Marcus Corporation (The)

Good morning, everyone, and welcome to the Marcus Corporation second quarter earnings conference call. My name is Crystal, and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. If at any time during the call you require assistance, please press star zero, and an operator will be happy to assist you. As a reminder, this conference is being recorded. Joining us today are Greg Marcus, President and Chief Executive Officer, And Justin Nice, Executive Vice President, Chief Financial Officer, and Treasurer of the Markets Corporation. At this time, I'd like to turn the program over to Mr. Nice for his opening remarks. Please go ahead, sir.

Well, thank you, Crystal, and good morning, everybody. Welcome to our fiscal 2020 second quarter conference call. As usual, I do need to begin by stating 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 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 J.D. J.D. J.D. which are based only upon currently available information including 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, the continued availability of our workforce following the temporary layoffs we've implemented as a result of the COVID-19 pandemic, and the temporary and long-term effects of the COVID-19 pandemic on our businesses. Listeners are cautioned not to place undue reliance on our forward-looking statements. Additional factors, risks, and uncertainties which can 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 2020 second quarter results. And in the risk factors section of our fiscal 2019 annual report on Form 10-K and the subsequent quarterly reports on Form 10-Q, including the Form 10-Q that we're filing today, all of which you can access on the SEC's website. We'll also post all Regulation G disclosures when applicable on our website at www.marcuscorp.com. With that behind us, let's begin. This will obviously not be a normal quarter for us, and our prepared remarks today will once again reflect that as we spend less time looking back at this past quarter and spend most of our time looking ahead. I will still begin by spending a few minutes briefly sharing a few numbers with you, but then I'll pivot to more current topics such as our balance sheet liquidity. Once I do that, I'll turn the call over to Greg, who will focus his prepared remarks on where our businesses are today as we've begun reopening some of our properties, along with our plans for reopening the rest of our properties in the future. When we open the call up for questions, we'd certainly be happy to revisit the quarter and answer any follow-up questions if needed. So you've seen the numbers. Essentially, you're looking at operating results with all of our businesses closed for the entire quarter. On the theater side, our only revenues were from six theaters that opened on a very limited basis in June 2020, primarily to test new operating protocols, as well as five parking lot cinemas, which is our version of a drive-in, J.D. J.D. J.D. followed by the Grand Geneva, the Hilton Madison, and the Skirvin Hilton in subsequent weeks in June. As the press release notes, we did once again have several non-recurring items this quarter directly related to the impact of the COVID-19 pandemic. We incurred approximately $3 million of additional property closure and subsequent reopening expenses with the majority of the expenses in our hotels and resorts division. A portion of these expenses represented payroll continuation and severance payments, J.D. J.D. In that reconciliation, you also see a significant favorable adjustment for income taxes that needs to be addressed. You will note that we reported a larger than might be expected income tax benefit this quarter. In fact, our effective income tax rate was 52.5% during the second quarter and 44% from the first half of the year. Our fiscal 2020 income tax benefit was favorably impacted by an adjustment of approximately $17.6 million resulting from several accounting method changes and the March 27, 2020 signing of the CARES Act. One of the provisions of the CARES Act allows our 2019 and 2020 taxable losses to be carried back to prior fiscal years, including years during which the federal income tax rate was 35% compared to the current statutory federal income tax rate of 21%. Excluding this favorable adjustment to income tax benefit, J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. As you know, on April 29, 2020, we amended our existing credit agreement and issued a new $90.8 million, 364-day senior term loan aid to further support our already strong balance sheet. As of June 25, 2020, we had a cash balance of approximately $80 million and approximately $90 million of availability under our $225 million revolving credit facility. So you can do the math. J.D. J.D. Thanks, Doug.

As Doug noted earlier, I'm going to focus my remarks on where we are today, what we've done to date, and are continuing to do to manage through this crisis, and what some of our plans are for the future. As you can imagine, there are a lot of unknowns yet about what the future months will look like. So our plans will continue to evolve as the situation unfolds. In this rapidly changing, truly unprecedented environment, there is one thing that has not changed and will not change. Our priority, as it has been throughout our history, J.D. J.D. As we've now shifted to reopening properties, we're bringing people back and asking them to work under very different conditions. And not surprisingly, our people continue to step up and meet the challenges before us. Words alone don't do justice to how proud I am of all our associates. And I cannot emphasize at this point enough, from our executive team to our people in the field, they talk about the importance of gratitude. I have huge gratitude for everyone because we have less people. They're working harder. And as the words were just spoken, they're unprecedented. And so I'm thankful for everyone around me. You cannot do this alone. So now, as I've said, the focus is on reopening all our hotels and theaters. And I'd like to spend a few minutes talking about where we are and where we're headed in each of our divisions. So let's start with our hotels, since the reopening process has been the furthest along so far. When we closed our hotels, it was not because of any governmental requirements to do so. J.D. J.D. J.D. As air travel remains significantly reduced and the number of transient and group business customers will likely remain limited in the near term, the majority of the hotels we manage for other owners have also recently opened. We are monitoring market demand and we currently hope to reopen our remaining company-owned hotels during the third quarter of fiscal 2020. In fact, you may have seen the notice that we opened up the public spaces of St. Kate, the arts hotel, this past weekend. We're not booking rooms yet. But we wanted to activate the first few floors of the community, including our lobby bar, our pizza restaurant, and maybe most importantly, our art exhibit space. That first floor is essentially an art museum, and we felt it was important to get that space reopened as one more step towards recovery in downtown Milwaukee. And while the upcoming Democratic National Convention will not provide nearly the impact we all had originally expected, we currently expect to reopen the Hilton Milwaukee Hotel in time for that upcoming event. As we reopen our hotels, we are reopening with new operating protocols. In addition to following all new brand standards for our branded hotels, we have also introduced our own Clean Care Pledge that incorporates the best industry practices and protocols for operating our hotels, resorts, spas, golf courses and restaurants with an enhanced focus on cleanliness, sanitization and safety. Key elements and examples of the Clean Care Pledge include Introducing new processes and easy-to-use technology to create a low-to-no contact experience, incorporating social distancing into processes in various spaces, outfitting associates with masks and gloves, and making masks available for guests who are required to wear them in all of our public spaces, and enhanced cleaning and sanitization protocols that go beyond leading hospitality industry standards and CDC guidelines. Looking to future periods, overall occupants in the U.S. has slowly increased since the initial onset of the COVID-19 pandemic in March. Similar to our limited experience during the second quarter, most current demand continues to come from the drive-to leisure segment. Most organizations had implemented travel bans and are only now starting to allow some essential travel, which will likely limit business travel in the near term. And while early performances vary by hotel, I will tell you that occupancy rates, while still significantly lower than they would normally be this time of year, have generally exceeded our expectations as we have reopened hotels. Retail pricing has also thus far held relatively strong despite the current lower occupancy environment. Our company-owned hotels have experienced a significant decrease in group bookings for the remainder of fiscal 2020 compared to the same period last year. As of the date of this report, however, our group room revenue bookings for fiscal 2021, commonly referred to in the hotel and resorts industry as group PACE, J.D. J.D. Another positive development is the fact that the majority of our canceled group bookings due to COVID-19 are rebooking for future dates, excluding one-time events that couldn't rebook for future dates, such as those connected to the DNC. Another major event that will benefit our Milwaukee hotels, the Ryder Cup, was originally scheduled for September 2020, but it was recently rescheduled to September 2021. While disappointing to lose this event in 2020, it is contributing to our 2021 group pace. J.D. J.D. J.D. J.D. J.D. Regardless of how this unfolds, I am confident that our new hotel division president, Michael Evans, and his outstanding team will effectively manage our operations, and we look forward to reopening our remaining hotels. Our associates are working tirelessly so that every guest can rest easy knowing that they are receiving the highest standards of service and cleanliness while still enjoying the best our award-winning hotels and resorts have to offer. So let's shift to our theater division. On June 19th, we began to implement our phased reopening plan with the opening of six of our theaters in multiple markets with a primary goal of testing new operating protocols in accordance with local health and safety guidelines and designed to prioritize the safety and well-being of our associates and guests. During this initial phase, we've been showing older library film product, including a combination of films that have been released in theaters during the months prior to closing, as well as classic older films, such as films from the Harry Potter series. We waited for new films to be released. As we speak to you this morning, it appears we may finally have a clearer idea of what the film studio release plans will be. After several stops and starts, it appears increasingly likely that the first new film scheduled to be released is unhinged, together with the pre-release of Inception on August 21st. Disney's New Mutants is currently scheduled on August 28th, and the much-anticipated film Tenet is now scheduled for release in the U.S. on September 3rd, 2020. Warner Brothers' announcement of this new release date for Tenet was particularly important, as they acknowledged that this release will not follow the more common global day-and-date release patterns we've seen in recent years, but rather will mark a return to the days when films used to be released in different markets at different times in the industry.

We call it platform release.

Warner's has indicated that the film will first open overseas and has further acknowledged that when it opens in the U.S., it may not open in every market initially. Rather, it will open in as many markets as it can, with other markets to follow, as any remaining restrictions are lifted. The good news for us is that state and local governmental restrictions have been lifted in the vast majority of the markets in which we operate theaters, allowing movie theaters to reopen. As such, assuming the current release schedule holds, we expect the majority of our theaters to reopen in late August in time for these new movies. As part of our reopening experience in our theaters, we've introduced our Movie Star, S-T-A-R, approach, which incorporates new health and safety measurements J.D. J.D. J.D. requiring masks to be worn by guests except for when they are eating or drinking in the auditoriums, conducting associate wellness checks and requiring the use of face masks as well as gloves as appropriate during the associate shift, increasing frequency of cleaning, especially high-touch surfaces, providing hand sanitizer throughout the theater, and introducing signage to encourage proper social distancing, encouraging guests to purchase their tickets online or via the Marcus Theaters app, and encouraging low-contact food ordering through our proprietary Marcus Theaters app and website. We expect policies and guidelines will continue to evolve with time and will be assessed and updated on an ongoing basis. Our goal is to build consumer confidence and trust as quickly as possible, and I am pleased to share that we have received extremely positive comments from the guests who have been coming to our six test theaters. Our team has done an excellent job executing on the new protocols. Something that has come up before but is worth repeating is that a reduction in capacity does not necessarily translate to an equal reduction in potential revenues. Reduced capacity may potentially impact attendance on $5 Tuesdays and on opening weekends of major new film releases, but other showings may be relatively unaffected given normal attendance counts. And based upon our past experience, we believe that customers impacted on those $5 Tuesdays and opening weekends may adapt to reduced seat availability by shifting their attendance to different days and times of day. J.D. J.D. J.D. J.D. J.D. J.D. J.D. which will also now include multiple films originally scheduled for 2020, is currently expected to be very strong. Just as we've had to adapt our plans in the past month, we recognize that we will need to be prepared for new challenges and opportunities in the weeks and months ahead. I'm certain that Rolando Rodriguez and his incredibly talented team will be prepared to adapt and manage us through this reopening process and ultimately deliver a truly great movie-going experience to our guests. Normally, I would end my prepared remark at this point and open the call up for questions, but first, I want to address the elephant that entered the room last week. There's been some speculation that the COVID-19 pandemic may result in a change in how film studios may distribute their product in the future, including accelerating the release of films on alternate distribution channels such as premium video on demand, or PVOD, and streaming services. Of course, that speculation increased exponentially last week when AMC and Universal announced the deal they negotiated that would, according to reports, significantly shrink the window for select films to be released on PVOD. J.D. J.D. studios have continued to acknowledge that there's no economic model to recover the size of the investment in a big theatrical movie without theatrical revenue and their actions to delay the vast majority of new films until theaters reopen rather than release them to the home is a direct confirmation of that. Thus, we believe both studios and exhibition are aligned in their interest to preserve the theatrical experience for our valued customers. We believe an appropriate theatrical window is an integral part of that aligned interest. Second, I will say up front that we never have conducted our negotiations with studios and public, and we don't intend to start now. We will continue to talk to our studio partners about terms, windows, financial models, et cetera, as we always have, but in private as it should be. While speaking specifically to PVOD, what I'm about to say next applies to any changes in the financial interdistribution model of our business. Our position has always been that like in any successful negotiation, any change in the existing model needs to be a win-win-win for the studios, the exhibitor, and the customer. Our common goal should be to grow the size of the pie. I also think it's important to put all this PVOD talk in perspective. While acknowledging that consumer behavior can and will change periodically, history suggests that under normal conditions, when all forms of entertainment are available to the consumer, the market for PVOD may not be particularly deep. I think everyone would acknowledge that these last four months were not normal, with theaters essentially 100% closed J.D. J.D. J.D. J.D. And similar to pre-pandemic days, when they decide to stay home, they will continue to have a fire hose of other entertainment options available to them at a price point significantly lower than $20. As you can tell, I'm passionate about the exhibition business. We've made significant investments in our theaters over the last six years, and we believe we've built a theater circuit that is second to none in terms of entertainment experience for our loyal customers. We believe distributing films in a movie theater will continue to be an important component of their business model And we look forward to a continued healthy relationship with them in the future. In conclusion, in this rapidly changing environment, you can rest assured that we are continually reviewing the situation in both our businesses and we will make changes to our plans as warranted. A company is built for challenging times like this. Our leadership team, managers, and associates have stepped up to the challenge in ways that go way above and beyond. And for that, we are most grateful. We also very much appreciate the confidence and support of our lenders and the investment community during this challenging time and always. With that, at this time, Doug and I would be happy to open the call up for any questions you may have.

Thank you. Ladies and gentlemen, if you have a question at this time, please press the star followed by the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Once again, to ask a question, please press star and then one now. And our first question comes from Mike Hickey from The Benchmark Company. Your line is open.

Hey, Greg, Doug. Thanks for taking my questions, guys. Hi, Mike. Hey, bud. Obviously, it feels like you've gotten through the crux of the issues here as you sort of J.D. She can sort of think 22 years back to normal, like 19 or bigger. But your thoughts there would be appreciated, and I have a follow-up or two. Thank you.

I mean, I'll start, Mike, and look. I mean, we haven't even opened our theaters yet to speak of, I mean, with new products. So we certainly have a lot to learn yet about what the pace of the recovery will be on the theater side once we reopen. As we said in our prepared remarks, look, there's a lot of product. And 2021 has a whole bunch of films that were originally scheduled for this year that were moved into a year that already had quite a few films that looked very positive. So on that side, we're certainly very optimistic. But look, until we get open, until we start seeing how the customers respond, To try to now compare 2021 to 2019, that's tough, as you can imagine, and I imagine that'll be tough for anybody to try to do right now. Certainly on paper, we're going to have the goods to be able to deliver to the customer, and so assuming that things continue to progress, we certainly think that as we get, you know, as the year goes on, it will just progressively get better. But this will be a process. This won't be an overnight event.

Yeah, I mean, the only thing I would build on that, yeah, I mean, I have no idea what's going to happen in the short term. I have no idea even in sort of the medium term, you know, what will look like 2019 or better. But what I do know and what we've talked about here is that, you know, and we're in this for the long haul, is that People want to be together. I mean, just look at the news. They're crazy. You can't keep them apart, unfortunately. As we talked about in our prepared remarks, it's just nuts, which is short-term not really a good thing, but long-term, it says human creatures are social animals, and they want to be together, and they want to do things, and there will be pent-up demand, and I think that bodes well for really all of our businesses. But at the short-term, you know, who knows?

Fair enough. Thanks, Doug, Greg. The last question, just sort of curious maybe what the demo looks like for the moviegoers coming back to your theaters and sort of, I guess, the durability there, you think, of that demand. I imagine, you know, you sort of come back. It's, you know, you're dying to get out of the house. You want to do something. Theaters are obviously escapism. It makes a lot of sense. But curious if you feel there's durability there. J.D. J.D.

J.D. J.D. J.D. And people who, you know, when good product goes out, and as I said, we've been heartened to see what's happening in international markets, you know, the numbers are starting to tick up. They're seeing it. They described it yesterday. I saw as Europe had green shoots, and I know I think South Korea has had some success. So seeing, you know, people will go to see the product that is good. They have to feel comfortable. The one that we've seen really, really very, very positive, you know, we've been running our – J.D. J.D. J.D.

Yeah, I would just maybe the only thing I would add to the comment is that obviously showing library product, just like if we were showing new products, the demos are tied into what you're showing as well. But I would echo what Greg indicated. It's not as if there's no demo that hasn't been represented. I mean, we're seeing seniors, we're seeing adults, we're seeing families. And so it's not as if we've, you know, looked at it and said, well, boy, the theater is J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D. J.D.

The food and beverage product you have available to patrons when the theaters open based on cleaning restrictions or handling restrictions at your movie tavern and other locations, or is that going to be pretty much status quo when they reopen?

In terms of the offerings, the offerings are not changing so much as the procedures are changing and how we do it. I would speak to this idea of the low-to-no contact. It's something where we've been really ahead of the industry, and I'm really proud of our team Kim Lueck and her IT team really got us in a place that we – not because we planned for this, but this idea of being able to order on the app. I mean, you know, that idea is you can preorder your food. We can prompt you to preorder your food before you come to the theater, and your food is ready to pick up there. You don't have to wait in a line. You don't have to deal with a vendor, concession attendant. You're able to just show up and pick up your food. That, I think – J.D. J.D. We were ahead of the industry in getting testing on the application as part of our app. We have shrunk the menu a little bit, but not tons. And the movie taverns, we're not necessarily going and taking orders at the seats. We're changing that procedure a little bit as well right now for these times. People have to go out and pick up their food and bring it in. That is more. So it's been procedure, less menu. Well, a little bit of menu, but not much.

Okay. And then you mentioned the capacity limitations you're doing at the theaters, the 50% and the checkerboard seating. Is that Is that the norm across the circuit when they reopen ahead of Labor Day? Are there any markets where it's measurably less than 50%? And then what is your view as you get to the end of the year where you could be in terms of capacity limitations?

I think that is the vast, vast majority of the circuit is 50%. There may be one or two that was a little bit less and stuff that may come that may be less. But the way vast majority is 50%. And we feel comfortable having seen what happened with recliners that we can do pretty well in that environment.

Yeah, Eric. Eric, just I'm going to add on. If you look at our footprint of theaters, that's certainly to our advantage in this situation because of the markets that we're in. And so they are pretty much 50% elsewhere everywhere. We're only in really two markets. J.D. J.D. J.D. J.D. J.D.

J.D. How aggressive would you be or be willing to be to unlock some of that value for shareholders?

Boy, Eric, I mean, I'll start, and Greg, jump in if you want. But, I mean, so as we've talked about this, you know, multiple times before this all happened, in our core real estate, and particularly on the theater side, it's proving to be exactly what we said it was. That might be a tough decision. Having said that, We alluded to it briefly in the comments. We've got a lot of real estate. It doesn't mean that there couldn't be some selective monetization. We also have a lot of surplus real estate. Former locations, excess surplus land and outlots on real estate that we own. That's always a possibility for us to unlock and monetize real estate. We've done it selectively and periodically in the past and We certainly could do it in the future.

I would build on that just a little bit, and that is to sort of say, yeah, it really has been such an advantage for us over the years. Maybe it would be incumbent upon us to be better at working to really work to really press and educate the investment community on the value of that real estate and really try to stress that point. I'd rather do that than give up our strategic advantages that we've seen. Because you can always ultimately go and monetize something. It's a one-time event. But I prefer to get better at telling the story.

Perfect. Thanks, Greg.

Thank you. And our next question comes from Jim Goss from Barrington Research. The line is open.

Okay. Good morning. I'm wondering first if you could – If you have any estimate of the continuing cost of sort of the new normal in terms of cleaning protocols and any offsets you might have to that increased cost allocation?

Well, Jim, I mean, there's really two categories. There's kind of these non-recurring expenses and we'll have some more of that in the third quarter because we'll be reopening J.D. On an ongoing basis, that's a little harder. And I think until we really get our theaters open, for example, it's going to be harder to tell on that. I mean, there's a whole bunch of smaller supplies, right? And you're not going to notice those that much. And they get mixed into kind of that soup with all of our other costs where we're also trying to be very cautiously J.D. J.D. J.D. J.D. J.D. J.D.

J.D. J.D. J.D. J.D. Might you see a little more cost in terms of labor, in terms of things? You might say, yeah, this is a good thing that we were doing that anyway. But I think it will be offset by what I was talking about earlier, the technology changes that we're going to have put in place that's going to reduce people working at the box office and reduce people working at the concession stand as people use technology to access our theaters and our concessions and our food and beverage products. So in the end, probably not much change. In the medium term, we could see some increased costs.

Okay. And, Doug, just a housekeeping question. Timing of the inclusion of those very nice tax benefits you outlined, will that be in the third quarter report then?

So there's two different issues. There's the P&L impact, which is already reflected in – And it will continue in the third and fourth quarters, and it will come through in the third and fourth quarters because of that higher effective income tax rate that I referenced in my prepared remarks. Normally, as you know, you might see a, I don't know, 24%, 25% effective tax rate under normal conditions, and because we'll still be able to take some of our losses in the third and fourth quarter back to prior years, We're right now estimating that that effective rate might be 29% to 30% in the third and fourth quarters. So that's one way that you'll see it. The other way is a balance sheet. And so if you look at our balance sheet, you'll see that there's a large refundable income tax number there. And those claims, you know, part of that is claims that we're filing right now. And we will receive in, you know, J.D. J.D. J.D. J.D.

Mass protocols will be in place at both types of venues. How are you thinking in terms of enforcing that? And is that a challenge or is that something you're saying not to be so much? And maybe also in the theater area, the rewards program, I'm wondering how that fits into this whole process.

On the mask protocols, we require everyone to wear masks. And frankly, most of the country is getting it. I think that it's – two months ago, it might have been harder. Yeah, it probably would have been. But I think so much of the country – there are people who, for medical reasons, can't. And if they can't for a medical reason, then they don't wear a mask anymore. But if someone says they aren't going to wear a mask, then we ask them not to patronize our establishment. But we really don't ask them. We ask them to put on a mask. And we're seeing very, very, very high compliance because they understand that this is about staying in business. It's funny, the idea that masks are, and I've talked about this before, nobody likes them. I don't know anybody that says, oh, gee, I want to wear a mask. But I know everybody likes the economy functioning. And the only way the economy functions is if we're able to keep the virus at bay. And it seems that the masks, and we've seen numbers just looking around Wisconsin where Madison had a problem. They put in a mask policy, and the problem has started to abate. City of Milwaukee, same thing here. And so you see that the science shows that it's working, and that's good for business. And I think a lot of people are coming around to that. And it's temporary. It'll eventually go away. And it's not about the person, people, you know, just the distance I'm on my soapbox for a minute. It's about, you know, people always say, well, it's my choice. Well, yeah, but really their actions impact others. And that's when they have to have a different approach. It's just like I'm not allowed to drive on the street in front of my house 100 miles an hour because they're worried I might hurt someone else, including myself. That's the reasoning behind it. And as more people understand that, they go, oh, okay, I get it. So that's been fine, I would say. And your second question, Jim, I forgot what it was.

I was just saying the rewards program is typically because it gives you data and that sort of thing. I'm just wondering how it fits into this process.

Yep, same thing. Look, it's been great to have it, you know. It's been great to be able to... For all these years, we never knew who was coming to our theaters. We just never knew. They were paid cash, and they went into the movie theater, and they were anonymous. And now, with half our transactions coming out of our loyalty program, we're still seeing significant percentages, even in this environment, in the small tests that we're running. It's great to know who they are. We've been able to stay in contact with them throughout this whole experience. And They continue to be customers, and so it's very beneficial to us.

Okay, and lastly, I just wanted to compliment you, Greg, on the way you outlined your position on the Windows issue. I think it is clear that first-run domestic box office is a significant share of the studio's revenue base, and I agree with the confirmation that's indicated by putting off J.D.

J.D. J.D. J.D. And when you shrink the pie, it doesn't just hurt us. It hurts the distributors, too. They don't make it up in the PBOD side. And as we've talked about and as you've just alluded to, it's hard to know necessarily in a normalized environment how big that will be. And I guess I just end with there's an old saying, you know, and I remind anybody who's thinking about as they alter the model, don't leave a good party in pursuit of a better one. Okay. And by the way, also, let's not forget one other point. Nobody talks about this, and I want to talk about it for a minute. You know, this is about, in this whole discussion they've had about PBOD, this is all about figuring out how to make those mid-market movies more financially viable for the studios so that they can get more out of theatrical and more out of the secondary markets. I know that's what their goal is because that's been the challenge. But one of the things, and we applaud them and we want to be a part of that discussion. But one of the things that they never, and so they always talk about, oh, you know, the cost of releasing a movie is so high. Like, they talk about, like, that's never going to change. That actually is going to change. And so one piece of that equation is, you know, actually, I argue both pieces of P&A, prints and advertising. The cost of P is coming down. I hope it's not zero. You know, when the VPFs go away, the virtual print fees, you know, we'd like a little bit of money for maintenance. It'd be nice to have a little something because these projectors and all the components do wear out a lot faster than the older projectors. But virtually, that's going to go down to a very small number. And then the advertising, I would argue that with streaming, one of the things that you're seeing is that the way they market movies in the streaming world, they don't market the individual movies very much. They market the streaming service. And so I even think the cost of advertising could be going down as the streamers use their economies of scale across their marketing, their one name of their streamer, across a lot of films. That's one of the benefits of it. And I hope that they see the benefit of then giving some of those films a halo and a highlight and a platform where they get that national attention on the movie theater screens. I think that as that market becomes more competitive, the ability to use our theaters to say, see it here and then play exclusively on You Name the Streamer, that could be a benefit for some of them. I think they'll see that. And so I think the cost of distribution is coming down That will be helpful to the mid-market films. And if they can figure out a way then also to find other ways to monetize, and we can be a part of it where the pie is growing for everybody, that's a win-win-win.

All right. Well, thanks for your thoughts.

Thank you. And as a reminder, to ask a question, please press star and then one now. At this time, there... It appears that there are no other questions. I'd like to turn the call back to Mr. Nice for any additional or closing comments.

Well, listen, I'd just like to wrap up by saying thank you for joining us once again today. We do look forward to talking to you once again in approximately three months when we release our fiscal 2020 third quarter results. And until then, thank you and have a great day. Be safe. Be healthy.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.