Bowlero Aktie

Ladies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lucky Strike Entertainment Third Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Bobby Lavan, Chief Financial Officer.

Good morning to everyone on the call. This is Bobby Lavan, Lucky Strike's Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike's Third Quarter 2026 earnings. Joining me on the call today is Thomas Shannon, our Founder, Chief Executive Officer and President.

I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the SEC. Lucky Strike Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call.

Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website.

I'll now turn the call over to Tom.

Thanks, everyone, for joining today's call. In the March quarter, we delivered our second consecutive quarter of positive same-store sales comp at plus 0.2% and our first back-to-back positive comp performance since 2024. Total revenue grew to $342.2 million, up from $339.9 million in the prior year period. The quarter started powerfully with January same-store sales up plus 5.5%, and we entered February with strong momentum. That momentum was disrupted by an extraordinary stretch of weather and macro events.

Winter Storm Fern in late January and Winter Storm Hernando in late February, each brought widespread closures, travel bans and power outages across markets that account for a meaningful share of our footprint. Together, the 2 storms cost us approximately 250 basis points of comp in the quarter. Then on February 28, a large-scale military action in the Middle East drove a sharp spike in gasoline prices and consumer confidence fell to its lowest level in 70 years.

In this environment, a positive comp is, in our view, a credible outcome. Excluding our West Coast markets, which faced a sharper consumer drawdown in the quarter, the rest of the company actually comped plus 1.9%. As I outlined after our last call, we are committed to taking substantial and immediate action on costs and free cash flow. And that is exactly what we have done.

Beginning in mid-January and accelerating through the quarter with the help of AI, we have driven a sustained reduction in in-center labor hours, approximately 97,000 hours saved over the last 12 weeks versus the prior year, a more than 16% reduction from where we were peaking in early January. In 3 months, we have also reduced corporate field and sales headcount, generating more than $6 million of annualized savings. The full earnings benefit of these actions will land in our fiscal fourth quarter.

Orca is one of the most important developments in our business. Orca is our internal AI system, which aggregates approximately 750 million rows of operational data into a real-time decision-making layer for our managers. Orca is already managing clock-ins, clock-outs and aggregated guest reviews across our 360-plus locations. The early results are tangible. On closeout times alone, we have reduced excess post-close hours from approximately 2,000 per week to roughly 300, generating more than $2 million of annualized savings from a single workflow.

We see a similar opportunity in the high teens to mid-$20 millions of dollars of annual savings from optimizing clocking in-time. We are extending Orca into pricing, marketing creative, purchasing, arcade optimization and CapEx rationalization. While AI-related layoffs are creating some softness in corporate event demand, the longer-term effects of AI for Lucky Strike will be favorable. There is a developing thesis on Wall Street called Halo, high asset, low obsolescence that captures it well. Our analog bricks-and-mortar offering is one of the categories most insulated from AI disruption.

Our brand consolidation continues to run ahead of schedule. We are now at approximately 115 Lucky Strike conversions out of an ultimate target of 225 with the remainder receiving an upgraded AMF presentation. We expect to be substantially complete with the rebranding work by this time next year. Each conversion runs about $150,000. So on completion, we expect a meaningful step down in capital expenditures.

Our key operating metric continues to be free cash flow per share, which we measure as a trailing 12-month EBITDA less CapEx divided by shares outstanding. That figure currently stands at $1.53. Our goal is to reach at least $2 over the next 12 months, a 33% increase through a combination of EBITDA growth, continued CapEx discipline and opportunistic share repurchases, all while keeping net debt flat. Capital expenditures year-to-date are down 20% versus the prior year, $91 million compared with $114 million. The summer also looks materially better year-over-year.

Our waterpark portfolio is set to add approximately $18 million of incremental EBITDA this summer, with a vast majority in our September quarter, thus in fiscal 2027. And our family entertainment centers continue to perform ahead of plan.

Turning to guidance. Reflecting the macro reset in the back half of the March quarter, we are updating our fiscal 2026 outlook. We now expect total revenue growth of plus 4% to 5%, adjusted EBITDA of approximately $345 million to $350 million and capital expenditures of approximately $120 million.

Gross capital expenditures are down roughly $30 million year-over-year as we focus on cash flow generation. Importantly, this revision reflects the consumer environment, not our plan. The cost actions are landing on schedule. Operating leverage builds as comp recovers and the waterparks come online, and we expect to exit the year with materially better cash conversion than when we entered it.

With that, let's turn it over to Q&A.

[Operator Instructions] And our first question comes from the line of Steve Wieczynski with Stifel.

So Tom or Bobby, I want to go back to your commentary, Tom, I guess, it's your commentary around the consumer. And trying to understand your comments around the slowdown you saw as the Middle East war commenced. And I guess what I'm trying to figure out is that, that type of commentary goes against pretty much, I would say, kind of every other leisure company that we cover.

I think most of our -- I think most other consumer discretionary companies really haven't seen much of an impact from the war. So I'm just trying to understand your commentary and the pressure that you saw versus other leisure companies. And then maybe what you've seen from spend patterns more recently, meaning have you seen them stabilize and/or improve?

Everyone we've spoken to in the space saw a significant falloff greater than ours in March. I know a local proprietor in Southern California, very well located with a good demographic, they were down 17% on a comp basis. Dave & Buster's hasn't reported the March period yet. That was after their most recent earnings. So I think that actually the leisure-based, location-based entertainment space took a very big hit. I mean gas prices on the West Coast were as high as $9 and consumer confidence plunged to its lowest level in 70 years, I think it would be sort of delusional to think that, that didn't have an impact on the consumer in March.

Now I think the good news about the consumer is they have a very short memory or they adjust to new realities very quickly, and we saw a very rapid snapback. Our most recent period was effectively flat on a revenue basis. So we were way up in January, then we got kicked in the teeth by 2 epic snowstorms that shut us down for days on end across, up to half of the portfolio. And then there was the war where a lot of activity just stopped. We've heard again from a lot of operators, particularly those with a lot of West Coast exposure that they were down 20% or more. Now, we weren't down nearly that much. But yes, there was an impact on spending, and I think it was pretty broad.

Okay. And then second question, I'm wondering, obviously, we can kind of back in -- I mean, we have your fourth quarter potential guidance. But can you maybe help us think about the progression of same-store sales in terms of the way you guys are kind of thinking about it maybe now through the remainder of the year? Just want to kind of see how you guys are kind of thinking about the next, call it, 2 or 3 quarters.

Yes. If you look at the cadence, January was up 5.5%, February was up 1%, March was down 7%, April is flat. We're effectively focused on flat right now as we wait for the consumer to kind of normalize across the shock.

That being said, I'm surprised a little bit by your comments, Steve, because I mean, jet fuel prices are through the roof and airlines are pushing on. So volume has to be down, like they may be getting more dollars. But ultimately, as air travel costs rise, consumers are going to stay close to home this summer. So we should see a tailwind, particularly on our waterparks.

The one thing that's important from the waterpark perspective and a modeling perspective, we have $18 million of EBITDA coming online, but 80% of that comes online in the September quarter.

Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital.

Just building on the last point about the waterparks. As you look at summer season passes and whether or not you're getting an early read on how sales of that are? And as you think about pricing in an environment where consumers are challenged with some higher inflation and gas prices, are you thinking about maybe changing your pricing structure? How do you invite more guests to get to your parks in the face of higher inflation?

Well, thanks for the question. This is Tom. We've seen our waterpark sales roughly -- the season pass sales roughly flat with last year across the portfolio. The business is ultimately pretty weather-dependent, and I think pricing has a lot less to do with demand than weather. The season passes are always very attractively priced relative to walk-in. Usually, they're priced at less than 2 visits. And so it's already a tremendous value offering.

What we have done is upgraded all of the parks in many cases, meaningfully. So the amenities, the attractions, the food and beverage, the whole package is better than it was last year with increases in price. So we feel very [ strongly ] about the product and about our market position. We're in 5 really good markets, and we have dominant market positions.

We have the largest waterparks in North Carolina, Illinois and California. We have 2 parks in Panhandle, which is a fantastic market. And we've started booking events for the waterparks and for our family entertainment centers through our normal bowling event booking mechanism. And we've seen really, really strong early results, particularly in the family entertainment centers because they're open year-round, but we've seen some giant closes. So, really bullish on that business. A lot of it is noncomp.

So in the case of Wet 'n Wild Emerald Pointe in Greensboro, North Carolina and Raging Waters in San Dimas, California, you're going to see a lot of EBITDA coming that's incremental. We didn't have last year. And we also didn't have a particularly good weather year last year. I think Raging Waves only had 80 operating days, down from 90 planned opening days because it got cold late in August and also there was a lot of rain. So I think we're a coiled spring on the waterpark side.

One other comment with regard to value pricing. We have introduced 2 packages, one a retail package called Family Unlimited from 11:00 a.m. to 1:00 p.m. on the weekends in the bowling centers, a time when we're typically pretty slow, very attractively priced, 2 games and shoes for a very low price and then a discounted birthday party offering during the same time frame on the weekend. So the first weekend -- last weekend was the first weekend that we rolled out Family Unlimited. I think we had 3,000 packages sold each day with minimal advertising and minimal awareness. So pretty bullish on that.

But we are leaning into discounting where it's appropriate, certainly at off-peak. And again, I think that the waterparks were always pretty attractively priced. And now it's just going to come down to -- if we have normalized weather, there's no doubt that we're going to have a great waterpark summer.

Got it. And then just building on the kind of the capital allocation point. So in terms of how you're thinking about CapEx on a go-forward basis and being maybe a little bit tighter there. I think you're looking at $110 million to $120 million for fiscal '26. How do you think about that on a go-forward basis? And how do you think about just kind of M&A strategy in light of looking to generate a bit more free cash flow?

Right now, we're spending the majority of our cash flow on the Lucky Strike conversions. That will end in a year. We're halfway through that process. And then AMF conversions, which are much less expensive because most of the centers are already branded AMF. So it's just kind of a fine-tuning.

So with regard to that, CapEx is going to continue to decline, and then it's going to sort of make a much more serious turn down in a year as those projects are completed. There are 2 or 3 waterpark projects that we're looking at that would give us an expansion of capacity. And we haven't made final decisions on any of those awaiting final cost, but a large adult pool and a large family pool and an Action River at Raging Waves, which would add about 2,000 additional people for in-park capacity.

And then a large slide complex at Shipwreck Island in Panama City Beach, where we have unused space. And then a large slide array for children at Wet 'n Wild Emerald Pointe, which would probably increase in-park capacity by 1,000 to 1,500 people. All of those things will be price dependent. We'd like to do them, but we're not going to overpay for them.

With regard to other CapEx, we got a lot of discipline about a year ago, where we just started paying less by being much more aggressive in the bidding process. We've taken our amusement spending down dramatically. We found that we had purchased, frankly, way more games than we needed, and there's probably somewhere between 1,000 and 2,000 extra games in the system. So we haven't been spending any money on those as we burn through and reallocate new games that are in centers where they'd be better served in other centers. So that's probably worth minimum $10 million of spend over the next year. So a lot. There's a lot of free cash flow generation as a result of disciplined and reduced CapEx.

With regard to M&A, we're always opportunistic. And I'd like to point out that we did buy Raging Waters for $45 million in January. We bought a number of other assets last year. We bought all of these at very, very attractive multiples. And on a go-forward basis, we think excellent multiples. There is nothing that we're looking at currently that seems particularly attractive either on a fundamentals basis or a pricing basis. But we're opportunistic. So if something very interesting comes along, we would certainly take a good look at it. We'd love to do it.

One thing that we're committed to is no more incremental leverage. So our plan is to grow free cash flow, the way we define it, which is EBITDA less CapEx from $1.53 a share to over $2 a share in the next 12 months. I think internally, we're probably more ambitious than $2, but $2 is our advertised target. That will come from a combination of increased EBITDA, CapEx discipline, probably reduced CapEx at some point. But most importantly, with no incremental leverage at some point, through the increase of EBITDA, we'll start to delever. There may come a point in time where our best use of cash is actually, to actually delever, but we're not at that point yet.

Got it. And then just one more clarification. I think you talked about on your OpEx driving maybe an annualized, I think it was high teens to nearly $20 million of savings here over time through Orca and kind of other initiatives. Just wanted to get a sense for the timing on how that plays out, kind of what the June quarter looks like on your SG&A spend? And is that a 12-month process where you're getting majority in the first couple of quarters? Or any more color you might be able to share on that?

Yes. As you can see on our income statement, we brought down SG&A pretty materially. We were running 37, 39. (sic) [ $37million, $39 million ] We spiked up in the second quarter. We aggressively took that down. That is more from headcount cuts. As Tom said, we did about $6 million of annualized cuts in February. So we're pretty happy on the SG&A line.

On the payroll line, we have 35,000 to 40,000 shifts a week, where there is 20 to 30 minutes of wastage a shift on the in-times, the out-times we've already addressed. But on the in-times, it's a massive exercise. What time should a manager come in, what time should a kitchen -- a chef come in, what time should the front desk. And we are aggressively optimized. So you should see that play out over the next few quarters.

It's not going to be an overnight cut, but it is something that is -- we're taking -- we're leaning in heavily into the data here and focusing on optimizing schedules.

Next question comes from the line of Eric Wold with Texas Capital.

A quick -- 2 questions, I guess. The first question is kind of follow-ups on the waterparks. I know, Tom, you talked about a lot of things you're considering in terms of CapEx and kind of enhancements to the parks through capital. Maybe take a step back, the kind of $18 million you called out for this summer of expected EBITDA, remind us kind of what has been done to the parks in terms of low-hanging fruit that you're able to get done before this operating season versus what you expect to kind of do in the off-season coming up, so that -- what could that $18 million kind of become easily next year before you consider those major capital improvements?

Well, I'll give you an overview of what we've done, and then I'll give it to Bobby. So -- there was a marquee ride down for the last couple of years called the Edge at Wet 'n Wild Emerald Pointe. That's -- we repaired that, and that's back online. We made substantial cosmetic improvements to both parks in the Panhandle, and we added incremental food service in Shipwreck Island in Panama City Beach. We also added extensive incremental food service and got a liquor license in Raging Waves outside Chicago and added a large covered event space for large group gatherings. We also did significant cosmetic upgrades to that park and added a large video wall over the wave pool.

We're going to add a large video wall over the wave pool in season in Shipwreck Island in Panama City. We revamped parking lots, most of our parks to be able to optimize parking and capture more parking dollars. So we expanded the parking field at Emerald Pointe, which is consistently at capacity before the park is at capacity. We've added several hundred spaces there and added 2 more parking kiosks so that you can get in more quickly in the morning on peak days.

And then we've given a cosmetic refresh to Raging Waters, painted rides, rationalized the merchandising offerings there where we revamped all the in-park stores and gave it a cosmetic refresh at the entrance. So we did a lot of work in the off-season. The idea is that these park -- they all have different capacities, right? Some of them max out at 5,000, some of them max out at 9,000 or 10,000 people in park. If we get to capacity repeatedly over the course of the summer, it will really give us the justification to go ahead and make incremental CapEx, which varies by park.

So some of these projects, for example, adding 2,000 people in park capacity to Raging Waves would cost somewhere between $7.5 million and $8 million. A slide tower in Panama City Beach, which would be fairly transformative to that park is probably in the $5 million range. So none of these are particularly expensive, all things considered, given the volumes and values of the park. A lot of work has already been done, and there's really nothing that needs to be done from a base guest experience perspective on the parks. They all present very well, and they all have adequate food service and every other amenity that you really need.

So from a progression -- sorry, go ahead.

No, go ahead, Bobby.

Yes. From a progression perspective, the waterparks had a new $3 million of losses on a year-over-year basis in the March quarter, also a few million of losses from the parks that have been there for more than a year. And we expect that to -- the new assets will add kind of $3 million of EBITDA and then about $17 million -- $3 million of EBITDA in the June quarter, but then $17 million of EBITDA in the September quarter. So remember, the waterparks open in May, throughout May. And there's a lead up into opening them that has costs. And then June is your slowest month and then July, August, you make a significant amount of your money.

Got it. And then my follow-up question, thinking about the same-store sales and traffic in the March quarter. For those consumers that were still coming to the centers in February and March, can you talk about kind of what you saw in terms of F&B and amusement spending? Were the ones that were coming still spending at similar levels as before? Or when you talk about the pressure you're seeing on the consumer, was it not just impacting those who want to come at all, but those that did come were spending a little bit less when they did come?

Yes. So we saw kind of like 3 points of pressure. So food was strong, but alcohol continues to disconnect from food. That trend, we're aggressively focused on non-alc, but ultimately, alcohol spending is a secular issue.

Two, amusement is -- follows traffic. So we saw a little bit of softness in amusement. And we saw softness in California. California was down double digits. That's where gas price spikes were the highest.

That being said, New York continues to be strong. New York is where we focused our first rebrand of Lucky Strike and most of our marketing is being spent in the Northeast as we consolidate around the Lucky Strike brand. And so we saw strength in New York. We saw strength in Florida. We saw strength in Illinois. So really where gas prices spiked the most is where we saw the most softness in March that has rebounded in April.

Next question comes from the line of Matthew Boss with JPMorgan.

Tom, so maybe to take a step back, so how have you seen your business perform historically in environments with elevated gas prices or following geopolitical shock events? Just trying to compare today to historical precedent.

And then on the flat performance in April, so excluding an upturn in the macro backdrop, should we think of that as your baseline for the fourth quarter and business trends, excluding a change in the macro?

Well, we've been through 3 crises since I started the company. There was 9/11, where we really only had one location in Manhattan, and then there was the great financial crisis and then COVID. And in every one of them, there was a sharp decline followed by a sharper and more pronounced rebound. So we've come out stronger out of every single exogenous shock to the system than we went in.

Our revenue coming out of COVID, doubled. We were at $640 million of TTM revenue in February of 2020. And then 2 years later, we're at like $1.2 billion. So these things tend to never be pronounced or particularly long.

It's a shock to the system. Most of you on the call probably live in New York or in major metropolitan areas, and you're not that affected by gas. The people who commute working-class people, people with long commutes on the West Coast or other places really, really feel it. And even in South Florida, where I live, I saw gas at $6.50 a gallon. I mean, I've never seen anything even approaching that. So yes, it's a real shock to the consumer. And I think it causes everyone to sort of pause, including corporate event spending.

The fact that it came back so quickly and that we were flat in April, especially given that we've taken a significant number of hours out of the system and a significant number of cost out of the system just through discipline. We've lowered our breakeven on a comp basis from what used to be probably you had to be up plus 3.5% to be flat in terms of EBITDA. That number is now probably I don't know, ballpark 1, right? So effectively flat. So we -- the company has been reset in a way that makes it much more profitable even at a very close to flat comp.

The event comp from where I sit now, looking forward is the best I've seen in a really long time. Last month, the event business, which has underperformed retail. So retail was actually pretty strong. The walk-in customer, we were up like 6%. Corporate events, we were down like 5%. The period that we're in is the strongest early period booking that I've seen in maybe years. So I think that what we went through was fairly short-lived. I think that when the war is over and gas prices normalize, the consumer will probably come down and rebound very strongly like they always have.

But in this environment, we don't like to make predictions or give guidance and be wrong and look stupid, right? We don't give guidance sort of blindly and optimistically. The problem is that we're in a very short-cycle business. And so if you have a snowstorm that takes out the entire Northeast on a weekend in January, which is your highest revenue time of the year where you're doing $8 million on a Saturday versus, say, $5 million in the off-season, that really hurts.

You can't predict it and you can't do much to mitigate it either. So we have done, I think, a really good job of controlling the things that we can control; using AI and using just sort of old-fashioned common sense and discipline; we've taken a tremendous amount of cost out of the system without any negative effect on revenue. And I think revenue is poised to rebound in the core bowling business. We're already seeing it. And then you've got all the upside from the waterparks, right?

At the same time, you've got significantly reduced CapEx. So free cash flow is poised to expand significantly. But to get back to your core question, having done this through 3 significant crises, the consumer always comes back and usually stronger than before the crisis.

Great. And then, Bobby, just -- so with the cost savings actions that you cited as implemented, so should we think of this year's 27% to 28% EBITDA margin? Should we think of that as effectively a multiyear floor for the business? And just could you walk through recapture opportunity, where you think the right EBITDA margin for the business multiyear should rest?

Yes. The number this year is an anomaly. Remember, this year includes 2 different structural changes that happened. So one, we increased marketing spend year-over-year $15 million, right? So that is a 100-basis point weight on the margin that comes back or we turn off the marketing spend. It's one or the other. Either the marketing generates a return or we bring it back down to 1% of revenue versus right now, we're running at like 2.5%.

Two is, this year you had on the acquisition we closed at the end of July, you had negative $7 million of EBITDA that's in this year with no revenue associated with it. So that in itself is also a 100-basis point drag on the margin. And then in the September quarter, which is in fiscal '27, you get $20 million, $18 million of EBITDA like that, right, that you didn't have in the fiscal '26. So we are still very confident in low-30s long-term EBITDA margin. And this year, you just have these 2 anomalous facts that happen on top of in December, we've already addressed this a few times, just a lot of wasted payroll that will happen again.

Next question comes from the line of Eric Handler with ROTH Capital.

I wonder if you could talk about, given the economic pressures that are going on right now, aside from the disconnect between alcohol and food, are you seeing any other behavioral changes with food and beverage spending?

Not really. I think that food, in general, for us, we have a tailwind in that we have a new menu. We found we've been underpriced on food, and we continue to roll out new different options. We also have recently upgraded the food menu in the AMF. So it's hard for us to see if there's any sort of disconnect in the consumer because we have such a good tailwind on the evolution of our food product.

Next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

In the last quarter, events turned the corner. And I was wondering if we can just drill down a little bit about events. Corporate bookings, it looks like -- I was just wondering if they were behaving a little differently than social events bookings in the current macro environment. And I was just wondering if you can break out for us the weekend trends versus weekday corporate events demand and how that's tracking?

Yes. So corporate has bounced back across the country other than in California. no surprise, but we're seeing strength in New York, Florida, Illinois on the corporate side. the social side is up, but it's not up as much as sort of the corporate rebound in that, we're seeing people switch to either online or they're just walking in at this point because we have some of these value-based options.

During the week it's strong, we have seen less corporate activity on the weekends. We historically had less corporate activity, but that's being offset by adult parties. So we're feeling very good about the events business.

Got you. Good. And then in terms of like just -- you were mentioning just general softness, I would imagine, is that just coming from like lower income consumers? Or how should we look at in terms of -- like leading indicators like if gas prices do come down, you think things are going to bounce back or consumer confidence, do you think that is kind of like the key category that things to watch for as leading indicators for possible things to bounce back? What are your thoughts?

Yes. If you go backwards and you look at our October, November, December cadence, the business had rebounded to plus 1%, plus 2% off of a weak events year the prior year, right? Then you get into January, January is plus 5.5%. February is plus 1%. In both of those months, you had 2 snowstorms that cost anywhere between $8 million and $9 million. We spent in the quarter an incremental $1 million on shoveling snow, snow removal, right? So ultimately, our confidence in the awareness that our marketing is driving, the traffic that our marketing is driving our enhanced Lucky Strike property, very high.

Then we go into March, and I look at website traffic very closely. Website traffic, the day we started bombing Iran, down 20% overnight. It was just a shock to the system, right? And everybody that week was like, what do I do events, what do I do gas prices spiking. Ultimately, it was a shock. That shock -- and consumer have very short memories. And you look at April, April every week, the business got better. Last week, we had a very good same-store sales comp. Ultimately, the consumer softness is off of what good momentum the business had. So it's not that the consumer is declining. It's just that they're pulling back from the momentum we were gaining.

And our guidance is saying, okay, that momentum slowed, the momentum stopped. But when we get it back, particularly as these 2 major waterparks come on, we'll see good operating leverage.

Next question comes from the line of Ian Zaffino with Oppenheimer.

This is Isaac Sellhausen on for Ian. I just had one follow-up on the corporate event side. I think in the prepared remarks, you alluded to some new white-collar AI concerns or corporates potentially pulling back. I think you just addressed some of the corporate on the last question, but maybe if you could just touch on that piece.

Yes. So AI is obviously causing layoffs in Silicon Valley. And ultimately, that means that they're going to have less activity. But from our perspective, the efficiencies that it creates is significant. The tools we've built -- ultimately, we have quarterly business reviews. Quarterly business reviews traditionally would take the FP&A team 2 to 3 weeks to prepare for. Now they do it in an hour.

We have 300 social reviews a day and scouring through that was 3 people's jobs. And now our tool, Orca, which we internally built on a Snowflake AWS Claude instance, aggregates the reviews and pushes out the reviews that are meaningful versus not meaningful and also drives us to respond to those reviews. So we're seeing so much efficiency. We know that the rest of the market is going to see efficiency, and it also just means people are going to have more time on their hands and ultimately, good for costs and good for people wanting to enjoy analog entertainment.

Okay. Understood. And then just as a follow-up, just wondering on the Arcade performance, has that kind of trended with bowling activity and retail activity or yes, just that piece?

Yes. I think that Arcade performance is a little bit of just traffic, right? And so when we saw a little bit of pullback on traffic, ultimately, that drives down Arcade. We are very focused on investing in price and investing in gamification. So I think the Arcade will always follow traffic, but that should be short-lived as we go into the summer and season pass improves traffic.

And our last question comes from the line of David Hargreaves with Barclays.

Okay. All my smarter questions have been asked. But could you talk about what we should expect with -- should we expect the revolver to continue to come down in the fourth quarter and -- your fourth quarter? And then could you talk about the amount of room you have under the leverage covenant?

Yes. So we don't have a leverage covenant. We're not 40% drawn on our revolver, and we don't expect to be. I would expect the revolver to come down meaningfully throughout the September quarter. We're generating a significant amount of cash in the summer. And that is -- we're very focused on bringing that revolver down by the end of the year -- calendar year.

Okay. And then based on your commentary, there was a lot of noise in the quarter. I appreciate that. But it sounds like there may have been some traffic or participation declines based on gas prices and the conflict. Should that mean -- given that your same-store sales were up a little bit, does that mean you took a lot of price in the quarter? Or what should we be thinking about in terms of price and mix?

Yes. So remember, we were up 5.5% in January. We're up 1% in February. We're down 7% in March, right? And so we took a little bit of price, but it's not meaningfully. And ultimately, price mix and traffic are all sort of flattish.

I'm looking forward to seeing all the parts cohesively -- are working together.

Ladies and gentlemen, that concludes the question-and-answer session. Thank you all for joining. You may now disconnect.

Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the Lucky Strike Entertainment Q2 2026 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Bobby Lavan, Chief Financial Officer. Please go ahead.

Good afternoon. This is Bobby Lavan, Lucky Strike's Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike's second quarter 2016 earnings. Today, we issued a press release announcing our financial results for the period ended December 28, 2025. A copy of the press release is available in the Investor Relations section of our website. Joining me on the call today are Thomas Shannon, our Founder and Chief Executive; and Lev Ekster, our President.

I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the SEC. Lucky Strike Entertainment undertakes no obligation to revise or update any events or circumstances that occur after today's call.

Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website.

I will now turn the call over to Tom.

Thanks, everyone, for joining today's call. We finished the December quarter with a positive same-store sales comp of plus 0.3% and total revenue growth of plus 2.3%. The result was driven by continued strength in both our retail and, league businesses. While we made steady progress turning around our events business, which ended nearly flat for the quarter, its best showing in years.

Retail and lease performed well throughout the quarter and provided a stable foundation for the comp. Events, which have been the primary drag on same-store sales over the past several quarters, inflected meaningfully in January. The changes we've made to the events organization, pricing and funnel are beginning to show results. January started off with strong double-digit results. We saw 1 week of headwinds from the biggest snowstorm this country has seen in a while and then a return back to momentum of strength of retail, leagues and events.

During the quarter, we made deliberate investments in payroll, marketing and elevated activity levels to drive traffic and return the business to positive same-store sales growth. A number of these investments delivered attractive returns and helped establish positive momentum, particularly in retail, leagues and the early stages of the events turnaround. However, not all of the spending generated the ROI we expected with incremental labor in particular weighing on profitability. As a result, while we remain focused on driving organic growth, we are shifting toward a more balanced approach that places equal emphasis on same-store sales growth and EBITDA expansion. Going forward, investments will be more targeted, more measured and held to a higher return threshold.

In January, we also closed on the acquisition of Raging Waters, the largest water park in California, which will contribute meaningful EBITDA in the June and September quarters. When combined with Wet n' Wild Emerald Pointe in North Carolina and 3 new family entertainment centers we've acquired, we expect a significant seasonal lift to earnings as we move through the summer months, reflecting the continued diversification of our portfolio.

On the brand front, we opened Lucky Strike Aliso Viejo in Orange County, California in December, and early results have been encouraging. We now operate approximately 100 Lucky Strike locations and remain on track to sunset the Bowlero brand by the end of this calendar year. Conversions to Lucky Strike have delivered strong lifts, and simplifying the portfolio to 2 cohesive brands, Lucky Strike and AMF, will drive efficiencies, particularly in marketing spend. At the same time, we plan to roll out a refreshed AMF look later this year that leans into the brand's more than 100-year history. This evolution strengthens our value-oriented offering while clearly differentiating it from Lucky Strike, positioning the portfolio for profitable growth and improved returns.

With that, let's turn it over to Q&A.

[Operator Instructions] Your first question comes from the line of Steve Wieczynski of Stifel.

So Bobby, this is probably for you. I guess as we kind of think about the results we've seen here, I'm surprised you guys didn't elect to kind of lower the EBITDA guidance for the full year, at least maybe bring the high end of that range down. Based on the EBITDA generation through the first 6 months, you guys would need to see a pretty significant uptick in the second half of the year to kind of get inside of that range at this point. So I guess my question is what makes you guys still confident in getting into that range. And look, I understand your commentary you just made about how strong the start of the year has been.

Yes. So if you think about it from a numbers perspective, the past 2 years, we've had this $300 million business being really a drag on our results. It's a drag on our financial results, but also events is sort of tip of the spear as a lead gen for the business. That business has turned. As Tom said in his commentary, we said in the press release, that business had organic growth in January, February. When you compound that with retail being up mid-single digits, league being up mid-single digits, we're still within the paradigms of our guidance. We -- when we talked last quarter, we were very focused on people not getting super excited about the December quarter because we still have this corporate events business, which was front-end loaded in December. As expected, corporate events are down, but then you got into the third and fourth week of December, and our consumer events and our retail were on fire. And the first 3 weeks of January, the business was up double digits.

So our confidence in the business is very high. We invested to get there, and now we need to pull back some of those investments. But we're definitely still within confines of our guidance we gave out in August.

Okay. That makes sense. And then maybe if I could add one more real quick. I want to ask how we should think then about kind of a -- like how the flow-through would look for the rest of the year. Obviously, you guys were investing, it seems like, pretty heavily in the corporate events business and turning that around through December. So maybe a better way to ask that is how much of a drag was that on margins in the -- in your second quarter. Hopefully, that makes sense.

Yes. So there are 2 -- there are 3 buckets, I would say, of direct drags. So center payroll on a comp basis was up $6 million year-over-year, right? Two, we talked about and we flagged very heavily the marketing investment. The marketing investment on a year-over-year basis was up $4 million, and the marketing team investment on a year-over-year basis was up $1 million, right?

So ultimately, finding the right balance on those numbers and organic growth is what we think we've gotten to in January. We're very happy with the January results. But we're going to ultimately optimize those numbers to make sure that we're getting the appropriate flow-through. From our expectations, you should see margin growth in a material way in the fourth quarter as all the water parks and the Boomers go from being a few million a quarter of drag to significant EBITDA.

Your next question comes from the line of Matthew Boss of JPMorgan.

So could you elaborate on progress with your initiatives that you've made to date to rebuild the events business or specifically drivers you think underlying this recent inflection in the events business relative to the headwinds that you faced on that side of the house in the first half of the year?

Yes. We chased price for 2 years. So if you called us and you wanted a discount, we would give it to you. Now discounts are an important part of any sort of location-based entertainment company. If you call in the summer or Monday afternoon, a discount is warranted. But if you call for a Thursday at times where -- in December, we shouldn't give you a discount because demand is greater than the supply.

And so in September, we built out dynamic pricing reporting systems. And when we looked at where we are tracking in September, we were tracking for our events business to be down double digits, and we brought it all the way back. And now it's really less through volume and more through dynamic pricing. And that is something that has dramatically changed over the past few years. The volume, it's hard on the corporate side. That's business that we need to build functions to kind of build our marketing function to get our name out there more but also our marketing, which has really helped the kids birthday parties and consumer parties. So pricing has been paramount, and also the partnership with marketing is really a sea change for the business.

And maybe to that point, Bobby, could you elaborate on which investments you made in the second quarter that you saw translate directly to an improved traffic or same-center comps and then just how best to think about the continued investments as we think about the third or the fourth quarter as I think you mentioned balancing margin in the back half of the year, and particularly, it sounds like the fourth quarter?

Matt, this is Lev...

So I'm going to hand over to Lev because he's...

So you saw we made a significant increase to our marketing budget, and that was an investment in building our brand and increasing the brand awareness. We feel like it was, for the most part, a pretty worthy investments -- investment. In fact, we saw our media impressions in the quarter increase 200%. Q2 of prior year, we had 340 million impressions. Q2 of this year, we exceeded over 1 billion impressions. And that also converted. We saw online revenue increase 28% year-over-year and booking conversions improved 2x.

The rebrands of Lucky Strike, of which we did 30 in Q2, are also bearing fruit, and we anticipate being done with all of those rebrands this calendar year, which will put us right around 280 -- 218 Lucky Strike locations. But when you consider the efficiency of going from 3 brands to 2, it really helps our national awareness.

I also want to mention that the marketing investment increased our share of voice. So our search impressions climbed significantly. In fact, it was a 520% increase, but we also saw efficiency with our CPMs decreasing by 38%. So from a high level, marketing increase but largely as an investment in brand building, and we saw the benefits of that in January. And I think that's going to continue as we scale the rebrands of Lucky Strikes.

Your next question comes from the line of Jason Tilchen of Canaccord Genuity.

I was wondering if we could talk about the food and beverage sales that you saw during the quarter. It was a little bit below what we were expecting. And I'm just curious sort of how attach rates trended. And what are some of the benefits you're starting to see from sort of the increased emphasis on training and some of the tablet implementation that you guys are rolling out?

So our retail comp was just shy of 2% at 1.7%, but our retail food is at 10.9%, so continues to outperform. And while alcohol was a bit of a drag with retail alcohol down right around 4.7%, we saw that our retail nonalcoholic comp grew more than the drag. So that increased 26.2% or $2 million.

So in terms of food and beverage, it's pretty dynamic. We're seeing, obviously, as a society, the decrease in alcohol consumption, but we continue to invest in our zero-proof program. So we launched, as you remember, craft lemonades earlier in the year. That's a -- that has a run rate of over $5 million. And with the success of craft lemonades, later this quarter, we plan to introduce 30 soda programmings to our traditional properties and boba drinks to our experiential properties, and we anticipate similar results. We're also, for the first time ever, going to introduce a zero-proof program to our AMF properties, our traditional locations. They've never had a mocktail program. So we're just changing with the times, investing more in zero-proof, and it's working.

What also is working is our tablets. So we introduced server tablets. Today, we sit at 125 locations with server tablets, and we're seeing the average check size increase about 7% with increased gratuities for the associates using the server tablets. By March, we're going to have server tablets in 160 of our locations, and we're going to continue to evaluate as we scale that.

But ultimately, as Tom mentioned, we increased service labor in Q2, and some of it worked, and we saw retail comp growth. Some of it was inefficient, and we have to evaluate that. So we've actually recently trimmed some of our least profitable operating hours as a result of that, and we're looking at in and out times of our associates to make sure that they're very productive.

But that investment in labor, increased service labor for our guests and our increased hospitality training is working because we've now seen for 14 straight months our NPS score comp from prior year. In fact, it hit our highest point of 78.7% in October. So from a hospitality perspective, from a retail growth perspective, the service is working. We just want to optimize it.

Your next question comes from the line of Ian Zaffino of Oppenheimer.

I know you guys mentioned some of the investments that you're making and not being the return that you're expecting. Can you give us maybe kind of particulars of what you -- what was unexpected? I think you mentioned labor, but anything else? And then -- and how are you actually accounting for some of the line items as you get to the return that you want to get to?

Yes. I mean, the investments are focused on center payroll, marketing, infrastructure at the water parks, Boomers and then what I would call the other bucket or the incremental activity bucket. The center payroll, as Lev spoke at, we look -- center by center, we look at the amount of payroll we added and we identify where that payroll deliver a return or didn't deliver return, right?

Returns are -- in this world, ultimately, average labor is going to cost you $25 to $30 an hour, and if you're not getting the revenue to justify that, then that -- you shouldn't be investing in labor, right? We're in an incremental margin business. The revenue -- the incremental revenue has to be greater than the incremental cost [ as a whole ].

From a marketing perspective, right now, we're injecting capital into a system that has generally been starved of marketing. We're watching impressions very strategically. We are testing market by market. And so the first market we leaned into was in New York, New York City. We increased marketing spend. We rebranded Times Square, Chelsea Piers Lucky Strikes, and both of those centers comped double digits in the second quarter, right? At the same time, we have a state like Colorado, where we have a hodgepodge of Bowlero, Lucky Strikes and AMFs, so it's harder to test that marketing spend. And that's why the rebrand is so important to get done this year.

As it relates to the water parks and the FECs, these businesses have been starved of management labor. We think that there's massive opportunities on awareness, on investing capital into these locations. And we saw that with the robust performance at Boomers, Destin water park that we bought 1.5 years ago, that water park was up 20% year-over-year last summer. We continue to lean into that team, but that team does drive a multimillion-dollar drag in the off season, but then you get that EBITDA and more back.

And then the one that we found had the least returns was just kind of incremental activity. We had more programs. More programs mean that you're spending money faster. You're ultimately dealing with marketing materials, collateral in the centers, uniforms that you're not being as efficient, and those are the things that we're going to plan better, pull back on and really focus on service, labor and marketing that drives the top line.

Next question comes from the line of Eric Handler of ROTH Capital.

So we're now about, let's call it, 3.5 months away from Memorial Day when a lot of the regional water parks will be opening. As you sort of -- when customers show up on a sort of like on a like-for-like basis, where are they going to notice the biggest changes in operations?

This is Tom Shannon. We've been investing in all of these assets really from -- shortly after we acquired them. And one of the reasons that Big Kahuna in Destin was up 20% is it got a comprehensive facelift. It was done very efficiently. It was done largely within park labor, but there were a lot of -- there was a lot of rot literally in the park where you had things like bridges that were dilapidated, fences that were not appealing or maybe even structurally sound. And the team in the off season went through the entire park. They rebuilt 7 bridges. They probably replaced half of the fencing. They painted literally everything, gel coated the slides, replaced malfunctioning pumps, lighting, et cetera, and the park looked effectively new, and the customers responded.

We've done the same on the Boomers. So the preliminary numbers I have on the Boomers, the legacy Boomers that we've owned for more than a year, they're up in revenue 25% over the last 2 weeks. And that's 6 large locations from Boca Raton, Irvine, Livermore, Modesto, et cetera. They all benefited from meaningful capital investment and some very efficient capital investment. I think you're going to see that in all of the parks with the exception of probably Raging Waters, which we literally just closed on. We'll do our best to upgrade aspects of that.

But when the guest comes they're going to see something they haven't seen in a long time, and that is a really refreshed, really appealing and upscale water park or family entertainment center. Where we've made the investments, we've seen the return. I think we've seen a better return than we would have reasonably expected or even hoped for.

Your next question comes from the line of Eric Wold of Texas Capital Securities.

I just had a question kind of following up on the very first question out of the gate around the guidance range, Bobby. I guess January done, so 5-ish months left in the fiscal year. Maybe talk about the biggest variables between kind of the $50 million high and low end range of revenue and $40 million on EBITDA, the biggest variable that would take it in your mind from the high end to low end or vice versa. And then which of those are most in your control, like marketing, maintenance spend like that versus something that maybe is a little less out of your control?

Yes. So if you go first 6 months, the comp is flat, right? The comp is unbelievably easy for the next 6 months or 5 months, I guess, on the events side, right? Additionally, we're leaning more into summer season pass. Last year, we did $13 million. We think we can beat that significantly this year. And most important is going to be how profitable the Boomers; Emerald Pointe, which is the biggest water park in North Carolina; Raging Waters, which is the biggest water park in California; Raging Waves, biggest water park in Illinois. All of these are -- we've invested in. We've done what we did to the legacy Boomers.

And you remember, we bought the legacy Boomers for $27 million and those properties are doing $15 million of EBITDA at this point. We think we can get to not exactly there but close on the water parks. And so how profitable the water park has gone with the capital we invested is really kind of the main driver in the fourth quarter.

In the third quarter, we started January strong, right? And so we started January strong. If it wasn't for this snowpocalypse that happened, we would have been up double digits on a comp basis in January. We're still up. We had a great month. We'll see a ton of operating leverage that month. And the thing that Tom put it in his quotes in his press release is we're committing to taking down the inefficient stuff, right? And so the difference between the top and the bottom is going to be performance in the water parks, maintaining good organic growth but also us getting costs under control.

Next question comes from the line of Michael Kupinski of NOBLE Capital.

Obviously, you're anticipating that the water parks are going to contribute meaningfully into the fourth quarter, so I plan to get a little granular here and sorry for the questions. In terms of Raging Waves, you indicated that it came with a lot of land. And I know that you had anticipated that. You had planned to build out some event space there and maybe do some expansion. I was wondering if you had already done that.

And then part of the growth that we saw last year, I think you said that you introduced alcohol and that you saw a little revenue lift from that. I was wondering if you're Raging Waters in California, if that was part of the acquisition plan, if that already had alcohol, they had that there. Is that part of introduction that you can see a little lift from that as well? And then I guess in terms of other investments into the water parks, are there other expansion plans that you have either done or contemplated for those?

This is Tom Shannon. Thanks for the question. With regard to Raging Waves, we did add some covered event spaces with open sides, and those were open for the last season. We also got a beer license in the middle of 2024, and we had that last year. That contributed to a couple hundred thousand dollars of alcohol sales. We're increasing food and beverage availability throughout the park for this year. We sort of reconfigured the flow as you walk in and where we placed certain food and beverage outlets optimize that. So I think you'll see continued lift.

We purchased 66 acres adjacent to that park. We haven't done anything with it, and we don't have any plans at present. We were going to embark on a pretty meaningful expansion of the park with the addition of an action river, a family pool and an adult pool with swim-up bar that would have increased the in-park capacity by somewhere between 1,500 and 2,000 people. Unfortunately, we weren't able to get through the permitting process in time to start construction this year, so that will be deferred to next winter for a 2027 summer opening.

With regard to Raging Waters, it does not have a liquor license. We will be applying for a liquor license. That will not happen for this summer. Hopefully, we'll have that for the following summer. And given the volume of that park, that should be a meaningful number. I don't recall if there was anything else you asked that I haven't covered. Please let me know.

Outside of alcohol in terms of the prospects for growth there. Like is there other land that you're getting, other expansion plans in the future?

Well, I mean, we have expansion opportunities within the confines of all of the parks. None of them were built out to their capacity. So over time, the answer is yes. But I think that you have a lot of very low-investment, high-return opportunities. For example, in Big Kahuna in Destin, you could do a lot of rides and make the park sort of more dynamic and exciting. But the gating factor there is really there's not enough deck space and lounging space, which is a relatively inexpensive. And so we focused on those sorts of things.

We have ambitious expansions planned, as I mentioned, in Raging Waves, also in Shipwreck Island in Panama City. We're doing a number of upgrades over the next 2 years at Wet n' Wild Emerald Pointe, which is a very large high-volume park. We're adding a meaningful kiddie/family area. There will be upgrades to the cabanas there. We sell out nearly every weekend. We're adding something like 40 or 50 cabanas that will be in place for this coming season.

So there's a lot of that sort of stuff, relatively inexpensive, very high ROI, has a big impact on the guest experience. But we also have things planned like a large tower complex, slide tower complex at Shipwreck Island in Panama City that we hope to have in place for the '27 season, the expansion I mentioned at Raging waves for '27 season and also some things that we'd like to do at Raging Waters.

But for the most part, these parks are in pretty good shape. It really comes down to being able to increase revenue through simply having more availability of food and beverage, more cabanas to sell and then optimizing pricing and packages, which I think we've done a pretty good job on for this upcoming season.

Your next question comes from the line of Gregory Miller of Truist Securities.

I'm hoping you can provide some help in terms of getting a better understanding of how we should be thinking about, say, the next 50 or so Lucky Strike conversions relative to the first 100. How similar or different are these stores from a demographics perspective, locations, the types of stores, in part, in terms of how we should be thinking about the ramp of these rebranded locations over the course of the rest of the year?

Sure. This is Tom Shannon. There's no difference. It's not like we started at the top in terms of revenue and went down. A lot of what got converted was a function of how quickly they move through a permitting process. As you know, we deal with a lot of permitting issues in a lot of municipalities. Some are very easy and efficient to deal with. Some are not. And so the pace at which these things happen is somewhat dictated by an external audience, which is municipal governments.

So there is really no difference between the next 50 and the first 100. What is going to happen, and this is really important to note, is that we are going to build out critical mass in most, if not all markets with the new Lucky Strike brand. So I think Bobby mentioned that we have markets like Denver where you still have 3 brands, and you may have 4 or 5 Lucky Strikes out of 20 centers. It's not enough to do any meaningful marketing. You just can't amortize the spend over enough centers. But when you get to, call it, 15 Lucky Strikes in the market, you're able to do that, and you're also able to do that on a national basis.

So I think the returns will accelerate, and Lucky Strike will become a very, very powerful brand once we have 200 locations, which we expect by the end of calendar '26. And we're able to put real marketing muscle behind it in a way that's never occurred before. You're going to start to see a lot of -- a lot more relevance and unaided awareness of Lucky Strike and then following that, AMF.

Just to sort of flesh out the point, AMF as a brand has probably had no meaningful marketing spend in 3 or 4 decades. It doesn't mean anything at all. And the same is largely true of Lucky Strike. When Lucky Strike first launched back in, I believe, 2003, it had a lot of excitement around the brand that was on Entourage, was really considered a cool brand. And then it really sort of fell by the wayside, and real money was spent on the brand.

And so we're going from an environment of little to no investment over a very long period of time to 1 now where we have -- or, soon, we'll have critical mass and 2 brands that we're going to be investing serious marketing effort behind. And I think the upside in both of those is tremendous.

Your next question comes from the line of Jeremy Hamblin of Craig-Hallum.

This is Will on for Jeremy. Just first wondering if you could break down the comp cadence by month through the second quarter and then if you're able to quantify the weather impact you saw from the snow storms.

Yes. So it was -- the easiest cadence is plus 1, plus 1, minus 1, a little bit better in October, November and December, but that's the easiest way you should look at it. The hit on the snow in January was about $5 million in revenue, so it really took down Saturday afternoon to Saturday night, about -- we lost at least $2.5 million on Sunday, and we lost about $500,000 on Monday, Tuesday. So it was -- we were looking at double-digit comp for January until that. We're still pretty happy with the comp, but we get through. Yes. And then snow in December cost us about $2 million.

Okay. That's helpful. And then just curious on the EBITDA drag from the water park business in the quarter. And then I know focus has been on organic growth this year. But is there anything in the acquisition pipeline that we should consider for the back half?

And we've done $95 million of acquisitions this year. We're always looking at things, but right now, we're focused on having a monster summer season in our Boomers and water parks.

There are no further questions at this time. And with that, ladies and gentlemen, concludes today's conference call. We thank you for participating. You may now disconnect your lines.

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" JPMorgan Chase & Co, Research Division

" Stifel, Nicolaus & Company, Incorporated, Research Division

" Jefferies LLC, Research Division

" Canaccord Genuity Corp., Research Division

" Craig-Hallum Capital Group LLC, Research Division

" NOBLE Capital Markets, Inc., Research Division

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Thank you for standing by. My name is Liz, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Lucky Strike Entertainment First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Bobby Lavan, Chief Financial Officer. Please go ahead.

Good afternoon to everyone on the call. This is Bobby Lavan, Lucky Strike's Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike's First quarter 2026 earnings. Today, we issued a press release announcing our financial results for the period ended September 28, 2025. A copy of the press release is available in the Investor Relations section of our website.

Joining me on the call today are Thomas Shannon, our Founder and Chief Executive; and Lev Exter, our President. I'd like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the SEC. Lucky Strike Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call.

Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website.

I will now turn the call over to Tom.

Thanks, everyone, for joining today's call. I am Thomas Shannon, Lucky Strike's Founder and CEO. Starting with performance. Total revenue in the quarter grew 12% and adjusted EBITDA was up 15%. Same-store sales were close to flat at negative 0.4%, with retail revenue up 1.4% and league revenue up 2.1%, which shows healthy customer engagement across our core bowling and entertainment venues. We continue to see encouraging momentum in our online booking funnel, which grew double digits in the quarter. Our offline events business, which on a dollar-weighted basis is mostly corporate event bookings, was down 11%, creating roughly a 160 basis point drag on total comps. That said, trends have clearly turned the corner. October was our strongest month of the year for both offline and total events, which gives us confidence heading into the holiday season.

Our primary focus remains on improving free cash flow through disciplined cost management and capital efficiency. CapEx for the quarter came in at $26 million, down from $42 million a year ago, reflecting tighter capital allocation and benefits from our procurement function. In July, we made a strategic real estate investment, acquiring the land and buildings for 58 of our existing locations for $306 million. This enhances flexibility, lowers exposure to future rent increases, and sets us up for future accretive sale-leaseback or refinancing opportunities should we choose to pursue those.

In September, we closed a $1.7 billion refinancing that extends debt maturities to 2032 at an average weighted cost of capital of 7%. We also expanded our roughly 370 location platform through the acquisition of 2 large and very profitable water parks, Raging Waters Los Angeles and Wet 'n Wild Emerald Pointe in Greensboro, North Carolina. along with 3 high-performing family entertainment centers in Southern California, the 24-acre Castle Park in Riverside, California, Boomers Vista Boomers Palm Springs. Together, these destinations welcome more than 1 million annual guests and broaden our leadership across water parks, amusement, and family entertainment. The $90 million transaction is expected to generate returns above our historical average, with most of the financial contribution coming next summer.

We also continue to invest in our people. This quarter, we welcomed Brandon Briggs as Chief Revenue Officer, bringing global experience from major cruise lines, and Laura Cobos as Vice President of Field Training following her 3-decade career at Texas Roadhouse. Both are already having a measurable impact on our service and culture. Our teams are energized, engaged, and executing with precision. We're selling with confidence, serving with heart, and continuing to raise the bar for hospitality and out-of-home entertainment, keeping it short and sweet.

With that, let's turn it over to Q&A.

[Operator Instructions] Your first question comes from the line of Matthew Boss with JPMorgan.

It's Amanda Douglas on for Matt. So Tom, to start, could you break down the drivers of 1Q's roughly flat comp as you look across your walk-in retail business relative to events? And specifically on events, could you elaborate on the clear signs of recovery that you cited heading into the holiday?

This is Lev Ekster speaking. So I'll just quickly touch on retail and league, which I think were major drivers, and we actually saw continued strength in both categories in this most recent period, and then I'll turn it over to Bobby to talk more specifically about events. But we saw obviously very healthy retail foot traffic. The numbers indicate that finishing nearly 1.5% up. But I think even more encouraging is what we're seeing in terms of a response from our lead customer, which I would argue is maybe our most price-conscious customer. And yet, we were up in leagues over 2%. I want to point out this most recent period of October, we closed up over 5% in leads, and that was driven by a combination of an increase in headcount of boulders for our fall flooring, but also we were seeing an increase in the average price per game. So we saw an increase in lineage revenue as well.

And fortunately, with the increased headcount, we're also seeing that drive our food and beverage attachment from the League Bowler. In fact, we've had 5 consecutive weeks of all-time high food and beverage revenue coming from our league bowlers. So we found that to be super encouraging. And Bobby has been a lot closer with the event business. I'll turn it over to him.

So the event business, which we talked about sort of the -- the main sort of headwind the business has had in the corporate events business. That business was down in the September quarter, sort of mid-single digits. October, we had sort of the best month we've had in more than 1.5 years. So we've changed the way we're operating that business. Additionally, we're leaning into online more, and online is growing strong double digits to sort of make up for some of the headwinds we're seeing mostly from a macro perspective on the corporate events side.

And Bobby, just to follow up on the adjusted EBITDA margin expansion in the first quarter. Could you expand on the drivers of the 70 basis points of expansion? And then just any puts and takes to consider on the progression of EBITDA margins over the balance of the year?

Yes. So I mean, revenue is going to drive the most amount of operating leverage on an EBITDA margin perspective. That's offset by -- we did invest an incremental $2.5 million in marketing, and we have $1 million of higher sort of insurance costs as we bring other businesses into the system. From an EBITDA margin cadence, the first quarter of 2026 is the lowest margin quarter. I would say you should expect 600 to 800 basis points margin improvement as we go into the higher winter quarters and coming back down to around where we are now when we get into the June quarter.

Your next question comes from the line of Steve Wieczynski with Stifel.

So Bobby, wondering maybe how we should think about the cadence for the rest of the year in terms of same-store sales. And then maybe if there's anything we should be thinking about in terms of whether it's headwinds, whether it's tailwinds over the last 3 quarters of the year. So just kind of we can kind of get our models in the right spot moving forward.

Yes. So the next few quarters are pretty clean on an apples-to-apples basis. You have sort of New Year's is falling in the third quarter that happened last year. We have -- some of the growth -- inorganic growth came in the first quarter of '26 is from the acquisition of a water park in North Carolina, of another water park in L.A., coming in in sort of the June quarter. So you're going to have the strongest inorganic growth period or quarters in the first and the fourth quarter. From a same-store sales perspective, we guided the year to 1% to 5%, and that holds. You can kind of see how that should flow through. But ultimately, we expect for same-store sales to be in that range for the second and third quarter, and then the fourth quarter being a little bit better.

And then second question is probably for Lev. But maybe a little bit of color around attachment rates in terms of retail customers. Wondering what you've seen recently in terms of whether it's F&B or amusement spend, any material changes in their spending patterns once they're inside your properties?

I think we're more and more encouraged by our food attachment. And I think it was actually your question, maybe a year ago on a similar call where we talked about us leaning into food and seeing just a lot of organic upside within our business, improving the food quality, the food selection, the innovation in our food program. I'm happy to report that in Q1, food is actually up 10%, way outpaced our overall retail, which was up 1.4%, and we're going to continue doing that. And we have now an ecosystem focused around food attachment. And I don't think we've even scratched the surface of what our opportunity here is -- we're now focused on selling value to our customers right at the point of entry from the front desk. We're offering a product called the Pizza and Picture combo. We get a large cheese pizza and either a picture of soda, beer, or margarita right at the front desk. It's a huge win for us. In the first 5 months of selling this product, we sold over $8.5 million worth of pizza and picture combos.

First of all, it's a great product. It offers a lot of value to the consumer. I think it's helping drive our NPS score higher, which is up year-over-year. But also, it gets the food out to lean faster when they order from the front desk, which means we get a chance to sell more food and beverage products during their experience with us. We've introduced platters for larger groups. 3 months ago, we launched 2 platters. It's a combination of some of our more popular products, feed a group of 8 to 10 individuals, 3 months' worth of selling platters, $1.3 million. We launched our craft Lemonade program. This goes on and on and on, and we're going to continue to launch innovative products. So we've seen great success with craft Lemones. We're now testing BOA iced teas and dirty sodas, which are really popular industry-wide. We're leaning into training. As you heard, we introduced a new VP of Field Training and Laura Cobos. We're going to empower our associates and our centers to become even better at sales. And fortunately, for them, they have a better product to sell.

So super encouraged. The numbers speak for themselves. We're not done. You're going to continue to see innovation and value offered to our customers with better sales tactics. I think that combination is going to really power this business.

Your next question comes from the line of Randal Konik with Jefferies.

Maybe give us some updates on the progress on the Lucky Strike rebrand. You mentioned in the press release, I think you're up to 74. Maybe give us some perspective on how much more you have to go and the timing and framing up of that, how the economics are looking, or the metrics are looking of the Lucky Strike's rebrands versus the balance of the chain? And just that would be super helpful to get some more color there.

Thanks for the question. This is Lev. So you're right, we're up to 74. We set a goal to be at 100 by the end of this calendar year. We're still on track for that. We anticipate being at 200 by the end of 2026. Again, really important step for us because, as you know, we've significantly increased our marketing spend and having the ability to focus our marketing spend across 2 brands, that being AMF and Lucky Strike versus trying to execute across 3 brands when you consider Bowlero is going to give us a lot of, I think, more value for our dollars in marketing spend. It will allow us to do more national campaigns.

Obviously, the economics bode well for that when you talk about pushing marketing across 200 Lucky Strike locations. I think we're also seeing a lot stronger F&B attachment at the Lucky Strikes. And in terms of the value of doing these rebrands, 2 of our strongest properties in the portfolio, that being Times Square and Chelsea Piers, they have both been rebranded to Lucky Strike, and they had very strong results. Times Square was up in retail revenue 36% last period. So it's resonating. And I don't think it's a mystery why, when you visit these properties, they're stunning. Obviously, the menus are better, the level of hospitality, the experience is top-notch. And so the more of these we do, I think the stronger our results are going to become.

Back on the events side of the business, I believe you talked about starting to turn. Was there also a geographic component? I think in the past, California might have been weighing a little bit on the events business as well. Just give us some perspective on just any geographic disparity in that area -- in that part of the business? And where do we see that kind of trending going forward?

Yes. So if we were not in California or Washington, we would have comped up low single digits for the quarter. California and Washington continue to see significant amount of Silicon Valley layoffs. We are leaning in. We are accelerating sort of marketing spend. We are accelerating sort of a go out and get the business mentality on the events side. So some of it is just that we have to kind of deal with this storm and weather the storm on massive layoffs, corporates are not going to have celebratory parties. We're leaning in. We're ultimately seeing the turn. The events business in New York, strong events business in Texas, Florida, strong, really is ex-California, we would -- the business would have better results and already very outstanding results.

Your next question comes from the line of Jason Ross with Canaccord Genuity.

I wanted to start with maybe some clarification on walk-in retail trends that you've seen, obviously, the comp, how it trended through Q1, and then what you've seen so far in October as well?

Yes, it's been positive. I mean we had -- in the summer, we had season pass. In October, we've seen mid-single digits on retail. So again, very powerful trend on the retail side. It really comes down to we are winning on retail, we are winning on leads, winning on food, we're winning on alcohol, we're winning on amusements. The acquisitions we've done are extremely accretive to the business on an inorganic basis. We just have to get through the comps on the corporate events business, which again, is an important part of the business this quarter, but it becomes much less important of a business when we go into the third and fourth quarter.

And you mentioned the inorganic piece. Wondering if you could just go out a little bit more about some of the performance of the water parks and sort of their first full season with you guys? And maybe what are some of the operational learnings after going through that full summer period?

Yes. So we have 2 water parks that we owned through sort of the full -- 3 water parks that we own through the full season, Raging Waves, Big Destin, and Shipwreck. It's a very interesting business because you make all of your revenue in 100 days. Our procurement F&B synergies are massive. We are learning to have more of the hourly workers. So it's a little bit of a different business model. But the thing that's been paramount is the consumer is responding to premium value, right? And what do we -- what is premium value? Like we're improving the food at Raiging Waves. And so food sales at Raging Waves were up 10% year-over-year. We brought in alcohol to Raging Waves, right? And that's obviously been a massive tailwind. But we're also delivering these guys value by having bring-a-friend days during the week and things like that.

So ultimately, these businesses are great. We did market raging waves with our -- the 20-plus property Bowling properties we have in Chicago that work -- and we're looking forward to next year, where we're going to have a pass that you can use at Ragging Waves and at our Bowling centers in Chicago, a capacity you can use at Boomers, Boca Raton and our Bowling alleys in South Florida. And so ultimately, that is the next part of our business.

When you look at the cadence of improvements at these water parks, I think the best comp for you would be to consider our Boomers locations, which fell into our comp in October, and we finished that month up good single digits. So we've had those, obviously, for a bit longer, which gave us an opportunity to improve the facilities, improve the game selections and redemption, improve the menu, improve the staffing and the training of the staff, and the results are there. So as an example, we just hosted a family fest event. It's sort of our grand reopening for the Boomers locations once we complete renovations. We hosted at our Boomers Irvine location this past Sunday. 4,000 attendees, the community couldn't believe the quality of the product, and we expect similar results with our other assets once we have a little time to improve them and run them the Lucky Strike Entertainment way.

Your next question comes from the line of Jeremy Hamblin with Craig-Hallum.

This is Will on for Jeremy. Most of my questions were answered, but just one on the debt refi, just how we should think of interest expense for the full year?

I mean it's $1.7 billion times 7% plus $60 million for the capitalized leases.

Your next question comes from the line of Michael Kupinski with NOBLE Capital Markets.

It's [ Juobuchler ] on for Michael Kupinski. My first question piggybacks off of a few other questions that have already been asked. But just curious about the relationship between food and beverage revenue and Bowling revenue, and Lucky Strike locations compared to Bowlero locations. And just curious how those ratios are trending and potential upside in food and beverage when all Bowlero locations have been converted to Lucky Strike locations.

It's a really interesting question, and this is Lev, by the way. And it's really hard to give you an answer because I don't think that when we went down this journey of enhancing our food program, I couldn't have imagined that we'd be at 10% in Q1 of this fiscal year. And we're not done yet. The innovation continues. We just finished the Board meeting yesterday, where we talked about the next wave of products that we're going to be introducing a bit of tasting. They're incredible. And what's important is they're restaurant quality, they're not quality for a bowling alley. So I don't think we've scratched the surface of our food and beverage program. I think you're going to see a lot less of our guests eating and drinking before they come, and certainly a lot less after they leave.

When you pair a quality product, a value offering, enhanced marketing of that product, enhanced training of our staff to sell that product, I think the sky is the limit. And that's just on the Lucky Strike side. I mentioned earlier, our league bowler headcount is up. So going into this fall flooring, we were up nearly 3,000 bowlers for our traditional leagues. We're also introducing a league bowler menu with items exclusive to our league bowlers, and we're marketing that league bowler menu, which we've never done before. And now we're adequately staffing our centers for the nights that the leagues are in. There was this legacy mindset that league bowlers were not big on purchasing food and beverage. So historically, the centers weren't staffed the same way for league nights as they were staffed for retail nights.

Well, we've ripped up that notion, and now we're staffing the same way. And we're seeing a response to that. So I mentioned earlier in the call, this is a real stat, 5 consecutive weeks where we've set an all-time high in food and beverage sales for the League Buller menu. I don't think we've scratched the surface there yet as well. So the league bowlers are responding. They're cost-conscious. But when you give them value, they gravitate towards it. So this league bowler menu is performing really well. The staff on the floor are selling. They're making more money. They're happier. It's a win-win, and I think we're going to get it on both sides at our traditional centers with the league bowlers and at our more experiential Lucky Strikes.

So I'll give you some stats. Last quarter, locations that are branded Lucky Strike had 50% higher F&B to Bowl revenues than the Bowleros and AMS. If we are able to normalize that, that's a $125 million to $150 million pickup.

And then my next question, I'm just curious if you could talk a little bit about the promotional activity outlook. Just curious if there are any large promotional offerings planned over the winter months. I know the Summer Pass generated strong results. So just curious if there's anything like that planned over the winter.

Yes. So we're seeing promotional environment slow down. I think it was a race to the bottom last year with some of our competitors, and they've realized how much that's hurt their business. So we're seeing the benefit of that pulling back. We continue to be very tactical. Online, you generally have to offer some sort of call-to-action promotion to drive purchase. But we're being a little bit more tactical about that. We'll have a Black Friday sale. Maybe we won't have a sale in the first few weeks of December, where our lanes are 100% utilized for events.

Your final question comes from the line of Eric Walt with Axis Capital.

Just kind of want to follow up again on the -- 2 questions. One -- first one kind of follow-up on the F&B side. With the food up 10% in the quarter, you mentioned versus 1.4% for overall retail, how much of that was price versus general improvement in attachments across the various cohorts? And how much room do you think you have to raise F&B prices from this point forward? And remind us does -- I'm sorry, long question, but remind us, does the 1.5% comp guidance for this year, does that include any assumption of taking price on F&B?

So in the quarter, we took no price on food and beverage. So that performance is purely attachment. Now as we roll out new products, I wouldn't call it taking price, but if the price will match the quality of the product we roll out. So naturally, some items will raise the ticket averages for us. But those assumptions do not take price into consideration at all. So any price that we take will just supplement the assumptions.

And the last question, kind of obviously, with the big start to the year, the major acquisition, and then kind of the real estate purchase as well, how would you frame kind of the focus for the remainder of this year? I mean, obviously, I assume you'd be opportunistic if something does come up, given the environment in, but is this still a year of an M&A focus? Is it shifting a little bit more towards organic, given what you did at the start of the year? And then how much needs to be invested in those acquisitions that you did at the start of the year, as they kind of come on board?

Yes. Great question. We'll spend $95 million on acquisitions right now. I -- you never say never, we'll always be opportunistic. Right now, we're seeing the highest returns internally, whether it's marketing spend, whether it's F&B, whether it's a lot of these specials and bundles we're selling at the front desk. We are very focused on driving free cash flow right now. So unless the deal is a home run, I don't think we would do it this year. Also, as you can see, we reported $26 million of CapEx. I think we'll come in below our guidance this year for $130 million of CapEx as we really focus on internally.

To your question about acquisitions, the acquisitions we've done and the CapEx that's needed, there is a few million that's needed in North Carolina. There's a few million that's needed in L.A. We have a commitment to spend a certain amount in L.A. every year. The rest of the acquisitions, we're digesting right now, and we kind of want to see what is the opportunity there. There is some opportunity in amusements, but that's a few million here and there. So really, right now, the focus is organic.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, and welcome to Lucky Strike Entertainment's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Robert Lavan, Chief Financial Officer. Thank you. Please go ahead.

Good morning to everyone on the call. This is Bobby Lavan, Lucky Strikes Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike's Fourth quarter 2025 earnings.

Today, we issued a press release announcing our financial results for the period ended June 29, 2025. A copy of the press release is available in the Investor Relations section of our website.

Joining me on the call today are Thomas Shannon, our Founder and Chief Executive; and Lev Ekster, our President. I'd like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them.

Forward-looking statements are also subject to the inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the SEC.

Lucky Strikes Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website.

I'll now turn the call over to Tom.

Good morning. I am Thomas Shannon, Founder and CEO of Lucky Strike Entertainment. We closed fiscal 2025 on a high note, navigating a turbulent year with resilience and delivering 4% revenue growth despite headwinds in our off-line mostly corporate events business.

This summer, we sold more than 260,000 summer season passes and generated more than $13.4 million in pass revenue. Our record-setting season pass program boosted guest visits and also drove meaningful retail spend through targeted value-oriented specials. Pairing high-quality experiences with compelling value is working. Same-store sales strengthened sequentially in each month in the fourth quarter and turned positive in July.

Combined with the momentum from our Boomers integration and other recent acquisitions, July delivered double-digit total revenue growth year-over-year. In late July, we were excited to announce the acquisition of two iconic water parks. Raging Waters Los Angeles in San Dimas, California, which is the largest water park in California and Wet 'n Wild Emerald Pointe in Greensboro, North Carolina. alongside three well-known and high-performing or high-potential family entertainment centers, Castle Park in Riverside, California, Boomers Avista, in Vista, California, and boomers in Palm Springs, California.

Collectively, these destinations welcome more than 1.5 million annual guests and further expand Lucky Strike's leadership in our three verticals: Bowling, water parks and high-quality family entertainment centers. This acquisition is a bold step forward in our strategy to build the premier location-based entertainment platform in North America.

We are ambitiously investing in water parks, family entertainment centers and next-generation bowling concepts. And in early July, we acquired the real estate underlying 58 of our locations across the country for $306 million. By acquiring this real estate, we maximize our flexibility to optimize our capital structure and location footprint.

The purchase price highlights the long-term attractiveness of the stable and growing cash flows of our individual locations and highlights the option value of owning these assets. The transaction is immediately accretive to earnings and cash flow. Simultaneously, we are strengthening our leadership team and scaling marketing investments, ensuring we capture the full potential of the markets where we operate.

The path forward is clear: sustained growth, elevated guest experiences and market leadership. We remain firmly on track to deliver another year of strong growth both organically and through acquisition.

With that, I'll hand it over to Lev Ekster, our President, to share the exciting organic initiatives ahead. Lev?

Thanks, Tom, and good morning, everyone. Fiscal '25 was a transformative year for Lucky Strike entertainment, and we're carrying that strong momentum into fiscal '26. One of the major highlights this summer was our wildly successful season pass program.

Membership grew to over 260,000 members, up from 190,000 members last year. Sales exceeded $13.4 million compared to $8.5 million in the prior year. This growth was driven by an incremental marketing spend, applied dynamically each week to the best-performing channels and reinforce with employee engagement tools such as sales trackers, sales contest, and new training videos to sharpen best practices.

The program has been extremely well received by our guests, and we plan to continue optimizing it moving forward. We continued to execute on our plan to grow food and beverage attachment.

As we've been discussing throughout the year. Food revenue delivered positive 2.5% same-store comps. Alcohol comps were negative 2.7%, and while negative are improving and still better than the overall comp. We saw acceleration coming from the alcohol-free category through innovative releases like our new craft lemonade, which I'll speak more to shortly. We've introduced a new stage gate process for every venue release. It includes training videos for associates, sales trackers and full marketing support, including in-center, social, web and increasingly through influencer campaigns.

On the menu side, combos and platters continue to perform well, including pizza and picture combos and new platters for bigger groups, including the epic wings and fries platter and the ultimate sampler. Works offerings with new options to meet customer demand, like a pizza and margarita picture combo, and a Taco flight and bucket of Corona combo.

At the same time, we're launching new trend-driven menu items to stay relevant, such as the honey chicken bowl, strawberry poppy salad, a chopped chicken caesar app and a trio sliders with kings hawaiian buns.

In our water parks, we're unifying concessions and rolling in Signature national partners as well as leading lemonade and ice cream concepts. In our Boomers family entertainment centers, we've enhanced the food program with a streamlined higher-quality menu, new marketing graphics and upgraded items such as burgers, wings, cup sandwiches, improved pizza and healthier grab-and-go options.

On the beverage front, innovation has been a huge win. Our new crap limited featuring three flavors sold 135,000 units in the first two months since launch, generating nearly $800,000 in sales. We're now on pace for a $5 million annualized run rate. A seasonal fall flavor will be introduced soon.

Beyond that, we launched Energy mocktail with Red Bull. We're expanding our zero approved cocktail program, and we're rolling out shareable drinks in our experiential locations. Looking ahead, a major focus is strengthening our sales and hospitality culture.

On sales, every new program now comes with a training video supported by sales trackers and contests. This fall, we'll roll out our new LMS platform to enhance associate training. And just last month, we launched the winner circle, an Evergreen in-sensor contest where entire teams are rewarded for comping up in controllable revenue categories.

On the hospitality front, our Net Promoter Score is climbing, and we're leading it hard. We're creating a national field trading team, launching enhanced guest service training and sending senior operators to executive education programs. We're also rolling out a quarterly team building initiative to boost morale, camaraderie and tenure across the organization.

Finally, in marketing, we're increasing the budget to move closer to industry benchmarks. We're bolstering the team with top-tier talent, and we now see a tremendous opportunity to capture additional market share, especially as our rebrand initiative accelerates. We're already at 55 Lucky Strike locations and we expect to reach 100 locations by year-end.

With that, let me hand it over to Bobby to discuss the details of our financial results.

Thank you, Lev. In the fourth quarter of 20 we delivered total revenue of $301.2 million and adjusted EBITDA of $88.7 million. This compares to $283.9 million in revenue and $83.4 million in adjusted EBITDA in the same period last year. Total revenue grew 6.1%, while same-store sales declined by 4.1%. Same-store sales improved sequentially each month in the quarter as well as into July.

Breaking down performance by segment. Our retail business remains steady. Our lead operations experienced low single-digit growth, and our events business faced a high single-digit decline. Adjusted EBITDA for the quarter came in at $88.7 million, with same-store sales driving an $11 million headwind to the bottom line.

Offsetting that were improvements in payroll in the amount of $5 million and reductions in repair and maintenance supplies and services costs by an amount of $2 million. Boomers in our two new water parks added $7 million in EBITDA. Geographically, California, which accounts for approximately 20% of our total sales contributed $6 million to the same-store sales decline, which we have spoken about in previous quarters. This was offset by strength in our F&B offerings, both outperforming the same-store comp in the quarter.

During the quarter, we deployed $24 million in CapEx, down from $47 million last year as we drove procurement efficiencies and focused on high-return projects. In the quarter, we spent $13 million for growth initiatives, $1 million on new builds and $7 million for maintenance. For the total year, CapEx was $117 million, including a $9 million land purchase down from $195 million last year.

Post the quarter close, we acquired 58 properties that we are the tenant on for $306 million. Those properties were carried on our balance sheet at year-end with $33 million of operating liabilities and $269 million of finance leases.

In FY '26, you will see lower GAAP rent expense of $3 million and capitalized lease expense of $21 million from the transaction. We remain focused on delivering profitable growth by driving revenues, expanding operating cash flow and increasing free cash flow, including free cash flow per share.

For fiscal year 2026, the company is issuing the following performance guidance. This outlook reflects attractive growth supported by organic operating leverage and increased investment in high ROI revenue-generating initiatives. We expect total revenue growth of 5% to 9%, which implies $1.26 billion to $1.31 billion of revenue, which delivers $375 million to $415 million of adjusted EBITDA.

Our liquidity position remained strong at $342 million with $60 million in cash. Net debt at the end of the quarter was $1.3 billion, and our bank credit facility net leverage ratio was $2.9 billion. We appreciate your continued support and look forward to seeing you at our new properties soon.

Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Steve Wieczynski from Stifel.

[indiscernible] Steve's associate. So as we exit a somewhat choppy fiscal 2025, the setup for 2026 looks a lot more compelling with momentum going in the right direction and a few meaningful tailwinds in play. However, the midpoint of 2026 EBITDA guidance is the same as our suspended 2025 guidance, which strikes us is conservative. Wondering if you could maybe walk us through some of the assumptions embedded in the new targets and then maybe what drove your decision to go back to giving guidance so quickly after pulling it last quarter?

Yes. So I mean, first and foremost, July was positive from both an organic basis and double digits on a total basis. So we're confident after seeing some very choppy numbers in sort of the first half of this calendar year came back. The guidance integrates sort of two sort of new components to our business.

So one, we are investing more dollars into marketing and that will flow through. And then two, the assets that we purchased at the end of July are negative for the first 3 quarters of the year and then they flip positive in the June quarter, and makes a bulk of its earnings in the July, August, which flows into fiscal '27.

Got it. That's helpful. Just sticking on guidance for a second. Could you help us a little with how you see the cadence playing out between the quarters as we progress through fiscal 2026? You've got the new water parks in system, which you mentioned and ramping. So there should be some changes in seasonality.

Also have corporate events becoming a bigger contributor in the second and third quarters, but lack in weakness in 2025, just trying to get a sense of the puts and takes and if there's anything we need to watch out for in terms of timing.

Yes. So we'll have good double-digit growth in the September quarter and the fourth quarter will be $10 million to $20 million higher than the second quarter. So that should kind of get you to where the cadence is.

Our next question comes from Randy Konik from Jefferies.

Quick question. I guess, Bobby, kind of walk us through your thought process on the events side. You gave us good color on the impact of California as well. Just kind of give us that kind of playbook on where do we kind of see it over the coming quarters, the events side kind of inflecting and then just on the state of California kind of impact there and how that kind of plays out as well over the coming quarters?

Yes. So from a cadence perspective, the comp gets very easy starting in September. And so we're seeing -- the business has improved. We had our best month in off-line events. Last month, it's still down. But ultimately, as long as we keep tracking the 2-year stack, that business can go flat starting in end of September into October.

The one thing that we're trying to lean into is historically, we've spent -- we've been under-indexed on marketing spend. We are building that team, ramping that spend and we're putting a portion of it towards the off-line events business, we're targeting and using our warm leads to kind of grab market share. is core to that business getting to flat and ultimately inflecting up.

Great. And then maybe for Tom, you've shown a really great ability, obviously, on the bowling side to find assets and lift their profitability dollars, their EBITDA dollars and we find great returns, et cetera. As you approach the portfolio and you add to it around water -- you add water parks and family entertainment centers.

How are you approaching the business the same or different from how you run the bowling business. Just give us some insights on kind of things you take from the bowling playbook and apply to the water park area, the family entertainment sensor area where it could kind of -- you could get some synergies or just kind of use the same playbook to drive incremental profitability in these businesses you acquired?

Well, Randy, it's largely the same playbook, right? It starts with making the asset nicer. One of the reasons that we're buying these assets in some cases at 2x forward EBITDA is because they've been neglected and unloved or, in some cases, we're buying assets out of bankruptcy for no good reason.

The businesses are fundamentally strong. There's a lot of consumer demand. The replacement cost of these things is usually a multiple of the purchase price. And so it starts with making the asset physically better. We clean it up. We put in new games, we repaint stuff. We fix any deferred maintenance items. And then we execute our playbook of enhanced food and beverage.

We focus a lot on package pricing because you'll have multiple elements at, say, at Boomers, there'll be GoCarts [ meal ], bumper boats, batting cages and maybe ride elements. And so getting the come for the day, price right, it's very similar to an amusement part. So pricing and now marketing. Bobby mentioned marketing, but it's important to realize that our marketing spend had winded to under 1% of revenue, which was just not enough.

And so we're investing in building a marketing team a world-class marketing team that will be able to deploy whatever it is we decide the budgeted marketing number should be, but then brand building with those dollars on the Lucky Strike brand, the AMF brand, which we're going to rejuvenate the Boomers brand, which is relatively nascent for us and then the individual water parks. But to sum up, the playbook for the water parks and the FECs is the same as it has been for bowling.

Can I ask one last follow-up. If you had a crystal ball let's say, 5 to 10 years from now and you think about the portfolio construction and how, obviously, the last 5 years, obviously almost exclusively bowling. If you kind of think about the pie chart, bowling, water parts, FEC, what kind of do you think about the, first of all, looking like the pie chart looking like, let's say, 5 to 10 years from now?

From a revenue perspective?

Just from a bowling versus water part versus FVC revenue perspective, unit, et cetera.

I would say that you would probably end up with 40% bowling, 40% water parks and 20% FECs. If I had to -- yes, I've never really thought of this question before, but the thing about the water parks is they're much larger than the other assets. And so you don't have to do nearly as many deals to get to large revenue numbers.

For example, we're about to close on Raging waters in at San Dimas, which is outside of Los Angeles. And that's a part that in 2024 did $24 million versus our average bowling unit volume of about $3.4 million, right? So about 8x.

So you can see how you could scale that business more quickly. But I view this as ultimately becoming sort of a mini Disney. It's funny because I don't think our business gets nearly the respect it deserves, but Disney is going all in on water -- or sorry, on theme parks, including water parks.

They're spending $60 billion of CapEx in that business, and that is driving our profitability overwhelmingly as the legacy media business declines. So Disney is leaning heavily into the same business that we're in, that we're heavily leaning into, and I think that's underappreciated in the market. Just how good these assets are, just how we're replaceable these assets are and that you're buying them at a fraction of replacement value or in many cases, they could never be built again.

Our next question comes from Jason Tilchen from Canaccord Genuity.

Two for me. The first is -- just sort of little bit of a follow-up on the comments around marketing investment. Just wondering how much of this acceleration in comps. You've seen over the past few months, you would attribute to maybe early results from those marketing investments and how much of an increase maybe from a quantitative perspective is sort of contemplated within the EBITDA guidance that you've put out today?

This is Lev. I'll give you a quick example. You saw the results of our summer season pass program. Last year, we did $8.5 million this year, $13.4 million. That came with a $1 million incremental marketing increase. So we can see those dollars really driving results for us. And we look at holistically the entire business the same way. We've really underinvested almost to an anemic amount in awareness, marketing and brand building, we've really focused on performance marketing.

And I think the market opportunity right now really affords us an ability to gobble up a lot of market share with increased brand building and awareness marketing. So we want to get much closer to industry benchmarks. Those are 3% plus, maybe we get to like the 2.5 range, but it will be a significant increase to what we've been spending over the years.

Very helpful. And then second one for me, maybe one for Bobby. Wondering if you could -- I noticed you filed a shelf registration this morning. I wondered if you could just share a bit more about how you're thinking about that decision and maybe some of the background there?

Yes. So we haven't added shelf on file since we IPO-ed in December '21, it's purely housekeeping it's good housekeeping to have a shelf on file. We did raise a bridge loan in July to effectuate the repurchase of 58 properties and to pay down that bridge loan, we have been looking at sort of the unsecured debt market.

We had to put that shelf on file to be able to hit that market. The debt markets are on fire right now. But we're still evaluating what our opportunities are there, but there's nothing really planned other than hitting debt markets at this point.

Our next question comes from Ian Zaffino from Oppenheimer.

Would you be able to tell us the magnitude of the cadence in the quarter, as far as how much maybe was April down? And how much did it recover? I'm just trying to get a sense of the ramp during the quarter? And then also just one more question about the quarter, is aside from California, are there any other pockets that you're kind of seeing of any weakness and -- because I think some restaurant companies have called out DC, New York and just kind of trying to understand what you're seeing?

Yes. So April was minus 6%. May was minus 3%. June was minus 1 in July was better than plus 1 and August is trending similar. So again, the cadence is everything that we've kind of committed to. We're pretty happy in the comps, by the way, for -- you guys know the comp for last year was very strong in the tough ending quarter.

The comp for August is very tough. So we're very happy with sort of the recent performance. From a pockets of weakness. It's all about California. New York is looking good. Now New York is one of our home markets. It's where the company started. We have been leaning into marketing, testing in New York. So I get a lot of feedback from people in New York who see our ads, it's working. So New York is comping positive at this point.

Ultimately, California gets a lot easier from a comp perspective, but we're also very focused on inflecting the 2-year there positive. We think that, that is coming in the next few months.

Okay. And then as a follow-up, I just wanted to touch on the F&B side of it. Kind of I guess, mixed signals. And maybe help us understand, is this alcohol thing a trade down to reduce the bill size? Or is it people are truly trading into nonalcoholic options and that's a demographic thing. What are you actually seeing there? And any kind of thoughts?

Yes. I think it's unpredictable where society goes with alcohol consumption. We obviously noticed it was softening and rather than just accept it we lean into innovation in the non-alcohol category. So we launched our first ever craft lemonade program and the performance was incredible. So we're going to keep leaning into that.

Now that's not to say that we're not going to focus on our alcohol program. We have new signature cocktails launching at the end of October. But innovation has been working for us, and I think we've proven with food and alcohol that were a real option for our guests to eat and drink at our locations.

And that's why you've seen food and alcohol outperform the overall comp. So I look back in preparing for this call, last Q4, we set out as a major goal to lead into food and beverage attachment. And I think we've proven out with these results in the last fiscal. I think we're realizing that we can do this through marketing through enhanced employee training, through innovation on the food and beverage side through offering value to our consumer in the form of combos and platters that are seeing a great attachment.

And I think we still have a lot more upside in this program, especially as we convert more Bowleros into Lucky Strike inherently, Lucky Strike just -- it's entertainment concept, and I think eating and drinking there is a lot more accepted than at a bowling alley and we're seeing really outside results there.

Our next question comes from Michael Kupinski from Noble Capital Markets.

Most of my questions have been answered, but I do have a couple here. In terms of location operating costs, they were a little elevated in that quarter. I know there's some seasonality there, and I know that you acquired 58 properties and there's obviously some variances with the parks that you've acquired. I was just wondering, can you kind of give us a trajectory in terms of where you think that is because in the quarter, it was represented about 38% of total revenues. I was just wondering what you think that trajectory might be on an annualized basis?

Yes. So in the location operating cost is a $21 million noncash charge. So you have to back that out to kind of get back to sort of normal. So really, ultimately, the percentages are going to be highly seasonal, but it will run where we've been historically over the year.

Yes, once you back that out, but it's a little bit elevated, but you're saying that it would be more in the trend line of historic numbers then. Okay. And then in terms of your marketing spend, I kind of want to look back, strangely in the last quarter, Topgolf for any campaign that targeted bowling customers and was kind of odd that I thought, did this campaign have any effect on your customer base? And are there similarities between targeted demographics between golf and bowling and do you believe that maybe your efforts to move towards upscale dining options or bowling centers that had an impact on traditional customers? I was just curious.

Look, I think, first of all, very few people saw that ad. In fact, I believe after they posted it, they had to take the commons off because they were more so negative towards Topgolf than us. I think I might have backfired and it felt a little desperate. So we don't want to really play in the dirt with them.

I just think you should look at their specials and basically giving the product away at this point. It feels like a fire sale. I think the experience is probably lackluster at this point, and we're very much focused on our business and our product, which we was obviously superior, and I think the results show that as well.

Our next question comes from Eric Handler from ROTH Capital Partners.

Bobby, just wondering if you could sort of drill in a little bit in terms of the guidance revenue range that you have sort of what is that implying for same-store comps versus sort of your new builds and acquisitions?

Yes. I mean it implies a positive comp. There's a range between sort of 1 and 5. Right now, we're trending well on that. But ultimately, we want to get to event season before we get more excited about the organic for this year.

Got it. And then as far as the -- Bowlero, the Lucky Strike transition, can you maybe give a sense of what type of financial lift you're seeing as the transition occurs?

Yes. I mean we -- it's still early. We're at 55 lucky strikes at this point. We'll be at 100% by year-end, and we'll sunset the Bowlero brand by the end of next calendar. We invested in marketing in New York, but we also rebranded Chelsea Peers in Times Square, and those centers are comping up. right? So it's a fee change in the business.

The California is still to kind of be rebranded. So sort of as California rebrands, it should create this lift for California. But ultimately, we're getting a lot of trial. But ultimately, the proof will be in the pudding when we get out of sort of summer season pass and we see the organic list happen, which we expect to be a good move to the business.

Our next question comes from Jeremy Hamblin from Craig-Hallum Capital.

So I wanted to drill down a bit on cost structure and also just CapEx kind of non-acquisition CapEx expectations for FY '26. That's question number one.

But two, Bobby, there's been a pretty dynamic change in terms of how the cost structure is presenting now with a higher mix of FEC and water parks. But you've really done a great job of controlling your corporate spend, your SG&A. And so I wanted to just see if you could provide a bit more color on how we should be thinking about kind of COGS throughout FY '26? Historically, that's kind of peaked in Q3, but now with the FCC's water parks, presumably maybe Q4 might be your highest. And then just thinking about where your baseline SG&A expense run rate is at this point.

I mean, Q4 was pretty low. Can you help us provide a little bit of color on that?

Yes. So on the SG&A side, where we were for the fourth quarter is what you should run through for the rest of the year for the fiscal '26. We've done a lot of cost cutting. We've done a lot of streamlining. We will be investing in marketing. Marketing flows into the location operating costs. So you'll see a $10 million to $15 million lift there.

Ultimately, as we build out our hospitality culture I think that the payroll benefit cost line will grow some. But ultimately, from an organic basis, there's going to be good incremental 50% plus on the positive comp. The drag, as I talked at the beginning of the call, is that the boomers assets and the water parks, they run negative for most of the year, and then they dramatically over earn, they get to 50%, 60% EBITDA margins in the summer.

And so ultimately, as you sort of model that out, you will see that on a revenue basis, fourth quarter ends up being stronger than second quarter, but you're still going to have a lower EBITDA relative to the second quarter because you're having those negative months in April, May. We have a big positive month in June.

But I think what gets really exciting is the profitability flow-through that happens in the September quarter.

Got it. What is the total annualized cost to operate Boomers?

Boomers right now is running close to a 25% EBITDA margin. And excluding the water parks, it's about $40 million of revenue. We think we can get that up over the kind of the months. But ultimately, we've gone in, invested in processes, systems, rise, maintenance and ultimately, the customer is responding to that.

Got it. And then kind of the non-acquisition CapEx guidance for FY '26?

Yes. So it's about $130 million. So it's going to be down from where we were this year as we continue to kind of streamline activities, we're really only focusing on high ROI initiatives. So we're going to continue driving CapEx down.

We have no further questions in queue. This will conclude today's conference call. Thank you for your participation. You may now disconnect.