The Marcus (MCS) Q4 2019 earnings summary

Executive summary

• FY2019 revenue reached a record $820.9M, up 16.1% YoY; operating income fell 18.0% to $68.2M and attributable net earnings declined 21.3% to $42.0M, pressured by a weaker film slate and Saint Kate costs.

• The Movie Tavern acquisition lifted theatre revenue, while the Saint Kate conversion and weaker comparable theatre attendance weighed on earnings; the shareholder letter later described widespread temporary COVID-19 closures and cash-conservation actions.

Financial highlights

• Revenue $820.9M vs. $707.1M; operating income $68.2M vs. $83.2M; attributable net earnings $42.0M vs. $53.4M; diluted EPS $1.35 vs. $1.86.

• Operating cash flow was $141.5M vs. $137.4M; cash capital expenditures were $64.1M, and capital expenditures, acquisitions and joint-venture investments totaled $94.2M.

• FY2019 included $2.5M of Movie Tavern acquisition/preopening costs, $6.8M of Saint Kate preopening and startup costs, and a $1.9M theatre impairment charge.

Outlook and guidance

• FY2020 is a 53-week year; the extra week, including the traditionally strong Christmas-to-New-Year theatre period, is expected to benefit results, though comparable benefits are not assured.

• FY2020 cash capital expenditures were forecast at $65M–$85M, excluding unidentified acquisitions; theatre spending was expected at $45M–$60M and hotels/resorts at $20M–$25M.

• FY2020 effective tax rate was expected at 24%–26%, depending partly on excess share-based compensation tax benefits; interest expense was not expected to change materially.

• After the letter’s March 31 date, theatres were temporarily closed, most hotels and restaurants were temporarily closed, and expenses were being cut and cash conserved; the ultimate financial impact was uncertain.