What happened

The market threw shares of the world's largest bowling-center operator Bowlero (BOWL -2.89%) in the gutter on Thursday after the company reported its latest quarterly financial results. As of 11:30 a.m. ET, Bowlero stock was down about 18%.

So what

Bowlero went public at the end of 2021 in a merger with a special purpose acquisition company (SPAC). Yesterday afternoon, the company announced financial results for its fiscal third quarter of 2023. Q3 revenue came in at a record $316 million, up 22% year over year. And this growth was mostly fueled by an increase in same-store sales, which is good to see.

On the bottom line, Bowlero focuses on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). In Q3, the company had adjusted EBITDA of $128 million, up a nice 18% from the prior-year period.

SPAC stocks give longer-term financial guidance when they go public, and I like to judge them based on those original projections. On a trailing-12-month basis, Bowlero has revenue of $1.1 billion and adjusted EBITDA of $372 million. For comparison, management expected revenue of $904 million and adjusted EBITDA of $292 million in its fiscal 2023. Therefore, it's well on pace to deliver on the guidance from its SPAC presentation, which is a big positive in my opinion.

Now what

The market might be negatively reacting to forward guidance from Bowlero. Management said that it expects fourth-quarter numbers to be similar to what it posted in the first quarter. If that happens, both revenue and adjusted EBITDA would drop substantially year over year. And these numbers are likely lower than what Wall Street expected.

In my opinion, Bowlero is a complicated investment for a couple of reasons. First, as a SPAC stock, there are a lot of moving pieces with its outstanding share count, including warrants and preferred shares. Second, the company's business model uses a lot of leverage to acquire other companies and develop company-owned properties. 

Bowlero is an interesting company. But given the complexity of the business model and how new Bowlero still is to the stock market, it may be best to give it a little more time to develop a track record before buying shares.