Bowlero Corp.

and welcome to the Bolero Carp Q3 2022 earnings conference call. All participants will be in a listen-only mode. During this call, the company may make certain statements that constitute forward-looking statements. Such statements reflect the company's views with respect to future events as of today and are based on our management's current expectations, estimates, forecasts, projections, assumptions, beliefs, and information. These statements are subject to a number of risks and uncertainties that can cause actual events and results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please see our final prospectus file with the SEC on February 1, 2022. The company expressly disclaims any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments, or otherwise except as required by applicable law. In addition, during today's call, the company will discuss non-GAAP financial measures which we believe could be useful in evaluating our performance. Reconciliations of adjusted EBITDA to net income calculated under CAP can be found in our earnings press release and will be included in our Form 10-Q for the third quarter of fiscal year 2022. As a reminder, this conference is being recorded. I would now like to turn the conference over to Brett Parker. Please go ahead.

Good evening and welcome to the Bolero Corp earnings discussion for Q3 of fiscal year 2022. I am Brett Parker, President and CFO of Bolero Corp. Before I begin, I direct you to the disclaimer on page two of the deck, as well as the reconciliation for non-GAAP measures in the appendix, both of which are an integral part of this presentation. In this presentation, you will find a discussion of, among other things, adjusted EBITDA, which is a non-GAAP financial measure that is not in accordance with or an alternative to measures prepared in accordance with GAAP. We are extremely pleased with our performance in the quarter and the first nine months of the year. Our performance in Q3 resulted in the highest level of revenue and adjusted EBITDA in the company's history. The business is now materially outperforming pre-pandemic performance, both in total and on a same store basis. We also continue to generate prodigious levels of cash from operations, which positions us favorably to continue to execute our growth strategy. Driving this performance, was a very strong growth in revenue, which increased by 129.8% year over year and surpassed pre-pandemic levels by 25.8%. Steam store sales also rose 12.2% relative to pre-pandemic levels. This increase was supported by continued strong performance of walk-in retail revenue and driven higher by growth in event revenue for the first quarter since the onset of the pandemic. This emerging source of increased revenue has the potential to support continued material growth and has resulted in an acceleration of our revenue expansion through the week ended April 24, 2022. Adjusted EBITDA was $108.4 million in the quarter, which represents an increase of $81 million or 295.7% year-over-year and an increase of $41 million or 60.9% relative to pre-pandemic performance. At the end of Q3, trailing 52-week adjusted EBITDA was $276.3 million and exceeded the pre-pandemic level by 58.9%. We generated $83.6 million in cash from operations in Q3. During Q3, we also repurchased 109,754 shares of Class A common stock, as well as nearly 2.7 million warrants. On April 14th, we announced the redemption of all remaining publicly traded and privately held warrants. This redemption is expected to be completed by May 16th. On page four of the materials, you can see the recent trends in Boeing Center revenue. This is an extension of the chart that we shared in our Q2 earnings release. As we mentioned during the Q2 earnings call, this is not something that we expect to do indefinitely. That said, This extended release of data is related to the assessment of the impact of Omicron waning and COVID restrictions being eased on the business. As Omicron's impact was most strongly felt in the event business, we have presented both total center revenue and total center revenue excluding events revenue. The key takeaway here is that the event business, which was a headwind in Q2 due to Omicron, has turned into a tailwind and is now comping up higher than revenue excluding events relative to pre-pandemic levels. As a result, there has been a step change in the overall growth trend relative to pre-pandemic performance. It is notable that this transition occurred during the quarter, so the initial part of the quarter was still heavily impacted, but the latter part of the quarter and the initial part of Q4 shown here are reflective of the recovery in the event businesses as well as the continued growth in total revenue. On page 5, we have laid out just how strong Q3 was. The revenue performance, coupled with disciplined cost management, led to an increase in adjusted EBITDA of over 60.9% versus the comparable pre-pandemic quarter. Adjusted EBITDA in the quarter was $41 million higher than the equivalent pre-pandemic quarter. Despite the broadly documented macro increases to input costs, we also expanded adjusted EBITDA margin by 918 basis points from 32.8% to 42% versus pre-pandemic levels. The chart on page six illustrates the steep and consistent recovery of the business from the COVID impacted levels of last year. First, you can see the quarter-by-quarter expansion of trailing 52-week adjusted EBITDA from the end of Q3 of fiscal year 21 through the end of Q3 of fiscal year 22. For context, the orange line shows the pre-pandemic comparable level of $173.9 million. We now stand at 102.4 million, or 58.9% higher than the pre-COVID adjusted EBITDA as we grew adjusted EBITDA by $81 million in Q3 of FY22 versus FY21 alone. Page seven illustrates how the bowling center level economics continue to improve. We have charted the total quarter versus the COVID impacted prior year and also versus the pre-pandemic comparable quarter. As discussed, revenue grew significantly. This was led by increases in revenue derived from walk-in guests and events. Gross margin for bowling centers expanded 96 basis points to 70% versus the pre-pandemic quarter, largely as a result of the implementation of our redesigned and significantly more efficient business model. In total, the centers generated $134 million of EBITDA in the quarter, another record for the company. H-8 lays out the cash flows for the quarter. As I noted previously, the company generated $83.6 million in cash during Q3 of FY22, which provides support for our acquisition, building, and conversion of centers. The company finished the quarter in a very strong cash position with balances of nearly $173 million. In summary, Bolero's Q3 FY22 performance accelerated and continued to outpace pre-pandemic levels, further demonstrating that the business continues to be very well positioned to produce improved performance through a combination of organic growth and center additions. Thank you for your time, and I look forward to presenting again next quarter.

Operator, we can now take questions.