Q1 2024 Bowlero Corp Earnings Call
Greetings and welcome to bilateral first quarter fiscal year 'twenty 'twenty four conference call.
At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Once you require operator assistance during the conference. Please press one.
Zero on your telephone keypad.
As a reminder, this conference being recorded it is now my pleasure to introduce your host and turn it all over to Bobby.
Please go ahead Sir.
Thanks, operator.
Good morning to everyone on the call. This is Bobby Lavan, Polaris Chief Financial Officer.
Welcome to our conference call to discuss our first quarter of fiscal year 2020 for earnings.
This morning, we issued a press release announcing our financial results for the period ended October one 2023.
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 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.
We're 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.
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.
Alero 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 <unk> Corporation.
First quarter of fiscal 2024 met our expectations.
We worked hard during the seasonally slow first quarter to optimize dynamic pricing.
The journey of proactively sowing 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 10000 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.
Five building a sales culture, we started with a one size fits all program Upselling, the third game of Boeing for $5 and providing a $5 gift card.
We removed summer games are family program that was worth at least $6 million of revenue in the period. We also pulled midweek fixed price. All you can both specials that were traffic drivers.
The changes drove wallet sharp pickup in our premium times, a 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 mid week and in the second week of October our same store comp had returned to being positive I loved this dynamic as I built borrow to serve all customers and we learned that when you have a business that run seven 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 provider of customer 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.
So at a better value than a night out and a restaurant in the 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 of 2019, 61%.
And our comp is up 29% over first quarter 2019.
In the first quarter, we saw volatility with our temporary with pricing, but that will only help into the rest of the year in 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 90% lease.
Leagues, which started in September comps, 12% events is up 77% and leads is up 15% from 2019 the.
The resiliency of our model was in those results.
This quarter, we crossed 350 centers and I'm 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're 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 for your double digit revenue and earnings growth is proven and intact.
Bolero is evolving and getting more insightful everyday 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 Vinci that started with the 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.
U S location.
Which we believe will generate incremental returns and underscore the self funding model we have for acquisitions.
Our scale and credit worthiness or unique in the out of home Entertainment space.
I will now turn it back over to <unk> CFO, Bobby lab 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 reported $225 3 million of comparable revenue.
As a reminder service fee revenue is the mandatory passed through to the employee a non contributor to earnings and is being phased out.
Revenue excluding service fee revenue was up <unk>, 3%.
Total bowling center revenue was down <unk>, 7% and our comp was down five 5%.
The comp down five 5% slightly below our previous guidance of down 5%, mostly due to a $1 million timing issue that will be picked up in the second quarter.
Hit our internal EBITDA budget.
As Tom discussed we previously disclosed we use the 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% in the second week of September was minus 12 weeks.
We quickly reverse course, and a trend line, we would have been greater other than flooding in New York, but also comp hurricane in in 2022, a negative perfect storm in the last week of the quarter.
October has been very resilient without hitting positive in the second week of October.
The traffic data 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 earlier Thanksgiving extending the holiday season.
Adjusted EBITDA was $52 1 million compared to $65 $3 million year over year Delta of approximately $13 million.
We did not pivot to center cost structure savings mode in the quarter as we are forecasting a strong holiday season as seen returns on our people investment as a reminder, second into the third quarter and make up 70% of our annual EBITDA.
Comp revenue was down $12 million in payroll in the comp centers was up $2 million.
Utilities and seasonally high by the tune of $3 million in the quarter.
Corporate expenses are down year over year, while we're continuing 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 at $208 million of comp revenue in the second quarter comp revenue should be up approximately $50 million in revenue sequentially.
With the cost structure in place that should almost entirely false bottom line.
Additionally, we have $40 million of revenue from acquisition that are starting to flow through in.
In the quarter.
Company expects second quarter fiscal year, 2024, tab 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 event comp plus nine and leak comp plus 12 leagues.
For 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.
Corporate events business is strong with our top 50 bookings being up year over year for December.
<unk> bookings, starting now and right up until the day of that if we have to date.
In the quarter, we spent 24 million on growth Capex $11 million on Newbuild and 10 million on maintenance.
We spent $126 million on acquisitions, and we repurchased $130 million of shares in the quarter we.
We will continue to have a balanced capital program as we are confident in our combination of growth and shareholder returns.
As we announced on October 19, we entered into a partnership with BG properties to accelerate our self funding sale leaseback strategy.
Put a slide together in our investor deck, but his story is straightforward underpinned by bolero credits.
We buy centers with land from 4% to seven times EBITDAR.
Implement our proprietary tools to improve EBITDAR margins, but not within 90 days and then we look at sale lease back half of the EBITDAR for multiples of 12 to 15 type.
Once completed we have created on average $10 million of value per property.
At a purchase price.
We project, we can do this more than a 100 to 200 times that has a lot of value creation only we can do.
Post the BG transaction, we have eight unencumbered properties and we will focus on acquisitions with <unk> 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 entered into leases they are long term leases the Vinci 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 months or shorter.
Our method looking at leverage is net debt to EBITDA annualized for acquisition less capitalized cash lease costs.
We give 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 BG acquisition, we have approximately $930 million of net debt.
Why 2004, EBITDA midpoint is $385 million or about $50 million of acquisitions, new builds that you should annualize less $41 million of cash interest rent and $31 $6 million of each year at <unk>.
This gets you to two eight times net leverage target of three.
We will continue to manage leverage conservatively, especially until the unknown macro environment.
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.
Thank you.
We'll now conduct a question and answer session. We ask that all callers limit themselves to one question and one follow up.
Additional questions you may re queue and those questions will be addressed if time permitting.
To ask a question. Please press star one on your telephone keypad.
Information tone will indicate your line is in the question queue.
So if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.
One moment, while we poll conference question.
Our first question comes from Matthew Boss with Jpmorgan. Please proceed.
Great Thanks, and 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 less 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 is.
There's basically two types of customers there is theres the weekend customer, where we have a meaningful opportunity to upsell.
And then there is there is.
That's not exclusive to the weekend, but largely weekend.
And then there's the the more price sensitive customer who is used to.
Getting a better deal right. So in all you could both special or or a cheap game price.
Underpriced food and beverage relative to normal retail pricing and.
So.
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 make sense reinstituted them pretty much everywhere and have continued to add.
Other up sell opportunities on the weekends like pizza in pitcher and other things like that or better bundles that are meant to increase.
Customer spend and center and.
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 and.
High single digits. The event business has been up double digits for a very long time so.
Are those are sort of our pillars of strength.
Theyre also whether independent right. So people are making those decisions well in advance of the day are coming in and so when you have things like.
So long dry summers with no rain.
And then <unk>.
Comping.
A widespread weather event like we had last year, where there was a lot of rain in the northeast with with not that and then you have this sort of once in a generation flooding in New York Redwood and canceled their events.
A lot of weather headwinds I think that is partially reflected in.
And the retail numbers.
But not in the overall strength of the customer or strength of the business. The fact that the leaf business and the event business is so strong I think it gives you an indication of how strong our businesses and then the retail business, we will have a lot more volatility.
Based on things like weather, However, we're seeing now.
<unk> 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.
That's great color and then 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.
I mean, the balance sheet is very healthy.
And we have more than $200 million of cash $225 million of Undrawn revolver.
We're looking at upsizing two to be more closer to one turn of EBITDA.
So the balance sheet is very healthy.
We got the BG 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 Newbuild.
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 more park, which is Simi valley.
North of L. A in in.
And 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.
Okay.
With Darrow Ranch, which is Orange County, California, and then we've got a handful of others behind that so.
We've never had so much newbuild activity, which is great because our new builds of 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.
Great Best of luck.
Thanks, Thank you.
Our next question comes from Randy <unk> with Jefferies. Please proceed.
Hi, Randy.
Yes.
Comps turning positive can.
Can you just kind of break that out is that a function of continued stability in the weekend business, maybe flattish up or up just.
And then the midweek business really powering through them in becoming nicely positive, maybe just kind of breakdown those trends a little bit just to give us some flavor on how those comps have turned positive and then base.
Based on the changes you've made to the mid week promotion Ality and stability it sounds like in weekend in league.
Should we be should be continuing to think that comps 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.
Yes, I mean are we 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, yes.
But we're pretty because so much of the revenue is made 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 leads which is 10% of the business is up.
Yes, double digits event, which is 20% of the business, which goes to 30 plus percent of the business in the period.
Is it.
He is up.
Single digits.
Potential for more upside kind of as a balance.
And so all we really needed was retail could be down a little bit right and the issue. We had in the summer is that the customers rejected.
The the full price.
Up sell Monday through Thursday, so it wasn't Friday and Saturday with.
<unk> was flat to up it was really Monday through Thursday sort of at maximum pain, I mean, 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 call. So we've put the promotions back then.
We've optimized them. So we did have like eight Thursday promotion that we did not put back in because that was just a money loser, but the promotion have worked and it's when you see the resiliency in the business and sort of the Yelp reviews that we went from loved hated to now where love to get an end.
In the numbers.
We expect the comp to kind of bounce around a little bit the seasonality. This year is favorable to us with just the ways that new year's and Christmas Falls.
We're feeling pretty good about the business, but the fourth quarter make or break us in December. So we're not going to get ahead of ourselves, but we feel pretty confident and flattish at this point.
Super helpful is very good and 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 very cheap.
Kind of schizophrenia or of how you're balancing our thinking about share repurchase versus.
Capital towards M&A and builds and then back on M&A.
Changing from the price desired by.
Operators are owners of bowling alleys out their centers.
What is anything changed and where prices are coming down just just anything that would be around the flavor of M&A would be super helpful. Thanks.
Yes, so we've got $90 million left on the authorization.
But you know our board is willing to meet to kind of re up that as needed.
These levels will continue to buy.
Our stock.
We have and we've been pretty transparent with the market like when these new build turn on.
It.
The significant change and then you've got lucky with Lucky isn't in the <unk> numbers and Lucky will slowly come in in the Q2 numbers, but we're investing $30 million into Lucky, we're putting stream machines in Boston in November which changes the dynamic significantly so the market.
It is really not.
Very focused on my short term comp and not really focused on sort of what I would call the <unk>.
Very strong inorganic growth that we're doing whether it's lucky whether its maverick dock gains whether it's the four new builds that come into play this year, but then where the newbuild when we get to FY 'twenty five and we're guiding FY 'twenty five like how much strength or are we going to get from these newbuild and so the market, we're taking advantage of.
And the market being so focused on the short term comp and not being really focused on what these newbuild. The M&A the M&A synergies Oh and by the way when we refill our pipeline and we just do it again.
We will 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 other changes in price or are they coming down in price to make things even more attractive just curious what youre seeing there and that's it thanks guys.
Things are getting better.
I think that the multiple on lucky everybody focused on.
But that is coming down.
We've done a few acquisitions recently at much better multiples.
Well I think the <unk>.
People didn't really understand our bath on the lucky multiples so they looked at.
They looked at consolidated.
Trailing earnings at Lucky strike of being somewhere in the elevens.
Looked at it as <unk>.
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 of EBITDA.
So by our math looking forward, we paid 90, we anticipated investing another 30.
So you rented 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 forex. The market thought we were paying closer to eight or nine X. There was a pretty big disconnect. There.
We're right market's wrong that's okay.
As Bobby said.
People really arent figuring out or understanding how much incremental revenue and profit is coming from the 14, Lucky Strike's Mavericks and octane, which we're doing.
$20 million of revenue when we bought a very profitable asset in Scottsdale, all the new builds coming online and then the other independents III bought.
And we bought <unk>.
Two centers in Michigan, we are about to close on another we bought a property that was a joint venture outside of Chicago, So theres been a lot of incremental properties added.
Which will result in.
No.
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.
We did 52 million of EBITDA compared to.
It was more than double what we had done in.
In 2019.
Down from peak, but last year was just an epic year or so.
We're very very bullish about this business going forward and its been reflected in the amount of stock we bought back.
Very helpful. Thanks, guys.
Thank you.
Our next question comes from Steve <unk> with Stifel. Please proceed.
Yeah, Hey, guys. Good morning wanted to ask about the the incentive spending and maybe how that trended through the quarter or maybe better yet and how that has trended recently and just I'm just trying to get a sense of attachment rates.
As folks come in your properties, meaning if they come in have you seen guests spend be pretty resilient and have you seen any changes in those attachment rates are they coming into ball, but you've seen them pull back in food and beverage are amusements.
Any changes there would be helpful. Thank you very much.
Yeah, I think Friday Saturday, we've seen no change.
Again, the mid week.
We saw detachment.
On food, we saw detachment an amusing amusing.
Amusements is probably the best proxy.
Proxy as sort of a traffic.
Traffic in amusements was down the worse, but we think that that will reverse course.
When we get back into.
The colder second quarter third quarter and ultimately there is a wait and then people will play more arcade. So so I think that.
We're pretty happy with the food attachment because.
We've been trying out a lot of different new programs pizza and pitch or things like that because.
Over the past few.
A few years, we've been very focused on percent margin and now we're focused on margin dollars because you eat 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.
Okay got you that's great color. Thanks, Bobby and then second question, whether it's for you Barb your time, but wanted 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 you know as we kind of look into now your second quarter.
The remainder of the year, just just wondering how we should be thinking about.
The flow through from here and maybe some other maybe details about how you are mitigating labor and some of those other cost headwinds.
Yes. So if you think about our cost structure. Our cost structure is is 20% to 25% is payroll.
That the payroll we've been running at Max payroll that is effectively sequentially will be flat <unk>.
<unk>.
Another major spend is utilities utilities actually goes down about $3 million sequentially into the second quarter and third quarter and fourth quarter, it's really.
Air conditioning is sort of the peak as peak ish cost.
And then the rest of the cost structure, we'd probably have a few million dollars a quarter opportunity to pull back on supply services repairs maintenance.
Good 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.
The way I look at cost structure as you should just look at it flat.
Sequentially throughout the rest of the year.
And that is we feel very confident about that and we really think.
The past three months digging into our business or 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% to $28 million a quarter, but that is coming down and we should see more benefits of that in the second and third quarter.
Okay. Thanks, guys really appreciate it best of luck.
Our next question comes from Jason <unk> with Canaccord. Please proceed.
Great. Good morning, Thanks for taking the question I just want to touch on Lucky strike.
Tom mentioned some of the sort of cost synergies that we're going to be pulled out by compounded into your business I'm just curious sort of what the timeline 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.
No.
When I talked about we viewed this as 16 to 18.
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 even sales in their locations as sort of the key.
They have absolutely phenomenal locations in.
Downtown and suburban Boston downtown and suburban Chicago downtown Denver, Bellevue, Washington.
In downtown L, a and Hollywood in Honolulu in Orange County.
At CIT downtown San Francisco.
So.
Really that is 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 brands trends versus bolero, we've found that their brand strength was about 50% more.
And so we've decided that our next handful of new build locations will open us lucky strikes.
And we'll see.
We'll see how they perform.
It's impossible, obviously to know how they would've done opening as a bold arrow versus how they'll do opening.
Lucky strike, you will 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 more park in Miami.
We will be the first to new builds that will open as lucky strike's as I mentioned, we're investing a lot of capital Lucky strike had been sort of in financial distress for a while and so the assets had been underinvested in and they have become pretty dilapidated.
Dimension downtown Philly right in the heart of Philly as well.
And so we're putting that capital with now as we speak to upgrade those facilities to sort of return them to their luster, maybe makes them better than ever and I think youre going to see a lot of revenue performance.
Out of the Lucky strikes in calendar 2024 and beyond.
Great. That's really helpful. And then just one other question you had mentioned during our prepared remarks about sort of bringing that sales culture into the centers 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 flow through in the same store sales comps.
Yeah.
They already have.
Why we got an increase on the weekend sales and when we were pushing the special which was.
And income it was a third game because all of our testing indicated people, where Boeing about 1819 games per visit and so the philosophy behind the special was if we can get any incremental part of our third game given that there is no variable cost to a game of Boeing.
All of that revenue was profit.
So.
If were charging $8 of game and I will give you the third game for $5 and $5 arcade card in a way it's almost foresee this free to the guests because they're getting a five dollar arcade card as well.
For that incremental game for the incremental $5 spent what we found is that that did move bowling revenue higher and again all profit.
About 10% cost of goods sold on the arcade cards. So it doesn't all flow, but you can view the arcade Carter's as 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.
Ah, 60% sell through rate, which is phenomenal and that that was a result of the front desk associates. Following the special which had never heard before we'd never had really selling and put us in the center. So it's been a success.
<unk>.
Much 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've 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 picture special which is either a one topping pizza at a picture of soda or one topping.
He set a picture of beer, both for about a 20% reduced price over normal retail.
And we're seeing.
Really good results from that as well.
Thanks for the color there.
Our next question from Ian Zaffino with Oppenheimer. Please proceed.
Great. Thank you very much.
Hopped on a little bit late so sorry, anytime you have to repeat yourself, but.
On the new builds it seems like you're obviously accelerating as you're seeing much more opportunities or are you much more excitement.
What is basically driving that is our you see is the ability to do a sale leaseback now.
And then just need more new pills are you seeing less competition from others vying for that space, what exactly is going on that's driving that thanks.
Well, we don't do sale leasebacks on the new builds those are all leased mostly in malls.
We.
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 <unk>.
Miami based firm that has national contacts that's really increased our deal flow and we've 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 bankable tenant we are you know the 800 pound gorilla in the space. We have a 27 year track record. So if you are a landlord and youre looking to do.
Add in 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.
The extended period of time for the landlord to deliver or they've got held up in permitting or whatever so youre 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 a poodle going to the Boa constrictor.
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 we.
We are in the throes of a pretty aggressive construction cycle.
Opened one about to open two more or more should open next year and then I would think four five in the year after that.
Okay. Thank you and then maybe a question for Bobby as far as just the guidance and help us understand that the philosophy, there giving that guidance.
Sort of what you're used to is the CFO.
And should we be expecting this going forward and maybe any other type of homelink.
A holistic conversation around that thanks.
Yeah, I'm going to fall on my Sword, I would tell you our internal.
Model had.
EBITDA of $52 million for the first quarter.
So we were we just didn't signal that to the street so.
Building credibility and partnering with 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.
The fourth quarter earnings call, which is I guess, a month and a half ago is we probably should have signaled a little bit more about the higher highs and lower lows that aren't going to happen.
On our EBITDA and so I'm, just giving more clarity so I'm telling you what.
What my model looks at what we're seeing transparency is key.
And we think as we hit these numbers investors will will will reward us for such.
Alright, great. Thank you very much guys.
The next question comes from Jeremy Hamblin with Craig Hallum. Please proceed.
Thanks, and I wanted to follow up on the.
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 just wanted to make sure even with the addition of.
The 14.
That's 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 Cogs is only going to be up maybe slightly or flattish.
As we move through these next few quarters any color yeah. I mean, it's sequential was a comp basis like obviously as lucky Maverick Doc pain. The three other acquisitions, we did in the quarter flow through those are going to take cost up but you have to model those out as.
Inorganic growth.
So we balanced comp Cogs and M&A add ons like as the new builds come on those will come in and you flow those through EBITDA and as you.
They all have very similar cost structures, the bigger or better the smaller or getting 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.
For the comp and the total company and so you can model that forward, but as deals come in and you do have to layer those in to the cost structure.
Got it Okay and then in terms of just some other kind of.
Noise around the cost structure. So I think he had $8 4 million of transaction and advisory expenses in the quarter.
That flows through your SG&A.
You've had obviously the <unk> deal I'm sure some costs associated with that but okay.
How should we be thinking about like your transactional advisory costs here in Q2.
Yes, I mean, so beachy will be capitalized because beaches considered a financing from a deal perspective.
Lucky strike.
So you have color that deal what's going on for two years, so massive legal bill.
In.
The first quarter right.
To the tune of about $4 million all in.
So lucky strike.
Has passed.
Think that.
We don't forecast advisory costs or add backs.
I would tell you that it's going to be dramatically lower.
Got it and then and then just in terms of your that the interest expense.
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, I mean, you should annualize $31 6 million.
And so we paid.
In October we closed the deal on October 19, so you'll have to do.
Two months and 11 days in the second quarter, and then going forward. It would just be $31 six divide by four.
Got it thanks for the color and we will be we will be subject to fluctuations in so far but.
I'm not going to speculate on interest rates with the market right now, saying, they're going down.
Great. Thanks.
The next question comes from Eric Wold with B Riley. Please proceed.
Yes.
Thank you just a couple of questions I guess first off.
Given what you learned with the testing around the pricing and promotional cadence.
Turn comps positive in October as 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 additional levers.
That could be pulled that you haven't launched yet but are.
Since you're confident it can be an added boost.
Yes, I think theres going to be two primary focuses so to give you some context.
In the first quarter.
<unk> revenue was $117 million.
Right.
F&B revenue was 72.
You know round numbers we're.
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.
That is a multiyear journey.
But we think the menu has dramatically changed for the positive and 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.
We're going to keep going.
Obviously selling that the the.
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 multi pronged approach.
Got it Okay, and then second question on <unk>.
Event business.
What are you seeing in terms of.
Bookings in terms of the number of events versus average commitment are even more events at similar pricing or is the average size of the commitment is also increasing and break that down.
Yes, I think that more events site sizes are coming down a little bit.
But that's why we flagged the top 50 because of the top 50 for us up but overall we are seeing.
And we've always viewed ourselves as.
A better value for the events 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.
Perfect. Thank you.
The next question comes from Daniel Moore with CJS Securities. Please proceed.
Thank you for all the color most have been answered, but just as it relates to the learnings from the promotional activity you know kind of experimented with during the quarter.
It does it sounds like they have largely come back any of those mid week or family bowlers not fully come back yet that might create a little bit of a tailwind in the second.
Just how does that experience impacts, how you test or tweak promotions going forward.
Yes, there is more to come so we only brought back.
N D.
Third week of September we only brought back Monday and Friday late night.
So we didn't bring back the full.
Full special.
Until.
Mid October.
And there was still take.
Few weeks to percolate through the system.
So we definitely see.
A tailwind in the coming few weeks.
Got it and then is that kind of change your mindset or tweak how you would think about.
Implementing promotions or pulling back on them going forward.
I mean promotions have to be worked out right. So we had a college night.
That you know.
We had an about 50.
<unk> hundred 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 that college night, and Thursdays right now our best night of the week.
So we will be very tactical on it.
I think you know.
Priorities are going to be.
Analyzing when we have empty lanes.
In filling them.
It makes sense and lastly, any update on just penetration money ball how that.
[noise] trended throughout the quarter. Thanks again.
Yes, it's a moneyball.
We are we haven't 64 centers still operating but we're turning it into and out of center experience.
Youll start I'm sure all the guys who are on the call.
It will probably get like advertisements in the next few months it download moneyball 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 up selling we're actually going to use technology to do as well.
And money ball 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. So it's the journey is still there we're still pretty excited about it. We're just we're waiting for the website to be more up to speed.
Cause I think that money ball in a world where you can go onto 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.
Alright, Thanks again.
Thank you ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Yeah.
Yeah.
[music].