Bowlero (BOWL) - 2025 Q3 - Quarterly Report

Form 10-Q Filing Information This section provides key administrative details regarding the Form 10-Q filing, including registrant information, filing period, and stock outstanding data - Registrant: Lucky Strike Entertainment Corporation (formerly Bowlero Corporation), Delaware incorporation[3][29] | Detail | Value | | :--- | :--- | | Filing Period Ended | March 30, 2025 | | Commission File Number | 001-40142 | | Trading Symbol | LUCK | | Exchange | The New York Stock Exchange | | Filer Status | Accelerated filer, Emerging growth company | | Class A Common Stock Outstanding (as of April 30, 2025) | 81,685,637 shares | | Class B Common Stock Outstanding (as of April 30, 2025) | 58,519,437 shares | | Series A Preferred Stock Outstanding (as of April 30, 2025) | 117,087 shares | Table of Contents The report is structured into two main parts: Financial Information and Other Information, concluding with Signatures - The report is divided into two main parts: Part I - Financial Information and Part II - Other Information, followed by Signatures[8] Part I - Financial Information This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information[31] - The company changed its name from Bowlero Corporation to Lucky Strike Entertainment Corporation and its stock ticker symbol from NYSE: BOWL to NYSE: LUCK, effective December 12, 2024, to reflect its broader entertainment focus and commitment to offering a broader range of entertainment experiences[29] Item 1. Financial Statements This section provides the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), changes in equity, cash flows, and detailed notes to the financial statements Condensed Consolidated Balance Sheets The balance sheets show the company's financial position as of March 30, 2025, compared to June 30, 2024, indicating an increase in total assets and liabilities, and a larger stockholders' deficit | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------- | :------------- | :------------ | :----- | :------- | | Total Assets | $3,195,717 | $3,114,035 | $81,682 | 2.62% | | Total Liabilities | $3,282,121 | $3,163,887 | $118,234 | 3.74% | | Total Stockholders' Deficit | $(213,729) | $(177,262) | $(36,467) | 20.57% | Condensed Consolidated Statements of Operations For the nine months ended March 30, 2025, the company reported a significant turnaround from a net loss to a net income, driven by revenue growth and a favorable change in the fair value of earnout liability, despite increased interest and depreciation expenses | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Total Revenues | $900,151 | $870,746 | $29,405 | 3.38% | | Operating Income | $122,004 | $125,845 | $(3,841) | (3.05)% | | Net Income (Loss) | $64,694 | $(21,404) | $86,098 | * | | Basic EPS | $0.38 | $(0.18) | $0.56 | * | | Diluted EPS | $0.36 | $(0.18) | $0.54 | * | | Interest Expense, net | $146,879 | $130,575 | $16,304 | 12.49% | | Change in fair value of earnout liability | $(87,489) | $14,541 | $(102,030) | * | - The company reclassified depreciation and amortization as a separate line item and disaggregated revenues and costs of revenues to enhance comparability with industry peers[32] Condensed Consolidated Statements of Comprehensive Income (Loss) For the nine months ended March 30, 2025, total comprehensive income was positive, a significant improvement from a loss in the prior year, primarily due to the net income turnaround, despite other comprehensive losses from derivatives and foreign currency translation | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | | Net income (loss) | $64,694 | $(21,404) | $86,098 | | Other comprehensive income (loss) | $(2,037) | $(2,020) | $(17) | | Total comprehensive income (loss) | $62,657 | $(23,424) | $86,081 | Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' (Deficit) Equity The company's stockholders' deficit increased from June 30, 2024, to March 30, 2025, primarily due to share repurchases, cash dividends, and settlement of equity awards, partially offset by net income | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | | :-------------------- | :------------- | :------------ | :----- | | Total Stockholders' Deficit | $(213,729) | $(177,262) | $(36,467) | | Treasury stock, at cost | $(450,856) | $(385,015) | $(65,841) | | Accumulated deficit | $(238,465) | $(303,159) | $64,694 | - Repurchased 5,980,510 shares of Class A common stock for $65,147 thousand during the nine months ended March 30, 2025, at an average purchase price per share of $10.89[87] Condensed Consolidated Statements of Cash Flows For the nine months ended March 30, 2025, operating activities provided cash, while investing activities used cash, and financing activities provided a reduced amount of cash compared to the prior year, resulting in a net increase in cash and cash equivalents | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Net cash provided by operating activities | $154,767 | $148,098 | $6,669 | 4.50% | | Net cash used in investing activities | $(166,412) | $(285,960) | $119,548 | 41.81% | | Net cash provided by financing activities | $23,925 | $154,287 | $(130,362) | (84.49)% | | Net increase in cash and cash equivalents | $12,116 | $16,796 | $(4,680) | (27.86)% | | Cash and cash equivalents at end of period | $79,088 | $212,429 | $(133,341) | (62.77)% | Index for Notes to Condensed Consolidated Financial Statements This section provides an index to the detailed notes accompanying the condensed consolidated financial statements, covering various accounting policies, assets, liabilities, equity, and other financial disclosures Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, business acquisitions, goodwill, property and equipment, leases, debt, income taxes, commitments, earnouts, fair value measurements, equity, share-based compensation, and net income per share Note 1 Description of Business and Significant Accounting Policies This note describes Lucky Strike Entertainment Corporation's business as a premier operator of location-based entertainment, its recent rebranding, and outlines the significant accounting policies used in preparing the financial statements, including basis of presentation, principles of consolidation, use of estimates, fair-value estimates, derivatives, net income per share calculation, and emerging growth company status, also detailing recently issued accounting standards - The company changed its name from Bowlero Corporation to Lucky Strike Entertainment Corporation and its stock ticker symbol from NYSE: BOWL to NYSE: LUCK, effective December 12, 2024, to reflect its broader entertainment focus beyond traditional bowling[29] - The company operates various location-based entertainment venues, including traditional bowling centers (AMF, Bowl America) and upscale concepts (Bowlero, Lucky Strike), as well as other entertainment forms like Octane Raceway, Raging Waves water park, and Boomers Parks[30] - The company is an "emerging growth company" and has elected to use the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[41][43] - New accounting standards issued include ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), and ASU 2024-03 (Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures), with adoption planned for fiscal years 2025, 2025, and 2027 respectively[44][45][46] Note 2 Business Acquisitions During the nine months ended March 30, 2025, Lucky Strike completed three acquisitions, adding nine locations for a total consideration of $50,565 thousand, expanding its market share and leveraging fixed costs, with valuation analyses still being finalized - The company continually evaluates potential acquisitions that strategically fit its growth strategy to expand market share and leverage fixed costs[47] | Acquisition Details (Nine Months Ended March 30, 2025) | Value (in thousands) | | :----------------------------------------------------- | :------------------- | | Number of Acquisitions | 3 | | Number of Locations Acquired | 9 | | Total Consideration | $50,565 | | Total Assets Acquired | $120,023 | | Total Liabilities Assumed | $(69,458) | | Goodwill from Acquisitions | $7,589 | Note 3 Goodwill and Other Intangible Assets Goodwill increased to $841,550 thousand as of March 30, 2025, primarily due to fiscal year 2025 acquisitions, while total intangible assets decreased to $44,653 thousand, with a notable shift in the composition of finite-lived assets due to amortization and changes in trade names | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | | :-------------------- | :------------- | :------------ | :----- | | Goodwill | $841,550 | $833,888 | $7,662 | | Total Intangible Assets, net | $44,653 | $47,051 | $(2,398) | | Amortization expense (Nine Months Ended) | $5,528 | $5,315 | $213 | Note 4 Property and Equipment Net property and equipment increased to $933,532 thousand as of March 30, 2025, driven by additions to buildings, equipment, and land, including a significant land purchase adjacent to Raging Waves water park | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------- | :------------- | :------------ | :----- | :------- | | Property and equipment, net | $933,532 | $887,738 | $45,794 | 5.16% | | Land | $120,239 | $108,442 | $11,797 | 10.88% | | Depreciation expense (Nine Months Ended) | $97,817 | $86,554 | $11,263 | 13.01% | - Purchased 66 acres of land adjacent to Raging Waves water park for $9,400 thousand on December 16, 2024[52] Note 5 Leases The company leases various assets under operating and finance leases, with total lease costs increasing for the nine months ended March 30, 2025, and operating lease ROU assets and liabilities increasing, while finance lease ROU assets decreased slightly | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Total Operating Lease Costs | $67,676 | $62,557 | $5,119 | 8.18% | | Total Finance Lease Costs | $50,295 | $49,831 | $464 | 0.93% | | Total Financing Obligation Costs | $30,488 | $18,266 | $12,222 | 66.80% | | Total Lease Costs, Net | $196,686 | $175,666 | $21,020 | 11.97% | | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------- | :------------- | :------------ | :----- | :------- | | Operating lease ROU assets, net | $583,094 | $559,168 | $23,926 | 4.28% | | Operating lease liabilities, ST | $32,228 | $28,460 | $3,768 | 13.24% | | Operating lease liabilities, LT | $596,851 | $561,916 | $34,935 | 6.22% | | Finance lease ROU assets, net | $512,106 | $524,392 | $(12,286) | (2.34)% | | Finance lease liabilities, LT | $682,169 | $680,213 | $1,956 | 0.29% | | Long-term financing obligations | $447,099 | $440,875 | $6,224 | 1.41% | Note 6 Accounts Payable and Accrued Expenses Total accounts payable and accrued expenses increased to $154,740 thousand as of March 30, 2025, primarily driven by significant increases in customer deposits and interest payable, partially offset by a decrease in accounts payable | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------- | :------------- | :------------ | :----- | :------- | | Total accounts payable and accrued expenses | $154,740 | $135,784 | $18,956 | 13.96% | | Accounts payable | $34,379 | $50,457 | $(16,078) | (31.87)% | | Customer deposits | $30,717 | $14,006 | $16,711 | 119.31% | | Interest | $9,000 | $1,113 | $7,887 | 708.63% | | Other | $15,670 | $5,658 | $10,012 | 176.95% | Note 7 Debt The company's total long-term debt increased to $1,273,231 thousand as of March 30, 2025, primarily due to a $150,000 incremental term loan obtained in December 2024, with the company remaining in compliance with all debt covenants and using interest rate collars to manage interest rate risk | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | % Change | | :-------------------- | :------------- | :------------ | :----- | :------- | | First Lien Credit Facility Term Loan | $1,282,370 | $1,138,500 | $143,870 | 12.64% | | Total long-term debt | $1,273,231 | $1,129,523 | $143,708 | 12.72% | - On December 17, 2024, the company entered into a Twelfth Amendment to the First Lien Credit Agreement, providing for an incremental term loan of $150,000 thousand, used to repay outstanding Revolver amounts and for general corporate purposes[62] - The company was in compliance with all debt covenants as of March 30, 2025[66] - The company uses interest rate collars with a notional amount of $800,000 thousand to stabilize interest rate fluctuations, establishing a SOFR floor of approximately 0.94% and a cap of 5.50%, expiring March 31, 2026[67][68] Note 8 Income Taxes The company's effective tax rate for the nine months ended March 30, 2025, was (5)%, differing from the US federal statutory rate of 21% primarily due to the change in fair value of the earnout liability, permanent differences, and other discrete tax items - The effective tax rate for the nine months ended March 30, 2025, was (5)%, compared to (11)% for the same period in 2024[70] - The difference from the US federal statutory rate of 21% is mainly attributed to the change in fair value of the earnout liability, permanent differences, and other discrete tax items[70] Note 9 Commitments and Contingencies The company is involved in various legal proceedings incidental to its business, but management believes their ultimate disposition will not have a material adverse effect on its financial position, results of operations, or cash flows - The company faces various inquiries, investigations, claims, lawsuits, and other legal proceedings common to the retail, restaurant, and entertainment industries[71] - Management believes the ultimate disposition of these matters should not have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[71] Note 10 Earnouts As of March 30, 2025, there were 11,418,357 unvested earnout shares outstanding, which vest if the Class A common stock price reaches $17.50 for 10 trading days within a consecutive 20-trading-day period by December 15, 2026, with most earnout shares classified as a liability and changes in fair value recognized in the statement of operations | Metric | Value | | :----- | :---- | | Unvested Earnout Shares Outstanding (as of March 30, 2025) | 11,418,357 | | Vesting Condition | Class A common stock price ≥ $17.50 for 10 trading days within any consecutive 20 trading day period | | Vesting Deadline | December 15, 2026 | Note 11 Fair Value of Financial Instruments The fair value of the company's debt was $1,290,499 thousand as of March 30, 2025, and the earnout liability significantly decreased to $50,172 thousand, primarily due to a decrease in the company's stock price, as estimated using a Monte Carlo simulation model | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | | :-------------------- | :------------- | :------------ | :----- | | Carrying value of debt | $1,295,308 | $1,152,200 | $143,108 | | Fair value of debt | $1,290,499 | $1,152,200 | $138,299 | | Earnout shares liability | $50,172 | $137,636 | $(87,464) | - The fair value of earnout shares is estimated using a Monte Carlo simulation model (Level 3 inputs), with key inputs including an expected term of 1.71 years, expected volatility of 50%, and a stock price of $9.91 as of March 30, 2025[77] Note 12 Common Stock, Preferred Stock and Stockholders' Equity The company has Class A common stock, Class B common stock, and Series A preferred stock, with 3,300 Series A Preferred Stock shares converted to Class A Common Stock during the nine months ended March 30, 2025, and the Board declared quarterly cash dividends and authorized a share repurchase program with $99,215 thousand remaining as of March 30, 2025 - The company is authorized to issue 2,000,000,000 shares of Class A common stock, 200,000,000 shares of Class B common stock, and 200,000,000 shares of Series A preferred stock[85] - Series A preferred stock has a fixed dividend rate of 5.5% per annum on a liquidation preference of $1,000 per share, with accumulated dividends of $3,407 thousand added to liquidation preference for the nine months ended March 30, 2025[80] | Common Stock Dividends Paid (Nine Months Ended March 30, 2025) | Amount (in thousands) | | :------------------------------------------------------------- | :-------------------- | | Total | $25,283 | - The share repurchase program, extended indefinitely on February 2, 2024, had a remaining balance of $99,215 thousand as of March 30, 2025[84][87] Note 13 Share-Based Compensation Total unrecognized share-based compensation cost was $27,426 thousand as of March 30, 2025, with share-based compensation expense for the nine months ended March 30, 2025, significantly increasing to $17,955 thousand, primarily due to a non-recurring $4,809 thousand expense from the cash settlement of equity awards related to an executive's retirement | Metric (in thousands) | March 30, 2025 | June 30, 2024 | Change | | :-------------------- | :------------- | :------------ | :----- | | Total unrecognized compensation cost | $27,426 | $25,800 | $1,626 | | Share-Based Compensation Expense (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | % Change | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Total share-based compensation expense | $17,955 | $9,743 | $8,212 | 84.29% | - The increase in share-based compensation expense includes a non-recurring $4,809 thousand expense from the cash settlement of equity awards for a retiring executive[89] Note 14 Net Income (Loss) Per Share For the nine months ended March 30, 2025, basic and diluted net income per share attributable to common stockholders were $0.38 and $0.36, respectively, a significant improvement from a loss per share in the prior year | Metric | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | | :----- | :------------------------------- | :------------------------------- | :----- | | Basic EPS | $0.38 | $(0.18) | $0.56 | | Diluted EPS | $0.36 | $(0.18) | $0.54 | | Weighted-average shares outstanding (Basic) | 143,630,881 | 152,945,921 | (9,315,040) | | Weighted-average shares outstanding (Diluted) | 150,982,706 | 152,945,921 | (1,963,215) | - In periods of net loss, potentially dilutive securities are excluded from diluted EPS calculation as their effect is antidilutive, making basic and diluted EPS the same[40] Note 15 Supplemental Cash Flow Information Supplemental cash flow information for the nine months ended March 30, 2025, shows cash paid for interest of $129,066 thousand and income taxes of $1,848 thousand, along with noncash investing and financing transactions | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | | Cash paid for interest | $129,066 | $127,067 | $1,999 | | Cash paid for income taxes, net of refunds | $1,848 | $3,118 | $(1,270) | | Capital expenditures in accounts payable | $14,476 | $25,640 | $(11,164) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting revenue growth, strategic initiatives, and key financial trends for the three and nine months ended March 30, 2025 Overview Lucky Strike Entertainment is a premier operator of location-based entertainment, focused on organic growth, upgrading locations, opening new venues, and acquisitions to create long-term shareholder value - Lucky Strike Entertainment operates traditional bowling locations, upscale entertainment concepts with lounge seating, arcades, enhanced food and beverage, and other location-based entertainment like Octane Raceway, Raging Waves water park, and Boomers Parks[99] - The company's long-term strategy focuses on organic growth, converting and upgrading locations, opening new venues, and acquisitions to improve operating profit margins and leverage fixed costs[100] Recent Developments Recent developments for the nine months ended March 30, 2025, include 3% total revenue growth, rebranding to Lucky Strike Entertainment, opening four new locations, completing three acquisitions (Boomers Parks, Spectrum Entertainment Complex, Adventure Park), acquiring land for expansion, and increasing the term loan by $150,000 thousand - Total revenue growth of 3% for the nine months ended March 30, 2025[103] - Rebranded the company from Bowlero to Lucky Strike Entertainment[103] - Opened four newly-built Lucky Strike locations and completed acquisitions of Boomers Parks, Spectrum Entertainment Complex, and Adventure Park. Also acquired 66 acres of land adjacent to Raging Waves water park[103] - Increased term loan by $150,000 thousand[103] Trends Future profitability is influenced by changing economic conditions, debt levels, interest rates, and increasing labor and inventory costs, with the business being seasonal and highest sales volumes typically in the third fiscal quarter due to holidays and weather - Factors affecting future profitability include economic conditions, debt levels, interest rates, and increasing labor and inventory costs (food and beverage)[101] - Operating results fluctuate seasonally, with the highest sales volumes typically generated during the third fiscal quarter due to leagues, holidays, and changing weather conditions[102] Presentation of Results of Operations The company reports on a fiscal year with quarters generally comprising one 5-week and two 4-week periods - The company's fiscal year is divided into quarters, each typically consisting of one 5-week period and two 4-week periods[104] Results of Operations (Three Months Ended March 30, 2025 Compared to March 31, 2024) For the three months ended March 30, 2025, total revenues increased slightly by 1%, driven by new locations, but net income decreased by 44% due to higher operating costs, increased depreciation, and a significant increase in income tax expense, despite a favorable change in earnout liability | Metric (in thousands) | March 30, 2025 | March 31, 2024 | Change | % Change | | :-------------------- | :------------- | :------------- | :----- | :------- | | Total Revenues | $339,882 | $337,670 | $2,212 | 1% | | Operating Income | $62,185 | $71,012 | $(8,827) | (12)% | | Net Income | $13,292 | $23,846 | $(10,554) | (44)% | | Income Tax Expense | $18,348 | $9,141 | $9,207 | * | | Change in fair value of earnout liability | $(18,886) | $(8,868) | $(10,018) | * | - Same-store revenues decreased by 6% due to a reduction in corporate event business[108][109] - Location operating costs increased by 7% due to location count growth from acquisitions and lease agreements, with Raging Waves water park and Boomers Parks contributing $4,300 thousand to the increase[111] - Selling, general and administrative (SG&A) expenses increased by 11%, primarily due to a non-recurring $4,809 thousand share-based compensation expense from an executive's retirement settlement[114] Results of Operations (Nine Months Ended March 30, 2025 Compared to March 31, 2024) For the nine months ended March 30, 2025, total revenues increased by 3%, leading to a significant turnaround from a net loss of $21,404 thousand to a net income of $64,694 thousand, largely driven by a favorable change in the fair value of earnout liability and increased revenue from new locations | Metric (in thousands) | March 30, 2025 | March 31, 2024 | Change | % Change | | :-------------------- | :------------- | :------------- | :----- | :------- | | Total Revenues | $900,151 | $870,746 | $29,405 | 3% | | Operating Income | $122,004 | $125,845 | $(3,841) | (3)% | | Net Income (Loss) | $64,694 | $(21,404) | $86,098 | * | | Change in fair value of earnout liability | $(87,489) | $14,541 | $(102,030) | * | - Same-store revenues decreased by 4% due to a reduction in corporate event business[123][124] - Location operating costs increased by 9% due to location count growth from acquisitions and lease agreements, with Raging Waves water park and Boomers Parks contributing $10,600 thousand to the increase[125] - Selling, general and administrative (SG&A) expenses decreased by 1%, primarily due to a $10,000 thousand decrease in professional fees, partially offset by an $8,200 thousand increase in share-based compensation expense (including a $4,809 thousand non-recurring executive retirement settlement)[128] Non-GAAP measure (Adjusted EBITDA) Adjusted EBITDA for the nine months ended March 30, 2025, was $278,960 thousand, a slight increase of 0.32% from the prior year, reflecting adjustments for non-cash and non-recurring items to provide a clearer view of core operating performance - Adjusted EBITDA is a non-GAAP financial measure used by management to analyze operating performance by excluding items not indicative of core operations, such as interest expense, income taxes, depreciation, amortization, impairment charges, share-based compensation, and changes in earnout value[133] | Metric (in thousands) | Nine Months Ended March 30, 2025 | Nine Months Ended March 31, 2024 | Change | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :----- | :------- | | Net income (loss) | $64,694 | $(21,404) | $86,098 | * | | Adjusted EBITDA | $278,960 | $278,066 | $894 | 0.32% | Liquidity and Capital Resources The company manages liquidity through available cash, cash generation, and access to capital, believing its financial position, operating cash flows, existing credit facility, and potential additional financing will be sufficient to meet future operational requirements, capital expenditures, and commitments - As of March 30, 2025, the company had approximately $79,088 thousand of available cash and cash equivalents[137] - The company's long-term strategy includes capital expenditures for new locations and upgrading existing ones, funded by available cash, operating cash flows, existing credit facilities, and potential sale-lease-back transactions[136] - Operating activities provided $154,767 thousand, investing activities used $166,412 thousand, and financing activities provided $23,925 thousand for the nine months ended March 30, 2025[138][139][140][141] Critical Accounting Estimates There have been no significant changes to the company's critical accounting estimates during the quarter ended March 30, 2025, as previously discussed in its fiscal year 2024 Form 10-K - No significant changes in critical accounting estimates occurred during the quarter ended March 30, 2025[143] Recently Issued Accounting Standards Information regarding new accounting pronouncements is detailed in Note 1 of the Condensed Consolidated Financial Statements - Refer to Note 1 for details on recently issued accounting standards[145] Emerging Growth Company Accounting Election As an emerging growth company, Lucky Strike has elected to use the extended transition period for new accounting standards, which may result in financial statements not being comparable to companies that comply with public company effective dates - The company, as an emerging growth company, has elected to use the extended transition period for complying with new or revised accounting standards[146] - This election may lead to non-comparability of financial statements with other public companies that do not use the extended transition period[146] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section discusses the company's exposure to market risks, including interest rate risk, credit risk, commodity price risk, and inflation, and how it attempts to manage these risks through operating and financing activities Interest Rate Risk The company is exposed to interest rate risk on its variable-rate debt, where a 1.0% increase or decrease in the effective interest rate would impact annual interest expense by approximately $12,824 thousand, and interest rate collars are used to hedge $800,000 thousand of the Term Loan, setting a SOFR floor of approximately 0.94% and a cap of 5.50% until March 31, 2026 - A 1.0% increase or decrease in the effective interest rate would cause an approximate $12,824 thousand change in annual interest expense on outstanding debt[148] - The company uses interest rate collars for an aggregate notional amount of $800,000 thousand of its Term Loan, with a SOFR floor of approximately 0.94% and a cap of 5.50%, maturing March 31, 2026[148] Credit Risk The company's Credit risk primarily relates to cash and temporary investments held with high-quality financial institutions, which it monitors while prioritizing safety and liquidity of principal - Credit risk is concentrated in cash and temporary investments, which are placed with high-quality financial institutions[149] - The company monitors third-party depository institutions and prioritizes safety and liquidity of principal over maximizing yield[149] Commodity Price Risk The company is exposed to market price fluctuations in food, beverage, supplies, and energy costs, where volatility in commodity prices can materially impact food costs, and the ability to pass these increases to customers may be limited by the competitive environment - The company is exposed to market price fluctuations in food, beverage, supplies, and energy[150] - Price volatility in commodities like proteins, produce, dairy, and cooking oil can materially impact food costs, and the ability to pass these costs to customers is limited by the competitive environment[150] Inflation The company experiences inflation in product purchases, which can materially impact its financial condition, and while it monitors prices and may adjust its own pricing, competitive pressures can limit its ability to fully recover higher costs - The company experiences inflation in the purchase of products necessary for its business operations[151] - Price volatility from inflation could materially impact financial condition and results of operations, and the ability to recover higher costs through increased pricing may be limited by the competitive environment[151] Item 4. Controls and Procedures This section confirms the effectiveness of the company's Disclosure controls and procedures as of March 30, 2025, and reports no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures The Chief Executive Officer and Chief Financial Officer concluded that the company's Disclosure controls and procedures were effective as of March 30, 2025 - Disclosure controls and procedures are designed to ensure timely and proper reporting of information to management[152] - The CEO and CFO concluded that these controls and procedures were effective as of March 30, 2025[152] Changes in Internal Control Over Financial Reporting There were no material changes to internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the third quarter ended March 30, 2025 - No material changes to internal control over financial reporting occurred during the third quarter ended March 30, 2025[153] Part II - Other Information This part includes disclosures on legal proceedings, risk factors, unregistered sales of equity securities, and exhibits Item 1. Legal Proceedings For a description of all Material pending legal proceedings, refer to Note 9 - Commitments and Contingencies in the notes to the Condensed Consolidated Financial Statements - Material pending legal proceedings are described in Note 9 - Commitments and Contingencies[155] Item 1A. Risk Factors There have been no material changes to risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended June 30, 2024 - No material changes to risk factors since the Annual Report on Form 10-K for the fiscal year ended June 30, 2024[156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's purchases of its own equity securities, specifically Class A common stock, during the quarter ended March 30, 2025, including both publicly announced repurchase program activities and an employment separation agreement repurchase Issuer Purchases of Equity Securities During the quarter ended March 30, 2025, the company repurchased a total of 3,690,774 Class A shares at an average price of $10.81, including 1,943,340 shares under its publicly announced program and 1,747,434 shares as part of an employment separation agreement | Period | Total Number of Class A Shares Purchased | Average Price Paid per Class A Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Dollar Value of Shares That May Yet Be Purchased Under The Publicly Announced Repurchase Program (in thousands) | | :----- | :--------------------------------------- | :----------------------------------- | :-------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------ | | Dec 30, 2024 to Feb 2, 2025 | 1,733,144 | $10.26 | 1,733,144 | $101,154 | | Feb 3, 2025 to Mar 2, 2025 | 500 | $10.44 | 500 | $101,149 | | Mar 3, 2025 to Mar 30, 2025 | 1,957,130 | $11.29 | 209,696 | $99,215 | | Total | 3,690,774 | $10.81 | 1,943,340 | | - The company repurchased 1,747,434 shares of Class A common stock at $11.54 per share as part of an employment separation agreement, which was not part of the publicly announced repurchase program[159] Item 6. Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-Q, including employment agreements, certifications of principal officers, and XBRL interactive data files - Exhibits include an amendment to an employment agreement, certifications of the Principal Executive Officer and Principal Financial Officer, and XBRL interactive data files[160] Signatures This section contains the required signatures for the Form 10-Q filing - The report was signed by Robert M. Lavan, Chief Financial Officer (Principal Financial Officer), on May 8, 2025[165]