Q4 2022 Bowlero Corp Earnings Call
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Greetings and welcome to the Bolero Corp, Q4, and fiscal year 2022 earnings Conference call.
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I'll now turn the conference over to your host actually do some of them you may begin.
Good afternoon, I'm actually decent on from ICR.
Welcome to the Valero Corp, fourth quarter and fiscal year 2022 earnings conference call.
All participants will be in a listen only mode.
During this call the company may make certain statements that constitute forward looking statements.
Such statements reflect the company's views with respect to future events as of today and are based on management's current expectations.
Forecast projections assumptions beliefs and information.
These statements are subject to a number of risks and uncertainties that could cause actual events and results to differ materially from those described in the forward looking statements.
For further details concerning these risks and uncertainties. Please see our final prospectus filed with the SEC on February one 2022.
The company expressly disclaims any obligation to publicly update or review any forward looking statement, whether as a result of new information future developments or otherwise, except as required by applicable law.
In addition, during today's call the company will discuss non-GAAP financial measures, which we believe could be useful in evaluating our performance reconciliation of adjusted EBITDA to net income calculated under GAAP can be found in our earnings press release and will be included in our Form 10-Q for the fourth quarter and fiscal year two.
2022.
Throughout today's conversation, you'll hear the company refer to EBITDA and adjusted EBITDA at all times. The company is referring to adjusted EBITDA as described Darrin and reconciled to net income and the associated disclosures.
As a reminder, this conference is being recorded today.
I would now like to turn the call over to Tom Shannon, Chief Executive Officer of collateral and Brett Parker, President and Chief Financial Officer of Bolero. Please go ahead.
Good evening and welcome to the Bolero Corporation earnings discussion for Q4, and the full year of fiscal year 'twenty two.
Thomas Shannon, Chairman and CEO of Boral Corp.
We appreciate your taking the time to join the call. Today is we're looking forward to sharing some exciting updates on the state of the company.
We value our shareholders and continuously endeavor to create value for all of them.
What's your sense in fiscal year 'twenty two as we have recovered from the disruption of COVID-19 grew and upgraded our center footprint relentlessly focused on operational improvements and transitioning from a private company to a publicly held.
In fiscal year, 2022 bolero generated record revenues of nearly $912 million and record adjusted EBITDA of over $316 million.
Per door pre pandemic trailing 12 months levels as of December 2019 of $694 million and $174 million respectively.
Revenue was higher by $218 million or 31, 4%.
And adjusted EBITDA expanded by $142 million or 82%.
It's massive improvement comes despite the lingering headwinds of COVID-19, and public company transitional costs, which negatively impacted fiscal year 2022.
Fiscal year 'twenty, two cash produced from operating activities was a record $178 million.
And the first nine weeks of Q1 of fiscal year 'twenty, three which takes you to September 4th of this year.
Revenue has remained extremely robust with total revenue growing 53% versus pre pandemic levels and same store revenue growing 33% on the same basis when compared to fiscal year 'twenty two revenue for the corresponding nine week period fiscal year 'twenty three total revenues were higher by 23%.
Same store revenues were higher by 13%.
During fiscal year 2022 we added 29, new centers to our portfolio and in doing so through the center count by approximately 10%.
A significant majority of these came with owned real estate as well.
27 of these centers were added by acquisition and two were new builds.
Results in these new centers have been strong and anticipated returns are in line with or better than prior center additions.
The pipeline for additional deals is robust and we continue to pursue accelerated growth through additional acquisitions and new builds.
Adjusted EBITDA margin in fiscal 'twenty, two was 34, 7%.
This figure is higher than pre pandemic by 960 basis points and this is a testament to the relentless pursuit of World class operational performance that lies at the core of our company ethos and continues to deliver margins well in excess of our peers.
Ongoing utilization of our proprietary quantitative management solutions tool known as QM S bolsters, our ability to drive continuous operating improvements.
On December 16, 2021, the company began to trade publicly on the NYSE under the ticker bowl be OWS since.
Since then we have wasted no time and continuing to optimize our capital structure to maximize shareholder returns as of May 18, 2022, we retired all of the Companys outstanding warrants. Furthermore, we began returning capital to shareholders.
Under our previously announced $200 million buyback authorization, we repurchased over three 4 million shares in fiscal year 2022, returning over $34 $6 million to shareholders in only five months.
All in all fiscal year 2022 was a transformative year for bolero.
The company has performed very well during that process and is poised for continued success.
With that I will turn it over to our president and CFO Bret Parker to provide a more detailed review of the quarter and year and then we will take questions.
Brett.
Thank you Tom.
We are extremely pleased with our performance in Q4 and the fiscal year ended July three 2022.
As is true for the year our performance in Q4 resulted in the highest level of revenue and adjusted EBITDA in any Q4 in the Companys history.
<unk> continues to materially outperform pre pandemic performance both in total and on a same store basis.
Despite all of the well documented cost pressures. We also produced very strong margins with the FY 'twenty two adjusted EBITDA margin being 34, 7% as compared to 25, 1% in the trailing 12 months ended December 29, 2019, and only 18, 5% and the TTM period ended.
June 2021.
As Tom noted, we also continue to generate prodigious levels of cash from operations, which positions us favorably to continue to execute our growth strategy.
Driving this performance in the quarter was a very strong growth in revenue, which increased by 68, 3% year over year and surpassed pre pandemic levels by 72, 2%.
Same store sales also rose, 53% relative to pre pandemic levels.
This increase was supported by continued strong performance of walking retail revenue and driven higher by growth in event revenue for the second consecutive quarter as well as growth in lead revenue.
The emergence of increased revenue from event and league has the potential to support continued material growth and has resulted in an acceleration of revenue expansion through the week ended September 4th 2022.
Incremental performance was also supported by the construction of the Companys reporting calendar Q4, and FY 'twenty, two where each a week longer than the comparable periods in prior year and pre pandemic.
That extra week, which is part of the calendar every seven years.
Used $14 $9 million in revenue.
That being said the adjusted performance remains quite impressive.
In Q4, even adjusting for the 14th week revenue was $252 8 million, increasing 62, 6% relative to pre pandemic performance and 58, 9% versus prior year.
Adjusted revenue also expanded 44, 3% on a same store basis versus pre pandemic.
Adjusting for the 50, <unk> week and assessing the fiscal year revenue.
Revenue was $896 8 million, which was an increase of 29, 2% relative to pre pandemic performance and 126, 9% on a year over year basis.
Furthermore, revenue was $17, 5% higher on a same store basis versus pre pandemic performance.
Adjusted EBITDA was $82 $4 million in the quarter, which represents an increase of $41 million or <unk> 94, 8% year over year, and an increase of $48 $2 million or 149% relative to pre pandemic performance.
As Tom noted adjusted EBITDA for the year was $316 $4 million and exceeded the pre pandemic level by 81, 9% in the prior year by $243 $3 million or 332, 7%.
We generated $34 $8 million in cash from operations in Q4, and nearly $177 $7 million for the year.
Giving effect to the retirement of the warrants along with the associated share issuance and share repurchases under the buyback program as of July three 2022, the company had $163 1 million total class, a and class B shares outstanding.
On page five of the materials you can see the recent trends and bowling center revenue.
This is an extension of the chart that we showed in our Q2 and Q3 earnings releases.
As we mentioned during the prior earnings calls this is not something that we expect to do indefinitely.
That said this extended release of data is related to the assessment of the waning impacts of Covid. The general return to office trend and the macro environment, which is challenged by inflation and fears of recession.
The key takeaway here is that bolero continued to produce extremely strong results during Q4 and through the end of our August period.
Results compare very favorably to the pre pandemic and are outpacing FY 'twenty two as well.
On page six we have laid out just how strong 2022 was.
The revenue performance, coupled with disciplined cost management led to an increase in adjusted EBITDA of 81, 9% versus the comparable pre pandemic period.
Adjusted EBITDA in the year was $142 $5 million higher than the equivalent pre pandemic TTM period.
Despite the broadly documented macro increases to input costs. We also expanded adjusted EBITDA margin by 960 basis points from 25, 1% to 34, 7% versus pre pandemic levels.
Kendra level EBITDAR margin was 49% in FY 'twenty, two and 46% in Q4 FY 'twenty two as Q4 is a seasonally smaller revenue and therefore margin quarter.
The chart on page seven illustrates the steep and consistent recovery of the business from the Covid impacted levels of last year.
You can see the quarter by quarter expansion of trailing 12 month adjusted EBITDA from the end of Q3 of fiscal year 2021 through the end of Q4 of fiscal year 2022.
For context, the Orange line shows the pre pandemic comparable level of $173 9 million, we now stand at $316 $4 million or <unk> 81, 9% higher than the pre COVID-19 adjusted EBITDA as we grew adjusted EBITDA by $41 million in Q4 of FY <unk>.
<unk> 22 versus FY 'twenty one alone.
Page eight illustrates how the bowling center level economics continue to improve.
We have chartered the total quarter versus the Covid impacted prior year and also versus the pre pandemic comparable quarters.
Discussed the revenue grew significantly.
This was broad based and included growth among revenue derived from walk in guests League and events.
<unk> Centre EBITDA margins were 40%.
Which were flat to prior year and expanded 238 basis points versus pre pandemic performance.
Page nine lays out the cash flows for the quarter.
As I noted previously the company generated $34 $8 million in cash during Q4 of FY 'twenty, two which provides support for acquisition building and conversion of centers as well as the continued optimization of our capital structure.
The company finished the quarter in a very strong cash position with balances of nearly $132 million.
<unk> deploying $223 million in cash to investing activities and $12 1 million.
To financing activities during the year.
In summary, Polaris Q4, FY 'twenty two performance continued to outpace the pre pandemic levels.
Renting an extremely solid annual performance and further demonstrating that the business continues to be very well positioned to produce improved performance through a combination of organic growth and new center additions.
Thank you for your time and I look forward to presenting again next quarter.
Operator, we can now take questions.
Thank you and at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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One of them when we please while we poll for questions.
Our first question comes from the line of Eric Handler with <unk> partners. Please proceed.
With your question.
Good afternoon, thanks for the question.
Wondered if you could just talk about.
And clearly your second and third quarters, where you were supposed to be the strength your fourth quarter.
<unk>.
It was better than <unk>.
The second quarter.
If you take away the extra week it was pretty similar to your <unk>.
Seasonal high point of the third quarter.
It was there that much of a difference between league in event revenue.
Really sharp things up.
Yeah.
Brett you want to take that.
Sure.
So yeah, Eric Thank you for the question.
Effectively yes. So the key thing is if you. If you look at the chart that we include of the sales growth over time, you can see that it didn't really pop until we got into March. So the first couple of months of Q3, we're still more heavily impacted by Covid and we didn't see.
The substantial growth in event business, but also in lead business and just in business in general until the back part of that quarter, and then that level of comparable performance persisted throughout the.
The entirety of Q4 end.
Into Q1 of this year, so that's where you're seeing that sort of flattening of what you would normally expect to see from a seasonal standpoint.
Got it and then so as we look ahead.
I think another not even just a couple of weeks left of the first quarter.
As we look to the.
The holiday period, and which should be a seasonal peak for your <unk>.
So I'm just curious how the events are tracking relative to last year.
Yeah.
Well, it's too early to know what the holiday season is going to be like in terms of events, but the events trajectory.
Has been very strong and continues to strengthen I would say.
When do you people normally start booking for let's say holiday events.
Yes.
You start to see a flurry of activity after around the first of November .
Some people book earlier, but thats, a very small percentage, you'll really start to see it happening in November but people are booking really up until a few days out in some cases. So we that business is a relatively short cycle business.
But.
As I said, we're we're seeing a tremendous amount of strength in the event business now.
Great. Thank you so much.
Thank you.
Our next question comes from the line of Stefan with Chris with CJS Securities. Please proceed with your question.
Hey, great quarter, Thanks for taking my questions.
I just want to start on the conversions can you give us could you give us a little more color on how many centers went through conversions during the quarter and maybe your plans for the next 12 months.
Sure Stefan Oh, Hey, thanks for the comments.
Yeah.
I don't know how many were completed per se, it's it's sort of a continuous process.
If I had to guess I would say, we made substantial progress on probably.
25 centers I don't know that they all got completed but they got meaningfully improved.
The number might be a little higher it might be a little lower but that's a pretty good ballpark.
We are in the process of.
Converting a lot of the acquisitions that we've made recently that have high potential and these are these are sort of ongoing processes. It takes a number of months from permitting to completion and so we're in various stages on on a number of those.
We're getting ready to start building we announced.
A number of new locations, we're about to start construction on a couple of those.
And we will be broadening the.
Upgrade of our existing and then most recently purchased facility so.
There is always a lot of projects in the works.
How many get completed in the quarter I can't tell you but.
As a practical matter it doesn't really matter because <unk>.
Once they start being substantially improve you'll start to see a revenue lift from this.
No that's great color. Thank you.
And then just following up on one of the previous questions.
Anecdotally anecdotally I know a lot of people that have.
Gone through work events corporate events to Valero I also know a lot of people that are still working from home do you think there's still room for events to.
To rebound.
I guess as people come back to the office.
I think it's going to be extremely strong going forward.
And extended period of time, and I think that now.
Not only is there a lot of pent up demand from companies that haven't had events for years now, but I also think that even in the work from home environment, you have to get together and you have to preserve the culture and camaraderie that can only happen face to face now.
We've all learned that you don't actually need to go to the office to be effective at your job, but you do need to meet with your colleagues periodically and have that face time, and so I think a lot of that activity is actually happening in a more social function and so I think that even if a lot of people are still working from home and maybe working from home.
And extended period of time, you are still going to see corporate activity, where those people come in and meet and that social environment, even if theyre not necessarily going into the office.
That's great. Thank you so much for taking my questions.
My pleasure.
Our next question comes from the line of Kevin Heenan with J P. Morgan. Please proceed with your question.
Hi, guys. Congrats on the strong result, and thanks for taking my question.
Thank you Kevin.
Yeah I was just on the margin front I mean, you finished fiscal 'twenty two you know materially higher than you were pre pandemic.
Do you see this level as a base to build from.
And just how best to think about that go forward given kind of the majority of your revenue comes about very limited variable cost tied to it.
Yeah sure I think we can continue to grow margin.
For a really long time, because as you say in this inflationary environment, we're raising price on everything, but we don't have cost of goods sold on everything in fact, we don't have cost of goods sold on the majority of our revenue.
So I think we're going to continue to see.
Margin improvement it may not be as great as it has been historically because we do have other input costs rising on the food beverage utilities labor et cetera, but I think we are very fortunate that our business model.
It's designed in a way that really minimizes input costs.
Maximizes operating profit so youre going to see as revenue continues to grow.
Which is both a function of volume and price.
We're going to see continued margin expansion.
I think overtime.
Great and if I could just follow up on the macro have you seen any notable or discernible impact to date tied to inflation either on.
Visits or more games played and then maybe qualitatively what what leaves Boeing relatively <unk>.
Insulated from those pressures.
This macro environment. Thanks, a lot.
Sure well no we haven't seen any impact of inflation.
I would say this.
Boeing is a safe haven in a crazy world.
When you have wars, and disruption and inflation and high gas prices.
Boeing is relatively affordable.
It's easily accessible and it's in your community.
And so we've run this company. This yeah, we run this company through three significant crises 911, great financial crisis.
Covid Lockdowns.
And.
As soon as we were able to open in the most recent case or in the last few cases as soon as there were any stability at all what you find is people came rushing back because it was familiar to them that was comfortable and in some ways reassuring.
And so I think that gives Boeing.
And immunity.
From these exogenous shocks that that very few other businesses have.
Okay. Thanks very much.
Sure thing.
And our next question comes from the line of Michal Krupinski with Noble capital markets. Please proceed with your question.
Thank you for taking my questions and let me offer my congratulations on your quarter as well.
You talked a little bit about the pipeline of acquisitions and I was wondering if you can just give us a little color on what you anticipate especially as we look into this quarter, maybe lets just say for the full year. The fiscal the next fiscal year, what are the acquisition prospects. How many acquisitions do you plan or would like to make and then if you can just talk about the number of <unk>.
Enters that you plan to refurbish.
In the coming year, maybe a little bit of Capex that youre expecting for the year.
Yeah.
Well, Michael I would say that we're looking at.
Between acquisitions and new builds ballpark of 30 getting done in this fiscal year.
Now that number is is wildly subject to change because you never know what deal opportunity comes around the Pike.
The way, it's looking now Thirty's 30 sort of a good ballpark number.
What's really good is we continue to see high quality acquisitions.
So able to buy at relatively attractive prices.
There's a multiple arbitrage between what were paying in and what were being valued at in the markets to immediately accretive every time, we do one of these deals of course, we always get the margin expansion as well from improved operations.
So.
30 ballpark.
Relatively high quality.
And then in terms of the Capex number for this year, Brett do you have that handy.
Yes, we were.
We're not going to.
Got a number.
I would say that the per unit costs should be relatively in line with what they've been historically.
And it will scale to that.
<unk>.
Other numbers that I would put around this just just to frame the year is that so far in 'twenty. Three we have already closed on one new deal we have eight additional properties under contract.
For acquisitions.
Three leases signed for new centers, and then you know a prodigious pipeline of incremental deals coming behind that so there's a lot already sort of dialed in.
And then a lot more that we continue to work on.
Got you and just one other question you repurchased.
$3 3 million plus shares was just wondering if you could just talk a little bit about your allocation of capital at this time, what your thoughts are.
Repurchases near current levels, where the stock is trading and so forth.
Yeah.
Well.
We're opportunistic and that extends to both deals we do leases, we sign companies or acquisitions, we make sure that we repurchase et cetera.
The average price that we paid to repurchase shares was I.
I believe sub 10.
So it was very attractive.
Can't give guidance going forward as to how much we're going to repurchase going forward, but it is somewhat tied to the share price as you can imagine so.
Uh huh.
We have enough cash we generate enough cash to fulfill all of our needs.
Whether it's buying building renovating repurchasing shares what have you. So we're in a very very good position.
We don't need to go to the capital markets to raise debt to do any of these very high return activities.
That we do is our core functionality so.
I don't know if that answers the question specifically, but.
Fortunately, we haven't had to make decisions about doing this or that we've always been able to do this and that.
And we've had a very attractive.
Opportunity set of investments in front of us.
Perfect, Thanks, and congratulations again.
Thanks, Mike the one thing I would just clarify that.
The total average was $10 seven across all the repurchases.
We made last year.
So you know as Tom said, we'll continue to be opportunistic, but that was the level of her for last year.
And we have reached the end of our question and answer session. I will now turn the call back over to management for closing remarks.
Alright, well again this is Thomas Shannon.
Chairman and CEO and I'd just like to thank you for your participation on the call and for your support thanks, much and we'll talk to you next quarter.
And this concludes teleconference.
Today's conference and you may disconnect your lines at this time. Thank you for your participation.
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