8-K: Bowlero Corp. Announces Second Quarter Fiscal Year 2024 Results and Initiates Quarterly Dividend

Bowlero Corp. reported an 11.8% increase in revenue and initiated a quarterly dividend of $0.055 per share.

Summary

• Bowlero Corp. announced its financial results for the second quarter of fiscal year 2024, which ended on December 31, 2023.
• The company's revenue increased by 11.8% to $305.7 million compared to the prior year and 65.4% compared to the second quarter of fiscal year 2020.
• Excluding service fee revenue, revenue increased by 13.4% year-over-year to $304.0 million and 64.5% compared to 2QFY20.
• Total bowling center revenue rose by 14.5% compared to the prior year and 69.5% compared to 2QFY20.
• Same-store revenue increased by 0.2% year-over-year and 27.8% compared to 2QFY20.
• The company reported a net loss of $63.5 million, which includes a $64.1 million expense from non-cash earnouts, compared to a prior year income of $1.4 million.
• Adjusted EBITDA was $103.1 million, up from $97.0 million in the prior year and $52.9 million in 2QFY20.
• Bowlero added 3 new locations during the quarter, bringing the year-to-date total to 21.
• The company repurchased approximately 7.5 million shares of Class A common stock for approximately $80 million during the quarter.
• A quarterly dividend of $0.055 per share was declared, payable on March 8, 2024, to shareholders of record on February 23, 2024.
• The company reiterated its fiscal year 2024 revenue guidance of $1.14 billion to $1.19 billion and adjusted EBITDA of $365 million to $405 million.
• The company expects third quarter revenue excluding service fee revenue to be between $335 million and $350 million and adjusted EBITDA of $128 million to $143 million.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive due to strong revenue growth and the initiation of a dividend, but the net loss and cautious outlook for the third quarter temper the overall positive tone.

Positives

• Revenue growth was strong, with an 11.8% increase year-over-year.
• Adjusted EBITDA increased to $103.1 million, indicating improved profitability.
• The initiation of a quarterly dividend is a positive sign for shareholders.
• The share repurchase program demonstrates confidence in the company's value.
• The acquisition of Lucky Strike is performing well and contributing to growth.
• The company has a strong liquidity position with $190 million in cash and $412 million in total liquidity.
• The company is expanding its location count with 21 new centers year-to-date.

Negatives

• The company reported a net loss of $63.5 million for the quarter.
• The net loss includes a $64.1 million expense from non-cash earnouts.
• Same-store revenue growth was only 0.2% year-over-year.

Risks

• The company is taking a cautious approach to the third quarter due to weather headwinds in January.
• The company's performance is subject to changes in consumer preferences and buying patterns.
• The company faces risks associated with long-term non-cancellable leases.
• The company has substantial indebtedness and limitations on future sources of liquidity.
• The company is exposed to risks related to cybersecurity breaches and public health emergencies.

Future Outlook

The company expects double-digit revenue growth in fiscal year 2024, with revenue between $1.14 billion and $1.19 billion and adjusted EBITDA between $365 million and $405 million. The company expects third quarter revenue excluding service fee revenue to be between $335 million and $350 million and adjusted EBITDA of $128 million to $143 million. The company is also increasing its investment in acquisitions, new builds, and conversions.

Management Comments

• Thomas Shannon, Founder and CEO, stated that the second quarter saw double-digit total growth, amplifying the company's ability to grow despite difficult comparatives.
• Thomas Shannon highlighted the acquisition of Lucky Strike as a major milestone, focusing on higher revenue properties.
• Thomas Shannon noted that the event business was up over thirty percent and continues to drive the strength of the overall business.
• Bobby Lavan, CFO, mentioned the $409 million net proceeds from the sale-leaseback transaction with Vici, which was used to pay down debt and fund acquisitions.
• Bobby Lavan stated that the company ended the quarter with $190 million of cash and $412 million of total liquidity.

Industry Context

This announcement reflects the ongoing recovery and growth in the location-based entertainment sector, with Bowlero leveraging acquisitions and new builds to expand its footprint. The company's focus on higher revenue properties and event sales aligns with industry trends towards experiential entertainment.

Comparison to Industry Standards

• Bowlero's revenue growth of 11.8% is strong compared to other entertainment companies, but the net loss is a concern.
• The adjusted EBITDA margin of 33.7% is solid, indicating good operational efficiency.
• The company's expansion strategy through acquisitions and new builds is similar to other players in the industry, such as Dave & Buster's, but Bowlero's focus on bowling and related entertainment is a differentiator.
• The share repurchase program is a common practice among public companies to return value to shareholders, but the scale of Bowlero's repurchases is significant.
• The initiation of a quarterly dividend is a positive step, aligning Bowlero with more mature companies in the sector.

Stakeholder Impact

• Shareholders will benefit from the initiation of a quarterly dividend and the share repurchase program.
• Employees may benefit from the company's growth and expansion.
• Customers will have access to more locations and entertainment options.
• Suppliers may see increased business due to the company's growth.
• Creditors may be impacted by the company's debt levels and financial performance.

Next Steps

• The company will continue to focus on acquisitions and new builds to expand its location count.
• The company will continue to execute its share repurchase program.
• The company will pay its first quarterly dividend on March 8, 2024.
• The company will host a webcast on February 5, 2024, to review its results.

Key Dates

Keywords

Bowlero, Bowling, Entertainment, Dividend, EBITDA, Revenue, Acquisition, Share Repurchase, Financial Results, Lucky Strike