Lucky Strike Entertainment Corporation 2026 Q4 Earnings Call

This is Bobby Lavan, Lucky Strike's President and Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike's fourth quarter 2026 earnings. Today, we issued a press release announcing our financial results for the period ending June 29, 2026. A 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 and Chief Executive. I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed.

For additional information concerning factors could cause actual results to differ from those discussed in our forward-looking statements, you should refer to the cautionary statements contained in our press release as well as the risk factors contained in the company's filings with the SEC. Lucky Strike Entertainment undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure is most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website. I will now turn the call over to Tom.

Thanks everyone for joining today's call. Despite a weak consumer at the lower end of the K and general macro uncertainty, we finished fiscal 2026 with a same-store sales comp of -0.2%, a 3.5 point improvement over the prior year and our best comp performance since fiscal 2023. Total revenue grew 4% to $1.245 billion and adjusted EBITDA was $333 million, reflecting a year of deliberate investment in marketing in our water park platform and in the technology and leadership that position us for fiscal 2027. Had it not been for the World Cup and its record-breaking viewership and the conflict in the Middle East that drove consumer confidence to its lowest level in 70 years, our full-year comp would almost certainly have been positive. There are green shoots across the business and they are broadening. Ex-California, the company comped up +0.9% for the year.

Retail bowling and shoe revenue comped +2.9%. Leagues grew +3.6% and accelerated in each of the last 4 months. Food comped +8% and events, one of our most important product lines, turned positive in May and June for the first time since 2024 and remained positive in July and August, its best stretch in years. The fourth quarter started well. April was roughly flat, May swung to +2%, and we entered June with strong momentum. That momentum was disrupted by an extraordinary stretch of at-home sports viewership. on June 11th, the most-watched World Cup in American television history kicked off on home soil for the first time in a generation. The July 19 World Cup Final drew roughly 66 million viewers across platforms, the largest American television audience since the Super Bowl.

Layered on top of that, the Knicks won their first NBA title in 53 years in the most-watched finals in 28 years, averaging more than 20 million viewers a night in our largest market, with 33 million people watching the final game. For 5 straight weeks, millions of consumers who would ordinarily be bowling on a Friday or Saturday night were watching sports from home. June comped -7% and pulled an otherwise positive quarter and year slightly into the negative. I want to be precise about what that was and what it was not. It was not a weakening consumer. As we have seen through every exogenous shock since I started this company, the consumer has a short memory and adjusts to new realities quickly. That is exactly what happened here. Our trends inflected the week after the final, and August is rebounding.

It was a one-time, 5-week programming event on home soil, and it does not repeat next summer. California remains our weakest market, but it is trending better. We made meaningful upgrades to the operating team there, including replacing leadership, and we are overhauling our corporate sales organization in the state. As I outlined on our last call, the full earnings benefit of the cost actions we took beginning in mid-January would land in the fourth quarter, and that is exactly what happened. The second quarter's $6 million payroll overrun became a payroll tailwind in the fourth quarter and remained one in July. We made significant advancements this year in analytics, pricing, leagues, and capital efficiency.

With AI, our data and insights into the business are accelerating and our ability to optimize key functions like labor management. We reduced capital expenditures by 19% to $114 million from $141 million last year and $194 million 2 years ago. This is a reduction of $80 million in 2 years. On marketing, not all of our spending delivered the ROI we expected. We doubled working media and gained significant awareness, but the creative did not generate enough intent. Going forward, our investments will be more targeted, more measurable, and held to a higher return threshold. In fiscal 2027, every marketing dollar needs to generate a return. Otherwise, we will consider reducing marketing as a percentage of revenue. Water parks represented the largest operational change of our summer. A year ago, we directly managed 2 water parks.

This summer, we directly managed five, including Raging Waters Los Angeles, which we closed on in January for $45 million. We are in five really good markets with very strong positions, the largest water parks in North Carolina, Illinois, and California, and two very good parks in the Florida Panhandle. That is a step change in operating complexity, and the organization rose to it. Strategically, the season was about striking the right balance between price, attendance, and labor. Across the water park portfolio, per capita spending is up double digits, and payroll is down mid-single digits as we staff to demand. Price and cost discipline held what weather took, and it is the same pattern the large regional park operators described in their calls this month. Attendance pressured by weather, per capita spending up, and the economics protected through revenue management. The weather impact was real and concentrated.

Raging Waves, our 54-acre waterpark outside Chicago, saw attendance fall significantly against a June that ran cooler than normal with rainfall well above normal. As I've said before, in this business, pricing has a lot less to do with demand than weather, and a water park cannot comp through a cold, wet summer month. We remain very bullish here. I've described the water parks as a coiled spring. On a trailing 12-month basis through July, the water parks produced $56 million of revenue and $22 million of EBITDA, up from $23 million of revenue and $11 million of EBITDA in fiscal 2025. Roughly 80% of summer water park earnings land in our September quarter, which is in fiscal 2027. The business is highly counter-cyclical and will only get better as we become more experienced operators in this business. The fixes for next season are simple.

Sell season passes earlier to hedge out weather and further optimize price and admissions. We're very happy with our Boomers parks, which are counter-seasonal, high margin, and EBITDA positive in every period, delivering $11 million of EBITDA this year, nearly double the prior year. Turning to guidance. For fiscal 2027, we expect adjusted EBITDA of $340 million-$360 million. We run a short cycle business, and we do not give guidance blindly or optimistically, so we are deliberately guiding conservatively as we work through the year. Importantly, this range reflects prudence around the environment, not the trajectory of our plan. The consumer has already told us in August that they want what we sell, and the keys to this year will be events booking for December and a clean second half after more disturbances than we have ever seen historically. Thank you. With that, let's turn it over to Q&A.

Thanks. Yes. We've spent a lot of time on this topic, and we added a slide to our investor deck that will show you that $900 million of revenue of the portfolio runs at a 42% four-wall EBITDA margin, and all of that's the pre-2022 properties.