Business Overview and History
Pinstripes Holdings, Inc. (NYSE:PNST) is a leading experiential dining and entertainment concept that combines exceptional Italian-American cuisine with bowling, bocce, and private events. The company has developed a unique model that sets it apart in the restaurant industry, leveraging its large-format venues to offer a diverse range of experiences to its customers.
Pinstripes was founded in 2008 with the opening of its first location in Northbrook, Illinois. The company’s founder, Dale Schwartz, envisioned creating a destination where people could enjoy exceptional dining, bowling, bocce, and private events all under one roof. This innovative concept quickly gained traction, and Pinstripes has since expanded to 17 locations across 10 states and Washington D.C.
The company’s venues are designed to be large-format community hubs, ranging from 26,000 to 38,000 square feet of interior space, with additional outdoor patio areas. Each location can host over 900 guests at a time, with dining capacity for approximately 300 guests, a bar for 75 guests, 11 to 20 bowling lanes, 6 to 12 indoor/outdoor bocce courts, and multiple private event spaces that can accommodate groups of 20 to 1,000 guests.
Pinstripes’ revenue is primarily driven by food and beverage sales, which account for approximately 75% of total revenue, with the remaining 25% coming from bowling, bocce, and private events. The company has developed a disciplined new venue growth strategy, focusing on both new markets as well as existing markets where it can leverage brand awareness and operational efficiencies.
In 2023, Pinstripes completed a business combination with Banyan Acquisition Corporation, becoming a publicly traded company listed on the New York Stock Exchange. This transaction provided Pinstripes with additional capital to support its growth initiatives. Prior to the business combination, Pinstripes had raised funding through various debt and equity financing rounds to support the expansion of its operations.
Throughout its history, Pinstripes has faced various challenges common to a growing restaurant and entertainment business, such as managing costs, maintaining consistent performance across locations, and navigating macroeconomic conditions that impact consumer spending. The company has worked to address these challenges through operational improvements, cost-savings initiatives, and a disciplined approach to new unit development.
Navigating Macroeconomic Challenges
Despite Pinstripes’ strong operational performance and unique market positioning, the company has faced challenges in recent quarters due to the macroeconomic environment. In the first quarter of fiscal 2025, the company reported a 2.4% decrease in same-store sales, as it grappled with softer consumer demand and inflationary pressures.
To address these headwinds, Pinstripes has undertaken a comprehensive review of its cost structure, identifying $10 million in annualized savings at the venue level. These savings have been achieved through strategic labor adjustments, more favorable credit card processing agreements, and enhanced vendor negotiations. Additionally, the company has identified $4 million in annualized savings at the corporate level, primarily through reductions in marketing and administrative expenses.
While the implementation of these cost-saving measures has been underway, the company’s near-term profitability has been impacted by the sales deleverage and the ramp-up of its four new locations opened in fiscal 2024. However, Pinstripes management remains confident that the combination of these cost-efficiency initiatives and general improvements in its business will enable the company to achieve adjusted EBITDA profitability in the third quarter of fiscal 2025 on a sustainable basis going forward.
Expansion and Growth
Despite the current macroeconomic challenges, Pinstripes remains focused on its long-term growth strategy. The company’s development pipeline includes two new venues scheduled to open in Walnut Creek, California, and Coral Gables, Florida, in the second or third quarter of fiscal 2025. These new locations are part of Pinstripes’ broader plan to continue expanding its footprint, with an additional five sites currently under development and a pipeline of 30 potential future sites.
The company’s new venue openings are categorized into two distinct classifications: established real estate developments, where Pinstripes is typically taking over the location of a previous tenant, and new developments, where the company is often among the first to open in an area. While the maturation curve on the new developments is typically longer, Pinstripes has seen encouraging performance from its recent openings, with the four venues opened in fiscal 2024 achieving substantial improvement in venue-level EBITDA from the fourth quarter to the first quarter of fiscal 2025.
In fiscal 2024, the company opened four new locations, two of which (Topanga and Aventura) were classified as new developments, while the other two (Orlando and Garden State Plaza) were established developments. The company expects the new development locations to reach approximately $7 million in average unit volumes (AUVs), while the established development locations are expected to reach approximately $10 million AUVs.
Risks and Challenges
As Pinstripes navigates the current macroeconomic environment, the company faces several risks and challenges that investors should be aware of. These include:
Softening consumer demand: The recent decline in same-store sales highlights the potential for a broader slowdown in consumer spending, which could adversely impact Pinstripes’ revenue and profitability.
Execution of new venue openings: The company’s growth strategy relies on successfully opening and integrating new locations. Any delays or challenges in this process could affect Pinstripes’ financial performance.
Competitive landscape: Pinstripes operates in a competitive industry, and the company’s unique positioning may face increased competition from both traditional restaurants and other experiential dining concepts.
Financials
Pinstripes operates in one reporting segment, offering its experiential dining and entertainment concept across its locations. The company’s primary revenue streams come from food and beverage sales, as well as recreation revenue from bowling and bocce activities.
For the fiscal year 2024, Pinstripes reported: – Total revenue of $118.72 million – Net loss of $6.79 million – Operating cash flow of -$32.68 million – Free cash flow of -$54.81 million
In the most recent quarter (Q2 FY 2025), the company’s financial performance was as follows: – Total revenue of $26.48 million, up 7.5% year-over-year – Net loss of $9.31 million – Operating cash flow of -$5.80 million – Free cash flow of -$7.93 million
The revenue increase in Q2 FY 2025 was primarily driven by the four new locations opened in fiscal 2024, which was partially offset by a 2.4% decrease in same-store sales. The company experienced higher costs related to the ramp-up of these new locations, as well as some food cost inflation.
Breaking down the Q2 FY 2025 revenue: – Food and beverage revenues were $21.11 million, up 8.6% compared to the same period in the prior year – Recreation revenues were $5.37 million, an increase of 3.6% year-over-year
Store-level expenses, including cost of food and beverage, store labor and benefits, and store occupancy costs, increased in Q2 FY 2025 compared to the prior year period, primarily due to the impact of the four new locations that were fully open for the entire quarter. As a percentage of total revenue, store-level costs were relatively flat year-over-year, as the company was able to offset some increases through efficiencies and gradual menu price adjustments.
General and administrative expenses increased 34.6% in Q2 FY 2025, reaching $5.08 million. This increase was largely driven by public company readiness initiatives, including additional headcount, consulting fees, and increased marketing, as well as higher stock-based compensation expense.
Liquidity
As of April 28, 2024, Pinstripes’ liquidity position was as follows: – Cash: $13.17 million – Debt-to-Equity Ratio: -2.21 – Current Ratio: 0.25 – Quick Ratio: 0.23
The company has several credit facilities available: – $35.56 million term loan facility with Silverview Credit Partners – $15.88 million equipment loan facility with Granite Creek Capital Partners – $61.37 million senior secured notes with Oaktree Fund Administration
These credit facilities provide Pinstripes with additional financial flexibility to support its operations and growth initiatives.
Guidance and Outlook
For fiscal year 2025, Pinstripes has provided the following guidance: – Same-store sales growth is expected to be in the range of negative low single digits to positive low single digits. – The Topanga location will enter the comp base in Q3, and the Aventura location will enter in Q4. – Two new venues are expected to open in Walnut Creek, California and Coral Gables, Florida in late Q2 or Q3 of fiscal 2025. – Mature store venue-level EBITDA margin is expected to be 17% to 20%. – General and administrative expenses are expected to be $15 million, including $2.5 million in non-cash stock-based compensation. – Pre-opening expenses are expected to be approximately $3 million. – Adjusted EBITDA is expected to be $8 million to $12 million.
The company noted that approximately 50% of the benefits from their recent cost-saving initiatives will be reflected in fiscal 2025, with 100% being realized in fiscal 2026.
Conclusion
Pinstripes Holdings, Inc. (NYSE:PNST) has built a differentiated business model in the restaurant industry, leveraging its large-format venues to offer a diverse range of dining, entertainment, and event experiences to its customers. While the company has faced macroeconomic headwinds in recent quarters, Pinstripes has taken proactive steps to streamline its cost structure and position itself for long-term growth.
Despite the near-term challenges, Pinstripes’ management remains confident in the company’s ability to navigate the current environment and continue expanding its footprint. The company’s focus on high-income, highly educated markets and its unique blend of dining, recreation, and event offerings provide a strong foundation for future growth. As Pinstripes executes on its growth strategy and benefits from the cost-saving initiatives, investors will be closely watching for signs of a return to sustainable profitability and long-term shareholder value creation.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.