Wednesday, December 8, 2021
Bowlero: Heading Toward The Finish Line
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
Refer to end of report for Analyst Certification & Disclosures
Strong operating revenue. For the first 9 weeks of Bowlero’s fiscal 2022, the company reported strong revenue growth. Revenue for the 9 weeks ended November 28, 2021, was $134 million, a 20.3% increase compared with the same period in calendar year 2019 (pre-pandemic). This comes on the heels of the company’s fiscal Q1 results of 22% revenue growth above pre-pandemic levels. The company also highlighted same store sales growth of 8.7% during the period. We view the report favorably, reflecting that the company emerged from the pandemic and is in full growth mode.
Continued footprint expansion. The company added to its more than 300 total centers with the opening of another 4 bowling centers during the period. This included a continuation of the company’s roll-up strategy, with the acquisitions of two centers, one in Florida and one in California. The other two centers were newly constructed by the company, one in California and one in Virginia.
Unifying the brand. During the period, the company announced the rebranding of two of its flagship New York City locations. With the move the company’s Times Square and Chelsea Piers Bowlmor locations join the premium Bowlero brand. This leaves only three Bowlmor locations that have yet to be rebranded. All are slated to become premium Bowlero centers. We view the rebranding favorably as it continues the company’s quest to establish a brand that is universally recognized as the future of bowling.
Merger likely to be completed soon. In the company’s press release, it reiterated that the merger between Bowlero and the SPAC, Isos Acquisition Corporation, is planned for completion this quarter. Upon completion of the merger, Bowlero’s common stock and warrants are expected to trade on the NYSE under the symbols BOWL and BOWLWS, respectively.
Attractive stock valuation. Bowlero’s implied post-merger EV/2022E EBITDA multiple is roughly 10.5x. Using a blended target multiple, derived from peer groups in the Live Events, Leisure, Amusement, and Experiential industries, a price target of $15 per share appears appropriate. This price target is reflective of a target EV/2022 EBITDA multiple of roughly 15x.
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The SPAC Company in this report is a participant in the Company Sponsored Research Program (CSRP); Noble receives compensation from the Company for such participation. No part of the CSRP compensation was, is, or will be directly or indirectly related to any specific recommendations or views expressed by the analyst in this research report.
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ANALYST CREDENTIALS, PROFESSIONAL DESIGNATIONS, AND EXPERIENCE
Director of Research. Senior Equity Analyst specializing in Media & Entertainment. 34 years of experience as an analyst. Member of the National Cable Television Society Foundation and the National Association of Broadcasters. BS in Management Science, Computer Science Certificate and MBA specializing in Finance from St. Louis University.
Named WSJ ‘Best on the Street’ Analyst six times.
FINRA licenses 7, 24, 66, 86, 87
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RESEARCH ANALYST CERTIFICATION
Independence Of View
All views expressed in this report accurately reflect my personal views about the subject securities or issuers.
Receipt of Compensation
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Ownership and Material Conflicts of Interest
Neither I nor anybody in my household has a financial interest in the securities of the subject company or any other company mentioned in this report.
| NOBLE RATINGS DEFINITIONS | % OF SECURITIES COVERED | % IB CLIENTS |
| Outperform: potential return is >15% above the current price | 95% | 33% |
| Market Perform: potential return is -15% to 15% of the current price | 5% | 2% |
| Underperform: potential return is >15% below the current price | 0% | 0% |
NOTE: On August 20, 2018, Noble Capital Markets, Inc. changed the terminology of its ratings (as shown above) from “Buy” to “Outperform”, from “Hold” to “Market Perform” and from “Sell” to “Underperform.” The percentage relationships, as compared to current price (definitions), have remained the same.
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Report ID: 24313