fourth quarter theaters impairment charges, full-year operating income was $22,200,000 compared to operating income of $25,900,000 in fiscal 2024, excluding impairments and nonrecurring expenses in the prior year. Finally, adjusted EBITDA for the full year decreased 3.1% to $99,300,000. Turning to our segment results, I will start with theaters. Our fourth quarter fiscal 2025 total revenue of $123,800,000 increased 2.2% compared to the prior-year fourth quarter. It is important to note the shift in our fiscal calendar favorably impacted our revenue and attendance comparisons over the prior-year periods. Our fiscal year ended on December 31 this year compared to December 26 in fiscal 2024, resulting in five additional days in our fiscal fourth quarter during the busy week between the holidays compared to the prior year, while removing four days in late September when business is slower, and resulting in one net additional operating day for the quarter. The shift in our fiscal calendar and additional days between the holidays had a 6.8 percentage point favorable impact on admissions revenue growth and a 6.4 percentage point favorable impact on attendance growth compared with the prior-year fourth quarter. On a calendar quarter basis in both periods, comparable theater admission revenue increased 6.1% over 2024 with a more favorable mix of family films that played well in our markets. Comparable theater attendance decreased 5.7% in 2025 compared with the prior-year fiscal fourth quarter, while on a calendar quarter basis in both periods, comparable theater attendance decreased 12.1%. Average admission price increased 12.7% during 2025 compared to last year and was positively impacted by strategic ticket price optimization actions implemented during peak demand periods, changes to promotions during the holiday periods, and a higher mix of 3D tickets. According to data received from Comscore and compiled by us to evaluate our fiscal 2025 fourth quarter results using our comparable fiscal weeks, U.S. box office receipts decreased 1.5% during our fiscal 2025 fourth quarter compared to U.S. box office receipts in 2024, indicating our theaters led the industry, outperforming by approximately 7.6 percentage points. We believe our outperformance is primarily attributed to our strategic pricing actions with the slightly less concentrated film slate resulting in less than a one percentage point decrease in overall film cost as a percentage of admission revenues for the fourth quarter. For the full year, film cost as a percentage of admission revenues was flat compared to fiscal 2024. Per-capita concession, food and beverage revenues increased by 7.2% during 2025 compared to last year’s fourth quarter, which was driven by increases in incidence rate, higher merchandise sales, concessions pricing changes, as well as a favorable film slate that featured multiple titles appealing to family audiences, a genre where our circuit typically performs well. Our top 10 films in the quarter represented approximately 70% of the box office in 2025 compared to approximately 75% for the top 10 films in the fourth quarter last year. On the higher revenues, theater division adjusted EBITDA was $24,100,000, just under a two percentage point increase compared to the prior year. Reimbursements were $60,400,000 for 2025, a 5% increase compared to the prior year. Turning to the hotel division revenues and results, RevPAR for our owned hotels grew 3.5% during the fourth quarter compared to the prior-year quarter, driven primarily by higher revenues, as our newly renovated hotels continue to attract demand and drive higher rates. Our properties continue to perform well against the industry as a whole. Average daily rates grew 5.6% during the fourth quarter compared to the prior-year quarter, with our average occupancy rate for our owned hotels at 60.2% during 2025, a 1.2 percentage point decrease in our occupancy rate compared to 2024. The shift in our fiscal calendar and net one additional operating day in the quarter had an insignificant impact on the hotel division revenues and results. Based on data from STR, when comparing our RevPAR results to comparable upper-upscale hotels throughout the U.S., the upper-upscale segment experienced an increase in RevPAR of 0.8% during the fourth quarter compared to 2024, indicating that our hotels outperformed the industry by 2.7 percentage points. Comparable competitive hotels in our markets experienced a RevPAR decrease of 2% for 2025 compared to 2024, indicating that our hotels outperformed their competitive set by 5.5 percentage points, as well as a heavier mix of transient leisure demand at higher rates. Group demand remained generally steady during 2025, with group rooms representing 35% of our total room mix compared to 36% of our room mix in 2024, with our group mix in 2025 reverting to more typical levels. Finally, hotels’ fourth quarter adjusted EBITDA was $7,300,000, an increase of 3.4% compared to the prior-year quarter. Shifting to cash flow and the balance sheet, our cash flow from operations was $48,800,000 in 2025 compared to $52,600,000 in the prior-year quarter, with the decrease in cash flow from operations due to unfavorable working capital changes related to the timing of payments relative to our fiscal year-end. For the full year, cash flow from operations was $84,200,000 compared to just under $104,000,000 in fiscal 2024. Total capital expenditures for fiscal 2025 were $83,000,000 compared to $79,200,000 in fiscal 2024, which was primarily comprised of Hilton Milwaukee renovation project payments and maintenance projects in both businesses. During the fourth quarter, we repurchased approximately 118,000 shares of our common stock for $1,800,000 in cash. This brings our share repurchases for 2025 to just over 1,100,000 shares, or approximately 3.6% of our outstanding shares at the beginning of the year, returning approximately $18,000,000 in cash. Our cumulative buybacks since resuming share repurchases in the third quarter of 2024 are now over 1,800,000 shares, or approximately 5.7% of our outstanding share count when we began, returning nearly $28,000,000 in capital to shareholders. In total, over the last two years, we have returned over $45,000,000 in capital to shareholders through share repurchases and dividends paid during fiscal 2024 and 2025. We remain committed to returning capital to shareholders through our quarterly dividend and share repurchases. We plan to grow the dividend over time and opportunistically repurchase shares when we generate cash in excess of our near-term ability to reinvest or deploy for strategic growth. We are disciplined in our approach. While we often do not control the timing or availability of deals, we continue to actively search for opportunities to deploy capital to grow our businesses. Looking ahead, an overview of our current capital allocation priorities for 2026: We expect total capital expenditures of $50,000,000 to $55,000,000 based on our current portfolio of assets, with approximately $25,000,000 to $30,000,000 in hotels, and $20,000,000 to $25,000,000 in theaters. The timing of our planned capital projects may impact our actual capital expenditures during fiscal 2026, and we will continue to provide updates as the year progresses. We expect this decrease in capital expenditures to result in a significant increase in free cash flow in 2026, which will be allocated to opportunistic growth investments and returning capital to shareholders. With that, I will now turn the call over to Gregory S. Marcus.

Gregory S. Marcus: Thanks, Chad. Good morning, everyone. We delivered another record year in our hotel division. With Chad covering many of the details of the quarter, I would like to start today by reflecting a bit on the year. As is often the case with our two divisions, the story of the year was a bit mixed, while successfully executing on some very big projects that we expect to have long-term returns. In theaters, while the box office came up short of expectations for the year, audiences continue to come out and have strong demand for the theatrical experience. We have periods of steady product supply.

Because of the hits-driven nature of the business, the difference between a decent year and what would have been considered a great success was essentially one or two films that did not hit as expected. For our company specifically, our fourth quarter results were quite strong, with both businesses outperforming their industries. Theaters featured a diverse film slate with family content that played well in our markets and helped us achieve strong market share. In hotels, strong leisure demand, particularly at our recently renovated assets, helped us end the year on a high note.

Importantly, the fourth quarter film slate featured a diverse mix of films across genres that played well in our Midwestern markets and appealed to wide ranges of audiences, particularly families. I will start today with our theater division. We achieved above-average market share for seven of the top 10 films in the quarter, including particularly strong share from Wicked, Zootopia 2, and Avatar: Fire and Ash. We exit the year with good momentum, and as we look ahead to 2026, we are encouraged by the growth opportunities that we see ahead.

Chad went over the numbers for the quarter with you, including our strong per-cap growth for both concessions and food and beverage, as well as average ticket price that drove our outperformance for the quarter. Second-tier films beyond the top 10 also made important contributions to the overall box office, with mid-sized films like Regretting You, One Battle After Another, Marty Supreme, and Song Blue delivering compelling stories that audiences wanted to experience on the big screen, rather than sitting at home on their couch. The well-rounded holiday slate offered something for everyone, and it is a great example of when our industry is at its best.

While we had great blockbuster films like Avatar and Wicked that drew big crowds, the box office was so much more than the tentpoles, with multiple films working at once that appealed to different types of audiences. Our market share was also strong with several movies in the second-tier films, including double our normal market share for the Milwaukee-based hometown favorite story, Song Glu. While the overall industry box office was softer than anticipated, we continue to believe this is largely a function of product supply and individual film performance. October was impacted by softer carryover from September releases than we saw last year, as well as a few titles that did not hit as we hoped.

November’s slate had one less tentpole film over the Thanksgiving holiday compared to 2024, when the box office included Wicked, Moana 2, and Gladiator 2. This dynamic continues to illustrate the importance of maintaining consistent and steady product supply that is balanced throughout the year to support the momentum of moviegoing. And we had a more robust film slate in December. We again saw audiences come out as we would expect. As Chad discussed, we saw strong per-capita growth during the quarter, with the average ticket prices benefiting from our ongoing price optimization efforts.

As we have discussed throughout 2025, this has been an evolving effort to strike the right balance between capturing price during peak demand periods, as we did during the busy holiday periods in the fourth quarter, and maximizing attendance by having various price points for different types of customers. In addition to optimizing price, we are focused on other opportunities to grow per-capita by looking at every step in the customer journey. During the fourth quarter, we began rolling out a new queuing line system that consolidates multiple concession lines into a single line that is then served by multiple concession attendants.

The single line moves faster, improving customer perception, and is proving effective at increasing per-capita candy and merchandise sales. During the quarter, we made progress testing several initiatives that we believe will be drivers of per-cap growth in 2026. First, for a significant majority of our customers, their first interaction with us is the digital ticket purchase. While we have offered web- and mobile app-based ticketing for many years, we saw an opportunity to improve this purchase experience. We have completely redesigned our digital ticketing experience to make the purchasing experience as easy, fast, and frictionless as possible.

In November, we launched a new digital ticketing experience for mobile web browsers and our mobile app, followed by the launch of an entirely newly designed marcusleaders.com website in early February. The new site simplifies finding the movie, theater, and showtimes that work for customers, while speeding up the process of seat selection and payments. We are very encouraged by the early feedback from customers. Second, we continue to focus on improving the customer experience for our best-in-class menu of expanded food and beverage options. Again, the goal here is simple. We know from experience that when customers order concessions, food, and beverage on our mobile app, they buy more as they are consistently presented with upsell and cross-sell offers.

We are working to significantly improve our mobile web ordering experience and are going to make the ordering process as easy and frictionless as possible. We are well positioned for the ramp-up in business as we head into spring and summer movie season. Third, we are working on improving the digital ordering experience and fast, with integrated digital wallet payment options that significantly speed up the transaction process. In December, we began testing QR code food and beverage ordering for delivery to seats at two of our dine-in Movie Tavern locations, for those customers who want a fast digital ordering experience but have not yet downloaded our app.

The QR code ordering is simple, and the early results have shown encouraging growth in F&B per caps at these locations. We are in the process of rolling out QR code ordering to all our 20 Movie Tavern and Dine-In theaters. This will be followed by a redesigned food and beverage digital purchase experience in our mobile web and app for all locations later this year. For those customers who prefer the more traditional purchase experience at the box office, concession stand, and our bars and restaurants, we began rolling out new tap-pay terminals in the fourth quarter, and we expect to have the rollout complete at all points of sale by the end of the first quarter.

We expect these investments in technology will not only make the purchasing process easier for our customers and enhance per caps, we expect to get additional data and insight into our customers and their preferences through the new payment technology we are integrating across our various sales channels. We expect to leverage these insights to better tailor our communications and marketing with more customized offers and highlight coming events of interest. We believe it is very important to have programs that promote and incentivize repeat moviegoing, and we have created several with this goal in mind, including Marcus Passports, Marcus Mystery Movie, and Marcus Movie Club.

These programs can also have the added benefit of bringing customers out to see a broader range of small and mid-sized films in addition to the blockbuster films, which we believe supports a healthier overall exhibition ecosystem. While these programs offer a lower ticket price in the short term, they are important drivers of long-term future income. In November, we reached the one-year anniversary of Marcus Movie Club, our subscription program that offers monthly or annual memberships with several great benefits for customers, including a 20% food and beverage discount, access to additional companion tickets for $9.99, and waived digital ticketing convenience fees.

After our first year of Movie Club, we added free Marcus Mystery Movies as a new benefit for members, and we continue to look for ways to drive membership and usage of the program. Approximately 38% of members have selected the annual membership, which we believe supports our long-term goal of driving repeat moviegoing. Marcus Movie Club is one of several programs that promote and incentivize repeat moviegoing, including Marcus Passports, Marcus Mystery Movie, and our loyalty program Marcus Magical Movie Rewards, which now has 6,900,000 members.

As we look ahead, we are very excited by a 2026 movie slate that includes several potentially very strong titles, including Jumanji 3, Toy Story 5, Minions and Monsters, The Odyssey, The Mandalorian and Grogu, Dune: Messiah, Spider-Man: Brand New Day, the Super Mario Galaxy movie, and Avengers: Doomsday, just to name a few. There are many more great films coming, as noted in today’s earnings release. The current slate has a stronger mix of tentpole films, and the grossing potential of 2026 franchises is greater based on their historical predecessor box office performances.

Looking even further ahead, the early look at the 2027 film slate also looks strong with major franchises, including Shrek 5, Star Wars: Starfighter, Minecraft 2, Frozen 3, The Batman Part Two, Sonic the Hedgehog 4, Spider-Man: Beyond the Spider-Verse, The Legend of Zelda, Avengers: Secret Wars, and many more. We are excited about the momentum that is building in theaters and the film slate ahead in the coming years, and we remain very positive and optimistic about the long-term future for the industry and our theater business.

Moving to our Hotels & Resorts division, you have seen the segment numbers and Chad shared the highlights of our performance metrics for the quarter, so I will focus my comments on the year overall and looking ahead. We are pleased to report that, after another strong quarter to end the year, our hotels team delivered another record-breaking revenue and adjusted EBITDA year in fiscal 2025. This is quite the achievement, given that we are comparing against a record fiscal 2024 that benefited from the Republican National Convention and election-related business that did not recur in 2025.

Even more impressive considering that we also completed the largest hotel renovation project in our history at the Hilton Milwaukee, which disrupted operations and negatively impacted results with a significant number of rooms at the hotel out of service during the first half of the year. Even with the negative impact of the renovation, our RevPAR growth outperformed our competitive set for the year by 1.2 percentage points, and we really saw an inflection point once we completed the renovation, as we outperformed the competitive sets by over five percentage points in the second half of the year.

The demand environment was mixed in 2025 with group demand generally remaining strong, particularly at our properties that play well to group business. Leisure demand was mixed across our portfolio in 2025 compared to last year, with some markets seeing softness while others were positive. Demand remains strongest at the upper end of the market, and our upper-upscale properties are performing well in an environment where consumers continue to gravitate toward premium experiences. While we have made significant capital investments in our hotels over the few years, we have also been disciplined with the returns required for these projects. Milwaukee is a good example of our approach.

The Hilton Milwaukee renovation wrapped up in the fourth quarter with the lobby and lounge, public common spaces, ballrooms, meeting space, and updated 554 guest rooms. It looks fantastic, and it is a convention center hotel that Milwaukee can be proud of. As we chose not to renovate the 175-room west wing of the hotel and remove the rooms from the Hilton system at the end of December. Place. Running approximately 3% of in the year for the year. Place. Running approximately 3% of in the year for the year. Ahead of where we were at this time last year.

Looking a bit further out to 2027, group pace is slightly behind where we were at this time last year for the next year out. Banquet and catering pace for 2026 and 2027 is ahead of where we were at this time last year. Based on the current demand environment and our future bookings, our outlook for 2026 remains positive. We are excited about the opportunities for future growth in the hotels business. I would like to once again express my appreciation for our dedicated associates at The Marcus Corporation.

Chad Paris: On behalf of our Board of Directors and our entire executive team, thank you to all of our associates. Their outstanding work and commitment to serving our customers is responsible for our success. They are our most important asset, and we appreciate all that they do every day.

Operator: Thank you. If you would like to ask a question on today’s call, please press star, and to withdraw your question, it is star followed by 2. We will now open for questions. We will go to Eric Wold from Texas Capital Securities. Your line is open. Please proceed.

Eric Wold: Thank you. Good morning, guys. There was a lot of shifts in the pricing strategy last year. I guess, first question on the theater segment. You sounded like you implemented a few more things in the holiday period. Maybe give us a sense of what we should expect throughout 2026 in terms of cadence based on the programs currently in place, what you will come up against in this May, and how that should play out throughout the year?

And then on the hotel side, given the comments you made around seeing increased leisure demand and higher ADR as the renovations have come to fruition last year, maybe give us a sense of what you are seeing in terms of bookings in 2025, and then as we look forward, what you are seeing with leisure versus group and if you expect to see more of a shift back to leisure in your mind? And if that is the case, what do you see as the implication of that?

Chad Paris: Thanks, Eric. Yes, in terms of the cadence through the year, really, it is going to be the anniversarying of our price changes that we made midyear in 2025. I do not see customer sensitivity to price changes. We do want to continue to drive attendance, so it is really going to be more about per caps in that business on the F&B side, and that is where our focus is going to be. And then on the hotel side, you started lapping some of the headwinds in May. I would say, through the first part of the year, we are trying to be very thoughtful about customer sensitivity to price changes.

Maybe give us a sense of what you will come up against in May and how that should play out throughout the year. Got it.

Gregory S. Marcus: Let me start with the very last part of your question on group pace. You may recall at the beginning of 2025, we were seeing very significant increases in group pace early in the year, and then that flattened out a bit. We ended the year with growth that was mid-single digits, but we started the year much higher than that, and so we had a huge step-up early in the year last year, which is, I think, in part why our pace for 2026 is at, right at the moment, low single digit, because we had a big step-up last year.

Timing of when those events get booked really can vary from year to year, and so I would not read too much into what we are seeing right now for 2027. It is still pretty early. Group overall remains healthy, and as we have said over the last few months, or a few quarters, our renovated properties are winning really well with groups. What we have seen, at least in the fourth quarter, is we are also doing a really nice job, even in the slow season, capturing strong leisure demand around the weekends, and we did that here in the fourth quarter. Upper-upscale continues to perform better than the lower end of the market.

The nature of our properties—these “special assets”—is that they play in both the group and leisure. That is the good thing about our properties that we have talked about; our properties play well to that type of customer. If we see softening in one area, we can start to be more aggressive in another. Even in a flat overall demand environment in leisure, we can capture demand there. If you look at them, they are located and demo really well. We see a share nicely.

Eric Wold: Got it. Helpful. Thank you both.

Operator: Our next question comes from Michael Hickey from Stonex. Your line is now open. Please go ahead.

Michael Hickey: Thank you. Hey, Greg, Chad. Congrats, guys, on a great 4Q with outperform. Greg, your 2026 setup here sounds very encouraging on both the theater side and the hotel side. The slate looks exceptional. It seems like it will meet your demand there. Do you see a sort of mid-single digit type growth on the top line, and the premise leverage step up—step up is a big word—relative to 2025 growth on the top line? Do you think you can exceed that and free cash flow conversion? And I have got a follow-up. Thanks, guys.

Gregory S. Marcus: Well, you know, hope springs eternal. Hope is going to tell you hope springs eternal in the theater business. Soon. I mean, it certainly, as you said, on paper, looks good. It looks like it plays to our markets, and we talked about it, but this is an art form. We do not know how it is going to turn out. In 2025, we did not have one blockbuster over $500,000,000. That was a challenge, and it looks like the potential for these is better. We have a very significant PLF footprint. It is probably the highest penetration of PLFs in the industry.

We are very focused on making sure that our prices are market appropriate and that we are offering the right product for the right customer, so when those customers are there, we are going to be able to capture the top line and the bottom line. Yet, as you know, our pricing strategies have lots on. We are prepared to capitalize and maximize on whatever comes our way. We have programs for the customers that do not want to spend as much—our Tuesday program remains very robust. A big push for us this year is going to be our Movie Club as we continue to really build that base of business.

If you are in our theaters now, if you do not join the club, you are not paying attention. I mean, they are just really working hard to build that base of business. It reminds me a lot of the hotel business where you sometimes fill a hotel with a base of customers to sort of shrink the size of your hotel. And I think others in the industry who have seen a significant buildup in membership on the theater side enjoy that benefit of a continued income stream. So we are very focused on that as well. Then on the hotel side, we will continue to see the benefits of all the investment we have made in these properties.

They look so good. We should see good performance as long as the economy stays solid, we will be in good shape. The only thing I would add on the film mix is that the family slate that we see ahead for 2026 should benefit a circuit like ours in the markets that we are in. In 2025, we did not really have a family animated film that hit, and we saw the power of that over the holidays with Zootopia. As we look at the slate for summer 2026, I do think that is a net positive for Marcus Theatres.

And that dovetails nicely with the Hilton and that line in Milwaukee as our convention center continues to perform better.

Chad Paris: Yes, Mike. I will take the last part of this question. In terms of contribution and leverage on the incremental revenue, historically the theater business contributes at around 50% on the contribution margin line to EBITDA. And with our step down in CapEx this year, I think our free cash flow conversion on that is going to be very strong.

Michael Hickey: Very helpful. On M&A, you said “actively searching.” I do not know if I have heard that from you before. Are you a little bit more aggressive now looking at maybe some M&A? And I guess, with the Warner Brother deal hanging here, Greg, if that ices theater deals or not. Regardless of that, maybe some color there because I wonder how active the market is, but I do not think it has been great. And then on the hotel side, I am not sure how active the market is. So just curious where you are focusing your attention.

Do you see the biggest opportunity, whether it is theaters, hotels, or maybe another area that could be complementary to your overall business today?

Gregory S. Marcus: Transaction markets have been pretty slow across the entire industry. As interest rates went up, cap rates got elevated. The economy is strong enough, the businesses are okay, so there were not forced sales. People were doing well enough to wait, or at least they are going to try and wait. It is a waiting game. That has really slowed up that market a fair amount. That is a very good point. You are right.

Look, I will sort of work back to this: a lot of private equity investors with a five-year hold write a pro forma and they write a cap rate, and if cap rates are 100 to 200 basis points higher, it messes up the returns pretty significantly. So they can wait. On the theater side, again, there is very, very little transaction activity that we are seeing. We will look at anything that would come our way if we think it makes sense. A big challenge a lot of these guys have are very expensive leases, and a lot of that needs to be figured out.

But then you bring up a very interesting point, which we talk about, which is, okay, what other adjacencies can we have? We have worked through these huge capital investments that we have had to go through, and so now when we have free cash flow, we are looking at the leverage we can pull, whether it is buying back stock or dividends. If we can find good investments, we would like to make them. It is very tax efficient to not pay the capital out if we can keep it invested within the company for our investors. That can be a great return. And if we cannot, then we will distribute cash as we have talked about.

Michael Hickey: Nice. Thanks, guys. Good luck.

Gregory S. Marcus: Thanks, Mike.

Operator: Our next question comes from Andrew Edward Crum from B. Riley Securities. Your line is now open. Please proceed.

Andrew Edward Crum: Okay. Thanks. Hey, guys. Good morning. I want to ask about the occupancy rate. It was down year-on-year in 4Q. Was that election-related in the year-ago period? Was it the closing of the West Wing of the Milwaukee? Or was it something else? And would you anticipate that rebounding in 2026?

Chad Paris: Hi, Drew. Yes, I would start with occupancy in the fourth quarter last year did get a benefit from a bunch of group business related to the election. That definitely provided a tailwind last year. I do think in some of our markets this year, there is clearly some softness. It is very much a mix story that is market-specific and, at times, even property-specific. It is not an obvious softening trend in our markets where we are at, and we are outperforming the softness generally because of the quality of the assets and the investments that we have made.

So I think the way to think about it is we should look to outperform what our markets do, even if we see some of the softness.

Andrew Edward Crum: Got it. Okay. Thanks, Chad. And then Mike’s last question focused on M&A. Given the opportunity to review the portfolio, in the past you guys have made selective divestitures. Any updates there? Any comments you can give us in terms of how you are thinking about that?

Gregory S. Marcus: You know, look, we are always looking at our assets, and we come at it from a strong real estate mentality. One of the things that is important, as you saw in the last few years as the bubble came across the investments, is we have to look and decide, okay, is the investment going to be a good investment for us? And if we do not think the investment is the right investment for us, we can then divest ourselves of the asset, and that will happen occasionally.

We do not have any major divestiture planned right this minute, but if something makes sense or the markets get very hot, we are always looking at that and saying, okay, what is the right long-term choice for these assets for our company?

Chad Paris: And, Drew, we tend to immediately think about hotels in that context, but we own a lot of theater real estate, and portfolio management is an ongoing process. We are continuously looking at the performance of individual theater locations and highest and best use for the real estate. I would just suggest that store will continue to be part of a potential source of making changes, and we could add some locations too. In the past, we have monetized noncore real estate in our theater business. We might take investment and change some of the uses on some of our theater sites, and we can make investments to do that too.

Again, one of our hidden assets is our real estate, and we have come at this for decades from a real estate perspective, and we may make investments on our properties that would maximize the highest and best use of that real estate.

Andrew Edward Crum: Got it. Thanks, guys.

Operator: As a reminder, if you would like to ask a question on today’s call, please press star. And to withdraw your question, it is star followed by two. Our next question is from Patrick William Sholl from Barrington Research. Your line is now open. Please proceed.

Patrick William Sholl: Hi. Thanks for taking the question. Just maybe another question around capital allocation and M&A. Could you maybe discuss some of the differences in underwriting or opportunities in expansion, whether organic or M&A, and the differences in underwriting—just additional new builds versus the I know you talked about the difficulty with some of the leases and potential M&A—but any sort of update on those competing priorities?

Chad Paris: Pat, I mean, we have looked at a number of things in the last year plus and done a fair amount of work on different opportunities. In the theater business, the challenge on M&A, consistently, has been the leases and the number of locations in a theater circuit that work and do not work when you look at a circuit overall. That mix of locations that do not work has made it very hard to get deals done if you are going to have to assume the lease. And so it really requires more of a ground game in looking and doing onesie-twosie type deals where you are picking up individual theaters in that space.

That is really how we look at the underwriting—at a more granular level than in the past. New builds—we think about it. We think about attractive markets. But right now, with the product supply challenges, it is just tough to get the math to work on new construction. We are going to keep looking at it, but at the moment, it is not something I think you are going to see us do a lot of in the near term.

Patrick William Sholl: Okay. And then on concessions, you had mentioned the QR ordering is helping to increase incidence. I was wondering what other components of the per-cap trends in the quarter—was it between pricing or mix and things like that? What else contributed to the per-cap trends in the quarter?

Chad Paris: Yes. So in the fourth quarter, the QR code ordering actually had a really small impact. I think that is more of a 2026 benefit. We were doing a handful of test locations late in the quarter, but at those test locations, we are really encouraged by what we are seeing, and I think that is going to be a meaningful piece of our per-cap uplift for our dine-in theaters in the coming year. In the fourth quarter specifically, it was mostly incidence rate and capturing more customers. It was some of the queuing line benefit that Greg talked about and getting the basket size to grow with customers that are going to the concession stand.

We have seen some traction with that, which is really encouraging. There was a little bit of price, but price was not really the primary component of what we saw in the fourth quarter. I think there was certainly some benefit in a holiday quarter of people making events of going out to the movies and just generally spending more, and I think that is encouraging to see the health of the consumer that we continue to see in the fourth quarter.

Operator: Okay. Thank you.

Chad Paris: Thanks, Drew. We would like to thank everybody for joining us today, and we look forward to talking to you once again in May when we release our first quarter 2026 results. Until then, thank you, and have a great day.

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