Tear Sheet: CEC Entertainment LLC

CEC generated negative reported FOCF of $30 million in fiscal 2023, mainly due to continued heavy capital expenditures for its ongoing remodeling program—with over 75% of its store base now upgraded. We expect the reported FOCF deficit to narrow but remain around negative $10 million in fiscal 2024, turning positive in fiscal 2025 as capital spending drops substantially to about $70 million from $125 million. We anticipate that the company will use its operating cash to continue funding new traffic-driving initiatives. We also believe CEC's liquidity will remain adequate given its access to an undrawn $50 million revolving credit facility due 2025 and good cash balance. During the fiscal 2023 year (ended Jan. 28, 2024), total revenues grew 1% year-over-year

...June 24, 2024 The company's ability to turn free operating cash flow (FOCF) positive in the coming one to two years is not yet proven out. CEC generated negative reported FOCF of $30 million in fiscal 2023, mainly due to continued heavy capital expenditures for its ongoing remodeling program-- with over 75% of its store base now upgraded. We expect the reported FOCF deficit to narrow but remain around negative $10 million in fiscal 2024, turning positive in fiscal 2025 as capital spending drops substantially to about $70 million from $125 million. We anticipate that the company will use its operating cash to continue funding new traffic-driving initiatives. We also believe CEC's liquidity will remain adequate given its access to an undrawn $50 million revolving credit facility due 2025 and good cash balance. Still, we expect slower top-line growth next year with the sales uplift from store openings largely offset by muted walk-in retail traffic and the full benefit from new upgrades not...

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