UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 2,~~December 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-40142

BOWLERO CORP.

(Exact name of registrant as specified in its charter)


Delaware									98-1632024
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

7313 Bell Creek Road
Mechanicsville, Virginia									23111
(Address of Principal Executive Offices)									(Zip Code)

(804) 417-2000

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.0001 per share	BOWL	The New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	☐☒
Non-accelerated filer	☒☐	Smaller reporting company	☐
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had outstanding ~~112,676,464~~91,202,273 shares of Class A common stock, ~~60,819,437~~58,519,437 shares of Class B common stock, and ~~136,373~~129,457 shares of Series A preferred stock as of ~~May 10, 2023.~~January 31, 2024.

Table of Contents

Index to Notes

Table of Contents


		Page
Part I - Financial Information
Item 1.	Financial Statements	1i
	Condensed Consolidated Balance Sheets (unaudited)	1
	Condensed Consolidated Statements of Operations (unaudited)	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ (unaudited)	4
	Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ (Deficit) Equity (~~Deficit~~) (unaudited)	5
	Condensed Consolidated Statements of Cash Flows (unaudited)	76
	Index for Notes to Condensed Consolidated Financial Statements (unaudited)	98
	Notes to Condensed Consolidated Financial Statements (unaudited)	109
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3529
Item 4.	Controls and Procedures	3630

Part II - Other Information
Item 1.	Legal Proceedings	3730
Item 1A.	Risk Factors	3731
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3731
Item 5.	Other Information	31
Item 6.	Exhibits and Financial Statement Schedules	3831

Signatures		3932

Table of Contents

Index to Notes

Bowlero Corp.

Condensed Consolidated Balance Sheets

~~April 2, 2023 and July 3, 2022~~

(Amounts in thousands)

(Unaudited)

Item 1. Condensed Financial Statements


		April 2, 2023		July 3, 2022
	December 31, 2023					December 31, 2023	July 2, 2023
Assets	Assets
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	150,670	$	132,236
Restricted cash		10,374		—
Accounts and notes receivable, net of allowance for doubtful accounts of $592 and $504, respectively		6,157		5,227
Cash and cash equivalents
Cash and cash equivalents
Accounts and notes receivable, net of allowance for doubtful accounts
Inventories, net	Inventories, net	11,848		10,310
Prepaid expenses and other current assets	Prepaid expenses and other current assets	19,649		12,732
Assets held-for-sale	Assets held-for-sale	2,069		8,789
Total current assets	Total current assets	200,767		169,294

Property and equipment, net	Property and equipment, net	663,937		534,721
Property and equipment, net
Property and equipment, net
Internal use software, net	Internal use software, net	16,434		11,423
Property and equipment under capital leases, net		252,379		262,703
Operating lease right of use assets, net
Finance lease right of use assets, net
Intangible assets, net	Intangible assets, net	91,982		92,593
Goodwill	Goodwill	750,230		742,669
Deferred income tax asset
Other assets	Other assets	38,409		41,022
Total assets	Total assets	$	2,014,138	$	1,854,425

Liabilities, Temporary Equity and Stockholders’ Equity (Deficit)
Liabilities, Temporary Equity and Stockholders’ (Deficit) Equity
Liabilities, Temporary Equity and Stockholders’ (Deficit) Equity
Liabilities, Temporary Equity and Stockholders’ (Deficit) Equity
Current liabilities:	Current liabilities:
Accounts payable		$	46,601	$	38,217
Accrued expenses		83,774		62,854
Current liabilities:
Current liabilities:
Accounts payable and accrued expenses
Accounts payable and accrued expenses
Accounts payable and accrued expenses
Current maturities of long-term debt	Current maturities of long-term debt	5,569		4,966
Current obligations of operating lease liabilities
Other current liabilities	Other current liabilities	10,946		13,123
Total current liabilities	Total current liabilities	146,890		119,160

Long-term debt, net	Long-term debt, net	897,404		865,090
Long-term obligations under capital leases		393,890		397,603
Long-term debt, net
Long-term debt, net
Long-term obligations of operating lease liabilities
Long-term obligations of finance lease liabilities
Long-term financing obligations
Earnout liability	Earnout liability	185,361		210,952
Other long-term liabilities	Other long-term liabilities	80,004		54,418
Deferred income tax liabilities	Deferred income tax liabilities	15,771		14,882
Total liabilities	Total liabilities	1,719,320		1,662,105

Commitments and Contingencies (Note 10)	Commitments and Contingencies (Note 10)

Temporary Equity
Series A preferred stock		206,376		206,002
Commitments and Contingencies (Note 10)
Commitments and Contingencies (Note 10)

Table of Contents

Index to Notes

December 31, 2023

July 2, 2023

Temporary Equity

Series A preferred stock

April 2, 2023

July 3, 2022

Stockholders’ Equity (Deficit)

Stockholders’ (Deficit) Equity

Class A common stock

Class B common stock

Additional paid-in capital

519,093

335,015

Treasury stock, at cost

(53,530)

(34,557)

Accumulated deficit

(377,023)

(312,851)

Accumulated other comprehensive loss

(115)

(1,306)

Total stockholders’ equity (deficit)

88,442

(13,682)

Total liabilities, temporary equity and stockholders’ equity (deficit)

2,014,138

1,854,425

Accumulated other comprehensive income

Total stockholders’ (deficit) equity

Total liabilities, temporary equity and stockholders’ (deficit) equity

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Index to Notes

Bowlero Corp.

Condensed Consolidated Statements of Operations

~~For the Periods Ended April 2, 2023 and March 27, 2022~~

(Amounts in thousands, except share and per share amounts)

(Unaudited)


		Three Months Ended				Nine Months Ended
		April 2, 2023		March 27, 2022		April 2, 2023		March 27, 2022
	Three Months Ended										Three Months Ended			Six Months Ended
	December 31, 2023									December 31, 2023		January 1, 2023	December 31, 2023		January 1, 2023
Revenues	Revenues	$	315,725	$	257,820	$	819,370	$	643,988
Costs of revenues	Costs of revenues	189,304		156,491		534,212		424,742
Gross profit	Gross profit	126,421		101,329		285,158		219,246

Operating (income) expenses:
Operating expenses:
Operating expenses:
Operating expenses:
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	35,891		30,315		102,837		145,013
Asset impairment	Asset impairment	489		—		573		—
Gain on sale of assets		(192)		(1,601)		(2,170)		(1,755)
Loss (gain) on sale of assets
Other operating expense	Other operating expense	649		1,899		2,625		5,708
Total operating expense	Total operating expense	36,837		30,613		103,865		148,966

Operating profit	Operating profit	89,584		70,716		181,293		70,280
Operating profit
Operating profit

Other expenses:	Other expenses:
Other expenses:
Other expenses:
Interest expense, net
Interest expense, net
Interest expense, net	Interest expense, net	29,117		22,293		80,066		69,101
Change in fair value of earnout liability	Change in fair value of earnout liability	87,222		45,778		158,758		23,236
Change in fair value of warrant liability		—		20,678		—		20,748
Other expense		5,986		161		5,356		161
Other expense (income)
Total other expense	Total other expense	122,325		88,910		244,180		113,246

Loss before income tax (benefit) expense		(32,741)		(18,194)		(62,887)		(42,966)
(Loss) income before income tax expense (benefit)
(Loss) income before income tax expense (benefit)
(Loss) income before income tax expense (benefit)

Income tax (benefit) expense		(668)		(207)		1,285		(6,089)
Net loss		(32,073)		(17,987)		(64,172)		(36,877)
Income tax expense (benefit)
Income tax expense (benefit)
Income tax expense (benefit)
Net (loss) income

Series A preferred stock dividends
Series A preferred stock dividends
Series A preferred stock dividends	Series A preferred stock dividends	(4,401)		(2,818)		(10,004)		(7,290)
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(36,474)	$	(20,805)	$	(74,176)	$	(44,167)

Net loss per share attributable to Class A and B common stockholders	Net loss per share attributable to Class A and B common stockholders
Net loss per share attributable to Class A and B common stockholders
Net loss per share attributable to Class A and B common stockholders
Basic & Diluted
Basic & Diluted
Basic & Diluted	Basic & Diluted	$	(0.22)	$	(0.13)	$	(0.45)	$	(0.29)

Weighted-average shares used in computing net loss per share attributable to common stockholders	Weighted-average shares used in computing net loss per share attributable to common stockholders
Weighted-average shares used in computing net loss per share attributable to common stockholders
Weighted-average shares used in computing net loss per share attributable to common stockholders
Basic & Diluted	Basic & Diluted	165,698,500		162,590,921		163,676,194		152,731,385
Basic & Diluted
Basic & Diluted

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Index to Notes

Bowlero Corp.

Condensed Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~

~~For the Periods Ended April 2, 2023 and March 27, 2022~~

(Amounts in thousands)

(Unaudited)

Three Months Ended Nine Months Ended
April 2,
2023 March 27,
2022 April 2,
2023 March 27,
2022
Net loss $ (32,073) $ (17,987) $ (64,172) $ (36,877)
Other comprehensive income (loss), net of income tax:
Unrealized gain on derivatives — 97 — 55
Reclassification to earnings — 2,205 — 6,610
Foreign currency translation adjustment 1,477 214 1,191 (158)
Other comprehensive income 1,477 2,516 1,191 6,507
Total comprehensive loss $ (30,596) $ (15,471) $ (62,981) $ (30,370)


	Three Months Ended				Six Months Ended
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
Net (loss) income	$	(63,469)	$	1,435	$	(45,250)	$	(32,099)
Other comprehensive (loss) income, net of income tax:
Unrealized loss on derivatives	(3,110)		—		(3,450)		—
Foreign currency translation adjustment	666		81		179		(286)
Other comprehensive (loss) income	(2,444)		81		(3,271)		(286)
Total comprehensive (loss) income	$	(65,913)	$	1,516	$	(48,521)	$	(32,385)

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Index to Notes

Bowlero Corp.

Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)

~~For the Periods Ended April 2, 2023 and March 27, 2022~~

(Amounts in thousands, except share amounts)

(Unaudited)

Redeemable Class A common stock Series A preferred stock Class A
common Stock Class B
common Stock Treasury stock Additional
Paid-in
capital Accumulated
deficit Accumulated
other
comprehensive
loss Total
stockholders’
deficit
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Balance, June 27, 2021 2,069,000 $ 464,827 106,378 $ 141,162 3,842,428 $ 1 — $ — — $ — $ — $ (266,463) $ (9,404) $ (275,866)
Retroactive application of recapitalization 49,328,025 — 2,536,209 — 91,608,875 9 — — — — — (9) — —
Balance, June 27, 2021 (retroactively stated for application of recapitalization) 51,397,025 $ 464,827 2,642,587 $ 141,162 95,451,303 $ 10 — $ — — $ — $ — $ (266,472) $ (9,404) $ (275,866)
Net income — — — — — — — — — — — 15,564 — 15,564
Foreign currency translation adjustment — — — — — — — — — — — — (164) (164)
Unrealized loss on derivatives — — — — — — — — — — — — (32) (32)
Reclassification to earnings — — — — — — — — — — — — 2,202 2,202
Accrued dividends on pre-merger Series A preferred stock — — — 2,251 — — — — — — (2,251) — — (2,251)
Change in fair value of redeemable Class A common stock of Old Bowlero — 14,995 — — — — — — — — (14,995) — — (14,995)
Share-based compensation — — — — — — — — — — 801 — — 801
Reclass of negative APIC to accumulated deficit — — — — — — — — — — 16,445 (16,445) — —
Balance, September 26, 2021 51,397,025 $ 479,822 2,642,587 $ 143,413 95,451,303 $ 10 — $ — — $ — $ — $ (267,353) $ (7,398) $ (274,741)
Net loss — — — — — — — — — (34,454) — (34,454)
Foreign currency translation adjustment — — — — — — — — — — (208) (208)
Unrealized loss on derivatives — — — — — — — — — — (10) (10)
Reclassification to earnings — — — — — — — — — — 2,203 2,203
Accrued dividends on pre-merger Series A preferred stock — — — 1,885 — — — — (1,885) — — (1,885)
Change in fair value of redeemable Class A common stock of Old Bowlero — 23,869 — — — — — — (23,869) — — (23,869)
Merger induced stock based compensation — — — — 2,529,360 — 5,839,993 1 42,555 — — 42,556
Issuance of common stock and preferred stock in connection with Merger Capitalization, net of Bowlero equity issuance costs and fair value of liability-classified warrants and earnout 95,000 95,000 42,185,233 4 1,074,185 120,805 — — 120,809
Settlement of pre-merger Series A preferred stock — — (2,642,587) (145,298) — — — — — — — —
Conversion of Class A common stock of Old Bowlero to Series A preferred stock — — 105,000 105,000 (10,499,900) (1) — — (104,999) — — (105,000)
Consideration to existing shareholders of Old Bowlero — — — — (22,599,800) (2) — — (225,998) — — (226,000)
Consideration paid to Old Bowlero optionholders — — — — — — — — (15,467) — — (15,467)
Exchange of redeemable Class A common stock of Old Bowlero for Class B common stock (51,397,025) (503,691) — — — — 51,397,025 5 503,686 — — 503,691
Balance, December 26, 2021 — $ — 200,000 $ 200,000 107,066,196 $ 11 58,311,203 $ 6 — $ — $ 294,828 $ (301,807) $ (5,413) $ (12,375)


	Series A preferred stock			Class A common Stock			Class B common Stock			Treasury stock			Additional Paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ deficit
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, July 3, 2022	200,000	$	206,002	110,395,630	$	11	55,911,203	$	6	3,430,667	$	(34,557)	$	335,015	$	(312,851)	$	(1,306)	$	(13,682)
Net loss	—	—		—	—		—	—		—	—		—		(33,534)		—		(33,534)
Foreign currency translation adjustment	—	—		—	—		—	—		—	—		—		—		(367)		(367)
Share-based compensation	—	—		50,317	—		—	—		—	—		3,279		—		—		3,279
Repurchase of Class A common stock into Treasury stock	—	—		(468,103)	—		—	—		468,103	(5,462)		—		—		—		(5,462)
Balance, October 2, 2022	200,000	$	206,002	109,977,844	$	11	55,911,203	$	6	3,898,770	$	(40,019)	$	338,294	$	(346,385)	$	(1,673)	$	(49,766)
Net income	—	—		—	—		—	—		—	—		—		1,435		—		1,435
Foreign currency translation adjustment	—	—		—	—		—	—		—	—		—		—		81		81
Share-based compensation	—	—		377,927	—		—	—		—	—		3,632		—		—		3,632
Accrual of paid-in-kind dividends on Series A preferred stock	—	5,665		—	—		—	—		—	—		(5,665)		—		—		(5,665)
Repurchase of Class A common stock into Treasury stock	—	—		(629,677)	—		—	—		629,677	(7,949)		—		—		—		(7,949)
Balance, January 1, 2023	200,000	$	211,667	109,726,094	$	11	55,911,203	$	6	4,528,447	$	(47,968)	$	336,261	$	(344,950)	$	(1,592)	$	(58,232)

~~Table of Contents~~

~~Index to Notes~~


		Series A preferred stock			Class A common Stock			Class B common Stock			Treasury stock			Additional Paid-in capital				Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ equity (deficit)
		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, July 3, 2022		200,000	$	206,002	110,395,630	$	11	55,911,203	$	6	3,430,667	$	(34,557)			$	335,015			$	(312,851)	$	(1,306)	$	(13,682)
	Series A preferred stock																							Series A preferred stock		Class A common Stock	Class B common Stock	Treasury stock	Additional Paid-in capital	Accumulated deficit	Accumulated other comprehensive income	Total stockholders’ (deficit) equity
	Shares
Balance, July 2, 2023
Balance, July 2, 2023
Balance, July 2, 2023
Net income
Foreign currency translation adjustment
Unrealized loss on derivatives
Conversion of Class B common stock into Class A common stock
Share-based compensation
Repurchase of Class A common stock into Treasury stock
Balance, October 1, 2023
Net loss	Net loss	—	—		—	—		—	—		—	—		—				(33,534)		—		(33,534)
Foreign currency translation adjustment	Foreign currency translation adjustment	—	—		—	—		—	—		—	—		—				—		(367)		(367)
Unrealized loss on derivatives
Share-based compensation	Share-based compensation	—	—		50,317	—		—	—		—	—		3,279				—		—		3,279
Dividends on Series A preferred stock
Repurchase of Class A common stock into Treasury stock	Repurchase of Class A common stock into Treasury stock	—	—		(468,103)	—		—	—		468,103	(5,462)		—				—		—		(5,462)
Balance, October 2, 2022		200,000	$	206,002	109,977,844	$	11	55,911,203	$	6	3,898,770	$	(40,019)	$	338,294			$	(346,385)	$	(1,673)	$	(49,766)
Net income		—	—		—	—		—	—		—	—		—				1,435		—		1,435
Foreign currency translation adjustment		—	—		—	—		—	—		—	—		—				—		81		81
Share-based compensation		—	—		377,927	—		—	—		—	—		3,632				—		—		3,632
Accrual of paid-in-kind dividends on Series A preferred stock		—	5,665		—	—		—	—		—	—		(5,665)				—		—		(5,665)
Repurchase of Class A common stock into Treasury stock		—	—		(629,677)	—		—	—		629,677	(7,949)		—				—		—		(7,949)
Balance, January 1, 2023		200,000	$	211,667	109,726,094	$	11	55,911,203	$	6	4,528,447	$	(47,968)	$	336,261			$	(344,950)	$	(1,592)	$	(58,232)
Net loss		—	—		—	—		—	—		—	—		—				(32,073)		—		(32,073)
Foreign currency translation adjustment		—	—		—	—		—	—		—	—		—				—		1,477		1,477
Share-based compensation		—	—		46,553	—		—	—		—	—		3,709				—		—		3,709
Settlement of Earnout Shares		—	—		4,670,495	—		4,908,234	—		—	—		180,656				—		—		180,656
Settlement of Series A preferred stock		(5,000)	(5,291)		—	—		—	—		—	—		(1,533)				—		—		(1,533)
Repurchase of Class A common stock into Treasury stock		—	—		(370,612)	—		—	—		370,612	(5,562)		—				—		—		(5,562)
Balance, April 2, 2023		195,000	$	206,376	114,072,530	$	11	60,819,437	$	6	4,899,059	$	(53,530)	$	519,093			$	(377,023)	$	(115)	$	88,442
Balance, December 31, 2023

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

Index to Notes

Bowlero Corp.

Condensed Consolidated Statements of Cash Flows

~~Nine Months Ended April 2, 2023 and March 27, 2022~~

(Amounts in thousands)

(Unaudited)


		Nine Months Ended
		April 2, 2023		March 27, 2022
	Six Months Ended						Six Months Ended
	December 31, 2023					December 31, 2023		January 1, 2023
Operating activities	Operating activities
Net loss
Net loss
Net loss	Net loss	$	(64,172)	$	(36,877)
Adjustments to reconcile net loss to net cash provided by operating activities:	Adjustments to reconcile net loss to net cash provided by operating activities:
Asset impairment	Asset impairment	573		—
Asset impairment
Asset impairment
Depreciation and amortization	Depreciation and amortization	85,014		78,487
Gain on sale of assets, net	Gain on sale of assets, net	(2,170)		(1,755)
Income from joint venture		(329)		(285)
Loss on refinance of debt		—		953
Loss on repurchase of warrants		—		161
Income from equity method investment
Amortization of deferred financing costs	Amortization of deferred financing costs	2,585		2,769
Amortization of deferred rent incentive	Amortization of deferred rent incentive	(452)		(281)
Non-cash interest expense on capital lease obligation	Non-cash interest expense on capital lease obligation	4,850		4,514
Non-cash interest expense on finance lease obligation
Non-cash operating lease expense
Non-cash portion of gain on lease modification
Amortization of deferred sale lease-back gain	Amortization of deferred sale lease-back gain	(767)		(770)
Deferred income taxes	Deferred income taxes	397		(6,587)
Share-based compensation	Share-based compensation	11,891		46,376
Distributions from joint venture		323		265
Distributions from equity method investments
Change in fair value of earnout liability	Change in fair value of earnout liability	158,758		23,236
Change in fair value of warrant liability		—		20,748
Change in fair value of marketable securities	Change in fair value of marketable securities	(852)		—
Changes in assets and liabilities, net of business acquisitions:	Changes in assets and liabilities, net of business acquisitions:
Accounts receivable and notes receivable, net
Accounts receivable and notes receivable, net
Accounts receivable and notes receivable, net	Accounts receivable and notes receivable, net	(934)		23
Inventories	Inventories	(1,410)		(1,708)
Prepaids, other current assets and other assets	Prepaids, other current assets and other assets	(5,987)		(5,723)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	20,100		10,777
Other current liabilities	Other current liabilities	(1,166)		4,265
Other long-term liabilities	Other long-term liabilities	2,550		4,273
Net cash provided by operating activities	Net cash provided by operating activities	208,802		142,861

Investing activities	Investing activities
Investing activities
Investing activities
Purchases of property and equipment
Purchases of property and equipment
Purchases of property and equipment	Purchases of property and equipment	(112,044)		(135,548)
Purchases of intangible assets	Purchases of intangible assets	(22)		(2,602)
Proceeds from sale of property and equipment	Proceeds from sale of property and equipment	6,518		6,160
Proceeds from sale of intangibles	Proceeds from sale of intangibles	200		—
Purchase of marketable securities	Purchase of marketable securities	(44,855)		—
Proceeds from sale of marketable securities	Proceeds from sale of marketable securities	45,707		—
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(83,453)		(46,754)
Net cash used in investing activities	Net cash used in investing activities	(187,949)		(178,744)

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Index to Notes

Nine Months Ended
April 2,
2023 March 27,
2022
Financing activities
Repurchase of treasury stock $ (22,036) $ (1,026)
Repurchase of warrants — (5,382)
Repurchase of Series A preferred stock - Old Bowlero — (145,298)
Settlement of Series A preferred stock (6,824) —
Proceeds from issuance of Series A preferred stock — 95,000
Proceeds from issuance of Class A common stock to Isos investors — 94,413
Proceeds from share issuance 590 —
Transaction costs related to Merger recapitalization — (20,670)
Proceeds from PIPE Investment — 150,604
Proceeds from Forward Investment — 100,000
Payment to existing shareholders of Old Bowlero — (226,000)
Payments for tax withholdings on share-based awards (5,750) —
Consideration paid to existing option holders of Old Bowlero — (15,467)
Settlement of contingent consideration 1,000 —
Proceeds from Amendment No. 8 Term Loan 900,000 —
Payoff of First Lien Credit Facility Term Loan (786,166) —
Payment of long-term debt (4,629) (6,158)
Payment of First Lien Credit Facility Revolver — (39,853)
Proceeds from equipment loans 15,418 —
Payment of Incremental Liquidity Facility — (45,000)
Proceeds from Revolver — 86,434
Payoff of Revolver (86,434) —
Proceeds from sale-leaseback financing 10,363 —
Payment of deferred financing costs (8,058) (977)
Construction allowance receipts 490 1,132
Net cash provided by financing activities 7,964 21,752
Effect of exchange rates on cash (9) 15
Net increase (decrease) in cash, cash equivalents and restricted cash 28,808 (14,116)
Cash, cash equivalents and restricted cash at beginning of period 132,236 187,093
Cash, cash equivalents and restricted cash at end of period $ 161,044 $ 172,977


	Six Months Ended
	December 31, 2023		January 1, 2023
Financing activities
Repurchase of Class A common stock into Treasury stock	$	(218,669)	$	(16,355)
Proceeds from share issuance	1,274		590
Payments for tax withholdings on share-based compensation	(925)		(1,491)
Payment of dividends on Series A preferred stock	(3,969)		—
Settlement of contingent consideration	—		1,000
Payment of long-term debt	(6,525)		(4,399)
Payment on finance leases	(3,177)		—
Proceeds from long-term debt	—		15,418
Proceeds from Revolver draws	175,000		—
Payoff of Revolver	(175,000)		—
Proceeds from sale-leaseback financing	408,510		10,363
Payment of deferred financing costs	(6,781)		—
Net cash provided by financing activities	169,738		5,126

Effect of exchange rates on cash	51		(427)

Net decrease in cash and cash equivalents	(5,678)		(42,427)
Cash and cash equivalents at beginning of period	195,633		132,236
Cash and cash equivalents at end of period	$	189,955	$	89,809

See accompanying notes to unaudited condensed consolidated financial statements.

Bowlero Corp.

Bowlero Corp.

Notes to Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

(Unaudited)

(1) Description of Business and Significant Accounting Policies

Bowlero Corp., a Delaware corporation, and its subsidiaries (referred to herein as , the “Company”, “Bowlero”, “we,” “us” and “our”) are the world’s largest operator of bowling entertainment centers.

The Company operates bowling entertainment centers under different brand names. Our AMF and Bowl America branded centers are traditional bowling centers, ~~and~~while the Bowlero and Lucky Strike branded centers offer a more upscale entertainment concept with lounge seating, enhanced food and beverage offerings, and more robust customer service for individuals and group events. Additionally, within the brands, there exists a spectrum where some AMF branded centers are more upscale and some Bowlero branded centers are more traditional. All of our centers, regardless of branding, are managed in a fully integrated and consistent basis since all of our centers are in the same business of operating bowling entertainment.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended July ~~3, 2022.~~

~~Reverse Recapitalization:~~ On December 15, 2021, (the “Closing Date”), the Company consummated the previously announced Business Combination pursuant to the Business Combination Agreement (“BCA”) dated as of July 1, 2021, by and among Bowlero Corp. prior to the Closing Date (“Old Bowlero”) and Isos Acquisition Corporation (“Isos”).

Notwithstanding the legal form of the Business Combination pursuant to the BCA, the Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, Isos was treated as the acquired company and Old Bowlero was treated as the acquirer for accounting and financial statement reporting purposes.

The consolidated assets, liabilities and results of operations prior to the reverse recapitalization are those of the Company, thus the shares and corresponding capital amounts and losses per share, prior to the reverse recapitalization, have been retroactively restated based on shares reflecting the exchange ratio of 24.841 established in the BCA.2, 2023.

Principles of Consolidation: The condensed consolidated financial statements and related notes include the accounts of Bowlero Corp. and the subsidiaries it controls. Control is determined based on ownership rights or, when applicable, based on whether the Company is considered to be the primary beneficiary of a variable interest entity. ~~The Company’s interest in 20% to 50% owned companies that are not controlled are accounted for using~~We use the equity method to account for investments in which we have the ability to exercise significant influence over the investee’s operating and financial policies, or in which we hold a partnership or limited liability company interest in an entity with specific ownership accounts, unless we have virtually no influence over the ~~Company does not sufficiently influence the management of the investee.~~investee’s operating and financial policies. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates: The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the balance sheets, ~~statements~~statement of operations and accompanying notes. Significant estimates made by management include, but are not limited to, cash flow projections; the fair value of assets and liabilities in acquisitions; derivatives with hedge accounting; share-based compensation; depreciation and impairment of long-lived assets; carrying amount and recoverability analyses of property and equipment, assets held for sale, goodwill and other intangible assets; valuation of deferred tax assets and liabilities and income tax uncertainties; and reserves for litigation, claims and self-insurance costs. Actual results could differ from those estimates.

Fair-value Estimates: We have various financial instruments included in our financial statements. Financial instruments are carried in our financial statements at either cost or fair value. We estimate fair value of assets and liabilities using the following hierarchy using the highest level possible:

Level 1: Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities.

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~~Index to Notes~~

Level 2: Observable prices that are based on inputs not quoted on active markets, but are corroborated by market data.

Level 3: Unobservable inputs are used when little or no market data is available.

Cash and Cash ~~Equivalents and Restricted Cash:~~Equivalents: The Company considers all highly liquid investments with a maturity date of three months or less when purchased to be cash equivalents. ~~The Company had cash equivalents of $90,389 and $88,067 at April 2, 2023 and July 3, 2022, respectively.~~ The Company accepts a range of debit and credit cards, and these transactions are generally transmitted to a bank for reimbursement within 24 hours. The payments due from the banks for these debit and credit card transactions are generally received, or settled, within 24 to 48 hours of the transmission date. The Company considers all debit and credit card transactions that settle in less than seven days to be cash equivalents. ~~Amounts due from the banks for these transactions classified~~

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Index to Notes

Equity Method Investments: The aggregate carrying amounts of our equity method investments was $25,583 and $1,180 as ~~cash equivalents totaled $11,844~~of December 31, 2023 and ~~$8,688 at April~~July 2, 2023, and ~~July 3, 2022, respectively. The Company considers sales proceeds~~are included as a component of Other Assets in our accompanying condensed consolidated balance sheets. Equity method investments are adjusted to recognize (1) our share, based on percentage ownership or other contractual basis, of the investee’s net income or loss after the date of investment, (2) additional contributions made or distributions received, (3) amortization of the recorded investment that exceeds our share of the book value of the investee’s net assets, and (4) impairments resulting from ~~a sale-leaseback transaction held by a qualified intermediary~~other-than-temporary declines in ~~separate bank accounts as restricted cash, as part of like-kind exchange requirements under U.S. tax law.~~

~~The following table provides a reconciliation of cash, cash equivalents~~fair value. Cash distributions received from our equity method investments are considered returns on investment and ~~restricted cash reported~~presented within operating activities in the condensed consolidated ~~balance sheets~~statement of cash flows to the ~~condensed consolidated statements~~extent of ~~cash flows:~~

April 2, 2023 July 3, 2022
Cash and cash equivalents $ 150,670 $ 132,236
Restricted cash 10,374 —
Total cash, cash equivalents and restricted cash $ 161,044 $ 132,236
cumulative equity in net income of the investee. Additional distributions in excess of cumulative equity are considered returns of our investment and are presented as investing activities.

Derivatives: We are exposed to interest rate risk. To manage ~~these risks,~~this risk, we entered into interest rate ~~swap~~collar derivative transactions associated with a portion of our outstanding debt. The interest rate ~~swaps were~~collars, which are designated for accounting purposes as cash flow hedges, ~~of forecasted floating interest payments~~establish a cap and floor on ~~variable rate debt.~~the Secured Overnight Financing Rate (SOFR). The Company's interest rate ~~swaps expired~~collars expire on ~~June 30, 2022.~~March 31, 2026.

~~The reclassifications from accumulated~~For financial derivative instruments that are designated as a cash flow hedge for accounting purposes, the effective portion of the gain or loss on the financial derivative instrument is reported as a component of other comprehensive income ~~(“AOCI”)~~and reclassified into ~~income~~earnings in the same line item associated with the forecasted transaction, and in the same period or periods during ~~each reporting period were as follows:~~which the forecasted transaction affects earnings. Gains and losses on the financial derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Three Months Ended Nine Months Ended
April 2, 2023 March 27, 2022 April 2, 2023 March 27, 2022
Interest expense reclassified from AOCI into net loss $ — $ 2,205 $ — $ 6,610

The ~~fair value~~interest rate collar agreements effectively modified our exposure to interest rate risk by converting a portion of our interest payments on floating rate debt to include a cap and floor, thus reducing the ~~swap and cap agreements excludes accrued~~impact of interest ~~and takes into consideration current~~rate changes on future interest rates and current likelihood of the swap counterparties’ compliance with its contractual obligations. There are no income taxes related to the amounts recorded to AOCI due to tax credits and the full valuation allowance on deferred taxes.expense. See Note 8 - Debtfor more information.

Net Loss Per Share Attributable to Common Stockholders: We compute net loss per share of Class A common stock and Class B common stock under the two-class method. Holders of Class A common stock and Class B common stock have equal rights to the earnings of the Company. Our participating securities include the ~~redeemable convertible~~Series A preferred stock that have a non-forfeitable right to dividends in the event that a dividend is paid on common stock, but do not participate in losses, and thus are not included in a two-class method in periods of loss. ~~Since~~In periods where the Company ~~has reported~~reports a net loss, ~~for all periods presented,~~ all potentially dilutive securities ~~have been~~are excluded from the calculation of the diluted net loss per share attributable to common stockholders as their effect is antidilutive and accordingly, basic and diluted net loss per share attributable to common stockholders iswill be the ~~same for all periods presented.~~same. Dilutive securities include ~~convertible~~Series A preferred stock, earnouts, stock options, and restricted stock units (“RSUs”). See Note 15 - Net Loss Per Share.

Emerging Growth Company Status: The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as modified by the Jumpstart Our Business Startups Act of 2012 (“JOBS ~~Act,~~Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but

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~~Index to Notes~~

any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult ~~or impossible~~ because of the potential differences in accounting standards used.

Recently Issued Accounting Standards: We reviewed the accounting pronouncements that became effective for ~~our~~ fiscal year ~~2023~~2024 and ~~besides ASU No. 2016-02, Leases (“Topic 842”), we~~ determined that either they were not applicable, or they did not have a material impact on the consolidated financial statements.

~~As a result of ASU 2020-05, Topic 842 will~~ We also reviewed the recently issued accounting pronouncements to be ~~effective for fiscal years beginning after December 15, 2021~~adopted in future periods and interim periods within fiscal years beginning after December 15, 2022. The Company will adopt Topic 842 as of July 4, 2022 within our Annual Report on Form 10-K for the fiscal year ending July 2, 2023. The Company intendsdetermined that they are not expected to adopt the new standard using a modified retrospective transition approach and will apply the provisions at the effective date without adjusting the comparative periods. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before the effective date. The new standard provides a number of optional practice expedients in transition. The Company intends to elect the practical expedients to not reassess its prior conclusions about lease identification, lease classification, and initial direct costs. Additionally, we do not intend to elect the practical expedient allowing the use of hindsight or the practical expedient related to land easements. The Company is still evaluating the practical expedients related to ongoing lease accounting. Although management continues to evaluate the impacts on the Company’s consolidated financial statements and disclosures, management currently estimates total assets and liabilities will increase approximately $700,000 to $800,000. This estimate may change as the Company’s implementation progresses, the Company’s lease portfolio changes, and if discount rates fluctuate prior to adoption. The Company estimates that this standard will result in a material impact to our balance sheet primarily from the recognition of operating lease right of use assets and liabilities. We do not believe the adoption of this standard will have a material impact on ~~our statement~~the consolidated financial statements.

Table of ~~operations or cash flows.~~Contents

Index to Notes

(2) Revenue

The following table presents the Company’s revenue disaggregated by major revenue categories:


		Three Months Ended								Nine Months Ended									Three Months Ended													Six Months Ended
		April 2, 2023		% of revenues		March 27, 2022		% of revenues		April 2, 2023		% of revenues		March 27, 2022		% of revenues
	December 31, 2023																					December 31, 2023					% of revenues				January 1, 2023				% of revenues					December 31, 2023					% of revenues					January 1, 2023					% of revenues
Major revenue categories:	Major revenue categories:
Bowling	Bowling	$	154,960	49.1	%	$	130,394	50.6	%	$	401,713	48.9	%	$	326,536	50.8	%
Bowling
Bowling																			$	145,295			47.5		%			$	131,426			48.1	%			$	261,725					49.1	%			$	246,753					49.0	%
Food and beverage	Food and beverage	111,708		35.4	%	88,187		34.2	%	291,388		35.6	%	221,206		34.3	%	Food and beverage	111,192		36.4			36.4		%			100,657		36.8		36.8	%				186,105			34.9			34.9	%			179,680			35.7			35.7		%
Amusement		42,715		13.5	%	33,781		13.1	%	110,272		13.5	%	83,967		13.0	%
Amusement and other																		Amusement and other	45,415				14.9		%			36,748				13.4	%			75,784						14.2	%			67,557						13.4	%
Media	Media	6,342		2.0	%	5,458		2.1	%	15,997		2.0	%	12,279		1.9	%	Media	3,769		1.2			1.2		%			4,554		1.7		1.7	%				9,462			1.8			1.8	%			9,655			1.9			1.9		%
Total revenues	Total revenues	$	315,725	100.0	%	$	257,820	100.0	%	$	819,370	100.0	%	$	643,988	100.0	%	Total revenues	$	305,671	100.0			100.0		%			$	273,385	100.0		100.0	%				$	533,076		100.0			100.0	%			$	503,645		100.0			100.0		%

(3) Business Acquisitions

Acquisitions: The Company continually evaluates potential acquisitions, ~~of bowling entertainment centers. Acquisitions~~which can be either business combinations or asset purchases, that strategically fit within the Company’s existing portfolio of centers as a key part of the Company’s overall growth strategy in order to expand our market share in key geographic areas, and to improve our ability to leverage our fixed costs.

~~2023~~2024 Business Acquisitions: For business combinations, the Company allocates the consideration transferred to the identifiable assets acquired and liabilities assumed based on their preliminary estimated fair values as of the acquisition date. We estimate the fair values of the assets acquired and liabilities assumed using valuation techniques, such as the income, cost and market approaches. During the ~~nine~~six months ended ~~April 2,~~December 31, 2023, the Company ~~had ten business acquisitions in~~acquired substantially all of the assets of Lucky Strike Entertainment, LLC (“Lucky Strike”) which ~~we acquired twelve~~includes 14 bowling entertainment centers for a total consideration of ~~$83,454.~~$90,475. The Company also had three other acquisitions in which we acquired four bowling entertainment centers for a total consideration of $42,410. The Company is still in the process of finalizing ~~the acquisition date fair values.~~its valuation analysis. The remaining fair value estimates include working capital, intangibles, property and equipment, and ~~capital~~operating and finance lease assets and liabilities. ~~For~~If necessary, for business combinations, we will continue to refine our estimates throughout the permitted measurement period, which may result in corresponding offsets to goodwill. We expect to finalize the valuations as soon as possible, but no later than one year after the acquisition dates. ~~Fair values for acquisitions~~Acquisitions that were considered preliminary at July ~~3, 2022~~2, 2023 were finalized ~~with immaterial adjustments~~ during the ~~nine~~six months ended ~~April 2,~~December 31, 2023.

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Index to Notes

The following table summarizes the preliminary purchase price allocations for the fair values of the identifiable assets acquired and liabilities assumed, components of consideration transferred and the transactional related expenses using the acquisition method of accounting:

~~Identifiable assets acquired and liabilities assumed~~

~~Total~~

~~Current assets~~

~~122~~

~~Property and equipment~~

~~70,565~~

~~Capital lease asset~~

~~5,441~~

~~Identifiable intangible assets~~

~~4,680~~

~~Goodwill~~

~~7,901~~

~~Other assets~~

~~1,160~~

~~Total assets acquired~~

~~89,869~~

~~Current liabilities~~

~~(974)~~

~~Long-term obligations under capital leases~~

~~(5,441)~~

~~Total liabilities assumed~~

~~(6,415)~~

~~Total fair value, net of cash acquired of $61~~

~~83,454~~

~~Components of consideration transferred~~

~~Cash~~

~~80,339~~

Holdback*

~~3,115~~

~~Total consideration transferred~~

~~83,454~~

~~Transaction expenses included in “other operating expense” in the condensed consolidated statement of operations for the period ended April 2, 2023~~

~~571~~


Identifiable assets acquired and liabilities assumed	Lucky Strike		Other Acquisitions		Total
Current assets	$	586	$	133	$	719
Property and equipment	43,114		16,433		59,547
Operating lease ROU	95,232		12,923		108,155
Finance lease ROU	25,132		—		25,132
Identifiable intangible assets (1)	9,015		2,065		11,080
Goodwill	48,268		24,813		73,081
Deferred income tax asset	2,615		—		2,615
Total assets acquired	$	223,962	$	56,367	$	280,329

Current liabilities	$	(3,350)	$	(1,034)	$	(4,384)
Operating lease liabilities	(106,910)		(12,923)		(119,833)
Finance lease liabilities	(22,996)		—		(22,996)
Other liabilities	(231)		—		(231)
Total liabilities assumed	(133,487)		(13,957)		(147,444)
Total fair value, net of cash of $132	$	90,475	$	42,410	$	132,885

Components of consideration transferred
Cash	$	90,475	$	41,716	$	132,191
Holdback (2)	—		694		694
Total	$	90,475	$	42,410	$	132,885

*(1) Of the identifiable intangible assets acquired, $6,740 relates to the indefinite-lived Lucky Strike trade name. The remaining identifiable intangible assets acquired consist of definite-lived trade names, customer relationships, and non-compete agreements and indefinite-lived liquor licenses. See Note 4 - Goodwill and Other Intangible Assetsfor more information.

(2) The holdback represents a portion of the consideration transferred that is retained to indemnify the Company for general claims during a certain period subsequent to the acquisition date (the “holdback period”). Holdback funds, to the extent any funds remain, are released to the seller upon expiration of the holdback period.

During the six months ended December 31, 2023, we acquired one additional bowling entertainment center, which was previously managed by the Company, for $6,065 that did not meet the definition of a business under ASC 805. Therefore, this acquisition was accounted for as an asset acquisition, using a cost accumulation model. The assets acquired and liabilities assumed were recognized at cost, which was the consideration transferred to the seller, including direct transaction costs, on the acquisition date. The cost of the acquisition was then allocated to the assets acquired based on their relative fair values. Goodwill was not recognized.

(4) Goodwill and Other Intangible Assets

Goodwill:

The changes in the carrying amount of goodwill for the period ended ~~April 2,~~December 31, 2023:


Balance as of July ~~3, 2022~~2, 2023	$	~~742,669~~753,538
Goodwill resulting from acquisitions during fiscal year ~~2023~~2024	~~7,901~~73,081
~~Adjustments to preliminary fair values for prior year acquisitions~~	~~(340)~~
Balance as of ~~April 2,~~December 31, 2023	$	~~750,230~~826,619

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Index to Notes

Intangible Assets:


		April 2, 2023						July 3, 2022
		Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
	December 31, 2023															December 31, 2023			July 2, 2023
	Gross carrying amount													Gross carrying amount	Accumulated amortization		Net carrying amount	Gross carrying amount		Accumulated amortization	Net carrying amount
Finite-lived intangible assets:	Finite-lived intangible assets:
AMF trade name
AMF trade name
AMF trade name	AMF trade name	$	9,900	$	(9,088)	$	812	$	9,900	$	(8,593)	$	1,307
Other acquisition trade names	Other acquisition trade names	2,490		(1,141)		1,349		1,761		(651)		1,110
Customer relationships	Customer relationships	23,022		(17,382)		5,640		21,112		(13,989)		7,123
Management contracts	Management contracts	1,800		(1,659)		141		1,800		(1,443)		357
Non-compete agreements	Non-compete agreements	2,951		(1,271)		1,680		2,450		(1,067)		1,383
PBA member, sponsor & media relationships	PBA member, sponsor & media relationships	1,400		(599)		801		1,400		(504)		896
Other intangible assets	Other intangible assets	921		(323)		598		921		(133)		788
		42,484		(31,463)		11,021		39,344		(26,380)		12,964
	46,464
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:
Liquor licenses	Liquor licenses	10,961		—		10,961		9,629		—		9,629
Liquor licenses
Liquor licenses
PBA trade name	PBA trade name	3,100		—		3,100		3,100		—		3,100
Lucky Strike trade name
Bowlero trade name	Bowlero trade name	66,900		—		66,900		66,900		—		66,900
		80,961		—		80,961		79,629		—		79,629
		$	123,445	$	(31,463)	$	91,982	$	118,973	$	(26,380)	$	92,593
	89,152
	$

The following table shows amortization expense for finite-lived intangible assets for each reporting period:

Three Months Ended Nine Months Ended
April 2, 2023 March 27, 2022 April 2, 2023 March 27, 2022
Amortization expense $ 1,959 $ 3,341 $ 5,403 $ 8,098


	Three Months Ended				Six Months Ended
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
Amortization expense	$	1,760	$	1,862	$	3,541	$	3,444

(5) Property and Equipment

As of ~~April 2,~~December 31, 2023 and July ~~3, 2022,~~2, 2023, property and equipment consists of:


		April 2, 2023		July 3, 2022
	December 31, 2023					December 31, 2023	July 2, 2023
Land	Land	$	92,349	$	77,006
Buildings and improvements		118,679		69,219
Leasehold improvements		372,163		349,534
Building and leasehold improvements
Equipment, furniture, and fixtures	Equipment, furniture, and fixtures	453,350		375,780
Construction in progress	Construction in progress	44,070		15,638
		1,080,611		887,177
	1,297,610
Accumulated depreciation	Accumulated depreciation	(416,674)		(352,456)
Property and equipment, net of accumulated depreciation	Property and equipment, net of accumulated depreciation	$	663,937	$	534,721

The following table shows depreciation expense related to property and equipment for each reporting period:

Three Months Ended Nine Months Ended
April 2, 2023 March 27, 2022 April 2, 2023 March 27, 2022
Depreciation expense $ 22,319 $ 20,578 $ 64,583 $ 55,525


	Three Months Ended				Six Months Ended
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
Depreciation expense	$	29,453	$	21,925	$	53,631	$	42,264

~~Assets held for sale:~~

Total assets held for sale at April 2, 2023 and July 3, 2022 were $2,069 and $8,789, respectively. Assets held for sale are valued at the lower of their respective carrying value or their respective fair value less the costs to sell.

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(6) Leases

The Company leases various assets under non-cancellable operating and ~~capital~~finance leases. These assets include bowling entertainment centers, office space, vehicles, and equipment.

Most of our leases contain payments for some or all of the following: base rent, contingent rent, common area maintenance, insurance, real-estate taxes, and other operating expenses. Rental payments are subject to escalation depending on future changes in designated indices or based on pre-determined amounts agreed upon at lease inception.

VICI Transaction:

On October 19, 2023, the Company completed a transaction with VICI Properties Inc. (“VICI”) relating to the transfer of the land and real estate assets of 38 bowling entertainment centers for an aggregate value of $432,900. The transaction was structured as a tax-deferred capital contribution with cash proceeds of $408,510 and a $24,390 limited partner interest in a subsidiary of VICI, which is accounted for as an equity method investment.

~~Operating Leases:~~ ~~We recorded accrued~~Simultaneously with the transfer, the Company entered into a triple-net master lease agreement with VICI. The master lease has an initial total annual rent of ~~$27,126~~$31,600, and ~~$26,417 within~~will escalate at the greater of 2.0% or the consumer price index (CPI) (subject to a 2.5% ceiling). The master lease has an initial term of 25 years, and six five year tenant renewal options. Based on an analysis of the economic, market, asset and contractual characteristics of the master lease, the Company determined that all six renewal options were reasonably assured, and therefore, the lease term for accounting purposes is 55 years.

The Company concluded that the transfer was not a sale for accounting purposes as control of the underlying assets remained with the Company, and therefore, the Company recognized a financing obligation equal to the contribution value of $432,900, net of transaction costs. Consistent with the Company’s other ~~current liabilities~~financing obligations, the lease payments will be allocated between principal and ~~other long-term liabilities~~interest on the ~~condensed consolidated balance sheets as of April 2, 2023 and July 3, 2022, respectively.~~

~~Capital Leases:~~ ~~We had $56,546 and $47,298 in accumulated amortization on property and equipment under capital leases as of April 2, 2023 and July 3, 2022, respectively~~financing obligation.

The following ~~tables summarize~~table summarizes the ~~Company’s~~components of the net lease cost for each reporting period:


		Three Months Ended		Six Months Ended
Lease Costs:	Location on Consolidated Statements of Operations	December 31, 2023		December 31, 2023
Operating Lease Costs: (1)
Operating lease costs associated with master leases	Primarily cost of revenues	$	4,428	$	8,856
Operating lease costs associated with non-master leases	Primarily cost of revenues	14,691		26,268
Gains from modifications to operating leases	Other operating expense	—		(499)

Finance Lease Costs:
Amortization of right-of-use assets	Primarily cost of revenues	4,379		8,490
Interest on lease liabilities	Interest expense, net	12,467		24,488

Financing Obligation Costs:
Interest expense	Interest expense, net	8,138		8,244

Variable lease cost (2)	Primarily cost of revenues	19,182		37,185
Short-term lease cost (3)	Cost of revenues; SG&A	320		570
Sublease income	Revenues	(1,324)		(2,628)
Total net lease costs		$	62,281	$	110,974

(1)This represents cash and non-cash lease costs for operating leases. Operating lease costs are recognized evenly over the remaining lease term and ~~capital leases:~~

Three Months Ended Nine Months Ended
April 2, 2023 March 27, 2022 April 2, 2023 March 27, 2022
Operating Leases
Rent expense $ 14,296 $ 8,041 $ 45,522 $ 39,979
Capital Leases
Interest expense $ 10,304 $ 9,255 $ 31,145 $ 28,080
Amortization expense 3,095 3,003 9,332 9,313
Total capital lease cost $ 13,399 $ 12,258 $ 40,477 $ 37,393

~~(7) Accrued Expenses~~

~~As of April 2, 2023~~differ from the actual cash payments made for our leases. Cash payments and ~~July 3, 2022, accrued expenses consist of:~~

April 2, 2023 July 3, 2022
Customer deposits $ 27,378 $ 10,728
Compensation 15,366 15,746
Taxes and licenses 10,662 11,568
Deferred revenue 8,044 6,384
Insurance 6,040 5,229
Utilities 4,265 4,185
Professional fees 2,867 3,062
Deferred rent 2,731 3,252
Interest 665 498
Other 5,756 2,202
Total accrued expenses $ 83,774 $ 62,854
lease costs can differ due

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to the timing of cash payments relative to straight-line rent expense, non-cash adjustments as a result of purchase accounting, and various other non-cash adjustments to lease costs. Please see the table below for cash paid for our leases.

(2)This includes variable leases costs such as utilities, common area maintenance, property insurance, real estate taxes, and percentage rent

(3)Sublease income primarily represents short-term leases with pro-shops and various retail tenants

Supplemental cash flow information related to leases for the six months ended December 31, 2023:


	December 31, 2023
Cash paid for amounts included in the measurement of lease liabilities (1)
Operating cash flows paid for operating leases	$	31,690
Operating cash flows paid for interest portion of finance leases	22,398
Financing cash flows paid for principal portion of finance leases	3,165
Operating cash flows paid for interest portion of financing obligations	6,610

(1)This table includes cash paid for amounts included in the measurement of our lease liabilities. Since the lease liability only includes amounts that are contractually fixed, this table excludes cash paid for amounts that are variable in nature, such as utilities, common area maintenance, property insurance, real estate taxes, and percentage rent.

(7) Accounts Payable and Accrued Expenses

As of December 31, 2023 and July 2, 2023, accounts payable and accrued expenses consist of:


	December 31, 2023		July 2, 2023
Accounts Payable	$	51,353	$	53,513
Customer deposits	24,212		12,703
Taxes and licenses	17,968		13,076
Compensation	13,618		14,670
Deferred revenue	13,552		7,144
Insurance	6,157		6,168
Professional fees	5,334		4,307
Utilities	4,616		4,607
Interest	1,072		904
Other	4,788		4,134
Total accounts payable and accrued expenses	$	142,670	$	121,226

(8) Debt

The following table summarizes the Company’s debt structure as of ~~April 2,~~December 31, 2023 and July ~~3, 2022:~~2, 2023:


		April 2, 2023		July 3, 2022
Amendment No. 8 Term Loan (Maturing February 8, 2028 and bearing variable rate interest; 8.31% at April 2, 2023)		$	900,000	$	—
First Lien Credit Facility Term Loan (Maturing July 3, 2024 and bore variable rate interest of 5.17% at July 3, 2022		—		790,271
Revolver (Maturing December 15, 2026 and bearing variable rate interest; 4.13% at July 3, 2022)		—		86,434
	December 31, 2023					December 31, 2023	July 2, 2023
First Lien Credit Facility Term Loan (Maturing February 8, 2028 and bearing variable rate interest; 8.85% and 8.65% at December 31, 2023 and July 2, 2023, respectively)
Other Equipment Loans	Other Equipment Loans	14,893		—
		914,893		876,705
	1,158,437
Less:	Less:
Unamortized financing costs
Unamortized financing costs
Unamortized financing costs	Unamortized financing costs	(11,920)		(6,649)
Current portion of unamortized financing costs	Current portion of unamortized financing costs	2,127		3,245
Current maturities of long-term debt	Current maturities of long-term debt	(7,696)		(8,211)
Total long-term debt	Total long-term debt	$	897,404	$	865,090

Term Loan: Under the Company’s First Lien Credit ~~Facility Term Loan:~~ ~~The First~~Agreement, as amended (the “First Lien Credit ~~Facility~~Agreement”), the Company has made term loans consisting of $1,150,000 of aggregate initial principal amount of debt outstanding (the

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“Term Loan”). The Term Loan was repaid on a quarterly basis in principal payments of $2,053. The First Lien Credit Facility Term Loan bore interest at a rate per annum equal to LIBOR plus 3.50%. Interest on First Lien Credit Facility Term Loan was due quarterly.

~~Amendment No. 8 Term Loan:~~ ~~On February 8, 2023, the Company entered into an Eighth Amendment (the “Eighth Amendment”) to the First Lien Credit Agreement. The Eighth Amendment provided for a new $900,000 term loan maturing~~matures on February 8, 2028 (the “Amendment No. 8 Term Loan”). Proceeds of the Amendment No. 8 Term Loan were used to refinance the existing First Lien Credit Facility Term Loan, to repay all amounts outstanding on the Revolver, and for general corporate purposes. The Company accounted for this transaction as a debt modification, which was not substantial. Therefore, the Company did not incur any gain or loss relating to the modification. The Amendment No. 8 Term Loan is repaid on a quarterly basis in principal payments of ~~$2,250 beginning~~$2,875, which began on September 29, 2023. The ~~Amendment No. 8~~ Term Loan bears interest at a rate per annum equal to the Adjusted Term ~~Secured Overnight Financing Rate (“SOFR”)~~SOFR plus 3.50%. Interest ~~on the Amendment No. 8 Term Loan~~ is due on the last day of the interest period. The interest period, as agreed upon between the Company and its lender, can be either one, three, or six months in length. As of ~~April 2,~~December 31, 2023, the interest period is one month.

The Company entered into two hedging transactions effective as of March 31, 2023 for an aggregate notional amount of our Amendment No. 8 Term Loan of $800,000. The hedge transactions have a trade and hedge designation date of April 4, 2023. The hedge transactions, each for a notional amount of $400,000, provide for interest rate collars. The interest rate collars establish a floor on SOFR of 0.9429% and 0.9355%, respectively, and a cap on SOFR of 5.50%. The interest rate collars have a maturity date of March 31, 2026.

Revolver: Under the First Lien Credit Agreement, the Company has access to a senior secured revolving credit

facility (the “Revolver”). ~~The~~As of December 31, 2023, the Revolver commitment is $235,000. Any outstanding balance on the Revolver is due on December 15, 2026. Interest on borrowings under the Revolver is based on the Adjusted Term SOFR.

In connection with the Company entering into the Eighth Amendment, the Revolver commitment was increased by $35,000 to an aggregate amount of $200,000, and the amount outstanding as of the Eighth Amendment date of $86,434 was repaid. As of April 2, 2023, no amounts have been drawn on the Revolver.

First Lien Credit Agreement Covenants: Obligations owed under the First Lien Credit Agreement are secured by a first priority security interest on substantially all assets of Bowlero ~~Corp~~Corp. and the guarantor subsidiaries. The First Lien Credit Agreement contains customary events of default, restrictions on indebtedness, liens, investments, asset dispositions, dividends and affirmative and negative covenants. The Company is subject to a financial covenant requiring that the First Lien Leverage Ratio (as defined in the First Lien Credit Agreement) not exceed 6.00:1.00 as of the end of any fiscal quarter if amounts outstanding on the Revolver exceed an amount equal to 35% of the aggregate Revolver commitment (subject to certain exclusions) at the end of such fiscal quarter. In addition, payment of borrowings under the Revolver may be accelerated if there is an event of default, and Bowlero would no longer be permitted to borrow additional funds under the Revolver while a default or event of default were outstanding.

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Letters of Credit: Outstanding standby letters of credit as of ~~April 2,~~December 31, 2023 and July ~~3, 2022~~2, 2023 totaled $12,621 and $10,386, and are guaranteed by JP Morgan Chase Bank, N.A. The available amount of the Revolver is reduced by the outstanding standby letters of credit.

Other Equipment ~~Loans~~Loan: : On August 19, 2022, the Company entered into an equipment loan agreement for a principal amount of $15,350 with JP Morgan Chase Bank, ~~N.A.~~N.A.. The loan matures August 19, 2029 and bears a fixed interest rate of 6.24%. The loan is repaid on a monthly basis in fixed payments of $153 plus a final payment at maturity. The loan obligation is secured by a lien on the equipment.

Covenant Compliance: The Company was in compliance with all debt covenants as of December 31, 2023.

Interest rate collars:The Company entered into two interest rate collars effective as of March 31, 2023 for an aggregate notional amount of our Term Loan of $800,000. The collar hedging strategy stabilizes interest rate fluctuations by setting both a floor and a cap. The hedge transactions have a trade and hedge designation date of April 4, 2023. The hedge transactions, each for a notional amount of $400,000, provide for interest rate collars. The interest rate collars establish a floor on SOFR of 0.9429% and 0.9355%, respectively, and a cap on SOFR of 5.50%. The interest rate collars have a maturity date of March 31, 2026.

The fair value of the collar agreements as of December 31, 2023 and July 2, ~~2023.~~2023 was a net liability of $89 and an asset of $4,608, respectively, and is included within other current assets, other assets, and other long-term liabilities in the consolidated balance sheet.

Since SOFR was within the collar cap and floor rates, there was no interest impact on the statement of income.

(9) Income Taxes

The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company's best estimate of the effective tax rate expected for the full year. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated (discrete items), are excluded from the estimated annual effective tax rate, and the related tax expense or benefit is reported ~~as a discrete item~~ in the same period as the related item. The Company’s effective tax rate for the ~~nine~~six months ended ~~April 2,~~December 31, 2023 was ~~2.0% tax expense,~~13.5%, which differs from the US federal statutory rate of 21% primarily due to the change in fair value of the earnout liability, permanent differences, and items associated with the VICI Transaction, which are treated as discrete tax items. The Company’s effective tax rate for the six months ended January 1, 2023 was 6.5% tax benefit and differs from the US federal statutory rate of 21% due to certain non-deductible expenses, changes in the valuation allowance, and state and local taxes offset in part with changes in estimates associated with certain income tax credits and tax deductible expenses. The Company’s effective tax rate for the nine months ended March 27, 2022 was 14.2% tax benefit and differs from the US federal statutory rate of 21% due to the release of a portion of the valuation allowance resulting from the acquisition of Bowl America offset in part by other changes in the valuation allowance and state and local taxes.

We regularly evaluate the realizability of our net deferred tax assets. As of April 2, 2023, substantially all our U.S. federal, state and foreign deferred tax assets, net of deferred tax liabilities, were subject to valuation allowances. If our financial results continue to improve and we conclude that estimates of our future taxable income are objectively verifiable, our assessment of the realization of our net deferred tax assets could result in the release of a significant portion of the valuation allowances, with the exception of any potentially remaining net operating losses subject to potential limitation, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or state tax loss limitations. Such a release would result in a material non-cash income tax benefit in our consolidated statement of operations in the period of release and the recording of additional deferred tax assets on our consolidated balance sheet. There is a reasonable possibility that within the next several quarters, sufficient positive evidence becomes available to reach a conclusion that a significant portion of the valuation allowances against our U.S. net deferred tax assets would no longer be required.

(10) Commitments and Contingencies

Litigation and Claims: The Company is currently, and from time to time may be, subject to claims and actions arising in the ordinary course of its business, including general liability, fidelity, workers’ compensation, employment claims, and Americans with Disabilities Act (“ADA”) claims. The Company has insurance to cover general liability and workers’ compensation claims and reserves for claims and actions in the ordinary course. The insurance is subject to a self-insured retention. In some actions, plaintiffs request punitive or other damages that may not be covered by insurance.

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There is currently a group of approximately 73 pending claims, filed with the Equal Employment Opportunity Commission (the “EEOC”) between 2016 and 2019, generally relating to claims of age discrimination. To date, the EEOC issued determinations of probable cause as to 55 of the charges, which the Company contests and intends to defend vigorously. The EEOC has also alleged a pattern or practice of age discrimination, which resulted in a determination of probable cause and, on August 22, 2022, the EEOC submitted a proposal for the Company to participate in the conciliation process. The EEOC’s proposal included a demand for monetary and non-monetary remedies. On April 11, 2023, the EEOC provided notice to the Company that its conciliation efforts were unsuccessful; ~~however,~~moreover, the Company continues to contest the determinations issued by the EEOC with respect to all charges and intends to defend vigorously. The Company cannot estimate ~~the~~reasonably possible range of loss, if any, associated with these EEOC matters.

(11) Earnouts

~~Old Bowlero’s stockholders~~There were 11,418,357 unvested earnout shares outstanding as of December 31, 2023 and ~~option holders received additional~~July 2, 2023.

The outstanding unvested earnout shares ~~of Bowlero common stock (the “Earnout Shares”). Earnout Shares~~will vest during the period from and after the Closing Date until the fifth anniversary of the Closing Date (the “Earnout Period”). The following tranches of Earnout Shares were issued to Old Bowlero stockholders:

~~(a)10,375,000 Earnout Shares,~~ if the closing share price of Bowlero’s Class A common stock, par value $0.0001 per share (Class A common stock) equals or exceeds $15.00 per share for any 10 trading days within any consecutive 20-trading day period that occurs after the Closing Date during the Earnout Period and

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~~(b)10,375,000 Earnout Shares, if the closing share price of~~ Class A common stock equals or exceeds $17.50 per share for any 10 trading days within any consecutive ~~20-trading day period during the Earnout Period.~~

During the Earnout Period, if Bowlero experiences an Acceleration Event, which as detailed in the BCA includes a change of control, liquidation or dissolution of the Company, bankruptcy or the assignment for the benefit of creditors the appointment of a custodian, receiver or trustee for all or substantially all the assets or properties of the Company, then any Earnout Shares that have not been previously issued by Bowlero (whether or not previously earned) to the Bowlero stockholders or holders of Options or Earnout shares issued but not vested will be deemed earned and issued or vested by Bowlero as of immediately prior to the Acceleration Event, unless, in the case of an Acceleration Event, the value of the consideration to be received by the holders of Bowlero common stock in such change of control transaction is less than the applicable stock price thresholds described above. If the consideration received in such Acceleration Event is not solely cash, Bowlero’s Board of Directors will determine the treatment of the Earnout Shares.

As part of the Sponsor Support Agreement, Isos and LionTree were issued 1,611,278 Earnout Shares which vest during the period from and after the Closing Date during the Earnout Period: (a) 805,639 Earnout Shares if the closing share price of Bowlero’s Class A common stock equals or exceeds $15.00 per share for any 1020 trading ~~days within any consecutive 20-trading~~ day period that occurs after the Closing Date during the Earnout Period and (b) 805,639 Earnout Shares, if the closing share price of Class A common stock equals or exceeds $17.50 per share for any 10 trading days within any consecutive 20-trading day period during the Earnout Period. As a result of the cashless exercise of their unvested private placement warrants, the Sponsor and LionTree were issued 475,440 additional Earnout Shares, which vest during the period from and after the Closing Date during the Earnout Period: (a) 237,721 Earnout Shares if the closing share price of Bowlero’s Class A common stock equals or exceeds $15.00 per share for any 10 trading days within any consecutive 20-trading day period that occurs after the Closing Date during the Earnout Period and (b) 237,719 Earnout Shares, if the closing share price of Class A common stock equals or exceeds $17.50 per share for any 10 trading days within any consecutive 20-trading day period during the Earnout Period.

On March 2, 2023, Bowlero’s closing stock price of Class A common stock equaled or exceeded $15.00 for 10 trading days within a 20-trading day period. As a result, 11,418,361 Earnout Shares were fully vested and are no longer subject to the applicable vesting restrictions. The Earnout Shares settled into equity and are no longer included in the Earnout liability on the condensed consolidated balance sheet as of April 2, 2023.December 15, 2021 through December 15, 2026.

All but ~~60,471 Earnout Shares~~52,699 earnout shares are classified as a liability and changes in the fair value of the ~~Earnout Shares~~earnout shares are recognized in the statement of operations. Those ~~Earnout Shares~~earnout shares not classified as a liability are classified as equity compensation to employees and recognized as compensation expense on a straight-line basis over the expected term or upon the contingency being met.

See Note 12 - Fair Value of Financial Instrumentsfor a summary of changes in the estimated fair value of the earnout shares for the three and six months ended December 31, 2023 and January 1, 2023.

(12) Fair Value of Financial Instruments

Debt

The fair value and carrying value of our debt as of ~~April 2,~~December 31, 2023 and July ~~3, 2022~~2, 2023 are as follows:


		April 2, 2023		July 3, 2022
	December 31, 2023					December 31, 2023	July 2, 2023
Carrying value	Carrying value	$	914,893	$	876,705
Fair value	Fair value	914,899		841,637

The fair value of our debt is estimated based on trading levels of lenders buying and selling their participation levels of funding (Level 2).

There were no transfers in or out of any of the levels of the valuation hierarchy during the ~~nine~~six months ended ~~April 2,~~December 31, 2023 and the fiscal year ended July ~~3, 2022.~~2, 2023.

Items Measured at Fair Value on a Recurring Basis

The Company holds certain assets and liabilities that are required to be measured at fair value on a recurring basis. The following table is a summary of fair value measurements and hierarchy level as of ~~April 2,~~December 31, 2023 and July ~~3, 2022:~~2, 2023:


		April 2, 2023
		Level 1		Level 2		Level 3		Total
	December 31, 2023											December 31, 2023
	Level 1									Level 1	Level 2	Level 3	Total
Interest rate collars
Earnout shares	Earnout shares	$	—	$	—	$	185,361	$	185,361
Total liabilities	Total liabilities	$	—	$	—	$	185,361	$	185,361

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		July 3, 2022
	July 2, 2023											July 2, 2023
	Level 1									Level 1	Level 2	Level 3	Total
Interest rate collars
Total assets
		Level 1		Level 2		Level 3		Total
Earnout shares	Earnout shares	$	—	$	—	$	210,952	$	210,952
Contingent consideration		—		—		1,470		1,470
Earnout shares
Earnout shares
Total liabilities	Total liabilities	$	—	$	—	$	212,422	$	212,422

The fair value of earnout shares was estimated using a Monte Carlo simulation model (level 3 inputs). The key inputs into the Monte Carlo simulation as of ~~April 2,~~December 31, 2023 were as follows:


		Earnout
	Earnout						Earnout
Expected term in years	Expected term in years	3.7		Expected term in years	2.96
Expected volatility	Expected volatility	60%		Expected volatility	50%
Risk-free interest rate	Risk-free interest rate	3.74%		Risk-free interest rate	4.02%
Stock price	Stock price	$	16.95	Stock price	$	14.16
Dividend yield	Dividend yield	—		Dividend yield	1.62%

The following table sets forth a summary of changes in the estimated fair value of the Company's Level 3 Earnout liability for the three and ~~nine~~six months ended ~~April 2,~~December 31, 2023 and ~~March 27, 2022:~~January 1, 2023:

Three Months Ended Nine Months Ended
April 2, 2023 March 27, 2022 April 2, 2023 March 27, 2022
Balance as of beginning of period $ 282,557 $ 158,571 $ 210,952 $ —
Issuances 19 67 88 181,180
Settlements* (184,437) — (184,437) —
Changes in fair value 87,222 45,778 158,758 23,236
Balance as of end of period $ 185,361 $ 204,416 $ 185,361 $ 204,416

* This represents the settlement of the $15.00 tranche of Earnout Shares. The $17.50 tranche of Earnout Shares has not vested and is still subject to the applicable vesting restrictions See Note 11 - ~~Earnouts~~.


	Three Months Ended				Six Months Ended
	December 31, 2023		January 1, 2023		December 31, 2023		January 1, 2023
Balance as of beginning of period	$	71,364	$	251,779	$	112,041	$	210,952
Issuances	24		2		29		69
Changes in fair value	64,091		30,776		23,409		71,536
Balance as of end of period	$	135,479	$	282,557	$	135,479	$	282,557

Items Measured at Fair Value on a Non-Recurring Basis

The Company’s significant assets measured at fair value on a non-recurring basis subsequent to their initial recognition include assets held for sale. We utilize third party brokers for an estimate of value to record the assets held for sale at their fair value less costs to sell. These inputs are classified as Level 2 fair value measurements.

As part of the VICI Transaction, the Company recognized an initial limited partnership interest in a subsidiary of VICI equal to its fair value of $24,390. Subsequent adjustments will be accounted for using the equity method of accounting.

Other Financial Instruments

Other financial instruments include cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses. The financial statement carrying amounts of these items approximate the fair value due to their short duration.

(13) Common Stock, Preferred Stock and Stockholders’ Equity

The Company is authorized to issue three classes of stock to be designated, respectively, Class A common stock, Class B common stock (together with Class A common stock, the “Common Stock”) and Series A preferred stock (the “Preferred Stock”). The total number of shares of capital stock which the Company shall have authority to issue is 2,400,000,000, divided into the following:

Class A common stock:

•Authorized: 2,000,000,000 shares, with a par value of $0.0001 per share as of ~~April 2,~~December 31, 2023 and July ~~3, 2022.~~2, 2023.

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•Issued and Outstanding: ~~114,072,530~~90,664,596 shares (inclusive of ~~1,600,993~~1,593,593 shares contingent on certain stock price thresholds but excluding ~~4,899,059~~30,960,342 shares held in treasury) as of ~~April 2,~~December 31, 2023 and ~~110,395,630~~107,666,301 shares (inclusive of ~~3,209,972~~1,595,930 shares contingent on certain stock price thresholds but excluding ~~3,430,667~~11,312,302 shares held in treasury) as of July ~~3, 2022.~~2, 2023.

Class B common stock:

•Authorized: 200,000,000 shares, with a par value of $0.0001 per share as of ~~April 2,~~December 31, 2023 and July ~~3, 2022.~~2, 2023.

•Issued and Outstanding: ~~60,819,437~~58,519,437 and ~~55,911,203~~60,819,437 shares as of ~~April 2,~~December 31, 2023 and July ~~3, 2022,~~2, 2023 respectively.

Preferred Stock:

•Authorized: 200,000,000 shares, with a par value of $0.0001 per share as of ~~April 2,~~December 31, 2023 and July ~~3, 2022.~~2, 2023.

•Issued and Outstanding: ~~195,000 and 200,000~~136,373 shares as of ~~April 2,~~December 31, 2023 and July ~~3, 2022, respectively.~~2, 2023.

Series A Preferred Stock

Dividends accumulate on a cumulative basis on a 360-day year commencing from the issue date. The dividend rate is fixed at 5.5% per annum on a liquidation preference of $1,000 per share. Payment dates are June 30 and December 31 of each year with a record date of June 15 for the June 30 payment date and December 15 for the December 31 payment date. Declared dividends will be paid in cash if the Company declares the dividend to be paid in cash. If the Company does not pay all or any portion of the dividends that have accumulated as of any payment date, then the dollar amount of the dividends not paid in cash will be added to the liquidation preference and deemed to be declared and paid in-kind. ~~As of April 2, 2023, there have been no dividends declared or paid in cash.~~ For the ~~period~~six months ended ~~April 2,~~December 31, 2023, no accumulated dividends ~~in the amount of $5,665~~ were added to the liquidation preference and deemed to be declared and paid in-kind. ~~During~~For the ~~period~~six months ended ~~April 2,~~December 31, 2023, ~~5,000 shares were settled for cash of $6,824.~~

~~The Preferred Stock is redeemable if a Fundamental Change occurs and each holder will have the right to require~~ the Company ~~to repurchase such holders’ shares~~paid a cash dividend in the amount of $29.10 per share of Preferred Stock, or any portion thereof for a cash purchase price. A Fundamental Change includes events such as a person or a group becoming direct or indirect owners of shares of the Company’s Common Stock representing more than 50% of the voting power, consummation of a transaction with which all the Common Stock is exchanged for, converted into, acquired for, or constitutes solely the right to receive cash or other property, Company’s stockholders approve any plan or proposal for the liquidation or dissolution of the Company, or the Company’s Common Stock ceases to be listed on any of the NYSE or The Nasdaq Global Market or The Nasdaq Global Select Market (or any of their respective successors).

~~The Company has classified the Preferred Stock as temporary equity as the shares have certain redemption features that are not solely~~ in the ~~control~~aggregate amount of the Company. The Preferred Stock is not currently redeemable because the deemed liquidation provision is considered a substantive condition that is contingent on the event and it is not currently probable that it will become redeemable.$3,969.

~~Shares and Warrant~~Share Repurchase Program

On February 7, 2022, the Company announced that its Board of Directors authorized a share ~~and warrant~~ repurchase program providing for repurchases of up to $200,000 of the Company’s outstanding Class A common stock ~~and warrants~~ through February 3, 2024. On each of May 15, 2023, September 6, 2023 and February 2, 2024, the Board of Directors authorized a replenishment of then-remaining balance of the share repurchase program to $200,000, which in aggregate increased the total amount that has been authorized under the share repurchase program to approximately $551,518. On February 2, 2024, the Board of Directors extended the share repurchase program indefinitely. Treasury stock purchases are stated at cost and presented as a reduction of equity on the condensed consolidated balance sheets. Repurchases of shares ~~and warrants~~ are made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases are based on a variety of factors, including stock price, regulatory limitations, debt agreement limitations, and other market and economic factors. The share repurchase ~~plan~~program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase ~~plan~~program at any time.

As of ~~April 2,~~December 31, 2023, the remaining balance of the repurchase ~~plan~~program was ~~$141,089.~~$54,168. For the ~~nine~~six months ended ~~April 2,~~December 31, 2023, ~~1,468,392~~19,648,040 shares of Class A common stock were repurchased for a total of ~~$18,972,~~$211,551, for an average purchase price per share of $12.92, and bringing the cumulative total shares repurchased to 4,899,059 for a total of $53,530 at an average per share price of $10.92. On May 16, 2023, the Board of Directors authorized the replenishment of the remaining balance of the share and warrant repurchase program to $200,000.$10.77.

(14) Share-Based Compensation

The Company has three stock plans: the 2017 Stock Incentive Plan (“2017 Plan”), the Bowlero Corp. 2021 Omnibus Incentive Plan (“2021 Plan”) and the Bowlero Corp. Employee Stock Purchase Plan (“ESPP”). These stock incentive plans are designed to attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company and align the interest of key personnel with those of the Company’s stockholders.

As of December 31, 2023 and July 2, 2023, the total compensation cost not yet recognized is as follows:

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~~As of April 2, 2023 and July 3, 2022, the total compensation cost not yet recognized is as follows:~~


		Award Plan	April 2, 2023		July 3, 2022
	Award Plan						Award Plan	December 31, 2023	July 2, 2023
Stock options	Stock options	2021 Plan	$	30,175	$	37,273
Service based RSUs	Service based RSUs	2021 Plan	7,166		7,211
Market and service based RSUs	Market and service based RSUs	2021 Plan	1,655		1,498
Earnout RSUs	Earnout RSUs	2021 Plan	352		939
ESPP	ESPP		558		—
Total unrecognized compensation cost	Total unrecognized compensation cost		$	39,906	$	46,921

Share-based compensation recognized in the consolidated statements of operations for the periods ended ~~April 2,~~December 31, 2023 and ~~March 27, 2022~~January 1, 2023 is as follows:


				Three Months Ended				Nine Months Ended
		Award Plan		April 2, 2023		March 27, 2022		April 2, 2023		March 27, 2022
Performance-based options		2017 Plan		$	—	$	—	$	—	$	24,516
Time-based options		2017 Plan		—		—		—		952
			Three Months Ended												Three Months Ended			Six Months Ended
	Award Plan											Award Plan	December 31, 2023	January 1, 2023		December 31, 2023	January 1, 2023
Stock options	Stock options	2021 Plan		2,358		2,358		7,099		5,966
Service based RSUs	Service based RSUs	2021 Plan		1,030		560		3,357		605
Market and service based RSUs	Market and service based RSUs	2021 Plan		200		44		489		44
Earnout RSUs	Earnout RSUs	2021 Plan		432		58		527		65
Share-based bonus				—		—		—		14,228
ESPP	ESPP			187		—		419		—
Total share-based compensation expense	Total share-based compensation expense			$	4,207	$	3,020	$	11,891	$	46,376

The Company did not have any recognized income tax benefits, net of valuation allowances, related to our share-based compensation plans.

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(15) Net Loss Per Share

Net loss per share calculations for all periods prior to the Closing Date have been retrospectively adjusted for the equivalent number of shares outstanding immediately after the Closing Date to effect the reverse recapitalization. The computation of basic and diluted net loss per share of Class A common stock and Class B common stock is as follows:


		Three Months Ended
		April 2, 2023						March 27, 2022
		Class A		Class B		Total		Class A		Class B		Total
	Three Months Ended																		Three Months Ended
	December 31, 2023															December 31, 2023				January 1, 2023
	Class A													Class A	Class B		Total	Class A			Class B	Total
Numerator	Numerator
Net loss allocated to common stockholders
Net loss allocated to common stockholders
Net loss allocated to common stockholders	Net loss allocated to common stockholders	$	(23,846)	$	(12,628)	$	(36,474)	$	(13,344)	$	(7,461)	$	(20,805)

Denominator	Denominator
Denominator
Denominator
Weighted-average shares outstanding
Weighted-average shares outstanding
Weighted-average shares outstanding	Weighted-average shares outstanding	108,331,008		57,367,492		165,698,500		104,279,718		58,311,203		162,590,921

Net loss per share, basic & diluted	Net loss per share, basic & diluted	$	(0.22)	$	(0.22)	$	(0.22)	$	(0.13)	$	(0.13)	$	(0.13)
Net loss per share, basic & diluted
Net loss per share, basic & diluted

Anti-dilutive shares excluded from diluted calculation*	Anti-dilutive shares excluded from diluted calculation*					28,237,567						20,987,931
Anti-dilutive shares excluded from diluted calculation*
Anti-dilutive shares excluded from diluted calculation*

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Nine Months Ended
April 2, 2023 March 27, 2022
Class A Class B Total Class A Class B Total
Numerator
Net loss allocated to common stockholders $ (48,618) $ (25,558) $ (74,176) $ (37,867) $ (6,300) $ (44,167)
Denominator
Weighted-average shares outstanding 107,279,561 56,396,633 163,676,194 130,944,782 21,786,603 152,731,385
Net loss per share, basic & diluted $ (0.45) $ (0.45) $ (0.45) $ (0.29) $ (0.29) $ (0.29)
Anti-dilutive shares excluded from diluted calculation* 26,522,848 21,055,169


	Six Months Ended
	December 31, 2023						January 1, 2023
	Class A		Class B		Total		Class A		Class B		Total
Numerator
Net loss allocated to common stockholders	$	(30,298)	$	(18,877)	$	(49,175)	$	(24,743)	$	(12,959)	$	(37,702)

Denominator
Weighted-average shares outstanding	95,723,299		59,644,162		155,367,461		106,753,838		55,911,203		162,665,041

Net loss per share, basic & diluted	$	(0.32)	$	(0.32)	$	(0.32)	$	(0.23)	$	(0.23)	$	(0.23)

Anti-dilutive shares excluded from diluted calculation*					18,772,390						25,696,874

*The impact of potentially dilutive ~~convertible~~Series A preferred stock, ~~service based RSUs, market and~~ service based RSUs, stock options, and purchases of shares under our ESPP were excluded from the diluted per share calculations because they would have been antidilutive.

2221

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(16) Supplemental Cash Flow Information


		Nine Months Ended
		April 2, 2023		March 27, 2022
	December 31, 2023					December 31, 2023	January 1, 2023
Cash paid during the period for:	Cash paid during the period for:
Interest		$	69,352	$	60,531
Interest (1)
Interest (1)
Interest (1)
Income taxes, net of refunds	Income taxes, net of refunds	5,696		2,277
Noncash investing and financing transactions:	Noncash investing and financing transactions:
Assets obtained in build to suit arrangement	Assets obtained in build to suit arrangement	13,390		—
Assets obtained in build to suit arrangement
Assets obtained in build to suit arrangement
Capital expenditures in accounts payable	Capital expenditures in accounts payable	13,563		6,887
Capital lease assets obtained in exchange for capital lease liabilities		—		4,970
Modifications of capital lease assets and liabilities	Modifications of capital lease assets and liabilities	6,802		(23,604)
Change in fair value of interest rate swap	Change in fair value of interest rate swap	—		6,610
Issuance of warrants in Business Combination		—		22,426
Issuance of earnout obligation in Business Combination		—		181,113
Settlement of earnout obligation		184,437		—
Unsettled trade receivable, net
Excise tax

(1)Includes cash paid for the interest portion on finance leases. See Note 6 - L ease s for more information

(17) Subsequent Events

On ~~April 24, 2023,~~February 5, 2024, the ~~Company repurchased 56,217 shares~~Company’s Board of ~~Series A Preferred Stock for~~Directors declared a regular quarterly cash dividend of ~~$70,958. On April 27, 2023, the Company repurchased 2,410 shares~~$0.055 per share of ~~Series A Preferred Stock for cash~~common stock, which will be paid on March 8, 2024, to stockholders of ~~$3,041. All of the repurchased shares were then cancelled in accordance with our Series A Convertible Preferred Stock Certificate of Designations.~~record on February 23, 2024.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This discussion should be read in conjunction with Bowlero Corp.’s unaudited condensed consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended July ~~3, 2022~~2, 2023 as filed with the Securities and Exchange Commission (“SEC”) on September ~~15, 2022.~~11, 2023. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July ~~3, 2022.~~2, 2023. Actual results may differ materially from those contained in any forward-looking statements. All period references are to our fiscal periods unless otherwise indicated. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we,” “us,” “our,” the “Company,” and “Bowlero” are intended to mean the business and operations of Bowlero Corp. and its consolidated subsidiaries. All financial information in this section is presented in thousands, unless otherwise noted, except share and per share amounts.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial of Bowlero. These statements are based on the beliefs and assumptions of our management. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, we cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements about our business strategy, financial projections, anticipated growth and market opportunities.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the

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date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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In addition, statements that we “believe,” and similar statements reflect only our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. ~~Some factors~~Factors that could cause our actual results to differ ~~include:~~

•~~our ability to grow and manage growth profitably;~~

•include those described under the ~~possibility that we may be adversely impacted by other economic, business, and/or competitive factors;~~

•~~the risk that the market for our entertainment offerings may not develop on the timeframe or in the manner that we currently anticipate;~~

•~~general geopolitical and economic conditions and uncertainties affecting markets in which we operate and economic volatility that could adversely impact our business;~~

•~~our ability to attract new customers and retain existing customers;~~

•~~changes in consumer preferences and buying patterns;~~

•~~the impact of inflation on our costs, margins and our pricing;~~

•~~inability to compete successfully against current and future competitors in the highly competitive out-of-home and home-based entertainment markets;~~

•~~inability to operate venues, or obtain and maintain licenses and permits necessary for such operation, in compliance with laws, regulations and other requirements;~~

•~~damage to brand or reputation;~~

•~~our ability to successfully defend litigation brought against us;~~

•our ability to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights and claims of intellectual property and proprietary right infringement, misappropriation or other violation by competitors and third parties;

•~~failure to hire and retain qualified employees and personnel;~~

•~~fluctuations in our operating results;~~

•~~security breaches, cyber-attacks and other interruptions to our and our third-party service providers’ technological and physical infrastructures;~~

•~~catastrophic events, including war, terrorism and other international conflicts, adverse weather conditions, public health issues or natural catastrophes and accidents;~~

•~~risk of increased regulation of our operations;~~

•~~our future capital needs; and~~

•~~other risks and uncertainties indicated in this Quarterly Report on Form 10-Q, including those under~~heading “Risk Factors” in ~~other filings that have been made or will be made by us with~~our Annual Report on Form 10-K for the ~~SEC.~~fiscal year ended July 2, 2023.

Overview

Bowlero Corp. is the world’s largest operator of bowling entertainment centers. The Company operates traditional bowling centers and more upscale entertainment concepts with lounge seating, arcades, enhanced food and beverage offerings, and more robust customer service for individuals and group events, as well as hosting and overseeing professional and non-professional bowling tournaments and related broadcasting.

The Company remains focused on creating long-term shareholder value through continued organic growth, the conversion and upgrading of centers to more upscale entertainment concepts offering a broader range of offerings, the opening of new centers and acquisitions. A core tenet of our long-term strategy to increase profitability is to grow the size and scale of the Company in order to improve our leverage of Selling, General and Administrative expenses (“SG&A”). For the third quarter of fiscal 2023 as compared to the third quarter of fiscal 2022, the Company’s total revenue (inclusive of acquisitions and new centers) increased by approximately 22% and the Company’s total revenue on a same-store basis increased by approximately 17%.

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Same-store revenues includes revenue from centers that are open in periods presented (open in both the current period and the prior period being reported) and excludes revenues from centers that are not open in both periods presented, such as recently acquired centers or centers closed for upgrades, renovations or other such reasons, as well as media revenues. We continue to see positive momentum for future demand and we have recovered to better than pre-pandemic performance. While we generated a strong financial performance prior to the COVID-19 pandemic and during the previous seven quarters, the impact of the COVID-19 pandemic, various COVID-19 virus variants, the governmental actions imposed in response to the pandemic, and the resulting consequences on our consumer’s risk tolerance toward health and safety matters remains uncertain.

~~The Business Combination~~

On December 15, 2021, we completed the business combination (the “Business Combination”) contemplated by the Business Combination Agreement, dated as of July 1, 2021, as amended on November 1, 2021 (the Business Combination Agreement), by and among Isos Acquisition Corporation (“Isos”) and Bowlero Corp. (“Old Bowlero”). Pursuant to the Business Combination Agreement, Old Bowlero was merged with and into Isos, with Isos surviving the merger, and Isos was renamed “Bowlero Corp.”

Recent Developments

Bowlero’s results for the ~~three and nine~~six months ended ~~April 2,~~December 31, 2023 exhibited ~~continued strong revenue growth. This growth has been bolstered by technology driven performance enhancements,~~ the ~~strength of our business model, the increase in confidence of our customers and the resilience~~planned fiscal year 2024 reinvestment in the ~~bowling market. Additionally, the further improvements in our quarterly results demonstrate our continued ability to execute our growth strategy~~business through acquisitions, new builds, and ~~business model.~~conversions. To highlight the Company’s recent activity during the ~~nine~~six months ended ~~April 2,~~December 31, 2023:

•We ~~made ten~~completed five acquisitions in which we acquired ~~twelve~~19 bowling entertainment centers ~~adding a total~~during the six months ended December 31, 2023. We have signed one agreement to acquire one additional center as of ~~39 net acquired new centers since~~December 31, 2023, which is expected to close in the ~~start~~third quarter of fiscal 2022, which we believe will aid the Company in several key geographic markets and aid in leveraging our fixed costs. We have a strong pipeline of potential acquisitions that we continue to actively evaluate.year 2024.

•We ~~signed three agreements for~~completed and opened two new build-outs ~~of new bowling entertainment centers~~during the six months ended December 31, 2023 and have a total of ~~six~~seven signed agreements for build-outs ~~of new bowling entertainment centers~~ in prime markets.

•~~On February 8, 2023,~~Renovations and remodels are currently underway at 15 bowling centers, with approximately 30 additional renovations and remodels slated to begin in the ~~Company~~next six months.

•We entered into ~~an Eighth Amendment~~a transaction with VICI Properties Inc. (“VICI”) relating to the ~~First Lien Credit Agreement pursuant~~transfer of land and real estate assets of 38 bowling entertainment centers for an aggregate value of $432,900 providing a source of cash liquidity to ~~which the total principal amount under the First Lien Credit Facility Term Loan was increased~~accelerate new builds, deploy capital into acquisitions and conversions, return value to $900,000 from $812,850, and the maturity date was extended to February 8, 2028. In addition, the total revolving commitments under the Revolver were increased to $200,000 from $165,000, and the maturity date was extended to December 15, 2026. Proceeds from refinancing the term loan were used to repay the existing term loan under the First Lien Credit Agreement, to repay all amounts outstanding under the Revolver,shareholders, pay down debt, and for general corporate purposes.

•On March 2, 2023, Bowlero’s closing stock price of Class A common stock equaled or exceeded $15.00 for 10 trading days within a 20-trading day period. As a result, 11,418,361 Earnout Shares were fully vested and are no longer subject to the applicable vesting restrictions. See Note 11 - ~~Earnouts~~ ~~of the notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for further information.~~

Although we believe our recent results, actions and goals exhibit our strength in the bowling market and our position for the future growth, we may incur future unplanned expenses related to training, hiring and retaining associates, and navigating the disruption in the food and beverage supply chains, whether due to the lingering effects of the COVID-19 pandemic or otherwise. For more details, see the risk factors included under “~~Risk Factors — Risks Related to Bowlero’s Business and Industry” in our previously filed Annual Report on Form 10-K for the fiscal year ended July 3, 2022.~~

Trends

There are a number of factors that could to materially affect our future profitability, including changing economic conditions with the resulting impact on our sales, profitability, and capital spending, changes in our debt levels and applicable interest rates, and increasing prices of labor ~~raw materials~~ and ~~other~~inventory, which includes food and beverage costs. Additionally, sales and results of operations could be impacted by acquisitions and restructuring projects. Restructuring can include various projects, including closure of centers not performing well, cost reductions through staffing reductions, and optimizing and allocating resources to improve profitability.

Our operating results fluctuate seasonally. We typically generate our highest sales volumes during the third quarter of each fiscal year due to the timing of leagues, holidays and changing weather conditions. School operating schedules, holidays and weather conditions may also affect our sales volumes in some operating regions differently than others. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for our full fiscal year.

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Presentation of Results of Operations

The Company reports on a fiscal year, with each quarter generally comprised of one 5-week period and two 4-week periods.

Results of Operations

Three Months Ended ~~April 2,~~December 31, 2023 Compared to the Three Months Ended ~~March 27, 2022~~January 1, 2023

Analysis of Consolidated Statement of Operations. The following table displays certain items from our consolidated statements of operations for the ~~periods~~quarters presented below:


			Three Months Ended
		Three Months Ended
(in thousands)
(in thousands)
(in thousands)	(in thousands)		April 2, 2023		%(1)		March 27, 2022		%(1)		Change		% Change			December 31, 2023					%(1)						January 1, 2023							%(1)				Change						% Change
Revenues	Revenues		$	315,725	100.0	%	$	257,820	100.0	%	$	57,905	22.5	%	Revenues		$	305,671		100.0				100.0		%				$	273,385		100.0			100.0	%			$	32,286		11.8					11.8		%
Costs of revenues	Costs of revenues		189,304		60.0	%	156,491		60.7	%	32,813		21.0	%	Costs of revenues		215,090			70.4				70.4		%				179,706			65.7			65.7	%			35,384			19.7					19.7		%
Gross profit	Gross profit		126,421		40.0	%	101,329		39.3	%	25,092		24.8	%	Gross profit		90,581			29.6				29.6		%				93,679			34.3			34.3	%			(3,098)			(3.3)					(3.3)		%
Operating (income) expenses:
Operating expenses:
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		35,891		11.4	%	30,315		11.8	%	5,576		18.4	%		37,512			12.3			12.3		%				34,452				12.6			12.6	%			3,060			8.9				8.9		%
Asset impairment	Asset impairment		489		0.3	%	—		—	%	489				Asset impairment		29			—				—		%				—			—			—	%			29			*						*
Gain on sale of assets			(192)		(0.1)	%	(1,601)		(0.6)	%	(1,409)		(88.0)	%
Loss (gain) on sale of assets															Loss (gain) on sale of assets		21						—		%				(1,823)						(0.7)	%			1,844						*
Other operating expense	Other operating expense		649		0.2	%	1,899		0.7	%	(1,250)		(65.8)	%	Other operating expense		3,542			1.2				1.2		%				614			0.2			0.2	%			2,928			*						*
Total operating expense	Total operating expense		36,837		11.7	%	30,613		11.9	%	6,224		20.3	%	Total operating expense		41,104			13.4				13.4		%				33,243			12.2			12.2	%			7,861			23.6					23.6		%
Operating profit	Operating profit		89,584		28.4	%	70,716		27.4	%	18,868		26.7	%	Operating profit		49,477			16.2				16.2		%				60,436			22.1			22.1	%			(10,959)			(18.1)					(18.1)		%
Other expenses:	Other expenses:
Interest expense, net	Interest expense, net		29,117		9.2	%	22,293		8.6	%	6,824		30.6	%
Interest expense, net
Interest expense, net																	46,236						15.1		%				27,379						10.0	%			18,857						68.9		%
Change in fair value of earnout liability	Change in fair value of earnout liability		87,222		27.6	%	45,778		17.8	%	41,444		90.5	%	Change in fair value of earnout liability		64,091			21.0				21.0		%				30,776			11.3			11.3	%			33,315			*						*
Change in fair value of warrant liability			—				20,678		8.0	%	(20,678)		(100.0)	%
Other expense			5,986		1.9	%	161		0.1	%	5,825		3618.0	%
Other expense (income)															Other expense (income)		10						—		%				(678)						(0.2)	%			(688)						*
Total other expense	Total other expense		122,325		38.7	%	88,910		34.5	%	33,415		37.6	%	Total other expense		110,337			36.1				36.1		%				57,477			21.0			21.0	%			52,860			92.0					92.0		%
Loss before income tax benefit			(32,741)		(10.4)	%	(18,194)		(7.1)	%	(14,547)		(80.0)	%
Income tax benefit			(668)		(0.2)	%	(207)		(0.1)	%	461		222.7	%
Net loss			$	(32,073)	(10.2)	%	$	(17,987)	(7.0)	%	(14,086)		(78.3)	%
(Loss) income before income tax expense															(Loss) income before income tax expense		(60,860)						(19.9)		%				2,959						1.1	%			(63,819)						*
Income tax expense															Income tax expense		2,609						0.9		%				1,524						0.6	%			1,085						71.2		%
Net (loss) income															Net (loss) income		$	(63,469)					(20.8)		%				$	1,435					0.5	%			(64,904)						*

___________

(1) Percent calculated as a percentage of revenues and may not total due to rounding.

*Represents a change equal to or in excess of 100% or one that is not meaningful.

Revenues: For the quarter ended ~~April 2,~~December 31, 2023, revenues totaled ~~$315,725~~$305,671 and represented an increase of ~~$57,905,~~$32,286, or ~~approximately 22%~~12%, over the same period of last fiscal ~~year because of organic growth and increases in revenue due to higher center count.~~year. The ~~overall~~ increase in revenues is ~~due~~primarily attributable to ~~our ability to execute our growth strategy~~revenue from newly acquired or leased centers and group event business, ~~model with the impact of 17 new centers compared to the same period last year, and continued revenue growth~~which was partially offset by a decrease in ~~our existing centers, resulting from an increase in event revenue, league revenue, broader and enhanced range of offerings, as well as the impact of positive market conditions and price increases.~~service fee revenue. The following table summarizes ~~the increase in~~ our revenues on a same-store-basis for the quarter ended ~~April 2,~~December 31, 2023 as compared to the corresponding period last fiscal year:


		Three Months Ended
	Three Months Ended
(in thousands)	(in thousands)	April 2, 2023		March 27, 2022		Change		% Change
Center revenues on a same-store basis		$	295,210	$	252,109	$	43,101	17.1	%
(in thousands)
(in thousands)											December 31, 2023			January 1, 2023				Change					% Change
Center revenues on a same-store basis (1)										Center revenues on a same-store basis (1)	$	260,178		$	259,582			$	596				0.2		%
Revenues for media, new and closed centers	Revenues for media, new and closed centers	20,515		5,711		14,804		259.2	%	Revenues for media, new and closed centers	43,860		8,454		8,454		35,406			35,406		418.8				418.8	%
Service fee revenue (2)										Service fee revenue (2)	1,633			5,349				(3,716)					(69.5)		%
Total revenues	Total revenues	$	315,725	$	257,820	$	57,905	22.5	%	Total revenues	$	305,671	$	$	273,385	$		$	32,286		11.8			11.8		%

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(1) Revenues from 315 centers are included in the same-store comparable center base for the comparison in the above table. In our previously filed 10-Q for the three months ended January 1, 2023, revenues from 306 centers were included in the same-store

(2) Service fee revenue is a mandatory gratuity passed through to the employee, which is a non-contributor to earnings and is being phased out across our centers.

Same-store revenues includes revenue from centers that are open in periods presented (open in both the current period and the prior period being reported) and excludes revenues from centers that are not open in periods presented such as acquired new centers or centers closed for upgrades, renovations or other such reasons, as well as media revenues and service fee revenues. The increase in same-store revenues during the quarter ended ~~April 2,~~December 31, 2023 reflects ~~among other factors, continued favorable demand for our products~~an increase in league and ~~services and price increases.~~group event business, which was partially offset by a reduction in walk-in or retail business relative to the consumer environment during the same period of last fiscal year.

Cost of Revenues: ~~Our cost~~Cost of revenues ~~includes costs that are not variable~~increased $35,384, or are less variable with changes in revenues, such as depreciation, amortization, rent and property taxes, as well as more variable costs that include labor, food and beverage costs, prize funds, supplies, production expenses and amusement costs. The increase in cost of revenues of $32,813, or 21%, corresponds to the increase in revenues.20%. Increases in costs were in most areas and include labor, supplies, repairs & maintenance, depreciation, rent, property taxes, and utilities. The increase in costs was mainly attributable to bowling center count growth from acquisitions and lease agreements since the second quarter of fiscal 2023, which contributed approximately $37,000 to cost of revenues. This was coupled with the increased sales volume and higher costs ~~with labor, utilities, food & beverage, and increases~~due to inflation. For instance, the increase in ~~depreciation, advertising, rent and other operational costs such as security and supplies. Higher~~ labor costs ~~mainly reflect~~reflects the additional staffing and higher ~~labor~~ pay rates to support the growing ~~business. Depreciation costs increased because~~business and position us for continued success in the key third quarter of the fiscal year. Furthermore, the increase in depreciation reflects the added depreciable assets ~~from acquisitions of businesses, asset~~through acquisitions and capital ~~expenditures. The~~expenditures and the increase in rent ~~is due in large part to last year’s costs of revenues being favorably impacted by a reduction in rent expense of approximately $5,603 related to rent relief obtained by~~primarily reflects the ~~Company. This rent abatement was part of~~added operating leases from the ~~Company's efforts to secure rent relief from landlords in connection with the COVID-19 pandemic closures.~~Lucky Strike acquisition. Cost of revenues as a percent of revenues ~~decreased~~increased from ~~approximately 61%~~66% during the ~~third quarter of fiscal 2022 to 60% during the third~~second quarter of fiscal 2023 to 70% during the second quarter of fiscal 2024, mainly due to ~~improved operating leverage since revenues increased~~the aforementioned costs increasing at a ~~higher~~faster rate than costs and the impact of cost control measures, which were partially offset by inflationary pressures. Additionally, we have recently increased prices in an effort to address the impact of higher costs and to support margin and profit levels.

~~Gross Profit:~~ Our gross profit increased $25,092, or 25%, to $126,421, primarily due to the $57,905 increase in revenues and the 70 basis point increase in gross profit margin (gross profit divided by revenues). The increase in gross profit margin is due to a number of factors, including higher operating leverage in that revenues increased at a higher rate than costs, cost control measures and higher selling prices.revenues.

Selling, general and administrative expenses (“SG&A”): SG&A expenses ~~include employee-related costs, such as payroll and benefits, as well as depreciation and amortization (excluding those related to our center operations), media and promotional expenses. SG&A expenses~~ increased ~~$5,576,~~$3,060 or ~~18%, to $35,891,~~9% mainly due to higher compensation costs, as well as increases in other costs, including professional fees, which were partially offset by decreases in depreciation, amortization and insurance. Additionally, last year’s SG&A expenses were favorably impacted by a reduction in rent expense of approximately $1,867 related to rent relief obtained by the Company. Increasesan increase in compensation and ~~benefits were $4,823, equity compensation increased $1,166, and~~ professional ~~fees increased $2,233.~~fees. The increase in compensation ~~costs mainly~~ reflects ~~rebuilding staff after~~ the ~~interruption caused by the pandemic,~~ increases in pay rates and higher ~~staffing~~staffing. For instance, we have increased our event sales and operations management teams to support the ~~increase~~growing business. The increases in ~~business~~our event sales and operations management teams were offset by reductions in corporate staff during the ~~costs we incur as a public reporting company.~~quarter. The increase in ~~share-based compensation costs reflects equity awards to key members of management as an incentive to motivate and retain associates. The increases in~~ professional fees ~~include higher~~is driven by legal costs related to advisory items.

Other operating expense: Other operating expense increased $2,928 mainly due to the approximately $2,600 in costs associated with ~~the growth~~obtaining an equity method investment in ~~our business and costs associated with being~~ a ~~public reporting company. The $1,852 decrease in depreciation and amortization mainly reflects the scheduled decrease based on useful lives~~subsidiary of assets subject to depreciation and amortization. The $641 decrease in insurance reflects the favorable renewal of certain insurance policies. Total SG&A expenses as a percent of revenues for the third quarter of fiscal 2023 was approximately 11%, as compared to 12% during the corresponding period last fiscal year. The decrease in SG&A costs as a percentage of revenues is mainly due to improved operating leverage.VICI.

Interest expense, net: Interest expense primarily relates to interest on debt, finance leases, and ~~capital leases.~~financing obligations. Interest expense increased ~~$6,824,~~$18,857, or ~~31%~~69%, to ~~$29,117.~~$46,236. The higher interest expense is primarily the result of higher interest rates and ~~an increase in~~ our increased debt, financing obligations, and ~~capital lease obligations during~~finance leases as compared to the same period last fiscal ~~2023.~~year.

Change in fair value of earnouts: Changes in the fair value of the earnout liabilities are recognized in the statement of operations. Decreases in the liability will have a favorable impact on the statement of operations and increases in the liability will have an unfavorable impact. The estimated fair value of the earnout liability is determined using a Monte-Carlo simulation model. Inputs that have a significant effect on the valuation include the expected volatility, stock price, expected term, risk-free interest rate and performance hurdles. The unfavorable impact on the statement of operations during the quarter ended ~~April 2,~~December 31, 2023 is ~~a non-cash expense and was~~mainly due to the increase in the fair value of the earnouts, which mainly reflects the increase in the Company’s stock price in the current quarter. On March 2, 2023, Bowlero’s closing stock price of Class A common stock equaled or exceeded $15.00 for 10 trading days within a 20-trading day period. As a result, 11,418,361 Earnout Shares were fully vested, settled into equity and are no longer included in the Earnout liability on the condensed consolidated balance sheet.

~~Other expense:~~Income Taxes: ~~Other expenses include various cost related to transactions that do not represent ongoing or frequently recurring activities as part~~Income tax expense and deferred tax assets and liabilities reflect management’s assessment of the Company’s ~~operations.~~tax position. The ~~increase in other expenses is mainly due~~effective tax rate of (4.3)% for the quarter ended December 31, 2023 was primarily attributed to the ~~$5,342~~change in ~~costs that were expensed~~fair value of the earnout liability, permanent differences, and items associated with the ~~refinancing of the First Lien Credit Facility Term Loan.~~

VICI Transaction, which are treated as discrete tax items.

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~~Income Taxes:~~ Income tax benefit and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. The increase in income tax benefit during the three months ended April 2, 2023 as compared to the three months ended March 27, 2022 mainly reflects the decrease in the overall effective tax rate resulting from changes in estimates associated with certain income tax credits and tax deductible expenses. The effective tax rate of 2.0% tax benefit for the quarter ended April 2, 2023 is primarily attributed to changes in the valuation allowance and in estimates associated with certain income tax credits and tax deductible expenses, which were partially offset by state income tax expense due to, higher income and certain non-deductible expenses. The effective tax rate of 1.1% tax benefit for the quarter ended March 27, 2022 was primarily impacted by a favorable return to provision income tax adjustment offset in part by state income tax expenses. We regularly evaluate the realizability of our net deferred tax assets. As of April 2, 2023, substantially all our U.S. federal, state and foreign deferred tax assets, net of deferred tax liabilities, were subject to valuation allowances. If our financial results continue to improve and we conclude that estimates of our future taxable income are objectively verifiable, our assessment of the realization of our net deferred tax assets could result in the release of a significant portion of the valuation allowances, with the exception of any potentially remaining net operating losses subject to potential limitation, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or state tax loss limitations. Such a release would result in a material non-cash income tax benefit in our consolidated statement of operations in the period of release and the recording of additional deferred tax assets on our consolidated balance sheet. There is a reasonable possibility that within the next several quarters, sufficient positive evidence becomes available to reach a conclusion that a significant portion of the valuation allowances against our U.S. net deferred tax assets would no longer be required.

~~Nine~~Six Months Ended ~~April 2,~~December 31, 2023 Compared to the ~~Nine~~Six Months Ended ~~March 27, 2022~~January 1, 2023

Analysis of Consolidated Statement of Operations. The following table displays certain items from our consolidated statements of operations for the ~~periods~~quarters presented below:


			Nine Months Ended
		Six Months Ended
(in thousands)
(in thousands)
(in thousands)	(in thousands)		April 2, 2023		%(1)		March 27, 2022		%(1)		Change		% Change			December 31, 2023					%(1)						January 1, 2023							%(1)				Change						% Change
Revenues	Revenues		$	819,370	100.0	%	$	643,988	100.0	%	$	175,382	27.2	%	Revenues		$	533,076		100.0				100.0		%				$	503,645		100.0			100.0	%			$	29,431		5.8					5.8		%
Costs of revenues	Costs of revenues		534,212		65.2	%	424,742		66.0	%	109,470		25.8	%	Costs of revenues		398,011			74.7				74.7		%				344,908			68.5			68.5	%			53,103			15.4					15.4		%
Gross profit	Gross profit		285,158		34.8	%	219,246		34.0	%	65,912		30.1	%	Gross profit		135,065			25.3				25.3		%				158,737			31.5			31.5	%			(23,672)			(14.9)					(14.9)		%
Operating (income) expenses:
Operating expenses:
Selling, general and administrative expenses
Selling, general and administrative expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		102,837		12.6	%	145,013		22.5	%	(42,176)		(29.1)	%		75,277			14.1			14.1		%				66,946				13.3			13.3	%			8,331			12.4				12.4		%
Asset impairment	Asset impairment		573		0.1	%	—		—	%	573				Asset impairment		55			—				—		%				84			—			—	%			(29)			(34.5)					(34.5)		%
Gain on sale of assets	Gain on sale of assets		(2,170)		(0.3)	%	(1,755)		(0.3)	%	415		23.6	%	Gain on sale of assets		(6)			—				—		%				(1,978)			(0.4)			(0.4)	%			(1,972)			(99.7)					(99.7)		%
Other operating expense	Other operating expense		2,625		0.3	%	5,708		0.9	%	(3,083)		(54.0)	%	Other operating expense		4,906			0.9				0.9		%				1,976			0.4			0.4	%			2,930			*						*
Total operating expense	Total operating expense		103,865		12.7	%	148,966		23.1	%	(45,101)		(30.3)	%	Total operating expense		80,232			15.1				15.1		%				67,028			13.3			13.3	%			13,204			19.7					19.7		%
Operating profit	Operating profit		181,293		22.1	%	70,280		10.9	%	111,013		158.0	%	Operating profit		54,833			10.3				10.3		%				91,709			18.2			18.2	%			(36,876)			(40.2)					(40.2)		%
Other expenses:	Other expenses:
Interest expense, net	Interest expense, net		80,066		9.8	%	69,101		10.7	%	10,965		15.9	%
Interest expense, net
Interest expense, net																	83,685						15.7		%				50,949						10.1	%			32,736						64.3		%
Change in fair value of earnout liability	Change in fair value of earnout liability		158,758		19.4	%	23,236		3.6	%	135,522		583.2	%	Change in fair value of earnout liability		23,409			4.4				4.4		%				71,536			14.2			14.2	%			(48,127)			(67.3)					(67.3)		%
Change in fair value of warrant liability			—		—	%	20,748		3.2	%	(20,748)		(100.0)	%
Other expense			5,356		0.7	%	161		—	%	5,195		3226.7	%
Other expense (income)															Other expense (income)		63						—		%				(630)						(0.1)	%			(693)						*
Total other expense	Total other expense		244,180		29.8	%	113,246		17.6	%	130,934		115.6	%	Total other expense		107,157			20.1				20.1		%				121,855			24.2			24.2	%			(14,698)			(12.1)					(12.1)		%
Loss before income tax expense (benefit)			(62,887)		(7.7)	%	(42,966)		(6.7)	%	(19,921)		(46.4)	%
Income tax expense (benefit)			1,285		0.2	%	(6,089)		(0.9)	%	(7,374)		(121.1)	%
Loss before income tax (benefit) expense															Loss before income tax (benefit) expense		(52,324)						(9.8)		%				(30,146)						(6.0)	%			(22,178)						(73.6)		%
Income tax (benefit) expense															Income tax (benefit) expense		(7,074)						(1.3)		%				1,953						0.4	%			(9,027)						*
Net loss	Net loss		$	(64,172)	(7.8)	%	$	(36,877)	(5.7)	%	(27,295)		(74.0)	%	Net loss		$	(45,250)		(8.5)				(8.5)		%				$	(32,099)		(6.4)			(6.4)	%			(13,151)			(41.0)					(41.0)		%

___________

(1) Percent calculated as a percentage of revenues and may not total due to rounding.

*Represents a change equal to or in excess of 100% or one that is not meaningful.

Revenues: For the ~~nine~~six months ended ~~April 2,~~December 31, 2023, revenues totaled ~~$819,370~~$533,076 and represented an increase of ~~$175,382,~~$29,431, or ~~27%~~6%, over the same period of last fiscal ~~year because of organic growth and increases in revenue due to~~

~~Table of Contents~~

~~Index to Notes~~

~~higher center count.~~year. The ~~overall~~ increase in revenues is ~~due~~primarily attributable to ~~our ability to execute our growth strategy~~revenue from newly acquired or leased centers and group event business, ~~model with the impact of 22 new centers compared to the same period last year~~which was partially offset by a decrease in service fee revenue and ~~continued revenue growth~~a slight decrease in ~~our existing centers, resulting from an increase in event revenue, our broader and enhanced range of offerings, as well as the impact of positive market conditions and price increases.~~revenues on a same-store basis. The following table summarizes ~~the increase in~~ our revenues on a same-store-basis for the ~~nine~~six months ended ~~April 2,~~December 31, 2023 as compared to the corresponding period last fiscal year:


		Nine Months Ended
	Six Months Ended
(in thousands)	(in thousands)	April 2, 2023		March 27, 2022		Change		% Change
Center revenues on a same-store basis		$	722,638	$	597,997	$	124,641	20.8	%
(in thousands)
(in thousands)											December 31, 2023			January 1, 2023				Change					% Change
Center revenues on a same-store basis(1)										Center revenues on a same-store basis(1)	$	465,763		$	476,945			$	(11,182)				(2.3)		%
Revenues for media, new and closed centers	Revenues for media, new and closed centers	96,732		45,991		50,741		110.3	%	Revenues for media, new and closed centers	64,059		16,376		16,376		47,683			47,683		291.2				291.2	%
Service fee revenue (2)										Service fee revenue (2)	3,254			10,324				(7,070)					(68.5)		%
Total revenues	Total revenues	$	819,370	$	643,988	$	175,382	27.2	%	Total revenues	$	533,076	$	$	503,645	$		$	29,431		5.8			5.8		%

(1) Revenues from 312 centers are included in the same-store comparable center base for the comparison in the above table. In our previously filed 10-Q for the six months ended January 1, 2023, revenues from 288 centers were included in the same-store

(2) Service fee revenue is a mandatory gratuity passed through to the employee, which is a non-contributor to earnings and is being phased out across our centers.

~~Cost of Revenues:~~ Our cost of revenues includes costs that are not variable or less variable with changes in revenues, such as depreciation, amortization, rent and property taxes, as well as more variable costs that include labor, food and beverage costs, prize funds, supplies, production expenses and amusement costs. The increase in cost of revenues of $109,470, or 26%, corresponds to the increase in revenues, as well as higher costs due to inflation. Increases in costs were in most areas and include higher costs with labor, utilities, food and beverage, as well as increases in depreciation, insurance and other operational costs such as security and supplies. Labor costs were higher because of additional staffing and higher labor pay rates to support growing business. Depreciation costs increased because of added depreciation from acquisitions of businesses, asset acquisitions and capital expenditures. Cost of revenues as a percent of revenues decreased from 66% during the first nine months of fiscal 2022 to almost 65% during the first nine months of fiscal 2023, mainly due to improved operating leverage with revenues increasing at a faster rate than costs. Additionally, we have recently increased prices in an effort to address the impact of higher costs and to improve margins.

~~Gross Profit:~~ Our gross profit increased $65,912, or 30%, to $285,158, primarily due to the $175,382 increase in revenues. Gross profit margin (gross profit divided by revenues) increased by 80 basis points. The increase in gross profit margin is due to a number of factors, including higher operating leverage in that revenues increased at a higher rate than costs.

~~Selling, general and administrative expenses (“SG&A”):~~ SG&A expenses include employee-related costs, such as payroll and benefits, as well as depreciation and amortization (excluding those related to our center operations), media and promotional expenses. SG&A expenses decreased $42,176, or 29%, to $102,837, mainly due to the $68,405 in transaction costs during the prior fiscal year related to the Business Combination, which were partially offset by increases during the current fiscal period in various SG&A costs not directly associated with the Business Combination.

The increases in SG&A costs not directly associated with the Business Combination include compensation costs and increases in other costs, including professional fees and insurance. Increases in compensation and benefits were $13,802, equity compensation increased $7,676, professional fees increased $2,427 and insurance costs increased $1,429. The increase in compensation costs not associated with the Business Combination mainly reflects rebuilding staff after the interruption caused by the pandemic, increases in pay rates and higher staffing to support the increase in business and the costs we incur as a public reporting company. The increase in share-based compensation costs not associated with the Business Combination reflects equity awards to key members of management as an incentive to motivate and retain associates. The increases in insurance costs and professional fees not directly related to the Business Combination include higher costs associated with the growth in our business, costs associated with being a public reporting company and higher costs due to inflation. Total SG&A expenses as a percent of revenues for the first nine months of fiscal 2023 was approximately 13%, as compared to approximately 23% during the corresponding period last fiscal year. Excluding the impact of the transaction costs associated with the Business Combination, SG&A costs as a percentage of revenues increased from 12% to 13% mainly due to costs increasing at a higher rate than revenues.

~~Interest expense, net:~~ Interest expense primarily relates to interest on debt and capital leases. Interest expense increased $10,965, or 16%, to $80,066. The higher interest expense is primarily the result of higher interest rates and our increased debt and capital lease obligations during fiscal 2023.

~~Change in fair value of earnouts:~~ Changes in the fair value of the earnout liabilities are recognized in the statement of operations. Decreases in the liability will have a favorable impact on the statement of operations and increases in the liability will have an unfavorable impact. The change in the fair value of the earnout for the first nine months of

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service fee revenues. The decrease in same-store revenues during the six months ended December 31, 2023 reflects, among other factors, a reduction in walk-in or retail business relative to the consumer environment during the same period of last fiscal year, which was partially offset by increased league and group event business.

Cost of Revenues: Cost of revenues increased $53,103, or 15%. Increases in costs were in most areas and include labor, supplies, repairs & maintenance, depreciation, rent, property taxes, and utilities. The increase in costs was mainly attributable to bowling center count growth from acquisitions and lease agreements since the second quarter of fiscal 2023, ~~when~~which contributed approximately $49,000 to cost of revenues. This was coupled with the increased sales volume and higher costs due to inflation. For instance, the increase in labor costs reflects the additional staffing and higher pay rates to support the growing business and position us for continued success in the key third quarter of the fiscal year. Furthermore, the increase in depreciation reflects the added depreciable assets through acquisitions and capital expenditures and the increase in rent primarily reflects the added operating leases from the Lucky Strike acquisition. Cost of revenues as a percent of revenues increased from 68% during the second quarter of fiscal 2023 to 75% during the second quarter of fiscal 2024, mainly due to the aforementioned costs increasing at a faster rate than revenues.

Selling, general and administrative expenses (“SG&A”): SG&A expenses increased $8,331 or 12% mainly due to an increase in compensation and professional fees. The increase in compensation reflects the increases in pay rates and higher staffing. For instance, we have increased our event sales and operations management teams to support the growing business. The increase in professional fees is attributable to the heightened acquisition activity and scale of acquisitions as compared to the ~~comparable~~same period of last fiscal year. In addition to acquisition activity, the ~~prior~~increase in professional fees is driven by legal costs related to advisory items. The aforementioned increases were partially offset by lower share-based compensation expense due to forfeitures.

Other operating expense: Other operating expense increased $2,930 mainly due to the approximately $2,600 in costs associated with obtaining an equity method investment in a subsidiary of VICI.

Interest expense, net: Interest expense primarily relates to interest on debt, finance leases, and financing obligations. Interest expense increased $32,736, or 64%, to $83,685. The higher interest expense is primarily the result of higher interest rates and our increased debt, financing obligations, and finance leases as compared to the same period last fiscal ~~year, resulted~~year.

Change in ~~an unfavorable change of $135,522. The estimated~~ fair value of the earnout liability is determined using a Monte-Carlo simulation model. Inputs that have a significant effect on the valuation include the expected volatility, stock price, expected term, risk-free interest rate and performance hurdles.earnouts: The unfavorable impact on the statement of operations during the ~~nine months~~quarter ended ~~April 2,~~December 31, 2023 is ~~a non-cash expense and was~~mainly due to the increase in the fair value of the earnouts, which mainly reflects the increase in the Company’s stock price in the current quarter. On March 2, 2023, Bowlero’s closing stock price of Class A common stock equaled or exceeded $15.00 for 10 trading days within a 20-trading day period. As a result, 11,418,361 Earnout Shares were fully vested, settled into equity and are no longer included in the Earnout liability on the condensed consolidated balance sheet.

~~Other expense:~~ Other expenses include various cost related to transactions that do not represent ongoing or frequently recurring activities as part of the Company’s operations. The increase in other expenses is mainly due to the $5,342 in costs that were expensed associated with the refinancing of the First Lien Credit Facility Term Loan.

Income Taxes: Income tax ~~expense (benefit)~~benefit and deferred tax assets and liabilities reflect management’s assessment of the Company’s tax position. The change to an income tax expense for the nine months ended April 2, 2023 from an income tax benefit for the corresponding period of the prior fiscal year mainly reflects the release of a portion of the valuation allowances for deferred income taxes during the prior fiscal year and higher levels of income during the current fiscal year. The effective tax rate of ~~2.0% tax expense~~13.5% for the ~~nine~~six months ended ~~April 2,~~December 31, 2023 was primarily ~~due~~attributed to ~~certain non-deductible expenses,~~the change in fair value of the earnout liability, permanent differences, and ~~state and local taxes offset in part with changes in the valuation allowance and estimates~~items associated with ~~certain income~~the VICI Transaction, which are treated as discrete tax credits and tax deductions. The effective tax rate benefit of 14.2% for the nine months ended March 27, 2022 was due to the release of a portion of the valuation allowance resulting from the acquisition of Bowl America, which was offset in part by state and local income taxes. We regularly evaluate the realizability of our net deferred tax assets. As of April 2, 2023, substantially all our U.S. federal, state and foreign deferred tax assets, net of deferred tax liabilities, were subject to valuation allowances. If our financial results continue to improve and we conclude that estimates of our future taxable income are objectively verifiable, our assessment of the realization of our net deferred tax assets could result in the release of a significant portion of the valuation allowances, with the exception of any potentially remaining net operating losses subject to potential limitation, including limitations under Internal Revenue Code Section 382 or 383, separate return loss year rules, or state tax loss limitations. Such a release would result in a material non-cash income tax benefit in our consolidated statement of operations in the period of release and the recording of additional deferred tax assets on our consolidated balance sheet. There is a reasonable possibility that within the next several quarters, sufficient positive evidence becomes available to reach a conclusion that a significant portion of the valuation allowances against our U.S. net deferred tax assets would no longer be required.items.

Non-GAAP measure

Adjusted ~~Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)~~EBITDA is a non-GAAP financial measure that is not in accordance with, or an alternative to, measures prepared in accordance with GAAP. The Company believes certain financial measures which meet the definition of non-GAAP financial measures provide important supplemental information. The Company considers Adjusted EBITDA as an important financial measure because it provides a financial measure of the quality of the Company’s earnings. Other companies may calculate Adjusted EBITDA differently than we do, which might limit its usefulness as a comparative measure. Adjusted EBITDA is used by management in addition to and in conjunction with the results presented in accordance with GAAP. Additionally, we believe trailing twelve month Adjusted EBITDA provides the current run-rate for trending purposes, rather than annualizing the respective quarters, as the Company’s business is seasonal, with the second and third fiscal quarters being higher than the first and last quarters. We have presented Adjusted EBITDA solely as a supplemental disclosure because we believe it allows for a more complete analysis of results of operations and assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as Interest Expense, Income Taxes, Depreciation and Amortization, Impairment Charges, Share-based Compensation, EBITDA from Closed Centers, Foreign Currency Exchange Loss (Gain) ~~Loss,~~, Asset Disposition Loss (Gain) ~~Loss,~~, Transactional and other advisory costs, ~~Charges attributed to new initiatives, Extraordinary unusual or non-recurring gains or losses and~~ Changes in the value of earnouts, and ~~warrants.~~Other. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. ~~Some of these limitations are that Adjusted EBITDA and trailing twelve month Adjusted EBITDA do not reflect:~~

•~~every expenditure, future requirements for capital expenditures or contractual commitments;~~

•~~changes in our working capital needs;~~

•~~the interest expense, or the amounts necessary to service interest or principal payments, on our outstanding debt;~~

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•~~income tax expense (benefit), and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate;~~

•~~non-cash equity compensation, which will remain a key element of our overall equity based compensation package; and~~

•~~the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations.~~

Refer to notes below for additional details concerning the respective items for Adjusted EBITDA.

The following graph details the Company’s trailing twelve month revenues, net (loss) income, and Adjusted EBITDA on a quarterly basis over the previous quarters. Adjusted EBITDA represents Net income (loss) before Interest, Income Taxes, Depreciation and Amortization, Impairment Charges, Share-based Compensation, EBITDA from Closed Centers, Foreign Currency Exchange (Gain) Loss, Asset Disposition (Gain) Loss, Transactional and other advisory costs, Charges attributed to new initiatives, Extraordinary unusual non-recurring gains or losses and Changes in the value of earnouts and warrants.

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The following table ~~details quarterly revenues,~~provides a reconciliation from net (loss) income ~~and~~to Adjusted EBITDA on a quarterly basis, as well as trailing twelve month revenues and net (loss) income and a non-GAAP reconciliation of quarterly Adjusted EBITDA to net (loss) income, the closest applicable GAAP financial measures.for each reporting period:


(in thousands)			June 27, 2021		September 26, 2021		December 26, 2021		March 27, 2022		July 3, 2022		October 2, 2022		January 1, 2023		April 2, 2023
Consolidated
Revenues			$	159,103	$	180,978	$	205,190	$	257,820	$	267,717	$	230,260	$	273,385	$	315,725

		Three Months Ended																								Three Months Ended								Six Months Ended
		December 31, 2023																				December 31, 2023						January 1, 2023				December 31, 2023				January 1, 2023
Net (loss) income	Net (loss) income		$	(13,461)	$	15,564	$	(34,454)	$	(17,987)	$	6,943	$	(33,534)	$	1,435	$	(32,073)
Adjustments:	Adjustments:
Interest expense	Interest expense		23,128		22,928		23,880		22,293		25,359		23,570		27,379		29,117
Income tax (benefit) expense			(1,368)		(6,244)		362		(207)		5,399		429		1,524		(668)
Interest expense
Interest expense																				48,112			27,379						87,144				50,949
Income tax expense (benefit)																			Income tax expense (benefit)	2,609			1,524						(7,074)				1,953
Depreciation, amortization and impairment charges	Depreciation, amortization and impairment charges		23,872		22,841		25,660		29,986		30,018		26,351		29,303		29,933		Depreciation, amortization and impairment charges	37,562			29,303						69,588				55,654
Share-based compensation	Share-based compensation		793		801		42,555		3,020		3,860		3,648		4,036		4,207		Share-based compensation	3,689			4,036						5,600				7,684
Closed center EBITDA (1)	Closed center EBITDA (1)		1,750		420		398		611		51		379		768		480		Closed center EBITDA (1)	2,157	768				768					4,619	1,147				1,147
Foreign currency exchange (gain) loss	Foreign currency exchange (gain) loss		(99)		35		86		(90)		(26)		(71)		(182)		328		Foreign currency exchange (gain) loss	(78)	(182)				(182)					1	(253)				(253)
Asset disposition loss (gain)	Asset disposition loss (gain)		31		(30)		(123)		(1,601)		(2,355)		(155)		(1,823)		(192)		Asset disposition loss (gain)	21	(1,823)			(1,823)			(6)			(6)	(1,978)				(1,978)
Transactional and other advisory costs (2)	Transactional and other advisory costs (2)		6,644		2,829		29,149		4,757		1,405		2,226		5,880		8,726		Transactional and other advisory costs (2)	4,935	3,848				3,848					13,241	7,922				7,922
Charges attributed to new initiatives (3)			147		141		65		43		113		45		40		40
Extraordinary unusual non-recurring losses (gains) (4)			859		(441)		1,662		929		2,981		1,661		(2,181)		468
Changes in the value of earnouts and warrants (5)			—		—		(22,472)		66,617		8,644		40,760		30,776		87,222
Changes in the value of earnouts (3)
Other, net (4)
Adjusted EBITDA	Adjusted EBITDA		$	42,296	$	58,844	$	66,768	$	108,371	$	82,392	$	65,309	$	96,955	$	127,588
Trailing twelve month Net loss									$	(50,338)	$	(29,934)	$	(79,032)	$	(43,143)	$	(57,229)
Trailing twelve month Adjusted EBITDA									276,279		316,375		322,840		353,027		372,244
Trailing twelve month Revenues									803,091		911,705		960,987		1,029,182		1,087,087

Notes to Adjusted EBITDA:

(1)The closed center adjustment is to remove EBITDA for closed centers. Closed centers are those centers that are closed for a variety of reasons, including permanent closure, newly acquired or built centers prior to opening, centers closed for renovation or rebranding and conversion. ~~Closed centers do not include centers closed in compliance with local, state and federal government restrictions due to COVID-19.~~ If a center is not open on the last day of the reporting period, it will be considered closed for that reporting period. If the center is closed on the first day of the reporting period for permanent closure, the center will be considered closed for that reporting period.

(2)The adjustment for transaction costs and other advisory costs is to remove charges incurred in connection with any transaction, including mergers, acquisitions, refinancing, amendment or modification to indebtedness, dispositions and costs in connection with an initial public offering, in each case, regardless of whether consummated. Certain prior year amounts have been reclassified to conform to current year presentation.

(3)The adjustment for charges attributed to new initiatives is to remove actual charges attributed to new initiatives, including charges with the undertaking and/or implementation of new initiatives, business optimization activities, cost savings initiatives, cost rationalization programs, operating expense reductions and/or synergies and/or similar initiatives and/or programs including any restructuring charge (including any charges relating to any tax restructuring), any charge relating to the closure or consolidation of any office or facility, any systems

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implementation charge, any severance charge, any one time compensation charge, any charge relating to entry into a new market, any charge relating to any strategic initiative or contract and any lease run-off charge.

~~(4)~~The adjustment for extraordinary unusual non-recurring gains or losses is to remove extraordinary gains and losses, which include any gain or charge from any extraordinary item as determined in good faith by the Company and/or any non-recurring or unusual item as determined in good faith by the Company and/or any charge associated with and/or payment of any legal settlement, fine, judgment or order.

~~(5)~~The adjustment for changes in the value of earnouts ~~and warrants~~ is to remove of the impact of the revaluation of the ~~earnouts and warrants. As a result of the Business Combination, the Company recorded liabilities for earnouts and warrants.~~earnouts. Changes in the fair value of the earnout ~~and warrant liabilities are~~liability is recognized in the statement of operations. Decreases in the liability will have a favorable impact on the statement of operations and increases in the liability will have an unfavorable impact. ~~The adjustment also~~

(4)Other includes ~~realized~~the following related to transactions that do not represent ongoing or frequently recurring activities as part of the Company’s operations: (i) non-routine expenses, net of recoveries for matters outside the normal course of business, (ii) costs incurred that have been expensed associated with ~~the settlement~~obtaining an equity method investment in a subsidiary of ~~warrants during past reporting periods.~~VICI, (iii) severance expense, and (iv) other individually de minimis expenses. Certain prior year amounts have been reclassified to conform to current year presentation.

Liquidity and Capital Resources

We manage our liquidity through assessing available cash-on-hand, our ability to generate cash and our ability to borrow or otherwise raise capital to fund operating, investing and financing activities. The Company remains in a positive financial position with available cash balances. ~~We also obtained rent deferrals or abatements on a substantial number of our leases due to the effects of the COVID-19 pandemic.~~

A core tenet of our long-term strategy is to grow the size and scale of the Company in order to improve our operating profit margins through leveraging our fixed costs. As such, one of the Company’s known cash requirements is for capital expenditures related to the construction of new centers and upgrading and converting existing centers. We believe our financial position, generation of cash, available ~~cash on hand,~~cash-on-hand, existing credit facility, and ~~potential~~ access to potentially obtain additional financing from sale-lease-back transactions or other sources will provide sufficient capital resources to fund our operational requirements, capital expenditures, and material short and long-term commitments for the foreseeable future. We also plan to use available cash-on-hand to fund our share repurchase program, which was implemented as a method to return value to our shareholders. However, there are a number of factors that may hinder our ability to access these capital resources, including but not limited to ~~the impact of COVID-19 on our business,~~ our degree of leverage, and potential borrowing restrictions imposed by our lenders. See “Risk Factors” included in our previously filed Annual Report on Form 10-K for the fiscal year ended July ~~3, 2022~~2, 2023 for further information.

On February 8, 2023, we entered into an Eighth Amendment (the “Eighth Amendment”) to the First Lien Credit Agreement. The Eighth Amendment provided for a new $900,000 term loan maturing on February 8, 2028 (the “Amendment No. 8 Term Loan”). Proceeds of the Amendment No. 8 Term Loan were used to refinance the existing First Lien Credit Facility Term Loan, to repay all amounts outstanding on the Revolver, and for general corporate purposes. The Amendment No. 8 Term Loan is repaid on a quarterly basis in principal payments of $2,250 beginning on September 29, 2023. The Amendment No. 8 Term Loan bears interest at a rate per annum equal to the Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 3.50%. As of April 2, 2023, interest on the Amendment No. 8 Term Loan is due monthly.

~~Under the First Lien Credit Agreement, we have access to a senior secured revolving credit facility (the “Revolver”). The outstanding balance on the Revolver is due on~~At December ~~15, 2026. Interest on borrowings under the Revolver is based on the Adjusted Term SOFR.~~

~~At April 2,~~31, 2023, we had approximately ~~$161,044~~$189,955 of available cash and cash ~~equivalents and restricted cash.~~equivalents.

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~~Nine~~Six Months Ended ~~April 2,~~December 31, 2023 Compared To the ~~Nine~~Six Months Ended ~~March 27, 2022~~January 1, 2023

The following compares the primary categories of the consolidated statements of cash flows for the ~~periods~~period ended ~~April 2,~~December 31, 2023 and ~~March 27, 2022:~~January 1, 2023:


			Nine Months Ended				$ Change			% Change
		Six Months Ended																Six Months Ended								$ Change				% Change
(in thousands)	(in thousands)		April 2, 2023		March 27, 2022				$ Change					% Change
Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities	Net cash provided by operating activities		$	208,802	$	142,861	$	65,941			46.16		%		$	71,199	$		$	115,879	$		$	(44,680)		(38.56)		(38.56)	%
Net cash used in investing activities	Net cash used in investing activities		(187,949)		(178,744)		(9,205)			(5.15)	%	Net cash used in investing activities			(246,666)		(163,005)			(163,005)		(83,661)			(83,661)		51.32		51.32		%
Net cash provided by financing activities	Net cash provided by financing activities		7,964		21,752		(13,788)			(63.39)	%	Net cash provided by financing activities			169,738		5,126			5,126		164,612			164,612		3211.31		3211.31		%
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash		(9)		15		(24)			(160.00)	%	Effect of exchange rate changes on cash			51		(427)			(427)		478			478		(111.94)		(111.94)		%
Net change in cash and cash equivalents and restricted cash	Net change in cash and cash equivalents and restricted cash		$	28,808	$	(14,116)	$	42,924		(304.08)	%	Net change in cash and cash equivalents and restricted cash			$	(5,678)	$		$	(42,427)	$		$	36,749		(86.62)		(86.62)	%

During ~~the nine~~six months ended ~~April 2,~~December 31, 2023, net cash provided from operations totaled ~~$208,802,~~$71,199, as compared to ~~$142,861~~$115,879 during the same period of the prior fiscal year. The ~~increase~~decrease in cash provided by operating activities primarily reflects ~~continued~~ higher cost of revenues and ~~profitability after adjusting for non-cash items such as the loss associated with the change~~an increase in ~~the fair value of the earnout liability. We benefited during the nine months ended April 2, 2023 from continued strong consumer demand and revenues from recently acquired centers.~~interest expense.

Investing activities utilized ~~$187,949,~~$246,666, reflecting our acquisitions ~~of businesses,~~and capital expenditures, as well as center conversions and ~~purchases~~related capital expenditures. The higher level of ~~marketable securities. The increase in~~ cash used in investing activities during the ~~nine months ended April 2, 2023~~period mainly reflects the acquisition of Lucky Strike, which had a larger purchase price as compared to the ~~corresponding~~bowling centers acquired during the same period ~~last fiscal year mainly reflects the increase in spending for acquisitions. The increase in the purchase price~~ of ~~acquisitions mainly reflects the increase in the quantity and higher value of business acquisitions as compared to~~ the prior fiscal year. The decrease in capital expenditures is mainly due to the acquisition of Bowl America during the prior year which was accounted for as an asset acquisition (reflected as purchase of property and equipment in the statement of cash flows). The purchase and sale of marketable securities reflects an investment the Company made and subsequently sold. We expect to continue to invest in accretive acquisitions in future periods as well as center upgrades and conversions.

Financing activities generated ~~$7,964 during the nine months ended April 2, 2023,~~$169,738, reflecting proceeds from ~~the Amendment No. 8 Term Loan~~our transaction with VICI of ~~$900,000, as well as proceeds from a sale-leaseback financing transaction of $10,363, all of which were~~$408,510, partially offset by ~~the payoff of the First Lien Credit Facility Term Loan of $786,166, the payoff of outstanding amounts under the Revolver of $86,434, payments of deferred financing costs of $8,058,~~$218,669 for the repurchase of treasury stock for $22,036, $4,629 for scheduled long-term debt payments, the settlement of Series A preferred stock for $6,824 and payments of $5,750 for tax withholdings on share-based awards. The net cash provided by financing activities during the corresponding prior year period of $21,752, mainly reflects the net funds received from the Business Combination which were partially offset by scheduled long-term debt payments.through our share repurchase program.

Our contractual obligations primarily include, but are not limited to, debt service, self-insurance liabilities, and leasing arrangements. We believe our sources of liquidity, namely available cash on hand, ~~the undrawn revolver,~~ positive operating cash flows, and access to capital markets will continue to be adequate to meet our contractual obligations, as well as fund working capital, planned capital expenditures, center acquisitions, and execute purchases under our share repurchase program.

~~Off-Balance Sheet Arrangements~~

~~As of April 2, 2023, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.~~

Critical Accounting Estimates

The preparation of our financial statements are in conformity with GAAP, which requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the consolidated financial statements. Our current estimates are subject to change if different assumptions as to the outcome of future events were made. We evaluate our estimates and judgments on an ongoing basis, and we adjust our assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying consolidated financial statements. Critical accounting estimates are defined as those

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~~that require management's most difficult, subjective or complex judgments, and which may result in materially different results under different assumptions and conditions.~~ Our critical accounting estimates are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our fiscal year ~~2022~~2023 Form 10-K under “Critical Accounting Estimates.” There have been no significant changes in our critical accounting estimates ~~for~~during the ~~period~~quarter ended ~~April 2,~~December 31, 2023.

Recently Issued Accounting Standards

For a description of recently issued Financial Accounting Standards that we adopted during the quarter ended ~~April 2,~~December 31, 2023 and, that are applicable to us and likely to have material effect on our consolidated financial statements, but have not yet been adopted, see Note 1 - ~~Descripti~~onDescription of Business an ~~d Significant~~and Significant Accounting Policies of the notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Emerging Growth Company Accounting Election

~~The Company is~~We are currently an emerging growth company, as defined in ~~Section 2(a) of~~ the ~~Securities~~JOBS Act. Under the JOBS Act, as modified by the Jumpstart our Business Startups Act of 2012, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies ~~including, but not limited~~can delay adopting new or revised accounting standards until such time as those standards apply to ~~not being required~~private companies. We have elected to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements.

~~Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply~~use this extended transition period for complying with new or revised ~~financial~~ accounting standards ~~until~~that have different effective dates for public and private companies ~~(that is, those that have not had a registration statement under~~until the ~~Securities Act declared effective~~earlier of the date we (i) are no longer an emerging growth company or ~~do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to~~(ii) affirmatively and irrevocably opt out of the extended transition period ~~and~~provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised ~~standard at the time private companies adopt the new or revised standard. This may make comparison~~accounting pronouncements as of ~~our financial statements with those of another~~ public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of Isos’ IPO (March 5, 2026), (b) in which we have total annual gross revenue of at least $1,235,000 or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700,000 as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1,000,000 in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk from changes in, among other things, ~~the ongoing effect of the COVID-19 pandemic,~~ interest rates, credit risk, labor costs, health insurance claims and foreign currency exchange rates, which could impact its results of operations and financial condition. We attempt to address our exposure to these risks through our normal operating and financing activities.

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Interest Rate Risk

Under our term and revolving credit facilities, we are exposed to a certain level of interest rate risk. Interest on the principal amount of our borrowings under our revolving credit facility loan accrues at the Adjusted Term Secured Overnight Financing Rate or the Alternate Base Rate, as further described in the credit agreement governing our term and revolving credit facilities. An increase or decrease of 1.0% in the effective interest rate would cause an increase or decrease to interest expense of approximately ~~$9,000~~$11,443 over a twelve month period on our outstanding debt without considering the impact of hedging. The Company entered into two hedging transactions effective as of March 31, 2023 for an aggregate notional amount of our ~~Amendment No. 8~~ Term Loan of $800,000. The hedge transactions have a trade and hedge designation date of April 4, 2023. The hedge transactions, each for a notional amount of $400,000, provide for interest rate collars. The interest rate collars establish a floor on SOFR of 0.9429% and 0.9355%, respectively, and a cap on SOFR of 5.50%. The interest rate collars have a maturity date of March 31, 2026.

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Credit Risk

Financial instruments that potentially subject us to significant concentrations of credit risk consist of cash and temporary investments. We are exposed to credit losses in the event of non-performance by counter parties to our financial instruments. We place cash and temporary investments with various high-quality financial institutions. Although we do not obtain collateral or other security to secure these obligations, we periodically monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety and liquidity of principal and secondarily on maximizing yield on those funds.

Commodity Price Risk

We are exposed to market price fluctuation in food, beverage, supplies and other costs such as energy. Given the historical volatility of certain of our food product prices, including proteins, produce, dairy products, and cooking oil, these fluctuations can materially impact our food costs. While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our food operations to fluctuate. Additionally, the cost of purchased materials may be influenced by tariffs and other trade regulations which are outside of our control. To the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected.

Inflation

We experience inflation ~~and deflation~~ related to our purchase of certain products that we need to operate our business. This price volatility could potentially have a material impact on our financial condition and/or our results of operations. In order to mitigate price volatility, we monitor price fluctuations and may adjust our prices accordingly, however, our ability to recover higher costs through increased pricing may be limited by the competitive environment in which we operate.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is properly and timely reported and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~In designing and evaluating~~ Based on that evaluation, the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error and circumvention or overriding of controls and therefore can provide only reasonable assurance with respect to reliable financial reporting. Furthermore, effectiveness of an internal control system in future periods cannot be guaranteed because the design of any system of internal controls is based in part upon assumptions about the likelihood of future events. There can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time certain controls may become inadequate because of changes in business conditions, or the degree of compliance with policies and procedures may deteriorate. As such, misstatements due to error or fraud may occur and not be detected. We have evaluated the effectiveness of our disclosure controls and procedures as of April 2, 2023 with the participation, and under the supervision, of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that ~~as of April 2, 2023, our~~these disclosure controls and procedures ~~were not~~are effective ~~because~~as of ~~the material weaknesses described below in~~ ~~Changes in Internal Control Over Financial Reporting~~.

Notwithstanding these material weaknesses, the Company has concluded that the condensed consolidated financial statements included in this Quarterly Report are fairly stated in all material respects in accordance with GAAP.December 31, 2023.

Changes in Internal Control Over Financial Reporting

~~During the most recently completed quarter, there have been~~There were no changes into our internal control over financial reporting practices or processes that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting ~~except as noted in this paragraph regarding material weaknesses. We did not design and maintain effective~~

~~Table of Contents~~

~~Index to Notes~~

controls over certain financial reporting processes, including acquisition accounting, accounting for fixed assets, and certain financial reporting disclosures. Additionally, we did not design and maintain effective controls over system access controls to establish segregation of duties for those with roles and responsibilities for the general ledger. We continue to develop and implement a plan to remediate the material weaknesses described above, which will include additional training of existing staff, hiring additional staff with technical accounting skills and engaging third-party experts to assist in accounting for fixed assets, acquisitions and technical areas, as well as the development of more formal internal control processes and improving information technology controls over system access.during our second quarter ended December 31, 2023.

Part II

Item 1. Legal Proceedings

From time to time, we are involved in various inquiries, investigations, claims, lawsuits and other legal proceedings that are incidental to the conduct of our business. These matters typically involve claims from customers, employees or other third parties involved in operational issues common to the retail, restaurant and entertainment industries. Such matters typically represent actions with respect to contracts, intellectual property, taxation, employment, employee benefits, personal injuries and other matters. A number of such claims may exist at any given time and there are currently a number of claims and legal proceedings pending against us.

For a description of all material pending legal proceedings, see Note 10 - Commitments and Contingencies of the notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Table of Contents

Index to Notes

Item 1A. Risk Factors

WeThere have ~~disclosed under the heading~~been no material changes to our risk factors contained in Part I. Item IA. “Risk Factors” ~~in Item 1A~~ of ~~the~~our Annual Report on Form 10-K for the ~~fiscal period~~year ended July 3, 2022 the risk factors that materially affect our business, financial condition or results of operations. There have been no material changes from the risk factors previously disclosed. You should carefully consider the risk factors set forth in the Annual Report on Form 10-K for the fiscal period ended July 3, 2022 and the other information set forth elsewhere in this Quarterly Report on Form 10-Q. You should be aware that these risk factors and other information may not described every risk that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.2, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On February 7, 2022, the Company announced that its Board of Directors authorized a share and warrant repurchase program providing for repurchases of up to $200,000 of the Company’s outstanding Class A common stock and warrants through February 3, 2024. Repurchases of shares and warrants are made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases are based on a variety of factors, including stock price, regulatory limitations, debt agreement limitations, and other market and economic factors. The share repurchase plan does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase plan at any time.

The following table provides information regarding purchases of our securities made by us for the quarter ended ~~April 2,~~December 31, 2023.

Fiscal Period Total Number of Class A Shares Purchased Average Price Paid per Class A Share Total Number of Shares Purchased as Part of Publicly Announced Programs Dollar Value of Shares that May Yet Be Purchased Under the Plan
January 2, 2023 to February 5, 2023 400 $ 13.05 400 $ 146,645
February 6, 2023 to March 5, 2023 98,420 15.17 98,420 145,152
March 6, 2023 to April 2, 2023 271,792 14.95 271,792 141,089
Total 370,612 $ 15.01 370,612


Date	Total Number of Class A Shares Purchased	Average Price Paid per Class A Share*		Total Number of Shares Purchased as Part of Publicly Announced Programs	Dollar Value of Shares That May Yet Be Purchased Under The Publicly Announced Repurchase Program*
October 2, 2023 to November 5, 2023	5,082,260	$	10.55	5,082,260	$	80,737
November 6, 2023 to December 3, 2023	989,181	10.46		989,181	70,393
December 4, 2023 to December 31, 2023	1,445,414	11.23		1,445,414	54,168
Total	7,516,855	$	10.67	7,516,855

~~On May 16, 2023, the Board of Directors authorized the replenishment of the remaining balance of the~~*The average price paid per share and ~~warrant~~dollar value of shares that may yet be purchased under the plan includes any commissions paid to repurchase ~~program~~stock (but excludes any excise taxes).

Item 5. Other Information

Rule 10b5-1 Trading Plans

Effective as of December 4, 2023, Thomas Shannon, the Company’s Chief Executive Officer, amended an existing trading plan intended to ~~$200,000.~~

satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (the “Shannon 10b5-1 Plan”). The Shannon 10b5-1 Plan provides for the potential sale of up to 2,300,000 shares of Class A common stock and will expire on the earlier of April 30, 2025 and the date when all shares under the Shannon 10b5-1 Plan are sold.

~~Table of Contents~~

~~Index to Notes~~

Item 6. Exhibits


Exhibit No.						Description
~~10.1~~						Eighth Amendment to the First Lien Credit Agreement, dated as of July 3, 2017, by and among Bowlero Corp., Kingpin Intermediate Holdings LLC, as the borrower, JPMorgan Chase Bank, N.A., as the administrative agent, and the lenders from time to time party thereto, dated February 8, 2023 (incorporated by reference to Exhibit 10.1 to Bowlero Corp.’s Current Report on Form 8-K filed with the SEC on February 8, 2023).
31.1+						Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2+						Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1+						Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2+						Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (embedded within the Inline iXBRL document).

____________

+ Filed herewith.

3831

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Index to Notes

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		BOWLERO CORP.

Date:	~~May 17, 2023~~February 5, 2024	By:	/s/ ~~Brett I. Parker~~Robert M. Lavan
		Name:	~~Brett I. Parker~~Robert M. Lavan
		Title:	Chief Financial Officer
			(Principal Financial Officer)

3932


	Redeemable Class A common stock			Series A preferred stock			Class A common Stock			Class B common Stock			Treasury stock			Additional Paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ deficit
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance, June 27, 2021	2,069,000	$	464,827	106,378	$	141,162	3,842,428	$	1	—	$	—	—	$	—	$	—	$	(266,463)	$	(9,404)	$	(275,866)
Retroactive application of recapitalization	49,328,025	—		2,536,209	—		91,608,875	9		—	—		—	—		—		(9)		—		—
Balance, June 27, 2021 (retroactively stated for application of recapitalization)	51,397,025	$	464,827	2,642,587	$	141,162	95,451,303	$	10	—	$	—	—	$	—	$	—	$	(266,472)	$	(9,404)	$	(275,866)
Net income	—	—		—	—		—	—		—	—		—	—		—		15,564		—		15,564
Foreign currency translation adjustment	—	—		—	—		—	—		—	—		—	—		—		—		(164)		(164)
Unrealized loss on derivatives	—	—		—	—		—	—		—	—		—	—		—		—		(32)		(32)
Reclassification to earnings	—	—		—	—		—	—		—	—		—	—		—		—		2,202		2,202
Accrued dividends on pre-merger Series A preferred stock	—	—		—	2,251		—	—		—	—		—	—		(2,251)		—		—		(2,251)
Change in fair value of redeemable Class A common stock of Old Bowlero	—	14,995		—	—		—	—		—	—		—	—		(14,995)		—		—		(14,995)
Share-based compensation	—	—		—	—		—	—		—	—		—	—		801		—		—		801
Reclass of negative APIC to accumulated deficit	—	—		—	—		—	—		—	—		—	—		16,445		(16,445)		—		—
Balance, September 26, 2021	51,397,025	$	479,822	2,642,587	$	143,413	95,451,303	$	10	—	$	—	—	$	—	$	—	$	(267,353)	$	(7,398)	$	(274,741)
Net loss	—	—		—	—		—	—		—	—					—		(34,454)		—		(34,454)
Foreign currency translation adjustment	—	—		—	—		—	—		—	—					—		—		(208)		(208)
Unrealized loss on derivatives	—	—		—	—		—	—		—	—					—		—		(10)		(10)
Reclassification to earnings	—	—		—	—		—	—		—	—					—		—		2,203		2,203
Accrued dividends on pre-merger Series A preferred stock	—	—		—	1,885		—	—		—	—					(1,885)		—		—		(1,885)
Change in fair value of redeemable Class A common stock of Old Bowlero	—	23,869		—	—		—	—		—	—					(23,869)		—		—		(23,869)
Merger induced stock based compensation	—	—		—	—		2,529,360	—		5,839,993	1					42,555		—		—		42,556
Issuance of common stock and preferred stock in connection with Merger Capitalization, net of Bowlero equity issuance costs and fair value of liability-classified warrants and earnout				95,000	95,000		42,185,233	4		1,074,185						120,805		—		—		120,809
Settlement of pre-merger Series A preferred stock	—	—		(2,642,587)	(145,298)		—	—		—	—					—		—		—		—
Conversion of Class A common stock of Old Bowlero to Series A preferred stock	—	—		105,000	105,000		(10,499,900)	(1)		—	—					(104,999)		—		—		(105,000)
Consideration to existing shareholders of Old Bowlero	—	—		—	—		(22,599,800)	(2)		—	—					(225,998)		—		—		(226,000)
Consideration paid to Old Bowlero optionholders	—	—		—	—		—	—		—	—					(15,467)		—		—		(15,467)
Exchange of redeemable Class A common stock of Old Bowlero for Class B common stock	(51,397,025)	(503,691)		—	—		—	—		51,397,025	5					503,686		—		—		503,691
Balance, December 26, 2021	—	$	—	200,000	$	200,000	107,066,196	$	11	58,311,203	$	6	—	$	—	$	294,828	$	(301,807)	$	(5,413)	$	(12,375)


		Page
Note 1	Description of Business and Significant Accounting Policies	109
Note 2	Revenue	1211
Note 3	Business Acquisitions	1211
Note 4	Goodwill and Other Intangible Assets	1312
Note 5	Property and Equipment	1413
Note 6	Leases	1514
Note 7	Accounts Payable and Accrued Expenses	15
Note 8	Debt	1615
Note 9	Income Taxes	1716
Note 10	Commitments and Contingencies	1716
Note 11	Earnouts	17
Note 12	Fair Value of Financial Instruments	1817
Note 13	Common Stock, Preferred Stock and Stockholders’ Equity	1918
Note 14	Share-Based Compensation	2019
Note 15	Net Loss Per Share	2220
Note 16	Supplemental Cash Flow Information	2322
Note 17	Subsequent Events	2322


Fiscal Period	Total Number of Class A Shares Purchased	Average Price Paid per Class A Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Dollar Value of Shares that May Yet Be Purchased Under the Plan
January 2, 2023 to February 5, 2023	400	$	13.05	400	$	146,645
February 6, 2023 to March 5, 2023	98,420	15.17		98,420	145,152
March 6, 2023 to April 2, 2023	271,792	14.95		271,792	141,089
Total	370,612	$	15.01	370,612