Lucky Strike Entertainment Corp: Form 10-Q for the period ended Dec 28, 2025

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 29, 2025 as filed with the Securities and Exchange Commission (“SEC”) on August 28, 2025. 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 29, 2025. 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,” “Lucky Strike Entertainment,” and “Lucky Strike” are intended to mean the business and operations of Lucky Strike Entertainment Corporation 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. 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 29, 2025.

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 family entertainment centers (FEC’s) and water parks. Our other entertainment brands include Octane Raceway, Raging Waves water park, Shipwreck Island water park, Big Kahuna’s water park, Wet ‘n Wild Emerald Pointe water park, Castle Park and Boomers Parks.

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 28, 2025 exhibited the expected total revenue growth and further expansion of our three verticals: bowling, water parks, and high-quality FEC’s. To highlight the Company’s recent activity during the six months ended December 28, 2025:

• We reported total revenue growth of 7%.
• We acquired 58 existing properties that were previously under a master lease agreement with Carlyle for $306,000. Spanning 16 states, the 58 property portfolio includes prime locations in California, Illinois, Georgia, Arizona, and Colorado. This transaction represents a major step forward in the Company’s long-term growth strategy by reducing annual rent obligations as a result of removing the associated lease liabilities and unlocking powerful financial and operational flexibility.
• We completed the acquisition of Wet ‘n Wild Emerald Pointe water park, Castle Park, and two additional Boomers Parks locations.
• We completed and opened a newly built Lucky Strike location in Southern California.
• We signed a definitive agreement to acquire Raging Waters Los Angeles, which is California’s largest water park. We completed the acquisition in January 2026.
• We continued to make meaningful progress on the Lucky Strike rebrand initiative with an additional 48 locations converted. As of December 28, 2025, we had 93 Lucky Strike locations.
• We refinanced our existing term loan for a $1,200,000 Term Loan, issued $500,000 of Senior Secured Notes, and increased our Revolver commitment to $425,000.

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. For example, the Company continues to monitor the impacts of various macroeconomic trends, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, and the introduction of or changes in tariffs. Such changes in macroeconomic conditions may lead to increased costs for the business. Furthermore, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to visit the Company’s locations, which could harm the financial results. 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. For bowling locations, 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. For

FEC and water park locations, we typically generate our highest sales volumes during the fourth and first quarters of our fiscal years due to more favorable weather conditions and the timing of operating seasons. 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 28, 2025 Compared to the Three Months Ended December 29, 2024

Analysis of Consolidated Statement of Operations. The following table displays certain items from our condensed consolidated statements of operations for the periods presented below:

(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 28, 2025, revenues totaled $306,861 and represented an increase of $6,787, or 2%, over the same period of last fiscal year. The increase is primarily attributable to newly acquired or opened locations.

The following table summarizes our revenues on a same-store-basis for the quarter ended December 28, 2025 as compared to the corresponding period last fiscal year:

(in thousands)

(1) Revenues from 356 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 29, 2024, revenues from 347 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. Same-store revenues was up slightly during the quarter ended December 28, 2025 relative to the same period of last fiscal year. The walk-in business for same-store bowling entertainment locations remained strong during the quarter, contributing approximately $2,800 of comparable store revenue, which was offset by decreases in our offline events business.

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 $16,973, or 21%. Increases in costs were in most areas and include amusement costs, marketing, rent, property taxes, insurance and utilities. The increases in costs are mainly attributable to location count growth and other initiatives. For instance, water parks and FEC’s contributed approximately $2,200 and new bowling locations contributed approximately $2,300 to the increase over the comparable. Additionally, marketing increased approximately $4,300 compared to the previous year, which is driven by our initiative to move our marketing budget closer to industry benchmarks. We believe the increased marketing spend has assisted in driving higher retail entertainment revenue.

Location operating costs as a percent of revenues increased from 28% to 32%. The increase as a percent of revenues is attributed to location operating costs related to our FEC and water park locations, which typically generate their highest sales volumes during the fourth and first quarters of our fiscal years due to more favorable weather conditions and the timing of operating seasons. Therefore, location operating costs for these locations will typically increase at a higher rate than revenues during the second and third quarters of our fiscal years.

Location payroll and benefit costs: Location payroll and benefit costs consist of employee costs that directly support location operations. Location payroll and benefit costs increased $7,006, or 10%, mainly driven by the impact of location count growth, additional bonus incentives, and an overall increase in labor hours per location. For instance, water parks and FEC’s contributed approximately $1,500 to the increase over the comparable period.

Location food & beverage costs: Location food & beverage costs as a percentage of food & beverage revenue remained flat at 21%. Location food & beverage costs increased $730, or 3%. The increase in location food & beverage costs is mainly attributable to increased food & beverage revenue as compared to the second quarter of fiscal 2025.

Selling, general and administrative expenses (“SG&A”): SG&A expenses increased $4,688 or 14%. The increase is mainly attributable to SG&A labor, which increased approximately $3,600. The SG&A labor increase is driven by investments in our marketing, water park and FEC teams. In conjunction with our initiative to increase our marketing budget, we are also investing in our marketing team in order to deploy the increased budget. The water park and FEC teams are primarily year round-staff that support the peak Summer periods.

Depreciation and amortization: Depreciation and amortization decreased $8,696 or 22%. The decrease in depreciation and amortization primarily reflects the change in estimated useful lives of fixed assets, which benefited from a decrease in expense of $8,341.

Interest expense, net: Interest expense primarily relates to interest on debt, finance leases, and financing obligations. Interest expense increased $1,321, or 3%. The higher interest expense is primarily attributable to increases in debt since the second quarter of fiscal 2025. Specifically, the 7.25% Senior Secured Notes (the “Notes”), which were issued late in the first quarter of fiscal 2026. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year and we have approximately $9,900 of interest accrued related to the Notes as of December 28, 2025. The increases in interest expense were partially offset by a $4,996 decrease in interest expense for finance leases due to the purchase of previously leased assets.

Change in fair value of earnouts: The impact on the statement of operations during the quarter ended December 28, 2025 is due to the decrease in the fair value of the earnouts. The decrease in the fair value of the earnouts is primarily driven by the decrease in the Company’s stock price and the limited remaining vesting period associated with the earnouts, which reduce the estimated probability of vesting.

Income tax expense (benefit): The income tax expense (benefit) and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. During the quarter ended December 28, 2025, the Company determined that its estimated AETR was not possible to reliably estimate due to the timing of results and the existence of a valuation allowance against interest limitation due to IRC Section 163(j). As a result, the Company utilized the discrete method. The effective tax rate of 504% for the quarter ended December 28, 2025 was primarily attributed to the change in fair value of the earnout liability, unrealizable Section 163(j) interest limitation, and permanent differences.

Six Months Ended December 28, 2025 Compared to the Six Months Ended December 29, 2024

Analysis of Consolidated Statement of Operations. The following table displays certain items from our condensed consolidated statements of operations for the periods presented below:

(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 28, 2025, revenues totaled $599,139 and represented an increase of $38,870, or 7%, over the same period of last fiscal year. The increase in revenues is primarily attributable to revenue from newly acquired or leased locations.

The following table summarizes our revenues on a same-store-basis for six months ended December 28, 2025 as compared to the corresponding period last fiscal year:

Index to Notes

(in thousands)

(1) Revenues from 351 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 29, 2024, revenues from 327 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 remained relatively flat during six months ended December 28, 2025 relative to the same period of last fiscal year. The walk-in business for same-store bowling entertainment locations remained strong during the quarter, contributing approximately $5,200 of comparable store revenue, which was offset by decreases in our offline events business.

Location operating costs: Location operating costs increased $28,571, or 17%. Increases in costs were in most areas and include amusement costs, marketing, rent, property taxes, insurance, and utilities. The increase in costs was mainly attributable to location count growth and other initiatives. For instance, water parks and FEC’s contributed approximately $10,400 and new bowling locations contributed approximately $4,800 to the increase over the comparable period. Additionally, marketing increased approximately $6,600 compared to the previous year, which is driven by our initiative to move our marketing budget closer to industry benchmarks. We believe the increased marketing spend has assisted in driving higher retail entertainment revenue.

Location operating costs as a percent of revenues increased from 30% to 33%. The increase as a percent of revenues is attributed to our FEC and water park locations, which typically generate their highest sales volumes during the fourth and first quarters of our fiscal years due to more favorable weather conditions and the timing of operating seasons. Therefore, location operating costs for these locations will typically increase at a higher rate than revenues during the second and third quarters of our fiscal years.

Location payroll and benefit costs: Location payroll and benefit costs increased $14,814, or 11%, mainly driven by the impact of location count growth, additional bonus incentives, and an overall increase in labor hours per location. For instance, water parks and FEC’s contributed approximately $7,700 to the increase over the comparable period.

Location food & beverage costs: Location food & beverage costs as a percentage of food & beverage revenue remained flat at 22%. Location food & beverage costs increased $2,135, or 5%. The increase in location food & beverage costs is mainly attributable to increased food & beverage revenue as compared to the comparable period of fiscal 2025.

Selling, general and administrative expenses (“SG&A”): SG&A expenses increased $5,222 or 8%. The increase is mainly attributable to SG&A labor, which increased approximately $5,200. The SG&A labor increase is driven by investments in our marketing, water park and FEC teams. In conjunction with our initiative to increase our marketing budget, we are also investing in our marketing team in order to deploy the increased budget. The water park and FEC teams are primarily year round-staff that support the peak Summer periods.

Depreciation and amortization: Depreciation and amortization decreased $12,484 or 16%. The decrease in depreciation and amortization primarily reflects the change in estimated useful lives of fixed assets, which benefited from a decrease in expense of $15,785.

Interest expense, net: Interest expense increased $6,048, or 6%. The higher interest expense is primarily attributable to increases in debt since the second quarter of fiscal 2025. Specifically, the Notes, which were issued late in the first quarter of fiscal 2026. We have approximately $9,900 of interest accrued related to the Notes as of December 28, 2025. In addition to the impact of the Notes, the increase is attributable to the amortization of approximately $3,300 of deferred financing costs associated with the Bridge Term Loan during the first quarter of fiscal 2026. The increases in interest expense were partially offset by a $9,439 decrease in interest expense for finance leases due to the purchase of previously leased assets.

Change in fair value of earnouts: The impact on the statement of operations during six months ended December 28, 2025 is due to the decrease in the fair value of the earnouts. The decrease in the fair value of the earnouts is primarily driven by the decrease in the Company’s stock price and the limited remaining vesting period associated with the earnouts, which reduce the estimated probability of vesting.

Income tax expense (benefit): Income tax expense (benefit) and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. During the six months ended December 28, 2025, the Company determined that its estimated AETR was not possible to reliably estimate due to the timing of results and the existence of a valuation allowance against interest limitation due to IRC Section 163(j). As a result, the Company utilized the discrete method. The effective tax rate of (13)% for six months ended December 28, 2025 was primarily attributed to state taxes incurred relating to the repurchase of the 58 properties under the Carlyle master lease agreement, 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 (loss) income to Adjusted EBITDA for each reporting period:

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, and dispositions, 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) severance expense, and (iii) other individually de minimis expenses.

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.

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 29, 2025 for further information.

At December 28, 2025, we had approximately $95,912 of available cash and cash equivalents.

Six Months Ended December 28, 2025 Compared to the Six Months Ended December 29, 2024

The following compares the primary categories of the condensed consolidated statements of cash flows for the periods ended December 28, 2025 and December 29, 2024:

(in thousands)

*Represents a change equal to or in excess of 100% or one that is not meaningful.

Operating activities provided $41,656 as compared to providing $68,147 during the same period of the prior fiscal year. The decrease in cash provided by operating activities is due primarily to unfavorable changes in working capital coupled with lower net income.

Investing activities used $354,141 as compared to $133,214 during the same period of the prior fiscal year. The increase in cash used in investing activities mainly reflects the purchase of previously leased assets offset by a decrease in purchases of property and equipment.

Financing activities provided $348,326 as compared to using $79,099 during the same period of the prior fiscal year. The increase in cash provided by financing activities primarily reflects the proceeds from the Fifteenth Amendment to the First Lien Credit Agreement and the issuance of Senior Secured Notes. This was partially offset by the repayment of outstanding debt and payment of deferred financing costs.

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, history of generating 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 Annual Report on Form 10-K for the fiscal year ended June 29, 2025 under “Critical Accounting Estimates.” There have been no significant changes in our critical accounting estimates during the quarter ended December 28, 2025.

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. We will lose our emerging growth company status on June 28, 2026, which is the last day of the fiscal year following the fifth anniversary of Isos’ IPO (March 5, 2026).

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 $12,850 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.

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 28, 2025.

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 28, 2025.

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 29, 2025.