Bowlero Corp. (BOWL) on Q4 2024 Results - Earnings Call Transcript
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bowlero Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. And I would now like to turn the conference over to Bobby Lavan, Chief Financial Officer. You may begin. Bobby Lavan: Good afternoon to everyone on the call. This is Bobby Lavan, Bowlero's Chief Financial Officer. Welcome to our conference call to discuss Bowlero's fourth quarter 2024 earnings. Today, we issued a press release announcing our financial results for the period ended June 30, 2024. A copy of the press release is available in the Investor Relations section of our website. Joining me today are Thomas Shannon, our Founder and Chief Executive Officer; and Lev Ekster, our President. I would like to remind you that during today's conference call, we may make certain forward-looking statements, 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 the 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 the cautionary statements contained 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'll now turn the call over to Tom. Thomas Shannon: Good afternoon. Thank you for joining us today. I am Thomas Shannon, Founder and CEO of Bowlero Corporation. When I founded our company 27.5 years ago, I was driven to provide customers with a world-class experience, with a positive 6.9% same-store comp and near 20% revenue growth this most recent quarter, our results speak for themselves, and we have become a premier location-based entertainment platform. In 2013, we acquired 266 centers from AMF out of bankruptcy for $270 million. We spent the past 10 years investing deliberately in rebranding the centers, upgrades across the kitchen, audiovisual, seating, technology and overall experience. These legacy bowling centers became the best-in-class entertainment location in their communities for children's birthday parties, corporate gatherings, leagues, date nights and group outings. At the same time, they run efficiently and operate at near 50% EBITDA margins compared with an industry average less than half that. This playbook was repeated with our acquisition of the 85 bowling centers from Brunswick Corporation in 2014, 17 centers from Bowl America in 2022, the 14 centers of Lucky Strike in 2023 and almost 50 from sole proprietors along with building around 20 new centers in superb locations during this time period. We have spent over $2 billion on acquisitions and capital expenditures over the past 27 years, and in fiscal year '25, we project $520 million of four-wall EBITDA and more than $400 million of consolidated EBITDA. We target strong double-digit returns on invested capital and we have the expertise to continue achieving that. We continue to drive forward with the majority of our focus on deploying capital into bowling through new builds, acquisitions and upgrading our centers. We are currently under construction on four new centers in Beverly Hills, California; Denver Ranch, California; North Field in Denver; and South Lands also in Denver. These powerhouse locations will open between September and November of this year. In May 2024, we acquired a large water park in Yorkville, Illinois, named Raging Waves. We acquired this asset along with 60 acres of real estate at an attractive valuation and underwrote synergies from implementing our operating philosophies and having efficiencies at scale. Throughout our first summer, we implemented our tried-and-true practices of focusing on the consumer, while also executing efficient operating standards. I am happy to say that revenue was up double digits year-over-year, and we have identified significant capital deployment opportunities at the property to deliver powerful long-term growth. This experience with Raging Waves confirms that the Bowlero operating philosophy can expand outside of bowling as we look more broadly at the location-based entertainment industry. We will continue to seek opportunities to deploy capital for double-digit returns while implementing best-in-class operating standards that drive efficiencies at scale and grow earnings well in excess of our cost of capital. We will deliver outsized returns to our investors that will continue to scale and accelerate in the coming years. Let me hand it over to Lev to talk about our internal initiatives and then Bobby will review the financial details. Thank you. Lev Ekster: Thanks, Tom. This summer, our season passes were success driving traffic during the slower summer months. As a reminder, our weekly sales from April through November are approximately $17 million compared to $25 million plus starting in December through March. Incremental traffic into our locations with improved attachment helps our business during the slower months. We believe the seasonal passes improve customer satisfaction by providing value and ultimately helping them revisit our locations during the critical holiday and winter periods. As we discussed last quarter, we are leaning heavily into increasing food and beverage sales. This summer, we started the rollout of all new retail F&B menus. And by the end of this month, all of our locations will be featuring a new menu that will be more compelling to our guests, featuring better presentation, a better offering and better portion sizes. The new menus are setting us up for success in the holidays when we will also be introducing a fully revamped event catering menu for our top 75 locations with an innovative offering of higher-quality selections such as Mike's Hot Honey Pizza, Spicy Rigatoni, Lobster Mac & Cheese and Sweet Poppy Salad. Additionally, we have begun piloting tablets for the servers in our locations, which provides strong efficiencies from having to walk back and forth to point-of-sale stations, thereby improving the process for our associates and the experience of our guests. The Lucky Strike brand has a new logo, which we will be hanging on three new locations opening in the next few months, two in Denver and one in Beverly Hills, more to come on the expansion of the Lucky Strike brand. We will continue to optimize our offerings to improve customer satisfaction and traffic while increasing guest spend as we look to become the preferred out-of-home entertainment destination of choice. This is how we will continue to outperform our peers. And now, I'll pass it over to Bobby. Bobby Lavan: Thanks, Lev. In the fourth quarter of 2024, we generated total revenue ex-service fee of $283 million, and adjusted EBITDA of $83.4 million compared to the last year of $235 million and adjusted EBITDA of $64.5 million. As a reminder, service fee revenue is a pass-through, a non-contributor earnings is being phased out and normalizes year-over-year in fiscal year 2025. Our total growth in the quarter was 20.2%, and same-store comp was positive 6.9%. April, May and June all saw positive same-store growth. Adjusted EBITDA was $83.4 million, up 29% year-over-year as we return to positive comps and meaningful operating leverage. In the quarter, we had a $2 million insurance true-up and PBA continued to operate at a worse-than-expected loss. Food costs are a headwind that we will manage through in the upcoming year, while the previously mentioned amusements investments have turned positive with amusement contribution outperforming the rest of the business in the quarter. We expect to achieve operating leverage around 50% in FY '25, as we have comped the March 2023 manage wage increases and onetime COVID costs. We found a good balance of investing in payroll and managing costs with our same-store comp payroll flat year-over-year in the quarter, which is better than last quarter, and negative $4 million. Non-comp centers contributed $9 million of EBITDA on approximately $32 million of revenue. Raging Waves, our water park in Illinois, contributed $3.5 million of revenue and $2 million of EBITDA in June. The week of July 4 was a slow start to the year and July 4 falling on a Thursday this year versus Tuesday the prior year, and we have seen positive same-store comps since mid-July. In our press release today, we issued fiscal year 2025 guidance. While we are hearing concerns in the market and weakness in the consumer, are not seeing signs of that, and at this point, are guiding to total growth of mid-single digits to 10% in fiscal 2025. This includes a forecast of low to mid-single-digit same-store sales comp. EBITDA margins will be 32% to 34%. We spent $193 million in capital expenditures in FY '24. As we shift our focus to internal initiatives, we are paring back our capital expenditure plans for FY '25 with a total CapEx spend expected to be $154 million. The breakdown includes growth CapEx of $50 million, new build CapEx of $45 million, maintenance of $44 million, and we plan to allocate $15 million of CapEx to rebranding Bowlero Centers to Lucky Strike. We plan to continue to balance investing in our growth and rewarding our shareholders. We increased our revolver capacity in the past few months to $335 million in anticipation of an increased M&A environment. Pro forma for those increases -- our liquidity at the end of the quarter was $386 million with nothing drawn on the revolver and $67 million of cash. Net debt was $1.1 billion, and the bank credit facility net leverage ratio was 2.6. Thank you for your time, and we look forward to seeing you on the road in the coming months. Operator: [Operator Instructions] And your first question comes from the line of Steve Wieczynski with Stifel. Your line is open. Steve Wieczynski: So, Bobby, as we think about fiscal year '25 and your expectation for low to mid-single-digit same-store sales comps. Is there a way to help us think about maybe the cadence of how the quarters might look or I should say, maybe how the quarters should play out? Just -- I mean I just want to make sure we're thinking about how the quarters could or should come together in any headwinds or tailwinds that could impact those -- that low to mid-single-digit outlook for the year? Bobby Lavan: Yes. The only thing I would direct you to is New Year's does fall in the third quarter, and January last year was extremely weak from weather. So, I would expect stronger relative performance in the third quarter. But generally, we're expecting positive comps throughout the year. Steve Wieczynski: Okay. And then, Tom, maybe for you, maybe a little bit of a bigger picture question, but it seems like it's pretty clear that you've been pleased with the acquisitions outside of the bowling arena, so to speak. So, I think kind of going through your press release and your presentation, it's pretty clear that the M&A environment still seems very healthy at this point. Is there any way to help us think about as you kind of go down that M&A path, will it be more allocated towards traditional bowling or do you think that mix really starts to maybe shift a little bit more towards non-bowling amenities? Thomas Shannon: We won't do every attractive bowling deal we can do, whether it's a new build or the acquisition of the center. We're about to open four new centers in Marquee locations. The pipeline for new builds is very strong after that with about a dozen deals percolating, and these are much larger on average than the acquisitions, right? So, the average acquisition we do has revenue in the $3 million range, the average center that we're opening now is $7.5 million to $8 million on average. So even though we're not doing as many, the newbuilds are quite large in terms of their contribution. Similarly, we're very pleased with the results out of Ranging Waves, and we're opportunistic. So, we'll continue to look at every opportunity within location-based entertainment, and we'll apply the same very tight deal stream that we always did with bowling. But yes, we're casting a wider net now, but it's really dependent upon the deals and the returns that we're going to get from the deals. Operator: And your next question comes from the line of Matthew Boss with JPMorgan. Your line is open. Matthew Boss: Congrats on the nice quarter. So, Tom, maybe could you speak or elaborate on the inflection in traffic in same-store sales that you saw as the fourth quarter progressed. And really what you've seen so far in the first quarter? And maybe taking a step back, just if you could walk through what you think is differentiating your experience relative to other parts of leisure in this economic backdrop? Thomas Shannon: Yes. So, I'll sort of answer that from a bigger picture perspective, and then I'll hand it off to Lev to talk about some of the tactical things that we've done. But look, bowling is a very good enduring business. We've spent a lot of money to build really wonderful -- excise me, wonderful centers that are the best product available. They're easily accessible. They're in your community, and it's still a very good value. I think that the fundamentals of bowling get overlooked. The bowling is an absolutely fantastic business. We love it. We're committed to it. It's extremely high margin, and it's very resilient. When we started to comp down last year, realized that we were comping down off of unbelievably high results that came out of COVID. So, comping down off being up 40% in three years -- it's a comp down, but it was in no way a repudiation of the strength of bowling. Bowling is as strong as it's ever been. It's during -- we have the best product. And most importantly, we have the best management team, I believe, in location-based entertainment. And so, you take the fundamentals of bowling, you take the product that we've built, which is best-in-class, and you combine that with our data-driven, very results-oriented culture, and you end up with wide outperformance versus our peers. So let me turn it over to Lev to talk about some of the things we did specifically over the last few months to get to this result. Lev Ekster: So as Tom mentioned, obviously, we do bowling incredibly well, and we continue to invest in our facilities. We want to have the best bowling centers in every market that we're in. But we're not sitting on our hands, and these results don't happen by accident. So, you read that we launched a brand-new Summer Season Pass this summer. We didn't launch it last summer at all. We did just relaunch a former pass. We totally revamped it. We removed all the complexity from the product. We made the value proposition to the consumer very, very clear, and we sold over $8.5 million with the summer season passes. How do we know there was a clear value proposition, that pass was redeemed in the summer, 1.6 million times. So, our consumers got a great value for it. And as a result, our NPS score continues to climb. And I think we're starting to take market share. So, we mentioned we were investing in our amusement business. That continues to improve. We're adding better games. We're maintaining our centers a lot better than other competitors. You're never going to walk into one of our caves and see half the games down or price has not stopped. We're upgrading our redemption counters. We're launching locations now with a brand-new redemption store called Price Vault. Our food and beverage menus are improving. We've released all new food and beverage menus across our traditional centers all the way up to our premier centers, the Lucky Strikes, and we're starting to see growth there. We're investing in the food and beverage team to grow sales and just offer a better product there. So, we're just upping our game across the enterprise and I think you're starting to see that in the results. And we've continued to see those results, these first two periods of the fiscal, which are both positive, and as Bobby mentioned, we expect to see that throughout the rest of the fiscal. Matthew Boss: Great. And then maybe just a follow-up, Bobby any puts and takes to consider as it relates to EBITDA margin this year embedded within the FY '25 outlook? And just procurement and SG&A, any efficiencies that you've identified to support the bottom line? Bobby Lavan: Let's -- we're always going to be focused on costs, Matt. We're not going to be one of those companies that's how we drive earnings growth. From our perspective, we have hired procurement team. We like that. Really, at the end of the day, as the comp goes up as the acquisitions roll through, and we continue to manage sort of the cost at the centers, that's where you'll see the earnings levers. Operator: And your next question comes from the line of Randy Konik with Jefferies. Your line is open. Randy Konik: I guess, Bobby, first for you. Any thoughts on how we should be thinking about the low to mid-single-digit comp as it relates to the first quarter. And I think you spoke about the near shift impacting 2Q. Does that kind of mean that the 2Q comp should kind of fall without potentially outside the annual range of comp guidance? Just curious there. And then also on the guidance, does the annual guide include -- or I guess, exclude unannounced or include any M&A that you're thinking of in the guidance? Just thoughts there. Bobby Lavan: It does not include M&A. It does include the new build. So, M&A would effectively could drive you to the higher end of sort of the guidance and above. From a cadence perspective, I'd like to stay sort of in the low single digits to mid-single digits as we go through the year. This quarter, we still have some time to go, but I would stay in the low single digits to mid-single digits range. Randy Konik: All right. Super helpful. And then I guess Lev, you gave some good perspective on the season past success. Have you guys looked at what the lift was from food and beverage of season pass kind of redemption people that visited on the pass versus those that visit not on the pass? Do you see an extra lift in food and beverage on those season pass attendees? And then, Tom, you gave some good perspective on widening the net for potential M&A could include a lot of different types of location-based entertainment. What would be probably helpful to us on the call is to give some perspective of what you don't want to look at from an entertainment perspective, what types of businesses or areas of the entertainment economy are you not interested in or you don't think are particularly good businesses or business models? Lev Ekster: So, I'll just hit the first part of your question about the F&B, and I don't want it to be limited to that because I think the attachment across our amusements business was also significant, thanks to the pass and all of these visits. You heard that our amusements performance is now outpacing the other revenue lines. And I think it's because when we created this pass, we put focus around those segments. So, with a premium pass, you were getting 15% of food and nonalcoholic beverage. You were also getting a $5 arcade reload during every visit. And as a pass holder, you were able to get onetime per visit, a discounted arcade card. And so again, we wanted to drive a lot of value to pass holders, the amount of visits we got out of it was pretty obvious. Food and beverage sales were up. Now it could be attributed to all the new menus that we mentioned. It could also be attributed to the visitation. But overall, I think, the consumer is quite clearly telling us that they're loving the pass, they're loving the product that we're delivering to them when they come. And that's driven our decision to launch for the first time ever a Fall Season Pass. We're being very selective during October, November when you can use the pass, right? We exclude peak times on Saturdays, so we don't want to cannibalize that traffic, but there's a lot of opportunity in those months to fill in the centers, and we're really excited for the opportunity to launch that new product. Thomas Shannon: Yes. Just to complete the thought there, we did over $2.5 million or in the neighborhood of $2.5 million of season pass sales at Raging Waves despite only owning that property for about 40 days between close and season opening. I would expect next year that, that number will be $3 million to $4 million in season pass. We're leaning really hard into the season pass because -- there are a lot of attributes. One is enormous customer satisfaction and increased customer visitation. But it also insulates you from weather, right? So, all these businesses have some weather dependency, one of the advantages that we found from Raging Waves is that it was an excellent weather hedge to offset the effects of good weather in Chicago metro area where we have 19 bowling centers. The first -- the first day Ranging Waves was supposed to open, it actually didn't open because of rain. And what we found is in the three districts that comprise the centers in the Chicago area, we were up about 90% same-store sales versus prior year. So excellent weather hedge. Of course, it reverses, right? Ranging Waves had several days over $350,000, which is an astonishing number for single day revenue in a regional park, while at the same time, our bowling centers were very challenged because of the good weather. So, lots of exciting stuff going on there. I think you asked the question, what wouldn't we look at -- and I would say that the one thing that we're probably least excited about is things that are dining centric, right, restaurant centric. We don't view the restaurant space particularly attractive. Selling food and beverage that are attached to bowling or a water park visit, for example, are great because those are ancillary and add-on. But you're probably familiar with Pinstripes. Pinstripes is really a fine dining concept with a handful of lanes attached. I never thought that was a good business model. That is a great example of a business that we would never be interested in owning. Operator: And your next question comes from the line of Jason Tilchen with Canaccord Genuity. Your line is open. Jason Tilchen: I wanted to follow up on a comment from Bobby in regards to the CapEx allocation for this year, and particularly that last portion regarding the amount allocated for rebranding of Bowlero centers. Is there anything more you can share in terms of the strategy to expand these Lucky Strike brand? Bobby Lavan: Yes. So, we're opening a flagship property in Beverly Hills in the next few months, so there'll be a lot more to come about or leaning into the brand, and let's leave it at that. Jason Tilchen: Okay. Great. And then one more quick follow-up. In terms of the guidance for next year, is there anything you can talk about in terms of the same-store sales, the breakout we could sort of expect between traffic and pricing? Bobby Lavan: We're not assuming any pricing this year. Operator: And your next question comes from the line of Jeremy Hamblin with Craig-Hallum. Your line is open. Jeremy Hamblin: Congrats on the strong results. And I wanted to come back to kind of the operating piece of the business. Your SG&A was a little over $40 million in the quarter, I think, the highest that you've had. And in terms of thinking about that, I think I called it in the prepared remarks a $2 million insurance true-up, which I'm assuming folds into there. But also, just wanted to understand, given the seasonality of Raging Waves of how much that might have contributed into your SG&A? Bobby Lavan: Yes, that $40 million did not include anything for Raging Waves, but it did include $4 million of write-offs related to some abandoned software development costs, $4 million of deal costs, $4 million of D&A and $4 million of share comp. So, you'll see in our non-GAAP rec in our investor deck that we view SG&A as a $26 million cost. Next quarter, we will start -- we will remove D&A from our corporate SG&A costs. So, we will give a lot more clarity. This is a sort of end of the gross profit income statement. So, you'll have a lot more four-wall going forward. Jeremy Hamblin: Got it. And then I want to come back to the comment just made here on pricing. And in terms of what you are expecting from -- what your consumer maybe is expecting as well? Obviously, you're having tremendous success here with the season passes and that's a driver to get foot traffic in the door. You are seeing a bit of price competition from other entertainment businesses, but I wanted to get a sense for how you felt like you needed to operate your pricing models, particularly your weekend pricing models and whether or not you feel like you need to dip into more of the kind of promos to drive traffic outside of just the season passes? Bobby Lavan: Yes. So, one thing to be clear, the season pass you can't use on a Saturday, right? So, we don't need to discount or promote Saturday. The season pass is great when school is out. We extended the hours of our centers, so we could sell more F&B. Really, the focus is going to be getting people into the center and then selling them more food, right? We've talked about this a lot, and we've actually got proof in our first kitchen that has the upgraded menu, and I'll hand that over to Lev to kind of jump into. Lev Ekster: So, the blueprint that I think triggered -- this focus on food and beverage is obviously the acquisition of Lucky Strike and seeing what's possible. Their food and beverage attachment was multiples higher than ours. And when we launched Lucky Strike in Miami, the menu that we built there in terms of the innovation from the mixology, right, the cocktails that we were making there, a menu that was featuring craft pizzas and street tacos and bow buns and seasonal salads and bowls. So now, we're looking at the results there, and we're seeing nearly $3.40 food and beverage spend for every dollar rolling. And again, that's much, much higher than we've ever seen. So we've used that as an inspiration to launch revamped menus across all of our centers. We went down to the traditional centers. They got all new menus, all the way up to the Lucky Strike premier centers and now we're going to be focused on our catering menu. So it's just given us like a sense of confidence that we're capable as an operator to run this type of food and beverage operation. And again, bowling is still king. But when you're visiting us for bowling, it's we're offering you better food and beverage options, if we're offering you a better amusement option, the attachment is going to continue to grow. I see a world where you're going to show to a Lucky Strike this year, and you're not going to have any plans to go to dinner before afterwards where you're going to find us to be a great option for that. That's what we're driving towards. And early indications are super encouraging. Bobby Lavan: Yes. And I would just -- F&B revenue was up greater than owing revenue this summer. So proof is in the pudding. You get people in the centers, and we sell them more food, the upside is significant. Operator: And your next question comes from the line of Eric Handler with ROTH Capital. Your line is open. Eric Handler: Bobby, can we talk a little bit about the gross margin. So, while same-center sales were up in the fourth quarter, implying volume was up, gross profit was down. As we look into fiscal '25, how do we think about the direction for gross margin? Bobby Lavan: Yes. So, as we've talked a lot about this issue, our legacy reporting standards date back to the acquisition of AMF, where AMF also had a manufacturing business. We're not going to be reporting gross margins starting in the first quarter. So, I really look at four-wall, the depreciation and amortization that came in from Lucky Strike is what the drag on the gross margin. If you look ex D&A, gross margin was up 200 basis points. So, it's just something that is a legacy standard, you can't really change it in your K, but we are changing in our Q going forward. Eric Handler: Got it. Okay. And then you did sort of dance around how first quarter was going so far. I wonder if you could just talk about what you saw in July and August? Thomas Shannon: I don't think we've danced around it at all. We are positive on a same-store basis through the first the -- first two periods of the fiscal year, and we're seeing expanding operating margins. Operator: And your next question comes from the line of Michael Kupinski with NOBLE Capital Markets. Your line is open. Michael Kupinski: Congratulations on a solid quarter. A couple of questions. I kind of want to go back to the same-store revenue growth, obviously showed a nice acceleration from the third quarter. I was wondering, can you maybe give a little bit more color on what you're seeing that is allowing it to grow so nicely in spite of the macroeconomic trends that are hurting other discretionary consumer businesses. And it seems like you're introducing higher-end food items and so forth. Are you seeing any differences in consumer spending patterns? I'm just wondering if you're moving up the demographic towards higher income consumers, just kind of giving a flavor of what you're seeing that is allowing you to kind of grow so nicely? Thomas Shannon: Well, this is Tom. If you look at where our centers are located geographically and then really how those centers perform relative to other centers, we are very overweighted from a revenue standpoint towards the higher-end consumer. So, our highest grossing centers are in Bellevue, Washington; our two locations in Manhattan, Tysons Corner, Virginia, now in Miami. These are all A markets. The average asset hold income is probably well in excess of $150,000 or maybe even $200,000. So, we're overweighted to a higher-end customer. Where we're particularly strong is in our events business where through some really good revamps of our online booking platform. We've dramatically increased online bookings for reservations very close to the time or date of the desired party. So, we went from -- in the past, we weren't able to book parties within three days of a given date. Now that's down to, what, three hours, two hours, right? So, through technological and operational refinements, we've made it much easier for the guest to buy, particularly spur at the moment, and that's had a very meaningful effect on our event business. We're seeing the larger event business remain strong, continue to grow. We have excellent sales leadership. Our head of sales and the team we have below them is really superb. No doubt they are the best-in-class by far. And we'll do -- Bobby, do you recall what we did in event sales? Bobby Lavan: Yes. Thomas Shannon: Yes, what was the number? Bobby Lavan: 275 Thomas Shannon: $275 million of event sales in the last fiscal. That number will certainly be over $300 million in this fiscal year. So we're seeing strong retail events, we're seeing strong corporate events. And then we're also -- we're really focused on offering value to the value-oriented customer when they want it. So, the season pass from zero last year to $8.5 million, certainly additive, $8.5 million is a lot of money in our slowest revenue period that made a meaningful difference. Also, things like Groupon, where -- the number was $17.4 million, I believe, last year. [Technical Difficulties] condition is very favorable to us. So, we have a disproportionately large hole from Groupon. We also restrict use to off-peak times. So, we don't squeeze out any full price revenue. So, it's a lot of things. It's a lot of operational nuances. And getting full price when we can and discounting when we need to. I think we're continuing to refine our model, and we're just getting better and better at that. And then going back to something I said earlier, don't discount the quality of our product. We've spent a lot of time and effort and money to build really spectacular facilities, and if you come and visit some of these, which I would encourage you to do, in Miami, the new one at Beverly Hills were about to open Tyson's Corner, any of these that we've built new. I mean it's almost like Vegas in your community. That level of glitz and glamor. So, you put it all together, and we've got a winning model. Michael Kupinski: Got you. That was very helpful. I appreciate that. I do have one more question. I know that it's a relatively small acquisition, Raging Waves. But I believe that there was a relatively mild summer in Illinois, I lived there during the summer. So, except for the past few weeks, -- can you -- and I'm kind of surprised that you had such strong growth. I was wondering, can you kind of give us a little flavor of what drove the growth? Or was it the increase in gas price increases? Or were you able to implement some of the revenue initiatives that you had planned? Or are those still on the dock? Thomas Shannon: Great question. It was mild. It was surprisingly cool this summer in Chicago, which definitely hurt us, which makes me feel very excited about what might happen next year. Combination of factors. We leaned really hard into season pass sales, which were up significantly year-over-year, drove attendance, which was up more than 10% revenue, more than 10%, maybe it will shake out and closer to 15% too early to know. And frankly, we still have one more weekend to go. And then we got a liquor license, which we put into effect where we sell beers from about the middle of the season on, which had a beneficial effect. It wasn't a game changer because, again, it was it was only for a partial period, but definitely increased food and beverage sales. So, things that didn't happen was that we didn't fold the event booking process into our existing Chicago-based sales force, which is quite large and quite capable. We think there's $0.5 million to $1 million of upside from events, whether it's birthday parties, corporate team building, family stuff. We're actually going to be building a dedicated area within the park to really facilitate those sorts of events. I think that really summarizes most of it, but we paid $49 million for that part. Figure will do $7 million of EBITDA this year, give or take. I think the upside in that park is in the next year or two, it could get to $10 million of EBITDA. And I think that ultimately, the number could be meaningfully higher. I mean, it's 60 acres, but 13 are undeveloped, 13 acres of expansion capacity allows you to go from sort of an in-park comfortable capacity of 5,000 to 6,000 people on a peak data to 8,000 or 9,000, which makes a huge difference because as you said, when you have a mild season, there are going to be days that are disproportionately busy. And it's really important to be able to capture as much revenue as you possibly can in those days. And so, we're doing some tweaks to expanding our capacity. But longer term, we also have the ability to meaningfully increase the capacity to embark on land that we already own that's adjacent to the existing facility. Operator: And your next question comes from the line of Eric Wold with B. Riley Securities. Your line is open. Eric Wold: A couple of questions. I just want to go back, Bobby, to the same-store sales question. I know that in the guidance for this year, you noted an expectation of not taking price. They're obviously driving more food and beverage uplift -- maybe then ask it a different way, within the same-store sales guidance, how much is attendance and how much is per-person spend. And then, if you're not taking price at least on planning on taking price right now, what do you say is kind of the biggest drivers in helping you offset any input or labor contemplation that may arise? Bobby Lavan: Yes. So, there's event growth -- event comes in at least a 20% higher per cap than retail walk-in and in a lot of centers, the bigger centers, it's 50-plus percent on a per cap basis. So, as we do more events, the check size goes up. Secondarily, we've spent a lot of time talking about it. Our online business is killing it, is up 30%, 40%. It continues to get better. The new website has rolled out a lot of different technologies are being used and the website drives, wallet share and drive ticket price up. So, ultimately, it's not -- we don't need to go and raise the price of the bowling, right? We're just getting -- we're moving up sort of the value chain as we get wallet share. And then, the big initiative that we talked about that we're seeing early green shoots is the F&B attachment. Eric Wold: Got it. And then does that all play into -- obviously, those are all great is our driving per person spend. But if you started seeing some cost inflation, would you offset that would price? Do you think you have other levers to play where you don't have to do that? Bobby Lavan: We have other levers to play. I've been very focused on kind of rebuilding sort of procurement rebuilding systems. And so, when you look at every dollar, you can figure it out. Operator: And your final question comes from the line of Daniel Moore with CJS Securities. Your line is open. Daniel Moore: Just I think most have been asked and answered. But just in terms of the balance sheet and free cash, obviously, you've got very healthy liquidity. Is there a range of M&A you're targeting this year? And based on the EBITDA guide, what are your expectations for working capital? And any thoughts around kind of the free cash flow range for fiscal '25? Bobby Lavan: Yes. Working capital is going to continue to come in as we take -- as we just try to turn product faster, but working capital has never been that meaningful part of our business. From an M&A perspective, the range is wide because there's a lot out there to do. That's -- we've quietly been raising our revolver capacity. We added $100 million in the past few months. So, we're expecting that there's an opportunity out there, but the M&A environment is very active. And so, we'll announce deals as we get them done, it will be that kind of trajectory. So, I know that's difficult for you guys to model, but I think it's better for us to surprise to the upside, if we get more M&A done. Operator: And ladies and gentlemen, that concludes our question-and-answer session and today's conference. We thank you for your participation, and 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.
