Lucky Strike Entertainment Corporation earnings

Management highlights

• Took substantial cost actions: reduced in-center labor hours by approximately 97,000 hours over 12 weeks, reduced corporate field and sales head count generating over $6 million annualized savings. • ORCA AI system aggregates operational data, reduced excess post-close hours from ~2,000 per week to ~300, with potential for high teens to mid 20 millions of dollars annual savings from optimizing clocking in time. • Brand consolidation: ~115 Lucky Strike conversions out of 225 ultimate target, expect to be substantially complete by next year, leading to step down in capital expenditures. • AI-related layoffs causing some softness in corporate event demand, but longer-term effects favorable.

Guidance

• Updated fiscal 2026 outlook: total revenue growth of plus 4% to 5%, adjusted EBITDA of approximately $345 to $350 million, capital expenditures of approximately $120 million. • Goal to reach at least $2 free cash flow per share over next 12 months through EBITDA growth, CapEx discipline, and opportunistic share repurchases while keeping net debt flat. • Water parks expected to add ~$18 million incremental EBITDA this summer, with vast majority in September quarter.

Segment performance

Total revenue grew to $342.2 million, up from $339.9 million in the prior year period. Same-store sales comp was plus 0.2% for the March quarter, with January same-store sales up plus 5.5% but disrupted by winter storms and macro events. Excluding West Coast markets, the rest of the company comped plus 1.9%. Water park portfolio set to add approximately $18 million of incremental EBITDA this summer, with vast majority in September quarter. Family entertainment centers continue to perform ahead of plan.

Risks & headwinds

• Disruptions from extraordinary weather events like winter storms and macro events like Middle East military action impacting sales. • AI-related layoffs causing softness in corporate event demand in the short term. • Uncertainty around consumer response to elevated gas prices, geopolitical shocks, and inflation affecting spending patterns.

Analyst Q&A

• Q: Steve Wyzynski asked about consumer impact from Middle East war and spend patterns.

  A: Tom said leisure-based entertainment space took big hit, gas prices on West Coast high, consumer confidence low, but recent period was effectively flat.

• Q: Steve Wyzynski asked about same-store sales progression.

  A: Tom said January up 5.5%, February up 1%, March down 7%, April flat, focused on flat now.

• Q: Jeremy Hamlin asked about water park season passes and pricing.

  A: Tom said season pass sales roughly flat, upgraded parks, introduced family unlimited package.

• Q: Mark McIntyre asked about capex and M&A.

  A: Tom said CAPEX to decline, looking at water park projects, opportunistic on M&A, committed to no more incremental leverage.

• Q: Eric Wolff asked about water park enhancements and F&B/amusement spending.

  A: Tom said did work in off-season, saw softness in amusement and California, strength in NY, FL, IL.

• Q: Matthew Boss asked about business performance in elevated gas prices and flat April performance.

  A: Tom said business rebounded from crises, short-lived impact, revenue poised to rebound.

• Q: Bobby asked about EBITDA margin.

  A: Bobby said current margin anomaly due to marketing spend and acquisition, confident in low 30s long-term margin.

• Q: Eric Handler asked about food and beverage behavioral changes.

  A: Tom said good tailwind from new menu.

• Q: Michael Kupinski asked about corporate vs social event bookings.

  A: Tom said corporate bounced back except CA, social up but not as much, week strong, less corporate on weekends.

• Q: Ian Zaffino asked about corporate events and arcade performance.

  A: Tom said AI creates efficiencies, arcade follows traffic.

• Q: David Hargreaves asked about revolver and leverage.

  A: Tom said revolver to come down, no leverage covenant, little price change in quarter