Pinstripes Holdings Inc. (NYSE:PNST) Q3 2023 Earnings Convention Name February 21, 2024 5:00 PM ET

Firm Members

Dale Schwartz – President & Chief Govt Officer

Tony Querciagrossa – Chief Monetary Officer

Convention Name Members

Peter Sala – BTIG

Sharon Zackfia – William Blair

Operator

Good day, girls and gents, and thanks for standing by. Welcome to the Pinstripes Holdings Inc. Third Quarter Fiscal 2024 Earnings Convention Name. Right now, all contributors have been positioned in a listen-only mode, and the strains might be open to your questions following the presentation. Please observe, that this convention is being recorded in the present day, February twenty first, 2024.

Throughout administration’s presentation and in response to your questions, they are going to be making forward-looking statements in regards to the firm’s enterprise outlook and expectations, together with in respect of steerage for the fourth quarter of fiscal 2024. These forward-looking statements and all different statements that aren’t historic info and replicate administration’s beliefs and predictions as of in the present day and due to this fact are topics to dangers and uncertainties as described within the firm’s quarterly report on Kind 10-Q for the third quarter fiscal 2024 and subsequent SEC filings.

Administration can even talk about non-GAAP monetary measures as a part of in the present day’s convention name. These non-GAAP measures aren’t ready in accordance with typically accepted accounting ideas, however are supposed for instance different measures of the corporate’s working efficiency which may be helpful. Reconciliation of the non-GAAP monetary measures to probably the most instantly comparable GAAP measures could be discovered within the earnings launch. The corporate has posted its third quarter fiscal 2024 earnings launch and earnings presentation on its web site at www.pinstripes.com. beneath the Investor Relations part.

And now, I would like to show the convention over to Pinstripes’s Founder, President and CEO, Dale Schwartz.

Dale Schwartz

Thanks. Good afternoon, everybody, and welcome to our inaugural public firm quarterly earnings name. I wish to begin by thanking our Pinstripes’s crew for his or her ardour and dedication, and our friends who for 17 years have joined us for numerous celebrations and magical moments. I’d additionally wish to thank Banyan and Oaktree for his or her robust partnership in introducing Pinstripes to the general public market. It has been fairly a journey that began over 50 years in the past after I bowled in Cleveland as a toddler, and as they are saying, it takes 50 years to make an in a single day success.

I coined the identify Pinstripes in 1989 and 28 years later in 2007 the dream turned a actuality after we opened our flagship Pinstripes location in Northbrook Illinois. Quick ahead to in the present day we now have 16 stunning Pinstripes venues with further new venue openings over the subsequent few months, together with areas in Orlando, Walnut Creek, California, and Coral Gables, Florida.

For these of you not acquainted or have by no means been to Pinstripe earlier than, let me provide you with a quick overview. Our imaginative and prescient is an easy one, to create a novel eating and leisure vacation spot the place friends can join in an old school approach. By combining aesthetically stunning venues, scrumptious Italian-American delicacies, best-in-class service, and the timeless video games of bowling and bocce, together with personal occasions based mostly for memorable events, our venues foster genuine human connections throughout life’s on a regular basis and particular occasions, creating broad market enchantment.

This has resulted in our capability to generate substantial gross sales, whereas sustaining sturdy venue-level economics. Pinstripes can also be capitalizing on the dislocation of the retail trade, filling the void as a site visitors creator. Traditionally, when contemplating malls and different giant retail facilities, the movie show and anchored condominium shops have been the important thing site visitors drivers. Over time, streaming and the rise of e-commerce have created important dislocations inside the retail trade. By offering top quality and connection-oriented eating, leisure, and occasion areas, Pinstripes is ready to tackle the important thing components that builders have to drive site visitors and set up or transition their properties as life-style facilities.

With that, let me undergo the differentiating components that set Pinstripes other than different ideas out there. Whereas we’re comprised of bistro, bowling and bocce, our made-from-scratch eating is what really differentiates our model. Meals and beverage comprise roughly 75% of our whole income, with bowling, bocce comprising nearly the remainder of the stability. Equally essential is our personal occasion area, the place every of our location hosts over 1,000 occasions per 12 months.

Non-public occasions symbolize almost 50% of our gross sales, each social and company, and are an awfully essential and worthwhile aspect of our enterprise. It additionally creates a flywheel impact of elevated model consciousness, which additional drives repeat clients and future open eating and play visits.

Turning to unit economics, the common unit quantity for Pinstripe’s venues is in extra of $8 million, with choose areas in extra of $10 million. Our venues vary in measurement from 25,000 to 38,000 sq. toes of inside area, with further out of doors patio area producing venue stage EBITDA margins averaging over 17%. As we construct new venues going ahead, we’ll proceed to focus on 12 months two income of $9 million plus venue stage EBITDA margins of 17%. Mixed with construct out prices of roughly $3 million, internet of tenant allowances, we’re 40% plus money on money returns, which equates to a payback interval of roughly two years.

Lastly, let’s discuss our growth plan. As I discussed earlier, we at present have 16 venues in 11 states with three further openings deliberate for the subsequent couple of months in California and Florida. Roughly 85% of our present areas and all deliberate new areas are suburban, which is right with the post-COVID hybrid workplace traits. That mentioned, the broad enchantment of our model has confirmed itself throughout each suburban and concrete markets, showcasing the ability of what Pinstripes has to supply and proving our nationwide portability.

With respect to web site choice course of, we contemplate residential and business demographics, co-tenancy with prime manufacturers, iconic settings, and the provision of outside patios, ideally on two ranges, with our venues spanning throughout signature mall properties, experiential life-style facilities, and prime city areas. When it comes to gentle area, we consider we now have the potential for at the least 150 areas domestically, and internationally, we consider in equal or larger alternative as we do domestically, pushed by international shoppers’ craving for interpersonal connections, very like shoppers within the U.S.

In abstract, we’re at an thrilling inflection level in our 17-year journey. Our model is uniquely positioned for the present client setting, and we now have a strong basis of over 2,000 passionate crew members which can be excited to capitalize on the white area alternative forward of us.

With that, let me now flip the decision over to our CFO Tony to debate our third quarter ends in larger element.

Tony Querciagrossa

Thanks, Dale, and good afternoon, everybody. Let me begin by providing you with a quick overview of the place we’re as an organization 12 months so far, offer you our third quarter outcomes, and lastly, our expectation for the fourth quarter of fiscal 2024. [Dackledale] (ph) Sentiment, fiscal 2024 has been an thrilling 12 months for Pinstripes as we embark on being a public firm. In reference to the closing of our SPAC merger with Banyan Acquisition Company, we raised greater than $70 million in gross proceeds, which is able to assist gasoline our development as we proceed to scale and open further Pinstripes venues.

For the fiscal 2024 third quarter, whole income elevated 14.1% to $32.2 million in comparison with $28.2 million in the identical quarter final 12 months, together with a 14.2% enhance in meals and beverage revenues and a 13.9% enhance in recreation revenues. This enhance was pushed by two new unit openings and a 6.9% enhance in same-store gross sales.

Turning to bills, price of meals and beverage as a share of whole income decreased 30 foundation factors to fifteen.6%, pushed by meals price optimization initiatives within the quarter. Labor and advantages as a share of whole income decreased 10 foundation factors to 33.7%. Occupancy prices as a share of whole income elevated 10 foundation factors to fifteen.4%. Different working bills as a share of whole income elevated 20 foundation factors to 16%. The rise is primarily as a consequence of elevated restore and upkeep actions, in addition to different store-level initiatives that kicked off within the quarter.

Venue-level EBITDA as a share of whole income decreased 104 foundation factors to 19.4%, pushed primarily by the partial interval opening of our Aventura location. Please check with our earnings launch for a reconciliation of non-GAAP measures. Basic and administrative bills elevated to $5.3 million, together with $1.2 million of M&A and public firm readiness and associated expense, in comparison with $2.5 million in the identical interval final 12 months.

Turning to liquidity, as of January 7, 2024, we had $39.6 million in money and money equivalents and $102 million of excellent debt. Turning to our outlook, let me start with a reminder that our fiscal 12 months ends April twenty eighth, 2024 with a 16 week fourth quarter. With that in thoughts, our steerage for the fiscal 2024 fourth quarter is as follows; identical retailer gross sales development of low single digits. To place this in context, identical retailer gross sales development in This autumn fiscal 2023 versus This autumn fiscal 2022 was 40.7% and 25.7% versus pre-COVID ranges. Venue stage EBITDA margin of 13% to 16%. Basic and administrative bills of $4 to $4.5 million, together with $400,000 of non-cash stock-based compensation and tax, and adjusted EBITDA of unfavourable $0.75 million to constructive $0.3 million.

We might wish to thanks once more to your curiosity in Pinstripes. Dale and I are actually glad to reply any questions that you could have. Operator, please open the road for questions.

Query-and-Reply Session

Operator

Thanks. Girls and gents, presently, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first query comes from the road of Peter Sala with BTIG. Please proceed along with your query.

Peter Sala

Nice, thanks and congrats in your first earnings name. I did wish to ask on — simply on the identical retailer gross sales within the quarter, the 6.9%. Might you simply present a bit bit extra coloration on possibly site visitors versus verify in the course of the quarter?

Tony Querciagrossa

Hey, Peter. That is Tony. So when you have a look at simply worth, it is about 2.5% of that 6.9% and the remaining quantity is quantity, which is how we have sort of damaged it out to date.

Peter Sala

Nice. Now, that is very useful. Simply on the steerage and the go-forward, I do know you guys talked about low single digit. I do know we’re a number of weeks into the quarter right here. Simply curious when you guys may present any replace on what you are seeing inter quarter, is it in step with the identical retailer gross sales steerage you guys have given for the quarter, simply making an attempt to know if the traits are matched sort of the steerage to date.

Tony Querciagrossa

Yeah, so a pair issues. First, the steerage kind of is knowledgeable a bit by, we noticed the identical climate associated kind of impacts in January that virtually everyone else has seen. In order that knowledgeable {that a} bit. After which I received to level out the identical first gross sales stack. So when you have a look at Q3, the place we have been at 6.9%, over pre-COVID ranges, we have been 19.4%. And when you have a look at This autumn, that very same sort of look versus pre-COVID was 25.7%. So it is a bit of a step up. So for us to comp up at that very same 6.9%, for instance, This autumn is a bit little bit of a troublesome spot.

Peter Sala

Okay, That is useful. Okay. After which simply on the steerage, the venue stage margin for the fourth quarter right here, 13 to 16, I suppose first that is considerably above what we have been anticipating and it is above, I feel, final 12 months’s ranges. Are you able to give us a bit little bit of coloration on what’s driving that year-over-year enhance after which additionally, it’s a fairly wide selection, 13 to 16. What would lead us at this level with about two months to go right here within the quarter to be both on the low finish or the excessive finish of that vary?

Tony Querciagrossa

Good query, Peter. So we see important alternatives each within the labor line in addition to different OpEx. In the event you have a look at Q3, different OpEx is definitely an space the place we may have achieved a bit higher. And we have recognized these areas. And what provides the vary is de facto, can we get it in inside the quarter? A few of it we have already taken motion on, however there is a couple issues that would slip within the subsequent quarter, and in order that’s why we put the wide selection round it.

Peter Sala

Nice. Understood. Okay. I am going to move it alongside. Thanks.

Tony Querciagrossa

Thanks, Peter.

Operator

Our subsequent query comes from the road of Sharon Zakhia with William Blair. Please proceed along with your query.

Sharon Zackfia

Hello. Good afternoon. I’ve a few — Hello. A few questions. On the event pipeline, the place do you stand as you look out past this fiscal 12 months into, I suppose I am going to name it fiscal 2025. The time to assemble and sort of the standard of websites that you just see in the present day versus possibly a number of years in the past as you alluded to sort of changing into a site visitors driver clearly being higher capitalized now I am simply curious sort of on that that high quality of the websites that you just’re seeing in the present day versus traditionally.

Dale Schwartz

Positive Sharon, it is Dale. So the standard of websites simply retains getting higher on the margin. A number of the identical developer companions that we’re already working with, we’re in lively discussions with some very thrilling areas all around the nation, that a few of which we have been in discussions for six, 12 months prior, and a very good variety of that are taking place in actual time. So all the identical traits of a number of the giant retailers in bins downsizing and/or closing areas and the continued Amazon impact is as actual because it’s ever been. And admittedly, our go public has made us an much more engaging tenant for lots of those landlords.

Sharon Zackfia

And I suppose, Dale, on the variety of items that you are looking at doubtlessly opening at fiscal 2025?

Dale Schwartz

So, we’re nonetheless comfy with that six to eight areas, name it each fiscal or calendar 12 months, each now and going ahead. And pipeline-wise to try this, I and we’re in lively in varied discussions with over 30, 40 totally different areas at present all around the nation, simply within the curiosity of not simply filling the pipeline, however qualitatively ensuring that we discover and proceed with some actually thrilling areas.

Sharon Zackfia

And I needed to ask a query on personal events versus walk-in. I’d assume, I imply, you might have a giant personal get together enterprise yearly. I’d assume it is a bit bit larger even than the January quarter. I is perhaps improper, however I used to be considering with vacation events that that could possibly be even larger. Did you see any divergence in sort of the way in which that personal get together enterprise trended versus the buyer sort of walk-in enterprise?

Dale Schwartz

Yeah, so Q3 is our largest occasion kind of combine quarter, however we noticed each development throughout occasions and open play. So it wasn’t like we noticed like a big slowdown or a few of these stuff you’re listening to in regards to the client pulling again a bit. We noticed development throughout each.

Tony Querciagrossa

The opposite piece that I would add Sharon. The company part of our, name it, personal occasion enterprise, can run significantly larger than 50% in the course of the busy December interval. The vacation events are terribly busy. We noticed that once more this 12 months. So we had report vacation gross sales at nearly each location and possibly the one distinction this 12 months was the decision-making of plenty of corporations was just a bit longer. So corporations that possibly prior to now would commit in February, March, or April for a future six, eight months later December get together. We had a bit extra of the equal of pop-ups with corporations simply all determining a number of the tradition and learn how to deal with versatile workplace.

Sharon Zackfia

Okay. I suppose final query for me, it is actually useful to have a look at that 13 to 16 within the April quarter, and you’ve got had plenty of enchancment in margin year-over-year, actually all year long. What are the pushes and pulls as you assume past fiscal 2024 on margins on the unit stage?

Tony Querciagrossa

I imply, clearly Persevering with to go in direction of that mid-single digit identical retailer gross sales development stage that we wish to be at to seize plenty of working leverage. That may most likely be the important thing contributor. We nonetheless assume we have a number of quarters, effectively into fiscal 2025, of alternative and numerous totally different price strains on the venue stage, labor being a giant one, but additionally a pair different areas as effectively.

Sharon Zackfia

Nice. Thanks.

Dale Schwartz

[indiscernible]

Sharon Zackfia

Sorry, Dale. I did not imply to chop you off.

Dale Schwartz

No, I used to be solely simply going so as to add the continued enhance in our bowling and bocce gross sales as a share of whole gross sales has continued to extend. And it is very, as you understand, 100% gross margin. In order that performs proper into that larger retailer contribution.

Sharon Zackfia

Nice, thanks.

Operator

[Operator Instructions] There are not any additional questions within the queue. I would like handy the decision again to Dale Schwartz for closing remarks.

Dale Schwartz

I simply wish to thank everybody for becoming a member of us this afternoon. We’re trying ahead the subsequent opening in Orlando, Walnut Creek, and Coral Gables the subsequent a number of months and we welcome you becoming a member of us at any location of ours to benefit from the magic of pinstripes. Thanks.

Operator

Girls and gents this does embody in the present day’s teleconference. Thanks to your participation. You might disconnect your strains presently, and have an exquisite day.