LUCK - NYSE

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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.