Lucky Strike Suspends Dividend, Targets Debt After 3.5% Growth

By Tom Whitfield

Revenue rose 3.5% to $302.6 million in the fiscal first quarter ended Sept. 27, and Bowlero (NYSE:BOWL), reporting under the name Lucky Strike Entertainment, responded by suspending its quarterly dividend to attack a $1.817 billion debt load. The board's decision frees roughly $35 million in annual cash. The company said it will revisit the dividend as leverage falls — a promise that carries no date and no numeric trigger.

Adjusted EBITDA came in at $72.1 million, essentially flat with the prior year, Founder and CEO Tom Shannon said. Management reaffirmed fiscal 2027 adjusted EBITDA guidance of $340 million to $360 million. What management did not say is when EBITDA growth resumes; flat results against reaffirmed guidance leave little margin for error in the remaining three quarters.

What does the dividend suspension buy?

The company ended the quarter with $1.817 billion in debt and $38 million in cash, essentially unchanged from June. Leverage stood at 5.5 times the prior year's adjusted EBITDA, Shannon said. That is the number the entire capital allocation shift serves.

The plan is specific, at least in aggregate:

• Roughly $100 million toward debt reduction over the next year.
• Funding from lower capital and litigation spending, sales of a small number of non-core assets, and free cash flow.
• At the guidance midpoint, that would bring leverage to about five times.

President and CFO Bobby Lavan said the company is marketing a handful of non-core assets, including extra land and balance-sheet investments. He framed the broader goal as paying down "a few hundred million" in debt — a phrase that sets a wide range and commits to none of it.

Quarterly capital spending fell 17% to $21.5 million, the lowest quarterly amount in five years, according to Shannon. The company expects approximately $90 million in capital spending for fiscal 2027, against $114 million last year and $194 million at its peak. In plain words: the company is shrinking its investment base to pay its lenders.

Did same-store sales actually turn the corner?

The quarter's headline conceals a weaker core. Same-store revenue fell 2.6%, though the monthly trend improved: comparable sales declined 4% in July and 3% in August, then rose 2% in September. Shannon attributed July's drop largely to the World Cup. Lavan attributed part of August's weakness to selling fewer summer passes. Both explanations are plausible; neither is verifiable from disclosed figures.

October tells a more nuanced story. Shannon said same-store sales tracked positive until the final weekend, when Halloween fell on a Saturday rather than a Friday as it did a year earlier. The lost Saturday business pushed the month slightly negative. The results remained preliminary.

Where is the growth coming from?

Events provided the offset. First-quarter event sales grew 3%, and event revenue sat at or above the prior year for six consecutive months through October, Shannon said. Bookings for October through December tracked higher on a comparable basis, led by corporate events.

Lavan said corporate events, roughly two-thirds of the events business, posted double-digit booking growth, while adult and children's parties faced pressure. A previously cited roughly 10% increase in the December backlog had moderated but remained positive heading into the holidays. For the quarter, corporate event sales rose and consumer events were flat.

League revenue also grew, despite a September decline caused by a later Labor Day that delayed the start of fall leagues by a week. Shannon said recurring fall league revenue appeared on track to rise 3% to 4%.

Water parks delivered $25 million in EBITDA, up $9 million from a year earlier — the quarter included the first full summer under ownership of the two largest parks, Raging Waters in California and Emerald Pointe in North Carolina. In plain words: nearly all the incremental EBITDA came from water parks, not bowling.

What did cost discipline deliver?

Shannon said comparable-center payroll hours fell 5%, total labor costs decreased by $1 million despite a $1.2 million increase in health care costs, and operating expenses declined $3 million. Those savings let the company grow same-store EBITDA despite slightly lower revenue.

The beverage mix shifted sharply. Lavan said nonalcoholic beverage sales rose by double digits, food sales climbed by a single- to double-digit percentage, and alcohol sales fell by a low- to mid-single-digit percentage. Shannon said the company plans to test alcohol pricing and adjust menus; Lavan said a new menu would lean further into zero-proof drinks.

The quarter shows a company funding its balance sheet from its cost base and water parks while its core bowling business shrinks modestly. Five-times leverage remains the number to watch.