Rolls A Solid Quarter

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Bowlero Corp. Class A

Investment Appraisal
The company reported strong fiscal Q3 results with revenue of $315.7 million, up 22.5% from the prior year period, beating our estimate of $298 million by 5.9%. Adj. EBITDA in the quarter increased 17.7% to $127.6 million, beating our estimate of $116.3 million by 9.7%. Our estimates are illustrated in Figure #1 Q3 Results.
Bowling center adj. gross profit margins were a strong 68% and adj. Center EBITDA margins were 48%, a record high. The company posted impressive total company Adj. EBITDA margins of 40.4% for Q3. The total company adj. EBITDA margins were 60 basis points better than our estimate.
The company is facing a difficult year-over-year comparison in Q4. The difficult comp is largely attributed to a 53rd week and an accounting change in service fee revenue, which contributed revenue of $15 million and $9 million, respectively, to the year earlier results. Additionally, the company is indicating small group event revenue is softening in Q4 due to the economic headwinds. 
Given prospects for difficult year-over-year comps and macroeconomic weakness, we believe revenue growth will decelerate. As such, we are maintaining our Q4 revenue estimate of $241.5 million, despite the strong Q3 outperformance. Our Q4 revenue estimate represents roughly flat growth over the prior year Q4 when adjusted for the non-recurring revenue items mentioned above. As for adj. EBITDA, we are conservatively taking some of the upside Q3 variance out of our Q4 forecast and lowering our estimate from $73.3 million to $67.8 million. Notably, our fiscal 2023 forecast for both revenue and adj. EBITDA is still above our previous forecast, reflecting much of the upside from the companyâ€™s Q3 performance. We are forecasting fiscal 2023 revenue of $1.04 billion and adj. EBITDA of $357.6 million. Figure #2 Forecast Revisions illustrates our updated forecast. 
As of April 2, the company had $150.6 million in cash and cash equivalents, an undrawn facility of $160 million and generated $118 million of adjusted cash from operating activities in Q3. The company&#8217;s board increased the share repurchase authorization to $200 million. We believe that the company has significant financial flexibility to repurchase shares, invest in new and existing centers and to make acquisitions. Notably, management stated that the companyâ€™s bowling center acquisition pipeline is currently the best it has ever been. Additionally, the company currently has more than 35 conversion projects underway to improve its current portfolio of centers.
Near current levels the BOWL shares trade at 9.3 times enterprise value to our 2024 adj. EBITDA forecast. Our price target of $17.50 reflects a target multiple of 12.5 times enterprise value to 2024 adj. EBITDA. Given the current economic uncertainty and the possible impact on the company&#8217;s growth rate, we anticipate near term volatility in the shares. As such, we would take an accumulation approach and be opportunistic. The shares are rated Outperform with a $17.50 price target. 
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Figure #1 Q3 Results
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/BOWL_20230519-01.jpg" style="width: 555px;height: 449px" />
Source: Company filings &amp; Noble estimates
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Figure #2 Revisions&nbsp;
<img decoding="async" src="https://www.noblelinx.com/x/research/images/reports/BOWL_20230519-02.jpg" style="width: 576px;height: 376px" />
Source: Noble estimates

Bowlero Corp. Class A (BOWL)

Still On A Good Roll

Fundamental Analysis:

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Rolls A Solid Quarter (BOWL)

Makes A Lucky Strike (BOWL)

Still On A Good Roll (BOWL)

Feeling Some Impact Of Economic Headwinds (BOWL)

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