Marcus Corp (MCS) 2021 Q1 法說會逐字稿

Good morning everyone and welcome to The Marcus Corporation First Quarter Earnings Conference Call. My name is Celine and I will be your operator for today. (Operator Instructions) As a reminder, this conference is being recorded.

Joining us today are Greg Marcus, President and Chief Executive Officer; and Doug Neis, Executive Vice President, Chief Financial Officer and Treasurer of The Marcus Corporation. At this time, I'd like to turn the program over to Mr. Neis for his opening remarks. Please go ahead, sir.

Thank you very much and good morning everybody and welcome to our fiscal 2021 first quarter conference call. As usual, you know I need to begin by saying we plan on making a number of forward-looking statements in our call today, all of which we intend to qualify for the safe harbors from liability established by the Private Securities Litigation and Reform Act. Our forward-looking statements may generally be identified by our use of words such as, we believe, anticipate, expect or words of similar import. Our forward-looking statements are subject to certain risks and uncertainties, which may cause our actual results to differ materially from those expected, including, but not limited to the adverse effects of the COVID-19 pandemic in our theater and hotels and resorts businesses, results of operations, liquidity, cash flows, financial condition, access to credit markets and ability to service our existing and future indebtedness, and the duration of the COVID-19 pandemic and related government restrictions and social distancing requirements and the level of customer demand following the relaxation of such requirements.

Our forward-looking statements are based upon our assumptions, which are based only upon currently available information, including the assumptions about our ability to manage difficulties associated with or related to the COVID-19 pandemic; the assumption that our theater closures, hotel closures and restaurant closures are not expected to be permanent or to reoccur; and our assumptions about the release of new movies and the temporary and long-term effects of the COVID-19 pandemic on our business. Listeners are cautioned not to place undue reliance on our forward-looking statements. And additional factors, risks and uncertainties, which could impact our ability to achieve our expectations identified in our forward-looking statements are included under the heading Forward-looking Statements in the press release we issued this morning announcing our fiscal 2021 first quarter results and in the Risk Factors section of our fiscal 2020 annual report on Form 10-K, which you can access on the SEC's website. We'll also post all Regulation G disclosures where applicable on our website at www.marcuscorp.com.

So with that behind us, let's begin. Our call will follow the usual format, which is where I will start with spending a few minutes briefly showing a few numbers from our quarter with you and we'll also discuss our balance sheet and liquidity. I'll then turn the call over to Greg who will focus his prepared remarks on where our businesses are today and what we're seeing for the near term and longer future. We'll then open the call up for questions.

So you've seen the numbers. This will be the last quarter that we're comparing our results to a quarter that included pre-COVID results for the majority of the quarter. We did have multiple non-recurring items last year, all of which are detailed in a non-GAAP reconciliation that we included at the end of the press release. And so while this year's first quarter results were understandably worse than last year, they were also noticeably better than the last 3 quarters of fiscal 2020. Even after adjusting for 1 non-recurring item in our fiscal 2021 first quarter, a onetime state government grant, our non-GAAP adjusted EBITDA, while still negative, was over $10 million better than our fiscal 2020 fourth quarter, a sign of real progress. And that's despite the fact that our first quarter is historically a weaker quarter than our fourth quarter.

Our theater results were obviously still impacted by state and local restrictions and a significantly reduced number of new films, but our adjusted EBITDA from this division still improved by nearly $5 million compared to last quarter. And our Hotels and Resorts division reported adjusted EBITDA that was $6 million better than last quarter and in fact was over $2 million better than last year. Greg, will go into a little more detail about these improvements in his remarks.

There are a couple of items worth noting in our numbers below operating income. As you'd expect, our interest expense increased during the first quarter due to increased borrowings and a higher average interest rate. It's important to note, however, that our fiscal 2021 first quarter interest expense included over $600,000 of non-cash amortization of debt issuance costs compared to only $49,000 of such costs last year. I also want to point out that beginning in fiscal 2021, the accounting for our convertible notes changed. We now show the entire $100.1 million of convertible notes as debt. There's no longer a portion allocated to equity. As such, our reported interest expense this quarter did not have any non-cash debt discount, unlike our fourth quarter of fiscal 2020.

You'll also note that we reported net gains and disposition of assets during the first quarter of fiscal 2021. This net gain was due primarily to the sale of our interest in the joint venture during the period. Our effective income tax rate was 27.7% during the quarter and we anticipate that our effective income tax rate for the remaining quarters of fiscal 2021 will be or may be in that 24% to 26% range that we've typically seen. Of course, our actual fiscal 2021 effective income tax rate may be different depending upon actual facts and circumstances.

Shifting gears away from the earnings statement, just for a moment, our total cash capital expenditures during the first quarter of fiscal 2021 total approximately $1.5 million. Most of these dollars were spent on 2 projects: a theater renovation mentioned in our press release and a lobby renovation that we've initiated at our Grand Geneva Resort and Spa. We're still estimating that our fiscal 2021 capital expenditures may be in the $15 million to $25 million range, with many of our projected expenditures backloaded to the second half of the year.

Let me now provide some brief financial comments on our operations for the quarter beginning with theaters. Total attendance was down 81.4% compared to the prior year first quarter, reflecting the large number of theaters closed for all or portions of the quarter and the fact that our open theaters were only operating on Tuesdays and weekends. Now, according to the data received from comScore and compiled by us to evaluate our fiscal 2021 first quarter results, United States box office receipts decreased 89.7% during our fiscal 2021 first quarter. As a result, we believe our admission revenues decline of 80.7% for comparable theaters during the first quarter of fiscal 2021 outperform the industry average by 9 percentage points.

Our average admission price for our comparable theaters increased 3.7% during the first quarter. And our average concession and food and beverage revenues per person at our comparable theaters increased 16% for the first quarter. Shorter lines at the concession stand, the emphasis we're placing on encouraging guests to purchase their concessions and food and beverage ahead of time, either online or using our mobile app, and the success of our Marcus Private Cinema Program, particularly for several family films that were released during the quarter, contributed to our increased per capita revenues.

Shifting to our Hotels and Resorts division, our total revenue per available room, or RevPAR, for our 8 owned hotels decreased 46.4% during the first quarter compared to last year same period. Once again now comparing it to the industry, however, when you compare -- according to the data received from Smith Travel Research and compiled by us in order to compare our results, our hotels outperformed comparable upper-upscale hotels throughout the United States during the first quarter by approximately 8 percentage points. The data also indicates that our hotels outperformed competitive hotels in our market by approximately 6 percentage points during the first quarter.

Breaking out the numbers for all 8 hotels more specifically, our fiscal 2021 first quarter overall RevPAR decrease was due to an overall occupancy rate decrease of 25.9 percentage points, partially offset by a 2.6% increase in our average daily rate or ADR. Our average first quarter occupancy rate for our own hotels was 28.3%, with several hotels performing much better than that.

Now finally, before I turn the call over to Greg, let me also briefly comment on our balance sheet liquidity position. You may recall that we reported cash and revolving credit availability of approximately $227 million at the end of December. Thanks to the receipt of a remaining fiscal 2019 income tax refund, several state government grants and continued strong cost controls at every level of our organization, our cash and revolving credit availability was still an extremely strong $213 million at the end of our fiscal 2021 first quarter. We also used proceeds from the previously mentioned sale of a joint venture to pay down our term loan by over $4 million during the quarter. And now that we have filed our fiscal 2020 income tax return, we anticipate an additional income tax refund of approximately $24 million later in the year, along with tax loss carryforwards that may be used in future years.

We'll continue to pursue additional opportunities to reinforce our liquidity in the future as well, which would include sales of surplus real estate and other non-core real estate. We have over $8 million of carrying value in additional assets currently under contract or letters of intent to sell later in 2021. We continue to believe we'll receive total sales proceeds from real estate sales during the next 12 to 18 months totaling approximately $10 million to $40 million depending on demand for the real estate in question. Our significant liquidity, combined with the receipt of expected income tax refunds and proceeds from the sale of surplus real estate, positions us to continue to meet our obligations as they come to and continue to sustain operations throughout fiscal 2021 and into 2022, even in the very unlikely event that our properties continue to generate significantly reduced revenues.

With that, I'll now turn the call over to Greg.

Thanks, Doug. During our year-end earnings call in early March, I opened my remarks by recognizing that there still may be some bumpy weeks and/or months ahead of us, but that we were very encouraged by a number of green shoots that were springing forth in both of our businesses. Well now, 2 months later, I think we all agree that most of the news since then has been largely encouraging and some of those green shoots are starting to bud. The rollout of vaccinations has gone better than expected with over 50% of the eligible adult population having now received at least one shot, both nationwide and most importantly in our markets. As you know from prior calls, I'm a huge proponent of the vaccines and their role on getting this country and our businesses back to normal. There's still work to be done to get more people vaccinated. The most eager have now been vaccinated and now the heavy lifting begins as we work to motivate others to get vaccinated. But you have to be encouraged by the progress thus far and the resulting improvements we are seeing in the COVID numbers across the country.

As we said in our press release, we truly do see a recovery beginning to take hold. Having said that, this is no time to spike the ball on the 5-yard line. We know the recovery will not be an overnight process. So our teams still have a lot of work ahead of us as we rebuild our businesses. Our priority will continue to be the safety and wellbeing of our associates and customers and communities. This has guided everything we've done so far and will guide us in the weeks and months ahead as well.

Let's start with our Hotel division. Doug shared some of the numbers with you, including the fact that the data indicates that we once again significantly outperformed both the industry and our competitive sets this quarter. As you know, our hotels have consistently outperformed their markets in prior years as well, but the amount of outperformance in recent quarters has widened significantly. It's fair to assume that as demand increases and all hotels are fully operating, we might expect that our percentage of outperformance might decrease somewhat. But as I shared with you last quarter, I think our numbers speak to a flight to quality that should be beneficial in the future in our ability to consistently outperform in our markets.

Stated simply, we have always had some of the best properties in our respective markets and it doesn't surprise us that they've outperformed during this challenging time, but I will admit some of the other numbers Doug shared with you about the first quarter did surprise us. Our first quarter is historically our weakest quarter of the year, so without meaningful business travel yet, we did not necessarily expect to report quarterly results that would end up better than last year, even after adjusting for some non-recurring costs last year. But thanks to stronger-than-expected drive-to-leisure customer demand, that's exactly what we did. The majority of our customers have been transient leisure customers who are looking to get away and change their scenery after months of staying home. As a result, not surprisingly, weekend business was the strongest at all of our hotels and during spring break weeks in March. We even saw stronger-than-expected business midweek. Properties like the Grand Geneva Resort and Spa and Timber Ridge Lodge performed the best among our hotels as they're well-suited for families looking to get away. But our downtown hotels also saw an uptick in leisure business as well.

During our last call, I shared with you that we had a record ski season at Grand Geneva. We've been at or near sellouts on multiple Saturdays at this resort. It wasn't that we didn't have any transient business in group business. We continue to have weddings and some small group business, and we continue to have success booking major league baseball teams and NBA basketball teams. And as I shared with you in March, there were also some green shoots in individual business travel, and we believe that continued progress with the vaccine rollout will further spark growth in both of these business travel segments. I think one of the first steps leading towards the resumption of business travel will be the reopening of offices. And although it is slow, we're starting to see progress on that front.

Our improved first quarter numbers are also a direct result of the continued hard work of Michael Evans, our Hotel division president, and his entire team. They've done a fantastic job of streamlining our operations, reducing both variable costs and costs we might have previously deemed fixed in order to keep our hotels open and operating at reduced occupancy levels. They've done incredible work focusing our marketing efforts on reaching the drive-to-leisure market through aggressive campaigns, promoting creative packages for our guests, contributing to our outperformance.

Looking to future periods, our group room revenue bookings for fiscal 2021, commonly referred to in the hotels and resorts industry as group pace, is running significantly behind where we would historically be at this same time in prior years. But we are beginning to experience increased booking activity for later in 2021, and particularly for 2022 and beyond. Banquet and catering revenue pace for fiscal 2021 is behind -- is running behind where we would typically be at the same time in prior years, but not as much as group room revenues, due in part to increases in wedding bookings. Many of our canceled group bookings due to COVID-19 are rebooking for future dates, excluding onetime events that could not rebook for future dates.

The average lead time for our reservation in the leisure segment continues to be approximately 3 days, making it very difficult to forecast occupancy from this customer segment. Having said that, everything we've seen thus far supports a belief within the industry that leisure travel will continue to be quite strong, particularly during the upcoming summer months. It's our hope that as we get to the fall and mid-week leisure travel subsides, as kids go back to school, we'll also be experiencing continued improvement in the business segments.

Overall, we generally expect our revenue trends to track or exceed the overall industry trends for our segment of the industry, particularly in our respective markets.

Finally, let me end my remarks about hotels by once again noting that we would have an interest in growing this division in the future. We see opportunities to pursue less capital-intensive strategies such as strategic partnerships, the creation of a fund or straight management contracts. No one really knows yet what the hotel transactional market might look like, and whether there may be opportunities to acquire hotels that might be experiencing some distress. Regardless, if opportunities arise, we want to be prepared on the other side of this.

So let's shift to our Theater division. Doug went over the numbers with you. We started the quarter off with only 52% of our theaters open due to temporary restrictions put back in place in several of our markets in the fourth quarter. As those restrictions were lifted, we began reopening theaters once again, and as a result, we ended the first quarter with approximately 74% of our theaters open. And as we noted in our press release, beginning this coming weekend, we will have nearly 90% of our theaters open, many with expanded operating hours and days.

Like our Hotel division, the highlight of the quarter was the outperformance versus the industry. As Doug shared with you, based on industry data available to us, we believe we outperformed the industry by approximately 9 percentage point this quarter. In fact, based upon the metric, we believe we were the top performing theater circuit during the first quarter of fiscal 2021, compared to the top 10 circuits in the US. Additional data received and compiled by us from comScore indicates our admission revenues during the first quarter of fiscal 2021 represented approximately 4.8% of the total admission revenues in the US during the period, commonly referred to as market share in our industry. This represents an approximately 55% increase over our reported market share of approximately 3.1% during the first quarter of fiscal 2019 prior to the pandemic.

We certainly recognize that closed leaders in other markets in the US contributed to our outperformance of both of these metrics. So we expect our outperformance to lessen in future periods as more theaters open, but that still doesn't lessen the fact that our theaters outperformed the rest of the industry, open or closed. A great job all around by Rolando Rodriguez and his entire team.

During our year-end earnings call in early March, we talked about one of the primary contributors to this outperformance. Faced with limited amount of new film product and a pandemic that was further limiting customer willingness to go to public places, our team had to get creative. We had to move up with innovative promotions and programs that would encourage the return of movie-going to an audience who we believe wanted to come back but was reticent to do so. Out of that came the development of Marcus Private Cinema, or as we refer to it internally, MPC, for short.

Developed and introduced in the second half of the fourth quarter, this program really took off during the first quarter of fiscal 2021. Sales attributable to Marcus Private Cinema have exceeded expectations, partially offsetting reduced traditional attendance. During the last 11 weeks of fiscal 2021 first quarter, we averaged over 1,500 MPC events per week, accounting for approximately 21% of our admission revenues during those weeks. MPC worked particularly well with family films, so not surprisingly, our top 3 films during the quarter were Raya and the Last Dragon, Tom and Jerry, and The Croods: A New Age. All 3 of these films were available to customers in other formats. So that says a lot about what we believe is a strong desire on the part of consumers to see movies the way they were meant to be seen: on the big screen.

Industry optimism that consumers are anxious to return to movie theaters has been further supported by the early second quarter box office results of the first King Kong and most recently Mortal Kombat and Demon Slayer, easily becoming the best performing films since the onset of the pandemic.

Recent surveys by the National Association of Theater Owners have indicated that approximately 65% of those surveyed say they are very or somewhat comfortable going to the movies right now, with the percentage climbing to the mid 80s when the participants indicate they are vaccinated. This is up from around 47% at the beginning of the year, which is an exciting improvement in just a short period of time. Vaccines and reducing COVID numbers not only play a critical role in getting customers comfortable with returning to movie theaters in larger numbers but these external factors are also critical as studios make decisions on the release of new blockbuster films. With the strong performance of the 3 films I just mentioned, it should encourage the studios to move ahead with future scheduled release dates of new films. Our press release lists several films that are slated for release during the rest of May and June, and once we hit July, there is a long list of films currently scheduled to be released each and every week.

It also continues to be very encouraging that key markets in New York and California are reopening. San Francisco, Los Angeles, and New York City, to name a few, are very important markets to the film studios and all current signs point towards these markets being much more open by the time we hit the meat of the summer film schedule, which bodes well for the studios' willingness to hold to their current summer release plans.

Now like my comments about the Hotel division, please don't interpret my optimism about what lies ahead to suggest that we might not still face challenges in the near term. There certainly is the possibility that there may be further changes in the release schedule and the studios continue to experiment with the theatrical window. We have yet to learn how that might change consumer behavior in the future when the world is back to "normal". We know there are uncertainties in the weeks ahead, but I believe we are prepared to navigate through any further challenges as we redefine, refocus and rebuild our industry-leading theater business.

In closing, while it will take some time for both of our businesses to return to pre-pandemic levels, the quality of our assets, the industry-leading out-of-home entertainment and hospitality experiences we provide, and our continued focus on service and safety have positioned both Marcus Theaters and Marcus Hotels & Resorts for the continued recovery. We are encouraged by the improvements we are seeing and remain optimistic for the future. And I can't end my prepared remarks without saying that I continue to be thankful for our experienced and dedicated associates throughout our organization. Never has my grandfather's oft-repeated statement rung more true than during this past year: Our associates are truly our most important asset.

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

(Operator Instructions) We'll go first with a question for Mike Hickey with The Benchmark Company.

Greg, Doug, congrats, guys, on the quarter. Obviously, we're seeing, I think, a good drumbeat, I think, of positive evidence cinema is coming back. Saw it in Asia, seeing it in the US, seeing it in your circuits specifically. Just sort of curious how opportunistic you think you can be on potentially growing your network given that we are seeing a bounce-back and we are seeing theaters like ArcLight and Pacific go dark in California. Just curious if you think you can grow your network here and if you looked at those deals specifically.

Look, I think the first thing, and I'll repeat what others in our industry probably similarly situated say. First, job one is just get our balance sheet, keep it solid, get ourselves in the right place.

We will look for opportunities to grow the network as we can with great properties. Yes, I happened to notice that ArcLight thing. It caught my attention. Well, it caught my attention. At first I was like, "What? ArcLight's not reopening?" ArcLight's reopening. I'll take that bet with anybody who wants to bet me on that. Those theaters are so productive nationally that they will reopen. I just don't know who will control them. We certainly welcome those discussions. There's nothing I can speak to right this second. But I think that any -- look, I've said this before, I think we're one of the best operators in this business. We have great food and beverage; we have great experience. And I think our hotel side helps influence our theater side from a level of, if you really want the quality operator, we're your team, because not only do we do just great theaters period, we understand hospitality, which probably becomes even more important as we go on. So for people who have theater properties, where they've got significant investments, to the extent that we can come in and help them as we get through it, we're all open ears to do it. Nothing to report right this second, but we are open and available to discussions.

Greg, one more, I guess. From Netflix, you're seeing Zack Snyder's upcoming film, Army of the Dead, which sounds pretty exciting. It looks like it's going to have a exclusive theatrical release of 1 week, looks like, window, and it's getting some fairly broad distribution from some of your peers. Curious if you plan to show this film and the opportunity you see from OTT content maybe being part of the new normal.

Yes, we are playing it. Look, we're in the world of experimentation, and it's an experiment, obviously a very short window. Look, and I've talked about this before, I'm not sure I've talked about it on our calls, but there's such a tremendous amount of content out there to the extent that the over-the-top players start to extend some of that to theatrical, that could be the other side of what might make up for decreasing windows is going to be more content and at potentially more advantageous terms. I don't have anything to tell you about that today. I can't tell you that's what's going to happen. But I mean I think it's -- what a great -- what an interesting thing the Oscars were. Really they were challenged because nobody even knew the movies. It's hard for a regular because some of these movies tend to be less of the commercial films. But there is something to the benefit of -- I don't know about you, but I become a TV expert. The truth of the matter is, most people that watch -- and I'm a big moviegoer. The studies show most people that go to the movies are big consumers of content just generally. And so you watch stuff on over-the-top, on TV, and watching -- trying to find something to watch with all these services, it just gets harder every single day, and jumping between apps and trying to remember, well, I was going to, well, maybe I'll watch that. And then I'll get to go to I mean things just disappear quickly.

And the theaters, we can't have unlimited product at any given time, right? I mean right now, basically, the ultimate prison is complete and total choice, the unbounded choice. And that's sort of what -- you almost struggle with over-the-top. [Theater's okay]. So what are we going to have at any given time, how many pieces of content? 10, 15? So you get that halo and that spotlight put on certain pieces of content that I think would be good for -- it's great. When they look at it. They know, the studios -- the historical studios have known that forever. I think that the over-the-top gang can start to take advantage of that as well, and potentially provide a theatrical window so that -- because our economics dictate that. And then have it be exclusive on their thing.

It's so interesting to me, somehow people seem to view content sometimes as a widget. But you know what? If you want to watch Star Wars, you really only have one place to go do it. And that's Disney+, after it's been in a movie theater. You can't go watch it on anybody else's place. And so they get to maintain their exclusivity and yet they can run it in theatrical first and get those front-end dollars, which are really important, that's per capita dollars. So I think that there's going to be, I think -- I don't have anything for sure to say to them, but there should be hopefully more content that will come our way that we can use the spotlight.

And I will say Frances McDormand was right. I went to the movies and saw Nomadland this week -- this last weekend. And my wife and I met with another couple who had actually seen it already on TV and they were so into it, they wanted to see it again. And they said it was just a different experience. And you think that kind of film, you'd say, oh, that's not a big theatrical temple. That's not -- that isn't but to the theaters' benefit. But the truth is, first of all, I had some Western vistas, which visually were very appealing but the story -- if you know the story, I mean these are some really intense stories of people who are homeless. And they said, you're just seeing their faces on the big screen, 50 feet. We weren't even in a monster screen, we weren't in a PLF, a premium large format. We were in just a 50-foot screen, but that all-encompassing immersion was -- it's just different than being at home. And I mean I walked out of there and I thought, wow, this experience has just so differentiated. There's no difference between watching over-the-top and linear. It's just isn't. But there is a big difference between watching something at home with your phone and the lights and the dog and watching something in the theater where you sit there and do that. And so it gave me great comfort for the long-term of this business, once we get past what's going on now. That was a long one, I'm sorry.

You really wound him up.

Right. That's awesome. Last question from me on the hotel side. The Grand Geneva Resort & Spa asset really shining here in a difficult time. I mean is this something that you would look for a bid on, Greg, or is this sort of like a trophy asset you wouldn't want to sell?

And secondly, Summerfest? is this confirmed? And so how is that tracking? And how big can that be on a comparable basis? Obviously comparable basis, it would be a huge, but just curious your thoughts on that event and if it's -- how big a positive it can be?

On Grand Geneva, I mean, yes. Wow. Even better. The guys said we think we found a new line of business that should in terms of -- because one of the things that was really -- that we had a lot of it was youth athletic stuff, youth dance. I'm sorry -- yes, athletics and dance. We got people in that first quarter who we typically don't see and they think that's going to be a line of business that's going to be good for us for the long term. We don't have any -- again just going back to our comments on the transactional market, I think it's impossible to even really figure anything out in that regard. It's a great irreplaceable asset. And thank Kevin for it right now. It's been really important to us in this quarter and really pretty amazing.

As it goes to Summerfest, Summerfest moved into the fall, and so far we're hearing it's still on. It's a really interesting dynamic, a lot of the festivals. A lot of the -- this is a really interesting thing and it speaks to the movie business. I think summer leisure should be pretty good around here as we've talked about. So I'm not sure -- I think what we might see for festivals not being here, it's going to be made up just for people wanting to get out and get on the road and get out of their houses. I know that. I know that feeling personally; I want to be out.

The theater side though should benefit and there's not going to be a lot to do in terms of getting entertained really anywhere. I mean in the country so many of these acts have had to cancel because if you think about it for -- if you're a performing act, how many shows can you do a day? 1? I mean probably not 2. And you've got to play to a limited size audience. Well that -- if you can only half fill a venue, that limits what you can do and not knowing what the constraints will be. And you've got to plan those so far ahead. And the theaters even with capacity restrictions, we usually add showtimes and we can stretch out the -- even if we have limited seating capacities for individual shows, we're actually able to sort of virtually increase our capacity by just adding showtimes on the earlier or later periods. So if people are looking to get entertained, I think let's go to a baseball game or watch a movie, that's going to be getting out of your house. So I think that you got positives and negatives on both sides of the business. Again, I'll just be happy when we get past all this and there's positives on all sides. But I think things -- we'll see different impacts on either side.

We have our next question coming from the line of Eric Wold with B. Riley Securities.

So just a couple questions, I guess. One, you kind of -- I can't remember which of you kind of talked about it, but you talked about in the beginning the market share gains you are seeing on the theater side and then kind of came back later on to acknowledge that some of that is due to theaters that haven't reopened yet and you've obviously gained shares at their expense. I guess, obviously, that dynamic could change as people come back. But I guess thinking about the markets that you're in, have you seen theaters permanently close in those markets? Is there any way to quantify kind of what that impact could be as everything kind of starts coming back online?

No, not yet. It's too hard to quantify. We don't know necessarily what will open. I just saw one -- in one of our markets that we thought was going to close and now it's reopening. I mean, look, there will be stuff that will close and not reopen again. My guess is that's going to tend to be the stuff that's really obsolete or right on top of something else. But otherwise you got to -- if you're a landlord and you got a piece of real estate that's a movie theater, again you may take whatever it is. You may find someone to operate it and take what you can get in the door. So when it all shakes out, I think there'll be less theaters than there are today.

And in some of our markets that could benefit us in the smaller markets. Because as I said, the obsolete stuff tends to be in the smaller markets. And so could we see people driving a longer distance to go to a movie because something closer to them was closed and yet still is in some of our markets? We might see some of that. I don't think I could ever quantify it just yet. But as I've seen in the past on these things is the world -- this isn't the first time the movie business has gone upside down. And usually what will happen is, not as much as you think, some will close, but not as much as we all think.

And Eric, so the numbers, I mean absolutely when you're comparing to the national numbers, of course, we're going to look better because we're more open than not compared to, I mean, a Regal, which was closed the entire time. Having said that, keep in mind, we started the quarter with only 52% of our theaters open, ended the quarter with 74, I think is what we said it was. So we didn't have all of our theaters open either during the quarter and yet we still had that kind of performance. So I don't want to just say it's all just because some theaters were closed nationwide.

Got it. And then on the concession trends, obviously, great 16% gain. You kind of talked about that being driven by the combination of shorter concession lines and more in-app ordering. Assuming lines eventually get longer as people come back, is there a way to parse out and talk kind of what you saw with kind of from the in-app side of the benefit in terms of what kind of tailwind could come back as more people feel comfortable ordering on that. Obviously it's easier to promote people to grow bigger basket sizes, whatnot, on an app. Any way to kind of think about what the sustainable number could be versus historical levels.

I think it was really hard to do that right now, Eric. I mean even -- I mean we're surmising that the app ordering and the online is helping, but it's so hard to quantify exactly because we also have the shorter lines. And in this particular quarter, we had 3 family films with -- where we did a lot of really good MPC business. And so we saw -- most of our growth we saw was in our traditional concession business. So it's hard.

I mean, certainly, we've always said -- I mean this is pre-COVID and everything else, we've always known in this industry that shorter lines helps. And so you can bet we're going to be trying to figure out how to continue that dynamic. And it's not just going to be throwing people at it, it's going to be the technology part of it as well to be able to kind of keep that dynamic. Because we just know and we've seen it now. It was actually not in the way we'd like to document it, but we were able to actually document how much impact it has.

So I would build on that, too. I think your comment, Eric, is exactly right about building basket size. That's a nice way of saying; I hadn't heard that before. I'm going to have to steal that. I hope you don't mind. But the idea of upselling, right. I mean you just don't -- especially as you get busier too, right? Look, the app won't ever miss the upsell opportunity. The human standing behind the thing with a line 10 deep is -- the human's a kid, is saying, how do I just fill the popcorn bucket as fast as I can. I'm not worrying about, hey, do you want to go from a medium to a large soda? So the app, I think as we -- that's the opportunity on the revenue side there.

But the other side, let's not forget, is the labor side of that because if we can get more people to order on the app, that means less concession stand labor. Now we deliver to the seat and so that may be -- that will offset a little bit of that. But we do think that there are 2 pieces of this equation that should be financially beneficial to us.

Got it. And the final question. The $10 million to $40 million of potential assets that could be sold that you highlighted, Doug, and you talked about them in the last call as well. How would you quantify that versus the total universe of potential assets that could be sold, excluding kind of hotels or larger properties, just kind of the surplus assets? Is that kind of the upper end of the surplus asset basket or is there a way to think about what could go beyond that $10 million to $40 million?

Look, it can go beyond that number. We haven't put a number out there, but we've got more than that. And we were trying to give a range for what could get done in the next year or so. And some of these outlots and some of these other things might go a little longer. So I'll just say it could be higher than that in the long run.

(Operator Instructions) We have our next question coming from the line of Jim Goss with Barrington Research.

I might start by following up on what Eric was just asking regarding the real estate. What do you envision your own versus managed properties ultimately being in terms of an end game in the hotel division?

Well, wholly owned -- I don't see a lot of new wholly owned acquisitions right this second. So my guess is short to medium term, it's going to be looking at stuff we can do where we're going to take on management contracts, some small co-investment where we acquire assets with partners to build out on that platform. I think we're seeing the benefits of some diversity right now. I think that's been -- as we said, the Grand Geneva has been really very helpful. Other hotels have been helpful and we're seeing the benefits to our -- to right now what's going on our business and having that. Now where does the world go? We're going to be opportunistic and we will direct capital when we get back to the place that we can start directing capital to where we see the best returns.

So just to follow up on that, Jim, I mean the growth would skew things a little bit more, right? So if there's some growth that we expect it to probably be more likely on the less capital-intensive side. The only other thing that would change, and maybe you were also headed towards, was might we reduce the number of owned properties that we have, and we've talked about that in the past, as you well know, and obviously this is probably not a seller's market right now. And so it's hard to predict exactly when we might revisit a strategy that might include monetizing any assets, if it was at the appropriate time. So -- but obviously, 2 things could happen, right? We could end up with less of those, but we also can end up with more of the other with the less capital intensive as well, but we have no timetable on that right now. And -- but that's how it could change.

Okay. And also on the hotel side, you've usually given a little bit of an update on your latest project St. Kate - The Arts Hotel. Any comment on how that seems to be going and what your expectations are for that?

Well, it's going okay. I mean we're open for business. That was a positive. That hotel, in a way, it was really tough. I mean it has been unbelievably well reviewed. I think we all know that it's gotten -- it's won Conde Nast awards, it's won USA Today 10Best in the Country award. I mean it really has been well-received from an accolade perspective. And not only that, the guests, if you look at TripAdvisor Traveler Reviews, it's now the #3 hotel in Milwaukee from Traveler Reviews and in its class, because you know TripAdvisor, it mixes all sorts of hotels up. There is no -- it doesn't pay attention to classes. It will rate you against, frankly, the Hilton Garden Inn, which is a nice hotel but it's not really what you would call in the concept of St. Kate. It is the #1 reviewed hotel by travelers in its concept. And that team has really done a fantastic job of running that hotel and that's current reviews.

But we -- so what happened was -- but the problem we have is we really didn't get a chance to establish it. The one thing I learned early on as we opened it was nobody knew what a St. Kate was and we needed to be able to get those accolades, so when people Google, best hotel in Milwaukee, right after, they'd see the tie between the Pfister and the St Kate and then the Hilton right behind it. I'm going to give an ad for everybody. But as the -- and then all of a sudden, what 9 months in, we're closed. And so we really didn't get a chance to establish it. But because it was so well-regarded, when we got the chance to even just get again -- remember our math early on was, are we better off open than closed, and even if it was closed, let's at least get the public spaces opened at the St. Kate, get the artists, get it going again, make sure the galleries are fresh, because that's one of the cool things about it. The galleries change-out. And we did that. We opened for the weekends. We got some NBA basketball teams in there that was originally as we were in the spring. Now we've opened -- we're open 7 days a week and we're starting to get traction there. So we're pleased with the traction we're getting.

We got a lot of room to go and a lot of room to grow, but the team is committed and they know they have something really special on their hands. And so we're confident. It's going to take time. It is a new brand. And so to establish a new brand takes some time, but it really is special. There is nothing like it. It's really a special place. So we'll be patient with it.

Okay. Now we're on the theater side. So IMAX has been overindexing and I believe the PLF experience in general has been outpacing or taking a larger share than normal. Have you had that same experience? And do you think it will continue beyond the initial return of customers?

And maybe separately regarding the impact of windows and streaming, if that creates a skew to blockbusters and fewer smaller films, how will that affect your overall business?

Well, let me tackle the first part of it here. Yes, sure, we have definitely -- we were overindexing with our PLS, our proprietary PLS, our ultrascreens and superscreens before. And when now you have less product and just less attendance in general, there's no question that people, if they're going to go to the theater, they like seeing it on the big screen and their seats are available. So there's not a case where, well that show's sold out and I'll go to a different auditorium. I think that's certainly contributed to our increase in our average admission price this quarter. It was the fact that we had probably a higher percentage of PLF sales.

But we expect that to continue, Jim. I mean the fact of matter is that's where -- those are always the first shows that sell out when we have the new big blockbusters that come out. And so even with the price premium, that's where people gravitate. And so that's why we spent so many capital dollars over the last number of years increasing the number of superscreens and ultrascreens that we have. The Mid Rivers theater that we've mentioned in our press release, that's reopening on Friday. We've added the superscreen. It's what the customer wants. And we have we believe the highest percentage on a percentage of theaters that have these large-format screens in the country, we believe. And certainly among the top 10 chains. So yes we are overindexing and expect to continue to on that.

And I'm also asking, is that disparity wider than it had been earlier? And is that persisting? I understand the large screens are getting a larger share of revenue, but I wonder if the degree to which that overindexing is taking place right now is greater than it was earlier on.

I'm not sure if I know, but I wouldn't be surprised if it was. But I think we have to be careful to draw any conclusions right now about where's the world going, okay. The consumer who now says I'm going out is maybe treating themselves to something they haven't done in a while. We know that there's a lot of stimulus dollars floating around. They may have a few extra bucks in their pocket because they weren't able to spend so much because they were sort of in a lockdown phase. So very tough, I think, to extrapolate going forward, although the overall trend has been to the PLF thing, it was happening before any of this all happened. So I do think that you'll continue to see a trend in that direction. I just don't know what you can extrapolate from it.

I want to talk about the small film thing for a second. Again, I don't know what's going to happen in terms of, will the small films go away. Again, the trend had been away from those, but there's some things that are changing in the world that might impact that in the other direction. And that is, again, so much over-the-top content being produced. What are the 2 of the big incremental cost to a studio to release a smaller film that they grappled with, right? P&A, prints and advertising. Well, you know VPFs are burning off. So the cost of prints is going to start to go away. We've talked about this before, in terms of, I thought maybe there'll be an independent film -- potentially much easier for independent films to play on our screens. They don't have to pay a virtual print fee. They used to -- it became -- it was a very interesting dynamic years ago. But what happened in the day of film, before digital came along, was if you had a big movie and they played for long times before going to any ancillary markets, you could do what was known as caravaning a print and you'd have a print and it would play at one theater and then you'd move that same print to another theater and then to another theater and you have -- until it wore out. That means your cost of P in the P&A goes down. As you -- but now you go to the world of VPFs. There was no caravaning a print anymore. Well, as VPFs go away, it's going to be better than caravaning prints. There won't be any print costs.

And then advertising. That's what's going to be incumbent upon us. And I will tell you we are not there yet as a company. We have to get better at it. My admonition to the team has been, we've got to figure out how to help the studios get rid of their cost of advertising using our -- on the small films, using our loyalty members. We've got to be able to get to those customers and help them, and maybe become better at local marketing as well. We may be able to then spend some -- if terms are appropriate, spend local marketing dollars in a way that weren't spent before to drive traffic. And so if the studios can get rid of that incremental cost, they virtually have no incremental cost of putting a film on our screen. And so they give us a window and let us use some money for the advertising. It would be out of the rent, there may be an interesting dynamic coming forward. We just don't know what that's going to be. I'm not here to tell you I have the answer, but I would also tell you don't discount it either.

So the notion of working with Amazon and Netflix, that sort of thing with some of the films that are only going to go on those services might be something that you and the rest of the industry can pursue?

Yes. I guess it goes back to that same comment I made earlier. If it can be in the theater and then it's exclusive on their service, it's still exclusive on their service and we'll drive traffic to their services. Of course, they're going to want to do some specialty stuff. Oh, it's premiering in the thing. But there's a lot of content that I think -- again, these are not widgets. You cannot -- it's not like you can decide which washer and dryer you want and then you can pick any one of them. If you like a piece of content, it is exclusive to wherever it's playing.

Yes. That makes sense. Because you don't really want the blockbuster to be on 12 of your 14 screens or something like that because you need some variety to get the rest of the audience.

Yes.

At this time it appears there are no more other questions I'd like to turn the call back over to Mr. Neis for any additional or closing comments.

Well, certainly want to thank everybody once again for joining us today. Tomorrow, we'll be holding our virtual annual meeting at 9:00 AM Central Time. Interested parties can listen to a live audio webcast and view presentation slides by logging on to our investor relations section of our company's website, www.marcuscorp.com, or through the direct link provided in a press release that we issued dated April 27, 2021, and selecting Guest when logging in. Shareholders who register with a control number will be able to vote and ask questions during the meeting. We also look forward to talking to you once again in approximately 3 months when we release our fiscal 2021 second quarter results. Until then, thank you and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.