Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bowlero Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks, there will be a question-and-answer session. Thank you. And I would now like to turn the conference over to Bobby Lavan, Chief Financial Officer. You may begin.

Good afternoon to everyone on the call. This is Bobby Lavan, Bowlero's Chief Financial Officer. Welcome to our conference call to discuss Bowlero's fourth quarter 2024 earnings. Today, we issued a press release announcing our financial results for the period ended June 30, 2024. A copy of the press release is available in the Investor Relations section of our website. Joining me today are Thomas Shannon, our Founder and Chief Executive Officer; and Lev Ekster, our President. I would like to remind you that during today's conference call, we may make certain forward-looking statements. 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 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 the SEC. Bowlero Corporation 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 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'll now turn the call over to Tom.

Good afternoon. Thank you for joining us today. I am Thomas Shannon, Founder and CEO of Bowlero Corporation. When I founded our company 27.5 years ago, I was driven to provide customers with a world-class experience. With a positive 6.9% same-store comp and near 20% revenue growth this most recent quarter, our results speak for themselves, and we have become a premier location-based entertainment platform. In 2013, we acquired 266 centers from AMF out of bankruptcy for $270 million. We spent the past 10 years investing deliberately in rebranding the centers, upgrades across the kitchen, audiovisual, seating, technology, and overall experience. These legacy bowling centers became the best-in-class entertainment location in their communities for children's birthday parties, corporate gatherings, leagues, date nights, and group outings. At the same time, they run efficiently and operate at nearly 50% EBITDA margins compared with an industry average of less than half that. This playbook was repeated with our acquisition of the 85 bowling centers from Brunswick Corporation in 2014 and other acquisitions in subsequent years. We have spent over $2 billion on acquisitions and capital expenditures over the past 27 years, and in fiscal year '25, we project $520 million of four-wall EBITDA and more than $400 million of consolidated EBITDA. We target strong double-digit returns on invested capital and we have the expertise to continue achieving that. We continue to drive forward with the majority of our focus on deploying capital into bowling through new builds, acquisitions, and upgrading our centers. We are currently under construction on four new centers in Beverly Hills, California; Denver Ranch, California; North Field in Denver; and South Lands also in Denver. These powerhouse locations will open between September and November of this year. In May 2024, we acquired a large water park in Yorkville, Illinois, named Raging Waves. We acquired this asset along with 60 acres of real estate at an attractive valuation and underwrote synergies from implementing our operating philosophies and having efficiencies at scale. Throughout our first summer, we implemented our tried-and-true practices of focusing on the consumer while also executing efficient operating standards. I am happy to say that revenue was up double digits year-over-year, and we have identified significant capital deployment opportunities at the property to deliver powerful long-term growth. This experience with Raging Waves confirms that the Bowlero operating philosophy can expand outside of bowling as we look more broadly at the location-based entertainment industry. We will continue to seek opportunities to deploy capital for double-digit returns while implementing best-in-class operating standards that drive efficiencies at scale and grow earnings well in excess of our cost of capital. We will deliver outsized returns to our investors that will continue to scale and accelerate in the coming years. Let me hand it over to Lev to talk about our internal initiatives and then Bobby will review the financial details. Thank you.

Thanks, Tom. This summer, our season passes were a success, driving traffic during the slower summer months. As a reminder, our weekly sales from April through November are approximately $17 million compared to $25 million starting in December through March. Incremental traffic into our locations with improved attachment helps our business during the slower months. We believe the seasonal passes improve customer satisfaction by providing value and ultimately helping them revisit our locations during the critical holiday and winter periods. As we discussed last quarter, we are leaning heavily into increasing food and beverage sales. This summer, we started the rollout of all new retail F&B menus. By the end of this month, all of our locations will be featuring a new menu that will be more compelling to our guests, featuring better presentation, a better offering, and better portion sizes. The new menus are setting us up for success during the holidays when we will also be introducing a fully revamped event catering menu for our top 75 locations with an innovative offering of higher-quality selections such as Mike's Hot Honey Pizza, Spicy Rigatoni, Lobster Mac & Cheese, and Sweet Poppy Salad. Additionally, we have begun piloting tablets for the servers in our locations, which provides strong efficiencies from having to walk back and forth to point-of-sale stations, thereby improving the process for our associates and the experience of our guests. The Lucky Strike brand has a new logo, which we will be hanging on three new locations opening in the next few months, two in Denver and one in Beverly Hills, more to come on the expansion of the Lucky Strike brand. We will continue to optimize our offerings to improve customer satisfaction and traffic while increasing guest spend as we look to become the preferred out-of-home entertainment destination of choice. This is how we will continue to outperform our peers. And now, I'll pass it over to Bobby.

Thanks, Lev. In the fourth quarter of 2024, we generated total revenue ex-service fee of $283 million and adjusted EBITDA of $83.4 million compared to last year of $235 million and adjusted EBITDA of $64.5 million. As a reminder, service fee revenue is pass-through and non-contributor earnings that are being phased out and normalizes year-over-year in fiscal year 2025. Our total growth in the quarter was 20.2%, and same-store comp was positive 6.9%. April, May, and June all saw positive same-store growth. Adjusted EBITDA was $83.4 million, up 29% year-over-year as we return to positive comps and meaningful operating leverage. In the quarter, we had a $2 million insurance true-up and PBA continued to operate at a worse-than-expected loss. Food costs are a headwind that we will manage through in the upcoming year, while the previously mentioned amusements investments have turned positive, with amusement contribution outperforming the rest of the business in the quarter. We expect to achieve operating leverage around 50% in FY '25, as we have comped the March 2023 manage wage increases and one-time COVID costs. We found a good balance of investing in payroll and managing costs, with our same-store comp payroll flat year-over-year in the quarter, which is an improvement. Non-comp centers contributed $9 million of EBITDA on approximately $32 million of revenue. Raging Waves, our water park in Illinois, contributed $3.5 million of revenue and $2 million of EBITDA in June. The week of July 4 was a slow start to the year; however, we have seen positive same-store comps since mid-July. In our press release today, we issued fiscal year 2025 guidance. While we are hearing concerns in the market about consumer weakness, we are not seeing signs of that and at this point, are guiding to total growth of mid-single digits to 10% in fiscal 2025. This includes a forecast of low to mid-single-digit same-store sales comp. EBITDA margins will be between 32% and 34%. We spent $193 million in capital expenditures in FY '24. As we shift our focus to internal initiatives, we are paring back our capital expenditure plans for FY '25, with a total CapEx spend expected to be $154 million. The breakdown includes growth CapEx of $50 million, new build CapEx of $45 million, maintenance of $44 million, and we plan to allocate $15 million of CapEx to rebranding Bowlero Centers to Lucky Strike. We plan to continue to balance investing in our growth and rewarding our shareholders. We increased our revolver capacity in the past few months to $335 million in anticipation of an increased M&A environment. Pro forma for those increases, our liquidity at the end of the quarter was $386 million with nothing drawn on the revolver and $67 million of cash. Net debt was $1.1 billion, and the bank credit facility net leverage ratio was 2.6. Thank you for your time, and we look forward to seeing you on the road in the coming months.

Bobby, as we consider fiscal year '25 and your expectation for low to mid-single-digit same-store sales comparisons, could you help us understand how the quarters might unfold? I want to ensure we're considering how the quarters could come together in light of any headwinds or tailwinds that might influence that low to mid-single-digit outlook for the year.

Yes. The only thing I would direct you to is that New Year's falls in the third quarter, and January last year was extremely weak due to weather. Therefore, I would expect stronger relative performance in the third quarter. But generally, we're expecting positive comps throughout the year.

Congrats on the nice quarter. So, Tom, maybe could you speak or elaborate on the inflection in traffic in same-store sales that you saw as the fourth quarter progressed? And really what you've seen so far in the first quarter? And maybe taking a step back, just if you could walk through what you think is differentiating your experience relative to other parts of leisure in this economic backdrop?

Yes. I'll answer that from a broader perspective and then let Lev discuss some of the specific actions we've taken. Bowling is a resilient business. We have invested significantly to create top-notch centers that are easily accessible in your community, and they offer great value. The core strengths of bowling often go unnoticed. It’s a fantastic business that we are passionate about. It's highly profitable and very resilient. When we began to see a decline last year, it was from exceptionally high performance following COVID. Although it might seem like a downturn from a 40% increase over three years, it does not reflect any weakness in bowling. Bowling remains as robust as ever. At this time, we offer the best product and, importantly, we have an outstanding management team in location-based entertainment. Combining the fundamentals of bowling and our best-in-class product with our data-driven, results-oriented culture leads to significant outperformance compared to our competitors. Now, I’ll hand it over to Lev to discuss some of the actions we took in recent months to achieve these results.

So as Tom mentioned, obviously, we do bowling incredibly well, and we continue to invest in our facilities. We want to have the best bowling centers in every market that we're in. But we're not sitting on our hands, and these results don't happen by accident. So, we launched a brand-new Summer Season Pass this summer. We didn't launch it last summer at all, we totally revamped it, and we removed all the complexity from the product. We made the value proposition to the consumer very, very clear, and we sold over $8.5 million in summer season passes. How do we know there was a clear value proposition? That pass was redeemed in the summer 1.6 million times. Our consumers got a great value for it. And as a result, our NPS score continues to climb, and I think we're starting to take market share. We have been investing in our amusement business, adding better games, and maintaining our centers significantly better than our competitors. You're never going to walk into one of our centers and see half the games down or prices not stopped. We're upgrading our redemption counters, launching new locations with a brand-new redemption store called Price Vault. Our food and beverage menus are improving; we've released all new food and beverage menus across all our centers, and we're starting to see growth there. We're investing in the food and beverage team to grow sales and just offer a better product. We're just upping our game across the enterprise, and I think you're starting to see that in the results. We've continued to see positive results through the first two periods of the fiscal year, as Bobby mentioned, we expect to see that throughout the rest of the fiscal year.

Great. And then maybe just a follow-up, Bobby, any puts and takes to consider as it relates to EBITDA margin this year embedded within the FY '25 outlook? And just procurement and SG&A, any efficiencies that you've identified to support the bottom line?

We will always prioritize cost management. Our approach to driving earnings growth differs from others. We have assembled a procurement team that we are pleased with. Ultimately, as compensation increases from acquisitions and we continue to oversee costs at our locations, you'll notice the impacts on earnings.

I guess, Bobby, first for you. Any thoughts on how we should be thinking about the low to mid-single-digit comp related to the first quarter? And I think you spoke about the near shift impacting 2Q. Does that kind of mean that the 2Q comp should kind of fall outside of the annual range of comp guidance? Just curious there. And then also on the guidance, does the annual guide include or exclude unannounced M&A that you're thinking of in the guidance?

It does not include M&A. It does include the new build. So, M&A could effectively drive you to the higher end of the guidance and above. From a cadence perspective, I'd like to stay sort of in the low single digits to mid-single digits as we go through the year. This quarter, we still have some time to go, but I would stay in the low single digits to mid-single digits range.

So, I'll just hit the first part of your question about the food and beverage aspect. I don't want it to be limited to that because I think the attachment across our amusements business was also significant, thanks to the pass and all of these visits. You heard that our amusements performance is now outpacing the other revenue lines. And, I think it's because when we created this pass, we focused on those segments. With a premium pass, you were getting 15% off food and nonalcoholic beverages. You were also getting a $5 arcade reload during every visit. As a pass holder, you were able to get a discounted arcade card once per visit. Again, we wanted to drive a lot of value to pass holders, and the amount of visits we got out of it was significant. Food and beverage sales were up. Now it could be attributed to all the new menus that we mentioned. It could also be attributed to the visitation, but overall, I think, the consumer is quite clearly telling us that they're loving the pass and they're loving the product that we're delivering to them when they come.

Yes. Just to complete the thought there, we did over $2.5 million in season pass sales at Raging Waves despite only owning that property for about 40 days between close and season opening. I would expect next year that this number will be $3 million to $4 million in season pass sales. We're leaning really hard into the season pass because there are a lot of attributes. One is enormous customer satisfaction and increased customer visitation. But it also insulates you from weather. All these businesses have some weather dependency, and one of the advantages we found from Raging Waves is that it was an excellent weather hedge to offset the effects of good weather in the Chicago metro area, where we have 19 bowling centers. The first day Raging Waves was supposed to open, it didn't because of rain. And what we found is that in the three districts comprising the centers in the Chicago area, we were up about 90% in same-store sales versus the prior year. So excellent weather hedge. Of course, it reverses; Raging Waves had several days over $350,000, which is astonishing for single-day revenue in a regional park, while at the same time, our bowling centers were challenged due to the good weather.

Bobby, can we talk a little bit about the gross margin? While same-center sales were up in the fourth quarter, implying volume was up, gross profit was down. As we look into fiscal '25, how do we think about the direction for gross margin?

Yes. As we've talked a lot about this issue, our legacy reporting standards date back to the acquisition of AMF, where AMF also had a manufacturing business. We're not going to be reporting gross margins starting in the first quarter. So, I really look at four-wall; depreciation and amortization that came from Lucky Strike is what dragged on the gross margin. If you look ex D&A, gross margin was up 200 basis points. So, it's just a legacy standard you can't change in your K, but we are changing in our Q going forward.

Just I think most have been asked and answered. But just in terms of the balance sheet and free cash, obviously, you've got very healthy liquidity. Is there a range for M&A you're targeting this year? And based on the EBITDA guide, what are your expectations for working capital?

Yes. Working capital is going to continue to come in as we try to turn product faster, but working capital has never been that meaningful a part of our business. From an M&A perspective, the range is wide because there's a lot out there to do. We've quietly been raising our revolver capacity, and we added $100 million in the past few months. We're expecting that there's an opportunity out there, but the M&A environment is very active. We'll announce deals as we get them done, and it will be that kind of trajectory. So, I know that's difficult for you to model, but I think it's better for us to surprise to the upside if we get more M&A done.

Ladies and gentlemen, that concludes our question-and-answer session and today's conference. We thank you for your participation, and you may now disconnect.