Lucky Strike Entertainment Corporation Q4 FY2025 earnings call

Key Points - Closed fiscal 2025 on a high note with 4% revenue growth despite off-line corporate events headwinds. - Summer season passes: sold over 260,000, generating over $13.4 million in pass revenue. - Same-store sales strengthened sequentially in Q4 and turned positive in July; July had double-digit total revenue growth year-over-year. - Acquired two iconic water parks (Raging Waters Los Angeles and Wet 'n Wild Emerald Pointe) and 3 family entertainment centers. - Acquired real estate underlying 58 locations for $306 million, immediately accretive to earnings and cash flow. - Season pass program growth driven by incremental marketing spend, employee engagement tools. - Food revenue had positive 2.5% same-store comps; alcohol comps negative but improving, with innovation in alcohol-free category (e.g., new craft lemonade). - Introduced stage gate process for menu releases, including training, sales trackers, marketing support. - Expanded food and beverage offerings with combos, platters, and new menu items. - Water parks unifying concessions and adding national partners; Boomers family entertainment centers enhanced food program.

In the fourth quarter of 2025, total revenue was $301.2 million and adjusted EBITDA was $88.7 million, compared 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%. The retail business remained steady, league operations experienced low single-digit growth, and the events business faced a high single-digit decline. Adjusted EBITDA for the quarter was $88.7 million, with same-store sales driving an $11 million headwind, offset by $5 million in payroll improvements and $2 million in reductions in repair and maintenance supplies and services costs. Boomers and the 2 new water parks added $7 million in EBITDA. California, accounting for approximately 20% of total sales, contributed $6 million to the same-store sales decline, but F&B offerings outperformed the same-store comp. CapEx in the quarter was $24 million, down from $47 million last year.

Fiscal 2026 Guidance - Expect total revenue growth of 5% to 9%, implying $1.26 billion to $1.31 billion of revenue and $375 million to $415 million of adjusted EBITDA. - CapEx for FY '26 is expected to be about $130 million, down from previous years as focusing on high-ROI initiatives. - Post-quarter close, acquisition of 58 properties led to lower GAAP rent expense of $3 million and capitalized lease expense of $21 million in FY '26.

Q: As we exit fiscal 2025, the setup for 2026 looks compelling but midpoint of 2026 EBITDA guidance is same as suspended 2025 guidance. Wondering about assumptions in new targets and why guidance was given so quickly after pulling last quarter?

A: July was positive organically and double digits total; guidance integrates more marketing investment and assets purchased at end of July are negative first 3 quarters then flip positive in June quarter, bulk earnings in July, August flowing into fiscal '27 Q: Could you help with cadence playing out between quarters in fiscal 2026, with new water parks ramping and corporate events?

A: Good double-digit growth in September quarter and fourth quarter will be $10 million to $20 million higher than second quarter Q: Walk us through thought process on events side, impact of California and playbook for coming quarters?

A: Comp gets easy starting in September, business improved but still down last month; under-indexed on marketing spend, building team, ramping spend towards off-line events to grab market share Q: How are you approaching the portfolio adding water parks and family entertainment centers differently or same as bowling business?

A: Largely same playbook: make asset nicer, clean up, repaint, fix deferred maintenance; focus on enhanced food and beverage, package pricing, and marketing; marketing spend had dwindled, now investing in world-class marketing team Q: How much of acceleration in comps over past few months attributed to early results from marketing investments and increase in EBITDA guidance?

A: Summer season pass program saw $8.5 million last year vs $13.4 million this year with $1 million incremental marketing increase; underinvested in awareness, marketing, brand building before, now can gobble market share with increased brand building and awareness marketing closer to industry benchmarks Q: Magnitude of cadence in the quarter, how much April down, recovered, and pockets of weakness aside from California?

A: April minus 6%, May minus 3%, June minus 1 and July better than plus 1, August trending similar; New York looking good, comping positive, California gets easier from comp perspective but focused on inflecting 2-year there positive in next few months Q: On F&B side, mixed signals, is alcohol trade down or people trading into non-alcoholic options?

A: Unpredictable alcohol consumption, leaned into innovation in non-alcohol category with craft lemonade program; new signature cocktails launching end of October, innovation working as food and alcohol outperform overall comp Q: Trajectory of location operating costs with higher mix of FEC and water parks?

A: Location operating cost is a $21 million noncash charge, percentages highly seasonal, will run where historically over the year; Boomers running close to 25% EBITDA margin, revenue about $40 million, expect to increase over next 12 months Q: Drill down on cost structure and non-acquisition CapEx expectations for FY '26?

A: SG&A for rest of FY '26 is like Q4; marketing will lift location operating costs by $10 million to $15 million; non-acquisition CapEx for FY '26 is about $130 million, down from previous years focusing on high ROI initiatives