- Top bowling center operator Bowlero Corp. (NYSE: BOWL) posts $230.3 million in fiscal Q1 sales
- Easily topped consensus estimates for $223.5 million for quarter ended Oct. 2
- Company added several new locations since the start of Q1, says pipeline is “robust as ever”
- Bowlero also repurchased 468,103 shares at an average price of $11.67 in Q1
- Bowlero shares have risen 53% YTD through Wednesday’s close vs. a 17% drop in the S&P 500
- Shares remain reasonably priced at about 10x fiscal 2023 Ebitda estimates
Leading bowling center operator Bowlero Corp. (NYSE: BOWL) topped analyst expectations in a blowout first fiscal quarter as the company continued to scoop up attractive locations across the country.
Bowlero said it earned $230.3 million of revenue in the quarter ended Oct. 2, a 27.2% year-over-year increase and a 55.0% rise relative to pre-pandemic levels. Revenue also beat a consensus of $223.5 million, according to estimates from Sentieo, an AI-enabled research platform.
Adjusted Ebitda in the first quarter was $65.3 million, 11.0% higher than a year earlier and 162.0% above Bowlero’s pre-pandemic performance.
The impressive news comes in the final weeks of a blockbuster year for Bowlero, whose shares were up an astonishing 53% so far in 2022 through Wednesday’s close. The typical company that went public through a SPAC last year has seen its shares fall more-than 50% and the S&P 500 is down 17% so far in 2022.
“With the strong results from our event and league businesses in the first quarter, which join our walk-in retail business that was already extremely healthy, fiscal year 2023 is off to an outstanding start,” said Brett Parker, Vice Chairman, President and Chief Financial Officer of Bowlero Corp.
Bowlero’s Brett Parker
“Event revenue was up 69%, and our league business rose almost 20% from pre-pandemic periods, two data points we take great pride in. I’m also very pleased with the expansion of our Adjusted EBITDA margin by nearly 1,200 basis points in the quarter from pre-pandemic periods, demonstrating our team’s intense focus on maximizing profitability. Those efforts are enhanced greatly by our proprietary, algorithmically-powered Quantitative Management Solutions tool,” added Mr. Parker.
An important part of the Bowlero story is its balance sheet and strong cash flow, which help it self-fund acquisitions, renovations, and other improvements. That also sets Bowlero apart from many companies that went public via SPAC and are currently scrambling to find growth capital in a tough market.
The Company added 3 new centers during the quarter and another 6 centers since then, bringing the updated center count to 325. Bowlero has also signed definitive purchase agreements for an additional 3 new centers and signed leases for another 5 locations to be newly constructed.
On an investor call Wednesday night, Bowlero said the recent acquisitions and those in its cross hairs have been even better than usual. The company said those centers have the potential to reach $8 million to $9 million in annual revenue, which would make them “extremely profitable.”
Indeed, Bowlero’s rollup strategy continues to be effective. The key is that many bowling centers are owned by mom and pop operators who are often elderly and willing to sell for the right amount. Meanwhile, Bowlero is about 8 times as large as its closest competitor and has a strong balance sheet to fund deals.
Mr. Parker pointed out that Bowlero seeks a hurdle rate of 25% annualized over five years when doing deals. Nearly all of the deals the company has done recently are “well ahead” of the hurdle, he said.
While the company’s bowling centers have different footprints from their legacy operations, Bowlero transforms them to have the same look and feel. The experience includes much more than bowling—high-end bars, cuisine and arcade entertainment. The result is a venue that can be enjoyed by customers who don’t even pick up a bowling ball.
Bowlero also highlighted the success of Moneybowl, an app-based game that lets customers play for prizes. The company pointed out that Moneybowl can encourage customers to bowl an extra game worth about $8 in revenue, virtually all of which converts to profit.
But Mr. Parker emphasized that there could be room to improve the odds for customers – allowing them to win slightly more – and it would still be a worthwhile opportunity. “The point is to increase the number of games played and increase frequency of visits,”he said.
Bowlero has also added staff in anticipation of its seasonally-peak second and third quarters. Those quarters were hurt in the prior year due to concerns about the Omicron variant, which led to cancellations of group gathering across the country.
“It positions us extremely well to maximize revenue over the next two quarters,” Mr. Parker said on the investor call.
Despite Bowlero’s impressive share-price run, the stock is reasonably priced at 10 times fiscal 2023 Ebitda, according to Sentieo estimates.
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