Marcus Corp.'s Q3 2025 Earnings Call: Contradictions Emerge on Hotel Revenue, Consumer Behavior, and M&A Outlook

Date of Call: October 31, 2025

Financials Results

• Revenue: $210.0M, down 9.7% YOY
• EPS: $0.52 per share (includes $0.10 per share insurance gain); $0.42 ex-gain, versus $0.78 in prior year (ex-adjustments)

Guidance:

• Fiscal 2025 capital expenditures expected to be $75–$85M.
• Preliminary 2026 capex expected to step down to approximately $50–$55M (subject to timing).
• Expect continued admission-per-cap growth over the next several quarters driven by prior pricing moves and blockbuster pricing annualization.
• Group room pace for 2026 running ~14% ahead versus last year; banquet/catering also ahead.
• Board increased share repurchase authorization by 4.0M shares to a total authorization of 4.7M shares.

Business Commentary:

• Mixed Results in Division Performance:
• The Marcus Corporation reported consolidated revenue of $210 million, down 9.7% year over year, with operating income decreasing by $10.1 million compared to the prior year.

• The decline was attributed to mixed performance in the theater and hotel divisions, with theaters experiencing a 16% decrease in total revenue primarily due to weaker film performances, and hotels showing a 1.7% increase in revenue.

• Theater Division Challenges and Opportunities:

• Theater division total revenue was $119.9 million, down approximately 16% year over year, with comparable theater attendance decreasing 18.7%.

• The decline was mainly due to a less concentrated film slate and fewer blockbuster films compared to previous years. However, there were positive aspects, such as strategic pricing changes resulting in an average admission price increase of 3.6%.

• Hotel Division Outperformance:

• The hotel and resorts division achieved a 1.7% increase in revenue, with RevPAR growth of 7.5% when adjusted for the prior year's Republican National Convention impact.

• The growth was driven by strong sales results in the group customer segment, higher results from recently renovated properties, and an increase in banquet and catering revenues by 8.3%.

• Capital Expenditure and Share Repurchase Strategies:

• The company's capital expenditures were $20.9 million in Q3, with expectations for fiscal 2025 of $75 to $85 million and a planned decrease to $50 to $55 million in 2026.
• The company repurchased approximately 600,000 shares this quarter, increasing its share repurchases this year to over 1 million shares.

Sentiment Analysis:

Overall Tone: Neutral

• Consolidated revenues $210M, down 9.7% YOY; net earnings $0.52/share ($0.42 ex $0.10 insurance gain) vs $0.78 prior year (ex-adjustments). Theater adjusted EBITDA $22.1M, down 33% YOY; comparable theater admissions down 15.8%, attendance down 18.7%. Hotels: RevPAR +7.5% when excluding prior-year RNC impact and hotels' adjusted EBITDA essentially flat. Strong liquidity, buybacks and reduced 2026 capex imply balanced outlook.

Q&A:

• Question from Eric Wald (Texas Capital): On the hotel side you mentioned rate growth at four of seven hotels; for the other three is that short-term or a longer issue—competitive or requiring investment? On the $50–$55M 2026 capex, is that primarily maintenance? And on M&A, given reduced capex and potential free cash flow, what is your comfort taking on leverage, target leverage range, and would you use equity versus debt for deals?
  Response: Two of the three lagging hotels reflect persistent local supply/market dynamics, the third a recent softening; only minor refreshes planned (within the $50–$55M 2026 capex). 2026 capex is primarily maintenance with some ROI projects. Net leverage is ~1.7x with a target nearer 2.25–2.5x; management is comfortable modestly increasing leverage for attractive M&A and would use equity opportunistically but would not issue equity at current prices.

• Question from Patrick Shaw (Barrington Research): Have you seen any consumer hesitation on concession price increases—changes in uptake or basket sizes? And how are you seeing macro factors affect the M&A market in hotels and exhibition—any increase in deal activity or pressure sellers?
  Response: Concessions: no meaningful change—hit rates and basket sizes remained stable and merchandise sales helped per-cap growth. M&A: transaction volume remains sluggish but shows early signs of pickup; no widespread forced sellers yet—opportunities may arise as owners face reinvestment cycles and cap-rate/exit mismatches.

• Question from Drew Crum (B. Riley Securities): Your expectation for admission per-cap growth — does that assume further pricing changes? Any early learnings from Q3 pricing? And how do you view film-mix for Q4—positive, negative, or too uncertain?
  Response: Admission per-cap growth largely reflects annualization/tailwind from Q3 pricing and strategic blockbuster pricing already implemented; no material additional pricing changes planned. Early learnings: blockbuster/Everyday Matinee adjustments worked as intended. Q4 mix is uncertain—some family titles and Avatar help, but comparisons (e.g., Moana last year) make the outcome hard to predict.

• Question from Mike Hickey (Benchmark): Off-script views on growth opportunities and catalysts for theaters and hotels in 2026; drivers of bottom-line/free cash flow improvement and operating leverage; and plans for leadership transition after Mark's retirement—could that change strategy?
  Response: Theaters: 2026 slate (notably stronger family franchises) should support box-office upside; Hotels: renovated assets are driving ADR/RevPAR outperformance. Free cash flow should increase materially in 2026 due to the capex step-down to ~$50–$55M, and theater revenue gains have high operating leverage. Leadership transition: search underway (internal/external); expect new ideas but not a wholesale strategic change.

Contradiction Point 1

Hotel Segment Revenue Growth and Market Dynamics

It involves differing explanations for the hotel segment revenue growth and the impact of market dynamics on specific properties, which could affect investor understanding of the company's performance and strategies.

What caused the lack of rate growth in the three hotels? Is this due to short-term market dynamics or competitive factors? What are the future plans and capital expenditure requirements for these hotels? - Eric Wald (Texas Capital)

2025Q3: The three hotels without rate growth face market dynamics issues, particularly supply in the market at two hotels. One hotel experienced recent demand softening. - Chad Paris(CFO)

What factors impacted hotel segment revenue in Q3? - Andrew Edward Crum (B. Riley Securities)

2025Q2: Hotel revenue of $97 million increased 9.4% over Q2 2022 excluding the impact of the Hilton project. The growth was driven by continued strength in transient and group business, particularly at our hotels in Wisconsin. - Chad Paris(CFO)

Contradiction Point 2

Consumer Behavior and Merchandise Sales

It involves differing statements about consumer behavior and the impact of macroeconomic conditions on merchandise sales, which could affect investor perceptions of the company's resilience and pricing strategies.

Have you seen changes in consumer behavior regarding concessions in the current macro environment? - Patrick Shaw (Barrington Research)

2025Q3: No significant changes in consumer buying patterns have been observed. Hit rates and basket sizes remain consistent. - Chad Paris(CFO)

How does the $7 Everyday Matinee pricing compare to previous pricing models? - Patrick William Sholl (Barrington Research)

2025Q2: Merchandise sales of $73 million increased 7.3% over Q2 2022, aided by higher concession sales and customers' increased propensity to buy merchandise items with concession purchases. - Chad Paris(CFO)

Contradiction Point 3

Film Surcharge Impact on Admission per Cap

It involves differing expectations about the impact of film surcharges on admission per capita, which could influence investor expectations for the company's revenue growth and pricing strategies.

How do you expect admissions per cap to grow in the next few quarters, and what insights have you gained from recent pricing increases? - Drew Crum (B. Riley Securities)

2025Q3: Growth is expected through tailwinds from strategic pricing moves and blockbuster pricing. - Greg Marcus(CEO)

What is the size of the surcharge for blockbuster films, and how many tickets will it affect? - Eric Wold (Texas Capital Securities)

2025Q2: The pricing changes from Everyday Matinee to $7.50 and $8.50 for certain films, which is generally applied to blockbusters, and it's a thoughtful approach to balance attendance and revenue. It will provide uplift to admission per caps in the second half of the year. - Chad Paris(CFO)

Contradiction Point 4

Hotel Market Dynamics and Capital Expenditure

It involves differing explanations for hotel performance and capital expenditure plans, which are critical for understanding the company's financial strategy and growth potential.

What are the reasons for the lack of rate growth in the three hotels? Is this due to short-term market conditions or competitive pressures? What are the future plans and capital expenditure requirements for these hotels? - Eric Wald (Texas Capital)

2025Q3: The three hotels without rate growth face market dynamics issues, particularly supply in the market at two hotels. One hotel experienced recent demand softening. No significant capital investments are planned; only normal course refreshes. - Chad Paris(CFO)

As the Hilton Milwaukee renovation nears completion, will it allow for price increases or is the focus on maintaining prices to remain competitive? - Michael Hickey (Benchmark Company)

2025Q1: The renovation was necessary and an investment for the future. The company aims to benefit from the new convention center and become the premier hotel connected to it, potentially allowing for price adjustments. - Gregory S. Marcus(CEO)

Contradiction Point 5

Transaction Activity and M&A Opportunities

It involves the company's stance on transaction activity and M&A opportunities, which directly impacts investors' expectations about the company's growth strategy.

How are macro factors impacting the M&A market in the hotel and film segments? - Patrick Shaw (Barrington Research)

2025Q3: Transaction volumes are still sluggish. Interest rates affecting pro formas of existing assets are a challenge. - Chad Paris(CFO)

How are average ticket prices and attendance growth expected to trend compared to 2024? How might the 2025 and 2026 film slate impact screen count growth, considering the 11% decline in screens since Q4 2019? - Mike Hickey (The Benchmark Company)

2024Q4: Currently, transaction activity is quiet. - Gregory S. Marcus(CEO)