Good afternoon, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Lucky Strike Entertainment Corporation Q2 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' 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, please press star one again. Thank you. I would now like to turn the call over to Bobby Lavan, Chief Financial Officer. Please go ahead.

Good afternoon. This is Bobby Lavan, Lucky Strike Entertainment Corporation's Chief Financial Officer. Welcome to our conference call to discuss Lucky Strike Entertainment Corporation's second quarter 2026 earnings. Today, we issued a press release announcing our financial results for the period ended December 28, 2025. A copy of the press release is available in the Investor Relations section of our website. Joining me on the call today are Thomas Shannon, our Founder and Chief Executive, and Lev Ekster, our President. I would like to remind you that during today's conference call, we 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. Lucky Strike Entertainment Corporation undertakes no obligation to revise or update any 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 most directly comparable to each non-GAAP financial measure discussed and 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 will now turn the call over to Tom.

Thanks, everyone, for joining today's call. We finished December with a positive same-store sales comp of plus 0.3% and total revenue growth of plus 2.3%. The result was driven by continued strength in both our retail and league businesses, while we made steady progress turning around our events business, which ended nearly flat for the quarter, its best showing in years. Retail and leagues performed well throughout the quarter and provided a stable foundation for the comp. Events, which had been the primary drag on same-store sales over the past several quarters, inflected meaningfully in January. The changes we have made to the events organization, pricing, and funnel are beginning to show results. January started off with strong double-digit results. We saw one week of headwinds from the biggest snowstorm this country has seen in a while, and then a return back to momentum of strength in retail, leagues, and events. During the quarter, we made deliberate investments in payroll, marketing, and elevated activity levels to drive traffic and return the business to positive same-store sales growth. A number of these investments delivered attractive returns and helped establish positive momentum, particularly in retail, leagues, and the early stages of the events turnaround. However, not all of the spending generated the ROI we expected, with incremental labor in particular weighing on profitability. As a result, while we remain focused on driving organic growth, we are shifting toward a more balanced approach that places equal emphasis on same-store sales growth and EBITDA expansion. Going forward, investments will be more targeted, more measured, and held to a higher return threshold. In January, we also closed on the acquisition of Raging Waters, the largest water park in California. It will contribute meaningful EBITDA in the June and September quarters. When combined with Wet 'n Wild Emerald Point in North Carolina and three new family entertainment centers we have acquired, we expect a significant seasonal lift to earnings as we move through the summer months, reflecting the continued diversification of our portfolio. On the brand front, we opened Lucky Strike Aliso Viejo in Orange County, California in December, and early results have been encouraging. We now operate approximately 100 Lucky Strike locations and remain on track to sunset the Bolero brand by the end of this calendar year. Conversions to Lucky Strike have delivered strong lifts, and simplifying the portfolio to two cohesive brands, Lucky Strike and AMF, will drive efficiencies, particularly in marketing spend. At the same time, we plan to roll out a refreshed AMF look later this year that leans into the brand's more than 100-year history. This evolution strengthens our value-oriented offering while clearly differentiating it from Lucky Strike, positioning the portfolio for profitable growth and improved returns. With that, let's turn it over to Q&A.

Ladies and gentlemen, we will now begin the question and answer session. As we enter Q&A, we ask that you please limit your input to one question. If you would like to withdraw your question, please press star 1 again. One moment, please, for your first question. Your first question comes from the line of Steven Wieczynski of Stifel. Please go ahead.

So, Bobby, this is probably for you. Like, you know, as we kind of think about the results we have seen here, I am surprised you guys did not elect to kind of lower the EBITDA guidance for the full year, at least maybe bring the high end of that range down. Based on the EBITDA generation through the first six months, you guys would need to see a pretty significant uptick in the second half of the year to kind of get inside of that range at this point. So I guess my question is, are you guys still confident in getting into that range? And, you know, the start of the year has been strong.

Yeah. So, Steve, if you think about it from a numbers perspective, the past two years, we have had this $300 million business being really a drag on our results. You know, it is a drag on our financial results, but also events is sort of the tip of the spear as a lead gen for the business. That business has turned, you know, as Tom said in his commentary and in the press release, that business had organic growth in January and February. When you compound that with retail being up mid-single digits and leagues being up mid-single digits, you know, we are still within the paradigms of our guidance. You know, when we talked last quarter, we were very focused on people not getting super excited about December because we still had this corporate events business, which was front-end loaded in December as expected. Corporate events are down, but then you got into December, and our consumer events and our retail were on fire. And the first three weeks of January, the business was up double digits. So, you know, our confidence in the business is very high. We invested to get there, and now we need to pull back some of those investments. But, you know, we are definitely still within the confines of our guidance we gave out in August.

Okay. That makes sense. And then maybe if I could add one more real quick. You know, I want to ask how we should think then about kind of, you know, a flow like, how the flow through would look for the rest of the year. Obviously, you know, you guys were investing, it seems like, pretty heavily in the corporate events business turning that around through December. So maybe a better way to ask that is, you know, how much of a drag was that on margins in your second quarter? Hopefully, that makes sense.

Yeah. So, you know, there are two or three buckets, I would say, of direct drag. So center payroll, on a comp basis, was up $6 million year over year. Right? Two, you know, we talked about and we flagged very heavily the marketing. The marketing investment on a year-over-year basis was up $4 million, and the marketing team investment on a year-over-year basis was up a million. Right? So, ultimately, finding the right balance on those numbers and organic growth is what we think we have gotten to in January. And we are very happy with the January results. We are going to, you know, ultimately optimize those numbers to make sure that, you know, we are getting the appropriate flow through. You know? And, you know, from our expectations, you should see margin growth in a material way in the fourth quarter as all the water parks and the boomers go from being a few million a quarter of drag to significant EBITDA.

Okay. Helpful. Thanks, guys. Really appreciate it.

Your next question comes from the line of Matthew Boss of JPMorgan. Please go ahead.

Great. Thanks. So could you elaborate on progress with your initiatives that you have made to date to rebuild the Events business? Or specifically, drivers you think are underlying this recent inflection in the events business relative to the headwinds that you faced on that side of the house in the first half of the year?

Yeah. We chased price for two years. So if you called us and you wanted a discount, we would give it to you. Now discounts are an important part of any sort of location-based entertainment company. You know, if you call in the summer, Monday afternoon, you know, a discount is warranted. But if you call for a Thursday at Times Square in December, we should not give you a discount because demand is greater than the supply. And so in September, we built out dynamic pricing reporting systems. When we looked at where we were tracking in September, we were tracking for our events business to be down double digits, and we brought it all the way back. And that was really less through volume and more through dynamic pricing. And that is something that has dramatically changed over the past few years. You know, the volume, it is hard on the corporate side. You know, that is business that we need to build functions to kind of build, you know, our marketing function to get our name out there more. But, you know, also our marketing, which has really helped the kids' birthday parties and consumer parties. So pricing has been paramount, and also the partnership with marketing is really a sea change for the business.

And maybe to that point, Bobby, could you elaborate on which investments you made in the second quarter that you saw translate to improved traffic or same-center comps? And then just how best to think about the continued investments as we think about the third or the fourth quarter, as I think you mentioned balancing margin in the back half of the year and particularly it sounds like the fourth quarter.

I am going to hand the hand over to Lev because you...

Hey, Matt. So you saw we made a significant increase to our marketing budget, and that was an investment in building our brand and increasing the brand awareness. We feel like it was, for the most part, a pretty worthy investment. In fact, we saw our media impressions in the quarter increase 200% from Q2 of the prior year. We had 340 million impressions in Q2 of this year; we exceeded over a billion impressions. And that also converted. We saw online revenue increase 28% year over year, and booking conversions improved twofold. The rebrands of Lucky Strike, of which we did 30 in Q2, are also bearing fruit, and we anticipate being done with all of those rebrands this calendar year, which would put us right around 218 Lucky Strike locations. But when you consider the efficiency of going from three brands to two, it really helps our national awareness. I also want to mention that the marketing investment increased our share of voice. So our search impressions climbed significantly. In fact, it was a 520% increase, but we also saw efficiency with our CPMs decreasing by 38%. So from a high level, marketing increased, but largely as an investment in brand building, and we saw the benefits of that in January, and I think that is going to continue as we scale the rebrands of Lucky Strikes.

Great. Best of luck.

Thank you.

Your next question comes from the line of Jason Tilchen of Canaccord Genuity. Please go ahead.

Good afternoon. Thanks for taking my question. I was wondering if we could talk about the food and beverage sales that you saw during the quarter. It was a little bit below what we were expecting. And I am just curious sort of how attach rates trended and what are some of the benefits you are starting to see from sort of the increased emphasis on training and some of the tablet implementation that you guys are rolling out? Thanks.

So our retail comp was just shy of 2% at 1.7%, but our retail food was at 10.9%. So it continues to outperform. And while alcohol was a bit of a drag, with retail alcohol down right around 4.7%, we saw that our retail nonalcoholic comp grew more than the drag did; that increased 26.2% or $2 million. So in terms of food and beverage, it is pretty dynamic. We are seeing, obviously, as a society, the decrease in alcohol consumption. But we continue to invest in our zero-proof program. So we launched, as you remember, Kraft Lemonades earlier in the year. That has a run rate of over $5 million. With the success of Kraft Lemonades, later this quarter, we plan to introduce dirty soda programming to our traditional properties and boba drinks to our experiential properties, and we anticipate similar results. We are also, for the first time ever, going to introduce a zero-proof program to our AMF properties, our traditional locations. They have never had a mocktail program. So we are just changing with the times, investing more in zero-proof, and it is working. What also is working is our tablets. We introduced server tablets. Today, we sit at 125 locations with server tablets, and we are seeing the average check size increase about 7% with increased gratuities for the associates using the server tablets. By March, we are going to have server tablets in 160 of our locations. We are going to continue to evaluate as we scale that. But, ultimately, as Tom mentioned, we increased service labor in Q2. And some of it worked, and we saw retail comp growth. Some of it was inefficient, and we have to evaluate that. So we have actually recently trimmed some of our least profitable operating hours as a result of that. And we are looking at in and out times of our associates to make sure that they are very productive. But that investment in labor increased service labor for our guests, and our increased hospitality training is working because we have now seen for fourteen straight months our NPS score comp from the prior year. In fact, it hit our highest point of 78.7% in October. So from a hospitality perspective, from a retail growth perspective, the service is working. We just want to optimize it.

Your next question comes from the line of Ian Zaffino of Oppenheimer. Please go ahead.

Great. Thank you very much. You know, you guys mentioned some of the investment that you are making and upping the return that you are expecting. Can you give us maybe kind of particulars of what was unexpected? I think you mentioned labor, but anything else? And then how are you actually accounting for some of the line items as you get to the return that you want to get to? Thanks.

Yeah. I mean, investments are focused on center payroll, marketing, infrastructure at the water parks, boomers, and then what I would call the other bucket or the incremental activity bucket. The center payroll, as Lev spoke at, we look center by center. We look at the amount of payroll we added, and we identify where that payroll delivered a return or did not deliver a return. Right? You know, returns are, in this world, you know, ultimately, you know, average labor is going to cost you $25 to $30 an hour. And if you are not getting the revenue to justify that, then you should not be investing in labor. Right? We are in an incremental margin business. You know, the incremental revenue needs to be greater than the incremental cost. You know, from a marketing perspective, you know, right now, we are injecting capital into a system that has generally been starved of marketing. We are watching impressions very strategically. We are testing market by market. And so, you know, the first market we leaned into was New York. New York City, we increased marketing spend. We rebranded Times Square, Chelsea Piers, Lucky Strikes, and both of those centers comped double digits in the second quarter. Right? At the same time, we have a state like Colorado where we have a hodgepodge of Bolero, Lucky Strikes, AMFs. It is harder to test that marketing spend. And that is why the rebrand is so important to get done this year. As it relates to the water parks and the FCCs, you know, these businesses have been starved of management labor. We think that there are massive opportunities on awareness, on investing capital into these locations, and we saw that with the robust performance at Boomers. Destin Water Park that we bought a year and a half ago, you know, that water park was up 20% year over year last summer. We continue to lean into that team, but that team does drive, you know, a multimillion-dollar drag in the off-season, but then you get EBITDA and more back. You know? And then the one that we found had the least returns was kind of incremental activity. We had more programs. More programs mean you are spending money faster. You are ultimately dealing with marketing materials, collateral, and the center of uniforms that you are not being as efficient. Now those are the things that we are going to plan better, pull back on, and really focus on service labor and marketing that drives the top line.

Next question comes from the line of Eric Handler of ROTH Capital. Please go ahead.

So we are now about, let us call it, three and a half months away from Memorial Day when a lot of the regional water parks will be opening. You know, as you sort of when customers show up on a sort of, like, on a like-for-like basis, where are they going to notice the biggest changes in operations?

This is Tom Shannon. We have been investing in all of these assets really from shortly after we acquired them, and one of the reasons that Big Kahuna in Destin was up 20% is it got a comprehensive facelift. It was done very efficiently. It was done largely within park labor, but there was a lot of rot literally in the park where you had things like bridges that were dilapidated, fences that were not, you know, appealing or maybe even structurally sound. And the team in the off-season went through the entire park. They rebuilt seven bridges. They probably replaced half of the fencing. They painted literally everything. Gel-coated the slides, replaced, you know, malfunctioning pumps, lighting, etcetera, and the park looked effectively new. And the customers responded. We have done the same on the Boomers. So the preliminary numbers I have on the Boomers, the legacy Boomers that we have owned for more than a year, they are up in revenue 25% over the last two weeks. And that is six large locations from Boca Raton, Irvine, Little Moore, Modesto, etcetera. They all benefited from meaningful capital investment and some very efficient capital investment. I think you are going to see that in all the parks with the exception of probably Raging Waters, which we literally just closed on. We will do our best to upgrade aspects of that. But when the guest comes, they are going to see something they have not seen in a long time. And that is a really refreshed, really appealing, and upscale water park or family entertainment center where we have made the investments we have seen the return, and I think we have seen a better return than we would have reasonably expected or even hoped for.

Your next question comes from the line of Eric Walt of Texas Capital Securities. Please go ahead.

Thank you. Good afternoon. I just have a question kind of following up on the very first question. Out of the gate around the guidance range, Bobby. I guess, you know, January is done, so five-ish months left in the fiscal year. You know, maybe talk about the biggest variables between kind of the, you know, the $50 million high end, low end range of revenue and $40 million on EBITDA, the biggest variable that would take it in your mind from the high end to low end or vice versa. And then which of those are most in your control, you know, like marketing, maintenance, something like that versus something that maybe is a little less out of your control?

Yeah. So if you go for six months, the comp is flat. Right? The comp is unbelievably easy for the next six months or five months, I guess, on the event side. Right? Additionally, leaning more into summer season pass, last year, we did $13 million. You know, we think we can beat that significantly this year. You know? And most important is going to be how profitable the Boomers, Emerald Point, which is, you know, the biggest water park in North Carolina, Raging Waters, which is the biggest water park in California, Raging Waves, the biggest water park in Illinois, all of these are we have invested in. We have done what we did to the legacy Boomers. And you remember we bought the legacy Boomers for $27 million, and those properties are doing $16 million of EBITDA at this point. We think we can, you know, get to not exactly there, but close on the water parks. And so how profitable the water parks come on with the capital invested is really the main driver in the fourth quarter. In the third quarter, you know, we started January strong. Right? And so, you know, we started January strong. You know, if it was not for this snow apocalypse that happened, you know, we would have been up double digits on a comp basis in January. We are still up. You know, we had a great month. We will see a ton of operating leverage that month. And the thing that, you know, Tom put in his quotes in his press release is committing to taking down the inefficiency spend. Right? And so the difference between, you know, the top and the bottom is going to be performance in the water parks, maintaining good organic growth, but also us getting costs under control.

This question comes from the line of Michael Kupinski of NOBLE Capital. Please go ahead.

Yeah. Obviously, you are anticipating that the water parks are going to contribute meaningfully into the fourth quarter, so I plan to get a little granular here and start for the questions. In terms of Raging Waves, you indicated that it came with a lot of land. And I know that you had anticipated that you had planned to build out some event space there and maybe do some expansion. I was wondering if you had already done that. And then part of the growth that we saw last year, I think you said that you introduced alcohol and that we saw a little revenue lift from that. I was wondering if your Raging Waters in California, if that was part of the acquisition plan, if that already had alcohol, you know, they had that there, or is that a part of the introduction that you can see a little lift from that as well? And then, I guess, in terms of other investments into the water parks, are there other expansion plans that you have either done or contemplated for those?

Hi. This is Tom Shannon. Thanks for the question. With regard to Raging Waves, we did add some covered event spaces with open sides, and those were open for the last season. We also got a beer license in the middle of 2024, and we had that last year. That contributed a couple hundred thousand dollars in alcohol sales. We are increasing food and beverage availability throughout the park for this year. We have sort of reconfigured the flow as you walk in and where we have placed certain food and beverage outlets, optimized that. I think you will see continued lift. We purchased 66 acres adjacent to that park. We have not done anything with it, and we do not have any plans at present. We were going to embark on a pretty meaningful expansion of the park with the addition of an Action River, a family pool, and an adult pool with a swim-up bar that would have increased the in-park capacity by somewhere between 1,500 to 2,000 people. Unfortunately, we were not able to get through the permitting process in time to start construction this year, so that will be deferred to next winter for a 2027 summer opening. With regard to Raging Waters, it does not have a liquor license. We will be applying for a liquor license. That will not happen for this summer. Hopefully, we will have that for the following summer. Given the volume of that park, you know, that should be a meaningful number. I do not recall if there was anything else you asked that I have not covered. Please let me know.

Other outside of alcohol in terms of the prospects for growth there. Like, is there other land that you are getting, other expansion plans done in the future?

Well, I mean, we have extension opportunities within the confines of all of the parks. None of them are built out to their capacity. So over time, the answer is yes. But I think that you have a lot of very low investment, high return opportunities. For example, in Big Kahuna in Destin, you could do a lot of rides and make the park more dynamic and exciting. But the gating factor there is really there is not enough deck space and lounging space, which is relatively inexpensive. And so we focused on those sorts of things. We have ambitious expansions planned, as I mentioned, in Raging Waves. Also in Shipwreck Island in Panama City, we are doing a number of upgrades over the next two years at Wet 'n Wild Emerald Point, which is a very large high-volume park. We are adding a meaningful kiddie/family area. There will be upgrades to the cabanas there, which sell out nearly every weekend. We are adding something like 40 or 50 cabanas that will be in place for this coming season. There is a lot of that sort of stuff, relatively inexpensive, very high ROI, has a big impact on the guest experience. But we also have things planned like a large tower complex slide tower complex at Shipwreck Island in Panama City that we hope to have in place for the 2027 season. The expansion I mentioned at Raging Waves for the 2027 season and also some things that we would like to do at Raging Waters. For the most part, you know, these parks are in pretty good shape. It really comes down to being able to increase revenue through simply having more availability of food and beverage, more cabanas to sell, and, you know, and then optimizing pricing and packages, which I think we have done a pretty good job on for this upcoming season.

Thanks for the color.

My pleasure.

Your next question comes from the line of Gregory Miller of Shoeh Securities. Please go ahead.

Thanks. Good afternoon all. I am hoping you could provide some help in terms of getting a better understanding of how we should be thinking about, say, the next 50 or so Lucky Strike conversions relative to the first 100. How similar or different are these stores from a demographics perspective? Locations, the types of stores? In part, in terms of how we should be thinking about the ramp of these rebranded locations over the course of the rest of the year? Thank you.

Sure. This is Tom Shannon. There is no difference. It is not like we started at the top in terms of revenue and went down. A lot of what got converted was a function of how quickly they moved through a permitting process. As you know, we deal with a lot of permitting issues in a lot of municipalities. Some are very easy and efficient to deal with. Some are not. And so, you know, the pace at which these things happen is somewhat dictated by an external audience, which is municipal governments. So there is really no difference between the next fifty and the first 100. What is going to happen, and this is really important to note, is that we are going to build out critical mass in most, if not all, markets with the new Lucky Strike brand. So I think Bobby mentioned that we have markets like Denver where you still have three brands and you may have, you know, four or five Lucky Strikes out of 20 centers. It is not enough to do any meaningful marketing. You just cannot amortize the spend over enough centers. But when you get to, call it, 15 Lucky Strikes in the market, you are able to do that, and you are also able to do that on a national basis. So I think the returns will accelerate, and, you know, Lucky Strike will become a very, very powerful brand once we have 200 locations, which we expect by the end of calendar '26, and we are able to put real marketing muscle behind it in a way that has never occurred before. You are going to start to see a lot more relevance and unaided awareness of Lucky Strike. And then following that, AMF. You know? Just to sort of flesh out the point, AMF as a brand has probably had no meaningful marketing spend in three or four decades. It does not mean anything at all. The same is largely true of Lucky Strike. When Lucky Strike first launched, back in, I believe, 2003, it had a lot of excitement around the brand. It was on Entourage. You know, it was really considered a cool brand. And then it really sort of fell by the wayside, and no real money was spent on the brand. And so we are going from an environment of little to no investment over a very long period of time to one now where we have, or soon will have, critical mass in two brands that we are going to be investing serious marketing effort behind, and I think the upside in both of those is tremendous.

Thank you, Tom.

Your next question comes from the line of Jeremy Hamblin of Craig Hallum. Please go ahead.

Hey. This is Will on for Jeremy. Thanks for taking my questions. Just first wondering if you could break down the comp cadence by month through the second quarter? Then if you are able to quantify the weather impact you saw from the snowstorms?

Yeah. So it was the easiest cadence is plus one, plus one, minus one. A little bit better in October, November, and December, but that is the easiest way you should look at it. The hit from the snow in January was about $5 million in revenue. So, you know, it really took down Saturday afternoon to Saturday night about, you know, we lost at least $2.5 million on Sunday. We lost about $500,000 on Monday, Tuesday. So it is, you know, we were looking at double-digit comp for January until that. You know, we are still pretty happy with the comp. But, you know, we get through, yeah. And then snow in December offsets about $2 million.

Okay. That is helpful. And then just curious on the EBITDA drag from the water park business in the quarter. Then I know the focus has been on organic growth this year, but is there anything in the acquisition pipeline that we should consider for the back half?

We have done $95 million of acquisitions this year. You know, we are always looking at things, but right now, we are focused on having a monster summer season, you know, in our Boomers and water parks.

Got it. Appreciate the color.

There are no further questions at this time. And with that, ladies and gentlemen, concludes today's conference call. We thank you for participating. You may now disconnect your lines.