Good evening, welcome to the Bowlero Corp third quarter 2023 conference call. It is now my pleasure to hand over the call to Ashley De Simone of ICR. Good afternoon and welcome to the Bowlero Corp 3rd quarter fiscal 2023 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 under the Private Securities Litigation Reform Act. 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 annual report on Form 10-K, filed with the SEC on September 15th, 2022, as well as other filings that the company will make or has made with the SEC, such as quarterly reports on Form 10-Q and current reports on Form 8-K. 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 law. In addition, during today's call, the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating performance. Definitions and reconciliations for non-GAAP measures can be found in our earnings press release. As a reminder, this conference is being recorded. I would now like to turn the call over to Thomas Shannon of Bowlero Corp. Please go ahead. Good afternoon, and welcome to the Bowlero Corp earnings discussion for Q3 of fiscal 2023. Thank you for participating in today's conference call. I am Thomas Shannon, Founder, Chairman, and CEO of Bowlero Corp. I'm joined by Brett Parker, Vice Chairman and President, and Bobby Lavan, who recently joined as Chief Financial Officer Designate. Bobby, who will be the company's CFO as of tomorrow, brings extensive experience as a public company CFO and is a natural fit with our team and culture. We're thrilled to welcome him to the Bowlero family. During today's prepared remarks, we'll cover several topics as we have many exciting updates to share, starting with our financial performance in the quarter and several important balance sheet optimization transactions we have completed as we continue to focus on ways to create and deliver shareholder value. Beginning with the financial highlights, I am happy to report that we had by far the largest quarter in our nearly three-decade history, with revenues reaching $316 million and Adjusted EBITDA reaching $128 million, equating to a 40.4% margin for the quarter. Year-over-year revenue growth was 22%. Relative to pre-pandemic, revenue was higher by 54%. This revenue growth was driven by a healthy combination of same-store sales growth and contributions from acquired and newly opened centers, with same-store sales increasing 17% year-over-year and 30% versus pre-pandemic. In addition to continued strong demand across our various business lines, which are walk-in retail, leagues, and events, this new high watermark remains a testament to our operating ethos. We prioritize consistent execution across all levels of the organization. These results reflect the output of our team's efforts, our proprietary technology, and the fundamental strength of our business model. Overall, Bowlero's trajectory is shaped by our ability to generate consistent same-store sales growth. Our ABC growth strategy, which includes acquisitions, new builds, and conversions, our proprietary technology and world-class team, and our dedication to continued innovations and excellence in execution. We pioneered upscale experiential bowling, introduced technology and disciplined operational execution to a highly fragmented industry and continue to focus on the next frontier of the customer experience, as exemplified through strategic innovation such as MoneyBowl, which has now been activated in 64 centers or about 20% of our portfolio. Total downloads are over 60,000. Moreover, the free-to-play version is expected to launch in our current fiscal quarter, which will further our reach across the nation and increase access to this differentiated gamified bowling experience. We appreciate your continued trust in our team and support of our proven strategy, and we're excited to take Bowlero to new heights. With that, I would like to hand it off to Brett Parker to lead the balance of the discussion. Thank you. Good evening, everyone. As Thomas mentioned, we are happy to report a number of extremely positive developments. We had our strongest performing quarter ever. In the third quarter of fiscal year 2023, historically our seasonally most significant quarter, Bowlero generated revenues of $316 million and record Adjusted EBITDA of $128 million, with a 40.4% Adjusted EBITDA margin. This translated into $118 million of adjusted cash from operating activities. Compared to the prior year's Q3, revenue grew $58 million or 22%, and Adjusted EBITDA expanded by $19 million or 18%. Compared to pre-pandemic, revenue was higher by $111 million or 54%, and Adjusted EBITDA expanded by $60 million or 89%. Net loss for the quarter was $32 million. Adjusted for a non-cash expense related to the valuation of earnout shares, adjusted net income was $55 million. We had a highly cash flow generative quarter, and we redeployed much of the operating cash flow across our multi-pronged reinvestment strategy to continue to fuel future growth. On a trailing 12-month basis, revenue grew to $1.1 billion, and Adjusted EBITDA reached $372 million at a 34.2% margin. TTM revenue grew $284 million or 35% compared to the prior year TTM period. From a center fleet perspective, we have remained active with respect to acquisitions, new builds, and conversions. We added one new center in the third quarter and two additional centers subsequent to the end of the third quarter, bringing our current center count to 329. We also have definitive purchase agreements to acquire two additional centers in the fourth quarter. Two new builds are currently under construction and are expected to open this calendar year. Since the start of fiscal 2022, we have added 44 new centers to our portfolio, the majority of which came with owned real estate, which provides long-term optionality for us to raise capital through sale leaseback transactions or traditional mortgages. There are currently more than 35 conversion projects underway. Overall, our pipeline remains robust, with ample opportunity to further grow inorganically as well as organically with our same-store sales growth algorithm serving as the central ingredient in our success. Reflecting upon our robust financial performance in 3Q, in each of the prior two quarters, the level of demand we saw in the business were sustained in the first month of the subsequent quarter. Looking ahead to our fiscal fourth quarter, this dynamic remains intact, particularly relative to pre-pandemic levels. Since the beginning of calendar year 2022, we have been sharing the growth over pre-pandemic chart to provide a snapshot into how the business was performing in light of the COVID-19 pandemic. After this quarter, we will no longer provide a forward-looking view of operating performance relative to pre-pandemic periods as its relevance decreased given the time that has elapsed. Nevertheless, despite macro headwinds such as continued inflation and rising interest rates, center-level revenue continues to perform 50% or higher versus pre-pandemic levels, and same-store sales growth has been strong. While the results are preliminary, the revenue in the most recent 13-week period ending May 7th grew an impressive 53% compared to pre-pandemic. As we have stated previously, we expect that the year-over-year comparable performance will naturally become less pronounced as we begin comping over the surge in demand in the latter half of the third fiscal quarter and all of the fourth quarter of last year as the COVID-19 Omicron wave subsided. On that note, I would like to briefly talk about our fiscal fourth quarter and items that will affect year-over-year comparability. As a reminder, revenue in the fourth quarter last fiscal year benefited from two factors. One, there was a 53rd week in our fiscal 2023 calendar that added an estimated $15 million in revenue, and two, a change in the accounting methodology for service fee revenue, which resulted in a net positive impact of $9 million in the fourth quarter. For context, the service fee revenue is an 18% gratuity charged on all F&B related revenue, all of which is paid to our servers and bartenders. Adjusting last year's fourth quarter revenue figure for the 53rd week and the service fee revenue recognition impact in the fourth quarter, the comparable baseline revenue for Q4 of fiscal 2022 is $244 million. Turning to our center-level economics, the heart of our operation and our overall financial profile, we continue to see robust year-over-year growth and performance well above pre-pandemic levels and prior year. Total bowling center level revenue increased $57 million or 23% over the comparable prior year period, with walk-in retail growing $31 million or 17% and group events up $20 million or 49%. This strong top-line growth translated into a significant increase in adjusted center EBITDA, which jumped 20% year-over-year and an impressive 73% over the pre-pandemic period, reaching $149 million. Our 48% adjusted center EBITDA margin decreased 103 basis points versus prior year. It increased 444 basis points compared to the comparable pre-pandemic period. Adjusted EBITDA in the prior year benefited from a $7.5 million rent concession related to COVID-19 and staffing shortages, which coincided with a surge in demand in the latter half of the quarter. Normalized for the prior year rent credit, adjusted EBITDA expanded by 25% year-over-year, and adjusted center EBITDA margin expanded 103 basis points. On a consolidated basis, Adjusted EBITDA margin was 40.4%, which surged almost 756 basis points above the comparable pre-pandemic metric despite well-documented input cost inflation. Relative to prior year, Adjusted EBITDA margin expanded 128 basis points when adjusted for the aforementioned $7.5 million rent credit. This margin level exemplifies the benefits of operating leverage inherent in the business at both the individual center and overall portfolio levels. This leverage is largely a function of portfolio-wide 50% variable contribution margins across our revenue streams. From a cash flow perspective, in the third quarter of fiscal 2023, we generated $118 million in adjusted cash from operations versus $103 million in the comparable prior year period. Consistent with our history, we redeployed much of this cash flow across our portfolio to self-fund center acquisitions, new builds, and existing center upgrades and renovations. The company finished the quarter with robust liquidity, underpinned by over $150 million in cash on the balance sheet and roughly $190 million of undrawn capacity on our revolving credit facility. Now let's discuss several noteworthy capital markets updates. As you may recall, in February, we amended and extended our Term Loan B through February 2028 with $900 million of notional principal. We have now hedged $800 million of the loan, or nearly 90% of the total, by locking in our floating rate one-month term SOFR exposure into a defined band of approximately 94 basis points to 550 basis points through March 31st, 2026. It cost us $0 in upfront premium to achieve this protection as we utilized a cashless collar to contain interest rate risk without paying a premium to do so. As of April 2, 2023, the effective interest rate on the Term Loan B was 8.3%. We are very pleased with this outcome, particularly given that we have capped our annual interest rate expense on the Term Loan B at 9%, which compares to the 30%+ returns we generate across our multi-pronged reinvestment strategy I referenced moments ago. Further, and also salient to the capital structure discussion, we have completed the buyback of 32% of our convertible preferred shares for $81 million in two separate transactions, $74 million of which occurred subsequent to quarter end. We funded these buybacks with cash on hand. Pro forma for these transactions, approximately $136 million of the $200 million notional principal remains outstanding. Importantly, these two transactions reduced the potential impact to fully diluted share count by 5.2 million shares as measured on an as converted basis. We have also been active in returning capital to common shareholders via share buybacks. This calendar year through May 15th, we have repurchased 2.4 million Class A common stock for $34 million, or an average price of $14.19 per share. Since the inception of the program, we have bought back $82 million of stock, equating to roughly 7 million shares for an average of $11.85 per share. In continued support of this reinvestment strategy, on May 16, 2023, the company's board of directors authorized an increase to our share buyback to $200 million. It is worth noting that the first tranche of earnout shares were earned on March 2. There is only one remaining tranche of earnout shares that vest at $17.50. The combination of these various share-related transactions has resulted in a net reduction in our fully diluted share count by nearly 8.7 million shares since our first full quarter as a public company, despite the 4.3 million common shares issued as part of the warrant redemption, which was completed in May 2022. As you can see in the chart and the table, we have consistently reduced the fully diluted share count since coming public in December 2021. In closing, to recap a quarter with many substantial positive highlights, we have set a new high watermark in terms of financial performance with record revenue of $316 million, Adjusted EBITDA of $128 million, and Adjusted EBITDA margin of 40.4%. We continued to simplify our capital structure by retiring nearly one-third of the convertible preferred for $81 million and reducing our fully diluted share count by approximately 8.7 million shares or 4%. We successfully executed a hedge on roughly 90% of the notional principal of our $900 million Term Loan B, it cost us $0 in upfront premium to insure this risk. Finally, we augmented our management team with the addition of Bobby Lavan as our CFO. Needless to say, it was a very exciting quarter on multiple fronts, and we remain active in finding ways to deliver value to our shareholders. As Thomas highlighted, we remain enthusiastic about our growth trajectory despite some of the near-term macro dynamics that we discussed. Thank you for your time, and we all look forward to presenting next quarter. We'll now begin a brief Q&A led by our Chairman, Founder, and CEO, Thomas Shannon. Operator, please open the line for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from Matthew Boss with JP Morgan. Please proceed with your question. Thanks, congrats on a nice quarter. Thanks, Matt. Thanks, Matt. Tom, maybe could you speak to overall demand trends or the progression of traffic that you saw in the third quarter, maybe more recently in April and May? Have you seen any notable changes in demand between group events relative to walk-in retail? Well, there has been a slowing, there's no doubt. As the quarter progressed, the comps slowed. We saw that in April, but it seems to be flattening now. You know, we were coming off of maybe the biggest sugar high in history a year ago with all the money flowing through the system. I think probably more importantly, for our business, a lot of people not back at work, kids not back at school. You had this unparalleled combination of a huge amount of idle time and a lot of money. I think we'll resume growth, but I think we. You know, there needed to be a pause because it's been two and a half years of double-digit growth, and obviously that's not really sustainable for any business. I'm not concerned about it. I think it's, it was inevitable at some point. We did see it. We see the slowdown more pronounced in California, which was also the market that came back the most strong. Again, just sort of a return to normalization. Yes, probably more so on the event side than on the retail side. The trends I'm seeing now are sort of more of a return to stability or positive growth. We did notice it for the first time since 2020 in the last two or three months. Great. Maybe just a follow-up. As we think about moving into next year, FY 2024, how best to think about some of the underlying drivers of same-store sales growth, your pricing power, some of your upgraded offerings as we think about the sustainable underlying drivers of comps? We have a lot of centers that are either being renovated, they're getting arcades for the first time. They're getting, in some cases, bars, kitchens that they didn't have. You know, we've done a lot of acquisitions over time, but it takes a while for those facilities to become renovated and then they contribute more. That's one tailwind we have. The second is, we continue to optimize things like pricing and packages and other things that I think will continue to give us the ability to increase the revenue that we're able to get per guest visit. Lastly, we have a very robust acquisition pipeline. I think between the renovations, acquisitions to come, the new builds, just sort of the flow of the underlying business, I think, I think all the trends will be very positive for the next 12 months. Great. Best of luck. Thank you. Thank you. Our next question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Please proceed with your question. Thanks and congrats on the strong results. wanted to just ask, you know, a follow-up question in terms of the, you know, the trailing 13-week period, make sure that I understood what you were saying, because, you said that it was up 53% versus pre-pandemic levels. How does that translate on a quarter to date, same-store sales basis? Sure. It's Brett Parker speaking. We haven't released that level of detail. We've been fairly cautious on the numbers outside of the quarter itself. You know, we've been putting out this chart consistently and done so for the purposes of giving incremental visibility. I think if you look at kind of you know, this year, April, and back into March and February, and then kind of look at the prior year, you can see that's when the big uptick was happening. We continued to comp, you know, meaningfully higher. As Tom was saying, you know, saw some deceleration that we knew would happen as we come up against those more difficult comps. You know, continuing to trend meaningfully higher than pre-pandemic. You know, the trends are intact, as Tom said. Okay. got it. It just went from the comments from Tom, it was hard to interpret whether or not comp trends were, you know, Q to date, positive or not. Do you want to clarify that at all? we're not gonna give the comp numbers on the quarter until we get into it. I think what Tom was articulating was that the front part of the quarter had, you know, the most difficult comps and would be easiest to keep higher on a total revenue basis and most difficult to keep high on a comp basis. Got it. Okay. I wanted to ask about MoneyBowl. It looks like, you know, you've rolled that out, as you said, to you know, almost 20% of your centers now. It looks like you saw a pretty meaningful uptick in app downloads. wanted to see if you could comment or provide any color onYou know, this, the ability for this to drive, you know, the two intended goals, you know, trip frequency, and games played, you know, anything notable that you would be willing to share at this point in time? Also associated with that is with the pending launch of Free Play. You know, what are the expected costs that you would incur with that launching or in beta test in Q4 here? With respect to the performance in aggregate, you know, of the system, we're very encouraged by what we're seeing. We're, you know, hesitant to give specific data points yet just because the data set isn't that rich. The directionality is certainly, you know, what we're looking to see. Excuse me, with respect to, free-to-play and the cost to roll it out, it's de minimis, at the location level, zero in many instances, where the systems already exist. It's really just the overall development cost. We didn't add heads to support that effort. It's just an allocation of the team dedicated to MoneyBowl. In terms of incremental expense, if there were, you know, meaningful capital requirements needed at the centers or significant advertising plan for it or anything like that, you know, that would be very different from what we're looking at today, which is just a simple push. Okay. Got it. Last one for me before I hop out of the queue. Just in terms of, you know, there's been quite a bit of noise related to the EEOC review that's been pending here. You know, it seemed to grab quite a bit of media attention in the last week. Wanted to see if there was anything that you wanted to comment on that. I know probably some of it you can't, but anything you were willing to share on that. Sure. Yeah. I mean, you're right in that we're limited, but, you know, I would tell you, first of all, the claims made in the CNBC.com article are entirely false. We deny them in the strongest terms, that there were any of those allegations are accurate. The EEOC investigation is not a new development. It's been dragging on for over seven years. We've disclosed in regulatory filings all the information we're able to share, as you noted. We have nothing to hide. We have fully cooperated and provided information to document and documents to the EEOC throughout this whole process. To date, the EEOC has not substantiated their determinations with any evidence or any viable methodology that supports their conclusion. Our own thorough investigation into the claims also has not substantiated, excuse me, any evidence of wrongdoing or any violation of our policies prohibiting any form of employment discrimination. As a values-based enterprise, Bowlero does not tolerate discriminatory or demeaning conduct. These are the facts and the reasons why we continue to battle to have these claims thrown out. Whatever the outcome is, it will not materially impact our business or distract us from executing against our strategic priorities. Our latest earnings results that we're talking about now reflect our unwavering focus and commitment to excellence. I'd also note that the CNBC.com article essentially regurgitates the same stale narrative and misleading claims the author made in a similar story that she wrote for the New York Post in 2017. At the end of the day, we stand by our positive workplace culture, we stand by our visionary leader, and we stand by our track record of cultivating exceptional talent. Beyond that, there's not much we can say. Got it. Thanks for the color. Best wishes, guys. Thank you. Thank you. Our next question comes from Randy Konik with Jefferies. Please proceed with your question. Hey, guys. Thanks a lot. really appreciate it. I just wanna kind of really think about and focus my questions on, you know, some long-term opportunities for productivity enhancement. first, I want to discuss lane kiosks and maybe give us some perspective, remind us, you know, what percent of the centers currently have the lane kiosks installed. Have you seen kind of a noticeable difference in the amount of F&B per revenue per lane, per bowling session, if you will, in the, in the lanes or the centers with the lane kiosk versus the ones without? Just wanna kinda get some perspective there because it seems like a, you know, a good unlock for driving, you know, higher and higher F&B and just revenue per lane going forward. Yeah, Randy, this is Tom. I think it's a great question, and as a funny coincidence, it's something I was spending time talking to some of my senior people about today. The reality is, the kiosks have underperformed our expectations for them and certainly their potential. We have them in 80 of our highest grossing centers. The technology is very good. We spent a lot of time. I think we're on version three or four of the product. Works very well. I think there were two problems that have resulted in it not getting sort of the level of attention in the centers that it should. The first is we had a lot of management turnover, which we've addressed by giving broad-based raises to all of our center-level managers, operations managers, assistant general managers, general managers, and even the facility managers who are the mechanics. We needed to mitigate the turnover. We hadn't raised pay in those positions in quite a while. We made some meaningful increases. What we've seen since that happened is a dramatic stabilization in the workforce, the managerial workforce. The reason that matters is because you can't train managers and have something stick in terms of a quasi complicated process or let's say a process with a number of attributes, like getting the kiosks optimized if you have rampant turnover. We need to address turnover for a lot of reasons. One of the casualties of high turnover was kiosk utilization, because managers need to really understand the value it provides to them, whether it's as an adjunct to a server or as a replacement to a server, and the entire customer journey through that experience from educating them at the front end, this is an avenue by which they can order, making sure that the orders are executed properly by the kitchen and delivery to the lanes, et cetera. What we found recently was a wide range of how kiosks are being utilized in the centers. Some centers utilize them quite a lot. Some centers utilize them basically as a digital menu, and some centers didn't utilize them at all. It's more of a cultural thing and more of a training thing than it is a technology thing. The good news is, I think that once we solve this, and we will, and we need, I think, a very dedicated product champion to really spearhead this effort, that the possibility for this is meaningful. What does that mean? I would say, you know, there's no reason we shouldn't be looking at a high single digit or even low double-digit increase in retail food sales by getting these utilized. The problem is, unfortunately, that this is not a technological solution. At the end of the day, it's a people-based issue. In a rapidly growing company, you know, with high turnover like everyone else in hospitality, it hasn't taken root culturally in the centers like we would have hoped. This is addressable, and it's something that we're very focused on. That's interesting. It almost feels like, you know, investing in almost a greeter or someone that. 'Cause when I go to the lanes, if someone does walk me over to the lanes and, you know, this, it could be just as simple as, "Hey, just these kiosks can help you out, and if you want to order food, blah, blah." We can talk about that offline. Just seems like obviously a huge opportunity going forward in the years ahead. My second question is more around the social, I guess the group events. Very good growth in the quarter. You know, the way I kind of almost thought about this was the last bowling party I went to was when I was six. That's 40 years ago, right? It almost felt like there was a dormancy in bowling as a party, you know, being in a consideration for a kid party. Obviously, that's improved over the last few years with Bowlero remodels and everything, but it still seems like a massive opportunity ahead as the bowling party comes back into consideration for kid parties. How do you think about that? How do you think about that in the non-Bowlero versus Bowlero centers? Like, just give us some perspective there. Well, I mean, we do a enormously robust event business. I don't know what the TTM is, but I would imagine it's in the neighborhood of $200 million of events. You know, the bowling birthday party is kind of a bedrock American institution. In some markets it may be stronger than others. For example, in Los Angeles, the people I know out there say all they do on weekends is end up going to birthday parties for their kids or other kids at bowling at our centers on the west side of L.A. You know, same thing in Manhattan. You know, I think it's that business will continue to grow long-term. It's not one business, right? You've got the kids birthday party business, you have adult so-social, you have corporate events, you have holiday events, right? I think all of those will grow either by population growth or other reasons. I think we're actually helped by workers not going to the office as much as they did previously because it requires companies to get employees together in some way to keep the culture intact, and this is a great way of doing that. I would say relative to what seems to be a very negative trend for many companies, which is work from home, and they're fighting that, they want people to come back. We've seen corporate activity stronger than it was previously. As a result of what I think we're benefiting from that, where companies need to get creative to get people back in the office or together, I should say, we're a great way of doing that. The event business is extremely robust for us, and I think that all the market segments that go into that are growth segments for us, really almost in perpetuity. Yes, super helpful. Thank you. Sure. Thank you. Our next question comes from Ian Zaffino with Oppenheimer. Please proceed with your question. Hi. Great. Thank you very much. You know, just wanted to build on that question. I guess I'm kind of hearing two different things on the event business. I think you mentioned that they were slowing a little bit, and that was related to a sugar high. I guess was that sugar high that you're referring to is just really companies trying to get employees back, or did that have to do with something else? Because I guess the way I originally interpreted it is a sugar high probably would have juiced retail previously, and now retail would have come down, but it seems like retail is strong. Maybe my interpretation of the sugar high is different. Then the other question would be, going into... I don't know if we're going into recession. I think people think we are. How does the business perform in a recession, and how do we think of, maybe retail, event, et cetera, maybe in slowing macro environment? Thanks. I'm glad you asked, Ian. Let me clarify. The weakness in the event business at the end of the quarter we just reported was in the social events. That is small groups of people, not corporate, who come in together typically on the weekends. That is the business that slowed most dramatically, and that is, you know, that was the business where I think that there was the biggest sugar high, where people were going out and they were sort of spending indiscriminately on a social basis a year ago. That came in a little bit. Corporate business remained very strong. That was the weakness, and I'm glad you asked the question. You know, with regard to recession, we've been through a number of them in the company's 26 and a half year history, they're all different. You know, we're not really meaningfully impacted by sort of shallow recessions. For one thing, we're a value offering, right? We're a cheaper alternative than most other entertainment opportunities, certainly compared to going to a sporting event or to a theme park or traveling anywhere, right? We're local, we're in the community, and that's why when gas prices spiked, our business actually improved because we're local. We're easily accessible, and we're low cost. Recessions don't bother us. The only recessions that are really problematic for us are things like, you know, when we had the great financial crisis and companies just turn off the spigot and don't have corporate events, you know, that hurts our business meaningfully because that's a very good segment of our business, very profitable segment. None of these things are in any way catastrophic for us, you know? The event of a garden variety recession for us, I think, might be revenues flat or down two points. It's hard to imagine revenue being down much more than, you know, -5%, even in a very meaningful recession, because we become the default low cost alternative. You know, when you have a slowing of the business like that, it presents opportunities. The first is that the acquisition market becomes that much better. We've been doing a lot of deals. One of the things we've been facing in the last few years is that business was good for the industry and everyone had very high expectations of what the future was gonna bring. When you have a recession, it resets sellers expectations lower, so more assets come on the market and perhaps at more favorable pricing. Every time there's been a recession, we've benefited. The financial crisis led to the bankruptcy of AMF. We acquired AMF very attractively. We turned it around. Great deal. You know, the COVID, you know, a lot of deals emerged out of COVID, Bowl America and a number of others. You know, number one, they're not that important to our business. It's not like we ever lose money, we make less money, but we make a lot of money to begin with. If there's a slight reduction in profitability, really not that consequential. From an M&A growth standpoint, it has tended to be on balance, a better thing than a worse thing for us. Brett, you've spent a lot of time sort of talking about what happened in recessions in years past. You wanna talk about some of the actual data that we have? Sure. Thanks, Tom. I would just before I get to even the data, I would just kind of stack on top of what you were saying. The value-based offering absolutely matters. You're also talking about a business that has very high natural margins and low decrementals. We have the ability to be, you know, very nimble on our feet. The managers out in the field go through effectively boom and bust cycle training every year, just riding our seasonality curve throughout the course of the year. As Tom mentioned, you know, in terms of the senior team, we've been doing this together since, you know, before 9/11. 9/11, GFC, COVID, and, you know, none of these things had any, you know, lasting impact on us that was anything other than positive, as Tom was saying. That's really true for a couple of reasons. Number one, to pull on some of those stats, looking back at the AMF portfolio during the Great Financial Crisis, which was really the only large national diversified portfolio of assets to look at that's indicative of what we have now. They were only down 4.5% peak to trough during the GFC, and that was, you know, with the business essentially unmanaged, at the time. The business that we were running, was smaller, had more exposure to the dense urban markets, et cetera. Saw a little bit more pain on the top line, but we actually grew EBITDA 2008 to 2009 because we were out in front of it, and we were at managing it very actively. That remains in terms of a core part of who we are and what we do, is something we call the Recession Contingency Plan or RCP, which is essentially five different levels of economic dislocation from a stagnation to a depression. Then it lists all the way down to the belly button analysis across thousands of rows, what actions are to be undertaken in response to each stimulus. What that does is it sets out for us a roadmap and a game plan that we can follow. We've been doing this since 2016. We know it works because we started running it in January of 2020, as soon as there was any wonkiness around COVID. You know, that plan is updated every handful of months. It sits on our computers, and it can save 30% out of SG&A if needed. You know, our finger sort of hovers above that button at all times. You know, we have our entrepreneurial roots. We've never forgotten all those things that we've come through. You know, it gives us a lot of confidence that whatever comes down the pipe, we'll be able to handle it because it's unlikely to be anything that we haven't seen before. Okay. That's actually very helpful. I guess the way we think about just the model in general is in good times, you have very high incrementals, and then I guess to say in moderately down times, you have enough levers to pull to keep the decrementals very reasonable, so. Yep. And how do we think about just. You know, you mentioned store growth or location growth. How do we think about location growth, I guess maybe in today's market, if we look over the next 12 months, how do we think about location growth, you know, in today's environment over the next 12 months versus, let's just say, a downturn in the economy? Thanks. Well, I think we're gonna have a very, very good next 12 months of growth. If I had to ballpark, I would say in the neighborhood of 25-30 new centers, combination of acquisitions and new builds that are opening. We are under construction in several places right now, and we have a number of deals working their way through the pipeline. In fact, we closed on an acquisition yesterday that hasn't even been announced yet. In Tennessee, which I believe is our first in Tennessee. We continue to go into new markets, put in a foothold, and we'll expand from there. You know, we have a infrastructure at the corporate level that is geared for growth, right? We have a lot of people who process deals. We have a robustness to the organization that's predicated upon us continuing to grow. If we ever needed to streamline that, if we ever said, "Well, okay, we think the situation is severe," right? "The recession is really deep, and we're uncertain about the future." As Brett said, we can very rapidly take massive fixed cost out of overhead. You know, you can also go backwards in terms of management pars in the centers. We are staffed to maximize revenue in good times. The staffing model is different in bad times. There's operating leverage on the way up, there's operating leverage on the way down, that's different. We've been through three pretty severe macro environmental shocks since the company, you know, existed, and we've navigated all of them, and the playbook is not new to us. You know, that said, look, I think that to the extent that there's a recession and I'm not predicting one, but recessions are different for every industry, you know. I wouldn't wanna be a car dealer. I wouldn't wanna be necessarily a real estate agent, but, you know, bowling alley, low cost in your neighborhood, familiar. It's a great place to go if you don't wanna spend a lot of money. To the extent that there's a recession, we just don't have that much volatility. Okay, great. Thank you very much. That's great color. You have a good night. Thanks, Ian. Thank you. Please keep your questions to one or two. Our next question comes from Steve Wieczynski with Stifel. Please proceed with your question. Hey, guys. Good afternoon and congrats on the quarter. Tom and Brett, if we could stay on the scalability of costs across your business, you know, if in fact you do start to witness declines in demand, I guess to stay on that point there, is there any way to help us think about like if we actually threw a number out there, let's say revenues declined, you know, pick a number. Let's say it's 5%. Is there any way for you to help us think about how much of that decline, you know, really could be offset by expense reductions? Well, you know, let's just ballpark. Haven't done this before, so forgive me if it's inaccurate, but $10 million of overhead, and then probably $50,000 per center, maybe more. Just to be conservative here. $50,000, what would that be? About $16.5 million. $26.5 million in fixed cost right off the bat. Then if you have reductions in revenue, you also have some reduction in cost of goods sold, right? To the extent that you have reductions in food and beverage, you have some corresponding reduction in food and beverage. You know, if you say, well, that in aggregate is $30 million, you know, $35 million. Again, I think these are very conservative numbers. You're talking about a 3%+ total company revenue reduction before you see any impact in terms of profit reduction. That is if you do it, right? If you say, well, you know, we're gonna have a... If we're going through a shallow recession or you see some sort of shallow, you know, whatever, softer results than you've seen historically, right? You don't want to overreact to that. You know, would we change our operating methodology if, you know, things started to slow a little bit? Probably not, because we've made great investments that have really bolstered the company and positioned us for the growth that we've had and hopefully accelerated growth to come. If the concern is, you know, what happens if you have a real recession, the answer is we can act almost immediately. I mean, in COVID-19, for example, in two weeks, we took out enormous cost. You know, we can do what we need to do. I think, though, that we also don't overreact to stuff that doesn't turn out to be that consequential, you know. Yep. That's great color. Thanks, Tom. But the. Sorry. I was just gonna add. Yeah, it, I mean, the key is the for a couple of% type of a thing like that, there's really not even much you have to do from the parent company level because the centers are used to those sorts of vacillations in their performance anyway and optimizing performance through those scenarios. I mean, there's a lot of things that we can do, a lot of levers that we can pull, you know, to maintain or expand profitability, you know, depending on the environment. Okay. That's great color. Second question, Tom, probably for you. You know, in your, in your remarks, you talked about, you know, you've started to see a so-called slowdown. Just wanna be very clear here, you know, that's gonna make a lot of investors kind of panic. You know, you're just talking about at this point, your comparisons year-over-year are much, much more difficult. You're not, you know, you're not seeing a material change in your normal retail customer's appetite to spend, you know, or their spending power as they enter your stores. Am I thinking about that the right way? You are. What I was really alluding to is, you know, when we've had these consistent, you know, very high double-digit comps year after year after year, that that has slowed. Okay. Then if I can just add one more on real quick. From a price standpoint and taking price, where do you guys think you are at this point? You know, do you think you're at the point where you maybe have pushed price too much or, you know, is there still more room for you to take price depending on the geographic location? I think that we're in pause mode on taking price, but there are, there are other ways of addressing price that or value that we're gonna start to explore. One thing that we haven't done historically is things like bundling. It's all been à la carte on a retail basis. Some of our competitors bundle. You know, the most famous bundlers, of course, are places like McDonald's, where I think probably the majority of their customers buy a combo or a Happy Meal or Value Meal, right, which is a bundle. There are things that we can do that would provide greater value to our guests and still increase revenue, you know, guests, guest spend per visit, and profit, but also increase value to the guest. Those are things that we're gonna start to explore in earnest. We've already started to explore them. I think that, you know, that could be, that could be an important growth sector for us. I think it's probably a bit of a blind spot. You know, I think our pricing on the event side has been very sophisticated. I think our pricing on the retail side has been the opposite. That's a great opportunity for us. It's not, it's not gonna be a price increase. I don't think that, you know, in this environment, price increases are warranted. Now, typically, we take price increases in the fall, we'll see, you know, what the tea leaves look like, going into the busiest season. It may be that we feel like we can take price, but at this point, we're not looking at price increases. Okay, great color. Thanks, guys. Appreciate it. Thank you. Thanks, Steve. Thank you. Our next question comes from Jason Tilchen with Canaccord Genuity. Please proceed with your question. Great. Thanks for taking my question. There was a note in the deck that indicated sort of relative Q4 seasonality within the total annual mix. I just wanted to clarify, on the profitability side, it sort of indicated 15% of total trailing twelve-month EBITDA, which would sort of imply a pretty significant year-over-year margin compression. Just curious, you know, relative to the commentary earlier about the year-over-year differences in the calendar. Can you talk about some of the key puts and takes for Q4 profitability and whether that interpretation on the sort of year-over-year margin compression is accurate? Thank you. No, no. It's not an indication of year-over-year margin compression. What you're seeing is sequential margin compression, which is just the natural state of things as we go from our biggest quarter, Q3, into one of our smallest quarters, Q4. You're always gonna see margin come in in Q4 versus Q3. A little bit of difference just this year, Q4, versus last year, Q4, is around those, most particularly the $15 million of incremental revenue from the 53rd week. That won't be repeated this year. You have some coming in on that. That's, we just wanted to be clear with folks what, you know, what items from last year were anomalous and what those impacts were so that, you know, we could have a reasonable setup going into Q4. Okay. Just to make sure I follow that. Those dynamics could have sort of a modest year-over-year margin impact but not a significant impact is sort of the right way to think about it. Yeah, 'cause it's not, it's not even an actual impact on margin. Just on the way that they flow through. Exactly. Yeah. If you're gonna have one week less, right? Yeah. You have substantially less revenue and it doesn't really make a huge difference in terms of cost. Okay, that's helpful. Just one other follow-up on some of the earlier questions about the events business. Just curious if you can maybe help us understand a little bit the mix within the events business between corporate kids parties and sort of smaller social gatherings, how, you know, each one size-wise stacks up, you know, either this quarter or sort of a trailing twelve basis would be helpful? Brett, do you wanna provide that later? 'Cause I don't have that information. Yeah, That's fine. I mean, what I would tell you is that what we view as retail events, which are event or birthday parties and social, make up a majority of the event count and a minority of the event dollars. Corporate is the inverse, and it's just because the per person spend is materially different. Okay, great. That's really helpful. Just to reiterate what Tom said earlier, the corporate side, demand has remained really strong there through the end of last quarter, and then the weakness that he commented on was more on the sort of smaller social gatherings. Yeah. I mean, events in aggregate across the quarter were really strong. The event revenue in the quarter at $60 million was 49% higher than last year, 84% higher than pre-pandemic. It's 44% higher even on a same-store sales basis than last year or 52% higher than pre-pandemic same store. I mean, the event business overall was quite robust. The TTM number, just FYI, while, because Tom did mention it, he was pretty much right on the button. It's $217 million. Great. Very helpful. Thanks a lot. Sure. Thank you. Our next question comes from Eric Handler with Roth MKM. Please proceed with your question. Good afternoon. Thank you for the questions. Two questions. First, with an economic tightening, is that helpful or a hindrance for the M&A pipeline in terms of volume of potential deals? Well, historically, it's always been good for us. We're cash buyers. We don't rely on financing to get these deals done. You know, in boom times, sellers have higher price expectations and are more reluctant to sell quality assets. The inverse is true in downturns. You know, we don't wish for recessions, but we've been doing this long enough and through enough cycles to realize that these downturns do have a silver lining, and it shows up in M&A. Yep. Okay. With regards to the new builds, obviously things slowed down in terms of lease signings during COVID. You said, you know, things are a little bit more active now, coming out of COVID. What does the situation look like as, you know, with economic tightening and, you know, as you look at more new build deals, are there a lot of opportunities being thrown your way? Like, what would be a good goal for you know, 12 months from now to have sort of in the pipeline? We have a tremendous amount in the pipeline now. We're currently under construction, well, well under construction, I'd say more than 50% done in San Jose in the Westfield Valley Fair Mall, which is one of the best malls in the country. Exceptional, exceptional location and a fantastic mall. We started construction in Miami WorldCenter, which should end up as one of our, you know, top five, certainly top 10 highest grossing locations right in the heart of Miami, zero competition. We've done some preliminary construction in Moorpark, which is sort of out near, it's out in, near, like, Thousand Oaks, Calabasas, outside of L.A. I think there are six or seven signed leases and six or seven behind that are likely to get signed. From a new build standpoint, it's actually our pipeline has never been this good. The locations are phenomenal. A lot of California, which, you know, our California centers do about on average almost twice what the rest of the country does. You know, we love building in California and buying in California. It's our biggest market. We have about 50 locations there already, I could see adding 10 more in the next 18 months. You know, despite all the headwinds that you hear about in California, which are, you know, true, the reality is that you just have an enormous population, huge amount of disposable income, and a cultural propensity to bowl, which you would not expect, Californians love to bowl. I don't know why they just do. We do great in California, and we continue to expand there. As part of this pipeline, we've got half a dozen or so new builds in California, couple in Denver, Miami, as I mentioned. It's the best it's ever been. Great. Thanks, Tom. Sure. Thank you. Thank you. At this time, we do not have time for any further questions. I will now turn the call to Brett Parker for closing remarks. Thank you. Thank you to all of you for joining us on today's call. We greatly appreciate your interest and support in the fundamentally sound business that we're continuing to build. We're extremely proud of the record-breaking quarter that our world-class team achieved. We're also very pleased with the capital structure management initiatives that we executed. We look forward to speaking with you after the conclusion of our fiscal 2023. Thanks again for your time today. This concludes today's teleconference. You may disconnect your lines.