Bowlero (BOWL) - 2025 Q2 - Quarterly Report

Part I Financial Statements The company's financial statements for the period ended December 29, 2024, reflect increased revenue, positive net income, and growth in total assets Condensed Consolidated Balance Sheets As of December 29, 2024, total assets increased to $3.24 billion and total liabilities to $3.30 billion, primarily due to growth in property and long-term debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 29, 2024 | June 30, 2024 | | :--- | :--- | :--- | | Total Assets | $3,239,985 | $3,114,035 | | Cash and cash equivalents | $80,755 | $66,972 | | Property and equipment, net | $935,854 | $887,738 | | Goodwill | $841,269 | $833,888 | | Total Liabilities | $3,295,725 | $3,163,887 | | Long-term debt, net | $1,275,757 | $1,129,523 | | Long-term obligations of operating lease liabilities | $603,986 | $561,916 | | Total stockholders' deficit | ($179,658) | ($177,262) | Condensed Consolidated Statements of Operations For the six months ended December 29, 2024, total revenues increased to $560.3 million, with net income turning positive to $51.4 million, largely due to fair value changes Quarterly Performance (in thousands, except per share data) | Metric | Q2 FY2025 (ended Dec 29, 2024) | Q2 FY2024 (ended Dec 31, 2023) | | :--- | :--- | :--- | | Total Revenues | $300,074 | $305,671 | | Operating Income | $46,873 | $49,477 | | Net Income (Loss) | $28,307 | ($63,469) | | Diluted EPS | $0.16 | ($0.44) | Six-Month Performance (in thousands, except per share data) | Metric | H1 FY2025 (ended Dec 29, 2024) | H1 FY2024 (ended Dec 31, 2023) | | :--- | :--- | :--- | | Total Revenues | $560,269 | $533,076 | | Operating Income | $59,819 | $54,833 | | Net Income (Loss) | $51,402 | ($45,250) | | Diluted EPS | $0.29 | ($0.32) | - A significant driver of the improved net income was the change in fair value of earnout liability, which contributed a gain of $68.6 million in the first six months of fiscal 2025, compared to a loss of $23.4 million in the same period of the prior year[14] Condensed Consolidated Statements of Comprehensive Income (Loss) For the six months ended December 29, 2024, the company reported a total comprehensive income of $49.3 million, primarily from net income offset by other comprehensive losses Comprehensive Income (Loss) Summary (in thousands) | Description | Six Months Ended Dec 29, 2024 | Six Months Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net income (loss) | $51,402 | ($45,250) | | Other comprehensive loss | ($2,117) | ($3,271) | | Total comprehensive income (loss) | $49,285 | ($48,521) | Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' (Deficit) Equity During the six months ended December 29, 2024, the stockholders' deficit increased, influenced by net income, share repurchases, and dividend payments - For the six months ended December 29, 2024, the company recorded net income of $51.4 million, which increased the accumulated deficit[14][19] - The company repurchased Class A common stock for treasury at a cost of $45.8 million ($38.1 million in Q2, $7.7 million in Q1) and paid cash dividends of $17.0 million ($8.5 million in Q2, $8.5 million in Q1) during the six-month period[19][23] Condensed Consolidated Statements of Cash Flows For the six months ended December 29, 2024, operating activities provided $68.1 million in cash, while investing and financing activities significantly impacted overall cash flow Cash Flow Summary (in thousands) | Activity | Six Months Ended Dec 29, 2024 | Six Months Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $68,147 | $71,199 | | Net cash used in investing activities | ($133,214) | ($246,666) | | Net cash provided by financing activities | $79,099 | $169,738 | | Net increase (decrease) in cash | $13,783 | ($5,678) | - Investing activities included $92.0 million for purchases of property and equipment and $42.9 million for acquisitions[22] - Financing activities were highlighted by $150.0 million in proceeds from an Incremental Term Loan, offset by $45.4 million in share repurchases and $17.0 million in dividend payments[23] Notes to Condensed Consolidated Financial Statements The notes detail significant events including the company's name change, $42.9 million in acquisitions, a $150 million incremental term loan, and $45.4 million in share repurchases - Effective December 12, 2024, the company changed its name from Bowlero Corporation to Lucky Strike Entertainment Corporation and its stock ticker from BOWL to LUCK[28] - During the six months ended December 29, 2024, the Company acquired eight locations in two separate transactions for a total consideration of $42.9 million[46] - On December 17, 2024, the company entered into an amendment to its First Lien Credit Agreement, which provided for an incremental term loan of $150 million[61] - For the six months ended December 29, 2024, the company repurchased 4,037,170 shares of Class A common stock for $45.4 million, with $118.9 million remaining available under the repurchase program[84] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 5% revenue increase, strategic rebranding and acquisitions, and a $150 million term loan increase, with Adjusted EBITDA reaching $161.7 million for the six-month period - Recent strategic developments include: - Rebranding from Bowlero to Lucky Strike Entertainment - Completing and opening four new Lucky Strike locations - Acquiring Boomers Parks and Spectrum Entertainment Complex - Acquiring 66 acres of land adjacent to Raging Waves water park for expansion - Increasing the term loan by $150 million[100] Same-Store Revenue Comparison (in thousands) | Period | Same-Store Revenue | % Change | | :--- | :--- | :--- | | Three Months Ended Dec 29, 2024 | $280,530 | (6)% | | Six Months Ended Dec 29, 2024 | $471,074 | (3)% | Adjusted EBITDA Reconciliation (in thousands) | Period | Net Income (Loss) | Adjusted EBITDA | | :--- | :--- | :--- | | Three Months Ended Dec 29, 2024 | $28,307 | $98,757 | | Three Months Ended Dec 31, 2023 | ($63,469) | $103,126 | | Six Months Ended Dec 29, 2024 | $51,402 | $161,700 | | Six Months Ended Dec 31, 2023 | ($45,250) | $155,260 | - The company believes its financial position, cash generation, and access to capital will provide sufficient resources to fund operations, capital expenditures, acquisitions, and the share repurchase program[133] Quantitative and Qualitative Disclosures about Market Risk The company faces market risks including interest rate, credit, and commodity price fluctuations, mitigating interest rate risk with collars on $800 million of its term loan - The company is exposed to interest rate risk on its term and revolving credit facilities, where a 1.0% change in the effective interest rate would impact annual interest expense by approximately $12.9 million, before considering hedging[144] - To manage interest rate risk, the company has interest rate collars on $800 million of its Term Loan, with a SOFR cap of 5.50% and a floor around 0.94%, maturing March 31, 2026[144] - The company faces commodity price risk from fluctuations in food, beverage, and energy costs, which can impact operating results if not passed on to customers[146] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 29, 2024, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of December 29, 2024[148] - No changes were made to internal control over financial reporting during the second quarter that materially affected, or are reasonably likely to materially affect, these controls[149] Part II Legal Proceedings The company is involved in routine legal proceedings, which management believes will not materially adversely affect its financial position or operations - The company is involved in various inquiries, claims, and lawsuits incidental to its business, but management believes their disposition will not have a material adverse effect on the company's financials[70][151] Risk Factors No material changes have occurred in the company's risk factors since the filing of its Annual Report on Form 10-K for the fiscal year ended June 30, 2024 - No material changes have occurred in the company's risk factors since the filing of its Annual Report on Form 10-K for the year ended June 30, 2024[152] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter ended December 29, 2024, the company repurchased 3,334,976 shares of Class A common stock, with $118.9 million remaining for future repurchases Issuer Purchases of Equity Securities (Quarter Ended Dec 29, 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Sep 30 - Nov 3, 2024 | 242,700 | $10.75 | | Nov 4 - Dec 1, 2024 | 2,559,561 | $11.48 | | Dec 2 - Dec 29, 2024 | 532,715 | $10.87 | | Total | 3,334,976 | $11.33 | - As of December 29, 2024, the remaining value of shares that may be purchased under the repurchase program is $118,941,000[154] Exhibits This section lists exhibits filed with the Form 10-Q, including documents related to the corporate name change, credit agreement amendments, and officer certifications - Filed exhibits include documents related to the corporate name change, an amendment to the credit agreement for an incremental term loan, and officer certifications[156]