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spk03: Greetings and welcome to Bolero first quarter fiscal year 2024 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If you want to require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host and turn the call over to Bobby LaBarra of Bolero. Please go ahead, sir.
spk02: Thanks, Operator. Good morning to everyone on the call. This is Bobby Laban, Bolero's Chief Financial Officer. Welcome to our conference call to discuss our first quarter fiscal year 2024 earnings. This morning, we issued a press release announcing our financial results for the period ended October 1st, 2023. 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, chief executive, and president. I would like to remind you that during today's conference call, you 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 the 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. Bolero undertakes no obligation to revise or update any poor-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 that are most directly comparable to each non-GAAP financial measure discussed in reconciliation of those differences between each non-GAAP financial measure and its most directly comparable GAAP financial measure can be found on the company's website. I'll now turn the call over to Tom.
spk08: Good morning and thank you for joining us today. I am Thomas Shannon, founder, CEO, and president of Valera Corporation. First quarter fiscal 2024 met our expectations. We worked hard during the seasonally slow first quarter to optimize dynamic pricing, began the journey of proactively selling in-center by building a sales culture, and crossed 350 centers in our fleet. Before I jump into my prepared remarks, I want to thank the 10,000 associates in our centers. The first week of July, our same-store sales comp was positive. We then began to tinker with price and find upsell opportunities. To simplify building a sales culture, we started with a one-size-fits-all program, upselling the third game of bowling for $5 and providing a $5 gift card. We removed summer games, a family program that was worth at least $6 million of revenue in the period. We also pulled midweek fixed price all-you-can-bowl specials that were traffic drivers. The changes drove wallet share pickup in our premium times of Friday and Saturday. However, the midweek customer did not like that offer. By Labor Day, our comp was down double digits, with Monday through Thursday dramatically worse. We reversed course on pricing midweek, and in the second week of October, our same-store comp had returned to being positive. I love this dynamic, as I built Bolero to serve all customers, and we learned that when you have a business that runs seven days a week, serving consumers nationally from all classes of life, everyone is looking for something different. We are continuing this journey to fill our lanes and provide our customer what they want, when they want. Some consumers want all-you-can-bowl during the week where they have a fixed price to entertain their family. On the weekends, a different subset of consumers is willing to pay more, still at a better value than a night out at a restaurant and a movie. Customers want to be entertained on their schedule, and as we have done so for 27 years, we will continue to deliver. Our total business is up 61% over first quarter 2019. 61%, and our comp is up 29% over first quarter 2019. In the first quarter, we saw volatility with our tickering with pricing, but that will only help into the rest of the year and the years to come. We learned a lot, and we will continue to optimize price and maximize revenue and earnings dollars with our efforts. Our shining star is our events platform. This fiscal quarter, first fiscal quarter of 2024, Events comped plus 9%. Leagues, which start in September, comped 12%. Events is up 77%, and leagues is up 15% from 2019. The resiliency of our model is in those results. This quarter, we crossed 350 centers, and I am very happy with the integration of Lucky Strike. They are fully on our proprietary events CRM, and we are already seeing the benefits of our world-class events team on their higher-end customer profile. We also opened a new facility that we built in Valley Fair Mall in San Jose, California, and the early results underscore the 40-plus percent cash-on-cash returns we are getting from new builds. We currently have 10 new builds in the pipeline. Bigger is better as we push higher average unit values into our business model. The long-term formula of double-digit revenue and earnings growth is proven and intact. Valero is evolving and getting more insightful every day. We have established a flywheel in our business that will enable us to compound top-line growth over the long-term fueled by self-funded reinvestment. As recently announced, we entered a partnership with Vici that started with a sale-leaseback of 38 properties for $433 million. We paid approximately $150 million for those properties. The pipeline opportunity for more sale leasebacks is in the 100 to 200 U.S. location, which we believe will generate incremental returns and underscore the self-funding model we have for acquisitions. Our scale and creditworthiness are unique in the out-of-home entertainment space. I will now turn it back over to Bolero CFO Bobby Lavin to provide more details on the quarter's results. Bobby?
spk02: Thanks, Tom. In the first quarter of 2024, we generated total revenue ex-service fee of $225.8 million. Last year, we reported $225.3 million of comparable revenue. As a reminder, service fee revenue is a mandatory tip pass-through to the employee, a non-contributor earning, and is being phased out. Revenue excluding service fee revenue is up 0.3%. Total bowling center revenue was down 0.7%, and our comp was down 5.5%. The comp down 5.5% is slightly below our previous guidance of down 5%, mostly due to a $1 million timing issue that we picked up in the second quarter. We hit our internal EBITDA budget. As Tom discussed and we previously disclosed, we used a seasonally low first quarter to test price changes in the centers. We started the quarter off with positive comps But by early August, we had hit almost minus 8%, and the second week of September was minus 12%. We quickly reversed course, and the trend line would have been greater other than flooding in New York that also comped Hurricane Ian in 2022, a negative perfect storm in the last week of the quarter. October has been very resilient, with us hitting positive in the second week of October. The traffic data some of our more active investors look at will appear volatile in Halloween week, with the timing of Halloween being negative. but we will get a positive benefit this year with earlier Thanksgiving extending the holiday season. Adjusted EBITDA was $52.1 million compared to $65.3 million year-over-year, a delta of approximately $13 million. We did not pivot to center cost structures to savings mode in the quarter, as we are forecasting a strong holiday season and have seen returns on our people investments. As a reminder, second and third quarter make up 70% of our annual EBITDA. Comp revenue was down $12 million, and payroll in the comp centers was up $2 million. Utilities is seasonally high by the tune of $3 million in the quarter. Corporate expenses are down year over year while we continue to invest in our event sales team. Non-comp centers contributed $4 million of EBITDA on approximately $10 million of revenue in the quarter. First quarter had $208 million of comp revenue, and the second quarter comp revenue should be up approximately $50 million in revenue sequentially. With the cost structure in place, That should almost entirely fall to the bottom line. Additionally, we have $40 million of revenue from acquisitions that are starting to flow through in the quarter. The company expects second quarter fiscal year 2024 to have revenue at service fee of $295 to $310 million and adjusted EBITDA of $100 to $110 million. We will continue to cut costs at corporate. In the quarter, events comp plus nine and league comp plus 12. Leagues floor mid-September, and weekly revenues go from about $1 million in the summer to $2.5 million a week until the end of March. The timing of this and the results once we start gives us incremental confidence in the second and third quarter. The corporate events business is strong, with our top 50 bookings being up year-over-year for December. The smaller bookings start now and right up until the day of the event, if we have space. In the quarter, we spent $24 million on growth capex, $11 million on new builds, and $10 million on maintenance. We spent $126 million on acquisitions, and we repurchased 130 million of shares in the quarter. We will continue to have a balanced capital program as we are confident in our combination of growth and shareholder returns. As we announced in October 19, we entered into a partnership with Vichy Properties to accelerate our self-funding sale-leaseback strategy. We've put a slide together on our investor deck, but the story is straightforward, underpinned by Bolero credit. We buy centers with land for four to seven times EBITDA We implement our proprietary tools to improve EBITDA margins within 90 days. And then we look to sale the spec half of the EBITDA for multiples of 12 to 15 times. Once completed, we have created, on average, 10 million of value per property net of purchase price. And we project we can do this more than 100 to 200 times. That is a lot of value creation only we can do. Post-Avici transaction, we have eight unencumbered properties and we'll focus on acquisitions with SLB-type characteristics. One topic that has gotten airtime is the capitalization of our leases and how that should be viewed by the street. When we enter into leases, they are long-term leases. The VG lease is 50 years. The capitalization of such leases is done at a significant multiple of current cash lease costs. This compares to a company that might have a month-to-month or shorter lease. Our method looking at leverage is net debt to EBITDA annualized for acquisitions less capitalized cash lease costs. We give a lot of disclosure on this in our 10Q under cash paid for amounts included in the measurement of lease liabilities. Proforma for the VG acquisition, we have approximately $930 million of net debt. FY24 EBITDA midpoint is $385 million. There are about $15 million of acquisitions and new builds. that you should annualize, less $41 million of cash interest rent and $31.6 million of VCHI rent. This gets you to 2.8 times net leverage versus our target of three. We will continue to manage leverage conservatively, especially into the unknown macro environment. In closing, we have several exciting initiatives underway and are continuing to evolve and innovate. We are prepared for the oncoming seasonal high periods and have the right team and structure to execute. Now let's turn it over to the operator for questions.
spk04: Thank you. We will now conduct a question and answer session.
spk03: We ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may read Q, and those questions will be addressed if time permitting. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate you're live in a question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment while we pull from our first question. Our first question comes from Matthew Voss with J.P. Morgan. Please proceed.
spk11: Great, thanks, and congrats on the inflection mid-quarter. So maybe, Tom, could you elaborate on the test and learn approach? Maybe what was the sweet spot to drive the inflection to positive comps in mid-October? And any differences with walk-in retail demand versus events? And just tying in the list from conversions that you have on tap, how best to think about same-store sales moving forward in your view?
spk04: Well, what we learned is that there is...
spk08: There's basically two types of customers. There's the weekend customer where we have a meaningful opportunity to upsell. And then there is – and that's not exclusive to the weekend, but largely weekend. And then there's the more price-sensitive customer who is used to getting, you know, a better deal, right? So an all-you-could-bowl special or a cheap game price, you know, underpriced food and beverage relative to normal retail pricing and so based on the amount of volume that we had coming out of the winter and into the spring we thought we could get really aggressive on price and so we simultaneously increased the upsell opportunities which we're able to capture on the weekends and eliminated a lot of the lower priced offerings that increased revenue on the weekends but decreased revenue during the week. So basically what we did is we went back to the promotions that we had during the week. We tinkered with them, modified them in ways that made sense, reinstituted them pretty much everywhere, and have continued to add other upsell opportunities on the weekends like pizza and pitcher and other things like that that are bundles that are meant to increase revenue customer spend in center. And we got back to same store comp, positive comp by the middle of this month, October. So, you know, what we learned is that there are customers who are more price sensitive and there are customers that are less price sensitive. I think we hadn't fully appreciated the difference, but now we know. And that's an important realization. Because knowing the consumer mindset enables us to really optimize the model going forward. As I mentioned in my remarks, you know, the league business has been up and, you know, high single digits. The event business has been up double digits for a very long time. So those are sort of our pillars of strength. They're also weather independent, right? So people are making those decisions well in advance of the day of coming in. And so when you have things like long, dry summers with no rain, and then, you know, comping, a widespread weather event like we had last year where there was a lot of rain in the Northeast with not that, and then you have this sort of once-in-a-generation flooding in New York where everyone canceled their events. We had a lot of weather headwinds. I think that is partially reflected in – in the retail numbers, but not in the overall strength of the customer or strength of the business. The fact that the lead business and the event business is so strong, I think gives you an indication of how strong our business is. And then the retail business will have a lot more volatility based on things like weather. However, you know, we're seeing now consistently positive either down a little or up a little as we move into our busiest season, I think it bodes very well for us for the rest of the year.
spk11: It's great color. And then, Bobby, maybe could you speak to health of the balance sheet today? How would you rank capital investment opportunities from here? And just what's your level of visibility to the unit pipeline for the next 12 months as you think about acquisitions versus new builds?
spk02: I mean, the balance sheet is very healthy. I mean, we have more than $200 million of cash, you know, $225 million undrawn revolver that, you know, we're looking at upsizing to, you know, to be more closer to, you know, one turn of EBITDA. So the balance sheet is very healthy. You know, we got the VC deal done, and we are evaluating accelerating on new builds. We think that the math is right for conversions, the math is right for acquisitions, but new builds are just coming in that much stronger. So we are looking at accelerating. Right now we've got four that we're doing this year, but that could increase dramatically next year. So the visibility on new builds is good. I'll let Tom comment on sort of the visibility on M&A.
spk08: The pipeline is very strong, as strong as it's ever been. So we are doing more new builds now than we've ever done. We opened Valley Fair about two months ago. We are about to open Moore Park, which is Hemi Valley, north of L.A. That will open in late November or early December. Miami World Center will open in February. about to start construction in Beverly Hills, two locations in Denver, Ladera Ranch, which is Orange County, California. And then we've got a handful of others behind that. So we've never had so much new build activity, which is great because our new builds are returning about a 45% cash on cash return on significant investments. So it's big dollars that are coming in and dropping to the bottom line. And we're seeing the same level of activity that we really have for the last couple of years on the acquisition side.
spk04: That's great. Best of luck. Thanks. Thank you. The next question comes from Randy Connick with Jeff Bees. Please repeat. Hi, Randy.
spk05: The comp's turning positive. Can you just kind of break that out? Is that a function of continued stability in the weekend business, maybe a flattish up or up, and then the midweek business really powering through and becoming nicely positive? Maybe just kind of break down those trends a little bit just to give us some flavor on how those comps have turned positive. And then based on the changes you've made to the midweek promotionality and stability, it sounds like in weekend and league, Should we be continuing to think that comps should stay nicely positive at a low to mid single digit type rate for the balance of the fiscal year? Just how do we think about that?
spk02: Yeah, I mean, we're going to be balanced on giving guidance for the quarter. We've said that, you know, the quarter we're sort of expecting down a little bit or up a little bit on a comp basis. Yep. But we're pretty, you know, because so much of the revenue is made the last two weeks of December. We're not going to get ahead of ourselves, but we are very happy of where sort of the corporate bookings are today. You know, when you think about the comp, the leads, which is 10% of the business, is up, you know, double digits. Events, which is 20% of the business, which is, you know, goes to 30 plus percent of the business in the period. is, you know, is up, you know, single digits, you know, with potential for more upside kind of is a balance. You know, and so all we really needed was retail to be down a little bit, right? And the issue we had in the summer is that the customers rejected the full price upsell Monday through Thursday. So it wasn't Friday and Saturday, you know, was flat to up. it was really Monday through Thursday, sort of at maximum pain. I mean, Mondays were down 20 plus percent. So even though Mondays through Thursdays are 30% of our business, when those are down so big on retail, it just was dragging down the comp. So we've put the promotions back in, we've optimized them. So we did have like a Thursday promotion that we did not put back in because that was just a money loser. But the promotions have worked, and you see the resiliency in the business in sort of the Yelp reviews that we went from love to hated to now we're loved again. And in the numbers, we'll expect the comp to kind of bounce around a little bit. The seasonality this year is favorable to us with just the ways that New Year's and Christmas falls So we're feeling pretty good about the business. But, you know, the fourth quarter make or break is in December, so we're not going to get ahead of ourselves. But we feel pretty confident and flattish at this point.
spk05: Super helpful. That was very good. And basically, back on capital allocation, can you just remind us how much you have left? I might have missed it. On share or purchase authorization, you were nicely aggressive in the quarter. Stock is where it is. It's very cheap. Just kind of get some flavor of how you're balancing or thinking about share or purchase versus capital towards M&A and builds. And then back on M&A, what's changing from the price desired by operators or owners of bowling alleys out there, centers? Is anything changing where prices are coming down? Just anything around the flavor of M&A would be super helpful. Thanks.
spk02: Yeah, so we've got $90 million left on the authorization. But, you know, our board is willing to meet to kind of re-up that as needed. At these levels, we'll continue to buy, you know, our stock. You know, we have, you know, and we've been pretty transparent with the market. Like, when these new bills turn on, it's a significant change. And then you've got Lucky, which Lucky isn't in the 1Q numbers. And Lucky will slowly come in the 2Q numbers. But, you know, we're investing $30 million into Lucky. We're putting string machines in Boston in November, which changes the dynamic significantly. So the market is really not, you know, it's very focused on my short-term comp and not really focused on sort of what I would call the very strong inorganic growth that we're doing, whether it's Lucky, whether it's Maverick Stock Gains. whether it's the four new builds that come in to play this year, but then, you know, where are the new builds? You know, when we get to FY25 and we're guiding FY25, like how much strength are we going to get from these new builds? And so the market, we're taking advantage of the market being so focused on the short-term comp and not being really focused on what these new builds, the M&A, the M&A synergies. Oh, and by the way, when we refill our SLB pipeline and we just do it again. So we'll continue buying back our stock. you know, at these levels because we do feel like we're dramatically undervalued.
spk05: And just on the M&A prices commanded, you know, what are the bowling center proprietors kind of – are there changes in price? Are they coming down in price to make things even more attractive? Just curious what you're seeing there. And that's it. Thanks, guys.
spk02: Things are getting better. You know, I think the multiple unlucky everybody focused on, but, you know, that is coming down. You know, we've done a few acquisitions recently at much better multiples.
spk08: Well, I think people didn't really understand our math on the lucky multiples. So they looked at consolidated trailing earnings at Lucky Strike of being somewhere in the 11s. You know, we looked at it as more like 18 million of EBITDA at the center level that would need very, very little incremental overhead spend from us. So somewhere in the $16 to $17 million range with upside potentially to $30 of EBITDA. So by our math, looking forward, we paid $90. We anticipated investing another $30. So you're in it for $120 million, and we think it can get to $30 million of EBITDA. So on a forward basis, we figured we were paying about $4X The market thought we were paying closer to 8 or 9x. There was a pretty big disconnect there. We're right. Market's wrong. That's okay. But as Bobby said, people really aren't figuring out or understanding how much incremental revenue and profit is coming from the 14 lucky strikes, Mavericks and Octane, which were doing almost $20 million of revenue when we bought a very profitable asset. in Scottsdale, all the new builds coming online. And then the other independence we bought, we bought two centers in Michigan. We're about to close on another. We bought a property that was a joint venture outside of Chicago. So there's been a lot of incremental properties added, which will result in significant incremental revenue in EBITDA. And as Bobby said, I think the market was really focused on our least important quarter on a comp basis. And, you know, we did 52 million of EBITDA compared to, you know, it was more than double what we had done in 2019. Down from peak, but, you know, last year was just an epic year. So we're very, very bullish about this business going forward. And it's been reflected in the amount of stock we bought back.
spk04: Very helpful. Thanks, guys. Thank you. Our next question comes from . Please proceed.
spk09: Yeah, hey guys, good morning. I want to ask about the in-center spending and maybe how that trended through the quarter or, you know, maybe better yet how that has trended recently. And just, you know, just trying to get a sense of attachment rates, you know, as folks come in your properties, meaning, you know, they come in, have you seen guest spend be pretty resilient? Have you seen any changes in those attachment rates? You know, are they coming into bowl, but you've seen them pull back in food and beverage or amusements? Any changes there would be helpful. Thank you very much.
spk02: Yeah, I think Friday, Saturday, we've seen no change. You know, again, the midweek, we saw detachment on food. We saw detachment on amusement. You know, amusement is probably the best proxy as sort of a traffic, you know, of traffic and amusements. was down the worst, but we think that that will reverse course when we get back into the colder second quarter, third quarter. And ultimately, you know, there is a wait and then people will play more arcade. So I think that, you know, we're pretty happy with the food attachment because, Food, we've been trying out a lot of different new programs, pizza and pitchers, things like that, because over the past few years, we've been very focused on percent margin, and now we're focused on margin dollars, because you eat margin dollars. And so we're pretty happy with the results there. I think the only place that we've seen a little bit of detachment on would be more on the amusement side.
spk09: Okay, gotcha. That's great color. Thanks, Bobby. And then second question, whether it's for you, Bobby or Tom, but want to ask about the cost structure at this point, maybe during the quarter. And obviously, it was inflated for a number of reasons that you mentioned. You also called it out in the 10Q as well. But as we kind of look into now your second quarter and the remainder of the year, just wondering how we should be thinking about the flow through from here and maybe some other maybe details about how you're mitigating labor and some of those other cost headings?
spk02: Yeah, so if you think about our cost structure, our cost structure is 20% to 25% is payroll. The payroll we've been running at max payroll that is effectively sequentially will be flat 1Q to 2Q. Another major spend is utilities. Utilities actually goes down about $3 million sequentially into the second quarter and third quarter. And fourth quarter is really air conditioning is sort of the peakish cost. And then the rest of the cost structure, we probably have a few million a quarter opportunity to pull back on supplies, services, repairs, maintenance. You know, we did use sort of the slower time to kind of clean up a bunch of, you know, things that just needed to be fixed. But we probably swung a little bit more than we should. So the way I look at the cost structure is you should just look at it flat sequentially throughout the rest of the year. And that is, we feel very confident about that. And we really spent the past three months digging into our business and getting understanding of the cost structure better. The one cost structure that we are cutting on is corporate. You know, we've taken about $12 million out of corporate so far. You know, our corporate cost is roughly $25 to $28 million a quarter, but that is coming down. And we should see more benefits of that in the second and third quarter.
spk04: Okay. Thanks, guys. Really appreciate it. Best of luck. The next question comes from Jason Tilschen with Canaccord. Please proceed.
spk10: Great. Good morning. Thanks for taking the question. I just want to touch on Lucky Strike. Tom mentioned some of the sort of cost synergies that were going to be pulled out by consolidated into your business. I'm just curious sort of what the timeline is for when you expect some of those to flow through into the P&L. And then also on Lucky Strike, what are some of the plans to sort of expand the use of that brand? How do you see over the sort of medium term the different brands within your portfolio being used?
spk08: Well, I think the opportunity is more on the revenue side than on the cost side. You know, when I talked about we viewed this as 16 to 18 of EBITDA as opposed to 11, that was really the elimination of their overhead. So, you know, that's obviously a cost savings. But going forward, we see the ability to drive event sales in their locations as sort of the key. downtown and suburban Boston, downtown and suburban Chicago, downtown Denver, Bellevue, Washington, in downtown L.A., in Hollywood, in Honolulu, in Orange County, downtown San Francisco. So, you know, they had an irreplaceable set of assets, and we're very excited to get them. And I think that the early indications are very bullish. We love the name. We did a survey. We hired Nielsen to do analysis of their brand strength versus Bolero. We found that their brand strength was about 50% more. And so we've decided that our next handful of new build locations will open as Lucky Stripes. And we'll see how they perform. You know, it's impossible, obviously, to know how they would have done opening as a bull arrow versus how they'll do opening as a lucky strike. We'll try and make a determination of whether or not we feel like they were stronger as a result of that brand. But we certainly are bullish on that brand. So Moorpark and Miami will be the first two new builds that will open as lucky strikes. As I mentioned, we're investing a lot of capital. Lucky strike had been sort of in financial distress for a while. And so the assets have been underinvested in. and they had become pretty dilapidated. I failed to mention downtown Philly, right in the heart of Philly as well. And so we're putting that capital in now as we speak to upgrade those facilities, to sort of return them to their luster, maybe make them better than ever. And I think you're going to see a lot of revenue performance out of the Lucky Strikes in calendar 2024 and beyond.
spk10: Great. That's really helpful. And then just one other question. You had mentioned during the prepared remarks about sort of bringing that sales culture into the center. You talked about that a lot in the last call. I'm just wondering if you could maybe give a little bit of update on how that's going and when you expect some of those benefits to sort of flow through in the same sort of sales comps.
spk08: Well, they already have. That's why we got an increase on the weekend sales and when we were pushing the special, right, which was – it was a third game because all of our testing indicated people were bowling about 1.8, 1.9 games per visit. And so the philosophy behind the special was if we can get any incremental part of a third game, given that there is no variable cost to a game of bowling, all of that revenue is profit. So, you know, if we're charging $8 a game and I'll give you the third game for $5 and a $5 arcade card, In a way, it's almost perceived as free to the guest because they're getting a $5 arcade card as well for that incremental game, for the incremental $5 spend. What we found is that that did move bowling revenue higher. And again, all profit. There's about 10% cost of goods sold on the arcade card, so it doesn't all flow, but you can view the arcade card as a seed card that gets them in the arcade and and then they have the opportunity to refill that card. We instituted this, and consistently across hundreds of centers that were doing it, we found a 60% sell-through rate, which is phenomenal. And that was a result of the front desk associates selling the special, which had never occurred before. We'd never had really a selling impetus in the center. It's been a success, much better success than any of us previously thought it could be. I mean, 60% sell-through rate of all retail customers coming in throughout the week over hundreds of centers was very validating. Had we not eliminated the low-cost promotions during the week, I think you would have seen a very different result. But we've added those back, and now we've got the muscle memory to sell. And so we've increased the offering to the pizza and pitcher special, which is either a one-topping pizza and a pitcher of soda or one-topping pizza and a pitcher of beer, both for about a 20% reduced price over normal retail. And we're seeing, you know, initially good results from that as well.
spk04: Thanks for the color there.
spk03: Our next question comes from Ian Zafino with Oppenheimer. Please proceed.
spk01: I agree. Thank you very much. You know, I hopped on a little bit late, so sorry if you have to repeat yourselves. But on the new bills, it seems like you're obviously accelerating this. You're seeing much more opportunities or you're much more excitement. What is basically driving that? Is it the ability to do a sell-leaseback now? Are there just more new bills? Are you seeing less competition from others vying for that space? What exactly is kind of going on that's driving that? Thanks.
spk08: Well, we don't do sale leasebacks on the new bills. Those are all leased, mostly in malls. What happened is about two years ago, we made a change in terms of how we go out and source these deals online. We hired a Miami-based firm that has national contacts that's really increased our deal flow. And so we've seen a lot more. And as a consequence, we've been able to make a lot more deals. You know, I think being public has helped from a landlord's perspective. We're a bankable tenant. We are, you know, the 800-pound gorilla in space. We have a 27-year track record. So if you're a landlord and you're looking to do, you know, add an experiential offering to your small, we are the logical choice and landlords are acting that way and consequently we're seeing a lot more opportunities than we ever have. Some of these deals have stretched out for a long period of time, whether it took an extended period of time for the landlord to deliver or they got held up in permitting or whatever. You're seeing a flurry of activity here, but we've been working on this deal set now for a longer time period than you might imagine. So it's a little bit of sort of the poodle going through the boa constrictor. You know, we're seeing this bulge of deals that are happening right now, but they didn't all happen. They weren't all sourced at the same time. It's just that there was a lag to get them built. But fortunately now we are. we are in the throes of a pretty aggressive construction cycle. You know, opened one, about to open two more, four more should open next year, and then I would think four or five in the year after that.
spk01: Okay, thank you. And then maybe a question for Bobby. As far as just the guidance, help us understand the philosophy there of giving that guidance. Is this just sort of what you're used to as a CFO? And should we be expecting this going forward and maybe any other type of, you know, holistic conversation around that? Thanks.
spk02: Yeah. I mean, I'm going to follow my sword. I would tell you our internal model had EBITDA of 52 million for the first quarter. So we were, we just didn't signal that to the street. So, you know, building credibility and, you know, partnering with investors is giving them clarity on where our numbers are going to go and what we think our numbers are going to be. I just didn't do that, you know, at the, you know, at the fourth quarter earnings call, which, you know, is I guess a month and a half ago, is we probably should have signaled a little bit more about the higher highs and lower lows that are going to happen on our EBITDA. And so I'm just giving more clarity. So I'm telling you what, you know, what my model looks at, what we're seeing transparency is key. And, you know, we think as we hit these numbers, investors will, you know, will reward us for such.
spk04: All right, great. Thank you very much, guys.
spk03: The next question comes from Jeremy Hamlin with Craig Hallam. Please proceed.
spk06: Thanks. And I wanted to follow up on the last point here about, you know, cost of operations, COGS, and just make sure I understood. In terms of you know, thinking about COGS going forward, I think you indicated that you would expect that to be somewhat flat sequentially. And just wanted to make sure, even with the addition of, you know, the 14 units with the Lucky Strike deal and some of the other acquisitions, you know, typically you've seen a little bit of a skew up in these higher revenue quarters, just a cost of operations. But It sounds like you're thinking that that sequential cost on COGS is only going to be up maybe slightly or flattish as we move through these next few quarters. Any color?
spk02: Yeah, I mean, the sequential was a comp basis. Like, obviously, as lucky Maverick, Doctane, the three other acquisitions we did in the quarter flow through, those are going to take COGS up. But you have to, you know, model those out as inorganic growth. We balance comp, COGS, and M&A add-ons. As the new bills come on, those will come in. You flow those through as EBITDA. They all have very similar cost structures. The bigger, better. The smaller are going to be a little bit worse. We did put in our investor deck a quarterly what we call center EBITDA and center gross profit. It's very transparent about what the cost structure is for the comp and the total company. And so you can model that forward. But as deals come in, you do have to layer those into the cost structure.
spk06: Got it. OK. And then in terms of just some other kind of noise around the cost structure, so I think you had $8.4 million of transaction and advisory expenses in the quarter. I think that flows through your SG&A. You've had, obviously, the Vici deal. I'm sure some costs associated with that. How should we be thinking about your transactional advisory costs here in Q2?
spk02: Vici will be capitalized because Vici is considered a financing from a deal perspective. Lucky Strike, just so you have color, that deal was going on for two years. Massive legal bill in the first quarter to the tune of about $4 million all in. So lucky strike has passed. So I think that we don't forecast advisory costs or ad back, but I would tell you that it's going to be dramatically lower.
spk06: Got it. And then just in terms of the interest expense, right with the sale-leaseback here, so $37.5 million in Q1, what are we looking at here on a go-forward basis, all else being equal?
spk04: Yeah, I mean, you should annualize $31.6 million. And so we paid...
spk02: We closed the deal on October 19th, so you'll have to do two months and 11 days in the second quarter, and then going forward, it would just be 31.6 divided by four. Got it. Thanks for the color. And we'll be subject to fluctuations in SOFR, but I'm not going to speculate on interest rates, but the market right now is saying they're going down.
spk04: Great. Thanks. The next question comes from Eric Wolwood B. Riley.
spk03: Please proceed.
spk07: Thank you. Just a couple questions. I guess first off, given what you learned with the testing around the pricing and promotional cadence that turned comps positive in October, should we expect what's in place now to be in place through the busy season? Are you likely to test more options in the coming months? Do you have additional levers that could be pulled that you haven't launched yet but are potentially confident that could be an added boost?
spk04: Yeah, I think there's going to be two primary focuses.
spk02: So to give you some context, in the first quarter, bowling revenue was $117 million, right? F&B revenue was 72, you know, round numbers. We're not going to be happy until those numbers are equal to each other by F&B going up. So we want to attach there. So that is a multi-year journey. But we think the menu has dramatically changed to the positive in the centers. We think that people should be having dinner there. People should be buying more food. And some of that is going to be from our employees selling food. So we're going to keep going. You know, obviously selling, you know, the holy grail of bowling is getting people to go from two games to three games, and we will continue pushing that, but it's a multi-pronged approach.
spk04: Got it. Okay.
spk07: And then second question, on the events business, what are you seeing in terms of bookings in terms of the number of events versus average commitment? Are more events at similar pricing or is the average size of the commitments also increasing? Break that down if you could.
spk02: Yeah, I think that more event sizes are coming down a little bit. But, you know, that's why we flag the top 50 because the top 50 for us is up. But overall, we've seen, you know, we are and we've always viewed ourselves as a better value for the event community relative to other upscale opportunities. And we are a premium brand. And so we are seeing a lot of more events. So we're sort of excited about that.
spk04: But generally, you know, the business continues to be strong. Perfect. Thank you. The next question comes from Daniel Moore with CJS Securities.
spk03: Please proceed.
spk12: Thank you for all the color. Most have been answered, but just as it relates to the learnings from the promotional activity I experimented with during the quarter, it sounds like they've largely come back. Any of those midweek or family bowlers not fully come back yet that might create a little bit of a tailwind? And second, just how does that experience impact how you test or tweak promotions going forward?
spk02: Yeah, there's more to come. So we only brought back in – the third week of september we only brought back monday and friday late night so we didn't bring back the full uh full special until mid october um and that would still take you know a few weeks to percolate through the system um you know so so we definitely see a tailwind the coming few weeks.
spk12: Got it. And then is that, you know, kind of change your mindset or tweak how you would think about, you know, implementing promotions or pulling back on them going forward? I mean, promotions have to be worth it, right?
spk02: So we had a college night that, you know, we had in about I don't know, 50, 60 centers. And it was on Thursdays. And to be fair, it turned off, you know, another subset of the customer base. So we didn't bring back college night and Thursdays right now are our best night of the week. So we will be very tactical on it. I think, you know, priorities are going to be analyzing when we have empty lanes and filling them.
spk12: Makes sense. Lastly, any update on just penetration and Money Bowl, how that trended throughout the quarter? Thanks again.
spk02: Yeah, so Money Bowl, we have it in 64 centers, still operating, but we're turning it into an out-of-center experience. So you'll start, you know, I'm sure all the guys who are on the call will probably get, like, advertisements in the next few months to download Money Bowl because that's just how tracking works. We are updating our website significantly. Huge change, huge projects will be done sort of in the first calendar quarter. And it's going to be a game changer for the business. You know, and it's really everything that we're trying to enact in center with upselling, we're actually going to use technology to do as well. And Money Bowl will become sort of the loyalty platform and the out-of-center platform to bring people into the center. And at that point, we'll roll it out to a lot more centers. So the journey is still there. We're still pretty excited about it. We're waiting for the website to be more up-to-date, because I think that Money Bowl, in a world where you can go onto the website and track your progress, and we can use the website to pull you into the center, I think is going to be a very powerful tool for us into the future.
spk04: All right. Thanks again. Thank you. Ladies and gentlemen, this does conclude today's teleconference.
spk03: You may disconnect your lines at this time. Thank you for your participation and have a great day.
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