Q3 2024 Bowlero Corp Earnings Call
Good morning, and welcome to Polaris third quarter 2024 conference call all lines based on mute to prevent any background noise. After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Ross.
Speaker Change: And again, thank you all.
Speaker Change: I'd like to turn the call over to Bobby Lavan, Chief Financial Officer. Please go ahead.
Speaker Change: Good morning to everyone on the call. This is Bobby Lavan alerts Chief Financial Officer.
Robert Lavan: Welcome to our conference call to discuss Polaris third quarter of 2020 for earnings.
Robert Lavan: We issued a press release announcing our financial results for the period.
Robert Lavan: It ended March 31, 2024 copies of the press release is available on the Investor Relations section of our website.
Robert Lavan: Joining me on the call today are Thomas Shannon, our founder Chairman and Chief Executive and lead actor or pricing.
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.
Robert Lavan: Forward looking statements are also subject to inherent risks and uncertainties that can 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 Securities and Exchange Commission.
Robert Lavan: <unk> Corporation undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances that occur after today's call.
Robert Lavan: Also during today's call the company may discuss certain non-GAAP financial measures as defined by SEC regulation G.
Robert Lavan: 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 maybe found on the company's website.
Robert Lavan: I'll now turn the call over to Tom.
Robert Lavan: Good morning, Thank you for joining us today, I am Thomas Shannon founder Chairman and CEO of Bolero Corporation.
Thomas F. Shannon: <unk> had a solid third quarter with total revenue growth of eight 8%.
Thomas F. Shannon: January was a challenging months because of blizzards and flooding across the country.
Tom: Following this weather impacted results our same store comp was positive in both February and March and our total growth was double digits.
Tom: This follows the Companys second quarter in which we produced same store sales growth of <unk>.
Tom: 2% and total company growth of 13, 4% a.
Tom: Our results in the second and third quarters are better than most or all of our competitors in the location based entertainment space.
Tom: When we acquired Lucky strike, we were impressed by how much food and beverage they sold to each customer we.
Tom: We have taken some of the learnings from Lucky strike and began to implement that into our F&B business. We are revamping, our menus, increasing food and beverage training and improving our hiring processes to make the strong organic impact on our business.
Our new premium menu, which launched and recently opened Lucky strike Miami include salads, gluten free options Val bonds, honey chicken sandwiches and more variations of our excellent pizza.
Tom: Additionally, we continue to instill a selling culture that began last summer with the implementation of the bowling special.
Tom: Im excited about the opportunities in front of us as we train and incentivize our employees to sell more.
Tom: The quarter was marked by substantial investments and traffic driving initiatives.
Tom: These initiatives, though with some added costs have proven their worth as evidenced by our industry, leading same store comp growth level.
Extra: <unk> extra will discuss these initiatives in a few minutes.
Extra: Our best in class events platform continues to outperform.
Extra: <unk> revenue increased 27% year over year in the third quarter and leaves were up 9% year over year as we expanded social league opportunities combined with growing brand recognition from our PBA ownership.
Extra: We continue to deploy capital in acquisitions and new builds we opened lucky strike Miami in the third quarter with results moving higher weekly and above our expectations.
Extra: We have four new builds coming online in the next nine months with two opening in Denver. This summer one opening in Beverly Hills in early fall and another opening in Orange County, California in the late fall and we are actively engaged on a pipeline of approximately a dozen more newbold locations. Following these.
Extra: Last week, we acquired raging waves, the largest water park, Illinois, and a transaction that came with approximately 53 five acres of land.
Extra: With this acquisition, we acquired a superb very profitable property and partnered with a strong operator in the regional water parks space at an attractive valuation, we think theres significant upside in this property.
Extra: I'm also happy to provide a positive update on the status of the EEOC matter.
Extra: On April 12th of this year.
Extra: <unk> issued closure notices for the approximately 73 individual age discrimination charges.
Extra: Phil.
In most cases many years ago.
The notices communicate that the EOC has dismissed the charges and will not bring suit against the company in the individual cases.
Extra: Additionally on this most recent Friday may three.
Extra: The EOC issued an additional closure notice for the pattern and practice directed investigation.
Extra: In that notice the EOC wrote quote the commission has determined that it will not bring a civil action against bolero under the age discrimination Employment Act unquote.
Extra: And also on Friday.
Extra: We received a positive court ruling in Richmond, Virginia that the case CNBC had breathlessly reported.
Related to our former employees attempt to countersuit bolero had been denied.
Oh, great and a half years. The company has vigorously denied and contest at the false allegations made against it and is pleased to see that the ERC has closed its files.
Extra: We are disappointed that media outlets, mainly CNBC have told only one side of the story no matter, how preposterous acting as a show for attempts to damage our reputation and leveraging unwarranted settlement.
Extra: We are pleased to report these very positive developments on behalf of our shareholders.
Extra: Let me hand, it over to <unk> to talk about our internal initiatives and then Bob who will review the financial details.
Speaker Change: Thanks, Tom as I discussed last quarter, there is material white space to provide the consumer a better experience and increase wallet share and our locations. This quarter, we saw the benefit in traffic coming from two internal initiatives.
Speaker Change: First with amusements, we have improved guest satisfaction through increased gameplay.
Speaker Change: We have seen benefits to traffic as exhibited in our February March and April comparative.
Speaker Change: This should help continue drive traffic in the slower months.
Speaker Change: We have invested materially in our PVA programming.
Speaker Change: Since the start of the year $18 5 million viewers have watched the PBA on Fox <unk>, one or <unk>, two which is 16% more than at the same point last year.
Speaker Change: The increase is even higher among younger viewers with the male 18 to 34 demo reach up 22% year over year.
Speaker Change: Yours are watching more PBA than ever before as average minutes viewed per viewer has steadily increased each year and so far in 2024 that is already 15% higher than it was in 2019. The first year. The TBA aired on Fox sports.
Speaker Change: We have more stops and televised shows which means more awareness and ultimately supports the value proposition of the TBA to Valero and the industry overall.
Speaker Change: Lastly, as Tom mentioned, we are leaning heavily into increasing food and beverage sales.
Speaker Change: This has become a primary focus new menus and updated pricing rollout over the next few months. Additionally, in kitchen training and the continued development of our sales culture will lead to improve F&B uptake benefiting from the foot traffic generated by initiatives like our new summer season pass and then lead.
Speaker Change: Into the critical holiday period, we will continue to optimize our offerings to improve customer satisfaction traffic and increased spend as we look to be the out of home entertainment destination of choice that is how we will continue to outperform our peers now let me turn it over to Bobby.
Robert Lavan: Thanks Glenn.
Robert Lavan: The third quarter of 2024, we generated total revenue ex service fee of $336 4 million and adjusted EBITDA of $122 8 million compared to the last year of $309 1 million and adjusted EBITDA of $127 6 million.
Robert Lavan: As a reminder service fee revenue as a pass through a non contributor to earnings and being phased out.
Robert Lavan: Our total growth was positive eight 8% and same store comp was negative two 1%.
<unk> is the sole contributor to the negative comp for the quarter.
Adjusted EBITDA was $122 8 million compared to $127 6 million in the prior year.
Robert Lavan: Worse than we expected we're excited about the topline contribution and customer satisfaction from two meaningful traffic driving initiatives.
Robert Lavan: Amusement comp gross profit year over year in the quarter was minus $5 million as we invested in better experiences for the consumer.
Robert Lavan: I'd love to cut the PVA is seeing significant growth this year as we increase stop and TV coverage throughout the quarter. This swung PVA to a $2 million loss in the quarter.
Robert Lavan: This will continue into <unk> hundred 24, as we ramp up incremental sponsorship on the better results.
Robert Lavan: We continue to invest in our people and their same store comp payroll up $4 million year over year, which is better than last quarter at $6 million.
Robert Lavan: Our cost structure, primarily employees payroll normalizes after double digit bump to payroll in March 2023.
Robert Lavan: Corporate expenses are down while we continue to invest in our event calcium non.
Non comp centers contributed 11 million of EBITDA on approximately $35 million of revenue Lucky strike outperformed our expectations with the $6 million contribution to EBITDA in the quarter compared to $5 million in the previous year.
Robert Lavan: The FERC four weeks of April 2024 have been strong, but due to the investments we made in the third quarter. We are taking our full year guidance to low end of the range previously disclosed.
Robert Lavan: It still implies double digit revenue growth for the year and significant revenue and EBITDA growth in the fourth quarter.
Robert Lavan: Please note that in the quarter and we closed one center, which is reflected in the end center count of 352.
Robert Lavan: In the quarter, we spent 13 million on growth Capex $9 million on Newbuild and $7 million of maintenance.
Robert Lavan: 12 million on acquisitions, we also updated our capital guidance for the year.
We are increasing our M&A spending $220 million from $190 million, we are lowering conversions from 80 million to $70 million as we focused on internal organic opportunities to drive returns.
Robert Lavan: <unk> will be higher as we continue and ramp up well adjusting newbuild capex this year to 45 million from $40 million.
Robert Lavan: We plan to continue to balance investing in our growth and rewarding our shareholders. Our liquidity at the end of the quarter was $437 million with nothing drawn on our revolver and $212 million of cash.
Robert Lavan: That was $943 million bank credit facility net leverage ratio was two four times.
Speaker Change: Thank you for your time, and we look forward to taking your questions operator.
Speaker Change: Thank you we will now begin our question and answer session. At this time, if he would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question seem to press Star One again as a reminder, please limit yourself to one question and one follow up only.
Speaker Change: For just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Stephen <unk> from Stifel. Please go ahead.
Stephen: Hey, guys good morning.
Stephen: So I want to start with going back to the third quarter and I guess, if we can.
Stephen: Go back and think about when you guided.
Stephen: It was early February you pretty much had an idea of what the weather headwinds, where we're going to be so I guess.
Stephen: What we're trying to figure out is what kind of drove the underperformance relative to the third quarter guidance was it really just driven by some of the investments that you guys talked about in your prepared remarks in terms of trying to drive more foot traffic and just I'm just trying to tie the guidance versus where the quarter came in thanks.
Speaker Change: Yes, it was entirely costs Steve.
Speaker Change: So we're.
Speaker Change: We're pretty aware of where our revenue is kind of going at but at the time of the February report, we werent completely clear on both payroll cost and sort of the costs from investing in amusements and PVA.
Speaker Change: If you go back to January is our highest.
Speaker Change: <unk>.
Speaker Change: Quarter or month.
Speaker Change: So when that month, just had the massive dry.
Speaker Change: <unk> it.
Speaker Change: It creates a little bit of uncertainty on the costs, we have gotten a handle of that in February March and so if it were just for February and March we would have.
Speaker Change: We beat our numbers, but it's a miss and we're moving forward.
Speaker Change: Sure.
Speaker Change: Okay and then second question is we've got a lot of questions. This morning.
Speaker Change: About the acquisition outside of the the bowling space and I guess first can you can you help us think about what you paid for that acquisition and then maybe what that Waterpark is doing EBITDA and then the second part of that question is.
Speaker Change: One of the questions. We've gotten is why go outside the bowling.
Speaker Change: Call It arena and look at other entertainment options given in.
Speaker Change: In your presentation, you guys still believe there's a huge opportunity in terms of driving.
Speaker Change: Youre bowling store count.
Yeah.
Speaker Change: Hey, this is Tom Shannon and good morning.
Thomas F. Shannon: Yes, there is still remaining market for bowling is quite large but Boeing in the U S is only a $4 billion Tam and when you look at.
Thomas F. Shannon: Location based entertainment, it's more like $100 billion Tam. So we were presented an opportunity to buy a really beautiful asset very well maintained well located.
Thomas F. Shannon: 53 acres right sort of on the edge of the western suburbs of Chicago.
And to partner with a really good operator with decades of experience running these at an attractive valuation and we thought it was a great foray into looking at this.
Thomas F. Shannon: Sort of asset that goes beyond Boeing with shares many of the fundamental similarities with Boeing.
Thomas F. Shannon: Very low variable cost.
Thomas F. Shannon: We understand I think the consumer in this segment very well and I'll say this.
Thomas F. Shannon: About a year ago, maybe nine months ago.
Thomas F. Shannon: Purchased.
Thomas F. Shannon: Asset called Mavericks, and octane in Scottsdale, Arizona and half of that business was a indoor go-cart track.
Thomas F. Shannon: And.
Thomas F. Shannon: There was a lot of negative sentiment about.
Thomas F. Shannon: Buying the go kart track and had we sort of lost faith in the Boeing business and.
Thomas F. Shannon: We're about seven months into that acquisition on the run rate. It's on it's going to do $8 million of EBITDA.
Thomas F. Shannon: Against the purchase price of $33 $5 million and really no. Subsequent investment after that so there are a lot of really really good businesses and location based entertainment that share fundamental similarities with Boeing but arent bowling and we're availing ourselves of that rather not get into.
Thomas F. Shannon: To what we paid for it but on a multiple basis commensurate with what we paid for the majority of our bowling acquisitions over the last couple of years.
Speaker Change: Okay, great. Thanks for the color I appreciate it.
Speaker Change: Sure thing.
Speaker Change: Okay.
Speaker Change: The next question comes from the line of Matthew Boss from Jpmorgan. Please go ahead.
Matthew Robert Boss: Great. Thanks.
Matthew Robert Boss: So Tom could you elaborate on trends that you've seen with walk in retail traffic as the third quarter progressed, maybe what exactly have you seen from same center comps in April and how best to think about expectations for comps in the fourth quarter.
Matthew Robert Boss: Yeah.
So Matt the problem with our business in terms of making predictions is it's very short cycle right. So we were positive in December we fully anticipated.
Thomas F. Shannon: Positive January and we.
Thomas F. Shannon: We were surprised by the weather Unfortunately.
Thomas F. Shannon: But we were we had a positive comp in February we had a positive comp in March and in the period that just ended yesterday in fact, our preliminary numbers are that on a same store basis were up over 6% and on a total company basis revenue was up 20%.
Thomas F. Shannon: So.
Thomas F. Shannon: On a same store basis were up four out of the last five periods. I think we would have been up in January except for the weather, but regardless the trend is very positive.
It's a tough environment, we see that the consumer is spending but the consumers being more discerning. The good news is that I think we're winning the market share battle you can't be up 6% what everyone else is down.
Thomas F. Shannon: In some cases meaningfully down.
And not be picking up market share. So I think the company is executing extremely well.
Thomas F. Shannon: We were cycling a lot of legacy costs as Youll recall.
Thomas F. Shannon: Around.
Thomas F. Shannon: March of last year, we gave sizeable increases in compensation to.
Thomas F. Shannon: All of our managers in the field between 12% and 17, 5% increases and we're just cycling that now. So you had a combination of two factors over the last year, we were comping against very very very high post COVID-19.
Same store comps year over year up.
Thomas F. Shannon: Up double digits up wildly so we're comping against that and at the same time, We institute a massive wage increase to create more stability in 10 year, among our managers, which has been successful in achieving its goal.
Thomas F. Shannon: Do you have the combination a year ago of a very tough comp on the revenue side and we created a very tough comp on the cost side those trends have now reversed themselves.
Thomas F. Shannon: We now have relatively easy same store sales comps and we've cycled that enormous wage increase that we put through.
Thomas F. Shannon: And Thats why.
Thomas F. Shannon: Partially why on a comp basis in February were up 6%, which is I mean, it's orders of magnitude versus what everyone else is doing I take no joy in saying that other than to illustrate the point that it's a very tough environment for everyone in the space and 6% is a massive outperform.
Thomas F. Shannon: It didn't happen by accident, it's happened by a very very focused effort.
Thomas F. Shannon: By Bobby and lab to drive traffic in a variety of ways.
Optimizing our online booking process streamlining that.
Thomas F. Shannon: Driving more traffic to the website economically we've driven down our customer acquisition cost by half on a year over year basis.
Thomas F. Shannon: And now we have the summer pass, which is our our season pass for the summer where you can come in and bowl their various packages with the standard packages you get two games everyday for one low cost upfront akin to what the ski areas due for their winter season passes and the past.
Thomas F. Shannon: Become eligible for use until around memorial day through yesterday, we had already sold one $5 million against our goal in the $10 million to $15 million range. You may recall that last year, we eliminated that.
Thomas F. Shannon: So again this summer we have a lot of tailwind.
Thomas F. Shannon: We're doing all the right things, we are driving traffic and we're coming up against a relatively easy comp.
Thomas F. Shannon: Four out of five of the last periods positive same store sales on a consolidated basis, we're seeing the impact of the Lucky strike acquisition, a handful of other individual center acquisitions and also year to date, we've opened three new builds in San Jose More Park, California and in <unk>.
Thomas F. Shannon: And they are all outperforming.
Thomas F. Shannon: From where I sit the news is very very good.
Thomas F. Shannon: Yes.
Thomas F. Shannon: Is encouraging, particularly the 6% comp in April I guess, what's your confidence in sustaining positive low to mid singles from here and historically, how has bowling held up and more recessionary backdrops and then Bobby I just had one for you. If you could just help walk through the drivers in the fourth quarter of the EBITDA.
Speaker Change: Margin expansion just relative to the third quarter contraction I think that would be really helpful.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Like I said, it's really hard for us to make predictions because it's such a short cycle business from where we are now I would expect that the trend that we have.
Speaker Change: Low to middle single digit same store sales comps will sustain itself through the rest of the year.
Speaker Change: We're seeing strength really in all parts of the business for example.
In.
Speaker Change: In the.
Speaker Change: The April period that just ended yesterday.
Speaker Change: The sustained store event comp was up over 15% I expect that all of those numbers are fully baked it'll end up being up more like 60% or 17%. The league business is performing extremely well, we're doing well on the retail walk in business, we have a lot of initiatives to drive organic food and beverage sales.
Speaker Change: In center, which is something we've always underperformed on but we're no longer we are no longer going to accept that as the status quo and thats a comprehensive redo from training.
Speaker Change: Two menus to presentation and center at all of that so all of the things that we can control I think are driving this result, now if you have some exogenous shock to the economy or other things that we can't predict again.
Speaker Change: All of this goes out the window, but based on where we are now and based on the trend I feel very confident that low to mid single digit same store sales comp is readily achievable.
Speaker Change: End of the calendar year.
Yes, Matt.
Matt: So when you go to the EBITDA expansion, you would expect our EBITDA margin and EBITDA expansion, we expect in the fourth quarter. It really comes down to.
Speaker Change: We need to have a few points of positive comp yet EBITDA up but the second net youre above a 2% comp the dollars flow through at anywhere between 75% to 90% in this circumstance.
Speaker Change: We've taken costs out over the past year and there are some legacy costs.
We've been very clear about this litigation, we have that going on for the past year and all of those are going away. So we feel very strong going into the fourth quarter, we sort of lapped a year of frothiness plus wage increases we can see those real time and those are flat.
Speaker Change: Now at the end of the day and we are taking costs out of our service centers as well as you've seen the costs coming out of corporate.
Speaker Change: That's great color best of luck.
Speaker Change: The next question comes from the line of Jason <unk> from Canaccord Genuity. Please go ahead.
Jason: Yes, thanks for taking the question. Good morning, I'm, just curious when the events business revenue remained really strong up about 30% year over year for the second consecutive quarter. I was wondering if you could call out anything in terms of the mix between corporate non corporate.
Speaker Change: Anything to comment on there would be very helpful.
Speaker Change: Yes, we've seen a pick up in corporate.
Speaker Change: They parties and online, but really the mix has been strong across the board as we continue to upgrade systems processes and we've simplified pricing on our events platform. So we've talked about pretty openly about having our pricing consultant in here we used to have.
Speaker Change: 12000 different skus in 100 different open bar packages, we simplified that significantly and the team also continues just punch above its weight.
Speaker Change: Okay, Great. That's helpful and just a follow up you mentioned the pricing consultant.
Can you talk about that sort of contract running up soon and you just recently instituted a some other price changes sort of across the board I was curious about the customer response to those over the past few months.
Speaker Change: Any update on where any remaining pricing changes that we would expect the balance of this year.
Yes, we took we took shoe pricing down at the beginning of April.
Speaker Change: Which we feel like shoe is one of these things that the customer feels is overpriced.
Speaker Change: We've seen only positive reaction to it based on our traffic data I mean, I would just look at some of the centers, we took shoes down the most they were up the most last week.
Speaker Change: We will take pricing up on.
Speaker Change: In the coming months as we roll out the new menu and we're excited about both the pricing and the uptake there.
Speaker Change: Great. Thank you very much.
Speaker Change: The next question comes from the line of Jeremy Hamblin from Craig Hallum Capital Group. Please go ahead.
Jeremy Scott Hamblin: Thanks wanted to just come back to cost for a second here and just understand a little bit about the seasonality.
Jeremy Scott Hamblin: That we should expect here in the fourth quarter. So.
Jeremy Scott Hamblin: As you noted Q3 typically your strongest quarter in terms of revenue also your highest in terms of embedded cost to operate.
Jeremy Scott Hamblin: I imagine you get.
Jeremy Scott Hamblin:
Jeremy Scott Hamblin: It's a downtick in terms of that that cost.
Jeremy Scott Hamblin: Well to operate in Q4, but also wanted to understand in terms of some of the investments that you noted.
Jeremy Scott Hamblin: In PBA.
Jeremy Scott Hamblin: How should we be thinking about that here as we look forward to Q4, presumably maybe some sequential declines in.
Jeremy Scott Hamblin: SG&A spend.
Jeremy Scott Hamblin: And then also in terms of.
Jeremy Scott Hamblin: The cost to operate in Q4.
So youll continue to see SG&A spend coming down so that that has been a the tip of the spear for us on how to manage inflationary dynamics.
Jeremy Scott Hamblin: From a payroll perspective payroll.
Jeremy Scott Hamblin: In the comp centers and <unk> 24 was $68 million that comes down by.
Jeremy Scott Hamblin: About 15% sequentially.
Jeremy Scott Hamblin: In the fourth quarter and that's just a seasonality dynamic we are looking at other opportunities there from a center a fixed cost perspective that old because while some of the seasonal winter seasonal issues go down this summer utilities go up so really the key.
Jeremy Scott Hamblin: <unk> flex is going to be on center payroll and any sort of cost.
Speaker Change: <unk>, we do.
Speaker Change: And that's how you should think about sort of the system is that SG&A sequentially down corporate sequentially down and payroll meaningfully stepped down and thats why in a world where we have.
A good mid single digit comp, there's just a lot of operating leverage going into the fourth quarter.
Speaker Change: Great helpful color and then just as a follow up with you.
Speaker Change: The nice update here on EEOC.
Is there any.
Speaker Change: Do you have a kind of a specific call out in terms of whether or not that's had additional costs from our litigation and legal perspective.
Speaker Change: That with that kind of in the rearview mirror.
Speaker Change: On an annualized basis, what you think the benefit might be to the company.
Speaker Change: Yes, I would say there has been a few million dollars that flows through the income statement, but more importantly, its been a distraction and.
Speaker Change: And so we're happy to.
Speaker Change: Focus 100% now on our business and get this behind us.
Speaker Change: Great last one for me.
In terms of your repurchase plan.
Speaker Change: Believe that you guys still have over $180 million.
<unk> on that.
Speaker Change: Remove the exploration date.
Speaker Change: In prior quarters with the stock below $11, you've been pretty aggressive.
Speaker Change: On buying back the stock of course has generally been above that level in.
Speaker Change: In recent months, but wanted to get a sense, if that's still kind of a range, where you guys see tremendous value.
Speaker Change: And how.
Speaker Change: How.
Speaker Change: When your window opens up on potentially doing something there.
Speaker Change: Yeah, we.
Speaker Change: We look at our performance and we evaluate.
Speaker Change: Where we want to buy a stock we would we would aggressively buy our stock here.
Speaker Change: And in terms of the window.
Speaker Change: When it reopens.
Speaker Change: We don't comment on those kind of mechanics.
Speaker Change: Got it.
Speaker Change: Thanks for the updates and grow our best wishes.
Speaker Change: The next question comes from the line of Ian Zaffino from Oppenheimer. Please go ahead.
Ian Alton Zaffino: Alright, Thank you very much.
Ian Alton Zaffino: Wanted to ask a couple of questions here.
Ian Alton Zaffino: First one would be Bobby I think you mentioned that Internet, which I guess is pre bookings that I believe were very strong so.
Ian Alton Zaffino: How does that kind of split with how walk in retail moves.
Ian Alton Zaffino: Why would one be strong and then the other one kind of lagging somewhat.
Speaker Change: And then also I know you restored a lot of these mid week promotions have you seen the benefit of those and they kind of baked in or.
Speaker Change: And the consumer been responding the way you expected.
Speaker Change: Yes, so I mean mid week promotions coming back are great because we have an easy comp from <unk>.
Speaker Change: June to October right on top of Tom talked about summer season pass, we're expecting we had nothing last year and we expect to kind of double from where we were two years ago.
Speaker Change: Really focused on traffic.
Speaker Change: Traffic doesn't have to be just a walk in retail.
Speaker Change: Rents are up online is up.
Speaker Change: 100%, so ultimately events and online are going to cannibalize just the walk in retail traffic.
Generally because theres just can be some people who want to book at but Thats, a better experience for the customer and ultimately allows us to upsell them. So it's a better transaction, it's higher <unk> ultimately it allows us to plan better and staff better.
Speaker Change: And what we're really excited about that dynamic as well is that if we have a center thats all this weekend.
Speaker Change: Square as full as we can we don't need to spend online marketing dollars driving traffic there, but if we have a center that might be have lower utilization in the summer. We can go spend shifted marketing dollars from high cost DNA like New York to lower costs and drive traffic into those centers. So ultimately.
Speaker Change: That if you take a step back for years, our business was a pricing game.
Speaker Change: Now its a traffic game.
Speaker Change: And ultimately if we can get traffic into the centers the incremental leverage on that is dramatic.
Okay.
Speaker Change: <unk>.
Speaker Change: And then can you just maybe help us understand how the comps progressed throughout the quarter.
Speaker Change: I know you had a tough January but when you say tough was that sort of down mid teens.
Speaker Change: Kind of do the math or make some assumptions. That's it seems like and then you kind of were doing low singles in February and March is that kind of directionally right.
Speaker Change: And Thats the case I guess the thing you saw an acceleration to the 6% in April just trying to get a sense of the cadence of the biz.
Speaker Change: Bye bye months thanks.
Speaker Change: Yes. The first three weeks of January were worse than minus 10.
Speaker Change: We ended January minus 7%.
Speaker Change: February was plus 1% and March was plus three and April as Tom said was plus six.
Speaker Change: Okay.
Speaker Change: Okay perfect. Thank you very much.
Speaker Change: The next question comes from the line of Eric Handler from Roth MTN. Please go ahead.
Eric Owen Handler: Yes. Good morning, Thank you very much.
Eric Owen Handler: I'm wondering if you could talk a little bit about all the various initiatives that are working in amusements to drive that business.
Speaker Change: Hey, good morning, let X they are here so.
Speaker Change: When I started with Amusements Department, we didn't have very many company owned arcades today, we have over 330 centers with company owned arcades and we consider ourselves to be a real player in the music space, but I don't think the consumer has caught up fast enough considering us for that business and so on.
Speaker Change: All of these initiatives were to expose our amusements business to more consumers and to drive repeat visits as a result.
Speaker Change: Offering them more game play.
For a similar amount of cost then.
Speaker Change: That are prizes and redemption.
Speaker Change: Winning more.
And overall, just a better guest experience because as Tom as Bobby mentioned, we're in the trafficking, we want to provide as good of an experience as possible to drive those repeat visits because at the same time, we're getting better and really focused on increasing our F&B attachment when they come back right. So music has become a major.
Speaker Change: <unk> pull for us for traffic and to do so we wanted to offer a better experience, but also.
Speaker Change: But a bigger spotlight on our amusements business. So we've even recently been engaged with.
Arcade Influencers visiting our centers sharing content, we never had that level of focus on marketing our amusements business like we have today.
Speaker Change: Getting back to our redemption prizes, we want our guests to feel like they got a great value for their spend.
Speaker Change: We're bringing in products that are market specific with fanatics right. We want it can be a better experience.
Speaker Change: And that's a 360 degree view more game play.
Speaker Change: Better game selection better prizes more value and as a result.
Speaker Change: Pete visits and a better sentiment towards our meetings business.
Speaker Change: Locations as a whole.
Speaker Change: So as a follow up then I'm, assuming the more time well the more people spend on amusements and the more time. They are spending in your centers, which I imagine that has a trickle down effect on food and beverage can you talk about like what happens if a person spends one.
Speaker Change: Incremental hour in your center, maybe what that translates to an incremental spending our margin.
It's a good question.
Speaker Change: I would say the average dwell time in our centers right now is about 105 to 110 minutes.
Speaker Change: We have seen that creeping up it's still early days, but really if somebody were to order. Another cocktail I mean, that's the 10 $12 increase with very little cost.
Speaker Change: And you multiply that by.
Speaker Change: 40 million people I mean, the numbers get meaningful very quick and so.
Speaker Change: We are very focused on traffic.
Speaker Change: This summer.
Speaker Change: Because from our perspective.
Speaker Change: We crush it in December January we got.
Speaker Change: Whipped around on the weather, we did fairly well in February March.
Speaker Change: Well, we have this fixed cost structure, we have.
Speaker Change: Payroll structure and so ultimately if we can add.
Speaker Change: Yes.
Speaker Change: $100 million of revenue in the summer, that's a meaningful change to our business and if we give people a better experience, particularly with the season pass and Theyre going to come back in November and December so the flywheel of getting people into the center is giving them a premium experience letting them engage with.
Speaker Change: The new menu, the new arcade dynamic really improves customer satisfaction and we've seen our NPS go up our NPS is up has gone from 62% to 65 in the past six months, which is meaningful for us and ultimately we think customers are choosing us.
Speaker Change: Thats really exhibited in the fact that our comp in April is.
Speaker Change: Strong and Thats, where we want to be.
Speaker Change: Great and just if I could one quick follow up in terms of the new menu. How many centers have the new menu, how many center how long before it rolls out everywhere.
Speaker Change: Yes, so just to share a little bit more about how we're reviewing our food and beverage attachment and the focus there. So as Tom mentioned, so it's a really big focus and we've kind of underperformed there historically so.
Speaker Change: TTM apart centers are averaging 65, and food and beverage spend every retail bowling dollar I've seen firsthand being here in Miami at our new location Lucky strike Miami that number is closer to $2 25.
Speaker Change: So we can really see what's possible with this level of focus on food and beverage sales, but thats a comprehensive effort right. So as Tom mentioned new menus.
Speaker Change: The new menu items new pricing.
Speaker Change: The presentation of the menu going from multiple sheets to a trifold or in Miami's case on our luxury menu of book.
Speaker Change: New hiring standards to get chefs.
Kitchen managers into our locations, where we're assessing them now on our skills based approach versus using zoom into these were getting them into our kitchens to see how they perform and we're filtering a lot better.
Speaker Change: More training on the soft skills of selling food and beverage.
Speaker Change: We're taking a look at our our windows for food sales right. We've had like this food truck design wherever reevaluating it.
Speaker Change: We are evaluating the bari displays to be more impactful and bigger focal points for our consumer.
Yes.
Speaker Change: It's like a comprehensive approach and food and beverage sales on top of driving more traffic into our centers and if we get that 60 <unk> closer to one dollar.
Speaker Change: Really really meaningful stuff.
Speaker Change: We're going to be rolling out our traditional to your question our traditional premium menus in late May into June and then the luxury menu I mentioned.
Speaker Change: Danny do the Lucky strikes and the higher end <unk> that'll be June into July. So by the end of July all of our centers will be on a new menu new pricing and we're also getting a real look to scaling our cheeky monkey concept.
That came with our acquisition of Lucky strike Fenway joining.
Speaker Change: Joining space.
Really cool concept.
Speaker Change: Revamping the brand identity right now in the menu there, but we've identified 10 of our existing locations that has.
Speaker Change: Viable restaurant space is already built in that are just looking for a great concept and we think cheeky monkey is just that.
Speaker Change: Thanks.
Speaker Change: Welcome.
Speaker Change: The next question comes from the line of Eric both from B Riley Securities. Please go ahead.
Eric Owen Handler: Thank you. Good morning, two questions from me I guess I guess, one just a quick follow up on your earlier comments on the season. The summer season pass you mentioned that you have done $101 5 million.
Eric Owen Handler: Getting to your goal of 10 to 15, how does that one five.
Eric Owen Handler: Compare kind of from the start of selling to date to prior year that the sole mccain or similar offering.
Eric Owen Handler: We're running ahead of back then are kind of in line.
Speaker Change: Yes, it's a really interesting question, because it's not necessarily apples to apples so.
At its peak the season pass sold about a little over $6 million.
Speaker Change: But this year with the launch of the summer season pass so we rebranded it from summer games, and we really improve the value proposition the pricing model to the consumer that you can get kids passed an adult pass option. There just one pass now which is similar to our bowling pricing right Theres No kids bowling in adult all in price.
Speaker Change: We have a basic pass and premium pass now the premium pass gets you a slight discount in food and beverage sales gets you some of our key credit so it's a better experience but.
Speaker Change: Through the first three weeks of selling this past, where we've reached at $1 $5 million in sales that's pre redemption. So historically when we sold the pass those through Q4.
Speaker Change: Three weeks, you were able to buy it and use it that visit and Redeemer right away right now, we're calling it a presale.
Speaker Change: And you can't redeem it until May 24, so obviously it increasingly harder to sell it right now right because you don't get the same.
Speaker Change: Instant gratification of using it at the time of purchase.
Speaker Change: So the $1 $5 million. During this period I think is really really encouraging and I think may 24th when redemption opens up and you can purchase it and use it in that same visit youre going to see it exploding sales.
Speaker Change: Got it helpful and then last question.
Speaker Change: Hello.
Speaker Change: High level question I guess, there's been a lot of focus on investments over the past year, plus the drive traffic, including.
Speaker Change: The current quarter or the last quarter, you talked about the investment.
Speaker Change: The PVA.
Speaker Change: And then obviously you continue to focus on payroll can we get to a point where.
Speaker Change: We feel you can take the foot off the gas of these investments and still be able to sustain.
Speaker Change: Any traffic gains or should we now think about maybe a longer term.
Speaker Change: Need to spend at higher levels, just to kind of get to that normal traffic and kind of expect maybe a longer term lower margin as a result.
Speaker Change: Yeah.
Speaker Change: Youre going to see the investments come down I think we probably overshot a little bit this quarter.
The new website turns on <unk>.
June 2nd.
Speaker Change: The PBA renewal reset next year.
Speaker Change: And amusements, we continue to Tinker refining the right answer, but what I think youre going to see is a meaningful step up.
Over the next 12 to 18 months of revenue from these other ancillary lines, whether it's F&B, whether its PBA, whether it's amusements and so youll see a very strong comp in the near term.
Speaker Change: Then we will get back to sort of a run rate mid mid single digit comp and those investments that are driving that big step up will normalize and come down, particularly the website I mean websites we were spending $200.
Speaker Change: Per acquisition six nine months ago, now we are spending less significantly less than that so youre, just seeing things coming down and really I would call three huge 24 as kind of the nature of all of that.
Speaker Change: That's very helpful. Thank you Bobby.
Speaker Change: The next question comes from the line of Daniel Moore from CJS Securities. Please go ahead.
Daniel Joseph Moore: Thank you appreciate it a lot of the stuff a lot of the questions have been covered but just clarifying guidance near the low end of the range.
Daniel Joseph Moore: Does that mean, it's likely to come in a little above or a little below what should we think of that as the new midpoint I know its semantics, but just trying to clarify.
Yes, it should come in at the low end of the range.
Daniel Joseph Moore: Okay.
Speaker Change: We're always going to have a little we're always going to have a little bit of a range.
Speaker Change: Alright.
Speaker Change: But we feel comfortable with with where we're at.
Speaker Change: Okay.
Speaker Change: And then just.
Speaker Change: You talked about it I mean, certainly Tom talked about it but just how the raging waves acquisition came about.
Speaker Change: And then.
Speaker Change: Given this is obviously.
Speaker Change: As seen in the new opportunity in a much bigger tam, but to expand the Tam.
Speaker Change: <unk> operated for a season or two before.
Speaker Change: Maybe expanding in that new vertical and see how things go just wondering about the cadence of how youre thinking about that thank you again.
Speaker Change: Yeah.
Speaker Change: We have a partner who as a number of these assets and manages them some of them for.
The owners of some ups some of whom are very prominent well known businessmen.
Speaker Change: These guys are the best in the water Park business certainly on the regional and the.
Our regional level. So you think about the market right, it's everything below <unk>.
Speaker Change: Six flags Cedar fair and Seaworld and there are a lot of them out there and.
Speaker Change: Some of them are quite large and and have a very wide moat because as you can imagine it's very hard to build these assets now costs are very high zoning prohibited et cetera. So.
Speaker Change: These businesses, we view as being very very attractive businesses. This particular deal was brought to US by this company, who would have financed it themselves and bought it themselves, but they found that the cap rates that are being offered in the sale leaseback market.
Speaker Change: Other than they wanted to pay and so we made a great deal for both sides, where they run it with the incentive structure and we own it I think that the EBITDA can double from where we purchased it.
Speaker Change: The next couple of years.
Speaker Change: The park is beautiful the infrastructure is first class.
Speaker Change: Well located but there were a lot of things they were doing that are sort of fundamental basics.
Speaker Change: The water Park, an amusement park business I'll give you one example.
Speaker Change: They didn't sell alcohol.
So it can be a 95 degree day in the park is packed with 8000 people, which is about its capacity and you can't get a beer.
Speaker Change: So simply adding that not only enhances the experience for the adults, but gives you meaningful revenue and EBITDA upside one of many examples so like the Boeing business law.
Speaker Change: Largely mom and pop operated older.
Proprietors, who are natural sellers at this point.
Speaker Change: And so the deal was brought to US we jumped on it we've already effectuate. It a lot of changes for example, applying for a liquor license months in advance of closing the transaction, which occurred when we could go to that.
Speaker Change: That location will open around Memorial day, and we'll have basically the entire season to evaluate how we like that business before any other potential transactions would come down the pipe. So thats, a very long winded way of saying, yes, we're going to know exactly.
Speaker Change: <unk>, how this thing is performing and really know how well we like this business in very short order.
Speaker Change: That is helpful. Thank you again.
The next question comes from the line of Randy Clinic from Jefferies. Please go ahead.
Randal J. Konik: Hey, Thanks, a lot.
Randal J. Konik: I guess first question.
Randal J. Konik: <unk> Tom.
Randal J. Konik: How should we just back on the Boeing side of things how should we be thinking about over the next few years.
Randal J. Konik: The split between buy versus build on the bowling center side.
Randal J. Konik: Give us your updated thoughts on how youre thinking about that part of the world.
Randal J. Konik: Well.
Randal J. Konik: The decision is in some ways made by the market. So to the extent that you see more attractive deals on the buy side or the build side.
Randal J. Konik: Fully allocate capital in those directions.
Randal J. Konik: There was a very long period of time, where we didn't see a lot of really good newbuild opportunities either the location wasn't good or the economics weren't attractive.
Randal J. Konik: And over the last two years that has changed and so we opened three new builds this fiscal year, we have four under construction currently in Beverly Hills, two in Denver, and one in Orange County, California, and about a dozen behind that working their way through the pipeline.
Randal J. Konik: So what we're seeing now is on a relative basis much more newbuild activity than acquisitions.
That said, we'll acquire 'twenty, one or 'twenty two.
Randal J. Konik: Existing Boeing centers this fiscal year. So it's not like there was a dearth of that activity, but youre definitely we're definitely seeing.
Higher quality more attractive newbuild opportunities now than we've seen historically the good news is is that the average unit volume of those new builds is significantly higher than the average unit volume of the typical acquisition I would say the typical acquisition because.
Randal J. Konik: This year, we bought the Lucky strike chain.
Randal J. Konik: Which.
Randal J. Konik: Had much higher average unit volumes and the typical centers, we've seen and by the way is on pace I think to dramatically outperform our expectations in the market ex market's expectations. So.
Randal J. Konik: Just a ballpark through about.
Randal J. Konik: Six real months of our ownership those assets are doing ballpark $12 million of EBITDA.
Randal J. Konik: And you can annualize that to a number that will be in excess of $20 million in the first year against the $90 million purchase price I think you could naturally extrapolate that out to eventually get to 25% or $30 million of EBITDA against the $90 million purchase price with all the capex.
Randal J. Konik: Ex that we'd use to enhance those properties generated out of the cash flow from those properties. So it was a really really good acquisition year, because the lucky strike assets.
Our phenomenal extremely well located in major markets and then we've got the brand for free we loved the brand we've tested it we had Nielsen test it and the unaided awareness was 50% higher than it was for bolero. That's why all of the new centers. We're building we're building under the Lucky strike brand.
Randal J. Konik: So it was a really really good year for acquisitions in large part because of Lucky strike.
Randal J. Konik: But the aggregate number in the low twenties is a pretty good number for us historically.
Randal J. Konik: Over the near term you're going to see a lot of the new development.
B, new builds but look a year from now we may we may find that there is a whole new crop of existing centers to buy so we're opportunistic we deploy capital.
Randal J. Konik: In the highest IRR opportunities first.
Speaker Change: And we're not.
Speaker Change: We don't limit ourselves to at this point strictly Boeing that's why we were able to buy Mavericks and octane and Scottsdale that'll do on order of $8 million of EBITDA in its first year against the $33 $5 million purchase price. There is a lot of really really good stuff out there that I view as contiguous to our business and very.
Similar to our business in terms of how it operates and what the levers are and they are all in our sweet spot.
Speaker Change: Okay Super helpful and it shows you, obviously know how to buy and build so I guess my last question would be more for Bobby.
Had the quarter, it's printed it's now behind us.
Robert Lavan: I think we will be very helpful.
Robert Lavan: People listening to the call and trying to frame out more of a long term focus here is how do you think about kind of long term EBITDA margins and where they should sit over the medium to long term and why they should be at those types of levels that would be super helpful.
Robert Lavan: Yes.
I think that.
Speaker Change: Based on what we've seen particularly what we've <unk>.
Speaker Change: Engage on over the past six months.
Speaker Change: We have a long runway of acquiring traffic very accretively.
Speaker Change: And so ultimately.
Speaker Change: I think that will start shifting into the higher end of the 32% to 34% range on an EBITDA margin going into.
Speaker Change: 2025.
But over the long term, we should hold those levels.
Speaker Change: As we find the optimal sort of.
Speaker Change: CAC to LTV transaction or what really gets customers.
Coming and coming more.
Speaker Change: And so ultimately we will continue to invest I expect a material step up in EBITDA over the next sort of 12 to 18 months and then we'll grow from there.
Speaker Change: As we continue to sort of invest but invest where the EBITDA number is higher and the investments are lower as a percentage of EBITDA.
Speaker Change: This is a very like sort of transitory time and that we had is we had a bad quarter, but we had a bad quarter from an investment perspective, we had a bad quarter in that January was just a massive massive drawdown if it wasn't for.
Speaker Change: Or whether the first three weeks this would be a very different conversation, where we would have hit.
Speaker Change: Hit our numbers and continue to invest in the business now we missed their numbers, but invested in the business, we're not going to just stop investing in the business just because of some weather impact, but ultimately I think that the next few quarters youre going to see significant operating leverage because we've invested in that traffic and that traffic is coming in at.
Speaker Change: <unk>.
Super helpful. Thanks, guys.
Speaker Change: The next question comes from the line of Michael Pinsky from Noble capital markets. Please go ahead.
Michael Pinsky: Thank you for taking my questions. Just a couple of follow up one you made comments about the Lucky strike brand is there a prospect for converting bolero locations until Lucky strike.
Michael Pinsky: Oh, yes. The plan is to convert nearly all our all of the bolero is to Lucky strike will eventually consolidate down to two Boeing brands Lucky strike, which will be the experiential as in <unk>, which will be the traditional.
Speaker Change: Gotcha. Thank you Ed.
Speaker Change: We are building in <unk> I'm sorry.
Speaker Change: I'm sorry go on building an infrastructure bill.
Speaker Change: Building an infrastructure for it right now youll start seeing sort of the more prominent.
Speaker Change: All arrows converting that sits in cities that have.
Speaker Change: A lot of investment community.
Speaker Change: We're starting slow, but we are rolling it out.
Speaker Change: Perfect and just one additional question if you could add a little bit of more color on a raging waves I know there is a lot for you to learn about water parks, but do you think that there is a better return on water parks and possibly opening new bowling centers and then can you add more color on the possible rollout opportunity in water parks and.
Speaker Change: <unk>.
Speaker Change: Well I am not new to the water Park space.
Speaker Change: I am as an owner but.
Speaker Change: I look to acquire a location in Florida that was very similar to the one that we acquired similar dynamic elderly seller had been around for a long time.
Speaker Change: And.
Speaker Change: I wasn't able to buy that center, because I didn't understand the concept of a sale leaseback and I could never get to the sellers price.
Speaker Change: Our partner the management partner on this asset raging waves that we bought was actually the guy who bought it.
Speaker Change: He had previously been.
Speaker Change: CEO of six flags less six flags and then started buying these regional assets.
Speaker Change: He took that location from $11 million in revenue to $25 million.
Speaker Change: And EBITDA exploded so.
Speaker Change: Unfortunately, I sat on the sidelines I tried to buy that asset for 11 years, and Couldnt quite get there and I got intellectually arbitrage because.
Speaker Change: This other guy understood the sale leaseback market and I did well now I understand the sale leaseback market and so.
Speaker Change: If you if you think about what the potential is or the likely outcome of this asset once we optimize EBITDAR it would be a perfect asset to flip to the sale leaseback market.
And even at these current cap rates, which are not attractive we would we would probably end up with.
Speaker Change: Proceeds in excess of the purchase price and we still own on order of 50% of the cash flow. So the return would be infinite.
Speaker Change: So I think from a return profile the returns of doing an acquisition like this are far better actually than doing a bowling alley newbuild. The other thing Thats significant is it's more dollars.
Speaker Change: So we're able to put more dollars to work with effectively the same effort.
And I think that's important as we want to continue to scale.
Speaker Change: Doing individual Boeing acquisitions at this point it doesn't really move the needle we have to do more and more of them to maintain the same percentage increase as the asset base grows in size. So what are the advantages of doing these other things is as you end up with.
Speaker Change: Assets that weren't optimized can be doing 12 or $15 million of EBITDA versus two or three or in some cases four so I think that's an important way of looking at the business. We are in no way abandoning or walking away from the Boeing business I want to make that perfectly clear, but we have the wherewithal from a.
<unk> perspective, and from a financial perspective of doing more than just Boeing at this point and there is a whole very interesting world.
Speaker Change: The mechanics of the business are very similar to those of the Boeing business or it's not a leap into the unknown, where we can avail ourselves of them on an opportunistic basis, and I think youre going to find that this is going to be <unk>.
Speaker Change: At the low end this would be a unlevered <unk>.
Speaker Change: <unk> 20, plus percent performer and with leverage or a sale leaseback would be.
Infinite return so.
Like I've said earlier. These are all good opportunities, we pick and choose from the best and work our way down but water. This waterpark investment is in no way a trade down from a return perspective versus buying or building bowling alleys I want to make that perfectly clear.
Speaker Change: Perfect. Thank you for that color, that's all I have.
Yeah.
Speaker Change: And by the way I would encourage all of you to look online look at Google look at what this water park looks like where it's located et cetera.
Speaker Change: A first class.
Speaker Change: Credibly, well maintained and beautiful asset this isn't just some regional election of slides. This is this is themed at a at a very high level.
Speaker Change: And I think we were very very fortunate to be able to get this asset I'd encourage you to diligence that yourselves and see just what we bought here.
Speaker Change: Ladies and gentlemen, there are no further questions at this time discusses today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: And gentlemen, there are no further questions at this time discusses today's conference call. Thank you for your participation you may now disconnect.