Lucky Strike Entertainment Corp: Form 10-Q for the period ended Dec 29, 2024
Filed with the SEC on Feb 5, 2025 and accepted by EDGAR at Feb 5, 2025, 07:33 ET.
Management's discussion and analysis
As filed, 34,392 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
This discussion should be read in conjunction with Lucky Strikes Entertainment’s unaudited condensed consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 as filed with the Securities and Exchange Commission (“SEC”) on September 5, 2024. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Actual results may differ materially from those contained in any forward-looking statements. All period references are to our fiscal periods unless otherwise indicated. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” the “Company,” and “Lucky Strike” are intended to mean the business and operations of Lucky Strike Entertainment and its consolidated subsidiaries. All financial information in this section is presented in thousands, unless otherwise noted, except share and per share amounts.
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial of Lucky Strike. These statements are based on the beliefs and assumptions of our management. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about our business strategy, financial projections, anticipated growth and market opportunities.
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
In addition, statements that we “believe,” and similar statements reflect only our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Factors that could cause our actual results to differ include those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Overview
Lucky Strike Entertainment is one of the world’s premier operators of location-based entertainment. The Company operates traditional bowling locations and more upscale entertainment concepts with lounge seating, arcades, enhanced food and beverage offerings, and more robust customer service for individuals and group events, as well as hosting and overseeing professional and non-professional bowling tournaments and related broadcasting. The Company also operates other forms of location-based entertainment, such as Octane Raceway, Raging Waves water park, and Boomers Parks (inclusive of Big Kahuna’s water park).
The Company remains focused on creating long-term shareholder value through continued organic growth, the conversion and upgrading of locations to more upscale entertainment concepts offering a broader range of offerings, the opening of new locations and acquisitions.
Recent Developments
Lucky Strike’s results for the six months ended December 29, 2024 exhibited the expected total revenue growth and shift of focus to internal initiatives while also increasing liquidity in anticipation of what we believe will be an increased acquisition environment during the 2025 fiscal year to further diversify our location based entertainment offerings. To highlight the Company’s recent activity during the six months ended December 29, 2024:
- We reported total revenue growth of 5% despite an unfavorable calendar shift.
- We effected the rebranding of the Company from Bowlero to Lucky Strike Entertainment.
- We completed and opened four newly built Lucky Strike locations in prime markets with two others underway.
- We completed the acquisitions of Boomers Parks and Spectrum Entertainment Complex to further enhance our location-based entertainment offerings.
- We acquired 66 acres of land adjacent to Raging Waves water park for further expansion.
- We increased our term loan by $150,000.
Trends
There are a number of factors that could materially affect our future profitability, including changing economic conditions with the resulting impact on our sales, profitability, and capital spending, changes in our debt levels and applicable interest rates, and increasing prices of labor and inventory, which includes food and beverage costs. Additionally, sales and results of operations could be impacted by acquisitions and restructuring projects. Restructuring can include various projects, including closure of locations not performing well, cost reductions through staffing reductions, and optimizing and allocating resources to improve profitability.
Our operating results fluctuate seasonally and may also be affected by calendar shifts of holiday or seasonal periods. We typically generate our highest sales volumes during the third quarter of each fiscal year due to the timing of leagues, holidays and changing weather conditions. School operating schedules, holidays and weather conditions may also affect our sales volumes in some operating regions differently than others. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for our full fiscal year.
Presentation of Results of Operations
The Company reports on a fiscal year, with each quarter generally comprised of one 5-week period and two 4-week periods.
Results of Operations
Three Months Ended December 29, 2024 Compared to the Three Months Ended December 31, 2023
Analysis of Consolidated Statement of Operations. The following table displays certain items from our condensed consolidated statements of operations for the periods presented below:
| Revenues | Three Months Ended December 29, 2024 | %(1) | December 31, 2023 | %(1) | Change | % Change |
|---|---|---|---|---|---|---|
| Bowling | $138,967 | 46% | $145,295 | 48% | $(6,328) | (4)% |
| Food & beverage | 110,902 | 37% | 111,192 | 36% | (290) | —% |
| Amusement & other | 50,205 | 17% | 49,184 | 16% | 1,021 | 2% |
| Total revenues | 300,074 | 100% | 305,671 | 100% | (5,597) | (2)% |
| Costs and expenses | ||||||
| Location operating costs, excluding depreciation and amortization | 82,694 | 28% | 78,837 | 26% | 3,857 | 5% |
| Location payroll and benefit costs | 70,876 | 24% | 77,742 | 25% | (6,866) | (9)% |
| Location food and beverage costs | 23,225 | 8% | 23,920 | 8% | (695) | (3)% |
| Selling, general and administrative expenses, excluding depreciation and amortization | 34,384 | 11% | 35,835 | 12% | (1,451) | (4)% |
| Depreciation and amortization | 39,118 | 13% | 37,071 | 12% | 2,047 | 6% |
| Loss on impairment and disposal of fixed assets, net | 2,575 | 1% | 50 | —% | 2,525 | * |
| Other operating expense, net | 329 | —% | 2,739 | 1% | (2,410) | (88)% |
| Total costs and expenses | 253,201 | 84% | 256,194 | 84% | (2,993) | (1)% |
| Operating income | 46,873 | 16% | 49,477 | 16% | (2,604) | (5)% |
| Other (income) expenses | ||||||
| Interest expense, net | 48,795 | 16% | 46,236 | 15% | 2,559 | 6% |
| Change in fair value of earnout liability | (19,682) | (7)% | 64,091 | 21% | (83,773) | * |
| Other expense | 800 | —% | 10 | —% | 790 | * |
| Total other expense | 29,913 | 10% | 110,337 | 36% | (80,424) | (73)% |
| Income (loss) before income tax benefit | 16,960 | 6% | (60,860) | (20)% | 77,820 | * |
| Income tax benefit | (11,347) | (4)% | 2,609 | 1% | (13,956) | * |
| Net income (loss) | $28,307 | 9% | $(63,469) | (21)% | 91,776 | * |
(1) Percent calculated as a percentage of revenues and may not total due to rounding.
*Represents a change equal to or in excess of 100% or one that is not meaningful.
Revenues: For the quarter ended December 29, 2024, revenues totaled $300,074 and represented a slight decrease of $5,597, or 2%, over the same period of last fiscal year. The slight decrease in revenues is primarily attributable to a decline in revenues on a same-store basis, which was partially offset by an increase in revenue from newly acquired or leased locations.
The following table summarizes our revenues on a same-store-basis for the quarter ended December 29, 2024 as compared to the corresponding period last fiscal year:
(in thousands)
| Three Months Ended December 29, 2024 | December 31, 2023 | Change | % Change | |
|---|---|---|---|---|
| Revenues on a same-store basis (1) | $280,530 | $299,065 | $(18,535) | (6)% |
| Revenues for media, new and closed locations | 19,000 | 4,973 | 14,027 | * |
| Service fee revenue (2) | 544 | 1,633 | (1,089) | (67)% |
| Total revenues | $300,074 | $305,671 | $(5,597) | (2)% |
(1) Revenues from 347 locations are included in the same-store comparable location base for the comparison in the above table. In our previously filed Form 10-Q for the three months ended December 31, 2023, revenues from 315 locations were included in the same-store revenue.
(2) Service fee revenue is a mandatory gratuity passed through to the employee, which is a non-contributor to earnings and is being phased out across our locations.
*Represents a change equal to or in excess of 100% or one that is not meaningful.
Same-store revenues includes revenue from locations that are open in periods presented (open in both the current period and the prior period being reported) and excludes revenues from locations that are not open in periods presented such as acquired new locations or locations closed for upgrades, renovations or other such reasons, as well as media revenues and service fee revenues. The decrease in same-store revenues during the quarter ended December 29, 2024 was primarily attributable to a reduction in group events business relative to the consumer environment during the same period of last fiscal year. In addition, revenues on a same-store basis were impacted by an unfavorable calendar shift.
Location operating costs: Location operating costs primarily consist of rent, utilities, insurance, repairs & maintenance, property taxes, supplies, marketing, and other costs associated with Company locations. Location operating costs include both fixed and variable components and therefore do not directly correlate with revenue.
Location operating costs increased $3,857, or 5%. Increases in costs were in various areas including amusement costs, advertising, property taxes, insurance, and utilities. The increase in costs was mainly attributable to location count growth from acquisitions and lease agreements. For instance, Raging Waves water park and Boomers Parks location operating costs contributed $5,000 to the increase. The increase in costs were partially offset by cost management initiatives with reductions noted in supplies and repairs and maintenance. Location operating costs as a percent of revenues increased from 26% during the second quarter of fiscal 2024 to 28% during the second quarter of fiscal 2025, mainly due to the aforementioned location count growth and fixed costs.
Location payroll and benefit costs: Location payroll and benefit costs consist of employee costs that directly support location operations. Location payroll and benefit costs decreased $6,866, or 9%. The decrease in location payroll and benefit costs reflects the impact of the ongoing staffing optimization initiative. This is further illustrated by the decrease as a percent of revenues from 25% during the second quarter of fiscal 2024 to 24% during the second quarter of fiscal 2025. The decrease driven by staffing optimization was partially offset by location count growth. For instance, Raging Waves water park and Boomers Parks added $2,600 of location payroll and benefit costs.
Location food & beverage costs: Location food & beverage costs decreased $695, or 3%. The decrease in location food & beverage costs is mainly attributable to decreased food & beverage revenue as compared to the second quarter of fiscal 2024.
Selling, general and administrative expenses (“SG&A”): SG&A expenses decreased $1,451 or 4%. The decrease is mainly attributable to a decrease in professional fees, which was partially offset by an increase in share-based compensation expense. The decrease in professional fees is mainly attributable to less acquisition activity as compared to the second quarter of fiscal 2024 and cost management initiatives at corporate. The cost management initiatives at corporate have also resulted in decreased payroll expense as compared to the same period of the prior fiscal year. The increase in share-based compensation expense is mainly attributable to less forfeiture activity as compared to the second quarter of fiscal 2024 coupled with an increase in share-based awards granted during the second quarter of fiscal 2025.
Depreciation and amortization: Depreciation and amortization increased $2,047 or 6%. The increase in depreciation and amortization reflects the added depreciable assets, finite-lived intangible assets, and finance leases through acquisitions and capital expenditures.
Interest expense, net: Interest expense primarily relates to interest on debt, finance leases, and financing obligations. Interest expense increased $2,559, or 6%. The higher interest expense is primarily the result of an added financing obligation within the second quarter of fiscal 2024 coupled with lower interest income as compared to the second quarter of fiscal 2024.
Change in fair value of earnouts: The impact on the statement of operations during the quarter ended December 29, 2024 is due to the decrease in the fair value of the earnouts, which mainly reflects the decrease in the Company’s stock price in the current quarter.
Income Taxes: Income tax expense and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. The effective tax rate of (67)% for the quarter ended December 29, 2024 was primarily attributed to the change in fair value of the earnout liability, and permanent differences.
Six Months Ended December 29, 2024 Compared to the Six Months Ended December 31, 2023
Analysis of Consolidated Statement of Operations. The following table displays certain items from our condensed consolidated statements of operations for the periods presented below:
| Revenues | Six Months Ended December 29, 2024 | %(1) | December 31, 2023 | %(1) | Change | % Change |
|---|---|---|---|---|---|---|
| Bowling | $261,170 | 47% | $261,725 | 49% | $(555) | —% |
| Food & beverage | 198,941 | 36% | 186,105 | 35% | 12,836 | 7% |
| Amusement & other | 100,158 | 18% | 85,246 | 16% | 14,912 | 17% |
| Total revenues | 560,269 | 100% | 533,076 | 100% | 27,193 | 5% |
| Costs and expenses | ||||||
| Location operating costs, excluding depreciation and amortization | 168,922 | 30% | 152,210 | 29% | 16,712 | 11% |
| Location payroll and benefit costs | 138,312 | 25% | 140,796 | 26% | (2,484) | (2)% |
| Location food and beverage costs | 43,755 | 8% | 40,605 | 8% | 3,150 | 8% |
| Selling, general and administrative expenses, excluding depreciation and amortization | 69,195 | 12% | 73,959 | 14% | (4,764) | (6)% |
| Depreciation and amortization | 76,101 | 14% | 68,423 | 13% | 7,678 | 11% |
| Loss on impairment and disposal of fixed assets, net | 4,047 | 1% | 49 | —% | 3,998 | * |
| Other operating expense, net | 118 | —% | 2,201 | —% | (2,083) | (95)% |
| Total costs and expenses | 500,450 | 89% | 478,243 | 90% | 22,207 | 5% |
| Operating income | 59,819 | 11% | 54,833 | 10% | 4,986 | 9% |
| Other (income) expenses | ||||||
| Interest expense, net | 97,465 | 17% | 83,685 | 16% | 13,780 | 16% |
| Change in fair value of earnout liability | (68,603) | (12)% | 23,409 | 4% | (92,012) | * |
| Other expense | 800 | —% | 63 | —% | 737 | * |
| Total other expense | 29,662 | 5% | 107,157 | 20% | (77,495) | (72)% |
| Income (loss) before income tax benefit | 30,157 | 5% | (52,324) | (10)% | 82,481 | * |
| Income tax benefit | (21,245) | (4)% | (7,074) | (1)% | (14,171) | * |
| Net income (loss) | $51,402 | 9% | $(45,250) | (8)% | 96,652 | * |
(1) Percent calculated as a percentage of revenues and may not total due to rounding.
*Represents a change equal to or in excess of 100% or one that is not meaningful.
Revenues: For the six months ended December 29, 2024, revenues totaled $560,269 and represented an increase of $27,193, or 5%, over the same period of last fiscal year. The increase in revenues is primarily attributable to revenue from newly acquired or leased locations. The increase in revenue from newly acquired or leased locations was partially offset by a decline in revenues on a same-store basis.
The following table summarizes our revenues on a same-store-basis for six months ended December 29, 2024 as compared to the corresponding period last fiscal year:
Index to Notes
(in thousands)
| Six Months Ended December 29, 2024 | December 31, 2023 | Change | % Change | |
|---|---|---|---|---|
| Revenues on a same-store basis (1) | $471,074 | $486,402 | $(15,328) | (3)% |
| Revenues for media, new and closed locations | 88,001 | 43,420 | 44,581 | * |
| Service fee revenue (2) | 1,194 | 3,254 | (2,060) | (63)% |
| Total revenues | $560,269 | $533,076 | $27,193 | 5% |
(1) Revenues from 327 locations are included in the same-store comparable location base for the comparison in the above table. In our previously filed 10-Q for the six months ended December 31, 2023, revenues from 312 locations were included in the same-store revenue.
(2) Service fee revenue is a mandatory gratuity passed through to the employee, which is a non-contributor to earnings and is being phased out across our locations.
*Represents a change equal to or in excess of 100% or one that is not meaningful.
The decrease in same-store revenues during the six months ended December 29, 2024 was primarily attributable to a reduction in group events business relative to the consumer environment during the same period of last fiscal year. In addition, revenues on a same-store basis were impacted by an unfavorable calendar shift.
Location operating costs: Location operating costs increased $16,712, or 11%. Increases in costs were in most areas and include amusement costs, advertising, rent, property taxes, and utilities. The increase in costs was mainly attributable to location count growth from acquisitions and lease agreements. For instance, Raging Waves water park and Boomers Parks location operating costs contributed $6,300 to the increase. The increase in costs were partially offset by cost management initiatives with reductions noted in supplies and repairs and maintenance. Location operating costs as a percent of revenues increased from 29% during the second quarter of fiscal 2024 to 30% during the second quarter of fiscal 2025, mainly due to the aforementioned location count growth and fixed costs.
Location payroll and benefit costs: Location payroll and benefit costs decreased $2,484, or 2%. The decrease in location payroll and benefit costs reflects the impact of the ongoing staffing optimization initiative. This is further illustrated by the decrease as a percent of revenues from 26% during the second quarter of fiscal 2024 to 25% during the second quarter of fiscal 2025. The decrease driven by staffing optimization was partially offset by location count growth. For instance, Raging Waves water park and Boomers Parks added $3,900 of location payroll and benefit costs.
Location food & beverage costs: Location food & beverage costs increased $3,150, or 8%. The increase in location food & beverage costs is mainly attributable to increased food & beverage revenue as compared to the second quarter of fiscal 2024.
Selling, general and administrative expenses (“SG&A”): SG&A expenses decreased $4,764 or 6%. The decrease is mainly attributable to a decrease in professional fees, which was partially offset by an increase in share-based compensation expense. The decrease in professional fees is mainly attributable to less acquisition activity as compared to the same period of the prior year and cost management initiatives at corporate. The cost management initiatives at corporate have also resulted in decreased payroll expense as compared to the same period of the prior fiscal year. The increase in share-based compensation expense is mainly attributable to less forfeiture activity as compared to the same period of fiscal 2024 coupled with an increase in share-based awards granted thus far in fiscal 2025.
Depreciation and amortization: Depreciation and amortization increased $7,678 or 11%. The increase in depreciation and amortization reflects the added depreciable assets, finite-lived intangible assets, and finance leases through acquisitions and capital expenditures.
Interest expense, net: Interest expense increased $13,780, or 16%. The higher interest expense is primarily the result of an added financing obligation within the second quarter of fiscal 2024 coupled with lower interest income as compared to the second quarter of fiscal 2024.
Change in fair value of earnouts: The impact on the statement of operations during six months ended December 29, 2024 is due to the decrease in the fair value of the earnouts, which mainly reflects the decrease in the Company’s stock price in the current quarter.
Income Taxes: Income tax expense and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. The effective tax rate of (70)% for six months ended December 29, 2024 was primarily attributed to the change in fair value of the earnout liability, permanent differences, and other discrete tax items.
Non-GAAP measure
Adjusted EBITDA is a non-GAAP financial measure that is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. The Company believes certain financial measures which meet the definition of non-GAAP financial measures provide important supplemental information. The Company considers Adjusted EBITDA as an important financial measure because it provides a financial measure of the quality of the Company’s earnings. Other companies may calculate Adjusted EBITDA differently than we do, which might limit its usefulness as a comparative measure. Adjusted EBITDA is used by management in addition to and in conjunction with the results presented in accordance with GAAP. We have presented Adjusted EBITDA solely as a supplemental disclosure because we believe it allows for a more complete analysis of results of operations and assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as Interest Expense, Income Taxes, Depreciation and Amortization, Impairment Charges, Share-based Compensation, EBITDA from Closed Locations, Foreign Currency Exchange Loss (Gain), Asset Disposition Loss (Gain), Transactional and other advisory costs, Changes in the value of earnouts, and Other. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.
Refer to notes below for additional details concerning the respective items for Adjusted EBITDA.
The following table provides a reconciliation from net income to Adjusted EBITDA for each reporting period:
| Three Months Ended December 29, 2024 | December 31, 2023 | Six Months Ended December 29, 2024 | December 31, 2023 | ||
|---|---|---|---|---|---|
| Net income (loss) | $28,307 | $(63,469) | $51,402 | $— | $(45,250) |
| Adjustments: | |||||
| Interest expense | 48,795 | 48,112 | 97,465 | 87,144 | |
| Income tax benefit | (11,347) | 2,609 | (21,245) | (7,074) | |
| Depreciation and amortization | 39,573 | 37,533 | 77,010 | 69,533 | |
| Loss on impairment, disposals, and other charges, net | 2,575 | 50 | 4,047 | 49 | |
| Share-based compensation | 4,664 | 3,689 | 9,167 | 5,600 | |
| Closed location EBITDA (1) | 1,189 | 2,157 | 3,394 | 4,619 | |
| Transactional and other advisory costs (2) | 4,020 | 4,935 | 7,279 | 13,241 | |
| Changes in the value of earnouts (3) | (19,682) | 64,091 | (68,603) | 23,409 | |
| Other, net (4) | 663 | 3,419 | 1,784 | 3,989 | |
| Adjusted EBITDA | $98,757 | $103,126 | $161,700 | $155,260 |
Notes to Adjusted EBITDA:
(1) The closed location adjustment is to remove EBITDA for closed locations. Closed locations are those locations that are closed for a variety of reasons, including permanent closure, newly acquired or built locations prior to opening, locations closed for renovation or rebranding and conversion. If a location is not open on the last day of the reporting period, it will be considered closed for that reporting period. If the location is closed on the first day of the reporting period for permanent closure, the location will be considered closed for that reporting period.
(2) The adjustment for transaction costs and other advisory costs is to remove charges incurred in connection with any transaction, including mergers, acquisitions, refinancing, amendment or modification to indebtedness, dispositions and costs in connection with an initial public offering, in each case, regardless of whether consummated.
(3) The adjustment for changes in the value of earnouts is to remove of the impact of the revaluation of the earnouts. Changes in the fair value of the earnout liability is recognized in the statement of operations. Decreases in the liability will have a favorable impact on the statement of operations and increases in the liability will have an unfavorable impact.
(4) Other includes the following related to transactions that do not represent ongoing or frequently recurring activities as part of the Company’s operations: (i) non-routine expenses, net of recoveries for matters outside the normal course of business, (ii) costs incurred that have been expensed associated with obtaining an equity method investment in a subsidiary of VICI, (iii) severance expense, and (iv) other individually de minimis expenses. Certain prior year amounts have been reclassified to conform to current year presentation.
Liquidity and Capital Resources
We manage our liquidity through assessing available cash-on-hand, our ability to generate cash and our ability to borrow or otherwise raise capital to fund operating, investing and financing activities. The Company remains in a positive financial position with available cash balances.
A core tenet of our long-term strategy is to grow the size and scale of the Company in order to improve our operating profit margins through leveraging our fixed costs. As such, one of the Company’s known cash requirements is for capital expenditures related to the construction of new locations and upgrading and converting existing locations. We believe our financial position, generation of cash, available cash-on-hand, existing credit facility, and access to potentially obtain additional financing from sale-lease-back transactions or other sources will provide sufficient capital resources to fund our operational requirements, capital expenditures, and material short and long-term commitments for the foreseeable future. We also plan to use available cash-on-hand to fund our share repurchase program, which was implemented as a method to return value to our shareholders. However, there are a number of factors that may hinder our ability to access these capital resources, including but not limited to our degree of leverage, and potential borrowing restrictions imposed by our lenders. See “Risk Factors” included in our previously filed Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for further information.
At December 29, 2024, we had approximately $80,755 of available cash and cash equivalents.
Six Months Ended December 29, 2024 Compared To the Six Months Ended December 31, 2023
The following compares the primary categories of the condensed consolidated statements of cash flows for the period ended December 29, 2024 and December 31, 2023:
(in thousands)
| Six Months Ended December 29, 2024 | December 31, 2023 | $ Change | % Change | |
|---|---|---|---|---|
| Net cash provided by operating activities | $68,147 | $71,199 | $(3,052) | (4)% |
| Net cash used in investing activities | (133,214) | (246,666) | 113,452 | 46% |
| Net cash provided by financing activities | 79,099 | 169,738 | (90,639) | (53)% |
| Effect of exchange rate changes on cash | (249) | 51 | (300) | * |
| Net change in cash and cash equivalents | $13,783 | $(5,678) | $19,461 | * |
*Represents a change equal to or in excess of 100% or one that is not meaningful.
Operating activities provided $68,147 as compared to $71,199 during the same period of the prior fiscal year. The decrease in cash provided by operating activities primarily reflects an increase in interest expense partially offset by higher revenues and lease incentive receipts.
Investing activities used $133,214 as compared to $246,666 during the same period of the prior fiscal year. The decrease in cash used in investing activities mainly reflects a reduction in capital expenditures and less acquisition activity as compared to the same period of the prior year. This was partially offset by the purchase of 66 acres of land adjacent to Raging Waves water park for $9,400.
Financing activities provided $79,099 as compared to $169,738 during the same period of the prior fiscal year. The decrease in cash provided by financing activities primarily reflects the proceeds from the transaction with VICI during the same period of the prior year and increased cash dividends during the six months ended December 29, 2024. This was partially offset by less share buyback activity as compared to the same period of the prior year and the impact of the $150,000 incremental term loan.
Our contractual obligations primarily include, but are not limited to, debt service, self-insurance liabilities, and leasing arrangements. We believe our sources of liquidity, namely available cash on hand, positive operating cash flows, and access to capital markets will continue to be adequate to meet our contractual obligations, as well as fund working capital, planned capital expenditures, location acquisitions, and execute purchases under our share repurchase program.
Critical Accounting Estimates
Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our fiscal year 2024 Form 10-K under “Critical Accounting Estimates.” There have been no significant changes in our critical accounting estimates during the quarter ended December 29, 2024.
Recently Issued Accounting Standards
See Note 1 - Description of Business and Significant Accounting Policies of the notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for information regarding new accounting pronouncements.
Emerging Growth Company Accounting Election
We are currently an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Market risk
As filed, 3,489 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
We are exposed to market risk from changes in, among other things, interest rates, credit risk, labor costs, health insurance claims and foreign currency exchange rates, which could impact its results of operations and financial condition. We attempt to address our exposure to these risks through our normal operating and financing activities.
Interest Rate Risk
Under our term and revolving credit facilities, we are exposed to a certain level of interest rate risk. Interest on the principal amount of our borrowings under our revolving credit facility loan accrues at the Adjusted Term Secured Overnight Financing Rate or the Alternate Base Rate, as further described in the credit agreement governing our term and revolving credit facilities. An increase or decrease of 1.0% in the effective interest rate would cause an increase or decrease to interest expense of approximately $12,856 over a twelve month period on our outstanding debt without considering the impact of hedging. The Company entered into two hedging transactions effective as of March 31, 2023 for an aggregate notional amount of our Term Loan of $800,000. The hedge transactions have a trade and hedge designation date of April 4, 2023. The hedge transactions, each for a notional amount of $400,000, provide for interest rate collars. The interest rate collars establish a floor on SOFR of 0.9429% and 0.9355%, respectively, and a cap on SOFR of 5.50%. The interest rate collars have a maturity date of March 31, 2026.
Credit Risk
Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and temporary investments. We are exposed to credit losses in the event of non-performance by counter parties to our financial instruments. We place cash and temporary investments with various high-quality financial institutions. Although we do not obtain collateral or other security to secure these obligations, we periodically monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds.
Commodity Price Risk
We are exposed to market price fluctuation in food, beverage, supplies and other costs such as energy. Given the historical volatility of certain of our food product prices, including proteins, produce, dairy products, and cooking oil, these fluctuations can materially impact our food costs. While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our food operations to fluctuate. Additionally, the cost of purchased materials may be influenced by tariffs and other trade regulations which are outside of our control. To the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected.
Inflation
We experience inflation related to our purchase of certain products that we need to operate our business. This price volatility could potentially have a material impact on our financial condition and/or our results of operations. In order to mitigate price volatility, we monitor price fluctuations and may adjust our prices accordingly, however, our ability to recover higher costs through increased pricing may be limited by the competitive environment in which we operate.
Controls and procedures
As filed, 997 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is properly and timely reported and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of December 29, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting practices or processes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during our second quarter ended December 29, 2024.
Risk factors
As filed, 168 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes to our risk factors contained in Part I. Item IA. “Risk Factors” of our Annual Report on Form 10-K for the year ended June 30, 2024.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2024-12-29. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2024-09-30 to 2024-12-29 | $300.1m | us-gaap:Revenues |
| Revenue | 6 months2024-07-01 to 2024-12-29 | $560.3m | us-gaap:Revenues |
| Selling, general and administrative | 3 months2024-09-30 to 2024-12-29 | $34.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months2024-07-01 to 2024-12-29 | $69.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2024-09-30 to 2024-12-29 | $46.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months2024-07-01 to 2024-12-29 | $59.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2024-09-30 to 2024-12-29 | −$11.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months2024-07-01 to 2024-12-29 | −$21.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2024-09-30 to 2024-12-29 | $28.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months2024-07-01 to 2024-12-29 | $51.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2024-09-30 to 2024-12-29 | $0.16 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months2024-07-01 to 2024-12-29 | $0.29 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2024-09-30 to 2024-12-29 | $0.17 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months2024-07-01 to 2024-12-29 | $0.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2024-09-30 to 2024-12-29 | 152,957,223 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months2024-07-01 to 2024-12-29 | 154,228,643 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months2024-07-01 to 2024-12-29 | $68.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months2024-07-01 to 2024-12-29 | $92.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months2024-09-30 to 2024-12-29 | $8.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 6 months2024-07-01 to 2024-12-29 | $17.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months2024-07-01 to 2024-12-29 | $45.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | At period end2024-12-29 | $138.0m | us-gaap:AssetsCurrent |
| Total assets | At period end2024-12-29 | $3.24bn | us-gaap:Assets |
| Current liabilities | At period end2024-12-29 | $191.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2024-12-29 | $3.30bn | us-gaap:Liabilities |
| Long-term debt | At period end2024-12-29 | $1.28bn | us-gaap:LongTermDebt |
| Current portion of debt | At period end2024-12-29 | $10.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | At period end2024-12-29 | −$179.7m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001628280-25-003930. Last ingested by Listed: Oct 24, 2026, 15:06 ET. Listed shows no prices and gives no investment advice.