Lucky Strike Entertainment Corporation (LUCK) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate strong financial metrics, with revenue and EBITDA growth, successful product innovations, and strategic acquisitions. Despite some regional challenges, the overall sentiment is positive, with optimistic guidance and effective marketing strategies. The acquisition of entertainment properties and the focus on organic growth further bolster the outlook. The absence of negative factors like guidance refusal or secondary offerings supports a positive sentiment, though not strong enough for a 'Strong positive' rating.
Key Financial Performance
Total Revenue Grew 12% year-over-year. This growth reflects healthy customer engagement across core bowling and entertainment venues, as well as double-digit growth in the online booking funnel.
Adjusted EBITDA Increased by 15% year-over-year. This improvement is attributed to disciplined cost management and capital efficiency.
Same-Store Sales Close to flat at negative 0.4% year-over-year. Retail revenue increased by 1.4% and league revenue grew by 2.1%, indicating healthy customer engagement. However, offline events business declined by 11%, causing a 160 basis point drag on total comps.
CapEx (Capital Expenditures) Decreased to $26 million from $42 million year-over-year. This reduction is due to tighter capital allocation and benefits from the procurement function.
Strategic Real Estate Investment Invested $306 million to acquire land and buildings for 58 existing locations. This move enhances flexibility, reduces exposure to future rent increases, and sets up opportunities for future accretive sale-leaseback or refinancing.
Debt Refinancing Closed a $1.7 billion refinancing, extending debt maturities to 2032 at an average weighted cost of capital of 7%. This provides financial stability and long-term cost management.
Acquisition of Entertainment Properties Acquired 2 water parks and 3 family entertainment centers for $90 million. These properties welcome over 1 million annual guests and are expected to generate returns above historical averages, with most financial contributions coming next summer.
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Operating Highlights
Online booking funnel: Grew double digits in the quarter, showing strong customer engagement.
Acquisition of water parks and family entertainment centers: Acquired Raging Waters Los Angeles, Wet 'n Wild Emerald Pointe, and three family entertainment centers in Southern California for $90 million. These destinations welcome over 1 million annual guests and are expected to generate above-average returns, with most financial contributions coming next summer.
Expansion of location platform: Expanded to include water parks and family entertainment centers, broadening leadership in water parks, amusement, and family entertainment.
Free cash flow improvement: Focused on disciplined cost management and capital efficiency. CapEx reduced to $26 million from $42 million year-over-year.
Strategic real estate investment: Acquired land and buildings for 58 existing locations for $306 million, enhancing flexibility and reducing exposure to future rent increases.
Debt refinancing: Closed a $1.7 billion refinancing extending debt maturities to 2032 at an average weighted cost of capital of 7%.
Leadership appointments: Welcomed Brandon Briggs as Chief Revenue Officer and Laura Cobos as Vice President of Field Training, both bringing extensive industry experience and already impacting service and culture positively.
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Risk or Challenges
Offline Events Business Decline: Offline events business, primarily corporate event bookings, was down 11%, causing a 160 basis point drag on total comparable sales. This decline could impact overall revenue and profitability.
Debt Refinancing: The company closed a $1.7 billion refinancing with debt maturities extended to 2032 at an average weighted cost of capital of 7%. While this provides financial stability, the high cost of capital could strain future cash flows.
Real Estate Investment: The $306 million strategic real estate investment in land and buildings for 58 locations enhances flexibility but represents a significant capital outlay, potentially impacting liquidity.
CapEx Reduction: Capital expenditures were reduced to $26 million from $42 million a year ago. While this reflects tighter capital allocation, it may limit future growth or maintenance of existing assets.
Acquisition Risks: The acquisition of water parks and family entertainment centers for $90 million is expected to generate returns, but integration challenges and seasonal revenue dependency could pose risks.
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Guidance & Outlook
Future Revenue Growth: The company expects financial contributions from the recent acquisition of water parks and family entertainment centers to materialize primarily in the next summer season, with returns anticipated to exceed historical averages.
Debt Refinancing: The $1.7 billion refinancing extends debt maturities to 2032 at an average weighted cost of capital of 7%, providing financial stability and flexibility for future operations.
Capital Expenditures: Capital expenditures have been reduced to $26 million this quarter, down from $42 million a year ago, reflecting tighter capital allocation and cost management.
Real Estate Strategy: The acquisition of land and buildings for 58 existing locations for $306 million is expected to enhance flexibility, reduce exposure to future rent increases, and create opportunities for accretive sale-leaseback or refinancing in the future.
Holiday Season Outlook: October was the strongest month of the year for offline and total events, providing confidence in performance heading into the holiday season.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Could you break down the drivers of 1Q's roughly flat comp as you look across your walk-in retail business relative to events?
A:Lev Ekster explained that retail and league were major drivers, with retail foot traffic up nearly 1.5% and leagues up over 2%. October saw a 5% increase in leads, driven by higher headcount and increased average price per game. Food and beverage revenue from league bowlers also hit all-time highs for five consecutive weeks. Bobby Lavan added that the event business faced headwinds in corporate events but saw improvement in October, with online sales growing in double digits.
Q:Could you expand on the drivers of the 70 basis points of adjusted EBITDA margin expansion in the first quarter?
A:Robert Lavan stated that revenue drove operating leverage, offset by $2.5 million in incremental marketing investment and $1 million in higher insurance costs. He noted that the first quarter is the lowest margin quarter, with expected 600-800 basis points margin improvement in winter quarters.
Q:How should we think about the cadence for the rest of the year in terms of same-store sales and any headwinds or tailwinds?
A:Robert Lavan mentioned that the next few quarters are clean on an apples-to-apples basis. Same-store sales are guided to 1%-5% for the year, with stronger inorganic growth in the first and fourth quarters. He expects same-store sales to remain in the guided range for the second and third quarters, with the fourth quarter being slightly better.
Q:What are the recent trends in attachment rates for retail customers in terms of food and beverage or amusement spend?
A:Lev Ekster reported a 10% increase in food sales in Q1, outpacing overall retail growth of 1.4%. Initiatives like the Pizza and Picture combo and platters for larger groups have been successful, generating $8.5 million and $1.3 million in sales, respectively. The company is also testing new products like craft lemonades and dirty sodas.
Q:What is the progress on the Lucky Strike rebrand, and how are the economics and metrics looking?
A:Lev Ekster stated that 74 locations have been rebranded, with a goal of 100 by year-end and 200 by 2026. Rebranded locations like Times Square and Chelsea Piers have shown strong results, with Times Square retail revenue up 36%. The rebrand allows for more focused marketing and stronger F&B attachment.
Q:Is there a geographic disparity in the events business, and how is it trending?
A:Robert Lavan noted that California and Washington are underperforming due to Silicon Valley layoffs, while New York, Texas, and Florida are strong. Excluding California, the business would have comped up low single digits for the quarter.
Q:What are the walk-in retail trends observed in Q1 and October?
A:Robert Lavan reported positive trends, with mid-single-digit growth in October. Retail, leagues, food, alcohol, and amusements are all performing well, while corporate events are less impactful in the third and fourth quarters.
Q:How have the water parks performed in their first full season, and what are the operational learnings?
A:Robert Lavan highlighted strong performance, with food sales up 10% and alcohol introduced at Raging Waves. The company plans to integrate water parks with bowling centers through combined passes and promotions.
Q:What is the outlook for promotional activity over the winter months?
A:Robert Lavan mentioned a slowdown in the promotional environment, with tactical promotions like a Black Friday sale planned. The company may avoid promotions in early December when lane utilization is high.
Q:How much of the 10% food growth in Q1 was due to price versus attachment, and is there room for further price increases?
A:Robert Lavan clarified that the 10% growth was entirely due to attachment, with no price increases. Future price adjustments will align with product quality and are not included in the current guidance.
Q:What is the focus for the remainder of the year in terms of M&A versus organic growth?
A:Robert Lavan stated that the focus is on organic growth, with $95 million spent on acquisitions so far. CapEx is expected to come in below the $130 million guidance, with limited additional investment needed for recent acquisitions.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the specific geographic impact of layoffs in California and Washington on the events business, providing only general comments about leaning into marketing and weathering the storm.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Officer
CFO Treasurer
Canaccord Genuity
Capital Group
Capital Markets
Chase Co
Co Research
Corp Research
Craig Hallum
Division Canaccord
Division Craig
Division NOBLE
Division Stifel
Genuity Corp
Group LLC
Hallum Capital
Inc Research
Incorporated Research
JPMorgan Chase
LLC Research
Lucky Strike
Markets Inc
NOBLE Capital
Nicolaus Incorporated
Principal
Research Division
Stifel Nicolaus
Strike Entertainment
LUCK Transcript
Lucky Strike Entertainment Corporation (LUCK) Q1 2026 Earnings Call Transcript
Positive11-4
The earnings call summary and Q&A indicate strong financial metrics, with revenue and EBITDA growth, successful product innovations, and strategic acquisitions. Despite some regional challenges, the overall sentiment is positive, with optimistic guidance and effective marketing strategies. The acquisition of entertainment properties and the focus on organic growth further bolster the outlook. The absence of negative factors like guidance refusal or secondary offerings supports a positive sentiment, though not strong enough for a 'Strong positive' rating.
Lucky Strike Entertainment Corporation (LUCK) Q4 2025 Earnings Call Transcript
Positive8-28
The earnings call shows a positive sentiment due to the reinstatement of guidance, expected double-digit growth, and strategic acquisitions. Despite some weaknesses in California, the company is optimistic about future performance, particularly with water parks and FECs. Marketing investments are showing results, and the company is confident in its business trajectory. However, the lack of specific financial details in some responses and the filing of a shelf registration could be a concern. Overall, the strategic focus and positive guidance suggest a positive stock price movement.
Lucky Strike Entertainment Corporation (NYSE:LUCK) Q2 2025 Earnings Call Transcript
Unknown2-6
The earnings call highlights several negative factors: a decline in revenue and adjusted EBITDA, reduced capital expenditures, and macroeconomic uncertainties affecting consumer behavior. The Q&A reveals concerns about same-store sales and management's unclear responses on key issues. Despite a positive EPS growth, the absence of a share repurchase program and lack of strong guidance further weigh on sentiment. Overall, the cautious outlook and potential risks suggest a negative stock price reaction.
LUCK Slides
Frequently Asked Questions
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