8-K: Pinstripes Reports Mixed Q1 Results with Revenue Growth Offset by Increased Losses

Pinstripes saw a 18.9% increase in revenue in the first quarter of fiscal 2025, but also experienced a significant increase in net losses compared to the same period last year.

Summary

• Pinstripes reported a 18.9% increase in total revenue, reaching $30.6 million in the first quarter of fiscal year 2025, compared to $25.7 million in the same quarter of the previous year.
• The revenue growth was primarily driven by the opening of four new venues, which helped offset a 2.4% decrease in same-store sales.
• Food and beverage revenue increased by 16.1% to $23.8 million, while recreation revenue saw a larger increase of 29.7% to $6.8 million.
• Despite the revenue growth, the company's operating loss widened to $7.6 million, compared to $0.9 million in the prior year, and net loss increased to $10.0 million from $3.0 million.
• Venue-Level EBITDA decreased to $2.2 million, with a margin of 7.2%, down from 15.0% in the prior year, and Adjusted EBITDA was $(3.5) million compared to $(1.0) million in the prior year.
• The company has secured an additional $5 million in funding from existing lenders and upsized future loan potential by $10 million.
• Pinstripes is targeting a negative low single digit to positive low single digit same store sales growth for fiscal 2025, with two new venue openings planned.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the significant increase in losses and decreased profitability, despite revenue growth. The company is facing challenges, but management is taking steps to address them.

Positives

• Total revenue increased by 18.9% year-over-year, driven by new venue development.
• Recreation revenues increased by 29.7%, indicating strong performance in this segment.
• The company has identified and begun implementing $14 million in annualized cost savings.
• Four new venues opened in fiscal 2024 are showing improvements in both top-line sales and profitability as they mature.
• Pinstripes secured an additional $5 million in funding and upsized future loan potential by $10 million.

Negatives

• Same store sales decreased by 2.4% compared to the prior year period.
• Operating loss significantly increased to $7.6 million from $0.9 million in the prior year.
• Net loss widened to $10.0 million from $3.0 million in the prior year.
• Venue-Level EBITDA decreased by $1.7 million from the prior year period.
• Venue-Level EBITDA margin decreased by 786 basis points from the prior year period.
• Adjusted EBITDA was $(3.5) million, compared to $(1.0) million in the prior year period.
• General and administrative expenses increased to $5.5 million from $3.5 million in the prior year.

Risks

• The company is facing a challenging macro environment which is impacting financial performance.
• Consumer softness is contributing to decreased same-store sales.
• The company is experiencing increased costs related to being a public company.
• There are risks associated with the company's growth strategy and ability to open and integrate new locations on a timely basis.
• The company has substantial indebtedness and is capital intensive.

Future Outlook

Pinstripes expects negative low single digit to positive low single digit same store sales growth for fiscal 2025, with two new venue openings planned. They also anticipate approximately $15 million in general and administrative expenses, $3 million in pre-opening expenses, and $8-12 million in adjusted EBITDA.

Management Comments

• Dale Schwartz, Founder and CEO, stated that the first quarter results did not meet expectations due to a challenging macro environment.
• Schwartz mentioned that the team is focused on executing top-line and profitability initiatives.
• Schwartz noted that the company has made significant progress on rationalizing its cost structure, removing $10 million in annualized venue-level costs and identifying an additional $4 million in annualized savings in SG&A.
• Schwartz believes that the company's high-quality, connection-oriented venues uniquely position them to succeed and drive long-term shareholder value.

Industry Context

The results reflect a challenging period for the experiential dining and entertainment industry, with macroeconomic factors and consumer softness impacting performance. Pinstripes is focusing on cost-cutting measures and new venue development to improve profitability, which is a common strategy in the current environment.

Comparison to Industry Standards

• Pinstripes' same-store sales decrease of 2.4% contrasts with some competitors in the restaurant and entertainment sector that have reported positive same-store sales growth, indicating potential underperformance relative to peers.
• The significant increase in operating and net losses, despite revenue growth, suggests that Pinstripes is facing challenges in managing costs and achieving profitability, which is a concern compared to industry benchmarks.
• The company's Venue-Level EBITDA margin of 7.2% is below the typical range for mature restaurant and entertainment venues, which often aim for margins in the mid-teens or higher.
• While the company is expanding with new venues, the financial results indicate that the new locations are not yet contributing to overall profitability, which is a common challenge for rapidly expanding businesses.

Stakeholder Impact

• Shareholders may be concerned about the increased losses and decreased profitability.
• Employees may be impacted by cost-cutting measures.
• Customers may experience changes as the company adjusts its operations.
• Suppliers may be affected by changes in the company's financial performance.

Next Steps

• The company plans to open two new venues in fiscal 2025.
• Pinstripes will continue to implement cost-saving measures to improve profitability.
• The company will focus on improving same-store sales performance.

Key Dates

Keywords

Pinstripes, revenue, EBITDA, net loss, same store sales, venue development, financial results, funding, cost savings, restaurant, entertainment