Bowlero Corp. (BOWL) on Q2 2024 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the Bowlero Second Quarter 2024 Earnings Conference Call. [Operator Instructions] After the speakers’ remarks, there will be a question-and-answer-session. [Operator Instructions] Thank you. Bobby Lavan, Bowlero's Chief Financial Officer, you may begin your conference. Bobby Lavan: Good morning to everyone on the call. This is Bobby Lavan, Bowlero's Chief Financial Officer. Welcome to our conference call to discuss Bowlero's second quarter 2024 earnings. This morning, we issued a press release announcing our financial results for the period ended December 31, 2023. A copy of the press release is available in the Investor Relations section of our website. Joining me on the call today are Thomas Shannon, our Founder and Chief Executive; and Lev Ekster, our President. I would like to remind you that during today's conference call, we may make certain forward-looking statements about the company's performance. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place undue reliance on them. Forward-looking statements are also subject to inherent risks and uncertainties that could cause actual results to differ materially from those expressed. For additional information concerning factors that could cause actual results to differ from those discussed in our forward-looking statements, you should refer to cautionary statements in our press release as well as the risk factors contained in the company's filings with the SEC. Bowlero Corporation undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after today's call. Also, during today's call, the company may discuss certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measures most directly comparable to each non-GAAP financial measure discussed and the reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure can be found on the company's website. I will now turn the call over to Tom. Thomas Shannon: Good morning, and thank you for joining us today. I am Thomas Shannon, Founder and CEO of Bowlero Corporation. Bowlero had a strong second quarter with total revenue growth of 13.4%. We continue to invest in our centers, our people and our goal to become the premier experiential recreation company. Our same-store sales comp turned positive as consumers picked Bowlero for celebrations in the December holiday period. Our revenues are up 65% from pre-pandemic levels as we grow market share through acquisitions and investing in our premium product. Calendar year 2023 was a transformative year. We started the year with 327 centers and ended with 350. We accelerated growth through acquisitions, bringing in the Lucky Strike Premier centers into the portfolio, and we built two new builds that are outperforming the expectations and have more than a dozen in the pipeline. We put $350 million of capital to work that will generate industry-leading 25%-plus returns on capital. The new builds and Lucky Strike combined is pushing our average revenue per unit revenue up. In second quarter 2024, our average revenue per unit was up 6% year-over-year combined with unit count increasing by 8%. We will continue to focus on this formula to drive double-digit revenue growth over the long term. Our best-in-class events platform continues to outperform. Event revenue increased by 30% year-over-year. Strong corporate demand for employees to come together in a work-from-home environment, combined with companies seeking premium offerings at a reasonable price during a blockbuster December. Leagues was up 14% year-over-year as we expand social league opportunities combined with brand recognition from our PBA ownership. These are offsetting slower retail business traffic as subprime customer spend slows and we lapped record-breaking prior year comps. Last summer, we spent considerable effort tinkering with our business model. We found good footing with a balance between promotional activity during the midweek and enhanced pricing and offerings on the full-priced weekends. Our model was fully reset in mid-October, and that allowed us to identify pricing opportunities across certain centers. In December, we took an average price increase of 2% across retail in the centers, which we applied to events in January. We continue to see pricing opportunities enhancements across our product line. This year, we also invested in our C-suite. Last month, we announced the promotion of Lev Ekster to President. Lev brings 10-plus years of experience at Bowlero, leading dramatic expansion of leagues and amusements. We are investing in our people by adding to the C-suite that will complement our 12,000-plus workforce in providing premium experiences to the customer, which drive revisits and long-term growth. With that, let me hand it over to Lev for a business review. Lev? Lev Ekster: Thank you, Tom. I'm thrilled to be here today. The white space to grow revenue about more than 12 million square feet of entertainment space is tremendously exciting. When I joined Bowlero, our amusements business was an afterthought. Today, it accounts for $100 million of revenue and growing. We're able to maximize amusement revenue by optimizing our pricing, game selection and floor plans. Opportunities to drive the customer into the arcade while they're on a wait for a lane or get them to extend their visit after bowling by playing a few games is why we performed so well with amusements. We plan to implement the same successful processes to our bowling and food and beverage revenue. Selling extra game of bowling has 100% incremental profits to us. Driving traffic in the slower summer months through promotion or all you can bowl passes, help amusements and food and beverage attachment. Our database and loyalty program has millions of customers. Pushing content on the Professional Bowlers Association telecast with the 2024 season featuring the most broadcast hours ever in a single season on Big Fox increases the awareness of our centers. Lucky Strike is a well-recognized iconic brand. We're really leaning into the brand with the opening of Lucky Strike Moorpark in California and the upcoming opening of Lucky Strike Miami. The demand from customers for these properties as well as the inbound interest for job opportunities underscores the promise of the brand as an important part of the entertainment culture we are building. I look forward to meeting you in the coming months and showing the results. And now Bobby Lavan. Bobby Lavan: Thanks, Lev. In the second quarter of 2024, we generated total revenue ex service fee of $304 million and adjusted EBITDA of $103.1 million compared to the last year of $268.1 million and an adjusted EBITDA of $97.0 million. As a reminder, service fee revenue is a pass-through, a noncontributor earnings and is being phased out. Our total growth was plus 13.4% year-over-year, and same-store comp was positive 0.2%. Positive 0.2% same-store comp is in line with our expectations. Our communications with investors we down the middle as we continue to execute on difficult comparatives and outperform our peer set. Adjusted EBITDA was $103.1 million compared to $97 million in the prior year. We continue to invest in our people with our same-store comp payroll up $6.3 million year-over-year. Lucky Strike outperformed our expectations for the $6 million-plus contribution to EBITDA in the quarter compared to $4 million in the previous year. Our cost structure, primarily employee payroll, normalizes after a double-digit bump in payroll in March 2023. Corporate expenses are down while we continue to invest in our event sales team. Non-comp centers contributed $14 million of EBITDA on approximately $41 million of revenue. The first 3 weeks of January 2024 were difficult, primarily due to significant ice across the country. Same-store comps over the past two weeks have rebounded. Due to the slow start, we are slightly revising our expectations for the third quarter to high single to teens growth and a flat to down low single-digit same-store comp for the third quarter. We expect fourth quarter total revenue to be up around 20%. In the quarter, we spent $26 million on growth CapEx, $13 million on new builds and $10 million on maintenance. We spent $24 million on net acquisitions, and we repurchased $80 million of shares in the quarter. This morning, we announced a $0.055 quarterly dividend for an expected annual rate of $0.22. Our Board of Directors additionally increased our share repurchase authorization to $200 million. We have ample liquidity to continue to investing in our growth and rewarding our shareholders. We also updated our capital guidance for the year. We are increasing our M&A spend from $160 million to $190 million. Conversions are up to $80 million from $75 million, and we continue to ramp up new builds holding our previous guidance at $40 million. Our liquidity at the end of the quarter was $412 million with nothing drawn on our revolver and $190 million of cash. Net debt was $960 million and bank credit facility net leverage ratio was 2.5 times. We have several exciting initiatives underway and are continuing to evolve and innovate. We believe in our fundamental offering in ABC or acquisition, new build and conversion strategy as part of our operating ethos and we remain enthusiastic about our long-term growth trajectory. Thank you for your time, and we look forward to seeing you on the road in the coming months. Operator: We will now begin our question-and-answer session. [Operator Instructions] Your first question comes from the line of Steven Wieczynski from Stifel. Your line is open. Steven Wieczynski: Hey, guys. Good morning. So I want to ask about the ability to hold guidance. With the headwinds you've already faced, obviously, with weather so far here in the third quarter. And Bobby, you called out the impact of weather so far. But if we look at your guidance for the third quarter and the fact January is behind us, obviously, it seems like you guys might need to see a significant upswing in trends in February and March. So am I missing something there? Or are there other levers that you guys can use or are willing to pull to get that third quarter more in line with your guidance? Bobby Lavan: Yes. I mean the first three weeks of January hit us for kind of about $7 million to $8 million. And we've seen a rebound in the past few weeks. So we're pretty comfortable with our guidance at this point. Steven Wieczynski: Okay. So based on what you're seeing today, you just think kind of February and March can kind of carry you into that guidance range. Fair? Bobby Lavan: Correct. Steven Wieczynski: Okay. Got it. And then second question is for Lev since he's on one of these calls for the first time. But Lev, you've obviously been at the company for a long time. Obviously, you've got a nice promotion here. Is there anything you really want to kind of go after or change or any major initiatives that you think is really going to benefit the Bowlero story over time? Lev Ekster: Yes. So I've been here long enough to see that we have probably the best mousetrap, the strongest business model out there. It really comes down to me focusing on the execution of that to maximize that food and beverage and amusement attachment to help continue to improve our people, our processes across the company just to execute at a higher level. The business that is core is phenomenal, but I want to get us to good to great, from good to great with these processes. Steven Wieczynski: Okay, got you guys. Appreciate it. Thank you very much. Bobby Lavan: Thanks, Steve. Operator: Your next question comes from the line of Randy Konik from Jefferies. Your line is open. Randy Konik: Yes, maybe to follow up on that a little bit on the processes. Can you kind of give us some perspective on some of the things you're working on. I think, Bobby, we had spoken at our Winter Summit, I think a food and beverage system that's being implemented or looked into. Just can you give us some perspective on some of the things you're working on and areas of focus that we can see to help these already very high margins potentially go even higher. Just curious. Thanks guys. Lev Ekster: Yes, this is Lev. I'm happy to take that. So Bobby has been with us not that long, but the level of data that he brings to the table is something that we haven't had at our fingertips historically. So our decision-making is way more data-driven these days, but also something we're focused on is really reducing the variance across all of our centers, 350 centers. We want to tighten up the processes. So can we apply standards for repair and maintenance budgets? Can we give guidance on what optimal staffing parts should be to really maximize the foot traffic in our centers and have that convert to revenue? So we're going to foster this culture of collaboration across our company and use what works best across a given number of centers and expand that knowledge and that process to the rest of the centers. Randal Konik: Got you. And then just any areas in particular you're mostly focused on in addition to the ones you just talked about, anything around food and beverage, anything else? Bobby Lavan: Yes. I mean, F&B, we're installing a very robust inventory management system that ultimately can add a significant amount of dollars to the bottom line. We've always had a perpetual inventory system, so that opportunity is rolling out this summer. We talked about the website. The website will roll out in the next few months. And the reason that the website is so important is it allows for dynamic pricing. Ultimately, our goal is to fill the centers on the weekends at the highest price we can and fill the centers at the most reasonable price we can during the week. And ultimately, dynamic pricing allows you to do that. and the website system will allow that. And then when we get to the summer, the summer, we're going to re-implement summer games, which is something we talked about that we did not have last year that cost us $10 million of revenue, but it also is going to be, the website will allow us to effectively drive traffic in the slower times in the summer, which is sort of a key dynamic for really getting leverage out of our model. Randal Konik: And just last question on the capital plan, the $190 million versus $160 million. Is that a function of just more assets you think coming to market, the bid-ask spread narrowing? Like just give us perspective on why the $190 million versus $160 million, just the rationale behind that? Thanks guys. Bobby Lavan: Yes. So we bought Lucky Strike. We closed September 15. We got in there, and we're accelerating our capital plan there just because of the opportunity set in Lucky is significant. So really is a focus of that. We've got a few more deals in the pipeline. But really at the end of the day, we're pulling Lucky Strike in where we felt we'd spend the capital over a few years. It's definitely going to be sooner. Randal Konik: Got it thanks guys. Bobby Lavan: Thank you. Operator: Your next question comes from the line of Jason Tilchen from Canaccord Genuity. Your line is open. Bobby Lavan: Hi, Jason. Jason Tilchen: Great, good morning. Thanks for taking the question. Just to start, I was curious on Lucky Strike. In the press release, you talked a little bit about how profitability there was ahead of target. Wondering if you could maybe just spend a minute filling down on that a bit, talk about some of the areas we're already seeing savings and then some of the further areas of improvement that you've identified some of that, which could be centered around some of those investments you were just talking about. Bobby Lavan: Yes. I mean the Bowlero procurement system is very strong. And so ultimately, we put in our systems in Lucky, we only closed on September 15. So it's that. But on top of that, our events platform just crushed it in December, and we had multiple center buyouts, which are very, very profitable to the business. Center buyouts are great because they take down the center, you know exactly how much staffing you're doing, how much food you're doing, how much liquor you're doing, things like that. And that ultimately sort of drove incremental profitability in those centers. So we're very happy with where Lucky is coming out. Jason Tilchen: Great. That's helpful. And just one quick follow-up. Maybe you can give an update on how sort of the value bundles that you've been using during sort of the peak times have performed over recent months as you've expanded them to more centers across the country. Bobby Lavan: Yes. I mean, ultimately, the pizza and pictures in every center, we're getting good uptake. You'll see that we're testing out the alley sampler. A lot of these things take a little bit of a pause in December because December is very focused on events, but we're pretty happy with the uptake. We're really focused on what Lev said, is taking best practices from centers that are very good at upselling these products and pushing that to the rest of the portfolio. Thomas Shannon: This is Tom. I'll chime in and add. Dave & Buster's was down 7.8% on a same-store basis in the last reported quarter. We were up 0.2%, right? So we are massively outperforming the leisure and hospitality sector. And so the way you get there is by doing all these things like bundling, value pricing, tinkering with pricing and all these other sort of continuous optimization exercises. And so don't think of it as one initiative or another initiative that we talk about. It's really been systematized and it's getting more optimized and will continue to become more optimized under Lev's leadership. But we're playing with pricing and promotion sort of all the time. And I think that the result of being up when everyone, all of our competitors, all of our peers were down, in some cases, down massively, shows you the strength of our model and the strength of how we operate and how we adjust on the fly. Jason Tilchen: Perfect. Thanks so much. Operator: Your next question comes from the line of Matthew Boss from JPMorgan. Matthew Boss: Great, thanks. Thomas Shannon: How are you doing? Matthew Boss: Hey good, how are you? Tom, maybe just to start off, could you speak to performance that you're seeing from Lucky Strike maybe relative to initial expectations? And then could you just elaborate on the customer response specifically to some of the pricing and promotion changes and how you saw this impact second quarter comps? Thomas Shannon: I'll take the first part, and I'll hand off to Lev on the second part. We're very pleased with Lucky Strike, it's outperformed our expectation. They had a very, very strong December, very strong holiday season, and we're seeing shockingly high revenue numbers out of the Lucky Strike properties. We hired Nielsen to conduct brand survey, and they came and concluded that the strength of the Lucky Strike brand was between 50% and 100% stronger than Bowlero in terms of aided and unaided customer awareness. And so as an experiment, we opened our most recent center in Moorpark, California, which is just northwest of Los Angeles as a Lucky Strike and it has wildly outperformed expectations. So we feel very, very good about the Lucky Strike brand. We're about to open our second new Lucky Strike location in Miami. That will open probably this month, if not the beginning of March. We couldn't be happier with the Lucky Strike brand, Lucky Strike performance. We already saw a 50% increase in profitability in the last quarter versus what Lucky Strike had done a year ago under prior ownership, and we're just getting started. And I'll give the second part of that question to Lev. Lev Ekster: So with regard to our promotions, like Tom mentioned earlier, we just continue to tinker and we try new things, we try new price points, we try new offerings, things that work, we expand. So Tom mentioned the pizza and picture worked really well, or sorry, Bobby mentioned that it's performing, right? So what did we do? We expanded that to our lead program. So now we actually have a national league program that comes with a pizza and picture for every team. And that's really resonating as one of our fastest national programs in terms of sign-ups. We're bringing summer games back. We're not going to bring it back exactly how we've done it in the past. We have some learnings. We're going to optimize that program. But at the end of the day, none of them operate in a vacuum. We try to get foot traffic into our centers and now we're focused on execution once we have that customer. So we're seeing a really nice improvement in our NPS scores, which is our guest service landscape, right? We're investing into our people, and I think it's really showing in those results. And now we get that foot traffic back with these promotions, and we execute, we convert that to revenue, higher F&B attachment for example. Bobby Lavan: And Matt, it's Bobby. Like when I look at December, we took 2 points on retail. We look back at it after 4 weeks of running and we saw no consumer pushback. So we rolled it out in events in January and events is up 3% in January. So the consumer is not pushing back on our price movements. And frankly, they see the value in what we're charging. And so ultimately, we feel like the opportunity to continue going where we increase price in some places, potentially like increased shoe pricing, maybe lower the price of bowling, but increase the price of food, like there's just a lot of opportunities to continue taking wallet share while giving the consumer a premium product. Matthew Boss: Great. And then, Bobby, maybe just as we think multiyear, what's your level of visibility to the new unit pipeline for next year where we sit today? Or just the potential opportunity to accelerate new builds and just how you view the white space opportunity in the highly fragmented Bowling center total addressable market? Bobby Lavan: Yes. Well, we look at the white space as the total entertainment market. So you can see in our press release, we're moving away from the word center. We're moving towards locations. The white space is significant. From a new build perspective, we've got at least five a year for the next few years. And remember, these new builds, they come in at $7 million, $8 million versus our average unit value is $3 million. So for every new build that comes up, it's effectively three smaller acquisitions. On the acquisition side, the bid-ask hasn't really come in yet. So we're kind of building dry powder while we expect a little bit more volatility in the entertainment space over the next year. So I don't want to get pinned down by sort of unit count and unit growth, but we are building dry power when we expect sort of the ask to come down. Matthew Boss: That's a great color. Best of luck. Operator: Your next question comes from the line of Eric Handler from ROTH MKM. Your line is open. Eric Handler: Yes, good morning. Thank you for the question. Bobby, you spoke about increased payroll costs in the quarter on a same comp basis. I'm curious, is that what weighed on your gross margin on a year-over-year basis? And as that anniversaries itself, I believe you said at the end of the March quarter, does that allow gross margin then to start improving in fiscal '25? Bobby Lavan: So there are two things that weighed on our gross margin. So there is $6 million of payroll in the comp centers that ultimately cost us about 200 basis points on gross margin. The bigger one, and I want to just give these numbers is that Lucky Strike and the new acquisitions did $14 million of EBITDA, but they have $8 million of D&A. So you effectively have $6 million of gross profit on $41 million of sales. So the M&A accounting does depress our gross margin. But ultimately, when you use a seven-year formula for D&A for a business that is 50 years plus, it's kind of skewing it in the short term, but it will benefit in the long term. If I think about D&A, last quarter on acquisitions, it was $4 million, now it's $8 million. Additionally, in the quarter, we had $1.4 million of D&A from we closed West Nyack Lucky Strike. So we are being very focused on cash flow and performance, but it does create some noise in the numbers. Eric Handler: Okay. Great. And then the implementation of a dividend was a nice surprise. I'm curious what made you decide now is the right time to increase capital returns, complementing your buybacks with now you've got this dividend. At the same time, you're increasing your investment spending. So maybe you could talk a little bit about your balance sheet. Bobby Lavan: Yes. So I joined here in May. And I have been unbelievably impressed by sort of the cash flow generation of this business in the second quarter and third quarter. We discussed that internally. When we look at all of our different outflows needed over the next few years, M&A, conversions, new builds, and we looked at our liquidity, and we had ample liquidity to continue buying back stock and pay a dividend. And so it's effectively, we're really excited about where the business is, but we're much more excited about where the business is going and sort of the exit rate on FY '24 and just the opportunities in capital. And frankly, there's more capital if we want to bring it in. But right now, we're still sitting on a lot of cash. So at the end of the day, we're going to reward shareholders and continue to invest in the business. Eric Handler: Great, thank you very much. Operator: Your next question comes from the line of Eric Wold from B. Riley Securities. Your line is open. Eric Wold: Thanks, good morning. Two questions kind of a follow-up on prior comments. I guess, Bobby or whoever going to take it, I guess, on the average of 2% price taken in December, I know you talked about kind of going in various forms from possibly shoes, food and beverage, bowling. I guess, what drove the decision in each market or each center to make specific pricing moves, you're going higher or lower, were there competitive offerings in the market? Was it the specific trends of that location kind of what drove each decision on pricing? Bobby Lavan: Yes. So we only took retail. So remember, retail is a smaller portion of the business in December. But the reason we took it was we wanted to test the consumer a little bit and see how much pushback there was and there was none. So ultimately, we've had a pricing consultant in-house for the past six months, and we're really looking at pricing by hour, by day, by center, by products. And we saw some low-hanging fruit that we took in December that allowed us to test that change and whether the consumer react negatively to it. They didn't. But now we're pushing it into events. And so ultimately, we're going to continue doing that. We have another round of pricing changes coming, and those are very exciting because we're kind of coming to the end of this consultant engagement. There's so much opportunity to be dynamic that the consumer will continue to just spend more and have better product in center. Eric Wold: Got it. And then the comments around the maybe promotions kind of testing different things, seeing what works, expanding that, maybe cutting back on ones that didn't work. Maybe talk about some of the something that hasn't worked as you expected on kind of the midweek promotion to kind of promotional activity and kind of what you learned from the ones that didn't work? Thomas Shannon: Look, this is Tom. I'll take the Mea Culpa. So we've had summer games, which had built up to about $6 million of revenue. Summer games was like a ski mountain season pass. And business was so strong back in fiscal '23 that I decided to eliminate it in the summer of 2023 because I figure we could just get full price for those games. And while there was some offset, there wasn't nearly enough offset to have made it worthwhile to kill that program. So as Lev mentioned, we're going to bring that back. But that probably eliminating that probably cost us on order of $6 million of revenue last summer. So that was a pretty good example of something that didn't work that we have learned. And we're not going to bring it back exactly as it was before. We're going to make it better. There'll probably be a wider range of options for the consumer depending on what kind of experience they want. But that was entirely my decision, and it was a wrong decision. Eric Wold: Okay. Operator: Your next question comes from the line of Jeremy Hamblin from Craig-Hallum Capital Group. Your line is open. Jeremy Hamblin: Thanks and congrats on the strong results. I wanted to just dial in a little bit more on the Lucky Strike integration and the acceleration of investment in that. In terms of thinking about outcomes and rationale, can you just get a little deeper into that in terms of getting the implementation done and the capital investment, is this more an opportunity you see driving revenue? You talked about some of the systems you're bringing in that sounds like they are cost focused as well. But where do you see more of that opportunity here over the next 12 months? Bobby Lavan: Yes. It's going to be revenue and cost, right. So let's talk about the revenue first. Fenway, which does $13-plus million of revenue at $16 million, we think we can put in another four to eight. So you can do the math on the magnitude of that. There's always a way. That's the kind of things we're looking at and that we're effectively accelerating. On the brand, I'll let Lev kind of talk more about the brand. Lev Ekster: Well, even on the revenue side, I want to point out, I've managed our amusements department for the last few years. A lot of those locations haven't seen investment into the games in a number of years. We're addressing that. There are some locations that had no arcades. We're addressing that. And in terms of the brand, I personally lived in Miami, we have Lucky Strike Miami opening. I visit that center. I see the inbound interest. People are reaching out before we've even opened for events and buyouts. We do open calls for hiring events. It looks like we're giving out free Taylor Swift tickets, the line is so long. We haven't seen that in any of our properties, right? There's just a lot of demand for this brand. And I think we're going to get better with it. Our marketing department engaged with an agency right now where we're going to develop the Lucky Srike brand identity. And the results speak for themselves, Lucky Strike Moorpark, the food and beverage sales relative to bowling dollars, some of the highest we've seen, right? So it's just a totally different concept. And I think we're really going to lead into that. And as strong as it was, the Lucky Strike brand, we're just really strong operators, and we know which levers to pull now to maximize it. Bobby Lavan: Yes. And if you look at just the math, right now, Lucky is operating a little bit better than sort of the low-20s EBITDA margin. Like there's no reason that, that margin couldn't be our corporate-wide margin. Jeremy Hamblin: Got it. That's helpful. Let's switch to just technology investments. You noted that the website is getting updated. I think it sounds like that's coming here in a couple of months in terms of the refresh you're doing there. I wanted to just marry that also with Moneybowl and you noted that that's becoming more of an out of center operation. I wanted to see if you could just provide some update there on the technology side and get a little bit deeper. Bobby Lavan: Yes. So Moneybowl is still operating in 64 centers. So we haven't increased that yet. Moneybowl will be relaunching as a loyalty app. The company has a third-party loyalty app that has a lot of demand, but it doesn't have a lot of functionality, and that will be rolling out this summer. Jeremy Hamblin: Got it. And then last thing, just looking ahead over the summer period, you talked about summer games and kind of bringing back some of the things you've done before. Just wanted to get a sense for when you're in an Olympic year like this year and some of the media that you have available within the locations and the centers, is that something that in the past historically has been a positive or negative for traffic? And is this something you see as an opportunity maybe to keep people in centers longer? Anything you kind of got planned around that? Lev Ekster: No. This is Lev. I would argue that's a stretch. I don't think that has any bearing on our business, but I will tell you what media does have a bearing on our business. So we bought the PBA in 2019. Leagues across the country were dwindling. Orly league business you see is strong. It's growing, and it's growing by headcount. It's grown by average price per game and obviously, revenue. So now we have this halo effect that the PBA gives us, right? Viewership on our first event for the PBA, the players championship was up 17% year-over-year in January. I think that property is getting stronger, but we have the flywheel now, and we send our PBA stars into our centers on busy league nights, and we delight and we surprise our bowlers. That's something that we have at our disposal, and we're going to continue to lean into. But I think in my growing involvement with the PBA, I think it's all upside. We're trying new things like our core business, but we're trying things with the PBA. So this year will be the first ever PBA All-Star weekend in March. We had a really interesting property in the PBA called the Elite League. It was team-based. We did one event a year. I attended last year Base ibowl. It was electric. So we said, why shouldn't we do this more? We're going to have five events for the league this season, and we're going to continue to grow the casual viewership to that property and more awareness around bowling in our centers as a result. So that's more of the media that we're focused on. Jeremy Hamblin: Great. Super helpful. Best wishes, guys. Thanks. Lev Ekster: Thank you. Operator: Your next question comes from the line of Michael Kupinski from NOBLE Capital Markets. Your line is open. Michael Kupinski: Thank you and thank you for taking my questions and congratulations on the quarter. I want to go back to the increase in payroll in the quarter. I know last year, you indicated that you were tweaking some of your staffing levels. And I was just wondering if you can give us a sense of where you are today in terms of your goals in terms of center staffing levels? Thomas Shannon: Michael, Tom Shannon. Well, so as Bobby mentioned, last March, we gave all of our management staff in the field increases in salary that range from 12% to 17.5%, and we view that really as a onetime market adjustment. So we're going to lap that in short order, which will make the payroll comp much easier. We did that with the goal of reducing turnover and increasing guest satisfaction and both have been achieved. We've dramatically reduced manager turnover, which was really important as the company continues to grow, we need to retain managers and develop them for future leadership roles. And as we added about 25 locations last year, we continue to be ambitious in our growth plan, and we need a stable and experienced group of managers to get you there, and that's what we achieved. We also saw meaningful increases in Net Promoter Score results, which was the other part of the goal. So we're about to lap that. On the hourly side, there aren't a lot of tweaks with the model other than getting the allocations between some of the back of the house and front of the house functions correct. So as we go deeper into the data, we find disconnects where we are running, for example, too much mechanics labor and not enough server labor. And that's really a function of how bowling centers have been run since the beginning of time. And so going in and now using the data we have at our fingertips to really make the most informed and rational decisions with regard to allocations of labor within the center, I think will have a meaningful impact going forward. I can't quantify it, but I think it will be pretty substantial. Michael Kupinski: Thanks for that color. All my other questions have been addressed. Thank you so much. Thomas Shannon: Thank you. Operator: Our next question comes from the line of [indiscernible] from Oppenheimer. Your line is open. Unidentified Analyst: Hey, good morning. This is [indiscernible] for Ian. Thanks for taking the question. Most of it has been pretty much answered, but a follow-up on the event business. It looks like it continues to be very strong. How much of that strength is driven by corporate demand versus birthday parties, other events, et cetera? I guess is there more room for upside as far as the corporate recovery. Thank you. Bobby Lavan: Yes, it's going to keep going. I mean it's both corporate and families. I mean, we saw significant strength on the corporate side in December and through January, despite the weather, we're still seeing a good ramp on birthday parties and family events. So we are the beneficiary of trade down in this dynamic where we're not too expensive that it's something that like a corporate can't do anymore or enough of a premium product that it's a place you'd be willing to bring your employees. And so we're definitely seeing a benefit of that. And we always do well with birthday parties. Unidentified Analyst: Okay. Great. And then just on the pricing. I guess you mentioned the 2% on event in January. I guess does guidance assume any more incremental price increases in the back half of the year? Or will you continue to be flexible in adjusted demand as you move through the year? Bobby Lavan: It does not assume any more price increases. Unidentified Analyst: Okay, great. Thank you very much. Operator: There are no further questions. This concludes today's conference call. Thank you for your participation. You may now disconnect.BOWL Ratings Summary
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Bowlero Corp. Struggles After Fiscal Third-Quarter Earnings Miss Expectations
Bowlero Corp. Faces Challenges Amid Fiscal Third-Quarter Earnings Release
Bowlero Corp. (BOWL:NYSE) faced a challenging start to the week as its stock dipped by 11% in premarket trading, following the release of its fiscal third-quarter earnings that did not meet expectations. This downturn was a reaction to the company's announcement, which was covered by Market Watch, indicating a performance that fell short of what investors were hoping for. Despite this initial setback, BOWL's stock managed to recover slightly, posting a 2.71% increase at another point during the trading day. This resilience is noteworthy, especially considering the broader context of the company's financial health and market performance as detailed in their press release distributed by Business Wire.
The financial results for the third quarter of the fiscal year 2024, ending on March 31, 2024, reveal a complex picture of Bowlero Corp.'s current standing. With the stock price adjusting to $12.49, reflecting a positive change of 2.71% or an increase of $0.33, it's clear that the market is still responsive to the company's potential for recovery and growth. This price movement occurred within a trading range between $12.36 and $12.74 throughout the day, indicating a level of volatility but also investor interest in finding a new equilibrium for BOWL's stock value.
Over the past year, BOWL's shares have seen a wide range of trading prices, from a high of $15.47 to a low of $8.85. This fluctuation highlights the variable nature of the entertainment and leisure sector, which Bowlero Corp. is a part of. The company's market capitalization, standing at approximately $1.87 billion, along with a trading volume of 1,599,122 shares on the NYSE, underscores its significant presence in the market despite the recent challenges. These figures suggest that while the company faces immediate hurdles, there is still a considerable amount of investor engagement and confidence in its long-term prospects.
The guidance towards the lower end of its fiscal year range, as reported by Market Watch, might initially seem concerning. However, when viewed in the context of the company's overall market performance and the resilience it has shown in the face of adversity, it becomes a part of a larger narrative. Bowlero Corp.'s ability to navigate the ups and downs of market expectations, coupled with its strategic responses to financial results, will be crucial as it moves forward. The fluctuating stock prices and the detailed financial overview provided by the company offer a glimpse into the challenges and opportunities that lie ahead for Bowlero Corp. in the competitive entertainment industry.
