What happened
Shares of bowling alley operator Bowlero (BOWL 2.72%) were pulling back today after the company reported mixed results in its fiscal first-quarter earnings report last night.
Though the stock was actually up in the after-hours session last night, investors seemed to have different thoughts in regular trading this morning. As of 10:59 a.m. ET, the stock was down 8.4%.
So what
Bowlero, which owns more than 300 bowling centers across North America under brands like AMF and Bowlmor, said that revenue in its fiscal first quarter rose 27.2% to $230.3 million, which beat expectations at $223.3 million.
Same-store sales also jumped 19.9% in the quarter, showing customers are flocking back to in-person experiences as pandemic concerns have faded. The company credited growth in event revenue, the return of league bowling, and solid walk-in traffic for the strong performance.
On the bottom line, adjusted EBITDA increased 11% to $65.3 million, and the company said EBITDA margins fell 415 basis points from the prior-year quarter because staffing levels were unusually low in the quarter a year ago. Adjusted net income fell from $15.6 million in the quarter a year ago to $7.2 million, or $0.04 per share, slightly below the consensus at $0.05.
CEO Thomas Shannon said in a press release: "Bowling is booming, and we are pleased with our continued world-class performance in the first quarter, particularly relative to the prior year's comparable period, which reflected a rapid recovery from the pandemic and corresponding staffing shortages. We never lost focus on our goal to provide delightful experiences for our guests and are now well positioned to do so through fiscal year 2023."
Now what
Bowlero went public as a SPAC last year, and the company faces significant interest expense. Liabilities are greater than its tangible assets on the balance sheet, putting it in a vulnerable position.
In the first quarter, $23.6 million in interest expense nearly wiped out its $31.2 million in operating income. Though the top-line growth is impressive, it's unlikely to persist over the long term, as bowling isn't a growth industry.
While Bowlero delivered solid results in the first quarter, concerns about the business model and its ability to turn a profit seem to be superseding the growth story for now.
