Greetings, and welcome to the Bowlero Corp., Q4 and Fiscal Year 2022 Earnings Conference Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Ashley De Simone, you may begin.

Good afternoon. I'm Ashley DeSimone from ICR. Welcome to the Bowlero Corp., fourth quarter and fiscal year 2022 earnings conference call. All participants will be in a listen-only mode. During this call, the company may make certain statements that constitute forward-looking statements. Such statements reflect the company's views with respect to future events as of today, and are based on management's current expectations, estimates, forecasts, projections, assumptions, beliefs and information. These statements are subject to a number of risks and uncertainties that can cause actual events and results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please see our final prospectus filed with the SEC on February 1, 2022. The company expressly disclaims any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law. In addition, during today's call, the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance. Reconciliation of adjusted EBITDA to net income calculated under GAAP, can be found in our earnings press release and will be included in our Form 10-Q for the fourth quarter and fiscal year 2022. Throughout today's conversation, you will hear the company refer to EBITDA and adjusted EBITDA. At all times, the company is referring to adjusted EBITDA, as described therein and reconciled to net income in the associated disclosures. As a reminder, this conference is being recorded today. I would now like to turn the call over to Tom Shannon, Chief Executive Officer of Bowlero; and Brett Parker, President and Chief Financial Officer of Bowlero. Please go ahead.

Good evening, and welcome to the Bowlero Corporation earnings discussion for Q4 and the full year of fiscal year '22. I'm Thomas Shannon, Chairman and CEO of Bowlero Corp. We appreciate your taking the time to join the call today as we're looking forward to sharing some exciting updates on the state of the company. We value our shareholders and continuously endeavor to create value for all of them. Much has changed in fiscal year '22, as we have recovered from the disruptions of COVID-19, grew and upgraded our center footprint, relentlessly focused on operational improvements and transitioned from a private company to a publicly held one. In fiscal year 2022, Bowlero generated record revenues of nearly $912 million and record adjusted EBITDA of over $316 million. Compared to our pre-pandemic trailing 12 month levels, as of December 2019 of $694 million and $174 million respectively, revenue was higher by $218 million or 31.4% and adjusted EBITDA expanded by $142 million or 82%. This massive improvement comes despite the lingering headwinds of COVID-19 and public company transitional costs, which negatively impacted fiscal year 2022. Fiscal year '22 cash produced from operating activities was a record $178 million. In the first nine weeks of Q1 of fiscal year '23, which takes you to September 4 of this year, revenue has remained extremely robust, with total revenue growing 53% versus pre-pandemic levels and same store revenue growing 33% on the same basis. When compared to fiscal year '22 revenue for the corresponding 9 week period, fiscal year '23 total revenues were higher by 23%, and same store revenues were higher by 13%. During fiscal year 2022, we added 29 new centers to our portfolio, and in doing so grew the center count by approximately 10%. A significant majority of these came with…

Thank you, Tom. Were extremely pleased with our performance in Q4 and the fiscal year ended July 3, 2022. As is true for the year, our performance in Q4 resulted in the highest level of revenue and adjusted EBITDA in any Q4 in the company's history. Revenue continues to materially outperform pre-pandemic performance, both in total and on a same store basis. Despite all of the well documented cost pressures, we also produced very strong margins with the FY '22 adjusted EBITDA margin being 34.7% as compared to 25.1% in the trailing 12 months ended December 29, 2019, and only 18.5% in the TTM period ended June 2021. As Tom noted, we also continued to generate prodigious levels of cash from operations, which positions us favorably to continue to execute our growth strategy. Driving this performance in the quarter was a very strong growth in revenue, which increased by 68.3% year-over-year and surpassed pre-pandemic levels by 72.2%. Same store sales also rose 53% relative to pre-pandemic levels. This increase was supported by continued strong performance for walk in retail revenue, and driven higher by growth in event revenue for the second consecutive quarter, as well as growth in league revenue. The emergence of increased revenue from events and leagues has the potential to support continued material growth, and has resulted in an acceleration of revenue expansion through the week ended September 4, 2022. Incremental performance was also supported by the construction of the company's reporting calendar. Q4 and FY '22 were each a week longer than the comparable periods in prior year and pre-pandemic. That extra week, which is part of the calendar every seven years, produced $14.9 million in revenue. That being said, the adjusted performance remains quite impressive. In Q4, even adjusting for the 14 week, revenue was…

Thank you. And at this time, we will be conducting a question-and-answer session. [Operator Instructions] One moment we please while we poll for questions. Our first question comes from the line of Eric Handler with MKM Partners. Please proceed with your question.

Good afternoon. Thanks for the question. I wondered if you could just talk about in theory, your second and third quarters for you were supposed to be the strength, your fourth quarter was better than your second quarter. If you take away the extra week, it was pretty similar to your seasonal high point of the third quarter. It was that much of a difference between league and events revenue that really shot things up.

Brett, do you want to take that?

Sure. So yeah, Eric, thank you for the question. Effectively, yes. So the key thing is, if you look at the chart that we include of the sales growth over time, you can see that it didn't really pop until we got into March. So the first couple of months of Q3 were still more heavily impacted by COVID. And we didn't see the substantial growth in events business, but also in league business, and just in business in general until the back part of that quarter. Then that level of comparable performance persisted throughout the entirety of Q4 and into Q1 of this year. So that's where you're seeing that sort of flattening of what you would normally expect to see from a seasonal standpoint.

Got it. And then so, as we look ahead, and there's -- I mean not a -- not even -- just a couple of weeks left of the first quarter. But as we look to the holiday period, and which be seasonal peak for your events, I'm just curious how the events are tracking relative to last year.

Well, it's too early to know what the holiday season is going to be like in terms of events. But the event trajectory has been very strong and continues to strengthen, I would say.

When do people normally start booking for let's say, holiday events?

You start to see a flurry of activity after around the first of November. Some people book earlier, but that's a very small percentage. You really start to see it happening in November, but people are booking really up until a few days out in some cases. So the event businesses is a relatively short cycle business. But as I said, we're seeing a tremendous amount of strength in the event business now.

Great, thank you so much.

Thank you. Our next question comes from the line of Stefanos Crist with CJS Securities. Please proceed with your question.

Hey, great quarter. Thanks for taking my questions. Just want to start on the conversions. Could you give us a little more color on how many centers went through conversions during the quarter, and maybe your plans for the next 12 months?

Sure Stefanos. Hey, thanks for the comments. I don't know how many were completed per se. It's sort of a continuous process. If I had to guess, I would say we made substantial progress on probably 25 centers. I don't know that they all got completed, but they got meaningfully improved. The number might be a little higher, might be a little lower, but that's a pretty good ballpark. We are in the process of converting a lot of the acquisitions that we've made recently that have high potential, and these are sort of ongoing processes. It takes a number of months from permitting to completion. And so we're in various stages on a number of those. And then we're getting ready to start building. We announced a number of new locations. We're about to start construction on a couple of those. And we'll be broadening the upgrade of our existing and then most recently purchased facility. So there's always a lot of projects in the works. How many get completed in a quarter, I can't tell you. But as a practical matter, it doesn't really matter. Because once they start being substantive improved, you start to see a revenue lift from those.

That's great color. Thank you. And then just following up on one of the previous questions. I mean anecdotally, I know a lot of people that have gone through work events, corporate events to Bowlero. I also know a lot of people that are still working from home. Do you think there's enough still room for events to rebound I guess as people come back to the office?

I think it's going to be extremely strong going forward for an extended period of time. And I think that not only is there a lot of pent-up demand from companies that haven't had events for years now, but I also think that even in the work from home environment, you have to get together and you have to preserve the culture and camaraderie that can only happen face to face. Now I think we've all learned that you don't actually need to go to the office to be effective at your job. But you do need to meet with your colleagues periodically and have that face time. And so I think a lot of that activity is actually happening in a more social function. And so I think that even if a lot of people are still working from home, and maybe working from home for an extended period of time, you're still going to see corporate activity where those people come in and meet in that social environment, even if they're not necessarily going into the office.

That's great. Thank you so much for taking my questions.

My pleasure.

Our next question comes from the line of Kevin Heenan with JPMorgan. Please proceed with your question.

Hi, guys. Congrats on a strong result, and thanks for taking my questions. I guess just on the margin front, I mean, you finished fiscal '22 materially higher than you were pre-pandemic. Do you see this level as a base to build from? And just how best to think about that go forward, given kind of the majority of your revenue comes with very limited variable cost add to it? Thanks.

Yes, sure. I think we can continue to grow margin for a really long time, because as you say, in this inflationary environment, we're raising price on everything. But we don't have cost of goods sold and everything. In fact, we don't have cost of goods sold on the majority of our revenue. So I think we're going to continue to see margin improvement. It may not be as great as it has been historically, because we do have other input costs rising on the food, beverage, utilities, labor, etc. But I think we're very fortunate that our business model is designed in a way that really minimizes input costs, and maximizes operating profit. So you're going see as revenue continues to grow, which is both a function of volume and price that we're going to see continued margin expansion, I think over time.

Great, and I could follow-up on the macro. Have you seen any notable or discernible impact to date tied to inflation, either on visits or games played? And then maybe qualitatively, what leaves bowling relatively insulated from those pressures in this macro environment? Thanks a lot.

Sure, well. No, we haven't seen any impact of inflation. I would say this, bowling is a safe haven in a crazy world. When you have wars and disruption and inflation and high gas prices, bowling is relatively affordable. It's easily accessible and it's in your community. So we've run this company through three significant crises, 9/11, great financial crisis, COVID lockdowns. And as soon as we were able to open in the most recent case, or in the last few cases, as soon as there was any stability at all, what you found is people came rushing back, because it was familiar to them. It was comfortable, in some ways reassuring. So I think that gives bowling an immunity from these exogenous shocks that very few other businesses have.

Okay, thanks very much.

Sure, thanks.

And our next question comes from the line of Michael Kupinski with Noble Capital Markets. Please proceed with your question.

Thank you for taking my questions, and let me offer my congratulations on your quarter as well. You talked a little bit about the pipeline of acquisitions. And I was wondering if you can just give us a little color on what you anticipate, especially as we look into this quarter, maybe let's just say for the full year, the next fiscal year, what are the acquisition prospects? How many acquisitions do you plan or would like to make? Then if you can just talk about the number of centers that you plan to refurbish in the coming year, maybe a little bit of the CapEx that you're expecting for the year?

Michael, I'd say that we're looking at, between acquisitions and newbuilds ballpark of 30 getting done in this fiscal year. Now that number is wildly subject to change because you never know what deal opportunity comes around the pipe. The way it's looking now, 30 is sort of a good ballpark number. What's really good is we continue to see high quality acquisitions. We're still able to buy at relatively attractive prices. There's a multiple arbitrage between what we're paying and what we're being valued at and the market's immediately accretive every time we do one of these deals. Of course, we always get the margin expansion as well from improved operations. So 30 ballpark, and relatively high quality. Then in terms of the CapEx number for this year, Brett, do you have that handy?

We're not going to guide a number. So I would say the per unit cost should be relatively in line with what they've been historically. And it will scale to that. The other numbers that I would put around this just to frame the year is that so far in '23 we have already closed on one new deal. We have eight additional properties under contract for acquisitions and three leases signed for new centers. And then a prodigious pipeline of incremental deals coming behind those. So there's a lot already sort of dialed in, and then a lot more that we continue to work on.

Got you. And just one other question. You purchased 3.3 million plus shares. I was just wondering if you can just talk a little bit about your allocation of capital at this time. What your thoughts are on further repurchases on your current levels where the stock is trading and so forth?

Well, we're opportunistic, and that extends to both deals we do, spaces we sign, companies or acquisitions we make, shares that we repurchase etc. The average price that we paid to repurchase shares was, I believe, sub-10. So it was very attractive. I can't give guidance going forward as to how much we're going to repurchase going forward. But it is somewhat tied to the share price, as you can imagine. So we have enough cash and we generate enough cash to fulfill all of our needs, whether it's buying, building, renovating, repurchasing shares, what have you. So we're in a very, very good position, that we don't need to go to the capital markets to raise debt, to do any of these very high return activities that we do as our core functionality. So I don't know if that answers the question specifically. But fortunately, we haven't had to make decisions about doing this or that. We've always been able to do this and that. We've a very attractive opportunity set of investments in front of us.

Perfect. Thanks, and congratulations again.

Thanks, Mike. The one thing I would just clarify, the total average was $10.07 across all the repurchases that we made last year. So we will continue to be opportunistic, but that was the level for last year.

We have reached the end of our question-and-answer session, I will now turn the call back over to management for closing remarks.

All right. Well again, this is Thomas Shannon, Chairman and CEO. I'd just like to thank you for your participation on the call and for your support. Thanks so much, and we'll talk to you next quarter.

This concludes this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.