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Greetings. And welcome to Bowlero First Quarter Fiscal Year 2024 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your holds and turn the call over to Bobby Lavan of Bowlero. Please go ahead, sir.

Thanks, operator. Good morning to everyone on the call. This is Bobby Lavan, Bowlero's Chief Financial Officer. Welcome to our conference call to discuss our first quarter fiscal year 2021 earnings. This morning, we issued a press release announcing our financial results for the period ended October 1, 2023. A copy of the press release is available in the Investor Relations section of our website. Joining me on the call today is Thomas Shannon, our Founder, Chief Executive and 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 on certain 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. Bowlero 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 that are most directly comparable to each non-GAAP financial measure discussed and a reconciliation of those differences between each non-GAAP financial measure and its most directly comparable GAAP financial measure can be found on the company's website. . I'll now turn the call over to Tom.

Good morning. And thank you for joining us today. I am Thomas Shannon, Founder, CEO and President of Bowlero Corporation. First quarter fiscal 2024 met our expectations. We worked hard during the seasonally slow first quarter to optimize dynamic pricing, began the journey of proactively selling in-center by building a sales culture and cross 350 centers in our fleet. Before I jump into my prepared remarks, I want to thank the 10,000 associates in our centers. The first week of July, our same-store sales comp was positive. We then began to tinker with price and find upsell opportunities. To simplify building a sales culture, we started with a one-size-fits-all program, upselling the third game of bowing for $5 and providing a $5 gift card. We removed Summer Games, a family program that was worth at least $6 million of revenue in the period. We also pulled midweek fixed-price All You Can Bowl specials that were traffic drivers. The changes drove wallet share pickup in our premium times of Friday and Saturday. However, the midweek customer did not like that offer. By Labor Day, our comp was down double digits with Monday through Thursday dramatically worse. We reversed course on pricing midweek. And in the second week of October, our same-store comp had returned to being positive. I love this dynamic as I built Bowlero to serve all customers. And we learned that when you have a business that runs 7 days a week, serving consumers nationally from all classes of life, everyone is looking for something different. We are continuing this journey to fill our lanes and provide our customers what they want when they want. Some consumers want All You Can Bowl during the week where they have a fixed price to entertain their family. On the weekends, a different subset of consumers is willing to pay more, still at a better value than the night out at a restaurant and a movie. Customers want to be entertained on their schedule. And as we have done so for 27 years, we will continue to deliver. Our total business is up 61% over first quarter 2019, 61%, and our comp is up 29% over first quarter 2019. In the first quarter, we saw volatility with our tempering with pricing, but that will only help into the rest of the year and the years to come. We learned a lot and we will continue to optimize price and maximize revenue and earnings dollars with our efforts. Our shining star is our events platform. This fiscal quarter, first fiscal quarter of 2024, events comped plus 9%. Leagues, which started in September, comped 12%. Events is up 77% and leagues is up 15% from 2019. The resiliency of our model is in those results. This quarter, we crossed 350 centers, and I am very happy with the integration of Lucky Strike. They are fully on our proprietary events CRM, and we are already seeing the benefits of our world-class events team on their higher-end customer profile. We also opened a new facility that we built in Valley Fair Mall in San Jose, California, and the early results underscore the 40-plus percent cash-on-cash returns we are getting from new builds. We currently have 10 new builds in the pipeline. Bigger is better as we push higher average unit values into our business model. The long-term formula of double-digit revenue and earnings growth is proven and intact. Bowlero is evolving and getting more insightful every day. We have established a flywheel in our business that will enable us to compound top line growth over the long term, fueled by self-funded reinvestment. As recently announced, we entered a partnership with VICI that started with a sale-leaseback of 38 properties for $433 million. We paid approximately $150 million for those properties. The pipeline opportunity for more sale leasebacks is in the 100 to 200 US locations, which we believe will generate incremental returns and underscore the self-funding model we have for acquisitions. Our scale and credit worthiness are unique in the out-of-home entertainment space. I will now turn it back over to Bowlero's CFO, Bobby Lavan, to provide more details on the quarter's results. Bobby?

Thanks, Tom. In the first quarter of 2024, we generated total revenue ex service fee of $225.8 million. Last year, we reported $225.3 million of comparable revenue. As a reminder, service fee revenue is a mandatory tip passed through to the employee, a non-contributor to earnings and being phased out. Revenue excluding service fee revenue was up 0.3%. Total bowling center revenue was down 0.7% and our comp was down 5.5%. The comp down 5.5% is slightly below our previous guidance of down 5%, mostly due to a $1 million timing issue that we picked up in the second quarter. We hit our internal EBITDA budget. As Tom discussed and we previously disclosed, we used a seasonally low first quarter to test price changes in the centers. We started the quarter off with positive comps, but by early August, we had hit almost minus 8% and the second week of September was minus 12%. We quickly reversed course and the trend line would have been greater other than flooding in New York that also comped Hurricane Ian in 2022, a negative perfect storm in the last week of the quarter. October has been very resilient with us getting positive in the second week of October. The traffic data that some of our more active investors look at will appear volatile on Halloween with the timing of Halloween being negative, but we will get a positive benefit this year with the earlier Thanksgiving extending the holiday season. Adjusted EBITDA was $52.1 million compared to $65.3 million year-over-year, a delta of approximately $13 million. We did not pivot to center cost structures to savings mode in the quarter as we are forecasting a strong holiday season as seen returns on our people investment. As a reminder, second and the third quarter make up 70% of our annual EBITDA. Comp revenue was down $12 million and payroll in the comp centers was up $2 million. Utilities is seasonally high by the tune of $3 million in the quarter. Corporate expenses are down year-over-year, while we continue to invest in our event sales team. Non-comp centers contributed $4 million of EBITDA on approximately $10 million of revenue in the quarter. First quarter had $208 million of comp revenue, and the second quarter comp revenue should be up approximately $50 million in revenue sequentially. With the cost structure in place, that should almost entirely fall to the bottom line. Additionally, we have $40 million of revenue from acquisitions that are starting to flow through in the quarter. The company expects second quarter fiscal year 2024 to have revenue ex service fee of $295 million to $310 million and adjusted EBITDA of $100 million to $110 million. We will continue to cut costs at corporate. In the quarter, events comped plus 9% and leagues comped plus 12%. Leagues floor mid-September and weekly revenues go from about $1 million in the summer to $2.5 million a week until the end of March. The timing of this and the results once we start gives us incremental confidence in the second and third quarter. The corporate events business is strong, with our top 50 bookings being up year-over-year for December. The smaller bookings start now and right up until the day of the event if we have space. In the quarter, we spent $24 million on growth CapEx, $11 million on new builds and $10 million on maintenance. We spent $126 million on acquisitions, and we repurchased $130 million of shares in the quarter. We will continue to have a balanced capital program as we are confident in our combination of growth and shareholder return. As we announced on October 19, we entered into a partnership with VICI Properties to accelerate our self-funding sale leaseback strategy. We have put a slide together in our investor deck, but the story is straightforward, underpinned by Bowlero credit. We buy centers with land 4 to 7 times EBITDAR. We implement our proprietary tools to improve EBITDAR margins within 90 days, and then we look to sale leaseback half of the EBITDAR for multiples of 12 to 15 times. Once completed, we have created on average $10 million of value per property net of purchase price, and we project we can do this more than 100 to 200 times. That is a lot of value creation only we can do. Post the VICI transaction, we have 8 unencumbered properties and will focus on acquisitions with SLB type characteristics. One topic that has gotten airtime is the capitalization of our leases and how that should be viewed by the Street. When we enter into leases, they are long-term leases. The VICI lease is 50 years. The capitalization of such leases is done at a significant multiple of current cash lease costs. This compares to a company that might have a month-to-month or shorter. Our method looking at leverage is net debt to EBITDA annualized for acquisitions less capitalized cash lease costs. We gave a lot of disclosure on this in our 10-Q under cash paid for amounts included in the measurement of lease liabilities. Pro forma for the VICI acquisition, we have approximately $930 million of net debt. FY 2024 EBITDA midpoint is $385 million. There are about $50 million of acquisitions and new builds that you should annualize less $41 million of cash interest rent and $31.6 million of VICI rent. This gets you to 2.8 times net leverage versus our target of 3. We will continue to manage leverage conservatively, especially into the unknown macroenvironment. In closing, we have several exciting initiatives underway and are continuing to evolve and innovate. We are prepared for the oncoming seasonal high period and have the right team and structure to execute. Now let's turn it over to the operator for questions.

[Operator Instructions]. Our first question comes from Matthew Boss of for J.P. Morgan.

Congrats on the inflection mid-quarter. So maybe, Tom, could you elaborate on the test and learn approach. Maybe what was the sweet spot to drive the inflection to positive comps in mid-October. And any differences with walk-in retail demand versus events? And just tying in the lift from conversions that you have on tap, how best to think about same store sales moving forward in your view?

Well, what we learned is that there's basically two types of customers. There's the weekend customer where we have a meaningful opportunity to upsell. And that's not exclusive to the weekend, but largely weekend. And then there's the more price-sensitive customer who was used to getting a better deal, right? So an All You Could Bowl special or a cheap game price, underpriced food and beverage relative to normal retail pricing. Based on the amount of volume that we had coming out of the winter and into the spring, we thought we could get really aggressive on price. And so, we simultaneously increased the upsell opportunities, which we're able to capture on the weekends, and eliminated a lot of the lower-priced offerings. That increased revenue on the weekends, but decreased revenue during the week. So, basically, what we did is we went back to the promotions that we had during the week. We tinkered with them, modified them in ways that made sense, reinstituted them pretty much everywhere and have continued to add other upsell opportunities on the weekends, like pizza and pitcher and other things like that, that are bundles that are meant to increase customer spend in-center. And we got back to same-store comp, positive comp by the middle of this month, October. So what we learned is that there are customers who are more price-sensitive and there are customers that are less price sensitive. I think we hadn't fully appreciated the difference, but now we know. And that's an important realization because knowing the consumer mindset enables us to really optimize the model going forward. As I mentioned in my remarks, the league business has been up high-single digits. The event business has been up double-digits for a very long time. So those are sort of our pillars of strength. They're also weather independent, right? So people are making those decisions well in advance of the day of coming in. And so, when you have things like long, dry summers with no rain and then comping a widespread weather event like we had last year where there was a lot of rain in the Northeast with not that and then you have this sort of one-stone generation flooding in New York where everyone canceled their events, we had a lot of weather headwinds. I think that is partially reflected in the retail numbers, but not in the overall strength of the customer or strength of the business. The fact that the league business and the event business is so strong, I think, gives you an indication of how strong our business is and then the retail business will have a lot more volatility based on things like weather. However, we're seeing now a consistently positive either down a little or up a little as we move into our busiest season. I think it bodes very well for us for the rest of the year.

Bobby, maybe could you speak to health of the balance sheet today? How would you rank capital investment opportunities from here? And just what's your level of visibility to the unit pipeline for the next 12 months as you think about acquisitions versus new builds?

The balance sheet is very healthy. We have more than $200 million of cash, $225 million undrawn revolver that we're looking at upsizing to be more closer to 1 turn of EBITDA. So the balance sheet is very healthy. We got the VICI deal done, and we are evaluating accelerating on new builds. We think that the math is right for conversions. The math is right for acquisitions, but new builds are just coming in that much stronger. So we are looking at accelerating. Right now, we've got four that we're doing this year, but that could increase dramatically next year. So the visibility on new builds is good. I'll let Tom comment on sort of the visibility on M&A.

The pipeline is very strong, as strong as it's ever been. So we are doing more new builds now than we've ever done. We opened Valley Fair about two months ago. We are about to open Moorpark, which is Simi Valley north of LA in – so that will open in late November or early December. Miami World Center will open in February. We are about to start construction in Beverly Hills, two locations in Denver, Ladera Ranch, which is Orange County, California, and then we've got a handful of others behind that. So we've never had so much new build activity, which is great because our new builds are returning about a 45% cash-on-cash return on significant investments. So, it's big dollars that are coming in and dropping to the bottom line. And we're seeing the same level of activity that we really have for the last couple of years on the acquisition side.

The next question comes from Randy Konik with Jefferies.

[Technical Difficulty] comps turning positive. Can you just kind of break that out? Is that a function of continued stability in the weekend business, maybe a flattish up or up just – and then the midweek business really powering through and becoming nicely positive. Maybe just kind of break down those trends a little bit just to give us some flavor on how those comps have turned positive. Based on the changes you've made to the midweek promotionality and stability, it sounds like, in weekend and league, should we be continuing to think that comp should stay nicely positive at a low to mid-single-digit type rate for the balance of the fiscal year? Just how do we think about that?

We're going to be balanced on giving guidance for the quarter. We've said that, the quarter, we're sort of expecting down a little bit or up a little bit on a comp basis, but we're pretty – because so much of the revenue is made in the last two weeks of December. We're not going to get ahead of ourselves, but we are very happy of where sort of the corporate bookings are to date. When you think about the comp, the leagues, which is 10% of the business, is up double digits. Events, which is 20% of the business, goes to 30-plus percent of the business and the period is up single digits with potential for more upside kind of is a balance. All we really needed was retail to be down a little bit, right? And the issue we had in the summer is that the customers rejected the full price upsell Monday through Thursday. So it wasn't – Friday and Saturday was flat to up. It was really Monday through Thursday sort of at maximum pain. Mondays were down 20-plus percent. So even though Mondays through Thursdays are 30% of our business, when those are down so big on retail, it just was dragging down the comp. So we've put the promotions back in, we've optimized them. So we did have like a Thursday promotion that we did not put back in because that was just a money loser. But the promotions have worked and it's – you see the resiliency in the business in sort of the Yelp reviews that we went from love to hate it to now we're loved again. And in the numbers, we'll expect the comp to kind of bounce around a little bit. The seasonality this year is favorable to us with just ways that New Year's and Christmas falls. So we're feeling pretty good about the business. But the fourth quarter make or break is in December. So we're not going to get ahead of ourselves, but we feel pretty confident in flattish at this point.

Basically, back on capital allocation, can you just remind us how much you have left, I might have missed it, on share repurchase authorization? You were nicely aggressive in the quarter. Stock is where it is, is very cheap. Just kind of get some flavor of how you're balancing or thinking about share repurchase versus capital towards M&A and builds. And then back on M&A, what's changing from the price desired by operators or owners of bowling alleys out there, centers? Is anything changing where prices are coming down? Just anything that would be around the flavor of M&A would be super helpful.

We've got $90 million left on the authorization, but our board is willing to meet to kind of re-up that as needed. At these levels, we'll continue to buy our stock. We've been pretty transparent with the market, like when these new builds turn on, it's a significant change. And then you've got Lucky. Lucky isn't in the 1Q numbers and Lucky will slowly come into 2Q numbers. But we're investing $30 million into Lucky. We're putting string machines in Boston in November, which changes the dynamic significantly. So the market is really not – is very focused on my short-term comp and not really focused on sort of what I would call the very strong inorganic growth that we're doing, whether it's Lucky, whether it's Mavrix and Octane, whether it's the four new builds that come into play this year, but then where are the new builds when we get to FY 2025, and we're guiding FY 2025, like how much strength are we going to get from these new builds. We're taking advantage of the market being so focused on the short-term comp and not being focused on what these new builds, the M&A, the M&A synergies – oh, and by the way, when we refill our SLB pipeline, and we just do it again. So we'll continue buying back our stock at these levels because we do feel like we're dramatically undervalued.

And just on the M&A prices commanded, what are the bowling center proprietors kind of – are there changes in price? Are they coming down in price to make things even more attractive? Just curious what you're seeing there.

Things are getting better. I think the multiple on Lucky everybody focused on, but that is coming down. And we've done a few acquisitions recently at much better multiples.

Well, I think people didn't really understand our math on the Lucky multiple. So they looked at consolidated trailing earnings at Lucky Strike of being somewhere in the 11s. We looked at it as more like $18 million of EBITDA at the center level that would need very, very little incremental overhead spend from us. So somewhere in the $16 million to $17 million range with upside potentially to $30 million of EBITDA. So by our math, looking forward, we paid $90 million. We anticipated investing another $30 million, so you're in it for $120 million, and we think it can get to $30 million of EBITDA. So on a forward basis, we figured we were paying about 4x. The market thought we were paying closer to 8 or 9x. There was a pretty big disconnect there. We're right, market is wrong. That's okay. But as Bobby said, people really aren't figuring out or understanding how much incremental revenue and profit is coming from the 14 Lucky Strikes, Mavrix and Octane, which we're doing almost $20 million of revenue when we bought a very profitable asset in Scottsdale, all the newbuilds coming online and then the other independents we bought. We bought two centers in Michigan. We're about to close on another. We bought a property that was a joint venture outside of Chicago. So there's been a lot of incremental properties added, which will result in significant incremental revenue and EBITDA. And as Bobby said, I think the market was really focused on our least important quarter on a comp basis. And we did $52 million of EBITDA compared to – it was more than double what we had done in 2019, down from peak, but last year was just an epic year. So, we're very, very bullish about this business going forward, and it's been reflected in the amount of stock we bought back.

Our next question comes from Steven Wieczynski with Stifel.

I want to ask about the in-center spending and maybe how that trended through the quarter or maybe, better yet, how that has trended recently? I'm just trying to get a sense of attachment rates as folks come in your properties, meaning as they come in, have you seen guest spend be pretty resilient? Have you seen any changes in the detachment rates? Are they coming in to bowl, but you've seen them pull back in food or beverage or amusements? Any changes there would be helpful.

I think Friday, Saturday, we've seen no change. Again, the midweek, we saw detachment on food. We saw the detachment on amusements. Amusements is probably the best proxy as sort of a traffic. Traffic in amusements was down the worst, but we think that that will reverse course when we get back into the colder second quarter, third quarter, and ultimately, there is a weight and then people will play more arcade. So I think that we're pretty happy with the food attachment because food, we've been trying out a lot of different new programs, pizza and pitchers, things like that, because over the past few years, we've been very focused on percent margin and now we're focused on margin dollars because you need margin dollars. And so, we're pretty happy with the results there. I think the only place that we've seen a little bit of detachment on would be more on the amusement side.

That's great color. Second question, whether it's for you, Bobby, or Tom, but I want to ask about the cost structure at this point, maybe during the quarter. And obviously, it was inflated for a number of reasons that you mentioned. You also called it out in the 10-Q as well. But as we kind of look into now your second quarter and the remainder of the year, just wondering how we should be thinking about the flow-through from here and maybe some other maybe details about how you're mitigating labor and some of those other cost headwinds?

If you think about our cost structure, our cost structure is – 20% to 25% is payroll. The payroll we've been running at, max payroll, that is effectively sequentially will be flat 1Q to 2Q. Another major spend is utilities. Utilities actually goes down about $3 million sequentially into the second quarter and third quarter. The fourth quarter, it's really air conditioning is sort of the peak-ish cost. And then the rest of the cost structure, we probably have a few million a quarter opportunity to pull back on supply services, repairs, maintenance. We did use sort of the slower time to kind of clean up a bunch of things that just needed to be fixed, but we probably swung a little bit more than we should. So the way I look at cost structure is you should just look at it flat sequentially throughout the rest of the year. We feel very confident about that. And we really spent the past three months digging into our business and getting understanding of the cost structure better. The one cost structure that we are cutting on is corporate. We've taken about $12 million out of corporate so far. Our corporate cost is roughly $25 million to $28 million a quarter, but that is coming down, and we should see more benefits of that in the second and third quarter.

The next question comes from Jason Tilchen with Canaccord.

I just want to touch on Lucky Strike. Tom mentioned some of the sort of cost synergies that were going to be pulled out by consolidating to your business. I'm just curious sort of what the time line is for when you expect some of those to flow through into the P&L? And then, also on Lucky Strike, what are some of the plans to sort of expand the use of that brand? How do you see over the sort of medium term, the different brands within your portfolio being used?

Well, I think the opportunity is more on the revenue side than on the cost side. When I talked about – we viewed this as 16 to 18 of EBITDA as opposed to 11. That was really the elimination of their overhead. So that's obviously a cost savings. But going forward, we see the ability to drive event sales in their locations as sort of the key. They have absolutely phenomenal locations downtown in suburban Boston, downtown in suburban Chicago, downtown Denver, Bellevue, Washington, in Downtown LA, Hollywood, Honolulu and Orange County, Downtown San Francisco. So they had an irreplaceable set of assets and we're very excited to get them. And I think that the early indications are very bullish. We love the name. We did a survey. We hired Nielsen to do analysis of their brand strength versus Bowlero. We found that their brand strength was about 50% more. And so, we've decided that our next handful of new build locations will open as Lucky Strikes and we'll see how they perform. It's impossible, obviously, to know how they would have done opening as a Bowlero versus how they'll do opening as a Lucky Strike. We'll try and make a determination of whether or not we feel like they were stronger as a result of that brand. But we certainly are bullish on that brand. So Moorpark and Miami will be the first two newbuilds that will open as Lucky Strikes. As I mentioned, we're investing a lot of capital. Lucky Strikes had been sort of in financial distress for a while. And so, the assets have been underinvested in, and they had become pretty dilapidated. I failed to mention downtown Philly right in the heart of Philly as well. And so, we're putting that capital in now as we speak, to upgrade those facilities to sort of return them to their luster, maybe make them better than ever. And I think you're going to see a lot of revenue performance out of the Lucky Strikes in calendar 2024 and beyond.

Just one other question. You had mentioned during prepared remarks about sort of bringing that sales culture into the center, you talked about that a lot in the last call. I was wondering if you could maybe give a little bit of update on how that's going and when you expect some of those benefits to sort of flow through in the same-store sales comps.

Well, they already have. That's why we got an increase on the weekend sales and when we were pushing the special, right, which was an income – it was a third game. Because all of our testing indicated people were bowling about 1.8, 1.9 games per visit. And so, the philosophy behind the special was if we can get any incremental part of a third game, given that there is no variable cost to the game of bowling, all of that revenue is profit. So if we're charging $8 a game, and I'll give you the third game for $5 and a $5 arcade card, in a way, it's almost perceived as free to the guest because they're getting a $5 arcade card as well for that incremental game, for the incremental $5 spend. What we found is that, that did move bowling revenue higher. And again, all profits. There's about 10% cost of goods sold on the arcade card. So it doesn't all flow, but you can view the arcade card as a seed card that gets them in the arcade and then they have the opportunity to refill that card. We instituted this. And consistently across hundreds of centers that were doing it, we found a 60% sell-through rate, which is phenomenal. And that was a result of the front desk associates selling the special, which had never heard before. We never had really a selling impetus in the center. So it's been a success, much better success than any of us previously thought it could be. 60% sell-through rate of all retail customers coming in throughout the week over hundreds of centers was very validating. Had we not eliminated the low-cost promotions during the week, I think you would have seen a very different result, but we've added those back. And now we've got the muscle memory to sell. And so, we've increased the offering to the pizza and pitcher special, which is either a one topping pizza and a pitcher of soda or one topping pizza and a pitcher of beer, both for about a 20% reduced price over normal retail, and we're seeing initially good results from that as well.

Our next question comes from Ian

I just hopped on a little bit late, so sorry if you have to repeat yourself. But on the new builds, it seems like you're obviously accelerating this. You're seeing much more opportunities or much more excitement. What is basically driving that? Is the ability to do a sale-leaseback now? Are there just more new builds? Are you seeing less competition from others vying for that space? What exactly is kind of going on that's driving that?

Well, we don't do sale leasebacks on the new builds. Those are all leased, mostly in malls. What happened is, about two years ago, we made a change in terms of how we go out and source these deals. We hired a Miami-based firm that has national contacts that's really increased our deal flow, and so we've seen a lot more. And as a consequence, we've been able to make a lot more deals. I think being public has helped. From a landlord's perspective, we're a bankable tenant. We are the 800-pound gorilla in space. We have a 27-year track record. So if you're a landlord and you're looking to add an experiential offering to your mall, we are the logical choice and landlords are acting that way. And consequently, we're seeing a lot more opportunities than we ever have. Some of these deals have stretched out for a long period of time, whether it took extended period of time for the landlord to deliver or they got held up in permitting or whatever. So you're seeing a flurry of activity here, but we've been working on this deal set now for a longer time period than you might imagine. So it's a little bit of sort of the poodle going through the boa constrictor. We're seeing this bulge of deals that are happening right now, but they didn't all happen. They weren't all sourced at the same time. It's just that there was a lag to get them built. But fortunately now, we are in the throes of a pretty aggressive construction cycle, opened one, about to open two more, four more should open next year. And then, I would think four or five in the year after that.

Maybe a question for Bobby. As far as just the guidance, help us understand the philosophy there of giving that guidance? Is this just sort of what you're used to as a CFO? And should we be expecting this going forward? And maybe any other type of holistic conversation around that?

Yes. I'm going to follow my sword. I would tell you our internal model had EBITDA of $52 million for the first quarter. So we just didn't signal that to the Street. So building credibility and partnering with investors is giving them clarity on where our numbers are going to go and what we think our numbers are going to be. I just didn't do that at the fourth quarter earnings call, which was only, I guess, month-and-a-half ago, is we probably should have signaled a little bit more about the higher highs and lower lows that are going to happen on our EBITDA. And so, I'm just giving more clarity. So I'm telling you what my model looks at, what we're seeing transparency is key. And we think as we hit these numbers, investors will reward us for such.

The next question comes from Jeremy Hamblin with Craig-Hallum.

I wanted to follow up on the last point here about cost of operations, COGS, and just make sure I understood. In terms of thinking about COGS going forward, I think you indicated that you would expect that to be somewhat flat sequentially. And I just want to make sure, even with the addition of the 14 units with the Lucky Strike deal and some of the other acquisitions, typically, you've seen a little bit of a skew up in these higher revenue quarters, just the cost of operations, but it sounds like you're thinking that that sequential cost on COGS is only going to be up maybe slightly or flattish as we move through these next few quarters? Any color?

Yes. The sequential was a comp basis. Like, obviously, as Lucky, Mavrix, Octane, the three other acquisitions we did in the quarter flow through, those are going to take COGS up, but you have to model those out as inorganic growth. We balance comp, COGS and M&A add-ons. Like, as the new builds come on, those will come in – you flow those through as EBITDA. They all have very similar cost structures, the bigger are better, the smaller are going to be a little bit worse. We did put in our investor deck sort of a quarterly, what we call, center EBITDA and center gross profit. So it's very transparent about what the cost structure is for the comp in the total company, and so you can model that forward. But as deals come in, you have to layer those into the cost structure.

In terms of just some other kind of noise around the cost structure. So I think you had $8.4 million of transaction and advisory expenses in the quarter. I think that flows through your SG&A. You've had, obviously, the VICI deal. I'm sure some costs associated with that. But how should we be thinking about like your transactional advisory costs here in Q2?

Yes. So, VICI will be capitalized because VICI is considered a financing from a deal perspective. Lucky Strike, just so you have a color, that deal was going on for two years. So massive legal bill in the first quarter to the tune of about $4 million, all in. So, Lucky Strike has passed. So I think that we don't forecast advisory costs or add backs, but I would tell you that it's going to be dramatically lower.

Just in terms of your – the interest expense, right, with the sale leaseback here, so $37.5 million in Q1. What are we looking at here on a go-forward basis, all else being equal?

Yes. You should annualize $31.6 million. And so, we paid in – we closed the deal on October 19. So you'll have to do 2 months and 11 days in the second quarter. And then, going forward, it would just be 31.6% divided by 4. And we'll be subject to fluctuations in SOFR, but I'm not going to speculate on interest rates, but the market right now is saying they're going down.

The next question comes from Eric Wold with B. Riley.

Just a couple of questions. I guess, first off, given what you learned with the testing around the pricing and kind of promotional cadence that turned comps positive in October. Should you expect what's in place now to be in place through the busy season? Are you likely to test more options in the coming months? Do you have additional levers that could be pulled, but you haven't launched yet, but are potentially confident that could be an added boost?

Yes. I think there's going to be two primary focuses. So, to give you some context, in the first quarter, bowling revenue was $117 million, right? F&B revenue was $72 million, round numbers. We're not going to be happy until those numbers are equal to each other by F&B going up. So we want to attach there. So that is a multiyear journey, but we think the menu has dramatically changed to the positive in the centers. We think that people should be having dinner there, people should be buying more food. And some of that is going to be from our employees selling. So we're going to keep going. Obviously, the holy grail of bowling is getting people to go from two games to three games, and we will continue pushing that, but it's a multipronged approach.

Second question on the events business, what are you seeing in terms of bookings in terms of the number of events versus average commitment? Or getting more events at similar pricing? Or is the average size of the commitments also increasing? Maybe break that down, if you could?

Yes. I think that more events – sizes are coming down a little bit. But that's why we flagged the top 50 because the top 50 for us up. But overall, we've seen – and we've always viewed ourselves as a better value for the event community relative to other upscale opportunities, and we are a premium brand. And so, we are seeing a lot of more events. So we're sort of excited about that. But generally, the business continues to be strong.

The next question comes from Daniel Moore with CJS Securities.

Most have been answered, but just as it relates to the learnings from the promotional activity kind of experimented with during the quarter, it sounds like they've largely come back. Any of those midweek or family bowlers not fully come back yet that might create a little bit of a tailwind. And second, just how does that experience impact how you test your tweak promotions going forward?

Yes, there's more to come. So we only brought back – in the third week of September, we only brought back Monday and Friday late night. So we didn't bring back the full special until mid-October, and those still take a few weeks to percolate through the system. So we definitely see a tailwind in the coming few weeks.

Has that kind of changed your mindset or tweaked how you would think about implementing promotions or pulling back on them going forward?

Promotions have to be worth it, right? So we had a college night that we had in about, I don't know, 50, 60 centers, and it was on Thursdays. And to be fair, it turned off another subset of the customer base. So we didn't bring back college nights and Thursday is right now our best night of the week. So we will be very tactical on it. I think priorities are going to be analyzing when we have empty lanes and filling them.

Lastly, any update on just penetration in MoneyBowl, how that trended throughout the quarter.

Yes. So MoneyBowl, we have it in 64 centers, still operating, but we're turning it into an out-of-center experience. I'm sure all the guys who are on this call will probably get advertisements in the next few months to download MoneyBowl because that's just how tracking works. We are updating our website significantly – huge change, huge projects will be done sort of in the first calendar quarter, and it's going to be a game changer for the business. And it's really everything that we're trying to enact in center with upselling. We're actually going to use technology to do as well. And MoneyBowl will become sort of the loyalty platform and the out-of-center platform to bring people into the center. And at that point, we'll roll it out to a lot more centers. The journey is still there. We're still pretty excited about it. We're waiting for the website to be more up to speed because I think that MoneyBowl in a world where you can go on to the website and track your progress and we can use the website to pull you into the center, I think, is going to be a very powerful tool for us into the future.