Bowlero Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 5, 2024

There are 13 speakers on the call.

Operator

Good morning, and welcome to the Valero Second Quarter 20 24 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Thank you. Bobby Lavin, Valero's Chief Financial Officer, you may begin your conference.

Speaker 1

Good morning to everyone on the call. This is Bobby Lavin, Valero's Chief Financial Officer. Welcome to our conference call to discuss Valero's Q2 2024 Earnings. This morning, we issued a press release announcing our financial results for the period ended December 31, 2023. A copy of the press release is available in the Investor Relations section of our website.

Speaker 2

Joining me on

Speaker 1

the call today are Thomas Shannon, our Founder and Chief Executive and Lev Aksir, our President. 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 that could cause actual results to differ from those discussed In our forward looking statements, you should refer to cautionary statements in our press release as well as the risk factors contained in the company's filings with the SEC.

Speaker 1

Bolero 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 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.

Speaker 3

Good morning and thank you for joining us today. I am Thomas Shannon, Founder and CEO of Bolero Corporation. Bolero had a strong second quarter with total revenue growth of 13.4%. We continue to invest in our centers, our people and our goal to become the premier experiential recreation company. Our same store sales comp turned positive as Consumers pick Bolero for celebrations in the December holiday period.

Speaker 3

Our revenues are up 65% from pre pandemic levels As we grow market share through acquisitions and investing in our premium product. Calendar year 2023 was a transformative year. We started the year with 327 centers and ended with 350. We accelerated growth through acquisitions, bringing in the Lucky Strike Premier Centers into the portfolio and we built 2 new builds that are outperforming the expectations and have more than a dozen in the We put $350,000,000 of capital to work that will generate industry leading 25 plus percent returns on capital. The newbuilds and Lucky Strike combined is pushing our average revenue per unit revenue up.

Speaker 3

In Q2 2024, our average revenue per unit was up 6% year over year combined with unit count increasing by 8%. We will continue to focus on this formula to drive double digit revenue growth over the long term. Our best in class events continues to outperform. Event revenue increased by 30% year over year. Strong corporate demand for employees to come together In a work from home environment, combined with companies seeking premium offerings at a reasonable price drove a blockbuster December.

Speaker 3

Leagues was up 14% year over year as we expand Social League opportunities combined with brand recognition from our PBA ownership. These are offsetting slower retail business traffic as subprime customer spend slows and we lap record breaking prior year comps. Last summer, we spent considerable effort tinkering with our business model. We found good footing with a balance between promotional activity during the mid week and enhanced pricing and offerings on the full priced weekends. Our model was fully reset in mid October and that allowed us to identify pricing opportunities across certain centers.

Speaker 3

In December, we took an average price increase of 2% across retail in the centers, which we applied to events in January. We continue to see pricing opportunities enhancements across our product line. This year, we also invested in our C suite. Last month, we announced the promotion of Lev Exter to President. Leb brings 10 plus years of experience at Bolero, leading dramatic expansion of leagues and amusements.

Speaker 3

We are investing in our people by adding to the C suite that will complement our 12,000 plus workforce in providing premium experiences to the customer, which drive revisits and long term growth. With that, let me hand it over to Lev for a business review. Lev?

Speaker 4

Thank you, Tom. I'm thrilled to be here today. The white space to grow revenue will have more than 12,000,000 square feet of entertainment space is tremendously exciting. When I joined Valero, our amusements business was an afterthought. Today, it accounts for $100,000,000 of revenue and growing.

Speaker 4

We're able to maximize amusement revenue by optimizing our pricing, game selection and floor plans. Opportunities to drive the customer into the arcade While they're there on a wait for a lane or get them to extend their visit after bowling by playing a few games is why we perform so well with amusements. We plan to implement the same successful processes to our bowling and food and beverage revenue. Selling an extra game of bowling has 100% incremental profits to us. Driving traffic in the slower summer months through promotion Our all you can bowl passes, help amusements and food and beverage attachment.

Speaker 4

Our database and loyalty program has millions of customers. Pushing content on the Professional Bowlers Association Telecast with the 2024 season featuring the most broadcast hours Ever in a single season on Big Fox increases the awareness of our centers. Lucky Strike is a well recognized iconic brand. We're really leaning into the brand with the opening of Lucky Strike Moore Park in California and the upcoming opening of Lucky Strike Miami. The demand from customers for these properties as well as the inbound interest for job opportunities underscores the promise of the brand as an important part of the entertainment culture we are building.

Speaker 4

I look forward to meeting you in the coming months and showing the results. And now, Bobby Lavin.

Speaker 1

Thanks, Lev. In the Q2 of 2024, we generated total revenue ex service fee of $304,000,000 adjusted EBITDA of $103,100,000 compared to the last year of $268,100,000 and adjusted EBITDA of $97,000,000 As a reminder, service fee revenue is a pass through, a non contributor earnings and is being phased out. Our total growth was +13.4% year over year and same store comp was positive 0.2%. Positive 0.2% same store comp is in line with our expectations. Our communications with investors will be down the middle as we continue to execute on difficult comparatives and outperform our peer set.

Speaker 1

Adjusted EBITDA was $103,100,000 compared to $97,000,000 in the prior year. We continue to invest in our people with our same store comp payroll up $6,300,000 year over year. Lucky Strike outperformed our expectations with a $6,000,000 plus contribution to EBITDA in the quarter compared to $4,000,000 the previous year. Our cost structure, primarily employee payroll, normalizes after a double digit bump to payroll in March 2023. Corporate expenses are down, while we continue to invest in our event sales team.

Speaker 1

Non comp centers contributed $14,000,000 of EBITDA approximately $41,000,000 of revenue. The 1st 3 weeks of January 2023 and 4 were difficult, primarily due to significant ice across the country. Same store comps over the past 2 weeks have rebounded. Due to the slow start, we are slightly revising our expectations for the Q3 to high single to teams growth and a flat to down low single digit same store comp for the 3rd quarter. We expect 4th quarter total revenue to be up around 20%.

Speaker 1

In the quarter, we spent $26,000,000 on growth CapEx, dollars 13,000,000 on newbuild and $10,000,000 on maintenance. We spent $24,000,000 on acquisitions and we repurchased $80,000,000 of shares in the quarter. This morning we announced A $0.055 quarterly dividend for an expected annual rate of $0.22 Our Board of Directors additionally increased our share repurchase authorization to 200,000,000 We have ample liquidity to continue to investing in our growth and rewarding our shareholders. We also updated our capital guidance for the year. We are increasing our M and A spend from $160,000,000 to $190,000,000 Conversions are up to $80,000,000 from 75,000,000 We continue to ramp up new builds holding our previous guidance at $40,000,000 Our liquidity at the end of the quarter was $412,000,000 with nothing drawn on our revolver and $190,000,000 of cash.

Speaker 1

Net debt was $960,000,000 and bank credit facility net leverage ratio was 2.5 times. We have several exciting initiatives underway and are continuing to evolve and innovate. We believe in our fundamental offering in ABC, Our acquisition, new build and conversion strategy is part of our operating ethos and we remain enthusiastic about our long term growth trajectory. Thank you for your time and we look forward to seeing you on the road in the coming months.

Operator

We will now begin our question and answer session. Your first question comes from the line of Steven Wieczynski from Stifel. Your line is open.

Speaker 5

Yes. Hey, guys. Good morning. So I want to ask about the ability to hold guidance with the headwinds you've already faced, obviously, with weather so far here in the Q3. And Bobby, you called out the impact of weather so far.

Speaker 5

But if we look at your guidance For the Q3 and the fact January is behind us, obviously, it seems like you guys might need to see a significant upswing in trends in February March. So am I missing something there? Or are there other levers that you guys can use or willing to pull to get that 3rd quarter more in line with your guidance?

Speaker 1

Yes. I mean, the 1st 3 weeks of January Hit us for kind of about $7,000,000 to $8,000,000 but we haven't seen that and we've seen a rebound in the past weeks. So we're pretty comfortable with our guidance at this point.

Speaker 5

Okay. So based on what you're seeing today, you just think kind of February, March can kind of carry you into that Guidance range, fair?

Speaker 1

Correct.

Speaker 5

Okay, got it. And then second question is for Lev since he's on one of these calls for the first time. But Lev, you obviously have been at the company for a long time. Obviously, you've got a nice promotion here. Is there anything you really want to go after or change any major initiatives that you think is really going to benefit the bolero story over time?

Speaker 4

Yes. So I've been here long enough to see that we have Probably the best mousetrap, the strongest business model out there. It really comes down to me focusing on the execution of that To maximize that food and beverage and amusements attachment, to help continue to improve our people, our processes across the company, Just to execute at a higher level, the business at its core is phenomenal, but, you know, I want to get us to good to great from good to great with these processes.

Speaker 5

Okay. Got you guys. Appreciate it. Thanks for it. Thank you very much.

Speaker 3

Thanks, Steve.

Operator

Your next question comes from the line of Randy Konik from Jefferies. Your line is open.

Speaker 6

Yes, maybe to follow-up on that a little bit on the processes. Can you kind of give us some perspective on some of the things you're working on? I think, Bobby, we had Spoken at our winter summit, I think a food and beverage system that's being implemented or looked into. Just you give us some perspective on some of the things you're working on and areas of focus that we can see to help these already Very high margins potentially go even higher. Just curious.

Speaker 6

Thanks guys.

Speaker 4

Yes. This is Lev. I'm happy to take that. So Bobby has been with us Not that long, but the level of data that he brings to the table is something that we haven't had at our fingertips historically. So our decision making is way more data driven these days, but also something we're focused on is really reducing the variance across all of our centers, 350 centers, we want to tighten up the processes.

Speaker 4

So can we apply Standards for repair and maintenance budgets, can we give guidance on what optimal staffing pars should be to really maximize the foot traffic in our centers and have that convert to revenue. So we're going to foster this culture of collaboration across our company and use what works best across a given number of centers and expand that knowledge and that process to the rest of the centers.

Speaker 6

Got you. And then just any areas in particular you're mostly focused on in addition to the ones you just talked about, Anything around food and beverage, anything else?

Speaker 1

Yes. I mean F and B, we're installing a very robust inventory management system that ultimately can add a significant amount of dollars to the bottom line. We've always had a perpetual inventory systems. So that opportunity is rolling out this summer. We talked about the website.

Speaker 1

The website will roll out in the next few months. And the reason that the website is so important is it allows for dynamic pricing. Ultimately, our goal It's to fill the centers on the weekends at the highest price we can and fill the centers at the most reasonable price we can during the week. And ultimately, dynamic pricing allows you to do that. And the website system will allow that.

Speaker 1

And then when we get to the summer, This summer, we're going to reimplement summer games, which is something we talked about that we did not have last year that cost us $10,000,000 of revenue, But it also is going to be the website will allow us to effectively drive traffic in the slower times in the summer, which is sort of a key dynamic for really getting leverage out of our model.

Speaker 6

Thanks. And just last question on the capital plan, the 190 versus 160, Is that a function of just more assets you think coming to market, the bid ask spread narrowing? Like just give us perspective on Why the 190 versus 160, just the rationale behind that? Thanks guys.

Speaker 1

Yes. So we bought Lucky Strike. We closed September 15. We got in there and we're accelerating our capital plan there just because of the opportunity set in Lucky is significant. So, it really is the focus of that.

Speaker 1

We've got a few more deals in the pipeline. But really, at the end of the day, we're pulling Lucky Strike in where we thought we'd spend the capital over a few years, it's definitely going to be sooner.

Speaker 6

Got it. Thanks, guys.

Speaker 7

Thank you.

Operator

Your next question comes from the line of Jason Tilton from Canaccord Genuity. Your line is open.

Speaker 1

Hi, Jason.

Speaker 8

Great. Good morning. Thanks for taking the question. Just to start, I was curious on Lucky Strike in the press release, you talked a little bit about how Profitability there was ahead of targets. Wondering if you could maybe just spend a minute drilling down on that a bit, talking about some of the areas you're already seeing savings and then some of the the areas of improvement that you've identified, some of that which could be, centered around some of those investments you were just talking about?

Speaker 1

Yes. I mean, the Bolero procurement system is very strong. And so ultimately, we put in our systems in Lucky, We only closed on September 15th. So it's that. But on top of that, our events platform just crushed it in December and we had multiple center buyouts, which are very, very profitable to the business.

Speaker 1

Center buyouts are great because they take down the center, you know exactly how much staffing you're doing, how much food you're doing, how much liquor you're doing, things like that. And that Ultimately, sort of drove incremental profitability in the center. So we're very happy with where Lucky is coming out.

Speaker 8

Great. That's helpful. And just one quick follow-up. Maybe give an update on how sort of the value bundles that you've been using during sort of the peak times have as you've expanded them to more centers across the country?

Speaker 1

Yes. I mean, ultimately, the Pizza and pitchers in every center, we're getting good uptake. You'll see that we're testing out the alley sampler. A lot of these things are Take a little bit of a pause in December because December is very focused on events, but we're pretty happy with the uptake. We're really focused on what Les said is taking best practices from centers that are very good at upselling these products and pushing that to the rest of the portfolio.

Speaker 3

This is Tom. I'll chime in and add. Dave Investors was down 7.8% on the same store basis in the last reported quarter, we were up 0.2 percent, right? So it's a we are massively outperforming the leisure and hospitality sector. And so the way you get there is by doing all these things like bundling, value pricing, tinkering with pricing and all these other sort of continuous optimization exercises.

Speaker 3

And so don't think of it as One initiative or another initiative that we talk about, it's really been systematized and it's getting More optimized and we'll continue to become more optimized under Webb's leadership. But we're playing with pricing and promotion sort of all the time. I think that the result of being up when everyone, all of our competitors, all of our peers were down, in some cases down massively, shows you the strength of our model and the strength of how we operate and how we adjust on the fly.

Speaker 8

Perfect. Thanks so much.

Operator

Your next question comes from the line of Matthew Boss from JPMorgan. Your line is open.

Speaker 9

Great, thanks. How are we doing? Tom, maybe to just to start off, could you speak to performance that you're seeing from Lucky Strike maybe relative to initial expectations? And then could you just elaborate on the customer response Specifically to some of the pricing and promotion changes and how you saw this impact 2nd quarter comps?

Speaker 3

I'll take the first part and I'll hand off to Lev on the second part. We are very pleased with Lucky Strike. It's outperformed our expectation. They had a very, very strong December, very strong holiday season and we're seeing, shockingly high revenue numbers out of Lucky Strike Properties. We also did we hired Nielsen to conduct a brand survey and They came and concluded that the strength of the Lucky Strike brand was between 50% and 100% stronger than Bolero terms of aided and unaided customer awareness.

Speaker 3

And so as an experiment, we opened our most recent center in Moorpark, California, which is Just Northwest of Los Angeles as a Lucky Strike and it has wildly outperformed expectations. So, we feel very, very good about the Lucky Strike brand. We're about to open our 2nd new Lucky Strike location in Miami that will open Probably this month, if not the beginning of March. But we couldn't be happier with the Lucky Strike brand, with Lucky Strike performance. We already saw 50% increase in profitability in the last quarter versus what Lucky Strike had done a year ago under prior ownership and we're just getting started.

Speaker 3

And I'll give the second part of that question to Lev.

Speaker 4

Hey. So with regard to our promotions, like Tom mentioned earlier, we just continue to tinker and we try new things. We try new price points. We try new things that work, we expand. So Tom mentioned the pizza and pitcher worked really well or sorry, Bob, you mentioned that it's performing, right?

Speaker 4

So What did we do? We expanded that to our league programs. So now we actually have a national league program that comes with a pizza and pitcher for every team. And that's really resonating. It's one of our fastest national programs in terms of sign ups.

Speaker 4

We're bringing summer games back. Not going to bring it back exactly how we've done in the past. We have some learnings. We're going to optimize that program. But at the end of the day, All of these, none of them operate in a vacuum.

Speaker 4

We try to get foot traffic into our centers and now we're focused on execution once we have that customer. So We're seeing a really nice improvement in our NPS scores, which is our guest service landscape, right? We're investing into our people and I think it's really showing in those results. And now we get that foot traffic back with these promotions and we execute, we convert that to revenue, higher F and B attachment, for example.

Speaker 1

Yes. And when I and Matt, it's Bobby. Like when I look at December, we took 2 points on retail. We look back added after 4 weeks of running and we saw no consumer pushback. So we rolled it out in events in January and events is up 3% in January.

Speaker 1

So the consumer is not pushing back on our price Movement. And frankly, they see the value in what we're charging. And so ultimately, we feel like The opportunity to continue going where we increase price in some places, potentially like increase shoe pricing, Maybe lower the price of bowling, but increase the price of food. Like there's just a lot of opportunities to continue taking wallet share while giving the consumer a premium product.

Speaker 9

Great. And then Bobby, maybe just as we think multiyear, what's your level of visibility to the new unit pipeline for next year Where we sit today or just the potential opportunity to accelerate new builds? And just how you view the white space opportunity in the highly fragmented Bowling Center total addressable market.

Speaker 1

Yes. Well, we look at the white space as the total entertainment market. So let's you can see in our press release, we're moving away from the word center, we're moving towards locations. The white space is significant. From a new build perspective, we've got at least 5 a year for the next few years.

Speaker 1

And remember, these new builds, they come in at $7,000,000 $8,000,000 versus our average unit value is $3,000,000 So for every new build that comes up, it's effectively 3 smaller acquisitions. On the acquisition side, the bid ask hasn't really come in yet. So, we're kind of building dry powder while we expect a little bit more volatility in the entertainment space over the next year. So I don't want to get pinned down by sort of unit count and unit growth, but we are building dry powder when we expect sort of the ask to come down.

Speaker 9

It's great color. Best of luck.

Operator

Your next question comes from the line of Eric Handler from Roth MKM. Your line is open.

Speaker 10

Yes, good morning. Thank you for the question. Bobby, you spoke about increased payroll costs In the quarter on a same comp basis, I'm curious, is that what weighed on your gross margin on a year over year basis? And As that anniversaries itself, I believe you said at the end of the March quarter, does that allow gross margin then to start improving in fiscal 2025?

Speaker 1

So there are 2 things that weighed on our gross margin. So there is $6,000,000 of payroll in the comp centers That ultimately cost us about 200 basis points on gross margin. The bigger one, and I want to just give these numbers, is that Lucky Strike and the new acquisitions did $14,000,000 of EBITDA, but they have $8,000,000 of D and A. So you effectively have $6,000,000 of gross profit on $41,000,000 of sales. So the M and A accounting does depress our gross margin.

Speaker 1

But ultimately, when you use a 7 year Formula for DNA for business that is 50 years plus, it's kind of skewing it in the short term, but it will benefit in the long term. If I think about D and A last quarter on acquisitions, it was $4,000,000 Now it's 8,000,000 Additionally, in the quarter, we had $1,400,000 of D and A from we closed West Nyack Lucky Strike. So we are being very focused on cash flow and performance, but it does create some noise in the numbers.

Speaker 10

Okay, great. And then, the implementation of a dividend was a nice surprise. I'm curious what made you decide now was the right time to increase capital returns, complementing your buybacks with now you've got this dividend, at the same time you're increasing your Investment spending, so maybe you could talk a little bit about your balance sheet.

Speaker 1

Yes. So I joined here in May And I have been unbelievably impressed by sort of the cash flow generation of this business In the Q2, Q3, we discussed that internally. When we looked at all of our different outflows needed over the next few years, M and A, conversions, new builds and we looked at our liquidity and we had ample liquidity to continue buying back stock and pay a dividend. And so it's effectively we're really excited about where the business is, But we're much more excited about where the business is going and sort of the exit rate on FY 2024 and just the opportunities And the capital and frankly, there's more capital if we want to bring it in, but right now we're still sitting on a lot of cash.

Speaker 5

So at the

Speaker 1

end of the day, we're going to reward shareholders and continue to invest in the business.

Speaker 10

Great. Thank you very much.

Operator

Your next question comes from the line of Eric Wold from B. Riley Securities. Your line is open.

Speaker 3

Thanks. Good morning. So two questions kind of follow-up on prior comments. I guess, Bobby or whoever will take

Speaker 11

it, I guess, on The average of 2% price taken in December, I know you talked about kind of going in various forms from Possibly shoes, food and beverage, bowling. I guess what drove the decision in each market or each center to Make specific pricing moves either higher or lower? Was it competitive offerings in the market? Was it the specific trends of that location? Kind of what drove each decision On pricing?

Speaker 1

Yes. So we only took retail. So remember, retail is a smaller portion of the business in December. But the reason we took it was we wanted to test the consumer a little bit and see how much pushback there was and there was none. So ultimately, we've had a pricing consultant in house for the past 6 months and we're really looking at pricing by hour, by day, by center, by products.

Speaker 1

And we saw some low hanging fruit that we took in December that allowed us to test that change and whether the consumer react negatively to it. They didn't. So now we're pushing it into events. So ultimately, we're going to continue doing that. We have another round of pricing changes coming And those are very exciting because we're kind of coming to the end of this consultant's engagement.

Speaker 1

There's so much opportunity to be dynamic that the consumer will continue to just spend more and have better product in center.

Speaker 11

Got it. And then the comments around the maybe promotions kind of testing different things, seeing What worked, expanding that, maybe cutting back on ones that didn't work? Maybe talk about some of the stuff that hasn't worked, as you expected on kind of the midweek promotion, the kind of promotional activity and kind of What you learned from the ones that didn't work?

Speaker 3

Yes. Well, look, this is Tom. I'll take the Mia Culpa. So we had had summer games, which had built up to about $6,000,000 of revenue. Summer games was like a ski mountain season pass and business was so strong back in fiscal 2023 that I decided to eliminate it in the summer of 2023 because I figured we could just get full price for those games.

Speaker 3

And While there was some offset, there wasn't nearly enough offset to have made it worthwhile to kill that program. So as Lev mentioned, We're going to bring that back, but that probably eliminating that probably cost us on order of $6,000,000 of revenue last summer. So that was a pretty good example of something that didn't work that we have learned and we're not going to bring it back exactly as it was before. We're going to make it better. There'll probably be a wider range of options for the consumer depending on what kind of experience they want.

Speaker 3

But that was entirely my decision And it was a wrong decision.

Speaker 8

Okay.

Operator

Your next question comes from the line of Jeremy Hamblin from Craig Hallum Capital Group. Your line is open.

Speaker 12

Thanks and congrats on the strong results. I want to just dial in a little bit more on the Lucky Strike integration and The acceleration of investment in that, in terms of thinking about outcomes and rationale, is Can you just get a little deeper into that in terms of getting the implementation done And the capital investment, is this more an opportunity you see driving revenue? You talked about of the systems you're bringing in, it sounds like they are cost focused as well. But where do you see more of that opportunity here over the next 12 months?

Speaker 1

Yes, it's going to be revenue and cost, right? So let's talk about the revenues, guys. Fenway, which does $13,000,000 plus of revenue at 16 lanes. We think we can put in another 4 to 8. So you can do the math on the magnitude of that.

Speaker 1

There's always a weight. There's that's the kind of things we're looking at and that we're effectively accelerating. On the brand, I'll let Lev kind of talk more about the brand.

Speaker 4

Well, even on the revenue side, I want to point out, I've managed our amusements department For the last few years, a lot of those locations haven't seen investment into the games in a number of years. We're addressing that. There were some locations that had no arcades. We're addressing that. And In terms of the brand, I think just I personally live in Miami.

Speaker 4

We have Lucky Strike Miami opening. I visit that center. I see the inbound interest. People are reaching out before we've even opened for events and buyouts. We do open calls for hiring events.

Speaker 4

It looks like we're giving out free Taylor Swift tickets, the line is so long. We haven't seen that in any of our properties, Right. There's just a lot of demand for this brand and I think we're going to get better with it. Our marketing engaged with an agency right now where we're going to develop the Lucky Shrek brand identity. And The results speak for themselves.

Speaker 4

Lucky Shrinkmore Park, the food and beverage sales relative to bowling dollars, Some of the highest we've seen, right? So it's just a totally different concept. And I think we're really going to lead into that. And as strong as it was, the Lucky Strike brand, we're just really strong operators and we know which levers to pull now to maximize it.

Speaker 1

Yes. And if you look at just the math, right now Lucky is operating a little bit better than sort of the 20 low 20s EBITDA margin, like there's no reason that that margin couldn't be our corporate wide margin.

Speaker 12

Got it. That's helpful. Let's switch to just technology investments. You noted that The website is getting updates. I think it sounds like that's coming here in a couple of months in terms of the refresh you're doing there.

Speaker 12

Wanted to just, marry that also With Money Bowl, and you noted that that's becoming more of an out of center operation. Wanted to see if you could just provide some update there on the technology side and get a little bit deeper?

Speaker 1

Yes. So Moneybulk is still operating in 64 centers. So We haven't increased that yet. Moneybulk will be relaunching as a loyalty app. The company has a third party loyalty app that has a lot of demand, but it doesn't have a lot of functionality, and that will be rolling out this summer.

Speaker 12

Got it. And then last thing, just looking ahead Over the summer period, you talked about summer games and kind of bringing back some of the things you've done before. Just want to get a sense for when you're in an Olympic year like this year and some of the media that you have available within the locations in the centers. Is that something that in the past historically has been a positive or negative for traffic? And is this something you see as an opportunity maybe to keep people in centers longer, anything you kind of got planned around that?

Speaker 4

No, this is Lev. I would argue that's a I don't think that has any bearing on our business, but I will tell you what media does have a bearing on our business. So we bought the PBA in 2019. Leagues across the country were dwindling. Our league business you see is strong.

Speaker 4

It's growing and it's growing by headcount. It's grown by average price per game and obviously revenue. So now we have this halo effect that the PBA gives us, Right? Viewership on our first event for the TBA, the Players Championship was up 17% year over year in January. I think that property is getting stronger.

Speaker 4

But we have this flywheel now and we send our PBA Stars into our centers On busy league nights and we delight and we surprise our bowlers, that's something that we have at our disposal and we're going to continue to lean into. But I think in my growing involvement with the PBA, I think it's all upside. We're trying new things like our core business, but we're trying new things with the PBA. So this year will be the 1st ever PBA All Star Weekend in March. We had a really interesting property in the PBA called the Elite League.

Speaker 4

It was team based. We did one event a year. I attended last year, Bayside Bowl. It was electric. So we said, why shouldn't we do this more?

Speaker 4

We're going to have 5 events for the league this season And we're going to continue to grow the casual viewership to that property and more awareness around bowling in our centers as a result. That's more of the media that we're focused on.

Speaker 12

Great. Super helpful. Best wishes, guys. Thanks.

Speaker 6

Thank you.

Operator

Your next question comes from the line of Michael Kupinski from Noble Capital Markets. Your line is open.

Speaker 7

Thank you and thank you for taking my questions and congratulations on the quarter. I want to go back to the increase in payroll in the quarter. I know last year you indicated that you were tweaking some of your staffing levels and I was just wondering if you can give us a sense of where you are today in terms of your goals and in terms of center staffing levels?

Speaker 3

Hi, Michael. Tom, Shannon. Well, So as Bobby mentioned, last March, we gave all of our management staff in the field increases in salary that range from 12% to 17.5%. And we view that really as a one time market adjustment. So we're going to lap that in short order, which will make the payroll comp much easier.

Speaker 3

We did that with goal of reducing turnover and increasing guest satisfaction and both have been achieved. We've dramatically reduced manager turnover, which was really important as the company continues to grow. We need to retain managers and develop them for future leadership roles. And as we added about 25 locations Last year, we continue to be ambitious in our growth plan and you need a stable and experienced group of managers to get you there and that's what we achieved. We also saw meaningful increases in Net Promoter Score results, which was the other part of the goal.

Speaker 3

So, we're about to lap that. On the hourly side, there aren't a lot of tweaks with the model other than getting the allocations between some of the back of the house and front of the house functions correct. So as we go deeper into the data, we find disconnects where we are running, for example, too much mechanics labor and not enough server labor. And that's really a function of how Boeing centers have been run since the beginning of time. And so going in and now using the data we have at our fingertips to really make the most informed and rational decisions with regard to Allocations of labor within the center, I think, will have a meaningful impact going forward.

Speaker 3

I can't quantify it, but I think it will be pretty substantial.

Speaker 7

Thanks for that color. All my other questions have been addressed. Thank you so much. Thank you.

Operator

Your next question comes from the line of Isaac Selhuysen from Oppenheimer. Your line is open.

Speaker 5

Hey, good morning.

Speaker 2

This is Isaac on for Ian. Thanks for taking the question. Most have been pretty much answered, but a follow-up on the event business. Looks like it continues to be very strong. How much of that strength is driven by corporate demand versus birthday parties, other events, etcetera?

Speaker 2

I guess is there more room for upside as far as the corporate recovery? Thank you.

Speaker 1

Yes, it's going to keep going. I mean it's both corporate And families, I mean, we saw significant strength on the corporate side in December. And through January, despite the weather, we're still seeing a good ramp on birthday parties and family events. So we are the beneficiary of trade down in this dynamic, where we're not Too expensive that it's something that like a corporate can't do anymore or enough of a premium product that it's a place you'd be willing to bring your employees. And so we're definitely seeing a benefit that we always do well with birthday parties.

Speaker 2

Okay, great. And then just on the pricing, I guess, You mentioned the 2% on event in January. I guess, does guidance assume any more incremental price increases in the back half of the year? Or you just will you continue to be flexible in adjustment demand as you move through the year?

Speaker 1

It does not assume any more price increases.

Speaker 2

Okay, great. Thank you very much.

Operator

There are no further questions. This concludes today's conference call.

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Key Takeaways

  • Strong Q2 Performance: Total revenues ex service fees rose 13.4% to $304 M with adjusted EBITDA up to $103.1 M, and same-store comps turned positive at +0.2% despite challenging weather and comparatives.
  • Brand & Portfolio Expansion: The Lucky Strike acquisition and two new builds grew the network from 327 to 350 centers in 2023, deploying $350 M of capital for targeted 25%+ returns on investment.
  • Key Revenue Drivers: Average revenue per unit increased 6% year-over-year, event revenue jumped 30% on strong corporate and holiday demand, and league play rose 14% leveraging PBA ownership.
  • Pricing & Promotion Optimization: After mid-October model adjustments, a 2% price increase was tested in December with no consumer pushback, and a new dynamic-pricing website will further refine rates by day, hour and location.
  • Robust Shareholder Returns & Liquidity: The quarter saw $80 M in share repurchases, a new $0.055 per-share quarterly dividend, an expanded $200 M buyback authorization, and $412 M of undrawn liquidity with net leverage at 2.5×.
AI Generated. May Contain Errors.
Earnings Conference Call
Bowlero Q2 2024
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