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Bowlero Corp. Class A

Investment Appraisal
 The company started the fiscal year off with a good quarter, which illustrate favorable retail trends. Total company revenues of $230.3 million was better than our $222.5 million estimate, reflecting improved revenues across all business lines including Bowling &amp; Shoe (up 24.5%), Food &amp; Beverage (up 31.2%) and Amusement (up 29.9%). Figure #1 Fiscal Q1 Results highlights the recent results and our quarterly expectations. The company indicated that Walk in Retail revenue increased 18% to $166 million and Group Events increased a solid 86%. Notably, League &amp; Tournaments revenue, which lagged the recovery, increased a solid 46% to $19 million, now above pre-pandemic levels of $13 million. Moreover, same-store revenue was up 37.6% compared with pre-pandemic levels, indicating favorable fundamental trends. Figure #2 â€”&nbsp;YoY Performance illustrates the companies growth out of the pandemic.&nbsp;
The company&#8217;s costs increased in the quarter, reflective of more &#8220;normalized&#8221; staffing levels, an increase to support the anticipated stronger upcoming revenue quarters of fiscal Q2 and Q3. Costs were higher than expected, especially SG&amp;A which was $32.5 million, higher than our $25.0 million estimate. Nonetheless, Adj. EBITDA was $65.3 million, slightly better than our $63.9 million estimate.&nbsp;
Management indicated that the favorable revenue trends in the latest quarter appear to be providing favorable operating momentum into the seasonally stronger fiscal second quarter. Revenues appear to be pacing 52% higher than its pre-pandemic comparable quarter. Furthermore, the company recently raised prices to support its reinvestment in staffing levels. As such, we have raised our Fiscal Q2 revenue estimate from $235.0 million to $254.5 million. Given the higher expenses, we have conservatively kept our $81.8 million Adj. EBITDA estimate. 
We believe that given the favorable operating momentum, the company is on track to exceed our original full fiscal year 2023 adj. EBITDA estimate. As such, we are revising upward our fiscal 2023 adj. EBITDA estimate from $322.2 million to $336.6 million. We are also revising upward our fiscal 2024 adj. EBITDA estimate from $328.4 million to $350.4 million to reflect the upward base year revision in 2023. Figure #3 Fiscal Full Year Revisions highlight our fiscal years 2023 and 2024 revisions.&nbsp;
Near current levels, the BOWL shares trade at 9.4 times enterprise value to our upwardly revised calendar year 2023 adj. EBITDA forecast of $343.8 million, below peers. Our price target of $17 reflects a target multiple of roughly 13 times enterprise value to our 2023 adj. EBITDA forecast. Notably, we view Bowleroâ€™s calendar year 2023 adj. EBITDA estimate as conservative should the companyâ€™s favorable operating momentum continue into its fiscal second quarter. As such, we believe that the company has a favorable risk/reward profile and maintain our Outperform rating.&nbsp;&nbsp;

 

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Figure #1 Fiscal Q1 Results
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/bowlq123results.jpg" style="width: 370px;height: 685px" />

 
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Figure #2&nbsp;â€”&nbsp;YoY Performance
 
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/BOWL_20221117_25406-02.jpg" />
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Figure #3 Fiscal Full Year Revisions

 
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/bowl2023update.jpg" style="width: 552px;height: 625px" />

Bowlero Corp. Class A (BOWL)

Favorable Retail Trends; Raising Estimates

Fundamental Analysis:

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Stock Slips Creating More Compelling Opportunity (BOWL)

In A League Of Its Own (BOWL)

Favorable Retail Trends; Raising Estimates (BOWL)

Fiscal Q1 2023 Preview (BOWL)

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