Adds Great Escape in Pleasant Hill, Iowa to Growing Portfolio
RICHMOND, Va.–(BUSINESS WIRE)– Bowlero Corp., (NYSE: BOWL) the global leader in bowling entertainment, announced today that it has completed the acquisition of Great Escape in Iowa. This is the Company’s 15th completed acquisition in calendar year 2022, bringing the Company’s total center count to 326.
Great Escape, located in Pleasant Hill, a suburb of Des Moines, is a 24-lane bowling center featuring laser tag, over 50 arcade games, virtual reality, and a full-service restaurant. Great Escape marks the Company’s second acquisition in Iowa this calendar year, the first being Thunderbowl located in Council Bluffs.
Brett Parker, President & Chief Financial Officer of Bowlero Corp. stated, “The addition of Great Escape is another exciting acquisition for Bowlero. We remain committed to bringing our guests a world-class entertainment experience, and furthering our presence nationwide.”
Great Escape is expected to open under Bowlero Corp. management on December 9th.
About Bowlero Corp Bowlero Corp. is the global leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 27 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com
RICHMOND, Va.–(BUSINESS WIRE)– Bowlero Corp. (NYSE: BOWL) (“Bowlero”), the global leader in bowling entertainment, announced today that management will participate in The UBS Global TMT Conference taking place December 5-7, 2022 at the Sheraton New York Times Square Hotel in New York, NY.
Brett Parker, President & Chief Financial Officer of Bowlero, will participate in a fireside chat at 3:50 PM ET on Tuesday, December 6, 2022. Mr. Parker will also be available for meetings during the conference.
For more information, or to request a meeting with management, please reach out to your UBS representative.
About Bowlero Corp
Bowlero Corp. is the global leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 27 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com.
SANTA MONICA, Calif.–(BUSINESS WIRE)– Entravision Communications Corporation (NYSE: EVC), a leading global advertising solutions, media and technology company, today announced financial results for the three- and nine-month periods ended September 30, 2022.
Third Quarter 2022 Highlights
Record third quarter advertising revenue
Net revenue up 21% over the prior-year quarter
Net income attributable to common stockholders down 23% over the prior-year quarter
Consolidated adjusted EBITDA up 12% over the prior-year quarter
Operating cash flow up 62% over the prior-year quarter
Free cash flow down 31% over the prior-year quarter
Quarterly cash dividend of $0.025 per share
“Entravision continued to see progress in the third quarter of 2022, with revenue up 21% versus the prior-year period. Adjusted EBITDA also improved double-digits, increasing 12% year-over-year,” said Walter Ulloa, Chairman and Chief Executive Officer. “Entravision’s strength throughout the quarter was again driven by our digital segment, where revenue improved 29% versus the third quarter of 2021. In our television and audio businesses, political ad spend, in particular, continued to perform strongly.”
Mr. Ulloa continued, “Entravision’s solid performance in the third quarter, together with our progress year-to-date, demonstrates the resiliency and growth of our business in a tough macro environment. We continue to strategically expand across the globe and now have operations in 40 countries across five continents in service of more than 7,000 clients. We are thoughtfully positioning our digital teams in emerging economies where Entravision’s unique offerings have a key first-mover advantage and where a critical mass of connected consumers exists alongside a growing advertising industry. We remain optimistic in finding multiple growth opportunities around the world for our digital business and look forward to sharing our progress as we continue to grow and expand globally.”
Quarterly Cash Dividend
The Company announced today that its Board of Directors approved a quarterly cash dividend to shareholders of $0.025 per share on the Company’s Class A, Class B and Class U common stock, in an aggregate amount of approximately $2.1 million. The quarterly dividend will be payable on December 30, 2022 to shareholders of record as of the close of business on December 15, 2022, and the common stock will trade ex-dividend on December 14, 2022. The Company currently anticipates that future cash dividends will be paid on a quarterly basis; however, any decision to pay future cash dividends will be subject to approval by the Board.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures as defined by SEC Regulation G. The GAAP financial measure most directly comparable to each of these non-GAAP financial measures, and a table reconciling each of these non-GAAP financial measures to its most directly comparable GAAP financial measure is included beginning on page 10.
Net revenue in the third quarter of 2022 totaled $241.0 million, up 21% from $199.0 million in the prior-year period. Of the overall increase, approximately $42.8 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business, and due to our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, neither of which contributed to net revenue in the comparable period ended September 30, 2021. In addition, of the overall increase, approximately $0.1 million was attributable to our audio segment, primarily due to increases in political advertising revenue and local advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $0.8 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television segment revenue was partially offset by increases in political advertising revenue and spectrum usage rights revenue.
Cost of revenue in the third quarter of 2022 totaled $157.1 million, up 26% from $124.3 million in the prior-year period. The increase was primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and due to our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, neither of which incurred cost of revenue for us in the comparable period ended September 30, 2021.
Operating expenses in the third quarter of 2022 totaled $49.3 million, up 14% from $43.1 million in the prior-year period. Of the overall increase, approximately $5.9 million was attributable to our digital segment and was primarily due to an increase in expenses associated with the increase in digital advertising revenue, an increase in salary expense and our investment in a variable interest entity during the third quarter of 2022 and our acquisition of 365 Digital during the fourth quarter of 2021, which did not incur operating expenses for us in the comparable period. Additionally, of the overall increase in operating expenses, approximately $0.4 million was attributable to our audio segment primarily due to an increase in expenses associated with the increase in local advertising revenue. The overall increase in operating expenses was partially offset by a decrease of approximately $0.1 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue, partially offset by an increase in rent expense and an increase in bad debt expense.
Corporate expenses in the third quarter of 2022 totaled $9.5 million, up 31% from $7.3 million in the prior-year period. The increase was primarily due to increases in non-cash stock-based compensation and an increase in salaries.
Net revenue for the nine-month period of 2022 totaled $659.9 million, up 25% from $526.3 million in the prior-year period. Of the overall increase, approximately $139.1 million was attributable to our digital segment and was primarily due to advertising revenue growth from our digital commercial partnerships business. In addition, the increase in net revenue in our digital segment was due to our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which contributed to net revenue in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially contributed to net revenue in the comparable period ended September 30, 2021. Additionally, of the overall increase, approximately $2.1 million was attributable to our audio segment, primarily due to increases in political advertising revenue and local advertising revenue, partially offset by a decrease in national advertising revenue. The overall increase was partially offset by a decrease of approximately $7.7 million attributable to our television segment, primarily due to decreases in local and national advertising revenue, and a decrease in retransmission consent revenue. These decreases were mainly attributed to the expiration of our Univision and UniMás network affiliation agreements in Orlando, Tampa and Washington, D.C. on December 31, 2021. The decrease in our television segment revenue was partially offset by increases in political advertising revenue and spectrum usage rights revenue.
Cost of revenue for the nine-month period of 2022 totaled $432.0 million, up 36% from $318.1 million in the prior-year period. The increase was primarily due to increased cost of revenue related to advertising revenue growth from our digital commercial partnerships business, and due to our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which incurred cost of revenue for us in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially incurred cost of revenue for us in the comparable period ended September 30, 2021.
Operating expenses for the nine-month period of 2022 totaled $140.5 million, up 12% from $125.0 million in the prior-year period. Of the overall increase, approximately $15.5 million was attributable to our digital segment and was primarily due to an increase in expenses associated with the increase in digital advertising revenue and an increase in salary expense. In addition, the increase in operating expenses in our digital segment was due to our investment in a variable interest entity and our acquisition of 365 Digital during the third quarter of 2022 and fourth quarter of 2021, respectively, neither of which incurred operating expenses for us in the comparable period ended September 30, 2021, and due to our acquisition of MediaDonuts during the third of 2021, which only partially incurred operating expenses for us in the comparable period ended September 30, 2021. Additionally, of the overall increase in operating expenses, approximately $0.6 million was attributable to our audio segment primarily due to an increase in expenses associated with the increase in local advertising revenue. The overall increase in operating expenses was partially offset by a decrease of approximately $0.6 million that was attributable to our television segment primarily due to a decrease in expenses associated with the decrease in local and national advertising revenue, partially offset by an increase in rent expense and bad debt expense.
Corporate expenses for the nine-month period of 2022 totaled $26.8 million, up 23% from $21.8 million in the prior-year period. The increase was primarily due to increases in non-cash stock-based compensation and an increase in salaries.
Balance Sheet and Related Metrics
Cash and marketable securities as of September 30, 2022 totaled approximately $164.8 million. Total debt under the Company’s credit agreement was $210.0 million. Net of $75 million of cash and marketable securities, total leverage as defined in the Company’s credit agreement was 1.4 times as of September 30, 2022. Net of total cash and marketable securities, total leverage was 0.5 times.
Notice of Conference Call
Entravision Communications Corporation will hold a conference call to discuss its third quarter 2022 results on Thursday, November 3, 2022 at 4:30 p.m. Eastern Time. To access the conference call, please dial (844) 836-8739 (U.S.) or (412) 317-5440 (Int’l) ten minutes prior to the start time and reference Conference ID number 10171311. The call will also be available via live webcast on the investor relations portion of the Company’s website located at www.entravision.com.
About Entravision Communications Corporation
Entravision is a leading global advertising, media and ad-tech solutions company connecting brands to consumers by representing top platforms and publishers. Our dynamic portfolio includes digital, television and audio offerings. Digital, our largest revenue segment, is comprised of four business units: our digital sales representation business; Smadex, our programmatic ad purchasing platform; our branding and mobile performance solutions business; and our digital audio business. Through our digital sales representation business, we connect global media companies such as Meta, Twitter, TikTok and Spotify with advertisers in primarily emerging growth markets worldwide. Smadex is our mobile-first demand side platform, enabling advertisers to execute performance campaigns using machine learning. We also offer a branding and mobile performance solutions business, which provides managed services to advertisers looking to connect with global consumers, primarily on mobile devices, and our digital audio business provides digital audio advertising solutions for advertisers in the Americas. In addition to digital, Entravision has 49 television stations and is the largest affiliate group of the Univision and UniMás television networks. Entravision also manages 45 primarily Spanish-language radio stations that feature nationally recognized, Emmy award-winning talent. Shares of Entravision Class A Common Stock trade on the NYSE under ticker: EVC. Learn more about our offerings at entravision.com or connect with us on LinkedIn and Facebook.
Forward-Looking Statements
This press release contains certain forward-looking statements. These forward-looking statements, which are included in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that actual results will not differ materially from these expectations, and the Company disclaims any duty to update any forward-looking statements made by the Company. From time to time, these risks, uncertainties and other factors are discussed in the Company’s filings with the Securities and Exchange Commission.
IRVING, Texas–(BUSINESS WIRE)– Salem Media Group, Inc. (Nasdaq: SALM) released its results for the three and nine months ended September 30, 2022.
Third Quarter 2022 Results
For the quarter ended September 30, 2022 compared to the quarter ended September 30, 2021:
Consolidated
Total revenue increased 1.3% to $66.9 million from $66.0 million;
Total operating expenses increased 50.7% to $75.6 million from $50.2 million;
Operating expenses, excluding stock-based compensation expense, debt modification costs, gains and losses on the sale or disposition of assets, legal settlement, impairments, depreciation expense and amortization expense (1) increased 10.3% to $60.8 million from $55.2 million;
The company had an operating loss of $8.8 million compared to operating income of $15.8 million;
The company recognized $0.1 million in film distribution income from an unconsolidated equity investment;
The company had a net loss of $11.9 million, or $0.44 net loss per share compared to net income of $22.1 million, or $0.81 net income per diluted share;
EBITDA (1) decreased to $(5.7) million from $30.2 million; and
Adjusted EBITDA (1) decreased 78.8% to $2.3 million from $10.8 million.
Broadcast
Net broadcast revenue increased 3.1% to $51.1 million from $49.6 million;
Station Operating Income (“SOI”) (1) decreased 17.9% to $10.0 million from $12.1 million;
Same Station (1) net broadcast revenue increased 3.2% to $51.1 million from $49.5 million; and
Same Station SOI (1) decreased 16.7% to $10.1 million from $12.1 million.
Digital Media
Digital media revenue decreased 4.3% to $10.2 million from $10.6 million; and
Digital Media Operating Income (1) decreased 21.9% to $1.9 million from $2.4 million.
Publishing
Publishing revenue decreased 3.7% to $5.5 million from $5.7 million; and
Publishing Operating Loss (1) was $1.0 million as compared to publishing operating income of $0.5 million.
Included in the results for the quarter ended September 30, 2022 are:
A $7.7 million ($5.7 million, net of tax, or $0.21 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento, and San Francisco;
A $0.1 million loss on the disposal of assets;
A $3.8 million ($2.8 million, net of tax, or $0.10 per share) legal settlement expense; and
A $0.1 million non-cash compensation charge related to the expensing of stock options.
Included in the results for the quarter ended September 30, 2021 are:
A $2.3 million ($1.7 million, net of tax, or $0.06 per share) charge for debt modification costs. On September 10, 2021, the company refinanced $112.8 million of the 2024 Notes by exchanging into $114.7 million (reflecting a call premium of 1.688%) of 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with ASC 470 with $2.3 million of fees paid to third parties included in operating expenses for the period;
A $11.2 million ($8.3 million, net of tax, or $0.30 per diluted share) gain on the forgiveness of PPP loans;
A $0.1 million loss from the early retirement of long-term debt associated with the 2024 Notes;
A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted share) net gain on the disposition of assets relates to a $10.5 million pre-tax gain on the sale of land in Lewisville, Texas, and $0.1 million pre-tax gain on the sale of the Hilary Kramer Financial Newsletter and related assets as well as various other fixed asset disposals; and
A $0.1 million non-cash compensation charge ($0.1 million, net of tax) related to the expensing of stock options.
Per share numbers are calculated based on 27,216,787 diluted weighted average shares for the quarter ended September 30, 2022, and 27,280,949 diluted weighted average shares for the quarter ended September 30, 2021.
Year to Date 2022 Results
For the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021:
Consolidated
Total revenue increased 4.8% to $198.2 million from $189.1 million;
Total operating expenses increased 19.2% to $194.6 million from $163.3 million;
Operating expenses, excluding stock-based compensation expense, debt modification costs, gains and losses on the sale or disposition of assets, legal settlement, impairments, depreciation expense and amortization expense (1) increased 9.2% to $176.6 million from $161.6 million;
The company’s operating income decreased 86.4% to $3.5 million from $25.8 million;
The company recognized $4.0 million in film distribution income from an unconsolidated equity investment;
The company had a net loss of $1.0 million, or $0.04 net loss per share compared to net income of $24.7 million, or $0.91 net income per diluted share;
EBITDA (1) decreased 63.6% to $17.0 million from $46.7 million; and
Adjusted EBITDA (1) decreased 24.3% to $20.8 million from $27.5 million.
Broadcast
Net broadcast revenue increased 8.3% to $152.0 million from $140.4 million;
SOI (1) decreased 6.8% to $31.2 million from $33.5 million;
Same station (1) net broadcast revenue increased 8.1% to $151.6 million from $140.2 million; and
Same station SOI (1) decreased 6.7% to $31.3 million from $33.6 million.
Digital media
Digital media revenue increased 2.3% to $31.3 million from $30.6 million; and
Digital media operating income (1) increased 16.7% to $6.2 million from $5.3 million.
Publishing
Publishing revenue decreased 18.0% to $14.8 million from $18.1 million; and
Publishing Operating Loss (1) was $1.6 million compared to publishing operating income of $1.2 million.
Included in the results for the nine months ended September 30, 2022 are:
A $11.7 million ($8.6 million, net of tax, or $0.32 per share) impairment charge to the value of broadcast licenses in Boston, Chicago, Columbus, Dallas, Greenville, Honolulu, Little Rock, Orlando, Philadelphia, Portland, Sacramento and San Francisco;
A $8.5 million ($6.3 million, net of tax, or $0.23 per diluted share) net gain on the disposition of assets relates primarily to the $6.5 million pre-tax gain on the sale of land used in the company’s Denver, Colorado broadcast operations, the $1.8 million pre-tax gain on sale of land used in the company’s Phoenix, Arizona broadcast operations, and $0.5 million pre-tax gain on the sale of the company’s radio stations in Louisville, Kentucky offset by various fixed asset disposals;
A $18,000 loss on the early retirement of long-term debt associated with the 2024 Notes;
A $4.8 million ($3.5 million, net of tax, or $0.13 per share) legal settlement expense;
A $0.1 million ($0.1 million, net of tax) goodwill impairment charge;
A $0.2 million ($0.2 million, net of tax, or $0.01 per share) charge for debt modification costs; and
A $0.2 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options.
Included in the results for the nine months ended September 30, 2021 are:
A $2.3 million ($1.7 million, net of tax, or $0.06 per share) charge for debt modification costs. On September 10, 2021, the company refinanced $112.8 million of the 2024 Notes by exchanging into $114.7 million (reflecting a call premium of 1.688%) of 2028 Notes. The transaction was assessed on a lender-specific level and was accounted for as a debt modification in accordance with ASC 470 with $2.3 million of fees paid to third parties included in operating expenses for the period;
A $11.2 million ($8.3 million, net of tax, or $0.30 per diluted share) gain on the forgiveness of PPP loans;
A $0.1 million loss from the early retirement of long-term debt associated with the 2024 Notes;
A $10.6 million ($7.8 million, net of tax, or $0.29 per diluted share) net gain on the disposition of assets relating to a $10.5 million pre-tax gain on the sale of land in Lewisville, Texas, a $0.5 million pre-tax gain on the sale of Singing News Magazine and Singing News Radio and a $0.1 million pre-tax gain on the sale of the Hilary Kramer Financial Newsletter and related assets offset by $0.4 million additional loss recorded at closing on the sale of radio station WKAT-AM and FM translator in Miami, Florida and various fixed asset disposals; and
A $0.2 million non-cash compensation charge ($0.2 million, net of tax, or $0.01 per share) related to the expensing of stock options.
Per share numbers are calculated based on 27,202,983 diluted weighted average shares for the nine months ended September 30, 2022, and 27,217,382 diluted weighted average shares for the nine months ended September 30, 2021.
Balance Sheet
As of September 30, 2022, the company had $114.7 million outstanding on the 7.125% senior secured notes due 2028 (“2028 Notes”) and $44.7 million outstanding on 6.75% senior secured notes due 2024 (“2024 Notes”).
Acquisitions and Divestitures
The following transactions were completed since July 1, 2022:
On October 1, 2022, the company acquired websites and the related assets of DayTradeSPY for $0.6 million in cash. As part of the purchase agreement, the company may pay up to an additional $1.0 million of cash in contingent earn-out consideration within one-year of the closing date based on the achievement of certain revenue benchmarks.
Pending Transactions
On September 29, 2022, the company entered into an Asset Purchase Agreement (“APA”) to acquire radio station WMYM-AM and an FM translator in Miami, Florida for $5.0 million. The company paid $0.3 million of cash into an escrow account and plans to operate the radio stations under a Time Brokerage Agreement beginning on November 16, 2022.
On September 22, 2022, the company entered into an APA to acquire radio stations WWFE-AM, WRHC-AM and two FM translators in Miami, Florida for $5.0 million.
On June 2, 2021, the company entered into an APA to acquire radio station KKOL-AM in Seattle, Washington for $0.5 million. The company paid $0.1 million of cash into an escrow account and began operating the station under a Local Marketing Agreement on June 7, 2021.
Conference Call Information
Salem will host a teleconference to discuss its results on November 3, 2022 at 4:00 p.m. Central Time. To access the teleconference, please dial (888) 770-7291, and then ask to be joined into the Salem Media Group Third Quarter 2022 call or listen via the investor relations portion of the company’s website, located at investor.salemmedia.com. A replay of the teleconference will be available through November 17, 2022 and can be heard by dialing (800) 770-2030, passcode 2413416 or on the investor relations portion of the company’s website, located at investor.salemmedia.com.
Follow us on Twitter @SalemMediaGrp.
Fourth Quarter 2022 Outlook
For the fourth quarter of 2022, the company is projecting total revenue to decrease between 3% and 5% from fourth quarter 2021 total revenue of $69.1 million. This decrease is due largely to the fact that Regnery had an extremely strong fourth quarter in book sales last year. The company is also projecting operating expenses before gains or losses on the sale or disposal of assets, stock-based compensation expense, legal settlement, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation expense and amortization expense (“Recurring Operating Expenses”) to increase between 4% and 7% compared to the fourth quarter of 2021 Recurring Operating Expenses of $58.3 million.
A reconciliation of Recurring Operating Expenses to the most directly comparable GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the potential high variability, complexity and low visibility with respect to the charges excluded from this non-GAAP financial measure, in particular, the change in the estimated fair value of earn-out consideration, impairments and gains or losses from the disposition of fixed assets. The company expects the variability of the above charges may have a significant, and potentially unpredictable, impact on its future GAAP financial results.
About Salem Media Group, Inc.
Salem Media Group is America’s leading multimedia company specializing in Christian and conservative content, with media properties comprising radio, digital media and book and newsletter publishing. Each day Salem serves a loyal and dedicated audience of listeners and readers numbering in the millions nationally. With its unique programming focus, Salem provides compelling content, fresh commentary and relevant information from some of the most respected figures across the Christian and conservative media landscape. Learn more about Salem Media Group, Inc. at www.salemmedia.com, Facebook and Twitter.
Forward-Looking Statements
Statements used in this press release that relate to future plans, events, financial results, prospects or performance are forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those anticipated as a result of certain risks and uncertainties, including but not limited to the ability of Salem to close and integrate announced transactions, market acceptance of Salem’s radio station formats, competition from new technologies, inflation and other adverse economic conditions, and other risks and uncertainties detailed from time to time in Salem’s reports on Forms 10-K, 10-Q, 8-K and other filings filed with or furnished to the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Salem undertakes no obligation to update or revise any forward-looking statements to reflect new information, changed circumstances or unanticipated events.
(1) Regulation G
Management uses certain non-GAAP financial measures defined below in communications with investors, analysts, rating agencies, banks and others to assist such parties in understanding the impact of various items on its financial statements. The company uses these non-GAAP financial measures to evaluate financial results, develop budgets, manage expenditures and as a measure of performance under compensation programs.
The company’s presentation of these non-GAAP financial measures should not be considered as a substitute for or superior to the most directly comparable financial measures as reported in accordance with GAAP.
Regulation G defines and prescribes the conditions under which certain non-GAAP financial information may be presented in this earnings release. The company closely monitors EBITDA, Adjusted EBITDA, Station Operating Income (“SOI”), Same Station net broadcast revenue, Same Station broadcast operating expenses, Same Station Operating Income, Digital Media Operating Income, Publishing Operating Income (Loss), and operating expenses excluding gains or losses on the disposition of assets, stock-based compensation, changes in the estimated fair value of contingent earn-out consideration, impairments, depreciation and amortization, all of which are non-GAAP financial measures. The company believes that these non-GAAP financial measures provide useful information about its core operating results, and thus, are appropriate to enhance the overall understanding of its financial performance. These non-GAAP financial measures are intended to provide management and investors a more complete understanding of its underlying operational results, trends and performance.
The company defines Station Operating Income (“SOI”) as net broadcast revenue minus broadcast operating expenses. The company defines Digital Media Operating Income as net Digital Media Revenue minus Digital Media Operating Expenses. The company defines Publishing Operating Income (Loss) as net Publishing Revenue minus Publishing Operating Expenses. The company defines EBITDA as net income before interest, taxes, depreciation, and amortization. The company defines Adjusted EBITDA as EBITDA before gains or losses on the disposition of assets, before debt modification costs, before changes in the estimated fair value of contingent earn-out consideration, before impairments, before net miscellaneous income and expenses, before (gain) loss on early retirement of long-term debt and before non-cash compensation expense. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are commonly used by the broadcast and media industry as important measures of performance and are used by investors and analysts who report on the industry to provide meaningful comparisons between broadcasters. SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not measures of liquidity or of performance in accordance with GAAP and should be viewed as a supplement to and not a substitute for or superior to its results of operations and financial condition presented in accordance with GAAP. The company’s definitions of SOI, Digital Media Operating Income, Publishing Operating Income (Loss), EBITDA and Adjusted EBITDA are not necessarily comparable to similarly titled measures reported by other companies.
The company defines Same Station net broadcast revenue as broadcast revenue from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station broadcast operating expenses as broadcast operating expenses from its radio stations and networks that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. The company defines Same Station SOI as Same Station net broadcast revenue less Same Station broadcast operating expenses. Same Station operating results include those stations that the company owns or operates in the same format on the first and last day of each quarter, as well as the corresponding quarter of the prior year. Same Station operating results for a full calendar year are calculated as the sum of the Same Station-results for each of the four quarters of that year. The company uses Same Station operating results, a non-GAAP financial measure, both in presenting its results to stockholders and the investment community, and in its internal evaluations and management of the business. The company believes that Same Station operating results provide a meaningful comparison of period over period performance of its core broadcast operations as this measure excludes the impact of new stations, the impact of stations the company no longer owns or operates, and the impact of stations operating under a new programming format. The company’s presentation of Same Station operating results are not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. The company’s definition of Same Station operating results is not necessarily comparable to similarly titled measures reported by other companies.
For all non-GAAP financial measures, investors should consider the limitations associated with these metrics, including the potential lack of comparability of these measures from one company to another.
The Supplemental Information tables that follow the condensed consolidated financial statements provide reconciliations of the non-GAAP financial measures that the company uses in this earnings release to the most directly comparable measures calculated in accordance with GAAP. The company uses non-GAAP financial measures to evaluate financial performance, develop budgets, manage expenditures, and determine employee compensation. The company’s presentation of this additional information is not to be considered as a substitute for or superior to the directly comparable measures as reported in accordance with GAAP.
Prepared remarks via webcast on November 16 at 4:30 PM ET
RICHMOND, Va.–(BUSINESS WIRE)– Bowlero Corp. (NYSE: BOWL) (“Bowlero” or the “Company”), the world’s largest owner and operator of bowling centers, will report financial results for the first quarter of fiscal 2023 on Wednesday, November 16, 2022 after the U.S. stock market closes. Management will discuss the results via webcast at 4:30 PM ET on the same day.
The live webcast, replay and results presentation will be available in the Events & Presentations section of the Bowlero Investor Relations website at https://ir.bowlerocorp.com/overview/default.aspx.
About Bowlero Corp.
Bowlero Corp. is the worldwide leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 27 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com.
RICHMOND, Va.–(BUSINESS WIRE)– Bowlero Corp. (NYSE: BOWL), the world’s leader in bowling entertainment, announced today that Thomas Shannon, Founder & Chief Executive Officer of Bowlero Corp., will be interviewed by Jim Cramer on tonight’s edition of Mad Money with Jim CrameronCNBC.
The interview is scheduled to air tonight during the 6:00 PM ET showing of Mad Money. To view the interview, please visit CNBC’s website at www.cnbc.com/live-tv/ or visit the CNBC channel anywhere you get live TV.
About Bowlero Corp
Bowlero Corp. is the worldwide leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 27 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com.
Marks the Company’s 10th, 11th, and 12th Completed Acquisitions of 2022
Robust Pipeline of Definitive Agreements Remain
RICHMOND, Va., Oct. 20, 2022 /PRNewswire/ — Bowlero Corp., (NYSE: BOWL) the world’s leader in bowling entertainment, announced today that it has completed three more acquisitions from its pipeline of definitive agreements in 2022. This marks the Company’s 7th completed acquisition of FY23.
Brett Parker, President & Chief Financial Officer of Bowlero Corp stated, “We are delighted with the pace and quality of our acquisitions so far in 2022, with these completions marking our 45th location in California and expanding our presence in Wisconsin from three to five.”
On the West Coast, Strikes Unlimited is a 50-lane center in Sacramento, CA with state-of-the-art technology, arcade games, an on-site pro-shop and home to the Halftime Bar and Grill.
Super Bowl Family Entertainment Center, located in Wisconsin, is a 48-lane center featuring a wide selection of arcade games, blacklight bowling, leagues and a sports bar and grill. Additionally, located minutes away from downtown Milwaukee, is JB’s on 41. With 10 private luxury suites, 35 modern bowling lanes, 40 arcade games and much more, this location is a nationally and locally ranked top bowling and entertainment destination.
All three locations will officially open under Bowlero Corp management the weekend of October 21st.
“Our pipeline for additional deals remains robust, and we will continue to pursue accelerated growth through our proven strategy of acquisitions and new builds,” said Parker in closing.
About Bowlero Corp
Bowlero Corp. is the worldwide leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 27 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
Jacob Mutchler, Research Associate, Noble Capital Markets, Inc.
Refer to the bottom of the report for important disclosures
Overview: Developing A Shopping List. With the U.S. economy in the midst of a recession, we believe investors should be on the lookout for stocks on the “discount rack.” In our view, companies that possess ample funding and favorable growth characteristics could be well positioned to survive the downturn and be on the forefront of the subsequent economic recovery. This report highlights some of our favorite picks in the Entertainment & Leisure industries.
Entertainment: Bowlero Bowls Over Its Peers. Bowlero’s most recent fiscal quarter illustrated a continuation of the entertainment industry’s COVID rebound. Bowlero’s Group Event revenue grew 140% from the prior year period while total revenue was up 68%. With cash flow margins above 30% and cash on the balance sheet of $132 million, the company is poised to continue making accretive acquisitions in the fragmented bowling industry.
Gaming: Placing A Bet On Codere. The CDRO shares have been punished year-to-date (-58%) despite the company executing on its growth strategy as planned and maintaining pace to meet full-year guidance. Given a combination of robust growth in key Latin American markets and a balance sheet that boasts €84 million in cash and no LT debt, we believe the shares offer a favorable risk/reward relationship.
Esports: Motorsport Games Gets Funding. After a difficult second quarter a transformative restructuring plan has been implemented, which is estimated by the company to reduce overhead costs by 20% and save $4 million by the end of 2023. Additionally, Motorsport has secured $3 million from an existing credit line. These promising changes allow for more dollars to be spent on key revenue drivers.
Leisure. Travelzoo Readies A New Journey. Although Travelzoo (TZOO) is a digital media company, it is one of our favorite ways to play the recovering travel industry.
Investment Overview
Developing A Shopping List
The best time to buy stocks is typically in the midst of an economic recession. Investors begin to look beyond the economic weakness and begin positioning portfolios for an economic rebound. The hard part is determining when the economy is in the middle of the downturn. It appears by all standard definitions of an economic downturn that the U.S. is in an economic recession. But, how long will a downturn last? Should investors try to be cute to predict the midpoint of the downturn?
Many economic pundits paint the current state of the economy against the canvass of the 1970s, a period of high inflation and low economic growth. There are many similarities. The Federal Reserve in the early 70s was willing to provide cheap money to fuel the economy, without much concern about inflation. In the second half of the 70s, the economy was rocked by fuel supply shortages and high inflation. During the Covid pandemic, both fiscal and monetary policy was designed to provide liquidity and to make sure that people were able to pay their bills during the economic lockdowns. This had the affect of increasing personal income, even though GDP declined 31.4% in 2020. As the economy reopened, there was significant demand for goods and services, some of which were in short supply because of the previous and recurring economic lock downs. Simplistically, this fueled inflation, high demand with a consumer that had disposable income and limited supply.
As Figure #1 Early 1970s chart illustrates, the US economy grew 9.8%, as measured by real GDP, from January 1972 to September 1975. Notably, the stock market, as measured by the S&P 500 Index, declined a significant 18.6%. This was a period marked by rising inflation due to government spending. The inflation rate, as measured by the US Bureau of Labor Statistics, was a reasonable 3.3% in 1972, but increased to 11.1% in 1974 and then moderated slightly to 9.1% in 1975. The inflation rate remained above 5% for the following 3 years.
Figure #1 Early 1970s
Source: US Bureau of Economic Analysis and Yahoo Finance.
Given the current state of rising energy prices, many pundits paint the current US economic plight similar to the period of fuel shortages of the late 1970s. As Figure #2 Late 1970s illustrates, the US economy, as measured by real GDP, grew 13.5% from January 1977 to October 1981, an average of slightly more than 3% per year. Notably, inflation increased significantly, from 6.5% in 1977 to 11.3% in 1979, followed by 13.5% in 1980, and 10.3% in 1981. The stock market, as measured by the S&P 500 Index, did not react well, up 9.3% from January 1977 to October 1981, an average of 2.3% growth.
Figure #2 Late 1970s
Source: US Bureau of Economic Analysis and Yahoo Finance.
So, where are we now? In the present, the Covid induced government spending and stimulus related fiscal policy, large spending on the Ukraine war, and a Fed unwilling to reign in early signs of inflation has put the US in a dire economic position. Certainly, supply chain shortages contributed to the current rise in inflation, as well. The Fed now appears to have religion on inflation and is aggressively raising interest rates. The Fed indicated that it is willing to create economic pain to arrest inflationary pressures. Most certainly this will cause additional economic weakness. The stock market in the near to intermediate term will need to digest the likelihood of weakening corporate profits, as well. Furthermore, as it relates to the equity markets, other investment classes, such as bonds, may become more appealing, taking demand from the stock market.
We believe that arresting inflation would set a favorable trajectory for the stock market, as investors position for the prospect of an economic recovery. To some degree, the 24.4% drop in the stock market, as measured by the S&P 500 index, from January 2022 to near current levels, anticipate some of the headwinds for investors described earlier in this report, including weakening corporate profits, the prospect of a further weakened US, and, even global economy, a move toward other investment classes, and stubborn inflation. What is different this time is that the Fed now appears to be aggressively tackling inflation. As such, the 47% drop in the stock market from highs in 1973 to the low in 1974 may not be a prelude to the current environment. It was a different Fed and it took different actions.
We encourage a different approach than trying to time the market. Our advice is for investors to develop a shopping list and begin accumulating. But, be selective. We focus on companies with favorable balance sheets, or are well funded, have compelling growth characteristics, and attractive free cash flow. In other words, we look for companies that appear well positioned to come out on the other side of the recession and will benefit from an economic recovery.
In this, our inaugural issue of the Entertainment and Leisure Industry Quarterly, we look at several companies that have favorable investment attributes for investors to consider. As Figure #3 Entertainment 12 Month Trailing Stock Performance Chart illustrates, the Entertainment Group performed poorly over the past 12 months. The Noble Entertainment index performed the best among our three Entertainment & Leisure sectors, down 16.1%, slightly outperforming the general market as measured by the S&P 500 Index, which decreased 16.8% in the comparable period. The Noble iGaming Index decreased 53.6% and the Noble eSports Index decreased 82.5% as these developmental industries were adversely affected by the closing of the capital markets to fund expansion. Given the weakness in these sectors, we look for the hidden gems. Some of our favorites highlighted in this report include: Bowlero (BOWL), Motorsport Games (MSGM), Travelzoo (TZOO) and Codere Online Luxemburg (CDRO)
Figure #3 Entertainment 12 Month Trailing Stock Performance
Source: Capital IQ
Entertainment Industry
Bowlero Bowls Over Its Peers
While the entertainment industry is broadly defined, we take a look at the Experiential Entertainment industry, in general, and at Bowlero (BOWL), specifically. In the latest quarter, the Noble Entertainment Index outperformed the general market, as measured by the S&P 500 Index, up 0.7% versus the general market decline of 5.3%. One of the contributors to the outperformance of the Entertainment group was Bowlero, up 16.2% in the comparable period.
The Bowlero shares reacted well to the company’s fiscal fourth quarter earnings release on September 15th. Q4 revenue of $267.7 million increased a strong 68% from year earlier levels and an impressive 42% above our estimate of $188.3 million. The strong revenue was attributed to favorable “walk-in” revenue, driven in part by a continuation of the Covid recovery. Adj. EBITDA was well above our estimate at $82.4 million, 45% higher than our forecast of $56.8 million.
How did Bowlero perform relative to its peers? As Figures #4 and #5 Entertainment Q2 Performance illustrates, Bowlero’s revenue growth for the comparable company peer second quarter outperformed its peers, save Live Nation. Live Nation’s revenue growth was 670%, reflecting the year earlier absence of events. Outside of Live Nation, Bowlero’s revenue growth of 68% compared favorably with the rest of its experiential entertainment peers, including Dave & Buster’s Entertainment’s, up 24%, and Vail Resorts, up roughly 31%.
Notably, management indicated that first quarter revenues are pacing 23% higher than year earlier results. As such, we raised our fiscal Q1 revenue forecast from $193.5 million to $222.5 million and raised our Q1 Adj. EBITDA estimate from $61.4 million to $72.0 million. Given strong operating momentum, we raised our fiscal full year 2023 revenue estimate to $983.5 million from $899.3 million and our Adj. EBITDA estimate to $322.2 million from $301.3 million. While we anticipate Bowlero’s revenue growth will slow as it faces more difficult comps due to the post Covid recovery and potential economic weakness, we believe that the company is well positioned. Furthermore, we expect that the company will grow revenues faster than most of its peers post Covid recovery due to the growth potential of its industry.
Figure #4 Entertainment Q2 Performance
Source: Company 10Qs
Figure #5 Entertainment Q2 Performance
Source: Company 10Qs
As of July 3, the company had $132.2 million in cash and $865.1 million in long-term debt. Debt is a comfortable 2.6 times our calendar year 2023 adj. EBITDA estimate, with net debt a conservative 2.1 times. With a large cash balance and strong cash flow generation (32% adj. EBITDA margin), we believe the company is well positioned to repurchase stock, upgrade its facilities, and/or acquire new facilities. The company has a large $200 million share repurchase authorization, of which it repurchased 3.3 million shares at an average share price of $10.07. There is a large repurchase authorization remaining. Furthermore, we believe that the company will seek acquisition fueled growth, possibly in other experiential center based facilities other than bowling.
Notably, the BOWL shares trade at 8.6 times our revised calendar full year 2023 adj. EBITDA forecast, below peers which currently trade near 9.5 times. Figure #6 Entertainment Comparables highlight the stock valuations in the experiential entertainment group. Given its favorable growth profile, (the company has grown faster than its peers), a healthy balance sheet, compelling stock valuation, and prospects for acquisition fueled growth, we view the Bowlero shares as among our favorites in the sector and one to put on a shopping list for a recovery play.
Figure #6 Entertainment Comparables
Source: Capital IQ and Noble estimates.
iGaming Industry
Placing A Bet On Codere
The past year has been tough on the iGaming industry. The Noble iGaming Index is down nearly 54% versus a negative 17% for the general market, as measured by the S&P 500 Index. In the latest quarter, the iGaming stocks seemed to have stabilized, up 1.6% versus a continued general market decline, down 5.3% for the general market. Interestingly, as Figure #7 Third Quarter Stock Performance chart illustrates, the iGaming sector was the best performing sector among the Entertainment and Esports sectors, which were up a modest 0.7% and down 38.1%, respectively.
The shares of Codere Online Luxembourg could not fight the headwinds of the industry wide selling pressure. The CDRO shares dropped 70% from its post de-SPACing in December 2021 to near current levels. The weakness in the shares has been in spite of the company executing on its growth strategy as planned and maintaining its fundamental pace to meet full-year guidance. In the latest quarter, the shares drifted 3.9% versus the industry which increased 1.6%.
Figure #7 Third Quarter Stock Performance
Source: Capital IQ
We believe that the CDRO shares are a victim of throwing the baby out with the bath water. The poor performance of the iGaming industry in many respects is due to the developmental nature of the industry. Many of the companies included in the Noble iGaming index do not generate positive cash flow. As such, balance sheets have been supporting growth investment. Certainly, there will be a shake-out of players in the industry that do not have the financial capability to invest for growth. We believe that Codere Online is one of the survivors.
First, the company has been executing on its development plans to expand its operations in Latin America, as evidenced by favorable quarterly results. The latest second quarter net gaming revenue grew 41% to $29.2 million, accelerating from the 24% year-over-year growth in Q1. At $11.9 million, Mexico accounted for nearly 41% of the revenue, growing 85% over the prior year period. Operations in Columbia contributed $2.2 million, with 56% growth. Even revenue in Spain grew 12%, despite restrictions on marketing in the country.
Given a combination of robust growth in key Latin American markets and a balance sheet that boasts €84 million in cash and no LT debt, we believe the shares offer a favorable risk/reward relationship. We believe the company is off to a good start since the completion of the SPAC merger, with strong execution of its growth strategy in Latin America. Management is continuing expansion with plans to add to the company’s presence in Argentina. In August, the company completed its application for an online gambling license in Cordoba, Argentina’s second-most populous province. If the company is granted a license, which would likely happen before year-end, it would begin operations shortly after the issuance. Notably, Cordoba will issue up to 10 licenses and Codere Online is one of just 10 applicants. Management believes there is an opportunity for the company to be a market leader in Argentina. To that end, the company expanded its partnership with Argentine soccer club River Plate, during the quarter becoming the club’s primary sponsor. The Codere logo is now on the front of the club’s jersey, which will increase the company’s visibility in the country.
Although the company is not yet cash flow positive, its operations in Spain generated its highest quarterly cash flow since Q2 2020. Adj. EBITDA in Spain was $3.6 million, enough to offset 87% of the $4.1 million adj. EBITDA loss from the company’s operations in Mexico. Interestingly, the marketing restrictions in the country came with a silver lining of lower competition. This is because the restrictions make it harder for newer operators to establish their brands in the country. Additionally, the lower marketing costs contributed to the strong cash flow generation. Notably, management expects similar cash flow generation going forward for the Spanish operations. We view the situation in Spain favorably as the consistent cash flow profile will help fund the expansion in Latin America and have a mitigating impact on the company’s cash burn.
Figure #8 iGaming Comparables highlight the stock valuations in the iGaming industry and the valuation gap between the industry and Codere. Near current levels, the CDRO shares trade at 0.2 times enterprise value to 2023 expected revenue. Like other companies that have negative cash flow, the CDRO shares have suffered in recent months. However, Codere Online does not appear to be in need of funding to execute on its growth strategy. As such, we believe that investors have not differentiated it from its peers. Our price target of $9 reflects a target EV/2023 revenue multiple of 2 times, more in line with peers of 4 times, but with additional headroom for upside. The shares are rated Outperform.
Figure #8 iGaming Comparables
Source: Capital IQ and Noble estimates.
Esports Industry
The Esports industry had a difficult year and a difficult quarter in terms of stock performance. The horrible stock performance does not reflect the overall industry trends. Video gaming is still on the rise. It is estimated that there are 2.7 billion gamers worldwide, expected to achieve an estimated 3.0 billion gamers in 2023, based on Newzoo’s numbers. The video game market is expected to reach $159.3 billion this year and grow to $200.0 billion in 2023. So, what about the Esports industry? Esports viewership was elevated during the Covid lockdowns, with viewership significantly higher. As Figure #9 Esports Viewership Outlook illustrates, viewership trends are expected to increase even from the elevated 2020 levels to over 640 million viewers in 2025.
In spite of the compelling industry fundamental trends, the individual esports companies in the space are struggling. Many of the companies were developmental, and, as such, were caught without investment spend as the capital markets closed. We find some gems in the rubble of the esports industry. The stock that we would like to highlight in this report is Motorsport Games (MSGM). Motorsport Games is a publisher of motorsport video games, with the rights to iconic racing games such as NASCAR and 24 Hour of LeMans. After a high of $15.50 in October 2021, the shares are currently trading at $0.78 per share.
Recently, the company announced several moves to shore up its financing until it releases a set of new motorsport games in 2023. At that time, the company is expected to significantly improve its financial capability to invest in future updates to its expanding game portfolio. First, the company announced that it will decrease overhead by an annualized $4 million. Secondly, the company will receive a $3 million cash advance from its majority shareholder, Motorsport Network. This agreement is under the same terms as its previous $12 million line of credit, which had been paid off. Finally, the company plans to have a 1 for 10 reverse stock split. This move is to maintain NASDAQ listing requirements.
Near current levels, the MSGM shares trade at an enterprise value below cash value, well below peers as Figure #10 Esports Comparables illustrate. We view the shares as an option on the company’s ability to fund its operations long enough to launch its new titles and cash in on its world class licensing agreements. We view the shares as a high risk/high reward opportunity, suitable only for speculative investors. We rate the shares Outperform with a price target of $2.50. Notably, our price target, which represents significant upside, implies a conservative target enterprise value of just 0.7 times 2023 revenue. Please read the attached report for important disclosures.
Figure #9 Esports Viewership Outlook
Source: Newzoo/Statista
Figure #10 Esports Comparables
Source: Capital IQ and Noble estimates.
Leisure Industry
The Leisure industry is a very broad industry. In this report, we highlight a company that is in the Travel Leisure industry, but is really an advertising/media company. But, because its business is closely aligned with the travel industry, we have included it in this Leisure report. The company is Travelzoo. Much like the travel industry, there has been fits and starts with the recovery post Covid. Many countries are now open, travel restrictions are gone, and, even Covid/mask policies have relaxed. But, the industry, in general, and Travelzoo, in particular, are dealing with the weakening global economies.
In the recent second quarter, the favorable revenue momentum from the first quarter fizzled. Total company revenues declined 7.3% year over year and were down roughly 4% from the first quarter. Some seasonality appears to be at play here. The question will be whether the softness in the quarter was related to general macro economic trends and if those trends appear to be evident heading into the third quarter. We believe that the weak quarter is related to choppiness in revenue due to the company’s transition toward advertising rather than “getaway” voucher sales. As such, we do not believe that there is an unraveling of the fundamental underpinning of the company.
The company sold travel “getaway” vouchers during the Covid pandemic. Those voucher sales accounted for as much as 60% of total company revenues. Now that the travel industry is coming back, the company has pivoted toward its traditional advertising focused model. We estimate that “getaway” voucher sales were between 15% to 20% of total revenues in the latest quarter. Given that advertising represents a higher margin business, gross margins were higher than expected in the quarter (87.8% versus our 85.4% estimate). But, advertising was not as strong as what we had hoped. Management believes that travel demand increased beyond the capability of the travel industry. While prices increased for airline tickets, the industry was not able to deal with the demand given staffing shortages. Similarly, hotels faced the same issue. As a result, airlines have cutback on flights. More recently, given a waning consumer demand and softening US economy, airline prices are coming back down. We believe that the company is entering a more favorable environment given softening demand. In other words, the travel industry will need to provide favorable deals to lure consumers to travel. That is the sweet spot for Travelzoo.
Notably, the company has a flexible and improving balance sheet. As of June 30, the company had $26.6 million in cash and restricted cash and no long term debt. The company had $47.9 million in merchant liabilities (which reflects the amount of un-redeemed voucher sales). The amount of cash would be expected to be reduced as vouchers are redeemed. There are roughly $14 million in receivables. Management indicated that credit card receivables collection should significantly enhance its cash position in 2023. Given that the company will be generating positive cash flow, it is possible that the company will begin share repurchases. The company has a 1 million share repurchase authorization. The company did not repurchase shares in the latest quarter.
Near current levels, the shares trade at just 4.6 times enterprise value to our 2023 adj. EBITDA estimate, using a fully-diluted share count of 14.9 million. Our price target of $10, reflects a target multiple of 8.3 times enterprise value to our 2023 adj. EBITDA estimate. We believe over the next quarter or two revenue growth acceleration could serve as a catalyst to drive the share price higher. The shares are rated Outperform. Please see the report for important disclosures and information.
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Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis. Named WSJ ‘Best on the Street’ Analyst and Forbes/StarMine’s “Best Brokerage Analyst.” FINRA licenses 7, 24, 63, 87
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Bowlero Corp. is the worldwide leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 26 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com.
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Reports a strong year. The company reported another strong quarter. Q4 revenue of $267.7 million increased a strong 68% from year earlier levels and an impressive 42% above our estimate of $188.3 million. The strong revenue was attributed to favorable “walk-in” revenue. Adj. EBITDA was well above our estimate at $82.4 million, 45% higher than our forecast of $56.8 million.
The COVID bounce continues. Management noted the strong performance was driven in large part by a continuation of the COVID recovery. This is perhaps best illustrated by Group Event revenue which was $46 million, up 140% from the prior year period. Notably, the recovery of Event revenue will likely get an additional boost over the upcoming holiday season as year earlier results reflected lingering Covid issues.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Prepared remarks to be webcast at 4:30 PM ET on September 15
RICHMOND, Va.–(BUSINESS WIRE)– Bowlero Corp. (NYSE: BOWL) (“Bowlero” or the “Company”), the world’s largest owner and operator of bowling centers, will report financial results for the fourth quarter and full year 2022 on Thursday, September 15, 2022 after the U.S. stock market closes. Management will discuss the results via webcast at 4:30 PM ET on the same day.
The live webcast, replay and results presentation will be accessible in the Events & Presentations section of the Bowlero Investor Relations website at https://ir.bowlerocorp.com/overview/default.aspx.
About Bowlero Corp.
Bowlero Corp. is the worldwide leader in bowling entertainment, media, and events. With more than 300 bowling centers across North America, Bowlero Corp. serves more than 26 million guests each year through a family of brands that includes Bowlero, Bowlmor Lanes, and AMF. In 2019, Bowlero Corp. acquired the Professional Bowlers Association, the major league of bowling, which boasts thousands of members and millions of fans across the globe. For more information on Bowlero Corp., please visit BowleroCorp.com.
