Bowlero (NYSE:BOWL) Exceeds Q2 Expectations, Stock Jumps 12.3%
Upscale bowling alley chain Bowlero (NYSE:BOWL) reported Q2 CY2024 results exceeding Wall Street analysts’ expectations, with revenue up 18.6% year on year to $283.9 million. The company expects the full year’s revenue to be around $1.25 billion, in line with analysts’ estimates.
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Bowlero (BOWL) Q2 CY2024 Highlights:
- Revenue: $283.9 million vs analyst estimates of $273.7 million (3.7% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $1.25 billion at the midpoint, in line with analyst expectations and implying 8.3% growth (vs 9% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $410 million at the midpoint, in line with analyst expectations
- Gross Margin (GAAP): 23.7%, down from 26.8% in the same quarter last year
- EBITDA Margin: 29.4%, up from 26.9% in the same quarter last year
- Market Capitalization: $1.67 billion
“We ended fiscal year 2024 on a high note with a superior same-store-sales comp and total growth. Our proven ability to deploy capital across our portfolio and operate acquired assets more efficiently while investing in our people and brand showed results with Adjusted EBITDA growing 29%+ year-over-year in the quarter,” said Thomas Shannon, Founder, Chairman, and CEO.
Operating over 300 locations globally, Bowlero (NYSE:BOWL) is a contemporary bowling company merging classic lanes with entertainment and deluxe food offerings.
Leisure Facilities
Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.
Sales Growth
A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last three years, Bowlero grew its sales at an incredible 43% compounded annual growth rate. This shows it expanded quickly, a useful starting point for our analysis. 
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Bowlero’s recent history shows its demand slowed significantly as its annualized revenue growth of 12.5% over the last two years is well below its three-year trend. Note that COVID hurt Bowlero’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.
This quarter, Bowlero reported robust year-on-year revenue growth of 18.6%, and its $283.9 million of revenue exceeded Wall Street’s estimates by 3.7%. Looking ahead, Wall Street expects sales to grow 6.6% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income–the bottom line–excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Bowlero’s operating margin has been trending down over the last year, but it still averaged 13.2%, solid for a consumer discretionary business. This shows it generally manages its expenses well, and its elite revenue growth also suggests its margin dropped because it ramped up investments to capture market share. We’ll keep a close eye to see if this strategy pays off.
In Q2, Bowlero generated an operating profit margin of negative 12.1%, down 20.2 percentage points year on year. This contraction shows it was recently less efficient because its expenses grew faster than its revenue.
Key Takeaways from Bowlero’s Q2 Results
It was good to see Bowlero beat analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance came in higher than Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 12.3% to $12.13 immediately following the results.
Bowlero may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
