Bowlero Corp.

Greetings, and welcome to Bolero Earnings Call for Q2 Fiscal Year 2022. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. 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 our management's current expectations, estimates, forecasts, projections, assumptions, beliefs, and information. These statements are subject to a number of risks and uncertainties that can 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 1st, 2022. The company expressly disclaims any obligation to publicly update or review any forward-looking statements, 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. Reconciliations 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 second quarter of fiscal year 2022. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Parker, President and CFO of Bolero Corp. Thank you, Mr. Parker. You may begin.

Good evening and welcome to the Bolero Corp earnings discussion for a Q2 of fiscal year 2022. I am Brett Parker, President and CFO of Bolero Corp. Before I begin, I direct you to the disclaimer on page two of the deck, as well as the reconciliations for non-GAAP measures in the appendix, both of which are integral parts of this presentation. In this presentation, You will find a discussion of, among other things, adjusted EBITDA, which is a non-GAAP financial measure that is not in accordance with or an alternative to measures prepared in accordance with GAAP. We are extremely pleased with the performance of the business as we continue to recover from the interruptions related to COVID-19. The business continues to perform far better than it was pre-pandemic, and our unit growth profile has also continued to advance. Year-over-year revenue increased by 177.3% and surpassed pre-COVID levels by 11%. This excellent performance came despite the emergence of the Omicron variant of COVID-19, as well as Halloween and Christmas going on weekends. This increase is supported by our multi-vectored growth, which combines strong organic performance and unit growth. During the quarter, Bolero Corp grew its bowling center portfolio by adding five new bowling centers, consisting of three acquisitions of existing centers in Spring Hill, Florida, Fort St. Lucie, Florida, and Vacaville, California, along with the opening of two newly constructed centers in Oxnard, California, and Tyson's Corner, Virginia. Adjusted EBITDA was $66.8 million in the quarter. This figure is 26.2% higher than the pre-pandemic level and $70.5 million higher than prior fiscal year. At the end of Q2, trailing 52-week adjusted EBITDA was $195.3 million and exceeded the pre-COVID level by 12.3%. We generated $27.7 million in cash from operations in Q2, which helped fund our investments in the business. On page four of the materials, you can see the recent trends in bowling center revenue. As we expect that one of the central questions around our performance will be how we have done through the Omicron wave, we have chosen to extend this chart through several weeks following the end of Q2. This is not something that we expect to do indefinitely. This extended release of data is purely related to the assessment of Omicron's impact on the business. As Omicron's impact was most strongly felt in the event business, we have presented both total center revenue and total center revenue excluding events revenue. The key takeaway here is that the overall trend of generating bowling center revenues well in excess of pre-pandemic levels remains intact. There were three key headwinds that impacted revenue in the quarter. As you can see in the two red box weeks, having Halloween and Christmas fall on weekends had a meaningful negative impact on revenue. Then, Looking at the gap between total revenue and revenue excluding events in December, which is the highest event revenue period of the year, you can see the clear impact of Omicron on the event business. Now, in recent weeks, we have returned to delivering total revenue growth well into the double digits, and most recently, nearly 25%. On page five, we have laid out just how strong Q2 was. The revenue performance, coupled with disciplined cost management, led to an increase in adjusted EBITDA of over 26% versus the comparable pre-COVID quarter. Adjusted EBITDA in the quarter was nearly $14 million higher than the equivalent pre-pandemic quarter. Despite the broadly documented macro increases to input costs, we also expanded adjusted EBITDA margin by 393 basis points from 28.6% to 32.5% versus pre-pandemic levels. The chart on page six illustrates the sharp recovery of the business from the COVID impacted levels of last year. First, you can see the quarter by quarter expansion of trailing 52 week adjusted EBITDA from the end of Q2 of fiscal year 21 through the end of Q2 of fiscal year 22. For context, the purple line shows the pre-pandemic comparable level of $173.9 million. We now stand 12.3% higher than the pre-COVID level as we grew adjusted EBITDA by $70.5 million in Q2 of FY22 versus FY2021 alone. Page seven illustrates how the bowling center level economics continue to improve. We have charted the total quarter versus the COVID impacted prior year and also versus the pre-pandemic comparable quarter. As discussed, revenue grew significantly. This was led by increases in revenue derived from walk-in guests and partially offset by the Omicron impact on events and unfavorable changes in the calendar. Gross margin for bowling centers expanded from 66% to 68% versus the pre-pandemic quarter, largely as a result of the implementation of our redesigned and significantly more efficient business model. In total, the centers generated $98 million of EBITDA in the quarter. Page 8 lays out the cash flows for the quarter. As I noted previously, the company generated $27.7 million in cash, which provided support for our acquisition, building, and conversion of centers. The company finished the quarter in a strong cash position with balances of over $115 million. In summary, Bolero's Q2 FY22 performance continued to outpace pre-pandemic levels, 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. At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.