Pinstripes Holdings Inc

time, all participants have been placed in a listen-only mode, and the lines will be open for your questions following the presentation. Please note that this conference is being recorded today, February 19, 2025. During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations, including in respect of guidance for fiscal 2025. These forward-looking statements and all other statements that are not historical facts and reflect management's beliefs and predictions as of today, and therefore are subject to risk and uncertainties as described in the company's quarterly report on Form 10-K for fiscal 2024 and subsequent SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to most of the directly comparable GAAP measures can be found in the earnings release. The company has posted its third quarter fiscal 2025 earnings release and earnings presentation on its website at www.pinstripes.com under the investor relations section. And now, I would like to turn the conference over to Pinstripe's founder and CEO, Dale Schwartz.

Good afternoon, everyone, and thank you for joining our call today. The profitability improvements that our team has been driving over the last several quarters began to shine through during the fiscal third quarter. Some of the highlights include strong venue-level EBITDA margins of over 19%, and our best corporate profitability quarter in two years with adjusted EBITDA of 2.7 million. Moreover, our new stores are continuing to mature, delivering a $1.3 million improvement in venue level EBITDA versus last quarter and a venue level EBITDA margin of over 10%, excluding extraordinary expenses. While our top line results are not where we want them to be, I want to thank our more than 1,900 team members for their passion and dedication every day as they continue to provide our guests with those magical moments they've come to expect from Pinstripe. Over the last few quarters, our strategic focus has been on three main initiatives. One, improving our top-line comp growth trajectory. Two, driving improved profitability at both the venue level and corporate level. And three, opening high-quality locations within our current funding capacity. Let me speak to each of these areas, starting with improving our top-line comp growth. As we spoke to previously, during the first four weeks of the third quarter, we saw comp trends in the negative mid to high teens as we made some adjustments to our marketing that had unintended impacts to our business. As we corrected those changes along with adjustments on our promotional strategy, we saw comps improve 10 percentage points to the down 7% range. The improvement was primarily driven by a meaningful improvement in our events business in the final month of the quarter, as both corporate and social event leads increased and our teams drove positive bookings. For our open play business, we are focused on ensuring we have the right level of value for our guests through programs such as happy hour gaming promotion, where you can enjoy a lane and bowl for 50% off during certain hours, as well as our daily special. Additionally, we have made exciting changes and additions to our legendary weekend brunch buffet offering, and we're seeing positive trends as a result. In addition, our local store marketing campaigns continue to see exciting success as we've introduced activities such as kids clubs, comedy nights, line dancing, yoga classes, trivia nights, and many other community activities that complement our F&B and gaming offerings. As we enter the fiscal third quarter, we continue to test programs that we believe are right for our brand and our guests, while being quick to discontinue those that did not perform to expectations. We believe we found the right balance as demonstrated by the substantial improvement in our comp performance in recent weeks compared to the second quarter. On the event side of the business, our third quarter is our seasonally strongest, and our teams worked hard to drive as many events as possible for Pinstripes through the holiday season and beyond. We are encouraged by the fact that we are seeing strong lead generation and booking performance on the event side of the business in recent weeks. And our continued investment in the tourism convention segment of our event business is showing very promising bookings and sales results. We believe that targeting these adjacent opportunities will allow us to grow our event business beyond the third quarter and create additional momentum to the rest of calendar 2025. With respect to profitability, The third quarter represented our best quarter for corporate profitability in two years. The substantial work that our teams have done since the start of the fiscal year to remove $10 million in annualized cost savings at the store level helped to protect our overall profitability and mostly offset our near-term comp growth headwinds, resulting in a venue-level EBITDA margin of 19.2% for the third quarter, a reduction of only 20 basis points. As a reminder, These savings range from strategic hourly and salaried labor savings, a more favorable credit card processing agreement, to more intense negotiations with our various vendor partners, leveraging our growing scale and brand. Our cost-saving initiative extended to the corporate level with the targeted removal of approximately $4 million of annualized cost savings in our SG&A. The fiscal third quarter year-over-year SG&A decline of almost $500,000 represented the beginning of those savings starting to flow through our P&L, with the remainder expected to flow through in future quarters. As a reminder, these cost savings range from negotiations with agency partners to strategic corporate headcount reductions and a renewed focus on marketing efficiency. overall our profitability improvements were one of the major bright spots in our third quarter results and following the completion of our cost reduction efforts at the venue level and corporate level we believe we have the appropriate cost structure for our business and are focused on driving top line improvements to be able to drive further corporate profitability upside turning to unit development During the third quarter, on November 15th, we opened our 18th location of Walnut Creek, California at Broadway Plaza, marking our second location in the San Francisco area in close proximity to our location in San Mateo. This new two-story Walnut Creek venue features 25,000 square feet across two levels with eight bowling lanes, two indoor bocce courts, and private event space for groups of up to 1,500. Overall, we remain very pleased with the new opening. Next, I want to touch on liquidity. As of January 5th, we had $2.4 million in cash and cash equivalent. While our third quarter represented a substantial improvement in our trajectory with positive corporate-level EBITDA and only modestly negative free cash flow, the company is exploring several strategic alternatives in order to improve our overall liquidity position. As part of this, On January 21st, Oaktree funded an additional $6 million under the Oaktree Tranche 2 loan. Otherwise, until we conclude the strategic and financing alternative process, we do not intend to make any further public comment unless as deemed appropriate or necessary. In summary, while we are pleased with what we've accomplished in writing our cost structure, both venue level and corporate, we remain acutely aware of our needs to improve our top-line growth trajectory to further realize improved profitability. Before I turn the call over, as we noted in our earnings release this afternoon, Tony Cucciagrosa, our CFO, will be stepping down effective February 28th to pursue other opportunities outside of the restaurant and entertainment industry. I want to personally thank Tony for the work he's done over the past 18 months including contributing to our transition to a public company. It's been a privilege to work with you, and I wish you well in your future endeavors. With that, let me now turn the call over to Tony to discuss our fiscal third quarter results in greater detail.

Thank you, Dale. It's been an honor to be part of the Pinstripe story, including, as you noted, the transition to becoming a public company. I look forward to working with you and the rest of the management team to ensure a smooth transition. Tony Doan- Turning your results for fiscal third quarter total revenue increase 10.4% for 35.5 million. Tony Doan- Compared to 32.2 million in the same quarter last year, including a 10.5% increase in food and beverage revenues and 10.3% increase in recreation revenues. Tony Doan- The increase in total revenue is primarily due to having one new store open for a portion of the third quarter of fiscal 2025. and three new stores open in the third quarter of fiscal 2025 for the full period compared to the third quarter of fiscal 2024. Turning to expenses, cost of food and beverage as a percentage of total revenue decreased 10 basis points to 15.5%, primarily due to cost efficiencies offsetting negative sales leverage in mature venues. Labor and benefits as a percentage of total revenue decreased 60 basis points to 33.1%, Rob Leibowitz, primarily due to reduce headcount in the third quarter of 2025 as compared to the third quarter of fiscal 2024 and increased Labor efficiency at locations open less than 24 months. Rob Leibowitz, Excluding the addition of four new stores store Labor and benefits costs were down approximately 20 basis points occupancy costs as a percentage of total revenue increased 140 basis points to 16.8%. other operating expenses as a percentage of total revenue increased 60 basis points to 16.6 percent primarily due to increases in janitorial and software as a service costs in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. venue level ebitda as a percentage of total revenue decreased 20 basis points to 19.2 percent driven by sales deleverage on negative comps TAB, Mark McIntyre, Partially offset by modest positive store contribution from the new locations that opened in fiscal 2024 and fiscal 2025 as these stores have continued to see improvements in profitability. TAB, Mark McIntyre, Please refer to our earnings release for reconciliation of non gap measures are mature stores those open more than 24 months generated average contribution margins of 21.6%. representing a 30 basis point decrease year-over-year driven primarily by cost efficiency improvements offset by sales deleverage that we've previously discussed. General and administrative expenses decreased to $4.8 million compared to $5.3 million in the same period last year. Turning to liquidity, as of January 5, 2025, we had $2.4 million in cash and cash equivalents and $114 million of debt outstandings. This concludes our prepared remarks. We'd like to thank you again for your interest in pinstripes. Dale and I are now happy to answer any questions that you may have. Operator, please open the line for questions.