The Marcus Corporation’s 2026 CapEx and M&A Outlooks Clash: Growth vs. Maintenance, Sluggish vs. Rising Activity

Date of Call: Feb 26, 2026

Financials Results

• Revenue: $193.5M, a 2.8% increase compared to the fourth quarter last year
• EPS: $0.24 per share benefit from federal and state historic tax credits, excluded from adjusted EBITDA
• Operating Margin: $1.7M operating income, negatively impacted by $5.2M noncash impairment charges in Theater division; excluding charges, $6.9M, growing 5.2% YOY

Guidance:

• Total capital expenditures for fiscal 2026 expected to be $50M to $55M ($25M-$30M in hotels, $20M-$25M in theaters).
• Expect significant increase in free cash flow in 2026, to be allocated to opportunistic growth investments and returning capital to shareholders.
• Hotels: outlook for 2026 is positive with expectations for low single-digit RevPAR growth.
• Group bookings for fiscal 2026 are approximately 3% ahead of this time last year.

Business Commentary:

Theater Revenue and Market Performance:

• Marcus Corporation's theater revenue for the fourth quarter was $123.8 million, a 2.2% increase compared to the prior year.
• The company outperformed the industry with a 7.6 percentage point lead in market share, driven by strategic pricing actions and a favorable film mix that included multiple family-oriented films.

Hotel Revenue and RevPAR Growth:

• The Hotels and Resorts division reported revenues before cost reimbursements of $60.4 million, a 5% increase compared to the prior year.
• RevPAR for owned hotels grew by 3.5%, with an increase in average daily rates by 5.6%, attributed to strong demand for renovated hotels and a higher mix of transient leisure demand at higher rates.

Capital Expenditure and Cash Flow:

• Total capital expenditures for fiscal 2025 were $83.2 million, with a significant portion allocated to the Hilton Milwaukee renovation project.
• Cash flow from operations in the fourth quarter was $48.8 million, impacted by unfavorable working capital changes, but the company anticipates a significant increase in free cash flow in 2026 due to a step down in capital expenditures.

Share Repurchases and Dividend Strategy:

• The company repurchased approximately 1.1 million shares for $18 million in fiscal 2025, representing 3.6% of outstanding shares at the beginning of the year.
• Marcus Corporation plans to continue returning capital to shareholders, with an emphasis on opportunistic share repurchases and dividend growth as capital allocation priorities for 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management described results as 'solid execution and results, with both divisions delivering year-over-year revenue and earnings growth and outperforming their industries.' They noted 'good momentum' exiting the year and are 'encouraged by the growth opportunities' ahead, citing a strong 2026 film slate and record hotel performance.

Q&A:

• Question from Eric Wold (Texas Capital Securities): On the Theater segment, give a sense of what we should expect throughout 2026 in terms of cadence based on current pricing programs.
  Response: Cadence will be influenced by anniversarying price changes made mid-2025; no big program changes expected, with focus shifting to driving per caps in F&B.

• Question from Eric Wold (Texas Capital Securities): On hotels, give a sense of what you're seeing in terms of bookings on leisure vs. group, and expectations for a shift back to leisure.
  Response: Group pace for 2026 is low single-digit, with healthy demand at renovated properties. Leisure demand is mixed but upper upscale properties perform well; outperformance is expected even in soft markets.

• Question from Michael Hickey (StoneX): Given the encouraging setup for 2026 in both hotels and theaters, do you see potential for exceeding 2025 top-line growth and how much leverage should be expected?
  Response: Hopes are high; focus is on pricing strategies, PLF footprint, and membership programs. Historically, theater contributes ~50% to EBITDA; strong free cash flow conversion expected due to lower CapEx.

• Question from Michael Hickey (StoneX): On M&A, are you more aggressive now? Where are you focusing attention given the current market?
  Response: The hotel transaction market is slow due to high cap rates; theater M&A activity is also low due to expensive leases. Focus is on finding good investments within the company or distilling cash if no opportunities arise.

• Question from Andrew Crum (B. Riley Securities): What drove the year-on-year decline in occupancy rate in Q4, and will it rebound in 2026?
  Response: Occupancy decline in Q4 was partly due to election-related group business in the prior year; softness in some markets is expected but company should outperform due to asset quality.

• Question from Andrew Crum (B. Riley Securities): Any updates on portfolio divestitures?
  Response: No major divestitures planned currently, but the company continuously evaluates assets from a real estate perspective and may monetize noncore real estate if the right opportunity arises.

• Question from Patrick Sholl (Barrington Research): Discuss differences in underwriting for expansion (organic/M&A) and updates on competing priorities.
  Response: Theater M&A is challenging due to leases, requiring granular, individual theater deals. New builds are not currently viable due to product supply challenges and math not working.

• Question from Patrick Sholl (Barrington Research): What contributed to the per cap trends in concessions in Q4 besides QR ordering?
  Response: Per cap growth was driven by incidence rate, queuing line benefits increasing basket size, and some price optimization, with holiday consumer health also a factor.

Contradiction Point 1

Capital Expenditure Outlook

Contradiction on whether 2026 CapEx is purely maintenance or includes growth investments.

Patrick Sholl (Barrington Research) - Patrick Sholl (Barrington Research)

2025Q4: The $50-55M is primarily maintenance and ROI capital, not 100% maintenance. - [Chad Paris](CFO)

Can you discuss the differences in underwriting between organic expansion and M&A, including challenges with new builds versus leases, and provide an update on capital allocation priorities between these options? - Eric Wold (Texas Capital)

2025Q3: No significant CapEx investments are planned, only normal course refreshes within the $50-55M budget. The $50-55M is primarily maintenance and ROI capital, not 100% maintenance. - [Chad Paris](CFO)

Contradiction Point 2

M&A Market Outlook

Contradiction on the current state and potential for M&A activity in the theater market.

Michael Hickey (StoneX) - Michael Hickey (StoneX)

2025Q4: The theater transaction market also has limited activity, often with expensive leases. - [Gregory S. Marcus](CEO)

Is the company becoming more aggressive in M&A, particularly in theaters or hotels, and how does the Warner Bros deal influence this strategy? - Patrick Sholl (Barrington Research)

2025Q3: The M&A market remains sluggish but may be starting to see more activity. - [Gregory S. Marcus](CEO)

Contradiction Point 3

Outlook on Group Pace Growth

Contradiction on the growth trajectory and drivers for group bookings.

Eric Wold (Texas Capital Securities) - Eric Wold (Texas Capital Securities)

2025Q4: Group pace for 2026 is running low single digits ahead of last year's pace due to a significant step-up in bookings early in 2025. - [Chad Paris](CFO)

Can you provide a breakdown of hotel bookings between leisure and business travel for this year? - Eric Wold (Texas Capital Securities)

2025Q2: The company has 7 hotels... The group pace gains are partly due to renovated meeting space at three Wisconsin properties... The convention center is positively impacting activity. - [Chad Paris](CFO)

Contradiction Point 4

Theatrical Pricing Strategy and Impact

Contradiction on the strategic focus and financial impact of pricing initiatives.

Did Eric Wold (Texas Capital Securities) participate in the earnings call? - Eric Wold (Texas Capital Securities)

2025Q4: Focus will be on driving per capita growth in concessions and food & beverage. The primary year-over-year benefit from the 2025 pricing actions will be seen in the first two quarters of 2026. - [Chad Paris](CFO)

What pricing strategy shifts in the Theater segment should we expect in 2026? - Eric Wold (Texas Capital Securities)

2025Q2: The previous $7 'Everyday Matinee' program is increasing to $7.50... The focus remains on driving attendance to boost total revenue, with the surcharge expected to improve admission per capita growth in the second half of the year. - [Chad Paris](CFO)

Contradiction Point 5

Primary Driver of Concession Per Capita Growth

Contradiction on whether per cap growth is driven by pricing or incidence/basket size.

What questions does Patrick Sholl from Barrington Research have for the earnings call? - Patrick Sholl (Barrington Research)

2025Q4: In Q4, the per capita growth was primarily driven by higher incidence rates and capturing more customers, along with benefits from the new queuing line system that increased basket size. QR code ordering had minimal impact as it was in a limited test phase. - [Chad Paris](CFO)

What components, including QR ordering, pricing, and mix, contributed to the per cap trends in the quarter? - Eric Wold (Texas Capital Securities)

2025Q1: The change in concession per caps was almost entirely due to pricing changes, with minimal impact from incidence or basket size. - [Chad Paris](CFO)