It is Expected That Bowlero Will Initiate a Dividend With a Yield That is Well Above the S&P 500

Bowlero Corp. experienced a surge in its stock shares on Monday following the announcement by the bowling-center operator and owner of the Professional Bowlers Association that it would initiate dividend payments to shareholders, coupled with the release of fiscal second-quarter revenue figures that surpassed expectations.

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In a move signaling financial health, Bowlero Corp. declared a cash dividend of 5.5 cents per share, slated for distribution on March 8 to shareholders of record as of February 23. Calculated based on the stock's closing price of $11.60 on Friday, this translates to an annual dividend rate of 22 cents per share, resulting in a dividend yield of 1.90%. Comparatively, this yield outperforms the implied yield for the S&P 500 index, which stands at 1.43%. In response to this positive news, the stock saw a 6.5% increase in premarket trading.

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For the quarter ending December 31, the company reported a remarkable 11.8% increase in revenue, reaching $305.7 million. This figure surpassed the FactSet consensus of $300.4 million, with the revenue surge being particularly attributed to a 30% growth in Bowlero's events business. Strategic acquisitions and new constructions contributed an additional $41 million to the overall revenue. Notably, this quarter marked the first full quarter following the completion of the Lucky Strike acquisition on September 18, 2023.

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Despite posting positive same-store revenue for the quarter, Bowlero disclosed a second-quarter net loss of $63.5 million, a stark contrast to the net income of $1.4 million reported during the same period in the preceding year. The net loss attributable to common stockholders widened to $65.4 million, equivalent to 44 cents per share, compared to the previous year's $1.4 million, or one cent per share. A notable component of the net loss was a substantial $64.1 million expense stemming from the impact of the earnouts for the period, with 11.42 million unvested earnout shares outstanding as of December 31.

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In a separate development, the company revealed its repurchase of $80 million worth of stock in the second quarter, following the earlier buyback of $131 million worth of shares in the first quarter. Bowlero not only replenished the buyback program to $200 million but also removed the program's expiration date, underscoring its commitment to shareholder value.

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Looking forward, Bowlero remains optimistic about fiscal 2024, maintaining its expectation of revenue growth between 10% and 15%. The current FactSet revenue consensus of $1.16 billion implies a growth rate of 9.1%. The company emphasized its commitment to substantial reinvestment in the business and increased its allocation for acquisitions from $160 million to $190 million.

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Over the past three months leading up to Friday, Bowlero's stock witnessed a robust 18.6% rally, outpacing the S&P 500, which posted a comparatively modest 13.8% gain.

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