Lucky Strike (NYSE:LUCK) held its third-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/210187994
Summary
Lucky Strike reported a second consecutive quarter of positive same-store sales, with total revenue increasing to $342.2 million despite disruptions from winter storms and geopolitical events.
The company has implemented significant cost-saving measures, including a reduction of 97,000 labor hours and $6 million in annualized savings from headcount reductions, aided by their AI system, ORCA.
Future guidance has been adjusted to account for macroeconomic challenges, with expectations for 4-5% revenue growth, $345-$350 million in adjusted EBITDA, and $120 million in capital expenditures.
Operational highlights include progress in brand consolidation with 115 Lucky Strike conversions and improvements in water parks expected to add $18 million in incremental EBITDA.
Management is focused on increasing free cash flow per share to $2 over the next 12 months, leveraging EBITDA growth, CapEx discipline, and opportunistic share repurchases.
Full Transcript
OPERATOR
Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time I would like to welcome everyone to the Lucky Strike Entertainment third quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question again, press star one. I would now like to turn the conference over to Bobby Levin, Chief Financial Officer.
Bobby Levin (Chief Financial Officer)
Good morning to everyone on the call. This is Bobby Levin, Lucky Strikes Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike’s third quarter 2026 earnings. Joining me on the call today is Thomas Shannon, our Founder, Chief Executive Officer 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 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. Lucky Strike Entertainment 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 in. 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’ll now turn the call over to
Tom
Tom thanks everyone for joining today’s call. In the March quarter, We delivered our second consecutive quarter of positive same store sales comp at plus 0.2% and our first back to back positive comp performance since 2024,, total revenue grew to $342.2 million, up from $339.9 million in the prior year period. The quarter started powerfully with January, same store sales up plus 5.5% and we entered February with strong momentum. That momentum was disrupted by an extraordinary stretch of weather and macro events Winter Storm Fern, in late January and Winter Storm Hernando in late February. Each brought widespread closures, travel bans and power outages across markets that account for a meaningful share of our Footprint. Together, the two storms cost us approximately 250 basis points of comp in the quarter. Then on February 28th, large scale military action in the Middle east drove a sharp spike in gasoline prices and consumer confidence fell to its lowest level in 70 years. In this environment, a positive comp is, in our view, a credible outcome. Excluding our west coast markets which faced a sharper consumer drawdown in the quarter, the rest of the company actually performed positively plus 1.9%. As I outlined after our last call, we are committed to taking substantial and immediate action on costs and free cash flow, and that is exactly what we have done. Beginning in mid January and accelerating through the quarter with the help of AI, we have driven a sustained reduction in incentive labor hours, approximately 97,000 hours saved over the last 12 weeks versus the prior year, a more than 16% reduction from where we were peaking in early January. In three months we have also reduced corporate field and sales headcount, generating more than $6 million of annualized savings. The full earnings benefit of these actions will land in our fiscal fourth quarter. ORCA, is one of the most important developments in our business. ORCA, is our internal AI system which aggregates approximately 750 million rows of operational data into a real time decision making layer for our managers. ORCA, is already managing clock ins, clock outs and aggregated guest reviews across our 360plus locations. The early results are tangible. On closeout times alone, we have reduced excess post close hours from approximately 2,000 per week to roughly 300, generating more than $2 million of annualized savings from a single workflow. We see a similar opportunity in the high teens to mid 20 millions of dollars of annual savings from optimizing clocking in time. We’re extending ORCA, into Pricing, Marketing, Creative Purchasing, Arcade optimization and capex rationalization. While AI-related layoffs are creating some softness in corporate event demand, the longer term effects of AI for Lucky Strike will be favorable. There was a developing thesis on Wall street called Halo High Asset Low Obsolescence that captures it well. Our analog bricks and mortar offering is one of the categories most insulated from AI disruption. Our brand consolidation continues to run ahead of schedule. We are now at approximately 115 Lucky Strike conversions out of an ultimate target of 225, with the remainder receiving an upgraded AMF presentation. We expect to be substantially complete with the rebranding work by this time next year. Each conversion runs about $150,000, so on completion we expect a meaningful step down in capital expenditures. Our key operating metric continues to be free cash flow per share, which we measure as a trailing twelve month EBITDA less CAPEX divided by shares outstanding. That figure currently stands at $1.53. Our goal is to reach at least $2 over the next 12 months, a 33% increase through a combination of EBITDA growth, continued CapEx discipline and opportunistic share repurchases, all while keeping net debt flat. Capital expenditures year to date are down 20% versus the prior year, $91 million compared with $114 million the summer also looks materially better year over year. Our water park portfolio is set to add approximately $18 million of incremental EBITDA this summer, with a vast majority in our September quarter. Thus, in fiscal 2027 and our family entertainment centers continue to perform ahead of plan Turning to guidance reflecting the macro reset in the back half of the March quarter,, we are updating our fiscal 2026 outlook. We now expect total revenue growth of plus 4 to 5%, adjusted EBITDA of approximately 345 to $350 million and capital expenditures of approximately $120 million. Gross capital expenditures are down roughly $30 million year over year as we focus on cash flow generation. Importantly, this revision reflects the consumer environment, not our plan. The cost actions are landing on schedule, operating leverage builds as comp recovers and the water parks come online, and we expect to exit the year with materially better cash conversion than when we entered it. With that, let’s turn it over to Q and A.
OPERATOR
Thank you. We will now begin the question and answer session. If you have dialed in and would like to add a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via speakerphone in your device, please pick up your handset to ensure that your phone is not on mute when asking your question. We do request for today’s session that you please limit to one question and one follow up question only. Thank you. And our first question comes from the line of Steve Wysinski, with Stifel. Your line is open.
Steve Wysinski (Equity Analyst)
Yeah hey guys, Good morning. So Tom or Bobby, I want to go back to your commentary, Tom. I guess it’s your commentary around the consumer and trying to understand your comments around the slowdown you saw as the Middle east war commenced. And I guess what I’m trying to figure out is that, you know, that type of commentary goes, you know, goes against pretty much, you know, I would say kind of every other leisure company that we, that we cover. You know, think, think most of our, you know, think most other consumer discretionary companies really, you know, haven’t seen much of an impact from the war. So I’m just trying to understand your commentary and the pressure that you saw versus other leisure companies and then maybe what you’ve seen from spend patterns more recently. Meaning, you know, have you seen them stabilize or, you know, and, or improve? Well, good morning. Everyone we’ve spoken to in the space saw a significant fall off greater than ours in March. I know a local proprietor in Southern California with a good demographic. They were down 17% on a comp basis. You know, Dave and Buster’s hasn’t reported the March period yet. That was, that was after their most recent earnings. So I think that actually the, the leisure, leisure based, location based entertainment space took a very big hit. I mean, gas prices on the west coast were as high as $9 and consumer confidence plunged to its lowest level in 70 years. I think it would be, you know, sort of delusional to think that that didn’t have an impact on the consumer in March. Now I think the good news about the consumer is they have a very short memory or they adjust to new realities very quickly. And we saw a very rapid snapback. Our most recent period was effectively flat on a revenue basis. So we were way up in January. Then we got kicked in the teeth by two epic snowstorms that shut us down for days on end across, you know, up to half of the portfolio. And then there was the war where a lot of activity just stopped. We’ve heard again from a lot of operators, particularly those with a lot of west coast exposure, that they were down 20% or more. We weren’t down nearly that much, but yeah, there was an impact on spending and I think it was pretty broad. Okay, thanks for that, Tom. And then second question. You know, I’m wondering, obviously, you know, we can kind of back in. I mean, we have your fourth quarter essential guidance, but can you maybe help us think about the progression of same store sales in terms of the way you guys are kind of thinking about it, you know, maybe now through, you know, through the remainder of the year. Just want to kind of see how you guys are kind of thinking about the next, you know, call it Two or three quarters.
Tom
Yeah. If you look at the cadence, you know, January was up, you know, five and a half percent, February is up 1, March was down 7. April’s flat. You know, we’re, we’re, we’re effectively focused on flat right now as we wait for the consumer to kind of normalize across the shock. You know, that being said, you know, I’m surprised a little bit by your comments to you because, I mean, jet fuel prices are through the roof and airlines are pushing on, so, you know, volume has to be down. Like they may be getting more dollars, but ultimately, you know, as air travel costs rise, consumers are going to stay close to home this summer. So, you know, we should see a tailwind, particularly in our water parks. You know, the one thing that’s important from the water park perspective and a modeling perspective, you know, we have 18 million of EBITDA coming online, but 80% of that comes online in the September quarter.
Steve Wysinski (Equity Analyst)
Okay, gotcha. Thanks, guys. Appreciate it.
OPERATOR
Our next question comes from the line of Jeremy Hamblin with Craig-Hallum Capital. Your line is open.
Jeremy Hamblin (Equity Analyst)
Thanks. Good morning. Just building on the …
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